Net cash used in operating activities
totaled $1,313,000 for the year ended June 30, 2009, primarily consisting of a
net loss of $4,826,000 and decreases of $764,000 in accounts payable and accrued
expenses and $698,000 in deferred revenues, offset by a decrease of $2,722,000
in accounts receivable and non-cash charges totaling $1,979,000, consisting of
$1,617,000 of share-based compensation, $300,000 of depreciation and
amortization and a $62,000 of bad debt expense. The reduction in accounts
payable and accrued expenses is primarily a function of payments of commissions
and bonuses accrued as of June 30, 2008. The decrease in deferred revenues is
due primarily to the timing of maintenance billings throughout the year and the
completion of customer implementation projects. Changes in accounts receivable
are the function of the timing of invoicing and collections throughout the year.
There was a decrease in the accounts receivable during the year which was
primarily due to the reduction in revenues. Share-based compensation charges
relate to grants of restricted stock units and stock options. For the year ended
June 30, 2008, net cash
used in operating
activities totaled $234,000, primarily consisting of decreases of $720,000 in
accounts payable and accrued expenses and $579,000 in deferred revenues, and an
increase of $1,032,000 in accounts receivable, $173,000 in prepaid expenses and
other assets, and $263,000 in other assets, offset by a net profit of $585,000
and decreases of $513,000 in inventory. Cash used in operating activities was
offset by non-cash charges totaling $1,330,000, consisting of $898,000 of
share-based compensation, $279,000 of depreciation and amortization, recognition
of foreign currency translation adjustment upon liquidation of Voxware, n.v. of
$17,000, and $136,000 of bad debt expense. The reduction in accounts payable and
accrued expenses is primarily a function of payments of inventory and bonuses
accrued as of June 30, 2007. The decrease in deferred revenues is due primarily
to the timing of maintenance billings throughout the year, and the completion of
customer implementation projects. Changes in accounts receivable are the
function of the timing of invoicing and collections throughout the year. The
decrease in inventory is primarily due to the delivery to our customer in July
2007 of a significant inventory order that we received in June 2007.
Net cash used in investing activities
totaled $91,000 during the year ended June 30, 2009 and $583,000 during the year
ended June 30, 2008 due primarily to purchases of property and
equipment.
Net cash provided by financing activities
totaled $2,243,000 during the year ended June 30, 2009, compared to net cash
used in financing activities of $641,000 during the year ended June 30, 2008.
During the year ended June 30, 2009, we had proceeds from equity financing of
$2,500,000, we borrowed $451,000 to fund the purchase of fixed assets and repaid
$704,000 against term loans with Silicon Valley Bank, “SVB”. We received net
proceeds in the amount of $5,000 from the exercise of stock options during the
year ended June 30, 2009. During the year ended June 30, 2008, we repaid
$687,000 against term loans with SVB and received proceeds of $46,000 from the
exercise of stock options.
We initially entered into a credit
facility with SVB on December 30, 2003. The following facilities were
outstanding during fiscal years 2008 and 2009:
A $1,000,000 equipment line of credit
(“Equipment Line”) secured by all of the Company’s personal property was first
drawn upon on December 16, 2005. The Company was required to make interest-only
payments, at a rate of prime plus 1.75%, on the principal balance through May 9,
2006, at which point the Equipment Line was converted into a term loan with 30
fixed monthly payments of approximately $17,000. Effective May 9, 2006, the
interest rate was fixed at 9.5%. The unpaid principal balance outstanding was $0
as of June 30, 2009 and $66,000 as of June 30, 2008.
On May 24, 2006, the Company entered into
a Loan and Security Agreement with SVB (“2006 Facility”) providing an additional
$3,000,000 credit facility comprised of a $1,500,000 revolving line of credit
(“Revolver”) and a $1,500,000 Non-Formula Term Loan, (“2006 Term Loan”) to fund
the Company's anticipated working capital needs. The Revolver created by the
2006 Facility was initially available until October 31, 2007. It was extended to
February 11, 2009 by the SLMA. The Revolver provides for a line of credit up to
$1,500,000, with a $1,000,000 sub-limit to be established for cash management
for foreign exchange requirements. As of June 30, 2009, amounts outstanding
under the Revolver bear interest at the rate of 7% calculated as the greater of
7% or prime plus 3%. In addition, a fee of 0.25% is charged against the unused
portion of the Revolver. No funds were borrowed against the Revolver at June 30,
2009 or June 30, 2008. The 2006 Term Loan is to be repaid in 36 equal monthly
payments of principle and interest, commencing on April 1, 2007, and had an
outstanding balance of $375,000 at June 30, 2009 and $875,000 at June 30, 2008.
Monthly principle payments total approximately $42,000. Amounts outstanding
under the 2006 Term Loan bear interest at June 30, 2009 at a rate of 7%,
calculated as the greater of 7% or prime plus 3%, as established by the Waiver
and Third Loan Modification Agreement (“TLMA”) with SVB executed on November 17,
2008.
On February 13, 2008, with an effective
date of December 27, 2007, the Company entered into a second loan modification
agreement (“SLMA”) with SVB, providing for a new $600,000 revolving equipment
line of credit (“Equipment Revolver”). The availability under the Equipment
Revolver was limited to a borrowing base advance rate that is equal to 100%
against the invoice value of new Eligible Equipment (as defined in the SLMA).
The draw down period for the Equipment Revolver expired May 31, 2008, but was
extended by SVB to July 31, 2008. Originally, amounts advanced under the
Equipment Revolver bore interest at a rate equal to the greater of (a) 6.75% and
(b) the amount equal to the prime rate plus 1.0%. This rate was revised to the
greater of 7% or prime plus 3% by the TLMA. The repayment of the funds drawn
against the Equipment Revolver will be made in 36 equal monthly payments of
principal and interest beginning August 1, 2008. The outstanding balance on the
Equipment Revolver was $313,000 at June 30, 2009 and $0 at June 30,
2008.
On February 17, 2009, the Company entered
into a Waiver and Fourth Loan Modification Agreement that, among other things,
waived a loan covenant violation that existed at December 31, 2008 and extended
the maturity of the Revolver until March 31, 2009. In addition, the Waiver and
Fourth Loan Modification Agreement revised certain outstanding financial
covenants under the 2006 Facility, including minimum net loss thresholds. On May
12, 2009, with an effective date of March 31, 2009, the Company entered into a
Fifth Loan Modification Agreement which extended the maturity of the Revolver
until May 31, 2009, and set financial covenants for the period ending May 31,
2009. On June 26, 2009, with an effective date of June 1, 2009, the Company
entered into a Sixth Loan Modification Agreement which extended the Revolver
until July 31, 2009. On September 9, 2009 the Company entered in to a Seventh
Loan Modification Agreement which extends the maturity, lowers the interest rate
to prime plus 2.25% and provides covenants of the Revolver until July 30, 2010.
(See Footnote 13 – Subsequent Events)
- 26
-
We continue to expand our partnership
channel, with particular emphasis on the development of relationships with
mobile computer equipment manufacturers and vendors, VARs, logistics consultants
and WMS vendors. Using Voxware 3 and VoxBrowser, independent third-party
partners are able to develop and deliver voice-enabled logistics solutions on
other manufacturers’ hardware. As a result of the partner relationships and
product offerings, a greater percentage of revenue may be derived in the future
from software than has occurred historically, with a lower percentage of total
revenue derived from hardware and professional services. The gross margin
generated by software revenue is higher than that earned on hardware and
professional services revenue. For the year ended June 30, 2009, we earned gross
margin from software licenses of 98%, as compared to 39% for sales of hardware
units and related accessories. Partnership channel sales accounted for 9% of our
revenues during the year ended June 30, 2009, as compared to 13% during the year
ended June 30, 2008. Software licenses contributed 17% of revenues for the year
ended June 30, 2009, compared to 28% of revenue for the year ended June 30,
2008. Decreases in the percentage of revenues generated through partnership
channels and the percentage of revenues derived from software licenses during
the year ended June 30, 2009 represent a departure from trends noted in recent
periods. These decreases are primarily attributable to decisions by customers
and prospective customers to delay major capital expenditures in light of tight
credit markets associated with general worldwide economic conditions. We expect
that recent coordinated efforts by federal authorities throughout the world will
gradually lead to a general loosening of international credit markets, thus
enabling customers and prospective customers to increase levels of capital
expenditures. In addition, given the volume and quality of prospective
transactions in our sales pipeline, we anticipate a resumption of the trend
towards a more profitable mix of revenue prior to the end of fiscal year 2010.
However, we can provide no assurance with respect to the timing of this expected
long-term trend or whether the trend will be true in any specific
period.
The continued deterioration of general
worldwide economic conditions has negatively impacted certain vertical markets,
including retail and food distribution, that are significant to our operations.
As a result of these general economic conditions, combined with the seasonal
impact of the typically slower summer months, our revenue during the first
quarter of fiscal 2010 is expected to be in line with the first quarter of
fiscal 2009, which was lower than quarterly revenues reported for fiscal 2008.
In response to the changing economic environment, we eliminated a net of 18
positions during the year ended June 30, 2009, after considering new hires, and
scaled back certain planned costs, new hires and capital purchases. However, our
customer base continues to expand, with existing customers expected to implement
our products in additional sites as they experience favorable results with our
offerings and new customers brought to us through direct sales efforts, VARs and
other channel partners. We expect the majority of revenues will come from
existing customers in fiscal year 2010, but that revenues from new customers,
including those brought to us through VARs and other channel partners, will grow
faster than revenues from existing customers. We can provide no assurances that
revenues earned in any given fiscal quarter or year will exceed the preceding
fiscal quarter or year. Furthermore, we anticipate that in some fiscal quarters
and years, costs will exceed revenues.
On June 29, 2009, the Company received an
equity infusion of $2.5 million from it’s two principal investors. On June 29,
2009, the Company entered into a Securities Purchase Agreement (the “Securities
Purchase Agreement”) with Co-Investment Fund II, L.P. (a Cross Atlantic
Technology Fund entity) and Edison Venture Fund V, L.P., pursuant to which the
Company issued and sold an aggregate of 1,428,571 shares (the “Shares”) of the
Company’s common stock, $0.001 par value per share (the “Common Stock”), at a
purchase price of $1.75 per share, and warrants to purchase up to 142,857 shares
(the “Warrant Shares”) of Common Stock, which will not be exercisable until the
six (6) months after the date of issuance and shall expire three (3) years from
the date of issuance, at an exercise price of $2.50 per share (the
“Warrant”).
Under the terms of the Securities Purchase
Agreement, Edison Venture Fund V, L.P. purchased 285,714 shares of Common Stock
and warrants to purchase 28,571 shares of Common stock and Co-Investment Fund
II, L.P. purchased 1,142,857 shares of Common Stock and warrants to purchase
114,286 shares of Common Stock. The private placement closed on June 30, 2009.
The Company received gross proceeds equal to $2,500,000. The securities sold in
this private placement have not been registered under the Securities Act of
1933, as amended (the “Securities Act”), and may not be offered or sold in the
United States in the absence of an effective registration statement or exemption
from the registration requirements under the Securities Act.
We may need to raise additional capital
through either new equity or debt financing arrangements and may elect to
utilize such an arrangement to fund further expansion of our operations. Due to
the recent downturn in the economy, there can be no assurances that financing
will be available on terms acceptable to us, if at all. However, due to a
general trend providing greater emphasis on sales of higher margin product and
given our efforts to reduce costs as well as having $4.3 million in cash, $1.5
million in debt availability, we believe that we have adequate capital resources
available to fund our operations through June 30, 2010.
- 27
-
As of June 30, 2009, 12,000,000 shares of
our Common Stock were authorized, of which 8,007,776 were issued and
outstanding. The following table summarizes the dilutive impact in the event of
the exercise of all options and warrants to purchase stock, including options
and warrants whose strike price exceeds the market value of our Common
Stock.
Dilutive Effect of Options and
Warrants as of June 30, 2009
|
Common
stock issued and outstanding as of June 30, 2009
|
8,007,766
|
|
|
|
Dilutive instruments:
|
|
|
Outstanding warrants to
purchase common stock *
|
1,298,331
|
|
Outstanding options to
purchase common stock *
|
1,108,216
|
|
Unissued restricted stock
units
|
150,714
|
|
|
|
|
Common
stock plus dilutive instruments outstanding
|
10,565,027
|
|
|
|
Options to
purchase common stock available to issue
|
|
|
pursuant to various stock
option plans
|
31,982
|
|
|
|
Common stock
outstanding if all dilutive instruments
|
|
|
are converted and
exercised
|
10,597,009
|
|
|
*
|
|
Includes all
"in-the-money" and "out-of-the-money" warrants and
options.
|
Effect of Recent Accounting
Pronouncements
In June 2008, the FASB ratified the
consensus reached on EITF 07-05, Determining Whether an Instrument (or Embedded
Feature) Is Indexed to an Entity’s Own Stock (“EITF 07-05”). EITF 07-05
clarifies the determination of whether an instrument (or an embedded feature) is
indexed to an entity’s own stock, which would qualify as a scope exception under
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. We
will adopt EITF 07-5 effective July 1, 2009, and we do not expect it to have a
material impact on our consolidated financial statements.
