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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
April 18,2000
PUMA TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-21709 77-0349154
---------------------- --------------------------------------
(Commission File No.) (IRS Employer Identification Number)
2550 North First Street, #500
San Jose, California 95131
(Address of Principal Executive Offices)
(408) 321-7650
--------------
(Registrant's Telephone Number, Including Area Code)
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Item 5. OTHER EVENTS
This Current Report on Form 8-K is to file the Supplementary Consolidated
Financial Statements, Selected Supplementary Consolidated Financial Data,
Management's Discussion and Analysis of Financial Condition and Results of
Operations, and Supplementary Consolidated Financial Statements with respect
to the acquisition of NetMind Technologies, Inc.("NetMind") by Puma
Technology ("the Company"), which acquisition was closed on February 24,
2000. Pursuant to an Agreement and Plan of Merger and Reorganization dated
December 8, 1999, the Company acquired all of the outstanding capital shares
and assumed all of the outstanding stock options and warrants of NetMind in
exchange for approximately 8,808,000 shares of the Company's common stock and
options and warrants to acquire approximately 1,192,000 shares of the
Company's common stock. The acquisition is being accounted for as a pooling
of interests transaction. Accordingly, the financial statements and other
financial data reflect the Company's financial position and results of
operations as if NetMind was a wholly owned subsidiary of the Company since
inception.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(a) Exhibits.
23.1 Consent of Independent Accountants
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Puma Technology, Inc.
Date: April 18, 2000
By /s/ Kelly Hicks
---------------------------------------------
Kelly Hicks, Vice President of Operations
and Chief Financial Officer
(Principal Accounting and Financial Officer)
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PUMA TECHNOLOGY, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Supplementary Selected Financial Data 4
Supplementary Management Discussion and Analysis 5
Supplementary Consolidated Balance Sheets 17
Supplementary Consolidated Statements of Operations 18
Supplementary Consolidated Statement of Stockholders' Equity 19
Supplementary Consolidated Statements of Cash Flows 21
Notes to Supplementary Consolidated Financial Statements 22
Report of Independent Accountants 36
23.1 Consent of Independent Accountants 37
</TABLE>
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<TABLE>
<CAPTION>
SUPPLEMENTARY SELECTED CONSOLIDATED FINANCIAL DATA
Six Months Ended Years Ended July 31,
Consolidated Statement of Operations Data 1/31/2000 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(In thousands, except per share data)
Revenue $13,773 $ 20,723 $22,341 $15,633 $ 7,716 $ 860
- --------------------------------------------------------------------------------------------------------------------------------
Cost and operating expenses 22,695 29,704 26,408 15,529 9,693 2,997
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Operating income (loss) (8,922) (8,981) (4,067) 104 (1,977) (2,137)
Other income, net 2,240 3,868 1,077 820 85 71
Income (loss) before income taxes (6,682) (5,113) (2,990) 924 (1,892) (2,066)
Provision for income taxes (358) (715) (1,164) (831) (509) (80)
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Net income (loss) (7,040) (5,828) (4,154) 93 (2,401) (2,146)
Accretion of mandatorily redeemable convertible
preferred stock to redemption value (3,300) (4,238) ---- ---- ---- ----
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Net loss attributable to common shareholders $(10,340) $(10,066) $(4,154) $ 93 $(2,401) $(2,146)
Basic net income (loss) per share $(0.32) $ (0.34) $ (0.15) $ 0.00 $ (0.41) (0.37)
Diluted net income (loss) per share $(0.32) $ (0.34) $ (0.15) $ 0.00 $ (0.41) $ (0.37)
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July 31,
Consolidated Balance Sheet Data 1/31/2000 1999 1998 1997 1996 1995
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(In thousands)
Cash, cash equivalents and
short-term investments $23,876 $ 28,516 $ 21,091 $ 21,180 $ 982 $ 2,500
Total assets 47,837 37,122 30,745 29,530 4,004 2,948
Long-term obligations 452 -- 41 66 961 16
Total stockholders' equity 23,694 18,201 25,824 26,242 653 1,886
</TABLE>
<TABLE>
<CAPTION>
Summary Quarterly Data
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Three Months Ended, Jan 31, Oct. 31, July 31, April 30, Jan 31, Oct 31, July 31, April 30,
(in thousands, except 2000 1999 1999 1999 1999 1998 1998 1998
- --------------------------------------------------------------------------------------------------------------------------------
per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue $ 7,361 $ 6,412 $ 5,946 $ 5,370 $ 4,907 $ 4,500 $ 4,621 $ 6,755
Cost and operating
expenses 10,454 12,241 7,054 6,867 7,897 7,886 8,907 6,176
Operating income (loss) (3,093) (5,829) (1,108) (1,497) (2,990) (3,386) (4,286) 579
Net income (loss) (2,285) (4,755) (239) (567) (2,827) (2,195) (4,376) 403
Accretion of mandatorily
redeemable convertible
preferred stock to
redemption value (1,765) (1,535) (2,700) (1,384) (154) ---- ---- ----
Net loss attributable
to common shareholders $ (4,050) $ (6,290) $ (2,939) $ (1,951) $ (2,981) $ (2,195) $ (4,376) $ 403
Basic net income (loss)
per share $ (0.12) $ (0.20) $ (0.10) $ (0.07) $ (0.10) $ (0.08) $ (0.16) $ 0.01
Diluted net income
(loss) per share $ (0.12) $ (0.20) $ (0.10) $ (0.07) $ (0.10) $ (0.08) $ (0.16) $ 0.01
</TABLE>
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SUPPLEMENTARY MANAGEMENT'S DISCUSSION AND ANALYSIS
ACQUISITION OF NETMIND TECHNOLOGIES, INC. On February 24, 2000, the Company
completed its acquisition of NetMind, which has been accounted for as a pooling
of interests, pursuant to the terms of the Agreement and Plan of Reorganization,
dated December 8, 1999. The Company issued approximately 8,808,000 shares of
PUMA Common Stock in the acquisition and assumed options and warrants that can
be exercised for approximately 801,000 and 391,000 shares of PUMA Common Stock
respectively. The Supplementary consolidated financial statements give
retroactive effect to the acquisition. Generally accepted accounting principles
proscribe giving effect to a consummated business combination accounted for by
the pooling-of-interests method in financial statements that do not include the
date of consummation. These financial statements do not extend through the date
of consummation, however, they will become the historical consolidated financial
statements of the Company and its subsidiaries after financial statements
covering the date of consummation of the business combination are issued.
The results of operations previously reported by the separate companies and the
combined amounts in the accompanying Supplementary consolidated financial
statements are summarized below (in thousands).
<TABLE>
<CAPTION>
Six Months Ended January 31, Years Ended July 31,
------------------------------ ----------------------
2000 1999 1999 1998 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
(Unaudited)
Revenue:
Puma $13,308 $ 9,154 $20,043 $22,308 $15,629
NetMind 465 253 680 33 4
--------- -------- --------- --------- ---------
Combined $13,773 $ 9,407 $20,723 $22,341 $15,633
========= ======== ========= ========= =========
Net income (loss):
Puma $(3,092) $(3,469) $(1,676) $(2,699) $ 660
NetMind (3,948) (1,553) (4,152) (1,455) (567)
--------- --------- --------- --------- ---------
Combined $(7,040) $(5,022) $(5,828) $(4,154) $ 93
======== ======== ========= ========= ==========
</TABLE>
The Company estimates that it will incur approximately $6,500,000 in
acquisition-related charges, principally in the fiscal third quarter ending
April 30, 2000. These charges include direct transaction costs primarily for
financial advisory services, legal and consulting fees and costs associated
with combining the operations of the two companies.
