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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
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 0-28672
Optika Inc.
(Exact name of registrant as specified in its charter)
Delaware 95-4154552
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7450 Campus Drive, 2nd Floor 80920
Colorado Springs, CO (Zip Code)
(Address of principal executive offices)
(719) 548-9800
(Registrant's telephone number, including area code)
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 ____.
7,177,896 shares of the Registrant's Common Stock, $.001 par value
per share, were outstanding as of May 1, 1999
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<PAGE>
INDEX
PAGE
PART 1 - FINANCIAL INFORMATION
Item 1 - Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of December 31, 1998
and March 31, 1999 (Unaudited) 1
Condensed Consolidated Statements of Operations for the three-
month periods ended March 31, 1998 and 1999 (Unaudited) 2
Condensed Consolidated Statements of Cash Flows for the three-
month periods ended March 31, 1998 and 1999 (Unaudited) 3
Notes to Condensed Consolidated Financial Statements (Unaudited) 4
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 16
Item 2 - Changes in Securities 16
Item 3 - Defaults on Senior Securities 16
Item 4 - Submission of Matters to a Vote of Security Holders 16
Item 5 - Other Information 16
Item 6 - Exhibits and Reports on Form 8-K 16
Signatures 17
<PAGE>
<TABLE>
<CAPTION>
OPTIKA INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except share and per share amounts)
December 31, March 31,
1998 1999
----------- ----------
(unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents....................... $ 6,811 $ 5,041
Short-term investments.......................... 1,000 2,693
Accounts receivable, net........................ 4,571 4,022
Other current assets............................ 511 679
----------- ----------
Total current assets...................... 12,893 12,435
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Fixed assets, net.................................. 3,136 3,034
Deferred tax asset................................. 2,438 2,593
Other assets, net.................................. 70 131
=========== ==========
$ 18,537 $ 18,193
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable................................ $ 710 $ 867
Accrued expenses................................ 1,446 1,273
Accrued compensation expense.................... 1,206 853
Deferred revenue................................ 3,355 3,539
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Total current liabilities................ 6,717 6,532
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Commitments and contingencies
Common stockholders' equity:
Common stock; $.001 par value; 25,000,000 shares
authorized; 7,114,573 and 7,171,470 shares issued
and outstanding at December 31, 1998 and March 31,
1999, respectively.............................. 7 7
Additional paid-in capital...................... 17,617 17,738
Accumulated deficit............................. (5,804) (6,084)
----------- ----------
Total common stockholders' equity........ 11,820 11,661
=========== ==========
$ 18,537 $ 18,193
=========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OPTIKA INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended March 31,
----------------------------
1998 1999
---- ----
<S> <C> <C>
Revenues:
Licenses................................... $ 2,248 $ 2,876
Maintenance and other...................... 1,460 2,302
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Total revenues.......................... 3,708 5,178
Cost of revenues:
Licenses................................... 126 148
Maintenance and other...................... 709 950
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Total cost of revenues.................. 835 1,098
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Gross profit................................. 2,873 4,080
Operating expenses:
Sales and marketing........................ 2,927 2,699
Research and development................... 1,126 1,357
General and administrative................. 561 489
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Total operating expenses................ 4,614 4,545
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Loss from operations......................... (1,741) (465)
Other income, net............................ 59 34
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Loss before benefit from income taxes........ (1,682) (431)
Benefit from income taxes.................... (336) (151)
------------- --------------
Net loss .................................... $ (1,346) $ (280)
============= ==============
Basic net loss per common share.............. $ (0.19) $ (0.04)
============= ==============
Basic weighted average number of common shares
outstanding.................................. 6,927 7,151
============= ==============
Diluted net loss per common share............ $ (0.19) $ (0.04)
============= ==============
Diluted weighted average number of common
shares outstanding........................... 6,927 7,151
============= ==============
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OPTIKA INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Three Months Ended
March 31,
-----------------------
1998 1999
------------ ----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss........................................... $ (1,346) $ (280)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and amortization................... 186 218
Deferred tax benefit............................ (353) (155)
Change in assets and liabilities:
Accounts receivable, net..................... 1,974 549
Other assets................................. (36) (229)
Accounts payable............................. 330 157
Accrued expenses............................. (719) (526)
Deferred revenue............................. 187 184
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Net cash provided (used) by operations.......... 223 (82)
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Cash Flows From Investing Activities:
Capital expenditures............................... (425) (116)
Sale (purchase) of short-term investments.......... 1,954 (1,693)
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Net cash provided (used) by investing actvities. 1,529 (1,809)
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Cash Flows From Financing Activities:
Principal payments on long-term debt............... (15) --
Proceeds from issuance of common stock............. 40 121
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Net cash provided by financing activities....... 25 121
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Net increase (decrease) in cash and cash equivalents 1,777 (1,770)
Cash and cash equivalents at beginning of period... 3,202 6,811
------------ ----------
Cash and cash equivalents at end of period......... $ 4,979 $ 5,041
============ ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
OPTIKA INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General
Basis of Presentation
The unaudited condensed consolidated financial statements included herein
reflect all adjustments, consisting only of normal recurring adjustments, which
in the opinion of management are necessary to fairly present the Company's
consolidated financial position, results of operations, and cash flows for the
periods presented. Certain information and footnote disclosures normally
included in audited financial information prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to the
Securities and Exchange Commission's (SEC's) rules and regulations. The
consolidated results of operations for the period ended March 31, 1999 are not
necessarily indicative of the results to be expected for any subsequent quarter
or for the entire fiscal year ending December 31, 1999. These condensed
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto for the year ended December 31, 1998,
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1998.
Net Loss Per Common Share
Basic EPS is computed by dividing net income by the weighted average
number of shares outstanding during the period. Diluted EPS is computed using
the weighted average number of shares outstanding plus all dilutive potential
common shares outstanding. During the first quarter of 1998, 239,000 options to
purchase common stock of the Company were granted. During the first quarter of
1999, 102,200 options to purchase common stock of the Company were granted.
