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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE FISCAL YEAR ENDED JULY 31, 1999
OR
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/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD FROM ______ TO ______
COMMISSION FILE NUMBER 0-21709
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PUMA TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 77-0349154
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2550 NORTH FIRST STREET, SUITE 500 95131
SAN JOSE, CALIFORNIA (ZIP Code)
(Address of principal executive
offices)
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(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. /X/
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of October 15, 1999, was approximately $312,486,363.
The number of the registrant's $0.001 par value Common Stock outstanding as of
October 15, 1999, was 13,384,711shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE:
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Certain sections of the Proxy Statement for registrant's PART III
1999 Annual Meeting of Stockholders to be held on
December 8, 1999 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, 1999.
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TABLE OF CONTENTS
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PART I.................................................................. 3
ITEM 1. BUSINESS.................................................... 3
ITEM 2. PROPERTIES.................................................. 18
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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK........................................................ 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................................................................. 22
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K......................................................... 22
SCHEDULE II........................................................... 25
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PART I
ITEM 1. BUSINESS
THIS ANNUAL REPORT ON FORM 10-K CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS
THAT INVOLVE RISKS AND UNCERTAINTIES. WORDS SUCH AS "ANTICIPATES," "BELIEVES,"
"EXCEPTS," "FUTURE," "PLAN," "INTENDS" "SHOULD," AND SIMILAR EXPRESSIONS ARE
USED TO IDENTIFY FORWARD-LOOKING STATEMENT. THESE STATEMENTS ARE ONLY
PREDICTIONS. 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 Technology, Inc. ("Puma" or the "Company") was incorporated in
California in August 1993 and reincorporated in Delaware in November 1996. Puma
develops markets and supports mobile device management and synchronization
software that enables consumers, mobile professionals and information technology
officers to harness the full capabilities of handheld computers, smart phones
and other wireless personal communications platforms. The Company's software is
designed to improve the productivity of business professionals and corporations
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. Our current Intellisync-Registered Trademark- and Intellisync
Anywhere-TM- product families allow local, LAN and remote "content-aware" data
synchronization between a wide range of mobile computing devices and
PC/server-based applications. The Satellite Forms-TM- family enables developers
to create complete applications for the Palm Computing-Registered Trademark-
platform--without programming. Our original 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.
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. Electronic consumer devices,
such as personal electronic organizers, smart phones and pagers are being
introduced to provide data storage and information management capabilities to
the mobile business professional. Palm Computing platform devices such as the
Palm V and PalmPilot, along with Windows CE Palmsize and handheld PCs, the Nokia
9000 Communicator and the REX PC Companion are examples of popular handheld
mobile devices. Industry analysts, such as IDC, project that purchases of
handheld devices will grow from under 4 million units in 1997 to 14 million by
2001, with worldwide cellular phone subscribers jumping from 200 million to
600 million in the same time frame. With up to 25% of these new phones and
pagers potentially offering application intelligence, the overall "smart device"
market may be several times larger than that of personal digital assistants
("PDAs") alone.
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
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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 98, Windows NT, DOS and others, and utilize an even greater range of
information management applications, databases and data formats. Enabling these
devices to communicate, 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
PalmPilot with Microsoft Outlook on a desktop PC or Lotus Notes on corporate
server, 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.
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. These software
solutions must allow users to synchronize information maintained separately on
multiple devices, for example, 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.
OUR TECHNOLOGY SOLUTION
Our software solutions, anchored by the 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. Our products allow the mobile professional to
access information with easy-to-use applications, saving time and money. Our
Intellisync product family allows users to synchronize data on handheld mobile
computing devices with data on PCs and groupware servers by virtue of our
patented Data Synchronization Extensions Technology ("DSX
Technology-Registered Trademark-") engine. The TranXit product family is
specifically designed to utilize IR connectivity technology for reliable,
cost-effective file exchange, synchronization and printing. Our solution
includes the following characteristics:
INTELLIGENT, CONTENT-AWARE DATA SYNCHRONIZATION. Our patented DSX
Technology engine provides content-aware data synchronization among a growing
number of handheld devices and industry-leading personal information management
software ("PIMs"), contact management and scheduling applications such as
Microsoft Outlook, Schedule+ and Exchange, Lotus Notes and Organizer, GoldMine,
Symantec ACT!, Novell GroupWise, ON Technology Meeting Maker 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
synchronization engine, it can expand via device and application-specific
translators to accommodate new devices and applications. With the Intellisync
Software Development Kit ("SDK"), we have enabled ISVs, device OEMs and
Internet-based services to build synchronization solutions for their products on
the Intellisync platform, further entrenching our standard and have lowered our
own development costs.
ANYTIME, ANYWHERE HANDHELD ACCESS TO CORPORATE APPLICATION STANDARDS. With
the Intellisync Anywhere product line, we are providing desktop, remote and
LAN-based synchronization between both Palm Computing platform devices and
corporate groupware messaging server applications, including Microsoft Exchange
and Lotus Domino. Using wired or wireless connections, users can synchronize
email, calendar, contact and to-do list information from virtually any location.
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WIDESPREAD SOLUTIONS FOR INTEROPERABILITY. Our products provide
connectivity and content-aware data synchronization among industry-leading PCs
and mobile computing devices, operating systems and applications. Our products
operate with major PC operating systems for Windows 95, Windows 98 and Windows
NT, as well as several proprietary operating systems. We also provide
interoperability across a wide range of industry-standard and vendor-specific
applications by supporting multiple data formats. Our 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. We have also
bundled either TranXit or Intellisync for Notebooks with the vast majority of
IR-enabled notebooks shipped worldwide.
PRODUCTS
We offer 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 our advanced data
synchronization and IR connectivity technologies, we are able to develop a
number of products designed for a specific application, operating system or
hardware platform.
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PRODUCT NAME DESCRIPTION INTRODUCTION DATE
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Intellisync Anywhere Designed for remote and LAN-based synchronization of March, 1999
calendar, e-mail, contract and task data between
groupware messaging servers and Palm Computing
platform handhelds.
Satellite Forms-TM- A rapid application development ("RAD") tool, this July, 1998
product lets developers quickly create and deploy (acquired)
custom handheld applications for Palm Computing
platform devices, which can be tightly integrated
with corporate databases.
Intellisync for Notebooks Sold through OEM and retail channels, this product September 1997
provides PC-to-PC file transfer and synchronization
including PIM-to-PIM synchronization over wireless
IR, wired connection and network connections.
Intellisync for PDA product family Designed content-aware data synchronization among August 1996
PC-based applications and mobile computing devices.
The Intellisync for PDA product family includes
support for the Palm Computing platform, Windows CE
and REX PC Companion.
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PRODUCT NAME DESCRIPTION INTRODUCTION DATE
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Intellisync Gold Designed for the corporate market, Intellisync Gold October 1997
includes several Intellisync-supported products in a
single package.
TranXit OEM product designed for file transfer, October 1994
synchronization and wireless printing over IR
connections.
TranXit Pro Retail version, including SyncPro automatic May 1996
synchronization, delta file transfer and long file
name support for Windows 95.
TranXit Pro Connectivity Kit TranXit Pro plus IR-adapter hardware for the desktop May 1996
PC.
TranXit for DOS File transfer and synchronization over IR December 1996
connections for DOS.
IntelliLink-Registered Trademark- Data "import" and "export" among PC-based September 1993
applications and mobile computing devices.
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INTELLISYNC ANYWHERE. An important extension to the Intellisync family of
synchronization software, Intellisync Anywhere empowers corporations worldwide
to adopt handheld computers such as Palm Computing platform devices. Intellisync
Anywhere provides remote (dial-up, Internet) and LAN-based synchronization of
leading handheld devices with mission-critical enterprise groupware
applications, including Microsoft Exchange and Lotus Domino. By addressing this
pivotal requirement of mobile corporate users, Intellisync Anywhere lets
organizations give handheld users untethered, up-to-date information while at
their desks, on the road or just in the office down the hall.
SATELLITE FORMS. Added to our product line with the acquisition of
SoftMagic Corporation, Satellite Forms allows corporations and developers to
quickly create and deploy sophisticated custom applications for Palm Computing
platform devices that can be tightly integrated with information stored in
corporate databases, including Oracle, DB2, Microsoft Access and Lotus Notes.
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 Our DSX Technology engine) 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 Palm Computing Platform, Connected Organizers, Windows CE devices, REX
PC Companion, Sharp Organizers, TI Organizers, Nokia 9000 Communicator, AT&T
PocketNet Service, and many others. Based upon our patented DSX Technology
engine, 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 is 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.
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TRANXIT. Our original product line, later succeeded by Intellisync for
Notebooks, 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.
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.
TECHNOLOGY
Our software products allow the exchange and synchronization of data across
diverse platforms, operating systems and applications. We have developed three
complementary proprietary technologies: The DSX Technology engine for
content-aware data synchronization, Notification Transport Processing Technology
("NXP Technology-TM-") engine and IR connectivity. These complementary
technologies, taken individually and together, enable us 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. Our content-aware DSX Technology engine
operates at both the file and record level to synchronize data among different
software applications and hardware platforms during data transfer. With the DSX
Technology engine, our products allow users to synchronize not only files, but
also the data within those files, and 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. Our 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. Our 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
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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 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.
NXP TECHNOLOGY. A core technology underpinning the Intellisync Anywhere
product family of remote synchronization server solutions is NXP Technology. NXP
Technology optimizes performance for the increasingly common wireless
connections by automatically checking for and preparing for synchronization of
all new information for each user, such as email and appointments, stored on
corporate servers. This process minimizes both end user remote synchronization
time and reduces the overhead on the corporate messaging server itself.
IR CONNECTIVITY. Our 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. Our 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.
Our 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.
Our communication protocols are designed to operate across a variety of
network and operating system environments, enabling mobile data exchange among
them. Our software currently supports data transfer among Windows for
Workgroups, Windows 3.1 and Windows 95. We have also worked with Microsoft to
ensure that the Microsoft IR driver supports Mobile Data Exchange among
operating systems and IR devices.
SALES AND MARKETING
We strive to be both a marketing and a technology partner with our OEM
customers and our strategic partners. Our sales and marketing organization sells
our products directly to our OEM partners, and then works with them on joint
marketing and channel programs. We work closely with OEM partners on their new
hardware products by providing them with technical input, thereby helping to
ensure that our software products will work successfully with the OEM's hardware
products. We also train and educate the OEM's sales and marketing organizations
on our products, allowing them to act as our "virtual" sales force to their
channels and direct customers. In addition, we work closely with our hardware
and software strategic partners to develop effective marketing programs designed
to increase sales.
We distribute our retail products through several distribution channels both
domestically and internationally. In the United States, our sales organization
works directly with major distributors, resellers,
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computer dealers, retailers and mail order companies to distribute our retail
packaged products. Increasingly, we are also distributing our software products
directly to corporate customers through the Intellisync Gold enterprise site
license program. In order to further develop our brand name recognition, we plan
to continue to expand our joint marketing programs, marketing channel promotions
and bundling arrangements with our strategic partners. See "Business
Risks--Risks Associated with Development of Retail Distribution Channel."
Revenue from OEMs was approximately 56% 68% and 74% of revenue in fiscal
1999, fiscal 1998, and fiscal 1997, respectively. Although several OEMs are
subject to certain contractual minimum purchase obligations, there can be no
assurance that any particular OEM will satisfy the minimum obligations.
Weakening demand from any key OEM and the inability to replace revenue provided
by such OEM could have a material adverse effect on our business, operating
results and financial condition. We maintain individually significant receivable
balances from major OEMs. If these OEMs fail to meet their payment obligations,
our operating results could be materially adversely affected. See "Business
Risks--Dependence on OEMs."
We market and sell through selected distributors and republishers that focus
on specific geographic and market segment areas. These international partners
operate as an extension of our marketing and sales organizations, developing the
appropriate sales channels in their regions. They also work with local resellers
as well as local offices of our OEM customers to develop specific marketing and
channel promotions for their regions. As of July 31, 1999, we were represented
by over 20 distributors and resellers in Africa, Asia, Australia, Canada and
Europe and are continuing to expand our international reach as appropriate
distributors or republishers are found. See "Business Risks--Risks Associated
with International Operations."
Our current customer base includes large OEMs in the PC market. In fiscal
1999, 1998 and 1997, Toshiba accounted for approximately 14%, 18% and 21% of our
revenue, respectively. No other customer accounted for greater than 10% of our
revenue in fiscal 1999, 1998 or 1997.
COMPETITION
We expect the market for our software, including data synchronization and IR
connectivity software to the extent it develops, to become intensely
competitive. We currently face direct competition with respect to a number of
its individual products from several private companies, including Traveling
Software, Chapura, DataViz, River Run, Randsoft, and Starfish (recently acquired
by Motorola). In the future, we will also face competition relative to our
upcoming products from vendors offering server-based mobile device data exchange
products and services, including Advanced Systems, Riverbed, AvantGo, and
FusionOne. In addition to direct competition, we face indirect competition from
existing and potential customers that provide internally developed solutions. As
a result, we must educate prospective customers as to the advantage of our
products versus internally developed solutions. We currently face 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 our 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 98 operating system may
have the effect of reducing revenue from our software if users of Windows 98
perceive that their data synchronization and IR connectivity needs are
adequately met by Microsoft. Certain companies, with whom we compete or may
compete in the future, including internal software development groups of our
current and potential customers, have substantially greater financial,
marketing, sales and support resources and may have more "brand-name"
recognition than us. There can be no assurance that we will be able to either
develop software comparable or superior to software offered by our 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 we expect, in order to
remain
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competitive, we may have to decrease our unit royalties on certain products. See
"Risk Factors--Competition."
The principal competitive factors affecting the market for our software are
compatibility, functionality, reliability, OEM relationships and price. We
believe we compete favorably overall with respect to these factors.
We believe 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 our standards-based approach will
continue to allow us to compete favorably with larger companies whose products
may not be able to support such a degree of interoperability. Our strategic
relationships with hardware and software vendors enable us to provide
interoperability among a broader range of applications than many of our current
and potential competitors.
CUSTOMER SUPPORT
Our 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. Our current OEMs typically have
software maintenance agreements with us that provide for technical support which
include maintenance of our products in accordance with specifications contained
in our 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. Our OEMs and some of our retail channel partners provide telephone and
initial support to end-users.
RESEARCH AND DEVELOPMENT
We seek to capitalize on our expertise in data synchronization and IR
connectivity technology by developing products for new applications and
increasing the functionality of existing products. We believe our core DSX
Technology engine and IR technologies are widely applicable, and we plan to
continue to develop new products based on our core technologies.
As of July 31, 1999, our engineering group consisted of 70 full-time
employees and full-time equivalent consultants who were engaged in product
development and localization efforts for existing products. Product maintenance
and customer support responsibilities are shared by engineering group employees
on an as-needed basis. In fiscal 1999, fiscal 1998 and fiscal 1997 research and
development expenses were $11.1 million, $9.9 million and $6.2 million,
respectively.
The markets for our products are characterized by rapidly changing
technologies, evolving industry standards, frequent new product introductions
and short product life cycles. We first introduced our TranXit products in
October 1994. Our future success will depend to a substantial degree upon our
ability to enhance our 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. We plan our
budget 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,
accurate anticipation of technological and market trends. The introduction of
new or enhanced products also requires us 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 we will successfully develop, introduce or manage the transition
to new products. We have in the past, and may in the future, experience delays
in the introduction of our products, due to factors internal and external. Any
future delays in the introduction or shipment of new or enhanced products, the
inability of such
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products to gain market acceptance or problems associated with new product
transitions could adversely affect our operating results, particularly on a
quarterly basis. See "Risk Factors--Risks Associated with Product Development
and Timely Introduction of New and Enhanced Products."
PROPRIETARY RIGHTS
We rely on a combination of patent, copyright and trademark laws, trade
secrets, confidentiality procedures and contractual provisions to protect our
proprietary rights. We also believe that factors such as technological and
creative skills of our personnel, new product developments, frequent product
enhancements and name recognition are essential to establishing and maintaining
a technology leadership position. We seek to protect our software, documentation
and other written materials under trade secret and copyright laws, which afford
only limited protection. We currently has five issued United States patents that
expire in 2012, 2014 and 2015, respectively, and have ten patent applications
pending. In addition, we have 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 our patents will not
be invalidated, circumvented or challenged, that the rights granted thereunder
will provide competitive advantages to us or that any of our 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 us, if at all. Furthermore, there can be no assurance that others will
not develop technologies that are similar or superior to our technology or
design around the patents owned by us. Despite our efforts to protect our
proprietary rights, unauthorized parties may attempt to copy aspects of our
products or to obtain and use information that we regard as proprietary.
Policing unauthorized use of the our products is difficult, and while we are
unable to determine the extent to which piracy of our 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 our means of protecting our
proprietary rights in the United States or abroad will be adequate or that
competition will not independently develop similar technology. We have entered
into source code escrow agreements with a limited number of our 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 us, if we cease to do business or if we fail to meet
our support obligations. We also provide our source code to foreign language
translation service providers and to consultants in a limited circumstance. The
provision of source code may increase the likelihood of misappropriation by
third parties.
We are not aware of any infringement of proprietary rights of any third
party. There can be no assurance, however, that third parties will not claim
infringement by us of their intellectual property rights. We expects that
software product developers will increasingly be subject to infringement claims
as the number of products and competitors in our 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, resulting in costly
litigation, divert our attention and resources or cause product shipment delays.
In addition, such claims could require us 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 we 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 us. In the
event of a successful claim of product infringement against us and failure or
inability to license the infringed or similar technology, our 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, 1999, we had 131 employees and full-time equivalent
consultants, including 38 in sales and marketing, 70 in engineering and 23 in
operations, finance and administration. All of our employees are located in the
United States with the exception of three, who are located in Japan. None are
represented by a labor union. We have experienced no work stoppages and believe
our relationship with our employees is good.
Competition for qualified personnel in our industry is intense. We believe
that our future success will depend in part on our continued ability to hire,
train and retain qualified personnel.
BUSINESS RISKS
RISKS ASSOCIATED WITH NEW PRODUCT DEVELOPMENT AND TIMELY INTRODUCTION OF NEW
AND ENHANCED PRODUCTS. The market for our products is characterized by rapidly
changing technologies, evolving industry standards, frequent new product
introductions and short product life cycles. We first introduced our TranXit
products in October 1994, Intellisync for handheld devices in the first quarter
of fiscal 1997, and Intellisync for Notebooks in the first quarter of fiscal
1998 and Intellisync Anywhere in the third quarter of fiscal 1999. Our future
success will depend to a substantial degree upon our ability to enhance our
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. We budget 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 is 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 us 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. We are 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 we will successfully develop, introduce or manage the transition
to new products. Nor can there be any assurance that we will be able to hire and
retain sufficient engineering personnel to meet the requirements inherent in
this transition. We have in the past, and may in the future, experience delays
in the introduction of our products, due to factors internal and external.
BUSINESS STRATEGY. Our current business strategy with respect to the market
for synchronization software for handheld devices has been to identify multiple
handheld solutions and software applications, and offer an array of solutions in
our Intellisync product family. We have also attempted to transform Intellisync
into a standard platform by opening it to third party developers through the
sale of our SDK. In contrast, some of our direct competitors in this market
focus their efforts on fewer devices and fewer applications. Our success is
highly dependent upon the market acceptance of both the handheld devices and
software applications supported by our Intellisync products. Lack of market
acceptance of hardware or software products supported by our Intellisync product
is largely outside of our control and may have an adverse effect on the results.
And, because we are focusing on a variety of products, we may be slower to offer
features that are specific to each individual handheld-to-PC solution. Our
failure to identify in advance the devices and applications that may gain market
dominance and to sufficiently focus on the most popular solutions may adversely
affect our results of operations.
COMPETITION. We expect the market for mobile device management and
synchronization software, including data synchronization and IR connectivity
software to the extent it develops, to become intensely competitive. We
currently face direct competition with respect to a number of our individual
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products from several private companies, including Traveling Software, Chapura,
DataViz, River Run, Randsoft, and Starfish (recently acquired by Motorola). In
the future, we will also face competition relative to our upcoming products from
vendors offering server-based mobile device data exchange products and services,
including Advanced Systems, Riverbed, and AvantGo. In addition to direct
competition, we face indirect competition from existing and potential customers
that provide internally developed solutions. As a result, we must educate
prospective customers as to the advantage of our products versus internally
developed solutions. We currently face 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 our 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 98 operating system may
have the effect of reducing revenue from our software if users of Windows 98
perceive that their data synchronization and IR connectivity needs are
adequately met by Microsoft. Certain of the companies with which we compete or
may in the future compete, including internal software development groups of our
current and potential customers, have substantially greater financial,
marketing, sales and support resources and may have more "brand-name"
recognition than us. There can be no assurance that we will be able to either
develop software comparable or superior to software offered by our 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 we expect that, in
order to remain competitive, we may have to decrease our unit royalties on
certain products.
PRODUCT CONCENTRATION; RISKS ASSOCIATED WITH NEW AND EVOLVING MARKETS. The
market for mobile device synchronization software, including wireless IR
connectivity and advanced data synchronization software, is new and evolving. To
date, we have derived a substantial portion of our revenue from the licensing of
our TranXit IR connectivity software. We believe that the TranXit and
Intellisync for Notebooks product families, although currently accounting for a
substantial portion of the our revenue, will decline in overall revenue
contribution in 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 USS software market and the possibility of
future competition. As a result, our future operating results, particularly, in
the near term, are dependent upon the continued market acceptance of TranXit and
Intellisync for Notebooks. We anticipate that the overall revenue contribution
of the TranXit and Intellisync for Notebooks business will decrease as a
percentage of total revenue, since these products are at a mature stage in their
product life cycles. There can be no assurance that TranXit will rebound from
its decline or that we will be successful in developing, introducing or
marketing new or enhanced products. A continued 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 our business, financial
condition and results of operations.