Prior to the acquisition, NetMind's fiscal year ended on December 31. The
consolidated financial statements for the six months ended January 31, 2000
and 1999 and for the years ended July 31, 1999, 1998, and 1997 reflect the
results of operations of PUMA for the six months ended January 31, 2000 and
1999 and for the years ended July 31, 1999, 1998, and 1997 combined with the
results of operations of NetMind for the corresponding periods.
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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.
In October 1999, we acquired ProxiNet, Inc. a startup company involved in the
development of software, enabling users of handheld devices to connect to the
Internet. We are in the process of combining our synchronization technology with
ProxiNet's web connectivity technology, and we expect to announce product
offerings in the near future.
NetMind's product deliver scalable software applications that integrate
user-driven personalization technologies into the Internet infrastructure. The
products include Mind-it Enterprise Minder and Minder for partners. These
products are highly scalable, software solutions that detect specific relevant
changes in free-form content on the worldwide web that then promptly notifies
users about what information has changed, by how much, and when.
On February 23, 2000, we announced a two-for-one stock split in the form of a
stock dividend. The record date for the stock split was March 8, 2000, and the
payment date was March 22, 2000. The share numbers set forth in this Form 8K
reflect the effect of the announced stock split.
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This Discussion and Analysis of Financial Condition and Results of Operations
contains forward-looking statements regarding future events or the future
performance of the Company that involve certain risks and uncertainties. In this
report, the words "anticipate(s)," "believe(s)", "expect(s)", "intend(s)",
"future" and similar expressions identify forward-looking statements. Actual
events or the actual future results of the Company may differ materially from
any forward-looking statements due to such risks and uncertainties. The Company
assumes no obligation to update these forward-looking statements to reflect
actual results or changes in factors or assumptions affecting such
forward-looking assumptions. Readers are cautioned not to place undue reliance
on these forward-looking statements, which reflect management's analysis only as
of the date hereof. The Company undertakes no obligation to publicly release the
results of any revision to these forward-looking statements, which may be made
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
RESULTS OF OPERATIONS
All historical financial information and analysis have been restated to reflect
the acquisition of NetMind Technologies, Inc. on February 24, 2000, which was
accounted for as a pooling of interests (see Note 1 of Notes to Consolidated
Financial Statements).
The following table sets forth, as a percentage of revenue, certain consolidated
statements of operations data for the periods indicated (after giving effect to
rounding). These operating results are not necessarily indicative of the results
for any future period.
SIX MONTH PERIOD ENDED JANUARY 31, 2000
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 $13,773,000 in the
six-month period ended January 31, 2000 as compared to $9,407,000 in the
comparable period in fiscal 1999. Revenue increased 46% in the first six
months of fiscal 2000 as compared to the same period in fiscal 1999. The
majority of the increase is attributable to sales growth in our Intellisync
products to both retail and corporate customers. Sales of our Software
Development Kit ("SDK") have also increased substantially.
LICENSE REVENUE License revenue is earned from the sale of software products
and royalty agreements with OEMs. License revenue was $12,547,000 in the first
six months of fiscal 2000 as compared to $8,776,000 in the same period in
fiscal 1999. Our license revenues increased for Software Development Kits,
IntelliSync, Satellite Forms and Intellisync Anywhere products. These
increases were offset by declining revenues in the Intellisync for Notebook
and TranXit products. Deferred revenue was $4,666,000 at January 31, 2000, as
compared to $3,989,000 at July 31, 1999. This represented an increase of 17%,
which is attributable to revenues related to our SDK and Intellisync Gold and
Intellisync Anywhere products.
OEM revenue continues to represent a significant portion of our revenue. OEM
revenue was $6,032,000 in the first six months of fiscal 2000 as compared to
$4,963,000 in the same period in fiscal 1999. This represented 44% and 53% of
our revenue in the first six months of fiscal 2000 and fiscal 1999,
respectively. Toshiba accounted for approximately 9% and 17% of our revenue in
the first six months of 2000 and 1999 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 was $4,455,000 in the first six months of
fiscal 2000 as compared to $3,670,000 in the same period in fiscal 1999.
International revenue represented approximately 32% and 39% in the first six
months of fiscal 2000 and 1999, respectively. We expect that international
revenue will continue to represent a significant portion of our revenue for
the foreseeable future.
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SERVICE REVENUE Service revenue is derived from fees for services, including
customer-funded engineering projects and amortization of maintenance contract
programs. Service revenue was $1,194,000 in the first six months of fiscal
2000 as compared to $631,000 in the same period in fiscal 1999. The 89%
increase in service revenue was primarily due to an increased number of
customer-funded engineering service projects for software development and
increased maintenance revenue.
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 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 4% in the first six months of fiscal 2000 as compared to 10% in the same
period in fiscal 1999. The decrease in fiscal 2000 cost of license revenue as
percentage of license revenue was primarily due to increased site licensing
and SDK sales, which have negligible product costs.
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 89% in the first six months of fiscal 2000 as
compared to 55% in the same period in fiscal 1999.
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 decreased by 4% to $6,593,000 in the first six months of fiscal 2000
as compared to $6,866,000 in the same period in fiscal 1999. Research and
development represented approximately 48% of total revenue the first six
months of fiscal 2000, and 73% of total revenue in the comparable period in
fiscal 1999. The absolute dollar year over year decrease in research and
development expenses in the first six months of fiscal 2000 as compared to
the same period in fiscal 1999 was primarily due a consolidation of
engineering in our east coast facility, which lowered engineering cost over
the past year. We do expect that research and development costs will increase
in the future as we merge with the NetMind engineering and continue
development of the Intellisync and NetMind product initiatives. We also
project that 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.
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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 38% to $6,460,000 from $4,691,000 in the first six
months of fiscal 2000. Sales and marketing expenses represented approximately
47% and 50% of total revenues in the first six months of fiscal 2000 and
fiscal 1999, respectively. Sales and marketing expenses increased in absolute
dollars in the first six months of fiscal 2000, 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 the remainder of fiscal 2000 as we continue to
expand our direct sales force in the United States to support the sales of
our personal and server-based products to corporations, expand the sales of
our NetMind products, 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 marginally to $1,998,000 in the first six
months of fiscal 2000, from $1,986,000 the comparable period in fiscal 1999.
General and administrative expenses represented approximately 15% of total
revenues in the first six months of fiscal 2000 and 21% of total revenues in
the comparable period in fiscal 1999. The increases in absolute general and
administrative spending in the first six months of fiscal 2000 were primarily
due to increased personnel costs of the combined Puma and Netmind management
team as well as additional legal fees and other administrative costs.