Additionally, during the first quarter of 1998, 264,500 options to purchase
common stock of the Company were re-priced at $3.18 per option share.
The following is the reconciliation of the numerators and denominators of the
basic and diluted EPS computations (in thousands except per share data):
Three Months Ended
March 31,
1998 1999
------------------
Earning Per Share:
Net loss..................................... $(1,346) $ (280)
Basic weighted average common shares
outstanding................................. 6,927 7,151
Basic net loss per common share.............. $ (0.19) $ (0.04)
Effect of Dilutive Securities:
Options and warrants......................... -- --
Diluted weighted average common shares
outstanding................................. 6,927 7,151
Diluted net loss per common share............ $ (0.19) $ (0.04)
2. Contingencies
The Company is, from time to time, subject to certain claims, assertions
or litigation by outside parties as part of its ongoing business operations. The
outcome of any such contingencies are not expected to have a material adverse
effect on the financial condition, operations or cash flows of the Company. The
Company is not currently a party to any material legal proceedings.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS
THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS
THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE
DISCUSSED UNDER THE CAPTION "BUSINESS RISKS" CONTAINED HEREIN.
Overview
Optika(R) Inc. is a leading provider of business-to-business electronic
commerce ("e-commerce") solutions. By leveraging the technology of the World
Wide Web, the Company's software bridges the gap between paper and electronic
commerce across the enterprise and throughout supply chains.
The license of the Company's software products is typically an
executive-level decision by prospective end-users and generally requires the
Company and its Advantage Partners ("APs") or Original Equipment Manufacturers
("OEMs") to engage in a lengthy and complex sales cycle (typically between six
and twelve months from the initial contact date). The Company distributes its
products through a direct sales force and worldwide network of approximately 170
APs and 5 OEMs. For fiscal year 1998, approximately 69% of the Company's license
revenues were derived from its APs, approximately 10% of its license revenues
were derived from sales by OEMs and the remaining license fees were derived from
direct sales. However, no individual AP accounted for more than 10% of the
Company's total revenues. For the years ended December 31, 1996, 1997 and 1998,
the Company generated approximately 29%, 23% and 24%, respectively, of its total
revenues from international sales.
The Company's revenues consist primarily of license revenues, which are
comprised of one-time fees for the license of the Company's products; and
maintenance revenues, which are comprised of fees for upgrades and technical
support. The APs and OEMs, which are responsible for the installation and
integration of the software, enter into sales agreements with the end-user, and
purchase software directly from the Company. The software is licensed directly
to the end-user by the Company through a standard shrink-wrapped license
agreement. Annual maintenance agreements are also entered into between the APs
and OEMs and the end-user, and the APs and OEMs then purchase maintenance
services directly from the Company. For 1997 and 1998, approximately 73% and
60%, respectively of the Company's total revenues were derived from software
licenses and approximately 18% and 28%, respectively, of the Company's total
revenues were derived from maintenance agreements. Other revenues, which are
comprised of training, consulting and implementation services, and third-party
hardware and software products, accounted for 9% and 12%, respectively, of the
Company's total revenues.
The Company adopted the provisions of Statement of Position 97-2, Software
Revenue Recognition (SOP 97-2), for transactions entered into after January 1,
1998. Under SOP 97-2, the Company generally recognizes license revenue upon
shipment when a non-cancelable license agreement has been signed or a purchase
order has been received, delivery has occurred, the fee is fixed and
determinable and collectibility is probable. Where applicable, fees from
multiple element arrangements are unbundled and recorded as revenue as the
elements are delivered to the extent that vendor specific objective evidence of
fair value exists. Maintenance revenues are deferred and recognized ratably over
the maintenance period, which is generally one year. Other revenues are
recognized as services are performed.
The Company generally does not grant rights to return products, except for
defects in the performance of the products relative to specifications and
pursuant to standard industry shrink-wrapped license agreements which provide
for 30-day rights of return if an end-user does not accept the terms of the
software license, nor does it provide provisions for price adjustments or
rotation rights.
Based on the Company's research and development process, costs incurred
between the establishment of technological feasibility and general release of
the software products have not been material and therefore have not been
capitalized in accordance with Statement of Financial Accounting Standards No.
86. All research and development costs have been expensed as incurred.
Revenues
Total revenues increased 39.6% from $3.7 million for the quarter ended
March 31, 1998 to $5.2 million for the quarter ended March 31, 1999.
Licenses. License revenues increased 27.9% from $2.2 million during the
quarter ended March 31, 1998 to $2.9 million for the quarter ended March 31,
1999. License revenues represented 60.6% and 55.5% of the total revenues for the
quarter ended March 31, 1998 and 1999, respectively. The absolute dollar
increase in license revenues during the first quarter of 1999 is primarily a
result of the release of the Optika eMedia product into the marketplace. License
revenues generated outside of the United States accounted for approximately
11.3% of the Company's revenues for the quarter ended March 31, 1999, compared
to 18.3% in the corresponding prior period. The decrease in international
revenue is a result of the weak economies in Latin America and Asia.
Maintenance and Other. Maintenance revenues, exclusive of other revenue,
increased 44.2% from $1.1 million during the quarter ended March 31, 1998, to
$1.6 million for the quarter ended March 31, 1999. Maintenance revenue
represented 29.7% and 30.7% of the total revenues for the quarter ended March
31, 1998 and 1999, respectively. This increase was primarily a result of an
increase in the number of installed systems. Other revenue, consisting primarily
of consulting services, training and consulting fees represented 9.7% and 13.8%
of total revenues for the quarter ended March 31, 1998 and 1999, respectively.
The increase in other revenue as a percentage of total revenue was primarily due
to increased consulting, project management and implementation services
resulting from the Company's direct sales efforts.
