<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934, FOR THE QUARTERLY PERIOD
ENDED SEPTEMBER 30, 2000.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934, FOR THE TRANSITION
PERIOD FROM TO
COMMISSION FILE NUMBER 1-10139
NETEGRITY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-2911320
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
52 SECOND AVENUE
WALTHAM, MA 02451
(Address of principal executive offices) (Zip Code)
(781) 890-1700
(Registrant's Telephone Number)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such other shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days [X] Yes No [ ]
As of November 8, 2000 there were 30,105,660 shares of Common Stock outstanding,
exclusive of Treasury stock.
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FORM 10-Q
QUARTERLY REPORT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Facing Sheet.................................................................................. 1
Table of Contents............................................................................. 2
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of September 30, 2000 and
December 31, 1999................................................... 3
Consolidated Statements of Operations for the three months
ended September 30, 2000 and 1999................................... 4
Consolidated Statements of Operations for the nine months
ended September 30, 2000 and 1999................................... 5
Consolidated Statements of Cash Flows for the nine months
ended September 30, 2000 and 1999................................... 6
Notes to Consolidated Financial Statements............................ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................... 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk............................ 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................... 21
Item 2. Changes in Securities................................................. 21
Item 3. Defaults upon Senior Securities....................................... 21
Item 4. Submission of Matters to a Vote of Security Holders................... 21
Item 5. Other Information..................................................... 22
Item 6. Exhibits ............................................................. 22
SIGNATURES.................................................................................... 22
Exhibit 27.................................................................................... 23
</TABLE>
2
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PART I. - FINANCIAL INFORMATION
NETEGRITY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
2000 December 31,
(unaudited) 1999
-------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ......................................... $108,068,310 $102,878,564
Accounts receivable-trade, net of allowance for doubtful
accounts of $802,223 at September 30, 2000 and $483,973 at
December 31, 1999 ............................................... 11,994,899 4,730,626
Prepaid expenses and other current assets ......................... 2,109,910 1,361,568
------------ ------------
Total current assets ........................................... 122,173,119 108,970,758
Property and equipment, net ......................................... 4,260,167 1,884,749
Restricted cash ..................................................... 942,480 -
Other assets ........................................................ 170,984 114,118
------------ ------------
Total assets ................................................... $127,546,750 $110,969,625
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable-trade ............................................... 1,485,690 1,090,747
Accrued compensation and benefits .................................... 4,478,929 1,420,119
Other accrued expenses ............................................... 2,927,625 675,913
Deferred revenue ..................................................... 5,953,336 1,349,232
------------- -------------
Total current liabilities ......................................... 14,845,580 4,536,011
------------- -------------
Stockholders' Equity:
Common stock, voting, $.01 par value; 55,000,000 shares
authorized; 29,882,648 shares issued and 29,857,547 shares
outstanding at September 30, 2000; 25,672,443 shares
issued and 25,634,942 shares outstanding at December 31,
1999 ............................................................... 298,575 256,349
Additional paid-in capital ........................................... 137,555,699 131,200,370
Accumulated deficit .................................................. (24,939,447) (24,809,448)
Loan to officer ...................................................... (130,000) (130,000)
------------- -------------
112,784,827 106,517,271
Less -- Treasury stock, at cost: 37,651 shares ......................... (83,657) (83,657)
------------- -------------
Total stockholders' equity ........................................ 112,701,170 106,433,614
------------- -------------
Total liabilities and stockholders' equity ........................ $ 127,546,750 $ 110,969,625
============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
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NETEGRITY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended September 30,
2000 1999
------------ ------------
<S> <C> <C>
Revenues:
SiteMinder software ................................ $ 10,586,467 $ 2,008,493
SiteMinder services ................................ 3,921,532 600,582
Other .............................................. 824,704 719,070
------------ ------------
Total revenues ..................................... 15,332,703 3,328,145
------------ ------------
Cost of SiteMinder software .......................... 695,235 158,409
Cost of SiteMinder services .......................... 2,259,420 307,614
Cost of other ........................................ 512,426 372,464
------------ ------------
Total cost of revenues ............................. 3,467,081 838,487
------------ ------------
Gross profit ......................................... 11,865,622 2,489,658
------------ ------------
Selling, general and administrative expenses.......... 9,956,007 3,218,816
Research and development costs ....................... 2,787,914 1,011,707
Non-cash stock compensation expense .................. -- 821,278
------------ ------------
Loss from operations ................................. (878,299) (2,562,143)
Interest income (expense), net ....................... 1,788,997 51,767
------------ ------------
Net profit (loss)..................................... $ 910,698 $ (2,510,376)
Accretion of preferred stock ......................... -- (137,627)
------------ ------------
Net income (loss) attributable to common stockholders. 910,698 (2,648,003)
============ ============
Basic and diluted earnings per share:
Net profit (loss) attributable to common stockholders. $ 0.03 $ (0.17)
============ ============
Weighted average shares outstanding
Basic ............................................... 29,652,000 15,864,000
Diluted ............................................. 34,008,000 15,864,000
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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NETEGRITY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended September 30,
2000 1999
------------ ------------
<S> <C> <C>
Revenues:
SiteMinder software ................................ $ 22,197,511 $ 4,476,094
SiteMinder services ................................ 7,873,774 1,405,609
Other .............................................. 2,503,151 2,144,970
------------ ------------
