<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the period from _______ to _______.
Commission File Number: 000-21751
MESSAGEMEDIA, INC.
(Exact Name of Registrant as specified in its charter)
Delaware 33-0612860
- ------------------------------ ---------------------------------------
(State or jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
6060 SPINE ROAD
BOULDER, CO 80301
(Address, including zip code, of principal executive offices)
(303) 440-7550
(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
--- ---
Applicable Only to Issuers Involved in Bankruptcy
Proceedings During the Preceding Five Years
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by the court. Yes No
--- ---
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
Common Stock, $0.001 Par Value - 49,954,113 shares as of September 30, 1999.
<PAGE> 2
MESSAGEMEDIA, INC.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1999 (unaudited) and
December 31, 1998 3
Consolidated Statements of Operations (unaudited) for the three months
and nine months ended September 30, 1999 and 1998 4
Consolidated Statements of Cash Flows (unaudited) for the nine months
ended September 30, 1999 and 1998 5
Notes to the Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
Factors Affecting Operating Results and Market Price of Stock 15
Item 3. Quantitative and Qualitative Disclosures About Market Risk 26
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 26
Item 2. Changes in Securities and Use of Proceeds 26
Item 3. Defaults Upon Senior Securities 27
Item 4. Submission of Matters to a Vote of Security Holders 27
Item 5. Other Information 27
Item 6. Exhibits and Reports on Form 8-K 27
SIGNATURES 28
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MESSAGEMEDIA, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- -------------
ASSETS (unaudited) (note 1)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,404,843 $ 4,659,375
Accounts receivable, net 3,306,370 680,927
Prepaid expenses and other 509,252 429,963
------------- -------------
Total current assets 11,220,465 5,770,265
Furniture, equipment and software, net 2,550,798 1,475,720
Patent and other costs, net 23,204 50,835
Intangible assets, net 88,133,090 23,894,715
Deposits and other 181,565 29,446
------------- -------------
Total assets $ 102,109,122 $ 31,220,981
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,319,224 $ 1,383,197
Accrued compensation and related liabilities 1,459,986 148,419
Accrued interest -- 15,226
Deferred revenue 537,165 36,000
Amount due to stockholders, current portion -- 395,000
Note payable and capital lease obligations, current portion 27,193 108,990
Accrued acquisition costs 1,187,947 --
Other accrued liabilities 970,389 583,770
------------- -------------
Total current liabilities 6,501,904 2,670,602
Note payable and capital lease obligations 41,552 53,786
Deferred rent -- 13,083
------------- -------------
Total long term liabilities 41,552 66,869
Stockholders' equity :
Preferred stock, 5,000,000 shares authorized, none
outstanding at September 30, 1999 and December 31, 1998 -- --
Common stock, $0.001 par value; 100,000,000 shares authorized,
49,954,113 and 40,121,048 shares issued and outstanding at
September 30, 1999 and December 31, 1998, respectively 49,954 40,121
Additional paid-in-capital 166,207,498 71,398,314
Warrants 1,430,828 1,430,828
Deferred compensation (1,489,211) (657,720)
Accumulated deficit (70,633,403) (43,728,033)
------------- -------------
Total stockholders' equity 95,565,666 28,483,510
------------- -------------
Total liabilities and stockholders' equity $ 102,109,122 $ 31,220,981
============= =============
</TABLE>
See accompanying notes.
3
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MESSAGEMEDIA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 3,053,523 $ 346,632 $ 5,109,166 $ 844,926
Cost of revenues 1,686,624 10,193 2,067,427 44,830
------------ ------------ ------------ ------------
Gross profit 1,366,899 336,439 3,041,739 800,096
Operating expenses:
Marketing and sales 3,490,775 209,993 5,803,197 1,423,492
Research, development
and engineering 1,052,884 996,078 2,841,888 3,892,823
General and administrative 2,008,736 550,833 4,994,059 2,781,554
Restructuring charge -- -- 1,025,000 812,166
Depreciation and amortization 8,672,781 305,282 15,487,829 1,145,357
------------ ------------ ------------ ------------
Total operating expenses 15,225,176 2,062,186 30,151,973 10,055,392
------------ ------------ ------------ ------------
Loss from operations (13,858,277) (1,725,747) (27,110,234) (9,255,296)
Interest income 117,721 72,603 284,800 128,364
Interest expense (9,056) (3,897) (79,933) (68,155)
------------ ------------ ------------ ------------
Net loss (13,749,612) (1,657,041) (26,905,367) (9,195,087)
Dividend imputed on preferred
stock -- -- -- (153,126)
------------ ------------ ------------ ------------
Net loss applicable to
common shares $(13,749,612) $ (1,657,041) $(26,905,367) $ (9,348,213)
============ ============ ============ ============
Net loss per share, basic
and diluted $ (0.29) $ (0.05) $ (0.61) $ (0.52)
Shares used in per share
computation, basic and
diluted 47,355,875 31,744,216 43,995,120 18,125,810
OTHER DATA:
EBITDA $ (5,185,496) $ (1,420,465) $(11,622,405) $ (8,109,939)
</TABLE>
See accompanying notes.
4
<PAGE> 5
MESSAGEMEDIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(26,905,367) $ (9,195,087)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 15,487,829 1,145,357
Loss on disposal of assets -- 33,943
Common stock issued for services -- 46,745
Amortization of deferred compensation 273,462 --
Compensation expense for stock options 916,007 446,082
Changes in operating assets and liabilities:
Accounts receivable (1,882,865) 122,143
Note receivable -- (100,000)
Prepaid expenses and other (76,264) 211,987
Deposits and other (95,015) (106,842)
Accounts payable 222,502 (768,345)
Accrued compensation and related liabilities 1,024,275 (224,447)
Deferred revenue 161,565 (537,790)
Accrued interest (15,226) (289,903)
Deferred rent (13,083) --
Amount paid to stockholder -- (97,500)
Other accrued liabilities (216,454) (236,616)
------------ ------------
Net cash used in operating activities (11,118,634) (9,550,273)
INVESTING ACTIVITIES
Additions to furniture, equipment and software (1,156,363) (297,760)
Proceeds from sale of fixed assets -- 14,733
Cash and cash equivalents acquired with acquisitions 2,053,541 --
------------ ------------
Net cash provided by (used in) investing activities 897,178 (283,027)
FINANCING ACTIVITIES
Proceeds from issuance of common stock, net 13,531,486 11,114,423
Proceeds from the exercise of warrants -- 8,523
Proceeds from SOFTBANK -- 1,411,578
Repayment of amount due to SOFTBANK -- (1,411,578)
Repayment of amount due to stockholder (395,000) --
Repayment of capital lease obligations (169,562) --
------------ ------------
Net cash provided by financing activities 12,966,924 11,122,946
Net increase (decrease) in cash and cash
equivalents 2,745,468 1,289,646
Cash and cash equivalents at the beginning
of period 4,659,375 6,331,059
------------ ------------
Cash and cash equivalents at the end
of period $ 7,404,843 $ 7,620,705
============ ============
</TABLE>
See accompanying notes.
5
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MESSAGEMEDIA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in acccordance with generally accepted accounting principles for interim
financial information and with instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month and nine-month periods
ended September 30, 1999 are not necessarily indicative of the results that may
be expected for the year ended December 31, 1999.
The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in MessageMedia's annual report on Form 10-K for the
year ended December 31, 1998.
2. EBITDA
EBITDA is defined as operating income (loss) before interest, taxes,
depreciation and amortization. The primary measure of operating performance is
net earnings (loss). Although EBITDA is a measure commonly used in our industry,
it should not be construed as an alternative to net earnings (loss), determined
in accordance with GAAP, as an indicator of operating performance, or as an
alternative to cash flows from operating activities, determined in accordance
with GAAP.
3. ACQUISITIONS
Revnet Systems Inc.
On August 9, 1999, MessageMedia acquired all of the common stock and all
outstanding rights of the common stock of Revnet Systems Inc. (Revnet) in
exchange for 3,262,120 shares of MessageMedia common stock and the assumption by
Messagemedia of options to acquire up to approximately 681,675 additional shares
of MessageMedia common stock, at a weighted average exercise price of $1.36. The
purchase price was calculated to be $41,834,901 based on the fair market value
of $10.64 per share of MessageMedia common stock. The purchase price also
includes estimated acquisition costs of $800,000. The purchase price has been
allocated as follows:
<TABLE>
<S> <C>
Current assets acquired........................................ $ 2,279,472
Furniture, equipment and software.............................. 175,867
Other long term assets......................................... 591
Goodwill and other tangibles................................... 39,404,967
Liabilities assumed............................................ (1,101,385)
Deferred compensation.......................................... 1,075,389
-----------
$41,834,901
</TABLE>
Decisive Technology, Inc.
On August 16, 1999, MessageMedia acquired all of the common stock and all
outstanding rights of the common stock of Decisive Technology Inc. in exchange
for 2,054,498 shares of MessageMedia common
6
<PAGE> 7
stock and the assumption of options to acquire up to approximately 466,818
additional shares of MessageMedia common stock at a weighted average exercise
price of $2.69. The purchase price was calculated to be $39,635,955 based on the
fair market value of $16.03 per share of MessageMedia common stock. The purchase
price also includes estimated acquisition costs of $475,000. The purchase price
has been allocated as follows:
<TABLE>
<S> <C>
Current assets acquired........................................... $ 519,671
Furniture, equipment and software................................. 607,500
Other assets...................................................... 57,104
Goodwill and other intangibles.................................... 39,428,361
Liabilities assumed............................................... (976,681)
-----------
$39,635,955
</TABLE>
The accompanying statements of operations reflect the operating results of
Revnet and Decisive since the date of their respective acquisitions. The pro
forma unaudited results of operations for the nine months ended September 30,
1999 and 1998, assuming the purchase of Revnet and Decisive had occurred on
January 1, of the respective years, are as follows:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1999 1998
------------ ------------
<S> <C> <C>
Revenues $ 8,722,651 $ 3,908,379
Net loss attributable to common shares (54,369,579) (44,279,462)
Net loss per share attributable to common
shares, basic and diluted $ (1.12) $ (1.89)
</TABLE>
4. SUBSEQUENT EVENTS
On October 7, 1999, we entered into a non-binding agreement with @viso, a
strategic partnership between Vivendi and SOFTBANK, to create MessageMedia
Europe which will be a joint venture between us and @viso.
On October 19, 1998, Exactis.com, Inc. filed a complaint against our subsidiary
Epub in the Federal District Court of Colorado. The complaint alleged
infringement of a patent held by Exactis.com, Inc. and sought injunctive relief
and unspecified damages. On October 29, 1998, we filed a complaint in the U.S.
District Court for the Southern District of California against Exactis.com, Inc.
The complaint alleged infringement of a patent held by us and sought injunctive
relief and unspecified damages. On October 13, 1999 both parties agreed to a
settlement of these actions which have subsequently been dismissed by the courts
with prejudice.
On October 21,22, and 25, 1999, in three separate closings, we completed a
private placement of 4,095,124 shares of our common stock for $41,975,021.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Report on Form 10-Q may contain, forward-looking statements including
statements regarding the Company's strategy, financial performance and revenue
sources, that involve risks and uncertainties. The Company's actual results may
differ significantly from the results discussed in the forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, those discussed in the subsection entitled "Factors Affecting
Operating Results and Market Price of Stock" commencing on page 12. Readers are
urged to carefully review and consider the various disclosures made by the
Company in this report and in the Company's other reports filed with the SEC
that attempt to advise interested parties of certain risks and factors that may
affect the Company's business. The following discussion should be read in
conjunction with the Company's financial statements and notes thereto.
COMPANY OVERVIEW
MessageMedia is a leading provider of permission-based, comprehensive
e-messaging solutions. E-messaging is our term to describe our suite of services
that utilize the medium of e-mail to develop and foster permission-based
relationships with customers. Our suite of services and products, including
Internet-based marketing, customer care, survey and information distribution
solutions, enable businesses to use e-messaging as a strategic tool to increase
sales, improve customer communication and develop long-term customer loyalty.
Our e-messaging solutions, available either on an outsourced-subscription basis
or using in-house, packaged software, allow businesses to establish and enhance
two-way customer dialogue across the extended enterprise, from marketing to
sales to customer service. By leveraging the cost-effective reach, flexibility
and widespread acceptance of e-mail, our solutions enable businesses to create,
deliver and continually refine targeted, permission-based e-messaging campaigns.
Our staff of client service professionals assist our clients in building their
businesses through the strategic implementation and use of our suite of service
applications.
Through our professional staff of client service representatives, we deliver
e-messaging services specifically tailored to each client's business objectives.
