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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended July 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________to________________
Commission File Number 333-11445
PUMA TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 77-0349154
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
2550 North First Street, Suite 500 95131
San Jose, California (ZIP Code)
(Address of principal executive offices)
(408) 321-7650
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of September 25, 1997, was approximately $62,652,000.
The number of the registrant's $0.001 par value Common Stock outstanding as
of October 13, 1997, was 12,085,097 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE:
Certain sections of the Proxy Statement for registrant's PART III
1997 Annual Meeting of Stockholders to be held on
December 10, 1997 to be filed with the Commission
pursuant to Registration 14A no later than 120 days
after the end of the fiscal year covered by this Form.
Certain sections of the Annual Report to Stockholders for PARTS II & IV
fiscal year ended July 31, 1997.
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TABLE OF CONTENTS
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . 3
ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . 19
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . 19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . 19
PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . 21
ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . 21
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . 22
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . 22
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . 22
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . 22
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . 22
PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . 23
EXHIBIT 11.1 . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SCHEDULE II . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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PART I
ITEM 1. BUSINESS
EXCEPT FOR THE HISTORICAL STATEMENTS CONTAINED HEREIN, THIS ANNUAL REPORT
ON FORM 10-K CONTAINS CERTAIN FORWARD LOOKING STATEMENTS WITHIN THE MEANING
OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934. THE ACTUAL RESULTS
THAT THE COMPANY ACHIEVES MAY DIFFER MATERIALLY FROM THOSE INDICATED IN ANY
FORWARD LOOKING STATEMENTS DUE TO THE RISKS AND UNCERTAINTIES SET FORTH UNDER
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS", "CERTAIN BUSINESS RISKS" AND ELSEWHERE IN THIS FORM 10-K. THE
COMPANY UNDERTAKES NO OBLIGATION TO REVISE ANY FORWARD LOOKING STATEMENTS IN
ORDER TO REFLECT EVENTS OR CIRCUMSTANCES THAT MAY ARISE AFTER THE DATE OF
THIS REPORT. READERS ARE URGED TO CAREFULLY REVIEW AND CONSIDER THE VARIOUS
DISCLOSURES MADE BY THE COMPANY IN THIS REPORT AND IN THE COMPANY'S REPORTS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION THAT ATTEMPT TO ADVISE
INTERESTED PARTIES ON THE RISKS AND FACTORS THAT MAY AFFECT THE COMPANY'S
BUSINESS.
OVERVIEW
Puma develops, markets and supports Mobile Data Exchange-TM- ("MDE")
software, which allows users to easily access, exchange and synchronize
information stored on a variety of different computing devices such as
desktop computers and mobile computing devices, including notebook and
handheld computers, personal electronic organizers, smart phones and smart
pagers. The Company's MDE software is designed to improve the productivity of
business professionals who are increasingly relying on mobile computing
devices to address their growing needs for accessible, up-to-date
information, whether in or out of the office. Puma's IntelliSync-TM- product
family allows "content-aware" data synchronization among a wide range of
mobile computing devices. Puma's TranXit-Registered Trademark- product
family ("TranXit") is a leading software solution specifically designed to
utilize wireless infrared ("IR") connectivity technology for file exchange,
synchronization and printing and, along with IntelliSync, offers solutions
for convenient, reliable and cost-effective Mobile Data Exchange.
INDUSTRY BACKGROUND
In recent years, significant advancements in miniaturization, visual
displays, long-life batteries and portable communications have led to the
introduction of many innovative new mobile computing devices. These highly
portable devices allow users to work and communicate as they travel and have
fueled the significant growth of mobile computing. According to International
Data Corporation ("IDC"), portable computers represented 15.2% of total
personal computer ("PC") shipments of 58.2 million units in 1995. IDC
estimates that this percentage will grow to 19.6% of 117.2 million units in
the year 2000. Other electronic consumer devices, such as personal electronic
organizers and smart phones, are also being introduced to provide data
storage and information management capabilities to the mobile business
professional. The 3COM PalmPilot, Windows CE handheld PCs, Nokia 9000
Communicator, and the Sharp Mobile Organizer are examples of popular handheld
mobile devices. Dataquest estimates that 1.3 million handheld computers,
including organizers and other handheld devices, were shipped worldwide in
1995, and will grow to 5.3 million in the year 2000. IDC estimates that the
PDA market (which includes smart pagers) will grow from 858,000 units sold
last year to 1.8 million by the end of 1997, and out to 7.6 million in the
year 2001.
As more types of new mobile computing devices become available to
business professionals, users are faced with the difficulty of exchanging
information among these various devices. This problem of interoperability is
caused by the need to exchange information among different hardware devices,
operating systems and applications. Hardware platforms range from high-speed
Pentium PCs with hundreds of megabytes of memory and gigabytes of storage, to
"shirt pocket" organizers, with specialized processors and limited memory and
storage. In addition, these devices use numerous operating systems, such as
Windows for Workgroups, Windows 3.1, Windows 95, Windows NT, DOS and others,
and utilize an even greater range of information management applications,
databases and data formats. Enabling these devices to communicate,
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exchange and synchronize information is a complex and challenging task.
Accomplishing this requires data-level, or content-aware, synchronization
technology to maintain complete, up-to-date and accurate information. For
example, content-aware data synchronization technology allows users to
exchange addresses from the Address Book software application on a 3COM
PalmPilot with Lotus Organizer on a desktop PC, updating only the fields that
have been most recently modified, rather than copying one file over another,
thereby synchronizing both databases with the latest information.
In addition, while notebooks and a wide range of other mobile computing
devices have increased individual productivity, they have created certain
challenges in the areas of connectivity and synchronization of data and files
stored on those devices and on desktop computers. Until recently, users of
mobile computing devices were limited to cable and wired solutions as the
only effective means to connect to their desktop computers and printing
devices. Most PC notebook manufacturers, and a growing number of handheld
device manufacturers have adopted IR (infrared) as the most cost-effective,
efficient medium for wireless connectivity in the MDE software market. Today,
IR connectivity costs less than other connectivity technologies, requires
less space inside a device, and is based on a single, international standard
developed by the Infrared Data Association ("IrDA") which includes
approximately 150 companies including Compaq, Ericsson, HP, IBM, Intel,
Microsoft, Motorola, Nokia, Sharp and Toshiba. The Company believes the
market for IR connectivity is significant, as IDC estimates that 1.7 million
IR-enabled notebooks were shipped worldwide in 1995, and will grow to 20
million in the year 2000. IDC also estimates that the percentage of
IR-enabled notebook computers as a percentage of all notebook computers
shipped will increase from 21.2% in 1995 to 100.0% by the year 2000.
Business professionals are continuously seeking ways to improve
productivity and, as a result, are increasingly using the growing number of
new, innovative mobile computing devices. In order to manage information
effectively, these users need convenient connectivity and synchronization
solutions for the specific combination of devices and applications that they
use. MDE software solutions allow users to synchronize information maintained
separately on multiple devices (e.g., contact databases maintained by a
mobile professional using a handheld computer in the field and by a support
colleague using a desktop PC in the office). A software solution that links
such different devices must address multiple hardware architectures,
operating systems, communications architectures and application specific data
formats and structures.
THE PUMA SOLUTION
Puma's MDE software products, anchored by its award-winning IntelliSync
family, are designed to increase productivity for business professionals by
allowing users to easily access, exchange and synchronize information stored
on a variety of different computing devices. Puma's products allow the mobile
professional to access information at low cost with easy-to-use applications,
saving time and money. Puma's lntelliSync product family allows users to
synchronize data on handheld mobile computing devices with data on PCs by
virtue of Puma's patented DSX-TM- (data synchronization extensions)
content-aware data synchronization technology. The TranXit product family is
specifically designed to utilize IR connectivity technology for reliable,
cost-effective file exchange, synchronization and printing. The Puma solution
includes the following characteristics:
INTELLIGENT, CONTENT-AWARE DATA SYNCHRONIZATION. The Company's patented DSX
technology provides content-aware data synchronization among a growing number
of handheld devices and industry-leading personal information management
software ("PIMs") and contact management and scheduling applications such as
Lotus Organizer, Microsoft Schedule+ and Outlook, GoldMine, Symantec ACT!,
Novell GroupWise, ON Technology Meeting Maker, NetManage ECCO, Starfish
Sidekick and others. This technology seamlessly and transparently translates
the information from one data format to another as the information is
synchronized. Built on a powerful data translation engine, it can expand via
device and application-specific translators to accommodate new devices and
applications.
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WIDESPREAD SOLUTIONS FOR INTEROPERABILITY. Puma's products provide
connectivity and content-aware data synchronization among industry-leading
PCs and mobile computing devices, operating systems and applications. Puma
products operate with major PC operating systems including Windows 3.1,
Windows for Workgroups, Windows 95 and Windows NT as well as several
proprietary operating systems. Puma also provides interoperability across a
wide range of industry-standard and vendor-specific applications by
supporting multiple data formats. Puma's IR communications architecture
enables robust operation across IR-enabled platforms. IntelliSync for
Notebooks, the successor to TranXit, is backwards compatible with previous
versions of TranXit, allowing users to connect and exchange information with
all previous versions across different operating systems.
LEADING IR CONNECTIVITY SOFTWARE. Both IntelliSync for Notebooks and the
TranXit product family are specifically designed for file exchange and
synchronization over convenient wireless IR connections. They fully support
the IrDA standards, with TranXit being the first file exchange software to
incorporate the new Fast IR standard (IrDA-2) for 4.0 Mbps connectivity. They
provide a rich set of wireless file transfer, synchronization and wireless
printing features that are both easy to use and cost-effective. Puma has
bundled either TranXit or IntelliSync for Notebooks with the vast majority of
IR-enabled notebooks shipping worldwide.
STRATEGIC PARTNERS AND BROAD-BASED OEM ADOPTION WORLDWIDE. Puma has
achieved broad penetration into many of the leading OEM hardware vendors,
including Acer, Brother, Canon, Citizen, Compaq, DEC, Epson, Fujitsu, Gateway
2000, Hitachi, IBM, Matsushita, Mitsubishi, NEC, Olivetti, Samsung, Sanyo,
Sharp, Texas Instruments and Zenith. This allows business professionals to
choose virtually any mobile computing device and effectively manage data
between a PC or server and a mobile computing device. The Company believes
that its development projects with leading hardware and software vendors
significantly reduce time to market for its products.
STRATEGY
Puma's objective is to maintain its leadership position as a worldwide
provider of mobile data exchange software, including advanced data
synchronization and wireless IR connectivity software, for business
professionals. To achieve this objective, Puma has adopted the following key
strategies:
CREATE CROSS-PLATFORM STANDARD. The Company's strategy is to provide
innovative software solutions that allow a growing number of mobile computing
devices to communicate and exchange data. These mobile devices are based on
an increasing number of different operating systems, processor architectures,
communications architectures and applications which utilize incompatible data
formats. The Company plans to continue to work closely with leading operating
system suppliers, OEMs, semiconductor manufacturers, device manufacturers and
applications vendors that often compete with one another. The Company
believes that its cross-platform standard will continue to be an advantage in
providing a widely-adopted MDE software solution.
DEVELOP MULTIPLE PRODUCTS FROM CORE TECHNOLOGIES. The Company intends to
leverage its core technologies and engineering experience to expand the
breadth of its software product offerings. By leveraging its advanced
content-aware DSX data synchronization and IR connectivity technologies, Puma
plans to continually broaden its IntelliSync product family. In addition, as
innovative new mobile computing devices are introduced into the market, Puma
will leverage its engineering expertise, core technologies and relationships
with market-leading OEMs to develop new advanced MDE software products that
support these devices.
EXPAND AND LEVERAGE STRATEGIC RELATIONSHIPS. Puma currently has OEM,
marketing or technology relationships with more than 70 hardware and software
vendors worldwide including 3COM/U.S. Robotics, Acer, AST, AT&T Wireless,
Canon, Casio, DEC, Ericsson, Fujitsu, Geoworks, HP, IBM, Intel, Lotus,
Motorola, NEC, Novell, Oracle, Seiko Epson, Sharp, Texas Instruments, Toshiba
and Unwired Planet, and
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plans to develop additional relationships with other computer and mobile
computing device manufacturers as well as other software application vendors.
These relationships generally enable Puma to receive product prototypes from
hardware manufacturers and software vendors prior to their market
introduction. The Company believes it is thereby in a strong position to
launch complementary product offerings shortly after the commercial release
of these companies' new hardware and software products.
EXPAND DISTRIBUTION CHANNELS. The Company has developed significant
brand-name recognition with its customers by licensing its products to many
of the world's leading computer and mobile computing device manufacturers.
Puma seeks to leverage this brand name recognition in order to license its
products to additional OEMs and to increase sales through major distributors,
resellers, computer dealers, retailers and mail-order companies. In addition,
Puma plans to continue to expand its co- and joint-marketing programs,
channel promotions and bundling arrangements.
INCREASE PENETRATION OF INTERNATIONAL MARKETS. The Company has established
an international distribution network by forming overseas relationships in
South Africa, Asia, Australia, Europe and Canada. Puma intends to further
develop its international distribution network by forming additional
distribution partnerships and offering translations of its product family in
several additional languages. The Company believes its growing international
distribution network will further its competitive advantage over potential
entrants into a market.
CUSTOMERS. Puma's current customer base consists principally of large OEMs
in the PC market. In fiscal 1997, Toshiba accounted for approximately 21% of
the Company's revenue. In fiscal 1996, Toshiba and NEC accounted for
approximately 18% and 13% of the Company's revenue, respectively. In fiscal
1995, NEC, Toshiba and Canon accounted for approximately 16%, 15% and 14% of
the Company's revenue, respectively. No other customer accounted for greater
than 10% of the Company's revenue in fiscal 1997, fiscal 1996 or fiscal 1995.
The Company licensed its products to more than 50 OEM customers in fiscal
1997. The following is a list of customers from whom the Company recognized
more than $100,000 in revenue in fiscal 1997:
Apple Matsushita
Compaq NEC
Ericsson Olivetti
Fujitsu Samsung
GVC Sharp
Gateway Texas Instruments
Hitachi Toshiba
IBM
PRODUCTS
Puma offers a wide range of software products to both the OEM and retail
markets. These products allow users to wirelessly connect computing devices
as well as exchange and synchronize information across a diverse set of
hardware platforms, operating systems and applications. By combining its
advanced data synchronization and IR connectivity technologies, the Company
is able to develop a number of products designed for a specific application,
operating system or hardware platform.
<TABLE>
<CAPTION>
PRODUCT NAME DESCRIPTION INTRODUCTION DATE
- ------------ ----------- -----------------
<S> <C> <C>
IntelliSync for Notebooks/IntelliSync 97 Sold through both OEM and retail channels, this September 1997
product provides PC-to-PC file transfer and
synchronization including PIM-to-PIM
synchronization over wireless IR, wired connection,
and network connections.
</TABLE>
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<TABLE>
<CAPTION>
PRODUCT NAME DESCRIPTION INTRODUCTION DATE
- ------------ ----------- -----------------
<S> <C> <C>
IntelliSync for PDA product family Content-aware data synchronization among PC-based August 1996
applications and mobile computing devices. The
IntelliSync for PDA family include support for the
PalmPilot, Windows CE, Sharp Organizers, TI
Organizers, Nokia 9000 Communicator, and AT&T
PocketNet Service.
IntelliSync Gold Designed for the corporate market, IntelliSync Gold October 1997
includes several IntelliSync-supported products in a
single package.
