As Reported By Business Wire - Voxware Announces Fiscal 2006 Year End and Fourth Quarter Results

PRINCETON, N.J.--(BUSINESS WIRE)--Sept. 1, 2006--Voxware, Inc. (NASDAQ Capital Market: VOXW), a leading supplier of voice-driven logistics solutions, announced preliminary financial results for the quarter and twelve months ended June 30, 2006.

Three Months Ended June 30, 2006 2005 % Change ------ ------ ---------- (positive numbers indicate favorable (in thousands) variance, numbers in () indicate unfavorable variance) Total Revenues $3,485 $5,340 (35)% Net Income/(Loss) applicable to common stockholders $(3,699) $(145) (2,451)% Twelve Months Ended June 30, 2006 2005 % Change ------ ------ ---------- (positive numbers indicate favorable variance, numbers in () indicate unfavorable variance) Total Revenues $15,478 $17,502 (12)% Net Income/(Loss) applicable to common stockholders $(6,843) $(1,456) (370)%

Revenues for the twelve months ended June 30, 2006 were $15.5 million, down 12% from $17.5 million in 2005, with a corresponding operating loss equal to $6.9 million. After the exclusion of $4.1 million in amortization of deferred employee compensation associated with stock option issuances and acceleration of vesting (a non-cash item), 2006 operating loss was $2.8 million (a non-GAAP measure). Voxware believes this non-GAAP measure is a more representative measure of overall financial health of the Company because it is more closely correlated to cash flow.

Tom Drury, Voxware President and CEO, said, "2006 was a transitional year for Voxware. The company began execution of a multi-year strategy to reposition Voxware as a leading provider of speech recognition enabled software for the logistics industry. In so doing, Voxware partnered with LXE Inc. to transition its hardware business to LXE, engaged development of a partner led sales strategy with Symbol Technologies, Inc, RedPrairie Corporation, and Infologix Inc., amongst others, and invested $3.2 million in research and development of its next generation software products, featuring VoiceLogistics Pro(TM). The combination of these activities negatively impacted the near term financial performance of the business, but in management's view, best positions the company for future revenue and profit growth."

Details of the company's quarterly and twelve month financial results are as follows:

Revenues for the fiscal fourth quarter increased to $3.5 million, up 30% from $2.7 million in the third quarter of 2006, although down $1.9 million from fiscal 2005 fourth quarter. Total operating expenses for fiscal 2006 fourth quarter were $5.6 million, up 70% from $3.3 million in the third quarter of 2006, and up 93% from $2.9 million in the fourth quarter of 2005. The increase in operating expenses over the third quarter of 2006 was due primarily to approximately $2.5 million in deferred compensation, a non-cash charge associated with accelerating the vesting of employee stock options. Without acceleration this would be expensed over future periods as the underlying stock options vested. The increase in costs over the prior year's quarter reflects not only the deferred compensation charge, but also increased spending in R&D and Sales & Marketing associated with developing a new product line, VoiceLogistics Pro, and development of a partner led sales channel. The company expects to continue this increased level of spending to take advantage of the use of voice in the logistics market place over the coming years. With the acceleration of selected employee options, future periods will not be charged with deferred compensation associated with these options. Net loss applicable to common stockholders for the fourth quarter increased to $3.7 million or $0.59 per diluted share, compared to $0.1 million or $0.32 per diluted share in the fourth quarter of 2005.

Net loss applicable to common stockholders for the full year increased to $6.8 million or $1.22 per diluted share, compared to $1.5 million or $3.78 per diluted share in 2005. The improvement in the per share loss is primarily due to the conversion of preferred shares into common stock during the year.

About Voxware

Voxware's corporate headquarters are in Princeton, New Jersey, with operating offices in Cambridge, Massachusetts and the United Kingdom. Additional information about Voxware can be obtained on the Internet at www.voxware.com.

