SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC
Washington, D.C. 20549FORM 10-K
X(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31,
19992000OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
[NO FEE REQUIRED] For the transition period from _______ to __________FOR THE TRANSITION PERIOD FROM ___________ TO _____________
Commission file number 0-22292
---------------------------------------------------------------------- INPUT SOFTWARE,ACTIONPOINT, INC.
(Exact
(Exact name of registrant as specified in its charter)Delaware 77-0104275 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No)
1299 Parkmoor Avenue
San Jose, CACalifornia 95126
(Address
(Address of principal executive offices) (Zip Code)
offices including zip code)
(408) 325-3800
(Registrant's telephone number, including area code (408) 325-3800
code)
Securities registered pursuant to Section 12 (b)12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Title or each class | Name of each exchange on which registered |
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
Common Stock, $0.01 par value |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO
[Cover page 1 of 2 pages]Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of the 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. [__][ ]
The aggregate market value of voting stock held by non-affiliates of the Registrant as of February 29, 2000,28, 2001, was to the best of the Company's knowledge approximately $36,345,000$13 million (based upon the February 29, 200028, 2001 closing price for shares of the Registrant's Common Stock as reported by the Nasdaq National Market). Shares of Common Stock held by each officer, director and holder of 5% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
On February 29, 2000,28, 2001, approximately 4,159,0004,273,611 shares of the Registrant's Common Stock, $0.01 par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Registrant's Proxy Statement for the 20002001 Annual Meeting of Stockholders to be held on May 31, 2000June 20, 2001 are incorporated by reference into Part III.
[Cover page 2 of 2 pages]
ACTIONPOINT, INC.
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
TABLE OF CONTENTS
Part I. | Page | |
Item 1. | Business | |
Item 2. | Properties | |
Item 3. | Legal Proceedings | |
Item 4. | Submission of Matters to a Vote of Security Holders | |
Part II. | ||
Item 5. | Market for the Registrant's Common Equity and Related Stockholder Matters | |
Item 6. | Selected Consolidated Financial Data | |
Item 7. | Management's Discussion and Analysis of Financial Condition and Results of Operations | |
Item 7a. | Quantitative and Qualitative Disclosures About Market Risks | |
Item 8. | Financial Statements and Supplementary Data | |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosures | |
Part III. | ||
Item 10. | Directors and Executive Officers of the Registrant | |
Item 11. | Executive Compensation | |
Item 12. | Security Ownership of Certain Beneficial Owners and Management | |
Item 13. | Certain Relationships and Related Transactions | |
Part IV. | ||
Item 14. | Exhibits, Consolidated Financial Statement Schedules and Reports on Form 8-K | |
Signatures |
PART I
This Annual Report on Form 10-K may contain forward-lookingforward- looking statements that involve risks and uncertainties. The Company'sOur actual results may differ materially from the results discussed in any such forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed below under the caption "Risk Factors" as well as the following: the emergence of the document management and image processing markets, potential fluctuations in quarterly results, competition, new products and technological change, general economic conditions and dependence on capital spending of customers, a lengthy sales cycle and dependence on system sales, reliance upon third-party resellers and dependence upon key personnel.
Item 1.Business
Input Software, Inc. ("Input Software"or the "Company") develops,
markets,
Overview
We develop, market and servicesservice information capture software. Our customers have traditionally been large global 1000 businesses and e-commerce softwaregovernmental agencies. We currently have two main product lines to Global 1000 companies. The Company'sserve the electronic documentation needs of entities that use computers to facilitate business activities. Our InputAccel family is an information capture product, InputAccel,which means that it automates the conversion of paper and fax documents into electronic format thus allowing for paperless business-to-business and
business-to-customer transactions. Customersimproved operating efficiencies. Our customers use InputAccel to convert transactiontransaction-related documents, such as order forms, claimsclaim forms, or loan applications, into an appropriate electronic format;format and to upload externaltransport images of and information from these documents to storage on Web sites, CDs,compact disks, or application serversinternal databases for subsequent search, and retrieval.
The Company recently announced DynamicInput,retrieval or further processing. Our new Dialog Server product, released in September 2000, is an XML-based software product designed to replace today's static forms on the Web forms with personalized, intelligent interactions. DynamicInput is designed to help simplify
complex e-commerce customer interaction, which will help reduce online
transaction abandon rates and increase e-sales for it's customers.
Additionally, DynamicInput will help reduce deployment times for e-
commerce businesses.
Additionally, the Company sellswe market software tools which allowunder our Pixel Translations brand to various hardware and software developersproviders.
Industry Background
Today, most global 1000 companies and governmental agencies worldwide have installed computerized enterprise resource planning, document management and intranet applications, all of which have had a profound impact on how these entities manage their internal information and internal business operations. But, these same organizations continue to save both timereceive a significant amount of information from customers, suppliers, partners and money by offering
stable, supported librariesothers outside the enterprise in the form of software codepaper, faxes, microfilm and even incompatible electronic files. Dealing with paper and fax in a computerized environment is a challenge in all industries, it is particularly problematic in services industries - financial services, insurance, health care, telecommunications, transportation and government. Paper and fax from customers and partners is vital to drive certainrunning these businesses, but this information is incompatible with the installed computer peripherals rather than havingsystems making it difficult to develop such software themselves.
provide the desired levels of customer service and operating efficiencies.
Information capture solutions enable organizations to collect, organize and input paper and fax-based information into their installed computing systems, providing a critical bridge between the paper world and the digital world. The result is improved customer satisfaction, increased productivity and cost control.
Technology and Products
InputAccel
InputAccel has, in recent years, been the Company'sour main software product. InputAccelrInputAccel began shipping in November 1995 and has become an
open systems information capture platform.1995. With InputAccel, enterprises of various sizes and volume requirements can now standardize their systems on a singleour enterprise information capture solution, yet customize the system to meet the needs of either a transaction or content loading operation at any levelvarious levels of input volume. Input Software partnersWe have selling relationships with such established providers such as Adobe, Documentum, IBM and Tower Systems to provide
complete solutions for internal and external information processing to
global 1000 companies and government agencies.
Systems.
InputAccel is an open high-throughput, standard integration platform and set of software modules thatdesigned to automate the conversion and indexing of paper documents into electronic e-business format.
InputAccel's NT-based integration platformformats compatible with computerized business systems. InputAccel is a Windows NT-based client server application comprised of the ActionPoint Enterprise Server, which is the system's architectural backbone and ActionPoint InputAccel modules, which plug into the Enterprise Server platform and perform specific information capture tasks such as scanning, image enhancement, or data extraction.
The Enterprise Server is the foundation linkingof our InputAccel system. It manages and controls various technologiesscanning processes-- acting as a work- queue manager, performing automatic workload balancing and collecting performance data that system managers need to control the capture process and insure efficiency and productivity. When capture tasks are complete Enterprise Server provides the connectivity between paper format and digital format by delivering data and images to selected enterprise database systems.
InputAccel modules plug into an upgradeable system that provides systemthe Enterprise Server platform and perform such image enhancement or data capture tasks as:
Image Capture | Data Capture |
Scan | Full Text OCR, OCR Edit |
Rescan | Key Index |
Copy | PDF Conversion |
Automatic Quality Assurance | Document ID |
Image Quality Assurance | Forms |
Image Enhancement |
In addition to ActionPoint's InputAccel modules, over a dozen-technology provider partners offer InputAccel-compatible modules worldwide. These partnerships help make InputAccel a standard platform for building information capture solutions, giving customers the flexibility they need and making InputAccel a safe choice. These partnerships also help extend ActionPoint's reach into many niche markets requiring specialized functionality.
Dialog Server
Our interaction management control, and reporting functions and can incorporate/utilize
various software modules from Input Software, as well as products from
third-parties, including application vendors, scanner manufacturers, and
other providers.
DynamicInput is an XML-based software product Dialog Server is designed to replace today's static Web forms with personalized, intelligent interactionsinteractions. XML, or extensible mark-up language, is the standard for the exchange of business data over the Web and is at the core of the ActionPoint Dialog Server architecture. XML facilitates the creation of business rules and simplifies integration with business processes and systems. Dialog Server is compatible with standard Web browsers and, with a unique architecture for seperatingdesign that enables the separation of business-rules from content presentation, allows forfacilitates rapid deployment, changes and upgrades. DynamicInput
Software Tools
Our software tools are designed to enable hardware and software developers to save both time and money by using stable, supported libraries of software code to drive document imaging peripherals such as scanners, printers and displays. We provide PixTools software tools that allow imaging applications to work with virtually any scanner, controller board, or display.
Customers
The customers of our InputAccel products are primarily Global 1000 companies and government entities. Customers include: Delta Airlines, Wachovia Bank, Fidelity Investments, Enron, Metropolitan Life, Amgen, Searle, Prudential and the U.S. Patent Office. We intend to market our Dialog Server products also to these customers. Dialog Server is expectedalso targeted to internet-based businesses and market exchanges, commonly known as dot.coms, particularly those involved in business-to-business exchanges.
We sell or license our software tools to hardware and software suppliers such as Fujitsu, Canon, Scansoft and Filenet.
Sales
Our revenues primarily come from the sale of InputAccel product licenses. We offer to sell InputAccel using volume-based perpetual licenses or transaction-based licenses. Historically, our customers have predominantly been Global 1000 companies. Most of these customers elect to buy perpetual licenses. These licenses are typically volume-based which allow customers to make initial purchases at attractive prices. As a customer's system expands, as defined by document volume throughput, purchases of additional licenses are required. Dialog Server is licensed on a per-server basis and larger systems can include multiple servers.
Additionally revenues are obtained from annual software maintenance subscriptions and professional consulting/implementation services. These service/support revenues represented 22% of our total revenues in 2000.
Most of our products are sold by a combination of direct and indirect channels. We employ a sales force of approximately twenty account representatives and twelve sales engineers located across several U.S. and two international field offices. Historically worldwide, approximately 50% of our InputAccel sales are made directly to end-users and 50% through an established channel of 80 systems integration companies such as EDS, IBM, SAIC and Xerox. We cannot be an important component within an overall e-commerce solution and first
beta shipments are expectedcertain whether this ratio will continue in April,future periods. International revenues represented 26% of total revenues in 2000.
Sales and Marketing
The Company's sales and marketing activities include participation
in industry trade shows and seminars and advertising in trade
publications.
InputAccel software is typically used in connection with a complex enterprise system that includes important elements supplied by other vendors. As a result, purchasers of suchthese enterprise systems often rely on system integrators and VARsvalue-added resellers to oversee the acquisition and installation of key hardware and software components of the overall system. Accordingly, a significant portion of the Company'sour sales to end-users are made through system integrators and value-added resellers. The Company anticipatesWe currently anticipate that the selling and marketing efforts for DynamicInputDialog Server will be largely
complimentaryused in a similar fashion and that a substantial amount of the sales to end-users for Dialog Server will also be made by system integrators and value-added resellers. We are continually working to improve our relationships with InputAccel. Softwaresystem integrators and value-added resellers that routinely service end-users that would benefit from our products.
Our software tools are generally sold or licensed on a royalty basis through a direct sales program to such hardware and software suppliers such as Fujitsu, Canon, Caere,Scansoft and Filenet.
In 1999, international sales, principally
Marketing
Our marketing objectives include building market awareness and acceptance of ActionPoint and our products, as well as generating qualified customer leads. We attend industry trade shows and seminars and provide information about our company and our products on our Web site. Our executives speak at industry events and provide briefings to industry analysts and trade press. We also conduct public relations activities and advertise in Europe, represented
approximately 27% oflocal and trade publications to promote our products to our target markets.
Our marketing goals include the Company's revenuesfollowing:
Research and Development
The Company believes
We believe that itsour future success will depend in large part on itsour ability to enhance itsour current product line, develop new products, maintain technological competitiveness and satisfy an evolving range of customer requirements. The Company's researchWe have assembled a team of skilled software developers and software quality assurance engineers with significant industry experience. This development group is responsible for exploring new directions and applications of core technologies, incorporating new technologies into products and maintaining strong research relationships outside the
Company. The Company seekswith other software developers. We seek to leverage itsbuild upon our direct investment in research and development by supporting efforts by independent software vendors to develop complementary products. During 1999, 1998,products and 1997
research and development expenses were approximately $5.6 million, $4.2
million and $4.0 million, respectively. The Company intends to continue
to make substantial investments in product and technology research and
development, particularly for DynamicInput in the near term, and to
continue to participate actively in the development of industry standards.
Patents and Other Proprietary Rights
The Company does not currently have any patents and relies
on a combination of trade secret, copyright, and trademark laws,
nondisclosure and other contractual agreements and technical measures to
protect its proprietary rights in its products. There can be no
assurance that it will develop proprietary products or technologies that
are patentable, that any issued patent will provide it with any
competitive advantages or will not be challenged by third-parties, or
that the patents of others will not have an adverse effect on the
Company's ability to do business. Furthermore, there can be no
assurance that others will not independently develop similar products,
duplicate the Company's products or, if patents are issued to the
Company, design around the patents issued to the Company. There can be
no assurance that the steps taken by the Company will prevent
misappropriation of its technology, and such protections may not
preclude competitors from developing products with features similar to
the Company's products. In addition, effective copyright and trade
secret protection may be unavailable or limited in certain foreign
countries. The Company believes that its products and trademarks do not
infringe upon the proprietary rights of third-parties. There can be no
assurance, however, that third-parties will not assert infringement
claims against the Company in the future or that such claims will not
require the Company to enter into royalty arrangements or result in
costly litigation. Because the industry is characterized by rapid
technological change, the Company believes that factors such as the
technological and creative skills of its personnel, new product
developments, frequent product enhancements, name recognition and
reliable product maintenance are more important to establishing and
maintaining a technology leadership position than the various legal
protections of its technology.
