<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________________________________
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934.
FOR THE FISCAL YEAR ENDED: MARCH 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER: 0-27798
---------------------------------
WORKGROUP TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 04-3153644
--------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
91 HARTWELL AVE., LEXINGTON, MA 02421
------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (781) 674-2000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
----------------------------
(Title of class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in 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 the voting stock held by nonaffiliates of the
registrant as of June 15, 1998 (based on the closing price as quoted by Nasdaq
National Market as of such date) was $22,600,000.
As of June 15, 1998, 8,371,947 shares of the registrant's common stock were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement relating to the Company's Annual
Meeting of Stockholders to be held on July 31, 1998 are incorporated by
reference into Part III hereof.
================================================================================
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Founded in 1992, Workgroup Technology Corporation ("WTC" or the "Company")
designs, develops, markets and supports WTC SolutionCenterTM, a family of
products and services that facilitates the management of product information and
work processes performed by multi-functional, enterprise product development
organizations. CMS, a product within the WTC SolutionCenter, provides
organizations with production-proven, enterprise Product Data Management ("PDM")
solutions. WTC OpCenterTM, which the Company expects to release during fiscal
year 1999, provides real-time program management solutions for product
development. WTC ServiceCenterTM is a line of professional service offerings
providing consulting, training and technical support services to customers.
The Company was incorporated in the State of Delaware in May 1992. The
Company's principal executive offices are located at 91 Hartwell Avenue,
Lexington, Massachusetts 02421, and its telephone number is (781) 674-2000.
References herein to "WTC" and "the Company" include Workgroup Technology
Corporation and its wholly owned subsidiary, Workgroup Technology GmbH.
From time to time, information provided by the Company or statements made by
its employees, including statements made herein, may contain "forward looking"
information which involve risks and uncertainties. In particular, the
statements set forth under the heading "WTC's Strategy" below regarding the
Company's objectives to expand its technological leadership and product
offerings, enter a new market and broaden distribution and market awareness are
"forward looking" statements and are based on the assumptions and expectations
of the Company's management at the time such statements are made. The Company's
actual results may vary significantly from those stated in any forward looking
statements. Important information about the factors that may cause such
differences include, but are not limited to, the risks, uncertainties and other
information discussed in "Certain Factors That May Affect Future Results" in
Management's Discussion and Analysis of Financial Conditions and Results of
Operations included in this Form 10K.
INDUSTRY BACKGROUND
Intense competitive pressures are pressing companies to shorten development
time-to-market, improve the predictability of product development programs and
reduce total product cost. At the same time, the globalization of markets and
competition demands consistent product quality with an ability to tailor product
features to suit local and regional market conditions. These pressures are
causing companies to reengineer their approach to the management of the product
lifecycle - the conceptual design, engineering, production, marketing, support
and service, and retirement of their products.
Managing the product lifecycle imposes significant demands on information
systems. Companies must be able to manage product information within global
organizations and distribute this information to support decision making in
remote locations and across functional areas. Increasingly, product information
is created and stored electronically by a wide range of disparate applications
and systems such as Computer Aided Design ("CAD") systems; Electronic Design
Automation ("EDA") systems; word processing, document management and spreadsheet
applications; enterprise manufacturing resource planning ("MRP") systems; and
various project management tools.
The pressures on product development are driving growth in the PDM market as
companies are pressed to implement PDM and program management solutions to
manage, track and alleviate the increasing complexity of products and product
data with the ultimate goal of shortening and improving the
-1-
<PAGE>
predictability of product development cycles. WTC has a proven track record for
developing and implementing software solutions that meet the needs of product
development organizations for developing, using, maintaining and modifying
product data and associated change processes while offering access to current
information at all stages of product development.
WTC SOLUTIONCENTER PRODUCTS
WTC SolutionCenter is a family of products and services that facilitates the
management of product information and work processes performed by multi-
functional, enterprise product development organizations. CMS, a product within
the WTC SolutionCenter, provides organizations with production-proven,
enterprise Product Data Management ("PDM") solutions. WTC OpCenter, which the
Company expects to release during fiscal year 1999, provides real-time program
management solutions for product development. WTC ServiceCenter is a line of
professional service offerings providing consulting, training and technical
support services to customers.
CMS is a family of client/server software products designed to automate and
accelerate the creation, capture, modification, control and reuse of product and
process information. CMS currently provides thousands of end-users with
production proven solutions and important benefits, including:
Quick Adaptability: The highest hurdle companies must overcome when
instituting a PDM system is lengthy implementation and deployment time.
CMS is a flexible, modular system and can be used immediately with minimal
programming or customization. As a result, CMS can be managed without an
overwhelming burden on programmers and administrators, significantly
reducing the ongoing cost of ownership.
Total Functionality: CMS processes, stores and retrieves all electronic
data including design models, bills of material, spreadsheets, voice, video
and multimedia files regardless of their location on the network.
Additionally, CMS provides the ability to mark up and revise proposed
changes throughout the entire design and production process.
Complete Scalability: CMS is easy to use and can efficiently scale from
small initial installations to worldwide systems. CMS is engineered for
use in a single department with a limited number of users or in a large
multi-site, extended enterprise of thousands of concurrent users. Utilizing
Internet technology, CMS accommodates evolving PDM needs for both small
companies and global enterprises.
Effective Integration: Through its open architecture and API module, CMS
can be integrated with various information systems, tools and industry
products. WTC also provides integrations to industry standard tools such
as Parametric Technology Corporation's ("PTC") Pro/ENGINEER, Mentor
Graphics, Informative Graphics' Myriad and Engineering Animation, Inc.'s
("EAI") PreVIEW.
Rapid and Accurate Information: Leveraging the capabilities of the
Internet and corporate intranets, WTC products rapidly disseminate the most
current product information worldwide throughout extended enterprise
networks and across functional areas.
The CMS product solution is packaged as a suite of modules. When combined,
the modules form an integrated solution, based upon a unified software
architecture foundation that provides a consistent user interface and common
data management structure. CMS modules may be deployed in any combination to
meet the specific needs of a customer. The following modules comprise the CMS
product family:
-2-
<PAGE>
CMS
---
The core of the CMS product family, CMS provides comprehensive document and
release management, including vault management, version control, security,
administration and reporting. CMS manages documents, data and information
such as CAD models, bills of materials, technical specifications and
regulatory documents.
CMS Workflow/TM/
--------------
CMS Workflow is a flexible process management application that allows
companies to model the business process for CMS managed information. Work
requests are routed to the appropriate individuals and groups, together with
the information needed to perform the work. CMS ensures that all assigned
personnel are given the correct task to complete. CMS team members have
access to the status of all active workflows, as well as the statistics for
completed workflows.
CMS Replication Server/TM/
------------------------
When a customer needs to support an enterprise or an extended enterprise
distributed over wide-area networks ("WAN"), the CMS Replication Server
supports distribution to multiple sites worldwide. CMS Replication Server
distributes read-only copies of files to user-defined replication vaults that
can exist anywhere on the WAN. The CMS Replication Server reduces network
traffic and response time for the distributed teams, particularly for those
sharing work on large design projects.
WTC WebLink/TM/
-------------
WTC WebLink is an easy-to-use toolkit for producing customer-specific CMS Web
clients. With WTC WebLink, users can create clients tailored specifically to
the needs of particular users or groups of users. This is an ideal solution
for information consumers who are not familiar with CMS. Simplified clients
can be created which mask the complexity of the underlying data management
system. Because these clients utilize familiar browser interfaces, user
training is minimal and usage is encouraged. WTC WebLink enables
organizations to replace inefficient paper-based systems for distributing
product development information from the engineering department to other
areas of the company where most PDM consumers reside.
CMS Integrator for Pro/ENGINEER/TM/
---------------------------------
CMS Integrator for Pro/ENGINEER is a tight integration with PTC's
Pro/ENGINEER family of mechanical design and analysis tools. This
integration supports the management of all Pro/ENGINEER configurations and
automatically extracts and maintains the relationships and attributes which
define the Pro/ENGINEER design. By leveraging CMS release management, the
Pro/ENGINEER design team is able to easily build and retrieve configurations
throughout the product lifecycle.
CMS Integrator for Mentor Graphics/TM/
------------------------------------
CMS Integrator for Mentor Graphics represents the first fully integrated data
management solution for the Mentor Graphics design environment, giving Mentor
Graphics users the power to build and maintain configurations based on the
Mentor Graphics Design Architect and BoardStation data models. CMS
Integrator for Mentor Graphics shortens cycle time by automatically providing
access to managed design data by all team members at any design milestone.
It maintains secure configuration control over the electronic information
throughout the enterprise allowing for increased reuse of design information
and eliminating non-value added engineering activity.
CMS Integrator for PreVIEW/TM/
----------------------------
CMS Integrator for Myriad/TM/
---------------------------
CMS Integrator for PreVIEW integrates CMS with EAI's PreVIEW and CMS
Integrator for Myriad integrates CMS with Informative Graphics' Myriad. Both
integrations provide wholly electronic management of documents, including a
paperless review process, which allow users view, mark up and
-3-
<PAGE>
print files on-line. Project managers and reviewers can easily suggest
product design changes, confident that those changes will be rapidly and
accurately communicated to people responsible for source documentation. CMS
Integrator for PreVIEW and CMS Integrator for Myriad automatically launch and
support all functions of PreVIEW and Myriad, respectively, including markup
and watermarking.
CMS API/TM/
---------
Through its API module, CMS can be integrated to various information systems
and tools, for example, CAD/CAM, MRP/ERP, document management, workflow and
even other PDM systems. WTC provides integrations to many standard industry
products, such as PTC's Pro/ENGINEER, Mentor Graphics' products, Informative
Graphics' Myriad and EAI's PreVIEW. CMS API is a programmatic interface that
enables the building of applications that perform site-specific operations,
as well as the automation and streamlining of repetitive tasks.
CMS is a three-tier client/server architecture designed to maximize system
and network performance and flexibility. It involves the client services layer,
the application server layer and the data storage layer.
Client Services Layer provides the programmatic interface, client
applications, and third-party application integrations to CMS on the user's
platform of choice. The CMS programmatic interfaces are optimized for high
speed access and provide communication to the CMS application and vault servers.
There are three primary types of access to the CMS application server from the
CMS client: (1) the standard CMS client interface; (2) customer-specific Web
clients created with WTC WebLink; and (3) tool integrations such as Pro/ENGINEER
or Mentor Graphics.
Application Server Layer maintains the business logic and rules which govern
the use of CMS. The application servers process the information request
structured at the CMS client desktop, while coordinating the communication with
the CMS vault servers and metadata servers. Any CMS installation can have
multiple CMS application servers.
Data Storage Layer consists of files and metadata. The files are stored in
controlled vault servers, which can be flexibly located throughout the
enterprise. The metadata information is stored in the Oracle database server
which also keeps track of the vault server locations and status.
WTC SERVICECENTER
WTC ServiceCenter is a complete line of technical support, consulting and
training offerings. These services are an important component of the total
solution the Company seeks to provide to its customers.
System-level training is provided to customers' system administrators and
database administrators to prepare them for successful implementation of CMS.
Implementation services are offered to those customers who request assistance in
installing software, designing databases, organizing data and developing
workflow processes. The Company also provides software maintenance which
includes central call center support, technical updates and maintenance releases
of products.