Cost of Revenues
Licenses. Cost of licenses consist primarily of royalty payments to
third-party vendors and costs of product media, duplication, packaging and
fulfillment. Cost of licenses increased from $126,000 or 5.6% of license
revenues to $148,000 or 5.1% of license revenues for the quarter ended March 31,
1998 and 1999, respectively. The increase in absolute dollar cost of licenses
was attributable to the increased license revenue.
Maintenance and Other. Costs of maintenance and other consist of the
direct and indirect costs of providing software maintenance and support,
training and consulting services to the Company's APs, OEMs and end-users, and
the cost of third-party software products. Cost of maintenance and other
increased from $709,000 or 48.6% of maintenance and other revenues to $950,000
or 41.3% of maintenance and other revenues for the quarters ended March 31, 1998
and 1999, respectively. The absolute dollar increase in cost of maintenance and
other is primarily a result of the direct costs associated with the increased
number of service and consulting contracts.
Operating Expenses
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, commissions and other related expenses for sales and marketing
personnel, marketing, advertising and promotional expenses. Sales and marketing
expenses decreased from $2.9 million, or 78.9% of total revenues, for the
quarter ended March 31, 1998 to $2.7 million, or 52.1% of total revenues, for
the quarter ended March 31, 1999. The decrease in sales and marketing expenses
is primarily attributable to the closure of several Asian sales offices in late
1998. The Company anticipates that sales and marketing expenses will increase in
absolute dollars in future quarters as it continues to launch the Optika eMedia
product.
Research and Development. Research and development expenses consist
primarily of salaries and other related expenses for research and development
personnel, as well as the cost of facilities and equipment. Research and
development expenses increased from $1.1 million, or 30.4% of total revenues,
for the quarter ended March 31, 1998 to $1.4 million, or 26.2% of total
revenues, for the quarter ended March 31, 1999. The absolute dollar increase in
research and development is primarily the result of the continued cost to
develop the Optika eMedia product. The Company anticipates that research and
development expenses will increase slightly in absolute dollars in future
quarters.
General and Administrative. General and administrative expenses consist
primarily of salaries and other related expenses of administrative, executive
and financial personnel, and outside professional fees. General and
administrative expenses decreased from $561,000, or 15.1% of total revenues, for
the quarter ended March 31, 1998 to $489,000, or 9.4% of total revenues, for the
quarter ended March 31, 1999. The decrease in general and administrative
expenses was primarily due to the write-off of certain accounts receivable in
Asia during the first quarter of 1998 that were not present in 1999.
Other Income, net. Other income, net consists primarily of interest earned
on the Company's investing activities offset by interest expense on the
Company's capitalized lease obligations, other debt, and foreign currency
translation adjustments. The Company incurred a net other income of $59,000
during the quarter ended March 31, 1998 compared to net other income of $34,000
during the quarter ended March 31, 1999, primarily as a result of interest
income derived from the investment of the Company's initial public offering
proceeds.
Benefit from Income Taxes. The Company's effective tax rate for the
quarter ended March 31, 1999 was 35%, which reflects the Company's estimated
annual effective tax rate.
Liquidity and Capital Resources
Cash and short-term investments at March 31, 1999 were $7.7 million,
decreasing by approximately $77,000 from December 31, 1998. The decrease in cash
and short-term investments is primarily due to the 1999 first quarter loss and
capital expenditures associated with additional computer equipment.
For the quarter ended March 31, 1998, net cash provided by operating
activities was $223,000 compared to net cash used in operating activities of
$82,000 for the quarter ended March 31, 1999. The cash used in operating
activities for the quarter ended March 31, 1999 was a direct result of the first
quarter net loss.
Cash provided by investing activities was $1.5 million for the quarter
ended March 31, 1998 compared to cash used of $1.8 million for the quarter ended
March 31, 1999. Sources of cash consisted primarily of sales of marketable
securities in the first quarter of 1998, while marketable securities were
purchased during the first quarter of 1999.
Cash provided by financing activities was $25,000 for the quarter ended
March 31, 1998. Cash provided by financing activities was $121,000 for the
quarter ended March 31, 1999. Cash provided by financing activities resulted
primarily from proceeds from the sale of securities under the Company's employee
stock option plan and employee stock purchase plan, offset in part by repayments
of bank borrowings, capital leases and other debt in 1998.
At March 31, 1999, the Company's principal sources of liquidity included
cash and short-term investments of $7.7 million. In addition, the Company has a
secured credit facility for up to $3.0 million, bearing interest at the bank's
prime rate. As of March 31, 1999, the Company had $2.8 million available for
borrowing and no other debt outstanding.
The Company believes that its current cash and short-term investments,
together with anticipated cash flow from operations and its bank credit
facility, will be sufficient to meet its working capital and capital expenditure
requirements for at least the next 12 months. Thereafter, the Company may
require additional funds to support such activity through public or private
equity financing or from other sources. There can be no assurance that
additional financing will be available at all or that, if available, such
financing will be obtainable on terms favorable to the Company and would not be
dilutive.
Year 2000
The Company is aware of the issues associated with the programming code in
existing computer systems as the Year 2000 approaches. Many currently installed
computer and software products are coded to accept only two digit entries in the
date code field. These date code fields will need to accept four digit entries
to distinguish 21st century dates from 20th century dates. As a result, in less
than one year, computer systems and/or software used by many companies may need
to be upgraded to comply with such "Year 2000" requirements. Significant
uncertainty exists in the software industry concerning the potential effects
associated with such compliance. The Company believes that the purchasing
patterns of customers and potential customers may be significantly affected by
Year 2000 issues. Moreover, the Company believes some companies may delay
software purchasing decisions until after January 1, 2000, in hopes that Year
2000 issues will have been identified and corrected prior to their purchase.
