UNITED STATES ~~STATESSECURITIES~~SECURITIES AND EXCHANGE COMMISSION ~~COMMISSIONWashington~~Washington, D.C. ~~20549____________________~~ 20549

____________________

FORM 10-K

x		ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2009
For the fiscal year ended June 30, 2010
o		TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ~~________~~ __________ to ~~________~~ __________

Commission File Number 0-021403

VOXWARE, INC. (Name of Registrant in its Charter)

Delaware	36-3934824
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

300 American Metro Blvd., Suite 155
Hamilton, NJ 08619
609-514-4100
(Address, including zip code, and telephone number (including area code) of registrant’s principal executive office)

Securities registered under Section 12(b) of the Exchange Act:

Title of each class	Name of each exchange on which registered
Common Stock, $0.001 par value per share	~~NASDAQ STOCK MARKET LLC~~None

Securities registered under Section 12(g) of the Exchange Act: Common ~~None~~Stock, $0. 001 par value per share.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports under Section 13 or 15(d) of the Act. Yes o No x

Indicate by check mark if the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) Yes o No o

Indicate by check mark if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K contained in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of ‘large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of ‘large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):
Large accelerated filer o	Accelerated filer o
Non-accelerated filer (do not check If a smaller reporting company) o	Smaller reporting company x

Large accelerated filer o Accelerated filer o Non-accelerated filer (do not check If a smaller reporting company) o Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes o No x

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $23,~~157~~609,000 as of December 31, ~~2008~~2009, based upon the closing sale price of the Common Stock as quoted on the NASDAQ Capital Market.

The number of shares of the registrant’s Common Stock outstanding as of August 31, ~~2009~~2010 is 8,~~013~~096,~~941~~267.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information required by Part III of this Annual Report on Form 10-K will be set forth in, and is incorporated by reference to, the Registrant's Proxy Statement for the ~~2009~~2010 Annual Meeting of Stockholders.

VOXWARE, INC. ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

PART I				4	4
ITEM 1.	~~ITEM 1.~~	BUSINESS	~~BUSINESS~~	5	5
ITEM 1A.	~~ITEM 1A.~~	RISK FACTORS	~~RISK FACTORS~~	9	10
ITEM 1B.	~~ITEM 1B.~~	UNRESOLVED STAFF COMMENTS	~~UNRESOLVED STAFF COMMENTS~~	13	14
ITEM 2.	~~ITEM 2.~~	PROPERTIES	~~PROPERTIES~~	13	14
ITEM 3.	~~ITEM 3.~~	LEGAL PROCEEDINGS	~~LEGAL PROCEEDINGS~~	13	15
	ITEM 4.		SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		15
PART II				14
PART II					16
ITEM 5.		MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES		14
	ITEM 5.		MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
ITEM 6.		SELECTED FINANCIAL DATA		16
			EQUITY SECURITIES		16
ITEM 7.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		16
	ITEM 6.		SELECTED FINANCIAL DATA		17
ITEM 7A.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		28
	ITEM 7.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
ITEM 8.		FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		28
			OPERATIONS		17
ITEM 9.		CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		28
	ITEM 7A.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		29
ITEM 9A.		CONTROLS AND PROCEDURES		28
	ITEM 8.		FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		29
ITEM 9B.		OTHER INFORMATION		29
	ITEM 9.		CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
PART III				30
			DISCLOSURE		29
ITEM 10.		DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE		30
	ITEM 9A(T).		CONTROLS AND PROCEDURES		29
ITEM 11.		EXECUTIVE COMPENSATION		30
	ITEM 9B.		OTHER INFORMATION		30
ITEM 12.		SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS		30
PART III					31
ITEM 13.		CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE		30
	ITEM 10.		DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE		31
ITEM 14.		PRINCIPAL ACCOUNTANT FEES AND SERVICES		30
	ITEM 11.		EXECUTIVE COMPENSATION		31
PART IV				30
	ITEM 12.		SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
ITEM 15.		EXHIBITS, FINANCIAL STATEMENT SCHEDULES		31
			STOCKHOLDER MATTERS		31
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS				F-1
	ITEM 13.		CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE		31
Report of Independent Registered Public Accounting Firm				F-2
	ITEM 14.		PRINCIPAL ACCOUNTANT FEES AND SERVICES		31
Consolidated Balance Sheets as of June 30, 2010 and 2009				F-3
PART IV					32
Consolidated Statements of Operations for the years ended June 30, 2010 and 2009				F-4
	ITEM 15.		EXHIBITS, FINANCIAL STATEMENT SCHEDULES		32
Consolidated Statements of Stockholders’ Equity for the years ended June 30, 2010 and 2009				F-5
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS					F-1
Consolidated Statements of Cash Flows for the years ended June 30, 2010 and 2009				F-6
	Report of Independent Registered Public Accounting Firm				F-2
Summary of Accounting Policies and Notes to Consolidated Financial Statements				F-7
	Consolidated Balance Sheets as of June 30, 2009 and 2008				F-3
	Consolidated Statements of Operations for the years ended June 30, 2009 and 2008				F-4
	Consolidated Statements of Stockholders’ Equity for the years ended June 30, 2009 and 2008				F-5
	Consolidated Statements of Cash Flows for the years ended June 30, 2009 and 2008				F-6
	Summary of Accounting Policies and Notes to Consolidated Financial Statements				F-7

Explanatory Note

The Company has filed post-effective amendments to each of its effective registration statements and, accordingly, this Annual Report on Form 10-K and the financial statements contained herein are explicitly not incorporated by reference into any effective registration statement of the Company.

PART I

When used in this report, the term “Voxware”, “us”, “our”, “we”, “the Company” and similar terms refer to Voxware, Inc., a Delaware Corporation and our Subsidiaries.

This Annual Report on Form 10-K contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, and information relating to us that are based on the beliefs of our management, as well as assumptions made by, and the information currently available to, our management. When used in this Annual Report, the words “estimate,” “project,” “believe,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements. These statements reflect our current views with respect to future events, and are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in these forward-looking statements, including those risks discussed in this Annual Report. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report. Except for special circumstances in which a duty to update arises when prior disclosure becomes materially misleading in light of subsequent circumstances, we do not intend to update any of these forward-looking statements to reflect events or circumstances after the date of this Annual Report, or to reflect the occurrence of unanticipated events. You should carefully review the risk factors set forth in other reports or documents we file from time to time with the Securities and Exchange Commission, or the SEC.

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ITEM 1. BUSINESS.

Overview

Voxware is a leading provider of software for voice recognition solutions that direct the work of the warehouse workforce. Warehouse workers, wearing headsets with microphones, speak back and forth to our voice applications. Since these workers can now work “hands and eyes free” when performing a wide array of tasks such as picking, putaway, and receiving, worker productivity typically increases while errors can be reduced. Our customers typically increase productivity from 10 to 30% and reduce error rates by 30 to 50%. Our primary software product, Voxware 3, offers multiple languages so companies can utilize non-native speaking workers.

Voxware 3 is a unique product in the supply chain market as it combines 1) a studio for designing and configuring voice solutions, 2) an open, standards-based environment and 3) a patented software technology for managing speech recognition within a web browser architecture. By using technology that leverages open, web-centric standards to integrate voice solutions within their overall IT infrastructures with a system that is configurable and adaptable, our customers can respond to change rapidly. Thus, we find our customers achieve benefits faster with less cost since they can implement our systems more rapidly with fewer resources.

A complete voice recognition solution combines software, hardware and professional services. The primary focus and the core of our business is the software component of the solution. Customers may choose from a variety of certified hardware devices, which may or may not be supplied by us. Customers may also choose to have solutions delivered by receiving services from us or from our certified partners that also resell the Voxware solution. Therefore, the software that both enables voice recognition and also facilitates the creation of voice applications or workflows is the foundation of our business.

We sell Voxware 3 primarily to large companies that operate warehouses and distribution centers. Our customers come from a variety of industry sectors, including food service, grocery, retail, consumer packaged goods, automotive parts, third-party logistics, publishing and wholesale distribution. Our technology has the ability to integrate easily with an external warehouse management system (“WMS”), or an Enterprise Resource Management System (“ERP”).

We also sell software and some hardware accessories to value-added resellers (“VARs”), who in turn develop and deliver voice solutions based on our software for their customers.

Our revenues are generated primarily from software license fees, maintenance fees, professional services and hardware products sales to both our end customers and VARs.

Our sales are generated primarily by our own sales force working directly with the end users of the voice recognition solution. In addition, we have developed partnerships with VARs and WMS companies, both in the United States and in international markets, who are incorporating our voice technology, most notably our Voxware 3 product, into their offerings. The first deliveries of solutions by partners to end customers occurred during fiscal year 2007. However, we believe it takes on average a year or more before new partners begin generating sales to end user customers, because partners must complete product integration efforts, become certified to deliver Voxware-based voice solutions and secure customer acceptance of their initial deployments.

The recent deterioration of general worldwide economic conditions has negatively impacted certain vertical markets, including retail and food distribution, that are significant to our operations. However, we anticipate an expansion of our customer base, with existing customers expected to implement our products in additional sites as they experience favorable results with our offerings and new customers brought to us through direct sales efforts, VARs and other channel partners. We expect the majority of revenues will come from existing customers in fiscal year 2011, but that revenues from new customers, including those brought to us through VARs and other channel partners, will grow faster than revenues from existing customers. We can provide no assurances that revenues earned in any given fiscal quarter or year will exceed the preceding fiscal quarter or year. Furthermore, we anticipate that in some fiscal quarters and years, costs will exceed revenues.

Products and Services

The Voxware 3 product line is the primary focus of our operations. The Voxware 3 product includes 1) VoxStudio, a facility for designing and configuring voice applications without programming, 2) applications such as VoxPick that target the mobile, front line workforce in modernized distribution centers, and 3) Voxconnect, an integration tool that simplifies the creation and maintenance of the Voxware application into the customer’s warehouse system.

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~~ITEM~~Voxware 13 is the first open service oriented architecture-based, or SOA-based, voice software product for the logistics industry. ~~BUSINESS~~Usable by non-programmers, we believe Voxware 3 eliminates up to 90% of the coding effort required by conventional voice products. The output is a robust voice solution, complete with an operational voice interface and a direct connection to the appropriate WMS/ERP system. Voxware 3 utilizes an SOA-based modern Web service architecture, delivering complete independence from the specifics of client hardware, operating system, data base and WMS/ERP system details. The openness of Voxware 3 is demonstrated by the fact that we have delivered Voxware 3 solutions to enterprises that operate with widely differing technical infrastructures, represented by different Operating Systems (OS), Database Management Systems (DBMS), WMS/ERP systems, and different wireless computers from various manufacturers – in both decentralized and centralized deployments.

~~Overview~~Each Voxware solution requires software and hardware components, and generally some professional services elements. As noted above, the software always is provided by us – either directly or through a VAR – but hardware and services may be acquired from other parties.

~~Voxware~~The isclient asoftware ~~leading~~component ~~provider~~ of ~~software for voice recognition solutions that direct~~ the ~~work~~solution ofincludes ~~the~~two ~~warehouse~~important ~~workforce. Warehouse~~Voxware ~~workers,~~software ~~wearing~~technologies ~~headsets~~that ~~with~~are ~~microphones,~~installed ~~speak~~on ~~back~~each ~~and~~wearable ~~forth~~computer: to our ~~voice~~noise-robust ~~applications.~~Voxware ~~Since~~Integrated ~~these~~Speech ~~workers~~Recognition ~~can~~Engine ~~now~~(VISE™), ~~work~~designed ~~“hands~~specifically ~~and~~for ~~eyes~~high ~~free” when~~performance ~~performing~~industrial ~~a wide array of tasks such as picking~~environments, ~~putaway,~~ and ~~receiving, worker~~our ~~productivity~~patented ~~typically~~VoiceXML ~~increases~~voice ~~while~~browser, ~~errors~~which ~~can~~uses bestandard ~~reduced.~~Web ~~Our customers~~technologies ~~typically increase productivity from 10~~ to ~~30%~~enable ~~and~~application-level ~~reduce~~functionality ~~error~~on ~~rates by~~any 30certified towearable ~~50%~~computer. ~~Our primary software product, Voxware 3, offers multiple languages so companies can leverage non-native speaking workers.~~

Voxware 3 issolutions aalso ~~unique~~generally ~~product~~include ~~in the supply chain market as it combines 1)~~ a ~~studio~~Voxware ~~for~~application ~~designing and configuring voice solutions, 2) an open, standards-based environment and 3) a patented~~ software ~~technology~~component ~~for~~installed ~~managing~~on ~~speech recognition within~~ a ~~web~~server ~~browser architecture. By using technology~~ that ~~leverages~~communicates ~~open,~~with ~~web-centric~~a ~~standards~~central ~~to integrate~~WMS ~~voice~~(or ~~solutions within their overall IT infrastructures with a~~ system ~~that~~ isof ~~configurable~~record) and ~~adaptable,~~a ~~our~~variety ~~customers~~of ~~can~~special ~~respond~~purpose towearable ~~change~~computers ~~rapidly. Thus,~~that weare ~~find~~worn ~~our~~by ~~customers~~individual ~~achieve~~warehouse ~~benefits faster with less cost since they can implement our systems more rapidly with less resources~~workers.

ALeading ~~complete voice recognition solution combines software,~~ hardware ~~and~~Auto-ID ~~professional~~manufacturers ~~services.~~bring ~~The~~voice ~~primary~~to ~~focus~~their ~~and~~mobile ~~the core~~computers ofwith ~~our business is~~ the ~~software~~availability ~~component~~ of ~~the~~our ~~solution~~software. ~~Customers~~Their ~~may choose~~devices ~~from~~must acomplete ~~variety~~the ofPowered ~~certified~~by ~~hardware~~Voxware™ ~~devices~~Certification Program, ~~which~~a ~~may~~process orrequired ~~may~~of ~~not~~all ~~be supplied~~third-party bywireless ~~us.~~computer ~~Customers~~manufacturers, ~~may~~enabling ~~also~~them ~~choose~~ to ~~have~~integrate ~~solutions~~our ~~delivered~~client ~~by receiving~~software ~~services~~on ~~from~~their usmobile ordevices. ~~from~~Every ~~our~~terminal ~~certified~~submitted ~~partners~~for ~~that~~certification ~~also~~must ~~resell~~meet ~~the~~ Voxware’s ~~solution~~minimum requirements. ~~Therefore,~~Our ~~the~~certification ~~software~~process ~~that~~provides ~~both~~official ~~enables voice~~ recognition and ~~also~~gives ~~facilitates~~our ~~the~~customers ~~creation~~confidence ofthat ~~voice~~all ~~applications~~devices orPowered ~~workflows~~by isVoxware ~~the foundation~~will ofoperate ~~our~~satisfactorily ~~business~~in their environments.

Our solutions require mobile computing equipment and related hardware accessories. We ~~sell~~typically ~~Voxware~~supply 3the ~~primarily~~hardware toaccessories, ~~large companies~~but ~~that~~have ~~operate~~partnered ~~warehouses~~with major mobile computing equipment manufacturers such as Motorola, Inc., Intermec, Inc. and ~~distribution~~LXE, ~~centers~~Inc., a subsidiary of EMS Technologies, Inc., for the provision of mobile computers. Our customers ~~come~~ may elect to purchase the mobile computing equipment from aus ~~variety~~or from any other authorized dealer of ~~industry~~the ~~sectors,~~equipment. ~~including~~One ~~food~~implication ~~service,~~of ~~grocery,~~this ~~retail, consumer~~strategy ~~packaged~~is ~~goods,~~that ~~automotive~~if ~~parts~~customers elect to buy the equipment from other sources, ~~third~~the portion of our revenues associated with hardware sales could diminish as a percentage of total revenues over time as we transition to a software-~~party~~centric ~~logistics~~business model. However, ~~publishing~~we can not predict whether customers will buy from us or other authorized distributors. We are continuing to work with these and ~~wholesale~~ ~~distribution~~other major vendors of wireless computers to provide Voxware software on their devices. ~~Our~~We ~~technology~~believe ~~has~~this gives customers flexibility in the ~~ability~~choice of hardware and allows us to ~~integrate~~expand ~~easily~~our product line with an ~~external~~new, ~~warehouse~~multi-modal ~~management~~versions ~~system~~of Voxware 3, orwhich ~~WMS~~will work both via speech recognition and other modes, orsuch anas ~~Enterprise~~keyboard, ~~Resource Management~~screen, ~~System~~radio frequency identification (RFID), or ~~ERP~~barcode scanning, as appropriate.

We offer professional services that include system implementation and training, as well as assistance in tailoring our solution to meet specific requirements within customers’ facilities. We also ~~sell~~offer customers the option to enter into extended warranties on hardware and annual software maintenance and ~~some~~customer ~~hardware accessories~~support toarrangements ~~value-added~~with ~~resellers,~~us. orWe ~~VARs,~~will ~~who~~continue into ~~turn~~offer ~~develop~~maintenance support and ~~deliver voice~~make ~~solutions~~software ~~based~~updates onavailable to our ~~software~~customers’ ~~for~~tailored solutions, as well as provide enhancements, upon their ~~customers~~request.

~~Our~~We ~~revenues~~also ~~are~~offer ~~generated~~professional ~~primarily~~services ~~from software~~to ~~license~~partners ~~fees,~~that ~~maintenance~~include ~~fees,~~training ~~professional~~in ~~services~~Voxware 3 software and ~~hardware products~~voice ~~sales~~solution toimplementation, ~~both~~as ~~our~~well ~~end~~as ~~customers~~consulting, ~~and~~development ~~VARs~~or deployment services on specific projects.

~~Our~~Although ~~sales~~Voxware ~~are~~3 ~~generated~~is ~~primarily~~targeted byat ~~our own~~the ~~sales~~warehousing ~~force~~market ~~working~~today, ~~directly~~we ~~with~~believe ~~the~~its ~~end users of the~~ voice recognition ~~solution.~~ Intechnology ~~addition,~~and weVoxStudio ~~have~~are ~~developed~~open ~~partnerships~~in ~~with~~design ~~VARs~~ and, ~~WMS companies~~therefore, ~~both~~could inbe ~~the~~applied ~~United~~to ~~States~~other ~~and~~markets in ~~international~~which ~~markets,~~highly ~~who~~accurate ~~are incorporating our~~ voice ~~technology,~~recognition ~~most~~in ~~notably~~a ~~our~~demanding ~~Voxware~~environment 3would ~~product,~~be ~~into their offerings~~important. ~~The~~At ~~first~~the ~~deliveries~~present ~~of solutions by partners to end customers occurred during fiscal year 2007. However~~time, we ~~believe~~are itfocused ~~takes~~ on ~~average~~growing aour ~~year or~~market ~~more~~share ~~before~~within ~~new~~the ~~partners~~warehousing ~~begin generating sales to end user customers~~environment, ~~because~~ ~~partners~~but ~~must~~we ~~complete~~will ~~product~~continue ~~integration efforts, become certified~~ to ~~deliver~~ ~~Voxware-based~~explore ~~voice~~other ~~solutions~~markets ~~and~~that ~~secure~~may ~~customer~~benefit ~~acceptance~~from ofvoice ~~their initial~~technology ~~deployments~~transactions.

~~The~~Sales ~~continued deterioration of general worldwide economic conditions has negatively impacted certain vertical markets, including retail~~ and food distribution, that are significant to our operations. However, we anticipate an expansion of our customer base, with existing customers expected to implement our products in additional sites as they experience favorable results with our offerings and new customers brought to us through direct sales efforts, VARs and other channel partners. We expect the majority of revenues will come from existing customers in fiscal year 2010, but that revenues from new customers, including those brought to us through VARs and other channel partners, will grow faster than revenues from existing customers. We can provide no assurances that revenues earned in any given fiscal quarter or year will exceed the preceding fiscal quarter or year. Furthermore, we anticipate that in some fiscal quarters and years, costs will exceed revenues. Distribution

~~Products~~We sell directly to large companies in North America and ~~Services~~Europe. We also utilize third parties such as consultants, VARs, wireless computer manufacturers and systems integrators to sell or assist us in selling our products. To date, we have signed agreements with several third-party partners. We believe that the establishment of a network of third-party partners with extensive knowledge of specific market sectors is important to our long-term success in those sectors.

~~The~~- 5 ~~Voxware~~- 3 product line is the primary focus of our operations. The Voxware 3 product includes 1) VoxStudio, a facility for designing and configuring voice applications without programming, 2) applications such as VoxPick that target the mobile, front line workforce in modernized distribution centers, and 3) Voxconnect, an integration tool that simplifies the creation and maintenance of the Voxware application into the customers’ warehouse system.

-Historically, 5our sales were generated primarily by our own sales force working directly with the end users of the Voxware solution. With the introduction of VoxBrowser in 2005, VoiceLogistics Pro in 2006 and Voxware 3 in 2007, we have invested substantial resources into expanding our partnership channels in North America and abroad. This is evidenced through our relationships with LXE, Motorola, Intermec and other companies. Our direct sales efforts currently contribute the majority of our revenues; we expect a gradual shift to more third-party generated revenues in the future as our channel partner efforts expand.

~~Voxware~~We 3are isactively ~~the~~working ~~first~~with ~~open~~third-party ~~service oriented~~partners ~~architecture-based,~~who orpurchase ~~SOA-based,~~products ~~voice~~and ~~software~~accessories ~~product~~from ~~for~~us ~~the logistics~~at ~~industry.~~a ~~Usable~~discount byand ~~non-programmers,~~incorporate wethem ~~believe~~into ~~Voxware~~application 3systems ~~eliminates up~~for tovarious ~~90%~~target ofmarkets and/or consult with us in the ~~coding~~development ~~effort~~of ~~required~~application bysystems ~~conventional~~for ~~voice~~end ~~products~~users. ~~The output~~These isapplication asystems ~~robust~~integrate ~~voice~~our ~~solution,~~software ~~complete~~and accessories with anadditional ~~operational~~hardware ~~voice interface~~ and asoftware ~~direct~~components ~~connection~~and toinclude ~~the~~service ~~appropriate~~and ~~WMS/ERP~~product ~~system~~support. ~~Voxware~~These 3partners ~~utilizes~~then ~~an SOA-based~~resell ~~modern~~or ~~Web~~lease ~~service~~the ~~architecture,~~application ~~delivering~~systems ~~complete~~to ~~independence~~their ~~from the~~end ~~specifics~~user customers. Under these types of ~~client~~partnership ~~hardware~~agreements, ~~operating~~we ~~system,~~warrant ~~data~~to ~~base~~repair ~~and~~or ~~WMS/ERP~~replace ~~system details.~~any ~~The~~defective ~~openness~~hardware ofproduct ~~Voxware~~delivered 3to isa ~~demonstrated~~third-party bypartner ~~the~~or ~~fact~~their customer, provided that we ~~have delivered~~are ~~Voxware~~notified 3of ~~solutions~~the defective product generally within one year from delivery of the product to ~~enterprises~~the end user. We believe that ~~operate~~in ~~with~~the ~~widely~~industrial ~~differing technical~~speech ~~infrastructures~~recognition market, ~~represented~~strategic bypartnerships ~~different~~with ~~Operating~~these ~~Systems~~various ~~(OS), Database~~parties ~~Management~~are ~~Systems~~critical ~~(DBMS)~~to our success. We anticipate that, ~~WMS/ERP~~over ~~systems~~time, ~~and~~an ~~different~~increasingly ~~wireless computers~~greater percentage of our revenues will be generated from ~~various~~software ~~manufacturers~~components –as inour ~~both~~partners ~~decentralized~~supply a greater percentage of hardware and ~~centralized deployments.~~professional services to our new customers.

~~Each~~Building ~~Voxware~~a ~~solution~~network of third-party partners such as those described above takes time and requires ~~software~~ different sales and ~~hardware~~marketing ~~components~~expertise than that required to build a direct to end user software distribution channel, ~~and~~or ~~generally~~an ~~some~~original ~~professional~~equipment ~~services~~manufacturer, ~~elements~~or OEM, relationship for technology. ~~As noted~~Challenges ~~above,~~we ~~the~~face ~~software~~in ~~always~~establishing isthis ~~provided~~network byinclude usovercoming –existing ~~either~~relationships ~~directly~~potential orpartners ~~through a~~have ~~VAR~~with –our ~~but~~competitors ~~hardware~~and training new partners to develop and ~~services~~sell ~~may~~solutions based on Voxware 3. There can be ~~acquired~~no ~~from~~assurance ~~other~~that ~~parties~~we will be successful in developing strategic relationships with channel partners, hardware vendors, VARs, logistics consultants or WMS vendors that produce a favorable impact on our operations.

The client software component of the solution includes two important Voxware software technologies that are installed on each wearable computer: our noise-robust Voxware Integrated Speech Recognition Engine (VISE™), designed specifically for high performance industrial environments, and our patented VoiceXML voice browser, which uses standard Web technologies to enable application-level functionality on any certified wearable computer.Customers

~~Voxware~~Our 3customers ~~solutions~~include ~~also~~some ~~generally~~of ~~include a~~the ~~Voxware~~largest ~~application~~and ~~software~~best-known ~~component~~companies ~~installed~~in ontheir arespective ~~server~~industries, ~~that~~including ~~communicates with~~7-Eleven, aInc., ~~central~~AutoZone, ~~WMS~~Inc., ~~(or~~Black ~~system~~and ofDecker, ~~record)~~Carters, Inc., Dunkin’ Donuts, McGraw Hill, Mohawk Carpet Corporation, Neiman Marcus, Performance Food Group, West Marine, Inc., Whole Foods, and aUS ~~variety~~Foodservice in North America; Argos, B&Q, Belron International, Somerfield and Waitrose in the UK; and Intermarché in France. We added new customers in fiscal 2010 and 2009, and are optimistic our increased momentum in key market sectors such as retail, consumer packaged goods and food service will continue. For the fiscal years ended June 30, 2010 and 2009, US Foodservice accounted for approximately 14% and 16%, respectively, of ~~special~~our ~~purpose wearable~~total ~~computers~~revenues. There can be no assurance that ~~are~~this ~~worn~~customer bywill ~~individual~~continue ~~warehouse~~to ~~workers~~seek our products and services at the same levels as it has in the past, or at all. No other customer accounted for greater than 10% of our total revenues for the last two fiscal years.

~~Leading~~Our ~~hardware~~standard ~~Auto-ID~~warranty ~~manufacturers bring~~policy ~~voice~~generally allows customers or end users to ~~their~~return ~~mobile~~defective ~~computers~~products ~~with~~for ~~the~~repair ~~availability~~or ofreplacement, ~~our~~provided ~~software. Their~~that ~~devices~~we ~~must~~are ~~complete~~notified of the ~~Powered~~defective byproduct ~~Voxware™~~generally ~~Certification~~within ~~Program,~~90 ~~a process~~days ~~required~~from delivery of ~~all~~the ~~third-party~~product ~~wireless~~to ~~computer~~the ~~manufacturers,~~end ~~enabling them~~user toin ~~integrate~~the ~~our~~case ~~client~~of software, onand ~~their~~up ~~mobile~~to ~~devices~~one year in the case of hardware. ~~Every~~Substantially ~~terminal submitted~~all ~~for~~components, ~~certification~~parts ~~must~~and ~~meet~~subassemblies ~~Voxware’s~~purchased ~~minimum~~by ~~requirements.~~Voxware ~~Our certification~~are ~~process~~covered ~~provides~~by ~~official~~other ~~recognition~~manufacturer ~~and~~warranties ~~gives~~for ~~our~~periods ~~customers confidence~~ranging ~~that~~from ~~all~~30 ~~devices~~days ~~Powered~~to byone ~~Voxware~~year ~~will~~from ~~operate~~date ~~satisfactorily~~of ~~in their~~purchase ~~environments~~by us.

Our solutions require mobile computing equipment and related hardware accessories. We typically supply the hardware accessories, but have partnered with major mobile computing equipment manufacturers such as Motorola, Inc., Intermec, Inc. and LXE, Inc., a subsidiary of EMS Technologies, Inc., for the provision of mobile computers. Our customers may elect to purchase the mobile computing equipment from us or from any other authorized dealer of the equipment. One implication of this strategy is that if customers elect to buy the equipment from other sources, the portion of our revenues associated with hardware sales could diminish as a percentage of total revenues over time as we transition to a software-centric business model. However, we can not predict whether customers will buy from us or other authorized distributors. We are continuing to work with these and other major vendors of wireless computers to provide Voxware software on their devices. We believe this gives customers flexibility in the choice of hardware and allows us to expand our product line with new, multi-modal versions of Voxware 3, which will work both via speech recognition and other modes, such as keyboard, screen, radio frequency identification (RFID), or barcode scanning, as appropriate. Competition

We ~~offer~~encounter ~~professional~~competition ~~services~~from ~~that include~~two ~~system~~primary ~~implementation and training, as well as assistance in tailoring our solution to meet specific requirements within customers’ facilities~~sources. We ~~also offer~~experience ~~customers~~direct ~~the~~competition ~~option~~from tocompanies ~~enter~~offering ~~into~~similar ~~extended~~voice-based ~~warranties~~solutions. onAdditionally, ~~hardware~~our ~~and annual~~solution ~~software~~competes ~~maintenance and customer support arrangements~~ with ~~us.~~technologies Wethat ~~will continue~~may tobe ~~offer~~considered ~~maintenance~~an ~~support~~alternative ~~and make software updates available~~ to ~~our customers’~~voice-based ~~tailored~~ solutions~~, as well as provide enhancements, upon their request~~.

WeA ~~also~~Voxware-based ~~offer~~voice ~~professional~~solution ~~services~~integrates software, hardware and service components. There are several alternative providers against whom we compete to ~~partners~~ ~~that~~market ~~include~~some ~~training~~or inall ~~Voxware~~of 3those ~~software~~components. The major competitor offering a similar solution is Vocollect, Inc., which markets a proprietary, wearable voice-based computer and complementary software. Vocollect, Inc. also indirectly sells voice-based ~~solution implementation~~systems within the logistics and distribution market to resellers who also compete against us. In addition to Vocollect, asInc. ~~well~~and asits ~~consulting~~resellers, ~~development~~there orare ~~deployment~~other ~~services~~vendors ~~on specific~~who ~~projects~~promote similar solutions, including Lucas Systems, Inc., TOPSystem Systemhaus GmbH, Aldata and Waveform.

~~Although~~In ~~Voxware~~each 3application isarea, ~~targeted~~there atexist ~~the warehousing~~alternatives ~~market~~to ~~today~~voice-based solutions. Barcode scanning devices, wefor ~~believe~~example, ~~its~~represent a competitive alternative to voice-based ~~recognition~~products ~~technology~~in certain warehouse picking applications. Thus, barcode product companies such as Motorola, Intermec Technologies Corporation (a subsidiary of UNOVA, Inc.), LXE, and ~~VoxStudio~~ ~~are~~Psion ~~open~~Teklogix can be considered competitors in ~~design~~the logistics and, ~~therefore~~fulfillment marketplace. However, ~~could~~while these barcode product companies can sometimes be ~~applied~~competitors to ~~other~~us, ~~markets in~~we ~~which~~also ~~highly~~have ~~accurate~~begun ~~voice~~establishing ~~recognition~~formal inrelationships awith ~~demanding~~several ~~environment~~of ~~would~~these ~~be important~~companies to provide potential customers with complementary joint product offerings that integrate voice-based capabilities with alternative technologies. AtLikewise, in the ~~present~~package ~~time~~sorting and remittance processing segments, wekeyboards are ~~focused~~the onmost ~~growing~~prevalent ~~our~~alternative ~~market~~along ~~share within~~with ~~the~~an ~~warehousing~~increasing ~~environment~~use of barcode scanning. Inspection, ~~but~~receiving weand ~~will~~inventory ~~continue~~applications touse ~~explore~~keyboards ~~other markets~~as ~~that~~well, ~~may~~but ~~benefit~~often ~~from~~pen ~~voice~~and ~~technology~~paper ~~transactions.~~comprise the primary alternative method in those cases.

~~Sales~~- 6 ~~and~~- ~~Distribution~~

WeFactors ~~sell~~considered ~~directly~~by prospective customers evaluating competing voice-based logistics solutions include technical features and functionality of the underlying hardware and software components, time required to ~~large~~deploy ~~companies~~the ~~in North~~solutions, ~~America~~quality and ~~Europe~~availability of professional and support services, price and ongoing total cost of ownership, or TCO. WeHardware ~~also~~components ~~utilize~~are ~~third~~generally ~~parties~~evaluated based upon such factors as ~~consultants~~size, ~~VARs~~ weight, ~~wireless~~processing ~~computer~~speed ~~manufacturers~~and multi-modal functionality. Voxware-certified units compete against Vocollect’s Talkman® series. Evaluations of competing software solutions generally consider, among other factors, the breadth of applications supporting various warehouse operations, support for different languages and warehouse management systems, ~~integrators~~and tothe ~~sell~~portability, orscalability ~~assist us~~and inextensibility ~~selling~~of ~~our~~the ~~products~~software. ToDeployment ~~date,~~time weis ~~have~~impacted ~~signed~~primarily ~~agreements~~by ~~with~~the ~~several third-party~~extent ~~partners~~to which customized software development is required to implement the solution. We believe ~~that~~our Voxware 3 solution, coupled with our VoxBrowser client software, is unique in the ~~establishment~~industry ofand gives us a ~~network~~competitive ~~of third-party~~advantage ~~partners~~by ~~with~~potentially ~~extensive~~reducing ~~knowledge~~TCO ofbecause ~~specific~~its ~~market~~open ~~sectors~~standards, ~~is important~~web-based, topeople-centric ~~our~~design ~~long~~enables cross-~~term~~platform ~~success~~portability, inrapid ~~those~~deployment ~~sectors~~and ease of application extension.

Voice-based 6logistics applications offer real time updating of inventory systems, error checking capabilities to minimize picking mistakes and hands-free communications allowing for easier handling of bulky or frozen products. Barcode scanning applications offer similar file update and error checking features but lack the advantages of hands-free communication. Voice-based and barcode-based solutions both require substantially higher capital investments than paper-based and other low technology systems.

~~Historically,~~Patents ~~our sales were generated primarily by our own sales force working directly with the end users of the Voxware solution. With the introduction of VoxBrowser in 2005, VoiceLogistics Pro in 2006~~ and ~~Voxware~~Proprietary 3 in 2007, we have invested substantial resources into expanding our partnership channels in North America and abroad. This is evidenced through our relationships with LXE, Motorola, Intermec and other companies. Our direct sales efforts currently contribute the majority of our revenues; we expect a gradual shift to more third-party generated revenues in the future as our channel partner efforts expand. Information

WeVoxware ~~are~~3 ~~actively~~is ~~working~~based ~~with~~on third-party partners who purchase products and accessories from us at a discount and incorporate them into application systems for various target markets and/or consult with us in the development of application systems for end users. These application systems integrate our ~~software~~VISE ~~and~~speech accessories with additional hardware and software components and include service and product support. These partners then resell or lease the application systems to their end user customers. Under these types of partnership agreementsengine, wewhich ~~warrant~~is ~~to repair or replace any defective hardware product delivered to~~ a ~~third-party~~highly ~~partner or their customer~~noise-tolerant, ~~provided~~continuous ~~that~~speech ~~we are notified of the defective product generally within one year from delivery of the product to the end user~~recognizer. We believe ~~that~~it in is the ~~industrial~~first speech ~~recognition~~recognizer ~~market,~~to ~~strategic~~be ~~partnerships~~engineered ~~with~~specifically ~~these various~~for ~~parties~~use ~~are~~in ~~critical~~highly todemanding ~~our~~industrial ~~success~~environments. WeVoxware ~~anticipate that~~3, ~~over~~and ~~time,~~all ~~an increasingly greater percentage~~ of our ~~revenues~~other ~~will~~voice-based beproducts ~~generated~~sold ~~from~~to ~~software components~~industrial ascustomers, ~~our~~are ~~partners~~based ~~supply~~on aVISE ~~greater percentage of hardware and professional services to our new customers~~technology.

~~Building~~All aVoxware-certified ~~network~~mobile ofdevices, ~~third-party~~when ~~partners such~~deployed asfor ~~those~~a ~~described~~Voxware-based ~~above~~voice ~~takes~~solution, ~~time~~incorporate ~~and~~an ~~requires~~embedded ~~different~~version ~~sales~~of ~~and marketing~~our ~~expertise~~VISE ~~than~~speech ~~that~~recognition ~~required~~engine towith ~~build~~ a ~~direct~~standards-based tointerface ~~end~~that ~~user~~allows ~~software distribution~~for ~~channel,~~interfaces orwith ana ~~original~~wide ~~equipment~~variety ~~manufacturer,~~of orWMS ~~OEM, relationship~~packages. ~~for~~Voxware ~~technology.~~3 ~~Challenges~~also weemploys ~~face~~our inpatented ~~establishing~~invention ~~this~~of ~~network include~~systems ~~overcoming~~and ~~existing~~methods ~~relationships~~for ~~potential~~using ~~partners~~standard ~~have~~Internet ~~with~~protocols ~~our competitors~~in ~~and~~conjunction ~~training~~with ~~new~~VoiceXML ~~partners~~Web pages to ~~develop~~remotely ~~and~~program ~~sell~~portable ~~solutions~~voice ~~based~~devices, ~~on Voxware~~such 3.as ~~There~~our ~~can~~VoiceLogistics becomputer, nothat ~~assurance~~direct ~~that~~and weguide ~~will~~users bethrough ~~successful~~defined intasks ~~developing strategic~~and ~~relationships~~work. ~~with~~The ~~channel~~United ~~partners,~~States ~~hardware~~Patent ~~vendors,~~and ~~VARs,~~Trademark ~~logistics consultants~~Office orissued ~~WMS~~a ~~vendors~~patent ~~that~~relating ~~produce~~to athis ~~favorable~~invention ~~impact~~(Patent on#6662163) ~~our~~in ~~operations~~2003 which will expire in 2023.

~~Customers~~We believe that owning and developing our core technologies represents a significant strategic and competitive advantage for us. We may, from time to time, file patent applications as deemed appropriate. Our success will depend in part on our ability to obtain patent protection for our products, preserve our trade secrets and operate without infringing the proprietary rights of other parties.

~~Our~~The ~~customers~~software ~~include~~market ~~some~~has oftraditionally ~~the~~experienced ~~largest and~~widespread ~~best-known~~unauthorized ~~companies~~reproduction inof ~~their~~products ~~respective~~in ~~industries,~~violation ~~including~~of ~~7-Eleven, Inc.,~~manufacturers’ ~~AutoZone,~~intellectual ~~Inc.,~~property ~~Black and Decker, Carters, Inc~~rights., ~~Dunkin’~~Such ~~Donuts,~~activity ~~McGraw Hill,~~is ~~Mohawk~~difficult ~~Carpet~~to ~~Corporation,~~detect ~~Neiman Marcus, Performance Food Group, West Marine, Inc.~~ and USlegal ~~Foodservice~~proceedings into ~~North~~enforce ~~America; Argos, B&Q, Somerfield and Waitrose in~~ the ~~UK;~~manufacturers’ ~~and~~intellectual ~~Intermarché~~property inrights ~~France. We added new customers in fiscal 2009 and 2008, and~~ are ~~optimistic~~often ~~our~~burdensome ~~increased momentum in key market sectors such as retail, consumer packaged goods~~ and ~~food~~involve ~~service~~a ~~will~~high ~~continue.~~degree ~~For the fiscal years ended June 30, 2009 and 2008, US Foodservice accounted for approximately 16% and 18%, respectively,~~ of ~~our~~uncertainty ~~total revenues. There can be no assurance that this customer will continue to seek our products~~ and ~~services at the same levels as it has in the past, or at all~~costs. ~~No other customer accounted for greater than 10% of our total revenues for the last two fiscal years.~~

Our ~~standard~~success ~~warranty~~is ~~policy~~also ~~generally allows~~dependent ~~customers~~upon orunpatented ~~end~~trade ~~users~~secrets, towhich ~~return~~are ~~defective~~difficult ~~products~~to ~~for~~protect. ~~repair~~To ~~or replacement,~~help ~~provided~~protect ~~that~~our rights, we ~~are~~require ~~notified~~employees ofand ~~the~~consultants ~~defective~~to ~~product~~enter ~~generally within~~into 90confidentiality ~~days~~agreements ~~from~~that ~~delivery~~prohibit disclosure of ~~the~~our ~~product~~proprietary toinformation ~~the~~and ~~end~~require ~~user~~the inassignment ~~the~~to ~~case~~us of ~~software,~~ ~~and~~their upideas, todevelopments, ~~one~~discoveries ~~year~~and ininventions. ~~the~~We ~~case~~cannot ofassure ~~hardware.~~you, ~~Substantially all components~~however, ~~parts~~that ~~and~~these ~~subassemblies~~agreements ~~purchased~~will byprovide ~~Voxware~~adequate ~~are~~protection ~~covered~~for byour ~~other manufacturer~~trade ~~warranties~~secrets, ~~for~~know-how ~~periods~~or ~~ranging~~other ~~from~~proprietary 30information ~~days~~in tothe ~~one~~event ~~year~~of ~~from~~any ~~date of~~unauthorized ~~purchase~~use byor usdisclosures.

~~Competition~~Research and Development

We ~~encounter~~incurred ~~competition~~$3,073,000 ~~from~~and ~~two~~$3,686,000 ~~primary sources.~~in We2010 ~~experience~~and ~~direct~~2009, ~~competition~~respectively ~~from~~of ~~companies offering similar voice~~Company-~~based~~sponsored ~~solutions.~~research ~~Additionally,~~and ~~our~~development ~~solution competes with technologies that may be considered an alternative to voice-based solutions~~activities.

AEmployees Voxware-based voice solution integrates software, hardware and service components. There are several alternative providers against whom we compete to market some or all of those components. The major competitor offering a similar solution is Vocollect, Inc., which markets a proprietary, wearable voice-based computer and complementary software. Vocollect, Inc. also indirectly sells voice-based systems within the logistics and distribution market to resellers who also compete against us. In addition to Vocollect, Inc. and its resellers, there are other vendors who promote similar solutions, including Lucas Systems, Inc., TOPSystem Systemhaus GmbH, Aldata and Waveform.

InAs ~~each~~of ~~application~~June ~~area~~30, ~~there~~2010, ~~exist alternatives~~we tohad ~~voice~~56 full-~~based~~time ~~solutions. Barcode scanning devices~~employees, ~~for~~consisting ~~example, represent~~of a13 ~~competitive~~individuals ~~alternative~~who toare ~~voice-based~~accounted ~~products~~for in ~~certain~~cost ~~warehouse picking~~of ~~applications.~~goods ~~Thus,~~sold ~~barcode~~(which ~~product~~includes ~~companies~~professional ~~such~~services, ascustomer ~~Motorola~~support and production), ~~Intermec Technologies~~18 ~~Corporation~~individuals (ain ~~subsidiary~~research ofand ~~UNOVA~~development, ~~Inc.),~~16 ~~LXE,~~individuals ~~and~~in ~~Psion~~sales ~~Teklogix can~~and bemarketing ~~considered~~and ~~competitors~~9 individuals in ~~the~~general ~~logistics~~ and ~~fulfillment marketplace~~administrative. ~~However,~~ ~~while~~Twenty ~~these~~of ~~barcode~~our ~~product~~employees ~~companies~~are ~~can~~located ~~sometimes~~at beour ~~competitors~~Cambridge, ~~to us~~Massachusetts facility, we19 ~~also~~individuals ~~have~~are ~~begun~~located ~~establishing~~at ~~formal~~our ~~relationships~~corporate ~~with~~offices ~~several~~in ofHamilton, ~~these companies~~New toJersey, ~~provide~~7 ~~potential~~individuals ~~customers~~work with ~~complementary~~our ~~joint~~sales ~~product offerings~~and ~~that~~customer ~~integrate~~support ~~voice-based~~office ~~capabilities with alternative technologies. Likewise,~~ in the ~~package~~United ~~sorting~~Kingdom and ~~remittance~~10 ~~processing~~individuals ~~segments,~~work ~~keyboards are~~elsewhere. ~~the~~None ~~most~~of ~~prevalent~~our ~~alternative~~employees ~~along~~are ~~with~~represented anby ~~increasing~~a ~~use~~labor ofunion ~~barcode scanning.~~or ~~Inspection,~~are ~~receiving~~subject ~~and~~to ~~inventory~~a ~~applications~~collective ~~use~~bargaining ~~keyboards~~agreement. ~~as well,~~We ~~but~~believe ~~often~~we ~~pen~~have ~~and~~good ~~paper~~relations ~~comprise~~with ~~the~~our ~~primary alternative method in those cases~~employees.

- 7 -

~~Factors~~Corporate ~~considered~~Information by prospective customers evaluating competing voice-based logistics solutions include technical features and functionality of the underlying hardware and software components, time required to deploy the solutions, quality and availability of professional and support services, price and ongoing total cost of ownership, or TCO. Hardware components are generally evaluated based upon such factors as size, weight, processing speed and multi-modal functionality. Voxware-certified units compete against Vocollect’s Talkman® series. Evaluations of competing software solutions generally consider, among other factors, the breadth of applications supporting various warehouse operations, support for different languages and warehouse management systems, and the portability, scalability and extensibility of the software. Deployment time is impacted primarily by the extent to which customized software development is required to implement the solution. We believe our Voxware 3 solution, coupled with our VoxBrowser client software, is unique in the industry and gives us a competitive advantage by potentially reducing TCO because its open standards, web-based, people-centric design enables cross-platform portability, rapid deployment and ease of application extension.

~~Voice-based~~We ~~logistics~~were ~~applications~~incorporated ~~offer real~~on ~~time~~August ~~updating of inventory systems~~20, ~~error~~1993 ~~checking~~in ~~capabilities~~the toState ~~minimize picking mistakes and hands-free communications allowing for easier handling~~ of ~~bulky~~ ~~or frozen products~~Delaware. ~~Barcode~~Our ~~scanning~~headquarters ~~applications~~is ~~offer~~located ~~similar~~at ~~file update~~300 ~~and~~American ~~error~~Metro ~~checking~~Blvd, ~~features~~Suite ~~but~~155, ~~lack~~Hamilton, ~~the~~NJ ~~advantages of hands-free communication~~08619. ~~Voice-based~~Our ~~and~~telephone ~~barcode-based~~number ~~solutions~~is ~~both~~+1 ~~require substantially higher capital investments than paper~~609-~~based and other low technology systems~~514-4100.

