SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A-2
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 28, 2000
LIGHTNING ROD SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
0-18809
(Commission File Number)
41-1614808
(I.R.S. employer Identification No.)
7301 Ohms Lane, Suite 600,
Minneapolis, Minnesota 55439
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 837-4000
CE SOFTWARE HOLDINGS, INC.
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
MERGER
In accordance with approval obtained at its annual meeting on April 27, 2000, CE
Software Holdings, Inc. (the "Registrant") completed the acquisition of
Lightning Rod Software, Inc. (formerly known as ATIO Corporation USA, Inc. and
hereafter "Lightning Rod") on April 28, 2000 through the merger (the "Merger")
of Lightning Rod with and into the Registrant. In accordance with the Amended
and Restated Agreement and Plan of Merger, as amended (the "Merger Agreement")
governing the transaction, the name of the Registrant became "Lightning Rod
Software, Inc." after the Merger, and the directors and officers of Lightning
Rod became the directors and officers of the Registrant. The Registrant issued a
total of 1,044,429 shares of its common stock to shareholders and warrant
holders of Lightning Rod in the Merger and assumed the obligation to issue an
additional 189,571 shares of its common stock upon exercise of Lightning Rod
options.
Immediately prior to consummation of the Merger, the Registrant declared and
paid a dividend to all of its shareholders as of record as of the close of
business on April 28, 2000 of one share of the Common Stock of CE Software, Inc.
("CSI"), its wholly-owned operating subsidiary, for each outstanding share of
the Registrant. Substantially all of the business operations of the Registrant
were conducted through CSI prior to this spin-off.
In accordance with the Merger Agreement, prior to the Merger the Registrant's
assets consisted of approximately $1,543,000 of cash and short term investments,
$548,000 of which was placed in an special escrow account at the effective time
of the Merger, and a $3,221,000 receivable from Lightning Rod that was
extinguished through the Merger. The special escrow account is to be disbursed
to CSI simultaneous with the exercise of options on the Registrant's stock held
by persons who were employees and directors of the Registrant prior to the
Merger. The Registrant had virtually no recorded liabilities at the time of the
Merger.
The Registrant also sold to one of the shareholders of Lightning Rod a total of
70,234 shares at a price of $6.48 per share paid in cash and by cancellation of
certain indebtedness at the effective time of the Merger. The shareholder
executed a promissory note in the amount of $509,725.65 to secure its obligation
to purchase an additional 78,666 shares pursuant to the Merger Agreement. This
note was paid in full and corresponding shares were issued in June 2000. Another
Lightning Rod shareholder pledged a total of 314,062 shares to secure its
obligation to purchase a like number of shares. These shares have not yet been
purchased.
The Merger was treated as a tax-free reorganization for tax purposes. For
accounting purposes, the Merger was treated as a reverse acquisition of the
Registrant by Lightning Rod. Because of the spin-off of CSI and the subsequent
private sale of securities (see item 5), the Merger had the effect of a
financing transaction for Lightning Rod. Accordingly, the historical financial
statements of Lightning Rod became the historical financial statements of the
Registrant as a result of the Merger.
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BUSINESS SUBSEQUENT TO MERGER
Effective as of the date of the Merger (April 28, 2000), the business of
Lightning Rod became the sole business of the Registrant. As a result, the
Registrant (also referred to herein as "we," "us," "our," and other similar
terms) is now a market leader in providing proactive e-business customer service
software solutions for personalizing the customer interaction experience and for
building customer loyalty. We improve e-business customer loyalty by
anticipating customer needs and providing superior real-time customer service
responses. We implement unique solutions for a variety of companies that
maintain a presence on the Web for the purpose of marketing products or services
or engaging in business-to-consumer or business-to-business transactions. By
using Lightning Rod Interaction Manager (f/k/a CyberCall), e-commerce companies
or expanding bricks-and-mortar businesses are able to deliver responsive,
personalized customer service via a customer's preferred communications medium,
including Web callback, chat, e-mail, collaboration, voice-over-the-Web, also
called voice-over-IP (VoIP), fax and telephone. Lightning Rod Interaction
Manager's unique ability to enable customer service anytime, anywhere, via a
variety of media, gives e-businesses a significant competitive edge in their
marketplaces. In addition, we believe e-businesses using Lightning Rod
Interaction Manager will experience:
* Increased customer loyalty and revenue as a result of efficiently handled
interactions and repeat customer business;
* Faster time to market because Lightning Rod Interaction Manager
easily integrates with legacy technologies; and
* Greater operational effectiveness due to Lightning Rod Interaction
Manager's ability to prioritize interactions and route them to the
customer-service representatives (CSR) most qualified to handle them.
