<PAGE>

================================================================================


                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                          --------------------------
                                   FORM 10-K
                          --------------------------

[x]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 (Fee Required) For the fiscal year ended December
         31, 1999
                                       or
[_]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 (No Fee Required) For the transition period from
         ___________ to ___________

                        Commission file number: 0-26394

                        LANGUAGEWARE.NET (COMPANY) LTD.
--------------------------------------------------------------------------------
            (Exact Name of Registrant as Specified in its Charter)

<TABLE>
  <S>                                                 <C>
                      Israel                                             N/A
----------------------------------------------------  -------------------------------------------
  (State or Other Jurisdiction of Incorporation or        (I.R.S. Employer Identification No.)
                   Organization)
</TABLE>

                            102 South Tejon Street
                                   Suite 320
                       Colorado Springs, Colorado 80903
                                 719-955-3400

  (Address, Including Zip Code, and Telephone Number, Including Area Code, of
        Registrant's Principal Executive Offices) Securities registered
                     pursuant to Section 12(b) of the Act:

     Title of Each Class             Name of Each Exchange on Which Registered
----------------------------------  --------------------------------------------
             None                                       ---

          Securities registered pursuant to Section 12(g) of the Act:

--------------------------------------------------------------------------------

                  Ordinary Shares par value NIS .01 per share
   Units, consisting of one Ordinary Share and one Warrant to purchase one
                                Ordinary Share

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes  [x]   No  [_]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in a definitive proxy or information statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [_].

Aggregate market value of the voting stock of the registrant held by
non-affiliates of the registrant on March 15, 2000 (computed by reference to the
last reported closing sale price of the Common Stock on the over-the-counter
market on such date): $133,624,000. On March 15, 2000, the registrant had
outstanding 83,187,982 Ordinary Shares (including 2,000 Ordinary Shares included
in the registrant's outstanding Units).

                                      -1-
<PAGE>

                                   FORM 10-K
                               TABLE OF CONTENTS

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                                                                                                              Page
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<S>                                                                                                           <C>
                                                         PART I
Item 1.      Business.........................................................................................   3
Item 2.      Properties.......................................................................................  13
Item 3.      Legal Proceedings................................................................................  13
Item 4.      Submission of Matters to a Vote of Security Holders..............................................  13

                                                        PART II

Item 5.      Market for Registrant's Common Equity and Related Shareholder Matters............................  14
Item 6.      Selected Consolidated Financial Data.............................................................  16
Item 7.      Management's Discussion and Analysis of Financial Condition and Results
               of Operations..................................................................................  18
Item 7A.     Quantitative and Qualitative Disclosures About Market Risk.......................................  28
Item 8.      Consolidated Financial Statements and Supplementary Data.........................................  29
Item 9.      Changes in and Disagreements with Accountants on Accounting and
               Financial Disclosure...........................................................................  30

                                                       PART III

Item 10.     Directors and Executive Officers of the Registrant...............................................  30
Item 11.     Executive Compensation...........................................................................  33
Item 12.     Security Ownership of Certain Beneficial Owners and Management...................................  38
Item 13.     Certain Relationships and Related Transactions...................................................  41

                                                       PART IV

Item 14.     Exhibits, Financial Statement Schedules, and Reports on Form 8-K.................................  44
</TABLE>

                                      -2-
<PAGE>

        FORWARD-LOOKING INFORMATION

Certain statements contained in this Annual Report on Form 10-K, including
information with respect to the Company's future business plans, constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. For this purpose, any statements
contained herein that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the foregoing, the words
"anticipates," "believes," "plans," "expects" and similar expressions are
intended to identify forward-looking statements. There are a number of important
factors that could cause the results of the Company to differ materially from
those indicated by such forward-looking statements. These factors include those
set forth in Part I "Business -- Risk Factors." Readers are cautioned not to
place undue reliance on these forward-looking statements, which reflect
management's opinions only as of the date hereof. The Company undertakes no
obligation to revise or publicly release the results of any revision to these
forward-looking statements. Readers should carefully review the risk factors
described in other documents the Company files from time to time with the
Securities and Exchange Commission, including the Quarterly Reports on Form 10-Q
to be filed by the Company in fiscal year 2000.

                                    PART I
Item 1.     Business.

Overview

LanguageWare.net (Company) Ltd. (the "Company" or "Languageware") enables
businesses to communicate, carry out transactions and provide customer support
multinationally and multiculturally through web sites via the Internet. Founded
in 1988 in Jerusalem as Accent Software International Ltd., the Company provides
a wide range of language-related solutions and services that ensure that
e-business web sites are dynamically interactive and capable of being used by
customers around the globe, regardless of their native language, culture or
currency.

The Company has undergone extensive restructuring from 1997 through 1999,
positioning itself to take advantage of the growing e-business marketplace and
the shift in that market toward non-English speaking users. The Company has
transformed itself from a seller of language technology and translation software
to a provider of a full range of multilingual, multicultural and multi-commerce
products and services that enable customer companies to truly conduct business
on a global scale over the Internet.

In October 1999, the Company changed its name from Accent Software International
Ltd. to LanguageWare.net (Company) Ltd. In calendar 1999 it shored up its
financial position by exchanging $1.19 million in outstanding debt owed to the
Government of Israel with warrants that are convertible to common shares, and by
obtaining $2.2 million in additional working capital primarily through the sale
of convertible securities and ordinary shares in a series of private equity
placements with a group of private investors and related parties.

Languageware began an alliance that culminated in the acquisition of Star+Globe
Technologies Pte. Ltd., ("Star+Globe") a closely-held Singapore company that
provides proprietary Asian character processing technology. The transaction,
which closed on January 14, 2000, gives the Company a unique competitive
advantage in developing multilingual web sites and e-business solutions for
customers serving Asian markets.

In 1999, the Company released the world's first multilingual customer support
solution product. NativeTongue(TM) allows Internet communication between
companies and their customers,

                                      -3-
<PAGE>

vendors and suppliers around the world in the language the individual is most
comfortable with.

In the U.S., the Company operates through its wholly-owned subsidiary,
WholeTree.com, Inc, which was formed in January 2000. Its customers include
Hewlett-Packard Company, Lucent Technologies Inc., Dell Computer Corp., Unisys
Corp. and other Fortune 1000 companies. International operations, focusing on
Asia, are handled through recently-acquired Star+Globe in Singapore.

By the end of 2000, Languageware is expected to have 16 sales teams operating
from Colorado Springs, Colorado; Irvine, California; Sarasota, Florida;
Singapore, Hong Kong and Tokyo.


Industry Background

The global e-commerce market is exploding, with sales expected to reach $1.3
trillion by 2001./(1)/ That, in turn, is creating tremendous demand for language
information technology (IT) and language IT services.

While 78 percent of Web site content currently is written in English, that is
the native language for only 6.2 percent of the world's population./(2,3)/ By
2005, it's estimated that more than one billion people will be using the
Internet -- about 700 million of them outside the United States. In just three
years, 50 percent of Internet sales are expected to be outside the U.S. /(4)/

Sources:
1 - International Data Corporation
2 - The Industry Standard
3 - Business 2.0
4 - NUA Limited

To effectively compete in this global marketplace, companies need more than
simple translation of English-based Web sites into different languages. They
also need a working knowledge of a country's business practices, cultural
attitudes, marketing ethics, public relations and advertising standards. They
need financial systems that account for daily fluctuations in currency exchange
rates and local tax requirements. They also must provide quality technical
support in the appropriate language and respond quickly to e-mail questions,
whether of a technical nature, or requests for corporate or investor
information.

Languageware Strategy

Languageware offers the only comprehensive source for global e-business
solutions currently available to help corporations improve their competitive
advantage in a worldwide marketplace. Global e-business requires not only
translation services, but also ways to communicate rapidly, calculate local
currency options and tools that make customers, of any country or language, feel
at home at a Web site.

Languageware's strategic solutions include:

         . Multilingual Web site development, maintenance and e-commerce
         solutions
         . The unique ability to view, search and build multilingual databases
         on English operating systems
         . Database and desktop capabilities that allow Asian (double-byte)
         characters to be viewed on English operating systems
         . An integrated on line machine and human translation portal

                                      -4-
<PAGE>

         . Real-time multilingual, multicultural customer support and sales
           system development
            . Industry leading software localization services
            . Worldwide network of thousands of in-country native-speaking
              translators that are instantly screened and accessed via the
              Company's Internet server technology

Products and Services

Languageware's language-related solutions ensure companies can conduct business
with consumers worldwide, regardless of their spoken native language. Those
solutions include:

 .    NativeTongue(TM) - An integrated, Web-based customer support application,
     combining machine and human translation, that enables companies to respond
     quickly to queries from Web site users located around the world. Instant
     machine translation provides a company's customer support staff with
     immediate access to foreign correspondence. The Company's proprietary
     server system also links customers to a network of pre-screened,
     specialized human translators. NativeTongue also lets companies build a
     database of Frequently Asked Questions (FAQs) to reduce the need for and
     cost of repeated translations.

 .    IMEase(TM) - A tool that provides Input Method Editors (IME's) for
     virtually all written languages which enables visitors to a web site to
     input any language from any language operating system. It makes possible
     the creation of a web-based, fully functional, multilingual database and
     puts multilingual search capability on a web site enabling visitors to
     rapidly find any data in any of the languages included on a web site.

 .    TranServer(TM) - A dedicated server residing at WholeTree.com which
     receives all customer submitted files that need translating. The TranServer
     automatically performs either machine translations on desired files or
     sends files to human translators for translation. Upon translation, the
     TranServer returns the files to the appropriate location.

 .    Loc@ale - A unique suite of management, administrative and translation
     tools allowing a user interface of any MS Windows(TM) application to be
     localized into virtually any language. Loc@ale enables international
     solutions for any C/C++, Java, or Visual Basic development environment.

 .    Web site and e-commerce solutions - Allow companies to enable existing
     databases for multilingual searches by customers; calculate currency
     conversion rate for purchases; and negotiate complex legal issues,
     purchasing traditions and delivery restrictions.


Sales and Marketing

The Company's primary market is non-technology companies that use the Internet
to conduct business on a global scale. The Company reaches this market through a
combination of direct sales, telemarketing and other types of marketing
programs. Given the Company's recent shift to a customized solutions company,
direct sales efforts are increasingly more critical. With the acquisition of
Star+Globe, which is based in Singapore, the Company currently is focused on
products and services based on Asian languages that enhance trade between the
U.S. and Asia. Other solutions for all areas of the world also are being
developed.

Marketing. The Company historically has utilized a variety of marketing programs
to stimulate and build long-term demand for its products, including public
relations, advertising, trade shows, direct mail,

                                      -5-
<PAGE>

catalogs and ongoing customer communications. In the past, the Company has used
marketing programs that were specifically sales-oriented, rather than image or
brand-awareness-oriented; however, the Company's recent transformation has
brought about the need for enhanced marketing efforts. In January 2000, the
Company launched an international advertising and branding campaign for
WholeTree.com. This advertising platform features newspaper, magazine and
television creative, including full-page ads in the Wall Street Journal and
placements in industry publications, such as Business 2.0, WIRED Magazine, Red
Herring and Industry Standard. The broadcast creative runs in New York, Chicago,
San Francisco, Washington D.C., Denver and Atlanta on cable networks, including
CNN, CNBC, USA-Bloomberg, MSNBC, and others. The Company will continue to
advertise in other software development and translation industry publications,
as well as attend appropriate trade shows. These highly-focused efforts are
designed to build awareness of the Company and develop an understanding of its
services in order to get products into the hands of potential customers.

Product Development. Product and solution development plays a significant role
at Languageware. The development of NativeTongue(TM) generated a vast amount of
market knowledge that has been leveraged within the Company to define the
direction of future products and services.

One such product is Site Trak(TM), a solution that enables companies, whose Web
sites are available in other languages to easily incorporate Web site updates
from the source site into each language's site. Languageware commercially
launched Site Trak(TM) in March 2000.


Competition

Languageware, through its operating subsidiary, WholeTree.com, has created its
own competitive niche through its unique combination of multilingual software,
Web site development and multilingual content management. It currently has no
direct competition due, in part, to its ability to offer Asian character
processing among a full range of global e-business solutions. The globalization
of e-commerce through the Internet likely will see a movement of pure
translation companies into customer services, systems integration, consulting
and solution design during the coming years.

The Company's Web site development business faces competition from much larger
companies that offer a variety of business-to-business professional services to
companies wishing to expand e-business operations. These include Scient
Corporation, Viant Corporation and USWeb Corporation.

Product Support and Maintenance

Languageware's Technical Support Group provides the services needed to deliver
and support the Company's solutions in the marketplace. These services include
translation and technical support that are generally available to customers
worldwide via Internet e-mail.

Proprietary Rights

The Company regards its products and the processes used to produce them as
proprietary trade secrets and confidential information. With regards to its
software, the Company relies on a combination of trademarks, trade secret and
copyright law to establish and protect proprietary rights in its products. In
addition, the Company attempts to protect trade secrets and other proprietary
information through confidentiality agreements with its employees, outside
consultants and potential business partners. The Company requires all of its
employees to sign confidentiality agreements as a condition of employment.

The Company currently holds no patents. Languageware has established an internal
process, however,

                                      -6-
<PAGE>

which has resulted in the filing of two patent applications (both of which have
been transferred to third parties for appropriate consideration) and which will
ensure that protection will be sought for any future patentable inventions.
There can be no assurance that the Company will develop any further patentable
inventions or that any patent applications filed by the Company for technology
or products derived therefrom will be granted.

Historically, the Company provided its products to customers under
non-exclusive, non-transferable licenses. The Company has not required end-users
of its retail, mass-market products to sign license agreements. Instead, the
Company included an on-line "click wrap" license and/or a printed "shrink wrap"
license with each copy of its products. It is uncertain whether license
agreements of this type are legally enforceable in all countries and
jurisdictions in which the products are marketed.

The Company believes that its products are proprietary and are protected by
copyright, trade secret and trademark law, as well as by the contractual
agreements described above. However, certain protections, such as limitations on
use of a product and limitations on warranties and liability, are not afforded
by copyright law and may not be available without an enforceable license
agreement. Moreover, there can be no assurance that the proprietary technology
of the Company will continue to be secret or that others will not develop
similar technology and use such technology to compete with the Company. The
Company does not currently include in its products any mechanism to prevent or
inhibit unauthorized copying or usage.

     The following chart describes the status of the Company's trademarks.

<TABLE>
<CAPTION>
------------------------------------- --------------------------------------------------------------------
             Trade Mark                                             Status
------------------------------------- --------------------------------------------------------------------
                                                 Registered                     Application Pending
                                      ---------------------------------- ---------------------------------
<S>                                   <C>                                <C>
Accent (name & logo)                  United States, United Kingdom,
                                      Germany, France, Benelux

LanguageWare                          United States, United Kingdom,
                                      France, Israel
WholeTree (name & logo)                                                     United States, Singapore
WholeTree.com                                                               United States, Singapore
NativeTongue                                                                United States
SiteTrak                                                                    United States
IMEase                                                                      United States
TranServer                                                                  United States
"The Language of e-business" (the                                           United States
phrase)

AccentDuo                             United States, United Kingdom,
                                      France, Germany, Mexico

Dagesh                                Israel

WebTamer                              United States, United Kingdom,
                                      France
------------------------------------- ---------------------------------- ---------------------------------
</TABLE>

The Company does not believe that its products or their trademarks infringe upon
the proprietary rights of

                                      -7-
<PAGE>

third parties. However, there can be no assurance that a third party will not
make a contrary assertion. The cost of responding to such assertions may be
material whether or not the assertions are validated.

The Company licenses, pursuant to non-exclusive licenses, proprietary technology
from other companies including Lernout & Hauspie Speech Products N.V. (machine
translation), Bitstream, Inc. (fonts) and URW, GmbH (fonts), for inclusion in
its products. These licenses are generally for a one year term with automatic
renewal. There can be no assurance that these third parties will continue to
license their software programs to the Company on commercially reasonable terms,
particularly if such companies develop products which they perceive as
competitive with those developed and marketed by the Company. Although the
Company believes that multiple sources are available for such licensed products,
if any of the Company's license agreements were terminated and the Company was
unable to replace those licenses with comparable licenses from alternate
suppliers, such terminations could have a material adverse effect on the
Company's ability to market certain of its products.


Employees

As of December 31, 1999, the Company had 17 full time employees.

Following its acquisition of Star+Globe in January 2000, and embarking on the
new business strategy of providing e-commerce solutions, the Company had 64 full
time employees as of March 15, 2000, including 42 in the United States and 22 in
Singapore. Future staffing requirements will be dependent upon the Company's
success in implementing its new business strategy, and consequently, cannot be
predicted at this time.

Risk Factors

Going Concern. From its inception through December 31, 1999, Languageware has
accumulated deficits in excess of $53.4 million, including net losses of $1.4
million, $6.8 million and $12.0 million for the fiscal years ended December 31,
1999, 1998 and 1997, respectively. Although the Company believes it has made
substantial progress in reducing its operating expenses and annual losses, its
failure to achieve its historical revenue plans has significantly affected its
ability to generate adequate cash flow to meet its operating requirements.
Additionally, commencing in January 2000 the Company has embarked on a new
business strategy of providing e-commerce solutions as more fully described
above. These factors create substantial doubt about the Company's ability to
continue as a going concern and there can be no assurance that the Company will
be able to continue as a going concern.

Liquidity/Working Capital/Debt. The Company has been successful on several
occasions during the past three years in raising additional working capital
through the sale of ordinary shares and convertible debt and equity securities.
The Company secured $2.2 million in additional working capital during 1999 and
successfully converted all of its long-term debt into equity. Through March 15,
2000 the Company raised an additional $2.5 million from (1) the sale of $1.5
million of Ordinary Shares pursuant to an agreement dated July 14, 1999; (2) the
receipt of $633,000 from the exercise of warrants associated with convertible
debentures sold in 1999; (3) the sale of a $250,000 convertible debenture which
was converted into ordinary shares in February 2000; and (4) the receipt of
$97,000 from the exercise of employee and non-employee share options. The
Company believes that these accomplishments will be sufficient to meet its
requirements for approximately six months. Beyond that time, the Company
believes it will need additional external financing to meet its needs. If the
Company fails to achieve its projected results and is required to seek
additional financing, there is no assurance that its efforts to obtain such
financing will be successful. Any failure on the part of the Company to secure
required financing will have a material adverse impact on the Company and may
cause the Company to cease operations.

                                      -8-
<PAGE>

Increased Acceptance and Use of the Internet as a Means for Conducting Commerce.
The Company's future success depends heavily on the increased acceptance and use
of the Internet as a means for conducting commerce. The Company focuses its
services on the development and implementation of Internet strategies and
solutions. If commerce on the Internet does not continue to grow, or grows more
slowly than expected, revenue growth would slow or decline and the Company's
business, financial condition and results of operations would be materially
adversely affected. Consumers and businesses may reject the Internet as a viable
medium for commerce for a number of reasons, including:

     - inadequate network infrastructure;

     - delays in the development of Internet enabling technologies and
       performance improvements;

     - delays in the development or adoption of new standards and protocols
       required to handle increased levels of Internet activity;

     - delays in the development of security and authentication technology
       necessary to effect secure transmission of confidential information;

     - changes in, or insufficient availability of, telecommunications services
       to support the Internet; and

     - failure of companies to meet their customers' expectations in delivering
       goods and services over the Internet.

Need to Attract and Retain Professional Staff. The Company's business is labor
intensive and its success will depend in large part upon its ability to attract,
retain, train and motivate highly-skilled employees. Because of the rapid growth
of the Internet, there is intense competition for employees who have strategic,
experience modeling, creative design, technical or program management
experience. In addition, the Internet has created many opportunities for people
with the skills we seek to form their own companies or join startup companies
and these opportunities frequently offer the potential for significant future
financial profit through equity incentives which the Company cannot match. The
Company may not be successful in attracting a sufficient number of highly
skilled employees in the future, or in retaining, training and motivating the
employees the Company is able to attract. Any inability to attract, retain,
train and motivate employees could impair the Company's ability to adequately
manage and complete projects.

Need to Manage Anticipated Growth Effectively.  The future success of the
Company will depend on its ability to manage growth effectively, including by:

     - developing and improving  operational, financial and other internal
       systems;

     - integrating and managing acquired businesses, joint ventures and
       strategic investments;

     - training, motivating and managing  employees;

     - estimating fixed-price fees and project timeframes accurately;

                                      -9-
<PAGE>

     - maintaining high rates of employee utilization; and

     - maintaining project quality and client satisfaction.

If the Company is unable to manage growth and projects effectively, the quality
of its services and products, its ability to retain key personnel and its
business, financial condition and results of operations may be materially
adversely affected.

Significant Fixed Operating Costs. A high percentage of the Company's operating
expenses, particularly personnel and rent, are fixed in advance of any
particular quarter. As a result, unanticipated variations in the number, or
progress toward completion, of customer projects may cause significant
variations in operating results in any particular quarter and could result in
losses for that quarter. An unanticipated termination of a major project, a
client's decision not to proceed with a project as anticipated, or the
completion during a quarter of several major client projects could require the
Company to maintain underutilized employees and could therefore have a material
adverse effect on its business, financial condition and results of operations.
The Company's revenues and earnings may also fluctuate from quarter to quarter
based on such factors as:

     - the contractual terms and timing of completion of projects;

     - any delays incurred in connection with projects;

     - the adequacy of provisions for losses;

     - the accuracy of  estimates of resources required to complete ongoing
       projects; and

     - general economic conditions.

Fixed-Price Contracts. The Company anticipates that some of its projects will be
based on fixed-price, fixed-timeframe contracts, rather than contracts in which
payment is determined on a time and materials basis. Failure to accurately
estimate the resources required for a project or to complete contractual
obligations in a manner consistent with the project plan upon which a
fixed-price, fixed-timeframe contract was based would adversely affect the
Company's overall profitability and could have a material adverse effect on its
business, financial condition and results of operations. In addition, the price
for some projects may be fixed at an early stage of the process, which could
result in a fixed price that turns out to be too low and therefore would
adversely affect profitability.

Achievement of Anticipated Benefits from Acquisition. On January 14, 2000 the
Company acquired Star+Globe. The anticipated benefits from the acquisition, and
any future acquisitions, joint ventures and strategic investments may not be
achieved. For example, the Company cannot be certain that customers of the
acquired business will continue to do business with it or that employees of the
acquired business will continue their employment or become well integrated into
the operations and culture of the Company. The identification, consummation and
integration of acquisitions, joint ventures and strategic investments requires
substantial attention from management. The diversion of the attention of
management relating to these activities, as well as any difficulties encountered
in the integration process, could have an adverse impact on the Company's
business, financial condition and results of operations.

Unexpected Termination of Contracts. In the negotiation process it is
anticipated that some contracts could contain provisions permitting cancellation
of a project by the client with limited advance notice and without significant
penalty. Termination by any client of a contract for the Company's services
could

                                     -10-
<PAGE>

result in a loss of expected revenues and additional expenses for staff which
were allocated to that client's project. The cancellation or a significant
reduction in the scope of a large project could have a material adverse effect
on the Company's business, financial condition and results of operations.

Price Fluctuations of Common Stock. The trading price of the Company's common
stock could be subject to wide fluctuations in
response to:

     - quarterly variations in operating results and the achievement of key
       business metrics;

     - changes in earnings estimates by securities analysts;

     - any differences between reported results and securities analysts'
       published or unpublished expectations;

     - announcements of new contracts or service offerings by the Company or its
       competitors;

     - market reaction to any acquisitions, joint ventures or strategic
       investments announced by the Company or its competitors; and

     - general economic or stock market conditions unrelated to the Company's
       operating performance.

In the past, securities class action litigation has often been instituted
against companies following periods of volatility in the market price of their
securities. This type of litigation could result in substantial costs and a
diversion of management attention and resources.

Technological Changes. The markets and the technologies used in the Company's
solutions are characterized by rapid technological change. Failure to respond in
a timely and cost-effective way to these technological developments would have a
material adverse effect on its business, financial condition and results of
operations. The Company expects to derive a substantial portion of its revenues
from providing Internet solutions that are based upon leading technologies
capable of adapting to future technologies. As a result, success of the Company
will depend on its ability to offer services that keep pace with continuing
changes in technology, evolving industry standards and changing client
preferences. The Company may not be successful in addressing future developments
on a timely basis. Its failure to keep pace with the latest technological
developments would have a material adverse effect on its business, financial
condition and results of operations.