Total revenues ..................................... 32,574,436 8,026,673
------------ ------------
Cost of SiteMinder software .......................... 1,527,828 428,816
Cost of SiteMinder services .......................... 4,581,524 743,373
Cost of other ........................................ 1,497,056 1,159,253
------------ ------------
Total cost of revenues ............................. 7,606,408 2,331,442
------------ ------------
Gross profit ......................................... 24,968,028 5,695,231
------------ ------------
Selling, general and administrative expenses.......... 22,991,252 7,806,460
Research and development costs ....................... 6,136,014 2,486,126
Non-cash stock compensation expense .................. 292,148 2,026,367
------------ ------------
Loss from operations ................................. (4,451,386) (6,623,722)
Interest income (expense), net ....................... 4,321,387 118,912
------------ ------------
Net loss ............................................. (129,999) (6,504,810)
Accretion of preferred stock ......................... -- (412,881)
------------ ------------
Net loss attributable to common stockholders ......... (129,999) (6,917,691)
============ ============
Basic and diluted earnings per share:
Net loss attributable to common stockholders ......... $ (0.00) $ (0.45)
============ ============
Weighted average shares outstanding
Basic .............................................. 28,676,000 15,410,000
Diluted ............................................ 28,676,000 15,410,000
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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NETEGRITY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended
September 30,
2000 1999
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (129,999) $(6,504,810)
Adjustments to reconcile net loss to net cash used for
operating activities:
Depreciation and amortization 668,369 245,913
Provision for doubtful accounts receivable 716,789 282,842
Compensation expense related to warrant 292,148 2,026,367
Changes in operating assets and liabilities:
Accounts receivable (7,981,063) (1,411,605)
Prepaid expenses and other current assets (748,342) (97,884)
Other assets (56,865) (16,105)
Accounts payable-trade 394,943 13,040
Accrued compensation and benefits 3,058,810 294,605
Other accrued expenses 2,251,712 205,386
Deferred revenue 4,604,104 (188,708)
------------ --------------
Net cash provided by (used for) operating activities 3,070,606 (5,150,959)
INVESTING ACTIVITIES:
Capitalized software costs -- 175,629
Capital expenditures for equipment and
leasehold improvements (3,043,787) (509,603)
Restricted cash (942,480) --
------------ --------------
Net cash used for investing activities (3,986,267) (333,974)
FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 6,105,407 15,522,268
------------ --------------
Net increase in cash and cash equivalents 5,189,746 10,037,335
Cash and cash equivalents at beginning of period 102,878,564 1,174,625
------------ --------------
Cash and cash equivalents at end of period $108,068,310 $ 11,211,960
============ ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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NETEGRITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - The unaudited financial information furnished herein reflects all
adjustments which are of a normal recurring nature, which in the opinion of
management are necessary to fairly state the Company's financial position, cash
flows and results of operations for the periods presented. Certain information
and footnote disclosure normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. This information should be read in conjunction with the Company's
audited financial statements for the fiscal year ended December 31,
1999, included in Form 10-K/A filed on July 25, 2000.
NOTE 2 - Certain 1999 information has been reclassified to conform with the 2000
financial statement presentation.
NOTE 3 - The results of operations for the nine months ended September 30, 2000
are not necessarily indicative of the results to be expected for the remainder
of the year ending December 31, 2000.
NOTE 4 - Basic net income (loss) per share is computed using the weighted
average number of shares of common stock outstanding. Diluted EPS is based upon
the weighted average number of common and common equivalent shares outstanding
during the period. Up through the first six months of fiscal year 2000 diluted
net loss per share does not differ from basic net loss per share since potential
common shares from stock options and warrants and convertible preferred stock
are anti-dilutive for all periods presented.
The following table sets forth basic and diluted income (loss) per share
computational data for the periods presented:
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
September 30, September 30,
------------------------------- --------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income (loss) attributable
to common stockholders $ 910,698 $ (2,648,003) $ (129,999) $ (6,917,691)
------------ ------------ ------------ ------------
Weighted average shares outstanding
used in computing basic net income
(loss) per share 29,652,000 15,864,000 28,676,000 15,410,000
Weighted average common equivalent
shares outstanding:
employee stock options and warrants 4,356,000 -- -- --
------------ ------------ ------------ ------------
Total weighted average common and
common equivalent shares
outstanding used in computing
diluted net income (loss) per
share 34,008,000 15,864,000 28,676,000 15,410,000
------------ ------------ ------------ ------------
Basic net income (loss) per share $ 0.03 $ (0.17) $ (0.00) $ (0.45)
============ ============ ============ ============
Diluted net income (loss) per share $ 0.03 $ (0.17) $ (0.00) $ (0.45)
============ ============ ============ ============
</TABLE>
NOTE 5 - Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources, including foreign currency translation adjustments and
unrealized gains and losses on marketable securities. For the nine months ended
September 30, 2000 and 1999, comprehensive income (loss) was not materially
different from net income (loss).
NOTE 6 - In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, or SFAS 133, "Accounting
for Derivative Instruments and Hedging Activities." This statement initially was
to be effective for all fiscal quarters of fiscal years beginning after June 15,
1999. In July 1999, the FASB issued SFAS 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133 -- An amendment of FASB Statement No. 133." SFAS 137 defers
the implementation of SFAS 133 by one year to June 15, 2000 and will be
effective for fiscal quarters beginning after January 1, 2001 for the Company,
and its adoption is not expected to have a material impact on the Company's
financial position or results of operations.
In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." This bulletin summarizes certain views of the staff on applying
generally accepted accounting principles to revenue recognition in financial
statements. SAB 101 becomes effective for the Company's quarter ended December
31, 2000. The Company does not expect the application of SAB No. 101 to have a
material impact on the Company's financial position or results of operation.
NOTE 7 - The Company considers that it has the following five reportable
operating segments based on differences in products and services. Operating
segments are defined as components of the enterprise about which separate
financial information is available that is reviewed regularly by the chief
operating decision maker, or decision-making group, in deciding how to allocate
resources and in assessing their performance.