CyberCall was developed by Atio (Pty) starting in 1993. In 1997, the technology
that comprises CyberCall and Atio (Pty) management were combined with Venturian
Software Enterprises, Inc., a Minnesota corporation formed in October 1992.
Venturian Software Enterprises, Inc. changed its name to ATIO Corporation USA,
Inc. in November 1997. ATIO Corporation USA, Inc. changed its name to Lightning
Rod Software, Inc., and changed the name of its software to Lightning Rod
Interaction Manager, in March 2000.
Market Opportunity
We are uniquely positioned to take advantage of the explosive growth in the
market space for e-businesses, whether new e-commerce businesses or traditional
bricks-and-mortar companies seeking Web-related expansion opportunities.
Lightning Rod Interaction Manager addresses a large and growing demand for
e-business customer service solutions that deliver customer service through a
variety of contact media. The e-business world is extremely competitive. Because
the Web is an arena for instant gratification, e-shoppers recognize that
competitors' Web sites are only a mouse click away. Even customers who have
historically been loyal to a business could be lost following an unsatisfactory
experience with an e-business transaction. We believe that only those companies
delivering a high level of customer service are going to be successful in
building a loyal customer following. Companies like e-style.com, babystyle.com,
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Stockwalk.com, and other leaders in their respective fields now recognize
customer service as strategic to their long-term growth and profitability.
* According to the Patricia Seybold Group: "The lifetime value of your
customers will increase in direct proportion to how easy you can make it
for them to do business with you."
* Gartner Group advises e-businesses to develop a customer
communications strategy for all media types including the Web, for
their customers and business partners.
* "Only 1/3 of the shoppers who place items in a shopping cart actually
complete the purchase. In large part...this is due to the lack of
real-time customer service help." Survey by Net Effect Systems -
Inter@ctive Week, 8/99.
* According to Ovum, the customer service center software market will
grow from $580 million in 1998 to $3.1 billion in 2003.
In addition to the increasing need to rely on customer service for competitive
differentiation, we believe technological change will be a key driver in the
growth of the e-business customer service market, and Lightning Rod Interaction
Manager will provide e-businesses with the tools they need to succeed in this
arena.
Target Market
We believe that the strongest target market exists in the e-business arena with
customer service operations between ten and 200 CSRs. This market segment,
currently underserved by the industry, shows much greater growth potential than
the higher end of the market. Our targeted e-businesses span multiple vertical
markets, including, but are not limited to:
* Niche e-tailing;
* On-line brokerage;
* e-customer service providers;
* On-line entertainment, i.e., CDs, music, etc.; and
* Niche on-line service providers.
These sectors were identified because we believe they have the following key
attributes that will provide the company with a substantial ability to be a
recognized leader:
* Sector is "well funded" and has explosive growth opportunities;
* Customer service is a strategic differentiator;
* New entrants can compete with superior customer service;
* The focus is business-to-consumer;
* Substantial market share can be obtained; and
* No competitor dominates the sector.
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Products
Lightning Rod Interaction Manager is an integrated, modular, and scalable
all-media customer service solution that can be tailored to meet specific
e-business customer service center requirements. The base of the Lightning Rod
Interaction Manager system is the Interaction Gateway. This multimedia "traffic
cop" interfaces with a customer's e-business system and handles the
prioritization, routing and queuing of all types of interactions independent of
the media. Telephone calls, e-mails, faxes, Web callback requests, Web chat and
collaboration, interactive voice response (IVR) and VoIP interactions are all
handled in the same manner, based on a company's particular business rules.
Lightning Rod Interaction Manager can be configured with one or more of the
media-access modules and interaction processing modules.
Lightning Rod Interaction Manager highlights:
o All-media. Lightning Rod Interaction Manager provides customers with
a choice of media - telephone, e-mail, fax, Web callback, Web chat,
Web collaboration and VoIP - on one integrated platform.
o Quick Deployment. Lightning Rod Interaction Manager is an integrated
solution that can be deployed quickly to allow a fast return on a
customer's investment.
o Modular. Lightning Rod Interaction Manager can be configured to fit
the needs for access media and the interaction handling capabilities
of most e-businesses.
o Scalable. Lightning Rod Interaction Manager scales from as few as ten
and up to hundreds of concurrent CSRs per system. Multiple sites can
be networked for support of decentralized customer service centers.
o Reporting. Lightning Rod Interaction Manager allows for real-time and
historical reporting of all customer service center metrics for all
media, thereby resulting in comprehensive and meaningful data.
o Open Standards. Lightning Rod Interaction Manager is built upon open
standards for easy integration with e-commerce, data warehouse,
back-office and business applications.
o Open Systems. Lightning Rod Interaction Manager is built to operate on
Microsoft Windows NT Server and SQL Server.
o Switch independent. Lightning Rod Interaction Manager integrates with
most switches through a variety of interfaces.