WTC'S STRATEGY
WTC's goal is to establish itself as a leader in the PDM market and to
establish itself as the leader in a new, but complementary, market segment that
the Company calls Knowledge-based Program Management. The Company intends to
achieve this goal by providing customers with pragmatic solutions that can be
brought into production quickly to meet customer's business needs and are
adaptable to meet the ever-changing business requirements of product development
organizations. To achieve this goal, the Company has established a three-tiered
strategy:
-4-
<PAGE>
Enhance State-of-the-Art PDM Technology Product Offerings. The Company
believes that it has certain core competencies that can be leveraged in the PDM
market. In line with this strategy, the Company has further enhanced the
functionality of its core client/server technology with upgraded product
releases, additional applications and related products developed both internally
and in conjunction with leading technology partners. During fiscal 1998, the
Company released CMS versions 6.4 and 6.5, WTC WebLink and CMS Integrator for
PreVIEW. The Company plans to continue to build upon its technological base by
adding new modules, features, functionality and integrations to its CMS family
of products. During fiscal 1999, the Company plans to introduce a major new
release of the CMS product at which time the name of the product will be changed
to WTC ProductCenter 7.0.
Leverage Core PDM Expertise in a New Industry. Building upon its core
competency in providing PDM solutions, WTC is entering a dynamic new market
which the Company calls Knowledge-based Program Management. The Company believes
that this new market has the potential to grow significantly due to the
competitive pressures companies are faced to reduce time-to-market and improve
product development predictability. Unlike traditional PDM which focuses on the
management of "hard data," such as CAD files or documentation, Knowledge-based
Program Management provides for the management of "soft data," such as complex
project processes, human resources utilization or best practices, which are
increasingly critical to product development success. WTC's Knowledge-based
Program Management solution, WTC OpCenter, is designed to improve time to market
by providing people across geographic locations and functional divisions with
real-time visibility into project status. WTC OpCenter is scheduled for release
in fiscal 1999.
Broaden Distribution Channels and Market Awareness. An important component of
the Company's future success will be the ability to complement its product
development activities with a strong sales and marketing effort. The Company
intends to increase the distribution of its products through the development of
additional strategic relationships with resellers, systems integrators and
consulting firms and through the expansion of its direct sales force. The
Company also plans to continue to build market awareness of its products through
increased marketing and public relations activities.
CUSTOMERS
WTC solutions are used by thousands of individuals at more than 500 customers
worldwide and have been implemented across a range of industries including
telecommunications, medical products, aerospace and defense. WTC customers
include leading corporations such as 3Com Corporation; ADC Telecommunications,
Inc.; AlliedSignal; DSC Communications; Eaton Corporation; Fujitsu Network
Communications; General Electric Company; Moen Incorporated; Siemens Energy &
Automation, Inc.; Tektronix; United States Surgical Corporation and Whirlpool
Corporation.
SALES AND MARKETING
The Company has implemented a multi-channel sales strategy including direct
sales, Value-Added Resellers ("VARs") and OEM partners to efficiently address
the global market for its products.
The Company has established a direct sales organization in the United States
to sell to new customers as well as to expand installations within its existing
customer base. The Company provides installation and post-sale consulting
services to facilitate customer implementations and to build long-term customer
relationships. As of March 31, 1998, the Company's sales and marketing
organization consisted of 26 people located in the Company's headquarters in
Lexington, Massachusetts and in locations throughout the United States and
Europe. The Company does not believe that its revenue is materially impacted by
seasonality.
-5-
<PAGE>
The Company utilizes VARs in North America and Europe to complement its
direct sales force. These VARs have vertical market expertise and focus their
efforts on selling CMS within those markets to new customers as well as to their
own installed base. To avoid channel conflict, generally, direct sales personnel
are compensated both on their performance and that of the VARs in their
territory. As of March 31, 1998, the Company had eight VARs located throughout
North America and Europe.
The Company utilizes OEM relationships to complement its direct sales and VAR
channels. The Company has an OEM partnership with Mentor Graphics Corporation.
In addition, the Company has two OEM partners in the Far East, Zuken, Inc. and
Hitachi, Ltd. Zuken is one of Japan's largest independent software suppliers,
focused on the ECAD marketplace. OEM partners provide vertical market expertise
and sell to customers generally not targeted by or geographically accessible to
the Company's direct sales force.
The Company's VARs and OEM partners license the Company's products at a
discount for sublicensing and may provide training, support and consulting
services to their customers. The Company receives fees for support and
maintenance provided to these channel partners. The Company and its VARs and OEM
partners generally market CMS and related services through sales teams
consisting of a sales representative and an applications engineer. To support
the sales process, the Company conducts comprehensive marketing programs that
include public relations, seminars, trade shows, direct mail, telemarketing and
customer communications programs. The Company sponsors user groups, focus groups
and a customer advisory board as a source of feedback about its customers'
requirements.
CUSTOMER SUPPORT AND CONSULTING
The Company's customers utilize CMS in mission-critical applications on which
the success of the organization may depend. Therefore, a high level of customer
service, training and technical support is critical. The Company's customer
support organization provides support through telephone, electronic mail and fax
communications. As of March 31, 1998, the Company's customer support and
consulting organization consisted of 25 people. OEMs and some of the Company's
VARs offer first-level customer support to their end-user customers and rely on
the Company for any additional required support. Additionally, the Company
provides consulting services to those customers seeking assistance in the
implementation, use and expansion of the Company's products.
PRODUCT DEVELOPMENT
Since its inception, the Company has made substantial investments in research
and development. The Company believes its future success depends in part upon
its ability to enhance its existing products and to develop and introduce
products that address technological developments in the marketplace and the
increasingly sophisticated needs of its customers.
While the Company expects that certain of its new products will be developed
internally, the Company may, based upon timing and cost considerations, acquire
technology and/or products from third parties. Additionally, the Company's
Workgroup Partners Program provides the Company's customers with various third
party developed applications that are complementary to the Company's products.
As of March 31, 1998, the Company's product development staff consisted of 45
employees. The Company's total expense for research and development in fiscal
1996, 1997 and 1998 was $3.0 million, $4.6 million and $5.7 million,
respectively.
COMPETITION
The PDM market is intensely competitive and is subject to rapid change. The
Company's competitors offer a variety of products and services to address this
market. No company is currently the dominant leader
-6-
<PAGE>
in the PDM market. However, the Company currently encounters direct competition
for its CMS family of products from a number of public and privately-held
companies. In addition, the possible entrance of new competitors may intensify
competition in the PDM market. Vendors of Relational Database Management Systems
and enterprise MRP systems, among others, may compete with the Company in the
future. Many of the Company's current and possible future competitors have
significantly greater financial, technical, marketing and other resources than
the Company, and many have well established relationships with current and
potential customers of the Company. It is also possible that alliances among
competitors may emerge and rapidly acquire significant market share. The Company
also expects that competition will increase as a result of software industry
consolidations. Increased competition may result in price reductions, reduced
gross margins and loss of market share, any of which would materially adversely
affect the Company's business, operating results and financial condition.
The Company believes that the principal competitive factors affecting
its market include product features and functionality, such as flexibility,
scalability, ease of integration, ease of implementation, ease of use, quality,
and performance; price and total cost of ownership; customer service and
support; company reputation and financial viability; and effectiveness of sales
and marketing efforts. There can be no assurance that the Company will be able
to maintain a competitive position against current and potential competitors.
The Company will be entering a new market with it's WTC OpCenter
product, which is expected to be released in fiscal 1999. Although the Company
expects this new market to grow significantly, there can be no assurance that
the market will grow or that WTC OpCenter will be broadly accepted in this
market. Also there can be no assurance that the Company will be able to compete
effectively against other potential competitors in this market.
PROPRIETARY RIGHTS
The Company primarily relies upon a combination of copyright, trademark
and trade secret laws, nondisclosure agreements and license agreements to
establish and protect proprietary rights in its products. The Company does not
currently hold any patents. The source code for the Company's products is
protected both as a trade secret and as an unpublished copyrighted work. Despite
these precautions, it may be possible for a third party to copy or otherwise
obtain and use the Company's products or technology without authorization or to
develop similar technology independently. In addition, effective copyright and
trade secret protection may be unavailable or limited in certain foreign
countries. The software development industry is characterized by rapid
technological change. Therefore, 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. The Company is
not aware that any of its products infringes the proprietary rights of third
parties. There can be no assurance, however, that third parties will not claim
such infringement by the Company or its licensers with respect to current or
future products. The Company expects that software product developers will
increasingly be subject to such claims as the number of products and competitors
in the Company's market segment grows and the functionality of products in
different market segments overlaps. Any such claims, with or without merit,
could be time-consuming, result in costly litigation, cause product shipment
delays or might 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.
Workgroup Technology Corporation, Workgroup, WTC, the Company's logo,
CMS, CMS Workflow, CMS Replication Server, CMS Integrator for Pro/ENGINEER, CMS
Integrator for Mentor Graphics, CMS Integrator for PreVIEW, CMS API, WTC
WebLink, WTC SolutionCenter, WTC ServiceCenter and WTC OpCenter are trademarks
of the Company. All other trademarks and trade names referred to in this report
are the property of their respective owners.
-7-
<PAGE>
EMPLOYEES
As of March 31, 1998, the Company employed 113 persons, including 45
product development personnel, 26 sales personnel, 25 customer support, training
and consulting personnel, 11 finance and administration personnel and 6
marketing personnel. None of the Company's employees is represented by a
collective bargaining arrangement, and the Company has experienced no work
stoppages. The Company considers its relations with its employees to be good.
The Company's future success depends in large part on the ability to
continue to motivate and retain highly qualified employees, including management
personnel, and to attract and retain a significant number of additional
qualified personnel, including sales, product development and operations staff.
Competition for qualified personnel in the Company's industry is intense, and
many of the companies with which the Company competes for qualified personnel
have substantially greater financial and other resources than the Company.
Furthermore, competition for qualified personnel can be expected to become more
intense as competition in the Company's industry increases. There can be no
assurance that the Company will be able to recruit, retain and motivate a
sufficient number of qualified personnel to compete successfully. The loss of
any of the Company's senior management personnel or any material failure to
recruit, retain and motivate a sufficient number of qualified personnel could
have a material adverse effect on the Company.
ITEM 2. PROPERTIES
The Company's headquarters are located in approximately 29,000 square
feet of office space in Lexington, Massachusetts. This facility accommodates
research, marketing, sales, customer support and corporate administration. The
lease on this facility expires in September 2001. The Company also leases office
space for regional offices in Chicago, Illinois and San Mateo, California to
support its field sales and support operations. The Company believes that its
existing facilities are adequate for its current needs and that, if necessary,
additional facilities are available for lease to meet future needs.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any litigation that it believes would
have a material impact on its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the year ended March 31, 1998, no matters
were submitted to a vote of security holders of the Company through the
solicitation of proxies or otherwise.
-8-
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER
MATTERS
The Company's Common Stock trades on the Nasdaq National Market under the
symbol "WKGP". On June 15, 1998, the closing price of the Company's Common Stock
was $3.50 per share. As of June 15, 1998, there were approximately 115 holders
of record of the Company's Common Stock and at least 1,500 beneficial holders,
based on information obtained from the Company's transfer agent.
