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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
|X| Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Fiscal Year Ended March 31, 2000
or
|_| Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition Period From _______________ to
________________.
Commission file number 0-19817
IntraNet Solutions, Inc.
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(Exact name of registrant as specified in its charter)
Minnesota 41-1652566
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
8091 Wallace Road
Eden Prairie, Minnesota 55344-3775
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(Address of principal executive offices) (Zip code)
(952) 903-2000
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
par value
$.01 per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
The aggregate market value of the registrant's common stock held by
non-affiliates of the registrant as of June 16, 2000, was $505,993,332 based on
the closing sale price for the registrant's common stock on that date as
reported by The Nasdaq Stock Market. For purposes of determining such aggregate
market value, all officers and directors of the registrant are considered to be
affiliates of the registrant, as well as shareholders holding 10% or more of the
outstanding common stock as reflected on Schedules 13D or 13G filed with the
registrant. This number is provided only for the purpose of this report on Form
10-K and does not represent an admission by either the registrant or any such
person as to the status of such person.
As of June 16, 2000, the registrant had 21,270,874 shares of common
stock issued and outstanding.
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INTRANET SOLUTIONS, INC.
FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 31, 2000
TABLE OF CONTENTS
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<CAPTION>
DESCRIPTION PAGE
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PART I
<S> <C> <C>
Item 1. Business............................................................ 2
Item 2. Properties.......................................................... 19
Item 3. Legal Proceedings................................................... 20
Item 4. Submission of Matters to a Vote of Security Holders................. 20
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters............................................... 20
Item 6. Selected Financial Data............................................. 20
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................... 20
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.......... 20
Item 8. Financial Statements and Supplementary Data......................... 20
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............................... 20
PART III
Item 10. Directors and Executive Officers of the Registrant.................. 21
Item 11. Executive Compensation.............................................. 22
Item 12. Security Ownership of Certain Beneficial Owners
and Management.................................................... 22
Item 13. Certain Relationships and Related Transactions...................... 22
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K........................................... 22
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement dated for the annual
meeting of Shareholders to be held on August 30, 2000 and the Annual Report to
Shareholders for the year ended March 31, 2000 are incorporated by reference in
Parts II, III and IV of this Annual Report on Form 10-K. (The Compensation
Committee Report and the stock performance graph contained in the registrant's
Proxy Statement are expressly not incorporated by reference in this Annual
Report on Form 10-K). The Proxy Statement will be filed within 120 days after
the end of the fiscal year ended March 31, 2000.
PART I
ITEM 1. BUSINESS
FORWARD-LOOKING STATEMENTS
The information presented in this Annual Report on Form 10-K under the
headings "Item 1. Business" and "Item 2. Properties" and incorporated by
reference under "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" contains forward-looking statements within
the meaning of the safe harbor provisions of Section 21E of the Securities
Exchange Act of 1934, as amended. Such statements are subject to risks and
uncertainties, including those discussed under "Risk Factors" beginning on page
14 of this Annual Report on Form 10-K, that could cause actual results to differ
materially from those projected. Because actual results may differ, readers are
cautioned not to place undue reliance on these forward-looking statements.
OVERVIEW
IntraNet Solutions is a leading provider of Web content management solutions
for intranets, extranets and the Internet. Our Xpedio Content Management Suite
offers customers the ability to simplify and automate management of Web content
from all sources. We address an organization's complex needs in publishing,
updating and maintaining its Web sites by providing a comprehensive solution
that eliminates administrative bottlenecks and automatically publishes content
from native formats directly to the Web.
Xpedio gives every content contributor in an organization the ability to
automatically Web-publish content to Hypertext Markup Language (HTML) and
Extensible Markup Language (XML) Web sites from native desktop formats. Our
solution is based on open Web standards and Java server architecture and
integrates with an organization's existing security model. Xpedio keeps Web
content current and gives it the desired "look and feel", while maintaining the
source content in both Web and native formats. By allowing content contributors
to directly participate in the Web publishing process, Xpedio automates the
manual content conversion and publication tasks usually required of Webmasters.
This reduces errors, provides information more rapidly to users and allows
Webmasters to focus on site architecture and "look and feel" enhancements.
Our comprehensive solution, applicable across a wide variety of industries
and Web applications, enables organizations to effectively utilize their content
on the Web. Since our first Web-based software products were introduced in
fiscal 1997, they have been adopted by over 500 customers for use on one or more
of their intranet, extranet and Internet Web sites. Customer uses of our
products have ranged from single workgroups to enterprise-wide deployments. Our
customers include organizations such as Agilent Technologies, British Aerospace
Airbus, Ltd., Cargill Incorporated, Ericsson Telecom AB, GE Capital Corporation,
Hewlett-Packard Company and Merrill Lynch. We currently operate in one business
segment.
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INDUSTRY BACKGROUND
EXPLOSIVE GROWTH OF THE INTERNET AND WEB CONTENT MANAGEMENT
As the rapid growth of the Internet has fundamentally changed the way that
businesses communicate and transact, Web content has increased dramatically in
both volume and importance. Web content, including graphics, audio and video
clips, hyperlinked text and executable software, is the basis for every Web page
and most e-commerce applications. International Data Corporation, or IDC,
estimates that the number of Web pages will grow from 925 million in 1998 to
13.1 billion in 2003. In addition, the overall market for business-to-business
software tools, which includes content management software, is projected to
reach approximately $40.0 billion by 2002, according to The Delphi Group. IDC
estimates that the worldwide market for content management and document
technology software will expand from $1.4 billion in 2000 to $2.8 billion in
2003.
RAPID ADOPTION OF CORPORATE INTRANETS AND EXTRANETS
Corporations are employing intranets and extranets in order to capitalize on
their investments in Web-based infrastructure by sharing computing resources and
facilitating communication. Intranets typically refer to secure Web-based
networks dedicated to an organization's employees, while extranets extend such
networks beyond an organization's "internal walls" to include suppliers,
vendors, partners, customers and other businesses. Intranets and extranets
utilize common Internet protocols and Web browsers to share information and
efficiently communicate among large numbers of users in the secure environment
of a private network.
Intranets provide multiple users the potential to securely and efficiently
access a wealth of data and up-to-date information in a wide variety of formats,
such as CAD files, engineering schematics, design specifications, audio and
video clips, graphics and traditional documents. Intranet usage has evolved
beyond document access and internal distribution of information to enable
organizations to streamline, automate and increase the productivity of everyday
business processes in a wide variety of applications. For example, at the
corporate management level, the effective use of intranets enables managers to
have rapid and secure access to relevant business data, leading to expeditious
and well-informed decisions. Engineering and manufacturing departments are also
using intranets for ISO certification, technical manual publication and quality
assurance processes. Similarly, intranets allow human resource departments to
make real-time changes to policies and procedures, perform full-text searches of
resumes and facilitate reimbursement of employee expenses.
Extranets expand intranet applications to enable organizations to
selectively share business-critical data with suppliers, vendors, partners,
customers and other businesses. Extranet applications are increasingly being
used to increase sales, cut costs and improve customer service and support.
Organizations are making large investments in these applications to create
meaningful and attractively presented content that conveys important information
to selected recipients. Extranets also provide a platform for e-commerce,
allowing businesses to efficiently execute business transactions over the
Internet.
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NEED FOR COMPREHENSIVE WEB CONTENT MANAGEMENT SOLUTIONS
Many Web content management approaches target the collaborative model of
multiple Web developers manually converting content into Web formats and
publishing the content to large Internet Web sites. The limitations of these
content management systems are strongly evident in large organizations managing
multiple intranet or extranet Web sites. Many large corporations are attempting
to build and manage large numbers of business-to-business and intra-business Web
sites through manual conversion and publication of content with little process
oversight. The lack of resources makes HTML and XML conversion impractical. The
result is an inefficient environment with a lack of control over "look and
feel," outdated or untimely content and limited security. Large Internet Web
sites often have many different Web developers devoted to converting, publishing
and updating content in HTML or XML formats. However, this collaborative
approach is labor intensive and requires a great deal of oversight to ensure
consistency. In addition, even large organizations can not allocate the
necessary resources to avoid "Webmaster bottlenecks" caused by the continuous
manual coding and recoding required to make ongoing revisions to the vast amount
of information on their Web sites.