~~Patents~~We file annual, quarterly and ~~Proprietary~~ current reports, proxy statements and other documents with the SEC, under the Securities Exchange Act of 1934, as amended, or the Exchange Act. You may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at +1 800-SEC-0330. Our reports, proxy statements and other documents filed electronically with the SEC are available at the website maintained by the SEC at http://www.sec.gov. In addition, we also make available free of charge on or through our Internet website, http://www.voxware.com, our annual, quarterly and current reports, and, if applicable, amendments to those reports, filed or furnished pursuant to Section 13(a) of the Exchange Act, as soon as reasonably practicable after we electronically file such reports with the SEC. Copies of our SEC filings may also be obtained by calling our main number and asking for investor relations or emailing: ir@voxware.com. Information on our website is not a part of this report. In addition, we make available on our website (i) the charters for the committees of our Board of Directors, including the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee and (ii) our Code of Business Conduct and Ethics governing our directors, officers and employees. We intend to disclose on our website any amendments to, or waivers from, our Code of Business Conduct and Ethics that are required to be disclosed pursuant to the rules of the Securities and Exchange.

~~Voxware 3 is based on our VISE speech engine, which is a highly noise~~-~~tolerant,~~ 8 ~~continuous speech recognizer. We believe it is the first speech recognizer to be engineered specifically for use in highly demanding industrial environments. Voxware 3, and all of our other voice~~-~~based~~ ~~products sold to industrial customers, are based on VISE technology.~~

~~All~~ITEM Voxware-certified mobile devices, when deployed for a Voxware-based voice solution, incorporate an embedded version of our VISE speech recognition engine with a standards-based interface that allows for interfaces with a wide variety of WMS packages1A. ~~Voxware~~RISK 3 also employs our patented invention of systems and methods for using standard Internet protocols in conjunction with VoiceXML Web pages to remotely program portable voice devices, such as our VoiceLogistics computer, that direct and guide users through defined tasks and workFACTORS. ~~The United States Patent and Trademark Office issued a patent relating to this invention (Patent #6662163) in 2003 and will expire in 2023.~~

We ~~believe~~operate in a rapidly changing business environment that ~~owning~~involves substantial risk and ~~developing~~uncertainty. ~~our core~~The ~~technologies~~following ~~represents~~discussion aaddresses ~~significant~~some ~~strategic~~of ~~and~~the ~~competitive~~risks ~~advantage for~~and ~~us.~~uncertainties Wethat ~~may~~could cause, ~~from~~or ~~time~~contribute to ~~time~~cause, ~~file~~actual ~~patent~~results ~~applications~~to asdiffer ~~deemed appropriate.~~materially ~~Our~~from ~~success~~expectations. ~~will~~We ~~depend~~caution inall ~~part~~readers onto ~~our~~pay ~~ability~~particular attention to ~~obtain~~the ~~patent protection~~descriptions ~~for~~of ~~our~~risks ~~products,~~and ~~preserve~~uncertainties ~~our~~described ~~trade~~below ~~secrets~~ and ~~operate~~in ~~without infringing~~other ~~the~~sections ~~proprietary~~of ~~rights~~this ofReport and our other ~~parties~~filings with the SEC.

~~The~~If ~~software~~any ~~market~~of ~~has~~the ~~traditionally experienced~~following ~~widespread~~risks ~~unauthorized~~actually ~~reproduction~~occur, ofour ~~products~~business, infinancial ~~violation~~condition ~~of manufacturers’~~or ~~intellectual~~results ~~property~~of ~~rights.~~operations ~~Such~~could ~~activity~~be ismaterially ~~difficult~~adversely ~~to detect~~affected. ~~and~~In ~~legal~~such ~~proceedings~~case, tothe ~~enforce~~trading ~~the~~price ~~manufacturers’~~of ~~intellectual~~our ~~property rights~~Common ~~are~~Stock ~~often~~could ~~burdensome~~decline, and ~~involve~~we amay ~~high~~be ~~degree~~forced ofto ~~uncertainty~~consider ~~and costs~~additional alternatives.

~~Our~~This ~~success~~Report ison ~~also~~Form ~~dependent~~10-K ~~upon unpatented~~contains ~~trade~~forward-looking ~~secrets,~~statements ~~which~~that ~~are~~involve ~~difficult~~risks toand ~~protect~~uncertainties. ToOur ~~help~~actual ~~protect~~results ~~our rights,~~could wediffer ~~require~~materially ~~employees~~from ~~and~~those ~~consultants~~anticipated toin ~~enter~~the ~~into~~forward-looking ~~confidentiality agreements~~statements ~~that~~as ~~prohibit~~a ~~disclosure~~result of ~~our~~certain ~~proprietary~~factors, ~~information~~including ~~and require~~ the ~~assignment~~risks todescribed usbelow ~~of their ideas, developments, discoveries~~ and ~~inventions. We~~elsewhere ~~cannot assure you, however, that these agreements will provide adequate protection for our trade secrets, know-how or other proprietary information~~ in ~~the~~ ~~event~~this ofAnnual ~~any~~Report ~~unauthorized~~on ~~use~~Form ~~or disclosures~~10-K.

~~Research~~Risks Relating to Our Business and ~~Development~~ Operations

WeIf we continue to incur operating losses, we may be unable to continue our operations. With the exception of fiscal year 2008, we have incurred operating losses since we started our company in August 1993. The accumulated deficit at June 30, 2010 was $382,~~686~~663,000. The recent deterioration of general worldwide economic conditions has negatively impacted certain vertical markets, including retail and food distribution, that are significant to our operations. As a result of these general economic conditions, we incurred a net loss of $3,~~830~~097,000 ~~in 2009~~for ~~and~~the ~~2008~~year ended June 30, ~~respectively~~2010. ofIf ~~Company-sponsored~~we ~~research~~incur operating losses and ~~development activities~~consistently fail to be a profitable company, we may be unable to continue our operations. Our future profitability depends on our ability to obtain significant customers for our products, to identify, engage and $0support insignificant ~~each~~partners ~~year~~to ~~related~~sell our products, to ~~customer-sponsored~~respond ~~activities~~to competition, to introduce new and enhanced products and to successfully market and support our products. We cannot assure you that we will achieve or sustain significant sales or profitability in the future.

~~Employees~~If we cannot raise adequate capital in the future, we may be unable to continue our product development, marketing and business, generally. We anticipate investing significant resources to fund future operations, including product development and marketing. The recent deterioration of general worldwide economic conditions has negatively impacted certain vertical markets, including retail and food distribution, that are significant to our operations. As a result, we may need to raise additional capital to fund future operations. Funding in the form of either debt or equity, from any source, may not be available when needed or on favorable terms, particularly in light of the recent tightening of worldwide credit markets. If we cannot raise adequate funds to satisfy our capital requirements, we may have to limit, delay, scale-back or eliminate product development programs, marketing or other activities. We might be forced to sell or license our technologies. Any of these actions might harm our business. If additional financing is obtained, the financing may be dilutive to our current stockholders.

AsWe ofrely ~~June~~substantially ~~30,~~on ~~2009,~~key wecustomers. ~~had~~Our 64customer ~~full-time employees,~~base ~~consisting~~is ofhighly 19concentrated. ~~individuals~~One incustomer ~~cost~~accounted for 14% of ~~goods~~our ~~sold~~total ~~(which~~revenues ~~includes professional~~for ~~services,~~the ~~customer~~year ~~support~~ended ~~and~~June ~~production)~~30, 182010. ~~individuals~~We ~~in research~~believe ~~and~~that ~~development,~~a 17substantial ~~individuals~~portion inof our net sales ~~and~~will ~~marketing~~continue ~~and~~to ~~10 individuals~~be inderived ~~general~~from ~~and~~a ~~administrative~~concentrated group of customers. ~~Twenty~~However, ~~two~~the volume of ~~our~~sales ~~employees~~to ~~are located~~a atspecific ~~our~~customer ~~Cambridge,~~is ~~Massachusetts~~likely ~~facility~~to vary from period to period, 23and ~~individuals~~a ~~are~~significant ~~located~~customer ~~at our~~in ~~corporate~~one ~~offices~~period may not purchase our products in ~~Hamilton,~~a ~~New~~subsequent ~~Jersey~~period. In general, 8there ~~individuals~~are ~~work~~no ~~with~~ongoing written commitments by customers to purchase our products. Our net sales in any period generally have been, and ~~customer~~likely ~~support~~will ~~office~~continue to be, in the ~~United~~near ~~Kingdom~~term, ~~and~~derived 11from ~~individuals~~a ~~work elsewhere.~~relatively ~~None~~small number of ~~our~~sales ~~employees~~transactions. ~~are~~Therefore, ~~represented~~the byloss aof ~~labor~~one ~~union~~ or ~~are~~more ~~subject to~~major acustomers, ~~collective~~or ~~bargaining~~a ~~agreement.~~delay Wein ~~believe~~their weorders, could have ~~good~~a ~~relations~~material ~~with~~adverse affect on our ~~employees~~ results of operations.

-If 8our -Voxware 3 family of products is not successful in the market, we will not be able to generate substantial revenues or achieve sustained profitability. Our success is substantially dependent on the success of our Voxware 3 family of products. If the market accepts our Voxware 3 products, these products will account for the vast majority of our net revenue in the future. If our Voxware 3 products are unsatisfactory, or if we are unable to generate significant demand for these products, or if we fail to develop other significant products or applications, our business will be materially and adversely affected.

~~Corporate~~We ~~Information~~have a sole source vendor for our primary hardware products. One vendor supplies us with our primary wearable computer hardware products. Any disruption in supply by this vendor would prohibit us from shipping our products, and thus recognizing revenue. In addition, other vendors provide custom-made components that would take time to reproduce with other suppliers should a current vendor fail to deliver quality product in a timely manner. Any disruptions in our supply chain could have a material adverse effect on our results of operations.

We- 9 ~~were incorporated on August 20, 1993 in the State of Delaware. Our headquarters is located at 300 American Metro Blvd, Suite 155, Hamilton, NJ 08619. Our telephone number is +1 609~~-~~514-4100.~~

We ~~file~~are ~~annual,~~relying ~~quarterly~~on ~~and~~third-party ~~current reports,~~hardware ~~proxy~~manufacturers ~~statements~~to ~~and~~develop ~~other documents with the SEC, under the Securities Exchange Act of 1934, as amended, or the Exchange Act. You may read~~ and ~~copy~~bring ~~any materials~~to ~~that~~market weportable ~~file~~voice-compatible ~~with~~computer ~~the~~equipment ~~SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information~~ on ~~the operation~~which ofto ~~the~~run ~~Public~~our ~~Reference Room by calling the SEC at +1 800-SEC-0330~~software. ~~Our~~ ~~reports,~~Sales ~~proxy statements and other documents filed electronically with the SEC are available at the website maintained by the SEC at http://www.sec.gov. In addition, we also make available free~~ of ~~charge on or through~~ our ~~Internet website,~~Voxware ~~http://www.voxware.com,~~3 ~~our annual, quarterly~~ and ~~current~~VoxBrowser ~~reports,~~software ~~and,~~products ~~if applicable~~depend, ~~amendments~~in ~~to those reports~~part, ~~filed~~upon ~~or furnished pursuant to Section 13(a) of~~ the ~~Exchange~~delivery ~~Act,~~by asthird-party ~~soon~~hardware asmanufacturers ~~reasonably~~of ~~practicable~~robust ~~after~~Voxware-certified ~~we electronically~~mobile ~~file~~computing ~~such~~devices ~~reports~~ with ~~the~~sufficient ~~SEC.~~memory, ~~Copies~~voice ofcapabilities ~~our SEC filings may also be obtained by calling our main number~~ and ~~asking~~form ~~for investor relations or emailing: ir@voxware~~factor.~~com.~~ ~~Information~~While onwe ~~our~~anticipate ~~website~~the isentrance ~~not a part~~ of ~~this~~additional ~~report.~~Voxware-certified Indevices ~~addition, we~~in ~~make available on our website (i)~~ the ~~charters~~marketplace ~~for~~in the ~~committees~~future, of our ~~Board~~ ofcustomers ~~Directors,~~seeking ~~including~~best-of-breed ~~the~~hardware ~~Audit~~units ~~Committee,~~to ~~Compensation~~drive ~~Committee and Nominating and Corporate Governance Committee and (ii)~~ our ~~Code~~software ofcurrently ~~Business Conduct~~have ~~and~~a ~~Ethics~~limited ~~governing~~selection ~~our~~from ~~directors,~~which ~~officers~~to ~~and employees~~choose. We ~~intend~~cannot ~~to disclose~~assure onyou ~~our~~that ~~website~~third-party ~~any~~manufacturers ~~amendments~~will ~~to,~~develop ~~or waivers from, our Code of Business Conduct~~ and ~~Ethics~~market ~~that~~hardware ~~are~~units ~~required~~compatible towith beour ~~disclosed~~software ~~pursuant~~on toa ~~the~~timely ~~rules~~basis, ~~of the~~if ~~Securities~~at ~~and Exchange Commission and The NASDAQ Stock Market, LLC~~all.

-If 9we do not develop or acquire and introduce new and enhanced products on a timely basis, our products may be rendered obsolete. The markets for our speech recognition products and voice-based technologies are characterized by rapidly changing technology. The introduction of products by others based on new or more advanced technologies could render our products obsolete and unmarketable. Therefore, our ability to build on our existing technologies and products to develop and introduce new and enhanced products in a cost effective and timely manner will be a critical factor in our ability to grow and compete. We cannot assure you that we will develop new or enhanced products successfully and bring them to market in a timely manner. Further, we cannot assure you that the market will accept new or enhanced products. Our failure to develop new or enhanced products, including our failure to develop or acquire the technology necessary to do so, would have a material adverse effect on our business.

~~ITEM~~If 1Aour competitors introduce better or less expensive products, our products may not be profitable to sell or to continue to develop. ~~RISK~~The ~~FACTORS~~business in which we engage is highly competitive. Advances in technology, product improvements and new product introductions, as well as marketing and distribution capabilities and price competition influence success. Failure to keep pace with product and technological advances could adversely affect our competitive position and prospects for growth. Our products compete with those being offered by larger, traditional computer industry participants who have substantially greater financial, technical, marketing and manufacturing resources than we do. We cannot assure you that we will be able to compete successfully against these competitors, or that competitive pressures faced by us would not adversely affect our business or operating results.

WeIf ~~operate~~we cannot integrate our speech recognition products with other components of customer systems, we may not be able to sell our products. Although state-of-the-art speech recognition technology is important to generating sales in our target markets, other components of a ~~rapidly~~voice-based ~~changing~~system ~~business environment~~are ~~that~~also ~~involves~~necessary. ~~substantial~~Our ~~risk~~products must be easily integrated with customers’ asset management and ~~uncertainty~~information systems. The ~~following discussion~~ability ~~addresses~~to ~~some~~incorporate ofspeech ~~the~~recognition ~~risks~~products ~~and~~into ~~uncertainties~~customers’ ~~that~~systems, ~~could~~quickly ~~cause,~~and ~~or contribute~~without toexcessive ~~cause~~cost or disruption, ~~actual~~will ~~results~~be toa ~~differ~~key ~~materially~~factor ~~from~~in ~~expectations~~our success. We ~~caution~~ do not now possess all ~~readers~~the necessary components for system integration. Acquisitions, joint ventures or other strategic relationships may be required for us to ~~pay~~develop ~~particular~~or ~~attention~~obtain access to the ~~descriptions~~necessary ofcomponents ~~risks~~to ~~and uncertainties~~achieve ~~described~~market ~~below~~penetration. ~~and~~The indevelopment of strategic relationships with other ~~sections~~software ofvendors ~~this~~can ~~Annual~~be ~~Report~~a ~~on Form~~lengthy 10process as potential partners evaluate the benefit to their business of integrating voice-Kbased solutions, and in particular, our ~~other~~software, ~~filings~~into ~~with~~their product offerings. We cannot assure you that our efforts will be successful and, to the ~~SEC~~extent we are unsuccessful, our business may be materially adversely affected.

IfThere ~~any~~are a number of ~~the~~factors ~~following~~which ~~risks~~may ~~actually occur,~~cause substantial variability in our ~~business~~quarterly operating results. Our revenues, ~~financial~~gross ~~condition~~profit, operating income or ~~results~~loss ofand ~~operations~~net ~~could~~income ~~be materially~~or ~~adversely~~loss ~~affected.~~may Invary ~~such~~substantially ~~case,~~from ~~the~~quarter-to-quarter ~~trading~~due ~~price~~to ofa ~~our~~number ~~Common Stock~~of ~~could~~factors. ~~decline~~Many factors, ~~and~~some weof ~~may~~which beare ~~forced~~not within our control, may contribute to ~~consider~~fluctuations ~~additional alternatives~~in operating results. These factors include, but are not limited to, the following:

~~This~~market ~~Report~~acceptance ~~on Form 10-K contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result~~ of ~~certain~~our ~~factors,~~products; ~~including the risks described below and elsewhere in this Annual Report on Form 10-K.~~
~~Risks~~timing ~~Relating to Our Business~~ and ~~OperationsIf~~ welevels ~~incur operating losses, we may be unable to continue our operations. With the exception~~ of ~~fiscal~~purchases ~~2008,~~by we have incurred cumulative operating losses since we started our company in August 1993. The accumulated deficit at June 30, 2009 was $79,566,000. The continued deterioration of general worldwide economic conditions has negatively impacted certain vertical markets, including retail and food distribution, that are significant to our operations. As a result of these general economic conditions, combined with the seasonal impact of the typically slower summer months, our revenue during the first quarter of fiscal 2010 is expected to be in line with the first quarter of fiscal 2009, which was lower than quarterly revenues reported for fiscal 2008. If we incur operating losses and consistently fail to be a profitable company, we may be unable to continue our operations. In addition, we plan to continue to increase spending on research and development, along with sales and marketing, at levels higher than in the recent past and possibly disproportionate to revenue, thus incurring net losses in the near term. Our future profitability depends on our ability to obtain significant customers; for our products, to identify, engage and support significant partners to sell our products, to respond to competition, to introduce new and enhanced products and to successfully market and support our products. We cannot assure you that we will achieve or sustain significant sales or profitability in the future.
Ifinterruption ~~we cannot raise adequate capital in the future, we may be unable to continue our product development, marketing~~ and ~~business,~~ ~~generally.~~delays We anticipate investing significant resources to fund future operations, including product development and marketing. The continued deterioration of general worldwide economic conditions has negatively impacted certain vertical markets, including retail and food distribution, that are significant to our operations. As a result of these general economic conditions, combined with the seasonal impact of the typically slower summer months, our revenue during the first quarter of fiscal 2010 is expected to be in ~~line~~production ~~with~~caused ~~the~~by ~~first~~vendor ~~quarter~~delays; of fiscal 2009, which was lower than quarterly revenues reported for fiscal 2008. As a result, we may need to raise additional capital to fund future operations. Funding in the form of either debt or equity, from any source, may not be available when needed or on favorable terms, particularly in light of the recent tightening of worldwide credit markets. If we cannot raise adequate funds to satisfy our capital requirements, we may have to limit, delay, scale-back or eliminate product development programs, marketing or other activities. We might be forced to sell or license our technologies. Any of these actions might harm our business. If additional financing is obtained, the financing may be dilutive to our current stockholders.
Wenew ~~rely~~product substantially on key customers. Our customer base is highly concentrated. One customer accounted for 16% of our total revenues for the year ended June 30, 2009. We believe that a substantial portion of our net sales will continue to be derived from a concentrated group of customers. However, the volume of sales to a specific customer is likely to vary from period to period, and aservice ~~significant customer~~introductions ~~in one period may not purchase our products in a subsequent period. In general, there are no ongoing written commitments~~ by ~~customers to purchase~~ our ~~products.~~ ~~Our~~competitors ~~net sales in any period generally have been, and likely will continue to be, in the near term, derived from a relatively small number of sales transactions. Therefore, the loss of one~~ or ~~more~~us; ~~major customers, or a delay in their orders, could have a material adverse affect on our results of operations.~~
Ifmarket ~~our~~factors ~~VoiceLogistics~~affecting ~~family of products is not successful in~~ the ~~market,~~availability ~~we will not be able to generate substantial revenues~~ or ~~achieve~~cost ~~sustained profitability. Our success is substantially dependent on the success~~ of ~~our VoiceLogistics~~qualified ~~family~~technical ofpersonnel; products. If the market accepts our Voxware 3 products, these products will account for the vast majority of our net revenue in the future. If our Voxware 3 products are unsatisfactory, or if we are unable to generate significant demand for these products, or if we fail to develop other significant products or applications, our business will be materially and adversely affected.
Wetiming have a sole source vendor for our primary hardware products. One vendor supplies us with our primary wearable computer hardware products that we resell. Any disruption in supply by this vendor would prohibit us from shipping the products we resell, and ~~we would need to convince the~~ customer toacceptance purchase a supported product distributed by another vendor. In addition, other vendors provide custom-made components that would take time to reproduce with other suppliers should a current vendor fail to deliver quality product in a timely manner. Any disruption in or termination of ~~supply~~ by our ~~vendors~~new ~~could~~product ~~have~~and aservice ~~material~~offerings; ~~adverse effect on our results of operations.~~
-effectiveness 10of sales efforts by third-party partners;
Welength ~~are relying on third-party hardware manufacturers to develop and bring to market portable voice-compatible computer equipment on which to run our software. Sales~~ of ~~our~~sales ~~Voxware~~cycle; 3 and VoxBrowser software products depend, in part, upon the delivery by third-party hardware manufacturers of robust Voxware-certified mobile computing devices with sufficient memory, voice capabilities and form factor. While we anticipate the entrance of additional Voxware-certified devices in the marketplace in the future, our customers seeking best-of-breed hardware units to drive our software currently have a limited selection from which to choose. We cannot assure you that third-party manufacturers will develop and market hardware units compatible with our software on a timely basis, if at all.
Ifindustry ~~we do not develop or acquire~~ and ~~introduce~~ ~~new~~general ~~and~~economic ~~enhanced products on a timely basis~~conditions, ~~our~~including ~~products~~the ~~may~~recent ~~be rendered~~slowdown ~~obsolete. The markets for our speech recognition products and voice-based technologies are characterized by rapidly changing technology. The introduction~~ of products by others based on new or more advanced technologies could render our products obsolete and unmarketable. Therefore, our ability to build on our existing technologies and products to develop and introduce new and enhanced products in a cost effective and timely manner will be a critical factor in our ability to grow and compete. We cannot assure you that we will develop new or enhanced products successfully and bring them to market in a timely manner. Further, we cannot assure you that the ~~market will~~global ~~accept new or enhanced products~~economy. ~~Our failure to develop new or enhanced products, including our failure to develop or acquire the technology necessary to do so, would have a material adverse effect on our business.~~

If our competitors introduce better or less expensive products, our products may not be profitable to sell or to continue to develop. The business in which we engage is highly competitive. Advances in technology, product improvements and new product introductions, as well as marketing and distribution capabilities and price competition influence success. Failure to keep pace with product and technological advances could adversely affect our competitive position and prospects for growth. Our products compete with those being offered by larger, traditional computer industry participants who have substantially greater financial, technical, marketing and manufacturing resources than we do. We cannot assure you that weany ~~will~~of ~~be able to compete successfully against~~ these ~~competitors~~ orfactors ~~that~~will ~~competitive pressures faced by us would~~ not ~~adversely~~substantially ~~affect~~ influence our ~~business~~quarterly or operating results.

If weour ~~cannot~~third-party ~~integrate~~partners ~~our~~do ~~speech recognition~~not ~~products~~effectively ~~with~~market ~~other~~and ~~components~~service ofour ~~customer systems~~products, we may not ~~be able~~generate tosignificant ~~sell~~revenues or profits from sales of our products. ~~Although state-of-the-art~~We ~~speech~~utilize ~~recognition~~third ~~technology~~parties, issuch ~~important~~as tohardware ~~generating~~system ~~sales in~~vendors, ~~our~~WMS ~~target~~companies, ~~markets~~distributors, ~~other~~consultants, ~~components~~VARs ofand asystem ~~voice-based~~integrators, ~~system~~to ~~are~~sell ~~also necessary.~~and/or ~~Our~~assist us in selling our products. ~~must~~To bedate ~~easily~~we ~~integrated~~have signed agreements with ~~customers’~~several ~~asset management~~of these third-party partners, and ~~information~~we ~~systems.~~expect ~~The~~these ~~ability~~partners to ~~incorporate~~contribute ~~speech recognition~~an ~~products~~increasing ~~into~~percentage ~~customers’~~of ~~systems,~~overall ~~quickly~~revenues ~~and~~in ~~without~~the ~~excessive~~future. ~~cost or~~We ~~disruption,~~believe ~~will~~that bethe establishment of a ~~key~~network ~~factor~~of inthird-party ~~our~~partners, ~~success.~~with Weextensive doand ~~not~~specific ~~now~~knowledge ~~possess~~of ~~all~~ the ~~necessary~~various ~~components~~applications critical in the industrial market, is important for ~~system~~us ~~integration~~to succeed in that market. ~~Acquisitions,~~Some ~~joint~~third-party ~~ventures~~partners ~~or other~~also ~~strategic~~purchase ~~relationships~~products ~~may~~from beus ~~required~~at a discount and incorporate them into application systems for usvarious totarget ~~develop~~markets, and/or ~~obtain~~consult ~~access to~~with us in the ~~necessary~~development ~~components~~of toapplication ~~achieve~~systems ~~market~~for ~~penetration~~end users. ~~The~~Once signed, new partners must be trained in the development and sale of ~~strategic~~ ~~relationships~~voice-based ~~with~~logistics ~~other~~solutions. ~~software~~Accordingly, ~~vendors~~there can be a ~~lengthy~~significant ~~process~~lead ~~as potential~~time between the signing of agreements with partners ~~evaluate~~and the ~~benefit~~recognition toof ~~their~~revenues ~~business~~generated ofby ~~integrating voice-based~~the ~~solutions,~~partners. ~~and~~For inthe ~~particular~~foreseeable future, ~~our~~we ~~software,~~may ~~into~~sell ~~their~~fewer ~~product offerings.~~products Weif we cannot ~~assure~~attract ~~you~~and ~~that~~retain third-party partners to sell and service our ~~efforts~~products ~~will~~effectively beand ~~successful~~provide timely and, cost-effective customer support. An increasing number of companies compete for access to the ~~extent~~ types of partners we ~~are~~use. ~~unsuccessful~~Additionally, we may experience conflicts between our ~~business~~distribution channel partners who may becompete ~~materially~~against ~~adversely~~one ~~affected~~another. Our sales may suffer as a result of these conflicts.

~~There~~- ~~are~~10 a number of factors which may cause substantial variability in our quarterly operating results. Our revenue, gross profit, operating income or loss, and net income or loss may vary substantially from quarter-~~to-quarter due~~ ~~to a number of factors. Many factors, some of which are not within our control, may contribute to fluctuations in operating results. These factors include, but are not limited to, the following:~~

~~market~~Either ~~acceptance~~party ofgenerally may terminate our current arrangements with third-party partners at any time upon 30 days prior written notice. We cannot assure you that our partners will continue to purchase and re-sell our products; , or provide us with adequate levels of support. If our partner relationships are terminated or otherwise disrupted, our operating performance and financial results may be adversely affected.

~~timing~~If we cannot attract and ~~levels~~retain management and other personnel with experience in the areas of ~~purchases~~our ~~by customers;~~ business focus, we will not be able to manage and grow our business. We have been developing and selling our speech recognition products and voice-based technologies since February 1999. Since that time, we have been hiring personnel with skills and experience relevant to the development and sale of these products and technologies. If we cannot continue to hire such personnel and to retain personnel hired, our ability to operate our business will be materially adversely affected. On June 30, 2006, the Company accelerated the vesting of outstanding stock options to all of its employees, thereby eliminating a possible reason for employees to remain with us. As of August 31, 2010, 403,989 options to purchase shares of our Common Stock were available for grant to employees. Competition for qualified personnel is intense, and we cannot assure you that we will be able to attract, assimilate or retain qualified personnel.

~~interruption~~If the export of our technology is deemed a violation of the regulations of the United States Department of Commerce, Bureau of Industry and ~~delays~~Security, inour ~~production~~business ~~caused~~will ~~by vendor~~be ~~delays~~substantially harmed. The Bureau of Industry and Security (“BIS”), oversees implementation and enforcement of the Export Administration Regulations (“EAR”), which control the export of most commercial items. The BIS regulates "dual-use" items that have both commercial and military or proliferation applications; however, purely commercial items without an obvious military use are also subject to the EAR. The EAR prohibits the export of certain technologies, while the export of other technologies is restricted in certain geographical regions or to certain entities. Exporters deemed in violation of the EAR are subject to substantial penalties. We are developing international channels for the distribution of our speech recognition and voice-based technology, and anticipate increasing our dependence upon revenue derived from foreign sources. If some or all of our products are classified as a restricted technology under the EAR, our ability to generate revenue from international sources will be materially adversely affected.

~~new~~If ~~product~~we cannot protect our proprietary rights and ~~service~~trade ~~introductions~~secrets, byor if we are found to be infringing on the patents and proprietary rights of others, our ~~competitors~~ business would be substantially harmed. Our success depends in part on our ability to protect the proprietary nature of our products, preserve our trade secrets and operate without infringing upon the proprietary rights of others. If others obtain and copy our technology, or claim that we are making unauthorized use of their proprietary technology, we may become involved in lengthy and costly disputes to resolve questions of ownership of the technology. If we are found to be infringing on the proprietary rights of others, we could be required to seek licenses to use necessary technology. We cannot assure you that licenses of third-party patents or proprietary rights would be made available to us; on acceptable terms, if at all. In addition, the laws of certain countries may not protect our intellectual property because the laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the United States, and many companies have encountered significant problems and costs in protecting their proprietary rights in these foreign countries. To protect our proprietary rights, we seek patents and we enter into confidentiality agreements with our employees and consultants with respect to proprietary rights and unpatented trade secrets. We cannot assure you those patent applications in which we hold rights will result in the issuance of patents. We cannot assure you that any issued patents will provide significant protection for our technology and products. In addition, we cannot assure you that others will not independently develop competing technologies that are not covered by our patents. We cannot assure you that confidentiality agreements will provide adequate protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosures. Any unauthorized disclosure and use of our proprietary technology could have a material adverse effect on our business.

~~market~~Risks ~~factors~~Relating ~~affecting~~to ~~the~~Our ~~availability~~Securities ~~or cost of qualified technical personnel;~~

~~timing~~The ~~and~~price ~~customer~~of ~~acceptance~~our Common Stock has been highly volatile due to factors that will continue to affect the price of our ~~new~~stock. ~~product~~ Our Common Stock traded as high as $2.99 and ~~service~~as ~~offerings;~~ low as $0.56 per share between July 1, 2009 and August 31, 2010. Historically, the over-the-counter markets and NASDAQ Capital Market for securities such as our Common Stock have experienced extreme price fluctuations. Some of the factors leading to this volatility include:

~~effectiveness~~fluctuations ofin ~~sales~~our ~~efforts~~quarterly byrevenue ~~third-party partners~~and operating results;
~~length~~announcements of ~~sales~~product ~~cycle~~releases by us or our competitors;
~~introduction~~announcements of acquisitions and/or ~~application~~partnerships ofby ~~new~~us ~~generally accepted~~or ~~accounting~~our ~~principles~~competitors; ~~and~~
~~industry~~increases ~~and~~in ~~general~~outstanding ~~economic~~shares ~~conditions, including~~of ~~the~~our ~~continued~~Common ~~economic~~Stock ~~slowdown~~upon exercise or conversion of derivative securities, and the ~~global~~issuances ~~economy.~~ of our Common Stock pursuant to our private placement transactions;
Wedelays ~~cannot~~in ~~assure~~producing ~~you~~finished ~~that~~goods ~~any~~inventory offor ~~these factors~~shipment; ~~will~~and ~~not substantially influence our quarterly operating results.~~
-the 11small -public float of our outstanding Common Stock in the marketplace.

~~If our third~~-~~party~~ ~~partners~~11 ~~do not effectively market and service our products, we may not generate significant revenues or profits from sales of our products. We utilize third~~-~~parties,~~ such as hardware system vendors, WMS companies, distributors, consultants, VARs and system integrators to sell and/or assist us in selling our products. To date we have signed agreements with several of these third-party partners, and we expect these partners to contribute an increasing percentage of overall revenues in the future. We believe that the establishment of a network of third-party partners, with extensive and specific knowledge of the various applications critical in the industrial market, is important for us to succeed in that market. Some third-party partners also purchase products from us at a discount and incorporate them into application systems for various target markets and/or consult with us in the development of application systems for end users. Once signed, new partners must be trained in the development and sale of voice-based logistics solutions. Accordingly, there can be a significant lead time between the signing of agreements with partners and the recognition of revenues generated by the partners. For the foreseeable future, we may sell fewer products if we cannot attract and retain third-party partners to sell and service our products effectively and provide timely and cost-effective customer support. An increasing number of companies compete for access to the types of partners we use. Additionally, we may experience conflicts between our distribution channel partners who may compete against one another. Our sales may suffer as a result of these conflicts.

~~Either~~There ~~party~~is ~~generally~~no ~~may~~assurance ~~terminate our current arrangements with third-party partners at any time upon 30 days prior written notice. We cannot assure you~~ that ~~our~~the ~~partners~~price ~~will continue to purchase and re-sell our products or provide us with adequate levels~~ of ~~support. If~~ our ~~partner~~ ~~relationships~~Common ~~are~~Stock ~~terminated~~will ornot ~~otherwise~~continue ~~disrupted,~~to ~~our~~be ~~operating performance~~volatile ~~and~~in ~~financial~~the ~~results may be adversely affected~~future.

IfA wesignificant ~~cannot~~portion ~~attract~~of ~~and~~our ~~retain management~~total ~~and~~outstanding ~~other~~shares ~~personnel with experience in the areas~~ of ~~our~~Common ~~business focus,~~Stock wemay ~~will not~~ be ~~able~~sold toin ~~manage~~the ~~and~~market ~~grow~~in ~~our~~the ~~business~~near future. WeThis ~~have~~could ~~been~~cause ~~developing~~the ~~and~~market ~~selling~~price of our ~~speech~~Common ~~recognition products~~Stock ~~and~~to ~~voice-based~~drop ~~technologies since February 1999. Since that time~~significantly, ~~we have~~even ~~been~~if ~~hiring~~our ~~personnel~~business ~~with~~is ~~skills~~doing ~~and~~well. ~~experience~~Sales ~~relevant~~of toa ~~the development~~substantial ~~and~~number ~~sale~~ of ~~these~~shares ~~products~~of ~~and~~our ~~technologies.~~Common IfStock wein ~~cannot~~the ~~continue to~~public ~~hire~~market ~~such~~could ~~personnel~~occur ~~and~~at toany ~~retain personnel hired, our ability to operate our business will be materially adversely affected~~time. OnThese ~~June 30~~sales, ~~2006,~~or ~~we accelerated~~ the ~~vesting~~perception ofin ~~outstanding~~the ~~stock~~market ~~options to all~~ of ~~our~~such ~~employees~~sales, ~~thereby eliminating~~may have a ~~possible~~material ~~reason~~adverse ~~for~~effect ~~employees~~on tothe ~~remain~~market ~~with~~price ~~us. As~~ of ~~June~~our ~~30, 2009,~~Common ~~31,982~~Stock. ~~options~~We topreviously ~~purchase~~registered all shares of ~~our~~ Common Stock ~~were~~that ~~available~~we ~~for grant~~may toissue ~~employees~~under ~~and~~our ~~directors.~~employee ~~Competition~~benefit ~~for~~plans. ~~qualified~~Sales ~~personnel~~of ~~is intense~~outstanding shares, ~~and~~when wesold, ~~cannot~~could ~~assure~~reduce ~~you~~the ~~that~~market weprice ~~will~~of beour ~~able~~Common ~~to attract, assimilate or retain qualified personnel~~Stock.

IfFuture ~~the~~sales ~~export~~ of our ~~technology~~Common ~~is deemed~~Stock ain ~~violation of~~ the ~~regulations~~public ofmarket ~~the~~could ~~United~~adversely ~~States~~affect ~~Department~~the ~~of Commerce,~~price ~~Bureau~~ of ~~Industry and Security,~~ our ~~business~~Common ~~will be substantially harmed~~Stock. ~~The~~Sales ~~Bureau~~in ofthe ~~Industry~~public ~~and~~market ~~Security, or BIS, oversees implementation and enforcement~~ of ~~the~~substantial ~~Export~~amounts ~~Administration Regulations, or EAR, which control the export~~ of ~~most~~our ~~commercial~~Common ~~items.~~Stock ~~The BIS regulates "dual-use" items~~ that ~~have both commercial and military or proliferation applications; however, purely commercial items without an obvious military use~~ are ~~also~~not ~~subject~~currently tofreely ~~the EAR. The EAR prohibit the export of certain technologies~~tradable, ~~while the export of other technologies is restricted in certain geographical regions~~ or toeven ~~certain entities. Exporters deemed in violation of~~ the ~~EAR~~potential ~~are~~for ~~subject~~such tosales, ~~substantial~~could ~~penalties.~~impair ~~We are developing international channels for~~ the ~~distribution~~ability of our ~~speech~~stockholders ~~recognition~~to ~~and~~recoup ~~voice-based technology,~~their ~~and~~investments ~~anticipate~~or ~~increasing~~make ~~our~~a ~~dependence upon revenue derived from foreign sources~~profit. IfAs ~~some or all~~ of ~~our~~August ~~products~~31, ~~are classified as a restricted technology under the EAR~~2010, ~~our~~these ~~ability~~shares toinclude: ~~generate revenue from international sources will be materially adversely affected.~~

Ifapproximately ~~we cannot protect our proprietary rights and trade secrets~~2, ~~or if we are found to be infringing on the patents and proprietary rights of others~~999,000 ~~our~~shares ~~business would be substantially harmed. Our success depends in part on our ability to protect the proprietary nature~~ of our ~~products,~~Common ~~preserve~~Stock ~~our~~owned ~~trade~~by ~~secrets~~Edison ~~and operate~~Venture ~~without~~Fund ~~infringing upon the proprietary rights of others. If others obtain~~ and ~~copy our technology or claim that we are making unauthorized use of their proprietary technology~~2, ~~we may become involved in lengthy and costly disputes to resolve questions of ownership of the technology. If we are found to be infringing on the proprietary rights of others~~047,000 weshares ~~could be required to seek licenses to use necessary technology. We cannot assure you that licenses~~ of ~~third-party~~ ~~patents or proprietary rights would be made available to us on acceptable terms, if at all. In addition, the laws of certain countries may not protect~~ our ~~intellectual~~Common ~~property~~Stock ~~because~~owned the laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the United States, and many companies have encountered significant problems and costs in protecting their proprietary rights in these foreign countries. To protect our proprietary rights, we seek patents and enter into confidentiality agreements with our employees and consultants with respect to proprietary rights and unpatented trade secrets. We cannot assure you those patent applications in which we hold rights will result in the issuance of patents. We cannot assure you that any issued patents will provide significant protection for our technology and products. In addition, we cannot assure you that others will not independently develop competing technologies that are not covered by ~~our patents.~~Cross WeAtlantic ~~cannot~~Technology ~~assure~~Fund ~~you~~Entities; that confidentiality agreements will provide adequate protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosures. Any unauthorized disclosure and ~~use of our proprietary technology could have a material adverse effect on our business.~~
-approximately 12320,000 -shares of our Common Stock owned by our executive officers and directors; and
~~Risks~~approximately ~~Relating~~2,305,000 shares of our Common Stock issuable to ~~Our~~ warrant holders, option holders and RSU holders, which may be sold under various prospectuses filed under the Securities Act of 1933, as amended, or the Securities Act.

The ~~price~~sale of substantial amounts of our Common Stock ~~has~~by ~~been highly~~certain ~~volatile~~affiliates, ~~due~~including toour ~~factors~~largest ~~that~~stockholders, ~~will~~or ~~continue~~the tosale ~~affect~~of ~~the~~substantial ~~price~~amounts of our ~~stock.~~ ~~Our~~ Common Stock ~~traded~~received asthrough ~~high~~the asexercise ~~$5.52~~of ~~and~~outstanding asoptions ~~low~~and/or ~~as $0.10 per share between July 1~~warrants, ~~2008~~or ~~and~~the ~~June~~perception ~~30,~~of ~~2009.~~such ~~Historically~~sales, ~~the~~may ~~over-the-counter markets~~have ~~and~~a ~~NASDAQ~~material ~~Capital~~adverse ~~Market~~effect ~~for~~on ~~securities such as~~ our ~~Common~~stock ~~Stock have experienced extreme~~ price ~~fluctuations~~. ~~Some of the factors leading to this volatility include:~~

~~fluctuations~~If inthe holders of the warrants and options to purchase our ~~quarterly~~Common ~~revenue~~Stock elect to have their collective holdings assumed by a potential acquirer of us, the potential acquirer could be deterred from completing the acquisition. Also, if the holders of the warrants and ~~operating~~ ~~results;~~ options to purchase our Common Stock elect to have their holdings remain outstanding after an acquisition of us, the potential acquirer could be deterred from completing the acquisition.

~~announcements~~Our management and other affiliates have significant control of ~~product~~our ~~releases~~Common Stock and could control our actions in a manner that conflicts with our interests and the interests of other stockholders, as well as impacting the price of our Common Stock. As of August 31, 2010, our executive officers, directors and affiliated entities together beneficially own approximately 7,204,000 shares of our Common Stock, assuming the exercise of options, warrants and other Common Stock equivalents, which are currently exercisable, held by usthese stockholders with Edison Venture Fund (“Edison”), beneficially owning approximately 3,800,000 shares of our Common Stock and Cross Atlantic Technology Fund Entities (“Cross Atlantic”), beneficially owning approximately 2,419,000 shares of our Common Stock. As a result, these stockholders, acting together, will be able to exercise considerable influence over matters requiring approval by our stockholders, including the election of directors, and may not always act in the best interests of other stockholders. Such a concentration of ownership may have the effect of delaying or preventing a change in our ~~competitors;~~ control, including transactions in which our stockholders might otherwise receive a premium for their shares over then current market prices. In addition, because Edison and Cross Atlantic are each venture capital funds, they may require liquidity which could result in transfers and sales of large blocks of our Common Stock. Such transfers and sales could negatively impact the price at which our Common Stock trades on the NASDAQ Capital Market.

~~announcements~~Because our common stock was delisted from the NASDAQ Capital Market, the liquidity of ~~acquisitions~~our common stock may be impaired. On September 2, 2010, we received a determination from the Listing Qualifications Department of NASDAQ that our request for continued listing on the NASDAQ Capital Market was denied. As a result, our common stock has been suspended from trading at the opening of business on September 13, 2010, and~~/or~~ ~~partnerships~~ a Form 25-NSE has been filed with the Securities and Exchange Commission which removed the Company’s securities from listing and registration on the NASDAQ Capital Market. Upon delisting from NASDAQ, the Company intends to have its common stock quoted on the Over-the-Counter Pink Sheets. Because our common stock is listed on the Over-the-Counter Pink Sheets, the liquidity of the common stock will be impaired, not only in the number of shares that are bought and sold, but also through delays in the timing of transactions, and limited coverage by ussecurity oranalysts and the news media. As a result, prices for shares of our ~~competitors;~~ common stock may be lower than might otherwise prevail if our common stock was traded on the NASDAQ Capital Market or another national securities exchange.

~~increases~~We intend on effecting a going-private transaction which will result in ~~outstanding~~our deregistering our common stock with the Securities and Exchange Commission and taking our company private. The going private transaction will include a self-tender offer for the purchase of shares of our ~~Common Stock~~commons ~~upon~~stock, ~~exercise~~followed orby ~~conversion~~a reverse split of ~~derivative~~our ~~securities~~common ~~and~~stock, if necessary. Because the ~~issuances~~ ofself-tender offer is subject to certain closing conditions, our ~~Common~~efforts ~~Stock~~may ~~pursuant~~be unsuccessful and we may be unable to ~~our private~~effect ~~placement~~the ~~transactions;~~ going-private transaction.

~~delays~~On inSeptember ~~producing~~17, ~~finished~~2010, ~~goods~~we ~~inventory~~entered into a Securities Purchase Agreement with the Co-Investment Fund II, L.P., an existing stockholder of the Company and affiliate of Cross Atlantic Technology Fund II, L.P., pursuant to which the Co-Investment Fund II, L.P. shall, subject to certain conditions, purchase up to 1,956,522 shares of a newly designated Series A Non-Participating Convertible Preferred Stock at a purchase price of $1.15 per share, and three-year warrants to purchase shares of the Company’s common stock. Proceeds from the offering will be used by us to fund a going-private transaction which will include a self-tender offer for ~~shipment;~~ some of the our common stock at $1.00 per share, followed by a reverse split and cash out of any fractional shares. Because the self-tender offer, and the equity offering which will fund the going-private transaction, are subject to certain conditions and obligations, there can be no assurances that we will be able meet these conditions and obligations and effect the going-private transaction, if at all.

~~the~~- ~~small~~12 ~~public~~- ~~float of our outstanding Common Stock in the marketplace.~~

~~There~~Risks isRelating ~~no assurance that the price of our Common Stock will not continue~~ to beAccounting ~~volatile~~Rules inand ~~the~~Internal ~~future.~~Controls

AChanges ~~significant~~in, ~~portion~~or ofinterpretations ~~our total outstanding shares~~ of, ~~Common~~accounting ~~Stock~~rules ~~may~~and beregulations, ~~sold~~such inas ~~the~~expensing ~~market in the near future. This could cause the market price~~ of ~~our~~stock ~~Common Stock to drop significantly~~options, ~~even~~ ifcould ~~our~~result ~~business~~in isunfavorable ~~doing~~accounting ~~well~~charges. ~~Sales~~We ~~of a~~prepare ~~substantial number of shares of~~ our ~~Common~~consolidated ~~Stock~~financial statements in ~~the~~conformity ~~public~~with ~~market~~accounting ~~could occur~~principles atgenerally ~~any~~accepted ~~time. These sales, or the perception~~ in the ~~market~~United ofStates ~~such sales, may have a material adverse effect on the market price~~ of ~~our Common Stock~~America. ~~On October~~These ~~25,~~principles ~~2005,~~are wesubject ~~registered~~to ~~1,084,383,899~~interpretation ~~shares~~by ~~(7,229,226 shares after giving effect to~~ the ~~1-for-150~~SEC ~~reverse~~and ~~stock~~various ~~split~~bodies ~~effected~~formed ~~in December 2005, or Reverse Split) of Common Stock, including an aggregate of 193,070,922 shares (1,287,139 shares after giving effect~~ to ~~the~~interpret ~~Reverse~~and ~~Split)~~create ofappropriate ~~Common~~accounting ~~Stock issuable upon the exercise of warrants~~policies. WeA ~~also~~change ~~previously~~in ~~registered~~these ~~all~~policies ~~shares of~~can ~~Common~~have ~~Stock~~a ~~that~~significant weeffect ~~may~~on ~~issue under~~ our ~~employee~~reported ~~benefit plans. Sales of outstanding shares~~results, ~~when~~and ~~sold,~~may ~~could~~even ~~reduce~~retroactively ~~the~~affect ~~market~~previously ~~price~~reported ~~of our Common Stock~~transactions.