The following table sets forth quarterly high and low prices of the Common
Stock for the indicated fiscal periods:
<TABLE>
<CAPTION>
1998 1997
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter $5.25 $3.75 $30.75 $21.50
Second Quarter 4.81 3.69 25.00 5.13
Third Quarter 4.75 3.13 7.13 5.00
Fourth Quarter 4.38 3.63 7.25 3.94
</TABLE>
The Company has never paid cash dividends on its Common Stock. The Company
currently intends to retain earnings, if any, for use in its business and does
not anticipate paying any cash dividend in the foreseeable future. Any future
declaration and payment of dividends will be subject to the discretion of the
Company's Board of Directors, will be subject to applicable law and will depend
upon the Company's results of operations, earnings, financial condition,
contractual limitations, cash requirements, future prospects and other factors
deemed relevant by the Company's Board of Directors.
-9-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below are derived from the financial
statements of the Company, and should be read in connection with those
statements, which are included herein.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
1998 1997 1996 1995 1994
------------ ------------ -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue $ 7,638 $10,439 $10,477 $ 4,616 $ 2,531
Gross profit 4,465 7,969 8,794 3,404 1,836
Operating expenses 14,248 12,255 7,405 4,692 3,599
Income (loss) from operations (9,783) (4,286) 1,389 (1,289) (1,763)
Net income (loss) (8,075) (2,407) 1,448 (1,437) (1,781)
Basic net income (loss) per common share $(0.98) $(0.30) $0.80 $(0.84) $(1.07)
Basic shares outstanding 8,226 7,994 1,808 1,714 1,667
Diluted net income (loss) per common share $(0.98) $(0.30) $0.29 $(0.84) $(1.07)
Diluted shares outstanding 8,226 7,994 5,036 1,714 1,667
<CAPTION>
March 31,
1998 1997 1996 1995 1994
------------ ------------ -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital (deficit) $28,442 $36,555 $39,426 $(1,161) $ (336)
Total assets 35,075 41,796 44,073 4,588 1,735
Convertible preferred stock - - - 4,290 3,700
Total stockholders' equity (deficit) 30,039 37,927 40,114 (5,113) (3,678)
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and results
of operations of the Company should be read in conjunction with the financial
statements and related notes thereto.
Results of Operations
The following table sets forth for the periods indicated, certain
consolidated financial data as a percentage of revenue:
-10-
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUE
-----------------------------------------------
FISCAL YEAR ENDED MARCH 31,
-----------------------------------------------
1998 1997 1996
------------ ---------- ----------
<S> <C> <C> <C>
Revenue:
Software licenses 42.9% 62.8% 73.1%
Maintenance and services 57.1 37.2 26.9
------------ ---------- ----------
Total revenue 100.0 100.0 100.0
Gross profit 58.5 76.3 83.9
Operating expenses:
Selling and marketing 80.9 57.5 34.5
Research and development 75.2 44.4 28.8
General and administrative 30.4 15.5 7.3
------------ ---------- ----------
Total operating expenses 186.5 117.4 70.6
Income (loss) from operations (128.0)% (41.1)% 13.3%
</TABLE>
FISCAL 1998 COMPARED TO FISCAL 1997
Revenue. The Company's revenue consists of license fees for its CMS family
of product data management software products and fees for professional services
and software maintenance. The Company had total revenue of $7,638,000 in
fiscal 1998 as compared to total revenue of $10,439,000 in fiscal 1997, a
decrease of $2,801,000 or 26.8%.
Software license revenue decreased 50.0% in fiscal 1998 to $3,277,000 from
$6,553,000 in fiscal 1997. The revenue decrease resulted primarily from lower
demand for the CMS 6 Series product as well as a delay in the release of an
enhanced version of the product with additional functionality and integrations.
The Company initiated a strategy of releasing the components of the additional
features of the enhanced product in stages which began in the second half of
fiscal 1998 with the release of the Company's Web interface and customization
toolkit, WTC WebLink, and a redline markup product, CMS Integrator for PreVIEW.
The completed enhanced version of the CMS product is expected to be released in
fiscal 1999.
Maintenance and services revenue increased 12.2% to $4,361,000 from
$3,886,000 for fiscal 1997. This increase resulted primarily from higher
maintenance revenue as a result of an increase in the customer maintenance base.
Cost of Revenue and Gross Profit. The Company's cost of software license
revenue consists primarily of royalties payable to third parties upon the
license of products as well as costs associated with media, packaging,
documentation and delivery of the Company's product. Gross profit associated
with software license revenue for fiscal 1998 was $3,000,000 or 91.5% of
software license revenue versus $6,213,000 or 94.8% of software license revenue
in fiscal 1997. The decrease in gross margin of $3,213,000 resulted primarily
from lower software revenue in fiscal 1998.
Cost of maintenance and services revenue consists primarily of personnel and
related costs for the Company's customer support and professional services
organizations. The Company's gross profit on maintenance and services revenue
decreased to $1,465,000 in fiscal 1998 from $1,756,000 in fiscal 1997. As a
percentage of maintenance and services revenue, the gross margin decreased to
33.6% in fiscal year 1998 from 45.2% in fiscal 1997. This decrease in gross
profit is due to incremental costs associated with the
-11-
<PAGE>
hiring and training of additional staff in the customer support and professional
services organizations as well as a greater utilization of outside contractors
versus employees in the professional services organization which are more costly
to the Company.
Selling and Marketing. The Company's products are distributed worldwide
through its direct sales organization as well as its network of resellers and
OEM partners. Selling and marketing expenses increased 3.0% in fiscal 1998 to
$6,178,000 from $5,999,000 in fiscal 1997. This increase is primarily
attributable to the costs associated with additional marketing programs.
Selling and marketing expenses as a percentage of revenue increased to 80.9% in
fiscal 1998 from 57.5% in fiscal 1997. This increase as a percentage of revenue
resulted primarily from lower revenue in fiscal 1998.
Research and Development. Research and development expenses increased 24.0%
in fiscal 1998 to $5,747,000 from $4,635,000 in fiscal 1997. The increase in
fiscal 1998 resulted primarily from the employment of additional staff and the
use of external contractors to develop and enhance the Company's products. As a
result of this expense increase and the lower revenue level of the Company,
research and development expenses as a percentage of revenue increased to 75.2%
in fiscal 1998 from 44.4% in fiscal 1997.
General and Administrative. In fiscal 1998, general and administrative
expenses increased 43.3% to $2,323,000 from $1,621,000 in fiscal 1997. As a
percentage of revenue, general and administrative expenses increased to 30.4% in
fiscal 1998 from 15.5% in fiscal 1997. General and administrative expenses
increased primarily as a result of an increase in personnel costs and expenses
associated with the termination and recruitment of several management positions
in fiscal 1998.
Interest Income. Interest income consists primarily of interest earned on
cash and cash equivalents during the year. As a result of a lower average cash
balance during fiscal 1998, interest income decreased 9.0% to $1,780,000 in
fiscal 1998 from $1,957,000 in fiscal 1997.
Provision for Income Taxes. For fiscal 1998, the provision for income taxes
increased to $70,000 from $55,000 for fiscal 1997. The provision for taxes
resulted primarily from taxable income in the Company's foreign subsidiaries as
well as certain state taxes.
FISCAL 1997 COMPARED TO FISCAL 1996
Revenue. The Company's revenue consists of license fees for its CMS family
of product data management software products and fees for professional services
and software maintenance. The Company had total revenue of $10,439,000 in
fiscal 1997 as compared to total revenue of $10,477,000 in fiscal 1996, a
decrease of less than 1%.
International revenue decreased 59.5% to $1,088,000 in fiscal 1997 from
$2,686,000 in fiscal 1996. This decrease was primarily due to non-recurring
license fees received from Hitachi, Ltd. in connection with a source code
license and maintenance that amounted to $1,800,000 in fiscal 1996.
International revenue accounted for 10.4% and 25.6% of total revenue in fiscal
1997 and fiscal 1996, respectively.
Software license revenue decreased 14.5% in fiscal 1997 to $6,553,000 from
$7,661,000 in fiscal 1996. The revenue decline resulted from a delay in
shipment of a server product for the Windows NT operating system, lower than
expected revenue in the European market and lower revenue from prospective and
existing customers as customers delayed orders in anticipation of the release of
the Company's new CMS 7 Series of products.
-12-
<PAGE>
Maintenance and services revenue increased 38.0% to $3,886,000 from
$2,816,000 for fiscal 1996. This increase resulted primarily from an increase
in the number of customers with maintenance agreements as well as an increase in
usage of the Company's professional services.
Cost of Revenue and Gross Profit. Gross profit associated with software
license revenue for fiscal 1997 was $6,213,000 or 94.8% of software license
revenue versus $7,211,000 or 94.1% of software license revenue in fiscal 1996.
The decrease in gross margin of $998,000 resulted primarily from lower software
revenue in fiscal 1997.
The Company's gross profit on maintenance and services revenue increased to
$1,756,000 in fiscal 1997 from $1,583,000 in fiscal 1996. As a percentage of
maintenance and services revenue, the gross margin decreased to 45.2% in fiscal
1997 from 56.2% in fiscal 1996. This decrease was due to a greater utilization
of the professional services organization on support, training and other
projects in fiscal 1997 as well as costs associated with hiring and training
additional staff for the Company's customer support organization.
Selling and Marketing. Selling and marketing expenses increased 65.9% in
fiscal year 1997 to $5,999,000 from $3,617,000 in fiscal 1996. Selling and
marketing expenses as a percentage of revenue increased to 57.5% in fiscal 1997
from 34.5% in fiscal 1996. These increases resulted primarily from costs
incurred as a result of an increase in sales and marketing personnel and
programs as well as an increase in international selling expenses due to the
costs associated with the Company's subsidiaries in Europe.
Research and Development. Research and development expenses increased 53.5%
in fiscal 1997 to $4,635,000 from $3,020,000 in fiscal 1996. Research and
development expenses as a percentage of revenue increased to 44.4% in fiscal
1997 from 28.8% in fiscal 1996. These increases in fiscal 1997 resulted
primarily from employment of additional staff and the use of independent
contractors to develop and enhance the Company's products, expand the
integration of its products with other applications and provide quality
assurance.
General and Administrative. In fiscal 1997, general and administrative
expenses increased 111.1% to $1,621,000 from $768,000 in fiscal 1996. As a
percentage of revenue, general and administrative expenses increased to 15.5% in
fiscal 1997 from 7.3% in fiscal 1996. General and administrative expenses
increased primarily as a result of severance related and other personnel
expenses as well as additional administrative expenses attributable to the
Company's status as a public company.
Interest Income, (Net). Interest income, (net) consists of interest earned
on cash and cash equivalents, offset by interest expense associated with
equipment financing. Interest income for fiscal 1997 increased to $1,827,000
from $94,000 in fiscal 1996 due to higher cash and cash equivalent balances
during fiscal 1997 as a result of the Company's initial public offering.
Provision for Income Taxes. For fiscal 1997, the provision for income taxes
increased to $55,000 from $35,000 for fiscal 1996. The provision for taxes
resulted primarily from taxable income in the Company's foreign subsidiaries as
well as certain state taxes.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at March 31, 1998 decreased $6,172,000 to
$31,779,000 from $37,951,000 at March 31, 1997. This decrease results primarily
from cash used for operating activities of $5,246,000 as well as capital
expenditures of $1,099,000 in fiscal 1998.