A Web content management solution should be able to meet a wide range of
needs by rapidly converting content into a Web-based format and by providing
consistent "look and feel," sophisticated security, dynamic updating and native
file management. It is critical that the integrity of the content on an
organization's intranet, extranet or Internet Web sites is constantly maintained
so that users are always utilizing the most current information. In addition,
any solution must provide scalability that allows it to effectively manage the
business-critical content for organizations with thousands of content
contributors who are often at dispersed locations. Most existing solutions
require significant human resources to address this complex range of problems.
The resulting increase in administrative needs has created delays in accessing,
publishing and managing Web content. Organizations are seeking a fast, efficient
and comprehensive means of publishing and utilizing their content in a Web
environment.
Management of Web content goes beyond HTML and XML pages to Active Server
Pages, or ASPs, PDF files, CAD files, engineering schematics, design
specifications, audio and video clips, graphics and traditional documents. Many
Web content management products do not provide an environment in which the
creation, approval, revision and release of all of these Web assets is fully
automated in one comprehensive content management system. The lack of a single
authority prevents implementation of sophisticated searching capabilities that
use meta data, or profiling information, to locate content by simultaneously
searching multiple Web sites. Sophisticated security is also problematic without
a comprehensive system controlling access to all of an organization's Web
content across intranets, extranets and the Internet.
Web content management solutions must provide a cost-effective and rapid
means of disseminating information to the Web for global organizations. An
effective Web content management solution must quickly publish accurate
information to the Web in the appropriate format and then dynamically update and
manage that information. The need for organizations to effectively leverage
intranets, extranets and the Internet presents a significant opportunity for a
cost-effective and comprehensive solution that enables organizations to easily
manage Web content.
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OUR SOLUTION
Our solution to an organization's need for a cost-effective and
comprehensive means for managing Web content on intranets, extranets and the
Internet is the Xpedio Content Management Suite. Xpedio is a comprehensive
solution that allows customers to simplify and automate the Web management of
content from all sources. Xpedio enables automatic HTML and XML Web publication
by multiple content creators from native formats to a Web site with a consistent
"look and feel." Our solution is rapidly deployed, easily maintained and may be
configured to fit an organization's specific requirements.
Our solution has the following key benefits:
Comprehensive Solution. Xpedio provides a comprehensive solution to Web
content management needs. Our Web-based architecture utilizes the customer's
existing Internet infrastructure and provides a full range of content management
services without requiring customization. Our template-based Web publishing
technology allows customers to automatically publish well-designed and
consistent Web pages from diverse source objects. This technology also allows
customers to apply different templates to source content in order to publish all
or appropriate portions of it simultaneously to separate intranet, extranet and
Internet pages, each personalized for a specific audience. Xpedio has
enterprise-level security that integrates with the customer's existing security
framework in most cases. Attachment of meta data and security information,
authentication and replication of data, as well as updating and version control,
all have the capacity to occur automatically without the need to reconfigure
documents, thereby dramatically reducing administration by eliminating a number
of content handlers.
Scalable and Dynamic. Xpedio is a multi-tiered Web application consisting of
several independently scalable components: Xpedio Content Server, Xpedio Content
Publisher and the Web server that hosts the site. These components can be scaled
to meet the application requirements. As the volume of managed content
increases, it can be distributed across multiple Xpedio Content Servers. As the
number of Web sites being published increases, Xpedio Content Publishers can be
scaled to fit the organization's publication needs. Finally, as the amount and
frequency of information accessed by users increases, the Web servers can be
scaled appropriately. Performance is also enhanced by Xpedio's dynamic
management functions, including the ability to selectively retrieve, archive and
replicate content on an intranet, extranet or Internet site while performing
mass revisions of meta data. This allows users to quickly complete complex
reorganizations or consolidations of content. Xpedio provides dynamic
performance while minimizing costs and administration.
Easy to Install and Use. Our Xpedio solution has many features that make it
easy to install and use. Xpedio is an out-of-the box solution that can be
quickly deployed, often in a matter of days. Xpedio is a server-based product
that requires no client software other than a Web browser. Many customers can
implement Xpedio without any third-party consulting assistance. In addition, our
component level architecture and template-based publishing allow customers to
rapidly create a unique "look and feel" to Web sites. Once installed, Xpedio
delivers Web content access, publication and management to individual users
through a standard Web browser. This allows Xpedio to be utilized by all types
of users in organizations across diverse industries. Our automated solution
enables users to perform system administration, minimizing the involvement of
information systems departments.
Integrates with Existing Environment. Based on open Web standards, Xpedio
utilizes the existing Web infrastructure of a corporation, from Web servers,
databases and file servers to browsers. Our solution automates the publishing of
standard desktop applications, as well as CAD files, graphics and audio and
video clips. Xpedio's template-based conversion and publishing ability also
allows for easy creation of a consistent "look and feel" for Web content, in
HTML or XML. This is all accomplished in a secure environment that interacts
with the organization's existing security framework.
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STRATEGY
Our objective is to enhance our position as a leading provider of
enterprise-scalable Web content management solutions. Key strategies to
achieving this objective include:
Expand Product Leadership. We will continue to focus on providing our
market-leading solution for Web content management across intranets, extranets
and the Internet. We believe that business managers prefer our solution because
it automates the management of Web content and enables direct content
contribution from the desktop. We also believe these individuals prefer our
solution because it is easier to deploy, more cost-effective, contains
sophisticated security features and utilizes an open Web-based architecture.
Xpedio can be used by organizations of nearly any size due to its scalability
and can be adopted to a wide range of content management needs because of its
modular design. These range from a complete content management solution to
supplying other applications and Web sites with managed content or Web
publishing capability. We will continue to develop both new features for our
existing products and new products to enable our customers to further leverage
their intranets and extranets, as well as the Internet.
Aggressively Penetrate Domestic and International Markets. We plan to
aggressively penetrate domestic and international markets for Web content
management solutions through the following avenues:
o Expand Direct Sales Channels. We will continue to expand our direct
sales force and sales support network to increase the rate of customer
adoption of our products in both the United States and internationally.
We intend to build world-class direct sales channels by adding
high-quality direct sales personnel and devoting increased resources to
telemarketing and pre-sales support services.
o Expand Indirect Sales Channels. To increase the distribution and
visibility of our products, we will continue to expand our indirect
channels through strategic alliances with resellers, OEMs, key systems
integrators and other channel partners in both domestic and
international markets. We believe that a multi-channel sales effort will
broaden customer awareness of our products and will allow us to more
rapidly reach a greater number of customers.
o Increase Penetration of Existing Customers. We intend to expand sales to
existing customers by increasing the direct sales and marketing efforts
targeted at these organizations. The cost-effectiveness of Xpedio allows
us to gain entry into an organization at the workgroup level while the
scalability of our solution and the ease with which it can be deployed
allows existing customers to quickly and efficiently increase the
breadth of their Xpedio use.
Continue to Build Brand Awareness. We will continue to promote our brands as
synonymous with comprehensive, cost-effective solutions for Web content
management. In order to accelerate the acceptance and penetration of our brand,
we will continue our active public relations program, participate in trade shows
and conferences and advertise our products through traditional and on-line media
channels and our Web site. These efforts will focus on leveraging our reputation
with existing customers and product leadership to drive brand awareness in the
Web content management market.
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Continue to Invest in Technology. We believe that the technical features of
Xpedio, including its open Web-based architecture, its enterprise-scalability
and the modularity of its feature sets, distinguish our products in the market.
We believe that our customers purchase our products based on their performance
characteristics and ability to rapidly solve problems encountered in the
management of Web sites. We feel that this reputation for performance will
facilitate the acceptance of enhancements and additional products into our
markets. In order to maintain our technological leadership, we will continue to
invest in research and development. We intend to focus our research and
development efforts on both enhancements to our existing solution and the
development of new products as the demands of our market evolve.
Expand Services Offerings. We have established successful relationships with
our customers by serving as a consultant in the development of their content
management systems and applications. We are expanding our services capabilities
in order to extend our range of services and more completely address areas such
as business strategy, project management and application development. We believe
that providing high-quality services will strengthen our customer relationships
and enhance our product development efforts.