On May 28, 2009, the FASB issued SFAS No.
165, Subsequent Events, (“SFAS No. 165”). SFAS No. 165 introduces the concept of
financial statements being available to be issued. This statement requires the
disclosure of the date through which an entity has evaluated subsequent events
and the basis for that date, whether that date represents the date the financial
statements were issued or were available to be issued. The adoption of this
standard did not have a material impact on our financial statements.
In July 2009, the FASB issued Statement of
Financial Accounting Standards No. 168, the FASB Accounting Standards
Codification
TM
and the Hierarchy of Generally Accepted Accounting Principles — a
replacement of FASB Statement No. 162 (SFAS 168). With the issuance of SFAS 168,
the FASB Accounting Standards Codification (Codification) becomes the single
source of authoritative U.S. accounting and reporting standards applicable for
all nongovernmental entities, with the exception of guidance issued by the
Securities and Exchange Commission (SEC). The Codification does not change
current U.S. GAAP, but changes the referencing of financial standards, and is
intended to simplify user access to authoritative U.S. GAAP by providing all the
authoritative literature related to a particular topic in one place. The
Codification is effective for interim and annual periods ending after September
15, 2009, and is effective for our first quarter of 2010. At that time, all
references made to U.S. GAAP will use the new Codification numbering system
prescribed by the FASB. We are currently evaluating the impact to our financial
reporting process of providing Codification references in our public filings.
However, as the Codification is not intended to change or alter existing US
GAAP, it is not expected to have any impact on our consolidated financial
position or results of operations.
In September 2009, the EITF reached a
consensus on Issue 08-1, Revenue Arrangements with Multiple Deliverables (“EITF
08-1”). EITF 08-1 replaces and significantly changes certain guidance in EITF
00-21. EITF 08-1 modifies the separation criteria of EITF 00-21, by eliminating
the criterion for objective and reliable evidence of fair value for the
undelivered products or services. Instead, revenue arrangements with multiple
deliverables should be divided into separate units of accounting if the
deliverables meet both of the following criteria:
-
The delivered items have value to the customer on
a standalone basis
-
If the arrangement includes a general right of
return relative to the delivered items, delivery or performance of the
undelivered items is considered probable and substantially in the control of
the vendor.
- 28
-
The Issue eliminates the use of the
residual method of allocation and requires, instead, that arrangement
consideration be allocated, at the inception of the arrangement, to all
deliverables based on their relative selling price (i.e., the relative selling
price method). When applying the relative selling price method, a hierarchy is
used for estimating the selling price for each of the deliverables, as
follows:
-
Vendor-specific objective evidence (VSOE) of the
selling price – verifiable specific objective evidence
-
Third-party evidence (TPE) of the selling price –
prices of the vendor’s or any competitor’s largely interchangeable products or
services, in standalone sales to similarly situated customers
-
Best estimate of the selling price.
We will adopt EITF 08-1 effective July 1,
2010. We are currently evaluating the impact to our consolidated financial
statements.
In September 2009, the EITF reached a
consensus on Issue 09-3, Certain Revenue Arrangements That Include Software
Elements (“EITF 09-3”). Per EITF 09-3, all tangible products containing both
software and non-software components, that function together to deliver the
product’s essential functionality, will no longer be within the scope of SOP
97-2. In other words, entities that sell joint hardware and software products
that meet the scope exception (i.e., essential functionality) will be required
to follow the guidance in Issue 08-1. The Issue provides a list of items to
consider when determining whether the software and non-software components
function together to deliver a product’s essential functionality.
We will adopt EITF 09-3 effective July 1,
2010. We are currently evaluating the impact to our consolidated financial
statements.
ITEM 7A. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA.
The financial statements and supplementary
data required by this Item are included in this Annual Report on Form 10-K
beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
ITEM 9A(T). CONTROLS AND
PROCEDURES.
Disclosure Controls and
Procedures
We maintain disclosure controls and
procedures designed to ensure that information required to be disclosed in our
Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified in the SEC’s rules and forms, and that such information
is accumulated and communicated to our management, including our chief executive
officer and our chief financial officer/principal accounting officer, as
appropriate, to allow timely decisions regarding required disclosure. In
designing and evaluating our disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving their
objectives.
Our management, with the participation of
our chief executive officer and chief financial officer, evaluated the
effectiveness of our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2009. Based on
this evaluation, our chief executive officer and chief financial officer
concluded that, as of June 30, 2009, our disclosure controls and procedures were
functioning effectively to provide reasonable assurance that the information
required to be disclosed by us in reports filed under the Securities Exchange
Act of 1934 is (i) recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms and (ii) accumulated and
communicated to our management, including our chief executive officer and chief
financial officer, as appropriate to allow timely decision regarding
disclosures.
Changes in Internal Controls over
Financial Reporting
We regularly review our system of internal
control over financial reporting and make changes to our processes and systems
to improve controls and increase efficiency, while ensuring that we maintain an
effective internal control environment. Changes may include such activities as
implementing new, more efficient systems, consolidating activities and migrating
processes.
- 29
-
There were no changes during the quarter
ended June 30, 2009 in our internal control over financial reporting or in other
factors that materially affected, or are reasonably likely to materially affect,
our internal controls over financial reporting.
Management’s Report on Internal Control
over Financial Reporting
Our management is responsible for
establishing and maintaining adequate internal control over financial reporting.
Our internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
U.S. generally accepted accounting principles. Our internal control over
financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the Company’s assets; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being made
only in accordance with authorizations of our management and directors; and
(iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of our assets that could have a
material effect on the financial statements.
This annual report does not include an
attestation report of the Company’s independent registered public accounting
firm regarding internal control over financial reporting. Management’s report
was not subject to attestation by the Company’s independent registered public
accounting firm pursuant to temporary rules of the SEC that permit the Company
to provide only management’s report in this annual report.
Management assessed the effectiveness of
our internal control over financial reporting as of June 30, 2009 utilizing the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control-Integrated Framework. Based on the
assessment by our management, we determined that the Company’s internal control
over financial reporting was effective as of June 30, 2009. Management’s
assessment of the effectiveness of our internal control over financial reporting
as of June 30, 2009 has not been audited.
ITEM 9B. OTHER
INFORMATION.
None.
- 30
-
PART III
ITEM 10. DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE GOVERNANCE.
The information relating to our directors,
nominees for election as directors and executive officers under the headings
“Election of Directors” and “Executive Officers” in our definitive proxy
statement for the 2009 Annual Meeting of Stockholders is incorporated herein by
reference to such proxy statement.
ITEM 11. EXECUTIVE
COMPENSATION.
The discussion under the headings
“Executive Compensation” “Compensation Committee Report” and “Compensation
Committee Interlooks and Insider Participation” in our definitive proxy
statement for the 2009 Annual Meeting of Stockholders is incorporated herein by
reference to such proxy statement.
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS.
|
The discussion under the heading “Security
Ownership of Certain Beneficial Owners and Management” in our definitive proxy
statement for the 2009 Annual Meeting of Stockholders is incorporated herein by
reference to such proxy statement.
ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The discussion under the heading “Certain
Relationships and Related Transactions” and “Board Independence” in our
definitive proxy statement for the 2009 Annual Meeting of Stockholders is
incorporated herein by reference to such proxy statement.
ITEM 14. PRINCIPAL ACCOUNTANT FEES
AND SERVICES.
The discussion under the heading
“Independent Registered Public Accounting Firm Fees and Other Matters” in our
definitive proxy statement for the 2009 Annual Meeting of Stockholders is
incorporated herein by reference to such proxy statement.
- 31
-
PART IV
ITEM 15. EXHIBITS, FINANCIAL
STATEMENT SCHEDULES.
List of documents filed as part of this
Annual Report on Form 10-K.
1. FINANCIAL STATEMENTS. The financial
statements listed in the accompanying Index to Financial Statements appearing on
page F-1 are filed as part of this Annual Report on Form 10-K.
2. EXHIBITS. The following is a list of
Exhibits filed as part of this Annual Report on Form 10-K. Where so indicated by
footnote, Exhibits that were previously filed are incorporated by reference. For
Exhibits incorporated by reference, the location of the Exhibit in the previous
filing is indicated in parentheses.
|
(a)
|
Exhibit No.
|
|
Description
|
|
2.1
|
|
Asset Purchase Agreement, dated as of February 4, 1999, by and
between Ascend Communications, Inc. and Voxware, Inc.**(1)
|
|
|
|
|
|
3.1
|
(a)
|
Amended and Restated Certificate of Incorporation**(7)
|
|
|
|
|
|
3.1
|
(b)
|
Certificate of Amendment to the Amended and Restated Certificate of
Incorporation filed with the Secretary of State of the State of Delaware
on December 30, 2003.**(8)
|
|
|
|
|
|
3.1
|
(c)
|
Certificate of Amendment to the Amended and Restated Certificate of
Incorporation filed with the Secretary of State of the State of Delaware
on April 30, 2004.**(9)
|
|
|
|
|
|
3.1
|
(d)
|
Certificate of Amendment to the Amended and Restated Certificate of
Incorporation, filed with the Secretary of State of the State of Delaware
on November 29, 2004.**(12)
|
|
|
|
|
|
3.1
|
(e)
|
Certificate of Amendment to the Company’s Amended and Restated
Certificate of Incorporation, as amended, as filed with the Secretary of
State of the State of Delaware on November 28, 2005.**(11)
|
|
|
|
|
|
3.1
|
(f)
|
Certificate of Amendment to the Company’s Amended and Restated
Certificate of Incorporation, filed with the Secretary of State of the
State of Delaware on December 13, 2007.**(18)
|
|
|
|
|
|
3.2
|
|
Second Amended and Restated Bylaws.**(17)
|
|
|
|
|
|
4.1
|
|
Form of Common Stock Purchase Warrant.**(6)
|
|
|
|
|
|
4.2
|
|
Form of Common Stock Purchase Warrant issued to Ridgecrest Capital
Partners.**(6)
|
|
|
|
|
|
4.3
|
|
Form of Series D Convertible Preferred Stock Purchase
Warrant.**(6)
|
|
|
|
|
|
4.4
|
|
Form of Series D Convertible Preferred Stock Purchase Warrant to be
issued to Edison Venture Fund V, L.P., dated December 30,
2003.**(8)
|
|
|
|
|
|
4.5
|
|
Form of Series D Convertible Preferred Stock Purchase Warrant to be
issued to Cross Atlantic Technology Fund II, L.P., dated December 30,
2003.**(8)
|
|
|
|
|
|
4.6
|
|
Form of Common Stock Purchase Warrant issued to former holders of
Series D Convertible Preferred Stock Purchase Warrants (see Exhibits 4.7,
4.8 and 4.9).**(12)
|
|
|
|
|
|
4.7
|
|
Form of Common Stock Purchase Warrant issued to Mufson Howe Hunter
& Company LLC, dated August 11, 2005.**(12)
|
|
|
|
|
|
4.8
|
|
Form of Common Stock Purchase Warrant issued to Alan A. Nash, dated
August 11, 2005.**(12)
|
|
|
|
|
|
4.9
|
|
Form of Common Stock Purchase Warrant issued to Duncan J. L.
Fitzwilliams, dated August 11, 2005.**(12)
|
- 32
-
|
|
4.10
|
Form of Common
Stock Purchase Warrant issued to Emma Smith, dated August 11,
2005.**(12)
|
|
|
|
|
|
|
10.1
|
Voxware, Inc.
1994 Stock Option Plan.**(2)
|
|
|
|
|
|
10.2
|
Form of Voxware,
Inc. Stock Option Agreement.**(2)
|
|
|
|
|
|
10.3
|
Form of
Indemnification Agreement.**(2)
|
|
|
|
|
|
10.4
|
Securities
Purchase Agreement, dated as of August 10, 2000, by and between Voxware,
Inc. and Castle Creek Technology Partners, LLC.**(3)
|
|
|
|
|
|
10.5
|
Registration
Rights Agreement, dated as of August 15, 2000, by and between Voxware,
Inc. and Castle Creek Technology Partners, LLC.**(3)
|
|
|
|
|
|
10.6
|
Securities
Purchase Agreement, dated as of April 19, 2001, by and between Voxware,
Inc. and Castle Creek Technology Partners, LLC, together with the form of
Additional Share Warrant attached as an exhibit thereto.**(4)
|
|
|
|
|
|
10.7
|
Registration
Rights Agreement, dated as of April 19, 2001, by and between Voxware, Inc.
and Castle Creek Technology Partners, LLC, together with the form of
Remedy Warrant attached as an exhibit thereto.**(4)
|
|
|
|
|
|
10.8
|
Voxware, Inc.