Competition. The markets for the services the Company provides are highly
competitive. It believes that its major competitors are strategy consulting
firms, Internet professional services firms, systems integration firms,
technology vendors and internal information systems groups. Many of the
Company's competitors have significantly greater financial, technical and
marketing resources than it does and generate greater revenues and have greater
name recognition than it does. In addition, there are relatively low barriers to
entry into the Company's target markets, and the Company expects to face fierce
competition from existing competitors and from new entrants into its markets.

     The Company believes that the principal competitive factors in its markets
include:

     - ability to integrate strategy, experience modeling, creative design and
       technology services;

                                     -11-
<PAGE>

     - quality of service, speed of delivery and price;

     - industry knowledge;

     - sophisticated project and program management capability; and

     - Internet technology expertise and talent.

The Company's ability to compete also depends in part on a number of competitive
factors outside its control, including:

     - the ability of  competitors to hire, retain and motivate professional
       staff;

     - the development by others of Internet services or software that is
       competitive with the Company's solutions; and

     - the extent of  competitors' responsiveness to client needs.

There can be no assurance that the Company will be able to compete successfully
in its markets.

Government Regulation. Any new laws and regulations applicable to the Internet
and electronic commerce that are adopted by federal, state or foreign
governments could dampen the growth of the Internet and decrease its acceptance
as a commercial medium. If this occurs, companies may decide in the future not
to pursue Internet initiatives, which would decrease demand for the Company's
services. A decrease in the demand for its services would have a material
adverse effect on the Company's business, financial condition and results of
operations.

Susceptibility to General Economic Conditions. The Company's revenues and
results of operations are likely to be influenced by general economic
conditions. In the event of a general economic downturn or a recession in the
United States or Asia, the Company's clients and potential clients may
substantially reduce their information technology and related budgets. Such an
economic downturn may materially and adversely affect the Company's business,
financial condition and results of operations.

Intellectual Property. The Company's success depends, in part, upon its
proprietary software tools and other intellectual property rights. It relies
upon a combination of trade secrets, nondisclosure and other contractual
arrangements, and copyright and trademark laws to protect its proprietary
rights. The Company limits access to and distribution of such proprietary
information. There can be no assurance that the steps it takes in this regard
will be adequate to deter appropriation of proprietary information or that it
will be able to detect unauthorized use and take appropriate steps to enforce
its intellectual property rights. In addition, although the Company believes
that its services and products do not infringe on the intellectual property
rights of others, there can be no assurance that infringement claims will not be
asserted against the Company in the future, or that if asserted that any
infringement claim will be successfully defended. A successful claim against the
Company could materially adversely affect its business, financial condition and
results of operations.

Key Personnel. The Company's success will depend in large part upon the
continued services of a number of key employees, including Mr. Oseth. An
employment contract with Mr Oseth provides that employment is terminable at will
by either party. The loss of the services of Mr. Oseth or of one or more of its
other key personnel could have a material adverse effect on its business,
financial condition and

                                     -12-
<PAGE>

results of operations. In addition, if one or more of the Company's key
employees resigns to join a competitor or to form a competing company, the loss
of such personnel and any resulting loss of existing or potential clients to any
such competitor could have a material adverse effect on the Company's business,
financial condition and results of operations. In the event of the loss of any
personnel, there can be no assurance the Company would be able to prevent the
unauthorized disclosure or use of its technical knowledge, practices or
procedures by such personnel.

Item 2.  Properties.

In February 2000 the Company entered into a new office lease in Colorado
Springs, Colorado in order to accommodate the projected increase in its
operations. This office space is approximately 6,600 square feet with a term of
60 months, an option to renew for an additional 60 months and a right of first
refusal on contiguous space of approximately 5,170 square feet. The Company
continues to be obligated under a lease agreement expiring March 31, 2001 for
the office space it vacated in Colorado Springs, Colorado, which space is
comprised of approximately 4,600 square feet.

Upon the acquisition of Star+Globe in January 2000, the Company assumed the
obligations of a thirty-six month office lease in Irvine, California comprised
of approximately 3,653 square feet and expiring on October 14, 2002.

Effective February 1, 2000, the Company entered into an office lease agreement
in Sarasota, Florida comprised of approximately 1,050 square feet and expiring
in twelve months.

Any expansion of its operations will require the Company to lease additional
office space. The Company believes that its facilities are adequate for its
current needs and that suitable additional or substitute space will be available
as needed to accommodate expansion of the Company's operations.

Item 3.  Legal Proceedings.

There are no material pending legal proceedings as of the date of this filing,
and the Company is not aware of any other pending or threatened litigation that
could have a material adverse effect on the Company.

In the course of its business, the Company may become subject to various claims,
some or which may mature into litigation. Although the Company is aware of
claims asserted against it, the Company is not aware of any claims that have a
reasonable possibility of adverse outcome in a material amount. There can be no
assurance, however, that unforeseen circumstances will not cause such claims, or
other, currently unknown claims, to result in adverse outcomes in material
amounts.

Item 4.  Submission of Matters to a Vote of Security Holders.

None.

                                     -13-
<PAGE>

                                    PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.

     (a)  Market Information

The Company's Ordinary Shares and Units are quoted on the OTC Bulletin Board
under the symbols "LWNTF" and "LWNUF," respectively. Prior to March 12, 1999,
the shares and units were traded on the Nasdaq SmallCap Market. The following
table sets forth, for the periods indicated, the high and low closing prices of
the Company's Ordinary Shares and Units as reported by the OTC Bulletin Board.

<TABLE>
<CAPTION>
   -----------------------------------------------------------------------------
                                      ORDINARY SHARES            UNITS
                                     -----------------     ------------------
                                        LOW     HIGH          LOW      HIGH
                                     -------- --------     --------  --------
     <S>                             <C>      <C>          <C>       <C>
             2000
     First Quarter*                   $ 0.60   $ 3.00       $ 0.25    $ 3.50

             1999

     First Quarter                    $ 0.13   $ 0.44       $ 0.09    $ 0.38
     Second Quarter                   $ 0.16   $ 0.38       $ 0.13    $ 0.38
     Third Quarter                    $ 0.19   $ 0.28       $ 0.19    $ 0.31
     Fourth Quarter                   $ 0.13   $ 0.92       $ 0.13    $ 1.00

             1998

     First Quarter                    $ 0.41   $ 1.16       $ 0.38    $ 1.25
     Second Quarter                   $ 0.38   $ 0.78       $ 0.34    $ 0.77
     Third Quarter                    $ 0.22   $ 0.52       $ 0.25    $ 0.69
     Fourth Quarter                   $ 0.13   $ 0.34       $ 0.06    $ 0.34
   -----------------------------------------------------------------------------
</TABLE>

     *  Through March 15, 2000



Market quotations for the Company's Ordinary Shares and Units reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not necessarily represent actual transactions. On March 15, 2000, the last
reported sales price of the Ordinary Shares and Units on the OTC Bulletin Board
was $2.25 per Ordinary Share and $2.38 per Unit, respectively.

     (b)  Holders

As of March 15, 2000, there were approximately 6,700 record holders of the
Ordinary Shares (including 2 record holders of the Units). Such number of record
holders was determined from the Company's shareholder records, and does not
include beneficial owners of the Ordinary Shares whose shares are held in the
names of various shareholders, dealers and clearing agencies.

     (c)  Dividends

The Company has paid no cash dividends to date and does not currently intend to
declare any dividends on its Ordinary Shares. The Company intends to retain
earnings, if any, to fund the development and growth of its business. Payment of
cash dividends on the Ordinary Shares will depend upon the Company's earnings,

                                     -14-
<PAGE>

its capital requirements and financial condition, and other relevant factors.

The Company's decisions with respect to dividend payments will be determined by
its Board of Directors. Under Israeli law, certain dividends, referred to as
final dividends (which are comparable to annual dividends and are not related to
distributions on dissolution or liquidation or similar final distributions), are
recommended by the Board of Directors and may be declared by shareholders at the
annual meeting of shareholders, but only in an amount per share equal to or less
than the amount recommended by the Board of Directors. In addition, the Board of
Directors may declare and pay interim dividends on account of the final
dividend. Cash dividends may be paid by an Israeli Company only out of the
profits of such Company, as determined for statutory purposes.

Under Israeli law, cash dividends paid by the Company to its shareholders (other
than Israeli corporate shareholders) are subject to a withholding tax. The
applicable withholding tax rate will depend on the particular operations that
have generated the earnings constituting the source of dividends.

     (d)  Exchange Controls and Taxation Matters Affecting Non-Israeli
Shareholders

          Exchange Controls

All non-residents of Israel who purchase equity securities of the Company with
certain non-Israeli currencies (including dollars) may freely repatriate in such
non-Israeli currencies all amounts received in respect of such securities in
Israeli currency, whether as a dividend, as a liquidating distribution or as
proceeds from the sale of such securities (provided in each case that any
applicable Israeli income tax is paid or withheld on such amounts) at the rate
of exchange prevailing at the time of conversion, pursuant to the general permit
issued under the Israeli Currency Law, 1978.

          Capital Gains Taxation of the Company and its Shareholders

Israeli law imposes a capital gains tax on the sale of capital assets, including
securities held by the Company and securities of the Company sold by holders
thereof. The law distinguishes between "Real Gain" and "Inflationary Surplus."
Real Gain is the excess of the total capital gain over Inflationary Surplus,
computed on the basis of the increase in the Israeli CPI between the date of
purchase and the date of sale. Inflationary Surplus accumulated until December
31, 1993 is taxed at a rate of 10% for residents of Israel in respect of
securities (in respect of securities reduced to no tax for non-residents if
calculated according to the exchange rate of the dollar instead of the Israeli
CPI), while Real Gain is added to ordinary income, which is taxed at the
applicable ordinary rates for individuals (30% to 50%) and for corporations (36%
in 1996 and thereafter), while Inflationary Surplus accumulated from and after
December 31, 1993 is exempt from any capital gains tax. Under current law, the
Ordinary Shares of the Company are exempt from Israeli capital gains tax so long
as they are listed on a stock exchange recognized by the Israeli Ministry of
Finance and the Company qualifies as an "Industrial Company" as defined in the
"Law for the Encouragement of Industry (Taxes), 1969." There can be no assurance
that the Company will maintain such listing or qualifications.

Pursuant to the Convention Between the Government of the United States of
America and the Government of Israel with Respect to Taxes on Income (the
"U.S.-Israel Tax Treaty"), the sale, exchange or disposition of Ordinary Shares
by a person who qualifies as a resident of the United States within the meaning,
and who is entitled to claim the benefits afforded to such resident under, the
U.S.-Israel Tax Treaty ("Treaty U.S. Resident") will not be subject to the
Israeli capital gains tax unless such Treaty U.S. Resident holds, directly or
indirectly, shares representing 10% or more of the voting power of the Company
during any part of the 12-month period preceding such sale, exchange or
disposition (assuming that Israeli law would otherwise tax such gain). If such
gain is taxed by Israel, the gain will be a foreign source under the U.S.-Israel
Tax

                                     -15-
<PAGE>

Treaty and such U.S. Holder can elect to credit such Israeli tax against the
U.S. federal income tax imposed on the gain, subject to the limitations imposed
by U.S. law.

     Other Taxation Matters Under Israeli Law Affecting Non-Israeli
     Shareholders; Estate Taxes

Individuals who are non-residents of Israel are subject to a graduated income
tax on income derived from sources in Israel. Israeli source income is defined
under Israeli law as income derived or accrued in Israel and income derived or
accrued outside of Israel, if such income is received in Israel. A corporate
entity is deemed an "Israeli resident" under Israeli law if it is controlled and
managed from Israel or if it is registered in Israel and its business activities
are primarily in Israel. On the distribution of dividends other than bonus
shares to foreign residents, income tax at the rate of 25% (15% in the case of
dividends distributed from the taxable income attributable to an Approved
Enterprise) is withheld at the source unless a different rate is provided for in
a treaty between Israel and the shareholder's country of residence. The
U.S.-Israel Tax Treaty provides for a maximum tax of 25% on dividends paid to a
Treaty U.S. Resident.

A non-resident of Israel who has interest, dividend or royalty income derived
from, accrued or received in Israel from which tax was withheld at the source is
generally exempt from the duty to file tax returns in Israel in respect of such
income, provided that such income was not derived from a business conducted in
Israel.

Residents of the United States generally will have withholding tax in Israel
deducted at the source. Such persons may be entitled to a credit or deduction
for United States federal income tax purposes for the amount of such taxes
withheld.

Israel currently has no estate tax.

Item 6.  Selected Consolidated Financial Data.

The following selected financial data have been summarized from the Company's
consolidated financial statements and are qualified in their entirety by
reference to, and should be read in conjunction with, such consolidated
financial statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

                                     -16-
<PAGE>

                     Selected Consolidated Financial Data
               (Dollars in thousands, except per share figures)

<TABLE>
<CAPTION>
                                                                     For the Year Ended December 31,
                                               ---------------------------------------------------------------------------
                                                    1999           1998          1997           1996              1995
                                               ------------    ------------  -------------  -------------    -------------
<S>                                            <C>             <C>           <C>            <C>              <C>
Consolidated Statement of Operations Data:

Net Sales                                       $     1,714      $    1,949   $      3,125    $     4,953     $      5,135
Cost of Sales                                         1,163             997          3,062          6,767            2,972
                                               ------------    ------------  -------------  -------------    -------------
   Gross Margin                                         551             952             63         (1,814)           2,163

Product Development                                     283           2,540          4,813          3,386            1,097
Marketing Expenses                                      722           1,404          2,177          9,242            5,955
General & Administrative                              1,149           2,465          3,169          6,437            2,796
Restructuring Charge                                     -            1,257             -              -                -
                                               ------------    ------------  -------------  -------------    -------------
   Operating Expenses                                 2,154           7,666         10,159         19,065            9,848
                                               ------------    ------------  -------------  -------------    -------------
Operating Loss                                       (1,603)         (6,714)       (10,096)       (20,879)          (7,685)
Interest and other, net                                 679              78          1,912            155              163
                                               ------------    ------------  -------------  -------------    -------------
Net Loss Before Extraordinary Item                   (2,282)         (6,792)       (12,008)       (21,034)          (7,848)
Extraordinary Gain - Debt Extinguishment                885              -              -              -                -
                                               ------------    ------------  -------------  -------------    -------------
Net Loss                                             (1,397)         (6,792)       (12,008)       (21,034)          (7,848)
Dividend on Preferred Shares                             -            2,535          1,844             -                -
                                               ------------    ------------  -------------  -------------    -------------

Loss Applicable to Ordinary Shares              $    (1,397)     $   (9,327)  $    (13,852)   $   (21,034)    $     (7,848)
                                               ============    ============  =============  =============    =============

Basic and Diluted Loss per Ordinary Share:
-----------------------------------------
  Net Loss Before Extraordinary Item            $     (0.08)     $    (0.34)  $      (1.11)   $     (2.12)    $      (1.22)
  Extraordinary Item                                   0.03              -              -              -                -
                                               ------------    ------------  -------------  -------------    -------------
  Loss Applicable to Ordinary Shares            $     (0.05)     $    (0.34)  $      (1.11)   $     (2.12)    $      (1.22)
                                               ============    ============  =============  =============    =============

Weighted Average Number
  of Shares Outstanding                              30,407          27,242         12,495          9,926            6,421
                                               ============    ============  =============  =============    =============
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------

                                                                            as of December 31,
                                               -----------------------------------------------------------------------------
                                                   1999            1998          1997           1996            1995
                                               ------------    ------------  -------------  -------------    -------------
<S>                                            <C>             <C>           <C>            <C>              <C>
Consolidated Balance Sheet Data:

Cash and Cash Equivalents                       $       249             141          2,499          8,723            9,633
Working Capital (Deficit)                       $      (606)         (1,456)           109          3,628           10,329
Total Assets                                    $       909             599          6,438         13,789           17,650
Total Liabilities                               $     1,445           1,980          5,415          4,062            2,358
Accumulated Deficit                             $   (53,444)        (52,047)       (45,255)       (33,247)         (12,213)
Shareholders' Equity (Deficit)                  $      (536)         (1,381)         1,023          2,974           10,133
Long-Term Obligations                           $        -               15          1,162          2,948            2,541
</TABLE>

                                     -17-
<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
        of Operations.

Overview

The 1999 results reported here are those of a company in transition.
LanguageWare.net (Company) Ltd., formerly Accent Software International Ltd.,
(the "Company" or "Languageware") was restructured after recognizing that a
different type of business was needed to meet the language technology demands of
today's fast-paced, Internet-based economy. Founded in 1988, the Company today
is focused in a new direction. In October 1999, the Company changed its name to
LanguageWare.net (Company) Ltd., recognizing that it now provides a full range
of multilingual and multicultural products and services, rather than just
software, to enable the demands of electronic business on a global scale.

The Company provides strategic solutions designed to help businesses, their
customers, vendors, suppliers and employees around the world communicate with
each other in their native languages. Languageware operates primarily through
its wholly owned subsidiaries, WholeTree.com, Inc. in the U.S. and WholeTree.com
(Asia) Pte Ltd in Singapore, which enable global business over the Internet and
brings special expertise that fosters commerce between U.S. and Asian markets.

From its inception through December 31, 1999, the Company has accumulated
deficits in excess of $53.4 million, including net losses of $1.4 million, $6.8
million and $12.0 million for the fiscal years ended December 31, 1999, 1998 and
1997, respectively. Although the Company believes it has made substantial
progress in reducing its operating expenses and annual losses, its failure to
achieve its revenue plan coupled with its efforts in calendar 1999 to implement
the revised operating strategy of providing business-to-business e-commerce
solutions has significantly affected the Company's ability to generate adequate
cash flow to meet its working capital requirements. These factors create
substantial doubt about the Company's ability to continue as a going concern and
there can be no assurance that the Company will be able to continue as a going
concern.

The Company completed a restructuring during 1998 designed to position itself to
change its operating strategy from a consumer software products company to a
global e-commerce solutions company. The restructuring moved the Company's
operations to Colorado Springs, Colorado and eliminated its Israeli-based
product development, sales and marketing functions and various general and
administrative activities. In calendar 1999, as part of its efforts to
transition into a global e-commerce solutions company, the Company's operations
were changed to focus primarily on translation services and products offered to
other business. Commencing in January 2000, the Company implemented its plan to
become a provider of a full range of multilingual, multicultural and
multi-commerce products and services that enable customer companies to conduct
business on a global scale on web sites over the Internet. As part of its plan
to provide such services, on January 14, 2000, the Company acquired Star+Globe,
a company that provides proprietary Asian character processing technology. The
acquisition provided the Company a unique competitive advantage in developing
multilingual web sites and e-business solutions for customers serving Asian
markets.

The Company's ability to generate increased revenue and to fund planned
expenditures is dependent on a number of factors, some of which are outside its
control. In particular, revenue growth and profitability, if any, will depend on
the ability of the Company to market its services, demand for the Company's
services, the level of competition, the success of the Company in attracting and
retaining motivated and qualified personnel, the ability of the Company to
control its costs and general economic conditions. There can be no assurance
that the Company will meet such challenges successfully. Any of these or other
factors could have a material adverse effect on the Company's business,
operating results or financial condition.

                                     -18-
<PAGE>

The decline in revenue experienced during 1999, 1998 and 1997 created pressure
on the Company's working capital and its ability to fund its current operations.
Although the Company has been successful on several occasions during the past
three years in raising additional working capital, primarily through the sale of
convertible securities, those funds are not sufficient to meet the expected
working capital requirements of the Company for calendar year 2000.

The Company successfully converted all of its long-term debt into equity in
January 1999, secured $600,000 in additional working capital during the first
quarter of 1999, sold $1,100,000 of additional convertible securities in the
third and fourth quarters of 1999, and sold, through a private placement,
ordinary shares for $500,000 pursuant to an agreement dated July 14, 1999.
Through March 15, 2000 of the first quarter of calendar 2000 the Company raised
an additional $2.5 million from (1) the sale of $1.5 million of ordinary shares
pursuant to the aforementioned agreement dated July 14, 1999; (2) the receipt of
$633,000 from the exercise of warrants associated with convertible debentures
sold in 1999; (3) the sale of a $250,000 convertible debenture which was
converted into ordinary shares in February 2000; and (4) the receipt of $97,000
from the exercise of employee and non-employee share options. The Company
believes that these accomplishments, coupled with an improved revenue outlook
and cost reduction efforts that have substantially reduced its working capital
requirements, will be sufficient to meet its requirements for approximately the
first six months of calendar year 2000. Beyond that time, the Company believes
it will not generate sufficient operating cash flow to meet its needs without
additional external financing. There is no assurance that the Company's efforts
to obtain such financing will be successful. Any failure on the part of the
Company to secure required financing will have a material adverse impact on the
Company and may cause the Company to cease operations.

         Revenue Recognition

As required by U.S. generally accepted accounting principles, revenue from the
sale of software products to end-users and resellers (including distributors and
OEMs) is generally recognized when a customer purchase order has been received,
the software has been shipped, the Company has a right to invoice the customer,
collection of the receivable is determined to be probable and there are no
significant obligations remaining on the part of the Company. Revenue
recognition is deferred if any of these conditions are not met. The Company also
maintains appropriate allowances for anticipated returns.

OEM and licensing arrangements may include non-refundable payments in the form
of guaranteed sublicense and license fees. These guaranteed fees are recognized
as revenue upon shipment of the master copy of all software to which the fees
relate provided there are no significant post-delivery obligations and the
customer is creditworthy. Additionally, such revenue is recognized only to the
extent that the obligation to pay such fees is not subject to price adjustment,
is non-recoverable and non-refundable, and is due within twelve months.

         Currency

The functional currency for the Company is the dollar, which is the currency of
the primary economic environment in which the operations of the Company are
conducted. The majority of the Company's sales and expenses are made or incurred
in the United States. Transactions and balances originally denominated in
dollars are presented at their original amounts. Transactions and balances in
other currencies (including the New Israeli Shekel (NIS)) are remeasured into
dollars in accordance with principles set forth in FASB Statement No. 52.
Exchange gains and losses arising from remeasurement are reflected in other
income or expenses, as applicable.

Results of Operations

                                     -19-
<PAGE>

The table on the next page sets forth for the periods indicated the percentage
of sales represented by certain items reflected in the Company's Consolidated
Statements of Operations.

                                     -20-
<PAGE>

<TABLE>
<CAPTION>
                                   Cost of Sales and Operating Expenses as a Percentage of Sales
                                                 For the Year Ended December 31,
                                       ----------------------------------------------
                                            1999            1998            1997
                                       --------------   -------------   -------------
         <S>                          <C>               <C>             <C>
         Net Sales                           100.0%           100.0%          100.0%
         Cost of Sales                        67.9%            51.2%           98.0%
                                       -----------      -----------     -----------
            Gross Margin                      32.1%            48.8%            2.0%
                                       -----------      -----------     -----------

         Product Development                  16.5%           130.3%          154.0%
         Marketing Expenses                   42.1%            72.0%           69.7%
         General & Administrative             67.0%           126.5%          101.4%
         Restructuring Charge                  0.0%            64.5%            0.0%
                                       -----------      -----------     -----------
            Operating Expenses               125.7%           393.3%          325.1%
                                       -----------      -----------     -----------

         Operating Loss                      (93.5%)         (344.5%)        (323.1%)
                                       ===========      ===========     ===========
</TABLE>

         --------------------------------------------------------------------

Year Ended December 31, 1999 Compared with Year Ended December 31, 1998

Net Sales. Net sales decreased approximately 12% to $1,714,000 in 1999 from
$1,949,000 in 1998. As a percentage of revenues, translation services increased
to 71% of total revenue from approximately 40% in 1998. Such increase reflects
the transition of the Company's operating strategy away from consumer software
products into business-to-business, multilingual, multicultural products and
services over the Internet

Cost of Sales. Cost of sales increased $166,000, or 17%, to $1,163,000 in 1999
from $997,000 in 1998. As a percentage of sales, cost of sales increased to 68%
of sales in 1999 compared to 51% in 1998. The 1999 increases reflect the higher
cost of engaging translators associated with the increased emphasis on
translation services. Additionally, in 1999, 61% of the Company's sales of
translation services was derived from Star+Globe Technologies Pte Ltd. which
sales generated a lower than average gross margin of 2%, the results of which
was the increase in cost of sales as a percentage of revenues.