PRODUCTS
XPEDIO CONTENT MANAGEMENT SUITE
The Xpedio Content Management Suite provides a cost-effective, powerful and
comprehensive Web content management solution for developing and managing
intranet, extranet and Internet Web sites. Xpedio integrates Web publishing with
source content management to effectively control the entire content management
lifecycle. This system is based upon open Web standards and utilizes an
organization's existing Internet infrastructure. Xpedio is quickly deployed and
provides sophisticated security mechanisms that integrate with mechanisms
already in place within our customers' organizations.
Xpedio automates the development, publishing and maintenance of intranet,
extranet and Internet Web sites. Xpedio automatically converts source content
into Web-based formats, which are then dynamically published to a secure Web
site on an intranet, extranet or the Internet. Xpedio's automatic process
converts content from its native format into either HTML, XML or PDF. When users
revise or add content to Xpedio, our system dynamically updates and manages the
Web site while maintaining the native file. Xpedio also provides sophisticated
security mechanisms that integrate with frameworks such as Windows NT domains
and Lightweight Directory Access Protocol, or LDAP, directories by mapping to
these security systems. This enables systems administrators to secure content
and control access while using an enterprise-level security standard. Security
can be assigned to workgroups, users, collections of content or individual Web
pages. Users maintain a single log on and password to access content no matter
how many levels of security are added within their workgroup or across their
enterprise.
The architecture of Xpedio enables easy installation and simplifies
administrative functions. Through a Web browser, systems administrators can
create Xpedio users and groups, set security options, create folders and
configure publishing parameters. The automatic nature of many Xpedio publishing
and management functions eliminates manual steps in these processes and
minimizes the number of content handlers. This increases efficiency and accuracy
and makes Xpedio a dynamic tool that provides the most current business-critical
information to an organization's Web sites.
The Xpedio Content Management Suite is comprised of Xpedio Content Server,
Xpedio Content Publisher and Xpedio Web Asset Manager.
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Xpedio Content Server. Xpedio Content Server provides Xpedio's source
content repository and manages native files. Content Server enables content
revisions, release and expiration of specific content and the workflow
surrounding approval of source content. Individuals are able to contribute
content directly from desktop applications for Web publishing and management.
Content Server allows creators to convert content into either HTML or PDF
format. With its integrated search capability, individual users can search for
content within the Content Server using full-text or meta data searches, and
access either the native or Web version. Content Server Web-enables each piece
of content by providing a unique URL, or Web address, and file system location,
and provides a Web interface and an HTML interface to the content in the
repository.
Xpedio Content Publisher. Xpedio Content Publisher allows organizations to
further leverage the capabilities of Xpedio Content Server with dynamic Web
publishing ability. With Content Publisher, users can design and automatically
publish an HTML or XML Web site utilizing any Web standards. Content Publisher's
template-based technology allows automatic Web publication of content from
numerous native formats to HTML or XML, with a consistent treatment of layout,
navigation, behavior, colors and scripts. In addition, application of multiple
templates to a single piece of content allows the same Web content to be
personalized for several audiences. Content Publisher automatically creates
reference information, such as tables of contents, lists of figures and key word
indexes. These reference tools, as well as all hyperlinks, are automatically
updated when source content undergoes revisions.
Xpedio Web Asset Manager. Xpedio Web Asset Manager is a new product that
manages the Web assets of an organization and makes them available for use on
any Web site. Web assets include HTML pages, as well as images, PDF files,
scripts, video and audio clips, ASPs, and other forms of content. Lack of a
managed environment may result in difficulty in locating assets, improper use,
redundancy or use of expired or incorrect versions. Web Asset Manager is the
single authority that manages the contribution, approval, revision, archiving,
release and expiration of Web assets. All of these functions are performed while
making Web assets easy to locate for multiple users through meta-data driven
searches. Web Asset Manager can also version and archive entire Web sites which
can then be automatically recreated for future purposes.
INTRA.DOC! MANAGEMENT SYSTEM
Our Intra.doc! product line is a cost-effective suite of Web-based software
products for organizations requiring sophisticated content management without
the robust publishing capabilities of Xpedio. Intra.doc! is a modular solution
that can be configured for a project, workgroup or the entire enterprise. It
features the same scalability, ease of installation and use and flexible
architecture as Xpedio and additional Intra.doc! modules can easily be added as
an organization's needs evolve. These modules enhance such functions as
e-commerce sales of data and content, user profiling, archiving and replication
or conversion of paper-based legacy data into Web content. Intra.doc! provided
much of the underlying technology for the Xpedio Content Management Suite.
SERVICES
Our services organization provides solution-focused services that enable our
customers to realize the potential of our products in an open network computing
environment. We act as a business partner to our customers by providing a broad
spectrum of services, including needs assessment, software integration, security
analysis, application development and training. These services are offered for
fees, the amount of which depends on the nature and scope of the project. We are
currently focusing on expanding our consulting services to increase our breadth
of experience and geographic coverage.
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TECHNOLOGY
We believe our advanced technology provides our customers with a
comprehensive solution for managing Web content across intranets, extranets and
the Internet in less time, at lower cost and with better results than existing
alternatives.
PRODUCT ARCHITECTURE
We believe that we have developed a unique and comprehensive architecture
for meeting the technical demands of applications designed for Web content
management through intranets, extranets and the Internet. By emphasizing open
Web standards, our products provide an efficient architecture for organizations
to build and deploy Web-publishing applications quickly and cost-effectively. We
believe this architecture also provides a strong foundation on which we can
deliver future products.
Web-based Solution. Our products are designed to seamlessly and efficiently
interface with Web browsers, eliminating the need to install additional client
software. Xpedio is a server-based system written in Java, enabling it to
function in both the Windows NT and UNIX environments. On the front end, our
products utilize interfaces that are compatible with the leading Web browsers.
Once the browser has been launched, users can automatically Web publish content,
search for content utilizing Verity's search engine or navigate to a Web page
and view authorized content via a standard browser, a plug-in or another viewing
application. In addition, each piece of content is automatically fully indexed
allowing for full-text searching through the Web browser. Xpedio also allows
contributors to dynamically update both the Web content and the native file
simultaneously. As Web architecture continues to evolve, our architecture
strategy is to continue to develop our products as Web content management
solutions that integrate seamlessly with an organization's existing intranet,
extranet and Internet infrastructure.
Content Conversion for Web-publishing. Content may be published to the Web
through the Xpedio Content Publisher or directly from the Xpedio Content Server.
When content is published through the Xpedio Content Publisher, user-established
project definition files determine where the content is published and how it
will look. The content is slotted into the appropriate pre-approved template,
converted to HTML or XML from its native format and published to the Web. When
content is published directly from the Xpedio Content Server, content is stored
in its native language, meta data is attached and the content is automatically
converted to a Web-based version without the formatting features available
through Xpedio Content Publisher. Because there is no application server,
content can be delivered very quickly, which eliminates consumer frustration
with long wait times.
Content Storage and Management. Xpedio stores data and content, including
text and graphics, in its native format in a repository and enables access and
management control features for this information. Utilizing a server-based
architecture, Xpedio can access and manage vast amounts of content across a
large number of intranet, extranet and Internet users in a geographically
dispersed environment. Depending upon the needs of the organization, this
storage can take place on a single server or across a large number of servers,
affording efficient scalability. As a content manager, Xpedio enables standard
library services such as check-in, check-out, version control and content
history. This allows users to rapidly and securely access content while
providing management functions.
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Xpedio is a multi-tiered, server-based system that is written in Java. The
server layer contains all system processing logic and handles functions such as
content conversion and connection to the relational database. This relational
database is used to store all content profile information in the content
repository. Published content is stored directly on the Web server and all file
transfers are via hypertext transfer protocol, or HTTP. File access does not
have to be processed with a common gateway interface, or CGI, script, thereby
reducing retrieval time. A security plug-in is used on the server to reduce
security complexity and speed processing. The ability to use standard HTTP
provides a number of significant advantages such as the transfer of content
through firewalls while using standard compression, encryption and certificate
servers. HTTP allows organizations to keep their firewall configurations simple
and secure.