DEPENDENCE ON OEMS. Revenue from OEMs was a substantial portion of our
revenue during fiscal 1999, fiscal 1998 and fiscal 1997. OEM revenue as a
percentage of total revenue was 56%, 68% and 74% in fiscal 1999, fiscal 1998 and
fiscal 1997, respectively. Weakening demand from any key OEM customer and our
inability to replace revenue provided by these OEM customers could have a
material adverse effect on our business, operating results and financial
condition. We maintain individually significant receivable balances from major
OEMs. If these OEMs fail to meet their payment obligations, our operating
results could be materially adversely affected.
RISKS ASSOCIATED WITH DEVELOPMENT OF RETAIL DISTRIBUTION CHANNEL. We
distribute our products through distributors, major computer and software
retailing organizations, consumer electronics stores, discount warehouse stores
and other specialty retailers. We often sell 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
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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 ours could have a material adverse
effect on our 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 we sell to
such retailers may be materially adversely affected by the terms imposed by such
intermediaries, or we may be unable to sell to such retailers on the terms,
which we deem acceptable.
Retailers of our 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. We expect 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. Our products constitute a
relatively small percentage of each retailer's sales volume, and there can be no
assurance that retailers will continue to purchase our products or provide our
products with adequate shelf space and promotional support.
DEPENDENCE ON STRATEGIC BUSINESS RELATIONSHIPS; RISKS ASSOCIATED WITH
THIRD-PARTY SERVICES. We believe that our success is largely dependent on our
strategic relationships with key participants in the PC and mobile computing
device industries including 3COM, Acer, AT&T Wireless, Canon, Corex,Fujitsu,
IBM, Intel, Lucent Technologies, NEC, Nokia, Novell, Oracle, Phone.com,
QUALCOMM, Research in Motion, SalesLogix, Seiko Epson, Sharp, Symbol
Technologies, Texas Instruments and Toshiba, and many others. These
relationships generally enable us to receive prototypes from hardware
manufacturers and software vendors prior to their market introduction. We
thereby are 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 our product development
efforts, business, operating results and financial condition and our ability to
realize strategic objective to be the technological leader in the industry. In
addition, we rely significantly on third-party services. In particular, third
party services translate our products into over ten different native languages.
We have generally been able to obtain translated, functional versions of our
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 our business, operating results and financial condition.
DEPENDENCE ON KEY PERSONNEL. We believe our success will depend in a large
part upon our ability to attract and retain highly skilled managerial,
technical, sales and marketing, finance and operations personnel. In particular,
we will need to increase the number of technical staff members with experience,
as we further develop our product line. Competition for these highly skilled
employees in our industry is intense. Our failure to attract and retain these
key employees could have a material adverse effect on our business, results of
operations and financial condition.
We are seeking additional sales and marketing personnel. Competition for
qualified sales and marketing personnel is intense and we might not be able to
hire the kind and number of sales and marketing personnel we are targeting.
Unless we expand our sales and marketing force, we may not be able to increase
our revenue or extend our brand awareness.
The loss of the services of any of our key employees, the inability to
attract or retain qualified personnel in the future or delays in hiring required
personnel could hinder the development and introduction of and negatively impact
our ability to sell our products. In addition, employees may leave our company
and subsequently compete against us. Moreover, companies in our industry whose
employees accept positions with competitors frequently claim that their
competitors have engaged in unfair hiring
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practices. We may be subject to claims of this type in the future as we seek to
hire qualified personnel and some of these claims may result in material
litigation. We could incur substantial costs in defending ourselves against
these claims, regardless of their merits.
PROPRIETARY RIGHTS, RISKS OF INFRINGEMENT AND SOURCE CODE RELEASE. We rely
on a combination of patent, copyright and trademark laws, trade secrets,
confidentiality procedures and contractual provisions to protect its proprietary
rights. We also believe 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. We seek to protect our software, documentation and other
written materials under trade secret and copyright laws, which afford only
limited protection. We currently have five issued United States patents that
expire in 2012, 2014, 2015 and has ten patent applications pending. In addition,
we have 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 our patents will not be invalidated, circumvented or
challenged, that the rights granted thereunder will provide competitive
advantage to us or that any of our 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 us, if at all.
Furthermore, there can be no assurance that others will not develop technologies
that are similar or superior to our technology or design around the patents
owned by us. Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy aspects of our products or to obtain and use
information that we regard as proprietary. Policing unauthorized use of our
products is difficult, and while we are unable to determine the extent to which
piracy of our software products exists, software piracy can be expected to be a
persistent problem. We distribute our 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 we do business, in particular Taiwan, do not
ensure that our means of protecting our 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 we will not distribute our
software products in the future to countries where the enforcement of
proprietary rights may be equally or more uncertain. We have also entered into
source code escrow agreements with a limited number of our 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 us, if we
cease to do business or if we fail to meet our support obligations. We also
provide our source code to foreign language translation service providers and
consultants, in limited circumstances. The provision of source code may increase
the likelihood of misappropriation by third parties.
We are not aware that we are infringing any proprietary rights of third
parties. There can be no assurance, however, that third parties will not claim
infringement by us of their intellectual property rights. In particular, because
patent applications are kept confidential by the Patent and Trademark Office, we
have no means by which to monitor patent applications filed by our competitors,
which could result in future infringement claims against us. We expect that
software product developers will increasingly be subject to infringement claims
as the number of products and competitors in our industry segment grow 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,
and divert our attention and resources or cause product shipment delays. In
addition, such claims could require us 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 we 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 us.
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In the event of a successful claim of product infringement against us and
failure or inability to license the infringed or similar technology, our
business, operating results and financial condition would be materially
adversely affected.
DEPENDENCE ON LICENSED TECHNOLOGY. We license technology on a non-exclusive
basis from several companies for use with our products and anticipate that we
will continue to do so in the future. The inability to continue to license the
technology or to license other necessary technologies for use with our products
or substantial increases in royalty payments under third-party licenses could
have a material adverse effect on our business, operating results and financial
condition. In addition, the effective implementation of our products depends
upon the successful operation of these licenses in conjunction with our
products, and therefore any undetected errors in products resulting from such
licenses may prevent the implementation or impair the functionality of our
products, delay new product introductions and injure our reputation. Such
problems could have a material adverse effect on our business, operating results
and financial condition.
PRODUCT ERRORS; PRODUCT LIABILITY. Software products as complex as those
offered by us typically contain undetected errors or failures when first
introduced or as new versions are released. Testing of our products is
particularly challenging because it is difficult to simulate the wide variety of
computing environments in which our customers may deploy these products.
Accordingly, there can be no assurance that, despite testing by us 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 our business, operating results
and financial condition. Further, our license agreements with our customers
typically contain provisions designed to limit our exposure to potential product
liability claims. Although we have not experienced any product liability claims
the sale and support of products by us entails the risk of such claims. We do
not currently maintain product liability insurance. A successful product
liability claim brought against us could have a material adverse effect upon our
business, operating results and financial condition.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS. International revenue
accounted for a significant portion of our revenue in fiscal 1999 and fiscal
1998. We expect that international revenue will continue to account for a
significant portion of our future revenue. Revenue from our 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 our business, operating results and financial condition. Although our revenue
is currently denominated in U.S. dollars, fluctuations in currency exchange
rates could cause our 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 our operating results. Royalty
income from customers in certain countries, such as Japan and Taiwan, is subject
to withholding income taxes. The amount and mix of our income derived from such
customers will impact our provision for income taxes. Differences in the amount
and mix of our income actually derived from customers subject to foreign
withholding taxes as compared to the amounts forecasted by us may adversely
impact our income tax rate.
UNCERTAINTIES ASSOCIATED WITH ACQUISITIONS. We have been involved in
acquisitions. These acquisitions have been motivated by many factors including
the desire to obtain new technologies, the desire to expand and enhance our
product lines and the desire to attract key personnel.
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On Aug. 24, 1999, we entered into a definitive agreement to acquire
ProxiNet Inc., headquartered in Emeryville, California, for 2,600,000 shares of
our Common Stock to be issued in exchange for all issued and outstanding
preferred and common shares of ProxiNet Inc., and assumption of all outstanding
ProxiNet stock options. Closing of the merger is subject to certain closing
conditions and approval by the shareholders of ProxiNet, although, certain
affiliates of ProxiNet have agreed to vote their shares in favor of the merger.
The merger is expected to be finalized in our fiscal quarter ending October 31,
1999, and as a result, we expect to incur a one-time charge for in-process
research and development for ProxiNet's products which have not yet reached
technological feasibility.
In July 1998, we acquired SoftMagic Corp. ("SoftMagic") As a result of the
acquisition, three new employees and three new consultants joined us. SoftMagic
had incurred a cumulative loss through its acquisition by Puma on July 30, 1998
of approximately $135,000 on cumulative revenue of $331,000.
In July 1997, we acquired substantially all of the assets of Real World
Solutions, Inc. ("RWS"), a developer of client/server solutions. As a result of
the acquisition, four new employees joined us. RWS had incurred a cumulative
loss through its acquisition by us on July 17, 1997 of approximately
$1.3 million on cumulative revenue of $0.5 million.
These purchases also involve numerous risks, including:
- problems assimilating the purchased operations, technologies or products;
- unanticipated costs associated with the acquisition;
- diversion of management's attention from our core business;
- adverse effects on existing business relations with suppliers and
customers;
- incorrect estimates made in the accounting for acquisitions;
- risks associated with entering markets in which we have no or limited
prior experience; and
- potential loss of key employees of purchased organizations.
POTENTIAL VOLATILITY OF STOCK PRICE. The trading price of our Common Stock
is likely to be highly volatile and may be significantly affected by factors
such as actual or anticipated fluctuations in our operating results;
announcements of technological innovations; new products or new contracts by us
or our 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 market prices for the Common Stocks of technology
companies. These broad market fluctuations may materially adversely affect the
market price of our Common Stock.
DEPENDENCE ON YEAR 2000 COMPLIANCE OF THIRD-PARTY PRODUCTS. Some computers,
software, and other equipment include programming code in which calendar year
data is abbreviated to only two digits. As a result of this design decision,
some of these systems could fail to operate or fail to produce correct results
if "00" is interpreted to mean 1900, rather than 2000. These problems are widely
expected to increase in frequency and severity as the year 2000 approaches, and
are commonly referred to as the "Millennium Bug" or "Year 2000 Problem."
The Year 2000 Problem could affect computers, software, and other equipment
used, operated or maintained by us. We believe that our computer systems are
Year 2000 compliant.
We believe that we have substantially identified and resolved all potential
Year 2000 Problems with any of the software products which we develop and
market. However, we also believe that it is not possible to determine with
complete certainty that all Year 2000 Problems affecting our software products
have
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been identified or corrected due to the complexity of these products and the
fact that these products interact with other third party vendor products and
operate on computer systems which are not under the our control.
In addition to computers and related systems, the operation of office and
facilities equipment, such as fax machines, photocopiers, telephone switches,
security systems, elevators, and other common devices may be affected by the
Year 2000 Problem. We presently believe that our office and facilities equipment
are Year 2000 compliant.
We have limited or no control over the actions of third party suppliers.
Thus, while we expect that we will be able to resolve any significant Year 2000
Problems with these systems, there can be no assurance that the suppliers will
resolve any or all Year 2000 Problems with these systems before the occurrence
of a material disruption to our business or any of our customers. Any failure of
these third parties to resolve Year 2000 Problems with these systems in a timely
manner could have a material adverse effect on our business, financial
condition, and results of operation.
We expect to identify and resolve all Year 2000 Problems that would
materially adversely affect our business operations. However, we believe that it
is not possible to determine with complete certainty that all Year 2000 Problems
affecting us have been identified or corrected. The number of systems that could
be affected and the interactions among these systems are simply too numerous. In
addition, one cannot accurately predict how many Year 2000 Problem-related
failures will occur or the severity, duration, or financial consequences of
these perhaps inevitable failures. As a result, we expect that we would likely
suffer the following consequences:
1. a significant number of operational inconveniences and inefficiencies
for us and our clients that may divert our time and attention and
financial and human resources from ordinary business activities; and
2. a greater number of serious system failures that may require significant
efforts by us or our clients to prevent or alleviate material business
disruptions.
We have not developed any Year 2000 contingency plans. We do not believe
that the Year 2000 Problem will have a material adverse effect on our business
or results of operations.
ITEM 2. PROPERTIES
Our 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. We also have two leases for approximately 11,980 square feet and 9006
square feet in two buildings in Nashua, New Hampshire under leases that expires
in May 2002 and July 2003, respectively. These facilities primarily support the
engineering, product marketing and technical support functions for our
Intellisync family of products.
In the first quarter of fiscal 1999, we implemented a restructuring program
for the purpose of consolidating the majority of our engineering and development
work at existing facilities in Nashua, New Hampshire. As part of this program,
we implemented a reduction in force of approximately 40 positions that primarily
affected the engineering group located at the San Jose facility. The severance
charge was $210,000. The plan was completed at the end of February 1999. Some of
the positions eliminated in San Jose will be replaced in Nashua. Most of the
expected savings from this program will be realized in research and development.
Also as part of the restructuring, we vacated a portion of the San Jose
facility, as well as a recently leased facility in Nashua. The restructure
charge related to facilities was $558,000. We have secured a tenant for the San
Jose facility, and we continue to look for a tenant to sublease the facility in
Nashua.
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ITEM 3. LEGAL PROCEEDINGS
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Company
during the fourth quarter of fiscal year 1999.
EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ ----------- ---------------------------------------------------------------------
<S> <C> <C>
Bradley A. Rowe..................... 39 President, Chief Executive Officer and Director
Stephen A. Nicol.................... 39 Senior Vice President, Sales and Director
Kelly Hicks......................... 38 Vice President of Operations and Chief Financial Officer
Michael M. Clair.................... 52 Chairman of the Board
Tyrone F. Pike...................... 45 Director
M. Bruce Nakao...................... 55 Director
</TABLE>
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 management company, including Director of Western Area
Sales. Mr. Rowe currently serves as a Director of 7(th) Street Teleworks, Inc.,
a privately held company. 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. HICKS joined the Company in January 1997 as Corporate Controller and
became the Chief Financial Officer and Vice President of Operations in
May 1999. He has 15 years of progressive financial management and operations
experience in both privately and publicly held high-technology companies. During
the course of his carrier, his accomplishments include managing financial
aspects of initial public offerings, raising debt, and equity funding, managing
mergers and acquisitions, and leading major system conversions. He has also held
numerous financial management positions at companies including SCO, Silicon
Graphics and Granger Associates. He is a graduate of California State University
Chico and holds a Bachelor's of Science degree in business administration with a
concentration in finance.
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
19
<PAGE>
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 a 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 Director of Citrix Systems, a publicly held
supplier of multi-user application server products. Mr. Pike also serves as a
director of Proxinet, recently acquired by the Company. 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 also serves as a Director of both Citrix Systems and Proxinet.
Mr. Pike holds an A.B. degree in architecture from Princeton University.
MR. NAKAO became a Director of the Company in May 1999. Mr. Nakao currently
holds the position of Chief Financial Officer at an Internet search company, Ask
Jeeves, Inc. Prior to joining the Company's Board, from June 1996 to May 1999
Mr. Nakao was the Chief Financial Officer of the Company. Prior to that, from
May 1986 to June 1996, Mr. Nakao 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 a
M.B.A. degree from Stanford University.
20
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock of the Company began trading 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 August 1, 1998, through July 31, 1999. These prices
reflect inter-dealer prices, without retail mark-up, mark-down or commission,
and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1998
First fiscal quarter (August 1, 1997 to October 31,1997)....................................... $ 8.375 $ 5.563
Second fiscal quarter (November 1, 1997 to January 31, 1998)................................... $ 8.063 $ 5.563
Third fiscal quarter (February 1, 1998 to April 30, 1998)...................................... $ 7.313 $ 5.563
Fourth fiscal quarter (May 1, 1998 to July 31, 1998)........................................... $ 8.375 $ 5.063
1999
First fiscal quarter (August 1, 1998 to October 31,1998)....................................... $ 5.625 $ 2.000
Second fiscal quarter (November 1, 1998 to January 31, 1999)................................... $ 4.500 $ 2.750
Third fiscal quarter (February 1, 1999 to April 30, 1999)...................................... $ 5.375 $ 3.812
Fourth fiscal quarter (May 1, 1999 to July 31, 1999)........................................... $ 6.437 $ 4.750
</TABLE>
As of October 15, 1999, there were approximately 106 stockholders of record
of the Company's Common Stock and 13,384,711 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 five years ended July 31, 1999, which
appears on page 13 in the Registrant's Annual Report to Stockholders for the
fiscal year ended July 31, 1999 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 14-20 of the
Registrant's Annual Report to Stockholders for the fiscal year ended July 31,
1999 under the caption "Management's Discussion and Analysis," which is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Management believes that the market risk associated with the Company's
market risk sensitive instruments as of July 31, 1999 is not material and
therefore, disclosure is not required.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements, together with the report thereon of
PricewaterhouseCoopers LLP dated August 20, 1999, appearing on pages 21-36 of
the Registrant's Annual Report to Stockholders for the fiscal year ended
July 31, 1999 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
Not Applicable
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to the directors and executive officers of the Company
is set forth in Part I of this report under the caption "Executive Officers and
Directors of the Registrant." Information relating to compliance with
Section 16(a) of the Exchange Act is incorporated by reference from the
definitive proxy statement for the Company's 1999 annual meeting of stockholders
to be filed with the Commission 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 "Section 16(a) Beneficial Ownership Reporting
Compliance."
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference from 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."
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,
1998 are filed as part of this report:
Report of Independent Accountants.
Consolidated Balance Sheets at July 31, 1999 and 1998.
Consolidated Statements of Operations for the three fiscal Years Ended
July 31, 1999.
Consolidated Statements of Stockholders' Equity for the three fiscal Years
Ended July 31, 1999.
Consolidated Statements of Cash Flows for the three fiscal Years Ended
July 31, 1999.
Notes to Consolidated Financial Statements.
2. Supplemental Schedules.
Report of Independent Accountants on Financial Statement Schedule.
Schedule II--Valuation and Qualifying Accounts.
22
<PAGE>
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. 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 10K.
(b) Reports on Form 8-K. There were no reports on Form 8K filed during the last
quarter of the fiscal year covered by this report.
(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 10K.
(d) Financial Statement Schedules. See Item 14 (a) above.
23
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of Puma Technology, Inc.:
Our audits of the consolidated financial statements referred to in our
report dated August 20, 1999, except for Note 12, which is as of August 24,
1999, appearing in the Annual Report to Shareholders 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 schedules listed in Item 14(a)(2) of this Form 10-K. In our
opinion, these financial statement schedules present fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.
PricewaterhouseCoopers LLP
San Jose, California
August 20, 1999
24
<PAGE>
SCHEDULE II
PUMA TECHNOLOGY, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD/ BALANCE AT CHARGED TO
YEAR ENDED BEGINNING OF COSTS AND END OF
JULY 31 PERIOD/YEAR EXPENSES DEDUCTIONS PERIOD/YEAR
------------- --------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts and Sales
Returns........................................ 1997 $ 184 $ 948 $ 455 $ 677
Allowance for Doubtful Accounts and Sales
Returns........................................ 1998 $ 677 $ 733 $ 467 $ 943
Allowance for Doubtful Accounts and Sales
Returns........................................ 1999 $ 943 $ 904 $ 240 $ 1,607
</TABLE>
25
<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 28(th) day
of October, 1999.
<TABLE>
<S> <C> <C>
PUMA TECHNOLOGY, INC.
By: /s/ KELLY HICKS
-----------------------------------------
Kelly Hicks
Vice President of Operations and
Date: October 28, 1999 Chief Financial Officer
</TABLE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Bradley A. Rowe and Kelly Hicks, 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
--------- ----- ----
<C> <S> <C>
President, Chief Executive
/s/ BRADLEY A. ROWE Officer and Director
------------------------------------------- (PRINCIPAL EXECUTIVE October 28, 1999
Bradley A. Rowe OFFICER)
/s/ STEPHEN A. NICOL
------------------------------------------- Senior Vice President, Sales, October 28, 1999
Stephen A. Nicol Secretary and Director
Vice President of Operations
/s/ KELLY HICKS and Chief Financial Officer
------------------------------------------- (PRINCIPAL FINANCIAL AND October 28, 1999
Kelly Hicks ACCOUNTING OFFICER)
/s/ MICHAEL M. CLAIR
------------------------------------------- Chairman of the Board October 28, 1999
Michael M. Clair
/s/ TYRONE F. PIKE
------------------------------------------- Director October 28, 1999
Tyrone F. Pike
/s/ M. BRUCE NAKAO
------------------------------------------- Director October 28, 1999
M. Bruce Nakao
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT TITLE
- ---------------------- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
3.2 1 Certificate of Incorporation of Puma Technology, Inc., a Delaware corporation.
3.4 1 Bylaws of Puma Technology, Inc., a Delaware corporation.
10.1 * 2 Amended and Restated 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 * 2 Puma Technology, Inc. 1998 Employee Stock Purchase Plan and form of notice of exercised used
thereunder.
10.4 1 Lease Agreement dated October 18, 1995, between the Company and Photonics Corporation.
10.5 1 Form of Indemnity Agreement for directors and officers.
10.6 (+) 1 Software License Agreement dated as of May 30, 1995, between the Company and Toshiba Corporation.
10.7 (+) 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.
10.8 (+) 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.
10.9 (+) 1 Software License Agreement dated as of May 20, 1996 between the Company and NEC Corporation.