The Company believes its existing cash and cash equivalent balances will be
sufficient to meet its cash requirements for at least the next fiscal year.
-13-
<PAGE>
To date, neither foreign currency exposure nor inflation has had a material
impact on the Company's financial results.
YEAR 2000
The Company is in the process of replacing certain systems and evaluating and
upgrading other computer applications to ensure their functionality with respect
to the Year 2000 millennium change. Presently the Company does not anticipate
that material incremental costs will be incurred in any future year as a result
of the Year 2000 millennium change.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company does not provide forecasts of its future financial performance.
However, from time to time information provided by the Company or statements
made by its employees may contain "forward looking" information that involves
risks and uncertainties. In particular, statements contained in filings with
the Securities and Exchange Commission, press releases and oral statements which
are not historical facts constitute forward looking statements and are made
under the safe harbor provisions of the Private Securities Litigation Reform Act
of 1995. The Company's actual results of operations and financial condition
have varied and may in the future vary significantly from those stated in any
forward looking statements and there can be no assurance that the results set
forth in those statements will be achieved.
The Company's future results may be subject to substantial risks and
uncertainties. Because the Company derives the majority of its revenue from
software license fees, the Company's quarterly and annual operating results are
sensitive to the size, timing and shipment of individual orders, customer order
deferrals in anticipation of new products or the lengthening of the sales cycle
either generally or with respect to individual customers. In addition, the
Company's growth is dependent on achieving broader market acceptance of its
products and the ability of the Company to introduce new and enhanced versions
of its products in a timely manner to meet the evolving needs of its customers.
In addition, the Company relies on certain intellectual property protection to
preserve its intellectual property rights. Any invalidation of the Company's
intellectual property rights or lengthy and expensive defense of those rights
could have a material adverse effect on the Company. The segment of the
software industry in which the Company is engaged is extremely competitive.
Certain current and potential competitors of the Company are more established
and benefit from greater market recognition and substantially greater financial,
development and marketing resources than the Company.
The Company's quarterly and annual operating results are impacted by a
variety of factors that could materially adversely affect revenues and
profitability, including the timing and shipment of enhancements to the
Company's products and changes or anticipated changes in economic conditions.
Because the Company's operating expenses are relatively fixed, an unanticipated
shortfall in revenue in a quarter may have an adverse impact on the Company's
results of operations for that quarter. As a result of the foregoing and other
factors, the Company may experience material fluctuations in future operating
results on a quarterly or annual basis which could materially and adversely
affect its business, financial condition, operating results and stock price.
-14-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements and supplementary data are included herein and are
indexed under Item 14 (a) (1) - (2).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with accountants on
accounting or financial disclosure matters in the last two years.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item may be found under the sections
captioned "Election of Directors," "Occupations of Directors and Executive
Officers" and "Section 16 Reporting" in the Company's Proxy Statement (the "1998
Proxy Statement") for the Company's Annual Meeting of Stockholders to be held on
July 31, 1998, and is incorporated herein by reference. The 1998 Proxy
Statement will be filed with the Securities and Exchange Commission not later
than 120 days after the close of the Company's year ended March 31, 1998.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item may be found under the section
captioned "Compensation and Other Information Concerning Directors and Officers"
in the 1998 Proxy Statement, and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item may be found under the section
captioned "Management and Principal Holders of Voting Securities" in the 1998
Proxy Statement, and is incorporated herein by reference.
-15-
<PAGE>
PART IV
<TABLE>
<CAPTION>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a)(1) Financial Statements.
The following financial statements are filed as part of this report:
Page
----
<S> <C>
Report of Independent Accountants......................................................... F-1
Consolidated Balance Sheets at March 31, 1998 and 1997.................................... F-2
Consolidated Statements of Operations for the years ended March 31, 1998, 1997 and 1996... F-3
Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the years ended
March 31, 1998, 1997 and 1996......................................................... F-4
Consolidated Statements of Cash Flows for the years ended March 31, 1998, 1997 and 1996... F-5
Notes to Consolidated Financial Statements................................................ F-6
</TABLE>
(a)(2) Financial Statement Schedules:
All schedules for which provisions made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
-16-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Workgroup Technology Corporation:
We have audited the accompanying consolidated balance sheets of Workgroup
Technology Corporation as of March 31, 1998 and 1997 and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for each of the three years in the period ended March 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Workgroup
Technology Corporation as of March 31, 1998 and 1997 and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended March 31, 1998, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
April 29, 1998
F-1
<PAGE>
WORKGROUP TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31, 1998 and 1997
(dollars in thousands)
<TABLE>
<CAPTION>
ASSETS 1998 1997
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents $31,779 $37,951
Accounts receivable (net of allowance of
$200 and $50 in 1998 and 1997, respectively) 1,497 2,179
Prepaid expenses and other current assets 202 294
------- -------
Total current assets 33,478 40,424
Property and equipment, net 1,574 1,339
Other assets 23 33
------- -------
Total assets $35,075 $41,796
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,031 $ 660
Accrued expenses 1,753 963
Accrued vacation 229 271
Accrued royalties 139 181
Deferred revenue 1,884 1,794
-------- -------
Total current liabilities 5,036 3,869
Commitments (Note G)
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares authorized,
no shares issued or outstanding at March 31, 1998 and 1997 - -
Common stock, $.01 par value; 30,000,000 shares
authorized, 8,367,671 and 8,114,084 shares issued and
outstanding at March 31, 1998 and 1997, respectively 84 81
Additional paid-in capital 44,142 43,955
Cumulative translation adjustment (13) (10)
Accumulated deficit (14,174) (6,099)
-------- -------
Total stockholders' equity 30,039 37,927
-------- -------
Total liabilities and stockholders' equity $ 35,075 $41,796
======== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
WORKGROUP TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended March 31, 1998, 1997 and 1996
(in thousands, except per share data)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Revenue:
Software licenses $ 3,277 $ 6,553 $ 7,661
Maintenance and services 4,361 3,886 2,816
------- ------- -------
Total revenue 7,638 10,439 10,477
Cost of revenue:
Cost of software licenses 277 340 450
Cost of maintenance and services 2,896 2,130 1,233
------- ------- -------
Total cost of revenue 3,173 2,470 1,683
Gross profit 4,465 7,969 8,794
Operating expenses:
Selling and marketing 6,178 5,999 3,617
Research and development 5,747 4,635 3,020
General and administrative 2,323 1,621 768
------- ------- -------
Total operating expenses 14,248 12,255 7,405
------- ------- -------
Income (loss) from operations (9,783) (4,286) 1,389
Interest income 1,780 1,957 130
Interest expense (2) (23) (36)
------- ------- -------
Income (loss) before income taxes (8,005) (2,352) 1,483
Provision for income taxes 70 55 35
------- ------- -------
Net income (loss) $(8,075) $(2,407) $ 1,448
======= ======= =======
Basic net income (loss) per common share $(0.98) $(0.30) $0.80
Basic shares outstanding 8,226 7,994 1,808
Diluted net income (loss) per common share $(0.98) $(0.30) $0.29
Diluted shares outstanding 8,226 7,994 5,036
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
WORKGROUP TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
for the years ended March 31, 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
Common Stock Additional Officers' Cumulative Total
-------------- Paid-In Notes Translation Accumulated Stockholders'
Shares Amount Capital Receivable Adjustment Deficit Equity (Deficit)
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1995 1,722 $17 $ 17 $(7) $(5,140) $(5,113)
Issuance of common stock 2,664 27 36,429 36,456
Conversion of preferred stock
(Note D) 3,298 33 6,857 6,890
Exercise of warrants 133 1 399 400
Sale of stock under stock plans 110 1 25 26
Foreign currency translation
adjustment $ 7 7
Net income 1,448 1,448
----------------------------------------------------------------------------------------------------
Balance at March 31, 1996 7,927 79 43,727 (7) 7 (3,692) 40,114
Sale of stock under stock plans 188 2 72 74
Stock option compensation 156 156
Collection of officers' notes $ 7 7
Foreign currency translation
adjustment (17) (17)
Net loss (2,407) (2,407)
----------------------------------------------------------------------------------------------------
Balance at March 31, 1997 8,115 81 43,955 - (10) (6,099) 37,927
Sale of stock under stock plans 253 3 187 190
Foreign currency translation
adjustment (3) (3)
Net loss (8,075) (8,075)
----------------------------------------------------------------------------------------------------
Balance at March 31, 1998 8,368 $ 84 $ 44,142 - $ (13) $(14,174) $ 30,039
====================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
WORKGROUP TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended March 31, 1998, 1997 and 1996
(dollars in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income $(8,075) $(2,407) $ 1,448
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 776 582 399
Equity-based compensation 73 156 -
Provision for doubtful accounts 150 50 -
Loss on disposal of assets 88 - -
Changes in operating assets and liabilities:
Accounts receivable 532 (154) 437
Prepaid expenses and other current assets 92 (60) (190)
Other assets 10 11 (13)
Accounts payable 371 (230) 468
Accrued expenses 731 195 381
Accrued vacation (42) 68 95
Accrued royalties (42) 40 40
Customer deposits - - (100)
Deferred revenue 90 153 (2,349)
------- ------- -------
Net cash provided by (used in) operating activities (5,246) (1,596) 616
Cash flows from investing activities:
Purchases of property and equipment (1,099) (1,160) (442)
Cash flows from financing activities:
Proceeds from issuance of preferred stock - - 2,600
Proceeds from issuance of common stock 190 74 36,882
Proceeds from the collection of officers' notes - 7 -
Payments of capital lease obligations (14) (316) (251)
------- ------- -------
Net cash provided by (used in) financing activities 176 (235) 39,231
Effect of exchange rate changes on cash (3) (17) 7
------- ------- -------
Net increase (decrease) in cash and cash equivalents (6,172) (3,008) 39,412
Cash and cash equivalents, beginning of year 37,951 40,959 1,547
------- ------- -------
Cash and cash equivalents, end of year $31,779 $37,951 $40,959
======= ======= =======
Supplemental cash flow information:
Interest paid $ 2 $ 23 $ 36
Income taxes paid $ 22 $ 55 $ 35
Supplemental disclosure for non-cash transactions:
Acquisition of property and equipment
under capital lease obligations - - $ 264
Conversion of preferred stock - - $ 6,890
</TABLE>
The accompanying notes are an integral part of the financial statements
F-5
<PAGE>
WORKGROUP TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Nature of the Business
----------------------
Workgroup Technology Corporation (the "Company"), incorporated on May 11,
1992, provides both production-proven, enterprise Product Data Management
(through the CMS product) and real-time Knowledge-based Program Management
solutions for product development. WTC SolutionCenter/TM/ is a line of
productivity enhancing products and services that are pragmatic and results-
driven, offering even complex enterprises a quick return on investment.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany transactions
and balances have been eliminated.
Certain amounts from prior years have been reclassified to conform to the
current year's presentation.
REVENUE RECOGNITION
Revenue is recognized from the license of software upon shipment provided
that no significant vendor or postcontract support obligations remain
outstanding and collection of the resulting receivable is deemed probable.
Payments received in advance for services, development or product are
initially recorded as deferred revenue. Revenue from training and consulting
is recognized as the services are performed. Maintenance and support revenue
is recognized ratably over the contract term, typically one year.