<TABLE>
<CAPTION>
For the three months ended September 30,
------------------------------------------
2000 1999
------------------- ------------------
Gross Gross
Revenue Margin Revenue Margin
------- ------ ------- ------
<S> <C> <C> <C> <C>
Operating Segments:
SiteMinder software ........ $10,586,467 $ 9,891,232 $2,008,493 $1,850,084
----------- ----------- ---------- ----------
SiteMinder services:
Maintenance................. 1,401,490 1,401,490 185,101 185,101
Training and consulting..... 2,520,042 260,622 415,481 107,867
----------- ----------- ---------- ----------
3,921,532 1,662,112 600,582 292,968
----------- ----------- ---------- ----------
Other
Software and related
products.................. 424,340 92,070 366,471 139,572
Services.................... 400,364 220,208 352,599 207,034
----------- ----------- ---------- ----------
824,704 312,278 719,070 346,606
----------- ----------- ---------- ----------
Totals...................... $15,332,703 $11,865,622 $3,328,145 $2,489,658
=========== =========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
For the nine months ended September 30,
------------------------------------------------
2000 1999
------------------------ ---------------------
Gross Gross
Revenue Margin Revenue Margin
----------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Operating Segments:
SiteMinder software......... $22,197,511 $20,669,683 $4,476,094 $4,047,278
----------- ----------- ---------- ----------
SiteMinder services:
Maintenance................. 2,362,690 2,362,690 408,378 408,378
Training and consulting..... 5,511,084 929,560 997,231 253,858
----------- ----------- ---------- ----------
7,873,774 3,292,250 1,405,609 662,236
----------- ----------- ---------- ----------
Other
Software and related
products.................. 1,287,339 337,083 1,128,168 415,685
Services.................... 1,215,812 669,012 1,016,802 570,032
----------- ----------- ---------- ----------
2,503,151 1,006,095 2,144,970 985,717
----------- ----------- ---------- ----------
Totals...................... $32,574,436 $24,968,028 $8,026,673 $5,695,231
=========== =========== ========== ==========
</TABLE>
Certain expenses related to maintenance are included in operating expenses
based upon the Company's management reporting practice and it has not been
practical to allocate these expenses to cost of maintenance.
NOTE 8 - In July 2000, the Board of Directors approved a three for two stock
split of the Company's common stock in the form of a dividend which is effective
September 1, 2000 for all holders of record as of August 18, 2000. All common
share data presented in this 10-Q have been adjusted for the stock split.
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<PAGE> 8
2. Management's Discussion & Analysis of Financial Condition and Results of
Operations
FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
This report and the documents incorporated in it by reference contain
forward-looking statements about our plans, objectives, expectations and
intentions. You can identify these statements by words such as "expect,"
"anticipate," "intend," "plan," "believe," "seek," "estimate," "may," "will" and
"continue" or similar words. You should read statements that contain these words
carefully. They discuss our future expectations, contain projections of our
future results of operations or our financial condition or state other
forward-looking information, and may involve known and unknown risks over which
we have no control. You should not place undue reliance on forward-looking
statements. We cannot guarantee any future results, levels of activity,
performance or achievements. Moreover, we assume no obligation to update
forward-looking statements or update the reasons actual results could differ
materially from those anticipated in forward-looking statements. The factors
discussed in the sections captioned "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business" in
this report and the documents incorporated in it by reference identify important
factors that may cause our actual results to differ materially from the
expectations we describe in our forward-looking statements.
This report and the documents incorporated in it by reference contain data
related to the e-commerce market. This market data have been included in
studies published by the market research firms of Forrester Research and
International Data Corporation. These data include projections that are based on
a number of assumptions, including increasing worldwide business use of the
Internet, the growth in the number of web access devices per user, the absence
of any failure of the Internet, and the continued improvement of security on the
Internet. If any of these assumptions is incorrect, actual results may differ
from the projections based on those assumptions.
RISK FACTORS
The Private Securities Litigation Reform Act of 1995 contains certain safe
harbors regarding forward-looking statements. In that context, the discussion in
this Item contains forward-looking statements which involve certain degrees of
risk and uncertainties, including statements relating to liquidity and capital
resources. Except for the historical information contained herein, the matters
discussed in this section are such forward-looking statements that involve risks
and uncertainties, including:
WE HAVE INCURRED SUBSTANTIAL LOSSES AND MAY NOT BE PROFITABLE IN THE FUTURE.
Until this most recent quarter, we have incurred substantial losses in every
fiscal period. We cannot predict if we will remain profitable for any
substantial period of time. Failure to maintain levels of profitability as
expected by investors may adversely affect the market price of our common stock.
In the nine months ended September 30, 2000, we had a net loss of $129,999. As a
result of historical operating losses, we had an accumulated deficit of $24.9
million as of September 30, 2000. We have generated relatively small amounts of
SiteMinder revenues until recent fiscal quarters, while increasing expenditures
in all areas, particularly in research and development and sales and marketing,
in order to execute our business plan. Although we have experienced revenue
growth in connection with SiteMinder in recent periods, the growth has been off
of a small base, and it is unlikely that the recent growth rates are
sustainable.
DISAPPOINTING QUARTERLY RESULTS COULD CAUSE THE MARKET PRICE OF OUR COMMON STOCK
TO FALL SUBSTANTIALLY.
Our quarterly revenues and operating results are difficult to predict and may
fluctuate significantly from quarter to quarter. If our quarterly revenues or
operating results fall below the expectations of investors, the price of our
common stock could fall substantially.
Our quarterly revenues may fluctuate for several reasons, including the
following:
- market acceptance of our SiteMinder products;
- our success in obtaining follow-on sales to existing customers;
- the long sales and deployment cycle for sales of SiteMinder licenses;
- our ability to hire and retain personnel, particularly in services and
sales and marketing;
- the release of new versions of SiteMinder or other products; and
- the development of our direct and indirect sales channels.
In addition, because our revenues from services are largely correlated with our
SiteMinder software revenues, a decline in SiteMinder software revenues could
also cause a decline in our SiteMinder services revenues in the same quarter or
in subsequent quarters. Other factors, many of which are outside our control,
could also cause variations in our quarterly revenues and operating results.
8
<PAGE> 9
Most of our expenses, such as employee compensation and rent, are relatively
fixed. Moreover, our expense levels are based, in part, on our expectations
regarding future revenue increases. As a result, any shortfall in revenues in
relation to our expectations could cause significant changes in our operating
results from quarter to quarter and could result in increased quarterly losses.