1998 Stock Option Plan for Outside Directors.**(5)
|
|
|
|
|
|
10.9
|
Voxware, Inc.
Plan to Pay Non-Employee Directors an Annual Retainer.**(5)
|
|
|
|
|
|
10.10
|
Series D
Convertible Preferred Stock Purchase Agreement, dated as of April 16,
2003, by and among Voxware, Inc. and the Purchasers
thereto.**(6)
|
|
|
|
|
|
10.11
|
Exchange
Agreement, dated as of April 16, 2003, by and between Voxware, Inc. and
Castle Creek Technology Partners, LLC**(6).
|
|
|
|
|
|
10.12
|
Exchange
Agreement, dated as of April 16, 2003, by and among Voxware, Inc. and
certain holders of its Series C Convertible Preferred
Stock.**(6)
|
|
|
|
|
|
10.13
|
Exchange
Agreement, dated as of April 16, 2003, by and among Voxware, Inc.,
Creafund n.v., Avvision BVBA, BVBA Com2Wizards, Eurl Val D Auso and Wim
Deneweth.** (6)
|
|
|
|
|
|
10.14
|
Settlement
Agreement, dated as of April 16, 2003, by and between Voxware, Inc. and
Castle Creek Technology Partners, LLC.**(6)
|
|
|
|
|
|
10.15
|
Investor Rights
Agreement, dated as of June 27, 2003, by and between Voxware, Inc. and the
Investors thereto.**(7)
|
|
|
|
|
|
10.16
|
Stockholders
Agreement, dated as of June 27, 2003, by and between Voxware, Inc. and the
Holders and Investors listed on Schedule 1 thereto.**(7)
|
|
|
|
|
|
10.17
|
Voxware, Inc.
2003 Stock Option Plan.**(7)
|
|
|
|
|
|
10.18
|
Form of Voxware,
Inc. Stock Option Agreement.**(7)
|
|
|
|
|
|
10.19
|
Loan and Security
Agreement, dated as of December 29, 2003, by and between Voxware, Inc. and
Silicon Valley Bank.**(8)
|
|
|
|
|
|
10.20
|
Intellectual
Property Security Agreement, dated as of December 29, 2003, by and between
Voxware, Inc. and Silicon Valley Bank.**(8)
|
- 33
-
|
|
10.21
|
Unconditional Guaranty of Edison Venture Fund V, L.P., as
guarantor, dated as of December 29, 2003.**(8)
|
|
|
|
|
|
|
10.22
|
Unconditional Guaranty of Cross Atlantic Technology Fund II, L.P.,
as guarantor, dated as of December 29, 2003.**(8)
|
|
|
|
|
|
|
10.23#
|
Indemnification Agreement, dated June 21, 2004, by and between
Voxware, Inc. and Paul Commons.**(12)
|
|
|
|
|
|
10.24
|
Form of Common Stock Purchase Agreement, dated as of August 11,
2005, by and between Voxware, Inc. and certain accredited
investors.**(10)
|
|
|
|
|
|
10.25
|
Form of Amendment No. 2 to Stockholders Agreement, dated as of
August 11, 2005, by and between Voxware, Inc. and certain accredited
investors.**(10)
|
|
|
|
|
|
10.26
|
Form of Amended and Restated Investor Rights Agreement, dated as of
August 11, 2005, by and between Voxware, Inc. and certain accredited
investors.**(10)
|
|
|
|
|
|
10.27
|
License, Development and Reseller Agreement, dated as of September
26, 2005, by and between Voxware, Inc. and LXE, Inc.**†(15)
|
|
|
|
|
|
10.28
|
Amended and Restated Loan and Security Agreement dated as of
January 3, 2007, and effective as of December 29, 2006 between Silicon
Valley Bank and Voxware, Inc.**(13)
|
|
|
|
|
|
10.29
|
First Loan Modification Agreement dated as of February 1, 2007
between Silicon Valley Bank and Voxware, Inc.**(14)
|
|
|
|
|
|
10.30
|
Loan and Security Agreement dated as of January 3, 2007 and
effective as of December 29, 2006 between Silicon Valley Bank and Voxware,
Inc.** (13)
|
|
|
|
|
|
10.31
|
Amendment to Loan Arrangement with Voxware, Inc., dated as of
January 3, 2007, from Verbex Acquisition Corporation.** (13)
|
|
|
|
|
|
10.32#
|
Executive Employment Agreement, dated as of September 14, 2007,
between Voxware, Inc. and Scott J. Yetter.** (16)
|
|
|
|
|
|
10.33
|
Second Loan Modification Agreement, dated as of February 13, 2008,
and effective as of December 27, 2007, between Silicon Valley Bank and
Voxware, Inc.**(17)
|
|
|
|
|
|
10.34
|
Lease Agreement, dated as of December 3, 2007, by and between
Voxware, Inc. and 240 Princeton TCI Associates, LLC.**(18)
|
|
|
|
|
|
10.35
|
2007 Amendment to 2003 Stock Incentive Plan.**(18)
|
|
|
|
|
|
10.36
|
Waiver and Third Loan Modification Agreement, dated November 17,
2008, by and between the Company and Silicon Valley
Bank.**(19)
|
|
|
|
|
|
10.37
|
Waiver of Fourth Loan Modification Agreement, dated as of February
17, 2009, by and between the Company and Silicon Valley
Bank.**(20)
|
|
|
|
|
|
10.38
|
Fifth Loan Modification Agreement, dated as of May 12, 2009, by and
between the Company and Silicon Valley Bank.**(21)
|
|
|
|
|
|
10.39
|
Sixth Loan Modification Agreement, dated as of June 26, 2009, by
and between the Company and Silicon Valley Bank. *
|
|
|
|
|
|
10.40
|
Securities Purchase Agreement, dated as of June 29, 2009, by and
between the Company and The Co-Investment Fund II, L.P. and Edison Venture
Fund V, L.P.**(22)
|
- 34
-
|
|
10.41
|
Seventh Loan Modification Agreement, dated as of September 9, 2009
by and between the Company and Silicon Valley Bank.**(23)
|
|
|
|
|
|
|
21.1
|
Subsidiaries of the registrant.*
|
|
|
|
|
|
23.1
|
Consent of BDO Seidman, LLP.*
|
|
|
|
|
|
31.1
|
Certification of principal executive officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.*
|
|
|
|
|
|
31.2
|
Certification of the principal financial officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.*
|
|
|
|
|
|
32.1
|
Certification of the principal executive officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|
|
|
|
|
32.2
|
Certification of the principal financial officer pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002.*
|
____________________
|
*
|
|
Filed
herewith.
|
|
|
|
|
|
**
|
|
Previously
filed with the Commission as Exhibits to, and incorporated by reference
from, the following documents:
|
|
|
|
|
|
†
|
|
Portions of
this exhibit have been omitted and filed separately with the Securities
and Exchange Commission pursuant to a request for confidential
treatment.
|
|
|
|
|
|
#
|
|
Management
contract or compensatory plan or arrangement required to be filed as an
exhibit to this Form 10-K.
|
- 35
-
|
(1)
|
|
Filed in connection with the
Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended
December 31, 1998.
|
|
|
|
(2)
|
|
Filed in connection with the
Company’s Registration Statement on Form S-1 (File Number
33-08393).
|
|
|
|
(3)
|
|
Filed in connection with the
Company’s Current Report on Form 8-K that was filed on August 16,
2000.
|
|
|
|
(4)
|
|
Filed in connection with the
Company’s Current Report on Form 8-K that was filed on April 20,
2001.
|
|
|
|
(5)
|
|
Filed in connection with the
Company’s Registration Statement on Form S-8 (File Number
33-33342).
|
|
|
|
(6)
|
|
Filed in connection with the
Company’s Current Report on Form 8-K that was filed on April 17,
2003.
|
|
|
|
(7)
|
|
Filed in connection with the
Company’s Annual Report on Form 10-K for the fiscal year ended June 30,
2003.
|
|
|
|
(8)
|
|
Filed in connection with the
Company’s Current Report on Form 8-K that was filed on January 6,
2004.
|
|
|
|
(9)
|
|
Filed in connection with the
Company’s Current Report on Form 8-K that was filed on May 7,
2004.
|
|
|
|
(10)
|
|
Filed in connection with the
Company’s Current Report on Form 8-K that was filed on August 11,
2005.
|
|
|
|
(11)
|
|
Filed in connection with the
Company’s Current Report on Form 8-K that was filed on November 29,
2005.
|
|
|
|
(12)
|
|
Filed in connection with the
Company’s Annual Report on Form 10-KSB for the fiscal year ended June 30,
2005.
|
|
|
|
(13)
|
|
Filed in connection with the
Company’s Current Report on Form 8-K that was filed on January 8,
2007.
|
|
|
|
(14)
|
|
Filed in connection with the
Company's Quarterly Report on Form 10-QSB for the fiscal quarter ended
December 31, 2006.
|
|
|
|
(15)
|
|
Filed in connection with the
Company's Quarterly Report on Form 10-QSB/A for the fiscal quarter ended
September 30, 2005.
|
|
|
|
(16)
|
|
Filed in connection with the
Company’s Current Report on Form 8-K filed on September 17,
2007.
|
|
|
|
(17)
|
|
Filed in connection with the
Company’s Current Report on Form 8-K filed on October 17,
2007.
|
|
|
|
(18)
|
|
Filed in connection with the
Company’s Quarterly Report on Form 10-QSB for the fiscal quarter ended
December 31, 2008.
|
|
|
|
(19)
|
|
Filed in connection with the
Company’s Current Report on Form 8-K filed on November 21,
2008.
|
|
|
|
(20)
|
|
Filed in connection with the
Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended
December 31, 2008.
|
|
|
|
(21)
|
|
Filed in connection with the
Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 2009.
|
|
|
|
(22)
|
|
Filed in connection with the
Company’s Current Report on Form 8-K filed on July 1, 2009.
|
|
|
|
(23)
|
|
Filed in connection with the
Company’s Current Report on Form 8-K filed on September 14,
2009.
|
- 36
-
SIGNATURES
In accordance with Section 13 or 15(d) of
the Exchange Act, the Registrant caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
|
VOXWARE, INC.
|
|
|
|
|
|
By:
|
/s/ Scott J. Yetter
|
|
|
Scott J. Yetter,
President and Chief Executive Officer
|
Date:
September 28, 2009
- 37
-
In accordance with the Exchange Act, this
report has been signed below be the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
|
Signature
|
|
Title
|
|
Date
|
|
|
|
/s/ Joseph A. Allegra
|
|
Chairman and
Director
|
|
September 28,
2009
|
|
Joseph A.
Allegra
|
|
|
|
|
|
|
|
/s/ Scott J. Yetter
|
|
President and
Chief Executive Officer
|
|
September 28,
2009
|
|
Scott J.
Yetter
|
|
(principal executive officer)
|
|
|
|
|
|
/s/ William G. Levering,
III
|
|
Chief Financial
Officer
|
|
September 28,
2009
|
|
William G.
Levering, III
|
|
(principal financial and principal
accounting officer)
|
|
|
|
|
|
/s/ James L. Alexandre
|
|
Director
|
|
September 28,
2009
|
|
James L.
Alexandre
|
|
|
|
|
|
|
|
/s/ Donald R. Caldwell
|
|
Director
|
|
September 28,
2009
|
|
Donald R.
Caldwell
|
|
|
|
|
|
|
|
/s/ Don Cohen
|
|
Director
|
|
September 28,
2009
|
|
Don
Cohen
|
|
|
|
|
|
|
|
/s/ Robert Olanoff
|
|
Director
|
|
September 28,
2009
|
|
Robert
Olanoff
|
|
|
|
|
|
|
|
/s/ David J. Simbari
|
|
Director
|
|
September 28,
2009
|
|
David J.
Simbari
|
|
|
|
|
- 38
-
VOXWARE, INC. AND
SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS
|
Consolidated Financial Statements:
|
|
|
Report of Independent
Registered Public Accounting Firm
|
F-2
|
|
Consolidated Balance Sheets as of June 30, 2009 and 2008
|
F-3
|
|
Consolidated Statements
of Operations for the years ended June 30, 2009 and 2008
|
F-4
|
|
Consolidated Statements of Stockholders’ Equity for the years ended
June 30, 2009 and 2008
|
F-5
|
|
Consolidated Statements
of Cash Flows for the years ended June 30, 2009 and 2008
|
F-6
|
|
Summary
of Accounting Policies and Notes to Consolidated Financial
Statements
|
F-7
|
F-1
Report of Independent Registered Public
Accounting Firm
Board of Directors and
Stockholders
Voxware, Inc.