IN PROCESS RESEARCH AND DEVELOPMENT In the first quarter of fiscal 2000 we
recorded a charge of $4,218,000 for in-process research and development
associated with the acquisition of ProxiNet. The ProxiNet acquisition has
been accounted for as a purchase. The total purchase price of approximately
$17,384,000 (including liabilities of $2,070,000), was assigned, based on
independent appraisal, to the fair value of the assets acquired, including
$676,000 to tangible assets acquired, $3,378,000 to identified intangible
assets, $4,218,000 to in process research and development, and $9,112,000 to
goodwill. The in-process research and development was expensed at the
acquisition date.
The value assigned to acquired in-process research and development was
determined by identifying research projects in areas for which technology
feasibility had not been established as of the acquisition date. These
include projects for ProxiWare and ProxiWeb technology. The value was
determined by estimating the revenue contribution and the percentage of
complete of each of these products. The projects were deemed to be 55%
complete on the date of acquisition. The net cash flows were then discounted
utilizing a weighted average cost of capital of 27.5%. 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 fiscal 2000 for the
products in development at the acquisition date. If these projects are not
successfully developed our future revenues and profitability may be adversely
affected. Additionally, the value of other intangible assets acquired may
become impaired.
AMORTIZATION OF INTANGIBLES Amortization of intangibles consists of
amortization of acquired intangibles. Intangible expense increased 284% to
$909,000 in the first six months of fiscal 2000 from $237,000 for the same
period in the comparable fiscal period. The increase resulted from our
acquisition of ProxiNet.
NON-CASH STOCK COMPENSATION EXPENSE For the first six months of fiscal 2000
Non-cash stock compensation increased to $875,000 from $23,000 in the
comparable period in fiscal 1999. These expenses are for stock options that
were deemed to have been granted at a price less than market value. These
charges are being amortized on a straight-line basis over the vesting period
of the options.
RESTRUCTURING 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 40
positions that primarily affected the engineering group located at the San
Jose, California
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facility. The severance charge was $210,000. This plan was completed at the
end of February 1999. As of January 31, 2000, there was no unused balance.
Also as part of the restructuring, we announced plans for vacating a portion
of the San Jose facility. We reduced the total cost of leased facilities by
subleasing the excess office space. The restructure charge was $558,000. The
unused balance as of January 31, 2000 was $241,000.
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 capitalized leases and miscellaneous fees and charges.
Additionally, a gain related to our investment in PlanetAll, which was
acquired by Amazon.com, is also included. Interest and other income, net,
increased to $2,240,000 in the first six months of fiscal quarter of 2000
from $1,762,000 for the same period in the prior year. The increase in
interest and other income, net, was primarily due to the recognition of a
gain of $1,585,000 in the six months ended January 31, 2000 as compared with
$1,103,000 of gain recognized in the six months ended January 31, 1999. These
gains were attributable to stock sales and the exchange of Planet All stock
with Amazon.com stock upon acquisition of Planet All.
PROVISION FOR INCOME TAXES The provision for income taxes in the six-months
ended January 31, 2000 decreased to $358,000 from $408,000 for same period in
the prior year. The provision for income taxes primarily represents foreign
withholding taxes on royalties earned from certain foreign customers and
fluctuates based on amount and mix of our foreign income. Our overall
effective tax rate for fiscal 2000 is significantly dependent on the amount
and mix of income derived from sources subject to foreign withholding taxes.
FISCAL YEARS ENDED JULY 31, 1999, 1998 AND 1997
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 $20,723,000 in
fiscal 1999 as compared to $22,341,000 in fiscal 1998 and $15,633,000 in
fiscal 1997. Revenue decreased 7% 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 54%, 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 $19,084,000 in fiscal
1999 as compared to $18,477,000 in fiscal 1998 and $13,714,000 in fiscal
1997. Our license revenues increased for Software Development Kits,
IntelliSync, Satellite Forms, Intellisync Anywhere and Mind-it 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 $3,989,000 at July 31, 1999, as compared to $1,669,000
at July 31, 1998. This represented an increase of 139%, which is attributable
to revenues related to our SDK, Intellisync Gold and Intellisync Anywhere,
products.
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SERVICE REVENUE Service revenue is derived from fees for services, including
customer-funded engineering projects and amortization of maintenance contract
programs. Service revenue was $1,639,000 in fiscal 1999 as compared to
$3,864,000 in fiscal 1998 and $1,919,000 in fiscal 1997. The 58% 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 101% 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 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 decreased by 18% to $1,270,000 in
fiscal 1999 from $1,541,000 in fiscal 1998. In fiscal 1998 cost of license
revenue increased by 49% to $1,541,000 from $1,032,000 in fiscal 1997. The
decrease in fiscal 1999 in cost of license revenue as a 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 decreased 54% to
$709,000 in fiscal 1999 from $1,536,000 in fiscal 1998. In fiscal 1998 cost
of service revenue increased by 118% to $1,536,000 from $706,000 in fiscal
1997. The decrease in cost of service revenue fiscal 1999 is primarily
attributable to decrease in customer funded non-recurring engineering costs.
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 19% to $12,421,000 in fiscal 1999 from $10,421,000 in
fiscal 1998. In fiscal 1998, research and development expenses increased to
64% to $10,421,000 from $6,358,000 in fiscal 1997. Research and development
represented approximately 60% of total revenue in fiscal 1999, 47% of total
revenue in fiscal 1998 and 41% 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, Intellisync Anywhere and Mind-it 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.
11
<PAGE>
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 34% to $9,758,000 from $7,307,000 in fiscal 1998. In
fiscal 1998, sales and marketing expenses increased 79% to $7,307,000 from
$4,091,000 in fiscal 1997. Sales and marketing expenses represented
approximately 47%, 33% and 26% 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 to expand our direct
sales force in the United States to support the sales of our personal and
server-based products to 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 24% to $3,909,000 in fiscal 1999 from
$3,160,000 in fiscal 1998. In fiscal 1998, general and administrative
expenses increased 44% to $3,160,000 from $2,199,000 in fiscal 1997. General
and administrative expenses represented approximately 19% of total revenues
in fiscal 1999, 14% 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, and legal
fees for defending our Intellectual Property rights. 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.
NON-CASH STOCK COMPENSATION Non-cash stock compensation relates to certain
options granted by us prior to our initial public offering and by NetMind
prior to its merger with us which were deemed to have been granted below fair
market value. The non-cash stock compensation charge aggregated $410,000 in
fiscal 1999, $28,000 in fiscal 1998 and $27,000 in fiscal 1997. Unamortized
deferred compensation aggregated approximately $3,800,000 at July 31, 1999
and is being recognized on a straight-line basis over the four years vesting
term of the options.
AMORTIZATION OF INTANGIBLES Amortization of intangibles consists of the
amortization of intangible assets that resulted from our acquisitions of
Intellink, Real World Solutions, SoftMagic and ProxiNet. Amortization of
intangibles increased 77% to $459,000 in fiscal 1999 from $260,000 in fiscal
1998. In fiscal 1998, amortization of intangibles increased 10% to $260,000
from $236,000 in fiscal 1997.
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.
12
<PAGE>
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 MobileXtensionTM. 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 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 $3,868,000 in
fiscal 1999 from $1,077,000 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. Interest and other income,
net, increased to $1,077,000 in fiscal 1998 from $820,000 in fiscal 1997.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.