After an initial sale is made, we appoint an account management team to act as
the client's primary point of contact for all relationship and campaign
management issues. We provide end-to-end e-messaging mailing and campaign
management solutions, including creating a detailed specification of customer
needs, developing the web interfaces, customizing the database, implementing
project plans, campaign roll-out and post-mailing analysis. Our proprietary
technology allows us to track and review current and past e-messaging campaigns,
providing valuable information that allows us to tailor and fine-tune our
clients e-messaging campaigns to optimize effectiveness. Our services provide
clients with the following benefits:
o a comprehensive set of e-messaging solutions for businesses that seek
to increase sales, improve customer communication and develop
long-term customer loyalty;
o permission-based e-messaging to create an immediate two-way dialogue
with their customers;
o the tools to track, review and refine e-messaging campaigns by
leveraging our expertise and proprietary technology;
o rapidly deployable, cost-effective outsourced solutions which
eliminate the need to invest in the technology, hardware and human
resources necessary to implement and manage a comprehensive set of
e-messaging services; and
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<PAGE> 9
o the ability to manage large volumes of simple or complex customer
communications and easily integrate more advanced e-messaging
applications.
Our clients cover a broad range of industry segments, including
Internet/e-commerce, publishing, computer hardware/software and financial
services. In June 1998, we were recapitalized by SOFTBANK Corp. and affiliates,
a leading investor in the Internet sector. We intend to leverage our strategic
relationship with SOFTBANK through introductions to companies within the
SOFTBANK family of investments and capitalize on the expertise and advice of its
partners with respect to building e-businesses.
We have incurred net operating losses in each quarter since inception. As of
September 30, 1999, we had an accumulated deficit of $70.6 million. To date, we
have not generated significant revenues. There can be no assurance that our
future revenues will increase and our ability to generate significant future
revenues is subject to substantial uncertainty. In addition, as we introduce new
functionality of our services and explore opportunities to merge with or acquire
complementary businesses and technologies, we expect to continue to incur
significant operating losses for the foreseeable future.
9
<PAGE> 10
RESULTS OF OPERATIONS
Revenues
We currently derive our revenue from outsourced e-messaging services and
software products and related support services. Our outsourced e-messaging
services include information distribution, e-mail marketing, e-customer care,
e-commerce messaging and e-survey. Our software products provide e-messaging and
e-survey capabilities for clients desiring their own "in-house" solution. Prior
to July 1998, we derived our revenue from our First Virtual Internet Payment
System ("FVIPS") and related consulting services. In July 1998, we phased out
the operations of the FVIPS and launched our e-messaging services.
In December 1998, we acquired Email Publishing Inc. (Epub), a leading provider
of outsourced e-mail message delivery services to businesses and organizations.
In August 1999, we acquired Revnet and Decisive. Revnet, based in Huntsville,
Alabama, was a leading developer and supplier of software solutions providing
businesses and organizations with "in house" e-mail message delivery capability
and outsourced e-mail message delivery services. Decisive, based in Mountain
View, California, was a leading provider of online customer intelligence
solutions such as e-surveys. Revenue for the periods presented was earned as
detailed in the table below:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- --------------------------
1999 1998 1999 1998
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Revenue from E-Messaging Solutions $3,053,523 $ 56,000 $5,109,166 $ 81,700
Revenue from FVIPS -- 290,632 -- 763,226
---------- --------- ---------- ---------
Total revenues $3,053,523 $ 346,632 $5,109,166 $ 844,926
========== ========= ========== =========
</TABLE>
For the three months ended September 30, 1999, revenues increased to $3,053,523
as compared to $346,632 for the three months ended September 30, 1998. This
increase is primarily attributable to the change in our business strategy from
an internet payment system product to e-messaging services and software
products. In July 1998, we began our e-messaging services, which is now our
primary business, and phased out our FVIPS operations.
For the nine months ended September 30, 1999, revenues increased to $5,109,166
as compared to $844,926 for the nine months ended September 30, 1998. This
increase is primarily attributable to the change in our business strategy,
increases in the number of clients using our services, increased e-messaging
volume, and an incremental increase in revenue as a result of the Epub, Revnet,
and Decisive acquisitions.
Cost of Revenues
The cost of e-messaging solutions revenues consists of salaries, benefits,
consulting fees and operational costs related to providing our outsourced
e-messaging services and software packaging and distribution costs. The cost of
revenues from FVIPS consists of fees paid to third parties for processing
transactions, costs of setting up new accounts and communication expenses
related to providing services from the FVIPS. We have incurred cost of revenues
from e-messaging services and FVIPS, as detailed in the table below:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- --------------------------
1999 1998 1999 1998
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Cost of E-Messaging Solutions Revenues $1,686,624 $ 6,671 $2,067,427 $ 6,671
Cost of revenues from FVIPS -- 3,522 -- 38,159
---------- --------- ---------- ---------
Total cost of revenues $1,686,624 $ 10,193 $2,067,427 $ 44,830
========== ========= ========== =========
</TABLE>
10
<PAGE> 11
For the three months ended September 30, 1999, the cost of revenues increased to
$1,686,624 as compared to $10,193 for the three months ended September 30, 1998.
This increase is primarily attributable to increased headcount needed to service
our growing e-messaging customer base and e-messaging volumes and the
incremental increase in cost of revenues as a result of acquiring Revnet and
Decisive.
For the nine months ended September 30, 1999, the cost of revenues increased to
$2,067,427 as compared to $44,830 for the nine months ended September 30, 1998.
This increase is primarily attributable to increased headcount needed to service
our growing e-messaging customer base and e-messaging volumes and the
incremental increase in cost of revenues as a result of acquiring Revnet and
Decisive.
Operating Expenses
Operating expenses consist of marketing and sales, research, development and
engineering, and general and administrative expenses. Overall operating expenses
increased in the three months and nine months ended September 30, 1999 as
compared to the same periods in 1998 due to increased headcount and related
expenses. Operating expenses in the three months and nine months ended September
30, 1999 include the operating results of Revnet and Decisive as a result of
their acquisition on August 9, 1999 and August 16 1999, respectively.
Additionally, our acquisition of Epub and Distributed Bits LLC (D-Bits) was
completed in December 9, 1998 and December 11, 1998, respectively, and therefore
their operating results were included in the three months and nine months ended
September 30, 1999 but were not included in the comparable periods in 1998.
During the nine months ended September 30, 1999, we incurred a merger
integration and restructuring charge in connection with the relocation of our
corporate headquarters from San Diego, California to Boulder, Colorado. During
the nine months ended September 30, 1998, we incurred a restructuring charge in
connection with ceasing operations of our FVIPS. We expect operating expenses to
continue to be substantial as development and enhancement of technological
capabilities associated with our e- messaging services continue, as we explore
opportunities to merge with or acquire complementary businesses or technologies
and as we add staff to service our growing customer base. We also anticipate
that expenses necessary for the introduction of new services and promotion of
our products will be substantial.
Marketing and sales expenses. Marketing and sales expenses, which include
salaries, wages, consulting fees, advertising, trade shows, travel and other
marketing expenses, increased to approximately $3.5 million for the three months
ended September 30, 1999, as compared to $209,993 for the three months ended
September 30, 1998. This increase is primarily due to increased headcount in
sales, client services and marketing staff, as a result of increased sales
efforts related to our new e-messaging services and an incremental increase in
headcount from acquisitions. Additionally, advertising and promotional spending
increased as a result of promoting our new e-messaging services and products.
During the three months ended September 30, 1998, marketing and sales expense
was significantly lower due to our decision in July 1998 to phase out the FVIPS
services and introduce e-messaging services.
For the nine months ended September 30, 1999, marketing and sales expenses
increased to approximately $5.8 million as compared to approximately $1.4
million for the nine months ended September 30, 1998. This increase is primarily
due to increased headcount in sales, client services and marketing staff, as a
result of increased sales efforts related to our new e-messaging services and an
incremental increase in headcount from acquisitions.
Marketing and sales expense for the three months and nine months ended September
30, 1999 includes a one-time charge of approximately $855,000 in compensation
expense from acceleration of stock options. This compensation expense relates to
an employment agreement with a former officer which included an option vesting
acceleration clause that was triggered upon the company obtaining certain sales
contracts and/or certain sales levels.
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<PAGE> 12
Research, development and engineering expenses. Research, development and
engineering expenses, which include salaries, wages, and consulting fees to
support the development, enhancement and maintenance of our products and
services, increased to approximately $1.1 million for the three months ended
September 30, 1999, as compared to $996,078 for the three months ended September
30, 1998. This increase is due an increase in headcount and a related increase
in compensation expense.
For the nine months ended September 30, 1999, research, development and
engineering expenses decreased to approximately $2.8 million as compared to
approximately $3.9 million for the nine months ended September 30, 1998. This
decrease resulted primarily from a reduction in development headcount due to the
elimination of our FVIPS and a decrease in consulting fees due to the
elimination of development consultants associated with our FVIPS.
General and administrative expenses. General and administrative expenses consist
primarily of salaries, wages, professional and consulting fees, and other
expenses associated with the general management and administration of the
Company. General and administrative expenses increased to approximately $2.0
million for the three months ended September 30, 1999, as compared to $550,833
for the three months ended September 30, 1998. This increase is primarily due to
an increase in headcount and a related increase in compensation expense as a
result of the company's growth. Additionally, there was an incremental increase
in headcount and related expenses due to the merger and integration of Revnet's
and Decisive's respective operations.
For the nine months ended September 30, 1999, general and administrative
expenses increased to approximately $5.0 million as compared to approximately
$2.8 million for the nine months ended September 30, 1998. This increase is
primarily due to an increase in headcount and a related increase in compensation
expense as a result of the company's growth and additionally due to
acquisitions.
Merger integration and restructuring charges. In the first quarter of 1999, we
recorded a charge of $1,025,000 as a result of our decision to relocate our
corporate headquarters from San Diego, California to a new facility in Boulder,
Colorado. This decision was made to create efficiencies in the our messaging
services operations, reduce overhead by centralizing our offices to one facility
and eliminate duplication of efforts from similar positions in the separate
offices. The merger integration and restructuring activity of MessageMedia,
D-Bits, and Epub included a company wide staff reduction which resulted in
approximately $632,000 of employee severance pay and other related expenses and,
approximately $393,000 in moving expenses and costs related to closing the San
Diego facility.
In the second quarter of 1998, we recorded a restructuring charge of $812,166 as
a result of our decision to focus our efforts on our e-messaging platform,
initiate efforts to cease operations of our FVIPS and better align our cost
structure with expected revenue projections. The restructuring charge included
the elimination of job responsibilities company wide, resulting in approximately
$545,000 of employee severance pay and other related expenses, and approximately
$267,000 related to relocating our corporate office and termination fees for
cancellation of certain contracts related to FVIPS.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1999, we had $7.4 million in cash and cash equivalents. On
October 25, 1999, we closed a private placement of 4,095,124 shares of our
common stock for approximately $41.975 million. We believe that existing cash
resources will be sufficient to support our currently anticipated working
capital and capital expenditure requirements through the end of 2000.
Net cash used in operating activities was approximately $11.1 million and $9.6
million for the nine months ended September 30, 1999 and 1998, respectively. Net
operating cash flows were primarily attributable to net losses offset by
non-cash charges for depreciation, amortization and stock-based compensation, as
well as increases in accounts receivable, accounts payable and other accrued
liabilities.
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Net cash provided by (used in) investing activities was $897,178 and $(283,027)
for the nine months ended September 30, 1999 and 1998, respectively. The net
cash provided by investing activities for the nine months ended September 30,
1999 resulted from approximately $2.1 million in net cash acquired with the
Revnet and Decisive acquisitions offset by approximately $1.2 million in capital
expenditures.
Net cash provided by financing activities was approximately $12.9 million and
$11.1 million for the nine months ended September 30, 1999 and 1998,
respectively, and resulted from net proceeds from issuance of our common stock,
offset by payments of notes payable and capital lease obligations.
We have no material financial commitments other than obligations under operating
leases.
We expect to substantially increase expenditures for applications including
computer equipment and furniture and fixtures associated with new employees and
facility expansion, bandwidth and networking equipment and infrastructure,
additional sales and marketing employees, equipment and additional employees
related to product development, increased promotion and branding efforts, and
development and acquisition of new technology.
Capital requirements in any particular period will depend on the timing of these
expenditures.
YEAR 2000 COMPLIANCE
Many computer systems and software products are coded to accept only two-digit
entries in date code fields. Beginning in the year 2000, these date code fields
will need to accept four-digit entries to distinguish 21st century dates from
20th century dates. As a result, computer systems and/or software used by many
companies may need to be upgraded to comply with "year 2000" requirements. Since
we just recently developed the software for our e-messaging platform and are
adding new enhancements and functionality regularly, we believe that our
e-messaging platform is year 2000 compliant. There can be no assurance, however,
that coding errors or other defects will not be discovered in the future as more
testing is completed or new functionality added. We have completed a systematic
effort to identify year 2000 compliance problems in all of the components of our
e-messaging platform. We believe that any remaining testing and remediation will
require less than 100 man-hours and intend to complete our remediation efforts
on or before November 30, 1999. To date, we have incurred minimal expenses
related to year 2000 compliance and we expect to incur less than $50,000 of
expenses related to our remaining compliance efforts. We currently are
developing contingency plans to take effect in the event we do not complete any
necessary remediation efforts and to assist clients and customers in the event
we experience unexpected year 2000-related problems.