13.1 2 Portions of the Annual Report to Stockholders for the fiscal year ended July 31, 1999 expressly
incorporated by reference herein.
21.1 1 Subsidiaries of the Registrant.
23.1 2 Consent of PriceWaterhouseCoopers LLP, Independent Accountants.
24.1 2 Power of Attorney (reference page 26 of this the Form-10K)
27.1 2 Financial Data Schedule (filed in EDGAR format only).
</TABLE>
- ------------------------
(+) Confidential treatment has been granted for portions of this exhibit.
* Management contract or compensatory plan or arrangement.
1. Incorporated by reference to the Company's Registration Statement on
Form S-1 (File No. 333-11445).
2. Filed herewith.
27
<PAGE>
PUMA TECHNOLOGY, INC.
AMENDED AND RESTATED
1993 STOCK OPTION PLAN
(AS AMENDED THROUGH DECEMBER 3, 1997)
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1. ESTABLISHMENT. The Puma Technology, Inc. 1993 Stock Option Plan was
initially established as of October 30, 1993 (the "Initial Plan"). The Initial
Plan is hereby amended and restated in its entirety as the Puma
Technology, Inc. Amended and Restated 1993 Stock Option Plan (the "Plan")
effective as of September 3, 1996.
1.2. PURPOSE. The purpose of the Plan is to advance the interests of the
Participating Company Group and its stockholders by providing an incentive to
attract, retain and reward persons performing services for the Participating
Company Group and by motivating such persons to contribute to the growth and
profitability of the Participating Company Group.
1.3. TERM OF PLAN. The Plan shall continue in effect until the earlier of
its termination by the Board or the date on which all of the shares of Stock
available for issuance under the Plan have been issued and all restrictions on
such shares under the terms of the Plan and the agreements evidencing Options
granted under the Plan have lapsed. However, all Incentive Stock Options shall
be granted, if at all, within ten (10) years from the earlier of the date the
Plan is adopted by the Board or the date the Plan is duly approved by the
stockholders of the Company. Notwithstanding the foregoing, if the maximum
number of shares of Stock issuable pursuant to the Plan as provided in
Section 4.1 has been increased at any time, all Incentive Stock Options shall be
granted, if at all, no later than the last day preceding the tenth (10th)
anniversary of the earlier of (a) the date on which the latest such increase in
the maximum number of shares of Stock issuable under the Plan was approved by
the stockholders of the Company or (b) the date such amendment was adopted by
the Board.
2. DEFINITIONS AND CONSTRUCTION.
2.1. DEFINITIONS. Whenever used herein, the following terms shall have
their respective meanings set forth below:
(a) "BOARD" means the Board of Directors of the Company. If one or more
Committees have been appointed by the Board to administer the Plan, "Board"
also means such Committee(s).
(b) "CODE" means the Internal Revenue Code of 1986, as amended, and any
applicable regulations promulgated thereunder.
(c) "COMMITTEE" means the Compensation Committee or other committee of
the Board duly appointed to administer the Plan and having such powers as
shall be specified by the Board. Unless the powers of the Committee have
been specifically limited, the Committee shall have all of the powers of the
Board granted herein, including, without limitation, the power to amend or
terminate the Plan at any time, subject to the terms of the Plan and any
applicable limitations imposed by law.
(d) "COMPANY" means Puma Technology, Inc., a Delaware corporation, or
any successor corporation thereto.
(e) "CONSULTANT" means any person, including an advisor, engaged by a
Participating Company to render services other than as an Employee or a
Director.
(f) "DIRECTOR" means a member of the Board or of the board of directors
of any other Participating Company.
1
<PAGE>
(g) "EMPLOYEE" means any person treated as an employee (including an
officer or a Director who is also treated as an employee) in the records of
a Participating Company; provided, however, that neither service as a
Director nor payment of a director's fee shall be sufficient to constitute
employment for purposes of the Plan.
(h) "FAIR MARKET VALUE" means, as of any date, the value of a share of
stock or other property as determined by the Board, in its sole discretion,
or by the Company, in its sole discretion, if such determination is
expressly allocated to the Company herein.
(i) "INCENTIVE STOCK OPTION" means an Option intended to be (as set
forth in the Option Agreement) and which qualifies as an incentive stock
option within the meaning of Section 422(b) of the Code.
(j) "NONSTATUTORY STOCK OPTION" means an Option not intended to be (as
set forth in the Option Agreement) or which does not qualify as an Incentive
Stock Option.
(k) "OPTION" means a right to purchase Stock (subject to adjustment as
provided in Section 4.2) pursuant to the terms and conditions of the Plan.
An Option may be either an Incentive Stock Option or a Nonstatutory Stock
Option.
(l) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee setting forth the terms, conditions and restrictions of the
Option granted to the Optionee and any shares acquired upon the exercise
thereof.
(m) "OPTIONEE" means a person who has been granted one or more Options.
(n) "PARENT CORPORATION" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.
(o) "PARTICIPATING COMPANY" means the Company or any Parent Corporation
or Subsidiary Corporation.
(p) "PARTICIPATING COMPANY GROUP" means, at any point in time, all
corporations collectively which are then Participating Companies.
(q) "SECTION 162(M)" means Section 162(m) of the Code.
(r) "STOCK" means the common stock of the Company, as adjusted from time
to time in accordance with Section 4.2.
(s) "SUBSIDIARY CORPORATION" means any present or future "subsidiary
corporation" of the Company, as defined in Section 424(f) of the Code.
(t) "TEN PERCENT OWNER OPTIONEE" means an Optionee who, at the time an
Option is granted to the Optionee, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of
a Participating Company within the meaning of Section 422(b)(6) of the Code.
2.2. CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural, the plural shall include the singular, and
the term "or" shall include the conjunctive as well as the disjunctive.
3. ADMINISTRATION.
3.1. ADMINISTRATION BY THE BOARD. The Plan shall be administered by the
Board, including any duly appointed Committee of the Board. All questions of
interpretation of the Plan or of any Option shall be determined by the Board,
and such determinations shall be final and binding upon all persons having an
interest in the Plan or such Option. Any officer of a Participating Company
shall have the authority to act
2
<PAGE>
on behalf of the Company with respect to any matter, right, obligation,
determination or election which is the responsibility of or which is allocated
to the Company herein, provided the officer has apparent authority with respect
to such matter, right, obligation, determination or election.
3.2. POWERS OF THE BOARD. In addition to any other powers set forth in the
Plan and subject to the provisions of the Plan, the Board shall have the full
and final power and authority, in its sole discretion:
(a) to determine the persons to whom, and the time or times at which,
Options shall be granted and the number of shares of Stock to be subject to
each Option;
(b) to designate Options as Incentive Stock Options or Nonstatutory
Stock Options;
(c) to determine the Fair Market Value of shares of Stock or other
property;
(d) to determine the terms, conditions and restrictions applicable to
each Option (which need not be identical) and any shares acquired upon the
exercise thereof, including, without limitation, (i) the exercise price of
the Option, (ii) the method of payment for shares purchased upon the
exercise of the Option, (iii) the method for satisfaction of any tax
withholding obligation arising in connection with the Option or such shares,
including by the withholding or delivery of shares of stock, (iv) the
timing, terms and conditions of the exercisability of the Option or the
vesting of any shares acquired upon the exercise thereof, (v) the time of
the expiration of the Option, (vi) the effect of the Optionee's termination
of employment or service with the Participating Company Group on any of the
foregoing, and (vii) all other terms, conditions and restrictions applicable
to the Option or such shares not inconsistent with the terms of the Plan;
(e) to approve one or more forms of Option Agreement;
(f) to amend, modify, extend, or renew, or grant a new Option in
substitution for, any Option or to waive any restrictions or conditions
applicable to any Option or any shares acquired upon the exercise thereof;
(g) to accelerate, continue, extend or defer the exercisability of any
Option or the vesting of any shares acquired upon the exercise thereof,
including with respect to the period following an Optionee's termination of
employment or service with the Participating Company Group;
(h) to delegate to any proper officer of the Company the authority to
grant one or more Options, without further approval of the Board, to any
person eligible pursuant to Section 5, other than a person who, at the time
of such grant, is an Insider or is at or above the Vice-President level;
provided, however, that (i) such Options shall not be granted to any one
person within any twelve (12) month period for more than fifty thousand
(50,000) shares in the aggregate, (ii) the exercise price per share of each
such Option shall be equal to 100% of the closing price per share of the
Stock on the effective date of grant (or, if no price is reported for such
date, on the last day preceding the date of grant on which such price is
reported) as quoted on the National Association of Securities Dealers
Automated Quotation System (or the average of the closing bid and asked
prices if the shares of Stock are so quoted instead), or as reported on such
other stock exchange or market system which constitutes the primary market
for the Stock, and (iii) each such Option shall be subject to the terms and
conditions of the appropriate standard form of Option Agreement approved by
the Board and shall conform to the provisions of the Plan and such other
guidelines as shall be established from time to time by the Board, as well
as the Company's guidelines for stock option grants authorized for new
hires;
(i) to prescribe, amend or rescind rules, guidelines and policies
relating to the Plan, or to adopt supplements to, or alternative versions
of, the Plan, including, without limitation, as the Board deems necessary or
desirable to comply with the laws of, or to accommodate the tax policy or
custom of, foreign jurisdictions whose citizens may be granted Options; and
3
<PAGE>
(j) to correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Option Agreement and to make all other
determinations and take such other actions with respect to the Plan or any
Option as the Board may deem advisable to the extent consistent with the
Plan and applicable law.
3.3. COMMITTEE COMPLYING WITH SECTION 162(M). If a Participating Company
is a "publicly held corporation" within the meaning of Section 162(m), the Board
may establish a Committee of "outside directors" within the meaning of
Section 162(m) to approve the grant of any Option which might reasonably be
anticipated to result in the payment of employee remuneration that would
otherwise exceed the limit on employee remuneration deductible for income tax
purposes pursuant to Section 162(m).
4. SHARES SUBJECT TO PLAN.
4.1. MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as provided
in Section 4.2, the maximum aggregate number of shares of Stock that may be
issued under the Plan shall be four million five hundred thousand (4,500,000)
and shall consist of authorized but unissued or reacquired shares of Stock or
any combination thereof. If any outstanding Option for any reason expires or is
terminated or canceled or shares of Stock acquired, subject to repurchase, upon
the exercise of an Option are repurchased by the Company, the shares of Stock
allocable to the unexercised portion of such Option, or such repurchased shares
of Stock, shall again be available for issuance under the Plan.
4.2. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number and class of shares subject
to the Plan and to any outstanding Options and in the exercise price per share
of any outstanding Options. If a majority of the shares which are of the same
class as the shares that are subject to outstanding Options are exchanged for,
converted into, or otherwise become (whether or not pursuant to an Ownership
Change Event, as defined in Section 8.1) shares of another corporation (the "NEW
SHARES"), the Board may unilaterally amend the outstanding Options to provide
that such Options are exercisable for New Shares. In the event of any such
amendment, the number of shares subject to, and the exercise price per share of,
the outstanding Options shall be adjusted in a fair and equitable manner as
determined by the Board, in its sole discretion. Notwithstanding the foregoing,
any fractional share resulting from an adjustment pursuant to this Section 4.2
shall be rounded up or down to the nearest whole number, as determined by the
Board, and in no event may the exercise price of any Option be decreased to an
amount less than the par value, if any, of the stock subject to the Option. The
adjustments determined by the Board pursuant to this Section 4.2 shall be final,
binding and conclusive.
5. ELIGIBILITY AND OPTION LIMITATIONS.
5.1. PERSONS ELIGIBLE FOR OPTIONS. Options may be granted only to
Employees, Consultants, and Directors. For purposes of the foregoing sentence,
"Employees" shall include prospective Employees to whom Options are granted in
connection with written offers of employment with the Participating Company
Group, and "Consultants" shall include prospective Consultants to whom Options
are granted in connection with written offers of engagement with the
Participating Company Group. Eligible persons may be granted more than one
(1) Option.
5.2. OPTION GRANT RESTRICTIONS. Any person who is not an Employee on the
effective date of the grant of an Option to such person may be granted only a
Nonstatutory Stock Option. An Incentive Stock Option granted to a prospective
Employee upon the condition that such person become an Employee shall be deemed
granted effective on the date such person commences service with a Participating
Company, with an exercise price determined as of such date in accordance with
Section 6.1.
5.3. FAIR MARKET VALUE LIMITATION. To the extent that the aggregate Fair
Market Value of stock with respect to which options designated as Incentive
Stock Options are exercisable by an Optionee for the first
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time during any calendar year (under all stock option plans of the Participating
Company Group, including the Plan) exceeds One Hundred Thousand Dollars
($100,000), the portion of such options which exceeds such amount shall be
treated as Nonstatutory Stock Options. For purposes of this Section 5.3, options
designated as Incentive Stock Options shall be taken into account in the order
in which they were granted, and the Fair Market Value of stock shall be
determined as of the time the option with respect to such stock is granted. If
the Code is amended to provide for a different limitation from that set forth in
this Section 5.3, such different limitation shall be deemed incorporated herein
effective as of the date and with respect to such Options as required or
permitted by such amendment to the Code. If an Option is treated as an Incentive
Stock Option in part and as a Nonstatutory Stock Option in part by reason of the
limitation set forth in this Section 5.3, the Optionee may designate which
portion of such Option the Optionee is exercising and may request that separate
certificates representing each such portion be issued upon the exercise of the
Option. In the absence of such designation, the Optionee shall be deemed to have
exercised the Incentive Stock Option portion of the Option first.
6. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by Option
Agreements specifying the number of shares of Stock covered thereby, in such
form as the Board shall from time to time establish. Option Agreements may
incorporate all or any of the terms of the Plan by reference and shall comply
with and be subject to the following terms and conditions:
6.1. EXERCISE PRICE. The exercise price for each Option shall be
established in the sole discretion of the Board; provided, however, that
(a) the exercise price per share for an Incentive Stock Option shall be not less
than the Fair Market Value of a share of Stock on the effective date of grant of
the Option, (b) the exercise price per share for a Nonstatutory Stock Option
shall be not less than eighty-five percent (85%) of the Fair Market Value of a
share of Stock on the effective date of grant of the Option and (c) no Incentive
Stock Option granted to a Ten Percent Owner Optionee shall have an exercise
price per share less than one hundred ten percent (110%) of the Fair Market
Value of a share of Stock on the effective date of grant of the Option.
Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a
Nonstatutory Stock Option) may be granted with an exercise price lower than the
minimum exercise price set forth above if such Option is granted pursuant to an
assumption or substitution for another option in a manner qualifying under the
provisions of Section 424(a) of the Code.
6.2. EXERCISE PERIOD. Options shall be exercisable at such time or times,
or upon such event or events, and subject to such terms, conditions, performance
criteria, and restrictions as shall be determined by the Board and set forth in
the Option Agreement evidencing such Option; provided, however, that (a) no
Incentive Stock Option shall be exercisable after the expiration of ten (10)
years after the effective date of grant of such Option, (b) no Incentive Stock
Option granted to a Ten Percent Owner Optionee shall be exercisable after the
expiration of five (5) years after the effective date of grant of such Option,
and (c) no Option granted to a prospective Employee or prospective Consultant
may become exercisable prior to the date on which such person commences service
with a Participating Company.
6.3. PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise provided
below, payment of the exercise price for the number of shares of Stock being
purchased pursuant to any Option shall be made (i) in cash, by check, or
cash equivalent, (ii) by tender to the Company of shares of Stock owned by
the Optionee having a Fair Market Value (as determined by the Company
without regard to any restrictions on transferability applicable to such
stock by reason of federal or state securities laws or agreements with an
underwriter for the Company) not less than the exercise price, (iii) by the
assignment of the proceeds of a sale or loan with respect to some or all of
the shares being acquired upon the exercise of the Option (including,
without limitation, through an exercise complying with the provisions of
Regulation T as promulgated from time to time by the Board of Governors of
the Federal Reserve System) (a "CASHLESS EXERCISE"), (iv) by the Optionee's
promissory note in a form approved by the Company, (v) by such other
consideration as may be approved by the Board from
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time to time to the extent permitted by applicable law, or (vi) by any
combination thereof. The Board may at any time or from time to time, by
adoption of or by amendment to the standard forms of Option Agreement
described in Section 7, or by other means, grant Options which do not permit
all of the foregoing forms of consideration to be used in payment of the
exercise price or which otherwise restrict one or more forms of
consideration.
(b) TENDER OF STOCK. Notwithstanding the foregoing, an Option may not be
exercised by tender to the Company of shares of Stock to the extent such
tender of Stock would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock.
Unless otherwise provided by the Board, an Option may not be exercised by
tender to the Company of shares of Stock unless such shares either have been
owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company.
(c) CASHLESS EXERCISE. The Company reserves, at any and all times, the
right, in the Company's sole and absolute discretion, to establish, decline
to approve or terminate any program or procedures for the exercise of
Options by means of a Cashless Exercise.
(d) PAYMENT BY PROMISSORY NOTE. No promissory note shall be permitted if
the exercise of an Option using a promissory note would be a violation of
any law. Any permitted promissory note shall be on such terms as the Board
shall determine at the time the Option is granted. The Board shall have the
authority to permit or require the Optionee to secure any promissory note
used to exercise an Option with the shares of Stock acquired upon the
exercise of the Option or with other collateral acceptable to the Company.
Unless otherwise provided by the Board, if the Company at any time is
subject to the regulations promulgated by the Board of Governors of the
Federal Reserve System or any other governmental entity affecting the
extension of credit in connection with the Company's securities, any
promissory note shall comply with such applicable regulations, and the
Optionee shall pay the unpaid principal and accrued interest, if any, to the
extent necessary to comply with such applicable regulations.
6.4. TAX WITHHOLDING. The Company shall have the right, but not the
obligation, to deduct from the shares of Stock issuable upon the exercise of an
Option, or to accept from the Optionee the tender of, a number of whole shares
of Stock having a Fair Market Value, as determined by the Company, equal to all
or any part of the federal, state, local and foreign taxes, if any, required by
law to be withheld by the Participating Company Group with respect to such
Option or the shares acquired upon the exercise thereof. Alternatively or in
addition, in its sole discretion, the Company shall have the right to require
the Optionee, through payroll withholding, cash payment or otherwise, including
by means of a Cashless Exercise, to make adequate provision for any such tax
withholding obligations of the Participating Company Group arising in connection
with the Option or the shares acquired upon the exercise thereof. The Company
shall have no obligation to deliver shares of Stock or to release shares of
Stock from an escrow established pursuant to the Option Agreement until the
Participating Company Group's tax withholding obligations have been satisfied by
the Optionee.
7. STANDARD FORMS OF OPTION AGREEMENT.
7.1. INCENTIVE STOCK OPTIONS. Unless otherwise provided by the Board at
the time the Option is granted, an Option designated as an "Incentive Stock
Option" shall comply with and be subject to the terms and conditions set forth
in the form of Immediately Exercisable Incentive Stock Option Agreement adopted
by the Board concurrently with its adoption of the Plan and as amended from time
to time.
7.2. NONSTATUTORY STOCK OPTIONS. Unless otherwise provided by the Board at
the time the Option is granted, an Option designated as a "Nonstatutory Stock
Option" shall comply with and be subject to the terms and conditions set forth
in the form of Immediately Exercisable Nonstatutory Stock Option Agreement
adopted by the Board concurrently with its adoption of the Plan and as amended
from time to time.
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7.3. STANDARD TERM OF OPTIONS. Except as otherwise provided in
Section 6.2 or by the Board in the grant of an Option, any Option granted
hereunder shall have a term of ten (10) years from the effective date of grant
of the Option.
7.4. AUTHORITY TO VARY TERMS. The Board shall have the authority from time
to time to vary the terms of any of the standard forms of Option Agreement
described in this Section 7 either in connection with the grant or amendment of
an individual Option or in connection with the authorization of a new standard
form or forms; provided, however, that the terms and conditions of any such new,
revised or amended standard form or forms of Option Agreement are not
inconsistent with the terms of the Plan. Such authority shall include, but not
by way of limitation, the authority to grant Options which are not immediately
exercisable.
8. TRANSFER OF CONTROL.
8.1. DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have occurred if any
of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in a single or series of
related transactions by the stockholders of the Company of more than
fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the Company is a party;
(iii) the sale, exchange, or transfer of all or substantially all of
the assets of the Company; or
(iv) a liquidation or dissolution of the Company.
(b) A "TRANSFER OF CONTROL" shall mean an Ownership Change Event or a
series of related Ownership Change Events (collectively, the "TRANSACTION")
wherein the stockholders of the Company immediately before the Transaction
do not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership
of more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations
to which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding
sentence, indirect beneficial ownership shall include, without limitation,
an interest resulting from ownership of the voting stock of one or more
corporations which, as a result of the Transaction, own the Company or the
Transferee Corporation(s), as the case may be, either directly or through
one or more subsidiary corporations. The Board shall have the right to
determine whether multiple sales or exchanges of the voting stock of the
Company or multiple Ownership Change Events are related, and its
determination shall be final, binding and conclusive.
8.2. EFFECT OF TRANSFER OF CONTROL ON OPTIONS. In the event of a Transfer
of Control, the surviving, continuing, successor, or purchasing corporation or
parent corporation thereof, as the case may be (the "ACQUIRING CORPORATION"),
may either assume the Company's rights and obligations under outstanding Options
or substitute for outstanding Options substantially equivalent options for the
Acquiring Corporation's stock. Any Options which are neither assumed or
substituted for by the Acquiring Corporation in connection with the Transfer of
Control nor exercised as of the date of the Transfer of Control shall terminate
and cease to be outstanding effective as of the date of the Transfer of Control.