Technical Support and Professional Services
An important element in the Company'sour strategy is to provide comprehensive support of itsour products. The Company believesWe believe that responsive technical support is essential forto satisfy customer requirements and
provides extensiverequirements. We provide support for itsour products byprimarily through our customer support staff based in our San Jose, California facility. Our support activities include direct support to our customers through our Web site, which offers technical information designed to assist in answering frequently asked questions and in problem diagnosis and resolution. We also provide telephone faxsupport via a help desk, e-mail support and electronic medium.remote control support that provides direct access from our support personnel to our customers' systems for diagnosis and problem resolution. Additionally, the Company provideswe provide professional consulting services to those customers whothat require outside assistance to more efficiently implement their systems.
We provide a warranty program for all of our products, which is typically ninety days in duration for all defects. Our standard terms and conditions provide that a customer may return a defective product for repair or replacement during the warranty period.
Intellectual Property
We have invested significantly in the development of proprietary technology for our products and our operations frequently incorporate proprietary and confidential information. We rely upon a combination of copyright and trademark laws and non-disclosure and other intellectual property contractual arrangements to protect our proprietary rights. We protect our software, documentation and other written materials under trade secret and copyright laws, which only provide limited protection. We do not hold any patents and currently have no patent applications pending. We also enter into confidentiality or license agreements with our employees, consultants and corporate partners and control access to and distribution of our software, documentation and other proprietary information.
Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our products or technology. Monitoring unauthorized use of our products is difficult and we cannot be certain that the steps we have taken will prevent misappropriation of our technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. In addition, our competitors might independently develop similar technology or duplicate our product or circumvent any patents or our other intellectual property rights. Due to rapid technological change in our market, we believe the various legal protections available for our intellectual property are of limited value. Instead, we seek to establish and maintain a technology leadership position by leveraging technological and creative skills of our personnel, new product developments and enhancements to existing products.
Competition
The market for the Company'sour products is highly competitive.
The Company believescompetitive, evolving and subject to rapid technological change. We believe the principal competitive factors are product features, support, price and reputation. In addition, support of the
Company'sour product architecture by independent software vendors and ease of product implementation are important competitive factors for InputAccel and DynamicInput. The Company believesDialog Server. We believe that itwe currently competescompete favorably with respect toin these factors.
The Company has a number of current and potentialareas.
Our principal competitors manyare established software companies, some of which that have significantly greater financial,
technical, marketinga broad range of software offerings and other resources than does the Company. The
Company expectsWeb design consultants that provide customized solutions for e-commerce companies. These competitors include Kofax, Filenet, Readsoft and Captiva for our InputAccel family and Selectica, Calico Commerce and Onlink for our Dialog Server family.
We expect additional competition from other established and emerging companies if the market continues to develop and expand. Increased competition couldMany of these competitors and potential competitors may have significant competitive advantages, including greater name recognition, more resources to apply to the development, marketing and sales of their products and more established sales channels. In addition, many of our competitors have well-established relationships with our current and potential customers and have extensive knowledge of our industry. As a result, in additional price reductions,
reduced margins and loss of market share, which could materially
adversely affect the Company. There can be no assurance that the
Company willour competitors may be able to compete successfully againstrespond more quickly to new or emerging technologies and changes in customer requirements, or to devote greater resources to the development, promotion and sale of their products than we can. In addition, current and futurepotential competitors have established or may establish cooperative relationships among themselves or with third parties to increase the ability of their products to address customer needs. Accordingly, it is possible that new competitors or alliances among competitors may emerge and rapidly acquire significant market share. We also expect that competitive pressures faced by the Companycompetition will not
materially adversely affect its business, operating results and
financial condition.
increase as a result of software industry consolidations.
Employees
As of December 31, 1999, the Company2000, we had 146164 employees. The
Company employs 21We employ 22 people in finance and administrative functions, 80functions; 93 in marketing, sales, services,services; and support and 4549 in engineering and product development. In addition, the Company hireswe hire temporary employees on an as-needed basis to meet production requirements. None of the employees are represented by a labor union or is subject to a collective bargaining agreement. The Company believesWe believe that itsour employee relations are good.
Executive Officers
The
Our executive officers of the Company are as follows:
Name Age Position - ----------------------- ------------------------------------------ Thomas T. van Overbeek5051 Chairman of the Board of Directors Kimra Hawley4344 President, Chief Executive Officer and Director Matt Albanese4142 Vice President-Professional Services Cynthia Anderson3536 Vice President-Operations Joe Falk5051 Vice President-Sales John Finegan5051 Chief Financial Officer, Secretary and Director Stephen Francis3839 Vice President-Business Development Michael Parker4142 Vice President-Engineering Johannes Schmidt3637 Chief Technical Officer and Director John Stetak4142 Vice President-Marketing
Thomas T. van Overbeek joined the CompanyActionPoint in 1988 as President and Director. He was appointed Chief Executive Officer in July 1990 and became Chairman of the Board of Input SoftwareActionPoint in September 1998 upon completion of the sale of the Company'sActionPoint's display products division. Mr. Van Overbeek is currentlywas most recently CEO of Wavtrace, Inc. in Bellevue, Washington.
Washington, a developer of telecommunications products.
Kimra Hawley joined the CompanyActionPoint in 1992 as Product Marketing Director, was promoted to Vice President in November 1994 and Senior Vice President and General Manager for the Software Division in November 1996. She became President and CEO and was elected a Director of Input
Software,ActionPoint, Inc. in April 1998. Prior to joining the Company,ActionPoint, Ms. Hawley was a principal in MarketBound Associates, a marketing consulting firm. Ms. Hawley holds a BS in Psychology from Pittsburg State University.
Matt Albanese joined the CompanyActionPoint as Director of Engineering for the Software Division in 1995 and was promoted to Vice President, Professional Services in December 1997. Prior to joining the Company,ActionPoint, Mr. Albanese was the Director of Engineering for Plexus Software, a Division of Banctec.Banctec, a computer products firm. Mr. Albanese holds a BS in Computer Science from San Jose National University.
Cynthia Anderson joined the CompanyActionPoint as Director of Quality in 1992 and became Vice President of Quality and Information Systems for the Display Division in 1997. In 1998, she was appointed Vice President of Operations. Prior to joining the Company,ActionPoint, Ms Anderson held quality and engineering positions at Tandem Computers.Computers, a developer of computer hardware. Ms. Anderson holds a BS degree in Electrical Engineering from Michigan Technical University and an MS in Engineering Management from Santa Clara University.
Joe Falk joined the CompanyActionPoint in May 1997 as Vice President of Sales for the Software Division, and became Vice President of Sales in April 1998. Prior to joining the Company,ActionPoint, Mr. Falk was Vice President of Sales of Constellar Software Corporation, a developer of dataware housing software and prior to that, Director of Worldwide Sales at Vantageware Software.Software, a developer of distribution software. Mr. Falk holds a BS in Marketing from California State University at Northridge.
John Finegan joined the CompanyActionPoint in 1989 as Vice President-Finance, was elected Chief Financial Officer in 1990, Secretary in 1993, and Director in 1997. Prior to joining the CompanyActionPoint he was Vice President of Finance for the Paradise Systems Division of Western Digital Corporation.Corporation, a developer of computer peripherals. Mr. Finegan holds an MBA from the University of Massachusetts and a BS in Engineering from Tufts University.
Stephen Francis joined the CompanyActionPoint in 1994 as Vice President when the company he co-founded, Pixel Translations, was acquired.acquired by ActionPoint. Mr. Francis became Vice President, Business Development in 1999 after serving as General Manager of the Pixel Translations Division since 1997. Prior to joining Pixel Translations, Mr. Francis held engineering and marketing management roles at Calera Recognition Systems, now part of Caere Corporation.Corporation, a developer of recognition software. Mr. Francis holds a BS in Electrical Engineering/Computers from Stanford University.
Michael Parker joined the CompanyActionPoint in October 1998 as Vice President of Engineering. Prior to joining Input Software,ActionPoint, Mr. Parker held the positions at Adobe Systems of Director of Engineering from October 1997 to October 1998 and Engineering Manager from June 1993 to October 1997.1997 at Adobe Systems, a software developer. Mr. Parker holds a BS in Electrical Engineering from the University of Pennsylvania.
Johannes Schmidt joined the CompanyActionPoint as Vice President of Software Engineering in 1994 when the company he founded, Pixel Translations, was acquired by the Company.ActionPoint. He was appointed Chief Technology Officer in 1996 and Director in November 1998. Previously, Mr. Schmidt held senior engineering positions at Calera Recognition Systems, which is now part of Caere Corporation.Corporation, a developer of recognition software. Mr. Schmidt holds a BS in Engineering and Applied Science from the California Institute of Technology.
John Stetak joined the CompanyActionPoint as Vice President of Marketing in May 1998. From 1992 to 1998 he served as Director of Marketing for the Data Management Market Group of Autodesk.Autodesk, a software developer. Previously Mr. Stetak was Manager of Product Marketing for EDS.
RISK FACTORS
In addition to the other information in this Report, the following risk factors should be considered carefully in evaluating us and our business.
Risks Related to our Financial Results
We have recently experienced net losses and expect to continue to incur net losses for the Company
and its business.
Historyforeseeable future, which may harm the market price of Losses; Future Operating Results Uncertain
Forour common stock.
We incurred net losses of $8.8 million for the past several years, the Company has been investing in its
software business and as a result incurred operating losses in each
quarter from inception through the quarter ending June 30, 1997. As ofyear ended December 31, 1999,2000. In recent periods, we have not generated cash from operations. Our recent net losses are substantially the Company's software operations had cumulative pre-
tax operating lossesresult of approximately $3.5 million. The losses have
been due in part to the commitment of significant resources to theincreased research and development and sales and marketing departments. The
Company expectsexpenses for our new Dialog Server product family. We expect to continue to devote substantial resources to these
areasour product families and as a result we will need to achieve significant quarterlyincreased revenues to achieve profitability. In particular,Even if we achieve profitability, given the Company intendscompetitive and evolving nature of our industry we may not be able to continue to hire additional sales and research and development
personnel in 2000 and beyond, which the Company believes is required if
the Company is to achieve significant revenue growth in the future.
Although the Company's revenues generally have increased in recent
periods, there can be no assurance that this will continue in future
periods, that revenues will grow at past ratessustain or that the Company will
return toincrease profitability on a quarterly or annual basisbasis. As a result, we will need to generate higher revenues while containing costs and operating expenses to become and remain profitable. Our failure to do so will cause the price of our stock to decline.
Because of the unpredictability of operating results from our products, we may not accurately forecast our revenues or match our expenses to our revenues, which could harm our quarterly operating results and cause volatility or declines in the future.
Operating Results Subject to Significant Fluctuations; Seasonality
The Company'sour stock price.
Our quarterly revenues, expenses and operating results have varied significantly in the past and are likely to vary significantly in the future due to a variety of factors, such as demand for including:
We operate with virtually no order backlog because itsour software products are shipped shortly after orders are received, whichreceived. That makes product revenues in any quarter substantially dependent on orders booked and shipped throughout that quarter. In addition, the Company achieveswe achieve a significant portion of revenues from indirect sales channels over which the Company haswe have little control. Moreover, the Company'sour expense levels are based to a significant extent on the Company'sour expectations of future revenues and therefore are relatively fixed in the short term. If revenue levels are below expectations, our operating results are likely to be adversely and
disproportionately affectedharmed because only a small portion of the Company's expenses vary with its revenues.
The Company's business has experienced and is expected to continue to
experience seasonality, largely due to customer buying patterns. In
most of the
Also, in recent years, the Company haswe have had relatively stronger demand for itsour products during the quarter ending December 31 and demand has
been relatively weaker demand in the quarter ending March 31. This relative
strong fourth quarter demand was adversely affectedWe believe that, adjusting for the negative impact in late 1999 due tocaused by Year 2000 concerns, of potential customers in the Company's target markets.
The Company believes that, adjusting for such Year 2000 aberrations, this pattern will continue. Based upon allIn addition, we expect that sales may decline during summer months, particularly in European markets. This seasonality makes it more difficult to forecast future revenues. Therefore, it is likely that in some future quarter operating results will fall below expectations and as a result, the price of theour common stock may be harmed.
Our failure to forecast our revenues and future operating expenses accurately could cause quarterly fluctuations in our revenues and may result in volatility, which may cause a decline in our stock price.