We rely on a number of software and communications systems provided by third
parties to operate our e-messaging platform. Any of these could contain coding
which is not year 2000 compliant. These systems include server software used to
operate the network servers, software controlling routers, switches and other
components of the data network, disk management software used to control the
data disk arrays, firewall, security, monitoring and back-up software used by
us, as well as desktop PC applications software. In each case, we employ widely
available software applications from leading third party vendors, and expect
that such vendors will provide any required upgrades or modifications in a
timely fashion. However, if any third party software or communication systems
suppliers fail to provide year 2000 compliant versions of the software or system
components we rely upon, our operations, including our e-messaging platform,
could be disrupted. We have contacted and monitor each of our key suppliers to
validate their efforts to ensure that their software products and communication
systems are year 2000 compliant and will continue to do so throughout the course
of this process.
Year 2000 compliance problems also could undermine the general infrastructure
necessary to support our operations. For instance, we depend on third-party
Internet Service Providers (ISPs) to provide connections to the Internet and to
customer information systems. Any interruption of service from ISPs could result
in a temporary interruption of our e-messaging and other services. We have
attempted to address this risk by obtaining the same service capacity from
multiple ISPs. In addition, we rely on two third-party data centers to house
some servers and communications systems. Any interruption in the security,
access, monitoring or power systems at the third-party data centers could result
in an interruption of services. Moreover, it is difficult
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to predict what effects year 2000 compliance problems will have on the integrity
and stability of the Internet. If businesses and consumers are not able to
reliably access the Internet, or if the ISPs on which we rely fail to provide us
with uninterrupted service, our reputation could be harmed and the demand for
our services could decline, resulting in an adverse impact to our business,
financial condition and results of operations.
With respect to any particular customer, our ability to provide services to that
customer could be adversely affected if that customer fails to ensure that its
software systems are year 2000 compliant. Disruptions in the information systems
of significant customers could temporarily prevent such customers from accessing
or using our e-messaging platform, which could materially affect our operating
results. Our e-messaging platform is designed to interface with customer
databases and communications systems to retrieve relevant information from
customers' electronic commerce systems or customer databases and to allow
customers to independently control certain features of the service, including
the content of transmitted messages. We cannot assess or control the degree of
year 2000 compliance in our customers' information systems. To address the risk
of disruptions in customer information systems, we designed our e-messaging
platform to include redundant manual control features which can be used by such
customers. Nevertheless, certain customers may elect to discontinue use of our
e-messaging services until their internal information technology problems have
been alleviated, which would adversely affect our business, financial condition
and results of operations. The spending patterns of our current or potential
customers may be affected by year 2000 issues as companies expend significant
resources to correct or update their systems for year 2000 compliance. Because
of these expenditures, our customers may have less money available to pay for
services, which could have a material adverse affect on our business, financial
condition and results of operations.
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FACTORS AFFECTING OPERATING RESULTS AND MARKET PRICE OF STOCK
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones we face. If any of the following risks actually occur, our business,
financial condition or results of operations could be materially and adversely
affected. In that case, the trading price of our common stock could decline, and
you may lose all or part of your investment.
WE HAVE A HISTORY OF OPERATING LOSSES AND FUTURE LOSSES ARE LIKELY.
We have incurred net losses applicable to common shares of approximately $71.9
million since our inception in March 1994. We have not achieved profitability
and expect to continue to incur operating losses at least into 2001. We intend
to continue to invest heavily in acquisitions, infrastructure development and
marketing. Accordingly, we expect to continue to incur significant operating and
capital expenditures and, as a result, we will need to generate significant
revenue to achieve and maintain profitability. Although our revenue has grown in
recent quarters, we cannot assure you that we will achieve sufficient revenue
for profitability. Even if we do achieve profitability, we cannot assure you
that we can sustain or increase profitability on a quarterly or annual basis in
the future. If revenue grows slower than we anticipate, or if operating expenses
exceed our expectations or cannot be adjusted accordingly, our business, results
of operations and financial condition will be materially and adversely affected.
OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE WE HAVE A LIMITED OPERATING
HISTORY AND RECENTLY HAVE CHANGED OUR BUSINESS MODEL.
We were incorporated in March 1994 for the purpose of developing an Internet
payment system. In 1998 we changed our business model and acquired two
e-messaging companies, Epub and D-Bits. In August 1999, we acquired two
additional e-messaging companies, Revnet and Decisive. An investor in our common
stock must consider the risks and difficulties frequently encountered by early
stage companies in new and rapidly evolving markets, including the Internet
e-messaging market. These risks include our:
o ability to sustain historical revenue growth rates;
o need to manage our expanding operations;
o need to successfully integrate our recent and any future acquisitions;
o competition;
o ability to attract, retain and motivate qualified personnel;
o ability to maintain our current, and develop new, strategic relationships;
o ability to anticipate and adapt to the changing Internet market; and
o ability to attract and retain a large number of customers from a variety of
industries.
We also depend on the growing use of the Internet for marketing, advertising,
commerce and communication. We cannot assure you that our business strategy will
be successful or that we will successfully address these risks.
OUR MARKETS ARE RELATIVELY NEW AND UNPROVEN AND OUR SUCCESS DEPENDS ON MARKET
ACCEPTANCE AND THE EFFECTIVENESS OF OUR E-MESSAGING SERVICES.
Demand and market acceptance for Internet e-messaging solutions is uncertain.
Our future success is highly dependent on an increase in the use of the Internet
as a marketing, advertising and communications medium. The adoption of Internet
e-messaging, particularly by those entities that historically have relied upon
traditional media for marketing and advertising, requires the acceptance of a
new way of conducting business, exchanging information and marketing products
and services. Many of our current or potential e-messaging customers have little
or no experience using the Internet for marketing and advertising purposes and
they have allocated only a limited portion of their budgets to Internet
e-messaging. Moreover, our customers may find Internet e-messaging to be less
effective for promoting their products and services relative to traditional
marketing and advertising media. If our e-messaging platform fails to meet
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customers' demands, the use of our e-messaging services may decline over time
and our business would suffer.
WE ADOPTED OUR CURRENT BUSINESS MODEL IN THE FOURTH QUARTER OF 1998 AND ITS
PROFIT POTENTIAL IS UNCERTAIN.
The profit potential for our business model, which is to generate revenue solely
by providing Internet e-messaging solutions to our customers, is unproven. To be
successful, both Internet marketing and our future and current service
offerings, including information distribution, e-mail marketing, e-customer
care, e-commerce messaging and e-surveys, will need to achieve broad market
acceptance. Our ability to generate significant revenue will depend, in part, on
our ability to contract with a sufficient number of customers. The intense
competition among Internet e-messaging companies has led to the creation of a
number of pricing alternatives for Internet e-messaging solutions. These
alternatives make it difficult for us to project future levels of revenue and
applicable gross profit that can be sustained by us or the Internet e-messaging
industry in general.
SUBSTANTIAL SALES OF OUR COMMON STOCK BY OUR LARGE STOCKHOLDERS COULD CAUSE OUR
STOCK PRICE TO FALL.
A limited number of stockholders hold a large portion of our common stock. To
the extent our large stockholders sell substantial amounts of our common stock
in the public market, the market price of our common stock could fall. Several
transactions completed by us over the last several months increased both the
number of our securities available for resale to the public and the number of
our securities held by our largest stockholders. For instance, in connections
with our acquisition of Revnet and Decisive, we issued 5,316,618 shares of our
common stock and assumed options to purchase up to approximately 1,148,493
additional shares of our common stock. All of the shares referred to above have
been registered for resale on Registration Statements on Form S-3 which have
been declared effective by the SEC. Accordingly, all such shares may be resold
into the public markets without restrictions. Additionally, we issued 4,095,124
shares of our common stock in a private placement. Affiliates of two of our
largest stockholders, Softbank America Inc. and Pequot Capital Management, Inc.
acquired 975,611 of the shares sold in the private placement. We have filed a
Registration Statement on Form S-3 covering the resale of such securities which
have been declared effective by the SEC.
WE MAY NOT BE ABLE TO SUCCESSFULLY INTEGRATE EPUB, D-BITS, REVNET AND DECISIVE
OR FUTURE ACQUISITIONS.
In December 1998, we acquired Epub and D-Bits and in August 1999 we acquired
Revnet and Decisive. As a result, companies that had previously operated
independently and with distinct business models must now work together. The
integration will require significant effort from our personnel and the personnel
of the acquired companies who are now our employees. We may not be able to
profitably consolidate these businesses.
The following risks are common to the integration of different companies, and
may be associated with recent or future acquisitions, including the recent
acquisitions of Revnet and Decisive:
o the difficulty of incorporating new operations, technology and personnel
into one company;
o the potential effects on operating results from increases in goodwill
amortization, acquired in-process technology, stock compensation
expense and increased compensation expense resulting from newly hired
employees;
o the diversion of management attention from other aspects of our
business;
o the potential disruption of our ongoing business;
o the potential reduction of the value of our e-messaging solutions or
reputation if an acquired company turns out to be a poor performer;
o the additional expense associated with amortization of acquired
intangible assets;
o the maintenance of uniform standards, controls, procedures and policies;
o the potential of disputes with the sellers of one or more acquired
entities;
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o the possible failure to retain key acquired personnel;
o the assumption of most or all of the liabilities of the acquired
companies, some of which may be hidden, significant or not reflected in
the final acquisition price; and
o the impairment of relationships with employees and customers.
As part of our business strategy, we intend to focus on acquiring, or making
significant investments in, additional companies, products and technologies that
complement our business. The successful implementation of this strategy depends
on our ability to identify suitable acquisition candidates, acquire those
companies on acceptable terms and integrate their operations successfully with
our business. If we make additional acquisitions, we could have difficulty in
assimilating the acquired products, services or technologies into our
operations. These difficulties could disrupt our ongoing business, distract our
management and employees, increase our expenses and adversely affect our results
of operations. Furthermore, we may incur debt or issue equity securities to pay
for any future acquisitions. The issuance of equity securities could be dilutive
to our existing stockholders.
OUR FAILURE TO ENHANCE OUR EXISTING PRODUCTS AND INTRODUCE NEW PRODUCTS ON A
TIMELY BASIS COULD CAUSE OUR REVENUE TO FALL.
We are continually developing significant enhancements for our e-messaging
services and products. Any delay or difficulty associated with the introduction
of these enhancements could significantly harm our business, results of
operations and financial condition. We also may not be able to develop the
underlying core technologies necessary to create new products or enhancements,
or to license those products from third parties.
WE NEED TO ATTRACT AND RETAIN QUALIFIED PERSONNEL AND MAY NOT BE ABLE TO DO SO.
Our success depends on the continued service of our key senior management
personnel in particular A. Laurence Jones, our Chief Executive Officer. The loss
of any member of our senior management team could have a material adverse effect
on our future operating results. Our future success also depends on our
continuing ability to attract, retain and motivate highly skilled employees. We
face significant competition for individuals with the skills and experience
required to perform in required roles and may not be able to attract or retain
such individuals in the future.
OUR MANAGEMENT TEAM HAS ONLY WORKED TOGETHER FOR A SHORT PERIOD OF TIME AND MAY
NOT WORK WELL TOGETHER.
Virtually all of our executive officers, including our Chief Executive Officer,
Chief Financial Officer, Vice President of Sales and Marketing and Vice
President of Corporate Development, have joined our company in 1999. Due to the
fact that many of our executive officers are new to our company and never have
worked together, our management may not be able to function effectively,
individually or as a team.
WE ANTICIPATE FLUCTUATIONS IN OUR FUTURE OPERATING RESULTS.
We expect that our future operating results will fluctuate significantly. These
fluctuations may be due to a number of factors, many of which are beyond our
control. Some of the factors that may cause fluctuations include the following:
o Market response to our e-messaging services;
o Difficulties in the development or deployment of new e-messaging products
or services;
o The timing and rate at which we increase our expenses to support
projected growth;
o Fluctuating market demand for our products and services;
o The degree of acceptance of the Internet as a medium for communicating
with customers;
o Product introductions and service offerings by our competitors;
o The mix of the products and services provided by us; and
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o The cost of compliance with applicable government regulations, including
anti-SPAM legislation.
Our revenue for the foreseeable future will remain dependent on e-messaging
activity, the fees that we charge for our services and license fees for software
products. These future revenues are difficult to forecast. In addition, we plan
to significantly increase our operating expenses to increase our sales and
marketing operations, to upgrade and enhance our e-messaging solutions and to
market and support our solutions. We may be unable to adjust spending quickly
enough to offset any unexpected revenue shortfall. If we have a shortfall in
revenue in relation to our expenses, or if our expenses precede increased
revenue, our business, results of operations and financial condition would be
materially and adversely affected. This would likely affect the market price of
our common stock in a manner which may be unrelated to our long-term operating
performance.
We believe that marketing and advertising sales in traditional media, such as
television and radio, generally are lower in the first calendar quarter of each
year. Seasonal or cyclical patterns may develop in our industry if our market
makes the transition from an emerging to a more developed medium. Our revenue
may also be affected by seasonal and cyclical patterns in Internet e-messaging
spending if they emerge.