OUR FUTURE SUCCESS WILL DEPEND ON OUR ABILITY TO MARKET SITEMINDER AND RELATED
SERVICES SUCCESSFULLY.
The sale of SiteMinder licenses and related services provides a substantial
majority of our total revenues. These sales accounted for 92% of our total
revenues for the nine months ended September 30, 2000. We expect that our future
financial performance will depend on SiteMinder sales. Prior to the release of
SiteMinder 3.0 in June 1998, there had been very few commercial installations of
SiteMinder. Since June 1998, all commercial deployments of SiteMinder have
supported business-to-business web applications. Broad market acceptance of
SiteMinder will depend on the development of the market for secure portal
management, including usage of
9
<PAGE> 10
SiteMinder for business-to-consumer applications, and customer demand for the
specific functionality of SiteMinder. We cannot be sure that either will occur.
Like most technology products at an early stage of development, SiteMinder may
require extensive reengineering or upgrading if it fails to meet the performance
needs or expectations of our customers when shipped or contains significant
software defects or bugs. If we fail in marketing SiteMinder products and
services, for whatever reason, our business would be harmed.
OUR SUCCESS IS DEPENDENT ON OUR ABILITY TO ENHANCE OUR SITEMINDER PRODUCT LINE
AND DEVELOP NEW PRODUCTS.
We believe our success is dependent, in large part, on our ability to enhance
and broaden our SiteMinder product line to meet the evolving needs of both the
business-to-business and business-to-consumer market. We cannot be sure that we
will be able to respond effectively to technological changes or new industry
standards or developments. In the past, we have been forced to delay
introduction of several new product versions. In the future, we could be
adversely affected if we incur significant delays or are unsuccessful in
enhancing our SiteMinder product line or developing new products, or if any of
our enhancements or new products do not gain market acceptance.
OUR PERFORMANCE DEPENDS ON OUR ABILITY TO OBTAIN FOLLOW-ON SALES.
Customers typically place small initial orders for SiteMinder installations to
allow them to evaluate its performance. Our strategy is to pursue more
significant follow-on sales after these initial installations. Our financial
performance depends on successful initial deployments of SiteMinder that, in
turn, lead to follow-on sales. We cannot be sure that initial deployments of
SiteMinder by our customers will be successful, or that we will be able to
obtain follow-on sales.
WE FACE SIGNIFICANT COMPETITION FROM THE INTERNAL EFFORTS OF POTENTIAL CUSTOMERS
AND FROM OTHER TECHNOLOGY COMPANIES AND WE MAY NOT BE ABLE TO COMPETE
EFFECTIVELY.
The market for secure user management products and services is relatively
immature and highly competitive. We expect the level of competition to increase
as a result of the anticipated growth of e-commerce. Until recently, our primary
source of competition was from secure user management software developed
in-house. Many of our potential customers have the resources to establish
in-house software development capabilities, and some of them, from time to time,
may choose to develop their own secure user management technology that is
competitive with ours. In addition, we have faced competition from web
development professional services organizations. Today our primary competitors
include IBM and Entrust. In addition, a number of other security and software
companies have indicated that they offer products which may compete with ours.
We expect that additional competitors will emerge in the future. Current and
potential competitors have established, or may in the future establish,
cooperative relationships with third parties to increase the availability of
their products to the marketplace. It is possible that new competitors or
alliances may emerge and rapidly acquire significant market share. Potential
competitors may have significantly greater financial, marketing, technical and
other competitive resources than we have. If, in the future, a competitor
chooses to bundle a competing secure user management product with other
e-commerce applications, the demand for our products might be substantially
reduced. Many of these factors are out of our control, and there can be no
assurance that we can maintain or enhance our competitive position against
current and future competitors.
THE DEVELOPMENT OF A MARKET FOR SITEMINDER IS UNCERTAIN.
We provide secure user management solutions for web-based e-commerce
applications. Our market is new and rapidly evolving. If the market for secure
user management solutions does not grow at a significant rate, this will have a
material adverse effect on our business, operating results and financial
condition. As is typical for new and rapidly evolving industries, customer
demand for recently introduced secure user management products is highly
uncertain.
10
<PAGE> 11
OUR BUSINESS WILL BE ADVERSELY AFFECTED IF THE INTERNET DOES NOT BECOME A VIABLE
AND SUBSTANTIAL COMMERCIAL MEDIUM.
Our future success depends heavily on the acceptance and wide use of the
Internet for e-commerce. If e-commerce does not continue to grow or grows more
slowly than expected, significant demand for SiteMinder and related services may
fail to develop. Consumers and businesses may reject the Internet as a viable
commercial medium for a number of reasons, including potentially inadequate
network infrastructure, slow development of enabling technologies, insufficient
commercial support or privacy concerns. In addition, delays in the development
or adoption of new standards and protocols required to handle increased levels
of e-commerce, or increased government regulation or taxation, could cause the
Internet to lose its viability as a commercial medium.
REGULATIONS OR CONSUMER CONCERNS REGARDING THE USE OF "COOKIES" ON THE INTERNET
COULD REDUCE THE FUNCTIONALITY OF SITEMINDER.
SiteMinder uses cookies to support its single sign-on functionality. A cookie is
information keyed to a specific user that is stored on the hard drive of the
user's computer, typically without the user's knowledge. Cookies are generally
removable by the user, and can be refused by the user at the point at which the
information would be stored on the user's hard drive. A number of governmental
bodies and commentators in the United States and abroad have urged passage of
laws limiting or abolishing the use of cookies. The passage of laws limiting or
abolishing the use of cookies, or the widespread deletion or refusal of cookies
by web site users, could reduce or eliminate the effectiveness of single sign-on
and could reduce market demand for SiteMinder.
WE MUST HIRE AND RETAIN SKILLED PERSONNEL IN A TIGHT LABOR MARKET.