As a result of these factors, described
above, the Company believeswe believe that its quarterly revenues,quarter-to- quarter comparisons of our revenue, expenses and operating results are likely to vary significantly in the future and that period-to-period comparisons of itsour operating results are not necessarily meaningful and that, inmeaningful. In any event, such comparisons should not be relied upon as indications of our future performance. The Company
has limited ability to forecast future revenues, and it is likely that
in some future quarter the Company'sIn addition, our operating results will be belowin one or more future quarters may fail to meet the expectations of public securities analysts or investors. If this occurs, we could experience an immediate and investors. Insignificant decline in the event
thattrading price of our stock.
You may have difficulty evaluating our business and operating results are below expectations, orbecause we have yet to ship any meaningful volume of Dialog Server products, our new e-commerce interaction management product family.
We recently developed and will be enhancing our new Dialog Server product family to compete in the eventmarket for e-commerce interaction management software. Because we have a limited operating history for this new product family, it is impossible to discern trends that adverse conditions prevail or are perceivedmay emerge and affect our business. Our limited historical financial performance for this product family will make it difficult for you to prevail generally or with
respectevaluate the success of our business to date and to assess its future viability.
Risks Related to the Company's business,Information Capture and Interaction Management Software Industry
If we are not able to effectively compete against other software providers in the price of the Company's Common
Stock would likely be materially adversely affected.
Significant Competition
interaction management and data capture software industry, our revenues will not increase and may decrease.
The market for the Company'sour products is intensely competitive and subject to rapid change. In addition, because there are relatively low barriers to entry in the software market, the Companywe may encounter additional competition from othermany established and emerging companies. Many of the Company'sour competitors have longer operating histories, significantly greater financial, technical, marketing and other resources than the Company,us, significantly greater name recognition and a large installed base of customers. As a result, the Company'sour competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements, or to devote greater resources to the development, promotion and sale of competitive products than can the Company.we can. There is also a substantial risk that announcements of competing products by large competitors could result in the cancellationdelay or postponement of customer orders in anticipation of the introduction of such new products.
In addition, current and potential competitors have established or may establish cooperative relationships among themselves or with third-partiesthird parties to increase the ability of their products to address customer needs and whichneeds. These cooperative relationships may limit the Company'sour ability to sell itsour products through particular reseller partners. Accordingly, new competitors or alliances among current and new
competitorscompetitive cooperative relationships may emerge and rapidly gain significant market share. The
CompanyWe also expectsexpect that competition will increase as a result of software industry consolidation. Increased competition is likely to result in price reductions, fewer customer orders, reduced margins and loss of market share, any of which could materially adversely affectharm our revenues and business.
If the Company. There canmarket for interaction management and data capture software does not grow, our revenues may not grow.
The markets for interaction management and information capture software are fragmented, rapidly changing and extremely competitive. This interaction management market is still emerging, and it may not continue to grow or organizations may not adopt our products. We have spent, and intend to continue to spend, considerable resources educating potential customers about our software products and the interaction management market generally. Our expenditures may fail to achieve any additional degree of market acceptance for our products. The rate at which organizations have adopted our existing products has varied significantly, and we expect to continue to experience such variations in the future. For instance, the market for e-commerce interaction management products will not grow if customers are reluctant to abandon traditional customer relationship and order management systems. If the markets for our products fail to develop, or develop more slowly than we currently anticipate, our revenues will not grow and our operating results will suffer.
If businesses do not increasingly adopt the Internet as a means to deliver information and conduct commerce, the market for our products will not grow and the market price for our common stock could decline as a result of lower revenues or reduced investor expectations.
The market for e-commerce interaction management products, particularly those using the Internet to deliver information and process commercial transactions, has only recently begun to develop and is evolving rapidly. Because this market is new, we cannot predict its potential size or future growth rate. The use and acceptance of the Internet may not increase for a number of reasons, including:
If Internet infrastructure, products, services or facilities that support and complement our products are not developed, or if use of the Internet does not increase as expected, this could force us to lower the prices of our products or result in fewer sales of our products and our revenues will not grow and could decline.
Potential increases or changes in governmental regulation of Internet communication and commerce could discourage the growth of the Internet, which could decrease the demand for our new family of products.
Due to concerns arising from use of the Internet, a number of domestic and international laws and regulations have been, and may be, no assuranceadopted covering issues including user privacy, taxation, pricing, acceptable content and quality of products and services. Legislative changes could dampen the growth in use of the Internet generally and decrease the acceptance of the Internet as a communications and commercial medium. This could limit the market acceptance of our recently released e-commerce interaction management products. Further, due to the global nature of the Internet, it is possible that multiple federal, state or foreign jurisdictions might attempt to regulate Internet transmissions or levy sales or other taxes relating to Internet-based activities. Moreover, the Companyapplicability to the Internet of existing laws, including laws governing property ownership, libel and personal privacy, is uncertain. We cannot assess the possible negative impact of any future regulation of the Internet on our business.
Risks Related to Our Business
Significantly all of our revenues are currently derived from sales of our InputAccel product and related software tools, and if demand for these products declines or fails to grow as we expect, our revenues will be able to
compete successfully against current and future competitors or that the
competitive pressures faced by the Company will not materially adversely
affect its business, operating results and financial condition.
Product Concentration
The Company currently expects the sale and license of its InputAccel
products and software tools to account forharmed.
Through December 31, 2000 we derived substantially all of the
Company's revenues for 2000, withour revenues from DynamicInputthe InputAccel product family and Pixtools software tools. Revenues from our new Dialog Server product family are not expected to start contributing any significant amount until late in the second half of 2000. The Company's2001. Therefore, our future operating results are, therefore,depend heavily dependent upon continued and widespread market acceptance of thesefor our InputAccel products and enhancements to such.
Consequently, athose products. A decline in the demand for or market acceptance of, the
Company's InputAccel or DynamicInput products as a result of competition, technological change or other factors, would have a
material adverse effect oncause our revenues to suffer.
If the Company's business, operating resultsmarket for our new Dialog Server product family and financial condition.
Dependence on Continued Growth of the Marketenhancements for Data Capture and
e-Commerce Applications
Although demand for data capture and e-commerce has grown in recent
years, this market is still emerging and there can be no assurance that
it will continue to grow or that organizations will continue to adopt
the Company's products. The Company has spent, and intends to continue
to spend, considerable resources educating potential customers about the
Company's softwareour existing products and the e-commerce market generally.
However, there can be no assurance that such expenditures will enable
the Company's products to achieve any additional degree of market
acceptance. The rate at which organizations have adopted the Company's
products has varied significantly and the Company expects to continue to
experience such variations in the future. There can be no assurance
that the markets for the Company's products will continuefails to develop or that the Company's products will be accepted within such markets. If
the markets for the Company's products fail to develop, or develop more
slowly than the Company currently anticipates, the Company's business,grow, our revenues may not grow and our operating results will suffer.
If sales of our new products are lower than expected, our revenues and financial condition would be materially adversely
affected.
Rapid Technological Changeoperating results will suffer. Factors that may affect the market acceptance of our new products, some of which are beyond our control, include the following:
If we are unable to respond in an effective and timely manner to rapid technological change and new products in our industry, our revenues and operating results will suffer.
The market for the Company's productsinformation capture and interaction management software is characterized by rapid technological change, frequent new product introductions and enhancements, uncertain product life cycles, changes in customer demands and evolving industry standards. The introduction of products, such as our Dialog Server product family, embodying new technologies such as DynamicInput, and the emergence of new industry standards can render existing products obsolete and unmarketable. The Company'sOur future success will depend upon itsour ability to continue to enhance itsour current products and to develop and introduce new products on a timely basis that keep pace with technological developments and satisfy increasingly sophisticated customer requirements. As a result of the complexities inherent in document
image processingour software, new products and product enhancements can require long development and testing periods. As a result, significant delays in the general availability of such new releases or significant problems in the installation or implementation of such new releases could have a material adverse effect on the Company's business,harm our operating results and financial condition. The Company hasWe have experienced delays in the past in the release of new products and new product enhancements. There can be no assurance that the Company will be
successful in developingWe may fail to develop and marketing,market on a timely and cost effective basis new products or new product enhancements that respond to technological change, evolving industry standards or customer requirements, that the Company will notrequirements. We may experience difficulties that could delay or prevent the successful development, introduction or marketing of these products or that the Company'sour new products and product enhancements will achieve market acceptance.
Risk of
Software Defects
Softwaredefects that are discovered in our products ascould harm our business by damaging our reputation, causing us to lose customers and resulting in significant costs and liabilities.
Our software products are complex as those offered by the Companyand may contain errors or defects, particularly when first introduced or when new versions or enhancements are released. The Company has inIn the past, we have discovered software errors in certain of itsour new products after their introduction. There canIn addition, our products are combined with complex products developed by other vendors. As a result, should problems occur, it may be no assurance that, despite testing bydifficult to identify the Company,source of the problem. Defects and errors, or end-user perception of defects and errors, will not be found in current versions, new versions or enhancements of itsour products after commencement of commercial shipments resulting in may result in:
The occurrence of any one or more of these factors could have a material adverse effect on the Company'sharm our revenues and gross margins.
If we cannot manage and expand our international operations, our revenues may not increase and our business operatingand results of operations would harmed.
In 2000, international sales represented approximately 26% of our revenues, and financial condition.
Risks Associated with International Sales and Operations
The Company anticipateswe anticipate that for the foreseeable future a significant portion of itsour revenues will be derived from sources outside North America and the Company intendsAmerica. In addition, we intend to continue to expand itsour sales and support operations internationally. In order to successfully expand international sales, the Companywe may establish additional foreign operations, expand itsour international sales channel management and support organizations, hire additional personnel, customize itsour products for local markets, recruit additional international resellers and attempt to increase the productivity of existing international resellers. To the
extent that the Company isIf we are unable to do these things in a timely and cost-effective manner, the Company'sour sales growth internationally, if any, will be limited, and the Company'sour business, operating results and financial condition couldwould be materially adversely affected.harmed. Even if the
Company iswe are able to successfully expand itsour international operations, there can be no assurance that the Company willwe may not be able to maintain or increase international market demand for itsour products.
The Company's
Our international operations are generally subject to a number of risks, including including:
To date, athe majority of the Company'sour revenues and costs have been denominated in U.S. dollars. However, the Company believeswe expect that in the future an increasing portion of the Company'sour revenues and costs will be denominated in foreign currencies. Although the Companywe may from time to time undertake foreign exchange hedging transactions to reduce itsour foreign currency transaction exposure, the Company doeswe do not currently attempt to eliminate all foreign currency transaction exposure.
Dependence
Our future success is dependent on Key Personnel
The Company's success depends to a significant extent upon the effortsservices of itsour key management, sales and marketing, technical support and research and development personnel, noneand those persons' knowledge of whomour business and technical expertise would be difficult to replace.
Our products and technologies are bound by an
employment contract. The losscomplex, and we are substantially dependent upon the continued service of our existing key management, or technical personnel
could adversely affect the Company. The Company believes that its
future success will depend in large part upon its continuing ability to
attract and retain highly skilled managerial, sales and marketing, technical support and research and development personnel. Like other
software companies, the Company faces intense competition for such
personnel, and the Company has at times experienced and continues to
experience difficulty in recruiting qualified personnel. There can be
no assurance that the Company will be successful in attracting,
assimilating and retaining additional qualified personnel in the future.We do not have employment agreements with any of our key employees. The loss of the services of one or more of our key employees could harm our business and slow our product development processes or sales and marketing efforts.
If we fail to recruit and retain a significant number of qualified technical personnel, we may not be able to develop, introduce or enhance our products on a timely basis.
We require the Company's key
individuals, or the failureservices of a substantial number of qualified technical support and research and development personnel. The market for these personnel is characterized by intense competition, as well as a high level of employee mobility. These factors make it particularly difficult to attract and retain additionalthe qualified technical personnel we require. We have experienced, and we expect to continue to experience, difficulty in hiring and retaining highly skilled employees with appropriate technical qualifications. If we are unable to recruit and retain a sufficient number of technical personnel, we may not be able to complete development of, or upgrade or enhance, our products in a timely manner. Even if we are able to expand our staff of qualified technical personnel, it may require greater than expected compensation packages that would increase our operating expenses.
We must expand our sales and marketing organization to increase market awareness and sales of our products or our revenues may be adversely affected.
The sale of our products requires long and involved sales efforts targeted at several key departments within our prospective customers' organizations. Sales of our products require the prolonged efforts of executive personnel and specialized systems and applications engineers working together with a small number of dedicated salespersons. We will need to grow our sales force in order to increase market awareness and sales of our products. Competition for these individuals is intense, and we might not be able to hire a sufficient number of qualified sales personnel and applications engineers without incurring higher than expected compensation costs. If we are unable to expand our sales operations, we may not be able to increase market awareness or sales of our products, which could have a material adverse effect on the Company's
business,adversely affect our revenues.
If our products fail to perform properly, our customers may assert product liability claims for damages and our reputation and operating results may suffer.
Our products are used in connection with critical business functions and financial condition.