TranXit OEM product for file transfer, synchronization and October 1994
wireless printing over IR connections
TranXit Pro Retail version, including SyncPro automatic
synchronization, delta file transfer and long file May 1996
name support for Windows 95
TranXit Pro Connectivity Kit TranXit Pro plus IR-adapter hardware for the May 1996
desktop PC
TranXit for DOS File transfer and synchronization over IR connections December 1996
for DOS
IntelliLink-Registered Trademark- Data "import" and "export" among PC-based applications September 1993
and mobile computing devices
</TABLE>
INTELLISYNC FOR NOTEBOOKS (INITIALLY INTELLISYNC 97 FOR WINDOWS). IntelliSync
for Notebooks, the successor to the TranXit product family, is a native
32-bit Windows 95/Windows NT PC-to-PC synchronization product that provides
file transfer and synchronization as well as direct PIM-to-PIM
synchronization (incorporating Puma's DSX technology) between two PCs, or
between a PC and a network server. It supports IR, cable, and network
connections. IntelliSync for Notebooks will replace TranXit in the OEM
channel, and will also be sold in the retail channel.
INTELLISYNC FOR PDA PRODUCT FAMILY. The IntelliSync for PDA product family
provides content-aware data synchronization, including complete conflict
resolution, between a broad range of PC-based PIMs, contact management and
scheduling applications, as well as a number of mobile computing devices
including the PalmPilot, Windows CE, Sharp Organizers, TI Organizers, Nokia
9000 Communicator and AT&T PocketNet Service. Based upon the Company's
patented DSX technology, IntelliSync allows users to automatically
synchronize their mobile computing devices directly with various PC
applications in a single step, eliminating the need for intermediate
conversions or translations.
INTELLISYNC GOLD. IntelliSync Gold is designed for the corporate market, and
combines many of the individual IntelliSync products in a single package.
IntelliSync Gold will be sold primarily as a volume purchase product to the
corporate market, and provides increased flexibility to corporate users by
including support for a wide variety of mobile devices in a single product.
TRANXIT. TranXit is the leading software solution for wireless file
transfer, synchronization and printing, specifically designed to operate over
convenient IR connections. Directed at the OEM market, TranXit is currently
shipped on the vast majority of all IR-enabled notebook PCs shipped
worldwide. TranXit operates under Windows for Workgroups, Windows 3.1 and
Windows 95, offering users broad operating system interoperability. TranXit
has been significantly enhanced since its original release and each new
version of TranXit is backward compatible with all previous versions.
TRANXIT PRO. TranXit Pro is the retail version of the OEM TranXit software
product. Sold as both an upgrade for TranXit to existing users and as a
separate solution to new users, TranXit Pro adds additional features such as
SyncPro for enhanced and automatic data synchronization, a virtual Windows
clipboard for collaborative processing between two PCs, delta file transfer
for enhanced performance and long file-name support for Windows 95.
TRANXIT PRO CONNECTIVITY KIT. The TranXit Pro Connectivity Kit combines
TranXit Pro with an IrDA compliant serial IR adapter for a desktop PC. A
complete solution for an IR notebook user, the TranXit Pro Connectivity Kit
provides convenient notebook-to-desktop wireless IR connectivity.
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TRANXIT FOR DOS. Much of the horizontal computing market has migrated to
graphical user interface operating systems, such as Windows for Workgroups,
Windows 3.1 and Windows 95. There are, however, a large number of vertical
market hardware devices, such as those used for data collection or factory
automation, that remain based upon the DOS operating system. TranXit for DOS
provides the necessary connectivity and file transfer capabilities that
allows these devices to interoperate with PCs. TranXit for DOS is
interoperable with all other versions of the TranXit family.
INTELLILINK. IntelliLink provides data "import" and "export" between a broad
range of PC-based contact management and scheduling applications, and a
number of mobile computing devices.
FUTURE PRODUCTS
INTELLISYNC FOR PDA PRODUCT FAMILY. Puma will continue to broaden the
IntelliSync for PDA product family by providing support for new mobile
devices, including smart phones and smart pagers as they reach the market. In
addition, Puma will expand the application support provided with this family
of products to include additional applications, particularly groupware
applications.
INTELLISYNC FOR SERVERS. Part of Puma's strategy is to bring synchronization
solutions to the server level, both for enterprise and Internet environments.
Puma's acquisition of Real World Solutions, along with its existing core
technologies, will help Puma develop, and work with other partners to
develop such solutions.
TECHNOLOGY
Puma's software products allow the exchange and synchronization of data
across diverse platforms, operating systems and applications. The Company has
developed two complementary proprietary technologies for mobile data
exchange: DSX technology for content-aware data synchronization and IR
connectivity. These complementary technologies, taken individually and
together, enable Puma to provide comprehensive solutions that meet the
market's growing needs for convenient, accurate, easy to use data exchange,
synchronization and connectivity.
CONTENT-AWARE DATA SYNCHRONIZATION. The Company's content-aware DSX data
synchronization technology operates at both the file and record level to
synchronize data among different software applications and hardware platforms
during data transfer. With DSX technology, Puma's products allow users to
synchronize not only files, but also the data within those files, and to
synchronize databases by field or record, not just copy one database file
from one to another. This advanced data synchronization technology is
composed of three main components that collectively work to enable the
effective transfer of data across supported applications and platforms:
SYNCHRONIZATION ENGINE. Puma's proprietary synchronization engine is
the central component responsible for controlling the flow of data
throughout the entire synchronization process. It directs translator
modules to retrieve, add, delete, change and distribute data records or
fields on demand.
INTERMEDIATE DATA REPRESENTATION. Puma's synchronization technology
makes extensive use of modularity to maximize reusability for the
translator modules. The synchronization engine communicates with all
translator modules using a common "dialect," referred to as intermediate
data representation. Intermediate data representation stipulates rules
for exchanging common types of data imposing restrictions on data content
(i.e., the number and type of fields in each application). The existence
of a common data representation makes it possible for a new translator to
immediately synchronize with any supported application or mobile
computing device.
TRANSLATORS. Each translator module is responsible for interfacing with
one application or mobile computing device. When operating under Windows,
a translator is packaged as a separate Dynamic Link Library ("DLL") for
maximum reusability. The development of new translators (as well as the
maintenance of existing modules) is greatly eased by the existence of the
translator framework, a
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collection of powerful C++ classes which supply software engineers with
the necessary abstractions to quickly and easily develop translator
modules to meet expanding market needs.
IR CONNECTIVITY. Puma's IR connectivity software enables the wireless
transfer of data among notebook and desktop PCs, printers and mobile
computing devices. IntelliSync for Notebooks and the TranXit family are
designed to support IrDA standards, with TranXit being the first file
exchange and synchronization software to incorporate the new Fast IR standard
(IrDA-2) for 4.0 Mbps connectivity.
COMMUNICATIONS ARCHITECTURE. The Company's software is based upon an
extensive, proprietary, network and device independent communications
architecture, enabling access to a variety of mobile computing devices
through a flexible and simple application program interface ("API") that
speeds the development of new features. A layered, modular design allows
the architecture to leverage existing published data transfer protocols
(IrDA, Windows Sockets), when available, and to create proprietary data
transfer protocols to provide connectivity to a broad range of devices
without extensive modification of the software.
The Company's IR communications architecture isolates hardware
implementation details from the rest of the protocol stack, enabling quick
support of new IR hardware implementations and fast adoption of new IR
standards and extensions. The architecture supports multiple vendors'
implementation of IrDA protocol stacks for migration to new operating systems
and platforms.
Puma's communication protocols are designed to operate across a variety
of network and operating system environments, enabling mobile data exchange
among them. Puma software currently supports data transfer among Windows for
Workgroups, Windows 3.1 and Windows 95. Puma has also worked with Microsoft
to ensure that the Microsoft IR driver supports Mobile Data Exchange among
operating systems and IR devices.
SALES AND MARKETING
Puma primarily sells its products through more than 50 OEM customers and
strategic partners worldwide. In fiscal 1997, Toshiba accounted for
approximately 21% of the Company's revenue. In fiscal 1996, Toshiba and NEC
accounted for approximately 18% and 13% of the Company's revenue,
respectively. In fiscal 1995, NEC, Toshiba and Canon accounted for
approximately 16%, 15% and 14% of the Company's revenue, respectively.
Puma strives to be both a marketing and a technology partner with its OEM
customers and its strategic partners. Puma's sales and marketing organization
sells the Company's products directly to its OEM partners, and then works
with them on joint marketing and channel programs. Puma works closely with
OEM partners on their new hardware products by providing technical input to
the OEM, thereby helping to ensure that Puma's software products will work
successfully with the OEM's hardware products. Puma also trains and educates
the OEM's sales and marketing organizations on Puma's products, allowing them
to act as Puma's "virtual" sales force to their channels and direct
customers. In addition, Puma works closely with its hardware and software
strategic partners to develop effective marketing programs designed to
increase sales.
Puma distributes its retail products through several distribution
channels both domestically and internationally. In the United States, Puma's
sales organization works directly with major distributors, resellers,
computer dealers, retailers and mail order companies to distribute its retail
packaged products. In order to further develop its brand name recognition,
Puma plans to continue to expand its joint marketing programs, marketing
channel promotions and bundling arrangements with its strategic partners. See
"Business Risks-Risks Associated with Development of Retail Distribution
Channel."
Revenue from OEMs was approximately 74%, 89% and 95% of revenue in fiscal
1997, fiscal 1996 and fiscal 1995, respectively. In fiscal 1997, Toshiba
accounted for approximately 21% of the Company's revenue. Although several
OEMs are subject to certain contractual minimum purchase obligations, there
can
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be no assurance that any particular OEM will satisfy the minimum obligations.
Weakening demand from any key OEM and the inability of the Company to replace
revenue provided by such OEM could have a material adverse effect on the
Company's business, operating results and financial condition. The Company
maintains individually significant receivable balances from major OEMs. If
these OEMs fail to meet their payment obligations, the Company's operating
results could be materially adversely affected. See "Business Risks-
Dependence on OEMs."
International revenue represented approximately 54%, 67% and 71% in
fiscal 1997, fiscal 1996 and fiscal 1995, respectively. Puma markets and
sells through selected distributors and republishers that focus on specific
geographic and market segment areas. These international partners operate as
an extension of Puma's marketing and sales organizations, developing the
appropriate sales channels in their regions. They also work with local
resellers as well as local offices of Puma's OEM customers to develop
specific marketing and channel promotions for their regions. As of July 31,
1997, the Company was represented by approximately 26 distributors and
resellers in Africa, Asia, Australia, Canada and Europe and is continuing to
expand its international reach as appropriate distributors or republishers
are found. See "Business Risks-Risks Associated with International
Operations."
COMPETITION
The Company expects the market for MDE software, including data
synchronization and IR connectivity software to the extent it develops, to
become intensely competitive. The Company currently faces direct competition
with respect to a number of its individual products from several private
companies, including Traveling Software, Chapura, and DataViz. In addition to
direct competition, the Company faces indirect competition from existing and
potential customers that provide internally developed solutions. As a result,
the Company must educate prospective customers as to the advantage of the
Company's products versus internally developed solutions. The Company
currently faces limited direct competition from major applications and
operating systems software vendors who may choose to incorporate data
synchronization and IR connectivity functionality into their operating
systems software, thereby potentially reducing the need for OEMs to include
Puma's products in their notebook and desktop PCs. For example, Microsoft's
inclusion of certain features permitting data synchronization and IR
connectivity between computers utilizing the Windows 95 operating system may
have the effect of reducing revenue from the Company's software if users of
Windows 95 perceive that their data synchronization and IR connectivity needs
are adequately met by Microsoft. Certain of the companies with which the
Company competes or may in the future compete, including internal software
development groups of its current and potential customers, have substantially
greater financial, marketing, sales and support resources and may have more
"brand-name" recognition than the Company. There can be no assurance that the
Company will be able either to develop software comparable or superior to
software offered by its current or future competitors or to adapt to new
technologies, evolving industry standards and changes in customer
requirements. In addition, the PC and mobile computing device markets
experience intense price competition, and the Company expects that, in order
to remain competitive, it may have to decrease its unit royalties on certain
products. See "Risk Factors-Competition."
The principal competitive factors affecting the market for the Company's
software are compatibility, functionality, reliability, OEM relationships and
price. The Company believes it competes favorably overall with respect to
these factors.
The Company believes that users will want to be able to utilize IR
connectivity and data synchronization functionality with a wide variety of
mobile computing devices and software applications, and that its
standards-based approach will continue to allow it to compete favorably with
larger companies whose products may not be able to support such a degree of
interoperability. Puma's strategic relationships with hardware and software
vendors enable it to provide interoperability among a broader range of
applications than many of its current and potential competitors.
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CUSTOMER SUPPORT
The Company's service and support organization provides secondary
technical support to OEMs, primary technical support to retailers and end
users and education and training services to OEMs and retailers. The
Company's current OEMs typically have software maintenance agreements with
the Company that provide for one or more of the following services:
TECHNICAL SUPPORT. The Company offers technical support to OEM customers who
have entered into agreements to license the Company's products. The Company
provides service and support through its internal technical support
organization. Technical support includes the maintenance of the Company's
products in accordance with specifications contained in the Company's guide
for such products, as well as access to technical support personnel by
telephone, fax and e-mail. Customers under license agreements are typically
entitled to certain minor product updates and modifications, primarily bug
fixes. The Company's OEMs and some of its retail channel partners provide
telephone and initial support to end users.
RESEARCH AND DEVELOPMENT
The Company seeks to capitalize on its expertise in data synchronization
and IR connectivity technology by developing products for new applications
and increasing the functionality of existing products. The Company believes
its core DSX and IR technologies are widely applicable, and it plans to
continue to develop new products based on its core technologies.
As of July 31, 1997, the Company's engineering group consisted of 77
full-time employees and full-time equivalent consultants who were engaged in
product development. Product maintenance and customer support
responsibilities are shared by engineering group employees on an as-needed
basis. In fiscal 1997, fiscal 1996 and fiscal 1995 research and development
expenses were $6.2 million, $3.0 million and $1.8 million, respectively.
The markets for Puma's products are characterized by rapidly changing
technologies, evolving industry standards, frequent new product introductions
and short product life cycles. The Company first introduced its TranXit
products in October 1994. As its product families mature, the Company expects
that their gross margins may decline. The Company's future success will
depend to a substantial degree upon its ability to enhance its existing
products and to develop and introduce, on a timely and cost-effective basis,
new products and features that meet changing customer requirements and
emerging and evolving industry standards. The Company budgets for research
and development based on planned product introductions and enhancements;
however, actual expenditures may significantly differ from budgeted
expenditures. Inherent in the product development process are a number of
risks. The development of new, technologically advanced software products is
a complex and uncertain process requiring high levels of innovation, as well
as the accurate anticipation of technological and market trends. The
introduction of new or enhanced products also requires the Company to manage
the transition from older products in order to minimize disruption in
customer ordering patterns, avoid excessive levels of older product
inventories and ensure that adequate supplies of new products can be
delivered to meet customer demand. There can be no assurance that the Company
will successfully develop, introduce or manage the transition to new
products. The Company has in the past, and may in the future, experienced
delays in the introduction of its products, due to factors internal and
external to the Company. Any future delays in the introduction or shipment of
new or enhanced products, the inability of such products to gain market
acceptance or problems associated with new product transitions could
adversely affect the Company's operating results, particularly on a quarterly
basis. See "Risk Factors-Risks Associated with Product Development and Timely
Introduction of New and Enhanced Products."
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PROPRIETARY RIGHTS
Puma relies on a combination of patent, copyright and trademark laws,
trade secrets, confidentiality procedures and contractual provisions to
protect its proprietary rights. The Company also believes that factors such
as the technological and creative skills of its personnel, new product
developments, frequent product enhancements and name recognition are
essential to establishing and maintaining a technology leadership position.