We believe that period-to-period comparisons of our operating results are not
meaningful and should not be relied upon as an indication of our future
performance. Due to the factors we have listed above and other factors, it is
likely that our future operating results will at times not meet the expectations
of market analysts or investors. If our operating results fail to meet
expectations, the price of our common stock could fall.
WE NEED TO EFFECTIVELY MANAGE OUR GROWTH.
An effective planning and management process is required to successfully
implement our business plan in the rapidly evolving market for Internet
e-messaging. We continue to increase the scope of our operations, and we have
grown our workforce substantially. As of January 1, 1995, we had 5 employees
and, as of September 30, 1999, we had 224 employees. In addition, we plan to
continue to expand our sales and marketing and service offerings. This growth
has placed, and our anticipated future growth in our operations will continue to
place, a significant strain on our management systems and resources. We expect
that we will need to continue to improve our financial and managerial controls
and reporting systems and procedures, and will need to continue to expand, train
and manage our workforce. Our future performance also may depend on the
effective integration of acquired businesses. Such integration, even if
successful, may require a significant period of time and expense, and may place
a significant strain on our resources. We recently relocated a computer
processing center from San Diego, California to a facility in Colorado. Our
business, results of operations and financial condition will be materially and
adversely affected if we are unable to effectively manage our expanding
operations or the relocation of our computer processing center.
WE DEPEND ON THIRD-PARTY PROVIDERS OVER WHOM WE HAVE NO CONTROL TO OPERATE OUR
E-MESSAGING PLATFORM.
We depend heavily on several third-party providers of Internet and related
telecommunication services, including hosting and co-location companies, in
operating our e-messaging platform. These companies may not continue to provide
services to us without disruptions in service, at the current cost, or at all.
Although we believe that we could obtain these services from other sources if
need be, the costs associated with any transition to a new service provider
would be substantial, requiring us to reengineer our computer systems and
telecommunications infrastructure to accommodate a new service provider. This
process would be both expensive and time-consuming.
In addition, failure of our Internet and related telecommunications providers to
provide the data communications capacity in the time frame required by us could
cause interruptions in the services we provide. Despite precautions taken by us,
unanticipated problems affecting our computer and telecommunications systems in
the future could cause interruptions in the delivery of our e-messaging
services, causing a loss of revenue and potential loss of customers.
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WE RELY ON A FEW CUSTOMERS FOR A SIGNIFICANT PORTION OF OUR REVENUE.
A significant portion of our revenues are generated by a limited number of
customers. We expect that we will continue to depend on large contracts with a
small number of significant customers. This situation can cause our revenue and
earnings to fluctuate between quarters based on the timing of contracts. None of
our customers has any obligation to purchase additional products or services
from us. Consequently, if we fail to develop relationships with significant new
customers, our business and financial condition will suffer.
COMPETITION IN OUR INDUSTRY IS INTENSE.
We believe none of our competitors offer the full range of solutions provided by
us. However, the market for our products and services is intensely competitive.
There are no substantial barriers to entry into our business, and we expect that
established and new entities will enter the market for e-messaging services and
interactive Internet communications in the near future.
Our principal competitors in the e-messaging services arena include 24x7, Inc.,
Axciom, Inc., Cyber Data Systems, Inc., DoubleClick, Inc., eGain Communications
Corporation, EmailChannel, Inc., Exactis.com, Inc., Experian, Inc., Kana
Communications, Inc., MarketHome, Inc., MatchLogic, Inc., Mustang Software,
Inc., NetCreations, Inc., PostX Corporation and ReplyNet, Inc. We also compete
with BroadVision, Inc., Digital Impact, E-Care Group and Mypoints.com, Inc. for
one-to-one marketing.
We may experience additional competition from ISPs and other large established
businesses that enter the market for e-messaging services. Companies such as
ADVO Inc., America Online, Inc., AT&T, IBM Corporation, Harte-Hanks, Inc.,
Hewlett-Packard Company, Integrion Financial Network LLC, The Interpublic Group
of Companies, Inc., Microsoft Corporation, Netscape Communications and Foote
Cone & Belding, some of whom are current clients of ours, which possess large,
existing customer bases, substantial financial resources and established
distribution channels could develop, market or resell a number of messaging
services.
The Internet, in general, and our e-messaging solutions, in particular, also
must compete for a share of advertisers' total advertising budgets with
traditional advertising media such as television, radio, cable and print.
Consequently, we compete with advertising and direct marketing agencies. To the
extent that e-messaging is perceived to be a limited or ineffective advertising
medium, companies may be reluctant to devote a significant portion of their
advertising budget to our e-messaging solutions, which could limit the growth of
e-messaging and negatively effect our business.
We also expect that competition may increase as a result of industry
consolidation. Potential competitors may choose to enter the market for
e-messaging services by acquiring one or more of our existing competitors or by
forming strategic alliances with such competitors. 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 or services to address the needs of our potential e-messaging
customers. Accordingly, it is possible that new competitors or alliances 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 our business,
results of operations and financial condition. We also may experience
competition from internal information systems and development groups of our
current and prospective clients that have better access to senior management.
Many of our current and potential competitors have longer operating histories,
greater name recognition, larger customer bases, more diversified lines of
products and services and significantly greater resources than we do. These
competitors may be able to undertake more extensive marketing campaigns, adopt
more aggressive pricing policies and make more attractive offers to potential
customers. In addition, many of our current or potential competitors have broad
distribution channels that may be used to bundle competing products or services
directly to end-users or purchasers. If these competitors bundle competing
products or services for their customers, the demand for our products and
services could substantially decline. As a result of the above factors, we
cannot assure you that we will compete effectively with current or future
competitors or that
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competitive pressures will not have a material adverse effect on our business,
financial condition and results of operations.
THE MARKETS FOR OUR PRODUCTS ARE UNDEVELOPED AND RAPIDLY CHANGING, WHICH MAKES
AN INVESTMENT IN OUR COMPANY RISKY.
The Internet and Internet e-messaging markets are characterized by rapidly
changing technologies, evolving industry standards, frequent new product and
service introductions, changing customer demands and increasing numbers of
service providers. Our products and services are designed around current
technical standards and our revenue depends on continued industry acceptance of
these standards. While we intend to provide compatibility with the most popular
industry standards, widespread adoption of a proprietary or closed standard
could prevent us from doing so. The standards on which our products and services
are or will be based may not be accepted by the industry.
New market entrants have introduced or are developing products and services for
use on the Internet and the World Wide Web that compete with our products. The
products, services or technologies developed by others may render our products
and services noncompetitive or obsolete. Accordingly, our future success will
depend on our ability to adapt to rapidly changing technologies and to enhance
existing solutions and develop and introduce a variety of new solutions to
address new industry standards and our customers' changing demands. We may
experience difficulties that could delay or prevent the successful design,
development, introduction or marketing of our solutions. In addition, our new
solutions or enhancements must meet the requirements of our current and
prospective customers and must achieve significant market acceptance. Material
delays in introducing new solutions and enhancements may cause customers to
forego purchases of our solutions and purchase those of our competitors.
The degree to which our e-messaging platform is accepted and used in the
marketplace will depend on continued growth in the use of e-mail as a primary
means of communications by businesses and consumers. An increase in the use of
e-messaging also will depend on market acceptance of e-mail as a method for
targeted marketing of products and services. Our ability to successfully
differentiate our services from random mass e-mailing products and services
which have encountered substantial resistance from consumers will also be
important. Businesses that already have invested substantial resources in
traditional or other methods of conducting business may be reluctant to adopt
new commercial methods or strategies that may limit or compete with their
existing businesses. Individuals with established patterns of purchasing goods
and services may be reluctant to alter those patterns.
WE FACE RISKS OF DEFECTS AND DEVELOPMENT DELAYS IN OUR PRODUCTS AND SERVICES.
Products and services based on sophisticated software and computing systems
often encounter development delays. Our underlying software may contain hidden
errors and failures when introduced or when usage increases. It is possible that
we may experience delays in the development of the software and computing
systems underlying our services. Despite testing that our clients and we
conduct, we may not locate errors if they occur. Also, we may experience
development delays. These occurrences could harm our reputation and revenue
growth.
IF CURRENT GROWTH RATES CONTINUE, THE CAPACITY OF OUR SOFTWARE OR HARDWARE COULD
BE STRAINED, LEADING TO SLOWER RESPONSE TIMES OR SYSTEM FAILURES.
If the volume of messages that our systems process significantly increases, the
capacity of our software or hardware could be strained. This could lead to
slower response time or system failures. We have made and intend to continue to
make substantial investments to increase our server capacity by adding new
servers and upgrading our software as necessary. However, our products and
services may not be able to meet the growing demand as the number of World Wide
Web and Internet users increases. We also depend, as do our customers, on Web
browsers, e-mail clients and Internet and online service providers for access to
our services. Some users of our services have experienced difficulties due to
system failures unrelated to our
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system, products or services. If we cannot effectively address these capacity
constraints, our business and financial condition could be materially and
adversely affected.
THE SUCCESS OF OUR E-MESSAGING PLATFORM DEPENDS ON INCREASED USAGE AND THE
STABILITY OF THE INTERNET.
Our success will depend, in large part, upon the maintenance of the Internet
infrastructure, such as a reliable network backbone with the necessary speed,
data capacity and security, and timely development of enabling products such as
high speed modems, for providing reliable Internet access and services and
improved content. We cannot assure you that the Internet infrastructure will
continue to effectively support the demands placed on it as the Internet
continues to experience increased numbers of users, frequency of use or
increased bandwidth requirements of users. Even if the necessary infrastructure
or technologies are developed, we may have to spend a considerable amount of
money and time to adapt our solutions accordingly. Furthermore, the Internet has
experienced a variety of outages and other delays due to damage to portions of
its infrastructure. Any future outages or delays could impact the Internet sites
of customers using our solutions.
We believe that the future of the Internet as a center for commerce will depend
in significant part on the following factors:
o Continued rapid growth in the number of households and commercial,
educational and government institutions with access to the Internet;
o The level of usage by individuals;
o The number and quality of products and services designed for use on the
Internet; and
o Expansion of the Internet infrastructure.
The degree to which e-mail will become a common method of communication depends
on the extent that users increasingly prefer e-mail over traditional means of
communication. The growth of e-mail also depends on widespread access to
reliable and affordable e-mail services by individuals, businesses and other
organizations. Because usage of the Internet as a medium for on-line exchange of
information, advertising, merchandising and entertainment is a recent
phenomenon, it is difficult to predict whether the number of users drawn to the
Internet will continue to increase and whether any significant market for our
e-messaging platform, or any substantial commercial use of the Internet, will
develop. We cannot assure you that Internet usage patterns, and reliance on
e-mail communication in particular, will continue to grow and will not decline
as the newness of this method of communication wears off. It also is uncertain
whether the cost of Internet access will decrease. If either the Internet or
e-mail communication fails to achieve increased acceptance and does not become
accessible to a broad audience at moderate costs, the market for our products
and services will be jeopardized. The success of our business also depends on a
significant expansion of the Internet infrastructure to provide adequate
Internet access and proper management of Internet traffic.
ANY SYSTEM FAILURE MAY HARM OUR BUSINESS OR REPUTATION.
The continuing and uninterrupted performance of our computer systems and our
customers' computer systems is critical to our ability to provide outsourced
services. Sustained or repeated system failures would reduce the attractiveness
of our solutions to our customers and could harm our business reputation. Slower
response time or system failures may also result from straining the capacity of
our deployed software or hardware due to an increase in the volume of e-messages
delivered through our servers. To the extent that we do not effectively address
any capacity constraints or system failures, our business, results of operations
and financial condition would be materially and adversely affected.
Our operations are dependent on our ability to protect our computer systems
against damage from fire, power loss, water damage, telecommunications failures,
vandalism, infection by computer viruses, other malicious acts and similar
unexpected adverse events. In addition, interruptions in our solutions could
result from the failure of our Internet and related telecommunications providers
to provide the necessary
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data communications capacity in the time frame we require. Despite precautions
we have taken, unanticipated problems affecting our systems have from time to
time in the past caused, and in the future could cause, interruptions in the
delivery of our solutions. Most of our back-end systems for disaster recovery
presently are redundant and we expect all of our back-end systems to be fully
redundant by February 1, 2000. Our business, results of operations and financial
condition could be materially and adversely affected by any damage or failure
that interrupts or delays our operations.
WE FACE SECURITY RISKS AND POTENTIAL LIABILITY ASSOCIATED WITH MISAPPROPRIATION
OF CONFIDENTIAL INFORMATION.
We currently retain highly confidential customer information in a secure
database server. We cannot assure you, however, that we will be able to prevent
unauthorized individuals from gaining access to this database server. Any
unauthorized access to our servers could result in the theft of confidential
customer information such as e-mail addresses. It also is possible that one of
our employees could attempt to misuse confidential customer information,
exposing us to liability. We use disclaimers and limitation of warranty
provisions in our client agreements in an attempt to limit our liability to
clients, including liability arising out of systems failure. However, such
provisions may not be enforceable or effective in limiting our exposure to
damage claims.
OUR INSURANCE COVERAGE MAY NOT BE ADEQUATE TO COMPENSATE US FOR ALL POTENTIAL
LOSSES.