Hamilton, New
Jersey
We have audited the accompanying
consolidated balance sheets of Voxware, Inc. and subsidiaries (the “Company”) as
of June 30, 2009 and 2008 and the related consolidated statements of operations,
stockholders’ equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the
financial position of Voxware, Inc. and subsidiaries at June 30, 2009 and 2008,
and the results of their operations and their cash flows for the years then
ended, in conformity with accounting principles generally accepted in the United
States of America.
|
|
/s/
BDO Seidman, LLP
|
|
Bethesda,
Maryland
|
|
|
September 28, 2009
|
|
F-2
Voxware, Inc. and
Subsidiaries
Consolidated Balance Sheets
(in thousands, except share
data)
|
|
June 30, 2009
|
|
June 30, 2008
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
4,342
|
|
|
$
|
3,503
|
|
|
Accounts receivable, net of allowance for doubtful accounts of $158
and
|
|
|
|
|
|
|
|
|
$201 at June 30, 2009 and June 30, 2008,
respectively
|
|
3,350
|
|
|
|
6,134
|
|
|
Inventory, net
|
|
564
|
|
|
|
533
|
|
|
Deferred project costs
|
|
33
|
|
|
|
163
|
|
|
Prepaid expenses and other current assets
|
|
337
|
|
|
|
380
|
|
|
Total current assets
|
|
8,626
|
|
|
|
10,713
|
|
|
|
|
PROPERTY AND EQUIPMENT, NET
|
|
454
|
|
|
|
663
|
|
|
OTHER
ASSETS
|
|
184
|
|
|
|
316
|
|
|
TOTAL ASSETS
|
$
|
9,264
|
|
|
$
|
11,692
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
$
|
525
|
|
|
$
|
566
|
|
|
Accounts payable and accrued expenses
|
|
2,541
|
|
|
|
3,305
|
|
|
Current portion of deferred revenues
|
|
2,365
|
|
|
|
3,043
|
|
|
Total current liabilities
|
|
5,431
|
|
|
|
6,914
|
|
|
Long-term portion of deferred revenues
|
|
85
|
|
|
|
105
|
|
|
Long-term debt, net of current maturities
|
|
163
|
|
|
|
375
|
|
|
Total liabilities
|
|
5,679
|
|
|
|
7,394
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Common Stock, $0.001 par value, 12,000,000 shares authorized as
of
|
|
|
|
|
|
|
|
|
June 30, 2009 and June 30, 2008; 8,007,766
and 6,488,529
|
|
|
|
|
|
|
|
|
shares issued and outstanding at June 30,
2009 and
|
|
|
|
|
|
|
|
|
June 30, 2008, respectively
|
|
8
|
|
|
|
6
|
|
|
Additional paid-in capital
|
|
83,143
|
|
|
|
79,032
|
|
|
Accumulated deficit
|
|
(79,566
|
)
|
|
|
(74,740
|
)
|
|
Total stockholders' equity
|
|
3,585
|
|
|
|
4,298
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$
|
9,264
|
|
|
$
|
11,692
|
|
See accompanying summary of accounting
policies and notes to consolidated financial statements.
F-3
Voxware, Inc. and
Subsidiaries
Consolidated Statements of Operations
(in thousands, except
per share data)
|
|
Year Ended June 30,
|
|
|
2009
|
|
2008
|
|
REVENUES
|
|
|
|
|
|
|
|
|
Product revenues
|
$
|
8,643
|
|
|
$
|
17,173
|
|
|
Services revenues
|
|
5,884
|
|
|
|
6,211
|
|
|
Total revenues
|
|
14,527
|
|
|
|
23,384
|
|
|
|
|
COST OF REVENUES
|
|
|
|
|
|
|
|
|
Cost of product revenues
|
|
3,321
|
|
|
|
5,835
|
|
|
Cost of services revenues
|
|
2,974
|
|
|
|
3,718
|
|
|
Total cost of revenues
|
|
6,295
|
|
|
|
9,553
|
|
|
|
|
GROSS PROFIT
|
|
8,232
|
|
|
|
13,831
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
Research and development
|
|
3,686
|
|
|
|
3,830
|
|
|
Sales and marketing
|
|
5,321
|
|
|
|
6,019
|
|
|
General and administrative
|
|
4,020
|
|
|
|
3,414
|
|
|
Total operating expenses
|
|
13,027
|
|
|
|
13,263
|
|
|
|
|
OPERATING (LOSS) PROFIT
|
|
(4,795
|
)
|
|
|
568
|
|
|
|
|
INTEREST (EXPENSE) INCOME, NET
|
|
(28
|
)
|
|
|
24
|
|
|
|
|
(LOSS) PROFIT BEFORE INCOME TAXES
|
|
(4,823
|
)
|
|
|
592
|
|
|
|
|
PROVISION FOR INCOME TAXES
|
|
(3
|
)
|
|
|
(7
|
)
|
|
|
|
NET (LOSS) PROFIT
|
$
|
(4,826
|
)
|
|
$
|
585
|
|
|
|
|
NET (LOSS) PROFIT PER SHARE
|
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.74
|
)
|
|
$
|
0.09
|
|
|
Diluted
|
$
|
(0.74
|
)
|
|
$
|
0.08
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF SHARES USED IN
|
|
|
|
|
|
|
|
|
COMPUTING NET
(LOSS) PROFIT PER SHARE
|
|
|
|
|
|
|
|
|
Basic
|
|
6,532
|
|
|
|
6,417
|
|
|
Diluted
|
|
6,532
|
|
|
|
7,139
|
|
See accompanying summary of accounting
policies and notes to consolidated financial statements.
F-4
Voxware, Inc. and
Subsidiaries
Consolidated Statements of Stockholders' Equity
(in
thousands, except share data)
|
|
Common
|
|
Par Value
|
|
|
|
|
|
|
|
|
|
|
Stock Number
|
|
$.001
|
|
Additional
|
|
Accumulated
|
|
Accumulated Other
|
|
|
|
|
of Shares
|
|
Amount
|
|
Paid-in Capital
|
|
Deficit
|
|
Comprehensive Loss
|
|
Total
|
|
Balance, June 30, 2007
|
6,368,963
|
|
|
$
|
6
|
|
$
|
78,088
|
|
|
$
|
(75,325
|
)
|
|
$
|
(17
|
)
|
|
$
|
2,752
|
|
|
Share-based
compensation
|
-
|
|
|
|
-
|
|
|
898
|
|
|
|
-
|
|
|
|
-
|
|
|
|
898
|
|
|
Exercise of stock options
|
58,774
|
|
|
|
-
|
|
|
46
|
|
|
|
-
|
|
|
|
-
|
|
|
|
46
|
|
|
Issuance of
restricted stock units
|
60,792
|
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit
|
-
|
|
|
|
-
|
|
|
-
|
|
|
|
585
|
|
|
|
-
|
|
|
|
585
|
|
|
Foreign
currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustment
|
-
|
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
17
|
|
|
|
17
|
|
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
602
|
|
|
Balance, June 30, 2008
|
6,488,529
|
|
|
$
|
6
|
|
$
|
79,032
|
|
|
$
|
(74,740
|
)
|
|
$
|
-
|
|
|
$
|
4,298
|
|
|
Share-based
compensation
|
-
|
|
|
|
-
|
|
|
1,617
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,617
|
|
|
Issuance of common stock for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
cash
|
1,428,571
|
|
|
|
1
|
|
|
2,499
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,500
|
|
|
Exercise of
stock options
|
2,500
|
|
|
|
1
|
|
|
4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5
|
|
|
Issuance of restricted stock units
|
94,080
|
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Repurchase of
restricted stock units
|
(5,914
|
)
|
|
|
-
|
|
|
(9
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(9
|
)
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
-
|
|
|
|
-
|
|
|
-
|
|
|
|
(4,826
|
)
|
|
|
-
|
|
|
|
(4,826
|
)
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,826
|
)
|
|
Balance, June
30, 2009
|
8,007,766
|
|
|
$
|
8
|
|
$
|
83,143
|
|
|
$
|
(79,566
|
)
|
|
$
|
-
|
|
|
$
|
3,585
|
|
See accompanying summary of accounting
policies and notes to consolidated financial statements.
F-5
Voxware, Inc. and
Subsidiaries
Consolidated Statements of Cash Flows
(in
thousands)
|
|
Year Ended June 30,
|
|
|
2009
|
|
2008
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net (loss) profit
|
$
|
(4,826
|
)
|
|
$
|
585
|
|
|
Adjustments to reconcile net (loss) profit to net cash used in
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
300
|
|
|
|
279
|
|
|
Bed debt expense
|
|
62
|
|
|
|
136
|
|
|
Share-based compensation
|
|
1,617
|
|
|
|
898
|
|
|
Recognition of foreign currency translation adjustment upon
liquidation of Voxware, n.v.
|
|
-
|
|
|
|
17
|
|
|
Changes in
assets and liabilities:
|
|
|
|
|
|
|
|
|
(Increase) decrease in assets:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
2,722
|
|
|
|
(1,032
|
)
|
|
Inventory
|
|
(31
|
)
|
|
|
513
|
|
|
Deferred project costs
|
|
130
|
|
|
|
105
|
|
|
Prepaid expenses and other current
assets
|
|
43
|
|
|
|
(173
|
)
|
|
Other assets
|
|
132
|
|
|
|
(263
|
)
|
|
Increase (decrease) in liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued
expenses
|
|
(764
|
)
|
|
|
(720
|
)
|
|
Deferred revenues
|
|
(698
|
)
|
|
|
(579
|
)
|
|
Net cash used in operating
activities
|
|
(1,313
|
)
|
|
|
(234
|
)
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
(91
|
)
|
|
|
(583
|
)
|
|
Net cash used in investing
activities
|
|
(91
|
)
|
|
|
(583
|
)
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from long-term debt
|
|
451
|
|
|
|
-
|
|
|
Repayment of long-term debt
|
|
(704
|
)
|
|
|
(687
|
)
|
|
Repurchase of restricted stock units
|
|
(9
|
)
|
|
|
-
|
|
|
Proceeds from issuance of common stock
|
|
2,500
|
|
|
|
-
|
|
|
Proceeds from exercise of stock options
|
|
5
|
|
|
|
46
|
|
|
Net cash provided by (used in) financing
activities
|
|
2,243
|
|
|
|
(641
|
)
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
839
|
|
|
|
(1,458
|
)
|
|
CASH AND CASH
EQUIVALENTS, BEGINNING OF YEAR
|
|
3,503
|
|
|
|
4,961
|
|
|
CASH AND CASH EQUIVALENTS, END OF YEAR
|
$
|
4,342
|
|
|
$
|
3,503
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid for
interest
|
$
|
71
|
|
|
$
|
120
|
|
See accompanying summary of accounting
policies and notes to consolidated financial statements.
F-6
SUMMARY OF ACCOUNTING POLICIES AND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
1. THE COMPANY AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES:
Nature of Business
Operations
Voxware, Inc. and subsidiaries (“Voxware”,
or the “Company”) is a leading provider of software for voice recognition
solutions that direct the work of the warehouse workforce. Warehouse workers,
wearing headsets with microphones, speak back and forth to the Company’s voice
applications. Since these workers can now work “hands and eyes free” when
performing a wide array of tasks such as picking, putaway, and receiving, worker
productivity typically increases while errors can be reduced. Voxware 3 offers
multiple languages so companies can leverage non-native speaking workers.
The Company’s primary software product is
Voxware 3. Voxware 3 is a unique product in the supply chain market as it
combines 1) a studio for designing and configuring voice solutions, 2) an open,
standards-based environment and 3) a patented software technology for managing
speech recognition within a web browser architecture. By using technology that
leverages open, web-centric standards to integrate voice solutions within their
overall IT infrastructures with a system that is configurable and adaptable,
Voxware’s customers can respond to change rapidly. Thus, the Company finds its
customers achieve benefits faster with less cost since systems can be
implemented more rapidly using less resources.
A complete voice recognition solution
combines software, hardware and professional services. The primary focus and the
core of Voxware’s business is the software component of the solution. Customers
may choose from a variety of certified hardware devices, which may or may not be
supplied by Voxware. Customers may also choose to have solutions delivered by
receiving services from the Company or from its certified partners that also
resell the Voxware solution. Therefore, the software that both enables voice
recognition and also facilitates the creation of voice applications or workflows
is the foundation of the Company’s business.
The Company sells Voxware 3 primarily to
large companies that operate warehouses and distribution centers. Voxware’s
customers come from a variety of industry sectors, including food service,
grocery, retail, consumer packaged goods, automotive parts, third-party
logistics, publishing and wholesale distribution. The Company’s technology has
the ability to integrate easily with an external warehouse management system, or
WMS.
The Company also sells software and some
hardware accessories to value-added resellers, or VARs, who in turn develop and
deliver voice solutions based on Voxware software for their
customers.
Voxware’s revenues are generated primarily
from software license fees, maintenance fees, professional services and hardware
products sales to both end customers and VARs.
The European customers accounted for 28%
and 35% of the Company’s total revenue for fiscal years 2009 and 2008,
respectively.