~~Future~~ITEM ~~sales of our Common Stock in the public market could adversely affect the price of our Common Stock~~1B. ~~Sales~~ inUNRESOLVED ~~the~~STAFF public market of substantial amounts of our Common Stock that are not currently freely tradable, or even the potential for such sales, could impair the ability of our stockholders to recoup their investment or make a profitCOMMENTS. ~~As of August 31, 2009, these shares include:~~

~~approximately~~Not ~~255,000~~applicable ~~shares of our Common Stock owned by our executive officers and directors; and~~

~~approximately~~ITEM 2~~,409,000~~. ~~shares of our Common Stock issuable to warrant holders and option holders, which may be sold under various prospectuses filed under the Securities Act of 1933, as amended, or the Securities Act~~PROPERTIES.

~~The~~Effective ~~sale~~May of23, ~~substantial~~2008, ~~amounts~~we ofcommenced ~~our Common~~a ~~Stock~~lease byfor ~~certain~~our ~~affiliates~~headquarters facility, ~~including~~which ~~our~~contains ~~largest stockholders~~9,473 orsquare ~~the sale~~feet of ~~substantial~~office ~~amounts~~space ofin ~~our~~Hamilton, ~~Common~~New ~~Stock~~Jersey. ~~received~~The ~~through~~initial ~~the~~term ~~exercise~~ of ~~outstanding~~ ~~options~~this ~~and/or~~lease ~~warrants,~~expires oron ~~the~~May ~~perception~~31, of2013. ~~such~~Payments ~~sales,~~under ~~may~~this ~~have~~lease ~~a material~~consist ~~adverse~~of ~~effect~~a onbase ~~our~~rent ~~stock price.~~of:

If the holders of the warrants and options to purchase our Common Stock elect to have their collective holdings assumed by a potential acquirer of us, the potential acquirer could be deterred from completing the acquisition$23.50 ~~Also,~~per ifsquare ~~the~~foot ~~holders~~through ofMay ~~the warrants and options to purchase our Common Stock elect to have their holdings remain outstanding after an acquisition of us~~31, ~~the~~2009; ~~potential acquirer could be deterred from completing the acquisition.~~
~~Our~~$24.00 ~~management~~per ~~and~~square ~~other~~foot ~~affiliates have~~from ~~significant~~June ~~control of our Common Stock and could control our actions in a manner that conflicts with our interests and the interests of other stockholders. As of August 31~~1, 2009, ~~our executive~~through ~~officers,~~May ~~directors and affiliated entities together beneficially own approximately 5~~31,~~933,000~~ ~~shares~~2010; of our Common Stock, assuming the exercise of options, warrants and other Common Stock equivalents, which are currently exercisable, held by these stockholders. As a result, these stockholders, acting together, will be able to exercise considerable influence over matters requiring approval by our stockholders, including the election of directors, and may not always act in the best interests of other stockholders. Such a concentration of ownership may have the effect of delaying or preventing a change in our control, including transactions in which our stockholders might otherwise receive a premium for their shares over then current market prices.
If we are unable to maintain our listing on the NASDAQ Capital Market, the marketability of our Common Stock could be adversely affected. Our Common Stock is currently listed on the NASDAQ Capital Market under the symbol “VOXW”. In order for our Common Stock to continue trading on the NASDAQ Capital Market, we must meet certain minimum financial requirements. Among other requirements, the minimum bid price of our Common Stock must remain at least $124.0050 per ~~share~~square ~~and the~~foot ~~market~~from ~~value~~June ~~of publicly held shares~~1, as2010 ~~defined~~through byMay ~~the NASDAQ Capital Market~~31, ~~must~~2011; ~~remain at least $1,000,000. In addition, we must continue to meet at least one of the following three requirements:~~
~~Stockholders’~~$25.00 ~~equity~~per ~~must~~square befoot atfrom ~~least $2~~June 1,~~500~~ 2011 through May 31,~~000~~ 2012; and
~~Market~~$25.50 ~~value~~per ofsquare ~~our~~foot ~~Common~~from ~~Stock~~June ~~must~~1, be2012 atthrough ~~least $35~~May 31,~~000,000;~~ or 2013.

~~Net~~Beginning ~~income~~in ~~from~~2009, ~~continuing~~the ~~operations~~lease ~~must~~requires beus ~~at least~~to ~~$500~~pay for escalations in property operating expenses, property taxes and other items. We retain an option to extend the lease for five years after the initial lease termination date. In addition to our executive offices, this facility houses our Voxware 3 development staff, part of our sales and marketing staff and our finance and accounting staff. Prior to May 23, 2008, our headquarters contained approximately 5,000 square feet of leased office space in Lawrenceville, New Jersey. We anticipate that the Hamilton, New Jersey facility provides sufficient space for our headquarters operations for the foreseeable future.

-Effective 13August -1, 2007, we moved our Cambridge, Massachusetts operations to office space containing 7,632 square feet. This facility houses our customer support, professional services, product engineering, final assembly and testing and part of our research and development staff. The initial term of this lease expires on July 31, 2012. Payments under this lease consist of a base rent of:

~~On various occasions during the year ended June 30, 2009, the bid price of our Common Stock closed below~~ $117.00 per ~~share. Because~~square ~~this~~foot occurrence was widespread among NASDAQ listed companies, NASDAQ suspended enforcement of its minimum $1.00 closing bid price requirement on October 16, 2008. NASDAQ originally announced the suspension of enforcement of the rule would remain in effect through ~~January~~July 1631, ~~2009. However, on December 19,~~ 2008,; NASDAQ announced that the suspension of enforcement of the rule was extended through April 17, 2009 and on March 23, 2009 the extension was granted through July 20, 2009. Accordingly, we were not in violation of the minimum bid price requirement for NASDAQ as of June 30, 2009.
While we satisfied the requirements for continued listing on the NASDAQ Capital Market as of June 30, 2009, periods of operating losses may adversely affect our ability to maintain minimum required values of stockholders’ equity or Common Stock market value$18.00 Ifper wesquare ~~are~~foot ~~unable~~from ~~to satisfy~~August ~~the criteria to maintain listing of our Common Stock~~1, ~~our~~2008 ~~Common~~through ~~Stock could~~July ~~be subject to delisting. Trading~~31, if2009; any, of our Common Stock would thereafter be conducted on the OTC Bulletin Board or in the so-called “Pink Sheets”. As a consequence, it would be far more difficult for our stockholders to trade in our Common Stock, and it may be more difficult to obtain accurate and current information concerning market prices for our Common Stock.
~~Risks~~$19.00 ~~Relating~~per tosquare ~~Accounting~~foot ~~Rules and~~from ~~Internal~~August ~~ControlsChanges in~~1, or2009 ~~interpretations~~through ~~of,~~July ~~accounting rules and regulations~~31, ~~such~~2010; as expensing of stock options, could result in unfavorable accounting charges. We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. These principles are subject to interpretation by the SEC and various bodies formed to interpret and create appropriate accounting policies. A change in these policies can have a significant effect on our reported results and may even retroactively affect previously reported transactions.
~~ITEM 1B~~$20.00 ~~UNRESOLVED~~per ~~STAFF~~square ~~COMMENTS.~~foot from August 1, 2010 through July 31, 2011; and
~~Not~~$21.00 ~~applicable~~per square foot from August 1, 2011 through July 31, 2012.

~~ITEM~~Additionally, 2we are responsible for our proportionate share of building operating costs and real estate taxes, which are initially estimated to be $11.01 ~~PROPERTIES~~per square foot. Prior to August 1, 2007, our Cambridge, Massachusetts operations were housed in a different facility consisting of approximately 9,500 square feet of office space.

~~Effective~~Our ~~May~~Reading, 23England facility serves as a sales and service office for our customers based in the United Kingdom and Europe. On November 22, ~~2008~~2006, we ~~commenced~~entered into a 10-year lease ~~for~~of ~~our~~an ~~headquarters~~office ~~facility,~~consisting ~~which~~of ~~contains~~approximately 91,~~473~~000 square feet. ofUnder ~~office space~~the inlease ~~Hamilton~~terms, ~~New~~we ~~Jersey~~have options to terminate the lease without penalty after three and five years. ~~The~~Minimum ~~initial~~rent ~~term~~payments of ~~this~~£1,714 ~~lease~~per ~~expires~~month commenced on ~~May~~March 311, ~~2013~~ 2007. ~~Payments~~The ~~under~~minimum ~~this~~monthly lease ~~consist~~payment ofincreased ato ~~base~~£1,763 ~~rent~~on ~~of:~~March 1, 2008 and increased to £1,860 on March 1, 2010.

~~$23~~ITEM 3.50 ~~per~~LEGAL ~~square~~PROCEEDINGS. ~~foot through May 31, 2009;~~

~~$24~~We are subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business.00 ~~per square~~While ~~foot~~the ~~from~~outcome ~~June~~of 1these claims cannot be predicted with certainty, ~~2009~~we ~~through~~do ~~May~~not 31believe that the outcome of any of these legal matters will have a material adverse effect on our business, ~~2010;~~ operating results or financial condition.

~~$24.50~~- ~~per square~~13 ~~foot~~- ~~from June 1, 2010 through May 31, 2011;~~

~~$25.00~~PART ~~per square~~II ~~foot from June 1, 2011 through May 31, 2012; and~~

~~$25~~ITEM 5.50 ~~per square~~MARKET ~~foot~~FOR ~~from~~COMMON ~~June 1~~EQUITY, ~~2012~~RELATED ~~through~~STOCKHOLDER ~~May~~MATTERS ~~31,~~AND ~~2013~~ISSUER PURCHASES OF EQUITY SECURITIES.

~~Beginning~~Market inInformation 2009, the lease requires us to pay for escalations in property operating expenses, property taxes and other items. We retain an option to extend the lease for five years after the initial lease termination date. In addition to our executive offices, this facility houses our Voxware 3 development staff, part of our sales and marketing staff and our finance and accounting staff. Prior to May 23, 2008, our headquarters contained approximately 5,000 square feet of leased office space in Lawrenceville, New Jersey. We anticipate that the Hamilton, New Jersey facility provides sufficient space for our headquarters operations for the foreseeable future.

~~Effective~~From ~~August~~March 1, ~~2007,~~2001 wethrough ~~moved~~December ~~our Cambridge~~11, ~~Massachusetts~~2005, ~~operations~~our toCommon ~~office~~Stock ~~space~~traded ~~containing~~on 7the NASDAQ OTC Bulletin Board under the symbol VOXW.ob. From December 12,~~632~~ ~~square feet~~2005 through March 19, 2006, our Common Stock was traded on the NASDAQ OTC Bulletin Board under the symbol VXWR.ob ~~This~~after ~~facility~~giving ~~houses~~effect to the 1-for-150 reverse split of all the outstanding shares of our ~~customer~~Common ~~support~~Stock, ~~professional~~or ~~services~~the Reverse Split. From March 20, ~~product engineering~~2006 to September 10, ~~final~~2010, ~~assembly~~our ~~and~~Common ~~testing~~Stock ~~and~~began ~~part~~trading ofon the NASDAQ Capital Market under the symbol VOXW. On September 13, 2010 our ~~research~~Common ~~and~~Stock ~~development staff~~was traded on the OTC Bulletin Board Pink Sheets under the symbol VOXW.PK. The ~~initial~~following ~~term~~table ofsets ~~this~~forth ~~lease~~the ~~expires~~high onand ~~July~~low 31closing sale prices per share, ~~2012.~~as ~~Payments~~quoted ~~under this~~on ~~lease~~the ~~consist~~NASDAQ ofCapital aMarket ~~base~~for ~~rent~~our oftwo most recent fiscal years:

$17.00 per square foot through July 31, 2008;

	High		Low
Fiscal Year: 2009
1st Quarter	$	4.57	$	1.90
2nd Quarter	$	4.25	$	0.75
3rd Quarter	$	5.52	$	0.10
4th Quarter	$	2.89	$	0.75
Fiscal Year: 2010
1st Quarter	$	2.99	$	1.51
2nd Quarter	$	2.08	$	1.19
3rd Quarter	$	1.91	$	1.47
4th Quarter	$	1.61	$	0.90

~~$18~~As of August 31, 2009, there were approximately 148 holders of record of our Common Stock.00 ~~per square~~We ~~foot~~have ~~from~~never ~~August~~declared 1,nor ~~2008~~paid ~~through~~any ~~July~~cash ~~31,~~dividends ~~2009;~~ on our Common Stock. We do not anticipate paying any cash dividends in the foreseeable future.

~~$19.00~~Equity ~~per square~~Compensation ~~foot~~Plan ~~from August 1, 2009 through July 31, 2010;~~ Information

~~$20.00~~The ~~per square~~following ~~foot~~table ~~from~~provides ~~August~~information 1as of June 30, 2010, ~~through~~with ~~July~~respect ~~31,~~to ~~2011;~~the ~~and~~ shares of our Common Stock that may be issued under our existing equity compensation plans which were all approved by our stockholders.

$21.00 per square foot from August 1, 2011 through July 31, 2012.

			Number of
		Weighted	Securities
	Number of Securities	Average	Available for
	to be Issued Upon	Exercise Price of	Future Issuance
	Exercise of	Outstanding	under Equity
	Outstanding Options,	Options,	Compensation
	Warrants and Rights	Warrants and	Plans
Plan Category	(1)	Rights	(2)
2003 Stock Incentive Plan	941,423	$1.61	396,718
1994 Stock Option Plan	483	$72.27	--
1998 Stock Option Plan for Outside Directors	--	--	900

____________________

Additionally, we are responsible for our proportionate share of building operating costs and real estate taxes, which are initially estimated to be $11.01 per square foot. Prior to August 1, 2007, our Cambridge, Massachusetts operations were housed in a different facility consisting of approximately 9,500 square feet of office space.

(1)		Reflects 1-for-150 reverse stock split effectuated December 12, 2005.

(2)		Shares reserved for issuance under the plan may be issued upon the exercise of stock options or through direct stock issuances which vest upon the completion of designated service periods or the attainment of prescribed performance goals.

~~Our~~- ~~Reading,~~14 ~~England facility serves as a sales and service office for our customers based in the United Kingdom and Europe. On November 22, 2006, we entered into a 10~~-~~year~~ lease of an office consisting of approximately 1,000 square feet. Under the lease terms, we have options to terminate the lease without penalty after three and five years. Minimum rent payments of £1,713.54 per month commenced on March 1, 2007. The minimum monthly lease payment increased to £1,763 on March 1, 2008 and will increase to £1,860 on March 1, 2010.

-Sale 14of -Unregistered Securities

~~ITEM~~On 3September 17, 2010, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the Co-Investment Fund II, L.P., ~~LEGAL~~an ~~PROCEEDINGS~~existing stockholder of the Company and affiliate of Cross Atlantic Technology Fund II, L.P., pursuant to which the Co-Investment Fund II, L.P. shall, subject to certain conditions, purchase up to 1,956,522 shares of a newly designated Series A Non-Participating Convertible Preferred Stock of the Company at a purchase price of $1.15 per share, and three-year warrants to purchase shares of the Company’s common stock (the “Series A Financing”). The minimum investment under the Purchase Agreement is $1,250,000 and the maximum investment is $2,250,000. Proceeds from the Series A Financing will be used by the Company to fund a going-private transaction which will include a self-tender offer for some of the company's common stock at $1.00 per share, followed by a reverse split and cash out of any fractional shares. The Purchase Agreement contemplates two closings, the first closing shall be contemporaneous with the closing of the self-tender offer and the second closing shall be contemporaneous with the closing of the subsequent reverse split, if any. The Company continues to prepare for these transactions and intends to announce an offering for the purchase of shares of its common stock in a self-tender offer for $1.00 per share on or about October 4, 2010. In connection with the tender offer, the Company intends to deregister its common stock and take the Company private.

WePurchase ~~are subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course~~ of ~~business.~~Equity ~~While~~Securities ~~the~~by ~~outcome of these claims cannot be predicted with certainty, we do not believe that~~ the ~~outcome~~Registrant ofand ~~any~~Affiliated ofPurchases ~~these legal matters will have a material adverse effect on our business, operating results or financial condition.~~

~~ITEM 4~~None. ~~SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.~~

~~Not~~- ~~applicable.~~15 -

-ITEM 156. -SELECTED FINANCIAL DATA.

~~PART~~The IICompany is not required to provide the information required by this Item as a smaller reporting company.

ITEM 57. ~~MARKET~~MANAGEMENT’S ~~FOR~~DISCUSSION ~~COMMON~~AND ~~EQUITY,~~ANALYSIS ~~RELATED~~OF ~~STOCKHOLDER~~FINANCIAL ~~MATTERS~~CONDITION AND ~~ISSUER~~RESULTS ~~PURCHASES~~ OF ~~EQUITY SECURITIES~~OPERATIONS.

~~Market~~This ~~Information~~report contains forward-looking statements. Such statements are subject to certain factors that may cause our plans to differ, or results to vary from those expected, including:

~~From March 1, 2001 through December 11, 2005,~~ our ~~Common~~evolving ~~Stock~~distribution ~~traded~~strategy onand ~~the~~increasing ~~NASDAQ~~dependence ~~OTC Bulletin Board under the symbol VOXW.ob. From December 12, 2005 through March 19, 2006, our Common Stock was traded~~ on ~~the NASDAQ OTC Bulletin Board under the symbol VXWR.ob after giving effect to the 1~~third-~~for-150~~party ~~reverse~~distribution ~~split~~channels of all the outstanding shares of our Common Stock, or the Reverse Split. On March 20, 2006, our Common Stock began trading on the NASDAQ Capital Market under the symbol VOXW. The following table sets forth the high and ~~low~~hardware ~~closing~~manufacturers; ~~sale prices per share, as quoted on the NASDAQ Capital Market for our two most recent fiscal years:~~

	High	Low
Fiscal Year Ended June 30, 2008
Quarter ended September 30, 2007	$7.45	$3.78
Quarter ended December 31, 2007	$6.10	$3.31
Quarter ended March 31, 2008	$6.00	$4.10
Quarter ended June 30, 2008	$4.97	$3.52
Fiscal Year Ended June 30, 2009
Quarter ended September 30, 2008	$4.57	$1.90
Quarter ended December 31, 2008	$4.25	$0.75
Quarter ended March 31, 2009	$5.52	$0.10
Quarter ended June 30, 2009	$2.89	$0.75

the risks associated with our need to introduce new and enhanced products and services in order to increase market penetration;
Asthe ofrisk ~~August 31, 2009, there were approximately 148 holders~~ of ~~record~~obsolescence of our ~~Common~~products ~~Stock.~~and Weservices ~~have~~due ~~never~~to ~~declared nor~~technological ~~paid~~change; ~~any cash dividends on our Common Stock. We do not anticipate paying any cash dividends in the foreseeable future.~~
~~Equity~~our ~~Compensation~~need ~~Plan Information~~to attract and retain key management and other personnel with experience in providing integrated voice-based solutions for logistics, specializing in the supply chain sector;
~~The following table provides information as of June 30, 2009, with respect to~~ the ~~shares~~potential offor ~~our~~substantial ~~Common~~fluctuations ~~Stock~~in ~~that may be issued under~~ our ~~existing~~results ~~equity~~of ~~compensation~~operations; ~~plans which were all approved by our stockholders.~~

		Weighted	Number of
	Number of Securities	Average	Securities
	to be Issued Upon	Exercise Price of	Available for
	Exercise of	Outstanding	Future Issuance
	Outstanding Options,	Options,	under Equity
	Warrants and Rights	Warrants and	Compensation
Plan Category	(1)	Rights	Plans (2)
2003 Stock Incentive Plan	1,107,048	$4.46	31,082
1994 Stock Option Plan	1,168	$365.32	0
1998 Stock Option Plan for Outside Directors	0	--	900

the continuing negative impact of the current global economy on our target customer markets, including retail and food distribution;

(1)		Reflects 1-for-150 reverse stock split effectuated December 12, 2005.
(2)		Shares reserved for issuance under the plan may be issued upon the exercise of stock options or through direct stock issuances which vest upon the completion of designated service periods or the attainment of prescribed performance goals.

competition from others;
~~Sale~~the ofpotential ~~Unregistered Securities~~that voice-based products will not be widely accepted; and
~~On June 29, 2009, the Company entered into~~ a ~~Securities~~variety Purchase Agreement (the “Securities Purchase Agreement”) with Co-Investment Fund II, L.P. (a Cross Atlantic Technology Fund entity) and Edison Venture Fund V, L.P., pursuant to which the Company issued and sold an aggregate of ~~1,428,571~~risks ~~shares~~set ~~(the~~forth ~~“Shares”)~~from oftime ~~the Company’s common stock, $0.001 par value per share (the “Common Stock”), at a purchase price of $1.75 per share, and warrants~~ to ~~purchase~~time upin toour ~~142,857~~filings ~~shares~~with (the ~~“Warrant~~Securities ~~Shares”) of Common Stock, which will not be exercisable until the six (6) months after the date of issuance~~ and ~~shall~~Exchange ~~expire~~Commission ~~three~~ (~~3) years from the date of issuance, at an exercise price of $2.50 per share (the~~ “~~Warrants~~SEC”).

-We 16undertake no obligation to publicly release results of any of these forward-looking statements that may be made to reflect events or circumstances after the date hereof, or to reflect the occurrences of unexpected results.

~~Under~~Overview the terms of the Securities Purchase Agreement, Edison Venture Fund V, L.P. purchased 285,714 shares of Common Stock and Warrants to purchase 28,571 shares of Common stock and Co-Investment Fund II, L.P. purchased 1,142,857 shares of Common Stock and Warrants to purchase 114,286 shares of Common Stock. The private placement closed on June 30, 2009. The Company received gross proceeds equal to $2,500,000. The securities sold in this private placement have not been registered under the Securities Act of 1933, as amended (the “Securities Act”) as such issuance of securities was exempt from registration under Section 4(2) of the Securities Act, and may not be offered or sold in the United States in the absence of an effective registration statement or exemption from the registration requirements under the Securities Act.

~~Purchase~~Voxware is a leading provider of ~~Equity~~software ~~Securities~~for byvoice recognition solutions that direct the ~~Registrant~~ work of the warehouse workforce. Warehouse workers, wearing headsets with microphones, speak back and ~~Affiliated~~forth ~~Purchases~~to our voice applications. Since these workers can now work “hands and eyes free” when performing a wide array of tasks such as picking, putaway, and receiving, worker productivity typically increases while errors can be reduced. Our customers typically increase productivity from 10 to 30% and reduce error rates by 30 to 50%. Our primary software product, Voxware 3, offers multiple languages so companies can utilize non-native speaking workers.

~~None~~Voxware 3 is a unique product in the supply chain market as it combines 1) a studio for designing and configuring voice solutions, 2) an open, standards-based environment and 3) a patented software technology for managing speech recognition within a web browser architecture. By using technology that leverages open, web-centric standards to integrate voice solutions within their overall IT infrastructures with a system that is configurable and adaptable, our customers can respond to change rapidly. Thus, we find our customers achieve benefits faster with less cost since they can implement our systems more rapidly with fewer resources.

~~ITEM~~A 6complete voice recognition solution combines software, hardware and professional services. ~~SELECTED~~The ~~FINANCIAL~~primary ~~DATA~~focus and the core of our business is the software component of the solution. Customers may choose from a variety of certified hardware devices, which may or may not be supplied by us. Customers may also choose to have solutions delivered by receiving services from us or from our certified partners that also resell the Voxware solution. Therefore, the software that both enables voice recognition and also facilitates the creation of voice applications or workflows is the foundation of our business.

~~The~~We ~~Company~~sell isVoxware ~~not~~3 ~~required~~primarily to ~~provide~~large ~~the information~~companies ~~required~~that byoperate ~~this~~warehouses ~~Item~~and asdistribution centers. Our customers come from a ~~smaller~~variety ~~reporting~~of ~~company~~industry sectors, including food service, grocery, retail, consumer packaged goods, automotive parts, third-party logistics, publishing and wholesale distribution. Our technology has the ability to integrate easily with an external warehouse management system (“WMS”).

~~ITEM~~Our 7.revenues ~~MANAGEMENT’S~~are ~~DISCUSSION~~generated ~~AND~~primarily ~~ANALYSIS~~from OFsoftware ~~FINANCIAL~~license ~~CONDITION~~fees, ~~AND~~maintenance ~~RESULTS~~fees, OFprofessional ~~OPERATIONS~~services and hardware products sales to both our end customers and VARs.

~~This~~- ~~report~~16 ~~contains forward~~-~~looking statements.~~ ~~Such statements are subject to certain factors that may cause our plans to differ, or results to vary from those expected, including:~~

Our sales are generated primarily by our ~~evolving~~own ~~distribution~~sales ~~strategy~~force working directly with the end users of the VoiceLogistics solution. Since our 2005 fiscal year, we have been transitioning from direct selling of custom solutions that included proprietary hardware and ~~increasing dependence~~software onto ~~third-party~~the ~~distribution~~sale, ~~channels~~through both partners and direct channels, of productized, standards-based voice software that operates on open hardware ~~manufacturers;~~ platforms. Our transition to this sales approach and technology is an ongoing process that will continue in the future.

As part of our business transition, we stopped manufacturing our own proprietary hardware and, instead, have partnered with major mobile computing equipment manufacturers such as Motorola, Inc. and LXE, Inc., a subsidiary of EMS Technologies, Inc. One implication of this strategy is that we expect the ~~risks~~ portion of our revenues associated with ~~our~~proprietary ~~need~~hardware sales to ~~introduce~~diminish ~~new~~as ~~and~~a ~~enhanced~~percentage ~~products~~of ~~and~~total ~~services in~~revenues ~~order~~over time as we transition to ~~increase~~a ~~market~~software-centric ~~penetration;~~ business model. In addition, we expect that a greater percentage of our hardware revenues will be derived from the sales of accessories, rather than hardware units. However, we can provide no assurance as to the rate of this anticipated shift of revenue sources.

We have also developed partnerships with key VAR and WMS companies, both in the ~~risk~~United ~~of obsolescence~~States ofand in international markets, who are incorporating our ~~products~~voice ~~and~~technology, ~~services~~most ~~due~~notably our Voxware 3 product, into their offerings. The first deliveries of solutions by partners to ~~technological~~end ~~change;~~ customers occurred during fiscal year 2007. However, we believe it takes on average a year or more before new partners begin generating sales to end user customers, because partners must complete product integration efforts, become certified to deliver Voxware-based voice solutions and secure customer acceptance of their initial deployments.

The recent deterioration of general worldwide economic conditions has negatively impacted certain vertical markets, including retail and food distribution, that are significant to our ~~need~~operations. As a result of these general economic conditions, combined with the seasonal impact of the typically slower summer months, our revenue during the first quarter of fiscal 2011 is expected to ~~attract~~ be slightly higher than the first quarter of fiscal 2010, which was lower than quarterly revenues reported for fiscal 2009. In response to the changing economic environment, we eliminated a net of 18 positions during first half of fiscal 2009, after considering new hires, and ~~retain~~scaled ~~key~~back ~~management~~certain planned costs, new hires and ~~other~~capital ~~personnel~~purchases. However, our customer base continues to expand, with existing customers expected to implement our products in additional sites as they experience favorable results with our offerings and new customers brought to us through direct sales efforts, VARs and other channel partners. We expect the majority of revenues will come from existing customers in ~~providing~~ ~~integrated~~fiscal ~~voice-based~~year ~~solutions~~2011, ~~for~~but ~~logistics~~that revenues from new customers, ~~specializing~~including those brought to us through VARs and other channel partners, will grow faster than revenues from existing customers. We can provide no assurances that revenues earned in any given fiscal quarter or year will exceed the ~~supply~~ ~~chain~~preceding ~~sector;~~ fiscal quarter or year. Furthermore, we anticipate that in some fiscal quarters and years, costs will exceed revenues.

On June 26, 2009, with an effective date of June 1, 2009, we entered into a Sixth Loan Modification Agreement with Silicon Valley Bank (“SVB”), which, among other things extended the ~~potential for~~maturity ~~substantial~~of ~~fluctuations~~a in$1,500,000 ~~our~~revolving ~~results~~line of ~~operations;~~ credit until July 31, 2009. On September 9, 2009, we entered into a Seventh Loan Modification Agreement that, among other things, lowered the interest rate to prime plus 2.25% and extended the maturity of the Revolver until July 30, 2010. In addition, this modification revised certain financial covenants under the Loan Agreement. On August 23, 2010, we entered into a Eighth Loan Modification Agreement that, among other extended the maturity of the Revolver until July 30, 2011. In addition, this modification revised certain financial covenants under the Loan Agreement.

On June 29, 2009, the ~~continuing negative~~Company ~~impact~~received an equity infusion of $2.5 million from its two principal investors. On June 29, 2009, the ~~current~~Company ~~global~~entered ~~economy~~into ona ~~our~~Securities ~~target~~Purchase ~~customer~~Agreement ~~markets~~(the “Securities Purchase Agreement”) with Co-Investment Fund II, ~~including~~ ~~retail~~L.P. (a Cross Atlantic Technology Fund entity) and ~~food~~Edison ~~distribution;~~ Venture Fund V, L.P., pursuant to which the Company issued and sold an aggregate of 1,428,571 shares (the “Shares”) of the Company’s common stock, $0.001 par value per share (the “Common Stock”), at a purchase price of $1.75 per share, and warrants to purchase up to 142,857 shares (the “Warrant Shares”) of Common Stock, which will not be exercisable until the six (6) months after the date of issuance and shall expire three (3) years from the date of issuance, at an exercise price of $2.50 per share (the “Warrants”).

~~competition~~ Under the terms of the Securities Purchase Agreement, Edison Venture Fund V, L.P. purchased 285,714 shares of Common Stock and Warrants to purchase 28,571 shares of Common stock and Co-Investment Fund II, L.P. purchased 1,142,857 shares of Common Stock and Warrants to purchase 114,286 shares of Common Stock. The private placement closed on June 30, 2009. The Company received gross proceeds equal to $2,500,000. The securities sold in this private placement have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States in the absence of an effective registration statement or exemption from ~~others;~~ the registration requirements under the Securities Act.

On September 17, 2010, the ~~potential that~~Company ~~voice~~entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the Co-~~based~~Investment ~~products~~Fund II, L.P., an existing stockholder of the Company and affiliate of Cross Atlantic Technology Fund II, L.P., pursuant to which the Co-Investment Fund II, L.P. shall, subject to certain conditions, purchase up to 1,956,522 shares of a newly designated Series A Non-Participating Convertible Preferred Stock of the Company at a purchase price of $1.15 per share, and three-year warrants to purchase shares of the Company’s common stock (the “Series A Financing”). The minimum investment under the Purchase Agreement is $1,250,000 and the maximum investment is $2,250,000. Proceeds from the Series A Financing will ~~not~~be used by the Company to fund a going-private transaction which will include a self-tender offer for some of the company's common stock at $1.00 per share, followed by a reverse split and cash out of any fractional shares. The Purchase Agreement contemplates two closings, the first closing shall be ~~widely~~contemporaneous ~~accepted;~~with the closing of the self-tender offer and the second closing shall be contemporaneous with the closing of the subsequent reverse split, if any. The Company continues to prepare for these transactions and intends to announce an offering for the purchase of shares of its common stock in a self-tender offer for $1.00 per share on or about October 4, 2010. In connection with the tender offer, the Company intends to deregister its common stock and take the Company private. There can be no assurances that we will be able to consummate these transactions.

a- ~~variety~~17 ~~of risks~~- ~~set forth from time to time in our filings with the Securities and Exchange Commission, or SEC.~~

We ~~undertake~~may noneed ~~obligation~~to raise additional capital through either new equity or debt financing arrangements and may elect to ~~publicly release~~utilize ~~results~~such ofan ~~any~~arrangement to fund further expansion of ~~these~~our ~~forward-looking~~operations. ~~statements~~Due to the recent downturn in the economy, there can be no assurances that ~~may~~financing will be ~~made~~available ~~to reflect~~on ~~events~~terms oracceptable ~~circumstances~~to ~~after~~us, ~~the~~if ~~date~~at ~~hereof~~all. However, ordue to ~~reflect~~a ~~the occurrences~~general trend providing greater emphasis on sales of ~~unexpected~~higher ~~results~~margin product and given our efforts to reduce costs, as well as having $3.4 million in cash and $1.5 million in debt availability we believe that we have adequate capital resources available to fund our operations through June 30, 2011.

~~Overview~~Critical Accounting Policies

~~Voxware~~The ispreparation aof ~~leading~~financial ~~provider~~statements ofand ~~software for~~related ~~voice~~disclosures ~~recognition~~in ~~solutions~~conformity ~~that~~with ~~direct~~accounting principles generally accepted in the ~~work~~United States of ~~the~~America ~~warehouse~~requires ~~workforce. Warehouse~~management ~~workers~~to make judgments, ~~wearing~~assumptions ~~headsets~~and ~~with~~estimates ~~microphones,~~that ~~speak~~affect ~~back~~the amounts reported in our consolidated financial statements and ~~forth~~accompanying to notes. We base our ~~voice~~estimates ~~applications~~and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances. ~~Since~~However, ~~these~~future ~~workers~~events ~~can~~are ~~now~~subject ~~work~~to ~~“hands~~change, and ~~eyes~~the ~~free” when~~best ~~performing~~estimates aand ~~wide~~judgments ~~array~~routinely require adjustment. The amounts of ~~tasks~~assets ~~such~~and asliabilities ~~picking~~reported in our consolidated balance sheets, ~~putaway~~and the amounts of revenues and expenses reported for each of our fiscal periods, are affected by estimates and ~~receiving~~assumptions which are used for, ~~worker~~ ~~productivity~~but ~~typically~~not ~~increases~~limited ~~while~~to, ~~errors~~the ~~can~~accounting befor ~~reduced.~~allowance ~~Our customers~~for ~~typically~~doubtful ~~increase~~accounts, ~~productivity~~warranty ~~from~~costs, 10impairments, toinventory, ~~30%~~share-based compensation and ~~reduce~~income ~~error~~taxes. ~~rates by~~Actual 30results tocould ~~50%~~differ from these estimates. ~~Our~~The ~~primary~~following ~~software~~critical ~~product,~~accounting ~~Voxware~~policies 3are significantly affected by judgments, ~~offers~~assumptions ~~multiple~~and ~~languages so~~estimates ~~companies~~used ~~can~~in ~~leverage~~the ~~non-native~~preparation ~~speaking~~of ~~workers~~our consolidated financial statements.

~~Voxware~~Revenue ~~3 is a unique product in the~~Recognition ~~supply~~Revenues ~~chain~~are ~~market~~generated asfrom itlicensing ~~combines~~application 1)software, aselling ~~studio~~related ~~for~~computer ~~designing~~hardware and ~~configuring voice solutions~~accessories, 2)providing anextended ~~open,~~hardware ~~standards-based~~warranties ~~environment~~ and 3)providing aservices, ~~patented software~~including ~~technology~~professional ~~for~~deployment, ~~managing speech recognition within a web browser architecture. By using technology that leverages open~~configuration, ~~web-centric~~customized ~~standards~~application ~~to integrate voice solutions within their overall IT infrastructures with a system that is configurable and adaptable~~development, ~~our~~training ~~customers can respond to change rapidly. Thus~~services, wesoftware ~~find~~maintenance ~~our~~and ~~customers~~technical ~~achieve~~support ~~benefits faster with less cost since they can implement our systems more rapidly with less resources~~services.

Product revenues consist of software license fees, sales of related computer hardware and accessories and extended hardware warranties. Revenues from the licensing of software is recognized when (i) a signed contract or other persuasive evidence of an arrangement exists; (ii) the product has been shipped or electronically delivered; (iii) the license fee is fixed and determinable; and (iv) collection of the resulting receivable is probable. This generally occurs upon shipment of software or completion of the implementation, if applicable, provided collection is determined to be probable and there are no significant post-delivery 17obligations. If an acceptance period is required to ensure satisfactory delivery of the application software solution, as may occur for the initial site implementation for new direct-sales customers, revenues are recognized upon customer acceptance. Revenues from the sale of hardware and accessories are generally recognized upon shipment. Agreements with most direct customers do not include an acceptance period, so revenues from the sale of hardware and accessories and licensing of software in these transactions are recognized upon shipment. Extended hardware warranty revenues are recognized ratably over the life of the contract, which is generally either one year or three years. Channel partner revenue is recognized when the above four criteria are met. For the collectibility criterion, revenue from each channel partner is deferred until cash is collected, unless a pattern of collectibility has been established through actual transactions with each specific channel partner.

AServices ~~complete~~revenues ~~voice~~consist ~~recognition~~of ~~solution combines~~professional ~~software~~deployment, ~~hardware~~configuration, ~~and~~customized ~~professional~~application ~~services.~~development, ~~The~~training ~~primary~~services, ~~focus~~software maintenance and ~~the core~~technical ofsupport ~~our~~services. ~~business~~Professional isservices ~~the~~revenues ~~software~~are ~~component~~generally ofrecognized as the ~~solution~~services are performed. ~~Customers~~For ~~may choose~~arrangements ~~from~~in awhich ~~variety~~professional ofservices ~~certified~~are ~~hardware~~provided ~~devices,~~in ~~which~~conjunction ~~may~~with orsoftware, ~~may~~professional ~~not~~services ~~be supplied~~revenues generated by ~~us.~~services ~~Customers~~provided ~~may~~prior ~~also~~to ~~choose~~delivery toof ~~have~~software ~~solutions~~are ~~delivered~~deferred ~~by receiving~~until ~~services~~delivery ~~from~~of usall orsoftware. Revenues from ~~our~~maintenance ~~certified~~and ~~partners~~technical ~~that~~support, ~~also~~which ~~resell~~typically ~~the Voxware~~consist ~~solution.~~of ~~Therefore,~~unspecified ~~the~~when-and-if-available ~~software~~product ~~that~~updates ~~both~~and ~~enables~~customer ~~voice~~telephone ~~recognition and~~support ~~also~~services, ~~facilitates~~is recognized ratably over the ~~creation~~term of ~~voice~~the ~~applications~~service orperiod, ~~workflows~~which is ~~the foundation~~generally ofone ~~our business~~year.

WeThe ~~sell~~Company ~~Voxware~~recognizes 3revenue ~~primarily~~in toaccordance ~~large companies~~with ~~that~~the ~~operate~~Software ~~warehouses~~Revenue ~~and~~Recognition ~~distribution~~guidance ~~centers.~~of ~~Our~~ASC ~~customers~~985, ~~come~~ which requires that revenue recognized from amultiple ~~variety~~element arrangements that include software licenses be allocated to the various elements of ~~industry~~the ~~sectors,~~arrangement ~~including~~based ~~food~~on ~~service,~~the ~~grocery,~~fair ~~retail, consumer~~values ~~packaged~~of ~~goods~~the elements, ~~automotive~~such ~~parts~~as hardware, ~~third-party~~deployment ~~logistics,~~services ~~publishing~~and maintenance and ~~wholesale~~ ~~distribution~~technical support services. ~~Our~~The ~~technology~~Company ~~has~~follows the ~~ability~~residual method of accounting as provided in ASC 985. Under the residual method, the aggregate arrangement fee is allocated to ~~integrate~~each ~~easily~~of ~~with~~ the undelivered elements in an ~~external~~amount ~~warehouse~~equal ~~management~~to ~~system~~their fair values, orwith ~~WMS~~the residual arrangement fee allocated to the delivered elements. The fair value of the undelivered elements included in the Company’s multi-element sales arrangements is based on vendor specific objective evidence (“VSOE”).

~~Our~~- ~~revenues~~18 ~~are~~- ~~generated primarily from software license fees, maintenance fees, professional services and hardware products sales to both our end customers and VARs.~~

~~Our~~The ~~sales~~fair ~~are~~value ~~generated~~of ~~primarily~~elements bynot ~~our own~~essential ~~sales~~to ~~force working directly with~~ the ~~end~~functioning ~~users~~ of the ~~VoiceLogistics solution.~~software, ~~Since~~including ~~our~~hardware ~~2005~~units ~~fiscal~~and ~~year~~related accessories, weare ~~have~~calculated ~~been~~in ~~transitioning~~accordance ~~from~~with ~~direct selling~~the ofMultiple ~~custom~~Element ~~solutions~~Arrangements ~~that~~guidance ~~included~~of ~~proprietary~~ASC ~~hardware~~605. ~~and~~Under ~~software to~~ the ~~sale,~~ASC ~~through~~605 ~~both~~guidance, ~~partners~~the ~~and~~fair ~~direct~~value ~~channels,~~ of ~~productized, standards-based~~a ~~voice software that operates on open~~ hardware ~~platforms.~~element ~~Our transition~~is todetermined ~~this~~based ~~sales~~on ~~approach~~the ~~and~~price ~~technology~~when it is ansold ~~ongoing~~separately ~~process~~by ~~that~~either ~~will continue~~the inCompany ~~the~~or ~~future~~a competitor.

AsThe ~~part~~Company ofdetermines ~~our~~VSOE ~~business~~of ~~transition,~~the ~~we stopped~~fair ~~manufacturing~~values ~~our~~of ~~own~~maintenance ~~proprietary hardware~~ and, ~~instead,~~technical ~~have~~support ~~partnered with~~based ~~major~~on ~~mobile~~annual ~~computing~~renewal ~~equipment~~rates ~~manufacturers~~provided ~~such~~to ascustomers ~~Motorola, Inc.~~ and ~~LXE,~~ ~~Inc.,~~for aprofessional ~~subsidiary~~services ofbased ~~EMS~~on ~~Technologies,~~standard ~~Inc.~~hourly ~~One~~rates ~~implication~~when ofsuch ~~this strategy~~services isare ~~that~~provided weon ~~expect the portion of our revenues associated with proprietary hardware sales to diminish as~~ a ~~percentage of total revenues over time as we transition to a software~~stand-~~centric~~alone ~~business model~~basis. InAs ~~addition, we expect that a greater percentage~~ of ~~our~~June ~~hardware~~30, ~~revenues~~2010, ~~will be derived from~~ the ~~sales~~Company ofbelieves ~~accessories,~~that ~~rather~~they ~~than~~have ~~hardware~~realized ~~units.~~VSOE ~~However,~~of ~~we can provide no assurance as to~~ the ~~rate~~fair ofvalues ~~this~~for ~~anticipated~~maintenance ~~shift~~and ofprofessional ~~revenue sources~~services.

WeDeferred ~~have~~revenues ~~also~~consist ~~developed~~of ~~partnerships~~unearned ~~with key~~customer ~~VAR~~deposits, ~~and~~extended ~~WMS~~hardware ~~companies~~warranties, ~~both~~depot inmanagement ~~the~~service ~~United~~fees ~~States~~ and inpost ~~international markets,~~contract ~~who~~support (“PCS”) arrangements. Customer deposits are ~~incorporating~~recognized ~~our~~as ~~voice~~revenue ~~technology,~~upon ~~most~~customer ~~notably~~acceptance ~~our~~of ~~Voxware~~the 3 underlying product, ~~into~~and ~~their~~services ~~offerings.~~in ~~The~~conjunction ~~first~~with ~~deliveries~~the recognition of ~~solutions~~deferred byproject ~~partners~~costs. ~~to end~~PCS ~~customers~~arrangements ~~occurred~~include ~~during~~software ~~fiscal~~maintenance ~~year 2007~~revenues. ~~However~~These arrangements, wewhich ~~believe~~sometimes itinclude ~~takes~~amounts ~~on average~~bundled awith ~~year~~initial orrevenues, ~~more~~are ~~before~~deferred ~~new~~upon ~~partners~~invoicing ~~begin~~and ~~generating~~recognized ~~sales~~as torevenues ~~end~~over ~~user customers~~the term of the service period, ~~because~~which ~~partners~~is ~~must~~typically ~~complete~~one ~~product~~year. ~~integration~~Revenues ~~efforts~~from extended hardware warranties are recognized over the term of the warranty, ~~become certified~~which tois ~~deliver~~typically ~~Voxware-based~~one ~~voice~~year. ~~solutions~~Certain ~~and~~extended ~~secure~~hardware ~~customer acceptance~~warranty ofarrangements ~~their~~have ~~initial~~a ~~deployments~~three year term.

~~The~~Travel ~~continued~~costs ~~deterioration~~associated of general worldwide economic conditions has negatively impacted certain vertical markets, including retail and food distribution, that are significant to our operations. As a result of these general economic conditions, combined with ~~the~~professional ~~seasonal impact~~services of the typically slower summer months, our revenue during the first quarter of fiscal 2010 is expected to be in line with the first quarter of fiscal 2009, which was lower than quarterly revenues reported for fiscal 2008. In response to the changing economic environment, we eliminated a net of 18 positions during first half of fiscal 2009, after considering new hires, and ~~scaled~~billed ~~back certain planned costs, new hires and capital purchases. However, our customer base continues~~ to ~~expand, with existing~~ customers ~~expected to~~are ~~implement~~recorded ~~our products in additional sites~~ as ~~they~~services ~~experience~~revenues ~~favorable results~~at ~~with our offerings and new customers brought to us through direct sales efforts, VARs and other channel partners. We expect~~ the ~~majority~~time ofthey ~~revenues will~~are ~~come~~incurred ~~from~~by ~~existing customers in fiscal year 2010, but that revenues from new customers, including those brought to~~ us ~~through VARs and other channel partners, will grow faster than revenues from existing customers~~. We can provide no assurances that revenues earned in any given fiscal quarter or year will exceed the preceding fiscal quarter or year. Furthermore, we anticipate that in some fiscal quarters and years, costs will exceed revenues.