Qualified personnel are in great demand throughout the software industry. Our
success depends, in large part, upon our ability to attract, train, motivate and
retain highly skilled employees, particularly software engineers, professional
services personnel, sales and marketing personnel, and other senior personnel.
Our failure to attract and retain the highly trained technical personnel that
are integral to our product development, professional services and direct sales
teams may limit the rate at which we can generate sales and develop new products
or product enhancements. This could have a material adverse effect on our
business, operating results and financial condition.
OUR SUCCESS DEPENDS ON OUR ABILITY TO DEVELOP OUR DIRECT SALES AND INDIRECT
DISTRIBUTION CHANNELS.
To increase our revenues, we must develop our direct sales channel and increase
the number of our indirect channel partners. A failure to do so could have a
material adverse effect on our business, operating results and financial
condition. There is intense competition for sales personnel in our business, and
we cannot be sure that we will be successful in attracting, integrating,
motivating and retaining sales personnel. In addition, we must increase the
number of strategic partnerships and other third-party relationships with system
integrators, vendors of Internet-related systems and application software,
resellers. Our existing or future channel partners may choose to devote greater
resources to marketing and supporting the products of other companies. In
addition, we will need to resolve potential conflicts among our sales force and
channel partners.
OUR FAILURE TO EXPAND OUR PROFESSIONAL SERVICES RESOURCES COULD LIMIT THE
SUCCESS OF SITEMINDER.
Our professional services organization provides critical support to our
customers' installation and deployment of SiteMinder. If we fail to expand our
professional services resources, our ability to increase sales of SiteMinder may
be limited. In addition, if we cannot adequately support SiteMinder
installations, our customers' use of our products may fail, which could harm our
reputation and hurt our business.
11
<PAGE> 12
OUR LENGTHY SALES CYCLE MAKES IT DIFFICULT TO PREDICT OUR QUARTERLY OPERATING
RESULTS.
We have a long sales cycle because we generally need to educate potential
customers regarding the use and benefits of SiteMinder. Our sales cycle varies
depending on the size and type of customer contemplating a purchase and whether
we have conducted business with a potential customer in the past. These
potential customers frequently need to obtain approvals from multiple decision
makers prior to making purchase decisions. Our long sales cycle, which can range
from several weeks to several months or more, makes it difficult to predict the
quarter in which sales will occur. Delays in sales could cause significant
variability in our revenues and operating results for any particular period.
OUR FAILURE TO MANAGE OUR RAPID GROWTH EFFECTIVELY COULD HURT OUR BUSINESS.
Our failure to manage our rapid growth effectively could have a material adverse
effect on the quality of our products, our ability to retain key personnel and
our business, operating results and financial condition. We have been
experiencing a period of rapid growth that has been placing a significant strain
on all of our resources. From December 31, 1999 to September 30, 2000, the
number of our employees increased from 138 to 251. To manage future growth
effectively we must maintain and enhance our financial and accounting systems
and controls, integrate new personnel and manage expanded operations.
IF WE LOSE THE SERVICES OF BARRY BYCOFF OR ANY OTHER MEMBER OF OUR MANAGEMENT
TEAM, OUR BUSINESS COULD SUFFER.
Our future success depends, to a significant degree, on the skill, experience
and efforts of Barry Bycoff, our chief executive officer, and the rest of our
management team. The loss of any member of our management team could have a
material adverse effect on our business, operating results and financial
condition. We also depend on the ability of our officers and key employees to
work effectively as a team.
AS WE EXPAND OUR INTERNATIONAL OPERATIONS, WE WILL FACE NEW RISKS TO OUR
SUCCESS.
Historically, we have not derived a significant portion of our total revenues
from sales to customers outside the United States. However, we intend to expand
our international operations in the future. This expansion will require
additional resources and management attention, and will subject us to new
regulatory, economic and political risks. We have very little experience in
international markets. As a result, we cannot be sure that our expansion into
global markets will be successful. In addition, we will face new risks in doing
business internationally. These risks could reduce demand for our products and
services, increase the prices at which we can sell our products and services, or
otherwise have an adverse effect on our operating results. Among the risks we
believe are most likely to affect us are:
- longer payment cycles and problems in collecting accounts receivable;
- adverse changes in trade and tax regulations, including restrictions
on the import and export of sensitive technologies, such as encryption
technologies, that we use or may wish to use in our software products;
- the absence or significant lack of legal protection for intellectual
property rights;
- difficulties in managing an organization spread over several
countries, including complications arising from cultural, language and
time differences that may lengthen sales and implementation cycles;
- currency risks, including fluctuations in exchange rates; and
- political and economic instability.
OUR SUCCESS DEPENDS ON OUR ABILITY TO PROTECT OUR PROPRIETARY RIGHTS.
Our success depends to a significant degree upon the protection of our software
and other proprietary technology. The unauthorized reproduction or other
misappropriation of our proprietary technology could enable third parties to
benefit from our technology without paying us for it. This could have a material
adverse effect on our business, operating results and financial condition. We
depend upon a combination of
12
<PAGE> 13
trademark, trade secret and copyright laws, license agreements and
non-disclosure and other contractual provisions to protect proprietary and
distribution rights in our products. In addition, we attempt to protect our
proprietary information and the proprietary information of our vendors and
partners through confidentiality and/or license agreements with our employees
and others. Although we have taken steps to protect our proprietary technology,
they may be inadequate. Existing trade secret, copyright and trademark laws
offer only limited protection. Moreover, the laws of other countries in which we
market our products may afford little or no effective protection of our
intellectual property. If we resort to legal proceedings to enforce our
intellectual property rights, the proceedings could be burdensome and expensive,
even if we were to prevail.
CLAIMS BY OTHER COMPANIES THAT WE INFRINGE THEIR PROPRIETARY TECHNOLOGY COULD
HURT OUR FINANCIAL CONDITION.
