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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ___________.
Commission file number 0-27328
DELTAPOINT, INC.
(Exact name of registrant as specified in its charter)
California 77-0216760
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
22 Lower Ragsdale, Monterey, CA 93940
(Address of principal executive offices)
408-648-4000
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of May 9, 1996: 2,215,243
Traditional Small Business Disclosure Format (check one) Yes No X
--- ---
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DELTAPOINT, INC.
INDEX
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<S> <C> <C>
Part 1. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed Balance Sheets
March 31, 1996 (unaudited) and December 31, 1995 3
Condensed Statement of Income (unaudited)
Three months ended March 31, 1996 and 1995 4
Condensed Statement of Cash Flows (unaudited)
Three months ended March 31, 1996 and 1995 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
DELTAPOINT, INC.
CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
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ASSETS
MARCH 31, DEC. 31
1996 1995
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(UNAUDITED)
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Current assets:
Cash and cash equivalents..............................$ 4,224 $ 4,629
Accounts receivable, net of allowance for doubtful
accounts of $264 and $259............................. 1,179 1,225
Inventories............................................ 130 182
Prepaid expenses and other current assets.............. 230 194
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Total current assets........................... 5,763 6,230
Property and equipment, net.............................. 227 49
Purchased software, net.................................. 428 438
Other assets............................................. 32 47
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$ 6,450 $ 6,764
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................$ 1,021 $ 665
Accrued liabilities.................................... 2,170 2,202
Reserve for returns and exchanges...................... 629 398
Current portion of capital lease obligations........... 54 50
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Total current liabilities...................... 3,874 3,315
Commitments and contingencies
Shareholders' equity :
Preferred Stock, no par value, 4,000,000 shares
authorized, none issued or outstanding............ --- ---
Common stock, no par value, 25,000,000 shares
authorized 2,215,243 and 2,025,243 shares were
issued and outstanding............................. 13,098 12,267
Accumulated deficit.................................... (10,522) (8,818)
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Total shareholders' equity..................... 2,576 3,449
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$ 6,450 $ 6,764
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The accompanying notes are an integral part of these financial statements.
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DELTAPOINT, INC.
CONDENSED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
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THREE MONTHS ENDED
MARCH 31
--------------------------
1996 1995
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Net revenues...................................................$ 760 $ 854
Cost of revenues............................................... 338 349
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Gross profit................................................. 422 505
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Operating expenses:
Sales and marketing.......................................... 888 392
Research and development..................................... 486 200
General and administrative................................... 769 300
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2,143 892
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Loss from operations........................................... (1,721) (387)
Other income (expense)......................................... 17 (24)
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Net loss......................................................$(1,704) $ (411)
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Net loss per share............................................$ (0.79) $(0.41)
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Shares and share equivalents used in per share calculations.... 2,170 1,001
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The accompanying notes are an integral part of these financial statements.
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DELTAPOINT, INC.
CONDENSED STATEMENT OF CASH FLOWS
(IN THOUSANDS) (UNAUDITED)
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<CAPTION>
THREE MONTHS ENDED
MARCH 31
--------------------------
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net loss.....................................................$(1,704) $(411)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization............................. 37 46
Change in assets and liabilities:
Accounts receivable..................................... 46 (131)
Inventories............................................. 52 45
Prepaid expenses and other current assets............... (36) (61)
Accounts payable........................................ 356 (547)
Accrued liabilities..................................... (32) 134
Reserve for returns and exchanges....................... 231 151
Deposits and other assets............................... 15 6
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Net cash used in operating activities................ (1,035) (768)
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Cash flows from investing activities:
Acquisition of property and equipment....................... (205) (13)
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Net cash used in investing activities.............. (205) (13)
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Cash flows from financing activities:
Proceeds from issuance of common stock and warrants, net.... 831 --
Proceeds/repayment of note payable.......................... -- 822
Repayment of capitalized lease obligations.................. 4 (54)
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Net cash provided by financing activities........... 835 768
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Decrease in cash and cash equivalents......................... (405) (13)
Cash and cash equivalents at beginning of year................ 4,629 30
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Cash and cash equivalents at end of year...................... $4,224 $ 17
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The accompanying notes are an integral part of these financial statements.
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DELTAPOINT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
UNAUDITED
NOTE 1 -- THE COMPANY AND BASIS OF PRESENTATION:
The Company designs, develops and markets visualization software
products that are designed to facilitate the collection, interpretation and
management of business and technical information across multiple computing
environments such as desktop and client/server applications and the
Internet's World Wide Web.
The financial statements should be read in conjunction with the audited
financial statements contained in the Company's Annual Report on Form 10-KSB.
In the opinion of management, all adjustments, including normal recurring
accruals, necessary for a fair presentation of the Company's financial
position, results of operations and cash flows for the interim periods
presented have been made. The interim results are not necessarily indicative
of the results to be expected for the entire year.
NOTE 2 -- COMMITMENTS AND CONTINGENCIES:
CONTINGENCIES
On March 21, 1995, Ameriquest/Kenfil Inc. ("Kenfil") filed a complaint
in the Superior Court of the State of California before the county of
Monterey naming the Company as defendant and alleging (i) breach of a
distribution agreement between Kenfil and the Company and (ii) indebtedness
to Kenfil for the sum of $233,000 together with interest thereon at the rate
of 10% per annum. Kenfil was seeking damages, cost of suit and other relief.
In April 1996 the Company entered into a settlement agreement with Kenfil for
the sum of $50,000. Kenfil has filed a dismissal of the complaint with
prejudice on April 26, 1996 with the Superior Court of California.
NOTE 3 - SHAREHOLDERS' EQUITY:
COMMON STOCK:
Common Stock as of March 31, 1996 reflects the January 1996 sale of
165,000 shares of common stock issued in the overallotment of the Company's
initial public offering. Aggregate net proceeds to the Company were $831,000.
NOTE 4 - NET INCOME PER SHARE:
Net income per share is computed using the weighted-average number of
shares of common stock and common equivalent shares, when dilutive, from
mandatorily redeemable convertible preferred stock (using the if-converted
method) and from stock options and warrants (using the treasury stock
method). Pursuant to Securities and Exchange Commission Staff Accounting
Bulletins, common and common stock equivalent shares, options and warrants
issued by the Company during the 12-months period prior to the Company's
initial public offering have been included in the calculation as if they were
outstanding for all periods presented. Due to the net loss for the period
ended March 31, 1996, the common stock equivalents were excluded from the net
income per share calculation.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
THIS REPORT ON FORM 10-QSB CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS.
FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO,
THOSE DISCUSSED IN "RISK FACTORS" IN PART I OF THE COMPANY'S ANNUAL REPORT ON
FORM 10-KSB AT AND FOR THE YEAR ENDED DECEMBER 31, 1995. THE FOLLOWING
DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND
NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
DeltaPoint was incorporated on February 1, 1989 to design, develop and
market visualization software products for personal computers. DeltaPoint
commenced shipments of its initial product, DeltaGraph, at the end of 1989.
In June 1995, the Company shipped the initial version of Drag 'n Draw for
Windows. In November 1995, the Company acquired technology which is required
to develop WebAnimator, a multimedia authoring tool for the Web which is
expected to be released in the last half of 1996 at the earliest. In
December 1995, the Company acquired technology to develop QuickSite, a Web
site creation and management tool which was released in February 1996.
Although the Company has historically derived substantially all of its
revenues from visualization software products for desktop applications, the
Company's strategy is to realize a significant and growing percentage of
future revenues from the sale of its existing and anticipated Internet
products.
The Company's revenues consist of license revenues from sales of
software products to distributors, resellers and end users. In addition, the
Company derives license revenues from royalty and packaging agreements with
certain customers. Under these agreements, the Company typically receives a
large percentage of the aggregate revenues in the form of a royalty paid upon
signing the agreement, which allows the customer to license a specified
number of copies of the Company's software and a smaller percentage of
aggregate revenues in the form of packaging fees, which are paid upon the
shipment of products over the life of the agreement.
Software product sales are recognized upon shipment of the product, net
of appropriate allowances for estimated returns. Revenues from software
royalty and packaging agreements are recognized upon shipment of a master
copy of the software product and packaging if no significant vendor
obligations remain under the term of the license agreements and any amounts
to be paid are nonrefundable. Payments received in advance of revenue
recognition are recorded as deferred revenue. The Company grants distributors
and resellers certain rights of return, price protection and stock rotation
rights on unsold merchandise. Accordingly, reserves for estimated future
returns, exchanges and credits for price protection and stock rotation rights
are accrued at the time of shipment. To date, a majority of the Company's
revenue has come from sales of DeltaGraph.
The Company's quarterly and annual net revenues have been affected
historically by, among other factors, the timing of releases of new products
and new versions of existing products. Historically, sales volumes of new
products have increased in the first few months following introduction of a
new product due to the purchase of initial inventory by distributors and
resellers and the purchase of upgrades by existing users. Thereafter, net
revenues have tended to decline and stabilize to a relatively constant level.
Toward the end of a product or product version life cycle, revenues tend to
decline significantly, and the Company may experience returns from
distribution in anticipation of new products or product version.
Due to the inherent uncertainties of software development, the Company
cannot accurately predict the exact timing of shipment of a new product or
localization of version release on any particular platform. Any delays in
the scheduled release of any product or product version, or any failure to
achieve market
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acceptance among new and upgrade customers, could have a material effect on
the Company's business, results of operations and financial condition.
RESULTS OF OPERATIONS
NET REVENUES. Net revenues for the three month period ended March 31,
1996 decreased by 11% to $760,000 from $854,000 for the corresponding period
in the prior year. The decrease in revenue is primarily due to a new release
of the Company's Windows version of DeltaGraph in the three month period
ended March 31, 1995 and no corresponding release in the three month period
ended March 31, 1996. In addition, the decrease in revenue was due to the
refocus of the Company's business on the Internet market. For the three month
period ended March 31, 1996, international revenue decreased to 13.0% of net
revenues compared to 20.0% for the period ended March 31, 1995. The decrease
in international revenues was due to fewer Japanese license agreements and
the timing of new product introductions. The Company's domestic and
international sales are principally denominated in United States dollars.
Movements in currency exchange rates did not have a material impact on the
total revenue in the periods presented. However, there can be no assurance
that future movements in currency exchange rates will not have a material
adverse effect on the Company's future revenues and results of operations.
GROSS PROFIT. Gross profit for the three month period ended March 31,
1996 decreased as a percentage of net revenues to 55.5% from 59.1% for the
corresponding period in the prior fiscal year. The Company's gross profit has
varied from quarter to quarter as a result of changes in the mix of revenues
derived from sales to the Company's Japanese distributor and other customers.
The decrease in gross profit as a percentage of revenue for the three months
ended March 31, 1996 is partially attributable to a write-off of inventory
due to the release of a new version of DeltaGraph for Macintosh.
Additionally, the newly released QuickSite decreased gross margins. To the
extent that the newly released QuickSite and the anticipated WebAnimator
products increase in the future as a percentage of the Company's overall net
revenues, the Company's gross profit as a percentage of revenues will be
negatively affected as a result of similar royalties.
SALES AND MARKETING. Sales and marketing expenses include sales
commissions, compensation of sales and marketing personnel and cost of
promotional activities. Sales and marketing expenses for the three month
period ended March 31, 1996 increased to $888,000 or 116.8% of net revenues
compared to $392,000 or 45.9% of sales for the corresponding period in the
prior year. The increase in sales and marketing expenses in absolute dollars
and as a percentage of net revenues was primarily due to an increase in the
use of direct mail, telemarketing, consultants, and channel promotions used
to promote DeltaGraph and QuickSite. The Company expects that sales and
marketing expenses will increase in future quarters because the Company
intends to add sales and marketing personnel to support the anticipated
introduction of new products and updated versions of the Company's existing
products.
RESEARCH AND DEVELOPMENT. Research and development expenses for the
three month period ended March 31, 1996 increased to $486,000 or 63.9% of net
revenues compared to $200,000 or 23.4% of sales for the corresponding period
in the prior year. The increase in research and development expenses was
primarily due to a staffing increase for the development of DeltaGraph,
QuickSite and WebAnimator.. In addition, the Company retained several
consultants to aid in the development process. The Company expects that
research and development expenses will increase in future periods due to
further development of the Company's planned new products, including
ChartServer and WebAnimator, and the development of updated versions of the
Company's existing products.
GENERAL AND ADMINISTRATIVE. General and administrative expenses for the
three month period ended March 31, 1996 increased to $769,000 or 101.2% of
sales compared to $300,00 or 35.1% of sales for the corresponding period in
the prior year. The increase in general and administrative expenses in
absolute dollars and as a percentage of net revenues was primarily
attributable to a severance expense charge of $505,000 relating to the
departure of the Company's former Chief Executive Officer. The Company
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expects that general and administrative expenses will increase in future
periods to the extent that the Company expands its operations.