13
<PAGE>
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 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 used $4,825,000 of
cash in the first six months of fiscal 2000 and used $2,437,000 in the first
six months of fiscal 1999, respectively. Net cash used in the first six
months of fiscal 2000 was primarily due to the net loss adjusted for non-cash
depreciation and amortization, in-process research and development related
asset acquisition and adjusted for changes in deferred revenue, accrued
expenses, accounts receivable, prepaid expenses, inventory and accounts
payable.
Cash provided by investing activities was $2,493,000 in the first six months
of fiscal 2000. This compares to $8,928,000 of cash generated in the first
six months of fiscal 1999. Cash generated in the first six months of fiscal
2000 was primarily due to maturities of short-term investments and adjusted
for purchases of short-term investments and to a lesser extent, purchases of
property and equipment.
14
<PAGE>
Cash provided by financing activities was $210,000 in the first six months of
fiscal 2000. This compares to $6,804,000 of cash generated in the first six
months of fiscal 1999. Cash generated in the first six months of fiscal 2000
was due to exercise of stock options, issuance of common stock, proceeds from
line of credit and this was offset by payments made to settle liabilities of
ProxiNet.
Our operating activities used cash of $3,345,000, in fiscal 1999 as compared
with $789,000, and $136,000 of cash provided in fiscal 1998 and fiscal 1997,
respectively. Net cash used 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 by investing activities for fiscal 1999 was $4,444,000. This
compares with cash used of $1,085,000 and $19,565,000 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 $8,114,000, $1,888,000, and
$24,281,000 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 and issuance of preferred stock by NetMind in
October 1998. Cash provided from financing activities in fiscal 1998 was
primarily due to the issuance of Common Stock and repayments of notes to
stockholders and issuance of preferred stock by NetMind in August, September
and December 1997. 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 January 31, 2000, our principal source of liquidity represented by cash,
cash equivalents and short-term investments totaled $23,876,000. We currently
have no significant capital commitments or bank financing arrangements. We
believe that our current cash, cash equivalents and 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.
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
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 have not experienced any significant
problems on January 1, 2000 or since then and believe that our computer
systems are Year 2000 compliant.
15
<PAGE>
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 its 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 Puma's
control.
Since January 1, 2000, we have had minimal interruptions with third-party
software and we have not received any significant complaints from any
customers relating to Year 2000 problems in their products. Puma has 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.
16
<PAGE>
<TABLE>
<CAPTION>
SUPPLEMENTARY CONSOLIDATED BALANCE SHEETS
January 31, July 31,
2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(in thousands, except per share data) (Unaudited)
Assets
Current assets:
Cash and cash equivalents $14,517 $16,639 $7,426
Short-term investments 9,359 11,877 13,665
Accounts receivable, net 4,410 3,160 3,615
Inventories 300 258 244
Other current assets 2,074 590 410
- ------------------------------------------------------------------------------------------------------------------------------
Total current assets 30,660 32,524 25,360
Property and equipment, net 3,478 3,008 3,350
Other assets 13,699 1,590 2,035
- ------------------------------------------------------------------------------------------------------------------------------
Total assets $47,837 $37,122 $30,745
- ------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $1,374 $ 860 $1,214
Accrued liabilities 2,822 2,454 1,616
Notes Payable 236 325 150
Convertible note payable --- --- 203
Deferred revenues 4,666 3,989 1,669
Current portion of capital lease obligations ---- -- 28
- ------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 9,098 7,628 4,880
Capital lease obligations, net of current portion ---- ---- 41
Notes Payable long term 452 -- ---
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities 9,550 7,628 4,921
Redeemable, Convertible Preferred Stock 14,593 11,293 -----
Commitments and contingencies (Note 6)
- ------------------------------------------------------------------------------------------------------------------------------
Common stock, $0.001 par value; 120,000 shares authorized;
36,599 shares issued and outstanding at January 31, 2000
(unaudited) and 80,000 shares authorized; 31,501 and
29,374 shares issued and outstanding at July 31, 1999
and 1998, respectively 36 30 29
Additional paid-in capital 50,148 36,885 35,476
Receivable from stockholders (429) (428) (66)
Deferred stock compensation (4,068) (3,773) (53)
Accumulated deficit (22,430) (15,390) (9,562)
Other comprehensive income (loss) 437 877 --
- ------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 23,694 18,201 25,824
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities, redeemable convertible preferred stock
and stockholders' equity $47,837 $37,122 $30,745
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
17
<PAGE>
<TABLE>
<CAPTION>
SUPPLEMENTARY CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended Years Ended July 31,
1/31/2000 1/31/1999 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(in thousands, except per share data) (Unaudited)
Revenue
License $12,547 $8,776 $19,084 $18,477 $13,714
Services 1,226 631 1,639 3,864 1,919
- ------------------------------------------------------------------------------------------------------------------------------
Total revenue 13,773 9,407 20,723 22,341 15,633
- ------------------------------------------------------------------------------------------------------------------------------
Cost of revenues and operating expenses:
Cost of license revenue 557 862 1,270 1,541 1,032
Cost of service revenue 1,085 350 709 1,536 706
Research and development 6,593 6,866 12,421 10,421 6,358
Sales and marketing 6,460 4,691 9,758 7,307 4,091
General and administrative 1,998 1,986 3,909 3,160 2,199
Non-cash stock compensation 875 23 410 28 27
Amortization of acquired intangibles 909 237 459 260 236
In-process research and development 4,218 - -- 2,155 880
Restructuring - 768 768 -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total cost of revenues and operating expenses 22,695 15,783 29,704 26,408 15,529
- ------------------------------------------------------------------------------------------------------------------------------
Operating income (loss) (8,922) (6,376) (8,981) (4,067) 104
Other income, net 2,240 1,762 3,868 1,077 820
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (6,682) (4,614) (5,113) (2,990) 924
Provision for income taxes (358) (408) (715) (1,164) (831)
- ------------------------------------------------------------------------------------------------------------------------------
Net income (loss) (7,040) (5,022) (5,828) (4,154) 93
Accretion of mandatorily redeemable convertible
preferred stock to redemption value (3,300) (154) (4,238) ------ ---
- ------------------------------------------------------------------------------------------------------------------------------
Net income (loss) attributable to common
stockholders $(10,340) $(5,176) $(10,066) $(4,154) $93
- ------------------------------------------------------------------------------------------------------------------------------