Notwithstanding the foregoing, shares acquired upon exercise of an Option prior
to the Transfer of Control and any consideration received pursuant to the
Transfer of Control with respect to such shares shall continue to be subject to
all applicable provisions of the Option Agreement evidencing such Option except
as otherwise provided in such Option Agreement. Furthermore, notwithstanding the
foregoing, if the corporation the
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stock of which is subject to the outstanding Options immediately prior to an
Ownership Change Event described in Section 8.1(a)(i) constituting a Transfer of
Control is the surviving or continuing corporation and immediately after such
Ownership Change Event less than fifty percent (50%) of the total combined
voting power of its voting stock is held by another corporation or by other
corporations that are members of an affiliated group within the meaning of
Section 1504(a) of the Code without regard to the provisions of Section 1504(b)
of the Code, the outstanding Options shall not terminate unless the Board
otherwise provides in its sole discretion.
9. PROVISION OF INFORMATION. Each Optionee shall be given access to
information concerning the Company equivalent to that information generally made
available to the Company's common stockholders.
10. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee, an
Option shall be exercisable only by the Optionee or the Optionee's guardian or
legal representative. No Option shall be assignable or transferable by the
Optionee, except by will or by the laws of descent and distribution.
11. INDEMNIFICATION. In addition to such other rights of indemnification
as they may have as members of the Board or officers or employees of the
Participating Company Group, members of the Board and any officers or employees
of the Participating Company Group to whom authority to act for the Board is
delegated shall be indemnified by the Company against all reasonable expenses,
including attorneys' fees, actually and necessarily incurred in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan, or any right
granted hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such person is liable for gross
negligence, bad faith or intentional misconduct in duties; provided, however,
that within sixty (60) days after the institution of such action, suit or
proceeding, such person shall offer to the Company, in writing, the opportunity
at its own expense to handle and defend the same.
12. TERMINATION OR AMENDMENT OF PLAN. The Board may terminate or amend the
Plan at any time. However, subject to changes in the law or other legal
requirements that would permit otherwise, without the approval of the Company's
stockholders, there shall be (a) no increase in the maximum aggregate number of
shares of Stock that may be issued under the Plan (except by operation of the
provisions of Section 4.2), (b) no change in the class of persons eligible to
receive Incentive Stock Options, and (c) no expansion in the class of persons
eligible to receive Nonstatutory Stock Options. In any event, no termination or
amendment of the Plan may adversely affect any then outstanding Option or any
unexercised portion thereof, without the consent of the Optionee, unless such
termination or amendment is required to enable an Option designated as an
Incentive Stock Option to qualify as an Incentive Stock Option or is necessary
to comply with any applicable law or government regulation.
13. CONTINUATION OF INITIAL PLAN AS TO OUTSTANDING OPTIONS. Any other
provision of the Plan to the contrary notwithstanding, the terms of the Initial
Plan shall remain in effect and apply to all Options granted pursuant to the
Initial Plan.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that
the foregoing is the Puma Technology, Inc. 1993 Stock Option Plan as duly
adopted by the Board on September 3, 1996, and amended by the Board through
[August 25,] 1998.
--------------------------------------
Secretary
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PLAN HISTORY
<TABLE>
<S> <C>
October 30, 1993..... 1993 Stock Option Plan (the "Initial Plan") adopted by Unanimous
Written Consent of the Board of Directors of Puma Technology, Inc.,
a California corporation ("Puma California") with a share reserve of
685,500 shares.
October 30, 1993..... Shareholders of Puma California approve adoption of the 1993 Stock
Option Plan with a share reserve of 685,500 (pre 2 for 1 split)
shares by Written Consent of Shareholders.
January 18, 1994..... Puma California effects a 2-for-1 stock split, resulting in a share
reserve of 1,371,000 shares.
May 24, 1994......... Board of Directors of Puma California approves share reserve
decrease to 1,356,300 (post 2 for 1 split) shares by Unanimous
Written Consent.
March 8, 1996........ Board of Directors of Puma California approval of a share reserve
increase of 1,143,700 to 2,500,000.
April 4, 1996........ Shareholders of Puma California approve share reserve increase by
1,143,700 to 2,500,000.
September 3, 1996.... Board of Directors of Puma California amends and restates the
Initial Plan as the Plan, effective as of the effective date of the
Company's initial registration under Section 12 of the Exchange Act,
with a share reserve of 3,500,000 shares.
November 27, 1996.... Shareholders of Puma California approve amendment and restatement of
the Initial Plan as the Plan, with a share reserve of 3,500,000
shares.
November 27, 1996.... Effective date of Delaware reincorporation of Puma California with
and into the Company, pursuant to which each share of Puma
California became 1 share of the Company.
August 19, 1997...... Board approves share reserve increase by 1,000,000 from 3,500,000 to
4,500,000 shares.
December 3, 1997..... Stockholders approve share reserve increase to 4,500,000 shares.
</TABLE>
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PUMA TECHNOLOGY, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 ESTABLISHMENT. The Puma Technology, Inc. 1998 Employee Stock Purchase
Plan (the "PLAN") is hereby established effective as of the date on which the
stockholders of the Company approve the adoption of the Plan.
1.2 PURPOSE. The purpose of the Plan is to advance the interests of
Company and its stockholders by providing an incentive to attract, retain and
reward Eligible Employees of the Participating Company Group and by motivating
such persons to contribute to the growth and profitability of the Participating
Company Group. The Plan provides such Eligible Employees with an opportunity to
acquire a proprietary interest in the Company through the purchase of Stock. The
Company intends that the Plan qualify as an "employee stock purchase plan" under
Section 423 of the Code (including any amendments or replacements of such
section), and the Plan shall be so construed.
1.3 TERM OF PLAN. The Plan shall continue in effect until the earlier of
its termination by the Board or the date on which all of the shares of Stock
available for issuance under the Plan have been issued.
2. DEFINITIONS AND CONSTRUCTION.
2.1 DEFINITIONS. Any term not expressly defined in the Plan but defined
for purposes of Section 423 of the Code shall have the same definition herein.
Whenever used herein, the following terms shall have their respective meanings
set forth below:
(a) "BOARD" means the Board of Directors of the Company. If one or more
Committees have been appointed by the Board to administer the Plan, "Board"
also means such Committee(s).
(b) "CODE" means the Internal Revenue Code of 1986, as amended, and any
applicable regulations promulgated thereunder.
(c) "COMMITTEE" means a committee of the Board duly appointed to
administer the Plan and having such powers as specified by the Board. Unless
the powers of the Committee have been specifically limited, the Committee
shall have all of the powers of the Board granted herein, including, without
limitation, the power to amend or terminate the Plan at any time, subject to
the terms of the Plan and any applicable limitations imposed by law.
(d) "COMPANY" means Puma Technology, Inc., a Delaware corporation, or
any successor corporation thereto.
(e) "COMPENSATION" means, with respect to an Offering Period under the
Plan, all amounts paid in cash in the forms of base salary, commissions,
overtime, bonuses, annual awards, other incentive payments, shift premiums,
and all other compensation paid in cash during such Offering Period before
deduction for any contributions to any plan maintained by a Participating
Company and described in Section 401(k) or Section 125 of the Code.
Compensation shall not include reimbursements of expenses, allowances,
long-term disability, workers' compensation or any amount deemed received
without the actual transfer of cash or any amounts directly or indirectly
paid pursuant to the Plan or any other stock purchase or stock option plan.
(f) "ELIGIBLE EMPLOYEE" means an Employee who meets the requirements set
forth in Section 5 for eligibility to participate in the Plan.
(g) "EMPLOYEE" means a person treated as an employee of a Participating
Company for purposes of Section 423 of the Code. A Participant shall be
deemed to have ceased to be an Employee either upon an actual termination of
employment or upon the corporation employing the Participant ceasing to be a
Participating Company. For purposes of the Plan, an individual shall not be
deemed to have
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ceased to be an Employee while on any military leave, sick leave, or other
bona fide leave of absence approved by the Company of ninety (90) days or
less. If an individual's leave of absence exceeds ninety (90) days, the
individual shall be deemed to have ceased to be an Employee on the ninety-
first (91st) day of such leave unless the individual's right to reemployment
with the Participating Company Group is guaranteed either by statute or by
contract. The Company shall determine in good faith and in the exercise of
its discretion whether an individual has become or has ceased to be an
Employee and the effective date of such individual's employment or
termination of employment, as the case may be. For purposes of an
individual's participation in or other rights, if any, under the Plan as of
the time of the Company's determination, all such determinations by the
Company shall be final, binding and conclusive, notwithstanding that the
Company or any governmental agency subsequently makes a contrary
determination.
(h) "FAIR MARKET VALUE" means, as of any date if on such date the Stock
is listed on a national or regional securities exchange or market system,
the closing sale price of a share of Stock (or the mean of the closing bid
and asked prices of a share of Stock if the Stock is so quoted instead) as
quoted on the Nasdaq National Market, the Nasdaq SmallCap Market or such
other national or regional securities exchange or market system constituting
the primary market for the Stock, as reported in the WALL STREET JOURNAL or
such other source as the Company deems reliable. If the relevant date does
not fall on a day on which the Stock has traded on such securities exchange
or market system, the date on which the Fair Market Value is established
shall be the last day on which the Stock was so traded prior to the relevant
date, or such other appropriate day as determined by the Board, in its
discretion. If, on the relevant date, there is no public market for the
Stock, the Fair Market Value of a share of Stock shall be as determined by
the Board.
(i) "OFFERING" means an offering of Stock as provided in Section 6.
(j) "OFFERING DATE" means, for any Offering, the first day of the
Offering Period.
(k) "OFFERING PERIOD" means a period established in accordance with
Section 6.1.
(l) "PARENT CORPORATION" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.
(m) "PARTICIPANT" means an Eligible Employee who has become a
participant in an Offering Period in accordance with Section 7 and remains a
participant in accordance with the Plan.
(n) "PARTICIPATING COMPANY" means the Company or any Parent Corporation
or Subsidiary Corporation designated by the Board as a corporation the
Employees of which may, if Eligible Employees, participate in the Plan. The
Board shall have the sole and absolute discretion to determine from time to
time which Parent Corporations or Subsidiary Corporations shall be
Participating Companies.
(o) "PARTICIPATING COMPANY GROUP" means, at any point in time, the
Company and all other corporations collectively which are then Participating
Companies.
(p) "PURCHASE DATE" means, for any Purchase Period, the last day of such
period.
(q) "PURCHASE PERIOD" means a period determined in accordance with
Section 6.2.
(r) "PURCHASE PRICE" means the price at which a share of Stock may be
purchased under the Plan, as determined in accordance with Section 9.
(s) "PURCHASE RIGHT" means an option granted to a Participant pursuant
to the Plan to purchase such shares of Stock as provided in Section 8, which
the Participant may or may not exercise during the Offering Period in which
such option is outstanding. Such option arises from the right of a
Participant to withdraw any accumulated payroll deductions of the
Participant not previously applied to the purchase of Stock under the Plan
and to terminate participation in the Plan at any time during an Offering
Period.
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(t) "STOCK" means the common stock of the Company, as adjusted from time
to time in accordance with Section 4.2.
(u) "SUBSCRIPTION AGREEMENT" means a written agreement in such form as
specified by the Company, stating an Employee's election to participate in
the Plan and authorizing payroll deductions under the Plan from the
Employee's Compensation.
(v) "SUBSCRIPTION DATE" means the last business day prior to the
Offering Date of an Offering Period or such earlier date as the Company
shall establish.
(w) "SUBSIDIARY CORPORATION" means any present or future "subsidiary
corporation" of the Company, as defined in Section 424(f) of the Code.
2.2 CONSTRUCTION. Captions and titles contained herein are for convenience
only and shall not affect the meaning or interpretation of any provision of the
Plan. Except when otherwise indicated by the context, the singular shall include
the plural and the plural shall include the singular. Use of the term "or" is
not intended to be exclusive, unless the context clearly requires otherwise.
3. ADMINISTRATION.
3.1 ADMINISTRATION BY THE BOARD. The Plan shall be administered by the
Board. All questions of interpretation of the Plan, of any form of agreement or
other document employed by the Company in the administration of the Plan, or of
any Purchase Right shall be determined by the Board and shall be final and
binding upon all persons having an interest in the Plan or the Purchase Right.
Subject to the provisions of the Plan, the Board shall determine all of the
relevant terms and conditions of Purchase Rights; provided, however, that all
Participants granted Purchase Rights shall have the same rights and privileges
within the meaning of Section 423(b)(5) of the Code. All expenses incurred in
connection with the administration of the Plan shall be paid by the Company.
3.2 AUTHORITY OF OFFICERS. Any officer of the Company shall have the
authority to act on behalf of the Company with respect to any matter, right,
obligation, determination or election that is the responsibility of or that is
allocated to the Company herein, provided that the officer has apparent
authority with respect to such matter, right, obligation, determination or
election.
3.3 POLICIES AND PROCEDURES ESTABLISHED BY THE COMPANY. The Company may,
from time to time, consistent with the Plan and the requirements of Section 423
of the Code, establish, change or terminate such rules, guidelines, policies,
procedures, limitations, or adjustments as deemed advisable by the Company, in
its discretion, for the proper administration of the Plan, including, without
limitation, (a) a minimum payroll deduction amount required for participation in
an Offering, (b) a limitation on the frequency or number of changes permitted in
the rate of payroll deduction during an Offering, (c) an exchange ratio
applicable to amounts withheld in a currency other than United States dollars,
(d) a payroll deduction greater than or less than the amount designated by a
Participant in order to adjust for the Company's delay or mistake in processing
a Subscription Agreement or in otherwise effecting a Participant's election
under the Plan or as advisable to comply with the requirements of Section 423 of
the Code, and (e) determination of the date and manner by which the Fair Market
Value of a share of Stock is determined for purposes of administration of the
Plan.
4. SHARES SUBJECT TO PLAN.
4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as provided
in Section 4.2, the maximum aggregate number of shares of Stock that may be
issued under the Plan shall be Five Hundred Thousand (500,000), cumulatively
increased on August 1, 1999 and each August 1 thereafter until and including
August 1, 2008 by an amount equal to the lesser of (a) Five Hundred Thousand
(500,000) shares or (b) a lesser amount of shares determined by the Board, and
shall consist of authorized but unissued or reacquired shares of Stock, or any
combination thereof. If an outstanding Purchase Right for any reason
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expires or is terminated or canceled, the shares of Stock allocable to the
unexercised portion of that Purchase Right shall again be available for issuance
under the Plan.
4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification or similar change in the capital structure of the Company, or
in the event of any merger (including a merger effected for the purpose of
changing the Company's domicile), sale of assets or other reorganization in
which the Company is a party, appropriate adjustments shall be made in the
number and class of shares subject to the Plan, the annual increase described in
Section 4.1(a) and each Purchase Right, and in the Purchase Price. If a majority
of the shares of the same class as the shares subject to outstanding Purchase
Rights are exchanged for, converted into, or otherwise become (whether or not
pursuant to an Ownership Change Event) shares of another corporation (the "NEW
SHARES"), the Board may unilaterally amend the outstanding Purchase Rights to
provide that such Purchase Rights are exercisable for New Shares. In the event
of any such amendment, the number of shares subject to, and the Purchase Price
of, the outstanding Purchase Rights shall be adjusted in a fair and equitable
manner, as determined by the Board, in its discretion. Notwithstanding the
foregoing, any fractional share resulting from an adjustment pursuant to this
Section 4.2 shall be rounded down to the nearest whole number, and in no event
may the Purchase Price be decreased to an amount less than the par value, if
any, of the stock subject to the Purchase Right. The adjustments determined by
the Board pursuant to this Section 4.2 shall be final, binding and conclusive.
5. ELIGIBILITY.
5.1 EMPLOYEES ELIGIBLE TO PARTICIPATE. Each Employee of a Participating
Company is eligible to participate in the Plan and shall be deemed an Eligible
Employee, except the following:
(a) Any Employee who has not completed at least six (6) months of
continuous employment with the Participating Company Group as of the
commencement of the applicable Offering Period; or
(b) Any Employee who is customarily employed by the Participating
Company Group for twenty (20) hours or less per week.
(c) Any Employee who is customarily employed by the Participating
Company Group for not more than five (5) months in any calendar year.
5.2 EXCLUSION OF CERTAIN STOCKHOLDERS. Notwithstanding any provision of
the Plan to the contrary, no Employee shall be granted a Purchase Right under
the Plan if, immediately after such grant, the Employee would own or hold
options to purchase stock of the Company or of any Parent Corporation or
Subsidiary Corporation possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of such corporation, as
determined in accordance with Section 423(b)(3) of the Code. For purposes of
this Section 5.2, the attribution rules of Section 424(d) of the Code shall
apply in determining the stock ownership of such Employee.
6. OFFERINGS.
6.1 OFFERING PERIODS. Except as otherwise set forth below, the Plan shall
be implemented by sequential Offerings of approximately twenty-four (24) months
duration (an "OFFERING PERIOD"). The first Offering Period shall commence on
March 1, 1999 and end on February 28, 2001 (the "INITIAL OFFERING PERIOD").
Subsequent Offerings shall commence on the first day of March and September of
each year and end on the last day of the second following February and August,
respectively, occurring thereafter. Notwithstanding the foregoing, the Board may
establish a different duration for one or more Offering Periods or different
commencing or ending dates for such Offering Periods; provided, however, that no
Offering Period may have a duration exceeding twenty-seven (27) months. If the
first or last day of an Offering Period is not a day on which the national
securities exchanges or Nasdaq Stock Market are open for
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trading, the Company shall specify the trading day that will be deemed the first
or last day, as the case may be, of the Offering Period.
6.2 PURCHASE PERIODS. Each Offering Period shall consist of four (4)
consecutive Purchase Periods of approximately six (6) months duration, or such
other number or duration as the Board shall determine. The Purchase Period
commencing on the Offering Date of the Initial Offering Period shall end on
August 31, 1999. A Purchase Period commencing on or about March 1 shall end on
or about the last day of the next following August. A Purchase Period commencing
on or about September 1 shall end on or about the last day of the next following
February. Notwithstanding the foregoing, the Board may establish a different
duration for one or more Purchase Periods or different commencing or ending
dates for such Purchase Periods. If the first or last day of a Purchase Period
is not a day on which the national securities exchanges or Nasdaq Stock Market
are open for trading, the Company shall specify the trading day that will be
deemed the first or last day, as the case may be, of the Purchase Period
7. PARTICIPATION IN THE PLAN.
7.1 INITIAL PARTICIPATION. An Eligible Employee may become a Participant
in an Offering Period by delivering a properly completed Subscription Agreement
to the office designated by the Company not later than the close of business for
such office on the Subscription Date established by the Company for such
Offering Period. An Eligible Employee who does not deliver a properly completed
Subscription Agreement to the Company's designated office on or before the
Subscription Date for an Offering Period shall not participate in the Plan for
that Offering Period or for any subsequent Offering Period unless the Eligible
Employee subsequently delivers a properly completed Subscription Agreement to
the appropriate office of the Company on or before the Subscription Date for
such subsequent Offering Period. An Employee who becomes an Eligible Employee
after the Offering Date of an Offering Period shall not be eligible to
participate in that Offering Period but may participate in any subsequent
Offering Period provided the Employee is still an Eligible Employee as of the
Offering Date of such subsequent Offering Period.
7.2 CONTINUED PARTICIPATION. A Participant shall automatically participate
in the next Offering Period commencing immediately after the Purchase Date of
each Offering Period in which the Participant participates provided that the
Participant remains an Eligible Employee on the Offering Date of the new
Offering Period and has not either (a) withdrawn from the Plan pursuant to
Section 12.1 or (b) terminated employment as provided in Section 13. A
Participant who may automatically participate in a subsequent Offering Period,
as provided in this Section, is not required to deliver any additional
Subscription Agreement for the subsequent Offering Period in order to continue
participation in the Plan. However, a Participant may deliver a new Subscription
Agreement for a subsequent Offering Period in accordance with the procedures set
forth in Section 7.1 if the Participant desires to change any of the elections
contained in the Participant's then effective Subscription Agreement. Eligible
Employees may not participate simultaneously in more than one Offering.
8. RIGHT TO PURCHASE SHARES.
8.1 GRANT OF PURCHASE RIGHT. Except as set forth below, on the Offering
Date of each Offering Period, each Participant in that Offering Period shall be
granted automatically a Purchase Right consisting of an option to purchase the
lesser of (a) that number of whole shares of Stock determined by dividing Fifty
Thousand Dollars ($50,000) by the Fair Market Value of a share of Stock on such
Offering Date or (b) ten thousand (10,000) shares of Stock. No Purchase Right
shall be granted on an Offering Date to any person who is not, on such Offering
Date, an Eligible Employee.
8.2 PRO RATA ADJUSTMENT OF PURCHASE RIGHT. Notwithstanding the provisions
of Section 8.1, if the Board establishes an Offering Period of any duration
other than twenty-four months, then (a) the dollar amount in Section 8.1 shall
be determined by multiplying $2,083.33 by the number of months (rounded to
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<PAGE>
the nearest whole month) in the Offering Period and rounding to the nearest
whole dollar, and (b) the share amount in Section 8.1 shall be determined by
multiplying 416.67 shares by the number of months (rounded to the nearest whole
month) in the Offering Period and rounding to the nearest whole share.