Lightning Rod Interaction Manager is licensed to end users based on the number
of simultaneous users and modules of Lightning Rod Interaction Manager required
by the end user. Charges in addition to licensing fees include implementation
and customization services, maintenance, and third-party components. We expect
our average order per customer, per site to be approximately $200,000. To date,
pricing has been based on a software-licensing model, but we are also
introducing an ASP or pay-per-use arrangement.
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Wed believe that Lightning Rod Interaction Manager provides superior value to
e-business companies by:
1. Increasing customer loyalty. We recognize that behind every e-transaction,
there is a human being. In order to demonstrate the importance of each customer,
Lightning Rod Interaction Manager has been developed to personalize the customer
service experience in the following ways:
Customer Identification: Lightning Rod Interaction Manager uniquely
identifies each customer and allows self service or CSR-enabled
contact. Any information submitted by the customer online is
immediately sent to a CSR's screen. The CSR can even see the exact Web
page being viewed by the customer and can access historical data from
the customer's account. The CSR does not have to ask for a repeat of
information and customers feel the human touch with every interaction.
Differentiation: Lightning Rod Interaction Manager differentiates one
interaction from another, and one customer type from another, based on
pre-set value criteria. Interaction requests are analyzed by the
Lightning Rod Interaction Manager system to ensure that customers are
routed to the CSR best able to meet their needs. If, for example, a
Spanish-speaking customer requests a callback or other form of
interaction, he can be assured that a Spanish-speaking CSR will be in
touch with him.
Interaction: With Lightning Rod Interaction Manager, customers are able
to interact on their own schedules, with their choice of media,
allowing customer service representatives the opportunity to provide
superior service.
Customization. Because each customer is immediately identified, the
Lightning Rod Interaction Manager system can provide customized,
personalized messages, banner ads, and information specific to that
customer.
We believe that customers receiving these personalized interactions are more
likely to have positive experiences that will bring them back to e-businesses
time and time again.
2. Increasing operational effectiveness. When a customer sends an interaction
request via Lightning Rod Interaction Manager through his or her contact medium
of choice, that request is automatically forwarded to the CSR with the best
skill set to handle it. Any information submitted online by the customer is
matched with historical data about that customer and immediately appears on the
CSR's screen, thus personalizing the interaction and eliminating the need to
repeat information. The same personalization options are available for
self-service customers through e-mail, interactive voice response (IVR), and fax
on demand. Lightning Rod Interaction Manager's ease of integration between
access media and back-end business applications ensures that customer service
center operators are able to provide a more efficient contact experience to
their customers. Interaction requests are handled much more efficiently
resulting in more calls being handled in a shorter amount of time and a notable
increase in customer satisfaction.
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3. Enabling faster time to market. Our implementation methodology includes
working closely with our customers to understand their objectives prior to
installing a Lightning Rod Interaction Manager system. This initial-time
investment, coupled with Lightning Rod Interaction Manager's ability to
inter-operate with legacy technologies, results in faster deployment and
implementation time frames, thus enabling e-businesses to readily begin
interacting with their customers. Lightning Rod Interaction Manager is an
attractive customer service solution for both "startup.com" and brick-and-mortar
type companies. Both types of companies need to establish a rich all-media
customer service operation in order to be competitive.
Customers
As of August 1999, Lightning Rod Interaction Manager 3.0 had been in full
production as an all-media customer service solution. Innovative e-businesses
that have used or are using our software include: boo.com, Stockwalk.com,
e-style.com, babystyle.com, Invacare, Instant Impact, Gage Marketing and State
Capitol Credit Union.
Sales and Marketing
We currently distribute Lightning Rod Interaction Manager by means of direct
sales and relationships with strategically selected reseller partners. We also
maintain channel managers to support our resellers. We maintain a limited direct
sales force. In addition, we engage in marketing activities to support our sales
efforts.
Our strategy is to establish customer reference sites through our direct sales
effort, while establishing strategic relationships with qualified reseller
partners. Our goal is to eventually deliver approximately 70% of revenues
through reseller partners. In this way, we believe that time-to- market will be
compressed. At this time, we are continuing to build relationships with
committed distribution partners.
We currently have a primary reseller partnership with Norstan Communications.
Norstan, one of the world's largest Siemens Communications resellers, with
annual revenues of approximately $483 million, promotes Lightning Rod
Interaction Manager as the all-media customer service solution for its customer
service center clients. Norstan's strong corporate customer base in North
America exceeds 20,000 accounts.