The Company seeks to protect its software, documentation and other written
materials under trade secret and copyright laws, which afford only limited
protection. The Company currently has three issued United States patents that
expire in 2012, 2014 and 2015, respectively, and has six patent applications
pending. In addition, the Company has certain corresponding international
patent applications pending under the Patent Cooperation Treaty in countries
to be designated at a later date. There can be no assurance that the
Company's patents will not be invalidated, circumvented or challenged, that
the rights granted thereunder will provide competitive advantages to the
Company or that any of the Company's pending or future patent applications,
whether or not being currently challenged by applicable governmental patent
examiners, will be issued with the scope of the claims sought by the Company,
if at all. Furthermore, there can be no assurance that others will not
develop technologies that are similar or superior to the Company's technology
or design around the patents owned by the Company. Despite the Company's
efforts to protect its proprietary rights, unauthorized parties may attempt
to copy aspects of the Company's products or to obtain and use information
that the Company regards as proprietary. Policing unauthorized use of the
Company's products is difficult, and while the Company is unable to determine
the extent to which piracy of its software products exists, software piracy
can be expected to be a persistent problem. In addition, the laws of some
foreign countries do not ensure that the Company's means of protecting its
proprietary rights in the United States or abroad will be adequate or that
competition will not independently develop similar technology. The Company
has entered into source code escrow agreements with a limited number of its
customers and resellers requiring release of source code in certain
circumstances. Such agreements generally provide that such parties will have
a limited, non-exclusive right to use such code in the event that there is a
bankruptcy proceeding by or against the Company, if the Company ceases to do
business or if the Company fails to meet its support obligations. The Company
also provides its source code to foreign language translation service
providers and consultants to the Company in limited circumstances. The
provision of source code may increase the likelihood of misappropriation by
third parties.
The Company is not aware that it is infringing any proprietary rights of
third parties. There can be no assurance, however, that third parties will
not claim infringement by the Company of their intellectual property rights.
The Company expects that software product developers will increasingly be
subject to infringement claims as the number of products and competitors in
the Company's industry segment grows and the functionality of products in
different industry segments overlaps and as patent protection for software
becomes increasingly popular. Any such claims, with or without merit, could
be time consuming to defend, result in costly litigation, divert management's
attention and resources or cause product shipment delays. In addition, such
claims could require the Company to discontinue the use of certain software
codes or processes, to cease the manufacture, use and sale of infringing
products, to incur significant litigation costs and expenses and to develop
non-infringing technology or to obtain licenses to the alleged infringing
technology. There can be no assurance that the Company would be able to
develop alternative technologies or to obtain such licenses or, if a license
were obtainable, that the terms would be commercially acceptable to the
Company. In the event of a successful claim of product infringement against
the Company and failure or inability of the Company to license the infringed
or similar technology, the Company's business, operating results and
financial condition would be materially adversely affected. See "Risk
Factors-Proprietary Rights, Risks of Infringement and Source Code Release."
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EMPLOYEES
As of July 31, 1997, the Company had 136 employees and full-time
equivalent consultants, including 38 in sales and marketing, 77 in
engineering and 21 in operations, finance and administration. All of the
Company's employees are located in the United States and none are represented
by a labor union. The Company has experienced no work stoppages and believes
its relationship with its employees is good.
Competition for qualified personnel in the Company's industry is intense.
The Company believes that its future success will depend in part on its
continued ability to hire, train and retain qualified personnel.
BUSINESS RISKS
LIMITED HISTORY OF OPERATIONS AND PROFITABILITY. Puma was organized in
August 1993 and began shipping products in October 1994. Accordingly, the
Company has a limited operating history upon which an evaluation of the
Company can be based. The Company has only been profitable in five quarters
since inception. The Company's results must be considered in light of the
risks, expenses and difficulties frequently encountered by companies in their
early stages of development, particularly companies in a new and evolving
market such as the mobile data exchange software market. Although the
Company has experienced increased quarterly revenue over the last six fiscal
quarters, such growth rates may not be sustainable and are not indicative of
future operating results. There can be no assurance that any of the
Company's business strategies will be successful or that the Company's
revenue growth or profitability will continue on a quarterly or annual basis.
RISKS ASSOCIATED WITH NEW PRODUCT DEVELOPMENT AND TIMELY INTRODUCTION OF NEW
AND ENHANCED PRODUCTS. The markets for the Company's products are
characterized by rapidly changing technologies, evolving industry standards,
frequent new product introductions and short product life cycles. The
Company first introduced its TranXit products in October 1994. As its
product families mature, the Company expects that their gross margins may
decline. The Company's future success will depend to a substantial degree
upon its ability to enhance its existing products and to develop and
introduce, on a timely and cost-effective basis, new products and features
that meet changing customer requirements and emerging and evolving industry
standards. The Company budgets amounts to expend for research and
development based on planned product introductions and enhancements; however,
actual expenditures may significantly differ from budgeted expenditures.
Inherent in the product development process are a number of risks. The
development of new, technologically advanced software products is a complex
and uncertain process requiring high levels of innovation, as well as the
accurate anticipation of technological and market trends. The introduction
of new or enhanced products also requires the Company to manage the
transition from older products in order to minimize disruption in customer
ordering patterns, avoid excessive levels of older product inventories and
ensure that adequate supplies of new products can be delivered to meet
customer demand. The Company is continually required to recruit new
engineering personnel to meet increased engineering and testing requirements
associated with patent development and enhancement. There can be no
assurance that the Company will successfully develop, introduce or manage the
transition to new products. Nor can there be any assurance that the Company
will be able to hire and retain sufficient engineering personnel to meet the
requirements inherent in this transition. The Company has in the past, and
may in the future, experience delays in the introduction of its products, due
to factors internal and external to the Company. Any future delays in the
introduction or shipment of new or enhanced products, the inability of such
products to gain market acceptance or problems associated with new product
transitions could adversely affect the Company's operating results,
particularly on a quarterly basis.
PRODUCT CONCENTRATION; RISKS ASSOCIATED WITH NEW AND EVOLVING MARKETS. The
market for Mobile Data Exchange software, including wireless IR connectivity
and advanced data synchronization software, is new and evolving. To date,
the Company has derived a substantial
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portion of its revenue from the licensing of its TranXit IR connectivity
software. Although additional products are currently being sold and
potential products are currently under development, the Company believes that
the TranXit and IntelliSync for Notebooks product families may continue to
account for a substantial portion of the Company's revenue for the
foreseeable future. The life cycle of TranXit and IntelliSync for Notebooks
is difficult to estimate because of, among other factors, the emerging nature
of the MDE software market and the possibility of future competition. As a
result, the Company's future operating results, particularly in the near
term, are dependent upon the continued market acceptance of TranXit and
IntelliSync for Notebooks. There can be no assurance that TranXit will
continue to meet with market acceptance or that the Company will be
successful in developing, introducing or marketing new or enhanced products.
A decline in the demand for TranXit, as a result of competition,
technological change or other factors, and the failure to successfully
develop, introduce or market new or enhanced products would have a material
adverse effect on the Company's business, financial condition and results of
operations.
The market for MDE software is still emerging, and there can be no assurance
that it will continue to grow or that, even if the market does grow, TranXit
or IntelliSync for Notebooks will be adopted. Moreover, although demand for
TranXit and its successor product IntelliSync for Notebooks has grown in
recent years with the Company's OEM customers, the Company has no accurate
method of determining the extent that end-users utilize TranXit or
IntelliSync for Notebooks. The Company's success in generating significant
revenue in these evolving markets will depend, among other things, on its
ability to educate potential OEMs, retail partners and end users about the
benefits of the Company's IR technology, to maintain and enhance its
relationships with leading OEMs and to develop effective retail distribution
channels. The inability of the Company to continue to penetrate the existing
market for MDE products or the failure of current markets to grow or new
markets to develop or be receptive to the Company's products would have a
material adverse effect on the Company's business, operating results and
financial condition. The emergence of markets for the Company's MDE products
will also be affected by a variety of factors beyond the Company's control.
In particular, the Company's products are designed to conform to certain
standard IR and data communications specifications, many of which have not
been adopted as industry standards. There can be no assurance that these
specifications will be widely adopted or that competing specifications will
not emerge which will be preferred by OEMs. The emergence of markets for the
Company's products is also critically dependent upon continued expansion of
the market for mobile computing devices and the timely introduction and
successful marketing and sale of notebook and desktop personal computers
("PCs"), personal electronic organizers, smart phones and smart pagers. In
addition, there can be no assurance that IR technology itself will be adopted
as the standard or preferred technology for MDE or that manufacturers of
personal computers will elect to bundle IR technology in their products.
There can be no assurance that these or other factors beyond the Company's
control will not adversely affect the development of markets for the
Company's products.
DEPENDENCE ON OEMS. Revenue from OEMs was a substantial portion of the
Company's revenue during fiscal 1997, fiscal 1996 and fiscal 1995. Weakening
demand from any key OEM and the inability of the Company to replace revenue
provided by such OEM could have a material adverse effect on the Company's
business, operating results and financial condition. The Company maintains
individually significant receivable balances from major OEMs. If these OEMs
fail to meet their payment obligations, the Company's operating results could
be materially adversely affected.
RISKS ASSOCIATED WITH DEVELOPMENT OF RETAIL DISTRIBUTION CHANNEL. The Company
intends to distribute its products through distributors, major computer and
software retailing organizations, consumer electronics stores, discount
warehouse stores and other specialty retailers. The Company often sells on a
purchase order basis, and there are often no minimum purchase obligations on
behalf of any principal distributor or retailer. Distribution and retailing
companies in the computer industry have from time to time experienced
significant fluctuations in their businesses, and there have been a number of
business failures among these entities. The insolvency or business failure
of any significant distributor or retailer of the Company's products could
have a material adverse effect on the Company's business, operating results
and financial condition. Further, certain mass market retailers have
established exclusive relationships under which such retailers will buy
customer software only from one or two intermediaries. In such instances,
the price or other terms on which the Company sells to such retailers may be
materially adversely affected by
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the terms imposed by such intermediaries, or the Company may be unable to
sell to such retailers on the terms which the Company deems acceptable.
Retailers of the Company's products typically have a limited amount of shelf
space and promotional resources, and there is intense competition among
consumer software producers for adequate levels of shelf space and
promotional support from retailers. The Company expects that, as the number
of consumer multimedia and software products and computer platforms
increases, this competition for shelf space will intensify. Due to increased
competition for limited shelf space, retailers and distributors are
increasingly in a better position to negotiate favorable terms of sale,
including price discounts, price protection and product return policies.
Retailers often require software publishers to pay fees or provide other
accommodations in exchange for shelf space. The Company's products
constitute a relatively small percentage of each retailer's sales volume, and
there can be no assurance that retailers will continue to purchase the
Company's products or provide the Company's products with adequate shelf
space and promotional support.
UNCERTAINTIES ASSOCIATED WITH ACQUISITIONS. The Company has been involved in
two acquisitions. These acquisitions have been motivated by many factors
including the desire to obtain new technologies, the desire to expand and
enhance the Company's product lines and the desire to attract key personnel.
In July 1997, the Company acquired substantially all of the assets of Real
World Solutions, Inc. (RWS), a developer of client/server solutions. As a
result of the acquisition 4 new employees joined the Company. RWS has
incurred a cumulative loss through its acquisition by Puma on July 17, 1997
of approximately $1.3 million on cumulative revenue of $0.5 million.
In April 1996, the Company acquired IntelliLink Corp. As a result of the
acquisition the Company acquired two additional product families, as well as
other technologies. In addition, more than 20 new employees joined the
Company. IntelliLink had incurred a cumulative net loss through its
acquisition by Puma on April 30, 1996 of approximately $2.5 million on
cumulative revenue of approximately $4.2 million.
In connection with both acquisitions, the Company's personnel have dedicated
and will continue to dedicate substantial resources in order to achieve the
anticipated technological benefits and operating efficiencies from
integrating the two companies. Difficulties encountered in integrating the
two companies' technologies and operations could adversely affect the
Company's business, operating results and financial condition. Accordingly,
the increased operating expenses associated with the acquired businesses
could have a material adverse effect on the Company's business, operating
results and financial condition.
MANAGEMENT OF GROWTH. The Company is currently experiencing growth and rapid
change which has placed, and will continue to place, a significant strain on
its administrative, operational and financial resources and increased demands
on its systems and controls. This growth has resulted in a continuing
increase in the level of responsibility for both existing and new management
personnel. The Company anticipates that its continued growth will require it
to recruit, hire, train and retain a substantial number of new engineering,
managerial, sales and marketing personnel. The Company's ability to manage
its growth successfully will also require the Company to continue to expand
and improve its operational, management and financial systems and controls on
a timely basis. For example, the Company is currently in the process of
implementing a new management information system which will support the
current and anticipated needs in the business. There can be no assurance
that the Company will be able to successfully implement such a system on a
timely basis. If the Company's management is unable to manage growth
effectively, the Company's business, operating results and financial
condition will be materially adversely affected.
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DEPENDENCE ON STRATEGIC BUSINESS RELATIONSHIPS; RISKS ASSOCIATED WITH
THIRD-PARTY SERVICES. The Company believes that its success is largely
dependent on its strategic relationships with key participants in the PC and
mobile computing device industries, including Compaq, IBM, Intel, Microsoft,
NEC, Sharp, Texas Instruments, Toshiba and 3COM. These relationships
generally enable the Company to receive prototypes from hardware
manufacturers and software vendors prior to their market introduction. The
Company is thereby in a stronger position to launch complementary product
offerings shortly after the commercial release of these companies' new
hardware and software products. The loss of any of these strategic
relationships or any other significant partner could materially adversely
affect the Company's product development efforts, its business, operating
results and financial condition and its ability to realize its strategic
objective to be the technological leader in its industry. In addition, the
Company relies significantly on third-party services. In particular,
third-party services translate the Company's products into 13 different
native languages. The Company has generally been able to obtain translated,
functional versions of its products in a timely manner. However, any
significant delays by such third parties could delay new or existing
shipments of products and have a material adverse effect on the Company's
business, operating results and financial condition.
COMPETITION. The Company expects the market for MDE software, including data
synchronization and IR connectivity software, to the extent it develops, to
become intensely competitive. The Company currently faces direct competition
with respect to a number of its individual products from several private
companies, including DataViz, Chapura and Traveling Software. In addition to
direct competition, the Company faces indirect competition from existing and
potential customers that provide internally developed solutions. As a
result, the Company must educate prospective customers as to the advantage of
the Company's products versus internally developed solutions. The Company
currently faces limited direct competition from major applications and
operating systems software vendors who may choose to incorporate data
synchronization and IR connectivity functionality into their software,
thereby potentially reducing the need for OEMs to include the Company's
products in their notebook and desktop PCs. For example, Microsoft's
inclusion of certain features permitting data synchronization and IR
connectivity between computers utilizing the Windows 95 operating system may
have the effect of reducing revenue from the Company's software if users of
Windows 95 perceive that their data synchronization and IR connectivity needs
are adequately met by Microsoft. Certain of the companies with which the
Company competes or may in the future compete, including internal software
development groups of its current and potential customers, have substantially
greater financial, marketing, sales and support resources and may have more
"brand-name" recognition than the Company. There can be no assurance that the
Company will be able either to develop software comparable or superior to
software offered by its current or future competitors or to adapt to new
technologies, evolving industry standards and changes in customer
requirements. In addition, the PC and mobile computing device markets
experience intense price competition, and the Company expects that, in order
to remain competitive, it may have to decrease its unit royalties on certain
products.
DEPENDENCE ON KEY PERSONNEL. The Company's success depends to a significant
degree upon the continuing contributions of its engineering, management,
sales and marketing personnel. The Company has few employment contracts with
its key personnel and does not maintain any key person life insurance
policies. The loss of key management or technical personnel could adversely
affect the Company. The Company believes that its future success will depend
in large part upon its ability to attract and retain highly-skilled
engineering, management, sales and marketing personnel. Failure to recruit,
hire, train and retain key personnel could have a material adverse effect on
the Company's business, operating results and financial condition.