Many companies are expending significant resources to correct or patch their
current software systems for Year 2000 compliance. These expenditures may result
in reduced funds available to purchase products or services such as those
offered by the Company. Additionally, Year 2000 issues could cause a significant
number of companies, including current customers of the Company; to reevaluate
their current system needs, and as a result, consider switching to other systems
or suppliers. This could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company is currently taking steps to address its Year 2000 readiness
issues in the following areas:
1. The Company's products (including embedded software technology)
2. Internal systems (includes information technologies and non-information
technologies)
3. Readiness of third parties with whom the Company has business
relationships
The Company has assigned two dedicated Year 2000 cross functional teams
(CFT's), one CFT to address the Company's products and one CFT to address
internal systems and third parties. Each CFT has an executive sponsor and meets
regularly to carry out the process of identifying potential Year 2000 issues,
assessing their impact on the Company, putting in place an action plan to
address the problem (which will include contingency planning) and following
through to ensure the plan was carried out and tested.
The Company's Products
The Company designs its products and services to be Year 2000 compatible.
Nevertheless the Company has performed Year 2000 compliance testing on both
Optika eMedia and FilePower product suites. During the testing of the FilePower
product suite, a few minor deficiencies were found in the product. The Company
addressed these known deficiencies with a product release which was made
available during the first quarter of 1999. Costs to address these deficiencies
are expected to include only internal development staff time, which has not been
separately tracked, and is expected to have no effect on the Company's operating
results. No current projects have been delayed or are expected to be delayed due
to using internal staff on this issue.
The Company has developed the eMedia product with Year 2000 compliance in
mind. Testing of the product has been performed throughout the development cycle
for Year 2000 compliance. In addition, the Company is currently working with a
third-party to extensively test the Year 2000 compliance of the product. This
testing is currently expected to be completed during the second quarter of 1999.
While the Company is not aware of any current deficiencies that would result in
the product not being compliant, it is possible that deficiencies may be
discovered during the testing process or even subsequent to the testing process.
Costs to address these deficiencies are expected to include only internal
development staff time, which will not be separately tracked, and is expected to
have no material effect on the Company's operating results.
Although the Company has designed its products and services to be Year
2000 capable and tests its products and services, including third-party software
that is incorporated into its products and services, specifically for Year 2000
compliance, there can be no assurance that the Company's products and services,
particularly when such products and services incorporate third-party software,
contain all necessary date code changes. To the extent that the Company's
software does not comply with Year 2000 requirements, it will be necessary for
the Company to commit the necessary resources to correct the software. Although
the costs cannot be reasonably estimated, there can be no assurance that
potential system interruptions or the cost necessary to update the software will
not have a material adverse effect on the Company's business, financial
condition and results of operations.
Internal Systems
The Company's internal systems include both its information technology
("IT") and non-IT systems. The Company conducted an assessment of its internal
IT systems including third-party software and hardware technology and its non-IT
systems (such as its security system, building equipment, and phone systems).
The Company has identified its Mission Critical Systems and reviewed them for
Year 2000 compliance by contacting each vendor and requesting documentation on
Year 2000 readiness. The Company will do testing of its Mission Critical Systems
in the second quarter of 1999. It is estimated that the testing of the Mission
Critical Systems will cost approximately $121,000 during 1999. The bringing of
the Mission Critical Systems to Year 2000 readiness will be covered under
software/hardware maintenance agreements and/or normal product upgrades.
However, any failure of one or more of the Company's mission critical IT systems
to become Year 2000 compliant due to unanticipated problems could limit access
of employees to critical information, require the Company to process information
manually or result in other inconveniences or inefficiencies for the Company and
its customers that may divert management's time and attention, as well as
financial and personnel resources from normal business activities. The majority
of the Company's IT software applications are produced by Microsoft. Any failure
by Microsoft to address the Year 2000 issue will have a material impact on the
Company's operations. All non-Mission Critical Systems are deemed to be
non-essential to the business and will be upgraded or replaced if a Year 2000
issue exists. Year 2000 compliance issues relating to non-Mission Critical
Systems are not expected to have a material financial impact on operations or
the Company's ability to carry out its operations.
Third Parties
The Company has documentation on the Year 2000-compliance status of its
key vendors. The key third parties to which the Company is concerned are its
investing, banking, and payroll vendors. The Company will attempt to obtain Year
2000-compliance status from certain other third parties by the end of the second
quarter of 1999. If the Company's current or future vendors, including investing
and banking relationships, fail to achieve Year 2000 compliance or if they
divert substantial technology expenditures to address the Year 2000 issue, thus
impacting their ability to serve the Company, the Company will move its
relationships to another vendor that is Year 2000 compliant. Management believes
there will be no material adverse affect on the Company of this potential
action.
Disclaimer
The discussion of the Company's efforts, and management's expectations,
relating to Year 2000 compliance are forward-looking statements. The Company's
ability to achieve Year 2000 compliance and the level of incremental costs
associated therewith could be adversely impacted by, among other things, the
availability and cost of programming and testing resources, vendors' abilities
to modify proprietary software, unanticipated problems in the ongoing compliance
review and failure by the Company to identify a critical Year 2000 compliance
problem.
<PAGE>
BUSINESS RISKS
THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISK AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS
THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE
DISCUSSED BELOW.