The architecture of our products embodies the following concepts that make
them enterprise-scalable solutions that are easily deployable and can be
utilized by a wide range of customers:
o Ease of use and administration. Our products feature quick installation,
often in a matter of days, ease-of-use for individual users and simple
maintenance procedures for administrators. Xpedio's features automate
many tasks that are usually performed manually.
o Ease of integration. From inception, our products have been built on
open Web standards enabling seamless integration into existing corporate
environments. Our component architecture allows customers the ability to
integrate immediately with other system components. For example, our
compatibility with Windows NT domains and LDAP security frameworks
allows our customers to efficiently integrate NT or LDAP central
security with Xpedio to control and secure access to the content
repository without duplicating their efforts.
o Scalability. Our customers' business-critical information needs continue
to expand and evolve. Our understanding of the scaling of a customer's
future Web content management needs as volume and bandwidth increase
across an enterprise ensures that our customers' information investments
are protected and that they can continue to grow with our products.
o Flexibility. With our open Web standards, multi-platform Java-based
solution, we offer customers the flexibility to address both current Web
content management problems and future needs utilizing their existing
Internet infrastructure.
We believe Xpedio is a comprehensive solution for organizations that require
rapid Web publishing and sophisticated management of their Web content across
intranets, extranets and the Internet. We believe that by fostering the creation
and adoption of automated Web content management, we will be able to maintain
and extend our technology leadership.
RESEARCH AND DEVELOPMENT
We have made substantial investments in research and development through
both internal development and technology acquisitions. The majority of our
recent research and development activity has been focused on developing our
Xpedio Content Management Suite. We expect to develop most of our technology
enhancements internally while continuing to evaluate externally developed
technologies for integration into our Xpedio product line.
In order to continue to provide product leadership in the Web content
management market, we intend to make major product releases each year. The
success of new introductions is dependent on several factors, including timely
completion and market introduction, differentiation of new products and
enhancements from those of our competitors and market acceptance of new products
and enhancements.
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<PAGE> 12
Our research and development expenditures for fiscal 1998, 1999 and 2000,
were approximately $2.2 million, $2.2 million and $2.9 million, respectively. We
expect that we will continue to commit significant resources to research and
development in the future. All research and development costs have been expensed
as incurred.
The market for our products is characterized by rapid technological change,
frequent new product introductions and enhancements, evolving industry standards
and rapidly changing customer requirements. The introduction of products
incorporating new technologies and the emergence of new industry standards could
render existing products obsolete and unmarketable. Our future success will
depend in part on our ability to anticipate changes, enhance our current
products, develop and introduce new products that keep pace with technological
advancements and address the increasingly sophisticated needs of our customers.
We may not be successful in developing and marketing new products and
enhancements that respond to competitive and technological developments and
changing customer needs.
CUSTOMERS
Our customer base has grown to over 850 customers representing a diverse
group of industries. Our customers range from small manufacturing firms to
Fortune 500 companies. We are not dependent on any single customer or group of
customers. Selected customers using Xpedio and Intra.doc! include:
<TABLE>
<CAPTION>
AEROSPACE AND AIRLINE BANKING AND FINANCE CONSUMER GAS AND UTILITIES
------------------------------ -------------------------- ------------------------ --------------------------
<S> <C> <C> <C>
AlliedSignal Dean Witter Reynolds Carlson Companies Natural Gas Company of
Britannia Airways Fidelity Land O'Lakes Trinidad & Tobago
British Aerospace Airbus GE Capital OfficeMax Sierra Pacific Power
The Sabre Group GE Investments Revlon Wisconsin Electric Power
ING Barings Target
KPMG
Merrill Lynch
U.S. Bancorp Piper Jafray
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT AND EDUCATION HEALTH CARE MANUFACTURING TECHNOLOGY
------------------------------ -------------------------- ------------------------ --------------------------
<S> <C> <C> <C>
County of San Mateo, CA Allina Health System Cargill Agilent Technologies
Lawrence Livermore Guidant Eaton Data General
National Labs Tufts Health Care Ecolab Ericsson Telecom
Minnesota Department of United Health Group Fisher Controls Fujitsu
Transportation Wellmark Blue Cross Blue General Motors GTE Internetworking
Swiss Highway Authority Shield of Iowa Honeywell Hewlett-Packard
University of California Maytag IBM
University of Minnesota Toro Lucent Technologies
Toyota USA Rockwell Collins
TRW Siemens Microelectronics
Zilog Sony
SPS Commerce
Synopsys
Xerox
</TABLE>
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<PAGE> 13
SALES AND MARKETING
We market and sell our products using a combination of direct and indirect
distribution channels. Our primary distribution channel is our direct sales
force, which targets mid- and large-size organizations. Our sales approach
typically includes a technical systems evaluation performed by our pre-sales
personnel, followed by demonstrations of our products' capabilities and direct
negotiations with our sales staff. In addition, we have an internal
telemarketing operation that is responsible for customer prospecting, lead
generation and follow-up. These activities identify and develop leads for
further sales efforts by our direct sales force. As of March 31, 2000, we had a
worldwide total of 50 direct sales, sales support and marketing personnel. Our
goal is to increase both the number and geographic scope of our direct sales
force.
We also use indirect sales channels to increase the distribution and
visibility of our products through strategic alliances with resellers, OEMs, key
systems integrators and other channel partners in both domestic and
international markets. None of our distribution partners have exclusive
distribution rights.
We use a variety of marketing programs to build market awareness of our
brand name and our products, as well as to attract potential customers to our
products. A broad mix of programs is used to accomplish these goals, including
market research, product and strategy updates with industry analysts, public
relations activities, direct mail and relationship marketing programs, seminars,
trade shows, speaking engagements, Web site marketing and joint marketing
programs. Our marketing organization produces marketing materials in support of
sales to prospective customers that include brochures, data sheets, white
papers, presentations and demonstrations. Our joint marketing and distribution
partners include Adobe Systems, Inc. and Verity, Inc. In addition, our Xpedio
and Intra.doc! products incorporate Adobe and Verity technology. Verity also
sells our products using its own direct sales force pursuant to a non-exclusive
reseller agreement.
COMPETITION
The market for Web content management solutions is intensely competitive,
subject to rapid technological change and significantly affected by new product
introductions and other market activities of industry participants. We expect
competition to persist and intensify in the future. Our primary source of
competition is from Web content management products targeted at large Internet
Web sites, including those offered by companies such as Documentum, Inc.,
Interwoven, Inc. and Vignette Corporation. These products are oriented towards
large business-to-consumer Web sites with many collaborating Web developers.
Many of our competitors have longer operating histories and significantly
greater financial, technical, marketing and other resources than we do and thus
may be able to respond more quickly to new or changing opportunities,
technologies and customer requirements. Also, many current and potential
competitors have greater name recognition and access to larger customer bases
than we have. Such competitors may be able to undertake more extensive
promotional activities and offer more attractive terms to purchasers than we
can. In addition, current and potential competitors have established or may
establish cooperative relationships among themselves or with third parties to
enhance their products. Accordingly, it is possible that new competitors or
alliances among competitors may emerge and rapidly acquire significant market
share.
Competition in our market could materially and adversely affect our ability
to obtain revenues from software license fees from new or existing customers on
terms favorable to us. Further, competitive pressures may require us to reduce
the price of our software. In either case, we cannot be sure that we will be
able to compete successfully with existing or new competitors or that
competition will not have
12
<PAGE> 14
a material adverse effect on our business, operating results and financial
condition.
PROPRIETARY RIGHTS
We rely on a combination of copyright, trade secret, trademark,
confidentiality procedures and contractual provisions to protect our proprietary
rights. United States and international copyright laws provide limited
protections for our software, documentation and other written materials. We
license our products in object code format for limited use by customers. We
treat the source code for our products as a trade secret and we require all
employees and third-parties who need access to the source code to sign
non-disclosure agreements. We have registered the trademarks IntraNet Solutions
and Intra.doc!, in the United States and Canada and have applied for trademark
registration in the United States for the Xpedio mark.
Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our products or to obtain and use information
that we regard as proprietary. Policing unauthorized use of our products is
difficult, and while we are unable to determine the extent to which piracy of
our software exists, software piracy can be expected to be a persistent problem.