PROPRIETARY RIGHTS, RISKS OF INFRINGEMENT AND SOURCE CODE RELEASE. The
Company relies on a combination of patent, copyright and trademark laws,
trade secrets, confidentiality procedures and contractual provisions to
protect its proprietary rights. The Company also believes that factors such
as the technological and creative skills of its personnel, new product
developments, frequent
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product enhancements and name recognition are essential to establishing and
maintaining a technology leadership position. The Company seeks to protect
its software, documentation and other written materials under trade secret
and copyright laws, which afford only limited protection. The Company
currently has three issued United States patents that expire in 2012, 2014,
and 2015 and has six patent applications pending. In addition, the Company
has corresponding international patent applications pending under the Patent
Cooperation Treaty in countries to be designated at a later date. There can
be no assurance that the Company's patents will not be invalidated,
circumvented or challenged, that the rights granted thereunder will provide
competitive advantages to the Company or that any of the Company's pending or
future patent applications, whether or not being currently challenged by
applicable governmental patent examiners, will be issued with the scope of
the claims sought by the Company, if at all. Furthermore, there can be no
assurance that others will not develop technologies that are similar or
superior to the Company's technology or design around the patents owned by
the Company. Despite the Company's efforts to protect its proprietary
rights, unauthorized parties may attempt to copy aspects of the Company's
products or to obtain and use information that the Company regards as
proprietary. Policing unauthorized use of the Company's products is
difficult, and while the Company is unable to determine the extent to which
piracy of its software products exists, software piracy can be expected to be
a persistent problem. The Company distributes its software products in the
United States, Japan, Taiwan and member countries of the European Union. The
laws and practices of some foreign countries in which the Company does
business, in particular Taiwan, do not ensure that the Company's means of
protecting its proprietary rights in the United States or abroad will be
adequate or that competition will not independently develop similar
technology. There can be no assurance that the Company will not distribute
its software products in the future to countries where the enforcement of
proprietary rights may be equally or more uncertain. The Company has also
entered into source code escrow agreements with a limited number of its
customers requiring release of source code in certain circumstances. Such
agreements generally provide that such parties will have a limited,
non-exclusive right to use such code in the event that there is a bankruptcy
proceeding by or against the Company, if the Company ceases to do business or
if the Company fails to meet its support obligations. The Company also
provides its source code to foreign language translation service providers
and consultants to the Company in limited circumstances. The provision of
source code may increase the likelihood of misappropriation by third parties.
The Company is not aware that it is infringing any proprietary rights of
third parties. There can be no assurance, however, that third parties will
not claim infringement by the Company of their intellectual property rights.
In particular, because patent applications are kept confidential by the
Patent and Trademark Office, the Company has no means by which to monitor
patent applications filed by its competitors, which could result in future
infringement claims against the Company. The Company expects that software
product developers will increasingly be subject to infringement claims as the
number of products and competitors in the Company's industry segment grows
and the functionality of products in different industry segments overlaps and
as patent protection for software becomes increasingly popular. Any such
claims, with or without merit, could be time-consuming to defend, result in
costly litigation, divert management's attention and resources or cause
product shipment delays. In addition, such claims could require the Company
to discontinue the use of certain software codes or processes, to cease the
manufacture, use and sale of infringing products, to incur significant
litigation costs and expenses and to develop non-infringing technology or to
obtain licenses to the alleged infringing technology. There can be no
assurance that the Company would be able to develop alternative technologies
or obtain such licenses or, if a license were obtainable, that the terms
would be commercially acceptable to the Company.
In the event of a successful claim of product infringement against the
Company and failure or inability of the Company to license the infringed or
similar technology, the Company's business, operating results and financial
condition would be materially adversely affected.
DEPENDENCE ON LICENSED TECHNOLOGY. The Company licenses technology on a
non-exclusive basis from several companies for use with its products and
anticipates that it will continue to do so in the future. The inability of
the Company to continue to license this technology or to license other
necessary technology for use with its products or substantial increases in
royalty payments under third-
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party licenses could have a material adverse effect on its business,
operating results and financial condition. In addition, the effective
implementation of the Company's products depends upon the successful
operation of these licenses in conjunction with the Company's products, and
therefore any undetected errors in products resulting from such licenses may
prevent the implementation or impair the functionality of the Company's
products, delay new product introductions and injure the Company's
reputation. Such problems could have a material adverse effect on the
Company's business, operating results and financial condition.
PRODUCT ERRORS; PRODUCT LIABILITY. Software products as complex as those
offered by the Company typically contain undetected errors or failures when
first introduced or as new versions are released. Testing of the Company's
products is particularly challenging because it is difficult to simulate the
wide variety of computing environments in which the Company's customers may
deploy these products. Accordingly, there can be no assurance that, despite
testing by the Company and by current and potential customers, errors will
not be found after commencement of commercial shipments, resulting in loss of
or delay in market acceptance, any of which could have a material adverse
effect upon the Company's business, operating results and financial
condition. Further, the Company's license agreements with its customers
typically contain provisions designed to limit the Company's exposure to
potential product liability claims. Although the Company has not experienced
any product liability claims, the sale and support of products by the Company
entails the risk of such claims. The Company does not currently maintain
product liability insurance. A successful product liability claim brought
against the Company could have a material adverse effect upon the Company's
business, operating results and financial condition.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS. International revenue
accounted for a significant portion of the Company's revenue in fiscal 1997,
fiscal 1996 and fiscal 1997. The Company expects that international revenue
will continue to account for a significant portion of its future revenue.
Revenue from the Company's international operations is subject to certain
inherent risks, including unexpected changes in regulatory requirements and
tariffs, difficulties in staffing and managing foreign operations, longer
payment cycles, problems in collecting accounts receivable and potentially
adverse tax consequences. In addition, sales in Europe and certain other
parts of the world typically are adversely affected in the summer months of
each year when many customers and users reduce their business activities.
These seasonal factors may have a material adverse effect on the Company's
business, operating results and financial condition. Although the Company's
revenue is currently denominated in U.S. dollars, fluctuations in currency
exchange rates could cause the Company's products to become relatively more
expensive to customers in a particular country, leading to a reduction in
sales or profitability in that country. Furthermore, future international
activity may result in foreign currency denominated sales, particularly if
international revenue from distributors increases. Consequently, gains and
losses on the conversion to U.S. dollars of accounts receivable and accounts
payable arising from international operations may contribute to fluctuations
in the Company's operating results. Royalty income by the Company from
customers in certain countries, such as Japan and Taiwan, is subject to
withholding income taxes. The amount and mix of the Company's income derived
from such customers will impact the Company's provision for income taxes.
Differences in the amount and mix of the Company's income actually derived
from customers subject to foreign withholding taxes as compared to the
amounts forecasted by the Company may adversely impact the Company's income
tax rate.
POTENTIAL VOLATILITY OF STOCK PRICE. The trading price of the Company's
Common Stock is likely to be highly volatile and may be significantly
affected by factors such as actual or anticipated fluctuations in the
Company's operating results; announcements of technological innovations; new
products or new contracts by the Company or its competitors; developments
with respect to patents; copyrights or proprietary rights; conditions and
trends in the software and other technology industries; adoption of new
accounting standards affecting the software industry; changes in financial
estimates by securities analysts; general market conditions and other
factors. In addition, the stock market has from time to time experienced
significant price and volume fluctuations that have particularly affected the
18
<PAGE>
market prices for the common stocks of technology companies. These broad
market fluctuations may materially adversely affect the market price of the
Company's Common Stock.
DEPENDENCE ON YEAR 2000 COMPLIANCE OF THIRD-PARTY PRODUCTS. The Company's
synchronization software products operate as a conduit for data from handheld
devices to personal information manager software ("PIMs"). The Company has
no control as to whether the hardware devices and PIMs that the Company's
software supports will accurately process date and time data from, into and
between the 20th and 21st centuries. The Company and its business may be
adversely affected should the third-party products with which the Company's
software functions fail to accommodate the change in date from December 31,
1999 to January 1, 2000.
ITEM 2. PROPERTIES
The Company's principal administrative, engineering, manufacturing,
marketing and sales facilities total approximately 31,952 square feet and are
located in a single building in San Jose, California under a lease that
expires in June 2006. The Company also leases approximately 11,980 square
feet in a single building in Nashua, New Hampshire under a lease that expires
in May 2002.
Management believes that its current facilities are adequate for its
needs through the next twelve months, and that, should it be needed, suitable
additional space will be available to accommodate expansion of the Company's
operations on commercially reasonable terms.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Company
subsequent to the Company's initial public offering in December 1996.
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
NAME AGE POSITION
- ------------------------------------------------------------------------------
Bradley A. Rowe 37 President, Chief Executive Officer and Director
Stephen A. Nicol 37 Senior Vice President, Sales and Director
M. Bruce Nakao 53 Senior Vice President, Finance and Administration,
and Chief Financial Officer
Michael M. Clair 49 Chairman of the Board
Tyrone F. Pike 43 Director
Robert D. Rutner, DDS 39 Director
MR. ROWE co-founded the Company in August 1993 and has served as President
since October 1993 and Chief Executive Officer since March 1995. He has also
served as a Director of the Company since August 1993. Prior to founding the
Company, from January 1991 to July 1993, he held various management positions
at SystemSoft Corporation, a PC system software supplier, including Vice
President of Worldwide Sales and General Manager of Desktop Computing. In
June 1988, Mr Rowe co-founded Extar Technologies, a manufacturer's
representative of PC products, where he held a number of management
positions, including Vice President of Sales and President until December
1990. From November 1983 to June 1988, Mr. Rowe served in various sales
positions at Western Digital Corporation, a storage
19
<PAGE>
management company, including Director of Western Area Sales. Mr. Rowe holds
a B.S. degree in engineering and management science from Princeton University.
MR. NICOL co-founded the Company in August 1993 and has served as Senior Vice
President, Sales since its establishment. He has also served as a Director
since August 1993. Prior to founding the Company he served in several
capacities at SystemSoft Corporation, including as Director of Sales for
Japan and Asia Pacific from July 1992 to July 1993 and as Sales Manager for
the Eastern United States from November 1991 to July 1992. Mr. Nicol
co-founded Extar Technologies in June 1988 where he served until November
1991 as Vice President of Sales. Previously, Mr. Nicol served as OEM Manager
for Western Digital and computer sales representative for Hewlett-Packard. He
holds an A.B. degree in political science from Princeton University.
MR. NAKAO joined the Company in June 1996 as Chief Financial Officer and
Senior Vice President, Finance and Administration. Prior to joining the
Company, from May 1986 to June 1996, he served in several capacities at Adobe
Systems Incorporated, a software company, most recently as its Senior Vice
President, Finance and Administration, Chief Financial Officer and Treasurer.
He holds a B.A. degree in business and economics from the University of
Washington and an M.B.A. degree from Stanford University.
MR. CLAIR became a Director of the Company in November 1994 and has served as
Chairman of the Board since March 1995. Mr. Clair was a founder of SynOptics
Communications (now Bay Networks), a computer networking company, and from
January 1987 to November 1992, served as Vice President Sales and Marketing
and then as Senior Vice President of Sales and Customer Service of SynOptics.
Mr. Clair has more than 25 years' experience in data processing, data and
voice communications and local area networking. He spent the early part of
his career with Tymshare, a computer time-sharing company, and ROLM, a
manufacturer of digital PBX equipment, in a variety of sales and marketing
positions. He holds a B.S. degree in business and an M.B.A. degree from the
University of Buffalo. Mr. Clair is a director of several private companies
in Silicon Valley.
MR. PIKE became a Director of the Company in October 1996. Since March 1993,
Mr. Pike has served as a Director of Citrix Systems, a supplier of multi-user
application server products. In August 1996 Mr. Pike founded Switchsoft
Systems, a supplier of open virtual network management software for switches
and routers and has served as Chairman of the Board and Chief Executive
Officer since its inception. From January 1994 to August 1996, Mr. Pike
served in various positions at UB Networks, a computer networking company,
including Senior Vice President and Chief Technical Officer. Prior to joining
UB Networks, Mr. Pike served as a partner of Pike Associates from September
1992 to January 1994. From March 1992 to September 1992, Mr. Pike served as
President and Chief Executive Officer of Global Village Communications, a
networking communications company. From May 1991 to June 1992 he served as
Manager, Strategic Planning & Business Development of Intel Corporation, a
semiconductor company. From April 1983 to May 1991, Mr. Pike served as
Founder, Chairman of the Board and President of LANSystems, a computer
networking company, of which he served as a Director until February 1994. Mr.
Pike holds an A.B. degree in architecture from Princeton University.
DR. RUTNER became a Director of the Company in October 1993. He has practiced
dentistry since August 1985 as proprietor of the Serra Park Dental Group. He
holds a B.S. degree in biochemistry from the University of California at
Davis, an M.S. degree in biochemistry from the University of California at
Davis and a D.D.S. degree from Georgetown University. Dr. Rutner is a
director of several private companies in Silicon Valley.
20
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company completed its initial public offering of Common Stock in
December 1996, at $9.50 per share, and the Common Stock of the Company began
trading in the over-the-counter market on the Nasdaq National Market on
December 5, 1996, under the symbol "PUMA." The following table sets forth
the high and low closing prices for the Company's Common Stock as reported on
the Nasdaq National Market from December 5, 1996 through July 31, 1997.
These prices reflect inter-dealer prices, without retail mark-up, mark-down
or commission, and may not necessarily represent actual transactions.
1997 HIGH LOW
---- ---- ---
Period from December 5, 1996 to January 31, 1997 $19.25 $ 9.50
Third fiscal quarter (February 1, 1997 to April 30, 1997) 16.25 5.75
Fourth fiscal quarter (May 1, 1997 to July 31, 1997) 11.25 7.63
As of September 25, 1997, there were approximately 125 stockholders of
record of the Company's Common Stock and 12,086,823 shares of common stock
outstanding.
The Company has never paid dividends on its capital stock. The Company
currently intends to retain any future earnings for use in its business and
does not anticipate paying any cash dividends in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data for the four years ended July 31, 1997, which
appears on page 13 in the Registrant's Annual Report to Stockholders for the
fiscal year ended July 31, 1997 under the caption "Selected Financial Data",
is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required by this Item is set forth on pages 14-19 of the
Registrant's Annual Report to Stockholders for the fiscal year ended July 31,
1997 under the caption "Management's Discussion and Analysis", which is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements, together with the report thereon of Price
Waterhouse LLP dated August 25, 1997, appearing on pages 20-35 of the
Registrant's Annual Report to Stockholders for the fiscal year ended July 31,
1997 are incorporated by reference in this Form 10-K Annual Report.
21
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There were no disagreements with accountants on accounting and financial
disclosure.
PART III
ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT
Information relating to the directors and executive officers of the
Company is set forth in Part I Item 4 of this report under the caption
"Executive Officers and Directors of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference from
the definitive proxy statement for the Company's 1997 annual meeting of
stockholders to be filed with the Commision pursuant to Regulation 14A no
later than 120 days after the end of the fiscal year covered by this Form
(the "Proxy Statement") under the caption "Executive Compensation and Other
Matters."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item is incorporated from the Proxy
Statement under the captions "Stock Ownership of Certain Beneficial Owners
and Management."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated from the Proxy
Statement under the captions "Certain Relationships and Related Transactions"
and "Executive Compensation and Other Matters - Compensation Committee
Interlocks and Insider Participation in Compensation Decisions."
22
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements.
The following consolidated financial statements of the Company included
in the Company's Annual Report to Stockholders for the fiscal year ended
July 31, 1997 are filed as part of this report:
Report of Independent Accountants.
Consolidated Balance Sheets at July 31, 1997 and 1996.
Consolidated Statements of Operations for the three
fiscal Years Ended July 31, 1997.
Consolidated Statements of Stockholders' Equity for the
three fiscal Years Ended July 31, 1997.
Consolidated Statements of Cash Flows for the three
fiscal Years Ended July 31, 1997.
Notes to Consolidated Financial Statements.
2. Supplemental Schedules.
Report of Independent Accountants on Financial Statement Schedule.
Schedule II - Valuation and Qualifying Accounts.
Financial Statement Schedules, other than the schedule listed
above, have been omitted because the required information is
contained in the Consolidated Financial Statements and the Notes
thereto, or because such schedules are not required or applicable.
3. Exhibits
(b) 1. Reports on Form 8-K
On July 31, 1997, the Company filed a report on Form 8-K (the "Form 8-K")
relating to a definitive Asset Acquisition Agreement (the "Agreement")
dated July 16, 1997 between the Company and Real World Solutions, Inc.
("RWS"), whereby the Company acquired substantially all of the assets and
assumed all of the liabilities of RWS on such date.