Although we carry insurance, which we believe to be adequate, the coverage it
provides may not be adequate to compensate us for all losses that may occur. We
are in the process of taking precautions to protect both our company and our
customers from events that could interrupt delivery of our products and services
or that could result in a loss of transaction or customer data. However, these
measures will not eliminate a significant risk to our operations from a natural
disaster or systems failure. We cannot guarantee that these measures would
protect the company from an organized effort to inundate our servers with
massive quantities of e-mail or other Internet message traffic which could
overload our systems and result in a significant interruption of service. Our
business interruption insurance would not fully compensate us for lost revenue,
income, additional costs or increased costs that we would experience during the
occurrence of any disruption of our computer systems. We cannot guarantee that
we will be able to obtain sufficient insurance coverage on reasonable terms or
at all in the future.
OUR MEANS OF PROTECTING OUR PROPRIETARY RIGHTS MAY BE INADEQUATE AND OUR
COMPETITORS MAY DEVELOP SIMILAR TECHNOLOGY.
We rely on a combination of trade secret, copyright and trademark laws,
nondisclosure agreements, and other contractual provisions and technical
measures to protect our proprietary rights. We believe that, due to the rapid
pace of technological innovation for Internet products, our ability to establish
and maintain a position of technology leadership in the industry depends more on
the skills of our development personnel than upon the legal protections afforded
our existing technology. Trade secret, copyright and trademark protections may
not be adequate to safeguard the proprietary software underlying our products
and services. We may not have adequate remedies for any breach and our trade
secrets may otherwise become known. Moreover, notwithstanding our efforts to
protect our intellectual property, competitors may be able to develop
functionally equivalent e-messaging technologies without infringing any of our
intellectual property rights. Despite our efforts to protect our proprietary
rights, unauthorized parties may attempt to copy or otherwise obtain and use
products or technology that we consider proprietary, and third parties may
attempt to develop similar technology independently. In addition, effective
protection of intellectual property rights may be unavailable or limited in
certain countries. Accordingly, our means of protecting our proprietary rights
may not be adequate and our competitors may independently develop similar
technology.
We generally enter into confidentiality or license agreements with our
employees, consultants and corporate partners, and generally control access to
and distribution of our technologies, documentation and other proprietary
information. Despite our efforts to protect our proprietary rights from
unauthorized use or disclosure, parties may attempt to disclose, obtain or use
our solutions or technologies. We cannot assure
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<PAGE> 23
you that the steps we have taken will prevent misappropriation of our solutions
or technologies, particularly in foreign countries where laws or law enforcement
practices may not protect our proprietary rights as fully as in the United
States.
We have licensed, and we may license in the future, elements of our trademarks,
trade dress and similar proprietary rights to third parties. While we attempt to
ensure that the quality of our brand is maintained by these business partners,
such partners may take actions that could materially and adversely affect the
value of our proprietary rights or our reputation. In addition, we currently
license certain software and communication systems from third parties. Our
failure to maintain these licenses, or to find replacements for such technology
in a timely and cost-effective manner, could have a material adverse effect on
our business, results of operations and financial condition.
WE HAVE IN THE PAST, AND MAY IN THE FUTURE, BECOME INVOLVED IN PATENT
INFRINGEMENT CLAIMS WHICH RESULT IN A SIGNIFICANT DRAIN ON OUR RESOURCES AND
PREVENT OUR MANAGEMENT TEAM FROM FOCUSING ON MORE PROFITABLE TASKS.
As the volume of Internet commerce increases, and the number of products and
service providers that support Internet commerce increases, we believe that
Internet commerce technology providers may become increasingly subject to
infringement claims. We have been subject to claims of alleged infringement of
intellectual property rights in the past, and may become involved in additional
claims in the future. IN addition, we may initiate claims of litigation against
third parties for infringement of our proprietary rights or to establish the
validity of our proprietary rights. Any such claims, with or without merit,
could be time consuming, result in costly litigation, disrupt or delay the
enhancement or shipment of our products and services or require us to enter into
royalty or licensing agreements. Such royalty or licensing agreements, if
required, may not be available on terms acceptable or favorable to us, which
could have a material adverse effect on our business, financial condition and
results of operations. Litigation to determine the validity of any claims could
result in significant expense to us and divert the efforts of our technical and
management personnel from productive tasks, whether or not such litigation is
determined in our favor. In addition, patent litigation often gives rise to
counterclaims by the defendants, which could include challenges to the validity
of patents held by us. In the event of an adverse ruling in any such litigation,
we may be required to pay substantial damages, discontinue the use and sale of
infringing products, expend significant resources to develop non-infringing
technology or obtain licenses to infringing technology. Our failure to develop
or license a substitute technology could have a material adverse effect on our
business.
IN THE FUTURE, WE MAY BE SUBJECT TO INCREASED GOVERNMENT REGULATION.
Laws and regulations directly applicable to Internet communications, commerce
and advertising are becoming more prevalent. We believe that we are not
currently subject to direct regulation by any government agency in the United
States, other than regulations that are generally applicable to all businesses
and newly enacted laws prohibiting unsolicited commercial e-mail, or spam, or
laws intended to protect minors. A number of legislative and regulatory
proposals are under consideration by federal and state lawmakers and regulatory
bodies and may be adopted with respect to the Internet. Some of the issues that
such laws or regulations may cover include user privacy, obscenity, fraud,
pricing and characteristics and quality of products and services. The adoption
of any such laws or regulations may decrease the growth of the Internet, which
could in turn decrease the projected demand for our products and services or
increase our cost of doing business. Moreover, the applicability to the Internet
of existing U.S. and international laws governing issues such as property
ownership, copyright, trade secret, libel, taxation and personal privacy is
uncertain and developing. Any new legislation or regulation, or application or
interpretation of existing laws, could have a material adverse effect on our
business.
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OUR STOCK PRICE HAS BEEN VOLATILE IN THE PAST AND MAY BE VOLATILE IN THE FUTURE,
REGARDLESS OF OUR ACTUAL OPERATING PERFORMANCE.
The stock market in general, and Internet companies in particular, including our
company, have experienced extreme price and volume fluctuations that often have
been unrelated or disproportionate to operating performance. The trading prices
of many Internet companies' stocks are at or near historical highs and these
trading prices and multiples are substantially above historical levels. These
trading prices and multiples may not be sustained. Broad market and industry
factors may reduce our stock price, regardless of our actual operating
performance. In addition, the trading price of our common stock could fluctuate
in response to factors such as:
o quarterly fluctuations in our revenue and financial results both in
absolute terms and relative to analyst and investor expectations;
o changes in recommendations of securities analysts;
o announcements of technological innovations or new services or products;
o publicity regarding actual or potential results with respect to
technologies, services or products under development;
o disputes or other developments concerning proprietary rights, including
copyright and litigation matters; and
o other events or factors, many of which are beyond our control.
In the past, companies that have experienced volatility in the market price of
their stock have been the object of securities class action litigation. If we
were the object of securities class action litigation, it could result in
substantial costs and a diversion of management's attention and resources.
POTENTIAL YEAR 2000 PROBLEMS WITH OUR INTERNAL OPERATING SYSTEMS COULD HARM OUR
BUSINESS.
Many computer systems and software products are coded to accept only two-digit
entries in date code fields. Beginning in the year 2000, 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 two months, computer systems
and/or software used by many companies may need to be upgraded to comply with
"year 2000" requirements. Since we just recently developed the software for our
e-messaging platform and are adding new enhancements and functionality
regularly, we believe that our e-messaging platform is year 2000 compliant.
Coding errors or other defects may be discovered in the future as more testing
is completed or new functionality added.
We rely on a number of software and communications systems provided by third
parties to operate our e-messaging platform. Any of these could contain coding
which is not year 2000 compliant. These systems include server software used to
operate the network servers, software controlling routers, switches and other
components of the data network, disk management software used to control the
data disk arrays, firewall, security, monitoring and back-up software used by
us, as well as desktop PC applications software. In each case, we employ widely
available software applications from leading third party vendors, and expect
that such vendors will provide any required upgrades or modifications in a
timely fashion. However, if any third party software or communication systems
suppliers fail to provide year 2000 compliant versions of the software or system
components we rely upon, our operations, including our e-messaging platform,
could be disrupted. We have contacted and monitor each of our key suppliers to
validate their efforts to ensure that their software products and communication
systems are year 2000 compliant and will continue to do so throughout the course
of this process.
Year 2000 compliance problems also could undermine the general infrastructure
necessary to support our operations. For instance, we depend on third-party ISPs
to provide connections to the Internet and to customer information systems. Any
interruption of service from ISPs could result in a temporary interruption of
our e-messaging and other services. We have attempted to address this risk by
obtaining the same service capacity from multiple ISPs. In addition, we rely on
two third-party data centers to house some servers and communications systems.
Any interruption in the security, access, monitoring or power systems at the
third-party data centers could result in an interruption of services. Moreover,
it is difficult to predict what effects year 2000 compliance problems will have
on the integrity and stability of the Internet. If businesses and
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<PAGE> 25
consumers are not able to reliably access the Internet, or if the ISPs on which
we rely fail to provide us with uninterrupted service, our reputation could be
harmed and the demand for our services could decline, resulting in an adverse
impact to our business, financial condition and results of operations.
With respect to any particular customer, our ability to provide services to that
customer could be adversely affected if that customer fails to ensure that its
software systems are year 2000 compliant. Disruptions in the information systems
of significant customers could temporarily prevent such customers from accessing
or using our e-messaging platform, which could materially affect our operating
results. Our e-messaging platform is designed to interface with customer
databases and communications systems to retrieve relevant information from
customers' electronic commerce systems or customer databases and to allow
customers to independently control certain features of the service, including
the content of transmitted messages. We cannot assess or control the degree of
year 2000 compliance in our customers' information systems. To address the risk
of disruptions in customer information systems, we designed our e-messaging
platform to include redundant manual control features which can be used by such
customers. Nevertheless, certain customers may elect to discontinue use of our
e-messaging services until their internal information technology problems have
been alleviated, which would adversely affect our business, financial condition
and results of operations. The spending patterns of current or potential
customers may be affected by year 2000 issues as companies expend significant
resources to correct or update their systems for year 2000 compliance. Because
of these expenditures, our customers may have less money available to pay for
services, which could have a material adverse affect on our business, financial
condition and results of operations.
PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD PREVENT OR DELAY A
CHANGE IN CONTROL OF OUR COMPANY AND MAY REDUCE THE MARKET PRICE OUR COMMON
STOCK.
Provisions in our charter documents may delay, defer or prevent a change in
control of our company that a stockholder may consider favorable, may discourage
bids for our common stock at a premium over the market price of our common stock
and may adversely affect the market price of our common stock and the voting and
other rights of the holders of our common stock. These provisions include:
o authorizing the issuance of preferred stock without stockholder approval;
o providing for a classified board of directors with staggered, three -year
terms;
o prohibiting cumulative voting in the election of directors;
o requiring super-majority voting to effect certain amendments to our
certificate of incorporation and bylaws;
o limiting the persons who may call special meetings of stockholders; and
o prohibiting stockholders actions by written consent.
Other provisions of Delaware law also may discourage, delay or prevent someone
from acquiring or merging with us.
OUR OFFICERS AND DIRECTORS AND THEIR AFFILIATES EXERCISE SIGNIFICANT CONTROL
OVER OUR COMPANY.
Our directors and executive officers, and certain of their affiliates,
individually and as a group, effectively control us and direct our affairs and
business, including any determination with respect to the acquisition or
disposition of assets by us, future issuance's of common stock or other
securities by us, declaration of dividends on our common stock and the election
of directors. This concentration of ownership also may have the effect of
delaying, deferring or preventing a change in control of our company.
YOU SHOULD NOT RELY ON FORWARD-LOOKING STATEMENTS BECAUSE THEY ARE INHERENTLY
UNCERTAIN.
This document contains certain forward-looking statements that involve risks and
uncertainties. We use words such as "anticipate", "believe", "expect", "future",
"intend", "plan" and similar expressions to identify forward-looking statements.
These statements are only predictions. Although we believe that the expectations
reflected in these forward-looking statements are reasonable, we cannot
guarantee future
25
<PAGE> 26
results, levels of activity, performance or achievements. You should not place
undue reliance on these forward-looking statements, which apply only as of the
date of this document. Our actual results could differ materially from those
anticipated in these forward-looking statements for many reasons, including the
risks faced by us and described on the preceding pages and elsewhere in this
document.
We believe it is important to communicate our expectations to our investors.
However, there may be events in the future that we are not able to predict
accurately or over which we have no control. The risk factors listed above, as
well as any cautionary language in this document, provide examples of risks,
uncertainties and events that may cause our actual results to differ materially
from the expectations we describe in our forward-looking statements. Before you
invest in our common stock, you should be aware that the occurrence of the
events described in these risk factors and elsewhere in this document could have
a material adverse effect on our business, operating results, financial
condition and stock price.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our interest income is sensitive to changes in the general level of U.S.
interest rates, particularly since the majority of our investments are in
short-term investments. Due to the nature of our short-term investments, we have
concluded that there is no material interest rate risk exposure. Therefore, no
quantitative disclosures are required.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 19, 1998, Exactis.com, Inc. filed a complaint against our subsidiary
Epub in the Federal District Court of Colorado. The complaint alleged
infringement of a patent held by Exactis.com, Inc. and sought injunctive relief
and unspecified damages. On October 29, 1998, we filed a complaint in the U.S.