The Company’s operating results may
fluctuate significantly in the future as a result of a variety of factors,
including the Company’s ability to compete in the voice-based logistics market,
the budgeting cycles of potential customers, the lengthy sales cycle of the
Company’s solutions, the volume of and revenues derived from sales of products
utilizing our third-party partners network, the introduction of new products or
services by the Company or its competitors, pricing changes in the industry, the
degree of success of the Company’s efforts to penetrate its target markets,
technical difficulties with respect to the use of products developed by the
Company or its licensees and general economic conditions.
Summary of Significant Accounting
Policies
Use of Estimates
The preparation of financial statements
and related disclosures in conformity with accounting principles generally
accepted in the United States of America requires management to make judgments,
assumptions and estimates that affect the amounts reported in the Company’s
consolidated financial statements and accompanying notes. The Company bases its
estimates and judgments on historical experience and on various other
assumptions that it believes are reasonable under the circumstances. However,
future events are subject to change, and the best estimates and judgments
routinely require adjustment. The amounts of assets and liabilities reported in
the Company’s consolidated balance sheets, and the amounts of revenues and
expenses reported for each of its fiscal periods, are affected by estimates and
assumptions which are used for, but not limited to, the accounting for the
allowance for doubtful accounts, warranty costs, impairments, inventory,
share-based compensation and income taxes. Actual results could differ from
these estimates.
F-7
Principles of
Consolidation
The accompanying consolidated financial
statements include the financial statements of Voxware, Inc. and its
wholly-owned subsidiaries, Verbex Acquisition Corporation, Voxware (UK) Limited
and Voxware n.v. All significant inter-company balances and transactions have
been eliminated in consolidation. Voxware (UK) Limited was established during
fiscal year 2008 in conjunction with the Company’s decision to invest additional
resources to sell to and service customers in Europe. Voxware N.V. was dissolved
in fiscal year 2008.
Revenue Recognition
Revenues are generated from licensing
application software, selling related computer hardware and accessories,
providing extended hardware warranty and providing services, including
professional deployment, configuration, customized application development,
training services, software maintenance and technical support services.
Product revenues consist of software
license fees, sales of related computer hardware and accessories and extended
hardware warranties. Revenues from the licensing of software is recognized when
(i) a signed contract or other persuasive evidence of an arrangement exists;
(ii) the product has been shipped or electronically delivered; (iii) the license
fee is fixed and determinable; and (iv) collection of the resulting receivable
is probable. This generally occurs upon shipment of software or completion of
the implementation, if applicable, provided collection is determined to be
probable and there are no significant post-delivery obligations. If an
acceptance period is required to ensure satisfactory delivery of the application
software solution, as may occur for the initial site implementation for new
direct-sales customers, revenues are recognized upon customer acceptance.
Revenues from the sale of hardware and accessories are generally recognized upon
shipment. Agreements with some direct customers do not include an acceptance
period, so revenues from the sale of hardware and accessories and licensing of
software in these transactions are recognized upon shipment. Extended hardware
warranty revenues are recognized ratably over the life of the contract, which is
generally either one year or three years. Channel partner revenue is recognized
when the above four criteria are met. For the collectibility criterion, revenue
from each channel partner is deferred until cash is collected unless a pattern
of collectibility is established through actual transactions with each specific
channel partner.
Services revenues consist of professional
deployment, configuration, customized application development, training
services, software maintenance and technical support services. Professional
services revenues are generally recognized as the services are performed. For
arrangements in which professional services are provided in conjunction with
software, professional services revenues generated by services provided prior to
delivery of software is deferred until delivery of all software. Revenues from
maintenance and technical support, which typically consist of unspecified
when-and-if-available product updates and customer telephone support services,
is recognized ratably over the term of the service period, which is generally
one year.
The Company recognizes revenue in
accordance with the American Institute of Certified Public Accountants Statement
of Position (“SOP”) No. 97-2, “Software Revenue Recognition”, as amended by SOP
No. 98-9. SOP 97-2, as amended, requires that revenue recognized from multiple
element arrangements that include software licenses be allocated to the various
elements of the arrangement based on the fair values of the elements, such as
hardware, deployment services and maintenance and technical support services.
The Company follows the residual method of accounting under SOP 97-2, as
amended. Under the residual method, the aggregate arrangement fee is allocated
to each of the undelivered elements in an amount equal to their fair values,
with the residual arrangement fee allocated to the delivered elements. The fair
value of the undelivered elements included in the Company’s multi-element sales
arrangements is based on vendor specific objective evidence, or VSOE. The fair
value of elements not essential to the functioning of the software, including
hardware units and related accessories, are calculated in accordance with
Financial Accounting Standards Board Emerging Issues Task Force (“EITF”) No.
00-21, “Revenue Arrangements with Multiple Deliverables”.
Under EITF 00-21, the Company determines
the VSOE of fair value of hardware elements based on the price when they are
sold separately. The Company determines VSOE of the fair values of maintenance
and technical support based on annual renewal rates provided to customers and
for professional services based on standard hourly rates when such services are
provided on a stand-alone basis. As of June 30, 2009, the Company believes that
it has realized VSOE of the fair values for hardware, maintenance and
professional services.
Deferred revenues consist of unearned
customer deposits, extended hardware warranties, depot management service fees
and post contract support (“PCS”) arrangements. Customer deposits are recognized
as revenue upon customer acceptance of the underlying product and services in
conjunction with the recognition of deferred project costs. PCS arrangements
include software maintenance revenues. These arrangements, which sometimes
include amounts bundled with initial revenues, are deferred upon invoicing and
recognized as revenues over the term of the service period, which is typically
one year. Revenues from extended hardware warranties are recognized over the
term of the warranty, which is typically one year. Certain extended hardware
warranty arrangements have a three year term. Revenues from depot management
services, which were provided through December 2007, were recognized over the
contract period.
F-8
The Company continues to generate royalty
revenues from our legacy speech compression technology business, which was sold
in 1999. Royalties are earned on technologies our customers incorporate into
their products for resale pursuant to contracts that are renewable year to year.
Revenues are recognized at the time of the customers’ shipment of those
products, as estimated based upon reports received periodically from our
customers.
Travel costs associated with professional
services and billed to customers are recorded as services revenues at the time
they are incurred by Voxware. Services revenues included billed travel costs
totaling $189,000 and $297,000, respectively, during the years ended June 30,
2009 and 2008.
Research and Development
Research and development expenditures are
charged to operations as incurred. Pursuant to Statement of Financial Accounting
Standards (“SFAS”) No. 86, “Accounting for the Cost of Computer Software to be
Sold, Leased or Otherwise Marketed”, development costs incurred in connection
with the research and development of software products and enhancements to
existing software products are charged to expense as incurred until
technological feasibility has been established, at which time such costs are
capitalized until the product is available for general release to customers. The
Company defines technological feasibility as the point at which there is a
completed working model of the software product, the completeness of which is to
be confirmed by testing.
According to SFAS 86,
the working model is generally deemed to exist with commencement of beta
testing. No costs associated with the development of software products were
capitalized during the years ended June 30, 2009 and 2008 as technological
feasibility is achieved substantially at the time the software is released for
general sale to our customers.
Net (Loss) Profit Per
Share
The Company computes net (loss) profit per
share under the provisions of SFAS No. 128, “Earnings per Share” (“SFAS 128”).
Basic net (loss) profit per share is calculated by dividing net (loss) profit by
the weighted average number of shares of common stock outstanding during the
period. Diluted net (loss) profit per share is calculated by dividing net (loss)
profit by the weighted average number of shares of common stock outstanding for
the period, adjusted to reflect the dilutive impact of potential shares of
common stock outstanding during the period. As the Company had a net loss for
the year ended June 30, 2009, the impact of the assumed exercise of in-the-money
stock options and warrants in the aggregate amount of approximately 398,000
shares at June 30, 2009 is anti-dilutive and as such, these amounts have been
excluded from the calculation of diluted net profit (loss) per share. The impact
at June 30, 2008 of the assumed exercise of in-the-money stock options and
warrants in the aggregate amount of approximately 722,000 shares is included in
the calculation of diluted net profit (loss) per share for the year ended June
30, 2008.
Cash and Cash Equivalents
Cash and cash equivalents consist of
investments in highly liquid short-term instruments (short-term bank deposits
and commercial paper) with maturities of 90 days or less from the date of
purchase.
Accounts Receivable and Credit
Policies
Accounts receivable are uncollateralized
customer obligations due under normal trade terms generally requiring payment
within 30 days, depending on contractual terms. Unpaid accounts do not bear
interest. Accounts receivable are stated at the amount billed to the customer.
Payments of accounts receivable are allocated to the specific invoices
identified on the customer’s remittance advice or, if unspecified, are applied
to the earliest unpaid invoice.
The carrying amount of accounts receivable
is reduced by a valuation allowance that reflects management’s best estimate of
the amounts that will not be collected. Management reviews certain specific
accounts receivable balances and, based on an assessment of the collectibility
of specific customer accounts and an assessment of international and economic
risk, estimates the portion, if any, of the balance that will not be collected.
All other accounts have a general reserve percentage applied to their balance
based on the age of the receivable. The Company performed a detailed review of
the allowance for doubtful accounts as of June 30, 2008. Bad debt expense for
the year ended June 30, 2008 in the amount of $136,000 is net of a reduction of
$94,000 resulting from the review of the allowance for doubtful accounts at that
date.
Inventory
We value our inventory at the lower of
average cost (which approximates first-in, first-out cost) or net realizable
value. If we believe that demand no longer allows us to sell our inventory above
cost or at all, we write down that inventory to net realizable value or write
off excess inventory levels.
F-9
Property and Equipment
Property and equipment are stated at cost.
Purchases of property and equipment valued at less than $1,000 are charged to
expense. Depreciation is computed on a straight-line basis over the estimated
useful lives of the assets, ranging from three to seven years. Maintenance,
repairs and minor replacements are charged to expense as incurred.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets,
including property and equipment, for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be fully
recoverable. To determine the recoverability of its long-lived assets, the
Company evaluates the estimated future undiscounted cash flows that are directly
associated with, and that are expected to arise as a direct result of, the use
and eventual disposition of the long-lived asset. If the estimated future
undiscounted cash flows demonstrate that recoverability is not probable, an
impairment loss would be recognized. An impairment loss would be calculated
based on the excess carrying amount of the long-lived asset over its fair
value.
Share-Based Compensation
The Company accounts for share-based
compensation in accordance with SFAS No. 123(R), “Share-Based Payment”, which
requires all companies to measure compensation cost for all share-based
payments, including employee stock options and other equity awards, at fair
value. The values of the portions of the awards that are ultimately expected to
vest are recognized as expense over the requisite service periods. Compensation
expense associated with equity awards is determined based on the estimated fair
value of the award itself, measured using either current market data or an
established option pricing model. The Company uses the Black-Scholes option
pricing model to determine the fair value of option awards and the market value
on the date of the grant to determine the fair value of other equity awards. The
measurement date for option and other equity awards is the date of grant.
Warranty
The Company warrants all manufacturer
defects on its voice-based solutions, generally commencing upon shipment, and
extending for twelve months. The Company accrues warranty costs based on
historical experience and management’s estimates. Changes in accrued warranty
costs were as follows:
|
|
Balance at
|
|
Charged
to
|
|
|
|
Balance at
|
|
|
Beginning of
|
|
Costs
and
|
|
|
|
End of
|
|
|
Period
|
|
Expenses
|
|
Deductions
|
|
Period
|
|
|
(In thousands)
|
|
Year ended June 30, 2008
|
$
|
73
|
|
92
|
|
95
|
|
$
|
70
|
|
Year ended June
30, 2009
|
|
70
|
|
45
|
|
65
|
|
|
50
|
Concentration of Credit
Risk
Financial instruments that potentially
subject the Company to concentration of credit risk consist principally of cash
balances and trade receivables. The Company invests its excess cash in highly
liquid investments (short-term bank deposits and commercial paper). The
Company’s customer base principally comprises distribution and logistics
companies in food service, grocery, retail, consumer packaged goods, third-party
logistics providers, wholesale distributors, as well as value-added resellers.
The Company does not typically require collateral from its customers.
One customer accounted for 16% and 18% of
total revenue for the fiscal years ended June 30, 2009 and 2008, respectively.
Two separate customers accounted for 15% and 11% of total receivables at June
30, 2009. No customer accounted for more then 10% of total receivables at June
30, 2008.
The Company uses a sole source vendor for
its primary wearable computer hardware products that it sells. 55% of the
Company’s inventory purchases were derived from this vendor during the year
ended June 30, 2009, as compared to 61% during the year ended June 30, 2008. Any
disruption in supply by this vendor would prohibit the Company from shipping
products, and thus recognizing revenues on hardware.
