U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
X ANNUAL REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
----- 1934
For the fiscal year ended April 30, 2000.
TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
----- ACT OF 1934
For the transition period from _____ to _______
Commission file number 1-111898
JetForm Corporation
(Exact name of Registrant as specified in its Charter)
Canada N/A
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
560 Rochester Street
Ottawa, ON K1S 5K2, Canada
(Address of principal executive offices)
Issuer's telephone number including area code: 613-230-3676
Securities registered under Section 12(b) of the Exchange Act:
Name of each exchange on which
Title of each class registered
Common shares, without par value Pacific Stock Exchange
Securities registered under Section 12(g) of the Exchange Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting and non voting stock held by
non-affiliates of the registrant computed by reference to the last price at
which the stock was sold as reported on the NASDAQ Stock Market on July 20, 2000
was US$82,966,114. For the purpose of determining this amount, voting stock held
by officers, directors and stockholders whose ownership exceeds five percent are
excluded. This determination of affiliate status is provided for purposes of
this report and does not represent an admission by either the registrant or any
such person as to the status of such person.
State the number of the issuer's Common Shares outstanding on July 20, 2000;
19,625,919
DOCUMENTS INCORPORATED BY REFERENCE
NONE
<PAGE>
JETFORM CORPORATION
TABLE OF CONTENTS
PART I
PAGE
ITEM 1...............BUSINESS 4
ITEM 2...............PROPERTIES 15
ITEM 3...............LEGAL PROCEEDINGS 15
ITEM 4...............SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 15
PART II
ITEM 5...............MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS 16
ITEM 6...............SELECTED FINANCIAL DATA 18
ITEM 7...............MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 19
ITEM 7A..............QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISKS 29
ITEM 8...............FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 29
ITEM 9...............CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE 53
PART III
ITEM 10..............DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 54
ITEM 11..............EXECUTIVE COMPENSATION 58
ITEM 12..............SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 63
ITEM 13..............CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 64
PART IV
ITEM 14..............EXHIBITS, FINANCIAL STATEMENT
SCHEDULES, AND REPORTS ON FORM 8-K 66
SIGNATURES 71
<PAGE>
This Annual Report on Form 10-K ("Report"), contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933.
Discussions containing such forward-looking statements may be found in Items 1,
and 7 hereof, as well as within this Report generally. In addition, when used in
this Report, the words "believes", "intends", "anticipates", "expects", and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to a number of risks and uncertainties. Actual results in
the future could differ materially from those described in the forward-looking
statements as a result of changes in technology, changes in industry standards,
new product introduction by competitors, increased participation in the
enterprise software market by major corporations and other matters set forth in
this Report (see Item 1. Business - "Risk Factors"). The Company does not
undertake any obligation to publicly release the results of any revisions to
these forward-looking statements that may be made to reflect any future events
or circumstances.
<PAGE>
PART I
Item 1. BUSINESS
THE COMPANY
JetForm Corporation (which, together with its subsidiaries is referred to
herein as "JetForm" or the "Company") was incorporated as Jorag Computer Systems
Ltd. pursuant to the Canada Business Corporations Act on June 10, 1982. By
Articles of Amendment dated September 28, 1982, the Company changed its name to
Indigo Software Ltd. By Articles of Amendment dated September 30, 1991, the
Company changed its name to JetForm Corporation. The Company's registered head
and principal office is located at 560 Rochester Street, Ottawa, Ontario, K1S
5K2.
The following chart sets forth certain information concerning the principal
subsidiaries of the Company as at April 30, 2000:
JetForm Corporation
(Delaware, U.S.A.)
JetForm U.K. Limited
(England & Wales)
JetForm France SA
(France)
JetForm Corporation 100%
(Canada) JetForm Pacific Pty Ltd.
(Australia)
JetForm Scandinavia AB
(Sweden)
JetForm Deutschland GmbH
(Germany)
JetForm Technologies Limited
(Ireland)
JetForm Japan K.K.