District Court for the Southern District of California against Exactis.com, Inc.
The complaint alleged infringement of a patent held by us and sought injunctive
relief and unspecified damages. On October 13, 1999 both parties agreed to a
settlement of these actions which have subsequently been dismissed by the courts
with prejudice. Reference is made to our Quarterly Report on form 10Q for the
quarterly period ended March 31, 1999.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On August 9, 1999, we acquired all of the common stock of Revnet Systems Inc, in
exchange for 3,262,120 shares of our common stock and the assumption by us of
options to purchase up to approximately 681,675 additional shares of our common
stock. The purchase price was calculated to be approximately $41.8 million. The
sale of the common stock was not registered under the Securities Act of 1933, as
amended, in reliance on Section 4(2) and/or Regulation D promulgated thereunder.
The securities were not offered or sold by any form of general solicitation and
the purchasers represented their intention to acquire the securities for
investment purposes only and not with a view toward the distribution thereof.
Each purchases was accredited or a sophisticated investor with access to all
relevant information necessary to make an informed investment decision. We have
filed a Registration Statement on Form S-3 covering the resale of such
securities which has been declared effective by the SEC.
On August 16, 1999, we acquired all of the common stock of Decisive Technology
Inc. in exchange for 2,054,498 shares of our common stock and the assumption by
us of options and warrants to acquire up to approximately 466,818 additional
shares of our common stock. The purchase price was calculated to be
approximately $39.6 million. The sale of the common stock was not registered
under the Securities Act of 1933, as amended, in reliance on Section 4(2) and/or
Regulation D promulgated thereunder. The securities were not offered or sold by
any form of general solicitation and the purchasers represented their intention
to acquire the securities for investment purposes only and not with a view
toward the distribution thereof. Each purchaser was accredited or a
sophisticated investor with access to all relevant information necessary to make
an informed investment decision. We have filed a Registration Statement on Form
S-3 covering the resale of such securities which has been declared effective by
the SEC.
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On October 21, 22, and 25, 1999, in three separate closings we sold 4,095,124
shares of our common stock to 17 accredited investors for an aggregate purchase
price of $41,975,021. BancBoston Robertson Stephens, Inc. acted as placement
agent for which it received a commission of $1,598,750. The sale of the common
stock was not registered under the Securities Act of 1933, as amended, in
reliance on Section 4(2) and/or Regulation D promulgated thereunder. The
securities were not offered or sold by any form of general solicitation and the
purchasers represented their intention to acquire the securities for investment
purposes only and not with a view toward the distribution thereof. We have filed
a Registration Statement on Form S-3 covering the resale of such securities
which has been declared effective by the SEC.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
The management of the Company is not aware of any events required to
be reported hereunder.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Index
Exhibit 2.1 - Agreement and Plan of Merger and Reorganization
dated July 22, 1999 among the Registrant, Revnet Systems Inc.
and MM1 Acquisition Corporation.*
Exhibit 2.2 - Agreement and Plan of Merger and Reorganization
dated July 27, 1999 among the Registrant, Decisive Technology
Corporation and MM2 Acquisition Corporation.*
Exhibit 10.48 -Stuart Obermann Employment Agreement
Exhibit 10.49 -Randy Bachmeyer Employment Agreement
Exhibit 10.50 - Kelley Wood Employment Agreement
* Filed as an exhibit to Registrants Current Report on
Form 8-K, filed on August 24, 1999 and incorporated therein
by reference Exhibit 27.1 - Financial Data Schedule
(b) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K during the fiscal quarter ended
September 30, 1999, dated August 20, 1999, as amended September 23, 1999 and
October 1, 1999, reporting information under Item 2 with respect to our
acquisition of both Revnet Systems, Inc. and Decisive Technology Corporation and
information under Item 5 with respect to a discussion of our business, selected
historical consolidated financial data for the fiscal years ended December 31,
1994, 1995, 1996, 1997 and 1998, and for the six months ended June 30, 1998 and
1999, management's discussion and analysis of financial condition and results of
operations and pro forma combined results of operations. The following financial
statements were filed as part thereof:
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(A) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
1. Revnet Systems, Inc. Financial Statements filed as Exhibit 99.3.
2. Decisive Technology Corporation Financial Statements filed as
Exhibit 99.4.
(B) PRO FORMA FINANCIAL INFORMATION.
Unaudited Pro Forma Combined Financial Information of the Company,
Revnet Systems, Inc. and Decisive Technology Corporation filed as
Exhibit 99.5.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MESSAGEMEDIA, INC.
Date: November 12, 1999 By: /s/ Martin T. Johnson
------------------------------
Martin T. Johnson
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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<PAGE> 29
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
2.1 - Agreement and Plan of Merger and Reorganization
dated July 22, 1999 among the Registrant, Revnet Systems Inc.
and MM1 Acquisition Corporation.*
2.2 - Agreement and Plan of Merger and Reorganization
dated July 27, 1999 among the Registrant, Decisive Technology
Corporation and MM2 Acquisition Corporation.*
10.48 - Stuart Obermann Employment Agreement
10.49 - Randy Bachmeyer Employment Agreement
10.50 - Kelley Wood Employment Agreement
27.1 - Financial Data Schedule
* Filed as an exhibit to Registrants Current Report on Form 8-K, filed on
August 24, 1999 and incorporated therein by reference Exhibit 27.1 - Financial
Data Schedule
<PAGE> 1
EXHIBIT 10.48
August 9, 1999
Stuart Obermann
Dear Stuart:
MessageMedia, Inc. ("MessageMedia" or the "Company") is pleased to offer you the
position of Vice President Commercial Software Products on the terms and
conditions stated in this letter upon closing of the acquisition with Revnet
Systems, Inc. ("Revnet"). Of course, MessageMedia may change your position and
duties from time to time as it deems necessary. If you accept this offer, we
would like for you to begin work with MessageMedia as soon as possible. You will
report directly to Larry Jones, President and CEO.
Your initial rate of compensation will be $175,000 per year, less payroll
deductions and all required withholdings, paid on the Company's regular pay
periods. You will be eligible for all fringe benefits presently offered and
offered in the future to MessageMedia employees and senior executives who are
similarly situated. Details about such benefits are available for your review.
MessageMedia may modify your compensation and benefits, as it deems necessary.
In addition to your base salary, you will be eligible to earn an annual
performance bonus with a target of 50% of your base salary, less applicable
taxes, based upon performance targets to be defined by the CEO and will be paid
on a calendar basis.
You will be entitled to four weeks of paid vacation during your first year of
service which shall begin accruing monthly upon commencement of employment. You
will be eligible to use your accrued vacation after your first thirty (30) days
of employment in accordance with the Company's policies.
Should you accept this offer, your employment with MessageMedia will not be for
a specified term and may be terminated with or without cause and with or without
notice by you or by the Company at any time, for any reason or no reason. Any
contrary representations or agreements which may have been made to you are
superseded by this offer. The "at will" nature of your employment described in
this offer letter shall constitute the entire agreement between you and
MessageMedia concerning the nature and duration of your employment. Though your
job duties, title, compensation and benefits may change over time and you may be
subject to incremental discipline that doesn't include a termination, none of
these events changes our agreement that you are an "at will" employee. The "at
will" nature of your employment with MessageMedia can only be changed in a
writing signed by you and the President of the Company.
Initial
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<PAGE> 2
Stuart Obermann
August 9, 1999
Page 2
Notwithstanding the at-will nature of your employment, should your employment be
terminated by you for "good reason" or by the Company for any reason other than
for "cause," you will be entitled to severance compensation. Severance
compensation will be contingent on the execution of a waiver and release form (a
form of which is attached as Appendix D) as well as the acceptance of an
nine-month non-competition and non-solicitation restriction and will consist of
nine months of full salary paid monthly, continued vesting of MessageMedia stock
options over the nine-month term, and Company paid COBRA (medical and dental
coverage) for a period of nine months, and 100% of your then current unvested
options that were assumed by the Company in connection with the Company's
acquisition of Revnet will be accelerated. If you resign or your employment is
terminated for "cause," all compensation and benefits will cease immediately
upon your last day of employment and you will receive no severance benefits.
Vesting of your options will stop immediately and you will have our standard
ninety days to exercise those options. For purposes of this letter agreement,
the definition of "cause" shall be limited to the occurrence of any of the
following events: (i) your engaging or in any manner participating in an
activity which is intentionally and materially injurious to the Company; (ii)
your commission of any fraud or embezzlement against the Company; (iii) your
conviction of any crime involving dishonesty or moral turpitude; (iv) conduct by
you which in good faith and reasonable determination of the Board demonstrates
gross unfitness to serve; or (v) your incurable material breach of any element
of the Company's Proprietary Information and Inventions Agreement, including
without limitation, your theft or other misappropriation of the Company's
proprietary information. For purposes of this letter agreement, the definition
of "good reason" shall be limited to the occurrence of any of the following
events: (i) a significant reduction in your title or responsibilities; (ii) a
reduction in your base salary or (iii) relocation of your office more than
thirty (30) miles from Huntsville AL.
During your employment with the Company and for nine months thereafter, you
agree that you will not engage in competition with the Company, either directly
or indirectly, in any manner or capacity, as an advisor, principal, agent,
partner, officer, director, employee, member of any association or otherwise, in
any phase of the business of developing, manufacturing and marketing of products
which are in the same field of use or which otherwise compete in a material way
with the products or proposed products of MessageMedia at the time of
termination. While employed by the Company and for nine months thereafter, you
also agree that in order to protect the Company's confidential and proprietary
information from unauthorized use, that you will not, either directly or through
others, solicit or attempt to solicit any employee, consultant or independent
contractor of the Company to terminate his or her relationship with the Company
in order to become an employee, consultant or independent contractor to or for
any other person or business entity.
One of the conditions of your employment with MessageMedia is the maintenance of
the confidentiality of MessageMedia's proprietary and confidential information.
Upon commencement of employment, you will be required to execute the Company's
Proprietary Information and Inventions Agreement, attached hereto as Appendix A,
the Company's Voice-Mail Policy Statement, attached hereto as Appendix B, and
the E-Mail Policy Statement, attached hereto as Appendix C.
Initial
------
<PAGE> 3
Stuart Obermann
August 9, 1999
Page 3
In your work for the Company, you will be expected not to use or disclose any
confidential information, including trade secrets, of any former employer or
other person to whom you have an obligation of confidentiality. You agree that
you will not bring onto Company premises any unpublished documents or property
belonging to any former employer or other person to whom you have an obligation
of confidentiality. In the performance of your duties for the Company, you will
be expected to use only that information which is generally known and used by
persons with training and experience comparable to your own, which is common
knowledge in the industry or otherwise legally in the public domain, or which is
otherwise provided or developed by the Company.
As an employee of MessageMedia, you will be required to comply with all Company
policies and procedures. In particular, you will be required to familiarize
yourself with, and to comply with, MessageMedia's policy prohibiting harassment
and discrimination, and the policy concerning drugs and alcohol. As required by
law, this offer is subject to satisfactory proof of your right to work in the
United States.
We are looking forward to having you join MessageMedia, Inc. If you wish to
accept this offer, please sign below and return the fully executed letter to us.
You should keep one copy of this letter for your own records.
Very truly yours,
MESSAGEMEDIA, INC.
- ----------------------------- --------------------------------
Larry Jones Date
President & Chief Executive Officer
Initial
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<PAGE> 4
Stuart Obermann
August 9, 1999
Page 4
ACCEPTANCE:
I have read, understand, and accept the foregoing terms and conditions of
employment. I further understand my job duties, title, compensation and benefits
may change over time without a written modification of this agreement but such
changes may give right to terminate for "good reason" as provided in this
Letter. Further the "at will" term of my employment (i.e., my right and
MessageMedia's right to terminate our employment relationship at any time, with
or without cause) is a term of employment which cannot be altered or modified. I
understand and agree that any contrary representations or agreements which may
have been made to me are superseded by this offer and my acceptance of the same.
As further consideration for the offer of employment with MessageMedia that is
contained in this offer letter and accepted by me, I agree to be bound by the
following policies and procedures:
1. Appendix A - Proprietary Information and Inventions Agreement.
2. Appendix B - Voice-Mail Policy Statement.
3. Appendix C - E-Mail Policy Statement.
4. Appendix D - Waiver and Release
- ----------------------------- --------------------------------
Stuart Obermann Date
Initial
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<PAGE> 5
APPENDIX A
Proprietary Information and Inventions Agreement
Appendix A
Initial
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<PAGE> 6
EXHIBIT B
MESSAGEMEDIA, INC.