Gross Margin.   In 1999 gross margin declined to 32% of sales compared to 49% of
sales in 1998. The decline is primarily attributable to the sales of translation
services to Star+Globe Technologies Pte Ltd. as described above.

Product Development Costs. Product development costs historically were comprised
of software engineer employees assigned to consumer software product
development. The shift away from the consumer software products market allowed
the Company to eliminate the majority of such costs. Consequently, such costs
declined $2,257,000, or 89%, to $283,000 in 1999 from $2,540,000 in 1998.

Marketing Expenses. Sales and marketing expenses were reduced approximately 49%
to $722,000 in 1999 from $1,404,000 in 1998. The decreases are primarily
attributable to the reduction of expenditures for advertising, printing, travel
and trade shows as a part of the Company's plan to conserve working capital.

                                     -21-
<PAGE>

General and Administrative Expenses. General and administrative costs continued
to decline in 1999 as part of management's efforts to conserve working capital
through the reduction of costs. Such costs were decreased $1,316,000, or 53%, to
$1,149,000 in 1999 from $2,465,000 in 1998. Additionally, in 1998 several large
charges were incurred for consulting services related to the Company's efforts
to raise new capital and to sell its subsidiary, AgentSoft. These charges were
nonrecurring by their nature and not incurred in 1999.

Operating Loss. The operating loss for 1999 of $1,603,000 was $5,111,000, or 76%
lower than the operating loss of $6,714,000 incurred in 1998. The significant
improvement in the operating results reflects the Company's cost reduction
efforts and its shift away from the consumer software products market.

Other Expenses. Other expenses of $679,000 in 1999 compared to $78,000 in 1998,
consisted primarily of $600,000 of interest charges related to cost of warrants
granted by the Company in connection with the placement of convertible debt with
a related party in February 1999.

Extraordinary Gain - Debt Extinguishment. In 1999 the Company recognized an
extraordinary gain of $885,000 as a result of negotiating the elimination of
$1,180,000 of long-term bank debt, plus $11,000 of accrued interest, in exchange
for the issuance of a warrant valued at $306,000 to its primary lending bank in
Israel to receive 2,448,000 ordinary shares of the Company anytime after January
25, 2001, but before January 25, 2006.

Net Loss.  The Company experienced a net loss of $1,397,000 for 1999 compared to
a net loss of $6,792,000 for the prior year.

Year Ended December 31, 1998 Compared with Year Ended December 31, 1997

Net Sales. Net sales decreased approximately 37% to $1,949,000 in 1998 from
$3,125,000 in 1997. Sales of consumer software products fell short of management
expectations, the Company believes, due to potential customers' concerns about
the Company's ability to continue to support and expand its product offerings.

The percentage of the Company's total sales derived from its translation
services business increased substantially during 1998 and accounted for
approximately 40% of total revenue.


Cost of Sales. The Company's cost of sales improved to just over 50% of sales in
1998, or $997,000 on sales of $1,949,000, from almost 100% of sales, $3,062,000
on sales of $3,125,000 in the year earlier. The Company's continuing movement
away from consumer software products and relatively high cost of goods sold
towards the OEM and business-to-business market where manufacturing and
production costs are minimal, is primarily responsible for the improved cost of
sales. The translation services businesses, which received expanded emphasis in
1998, relies on an international network of human translators and a
correspondingly higher cost of sales.

Cost of sales during 1997 included a charge of $555,000 to amortize capitalized
software development costs compared to no charge for this expense in 1998. 1997
cost of sales also included the cost of technical support which the Company
provided primarily in support of its retail sales and a $666,000 charge related
to the sale of excess inventory.

Gross Margin. Although net sales declined by over one-third from 1997 to 1998,
the significant

                                     -22-
<PAGE>

reduction in the cost of sales as a percentage of revenue led to an improvement
in the Company's gross margin to 49% in 1998 from just 2% in 1997.

Product Development Costs. Product development costs consist almost entirely of
compensation and other personnel-related costs for the Company's staff of
software engineers. As the Company's sales and marketing focus shifted away from
"boxed software" for the retail market and towards software developers, software
content providers and software localizers/translators, new lines of products
were developed and introduced with corresponding large increases in product
development costs in 1997 compared to 1996 and continuing into 1998. By the
latter quarters of 1998, however, much of the personnel-intensive development
effort had been concluded and it became possible to achieve significant cost
reductions in this area. Product development costs for the full year, 1998, were
$2,540,000, a 47% reduction from the $4,813,000 spent on product development
during 1997.

During the fourth quarter of 1998, because significant development efforts had
been concluded and also due to the need to reduce the Company's overall expenses
and working capital requirements, the Israeli-based product development
department was disbanded. The product development staff in Israel consisted of
44 individuals at the beginning of 1998. The Company reestablished a small
portion of its product development capability in the United States.

Product development costs included costs of the Company's former subsidiary,
AgentSoft, of $674,000 in 1998 and $1,265,000 in 1997. During 1998, the Company
concluded that AgentSoft no longer fit in the Company's long-range strategic
plans and, furthermore, that AgentSoft required a significant investment if it
were to realize its market potential. The Company's liquidity constraints
precluded it from making the necessary investment in AgentSoft.

Marketing Expenses. Sales and marketing expenses were reduced approximately 36%
to $1,404,000 in 1998 from $2,177,000 in 1997. Pressure to reduce operating
expenses and to conserve working capital led to staffing reductions in the sales
and marketing functions, including the elimination of the Jerusalem-based sales
office, and greater reliance on sales representatives to augment the Company's
sales efforts. Related costs such as advertising, printing, travel and
participation in trade shows were also reduced.

General and Administrative Expenses. Efforts to streamline the management of the
Company began in 1997, continued throughout 1998 and led to a 22% reduction in
total general and administrative expenses in 1998 compared to the year earlier.

By the end of 1998, the Company had eliminated or out-sourced its human
resources and payroll activity, its in-house legal counsel, and significant
portions of its accounting and office management functions. 1998 was also
impacted by several large charges for consulting services related to the
Company's efforts to raise new capital and to sell its subsidiary, AgentSoft.
These charges are nonrecurring by their nature.

Restructuring Charge. Beginning with the arrival of a new management team in
early 1997 and continuing into the fourth quarter of 1998, the Company completed
a significant restructuring effort. The restructuring effort included a complete
reorientation of the Company's products away from the retail market and towards
software developers, software content providers and software
localizers/translators, increased emphasis on translation services as an
important source of revenue, corresponding shifts in the composition and
direction of the Company's sales and marketing activities, and movement of the
Company's executive offices from Israel to the United States.

The restructuring activities led to closing sales offices in Israel, England and
Canada; the disposition of the net assets of the Company's Jerusalem-based
subsidiary; AgentSoft, the closing of the Israeli-based product development
function and elimination of almost 90% of the Company's total staffing. The

                                     -23-
<PAGE>

staffing reductions resulted in large cash outlays for severance and other
employee benefits and left the Company with a substantial amount of excess
equipment. Further, the greatly reduced size of the Company following the
personnel reductions made it unlikely that the Company would realize significant
benefit from certain long-term assets.

The restructuring activities also led to a one-time restructuring charge during
1998 of $1,257,000 related primarily to severance costs and the disposal of
excess capital equipment.

Operating Loss. Despite the roughly 37% reduction in revenue and the $1,257,000
restructuring charge, the Company's cost reduction efforts allowed it to reduce
its operating loss by approximately one-third to $6,714,000 in 1998 from
$10,096,000 in the year earlier. Without the one-time restructuring charge, the
Company's operating loss would have been $5,457,000, almost one-half of the year
earlier figure.

Other Expenses. Other expenses, which totaled $78,000 during 1998 compared to
$1,912,000 in 1997, consisted primarily of interest expenses on the Company's
debt and costs related to currency conversions and exchange rate fluctuations
between the U.S. dollar and the Israeli shekel. Other expenses during 1997
included substantial charges related to two offerings by the Company of
convertible securities. These financing costs amounted to $1,845,000 relating to
the discount, beneficial conversion and issuance of warrants pertaining to
placement of convertible debt during 1997.

Net Loss. The Company experienced a net loss of $6,792,000 during 1998 compared
to a net loss of $12,008,000 during the prior year.

Deemed Dividend on Preferred Shares. Deemed dividend on preferred shares is the
imputed amount calculated when there is a discount from fair market value, or
there is additional consideration given, upon the sale of convertible preferred
shares. The deemed dividend is deducted from net income or loss in order to
arrive at net income or loss attributable to ordinary shareholders. In both 1998
and 1997 the Company issued convertible preferred shares and was required to
calculate a deemed dividend in both years. In 1998 the amount of deemed dividend
was $2,535,000 compared to $1,844,000 in 1997.

Net Loss Applicable to Ordinary Shareholders. As a result of recording deemed
dividends on preferred shares as described above, the net loss applicable to
ordinary shareholders was $9,327,000 in 1998 and $13,852,000 in 1997.


Liquidity and Capital Resources

The Company has been successful on several occasions during the past three years
in raising additional working capital through the sale of ordinary shares and
convertible debt and equity securities. The Company raised $2.2 million in
calendar year 1999 of which $1.7 million was secured in the form of short-term
convertible debt and $500,000 was secured from a private placement of ordinary
shares. Through March 15, 2000 of the first quarter of calendar 2000, the
Company raised an additional $2.5 million from (1) the sale of $1.5 million of
Ordinary Shares pursuant to an agreement dated July 14, 1999; (2) the receipt of
$633,000 from the exercise of warrants associated with convertible debentures
sold in 1999; (3) the sale of a $250,000 convertible debenture which was
converted into ordinary shares in February 2000; and (4) the receipt of $97,000
from the exercise of employee and non-employee share options. The Company
believes that these accomplishments, coupled with an improved revenue outlook
and cost reduction efforts that have substantially reduced its working capital
requirements, will be sufficient to meet its requirements for approximately the
first six months of calendar year 2000. Beyond that time, the Company believes
it will not generate sufficient operating cash flow to meet its needs without
additional external financing. There is no assurance that the Company's efforts
to obtain such financing will be successful. Any failure on the part

                                     -24-
<PAGE>

of the Company to do so will have a material adverse impact on the Company and
may cause the Company to cease operations.

On January 25, 1999, the Company entered into an agreement with the government
of Israel and various Israeli banking officials whereby the Company issued
warrants to the bank to receive 2,448,000 ordinary shares in full satisfaction
of the balance of the loan, which balance was $1,180,000, plus $11,000 of
accrued interest. The warrants vest on the second anniversary of the grant,
January 25, 2001, and expire on January 25, 2006.

On February 19, 1999, the Company obtained $600,000 of short-term financing
under a convertible loan agreement it executed with L&H Investment Company, N.V.
("LHIC"). On June 30, 1999, pursuant to the terms of the loan agreement, the
principal of the loan, plus $25,000 of accrued interest, was converted into
2,884,874 Series D Convertible Preferred Shares of the Company. Additionally,
pursuant to the terms of the loan agreement, the Company issued to LHIC a
warrant to purchase 3.0 million ordinary shares of the Company at a price of
$0.269 per share.

On November 15, 1999, the Company sold $1,000,000 of convertible debentures to
LHIC. Pursuant to the terms of the debentures, any time after March 1, 2000,
LHIC had the right to convert all or any portion of the unpaid principal and
accrued interest into ordinary shares of the Company at a conversion price of
$0.15 per share. Also pursuant to the terms of the debentures, warrants were
issued to LHIC to purchase a number of ordinary shares of the Company equal to
fifty percent (50%) of the number of shares issuable upon the conversion of all
the outstanding principal and accrued and unpaid interest. The exercise price of
the warrants was $0.15 per share. Additionally, LHIC was granted the right to
assign one-half, or $500,000, of the convertible debentures, which it elected to
do on February 3, 2000. On February 15, 2000, the Company offered to allow LHIC
and its assignees the option to convert principal and interest into ordinary
shares on such date only if the warrants were exercised concurrent with such
conversion. LHIC and its assignees agreed to the Company's offer and converted
all outstanding principal and accrued interest into ordinary shares of the
Company, plus exercised all warrants granted by the Company. Consequently, on
February 15, 2000, the Company issued 6.7 million shares to LHIC and its assigns
upon conversion of the principal and interest; and issued 3.4 million ordinary
shares upon receipt of $507,000 for the exercise of the warrants.

On February 2, 2000, the Company raised $250,000 from the sale to Technology
Fund II Pte Ltd of a convertible debenture under a commitment entered into on
November 15, 1999, which debenture contained essentially the same terms as the
LHIC convertible debentures mentioned above. Also, under the same terms granted
to LHIC and its assigns, of which Technology Fund II Pte Ltd. was one assignee,
on February 15, 2000, the outstanding principal and accrued interest of the
$250,000 debenture was converted into 1.7 million ordinary shares. Concurrent
with the conversion of principal and accrued interest, Technology Fund II Pte
Ltd. gave the Company $126,000 as the exercise price of the warrants contained
in the $250,000 convertible debenture agreement, causing the Company to issue an
additional 837,000 ordinary shares to Technology Fund II Pte Ltd.

On July 14, 1999, the Company entered into an agreement with a group of three
investors whereby the investors purchased for $500,000, 2.4 million ordinary
shares of the Company, which, after related fees, provided $459,000 to the
Company. Pursuant to the terms of the agreement, one of the investors, or his
assigns, was required to purchase an additional 7.1 million shares for
$1,500,000 when the Company obtained a strategic partner and entered into a
strategic alliance with such partner. In February 2000, the Company fulfilled
its obligations under the terms of the agreement, and the investor and his
assigns purchased the remaining 7.1 million ordinary shares for $1,500,000. The
investor, whose name is Jonathan Thomas, appointed to the Company's Board of
Directors on January 21, 2000, also loaned the Company $100,000 on October 12,
1999, evidenced by a Convertible Promissory Note (the "Note"). The principal

                                     -25-
<PAGE>

balance of the Note bears interest at the prime rate at the date of the Note
plus 200 basis points. The principal balance, plus all accrued and unpaid
interest, became due and payable on December 31, 1999. Pursuant to the terms of
the Note, the investor had the right at any time to convert all or any portion
of the outstanding principal and unpaid interest into ordinary shares of the
Company based on the average of the five (5) lowest closing trading prices of
the Company's ordinary shares between the date of the Note and the conversion
date. On December 30, 1999, the investor converted all the unpaid principal and
accrued interest of the Note into 741,000 ordinary shares of the Company.

The Company believes it has established sufficient reserves to accurately
reflect the likelihood of uncollectable receivables. There can be no assurance,
however, that uncollected accounts receivable beyond the reserves established
would not have a material adverse effect on the Company's business, results of
operations and financial condition.

The Company's working capital was $(606,000) at December 31, 1999, compared to
$(1,456,000) at December 31, 1998. The change in working capital primarily
reflects the Company's continuing operating losses. Included in working capital
of the Company at December 31, 1999 was the liability of $965,000 pertaining to
the convertible debentures which were converted into ordinary shares of the
Company on February 15, 2000.

The Company's operating activities used cash of $2,061,000, $4,796,000, and
$11,941,000 for the years ended December 31, 1999, 1998, and 1997, respectively.
The major factors contributing to the lower 1999 figure are the Company's
improved operating results. The Company's accounts payable and accruals balance
was reduced by $4,057,000 during 1997 and by $1,222,000 during 1998 as the
Company's Israeli operations wound down. During 1997, the Company retained the
services of a marketing specialist and a marketing and public/investor relations
firm, both of which were compensated through the issuance of warrants or shares
rather than in cash. During 1999, the Company recognized an extraordinary gain
of $885,000 as a result of negotiating the elimination of $1,180,000 of
long-term debt, plus $11,000 of accrued interest, in exchange for the issuance
of a warrant, valued at $306,000, to its primary lending bank in Israel. During
1999 and 1997, the Company issued convertible debentures and issued warrants in
connection with the convertible debentures. The Company recorded $627,000 in
1999 and $1,844,000 in 1997 for non-cash interest expense associated with the
beneficial conversion features and the issuance of warrants in connection with
the issuance of the convertible debentures.

The Company's investing activities used cash of $87,000, $40,000, and $168,000
during the years ended December 31, 1999, 1998, and 1997, respectively. The
reductions in 1999 and 1998 compared to 1997 reflect a reduction in spending on
capital equipment, such as computers, due to the winding down of the Company's
Israeli operations.

Financing activities provided cash of $2,256,000, $2,478,000, and $5,885,000
during the years ended December 31, 1999, 1998, and 1997, respectively. The cash
provided in 1999 includes the net proceeds from the sale of $1,600,000 of
convertible debentures to Lernout and Hauspie Investment Company N.V. ("LHIC"),
$100,000 from the convertible loan from Vulcan Investments, Inc., and $459,000,
net of costs, from the sale of ordinary shares pursuant to an agreement dated
July 14, 1999, both of which were discussed earlier in this section. During
1998, the Company retired long term debt in the amount of $1,550,000, of which
$1,321,000 was retired through cash payments and $229,000 was retired through
the issuance of ordinary shares. Also during 1998 the Company sold Series C
convertible preferred shares to Lernout & Hauspie Speech Products N.V., an
affiliate of LHIC, for $4,000,000. During 1997, $1,332,000 of the Company's
long-term debt was retired.

During August 1997, the Company completed a financing transaction pursuant to
Rule 505 of Regulation D under the Securities Act of 1933. Rule 505 was
applicable because the issuance involved fewer than 35

                                     -26-
<PAGE>

unaccredited investors. The Company received $1,850,000 in cash net of $150,000
in expenses and, in return, issued the investor an unsecured convertible
debenture carrying six percent (6%) annual interest. The total investment of
$2,000,000 was converted into 1,959,000 ordinary shares of the Company prior to
December 31, 1997.

During November and December, 1997, the Company completed a financing
transaction with a group of investors in which the Company received a total of
$5,750,000 in cash before expenses (approximately $5,305,000 net of expenses).
In return, the Company issued the investors convertible securities in the amount
of $5,750,000, carrying six percent (6%) annual interest. As of December 31
1997, $2,140,000 of the securities had been converted into 2,871,000 ordinary
shares of the Company. The balance of the securities was converted into an
additional 9,623,000 ordinary shares during the first quarter of 1998.

Impact of Inflation and Currency Fluctuations

The dollar cost of the Company's operations in Israel is influenced by the
extent to which any increase in the rate of inflation in Israel over the rate of
inflation in the United States is offset by the devaluation of the NIS in
relation to the dollar. Inflation in Israel will have a negative effect on the
profitability of contracts under which the Company is to receive payment in
dollars or other foreign currencies while incurring expenses in NIS linked to
the Israeli CPI, unless such inflation is offset by a devaluation of the NIS.
Inflation in Israel and currency fluctuations will also have a negative effect
on the profitability to the Company of fixed price contracts under which the
Company is to receive payment in NIS.

A devaluation of the NIS in relation to the dollar will have the effect of
decreasing the dollar value of any asset of the Company that consists of NIS or
receivables payable in NIS (unless such receivables are linked to the dollar).
Such a devaluation would also have the effect of reducing the dollar amount of
liabilities of the Company that are payable in NIS (unless such payables are
linked to the dollar). Conversely, any increase in the value of the NIS in
relation to the dollar will have the effect of increasing the dollar value of
any unlinked NIS assets of the Company and the dollar amounts of any unlinked
NIS liabilities of the Company.

Because exchange rates between the NIS and the other currencies in which the
Company conducts its business, including the dollar, fluctuate continuously
(albeit with a historically declining trend in the value of the NIS), exchange
rate fluctuation, and especially larger periodic devaluations, have an impact on
the Company's profitability and period-to-period comparisons of the Company's
results. Such impact is recorded in the Company's financial statements as Other
Expense. Favorable exchange rates will tend to increase reported financial
income and unfavorable exchange rates will tend to reduce reported income. To
date, the Company has not engaged in currency-hedging transactions intended to
reduce the effect of fluctuations in foreign currency exchange rates on the
Company's results of operations.

Effective Corporate Tax Rate

To date, none of the Company's operations in any of the countries in which it
operates has been profitable and, therefore, the Company has not paid income
taxes nor does it have any income tax liability.

Virtually all of the Company's facilities and investment programs have been
granted "Approved Enterprise" status under Israel's Law for Encouragement of
Capital Investments, 1959. Under the Approved Enterprise program, the Company is
entitled to reductions in the tax rate normally applicable to Israeli companies
with respect to income generated from Approved Enterprise investments. The
Company has derived, and expects to continue to derive, a substantial portion of
its income from Approved Enterprise investments. The Company is entitled to a
ten-year tax exemption commencing in the first year in which taxable income is
earned, subject to certain time restrictions, the benefit period for which has
not yet commenced. In addition,

                                     -27-
<PAGE>

the Company has U.S. net operating loss carryforwards that it intends to utilize
to reduce its future income tax liability.

As of December 31, 1999 and 1998, the Company has net deferred tax assets offset
by a full valuation allowance at December 31, 1999 and 1998. Management is not
able to determine if it is more likely than not that the net deferred tax assets
will be realized.

Year 2000

The Company develops all of its software products in compliance with Year 2000
industry guidelines. The Company's software products are not date sensitive and,
therefore, are not likely to be adversely impacted by Year 2000. The Company,
therefore, believes that it has minimal, if any, exposure to contingencies
related to the Year 2000 issue for the products it manufactures and sells. The
Company has reviewed the third-party custom-written software it uses in its
operations and has determined that this software is also not date sensitive and
poses minimal, if any, Year 2000 risk.

The Company has a policy of purchasing only information technology ("IT")
hardware that is warranted to be Year 2000 compliant and, therefore, believes
its only Year 2000 exposure in this regard is if the hardware fails to perform
as warranted, which is unlikely. The Company also utilizes "off-the-shelf"
software products in its operations. Such software is issued with frequent
updates which have or which are expected to address the Year 2000 issue.

The potential impact of the Year 2000 issue on the Company's non-IT systems that
may include embedded technology, such as microprocessors, is more difficult to
assess. The Company believes, however, that its operations are small enough that
any Year 2000 issue that may arise in its non-IT systems will amount to
inconveniences, which it can work around, rather than significant business
problems.

The Company continues to assess the compliance of its major customers, suppliers
and vendors. Management believes that third-party relationships upon which it
relies represent the greatest risk with respect to the Year 2000 issue because
it cannot guarantee that third parties will be able to adequately assess and
address their Year 2000 compliance issues in a timely manner. As a consequence,
the Company can give no assurances that issues related to Year 2000 will not
have a material adverse effect on future results of operations or financial
condition.

Since the beginning of 2000, the Company did not have any interruptions of its
business due to the Year 2000 issue. During the next few months, the Company
will continue to monitor its operations and assess whether the Year 2000 issue
has an impact on the Company.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

The Company is exposed to market risk through interest rates related to its
investment of current cash and cash equivalents. These funds are generally
highly liquid with short term maturities, and the related market risk is not
considered material. The Company's line of credit has a variable interest rate
and its convertible debentures are at a fixed interest rate. The Company's
management believes that fluctuations in interest rates in the near term will
not materially affect the Company's consolidated operating results, financial
position or cash flows.

                                     -28-
<PAGE>

Item 8.  Consolidated Financial Statements and Supplementary Data.

Consolidated Financial Statements

<TABLE>
              <S>                                                                                               <C>
              Reports of Independent Certified Public Accountants.............................................   F-2 -  F-3
              Financial Statements:
                  Consolidated Balance Sheets.................................................................   F-4 -  F-5
                  Consolidated Statements of Operations.......................................................          F-6
                  Consolidated Statements of Stockholders' Equity (Deficiit)..................................   F-7 -  F-8
                  Consolidated Statements of Cash Flows ......................................................          F-9
                  Summary of Accounting Policies..............................................................  F-10 - F-16
                  Notes to the Consolidated Financial Statements..............................................  F-17 - F-40
</TABLE>

                                     -29-
<PAGE>

Report of Independent Certified Public Accountants


To the Stockholders and Board of Directors
LanguageWare.net (Company), Ltd.
Colorado Springs, Colorado

We have audited the accompanying consolidated balance sheet of LanguageWare.net
(Company), Ltd. (formerly Accent Software International Ltd.) and its subsidiary
(the "Company") as of December 31, 1999 and the related consolidated statements
of operations, stockholders' deficit and cash flows for the year 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 audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 the Company at
December 31, 1999 and the results of their operations and their cash flows for
the year then ended in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's significant operating losses and working
capital deficit raise substantial doubt about its ability to continue as a going
concern.  Management's plans regarding those matters are also described in Note
1. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.