PROVISION FOR INCOME TAXES. There was no provision for taxes during the
three month periods ended March 31, 1996 and 1995 due to net operating losses
and the availability of net operating loss carryforwards. Due to certain
changes in the Company's ownership, the net operating loss carryforwards
available to offset against future income is limited to approximately
$2,345,000 or $142,000 per year. If certain additional changes in the
Company's ownership occur, the Company's use of net operating loss
carryforwards may be subject to a lower annual limitation.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996, the Company had a working capital balance of
$1,889,000 and shareholders' equity of $2,576,000. The Company has financed
its operations primarily through private and public sales of equity
securities, borrowings under a term loan and the private sale of debt
securities. Since inception, the Company has received $13,095,000 in proceeds
from private sales of preferred stock and from the Company's initial public
offering and the related overallotment exercise of common stock in December
1995 and January 1996, respectively.
The Company used net cash in operations of $1,035,000 in the three month
period ended March 31, 1996 and $768,000 for the corresponding period of the
prior year. Net cash used in 1996 consisted primarily of a net loss of
$1,704,000 offset by an increase in accounts payable of $356,000 and the
reserve returns of $231,000. Net cash used in 1995 consisted primarily of a
net loss of $411,000 and a decrease in accounts payable of $547,000.
Net cash provided by financing activities totalled $835,000 in the three
month period ended March 31, 1996 and $768,000 for the corresponding period
of the prior year. Net cash from financing activities in 1996 consisted
primarily of $831,000 in net proceeds from the Company's overallotment from
the initial public offering of common stock completed in 1995. Net cash from
financing activities in 1995 consisted primarily of a note payable of
$822,000.
The Company's capital expenditures related primarily to purchases of
personal computers and computer workstations to support the Company's
development work and other property and equipment. For the three month period
ended March 31, 1996 the Company's capital expenditures totaled approximately
$205,000.
The Company believes that its existing and available cash resources
should be sufficient to meet its cash requirements for at least the next
twelve months. Although operating activities may provide cash in certain
periods, to the extent the Company continues to incur losses or grows in the
future, its operating and investing activities may use cash and,
consequently, such losses or growth may require the Company to obtain
additional sources of financing. There can be no assurance that any necessary
additional financing will be available to the Company on commercially
reasonable terms, or at all. In particular, although the Company has
borrowed funds in the past, there can be no assurance that it can borrow
funds in the future.
FACTORS THAT MAY AFFECT FUTURE RESULTS
RECENT LOSSES; ACCUMULATED DEFICIT
The Company incurred a net loss of $1,704,000 for the three month period
ended March 31, 1996 and had an accumulated deficit of $10,522,000 as of
March 31, 1996. There can be no assurance that the Company will not incur
additional losses until it successfully develops or acquires new products or
enhancements to existing products that generate significant revenues.
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The Company's results of operations have historically varied
substantially from quarter to quarter and the Company expects they will
continue to do so. In the past, the Company's operating results have varied
significantly as a result of a number of factors, including the size and
timing of customer orders or license agreements, product mix, the revenues
derived from product sales and license fees, seasonality, the timing of the
introduction and customer acceptance of new products or product enhancements
by the Company's competitors, new product or version releases by the Company,
changes in pricing policies by the Company or its competitors, marketing and
promotional expenditures, research and development expenditures and changes
in general economic conditions. Furthermore, the Company has often recognized
a substantial portion of its revenues in the last month of the quarter, with
these revenues frequently concentrated in the last week or weeks of the
quarter.
The Company's operating and other expenses are relatively fixed in the
short term. As a result, variations in timing of revenues can cause
significant variations in quarterly results of operations. For example, the
Company plans on continuing to make significant expenditures to enhance its
sales and marketing and research and development activities. The Company may
be unable to reduce these expenditures quickly if revenue is less than
expected. The Company generally does not operate with a significant order
backlog and a substantial portion of its revenue in any quarter is derived
from orders booked in that quarter, which are difficult to forecast and which
are typically concentrated at the end of the quarter. Accordingly, the
Company's sales expectations are based almost entirely on its internal
estimates of future demand and not on firm customer orders. Due to the
foregoing factors, the Company believes that quarter to quarter comparisons
of its results of operations are not necessarily meaningful and should not be
relied upon as indications of future performance. In addition, there can be
no assurance the Company will be profitable on a quarter to quarter or any
other basis in the future.
FUTURE CAPITAL NEEDS; NO ASSURANCE OF FUTURE FINANCING
The Company completed its initial public offering in December 1995 and
the overallotment in January 1996. The net proceeds to the Company were
$5,978,000. Although the Company expects such proceeds together with its
existing capital to be adequate through 1996, there can be no assurance that
such capital will be sufficient to satisfy the Company's operating
requirements. The Company's actual capital needs, however, will depend upon
numerous factors, including the progress of the Company's software
development activities, the cost of increasing the Company's sales and
marketing activities and the amount of revenues generated from operations,
none of which can be predicted with certainty. There can be no assurance that
the Company will not require additional capital sooner than currently
anticipated. There can be no assurance that any additional financing will be
available to the Company on acceptable terms, or at all. The inability to
obtain required financing would have a material adverse effect on the
Company's business, financial condition and results of operation.
SUBSTANTIAL DEPENDENCE ON RECENT AND ANTICIPATED PRODUCT INTRODUCTIONS
DeltaPoint has historically derived substantially all of its product
revenues from licenses of DeltaGraph, its advanced charting and graphics
software product. However, DeltaPoint's future revenue growth will depend
substantially on the successful development, introduction and commercial
acceptance of its new and planned products, including QuickSite, its web page
creation and site management product, WebAnimator, its multimedia authoring
tool for the World Wide Web, currently under development, Chart Server, its
client-server enterprise wide charting software also currently under
development and Drag 'n Draw. Although DeltaPoint has completed much of the
development of Chart Server and WebAnimator, significant additional
development and testing will be required before commercial introduction of
either Chart Server or WebAnimator is possible. WebAnimator is not expected
to be released until the second half of 1996 at the earliest and Chart Server
is not expected to be shipped until late 1996 at the earliest. There can be
no assurance that either Chart Server or WebAnimator can be successfully
developed and introduced. Commercial acceptance of the Company's QuickSite
and anticipated WebAnimator and Chart Server products will require the
Company to establish additional distribution channels and sales and
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marketing methods, of which there can also be no assurance, because these
anticipated products will be targeted to existing customers as well as to a
significantly different potential end user population. In addition, the
commercial acceptance of the Chart Server is substantially dependent on
market acceptance of emerging inter-operability protocols such as object
linking and embedding ("OLE") 2.0 and OpenDoc, which facilitate the seamless
exchange and updating of information between software applications. There can
be no assurance that the Company can successfully manage the introduction of
QuickSite or of the Company's anticipated WebAnimator and Chart Server
products, or if introduced, that any of its existing or anticipated products
will achieve significant market acceptance. Failure of any of the Company's
existing or anticipated products to achieve significant market acceptance
will have a material adverse effect on the Company's business, financial
condition and results of operation.