FOREIGN CURRENCY TRANSLATION
The functional currency of the Company's foreign subsidiaries is the local
currency. Assets and liabilities are translated into U.S. dollars at the
exchange rates in effect at the balance sheet date and income and expense
items are translated at the average rates for the period. The effect of such
translations are excluded from net earnings and accumulated as a separate
component of stockholders' equity. Transaction gains and losses from foreign
currency transactions have not been material to date.
CASH EQUIVALENTS
Cash equivalents consist of commercial paper and money market mutual funds
with remaining maturities at acquisition of three months or less and are
carried at cost plus accrued interest which approximates market value.
The Company has approximately $155,000 of restricted cash included in the
March 31, 1998 and March 31, 1997 cash balances. This restricted cash serves
as collateral for a letter of credit obtained in fiscal year 1997 related to
the Company's property lease.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided under
the straight-line method based upon the following estimated useful lives:
Computer software 3 years
Furniture and fixtures 3 years
Equipment 3 years
Leasehold improvements Estimated useful life of
and equipment under the asset or term of the
capital leases lease whichever is shorter
Major replacements of, or improvements to, property and equipment are
capitalized. Minor replacements, repairs and maintenance are charged to
expense as incurred. Upon retirement or sale, the cost of the assets
disposed and the related accumulated depreciation are removed from the
accounts and any resulting gain or loss is recorded in operations.
RESEARCH AND DEVELOPMENT COSTS
Research and development expenditures are charged to operations as incurred.
The Company capitalizes eligible software costs incurred after technological
feasibility of the product has been established. The Company believes it has
achieved technological feasibility when the working model has been
established, which is typically demonstrated by beta shipment. Qualifying
capitalized costs for the years ended March 31, 1998, 1997 and 1996 have
been immaterial and, therefore, the Company has not capitalized such costs.
ROYALTY EXPENSE
Royalty expense with respect to sales of product under royalty agreements is
recorded when the revenue is recognized.
WARRANTY COSTS
The Company provides for warranty expenses, based on past experience, on an
accrual basis.
INCOME TAXES
The Company uses the asset and liability approach in its method of
accounting for income taxes which requires the recognition of deferred tax
liabilities and assets for expected future tax consequences of temporary
differences between the carrying amounts and the tax basis of assets and
liabilities. A valuation allowance against deferred tax assets is recorded
if, based upon weighted available evidence, it is more likely than not that
some or all of the deferred tax assets will not be realized.
BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE
The Company has adopted Statement of Financial Accounting Standards ("SFAS")
No. 128, "Earnings per Share" in fiscal year 1998 and all historical net
income (loss)
F-6
<PAGE>
WORKGROUP TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
per share data presented has been restated to conform to the provisions of
this statement. SFAS No. 128 requires the disclosure of basic and diluted
earnings per share.
The Company's basic net income (loss) per share is computed by dividing net
income (loss) by the weighted average number of shares of common stock and
diluted net income (loss) per share is based on the same computation and
includes dilutive potential common shares. Potential common shares include
shares issuable upon the exercise of stock options or warrants, net of
shares assumed to have been purchased with the proceeds. Potential common
shares, which consisted only of stock options, were antidilutive for fiscal
years 1998 and 1997 and therefore the basic and diluted net loss per share
were the same for those periods. For fiscal year 1996, the diluted net
income per share computation included approximately 2,863,000 and 362,000
shares of preferred stock and stock options, respectively.
NEW ACCOUNTING STANDARDS
The Company will adopt Statement of Financial Accounting Standard (FAS) No.
130 "Reporting Comprehensive Income" in fiscal 1999. This Statement
establishes standards for reporting and displaying comprehensive income and
its components (revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. This Statement requires the
classification of items of comprehensive income by their nature in a
financial statement and the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in capital in
the equity section of the balance sheet. The Company believes that adoption
of this Statement will not have a material effect on its financial
statements.
The Company will also adopt FAS No. 131 "Disclosures About Segments of an
Enterprise and Related Information" in fiscal 1999. This Statement
supercedes FAS No. 14 "Financial Reporting for Segments of a Business
Enterprise," but retains the requirement to report information about major
customers. This Statement establishes standards for reporting information
about operating segments in annual financial statements. Operating segments
are defined as components of an enterprise evaluated regularly by the
Company's senior management in deciding how to allocate resources and in
assessing performance. The Company believes that adoption of this Statement
will not significantly change its segment reporting disclosures.
The Company will adopt Statement of Position 97-2 "Software Revenue
Recognition" in fiscal 1999. This Statement supersedes Statement of Position
91-1 on software revenue recognition. The Company believes that adoption of
this Statement will not have a material effect on its financial statements.
The Company will adopt Statement of Position 98-1 "Internal Use Software" in
fiscal 2000. This Statement provides guidance on the accounting for the
costs of software developed or obtained for internal use. The Company
believes that the adoption of this Statement will not have a material effect
on its financial statements.
RISKS AND UNCERTAINTIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates and would impact future results of operations and cash flows.
The Company invests its cash primarily in commercial paper and money market
mutual funds with a large commercial bank. The Company has not experienced
any losses to date on its invested cash.
The Company sells its product to a wide variety of customers in a variety of
industries. The Company performs ongoing credit evaluations of its customers
but does not require collateral or other security to support customer
receivables. The Company believes any credit losses will not be material.
C. PROPERTY AND EQUIPMENT
----------------------
Property and equipment consisted of the following:
(in thousands)
<TABLE>
<CAPTION>
March 31,
---------
1998 1997
---------- ----------
<S> <C> <C>
Computer software $ 423 $ 477
Furniture and fixtures 110 79
Equipment 2,230 1,732
Leasehold improvements 92 96
------- -------
2,855 2,384
Less accumulated
depreciation and amortization (1,281) (1,045)
------- -------
$ 1,574 $ 1,339
======= =======
</TABLE>
D. STOCKHOLDERS' EQUITY
--------------------
INITIAL PUBLIC OFFERING
On March 21, 1996, the Company completed its initial public offering ("IPO")
and sold an aggregate of 2,663,668 shares of Common Stock at $15.00 per
share, resulting in net proceeds to the Company of approximately
$36,500,000. In addition, upon the closing of the IPO all issued and
outstanding shares of Series A, B, C and D Redeemable Convertible Preferred
Stock were automatically converted into 3,297,566 shares of Common Stock in
accordance with the underlying agreements.
F-7
<PAGE>
WORKGROUP TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PREFERRED STOCK
The Board of Directors was authorized upon the closing of the IPO, subject
to certain limitations prescribed by law, without further stockholder
approval, to issue from time to time up to an aggregate of 1,000,000 shares
of preferred stock in one or more series and to fix or alter the
designations, preferences, rights and any qualifications, limitations or
restrictions of the shares of each such series thereof, including the
dividend rights, dividend rates, conversion rights, voting rights, terms of
redemption (including sinking fund provisions), redemption price or prices,
liquidation preferences and the number of shares constituting any series or
designation of such series.
COMMON STOCK
All share and per share amounts have been restated to reflect a three into
two reverse stock split of its common stock which was approved by the Board
of Directors on January 26, 1996.
STOCK PLANS
At March 31, 1998, the Company has four stock-based compensation plans which
are described below. In October 1995, the Financial Accounting Standards
Board issued SFAS 123, "Accounting for Stock-Based Compensation." SFAS 123
requires that companies either recognize compensation expense for grants of
stock, stock options and other equity instruments based on fair value or
provide a pro forma basis disclosure of net income (loss) and earnings
(loss) per share which reflects such compensation expense in the notes to
the financial statements. The Company adopted the disclosure provisions of
SFAS 123 in fiscal year 1997 and has continued to apply APB Opinion 25 and
related Interpretations in accounting for its plans. The Company recognized
$73,000 and $156,000 of compensation cost for its fixed stock option plans
in fiscal years 1998 and 1997, respectively, and no compensation cost in
fiscal year 1996. Had compensation cost for the Company's four stock-based
compensation plans been determined based on the fair value at the grant
dates for awards under those plans consistent with the method of SFAS 123,
the Company's net income (loss) and earnings (loss) per share would have
been on a pro forma basis:
<TABLE>
<CAPTION>
(in thousands, except per share amounts)
1998 1997 1996
------------- ------------- ------------
<S> <C> <C> <C>
Net income (loss)
As reported $(8,075) $(2,407) $1,448
Pro forma $(9,487) $(3,020) $1,377
Net income (loss) per share
As reported $ (0.98) $ (0.30) $ 0.80
Pro forma $ (1.15) $ (0.38) $ 0.76
</TABLE>
For fiscal years 1998 and 1997, the fair value of each option grant is
estimated on the date of grant using the Black-Scholes option-pricing model
with the following weighted-average assumptions used for grants:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Expected volatility 80.3% 93.5%
Risk-free interest rates 6.0% 6.4%
Dividend rate 0% 0%
Expected life 5 years 5 years
</TABLE>
Because the Company went public on March 21, 1996, the fair value of each
option grant for fiscal year 1996 is estimated on the date of grant using
the minimum value method assuming a risk-free interest rate of 6%, an
expected life of 5 years and no dividend yield or volatility.
The weighted-average fair value of options granted during fiscal year 1998,
1997 and 1996 is estimated as $2.82, $7.21 and $0.78, respectively. The
effects of applying SFAS 123 in this pro forma disclosure are not an
indication of future amounts. SFAS 123 does not apply to awards prior to
1995 and additional awards in future years are anticipated.
Stock Option Plans
The Company has three fixed stock option plans. The 1992 and 1996 Stock
Option Plans provide for the granting of incentive stock options to
employees to purchase common stock at not less than the fair market value
per share of common stock on the date of the grant. The Plans also provide
for the granting of nonqualified stock options, stock awards and purchase
rights to employees, consultants, directors and officers of the Company. The
options generally become exercisable ratably over four or five years from
the date of grant and expire ten years from the date of grant. The maximum
number of shares for which options may be granted under the 1992 Plan is
356,559. In January 1996, the Board of Directors terminated the granting of
options under the 1992 plan. At March 31, 1998, 1,665,190 shares were
available for grant under the 1996 Plan.
The Company's 1996 Non-Employee Director Stock Option Plan (the "Director
Option Plan") provides for the granting of options to purchase a maximum of
100,000 shares of Common Stock of the Company to non-employee directors.
Under the Director Option Plan, each non-employee director shall receive an
option to purchase 15,000 shares of the Company's Common Stock upon the
later of (i) the effective date of an IPO, or (ii) the date on which the
director first is elected to the Board of Directors. Each non-employee
director who is still a member of the Board of Directors upon the full
vesting of this most recently granted option under the Director Option Plan
shall receive additional options to purchase 15,000 shares of Common Stock.
All options granted under the Director Option Plan vest in twelve equal
quarterly installments beginning three months from the date of grant. All
options granted under the Director Option Plan will have an exercise price
equal to the fair market value of the Common Stock on the date of grant. The
term of each option
F-8
<PAGE>
WORKGROUP TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
will be for a period of ten years from the date of grant. At March 31, 1998,
65,000 shares were available for grant under the Director Option Plan.