OnAllowance ~~June~~for ~~29,~~Doubtful ~~2009, with an effective date~~Accounts ofThe ~~June~~allowance 1,for ~~2009,~~doubtful weaccounts ~~entered~~is ~~into~~based aon ~~Sixth~~our ~~Loan~~assessment ~~Modification~~of ~~Agreement~~the ~~with Silicon~~collectibility ~~Valley~~of ~~Bank~~specific ~~(“SVB”),~~customer ~~which,~~accounts ~~among~~and ~~other~~an ~~things~~assessment ~~extended~~of ~~the~~international ~~maturity~~and ~~of a~~economic $1risk,~~500,000~~ ~~revolving~~as ~~line~~well ofas ~~credit~~the ~~until~~aging ~~July~~of ~~31,~~the ~~2009~~accounts receivable. OnIf ~~September~~there 9,is ~~2009, we~~a ~~entered~~change ~~into~~in a ~~Seventh~~major ~~Loan~~customer’s ~~Modification~~credit ~~Agreement~~worthiness ~~that,~~or ~~among~~if ~~other~~actual ~~things, lowered~~defaults ~~the~~differ ~~interest~~from ~~rate~~our tohistorical ~~prime~~experience, ~~plus~~our ~~2.25%~~estimates ~~and~~of ~~extended~~recoverability ~~the maturity~~ of ~~the Revolver~~amounts ~~until~~due ~~July~~us ~~30,~~could ~~2010.~~be ~~In addition, this modification revised certain financial covenants under the Loan Agreement~~affected.

-Research 18and -Development Research and development expenditures are charged to operations as incurred. In accordance with ASC 985, development costs incurred in connection with the research and development of software products and enhancements to existing software products are charged to expense as incurred until technological feasibility has been established, at which time such costs are capitalized until the product is available for general release to customers. Technological feasibility is evidenced by a detailed program design or the point at which there is a completed working model of the software product, the completeness of which is to be confirmed by testing. According to ASC 985, the working model is generally deemed to exist with commencement of beta testing. The Company capitalized $0 and $51,000 of costs during the years ended June 30, 2009 and 2010, respectively.

OnWarranty ~~June~~Costs Our ~~29,~~standard ~~2009,~~warranty ~~the~~policy ~~Company~~generally ~~received~~allows ~~an equity~~customers ~~infusion~~or ofend ~~$2.5~~users ~~million~~to ~~from~~return ~~its~~defective ~~two~~products ~~principal~~for ~~investors.~~repair Onor ~~June 29~~replacement, ~~2009,~~ ~~the~~provided ~~Company~~that ~~entered~~we ~~into~~are anotified ~~Securities~~of ~~Purchase~~the ~~Agreement~~defective ~~(the~~product ~~“Securities Purchase~~generally ~~Agreement”)~~within ~~with~~90 ~~Co-Investment~~days ~~Fund~~from ~~II,~~delivery ~~L.P.~~of (athe ~~Cross~~product ~~Atlantic Technology~~to ~~Fund~~the ~~entity)~~end ~~and~~user ~~Edison~~in ~~Venture~~the ~~Fund~~case V,of ~~L.P.~~software, ~~pursuant~~and up to ~~which~~one year in the ~~Company~~ ~~issued~~case ~~and~~of ~~sold~~hardware. anWe ~~aggregate~~accrue offor ~~1,428,571~~warranty ~~shares~~costs ~~(the~~based ~~“Shares”)~~on our estimate of ~~the Company’s~~expected ~~common~~repair ~~stock~~cost per unit, $0service policies and specific known issues.~~001~~ ~~par~~Certain ~~value~~extended ~~per~~hardware ~~share~~warranty ~~(the~~services ~~“Common~~are ~~Stock”),~~outsourced atto a ~~purchase~~ ~~price~~third-party ofin ~~$1.75~~accordance ~~per~~with ~~share,~~contracts ~~and~~that ~~warrants~~generally tospan ~~purchase~~three upyears. toThe ~~142,857~~costs ~~shares (the~~associated ~~“Warrant~~with ~~Shares”)~~these ofcontracts ~~Common~~are ~~Stock,~~prepaid ~~which~~and ~~will~~recognized ~~not~~ratably beover ~~exercisable~~the ~~until~~life of the ~~six~~ ~~(6)~~contract. ~~months~~If ~~after~~we ~~the~~experience ~~date~~claims ofor ~~issuance~~significant ~~and~~changes ~~shall~~in ~~expire~~costs ~~three~~of ~~(3)~~services, ~~years~~such ~~from the~~as ~~date~~third-party ofvendor ~~issuance~~charges, atmaterials anor ~~exercise~~freight, ~~price~~which could be higher or lower than our historical experience, our cost of ~~$2.50~~revenues ~~per~~could ~~share~~be ~~(the “Warrants”)~~affected.

~~Under the terms of the Securities Purchase~~Inventory ~~Agreement,~~Inventory ~~Edison~~purchases ~~Venture Fund V, L.P. purchased 285,714 shares of Common Stock~~ and ~~Warrants to~~ purchase ~~28,571~~commitments ~~shares~~are ofbased ~~Common~~upon ~~stock~~forecasts ~~and~~of ~~Co-Investment~~future ~~Fund II, L~~demand.P. ~~purchased~~We ~~1,142,857~~value ~~shares~~our ofinventory ~~Common~~at ~~Stock~~the ~~and~~lower ~~Warrants~~of toaverage ~~purchase 114,286~~cost ~~shares~~or ofnet ~~Common~~realizable ~~Stock~~value. ~~The~~If ~~private~~we ~~placement~~believe ~~closed~~that ondemand ~~June~~no ~~30,~~longer ~~2009. The~~allows ~~Company~~us ~~received~~to ~~gross~~sell ~~proceeds~~our ~~equal~~inventory toabove $2cost,~~500,000.~~ ~~The~~or ~~securities~~at ~~sold in this private placement have not been registered under the Securities Act of 1933~~all, asthen ~~amended~~we ~~(the~~write ~~“Securities~~down ~~Act”),~~that ~~and~~inventory ~~may~~to ~~not~~net berealizable ~~offered~~value or ~~sold~~write inoff ~~the United~~excess ~~States~~inventory inlevels. ~~the~~If ~~absence~~customer ofdemand ansubsequently ~~effective~~differs ~~registration~~from ~~statement~~our orforecasts, ~~exemption from~~requirements ~~the~~for ~~registration~~inventory ~~requirements~~write-offs ~~under~~could ~~the~~differ ~~Securities~~from ~~Act~~our estimates.

We- 19 ~~may~~- need to raise additional capital through either new equity or debt financing arrangements and may elect to utilize such an arrangement to fund further expansion of our operations. Due to the recent downturn in the economy, there can be no assurances that financing will be available on terms acceptable to us, if at all. However, due to a general trend providing greater emphasis on sales of higher margin product and given our efforts to reduce costs, as well as having $4.3 million in cash and $1.5 million in debt availability we believe that we have adequate capital resources available to fund our operations through June 30, 2010.

~~Critical~~Share-Based ~~Accounting Policies~~Compensation We account for share-based compensation in accordance with ASC 718, which requires all companies to measure compensation cost for all share-based payments, including employee stock options and other equity awards, at fair value. The values of the portions of the awards that are ultimately expected to vest are recognized as expense over the requisite service periods. Compensation expense associated with equity awards is determined based on the estimated fair value of the award itself, measured using either current market data or an established option pricing model. We use the Black-Scholes option pricing model to determine the fair value of option awards and the market value on the date of the grant to determine the fair value of other equity awards. The measurement date for option and other equity awards is the date of grant. Changes to the underlying assumptions may have significant impact on the underlying fair value of option and other equity awards, which could have a material impact on our consolidated financial statements.

~~The~~Income ~~preparation of financial statements~~Taxes ~~and~~There ~~related~~are ~~disclosures~~significant differences in ~~conformity~~calculating ~~with~~income ~~accounting~~or ~~principles~~loss ~~generally accepted~~for inaccounting ~~the~~and ~~United~~tax ~~States~~purposes, ofprimarily ~~America~~relating ~~requires management~~ to ~~make~~charges ~~judgments, assumptions~~that ~~and~~are ~~estimates~~recorded ~~that~~in ~~affect~~ the ~~amounts~~current ~~reported~~period infor ~~our~~accounting ~~consolidated financial~~purposes, ~~statements~~but ~~and~~are ~~accompanying~~deferred ~~notes.~~for Wetax ~~base~~purposes. ~~our~~Furthermore, ~~estimates~~tax ~~and~~laws ~~judgments on~~differ ~~historical~~in ~~experience~~each ~~and~~jurisdiction, onyielding ~~various~~differing ~~other~~amounts ~~assumptions~~of ~~that~~taxable weincome ~~believe~~or ~~are reasonable~~loss ~~under~~in ~~the~~each ~~circumstances~~jurisdiction. ~~However,~~While ~~future~~we ~~events~~have ~~are~~substantial ~~subject~~net ~~to change,~~operating ~~and~~losses ~~the~~to ~~best~~offset ~~estimates~~taxable ~~and~~income ~~judgments~~in ~~routinely~~some ~~require~~taxing ~~adjustment.~~jurisdictions, ~~The amounts~~certain ofrestrictions ~~assets~~may ~~and~~preclude ~~liabilities~~us ~~reported~~from infully ~~our~~utilizing ~~consolidated balance sheets, and~~ the ~~amounts~~benefit of ~~revenues~~these ~~and~~net ~~expenses~~operating ~~reported~~losses. ~~for~~In ~~each of our fiscal periods~~addition, ~~are~~the ~~affected~~expansion byof ~~estimates~~our ~~and~~business ~~assumptions~~requires ~~which~~us ~~are used for, but not limited~~ to, ~~the~~file ~~accounting~~taxes ~~for~~in ~~allowance~~jurisdictions ~~for~~where ~~doubtful~~we ~~accounts,~~did ~~warranty~~not ~~costs, impairments,~~previously ~~inventory~~operate, ~~share-based compensation~~ and ~~income~~thus ~~taxes.~~do ~~Actual results~~not ~~could~~have ~~differ~~established ~~from~~net ~~these~~operating ~~estimates.~~losses ~~The~~to ~~following~~offset ~~critical accounting policies are significantly affected by judgments, assumptions and estimates used in~~ the ~~preparation~~tax ~~of our consolidated financial statements~~liability.

~~Revenue~~Deferred ~~RecognitionRevenues~~income tax assets and liabilities are ~~generated~~determined ~~from~~based ~~licensing~~on ~~application~~differences ~~software, selling~~between ~~related~~the ~~computer~~financial ~~hardware~~statement reporting and ~~accessories,~~tax ~~providing~~basis ~~extended~~of ~~hardware warranties~~assets and ~~providing~~liabilities ~~services,~~and ~~including~~are ~~professional~~measured ~~deployment, configuration,~~using ~~customized~~the ~~application~~enacted ~~development~~tax rates and laws that will be in effect when the differences are expected to reverse. The measurement of deferred income tax assets is reduced, ~~training~~if ~~services~~necessary, ~~software maintenance~~by a valuation allowance for any tax benefits that are not expected to be realized. The effect of a change in tax rates on deferred income tax assets and ~~technical~~liabilities ~~support~~is ~~services~~recognized in the period that such tax rate changes are enacted.

~~Product~~We ~~revenues~~recognize ~~consist~~interest ofand ~~software license~~penalties ~~fees, sales of~~ related ~~computer~~to ~~hardware~~uncertain ~~and~~tax ~~accessories~~positions ~~and~~in ~~extended hardware~~income ~~warranties.~~tax Revenues from the licensing of software is recognized when (i) a signed contract or other persuasive evidence of an arrangement exists; (ii) the product has been shipped or electronically delivered; (iii) the license fee is fixed and determinable; and (iv) collection of the resulting receivable is probableexpense. ~~This~~As ~~generally occurs upon shipment~~ of ~~software~~June ~~or completion of the implementation~~30, if2010 ~~applicable, provided collection is determined to be probable~~ and 2009, there ~~are~~was no ~~significant~~accrued ~~post-delivery~~interest ~~obligations.~~related ~~If an acceptance period is required~~ to ~~ensure~~uncertain ~~satisfactory~~tax ~~delivery of the application software solution, as may occur for the initial site implementation for new direct-sales customers, revenues are recognized upon customer acceptance~~positions. Revenues from the sale of hardware and accessories are generally recognized upon shipment. Agreements with most direct customers do not include an acceptance period, so revenues from the sale of hardware and accessories and licensing of software in these transactions are recognized upon shipment. Extended hardware warranty revenues are recognized ratably over the life of the contract, which is generally either one year or three years. Channel partner revenue is recognized when the above four criteria are met. For the collectibility criterion, revenue from each channel partner is deferred until cash is collected, unless a pattern of collectibility has been established through actual transactions with each specific channel partner.

~~Services~~Our ~~revenues~~key ~~consist~~accounting ofestimates ~~professional deployment, configuration, customized application development, training services, software maintenance~~ and ~~technical~~policies ~~support services. Professional services revenues~~ are ~~generally~~reviewed ~~recognized~~with as the ~~services~~Audit ~~are~~Committee ~~performed. For arrangements in which professional services are provided in conjunction with software, professional services revenues generated by services provided prior to delivery~~ of ~~software~~our ~~are~~Board ~~deferred until delivery~~ of ~~all software~~Directors. Revenues from maintenance and technical support, which typically consist of unspecified when-and-if-available product updates and customer telephone support services, is recognized ratably over the term of the service period, which is generally one year.

Off-Balance 19Sheet -Arrangements

We ~~recognize~~do ~~revenue~~not inhave ~~accordance~~any ~~with the American Institute of Certified Public Accountants Statement of Position (“SOP”) No. 97~~off-2,balance ~~“Software~~sheet ~~Revenue Recognition”, as amended by SOP No. 98-9. SOP 97-2, as amended, requires that revenues recognized from multiple element~~ arrangements that include software licenses be allocated to the various elements of the arrangement based on the fair values of the elements, such as hardware, deployment services, maintenance and technical support services. We follow the residual method of accounting under SOP 97-2, as amended. Under the residual method, the aggregate arrangement fee is allocated to each of the undelivered elements in an amount equal to their fair values, with the residual arrangement fee allocated to the delivered elements. The fair value of the undelivered elements included in our multi-element sales arrangements is based on vendor specific objective evidence, or VSOE. The fair value of elements not essential to the functioning of the software, including hardware units and related accessories, are calculated in accordance with Financial Accounting Standards Board Emerging Issues Task Force (“EITF”) No. 00-21, “Revenue Arrangements with Multiple Deliverables”.

~~Under EITF 00~~-~~21,~~ we20 determine the fair value of hardware elements based on the price when they are sold separately. We determine VSOE of the fair values of maintenance and technical support based on annual renewal rates provided to customers and for professional services based on standard hourly rates when such services are provided on a stand-~~alone~~ ~~basis. As of June 30, 2009, we believe that we have realized VSOE of the fair values for maintenance and professional services, and the fair value of hardware elements.~~

~~Deferred~~Results ~~revenues consist~~ of ~~unearned customer~~Operations deposits, extended hardware warranties, depot management service fees and post contract support (“PCS”) arrangements. Customer deposits are recognized as revenue upon customer acceptance of the underlying product and services in conjunction with the recognition of deferred project costs. PCS arrangements include software maintenance revenues. These arrangements, which sometimes include amounts bundled with initial revenues, are deferred upon invoicing and recognized as revenues over the term of the service period, which is typically one year. Revenues from extended hardware warranties are recognized over the term of the warranty, which is typically one year. Certain extended hardware warranty arrangements have a three year term. Revenues from depot management services, which were provided through December 2007, were recognized over the contract period.

~~Travel~~Fiscal ~~costs~~2010 ~~associated~~versus ~~with~~Fiscal ~~professional services and billed to customers are recorded as services revenues at the time they are incurred by us.~~2009

~~Allowance~~(dollars ~~for~~in ~~Doubtful AccountsThe~~table ~~allowance~~are ~~for~~presented doubtful accounts is based on our assessment of the collectibility of specific customer accounts and an assessment of international and economic risk, as well as the aging of the accounts receivable. If there is a change in ~~a major customer’s credit worthiness or if actual defaults differ from our historical experience, our estimates of recoverability of amounts due us could be affected.~~thousands)

Research and Development Research and development expenditures are charged to operations as incurred. Pursuant to Statement of Financial Accounting Standards (“SFAS”) No. 86, "Accounting for the Cost of Computer Software to be Sold, Leased or Otherwise Marketed", development costs incurred in connection with the research and development of software products and enhancements to existing software products are charged to expense as incurred until technological feasibility has been established, at which time such costs are capitalized until the product is available for general release to customers. We define technological feasibility as the point at which there is a completed working model of the software product, the completeness of which is to be confirmed by testing. According to SFAS 86, the working model is generally deemed to exist with commencement of beta testing.

	Year Ended			% of Total		Year Ended			% of Total
	June 30, 2010			Revenues		June 30, 2009			Revenues		$ Change			% Change
Product revenues	$	6,678		53	%	$	8,643		59	%	$	(1,965	)	(23	%)
Services revenues		5,908		47	%		5,884		41	%		24		0	%
Total revenues		12,586		100	%		14,527		100	%		(1,941	)	(13	%)

Cost of product revenues		2,969		24	%		3,321		23	%		(352	)	(11	%)
Cost of services revenues		1,939		15	%		2,974		20	%		(1,035	)	(35	%)
Total cost of revenues		4,908		39	%		6,295		43	%		(1,387	)	(22	%)

Gross profit		7,678		61	%		8,232		57	%		(554	)	(7	%)

Research and development		3,073		24	%		3,686		25	%		(613	)	(17	%)
Sales and marketing		4,176		33	%		5,321		37	%		(1,145	)	(22	%)
General and administrative		3,477		28	%		4,020		28	%		(543	)	(14	%)
Total operating expenses		10,726		85	%		13,027		90	%		(2,301	)	(18	%)

Operating loss		(3,048	)	(24	%)		(4,795	)	(33	%)		1,747		36	%

Interest expense, net		(49	)	(1	%)		(28	)	(0	%)		(21	)	(75	%)
Loss before income taxes		(3,097	)	(25	%)		(4,823	)	(33	%)		1,726		36	%

Provision for income taxes		-		0	%		(3	)	(0	%)		3		100	%

Net loss	$	(3,097	)	(25	%)	$	(4,826	)	(33	%)	$	1,729		36	%

Warranty Costs Our standard warranty policy generally allows customers or end users to return defective products for repair or replacement, provided that we are notified of the defective product generally within 90 days from delivery of the product to the end user in the case of software, and up to one year in the case of hardware. We accrue for warranty costs based on our estimate of expected repair cost per unit, service policies and specific known issues. Certain extended hardware warranty services are outsourced to a third-~~party~~ in21 accordance with contracts that generally span three years. The costs associated with these contracts are prepaid and recognized ratably over the life of the contract. If we experience claims or significant changes in costs of services, such as third-~~party~~ ~~vendor charges, materials or freight, which could be higher or lower than our historical experience, our cost of revenues could be affected.~~

~~Inventory~~The ~~Inventory~~components ~~purchases and purchase commitments are based upon forecasts~~ of ~~future~~gross ~~demand.~~profit Wefor ~~value our inventory at~~ the ~~lower~~years ofended ~~average~~June ~~cost or net realizable value. If we believe that demand no longer allows us to sell our inventory above cost~~30, or2010 atand ~~all,~~2009 ~~then~~are weas ~~write~~follows: down that inventory to net realizable value or write off excess inventory levels. If customer demand subsequently differs from our forecasts, requirements for inventory write-offs could differ from our estimates.

- 20 -

	Year Ended
	June 30,				Difference
	2010		2009		$ change			% change
	(in thousands)				(in thousands)
Product revenues
Software licenses	$	1,457	$	2,476	$	(1,019	)	(41	%)
Hardware units and accessories		4,110		4,922		(812	)	(16	%)
Extended hardware warranties		970		1,023		(53	)	(5	%)
Royalties		141		222		(81	)	(36	%)
		6,678		8,643		(1,965	)	(23	%)

Cost of product revenues
Software licenses		16		38		(22	)	(58	%)
Hardware units and accessories		2,621		3,004		(383	)	(13	%)
Extended hardware warranties		332		279		53		19	%
		2,969		3,321		(352	)	(11	%)
Gross Profit from product revenues		3,709		5,322		(1,613	)	(30	%)

Services revenues
Professional services		1,419		1,654		(235	)	(14	%)
Software maintenance services		4,324		4,042		282		7	%
Billable travel		165		188		(23	)	(12	%)
		5,908		5,884		24		0	%

Cost of services revenues
Professional services		1,074		1,924		(850	)	(44	%)
Software maintenance services		747		857		(110	)	(13	%)
Billable travel		118		193		(75	)	(39	%)
		1,939		2,974		(1,035	)	(35	%)
Gross Profit from services revenues		3,969		2,910		1,059		36	%

Gross Profit	$	7,678	$	8,232	$	(554	)	(7	%)

~~Share-Based~~Revenues Compensation We account for share-based compensation in accordance with SFAS No. 123(R), “Share-Based Payment”, which requires all companies to measure compensation cost for all share-based payments, including employee stock options and other equity awards, at fair value. The values of the portions of the awards that are ultimately expected to vest are recognized as expense over the requisite service periods. Compensation expense associated with equity awards is determined based on the estimated fair value of the award itself, measured using either current market data or an established option pricing model. We use the Black-Scholes option pricing model to determine the fair value of option awards and the market value on the date of the grant to determine the fair value of other equity awards. The measurement date for option and other equity awards is the date of grant. Changes to the underlying assumptions may have significant impact on the underlying fair value of option and other equity awards, which could have a material impact on our consolidated financial statements.

~~Income~~Total ~~Taxes~~revenues ~~There~~were ~~are~~$12,586,000 ~~significant differences~~for inthe ~~calculating~~year ~~income~~ended orJune ~~loss~~30, ~~for~~2010 ~~accounting~~compared ~~and~~to ~~tax~~total ~~purposes~~revenues of $14, ~~primarily~~527,000 ~~relating~~for tothe ~~charges~~year ~~that~~ended ~~are~~June ~~recorded~~30, 2009. The $1,941,000 (13%) decrease in ~~the~~total ~~current~~revenues ~~period~~is ~~for accounting~~primarily ~~purposes~~due to decreases of $812,000 ~~but~~(16%) ~~are~~in ~~deferred~~revenues ~~for~~generated ~~tax~~from ~~purposes.~~the ~~Furthermore,~~sale ~~tax~~of ~~laws differ~~hardware inunits ~~each~~and ~~jurisdiction~~related accessories, ~~yielding~~$1,019,000 ~~differing~~(41%) ~~amounts~~in licensing of ~~taxable~~software, ~~income~~$235,000 ~~or loss~~(14%) in ~~each~~professional ~~jurisdiction.~~services ~~While~~and we$81,000 ~~have~~(36%) ~~substantial~~in ~~net~~royalties, ~~operating~~offset ~~losses~~by ~~to offset~~an ~~taxable~~increase ~~income~~of $282,000 (7%) in ~~some~~software ~~taxing~~maintenance ~~jurisdictions,~~services. ~~certain~~Product ~~restrictions~~revenues ~~may preclude~~accounted usfor ~~from~~53% ~~fully~~of ~~utilizing~~revenues during the ~~benefit~~year ofended ~~these~~June ~~net~~30, ~~operating~~2010 ~~losses.~~as ~~In addition,~~compared ~~the~~to ~~expansion~~59% ofduring ~~our~~the ~~business~~year ~~requires~~ended usJune to30, ~~file~~2009. ~~taxes~~Service ~~in jurisdictions~~revenues ~~where~~accounted wefor ~~did~~47% ~~not~~of ~~previously~~revenue ~~operate,~~during ~~and~~the ~~thus~~year doended ~~not~~June ~~have established~~30, ~~net~~2010 ~~operating~~as ~~losses~~compared to ~~offset~~41% during the ~~tax~~year ~~liability~~ended June 30, 2009.

~~Deferred~~Product ~~income~~revenues ~~tax~~include ~~assets~~licensing ~~and~~of ~~liabilities are~~software, ~~determined~~sales ~~based~~of onhardware ~~differences~~units ~~between~~and ~~the~~accessories, ~~financial~~extended ~~statement~~hardware ~~reporting~~ warranties and ~~tax~~royalties ~~basis~~from ofour ~~assets~~speech ~~and~~compression ~~liabilities~~technology. ~~and~~Total ~~are~~product ~~measured~~revenues ~~using~~decreased $1,965,000 (23%) to $6,678,000 during the ~~enacted~~year ~~tax rates~~ended ~~and~~June ~~laws~~30, ~~that~~2010 ~~will~~from be$8,643,000 in ~~effect~~the ~~when~~year ended June 30, 2009. The decrease in product revenues during the ~~differences~~year ~~are~~ended ~~expected~~June 30, 2010 was primarily due to ~~reverse~~ decreases in software licenses and related hardware units and accessories sold compared to the year ended June 30, 2009. The ~~measurement~~decrease ofin ~~deferred~~hardware ~~income~~units ~~tax~~and ~~assets~~hardware isaccessories ~~reduced~~sold was primarily due to fewer new customer sites purchasing software and related hardware units during the year ended June 30, if2010 ~~necessary~~as compared to the year ended June 30, by a2009. ~~valuation~~Software ~~allowance~~licenses ~~for~~contributed ~~any~~22% ~~tax~~of ~~benefits~~product ~~that~~revenues ~~are~~during ~~not~~the ~~expected~~year ended June 30, 2010 as compared to ~~be realized~~29% during the year ended June 30, 2009. ~~The~~Hardware ~~effect~~units and accessories accounted for 62% of aproduct ~~change~~revenues induring ~~tax~~the ~~rates~~year onended ~~deferred~~June ~~income~~30, ~~tax~~2010 ~~assets~~as ~~and liabilities~~compared isto ~~recognized~~57% induring the ~~period~~year ~~that~~ended ~~such~~June ~~tax~~30, ~~rate~~2009. ~~changes~~Accessories ~~are enacted~~generally provide higher gross margin percentages than hardware unit sales.

We- ~~recognize~~22 ~~interest~~- ~~and penalties related to uncertain tax positions in income tax expense. As of June 30, 2009 and 2008, there was no accrued interest related to uncertain tax positions.~~

~~Our~~Accessories ~~key~~accounted ~~accounting~~for ~~estimates~~69% ~~and~~of ~~policies are~~hardware ~~reviewed~~revenues ~~with~~during the ~~Audit~~year ~~Committee~~ended ofJune ~~our~~30, ~~Board~~2010 as compared to 60% of ~~Directors~~hardware revenues for the year ended June 30, 2009.

~~Off~~Services revenues are derived from professional services fees relating to voice-~~Balance~~based ~~Sheet Arrangements~~solutions, ongoing customer support activities and travel charges billed to customers for costs incurred while providing services. For the year ended June 30, 2010, services revenues totaled $5,908,000, an increase of $24,000 (0%) from services revenues of $5,884,000 for the year ended June 30, 2009. Professional services decreased $235,000 (14%) from $1,654,000 during the year ended June 30, 2009 to $1,419,000 during the year ended June 30, 2010. Software maintenance support services increased $282,000 (7%) from $4,042,000 during the year ended June 30, 2009 to $4,324,000 during the year ended June 30, 2010. Revenues from software maintenance support services tend to grow over time as additional software licenses are sold and remain in effect.

WeCost doof ~~not have any off-balance sheet arrangements.~~Revenues

-Total 21cost -of revenues decreased $1,387,000 (22%) from $6,295,000 for the year ended June 30, 2009 to $4,908,000 for the year ended June 30, 2010.

~~Results~~Cost of ~~Operations~~product revenues decreased $352,000 (11%) from $3,321,000 in the year ended June 30, 2009 to $2,969,000 in the year ended June 30, 2010. Such costs reflect materials, labor and overhead associated with the sale of our voice-based products. Included in our cost of product revenues is the cost associated with our team responsible for testing, shipping, supporting and managing third party hardware. This team was comprised of three individuals as of June 30, 2010 and four individuals as of June 30, 2009. The decrease in cost of product revenues is primarily attributable to a decrease of $363,000 for direct material costs and freight charges. These cost reductions were primarily due to a decrease in sales of computer hardware units and related accessories during the year ended June 30, 2010 as compared to the year ended June 30, 2009.

~~Fiscal~~Cost of services revenues consists primarily of the expenses associated with customer maintenance support and professional services, including employee compensation, outside consulting services and travel expenditures. Professional services costs include labor charges for custom application design and development, customer training and assisting customers implement our voice-based solutions. Professional services costs are tracked by project and are deferred until the related project revenue is recognized. Costs of customer support and professional services staff performed in support of our sales and research and development activities are recorded as operating expenses, while the cost of customer support or professional service activities performed by our research and development staff are recorded as cost of services revenues. Our customer support and professional services staff was comprised of 10 individuals as of June 30, 2010, as compared to 15 individuals as of June 30, 2009. ~~versus~~Four ~~Fiscal~~ positions were eliminated in December 2008 in response to the decline in our revenues during the period and others departed during fiscal year 2010. Cost of services revenues decreased $1,035,000 (35%) from $2,974,000 in the year ended June 30, 2009 to $1,939,000 in the year ended June 30, 2010. Expenses related to professional services accounted for the majority of the decrease as it decreased $850,000 (44%) from $1,924,000 in the year ended June 30, 2009 to $1,074,000 in the year ended June 30, 2010.

~~(dollars~~Operating inExpenses ~~table are presented in thousands)~~

	Year Ended			% of Total		Year Ended			% of Total
	June 30, 2009			Revenue		June 30, 2008			Revenue		$ Change			% Change
Product revenues	$	8,643		59	%	$	17,173		73	%	$	(8,530	)	(50	%)
Services revenues		5,884		41	%		6,211		27	%		(327	)	(5	%)
Total revenues		14,527		100	%		23,384		100	%		(8,857	)	(38	%)
Cost of product revenues		3,321		23	%		5,835		25	%		(2,514	)	(43	%)
Cost of services revenues		2,974		20	%		3,718		16	%		(744	)	(20	%)
Total cost of revenues		6,295		43	%		9,553		41	%		(3,258	)	(34	%)
Gross profit		8,232		57	%		13,831		59	%		(5,599	)	(40	%)
Research and development		3,686		25	%		3,830		16	%		(144	)	(4	%)
Sales and marketing		5,321		37	%		6,019		26	%		(698	)	(12	%)
General and administrative		4,020		28	%		3,414		14	%		606		18	%
Total operating expenses		13,027		90	%		13,263		56	%		(236	)	(2	%)
Operating (loss) profit		(4,795	)	(33	%)		568		2	%		(5,363	)	N/M
Interest (expense) income, net		(28	)	(0	%)		24		0	%		(52	)	N/M
(Loss) profit before income taxes		(4,823	)	(33	%)		592		3	%		(5,415	)	N/M
Provision for income taxes		(3	)	(0	%)		(7	)	(0	%)		4		57	%
Net (Loss) profit	$	(4,826	)	(33	%)	$	585		3	%	$	(5,411	)	N/M

Total operating expenses decreased by $2,301,000 (18%) to $10,726,000 in the year ended June 30, 2010 from $13,027,000 in the year ended June 30, 2009 due in part to lower average head count during the period and reasons discussed below. The number of employees associated with operating expenses (research and development, sales and marketing, general and administrative) totaled 43 individuals as of June 30, 2010 and 45 as of June 30, 2009.

-Research 22and -development expenses primarily consist of employee compensation, consulting fees and other costs associated with our voice recognition technology, hardware platform and VoiceLogistics software suite development efforts. In addition, costs incurred by our customer support and professional services teams relating to the development of our VoiceLogistics software suite are charged to research and development, while the cost of customer support or professional service activities performed by our research and development staff are recorded as cost of services revenues. Our research and development team was comprised of 18 individuals as of June 30, 2010 and 2009. Our research and development expenses decreased $613,000 (17%) to $3,073,000 in the year ended June 30, 2010, from $3,686,000 in the year ended June 30, 2009. The majority of the decrease related to a reduction of $141,000 for outside consultants, $263,000 for labor costs, $59,000 for depreciation costs and $54,000 for recruitment costs.

~~The~~Sales ~~components~~and marketing expenses primarily consist of ~~gross~~employee ~~profit~~compensation ~~for~~(including direct sales commissions), third-party partnership fees, travel expenses and trade show and other lead generation expenses. Our sales and marketing staff was comprised of 16 individuals as of June 30, 2010 compared to 17 individuals as of June 30, 2009. Sales and marketing expenses decreased $1,145,000 (22%) to $4,176,000 in the ~~years~~ year ended June 30, 2010 from $5,321,000 in the year ended June 30, 2009. The decrease in sales and ~~2008~~marketing ~~are~~expenses asis ~~follows:~~due primarily to decreases during the year ended June 30, 2010 of $115,000 in marketing costs, $227,000 in sales meeting and travel expenses, $255,000 in labor costs due to the smaller sales staff and $357,000 in lower commission expense due to reduction in the revenues and changes in the sales mix. In light of reduced revenues caused by global economic conditions, we undertook steps to reduce sales and marketing expenses.

	Year Ended
	June 30,
	2009		2008		$ change			% change
	(in thousands)				(in thousands)
Product revenues
Software licenses	$	2,476	$	6,474	$	(3,998	)	(62	%)
Hardware units and accessories		4,922		9,086		(4,164	)	(46	%)
Extended hardware warranties		1,023		1,205		(182	)	(15	%)
Royalties		222		408		(186	)	(46	%)
		8,643		17,173		(8,530	)	(50	%)
Cost of product revenues
Software licenses		38		96		(58	)	(60	%)
Hardware units and accessories		3,004		5,531		(2,527	)	(46	%)
Extended hardware warranties		279		208		71		34	%
		3,321		5,835		(2,514	)	(43	%)
Gross Profit from product revenues		5,322		11,338		(6,016	)	(53	%)
Services revenues
Professional services		1,654		2,502		(848	)	(34	%)
Software maintenance services		4,042		3,412		630		18	%
Billable travel		188		297		(109	)	(37	%)
		5,884		6,211		(327	)	(5	%)
Cost of services revenues
Professional services		1,924		2,601		(677	)	(26	%)
Software maintenance services		857		833		24		3	%
Billable travel		193		284		(91	)	(32	%)
		2,974		3,718		(744	)	(20	%)
Gross Profit from services revenues		2,910		2,493		417		17	%
Gross Profit	$	8,232	$	13,831	$	(5,599	)	(40	%)

- 23 -

~~Revenues~~General and administrative expenses consist primarily of employee compensation and fees for insurance, rent, office expenses, professional services, public company related charges and income and expenses related to fluctuations in foreign currency exchange rates. The general and administrative staff was comprised of 9 full time employees as of June 30, 2010 compared to 10 full time employees as of June 30, 2009. General and administrative expenses decreased $543,000 (14%) to $3,477,000 in the year ended June 30, 2010 from $4,020,000 in the year ended June 30, 2009. The decrease related to a decrease in labor costs of $277,000, provision for doubtful accounts of $37,000 and fluctuations in foreign currency exchange rates generated losses of $109,000 during the year ended June 30, 2010 compared to losses of $230,000 during the year ended June 30, 2009, a change of $121,000, and a decrease of $175,000 for stock-based compensation expense.

~~Total~~Interest ~~revenues were $14~~Expense,~~527,000~~ ~~for~~Net the year ended June 30, 2009 compared to total revenues of $23,384,000 for the year ended June 30, 2008. The $8,857,000 (38%) decrease in total revenues is primarily due to decreases of $3,998,000 (62%) in licensing of software, $4,164,000 (46%) in revenues generated from the sale of hardware units and related accessories, $182,000 (15%) in extended hardware warranties, $848,000 (34%) in professional services and $186,000 (46%) in royalties, offset by an increase of $630,000 (18%) in software maintenance services. Product revenues accounted for 59% of revenues during the year ended June 30, 2009 as compared to 73% during the year ended June 30, 2008. Services revenues accounted for 41% of revenue during the year ended June 30, 2009 as compared to 27% during the year ended June 30, 2008.

~~Product~~Interest ~~revenues~~expense ~~include~~is ~~licensing~~reported ~~of software,~~net ~~sales~~ of ~~hardware~~interest ~~units~~income ~~and accessories, extended hardware warranties and royalties from our speech compression technology~~earned. ~~Total~~Net ~~product~~interest ~~revenues decreased~~expense ~~$8,530,000~~was ~~(50%) to~~ $849,~~643,~~000 ~~during~~for the year ended June 30, ~~2009 from~~2010 ~~$17,173,000~~compared into ~~the~~net ~~year~~interest ~~ended~~expense ~~June~~of 30$28,000 ~~2008.~~for ~~The decrease in product revenues during~~ the year ended June 30, 2009, ~~was~~an ~~primarily~~increase ~~due to decreases in the number~~ of ~~VoxBrowser software licenses and related hardware units and accessories sold compared to the year ended June 30~~$21, ~~2008~~000. ~~The~~Interest ~~decrease~~income indecreased ~~the number~~$41,000 offrom ~~software licenses~~$43,000 ~~hardware units and hardware accessories sold was primarily due to a decrease in the number of new customer sites purchasing our solutions~~ during the year ended June 30, 2009 asto ~~compared~~$2,000 toduring the year ended June 30, ~~2008,~~2010 ~~which~~due ~~we believe was~~ primarily ~~caused by customers and sales prospects delaying purchasing decisions in response~~ to ~~current~~declining ~~global~~interest ~~economic~~rates ~~conditions~~ and~~/or~~ ~~purchasing~~lower ~~one~~balances ~~site~~of atinvested ~~a time as opposed to purchasing multiple sites at once~~funds. ~~Software~~Interest ~~licenses~~expense ~~contributed~~decreased ~~29%~~$20,000 offrom ~~product revenues during the year ended June 30~~$71,000 ~~2009 as compared to 38%~~ during the year ended June 30, ~~2008. Hardware units and accessories accounted for 57% of product revenues during the year ended June 30,~~ 2009 ~~as compared~~ to ~~53%~~$51,000 during the year ended June 30, ~~2008. Accessories~~2010 ~~generally~~due ~~provide~~primarily ~~higher~~to ~~gross~~an ~~margin~~interest ~~percentages~~charge ~~than~~related ~~hardware~~to ~~unit~~ a sales. ~~Accessories~~tax ~~accounted~~discount ~~for~~related ~~60% of hardware revenues during the year ended June 30, 2009 as compared~~ to ~~48%~~previous ~~of hardware revenues for the year ended June 30, 2008~~years.

-Income ~~23 -~~Taxes

~~Services~~There ~~revenues~~ are ~~derived~~significant ~~from professional~~differences ~~services~~in ~~fees~~calculating ~~relating~~income toor ~~voice-based~~loss ~~solutions,~~for ~~ongoing~~accounting ~~customer support activities~~ and ~~travel~~tax ~~charges~~purposes, ~~billed~~primarily relating to ~~customers~~charges ~~for~~that ~~costs~~are ~~incurred while~~recorded ~~providing~~in ~~services. For~~ the ~~year~~current ~~ended~~period ~~June~~for ~~30,~~accounting ~~2009~~purposes, ~~services~~but ~~revenues totaled~~are ~~$5,884,000,~~deferred ~~a decrease of 5% from $6,211,000~~ for ~~the~~tax ~~year~~purposes. ~~ended June 30~~Furthermore, ~~2008.~~ ~~Professional~~tax ~~services~~laws ~~decreased~~differ ~~$848,000~~in ~~(34%)~~each ~~from $2~~jurisdiction,~~502,000~~ ~~during~~yielding ~~the year~~differing ~~ended~~amounts ~~June~~of ~~30,~~taxable ~~2008~~income toor ~~$1,654,000~~loss ~~during~~in ~~the~~each ~~year~~jurisdiction. ~~ended~~While ~~June~~we ~~30,~~have ~~2009.~~substantial ~~The decrease~~net inoperating ~~professional~~losses ~~services~~to ~~reflects~~offset ~~the~~taxable ~~decrease~~income in ~~the~~some ~~number~~taxing ofjurisdictions, ~~new sites~~certain atrestrictions ~~which~~preclude ~~our~~us ~~solutions~~from ~~were~~fully ~~implemented~~utilizing ~~during~~ the ~~year~~benefit ~~ended~~of ~~June~~these ~~30, 2009~~net asoperating ~~compared~~losses. toIn ~~during~~addition, the ~~year~~expansion ~~ended June 30, 2008. Voxware 3 provides tools to allow third-party partners to develop voice-enabled logistics solutions independent~~ of our ~~professional~~business ~~services~~requires ~~staff.~~us Asto afile ~~result,~~taxes ~~professional services revenues for new customers may decline~~ in ~~the~~jurisdictions ~~future.~~where ~~Software maintenance~~we ~~support~~did ~~services~~not ~~increased~~previously ~~$630~~operate,~~000~~ ~~(18%)~~and ~~from~~thus ~~$3,412,000~~do ~~during~~not ~~the year~~have ~~ended~~established ~~June~~net ~~30,~~operating ~~2008~~losses to ~~$4,042,000~~offset ~~during~~ the ~~year~~tax ~~ended June 30, 2009~~liability. ~~Revenues~~ ~~from software maintenance support services tend to grow over time as additional software licenses are sold and remain in effect.~~

~~Cost~~The provision for income taxes was $0 for the year ended June 30, 2010 and $3,000 for the year ended June 30, 2009. We had a loss before taxes of ~~Revenues~~$3,097,000 for accounting purposes during the year ended June 30, 2010, compared to a loss before taxes of $4,823,000 during the year ended June 30, 2009.

~~Total~~Liquidity ~~cost~~and ofCapital ~~revenues~~Resources ~~decreased $3,258,000 (34%) from $9,553,000 for the year ended June 30, 2008 to $6,295,000 for the year ended June 30, 2009.~~

~~Cost~~As of ~~product~~June ~~revenues~~30, ~~decreased $2~~2010,~~514,000~~ ~~(43%)~~we ~~from~~had $53,~~835~~360,000 in ~~the~~cash ~~year~~and ~~ended~~cash ~~June 30~~equivalents, ~~2008,~~compared to $34,~~321~~342,000 in ~~the~~cash ~~year~~and ~~ended~~cash equivalents as of June 30, 2009~~. Such costs reflect materials~~, ~~labor~~a ~~and overhead~~decrease ~~associated with the sale~~ of ~~our voice-based products. Included in our cost of product revenues is the cost associated with our team responsible for testing~~$982,000 ~~shipping, supporting and managing third party hardware~~(23%). ~~This~~Our ~~team~~working ~~was comprised~~capital ~~of four individuals~~ as of June 30, ~~2009~~2010 aswas $1,474,000 compared to ~~five individuals~~$3,195,000 as of June 30, ~~2008.~~2009, ~~One position was eliminated during December 2008 in response to the decline in our revenues during the period. The decrease in cost of product revenues is primarily attributable to~~ a decrease of $21,~~425~~721,000 ~~for direct material costs~~(54%). ~~These cost reductions were primarily due to a decrease in sales of computer hardware units and related accessories during the year ended June 30, 2009 as compared to the year ended June 30, 2008.~~

~~Cost~~Net ofcash ~~services~~used ~~revenues~~in ~~consists primarily~~operating ofactivities totaled $211,000 for the ~~expenses~~year ~~associated~~ended ~~with~~June ~~customer~~30, ~~maintenance~~2010, ~~support~~primarily ~~and professional~~consisting ~~services~~of a net loss of $3,097,000 ~~including~~and ~~employee~~decreases ~~compensation~~of $127,000 ~~outside~~in ~~consulting services~~accounts payable and ~~travel~~accrued ~~expenditures.~~expenses, ~~Professional~~offset ~~services~~by ~~costs~~a ~~include~~decrease ~~labor charges~~of ~~for~~$910,000 ~~custom~~in ~~application~~accounts ~~design~~receivable and ~~development,~~non-cash ~~customer~~charges ~~training~~totaling ~~and assisting~~$1,735,000, ~~customers~~consisting ~~implement~~of ~~our~~$1,439,000 ~~voice~~of share-based ~~solutions.~~compensation, ~~Professional~~$271,000 ~~services costs~~of ~~are~~depreciation ~~tracked~~and byamortization ~~project~~ and ~~are~~a ~~deferred~~$25,000 ~~until~~adjustment to the ~~related~~provision ~~project~~for ~~revenue is~~doubtful ~~recognized~~accounts. ~~Costs~~The ofreduction ~~customer~~in ~~support~~accounts payable and ~~professional~~accrued ~~services~~expenses ~~staff performed~~is inprimarily ~~support~~a function of ~~our~~payments ~~sales~~of ~~and~~commissions ~~research~~ and ~~development~~bonuses ~~activities~~accrued ~~are recorded~~ as ~~operating~~of ~~expenses~~June 30, ~~while~~2009. ~~the~~Changes ~~cost~~in ofaccounts ~~customer~~receivable ~~support~~are ~~or professional~~the ~~service~~function ~~activities~~of ~~performed~~the bytiming ~~our~~of ~~research~~invoicing and ~~development~~collections ~~staff are~~throughout ~~recorded~~the asperiod. ~~cost~~Share-based ofcompensation ~~services~~charges ~~revenues.~~relate ~~Our~~to ~~customer~~grants ~~support~~of ~~and~~restricted ~~professional services~~stock ~~staff~~units ~~was~~and ~~comprised~~stock ofoptions. 15For ~~individuals~~the asyear ofended June 30, 2009, asnet ~~compared to~~cash 23used ~~individuals~~in asoperating ofactivities ~~June~~totaled 30$1,313,000, ~~2008.~~primarily ~~Four~~consisting ~~positions~~of ~~were~~a ~~eliminated~~net ~~during December~~loss ~~2008~~of $4,826,000 and decreases of $764,000 in ~~response~~accounts topayable ~~the~~and ~~decline~~accrued expenses and $698,000 in ~~our~~deferred revenues. ~~during~~Cash ~~the~~used ~~period.~~in ~~Cost of~~operating ~~services~~activities ~~revenues~~was ~~decreased~~offset ~~$744,000~~by ~~(20%)~~a ~~from~~decrease of $32,~~718~~722,000 in ~~the~~accounts ~~year~~receivable ~~ended June~~and 30non-cash charges totaling $1,979,000, ~~2008~~consisting toof $21,~~974~~617,000 inof ~~the~~share-based ~~year~~compensation, ~~ended~~$300,000 ~~June~~of 30depreciation and amortization, ~~2009.~~and ~~Expenses~~a ~~related~~$62,000 adjustment to ~~professional~~ ~~services~~the ~~accounted~~provision for ~~the~~doubtful ~~majority~~accounts. ofThe ~~the~~reduction ~~decrease~~in asaccounts itpayable ~~decreased $677,000~~and ~~(26%)~~accrued ~~from~~expenses ~~$2,601,000~~is inprimarily ~~the~~a ~~year~~function ~~ended~~of payments of inventory and bonuses accrued as of June 30, 2008. The decrease in deferred revenues is due primarily to $1the timing of maintenance billings throughout the year,~~924,000~~ and the completion of customer implementation projects. Changes in accounts receivable are the ~~year~~function ~~ended~~of ~~June~~the ~~30,~~timing ~~2009~~of invoicing and collections throughout the period.