Limited Protectionmay result in significant liability claims if they do not work properly. Limitation of Proprietary Technology; liability provisions we include in our license agreements may not sufficiently protect us from product liability claims because of limitations in existing or future laws or unfavorable judicial decisions. Although we have not experienced any material product liability claims to date, the sale and support of our products may give rise to claims which may be substantial in light of the use of the our products in business-critical applications. Liability claims could require us to spend significant time and money in litigation or to pay significant damages. Any claims for damages, whether or not successful, could seriously damage our reputation and our business.
We may need additional capital, which may not be available, and our ability to grow may be limited as a result.
The development and marketing of new and enhanced products and the associated personnel and capital expenditures will require a significant commitment of resources. As a result, we may need to raise substantial additional capital. If we must raise additional funds, we may not be able to do so on favorable terms, or at all. If we cannot raise funds on acceptable terms, we may not be able to further develop or enhance our products, take advantage of future opportunities or respond to competitive pressures or unanticipated requirements, which would harm our business and could require us to terminate operations.
Risks of Infringement;Related to Our Product's Dependence on Intellectual Property and Our Use of Licensed Technology
The Company reliesOur Brand
Our reliance upon contractual provisions and domestic copyright and trademark laws to protect our proprietary rights may not be sufficient to protect our intellectual property from others who may sell similar products.
We believe that the steps we have taken to safeguard our intellectual property afford only limited protection. We rely primarily on a combination of copyright, trademark and trade secret laws, confidentiality procedures and contractual provisions to protect itsour proprietary rights. The Company licenses itsWe license our software products primarily under license agreements. There can be no
assurance that others will notCompetitors may develop technologies that are similar or superior to the Company'sour technology or design around thethat do not infringe our copyrights and trade secrets, owned by the Company.and this could reduce demand for our products. Despite the Company'sour efforts to protect itsour proprietary rights, unauthorized parties may attempt to copy aspects of the Company'sour products or to obtain and use information that the Company regardswe regard as proprietary. Policing unauthorized use of the
Company'sour products is difficult, and although the Company iswe are unable to determine the extent to which piracy of itsour software products exists, software piracy can be expected to be a persistent problem.
In addition, the laws of some foreign countries do not protect the
Company'sour proprietary rights as fully as do the laws of the U.S. The Company is not aware thatIn those countries, reverse engineering, unauthorized copying or other misappropriation of our proprietary technology could enable third parties to benefit from our technology without paying us for it, is infringing any proprietary rightswhich would significantly harm our business.
We depend upon software we license from third parties, the loss of third-parties. There can be no assurance, however, that third-parties
will not claim infringement by the Company of their intellectual
property rights. The Company expects that software product developers
increasingly will be subject to infringement claims as the number of
products and competitors in the Company's industry segment grows and the
functionality of products in different industry segments overlaps. Any
such claims, with or without merit,which could be time consuming to defend,
result in costly litigation, divert management's attention and
resources, cause product shipment delays or require the Company to enter
into royalty or licensing agreements. Such royalty or licensing
agreements, if required, may not be available on terms acceptable to the
Company, if at all. In the event of a successful claim of product
infringement against the Company and failure or inability of the Company
to either license the infringed or similar technology or develop
alternative technology on a timely basis, the Company's business,
operating results and financial condition could be materially adversely
affected.
The Company reliesharm our revenues.
We rely upon certain software that it licenseswe license from third-third parties, including software that is integrated with the Company'sour internally developed software and used in itsour products to perform key functions. There can be no assurance that these third-party software licenses will continue to be available to the Company on commercially reasonable terms, if at all. The loss of or inability to maintain any such software licenses could result in shipment delays or reductions until equivalent software could be developed, identified, licensed and integrated such delays would materially adversely affect the Company'sour business, operating results and financial condition.
Product Liability
Although
We have invested substantial resources in developing our products and our brand, and our operating results would suffer if we were subject to a protracted infringement claim or one with a significant damage award.
Substantial litigation regarding intellectual property rights and brand names exists in our industry. We expect that software product developers increasingly will be subject to infringement claims as the Company's licensenumber of products and competitors in our industry segment grows and the functionality of products in different industry segments overlaps. We are not aware that any of our products infringe any proprietary rights of third parties. However, third parties, some with far greater financial resources than us, may claim infringement by our products of their intellectual property rights. Any such claims, with or without merit, could:
If we are required to enter into royalty or licensing agreements with its customers typically
contain provisions designed to limit the Company's exposure to potential
product liability claims, it is possible that such limitation of
liability provisionsresolve an infringement claim, we may not be effective asable to enter into these agreements on terms acceptable to us, if at all. A successful claim of product infringement against us or our failure or inability to either license the infringed or similar technology or develop alternative technology on a resulttimely basis, may harm our operating results, and our financial condition could be harmed because we would not be able to sell the impacted product without redeveloping it or incurring significant additional expenses.
Risks Related to the Market for Our Common Stock and Our Business
We experience volatility in our share price, and investors may not be able to resell shares of existingour common stock at or above the purchase price.
The market price of our common stock has historically varied from time to time. An investor in shares of our common stock may not be able to resell those shares at or above the price paid. Our common stock price may fluctuate significantly in the future lawsdue to:
In addition, The CompanyNasdaq National Market has not
experienced any material product liability claimsextreme volatility in recent years that has often been unrelated to date; however, the saleperformance of particular companies. Future market fluctuations may cause our stock price to fall regardless of our performance.
Provisions of our charter documents, Delaware law and support of the Company's productsour rights plan may entail the risks of such
claims,have anti-takeover effects that could discourage or prevent a change in control, which may suppress our stock price or cause it to decline.
Provisions of our certificate of incorporation and bylaws and a rights plan adopted by our board of directors may discourage, delay or prevent a merger or acquisition that our common stockholders may consider favorable. Provisions of our Certificate of Incorporation and bylaws:
The rights granted pursuant to the rights agreement entered into as part of our rights plan have anti-takeover effects. The rights may cause substantial dilution to a person or group that attempts to acquire ActionPoint on terms that our board of directors determines are not in lightthe best interests of our stockholders. Certain provisions of Delaware law also may discourage, delay or prevent someone from acquiring or merging with us, which may cause the usemarket price of the Company's
products in business-critical applications.
our common stock to decline.
Item 2. Properties
The Company's
Our principal administrative, sales, marketing and research and development facility is located in a building of approximately 46,000 square feet in San Jose, California. This facility is leased through February 2004. All Companyof our functions except certain sales activities are performed at this facility. Input Software'sOur European sales activities are conducted from leased facilities near Munich, Germany and London, England. Certain other sales activities are conducted from rented offices in various states in the U.S. The Company
believesWe believe that itsour facilities are adequate for itsour current needs.
Item 3.Legal Proceedings
Not applicable
There are no material pending legal proceedings to which we are a party or to which our subsidiaries are subject.
Item 4.Submission of Matters to a Vote of Security Holders
Not applicable.
No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended December 31, 2000.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholders Matters
Price range of common stock
Quarter Ended
------------------------------------------
1999 March 31, June 30, Sept. 30, Dec. 31,
- ---------------------------------------- --------- --------- --------- ---------
Stock prices:
High 7.50 6.25 5.88 19.50
Low 4.88 5.00 3.75 3.56
1998
- ----------------------------------------
Stock prices:
High 6.63 7.38 8.38 8.13
Low 4.50 5.13 5.50 5.13
Quarter Ended
------------------------------------------
2000 March 31, June 30, Sept. 30, Dec. 31,
- ------------------------ --------- --------- --------- ---------
Stock prices:
High 34.25 20.25 8.44 5.38
Low 10.88 7.00 4.13 2.00
1999
- ------------------------
Stock prices:
High 7.50 6.25 5.88 19.50
Low 4.88 5.00 3.75 3.56
Common stock market price
The Company's
Our common stock is traded on The Nasdaq National Market under the symbol INPT. The Company'sACTP. Our common stock began trading in September 1993. There were approximately 138approximately109 stockholders of record and approximately 2,4002,500 beneficial shareholders of record at February 29,
2000.
28, 2001.
To date, the Company haswe have not declared or paid any cash dividends on itsour common stock. The Company doesWe do not anticipate paying dividends on itsour common stock in the foreseeable future.
Item 6. Selected Consolidated Financial Data.
The following selected consolidated financial data should be read in conjunction with the consolidated financial statements.
Year Ended December 31,
------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- -------- -------- --------
(in thousands, except per share amounts)
Consolidated Statements of
Operations Data:
- ----------------------------
For continuing operations:
Net revenues.................... $25,042 $22,178 $17,409 $12,240 $7,090
Gross profit.................... 20,621 18,964 15,661 11,359 6,768
Operating income (loss)......... (8,353) (848) 832 (91) (2,304)
Net income (loss)............... (8,758) (141) 1,039 394 (1,449)
Diluted income (loss)
per share.................... ($2.09) ($0.03) $0.18 $0.05 ($0.19)
For discontinued operations:
Net income (loss)............... ($1,351) $687 $286
Diluted income (loss) per share. ($0.24) $0.10 $0.04
Net income (loss)............... ($8,758) ($141) ($312) $1,081 ($1,163)
Diluted income (loss) per share. ($2.09) ($0.03) ($0.06) $0.15 ($0.15)
Shares used in per share
calculations................. 4,190 4,370 5,657 7,285 7,548
Year Ended December 31,
------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- -------- -------- --------
(in thousands)
Consolidated Balance
Sheets Data:
- ----------------------------
Working capital................. $4,960 $13,863 $19,030 $16,981 $22,241
Total assets.................... 17,801 23,178 26,877 37,693 41,074
Stockholders' equity............ 9,922 17,378 21,357 33,923 39,018
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following table sets forth, for the periods indicated, certain financial data from the Company'sour consolidated statements of operations as a percentage of revenues.
Year Ended December 31,
--------------------------
2000 1999 1998
-------- -------- --------
For continuing operations only
Net revenues
License........................................... 78% 81% 89%
Service........................................... 22% 20% 11%
-------- -------- --------
Total revenues..................................... 100% 100% 100%
Cost of revenues
License........................................... 2% 3% 3%
Service........................................... 16% 12% 7%
-------- -------- --------
Cost of revenues.................................... 18% 15% 10%
-------- -------- --------
Gross profit.................................... 82% 85% 90%
-------- -------- --------
Research and development............................ 31% 25% 24%
Sales and marketing................................. 66% 50% 45%
General and administrative.......................... 19% 14% 16%
-------- -------- --------
Operating income (loss)......................... (34%) (4%) 5%
Interest and other income (expense)................. (1%) 3% 4%
-------- -------- --------
Income (loss) before provision for income taxes. (35%) (1%) 9%
Provision (benefit) for income taxes................ 3%
-------- -------- --------
Net income (loss) from continuing operations.... (35%) (1%) 6%
======== ======== ========
Revenues
The Company's
We derive the majority of our revenues from product licensing and royalty. Our license revenues increased by 8% in 2000 to $19.4 million from $17.9 million in 1999 and increased by 16% in 1999 to $17.9 million
from $15.4 million in 1998 and1998. The increases in license revenue are primarily from increased by 37% in 1998revenues from $11.2
million in 1997. ourInputAccelproduct line.As a percent of total revenue, licenses accounted for 80.5%78%, 88.6%81% and 92.0%89% of 2000, 1999 1998 and 1997 respectively. The
increases in license revenue are due primarily to increased revenues
from the InputAccel product line.
The Company's1998.
Our service revenues, which include software maintenance and professional consulting, increased by 30% in 2000 to $5.6 million from $4.3 million in 1999 and increased by 118% in 1999 to $4.3 million from $2.0 million in 1998 and increased by 102% in 1998 from $980,000 in
1997.1998. This represents 19.5%22%, 11.4%20% and 8.0%11% of 2000, 1999 and 1998 and 1997
total revenues respectively.revenues. The increase in service revenues in both absolute and percentage terms was attributable to a larger installed base of customers purchasing ongoing software maintenance; and increases in the Company'sour training and professional consulting offerings.
Gross Profit
Gross profit increased by 21%9% to $20.6 million in 2000 from $19.0 million in 1999 and increased 21% in 1999 from $15.7 million in 1998 and increased 38% in 1998 from $11.4 million in 1997.1998. Gross profit margin decreased to 86%82% in 2000 from 85% in 1999 fromand 90% in 1998. The decrease in gross margin percent is largely due to the increased percentage of revenues derived from software maintenance and professional services, which have lower margins than revenues from product licensing. The Company expectsWe expect revenues from maintenance and services to continue to increase as a percentage of overall revenues.
Research and Development
Research and development expenses increased by 41% in 2000 to $7.9 million from $5.6 million in 1999 and by 33% in 1999 to $5.6
million from $4.2 million in 1998 and by 5% in 1998 from $4.0 million in
1997.1998. The increase in 2000 includes $710,000 of stock related bonus expense. The other increases in 2000 and 1999 isrespectively are largely due to investments made for the DynamicInputDialog Server product line. Research and development expenses increased as a percentage of revenue to 31% in 2000, from 25% in 1999 and from 24% in 1998, which
decreased from 33% in 1997.
1998.
Current staffing levels exceed those of prior periods. The Company
believesWe believe that continued investment in research and development is critical to itsour future growth and that we will continue to commit substantial
resources to this area. As a result, research and development expenses
are likely to increase during 2000 and beyond.