If we discover that any of our products violated third party proprietary rights,
there can be no assurance that we would be able to reengineer our product or to
obtain a license on commercially reasonable terms to continue offering the
product without substantial reengineering. We do not conduct comprehensive
patent searches to determine whether the technology used in our products
infringes patents held by third parties. In addition, product development is
inherently uncertain in a rapidly evolving technology environment in which there
may be numerous patent applications pending, many of which are confidential when
filed, with regard to similar technologies. Any claim of infringement could
cause us to incur substantial costs defending against the claim, even if the
claim is invalid, and could distract our management from our business.
Furthermore, a party making such a claim could secure a judgment that requires
us to pay substantial damages. A judgment could also include an injunction or
other court order that could prevent us from selling our products. Any of these
events could have a material adverse effect on our business, operating results
and financial condition.
OUR BUSINESS COULD BE ADVERSELY AFFECTED IF OUR PRODUCTS CONTAIN ERRORS.
Software products as complex as ours may contain undetected errors or "bugs"
that result in product failures. The occurrence of errors could result in loss
of or delay in revenues, loss of market share, failure to achieve market
acceptance, diversion of development resources, injury to our reputation, or
damage to our efforts to build brand awareness, any of which could have a
material adverse effect on our business, operating results and financial
condition.
WE COULD INCUR SUBSTANTIAL COSTS RESULTING FROM PRODUCT LIABILITY CLAIMS
RELATING TO OUR CUSTOMERS' USE OF OUR PRODUCTS.
Many of the e-commerce applications supported by our products are critical to
the operations of our customers' businesses. Any failure in a customer's web
site or application caused or allegedly caused by our products could result in a
claim for substantial damages against us, regardless of our responsibility for
the failure. Although we maintain general liability insurance, including
coverage for errors and omissions, there can be no assurance that our existing
coverage will continue to be available on reasonable terms or will be available
in amounts sufficient to cover one or more large claims, or that the insurer
will not disclaim coverage as to any future claim.
IF WE ACQUIRE OTHER COMPANIES OR BUSINESSES, WE WILL BE SUBJECT TO RISKS THAT
COULD HURT OUR COMPANY.
In the future, we may pursue acquisitions to obtain complementary products,
services and technologies. An acquisition may not produce the revenues, earnings
or business synergies that we anticipated, and an acquired product, service or
technology might not perform as we expected. If we pursue any acquisition, our
management could spend a significant amount of time and effort in identifying
and completing the acquisition. If we complete an acquisition, we would probably
have to devote a significant amount of management resources to integrate the
acquired business with our existing business.
To pay for an acquisition, we might use our stock or cash. Alternatively, we
might borrow money from a bank or other lender. If we use our stock, our
stockholders would experience dilution of their ownership interests. If we use
cash or debt financing, our financial liquidity will be reduced.
13
<PAGE> 14
THE MARKET PRICE OF OUR COMMON STOCK HAS BEEN AND MAY CONTINUE TO BE VOLATILE.
Our stock price, like that of other technology companies, has been extremely
volatile. The announcement of new products, services, technological innovations
or distribution partners by us or our competitors, quarterly variations in our
operating results, changes in revenues or earnings estimates by securities
analysts and speculation in the press or investment community are among the
factors affecting our stock price.
The stock market in general, and the market prices for Internet-related
companies in particular, have experienced extreme volatility that often has been
unrelated to the operating performance of these companies. These broad market
and industry fluctuations may adversely affect the market price of our common
stock, regardless of our operating performance. Recently, when the market price
of a stock has been volatile, holders of that stock have often instituted
securities class action litigation against the company that issued the stock. If
any of our stockholders brought a lawsuit against us, we could incur substantial
costs defending the lawsuit. The lawsuit could also divert the time and
attention of our management.
WE MAY LOSE MONEY ON FIXED-PRICE CONSULTING CONTRACTS.
In the future, an increased portion of our SiteMinder services revenues may be
derived from fixed-price contracts. We work with complex technologies in
compressed time frames and it can be difficult to judge the time and resources
necessary to complete a project. If we miscalculate the resources or time we
need to complete work under fixed-price contracts, our operating results could
be materially harmed.
CERTAIN PROVISIONS OF OUR CHARTER AND OF DELAWARE LAW MAKE A TAKEOVER OF OUR
COMPANY MORE DIFFICULT.
Our corporate documents and Delaware law contain provisions that might enable
our management to resist a takeover of our company. These provisions might
discourage, delay or prevent a change in the control of Netegrity or a change in
our management. These provisions could also discourage proxy contests and make
it more difficult for you and other stockholders to elect directors and take
other corporate actions. The existence of these provisions could limit the price
that investors might be willing to pay in the future for shares of our common
stock.
14
<PAGE> 15
RESULTS OF OPERATIONS
The following information should be read in conjunction with the consolidated
financial statements and notes thereto:
<TABLE>
<CAPTION>
Period to Period %
Increase (Decrease)
% of Total Revenues Three Months Ended
For the three months September 30,
Ended September 30, 2000 1999 2000 vs. 1999
-------- -------- ------------------
<S> <C> <C> <C>
Revenues:
SiteMinder software 69% 60% 427%
SiteMinder services 26 18 553
Other 5 22 15
---- ---- -----
Total revenues 100 100 361
---- ---- -----
Cost of SiteMinder software 5 5 339
Cost of SiteMinder services 15 9 634
Cost of other 3 11 38
---- ---- -----
Total cost of revenues 23 25 313
---- ---- -----
Gross profit 77 75 377
Selling, general and administrative
expenses 65 97 209
Research and development costs 18 30 176
Non-cash stock compensation expense - 25 (100)
---- ---- -----
Loss from operations (6) (77) 489
Interest income (expense), net 12 2 N/A
---- ---- -----
Net income (loss) 6% (75)% 134%
==== ==== =====
</TABLE>
Revenues. Total revenues increased by $12.0 million, or 361%, to $15.3 million
in the three months ended September 30, 2000, from $3.3 million in the three
months ended September 30, 1999.