~~Operating~~Net ~~Expenses~~cash used in investing activities totaled $215,000 during the year ended June 30, 2010 and $91,000 during the year ended June 30, 2009 due primarily to purchases of property and equipment and capitalized software development costs.

~~Total~~- ~~operating~~24 expenses decreased by $236,000 (2%) to $13,027,000 in the year ended June 30, 2009 from $13,263,000 in the year ended June 30, 2008. The number of employees associated with operating expenses (research and development, sales and marketing, general and administrative) totaled 45 individuals as of June 30, 2009 and 56 as of June 30, 2008.-

~~Research~~Net ~~and~~cash ~~development~~used ~~expenses primarily~~in ~~consist~~financing ofactivities ~~employee~~totaled ~~compensation~~$556,000 ~~consulting~~during ~~fees~~the ~~and~~year ~~other~~ended ~~costs associated~~June ~~with our voice recognition technology~~30, ~~hardware~~2010 ~~platform~~compared ~~and VoiceLogistics~~to ~~software~~net ~~suite.~~cash Inprovided ~~addition, costs incurred~~ by ~~our~~financing ~~customer support~~activities ~~and~~of ~~professional~~$2,243,000 ~~services~~during ~~teams relating to~~ the ~~development~~year ofended ~~our VoiceLogistics~~June ~~software~~30, ~~suite~~2009. ~~are~~During ~~charged~~the toyear ~~research~~ended ~~and~~June ~~development~~30, ~~while~~2010, ~~the cost~~we ofrepaid ~~customer~~$525,000 ~~support~~against orterm ~~professional~~loans ~~service~~with ~~activities~~SVB, ~~performed~~paid by$50,000 ~~our research~~related ~~and~~to ~~development~~employee ~~staff~~taxes ~~are~~for ~~recorded~~certain ascashless ~~cost~~exercises of ~~services~~restricted ~~revenues.~~stock ~~Our research~~units and ~~development~~received ~~team~~proceeds ~~was comprised~~ of ~~18 individuals as of June 30~~$19, ~~2009~~000 ~~and~~from 23the ~~individuals~~exercise as of ~~June~~stock ~~30, 2008~~options. ~~Four~~During ~~positions~~the ~~were~~year ~~eliminated during~~ended ~~December~~June ~~2008~~30, ~~net of new hires~~2009, inwe ~~response~~received toproceeds ~~our~~from ~~decline~~the inissuance ~~revenues during~~of ~~the~~common ~~period.~~stock ~~Our~~of ~~research~~$2,500,000 and ~~development~~we ~~expenses~~borrowed ~~decreased~~ $~~144~~451,000 ~~(4%)~~ to ~~$3,686,000~~fund in the ~~year~~purchase ~~ended~~of ~~June~~fixed ~~30,~~assets ~~2009,~~and ~~from~~repaid $3704,~~830,~~000 inagainst ~~the~~term ~~year~~loans ~~ended June~~with ~~30, 2008~~SVB. ~~This~~We ~~decrease~~received ~~was~~net ~~mainly~~proceeds ~~comprised of a decrease of $275,000~~ in ~~outside~~ ~~consulting~~the ~~costs.~~amount ~~Offsetting this decrease, were labor costs, including an increase~~ of $~~262~~5,000 ~~of costs allocated~~ from ~~professional~~the ~~services~~exercise ~~and customer~~of ~~support,~~stock ~~which~~options ~~increased $114,000~~ during the year ended June 30, 2009 ~~as compared to the year ended June 30, 2008~~.

-We 24initially -entered into a credit facility with SVB on December 30, 2003. The following facilities were outstanding during fiscal years 2009 and 2010:

~~Sales~~On ~~and~~May ~~marketing~~24, ~~expenses~~2006, ~~primarily consist~~we ofentered ~~employee~~into ~~compensation~~a ~~(including~~Loan ~~direct~~and ~~sales~~Security ~~commissions)~~Agreement with SVB, ~~third-party~~ ~~partnership~~(“2006 ~~fees~~Facility”), ~~travel~~providing ~~expenses~~an ~~and~~additional ~~trade~~$3,000,000 ~~show~~credit ~~and~~facility ~~other~~comprised ~~lead generation~~of ~~expenses.~~a ~~Our~~$1,500,000 ~~sales~~revolving ~~and~~line ~~marketing~~of ~~staff~~credit ~~was~~(“ ~~comprised~~Revolver”) ofand ~~17 individuals~~a as$1,500,000 ofNon-Formula ~~June~~Term 30Loan, ~~2009~~or ~~compared~~2006 toTerm 22Loan ~~individuals~~to asfund ofour ~~June~~anticipated ~~30,~~working ~~2008~~capital needs. ~~Three~~ ~~positions~~The ~~were~~Revolver ~~eliminated~~created ~~during~~by ~~December~~the ~~2008~~2006 Facility was initially available until October 31, in2007. ~~response~~It was extended to ~~our~~February ~~decline in~~11, ~~revenues~~2009 ~~during~~by the ~~period~~Second Loan Modification Agreement (“SLMA”). ~~Sales~~The ~~and~~Revolver ~~marketing~~provides ~~expenses~~for ~~decreased~~a line of credit up to $~~698~~1,500,000 ~~(12%)~~, towith a $51,~~321~~000,000 insub-limit ~~the~~to ~~year~~be ~~ended~~established for cash management and foreign exchange requirements. As of June 30, ~~2009~~2010, ~~from~~amounts ~~$6,019,000~~outstanding inunder the ~~year ended~~Revolver ~~June~~bear ~~30,~~interest ~~2008.~~at ~~The~~prime ~~change~~plus in2.25%. ~~sales~~In ~~and~~addition, ~~marketing~~a ~~expenses~~fee of 0.25% is ~~due~~charged ~~primarily to~~against ~~decreases~~the unused portion of ~~$354,000~~the inRevolver. ~~commissions~~No funds were borrowed against the Revolver at June 30, ~~$103~~2010 or June 30,~~000~~ in2009. ~~labor~~The ~~costs~~2006 ~~due~~Term toLoan ~~the lower~~is ~~sales~~to ~~staff~~be ~~and~~repaid ~~allocations~~in ~~from~~36 ~~other~~equal ~~departments,~~monthly ~~$73,000~~payments of ~~training costs~~principal and ~~$103~~interest,~~000~~ ofcommencing ~~recruitment~~on ~~costs~~April ~~during~~1, ~~the~~2007, ~~year~~and ~~ended~~has an outstanding balance of $0 at June 30, ~~2009~~2010 ~~as compared~~and to$375,000 ~~the~~at ~~year ended~~ June 30, ~~2008~~2009. InMonthly ~~light~~principal ofpayments ~~reduced~~had ~~revenues~~totaled ~~caused~~approximately ~~by global economic conditions~~$42,000 weprior ~~undertook~~to ~~steps~~being tofully ~~reduce~~repaid ~~sales~~in ~~and~~March ~~marketing expenses~~2010.

~~General~~On ~~and~~February ~~administrative~~13, ~~expenses consist~~2008, ~~primarily~~with ofan ~~employee~~effective ~~compensation~~date ~~and~~of ~~fees~~December ~~for insurance~~27, ~~rent~~2007, ~~office expenses,~~we ~~professional~~entered ~~services,~~into ~~public~~the ~~company~~SLMA ~~related~~with ~~charges~~SVB, ~~and~~providing ~~income~~for ~~and expenses~~a ~~related~~new to$600,000 ~~fluctuations~~revolving inequipment ~~foreign~~line ~~currency~~of ~~exchange~~credit ~~rates~~(“Equipment Revolver”). The ~~general and~~availability ~~administrative~~under ~~staff~~the ~~was~~Equipment ~~comprised~~Revolver ofwas 10limited ~~full~~to ~~time~~a ~~employees~~borrowing asbase ofadvance ~~June~~rate ~~30, 2009~~that ~~and~~is 11equal atto ~~June~~100% ~~30,~~against ~~2008.~~the ~~General~~invoice ~~and~~value ~~administrative~~of ~~expenses~~new ~~increased $606,000~~Eligible Equipment (~~18%)~~as todefined ~~$4,020,000~~ in the ~~year~~SLMA). ~~ended~~The ~~June~~draw ~~30,~~down ~~2009~~period ~~from~~for ~~$3,414,000 in~~ the ~~year~~Equipment ~~ended~~Revolver ~~June~~expired 30May 31, 2008., ~~Fluctuations~~but inwas ~~foreign~~extended ~~currency~~by ~~exchange~~SVB ~~rates generated~~to ~~losses~~July ~~of $320~~31,~~000~~ ~~during~~2008. ~~the~~Originally, ~~year~~amounts ~~ended~~advanced ~~June~~under ~~30,~~the ~~2009~~Equipment ~~compared~~Revolver ~~to gains~~bore ofinterest ~~$88,000~~at ~~during~~a ~~the~~rate ~~year~~equal ~~ended~~to ~~June~~the ~~30,~~greater ~~2008,~~of (a) ~~change~~6.75% ofand ~~$408,000. Labor~~(b) ~~costs~~the ~~increased~~amount ~~$437,000~~equal ~~during~~to the ~~year~~prime ~~ended~~rate ~~June~~plus ~~30,~~1.0%. ~~2009~~This asrate ~~compared~~ was revised to the ~~year~~greater ~~ended~~of ~~June~~7% ~~30,~~or ~~2008~~prime ~~due~~plus ~~primarily~~3% toby anthe ~~increase~~Waiver ofand ~~$526,000~~Third ~~for non-cash~~Loan ~~share~~Modification ~~based~~Agreement ~~compensation~~with ~~charges~~SVB ~~associated~~executed ~~with~~on ~~stock~~November ~~options~~17, ~~and restricted~~2008. ~~stock~~The ~~units~~repayment ~~granted~~of inthe ~~fiscal~~funds ~~year~~drawn ~~2008.~~against ~~These~~the ~~cost~~Equipment ~~increases~~Revolver ~~were offset~~will bybe amade ~~decrease~~ in ~~outside~~36 ~~professional~~equal ~~services~~monthly ~~costs,~~payments ~~which~~of ~~were~~principal ~~$142,000 lower~~and ~~during~~interest ~~the~~beginning ~~year~~August ~~ended June 30~~1, ~~2009~~2008. ~~than~~Amounts ~~during~~outstanding under the ~~year~~Equipment ~~ended~~Revolver bear interest at June 30, ~~2008,~~ ~~lower~~2010 ~~travel~~at ~~expenses~~a rate of ~~$26,000~~7%. ~~and~~The ~~lower~~outstanding ~~bad~~balance ~~debt~~on ~~expense~~the ofEquipment Revolver was $73200,000~~, due~~ toat ~~the~~June ~~sufficiency~~30, of2010 ~~the~~and ~~accounts~~$313,000 ~~receivable reserve~~ at June 30, 2009.

~~Interest~~On ~~Income~~February 17, 2009, we entered into a Waiver and ~~Expense~~ Fourth Loan Modification Agreement that, among other things, waived a loan covenant violation that existed at December 31, 2008, and extended the maturity of the Revolver until June 30, 2009. In addition, the Waiver and Fourth Loan Modification Agreement revised certain outstanding financial covenants under the Loan Agreement, including minimum net loss thresholds. On May 12, 2009, with an effective date of June 30, 2009, the Company entered into a Fifth Loan Modification Agreement which extended the maturity of the Revolver until May 31, 2009, and set financial covenants for the period ended May 31, 2009.

~~Interest~~On ~~income~~June ~~earned~~26, ~~is reported net of interest expense. Net interest expense was $28~~2009,~~000~~ ~~for~~with ~~the~~an ~~year~~effective ~~ended~~date of June 301, 2009, ~~compared~~we toentered ~~net~~into ~~interest~~a ~~income~~Sixth ofLoan ~~$24,000~~Modification ~~for~~Agreement ~~the~~which ~~year~~extended ~~ended~~the ~~June~~Revolver ~~30, 2008,~~until aJuly ~~change of $52~~31,~~000~~ 2009. ~~Interest~~On ~~income~~September ~~decreased $101~~9,~~000~~ ~~from $144~~2009,~~000 during~~ the ~~year~~Company ~~ended~~entered ~~June~~in ~~30,~~to ~~2008~~a toSeventh ~~$43,000~~Loan ~~during~~Modification ~~the~~Agreement ~~year~~which ~~ended~~extended ~~June~~the 30maturity, ~~2009~~ ~~due~~lowered ~~primarily~~the ~~to declining~~ interest ~~rates~~rate ~~and~~to ~~lower~~prime ~~balances~~plus ~~of invested funds~~2.25% ~~Interest~~and ~~expense~~provided ~~decreased~~covenants ~~$49,000~~of ~~from $120,000 during~~ the ~~year~~Revolver ~~ended June~~until ~~30,~~July ~~2008 to $71,000 during the year ended June~~ 30, ~~2009 due primarily to declining debt levels~~2010.

~~Income~~On ~~Taxes~~August 23, 2010, the Company entered in to an Eighth Loan Modification Agreement that, among other things, extended the maturity of the Revolver until July 30, 2011 and revised certain financial covenants under the Loan Agreement.

~~There~~We ~~are~~continue ~~significant~~to ~~differences~~expand ~~in calculating~~our ~~income~~partnership orchannel, ~~loss~~with ~~for~~particular ~~accounting~~emphasis on the development of relationships with mobile computer equipment manufacturers and ~~tax~~vendors, ~~purposes~~VARs, ~~primarily~~logistics ~~relating to~~consultants ~~charges~~and ~~that~~WMS ~~are~~vendors. ~~recorded~~Using inVoxware ~~the~~3 ~~current~~and ~~period~~VoxBrowser, ~~for~~independent ~~accounting~~third-party ~~purposes,~~partners ~~but~~ are ~~deferred~~able ~~for~~to ~~tax~~develop ~~purposes~~and deliver voice-enabled logistics solutions on other manufacturers’ hardware. ~~Furthermore~~As a result of the partner relationships and product offerings, ~~tax~~a ~~laws~~greater ~~differ~~percentage of revenue may be derived in ~~each jurisdiction~~the future from software than has occurred historically, ~~yielding~~with ~~differing~~a ~~amounts~~lower percentage of ~~taxable~~total ~~income~~revenue orderived ~~loss~~from inhardware ~~each jurisdiction~~and professional services. ~~While~~The wegross ~~have~~margin ~~substantial~~generated ~~net~~by ~~operating~~software ~~losses~~revenue tois ~~offset~~higher ~~taxable income~~than inthat ~~some~~earned ~~taxing~~on ~~jurisdictions~~hardware and professional services revenue. For the year ended June 30, ~~certain~~2010, ~~restrictions~~we ~~preclude~~earned usgross margin from ~~fully utilizing~~software ~~the~~licenses ~~benefit~~of 99%, compared to 36% for sales of ~~these~~hardware ~~net~~units ~~operating~~and ~~losses~~related accessories. InPartnership ~~addition,~~channel ~~the~~sales ~~expansion~~ accounted for 10% of our ~~business~~revenues ~~requires~~during usthe toyear ~~file~~ended ~~taxes~~June in30, ~~jurisdictions~~2010 ~~where~~compared weto ~~did~~9% ~~not previously~~during ~~operate~~the year ended June 30, ~~and~~2009. ~~thus~~Software dolicenses ~~not~~contributed ~~have~~12% ~~established~~of ~~net~~revenues ~~operating~~for ~~losses~~the year ended June 30, 2010 compared to ~~offset~~ 17% of revenue for the ~~tax~~year ~~liability~~ended June 30, 2009.

~~The~~- ~~provision~~25 for income taxes was $3,000 for the year ended June 30, 2009 as compared to $7,000 for the year ended June 30, 2008. We had a loss before taxes of $4,823,000 for accounting purposes during the year ended June 30, 2009, compared to a profit before taxes of $592,000 during the year ended June 30, 2008.-

~~Liquidity~~We expect that recent coordinated efforts by federal authorities throughout the world will gradually lead to a general loosening of international credit markets, thus enabling customers and ~~Capital Resources~~prospective customers to increase levels of capital expenditures. In addition, given the volume and quality of prospective transactions in our sales pipeline, we anticipate a resumption of the trend towards a more profitable mix of revenue prior to the end of fiscal year 2011. However, we can provide no assurance with respect to the timing of this expected long-term trend or whether the trend will be true in any specific period.

AsOn of June 3029, 2009, we ~~had~~received an equity infusion of $42.5 million from our two principal investors. On June 29,~~342~~ 2009,~~000~~ ~~in cash~~we ~~and~~entered ~~cash~~into ~~equivalents,~~a ~~compared~~Securities toPurchase $3Agreement with Co-Investment Fund II,~~503,000~~ inL.P. ~~cash~~(a ~~and~~Cross ~~cash~~Atlantic ~~equivalents as~~Technology ofFund ~~June~~entity) 30and Edison Venture Fund V, ~~2008~~L.P., pursuant to which we issued and sold an ~~increase~~aggregate of ~~$839~~1,~~000.~~428,571 ~~Our~~shares ~~working~~of ~~capital~~our asCommon ofStock, ~~June~~at ~~30, 2009~~a ~~was~~purchase price of $31.75 per share,~~195,000~~ ~~compared~~and Warrants to $3purchase up to 142,~~799,000~~857 asshares of ~~June~~Common 30Stock, ~~2008~~which became exercisable six months after the date of issuance and shall expire three years from the date of issuance, aat ~~decrease~~an exercise price of $~~604,000~~2.50 per share.

-Under 25the terms of the Securities Purchase Agreement, Edison Venture Fund V, L.P. purchased 285,714 shares of Common Stock and Warrants to purchase 28,571 shares of Common stock and Co-Investment Fund II, L.P. purchased 1,142,857 shares of Common Stock and Warrants to purchase 114,286 shares of Common Stock. The private placement closed on June 30, 2009. We received gross proceeds equal to $2,500,000. The securities sold in this private placement have not been registered under the Securities Act, and may not be offered or sold in the United States in the absence of an effective registration statement or exemption from the registration requirements under the Securities Act.

~~Net~~On ~~cash~~September ~~used~~17, ~~in operating activities totaled $1~~2010,~~313,000~~ ~~for~~ the ~~year~~Company ~~ended~~entered ~~June~~into ~~30, 2009, primarily consisting of~~ a ~~net~~ ~~loss~~Securities ofPurchase ~~$4,826,000~~Agreement ~~and~~(the ~~decreases~~“Purchase ofAgreement”) ~~$764,000~~with inthe ~~accounts~~Co-Investment ~~payable~~Fund ~~and accrued expenses and $698~~II,~~000~~ ~~in deferred revenues~~L.P., ~~offset~~an byexisting astockholder ~~decrease~~ of ~~$2,722,000 in~~the ~~accounts~~Company ~~receivable~~ and ~~non-cash~~affiliate ~~charges totaling $1,979,000, consisting~~ of ~~$1,617,000~~ ofCross ~~share-based~~Atlantic ~~compensation,~~Technology ~~$300,000~~Fund ~~of depreciation and amortization and a $62~~II,~~000~~ ~~of bad debt expense~~L.P., ~~The~~pursuant ~~reduction~~to inwhich ~~accounts payable~~the ~~and~~Co-Investment ~~accrued~~Fund ~~expenses is primarily a function of payments of commissions and bonuses accrued as of June 30~~II, ~~2008~~L.P. ~~The~~shall, ~~decrease~~subject into ~~deferred~~certain ~~revenues~~conditions, ~~is due~~purchase ~~primarily~~up to ~~the~~1,956,522 ~~timing~~shares of ~~maintenance~~a ~~billings~~newly ~~throughout~~designated ~~the~~Series ~~year~~A ~~and~~Non-Participating ~~the completion~~Convertible ofPreferred ~~customer~~Stock ~~implementation~~of ~~projects.~~the ~~Changes~~Company inat ~~accounts~~a ~~receivable are~~purchase ~~the~~price ~~function~~ of ~~the~~$1.15 ~~timing~~per ofshare, ~~invoicing~~ and ~~collections throughout the~~ three-year~~. There~~ ~~was~~warrants ato ~~decrease~~purchase inshares ~~the~~of ~~accounts receivable during~~ the ~~year~~Company’s ~~which~~common ~~was primarily~~stock ~~due to~~ (the ~~reduction~~“Series inA ~~revenues~~Financing”). ~~Share-based~~The ~~compensation~~minimum ~~charges relate~~investment tounder ~~grants~~the ofPurchase ~~restricted~~Agreement ~~stock~~is ~~units~~$1,250,000 and ~~stock options. For~~ the ~~year~~maximum ~~ended June~~investment ~~30,~~is ~~2008, net cash used in operating activities totaled~~ $~~234~~2,~~000~~250,000. ~~primarily~~Proceeds ~~consisting~~from ofthe ~~decreases~~Series ofA ~~$720,000~~Financing ~~in accounts~~will ~~payable~~be ~~and~~used ~~accrued~~by ~~expenses~~the ~~and~~Company ~~$579,000~~to infund ~~deferred~~a ~~revenues,~~going-private ~~and~~transaction ~~an increase~~which ofwill ~~$1,032,000~~include ina ~~accounts~~self-tender ~~receivable,~~offer ~~$173,000~~for insome ~~prepaid~~of ~~expenses~~the ~~and other~~company's ~~assets,~~common ~~and~~stock at $~~263,000~~1.00 inper ~~other assets~~share, ~~offset~~followed by a ~~net~~reverse ~~profit~~split ~~of $585,000~~ and ~~decreases~~cash out of ~~$513,000~~any infractional ~~inventory~~shares. ~~Cash~~The ~~used~~Purchase inAgreement ~~operating~~contemplates ~~activities~~two ~~was offset~~closings, bythe ~~non-cash~~first ~~charges~~closing ~~totaling~~shall ~~$1,330,000,~~be ~~consisting~~contemporaneous ofwith ~~$898,000~~the closing of ~~share-based~~ ~~compensation,~~the ~~$279,000~~self-tender ofoffer ~~depreciation~~ and ~~amortization,~~the ~~recognition of~~second ~~foreign~~closing ~~currency~~shall ~~translation~~be ~~adjustment~~contemporaneous ~~upon~~with ~~liquidation~~the closing of ~~Voxware,~~the ~~n.v.~~subsequent ~~of $17,000,~~reverse ~~and $136~~split,~~000~~ ofif ~~bad debt expense~~any. The ~~reduction~~Company incontinues ~~accounts~~to ~~payable~~prepare ~~and accrued~~for ~~expenses~~these istransactions ~~primarily~~and aintends ~~function~~to ofannounce ~~payments~~an ofoffering ~~inventory~~for ~~and~~the ~~bonuses accrued~~purchase as of ~~June~~shares ~~30,~~of ~~2007.~~its ~~The~~common ~~decrease~~stock in ~~deferred~~a ~~revenues~~self-tender isoffer ~~due~~for ~~primarily to~~$1.00 ~~the~~per ~~timing~~share ofon ~~maintenance~~or ~~billings~~about ~~throughout~~October ~~the year~~4, ~~and the completion of customer implementation projects~~2010. ~~Changes~~In inconnection ~~accounts~~with ~~receivable are~~ the ~~function~~ oftender ~~the~~offer, ~~timing of invoicing and collections throughout~~ the ~~year.~~Company ~~The decrease~~intends into ~~inventory~~deregister isits ~~primarily~~common ~~due~~stock toand take the ~~delivery~~Company toprivate. ~~our~~There ~~customer~~can inbe ~~July 2007~~no ofassurances ~~a significant inventory order~~ that we ~~received~~will inbe ~~June~~able ~~2007~~to consummate these transactions.

~~Net~~We ~~cash~~may ~~used~~need into ~~investing~~raise ~~activities totaled~~additional ~~$91,000~~capital ~~during~~through ~~the~~either ~~year~~new ~~ended~~equity ~~June~~or ~~30,~~debt ~~2009~~financing arrangements and ~~$583,000~~may ~~during~~elect to utilize such an arrangement to fund further expansion of our operations. Due to the ~~year ended~~recent ~~June~~downturn 30in the economy, ~~2008~~there ~~due~~can ~~primarily~~be no assurances that financing will be available on terms acceptable to ~~purchases~~us, if at all. However, due to a general trend providing greater emphasis on sales of ~~property~~higher margin product and ~~equipment~~ given our efforts to reduce costs, as well as having $3.4 million in cash and $1.5 million in debt availability we believe that we have adequate capital resources available to fund our operations through June 30, 2011.

~~Net~~The ~~cash~~recent ~~provided~~deterioration byof ~~financing~~general ~~activities totaled~~worldwide $2economic conditions has negatively impacted certain vertical markets,~~243~~ including retail and food distribution,~~000~~ that are significant to our operations. However, our revenue during the ~~year~~first ~~ended~~quarter ~~June~~of ~~30,~~fiscal ~~2009,~~2011 ~~compared~~is expected to ~~net~~be ~~cash used~~slightly inhigher ~~financing~~than ~~activities~~the first quarter of ~~$641~~fiscal 2010,~~000~~ ~~during~~which ~~the~~was ~~year~~lower ~~ended~~than ~~June~~quarterly ~~30,~~revenues ~~2008~~reported for fiscal 2009. ~~During~~ ~~the~~In ~~year~~response ~~ended~~to ~~June~~the ~~30,~~changing ~~2009~~economic environment, we ~~had~~eliminated ~~proceeds~~a ~~from~~net ~~equity~~of ~~financing~~18 positions during first half of $2 fiscal 2009,~~500,000,~~ weafter ~~borrowed~~considering ~~$451~~new hires,~~000~~ toand ~~fund~~scaled ~~the~~back ~~purchase~~certain ofplanned ~~fixed~~costs, ~~assets~~new hires and ~~repaid $704~~capital purchases. However,~~000~~ ~~against~~our ~~term~~customer ~~loans~~base continues to expand, with ~~Silicon~~existing ~~Valley~~customers ~~Bank,~~expected ~~“SVB”.~~to Weimplement ~~received~~our ~~net proceeds~~products in ~~the~~additional ~~amount~~sites ofas ~~$5,000~~they ~~from~~experience ~~the~~favorable ~~exercise~~results ofwith ~~stock~~our ~~options~~offerings ~~during~~and ~~the year~~new ~~ended~~customers ~~June~~brought 30to us through direct sales efforts, ~~2009~~VARs and other channel partners. ~~During~~We expect the ~~year~~majority ~~ended~~of ~~June~~revenues ~~30,~~will ~~2008~~come from existing customers in fiscal year 2011, webut ~~repaid $687~~that revenues from new customers,~~000~~ ~~against~~including ~~term~~those ~~loans~~brought ~~with~~to ~~SVB~~us ~~and~~through ~~received~~VARs ~~proceeds~~and ofother ~~$46~~channel partners,~~000~~ will grow faster than revenues from existing customers. We can provide no assurances that revenues earned in any given fiscal quarter or year will exceed the ~~exercise~~ ofpreceding ~~stock~~fiscal ~~options~~quarter or year. Furthermore, we anticipate that in some fiscal quarters and years, costs will exceed revenues.

WeAs ~~initially~~of ~~entered~~June ~~into~~30, a2010, ~~credit facility~~15,000,000 ~~with~~shares ~~SVB~~of onour ~~December~~Common 30Stock were authorized, ~~2003~~of which 8,090,433 were issued and outstanding. The following ~~facilities~~table ~~were outstanding~~summarizes ~~during~~the ~~fiscal~~dilutive ~~years~~impact ~~2008~~in the event of the exercise of all options and ~~2009:~~warrants to purchase stock, including options and warrants whose strike price exceeds the market value of our Common Stock.

~~A $1,000,000 equipment line of credit (“Equipment Line”) secured by all of the Company’s personal property was first drawn upon on December 16, 2005. The Company was required to make interest~~-~~only payments,~~ at26 a rate of prime plus 1.75%, on the principal balance through May 9, 2006, at which point the Equipment Line was converted into a term loan with 30 fixed monthly payments of approximately $17,000. Effective May 9, 2006, the interest rate was fixed at 9.5%. The unpaid principal balance outstanding was $0 as of June 30, 2009 and $66,000 as of June 30, 2008.-

OnDilutive ~~May~~Effect ~~24, 2006, the Company entered into a Loan and Security Agreement with SVB (“2006 Facility”) providing an additional $3,000,000 credit facility comprised~~ of aOptions ~~$1,500,000 revolving line of credit (“Revolver”)~~ and aWarrants $1,500,000 Non-Formula Term Loan, (“2006 Term Loan”) to fund the Company's anticipated working capital needs. The Revolver created by the 2006 Facility was initially available until October 31, 2007. It was extended to February 11, 2009 by the SLMA. The Revolver provides for a line of credit up to $1,500,000, with a $1,000,000 sub-limit to be established for cash management for foreign exchange requirements. As of June 30, 2009, amounts outstanding under the Revolver bear interest at the rate of 7% calculated as ~~the greater~~ of 7% ~~or prime plus 3%. In addition, a fee of 0.25% is charged against the unused portion of the Revolver. No funds were borrowed against the Revolver at~~ June 30, ~~2009~~ or June 30, 2008. The 2006 Term Loan is to be repaid in 36 equal monthly payments of principle and interest, commencing on April 1, 2007, and had an outstanding balance of $375,000 at June 30, 2009 and $875,000 at June 30, 2008. Monthly principle payments total approximately $42,000. Amounts outstanding under the 2006 Term Loan bear interest at June 30, 2009 at a rate of 7%, calculated as the greater of 7% or prime plus 3%, as established by the Waiver and Third Loan Modification Agreement (“TLMA”) with SVB executed on November 17, 2008.2010

On February 13, 2008, with an effective date of December 27, 2007, the Company entered into a second loan modification agreement (“SLMA”) with SVB, providing for a new $600,000 revolving equipment line of credit (“Equipment Revolver”). The availability under the Equipment Revolver was limited to a borrowing base advance rate that is equal to 100% against the invoice value of new Eligible Equipment (as defined in the SLMA). The draw down period for the Equipment Revolver expired May 31, 2008, but was extended by SVB to July 31, 2008. Originally, amounts advanced under the Equipment Revolver bore interest at a rate equal to the greater of (a) 6.75% and (b) the amount equal to the prime rate plus 1.0%. This rate was revised to the greater of 7% or prime plus 3% by the TLMA. The repayment of the funds drawn against the Equipment Revolver will be made in 36 equal monthly payments of principal and interest beginning August 1, 2008. The outstanding balance on the Equipment Revolver was $313,000 at June 30, 2009 and $0 at June 30, 2008.

Common stock issued and outstanding as of June 30, 2010		8,090,433

Dilutive instruments:
Outstanding warrants to purchase common stock *		1,298,331
Outstanding options to purchase common stock *		941,906
Unissued restricted stock units		64,441

Common stock plus dilutive instruments outstanding		10,395,111

Options to purchase common stock available to issue
pursuant to various stock option plans		397,618

Common stock outstanding if all dilutive instruments
are converted and exercised		10,792,729
____________________

On* ~~February~~Includes ~~17,~~all ~~2009,~~ "in-the-money" ~~Company entered into a Waiver~~ and ~~Fourth Loan Modification Agreement that, among other things, waived a loan covenant violation that existed at December 31, 2008 and extended the maturity~~ "out-of -the-money" ~~Revolver~~warrants ~~until March 31, 2009. In addition, the Waiver~~ and ~~Fourth~~ ~~Loan Modification Agreement revised certain outstanding financial covenants under the 2006 Facility, including minimum net loss thresholds~~options. On May 12, 2009, with an effective date of March 31, 2009, the Company entered into a Fifth Loan Modification Agreement which extended the maturity of the Revolver until May 31, 2009, and set financial covenants for the period ending May 31, 2009. On June 26, 2009, with an effective date of June 1, 2009, the Company entered into a Sixth Loan Modification Agreement which extended the Revolver until July 31, 2009. On September 9, 2009 the Company entered in to a Seventh Loan Modification Agreement which extends the maturity, lowers the interest rate to prime plus 2.25% and provides covenants of the Revolver until July 30, 2010. (See Footnote 13 – Subsequent Events)

-Effect ~~26 -~~of Recent Accounting Pronouncements

WeIn ~~continue~~June ~~to expand our partnership channel~~2008, ~~with particular emphasis on~~ the ~~development~~FASB ofissued ~~relationships~~guidance ~~with mobile~~now ~~computer~~codified ~~equipment~~in ~~manufacturers~~ASC ~~and~~815 ~~vendors,~~which ~~VARs,~~clarifies logistics consultants and WMS vendors. Using Voxware 3 and VoxBrowser, independent third-party partners are able to develop and deliver voice-enabled logistics solutions on other manufacturers’ hardware. As a result of the ~~partner~~determination ~~relationships and product offerings, a greater percentage~~ of ~~revenue~~whether ~~may~~an beinstrument ~~derived~~(or inan ~~the~~embedded ~~future from~~feature) ~~software than has occurred historically, with a lower percentage of total revenue derived from hardware and professional services. The gross margin generated by software revenue~~ is ~~higher~~indexed ~~than~~to ~~that~~an ~~earned~~entity’s onown ~~hardware and professional services revenue. For the year ended June 30~~stock, ~~2009,~~which wewould ~~earned~~qualify ~~gross margin from software licenses of 98%,~~ as ~~compared~~a toscope ~~39%~~exception ~~for~~under ~~sales~~ASC ~~of hardware units and related accessories~~815. ~~Partnership~~We ~~channel~~adopted ~~sales accounted for 9% of our revenues during~~ the ~~year~~guidance ~~ended~~effective ~~June~~July 301, 2009, as compared to 13% during the year ended June 30, 2008. Software licenses contributed 17% of revenues for the year ended June 30, 2009, compared to 28% of revenue for the year ended June 30, 2008. Decreases in the percentage of revenues generated through partnership channels and ~~the~~it ~~percentage~~did ofnot ~~revenues~~have ~~derived from software licenses during the year ended June 30, 2009 represent~~ a ~~departure~~material ~~from~~impact ~~trends~~on noted in recent periods. These decreases are primarily attributable to decisions by customers and prospective customers to delay major capital expenditures in light of tight credit markets associated with general worldwide economic conditions. We expect that recent coordinated efforts by federal authorities throughout the world will gradually lead to a general loosening of international credit markets, thus enabling customers and prospective customers to increase levels of capital expenditures. In addition, given the volume and quality of prospective transactions in our ~~sales~~consolidated ~~pipeline,~~financial ~~we anticipate a resumption of the trend towards a more profitable mix of revenue prior to the end of fiscal year 2010~~statements. ~~However,~~ ~~we can provide no assurance with respect to the timing of this expected long-term trend or whether the trend will be true in any specific period.~~

~~The~~In ~~continued~~October ~~deterioration~~2009, ofthe ~~general worldwide~~FASB ~~economic~~issued ~~conditions~~Accounting ~~has~~Standards ~~negatively~~Update ~~impacted~~(“ASU”) ~~certain~~No. ~~vertical markets~~2009-13, ~~including~~ ~~retail~~Revenue ~~and~~Recognition ~~food~~(Topic ~~distribution,~~605): ~~that~~Multiple-Deliverable ~~are~~Revenue ~~significant~~Arrangements to– ~~our operations. As~~ a ~~result~~consensus of ~~these general economic conditions, combined with~~ the ~~seasonal impact~~FASB ofEmerging ~~the~~Issue ~~typically~~Task ~~slower~~Force ~~summer~~(“ASU ~~months,~~No. ~~our~~2009-13”). ~~revenue~~ASU ~~during~~No. ~~the~~2009-13 ~~first quarter~~replaces ofand ~~fiscal~~significantly ~~2010~~changes iscertain ~~expected~~guidance ~~to be~~ in ~~line~~ASC ~~with~~605. ~~the~~ASU ~~first~~No. ~~quarter of fiscal~~ 2009,-13 ~~which~~modifies ~~was lower than quarterly revenues reported for fiscal 2008. In response to~~ the ~~changing~~separation ~~economic~~criteria ~~environment, we eliminated a net~~ of ~~18 positions~~ASC ~~during the year ended June 30~~605, ~~2009,~~by ~~after~~eliminating ~~considering~~the ~~new~~criterion ~~hires,~~for ~~and scaled~~objective ~~back certain planned costs, new hires~~ and ~~capital~~reliable ~~purchases.~~evidence ~~However,~~of ~~our customer~~fair ~~base~~value ~~continues~~for tothe ~~expand,~~undelivered ~~with existing customers expected to implement our~~ products inor ~~additional~~services. ~~sites~~Instead, asrevenue ~~they~~arrangements ~~experience favorable results~~ with ~~our offerings~~multiple ~~and~~deliverables ~~new~~should ~~customers~~be ~~brought~~divided tointo usseparate ~~through~~units ~~direct~~of ~~sales~~accounting ~~efforts,~~if ~~VARs~~the ~~and other~~deliverables ~~channel~~meet ~~partners.~~both ~~We expect the majority~~ of revenues will come from existing customers in fiscal year 2010, but that revenues from new customers, including those brought to us through VARs and other channel partners, will grow faster than revenues from existing customers. We can provide no assurances that revenues earned in any given fiscal quarter or year will exceed the ~~preceding fiscal~~following ~~quarter~~criteria: ~~or year. Furthermore, we anticipate that in some fiscal quarters and years, costs will exceed revenues.~~

OnThe ~~June~~delivered ~~29,~~items ~~2009,~~have ~~the~~value Company received an equity infusion of $2.5 million from it’s two principal investors. On June 29, 2009, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with Co-Investment Fund II, L.P. (a Cross Atlantic Technology Fund entity) and Edison Venture Fund V, L.P., pursuant to ~~which~~ the ~~Company~~ ~~issued~~customer ~~and~~on ~~sold an aggregate of 1,428,571 shares (the “Shares”) of the Company’s common stock, $0.001 par value per share (the “Common Stock”), at~~ a ~~purchase~~ ~~price~~standalone ofbasis; ~~$1.75 per share,~~ and warrants to purchase up to 142,857 shares (the “Warrant Shares”) of Common Stock, which will not be exercisable until the six (6) months after the date of issuance and shall expire three (3) years from the date of issuance, at an exercise price of $2.50 per share (the “Warrant”).
~~Under~~If the ~~terms~~arrangement ofincludes ~~the~~a ~~Securities~~general ~~Purchase Agreement,~~right ~~Edison Venture Fund V, L.P. purchased 285,714 shares~~ of ~~Common~~return ~~Stock and~~relative ~~warrants~~ to ~~purchase~~the ~~28,571~~delivered ~~shares of Common stock and Co-Investment Fund II~~items, ~~L.P.~~delivery ~~purchased~~or ~~1,142,857~~performance ~~shares~~ of Common Stock and warrants to purchase 114,286 shares of Common Stock. The private placement closed on June 30, 2009. The Company received gross proceeds equal to $2,500,000. The securities sold in this private placement have not been registered under the ~~Securities~~undelivered ~~Act~~items ~~of 1933,~~is asconsidered ~~amended~~probable ~~(the “Securities Act”),~~ and ~~may~~substantially ~~not be offered or sold~~ in the ~~United~~ ~~States~~control ~~in the absence~~ of ~~an effective registration statement or exemption from~~ the ~~registration requirements under the Securities Act~~vendor.

WeASU ~~may~~No. ~~need~~2009-13 toeliminates ~~raise~~the ~~additional~~use ~~capital through~~of ~~either~~the ~~new~~residual ~~equity~~method orof ~~debt~~allocation ~~financing arrangements~~ and ~~may~~requires, ~~elect~~instead, ~~to utilize~~that ~~such an~~ arrangement toconsideration ~~fund~~be ~~further~~allocated, ~~expansion~~at ~~of our operations. Due to~~ the ~~recent~~inception ~~downturn~~of in the ~~economy~~arrangement, ~~there~~to ~~can~~all bedeliverables nobased ~~assurances that financing will be available~~ on ~~terms~~their ~~acceptable~~relative toselling ~~us,~~price ~~if at all~~(i. ~~However~~e., ~~due~~the torelative ~~a general~~selling ~~trend~~price ~~providing greater emphasis on sales of higher margin product and given our efforts to reduce costs as well as having $4~~method).3 ~~million~~When inapplying ~~cash,~~the ~~$1.5 million~~relative inselling ~~debt~~price ~~availability~~method, wea ~~believe~~hierarchy ~~that~~is weused ~~have~~for ~~adequate~~estimating ~~capital~~the ~~resources available~~selling toprice ~~fund~~for ~~our~~each ~~operations~~of ~~through~~the ~~June 30~~deliverables, ~~2010.~~as follows:

-VSOE ~~27 -~~of the selling price – verifiable specific objective evidence;
AsThird-party ofevidence ~~June~~(“TPE”) ~~30, 2009, 12,000,000 shares~~ of ~~our~~ ~~Common~~the ~~Stock~~selling ~~were~~price ~~authorized,~~– prices of ~~which~~the ~~8,007,776~~vendor’s ~~were~~or ~~issued~~any ~~and outstanding.~~competitor’s ~~The~~largely ~~following~~interchangeable ~~table~~products ~~summarizes~~or ~~the~~services, ~~dilutive impact~~ in ~~the~~standalone ~~event~~sales ~~of the exercise of all options and warrants~~ to ~~purchase~~similarly ~~stock,~~situated ~~including~~customers; ~~options~~ and ~~warrants whose strike price exceeds the market value of our Common Stock.~~
~~Dilutive~~Best ~~Effect~~estimate of ~~Options~~the ~~and Warrants~~selling asprice. ~~of June 30, 2009~~

Common stock issued and outstanding as of June 30, 2009	8,007,766
Dilutive instruments:
Outstanding warrants to purchase common stock *	1,298,331
Outstanding options to purchase common stock *	1,108,216
Unissued restricted stock units	150,714
Common stock plus dilutive instruments outstanding	10,565,027
Options to purchase common stock available to issue
pursuant to various stock option plans	31,982
Common stock outstanding if all dilutive instruments
are converted and exercised	10,597,009

The Company will adopt ASU No. 2009-13 effective July 1, 2010. The Company is currently evaluating the impact to the Company’s consolidated financial statements.

*In ~~Includes~~October ~~all~~2009, ~~"in~~the FASB issued ASU No. 2009-14, Software (“Topic 985”): Certain Revenue Arrangements That Include Software Elements - a consensus of the FASB Emerging Issue Task Force (“ASU No. 2009-~~money"~~14”). Per ASU No. 2009-14, all tangible products containing both software and ~~"out~~non-software components, that function together to deliver the product’s essential functionality, will no longer be within the scope of- ASC 985. In other words, entities that sell joint hardware and software products that meet the scope exception (i.e., essential functionality) will be required to follow the guidance in ASU No. 2009-~~money"~~14. ~~warrants~~ASU No. 2009-14 provides a list of items to consider when determining whether the software and ~~options~~non-software components function together to deliver a product’s essential functionality.

~~Effect~~- of27 ~~Recent Accounting Pronouncements~~ -

InThe ~~June~~Company ~~2008,~~will ~~the~~adopt ~~FASB~~ASU ratified the consensus reached on EITF 07-05, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock (“EITF 07-05”). EITF 07-05 clarifies the determination of whether an instrument (or an embedded feature) is indexed to an entity’s own stock, which would qualify as a scope exception under SFAS No. ~~133, Accounting for Derivative Instruments and Hedging Activities. We will adopt EITF 07~~2009-514 effective July 1, ~~2009,~~2010. ~~and~~The weCompany dois ~~not~~currently ~~expect~~evaluating itthe ~~to have a material~~ impact onto ~~our~~the Company’s consolidated financial statements.

OnITEM ~~May 28, 2009, the FASB issued SFAS No~~7A. ~~165,~~ ~~Subsequent~~QUANTITATIVE ~~Events,~~AND ~~(“SFAS~~QUALITATIVE ~~No.~~DISCLOSURES ~~165”).~~ABOUT ~~SFAS~~MARKET NoRISK. 165 introduces the concept of financial statements being available to be issued. This statement requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, whether that date represents the date the financial statements were issued or were available to be issued. The adoption of this standard did not have a material impact on our financial statements.

InNot July 2009, the FASB issued Statement of Financial Accounting Standards No. 168, the FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles — a replacement of FASB Statement No. 162 (SFAS 168). With the issuance of SFAS 168, the FASB Accounting Standards Codification (Codification) becomes the single source of authoritative U.S. accounting and reporting standards applicable ~~for all nongovernmental entities, with the exception of guidance issued by the Securities and Exchange Commission (SEC)~~. The Codification does not change current U.S. GAAP, but changes the referencing of financial standards, and is intended to simplify user access to authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. The Codification is effective for interim and annual periods ending after September 15, 2009, and is effective for our first quarter of 2010. At that time, all references made to U.S. GAAP will use the new Codification numbering system prescribed by the FASB. We are currently evaluating the impact to our financial reporting process of providing Codification references in our public filings. However, as the Codification is not intended to change or alter existing US GAAP, it is not expected to have any impact on our consolidated financial position or results of operations.

InITEM ~~September 2009, the EITF reached a consensus on Issue 08-1, Revenue Arrangements with Multiple Deliverables (“EITF 08-1”)~~8. ~~EITF~~FINANCIAL ~~08-1~~STATEMENTS ~~replaces~~AND ~~and~~SUPPLEMENTARY ~~significantly changes certain guidance in EITF 00-21~~DATA. EITF 08-1 modifies the separation criteria of EITF 00-21, by eliminating the criterion for objective and reliable evidence of fair value for the undelivered products or services. Instead, revenue arrangements with multiple deliverables should be divided into separate units of accounting if the deliverables meet both of the following criteria:

The ~~delivered~~financial ~~items~~statements ~~have~~and ~~value~~supplementary todata ~~the~~required ~~customer~~by this Item are included in this Annual Report on a ~~standalone~~Form ~~basis~~ 10-K beginning on page F-1.