Sales and Marketing
Sales and marketing expenses increased by 47% in 2000 to $16.4 million from $11.2 million in 1999 and by 42% in 1999 to $11.2 million from $7.9 million in 1998 and by 49%1998. The increase in 1998 from $5.3 million in 1997.2000 includes $638,000 of stock related bonus expense. Sales and marketing expenses increased as a percentage of revenue to 66% in 2000, from 50% in 1999 fromand 45% in 1998 and increased from 43% in 1997, respectively.
The Company expects that sales and marketing expenses will continue to
increase in the future as the Company continues to expand sales and
marketing programs, especially for those related to DynamicInput.
1998.
General and Administrative
General and administrative expenses increased by 54% in 2000 to $4.7 million from $3.0 million in 1999 and by 11% in 1999 to $3.0
million from $2.8 million in 1998 and by 27%1998. The increase in 1998 from $2.22000 includes $1.1 million in 1997.of stock related bonus expense. General and administrative expenses have decreasedincreased as a percentage of revenue to 19% in 2000, from 14% in 1999, fromand 16% in 1998 and from 18% in
1997, respectively. The decreases, as a percent to sales, are primarily
attributable to increased efficiencies resulting from higher revenue
levels. The Company expects general and administrative expenses to
continue to increase in absolute dollars in future periods.
1998.
Divestiture
The sale of the display division resulted in a net loss of $1.4 million, or 24 cents per share, in 1998. This charge includes a loss from display division operations in the first quarter of 1998, net of tax benefit, of $361,000, and an estimated loss of $990,000, net of tax benefit, on the sale of the net assets of the display division. As a result of the sale, the Company ownswe own a minority interest in Cornerstone Peripherals Technology, Inc., which is reflected as an `other asset' on the December 31, 1999 balance sheet. Based on our assessment of the likelihood to realize value, we wrote off the $500,000 value of this investment in the first quarter of 2000.
Interest and Other Income
Interest and other income decreased in 2000 to $95,000 from $631,000 in 1999 to $631,000and decreased in 1999 from $675,000 in 1998 and decreased in 1998 from $688,000 in 1997.
1998. This was due to a reduction of cash balances.
Provision (benefit) for Income Taxes
The provision (benefit) for income taxes as a percentage of pretax income (loss) wasof 35% as offset by an equivalent valuation allowance for 2000. This compares to a provision (benefit) as a percentage of pretax income (loss) of (35)%, 31% and 34%31% for 1999 1998 and 1997,
respectively.
1998.
Liquidity and Capital Resources
At December 31, 2000, we had cash and cash equivalents of $2.2 million, a decrease of $7.0 million from December 31, 1999. At December 31, 1999, the Companywe had cash and cash equivalents of $9.2 million, a decrease of $5.2$5.3 million from December 31, 1998.
At December 31, 1998, the Company had cash and cash equivalents2000, working capital totaled $5.0 million, a decrease of $14.4million, an
increase of $2.2$8.9 million from December 31, 1997.1999. At December 31, 1999, the working capital totaled $13.9 million, a decrease of $5.1 million from December 31, 1998. At December 31, 1998,
the working capital totaled $19.0 million, an increase of $2.0 million
from December 31, 1997.
Net cash used in operating activities was $6.9 million in 2000 compared to net cash used by operating activities of $413,000 in 1999 compared.The funds were utilized to support increased expenses, substantially related to our Dialog Server product family, and in 2000, for payments made under a stock-based incentive plan.Net cash provided by operating activities in 1998 was $15.2 million. The net cash provided by operating activities of $15.2 million 1998. The
cash provided in 1998 was resulting from the sale of the Company's
display division. Net cash provided by operating activities was $15.2
million in 1998 compared to $253,000 in 1997. The increase in net cash
provided by operating activities from 1997 to 1998 was due primarily to conversion to cash of various assets from the discontinued display operation.
Net cash used for investing activities, exclusively additions to property and equipment, was $827, 000$921,000 in 2000 compared to $827,000 in 1999 compared toand $821,000 in 1998 and $230,000 in 1997.
1998.
Through February 11, 1999, the Company'sour Board of Directors authorized the use of up to $25 million to repurchase the Company'sour common stock. The repurchased stock is expected to be held by the Companycompany and may be used to meet the Company'sour obligations under itsour stock plans and for other corporate purposes. Since inception of the plan in 1997 to December 31, 1999, 3.8 million shares have been repurchased for a total of $23.6 million. 1999 repurchases totaled $4.5 million. The CompanyNo purchases were made in 2000. We used cash on hand to fund itsthe purchases.
The Company believes
We anticipate that itsour cash and cash equivalents, together with cash flows from operations will be sufficient to meet the Company'sour liquidity and capital requirements for the next 12 months. The CompanyWe may, however, seek additional equity or debt financing to fund further
expansion. The timing and amount of such capital requirements cannot be
precisely determined at this time and will depend on a number of
factors, including demand for the Company's products, product mix and
competitive factors. Accordingly, the Company may require additional
funds to support its working capital requirements or for other purposes
and may seek toour business operations. If we raise such additional funds through publicthe issuance of equity, equity-related or private
equitydebt securities, such securities may have rights, preferences or other sources.privileges senior to those of the rights of our common stock. As a result, our stockholders may experience significant additional dilution. There can be no assurance that additional financing will be available at all or that it, if available, will be obtainable on terms favorable to the Companyus and that would not be dilutive.
Subsequent event
In January 2001, the Company reduced its workforce by 11 people. The expected savings from this reduction is approximately $194,000 per quarter
Quarterly Operating Results (Unaudited)
The following table sets forth selectedour unaudited financial information
for the Company for the eight quarters in the period ended December 31, 1999.2000. This information has been prepared on the same basis as the audited financial statements and, in the opinion of management, contains all adjustments necessary for a fair presentation thereof.
INPUT SOFTWARE,
ACTIONPOINT, INC.
CONSOLIDATED FINANCIAL INFORMATION
(unaudited
(unaudited - in thousands, except per share data)
Quarter Ended
------------------------------------------
1999 March 31, June 30, Sept. 30, Dec. 31,
- ---------------------------------------- --------- --------- --------- ---------
Net revenues $5,260 $5,856 $5,461 $5,601
Gross profit 4,546 5,006 4,692 4,720
Operating income (loss) 14 157 (133) (886)
Net income 127 185 42 (495)
Basic and Diluted EPS: 0.03 0.04 0.01 (0.12)
1998
- ----------------------------------------
Net revenues from continuing operations $3,387 $4,160 $4,599 $5,263
Gross profit 2,962 3,769 4,198 4,732
Operating income (loss) (93) 164 356 405
Net income (loss) from continuing
operations 35 219 354 431
Net income (loss) from
discontinued operations (2,645) -- -- 1,294
Basic and Diluted EPS:
For continuring operations 0.01 0.04 0.07 0.09
For discontinued operations (0.42) -- -- 0.26
--------- --------- --------- ---------
Net income (loss) (0.41) 0.04 0.07 0.35
Quarter Ended
------------------------------------------
2000 March 31, June 30, Sept. 30, Dec. 31,
- ------------------------ --------- --------- --------- ---------
Net revenues $4,613 $6,026 $5,967 $8,436
Gross profit 3,785 5,056 4,723 7,195
Operating income (loss) (4,738) (1,787) (1,925) 97
Net income (loss) (5,139) (1,750) (1,974) 105
Basic and Diluted EPS: (1.24) (0.42) (0.47) 0.02
1999
- ------------------------
Net revenues $5,260 $5,856 $5,461 $5,601
Gross profit 4,546 5,006 4,692 4,720
Operating income (loss) 14 157 (133) (886)
Net income 127 185 42 (495)
Basic and Diluted EPS: 0.03 0.04 0.01 (0.12)
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
The Company's exposure to market risk for changes in interest rates relate primarily to its investment portfolio. The Company maintains an investment policy which is intended to ensure the safety and preservation of its invested funds by limiting default risk, market risk and reinvestment risk. The Company does not currently use, nor has it historically used, derivative financial instruments to manage or reduce market risk. The Company mitigates default risk by investing in high credit quality securities such as debt instruments of the United States government and its agencies and high quality corporate issuers, as well as money market funds. The portfolio includes only marketable securities with active secondary or resale markets to ensure portfolio liquidity and maintains a prudent amount of diversification. As of December 31, 2000, the Company had $2.2 million of cash and cash equivalents.
The Company does not currently transact any significant portion of its business in functional currencies other than the United States dollar. To the extent that it continues to transact its business using the United State dollar as its functional currency, the Company does not believe that the fluctuations in foreign currency exchange rates will have a material adverse effect on the Company's results of operations.
Item 8. Financial Statements and Supplementary Data.
The following consolidated financial statements of the Company and auditor's reportreports are included in Item 8 and appear following Item 14:
Report of Independent Accountants
Consolidated Balance Sheets - At December 31, 19992000 and 1998
1999
Consolidated Statements of Operations - Years Ended December 31, 2000, 1999 1998, and 1997
1998
Consolidated Statements of Stockholders' Equity - Years Ended December 31, 2000, 1999 1998, and 1997
1998
Consolidated Statements of Cash Flows - Years Ended December 31, 2000, 1999 1998, and 1997
1998
Notes to Consolidated Financial Statements
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Diclosure.
Disclosure.
Not applicable.
PART III
Item 10. Directors and Officers of the Registrant.
The information required by this item relating to the
Company'sour directors and nominees and disclosure relating to compliance with Section 16(a) of the Securities Exchange Act of 1934 is included under the captions "Election of Directors" and "Compliance with Section 16(a) of the Securities Exchange Act of 1934" in the Company'sour Proxy Statement for the 20002001 Annual Meeting of Stockholders and is incorporated herein by reference. The information required by this item relating to the Company'sour executive officers and key employees is included under the caption "Executive Officers and Key Employees" in Part I of this Form 10-K Annual Report.
Item 11. Executive Compensation.
The information required by this item is included under the caption "Executive Compensation and Related Information" in the
Company'sour Proxy Statement for the 20002001 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by this item is included under the caption "Ownership of Securities" in the Company'sour Proxy Statement for the 20002001 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
The information required by this item is included under the caption "Certain Transactions" in the Company'sour Proxy Statement for the 20002001 Annual Meeting of Stockholders and is incorporated herein by reference.
PART IV
ITEM 14. Exhibits, Financial Statements, Schedules, and Reports on Form 10-K
(a) The following documents are filed as part of this Annual Report on Form 10-K:
1. Financial Statements
Report of PricewaterhouseCoopers LLP Independent Accountants
Consolidated Balance Sheets as of December 31, 19992000 and 1998
1999
Consolidated Statements of Operations for each of the three years in the period ended December 31, 1999
2000,
Consolidated Statements of Stockholders' Equity for each of the three years in the period ended December 31, 1999
2000
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 1999
2000
Notes to Consolidated Financial Statements
2. Financial Data Schedule. Form 10-K
Report of PricewaterhouseCoopers LLP
Independent Accountants
Statement Schedules
Schedule II -- Valuation and Qualifying Accounts
Schedules, other than those listed above, have been omitted since they are either not required, are not applicable, or the required information is shown in the financial statements and related notes.
3. (a) See Exhibit List below
(b) No reports on Form 8-K were filed during the last quarter of the fiscal year covered by this Form 10-K Annual Report.
Exhibit List
Exhibit
Number Description
- --------- ---------------------------------------------------------
2.1++ Agreement and Plan of Reorganization April 15, 1994 among the
Company, Pixel Translations, Inc., and Cornerstone Acquisition
Corporation.-----------------------------------------------------------------
3.1+ Amended and Restated Certificate of Incorporation of the
Company.Registrant
3.2+++ Bylaws of the CompanyRegistrant
4.1+ Reference is made to Exhibits 3.1 and 3.2
4.2+ Form of Investor Rights Agreement dated August 27, 1993 by and
among the CompanyRegistrant and the investors identified herein.
4.3 xx Rights Agreement dated September 9, 1997
10.1+ Form of Indemnity Agreement entered into between the CompanyRegistrant
and its directors and officer.
10.2+ Form of the Company'sRegistrant's 1993 Stock Option/Stock Issuance Plan.
10.3+ 1989 Employee10.3 Form of 1999 Stock Option Plan.
10.4+ Key10.4 Form of 1998 Employee Stock Purchase Plan.
10.5+ Form10.5 Lease of Employee Stock Purchase Plan.Property at 1299 Parkmoor Ave, San Jose, CA
21.1+ Subsidiaries of the Company.Registrant
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants
24.1 Power of Attorney (see page 22)24).
27 Financial Data Schedule
+ Incorporated by reference to an exhibit to the Company'sRegistrant's
Registration Statement of Form S-1 (Registration No. 33-
66142)33-66142), as
amended.
++ Incorporated by reference to an exhibit to the Company's 8-K
filed on July 6, 1994.
+++ Incorporated by reference to an exhibit to the Company'sRegistrant's 8-K
filed on September 24, 1997.
xx Incorporated by reference to an exhibit to the Company'sRegistrant's
Registration Statement on Form 8-A filed on September 10, 1997.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 14, 2000.