8.3 CALENDAR YEAR PURCHASE LIMITATION. Notwithstanding any provision of
the Plan to the contrary, no Participant shall be granted a Purchase Right which
permits his or her right to purchase shares of Stock under the Plan to accrue at
a rate which, when aggregated with such Participant's rights to purchase shares
under all other employee stock purchase plans of a Participating Company
intended to meet the requirements of Section 423 of the Code, exceeds
Twenty-Five Thousand Dollars ($25,000) in Fair Market Value (or such other
limit, if any, as may be imposed by the Code) for each calendar year in which
such Purchase Right is outstanding at any time. For purposes of the preceding
sentence, the Fair Market Value of shares purchased during a given Offering
Period shall be determined as of the Offering Date for such Offering Period. The
limitation described in this Section shall be applied in conformance with
applicable regulations under Section 423(b)(8) of the Code.
9. PURCHASE PRICE.
The Purchase Price at which each share of Stock may be acquired in an
Offering Period upon the exercise of all or any portion of a Purchase Right
shall be established by the Board; provided, however, that the Purchase Price
shall not be less than eighty-five percent (85%) of the lesser of (a) the Fair
Market Value of a share of Stock on the Offering Date of the Offering Period or
(b) the Fair Market Value of a share of Stock on the Purchase Date. Unless
otherwise provided by the Board prior to the commencement of an Offering Period,
the Purchase Price for that Offering Period shall be eighty-five percent (85%)
of the lesser of (a) the Fair Market Value of a share of Stock on the Offering
Date of the Offering Period, or (b) the Fair Market Value of a share of Stock on
the Purchase Date.
10. ACCUMULATION OF PURCHASE PRICE THROUGH PAYROLL DEDUCTION.
Shares of Stock acquired pursuant to the exercise of all or any portion of a
Purchase Right may be paid for only by means of payroll deductions from the
Participant's Compensation accumulated during the Offering Period for which such
Purchase Right was granted, subject to the following:
10.1 AMOUNT OF PAYROLL DEDUCTIONS. Except as otherwise provided herein,
the amount to be deducted under the Plan from a Participant's Compensation on
each payday during an Offering Period shall be determined by the Participant's
Subscription Agreement. The Subscription Agreement shall set forth the
percentage of the Participant's Compensation to be deducted on each payday
during an Offering Period in whole percentages of not less than one percent (1%)
(except as a result of an election pursuant to Section 10.3 to stop payroll
deductions effective following the first payday during an Offering) or more than
ten percent (10%). The Board may change the foregoing limits on payroll
deductions effective as of any future Offering Date. Amounts deducted shall be
reduced by any amounts contributed by the Participant and applied to the
purchase of Company stock pursuant to any other employee stock purchase plan
qualifying under Section 423 of the Code.
10.2 COMMENCEMENT OF PAYROLL DEDUCTIONS. Payroll deductions shall commence
on the first payday following the Offering Date and shall continue to the end of
the Offering Period unless sooner altered or terminated as provided herein.
10.3 ELECTION TO CHANGE OR STOP PAYROLL DEDUCTIONS. During an Offering
Period, a Participant may elect to increase or decrease the rate of or to stop
deductions from his or her Compensation by delivering to the Company's
designated office an amended Subscription Agreement authorizing such change on
or before the Change Notice Date, as defined below. A Participant who elects,
effective following the first payday of an Offering Period, to decrease the rate
of his or her payroll deductions to zero percent (0%) shall nevertheless remain
a Participant in the current Offering Period unless such Participant withdraws
from the Plan as provided in Section 12.1. The "CHANGE NOTICE DATE" shall be a
date prior to the beginning
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<PAGE>
of the first pay period for which such election is to be effective as
established by the Company from time to time and announced to the Participants.
Unless otherwise established by the Company, the Change Notice Date shall be the
seventh (7th) day prior to the end of the first pay period for which such
election is to be effective.
10.4 ADMINISTRATIVE SUSPENSION OF PAYROLL DEDUCTIONS. The Company may, in
its sole discretion, suspend a Participant's payroll deductions under the Plan
as the Company deems advisable to avoid accumulating payroll deductions in
excess of the amount that could reasonably be anticipated to purchase the
maximum number of shares of Stock permitted (a) under the Participant's Purchase
Right or (b) during a calendar year under the limit set forth in Section 8.3.
Payroll deductions shall be resumed at the rate specified in the Participant's
then effective Subscription Agreement at the beginning, respectively, of
(a) the next Offering Period, provided that the individual is a Participant in
such Offering Period or (b) the next Offering Period the Purchase Date of which
falls in the following calendar year.
10.5 PARTICIPANT ACCOUNTS. Individual bookkeeping accounts shall be
maintained for each Participant. All payroll deductions from a Participant's
Compensation shall be credited to such Participant's Plan account and shall be
deposited with the general funds of the Company. All payroll deductions received
or held by the Company may be used by the Company for any corporate purpose.
10.6 NO INTEREST PAID. Interest shall not be paid on sums deducted from a
Participant's Compensation pursuant to the Plan.
10.7 VOLUNTARY WITHDRAWAL FROM PLAN ACCOUNT. A Participant may withdraw
all or any portion of the payroll deductions credited to his or her Plan account
and not previously applied toward the purchase of Stock by delivering to the
Company's designated office a written notice on a form provided by the Company
for such purpose. A Participant who withdraws the entire remaining balance
credited to his or her Plan account shall be deemed to have withdrawn from the
Plan in accordance with Section 12.1. Amounts withdrawn shall be returned to the
Participant as soon as practicable after the notice of withdrawal and may not be
applied to the purchase of shares in any Offering under the Plan. The Company
may from time to time establish or change limitations on the frequency of
withdrawals permitted under this Section, establish a minimum dollar amount that
must be retained in the Participant's Plan account, or terminate the withdrawal
right provided by this Section.
11. PURCHASE OF SHARES.
11.1 EXERCISE OF PURCHASE RIGHT. On each Purchase Date of an Offering
Period, each Participant who has not withdrawn from the Plan and whose
participation in the Offering has not terminated before such Purchase Date shall
automatically acquire pursuant to the exercise of the Participant's Purchase
Right the number of whole shares of Stock determined by dividing (a) the total
amount of the Participant's payroll deductions accumulated in the Participant's
Plan account during the Offering Period and not previously applied toward the
purchase of Stock by (b) the Purchase Price. However, in no event shall the
number of shares purchased by the Participant during an Offering Period exceed
the number of shares subject to the Participant's Purchase Right. No shares of
Stock shall be purchased on a Purchase Date on behalf of a Participant whose
participation in the Offering or the Plan has terminated before such Purchase
Date.
11.2 PRO RATA ALLOCATION OF SHARES. If the number of shares of Stock which
might be purchased by all Participants in the Plan on a Purchase Date exceeds
the number of shares of Stock available in the Plan as provided in Section 4.1,
the Company shall make a pro rata allocation of the remaining shares in as
uniform a manner as practicable and as the Company determines to be equitable.
Any fractional share resulting from such pro rata allocation to any Participant
shall be disregarded.
11.3 DELIVERY OF CERTIFICATES. As soon as practicable after each Purchase
Date, the Company shall arrange the delivery to each Participant of a
certificate representing the shares acquired by the Participant
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on such Purchase Date; provided that the Company may deliver such shares to a
broker designated by the Company that will hold such shares for the benefit of
the Participant. Shares to be delivered to a Participant under the Plan shall be
registered in the name of the Participant, or, if requested by the Participant,
in the name of the Participant and his or her spouse, or, if applicable, in the
names of the heirs of the Participant.
11.4 RETURN OF CASH BALANCE. Any cash balance remaining in a Participant's
Plan account following any Purchase Date shall be refunded to the Participant as
soon as practicable after such Purchase Date. However, if the cash balance to be
returned to a Participant pursuant to the preceding sentence is less than the
amount that would have been necessary to purchase an additional whole share of
Stock on such Purchase Date, the Company may retain the cash balance in the
Participant's Plan account to be applied toward the purchase of shares in the
subsequent Purchase Period or Offering Period.
11.5 TAX WITHHOLDING. At the time a Participant's Purchase Right is
exercised, in whole or in part, or at the time a Participant disposes of some or
all of the shares he or she acquires under the Plan, the Participant shall make
adequate provision for the federal, state, local and foreign tax withholding
obligations, if any, of the Participating Company Group which arise upon
exercise of the Purchase Right or upon such disposition of shares, respectively.
The Participating Company Group may, but shall not be obligated to, withhold
from the Participant's compensation the amount necessary to meet such
withholding obligations.
11.6 EXPIRATION OF PURCHASE RIGHT. Any portion of a Participant's Purchase
Right remaining unexercised after the end of the Offering Period to which the
Purchase Right relates shall expire immediately upon the end of the Offering
Period.
11.7 REPORTS AND STOCKHOLDER INFORMATION TO PARTICIPANTS. Each Participant
who has exercised all or part of his or her Purchase Right shall receive, as
soon as practicable after the Purchase Date, a report of such Participant's Plan
account setting forth the total payroll deductions accumulated prior to such
exercise, the number of shares purchased, the Purchase Price for such shares,
the date of purchase and the cash balance, if any, remaining immediately after
such purchase that is to be refunded or retained in the Participant's Plan
account pursuant to Section 11.4. The report required by this Section may be
delivered in such form and by such means, including by electronic transmission,
as the Company may determine. In addition, each Participant shall be provided
information concerning the Company equivalent to that information generally made
available to the Company's common stockholders.
12. WITHDRAWAL FROM OFFERING OR PLAN.
12.1 VOLUNTARY WITHDRAWAL FROM THE PLAN. A Participant may withdraw from
the Plan by signing and delivering to the Company's designated office a written
notice of withdrawal on a form provided by the Company for such purpose. Such
withdrawal may be elected at any time prior to the end of an Offering Period;
provided, however, that if a Participant withdraws from the Plan after the
Purchase Date of a Purchase Period, the withdrawal shall not affect shares of
Stock acquired by the Participant on such Purchase Date. A Participant who
voluntarily withdraws from the Plan is prohibited from resuming participation in
the Plan in the same Offering from which he or she withdrew, but may participate
in any subsequent Offering by again satisfying the requirements of Sections 5
and 7.1. The Company may impose, from time to time, a requirement that the
notice of withdrawal from the Plan be on file with the Company's designated
office for a reasonable period prior to the effectiveness of the Participant's
withdrawal.
12.2 AUTOMATIC WITHDRAWAL FROM AN OFFERING. If the Fair Market Value of a
share of Stock on a Purchase Date of an Offering Period (other than the final
Purchase Date of such offering) is less than the Fair Market Value of a share of
Stock on the Offering Date for such Offering Period, then every Participant
shall automatically be (a) withdrawn from such Offering Period after the
acquisition of shares of Stock on the Purchase Date and (b) enrolled in the new
Offering Period effective on its Offering Date.
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A Participant may elect not to be automatically withdrawn from an Offering
Period pursuant to this Section 12.2 by delivering to the Company's designated
office not later than the close of business on Offering Date new Offering Period
a written notice indicating such election.
12.3 RETURN OF PAYROLL DEDUCTIONS. Upon a Participant's voluntary
withdrawal from the Plan pursuant to Sections 12.1 or automatic withdrawal from
an Offering pursuant to Section 12.2, the Participant's accumulated payroll
deductions which have not been applied toward the purchase of shares of Stock
(except, in the case of an automatic withdrawal pursuant to Section 12.2, for an
amount necessary to purchase an additional whole share as provided in
Section 11.4) shall be refunded to the Participant as soon as practicable after
the withdrawal, without the payment of any interest, AND the Participant's
interest in the Plan or the Offering, as applicable, shall terminate. Such
accumulated payroll deductions to be refunded in accordance with this Section
may not be applied to any other Offering under the Plan.
13. TERMINATION OF EMPLOYMENT OR ELIGIBILITY.
Upon a Participant's ceasing, prior to a Purchase Date, to be an Employee of
the Participating Company Group for any reason, including retirement, disability
or death, or the failure of a Participant to remain an Eligible Employee, the
Participant's participation in the Plan shall terminate immediately. In such
event, the payroll deductions credited to the Participant's Plan account since
the last Purchase Date shall, as soon as practicable, be returned to the
Participant or, in the case of the Participant's death, to the Participant's
legal representative, and all of the Participant's rights under the Plan shall
terminate. Interest shall not be paid on sums returned pursuant to this
Section 13. A Participant whose participation has been so terminated may again
become eligible to participate in the Plan by again satisfying the requirements
of Sections 5 and 7.1.
14. CHANGE IN CONTROL.
14.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have occurred if any
of the following occurs with respect to the Company: (i) the direct or
indirect sale or exchange in a single or series of related transactions by
the stockholders of the Company of more than fifty percent (50%) of the
voting stock of the Company; (ii) a merger or consolidation in which the
Company is a party; (iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or (iv) a liquidation or
dissolution of the Company.
(b) A "CHANGE IN CONTROL" shall mean an Ownership Change Event or a
series of related Ownership Change Events (collectively, the "TRANSACTION")
wherein the stockholders of the Company immediately before the Transaction
do not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership
of more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations
to which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding
sentence, indirect beneficial ownership shall include, without limitation,
an interest resulting from ownership of the voting stock of one or more
corporations which, as a result of the Transaction, own the Company or the
Transferee Corporation(s), as the case may be, either directly or through
one or more subsidiary corporations. The Board shall have the right to
determine whether multiple sales or exchanges of the voting stock of the
Company or multiple Ownership Change Events are related, and its
determination shall be final, binding and conclusive.
14.2 EFFECT OF CHANGE IN CONTROL ON PURCHASE RIGHTS. In the event of a
Change in Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "ACQUIRING
CORPORATION"), may assume the Company's rights and obligations under the Plan.
If the Acquiring Corporation elects not to assume the Company's rights and
obligations under outstanding
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Purchase Rights, the Purchase Date of the then current Purchase Period shall be
accelerated to a date before the date of the Change in Control specified by the
Board, but the number of shares of Stock subject to outstanding Purchase Rights
shall not be adjusted. All Purchase Rights which are neither assumed by the
Acquiring Corporation in connection with the Change in Control nor exercised as
of the date of the Change in Control shall terminate and cease to be outstanding
effective as of the date of the Change in Control.
15. NONTRANSFERABILITY OF PURCHASE RIGHTS.
A Purchase Right may not be transferred in any manner otherwise than by will
or the laws of descent and distribution and shall be exercisable during the
lifetime of the Participant only by the Participant.
16. COMPLIANCE WITH SECURITIES LAW.
The issuance of shares under the Plan shall be subject to compliance with
all applicable requirements of federal, state and foreign law with respect to
such securities. A Purchase Right may not be exercised if the issuance of shares
upon such exercise would constitute a violation of any applicable federal, state
or foreign securities laws or other law or regulations or the requirements of
any securities exchange or market system upon which the Stock may then be
listed. In addition, no Purchase Right may be exercised unless (a) a
registration statement under the Securities Act of 1933, as amended, shall at
the time of exercise of the Purchase Right be in effect with respect to the
shares issuable upon exercise of the Purchase Right, or (b) in the opinion of
legal counsel to the Company, the shares issuable upon exercise of the Purchase
Right may be issued in accordance with the terms of an applicable exemption from
the registration requirements of said Act. The inability of the Company to
obtain from any regulatory body having jurisdiction the authority, if any,
deemed by the Company's legal counsel to be necessary to the lawful issuance and
sale of any shares under the Plan shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the exercise of a
Purchase Right, the Company may require the Participant to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance with
any applicable law or regulation, and to make any representation or warranty
with respect thereto as may be requested by the Company.
17. RIGHTS AS A STOCKHOLDER AND EMPLOYEE.
A Participant shall have no rights as a stockholder by virtue of the
Participant's participation in the Plan until the date of the issuance of a
certificate for the shares purchased pursuant to the exercise of the
Participant's Purchase Right (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company). No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date such certificate is issued, except as
provided in Section 4.2. Nothing herein shall confer upon a Participant any
right to continue in the employ of the Participating Company Group or interfere
in any way with any right of the Participating Company Group to terminate the
Participant's employment at any time.
18. LEGENDS.
The Company may at any time place legends or other identifying symbols
referencing any applicable federal, state or foreign securities law restrictions
or any provision convenient in the administration of the Plan on some or all of
the certificates representing shares issued under the Plan. The Participant
shall, at the request of the Company, promptly present to the Company any and
all certificates representing shares acquired pursuant to a Purchase Right in
the possession of the Participant in order to carry out the
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provisions of this Section. Unless otherwise specified by the Company, legends
placed on such certificates may include but shall not be limited to the
following:
"THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO
THE REGISTERED HOLDER UPON THE PURCHASE OF SHARES UNDER AN EMPLOYEE STOCK
PURCHASE PLAN AS DEFINED IN SECTION 423 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED. THE TRANSFER AGENT FOR THE SHARES EVIDENCED HEREBY SHALL NOTIFY THE
CORPORATION IMMEDIATELY OF ANY TRANSFER OF THE SHARES BY THE REGISTERED HOLDER
HEREOF. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE PLAN IN
THE REGISTERED HOLDER'S NAME (AND NOT IN THE NAME OF ANY NOMINEE)."
19. NOTIFICATION OF SALE OF SHARES.
The Company may require the Participant to give the Company prompt notice of
any disposition of shares acquired by exercise of a Purchase Right within two
years from the date of granting such Purchase Right or one year from the date of
exercise of such Purchase Right. The Company may require that until such time as
a Participant disposes of shares acquired upon exercise of a Purchase Right, the
Participant shall hold all such shares in the Participant's name (or, if elected
by the Participant, in the name of the Participant and his or her spouse but not
in the name of any nominee) until the lapse of the time periods with respect to
such Purchase Right referred to in the preceding sentence. The Company may
direct that the certificates evidencing shares acquired by exercise of a
Purchase Right refer to such requirement to give prompt notice of disposition.
20. NOTICES.
All notices or other communications by a Participant to the Company under or
in connection with the Plan shall be deemed to have been duly given when
received in the form specified by the Company at the location, or by the person,
designated by the Company for the receipt thereof.
21. INDEMNIFICATION.
In addition to such other rights of indemnification as they may have as
members of the Board or officers or employees of the Participating Company
Group, members of the Board and any officers or employees of the Participating
Company Group to whom authority to act for the Board or the Company is delegated
shall be indemnified by the Company against all reasonable expenses, including
attorneys' fees, actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan, or any right
granted hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such person is liable for gross
negligence, bad faith or intentional misconduct in duties; provided, however,
that within sixty (60) days after the institution of such action, suit or
proceeding, such person shall offer to the Company, in writing, the opportunity
at its own expense to handle and defend the same.
22. AMENDMENT OR TERMINATION OF THE PLAN.
The Board may at any time amend or terminate the Plan, except that (a) such
termination shall not affect Purchase Rights previously granted under the Plan
except as permitted under the Plan, provided that the Board may terminate the
Plan (and any Offerings thereunder) on any Purchase Date if the Board determines
that such termination is in the best interests of the Company and its
stockholders, and (b) no amendment may adversely affect a Purchase Right
previously granted under the Plan (except to the extent
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permitted by the Plan or as may be necessary to qualify the Plan as an employee
stock purchase plan pursuant to Section 423 of the Code or to obtain
qualification or registration of the shares of Stock under applicable federal,
state or foreign securities laws). In addition, an amendment to the Plan must be
approved by the stockholders of the Company within twelve (12) months of the
adoption of such amendment if such amendment would authorize the sale of more
shares than are authorized for issuance under the Plan or would change the
definition of the corporations that may be designated by the Board as
Participating Companies. In the event that the Board approves an amendment to
increase the number of shares authorized for issuance under the Plan (the
"ADDITIONAL SHARES"), the Board, in its sole discretion, may specify that such
Additional Shares may only be issued pursuant to Purchase Rights granted after
the date on which the stockholders of the Company approve such amendment, and
such designation by the Board shall not be deemed to have adversely affected any
Purchase Right granted prior to the date on which the stockholders approve the
amendment.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that
the foregoing Puma Technology, Inc. 1998 Employee Stock Purchase Plan was duly
adopted by the Board of Directors of the Company on August 25, 1998.
--------------------------------------
Secretary
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PLAN HISTORY
<TABLE>
<S> <C>
August 25, 1998...... Board adopts Plan, with an initial reserve of 500,000 shares, to be
cumulatively increased on August 1, 1999 and each August 1
thereafter until and including August 1, 2008 by up to an additional
500,000 shares.
December 9, 1998..... Stockholders approve the Plan.
</TABLE>
<PAGE>
PUMA TECHNOLOGY, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
NAME (Please print):
- ------------------------------------------------------------------------------
(Last) (First) (Middle)
-TM-ERROR! SWITCH ARGUMENT NOT SPECIFIED. Original Application for the
Offering Period beginning
(date):
- ------------------------
-TM-ERROR! SWITCH ARGUMENT NOT SPECIFIED. Change in Payroll Deduction rate
effective with the pay period ending
(date):
- ------------------------
I elect to participate in the 1998 Employee Stock Purchase Plan (the "PLAN")
of Puma Technology, Inc. (the "COMPANY") and to subscribe to purchase shares of
the Company's Common Stock in accordance with this Subscription Agreement and
the Plan.
I authorize payroll deductions of percent (in whole percentages not
less than 1%, unless an election to stop deductions is being made) or more than
10%) of my "COMPENSATION" on each payday throughout the "OFFERING PERIOD" in
accordance with the Plan. I understand that these payroll deductions will be
accumulated for the purchase of shares of Common Stock at the applicable
purchase price determined in accordance with the Plan. Except as otherwise
provided by the Plan, I will automatically purchase shares on each "PURCHASE
DATE" unless I withdraw from the Plan by giving written notice on a form
provided by the Company or unless my eligibility or employment terminates.
I understand that I will automatically participate in each subsequent
Offering that commences immediately after the last day of an Offering in which I
am participating until I withdraw from the Plan by giving written notice on a
form provided by the Company or my eligibility or employment terminates.