Income Taxes
There are significant differences in
calculating income or loss for accounting and tax purposes, primarily relating
to charges that are recorded in the current period for accounting purposes, but
are deferred for tax purposes. Furthermore, tax laws differ in each
jurisdiction, yielding differing amounts of taxable income or loss in each
jurisdiction. While Voxware has substantial net operating losses to offset
taxable income in some taxing jurisdictions, certain restrictions may preclude
it from fully utilizing the benefit of these net operating losses. In addition,
the expansion of the Company’s business requires it to file taxes in
jurisdictions where it did not previously operate, and thus does not have
established net operating losses to offset the tax liability.
F-10
Deferred income tax assets and liabilities
are determined based on differences between the financial statement reporting
and tax basis of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to
reverse. The measurement of deferred income tax assets is reduced, if necessary,
by a valuation allowance for any tax benefits that are not expected to be
realized. The effect of a change in tax rates on deferred income tax assets and
liabilities is recognized in the period that such tax rate changes are enacted.
The Company adopted the provisions of
Financial Accounting Standards Board Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes – An interpretation of FASB Statement No. 109” (“FIN
48”) on July 1, 2007. As a result of the implementation of FIN 48, no adjustment
in the liability for unrecognized income tax benefits was recognized.
The Company recognizes interest and
penalties related to uncertain tax positions in income tax expense. As of June
30, 2009, there was no accrued interest related to uncertain tax positions.
Foreign Currency
Translation
The Company’s wholly-owned subsidiary,
Voxware n.v., which was dissolved during the year ended June 30, 2008, utilized
its local currency (Euro) as its functional currency. Its assets and liabilities
were translated into U.S. dollars monthly, at exchange rates as of the balance
sheet date. Revenues, expenses, gains and losses were translated monthly, at
average exchange rates during the period. Resulting foreign currency translation
adjustments were included as a component of other comprehensive (loss) income.
The Company incorporated Voxware (UK)
Limited (“Voxware UK”) as a wholly-owned subsidiary during the year ended June
30, 2008. Voxware UK’s functional currency is deemed to be the U.S. dollar.
Assets and liabilities denominated in foreign currencies are translated into
U.S. dollars monthly, at exchange rates as of the balance sheet date, with any
adjustment recorded as an increase or decrease to general and administrative
expense.
Comprehensive (Loss) Income
The Company has adopted SFAS No. 130,
“Reporting Comprehensive Income” ("SFAS 130"). Comprehensive income is a more
inclusive financial reporting methodology that includes disclosure of certain
financial information that historically has not been recognized in the
calculation of net (loss) profit. SFAS 130 requires that all items defined as
comprehensive income (loss), including changes in the amounts of unrealized
gains and losses on available-for-sale securities, be shown as a component of
comprehensive (loss) income. The entire accumulated comprehensive loss of
$17,000 recorded as of June 30, 2007 was recognized as general and
administrative expenses upon the dissolution of Voxware, n.v. during the year
ended June 30, 2008.
Fair Value of Financial Instruments
Fair value is defined under SFAS No. 157,
“Fair Value Measurements”, as the exchange price that would be received for an
asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. Valuation techniques used to
measure fair value under SFAS No. 157 must maximize the use of observable inputs
and minimize the use of unobservable inputs. The standard describes a fair value
hierarchy based on three levels of inputs, of which the first two are considered
observable and the third unobservable, that may be used to measure fair value
which are the following:
-
Level 1 – Quoted prices in active markets for
identical assets or liabilities.
-
Level 2 – Inputs other than Level 1 that are
observable, either directly or indirectly, such as quoted prices for similar
assets or liabilities; quoted prices in markets that are not active; or other
inputs that are observable or can be corroborated by observable market data
for substantially the full term of the assets or liabilities.
-
Level 3 – Unobservable inputs that are supported
by little or no market activity and that are significant to the fair value of
the assets or liabilities.
The Company has adopted SFAS No. 157 for
financial assets and liabilities. The adoption of SFAS No. 157 had no impact on
the Company’s consolidated results of operations and financial
condition.
F-11
At June 30, 2009, the Company held
$1,423,000 in money market funds which are valued in accordance with Level 1 and
are included in cash and cash equivalents. The Company has outstanding debt as
at June 30, 2009 aggregating $688,000, which is at variable interest rates. The
Company believes that the carrying value approximates fair value of the debt as
at June 30, 2009.
Recently Issued Accounting
Pronouncements
In June 2008, the FASB ratified the
consensus reached on EITF Issue No. 07-05, “Determining Whether an Instrument
(or Embedded Feature) Is Indexed to an Entity’s Own Stock” (“EITF 07-05”). EITF
07-05 clarifies the determination of whether an instrument (or an embedded
feature) is indexed to an entity’s own stock, which would qualify as a scope
exception under SFAS No. 133, “Accounting for Derivative Instruments and Hedging
Activities”. We will adopt EITF 07-5 effective July 1, 2009, and we do not
expect it to have a material impact on our consolidated financial statements.
In May 2009, the FASB issued Statement of
Financial Accounting Standards No. 165, Subsequent Events (“SFAS 165”), which
provides guidance to establish general standards of accounting for and
disclosures of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. SFAS 165 also
requires entities to disclose the date through which subsequent events were
evaluated as well as the rationale for why that date was selected. SFAS 165 is
effective for interim and annual periods ending after June 15, 2009.
Accordingly, the Company has adopted the provisions of SFAS 165 and the adoption
has not had a material impact on our consolidated financial statements. In
accordance with SFAS 165, the Company has evaluated subsequent events through
September 28, 2009, the date of issuance of the Consolidated Financial
Statements. During the period from July 1, 2009 to September 28, 2009, the
Company did not have any material recognizable subsequent events other than
those disclosed in Note 13.
In July 2009, the FASB issued Statement of
Financial Accounting Standards No. 168, the FASB Accounting Standards
Codification
TM
and the Hierarchy of Generally Accepted Accounting
Principles — a replacement of FASB Statement No. 162 (SFAS 168). With the
issuance of SFAS 168, the FASB Accounting Standards Codification (Codification)
becomes the single source of authoritative U.S. accounting and reporting
standards applicable for all nongovernmental entities, with the exception of
guidance issued by the Securities and Exchange Commission (SEC). The
Codification does not change current U.S. GAAP, but changes the referencing of
financial standards, and is intended to simplify user access to authoritative
U.S. GAAP by providing all the authoritative literature related to a particular
topic in one place. The Codification is effective for interim and annual periods
ending after September 15, 2009, and is effective for the Company’s first
quarter of 2010. At that time, all references made to U.S. GAAP will use the new
Codification numbering system prescribed by the FASB. The Company is currently
evaluating the impact to the Company’s financial reporting process of providing
Codification references in the Company’s public filings. However, as the
Codification is not intended to change or alter existing US GAAP, it is not
expected to have any impact on the Company’s consolidated financial position or
results of operations.
In September 2009, the EITF reached a
consensus on Issue 08-1, Revenue Arrangements with Multiple Deliverables (“EITF
08-1”). EITF 08-1 replaces and significantly changes certain guidance in EITF
00-21. EITF 08-1 modifies the separation criteria of EITF 00-21, by eliminating
the criterion for objective and reliable evidence of fair value for the
undelivered products or services. Instead, revenue arrangements with multiple
deliverables should be divided into separate units of accounting if the
deliverables meet both of the following criteria:
-
The delivered items have value to the customer on
a standalone basis
-
If the arrangement includes a general right of
return relative to the delivered items, delivery or performance of the
undelivered items is considered probable and
substantially in the control of the vendor.
The Issue eliminates the use of the
residual method of allocation and requires, instead, that arrangement
consideration be allocated, at the inception of the arrangement, to all
deliverables based on their relative selling price (i.e., the relative selling
price method). When applying the relative selling price method, a hierarchy is
used for estimating the selling price for each of the deliverables, as
follows:
-
Vendor-specific objective evidence (VSOE) of the
selling price – verifiable specific objective evidence
-
Third-party evidence (TPE) of the selling price –
prices of the vendor’s or any competitor’s largely interchangeable
products
or services, in standalone sales to
similarly situated customers
-
Best estimate of the selling price.
The Company will adopt EITF 08-1 effective
July 1, 2010. The Company is currently evaluating the impact to the Company’s
consolidated financial statements.
In September 2009, the EITF reached a
consensus on Issue 09-3, Certain Revenue Arrangements That Include Software
Elements (“EITF 09-3”). Per EITF 09-3, all tangible products containing both
software and non-software components, that function together to deliver the
product’s essential functionality, will no longer be within the scope of SOP
97-2. In other words, entities that sell joint hardware and software products
that meet the scope exception (i.e., essential functionality) will be required
to follow the guidance in Issue 08-1. The Issue provides a list of items to
consider when determining whether the software and non-software components
function together to deliver a product’s essential functionality.
F-12
The Company will adopt EITF 09-3 effective
July 1, 2010. The Company is currently evaluating the impact to the Company’s
consolidated financial statements.
2. INVENTORY:
|
|
June 30, 2009
|
|
June 30, 2008
|
|
|
(in thousands)
|
|
Raw materials
|
$
|
6
|
|
|
$
|
16
|
|
|
Work in
process
|
|
15
|
|
|
|
16
|
|
|
Finished goods
|
|
558
|
|
|
|
516
|
|
|
Less: inventory
reserve
|
|
(15
|
)
|
|
|
(15
|
)
|
|
Inventory - net
|
$
|
564
|
|
|
$
|
533
|
|
3. PROPERTY AND EQUIPMENT:
|
|
June 30,
|
|
|
2009
|
|
2008
|
|
|
(in thousands)
|
|
Equipment
|
$
|
2,305
|
|
|
$
|
2,216
|
|
|
Leasehold
improvements
|
|
50
|
|
|
|
48
|
|
|
Furniture and fixtures
|
|
641
|
|
|
|
641
|
|
|
|
|
2,996
|
|
|
|
2,905
|
|
|
Less: Accumulated depreciation
|
|
(2,542
|
)
|
|
|
(2,242
|
)
|
|
Property and
equipment, net
|
$
|
454
|
|
|
$
|
663
|
|
Depreciation expense was approximately
$300,000 and $279,000 for the fiscal years ended June 30, 2009 and 2008,
respectively.
4. ACCOUNTS PAYABLE AND ACCRUED
EXPENSES:
|
|
June 30,
|
|
|
2009
|
|
2008
|
|
|
(in thousands)
|
|
Accounts payable - trade
|
$
|
596
|
|
$
|
746
|
|
Accrued
compensation and benefits
|
|
925
|
|
|
1,269
|
|
Accrued professional fees
|
|
307
|
|
|
312
|
|
Accrued
taxes
|
|
132
|
|
|
269
|
|
Accrued inventory
|
|
67
|
|
|
151
|
|
Accrued
royalties
|
|
79
|
|
|
102
|
|
Warranty reserves
|
|
50
|
|
|
70
|
|
Other accrued
expenses
|
|
385
|
|
|
386
|
|
Accounts payable and accrued expenses
|
$
|
2,541
|
|
$
|
3,305
|
F-13
During the fourth quarter of fiscal year 2008,
Voxware conducted an extensive review of accrued expenses. The review
considered, among other factors, the age of recorded liabilities, the likelihood
of a liquidating event, and the most likely value of payments to be made in
satisfaction of the liabilities. As a result of this review, accrued expenses
were reduced by an aggregate of $349,000 comprised of reductions of $47,000 to
accrued professional fees, $17,000 to accrued inventory, $1,000 to accrued
royalties and $284,000 to other accrued expenses. These adjustments are recorded
as reductions to the following expenses for the year ended June 30,
2008:
|
|
|
Expense
|
|
|
|
Reduction for
|
|
|
|
the Year Ended
|
|
|
|
June 30, 2008
|
|
|
|
(in thousands)
|
|
Cost of product revenues
|
|
$
|
18
|
|
Research and
development
|
|
|
18
|
|
Sales and marketing
|
|
|
179
|
|
General and
administrative
|
|
|
134
|
|
|
|
$
|
349
|
5. DEBT:
The Company initially entered into a
credit facility with Silicon Valley Bank (“SVB”) on December 30, 2003. The
following facilities were outstanding during fiscal years 2008 and 2009:
A $1,000,000 equipment line of credit
(“Equipment Line”) secured by all of the Company’s personal property was first
drawn upon on December 16, 2005. The Company was required to make interest-only
payments, at a rate of prime plus 1.75%, on the principal balance through May 9,
2006, at which point the Equipment Line was converted into a term loan with 30
fixed monthly payments of approximately $16,000. Effective May 9, 2006, the
interest rate was fixed at 9.5%. The unpaid principal balance outstanding as of
June 30, 2009 and 2008 was $0 and $66,000, respectively.