Litigation may be necessary in the future to enforce our intellectual property
rights, to protect our trade secrets, to determine the validity and scope of the
proprietary rights of others or to defend against claims of infringement or
invalidity. However, the laws of many countries do not protect our proprietary
rights to as great an extent as do the laws of the United States. Any litigation
could result in substantial costs and diversion of resources and could have a
material adverse effect on our business, operating results and financial
condition. Our efforts to protect our proprietary rights may not be adequate or
our competitors may independently develop similar technology. Our failure to
meaningfully protect our property could have a material adverse effect on our
business, operating results and financial condition.
We have not received notice of any claims of infringement, except with
respect to our Xpedio mark as described below. We cannot be sure that third
parties will not make additional claims of infringement with respect to our
current or future products. We expect that developers of Web content management
products will increasingly be subject to infringement claims as the number of
products and competitors in our market grows and as the functionality of
products in different segments of the software industry increasingly overlaps.
Any claims, with or without merit, could be time consuming to defend, result in
costly litigation, divert management's attention and resources, cause product
shipment delays or require us to enter into royalty or licensing agreements.
Royalty or licensing agreements, if required, may not be available on terms
acceptable to us or at all. A successful claim of product infringement against
us and our failure or inability to license the infringed technology or develop
or license technology with comparable functionality could have a material
adverse effect on our business, operating results and financial condition.
We have been notified by a third party that it believes our Xpedio mark
infringes its trademark. We will cease the use of this mark by December 31, 2000
and will develop and adopt a new mark.
EMPLOYEES
As of March 31, 2000, we had 136 employees. Our future success will depend
in part on our ability to attract, retain, integrate and motivate highly
qualified sales, technical and management personnel, for whom competition is
intense. From time to time we also employ independent contractors to support our
services, product development, sales and marketing departments. Our employees
are not represented by any collective bargaining unit, and we have never
experienced a work stoppage. We believe our relations with our employees are
good.
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<PAGE> 15
RISK FACTORS
Certain statements made in this Annual Report on Form 10-K are
forward-looking statements based on our current expectations, assumptions,
estimates and projections about our business and our industry. These
forward-looking statements involve risks and uncertainties. Our business,
financial condition and results of operations could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
as more fully described below and elsewhere in this Form 10-K. You should
consider carefully the risks and uncertainties described below, which are not
the only ones facing our Company. Additional risks and uncertainties also may
impair our business operations. We undertake no obligation to update publicly
any forward-looking statements for any reason, even if new information becomes
available or other events occur in the future.
WE HAVE A LIMITED OPERATING HISTORY ON WHICH TO EVALUATE OUR PROSPECTS.
Significant sales of our Xpedio Content Management Suite, which includes
Xpedio Content Server, Xpedio Content Publisher and Xpedio Web Asset Management,
began following our acquisition of InfoAccess, Inc. in September 1999.
Accordingly, we have only a limited operating history in our current product
line on which you can base your evaluation of our business and prospects. In
addition, our prospects must be considered in light of the risks and
uncertainties encountered by companies in an early stage of development in new
and rapidly evolving markets. Many of these risks are discussed under the
subheadings below.
FLUCTUATIONS IN OUR OPERATING RESULTS MAY MAKE IT DIFFICULT TO PREDICT OUR
FUTURE PERFORMANCE.
While our products and services are not seasonal, our 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 or securities analysts, the price of our common stock
could fall substantially. A large part of our sales typically occur in the last
month of a quarter. If these sales were delayed from one quarter to the next for
any reason, our operating results could fluctuate dramatically. In addition, our
sales cycles may vary, making the timing of sales difficult to predict.
Furthermore, our infrastructure costs are generally fixed. As a result, modest
fluctuations in revenues between quarters may cause large fluctuations in
operating results. These factors all tend to make the timing of revenues
unpredictable and may lead to high period-to-period fluctuations in operating
results.
Our quarterly revenues and operating results may fluctuate for several
additional reasons, many of which are outside of our control, including the
following:
o demand for our products and services;
o the timing of new product introductions and sales of our products and
services;
o unexpected delays in introducing new products and services;
o increased expenses, whether related to sales and marketing, research and
development or administration;
o changes in the rapidly evolving market for Web content management
solutions;
o the mix of revenues from product licenses and services, as well as the mix
of products licensed;
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<PAGE> 16
o the mix of services provided and whether services are provided by our
staff or third-party contractors;
o the mix of domestic and international sales;
o costs related to possible acquisitions of technology or businesses;
o general economic conditions; and
o public announcements by our competitors.
OUR SUCCESS DEPENDS ON OUR ABILITY TO EXPAND OUR SALES FORCE AND
DISTRIBUTION CHANNELS.
To increase our market share and revenues, we must increase the size of our
sales force and the number of our distribution channel partners. Our failure to
do so may 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 new sales personnel. Our existing or
future distribution 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 distribution
channel partners.
POTENTIAL ACQUISITIONS MAY BE DIFFICULT TO COMPLETE OR TO INTEGRATE AND MAY
DIVERT MANAGEMENT'S ATTENTION.
We may seek to acquire or invest in businesses, products or technologies
that are complementary to our business. If we identify an appropriate
acquisition opportunity, we may be unable to negotiate favorable terms for that
acquisition, successfully finance the acquisition or integrate the new business
or products into our existing business and operations. In addition, the
negotiation of potential acquisitions and the integration of acquired businesses
or products may divert management time and resources from our existing business
and operations. To finance acquisitions, we may use a substantial portion of our
available cash or we may issue additional securities, which would cause dilution
to our shareholders.
WE MAY NOT BE PROFITABLE IN THE FUTURE.
Our revenues may not grow in future periods, may not grow at past rates and
we may not sustain our recent quarterly profitability (excluding expenses
incurred in connection with the acquisition of InfoAccess in the quarter ended
September 30, 1999). If we do not sustain our recent quarterly profitability,
the market price of our stock may fall. Our ability to sustain our recent
profitable operations depends upon many factors beyond our direct control. These
factors include, but are not limited to:
o the demand for our products;
o our ability to quickly introduce new products;
o the level of product and price competition;
o our ability to control costs; and
o general economic conditions.
15
<PAGE> 17
THE INTENSE COMPETITION IN OUR INDUSTRY MAY REDUCE OUR FUTURE SALES AND
PROFITS.
The market for our products is highly competitive and is likely to become
more competitive. We may not be able to compete successfully in our chosen
marketplace, which may have a material adverse effect on our business, operating
results and financial condition. Additional competition may cause pricing
pressure, reduced sales and margins, or prevent our products from gaining and
sustaining market acceptance. Many of our current and potential competitors have
greater name recognition, access to larger customer bases, and substantially
more resources than we have. Competitors with greater resources than ours may be
able to respond more quickly than we can to new opportunities, changing
technology, product standards or customer requirements.
WE MAY HAVE DIFFICULTY MANAGING OUR GROWTH.
Any failure to properly manage our growth may have a material adverse effect
on our business, operating results and financial condition. The rapid growth
that we have experienced places significant challenges on our management,
administrative and operational resources. To properly manage this growth, we
must, among other things, implement and improve additional and existing
administrative, financial and operational systems, procedures and controls on a
timely basis. We will also need to expand our finance, administrative and
operations staff. We may not be able to complete the improvements to our
systems, procedures and controls necessary to support our future operations in a
timely manner. Management may not be able to hire, train, integrate, retain,
motivate and manage required personnel and may not be able to successfully
identify, manage and exploit existing and potential market opportunities. In
connection with our expansion, we plan to increase our operating expenses to
expand our sales and marketing operations, develop new distribution channels,
fund greater levels of research and development, broaden services and support
and improve operational and financial systems. Our failure to generate
additional revenue commensurate with an increase in operating expenses during
any fiscal period could have a material adverse effect on our financial results
for that period.
WE DEPEND ON THE INTEGRATION AND CONTINUED SERVICE OF OUR KEY PERSONNEL.
We are a small company and depend greatly on the knowledge and experience of
our senior management team, many of whom have only recently joined us, and other
key personnel. If we fail to quickly integrate our team, or lose any of these
key personnel, our business, operating results and financial condition could be
materially adversely affected. We must hire additional employees to meet our
business plan and alleviate the negative effect that the loss of a senior
manager could have on us. Our success will depend in part on our ability to
attract and retain additional personnel with the highly specialized expertise
necessary to engineer, design and support our products and services. Like other
software companies, we face intense competition for qualified personnel. We may
not be able to attract or retain such personnel.