DEPENDENCE ON ANTICIPATED INTERNET PRODUCTS
Although the Company has historically derived substantially all of its
revenues from visualization software products for desktop applications, the
Company's strategy is to realize a significant and growing percentage of
future revenues from the sale of its anticipated Internet products. Sales of
QuickSite, and WebAnimator, if introduced, will depend in part upon a robust
industry and infrastructure for providing Internet access and carrying
Internet traffic. The Internet is at an early stage of development. There
can be no assurance that the infrastructure or complementary products
necessary to make the Internet a viable commercial marketplace will be
developed, or, if developed, that the Internet will become a viable
commercial marketplace. If the Internet does not become a viable commercial
marketplace, the commercial benefits derived from the Company's QuickSite
product and anticipated WebAnimator product, if any, would be materially
adversely effected. Moreover, the sale, marketing and distribution of the
Company's anticipated Internet products may be significantly different than
for the Company's existing products. Failure of the Company to successfully
sell, market and distribute its anticipated Internet products, if
successfully developed, would have a material adverse affect on the Company's
business, financial condition and results of operations.
RISKS ASSOCIATED WITH RETAIL DISTRIBUTION; SUBSTANTIAL CUSTOMER
CONCENTRATION
DeltaPoint sells its products to distributors for resale as well as
directly to certain retailers, including computer superstores and mass
merchandisers. Sales to a limited number of distributors and retailers have
constituted, and are anticipated to continue to constitute, a significant
portion of DeltaPoint's retail software sales. In particular, revenues from
licenses sold to Nippon Polaroid, the Company's Japanese distributor,
constituted approximately 38% , 35% and 6% of the Company's net revenues for
the years ended December 31, 1994, 1995 and the three months ended March 31,
1996, respectively. Sales to Ingram constituted approximately 17% , 13% and
23% of the Company's net revenues for the years ended December 31, 1994, 1995
and the three months ended March 31, 1996, respectively. Any termination or
significant disruption of DeltaPoint's relationship with any major
distributor or retailer, or a significant reduction in sales volume
attributable to any of such entities, could, unless or until replaced,
materially adversely affect the Company's business, financial condition and
results of operations. A deterioration in financial condition or other
business difficulties of a distributor or retailer could render the Company's
accounts receivable from such entity uncollectible, which could have a
material adverse effect on the Company's business, financial condition and
results of operations. There can be no assurance that DeltaPoint's existing
distributors and retailers will continue to provide DeltaPoint's products
with adequate levels of shelf space or promotional support. In addition,
personal computer hardware and software companies have generally reported
declines in gross margins and greater product returns as they have increased
sales through the mass merchandise distribution channel. The Company expects
that its margins will be similarly affected as it increases sales through
this channel.
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RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
The Company's revenues from international operations accounted for
approximately 42% , 40% and 13% of the Company's net revenues in 1994, 1995
and the three month period ended March 31, 1996, respectively, of which
approximately 90%, 87% and 46% , respectively, were derived from sales in
Japan. The Company expects that revenues from these international operations
will continue to represent a large percentage of its net revenues.
International revenues are subject to a number of risks, including greater
difficulties in accounts receivable collection, longer payment cycles,
exposure to currency fluctuations, political and economic instability and the
burden of complying with a wide variety of foreign laws and regulatory
requirements. The Company also believes that it is exposed to greater levels
of software piracy in international markets because of the weaker protection
afforded to intellectual property in some foreign jurisdictions.
DEPENDENCE ON NONEXCLUSIVE SOFTWARE LICENSE FOR DRAG 'N DRAW(TM)
DeltaPoint publishes Drag 'n Draw under a three-year non-exclusive,
royalty-bearing agreement licensed from a third party. Under the terms of
the license, the Company currently does not have access to the source code
for Drag 'n Draw, which may be obtained upon payment of a specified fee.
Therefore, without paying such fee, the Company has no right to the
technology underlying Drag 'n Draw and is dependent on the third party
licenser to modify or customize Drag 'n Draw in a timely manner. The license
agreement does not contain a non-compete clause and the licenser is therefore
free to allow other third parties, including competitors of DeltaPoint, to
publish a product similar to Drag 'n Draw. Termination of the license would,
or the grant of a non-exclusive license to a third party on the same or more
favorable terms as those granted to DeltaPoint could, have a material adverse
effect on the Company's business, financial condition and results of
operations.
RAPID TECHNOLOGICAL CHANGE; RISK OF PRODUCT DELAYS; RISK OF PRODUCT DEFECTS
The markets in which the Company competes are characterized by ongoing
technological developments, frequent new product announcements and
introductions, evolving industry standards and changing customer
requirements. The introduction of products embodying new technologies and the
emergence of new industry standards and practices can render existing
products obsolete and unmarketable. The Company's future success depends upon
its ability on a timely basis to enhance its existing products, introduce new
products that address the changing requirements of its customers and
anticipate or respond to technological advances, emerging industry standards
and practices in a timely, cost-effective manner. There can be no assurance
that the Company will be successful in developing, introducing and marketing
new products or enhancements to existing products or will not experience
difficulties that could delay or prevent the successful development,
introduction or marketing of these products, or that its new products and
product enhancements will adequately meet the requirements of the marketplace
and achieve any significant degree of commercial acceptance. Software
products such as those offered by the Company often contain errors or "bugs"
that can adversely affect the performance of the product or damage a user's
data. The Company has in the past discovered software defects in its products
that have adversely affected its business and operating results. If the
Company is unable, for technological or other reasons, to develop and
introduce new products or enhancements of existing products in a timely
manner or if new versions of existing products contain unacceptable levels of
product defects or do not achieve a significant degree of market acceptance,
or any of the above situations occur there could be a material adverse effect
on the Company's business, financial condition and results of operations.