INPUT SOFTWARE, INC.
By: /s/ Kimra Hawley
Kimra Hawley
President, Chief Executive
Officer and Director
30, 2001.
| ACTIONPOINT, INC. |
| By: | /s/ Kimra Hawley |
| Kimra Hawley | |
| President, Chief Executive Officer and Director |
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints jointly and severally, Thomas T. van Overbeek and John Finegan and each one of them, his attorneys-in-fact,attorneys-in- fact, each with the power of substitution, for him in any and all capacities, to sign any and all amendments (including post-
effectivepost-effective amendments) to this Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-
factattorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
Signature Title Date
- -------------------------- ---------------------------------------------------------------- ---------------------------------- -------------
/s/ Kimra Hawley President, Chief Executive March 14, 200030, 2001
- -------------------------- Officer and Director
Kimra Hawley (Principal Executive Officer)
/s/ John Finegan Chief Financial Officer, March 14, 200030, 2001
- -------------------------- Secretary and Director
John Finegan (Principal Financial and Accounting
Officer)
/s/ Thomas T. van Overbeek Chairman of the Board March 14, 200030, 2001
- -------------------------- of Directors
Thomas T. van Overbeek
/s/ Johannes Schmidt Director March 14, 200030, 2001
- --------------------------
Johannes Schmidt
/s/ James E. Crawford III Director March 14, 200030, 2001
- --------------------------
James E. Crawford III
/s/ Daniel D. Tompkins Director March 14, 200030, 2001
- --------------------------
Daniel D. Tompkins
/s/ Bruce Silver Director March 14, 200030, 2001
- --------------------------
Bruce Silver
Report of Independent Accountants
To the Board of Directors and Stockholders
of Input Software,ActionPoint, Inc.:
In our opinion, the accompanying consolidated balance sheets andfinancial statements listed in the related consolidated statements of operations, stockholders' equity and
cash flowsindex appearing under Item 14(a)(1) on page 23 present fairly, in all material respects, the financial position of Input Software,ActionPoint, Inc. and its subsidiaries ("the Company") at December 31, 19992000 and 1998,1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999,2000 in conformity with accounting principles generally accepted in the United States.States of America. In addition, in our opinion, the financial statement schedule in the index appearing under Item 14(a)(2) on page 23 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule 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 of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed
above.
our opinion.
PricewaterhouseCoopers LLP
San Jose, California
January 31, 2000
INPUT SOFTWARE,29, 2001
ACTIONPOINT, INC.
CONSOLIDATED BALANCE SHEETS
(in
(in thousands, except par value)
December 31,
----------------------
1999 1998
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $9,193 $14,447
Accounts receivable, net of allowance for doubtful
accounts of $209 in 1999 and $559 in 1998 5,300 4,490
Prepaid expenses and other current assets 1,262 934
Deferred income taxes 3,908 4,679
---------- ----------
Total current assets 19,663 24,550
Property and equipment, net 1,479 1,208
Deferred income taxes and other assets 2,036 943
Net assets related to the discontinued Display Division 176
---------- ----------
$23,178 $26,877
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $514 $652
Accrued compensation and related liabilities 1,217 969
Deferred revenue 1,997 1,694
Other accrued liabilities 2,072 2,205
---------- ----------
Total current liabilities 5,800 5,520
---------- ----------
Common stock, $0.01 par value; authorized: 25,000
shares; issued and outstanding: 4,076 shares
and 4808 shares at December 31, 1999 and
1998, respectively 41 48
Paid-in capital 8,681 12,512
Retained earnings 8,656 8,797
---------- ----------
Stockholders' equity 17,378 21,357
---------- ----------
$23,178 $26,877
========== ==========
December 31,
-------------------
2000 1999
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents........................... $2,242 $9,193
Accounts receivable, net of allowance for doubtful
accounts of $200 in 2000 and $209 in 1999........ 7,912 5,300
Prepaid expenses and other current assets........... 1,510 1,262
Deferred income taxes............................... 375 3,908
--------- ---------
Total current assets............................ 12,039 19,663
Property and equipment, net........................... 1,585 1,479
Deferred income taxes and other assets................ 4,177 2,036
--------- ---------
$17,801 $23,178
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................... $414 $514
Accrued compensation and related liabilities........ 2,055 1,217
Deferred revenue.................................... 3,202 1,997
Other accrued liabilities........................... 1,408 2,072
--------- ---------
Total current liabilities...................... 7,079 5,800
Long term deferred revenue............................ 800
--------- ---------
Total liabilities..................................... 7,879 5,800
--------- ---------
Common stock, $0.01 par value; authorized: 25,000
shares; issued and outstanding: 4,274 shares
and 4,076 shares at December 31, 2000 and
1999, respectively................................. 43 41
Paid-in capital....................................... 9,981 8,681
Retained earnings (accumulated deficit)............... (102) 8,656
--------- ---------
Stockholders' equity............................. 9,922 17,378
--------- ---------
$17,801 $23,178
========= =========
The accompanying notes are an integral part of these consolidated financial statements
INPUT SOFTWARE,
ACTIONPOINT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in
(in thousands, except per share amounts)
Year Ended December 31,
--------------------------------
1999 1998 1997
---------- ---------- ----------
Net revenues from continuing operations
License $17,858 $15,425 $11,260
Service 4,320 1,984 980
---------- ---------- ----------
Total revenues 22,178 17,409 12,240
Cost of revenues
License 616 490 267
Service 2,598 1,258 614
---------- ---------- ----------
Cost of revenues 3,214 1,748 881
Gross profit 18,964 15,661 11,359
---------- ---------- ----------
Research and development 5,586 4,212 4,016
Sales and marketing 11,182 7,863 5,270
General and administrative 3,044 2,754 2,164
---------- ---------- ----------
Operating income (loss) (848) 832 (91)
Interest and other income 631 675 688
---------- ---------- ----------
Income (loss) before provision for income taxes (217) 1,507 597
Provision (benefit) for income taxes (76) 468 203
---------- ---------- ----------
Net income (loss) from continuing operations ($141) $1,039 $394
Discontinued operations:
Net income (loss) from operations of
Discontinued Display Division (361) 687
Estimated net loss on the sale of Display Division (990)
---------- ---------- ----------
Net income (loss) form discontinued operations (1,351) 687
Net income (loss) ($141) ($312) $1,081
========== ========== ==========
Basic and diluted EPS:
For continuing operations ($0.03) $0.18 $0.05
For discontinued Display Division ($0.24) $0.10
Net income (loss) ($0.03) ($0.06) $0.15
========== ========== ==========
Shares used in Basic EPS calculation 4,370 5,657 7,248
Shares used in Diluted EPS calculation 4,370 5,731 7,285
========== ========== ==========
Year Ended December 31,
--------------------------
2000 1999 1998
-------- -------- --------
Net revenues from continuing operations
License........................................... $19,421 $17,858 $15,425
Service........................................... 5,621 4,320 1,984
-------- -------- --------
Total revenues..................................... 25,042 22,178 17,409
-------- -------- --------
Cost of revenues
License........................................... 525 616 490
Service (inclusive of stock related bonus
expense of $138 in 2000)...................... 3,896 2,598 1,258
-------- -------- --------
Cost of revenues.................................... 4,421 3,214 1,748
-------- -------- --------
Gross profit.................................... 20,621 18,964 15,661
-------- -------- --------
Research and development (inclusive of stock
related bonus expense of $710 in 2000)....... 7,854 5,586 4,212
Sales and marketing (inclusive of stock
related bonus expense of $638 in 2000)....... 16,437 11,182 7,863
General and administrative (inclusive of stock
related bonus expense of $1,090 in 2000)..... 4,683 3,044 2,754
-------- -------- --------
Operating income (loss)......................... (8,353) (848) 832
Interest and other income........................... 95 631 675
Write-off of equity investment in Cornerstone....... (500)
-------- -------- --------
Income (loss) before provision for income taxes. (8,758) (217) 1,507
Provision (benefit) for income taxes................ (76) 468
-------- -------- --------
Income (loss) from continuing operations........ ($8,758) ($141) $1,039
Discontinued operations:
Loss from operations of Discontinued
Display Division............................ (361)
Loss on the sale of Display Division............ (990)
-------- -------- --------
Loss from discontinued operations............... (1,351)
-------- -------- --------
Net loss........................................ ($8,758) ($141) ($312)
======== ======== ========
Basic and diluted EPS:
For continuing operations......................... ($2.09) ($0.03) $0.18
For discontinued Display Division................. ($0.24)
Net loss.......................................... ($2.09) ($0.03) ($0.06)
======== ======== ========
Shares used in Basic EPS calculation................ 4,190 4,370 5,657
======== ======== ========
Shares used in Diluted EPS calculation.............. 4,190 4,370 5,731
======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements
INPUT SOFTWARE,
ACTIONPOINT, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in
(in thousands)
=========== ==========
Unrealized
Loss on Total
Common Stock Additional Marketable Stock-
------------------ Paid-in Securities, Retained holders'
Shares Amount Capital Net Earnings Equity
--------- -------- ------------ ----------- ---------- ----------
Balances, December 31, 1996 7,558 $76 $30,914 $0 $8,028 $39,018
Common stock issued under:
Stock option plan 53 116 116
Employee Stock Purchase Plan 91 1 447 448
Common stock repurchased (1,007) (10) (6,447) (6,457)
Common stock received for Pegasus (35) (332) (332)
Tax benefit from disqualifying
dispositions of common stock 49 49
Net income 1,081 1,081
--------- -------- ------------ ----------- ---------- ----------
Balances, December 31, 1997 6,660 $67 $24,747 $0 $9,109 $33,923
Common stock issued under:
Stock option plan 2 12 12
Employee Stock Purchase Plan 78 1 357 358
Common stock repurchased (1,932) (20) (12,604) (12,624)
Net loss (312) (312)
--------- -------- ------------ ----------- ---------- ----------
Balances, December 31, 1998 4,808 $48 $12,512 $0 $8,797 $21,357
Common stock issued under:
Stock option plan 16 116 116
Employee Stock Purchase Plan 70 1 339 340
Common stock repurchased (818) (8) (4,462) (4,470)
Tax benefit from disqualifying
dispositions of common stock 87 87
Stock-based compensation 89 89
Net loss (141) (141)
--------- -------- ------------ ----------- ---------- ----------
Balances, December 31, 1999 4,076 $41 $8,681 $0 $8,656 $17,378
========= ======== ============ =========== ==========
Retained Total
Common Stock Additional Earnings Stock-
--------------- Paid-in (Accumulated holders'
Shares Amount Capital Deficit) Equity
-------- ------ ---------- ----------- ----------
Balances, December 31, 1997.............. 6,660 $67 $24,747 $9,109 $33,923
Common stock issued under:
Stock option plan..................... 2 12 12
Employee Stock Purchase Plan.......... 78 1 357 358
Common stock repurchased................ (1,932) (20) (12,604) (12,624)
Net loss................................ (312) (312)
-------- ------ ---------- ----------- ----------
Balances, December 31, 1998.............. 4,808 48 12,512 8,797 21,357
Common stock issued under:
Stock option plan..................... 16 116 116
Employee Stock Purchase Plan.......... 70 1 339 340
Common stock repurchased................ (818) (8) (4,462) (4,470)
Tax benefit from disqualifying
dispositions of common stock.......... 87 87
Stock-based compensation................ 89 89
Net loss................................ (141) (141)
-------- ------ ---------- ----------- ----------
Balances, December 31, 1999.............. 4,076 41 8,681 8,656 17,378
Common stock issued under:
Stock option plan..................... 85 1 596 597
Employee Stock Purchase Plan.......... 88 1 282 283
Stock related bonus plan.............. 25 362 362
Stock-based compensation................ 60 60
Net loss................................ (8,758) (8,758)
-------- ------ ---------- ----------- ----------
Balances, December 31, 2000.............. 4,274 $43 $9,981 ($102) $9,922
======== ====== ==========
The accompanying notes are an integral part of these consolidated financial statements
INPUT SOFTWARE,
ACTIONPOINT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in
(in thousands)
Year Ended December 31,
--------------------------------
1999 1998 1997
---------- ---------- ----------
Cash flows from operating activities:
Net income (loss) ($141) ($312) $1,081
Adjustments to reconcile net income
(loss) to net cash used in operating
activities:
Provision for doubtful accounts (350) 207 249
Stock compensation charge 89
Depreciation and amortization 556 669 383
Discontinued operations 176 15,286 (988)
Deferred income taxes (275) (28) (353)
(Increase) decrease in assets and
liabilities:
Accounts receivable (460) (1,751) (1,567)
Other assets (375) (583) (315)
Accounts payable (138) 189 160
Accrued compensation and related
liabilities 248 506 171
Deferred revenue 303 1,040 221
Accrued liabilities (46) 15 1,211
---------- ---------- ----------
Net cash (used) provided by
operating activities (413) 15,238 253
---------- ---------- ----------
Cash flows from investing activities:
Property and equipment additions (827) (821) (230)
---------- ---------- ----------
Net cash used in investing activities (827) (821) (230)
---------- ---------- ----------
Cash flows from financing activities:
Common stock received from Pegasus sale (332)
Repurchase of common stock (4,470) (12,624) (6,457)
Net proceeds from issuance of common stock 456 370 564
---------- ---------- ----------
Net cash used in financing activities (4,014) (12,254) (6,225)
---------- ---------- ----------
Net increase (decrease) in cash and
cash equivalents (5,254) 2,163 (6,202)
---------- ---------- ----------
Cash and cash equivalents at beginning of perio 14,447 12,284 18,486
---------- ---------- ----------
Cash and cash equivalents at end of period $9,193 $14,447 $12,284
========== ========== ==========
Supplemental cash flow disclosures:
Cash (received) paid during the year for taxes 364 (997) 1,203
Tax benefit from disqualifying dispositions 87 49
Year Ended December 31,
---------------------------
2000 1999 1998
-------- -------- ---------
Cash flows from operating activities:
Net loss........................................ ($8,758) ($141) ($312)
Adjustments to reconcile net loss
to net cash provided by (used in) operating
activities:
Provision for doubtful accounts.............. (9) (350) 207
Stock compensation charge.................... 60 89