WE HAVE RELIED AND EXPECT TO CONTINUE TO RELY ON SALES OF OUR CONTENT
MANAGEMENT SOFTWARE PRODUCTS FOR OUR REVENUES.
We currently derive all of our revenues from product licenses and services
associated with our suite of content management software products. The market
for content management software products is new and rapidly evolving. We cannot
be certain that a viable market for our products will emerge, or if it does
emerge, that it will be sustainable. If we do not continue to increase revenues
related to our
16
<PAGE> 18
existing products or generate revenues from new products and services, our
business, operating results and financial condition may be materially adversely
affected. We will continue to depend on revenues related to new and enhanced
versions of our software products for the foreseeable future. Our success will
largely depend on our ability to increase sales from existing products and
generate sales from product enhancements and new products.
We cannot be certain that we will be successful in upgrading and marketing
our existing products or that we will be successful in developing and marketing
new products and services. The market for our products is highly competitive and
subject to rapid technological change. Technological advances could make our
products less attractive to customers and adversely affect our business. In
addition, complex software product development involves certain inherent risks,
including risks that errors may be found in a product enhancement or new product
after its release, even after extensive testing, and the risk that discovered
errors may not be corrected in a timely manner.
OUR SUCCESS DEPENDS ON OUR ABILITY TO PROTECT OUR PROPRIETARY TECHNOLOGY.
If we are unable to protect our intellectual property, or incur significant
expense in doing so, our business, operating results and financial condition may
be materially adversely affected. Any steps we take to protect our intellectual
property may be inadequate, time consuming and expensive. We currently have no
patents or pending patent applications. Without significant patent or copyright
protection, we may be vulnerable to competitors who develop functionally
equivalent products. We may also be subject to claims that our current products
infringe on the intellectual property rights of others. Any such claim may have
a material adverse effect on our business, operating results and financial
condition.
We anticipate that software product developers will be increasingly subject
to infringement claims due to growth in the number of products and competitors
in our industry, and the overlap in functionality of products in different
industries. Any infringement claim, regardless of its merit, could be
time-consuming, expensive to defend, or require us to enter into royalty or
licensing agreements. Such royalty or licensing agreements may not be available
on commercially favorable terms, or at all. We are not currently involved in any
intellectual property litigation. We have been notified by a third party that it
believes our Xpedio mark infringes its trademark. We will cease the use of this
mark by December 31, 2000 and will develop and adopt a new mark.
We rely on trade secret protection, confidentiality procedures and
contractual provisions to protect our proprietary information. Despite our
attempts to protect our confidential and proprietary information, others may
gain access to this information. Alternatively, other companies may
independently develop substantially equivalent information. We have been issued
trademarks for the Intranet Solutions and Intra.doc! marks.
OUR PRODUCTS MAY NOT BE COMPATIBLE WITH COMMERCIAL WEB BROWSERS AND
OPERATING SYSTEMS.
Our products utilize interfaces that are compatible with commercial Web
browsers. In addition, Xpedio is a server-based system written in Java that
functions in both Windows NT and UNIX environments. We must continually modify
our products to conform to commercial Web browsers and operating systems. If our
products were to become incompatible with commercial Web browsers and
17
<PAGE> 19
operating systems, our business would be harmed. In addition, uncertainty
related to the timing and nature of product introductions or modifications by
vendors of Web browsers and operating systems may have a material adverse effect
on our business, operating results and financial condition.
WE COULD BE SUBJECT TO PRODUCT LIABILITY CLAIMS IF OUR PRODUCTS FAIL TO
PERFORM TO SPECIFICATIONS.
If software errors or design defects in our products cause damage to
customers' data and our agreements do not protect us from related product
liability claims, our business, operating results and financial condition may be
materially adversely affected. In addition, we could be subject to product
liability claims if our security features fail to prevent unauthorized third
parties from entering our customers' intranet, extranet or Internet Web sites.
Our software products are complex and sophisticated and may contain design
defects or software errors that are difficult to detect and correct. Errors,
bugs or viruses spread by third parties may result in the loss of market
acceptance or the loss of customer data. Our agreements with customers that
attempt to limit our exposure to product liability claims may not be enforceable
in certain jurisdictions where we operate.
FUTURE REGULATIONS COULD BE ADOPTED THAT RESTRICT OUR BUSINESS.
Federal, state or foreign agencies may adopt new legislation or regulations
governing the use and quality of Web content. We cannot predict if or how any
future laws or regulations would impact our business and operations. Even though
these laws and regulations may not apply to our business directly, they could
indirectly harm us to the extent that they impact our customers and potential
customers.
SIGNIFICANT FLUCTUATION IN THE MARKET PRICE OF OUR COMMON STOCK COULD RESULT
IN SECURITIES LITIGATION AGAINST US.
In the past, securities class action litigation has been brought against
publicly held companies following periods of volatility in the price of their
securities. If we were subject to such litigation due to volatility in our stock
price, we may incur substantial costs. Such litigation could divert the
attention of our senior management away from our business, which could have a
material adverse effect on our business, operating results and financial
condition.
The market price of our common stock has fluctuated significantly in the
past and may do so in the future. The market price of our common stock may be
affected by each of the following factors, many of which are outside of our
control:
o variations in quarterly operating results;
o changes in estimates by securities analysts;
o changes in market valuations of companies in our industry;
o announcements by us of significant events, such as major sales,
acquisitions of businesses or losses of major customers;
o additions or departures of key personnel; and
o sales of our equity securities.
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<PAGE> 20
OUR PERFORMANCE WILL DEPEND ON THE CONTINUING GROWTH AND ACCEPTANCE OF THE
WEB.
Our products are designed to be used with intranets, extranets and the
Internet. If the use of these methods of electronic communication does not grow,
our business, operating results and financial condition may be materially
adversely affected. Continued growth in the use of the Web will require ongoing
and widespread interest in its capabilities for communication and commerce. Its
growth will also require maintenance and expansion of the infrastructure
supporting its use and the development of performance improvements, such as high
speed modems. The Web infrastructure may not be able to support the demands
placed on it by continued growth. The ongoing development of corporate intranets
depends on continuation of the trend toward network-based computing and on the
willingness of businesses to reengineer the processes used to create, store,
manage and distribute their data. All of these factors are outside of our
control.
OUR EXISTING SHAREHOLDERS WILL HAVE SIGNIFICANT INFLUENCE OVER INTRANET
SOLUTIONS.
Robert F. Olson, our President and Chief Executive Officer, holds
approximately 12.7% of our outstanding common stock. Accordingly, Mr. Olson is
able to exercise significant control over the affairs of IntraNet Solutions.
Additionally, our directors and executive officers beneficially own
approximately 15.1% of our common stock. These persons have significant
influence over IntraNet Solutions' affairs, including approval of the
acquisition or disposition of assets, future issuances of common stock or other
securities and the authorization of dividends on our common stock. Our directors
and executive officers could use their stock ownership to delay, defer or
prevent a change in control of IntraNet Solutions, depriving shareholders of the
opportunity to sell their stock at a price in excess of the prevailing market
price.
WE CAN ISSUE SHARES OF PREFERRED STOCK WITHOUT SHAREHOLDER APPROVAL, WHICH
COULD ADVERSELY AFFECT THE RIGHTS OF COMMON SHAREHOLDERS.
Our Articles of Incorporation permit us to establish the rights, privileges,
preferences and restrictions, including voting rights, of unissued shares of our
capital stock and to issue such shares without approval from our shareholders.
The rights of holders of our common stock may suffer as a result of the rights
granted to holders of preferred stock that may be issued in the future. In
addition, we could issue preferred stock to prevent a change in control of
IntraNet Solutions, depriving shareholders of an opportunity to sell their stock
at a price in excess of the prevailing market price.
CERTAIN PROVISIONS OF MINNESOTA LAW MAY MAKE A TAKEOVER OF INTRANET
SOLUTIONS DIFFICULT, DEPRIVING SHAREHOLDERS OF OPPORTUNITIES TO SELL SHARES AT
ABOVE-MARKET PRICES.