On May 24, 2006, the Company entered into
a Loan and Security Agreement with SVB (“2006 Facility”), providing an
additional $3,000,000 credit facility comprised of a $1,500,000 revolving line
of credit ("Revolver") and a $1,500,000 Non-Formula Term Loan ("2006 Term Loan")
to fund the Company's anticipated working capital needs. The Revolver created by
the 2006 Facility was initially available until October 31, 2007. It was
extended to February 11, 2009 by the SLMA. The Revolver provides for a line of
credit up to $1,500,000, with a $1,000,000 sub-limit to be established for cash
management and foreign exchange requirements. As of June 30, 2009, amounts
outstanding under the Revolver bear interest at the rate of 7%, calculated as
the greater of 7% or prime plus 3%. In addition, a fee of 0.25% is charged
against the unused portion of the Revolver. No funds were borrowed against the
Revolver at June 30, 2009 or June 30, 2008. The Revolver was initially available
until October 31, 2007. The 2006 Term Loan is to be repaid in 36 equal monthly
payments of principle and interest, commencing on April 1, 2007, and had an
outstanding balance of $375,000 at June 30, 2009 and $875,000 at June 30, 2008.
Monthly principle payments total approximately $42,000. Amounts outstanding
under the 2006 Term Loan bear interest at June 30, 2009 at a rate of 7%,
calculated as the greater of 7% or prime plus 3%, as established by the waiver
and Third Loan Modification Agreement (“TLMA”) with SVB executed on November 17,
2008.
On February 13, 2008, with an effective
date of December 27, 2007, the Company entered into a second loan modification
agreement (“SLMA”) with SVB, providing for a new $600,000 revolving equipment
line of credit (“Equipment Revolver”). The availability under the Equipment
Revolver was limited to a borrowing base advance rate that is equal to 100%
against the invoice value of new Eligible Equipment (as defined in the SLMA).
The draw down period for the Equipment Revolver expired May 31, 2008, but was
extended by SVB to July 31, 2008. Originally, amounts advanced under the
Equipment Revolver bore interest at a rate equal to the greater of (a) 6.75% and
(b) the amount equal to the prime rate plus 1.0%. This rate was revised to the
greater of 7% or prime plus 3% by the TLMA. The repayment of the funds drawn
against the Equipment Revolver will be made in 36 equal monthly payments of
principal and interest beginning August 1, 2008. The outstanding balance on the
Equipment Revolver was $313,000 at June 30, 2009 and $0 at June 30,
2008.
On February 17, 2009, the Company entered
into a Waiver and Fourth Loan Modification Agreement that, among other things,
waived a loan covenant violation that existed at December 31, 2008, and extended
the maturity of the Revolver until March 31, 2009. In addition, the Waiver and
Fourth Loan Modification Agreement revised certain outstanding financial
covenants under the 2006 Facility, including minimum net loss thresholds. On May
12, 2009, with an effective date of March 31, 2009, the Company entered into a
Fifth Loan Modification Agreement which extended the maturity of the Revolver
until May 31, 2009, and set financial covenants for the period ending May 31,
2009. On June 26, 2009, with an effective date of June 1, 2009, the Company
entered into a Sixth Loan Modification Agreement which extended the Revolver
until July 31, 2009. On September 9, 2009, the Company entered in to a Seventh
Loan Modification Agreement which extends the maturity, lowers the interest rate
to prime plus 2.25% and provides covenants of the Revolver until July 30, 2010.
(See Footnote 13 – Subsequent Events).
F-14
Future minimum payments under the credit facility are
as follows as of June 30, 2009 (in thousands):
|
|
|
Silicon Valley Bank
|
|
|
|
|
|
2006 Term
|
|
Equipment
|
|
|
|
|
|
Loan
|
|
Revolver
|
|
Total
|
|
Short Term
|
|
$
|
375
|
|
$
|
150
|
|
$
|
525
|
|
Long
Term
|
|
|
-
|
|
|
163
|
|
|
163
|
|
Total Debt
|
|
$
|
375
|
|
$
|
313
|
|
$
|
688
|
6. COMMON STOCK AND COMMON STOCK
WARRANTS:
The Company had 12,000,000 authorized
shares of Common Stock as of June 30, 2008 and 2009.
On June 29, 2009, the Company entered into
a Securities Purchase Agreement (the “Securities Purchase Agreement”) with
Co-Investment Fund II, L.P. (a Cross Atlantic Technology Fund entity) and Edison
Venture Fund V, L.P., pursuant to which the Company issued and sold an aggregate
of 1,428,571 shares (the “Shares”) of the Company’s common stock, $0.001 par
value per share (the “Common Stock”), at a purchase price of $1.75 per share,
and warrants to purchase up to 142,857 shares (the “Warrant Shares”) of Common
Stock, which will not be exercisable until six (6) months after the date of
issuance and shall expire three (3) years from the date of issuance, at an
exercise price of $2.50 per share (the “Warrant”).
Under the terms of the Securities Purchase
Agreement, Edison Venture Fund V, L.P. purchased 285,714 shares of Common Stock
and warrants to purchase 28,571 shares of Common stock and Co-Investment Fund
II, L.P. purchased 1,142,857 shares of Common Stock and warrants to purchase
114,286 shares of Common Stock. The private placement closed on June 30, 2009.
The Company received gross proceeds equal to $2,500,000. The securities sold in
this private placement have not been registered under the Securities Act of
1933, as amended (the “Securities Act”), and may not be offered or sold in the
United States in the absence of an effective registration statement or exemption
from the registration requirements under the Securities Act. The Company
evaluated the transaction under the relevant accounting literature and
determined that the Warrant Shares should be classified as permanent equity.
As of June 30, 2009, the Company had
warrants outstanding to purchase 1,298,331 shares of the Company’s Common Stock
at exercise prices ranging from $0.15 per share to $5.76 per share. All of the
warrants outstanding as of June 30, 2009 were granted in conjunction with
private equity transactions occurring between 2003 and 2009. A summary of the
Company’s outstanding warrants as of June 30, 2009 is presented below:
|
|
|
|
|
Weighted
|
|
|
|
|
|
Average
|
|
|
|
Number
of
|
|
Exercise Price
|
|
Expiration
Date
|
|
Shares
|
|
Per Share
|
|
August 2010
|
|
43,527
|
|
$
|
5.432
|
|
June 2012
|
|
142,857
|
|
|
2.500
|
|
June 2013
|
|
67,223
|
|
|
2.250
|
|
December 2013
|
|
888,890
|
|
|
2.250
|
|
April 2014
|
|
155,834
|
|
|
0.150
|
|
Total Warrants Outstanding
|
|
1,298,331
|
|
$
|
2.132
|
Annual Stock Grant Retainer to
Directors
In January 1998, the Company’s Board of
Directors and stockholders approved a plan which provides for the granting to
non-employee directors options to purchase shares of Common Stock. Each calendar
year in which the Company holds an Annual Meeting of Stockholders, each
non-employee director can receive options valued at $10,000 based on the market
price of the Company’s Common Stock, as defined in the plan. For the fiscal
years ended June 30, 2009, and 2008, there were no shares of Common Stock
granted pursuant to this plan. However, non-employee directors received options
to purchase an aggregate of 5,000 and 17,334 shares of Common Stock pursuant to
a 2003 Option Plan approved by the Company’s stockholders, respectively, during
the years ended June 30, 2009 and 2008. (See Note 7 below.)
Since April 2001, all non-employee
directors have volunteered to not be paid for attending any regular or special
meeting of any committee of the Board of Directors until further notice.
Accordingly, the Company has not accrued any charges during the period pursuant
to this plan for the grant of Common Stock for attendance by members of the
Board of Directors at any regular or special meeting of any committee of the
Board of Directors.
F-15
7. STOCK OPTIONS AND SHARE-BASED
COMPENSATION:
Stock Option Plans
As of June 30, 2009, options to purchase
1,108,216 shares of Common Stock were outstanding under plans approved by the
Company’s stockholders in 1994 and 2003 and amended by the Company’s
stockholders in December 2007 (the “Option Plans”). In addition, 31,982 options
are available for grant under the Option Plans.
Information regarding option activity for
the years ended June 30, 2009 and 2008 under the Option Plans is summarized
below:
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Weighted
|
|
Average
|
|
|
|
|
|
|
|
Average
|
|
Remaining
|
|
Aggregate
|
|
|
|
Options
|
|
Exercise Price
|
|
Contractual
|
|
Instrinsic
|
|
|
|
Outstanding
|
|
Per Share
|
|
Term in Years
|
|
Value
|
|
Options outstanding as of June 30, 2007
|
|
596,440
|
|
|
$
|
5.421
|
|
|
|
|
|
|
Granted
|
|
504,603
|
|
|
|
5.825
|
|
|
|
|
|
|
Exercised
|
|
(100,249
|
)
|
|
|
2.940
|
|
|
|
|
|
|
Forfeited
|
|
(73,431
|
)
|
|
|
4.263
|
|
|
|
|
|
|
Expired
|
|
(13
|
)
|
|
|
665.625
|
|
|
|
|
|
|
Options
outstanding as of June 30, 2008
|
|
927,350
|
|
|
|
6.057
|
|
|
|
|
|
|
Granted
|
|
254,750
|
|
|
|
1.279
|
|
|
|
|
|
|
Exercised
|
|
(2,500
|
)
|
|
|
1.710
|
|
|
|
|
|
|
Forfeited
|
|
(70,214
|
)
|
|
|
5.241
|
|
|
|
|
|
|
Expired
|
|
(1,170
|
)
|
|
|
178.200
|
|
|
|
|
|
|
Options outstanding as of June 30, 2009
|
|
1,108,216
|
|
|
$
|
4.839
|
|
7.80
|
|
$
|
-
|
|
|
|
Options exercisable as of June 30, 2009
|
|
629,103
|
|
|
$
|
5.912
|
|
7.03
|
|
$
|
-
|
|
|
|
Options exercisable as of June 30, 2009 and
|
|
|
|
|
|
|
|
|
|
|
|
|
options expected to become exercisable
|
|
1,044,950
|
|
|
$
|
4.969
|
|
7.73
|
|
$
|
-
|
Aggregate intrinsic value of $0 was
calculated based on the Company’s closing Common Stock price as of June 30, 2009
of $1.94 per share. Options exercisable as of June 30, 2009 and options expected
to become exercisable includes vested options and nonvested options less
expected forfeitures.
A summary of the status of the Company’s
nonvested options and restricted stock units as of June 30, 2009 and June 30,
2008 and changes during the years then ended is presented below:
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
|
Average
|
|
Restricted
|
|
Average
|
|
|
|
Options
|
|
Grant-Date
|
|
Stock Units
|
|
Grant-Date
|
|
|
|
Outstanding
|
|
Fair Value
|
|
Outstanding
|
|
Fair Value
|
|
Outstanding as of June 30, 2007
|
|
101,083
|
|
|
$
|
392,176
|
|
|
-
|
|
|
$
|
-
|
|
|
Granted
|
|
436,934
|
|
|
|
2,373,393
|
|
|
305,586
|
|
|
|
1,888,623
|
|
|
Vested
|
|
(114,344
|
)
|
|
|
(594,316
|
)
|
|
(60,792
|
)
|
|
|
(435,104
|
)
|
|
Forfeited
|
|
(1,666
|
)
|
|
|
(10,190
|
)
|
|
-
|
|
|
|
-
|
|
|
Outstanding as of June 30, 2008
|
|
422,007
|
|
|
|
2,161,063
|
|
|
244,794
|
|
|
|
1,453,519
|
|
|
Granted
|
|
254,750
|
|
|
|
340,561
|
|
|
-
|
|
|
|
-
|
|
|
Vested
|
|
(170,644
|
)
|
|
|
(844,475
|
)
|
|
(88,166
|
)
|
|
|
(552,751
|
)
|
|
Forfeited
|
|
(27,000
|
)
|
|
|
(109,337
|
)
|
|
(5,914
|
)
|
|
|
(38,777
|
)
|
|
Outstanding as of June 30, 2009
|
|
479,113
|
|
|
$
|
1,547,812
|
|
|
150,714
|
|
|
$
|
861,990
|
|
F-16
Share-Based Compensation
The Company awarded a total of 0 and
305,586 restricted stock units (“RSUs”) to certain officers during the years
ended June 30, 2009 and 2008, respectively. The RSUs were granted pursuant to
the 2003 Plan and vest on a monthly basis. The vesting periods on the RSU grants
range from three to four years. The fair value of the RSUs range from $4.39 to
$6.95 per share, for a total fair value of $1,889,000. Share-based compensation
charges associated with the RSUs were recorded in the amount of $592,000 and
$435,000 for the years ended June 30, 2009 and 2008, respectively. No RSUs were
granted prior to the year ended June 30, 2008.
The Company records the issuance of shares
of Common Stock as RSUs vest. During the years ended June 30, 2009 and 2008,
94,080 shares and 60,792 shares, respectively, of Common Stock were issued as a
result of the vesting of RSUs.
The statement of operations includes total
share-based employee compensation charges resulting from stock option and RSU
awards in the amount of $1,617,000 for the year ended June 30, 2009 and $898,000
for the year ended June 30, 2008. At June 30, 2009, the Company’s actual
forfeiture rate was lower than originally estimated. Also, the Company was not
recording the compensation cost to equal the portion of the grant-date value of
the award that was vested during the year. As such the Company corrected the
error and recorded a cumulative adjustment during the fourth quarter of fiscal
2009 to increase the share-based compensation change by an additional $344,000.