Basic net income (loss) per share $(0.32) $(0.18) $(0.34) $(0.15) $0.00
Diluted net income (loss) per share $(0.32) $(0.18) $(0.34) $(0.15) $0.00
Shares used in computing basic net income (loss)
per common share 32,546 29,335 29,970 27,224 19,030
Shares used in computing diluted net income (loss)
per common share 32,546 29,335 29,970 27,224 23,262
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
SUPPLEMENTARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
18
<PAGE>
<TABLE>
<CAPTION>
Other
Convertible Preferred Additional Receivable Deferred Comprehensive Comprehensive
Stock Stock Common Stock Paid-in from Stock Accumulated Income Stockholders' Income
Subscription Shares Amount Shares Amount Capital StockholdersCompensation Debit (Loss) Equity (Loss)
- -----------------------------------------------------------------------------------------------------------------------------------
<S><C>
(in thousands)
Balance at July 31, 1996 1,582 2,620 $3 8,594 $ 9 $ 6,681 $(2,013) $(108) $(5,501) -- $ 653 --
Issuance of Series C
convertible preferred stock,
net of issuance costs (1,582) 286 -- -- -- 1,582 1,582 -- -- -- 1,582 --
Issuance of Common Stock
upon exercise of options -- -- -- 378 -- 564 -- -- -- -- 564 --
Issuance of warrants -- -- -- -- -- 175 -- -- -- -- 175 --
Exercise of warrants for
Common Stock -- -- -- 660 1 404 -- -- -- -- 405 --
Conversion of debenture to
Common Stock -- -- -- 688 1 952 -- -- -- -- 953 --
Repurchase of unvested
Common Stock -- -- -- (6) -- -- -- -- -- -- -- --
Loan to stockholder -- -- -- -- -- -- (71) -- -- -- (71) --
Repayments by stockholder -- -- -- -- -- -- 310 -- -- -- 310 --
Amortization of
deferred compensation -- -- -- -- -- -- -- 27 -- -- 27 --
Issuance of common shares 3,078 3 1 4
Shares issued in initial
offering, net of expenses -- -- -- 5,000 5 21,160 -- -- -- -- 21,165 --
Conversion of preferred stock
to Common Stock -- (2,906) (3) 8,750 8 (5) -- -- -- -- -- --
Net income -- -- -- -- -- -- -- -- 93 -- 93 $ 93
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at July 31, 1997 -- -- -- 27,142 27 31,514 (192) (81) (5,408) -- 25,860 $ 93
- ----------------------------------------------------------------------------------------------------------------------------------
Issuance of Common Stock
upon exercise of options -- -- -- 182 -- 107 -- -- -- -- 107 --
Issuance of Common Stock
under Employee Stock
Purchase Plan -- -- -- 124 -- 273 -- -- -- -- 273 --
Repurchase of unvested
Common Stock -- -- -- (108) -- (10) -- -- -- -- (10) --
Issuance of Options
and Warrants -- -- -- -- -- 38 -- -- -- -- 38 --
Issuance of Common Stock
in connection with
Soft Magic Acquisition -- -- -- 684 1 1,937 -- -- -- -- 1,938 --
Issuance of common stock 1,350 1 1,617 1,618
Repayments by stockholder -- -- -- -- -- -- 126 -- -- -- 126 --
Amortization of
deferred compensation -- -- -- -- -- -- -- 28 -- -- 28 --
Net loss -- -- -- -- -- -- -- -- (4,154) -- (4,154) $(4,154)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at July 31, 1998 -- -- -- 29,374 29 35,476 (66) (53) (9,562) -- 25,824 $(4,154)
- -----------------------------------------------------------------------------------------------------------------------------------
Issuance of Common Stock
upon exercise of options -- -- -- 1,388 1 1,164 -- -- -- -- 1,165 --
Issuance of Common Stock
under Employee Stock
Purchase Plan -- -- -- 348 --- 308 -- -- -- -- 308 --
Repurchase of unvested
Common Stock -- -- -- (12) -- (2) -- -- -- -- (2) --
Exercise of Warrants ---- ---- ---- 14 --- --- ---- ---- ---- --- --- ---
Repayments by (notes issued
to) stockholders -- -- -- -- -- -- (362) -- -- -- (362) --
Unrealized gain on Securities
available for sale -- -- -- -- -- -- -- -- -- 883 883 $883
Currency translation adjustment -- -- -- -- -- -- -- -- (6) (6) (6)
Issuance of Common Stock ---- ---- ---- 389 ---- 47 ---- ------ ----- ------ 47
Deferred compensation --- ---- ---- ----- --- 4,130 --- (4,130) ---- ----- 0 ---
Amortization of deferred
compensation -- -- -- -- -- -- -- 410 -- -- 410 --
Redeemable stock accretion --- --- ---- ---- ---- (4,238) ---- ----- ------ ---- (4,238)
Net loss -- -- -- -- -- -- -- -- (5,828) -- (5,828) (5,828)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at July 31, 1999 $-- -- $-- 31,501 $30 $36,885 $(428) $(3,773) $(15,390) $877 $18,201 $(4,951)
- -----------------------------------------------------------------------------------------------------------------------------------
Issuance of Common Stock
upon exercise
of options (Unaudited) -- -- -- 704 1 423 -- -- -- -- 424 --
Issuance of Common Stock
under Employee Stock
Purchase Plan (Unaudited) -- -- -- 58 -- 121 -- -- -- -- 121 --
19
<PAGE>
Exercise of
warrants (Unaudited) ---- ---- ---- 244 --- 30 ---- ----- ----- ---- 30 ----
Issuance of common
stock (Unaudited) --- --- ---- 290 1 36 ---- ----- ----- ---- 37 ----
Repayments by (notes issued
to) stockholders (Unaudited)-- -- -- -- -- -- (1) -- -- -- (1) ----
Unrealized gain on Securities
available for sale (Unaudited)-- -- -- -- -- -- --- -- -- (404) (404) $(404)
Currency translation
adjustment (Unaudited) -- -- -- -- -- -- -- -- ---- (36) (36) (36)
Issuance of common
stock for ProxiNet
acquisition (Unaudited) ---- --- ----- 3,802 4 14,783 --- ---- ---- ---- 14,787 -----
Deferred
compensation (Unaudited) --- --- ---- ---- ---- 1,170 ---- (1,170) ---- ---- 0 -----
Amortization of deferred
compensation (Unaudited) -- -- -- -- -- -- -- 875 -- -- 875 --
Redeemable stock
Accretion (Unaudited) --- ----- --- --- --- (3,300) --- ---- ---- ---- (3,300)
Net loss (Unaudited) -- -- -- -- -- -- -- -- (7,040) -- (7,040) (7,040)
- ------------------------------------------------------------------------------------------------------------------------------
Balance at January
31, 2000 (Unaudited) $-- -- $-- 36,599 $36 $50,148 $(429) $(4,068) $(22,430) $437 $23,694 $(7,480)
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
20
<PAGE>
SUPPLEMENTARY CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended January 31, Years Ended July 31,
2000 1999 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------
(in thousands) (Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (7,040) $(5,022) $ (5,828) $ (4,154) $ 93
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,608 1,016 1,678 1,232 630
In-process research and development 4,218 ----- --- 2,155 880
Non-cash stock compensation 875 23 410 28 27
Interest expense settled in common stock 42
Other ---- ---- ---- (7)
Realized gain on sale of investment (1,548) (1,103) (2,650) ---- ---
Changes in assets and liabilities:
Accounts receivable (1,250) 444 455 ---- (1,778)
Inventories (42) 159 (14) (20) (59)
Other current assets (1,756) (238) (180) 33 (385)
Other assets (2,177) (297) ----- ---- -----
Accounts payable 514 69 (354) (118) 629
Accrued liabilities 1,132 1,186 824 605 465
Foreign exchange translation (36) ----- (6) ----- -----
Deferred revenues 677 1,326 2,320 986 (359)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by operating activities (4,825) (2,437) (3,345) 789 136
- ------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of property and equipment (1,169) (559) (877) (1,371) (2,800)
Purchase of short term investments (10,806) (3,148) (20,230) (20,409) (23,960)
Maturities/sales of short-term investments 14,468 12,635 25,551 21,791 8,003
Cash used in acquisitions,
net of acquired working capital ---- ---- ---- (1,096) (808)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 2,493 8,928 4,444 (1,085) (19,565)
- ------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Principal payments under capital lease obligations ---- (69) (69) (22) (26)
Principal repayments on notes payable ---- (203) (203) 183 (35)
Proceeds from exercise of warrants ---- ---- ---- ---- 405
Note repayments (advances) to stockholder ---- ---- (362) 126 239
Net proceeds from issuance of
convertible preferred stock ---- 7,055 7,055 1,585
Net proceeds upon exercise of stock options 423 49 1,165 107 ---