Significant Fluctuations in Operating Results. The Company's sales and other
operating results have varied significantly in the past and will vary
significantly in the future as a result of factors such as: the size and timing
of significant orders and their fulfillment; demand for the Company's products;
changes in pricing policies by the Company or its competitors; the number,
timing and significance of product enhancements and new product announcements by
the Company and its competitors; changes in the level of operating expenses;
customer order deferrals in anticipation of new products or otherwise; foreign
currency exchange rates; warranty and customer support expenses; changes in its
end-users' financial condition and budgetary processes; changes in the Company's
sales, marketing and distribution channels; delays or deferrals of customer
implementation; product life cycles; software bugs and other product quality
problems; discounts; the cancellation of licenses during the warranty period or
nonrenewal of maintenance agreements; customization and integration problems
with the end-user's legacy system; changes in the Company's strategy; changes in
accounting pronouncements; potential acquisitions; changes in customer buying
patterns as a result of Year 2000 concerns; the level of international
expansion; and seasonal trends. A significant portion of the Company's revenues
has been, and the Company believes will continue to be, derived from a limited
number of orders, and the timing of such orders and their fulfillment have
caused, and are expected to continue to cause, material fluctuations in the
Company's operating results. Revenues are also difficult to forecast because the
markets for the Company's products are rapidly evolving, and the sales cycle of
the Company and of its APs and OEMs, from initial evaluation to purchase, is
lengthy and varies substantially from end-user to end-user. To achieve its
quarterly revenue objectives, the Company depends upon obtaining orders in any
given quarter for shipment in that quarter. Product orders are typically shipped
shortly after receipt; consequently, order backlog at the beginning of any
quarter has in the past represented only a small portion of that quarter's
revenues. Furthermore, the Company has often recognized most of its revenues in
the last month, or even in the last weeks or days, of a quarter. Accordingly, a
delay in shipment near the end of a particular quarter may cause revenues in a
particular quarter to fall significantly below the Company's expectations and
may materially adversely affect the Company's operating results for such
quarter. Conversely, to the extent that significant revenues occur earlier than
expected, operating results for subsequent quarters may fail to keep pace with
results of previous quarters or even decline. The Company also has recorded
generally lower sales in the first quarter than in the immediately preceding
quarter, as a result of, among other factors, end-users' purchasing and
budgeting practices and the Company's sales commission practices, and the
Company expects this pattern to continue in future years. To the extent that
future international operations constitute a higher percentage of total
revenues, the Company anticipates that it may also experience relatively weaker
demand in the third quarter as a result of reduced sales in Europe during the
summer months. A significant portion of the Company's expenses are relatively
fixed in the short term. Accordingly, if revenue levels fall below expectations,
operating results are likely to be disproportionately and adversely affected. As
a result of these and other factors, the Company believes that its quarterly
operating results will vary in the future, and that period-to-period comparisons
of its results of operations are not necessarily meaningful and should not be
relied upon as indications of future performance. Furthermore, due to all of the
foregoing factors, it is likely that in some future quarter the Company's
operating results will be below the expectations of public market analysts and
investors. In such event, the price of the Company's Common Stock would likely
be materially adversely affected.
Risks Associated with the Introduction of Optika eMedia. In March 1998, the
Company announced plans to introduce Optika eMedia, its 32-bit Web-based
software solution that enables organizations with high transaction volumes to
efficiently and inexpensively manage the high-volume flow of paper and
electronic data associated with running today's businesses. In July 1998, Optika
announced the controlled shipment of Optika eMedia to initial user sites that
included Fortune 1000 companies and other large organizations. Optika eMedia
became commercially available in late September 1998. Because the market for
Optika eMedia is new and evolving, it is difficult to assess or predict with any
assurance the growth rate and size of this market. There also can be no
assurance that the market for Optika eMedia will continue to develop. If the
market continues to develop more slowly than expected or becomes saturated with
competitors, or if the product does not achieve market acceptance, the Company's
business, results of operations and financial condition may be materially
adversely affected.
In 1999, Optika eMedia was fully implemented in several customers'
environments. However, there can be no assurance that Optika eMedia will not
require substantial software enhancements or modifications to satisfy
performance requirements of customers or to fix design defects of previously
undetected errors. Further, it is common for complex software programs such as
Optika eMedia to contain undetected errors when first released, which are
discovered only after the product has been used over time with different
computer systems and in varying applications and environments. While the Company
is not aware of any significant technical problems with Optika eMedia, there can
be no assurance that errors will not be discovered, or if discovered, that they
will be successfully corrected on a timely basis, if at all. The Company's
future business growth is substantially dependent on the continued development,
introduction and market acceptance of Optika eMedia. If customers experience
significant problems with implementation of Optika eMedia or are otherwise
dissatisfied with the functionality or performance of Optika eMedia, or if it
fails to achieve market acceptance for any other reason, the Company's business,
results of operations and financial condition may be materially adversely
affected.
Reliance on Indirect Distribution Channels; Potential for Channel Conflict.
The Company's future results of operations will depend on the success of its
marketing and distribution strategy, which has relied, to a significant degree,
upon APs and OEMs to sell and install the Company's software, and provide
post-sales support. These relationships are usually established through formal
agreements that generally do not grant exclusivity, do not prevent the
distributor from carrying competing product lines and do not require the
distributor to purchase any minimum dollar amount of the Company's software.
There can be no assurance that any APs will continue to represent the Company or
sell its products. Furthermore, there can be no assurance that other APs, some
of which have significantly greater financial marketing and other resources than
the Company, will not develop or market software products which compete with the
Company's products or will not otherwise discontinue their relationship with, or
support of, the Company. Some of the Company's APs are small companies that have
limited financial and other resources which could impair their ability to pay
the Company. To date, the Company's inability to receive payments from such APs
has not had a material adverse effect on the Company's business, results of
operations or financial condition. The Company's OEMs occasionally compete with
the Company and its APs. Selling through indirect channels may also hinder the
Company's ability to forecast sales accurately, evaluate customer satisfaction,
provide quality service and support or recognize emerging customer requirements.
During 1998, the Company altered its sales strategy with the introduction of
a direct sales team. Although the Company has recruited a direct sales staff,
the Company has limited experience in marketing and selling its products on a
direct sales basis. Consequently, there can be no assurance the Company will be
successful in achieving a significant level of direct sales on a timely basis,
or at all. The Company's strategy of marketing its products directly and
indirectly (through APs and OEMs) may result in distribution channel conflicts.