                                              /s/BDO Seidman, LLP
March 10, 2000
Denver, Colorado

                                      F-2
<PAGE>

Report of Independent Certified Public Accountants


To the Stockholders and Board of Directors
LanguageWare.net (Company), Ltd.
Colorado Springs, Colorado

We have audited the accompanying consolidated balance sheet of LanguageWare.net
(Company), Ltd. (formerly Accent Software International Ltd.) and its subsidiary
(the "Company") as of December 31, 1998 and the related consolidated statements
of operations, stockholders' deficit and cash flows for the years ended December
31, 1998 and 1997. 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 generally accepted auditing standards
in the 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. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes 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 the Company at
December 31, 1998 and the results of their operations and their cash flows for
the years ended December 31, 1998 and 1997 in conformity with generally accepted
accounting principles in the United States.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's significant operating losses and working
capital deficit raise substantial doubt about its ability to continue as a going
concern.  Management's plans regarding those matters also are described in Note
1. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.

As discussed in Note 2, the consolidated financial statements have been restated
to reflect the effect of the intrinsic value of beneficial conversion features
associated with certain debt and equity transactions entered into during 1998
and 1997.

                                              /s/BDO Shlomo Ziv & Co.
March 14, 2000
Tel Aviv, Israel

                                      F-3
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                                                    Consolidated Balance Sheets
                                                Dollars and Shares in Thousands

<TABLE>
<CAPTION>
December 31,                                               1999           1998
-----------------------------------------------------------------------------------

Assets (Note 3)

Current:
<S>                                                    <C>            <C>
 Cash and cash equivalents                                     $ 249          $ 141
 Accounts receivable, net of allowance for doubtful              460            265
  accounts of $113 and $219 (Note 10)
 Other receivables                                                53             91
 Inventories                                                       -              7
 Prepaid expenses and other current assets                        77              5
-----------------------------------------------------------------------------------

Total current assets                                             839            509
-----------------------------------------------------------------------------------

Property and equipment:
 Computer equipment                                              150            179
 Office furniture and equipment                                   32             59
-----------------------------------------------------------------------------------

                                                                 182            238

Less accumulated depreciation                                    128            198
-----------------------------------------------------------------------------------

Net property and equipment                                        54             40

Other assets                                                      16             50
-----------------------------------------------------------------------------------

                                                               $ 909          $ 599
-----------------------------------------------------------------------------------
</TABLE>

           See accompanying reports of independent certified public accountants,
  summary of accounting policies and notes to consolidated financial statements.

                                      F-4
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                                                    Consolidated Balance Sheets
                                                                    (Continued)
                                                Dollars and Shares in Thousands

<TABLE>
<CAPTION>
December 31,                                                                       1999                   1998
----------------------------------------------------------------------------------------------------------------------

Liabilities and Stockholders' Deficit

Current liabilities:
<S>                                                                        <C>                    <C>
 Accounts payable                                                                      $    282               $    467
 Accrued liabilities                                                                        139                    318
 Line-of-credit (Note 4)                                                                     59                      -
 Convertible debentures (Note 3)                                                            965                      -
 Current maturities of long-term debt (Note 3)                                                -                  1,180
----------------------------------------------------------------------------------------------------------------------

Total current liabilities                                                                 1,445                  1,965

Accrued severance liability                                                                   -                     15
----------------------------------------------------------------------------------------------------------------------

Total liabilities                                                                         1,445                  1,980
----------------------------------------------------------------------------------------------------------------------

Commitments (Note 6)

Stockholders' deficit  (Note 5):
Convertible preferred stock - NIS 0.01 par value, 10,000 shares                               7                      -
 authorized, 2,889 and 4 issued and outstanding
Common stock - NIS 0.01 par value, 130,000 shares authorized, 32,721 and                     85                     77
 29,223 issued and outstanding
Additional paid-in capital                                                               52,816                 50,589
Accumulated deficit                                                                     (53,444)               (52,047)
----------------------------------------------------------------------------------------------------------------------

Total stockholders' deficit                                                                (536)                (1,381)
----------------------------------------------------------------------------------------------------------------------

                                                                                       $    909               $    599
----------------------------------------------------------------------------------------------------------------------
</TABLE>

           See accompanying reports of independent certified public accountants,
  summary of accounting policies and notes to consolidated financial statements.

                                      F-5
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                                          Consolidated Statements of Operations
                       Dollars and Shares in Thousands Except Per Share Amounts

<TABLE>
<CAPTION>
Year Ended December 31,                                                 1999                 1998                 1997
----------------------------------------------------------------------------------------------------------------------

<S>                                                       <C>                  <C>                  <C>
Net sales (Notes 9, 10 and 11)                                       $ 1,714              $ 1,949             $  3,125

Cost of sales                                                          1,163                  997                3,062
----------------------------------------------------------------------------------------------------------------------

Gross profit                                                             551                  952                   63
----------------------------------------------------------------------------------------------------------------------

Operating expenses:
 Product development costs                                               283                2,540                4,813
 Marketing expenses                                                      722                1,404                2,177
 General and administrative expenses                                   1,149                2,465                3,169
 Restructuring charge (Note 1)                                             -                1,257                    -
----------------------------------------------------------------------------------------------------------------------
Total operating expenses                                               2,154                7,666               10,159
----------------------------------------------------------------------------------------------------------------------

Loss from operations                                                  (1,603)              (6,714)             (10,096)

Interest and other, net                                                  679                   78                1,912
----------------------------------------------------------------------------------------------------------------------

Net loss before extraordinary item                                    (2,282)              (6,792)             (12,008)

Extraordinary gain on extinguishment of debt   (Note 3)                  885                    -                    -
----------------------------------------------------------------------------------------------------------------------

Net loss                                                              (1,397)              (6,792)             (12,008)

Deemed dividends on preferred stock (Note 5)                               -                2,535                1,844
----------------------------------------------------------------------------------------------------------------------

Net loss applicable to common stockholders                           $(1,397)             $(9,327)            $(13,852)
----------------------------------------------------------------------------------------------------------------------

Basic and diluted loss per common share:
 Loss before extraordinary item                                      $  (.08)               $(.34)              $(1.11)
 Extraordinary item                                                      .03                    -                    -
----------------------------------------------------------------------------------------------------------------------

 Net loss per common share                                           $  (.05)               $(.34)              $(1.11)
----------------------------------------------------------------------------------------------------------------------

Basic and diluted weighted-average number of common
 shares outstanding                                                   30,407               27,242               12,495
----------------------------------------------------------------------------------------------------------------------
</TABLE>

           See accompanying reports of independent certified public accountants,
  summary of accounting policies and notes to consolidated financial statements.

                                      F-6
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                      Consolidated Statements of Stockholders' Equity (Deficit)
                                                Dollars and Shares in Thousands

<TABLE>
<CAPTION>

                                                         Convertible
                                                        Preferred Stock                                                 Total
                                                          (Note 5)            Common Stock      Additional            Stockolders'
                                                      -------------------  -------------------   Paid-In  Accumulated   Equity
Years Ended December 31, 1997, 1998, and 1999          Shares   Par Value   Shares  Par Value    Capital    Deficit    (Decifit)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>    <C>        <C>      <C>       <C>        <C>         <C>
Balance, January 1, 1997                                     -     $  -       11,670     $28     $ 36,193   $(33,247)   $  2,974

Issuance of preferred stock for cash, net of $170 in
 offering costs (Note 5)                                     2                             -        1,580    -     -       1,580


Issuance of preferred stock upon conversion of debentures    5        -            -       -        4,188          -       4,188
 (Note 5)

Issuance of common stock upon conversion of debentures
 (Note 5)                                                    -        -          846       2        1,386          -       1,388

Issuance of common stock upon conversion of preferred
 stock (Note 5)                                             (3)       -        3,985      11          (11)         -           -

Issuance of common stock for services (Note 5)               -        -          612       2          993          -         995

Issuance of common stock upon exercise of  stock warrants    -        -           27       -           62          -          62

Issuance of stock warrants net of unamortized discount of    -        -            -       -           34          -          34
 $291 (Note 5)

Contribution of capital associated with the beneficial
 conversion feature of convertible debentures (Note 5)       -        -            -       -        1,810          -       1,810

Net loss                                                     -        -            -       -            -    (12,008)    (12,008)
----------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1997                                   4        -       17,140      43       46,235    (45,255)      1,023
</TABLE>

           See accompanying reports of independent certified public accountants,
  summary of accounting policies and notes to consolidated financial statements.


                                      F- 7
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                      Consolidated Statements of Stockholders' Equity (Deficit)
                                                Dollars and Shares in Thousands

<TABLE>
<CAPTION>
                                                         Convertible
                                                        Preferred Stock                                                 Total
                                                          (Note 5)            Common Stock      Additional            Stockolders'
                                                      -------------------  -------------------   Paid-In  Accumulated   Equity
Years Ended December 31, 1997, 1998, and 1999          Shares   Par Value   Shares  Par Value    Capital    Deficit    (Decifit)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>         <C>     <C>        <C>     <C>       <C>         <C>
Issuance of preferred stock for cash, net of $232 in
 offering costs (Note 5)                                    4           -        -          -      3,768         -        3,768


Issuance of common stock upon conversion of preferred
 stock (Note 5)                                            (4)          -    9,623         27        (27)        -            -

Issuance of common stock in satisfaction of accounts
 payable (Note 5)                                           -           -    1,620          4        356         -          360

Issuance of common stock upon satisfaction of long-term
 debt (Notes 3 and 5)                                       -           -      732          2        227         -          229

Issuance of common stock upon exercise of stock options     -           -      108          1         30         -           31

Net loss                                                    -           -        -          -          -    (6,792)      (6,792)
------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998                                  4           -   29,223         77     50,589    (52,047)     (1,381)

Issuance of preferred stock upon conversion of
 debentures (Note 5)                                    2,885           7        -          -        618          -         625

Issuance of common stock for cash, net of $41 in
 offering costs (Note 5)                                    -           -    2,381          6        453          -         459

Issuance of common stock upon conversion of
 debentures (Note 5)                                        -           -      741          2        100          -         102

Issuance of common stock upon exercise of stock options
 (Note 5)                                                   -           -      376          -         88          -          88

Issuance of stock warrants (Notes 3 and 5)                  -           -        -          -        906          -         906

Contribution of capital associated with the beneficial
 conversion feature of convertible debentures (Note 3)      -           -        -          -         62          -          62

Net loss                                                    -           -        -          -          -     (1,397)     (1,397)
------------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1999                              2,889      $    7   32,721     $   85   $ 52,816   $(53,444)   $   (536)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying reports of independent certified public accountants,  summary
of accounting policies and notes to consolidated financial statements.

                                      F- 8
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                                          Consolidated Statements of Cash Flows

                                                           Dollars in Thousands

<TABLE>
<CAPTION>
Increase (Decrease) in Cash and Cash Equivalents

Year Ended December 31,                                                     1999                1998               1997
-----------------------------------------------------------------------------------------------------------------------

Operating activities:
<S>                                                            <C>                 <C>                 <C>
 Net loss                                                                $(1,397)            $(6,792)          $(12,008)
 Adjustments to reconcile net loss to net cash used in
  operating activities:
   Depreciation and amortization                                              44               1,312              1,052
   Write-down of property and equipment                                       13                   -                  -
   Change in realizable value of trade credits and equipment
    (Note 1)                                                                  50                 714                  -
   Bad debt expense                                                           73                 245                209
   Common stock issued for services                                            -                   -                995
   Non-cash interest expense                                                 627                   -              1,844
   Extraordinary gain (Note 3)                                              (885)                  -                  -
  Changes in operating assets and liabilities:                                 -                   -                  -
   Accounts receivable                                                      (268)                245               (645)
   Other receivables                                                          88                  26                 55
   Inventories                                                                 7                  78                936
   Prepaid expenses and other current assets                                 (72)                901               (311)
   Accounts payable and accrued liabilities                                 (326)             (1,222)            (4,057)
   Accrued severance liability                                               (15)               (303)               (11)
-----------------------------------------------------------------------------------------------------------------------

Net cash used in operating activities                                     (2,061)             (4,796)           (11,941)
-----------------------------------------------------------------------------------------------------------------------

Investing activities:
 Purchase of property and equipment                                          (71)                (40)              (168)
 Increase in other assets                                                    (16)                  -                  -
-----------------------------------------------------------------------------------------------------------------------

Net cash used in investing activities                                        (87)                (40)              (168)
-----------------------------------------------------------------------------------------------------------------------

Financing activities:
 Repayment of long-term debt                                                   -              (1,321)            (1,332)
 Proceeds on the issuance of convertible debentures, related
  party                                                                    1,700                   -              6,000
 Proceeds from the line-of-credit                                             59                   -                  -
 Proceeds on the issuance of common stock                                    500                   -                  -
 Proceeds on the issuance of convertible preferred stock                       -               4,000              1,750
 Proceeds from the exercise of stock warrants and options                     38                  31                 62
 Payments for debt issue costs                                                 -                   -               (425)
 Payment for offering costs                                                  (41)               (232)              (170)
-----------------------------------------------------------------------------------------------------------------------

Net cash provided by financing activities                                  2,256               2,478              5,885
-----------------------------------------------------------------------------------------------------------------------

Increase (decrease) in cash and cash equivalents                             108              (2,358)            (6,224)

Cash and cash equivalents, beginning of year                                 141               2,499              8,723
-----------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents, end of year                                   $   249             $   141           $  2,499
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
           See accompanying reports of independent certified public accountants,
  summary of accounting policies and notes to consolidated financial statements.

                                      F-9
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                                                 Summary of Accounting Policies
--------------------------------------------------------------------------------
Basis of                    LanguageWare.net (Company) Ltd., formerly Accent
Presentation                Software International Ltd., and its subsidiary (the
                            "Company") provide multilingual, multicultural and
                            multi-commerce products and services enabling
                            business to be conducted on web sites via the
                            Internet. The Company was incorporated in 1988 in
                            Jerusalem, Israel. In 1991, the Company formed a
                            wholly-owned subsidiary, Accent Worldwide, Inc.
                            ("Accent"), a Delaware corporation. Accent is
                            located in Colorado Springs, Colorado, and provides
                            sales, marketing, software development, and
                            executive management functions for the Company.
                            During 1999, the Company moved its operations to
                            Colorado Springs, Colorado.

                            The Company considers the U.S. dollar to be its
                            functional currency.

                            Transactions and balances originally denominated in
                            U.S. dollars are presented at their original
                            amounts. Transactions and balances in other
                            currencies are remeasured into U.S. dollars in
                            accordance with Statement of Financial Accounting
                            Standards No. 52, "Foreign Currency Translation".
                            Exchange gains and losses from the aforementioned
                            remeasurements are reflected in the statements of
                            operations. The representative rate of exchange
                            prevailing on December 31, 1999 was U.S. $1 = New
                            Israeli Shekel ("NIS") 4.149; on December 31, 1998
                            it was U.S. $1 = NIS 4.160 and on December 31, 1997
                            it was U.S. $1 = NIS 3.536.

Principles of               The accompanying consolidated financial statements
Consolidation               include the accounts of the Company and its wholly-
                            owned subsidiary. All significant intercompany
                            accounts and transactions have been eliminated in
                            consolidation.

Cash                        The Company considers highly liquid investments
Equivalents                 purchased with original maturities of three months
                            or less and money market accounts to be cash
                            equivalents.

                                     F-10
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                                                 Summary of Accounting Policies
<TABLE>
<CAPTION>
<S>                        <C>
Property, Equipment,        Property and equipment are stated at cost. Depreciation and amortization
Depreciation and            expense are computed using the straight-line method over the estimated useful
Amortization                lives of the assets, which range from two to five years.  Maintenance and
                            repairs are expensed as incurred.  Major renewals and improvements are
                            capitalized.  When property and equipment is retired or otherwise disposed
                            of, the asset and accumulated depreciation or amortization are removed from
                            the accounts and the resulting profit or loss is reflected in operations.

Research and                Research and development costs are expensed as incurred.  Statement of
Development                 Financial Accounting Standards 86, "Accounting for the Costs of Computer
                            Software to Be Sold, Leased, or Otherwise Marketed", does not materially
                            affect the Company, as all previously capitalized software development costs
                            were fully amortized by December 31, 1997.

Long-Lived Assets           Long-lived assets are reviewed for impairment whenever events or changes in
                            circumstances indicate that the carrying amount may not be recoverable.  If
                            the expected future cash flow from the use of the asset and its eventual
                            disposition is less than the carrying amount of the asset, an impairment loss
                            is recognized and measured using the asset's fair value.

Debt Issue Costs            Debt issue costs are being amortized using the interest method over the term of the
                            debt.

Revenue Recognition         Translation Services and Web Page Design

                            During 1999, the Company began providing translation services and web page design
                            services. The Company recognizes revenue on translation and web page design services
                            when the service is performed.

</TABLE>
                                     F-11
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                                                 Summary of Accounting Policies
<TABLE>
<CAPTION>
<S>                       <C>

                            Software Sales

                            Original Equipment Manufacturer ("OEM") software sales are typically made to
                            another hardware or software manufacturer who wishes to "bundle" the
                            Company's product with its product for sale to an end-user. The Company
                            recognizes the revenue from OEM sales once the order has been received, the
                            software has been shipped, collection of the receivable is determined to be
                            probable, and no significant obligations on the Company's part remain
                            outstanding. End-user  acceptance of the  software  is  irrelevant  to the
                            Company's revenue recognition because the OEM's do not have an option to
                            return or receive credit for product once it has been accepted by the OEM
                            even though it may subsequently be returned to the OEM by the end-user.

                            The Company recognizes revenue under the "try before you buy" arrangement
                            only upon acceptance of the product by the customer. Under the "try before
                            you buy" arrangement, a potential customer can either download the software
                            from the Company's web site or request the software from the Company.  In
                            either case, the software is "time bombed," meaning that it will operate for
                            only a limited trial period. If the user wishes to continue using the
                            software after the trial period, the user must "unlock" the software with
                            instructions provided by the Company. To receive the instructions, the
                            customer must accept and agree to pay for the product. Revenue recognition
                            occurs only at that point.

                            License Agreements

                            OEM arrangements may include non-refundable payments in the form of
                            guaranteed sublicense fees. Guaranteed sublicense fees from OEMs are
                            recognized as revenue upon shipment of the master copy of all software to
                            which the sublicense fees relate if there are not significant post-delivery
                            obligations and the obligation is not subject to price adjustment, is
                            non-recoverable and non-refundable and due within twelve months.
</TABLE>

                                     F-12
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                                                 Summary of Accounting Policies
<TABLE>
<CAPTION>

<S>                        <C>
                            License fees are earned under software license agreements to end-users and
                            resellers (including OEMs and distributors). Such fees are generally
                            recognized when a customer purchase order has been received, the software has
                            been shipped, the Company has a right to invoice the customer, collection of
                            the receivable is determined to be probable, and there are no significant
                            obligations remaining.

Income Taxes                The Company accounts for income taxes under the liability method, which
                            requires an entity to recognize deferred tax assets and liabilities.
                            Temporary differences are differences between the tax basis of assets and
                            liabilities and their reported amounts in the financial statements that will
                            result in taxable or deductible amounts in future years.

Advertising Costs           Statement of Position 93-7, "Reporting on Advertising Costs" ("SOP 93-7")
                            requires that the cost of an advertising campaign that is not "Direct
                            Response" advertising should be expensed as incurred or upon the first time
                            the advertising takes place.  As the Company does not  have "Direct Response"
                            advertising, costs are expensed in accordance with SOP 93-7.  For the years
                            ended December 31, 1999, 1998 and 1997, the Company expensed approximately
                            $78,000, $234,000 and $395,000 in advertising costs.

Net Loss per Common         Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
Share                       provides for the calculation of "Basic" and "Diluted" earnings per share.
                            Basic earnings per share includes no dilution and is computed by dividing
                            loss applicable to common stockholders by the weighted average number of
                            common shares outstanding for the period. Diluted earnings per share reflect
                            the potential dilution of securities that could share in the earnings of an
                            entity, similar to fully diluted earnings per share.
</TABLE>
                                     F-13
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                                                 Summary of Accounting Policies
<TABLE>
<CAPTION>
<S>                       <C>
                            For the years ended December 31, 1999, 1998 and 1997, total stock options
                            of 4,378,625, 1,508,717 and 1,436,126, total stock warrants of 18,227,528,
                            9,905,694 and 5,607,413 and convertible preferred stock and convertible debentures
                            of 18,526,550, 8,888,889 and 7,928,571 were not included in the computation of
                            diluted loss per share because their effect was anti-dilutive.

Concentrations of           The Company's financial instruments that are exposed to concentrations of
Credit Risk                 credit risk consist primarily of cash and accounts receivable.

                            The Company's cash is in demand deposit accounts placed with federally
                            insured financial institutions. Such deposit accounts at times may exceed
                            federally insured limits. The Company has not experienced any losses on such
                            accounts.

                            Concentrations of credit risk exist with respect to accounts receivable.  The
                            balances are due from a few customers and are limited as they are dispersed
                            across geographic areas. The Company reviews a customer's credit history
                            before extending credit and establishes an allowance for doubtful accounts
                            based upon the credit risk of specific customers, historical trends and other
                            information. Generally, the Company does not require collateral from its
                            customers.

Use of                      The preparation of financial statements in conformity with generally accepted
Estimates                   accounting principles requires management to make estimates and assumptions
                            that affect the reported amounts of assets and liabilities, the disclosure of
                            contingent assets and liabilities at the date of the financial statements,
                            and the reported amounts of revenues and expenses during the reporting
                            period. Actual results could differ from those estimates.
</TABLE>
                                     F-14
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                                                 Summary of Accounting Policies
<TABLE>
<CAPTION>

<S>                       <C>
Fair Value of               The following methods and assumptions were used to estimate the fair value of
Financial                   each class of financial instruments for which it is practicable to estimate
Instruments                 that value:

                            Cash, Accounts Receivable, Accounts Payable and Accrued Liabilities

                            Fair values of cash, accounts receivables, accounts payable, and accrued
                            liabilities are assumed to approximate carrying values for these financial
                            instruments since they are short term in nature and their carrying amounts
                            approximate fair value or they are receivable or payable on demand.

                            Long-Term Debt and Convertible Debentures

                            Long-term debt and convertible debentures bear interest at a rate of interest
                            based upon current lending rates of interest at the date they are issued and
                            the book value approximates fair value.

Stock Option Plan           The Company applies APB Opinion 25, "Accounting for Stock Issued to
                            Employees" ("APB Opinion 25") and related Interpretations in accounting for
                            all stock option plans. Under APB Opinion 25, compensation cost is recognized
                            for stock options issued to employees when the exercise price of the
                            Company's stock options granted is less than the market price of the
                            underlying common stock on the date of grant. Statement of Financial
                            Accounting Standards No. 123, "Accounting for Stock-Based Compensation"
                            ("SFAS No. 123") requires the Company to provide pro forma information
                            regarding net income (loss) as if compensation cost for the Company's stock
                            options plans had been determined in accordance with the fair value based
                            method prescribed in SFAS No. 123.  To provide the required pro forma
                            information, the Company estimates the fair value of each stock option at the
                            date of grant by using the Black-Scholes Option Pricing Model.
</TABLE>
                                     F-15
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                                                 Summary of Accounting Policies
<TABLE>
<CAPTION>
<S>                       <C>
Comprehensive Loss          Comprehensive loss is comprised of net loss and all changes to the
                            consolidated statement of stockholders' deficit, except those changes made
                            due to investments by stockholders, changes in paid-in capital and
                            distributions to stockholders.  The Company had no components of
                            comprehensive loss except for net losses for the three years ended December
                            31, 1999.

Recent Accounting           The Financial Accounting Standards Board has recently issued Statement on
Pronouncements              Financial Accounting Standards No. 133, "Accounting for Derivative
                            Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133, amended
                            by SFAS No. 137, established standards for recognizing all derivative
                            instruments including those for hedging activities as either assets or
                            liabilities in the statement of financial position and measuring those
                            instruments at fair value. This Statement is effective for all fiscal
                            quarters of all fiscal years beginning after June 15, 2000.  Management
                            believes the adoption of this statement will have no material impact on the
                            Company's consolidated financial statements.