Of this amount, $205,000 pertained to years prior to 2009 and $139,000 pertained
to the earlier quarters in 2009. The Company determined that the effect on prior
periods was not material. Amounts charged to operations are as follows:
|
|
|
Year Ended
|
|
|
|
June 30,
|
|
|
|
2009
|
|
2008
|
|
|
|
(in thousands)
|
|
Research and development
|
|
$
|
144
|
|
$
|
86
|
|
Sales and
marketing
|
|
|
316
|
|
|
181
|
|
General and administrative
|
|
|
1,157
|
|
|
631
|
|
|
|
$
|
1,617
|
|
$
|
898
|
As of June 30, 2009 and 2008, the Company
had $1,893,000 and $2,893,000, respectively of unrecognized compensation expense
that will be recognized as share-based compensation over a weighted average
period of 1 year. The weighted average per share fair value of stock options
granted was $1.34 and $5.43, respectively, during the years ended June 30, 2009
and 2008.
The Black-Scholes option valuation model
was developed for use in estimating the fair value of traded options, which have
no vesting restrictions and are fully transferable. In addition, option
valuation models require the input of subjective assumptions including the
expected stock price volatility. The Company’s employee stock options have
characteristics different from those of traded options, and changes in the
subjective input assumptions can materially affect the fair value estimate.
The fair value of each option granted
during the years ended June 30, 2009 and 2008 is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted average
assumptions:
|
|
|
Year Ended June 30,
|
|
|
|
2009
|
|
2008
|
|
Dividend yield
|
|
-
|
|
-
|
|
Expected
volatility
|
|
134 -
235%
|
|
134 -
145%
|
|
Risk-free interest rate
|
|
1.79% - 3.49%
|
|
2.85% - 4.33%
|
|
Expected
life
|
|
6.1
years
|
|
6.1 years
|
F-17
Dividend yield – The Company has never
declared or paid any cash dividends on its Common Stock and does not expect to
do so in the foreseeable future. Accordingly, the Company uses an expected
dividend yield of zero to calculate the grant-date fair value of a stock
option.
Expected volatility – The expected
volatility is a measure of the amount by which the Company’s Common Stock price
is expected to fluctuate during the expected term of options granted. SFAS
123(R) provides that expected volatility should be based upon the historical
volatility of the Company’s Common Stock, but adjusted based upon the expected
impact of changes in the business.
Risk-free interest rate – The risk-free
interest rate is the implied yield available on U.S. Treasury zero-coupon issues
with a remaining term equal to the option’s expected term on the grant date.
Since the U.S. Treasury Department does not issue zero-coupon securities with
maturity periods equal to the presumed expected life of the Company’s
outstanding options, the risk-free interest rate is interpolated based on rates
reported by the U.S. Treasury Department for securities with maturities shorter
than and longer than the expected life of the Company’s outstanding options.
Expected life –The expected life of stock
options granted is based on the simplified method prescribed under Staff
Accounting Bulletin (“SAB”) 107. Accordingly, the expected term is presumed to
be the midpoint between the vesting term and the original contract term.
The Company recognizes compensation
expense on a straight-line basis over the requisite service period based upon
options that are ultimately expected to vest, and accordingly, such compensation
expense has been adjusted by an amount of estimated forfeitures. Forfeitures
represent only the nonvested portion of a surrendered option. SFAS 123(R)
requires forfeitures to be estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from those
estimates. However the estimation of forfeitures requires significant judgment,
and to the extent actual results or updated estimates differ from the Company’s
current estimates, such amounts will be recorded as a cumulative adjustment in
the period in which estimates are revised. For the year ended June 30, 2009, the
Company estimates annual forfeiture rates of 5.24% for stock options and 0% for
restricted stock units. As of June 30, 2009, there are nonvested options for
approximately 478,000 shares and management estimates approximately 75,000 will
ultimately be forfeited.
8. 401(k) SAVINGS PLAN:
Effective January 1997, the Company
adopted a 401(k) Savings Plan ("401(k) Plan") that is available to all
employees. The 401(k) Plan permits participants to contribute up to 85% of their
base salary, pre-tax, not to exceed the limits established by the Internal
Revenue Code. Beginning January 1, 2009, the Company matches 25% of employee
contributions on the initial 6% contributed by employees.
All employee contributions and Company
match contributions vest immediately. The Company recorded $30,000 and $0 of
compensation expense in connection with the 401(k) Plan for the fiscal years
ended June 30, 2009 and 2008, respectively.
9. COMMITMENTS AND CONTINGENCIES:
The Company leases its office facilities
and certain equipment under operating leases with remaining non-cancelable lease
terms generally in excess of one year. Rent expense, including escalations, was
approximately $535,000 and $497,000 for the fiscal years ended June 30, 2009 and
2008, respectively. Future minimum rental payments for the Company’s office
facilities and equipment under operating leases as of June 30, 2009 are as
follows:
|
Year ending June 30,
|
|
(in thousands)
|
|
2010
|
|
$
|
431
|
|
2011
|
|
|
442
|
|
2012
|
|
|
423
|
|
2013
|
|
|
256
|
|
2014
|
|
|
3
|
|
|
|
$
|
1,555
|
In May, 2008, the Company moved its
corporate headquarters into office facilities located in Hamilton, New Jersey in
accordance with a five-year Lease Agreement. The Lease Agreement provides for
total base rental payments of $1,160,442 ($222,616 in the first year of the
lease, $227,352 in the second year of the lease, $232,088 in the third year of
the lease, $236,825 in the fourth year of the lease, and $241,561 in the last
year of the lease). The Lease Agreement provides that the above annual amounts
be paid in equal monthly installments.
F-18
The Company is subject to various legal
proceedings and claims, either asserted or unasserted, which arise in the
ordinary course of business. While the outcome of these claims cannot be
predicted with certainty, management does not believe that the outcome of any of
these legal matters will have a material adverse effect on the Company’s
business, operating results or financial condition.
The Company has one-year employment
agreements with two of its officers. The agreements extend annually unless
terminated by either the employee or Company at least 90 days prior to the
scheduled renewal date. The agreements provide for minimum salary levels,
adjusted annually at the discretion of the Board of Directors, and a bonus based
upon the Company’s performance as measured against a business plan approved by
the Company’s Board of Directors.
10. INCOME TAXES:
The provision for income taxes was $3,000
and $7,000 for the years ended June 30, 2009 and 2008, respectively. The
provision for income taxes is primarily the result of federal and state
alternative minimum tax regulations, which prevent the Company from fully
utilizing its net operating losses.
The Company and its wholly-owned domestic
subsidiaries are subject to U.S. federal income tax as well as income tax of
multiple state jurisdictions. The Company’s subsidiary based in the United
Kingdom is subject to income taxes imposed by the United Kingdom. The Company
had no accumulated earnings in the United Kingdom.
The tax years 2005-2008 remain open to
examination by the major taxing jurisdictions to which the Company is subject.
However, due to net operating loss (“NOL”) carryforwards, the Internal Revenue
Service (“IRS”) is permitted to recompute income from a closed year in order to
determine the NOL carryforward allowable in an open year. The Company has
operated at a loss since inception; therefore, NOL carryforwards are available
from 1995 through 2008, and these NOL carryforwards expire in the years 2011
through 2028. The cumulative unused NOL carryforward at June 30, 2009 was
approximately $16,000,000. Additionally, there are research credit carryforwards
from 1996 through 2002 that total approximately $866,000. As with the NOLs, the
IRS is permitted to recompute the research credit from a closed year in order to
determine the tax due in an open year.
The Tax Reform Act of 1986 enacted a
complex set of rules limiting the potential utilization of net operating loss
and tax credit carry-forwards in periods following a corporate “ownership
change.” In general, for federal income tax purposes, an ownership change is
deemed to occur if the percentage of stock of a loss corporation owned
(actually, constructively and, in some cases, deemed) by one or more “5%
shareholders” has increased by more than 50 percentage points over the lowest
percentage of such stock owned during a three-year testing period. During 2003,
such a change in ownership occurred. As a result of the change, the Company’s
ability to utilize certain of its net operating loss carry-forwards that were
generated prior to ownership changes will be limited.
A deferred tax asset or liability is
recorded for NOL carryforwards, research credit carryforwards and temporary
differences in the bases of assets and liabilities for book and tax based on
enacted rates expected to be in effect when these temporary items are expected
to reverse. The Company established a 100% valuation allowance against its net
deferred tax assets based on estimates and certain tax planning strategies.
Valuation allowances are provided to the extent it is more likely than not that
all or a portion of the deferred tax assets will not be realized.
F-19
Deferred tax assets reflect the impact of
temporary differences as follows:
|
|
|
June 30,
|
|
(in thousands)
|
|
2009
|
|
2008
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
Net operating loss
carryforwards
|
|
$
|
7,376
|
|
|
$
|
5,725
|
|
|
Depreciation and
amortization
|
|
|
3,169
|
|
|
|
3,661
|
|
|
Allowances and reserve
accounts
|
|
|
335
|
|
|
|
353
|
|
|
Accrued expenses
|
|
|
604
|
|
|
|
593
|
|
|
Deferred balances
|
|
|
1,342
|
|
|
|
1,385
|
|
|
Research and development
credit
|
|
|
866
|
|
|
|
866
|
|
|
Total deferred
tax assets
|
|
|
13,692
|
|
|
|
12,583
|
|
|
Valuation Allowance
|
|
|
(13,673
|
)
|
|
|
(12,564
|
)
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
Capitalized software
|
|
|
(19
|
)
|
|
|
(19
|
)
|
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
A reconciliation of the Company’s
effective tax rate to the statutory federal rate for the years ended June 30,
2009 and 2008 is as follows:
|
|
|
Year Ended June 30,
|
|
|
|
2009
|
|
2008
|
|
Federal statutory rate
|
|
35.0
|
%
|
|
35.0
|
%
|
|
State taxes, net
of federal
|
|
0.0
|
|
|
20.4
|
|
|
Foreign taxes
|
|
-2.4
|
|
|
8.3
|
|
|
Other
|
|
-0.8
|
|
|
4.6
|
|
|
Reduction to deferred tax asset
|
|
0.0
|
|
|
-25.6
|
|
|
Valuation
allowance
|
|
-31.8
|
|
|
-41.5
|
|
|
|
|
0.0
|
%
|
|
1.2
|
%
|
11. SEGMENT INFORMATION:
Voxware’s international operations team
headquartered in the United Kingdom serves all customers outside of North
America. International operations, which historically focus primarily on the
United Kingdom, contributed 28% of the Company’s revenues during the year ended
June 30, 2009, as compared to 35% during the year ended June 30, 2009. As of
June 30, 2009, Voxware’s international operations team consisted of 10 employees
located in the United Kingdom and France. Long-lived assets supporting the
international operations, consisting of computer hardware and furniture and
fixtures, were not a material component of total long-lived assets as of June
30, 2009 and 2008.
F-20
12. COST RESTRUCTURING
In December 2008, the Company reduced its
staff to bring costs more in line with anticipated revenues. In conjunction with
the staff reduction, 13 positions were eliminated in December (including one
part-time position) and one position was eliminated in February 2009. Employment
termination charges totaling $92,000 were expensed during the year ended June
30, 2009, all of which was paid during the period. Of the termination charges,
$82,000 was related to North American operations and $10,000 was related to
international operations.
The following charges associated with the
staff reductions are included in the consolidated statement of operations:
|
|
|
Year Ended
|
|
|
|
June 30,
|
|
|
|
2009
|
|
|
|
(in thousands)
|
|
Cost of product revenues
|
|
$
|
-
|
|
Cost of service
revenues
|
|
|
35
|
|
Research and development
|
|
|
27
|
|
Sales and
marketing
|
|
|
18
|
|
General and administrative
|
|
|
12
|
|
|
|
$
|
92
|
13. SUBSEQUENT EVENTS:
In accordance with the Company’s adoption
of SFAS No. 165, the Company evaluated all events or transactions that occurred
after June 30, 2009 up through September 28, 2009, the date the Company issued
these consolidated financial statements. Based on that evaluation, we have
determined no material events or transactions occurred after June 30, 2009 up
through September 28, 2009 that would affect the June 30, 2009 consolidated
financial statements.
On September 9, 2009, the Company entered
into a Seventh Loan Modification Agreement that, among other things, extended
the maturity of the Revolver until July 30, 2010 and lowered the interest rate
to prime plus 2.25%. In addition, this modification revised certain financial
covenants under the Loan Agreement.
F-21
Grafico Azioni Voxware (MM) (NASDAQ:VOXW)
Storico
Da Mag 2024 a Giu 2024
Grafico Azioni Voxware (MM) (NASDAQ:VOXW)
Storico
Da Giu 2023 a Giu 2024