COMPETITION
The visualization software market is highly competitive and
characterized by rapid technological change, frequent new product
introductions, short product lives, evolving industry standards and
12
<PAGE>
significant price erosion over the life of a product. The Company anticipates
increased competition from both existing vendors and new market entrants. In
the charting market, the Company has, to date, encountered competition
primarily from larger vendors such as Adobe Systems Incorporated, Microsoft,
Software Publishing Corporation, Lotus, Corel Corporation, and Computer
Associates International, Inc. In the structured drawing market, the Company
has, to date, encountered competition primarily from larger vendors such as
Corel Corporation, Visio and Micrografx Incorporated. In the Internet add-in
market, the Company expects to encounter competition primarily from Netscape
Communications Corporation, Microsoft, Adobe Systems Incorporated,
Macromedia, Inc. and Quarterdeck, Inc. In addition, the Company expects that
existing vendors and new market entrants will develop products that will
compete directly with the Company's products and that competition will
increase significantly to the extent that markets for the Company's products
grow. Increased competition is likely to result in price reductions, reduced
gross margins and loss of market share, any of which could have a material
adverse effect on the Company's business, financial condition and results of
operation. Most of the Company's current and potential competitors have
substantially greater financial, technical, marketing, sales and customer
support resources, greater name recognition and larger installed customer
bases than the Company. If the Company is unable to compete effectively
against current and future competitors, the Company's business, financial
condition and results of operations will be materially adversely affected.
RELIANCE ON MICROSOFT
Microsoft Windows has gained widespread market acceptance as the
dominant computer operating system. Accordingly, the Company has developed
and/or is developing advanced charting and structured drawing and diagramming
software products that function in the Microsoft Windows, Windows '95 or
Windows NT environments, and anticipates future products will also be
designed for use in these Microsoft environments. Because the Company expects
that its Microsoft-based applications will account for a significant portion
of new license revenue for the foreseeable future, sales of the Company's new
products would be materially and adversely affected by market developments
adverse to Microsoft Windows, Windows '95 and Windows NT. The Company's
ability to develop products using the Microsoft Windows, Windows '95 and NT
environments is substantially dependent on its ability to gain timely access
to, and to develop expertise in, current and future developments by
Microsoft, of which there can be no assurance. Moreover, the abandonment by
Microsoft of its current operating system, product line or strategy, or the
decision by Microsoft to develop and market products that directly or
indirectly compete with the Company's products would have a material adverse
effect on the Company's business, financial condition and results of
operations
DEPENDENCE ON LIMITED NUMBER OF KEY PERSONNEL
The Company's success depends to a significant extent upon the
contributions of several key personnel, some of whom were only recently hired
by the Company. The failure to attract and retain key personnel could have a
material adverse affect on the Company's business, financial condition and
results of operations.
RISKS ASSOCIATED WITH MANAGING GROWTH
In recent years, the growth of the Company's customer base and expansion
of its product line has challenged, and is expected to continue to challenge,
the Company's management and operations, including its sales, marketing,
customer support, research and development and finance and administrative
operations. The Company's future performance will depend in part on its
ability to manage growth, should it occur, both in its domestic and
international operations and to adapt its operational and financial control
systems, if necessary, to respond to changes resulting from such growth. The
Company intends to continue to invest in improving its financial systems and
controls in connection with anticipated increases in the level of its
operations. Although the Company believes that its systems and controls are
adequate for its current level of operations, the Company anticipates that it
may need to add additional personnel and
13
<PAGE>
expand and upgrade its financial systems to manage any future growth. The
failure of the Company's management to respond to and manage growth
effectively could have a material adverse effect on the Company's business,
financial condition and results of operations.
RELIANCE ON SOLE PRODUCT ASSEMBLER
All of the Company's software products are currently assembled by a
related third party assembler that beneficially owns approximately 2.2% of
the Company's Common Stock as of March 31, 1996. Although reliance on third
party assemblers is common in the software industry and DeltaPoint believes
that other assemblers are available, the Company has no formal contract with
the assembler and the termination or interruption of this assembly
arrangement could have a material adverse effect on the Company's business,
financial condition and results of operations until an alternate assembler is
secured.
RISKS ASSOCIATED WITH PRODUCT RETURNS; PRICE PROTECTION
Consistent with industry practice, the Company allows distributors,
retailers and end users to return products for credits towards the purchase
of additional products. In addition, DeltaPoint's promotional activities,
including free trial and satisfaction guaranteed offers, and competitors'
promotional or other activities could cause returns to increase sharply at
any time. Further, the Company expects that the rate of product returns could
increase to the extent that the Company introduces new versions of its
existing products. For example, product returns may increase above historical
levels as a result of new product introductions. In addition, if the Company
reduces its prices, the Company credits its distributors for the difference
between the purchase price of products remaining in their inventory and the
Company's reduced price for such products. Although the Company provides
allowances for anticipated returns, exchanges and price protection
obligations, and believes its existing policies have resulted in the
establishment of allowances that are adequate and have been adequate in the
past, there can be no assurance that such product returns and price
protection obligations will not exceed such allowances in the future and as a
result will not have a material adverse effect on future operating results,
particularly since the Company seeks to continually introduce new and
enhanced products and is likely to face increasing price competition.
LIMITED INTELLECTUAL PROPERTY PROTECTION; TRADEMARK DISPUTE
The Company's ability to compete effectively depends in large part on
its ability to develop and maintain proprietary aspects of its technology.
Despite precautions taken by the Company, it may be possible for unauthorized
third parties to copy aspects of the Company's products or to obtain and use
information that the Company regards as proprietary. Moreover, the laws of
some foreign countries do not protect the Company's proprietary rights in its
products to the same extent as do the laws of the United States. The Company
licenses its products primarily under "shrink wrap" license agreements that
are included in products shipped by the Company and are not signed by
licensees, therefore they may be unenforceable under the laws of certain
jurisdictions. In addition, some aspects of the Company's products are not
subject to intellectual property protection.
The Company cannot be certain that others will not independently develop
substantially equivalent or superseding proprietary technology, or that an
equivalent product will not be marketed in competition with the Company's
products, thereby substantially reducing the value of the Company's
proprietary rights. There can be no assurance that any confidentiality
agreements between the Company and its employees will provide adequate
protection for the Company's proprietary information in the event of any
unauthorized use or disclosure of such proprietary information.