Reclassifications           Certain reclassifications have been made to the 1998 and 1997 financial statements
                            in order for them to conform to the 1999 presentation. See Note 2 for restatement
                            of 1998 and 1997 financial statements.
</TABLE>
                                     F-16
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                                     Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
<S>                        <C>
1.  Going Concern           The consolidated financial statements have been prepared assuming the Company
                            will continue as a going concern.  Management believes the Company will
                            remain a going concern but acknowledges that the Company's history of
                            operating losses and operating cash flow deficits raises legitimate concern
                            about the Company's longer term prospects.

                            To enhance the Company's longer term prospects, effective January 2000
                            management has embarked on a new operating strategy designed to increase
                            revenue. In the years preceding 1999, the Company was a seller of language
                            technology and translation software to the consumer retail market,
                            transforming in calendar 1999 primarily to a provider of translation services
                            to other businesses. Beginning January 2000, the Company has changed its
                            focus by providing a full range of multilingual, multicultural and
                            multi-commerce products and services that enable its business customers to
                            conduct business on web sites via the Internet, primarily in the U.S. to Asia
                            market. Management's decision to pursue the new strategy was based on in
                            depth analysis of the market it desired to target.

                            Since its inception in 1988, the Company has developed proprietary software
                            serving the language information technology industry. To enhance its
                            competitive position in the newly targeted market under its new operating
                            strategy, the Company intends to utilize such proprietary software as tools
                            to provide superior service to potential customers. Additionally, the Company
                            has entered into alliances with other companies in the industry aimed at
                            broadening the Company's market reach and has expanded its translation
                            services business.

                            To further enhance its competitive advantage in its target market of U.S. to
                            Asia e-business solutions, the Company acquired Star+Globe Technologies Pte.
                            Ltd. ("Star+Globe") on January 14, 2000.  Star+Globe owns proprietary Asian
                            character processing technology and provides Asian languages translation
                            services.
</TABLE>
                                     F-17
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                                     Notes to Consolidated Financial Statements

                            To reduce expenses, the Company reduced its staffing
                            level from approximately 170 employees at its peak
                            in 1996 to 17 employees at December 31, 1999.
                            Related expenses such as rent, telephone, travel and
                            training costs were reduced proportionately. The
                            shift away from the retail market has led to a
                            reduction in production and inventory carrying
                            costs. Upon completion of several product
                            development activities during the fourth quarter,
                            1998, the Israel-based product development function
                            was disbanded. The Company reestablished a product
                            development capability in the United States. During
                            1999, the Company reduced discretionary spending on
                            advertising and marketing as well as the amount it
                            spends on exhibitions and trade shows and, over the
                            past few years, it has closed its sales offices in
                            England, California, Canada and Israel. General and
                            administrative expenses have been reduced through
                            out-sourcing and the elimination of non-essential
                            activities.

                            During both the third and fourth quarters of 1997,
                            the second quarter of 1998 and during all quarters
                            of 1999, the Company successfully obtained external
                            financing through the sale of convertible securities
                            and common stock. The Company continues to explore
                            sources of additional financing to satisfy its
                            operational requirements. Such sources may not be
                            available on terms acceptable to the Company.

                            The accompanying consolidated financial statements
                            do not include any adjustments relating to the
                            recoverability or classification of asset carrying
                            amounts or the amounts and classification of
                            liabilities that may result should the Company be
                            unable to continue as a going concern.

                            Restructuring

                            In response to the fact that actual revenue was
                            short of management's expectations and that the
                            Company was unable to generate sufficient cash flow
                            from its operations to sustain the business,
                            management instituted restructuring initiatives
                            designed to reduce operating expenses and working
                            capital requirements. During 1997 as the Company
                            shifted away from the retail market, it recognized
                            that it had a large amount of inventory that was
                            surplus to its foreseeable requirements and during
                            the second quarter of 1997, the Company completed an
                            exchange of its "excess" inventory in which it sold
                            inventory with a book value of $666,000 and received
                            $1,600,000 in "trade credits." The Company recorded
                            the trade credits as a long-term asset with a value
                            equal to the inventory surrendered, that is,
                            $666,000. No gain or loss was recorded on the
                            transaction. The trade credits were available to use
                            over a period of three years and could be exchanged,
                            with cash, for a variety of products and services.
                            From its receipt of the credits in 1997 through the
                            end of 1998, the Company realized approximately
                            $104,000 from use of the trade credits. Following
                            the restructuring which the Company substantially
                            completed during 1998, it recognized that it was
                            unlikely to realize more than a relatively small
                            additional amount of value from the trade credits
                            and took a charge of $512,000 to bring the carrying
                            cost of the credits in line with the estimated fair
                            value. In 1999 the Company took a charge of $50,000
                            to write off the remaining balance in trade credits.
                            The restructuring activities, which are also
                            discussed in the going concern paragraphs are
                            summarized below:

<TABLE>
<CAPTION>

                            Balance                                     Balance                                     Balance
                          December 31,              Reductions/       December 31,               Reductions/     December 31,
(Dollars in Thousands)       1997         Expense     Payments            1998        Expense     Payments           1999
-------------------------------------------------------------------------------------------------------------------------------
<S>                       <C>             <C>       <C>               <C>             <C>        <C>             <C>
Assets:

 Trade credits               $666          $512         $104              $ 50         $ 50         $   -            $  -

 Property and equipment       202           202            -                 -            -             -               -
-------------------------------------------------------------------------------------------------------------------------------

                             $868          $714         $104              $ 50         $ 50         $   -            $  -
-------------------------------------------------------------------------------------------------------------------------------

Liabilities:

 Severance and employee
   costs                     $318          $  -         $303              $ 15         $  -         $  15            $  -

 Operating leases and
   other                        -           543          543                 -            -             -               -
-------------------------------------------------------------------------------------------------------------------------------

                             $318          $543         $846              $ 15         $  -         $  15            $  -
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>



                                     F-18
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                                     Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
<S>                        <C>

2. Restatement of           The Company determined that it did not properly record the intrinsic value of
   1998 and 1997            the beneficial conversion feature associated with certain debt and equity
   Financial                transactions entered into during 1998 and 1997.
   Statements
                            During 1997, the Company did not properly account for the intrinsic value of
                            the beneficial conversion feature associated with the convertible debenture
                            and warrants issued in August 1997 (see Note 5) or the beneficial conversion
                            feature and warrants associated with the November and December 1997 issuance
                            of the convertible debentures, Series B convertible preferred stock and
                            warrants (see Note 5).  Accordingly, the 1997 financial statements have been
                            restated to correct this error.  As a result of reducing interest expense
                            from $3,311,000 to $1,845,000, and recording deemed dividends of $1,844,000
                            associated with the issuance of convertible preferred stock, additional
                            paid-in capital was reduced to $46,235,000 from $47,701,000, the net loss was
                            reduced from $13,474,000 to $12,008,000 and net loss applicable to common
                            stockholders increased to $13,852,000 from $13,474,000.  Basic and diluted
                            net loss per share increased from $1.08 per share to $1.11 per share.

                            During 1998, the Company should have recorded $2,535,000 in deemed dividends
                            associated with the beneficial conversion feature on the June 1998 issuance
                            of the Series B convertible preferred stock and warrants (see Note 5).
                            Accordingly, the 1998 financial statements have been restated to correct this
                            error, the effect of which reduces net loss to $6,792,000 from $6,819,000 and
                            increases net loss applicable to common stockholders from $6,819,000 to
                            $9,327,000.  Basic and diluted net loss per share increased from $.25 per
                            share to $.34 per share.
</TABLE>
                                     F-19
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                                      Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
<S>                       <C>
3.Long-Term                 On November 15, 1999, the Company issued two $500,000 convertible debentures
  Debt and                  to an existing stockholder of the Company. The debentures mature on May 31,
  Convertible               2000.  The debentures bear interest at 10.25%.  The first debenture is
  Debentures                assignable. The debentures are collateralized by substantially all assets
                            of the Company. The agreements allowed for the conversion of the unpaid
                            principal plus unpaid accrued interest at any time after March 1, 2000
                            into shares of the Company's common stock at a conversion price of $.15 per
                            share. In addition, the holders of the debentures received warrants to purchase
                            shares of the Company's common stock equal to 50% of the number of shares
                            issuable upon conversion of the outstanding principal and accrued interest
                            at a $.15 exercise price. The warrants will expire on February 15, 2005. At
                            the date of issuance, the warrant and the beneficial conversion feature have
                            been valued at $62,000 which will be amortized as additional interest expense
                            over the life of the related debentures. The unamortized discount was $35,000
                            at December 31, 1999.

                            On February 3, 2000, the Comapany accelerated the conversion date to February 15,
                            2000. The acceleration in the conversion date did not increase the intrinsic
                            value of the conversion feature; accordingly, no additional debt discount was
                            recorded.  On February 15, 2000, each of the holders of the debentures converted
                            their debt plus accrued interest into 6,766,18 shares of the Company's common
                            stock. In addition, on February 15, 2000, the holders exercised their warrants,
                            and the Company issued 3,383,094 shares of its common stock for cash proceeds
                            of approximately $507,000.

                            During 1998, the Company entered into an agreement with the government of
                            Israel and various Israeli banking officials, which allowed the Company to
                            convert a portion of its government-guaranteed long-term debt into common
                            stock of the Company.  In 1998 approximately $229,000 of the debt was
                            converted into 732,000 shares of the Company's common stock.  During January
                            1999, the Company agreed to issue the Bank warrants to purchase 2,448,000
                            shares of the Company's common stock at no exercise price in  exchange
                            for  payment on the outstanding  $1,180,000 in debt  and  accrued  interest
                            totaling
</TABLE>
                                     F-20
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                                     Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>

<S>                         <C>
                            $11,000.  The warrants were valued at $306,000 using the Black-Scholes option
                            pricing model and are exercisable on January 25, 2001 and expire on January
                            25, 2006.  The Company recognized a $885,000 extraordinary gain from this
                            debt extinguishment in 1999.

                            On February 2, 2000, the Company issued a $250,000 convertible debenture to
                            an existing stockholder of the Company under the same terms as the November
                            15, 1999 debentures, including the right of the holder of the debenture to
                            receive warrants to purchase shares of the Company's common stock equal to 50%
                            of the number of shares issuable upon conversion of the outstanding principal and
                            accrued interest at a $.15 exercise price. At the date of issuance, the warrants
                            and the beneficial conversion feature have been valued at $250,000 (the total
                            proceeds received) which will be amortized as additional interest expense over
                            the life of the related debenture.  On February 15, 2000, the holder of the
                            debenture converted its debt plus accrued interest into 1,673,379 shares
                            of the Company's common stock.  In addition, on February 15, 2000, the
                            holder exercised its warrants, and the Company issued 836,690 shares of its
                            common stock for cash proceeds of approximately $126,000.


4.  Line-of-Credit          The Company has a $75,000 revolving line-of-credit with a bank which expires
                            during February 2000.  The line-of-credit had an outstanding balance at
                            December 31, 1999 of $58,657 at an interest rate of 10.65%.

5.  Stockholders'           Increase In Authorized Shares
    Deficit
                            During the annual stockholders' meeting held on June 25, 1999, the
                            stockholders approved an amendment to its Articles of Association to
                            increase the number of authorized shares of common stock from 65,000,000 to
                            130,000,000.

                            Preferred Stock

                            The Company has 10,000,000 authorized shares of preferred stock divided into
                            five classes of preferred stock.  As of December 31, 1999, the Company has
                            the following series of preferred stock.
</TABLE>
                                     F-21
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                                     Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>

<S>                        <C>

                            Series C Convertible Preferred Stock - As of December 31, 1999 and 1998,
                            4,000 shares of Series C convertible preferred stock were issued and
                            outstanding.  The holders of the Series C convertible preferred stock shall
                            be entitled to receive dividends, when as and if declared by the Company's
                            Board of Directors out of any funds legally available therefor, equal in
                            amount per share to the dividends paid on the common stock.  Dividends on the
                            Series C convertible preferred stock shall be cumulative.  The Series C
                            convertible preferred stock are convertible into common stock at the option
                            of the holder at a conversion price of $.45 per share.  The holders of the
                            Series C convertible preferred stock have the right to vote the shares as if
                            they had all been converted into common stock, and the holders of the Series
                            C convertible preferred stock shall vote with the common stock as a single
                            class.  The holders of the Series C convertible preferred stock have been
                            granted one seat on the Company's Board of Directors, subject to shareholder
                            approval.

                            Series D Convertible Preferred Stock - As of December 31, 1999, 2,884,874 shares
                            of Series D convertible preferred stock were issued and outstanding. As of
                            December  31, 1998, no shares of Series D convertible preferred stock were issued
                            and outstanding. The holders of the Series D convertible preferred stock shall be
                            entitled to receive dividends, when as and if declared by the Company's Board
                            of Directors out of any funds legally available therefor, equal in amount per
                            share to the dividends paid on
</TABLE>

                                     F-22
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                                     Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>

<S>                        <C>
                            the common stock.  Dividends on the Series D convertible preferred stock
                            shall be cumulative.  The Series D convertible preferred stock shall rank
                            prior to all other shares of the Company, except the Series C Preferred
                            stock, with which the Series D Preferred Stock shall rank on par.  The Series
                            D convertible preferred stock are convertible at any time at the option of
                            the holder into one share of common stock for each preferred share converted.
                            The holders of the Series D convertible preferred stock have the right to
                            vote the shares as if they had all been converted into common stock, and the
                            holders of the Series D convertible preferred stock shall vote with the
                            common stock as a single class.  The holders of the Series D convertible
                            preferred stock have been granted one seat on the Company's Board of Directors,
                            subject to shareholders approval.

                            Private Placements Pursuant to Regulation D

                            On August 5, 1997, the Company completed a private placement of a debenture
                            with an investor pursuant to Regulation D of the Securities Act of 1933.
                            The Company received $2,000,000 in cash before offering costs of
                            approximately $150,000.  The debenture bore interest at 6% and matured
                            on August 5, 1999.  The debenture is convertible into the Company's
                            common stock at the earlier of 90 days after the date of the issuance
                            or upon which a registration statement covering the resale of the shares
                            of the common stock issuable upon conversion is declared effective by the
                            SEC.  The debenture is convertible at the lesser of 75% of the average
                            of the closing bid prices for the Company's common stock for the five
                            consecutive trading days ending on the trading day immediately preceding
                            such date of conversion or multiplying the average of the closing bid
                            prices for the five consecutive trading days ending on the trading date
                            immediately preceding the issue date of the debenture by 1.35. At any
                            time prior to 90 days following the date of the issuance of the debenture,
                            the Company has the right to convert the debenture and all accrued and
                            unpaid interest into the Company's Series A convertible preferred stock at
                            a conversion ratio of one share of Series A convertible preferred for each
                            $1,000 in debenture. The Company has recorded a discount for  the beneficial
                            conversion feature in the amount of $771,000 as original issued  discount
                            on the debenture and is being  amortized  to interest expense

</TABLE>
                                     F-23
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                                     Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>

<S>                        <C>
                            over the period in which the holder can first convert the debenture using the
                            interest method. Under the private placement, the Company issued the investor
                            warrants to purchase 250,000 shares of the Company's common stock at an
                            exercise price of $2.80 per share and warrants to purchase an additional
                            50,000 shares of the Company's common stock at an exercise price of $3.20
                            per share. In addition, the Company issued to the placement agents warrants
                            to purchase 30,000 shares of the Company's common stock at an exercise price
                            of $1.73 per share. The August Investor's warrants and those of the  placement
                            agents all expire on August 5, 2002 and have been valued at $325,000.  The
                            Company has recorded the value of the warrants as original issue discount
                            on the debenture and is being amortized  to  interest  expense  over  the
                            life of the related debt  using the interest  method.  During   October  1997,
                            the  Company  elected  to convert $500,000 of the debenture into 500  shares
                            of Series A convertible preferred stock.  The $500,000 debenture was converted
                            into Series A preferred stock net of $37,000 in unamortized debt issue costs.
                            By the end of 1997, the investor converted the remaining $1,500,000
                            debenture net of $112,000 unamortized debt issue costs into 846,540 shares
                            of common stock, and the investor converted its 500 shares of Series A
                            preferred stock of $463,000 into 1,112,769 shares of common stock.  The
                            Company expensed the remaining unamortized discount associated with the
                            beneficial conversion feature of the debenture to interest expense at the
                            time that the debenture was converted into common stock.  The Company recorded
                            the remaining $291,000 unamortized discount associated with the warrants to
                            additional paid-in capital at the time that the debenture was converted into
                            Series A convertible preferred stock and common stock.

                            During November and December 1997, the Company completed a private placement
                            with four investors pursuant to Regulation D of the Securities Act of 1933.
                            The Company received $5,750,000 in cash before offering costs of
                            approximately $445,000.  Under the private placement, the Company issued the
                            investors debentures in the amount of $4,000,000 and 1,750 shares of its
                            Series B convertible  preferred stock in the amount of $1,750,000, and
                            warrants to purchase 1,150,000 shares of the Company's common stock at an
                            exercise price of $2.45 per  share. In addition, the Company issued to
</TABLE>

                                     F-24
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                                     Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>

<S>                       <C>
                            the placement agent warrants to purchase 795,000 shares of the Company's
                            common  stock at  an  exercise  price  of $2.44 per share.

                            The November Investors' warrants and those of the placement agent all expire
                            on November 30, 2002.  Both the debentures and Series B convertible preferred
                            stock paid interest and dividends of 6% per year.  The debentures matured on
                            November 6, 1999. Any time at the earlier of November 11, 1997 or upon which
                            a registration statement covering the resale of the shares of the common
                            stock issuable upon conversion hereof is declared effective by the SEC, the
                            holder can elect to convert the debentures and the Series B convertible
                            preferred stock  into  shares of  the Company's common stock.  The debentures
                            and the Series B convertible preferred stock are convertible at the lesser of
                            80% of the average of the closing bid prices for the Company's common stock
                            for the five consecutive trading days ending on the trading day immediately
                            preceding such date of conversion or $2.45. The Company has the right to
                            convert the debentures and all accrued and unpaid interest into the Company's
                            Series B convertible preferred stock at any time prior to 90 days following
                            the date of the issuance of the debenture at a conversion ratio of one share
                            of Series B convertible preferred stock for each $1,000 in debenture.  The
                            Company has recorded the beneficial conversion feature in the amount of $1,039,000
                            as original issued discount on the debentures and is being amortized to
                            interest expense over the period in which the holders can first convert the
                            debentures using the interest method. The Company did not record any beneficial
                            conversion feature on the Series B convertible preferred stock as the market
                            price of the Company's common stock at the date of Series B convertible
                            preferred stock issuance was greater than the conversion price. The Company has
                            recorded the $1,844,000 value of the 1,150,000 warrants as a deemed dividend in
                            the December 31, 1997 statement of operations.  On November 6, 1997, the Company
                            elected to convert the $4,000,000 debentures net of $275,000 in unamortized debt
                            issue costs into 4,000 shares of Series B convertible preferred stock. During 1998
                            and 1997, the investors converted all

</TABLE>
                                     F-25
<PAGE>

                                                                LanguageWare.net
                                                                  (Company) Ltd.

                                      Notes to Consolidated Financial Statements

of the Series B convertible preferred stock of $3,330,000 and $1,975,000 into
9,623,372 shares and 2,871,248 shares of the Company's common stock.

On June 4, 1998, the Company issued 4,000 shares of Series C convertible
preferred stock at $10 per share together with warrants to purchase 4,444,444
shares of the Company's common stock at an exercise price of $0.55 per share.
The Company received $4,000,000 in cash before offering costs of approximately
$232,000. The investor can elect to convert the Series C convertible preferred
stock at any time into the Company's common stock at a conversion price of $.45
per share. The Company has recorded the beneficial conversion feature in the
amount of $445,000 as original issued discount on the Series C convertible
preferred stock and is being amortized as a deemed dividend over the period in
which the holders can first convert the Series C convertible preferred stock
using the interest method. The Company has recorded the $2,090,000 value of the
warrants as original issue discount on the Series C convertible preferred stock
and is being amortized to deemed dividend over the period in which the holders
can first convert the Series C convertible preferred stock using the interest
method.

During February 1999, the Company issued a $600,000 debenture to an existing
stockholder of the Company. The debenture bore interest at 11.75% and matured on
June 30, 1999. At the maturity date of the debenture, the holder can elect to
convert the debenture into the Company's Series D convertible preferred stock at
a price per share equal to 85% of the average closing bid price of the Company's
common stock for the 20 days prior to conversion. If the Company's common stock
is delisted from NASDAQ as of the date of conversion, the price per share shall
be equal to the average closing bid price of the Company's common stock as of
the last 20 days before being delisted. The Series D convertible preferred stock
is convertible any time at the option of the holder into one share of common
stock for each preferred share converted. In addition, the holder received
3,000,000 warrants to purchase shares of the Company's common stock at an
exercise price equal to 85% of the

                                     F- 26
<PAGE>

                                                                LanguageWare.net
                                                                  (Company) Ltd.

                                      Notes to Consolidated Financial Statements

Company's common stock for the twenty trading days preceding the date of
conversion. The warrants expire on February 18, 2004. The Company recorded a
$600,000 discount on the debenture attributable to the value of the warrants
issued as of the date of the debenture. The Company amortized the discount as
interest expense over the term of the debenture. On June 30, 1999, the holder
converted the debenture, plus accrued interest totaling $625,000, into 2,884,874
shares of the Company's Series D convertible preferred stock.

During October 1999, the Company issued a $100,000 convertible promissory note.
The note bore interest at 10.25% and matured on December 31, 1999. At any time
between the date of the note and the maturity date, the holder of the note has
the right to convert all or any portion of the outstanding principal amount of
the note and accrued interest into shares of the Company's common stock. The
note is convertible into common stock at the average of the five lowest closing
trades of the Company's common stock between the date of the note and the
conversion date. At the date of issuance, the market price of the Company's
common stock is equal to the conversion price. On December 30, 1999, the lender
converted the loan, plus accrued interest totaling $102,000, into 740,917 shares
of the Company's common stock.

During fiscal 1999, the Company issued 2,380,953 shares of its common stock for
$500,000 in cash before offering costs of approximately $41,000. During January
and February 2000, the Company issued 7,142,858 shares of its Company stock for
$1,500,000 in cash to the same investors.

During fiscal 1999, the Company issued 376,125 shares of its common stock upon
the exercise of stock options for cash proceeds of approximately $38,000 and
stock subscription receivables of $50,000 which is included in prepaid expenses
and other current assets in the accompanying December 31, 1999 balance sheet.
Subsequent to 1999, the Company received the $50,000 on the stock subscription
receivables. During first quarter of 2000, the Company issued 359,250 shares of
its common stock upon the exercise of stock options for cash proceeds of
approximately $97,000.

                                     F- 27
<PAGE>

                                                                LanguageWare.net
                                                                  (Company) Ltd.

                                      Notes to Consolidated Financial Statements

Issuance Of Common Stock In Satisfaction Of Debt and Trade Payables and
Services

During 1998, the Company reached agreements with several of its largest
creditors whereby the creditors agreed to accept shares of the Company's common
stock in satisfaction of all or a portion of the amounts due them. First, the
Company reached an agreement with the Bank for Industrial Development (the
"Bank") to repay a loan guaranteed by the Israeli government which the Company
received pursuant to the Government's Approved Enterprise Program. The shares
were to be sold by the Bank so that the proceeds would repay the bank debt and
any other associated commissions and costs. During 1998, the Company issued
732,000 shares of common stock to the bank in partial repayment of approximately
$229,000 of the loan (See Note 3). Second, during 1998, the Company issued
1,620,000 shares of common stock in satisfaction of $360,000 of trade payables.

During 1997, the Company issued 612,000 shares of its common stock with a market
value of approximately $995,000 as compensation for marketing and
public/investor relations services.

Stock Options and Stock Warrants

The Company's board of directors have adopted formal stock option plans which
allow for the issuance of incentive stock options, within the meaning of the
Internal Revenue Code, and other options issued pursuant to the plan that
constitute non-qualifed options for the issuance of common stock in the Company.
The following table is a summary of the Company's stock option plans as of
December 31, 1999.

                                     F- 28
<PAGE>

                                                                LanguageWare.net
                                                                  (Company) Ltd.

                                      Notes to Consolidated Financial Statements

Plan                                                    Reserved   Outstanding
                                                         Shares      Options
--------------------------------------------------------------------------------

Founders' Share Option Plan (1)                          190,000       152,625
Employee Share Option Plan (2)                         2,500,000     2,012,000
Non-Employee Share Option Plan (1998)                    600,000       402,000
CEO Share Option Plan (3)                              2,000,000     1,812,000
--------------------------------------------------------------------------------

                                                       5,290,000     4,378,625
--------------------------------------------------------------------------------

(1)  No additional stock options may be granted under this plan.