(c) Exhibits. The exhibits listed on the accompanying index to exhibits
immediately preceding the financial statement schedules are filed as part
of, or incorporated by reference into, this Form 10-K.
(d) Financial Statement Schedules. See Item 14 (a) above.
23
<PAGE>
EXHIBIT NUMBER EXHIBIT TITLE
1.1 1 Form of Underwriting Agreement (draft dated November 8, 1996).
2.1 1 Agreement and Plan of Merger by and between Puma Technology,
Inc., a California corporation, and Puma Technology, Inc., a
Delaware corporation.
3.1 1 Articles of Incorporation of Puma Technology, Inc., a
California corporation.
3.2 1 Certificate of Incorporation of Puma Technology, Inc., a
Delaware corporation.
3.3 1 Bylaws of Puma Technology, Inc., a California corporation.
3.4 1 Bylaws of Puma Technology, Inc., a Delaware corporation.
4.1 1 Specimen Stock Certificate of the Registrant.
5.1 1 Opinion of Gray Cary Ware & Freidenrich, A Professional
Corporation.
10 1 Agreement and Plan of Merger dated April 30, 1996 among the
Company, IntelliLink Corp. and certain holders of
IntelliLink Corp.
10.1 1 1993 Stock Option Plan and forms of stock option agreements
used thereunder.
10.2 1 Puma Technology, Inc. 1996 Employee Stock Purchase Plan and
form of notice of exercise used thereunder.
10.3 1 Lease Agreement dated October 18, 1995, between the Company
and Photonics Corporation.
10.4 1 Form of Indemnity Agreement for directors and officers.
10.5+ 1 Software License Agreement dated as of May 30, 1995, between
the Company and Toshiba Corporation.
10.6+ 1 Software License Agreement dated as of September 14, 1995,
between the Company and NEC Technologies, Inc. and Amendment
No. 1 thereto dated October 25, 1995 and Amendment No. 2
thereto dated January 10, 1996.
10.7+ 1 Software License Agreement dated as of May 23, 1995, between
the Company and NEC Corporation and Amendment No. 1 thereto
dated February 19, 1996.
10.8+ 1 Software License Agreement dated as of May 20, 1996 between
the Company and NEC Corporation.
10.9 1 IntelliLink Corp. 1992 Incentive Stock Option Plan and forms
of stock agreements used thereunder.
11.1 2 Statement regarding Computation of Net Income Per Share.
13.1 2 Portions of the Annual Report to Stockholders for the fiscal
year ended July 31, 1997 expressly incorporated by reference
herein.
21.1 1 Subsidiaries of the Registrant.
23.1 2 Consent of Price Waterhouse LLP, Independent Accountants.
24.1 2 Power of Attorney (reference page 27 of this Form 10-K)
27.1 2 Financial Data Schedule (filed in EDGAR format only).
+ Confidential treatment has been granted for portions of this exhibit.
1. Incorporated by reference to identically numbered Exhibit to the
Company's Registration Statement on Form S-1.
2. Filed herewith.
24
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Puma Technology, Inc.
Our audits of the consolidated financial statements referred to in our report
dated August 25, 1997 appearing in the 1997 Annual Report to Stockholders of
Puma Technology, Inc. (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included
an audit of the Financial Statement Schedule listed in Item 14(a) of this
Form 10-K. In our opinion, this Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read
in conjunction with the related consolidated financial statements.
Price Waterhouse LLP
San Jose, California
August 25, 1997
25
<PAGE>
SCHEDULE II
PUMA TECHNOLOGY, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD/ BALANCE AT CHARGED TO DEDUCTIONS END OF
YEAR ENDED BEGINNING OF COSTS AND PERIOD/YEAR
JULY 31 PERIOD/YEAR EXPENSES
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful 1995 $ - $ - $ - $ -
Accounts and Sales Returns
Allowance for Doubtful 1996 $ - $184 $ - $184
Accounts and Sales Returns
Allowance for Doubtful 1997 $184 $948 $ 455 $677
Accounts and Sales Returns
</TABLE>
26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-K to be
signed on its behalf by the undersigned thereunto duly authorized, on this
28th day of October, 1997.
Puma Technology, Inc.
Date: October 28, 1997 By: /s/ M. Bruce Nakao
--------------------------
M. Bruce Nakao
Senior Vice President and
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Bradley A. Rowe and M. Bruce
Nakao, and each of them acting individually, as his attorney-in-fact, each
with full power of substitution, for him in any and all capacities, to sign
any and all amendments to this Form 10-K, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each said
attorneys-in-fact or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Form 10-K has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------------------------------------------------
<S> <C> <C>
/s/ BRADLEY A. ROWE President, Chief Executive October 28, 1997
- ----------------------------- Officer and Director
Bradley A. Rowe (PRINCIPAL EXECUTIVE OFFICER)
/s/ STEPHEN A. NICOL Senior Vice President, October 28, 1997
- ----------------------------- Sales and Secretary
Stephen A. Nicol
/s/ M. BRUCE NAKAO Senior Vice President and, October 28, 1997
- ----------------------------- Chief Financial Officer
M. Bruce Nakao
/s/ MICHAEL M. CLAIRE
- ----------------------------- Chairman of the Board October 28, 1997
Michael M. Claire
/s/ TYRONE F. PIKE Director October 28, 1997
- -----------------------------
Tyrone F. Pike
/s/ Dr. ROBERT A. RUTNER, DDS Director October 28, 1997
- -----------------------------
Dr. Robert A. Rutner, DDS
</TABLE>
27
<PAGE>
PUMA TECHNOLOGY, INC.
COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
EXHIBIT 11.1
- ---------------------------------------------------------------------------
FISCAL YEAR
ENDED JULY 31,
1997
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
<S> <C>
NET INCOME $660
------
------
PRIMARY:
Weighted average common shares outstanding 11,338
Common stock equivalents:
Preferred stock using the as if converted method -
Stock options using the treasury stock method 475
Shares related to Staff Accounting Bulletin No. 83:
Shares of common stock -
Stock options -
Preferred stock using the as if converted method -
Convertible debenture using the as if converted method -
Warrants 38
------
Shares used in computing primary net income per share 11,851
------
PRIMARY NET INCOME PER SHARE $0.06
------
------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit 13.1
- --------------------------------------------------------------------------------
PUMA TECHNOLOGY
SELECTED FINANCIAL DATA
STATEMENT OF OPERATIONS DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED JULY 31, 1997 1996 1995 1994(1)
- --------------------------------------------------------------------------------
Revenue $15,629 $7,716 $ 860 $ 70
Cost of revenue 1,738 777 77 --
Gross profit 13,891 6,939 783 70
Operating expenses 13,222 8,916 2,920 1,030
Operating income (loss) 669 (1,977) (2,137) (960)
Other income, net 822 85 71 6
Income (loss) before income taxes 1,491 (1,892) (2,066) (954)
Provision for income taxes (831) (509) (80) --
Net income (loss) $ 660 $(2,401) $(2,146) $(954)
- --------------------------------------------------------------------------------
Net income (loss) per share $ 0.06 -- -- --
- --------------------------------------------------------------------------------
(1) PERIOD FROM AUGUST 27, 1993 (INCEPTION) TO JULY 31, 1994.
BALANCE SHEET DATA
(IN THOUSANDS)
JULY 31, 1997 1996 1995 1994
- --------------------------------------------------------------------------------
Cash, cash equivalents and
short-term investments $21,171 $ 982 $2,500 $406
Total assets 29,413 4,004 2,948 561
Long-term obligations 66 961 16 --
Total stockholders' equity 26,423 653 1,886 287
- --------------------------------------------------------------------------------
SUMMARY QUARTERLY DATA UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JULY 31, APRIL 30, JAN 31, OCT 31, JULY 31, APRIL 30, JAN 31, OCT 31,
THREE MONTHS ENDED, 1997 1997 1997 1996 1996 1996 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue $4,478 $4,325 $3,624 $3,202 $2,711 $2,101 $1,752 $1,152
Gross profit 3,926 3,791 3,329 2,845 2,353 1,959 1,628 999
Operating income (loss) (860) 675 515 339 211 (2,359) 235 (64)
Net income (loss) (649) 628 454 227 89 (2,492) 129 (127)
Net (loss) income per share $(0.05) $ 0.05 $ 0.04 $ 0.02 $ 0.01 $(0.26) $ 0.01 $(0.01)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
13.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PUMA TECHNOLOGY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
Puma Technology, Inc. ("Puma" or "the Company") develops, markets and
supports Mobile Data Exchange (MDE) software, including wireless infrared
connectivity and advanced data synchronization software. The Company
currently has two families of products -- its TranXit family of products that
supports infrared connectivity and its IntelliSync family of products that
performs advanced data synchronization.
TranXit software is licensed primarily to original equipment manufacturer
(OEM) customers, which are primarily makers of laptop computers. These OEM
customers license the Company's software for inclusion in their laptop
computers to enable infrared connectivity (IR) from the laptop back to
desktop computers. These OEM customers include the Company's software into
their products at the time of manufacture and for each device shipped, the
Company collects a royalty. Royalties are typically paid to the Company once
a quarter based on volume, although certain contracts contain fixed royalties
regardless of volume, for a given time period.
IntelliSync software is used for advanced data synchronization of data base
information that resides on a computer such as a desktop machine and
increasingly popular handheld devices such as electronic organizers, handheld
computers, smart phones and smart pagers. The Company's software actually
runs on the desktop computer and keeps information in the desktop and the
handheld device synchronized. IntelliSync software is currently distributed
directly to the end user and through the Company's retail distribution
channel, and is bundled with their products by some of the handheld device
manufacturers.
THE FOLLOWING INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS AND THE NOTES THERETO AND IN CONJUNCTION WITH THE
COMPANY'S FORM 10-K. THIS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTAINS FORWARD-LOOKING STATEMENTS REGARDING FUTURE
EVENTS OR THE FUTURE PERFORMANCE OF THE COMPANY THAT INVOLVE CERTAIN RISKS
AND UNCERTAINTIES. IN THIS REPORT, THE WORDS "ANTICIPATE(S)," "BELIEVE(S)",
"EXPECT(S)", "INTEND(S)", "FUTURE" AND SIMILAR EXPRESSIONS IDENTIFY
FORWARD-LOOKING STATEMENTS. ACTUAL EVENTS OR THE ACTUAL FUTURE RESULTS OF THE
COMPANY MAY DIFFER MATERIALLY FROM ANY FORWARD-LOOKING STATEMENTS DUE TO SUCH
RISKS AND UNCERTAINTIES. THE COMPANY ASSUMES NO OBLIGATION TO UPDATE THESE
FORWARD-LOOKING STATEMENTS TO REFLECT ACTUAL RESULTS OR CHANGES IN FACTORS OR
ASSUMPTIONS AFFECTING SUCH FORWARD-LOOKING ASSUMPTIONS. READERS ARE CAUTIONED
NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH
REFLECT MANAGEMENT'S ANALYSIS ONLY AS OF THE DATE HEREOF. THE COMPANY
UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE THE RESULTS OF ANY REVISION TO
THESE FORWARD-LOOKING STATEMENTS, WHICH MAY BE MADE TO REFLECT EVENTS OR
CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS.
RESULTS OF OPERATIONS
REVENUE
The Company's revenue is derived from two primary sources; software licenses
and fees for service. Revenue was $15,629,000 in fiscal 1997 as compared to
$7,716,000 in fiscal 1996 and $860,000 in fiscal 1995, representing increases
of 103% and 797% from fiscal 1996 to fiscal 1997 and from fiscal 1995 to
fiscal 1996, respectively. Revenue in the first nine months of fiscal 1996
did not include revenue derived from IntelliSync or IntelliLink products,
which resulted from the IntelliLink acquisition, since the acquisition was
not completed until April 30, 1996.
14.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PUMA TECHNOLOGY
OEM revenue continues to represent a significant portion of the Company's
revenue. OEM revenue represented 74%, 89%, and 95% of the Company's revenue
in fiscal 1997, fiscal 1996, and fiscal 1995, respectively. In fiscal 1997,
Toshiba accounted for approximately 21% of the Company's revenue and no other
customer accounted for more than 10% of the Company's revenue. In fiscal
1996, Toshiba and NEC accounted for approximately 18% and 13% of the
Company's revenue, respectively. In fiscal 1995, Toshiba, NEC, and Canon
accounted for approximately 16%, 15% and 14% of the Company's revenue,
respectively. Although several OEMs are subject to certain contractual
minimum purchase obligations, there can be no assurance that any particular
OEM will satisfy the obligation. In addition, the Company believes that the
percentage of revenue derived from OEMs may fluctuate in future periods since
the distribution channels used by the Company for its existing and future
products are subject to change.
International revenue continues to represent a significant portion of the
Company's revenue. International revenue represented approximately 54%, 67%
and 71% of the Company's revenue in fiscal 1997, fiscal 1996, and fiscal
1995, respectively. The Company expects that international revenue will
continue to represent a significant portion of the Company's revenue for the
foreseeable future.
LICENSE REVENUE License revenue is derived from the sale of software
products and royalty agreements with OEMs. License revenue was $13,710,000 in
fiscal 1997 as compared to $7,418,000 in fiscal 1996 and $860,000 in fiscal
1995, representing increases of 85% and 763% from fiscal 1996 to fiscal 1997
and from fiscal 1995 to fiscal 1996, respectively. The increase in license
revenue in fiscal 1997 as compared to fiscal 1996 was primarily due to both
increased unit shipments from the continuing acceptance of the Company's
TranXit products and increased unit shipments of the Company's IntelliSync
products which were introduced in fiscal 1996. The increase in license
revenue from fiscal 1996 as compared to fiscal 1995 was primarily due to
increased unit shipments from the continuing acceptance of the Company's
TranXit products and, to a lesser extent, increased unit shipments of the
Company's IntelliLink products introduced in the fourth fiscal quarter of
1996.
SERVICE REVENUE Service revenue is derived from fees for services including
customer funded engineering services and amortization of maintenance contract
programs. Service revenue was $1,919,000 in fiscal 1997 as compared to
$298,000 in fiscal 1996 representing a 544% increase. No services related
revenue was recognized in fiscal 1995. The increase in service revenue for
fiscal 1997 as compared to fiscal 1996 was primarily due to increased
customer funded engineering services for software development required to
support new mobile computing devices.
COST OF REVENUE
Cost of revenue consists primarily of product media and duplication, manuals,
packing supplies, shipping expenses and personnel related costs incurred
under customer funded software development agreements. The Company's cost of
revenue is affected by the mix between its distribution channels and is
affected by the mix between its revenue sources including royalties, packaged
product, customer funded engineering contracts and sales and fulfillment via
its Web site. A majority of IntelliSync revenue is derived by direct sales to
distributors and retailers as well as end-users. The Company anticipates that
gross profit as a percentage of total revenue will decrease, to the extent
sales to distributors and retailers increase in proportion to the Company's
total revenue. This decline in gross profit percentage is anticipated since
the average selling price to distributors and retailers is lower due to
distributor discounts and the cost of revenue is higher due to product costs.
Royalty revenue is derived largely from licensing TranXit to OEM customers
and cost of sales attributable to TranXit royalties have not been significant.
15.
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PUMA TECHNOLOGY
COST OF LICENSE REVENUE Cost of license revenue includes product media and
duplication, manuals, packing supplies, shipping expenses and, in certain
transactions, royalties paid to certain vendors. Cost of license revenue as a
percentage of license revenue decreased to 8% for fiscal 1997 from 9% in both
fiscal 1996 and 1995. The fiscal 1997 decrease in cost of license revenue as
percentage of license revenue as compared to fiscal 1996 was primarily due to
reduced product costs associated with OEM's partially offset by increased
costs associated with increased volumes of packaged product shipments.
COST OF SERVICE REVENUE Cost of service revenue represents personnel related
costs incurred for development work under customer funded software
development agreements. Cost of service revenue as a percentage of service
represented 37% in fiscal 1997, 35% in fiscal 1996, and 0% in fiscal 1995,
respectively.