(Japan)
JetForm PTE LTD
(Singapore)
Overview
JetForm Corporation develops software solutions that automate business
processes, transforming them into e-processes. JetForm solutions enable
companies and governments to lower operating costs, increase revenues and reduce
cycle times. The Company's core strengths are in intelligent XML forms, process
automation and customer-focused document output.
Management believes the Company is well positioned within the e-business market
to attract and serve a worldwide market in the electronic processes, electronic
document presentment and electronic forms arenas. JetForm's sales force and
service professionals, who operate in 11 countries, focus on sales and services
to end users and support the Company's numerous partnerships. Through strategic
partnerships with system integrators, solution partners, international
distributors and original equipment manufacturer's (OEMs) further leverage the
Company's global reach. JetForm has also established key technology alliances
with, among others, Microsoft, Hewlett-Packard, IBM, SAP and Xerox, to broaden
market acceptance for its solutions.
JetForm customers include The Australian Department of Defence, Axel Springer
Verlag AG, Bank of America, BankBoston, Chase Manhattan, China Life Insurance
Company, Cigna, DaimlerChrysler, Hydro Quebec, Fidelity Employer Services
Company (FESCO), Kodak, Merck Microsoft, Minnesota Mining and Manufacturing Co.,
Nationwide Building Society, New Brunswick Department of Supply and Services,
PaineWebber, Pennsylvania Department of Public Welfare, Prudential Real Estate
and Relocation Services, SAFECO, Siemens Nixdorf Informationssysteme, SNCF, U.S.
Army, U.S. Department of Defense, Volvo, Wachovia Bank and Wells Fargo.
Industry Background
Organizations are adopting e-business models at an accelerated pace. They are
evolving their traditional business models to digital-based models using process
automation, electronic document presentment and intelligent data capture.
Companies recognize the competitive advantage they gain from reduced cycle times
and costs and improved service for their customers, partners and suppliers.
Government agencies also recognize the benefits of being able to better serve
their citizens.
e-Process
e-Business is powered by process automation-the interaction of employees,
customers, partners and suppliers through integrated front- and back-office
enterprise applications. When a company needs to automate a cross-functional or
cross-enterprise process that integrates disparate applications,
interoperability becomes an issue. A pragmatic approach for overcoming this
issue is to integrate these departmental applications with an enterprise-wide
process automation tool.
e-Document Presentment
Documents such as invoices and statements often serve as the key point of
contact between an organization and its customers, partners and suppliers. The
demands of the current e-business revolution require dynamic, personalized
business documents to be delivered through multiple channels in a variety of
formats-paper, e-mail, fax and the Web. This revolution will not eliminate
entirely the need for paper, so organizations are striving to operate in this
hybrid paper-Web world.
e-Forms
Business and government are continuing to strive to improve their administrative
efficiencies by automating paper-based solutions. Organizations' intranets have
become the portals to initiate business processes. The evolution of the Internet
from a publishing vehicle to a service-delivery vehicle is requiring
organizations to offer customer service over the Internet; whether it be to
complete a required form, access account information or check on the status of a
customer service request.
The JetForm Solution
JetForm's e-process, e-document presentment and e-forms technologies provide
organizations with the capability to adopt e-business models, giving them a
competitive advantage in their respective industries. JetForm's solutions are
complemented by its professional services team, which facilitates product
implementation, and its customer services team, which provides ongoing support.
e-Process
JetForm's e-process framework integrates people, processes and applications in
e-business. It is an Extensible Mark-up Language ("XML") based process
automation solution that contains rich work management capabilities and provides
companies with the capability to deliver their services and products across
multiple media, including the Internet, wireless, mobile, e-mail and agents or
brokers.
o Safeco Corporation - in business since 1923, is a Fortune 500 diversified
financial services company based in Seattle. Safeco and its more than
17,000 independent agents and financial advisors provide premier insurance
and financial services to individual and business customers.