Since July 1995, the Company received correspondence from Visio
contesting the Company's right to use the product name Drag 'n Draw and
asserting that it is confusingly similar to a registered trademark owned by
Visio. Although the Company believes that this assertion lacks merit, there
can be no assurance
14
<PAGE>
that the ultimate resolution of the matter will not have a material adverse
impact on the Company's business, financial condition or results of
operations. Although the Company is not currently engaged in any intellectual
property litigation or proceedings regarding this matter or any other similar
matters, there can be no assurance that the Company will not become involved
in such proceedings. An adverse outcome in litigation or similar adversarial
proceedings could subject the Company to significant liabilities to third
parties, require disputed rights to be licensed from others or require the
Company to cease the marketing or use of certain products, any of which could
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company may be required to obtain licenses to
patents or proprietary rights of others, and there can be no assurance that
any licenses required under any patents or proprietary rights would be made
available on terms acceptable to the Company, if at all.
VOLATILITY OF STOCK PRICE; POSSIBLE ILLIQUIDITY OF TRADING MARKET
The Company's stock price has exhibited volatility since the Company's
initial public offering in December 1995. The trading price of the Company's
Common Stock could be subject to significant fluctuations in response to
variations in quarterly operating results, changes in analysts' estimates,
announcements of technological innovations by the Company or its competitors,
general conditions in the data and process visualization software industry
and other factors. In addition, the stock market is subject to price and
volume fluctuations that affect the market prices for companies in general,
and small capitalization, high technology companies in particular, and are
often unrelated to operating performance.
The shares of Common Stock are quoted on the Nasdaq SmallCap Market
which may be a significantly less liquid market than the Nasdaq National
Market. Moreover, if the Company should continue to experience losses from
operations, it may be unable to maintain the standards for continued
quotation on the Nasdaq SmallCap Market, and the shares of Common Stock could
be subject to removal from the Nasdaq SmallCap Market. Trading, if any, in
the Common Stock would therefore be conducted in the over-the-counter market
on an electronic bulletin board established for securities that do not meet
the Nasdaq Small Cap Market listing requirements, or in what are commonly
referred to as the "pink sheets." As a result, an investor would find it more
difficult to dispose of, or to obtain accurate quotations as to the price of,
the Company's Common Stock. In addition, if the Company's Common Stock were
removed from the Nasdaq SmallCap Market, they would be subject to so-called
"penny stock" rules that impose additional sales practice and market making
requirements on broker-dealers who sell and/or make a market in such
securities. Consequently, removal from the Nasdaq SmallCap Market, if it were
to occur, could affect the ability or willingness of broker-dealers to sell
and/or make a market in the Company's Common Stock and the ability of
purchasers of the Company's Common Stock to sell their securities in the
secondary market. In addition, if the market price of the Company's Common
Stock is less than $5.00 per share, the Company may become subject to certain
penny stock rules even if still quoted on the Nasdaq SmallCap Market. While
such penny stock rules should not affect the quotation of the Company's
Common Stock on the Nasdaq SmallCap Market, such rules may further limit the
market liquidity of the Common Stock and Warrants and the ability of
shareholders to sell such securities in secondary market.
The Company has not previously paid any dividends on its Common Stock
and for the foreseeable future intends to continue its policy of retaining
any earnings to finance the development and expansion of its business.
15
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On March 21, 1995, Ameriquest/Kenfil Inc. ("Kenfil") filed a complaint
in the Superior Court of the State of California before the county of
Monterey naming the Company as defendant and alleging (i) breach of a
distribution agreement between Kenfil and the Company (ii) and indebtedness
to Kenfil for the sum of $233,000 together with interest thereon at the rate
of 10% per annum. Kenfil is seeking damages, cost of suit and other relief.
In April 1996, the Company entered into a settlement agreement with Kenfil
for the sum of $50,000. A dismissal of the complaint was filed with the
Superior Court of the of California.
With the exception of the foregoing, there are no other material pending
legal proceedings against the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) List of Exhibits.
Exhibit Number Exhibit Description
-------------- -------------------
10.1 Separation Agreement and Release between
Registrant and Raymond R. Kingman, Jr.
dated April 5, 1996
10.2 Offer Letter dated March 29, 1996 between
Registrant and John J. Ambrose
(b) Reports on Form 8-K. No reports of Form 8-K were filed during the
quarter ended March 31, 1996.
16
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
DELTAPOINT, INC.
By: /s/ DONALD B. WITMER
---------------------------------
Donald B. Witmer
Chief Operating Officer and
Chief Financial Officer
(Principal Accounting Officer)
Date: May 14, 1996
17
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibits
- ------- --------
10.1 Separation Agreement and Release between Registrant and Raymond R.
Kingman, Jr. Dated April 5, 1996
10.2 Offer Letter dated March 29, 1996 between Registrant and John J.
Ambrose
18
<PAGE>
SEPARATION AGREEMENT AND RELEASE
This Agreement, dated as of April 5, 1996 ("Effective Date"), is between
DeltaPoint, Inc., a California corporation ("Company"), and Raymond R. Kingman,
Jr. ("Mr. Kingman"). The parties agree as follows:
1. COMPANY OBLIGATIONS
(a) SEVERANCE. Company shall pay Mr. Kingman the sum of One Hundred and
Eight Thousand Dollars ($108,000), less withholdings required by law, on the
later of (i) seven days after execution of this Agreement by Mr. Kingman and
(ii) April 12, 1996.
(b) STOCK. Sixty Two Thousand, five hundred shares (62,500) of the unvested
options for the Company's common stock presently held by Mr. Kingman shall vest
at a price of $3.50 per share on the later of (i) seven days after execution of
this Agreement by Mr. Kingman and (ii) the Effective Date .
(c) VEHICLE. Company shall pay Mr. Kingman an amount equal to the balance
due on the Company vehicle currently used by Mr. Kingman, not to exceed Fifteen
Thousand Dollars ($15,000).
(d) ACCRUED SALARY AND VACATION. Company shall pay Mr. Kingman all salary
and accrued but unused vacation due through the Effective Date.
(e) CONSOLIDATED OMNIBUS BUDGET RECONCILIATION ACT OF 1985 ("COBRA"). As of
the Effective Date, Company shall provide Mr. Kingman COBRA benefits as required
by law, with Company to pay the COBRA premiums until the earlier of (i) the
first anniversary of the Effective Date, and (ii) the date on which Company's
statutory obligation to provide Mr. Kingman COBRA benefits terminates.
2. EMPLOYEE OBLIGATIONS.
(a) RESIGNATION. As of the Effective Date, Mr. Kingman resigns his
employment with Company and all offices and directorships held with Company or
any Affiliate.