RESEARCH AND DEVELOPMENT Research and development expenses consist primarily
of salaries and other related expenses for research and development
personnel, quality assurance personnel, fees to outside contractors and the
cost of facilities and depreciation of capital equipment. The Company invests
in research and development both for new products and to provide continuing
enhancements to existing products. Research and development expenses
increased by 108% to $6,236,000 in fiscal 1997 from $3,003,000 in fiscal
1996. In fiscal 1996, research and development expenses increased 63% to
$3,003,000 from $1,840,000 in fiscal 1995. Research and development
represented approximately 40% of total revenue in both fiscal 1997 and fiscal
1996, and 214% of total revenue in fiscal 1995. The absolute dollar year over
year increase in research and development expenses in both fiscal 1997 and
fiscal 1996 was primarily due to increased personnel related costs and
spending required to develop the Company's IntelliSync product offerings and,
to a lesser extent, increased personnel related costs and spending required
to develop enhanced versions of TranXit and other new products. A significant
portion of the Company's research and development expenses are comprised of
fees paid to outside contractors which are engaged by the Company on a
project-by-project basis. Research and development spending is anticipated to
increase in absolute dollars as the Company continues to invest in product
development. In addition, the Company believes research and development
expenses may fluctuate from quarter to quarter both in absolute dollars as
well as a percentage of revenue, depending upon the status of various
development projects.
Research and development expenses have been expensed as incurred. Statement
of Financial Accounting Standards No. 86 requires capitalization of certain
software development costs once technological feasibility is established. The
Company defines establishment of technological feasibility at the point which
product reaches beta. Software development costs incurred subsequent to the
establishment of technological feasibility through the period of general
market availability of the product are capitalized, if material. To date, all
of these software development costs have been insignificant and expensed as
incurred.
SALES AND MARKETING Sales and marketing expenses consist primarily of salaries,
commissions, promotional expenses and other related expenses of sales and
marketing personnel. Sales and marketing expenses increased by 84% to $3,983,000
in fiscal 1997 from $2,169,000 in fiscal 1996. In fiscal 1996, sales and
marketing expenses increased 274% to $2,169,000 from $580,000 in fiscal 1995.
Sales and marketing expenses represented approximately 25%, 28% and 67% of total
revenues in fiscal 1997, fiscal 1996, and fiscal 1995, respectively. Sales and
marketing expenses increased in absolute dollars in both fiscal 1997 and fiscal
1996 primarily due to the expansion of the Company's sales force, related travel
and entertainment expenses and increased marketing activities in an effort to
expand its customer base and channel presence. In addition, upon entering the
retail market channel, the Company incurs market development
16.
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PUMA TECHNOLOGY
fund and cooperative advertising expenses paid to its distributors. The
Company intends to focus its energy on creating end user demand and,
accordingly, expects to increase its investment in both its sales and
marketing team as well as advertising in fiscal 1998. Additionally, the
Company intends to continue expanding its sales and marketing organization to
promote new products and increase its presence in the distribution and retail
channel. As a result, the Company anticipates that sales and marketing
expenses will continue to increase in absolute dollars and as a percentage of
revenue throughout fiscal 1998.
GENERAL AND ADMINISTRATIVE General and administrative expenses consist
primarily of salaries and other related expenses of administrative, executive
and financial personnel and other outside professional fees. General and
administrative expenses increased by 100% to $2,123,000 in fiscal 1997 from
$1,064,000 in fiscal 1996. In fiscal 1996, general and administrative
expenses increased 113% to $1,064,000 from $500,000 in fiscal 1995. General
and administrative expenses represented approximately 14% of total revenues
in fiscal 1997 and fiscal 1996, and represented 58% of total revenue in
fiscal 1995. The year over year increases in absolute general and
administrative spending in both fiscal 1997 and fiscal 1996 was primarily due
to increased headcount and related spending to support the need for a growing
infrastructure, and to a lesser extent, amortization of intangible assets
related to the acquisition of IntelliLink. The Company anticipates that its
general and administrative expenses will increase in absolute dollars in the
future as the Company expands its administrative staff, management
information systems and other items related to infrastructure.
IN-PROCESS RESEARCH AND DEVELOPMENT In the fourth quarter of fiscal 1997,
the Company recorded a charge of $880,000 for in-process research and
development associated with the asset purchase of Real World Solutions. In
the third quarter of 1996, the Company recorded a charge of $2,680,000 for
in-process research and development associated with the purchase of
IntelliLink Corporation. See note 2 of Notes to Consolidated Financial
Statements.
INTEREST AND OTHER INCOME, NET Interest and other income, net, represents
interest earned by the Company on its cash and short-term investments, offset
by interest expense on long-term debt and capitalized leases and
miscellaneous fees and charges. Interest and other income, net, increased to
$822,000 in fiscal 1997 from $85,000 in fiscal 1996 and from $71,000 in
fiscal 1995. The increase in interest and other income, net, in fiscal 1997
as compared to fiscal 1996 was primarily due to increased interest income due
to higher levels of cash equivalents and short-term investments. The
increased balances were primarily a result of proceeds generated from the
Company's initial public offering in December 1996.
PROVISION FOR INCOME TAXES Provision for income taxes increased to $831,000
in fiscal 1997 from $509,000 in fiscal 1996 and $80,000 in fiscal 1995. The
provision for income taxes primarily represents foreign withholding taxes.
The foreign withholding taxes are a function of royalties earned by the
Company from certain foreign customers. The Company's tax rate for fiscal
1998 is significantly dependent on the amount and mix of income derived from
sources subject to foreign withholding taxes.
17.
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PUMA TECHNOLOGY
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
The Company expects that its future operating results could fluctuate
significantly as a result of numerous factors including, but not limited to,
the demand for the Company's products, the Company's success in developing
new products, the timing of new product introductions by the Company and its
competitors, market acceptance of the Company's new and enhanced products,
the emergence of new industry standards, the timing of customer orders, the
mix of products sold, competition, the mix of distribution channels employed,
the evolving and unpredictable nature of the markets for the Company's
products and mobile computing devices generally, the rate of growth of the
personal computer market in general and general economic conditions.
The Company's revenue is difficult to forecast in part because the market for
wireless IR connectivity and data synchronization software is rapidly
evolving. In addition, the Company typically operates with a relatively small
order backlog. As a result, quarterly sales and operating results depend in
part on the volume and timing of orders received within the quarter, which
are difficult to forecast. In addition, a significant portion of the
Company's expense levels is fixed in advance based in large part on the
Company's forecasts of future revenue. If revenue is below expectations in
any given quarter, the adverse impact of the shortfall on the Company's
operating results may be magnified by the Company's inability to adjust
spending to compensate for the shortfall. Therefore, a shortfall in actual
revenue as compared to estimated revenue would have an immediate adverse
effect on the Company's business, financial condition and operating results
that could be material.
The Company historically has derived a substantial portion of its revenue
from OEMs. Due to the Company's ongoing effort to expand into retail and
reseller distribution channels, an increasing percentage of the Company's
licensing activity is expected to result from the sale of products through
distributors and other resellers, which sales are harder to predict and may
have lower margins than other channels. Sales through such channels may
contribute to increased fluctuation of operating results. A significant
portion of the Company's revenue in any quarter is typically derived from
sales to a limited number of customers. The Company has generally recognized
a substantial portion of its revenue in the last month of each quarter, when
it typically receives royalty reports from its OEM customers. Any significant
deferral of purchases of the Company's products by its customers could have a
material adverse effect on the Company's business, operating results and
financial condition in any particular quarter. To the extent that significant
sales occur earlier than expected, operating results for subsequent quarters
may be adversely affected.
The Company recently expanded its sales channel by fulfilling orders via the
World Wide Web. Given its limited history, there can be no assurance of
continued acceptance or demand for orders placed via the Web. Additionally,
there can be no assurance that Web sales may not adversely affect sales in
the Company's retail and reseller sales channels.
The Company's gross margin on its service revenue is substantially lower than
its gross margin on license revenue. Any increase in service revenue would
have a corresponding increase in cost of revenue and may have an adverse
effect on the Company's gross margins. In addition, certain of the Company's
retail products contain hardware as well as software components. The
Company's expense levels, therefore, may be higher than those of other
software companies. The Company may also reduce prices or increase spending
in response to competition or to pursue new market opportunities.
The Company has not experienced seasonality to date; however, the operating
results of many software companies reflect seasonal fluctuations, and there
can be no assurance that the Company will not experience such fluctuations in
the future.
18.
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PUMA TECHNOLOGY
For example, sales in Europe and certain other countries typically are
adversely affected in the summer months when business activity is reduced.
Because of these factors, the Company believes that period-to-period
comparisons of its operating results are not necessarily meaningful and that
such comparisons should not be relied upon as indications of future
performance. As a result of the foregoing and other factors, the Company's
operating results and stock price may be subject to significant volatility,
particularly on a quarterly basis.
LIQUIDITY AND CAPITAL RESOURCES
Up until the Company's initial public offering in December 1996, the Company
financed its operations and met its capital expenditure requirements
primarily from proceeds from the private sale of Preferred Stock and Common
Stock. Through October 31, 1996, the Company had raised approximately
$6,800,000 from the sale of Preferred and Common Stock. In December 1996, the
Company generated net proceeds of approximately $21,165,000 from its initial
public offering of common stock.
The Company's operating activities provided cash of $392,000, used cash of
$896,000 and used cash of $1,401,000 in fiscal 1997, fiscal 1996 and fiscal
1995, respectively. Net cash provided in fiscal 1997 was primarily due to net
income adjusted for non-cash depreciation and amortization, in-process
research and development related to the asset acquisition of Real World
Solutions and increased accounts payable and accrued expenses. These sources
were partially offset by increases in accounts receivable, inventory,
prepaids and other assets and decreases in deferred revenue. The decrease in
net cash used in fiscal 1996 as compared to fiscal 1995 is primarily due to
an increase in net loss, offset by adjustments for non-cash in-process
research and development related to the acquisition of IntelliLink and an
increase in accounts receivable.
Cash used in investing activities was $19,444,000, provided from investing
activities $132,000, and used in investing activities was $680,000 in fiscal
1997, fiscal 1996 and fiscal 1995, respectively. Cash used in fiscal 1997 was
primarily due to purchases of short-term investments, and to a lesser extent,
purchases of property and equipment and cash used in the asset purchase of
Real World Solutions. Cash provided by investing activities in fiscal 1996
was primarily related to proceeds from maturities of short-term investments
offset by purchases of property and equipment. Cash used in fiscal 1995 was
primarily related to purchases of short-term investments, and to a lesser
extent, purchases of property and equipment. The Company expects purchases of
property and equipment will increase in the first half of fiscal 1998 as it
purchases computer and other equipment to enhance its infrastructure as well
as expands its facility located on the East Coast.
Cash provided by financing activities was $23,894,000, used in financing
activities $254,000, and provided by financing activities was $3,675,000 in
fiscal 1997, fiscal 1996 and fiscal 1995, respectively. Cash provided from
financing activities provided in fiscal 1997 was primarily due to the
issuance of Common Stock and, to a much lesser extent, the preferred stock
and proceeds from conversion of warrants and exercise of stock options.
At July 31, 1997 the Company's principal source of liquidity represented by
cash, cash equivalents and short-term investments totaled $21,171,000. The
Company currently has no significant capital commitments. The Company
currently has no bank financing arrangements. The Company believes that its
current cash, cash equivalents and short-term investment balances and cash
generated from operations, if any, will be sufficient to meet its working
capital and other cash requirements for at least the next twelve months.
19.
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PUMA TECHNOLOGY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
JULY 31, 1997 1996
- --------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 5,824 $ 982
Short-term investments 15,347 --
Accounts receivable, net 3,615 1,837
Inventories 224 165
Prepaid expenses and other current assets 443 114
- --------------------------------------------------------------------------------
Total current assets 25,453 3,098
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Property and equipment, net 2,844 449
Other assets 1,116 457
- --------------------------------------------------------------------------------
Total assets $29,413 $4,004
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,215 $ 682
Accrued expenses and other current liabilities 1,001 645
Deferred revenue 683 1,042
Current portion of capital lease obligations 25 21
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Total current liabilities 2,924 2,390
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Capital lease obligations, net of current portion 66 28
Convertible debenture -- 933
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Total liabilities 2,990 3,351
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Commitments and contingencies (Note 5)
Stockholders' equity:
Stock subscription -- 1,582
Preferred Stock, $0.001 par value; 3,500 shares authorized;
no shares issued or outstanding -- --
Convertible preferred stock, $0.001 par value;
3,786 designated; none and 2,620 shares issued
and outstanding at July 31, 1997 and 1996 respectively -- 3
Common stock, $0.001 par value; 40,000 shares authorized;
12,032 and 4,297 shares issued and outstanding at
July 31, 1997 and 1996 respectively 12 4
Additional paid-in capital 31,525 6,686
Receivable from stockholders (192) (2,013)
Deferred stock compensation (81) (108)
Accumulated deficit (4,841) (5,501)
- --------------------------------------------------------------------------------
Total stockholders' equity 26,423 653
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Total liabilities and stockholders' equity $29,413 $4,004
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
20.
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PUMA TECHNOLOGY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED JULY 31, 1997 1996 1995
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Revenue:
License $13,710 $7,418 $ 860
Services 1,919 298 --
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Total revenue 15,629 7,716 860
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Cost of revenue:
License 1,032 673 77
Services 706 104 --
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Total cost of revenue 1,738 777 77
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Gross profit 13,891 6,939 783
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Operating expenses:
Research and development 6,236 3,003 1,840
Sales and marketing 3,983 2,169 580
General and administrative 2,123 1,064 500
In-process research and development 880 2,680 --
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Total operating expenses 13,222 8,916 2,920
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Operating income (loss) 669 (1,977) (2,137)
Other income, net 822 85 71
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Income (loss) before income taxes 1,491 (1,892) (2,066)
Provision for income taxes (831) (509) (80)
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Net income (loss) $ 660 $(2,401) $(2,146)
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Net income (loss) per share $ 0.06 -- --
Weighted average common and common
equivalent shares outstanding 11,851 -- --
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
21.
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<PAGE>
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PUMA TECHNOLOGY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE RECEIVABLE DEFERRED
PREFERRED STOCK COMMON STOCK ADDITIONAL FROM STOCK ACCU-
STOCK SUB- --------------- ------------ PAID-IN STOCK- COMPEN- MULATED
SCRIPTION SHARES AMOUNT SHARES AMOUNT CAPITAL HOLDERS SATION DEFICIT TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1994 $ -- 943 $1 3,045 $ 3 $ 1,265 $ (28) $ -- $ (954) $ 287
Issuance of Common Stock
upon exercise of options -- -- -- 220 -- 57 -- -- -- 57
Issuance of Series A
convertible preferred stock,
net of issuance costs -- 651 1 -- -- 641 -- -- -- 642
Issuance of Series B
convertible preferred stock,
net of issuance costs -- 1,026 1 -- -- 3,026 -- -- -- 3,027
Repurchase of unvested
founder Common Stock -- -- -- (543) -- (7) 26 -- -- 19
Net loss -- -- -- -- -- -- -- -- (2,146) (2,146)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at July 31, 1995 -- 2,620 3 2,722 3 4,982 (2) -- (3,100) 1,886
Issuance of Common Stock
upon exercise of options -- -- -- 580 -- 321 (53) -- -- 268
Issuance of Common Stock
in connection with
acquisition of IntelliLink -- -- -- 1,019 1 1,273 (194) -- -- 1,080
Loan to former officer of
IntelliLink Corp. -- -- -- -- -- -- (184) -- -- (184)
Repurchase of unvested
Common Stock -- -- -- (24) -- (5) 2 -- -- (3)
Deferred compensation
related to stock options -- -- -- -- -- 115 -- (108) -- 7
Subscription for Series C
convertible preferred stock 1,582 -- -- -- -- -- (1,582) -- -- --
Net loss -- -- -- -- -- -- -- -- (2,401) (2,401)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at July 31, 1996 1,582 2,620 3 4,297 4 6,686 (2,013) (108) (5,501) 653
Issuance of Series C
convertible preferred stock,
net of issuance costs (1,582) 286 -- -- -- 1,582 1,582 -- -- 1,582
Issuance of Common Stock
upon exercise of options -- -- -- 189 -- 564 -- -- -- 564
Issuance of warrants -- -- -- -- -- 175 -- -- -- 175
Exercise of warrants for
Common Stock -- -- -- 330 -- 405 -- -- -- 405
Conversion of debenture to
Common Stock -- -- -- 344 -- 953 -- -- -- 953
Repurchase of unvested
Common Stock -- -- -- (3) -- -- -- -- -- --
Loan to stockholder -- -- -- -- -- -- (71) -- -- (71)
Repayments by stockholder -- -- -- -- -- -- 310 -- -- 310
Amortization of deferred
compensation -- -- -- -- -- -- -- 27 -- 27
Shares issued in initial
offering, net of expenses -- -- -- 2,500 4 21,161 -- -- -- 21,165
Conversion of preferred stock
to Common Stock -- (2,906) (3) 4,375 4 (1) -- -- -- --
Net income -- -- -- -- -- -- -- -- 660 660
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at July 31, 1997 $ -- -- $-- 12,032 $12 $31,525 $ (192) $ (81) $(4,841) $26,423
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
22.