Write-off of minority investment............. 500
Shares issues for stock related bonus......... 362
Depreciation and amortization................ 815 556 669
Discontinued operations...................... 176 15,286
Deferred income taxes........................ 895 (275) (28)
(Increase) decrease in assets and
liabilities:
Accounts receivable.......................... (2,603) (460) (1,751)
Other assets................................. (251) (375) (583)
Accounts payable............................. (100) (138) 189
Accrued compensation and related
liabilities................................. 838 248 506
Deferred revenue............................. 2,005 303 1,040
Accrued liabilities.......................... (664) (46) 15
-------- -------- ---------
Net cash provided by (used in)
operating activities..................... (6,910) (413) 15,238
-------- -------- ---------
Cash flows from investing activities:
Property and equipment additions................ (921) (827) (821)
-------- -------- ---------
Net cash used in investing activities.... (921) (827) (821)
-------- -------- ---------
Cash flows from financing activities:
Repurchase of common stock...................... (4,470) (12,624)
Net proceeds from issuance of common stock...... 880 456 370
-------- -------- ---------
Net cash provided by (used in)
financing activities..................... 880 (4,014) (12,254)
-------- -------- ---------
Net increase (decrease) in cash and
cash equivalents............................... (6,951) (5,254) 2,163
Cash and cash equivalents at beginning of period.. 9,193 14,447 12,284
-------- -------- ---------
Cash and cash equivalents at end of period........ $2,242 $9,193 $14,447
======== ======== =========
Supplemental cash flow disclosures:
Cash (received) paid during the year for taxes.... 36 364 (997)
Tax benefit from disqualifying dispositions....... 87
The accompanying notes are an integral part of these consolidated financial NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1.Business of the Company: ActionPoint, Inc. and subsidiaries (the "Company") develops, markets, and services software that helps automate and manage the input of external information into an organization's internal computing systems. On September 8, 1998 the Company sold its display division to its management (see Note 3). Accordingly, in 1998, the operating results and net assets of the display division have been segregated from continuing operations 2.Summary of Significant Accounting Policies: Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Liquidity and For the year ended December 31, 2000 the company incurred a net loss of $8.8M and Management has reduced the workforce and taken other steps to reduce operating expenditures. In the event that such measures are not sufficient to meet the company's obligations, the company may need to seek additional financing. There can be no assurance that such additional financing will be available or will be available on terms acceptable to the company which, as a result, could have a material adverse effect on the company's business, operating results and financial condition. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Certain Risks and Concentrations: The Company's products are concentrated in the data capture and document management industry which is highly competitive and rapidly changing. Significant technological changes in the industry, including changes in computing platforms, changes in customer requirements, the infringement of proprietary patent, or the emergence of a major direct competitor could affect operating results adversely. In addition, a significant portion of the Company's revenue derives from international sales. Fluctuations of the U.S. dollar against foreign currencies or local economic conditions could adversely affect operating results. Property and Equipment: Property and equipment are stated at cost and depreciated on a straight-line basis over estimated useful lives of three years. Leasehold improvements are recorded at cost and depreciated on a straight-line basis over the lesser of their useful lives or the related lease term. Revenue Revenue is generated from four primary sources: licensing of product, royalties, software maintenance, and professional services. Product licensing and royalty revenue is recognized upon shipment if a signed agreement exists, the fee is fixed and determinable, collection of invoice amounts are probable, and product returns are reasonably estimable. Maintenance revenue for ongoing customer support and product updates is recognized ratably over the period of the maintenance contract. Payments for such are generally made in advance and are non-refundable. Professional service revenue is recognized as services are provided. For contracts with multiple obligations (e.g. deliverable and undeliverable products, maintenance and other services), the Company allocates revenue to each component of the contract based on objective evidence of its fair value, which is specific to the Company, or for products not being sold separately, the price established by management. Advertising: The Company expenses the costs of advertising as the expenses are incurred. The costs of advertising consist primarily of magazine advertisements, brochures, other direct production costs. Costs associated with trade shows are charged to expense upon completion of the trade show. The advertising and related promotional expense for the years ended December 31, 2000, 1999, and 1998 Income Taxes: Income taxes are accounted for under the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases 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. Computation of Net Income (Loss) Per Common Share: Basic EPS is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for that period. Diluted EPS is computed giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive potential common shares consist of incremental common shares issuable upon exercise of stock options, warrants and convertible securities for all periods. In accordance with the disclosure requirements of SFAS 128, a reconciliation of the numerator and denominator of basic and diluted EPS is provided as follows (in statements.
Input Software,in prior periods and reported as separate line items on the statements of operations and balance sheets.Input SoftwareActionpoint GmbH and Input SoftwareActionpoint (UK) Ltd.Ltd All significant intercompany accounts and transactions have been eliminated.
RestatementReclassifications:
The financial statements for 1997capital resources:1998 have been
restated for the effects of the discontinuednegative cash flows from operations of $6.9M. At December 31, 2000 the display division (see Note 3).
company had cash and cash equivalents of $2.2M.Recognition
Recognition:and 1997 was $2.0 million, $1.0 million and $722,000 and $634,000 respectively.thousands)thousands, except per share data):
Year Ended December 31,
--------------------------------
1999 1998 1997
---------- ---------- ----------
Net income (loss) ($141) ($312) $1,081
(numerator)
Shares used in basic EPS calculations
(denominator) 4,370 5,657 7,248
Dilutive effect of stock options 37
Shares used in diluted EPS calculations 4,370 5,657 7,285
Basic EPS ($0.03) ($0.06) $0.15
Diluted EPS ($0.03) ($0.06) $0.15
Year Ended December 31,
--------------------------
2000 1999 1998
-------- -------- --------
Numerator:
Net income (loss) from continuing operations...... ($8,758) ($141) $1,039
Net loss from discontinued Display Division....... (1,351)
-------- -------- --------
Net Loss ($8,758) ($141) ($312)
Denominator:
Shares used in basic EPS calculations............. 4,190 4,370 5,657
Dilutive effect of stock options.................. 74
-------- -------- --------
Shares used in diluted EPS calculations........... 4,190 4,370 5,731
Net income (loss) per share, basic and diluted:
For continuing operations......................... ($2.09) ($0.03) $0.18
For discontinued operations....................... (0.24)
-------- -------- --------
Net loss per share ($2.09) ($0.03) ($0.06)
======== ======== ========
Options outstanding at December 31, 2000, 1999, 1998, and 19971998 not included in computation of diluted EPS because the exercise price was greater than the average market price or because the Company incurred a net loss:
2000 1999 1998
------------ ------------- -------------
Number of options shares (000).. 3,030 2,660 1,876
Price range..................... $1.39-$31.00 $1.39-$15.75 $1.39-$15.75
Stock-Based Compensation:
The Company accounts for stock-based compensation arrangements in accordance with provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and complies with the disclosure provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123").
Under APB 25, compensation expense for grants to employees is based on the difference, if any, on the date of grant, between the fair value of the Company's stock and the option's exercise price. SFAS 123 defines a "fair value" based method of accounting for an employee stock option or similar equity investment. The pro forma disclosure of the difference between compensation expense included in net loss and the related cost measured by the fair value method is presented in Note 8.
The Company also adopted FASB issued Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation - an Interpretation of APB 25" ("FIN 44").
The Company accounts for equity instruments issued to non- employees in accordance with the provisions of SFAS 123 and Emerging Issues Task Force Issue No. 96-18, "Accounting for Equity Instruments that are Issued to Other Than Employees, or in Conjunction with Selling Goods and Services" ("EITF 96-18") and Financial Accounting Standards Board Interpretation No. 28, "Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans" ("FIN 28").
Concentration of Credit Risk:
The Company sells its products primarily in North America and Europe. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The Company maintains reserves for potential credit losses, which have been within management's expectations. Substantially all cash and cash equivalents are held by one bank
bank.
In accordance with Statement of Financial Accounting Standard No. 52, "Foreign Currency Translation", the assets and liabilities denominated in foreign currency are translated into U.S. dollars at the current rate of exchange existing at period end. Gains and losses resulting from foreign exchange transactions are included in results of operations.
Comprehensive Income
The Company has adopted the provisions of Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income", effective January 1, 1998. This statement requires the disclosure of comprehensive income and its components in a full set of general-purpose financial statements. Comprehensive income is the change in equity from transactions and other events and circumstances other than those resulting from investments by owners and distributions to owners. There are no significant components of comprehensive income excluded from net income; therefor,therefore, no separate statement of comprehensive income has been presented.
Cash and Cash Equivalents:
The Company considers all highly liquid investments with an original maturity from date of purchase of one year or less to be cash equivalents.
Recent Pronouncements
In December 1998, AcSEC released Statement of Position 98-9
("SOP 98-9"), "Modification of SOP 97-2, `Software Revenue
Recognition,' with Respect to Certain Transactions." SOP 98-9
amends SOP 97-2 to require that an entity recognize revenue for
multiple element arrangements by means of the "residual method"
when (1) there is vendor-specific objective evidence ("VSOE") of
the fair values of all the undelivered elements that are not
accounted for by means of long-term contract accounting, (2) VSOE
of fair value does not exist for one or more of the delivered
elements, and (3) all revenue recognition criteria of SOP 97-2
(other than the requirement for VSOE of the fair value of each
undelivered element) are satisfied
The provisions of SOP 98-9 that extend the deferral of
certain paragraphs of SOP 97-2 became effective December 15, 1998.
These paragraphs of SOP 97-2 and SOP 98-9 were effective for
transactions that were entered into in fiscal years beginning
after March 15, 1999. Retroactive application is prohibited. We
have evaluated the requirements of SOP 98-9 and do not believe it
will have a material impact on our current revenue recognition
policies.
As of January 1, 1999 the Company adopted Statement of
Position 98-1 ("SOP 98-1"), "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." This statement
provides guidance on accounting for the costs of computer software
developed or obtained for internal use and applies to all
nongovernmental entities. The adoption of SOP 98-1 had no material
impact on the Company's financial statements.
Pronouncements:
In June of 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities," which is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. In July of 1999, the FASB issued Statement of Financial Standards No. 137 ("SFAS 137"), "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133," which defers the effective date to all fiscal quarters of fiscal years beginning after June 15, 2000. The Company has not yet evaluated the
effects of this change on its operations. The Company will adoptadopted SFAS 133 as required for its first quarterly filing of the fiscal
yearJanuary 1, 2001. In December, 1999 the SEC issued Staff Accounting Bulletin
No. 101 ("SAB 101), "Revenue Recognition in Financial Statements."
SAB 101 provides guidance for revenue recognition under certain
circumstances. We are currently evaluating the impactThe adoption of SAB 101SFAS 133 did not have a material effect on the financial statements and related disclosures which will be
effective forposition or the year ended December 31, 2000.
results of operations of the Company.
3. Discontinued Operations
On September 8, 1998 the Company sold its display division to its current management team. The business now operates as a private company named Cornerstone Peripherals Technology, Inc. ("CPT") Under the terms of the sale the Company sold certain assets and transferred certain liabilities associated with the display division. The Company retained certain assets, primarily accounts receivable and some inventory, substantially all of which were substantiallywas converted to cash by December 31, 1998. The Company holds a minority equity interest in CPT. Accordingly,CPT, which because of a permanent decline in value, was written off in the operating
results and net assetsfirst quarter of the display division have been
segregated from continuing operations and reported separately on
the financial statements (see Note 6).
2000.
4. Balance Sheet Components (in thousands)(in thousands):
Property and equipment: 2000 1999
1998
--------- ---------------- -------
Office equipment and machinerymachinery..... $2,828 $2,224
$1,832
SoftwareSoftware........................... 786 480
188
Leasehold improvementsimprovements............. 526 520
444
--------- ---------------- -------
4,140 3,224 2,464
Less accumulated depreciation
and amortizationamortization................ (2,555) (1,745)
(1,256)
--------- ---------------- -------
$1,585 $1,479
$1,208
========= =========
======= =======
Depreciation expense was approximately $815,000, $556,000, and $669,000 in 2000, 1999, and $383,000 in 1999, 1998, and 1997 respectively
respectively.