(b) NOTICE. So long as Company is providing COBRA benefits, Mr. Kingman
shall provide Company advance written notice of (i) the effective date of any
subsequent employment, and (ii) the effective date of coverage under any
applicable benefit plan with such employer.
(c) COOPERATION. For a reasonable period of time after the Effective Date,
Mr. Kingman shall cooperate with Company in (i) the orderly transfer of Mr.
Kingman's responsibilities to other person(s); and (ii) the defense of any
action brought by any third party against Company that relates in any way to Mr.
Kingman's acts or omissions while employed by Company.
(d) RETURN OF PROPERTY. Mr. Kingman shall promptly return to Company all
property of Company, including, without limitation, all equipment, tangible
proprietary information, documents, books, records, reports, contracts, lists,
computer disks (or other computer-generated files or data), or copies thereof,
created on any medium, prepared or obtained by Mr. Kingman in the course of or
incident to his employment with Company.
(e) CONFIDENTIAL INFORMATION. Mr. Kingman shall not, for the benefit of any
person or entity other than Company, disclose or use any information regarding
Company's business, employees, or customers, which was produced by any employee
of Company in the course of his or her employment or otherwise produced or
acquired by or on behalf of Company, and which is not properly in the public
domain.
19
<PAGE>
(f) INVENTIONS/NON-DISCLOSURE. Mr. Kingman specifically acknowledges and
reaffirms the obligations contained in the DeltaPoint, Inc. Employee Non-
Disclosure and Inventions Assignment Agreement between him and Company executed
on or about October 2, 1990.
(g) NON-COMPETITION. Mr. Kingman acknowledges that during his employment
with Company, he has had access to confidential information and that the
activities forbidden by this subsection would necessarily involve the improper
use or disclosure of this confidential information. To forestall this use or
disclosure, Mr. Kingman agrees that for a period of one (1) year following the
Effective Date, Mr. Kingman shall not, directly or indirectly, (i) divert or
attempt to divert from Company or any Affiliate (defined as any person or entity
that directly or indirectly controls, is controlled by, or is under common
control with Company) any business, including the solicitation of customers;
(ii) solicit for employment any person currently employed by Company (or any
Affiliate); or (iii) engage in any business activity competitive with Company
(or any Affiliate) in any state where Company conducts its business, unless Mr.
Kingman can prove that any of the above actions was done without the use of
confidential information.
(h) NONDISPARAGEMENT. Mr. Kingman shall not disparage Company, any
Affiliate, or any of their officers or employees. The Company's executive
officers and the members of the Company's board of directors shall not disparage
Mr. Kingman.
(i) ANNOUNCEMENT. Any communication to Company employees or the public by
Mr. Kingman or the Company's executive officers or members of its board of
directors shall be consistent with the message that Mr. Kingman feels he has
accomplished for the Company what he set out to accomplish and has elected to
resign in order to pursue other opportunities.
3. RELEASE. Mr. Kingman and his representatives, heirs, successors, and
assigns do hereby completely release and forever discharge Company, any
Affiliate, and its and their present and former shareholders, officers,
directors, agents, employees, attorneys, successors, and assigns (collectively,
"Released Parties") from all claims, rights, demands, actions, obligations,
liabilities, and causes of action of every kind and character, known or unknown,
mature or unmatured, which Mr. Kingman may now have or has ever had, whether
based on tort, contract (express or implied), or any federal, state, or local
law, statute, or regulation (collectively, the "Released Claims"). By way of
example and not in limitation of the foregoing, Released Claims shall include
any claims arising under Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act, the Americans with Disabilities Act, and the
California Fair Employment and Housing Act, as well as any claims asserting
wrongful termination, breach of contract, breach of the covenant of good faith
and fair dealing, negligent or intentional infliction of emotional distress,
negligent or intentional misrepresentation, negligent or intentional
interference with contract or prospective economic advantage, defamation,
invasion of privacy, and claims related to disability. Released Claims shall
also include, but not be limited to, claims for severance pay, bonuses, sick
leave, vacation pay, life or health insurance, or any other fringe benefit. Mr.
Kingman likewise releases the Released Parties from any and all obligations for
attorneys' fees incurred in regard to the above claims or otherwise.
Notwithstanding the foregoing, Released Claims shall not include (i) any claims
based on obligations created by or reaffirmed in this Agreement; and (ii) any
vested pension rights or any workers' compensation claims settlement of which
would require approval by the California Workers' Compensation Appeals Board.
4. SECTION 1542 WAIVER. The parties understand and agree that the Released
Claims include not only claims presently known to Mr. Kingman, but also include
all unknown or unanticipated claims, rights, demands, actions, obligations,
liabilities, and causes of action of every kind and character that would
otherwise come within the scope of the Released Claims as described in Section
4. Mr. Kingman understands that he may hereafter discover facts different from
what he now believes to be true, which if known, could have materially affected
this Agreement, but he nevertheless waives any claims or rights based on
different or additional facts. Mr. Kingman knowingly and voluntarily waives any
and all rights or benefits that he may now have, or in the future may have,
under the terms of Section 1542 of the California Civil Code, which provides as
follows:
20
<PAGE>
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
5. CONFIDENTIALITY. Mr. Kingman and Company understand and agree that this
Agreement and each of its terms, and the negotiations surrounding it, are
confidential and shall not be disclosed to any entity or person, for any reason,
at any time, without the prior written consent of the other party, unless
required by law. Notwithstanding the foregoing, Mr. Kingman may disclose the
terms of this Agreement to his spouse, and both he and Company, for legitimate
business reasons, may disclose the terms of this Agreement to legal, financial,
and tax advisors as well as to Company's executive officers and members of its
board of directors.
6. NONADMISSION. The parties understand and agree that this is a compromise
settlement of disputed claims and that the furnishing of the consideration for
this Agreement shall not be deemed or construed at any time or for any purpose
as an admission of liability by Mr. Kingman or Company. The liability for any
and all claims is expressly denied by Mr. Kingman and Company.
7. AGE DISCRIMINATION CLAIMS. Mr. Kingman understands and agrees that, by
entering into this Agreement, (i) he is waiving any rights or claims he might
have under the Age Discrimination in Employment Act, as amended by the Older
Workers Benefit Protection Act; (ii) he has received consideration beyond that
to which he was previously entitled; (iii) he has been advised to consult with
an attorney before signing this Agreement; and (iv) he has been offered the
opportunity to evaluate the terms of this Agreement for not less than twenty-one
(21) days prior to his execution of the Agreement. Mr. Kingman may revoke this
Agreement (by written notice to Company) for a period of seven (7) days after
his execution of the Agreement, and it shall become enforceable only upon the
expiration of this revocation period without prior revocation by Mr. Kingman.