Net proceeds from issuance of Common Stock 188 164 353 1,444 22,116
Proceeds from line of credit 303 ---- 175 ---- ----
Payments to settle acquired liabilities (764) ---- ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 210 6,804 8,114 1,888 24,281
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (2,122) 13,295 9,213 1,592 4,852
Cash and cash equivalents at beginning of period 16,639 7,426 7,426 5,834 982
- ------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 14,517 $20,721 $ 16,639 $ 7,426 $ 5,834
- ------------------------------------------------------------------------------------------------------------------------------
Interest paid $ ---- $ ---- $ 17 $43 $ 23
Income taxes paid ---- ---- -- 370 831
Common Stock issued in connection
with the acquisition of SoftMagic ---- ---- ---- 1,938 ----
Common Stock issued in connection
with the acquisition of ProxiNet 14,787 ---- ---- ---- ----
Issuance of warrants for technology ---- ---- ---- ---- 175
Conversion of debenture to Common Stock ---- ---- ---- ---- 953
Conversion of promissory notes and interest
settled in common stock ---- ---- ---- 425
Non-cash stock compensation 1,170 ---- 4,130 ---- ----
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
21
<PAGE>
NOTES TO SUPPLEMENTARY 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, including the company formerly known as NetMind Technologies,
Inc. ("NetMind") that merged with Puma Technology on February 24, 2000 in a
pooling of interest transaction. All periods presented have been restated in
order to include the financial results of NetMind Technologies, Inc. since
inception. All significant inter-company accounts and transactions have been
eliminated.
On February 24, 2000, the Company completed its acquisition of NetMind, which
has been accounted for as a pooling of interests, pursuant to the terms of the
Agreement and Plan of Reorganization, dated December 8, 1999. The Company issued
approximately 8,808,000 shares of PUMA Common Stock in the acquisition and
assumed options and warrants that can be exercised for approximately 801,000 and
391,000 shares of PUMA Common Stock respectively. The Supplementary consolidated
financial statements give retroactive effect to the acquisition. Generally
accepted accounting principles prescribe giving effect to a consummated business
combination accounted for by the pooling-of-interests method in financial
statements that do not include the date of consummation. These financial
statements do not extend through the date of consummation, however, they will
become the historical consolidated financial statements of the Company and its
subsidiaries after financial statements covering the date of consummation of the
business combination are issued.
The results of operations previously reported by the separate companies and
the combined amounts in the accompanying Supplementary consolidated financial
statements are summarized below (in thousands).
<TABLE>
<CAPTION>
Six Months Ended January 31, Years Ended July 31,
------------------------------ ----------------------
2000 1999 1999 1998 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
(Unaudited)
Revenue:
Puma $13,308 $ 9,154 $20,043 $22,308 $15,629
NetMind 465 253 680 33 4
------------------------- -------------------------------------------
Combined $13,773 $ 9,407 $20,723 $22,341 $15,633
======== ======== ======== ======== ========
Net income (loss):
Puma $(3,092) $(3,469) $(1,676) $(2,699) $ 660
NetMind (3,948) (1,553) (4,152) (1,455) (567)
------------------------- -------------------------------------------
Combined $(7,040) $(5,022) $(5,828) $(4,154) $ 93
======== ======== ======== ======== ========
</TABLE>
22
<PAGE>
The Company estimates that it will incur approximately $6,500,000 in
acquisition-related charges, principally in the fiscal third quarter ending
April 30, 2000 (unaudited). These charges include direct transaction costs
primarily for financial advisory services, legal and consulting fees and costs
associated with combining the operations of the two companies.
Prior to the acquisition, NetMind's fiscal year ended on December 31. The
consolidated financial statements for the six months ended January 31, 2000
and 1999 and for the years ended July 31, 1999, 1998, and 1997 reflect the
results of operations of PUMA for the six months ended January 31, 2000 and
1999 and for the years ended July 31, 1999, 1998, and 1997 combined with the
results of operations of NetMind for the corresponding periods.
On February 23, 2000, the Company announced a two-for-one stock split in the
form of a stock dividend. The record date for the stock split was March 8,
2000, and the payment date was March 22, 2000. The share numbers set forth in
these financial statements and Form 8K have been retroactively restated to
reflect the stock split.
PRINCIPLES OF CONSOLIDATION The consolidated financial statements for the
six months ended January 31, 2000 and 1999 are unaudited and reflect all
adjustments (consisting only of normal recurring accruals) which are, in the
opinion of management, necessary for a fair presentation of the Company's
financial position and operating results for the interim periods.
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.
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.
23
<PAGE>
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.
LONG LIVED ASSETS The company evaluates the recoverability for its
long-lived assets in accordance with Statement of Financial Standards No. 121,
"Accounting for the Impairment of long-sleeved Assets and for Long-Lived
Assets to be disposed of" ("SFAS 121"). SFAS 121 requires recognition of
impairment of long-lived assets in the event the net book value of such assets
exceeds the future undiscounted cash flows attributable to such assets.
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 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.
24
<PAGE>
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 21% and 14% of accounts receivable, respectively. At July 31, 1998, three
customers accounted for 20%, 17%, and 14% of accounts receivable, respectively.
The Company's sales are generally denominated in US dollars. The Company does
not undertake any foreign currency hedging activities.
FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts of cash and cash
equivalents, short-term investments, accounts receivable and account payable
approximate their respective fair values because of the short-term maturity of
these items. Based on the borrowing rates available for the Company's loans
with similar terms, the carrying values of the notes payable and capital lease
obligation approximate fair value.
NON CASH STOCK COMPENSATION The Company accounts for non cash compensation
arrangements in accordance with the provisions of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," ("APB No. 25") and
complies with the disclosure provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation." (SFAS 123").
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.
UNAUDITED INTERIM FINANCIAL INFORMATION The accompanying consolidated
balance sheet as of January 31, 2000, the related consolidated statement of
operations and of cash flows for the six months ended January 31, 2000 and
1999 and the consolidated statement of stockholders equity for the six months
ended January 31, 2000 are unaudited. In the opinion of management, these
statements have been prepared on the same basis as the audited financial
statements and include all adjustments, consisting of only normal recurring
adjustments necessary for the fair presentation of the results for the interim
periods. The data disclosed in the financial statements as of such dates and
for such periods are unaudited. Results for the six months ended January 31,
2000 are not necessarily indicative of the results of the entire fiscal year.