To the extent that the Company, APs and OEMs target the same customers, they may
come into conflict with each other. Although the Company has attempted to avoid
potential conflicts, there can be no assurance that channel conflict will not
materially and adversely affect its relationship with existing APs and OEMs, or
adversely affect its ability to attract new APs and OEMs. The loss by the
Company of a number of its more significant APs or OEMs, the inability of the
Company to obtain qualified new APs or OEMs, or to obtain access to the channels
of distribution offering software products to the Company's targeted markets, or
the failure of APs or OEMs to pay the Company for its software, could have a
material adverse effect on the Company's business, results of operations, or
financial condition.
Rapid Technological Change: Dependence on New Product Development. The
market for the Company's products is characterized by rapid technological
change, changes in customer requirements, frequent new product introductions and
enhancements, and emerging industry standards. The Company's future performance
will depend in significant part upon its ability to respond effectively to these
developments. The introduction of products embodying new technologies and the
emergence of new industry standards can render existing products obsolete,
unmarketable or noncompetitive. The Company is unable to predict the future
impact of such technology changes on the Company's products. Moreover, the life
cycles of the Company's products are difficult to estimate. The Company's future
performance will depend in significant part upon its ability to enhance current
products, and to develop and introduce new products and enhancements that
respond to evolving customer requirements. The Company has in the recent past
experienced delays in the development and commencement of commercial shipments
of new products and enhancements, resulting in customer frustration and delay or
loss of revenues. The inability of the Company, for technological or other
reasons, to develop and introduce new products or enhancements in a timely
manner in response to changing customer requirements, technological change or
emerging industry standards, or maintain compatibility with heterogeneous
computing environments, would have a material adverse effect on the Company's
business, results of operations and financial condition.
Product Concentration. To date, the majority of the Company's revenues have
been attributable to sales of the FilePower Suite and individual software
modules which comprise the FilePower Suite. Optika eMedia became generally
available in September 1998. The Company expects Optika eMedia and the FilePower
Suite to account for substantially all of its future revenues. The Company's
future financial performance will depend in general on the continued transition
from imaging software to e-commerce, and in particular on the successful
development, introduction and customer acceptance of new and enhanced versions
of its existing software products such as Optika eMedia. There can be no
assurance that such market will continue to grow or that the Company will be
successful in developing and marketing these or any other products, or that any
of these products will achieve widespread customer acceptance. If the e-commerce
software market grows more slowly than the Company currently anticipates, the
Company's business, results of operations, and financial condition would be
materially and adversely affected.
Lengthy and Complex Sales and Implementation Cycles; Dependence on Capital
Spending. The license of the Company's software products is typically an
executive-level decision by prospective end-users, and generally requires for
the Company and its APs and OEMs to engage in a lengthy and complex sales cycle
(typically between six and twelve months from the initial contact date). In
addition, the implementation by customers of the products offered by the Company
may involve a significant commitment of resources by such customers over an
extended period of time. For these and other reasons, the sales and customer
implementation cycles are subject to a number of significant delays over which
the Company has little or no control. The Company's future performance also
depends upon the capital expenditure budgets of its customers and the demand by
such customers for the Company's products. Certain industries to which the
Company sells its products, such as the financial services industry, are highly
cyclical. The Company's operations may in the future be subject to substantial
period-to-period fluctuations as a consequence of such industry patterns,
domestic and foreign economic and other conditions, and other factors affecting
capital spending. There can be no assurance that such factors will not have a
material adverse effect on the Company's business, results of operations, and
financial condition.
Intense Competition. The market for the Company's products is intensely
competitive and can be significantly affected by new product introductions and
other market activities of industry participants. The Company's competitors
offer a variety of products and services to address the emerging market for
e-commerce solutions. The Company's principal direct competitors for its product
include FileNet Corporation, International Business Machines Corporation and
Eastman Kodak Company. The Company also competes with industry-specific
application vendors. Numerous other software vendors also compete in each
product area. Potential competitors include providers of document management
software, providers of document archiving products, and RDBMS ("Relational
Database Management Systems") vendors. In addition, the Company may face
competition from other established and emerging companies in new market segments
created by the release of Optika eMedia.
Many of the Company's current and potential competitors are substantially
larger than the Company, have significantly greater financial, technical and
marketing resources and have established more extensive channels of
distribution. As a result, such competitors may be able to respond more rapidly
to new or emerging technologies and changes in customer requirements, or to
devote greater resources to the development, promotion and sale of their
products than the Company. Because the Company's products are designed to
operate in non-proprietary computing environments and because of low barriers to
entry in the e-commerce market, the Company expects additional competition from
established and emerging companies, as the market for e-commerce continues to
evolve. The Company expects its competitors to continue to improve the
performance of their current products and to introduce new products or new
technologies that provide added functionality and other features. Successful new
product introductions or enhancements by the Company's competitors could cause a
significant decline in sales or loss of market acceptance of the Company's
products and services, result in continued intense price competition, or make
the Company's products and services or technologies obsolete or noncompetitive.
To be competitive, the Company will be required to continue to invest
significant resources in research and development, and in sales and marketing.
There can be no assurance that the Company will have sufficient resources to
make such investments or that the Company will be able to make the technological
advances necessary to be competitive. In addition, current and potential
competitors have established or may establish cooperative relationships among
themselves or with third parties, to increase the ability of their products to
address the needs of the Company's prospective customers. In addition, several
competitors have recently made, or attempted to make, acquisitions to enter the
market or increase their market presence. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. Increased competition is likely to result in price
reductions, reduced gross margins and loss of market share, any of which would
have a material adverse effect on the Company's business, results of operations
and financial condition. There can be no assurance that the Company will be able
to compete successfully against current or future competitors, or that
competitive pressures will not have a material adverse effect on the Company's
business, results of operations, and financial condition.