During fiscal year 1997, the Board of Directors approved the repricing of
certain outstanding stock options previously granted under the 1992 and 1996
Plans. Certain options outstanding at prices ranging from $8.50 to $25.75
were canceled and reissued as new grants on October 18, 1996 to reduce their
exercise price to $6.375, the fair market value of the stock on that date. A
total of 145,833 options were granted under this repricing.
The following is a summary of the Company's stock option plans as of March
31, 1996, 1997 and 1998 and changes during the years ending on those dates:
<TABLE>
<CAPTION>
(in thousands, except per share amounts)
Weighted
Number Average
of Shares Exercise Price
------------------ --------------------
<S> <C> <C>
Options outstanding
at March 31, 1995 616 $ 0.25
Granted 841 2.95
Exercised (110) 0.24
Canceled (38) 0.86
-----
Options outstanding
at March 31, 1996 1,309 1.79
Granted 487 9.62
Exercised (173) 0.25
Canceled (331) 9.09
-----
Options outstanding
at March 31, 1997 1,292 3.08
Granted 1,180 4.13
Exercised (228) 0.43
Canceled (518) 3.74
-----
Options outstanding
at March 31, 1998 1,726 3.95
Price range $0.15 - $1.95
(remaining contractual life of 6.5 years)
Outstanding 331 $ 0.45
Exercisable 176 0.41
Price range $3.81 - $8.50
(remaining contractual life of 8.9 years)
Outstanding 1,363 4.44
Exercisable 89 5.70
Price range $15.00 - $25.75
(remaining contractual life of 6.5 years)
Outstanding 32 19.02
Exercisable 20 17.69
Options exercisable, March 31
1996 156 $ 0.22
1997 332 1.34
1998 285 3.27
</TABLE>
Employee Stock Purchase Plan
The 1996 Employee Stock Purchase Plan provides for the issuance of up to
350,000 shares of Common Stock to eligible employees. The shares are
issuable at the lesser of 85% of the average market price on the first or
last business day of semiannual periods. During fiscal years 1998 and 1997,
25,996 and 14,660 shares, respectively, were issued under this plan. The
weighted average fair value of the purchase rights granted in fiscal years
1998 and 1997 was $1.16 and $1.81, respectively.
E. BENEFIT PLAN
------------
The Company maintains the Workgroup Technology Corporation 401(k) Plan (the
"401(k) Plan") for all eligible employees which provides for matching
employer contributions determined annually by the Board of Directors. There
have been no matching employer contributions made to the 401(k) Plan as of
March 31, 1998.
F. INCOME TAXES
------------
In fiscal years 1998 and 1997, the provision for income taxes reflects
foreign and state income taxes. In fiscal year 1996, the provision for
income taxes reflects foreign taxes on royalties from customers in Japan and
Germany.
Deferred income taxes represent the tax effects of transactions which are
reported in different periods for financial and tax reporting purposes. The
components of deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
(in thousands)
March 31, 1998 1997 1996
- ------------------------------------------------ -------- -------- --------
<S> <C> <C> <C>
Deferred tax assets:
Loss carryforward $ 4,578 $ 1,723 $ 1,306
Research & development
credit carryforwards 1,005 612 521
Depreciation & amortization 135 187 94
Vacation accrual 92 212 73
Rent 48 20 -
------- ------- -------
Gross deferred tax asset 5,858 2,754 1,994
Valuation allowance (5,858) (2,754) (1,994)
------- ------- -------
Net - - -
======= ======= =======
</TABLE>
At March 31, 1998, the Company has available net operating loss
carryforwards of $11,369,000 which it may use to offset future federal
taxable income. The net operating loss carryforwards, if not utilized, will
begin to expire in 2008. The utilization of the net operating loss
carryforwards and credit carryforwards for income tax purposes may be
restricted due to limitations which arise because of a change of ownership.
Additionally, the Company also has available research and development
credits of $649,000 and $539,000 for federal and state purposes,
respectively. The research and
F-9
<PAGE>
development credits, if not utilized, will expire from 2008 through 2012.
Due to the uncertainty of the realization of deferred tax assets, a full
valuation allowance has been recorded.
G. COMMITMENTS
-----------
LEASE COMMITMENTS
The Company leases the facility it occupies under a noncancelable operating
lease agreement which expires September 30, 2001. Total rent expense for the
years ended March 31, 1998, 1997 and 1996 was $682,000, $457,000 and
$135,000, respectively. The future minimum payments under such commitments
as of March 31, 1998 are as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C> <C>
1999 $610
2000 639
2001 668
2002 341
</TABLE>
H. SIGNIFICANT CUSTOMERS
---------------------
During fiscal year 1995, the Company entered into a one-time source code
license agreement with Hitachi, Ltd. Pursuant to this agreement and related
transactions, the Company recognized revenue of $1.8 million, which
represented 17% of the total revenue for the year ended March 31, 1996.
Additionally, a different customer represented 11% of total revenue for the
year ended March 31, 1997.
The Company operates in one industry segment. Export sales for the years
ended March 31, 1998, 1997 and 1996 were approximately $414,000, $1,088,000
and $2,686,000, respectively (including $39,000, $679,000 and $2,024,000 of
sales into Japan, respectively).
F-10
<PAGE>
<TABLE>
<CAPTION>
(a)(3) List of Exhibits.
The following exhibits are filed as part of and incorporated by reference
into, this Annual Report on Form 10-K:
Exhibit
Number Description
------- -----------
<S> <C>
3.1(1) Amended and Restated Certificate of Incorporation of the Company
3.2(1) Amended and Restated By-Laws of the Company
4.1(1) Specimen certificate representing the Common Stock
10.1(1)+ 1996 Stock Plan
10.2(2)+ Form of Incentive Stock Option Agreement under the 1996 Stock Plan
10.3(2)+ Form of Non-Qualified Stock Option Agreement under the 1996 Stock Plan
10.4(1)+ 1996 Employee Stock Purchase Plan
10.5(2)+ 1996 Employee Stock Purchase Plan Enrollment Authorization Form
10.6(1)+ 1996 Non-Employee Director Stock Option Plan
10.7(2)+ Form of Non-Qualified Stock Option Agreement under the 1996 Non-Employee Director Stock
Option Plan of the Registrant
10.8(1) Registration Rights Agreement between the Company and the Preferred Stockholders, James
Carney and James Simmons, as amended as of November 27, 1995
10.9(3) Master Lease Agreement between the Company and Mortimer B. Zuckerman and Edward H.
Linde, Trustees of 91 Hartwell Avenue Trust dated July 30, 1996
10.10(3)+ Employment Agreement between the Company and James Carney
10.11(1)+ Form of Executive Management Incentive Compensation Plan of the Company
10.12(1) Form of Non-Competition Agreement between the Company, its executive officers and
founders
10.13*+ Transition and Severance Agreement between the Company and James Carney dated March 13,
1998
10.14*+ Employment Agreement between the Company and John P. McDonough
10.15*+ Severance Agreement between the Company and Thomas Bilotta
21.1* Subsidiaries of the Company
23.1* Consent of Independent Accountants (Coopers & Lybrand)
24.1* Power of Attorney (see page 18)
- ------------------
(1) Incorporated herein by reference to the exhibits to the Company's
Registration Statement on Form S-1 (File No. 333-00810).
(2) Incorporated herein by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1996.
(3) Incorporated herein by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1997.
* Filed herewith.
+ Indicates a management contract or any compensatory plan, contract or arrangement.
</TABLE>
(b) Reports On Form 8-K
There were no reports on Form 8-K filed by the Company for the quarter
ended March 31, 1998.
(c) Exhibits.
The Company hereby files as part of this Annual Report on Form 10-K the
exhibits listed in Item 14(a)(3) set forth above.
<PAGE>
SIGNATURES
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.
WORKGROUP TECHNOLOGY
CORPORATION.
Date: June 29, 1998 By: /s/ John P. McDonough
---------------------
John P. McDonough
Chief Executive Officer and President
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Workgroup Technology
Corporation, hereby severally constitute and appoint John P. McDonough and Diane
M. Marcou, and each of them singly, our true and lawful attorneys, with the
power to them and each of them singly, to sign for us and in our names in the
capacities indicated below, any amendments to this Report on Form 10-K, and
generally to do all things in our names and on our behalf in such capacities to
enable Workgroup Technology Corporation to comply with the provisions of the
Securities Exchange Act of 1934, as amended, and all the requirements of the
Securities and Exchange Commission.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant, in the capacities indicated, on the 29th day of June, 1998.
<TABLE>
<CAPTION>
SIGNATURE Title(s)
--------- --------
<S> <C>
/s/ John P. McDonough President, Chief Executive Officer, Director and
- ----------------------------- Secretary (Principal Executive Officer)
John P. McDonough
/s/ Diane M. Marcou Vice President- Finance and Administration and Treasurer
- ----------------------------- (Principal Financial and Accounting Officer)
Diane M. Marcou
/s/ James M. Carney Chairman
- -----------------------------
James M. Carney
/s/ Stephen J. Gaal Director
- -----------------------------
Stephen J. Gaal
/s/ Charles E. Moran Director
- -----------------------------
Charles E. Moran
</TABLE>
<PAGE>
WORKGROUP TECHNOLOGY CORPORATION
INDEX TO EXHIBITS FILED WITH FORM 10-K
YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
3.1(1) Amended and Restated Certificate of Incorporation of the Company
3.2(1) Amended and Restated By-Laws of the Company
4.1(1) Specimen certificate representing the Common Stock
10.1(1)+ 1996 Stock Plan
10.2(2)+ Form of Incentive Stock Option Agreement under the 1996 Stock Plan
10.3(2)+ Form of Non-Qualified Stock Option Agreement under the 1996 Stock Plan
10.4(1)+ 1996 Employee Stock Purchase Plan
10.5(2)+ 1996 Employee Stock Purchase Plan Enrollment Authorization Form
10.6(1)+ 1996 Non-Employee Director Stock Option Plan
10.7(2)+ Form of Non-Qualified Stock Option Agreement under the 1996 Non-Employee Director Stock
Option Plan of the Registrant
10.8(1) Registration Rights Agreement between the Company and the Preferred Stockholders, James
Carney and James Simmons, as amended as of November 27, 1995
10.9(3) Master Lease Agreement between the Company and Mortimer B. Zuckerman and Edward H.
Linde, Trustees of 91 Hartwell Avenue Trust dated July 30, 1996
10.10(3)+ Employment Agreement between the Company and James Carney
10.11(1)+ Form of Executive Management Incentive Compensation Plan of the Company
10.12(1) Form of Non-Competition Agreement between the Company, its executive officers and
founders
10.13*+ Transition and Severance Agreement between the Company and James Carney dated March 13,
1998
10.14*+ Employment Agreement between the Company and John P. McDonough
10.15*+ Severance Agreement between the Company and Thomas Bilotta
21.1* Subsidiaries of the Company
23.1* Consent of Independent Accountants (Coopers & Lybrand)
24.1* Power of Attorney (see page 18)
- ------------------
(1) Incorporated herein by reference to the exhibits to the Company's
Registration Statement on Form S-1 (File No. 333-00810).
(4) Incorporated herein by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1996.
(5) Incorporated herein by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1997.
* Filed herewith.
+ Indicates a management contract or any compensatory plan, contract or arrangement.