IfITEM ~~the~~9. ~~arrangement~~CHANGES ~~includes~~IN aAND ~~general~~DISAGREEMENTS ~~right~~WITH ~~of return~~ACCOUNTANTS ~~relative~~ON toACCOUNTING ~~the~~AND ~~delivered~~FINANCIAL ~~items, delivery or performance of the undelivered items is considered probable and substantially in the control of the vendor~~DISCLOSURE.

-None. ~~28 -~~

~~The~~ITEM Issue eliminates the use of the residual method of allocation and requires, instead, that arrangement consideration be allocated, at the inception of the arrangement, to all deliverables based on their relative selling price (i9A.~~e.,~~ ~~the~~CONTROLS ~~relative~~AND ~~selling price method)~~PROCEDURES. ~~When applying the relative selling price method, a hierarchy is used for estimating the selling price for each of the deliverables, as follows:~~

~~Vendor-specific~~Disclosure ~~objective~~Controls ~~evidence~~and ~~(VSOE)~~Procedures ~~of the selling price – verifiable specific objective evidence~~

~~Third-party~~We ~~evidence~~maintain ~~(TPE)~~disclosure ofcontrols and procedures designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the ~~selling~~time ~~price~~periods ~~– prices~~specified ofin the ~~vendor~~SEC’s orrules ~~any~~and ~~competitor’s~~forms, ~~largely~~and ~~interchangeable~~that ~~products~~such ~~or services~~information is accumulated and communicated to our management, inincluding ~~standalone~~our ~~sales~~chief executive officer and our chief financial officer/principal accounting officer, as appropriate, to ~~similarly~~allow ~~situated~~timely ~~customers~~ decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives.

~~Best~~Our ~~estimate~~management, with the participation of our chief executive officer and chief financial officer, evaluated the ~~selling~~effectiveness ~~price~~of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2010. Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of June 30, 2010, our disclosure controls and procedures were functioning effectively to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decision regarding disclosures.

WeChanges ~~will~~in ~~adopt~~Internal ~~EITF~~Controls ~~08-1~~over ~~effective~~Financial ~~July~~Reporting ~~1, 2010. We are currently evaluating the impact to our consolidated financial statements.~~

InWe ~~September~~regularly ~~2009,~~review ~~the~~our ~~EITF~~system ~~reached~~of ~~a consensus~~internal oncontrol ~~Issue~~over ~~09-3,~~financial ~~Certain~~reporting ~~Revenue~~and ~~Arrangements~~make ~~That~~changes ~~Include~~to ~~Software Elements~~our ~~(“EITF~~processes ~~09-3”). Per EITF 09-3, all tangible products containing both software~~ and ~~non-software~~systems ~~components, that function together~~ to ~~deliver~~improve ~~the product’s~~controls ~~essential~~and ~~functionality,~~increase ~~will no longer be within the scope of SOP 97-2. In other words~~efficiency, ~~entities~~while ~~that~~ensuring ~~sell joint hardware and software products~~ that ~~meet~~we ~~the~~maintain ~~scope~~an ~~exception~~effective ~~(i.e.,~~internal ~~essential~~control ~~functionality) will be required to follow the guidance in Issue 08-1~~environment. ~~The~~Changes ~~Issue~~may ~~provides~~include asuch ~~list~~activities ofas ~~items~~implementing ~~to consider~~new, ~~when~~more ~~determining~~efficient ~~whether~~systems, ~~the~~consolidating ~~software~~activities and ~~non-software~~migrating ~~components function together to deliver a product’s essential functionality~~processes.

WeThere ~~will~~were ~~adopt~~no ~~EITF~~changes ~~09-3~~during ~~effective~~the ~~July~~quarter 1ended June 30, 2010. Wein ~~are~~our ~~currently~~internal ~~evaluating~~control ~~the~~over ~~impact~~financial reporting or in other factors that materially affected, or are reasonably likely to materially affect, our ~~consolidated~~internal controls over financial ~~statements~~ reporting.

~~ITEM~~Management’s ~~7A.~~Report ~~QUANTITATIVE~~on ~~AND~~Internal ~~QUALITATIVE~~Control ~~DISCLOSURES~~over ~~ABOUT~~Financial ~~MARKET~~Reporting ~~RISK.~~

~~Not~~Our ~~applicable~~management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

~~ITEM~~- 8.28 ~~FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.~~-

~~The~~Management assessed the effectiveness of our internal control over financial ~~statements~~reporting ~~and~~as ~~supplementary data~~of ~~required~~June 30, 2010 utilizing the criteria set forth by ~~this~~the ~~Item~~Committee ~~are~~of ~~included~~Sponsoring inOrganizations ~~this~~of ~~Annual~~the ~~Report~~Treadway onCommission ~~Form~~(COSO) 10in Internal Control-~~K beginning~~Integrated Framework. Based on ~~page~~the ~~F-1~~assessment by our management, we determined that the Company’s internal control over financial reporting was effective as of June 30, 2010. Management’s assessment of the effectiveness of our internal control over financial reporting as of June 30, 2010 has not been audited.

ITEM 99B. ~~CHANGES~~OTHER ~~IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE~~INFORMATION.

None.

~~ITEM~~- 29 ~~9A(T). CONTROLS AND PROCEDURES.~~-

~~Disclosure~~PART ~~Controls and Procedures~~III

WeITEM maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and our chief financial officer/principal accounting officer, as appropriate, to allow timely decisions regarding required disclosure10. ~~In designing and evaluating our disclosure controls and procedures~~DIRECTORS, ~~management recognized~~EXECUTIVE ~~that~~OFFICERS ~~any~~AND ~~controls~~CORPORATE ~~and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives~~GOVERNANCE.

~~Our~~The ~~management,~~information ~~with~~relating ~~the~~to ~~participation of~~ our ~~chief executive officer and chief financial officer~~directors, ~~evaluated~~nominees ~~the effectiveness~~for ofelection ~~our disclosure controls and procedures (~~as ~~defined~~directors ~~in Rules 13a-15(e)~~ and ~~15d-15(e)~~executive officers under the ~~Exchange~~headings ~~Act)~~“Election as of ~~June~~Directors” ~~30, 2009. Based on this evaluation, our chief executive officer~~ and ~~chief~~“Executive ~~financial~~Officers” ~~officer concluded~~in ~~that, as of June 30, 2009,~~ our ~~disclosure~~definitive ~~controls~~proxy ~~and~~statement ~~procedures~~for ~~were functioning effectively to provide reasonable assurance that~~ the ~~information required~~2010 toAnnual beMeeting ~~disclosed by us in reports filed under the Securities Exchange Act~~ of ~~1934~~Stockholders is ~~(i)~~incorporated ~~recorded,~~herein ~~processed,~~by ~~summarized~~reference ~~and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated~~ to ~~our~~such ~~management,~~proxy ~~including our chief executive officer and chief financial officer, as appropriate to allow timely decision regarding disclosures~~statement.

~~Changes~~ITEM in11. ~~Internal~~EXECUTIVE ~~Controls over Financial Reporting~~COMPENSATION.

WeThe ~~regularly~~discussion ~~review~~under ~~our~~the ~~system~~headings of“Executive ~~internal control~~Compensation” ~~over~~“Compensation ~~financial~~Committee ~~reporting~~Report” and ~~make~~“Compensation ~~changes~~Committee toInterlooks ~~our~~and ~~processes~~Insider ~~and~~Participation” ~~systems to~~in ~~improve~~our ~~controls~~definitive ~~and~~proxy ~~increase~~statement ~~efficiency,~~for ~~while~~the ~~ensuring~~2010 ~~that~~Annual weMeeting ~~maintain~~of ~~an effective~~Stockholders ~~internal~~is ~~control~~incorporated ~~environment.~~herein ~~Changes~~by ~~may~~reference ~~include~~to such ~~activities~~proxy ~~as implementing new, more efficient systems, consolidating activities and migrating processes~~statement.

-ITEM ~~29 -~~12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

~~There~~The ~~were~~discussion nounder ~~changes during~~ the ~~quarter ended~~heading ~~June~~“Security ~~30,~~Ownership ~~2009~~of inCertain ~~our~~Beneficial ~~internal~~Owners ~~control~~and ~~over~~Management” ~~financial~~in ~~reporting~~our ordefinitive inproxy ~~other factors~~statement ~~that~~for ~~materially~~the ~~affected,~~2010 orAnnual ~~are~~Meeting ~~reasonably~~of ~~likely~~Stockholders tois ~~materially~~incorporated ~~affect, our~~herein ~~internal~~by ~~controls~~reference ~~over~~to ~~financial~~such ~~reporting~~proxy statement.

~~Management’s~~ITEM ~~Report~~13. onCERTAIN ~~Internal~~RELATIONSHIPS ~~Control over~~AND ~~Financial~~RELATED ~~Reporting~~TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

~~Our~~The ~~management~~discussion isunder responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the ~~reliability~~heading of“Certain ~~financial~~Relationships ~~reporting~~ and ~~the preparation~~Related ofTransactions” ~~financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Our internal control over financial reporting includes those policies~~ and ~~procedures~~“Board ~~that~~Independence” ~~(i) pertain to the maintenance of records that,~~ in ~~reasonable~~our ~~detail,~~definitive ~~accurately~~proxy ~~and~~statement ~~fairly reflect~~for the ~~transactions~~2010 ~~and~~Annual ~~dispositions~~Meeting of ~~the~~Stockholders ~~Company’s~~is ~~assets;~~incorporated ~~(ii)~~herein ~~provide reasonable~~by ~~assurance~~reference ~~that transactions are recorded as necessary~~ to ~~permit preparation~~such ofproxy financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statementsstatement.

~~This~~ITEM ~~annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting~~14. ~~Management’s~~PRINCIPAL ~~report was~~ACCOUNTANT ~~not~~FEES ~~subject~~AND to attestation by the Company’s independent registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this annual reportSERVICES.

~~Management~~The ~~assessed~~discussion ~~the~~under ~~effectiveness of our internal control over financial reporting as of June 30, 2009 utilizing~~ the ~~criteria~~ ~~set~~heading ~~forth~~“Independent byRegistered ~~the~~Public ~~Committee~~Accounting ofFirm ~~Sponsoring~~Fees ~~Organizations~~and ofOther ~~the~~Matters” ~~Treadway Commission (COSO)~~ in ~~Internal Control-Integrated Framework. Based on the assessment by~~ our ~~management,~~definitive weproxy ~~determined~~statement ~~that~~for the ~~Company’s~~2010 ~~internal~~Annual ~~control over~~Meeting ~~financial reporting was effective as~~ of ~~June~~Stockholders ~~30,~~is ~~2009.~~incorporated ~~Management’s assessment~~herein ofby ~~the~~reference ~~effectiveness~~to ofsuch ~~our~~proxy ~~internal control over financial reporting as of June 30, 2009 has not been audited~~statement.

~~ITEM~~- ~~9B.~~30 ~~OTHER INFORMATION.~~-

~~None.~~PART IV

-ITEM ~~30 -~~15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

~~PART~~List ~~III~~of documents filed as part of this Annual Report on Form 10-K.

~~ITEM~~1. 10FINANCIAL STATEMENTS. ~~DIRECTORS,~~The ~~EXECUTIVE~~financial ~~OFFICERS~~statements ~~AND~~listed ~~CORPORATE~~in ~~GOVERNANCE~~the accompanying Index to Financial Statements appearing on page F-1 are filed as part of this Annual Report on Form 10-K.

2. EXHIBITS. The ~~information~~following ~~relating~~is toa ~~our~~list ~~directors, nominees~~of ~~for~~Exhibits ~~election~~filed as ~~directors~~part ~~and~~of ~~executive~~this ~~officers~~Annual ~~under~~Report ~~the~~on ~~headings “Election~~Form of10-K. ~~Directors”~~Where ~~and~~so ~~“Executive~~indicated ~~Officers”~~by infootnote, ~~our~~Exhibits ~~definitive~~that ~~proxy statement~~were ~~for~~previously ~~the~~filed ~~2009~~are ~~Annual~~incorporated ~~Meeting~~by ofreference. ~~Stockholders~~For isExhibits incorporated ~~herein~~ by reference, tothe ~~such~~location ~~proxy~~of ~~statement~~the Exhibit in the previous filing is indicated in parentheses.

ITEM 11. EXECUTIVE COMPENSATION.

(a)	Exhibit No.		Description
	2.1		Asset Purchase Agreement, dated as of February 4, 1999, by and between Ascend Communications, Inc. and Voxware, Inc.**(1)

	3.1	(a)	Amended and Restated Certificate of Incorporation**(7)

	3.1	(b)	Certificate of Amendment to the Amended and Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware on December 30, 2003.**(8)

	3.1	(c)	Certificate of Amendment to the Amended and Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware on April 30, 2004.**(9)

	3.1	(d)	Certificate of Amendment to the Amended and Restated Certificate of Incorporation, filed with the Secretary of State of the State of Delaware on November 29, 2004.**(12)

	3.1	(e)	Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation, as amended, as filed with the Secretary of State of the State of Delaware on November 28, 2005.**(11)

	3.1	(f)	Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation, filed with the Secretary of State of the State of Delaware on December 13, 2007.**(18)

	3.1	(g)	Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation, filed with the Secretary of State of the State of Delaware on December 10, 2009.**

	3.2		Second Amended and Restated Bylaws.**(17)

	4.1		Form of Common Stock Purchase Warrant.**(6)

	4.2		Form of Common Stock Purchase Warrant issued to Ridgecrest Capital Partners.**(6)

	4.3		Form of Series D Convertible Preferred Stock Purchase Warrant.**(6)

	4.4		Form of Series D Convertible Preferred Stock Purchase Warrant to be issued to Edison Venture Fund V, L.P., dated December 30, 2003.**(8)

	4.5		Form of Series D Convertible Preferred Stock Purchase Warrant to be issued to Cross Atlantic Technology Fund II, L.P., dated December 30, 2003.**(8)

	4.6		Form of Common Stock Purchase Warrant issued to former holders of Series D Convertible Preferred Stock Purchase Warrants (see Exhibits 4.7, 4.8 and 4.9).**(12)

	4.7		Form of Common Stock Purchase Warrant issued to Mufson Howe Hunter & Company LLC, dated August 11, 2005.**(12)

~~The~~- ~~discussion~~31 ~~under~~- the headings “Executive Compensation” “Compensation Committee Report” and “Compensation Committee Interlooks and Insider Participation” in our definitive proxy statement for the 2009 Annual Meeting of Stockholders is incorporated herein by reference to such proxy statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

	4.8		Form of Common Stock Purchase Warrant issued to Alan A. Nash, dated August 11, 2005.**(12)

	4.9		Form of Common Stock Purchase Warrant issued to Duncan J. L. Fitzwilliams, dated August 11, 2005.**(12)

	4.10		Form of Common Stock Purchase Warrant issued to Emma Smith, dated August 11, 2005.**(12)

	10.1		Voxware, Inc. 1994 Stock Option Plan.**(2)

	10.2		Form of Voxware, Inc. Stock Option Agreement.**(2)

	10.3		Form of Indemnification Agreement.**(2)

	10.4		Securities Purchase Agreement, dated as of August 10, 2000, by and between Voxware, Inc. and Castle Creek Technology Partners, LLC.**(3)

	10.5		Registration Rights Agreement, dated as of August 15, 2000, by and between Voxware, Inc. and Castle Creek Technology Partners, LLC.**(3)

	10.6		Securities Purchase Agreement, dated as of April 19, 2001, by and between Voxware, Inc. and Castle Creek Technology Partners, LLC, together with the form of Additional Share Warrant attached as an exhibit thereto.**(4)

	10.7		Registration Rights Agreement, dated as of April 19, 2001, by and between Voxware, Inc. and Castle Creek Technology Partners, LLC, together with the form of Remedy Warrant attached as an exhibit thereto.**(4)

	10.8		Voxware, Inc. 1998 Stock Option Plan for Outside Directors.**(5)

	10.9		Voxware, Inc. Plan to Pay Non-Employee Directors an Annual Retainer.**(5)

	10.10		Series D Convertible Preferred Stock Purchase Agreement, dated as of April 16, 2003, by and among Voxware, Inc. and the Purchasers thereto.**(6)

	10.11		Exchange Agreement, dated as of April 16, 2003, by and between Voxware, Inc. and Castle Creek Technology Partners, LLC**(6).

	10.12		Exchange Agreement, dated as of April 16, 2003, by and among Voxware, Inc. and certain holders of its Series C Convertible Preferred Stock.**(6)

	10.13		Exchange Agreement, dated as of April 16, 2003, by and among Voxware, Inc., Creafund n.v., Avvision BVBA, BVBA Com2Wizards, Eurl Val D Auso and Wim Deneweth.** (6)

	10.14		Settlement Agreement, dated as of April 16, 2003, by and between Voxware, Inc. and Castle Creek Technology Partners, LLC.**(6)

	10.15		Investor Rights Agreement, dated as of June 27, 2003, by and between Voxware, Inc. and the Investors thereto.**(7)

	10.16		Stockholders Agreement, dated as of June 27, 2003, by and between Voxware, Inc. and the Holders and Investors listed on Schedule 1 thereto.**(7)

	10.17		Voxware, Inc. 2003 Stock Option Plan.**(7)

	10.18		Form of Voxware, Inc. Stock Option Agreement.**(7)

	10.19		Loan and Security Agreement, dated as of December 29, 2003, by and between Voxware, Inc. and Silicon Valley Bank.**(8)

~~The~~- ~~discussion~~32 under the heading “Security Ownership of Certain Beneficial Owners and Management” in our definitive proxy statement for the 2009 Annual Meeting of Stockholders is incorporated herein by reference to such proxy statement. -

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

10.20		Intellectual Property Security Agreement, dated as of December 29, 2003, by and between Voxware, Inc. and Silicon Valley Bank.**(8)

10.21		Unconditional Guaranty of Edison Venture Fund V, L.P., as guarantor, dated as of December 29, 2003.**(8)

10.22		Unconditional Guaranty of Cross Atlantic Technology Fund II, L.P., as guarantor, dated as of December 29, 2003.**(8)

10.23	#	Indemnification Agreement, dated June 21, 2004, by and between Voxware, Inc. and Paul Commons.**(12)

10.24		Form of Common Stock Purchase Agreement, dated as of August 11, 2005, by and between Voxware, Inc. and certain accredited investors.**(10)

10.25		Form of Amendment No. 2 to Stockholders Agreement, dated as of August 11, 2005, by and between Voxware, Inc. and certain accredited investors.**(10)

10.26		Form of Amended and Restated Investor Rights Agreement, dated as of August 11, 2005, by and between Voxware, Inc. and certain accredited investors.**(10)

10.27		License, Development and Reseller Agreement, dated as of September 26, 2005, by and between Voxware, Inc. and LXE, Inc.**†(15)

10.28		Amended and Restated Loan and Security Agreement dated as of January 3, 2007, and effective as of December 29, 2006 between Silicon Valley Bank and Voxware, Inc.**(13)

10.29		First Loan Modification Agreement dated as of February 1, 2007 between Silicon Valley Bank and Voxware, Inc.**(14)

10.30		Loan and Security Agreement dated as of January 3, 2007 and effective as of December 29, 2006 between Silicon Valley Bank and Voxware, Inc.** (13)

10.31		Amendment to Loan Arrangement with Voxware, Inc., dated as of January 3, 2007, from Verbex Acquisition Corporation.** (13)

10.32	#	Executive Employment Agreement, dated as of September 14, 2007, between Voxware, Inc. and Scott J. Yetter.** (16)

10.33		Second Loan Modification Agreement, dated as of February 13, 2008, and effective as of December 27, 2007, between Silicon Valley Bank and Voxware, Inc.**(17)

10.34		Lease Agreement, dated as of December 3, 2007, by and between Voxware, Inc. and 240 Princeton TCI Associates, LLC.**(18)

10.35		2007 Amendment to 2003 Stock Incentive Plan.**(18)

10.36		Waiver and Third Loan Modification Agreement, dated November 17, 2008, by and between the Company and Silicon Valley Bank.**(19)

10.37		Waiver of Fourth Loan Modification Agreement, dated as of February 17, 2009, by and between the Company and Silicon Valley Bank.**(20)

10.38		Fifth Loan Modification Agreement, dated as of May 12, 2009, by and between the Company and Silicon Valley Bank.**(21)

10.39		Sixth Loan Modification Agreement, dated as of June 26, 2009, by and between the Company and Silicon Valley Bank. *

~~The~~- ~~discussion~~33 under the heading “Certain Relationships and Related Transactions” and “Board Independence” in our definitive proxy statement for the 2009 Annual Meeting of Stockholders is incorporated herein by reference to such proxy statement.-

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

	10.40		Securities Purchase Agreement, dated as of June 29, 2009, by and between the Company and The Co-Investment Fund II, L.P. and Edison Venture Fund V, L.P.**(22)

	10.41		Seventh Loan Modification Agreement, dated as of September 9, 2009 by and between the Company and Silicon Valley Bank.**(23)

	10.42		Amended and Restated 2003 Stock Incentive Plan as of December 10, 2009.**

	10.43		Form of Non Qualified Stock Option Agreement.**

	10.44		Eighth Loan Modification Agreement, dated as of August 23, 2010 by and between the Company and Silicon Valley Bank.**(27)

	10.45		Securities Purchase Agreement, dated as of September 17, 2010, by and between Voxware, Inc. and the Co-Investment Fund, II, L.P. (28)

	10.46		Form of Voting Agreement between the Company and certain stockholders. (28)

	21.1		Subsidiaries of the registrant.*

	31.1		Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

	31.2		Certification of the principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

	32.1		Certification of the principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

	32.2		Certification of the principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

____________________

The discussion under the heading “Independent Registered Public Accounting Firm Fees and Other Matters” in our definitive proxy statement for the 2009 Annual Meeting of Stockholders is incorporated herein by reference to such proxy statement.

*		Filed herewith.

**		Previously filed with the Commission as Exhibits to, and incorporated by reference from, the following documents:

†		Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

#		Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K.

- 31 34 -

PART IV

(1)		Filed in connection with the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 1998.

(2)		Filed in connection with the Company’s Registration Statement on Form S-1 (File Number 33-08393).

(3)		Filed in connection with the Company’s Current Report on Form 8-K that was filed on August 16, 2000.

(4)		Filed in connection with the Company’s Current Report on Form 8-K that was filed on April 20, 2001.

(5)		Filed in connection with the Company’s Registration Statement on Form S-8 (File Number 33-33342).

(6)		Filed in connection with the Company’s Current Report on Form 8-K that was filed on April 17, 2003.

(7)		Filed in connection with the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2003.

(8)		Filed in connection with the Company’s Current Report on Form 8-K that was filed on January 6, 2004.

(9)		Filed in connection with the Company’s Current Report on Form 8-K that was filed on May 7, 2004.

(10)		Filed in connection with the Company’s Current Report on Form 8-K that was filed on August 11, 2005.

(11)		Filed in connection with the Company’s Current Report on Form 8-K that was filed on November 29, 2005.

(12)		Filed in connection with the Company’s Annual Report on Form 10-KSB for the fiscal year ended June 30, 2005.

(13)		Filed in connection with the Company’s Current Report on Form 8-K that was filed on January 8, 2007.

(14)		Filed in connection with the Company's Quarterly Report on Form 10-QSB for the fiscal quarter ended December 31, 2006.

(15)		Filed in connection with the Company's Quarterly Report on Form 10-QSB/A for the fiscal quarter ended September 30, 2005.

(16)		Filed in connection with the Company’s Current Report on Form 8-K filed on September 17, 2007.

(17)		Filed in connection with the Company’s Current Report on Form 8-K filed on October 17, 2007.

(18)		Filed in connection with the Company’s Quarterly Report on Form 10-QSB for the fiscal quarter ended December 31, 2008.

(19)		Filed in connection with the Company’s Current Report on Form 8-K filed on November 21, 2008.

(20)		Filed in connection with the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2008.

(21)		Filed in connection with the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2009.

(22)		Filed in connection with the Company’s Current Report on Form 8-K that was filed on July 1, 2009.

(23)		Filed in connection with the Company’s Current Report on Form 8-K that was filed on September 14, 2009.

(24)		Filed in connection with the Company’s Current Report on Form 8-K that was filed on December 15, 2009.

(25)		Filed in connection with the Company’s Tender Offer statement on Form SC TO that was filed on January 20, 2010.

(26)		Filed in connection with the Company’s Tender Offer statement on Form SC TO that was filed on January 20, 2010.

(27)		Filed in connection with the Company’s Current Report on Form 8-K that was filed on August 26, 2010.

(28)		Filed in connection with the Company's current report on Form 8-K that was filed on September 20, 2010.

~~ITEM~~- ~~15.~~35 ~~EXHIBITS, FINANCIAL STATEMENT SCHEDULES.~~-

~~List of documents filed as part of this Annual Report on Form 10-K.~~SIGNATURES

1.In ~~FINANCIAL~~accordance ~~STATEMENTS.~~with ~~The~~Section ~~financial statements~~13 ~~listed~~or in15(d) of the ~~accompanying~~Exchange ~~Index~~Act, tothe ~~Financial~~Registrant ~~Statements~~caused ~~appearing~~this ~~on page~~report ~~F-1~~to ~~are~~be ~~filed~~signed ason ~~part~~its ofbehalf ~~this~~by ~~Annual~~the ~~Report~~undersigned, onthereunto ~~Form~~duly ~~10-K~~authorized.

2.VOXWARE, ~~EXHIBITS~~INC. ~~The~~By: ~~following~~/s/ isScott ~~a list of Exhibits filed as part of this Annual Report on Form 10-K~~J. ~~Where~~Yetter soScott ~~indicated by footnote, Exhibits that were previously filed are incorporated by reference~~J. ~~For Exhibits incorporated by reference~~Yetter, ~~the~~President ~~location~~and ofChief ~~the~~Executive ~~Exhibit in the previous filing is indicated in parentheses.~~Officer

~~(a)~~ Date: September ~~Exhibit~~28, ~~No. Description~~2010

2.1		Asset Purchase Agreement, dated as of February 4, 1999, by and between Ascend Communications, Inc. and Voxware, Inc.**(1)
3.1	(a)	Amended and Restated Certificate of Incorporation**(7)
3.1	(b)	Certificate of Amendment to the Amended and Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware on December 30, 2003.**(8)
3.1	(c)	Certificate of Amendment to the Amended and Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware on April 30, 2004.**(9)
3.1	(d)	Certificate of Amendment to the Amended and Restated Certificate of Incorporation, filed with the Secretary of State of the State of Delaware on November 29, 2004.**(12)
3.1	(e)	Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation, as amended, as filed with the Secretary of State of the State of Delaware on November 28, 2005.**(11)
3.1	(f)	Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation, filed with the Secretary of State of the State of Delaware on December 13, 2007.**(18)
3.2		Second Amended and Restated Bylaws.**(17)
4.1		Form of Common Stock Purchase Warrant.**(6)
4.2		Form of Common Stock Purchase Warrant issued to Ridgecrest Capital Partners.**(6)
4.3		Form of Series D Convertible Preferred Stock Purchase Warrant.**(6)
4.4		Form of Series D Convertible Preferred Stock Purchase Warrant to be issued to Edison Venture Fund V, L.P., dated December 30, 2003.**(8)
4.5		Form of Series D Convertible Preferred Stock Purchase Warrant to be issued to Cross Atlantic Technology Fund II, L.P., dated December 30, 2003.**(8)
4.6		Form of Common Stock Purchase Warrant issued to former holders of Series D Convertible Preferred Stock Purchase Warrants (see Exhibits 4.7, 4.8 and 4.9).**(12)
4.7		Form of Common Stock Purchase Warrant issued to Mufson Howe Hunter & Company LLC, dated August 11, 2005.**(12)
4.8		Form of Common Stock Purchase Warrant issued to Alan A. Nash, dated August 11, 2005.**(12)
4.9		Form of Common Stock Purchase Warrant issued to Duncan J. L. Fitzwilliams, dated August 11, 2005.**(12)

- 36 -

-In ~~32 -~~accordance with the Exchange Act, this report has been signed below be the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

	4.10	Form of Common Stock Purchase Warrant issued to Emma Smith, dated August 11, 2005.**(12)
Signature		Title	Date
	10.1	Voxware, Inc. 1994 Stock Option Plan.**(2)
/s/ Joseph A. Allegra		Chairman and Director	September 28, 2010
	10.2	Form of Voxware, Inc. Stock Option Agreement.**(2)
Joseph A. Allegra
	10.3	Form of Indemnification Agreement.**(2)
/s/ Scott J. Yetter		President and Chief Executive Officer	September 28, 2010
	10.4	Securities Purchase Agreement, dated as of August 10, 2000, by and between Voxware, Inc. and Castle Creek Technology Partners, LLC.**(3)
Scott J. Yetter		(principal executive officer)
	10.5	Registration Rights Agreement, dated as of August 15, 2000, by and between Voxware, Inc. and Castle Creek Technology Partners, LLC.**(3)
/s/ William G. Levering, III		Chief Financial Officer	September 28, 2010
	10.6	Securities Purchase Agreement, dated as of April 19, 2001, by and between Voxware, Inc. and Castle Creek Technology Partners, LLC, together with the form of Additional Share Warrant attached as an exhibit thereto.**(4)
William G. Levering, III		(principal financial and principal accounting officer)
	10.7	Registration Rights Agreement, dated as of April 19, 2001, by and between Voxware, Inc. and Castle Creek Technology Partners, LLC, together with the form of Remedy Warrant attached as an exhibit thereto.**(4)
/s/ James L. Alexandre		Director	September 28, 2010
	10.8	Voxware, Inc. 1998 Stock Option Plan for Outside Directors.**(5)
James L. Alexandre
	10.9	Voxware, Inc. Plan to Pay Non-Employee Directors an Annual Retainer.**(5)
/s/ Donald R. Caldwell		Director	September 28, 2010
	10.10	Series D Convertible Preferred Stock Purchase Agreement, dated as of April 16, 2003, by and among Voxware, Inc. and the Purchasers thereto.**(6)
Donald R. Caldwell
	10.11	Exchange Agreement, dated as of April 16, 2003, by and between Voxware, Inc. and Castle Creek Technology Partners, LLC**(6).
/s/ Don Cohen		Director	September 28, 2010
	10.12	Exchange Agreement, dated as of April 16, 2003, by and among Voxware, Inc. and certain holders of its Series C Convertible Preferred Stock.**(6)
Don Cohen
	10.13	Exchange Agreement, dated as of April 16, 2003, by and among Voxware, Inc., Creafund n.v., Avvision BVBA, BVBA Com2Wizards, Eurl Val D Auso and Wim Deneweth.** (6)
/s/ Robert Olanoff		Director	September 28, 2010
	10.14	Settlement Agreement, dated as of April 16, 2003, by and between Voxware, Inc. and Castle Creek Technology Partners, LLC.**(6)
Robert Olanoff
	10.15	Investor Rights Agreement, dated as of June 27, 2003, by and between Voxware, Inc. and the Investors thereto.**(7)
/s/ David J. Simbari		Director	September 28, 2010
	10.16	Stockholders Agreement, dated as of June 27, 2003, by and between Voxware, Inc. and the Holders and Investors listed on Schedule 1 thereto.**(7)
David J. Simbari
	10.17	Voxware, Inc. 2003 Stock Option Plan.**(7)
	10.18	Form of Voxware, Inc. Stock Option Agreement.**(7)
	10.19	Loan and Security Agreement, dated as of December 29, 2003, by and between Voxware, Inc. and Silicon Valley Bank.**(8)
	10.20	Intellectual Property Security Agreement, dated as of December 29, 2003, by and between Voxware, Inc. and Silicon Valley Bank.**(8)

- 33 37 -

	10.21	Unconditional Guaranty of Edison Venture Fund V, L.P., as guarantor, dated as of December 29, 2003.**(8)
	10.22	Unconditional Guaranty of Cross Atlantic Technology Fund II, L.P., as guarantor, dated as of December 29, 2003.**(8)
	10.23#	Indemnification Agreement, dated June 21, 2004, by and between Voxware, Inc. and Paul Commons.**(12)
	10.24	Form of Common Stock Purchase Agreement, dated as of August 11, 2005, by and between Voxware, Inc. and certain accredited investors.**(10)
	10.25	Form of Amendment No. 2 to Stockholders Agreement, dated as of August 11, 2005, by and between Voxware, Inc. and certain accredited investors.**(10)
	10.26	Form of Amended and Restated Investor Rights Agreement, dated as of August 11, 2005, by and between Voxware, Inc. and certain accredited investors.**(10)
	10.27	License, Development and Reseller Agreement, dated as of September 26, 2005, by and between Voxware, Inc. and LXE, Inc.**†(15)
	10.28	Amended and Restated Loan and Security Agreement dated as of January 3, 2007, and effective as of December 29, 2006 between Silicon Valley Bank and Voxware, Inc.**(13)
	10.29	First Loan Modification Agreement dated as of February 1, 2007 between Silicon Valley Bank and Voxware, Inc.**(14)
	10.30	Loan and Security Agreement dated as of January 3, 2007 and effective as of December 29, 2006 between Silicon Valley Bank and Voxware, Inc.** (13)
	10.31	Amendment to Loan Arrangement with Voxware, Inc., dated as of January 3, 2007, from Verbex Acquisition Corporation.** (13)
	10.32#	Executive Employment Agreement, dated as of September 14, 2007, between Voxware, Inc. and Scott J. Yetter.** (16)
	10.33	Second Loan Modification Agreement, dated as of February 13, 2008, and effective as of December 27, 2007, between Silicon Valley Bank and Voxware, Inc.**(17)
	10.34	Lease Agreement, dated as of December 3, 2007, by and between Voxware, Inc. and 240 Princeton TCI Associates, LLC.**(18)
	10.35	2007 Amendment to 2003 Stock Incentive Plan.**(18)
	10.36	Waiver and Third Loan Modification Agreement, dated November 17, 2008, by and between the Company and Silicon Valley Bank.**(19)
	10.37	Waiver of Fourth Loan Modification Agreement, dated as of February 17, 2009, by and between the Company and Silicon Valley Bank.**(20)
	10.38	Fifth Loan Modification Agreement, dated as of May 12, 2009, by and between the Company and Silicon Valley Bank.**(21)
	10.39	Sixth Loan Modification Agreement, dated as of June 26, 2009, by and between the Company and Silicon Valley Bank. *
	10.40	Securities Purchase Agreement, dated as of June 29, 2009, by and between the Company and The Co-Investment Fund II, L.P. and Edison Venture Fund V, L.P.**(22)

VOXWARE, INC. AND SUBSIDIARIES

-INDEX ~~34 -~~TO CONSOLIDATED FINANCIAL STATEMENTS

	10.41	Seventh Loan Modification Agreement, dated as of September 9, 2009 by and between the Company and Silicon Valley Bank.**(23)
Consolidated Financial Statements:
	21.1	Subsidiaries of the registrant.*
Report of Independent Registered Public Accounting Firm	F-2
	23.1	Consent of BDO Seidman, LLP.*
Consolidated Balance Sheets as of June 30, 2010 and 2009	F-3
	31.1	Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
Consolidated Statements of Operations for the years ended June 30, 2010 and 2009	F-4
	31.2	Certification of the principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
Consolidated Statements of Stockholders’ Equity for the years ended June 30, 2010 and 2009	F-5
	32.1	Certification of the principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
Consolidated Statements of Cash Flows for the years ended June 30, 2010 and 2009	F-6
	32.2	Certification of the principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
Summary of Accounting Policies and Notes to Consolidated Financial Statements	F-7

*		Filed herewith.
**		Previously filed with the Commission as Exhibits to, and incorporated by reference from, the following documents:
†		Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.
#		Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K.

F-1

-Report ~~35 -~~of Independent Registered Public Accounting Firm

(1)		Filed in connection with the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 1998.
(2)		Filed in connection with the Company’s Registration Statement on Form S-1 (File Number 33-08393).
(3)		Filed in connection with the Company’s Current Report on Form 8-K that was filed on August 16, 2000.
(4)		Filed in connection with the Company’s Current Report on Form 8-K that was filed on April 20, 2001.
(5)		Filed in connection with the Company’s Registration Statement on Form S-8 (File Number 33-33342).
(6)		Filed in connection with the Company’s Current Report on Form 8-K that was filed on April 17, 2003.
(7)		Filed in connection with the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2003.
(8)		Filed in connection with the Company’s Current Report on Form 8-K that was filed on January 6, 2004.
(9)		Filed in connection with the Company’s Current Report on Form 8-K that was filed on May 7, 2004.
(10)		Filed in connection with the Company’s Current Report on Form 8-K that was filed on August 11, 2005.
(11)		Filed in connection with the Company’s Current Report on Form 8-K that was filed on November 29, 2005.
(12)		Filed in connection with the Company’s Annual Report on Form 10-KSB for the fiscal year ended June 30, 2005.
(13)		Filed in connection with the Company’s Current Report on Form 8-K that was filed on January 8, 2007.
(14)		Filed in connection with the Company's Quarterly Report on Form 10-QSB for the fiscal quarter ended December 31, 2006.
(15)		Filed in connection with the Company's Quarterly Report on Form 10-QSB/A for the fiscal quarter ended September 30, 2005.
(16)		Filed in connection with the Company’s Current Report on Form 8-K filed on September 17, 2007.
(17)		Filed in connection with the Company’s Current Report on Form 8-K filed on October 17, 2007.
(18)		Filed in connection with the Company’s Quarterly Report on Form 10-QSB for the fiscal quarter ended December 31, 2008.
(19)		Filed in connection with the Company’s Current Report on Form 8-K filed on November 21, 2008.
(20)		Filed in connection with the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2008.
(21)		Filed in connection with the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2009.
(22)		Filed in connection with the Company’s Current Report on Form 8-K filed on July 1, 2009.
(23)		Filed in connection with the Company’s Current Report on Form 8-K filed on September 14, 2009.

Board of Directors and Stockholders
Voxware, Inc.
Hamilton, New Jersey

-We ~~36 -~~have audited the accompanying consolidated balance sheets of Voxware, Inc. and subsidiaries (the “Company”) as of June 30, 2010 and 2009 and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

~~SIGNATURES~~We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In ~~accordance~~our ~~with~~opinion, ~~Section~~the 13consolidated orfinancial ~~15(d)~~statements ~~of the~~referred ~~Exchange~~to ~~Act~~above present fairly, in all material respects, the ~~Registrant~~financial ~~caused~~position ~~this~~of ~~report~~Voxware, toInc. beand ~~signed~~subsidiaries onat ~~its~~June ~~behalf by~~30, 2010 and 2009, and the ~~undersigned~~results of their operations and their cash flows for the years then ended, ~~thereunto~~in ~~duly~~conformity ~~authorized~~with accounting principles generally accepted in the United States of America.

~~VOXWARE, INC. By:~~ /s/ ~~Scott~~BDO J.USA, ~~Yetter~~LLP ~~Scott J. Yetter~~Bethesda, ~~President~~Maryland ~~and~~September ~~Chief~~28, ~~Executive Officer~~2010

~~Date: September 28, 2009~~F-2

-Voxware, 37Inc. and Subsidiaries -Consolidated Balance Sheets (in thousands, except share data)

In accordance with the Exchange Act, this report has been signed below be the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

	June 30, 2010			June 30, 2009
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	3,360		$	4,342
Accounts receivable, net of allowance for doubtful accounts of $180 and
$158 at June 30, 2010 and June 30, 2009, respectively		2,415			3,350
Inventory, net		643			564
Deferred project costs		13			33
Prepaid expenses and other current assets		314			337
Total current assets		6,745			8,626

Property and equipment, net		347			454
Capitalized software development costs		51			-
Other assets		196			184
TOTAL ASSETS	$	7,339		$	9,264

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt	$	150		$	525
Accounts payable and accrued expenses		2,438			2,541
Current portion of deferred revenues		2,683			2,365
Total current liabilities		5,271			5,431
Long-term portion of deferred revenues		159			85
Long-term debt, net of current maturities		13			163
Total liabilities		5,443			5,679

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
Common Stock, $0.001 par value, 15,000,000 shares authorized as of
June 30, 2010 and 12,000,000 shares authorized at June 30, 2009;
8,090,433 and 8,007,766 shares issued and outstanding at
June 30, 2010 and June 30, 2009, respectively		8			8
Additional paid-in capital		84,551			83,143
Accumulated deficit		(82,663	)		(79,566	)
Total stockholders' equity		1,896			3,585
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	7,339		$	9,264

Signature	Title	Date
/s/ Joseph A. Allegra	Chairman and Director	September 28, 2009
Joseph A. Allegra
/s/ Scott J. Yetter	President and Chief Executive Officer	September 28, 2009
Scott J. Yetter	(principal executive officer)
/s/ William G. Levering, III	Chief Financial Officer	September 28, 2009
William G. Levering, III	(principal financial and principal accounting officer)
/s/ James L. Alexandre	Director	September 28, 2009
James L. Alexandre
/s/ Donald R. Caldwell	Director	September 28, 2009
Donald R. Caldwell
/s/ Don Cohen	Director	September 28, 2009
Don Cohen
/s/ Robert Olanoff	Director	September 28, 2009
Robert Olanoff
/s/ David J. Simbari	Director	September 28, 2009
David J. Simbari

See accompanying summary of accounting policies and notes to consolidated financial statements.

F- ~~38 -~~3

~~VOXWARE~~Voxware, ~~INC~~Inc. ~~AND~~and Subsidiaries ~~SUBSIDIARIES~~Consolidated Statements of Operations (in thousands, except per share data)

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Year Ended June 30,
	2010			2009
REVENUES
Product revenues	$	6,678		$	8,643
Services revenues		5,908			5,884
Total revenues		12,586			14,527

COST OF REVENUES
Cost of product revenues		2,969			3,321
Cost of services revenues		1,939			2,974
Total cost of revenues		4,908			6,295

GROSS PROFIT		7,678			8,232

OPERATING EXPENSES
Research and development		3,073			3,686
Sales and marketing		4,176			5,321
General and administrative		3,477			4,020
Total operating expenses		10,726			13,027

OPERATING LOSS		(3,048	)		(4,795	)

INTEREST EXPENSE, NET		(49	)		(28	)

LOSS BEFORE INCOME TAXES		(3,097	)		(4,823	)

PROVISION FOR INCOME TAXES		-			(3	)

NET LOSS	$	(3,097	)	$	(4,826	)

NET LOSS PER SHARE
Basic and diluted	$	(0.39	)	$	(0.74	)

WEIGHTED AVERAGE NUMBER OF SHARES USED IN
COMPUTING NET LOSS PER SHARE
Basic and diluted		8,041			6,532

Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of June 30, 2009 and 2008	F-3
Consolidated Statements of Operations for the years ended June 30, 2009 and 2008	F-4
Consolidated Statements of Stockholders’ Equity for the years ended June 30, 2009 and 2008	F-5
Consolidated Statements of Cash Flows for the years ended June 30, 2009 and 2008	F-6
Summary of Accounting Policies and Notes to Consolidated Financial Statements	F-7

See accompanying summary of accounting policies and notes to consolidated financial statements.

F-14

~~Report~~Voxware, ofInc. ~~Independent~~and ~~Registered~~Subsidiaries Consolidated ~~Public~~Statements of Stockholders' Equity ~~Accounting~~(in ~~Firm~~thousands, except share data)

Board of Directors and StockholdersVoxware, Inc.Hamilton, New Jersey

	Common		Par Value
	Stock Number		$.001		Additional			Accumulated
	of Shares		Amount		Paid-in Capital			Deficit			Total
Balance, June 30, 2008	6,488,529		$	6	$	79,032		$	(74,740	)	$	4,298
Share-based compensation	-			-		1,617			-			1,617
Issuance of common stock for
cash	1,428,571			1		2,499			-			2,500
Exercise of stock options	2,500			1		4			-			5
Issuance of restricted stock units	94,080			-		-			-			-
Repurchase of restricted stock units	(5,914	)		-		(9	)		-			(9	)
Net loss	-			-		-			(4,826	)		(4,826	)
Balance, June 30, 2009	8,007,766		$	8	$	83,143		$	(79,566	)	$	3,585
Share-based compensation	-			-		1,439			-			1,439
Exercise of stock options	18,325			-		19			-			19
Issuance of restricted stock units	95,746			-		-			-			-
Repurchase of restricted stock units	(31,404	)		-		(50	)		-			(50	)
Net loss	-			-		-			(3,097	)		(3,097	)
Balance, June 30, 2010	8,090,433		$	8	$	84,551		$	(82,663	)	$	1,896

WeSee ~~have audited the~~ accompanying ~~consolidated~~ ~~balance~~summary ~~sheets~~ of ~~Voxware,~~accounting ~~Inc.~~policies and ~~subsidiaries~~notes ~~(the~~to ~~“Company”) as of June 30, 2009 and 2008 and the related~~ consolidated ~~statements of operations, stockholders’ equity, and cash flows for the years then ended. These~~ financial ~~statements~~ ~~are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial~~ statements ~~based on our audits~~.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.F-5

~~In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of~~ Voxware, Inc. and ~~subsidiaries at June 30, 2009 and 2008,~~Subsidiaries ~~and~~Consolidated ~~the~~Statements ~~results~~ of ~~their~~Cash ~~operations and their cash flows for the years then~~Flows ~~ended,~~ (in ~~conformity with accounting principles generally accepted in the United States of America.~~thousands)

/s/ BDO Seidman, LLP Bethesda, Maryland September 28, 2009

	Year Ended June 30,
	2010			2009
	(unaudited)			(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(3,097	)	$	(4,826	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		271			300
Provision for doubtful accounts		25			62
Share-based compensation charges		1,439			1,617
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable		910			2,722
Inventory		(79	)		(31	)
Deferred project costs		20			130
Prepaid expenses and other current assets		47			43
Other assets		(12	)		132
Increase (decrease) in liabilities:
Accounts payable and accrued expenses		(127	)		(764	)
Deferred revenues		392			(698	)
Net cash used in operating activities		(211	)		(1,313	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(164	)		(91	)
Capitalized software development costs		(51	)		-
Net cash used in investing activities		(215	)		(91	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt		-			451
Repayment of long-term debt		(525	)		(704	)
Repurchase of restricted stock units		(50	)		(9	)
Proceeds from issuance of common stock		-			2,500
Proceeds from exercise of stock options		19			5
Net cash (used in) provided by financing activities		(556	)		2,243

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(982	)		839
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		4,342			3,503
CASH AND CASH EQUIVALENTS, END OF YEAR	$	3,360		$	4,342

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest	$	51		$	71

~~F-2~~See accompanying summary of accounting policies and notes to consolidated financial statements.