Recently SAFECO used JetForm's e-process technology to develop an
application that lets independent agents and brokers order, process and
receive surety bonds online, in near real time. The application's
efficiency and cost-savings will allow SAFECO to bring more products to
market, and to increase market share by making it easier for independent
agents and brokers to do business with SAFECO. The company plans to
leverage JetForm's e-process technology to build multiple applications,
ensuring SAFECO stays at the forefront of the financial services industry.
e-Document Presentment
JetForm's e-document presentment solutions allow organizations to produce
professional quality document output from their line-of-business, legacy or ERP
applications. The data generated from these business applications is merged with
an electronic document template to dynamically generate documents in multiple
formats for delivery to multiple devices, including print, e-mail, fax and the
Web.
o Healthaxis.com - Healthaxis.com is a leading provider of advanced
technology solutions for healthcare administration. Acting as an
intermediary, Healthaxis.com provides support to insurance carriers, Blue
Cross/Blue Shield organizations, third-party administrators and
self-administered employers. Their services include business-to-business
(B2B) Internet-enabled applications that address the processing and flow of
information among participants. JetForm's electronic document presentment
technology creates the complex documents and integrated electronic and
printed document output it needed to meet the challenges of the hybrid
paper-Web world. Through its dynamic sub-forms capabilities, the content,
look and feel of Healthaxis.com's forms is controlled dynamically by the
data ensuring the document is accurate and easy to read. As a result of
implementing JetForm's technology, Heathaxis.com realizes a cost savings of
$US1 per document, a significant savings given that the company produces
over 18 million documents each year.
e-Forms
JetForm is the e-forms industry leader, providing graphical XML-based design
tools that create compliant forms to capture data. JetForm provides support for
multiple platforms, whether the end user is filling out a form at a desktop, on
a disconnected handheld device or even on a mobile device with Internet access.
The Company's intelligent e-forms are robust in their ability to capture and
validate data, perform calculations or access data throughout the organization.
JetForm's e-form solutions can be used within governments and businesses wishing
to improve efficiencies and save costs. According to Gartner Group, 80 per cent
of all business documents are forms. These forms may need to be signed,
participate in a workflow or be stored in a document management system.
o Kansas Department of Transportation - The Kansas Department of
Transportation (KDOT) accumulates massive amounts of information about new
and existing transportation infrastructure. With reduced staff levels, the
rising tide of information was becoming increasingly difficult to manage
and process.
The answer was JetForm e-process technology. To guide enterprise
implementation, KDOT developed the Generic Implementation Methodology
(GIM), a repeatable process any business unit can use. Of the e-process
applications KDOT has deployed to date, one of the most innovative is a
solution that creates and updates over 3,000 project authorizations and
schedules annually. Developed without the need to rewrite mainframe-based
legacy systems, this e-process eliminates duplicate data entry, automates
processing and electronic distribution, and automatically converts the
final forms to Adobe Acrobat PDF format and stores the form and any
attachment in the KDOT document management system.
KDOT is now able to accommodate an increasing workload with existing staff
levels. The success of the GIM in this and many other e-process
applications spurred Kansas to recognize KDOT as the state's lead agency
for e-process initiatives.
Corporate Strategy
JetForm's strategic vision is to be the global industry standard in e-Process,
e-Document Presentment, and e-Forms solutions. The Company plans to achieve this
vision through the following strategies.
Expand Worldwide Sales and Distribution
Management believes that the e-business market in North America and globally
represents a significant growth opportunity as organizations strive to evolve
traditional business models into e-business models. JetForm plans to continue to
invest in its worldwide distribution capacity to increase market share and
penetration. This investment will include expanding the direct sales force
within the established and new sales offices in North America and around the
globe.
Extend Strategic Alliances
JetForm intends to build relationships with leading system integrators to extend
its reach and provide comprehensive solutions to its customers. JetForm believes
these relationships facilitate access to strategic projects that often generate
large commitments from its customers and can reduce the length of its sales
cycles. In addition, JetForm believes the software deployment expertise and
industry knowledge of system integrators shortens the implementation time of its
product and helps to secure add-on business.