</TABLE>
<PAGE>
Exhibit 10.13
TRANSITION AND SEVERANCE AGREEMENT
----------------------------------
This Transition and Severance Agreement (hereinafter the "Agreement") made
as of this 13th day of March, 1998 is by and between Workgroup Technology
Corporation (the "Company") and James Carney ("Mr. Carney").
WHEREAS, Mr. Carney is currently an employee of the Company in the position
of Chief Executive Officer;
WHEREAS, Mr. Carney is resigning from the position of Chief Executive
Officer and the Company desires to retain the services of Mr. Carney through a
Transition Period (as defined below);
WHEREAS, Mr. Carney desires to provide such transition services in the
capacity of an employee consultant; and
WHEREAS, the parties hereto wish to memorialize terms relating to: (i) Mr.
Carney's Transition Period, (ii) Mr. Carney's severance benefits; and (iii)
certain obligations of Mr. Carney.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and obligations herein contained, and for other good and valuable
consideration, the receipt of which are hereby acknowledged, the parties agree
as follows:
1. Employment Status:
-----------------
(a) Termination Date: Mr. Carney hereby resigns as the Chief
----------------
Executive Officer of the Company effective as of the date hereof. Mr. Carney
will continue to be employed by the Company as an employee consultant until July
6, 1998, at which date his employment shall terminate (the "Termination Date").
Mr. Carney shall report to, and his duties shall be subject to the direction and
control of, the Board of Directors of the Company, and Mr. Carney shall exercise
such powers and comply with and perform, faithfully and to the best of his
ability, such directions and duties in relation to the business and affairs of
the Company as may from time-to-time be vested in or required of him by the
Board. As of the Termination Date, Mr. Carney's salary will cease, and any
entitlement he has or might have under any Company-provided benefit plan,
program or practice will terminate, except as required by federal or state law,
or as otherwise described below.
(b) Transition Period:
-----------------
(i) Salary Continuation: The Company agrees to continue Mr. Carney's
-------------------
employment as an employee consultant during the period from March 13, 1998
through July 6, 1998 (the "Transition Period") at his current base salary, in
accordance with the Company's normal payroll practices.
<PAGE>
(ii) Benefits: The Company agrees that, during the Transition Period
---------
only, Mr. Carney will remain eligible for any and all other benefits incident to
employment at the Company as are normally available to full-time active
employees. All of Mr. Carney's stock options, including without limitation the
options granted under the Stock Option Agreement between Mr. Carney and the
Company dated October 5, 1995 (the "Stock Option Agreement"), will continue to
vest through the Transition Period in accordance with their terms.
(iii) Transition Duties: Mr. Carney agrees to make himself available
-----------------
during the Transition Period upon reasonable notice from the Company to assist
in the transition of his responsibilities and to provide any other assistance
needed by the Company. This assistance will include, among other things,
setting up and handing off of strategic partnering meetings, working with
selected accounts and aiding in the roll out of certain products.
(c) Post-Employment: After the Termination Date, Mr. Carney agrees
---------------
to continue to serve as Chairman of the Board of Directors of the Company,
subject to the continued approval of the shareholders and the Company, in
accordance with the Certificate of Incorporation and the By-Laws of the Company.
During the period that Mr. Carney serves on the Board of Directors, the Company
will reimburse Mr. Carney for expenses he incurs in that capacity if approved in
advance by the Company in writing.
2. Severance Benefits:
------------------
(a) Severance Pay: After the Termination Date, the Company will
-------------
provide Mr. Carney with salary continuation for a period of twelve (12) months
(the "Severance Period") at Mr. Carney's current base salary rate. Such salary
continuation will be paid in accordance with the Company's then-current payroll
practices, with the first payment to be made on the first regularly scheduled
payday on or immediately following the Termination Date.
(b) Health Insurance: The Termination Date shall be the date of the
----------------
"qualifying event" under the Consolidated Omnibus Budget Reconciliation Act of
1985 ("COBRA"). In the event that Mr. Carney elects the continuation of
coverage of the Company's health plans under COBRA, the Company agrees to pay
COBRA payments equivalent to the contribution it makes to the health insurance
payments of other employees, only during the Severance Period. After the
Severance Period, the Company will no longer be obligated to pay contributions
as above described and health plan coverage shall be continued only to the
extent required by COBRA and only to the extent Mr. Carney timely pays the
amount required for such continuation of health plan coverage.
In the event that Mr. Carney accepts any employment during the Severance
Period which provides health benefits, the Company's obligations to Mr. Carney
to make the COBRA payments on Mr. Carney's behalf provided in this subsection
shall cease upon the acceptance of such alternative employment.
(c) Disability Insurance: In the event that Mr. Carney obtains
--------------------
short-term and/or long-term disability insurance, the Company will pay to Mr.
Carney, only during the Severance
2
<PAGE>
Period, an amount equal to the then-current premiums paid by the Company for
such insurance at the time of the Termination Date.
In the event that Mr. Carney accepts any employment during the Severance
Period which provides short-term and/or long-term disability insurance, the
Company's obligations to Mr. Carney to make the payments provided in this
subsection shall cease upon the acceptance of such alternative employment.
(e) Stock Options: On the Termination Date, the Company will
-------------
accelerate the vesting of Mr. Carney's options under the Stock Option Agreement
to provide for the vesting of the remaining 18,751 unvested shares which were
granted on October 5, 1995 at $.30 per share. This acceleration of vesting is
in lieu of any options under the Company's Non-Employee Director Stock Option
Plan, which Mr. Carney hereby agrees to forfeit. Other than as expressly set
forth herein, all existing option agreements, including the Stock Option
Agreement, will remain in full force and effect in accordance with their terms.
(f) Lap Top Computer: On the Termination Date, the Company shall
----------------
transfer to Mr. Carney title to the laptop computer Mr. Carney is currently
using. The parties agree that the value of the computer is $ 4,318.65. Mr.
Carney hereby authorizes the Company to deduct any tax withholdings applicable
to such transfer from the payment by the Company specified in Section 3 below.
All risk of damage or loss with respect to such laptop computer shall rest with
Mr. Carney. The computer is transferred to Mr. Carney "as is," with no
representations or warranties, express or implied, being made to Mr. Carney
(including warranties of merchantability or fitness for a particular purpose)
and, without limiting the generality of the foregoing in any way, in no event
shall the Company be liable for any consequential, special, punitive, or other
damages in connection with this computer transfer.
3. Taxes: All payments set forth in Sections 1 and 2 are subject to
-----
applicable (if any) Federal, state and local withholding, payroll and other
taxes.
4. Conditions To Severance. Mr. Carney will not receive any of the
-----------------------
benefits set forth in Section 2 if he voluntarily terminates his employment
prior to or during the Transition Period or the Company terminates Mr. Carney's
employment prior to or during the Transition Period, for "Cause," as defined
below.
"Cause" shall mean, and be limited to, (1) dishonesty, (2) willful
misconduct in the performance of Mr. Carney's duties, (3) breach of the terms of
any confidentiality, non-competition, nonsolicitation or developments agreement
in favor of the Company, (4) breach of the terms of this Agreement or (5) the
commission by Mr. Carney of a felony.
5. Noncompetition, Nonsolicitation and Nondisclosure. Mr. Carney
-------------------------------------------------
confirms the existence and continued validity of his Noncompetition,
Nonsolicitation, Nondisclosure and Assignment of Inventions Agreement with the
Company dated May 14, 1992, a true and correct copy which is attached hereto as
Exhibit A.
- ---------
3
<PAGE>
6. Release:
-------
(a) In exchange for the amounts described in Sections 1 and 2 and
other good and valuable consideration, the receipt of which is hereby
acknowledged, Mr. Carney and his representatives, agents, estate, heirs,
successors and assigns, absolutely and unconditionally hereby release, remise,
discharge, indemnify and hold harmless the Company, its predecessors,
successors, parents, subsidiaries, divisions, affiliates, assigns, and its
current and former directors, shareholders, officers, employees, attorneys
and/or agents, both individually and in their official capacities (hereinafter
collectively referred to as the "Releases"), from any and all actions or causes
of action, suits, claims, complaints, contracts, liabilities, agreements,
promises, contracts, torts, debts, damages, controversies, judgments, rights and
demands, whether existing or contingent, known or unknown, which arise out of
Mr. Carney's employment with, change in employment status with, and/or
termination from the Company. This release is intended by Mr. Carney to be all
encompassing and to act as a full and total release of any claims he may have or
has had against the Releasees, including, but not limited to, any federal or
state law or regulation dealing with either employment or employment
discrimination such as those laws or regulations concerning discrimination on
the basis of race, color, creed, religion, age, sex, sex harassment, sexual
orientation, national origin, ancestry, handicap or disability, veteran status
or any military service or application for military service; any contract,
whether oral or written, express or implied; any tort; or common law. However,
it is expressly agreed and understood that Mr. Carney is not waiving any rights
to enforce the specific terms of this Agreement.
(b) The amounts set forth above in Sections 1 and 2 shall be complete
and unconditional payment, settlement, accord and/or satisfaction with respect
to all obligations and liabilities of the Releasees to Mr. Carney, including,
without limitation, all claims for back wages, salary, vacation pay, draws,
incentive pay, bonuses, stock and stock options, equity, promises of equity,
stock warrants, commissions, severance pay, any and all other forms of
compensation or benefits, attorney's fees, or other costs or sums.
7. Waiver of Rights and Claims Under the Age Discrimination and Employment
-----------------------------------------------------------------------
Act of 1967: Since Mr. Carney is 40 years of age or older, he has been
- -----------
informed that he has or might have specific rights and/or claims under the Age
Discrimination and Employment Act of 1967 (ADEA) and Mr. Carney agrees that:
(a) In consideration for the amounts described in Sections 1 and 2
hereof, which are in addition to anything of value to which Mr. Carney is
already entitled, Mr. Carney specifically waives such rights and/or claims to
the extent that such rights and/or claims arose prior to or on the date this
Agreement was executed;
(b) Mr. Carney has been advised of his right to consult with his
counsel of choice prior to executing this Agreement and Mr. Carney has not been
subject to any undue or improper influence interfering with the exercise of his
free will in deciding whether to execute this Agreement;
4
<PAGE>
(c) Mr. Carney was advised when presented by the Company with the
initial draft of this Agreement, that he had at least 21 days within which to
consider its terms and to consult with or seek advice from an attorney or any
other person of his choosing.
(d) Mr. Carney and the Company hereby agree that any revisions to the
initial drafts of this Agreement did not affect the calculation of the twenty-
one (21) day period provided for in subsection (c) above.
(e) Mr. Carney has carefully read and fully understands all of the
provisions of the Agreement, and he knowingly and voluntarily agrees to all of
the terms set forth in this Agreement; and
(f) In entering into this Agreement Mr. Carney is not relying on any
representation, promise or inducement made by the Company or its attorneys with
the exception of those promises described in this document.
8. Company Files, Documents and Other Property: No later than the
-------------------------------------------
Termination Date, Mr. Carney will return to the Company any keys, credit cards,
files, reports, books, data, and other documents or items or copies of any
documents or items, that he may have in his possession that are the property of
the Company. This provision will not apply to Mr. Carney's lap top computer but
does apply to any documents on this or any other computer.