(2)  During the Annual Stockholders' Meeting held on June 25, 1999, the
stockholders approved to increase the number of shares of common stock
reserved for issuance from 1,875,000 to 2,500,000.

(3) During 1999, the Company granted 1,812,000 options under the plan to the
Company's chief executive officer. The officer received 1,000,000 options at an
exercise price of $.16 which was equal to the Company's market price of the
Company's common stock at the date of grant. These options vest over a three-
year period and expire on March 22, 2004. The officer received 812,000 options
at an exercise price of $.34 per share which was equal to the market price of
the Company's common stock at the date of grant. These options vest over a
three-year period and expire on July 19, 2003.

In accordance with the Plans, the price per share covered by each option award
shall be 100% of the fair market value of each share on the date of grant, or
such other percentage as determined by the Share Option Committee; provided,
however, that in the case of an incentive option granted to an employee who, at
the time such option is granted, owns more than 10% of the total combined voting
power of all classes of shares of the Company or any subsidiary corporation or
parent corporation, the purchase price for each share will be not less than 110%
of the fair market value per share at the date the option is granted. Option
awards shall be exercisable pursuant to the terms under which they are awarded
and subject to the terms and conditions of the Plans. In no event shall an
incentive option be exercisable after the expiration of ten years from the date
such option award is granted. In the case of an incentive option granted to a
person who, at the time such option is granted, owns more than 10% of the total
combined voting power of all classes of shares of the Company or any subsidiary
corporation or parent corporation, such incentive option shall not be
exercisable after the expiration of five years from the date the option is
granted.

On January 10, 2000, the Company's Board of Directors approved the Star+Globe
Share Option Plan (2000) which allows for the issuance of non-qualified options
(see Note 12). The Company reserved 2,266,639 shares of the Company's common
stock for issuance under the plan. The plan will expire on January 15, 2001.

                                     F- 29
<PAGE>

                                                                LanguageWare.net
                                                                  (Company) Ltd.

                                      Notes to Consolidated Financial Statements


The following table summarizes information on stock option activity:

--------------------------------------------------------------------------------
                                                     Weighted
                                                      Average
                     Number of   Exercise Price   Exercise Price    Expiration
                       Shares      per Share $      per Share $        Dates
--------------------------------------------------------------------------------

January 1, 1997        993,459    .24 - 32.65          4.156        1999 - 2000
Granted                829,250    1.63 - 4.50          2.564               2002
Exercised              (16,667)   3.03 - 4.37           3.77                  -
Expired/forfeited     (369,916)   1.63 - 4.50          3.051                  -
--------------------------------------------------------------------------------

December 31, 1997    1,436,126    .24 - 32.65          3.526        1999 - 2002
Granted              2,525,250      .34 - .47           .344        1999 - 2005
Exercised             (107,168)     .24 - .34            .27                  -
Expired/forfeited   (2,345,491)   .34 - 32.65          2.584                  -
--------------------------------------------------------------------------------

December 31, 1998    1,508,717     .24 - 3.03           1.05        1999 - 2005
Granted              3,963,334      .12 - .45           .212        1999 - 2004
Exercised             (307,125)     .12 - .34           .289                  -
Expired/forfeited     (786,301)    .34 - 1.87          1.042                  -
--------------------------------------------------------------------------------

December 31, 1999    4,378,625     .12 - 3.03           .347        2000 - 2005
--------------------------------------------------------------------------------

The following table summarizes stock options exercisable:

                                                             Weighted
                                                             Average
                                          Options            Exercise
                                        Exercisable           Price
---------------------------------------------------------------------

December 31, 1999                        1,991,294           $ 0.347
December 31, 1998                        1,058,187           $ 1.11
December 31, 1997                          697,835           $ 4.43




                                     F- 30
<PAGE>

                                                                LanguageWare.net
                                                                  (Company) Ltd.

                                      Notes to Consolidated Financial Statements

The following table summarizes information on stock warrant activity:
                                                    Weighted
                                                     Average
                    Number of    Exercise Price   Exercise Price    Expiration
                     Shares       per Share $       per Share $        Dates
--------------------------------------------------------------------------------

January 1, 1997     3,254,913     1.83 - 14.03       9.263         1998 - 2003
  Granted           2,367,500      1.73 - 3.20        2.39         1998 - 2003
  Exercised           (15,000)            1.83        1.83                2002
  Expired                   -                -           -                   -
--------------------------------------------------------------------------------

December 31, 1997   5,607,413     1.73 - 14.03       6.381         1998 - 2003
  Granted           4,444,444              .55         .55                2003
  Exercised                 -                -           -                   -
  Expired            (146,163)            3.33        3.33                   -
--------------------------------------------------------------------------------

December 31, 1998   9,905,694      .55 - 14.03        3.81         1999 - 2003
  Granted           8,781,334       .00 - 2.69        .149         2004 - 2006
  Expired            (459,500)            1.83        1.83                   -
--------------------------------------------------------------------------------

December 31, 1999  18,227,528      .00 - 14.03       2.096         2000 - 2006
--------------------------------------------------------------------------------


                                                    Options     Warrants
--------------------------------------------------------------------------------
Weighted average fair value of options and
warrants granted during 1999                       $   .179  $       .146

Weighted average fair value of options and
warrants granted during 1998                            .15           .46

Weighted average fair value of options and
warrants granted during 1997                           .163          1.52

--------------------------------------------------------------------------------

The Company applies APB Opinion 25, "Accounting for Stock Issued to
Employees", and related Interpretations in accounting for the plans. Under
APB Opinion 25, when the exercise price of the Company's employee stock
options is less than the market price of the underlying stock on the date of
grant, compensation cost is recognized.

                                     F- 31
<PAGE>

                                                                LanguageWare.net
                                                                  (Company) Ltd.

                                      Notes to Consolidated Financial Statements

FASB Statement 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"),
requires the Company to provide pro forma information regarding net loss and net
loss per share as if compensation costs for the Company's stock option plans and
other stock awards had been determined in accordance with the fair value based
method prescribed in SFAS No. 123. The Company estimates the fair value of each
stock award at the grant date by using the Black-Scholes option-pricing model
with the following weighted-average assumptions used for grants in 1999, 1998
and 1997, respectively: dividend yield of 0 percent for all years; expected
volatility of 76 to 228 percent in 1999, 157 to 247 percent in 1998, and 91 to
244 percent in 1997; risk-free interest rates of 4.64 to 6.02 percent in 1999,
5.57 to 6 percent in 1998 and 5.81 to 6 percent in 1997; and expected lives of
less than one to seven years in 1999, two to seven years in 1998, and two to
five years in 1997.

Under the accounting provisions for SFAS No. 123, the Company's net loss and net
loss per share would have been increased by the pro forma amounts indicated
below:

Year Ended December 31,                       1999          1998          1997
--------------------------------------------------------------------------------
                                                  Dollars in Thousands

Net loss
  As reported                             $  (1,397)   $   (6,792)  $   (12,008)
  Pro forma                               $  (2,027)   $   (7,119)  $   (13,356)

Basic and diluted loss per common
  share:
  As reported                               $  (.05)        $(.34)  $     (1.11)
  Pro forma                                 $  (.07)        $(.35)  $     (1.22)

                                                                           F- 32
<PAGE>

                                                                LanguageWare.net
                                                                  (Company) Ltd.

                                      Notes to Consolidated Financial Statements

The following information summarizes stock options outstanding and
exercisable at December 31, 1999:

                    Outstanding                              Exercisable
----------------------------------------------------  -------------------------
                               Weighted Average
                          --------------------------

                          Remaining                                  Weighted
 Range of                Contractual                                  Average
 Exercise      Number      Life in      Exercise        Number       Exercise
 Prices $    Outstanding    Years        Price $      Exercisable     Price $
--------------------------------------------------------------------------------

 .12 -  .47   4,138,625       4           .221         1,751,294        .252
       1.00      60,000       1           1.00            60,000        1.00
       3.03     180,000       1           3.03           180,000        3.03
--------------------------------------------------------------------------------

 .12 - 3.03   4,378,625     3.8           .347         1,991,294         .53
--------------------------------------------------------------------------------

The following information summarizes stock warrants outstanding and
exercisable at December 31, 1999:

                    Outstanding                              Exercisable
----------------------------------------------------  --------------------------
                               Weighted Average
                          --------------------------

                          Remaining                                  Weighted
 Range of                Contractual                                  Average
 Exercise      Number      Life in      Exercise        Number       Exercise
 Prices $    Outstanding    Years        Price $      Exercisable     Price $
--------------------------------------------------------------------------------

  .00 - .55  13,225,778       5           .284        13,225,778        .284
       1.73     300,000       3          1.726           300,000       1.726
2.00 - 2.80   2,025,000       3          2.468         2,025,000       2.468
       3.20      50,000       3           3.20            50,000        3.20
7.00 - 7.15     344,500       2          7.106           344,500       7.106
       8.50     122,250       1           8.50           122,250        8.50
      11.50   1,980,000       1          11.50         1,980,000       11.50
      14.03     180,000       2          14.03           180,000       14.03
--------------------------------------------------------------------------------

 .00 - 14.03  18,227,528     4.2          2.096        18,227,528         .50
--------------------------------------------------------------------------------

                                                                           F- 33
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                                     Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>

<S>                        <C>
6.   Commitments            Employee Agreements

                            During 1997, the Company entered into an employment agreement with its chief
                            executive officer, expiring in February 2000. The employment agreement sets
                            forth annual compensation to the chief executive officer of $200,000.
                            Compensation is adjusted annually based upon an annual review by the
                            compensation  committee of the Board of Directors.  During February 2000, the
                            Company's Board of Directors extended the employment agreement for a period
                            of one year at an annual base salary of $250,000 with an immediate bonus of
                            $75,000.

                            Employee Benefit Plans

                            During fiscal 1997, the Company established a 401(k) plan. Employees who are at
                            least 21 years of age are eligible to participate in the plan. Employees may
                            contribute from 1% to 15% of their compensation to the plan. Employer matching
                            contributions are discretionary and vest ratably over a five year period. The
                            Company did not make any contributions to the Plan for the years ended December
                            31, 1999, 1998 and 1997.

                            During 1999, the Company adopted a flexible benefits plan.  The plan is
                            administrated by the Company.

                            Operating Leases

                            The Company leases office space under various non-cancelable leases, which
                            expire through January 2005.

                            Future minimum lease payments as of December 31, 1999 are as follows:

                            Year Ending December 31,        Dollars in Thousands
                          ----------------------------------------------------------------------

                            2000                                   $  174
                            2001                                      145
                            2002                                      133
                            2003                                      135
                            2004                                      138
                            Thereafter                                 11
                          ----------------------------------------------------------------------

                            Total                                  $  736
                          ----------------------------------------------------------------------

                            Total rent expense for the years ended December 31, 1999, 1998 and 1997 was
                            approximately $59,000, $106,000 and $120,000.
</TABLE>
                                                                           F-34
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                                     Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>

<S>                        <C>
7. Taxes on Income          Tax Benefits Under The Law For The Encouragement Of Capital Investments, 1959

                            The Company has been granted "approved enterprise" status under the Isreal Law
                            for the Encouragement of Capital Investments, 1959. The Company opted for
                            benefits under the "alternative path" which entitles it to a ten-year tax
                            exemption commencing in the first year in which taxable income will be
                            earned, subject to certain time restrictions. Entitlement to the benefits is
                            dependent upon compliance with the conditions of the letter of approval. Due
                            to reported losses, the benefit period has not yet commenced.

                            The Company has received final tax assessments through December 31, 1991.
                            According to Israeli Tax Law, tax assessments up to and including December
                            31, 1993 are considered final.

                            There was no provision for U.S. income taxes required for the years ended
                            December 31, 1999, 1998 and 1997 due to operating losses in those years. At
                            December 31, 1999, the Company had available U.S. net operating loss
                            carryforwards of approximately $8,018,000 for tax reporting purposes. These
                            U.S. net operating loss carry forwards expire through 2020.  These carry
                            forwards are subject to various limitations imposed by the rules and
                            regulations of the Internal Revenue Service.

                            Income taxes consisted of the following:

                            Year Ended December 31,               1999        1998       1997
                            -----------------------------------------------------------------
                                                                     Dollars in Thousands

                            Deferred benefit:
                                 Federal                        $ (464)     $ (130)    $ (589)
                                 Foreign                             -           -          -
                                 State                             (24)       (115)      (204)
                            -----------------------------------------------------------------

                            Change in valuation allowance          488         245        793
                            -----------------------------------------------------------------

                            Income tax benefit                  $    -      $    -     $    -
                            =================================================================

                            There were no tax credits established in the statements of operations since
                            the Company has a 100 percent valuation allowance for the tax benefit of net
                            deductible temporary differences and operating loss carryforwards. Management
                            is not able to determine if it is more likely than not that the deferred tax
                            assets will be realized. The Company has deferred tax assets with a 100
                            percent valuation allowance at December 31, 1999 and 1998. The tax effect on
                            the components is as follows:
</TABLE>
                                                                           F-35
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                                     Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>

<S>                      <C>

                           December 31,                                                1999          1998
                          --------------------------------------------------------------------------------
                                                                                   Dollars in Thousands

                            U.S. net operating loss carryforwards                $     2,992  $      2,509
                            Accounts receivable                                            5             -
                          --------------------------------------------------------------------------------
                                                                                       2,997         2,509

                            Valuation allowance                                       (2,997)       (2,509)
                          --------------------------------------------------------------------------------
                                                                                 $         -  $          -
                          --------------------------------------------------------------------------------

                            A reconciliation of the income taxes at the federal statutory rate to the
                            effective tax rate is as follows:

                            Year Ended December 31,                       1999          1998          1997
                          --------------------------------------------------------------------------------
                                                                            Dollars in Thousands

                            Federal income tax benefit computed       $  (475)   $   (2,309)  $    (4,083)
                             at the Federal statutory rate
                            State income tax benefit net of               (24)         (115)         (204)
                             Federal benefit
                            Exempt from Israel income taxes                11         2,179         3,494
                            Other - permanent differences                   -             -             -
                            Change in valuation allowance                 488           245           793
                          --------------------------------------------------------------------------------

                            Income tax benefit                        $     -    $        -   $         -
                          --------------------------------------------------------------------------------
</TABLE>

                                                                           F-36
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                                     Notes to Consolidated Financial Statements

<TABLE>
<CAPTION>
<S>                         <C>                            <C>        <C>        <C>          <C>
8. Supplemental             Year Ended December 31,                        1999        1998        1997
   Data to                -----------------------------------------------------------------------------
   Statements of                                                                 Dollars in Thousands
   Cash Flows
                            Cash payments for interest                   $   12     $    78      $   67
                          -----------------------------------------------------------------------------

                            Excluded from the statements of cash flows were the effects of certain
                            noncash investing and financing activities as follows:

                            Year Ended December 31,                        1999        1998        1997
                          -----------------------------------------------------------------------------
                                                                            Dollars in Thousands

                            Issuance of common stock upon exercise       $   50     $     -      $    -
                            of stock options for stock subscription
                            receivable

                            Issuance of common stock for accounts             -         360           -
                            payable
                            Issuance of common stock for                    102         229       1,388
                            convertible debentures and accrued
                            interest
                            Issuance of convertible preferred stock         625           -       4,188
                            for convertible debentures and accrued
                            interest
                            Issuance of stock warrants in                   600           -           -
                            connection with convertible preferred
                            stock
                            Issuance of stock warrants for debt             306           -           -
                            extinguishment
                            Issuance of stock warrants in                    62           -           -
                            connection with convertible debt
                            Trade credits received as payment on              -           -         666
                            accounts receivable
                          -----------------------------------------------------------------------------

9. Related Party            The Company recorded revenue of $100,000 from the sale of a software
   Transactions             license to a stockholder during 1998. There were no material sales to
                            stockholders or other related parties during 1999 or 1997.
</TABLE>
                                                                           F-37
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                                     Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>


<S>                        <C>
10. Significant             As of December 31, 1999, one customer accounted for 85% of total accounts
    Customers               receivable and as of December 31, 1998, one customer accounted for 16%
                            of total accounts receivable.  For the year ended December 31, 1999, two
                            customers accounted for 47% and 14% of total revenues.  For the
                            year ended December 31, 1997, one customer accounted for 21% of total
                            revenues.

11. Geographic              For purposes of allocating sales by geographic area, the Company uses the
    Segments                physical location of its customers as its basis.

                            Year Ended December 31,                        1999        1998        1997
                          -----------------------------------------------------------------------------
                                                                            Dollars in Thousands

                            Sales By Geographic Area:
                             Domestic (Israel)                           $   53     $   526      $  650
                             North America                                  794       1,326       1,197
                             Other                                          867          97       1,278
                          -----------------------------------------------------------------------------

                                                                         $1,714     $ 1,949      $3,125
                          -----------------------------------------------------------------------------

12. Subsequent              Business Acquisition
    Event
                            On January 14, 2000, the Company acquired all of the capital stock of
                            Star+Globe Technologies Pte. Ltd. ("Star+Globe"), a privately-held
                            Singapore company, in a transaction valued at approximately $6.5 million.
                            As a result of the acquisition, Star+Globe will operate as a wholly-owned
                            subsidiary of the Company.

                            In consideration for the Star+Globe stock, the Company may issue up to
                            33,673,361 shares of its common stock valued at $4,734,475 ($0.14 per
                            share quoted market price).  At the closing, the Company issued an
                            aggregate of 30,306,025 shares of its common stock (the "Closing
                            Consideration"), and was required to issue up to 3,367,336 additional
                            shares of its common stock (the "Holdback Shares") within  ninety (90)
                            days  of  January 14, 2000.  The Holdback  Shares may be reduced by
                            any indemnification claims pursuant to the
</TABLE>

                                                      F-38

<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                                     Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>

<S>                       <C>

                            provisions of the Agreement.  The Company has agreed to use its best
                            efforts to register, in calendar year 2000, all of the common stock issued
                            as consideration.

                            In connection with the transaction, the Company has also agreed to provide
                            a non-qualified share option plan for employees and a director of
                            Star+Globe wherein stock options have been granted to such employees
                            and director to purchase an aggregate of 2,266,639 the Company's common
                            stock valued at $1,735,183 using the Black-Scholes options pricing model
                            at an exercise price of $0.093 per share.  The stock options are exercisable
                            immediately and expire on January 15, 2001.

                            The acquisition was recorded using the purchase method of accounting by
                            which the assets were valued at fair market value at the date of
                            acquisition.  Based upon the contingency related to the Holdback Shares as
                            described above, the value of the acquisition consideration may decrease
                            up to approximately $473,000.

                            The following unaudited pro forma information presents the consolidated results
                            of the operations of the Company as if the acquisition of Star+Globe occurred on
                            January 1, 1999. The unaudited pro forma financial data does not purport to be
                            indicative of the results which actually would have been obtained had the
                            purchase been effected on the dates indicated or of the results which may be
                            obtained in the future.

                            Year Ended December 31,                             1999
                            -----------------------------------------------------------------
                                                                         Dollars in Thousands

                            Revenues                                            $  2,823

                            Loss before extraordinary item                      $ (4,554)

                            Net Loss                                            $ (3,669)

                            Basic and diluted net loss per share:
                            Before extraordinary item                         $  (0.06)
                            Net loss per share                                $  (0.07)

                            Basic and diluted weighted average
                              number of shares outstanding                        64,080


13. Fourth                  The Company recorded in the fourth quarter of 1999 certain adjustments relative to
    Quarter                 non-cash interest expense related to a convertible debenture amounting to
    Adjustments             $600,000 and an adjustment to reduce the Company's extraordinary gain from
                            debt extinguishment due to the change in the valuation of the warrants
                            issued in connection with the debt extinguishment amounting to $232,471.
                            Of the aggregate amount, $432,472 and $399,999 relate to the first and
                            second quarters, respectively.  The Company will file an amended Form 10-Q
                            for the quarters ended March 31, 1999 and June 30, 1999.
</TABLE>
                                     F-39
<PAGE>

                                                               LanguageWare.net
                                                                 (Company) Ltd.

                                     Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
14. Valuation and
    Qualifying                                            Balance at              Deductions   Balance
    Accounts                                              Beginning    Charge to      and     at End of
                                                          of Period    Expense    Write-Offs    Period
                          -----------------------------------------------------------------------------
                            <S>                              <C>        <C>       <C>          <C>
                            Year Ended December 31, 1999
                            Allowance for doubtful            $  192     $   73    $  (152)      $  113
                            accounts
                            Allowance for sales returns       $   27     $    -    $   (27)      $    -

                            Year Ended December 31, 1998
                            Allowance for doubtful            $   63     $  218    $   (89)      $  192
                            accounts
                            Allowance for sales returns       $    -     $   27    $     -       $   27

                            Year Ended December 31, 1997
                            Allowance for doubtful            $1,109     $  209    $(1,255)      $   63
                            accounts
                            Allowance for sales returns       $1,136     $    -    $(1,136)      $    -
                          -----------------------------------------------------------------------------
</TABLE>

                                                                           F-40
<PAGE>

Item 9.  Disagreements on Accounting and Financial Disclosure.

     None.

                                   PART III

Item 10. Directors and Executive Officers of the Registrant

     The directors and executive officers of the Company as of the date of this
filing and their respective ages and positions with the Company are set forth
below. Biographical information is also set forth below. The officers hold
office until the next Annual Meeting or until their successors are appointed by
the Board of Directors.

<TABLE>
<CAPTION>
Name                     Age       Position
----                     ---       --------
<S>                      <C>       <C>
Fred A. Snow             62        Chairman of the Board

Todd A. Oseth            38        President, Chief Executive Officer and Director

Esther Dyson             46        Director

Francis Vanderhoydonck   41        Director

Thomas Denys             32        Director

Jonathan M. Thomas       45        Director

Juzar Motiwalla          49        Director

Harold L. Covert         53        Director

Robert V. Antoniazzi     44        Vice President - Marketing

Thomas E. Groff          55        Vice President - Sales

Wilson Lee               42        Vice President - Research & Development

Thomas B. Foster         53        Chief Financial Officer and Secretary
</TABLE>

Fred A. Snow was appointed Chairman of the Board on January 21, 2000. He is a
partner with Singapore-based venture capital fund TDF Management. Mr. Snow has
held top management positions in high technology companies operating in the USA,
Europe, Asia and Latin America for the past 30 years. Most recently he served as
executive vice president of worldwide operations for Adobe Systems Inc. Prior to
his work with Adobe Systems, he served as president and CEO for Vector Graphic
Inc. and TransImage Corporation. He also has worked as vice president of western
operations for Businessland and senior vice president with Tech Data
Corporation.

Todd A. Oseth was appointed President and Chief Executive Officer of the Company
on February 6, 1997. He also served as Chairman of the Company from October 8,
1998 until Mr. Snow's appointment

                                     -30-
<PAGE>

in January. Prior to joining the Company, Mr. Oseth served as Vice President,
Business Development of Sony Information Technologies of America. From 1989 to
1995, he served in various senior managerial capacities, including two years as
President of Enhanced Memory Systems, Inc., a subsidiary of Ramtron
International Corp. He holds a B.S. degree in Electrical Engineering and
Computer Science from the University of Minnesota and an M.B.A. degree from the
University of St. Thomas.

Esther Dyson has served as a Director of the Company since June 1996. Ms. Dyson
has been President of EDventure Holdings, Inc., a diversified holding company
which publishes newsletters and sponsors conferences for the software industry,
for more than the past five years. Ms. Dyson is a member of the advisory boards
of the Software Entrepreneurs Forum, the Poynter Institute for Media Studies,
the Institute for Research on Learning and the Cyberspace Law Institute. Ms.
Dyson is a limited partner of the Mayfield Software Fund. Ms. Dyson is also a
Director of Thinking Tools, Inc.

Francis Vanderhoydonck has served as a Director of the Company since March 1999.
Mr.Vanderhoydonck has served as President and Managing Director of Lernout &
Hauspie Investment Company ("LHIC") since its incorporation. Prior to joining
LHIC, Francis Vanderhoydonck worked at the Generale Bank, Belgium's largest
bank, since 1986 where he became the head of Corporate & Investment Banking in
1995.