Increase Visibility
JetForm intends to devote significant resources to marketing efforts to increase
customer and industry awareness of its software and services. These increased
marketing efforts will include hiring additional marketing personnel, increasing
brand awareness through advertising, launching a focused press and industry
analyst campaign and expanding participation in related industry events. Through
these marketing efforts, JetForm intends to demonstrate the value of its
software and services to enterprises and thereby increase its market share.
Leverage Existing Customer Base
Management believes its significant base of customers provides an opportunity
for additional sales of current and future software, as well as ongoing
maintenance revenue. A majority of JetForm's customers have not yet purchased
its full suite of products or currently only use them in specific business units
or locations. Management believes that JetForm can sell more deeply into this
customer base by expanding these partial deployments into enterprise-wide
implementations as well as by cross-selling additional software and services.
Extend Technological Leadership
JetForm's XML-based products provide the foundation for the development of new
and innovative e-business solutions and allow JetForm's products to be easily
adapted to new and existing standards, protocols and platforms. This
architecture enables JetForm's products to surround and extend multiple
operating systems, applications, business processes and data sources. Management
believes that JetForm's product capabilities significantly differentiate it from
its competitors. By continuing to invest in research and development, JetForm
believes that it will extend its technological leadership in the market.
Products
The Company offers scaleable e-process, e-document presentment and e-forms
solutions for enterprises to adopt e-business models. The JetForm solution is
comprised of a combination of software products and associated implementation
and support services. The Company's product lines have been designed and
developed with a modular, open-systems architecture and support many industry
standard interfaces to e-mail, groupware, Internet/intranet and business
application software. The Company's products are sold individually or in
combination. The actual price to an end user or reseller can vary substantially
from customer to customer depending on location, the number of licensed users
and the combination of products and services to be provided.
e-Process
e-Process Framework - For companies who need to integrate multiple applications,
processes and people from their brick and mortar businesses into their
e-businesses, the e-process framework is an XML-based, process automation
platform that allows organizations to model, deploy and manage business
processes. Unlike application integration tools, packaged applications or Web
development tools, the framework integrates people and processes with existing
systems and supports multi-channel delivery including the Internet, wireless,
mobile and e-mail.
e-Document Presentment
Central and Central Pro - JetForm Central and Central Pro provide connectivity
to line-of-business applications for producing document output for print, fax,
e-mail and the Web. They combine an easy-to-use design tool for the creation of
dynamic e-document templates.
Output Pak for SAP R/3 - JetForm's Output Pak for SAP R/3 provides document
output for SAP R/3 applications. It expands the scope of R/3 applications by
allowing customers to create and integrate e-forms with their R/3 business
processes. With a BAPI-certified interface, it provides a flexible and
cost-effective way to create and maintain forms specifically for the SAP R/3
environment.
Output Pak for Oracle - JetForm Output Pak for Oracle Applications provides
document output from Oracle applications. It expands the scope of Oracle
Applications by allowing customers to create and integrate e-forms with their
Oracle business processes. With an Oracle CAI -certified interface, it provides
a flexible and cost-effective way to create and maintain forms specifically for
the Oracle environment. It provides professional-looking output, readability for
users and a better corporate image for organizations.
Forms Pak for PeopleSoft Student Administration - JetForm Forms Pak for
PeopleSoft Student Administration provides document output from the PeopleSoft
Student Administration module. It allows the higher-education community using
PeopleSoft Student Administration applications to output line-of-business
documents such as U.S. federal government-compliant loan forms, student invoices
and financial award notices.
e-Forms
ReachForm - JetForm's latest e-Forms technology, ReachForm, provides an
intelligent form filling experience to everyone on the Internet regardless of
browser type or computing device, with no download or plug-in. A single-form
template can be deployed to multiple platforms.
FormFlow99 - JetForm's FormFlow99 is an e-forms solution that provides
application interoperability, zero administration capabilities, process and
routing security, integration capabilities and applications functionality.