~~Voxware, Inc. and SubsidiariesConsolidated Balance Sheets(in thousands, except share data)~~F-6

	June 30, 2009			June 30, 2008
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	4,342		$	3,503
Accounts receivable, net of allowance for doubtful accounts of $158 and
$201 at June 30, 2009 and June 30, 2008, respectively		3,350			6,134
Inventory, net		564			533
Deferred project costs		33			163
Prepaid expenses and other current assets		337			380
Total current assets		8,626			10,713
PROPERTY AND EQUIPMENT, NET		454			663
OTHER ASSETS		184			316
TOTAL ASSETS	$	9,264		$	11,692
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt	$	525		$	566
Accounts payable and accrued expenses		2,541			3,305
Current portion of deferred revenues		2,365			3,043
Total current liabilities		5,431			6,914
Long-term portion of deferred revenues		85			105
Long-term debt, net of current maturities		163			375
Total liabilities		5,679			7,394
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock, $0.001 par value, 12,000,000 shares authorized as of
June 30, 2009 and June 30, 2008; 8,007,766 and 6,488,529
shares issued and outstanding at June 30, 2009 and
June 30, 2008, respectively		8			6
Additional paid-in capital		83,143			79,032
Accumulated deficit		(79,566	)		(74,740	)
Total stockholders' equity		3,585			4,298
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	9,264		$	11,692

SUMMARY OF ACCOUNTING POLICIES AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

~~See~~1. ~~accompanying~~THE ~~summary~~COMPANY ofAND ~~accounting policies~~SUMMARY ~~and~~OF ~~notes~~SIGNIFICANT toACCOUNTING ~~consolidated financial statements.~~ POLICIES:

~~F-3~~Nature of Business Operations

Voxware, Inc. and ~~SubsidiariesConsolidated~~ ~~Statements~~subsidiaries (“Voxware”, or the “Company”) is a leading provider of ~~Operations(in~~software ~~thousands~~for voice recognition solutions that direct the work of the warehouse workforce. Warehouse workers, ~~except per~~wearing ~~share~~headsets ~~data)~~with microphones, speak back and forth to the Company’s voice applications. Since these workers can now work “hands and eyes free” when performing a wide array of tasks such as picking, putaway, and receiving, worker productivity typically increases while errors can be reduced. Voxware 3 offers multiple languages so companies can leverage non-native speaking workers.

	Year Ended June 30,
	2009			2008
REVENUES
Product revenues	$	8,643		$	17,173
Services revenues		5,884			6,211
Total revenues		14,527			23,384
COST OF REVENUES
Cost of product revenues		3,321			5,835
Cost of services revenues		2,974			3,718
Total cost of revenues		6,295			9,553
GROSS PROFIT		8,232			13,831
OPERATING EXPENSES
Research and development		3,686			3,830
Sales and marketing		5,321			6,019
General and administrative		4,020			3,414
Total operating expenses		13,027			13,263
OPERATING (LOSS) PROFIT		(4,795	)		568
INTEREST (EXPENSE) INCOME, NET		(28	)		24
(LOSS) PROFIT BEFORE INCOME TAXES		(4,823	)		592
PROVISION FOR INCOME TAXES		(3	)		(7	)
NET (LOSS) PROFIT	$	(4,826	)	$	585
NET (LOSS) PROFIT PER SHARE
Basic	$	(0.74	)	$	0.09
Diluted	$	(0.74	)	$	0.08
WEIGHTED AVERAGE NUMBER OF SHARES USED IN
COMPUTING NET (LOSS) PROFIT PER SHARE
Basic		6,532			6,417
Diluted		6,532			7,139

The Company’s primary software product is Voxware 3. Voxware 3 is a unique product in the supply chain market as it combines 1) a studio for designing and configuring voice solutions, 2) an open, standards-based environment and 3) a patented software technology for managing speech recognition within a web browser architecture. By using technology that leverages open, web-centric standards to integrate voice solutions within their overall IT infrastructures with a system that is configurable and adaptable, Voxware’s customers can respond to change rapidly. Thus, the Company finds its customers achieve benefits faster with less cost since systems can be implemented more rapidly using less resources.

~~See~~A ~~accompanying~~complete ~~summary~~voice ofrecognition ~~accounting policies~~solution combines software, hardware and ~~notes~~professional services. The primary focus and the core of Voxware’s business is the software component of the solution. Customers may choose from a variety of certified hardware devices, which may or may not be supplied by Voxware. Customers may also choose to ~~consolidated~~have ~~financial~~solutions ~~statements~~delivered by receiving services from the Company or from its certified partners that also resell the Voxware solution. Therefore, the software that both enables voice recognition and also facilitates the creation of voice applications or workflows is the foundation of the Company’s business.

FThe Company sells Voxware 3 primarily to large companies that operate warehouses and distribution centers. Voxware’s customers come from a variety of industry sectors, including food service, grocery, retail, consumer packaged goods, automotive parts, third-4party logistics, publishing and wholesale distribution. The Company’s technology has the ability to integrate easily with an external warehouse management system (“WMS”).

~~Voxware,~~The ~~Inc.~~Company also sells software and ~~SubsidiariesConsolidated~~ ~~Statements~~some ofhardware ~~Stockholders'~~accessories ~~Equity~~to value-added resellers (~~in thousands~~“VARs”), ~~except~~who ~~share~~in ~~data)~~turn develop and deliver voice solutions based on Voxware software for their customers.

	Common		Par Value
	Stock Number		$.001		Additional			Accumulated			Accumulated Other
	of Shares		Amount		Paid-in Capital			Deficit			Comprehensive Loss			Total
Balance, June 30, 2007	6,368,963		$	6	$	78,088		$	(75,325	)	$	(17	)	$	2,752
Share-based compensation	-			-		898			-			-			898
Exercise of stock options	58,774			-		46			-			-			46
Issuance of restricted stock units	60,792			-		-			-			-			-
Comprehensive income:
Net profit	-			-		-			585			-			585
Foreign currency translation
adjustment	-			-		-			-			17			17
Total comprehensive income															602
Balance, June 30, 2008	6,488,529		$	6	$	79,032		$	(74,740	)	$	-		$	4,298
Share-based compensation	-			-		1,617			-			-			1,617
Issuance of common stock for
cash	1,428,571			1		2,499			-			-			2,500
Exercise of stock options	2,500			1		4			-			-			5
Issuance of restricted stock units	94,080			-		-			-			-			-
Repurchase of restricted stock units	(5,914	)		-		(9	)		-			-			(9	)
Comprehensive loss:
Net loss	-			-		-			(4,826	)		-			(4,826	)
Total comprehensive loss															(4,826	)
Balance, June 30, 2009	8,007,766		$	8	$	83,143		$	(79,566	)	$	-		$	3,585

Voxware’s revenues are generated primarily from software license fees, maintenance fees, professional services and hardware products sales to both end customers and VARs.

~~See~~The ~~accompanying~~European ~~summary~~customers ofaccounted ~~accounting policies~~for 27% and ~~notes~~28% toof ~~consolidated~~the ~~financial~~Company’s ~~statements.~~total revenue for fiscal years 2010 and 2009, respectively.

FThe Company’s operating results may fluctuate significantly in the future as a result of a variety of factors, including the Company’s ability to compete in the voice-5based logistics market, the budgeting cycles of potential customers, the lengthy sales cycle of the Company’s solutions, the volume of and revenues derived from sales of products utilizing our third-party partners network, the introduction of new products or services by the Company or its competitors, pricing changes in the industry, the degree of success of the Company’s efforts to penetrate its target markets, technical difficulties with respect to the use of products developed by the Company or its licensees and general economic conditions.

~~Voxware,~~Basis ~~Inc. and SubsidiariesConsolidated Statements~~ of ~~Cash Flows(in thousands)~~Presentation

	Year Ended June 30,
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) profit	$	(4,826	)	$	585
Adjustments to reconcile net (loss) profit to net cash used in operating activities:
Depreciation and amortization		300			279
Bed debt expense		62			136
Share-based compensation		1,617			898
Recognition of foreign currency translation adjustment upon liquidation of Voxware, n.v.		-			17
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable		2,722			(1,032	)
Inventory		(31	)		513
Deferred project costs		130			105
Prepaid expenses and other current assets		43			(173	)
Other assets		132			(263	)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses		(764	)		(720	)
Deferred revenues		(698	)		(579	)
Net cash used in operating activities		(1,313	)		(234	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(91	)		(583	)
Net cash used in investing activities		(91	)		(583	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt		451			-
Repayment of long-term debt		(704	)		(687	)
Repurchase of restricted stock units		(9	)		-
Proceeds from issuance of common stock		2,500			-
Proceeds from exercise of stock options		5			46
Net cash provided by (used in) financing activities		2,243			(641	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		839			(1,458	)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		3,503			4,961
CASH AND CASH EQUIVALENTS, END OF YEAR	$	4,342		$	3,503
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest	$	71		$	120

The Accounting Standards Codification (“ASC”) issued by the Financial Accounting Standards Board (“FASB”) has become the source of authoritative accounting principles generally accepted in the United States of America (“U.S. GAAP”). The ASC only changes the referencing of financial accounting standards and does not change or alter existing U.S. GAAP. In preparing the financial statements, the Company evaluated all events or transactions that occurred after June 30, 2010 through the date the Company issued these consolidated financial statements. See note 13 – Subsequent Events.

~~See~~Summary ~~accompanying summary~~ of ~~accounting policies~~Significant ~~and~~Accounting ~~notes to consolidated financial statements.~~ Policies

~~F-6~~Use of Estimates

~~SUMMARY~~The OFpreparation ~~ACCOUNTING~~of ~~POLICIES~~financial ~~AND NOTES~~statements TOand ~~CONSOLIDATED~~related ~~FINANCIAL~~disclosures ~~STATEMENTS~~in conformity with U.S. GAAP requires management to make judgments, assumptions and estimates that affect the amounts reported in the Company’s consolidated financial statements and accompanying notes. The Company bases its estimates and judgments on historical experience and on various other assumptions that it believes are reasonable under the circumstances. However, future events are subject to change, and the best estimates and judgments routinely require adjustment. The amounts of assets and liabilities reported in the Company’s consolidated balance sheets, and the amounts of revenues and expenses reported for each of its fiscal periods, are affected by estimates and assumptions which are used for, but not limited to, the accounting for the allowance for doubtful accounts, warranty costs, impairments, inventory, share-based compensation and income taxes. Actual results could differ from these estimates.

~~1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:~~ F-7

~~Nature~~Principles of ~~Business Operations~~Consolidation

~~Voxware,~~The ~~Inc.~~accompanying ~~and~~consolidated ~~subsidiaries~~financial ~~(“Voxware”, or~~statements include the ~~“Company”)~~financial isstatements ~~a leading provider~~ of ~~software~~Voxware, ~~for voice recognition solutions that direct the work of the warehouse workforce~~Inc. ~~Warehouse~~and ~~workers, wearing~~its ~~headsets~~wholly-owned ~~with microphones~~subsidiaries, ~~speak~~Verbex ~~back~~Acquisition Corporation and ~~forth~~Voxware to(UK) ~~the Company’s voice applications~~Limited. ~~Since~~All ~~these~~significant ~~workers~~inter-company ~~can~~balances ~~now work “hands~~ and ~~eyes~~transactions ~~free”~~have ~~when performing~~been aeliminated ~~wide~~in ~~array~~consolidation. ofVoxware ~~tasks~~(UK) ~~such~~Limited aswas ~~picking,~~established ~~putaway,~~during ~~and~~fiscal ~~receiving,~~year ~~worker productivity~~2008 ~~typically~~in ~~increases~~conjunction ~~while~~with ~~errors~~the ~~can~~Company’s bedecision ~~reduced.~~to ~~Voxware~~invest 3additional ~~offers multiple~~resources ~~languages~~to sosell ~~companies~~to ~~can~~and ~~leverage~~service ~~non-native~~customers ~~speaking~~in ~~workers~~Europe.

~~The~~Revenue Company’s primary software product is Voxware 3. Voxware 3 is a unique product in the supply chain market as it combines 1) a studio for designing and configuring voice solutions, 2) an open, standards-based environment and 3) a patented software technology for managing speech recognition within a web browser architecture. By using technology that leverages open, web-centric standards to integrate voice solutions within their overall IT infrastructures with a system that is configurable and adaptable, Voxware’s customers can respond to change rapidly. Thus, the Company finds its customers achieve benefits faster with less cost since systems can be implemented more rapidly using less resources. Recognition

ARevenues ~~complete~~are ~~voice~~generated ~~recognition~~from ~~solution combines~~licensing application software, ~~hardware~~selling ~~and~~related ~~professional~~computer ~~services.~~hardware ~~The~~and ~~primary~~accessories ~~focus~~ and ~~the core~~providing ofservices, ~~Voxware’s~~including ~~business~~professional isdeployment, ~~the~~configuration, ~~software~~customized ~~component~~application ~~of the solution. Customers may choose from a variety of certified hardware devices~~development, ~~which~~training ~~may or may not be supplied by Voxware. Customers may also choose to have solutions delivered by receiving~~ services ~~from the Company or from its certified partners that also resell the Voxware solution. Therefore~~, ~~the~~ software ~~that~~maintenance, ~~both~~extended ~~enables~~hardware ~~voice recognition~~warranty and ~~also~~technical ~~facilitates~~support ~~the creation of voice applications or workflows is the foundation of the Company’s business~~services.

~~The~~Product ~~Company~~revenues ~~sells~~consist ~~Voxware~~of 3software ~~primarily~~license ~~to large~~fees, ~~companies~~sales ~~that~~of ~~operate~~related ~~warehouses~~computer hardware and ~~distribution~~accessories ~~centers.~~and ~~Voxware’s customers~~extended ~~come~~hardware warranties. Revenues from the licensing of software are recognized when; (i) a ~~variety~~signed contract or other persuasive evidence of ~~industry~~an ~~sectors,~~arrangement ~~including~~exists; ~~food~~(ii) ~~service, grocery,~~the ~~retail,~~product ~~consumer~~has ~~packaged~~been ~~goods,~~shipped ~~automotive~~or ~~parts~~electronically delivered; (iii) the license fee is fixed and determinable and (iv) collection of the resulting receivable is probable. This generally occurs upon shipment of software or completion of the implementation, ~~third-party logistics~~if applicable, ~~publishing~~provided collection is determined to be probable and ~~wholesale~~there ~~distribution~~are no significant post-delivery obligations. ~~The~~If ~~Company’s~~an ~~technology~~acceptance ~~has the~~period ~~ability~~is required to ~~integrate~~ensure ~~easily~~satisfactory delivery of the application software solution, as may occur for the initial site implementation for new direct-sales customers, revenues are recognized upon customer acceptance. Agreements with most direct customers do not include an ~~external~~acceptance ~~warehouse~~period, ~~management~~so ~~system~~revenues from the sale of hardware and accessories and licensing of software in these transactions are recognized upon shipment. Extended hardware warranty revenues are recognized ratably over the life of the contract, which is generally either one year or ~~WMS~~ three years. Channel partner revenue is recognized when the four criteria set forth above in clauses (i) through (iv) are met. For the collectibility criteria, revenue from each channel partner is deferred until cash is collected unless a pattern of collectibility is established through actual transactions with each specific channel partner.

~~The~~Services ~~Company~~revenues ~~also~~consist ~~sells~~of professional deployment, configuration, customized application development, training services, software maintenance and ~~some hardware~~technical ~~accessories~~support toservices. ~~value-added~~Professional ~~resellers~~services revenues are generally recognized as the services are performed. For arrangements in which professional services are provided in conjunction with software, orprofessional ~~VARs~~services revenues generated by services provided prior to delivery of software are deferred until delivery of all software. Revenues from maintenance and technical support, ~~who~~which intypically ~~turn~~consist ~~develop~~of unspecified when-and ~~deliver~~-if-available ~~voice~~product ~~solutions~~updates ~~based~~and oncustomer ~~Voxware~~telephone ~~software~~support ~~for~~services, ~~their customers~~are recognized ratably over the term of the service period, which is generally one year.

~~Voxware’s~~The ~~revenues~~Company ~~are~~recognizes ~~generated~~revenue ~~primarily~~ in accordance with the Software Revenue Recognition guidance of ASC 985 - Software, which requires that revenue recognized from multiple element arrangements that include software ~~license~~licenses ~~fees~~be allocated to the various elements of the arrangement based on the fair values of the elements, ~~maintenance~~such ~~fees~~as hardware, ~~professional~~deployment services and ~~hardware products~~maintenance ~~sales~~and technical support services. We follow the residual method of accounting as provided in ASC 985. Under the residual method, the aggregate arrangement fee is allocated to ~~both~~each ~~end~~of ~~customers~~the ~~and~~undelivered ~~VARs~~elements in an amount equal to their fair values, with the residual arrangement fee allocated to the delivered elements. The fair value of the undelivered elements included in the Company’s multi-element sales arrangements is based on vendor specific objective evidence (“VSOE”).

The ~~European~~fair ~~customers~~value ~~accounted~~of ~~for~~elements ~~28% and~~not ~~35%~~essential ofto the ~~Company’s~~functioning ~~total~~of ~~revenue~~the ~~for~~software, ~~fiscal~~including ~~years~~hardware ~~2009~~units and ~~2008~~related accessories, ~~respectively~~ are calculated in accordance with the Multiple Element Arrangements guidance of ASC 605 – Revenue Recognition. Under the ASC 605 guidance, the fair value of hardware elements is determined based on the price when it is sold separately by either the Company or a competitor.

The Company’s ~~operating~~determines ~~results~~VSOE ~~may fluctuate~~of ~~significantly in~~ the ~~future~~fair asvalues ~~a result~~ of amaintenance ~~variety~~and oftechnical ~~factors, including~~support ~~the Company’s ability to compete in the voice-~~based ~~logistics~~on ~~market, the~~annual ~~budgeting~~renewal ~~cycles~~rates ofprovided ~~potential~~to customers, ~~the~~and ~~lengthy~~for ~~sales~~professional ~~cycle~~services ofbased ~~the Company’s~~on ~~solutions,~~standard ~~the~~hourly ~~volume~~rates ofwhen ~~and~~such ~~revenues~~services ~~derived~~are ~~from~~provided ~~sales~~on ofa ~~products utilizing our third~~stand-~~party~~alone ~~partners~~basis. ~~network,~~As ~~the introduction~~ of ~~new~~June ~~products or services by the Company or its competitors~~30, ~~pricing changes in the industry~~2010, the ~~degree~~ ~~of success of the~~ Company’s ~~efforts~~believes tothat ~~penetrate~~they ~~its~~have ~~target~~realized ~~markets, technical~~VSOE ~~difficulties with respect to the use~~ of ~~products developed by~~ the ~~Company~~ orfair ~~its~~values ~~licensees~~for maintenance and ~~general~~professional ~~economic conditions~~services.

~~Summary~~Deferred revenues consist of ~~Significant~~unearned ~~Accounting Policies~~customer deposits, extended hardware warranties and post contract support (“PCS”) arrangements. Customer deposits are recognized as revenue upon customer acceptance of the underlying product and services in conjunction with the recognition of deferred project costs. PCS arrangements include software maintenance revenues. These arrangements, which sometimes include amounts bundled with initial revenues, are deferred upon invoicing and recognized as revenues over the term of the service period, which is typically one year. Revenues from extended hardware warranties are recognized over the term of the warranty, which is typically one year. Certain extended hardware warranty arrangements have a three year term.

~~Use of Estimates~~F-8

~~The~~Travel ~~preparation~~costs ofassociated ~~financial statements and related disclosures in conformity~~ with ~~accounting~~professional ~~principles~~services ~~generally accepted~~and inbilled ~~the United States of America requires management~~ to ~~make~~customers ~~judgments, assumptions~~are ~~and~~recorded ~~estimates~~as ~~that~~services ~~affect~~revenues ~~the~~at ~~amounts reported in~~ the ~~Company’s consolidated~~time ~~financial~~they ~~statements and accompanying notes. The Company bases its estimates and judgments on historical experience and on various other assumptions that it believes~~ are ~~reasonable~~incurred ~~under~~by ~~the circumstances~~Voxware. ~~However, future~~Services events are subject to change, and the best estimates and judgments routinely require adjustment. The amounts of assets and liabilities reported in the Company’s consolidated balance sheets, and the amounts of revenues ~~and expenses~~included ~~reported~~billed ~~for~~travel ~~each~~costs oftotaling ~~its fiscal periods~~$165,000 ~~are affected by estimates~~ and ~~assumptions~~ ~~which are used for~~$189,000, ~~but not limited to~~respectively, ~~the~~during ~~accounting for~~ the ~~allowance~~ ~~for~~years ~~doubtful~~ended ~~accounts,~~June ~~warranty costs~~30, ~~impairments,~~2010 ~~inventory, share-based compensation~~ and ~~income taxes~~2009. ~~Actual results could differ from these estimates.~~

~~F-7~~Research and Development

~~Principles~~Research and development expenditures are charged to operations as incurred. In accordance with ASC 985, development costs incurred in connection with the research and development of ~~Consolidation~~ software products and enhancements to existing software products are charged to expense as incurred until technological feasibility has been established, at which time such costs are capitalized until the product is available for general release to customers. Technological feasibility is evidenced by a detailed program design or the point at which there is a completed working model of the software product, the completeness of which is to be confirmed by testing. According to ASC 985, the working model is generally deemed to exist with commencement of beta testing. Capitalization ceases when the product is available for general release to customers, at which time amortization of the capitalized costs begins, using the greater of the ratio of current revenue to the total of current and anticipated revenues or straight-line over the estimated remaining life of the product, not to exceed three years. The Company capitalized $51,000 of costs during the year ended June 30, 2010. No costs associated with the development of software products were capitalized during the year ended June 30, 2009.

~~The~~Net ~~accompanying~~Loss ~~consolidated~~Per financial statements include the financial statements of Voxware, Inc. and its wholly-owned subsidiaries, Verbex Acquisition Corporation, Voxware (UK) Limited and Voxware n.v. All significant inter-company balances and transactions have been eliminated in consolidation. Voxware (UK) Limited was established during fiscal year 2008 in conjunction with the Company’s decision to invest additional resources to sell to and service customers in Europe. Voxware N.V. was dissolved in fiscal year 2008. Share

~~Revenue~~The ~~Recognition~~Company computes net loss per share in accordance with ASC 260 – Earnings Per Share. Basic net loss per share is calculated by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is calculated by dividing net loss by the weighted average number of shares of common stock outstanding for the period, adjusted to reflect the dilutive impact of potential shares of common stock outstanding during the period. As the Company had a net loss during the years ended June 30, 2010 and 2009, the impact of the assumed exercise of in-the-money stock options and warrants in the aggregate amount of approximately 156,000 and 398,000 shares at June 30, 2010 and 2009, respectively, is anti-dilutive and as such, have been excluded from the calculation of diluted net loss per share.

~~Revenues~~Cash ~~are generated from licensing application software, selling related computer hardware~~ and ~~accessories, providing~~Cash extended hardware warranty and providing services, including professional deployment, configuration, customized application development, training services, software maintenance and technical support services. Equivalents

~~Product~~Cash ~~revenues consist of software license fees, sales of related computer hardware~~ and ~~accessories~~cash ~~and~~equivalents ~~extended hardware~~consist ~~warranties. Revenues from the licensing~~ of ~~software~~investments isin ~~recognized~~highly ~~when (i)~~liquid ashort-term ~~signed~~instruments ~~contract or other persuasive evidence of an arrangement exists;~~ (~~ii)~~short-term ~~the~~bank ~~product~~deposits ~~has been shipped or electronically delivered; (iii) the license fee is fixed~~ and ~~determinable;~~commercial ~~and (iv~~paper) collection of the resulting receivable is probable. This generally occurs upon shipment of software or completion of the implementation, if applicable, provided collection is determined to be probable and there are no significant post-delivery obligations. If an acceptance period is required to ensure satisfactory delivery of the application software solution, as may occur for the initial site implementation for new direct-sales customers, revenues are recognized upon customer acceptance. Revenues from the sale of hardware and accessories are generally recognized upon shipment. Agreements with ~~some~~original ~~direct~~maturities ~~customers do not include an acceptance period, so revenues from the sale~~ of ~~hardware~~90 ~~and~~days accessories and licensing of software in these transactions are recognized upon shipment. Extended hardware warranty revenues are recognized ratably over the life of the contract, which is generally either one year or ~~three years~~less. Channel partner revenue is recognized when the above four criteria are met. For the collectibility criterion, revenue from each channel partner is deferred until cash is collected unless a pattern of collectibility is established through actual transactions with each specific channel partner.

~~Services~~Accounts ~~revenues~~Receivable ~~consist of professional deployment, configuration, customized application development, training services, software maintenance~~ and ~~technical~~Credit support services. Professional services revenues are generally recognized as the services are performed. For arrangements in which professional services are provided in conjunction with software, professional services revenues generated by services provided prior to delivery of software is deferred until delivery of all software. Revenues from maintenance and technical support, which typically consist of unspecified when-and-if-available product updates and customer telephone support services, is recognized ratably over the term of the service period, which is generally one year. Policies

~~The~~Accounts ~~Company~~receivable ~~recognizes~~are ~~revenue~~uncollateralized ~~in accordance~~customer ~~with~~obligations ~~the~~due ~~American~~under ~~Institute~~normal oftrade ~~Certified~~terms ~~Public~~generally ~~Accountants~~requiring ~~Statement of~~payment ~~Position~~within ~~(“SOP”)~~30 ~~No. 97-2~~days, ~~“Software~~depending Revenue Recognition”, as amended by SOP No. 98-9. SOP 97-2, as amended, requires that revenue recognized from multiple element arrangements that include software licenses be allocated to the various elements of the arrangement based on ~~the~~contractual ~~fair values of the elements, such as hardware, deployment services and maintenance and technical support services~~terms. ~~The~~ ~~Company~~Unpaid ~~follows~~accounts ~~the~~do ~~residual~~not ~~method~~bear ~~of accounting under SOP 97-2, as amended~~interest. ~~Under~~Accounts ~~the~~receivable ~~residual~~are ~~method,~~stated ~~the~~at ~~aggregate arrangement fee is allocated to each of~~ the ~~undelivered elements in an~~ amount ~~equal~~billed to ~~their~~the ~~fair~~customer. ~~values, with~~Payments ~~the~~of ~~residual~~accounts ~~arrangement~~receivable ~~fee~~are allocated to the ~~delivered~~specific ~~elements.~~invoices ~~The~~identified ~~fair value~~on of the ~~undelivered elements included in the Company~~customer’s ~~multi-element~~remittance ~~sales arrangements~~advice ~~is based on vendor specific objective evidence,~~ or ~~VSOE. The fair value of elements not essential to the functioning of the software~~, ~~including hardware~~if ~~units and related accessories~~unspecified, are ~~calculated~~applied into ~~accordance~~the ~~with Financial~~earliest ~~Accounting~~unpaid ~~Standards Board Emerging Issues Task Force (“EITF”) No~~invoice. ~~00-21, “Revenue Arrangements with Multiple Deliverables”.~~

~~Under~~The ~~EITF~~carrying ~~00-21,~~amount ~~the~~of ~~Company~~accounts ~~determines the~~receivable ~~VSOE~~is ofreduced ~~fair~~by ~~value~~a ofvaluation ~~hardware~~allowance ~~elements~~that ~~based~~reflects onmanagement’s ~~the~~best ~~price~~estimate ~~when~~of ~~they~~the ~~are sold~~amounts ~~separately.~~that ~~The~~will ~~Company~~not ~~determines~~be ~~VSOE~~collected. ofManagement ~~the~~reviews ~~fair~~certain ~~values~~specific ofaccounts ~~maintenance and~~receivable ~~technical~~balances ~~support~~and, based on ~~annual~~an ~~renewal~~assessment ~~rates~~of ~~provided~~the tocollectibility ~~customers~~of specific customer accounts and ~~for~~ ~~professional~~an ~~services~~assessment ~~based~~of oninternational ~~standard~~and ~~hourly~~economic ~~rates~~risk, ~~when~~estimates ~~such~~the ~~services~~portion, ~~are provided~~if onany, aof ~~stand-alone~~the ~~basis.~~balance Asthat ofwill ~~June~~not ~~30,~~be ~~2009,~~collected. ~~the~~All ~~Company~~other ~~believes~~accounts ~~that it~~have ~~has~~a ~~realized~~general ~~VSOE~~reserve ofpercentage ~~the~~applied ~~fair~~to ~~values~~their ~~for~~balance ~~hardware,~~based ~~maintenance~~on ~~and professional~~the ~~services.~~age of the receivable.

Deferred revenues consist of unearned customer deposits, extended hardware warranties, depot management service fees and post contract support (“PCS”) arrangements. Customer deposits are recognized as revenue upon customer acceptance of the underlying product and services in conjunction with the recognition of deferred project costs. PCS arrangements include software maintenance revenues. These arrangements, which sometimes include amounts bundled with initial revenues, are deferred upon invoicing and recognized as revenues over the term of the service period, which is typically one year. Revenues from extended hardware warranties are recognized over the term of the warranty, which is typically one year. Certain extended hardware warranty arrangements have a three year term. Revenues from depot management services, which were provided through December 2007, were recognized over the contract period.Inventory

FThe Company values its inventory at the lower of average cost (which approximates first-8in, first-out cost) or net realizable value. If the Company believes that demand no longer allows them to sell the inventory above cost or at all, the Company writes down that inventory to net realizable value or writes off excess inventory levels.

~~The~~Property ~~Company~~and continues to generate royalty revenues from our legacy speech compression technology business, which was sold in 1999. Royalties are earned on technologies our customers incorporate into their products for resale pursuant to contracts that are renewable year to year. Revenues are recognized at the time of the customers’ shipment of those products, as estimated based upon reports received periodically from our customers.Equipment

~~Travel~~Property ~~costs~~and ~~associated~~equipment ~~with~~are ~~professional services~~stated ~~and~~at ~~billed~~cost. toPurchases ~~customers~~of ~~are~~property ~~recorded~~and asequipment ~~services~~valued ~~revenues~~ at ~~the~~less ~~time they~~than $1,000 are ~~incurred~~charged byto ~~Voxware~~expense. ~~Services~~Depreciation ~~revenues~~is ~~included~~computed ~~billed~~on ~~travel~~a ~~costs totaling~~straight-line ~~$189,000~~basis ~~and~~over ~~$297,000,~~the ~~respectively,~~estimated ~~during~~useful lives of the ~~years~~assets, ~~ended~~ranging ~~June~~from 30three to seven years. Maintenance, ~~2009~~ repairs and ~~2008.~~minor replacements are charged to expense as incurred.

~~Research and Development~~F-9

~~Research~~Impairment ~~and development expenditures are charged to operations as incurred. Pursuant to Statement~~ of ~~Financial~~Long-Lived ~~Accounting Standards~~Assets (“SFAS”) No. 86, “Accounting for the Cost of Computer Software to be Sold, Leased or Otherwise Marketed”, development costs incurred in connection with the research and development of software products and enhancements to existing software products are charged to expense as incurred until technological feasibility has been established, at which time such costs are capitalized until the product is available for general release to customers. The Company defines technological feasibility as the point at which there is a completed working model of the software product, the completeness of which is to be confirmed by testing. According to SFAS 86, the working model is generally deemed to exist with commencement of beta testing. No costs associated with the development of software products were capitalized during the years ended June 30, 2009 and 2008 as technological feasibility is achieved substantially at the time the software is released for general sale to our customers.

~~Net~~The ~~(Loss)~~Company ~~Profit~~reviews ~~Per Share~~its long-lived assets, including property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. To determine the recoverability of its long-lived assets, the Company evaluates the estimated future undiscounted cash flows that are directly associated with, and that are expected to arise as a direct result of, the use and eventual disposition of the long-lived asset. If the estimated future undiscounted cash flows demonstrate that recoverability is not probable, an impairment loss would be recognized. An impairment loss would be calculated based on the excess carrying amount of the long-lived asset over its fair value.

~~The Company computes net (loss) profit per share under the provisions of SFAS No. 128, “Earnings per~~ Share” (“SFAS 128”). Basic net (loss) profit per share is calculated by dividing net (loss) profit by the weighted average number of shares of common stock outstanding during the period. Diluted net (loss) profit per share is calculated by dividing net (loss) profit by the weighted average number of shares of common stock outstanding for the period, adjusted to reflect the dilutive impact of potential shares of common stock outstanding during the period. As the Company had a net loss for the year ended June 30, 2009, the impact of the assumed exercise of in-~~the-money stock~~Based ~~options~~Compensation and warrants in the aggregate amount of approximately 398,000 shares at June 30, 2009 is anti-dilutive and as such, these amounts have been excluded from the calculation of diluted net profit (loss) per share. The impact at June 30, 2008 of the assumed exercise of in-the-money stock options and warrants in the aggregate amount of approximately 722,000 shares is included in the calculation of diluted net profit (loss) per share for the year ended June 30, 2008.

~~Cash~~The Company accounts for share-based compensation in accordance with ASC 718 – Compensation – Stock Compensation, which requires all companies to measure compensation cost for all share-based payments, including employee stock options, at fair value. The values of the portions of the awards that are ultimately expected to vest are recognized as expense over the requisite service periods. Compensation expense associated with equity awards is determined based on the estimated fair value of the award itself, measured using either current market data or an established option pricing model. The Company uses the Black-Scholes option pricing model to determine the fair value of option awards and ~~Cash~~the ~~Equivalents~~ market value on the date of the grant to determine the fair value of other equity awards. The measurement date for option and other equity awards is the date of grant.

~~Cash~~Warranty ~~and~~Costs ~~cash equivalents consist of investments in highly liquid short-term instruments (short-term bank deposits and commercial paper) with maturities of 90 days or less from the date of purchase.~~

~~Accounts~~The ~~Receivable~~Company warrants all manufacturer defects on its voice-based solutions, generally commencing upon shipment, and ~~Credit Policies~~extending for twelve months. The Company accrues warranty costs based on its estimate of expected repair cost per unit, service policies and specific known issues. Certain extended hardware warranty services are outsourced to a third-party in accordance with contracts that generally span three years. The costs associated with these contracts are prepaid and recognized ratably over the life of the contract. Changes in accrued warranty costs were as follows:

Accounts receivable are uncollateralized customer obligations due under normal trade terms generally requiring payment within 30 days, depending on contractual terms. Unpaid accounts do not bear interest. Accounts receivable are stated at the amount billed to the customer. Payments of accounts receivable are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoice.

	Balance at		Charged to		Balance at
	Beginning of		Costs and		End of
	Period		Expenses	Deductions	Period
	(In thousands)
Year ended June 30, 2009	$	70	45	65	$	50
Year ended June 30, 2010		50	15	30		35

~~The~~Concentration ~~carrying amount~~ of ~~accounts~~Credit receivable is reduced by a valuation allowance that reflects management’s best estimate of the amounts that will not be collected. Management reviews certain specific accounts receivable balances and, based on an assessment of the collectibility of specific customer accounts and an assessment of international and economic risk, estimates the portion, if any, of the balance that will not be collected. All other accounts have a general reserve percentage applied to their balance based on the age of the receivable. The Company performed a detailed review of the allowance for doubtful accounts as of June 30, 2008. Bad debt expense for the year ended June 30, 2008 in the amount of $136,000 is net of a reduction of $94,000 resulting from the review of the allowance for doubtful accounts at that date. Risk

~~Inventory~~Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash balances and trade receivables. The Company invests its excess cash in highly liquid investments (short-term bank deposits and commercial paper). The Company’s customer base principally comprises distribution and logistics companies in food service, grocery, retail, consumer packaged goods, third-party logistics providers, wholesale distributors, as well as VARs. The Company does not typically require collateral from its customers.

WeOne ~~value~~customer ~~our~~accounted ~~inventory~~for at14% ~~the~~and ~~lower~~16% of ~~average~~ ~~cost~~total ~~(which~~revenue ~~approximates~~for ~~first-in,~~the ~~first-out~~fiscal ~~cost)~~years orended ~~net~~June ~~realizable value.~~30, If2010 weand ~~believe~~2009, ~~that~~respectively. ~~demand~~No nocustomer ~~longer~~accounted ~~allows~~for usmore tothan ~~sell~~10% ~~our~~of ~~inventory~~total ~~above cost~~receivables or at ~~all~~June 30, we2010. ~~write~~Two ~~down~~separate ~~that~~customers ~~inventory~~accounted tofor ~~net~~15% ~~realizable~~and ~~value~~11% orof ~~write off~~total ~~excess~~receivables ~~inventory~~at ~~levels~~June 30, 2009.

~~F-9~~The Company uses a sole source vendor for its primary wearable computer hardware products that it sells. 49% of the Company’s inventory purchases were derived from this vendor during the year ended June 30, 2010, as compared to 55% during the year ended June 30, 2009. Any disruption in supply by this vendor would prohibit the Company from shipping products, and thus recognizing revenues on hardware.

~~Property~~Income ~~and Equipment~~Taxes

~~Property~~There are significant differences in calculating income or loss for accounting and ~~equipment~~tax purposes, primarily relating to charges that are ~~stated~~recorded atin ~~cost~~the current period for accounting purposes, but are deferred for tax purposes. ~~Purchases~~ Furthermore, tax laws differ in each jurisdiction, yielding differing amounts of ~~property~~taxable ~~and~~income ~~equipment~~or ~~valued~~loss atin ~~less~~each ~~than~~jurisdiction. ~~$1,000~~While ~~are~~Voxware ~~charged~~has substantial net operating losses to ~~expense.~~ ~~Depreciation~~offset istaxable ~~computed~~income onin asome ~~straight-line~~taxing ~~basis~~jurisdictions, ~~over~~certain restrictions may preclude it from fully utilizing the ~~estimated useful~~benefit ~~lives~~of these net operating losses. In addition, the expansion of the ~~assets,~~Company’s ~~ranging~~business ~~from~~requires ~~three~~it to ~~seven~~file ~~years.~~taxes ~~Maintenance~~in jurisdictions where it did not previously operate, ~~repairs~~ and ~~minor~~thus ~~replacements~~does ~~are~~not ~~charged~~have established net operating losses to ~~expense~~offset asthe ~~incurred~~tax liability.

~~Impairment of Long~~F-~~Lived~~10 ~~Assets~~

~~The~~Deferred ~~Company~~income ~~reviews~~tax ~~its long-lived~~ assets~~, including~~ ~~property~~ and ~~equipment,~~liabilities ~~for~~are ~~impairment~~determined ~~whenever~~based ~~events~~on ordifferences ~~changes~~between ~~in circumstances~~the ~~indicate~~financial ~~that~~statement ~~the~~reporting ~~carrying~~and ~~amount~~tax basis of ~~the~~ assets ~~may~~and ~~not~~liabilities beand ~~fully recoverable.~~are Tomeasured ~~determine~~using the ~~recoverability~~enacted oftax ~~its~~rates ~~long-lived~~and ~~assets,~~laws ~~the Company~~that ~~evaluates~~will ~~the~~be ~~estimated~~in ~~future~~effect ~~undiscounted~~when ~~cash~~the ~~flows~~differences ~~that~~ are ~~directly associated~~expected ~~with,~~to ~~and~~reverse. ~~that~~The ~~are~~measurement ~~expected~~of todeferred ~~arise~~income astax aassets ~~direct~~is ~~result of~~reduced, ~~the~~if ~~use and~~necessary, ~~eventual~~by ~~disposition~~a ofvaluation ~~the~~allowance ~~long-lived~~for ~~asset.~~any Iftax ~~the~~benefits ~~estimated~~that ~~future undiscounted~~are ~~cash~~not ~~flows~~expected ~~demonstrate~~to ~~that~~be ~~recoverability~~realized. isThe ~~not~~effect ~~probable,~~of ~~an impairment~~a ~~loss~~change ~~would~~in betax ~~recognized.~~rates Anon ~~impairment~~deferred ~~loss~~income ~~would~~tax beassets ~~calculated based~~and onliabilities ~~the~~is ~~excess~~recognized ~~carrying~~in ~~amount~~the ofperiod ~~the~~that ~~long-lived~~such ~~asset~~tax ~~over~~rate ~~its~~changes ~~fair value~~are enacted.

~~Share-Based~~The ~~Compensation~~ Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of June 30, 2010 and 2009, the Company believes it has no material uncertain tax positions and accordingly it will not recognize any liability for unrecognized tax benefits. For the years ended June 30 2010 and 2009, the Company did not recognize any interest or penalties related to uncertain tax positions.

~~The~~Foreign ~~Company~~Currency ~~accounts~~Translation for share-based compensation in accordance with SFAS No. 123(R), “Share-Based Payment”, which requires all companies to measure compensation cost for all share-based payments, including employee stock options and other equity awards, at fair value. The values of the portions of the awards that are ultimately expected to vest are recognized as expense over the requisite service periods. Compensation expense associated with equity awards is determined based on the estimated fair value of the award itself, measured using either current market data or an established option pricing model. The Company uses the Black-Scholes option pricing model to determine the fair value of option awards and the market value on the date of the grant to determine the fair value of other equity awards. The measurement date for option and other equity awards is the date of grant.

~~Warranty~~The Company incorporated Voxware (UK) Limited (“Voxware UK”) as a wholly-owned subsidiary during the year ended June 30, 2008. Voxware UK’s functional currency is deemed to be the U.S. dollar. Assets and liabilities denominated in foreign currencies are translated into U.S. dollars monthly, at exchange rates as of the balance sheet date, with any adjustment recorded as an increase or decrease to general and administrative expense.

~~The~~Fair ~~Company~~Value ~~warrants~~of ~~all~~Financial ~~manufacturer defects~~Instruments on its voice-based solutions, generally commencing upon shipment, and extending for twelve months. The Company accrues warranty costs based on historical experience and management’s estimates. Changes in accrued warranty costs were as follows:

	Balance at		Charged to		Balance at
	Beginning of		Costs and		End of
	Period		Expenses	Deductions	Period
	(In thousands)
Year ended June 30, 2008	$	73	92	95	$	70
Year ended June 30, 2009		70	45	65		50

Fair value is defined under ASC 820 – Fair Value Measurements and Disclosures as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The guidance describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the third unobservable, that may be used to measure fair value which are the following:

~~Concentration~~Level of1 ~~Credit Risk~~– Quoted prices in active markets for identical assets or liabilities.
~~Financial~~Level ~~instruments~~2 ~~that~~– ~~potentially subject~~Inputs ~~the~~other ~~Company~~than toLevel ~~concentration~~1 ofthat ~~credit~~are ~~risk~~observable, ~~consist~~either ~~principally~~directly ofor ~~cash balances~~indirectly, ~~and~~such ~~trade~~as ~~receivables.~~quoted ~~The~~prices ~~Company~~for ~~invests~~similar ~~its~~assets ~~excess~~or ~~cash~~liabilities; inquoted ~~highly liquid~~prices ~~investments~~in ~~(short-term~~markets ~~bank~~that ~~deposits~~are ~~and~~not ~~commercial~~active; ~~paper).~~or ~~The Company’s~~other ~~customer~~inputs ~~base~~that ~~principally~~are ~~comprises~~observable ~~distribution~~or ~~and~~can ~~logistics companies~~be incorroborated ~~food~~by ~~service,~~observable ~~grocery,~~market ~~retail,~~data ~~consumer~~for ~~packaged~~substantially ~~goods,~~the ~~third-party logistics~~full ~~providers,~~term ~~wholesale~~of ~~distributors,~~the asassets ~~well~~or ~~as value-added resellers~~liabilities. ~~The~~ ~~Company does not typically require collateral from its customers.~~
~~One~~Level ~~customer~~3 ~~accounted~~– ~~for~~Unobservable ~~16%~~inputs ~~and~~that ~~18%~~are ~~of total~~supported ~~revenue~~by ~~for~~little ~~the~~or ~~fiscal~~no ~~years~~market ~~ended~~activity ~~June 30, 2009~~ and ~~2008,~~that ~~respectively. Two~~are ~~separate~~significant ~~customers~~to ~~accounted~~the ~~for~~fair ~~15%~~value ~~and 11%~~ of ~~total~~the ~~receivables~~assets ator ~~June 30, 2009~~liabilities. ~~No customer accounted for more then 10% of total receivables at June 30, 2008.~~

~~The~~At June 30, 2010 and 2009, the Company ~~uses~~held a$1,425,000 ~~sole~~and ~~source~~$1,423,000, ~~vendor~~respectively, ~~for its~~in ~~primary~~money ~~wearable~~market ~~computer~~funds ~~hardware~~which ~~products~~are ~~that~~valued itin ~~sells.~~accordance ~~55%~~with ofLevel ~~the Company’s~~1 ~~inventory~~and ~~purchases~~are ~~were~~included ~~derived~~in ~~from~~cash ~~this~~and ~~vendor~~cash ~~during~~equivalents. ~~the~~The ~~year ended~~Company has outstanding debt as at June 30, 2010 and 2009, asaggregating ~~compared~~$163,000 toand ~~61%~~$688,000, ~~during~~respectively, ~~the~~which ~~year~~is ~~ended~~at ~~June~~variable ~~30,~~interest ~~2008~~rates. ~~Any disruption~~The inCompany ~~supply~~believes bythat ~~this~~the ~~vendor~~carrying ~~would~~value ~~prohibit~~of the ~~Company~~debt ~~from~~approximates ~~shipping products,~~fair ~~and~~value ~~thus~~as ~~recognizing~~at ~~revenues~~June on30, ~~hardware~~2010 and 2009.

~~Income~~Recently ~~Taxes~~Issued Accounting Pronouncements

~~There~~In ~~are~~June ~~significant differences in calculating income or loss for accounting and tax purposes~~2008, ~~primarily~~the ~~relating to~~FASB ~~charges~~issued ~~that~~guidance ~~are~~now ~~recorded~~codified in ~~the~~ASC ~~current~~815 ~~period~~which ~~for~~clarifies ~~accounting~~the ~~purposes,~~determination ~~but are deferred for tax purposes. Furthermore, tax laws differ in each jurisdiction, yielding differing amounts~~ of ~~taxable~~whether ~~income~~an instrument (or ~~loss~~an inembedded ~~each jurisdiction.~~feature) ~~While~~is ~~Voxware~~indexed ~~has substantial net operating losses~~ to ~~offset taxable~~an ~~income~~entity’s inown ~~some taxing jurisdictions~~stock, ~~certain~~which ~~restrictions~~would ~~may~~qualify ~~preclude it~~as ~~from~~a ~~fully~~scope ~~utilizing~~exception ~~the~~under ~~benefit~~ASC ~~of these net operating losses~~815. InWe ~~addition, the~~adopted ~~expansion of~~ the ~~Company’s~~guidance ~~business~~effective ~~requires~~July it1, to2009, ~~file~~and ~~taxes in jurisdictions where~~ it did not ~~previously operate, and thus does not~~ have ~~established~~ ~~net~~a ~~operating~~material ~~losses~~impact toon ~~offset~~our ~~the~~consolidated ~~tax~~financial ~~liability~~statements.