Management Changes; No Assurance of Successful Expansion of Operations. Most
of the Company's senior management team have joined the Company within the last
five years. There can be no assurance that these individuals will be able to
achieve and manage growth, if any, or build an infrastructure necessary to
operate the Company. The Company's ability to compete effectively and to manage
any future growth will require that the Company continue to assimilate new
personnel and to expand, train and manage its work force. The Company intends to
continue to increase the scale of its operations significantly to support
anticipated increases in revenues, and to address critical infrastructure and
other requirements. These increases have included and will include the leasing
of new space, the opening of additional foreign offices, potential acquisitions,
increases in research and development to support product development, and the
hiring of additional personnel in sales and marketing. The increased scale of
operations has resulted in significantly higher operating expenses, which are
expected to continue to increase significantly in the future. If the Company's
revenues do not correspondingly increase, the Company's results of operations
would be materially and adversely affected. Expansion of the Company's
operations may impose a significant strain on the Company's management,
financial and other resources. In this regard, any significant revenue growth
will be dependent in significant part upon the Company's expansion of its
marketing, sales and AP support capabilities. This expansion will continue to
require significant expenditures to build the necessary infrastructure. There
can be no assurance that the Company's efforts to expand its marketing, sales
and customer support efforts will be successful or will result in additional
revenues or profitability in any future period.
Dependence on Key Personnel. The Company's future performance depends to a
significant degree upon the continuing contributions of its key management,
sales, marketing, customer support, and product development personnel. The
Company has at times experienced, and continues to experience, difficulty in
recruiting qualified personnel, particularly in software development and
customer support. The Company believes that there may be only a limited number
of persons with the requisite skills to serve in those positions, and that it
may become increasingly difficult to hire such persons. Competitors and others
have in the past, and may in the future, attempt to recruit the Company's
employees. The Company has from time to time experienced turnover of key
management and technical personnel. The loss of key management or technical
personnel, or the failure to attract and retain key personnel, could have a
material adverse effect on the Company's business, results of operations, and
financial condition.
Dependence on Proprietary Technologies; Risk of Infringement. The Company's
performance depends in part on its ability to protect its proprietary rights to
the technologies used in its principal products. The Company relies on a
combination of copyright and trademark laws, trade secrets, confidentiality
provisions and other contractual provisions to protect its proprietary rights,
which are measures that afford only limited protection. Despite the Company's
efforts to protect its proprietary rights, unauthorized parties may attempt to
copy aspects of the Company's products, or to obtain and use information that
the Company regards as proprietary. In addition, the laws of some foreign
countries do not protect the Company's proprietary rights as fully as do the
laws of the United States. There can be no assurance that the Company's means of
protecting its proprietary rights in the United States or abroad will be
adequate, or that competitors will not independently develop similar
technologies. There can be no assurance that third parties will not claim
infringement by the Company's products of their intellectual property rights.
The Company expects that software product developers will increasingly be
subject to infringement claims if the number of products and competitors in the
Company's industry segment grows and the functionality of products in different
industry segments overlaps. Any such claims, with or without merit, and
regardless of the outcome of any litigation, will be time consuming to defend,
result in costly litigation, divert management's attention and resources, cause
product shipment delays, or require the Company to enter into royalty or
licensing agreements. Such royalty or licensing agreements, if required, may not
be available on terms acceptable to the Company, if at all. In the event of a
successful claim of infringement against the Company's products and the failure
or inability of the Company to license the infringed or similar technology, the
Company's business, results of operations, and financial condition would be
materially and adversely affected.
The Company also licenses software from third parties, which is incorporated
into its products, including software incorporated into its viewer, image
decompression software and optical character recognition, and full-text engines.
These licenses expire from time to time. There can be no assurance that these
third-party software licenses will continue to be available to the Company on
commercially reasonable terms. While the Company believes that all of such
third-party software is available from alternate vendors, and the Company
maintains standard software escrow agreements with each of such parties,
agreements which provide the Company with access to the source code in the event
of their bankruptcy or insolvency, the loss of, or inability to maintain, any
such software licenses could result in shipment delays or reductions until
equivalent software could be developed, identified, licensed and integrated,
which in turn could materially and adversely affect the Company's business,
results of operations, and financial condition. In addition, the Company
generally does not have access to source code for the software supplied by these
third parties. Certain of these third parties are small companies that do not
have extensive financial and technical resources. If any of these relationships
were terminated or if any of these third parties were to cease doing business,
the Company may be forced to expend significant time and development resources
to replace the licensed software. Such an event would have a material adverse
effect upon the Company's business, results of operations, and financial
condition. The Company has entered into source code escrow agreements with a
limited number of its customers and resellers, requiring release of source code
in certain circumstances. Such agreements generally provide that such parties
will have a limited, non-exclusive right to use such code in the event that
there is a bankruptcy proceeding by or against the Company, if the Company
ceases to do business, or if the Company fails to provide timely responses to
identified product defects.
International Operations. Sales outside the United States accounted for
approximately 29%, 23% and 24% of the Company's revenues in 1996, 1997 and 1998,
respectively. An element of the Company's strategy is to expand its
international operations, including the development of certain third-party
distributor relationships and the hiring of additional sales representatives,
each of which involves a significant investment of time and resources. There can
be no assurance that the Company will be successful in expanding its
international operations. In addition, the Company has only limited experience
in developing localized versions of its products. There can be no assurance that
the Company will be able to successfully localize, market, sell and deliver its
products internationally. The inability of the Company to successfully expand
its international operations in a timely manner could materially and adversely
affect the Company's business, results of operations, and financial condition.