Shares I purchase under the Plan should be issued in the name(s) set forth
below. (Shares may be issued in the participant's name alone or together with
the participant's spouse as community property or in joint tenancy.)
NAME(S):
- --------------------------------------------------------------------------------
ADDRESS:
- --------------------------------------------------------------------------------
MY SOCIAL SECURITY NUMBER:
- ------------------------------------------------------------
I agree to make adequate provision for the federal, state, local and foreign
tax withholding obligations, if any, which arise upon my purchase of shares
under the Plan and/or my disposition of shares. The Company may withhold from my
compensation the amount necessary to meet such withholding obligations.
I agree that, unless otherwise permitted by the Company, until I dispose of
my shares, I will hold the shares I purchase under the Plan in the name(s)
entered above (and not in the name of any nominee) during a period of at least
two years from the first day of the Offering Period in which, and at least one
year from the Purchase Date on which, I acquired such shares.
I AGREE THAT I WILL NOTIFY THE CHIEF FINANCIAL OFFICER OF THE COMPANY IN
WRITING WITHIN 30 DAYS AFTER ANY SALE, GIFT, TRANSFER OR OTHER DISPOSITION OF
ANY KIND PRIOR TO THE END OF THE PERIODS REFERRED TO IN THE PRECEDING PARAGRAPH
(A "DISQUALIFYING DISPOSITION") OF ANY SHARES I PURCHASED UNDER THE PLAN. IF I
DO NOT RESPOND WITHIN 30 DAYS OF THE DATE OF A DISQUALIFYING DISPOSITION SURVEY
DELIVERED TO ME BY CERTIFIED MAIL, THE COMPANY IS AUTHORIZED TO TREAT MY
NONRESPONSE AS MY NOTICE TO THE COMPANY OF A DISQUALIFYING DISPOSITION AND TO
COMPUTE AND REPORT TO THE INTERNAL REVENUE SERVICE THE ORDINARY INCOME I MUST
RECOGNIZE UPON SUCH DISQUALIFYING DISPOSITION.
I am familiar with the provisions of the Plan and agree to participate in
the Plan subject to all of its provisions. I understand that the Board of
Directors of the Company reserves the right to terminate the Plan or to amend
the Plan and my right to purchase stock under the Plan to the extent provided by
the Plan. I understand that the effectiveness of this Subscription Agreement is
dependent upon my eligibility to participate in the Plan.
Date:
- ------------------------ Signature:
- -------------------------------------------------------
<PAGE>
PUMA TECHNOLOGY, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
NAME (Please print):
- ------------------------------------------------------------------------------
(Last) (First) (Middle)
I hereby elect to withdraw from the Puma Technology, Inc. 1998 Employee
Stock Purchase Plan (the "PLAN") and/or from the Offering under the Plan which
began on (date) and in which I am currently participating (the
"CURRENT OFFERING").
ELECT EITHER A OR B BELOW:
<TABLE>
<S> <C> <C>
-TM- A.
I request that the Company cease all further payroll deductions from my Compensation
under the Plan (provided that I have given sufficient notice prior to the next payday).
I request that all payroll deductions credited to my account under the Plan (if any) not
previously used to purchase shares under the Plan shall NOT be used to purchase shares
on the next Purchase Date of the Current Offering. Instead, I request that all such
amounts be paid to me as soon as practicable. I understand that this election
immediately terminates my interest in the Current Offering and in the Plan.
-TM- B. I elect to terminate my participation in the Plan following my purchase of shares on
next Purchase Date of the Current Offering.
I request that the Company cease all further payroll deductions from my Compensation
under the Plan (provided that I have given sufficient notice prior to the next payday).
I request that all payroll deductions credited to my account under the Plan (if any) not
previously used to purchase shares under the Plan shall be used to purchase shares on
the next Purchase Date of the Current Offering to the extent permitted by the Plan. I
understand that this election will terminate my interest in the Plan immediately
following such purchase. I request that any cash balance remaining in my account under
the Plan after my purchase of shares be paid to me as soon as practicable.
<CAPTION>
-TM- I elect to terminate immediately my participation in the Current Offering and in the Plan.
<S> <C>
</TABLE>
I understand that by making this election I am terminating my interest in
the Plan and that no further payroll deductions will be made (provided that I
have given sufficient notice prior to the next payday) unless I elect in
accordance with the Plan to become a participant in another Offering under the
Plan by filing a new Subscription Agreement with the Company.
Date:
- ------------------------ Signature:
- -------------------------------------------------------
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA
Revenue..................................................... $20,043 $22,308 $15,629 $ 7,716 $ 860
Cost of revenues............................................ 1,950 3,077 1,738 777 77
------- ------- ------- ------- -------
Gross profit................................................ 18,093 19,231 13,891 6,939 783
Operating expenses.......................................... 22,793 21,880 13,222 8,916 2,920
------- ------- ------- ------- -------
Operating income (loss)..................................... (4,700) (2,649) 669 (1,977) (2,137)
Other income, net........................................... 3,739 1,114 822 85 71
------- ------- ------- ------- -------
Income (loss) before income taxes........................... (961) (1,535) 1,491 (1,892) (2,066)
Provision for income taxes.................................. (715) (1,164) (831) (509) (80)
------- ------- ------- ------- -------
Net income (loss)........................................... $(1,676) $(2,699) $ 660 $(2,401) $(2,146)
======= ======= ======= ======= =======
Basic net income (loss) per share........................... $ (0.13) $ (0.22) $ 0.07 $ (0.82) $ (0.75)
======= ======= ======= ======= =======
Diluted net income (loss) per share......................... $ (0.13) $ (0.22) $ 0.06 $ (0.82) $ (0.75)
======= ======= ======= ======= =======
<CAPTION>
JULY 31,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA
Cash, cash equivalents and short-term investments........... $25,338 $21,083 $21,171 $ 982 $ 2,500
Total assets................................................ 33,243 30,439 29,413 4,004 2,948
Long-term obligations....................................... -- 41 66 961 16
Total stockholders' equity.................................. 26,563 26,224 26,423 653 1,886
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED,
-------------------------------------------------------------------------------------------
JULY 31, APRIL 30, JAN 31, OCT 31, JULY 31, APRIL 30, JAN 31, OCT 31,
1999 1999 1999 1998 1998 1998 1998 1997
--------- ---------- -------- -------- --------- ---------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUMMARY QUARTERLY DATA
Revenue............................. $5,714 $5,175 $4,742 $4,412 $4,602 $6,742 $5,727 $5,237
Gross profit........................ 5,338 4,812 4,216 3,727 3,751 5,770 5,098 4,612
Operating income (loss)............. 404 (339) (1,971) (2,794) (3,943) 900 312 82
Net income (loss)................... 1,249 544 (1,863) (1,606) (4,029) 726 376 228
Basic net income (loss) per share... $ 0.09 $ 0.04 $(0.15) $(0.13) $(0.33) $ 0.06 $ 0.03 $ 0.02
Diluted net income (loss) per
share............................. $ 0.09 $ 0.04 $(0.15) $(0.13) $(0.33) $ 0.06 $ 0.03 $ 0.02
</TABLE>
1
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
Puma Technology, Inc. ("Puma" or "the Company") develops, markets and
supports mobile device management and synchronization software, enabling
consumers, mobile professionals and information technology officers to harness
the full capabilities of handheld computers, smart phones, and other wireless
personal communication platforms. The Company currently has six primary families
of products: its Intellisync-Registered Trademark- family of products, which
performs advanced data synchronization from handheld devices to personal
computers; its Intellisync Anywhere-TM- server product, which performs advanced
data synchronization from handheld devices to corporate groupware messaging
servers; its Intellisync Software Development Kit ("SDK"), which enables
customers to develop translators for both applications and devices, which can
then be incorporated into the Company's product offerings; its Satellite
Forms-TM- product, which is a visual rapid application development tool for
devices based on the Palm Computing-Registered Trademark- platform; its
TranXit-Registered Trademark- family of products, which supports infrared
connectivity, and its Intellisync for Notebooks family of products, which
combines infrared connectivity with advanced data synchronization.
Intellisync software is used for advanced synchronization of calendar,
e-mail, contact and task data between PCs and popular handheld computers, smart
phones and smart pagers. Intellisync software is currently distributed directly
to the end user and through the Company's retail distribution channel, Web
store, and fulfillment house, and is bundled with products offered by certain
handheld device manufacturers.
Introduced in the second quarter of fiscal 1999, Intellisync Anywhere is a
server-based solution that provides secure, reliable synchronization of e-mail
and personal information manager ("PIM") data to mobile devices both in
connected and wireless environments. The Company is currently working on
expanding Intellisync Anywhere to include support for Lotus Domino, Novell
Groupwise and to incorporate its Satellite Forms functionality.
The Intellisync SDK is primarily licensed directly to both hardware and
software manufacturers to enable their products to operate with Intellisync
software.
Satellite Forms is a visual development tool that enables developers to
create complete applications for the Palm Computing platform--without
programming. These integrate tightly with corporate data stored in Microsoft
Access, Oracle, DB2, Lotus Notes and others.
TranXit and Intellisync for Notebooks 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") and
advanced data synchronization from the laptop back to desktop computers. These
OEM customers include the Company's software in their products during the
manufacturing process and for each device shipped, the Company earns a royalty.
Royalties are typically paid to the Company based on actual usage or forecasted
volume, although certain contracts contain fixed royalties regardless of volume,
for a given time period.
The following information should be read in conjunction with the
consolidated financial statements and the notes thereto included elsewhere in
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
2
<PAGE>
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. We derive revenue from two primary sources: software licenses and
fees for service, which include customer-funded engineering services and
amortization of maintenance contract programs. Revenue was $20,043,000 in fiscal
1999 as compared to $22,308,000 in fiscal 1998 and $15,629,000 in fiscal 1997.
Revenue decreased 10% in fiscal 1999 as compared to fiscal 1998 and increased
43% in fiscal 1998 as compared to 1997.
OEM revenue continues to represent a significant portion of our revenue. OEM
revenue represented 56%, 68%, and 74% of our revenue in fiscal 1999, fiscal
1998, and fiscal 1997, respectively. In fiscal 1999, 1998 and 1997, Toshiba
accounted for approximately 14%, 18% and 21% of our revenue, respectively, and
no other customer accounted for more than 10% of our revenue. 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, we believe that the percentage of revenue derived from OEMs may
fluctuate in future periods since the distribution channels used by us for our
existing and future products are subject to change.
International revenue continues to represent a significant portion of our
revenue. International revenue represented approximately 40%, 48%, and 54% of
our revenue in fiscal 1999, fiscal 1998, and fiscal 1997, respectively. We
expect that international revenue will continue to represent a significant
portion of our revenue for the foreseeable future.
LICENSE REVENUE. License revenue is earned from the sale of software
products and royalty agreements with OEMs. License revenue was $18,555,000 in
fiscal 1999 as compared to $18,469,000 in fiscal 1998 and $13,710,000 in fiscal
1997. Our license revenues increased for Software Development Kits, IntelliSync,
Satellite Forms and Intellisync Anywhere products in fiscal 1999 as compared to
fiscal 1998. These increases were offset by declining revenues in the
Intellisync for Notebook and TranXit products. The 35% increase in license
revenue from fiscal 1998 as compared to fiscal 1997 was primarily due to
increased revenue derived from our IntelliSync for handheld devices, and to a
lesser extent, increased license revenue derived from Intellisync for Notebook
products and Software Development Kits. Deferred revenue was $3,737,000 at
July 31, 1999, as compared to $1,489,000 at July 31, 1998. This represented an
increase of 151%, which is attributable to revenues related to our SDK and
Intellisync Gold and Intellisync Anywhere products.
SERVICE REVENUE. Service revenue is derived from fees for services,
including customer-funded engineering projects and amortization of maintenance
contract programs. Service revenue was $1,488,000 in fiscal 1999 as compared to
$3,839,000 in fiscal 1998 and $1,919,000 in fiscal 1997. The 61% decrease in
service revenue for fiscal 1999 as compared to fiscal 1998 was primarily due to
a reduced number of customer-funded engineering service projects for software
development. The 100% increase in service revenue for fiscal 1998 as compared to
fiscal 1997 was primarily due to an increased number of customer-funded
engineering service projects for software development for new mobile computing
devices.
COST OF REVENUE. Cost of revenue consists primarily of packaged product
costs, including product media and duplication, manuals, packing supplies,
shipping expenses and personnel related costs incurred under customer-funded
software development agreements. Our cost of revenue is affected by the mix
between our revenue sources such as royalties, site licenses, packaged products,
customer-funded engineering contracts and sales and fulfillment via our Web
site. Additionally, our cost of revenue is affected by the mix between our
various distribution channels and is also affected by the mix between
geographies such as the United States, Japan and Europe. In general, increased
revenue contribution from royalties, site
3
<PAGE>
licenses and fulfillment via our web site will have a favorable impact on cost
of revenue as compared to other sources of revenue since the cost of sales
associated with these sources tend not to be significant.
COST OF LICENSE REVENUE. Cost of license revenue consist primarily of
packaged product costs including 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 was
7% for fiscal 1999 and 8% for 1998 and 1997. The slight decrease in fiscal 1999
in cost of license revenue as percentage of license revenue was primarily due to
reduced packaged product costs as a percentage of packaged product revenue as
well as increased site licensing of personal and server-based products to
corporations.
COST OF SERVICE REVENUE. Cost of service revenue primarily represents
personnel related costs incurred for development work under customer funded
software development agreements. Cost of service revenue as a percentage of
service revenue represented 46% in fiscal 1999, 40% in fiscal 1998 and 37% in
fiscal 1997.
RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of salaries and other related expenses for research and development
personnel, quality assurance personnel, product localization, fees to outside
contractors and the cost of facilities and depreciation of capital equipment. We
invest in research and development both for new products and to provide
continuing enhancements to existing products. Research and development expenses
increased by 12% to $11,099,000 in fiscal 1999 from $9,876,000 in fiscal 1998.
In fiscal 1998, research and development expenses increased 58% to $9,876,000
from $6,236,000 in fiscal 1997. Research and development represented
approximately 55% of total revenue in fiscal 1999, 44% of total revenue in
fiscal 1998 and 40% in fiscal 1997. The absolute dollar year over year increase
in research and development expenses in fiscal 1999 as compared to fiscal 1998
was primarily due to increased personnel related costs and spending. This
increased spending was required to develop and support a wider breadth of our
existing Intellisync products and continued investment in our Satellite Forms
and Intellisync Anywhere products. The absolute dollar year-over-year increase
in research and development expenses in fiscal 1998 as compared to fiscal 1997
was primarily due to increased personnel related costs and spending required to
develop our 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 our research and
development expenses are comprised of fees paid to outside contractors that are
engaged by us on a project-by-project basis. We believe 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 costs have been expensed as incurred. Statement of
Financial Accounting Standards No. 86 requires capitalization of certain
software development costs once technological feasibility is established. We
define establishment of technological feasibility at the point that 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,
marketing and technical support personnel. Sales and marketing expenses
increased by 10% to $7,536,000 from $6,855,000 in fiscal 1998. In fiscal 1998,
sales and marketing expenses increased 72% to $6,855,000 from $3,983,000 in
fiscal 1997. Sales and marketing expenses represented approximately 38%, 31% and
25% of total revenues in fiscal 1999, fiscal 1998, and fiscal 1997,
respectively. Sales and marketing expenses increased in absolute dollars in both
fiscal 1999 and fiscal 1998 primarily due to the expansion of our sales and
marketing force, related travel and entertainment expenses and increased
marketing activities in an effort to expand our customer base and channel
presence. We expect that sales and marketing expenses will increase in fiscal
2000 as we continue
4
<PAGE>
to expand our direct sales force in the United States to support the sales of
our personal and server-based products to Fortune 1000 Corporations, as well as
expand our presence in Europe.
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 13% to $3,390,000 in fiscal 1999 from
$2,994,000 in fiscal 1998. In fiscal 1998, general and administrative expenses
increased 41% to $2,994,000 from $2,123,000 in fiscal 1997. General and
administrative expenses represented approximately 17% of total revenues in
fiscal 1999, 13% of total revenues in fiscal 1998 and 14% in fiscal 1997. The
year-over-year increases in absolute general and administrative spending in
fiscal 1999 were primarily due to increased personnel costs, legal fees for
defending our Intellectual Property rights, and the amortization of intangible
assets obtained in the SoftMagic acquisition. The year-over-year increases in
absolute general and administrative spending in fiscal 1998 were primarily due
to increased personnel and facility related costs, legal and accounting fees,
and the amortization of intangible assets related to the acquisition of Real
World Solutions.
IN-PROCESS RESEARCH AND DEVELOPMENT. We did not incur an expense for
in-process research and development in fiscal 1999. In the fourth quarter of
fiscal 1998, we recorded a charge of $2,155,000 for in-process research and
development associated with the asset purchase of SoftMagic. The SoftMagic
acquisition has been accounted for as a purchase. The total purchase price of
approximately $3,076,000 was assigned, based on an independent appraisal, to the
fair value of the assets acquired, including $35,000 to tangible assets
acquired, $2,155,000 to in-process research and development and $886,000 to
identified intangible assets. The in-process research and development was
expensed at the acquisition date.
The value assigned to acquired in-process technology was determined by
identifying research projects in areas for which technological feasibility had
not been established as of the acquisition date. These include projects for
Satellite Forms and MobileXtension-TM-. The value was determined by estimating
the revenue contribution of each of these products. The net cash flows were then
discounted utilizing a weighted average cost of capital of 35%. This discount
rate takes into consideration the inherent uncertainties surrounding the
successful development of the in-process research and development, the expected
profitability levels of such technology, and the uncertainty of technological
advances which could potentially impact the estimates described above. Revenues
were projected to be generated in 1998 for the products in development at the
acquisition date. If these projects are not successfully developed, future
revenues and profitability of the Company may be adversely affected.
Additionally, the value of other intangible assets acquired may become impaired.
In the fourth quarter of fiscal 1997, we recorded a charge of $880,000 for
in-process research and development associated with the asset purchase of Real
World Solutions.
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.
The value assigned to acquired in-process technology was determined by
identifying research projects in areas for which technological feasibility had
not been established as of the acquisition date. Some of the technology obtained
was incorporated into Intellisync Anywhere. The value was determined by
estimating the revenue contribution of each of these products. The net cash
flows were then discounted utilizing a weighted average cost of capital of 50%.
This discount rate takes into consideration the inherent uncertainties
surrounding the successful development of the in-process research and
development, the expected profitability levels of such technology, and the
uncertainty of technological advances which could potentially impact the
estimates described above. Revenues were projected to be generated in 1999 for
the products in development at the acquisition date. If these projects are not
successfully developed, future
5
<PAGE>
revenues and profitability of the Company may be adversely affected.
Additionally, the value of other intangible assets acquired may become impaired.
RESTRUCTURE. In the first quarter of Fiscal 1999, we implemented a
restructuring program for the purpose of consolidating the majority of our
engineering and development work at existing facilities in Nashua, New
Hampshire. As part of this program, we implemented a reduction in force of
approximately 40 positions that primarily affected the engineering group located
at the San Jose, California facility. The severance charge was $210,000. The
plan was completed at the end of February 1999. Some of the positions eliminated
in San Jose will be replaced in Nashua, New Hampshire. We expect the savings to
be approximately $3,200,000 annually. Most of the expected savings from this
program will be realized in research and development.
Also as part of the restructuring, we vacated a portion of the San Jose
facility, as well as a recently leased facility in Nashua. The restructure
charge related to facilities was $558,000. We have secured a tenant for the San
Jose facility, and we continue to look for a tenant to sublease the facility in
Nashua. We expect the savings to be approximately $349,000 annually.
INTEREST AND OTHER INCOME, NET. Interest and other income, net, represents
interest earned by us on our 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 $3,739,000 in fiscal 1999
from $1,114,000 in fiscal 1998. The increase in interest and other income, net,
in fiscal 1999 as compared to fiscal 1998 was primarily non-recurring income
associated with the sale of stock in Amazon.com. We acquired this position as a
result of a strategic investment in PlanetAll, which was subsequently acquired
by Amazon.com. The increase in interest and other income, net, in fiscal 1998 as
compared to fiscal 1997 was due to increased interest income on increased cash,
cash equivalents and short-term investment base held throughout the year.
PROVISION FOR INCOME TAXES. Provision for income taxes decreased to
$715,000 in fiscal 1999 from $1,164,000 in fiscal 1998 and $831,000 in fiscal
1997. The provision for income taxes primarily represents foreign withholding
taxes on royalties earned by us from certain foreign customers.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
We expect that our future operating results could fluctuate significantly as
a result of numerous factors including, but not limited to, the demand for our
products, our success in developing new products, the timing of new product
introductions by us and our competitors, market acceptance of our 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 our
products and mobile computing devices generally, the rate of growth of the
personal computer market in general and general economic conditions.
Our revenue is difficult to forecast in part because the market for data
synchronization software is rapidly evolving. In addition, we typically operate
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 our expense levels is fixed in advance, based in large part on our
forecasts of future revenue. If revenue is below expectations in any given
quarter, the adverse impact of the shortfall on our operating results may be
magnified by our 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 our business, financial condition and
operating results that could be material.
We have historically derived a substantial portion of our revenue from
OEMs. Due to our ongoing effort to expand into retail and reseller distribution
channels, in addition to expanding sales to corporations, we expect an
increasing percentage of our sales will come from corporate customers. Sales
into these
6
<PAGE>
channels are harder to predict and may have lower margins than other channels.
We have generally recognized a substantial portion of our revenue in the last
month of each quarter, when we typically receive royalty reports from our OEM
customers. Any significant deferral of purchases of our products by our
customers could have a material adverse effect on our 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.