CONFLICT OF INTEREST GUIDELINES
It is the policy of MESSAGEMEDIA, INC. (the "Company") to conduct its
affairs in strict compliance with the letter and spirit of the law and to adhere
to the highest principles of business ethics. Accordingly, all officers,
employees and independent contractors must avoid activities which are in
conflict, or give the appearance of being in conflict, with these principles and
with the interests of the Company. The following sets forth examples of
potentially compromising situations which must be avoided but is not all
inclusive of the types of conduct which may be considered a violation of this
policy. Any violations of this policy must be reported to the President.
1. Revealing confidential information to outsiders or misusing
confidential information. Unauthorized divulging of information is a violation
of this policy whether or not for personal gain and whether or not harm to the
Company is intended. (The Proprietary Information and Inventions Agreement
elaborates on this principle and is a binding agreement.)
2. Accepting or offering substantial gifts, excessive entertainment,
favors or payments which may be deemed to constitute undue influence or
otherwise be improper or embarrassing to the Company.
3. Initiating or approving personnel actions affecting reward or
punishment of employees or applicants where there is a family relationship or is
or appears to be a personal or social involvement.
4. Initiating or approving any form of personal or social harassment of
employees.
5. Investing or holding outside directorship in suppliers, customers,
or competing companies, including financial speculations, where such investment
or directorship might influence in any manner a decision or course of action of
the Company.
6. Borrowing from or lending to other employees, customers or
suppliers.
7. Improperly using or disclosing to the Company any proprietary
information or trade secrets of any former or concurrent employer or other
person or entity with whom obligations of confidentiality exist.
8. Unlawfully discussing prices, costs, customers, sales or markets
with competing companies or their employees.
9. Making any unlawful agreement with distributors with respect to
prices.
10. Improperly using or authorizing the use of any inventions which are
the subject of valid patent claims of any other person or entity.
Each officer, employee and independent contractor must take appropriate
action to ensure compliance with these guidelines and to bring problem areas to
the attention of higher management for review. Violations of this Conflict of
Interest Policy may result in discharge without warning.
Exhibit B
Initial
------
<PAGE> 7
APPENDIX B
MESSAGEMEDIA, INC.
VOICE-MAIL POLICY STATEMENT
1. The Company may maintain as part of its technology platform a
voice-mail system. This system is provided to assist in the conduct of business
within the Company.
2. Voice-mail and the data stored on it are and remain at all times the
property of the Company. As such, all voice-mail messages created, sent, and
received are and remain the property of the Company.
3. The Company reserves the right to retrieve and listen to any message
composed, sent, or received. Please note that even when a message is deleted, it
is still possible to recreate the message; therefore, ultimate privacy of
messages cannot be guaranteed to anyone.
4. Although voice-mail may accommodate the use of passwords for
security, the reliability of such for maintaining confidentiality cannot be
guaranteed. You must assume that any and all messages may be listened to by
someone other than the intended or designated recipient. Moreover, all passwords
must be made available to the Company. The reason for this is simple. Your
voice-mail may need to be accessed by the Company when you are absent.
5. Notwithstanding the Company's right to retrieve any voice-mail
message, all messages sent by voice-mail are considered to be confidential, and
as such are to be accessed only by the addressed recipient or by direction of
the addressed recipient. Any exception to this policy must be approved by the
Executive Committee.
6. Employees learning of any misuse of the voice-mail system or
violations of this policy shall notify General Counsel or Director of Human
Resources.
7. Voice-mail messages may not contain material that may reasonably be
considered offensive or disruptive to any employee. Offensive content would
include, but not be limited to, sexual comments, racial slurs, gender-specific
comments, or any comments that might offend someone on account of his or her
age, sex, sexual orientation, religious or political beliefs, national origin,
race or disability.
8. Any employee who violates this policy shall be subject to
disciplinary action, up to and including termination.
Appendix B
Initial
------
<PAGE> 8
APPENDIX C
MESSAGEMEDIA, INC.
E-MAIL POLICY STATEMENT
1. The Company maintains as part of its technology platform an e-mail
system. This system is provided to assist in the conduct of business both inside
and outside of the Company.
2. All computers and the data stored on them are and remain at all
times the property of the Company. As such, all e-mail messages composed, sent,
and received are and remain the property of the Company.
3. The Company reserves the right to retrieve and read any message
composed, sent, or received. Please note that even when a message is erased, it
is still possible to recreate the message; therefore, ultimate privacy of
messages cannot be guaranteed to anyone.
4. The Company reserves the right to retain any electronic message on
the system.
5. Although e-mail may accommodate the use of passwords for security,
the reliability of such for maintaining confidentiality cannot be guaranteed.
You must assume that any and all messages may be read by someone other than the
intended or designated recipient. Moreover, all passwords must be made available
to the Company. The reason for this is simple. Your e-mail may need to be
accessed by the Company when you are absent.
6. Notwithstanding the Company's right to retrieve and read any e-mail
message, all messages sent by e-mail are considered to be confidential, and as
such are to be read only by the addressed recipient or at the direction of the
addressed recipient. Any exception to this policy must be approved by the
Executive Committee.
7. Employees learning of any misuse of the e-mail system or violations
of this policy shall notify General Counsel or Director of Human Resources.
8. E-mail messages may not contain material that may reasonably be
considered offensive or disruptive to any employee. Offensive content would
include, but not be limited to, sexual comments or images, racial slurs,
gender-specific comments, or any comments that might offend someone on account
of his or her age, sex, sexual orientation, religious or political beliefs,
national origin, race or disability.
9. Any employee who violates this policy shall be subject to
disciplinary action, up to and including termination.
Appendix C
Initial
------
<PAGE> 9
APPENDIX D
MESSAGEMEDIA, INC.
WAIVER AND RELEASE OF CLAIMS
In exchange for the severance payments provided for in my offer letter agreement
(the "Agreement"), to which this form is attached, I hereby furnish
MESSAGEMEDIA, INC. (the "Company") with the following release and waiver.
I hereby release, and forever discharge the Company, its officers, directors,
agents, employees, stockholders, successors, assigns and affiliates, of and from
any and all claims, liabilities, demands, causes of action, costs, expenses,
attorneys' fees, damages, indemnities and obligations of every kind and nature,
in law, equity, or otherwise, known and unknown, suspected and unsuspected,
disclosed and undisclosed, arising at any time prior to and including my
employment termination date with respect to any claims relating to my employment
and the termination of my employment, including but not limited to, claims
pursuant to any federal, state or local law relating to employment, including,
but not limited to, discrimination claims, and the Federal Age Discrimination in
Employment Act of 1967, as amended ("ADEA"), or claims for wrongful termination,
breach of the covenant of good faith, contract claims, tort claims, and wage or
benefit claims, including but not limited to, claims for salary, bonuses,
commissions, stock, stock options, vacation pay, fringe benefits, severance pay
or any form of compensation.
I acknowledge that, among other rights, I am waiving and releasing any rights I
may have under ADEA, that this waiver and release is knowing and voluntary, and
that the consideration given for this waiver and release is in addition to
anything of value to which I was already entitled as an employee of the Company.
I further acknowledge that I have been advised, as required by the Older Workers
Benefit Protection Act, that: (a) the waiver and release granted herein does not
relate to claims which may arise after this agreement is executed; (b) I have
the right to consult with an attorney prior to executing this agreement
(although I may choose voluntarily not to do so); (c) I have twenty-one (21)
days from the date I receive this agreement, in which to consider this agreement
(although I may choose voluntarily to execute this agreement earlier); (d) I
have seven (7) days following the execution of this agreement to revoke my
consent to the agreement; and (e) this agreement shall not be effective until
the seven (7) day revocation period has expired.
Date: By:
--------------------------- --------------------------------
STUART OBERMANN
Appendix D
Initial
------
<PAGE> 1
EXHIBIT 10.49
August 9, 1999
Randy Bachmeyer
Dear Randy:
MessageMedia, Inc. ("MessageMedia" or the "Company") is pleased to offer you the
position of Director of Software Engineering on the terms and conditions stated
in this letter upon closing of the acquisition with Revnet Systems, Inc.
("Revnet"). Of course, MessageMedia may change your position and duties from
time to time as it deems necessary. If you accept this offer, we would like for
you to begin work with MessageMedia as soon as possible. You will report
directly to Stuart Obermann, VP of Commercial Software Products.
Your initial rate of compensation will be $145,000 per year, less payroll
deductions and all required withholdings, paid on the Company's regular pay
periods. You will be eligible for all fringe benefits presently offered and
offered in the future to MessageMedia employees and senior executives who are
similarly situated. Details about such benefits are available for your review.
MessageMedia may modify your compensation and benefits, as it deems necessary.
In addition to your base salary, you will be eligible to earn an annual
performance bonus with a target of 30% of your base salary less applicable
taxes, based upon performance targets to be defined by the CEO and will be paid
on a calendar basis.
You will be entitled to four weeks of paid vacation during your first year of
service which shall begin accruing monthly upon commencement of employment. You
will be eligible to use your accrued vacation after your first thirty (30) days
of employment in accordance with the Company's policies.
Should you accept this offer, your employment with MessageMedia will not be for
a specified term and may be terminated with or without cause and with or without
notice by you or by the Company at any time, for any reason or no reason. Any
contrary representations or agreements which may have been made to you are
superseded by this offer. The "at will" nature of your employment described in
this offer letter shall constitute the entire agreement between you and
MessageMedia concerning the nature and duration of your employment. Though your
job duties, title, compensation and benefits may change over time and you may be
subject to incremental discipline that doesn't include a termination, none of
these events changes our agreement that you are an "at will" employee. The "at
will" nature of your employment with MessageMedia can only be changed in a
writing signed by you and the President of the Company.
Notwithstanding the at-will nature of your employment, if the Company terminates
your employment without "cause" at any time, or your responsibilities and pay
are greatly reduced, then upon your furnishing to the Company an executed waiver
and release form (a form of which is attached as Appendix D), your unvested
options that were assumed by the Company in
Initial
------
<PAGE> 2
connection with the Company's acquisition of Revnet will be accelerated. If you
resign or your employment is terminated for "cause", all compensation and
benefits will cease immediately upon your last day of employment and you will
receive no severance benefits. Vesting of your options will stop immediately and
you will have our standard ninety days to exercise those options. For purposes
of this letter agreement, the definition of "cause" shall be limited to the
occurrence of any of the following events: (i) your engaging or in any manner
participating in an activity which is intentionally and materially injurious to
the Company; (ii) your commission of any fraud or embezzlement against the
Company; (iii) your conviction of any crime involving dishonesty or moral
turpitude; (iv) conduct by you which in good faith and reasonable determination
of the Board demonstrates gross unfitness to serve; or (v) your incurable
material breach of any element of the Company's Proprietary Information and
Inventions Agreement, including without limitation, your theft or other
misappropriation of the Company's proprietary information.
During your employment with the Company and for nine (9) months thereafter, you
agree that you will not engage in competition with the Company, either directly
or indirectly, in any manner or capacity, as an advisor, principal, agent,
partner, officer, director, employee, member of any association or otherwise, in
any phase of the business of developing, manufacturing and marketing of products
which are in the same field of use or which otherwise compete in a material way
with the products or proposed products of MessageMedia at the time of
termination. While employed by the Company and for nine (9) months thereafter,
you also agree that in order to protect the Company's confidential and
proprietary information from unauthorized use, that you will not, either
directly or through others, solicit or attempt to solicit any employee,
consultant or independent contractor of the Company to terminate his or her
relationship with the Company in order to become an employee, consultant or
independent contractor to or for any other person or business entity.
One of the conditions of your employment with MessageMedia is the maintenance of
the confidentiality of MessageMedia's proprietary and confidential information.
Upon commencement of employment, you will be required to execute the Company's
Proprietary Information and Inventions Agreement, attached hereto as Appendix A,
the Company's Voice-Mail Policy Statement, attached hereto as Appendix B, and
the E-Mail Policy Statement, attached hereto as Appendix C.
In your work for the Company, you will be expected not to use or disclose any
confidential information, including trade secrets, of any former employer or
other person to whom you have an obligation of confidentiality. You agree that
you will not bring onto Company premises any unpublished documents or property
belonging to any former employer or other person to whom you have an obligation
of confidentiality. In the performance of your duties for the Company, you will
be expected to use only that information which is generally known and used by
persons with training and experience comparable to your own, which is common
knowledge in the industry or otherwise legally in the public domain, or which is
otherwise provided or developed by the Company.
<PAGE> 3
As an employee of MessageMedia, you will be required to comply with all Company
policies and procedures. In particular, you will be required to familiarize
yourself with, and to comply with, MessageMedia's policy prohibiting harassment
and discrimination, and the policy concerning drugs and alcohol. As required by
law, this offer is subject to satisfactory proof of your right to work in the
United States.
We are looking forward to having you join MessageMedia, Inc. If you wish to
accept this offer, please sign below and return the fully executed letter to us.
You should keep one copy of this letter for your own records.
Very truly yours,
MESSAGEMEDIA, INC.
- ----------------------------- ---------------------------
Larry Jones Date
President & Chief Executive Officer
ACCEPTANCE:
I have read, understand, and accept the foregoing terms and conditions of
employment. I further understand my job duties, title, compensation and benefits
may change over time without a written modification of this agreement. Further
the "at will" term of my employment (i.e., my right and MessageMedia's right to
terminate our employment relationship at any time, with or without cause) is a
term of employment which cannot be altered or modified. I understand and agree
that any contrary representations or agreements which may have been made to me
are superseded by this offer and my acceptance of the same.