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PUMA TECHNOLOGY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED JULY 31, 1997 1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 660 $(2,401) $(2,146)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 616 217 73
In-process research and development 880 2,680 --
Other 20 42 56
Changes in assets and liabilities:
Accounts receivable (1,778) (1,637) (125)
Inventories (59) (105) (24)
Prepaid expenses and other current assets (384) (82) (17)
Accounts payable 512 17 218
Accrued expenses and other current liabilities 284 272 86
Deferred revenues (359) 101 478
- ------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 392 (896) (1,401)
- ------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of property and equipment (2,679) (317) (180)
Purchase of short term investments (23,960) -- (500)
Maturities of short-term investments 8,003 500 --
Cash used in acquisitions, net of cash acquired (808) (51) --
- ------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities (19,444) 132 (680)
- ------------------------------------------------------------------------------------------
Cash flows from financing activities:
Principal payments under capital lease obligations (26) (22) (14)
Principal repayments on notes payable (35) (119) --
Proceeds from exercise of warrants 405 -- --
Note repayments (advances) to stockholder 239 (184) --
Net proceeds from issuance of convertible preferred stock 1,582 -- 3,669
Net proceeds from issuance of Common Stock 21,729 71 20
- ------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 23,894 (254) 3,675
- ------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 4,842 (1,018) 1,594
Cash and cash equivalents at beginning of period 982 2,000 406
- ------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 5,824 $ 982 $2,000
- ------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Interest paid $ 21 $ 7 $ 6
Income taxes paid $ 831 $ 509 $ 80
- ------------------------------------------------------------------------------------------
Supplemental disclosure of noncash financing activities:
Property and equipment acquired under capital leases -- -- 20
Common Stock issued in connection with the
acquisition of IntelliLink Corp. -- 1,274 --
Common Stock paid by cancellation of accounts payable -- 197 --
Issuance of warrants for technology 175 -- --
Conversion of debenture to Common Stock 953 -- --
- ------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
23.
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PUMA TECHNOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. THE COMPANY AND A SUMMARY OF ITS SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY Puma Technology, Inc. (the "Company") was incorporated in
California on August 27, 1993 and was subsequently reincorporated in Delaware on
November 27, 1996. The Company develops, markets and supports mobile data
exchange software which allows user to easily access, exchange and synchronize
information stored on a variety of different computing devices.
BASIS OF PRESENTATION The accompanying consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries,
IntelliLink Corporation ("IntelliLink") and Puma Ireland, Inc. All significant
intercompany accounts and transactions have been eliminated. Certain prior year
financial statement balances have been reclassified to conform to the fiscal
1997 presentation.
USE OF ESTIMATES AND ASSUMPTIONS The preparation of the consolidated
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes. Actual
results could differ from those estimates.
REVENUE RECOGNITION The Company recognizes revenue in accordance with the
American Institute of Certified Public Accountants' Statement of Position 91-1
on software revenue recognition.
Revenue is comprised of license revenue and service revenue. License revenue is
derived from the sale of software products and royalty agreements with original
equipment manufacturers (OEMs). Service revenue is derived from customer funded
engineering services and maintenance contract programs.
License revenue is recognized upon shipment of the software if no significant
obligation remains and collection of the resulting receivable is deemed
probable. The Company currently sells its products primarily to OEMs and to a
lesser extent to distributors and resellers in the United States, Africa, Asia,
Australia, Canada and Europe. The Company grants distributors and resellers
certain rights of return and price protection on unsold merchandise held by
those distributors and resellers. Accordingly, reserves for estimated future
returns and credits for price protection are provided for upon revenue
recognition. Such reserves are based on historical rates of returns and
allowances, distributor inventory levels and other factors.
Revenue from OEMs under minimum guaranteed royalty arrangements, which are not
subject to significant future obligations, is recognized when such royalties are
earned and become payable. Royalty revenue that is subject to significant future
obligations is recognized when such obligations are fulfilled. Royalty revenue
that exceeds minimum guarantees is recognized in the period earned. Payments
received for maintenance contract services are recognized pro-ratably over the
term of the service agreement. Payments from customers received in advance of
revenue recognition are recorded as deferred revenue.
The Company also provides a limited amount of telephone technical support to
customers. These activities are generally considered insignificant postcontract
customer support obligations and related costs are accrued upon recognition of
the license revenue.
24.
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PUMA TECHNOLOGY
CASH AND CASH EQUIVALENTS The Company considers all highly liquid debt
instruments with a maturity of three months or less at the date of purchase to
be cash equivalents.
SHORT TERM INVESTMENTS The Company accounts for its marketable securities in
accordance with Statement of Financial Accounting Standards No. 115 (FAS 115),
"Accounting for Certain Investments in Debt and Equity Securities," which
requires the Company to classify debt and equity securities into one of three
categories: held to maturity, trading or available for sale. The Company has
classified its investments as available for sale. The cost of securities sold is
based on the specific identification method.
INVENTORIES Inventories consist principally of software and related
documentation, which are stated at the lower of cost (first-in, first-out) or
market.
SOFTWARE DEVELOPMENT COSTS Software development costs incurred prior to the
establishment of technological feasibility are included in research and
development and are expensed as incurred. The Company defines establishment of
technological feasibility at the point which product reaches beta. Software
development costs incurred subsequent to the establishment of technological
feasibility through the period of general market availability of the product are
capitalized, if material. To date, all software development costs have been
expensed as incurred.
PROPERTY AND EQUIPMENT Property and equipment are stated at cost.
Depreciation and amortization is computed using the straight-line method over
the estimated useful lives of the assets, generally three to five years, or in
the case of leased assets, the life of the lease, if shorter.
OTHER ASSETS Other assets are primarily comprised of intangibles and
goodwill. Amortization is computed on the straight-line basis over the
expected lives of the assets ranging from two to three years. Accumulated
amortization was $282,000 and $45,000 at July 31, 1997 and 1996 respectively.
INCOME TAXES Income taxes are computed using the asset and liability method.
Under the asset and liability method, deferred income tax assets and liabilities
are determined based on the differences between the financial reporting and tax
bases of the assets and liabilities and are measured using the currently enacted
tax rates and laws.
CONCENTRATION OF CREDIT RISK Financial instruments that potentially subject
the Company to significant concentrations of credit risk consist principally of
cash, cash equivalents, short-term investments and trade accounts receivable.
The Company places its cash, cash equivalents and short-term investments
primarily in money market accounts and commercial paper. The Company, by policy,
limits the amount of credit exposure for cash and cash equivalents to any one
issuer.
The Company performs ongoing credit evaluations of its customers and maintains
reserves for potential credit losses. At July 31, 1997 two customers accounted
for 17% and 11% of accounts receivable and at July 31, 1996, three customers
accounted for approximately 28%, 18% and 11% of accounts receivable.
The Company's sales are generally denominated in US dollars. The Company does
not currently undertake any foreign currency hedging activities.
25.
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PUMA TECHNOLOGY
NET INCOME (LOSS) PER SHARE Net income (loss) per share is computed using the
weighted average number of common shares, preferred shares (on an as converted
basis) and common equivalent shares outstanding during the period (using the
treasury stock method, if dilutive). Pursuant to the requirements of the
Securities and Exchange Commission, common shares, convertible preferred stock
(using the as converted method) and stock options and warrants (using the
treasury stock method and the initial public offering price) issued during the
twelve month period prior to the offering have been included in the computation
as if they were outstanding for all periods presented. Net loss per share data
prior to fiscal 1997 has not been presented as such information is not
considered meaningful in view of the significant change in capital structure
experienced by the Company as a result of its initial public offering.
RECENT PRONOUNCEMENTS The Company has adopted Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation (FAS
123), which establishes a fair value method of accounting for stock-based
compensation plans, and requires additional disclosures for those companies who
elect not to adopt the new method of accounting. The Company has elected to
continue to measure compensation costs using the intrinsic value method
prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees" and
to comply with the pro forma disclosure requirements of FAS 123 (see note 4). As
such, adoption of FAS 123 has had no impact on the Company's financial
statements.
In February 1997, the FASB issued Statement No. 128, "Earnings per Share" (FAS
128), which will be effective commencing with the Company's 1998 second quarter.
FAS No. 128 requires a change in the method currently used to compute earnings
per share and that all prior periods be restated. Under the new requirements,
primary and fully diluted earnings per share calculations would be replaced by
basic and diluted earnings per share calculations. For fiscal 1997
pro forma basic and diluted earnings per share would be the same as primary
earnings per share reported.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" (FAS 130). FAS 130 establishes standards
for reporting comprehensive income and its components in a financial state-
ment that is displayed with the same prominence as other financial statements.
Comprehensive income as defined includes all changes in equity (net assets)
during a period from nonowner sources. Examples of items to be included in
comprehensive income which are excluded from net income, include foreign
currency translation adjustments and unrealized gain/loss on available-for-sale
securities. The disclosures prescribed by FAS 130 are effective for fiscal years
beginning after December 15, 1997.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information (FAS
131). This statement establishes standards for the way companies report
information about operating segments in annual financial statements. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The Company does not expect there to be
any impact of adopting this new standard. The disclosures prescribed by FAS 131
are effective for fiscal years beginning after December 15, 1997.
NOTE 2. ACQUISITIONS
REAL WORLD SOLUTIONS, INC. In July 1997, the Company acquired the assets of
Real World Solutions, Inc., (RWS), a developer of client/server software
solutions, in a transaction accounted for as a purchase. The consolidated
financial statements of the Company include the results of the operations of RWS
since the date of acquisition.
26.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PUMA TECHNOLOGY
The total purchase price of approximately $1,006,000 (including $751,000 for
liabilities assumed) was assigned, based on an independent appraisal, to the
fair value of the assets acquired, including $70,000 to tangible assets
acquired, $880,000 to in-process research and development and $56,000 to
identified intangible assets. The in-process research and development was
expensed at the acquisition date.
INTELLILINK CORP. On March 6, 1996, the Company agreed to acquire
IntelliLink, a developer of advanced synchronization software, in a transaction
accounted for as a purchase. The IntelliLink acquisition was completed on April
30, 1996. The consolidated financial statements of the Company include the
results of operations of IntelliLink since the date of acquisition. Pursuant to
the acquisition, (i) all shares of outstanding common and preferred stock of
IntelliLink were exchanged for 769,000 shares of the Company's Common Stock,
(ii) outstanding options to purchase IntelliLink Common Stock were exchanged for
options to acquire 99,000 shares of the Company's Common Stock, (iii) the
Company issued a 7% convertible subordinated debenture for $850,000 in a
replacement of a debenture owed by IntelliLink for the same principal amount and
(iv) the Company issued a warrant to purchase 250,000 shares of the Company's
Common Stock at $5.60 per share in replacement of a similar warrant outstanding
for IntelliLink Common Stock. Additionally, in conjunction with the IntelliLink
acquisition, the Company issued 250,000 shares of Common Stock to two former
officers and principal stockholders of IntelliLink in exchange for cancellation
of debt owed to them by IntelliLink and notes receivable of $194,000. The shares
vest over a two year period. The notes receivable bear interest at 8% per annum.
The shares of Common Stock issued in connection with the IntelliLink acquisition
were valued based on an independent appraisal obtained by the Company. The total
purchase price of approximately $3,483,000 (including $1,207,000 for liabilities
assumed) was assigned, based on an independent appraisal, to the fair value of
the assets acquired, including $327,000 to tangible assets acquired, $2,680,000
to in-process research and development, $120,000 to identified intangible assets
and the remaining $356,000 to goodwill. The in-process research and development
was expensed at the acquisition date.
The 7% convertible subordinated debenture and the warrants to purchase Common
Stock were converted to Common Stock on the completion of the common stock
offering in December 1996.
Unaudited pro forma information, which reflects the results of operations for
the years ended July 31, 1997 and 1996 as if the acquisition of IntelliLink and
RWS had occurred as of the beginning of the periods presented and after giving
effect to certain adjustments, including amortization of goodwill and other
intangibles, and excluding the effect of a nonrecurring charge of $880,000 of
in-process research and development directly attributable to the acquisition of
RWS and $2,680,000 of in-process research and development directly attributable
to the acquisition of IntelliLink, is as follows (in thousands, except per share
data):
YEAR ENDED JULY 31, 1997 1996
- -------------------------------------------------------------------------------
Pro forma revenue $15,735 $9,003
Pro forma net (loss) 609 (1,155)
Pro forma net (loss) per share $ 0.05 $ --
- -------------------------------------------------------------------------------
27.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PUMA TECHNOLOGY
NOTE 3. BALANCE SHEET COMPONENTS
Cash equivalents and short-term investments include available-for-sale
securities as follows (in thousands):
JULY 31, 1997 1996
- -------------------------------------------------------------------------------
Cash equivalents
Commercial paper $4,439 $568
Money market funds 665 208
- -------------------------------------------------------------------------------
$5,104 $776
- -------------------------------------------------------------------------------
Short term investments
Commercial paper $11,284 $ --
US Government agencies 4,063 --
- -------------------------------------------------------------------------------
$15,347 $ --
- -------------------------------------------------------------------------------
Realized gains or losses on sales of available-for-sale securities were
immaterial for the years ended July 31, 1997, 1996 and 1995. There were no
unrealized holding gains or losses on such securities at July 31, 1997 and 1996.
The short-term investments have maturities of less than one year.
Accounts receivable, net consist of the following (in thousands):
JULY 31, 1997 1996
- -------------------------------------------------------------------------------
Accounts receivable $4,292 $2,021
Less allowance for doubtful accounts and sales returns (677) (184)
- -------------------------------------------------------------------------------
$3,615 $1,837
- -------------------------------------------------------------------------------
Property and equipment consist of the following (in thousands):
JULY 31, 1997 1996
- -------------------------------------------------------------------------------
Computer equipment and software $1,646 $522
Furniture and office equipment 1,252 245
Leasehold improvements 616 --
- -------------------------------------------------------------------------------
3,514 767
Less: accumulated depreciation and amortization (670) (318)
- -------------------------------------------------------------------------------
$2,844 $449
- -------------------------------------------------------------------------------
28.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PUMA TECHNOLOGY
At July 31, 1997 and July 31, 1996 the Company had $164,000 and $94,000 of
equipment under capital leases, respectively, and related accumulated
amortization of $65,000 and $48,000, respectively.
Accrued liabilities consist of the following (in thousands):
JULY 31, 1997 1996
- -------------------------------------------------------------------------------
Payroll related accruals $ 451 $278
Other accrued liabilities 550 367
- -------------------------------------------------------------------------------
$1,001 $645
- -------------------------------------------------------------------------------
NOTE 4. STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK The preferred stock was converted to Common Stock
on the completion of the common stock offering.