The Company's international revenues may be denominated in foreign or the U.S.
dollar currency. The Company does not currently engage in foreign currency
hedging transactions; as a result, a decrease in the value of foreign currencies
relative to the U.S. dollar could result in losses from transactions denominated
in foreign currencies, could make the Company's software less price-competitive,
and could have a material adverse effect upon the Company's business, results of
operations, and financial condition. In addition, the Company's international
business is, and will continue to be, subject to a variety of risks, including:
delays in establishing international distribution channels; difficulties in
collecting international accounts receivable; increased costs associated with
maintaining international marketing and sales efforts; unexpected changes in
regulatory requirements, tariffs and other trade barriers; political and
economic instability; limited protection for intellectual property rights in
certain countries; lack of acceptance of localized products in foreign
countries; difficulties in managing international operations, potentially
adverse tax consequences including, restrictions on the repatriation of
earnings; and the burdens of complying with a wide variety of foreign laws.
There can be no assurance that such factors will not have a material adverse
effect on the Company's future international revenues and, consequently, the
Company's results of operations. Although the Company's products are subject to
export controls under United States laws, the Company believes it has obtained
all necessary export approvals. However, the inability of the Company to obtain
required approvals under any applicable regulations could adversely affect the
ability of the Company to make international sales.
Product Liability; Risk of Product Defects. The Company's license agreements
with its customers typically contain provisions designed to limit the Company's
exposure to potential product liability claims. However, it is possible that the
limitation of liability provisions contained in the Company's license agreements
may not be effective under the laws of certain jurisdictions. Although the
Company has not experienced any product liability claims to date, the sale and
support of products by the Company may entail the risk of such claims, and there
can be no assurance that the Company will not be subject to such claims in the
future. A successful product liability claim brought against the Company could
have a material adverse effect upon the Company's business, results of
operations, and financial condition. Software products such as those offered by
the Company frequently contain errors or failures, especially when first
introduced or when new versions are released. Although the Company conducts
extensive product testing, the Company has in the past released products that
contained defects, and has discovered software errors in certain of its new
products and enhancements after introduction. The Company could in the future
lose or delay recognition of revenues as a result of software errors or defects,
the failure of its products to meet customer specifications or otherwise. The
Company's products are typically intended for use in applications that may be
critical to a customer's business. As a result, the Company expects that its
customers and potential customers have a greater sensitivity to product defects
than the market for general software products. Although the Company's business
has not been materially and adversely affected by any such errors, or by defects
or failure to meet specifications, to date, there can be no assurance that,
despite testing by the Company and by current and potential customers, errors or
defects will not be found in new products or releases after commencement of
commercial shipments, or that such products will meet customer specifications,
resulting in loss or deferral of revenues, diversion of resources, damage to the
Company's reputation, or increased service and warranty and other costs, any of
which could have a material adverse effect upon the Company's business,
operating results, and financial condition. (See Year 2000 discussion).
Potential Volatility of Stock Price. The market price of shares of Common
Stock is likely to be highly volatile and may be significantly affected by
factors such as: actual or anticipated fluctuations in the Company's operating
results; announcements of technological innovations; new products or new
contracts by the Company or its competitors; sales of Common Stock by
management; sales of significant amounts of Common Stock into the market;
developments with respect to proprietary rights; conditions and trends in the
software and other technology industries; adoption of new accounting standards
affecting the software industry; changes in financial estimates by securities
analysts and others; general market conditions; and other factors that may be
unrelated to the Company or its performance. In addition, the stock market has
from time to time experienced significant price and volume fluctuations that
have particularly affected the market prices for the common stock of technology
companies. These broad market fluctuations may adversely affect the market price
of the Company's Common Stock. In the past, following periods of volatility in
the market price of a particular company's securities, securities class action
litigation has often been brought against such company. There can be no
assurance that such litigation will not occur in the future with respect to the
Company. Such litigation, regardless of its outcome, would result in substantial
costs and a diversion of management's attention and resources which could have a
material adverse effect upon the Company's business, results of operations, and
financial condition.
Control by Existing Stockholders; Effects of Certain Anti-Takeover
Provisions. Members of the Board of Directors, and the executive officers of the
Company, together with members of their families and entities that may be deemed
affiliates of, or related to, such persons or entities, beneficially own
approximately 38% of the outstanding shares of Common Stock of the Company.
Accordingly, these stockholders could, if acting in concert, be able to elect
all members of the Company's Board of Directors and determine the outcome of
corporate actions requiring stockholder approval, such as mergers and
acquisitions. Certain provisions of the Company's Certificate of Incorporation,
equity incentive plans, Bylaws, and Delaware law may also discourage certain
transactions involving a change in control of the Company. This level of
ownership by such persons and entities, when combined with the Company's
classified Board of Directors and the ability of the Board of Directors to issue
"blank check" preferred stock without further stockholder approval, may have the
effect of delaying, deferring or preventing a change in control of the Company
and may adversely affect the voting and other rights of other holders of Common
Stock.
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings.
None.
Item 2 - Changes in Securities.
None.
Item 3 - Defaults upon Senior Securities.
None.
Item 4 - Submission of Matters to a Vote of Security Holders.
None.
Item 5 - Other Information.
None.
Item 6 - Exhibits and Reports on Form 8-K
.
(a) Exhibits
27 Financial data schedule.
(b) Reports on Form 8-K
On March 30 and April 2, 1999 the Company filed reports on Form 8-K,
Item 4, Change in Registrant's Certifying Accountants.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OPTIKA INC.
(Registrant)
5/13/99 /s/ Mark K. Ruport
------- ----------------------------------
(Date) Mark K. Ruport
President, Chief Executive Officer
and Chairman of the Board
5/13/99 /s/ Steven M. Johnson
------- ----------------------------------
(Date) Steven M. Johnson
Chief Financial Officer, Vice President
Finance and Administration, Secretary
and Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
MARCH 31, 1999 YEAR-TO-DATE FINANCIAL STATEMENTS AS REPORTED ON FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENT
</LEGEND>
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<NAME> OPTIKA INC.
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