Professional Services
Our professional services group partners with our direct sales force and
reseller partners to provide turnkey solutions that include all hardware,
software and training required to create a successful customer service solution.
The implementation methodology applied by this group includes pre-installation
customer interaction assessment and return on investment analysis, design,
configuration of solutions, and integration with third-party front office
applications. Once there is a clear understanding of customer needs and
objectives, the professional services organization manages the implementation,
integration, training, maintenance and follow-up support of the Lightning Rod
Interaction Manager system. Although each project varies depending on the needs
and existing infrastructure of the customer, we typically target an
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implementation time frame from four to eight weeks. While we ultimately
anticipate that approximately 10%-15% of our revenues will be derived from
professional services, it currently comprises approximately 45% of revenues.
Intellectual Property
We own, in accordance with an agreement with Atio International, all right title
and interest in and to the Lightning Rod Interaction Manager software and claim
copyright and trade secret rights therein. The software was initially developed
by Atio (Pty) and transferred to Atio International in 1997. Development
personnel at Atio (Pty) have continued to provide development services and have
enhanced the software since that date. We have endeavored to have each of our
employees, and to our knowledge, Atio (Pty) has endeavored to have each of its
employees, execute nondisclosure and intellectual property assignment
agreements. All of our assets, including our intellectual property, are subject
to a security interest held by CC Management, LLC ("Convergent") in connection
with a loan made by Convergent to ATIO Corporation USA, Inc. for $1.35 million.
We currently hold a variety of trademarks, trademark applications, trade names
and registered copyrights, but do not have exclusive rights to the use of "ATIO"
as a trade name or the stylized "A" used in the trade name and used as a logo in
various formats. Atio International has the right to use the trade name and the
mark, and will retain these rights after the Merger. Atio Corporation USA, Inc.
agreed to transfer, effective as of the date of the Merger, all of its rights in
the "ATIO" name to Atio International. Effective March 29, 2000, Atio
Corporation USA, Inc. changed its name to Lightning Rod Software, Inc., which
became the name of the surviving corporation (i.e., the Registrant) after the
Merger. We filed a patent application with the U.S. Government Patent Office for
our "System with Multi-media Real Time Queue Monitor" on December 2, 1999.
We imbed certain layer-two communication software licensed from Intel-Dialogic
Corporation into our software system for sale to end users. We have the right to
sublicense such software, as imbedded into our products, to our customers. We
also imbed license monitoring software developed by Rainbow Technologies in our
software products to monitor license-use compliance under individual license
agreements that are established and resold with each installation of the
software. We also imbed technology from DART Communications under a similar "per
occurrence" arrangement for e-mail related software code used in our products.
Competition
Although we believe we have a technologically advanced product, there are a
number of other companies (e.g., Apropros Technology, Inc. and Interactive
Intelligence, Inc.) that are developing products to allow communications in
multiple media to be handled by call-center personnel. In addition, a number of
companies offer products that perform some of the same functions as our software
products. Some of our existing competitors, as well as a number of potential
competitors, have larger technical staffs, more established and larger marketing
and sales organizations, and significantly greater financial resources than us.
There can be no assurance that such competitors will not develop products that
are superior to our products or that achieve greater market acceptance. Our
future success will depend significantly upon our ability to increase our share
of our target markets and to license additional products and product
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enhancements to existing customers. There can be no assurance that we will be
able to compete with companies that have significantly greater resources and
contacts within the industry, or that competition will not have a material
adverse effect on our results of operations.
Research and Development
Our research and development efforts are focused on enhancing the
e-business-centric features of our product based on the Microsoft development
environment. To ensure that Lightning Rod Interaction Manager systems easily
integrate with the most commonly used technologies today, technology
partnerships have been formed and inter-operability testing has been done with
products from IBM, Microsoft, and Intel-Dialogic Corporation. We manage
strategic research and development operations in the United States from our
Minneapolis office. As a result of the Atio corporate history, we had some
software development production operations in the Republic of South Africa. Most
of this function has been relocated to the United States.
Employees
As of December 1999, we had 45 full-time employees, with six employees in
executive management, seven in sales and marketing, 18 in product development
and engineering, 11 in professional services, two in finance, and one in
administration.
Property
We lease office space at 7301 Ohms Lane, Edina, Minnesota, 55439, pursuant to a
sublease arrangement. We plan to relocate to another facility by the end of
August 2000. We believe that the new facilities will be adequate for our current
needs.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
LIGHTNING ROD SOFTWARE, INC.
/s/ Jeffrey D. Skie
Jeffrey D. Skie,
Executive Vice President and Chief Financial Officer
Dated: July 24, 2000