25
<PAGE>
NOTE 2. ACQUISITIONS The company acquired SoftMagic, Corp. ("SoftMagic") in
July 1998 and Real World Solutions, Inc. ("RWS") in July 1997. The companies
acquired were 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.
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.
26
<PAGE>
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 actually taken place on August 1,
1998 and may not be indicative of future operating results (in thousands, except
per share data).
<TABLE>
<CAPTION>
1998 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Years Ended July 31,
Pro forma revenue $22,671 $15,739
Pro forma net income (loss) $(2,260) $42
Pro forma basic earnings (loss) per share $(0.08) $0.00
Pro forma diluted earnings (loss) per share $(0.08) $0.00
</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,
January 31, 2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(Unaudited)
Cash equivalents
Commercial paper $8,494 $ 9,339 $ 5,412
Money market funds 2,894 1,062 385
- ------------------------------------------------------------------------------------------------------------------------------
$11,388 $10,401 $ 5,797
- ------------------------------------------------------------------------------------------------------------------------------
Short term investments
Commercial paper $8,521 $10,414 $12,651
US Government agencies -- 1,014
Securities available for sale 838 1,463 --
- ------------------------------------------------------------------------------------------------------------------------------
$9,359 $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>
January 31, July 31,
2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(Unaudited)
Accounts receivable $6,460 $4,767 $4,558
Less allowance for doubtful accounts and sales returns (2,050) (1,607) (943)
- ------------------------------------------------------------------------------------------------------------------------------
$4,410 $3,160 $3,615
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
January 31, July 31,
2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(Unaudited)
Computer equipment and software $4,000 $2,931 $2,422
Furniture and office equipment 2,088 1,988 1,662
Leasehold improvements 975 975 934
- ------------------------------------------------------------------------------------------------------------------------------
7,063 5,894 5,018
Less: accumulated depreciation and amortization (3,585) (2,886) (1,668)
- ------------------------------------------------------------------------------------------------------------------------------
$3,478 $3,008 $3,350
- ------------------------------------------------------------------------------------------------------------------------------
</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 depreciation and amortization expense
for the six months ended January 31, 2000 was $1,608,000 (unaudited). The
depreciation and amortization expense for the fiscal years ended July 31, 1999,
1998 and 1997 was $1,678,000, $1,232,000 and $630,000 respectively.
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
January 31, July 31,
2000 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(Unaudited)
Payroll related accruals $1,607 $1,418 $835
Other accrued liabilities 1,215 1,036 781
- ------------------------------------------------------------------------------------------------------------------------------
$2,822 $2454 $1,616
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 4. MANDATORY REEEDMABLE PREFERRED STOCK During fiscal 1999 NetMind issued
approximately 4 million shares of Series B Preferred Stock which converted into
approximately 3.4 million shares of the Company's common stock upon completion
of the NetMind merger in February 2000. Under terms of the original issuance,
the Series B shares were redeemable in September 2003 and 2004, at the higher of
their original issue price or fair value of the stock at the dates of
redemption. The difference between the issuance price and the fair value of the
Series B stock was accreted by NetMind. Such accretion aggregated $4,238,000 in
fiscal 1999 and $3,300,000 for the six months ended January 31, 2000
(unaudited).
NOTE 5. 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 9,000,000.
28
<PAGE>
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 $1.0938 (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 exercised prior to January 29, 1999. Options to purchase
4,719,032 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 $3.25 (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 2,396,200 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>
Option Shares Range of Price Weighted Average Exercise
Per Share Price Per Share
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at July 31,1996 2,078 $0.10 - $3.03 $0.18
Granted 2,974 $3.75 - $8.63 $5.22
Exercised (378) $0.10 - $3.75 $1.50
Canceled (458) $0.10 - $8.63 $3.55
- ------------------------------------------------------------------------------------------------------------------------------
Outstanding at July 31,1997 4,216 $0.10 - $8.44 $3.63
Granted 3,816 $0.13 - $4.19 $3.16
Exercised (182) $0.10 - $3.75 $0.59
Canceled (2,848) $0.10 - $8.44 $4.86
- ------------------------------------------------------------------------------------------------------------------------------
Outstanding at July 31,1998 5,002 $0.10 - $4.88 $2.68
Granted 7,408 $0.13 - $2.94 $1.30
Exercised (1,388) $0.10 - $1.25 $0.84
Canceled (5,934) $0.10 - $4.88 $2.69
- ------------------------------------------------------------------------------------------------------------------------------
Outstanding at July 31,1999 5,088 $0.10 - $2.94 $1.16
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
At July 31, 1999, a total of 22,000 shares were subject to repurchase and
options to purchase approximately 867,000 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 were below the
estimated fair value of the Company's Stock at the dates of grant. The Company
is recognizing approximately $115,000 in fiscal 1996 of compensation expense
over the options' four-year vesting periods. In conjunction with certain options
granted by NetMind Technologies, Inc., the Company is recognizing approximately
$4,130,000 in fiscal 1999 of compensation expense over the options' four-year
vesting periods. Accordingly, the Company booked $410,000, $28,000 and $27,000
of expense in fiscal 1999, 1998 and 1997 respectively.
29
<PAGE>
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
Range of Number Weighted-Average Number
Exercise Outstanding Remaining Weighted-Average Exercisable Weighted-Average
Prices at 7/31/99 Contractual Life Exercise Price at 7/31/99 Exercise Price
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$0.10 - $0.16 560 8.9 $0.14 92 $0.12
$0.24 - $1.05 607 8.3 $0.57 111 $0.82
$1.09 - $1.09 2,572 8.3 $1.09 2,569 $1.09
$1.20 - $1.34 543 9.2 $1.26 543 $1.26
$1.42 - $2.47 274 9.5 $1.88 274 $1.87
$2.66 - $2.66 7 9.9 $2.66 7 $2.66
$2.72 - $2.72 93 9.8 $2.72 93 $2.72
$2.75 - $2.75 386 6.2 $2.75 386 $2.75
$2.94 - $2.94 46 9.8 $2.94 46 $2.94
- ------------------------------------------------------------------------------------------------------------------------------
5,088 8.40 $1.16 4,121 $1.35
- ------------------------------------------------------------------------------------------------------------------------------
</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
500,000 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, 348,260 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 1,000,000 shares of Common Stock.
At July 31, 1999 all 1,000,000 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. (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Years Ended July 31,
Net income (loss) attributable to common stockholders $(10,066) $(4,154) $ 93
Net income (loss) attributable to common stockholders - Pro forma $(14,138) $(8,946) $(2,326)
Basic and diluted net income (loss) per common share $(0.34) $(0.15) $0.00
Basic net income (loss) per common share - Pro forma $(0.47) $(0.33) $(0.12)
Diluted net income (loss) per common share - Pro forma $(0.47) $(0.33) $(0.10)
</TABLE>
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.
30
<PAGE>
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 $1.81, $3.60 and $5.87, respectively.
COMMON STOCK WARRANTS In July 1996, the Company agreed to issue a warrant to
purchase 280,000 shares of its Common Stock at $2.75 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 is being amortized over its estimated life.
NOTE 6. 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 $1,405
2001 1,412
2002 1,416
2003 1,005
2004 1,085
Thereafter 2,191
- ------------------------------------------------------------------------------------------------------------------------------
Total minimum lease payments $8,514
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Total rent expense was approximately, $1,161,000, $1,246,000 and $448,000 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.