Certain provisions of Minnesota law may have the effect of discouraging
attempts to acquire IntraNet Solutions without the approval of our Board of
Directors. Consequently, our shareholders may lose opportunities to sell their
stock for a price in excess of the prevailing market price.
ITEM 2. PROPERTIES
In August 2000, the Company will begin a five-year lease of approximately
32,000 square feet in Eden Prairie, Minnesota, which will be the new corporate
headquarters facilities. The Company is currently leasing approximately 18,000
square feet for its headquarters pursuant to a lease expiring in July 2005,
which the Company believes will be sublet in approximately September 2000 for
the remainder of the lease term. Additionally, the Company leases approximately
16,000 square feet of office space in Bellevue, Washington, and Boston,
Massachusetts pursuant to leases expiring in May 2002 and April 2002,
respectively. Management believes that the Company's new facilities are suitable
and adequate for current office requirements.
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ITEM 3. LEGAL PROCEEDINGS
The Company is not currently a party to any material legal proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Company's security holders during
the fourth quarter of the fiscal year ended March 31, 2000.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Incorporated herein by reference is the information appearing under the
heading "Market For Registrant's Common Equity and Related Shareholder Matters"
in the Company's Annual Report to Shareholders for the year ended March 31, 2000
(the "2000 Annual Report") included in this Form 10-K as Exhibit 13.1.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated herein by reference is the information appearing under the
heading "Selected Consolidated Financial Data" in the 2000 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Incorporated herein by reference is the information appearing under the
heading "Management's Discussion and Analysis of Financial Condition and Results
of Operations" in the 2000 Annual Report.
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Incorporated herein by reference is the information appearing under the
heading "Quantitative and Qualitative Disclosures About Market Risk" in the
2000 Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated herein by reference is the information appearing under the
headings "Consolidated Balance Sheets", "Consolidated Statements of Operations",
"Consolidated Statements of Shareholders' Equity (Deficit)", "Consolidated
Statements of Cash Flows", "Notes to Consolidated Financial Statements", and
"Report of Independent Certified Public Accountants" in the 2000 Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Directors of the Registrant
Incorporated herein by reference is the information appearing under the
headings "Election of Directors" and "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Company's definitive Proxy Statement for the annual
meeting of Shareholders to be held on August 30, 2000 (the "Proxy Statement").
(b) Executive Officers of the Registrant
The Executive Officers of the Company are:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert F. Olson 44 President, Chief Executive Officer and Chairman of
the Board
Vernon J. Hanzlik 42 Vice President, Sales
Gregg A. Waldon 39 Chief Financial Officer, Secretary, Treasurer and
Director
</TABLE>
Robert F. Olson founded our business and has served as President, Chief
Executive Officer and Chairman of the Board of IntraNet Solutions and its
predecessor company since 1990. From 1987 to 1990, he served as the General
Manager of the Greatway Communications Division of Anderberg-Lund Printing
Company, an electronic publishing sales and service organization. Prior to that
time, Mr. Olson held management and marketing positions in several electronic
publishing service organizations.
Vernon J. Hanzlik has served as our Vice President, Sales since October
1999. He has been employed by IntraNet Solutions and its predecessor company
since 1991, serving as Vice President, Strategic Development from April 1999 to
October 1999 and as Vice President, Product Marketing from June 1996 to April
1999. Prior to that time, Mr. Hanzlik held marketing and application consulting
positions with Lee Data Corporation, a computer hardware manufacturer.
Gregg A. Waldon has served as our Chief Financial Officer, Treasurer and
Secretary, and as a director, since April 1999. From 1992 to April 1999, he held
various financial management positions with GalaGen Inc., a publicly traded
nutritional ingredients company, where he served as Chief Financial Officer
since November 1994. Prior to that time, Mr. Waldon was employed by
PricewaterhouseCoopers LLP.
Officers of the Company are chosen by and serve at the discretion of the
Board of Directors. There are no family relationships among any of the directors
or officers of the Company.
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(c) Compliance with Section 16(a) of the Exchange Act
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference is the information appearing under the
headings "Report of the Compensation Committee", "Executive Compensation" and
"Comparative Stock Performance" in the Company's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference is the information appearing under the
heading "Security Ownership of Principal Shareholders and Management" in the
Company's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference is the information appearing under the
heading "Certain Relationships and Related Transactions" in the Company's Proxy
Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
1. Financial Statements:
The consolidated financial statements of the Company are
incorporated herein by reference from the information appearing
under the headings "Consolidated Balance Sheets", "Consolidated
Statements of Operations", "Consolidated Statements of
Shareholders' Equity (Deficit)", "Consolidated Statements of Cash
Flows", "Notes to Consolidated Financial Statements" and "Report of
Independent Certified Public Accountants" in the 2000 Annual
Report.
2. The following consolidated financial statement schedules of the
Company are included in Item 14(d):
Schedule II Valuation and Qualifying Accounts
3. See Item 14(c) below for a listing of exhibits filed as part of
this Annual Report on Form 10K
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the quarter ended March 31,
2000.
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c) Exhibits:
The following exhibits are filed as part of this Annual Report on
Form 10-K for the year ended March 31, 2000.
EXHIBIT INDEX
<TABLE>
<CAPTION>
FILE DESCRIPTION REFERENCE
---------- --------------------------------------- ------------------------------------------------
<S> <C> <C>
3.1 Amended and Restated Articles of Incorporated by reference to Exhibit 3.1 of
Incorporation the Registrant's registration statement on
Form SB-2, File No. 333-14175
3.2 Bylaws Incorporated by reference to Exhibit A of the
Registrant's registration statement on
Definitive Proxy Statement Schedule 14A filed
with the Securities and Exchange commission
July 22, 1997, File No. 0-19817
4.5 Form of Stock Purchase Warrant issued Incorporated by reference to Exhibit 4.1 of
to purchases of units containing the the Registrant's Form 10-QSB for the three
Registrant's Series A convertible months ended June 30, 1997.
preferred stock and Stock Purchase
Warrants
10.4 IntraNet Solutions, Inc. 1994-1997 Incorporated by reference to Exhibit 10.4 of
Stock Option and Compensation Plan the Registrant's registration statement on
Form SB-2, File No. 333-14175.
10.16 Schedule identifying certain material Incorporated by reference to Exhibit 10.16 of
details of documents substantially the Registrant's Form 10-KSB for the fiscal
identical to those set forth in year ended March 31, 1997.
Exhibits 10.17, 10.18, 10.19 and 10.20
10.17 Promissory Note dated December 20, Incorporated to Exhibit 10.17 of the
1996, made by the Registrant in favor Registrant's Form 10KSB for the fiscal year
of Rita M. Olson ended March 31, 1997.
10.18 Amendment dated March 4, 1997, to the Incorporated by reference to Exhibit 10.18 of
Promissory Note made by the the Registrant's Form 10KSB for the fiscal
Registrant in favor of Rita M. Olson year ended March 31, 1997.
dated December 20, 1996
10.19 Amendment dated June 5, 1997, by and Incorporated by reference to Exhibit 10.19 of
between the Registrant and Rita M. the Registrant's Form 10-KSB for the fiscal
Olson dated December 20, 1996 year ended March 31, 1997.
10.20 Stock Purchase Warrant Agreement Incorporated by reference to Exhibit 10.20 of
dated December 20, 1996, by and the Registrant's Form 10-KSB for the fiscal
between the Registrant and Rita M. year ended March 31, 1997.
Olson
10.21 Note Conversion and Subscription Incorporated by reference to Exhibit 10.21 of
Agreement dated the Registrant's Form 10-KSB
</TABLE>
23
<PAGE> 25
<TABLE>
<CAPTION>
<S> <C> <C>
June 6, 1997, by and between for the fiscal year ended March 31, 1997.
the Registrant and Rita M. Olson
10.26 Employment Agreement Dated April 1, Incorporated by reference to Exhibit 10.26 of
1999, by and between the Registrant the Registrant's statement on Form S-1, File
and Gregg A. Waldon. No. 333-77389.
10.28 InfoAccess, Inc. 1990 Stock Option Incorporated by reference to Exhibit 99.1 of
Plan as amended September 29, 1999 Registrant's statement on Form S-8, File No.