Our gross margin on our service revenue is substantially lower than our
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 our
gross margins. We may also change prices or increase spending in response to
competition or to pursue new market opportunities.
The operating results of many software companies reflect seasonal
fluctuation. For example, sales in Europe and certain other countries typically
are adversely affected in the summer months when business activity is reduced.
Our revenues and operating results may be adversely affected by diminished
demand for our products on a seasonal basis.
Because of these factors, we believe that period-to-period comparisons of
our 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, our operating results and stock price may be
subject to significant volatility, particularly on a quarterly basis.
LIQUIDITY AND CAPITAL RESOURCES
Our operating activities provided cash of $98,000, $2,128,000, and $392,000
in fiscal 1999, fiscal 1998 and fiscal 1997, respectively. Net cash provided in
fiscal 1999 was primarily due to net loss adjusted for non-cash depreciation and
amortization, an increase in customer deposits and small changes in other
working capital accounts. Net cash provided in fiscal 1998 and fiscal 1997 was
primarily due to net loss adjusted for non-cash depreciation and amortization,
in-process research and development related to the asset acquisitions and
adjusted for changes in deferred revenue, accrued expenses, accounts receivable,
prepaid expenses, inventory and accounts payable.
Cash provided in investing activities for fiscal 1999 was $4,902,000. This
compares with cash used of $1,046,000 and $19,444,000 in fiscal 1998 and fiscal
1997, respectively. Cash provided in fiscal 1999 was primarily due to maturities
of short-term investments, and to the sale of Amazon.com stock. Cash used in
fiscal 1998 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 SoftMagic. Cash used in fiscal 1997 was due to purchases of short
term investments, and to a lesser extent, purchases of property and equipment
and cash used in the purchase of Real World Solutions.
Cash provided by financing activities was $1,043,000, $512,000, and
$23,894,000 in fiscal 1999, fiscal 1998 and fiscal 1997, respectively. Cash
provided from financing activities in fiscal 1999 was attributable to the
issuance of stock under our employee stock purchase plan as well as the exercise
of stock options. Cash provided from financing activities in fiscal 1998 was
primarily due to the issuance of Common Stock and repayments of notes to
stockholders. Cash provided from financing activities in fiscal 1997 was
primarily due to the issuance of Common Stock in our initial public offering,
and, to a much lesser extent, the preferred stock and proceeds from conversion
of warrants and exercise of stock options.
At July 31, 1999 our principal source of liquidity represented by cash, cash
equivalents and short-term investments totaled $25,338,000. We currently have no
significant capital commitments. We currently have no bank financing
arrangements. We believe that our current cash, cash equivalents, short-term
investment balances and cash generated from operations, if any, will be
sufficient to meet our working capital and other cash requirements for at least
the next twelve months.
7
<PAGE>
OTHER FACTORS
YEAR 2000 READINESS DISCLOSURE. Some computers, software, and other
equipment include programming code in which calendar year data is abbreviated to
only two digits. As a result of this design decision, some of these systems
could fail to operate or fail to produce correct results if "00" is interpreted
to mean 1900, rather than 2000. These problems are widely expected to increase
in frequency and severity as the year 2000 approaches, and are commonly referred
to as the "Millennium Bug" or "Year 2000 Problem."
The Year 2000 Problem could affect computers, software, and other equipment
used, operated or maintained by us. We believe that our computer systems are
Year 2000 compliant.
We believe that we have substantially identified and resolved all potential
Year 2000 Problems with any of the software products that we develop and market.
However, we also believe that it is not possible to determine with complete
certainty that all Year 2000 Problems affecting our software products have been
identified or corrected due to the complexity of these products and the fact
that these products interact with other third-party vendor products and operate
on computer systems which are not under our control.
In addition to computers and related systems, the operation of office and
facilities equipment, such as fax machines, photocopiers, telephone switches,
security systems, elevators, and other common devices may be affected by the
Year 2000 Problem. We presently believe that our office and facilities equipment
are Year 2000 compliant.
We have limited or no control over the actions of third party suppliers.
Thus, while we expect that we will be able to resolve any significant Year 2000
Problems with these systems, there can be no assurance that these suppliers will
resolve any or all Year 2000 Problems with these systems before the occurrence
of a material disruption to our business or any of our customers. Any failure of
these third parties to resolve Year 2000 Problems with these systems in a timely
manner could have a material adverse effect on our business, financial
condition, and results of operation.
We expect to identify and resolve all Year 2000 Problems that would
materially adversely affect our business operations. However, we believe that it
is not possible to determine with complete certainty that all Year 2000 Problems
affecting us have been identified or corrected. The number of systems that could
be affected and the interactions among these systems are simply too numerous. In
addition, one cannot accurately predict how many Year 2000 Problem-related
failures will occur or the severity, duration, or financial consequences of
these perhaps inevitable failures. As a result, we expect that we could likely
suffer the following consequences:
1. a significant number of operational inconveniences and
inefficiencies for us and our clients that may divert our time, attention
and financial and human resources from ordinary business activities; and
2. a lesser number of serious system failures that may require
significant efforts by us or our clients to prevent or alleviate material
business disruptions.
We have not developed any Year 2000 contingency plans. We do not believe
that the Year 2000 Problem will have a material adverse effect on our business
or results of operations.
MARKET RISK DISCLOSURE. At the end of fiscal year 1999, we had an
investment portfolio of fixed income securities excluding those classified as
cash and cash equivalents, of $10,414,000 (see Note 3 of Notes to Consolidated
Financial Statements). These securities, like all fixed income instruments, are
subject to interest rate risk and will fall in values if market interest rates
increase. If market interest rates were to increase immediately and uniformly by
10% from levels as of July 31, 1999, the decline of the fair value of the
portfolio would not be material. However, we have the ability to hold our fixed
income investments until maturity, and therefore would not expect to recognize
such an adverse impact in income or cash flows.
8
<PAGE>
SUBSEQUENT EVENT. On Aug. 24, 1999, we entered into a definitive agreement
to acquire ProxiNet, Inc., headquartered in Emeryville, California, for
2,600,000 shares of our Common Stock to be issued in exchange for all issued and
outstanding preferred and common shares of ProxiNet Inc., and assumption of all
outstanding ProxiNet stock options. Closing of the merger is subject to certain
closing conditions and approval by the shareholders of ProxiNet, although,
certain affiliates of ProxiNet have agreed to vote their shares in favor of the
merger. The merger is expected to be finalized in our fiscal quarter ending
October 31, 1999, and as a result, we expect to incur a one-time charge for
in-process research and development for ProxiNet's products which have not yet
reached technological feasibility.
We believe that the acquisition has the potential to broaden the appeal of
Internet-connected wireless devices and other Internet appliances. By combining
the Intellisync synchronization platform with ProxiNet's highly scalable
proxy-based transformation and delivery architecture, major Internet
destinations such as portals, search-engines and e-commerce companies will have
the means to provide highly secure, real-time access to users of handheld
devices, cellular phones and other wireless devices and Internet appliances.
Users will be able to browse information online, while simultaneously retrieving
and synchronizing critical information, such as e-mail, calendar events, or
shopping information for use while offline. The combined companies' solution
eliminates the need to be constantly connected and online, enduring often
unreliable or unavailable wireless connections and incurring expensive wireless
charges. We plan to market this technology primarily to major Internet companies
such as portals and e-commerce sites as well as to cellular carriers and other
wireless providers.
9
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 31,
---------------------
1999 1998
--------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $13,461 $ 7,418
Short-term investments.................................... 11,877 13,665
Accounts receivable, net.................................. 3,027 3,431
Inventories............................................... 258 244
Other current assets...................................... 450 392
------- -------
Total current assets.................................... 29,073 25,150
Property and equipment, net................................. 2,580 3,254
Other assets................................................ 1,590 2,035
------- -------
Total assets............................................ $33,243 $30,439
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 723 $ 1,140
Accrued liabilities....................................... 2,220 1,517
Deferred revenues......................................... 3,737 1,489
Current portion of capital lease obligations.............. -- 28
------- -------
Total current liabilities............................... 6,680 4,174
Capital lease obligations, net of current portion........... -- 41
------- -------
Total liabilities....................................... 6,680 4,215
Commitments and contingencies (Note 5)......................
Common stock, $0.001 par value; 40,000 shares authorized
13,335 and
12,473 shares issued and outstanding at July 31, 1999 and
1998 respectively......................................... 13 12
Additional paid-in capital.................................. 35,342 33,871
Receivable from stockholders................................ (428) (66)
Deferred stock compensation................................. (25) (53)
Other comprehensive income (loss)........................... 877 --
Accumulated deficit......................................... (9,216) (7,540)
------- -------
Total stockholders' equity.............................. 26,563 26,224
------- -------
Total liabilities and stockholders' equity.............. $33,243 $30,439
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
10
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
------------------------------
1999 1998 1997
-------- -------- --------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
Revenue
License................................................... $18,555 $18,469 $13,710
Services.................................................. 1,488 3,839 1,919
------- ------- -------
Total revenue........................................... 20,043 22,308 15,629
------- ------- -------
Cost of revenue
License................................................... 1,262 1,541 1,032
Services.................................................. 688 1,536 706
------- ------- -------
Total cost of revenue................................... 1,950 3,077 1,738
------- ------- -------
Gross profit............................................ 18,093 19,231 13,891
Operating expenses:
Research and development.................................. 11,099 9,876 6,236
Sales and marketing....................................... 7,536 6,855 3,983
General and administrative................................ 3,390 2,994 2,123
In-process research and development....................... -- 2,155 880
Restructuring............................................. 768 -- --
------- ------- -------
Total operating expenses................................ 22,793 21,880 13,222
------- ------- -------
Operating income (loss)..................................... (4,700) (2,649) 669
Other income, net........................................... 3,739 1,114 822
------- ------- -------
Income (loss) before income taxes........................... (961) (1,535) 1,491
Provision for income taxes.................................. (715) (1,164) (831)
------- ------- -------
Net income (loss)....................................... $(1,676) $(2,699) $ 660
======= ======= =======
Basic net income (loss) per share........................... $ (0.13) $ (0.22) $ 0.07
======= ======= =======
Diluted net income (loss) per share......................... $ (0.13) $ (0.22) $ 0.06
======= ======= =======
Shares used in computing basic net income (loss) per common
share..................................................... 12,824 12,118 9,326
======= ======= =======
Shares used in computing diluted net income (loss) per
common share.............................................. 12,824 12,118 11,442
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
11
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE
STOCK ------------------- ------------------- PAID-IN FROM
SUBSCRIPTION SHARES AMOUNT SHARES AMOUNT CAPITAL STOCKHOLDERS
------------ -------- -------- -------- -------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at July 31, 1996.................... 1,582 2,620 $ 3 4,297 $ 4 $ 6,686 $(2,013)
Issuance of Series C convertible preferred
stock, net of issuance costs.............. (1,582) 286 -- -- -- 1,582 1,582
Issuance of Common Stock upon exercise of
options................................... -- -- -- 189 -- 564 --
Issuance of warrants........................ -- -- -- -- -- 175 --
Exercise of warrants for Common Stock....... -- -- -- 330 -- 405 --
Conversion of debenture to Common Stock..... -- -- -- 344 -- 953 --
Repurchase of unvested Common Stock......... -- -- -- (3) -- -- --
Loan to stockholder......................... -- -- -- -- -- -- (71)
Repayments by stockholder................... -- -- -- -- -- -- 310
Amortization of deferred compensation....... -- -- -- -- -- -- --
Shares issued in initial offering, net of
expenses.................................. -- -- -- 2,500 4 21,161 --
Conversion of preferred stock to Common
Stock..................................... -- (2,906) (3) 4,375 4 (1) --
Net income.................................. -- -- -- -- -- -- --
------- ------ ---- ------ ---- ------- -------
Balance at July 31, 1997.................... -- -- -- 12,032 12 31,525 (192)
======= ====== ==== ====== ==== ======= =======
Issuance of Common Stock upon exercise of
options................................... -- -- -- 91 -- 107 --
Issuance of Common Stock under Employee
Stock Purchase Plan....................... -- -- -- 62 -- 273 --
Repurchase of unvested Common Stock......... -- -- -- (54) -- (10) --
Issuance of Options and Warrants............ -- -- -- -- -- 38 --
Issuance of Common Stock in connection with
Soft Majic Acquisition.................... -- -- -- 342 -- 1,938 --
Repayments by stockholder................... -- -- -- -- -- -- 126
Amortization of deferred compensation....... -- -- -- -- -- -- --
Net loss.................................... -- -- -- -- -- -- --
------- ------ ---- ------ ---- ------- -------
Balance at July 31, 1998.................... -- -- -- 12,473 12 33,871 (66)
======= ====== ==== ====== ==== ======= =======
Issuance of Common Stock upon exercise of
options................................... -- -- -- 694 -- 1,165 --
Issuance of Common Stock under Employee
Stock Purchase Plan....................... -- -- -- 174 1 308 --
Repurchase of unvested Common Stock......... -- -- -- (6) -- (2) --
Repayments by (notes issued to)
stockholders.............................. -- -- -- -- -- -- (362)
Unrealized gain on Securities available for
sale...................................... -- -- -- -- -- -- --
Currency translation adjustment............. -- -- -- -- -- -- --
Amortization of deferred compensation....... -- -- -- -- -- -- --
Net loss.................................... -- -- -- -- -- -- --
------- ------ ---- ------ ---- ------- -------
Other Comprehensive Income (loss)........... -- -- -- -- -- -- --
------- ------ ---- ------ ---- ------- -------
Balance at July 31, 1999.................... $ -- -- $ -- 13,335 $ 13 $35,342 $ (428)
======= ====== ==== ====== ==== ======= =======
<CAPTION>
DEFERRED OTHER
STOCK ACCUMULATED COMPREHENSIVE STOCKHOLDERS' COMPREHENSIVE
COMPENSATION DEBT INCOME (LOSS) EQUITY INCOME (LOSS)
------------ ----------- ------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at July 31, 1996.................... $(108) $(5,501) -- $ 653 --
Issuance of Series C convertible preferred
stock, net of issuance costs.............. -- -- -- 1,582 --
Issuance of Common Stock upon exercise of
options................................... -- -- -- 564 --
Issuance of warrants........................ -- -- -- 175 --
Exercise of warrants for Common Stock....... -- -- -- 405 --
Conversion of debenture to Common Stock..... -- -- -- 953 --
Repurchase of unvested Common Stock......... -- -- -- -- --
Loan to stockholder......................... -- -- -- (71) --
Repayments by stockholder................... -- -- -- 310 --
Amortization of deferred compensation....... 27 -- -- 27 --
Shares issued in initial offering, net of
expenses.................................. -- -- -- 21,165 --
Conversion of preferred stock to Common
Stock..................................... -- -- -- -- --
Net income.................................. -- 660 -- 660 $ 660
----- ------- ---- ------- -------
Balance at July 31, 1997.................... (81) (4,841) -- 26,423 $ 660
===== ======= ==== ======= =======
Issuance of Common Stock upon exercise of
options................................... -- -- -- 107 --
Issuance of Common Stock under Employee
Stock Purchase Plan....................... -- -- -- 273 --
Repurchase of unvested Common Stock......... -- -- -- (10) --
Issuance of Options and Warrants............ -- -- -- 38 --
Issuance of Common Stock in connection with
Soft Majic Acquisition.................... -- -- -- 1,938 --
Repayments by stockholder................... -- -- -- 126 --
Amortization of deferred compensation....... 28 -- -- 28 --
Net loss.................................... -- (2,699) -- (2,699) $(2,699)
----- ------- ---- ------- -------
Balance at July 31, 1998.................... (53) (7,540) -- 26,224 $(2,699)
===== ======= ==== ======= =======
Issuance of Common Stock upon exercise of
options................................... -- -- -- 1,165 --
Issuance of Common Stock under Employee
Stock Purchase Plan....................... -- -- -- 309 --
Repurchase of unvested Common Stock......... -- -- -- (2) --
Repayments by (notes issued to)
stockholders.............................. -- -- -- (362) --
Unrealized gain on Securities available for
sale...................................... -- -- 883 883 $ 883
Currency translation adjustment............. -- -- (6) (6) (6)
Amortization of deferred compensation....... 28 -- -- 28 --
Net loss.................................... -- (1,676) -- (1,676) (1,676)
----- ------- ---- ------- -------
Other Comprehensive Income (loss)........... -- -- -- -- (799)
----- ------- ---- ------- -------
Balance at July 31, 1999.................... $ (25) $(9,216) $877 $26,563
===== ======= ==== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
12
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
------------------------------
1999 1998 1997
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $ (1,676) $ (2,699) $ 660
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................... 1,553 1,182 616
In-process research and development..................... -- 2,155 880
Other................................................... 5 28 20
Realized gain on sale of investment....................... (2,650) -- --
Changes in assets and liabilities:
Accounts receivable..................................... 404 184 (1,778)
Inventories............................................. (14) (20) (59)
Other current assets.................................... (58) 51 (384)
Accounts payable........................................ (417) (75) 512
Accrued liabilities..................................... 703 516 284
Deferred revenues....................................... 2,248 806 (359)
-------- -------- --------
Net cash provided by operating activities............. 98 2,128 392
-------- -------- --------
Cash flows from investing activities:
Purchase of property and equipment........................ (419) (1,332) (2,679)
Purchase of short term investments........................ (20,230) (20,409) (23,960)
Maturities/sales of short-term investments................ 25,551 21,791 8,003
Cash used in acquisitions................................. -- (1,096) (808)
-------- -------- --------
Net cash provided by (used in) investing activities... 4,902 (1,046) (19,444)
-------- -------- --------
Cash flows from financing activities:
Principal payments under capital lease obligations........ (69) (22) (26)
Principal repayments on notes payable..................... -- -- (35)
Proceeds from exercise of warrants........................ -- -- 405
Note repayments (advances) to stockholder................. (362) 126 239
Net proceeds from issuance of convertible preferred
stock................................................... -- -- 1,582
Net proceeds upon exercise of stock options............... 1,165 -- --
Net proceeds from issuance of Common Stock................ 309 408 21,729
-------- -------- --------
Net cash provided by financing activities............. 1,043 512 23,894
-------- -------- --------
Increase (decrease) in cash and cash equivalents............ 6,043 1,594 4,842
Cash and cash equivalents at beginning of period............ 7,418 5,824 982
-------- -------- --------
Cash and cash equivalents at end of period.................. $ 13,461 $ 7,418 $ 5,824
======== ======== ========
Interest paid............................................... $ 1 $ 3 $ 21
======== ======== ========
Income taxes paid........................................... $ -- $ 370 $ 831
======== ======== ========
Common Stock issued in connection with the acquisition of
SoftMagic................................................. -- 1,938 --
Issuance of warrants for technology......................... -- -- 175
Conversion of debenture to Common Stock..................... -- -- 953
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
13
<PAGE>
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 device
management and synchronization software, which allows users 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 and majority owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated.
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. In October 1997, the American Institute of Certified
Public Accountants issued Statement of Position 97-2 ("SOP 97-2"), "Software
Revenue Recognition" which superseded SOP 91-1 and provides guidance on
generally accepted accounting principles for recognizing revenue on software
transactions. SOP 97-2 requires that revenue recognized from software
arrangements be allocated to each element of the arrangement based on the
relative fair values of the elements, such as software products, upgrades,
enhancements, post contract customer support, installations or training. Under
SOP 97-2, the determination of fair value is based on objective evidence, which
is specific to the vendor. If such evidence of fair value for each element of
the arrangement does not exist, all revenue from the arrangement is deferred
until such time that evidence of fair value does exist or until all elements of
the arrangement are delivered. SOP 97-2 was amended in February 1998 by
Statement of Position 98-4 ("SOP 98-4"), "Deferral of the effective date of
Provision of SOP 97-2" and was amended again in December 1998 by Statement of
Position 98-9 ("SOP 98-9"), "Modification of 97-2, Software Revenue recognition
with Respect to Certain Transactions." Those amendments deferred and then
clarified, respectively, the specification of what was considered vendor
specific objective evidence of fair value for the various elements in a multiple
element arrangement. The Company adopted the provisions of SOP 97-2 and
SOP 98-4 as of August 1, 1998. The adoption has, in certain circumstances,
resulted in the deferral of software license revenues that would have been
recognized upon delivery of the related software under prior accounting
standards.
SOP 98-9 is effective for all transactions entered into by the Company in
fiscal year 2000. The adoption of this statement is not expected to have
material impact on the Company's operating results, financial position or cash
flows.
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 directly to
corporations, 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.
14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. THE COMPANY AND A SUMMARY OF ITS SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
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 ratably over
the term of the service agreement. Payments from customers received in advance
of revenue recognition are recorded as deferred revenue.
The Company enters into Software Development Kit ("SDK") agreements, which
generally are multi-year in duration. Revenue from SDK's is recognized ratably
over the term of the contract. The Company's personal and server-based products
sold to corporations include certain upgrade rights, maintenance and services.
The Company recognizes revenue for these products ratably over the term of the
related contracts.
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 five years. Accumulated amortization was
$1,002,000 and $543,000 at July 31, 1999 and 1998, 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.
FOREIGN CURRENCY. Balance sheet accounts of non U.S. subsidiaries are
translated into U.S. dollars at exchange rates prevailing at balance sheet
dates. Revenues, costs and expenses are translated into U.S. dollars at average
rates for the period. Gains and losses resulting from translation are
accumulated as a
15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. THE COMPANY AND A SUMMARY OF ITS SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
component of stockholders' equity (deficit). Net gains and losses resulting from
foreign exchange transactions are included in the consolidated statement of
operations and were not significant during any of the periods presented. To
date, the Company does not engage in hedging activities.