NOTE 7. OTHER INCOME (EXPENSE)
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Years Ended July 31, (in thousands)
Interest income $1,214 $1,158 $882
Interest expense (17) (43) (21)
Other expense, net (55) (38) (41)
Realized gains 2,650 -- --
Miscellaneous income 76 -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total other income, net $3,868 $1,077 $820
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
NOTE 8. INCOME TAXES The income tax provision for the years ended July 31, 1999,
1998 and 1997 is summarized as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Years Ended July 31,
Current
Federal $-- $ 13 $ 27
State 3 26 7
Foreign withholding tax 712 1,125 797
- ------------------------------------------------------------------------------------------------------------------------------
$715 $1,164 $831
- ------------------------------------------------------------------------------------------------------------------------------
Deferred tax assets are summarized as follows (in thousands):
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
July 31,
Net operating loss carryforwards $2,183 $ 818
Alternative minimum tax credit carryforwards 78 78
Research and development credit carryforwards 845 653
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 5,327 3,769
Deferred tax asset valuation allowance (5,327) (3,769)
- ------------------------------------------------------------------------------------------------------------------------------
$ -- $ --
- ------------------------------------------------------------------------------------------------------------------------------
</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.
32
<PAGE>
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>
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Years Ended July 31,
Amounts computed at statutory federal rate $(1,739) $(1,017) $314
Foreign withholding taxes 712 1,125 797
In-process research and development not deductible --- 288 247
Utilization of foreign tax credits -- (190) (633)
Utilization of tax loss carryforwards -- (359) (448)
Future benefits not currently recognized 1,742 1,317 554
- ------------------------------------------------------------------------------------------------------------------------------
$ 715 $1,164 $831
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
At July 31, 1999, the Company has approximately $6,000,000 of Federal loss
carryforwards and $845,000 of federal and state research and development credit
carryforwards, $1,343,000 of foreign tax credit carryforwards and $78,000 of
alternative minimum tax credit carryforwards.
NOTE 9. NET INCOME (LOSS) 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>
Six Months Ended Years Ended July 31,
1/31/200 1/31/1999 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net income (loss) attributable to common stockholders $(10,340) $(5,176) $(10,066) $(4,154) $ 93
- ------------------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding (denominator)
used to compute basic earnings per common share 32,546 29,335 29,970 27,224 19,030
Shares issuable upon exercise of options and warrants ---- ---- -- -- 1,164
Weighted average preferred shares as if converted ----- ---- -- -- 3,068
- ------------------------------------------------------------------------------------------------------------------------------
Denominator used to compute diluted earnings per share 32,546 29,335 29,970 27,224 23,262
- ------------------------------------------------------------------------------------------------------------------------------
Basic earnings (loss) per share $(0.32) $(0.18) $ (0.34) $ (0.15) $0.00
Diluted earnings (loss) per share $(0.32) $(0.18) $ (0.34) $ (0.15) $0.00
</TABLE>
As a result of net loss incurred by the Company in fiscal 1999 and 1998,
potential common share attributable to mandatorily redeemable preferred stock,
stock options and warrants were antidilutive and were excluded from net loss per
share calculations.
NOTE 10. 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 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.
33
<PAGE>
Revenue information by geographic region is as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Years Ended July 31,
North America $12,366 $11,714 $ 7,176
Japan 7,134 9,888 7,304
Other International 1,223 739 1,153
- ------------------------------------------------------------------------------------------------------------------------------
$20,723 $22,341 $15,633
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 11. 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 commencing after June 15, 2000. The Company
will adopt SFAS 133 in its quarter ending October 31, 2000 and does not expect
such adoption to have an impact on the Company's results of operations,
financial position or cash flows.
NOTE 12. 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 13. SUBSEQUENT EVENTS (UNAUDITED) On Aug. 24, 1999, the Company entered
into a definitive agreement to acquire ProxiNet, Inc., headquartered in
Emeryville, California, for 5,200,000 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. The merger was
finalized in fiscal quarter ending October 31, 1999, and as a result, the
Company incurred a one-time charge of $4,218,000 for in-process research and
development for ProxiNet's products which have not yet reached technological
feasibility. The ProxiNet acquisition has been accounted for as a purchase. The
total purchase price of approximately $17,384,000 (including liabilities of
$2,070,000), was assigned, based on independent appraisal, to the fair value of
the assets acquired, including $676,000 to tangible assets acquired, $3,378,000
to identified intangible assets, $4,218,000 to in process research and
development, and $9,112,000 to goodwill. The in-process research and development
was expensed at the acquisition date.
34
<PAGE>
The value assigned to acquired in-process research and development was
determined by identifying research projects in areas for which technology
feasibility had not been established as of the acquisition date. These include
projects for ProxiWare and ProxiWeb technology. The value was determined by
estimating the revenue contribution and the percentage of complete of each of
these products. The projects were deemed to be 55% complete on the date of
acquisition. The net cash flows were then discounted utilizing a weighted
average cost of capital of 27.5%. 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
fiscal 2000 for the products in development at the acquisition date. If these
projects are not successfully developed our future revenues and profitability
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 six months ended January 31, 2000, as if
the acquisition had occurred on August 1, 1999 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 actually taken place on
August 1, 1999 and may not be indicative of future operating results (in
thousands, except per share data).
<TABLE>
<CAPTION>
Six months ended January 31, 2000
<S> <C>
Pro forma revenue $13,773
Pro forma net loss $(5,049)
Pro forma basic and diluted loss per share $(0.13)
</TABLE>
On March 16, 2000 we completed a private placement of approximately 1,068,000
shares of common stock for approximately $82,000,000 in gross proceeds.
35
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Puma Technology, Inc.:
As described in Note 1, on February 24, 2000, Puma Technology, Inc. merged with
NetMind Technology, Inc. in a transaction accounted for as a pooling of
interests. The accompanying supplementary consolidated financial statements give
retroactive effect to the merger of Puma Technology, Inc. with NetMind
Technology, Inc.. Generally accepted accounting principles proscribe giving
effect to a consummated business combination accounted for by the pooling of
interest method in financial statements that do not include the date of
consummation. These financial statements do not extend through the date of
consummation; however, they will become the historical consolidated financial
statements of Puma Technology, Inc. and subsidiaries after financial statements
covering the date of consummation of the business combination are issued.
In our opinion, the accompanying supplementary consolidated balance sheets and
the related supplementary 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
accounting principles generally accepted in the United States. 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
auditing standards generally accepted in the United States, 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.
PricewaterhouseCoopers LLP
San Jose, California
August 20, 1999, except as to the pooling of
interests with NetMind Technologies, Inc., which
is as of February 24, 2000, and the common stock split discussed
in Note 1, which is as of March 22, 2000.
36
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 333-28277, 333-46691, 333-77961 and 333-0091) of
Puma Technology, Inc. of our report dated August 20, 1999, relating to the
supplementary consolidated financial statements, which appears in the Current
Report on Form 8-K of Puma Technology, Inc. dated April 17, 2000.
PRICEWATERHOUSECOOPERS LLP
/s/ PricewaterhouseCoopers LLP
San Jose, California
April 17, 2000
37