333-90843
10.29 InfoAccess, Inc. 1995 Stock Option Incorporated by reference to Exhibit 99.2 of
Plan as amended September 29, 1999 Registrant's statement on Form S-8, File No.
333-90843
10.30 Employment Agreement Dated August 1, Incorporated by reference to Exhibit 10.30 of
1999, by and between the Registrant the Registrant's Form 10-Q for the three
and Robert F. Olson. months ended September 30, 1999.
10.31 Employee Stock Option and Incorporated by reference to Exhibit 10.31 of
compensation Plan IntraNet Solutions, the Registrant's Form 10-Q for the three
Inc. 1999 Employee Stock Option and months ended September 30, 1999.
compensation Plan.
13.1 2000 Annual Report to Shareholders. Electronic transmission
21 Subsidiaries of Registrant Electronic transmission
23.1 Consent of Grant Thornton LLP Electronic transmission
24.1 Powers of Attorney Set forth on signature page.
27 Financial Data Schedule for the year Electronic transmission
ended March 31, 2000.
</TABLE>
(d) Schedule IntraNet Solutions, Inc and Subsidiaries
Schedule II Valuation of Qualifying Accounts
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
------------- -------------- ------------- -------------- ------------
BALANCE AT BALANCE
BEGINNING AT END OF
DESCRIPTION OF PERIOD ADDITIONS DEDUCTIONS PERIOD
------------- -------------- ------------- -------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Deducted From Assets:
Allowance for doubtful accounts:
Year ended March 31, 1998 $ 80 $ 328 $ -- $ 408
======== ======= ====== =======
Year ended March 31, 1999 $ 408 $ 692 $ 790 $ 310
======== ======= ====== =======
Year ended March 31, 2000 $ 310 $ 1,249 $1,029 $ 530
======== ======= ====== =======
</TABLE>
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REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS ON SCHEDULE
To the Board of Directors and Shareholders
IntraNet Solutions, Inc.
In connection with our audits of the consolidated financial
statements of IntraNet Solutions, Inc. and subsidiaries referred to in our
report dated May 5, 2000, which is included in the Annual Report to Shareholders
and incorporated by reference in Part II of this form, we have also audited
Schedule II for each of the three years in the period ended March 31, 2000. In
our opinion, this schedule presents fairly, in all material respects, the
information required to be set forth therein.
/s/ Grant Thornton LLP
Minneapolis, Minnesota
May 5, 2000
25
<PAGE> 27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on June 20, 2000.
INTRANET SOLUTIONS, INC.
By /s/ Robert F. Olson
--------------------------------------------
Robert F. Olson, President,
Chief Executive Officer and
Chairman of the Board
POWER OF ATTORNEY
Each of the undersigned hereby appoints Robert F. Olson and Gregg A. Waldon,
and each of them (with full power to act alone), as attorneys and agents for the
undersigned, with full power of substitution, for and in the name, place and
stead of the undersigned, to sign and file with the Securities and Exchange
Commission under the Securities Act of 1934, as amended, any and all amendments
and exhibits to this Annual Report on Form 10K and any and all applications,
instruments, and other documents to be filed with the Securities and Exchange
Commission pertaining to this Annual Report on Form 10K or any amendments
thereto, with full power and authority to do and perform any and all acts and
things whatsoever requisite and necessary or desirable.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on June 20, 2000.
/s/ Robert F. Olson
--------------------------------------------
Robert F. Olson, President, Chief Executive
Officer and Chairman of the Board
(Principal Executive Officer)
/s/ Gregg A. Waldon
--------------------------------------------
Gregg A. Waldon, Chief Financial Officer,
Secretary, Treasurer (Principal
Financial Officer and Principal
Accounting Officer) and Director
/s/ Ronald E. Eibensteiner
--------------------------------------------
Ronald E. Eibensteiner, Director
/s/ Kenneth H. Holec
--------------------------------------------
Kenneth H. Holec, Director
/s/ Steven C. Waldron
--------------------------------------------
Steven C. Waldron, Director
26
<PAGE> 28
EXHIBIT INDEX
<TABLE>
<CAPTION>
FILE DESCRIPTION REFERENCE
---------- --------------------------------------- ------------------------------------------------
<S> <C> <C>
3.1 Amended and Restated Articles of Incorporated by reference to Exhibit 3.1 of
Incorporation the Registrant's registration statement on
Form SB-2, File No. 333-14175
3.2 Bylaws Incorporated by reference to Exhibit A of the
Registrant's registration statement on
Definitive Proxy Statement Schedule 14A filed
with the Securities and Exchange commission
July 22, 1997, File No. 0-19817
4.5 Form of Stock Purchase Warrant issued Incorporated by reference to Exhibit 4.1 of
to purchases of units containing the the Registrant's Form 10-QSB for the three
Registrant's Series A convertible months ended June 30, 1997.
preferred stock and Stock Purchase
Warrants
10.4 IntraNet Solutions, Inc. 1994-1997 Incorporated by reference to Exhibit 10.4 of
Stock Option and Compensation Plan the Registrant's registration statement on
Form SB-2, File No. 333-14175.
10.16 Schedule identifying certain material Incorporated by reference to Exhibit 10.16 of
details of documents substantially the Registrant's Form 10-KSB for the fiscal
identical to those set forth in year ended March 31, 1997.
Exhibits 10.17, 10.18, 10.19 and 10.20
10.17 Promissory Note dated December 20, Incorporated to Exhibit 10.17 of the
1996, made by the Registrant in favor Registrant's Form 10KSB for the fiscal year
of Rita M. Olson ended March 31, 1997.
10.18 Amendment dated March 4, 1997, to the Incorporated by reference to Exhibit 10.18 of
Promissory Note made by the the Registrant's Form 10KSB for the fiscal
Registrant in favor of Rita M. Olson year ended March 31, 1997.
dated December 20, 1996
10.19 Amendment dated June 5, 1997, by and Incorporated by reference to Exhibit 10.19 of
between the Registrant and Rita M. the Registrant's Form 10-KSB for the fiscal
Olson dated December 20, 1996 year ended March 31, 1997.
10.20 Stock Purchase Warrant Agreement Incorporated by reference to Exhibit 10.20 of
dated December 20, 1996, by and the Registrant's Form 10-KSB for the fiscal
between the Registrant and Rita M. year ended March 31, 1997.
Olson
10.21 Note Conversion and Subscription Incorporated by reference to Exhibit 10.21 of
Agreement dated June 6, 1997, by and the Registrant's Form 10-KSB for the fiscal
between the Registrant and Rita M. year ended March 31, 1997.
Olson
</TABLE>
27
<PAGE> 29
<TABLE>
<CAPTION>
<S> <C> <C>
10.26 Employment Agreement Dated April 1, Incorporated by reference to Exhibit 10.26 of
1999, by and between the Registrant the Registrant's statement on Form S-1, File
and Gregg A. Waldon. No. 333-77389.
10.28 InfoAccess, Inc. 1990 Stock Option Incorporated by reference to Exhibit 99.1 of
Plan as amended September 29, 1999 Registrant's statement on Form S-8, File No.
333-90843
10.29 InfoAccess, Inc. 1995 Stock Option Incorporated by reference to Exhibit 99.2 of
Plan as amended September 29, 1999 Registrant's statement on Form S-8, File No.
333-90843
10.30 Employment Agreement Dated August 1, Incorporated by reference to Exhibit 10.30 of
1999, by and between the Registrant the Registrant's Form 10-Q for the three
and Robert F. Olson. months ended September 30, 1999.
10.31 Employee Stock Option and Incorporated by reference to Exhibit 10.31 of
compensation Plan IntraNet Solutions, the Registrant's Form 10-Q for the three
Inc.1999 Employee Stock Option and months ended September 30, 1999.
compensation Plan.
13.1 2000 Annual Report to Shareholders. Electronic transmission
21 Subsidiaries of Registrant Electronic transmission
23.1 Consent of Grant Thornton LLP Electronic transmission
24.1 Powers of Attorney Set forth on signature page.
27 Financial Data Schedule for the year Electronic transmission
ended March 31, 2000.
</TABLE>
28