Thomas Denys was appointed a Director on January 21, 2000. He is a partner and
managing director of Lernout & Hauspie Investment Company N.V. (LHIC). Mr. Denys
has been a partner and managing director of LHIC since its incorporation and was
formerly senior associate at Loeff Claeys Verbeke, a Benelux-based law firm,
where he was active in developing the company's business and finance department.
LHIC, LanguageWare.net's single largest shareholder, is an investment vehicle of
Lernout & Hauspie Speech Products N.V., a worldwide leader in speech and
linguistic technologies, products and services.

Jonathan M. Thomas was appointed a Director on January 21, 2000. He is president
of Denver-based Vulcan Investments, Inc., which is a Registered Investment
Advisor. His expertise is to identify direct equity investment alternatives for
high, net worth individuals and institutions across the world. Mr. Thomas works
with other financially sophisticated families who possess high-level business
contacts and strategic skill sets.

Juzar Motiwalla (PhD, Wisconsin) was appointed a Director on January 21, 2000.
He is the chief executive officer of Kent Ridge Digital Labs ("KRDL"), a 350
person high-tech incubator in Singapore. Dr. Motiwalla is a member of the board
of directors of several ventures, including ThirdVoice, PixAround.com, KRIS
Informatics and DigiSafe, and he has led the development of several
international research ventures, including those with Apple,Ericsson, HP, IBM,
and Johns Hopkins. Dr. Motiwalla was instrumental in the development of the
Singapore Information Technology Plan and is leading Singapore's research
efforts in new information and networking technologies.

Harold L. Covert was appointed as an outside Director by the board on February
17, 2000. He is a finance veteran who is currently chief financial officer of
RedHat.com. Mr. Covert brings more than twenty years of experience in strategic
management, operations, and information systems. Prior to joining RedHat, Mr.
Covert was executive vice president and Chief Financial Officer for Adobe
Systems, Inc. and prior to that he held a similar position for a business unit
of Philips Electronics, NV, a $40 billion Dutch electronics company.

Robert V. Antoniazzi has been Vice President of Marketing for the Company since
June 1997. Prior to joining the Company, he was the Managing Director and
Co-founder of GlobalKey Inc., an Internet-based secure communications technology
developer and provider. In addition, he has served in senior sales,

                                     -31-
<PAGE>

marketing, and general management positions for several start-up companies to
establish their European offices and operations.

Thomas E. Groff has been vice president of sales since January 1, 2000. Mr.
Groff has held top sales management positions in high technology companies
operating in the USA, Europe and Asia for the past 21 years. Most recently he
served as Vice President Sales Star+Globe Technologies Pte Ltd. Prior to his
work with Star+Globe, Mr. Groff served as Director of Channel Development
Worldwide for Novell Inc., Mr. Groff has also held sales and management
positions with IBM and Xerox.

Wilson Lee has been Vice President of Research and Development since the
acquisition of Star+Globe Technologies Pte Ltd. on January 14, 2000 where he was
the chief architect and visionary. Previously, Mr. Lee was Manager of
Development and Support for SingaLab Pte Ltd., a joint venture company from the
Institute of Systems Science (now known as Kent Ridge Digital Labs) and was the
senior systems specialist at Nixdorf Computers. Lee has a Master of Science
degree in Computer Science from Oklahoma State University.

Thomas B. Foster was appointed Chief Financial Officer of the Company on January
3, 2000. For two years prior to joining the Company, Mr. Foster was a financial
and accounting systems consultant for the service and energy industries. In
addition, he has served in various senior management positions for The Concord
Group of Companies, a privately held company, which generated annual sales of
$500 million. With subsidiaries of The Concord Group of Companies, Mr. Foster
served two years as President of Colorado Incineration Services, Inc., and six
years as Vice President of Finance of Greenwood Holdings Inc. He is a CPA and
holds a B.S. degree in Business Administration-Accounting from Colorado State
University.

Section 16(a) Beneficial Ownership Reporting Compliance:

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who beneficially own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Executive officers, directors and greater than 10% beneficial
shareholders are required by Commission regulations to furnish the Company with
copies of all Section 16(a) forms they file.

Based solely upon a review of the copies of such forms furnished to the Company
and written representations from the Company's executive officers, directors and
greater than 10% beneficial shareholders, the Company believes that during the
year ended December 31, 1999, all persons subject to the reporting requirements
of Section 16(a) filed the required reports timely.

                                     -32-
<PAGE>

Item 11. Executive Compensation

                          Summary Compensation Table

The following table sets forth information in respect to the compensation of the
Chief Executive Officer and the Company's other most highly compensated
executive officer who had annual compensation in excess of $100,000.

<TABLE>
<CAPTION>
                                                                                          Long-Term
                                                                                        Compensation
                                                                                           Awards
                                                                                        ------------
                                                                                          Number of
                                                                                         Securities
                                                                       Other Annual      Underlying            All Other
                                 Year      Salary           Bonus      Compensation        Options           Compensation
                                 ----      ------           -----      ------------        -------           ------------
<S>                              <C>     <C>                <C>        <C>               <C>                  <C>
Todd A. Oseth                    1999    $200,000  (1)      $   -      $      -          1,000,000  (2)       $      -
  President & CEO                1998    $199,998           $   -      $      -            812,000  (2)       $      -
                                 1997    $181,153           $   -      $      -               -               $ 102,905  (4)

Robert V. Antoniazzi             1999    $114,750           $   -      $      -            300,000  (3)       $      -
  Vice President, Marketing      1998    $120,000           $   -      $      -             45,000  (3)       $      -
                                 1997    $ 90,000           $   -      $      -             40,000  (3)       $      -
</TABLE>

 ----------------------------------------

(1)      The Board of Directors, at a meeting held February 17, 2000, extended
         the employment contract of Mr. Oseth for a period of one year at an
         annual salary of $250,000 with an immediate bonus of $75,000. In
         addition, the Board of Directors approved an increase in the number of
         ordinary shares to be issued under the CEO Share Option Plan (1999)
         from 2,000,000 shares to 5,000,000 shares and approved a grant of
         options to Mr. Oseth to purchase 3,000,000 ordinary shares at an
         exercise price equal to 100% of the fair market value as of February
         17, 2000. The increase in the authorized shares of the CEO Share Option
         Plan and the grant of options to Mr. Oseth are subject to the approval
         of the shareholders of the Company at their next regular or
         extraordinary meeting.
(2)      Options to purchase 1,812,000 Ordinary Shares were granted to Mr. Oseth
         by the Board of Directors on July 20, 1998 and March 23, 1999
         respectively and approved by shareholders at the Company's 1999 Annual
         Shareholders' Meeting.
(3)      Options to purchase ordinary shares were granted to Mr. Antoniazzi in
         the years indicated under the Company's Employee Share Option Plan
         (1995), which grants were approved by the Board of Directors.
(4)      Includes reimbursement of expenses associated with the relocation of
         Mr. Oseth's household in accordance with his employment agreement.

The following table sets forth information concerning individual grants of stock
options made pursuant to the Company's Employee Share Option Plan (1995) and CEO
Share Option Plan (1999) during 1999 to each of the named executive officers and
the potential realizable value for the stock options based on

                                     -33-
<PAGE>

future appreciation assumptions. There can be no assurance that the values shown
in this table will be achieved. No stock appreciation rights ("SARs") were
granted in 1999.

<TABLE>
<CAPTION>
                                                    Option Grants in 1999

                                                                                                  Potential Realizable Value
                                 Number of              % of Total                                 Assumed Annual Rates of
                           Securities Underlying      Options Granted     Exercise                  Stock Price Appreciation
                              Options Granted          to Employees        Price     Expiration       for Option Term  (1)
                                                                                                      --------------------
                                    (#)                   in 1999           ($)         Date         5%($)          10%($)
                           ---------------------          -------          ------       ----         -----          ------
<S>                        <C>                        <C>                 <C>        <C>          <C>              <C>
Todd A. Oseth                    1,000,000                 25.2%           $ 0.16     3/22/04       $47,900        $101,300

Robert V. Antoniazzi              300,000                   7.6%           $ 0.16     3/22/04       $14,370        $30,390
</TABLE>

_____________________
(1)  Amounts reported in these columns show hypothetical gains that may be
     realized upon exercise of the options, assuming the market price of common
     stock appreciates at the specified annual rates of appreciation, compounded
     annually over the term of the options. These numbers are calculated based
     upon rules promulgated by the SEC. Actual gains, if any, depend on the
     future performance of the Company's Ordinary Shares and overall market
     conditions.

The following table summarizes for each of the named executive officers, the
total number of unexercised outstanding options to purchase Ordinary Shares as
of December 31, 1999, and the aggregate dollar value of unexercised in-the-money
options to purchase Ordinary Shares, if any, held by them at December 31, 1999.
The value of unexercised in-the-money options at fiscal year-end is the
difference between the exercise price of such options and the market value of
the underlying Ordinary Shares at the close of business on December 31, 1999.

<TABLE>
<CAPTION>
                                    Number of Securities
                                   Underlying Unexercised             Value of Unexercised
                                   Options/SARs at Fiscal             In-the-Money Options
                                         Year-End                        Fiscal Year-End
                                ---------------------------        --------------------------
             Name               Exercisable   Unexercisable        Exercisable  Unexercisable
             ----               -----------   -------------        -----------  -------------
<S>                             <C>           <C>                  <C>          <C>
Todd A. Oseth                      874,667       937,333             $499,867     $593,733

Robert V. Antoniazzi               171,667       213,333             $104,594     $144,187
</TABLE>


                             Employment Agreements

The Company has an employment agreement with Todd A. Oseth for a three-year term
beginning on February 6, 1997, which is terminable upon three months notice at
the option of the Company. The

                                     -34-
<PAGE>

agreement provides that Mr. Oseth receive an annual salary of $200,000, together
with employee benefits granted by the Company to its senior managerial
personnel. The Board of Directors, on February 17, 2000, extended the employment
agreement for a period of one year at an annual base salary of $250,000 with an
immediate bonus of $75,000. The agreement contains provisions prohibiting Mr.
Oseth from competing with the Company for a two-year period following
termination of employment and requiring him not to disclose confidential or
proprietary information of the Company for a six-year period following
termination of employment.

                           Compensation of Directors

All Directors hold office until the next annual meeting of shareholders and the
election and qualification of their successors. Directors receive no cash
compensation for serving on the Board of Directors other than reimbursement of
reasonable expenses incurred in attending meetings. The Company has also agreed
to reimburse non-employee directors for their reasonable out-of-pocket expenses
incurred in performing various services on behalf of the Company.

In addition, the Company has granted to its non-employee directors options to
purchase Ordinary Shares pursuant to the Company's Non-Employee Share Option
Plan (1998). Under the Non-Employee Share Option Plan (1998), (i) each
non-employee who served as a director of the Company upon adoption of the
Non-Employee Share Plan (1998) automatically received an initial grant of
immediately vested options equal to the number of options which had been granted
under the Non-Employee Share Option Plan (1995), which plan was replaced by the
Non-Employee Share Option Plan (1998) in May 1998, (ii) each non-employee who
served as a director of the Company upon adoption of the Non-Employee Share Plan
(1998) automatically received an initial grant of options to purchase 25,000
Ordinary Shares which vested six (6) months after the date of grant, (iii) each
non-employee who became a member of the Board of Directors after the adoption of
the Non-Employee Share Option Plan (1998) automatically received an initial
grant of options to purchase 50,000 Ordinary Shares, vesting one year from the
date of grant and (iv) upon each anniversary of an initial grant, each
non-employee who served as a director of the Company automatically received an
annual grant of options to purchase 25,000 Ordinary Shares, vesting six months
after the date of grant. Options granted under the Non-Employee Share Option
Plan (1998) are for a five-year term.

As of December 31, 1999, there are 600,000 Ordinary Shares reserved for issuance
under the Company's Non-Employee Share Options Plan (1998). As of March 15,
2000, options to purchase 402,000 Ordinary Shares are outstanding under the
Company's Non-Employee Share Option Plan (1998). On February 17, 2000, the Board
of Directors approved an increase in the number of ordinary shares authorized to
be issued under the Non-Employee Share Option Plan (1998) from 600,000 shares to
2,600,000 shares, and approved a grant of stock options to its current Chairman,
Fred Snow, to purchase 2,000,000 ordinary shares at an exercise price equal to
100% of the fair market value of the Company's ordinary shares as of February
17, 2000. The increase in the number of authorized shares of the Non-Employee
Share Option Plan (1998) and the grant of options to Mr. Snow are subject to the
approval of the shareholders of the Company at their next regular or
extraordinary meeting.

Information Concerning the Board of Directors and Board Committees:

                            Meetings and Committees

During 1999, the Board of Directors held 8 meetings and took actions by
unanimous consent 8 times. Robert Kutnick missed 3 meetings prior to his
resignation on January 21, 2000.

                                     -35-
<PAGE>

There were a number of changes to the board within the last year. Robert
Rosenschein and Mark Tebbe resigned from the board on January 26, 1999, and
Chantal Mestdagh and Robert Kutnick resigned from the board on January 21, 2000
to pursue other personal and business commitments. Francis Vanderhoydonck was
appointed on March 3, 1999 as the Lernout & Hauspie Investment Company
representatives after its March 3, 1999 short-term loan to the Company. Fred
Snow was appointed Chairman of the Board on January 21, 2000. Thomas Denys was
appointed January 21, 2000 to replace Robert Kutnick as the Lernout & Hauspie
Speech Products representative. Jonathan Thomas was appointed January 21, 2000.

During 1998, the Board of Directors combined its three special committees into
one Executive, Audit and Compensation Committee. The members appointed to this
committee were Roger Cloutier, Esther Dyson and Mark Tebbe. Upon the
resignations of Roger Cloutier in October 1998 and Mark Tebbe in January 1999,
Robert Kutnick was appointed to this committee. The committee met one time
during 1999.

The current members of the Executive, Audit and Compensation Committee are Fred
Snow, Esther Dyson, and Thomas Denys. The role of the committee is:

    1) To be a board level resource for the management of the Company between
    formal board meetings and from time to time, to take on other tasks that
    were delegated by the full Board.

    2) To recommend to the Board independent auditors for the Company, to review
    financial statements and transactions between the Company and interested
    parties, to analyze and review internal audit procedures and controls.

    3) To determine and review the compensation of the Company's executive
    officers, and to establish and review the Company's employee benefit plans
    and to present and make recommendations to the Board. To administer the
    Company's share option grants and the terms associated with each of the
    grants under the Company's share option plans.

The Board of Directors does not have a nominating committee. Nominees for the
Board of Directors are selected by the entire Board.

Report of the Compensation and Share Option Committee of the Board of Directors:

The Compensation and Share Option Committee was responsible for overseeing and
administering executive compensation decisions, for administering the Company's
Employee Share Option Plans, and for making option grants to employees of the
Company thereunder. During 1998, the Compensation and Share Option Committee of
the Board of Directors was composed of Esther Dyson and Robert Kutnick, both
independent, outside directors. During 1999, the duties and responsibilities of
the Compensation and Share Option Committee was assumed by a combined Executive,
Audit and Compensation Committee whose current members are Fred Snow, Esther
Dyson and Thomas Denys (the "Committee").

Executive compensation decisions are made by the Committee and are designed to
serve the interest of the Company and its shareholders and to encourage and
reward management initiative and good performance. Specifically, executive
compensation decisions are made to:

    (1) implement compensation practices which allow the Company to attract and
    retain highly qualified executives and maintain a competitive position in
    the executive marketplace with employers of comparable size and in similar
    lines of business;

                                     -36-
<PAGE>

     (2) enhance the compensation potential of executives who are in the best
     position to contribute to the development and success of the Company by
     providing the flexibility to compensate individual performance; and

     (3) directly align the interests of the executives with the long-term
     interest of the shareholders and the Company through compensation
     opportunities in the form of share option grants vesting over a three-year
     period.

These objectives are met through a combination of base salary, annual cash
incentive awards based upon the annual operating performance of the Company, and
long-term incentive opportunities which, to date, have been in the form of
incentive share option grants.

Salary

The Committee considers, on an annual basis, salary for the Company's executive
officers, including those named in the Summary Compensation Table. Any salary
adjustments are designed to reflect internal comparability and organizational
considerations, as well as competitive data provided by independent external
information.

Incentive Awards

Executive officers are eligible for cash awards annually based upon financial
and non-financial results. For the year ended December 31, 1999, no cash
incentive awards were granted. On February 17, 2000 the Board of Directors
approved a cash incentive to Todd A. Oseth, President and CEO, in the amount of
$75,000. Any further cash incentive awards during 2000 will be based upon
pre-established performance targets and objectives.

Share Option Grants

Executive officers may receive grants of options pursuant to the Company's
Employee Share Option Plan (1995) and the CEO Share Option Plan (1999). During
1999 executive officers were granted options as set forth in the Summary
Compensation Table.

Chief Executive Officer Compensation

During 1999, Todd Oseth received annual compensation as President and Chief
Executive Officer, pursuant to the terms of an employment agreement, as set
forth in the Summary Compensation Table.

                  THE COMPENSATION AND SHARE OPTION COMMITTEE

                            Fred Snow (Chairperson)
                            Esther Dyson
                            Thomas Denys

Compensation Committee Interlocks and Insider Participation

Mr. Snow, Ms. Dyson and Mr. Denys each served as a member of the Compensation
and Share Option Committee. Neither Mr. Snow, Ms. Dyson nor Mr. Denys served as
a member of the compensation committee of another entity so as to create any
compensation committee interlock or served as an officer of the Company or any
of its subsidiaries so as to create any insider participation.

                                     -37-
<PAGE>

Shareholder Return Performance Graph

The following graph compares the cumulative total shareholder return of the
Ordinary Shares against the cumulative total return of the Russell 2000 Index
and the Russell 2000 Technology Index for the period commencing as of the close
of trading on July 20, 1995 (the effective date of the registration of the
Ordinary Shares under Section 12 of the Exchange Act). As the Ordinary Shares
began trading on July 21, 1995, the price of the Ordinary Shares in the graph
below as of the close of trading on July 20, 1995 is assumed to be the initial
public offering price.

     The graph assumes that $100 was invested July 20, 1995 in each of the
Ordinary Shares, the Russell 2000 Index and the Russell 2000 Technology Index
and that all dividends, if any, were reinvested. Figures for the Company have
been restated to show the effect of the 3 for 2 stock split in June 1996.

Comparison of Total Return of the Company, Russell 2000 Index and Russell 2000
Technology Index


         [GRAPHIC APPEARS HERE]


The chart is presented in accordance with the requirements of the U.S.
securities laws. Shareholders are cautioned against drawing any conclusion from
the data contained therein, as past results are not necessarily indicative of
future performance. This chart in no way reflects the Company's forecast of
future financial performance.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

Set forth below is certain information with respect to the beneficial ownership
of the Company's voting securities as of March 15, 2000 by (i) each person who,
to the knowledge of the Company, is the beneficial owner of more than 5% of the
outstanding Series C Preferred Shares, Series D Preferred Shares, and Ordinary
Shares and Units, all of which comprise the Company's voting securities, (ii)
each director and named executive officer of the Company and (iii) all executive
officers and directors of the Company as a group. As of March 15, 2000, there
were 4,000 Series C Preferred Shares outstanding convertible at any time into
8,888,889 Ordinary Shares, 2,844,874 Series D Preferred Shares outstanding
convertible at any time into 2,844,874 Ordinary Shares, and 83,187,982 Ordinary
Shares outstanding (including 2,000 Ordinary Shares that are part of Units).

                                                       Amount and Nature of
                                                       Beneficial Ownership
                                                       --------------------
Name of Beneficial Owner/(1)//(2)/                       Number         Percent
----------------------------------                       ------         -------
                                     -38-
<PAGE>

<TABLE>
<S>                                                       <C>                <C>
Lernout & Hauspie Investment Company, N.V.                14,110,062/(3)/    14.5%
     Sint- Krispijnstraat 7
     8900 Ieper, Belgium

Lernout & Hauspie Speech Products, N.V.                   13,333,333/(4)/    13.8%
     Sint- Krispijnstraat 7
     8900 Ieper, Belgium

Technology Fund II Pte Ltd                                 7,082,051/(5)/     7.8%
     9 Scotts Road, #06-01 Pacific Plaza
     Sinapore 228210

Technology Fund Pte Ltd                                    6,420,249/(6)/     7.2%
     9 Scotts Road, #06-01 Pacific Plaza
     Sinapore 228210

KRDL Holdings Pte Ltd                                      6,420,249/(7)/     7.2%
     21 Heng Mui Keng Terrace
     Sinapore 119613

Vertex Technology Fund Ltd                                 5,313,712/(8)/     6.0%
     77 Science Park Drive, #01-15 Cintech III
     Sinapore 118256

Jonathan M. Thomas                                         3,915,520/(9)/     4.5%
     1601 Arapahoe Road, #700
     Denver, Colorado 80202

Todd A. Oseth                                                924,000/(10)/    1.1%

Fred Snow                                                    225,000/(11)/    0.3%

Esther Dyson                                                  77,000/(12)/    0.1%
     Edventure Holdings, Inc.
     104 Fifth Avenue
     New York, New York 10011

Francis Vanderhoydonck                                           */(13)/        0%
     Sint- Krispijnstraat 7
     8900 Ieper, Belgium

Thomas Denys                                                     */(14)/        0%
     Sint- Krispijnstraat 7
</TABLE>

__________________________

                                     -39-
<PAGE>

<TABLE>
<S>                                                      <C>                  <C>

     8900 Ieper, Belgium

Wilson Lee                                                 513,620/(15)/      0.6%

Robert V. Antoniazzi                                       271,667/(16)/      0.3%

Thomas E. Groff                                            128,406/(17)/      0.2%

All Executive Officers and Directors as a Group          6,105,213/(18)/      6.8%
  (9 persons)
</TABLE>

__________________________

     (1) Unless otherwise indicated the address of each beneficial owner
         identified is 102 South Tejon, Suite 320, Colorado Springs, Colorado
         80903.
     (2) Unless otherwise noted, the Company believes that all persons named in
         the table have sole voting and investment power with respect to all
         Ordinary Shares beneficially owned by them. Each beneficial owner's
         percentage ownership is determined by assuming that options, warrants
         or Series C and D Preferred Shares convertible into Ordinary Shares
         that are held by such person (but not those held by any other person)
         and which are exercisable or convertible within 60 days of March 15,
         2000 have been exercised or converted.
     (3) Includes warrants to purchase 3,000,000 Ordinary Shares; options to
         purchase 100,000 Ordinary Shares granted to two of its employees who
         sit on the Company's Board of Directors (Ms Mestdagh, who resigned
         January 21, 2000, and Mr. Vanderhoydonck); assumes conversion of
         2,844,874 Series D Preferred Shares which would be convertible at any
         time into 2,844,874 Ordinary Shares; and assumes the issuance of
         216,088 "holdback" shares from the investment in the Company's purchase
         of Star+Globe Technologies Pte Ltd. on January 14, 2000. The "holdback"
         shares will be issued April 14, 2000 pending any idemnification claims
         allowed under the provisions of the Stock Purchase Agreement.
     (4) Assumes conversion of 4,000 Series C Preferred Shares into 8,888,889
         Ordinary Shares and includes warrants to purchase an aggregate of
         4,444,444 Ordinary Shares.
     (5) Includes 371,773 "holdback shares" from the investment in the Company's
         purchase of Star+Globe Technologies Pte Ltd. on January 14, 2000.
         Venture TDF Pte Ltd. is the investment manager of Technology Fund II
         Pte Ltd. and Technology Fund Pte Ltd. and may be deemed to share with
         these Funds the power to vote or direct the vote and to dispose or to
         direct the disposition of the Ordinary Shares of which the Funds are
         beneficial owners.
     (6) Includes 642,025 "holdback shares" from the investment in the Company's
         purchase of Star+Globe Technologies Pte Ltd. on January 14, 2000.
         Venture TDF Pte Ltd. is the investment manager of Technology Fund Pte
         Ltd. and Technology Fund II Pte Ltd. and may be deemed to share with
         these Funds the power to vote or direct the vote and to dispose or to
         direct the disposition of the Ordinary Shares of which the Funds are
         beneficial owners.
     (7) Includes 642,025 "holdback shares" from the investment in the Company's
         purchase of Star+Globe Technologies Pte Ltd. on January 14, 2000.
     (8) Includes 424,590 "holdback shares" from the investment in the Company's
         purchase of Star+Globe Technologies Pte Ltd. on January 14, 2000.