9. Confidentiality: Mr. Carney agrees to maintain confidentiality
---------------
concerning the dollar amount and all other terms of this Agreement. Except as
required pursuant to legal process, Mr. Carney agrees not to discuss the same
with anyone except his immediate family and accountants or attorneys when such
disclosure is necessary for them to render professional services. Prior to any
such disclosure that Mr. Carney may make, he shall secure from his attorney or
accountant their written agreement to maintain the confidentiality of such
matters. Nothing in this Section shall be interpreted to prevent Mr. Carney
from making any truthful disclosures required or authorized under law.
10. Representations and Additional Provisions:
-----------------------------------------
(a) This Agreement sets forth the complete and sole agreement and
understanding between the parties and supersedes any and all other agreements or
understandings, whether oral or written, and the Amended and Restated Agreement
executed on June 24th, 1997. However, nothing in this Agreement will affect or
supersede: (i) the Noncompetition, Nonsolicitation, Nondisclosure and
Assignment of Inventions Agreement executed by Mr. Carney on May 14, 1992 in
connection with his employment and (ii) the Stock Option Agreement of October 5,
1995 as such Agreement may be modified hereby. This Agreement may not be
changed, amended, modified, altered or rescinded except upon the express written
consent of both the Company and Mr. Carney.
(b) In the event that any provision of this Agreement is determined
to be legally invalid, the affected provision shall be stricken from the
Agreement, and the remaining terms of the Agreement and its enforceability shall
remain unaffected thereby.
5
<PAGE>
(c) This Agreement shall deemed to be made and entered into in the
Commonwealth of Massachusetts. This Agreement shall in all respects be
interpreted, enforced and governed under the internal and domestic laws of
Massachusetts without giving effect to the principles of conflicts of law
thereof. The language of all parts of this Agreement shall in all cases be
construed as a whole according to its fair meaning and not strictly for or
against any of the parties.
(d) Mr. Carney represents that he has read the foregoing Agreement,
that he fully understands the terms and conditions of such Agreement and that he
is voluntarily executing the same. In entering into this Agreement, Mr. Carney
does not rely on any representation, promise or inducement made by the Company
or its attorneys with the exception of the consideration described in this
document.
(e) This Agreement shall be binding upon and inure to the benefit of
the Company and Mr. Carney and their respective heirs, successors and assigns.
11. Effective Date: After signing this Agreement, Mr. Carney may revoke
--------------
it for a period of seven (7) days following said signing. This Agreement shall
not become effective or enforceable until the revocation period has expired.
IN WITNESS WHEREOF, the undersigned have each executed this Agreement as an
instrument under seal as of the date set forth above.
/s/ James Carney
- ---------------------------------
James Carney
Workgroup Technology Corporation
By: /s/ Stephen Gaal
-----------------------------
Stephen J. Gaal, Director
6
<PAGE>
Mr. Carney acknowledges that he was informed and understands that he
has at least 21 days within which to consider the attached Transition and
Severance Agreement, has been advised of his right to consult with an attorney
regarding such Agreement and has considered carefully every provision of the
Agreement, and that after having engaged in those actions, prefers to and has
requested that he enter into the Agreement prior to the expiration of the 21-day
period.
Dated: /s/ James Carney
--------------------- ---------------------
Witness:
Dated:
--------------------- ---------------------
7
<PAGE>
Exhibit 10.14
Memo
TO: John McDonough
FROM: James Carney
- --------------------------------------------------------------------------------
Due to your increased responsibilities at Workgroup Technology as a result of
your promotion to President and Chief Operating Officer, I am pleased to offer
to you the following:
. Increase in your base salary to $160,000 per year
. Grant of 75,000 stock options to vest in accordance with the company's
standard 4 year vesting schedule however in the event of a change in control
of the company 100% of your stock options will vest immediately
. In the event of a change of control of the company and your position is
significantly changed or eliminated, you will be eligible for twelve months
of severance should you no longer be employed by the company
. You will be appointed to the Board of Directors
. Your bonus plan will remain in effect and the Compensation Committee of the
Board of Directors will determine at the end of the fiscal year how much of
your bonus will be paid to you
- --------------------------------------------------------------------------------
91 Hartwell Avenue, Lexington, Massachusetts 02173
- --------------------------------------------------------------------------------
<PAGE>
Exhibit 10.15
SEVERANCE AGREEMENT
-------------------
AGREEMENT, dated as of September 2, 1997, by and between Workgroup
Technology Corporation (the "Company") and Thomas Bilotta (the "Employee").
WHEREAS, the Employee is the Senior Vice President of Research and
Development for the Company and has made and is expected to continue to make
major contributions to the Company;
WHEREAS, the Company desires continuity of management; and
WHEREAS, the Employee is willing to continue to render services to the
Company subject to the conditions set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the Employee agree
as follows:
1. TERM OF AGREEMENT.
-----------------
The period during which this Agreement shall be in effect (the "Term")
shall commence as of the date hereof and shall expire on the earlier of the
death, physical incapacity or mental incompetence of the Employee.
2. SEVERANCE PAY.
-------------
(a) If, during the Term of this Agreement, the Company terminates the
Employee's employment with the Company without "Cause" (as such term is defined
below) or the Employee terminates his employment with the Company for "Good
Reason" (as such term is defined below), the Company shall:
(1) pay to Employee severance pay at the Employee's then current base
salary (the "Severance Payments") for the lesser of (i) six months or
(ii) until the date the Employee commences subsequent employment (the
"Severance Period") (such Severance Payments to commence on the next
regularly scheduled pay date following the Effective Date of the
"Release" referred to below; "Effective Date" shall have the meaning
ascribed to it in the Release). The employee may also be eligible for
a pro-rated portion of the quarterly bonus. The amount will be
determined based on performance against set objectives.
(2) during the Severance Period, continue to pay its contribution to the
Employee's health and dental insurance coverage on the same terms and
conditions as are available to all employees and Employee shall be
responsible for any contribution required from active employees for
said health and dental insurance coverage. The last day of the
Employee's employment shall be the date of the "qualifying event"
under the Consolidated Omnibus Budget Reconciliation Act of 1985.
However, the Company's obligation to provide any of the amounts and benefits
hereunder shall be subject to, and conditioned upon, the Employee's execution of
a full release of claims (the "Release") satisfactory to the Company,
substantially in the form of Exhibit A hereto, releasing the Company and its
employees and agents from any claims arising from or related to the Employee's
employment or severance from employment with the Company, including any claims
arising from this Agreement.
(b) For purposes hereof, "Cause" shall mean and be limited to: (1) the
substantial, continuing and willful failure of the Employee to render services
to the Company in accordance with his assigned duties, which materially and
adversely affects the business, prospects, financial condition, operations,
property or affairs of the Company; (2) the commission of the Employee of a
felony, either in connection with the performance of his obligations to the
Company or which adversely affects the Employee's ability to perform such
obligations; (3) gross negligence, dishonesty, breach of fiduciary duty or
breach of any confidentiality, non-competition or developments agreement in
favor of the Company; (4) the commission by the Employee of an act of fraud or
embezzlement which results in loss, damage or injury to the Company, whether
directly or indirectly; or (5) death or disability of the Employee.
<PAGE>
-2-
(c) For purposes hereof, "Good Reason" shall mean and be limited to: (1)
the assignment to the Employee of any duties inconsistent in any adverse,
material respect with his position, authority, duties or responsibilities as of
the then current position or any other action by the Company which results in a
material diminution in such position, authority, duties or responsibilities; (2)
a material reduction (defined as 10% or more) in the Employee's base or
incentive compensation or the termination of the Employee's rights to any
employee benefits or a reduction in scope or value thereof; or (3) a relocation
of the Employee's place of business which results in the one-way commuting
distance for the Employee to be increased by at least 20 miles and the total
one-way commuting distance for the Employee to exceed 35 miles.
(d) In the event the Employee's employment with the Company is terminated
by the Company for any reason other than without Cause or the Employee
terminates his employment with the Company for any reason other than Good
Reason, the Employee shall not be entitled to any severance benefits or other
considerations described herein. In addition to, and not in limitation of, the
foregoing, the Company's obligations to provide severance and benefits hereunder
shall not apply to any termination of employment which occurs subsequent to the
expiration of the Term of this Agreement.
(e) Nothing in this Agreement shall create any obligation on the part of
the Company or any other person to continue the employment of the Employee. If
the Employee elects to receive the severance and benefits set forth in Section 2
hereof by executing the Release, Employee shall not be entitled to any other
salary continuation, severance or other termination benefits in the event of his
cessation of employment with the Company.
3. EXISTING AGREEMENTS.
-------------------
Nothing herein shall affect the Employee's obligations under any non-
competition agreement or any confidentiality agreement between the Company and
the Employee currently in effect or which may be entered into in the future.
4. GENERAL PROVISIONS.
------------------
This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts. This Agreement constitutes the
entire Agreement between the Employee and the Company concerning the subject
matter hereof and supersedes any prior negotiations, understandings or
agreements concerning the subject matter hereof, whether oral or written, and
may be amended or rescinded only upon the written consent of the Company and the
Employee. The invalidity or unenforceability of any provision of this Agreement
shall not affect the other provisions of this Agreement and this Agreement shall
be construed and reformed to the fullest extent possible. The Employee may not
assign any of his rights or obligations under this Agreement; the rights and
obligations of the Company under this Agreement shall inure to the benefit of,
and shall be binding upon, the successors and assigns of the Company. This
Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have causes this Agreement to be
executed as of the date first written above.
EMPLOYEE
Signature: /s/ Thomas Bilotta
-------------------
Print Name:__________________________
Title:_______________________________
Date: ______________________________
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF WORKGROUP TECHNOLOGY CORPORATION
Workgroup Technology GmbH
Rellingen, Germany
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation of our reports dated April 29, 1998, on our
audits of the consolidated financial statements of Workgroup Technology
Corporation as of March 31, 1998 and 1997, and for the years ended March 31,
1998, 1997 and 1996 which reports are included in this Annual Report on Form
10-K, into the Company's previously filed Registration Statements on Form S-8,
File Nos. 333-09161 and 333-11869.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
June 25, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> MAR-31-1998 MAR-31-1997
<PERIOD-START> APR-01-1997 APR-01-1996
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> 31,779 37,951
<SECURITIES> 0 0
<RECEIVABLES> 1,497 2,179
<ALLOWANCES> 200 50
<INVENTORY> 0 0
<CURRENT-ASSETS> 33,478 40,424
<PP&E> 1,574 1,339
<DEPRECIATION> 1,281 1,045
<TOTAL-ASSETS> 35,075 41,796
<CURRENT-LIABILITIES> 5,036 3,864
<BONDS> 0 0
0 0
0 0
<COMMON> 44,226 44,076
<OTHER-SE> (14,187) (6,109)
<TOTAL-LIABILITY-AND-EQUITY> 35,075 41,796
<SALES> 7,638 10,439
<TOTAL-REVENUES> 7,638 10,439
<CGS> 3,173 2,470
<TOTAL-COSTS> 3,173 2,470
<OTHER-EXPENSES> 14,248 12,255
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (1,778) (1,934)
<INCOME-PRETAX> (8,075) (2,352)
<INCOME-TAX> 70 55
<INCOME-CONTINUING> (8,075) (2,407)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (8,075) (2,407)
<EPS-PRIMARY> (0.98) (0.30)
<EPS-DILUTED> (0.98) (0.30)
</TABLE>