8. NOTICES. Any notice under this Agreement must be in writing and shall be
effective upon delivery by hand, upon facsimile transmission to the number
provided below (if one is provided), or three (3) business days after deposit in
the United States mail, postage prepaid, certified or registered, and addressed
to Company or to Mr. Kingman at the corresponding address below. Mr. Kingman
shall be obligated to notify Company in writing of any change in his address.
Notice of change of address shall be effective only when done in accordance with
this Section.
Company's Notice Address:
Chief Financial Officer
DeltaPoint, Inc.
2 Harris Court, Suite B-1
Monterey, CA 93940
Fax Phone No.: 408-648-4020
Mr. Kingman's Notice Address:
Raymond R. Kingman, Jr.
913 Monterey Circle
Monterey, CA 93940
Fax Phone No.: 408-373-1681
9. INTEGRATION. The parties understand and agree that the preceding Sections
recite the sole consideration for this Agreement; that no representation or
promise has been made by Mr. Kingman, Company, or any other Released Party on
any subject whatsoever, except as expressly set forth in this Agreement; and
that
21
<PAGE>
all agreements and understandings between the parties on any subject
whatsoever are embodied and expressed in this Agreement. This Agreement
shall supersede all prior or contemporaneous agreements and understandings
among Mr. Kingman, Company, and any other Released Party, whether written or
oral, express or implied, with respect to any subject whatsoever, including
without limitation, any employment-related agreement or benefit plan, except
to the extent that the provisions of any such agreement or plan have been
expressly referred to in this Agreement as having continued effect.
10. AMENDMENTS; WAIVERS. This Agreement may not be modified, amended, or
terminated except by an instrument in writing, signed by each of the parties.
No failure to exercise and no delay in exercising any right, remedy, or power
under this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, or power under this Agreement preclude
any other or further exercise thereof, or the exercise of any other right,
remedy, or power provided herein or by law or in equity.
11. ASSIGNMENT; SUCCESSORS AND ASSIGNS. Mr. Kingman agrees that he will not
assign, sell, transfer, delegate, or otherwise dispose of, whether voluntarily
or involuntarily, or by operation of law, any rights or obligations under this
Agreement. Any such purported assignment, transfer, or delegation shall be null
and void. Mr. Kingman represents that he has not previously assigned or
transferred any claims or rights released by him pursuant to this Agreement.
Subject to the foregoing, this Agreement shall be binding upon and shall inure
to the benefit of the parties and their respective heirs, successors, attorneys,
and permitted assigns. This Agreement shall also inure to the benefit of any
Released Party. This Agreement shall not benefit any other person or entity
except as specifically enumerated in this Agreement.
12. SEVERABILITY. If any provision of this Agreement, or its application to
any person, place, or circumstance, is held by an arbitrator or a court of
competent jurisdiction to be invalid, unenforceable, or void, such provision
shall be enforced to the greatest extent permitted by law, and the remainder of
this Agreement and such provision as applied to other persons, places, and
circumstances shall remain in full force and effect.
13. ATTORNEYS' FEES. In any legal action, arbitration, or other proceeding
brought to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to recover reasonable attorneys' fees and costs.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the law of the State of California.
15. INTERPRETATION. This Agreement shall be construed as a whole, according to
its fair meaning, and not in favor of or against any party. By way of example
and not in limitation, this Agreement shall not be construed in favor of the
party receiving a benefit nor against the party responsible for any particular
language in this Agreement. Captions are used for reference purposes only and
should be ignored in the interpretation of the Agreement.
16. REPRESENTATION BY COUNSEL. The parties acknowledge that (i) they have had
the opportunity to consult counsel in regard to this Agreement; (ii) they have
read and understand the Agreement and they are fully aware of its legal effect;
and (iii) they are entering into this Agreement freely and voluntarily, and
based on each party's own judgment and not on any representations or promises
made by the other party, other than those contained in this Agreement.
22
<PAGE>
The parties have duly executed this Agreement as of the date first written
above.
/s/ Raymond R. Kingman, Jr.
- ----------------------------
Raymond R. Kingman, Jr.
DeltaPoint, Inc.
/s/ Donald B. Witmer
- ---------------------
By: Don Witmer
Its: Chief Financial Officer
23
<PAGE>
3/29/96
John Ambrose
26275 Hilltop Place
Carmel, CA 93923
Dear John:
On behalf of the Board of Directors, I am pleased to offer you full time regular
employment as the Chief Executive Officer at the annual salary of $120,000. In
addition you will receive a grant for 145,000 stock options of DeltaPoint, Inc.
and a signing bonus of $25,000. Additional terms of the employment agreement
will be forthcoming.
Our employee benefits include coverage in major medical, dental, life, and AD &
D beginning thirty days after the first day of employment. We also offer
enrollment in a 401k tax deferred savings plan after one month of employment.
We are looking forward to having you join DeltaPoint, Inc., I am sure that
together we can establish a professionally committed organization.
This offer letter, if not signed, will expire on March 29, 1996.
Sincerely,
DELTAPOINT, INC.
/s/ Donald B. Witmer /s/ John Ambrose
- --------------------- -----------------
Donald B. Witmer John Ambrose
Chief Operations Officer/Chief Financial Officer Date: March 29, 1996
24
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Balance Sheets and Condensed Statement of Income found on pages 3 and
4 of the Company's Form 10-QSB for the year-to-date and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 4,224
<SECURITIES> 0
<RECEIVABLES> 1,443
<ALLOWANCES> 264
<INVENTORY> 130
<CURRENT-ASSETS> 5,763
<PP&E> 1,196
<DEPRECIATION> 969
<TOTAL-ASSETS> 6,450
<CURRENT-LIABILITIES> 3,874
<BONDS> 0
0
0
<COMMON> 13,098
<OTHER-SE> (7,946)
<TOTAL-LIABILITY-AND-EQUITY> 6,450
<SALES> 760
<TOTAL-REVENUES> 760
<CGS> 338
<TOTAL-COSTS> 338
<OTHER-EXPENSES> 2,143
<LOSS-PROVISION> 27
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,721)
<INCOME-TAX> 0
<INCOME-CONTINUING> 17
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,704)
<EPS-PRIMARY> (.79)
<EPS-DILUTED> (.79)
</TABLE>