COMMON STOCK OFFERING On December 10, 1996, the Company and certain
stockholders of the Company completed an initial public offering of common stock
involving the sale of 2,500,000 shares of the Company's common stock issued by
the Company and 1,985,000 shares of the Company's common stock held by the
existing stockholders. The net proceeds to the company from the sale of the
2,500,000 shares of common stock sold by the Company were approximately
$21,165,000.
STOCK OPTION PLANS In October 1993, the Board of Directors and stockholders
adopted the 1993 Stock Option Plan (the Plan) which provides for granting of
incentive stock options (ISOs) and nonqualified stock options (NSOs) to purchase
shares of Common Stock to employees, consultants and advisors of the Company. To
date, the Company has not granted any significant options to consultants or
advisors. In accordance with the Plan, the stated exercise price shall be not
less than 100% and 85% of the estimated fair market value of Common Stock on the
date of grant for ISOs and NSOs, respectively, as determined by the Board of
Directors. The Plan provides that the options shall be exercisable over a period
not to exceed ten years. Options generally vest 25% one year after date of grant
and 1/48th each month thereafter for the next 36 months. The Plan provides that
the options may be exercised prior to the options becoming vested. If the
optionee's employment is terminated for any reason, the Company has the right to
repurchase any unvested shares. At July 31, 1997, the options authorized under
the Plan aggregated 2,500,000.
The Company has assumed certain options granted to former employees of
IntelliLink (Acquired Options). The Acquired Options were assumed by the company
outside the Plan, but all are administered as if assumed under the Plan. All of
the Acquired Options have been adjusted to effectuate the conversion under the
terms of the Agreements between the Company and the companies acquired. The
Acquired Options generally become exercisable over a four year period and
generally expire ten years from the date of grant. No additional options will be
granted under any of these plans.
29.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PUMA TECHNOLOGY
Stock option activity, both incentive and nonqualified, under all plans is
presented as follows (in thousands, except per share amounts):
RANGE OF WEIGHTED-AVERAGE
PRICE EXERCISE PRICE
OPTION SHARES PER SHARE PER SHARE
- -------------------------------------------------------------------------------
Outstanding at July 31,1994 208 $0.025-$0.20 $ 0.08
Granted 597 0.20 0.20
Exercised (220) 0.025-0.20 0.12
Canceled (30) 0.20 0.20
- -------------------------------------------------------------------------------
Outstanding at July 31,1995 555 $0.025-$0.20 $ 0.20
Granted 1,144 0.20-6.05 2.64
Exercised (580) 0.025-1.25 0.55
Canceled (80) 0.20-2.50 0.50
- -------------------------------------------------------------------------------
Outstanding at July 31,1996 1,039 $0.20-$6.05 $ 0.35
Granted 1,487 7.50-17.25 10.43
Exercised (189) 0.20-7.50 3.00
Canceled (229) 0.20-17.25 7.10
- -------------------------------------------------------------------------------
Outstanding at July 31,1997 2,108 $0.20-$16.87 $ 7.26
- -------------------------------------------------------------------------------
The weighted average fair value of options granted during fiscal 1997 and 1996
was $4.27 and $0.47 respectively.
The following table summarizes information about stock options under the
Option Plan outstanding at July 31, 1997 (in thousands, except per share
price and contractual life in years):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------- -------------------------------
NUMBER WEIGHTED-AVERAGE NUMBER
RANGE OF OUTSTANDING REMAINING WEIGHTED-AVERAGE EXERCISABLE WEIGHTED-AVERAGE
EXERCISE PRICES AT 7/31/97 CONTRACTUAL LIFE EXERCISE PRICE AT 7/31/97 EXERCISE PRICE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 0.20 - $ 3.25 563 7.8 $ 1.45 526 $ 1.46
$ 3.26 - $ 7.50 446 8.7 6.03 414 6.02
$ 7.51 - $ 9.75 337 9.9 8.58 265 8.51
$ 9.76 - $10.75 511 9.7 10.75 436 10.75
$10.76 - $16.87 251 9.5 13.62 221 13.52
----- -----
Total 2,108 9.0 $ 7.26 1,862 $ 7.09
----- -----
</TABLE>
30.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PUMA TECHNOLOGY
EMPLOYEE STOCK PURCHASE PLAN In October 1996, the board of directors adopted
the 1996 Employee Stock Purchase Plan ( the "Purchase Plan") which authorizes
the issuance of 250,000 shares of Common Stock. Shares may be purchased under
the Purchase Plan at 85% of the lesser of the fair market value of the common
stock on the grant or purchase date. To date no shares have been issued under
the Purchase Plan.
PRO FORMA INFORMATION The company applies APB Opinion No. 25 and related
interpretations in accounting for the stock compensation plans (the Plans)
described above. Accordingly, no compensation cost has been recognized for the
Plans. If compensation cost for the Plans had been determined consistent with
FAS No. 123 the company's net income (loss) and earnings (loss) per share would
have been adjusted to the pro-forma amounts indicated below (in thousands,
except per share amounts).
JULY 31, 1997 1996
- -------------------------------------------------------------------------------
Net income (loss)
As reported $ 660 $(2,401)
Pro forma $ (870) $(2,464)
Earnings (loss) per share- primary
As reported $0.06 $ (0.25)
Pro forma $(0.07) $ (0.26)
- -------------------------------------------------------------------------------
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions used for 1997 and 1996: risk-free interest rate 6.46% for 1997 and
5.98% for 1996, dividend yields of 0%, volatility factors of the expected market
price of the Company's Common Stock of 50% for 1997 and 0% for 1996, and a
weighted average expected life of an option of four years. The Company has also
estimated the fair value for the purchase rights issued under the Company's
Employee Stock Purchase Plan, under the Black-Scholes valuation model using the
following assumptions for 1997: risk free interest rate 5.9%, dividend yields of
0%, volatility factors of the expected market price of the Company's Common
Stock of 50% and a weighted average expected life of two years.
Because the method of accounting prescribed by FAS 123 has not been applied to
options granted prior to August 1, 1995, and because the Black-Scholes option
valuation model was developed for traded options and requires the input of
subjective assumptions, the resulting pro forma compensation cost may not be
representative of that to be expected in future years.
At July 31, 1997, a total of 209,000 shares were subject to repurchase and
options to purchase approximately 503,000 shares were available for future
grants.
Based on an independent appraiser's valuation report, management believes that
the exercise price for certain options granted during fiscal 1996 was below the
estimated fair value of the Company's Common Stock at the dates of grant.
Accordingly, the Company will recognize approximately $115,000 of compensation
expense over the options' four-year vesting periods.
31.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PUMA TECHNOLOGY
COMMON STOCK WARRANTS In July 1996, the Company agreed to issue a warrant to
purchase 140,000 shares of its Common Stock at $5.50 per share to one of its
Series C stockholders in exchange for rights to certain technology. These
warrants were subsequently issued in August 1996. The aggregate value of the
warrant was estimated by the Company at $175,000 and is being accounted for as
purchased technology. The warrant is exercisable immediately and expires at the
earlier of August 1999 or the acquisition of the Company by another entity. The
purchased technology will be amortized over its estimated life.
NOTE 5. COMMITMENTS
The Company leases certain computer equipment and office equipment under
long-term lease agreements that are classified as capital leases. The leases
expire over the next four years and include options to purchase the equipment at
the end of the lease terms.
The Company leases its facilities under operating leases that expire at various
dates through April 2006. The leases provide for escalating lease payments.
Future minimum lease payments, at July 31, 1997 were as follows (in thousands):
CAPITAL OPERATING
LEASES LEASES
- -------------------------------------------------------------------------------
Fiscal year ending July 31,
1998 $ 39 $1,026
1999 37 1,034
2000 19 1,098
2001 13 1,102
2002 3 1,148
Thereafter -- 4,270
- -------------------------------------------------------------------------------
Total minimum lease payments 111 $9,678
- -------------------------------------------------------------------------------
Less amount representing interest (20)
- -------------------------------------------------------------------------------
Present value of future minimum lease payments 91
Less current portion of capital lease payments (25)
- -------------------------------------------------------------------------------
Long-term capital lease obligations $ 66
- -------------------------------------------------------------------------------
Total rent expense was approximately, $434,000, $293,000 and $122,000 for the
years ended July 31, 1997, 1996 and 1995, respectively. The 1997 and 1996 rental
expense was offset by sublease income of approximately $97,000 and $72,000
respectively.
32.
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<PAGE>
- --------------------------------------------------------------------------------
PUMA TECHNOLOGY
NOTE 6. OTHER INCOME (EXPENSE)
YEARS ENDED JULY 31, 1997 1996 1995
- ------------------------------------------------------------------------------
(IN THOUSANDS)
Interest income $882 $110 $77
Interest expense (19) (25) (6)
Other expense, net (41) -- --
- ------------------------------------------------------------------------------
Total other income, net $822 $ 85 $71
- ------------------------------------------------------------------------------
NOTE 7. INCOME TAXES
The income tax provision for the years ended July 31, 1997, 1996 and 1995 is
summarized as follows (in thousands):
YEARS ENDED JULY 31, 1997 1996 1995
- --------------------------------------------------------------------------------
Current
Federal $ 27 $ -- $--
State 7 -- --
Foreign withholding tax 797 509 80
- --------------------------------------------------------------------------------
$831 $509 $80
- --------------------------------------------------------------------------------
Deferred tax assets are summarized as follows (in thousands):
JULY 31, 1997 1996
- --------------------------------------------------------------------------------
Net operating loss carryforwards $ 230 $ 550
Alternative minimum tax credit carryforwards 65 --
Research and development credit carryforwards 180 300
Foreign tax credit carryforwards 750 589
Reserves and allowances 520 161
Research and development 755 600
- --------------------------------------------------------------------------------
Total deferred tax assets 2,500 2,200
- --------------------------------------------------------------------------------
Deferred tax asset valuation allowance (2,500) (2,200)
- --------------------------------------------------------------------------------
$ -- $ --
- --------------------------------------------------------------------------------
33.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PUMA TECHNOLOGY
The Company has incurred losses from inception through fiscal 1996. Management
believes that, based on the history of such losses and other factors, the weight
of available evidence indicates that it is more likely than not that the Company
will not be able to realize its deferred tax assets and thus a full valuation
reserve has been recorded at July 31, 1997 and 1996.
A reconciliation of the income tax provision to the amount computed by applying
the statutory federal income tax rate to income (loss) before income tax
provision is summarized as follows (in thousands):
YEARS ENDED JULY 31, 1997 1996 1995
- --------------------------------------------------------------------------------
Amounts computed at statutory federal rate $507 $(644) $(702)
Foreign withholding taxes 797 509 80
In-process research and development not deductible 247 911 --
Utilization of foreign tax credits (633) -- --
Utilization of tax loss carryforwards (448) (322) --
Future benefits not currently recognized 361 55 702
- --------------------------------------------------------------------------------
$831 $ 509 $ 80
- --------------------------------------------------------------------------------
At July 31, 1997, the Company had approximately $675,000 of federal net
operating loss carryforwards which expire beginning in 2008. Due to ownership
change limitations provided by the Internal Revenue Code of 1986, these net
operating loss carryforwards are subject to an annual limitation of
approximately $360,000.
At July 31, 1997, the Company has $180,000 of federal research and development
credit carryforwards and $750,000 of foreign tax credit carryforwards and
$65,000 of alternative minimum tax credit carryforwards which begin to expire in
2008. Utilization of approximately $168,000 of the Company's research and
development credit carryforwards is subject to an annual limitation of $120,000
due to ownership change limitations provided by the Internal Revenue Code of
1986 and similar state provisions and may be further limited should another
ownership change occur. The annual limitation may result in the expiration of
the credits before utilization.
NOTE 8. BUSINESS SEGMENTS
The Company operates in a single industry segment encompassing the development,
marketing and support of mobile data exchange software. The Company markets its
products to customers in North America, Asia and Europe. The Company's customer
base consists primarily of large OEMs in the PC market and selected distributors
in North America, Asia and Europe which primarily market to the retail channel.
Revenue information by geographic region is as follows:
YEARS ENDED JULY 31, 1997 1996 1995
- --------------------------------------------------------------------------------
North America $ 7,172 $2,649 $249
Japan 7,304 4,302 611
Other International 1,153 765 --
- --------------------------------------------------------------------------------
$15,629 $7,716 $860
- --------------------------------------------------------------------------------
34.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PUMA TECHNOLOGY
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Puma Technology, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Puma
Technology, Inc. and its subsidiaries at July 31, 1997 and 1996, and the results
of their operations and their cash flows for each of the three years in the
period ended July 31, 1997, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
San Jose, California
August 25, 1997
35.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PUMA TECHNOLOGY
CORPORATE DIRECTORY
BOARD OF DIRECTORS
+Michael M. Clair, Chairman
+Stephen A. Nicol
+Tyron F. Pike
+Bradley A. Rowe
+Dr. Robert A. Rutner, DDS
EXECUTIVE OFFICERS
+M Bruce Nakao
Chief Financial Officer and
Senior Vice President,
Finance and Administration
+Stephen A. Nicol
Senior Vice President,
Sales and Secretary
+Bradley A. Rowe
President and
Chief Executive Officer
+INDIVIDUALS SUBJECT TO THE PROVISIONS OF SECTION 16(b) OF THE SECURITIES ACT
OF 1934
VICE PRESIDENTS
Masanari Arai
Vice President, Product Marketing
Michael A. Blanchette
Vice President,
Chief Technology Officer
Kelly Hicks
Corporate Controller
Ken Kelly
Vice President,
Product Development
Steven R. Magidson
Vice President,
Corporate Communications
Krimo Salem
Vice President, Information Systems
GENERAL COUNSEL AND ASSISTANT SECRETARY
Karen A. Ammer
HEADQUARTERS
2550 N. First Street, #500
San Jose, CA 95131
(408)321-7650
SUBSIDIARIES
IntelliLink
One Tara Blvd., Suite 104
Nashua, NH 03062
(603)888-0666
INDEPENDENT AUDITORS
Price Waterhouse LLP
San Jose, CA
LEGAL COUNSEL
Gray Cary Ware & Freidenrich
Palo Alto, CA
TRANSFER AGENT
Harris Trust & Savings Bank
Chicago, IL
COMMON STOCK
The Company's stock is traded on the National Market System under the NASDAQ
symbol: PUMA
ANNUAL MEETING OF STOCKHOLDERS
The annual meeting will be held Wednesday, December 10, 1997 at 10:00 am PST
at the Santa Clara Marriott, located at 2700 Mission College Boulevard, Santa
Clara, California
FORM 10-K
A copy of the Company's form 10-K, as filed with the Securities and Exchange
Commission, is available upon written request from:
Investor Relations
Puma Technology
2550 N. First Street, #500
San Jose, California 95131
INVESTOR RELATIONS CONTACT
M Bruce Nakao
(408)321-3863
or e-mail: [email protected]
WORLD WIDE WEB HOME PAGE
http://www.pumatech.com
36.
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-28277) of Puma Technology, Inc. of our report
dated August 25, 1997 appearing in the Annual Report to Stockholders which is
incorporated in this Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report on the Financial Statement Schedule,
which appears in this Form 10-K.
Price Waterhouse LLP
San Jose, California
October 28, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> JUL-31-1997
<CASH> 5,824
<SECURITIES> 15,347
<RECEIVABLES> 3,919
<ALLOWANCES> 304
<INVENTORY> 224
<CURRENT-ASSETS> 443
<PP&E> 3,514
<DEPRECIATION> 670
<TOTAL-ASSETS> 29,413
<CURRENT-LIABILITIES> 2,924
<BONDS> 0
0
0
<COMMON> 12
<OTHER-SE> 26,411
<TOTAL-LIABILITY-AND-EQUITY> 29,413
<SALES> 13,710
<TOTAL-REVENUES> 15,629
<CGS> 1,032
<TOTAL-COSTS> 1,738
<OTHER-EXPENSES> 13,222
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19
<INCOME-PRETAX> 1,491
<INCOME-TAX> 831
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 660
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