SiteMinder software revenues increased by $8.6 million, or 427%, to $10.6
million in the three months ended September 30, 2000, from $2.0 million in the
three months ended September 30, 1999. This increase is due to the continued
increase in market awareness and the acceptance of the SiteMinder product and
expansion of our sales organization.
SiteMinder services revenues increased by $3.3 million, or 553%, to $3.9 million
in the three months ended September 30, 2000, from $601,000 in the three months
ended September 30, 1999. This increase reflects the continued growth in the
installed base of SiteMinder software licenses and the increasing demand to
provide installation and integration services for customers.
Other revenues increased by $106,000, or 15%, to $825,000 in the three months
ended September 30, 2000, from $719,000 in the three months ended September 30,
1999.
Cost of revenues. Total cost of revenue increased by $2.6 million or 313%, to
$3.5 million in three months ended September 30, 2000, from $838,000 in the
three months ended September 30, 1999.
Cost of SiteMinder software increased by $537,000, or 339%, to $695,000 in the
three months ended September 30, 2000 from $158,000 in the three months ended
September 30, 1999. The increase is primarily the result of increased volumes
associated with SiteMinder Software revenue.
Cost of SiteMinder services increased by $2.0 million or 634%, to $2.3 million
in the three months ended September 30, 2000 from $308,000 in the three months
ended September 30, 1999. The increase is primarily due to growth in personnel
related expenses for our consulting and education organizations as a result of
increased SiteMinder service revenues.
Cost of other increased by $140,000 or 38%, to $512,000 in the three months
ended September 30, 2000 from $372,000 in the three months ended September 30,
1999. A higher mix of lower margin accessory business within the other operating
segment in the three months ended September 30, 2000, resulted in costs
increasing at a higher rate than revenues to the same quarter for the previous
year.
Gross profit. Gross profit increased by $9.4 million, or 377%, to $11.9 million
in the three months ended September 30, 2000, from $2.5 million in the three
months ended September 30, 1999. The increase in SiteMinder software revenues
resulted in higher gross profit due to increased sales volume.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased by $6.8 million, or 209%, to $10.0 million in
the three months ended September 30, 2000, from $3.2 million in the three months
ended September 30, 1999. This increase is primarily a result of our continuing
to build our sales and marketing infrastructure to support planned growth in
sales of our SiteMinder product and services. We expect to increase the amount
spent on SG&A in the foreseeable future as we continue to expand our market
presence both domestically and internationally, and continue to invest in
supporting infrastructure.
Research and development costs. Research and development costs increased by $1.8
million, or 176%, to $2.8 million in the three months ended September 30, 2000,
from $1.0 million in the three months ended September 30, 1999. The increase was
primarily due to our continued development of SiteMinder and our increase in
research and development personnel. We expect to increase the amount spent on
research and development in the foreseeable future as we continue to develop and
enhance our product line to address the evolving needs of customers deploying
large-scale and transaction-based e-commerce applications.
Non-cash stock compensation expense. The non-cash stock compensation expense
decreased by $821,000 to $0 in the three months ended September 30, 2000 from
$821,000 in the three months ended September 30, 1999. This expense represents
the compensation charge for a common stock warrant for 100,000 shares issued to
a director in connection with the January 1998 preferred stock financing. The
warrant was accounted for as a variable award, and as a result, the expense
primarily related to the increase in the fair value of the Company's common
stock during the respective periods. The expense was recognized over the vesting
period until the warrant was exercised. As of June 30, 2000 these warrants were
fully exercised.
Interest income (expense), net. Net interest income increased by $1.7 million,
to $1.8 million in the three months ended September 30, 2000, from $52,000 in
the three months ended September 30, 1999. This increase is mainly attributable
to a higher average cash balance in the three months ended September 30, 2000.
Provision for income taxes. For the three months ended September 30, 2000 and
1999 we had no provision for income taxes due to the net losses incurred
year-to-date.
15
<PAGE> 16
RESULTS OF OPERATIONS
The following information should be read in conjunction with the consolidated
financial statements and notes thereto:
<TABLE>
<CAPTION>
Period to Period %
% of Total Revenue Increase (Decrease)
For the nine months 2000 1999 Nine Months Ended
Ended September 30, September 30, 2000 vs. 1999
<S> <C> <C> <C>
Revenues
SiteMinder software 68% 56% 396%
SiteMinder services 24 17 460
Other 8 27 17
--- --- -----
Total revenues 100 100 306
--- --- -----
Cost of SiteMinder software 5 5 256
Cost of SiteMinder services 14 10 516
Cost of Other 4 14 29
--- --- -----
Total cost of revenues 23 29 226
--- --- -----
Gross profit 77 71 338
Selling, general and adminstrative
expenses 71 97 195
Research and development costs 19 31 147
Non-cash stock compensation expense 1 25 (86)
--- --- -----
Loss from operations (14) (82) (33)
--- --- -----
Interest income (expense), net 13 1 N/A
--- --- -----
Net loss (1)% (81)% (98)%
=== === =====
</TABLE>
16
<PAGE> 17
Revenues. Total revenues increased by $24.5 million, or 306%, to $32.6 million
in the nine months ended September 30, 2000, from $8.0 million in the nine
months ended September 30, 1999.
SiteMinder software revenues increased by $17.7 million, or 396%, to $22.2
million in the nine months ended September 30, 2000, from $4.5 million in the
nine months ended September 30, 1999. This increase is due to the continued
increase in market awareness and the acceptance of the SiteMinder product and
expansion of our sales organization.
SiteMinder services revenues increased by $6.5 million, or 460%, to $7.9 million
in the nine months ended September 30, 2000, from $1.4 million in the nine
months ended September 30, 1999. This increase reflects the continued growth in
the installed base of SiteMinder software licenses and the increasing demand to
provide installation and integration services for customers.
Other revenues increased by $358,000, or 17%, to $2.5 million in the nine months
ended September 30, 2000, from $2.1 million in the nine months ended September
30, 1999.