FIn October 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-1013, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements – a consensus of the FASB Emerging Issue Task Force (“ASU No. 2009-13”). ASU No. 2009-13 replaces and significantly changes certain guidance in ASC 605. ASU No. 2009-13 modifies the separation criteria of ASC 605, by eliminating the criterion for objective and reliable evidence of fair value for the undelivered products or services. Instead, revenue arrangements with multiple deliverables should be divided into separate units of accounting if the deliverables meet both of the following criteria:

Deferred income tax assets and liabilities are determined based on differences between the financial statement reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The ~~measurement~~delivered ofitems ~~deferred~~have ~~income~~value ~~tax assets is reduced, if necessary, by a valuation allowance for any tax benefits that are not expected~~ to ~~be realized.~~the ~~The~~customer ~~effect~~on of a ~~change~~standalone inbasis; ~~tax rates on deferred income tax assets~~ and ~~liabilities~~ ~~is recognized in the period that such tax rate changes are enacted.~~
~~The~~If ~~Company adopted~~ the ~~provisions~~arrangement ~~of Financial~~includes ~~Accounting~~a ~~Standards~~general ~~Board~~right ~~Interpretation~~of ~~No.~~return ~~48,~~relative ~~“Accounting~~to ~~for Uncertainty~~the indelivered ~~Income~~items, ~~Taxes~~delivery –or Anperformance ~~interpretation~~ of ~~FASB~~the ~~Statement~~undelivered ~~No.~~items ~~109”~~is ~~(“FIN 48”)~~considered onprobable ~~July~~and 1,substantially ~~2007.~~in ~~As a result of~~ the ~~implementation~~control of ~~FIN 48, no adjustment in~~ the ~~liability for unrecognized income tax benefits was recognized~~vendor.

~~The~~F-11 ~~Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of June 30, 2009, there was no accrued interest related to uncertain tax positions.~~

~~Foreign~~ASU ~~Currency Translation~~No. 2009-13 eliminates the use of the residual method of allocation and requires, instead, that arrangement consideration be allocated, at the inception of the arrangement, to all deliverables based on their relative selling price (i.e., the relative selling price method). When applying the relative selling price method, a hierarchy is used for estimating the selling price for each of the deliverables, as follows:

~~The~~VSOE Company’s wholly-owned subsidiary, Voxware n.v., which was dissolved during the year ended June 30, 2008, utilized its local currency (Euro) as its functional currency. Its assets and liabilities were translated into U.S. dollars monthly, at exchange rates as of the ~~balance sheet~~selling ~~date.~~price ~~Revenues,~~— ~~expenses,~~verifiable ~~gains~~specific ~~and~~objective ~~losses~~evidence; ~~were translated monthly, at average exchange rates during the period. Resulting foreign currency translation adjustments were included as a component of other comprehensive (loss) income.~~
~~The~~Third-party ~~Company~~evidence ~~incorporated Voxware~~ (~~UK) Limited (~~“~~Voxware UK~~TPE”) asof athe ~~wholly-owned~~selling ~~subsidiary~~price ~~during~~— ~~the~~prices ~~year~~of ~~ended~~the ~~June 30,~~vendor’s ~~2008.~~or ~~Voxware~~any UKcompetitor’s ~~functional~~largely ~~currency~~interchangeable isproducts ~~deemed~~or toservices, ~~be the U.S. dollar. Assets and liabilities denominated~~ in ~~foreign~~standalone ~~currencies~~sales ~~are~~to ~~translated~~similarly ~~into U.S.~~situated ~~dollars~~customers; ~~monthly, at exchange rates as of the balance sheet date, with any adjustment recorded as an increase or decrease to general~~ and ~~administrative expense.~~
~~Comprehensive~~Best ~~(Loss)~~estimate ~~Income~~ of the selling price.

The Company ~~has~~will ~~adopted~~adopt ~~SFAS~~ASU No. ~~130, “Reporting~~2009-13 ~~Comprehensive~~effective ~~Income”~~July ~~("SFAS~~1, 130"). Comprehensive income is a more inclusive financial reporting methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation of net (loss) profit. SFAS 130 requires that all items defined as comprehensive income (loss)2010, ~~including changes in the amounts of unrealized gains~~ and ~~losses~~does onnot ~~available-for-sale~~expect ~~securities,~~it beto ~~shown~~have as a ~~component~~material ~~of comprehensive~~impact ~~(loss)~~on ~~income.~~its ~~The~~consolidated ~~entire~~financial ~~accumulated comprehensive loss of $17,000 recorded as of June 30, 2007 was recognized as general and administrative expenses upon the dissolution of Voxware, n~~statements.v. ~~during the year ended June 30, 2008.~~

~~Fair~~In ~~Value~~October 2009, the FASB issued ASU No. 2009-14, Software (“Topic 985”): Certain Revenue Arrangements That Include Software Elements - a consensus of ~~Financial~~the ~~Instruments~~ FASB Emerging Issue Task Force (“ASU No. 2009-14”). Per ASU No. 2009-14, all tangible products containing both software and non-software components, that function together to deliver the product’s essential functionality, will no longer be within the scope of ASC 985. In other words, entities that sell joint hardware and software products that meet the scope exception (i.e., essential functionality) will be required to follow the guidance in ASU No. 2009-14. ASU No. 2009-14 provides a list of items to consider when determining whether the software and non-software components function together to deliver a product’s essential functionality.

~~Fair~~The ~~value~~Company iswill ~~defined~~adopt ~~under~~ASU ~~SFAS~~ No. ~~157, “Fair~~2009-14 ~~Value~~effective ~~Measurements”~~July 1, as2010, ~~the~~and ~~exchange~~does ~~price~~not ~~that~~expect ~~would~~it ~~be received for an asset or paid~~ to ~~transfer~~have a ~~liability~~material ~~(an~~impact ~~exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants~~ on ~~the~~its ~~measurement~~consolidated ~~date.~~financial ~~Valuation techniques used to measure fair value under SFAS No~~statements. 157 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the third unobservable, that may be used to measure fair value which are the following:

~~Level 1 – Quoted prices in active markets for identical assets or liabilities.~~ F-12

~~Level~~ 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. INVENTORY:

~~Level~~The 3components –of ~~Unobservable~~our ~~inputs~~inventory ~~that~~as ~~are~~of ~~supported by~~June ~~little~~30, or2010 ~~no market activity~~ and ~~that~~2009 are ~~significant to the fair value of the assets or liabilities.~~:

The Company has adopted SFAS No. 157 for financial assets and liabilities. The adoption of SFAS No. 157 had no impact on the Company’s consolidated results of operations and financial condition.

	June 30,
	2010			2009
	(in thousands)
Raw materials	$	15		$	6
Work in process		13			15
Finished goods		643			558
Less: inventory reserve		(28	)		(15	)
Inventory - net	$	643		$	564

~~F-11~~3. PROPERTY AND EQUIPMENT:

AtThe ~~June~~components ~~30,~~of ~~2009,~~property ~~the Company held $1,423,000 in money market funds which are valued in accordance with Level 1~~ and ~~are~~ ~~included~~equipment ~~in cash and cash equivalents. The Company has outstanding debt~~ as at ~~June 30, 2009 aggregating $688,000, which is at variable interest rates. The Company believes that the carrying value approximates fair value~~ of ~~the debt as at~~ June 30, 2010 and 2009. are:

Recently Issued Accounting Pronouncements

	June 30,
	2010			2009
	(in thousands)
Equipment	$	2,469		$	2,305
Leasehold improvements		50			50
Furniture and fixtures		641			641
		3,160			2,996
Less: Accumulated depreciation		(2,813	)		(2,542	)
Property and equipment, net	$	347		$	454

InDepreciation ~~June~~expense ~~2008,~~was ~~the~~approximately ~~FASB~~$271,000 ~~ratified~~and ~~the consensus reached on EITF Issue No. 07-05~~$300,000 ~~“Determining~~for ~~Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock” (“EITF 07-05”). EITF 07-05 clarifies~~ the ~~determination~~fiscal ofyears ~~whether~~ended anJune ~~instrument (or an embedded feature) is indexed to an entity’s own stock~~30, ~~which~~2010 ~~would qualify as a scope exception under SFAS No. 133, “Accounting for Derivative Instruments~~ and ~~Hedging Activities”. We will adopt EITF 07-5 effective July 1,~~ 2009, ~~and we do not expect it to have a material impact on our consolidated financial statements~~respectively.

~~In May 2009, the FASB issued Statement of Financial Accounting Standards No~~4. ~~165,~~ACCOUNTS ~~Subsequent~~PAYABLE ~~Events~~AND ~~(“SFAS~~ACCRUED 165”), which provides guidance to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS 165 also requires entities to disclose the date through which subsequent events were evaluated as well as the rationale for why that date was selected. SFAS 165 is effective for interim and annual periods ending after June 15, 2009. Accordingly, the Company has adopted the provisions of SFAS 165 and the adoption has not had a material impact on our consolidated financial statements. In accordance with SFAS 165, the Company has evaluated subsequent events through September 28, 2009, the date of issuance of the Consolidated Financial Statements. During the period from July 1, 2009 to September 28, 2009, the Company did not have any material recognizable subsequent events other than those disclosed in Note 13. EXPENSES:

InThe ~~July~~components ~~2009, the FASB issued Statement~~ of ~~Financial~~ ~~Accounting~~accounts ~~Standards~~payable ~~No. 168, the FASB Accounting Standards CodificationTM~~ and ~~the~~accrued ~~Hierarchy~~expenses ofas ~~Generally Accepted Accounting Principles — a replacement~~ of ~~FASB~~June ~~Statement No. 162 (SFAS 168). With the issuance of SFAS 168~~30, ~~the~~2010 ~~FASB Accounting Standards Codification (Codification) becomes the single source of authoritative U.S. accounting~~ and reporting standards applicable for all nongovernmental entities, with the exception of guidance issued by the Securities and Exchange Commission (SEC). The Codification does not change current U.S. GAAP, but changes the referencing of financial standards, and is intended to simplify user access to authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. The Codification is effective for interim and annual periods ending after September 15, 2009, ~~and~~are: is effective for the Company’s first quarter of 2010. At that time, all references made to U.S. GAAP will use the new Codification numbering system prescribed by the FASB. The Company is currently evaluating the impact to the Company’s financial reporting process of providing Codification references in the Company’s public filings. However, as the Codification is not intended to change or alter existing US GAAP, it is not expected to have any impact on the Company’s consolidated financial position or results of operations.

In September 2009, the EITF reached a consensus on Issue 08-1, Revenue Arrangements with Multiple Deliverables (“EITF 08-1”). EITF 08-1 replaces and significantly changes certain guidance in EITF 00-21. EITF 08-1 modifies the separation criteria of EITF 00-21, by eliminating the criterion for objective and reliable evidence of fair value for the undelivered products or services. Instead, revenue arrangements with multiple deliverables should be divided into separate units of accounting if the deliverables meet both of the following criteria:

	June 30,
	2010		2009
	(in thousands)
Accounts payable - trade	$	784	$	596
Accrued compensation and benefits		475		925
Accrued professional fees		314		307
Accrued taxes		47		132
Accrued inventory		317		67
Accrued royalties		76		79
Warranty reserves		35		50
Other accrued expenses		390		385
Accounts payable and accrued expenses	$	2,438	$	2,541

~~The~~F-13 ~~delivered items have value to the customer on a standalone basis~~

If5. ~~the~~DEBT: arrangement includes a general right of return relative to the delivered items, delivery or performance of the undelivered items is considered probable and substantially in the control of the vendor.

The ~~Issue~~Company ~~eliminates~~initially ~~the~~entered ~~use~~into ofa ~~the residual~~credit ~~method~~facility ofwith ~~allocation~~Silicon ~~and~~Valley ~~requires,~~Bank ~~instead,~~(“SVB”) ~~that arrangement consideration be allocated, at the inception of the arrangement, to all deliverables based~~ on ~~their~~December ~~relative selling price (i.e.~~30, ~~the relative selling price method)~~2003. ~~When~~The ~~applying~~following ~~the~~facilities ~~relative~~were ~~selling~~outstanding ~~price~~during ~~method,~~fiscal ayears ~~hierarchy~~2009 ~~is used~~and ~~for estimating the selling price for each of the deliverables, as follows~~2010:

~~Vendor~~On May 24, 2006, the Company entered into a Loan and Security Agreement with SVB (“2006 Facility”), providing a $3,000,000 credit facility comprised of a $1,500,000 revolving line of credit ("Revolver") and a $1,500,000 Non-~~specific~~Formula ~~objective~~Term ~~evidence~~Loan (~~VSOE~~"2006 Term Loan") to fund the Company's anticipated working capital needs. The Revolver created by the 2006 Facility was initially available until October 31, 2007. It was extended to February 11, 2009 by the Second Loan Modification Agreement (“SLMA”). The Revolver provides for a line of credit up to $1,500,000, with a $1,000,000 sub-limit to be established for cash management and foreign exchange requirements. As of June 30, 2010, amounts outstanding under the ~~selling~~ ~~price~~Revolver –bear ~~verifiable~~interest ~~specific~~at ~~objective~~prime ~~evidence~~ plus 2.25% (5.50% at June 30, 2010). In addition, a fee of 0.25% is charged against the unused portion of the Revolver. No funds were borrowed against the Revolver at June 30, 2010 or June 30, 2009. The 2006 Term Loan is to be repaid in 36 equal monthly payments of principal and interest, commencing on April 1, 2007, and had an outstanding balance of $0 at June 30, 2010 and $375,000 at June 30, 2009. Monthly principal payments had totaled approximately $42,000 prior to being fully repaid in March 2010.

~~Third-party~~On ~~evidence~~February 13, 2008, with an effective date of December 27, 2007, the Company entered into the SLMA with SVB, providing for a new $600,000 revolving equipment line of credit (~~TPE~~“Equipment Revolver”). The availability under the Equipment Revolver was limited to a borrowing base advance rate that is equal to 100% against the invoice value of new Eligible Equipment (as defined in the ~~selling~~SLMA). ~~price~~The ~~– prices~~draw down period for the Equipment Revolver expired May 31, 2008, but was extended by SVB to July 31, 2008. Originally, amounts advanced under the Equipment Revolver bore interest at a rate equal to the greater of (a) 6.75% and (b) the ~~vendor’s~~amount orequal ~~any~~to ~~competitor’s~~the ~~largely~~prime ~~interchangeable products~~rate plus 1.0%. This rate was revised to the greater of 7% or ~~services~~prime plus 3% by the Waiver and Third Loan Modification Agreement with SVB executed on November 17, in2008. ~~standalone~~The ~~sales~~repayment of the funds drawn against the Equipment Revolver is to ~~similarly~~ ~~situated~~be ~~customers~~ made in 36 equal monthly payments of principal and interest beginning August 1, 2008. Amounts outstanding under the Equipment Revolver bear interest at June 30, 2010 at a rate of 7%. The outstanding balance on the Equipment Revolver was $163,000 at June 30, 2010 and $313,000 at June 30, 2009.

~~Best~~On ~~estimate~~February 17, 2009, the Company entered into a Waiver and Fourth Loan Modification Agreement that, among other things, waived a loan covenant violation that existed at December 31, 2008, and extended the maturity of the ~~selling~~Revolver ~~price~~until March 31, 2009. In addition, the Waiver and Fourth Loan Modification Agreement revised certain outstanding financial covenants under the Revolver, including minimum net loss thresholds. On May 12, 2009, with an effective date of March 31, 2009, the Company entered into a Fifth Loan Modification Agreement which extended the maturity of the Revolver until May 31, 2009, and set financial covenants for the period ended May 31, 2009.

~~The~~On ~~Company~~June ~~will~~26, ~~adopt~~2009, ~~EITF~~with ~~08-1~~an effective ~~July~~ date of June 1, ~~2010~~2009, the Company entered into a Sixth Loan Modification Agreement which extended the Revolver until July 31, 2009. ~~The~~On September 9, 2009, the Company isentered ~~currently~~into ~~evaluating~~a Seventh Loan Modification Agreement which extended the ~~impact~~maturity, lowered the interest rate to prime plus 2.25% and provided covenants of the ~~Company’s consolidated~~Revolver until July 30, 2010. The financial ~~statements~~covenant is a minimum cash balance, as defined in the Revolver. The Company is in compliance with the covenant as of June 30, 2010.

InOn ~~September~~August ~~2009~~23, ~~the EITF reached a consensus on Issue 09-3~~2010, ~~Certain~~the ~~Revenue~~Company ~~Arrangements~~entered ~~That~~into ~~Include~~a ~~Software Elements~~Eighth ~~(“EITF~~Loan ~~09-3”).~~Modification ~~Per~~Agreement ~~EITF 09-3~~that, ~~all~~among ~~tangible~~other ~~products containing both software and non-software components~~things, ~~that~~extended ~~function~~the ~~together~~maturity toof ~~deliver~~ the ~~product’s~~ ~~essential~~Revolver ~~functionality,~~until ~~will~~July no29, ~~longer be within the scope of SOP 97-2~~2011. In ~~other words~~addition, ~~entities~~this ~~that~~modification ~~sell~~revised ~~joint~~certain ~~hardware~~financial ~~and~~covenants ~~software~~under ~~products that meet~~ the ~~scope~~Loan ~~exception~~Agreement. (~~i.e.,~~See ~~essential~~note ~~functionality)~~13 ~~will~~– beSubsequent ~~required to follow the guidance in Issue 08-1~~Events). ~~The Issue provides a list of items to consider when determining whether the software and non-software components function together to deliver a product’s essential functionality.~~

~~F-12~~Future minimum payments under the credit facility are as follows as of June 30, 2010 (in thousands):

The Company will adopt EITF 09-3 effective July 1, 2010. The Company is currently evaluating the impact to the Company’s consolidated financial statements.

	Silicon Valley Bank
	Equipment Revolver
Short Term	$	150
Long Term		13
Total Debt	$	163

2.F-14 ~~INVENTORY:~~

	June 30, 2009			June 30, 2008
	(in thousands)
Raw materials	$	6		$	16
Work in process		15			16
Finished goods		558			516
Less: inventory reserve		(15	)		(15	)
Inventory - net	$	564		$	533

6. COMMON STOCK AND COMMON STOCK WARRANTS:

3.The ~~PROPERTY~~Company ~~AND~~had ~~EQUIPMENT:~~ 15,000,000 and 12,000,000 authorized shares of Common Stock as of June 30, 2010 and 2009, respectively, of which 8,090,433 and 8,007,766 were outstanding as of June 30, 2010 and 2009, respectively.

	June 30,
	2009			2008
	(in thousands)
Equipment	$	2,305		$	2,216
Leasehold improvements		50			48
Furniture and fixtures		641			641
		2,996			2,905
Less: Accumulated depreciation		(2,542	)		(2,242	)
Property and equipment, net	$	454		$	663

On June 29, 2009, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with Co-Investment Fund II, L.P. (a Cross Atlantic Technology Fund entity) and Edison Venture Fund V, L.P., pursuant to which the Company issued and sold an aggregate of 1,428,571 shares (the “Shares”) of the Company’s common stock, $0.001 par value per share (the “Common Stock”), at a purchase price of $1.75 per share, and warrants to purchase up to 142,857 shares (the “Warrant Shares”) of Common Stock, which will not be exercisable until six months after the date of issuance and shall expire three years from the date of issuance, at an exercise price of $2.50 per share (the “Warrant”).

~~Depreciation~~Under ~~expense~~the ~~was~~terms ~~approximately $300~~of the Securities Purchase Agreement,~~000~~ Edison Venture Fund V, L.P. purchased 285,714 shares of Common Stock and ~~$279~~warrants to purchase 28,~~000~~571 ~~for~~shares ~~the~~of ~~fiscal~~Common ~~years~~stock ~~ended~~and Co-Investment Fund II, L.P. purchased 1,142,857 shares of Common Stock and warrants to purchase 114,286 shares of Common Stock. The private placement closed on June 30, 2009. ~~and~~The ~~2008~~Company received gross proceeds equal to $2, ~~respectively~~500,000. The securities sold in this private placement have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States in the absence of an effective registration statement or exemption from the registration requirements under the Securities Act. The Company evaluated the transaction under the relevant accounting literature and determined that the Warrant Shares should be classified as permanent equity.

4As of June 30, 2010, the Company had warrants outstanding to purchase 1,298,331 shares of the Company’s Common Stock at exercise prices ranging from $0.15 ~~ACCOUNTS~~per ~~PAYABLE~~share ~~AND~~to ~~ACCRUED EXPENSES~~$5.76 per share. All of the warrants outstanding as of June 30, 2010 were granted in conjunction with private equity transactions occurring between 2003 and 2009. A summary of the Company’s outstanding warrants as of June 30, 2010 is presented below:

	June 30,
			Weighted
	2009			2008
			Average
	(in thousands)
	Number of		Exercise Price
Accounts payable - trade	$	596		$	746
Expiration Date	Shares		Per Share
Accrued compensation and benefits		925			1,269
August 2010	43,527		$	5.432
Accrued professional fees		307			312
June 2012	142,857			2.500
Accrued taxes		132			269
June 2013	67,223			2.250
Accrued inventory		67			151
December 2013	888,890			2.250
Accrued royalties		79			102
April 2014	155,834			0.150
Warranty reserves		50			70
Total Warrants Outstanding	1,298,331		$	2.132
Other accrued expenses		385			386
Accounts payable and accrued expenses	$	2,541		$	3,305

~~F-13~~Annual Stock Grant Retainer to Directors

~~During~~In January 1998, the ~~fourth~~Company’s ~~quarter~~Board of ~~fiscal~~Directors ~~year~~and ~~2008, Voxware~~stockholders ~~conducted~~approved ana ~~extensive~~plan ~~review~~which provides for the granting to non-employee directors options to purchase shares of ~~accrued~~Common ~~expenses~~Stock. ~~The~~Each ~~review considered,~~calendar ~~among~~year ~~other~~in ~~factors,~~which the ~~age~~Company ofholds ~~recorded~~an ~~liabilities,~~Annual ~~the~~Meeting ~~likelihood~~ of aStockholders, ~~liquidating~~each ~~event,~~non-employee ~~and~~director ~~the~~can ~~most~~receive ~~likely~~options ~~value~~valued ofat ~~payments~~$10,000 tobased beon ~~made~~the ~~in satisfaction~~market price of the ~~liabilities.~~Company’s AsCommon aStock, ~~result~~as ofdefined ~~this~~in ~~review,~~the ~~accrued~~plan. ~~expenses were~~For ~~reduced~~the byfiscal anyears ~~aggregate~~ended ofJune ~~$349~~30,~~000~~ ~~comprised~~2010, ofand ~~reductions~~2009, there were no shares of ~~$47,000~~Common Stock granted pursuant to ~~accrued~~ ~~professional~~this ~~fees,~~plan. ~~$17~~However,~~000~~ tonon-employee ~~accrued~~directors ~~inventory,~~received ~~$1,000~~options to ~~accrued royalties~~purchase ~~and~~an ~~$284~~aggregate of 5,000 toshares ~~other~~of ~~accrued~~Common ~~expenses.~~Stock ~~These~~pursuant ~~adjustments~~to ~~are~~a ~~recorded as~~2003 ~~reductions~~Option toPlan approved by the ~~following~~Company’s ~~expenses~~stockholders ~~for~~during the ~~year~~years ended June 30, ~~2008:~~ 2010 and 2009. (See Note 7 - Stock Options and Share-based Compensation)

	Expense
	Reduction for
	the Year Ended
	June 30, 2008
	(in thousands)
Cost of product revenues	$	18
Research and development		18
Sales and marketing		179
General and administrative		134
	$	349

Since April 2001, all non-employee directors have volunteered to not be paid for attending any regular or special meeting of any committee of the Board of Directors until further notice. Accordingly, the Company has not accrued any charges during the period pursuant to this plan for the grant of Common Stock for attendance by members of the Board of Directors at any regular or special meeting of any committee of the Board of Directors.

5.F-15 ~~DEBT:~~

~~The Company initially entered into a credit facility with Silicon Valley Bank (“SVB”) on December 30, 2003~~7. ~~The following~~STOCK ~~facilities~~OPTIONS ~~were~~AND ~~outstanding~~SHARE-BASED ~~during fiscal years 2008 and 2009~~COMPENSATION:

AStock ~~$1,000,000~~Option equipment line of credit (“Equipment Line”) secured by all of the Company’s personal property was first drawn upon on December 16, 2005. The Company was required to make interest-only payments, at a rate of prime plus 1.75%, on the principal balance through May 9, 2006, at which point the Equipment Line was converted into a term loan with 30 fixed monthly payments of approximately $16,000. Effective May 9, 2006, the interest rate was fixed at 9.5%. The unpaid principal balance outstanding as of June 30, 2009 and 2008 was $0 and $66,000, respectively. Plans

OnAs ~~May~~of ~~24,~~June ~~2006~~30, ~~the Company entered into a Loan and Security Agreement with SVB (“2006 Facility”)~~2010, ~~providing~~options ~~an additional~~to ~~$3,000,000~~purchase ~~credit facility comprised of a $1~~941,~~500,000~~906 ~~revolving~~shares ~~line~~ of ~~credit~~Common ~~("Revolver")~~Stock ~~and~~were aoutstanding ~~$1,500,000~~under ~~Non-Formula~~plans ~~Term~~approved ~~Loan~~by ~~("2006 Term Loan") to fund~~ the Company'’s ~~anticipated~~stockholders ~~working~~in ~~capital~~1994 ~~needs.~~and ~~The~~2003 ~~Revolver~~and ~~created~~amended by the ~~2006~~Company’s ~~Facility~~stockholders ~~was~~in ~~initially~~December ~~available until October 31,~~ 2007. ~~It was extended to February 11, 2009 by~~ (the ~~SLMA.~~“Option ~~The Revolver provides for a line of credit up to $1,500,000, with a $1,000,000 sub-limit to be established for cash management and foreign exchange requirements~~Plans”). ~~As of June 30, 2009, amounts outstanding under the Revolver bear interest at the rate of 7%, calculated as the greater of 7% or prime plus 3%.~~ In addition, ~~a fee of 0.25% is charged against the unused portion of the Revolver. No funds were borrowed against the Revolver at June 30~~397,618 ~~2009~~options orare ~~June 30, 2008. The Revolver was initially~~ available ~~until~~ ~~October~~for ~~31,~~grant 2007. The 2006 Term Loan is to be repaid in 36 equal monthly payments of principle and interest, commencing on April 1, 2007, and had an outstanding balance of $375,000 at June 30, 2009 and $875,000 at June 30, 2008. Monthly principle payments total approximately $42,000. Amounts outstanding under the ~~2006~~Option Term Loan bear interest at June 30, 2009 at a rate of 7%, calculated as the greater of 7% or prime plus 3%, as established by the waiver and Third Loan Modification Agreement (“TLMA”) with SVB executed on November 17, 2008Plans.

On ~~February~~January 1320, ~~2008~~2010, ~~with~~the anCompany ~~effective date~~commenced ofa ~~December~~formal ~~27,~~tender ~~2007,~~offer ~~the~~which ~~Company~~allowed ~~entered~~its ~~into~~employees ato ~~second~~exchange ~~loan~~certain ~~modification agreement~~outstanding ~~(“SLMA”)~~options ~~with~~to ~~SVB,~~purchase ~~providing~~shares ~~for~~of athe Company’s common stock for new ~~$600,000~~nonqualified ~~revolving~~options ~~equipment line~~to ofpurchase ~~credit~~fewer ~~(“Equipment~~shares ~~Revolver”).~~of ~~The~~common ~~availability~~stock ~~under~~with ~~the~~an ~~Equipment Revolver~~exercise ~~was~~price ~~limited~~per share equal to athe ~~borrowing~~closing ~~base~~price ~~advance~~per ~~rate~~share ~~that~~of isthe ~~equal~~Company’s tocommon ~~100% against~~stock on the ~~invoice~~new ~~value~~grant ofdate. ~~new~~An ~~Eligible~~option ~~Equipment~~was ~~(as~~eligible ~~defined~~for exchange in the ~~SLMA). The~~tender ~~draw~~offer ~~down~~if ~~period~~it ~~for~~(i) was granted under the ~~Equipment~~Company’s ~~Revolver~~2003 ~~expired~~Stock ~~May~~Incentive 31Plan, ~~2008~~as amended and restated, ~~but~~(ii) had an exercise price per share equal to or greater than $2.25, (iii) was ~~extended~~ held by ~~SVB~~an toactive ~~July~~employee 31of the Company or its subsidiaries, ~~2008.~~including ~~Originally~~its executive officers and non-employee members of its Board of Directors, ~~amounts~~but ~~advanced~~excluding ~~under~~those ~~the Equipment~~who ~~Revolver~~had ~~bore~~resigned ~~interest~~or atgiven or received a ~~rate~~written ~~equal~~notice toof their termination at any time before the ~~greater~~expiration of ~~(a)~~the ~~6.75%~~tender offer and (biv) was outstanding on the ~~amount~~expiration ~~equal~~date toof the ~~prime~~tender ~~rate~~offer. ~~plus~~Each ~~1.0%.~~option ~~This~~that ~~rate~~was eligible for exchange in the tender offer that was ~~revised~~properly tendered was canceled and a replacement option to ~~the greater~~purchase that number of 7%shares orof ~~prime~~the ~~plus~~Company's 3%common stock determined by dividing the ~~TLMA.~~number ~~The~~of ~~repayment~~shares of common stock underlying the ~~funds~~canceled ~~drawn against~~eligible option by 1.15 and rounding down to the ~~Equipment~~next ~~Revolver~~whole ~~will~~share bewas ~~made~~issued. The replacement options vest in 36accordance ~~equal~~with ~~monthly~~the ~~payments~~vesting schedule in place for the eligible option it replaced at the time of ~~principal~~ exchange. All eligible options that were tendered for exchange were canceled on February 25, 2010, and ~~interest~~the ~~beginning~~replacement ~~August~~options 1were granted on February 26, ~~2008~~2010. ~~The~~Any eligible option not tendered for exchange in the tender offer remains outstanding ~~balance~~in onaccordance with its terms. On February 26, 2010, pursuant to the ~~Equipment~~ ~~Revolver~~offer, ~~was~~the ~~$313~~Company cancelled options to purchase 806,~~000~~596 atshares ~~June~~of 30common stock and granted the replacement options to purchase 701,334 ~~2009~~shares of common stock. Each option has a new seven-year term and has an exercise price of $01.50 atper ~~June~~share. 30There was no additional compensation expense that had to be recognized in the financial statements on account of this transaction, ~~2008~~ since the fair value of the options issued was less than the fair value of the options cancelled as at the date of the exchange.

OnInformation ~~February~~regarding ~~17,~~option ~~2009,~~activity the Company entered into a Waiver and Fourth Loan Modification Agreement that, among other things, waived a loan covenant violation that existed at December 31, 2008, and extended the maturity of the Revolver until March 31, 2009. In addition, the Waiver and Fourth Loan Modification Agreement revised certain outstanding financial covenants under the 2006 Facility, including minimum net loss thresholds. On May 12, 2009, with an effective date of March 31, 2009, the Company entered into a Fifth Loan Modification Agreement which extended the maturity of the Revolver until May 31, 2009, and set financial covenants for the ~~period~~years ~~ending~~ended ~~May 31, 2009. On~~ June 2630, ~~2009,~~2010 ~~with~~and ~~an effective date of June 1,~~ 2009, ~~the~~under ~~Company entered into a Sixth Loan Modification Agreement which extended~~ the ~~Revolver until~~Option ~~July~~Plans ~~31,~~is ~~2009.~~summarized On September 9, 2009, the Company entered in to a Seventh Loan Modification Agreement which extends the maturity, lowers the interest rate to prime plus 2.25% and provides covenants of the Revolver until July 30, 2010. (See Footnote 13 – Subsequent Events).below:

F-14

					Weighted
			Weighted		Average
			Average		Remaining	Aggregate
	Options		Exercise Price		Contractual	Intrinsic
	Outstanding		Per Share		Term in Years	Value
Options outstanding as of June 30, 2008	927,350		$	6.057
Granted	254,750			1.279
Exercised	(2,500	)		1.710
Forfeited	(70,214	)		5.241
Expired	(1,170	)		178.200
Options outstanding as of June 30, 2009	1,108,216			4.839
Granted	35,000			1.490
Exercised	(18,325	)		1.036
Forfeited	(77,210	)		2.181
Cancelled under exchange program	(806,596	)		5.377
Reissued under exchange program	701,334			1.500
Expired	(513	)		646.950
Options outstanding as of June 30, 2010	941,906		$	1.647	7.04	$	-

Options exercisable as of June 30, 2010	706,273		$	1.729	6.71	$	-

Options exercisable as of June 30, 2010 and
options expected to become exercisable	928,758		$	1.650	7.02	$	-

~~Future~~Aggregate ~~minimum~~intrinsic ~~payments~~value ~~under~~of $0 was calculated based on the ~~credit~~Company’s ~~facility~~closing ~~are~~ Common Stock price as ~~follows~~of June 30, 2010 of $0.91 per share. Options exercisable as of June 30, ~~2009~~2010 ~~(in~~and ~~thousands):~~options expected to become exercisable includes vested options and nonvested options less expected forfeitures.

	Silicon Valley Bank
	2006 Term		Equipment
	Loan		Revolver		Total
Short Term	$	375	$	150	$	525
Long Term		-		163		163
Total Debt	$	375	$	313	$	688

F-16

6.A ~~COMMON~~summary ~~STOCK~~of ~~AND~~the ~~COMMON~~status ~~STOCK WARRANTS~~of the Company’s nonvested options and restricted stock units as of June 30, 2010 and June 30, 2009 and changes during the years then ended is presented below:

The Company had 12,000,000 authorized shares of Common Stock as of June 30, 2008 and 2009.

			Weighted					Weighted
			Average Grant-			Restricted		Average
	Options		Date Fair			Stock Units		Grant-Date
	Outstanding		Value			Outstanding		Fair Value
Outstanding as of June 30, 2008	422,007		$	2,161,063		244,794		$	1,453,519
Granted	254,750			340,561		-			-
Vested	(170,644	)		(844,475	)	(88,166	)		(552,751	)
Forfeited	(27,000	)		(109,337	)	(5,914	)		(38,778	)
Outstanding as of June 30, 2009	479,113		$	1,547,812		150,714		$	861,990
Granted	35,000			51,785		30,000			46,800
Vested	(191,143	)		(864,197	)	(64,280	)		(397,513	)
Net cancelled under exchange program	(31,712	)		-		-			-
Forfeited	(55,625	)		(61,643	)	(51,993	)		(241,866	)
Outstanding as of June 30, 2010	235,633		$	673,757		64,441		$	269,411

~~On June 29, 2009, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with Co~~Share-~~Investment~~Based ~~Fund~~Compensation II, L.P. (a Cross Atlantic Technology Fund entity) and Edison Venture Fund V, L.P., pursuant to which the Company issued and sold an aggregate of 1,428,571 shares (the “Shares”) of the Company’s common stock, $0.001 par value per share (the “Common Stock”), at a purchase price of $1.75 per share, and warrants to purchase up to 142,857 shares (the “Warrant Shares”) of Common Stock, which will not be exercisable until six (6) months after the date of issuance and shall expire three (3) years from the date of issuance, at an exercise price of $2.50 per share (the “Warrant”).

~~Under~~The ~~the~~Company ~~terms~~awarded ofa ~~the~~total ~~Securities~~of ~~Purchase Agreement~~30,000 ~~Edison~~restricted ~~Venture~~stock ~~Fund~~units V,(“RSUs”) ~~L.P.~~to ~~purchased~~certain ~~285,714~~officers ~~shares~~during ofthe ~~Common~~year ~~Stock and~~ended ~~warrants~~June to30, ~~purchase~~2010. ~~28,571~~No ~~shares~~RSUs ofwere ~~Common~~awarded ~~stock~~during ~~and~~the ~~Co-Investment~~year ~~Fund II~~ended June 30, L2009.P. ~~purchased~~The ~~1,142,857~~RSUs ~~shares~~were ofgranted ~~Common~~pursuant ~~Stock~~to ~~and~~the ~~warrants~~2003 toPlan ~~purchase 114,286~~and ~~shares~~vest ofon ~~Common~~a ~~Stock~~monthly basis. The ~~private~~vesting ~~placement~~periods ~~closed~~ on ~~June~~the ~~30,~~RSU ~~2009. The~~grants ~~Company~~range ~~received~~from ~~gross~~three ~~proceeds equal~~ to ~~$2,500,000~~four years. The ~~securities~~fair ~~sold~~value ~~in this~~of ~~private~~the ~~placement~~RSUs ~~have~~range ~~not~~from ~~been~~$4.39 ~~registered~~to ~~under~~$6.95 ~~the~~per ~~Securities~~share ~~Act~~and ~~of 1933,~~aggregates asto ~~amended (the “Securities Act”)~~$1,936,000. ~~and~~Share-based ~~may~~compensation ~~not~~charges beassociated ~~offered~~with orthe ~~sold~~RSUs inwere ~~the United~~recorded ~~States~~ in the ~~absence~~amount of an$594,000 ~~effective~~and ~~registration~~$592,000 ~~statement~~for orthe ~~exemption from~~years ~~the~~ended ~~registration~~June ~~requirements~~30, ~~under~~2010 ~~the~~and ~~Securities~~2009, ~~Act~~respectively. ~~The~~No ~~Company evaluated~~RSUs ~~the~~were ~~transaction~~granted ~~under~~prior ~~the~~to ~~relevant accounting literature and determined that~~ the ~~Warrant~~year ~~Shares~~ended ~~should~~June be30, ~~classified as permanent equity~~2008.

AsThe ofCompany ~~June~~records ~~30, 2009,~~ the ~~Company~~issuance ~~had warrants~~of ~~outstanding to purchase 1,298,331~~ shares of ~~the Company’s~~ Common Stock at ~~exercise~~as ~~prices~~RSUs ~~ranging from $0~~vest.15 ~~per~~During ~~share to $5.76 per share. All of~~ the ~~warrants~~ ~~outstanding~~years asended of June 30, 2010 and 2009, ~~were~~95,746 ~~granted~~shares inand ~~conjunction~~94,080 ~~with private~~shares, ~~equity~~respectively, ~~transactions~~of ~~occurring~~Common ~~between~~Stock ~~2003~~were ~~and~~issued ~~2009.~~as Aa ~~summary~~result of the ~~Company’s~~ ~~outstanding~~vesting ~~warrants as~~ of ~~June~~RSUs. ~~30, 2009 is presented below:~~

		Weighted
		Average
	Number of	Exercise Price
Expiration Date	Shares	Per Share
August 2010	43,527	$	5.432
June 2012	142,857		2.500
June 2013	67,223		2.250
December 2013	888,890		2.250
April 2014	155,834		0.150
Total Warrants Outstanding	1,298,331	$	2.132

The statement of operations includes total share-based employee compensation charges resulting from stock option and RSU awards in the amount of $1,439,000 and $1,617,000 for the years ended June 30, 2010 and 2009, respectively. At June 30, 2009, the Company’s actual forfeiture rate was lower than originally estimated. Also, the Company was not recording the compensation cost to equal the portion of the grant-date value of the award that was vested during the year. As such the Company corrected the error and recorded a cumulative adjustment during the fourth quarter of fiscal 2009 to increase the share-based compensation change by an additional $344,000. Of this amount, $205,000 pertained to years prior to 2009 and $139,000 pertained to the earlier quarters in 2009. The Company determined that the effect on prior periods was not material. Amounts charged to operations are as follows:

Annual Stock Grant Retainer to Directors

	Year Ended
	June 30,
	2010		2009
	(in thousands)
Research and development	$	146	$	144
Sales and marketing		311		316
General and administrative		982		1,157
	$	1,439	$	1,617

InAs ~~January 1998, the Company’s Board~~ of ~~Directors~~ ~~and~~June ~~stockholders~~30, ~~approved~~2010, ~~a plan which provides for~~ the ~~granting to non-employee directors options to purchase shares of Common Stock. Each calendar year in which the~~ Company ~~holds~~had ~~an Annual Meeting of Stockholders, each non-employee director can receive options valued at~~ $10707,000 ~~based~~of onunrecognized ~~the~~compensation ~~market price~~expense ofthat ~~the~~will ~~Company’s~~be ~~Common~~recognized ~~Stock,~~ as ~~defined~~share-based incompensation ~~the~~over ~~plan.~~a ~~For~~weighted ~~the~~average ~~fiscal years~~period ~~ended~~of ~~June~~1 ~~30,~~year. ~~2009,~~The ~~and~~weighted ~~2008,~~average ~~there~~per ~~were~~share nofair ~~shares~~value of ~~Common~~stock ~~Stock~~ options granted ~~pursuant~~was ~~to this plan~~$1.49 ~~However, non-employee directors received options to purchase an aggregate of 5,000~~ and 17$1.34,~~334~~ ~~shares of Common Stock pursuant to a 2003 Option Plan approved by the Company’s stockholders,~~ respectively, during the years ended June 30, ~~2009~~2010 and ~~2008~~2009. ~~(See Note 7 below.)~~

~~Since April 2001, all non~~F-~~employee directors~~17 have volunteered to not be paid for attending any regular or special meeting of any committee of the Board of Directors until further notice. Accordingly, the Company has not accrued any charges during the period pursuant to this plan for the grant of Common Stock for attendance by members of the Board of Directors at any regular or special meeting of any committee of the Board of Directors.

FThe Black-15Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of subjective assumptions including the expected stock price volatility. The Company’s employee stock options have characteristics different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value estimate.

7.The ~~STOCK~~fair ~~OPTIONS~~value ~~AND~~of ~~SHARE~~each option granted during the years ended June 30, 2010 and 2009 is estimated on the date of grant using the Black-~~BASED COMPENSATION~~Scholes option pricing model with the following weighted average assumptions:

Stock Option Plans

	Year Ended June 30,
	2010	2009
Dividend yield	-	-
Expected volatility	216 - 235%	134 - 235%
Risk-free interest rate	2.61 - 2.89%	1.79% - 3.49%
Expected life	6.1 years	6.1 years

AsDividend ofyield ~~June~~– ~~30,~~The ~~2009,~~Company ~~options~~has tonever ~~purchase 1,108,216~~declared ~~shares~~or ofpaid ~~Common~~any ~~Stock~~cash ~~were~~dividends ~~outstanding~~on ~~under~~its ~~plans~~Common ~~approved~~Stock byand ~~the Company’s~~does ~~stockholders~~not inexpect ~~1994~~to ~~and~~do ~~2003~~so ~~and~~in ~~amended~~the byforeseeable future. Accordingly, the Company~~’s stockholders~~ inuses ~~December~~an ~~2007~~expected ~~(the~~dividend ~~“Option~~yield ~~Plans”).~~of Inzero ~~addition,~~to ~~31,982~~calculate ~~options are~~the ~~available~~grant-date ~~for~~fair ~~grant~~value ~~under~~of ~~the~~a ~~Option~~stock ~~Plans~~option.

~~Information~~Expected ~~regarding~~volatility ~~option~~– ~~activity~~The ~~for~~ expected volatility is a measure of the ~~years~~amount ~~ended~~by ~~June~~which 30the Company’s Common Stock price is expected to fluctuate during the expected term of options granted. ASC 718 provides that expected volatility should be based upon the historical volatility of the Company’s Common Stock, ~~2009~~but ~~and~~adjusted ~~2008~~based ~~under~~upon the ~~Option~~expected ~~Plans~~impact isof ~~summarized below:~~changes in the business.

					Weighted
			Weighted		Average
			Average		Remaining	Aggregate
	Options		Exercise Price		Contractual	Instrinsic
	Outstanding		Per Share		Term in Years	Value
Options outstanding as of June 30, 2007	596,440		$	5.421
Granted	504,603			5.825
Exercised	(100,249	)		2.940
Forfeited	(73,431	)		4.263
Expired	(13	)		665.625
Options outstanding as of June 30, 2008	927,350			6.057
Granted	254,750			1.279
Exercised	(2,500	)		1.710
Forfeited	(70,214	)		5.241
Expired	(1,170	)		178.200
Options outstanding as of June 30, 2009	1,108,216		$	4.839	7.80	$	-
Options exercisable as of June 30, 2009	629,103		$	5.912	7.03	$	-
Options exercisable as of June 30, 2009 and
options expected to become exercisable	1,044,950		$	4.969	7.73	$	-

Risk-free interest rate – The risk-free interest rate is the implied yield available on U.S. Treasury zero-coupon issues with a remaining term equal to the option’s expected term on the grant date. Since the U.S. Treasury Department does not issue zero-coupon securities with maturity periods equal to the presumed expected life of the Company’s outstanding options, the risk-free interest rate is interpolated based on rates reported by the U.S. Treasury Department for securities with maturities shorter than and longer than the expected life of the Company’s outstanding options.

~~Aggregate~~Expected ~~intrinsic~~life ~~value~~–The expected life of $0stock ~~was calculated~~options granted is based on the ~~Company’s~~simplified ~~closing~~method ~~Common~~prescribed ~~Stock~~Staff ~~price~~Accounting asBulletin of(“SAB”) ~~June~~107. 30Accordingly, ~~2009 of~~the ~~$1.94~~expected ~~per~~term ~~share.~~is ~~Options~~presumed ~~exercisable~~to asbe ofthe ~~June~~midpoint ~~30,~~between ~~2009~~the ~~and~~vesting ~~options~~term ~~expected to become exercisable includes vested options~~ and ~~nonvested~~the ~~options~~original ~~less expected~~contract ~~forfeitures~~term.

AThe ~~summary~~Company recognizes compensation expense on a straight-line basis over the requisite service period based upon options that are ultimately expected to vest, and

Filing Compare · VOXWARE INC