5. Commitments:
Commitments
The Company has entered into various operating leases for their facilities and sales offices. Future rental commitments under these operating leases are as follows (in thousands)(in thousands):
Year ended December 31,
2000 $1,113
2001 1,153
2002 1,194
2003 1,237
2004 3172001............................... $1,266
2002............................... 1,297
2003............................... 1,284
2004............................... 308
2005............................... 116
Subsequent years 524
---------
Total $5,538
=========
years................... 373
-------
Total............................. $4,644
=======
Rent expense was approximately $1.3 million, $1.2 million and $409,000 in 2000, 1999, and $204,000 in 1999, 1998, and 1997, respectively.
6. Financial Information for the Display Division
Operating results of the discontinued display division are as follows:
Preferred Stock:Stock: The Board of Directors is authorized to determine the price, rights, preferences, privileges and restrictions (including voting rights) of preferred stock without any further vote or action by the stockholders. The Board is also authorized to increase or decrease the number of shares of any series. At December 31, 1999,2000, there were 2,000,000 shares of $.01 par value preferred stock authorized. No preferred shares were issued and outstanding at December 31, 2000, 1999, 1998, or 1997.
1998.
Employee-Stock Purchase Plan: Plan:The Board of Directors has reserved 200,000 shares of common stock for issuance under the 1993 Employee Stock Purchase Plan, 130,000 shares under the 1997 Employee Stock Purchase Plan, and 150,000250,000 shares under the 1998 Employee Stock Purchase Plan. Employees may elect to have the Company withhold up to 10% of their compensation for the purchase of the Company's common stock. The amounts withheld are used to purchase the Company's common stock at a price equal to 85% of the fair market value of the stock on the first day of a two-year offering or the last day of a six-month purchase period, whichever is lower. The number of shares employees may purchase is subject to certain limitations.
Stock-Option Plan:Plan: The Company has established the 1993 Stock Option/Stock Issuance Plan and the 1999 Stock Plan. As amended, the 1993 Plan authorizes the issuance of up to 2,974,8523,124,852 shares of common stock over the term of the Plan, pursuant to the grant of incentive stock and non-qualifiednon- qualified stock options and the direct issuance of shares to eligible employees, independent consultants and non-employee directors. The 1999 Plan authorizes the issuance of up to 300,000700,000 shares of common stock over the term of the Plan, pursuant to the grant of non-qualified stock options and the direct issuance of shares to eligible employees, independent consultants and non-employee directors. Additionally, the Company has issued an option for 47,750 shares to a consulting firm with which it has an ongoing business relationship.
Under these Plans, the exercise price per share is determined by the Compensation Committee. The exercise price of an incentive option cannot be less than 100% of the fair market value of the common stock on the grant date and the exercise price of a non-qualified option cannot be less than 85% of such fair market value. Options generally vest over four years and are exercisable for a term of ten years.
Aggregate activity under the plans is as follows (in(in thousands except the per share amounts)amounts):
During 1995, the Financial Accounting Standards Board issued Statement No. 123,Accounting for Stock-Based Compensation (SFAS No. 123). This standard, which establishes a fair value-based method for stock-basedstock- based compensation plans, also permits an election to continue following the requirements of APB Opinion No. 25,Accounting for Stock Issued to Employees, with disclosures of pro-forma net income and earnings per share under the new method. The Company continues to follow the requirements of APB Opinion No. 25, with disclosure of pro-forma information concerning its stock option and employee stock purchase plans in accordance with SFAS No. 123 .
123.
The following table summarizes information with respect to stock options outstanding at December 31, 1999:
Options Oustanding Options Exercisable
--------------------------------- -----------------------
Weighted
Number Average Weighted Number Weighted
Outstanding Remaining Average Exercisable Average
Range of as of Contractual Exercise as of Exercise
Exercise Prices 12/31/00 Life (Years) Price 12/31/00 Price
- ---------------- ---------- ----------- -------- ---------- -----------
(000s) (000s)
$1.39 - $5.00 765 7.9 $4.55 362 $4.82
$5.25 - $6.13 796 8.1 5.50 379 5.51
$6.19 - $8.63 1,080 6.8 7.83 809 7.98
$8.63 - $31.00 389 7.0 11.33 207 9.62
---------- ----------
3,030 7.5 $6.84 1,757 $6.99
========== ==========
Fair value of each option grant is estimated on the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2000, 1999, and 1998:
2000 1999 1998
and 1997:
1999 1998 1997
------------------- --------- ---------
Risk-free interest rates 5.60% 5.50% 5.17% 6.12%
Expected life 3.5 years 3.5 years 3.83.5 years
Volatility 50% 66%50% 66%
Dividend yield -- -- --
The weighted average fair value of those options granted in 2000, 1999 and 1998 1997 was $4.60, $2.79, $3.36 and $3.53, respectively. The Company has also estimated the fair value for the purchase rights issued under the Company's Employee Stock Purchase plan,Plan, under the Black-Scholes valustionvaluation model using the following assumptions for 2000, 1999 and 1998:
2000 1999 1998
and 1997:
1999 1998 1997
------------------- --------- ---------
Risk-free interest rates 5.60% 5.50% 5.17% 5.32%
Expected life 0.50 years 0.50 years 0.50 years
Volatility 50% 66%50% 66%
Dividend yield -- -- --
The weighted average fair value of those purchase rights granted in 2000, 1999 and 1998 was $2.51, $2.61 and 1997 was $2.61, $2.51 and $6.11, respectively.
The following pro forma income information has been prepared following the provisions of SFAS No. 123 (in thousands except per share data):
1999 1998 1997
------------------- --------- ---------
Net income (loss)loss - proforma ($11,571) ($1,443) ($1,864) ($1,238)
Basic EPS - proforma ($2.76) ($0.33) ($0.33) ($0.17)
Diluted EPS - proforma ($2.76) ($0.33) ($0.33)
($0.17)
The above pro forma effects on income may not be representative of the effects on net incomeincome(loss) for future years as option grants typically vest over several years and additional options are generally granted each year.
8. Significant Customers and Export Revenues:
The Company has adopted SFAS No. 131, "Disclosure about Segments
of an Enterprise and Related Information, " effective for fiscal years
beginning after December 15, 1997. SFAS No. 131 supercedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise", SFAS No.
131 changes current practice under SFAS No. 14 by establishing a new
framework on which to base segment reporting and introduces requirements
for interim reporting of segment information.
The Company has determined that it has a single reportable segment consisting of the development, marketing and servicing of information capture software. Management uses one measurement of profitability and does not disaggregate its business for internal reporting. Operations outside the United States primarily consist of sales offices in United Kingdom and Germany, responsible for the sales activities to foreign customers, invoiced by the Company's headquarters in the United States. The foreign subsidiaries do not carry any significant long-livelong-lived assets, and income and assets of the Company's foreign subsidiaries were not significant.
Revenue from external customers by geographic area for each of the three fiscal periods is presented in the following table:
2000 1999 1998
------------ --------- ----------
US $18,531 $16,189 $12,866
% of total 74% 73% 74%
International 6,511 5,989 4,543
% of total 26% 27% 26%
For the years ended December 31 2000, 1999, 1998, and 19971998 no customer accounted for more than 10% of the Company's revenues.
9.Income
9. Income Taxes:
Income tax expense(benefit)expense (benefit) consists of (in thousands)(in thousands):
2000 1999 1998
1997-------- --------- --------- -----------------
Current:
Federal $444
State and locallocal.................... $2 $2
Foreign............................ 128
-------- --------- --------
0 130 2
2 414
Foreign 128 47-------- --------- --------- ---------
$130 $2 $905
--------- --------- -----------------
Deferred:
Federal ($161) $160 ($193)Federal............................ (161) 160
State and locallocal.................... (45) 58
(143)-------- --------- --------
0 (206) 218
-------- --------- ---------
($206) $218 ($336)
--------- --------- -----------------
Total:
Federal ($161) $160 $251Federal............................ (161) 160
State and locallocal.................... (43) 60
271
ForeignForeign............................ 128
47-------- --------- --------- -----------------
$0 ($76) $220
$569======== ========= ========= =========
========
The Company's effective tax rate differs from the statutory federal income tax rate as shown in the following schedule:
2000 1999 1998
1997-------- --------- --------- -----------------
Statutory federal income tax rate -34.0% 34.0% 34.0%rate..... (34%) (34%) 34%
State taxes 5.8% 5.7% 5.8%taxes........................... (5%) 6% 6%
Foreign taxes in excess of US rate 19.9%rate.... 20%
Research and development credits -41.5% -3.7%
Tax exempt interest -1.0%credits...... (42%) (4%)
Non-deductible expenses 17.8%expenses............... 18%
Change in Valuation Allowance......... 39%
Other, net -3.2% -4.9% -4.2%net............................ (3%) (5%)
-------- --------- --------- ---------
-35.2% 31.1% 34.6%--------
(0%) (35%) 31%
======== ========= ========= =========
========
The components of the deferred tax asset (in(in thousands):
2000 1999
1998
----------------- ---------
Deferred tax assets:
Provision for doubtful accountsaccounts.... $84 $87
$223
Accrued liabilitiesliabilities................ 746 471 483
Depreciation and basis differences 949
Net operating loss carryforwardscarryforwards... 5,318 3,369 2,344
Research & development tax
credit carryforwardscarryforwards.............. 2,066 1,440
770
----------------- ---------
Total deferred tax assetasset....... $8,214 $5,367 $4,769
========= =========
Deferred tax liabilities:
Depreciation and basis differencesdifferences. (137) (41)
Valuation Allowance................ (3,665)
-------- ---------
Net deferred tax assetasset................ $4,412 $5,326
$4,769======== =========
=========
At December 31, 1999,2000, the Company had $9.9$17.0 million and $2.2$4.9 million of federal and California net operating loss carryfowards.carryforwards. These carryforwards expire beginning in 2018 and 2003 for federal and California tax purposes, respectively. In addition, the Company had $945,000$1.5 million of research and development tax credits available to offset future U.S. federal income tax. These carryforwards expire in 2004. For California franchise tax purposes, the Company has research and development credit carryforwards of $750,000.
$776,000.
While the company has recorded net losses during the years ended December 31, 2000 and 1999, management does not believe at this time that a full valuation allowance is needed for the Company's net deferred tax asset. Based on the company's historical performance and forecasts for the future, management believes it is more likely than not that its net deferred tax asset will be realized. However, should the company not realize its forecasts for 2001 or 2002, it may be necessary to increase the deferred tax asset valuation allowance in future periods
The ownership changes provisions of the Internal Revenue Code of 1986 and similar state provisions would limit utilization of the carry- forwards should there be a substantial change in the Company's ownership. The annual limitation may result in the expiration of net operating losses and credits before utilization.
10. Special IncentiveStock Related Bonus Plan
On October 8, 1999, the Company adopted (and further amended on December 29, 1999 and February 1, 2000) a Special Incentive
Bonus Planstock related bonus plan that, upon a specified increase to the Company's per share stock price, would result in bonus payments of $2.6 million, consisting of a combination of cash and stock.
During February 2000 the Company satisfied the requirements for payment of bonuses pursuant to the plan.
11.Employee Benefit Plan
The Company provides a 401(K) Plan to its employees providing tax deferred salary deductions for eligible employees. Participants may make voluntary contributions between 1% and 20% of their compensation subject to certain annual maximums. The Company matches 50% of employee contributions with a maximum of $2,000 per employee. The Plan provides for additional Company contributions at its discretion. Total contributions made by the Company were $212,000,$286,000, 212,000 and $157,000 during 2000, 1999 and $168,000 during 1999, 1998, and 1997, respectively.
12.
Since February 1997 through February, 2000, the Company's Board of Directors has authorized the use of up to $25 million to repurchase the Company's common stock. Through December 31, 1999 the Company has repurchased 3.8 million shares for a total of $23.6 million. The repurchased stock is expected to be held by the Company as treasury stock to be used to meet the Company's obligations under its stock plans and for other corporate purposes. Purchases have been and may continue to be made from time-to-timetime- to-time on the open market or in privately negotiated transactions. The timing and volume of purchases will be dependent upon market conditions and other factors. The Company has used cash on hand to fund its purchases.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Input Software, Inc.:
Our audits of the financial statements referred to in our report
dated January 31, 2000, appearing herein this Annual Report on
Form 10-K also included an audit of the financial statement
schedule listed in Item14(a)(2) of this Form 10-K. In our opinion,
this financial statement schedule presents fairly, in all material
respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
PricewaterhouseCoopers LLP
San Jose, California
January 31, 2000
INPUT SOFTWARE,
ACTIONPOINT, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(in
(in thousands)
Additions
Balance at Charged to Balance
beginning costs and at end
Description of year expenses Write-Offs of year
- ---------------------------- ---------- ---------- ---------- -----------------
Year ended December 31, 2000
Allowance for bad debt... $209 $83 ($92) $200
Year ended December 31, 1999
Allowance for bad debtdebt... $559 ($350) $0 $209
Year ended December 31, 1998
Allowance for bad debtdebt... $409 $207 ($57) $559
Year ended December 31, 1997
Allowance for bad debt $175 $249 ($15) $409