Cost of revenues. Total cost of revenue increased by $5.3 million or 226%, to
$7.6 million in nine months ended September 30, 2000, from $2.3 million in the
nine months ended September 30, 1999.
Cost of SiteMinder software increased by $1.1 million or 256%, to $1.5 million
in the nine months ended September 30, 2000 from $429,000 in the nine months
ended September 30, 1999. The increase is primarily the result of increased
volumes associated with SiteMinder software revenue.
Cost of SiteMinder services increased by $3.8 million or 516%, to $4.6 million
in the nine months ended September 30, 2000 from $743,000 in the nine months
ended September 30, 1999. The increase is due to increases in salaries and
related expenses for our consulting and education organizations as a result of
increased SiteMinder service revenues.
Cost of other increased by $338,000 or 29%, to $1.5 million in the nine months
ended September 30, 2000 from $1.2 million in the nine months ended September
30, 1999.
Gross profit. Gross profit increased by $19.3 million, or 338%, to $25.0 million
in the nine months ended September 30, 2000, from $5.7 million in the nine
months ended September 30, 1999. The increase in SiteMinder software revenues
resulted in higher gross profit due to increased sales volume.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased by $15.2 million, or 195%, to $23.0 million in
the nine months ended September 30, 2000, from $7.8 million in the nine months
ended September 30, 1999. This increase is primarily a result of our continuing
to build our sales and marketing infrastructure to support planned growth in
sales of our SiteMinder product and services. We expect to increase the amount
spent on SG&A in the foreseeable future as we continue to expand our market
presence both domestically and internationally, and continue to invest in
supporting infrastructure.
Research and development costs. Research and development costs increased by $3.6
million, or 147%, to $6.1 million in the nine months ended September 30, 2000,
from $2.5 million in the nine months ended September 30, 1999. The increase was
17
<PAGE> 18
primarily due to our continued development of SiteMinder and our increase in
research and development personnel. We expect to increase the amount spent on
research and development in the foreseeable future as we continue to develop and
enhance our product line to address the evolving needs of customers deploying
large-scale and transaction-based e-commerce applications.
Non-cash stock compensation expense. The non-cash stock compensation expense
decreased by $1.7 million to $292,000 in the nine months ended September 30,
2000 from $2.0 million in the nine months ended September 30, 1999. This expense
represents the compensation charge for a common stock warrant for 100,000 shares
issued to a director in connection with the January 1998 preferred stock
financing. The warrant was being accounted for as a variable award, and as a
result, the expense primarily related to the increase in the fair value of the
Company's common stock during the respective periods. The expense was recognized
over the vesting period until the warrant was exercised. As of June 30, 2000,
these warrants were fully exercised.
Interest income (expense), net. Net interest income increased by $4.2 million,
to $4.3 million in the nine months ended September 30, 2000, from $119,000 in
the nine months ended September 30, 1999. This increase is mainly attributable
to a higher average cash balance in the nine months ended September 30, 2000.
Provision for income taxes. For the nine months ended September 30, 2000 and
1999 we had no provision for income taxes due to the net losses incurred
year-to-date.
18
<PAGE> 19
LIQUIDITY AND CAPITAL RESOURCES
(in thousands, except ratios)
<TABLE>
<CAPTION>
September 30, December 31,
Financial Condition as of 2000 1999
--------- ------------
<S> <C> <C>
Cash and cash equivalents $108,068 $102,879
Working capital 107,328 104,435
Current ratio 8.23 24.02
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
In recent years, we have funded our operations primarily from sales of
securities.
Cash provided by operating activities in the nine months ended September 30,
2000 was $2.1 million, primarily due to increases in deferred revenue, accrued
compensation and benefits, and accrued expenses and partially offset by an
increase in accounts receivable.
Cash used for investing activities was $3.0 million in the nine months ended
September 30, 2000. Investing activities for the period consisted primarily of
the purchases of equipment, consisting largely of computer servers, workstations
and networking equipment.
Cash provided by financing activities in the nine months ended September 30,
2000 was $6.1 million which primarily related to the exercise of warrants and
stock options.
In recent years, we have significantly increased our operating expenses. We
anticipate that we will continue to experience significant growth in our
operating expenses for the foreseeable future and that our operating expenses
and capital expenditures will constitute a material use of our cash resources.
In addition, we may utilize cash resources to fund acquisitions or investments
in businesses, technologies, products or services that are complementary to our
business. We believe that our existing cash and cash equivalents will be
sufficient to meet our anticipated cash requirements for working capital and
capital expenditures for at least the next twelve months.
19
<PAGE> 20
YEAR 2000 UPDATE
We have not experienced any disruptions related to the "Year 2000" issue.
Nevertheless, we are continuing to evaluate risks associated with a potential
delayed impact of Year 2000 related failures. Any such failure could result in
an interruption in, or a failure of, normal business activities which could
materially and adversely affect our results of operations, liquidity and
financial condition. Due to the general uncertainty inherent in the Year 2000
issue, resulting in part from the uncertainty of the Year 2000 readiness of
third party vendors, we are unable to predict whether any future failure related
to the Year 2000 issue will have a material adverse impact on our results of
operations, liquidity or financial position. We believe that our efforts to
identify and resolve issues related to the Year 2000 problem have reduced, but
not eliminated, the possibility that we will in the future encounter any
significant interruptions to normal operations related to the Year 2000 issue.
3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable
20
<PAGE> 21
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. The Company is
not presently a party to any legal proceedings, the adverse outcome of which, in
management's opinion, would have a material adverse effect on the Company's
results of operations or financial position.
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
21
<PAGE> 22
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS
27. Financial Data Schedule
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NETEGRITY, INC.
Date: November 14, 2000 By: /s/ Barry N. Bycoff
-----------------------
Barry N. Bycoff President,
Chief Executive Officer,
Director and Chairman of the
Board
Date: November 14, 2000 By: /s/ James E. Hayden
-----------------------
James E. Hayden Vice
President, Finance and
Administration, and Chief
Financial Officer
22