_________________________

                                     -40-
<PAGE>

     (9)  Mr. Thomas was appointed to the Board of Directors on January 21,
          2000. He is the President of Vulcan Investments, Inc., which owns
          740,917 Ordinary Shares of the Company and, as an affiliate of
          Mr.Thomas, are included in the beneficial interest of Mr. Thomas.
     (10) Includes options to purchase 908,000 Ordinary Shares representing the
          exercisable portion of options granted to Mr. Oseth by the Board of
          Directors and approved by the shareholders.
     (11) Includes options to purchase 225,000 Ordinary Shares representing the
          exercisable portion of options granted to Mr. Snow by the Board of
          Directors.
     (12) Includes options to purchase 77,000 Ordinary Shares.
     (13) Mr. Vanderhoydonck is the President and Managing Director of and one
          of the two designees to the Company's Board of Directors for Lernout &
          Hauspie Investment Company. In connection with being appointed to the
          Board of Directors, Mr. Vanderhoydonck was granted options to purchase
          50,000 Ordinary Shares, the options of which have been issued in the
          name of Lernout & Hauspie Investment Company in accordance with
          Belgian law. Mr. Vanderhoydonck disclaims beneficial ownership of the
          equity securities owned by Lernout & Hauspie Investment Company.
     (14) Mr. Denys was appointed to the Board of Directors on January 21, 2000,
          replacing Ms. Chantal Mestdagh, who resigned on the same date, as one
          of the two designees to the Company's Board of Directors for Lernout &
          Hauspie Investment Company.
     (15) Includes options to purchase 513,620 Ordinary Shares.
     (16) Includes options to purchase 271,667 Ordinary Shares.
     (17) Includes options to purchase 128,406 Ordinary Shares.
     (18) Includes options to purchase 2,173,693 Ordinary Shares.

As of March 15, 2000, Cede & Co. held of record 29,080,935 Ordinary Shares and
Units (approximately 35% of the total number of Ordinary Shares outstanding
including Ordinary Shares which are part of Units). Cede & Co. held such shares
as a nominee for broker-dealer members of The Depository Trust Company, which
conducts clearing and settlement operations for securities transactions
involving its members.

Item 13.  Certain Relationships and Related Transactions

On February 19, 1999, Lernout & Hauspie Investment Company, N.V. ("LHIC"), an
affiliate of Lernout & Hauspie Speech Products, N.V. which is a beneficial owner
of more than 5% of the Company's Ordinary Shares, made a short term loan to the
Company in the amount of $600,000. The loan matured on June 30, 1999 at which
time LHIC elected to convert the principal and accrued interest into Series D
Preferred Shares of the Company at a price per share of eighty-five percent
(85%) of the average closing bid price of the Company's Ordinary Shares for
twenty (20) trading days prior to March 12, 1999. Additionally, in connection
with the short-term loan the Company issued to LHIC warrants to purchase 3.0
million Ordinary Shares of the Company at a price equal to the average trading
price for twenty (20) trading days prior to February 19, 1999.

On November 15, 1999, LHIC, an affiliate of Lernout & Hauspie Speech Products,
N.V. which is a beneficial owner of more than 5% of the Company's Ordinary
Shares, purchased two convertible debentures from the Company in the amount of
$500,000 each for a total of $1,000,000. LHIC had the right to assign one of the
$500,000 debentures, which it elected to do February 3, 2000. The assignment of
the debenture by LHIC to the assignees, some of which are holders of 5% or
greater of the Company's voting securities, is described in the table presented
below. The convertible debentures were to mature on May 31, 2000 accruing
interest at an annual percentage rate equal to two (2) percent above prime rate
as determined by the Wall Street Journal. At any time after March 1, 2000, LHIC
had a right to convert all or any portion of the outstanding principal amount of
the debentures and any accrued but unpaid interest on the debentures into the
Company's Ordinary Shares at a price per share of $0.15. In addition, under

                                     -41-
<PAGE>

terms of the debenture, if LHIC and its assigns elected to convert, they would
receive warrants to purchase a number of Ordinary Shares equal to fifty percent
(50%) of the number of shares issuable upon the conversion of the debentures,
also at a price per share of $0.15. On February 15, 2000 the Company offered to
allow LHIC and its assigns the option to convert all outstanding principal and
accrued interest into Ordinary Shares on such date only if the warrants were
exercised concurrent with such conversion. LHIC and its assigns agreed to the
Company's offer and converted all principal and the accrued interest of
$1,014,928 into 6,776,187 Ordinary Shares of the Company's stock.
Simultaneously, pursuant to the terms of the debentures and the election of LHIC
and its assigns, the Company issued 3,383,094 Ordinary Shares to LHIC and its
assigns for the exercise of warrants for which the Company received $507,464.
The following table sets forth the conversion transaction described in the above
paragraph with LHIC and the assigns, some of which, as indicated, are beneficial
owners of 5% or greater of the Company's voting securities:

                            Conversion of Debenture

<TABLE>
<CAPTION>
                                                 Amount of
                                               Principal and      Number of       Exercise of Warrants
                                                                                  --------------------
                     Assignee                   Interest           Shares        Amount           Shares
                     --------                   --------           ------        ------           ------
<S>                                            <C>               <C>           <C>              <C>
Lernout & Hauspie Investment Company(1)        $   600,432       4,002,878     $  300,216       2,001,439
Vertex Technology Fund Ltd.(1)                 $   106,781         711,872     $   53,390         355,936
Technology Fund II Pte Ltd (1)                 $    85,425         569,498     $   42,712         284,749
Seed Ventures II Limited                       $    59,085         393,900     $   29,542         196,950
InfoTech Ventures Limited                      $    59,085         393,900     $   29,542         196,950
WIIG Global Ventures Pte Ltd.                  $    42,001         280,008     $   21,001         140,004
NIF Asian Pre-IPO Fund Limited                 $    26,695         177,968     $   13,348          88,984
Asia Pacific Ventures II Ltd.                  $    26,695         177,968     $   13,348          88,984
James L. Kelly                                 $     8,729          58,195     $    4,365          29,098
                                               -----------       ---------     ----------       ---------
                       Total                   $ 1,014,928       6,766,187     $  507,464       3,383,094
</TABLE>

_______________________________________
(1)  Beneficial owners of more than 5% of the Company's Voting Securities.

On November 15, 1999 the Company entered into an agreement for the sale of a
$250,000 convertible debenture to Technology Fund II Pte Ltd. ("Tech Fund II"),
an affiliate of Technology Fund Pte Ltd which is a beneficial owner of more than
5% of the Company's Ordinary Shares at March 15, 2000, on substantially the same
terms and conditions as the convertible debenture with LHIC. Tech Fund II was
not obligated to remit the $250,000 to the Company until February 2, 2000, on
which date it paid the Company the $250,000. On February 15, 2000 the Company
offered to allow Tech Fund II the option to convert all outstanding principal
and accrued interest into Ordinary Shares on such date only if the warrants were
exercised concurrent with such conversion. Tech Fund II agreed to the Company's
offer and converted all principal and the accrued interest, the total of which
was $251,007, into 1,673,379 Ordinary Shares of the Company. Simultaneously,
pursuant to the terms of the debenture agreement and upon the election of Tech
Fund II, the Company issued 836,690 Ordinary Shares to Tech Fund II for the
exercise of warrants for which the Company received $125,504 from Tech Fund II.

On July 14, 1999, the Company entered into a stock purchase agreement with a
group of three investors whereby the investors purchased 2.4 million Ordinary
Shares of the Company for $500,000. One of the investors was Jonathan M. Thomas
who was appointed to the Company's Board of Directors on January

                                     -42-
<PAGE>

21, 2000, and together with his affiliated company, Vulcan Investments, Inc., is
a less than 5% beneficial owner of the Company's Ordinary Shares at March 15,
2000. Pursuant to the terms of the agreement, Mr. Thomas and his assigns, were
required to purchase an additional 7.1 million shares for $1,500,000 upon the
Company obtaining a strategic partner and entering into a strategic alliance
with such partner. In February 2000, the Company fulfilled its obligations under
the terms of the agreement, and Mr. Thomas and his assigns purchased the
remaining 7.1 million Ordinary Shares for $1,500,000, for which Mr. Thomas
individually paid the Company $500,000 for 2,380,953 Ordinary Shares.

Mr. Jonathan Thomas is the President of Vulcan Investments, Inc., which loaned
the Company $100,000 on October 12, 1999, evidenced by a Convertible Promissory
Note (the "Note"). The principal balance of the Note accrued interest at the
prime rate at the date of the Note plus 200 basis points. The principal balance,
plus all accrued and unpaid interest was due and payable on December 31, 1999.
Pursuant to the terms of the Note, Vulcan Investments, Inc. had the right at any
time to convert all or any portion of the outstanding principal and unpaid
interest into Ordinary Shares of the Company based on the average of the five
(5) lowest closing trading prices of the Company's Ordinary Shares between the
date of the Note and the conversion date. On December 30, 1999, Vulcan
Investments, Inc. converted all the unpaid principal and accrued interest
totaling $102,247 into 740,917 Ordinary Shares of the Company.

The Company believes that the transactions referred to above were on terms no
less favorable to the Company than terms that could have been obtained from
unrelated third parties. Any future transactions between the Company and
affiliated parties will be approved by a majority of the independent and
disinterested directors, and under certain circumstances, by the audit committee
or the shareholders, and will be on terms no less favorable than those that
could have been obtained from unrelated third parties.

                                     -43-
<PAGE>

                                    PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a) (1)  Financial Statements.
         --------------------

           See Index to Financial Statements and Financial Statements which
                appear under Item 8 herein.

     (2) Financial Statement Schedules.
         -----------------------------

           See Index to Financial Statements and Financial Statement Schedule
                which appear under Item 8 herein.


     (3) Exhibits

         3.1(a)    -  Memorandum of Association of Registrant (filed as Exhibit
                      3.1(a) to the Company's Registration Statement No. 33-
                      92754).*

         3.1(b)    -  Certificate of Name Change dated October 23, 1994 (filed
                      as Exhibit 3.1(b) to the Company's Registration Statement
                      No. 33-92754).*

         3.1(c)    -  Certificate of Name Change dated April 23, 1995 (filed as
                      Exhibit 3.1(c) to the Company's Registration Statement No.
                      33-92754).*

         3.1(d)    -  Certificate of Name Change dated October 6, 1999 (filed as
                      Exhibit 99.1 to the Company's Form 8-K on October 18,
                      1999)*

         3.2(a)    -  Articles of Association of Registrant (filed as Exhibit
                      3.2 to the Company's Registration Statement No. 33-
                      92754).*

         3.2(b)    -  Authorization of Registration of Increase in Share Capital
                      dated July 18, 1999 (filed as Exhibit 3.2(b) to the
                      Company's Form 10Q on May 12, 1999)*

         4.1       -  Form of Ordinary Share Certificate (filed as Exhibit 4.1
                      to the Company's Registration Statement No. 33-92754).*

         4.2       -  Form of Underwriter's Warrant Agreement (filed as Exhibit
                      4.4 to the Company's Registration Statement No. 33-
                      92754).*

         4.3       -  Form of Bridge Financing Warrant dated as of May 22, 1995
                      between the Company and each of the Holders (filed as
                      Exhibit 4.5 to the Company's Registration Statement No.
                      33-92754).*

         4.4       -  Form of Representative's Warrant Agreement, between the
                      Company and Sands Brothers & Co, Ltd., as representative
                      of the several underwriters (filed as Exhibit 4.4 to the
                      Company's Registration Statement No. 333-7637). *

------------------
* Incorporated by reference.


                                     -44-
<PAGE>

         4.5       -  Form of IMR Warrant dated as of November 22, 1996 between
                      the Company and IMR Fund, L.P. (filed as Exhibit 4.5 to
                      the Company's Registration Statement No. 333-7637).*

         4.6       -  Form of Redeemable Warrant Agreement dated as of November
                      22, 1996 between the Company, Sands Brothers & Co., Ltd.,
                      as representative of the several underwriters, and
                      American Stock Transfer & Trust Company (filed as Exhibit
                      4.6 to the Company's Registration Statement No. 333-
                      7637).*

         4.7       -  Form of Redeemable Warrant Certificate (filed as Exhibit
                      4.6 to the Company's Registration Statement No. 333-
                      7637).*

         4.8       -  Form of Unit Certificate (filed as Exhibit 4.6 to the
                      Company's Registration Statement No. 333-7637).*

         4.9       -  Securities Purchase Agreement dated August 5, 1997,
                      between CC Investments LDC and Accent Software
                      International Ltd., which includes the Convertible
                      Debenture, two Warrant Agreements and the Registration
                      Rights Agreement as exhibits thereto. (filed as Exhibit
                      4.1 to the Company's Registration Statement filed on
                      August 27, 1997, Reg. No. 333-34455).*

         4.10      -  Warrant Agreement with The Shemano Group, Inc. (filed as
                      Exhibit 4.6 to the Company's Registration Statement filed
                      on October 16, 1997, Reg. No. 333-380043).*

         4.11      -  Warrant Agreement with Equity Management Partners LLP
                      (filed as Exhibit 4.7 to the Company's Registration
                      Statement filed on October 16, 1997, Reg. No. 333-38043).*

         4.12      -  Warrant Agreement with Brad Gillingham (filed as Exhibit
                      4.8 to the Company's Registration Statement filed on
                      October 16, 1997, Reg. No. 333-38043).*

         4.13      -  Form of Warrant Agreement covering warrant agreements with
                      Robert J. Laikin, Michael Mosher and Manufacturers
                      Indemnity and Insurance Company of America (filed as
                      Exhibit 4.9 to the Company's Registration Statement filed
                      on October 16, 1997, Reg. No. 333-38043).*

         4.14      -  Form of Securities Purchase Agreement dated November 6,
                      1997, between Accent Software International Ltd., and CC
                      Investments LDC, Nelson Partners, Olympus Securities,
                      Ltd., Marshall Companies, Profinsa Investments, which
                      includes the Convertible Debenture, the Warrant Agreement,
                      Registration Rights Agreement and Certificate of
                      Designation as exhibits thereto. (filed as Exhibit 4.1 to
                      the Company's Registration Statement filed on November 6,
                      1997, Reg. No. 333-39697).*

         4.15         Warrant Agreement with The Shemano Group, Inc. (filed as
                      Exhibit 4.1 to the Company's Form S-3 filed on November 6,
                      1997, Reg. No. 333-39697).*

______________
* Incorporated by reference.

                                     -45-
<PAGE>

         4.16      -  Form of Warrant to Lernout & Hauspie Speech Products, N.V.
                      (filed as Exhibit 4.16 to the Company's Form 10-Q on May
                      12, 1999)*

         4.17      -  Form of Warrant to L&H Investment Company, N.V. (filed as
                      Exhibit 4.17 to the Company's Form 10-Q on May 12, 1999)*

         4.18      -  Certificate of Designation for Series C Preferred Stock
                      (filed as Exhibit 4.18 to the Company's Form 10Q on
                      November 12, 1999)*

         4.19      -  Certificate of Designation for Series D Preferred Stock
                      (filed as Exhibit 4.19 to the Company's Form 10Q on
                      November 12, 1999)*

         10.1      -  Stock Purchase Agreement between IMR Investments V.O.F.
                      and Kivun Computers Company (1988), Ltd., Robert
                      Rosenschein, Jeffrey Rosenschein, Accent Software
                      Partners, Pal-Ron Marketing, Ltd., and KZ Overseas Holding
                      Corp., dated as of May 11, 1994, as amended July 20, 1995
                      (filed as Exhibit 10.1 to the Company's Form 10-K on April
                      1, 1996).*

         10.2      -  Shareholders' Agreement by and among Kivun Computers
                      Company (1988) Ltd., Robert Rosenschein, Dr. Jeffrey
                      Rosenschein, Pal-Ron Marketing, Ltd., Accent Software
                      Partners, KZ Overseas Holding Corp. and IMR Investments
                      V.O.F., dated May 11, 1994, as amended July 20, 1995
                      (filed as Exhibit 10.2 to the Company's Form 10-K on April
                      1, 1996).*

         10.3(a)   -  Option Agreement dated March 23, 1993 between the Company
                      and Robert S. Rosenschein (filed as Exhibit 10.3(a) to the
                      Company's Registration Statement No. 33-92754).*

         10.3(b)   -  Schedule of other option agreements substantially
                      identical in all material respects to the option
                      agreement filed as Exhibit 10.3(a) (filed as Exhibit
                      10.3(b) to the Company's Registration Statement No.
                      33-92754).*

         10.4(a)   -  Warrant Acquisition Agreement dated January 1, 1995
                      between the Registrant and Robert S. Rosenschein (filed as
                      Exhibit 10.4(a) to the Company's Registration Statement
                      No. 33-92754).*

         10.4(b)   -  Schedule of other warrant acquisition agreements
                      substantially identical in all material respects to the
                      warrant agreement (filed as Exhibit 10.4(b) to the
                      Company's Registration Statement No. 33-92754).*

         10.5      -  Form of Registration Rights Agreements dated as of May 22,
                      1995 between the Company and each of the Holders (filed as
                      Exhibit 10.5 to the Company's Registration Statement No.
                      33-92754).*

______________
* Incorporated by reference.

                                     -46-
<PAGE>

         10.6(a)    -  Employee Share Option Plan (1995) (filed as Exhibit
                       10.7(a) to the Company's Registration Statement No. 33-
                       92754).*

         10.6(b)    -  Amended and Restated Employee Share Option Plan (1995)
                       (filed as Exhibit 4.2 to the Company's Registration
                       Statement No. 333-04285).*

         10.6(c)    -  Non-Employee Director Share Option Plan (1995) (filed as
                       Exhibit 10.7(b) to the Company's Registration Statement
                       No. 33-92754).*

         10.6(d)    -  Amended and Restated Non-Employee Share Option Plan
                       (1995) (filed as Exhibit 4.2 to the Company's
                       Registration Statement No. 333-07965).*

         10.6(e)    -  Amended and Restated Non-Employee Share Option Plan
                       (1995) (filed as Exhibit 10-6(e) to the Company's Form
                       10-K on March 31, 1998).*

         10.6(f)    -  CEO Share Option Plan (1997) (filed as Exhibit 10.6(f) to
                       the Company's Form 10-K on March 31, 1998).*

         10.6(g)    -  Non-Employee Share Option Plan (1998) (filed as Exhibit B
                       to the Company's Form 14-A on April 29, 1998)*

         10.6(h)    -  CEO Share Option Plan (1999) (filed as Exhibit 10.6(f) to
                       the Company's Form 10-Q on August 11, 1999)*

         10.6(i)    -  LanguageWare.net (Company) Ltd. Star+Globe Share Option
                       Plan (2000)

         10.7(a)    -  Employment Agreement between the Company and Robert S.
                       Rosenschein, dated July 26, 1995 (filed as Exhibit 10-
                       7(a) to the Company's Form 10-K on April 1, 1996).*

         10.7(b)    -  Employment Agreement between the Company and Todd A.
                       Oseth, dated February 3, 1997 (filed as exhibit 10.7(b)
                       to the Company's Form 10-K on March 31, 1998).*

         10.7(c)    -  Employment Agreement between the Company and Herbert
                       Zlotogorski, dated July 26, 1995 (filed as Exhibit 10-
                       7(c) to the Company's Form 10-K on April 1, 1996).*

         10.7(d)    -  Employment Agreement between the Company and Jeffrey
                       Rosenschein, dated July 26, 1995 (filed as Exhibit 10-
                       7(d) to the Company's Form 10-K on April 1, 1996).*

         10.8       -  Consulting Agreement, dated August 4, 1997, between the
                       Company and Investor Resource Services, Inc. (filed as
                       Exhibit 4.1 to the Company's Registration Statement filed
                       on October 16,1 997, Reg. No. 333-38043).*

         10.9       -  Amendment to the Consulting Agreement, dated January 30,
                       1998, between Company and Investor Resource Services,
                       Inc. (filed as Exhibit 10-9 to the

________________
* Incorporated by reference.

                                     -47-
<PAGE>

                       Company's Form 10-K on March 31, 1998).*

         10.10      -  Shareholders Agreement by and between Accent Software
                       International Limited and Gilad Zlotkin, dated February
                       21, 1996 (filed as Exhibit 10.10 to the Company's Form
                       10-K on April 1, 1996).*

         10.11      -  Debenture between the Company and Bank Leumi (filed as
                       Exhibit 10.11 to the Company's Registration Statement No.
                       333-7637).*

         10.12      -  Agreement between the Company and The Bank for Industrial
                       Development (filed as Exhibit 4-1 to the Company's Form
                       S-3 on August 4, 1998)*

         10.13      -  Stock Purchase Agreement between the Company and Gotham
                       Bay partners LLC dated July 14, 1999 (filed as Exhibit
                       10.13 to the Company's Form 10-Q on August 11, 1999)*

         10.14      -  Stock Purchase Agreement, dated as of January 14, 2000,
                       by and among LanguageWare.net (Company) Ltd., Star+Globe
                       Technologies Pte. Ltd., Technology Fund Pte. Ltd., KRDL
                       Holdings Pte. Ltd., Technology Fund II Pte. Ltd., Seed
                       Ventures II Limited, Info Tech Ventures Limited, Vertex
                       Technology Fund Pte. Ltd., NIF Asian Pre-IPO Fund
                       Limited, Asia-Pacific Ventures II Ltd., Virginia Cha,
                       James L. Kelly, Lernout & Hauspie Investment Co., N.V.
                       and WIIG Global Ventures Pte. Ltd. (filed as Exhibit 2 to
                       the Company's Form 8-K on January 28, 2000)*

         21         -  Subsidiaries of Registrant

         27         -  Financial Data Schedule


(4)      Executive Compensation Plans and Arrangements.
         ---------------------------------------------

         Employee Share Option Plan (1995) (filed as Exhibit 10.7(a) to the
         Company's Registration Statement No. 33-92754).*

         Amended and Restated Employee Share Option Plan (1995) (filed as
         Exhibit 4.2 to the Company's Registration Statement No. 333-04285).*

         Non-Employee Director Share Option Plan (1995) (filed as Exhibit
         10.7(b) to the Company's Registration Statement No. 33-92754).*

         Amended and Restated Non-Employee Share Option Plan (1995) (filed as
         Exhibit 4.2 to the Company's Registration Statement No. 333-07965).*

         Amended and Restated Non-Employee Share Option Plan (1995).

         CEO Share Option Plan (1999)

_____________
* Incorporated by reference.

                                     -48-
<PAGE>

         Employment Agreement between the Company and Todd A. Oseth, dated
February 3, 1997.



(b)      Reports on Form 8-K.
         -------------------

         On October 18, 1999, the Registrant filed a Current Report on Form 8-K
         reporting that it had changed its name to "LanguageWare.net (Company)
         Ltd.".

                                  SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange has been signed below by the following persons on behalf of the
registrant and in the capacities indicated, on the dates indicated.

                                             LANGUAGEWARE.NET (COMPANY) LTD.

March 29, 2000                               By: /s/ THOMAS B. FOSTER
                                                 --------------------
                                                 Thomas B. Foster

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated, on the dates indicated.

<TABLE>
<CAPTION>
Signature                                                       Title                            Date
---------                                                       -----                            ----
<S>                                           <C>                                            <C>
/s/ TODD A. OSETH                             President, Chief Executive Officer             March 29, 2000
--------------------------------
Todd A. Oseth                                 (principal Executive Officer), Director

/s/ ESTHER DYSON                              Director                                       March 29, 2000
--------------------------------
Esther Dyson

/s/ FREDERICK A. SNOW                         Interim Director and Chairman of the Board     March 29, 2000
--------------------------------
Frederick A. Snow

/s/ FRANCIS VANDERHOYDONCK                    Director                                       March 29, 2000
--------------------------------
Francis Vanderhoydonck
</TABLE>


                                     -49-
<PAGE>

<TABLE>
<S>                                           <C>                                            <C>
/s/ THOMAS DENYS                              Interim Director                               March 29, 2000
--------------------------------
Thomas Denys

/s/ JONATHAN M. THOMAS                        Interim Director                               March 29, 2000
--------------------------------
Jonathan M. Thomas

/s/ JUZAR MOTIWALLA                           Interim Director                               March 29, 2000
--------------------------------
Juzar Motiwalla

/s/ HAROLD L. COVERT                          Interim Director                               March 29, 2000
--------------------------------
Harold L. Covert

/s/ THOMAS B. FOSTER                          Principal Financial Officer                    March 29, 2000
--------------------------------
Thomas B. Foster
</TABLE>

                                     -50-