As further consideration for the offer of employment with MessageMedia that is
contained in this offer letter and accepted by me, I agree to be bound by the
following policies and procedures:
1. Appendix A - Proprietary Information and Inventions Agreement.
2. Appendix B - Voice-Mail Policy Statement.
3. Appendix C - E-Mail Policy Statement.
4. Appendix D - Waiver and Release
- ----------------------------- ---------------------------
Randy Bachmeyer Date
<PAGE> 4
APPENDIX A
Proprietary Information and Inventions Agreement
<PAGE> 5
EXHIBIT B
MESSAGEMEDIA, INC.
CONFLICT OF INTEREST GUIDELINES
It is the policy of MESSAGEMEDIA, INC. (the "Company") to conduct its
affairs in strict compliance with the letter and spirit of the law and to adhere
to the highest principles of business ethics. Accordingly, all officers,
employees and independent contractors must avoid activities which are in
conflict, or give the appearance of being in conflict, with these principles and
with the interests of the Company. The following sets forth examples of
potentially compromising situations which must be avoided but is not all
inclusive of the types of conduct which may be considered a violation of this
policy. Any violations of this policy must be reported to the President.
1. Revealing confidential information to outsiders or misusing
confidential information. Unauthorized divulging of information is a violation
of this policy whether or not for personal gain and whether or not harm to the
Company is intended. (The Proprietary Information and Inventions Agreement
elaborates on this principle and is a binding agreement.)
2. Accepting or offering substantial gifts, excessive entertainment,
favors or payments which may be deemed to constitute undue influence or
otherwise be improper or embarrassing to the Company.
3. Initiating or approving personnel actions affecting reward or
punishment of employees or applicants where there is a family relationship or is
or appears to be a personal or social involvement.
4. Initiating or approving any form of personal or social harassment of
employees.
5. Investing or holding outside directorship in suppliers, customers,
or competing companies, including financial speculations, where such investment
or directorship might influence in any manner a decision or course of action of
the Company.
6. Borrowing from or lending to other employees, customers or
suppliers.
7. Improperly using or disclosing to the Company any proprietary
information or trade secrets of any former or concurrent employer or other
person or entity with whom obligations of confidentiality exist.
8. Unlawfully discussing prices, costs, customers, sales or markets
with competing companies or their employees.
9. Making any unlawful agreement with distributors with respect to
prices.
10. Improperly using or authorizing the use of any inventions which are
the subject of valid patent claims of any other person or entity.
Each officer, employee and independent contractor must take appropriate
action to ensure compliance with these guidelines and to bring problem areas to
the attention of higher management for review. Violations of this Conflict of
Interest Policy may result in discharge without warning.
<PAGE> 6
APPENDIX B
MESSAGEMEDIA, INC.
VOICE-MAIL POLICY STATEMENT
1. The Company may maintain as part of its technology platform a voice-mail
system. This system is provided to assist in the conduct of business within the
Company.
2. Voice-mail and the data stored on it are and remain at all times the
property of the Company. As such, all voice-mail messages created, sent, and
received are and remain the property of the Company.
3. The Company reserves the right to retrieve and listen to any message
composed, sent, or received. Please note that even when a message is deleted, it
is still possible to recreate the message; therefore, ultimate privacy of
messages cannot be guaranteed to anyone.
4. Although voice-mail may accommodate the use of passwords for security,
the reliability of such for maintaining confidentiality cannot be guaranteed.
You must assume that any and all messages may be listened to by someone other
than the intended or designated recipient. Moreover, all passwords must be made
available to the Company. The reason for this is simple. Your voice-mail may
need to be accessed by the Company when you are absent.
5. Notwithstanding the Company's right to retrieve any voice-mail message,
all messages sent by voice-mail are considered to be confidential, and as such
are to be accessed only by the addressed recipient or by direction of the
addressed recipient. Any exception to this policy must be approved by the
Executive Committee.
6. Employees learning of any misuse of the voice-mail system or violations
of this policy shall notify General Counsel or Director of Human Resources.
7. Voice-mail messages may not contain material that may reasonably be
considered offensive or disruptive to any employee. Offensive content would
include, but not be limited to, sexual comments, racial slurs, gender-specific
comments, or any comments that might offend someone on account of his or her
age, sex, sexual orientation, religious or political beliefs, national origin,
race or disability.
8. Any employee who violates this policy shall be subject to disciplinary
action, up to and including termination.
Appendix B
Initial
------
<PAGE> 7
APPENDIX C
MESSAGEMEDIA, INC.
E-MAIL POLICY STATEMENT
1. The Company maintains as part of its technology platform an e-mail system.
This system is provided to assist in the conduct of business both inside and
outside of the Company.
2. All computers and the data stored on them are and remain at all times the
property of the Company. As such, all e-mail messages composed, sent, and
received are and remain the property of the Company.
3. The Company reserves the right to retrieve and read any message composed,
sent, or received. Please note that even when a message is erased, it is still
possible to recreate the message; therefore, ultimate privacy of messages cannot
be guaranteed to anyone.
4. The Company reserves the right to retain any electronic message on the
system.
5. Although e-mail may accommodate the use of passwords for security, the
reliability of such for maintaining confidentiality cannot be guaranteed. You
must assume that any and all messages may be read by someone other than the
intended or designated recipient. Moreover, all passwords must be made available
to the Company. The reason for this is simple. Your e-mail may need to be
accessed by the Company when you are absent.
6. Notwithstanding the Company's right to retrieve and read any e-mail message,
all messages sent by e-mail are considered to be confidential, and as such are
to be read only by the addressed recipient or at the direction of the addressed
recipient. Any exception to this policy must be approved by the Executive
Committee.
7. Employees learning of any misuse of the e-mail system or violations of this
policy shall notify General Counsel or Director of Human Resources.
8. E-mail messages may not contain material that may reasonably be considered
offensive or disruptive to any employee. Offensive content would include, but
not be limited to, sexual comments or images, racial slurs, gender-specific
comments, or any comments that might offend someone on account of his or her
age, sex, sexual orientation, religious or political beliefs, national origin,
race or disability.
9. Any employee who violates this policy shall be subject to disciplinary
action, up to and including termination.
Appendix C
Initial
------
<PAGE> 8
APPENDIX D
MESSAGEMEDIA, INC.
WAIVER AND RELEASE OF CLAIMS
In exchange for the severance payments provided for in my offer letter agreement
(the "Agreement"), to which this form is attached, I hereby furnish
MESSAGEMEDIA, INC. (the "Company") with the following release and waiver.
I hereby release, and forever discharge the Company, its officers, directors,
agents, employees, stockholders, successors, assigns and affiliates, of and from
any and all claims, liabilities, demands, causes of action, costs, expenses,
attorneys' fees, damages, indemnities and obligations of every kind and nature,
in law, equity, or otherwise, known and unknown, suspected and unsuspected,
disclosed and undisclosed, arising at any time prior to and including my
employment termination date with respect to any claims relating to my employment
and the termination of my employment, including but not limited to, claims
pursuant to any federal, state or local law relating to employment, including,
but not limited to, discrimination claims, and the Federal Age Discrimination in
Employment Act of 1967, as amended ("ADEA"), or claims for wrongful termination,
breach of the covenant of good faith, contract claims, tort claims, and wage or
benefit claims, including but not limited to, claims for salary, bonuses,
commissions, stock, stock options, vacation pay, fringe benefits, severance pay
or any form of compensation.
I acknowledge that, among other rights, I am waiving and releasing any rights I
may have under ADEA, that this waiver and release is knowing and voluntary, and
that the consideration given for this waiver and release is in addition to
anything of value to which I was already entitled as an employee of the Company.
I further acknowledge that I have been advised, as required by the Older Workers
Benefit Protection Act, that: (a) the waiver and release granted herein does not
relate to claims which may arise after this agreement is executed; (b) I have
the right to consult with an attorney prior to executing this agreement
(although I may choose voluntarily not to do so); (c) I have twenty-one (21)
days from the date I receive this agreement, in which to consider this agreement
(although I may choose voluntarily to execute this agreement earlier); (d) I
have seven (7) days following the execution of this agreement to revoke my
consent to the agreement; and (e) this agreement shall not be effective until
the seven (7) day revocation period has expired.
Date: By:
-------------- -----------------------------
RANDY BACHMEYER
Appendix D
Initial
------
<PAGE> 1
EXHIBIT 10.50
[MESSAGEMEDIA LOGO]
October 4, 1999
Kelley Wood
Dear Kelley:
MessageMedia, Inc. ("MessageMedia" or the "Company") is pleased to offer you
employment on the terms and conditions stated in this letter, pending reference
checks. MessageMedia is offering you the position of VP Information Technology.
You will work at our facility located at 6060 Spine Road, Boulder, CO 80301. You
will report to the CEO. Of course, MessageMedia may change your position,
duties, and work location from time to time as it deems necessary. If you accept
this offer, we would like for you to begin work with MessageMedia on August 31,
1999.
Your rate of compensation will be $165,000 per year, less payroll deductions and
all required withholdings. You will be paid semi-monthly. You will be eligible
for all fringe benefits presently offered MessageMedia employees. Details about
such benefits are available for your review. The Company will also pay you a
relocation bonus of $15,000, less payroll deductions and all required
withholdings to cover moving costs and temporary housing. You will also be
eligible to earn an annual bonus with a target of 50% of your base salary.
You may, subject to approval by the Compensation Committee of the Board of
Directors, be eligible to receive an option to purchase 100,000 shares of the
Company's Common Stock (the "Option"), with an exercise price per share equal to
the fair market value of the Company's Common Stock on the date you start
employment with MessageMedia ("Vesting Commencement Date"). This Option will be
issued in accordance with the terms and conditions of the 1995 Stock Option
Plan.
The Option shall vest in accordance with the Company's standard form of option
agreement under the 1995 Stock Option Plan, as amended, which provides that 25%
of the shares subject to the option shall vest and become exercisable on the
first anniversary of the Vesting Commencement Date, and an additional 1/48th of
the shares subject to the option at the end of each one-month period thereafter
shall vest and become exercisable provided in each case that the optionee
remains an employee and/or consultant of the Company.
Initial
-------
<PAGE> 2
You will be entitled to four weeks weeks of paid vacation during your first year
of service, which shall begin accruing monthly upon commencement of employment.
You will be eligible to use your accrued vacation after your first thirty (30)
days of employment, and in accordance with the provisions of the Employee
Handbook thereafter.
Should you accept this offer, your employment with MessageMedia will not be for
a specified term and may be terminated with or without cause and with or without
notice by you or by the Company at any time, for any reason or no reason. Any
contrary representations or agreements which may have been made to you are
superseded by this offer. The "at will" nature of your employment described in
this offer letter shall constitute the entire agreement between you and
MessageMedia concerning the nature and duration of your employment. Though your
job duties, title, compensation and benefits may change over time and you may be
subject to incremental discipline that doesn't include a termination, none of
these events change our agreement that you are an "at will" employee. In
addition, the fact that the rate of your salary is stated in units of years or
months and that your vacation accrues annually does not alter the at-will nature
of the employment, and does not mean and should not be interpreted to mean that
you are guaranteed employment to the end of any period of time or for any period
time. The "at will" term of your employment with MessageMedia can only be
changed in a writing signed by you and the President of the Company.
One of the conditions of your employment with MessageMedia is the maintenance of
the confidentiality of MessageMedia's proprietary and confidential information.
You will be required, prior to or on your start date, to execute the Company's
Proprietary Information and Inventions Agreement, attached hereto as Appendix A.
In your work for the Company, you will be expected not to use or disclose any
confidential information, including trade secrets, of any former employer or
other person to whom you have an obligation of confidentiality. You agree that
you will not bring onto Company premises any unpublished documents or property
belonging to any former employer or other person to whom you have an obligation
of confidentiality. In the performance of your duties for the Company, you will
be expected to use only that information which is generally known and used by
persons with training and experience comparable to your own, which is common
knowledge in the industry or otherwise legally in the public domain, or which is
otherwise provided or developed by the Company.
By joining MessageMedia, you are agreeing to abide by all laws and regulations,
all Company policies and procedures, to acknowledge in writing that you have
read the Company's Employee Handbook and that you are bound by the terms and
conditions of the Company's Proprietary Information and Inventions Agreement.
Violations of these policies may lead to immediate termination of employment. As
required by law, this offer is subject to satisfactory proof of your right to
work in the United States.
Initial
-------
<PAGE> 3
We are looking forward to having you join MessageMedia, Inc. If you wish to
accept this offer, please sign below and return the fully executed letter prior
to the expiration date of August 31, 1999. You should keep one copy of this
letter for your own records.
Very truly yours,
MESSAGEMEDIA, INC.
- --------------------------------- --------------------------
Larry Jones Date
CEO & President
Acceptance:
- --------------------------------- --------------------------
Kelley Wood Date
Initial
------
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<EPS-BASIC> (0.61)
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</TABLE>