This news release may contain forward-looking statements. Such statements are subject to certain factors that may cause Voxware's plans to differ or results to vary from those expected including the risks associated with Voxware's need to introduce new and enhanced products and services in order to increase market penetration and the risk of obsolescence of its products and services due to technological change; Voxware's need to attract and retain key management and other personnel with experience in providing integrated voice-based solutions for logistics, specializing in the supply chain sector; the potential for substantial fluctuations in Voxware's results of operations; competition from others; Voxware's evolving distribution strategy and dependence on its distribution channels; the potential that speech products will not be widely accepted; Voxware's need for additional capital; and a variety of risks set forth from time to time in Voxware's filings with the Securities and Exchange Commission. Voxware undertakes no obligation to publicly release results of any of these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unexpected results. >br>
Voxware, Inc. and Subsidiaries Consolidated Balance Sheets (unaudited) (in thousands, except share data) June 30, June 30, 2006 2005 -------- -------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 6,909 $ 3,639 Accounts receivable, net of allowance for doubtful accounts of $184 and $116 at June 30, 2006 and June 30, 2005, respectively 2,394 2,408 Inventory, net 629 616 Deferred project costs 54 150 Prepaids and other current assets 85 61 --------- --------- Total current assets 10,071 6,874 PROPERTY AND EQUIPMENT, NET 388 238 OTHER ASSETS Deferred financing costs, net 88 266 Capitalized software development costs 45 - Other assets, net 54 36 --------- --------- Total other assets 187 302 --------- --------- TOTAL ASSETS $ 10,646 $ 7,414 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt $ 503 $ 666 Line of credit 1,300 1,000 Accounts payable and accrued expenses 2,312 3,103 Deferred revenues 1,951 1,501 --------- --------- Total current liabilities 6,066 6,270 Long-term debt, net of current maturities 253 334 --------- --------- Total liabilities 6,319 6,604 --------- --------- STOCKHOLDERS' EQUITY 7% cumulative Series D Convertible Preferred Stock, $0.001 par value, ($9,744 aggregate liquidation preference at June 30, 2005); 649,621,940 shares issued and outstanding at June 30, 2005 - 650 Common Stock, $0.001 par value, 12,000,000 and 1,500,000,000 shares authorized as of June 30, 2006 and June 30, 2005, respectively; 6,262,844 and 521,354 shares issued and outstanding at June 30, 2006 and June 30, 2005, respectively 6 1 Additional paid-in capital 77,753 70,795 Accumulated deficit (73,389) (66,626) Deferred compensation (40) (4,022) Accumulated other comprehensive (loss) gain (3) 12 --------- --------- Total stockholders' equity 4,327 810 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,646 $ 7,414 ========= =========

Financial statements should be read in conjunction with the Notes to Consolidated Financial Statements contained in Forms 10-KSB and 10-QSB.

Voxware, Inc. and Subsidiaries Consolidated Statements of Operations (unaudited) (in thousands, except per share data)

Three Months Year Ended Ended June 30, June 30, ---------------- ------------------ 2006 2005 2006 2005 -------- ------- -------- --------- REVENUES Product revenues $ 2,571 $4,063 $11,922 $13,859 Services revenues 914 1,277 3,556 3,643 -------- ------- -------- --------- Total revenues 3,485 5,340 15,478 17,502 -------- ------- -------- --------- COST OF REVENUES Cost of product revenues 998 1,102 3,952 4,380 Cost of service revenues 603 1,236 3,351 3,685 -------- ------- -------- --------- Total cost of revenues 1,601 2,338 7,303 8,065 -------- ------- -------- --------- GROSS PROFIT 1,884 3,002 8,175 9,437 -------- ------- -------- --------- OPERATING EXPENSES Research and development 760 692 3,160 2,274 Sales and marketing 1,408 965 5,091 2,985 General and administrative 596 797 2,756 2,992 Amortization of deferred employee compensation 2,854 398 4,062 1,630 -------- ------- -------- --------- Total operating expenses 5,618 2,852 15,069 9,881 -------- ------- -------- --------- OPERATING LOSS (3,734) 150 (6,894) (444) OTHER (EXPENSES) INCOME Interest expense, net of interest income 2 (62) (45) (247) Gain on sale of tax loss carryforwards - - 248 - Other (expenses) income, net 33 (61) (52) (69) -------- ------- -------- --------- NET LOSS BEFORE INCOME TAXES (3,699) 27 (6,743) (760) PROVISION FOR INCOME TAXES - - (20) - -------- ------- -------- --------- NET LOSS (3,699) 27 (6,763) (760) Dividends-Series D Convertible Preferred Stock - (172) (80) (696) -------- ------- -------- --------- NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $(3,699) $ (145) $(6,843) $(1,456) ======== ======= ======== ========= NET LOSS PER SHARE APPLICABLE TO COMMON STOCKHOLDERS Basic and diluted $ (0.59) $(0.32) $ (1.22) $ (3.78) ======== ======= ======== ========= WEIGHTED AVERAGE NUMBER OF SHARES USED IN COMPUTING NET LOSS PER COMMON SHARE Basic and diluted 6,263 460 5,596 386 ======== ======= ======== =========

Financial statements should be read in conjunction with the Notes to Consolidated Financial Statements contained in Forms 10-KSB and 10-QSB.