COMPREHENSIVE NET INCOME. Effective January 1998, the Company adopted
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"). SFAS 130 establishes standards for the reporting of
comprehensive income and its components in a full set of general-purpose
financial statements. Comprehensive income is comprised of net income (loss) and
other comprehensive earnings such as foreign currency translation gain/loss and
unrealized gains or losses on available-for-sale marketable securities. The
Company's unrealized gains and loss on available-for-sale marketable securities
have been significant for the fiscal year ended July 31, 1999 and insignificant
for prior periods presented.
SEGMENT INFORMATION. Effective August 1, 1998, the Company adopted the
provisions of SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information." During each of the three years ended July 31, 1999, the
Company's management considers its business activities to be focused on the
licensing of its product and related services to end-user customers. Since
management's primary form of internal reporting is aligned with the offering of
products and services the Company believes it operates in one segment. The
Company has included information related to geographical segments. See Note 9.
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, 1999, two customers
accounted for 22% and 15% of accounts receivable, respectively. At July 31,
1998, three customers accounted for 21%, 18%, and 15% of accounts receivable,
respectively.
The Company's sales are generally denominated in US dollars. The Company
does not undertake any foreign currency hedging activities.
NET INCOME (LOSS) PER SHARE. Basic net income (loss) per share is computed
using the weighted average common shares outstanding during the period. Diluted
net income per share is computed using the weighted average common shares and
potential dilutive common shares outstanding during the period.
NOTE 2. ACQUISITIONS
The company acquired SoftMagic, Corp. ("SoftMagic") in July 1998 and Real
World Solutions, Inc. ("RWS") in July 1997, both development stage companies
with no fully developed products and no revenues.
SOFTMAGIC, CORP. On July 30, 1998, the Company completed its acquisition of
SoftMagic, a leader in software tools for the development of custom applications
for handheld devices. The consolidated financial statements of the Company
include the results of the operations of SoftMagic since the date of
acquisition. Under the terms of the agreement, Puma paid cash of $1,000,000 and
issued 341,742 shares of the Company's Common Stock in exchange for all
outstanding shares of SoftMagic.
16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. ACQUISITIONS (CONTINUED)
The SoftMagic acquisition has been accounted for as a purchase. The total
purchase price of approximately $3,076,000 was assigned, based on an independent
appraisal, to the fair value of the assets acquired, including $35,000 to
tangible assets acquired, $2,155,000 to in-process research and development and
$886,000 to identified intangible assets. The in-process research and
development was expensed at the acquisition date.
The value assigned to acquired in-process technology was determined by
identifying research projects in areas for which technological feasibility had
not been established as of the acquisition date. These include projects for
Satellite Forms and MobileXtension-TM-. The value was determined by estimating
the revenue contribution of each of these products. The net cash flows were then
discounted utilizing a weighted average cost of capital of 35%. This discount
rate takes into consideration the inherent uncertainties surrounding the
successful development of the in-process research and development, the expected
profitability levels of such technology, and the uncertainty of technological
advances that could potentially impact the estimates described above. Revenues
were projected to be generated in 1998 for the products in development at the
acquisition date. If these projects are not successfully developed, future
revenues and profitability of the Company may be adversely affected.
Additionally, the value of other intangible assets acquired may become impaired.
REAL WORLD SOLUTIONS, INC. In July 1997, the Company acquired the assets of
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.
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.
The value assigned to acquired in-process technology was determined by
identifying research projects in areas for which technological feasibility had
not been established as of the acquisition date. Some of the technology obtained
was incorporated into Intellisync Anywhere. The value was determined by
estimating the revenue contribution of each of these products. The net cash
flows were then discounted utilizing a weighted average cost of capital of 50%.
This discount rate takes into consideration the inherent uncertainties
surrounding the successful development of the in-process research and
development, the expected profitability levels of such technology, and the
uncertainty of technological advances that could potentially impact the
estimates described above. Revenues were projected to be generated in 1999 for
the products in development at the acquisition date. If these projects are not
successfully developed, future revenues and profitability of the Company may be
adversely affected. Additionally, the value of other intangible assets acquired
may become impaired.
The following unaudited pro forma consolidated financial information
reflects the results of operations for the years ended July 31, 1998 and 1997,
as if the acquisition had occurred on August 1, 1997, and 1996 and after giving
effect to purchase accounting adjustments but excluding the impact of write offs
of acquired in-process technology. These pro forma results have been prepared
for comparative purposes only and do not purport to be indicative of what
operating results would have been had the acquisition
17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. ACQUISITIONS (CONTINUED)
actually taken place on August 1, 1998 and may not be indicative of future
operating results (in thousands, except per share data).
<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
---------------------
1998 1997
--------- ---------
<S> <C> <C>
Pro Forma revenue......................................... $22,638 $15,735
Pro forma net income (loss)............................... $ (805) $ 609
Pro forma basic earnings (loss) per share................. $ (.07) $ .07
Pro forma diluted earnings (loss) per share............... $ (.07) $ .05
</TABLE>
NOTE 3. BALANCE SHEET COMPONENTS
Cash equivalents and short-term investments include available-for-sale
securities as follows (in thousands):
<TABLE>
<CAPTION>
JULY 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Cash equivalents
Commercial paper........................................ $ 9,339 $ 5,412
Money market funds...................................... 1,062 385
------- -------
$10,401 $ 5,797
======= =======
Short term investments
Commercial paper........................................ $10,414 $12,651
US Government agencies.................................. -- 1,014
Securities available for sale........................... 1,463 --
------- -------
$11,877 $13,665
======= =======
</TABLE>
Realized gains on sales of available-for-sale securities was $2,650,000 for
the year ended July 31, 1999 and was immaterial for the years ended July 31,
1998, and 1997. The unrealized holding gain on securities was $883,000 at
July 31, 1999 and there was no unrealized holding gain or loss on such
securities at July 31, 1998 and 1997. The short-term investments have maturities
of less than one year.
Accounts receivable, net consist of the following (in thousands):
<TABLE>
<CAPTION>
JULY 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Accounts receivable....................................... $ 4,634 $ 4,374
Less allowance for doubtful accounts and sales returns.... (1,607) (943)
------- -------
$ 3,027 $ 3,431
======= =======
</TABLE>
18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. BALANCE SHEET COMPONENTS (CONTINUED)
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
JULY 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Computer equipment and software........................... $ 2,437 $ 2,267
Furniture and office equipment............................ 1,865 1,657
Leasehold improvements.................................... 975 934
------- -------
5,277 4,858
Less: accumulated depreciation and amortization........... (2,697) (1,604)
------- -------
$ 2,580 $ 3,254
======= =======
</TABLE>
At July 31, 1999 the Company had no equipment under capital lease. At
July 31, 1998 the Company had $126,000 of equipment under capital leases and
related accumulated amortization of $102,000. The deprecation and amortization
expense for the fiscal years ended July 31, 1999, 1998 and 1997 was $1,553,000,
$1,182,000 and $616,000 respectively.
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
JULY 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Payroll related accruals.................................... $1,246 $ 741
Other accrued liabilities................................... 974 776
------ ------
$2,220 $1,517
====== ======
</TABLE>
NOTE 4. STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK. The preferred stock was converted to Common
Stock on the completion of the common stock offering.
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, directors, 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, 1999, the options authorized under the Plan aggregated 4,500,000.
In October 1998, the Board of Directors approved the repricing of certain
outstanding stock options under the Plan. Each employee, officer and director
who elected to participate in the repricing program received a new option with
an exercise price of $2.1875 (the fair market value on October 29, 1998). Each
repriced option retained its original vesting schedule except that no portion of
the option could be
19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. STOCKHOLDERS' EQUITY (CONTINUED)
exercised prior to January 29, 1999. Options to purchase 2,359,516 shares were
repriced pursuant to the program.
In September of 1997, the Board of Directors approved the repricing of
certain outstanding stock options under the Plan. Each employee, officer or
director who elected to participate in the repricing program received a new
option with an exercise price of $6.50 (the fair market value on October 3,
1997). Each repriced option retained its original vesting schedule except that
no portion of the option could be exercised prior to April 3, 1998 and no
vesting accrued between October 3, 1997 and April 3, 1998. Options to purchase
1,198,100 shares were repriced pursuant to this program.
The Company has assumed certain options granted to former employees of
acquired companies ("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.
Stock option activity, both incentive and nonqualified, under all plans is
presented as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTION RANGE OF PRICE EXERCISE PRICE
SHARES PER SHARE PER SHARE
-------- -------------- ----------------
<S> <C> <C> <C>
Outstanding at July 31, 1996.................... 1,039 $0.20-$ 6.05 $ 0.35
Granted......................................... 1,487 $7.50-$17.25 $10.43
Exercised....................................... (188) $0.20-$ 7.50 $ 3.00
Canceled........................................ (230) $0.20-$17.25 $ 7.10
------
Outstanding at July 31, 1997.................... 2,108 $0.20-$16.87 $ 7.26
Granted......................................... 1,853 $5.18-$ 8.38 $ 6.50
Exercised....................................... (91) $0.20-$ 7.50 $ 1.17
Canceled........................................ (1,424) $0.20-$16.87 $ 9.72
------
Outstanding at July 31, 1998.................... 2,446 $0.20-$ 9.75 $ 5.48
Granted......................................... 3,317 $2.09-$ 5.88 $ 2.83
Exercised....................................... (694) $0.20-$ 2.50 $ 1.68
Canceled........................................ (2,967) $0.20-$ 9.75 $ 5.27
------
Outstanding at July 31, 1999.................... 2,102 $0.20-$ 5.88 $ 2.70
======
</TABLE>
At July 31, 1999, a total of 11,000 shares were subject to repurchase and
options to purchase approximately 773,000 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 Stock at the dates of grant.
Accordingly, the Company is recognizing approximately $115,000 of compensation
expense over the options' four-year vesting periods.
20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. STOCKHOLDERS' EQUITY (CONTINUED)
The following table summarizes information about stock options under the
Plan outstanding at July 31, 1999 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------- ------------------------------
NUMBER WEIGHTED-AVERAGE NUMBER
RANGE OF OUTSTANDING REMAINING WEIGHTED-AVERAGE EXERCISABLE WEIGHTED-AVERAGE
EXERCISE PRICES AT 7/31/99 CONTRACTUAL LIFE EXERCISE PRICE AT 7/31/99 EXERCISE PRICE
- --------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$0.20-$2.09 141 6.8 $1.52 69 $1.06
$2.19-$2.19 1,286 8.0 $2.19 1,284 $2.19
$2.41-$2.69 271 8.0 $2.52 271 $2.52
$2.84-$4.25 118 9.5 $3.54 79 $3.34
$4.94-$4.94 19 9.6 $4.94 19 $4.94
$5.31-$5.31 4 9.9 $5.31 4 $5.31
$5.44-$5.44 47 9.8 $5.44 47 $5.44
$5.50-$5.50 193 6.2 $5.50 193 $5.50
$5.88-$5.88 23 9.8 $5.88 23 $5.88
----- ---- ----- ----- -----
2,102 7.90 $2.71 1,989 $2.70
===== ==== ===== ===== =====
</TABLE>
EMPLOYEE STOCK PURCHASE PLAN. In October 1996, the Board of Directors
adopted the 1996 Employee Stock Purchase Plan (the "ESPP") which authorizes the
issuance of 250,000 shares of Common Stock. The purpose of the ESPP is to
provide eligible employees of the Company with a means of acquiring common stock
of the Company through payroll deductions. The plan consists of four six-month
purchase periods in each two year offering period. Shares may be purchased under
the ESPP at 85% of the lesser of the fair market value of the common stock on
the grant or purchase date. During fiscal 1999, 174,130 shares were sold through
the ESPP.
In December 1998, the Board of Directors adopted the 1998 Employee Stock
Purchase Plan which authorizes the issuance of 500,000 shares of Common Stock.
At July 31, 1999 all 500,000 shares were available for purchase under the ESPP.
PRO FORMA INFORMATION. The company applies APB Opinion No. 25 "Accounting
for Stock Issued to Employees" 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 "Accounting for
Stock-Based Compensation", the Company's net income (loss) and earnings (loss)
per share would have been adjusted to the pro-forma amounts indicated below.
<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net income (loss) reported........................ $(1,676) $(2,699) $ 660
Pro forma net income (loss)....................... $(6,158) $(7,404) $ (870)
Basic Earnings (loss) per share as reported....... $ (0.13) $ (.22) $ .07
Diluted earnings (loss) per share as reported..... $ (0.13) $ (.22) $ .06
Pro forma basic earnings (loss) per share......... $ (0.48) $ (.61) $ (.09)
Pro forma diluted earnings (loss) per share....... $ (0.48) $ (.61) $ (.09)
</TABLE>
21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. STOCKHOLDERS' EQUITY (CONTINUED)
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.
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 1999, 1998 and 1997: risk-free interest rate 6.04% for
1999, 5.70% for 1998 and 6.46% for 1997, dividend yields of 0%, volatility
factors of the expected market price of the Company's Common Stock of 75% for
1999, 75 % for 1998 and 50% for 1997, 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 1999 and
1998: risk free interest rate 6.04% and 5.25%, respectively, dividend yields of
0%, volatility factors of the expected market price of the Company's Common
Stock of 75% and 75%, respectively, and a weighted average expected life of two
years and six months respectively.
The weighted average fair value of options granted during fiscal 1999, 1998
and 1997 was $1.56, $3.51 and $4.27, respectively.
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 2001 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 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, 1999 were as follows (in
thousands):
<TABLE>
<CAPTION>
OPERATING
LEASES
---------
<S> <C>
Fiscal year ending July 31,
2000........................................................ $1,210
2001........................................................ 1,217
2002........................................................ 1,265
2003........................................................ 994
2004........................................................ 1,085
Thereafter.................................................. 2,191
------
Total minimum lease payments................................ $7,962
======
</TABLE>
Total rent expense was approximately, $1,069,000, $1,178,000 and $434,000
for the years ended July 31, 1999, 1998 and 1997, respectively. The fiscal 1997
rental expense was offset by sublease income of approximately $97,000.
22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. OTHER INCOME (EXPENSE)
<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
------------------------------
1999 1998 1997
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest income..................................... $1,069 $1,155 $ 882
Interest expense.................................... (1) (3) (19)
Other expense, net.................................. (55) (38) (41)
Realized gains...................................... 2,650 -- --
Miscellaneous income................................ 76 -- --
------ ------ ------
Total other income, net............................. $3,739 $1,114 $ 822
====== ====== ======
</TABLE>
NOTE 7. INCOME TAXES
The income tax provision for the years ended July 31, 1999, 1998 and 1997 is
summarized as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Current
Federal.............................................. $ -- $ 13 $ 27
State................................................ 3 26 7
Foreign withholding tax.............................. 773 1,125 797
---- ------ ----
$776 $1,164 $831
==== ====== ====
</TABLE>
Deferred tax assets are summarized as follows (in thousands):
<TABLE>
<CAPTION>
JULY 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Net operating loss carryforwards.......................... $ 83 $ 118
Alternative minimum tax credit carryforwards.............. 78 78
Research and development credit carryforwards............. 759 653
Foreign tax credit carryforwards.......................... 1,343 1,632
Reserves and allowances................................... 1,714 406
Research and development.................................. (63) 182
SoftMagic................................................. (241) --
Unrealized holding gain................................... (532) --
------- -------
Total deferred tax assets................................. 3,141 3,069
Deferred tax asset valuation allowance.................... (3,141) (3,069)
------- -------
$ -- $ --
======= =======
</TABLE>
Except for fiscal 1997, the Company has incurred losses from inception
through fiscal 1999. 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, 1999
and 1998.
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. INCOME TAXES (CONTINUED)
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):
<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Amounts computed at statutory federal rate........... $(459) $ (522) $ 507
Foreign withholding taxes............................ 823 1,125 797
In-process research and development not deductible... 50 288 247
Utilization of foreign tax credits................... -- (190) (633)
Utilization of tax loss carryforwards................ -- (359) (448)
Future benefits not currently recognized............. 362 822 361
----- ------ -----
$ 776 $1,164 $ 831
===== ====== =====
</TABLE>
At July 31, 1999, the Company has $758,000 of federal and state research and
development credit carryforwards, $1,342,000 of foreign tax credit carryforwards
and $106,000 of alternative minimum tax credit carryforwards.
NOTE 8. NET INCOME PER SHARE
In accordance with disclosure requirements of SFAS 128, a reconciliation of
the numerator and denominator of basic and diluted net income per share
calculations is provided as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net income (loss) as reported.................... $(1,676) $(2,699) $ 660
------- ------- -------
Weighted average shares outstanding (denominator)
used to compute basic earnings per common
share.......................................... 12,824 12,118 9,326
Shares issuable upon exercise of options and
warrants....................................... -- -- 582
Weighted average preferred shares as if
converted...................................... -- -- 1,534
------- ------- -------
Denominator used to compute diluted earnings per
share.......................................... 12,824 12,118 11,442
------- ------- -------
Basic earnings (loss) per share.................. $ (0.13) $ (0.22) $ 0.07
Diluted earnings (loss) per share................ $ (0.13) $ (0.22) $ 0.06
</TABLE>
As a result of net loss incurred by the Company in fiscal 1999 and 1998,
potential common share attributable to stock options and warrants were
antidilutive and were excluded from net loss per share calculations.
NOTE 9. BUSINESS SEGMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which establishes standards for reporting
information about operating segments in annual financial statements. It also
establishes standards for related disclosures about products and services,
geographic areas and major
24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9. BUSINESS SEGMENTS (CONTINUED)
customers. Statement of Financial Accounting Standards No. 131 is effective for
fiscal years beginning after December 15, 1997. The Company has adopted the
provisions of Statement of Financial Accounting Standards No. 131 in connection
with the preparation of its financial statements for the fiscal year ending
July 31, 1999 and has determined it has one reportable segment. 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:
<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
North America.................................... $11,686 $11,681 $ 7,172
Japan............................................ 7,134 9,888 7,304
Other International.............................. 1,223 739 1,153
------- ------- -------
$20,043 $22,308 $15,629
======= ======= =======
</TABLE>
NOTE 10. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial accounting Standards Board issued SFAS No. 133,
"Accounting for Derivatives and Hedging Activities" ("SFAS 133"). SFAS 133 is
effective for all fiscal quarters beginning with the quarter ending June 30,
1999. SFAS 133 establishes accounting and reporting standards of derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. In July 1999, the Financial Accounting
Standards Board issued SFAS No. 137 "Accounting for Derivative Instruments and
Hedging Activities--Deferral of the effective date of FASB Statement No. 133"
("SFAS 137"). SFAS 137 deferred the effective date until the first fiscal
quarter ending June 30, 2000. The Company will adopt SFAS 133 in its quarter
ending June 30, 2000 and does not expect such adoption to have an impact on the
Company's results of operations, financial position or cash flows.
NOTE 11. RESTRUCTURING
In the first quarter of fiscal 1999, the Company implemented a restructuring
program for the purpose of consolidating the majority of engineering and
development work at existing facilities in Nashua, New Hampshire. As part of
this program, the Company implemented a reduction in force of approximately 40
positions that primarily affected the engineering group located at the San Jose,
California facility. The severance charge was $210,000. The plan was completed
at the end of February 1999. As of July 31, 1999, there was no unused balance.
Also as part of the restructuring, the Company vacated a portion of the San
Jose, California facility, as well as a facility in Nashua, New Hampshire. The
restructure charge for this was $558,000. The unused balance as of July 31, 1999
was $331,000.
NOTE 12. SUBSEQUENT EVENT
On Aug. 24, 1999, the Company entered into a definitive agreement to acquire
ProxiNet, Inc., headquartered in Emeryville, California, for 2,600,000 shares of
Common Stock to be issued in exchange for all issued and outstanding preferred
and common shares of ProxiNet Inc., and assumption of all outstanding ProxiNet
stock options. Closing of the merger is subject to certain closing conditions
and
25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12. SUBSEQUENT EVENT (CONTINUED)
approval by the shareholders of ProxiNet, although, certain affiliates of
ProxiNet have agreed to vote their shares in favor of the merger. The merger is
expected to be finalized in fiscal quarter ending October 31, 1999, and as a
result, the Company expects to incur a one-time charge for in-process research
and development for ProxiNet's products which have not yet reached technological
feasibility.
26
<PAGE>
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, 1999 and 1998, and the results
of their operations and their cash flows for each of the three years in the
period ended July 31, 1999, 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.
San Jose, California
August 20, 1999, except for Note 12, which is as of August 24, 1999
27
<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. 333-777961) of Puma Technology, Inc. of our report
dated August 20, 1999, except for Note 12, which is as of August 24, 1999,
relating to the financial statements, which appears in the Annual Report to
Stockholders, which is incorporated in this Annual Report on Form 10-K. We also
consent to the incorporation of our report dated August 20, 1999 relating to the
financial statement schedules, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
SAN JOSE, CALIFORNIA
OCTOBER 26, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> JUL-31-1999
<CASH> 13,461
<SECURITIES> 11,877
<RECEIVABLES> 3,696
<ALLOWANCES> 669
<INVENTORY> 258
<CURRENT-ASSETS> 29,073
<PP&E> 5,277
<DEPRECIATION> 2,692
<TOTAL-ASSETS> 33,243
<CURRENT-LIABILITIES> 6,680
<BONDS> 0
0
0
<COMMON> 13
<OTHER-SE> 26,550
<TOTAL-LIABILITY-AND-EQUITY> 33,243
<SALES> 18,555
<TOTAL-REVENUES> 20,043
<CGS> 1,950
<TOTAL-COSTS> 22,793
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (961)
<INCOME-TAX> 715
<INCOME-CONTINUING> (1,676)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,676)
<EPS-BASIC> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