Pocket Form - JetForm Pocket Form, for the Microsoft Windows Powered Pocket PC,
HPC and HPC Pro operating systems, enables mobile computing professionals to use
e-forms to efficiently collect data, complete business transactions with a
legally-binding signature and remotely initiate a workflow. JetForm's e-process
framework and JetForm's Pocket Form provide an enterprise development
environment for mobile solutions.
Services
As at April 30, 2000, the Company had a team of 120 professionals who are
responsible for consulting, custom software development, forms design and
technical support. Consulting services include assisting customers to configure,
implement and integrate the Company's products and, when required, customize
products and design automated processes to meet customers' specific business
needs. In addition, the Company offers e-forms design services. This broad range
of services provides customers with the ability to streamline business
processes.
The Company also provides customers with ongoing technical support by way of
phone, fax and the Web. The technical support team works closely with customers
to diagnose problems and address system integration issues to ensure the
customer receives the full benefit of the JetForm solution. The Company
maintains support facilities that permit real-time testing and replication of
customer problems. JetForm operates two support centers. The Ottawa support
center provides coverage for North America while coverage for Europe is provided
out of the Dublin support center. The Company's software products are typically
sold with annual maintenance and support contracts. The annual service fee is
generally 18 per cent of the corporate price of the software purchased and
entitles the customer to remote support, product upgrades and maintenance
releases. Maintenance and support contracts can also be tailored to meet
customer-specific needs.
Sales, Marketing and Distribution
The Company's sales strategy is to achieve broad market penetration worldwide by
employing a sales force focused on sales to end users. JetForm also supports its
strategic partners including systems integrators, consulting firms, solution
partners, OEMs and international distributors. The Company's marketing strategy
supports the various focuses of the sales force and includes market research and
industry analyst relations; targeted print, Web and direct mail advertising;
public relations activities, lead-generating events, seminars and conferences;
Web, multi-media and printed marketing collateral; and field-focused education
tools and communication.
The Company's sales force operates from 16 offices, with five in the United
States near the following centers: Atlanta, Chicago, New York, San Francisco and
Washington; two in Canada and one in each of the United Kingdom, Dublin, France,
Germany, Sweden, Japan and China. The Company's sales force primarily targets
Fortune 500 companies, with a particular focus on the financial services
industry, ERP/manufacturing, e-business, commercial, mid market and the
government sector. Trained in the Solution Selling methodology, the Company's
sales force builds on relationships with current clients while increasing the
Company's presence in the e-business market and delivering business value to its
customers.
The JetForm Partner Program
Through JetForm's Partner Program, the Company is able to develop relationships
with organizations that provide complementary products and services extending
its reach and core competencies. The Program is designed for medium-sized
integrators and large consulting firms that have a focus on implementing and/or
developing integrated solutions. JetForm partners with different types of
organizations for e-process, e-document presentment and e-forms through a
variety of partner categories.
Solution Partners: Star IT, Enterprise Resolutions, Evergreen, Pro Technologies,
OrdiPlan, Calian Technologies
System Integrators: CGI, The Hunter Group, Core Technology Partners
OEM Partners: Alltel, EDS, Unisys, Symix, Glovia, CMI, Teklynx, CSC, Dairyland,
3M
Technology Partners: Microsoft, Entrust, PenOp, Silanis, VeriSign, SAP, Oracle,
PeopleSoft, JD Edwards, HP, Xerox, Zebra, Dazel, TopCall
Distributors: Ingram
Customers
The Company's customers include a wide variety of organizations with an emphasis
on the financial services industry and the government sector. The Company has an
international customer base with customers outside of North America representing
44 per cent of revenues for the year ended April 30, 2000, and 31 per cent and
27 per cent of revenues for the years ended April 30, 1999 and April 30, 1998,
respectively. A selected list of users of JetForm's e-process, e-document
presentment and e-forms products is set forth below in the following table.
<TABLE>
<CAPTION>
North America International
<S> <C> <C>
Financial Services: Bank of Montreal Australia and New Zealand Banking
Chase Manhattan Group Limited
CIGNA Corp. Commonwealth Bank of Australia
PaineWebber Incorporated Dresdner Bank
Prudential Real Estate and Relocation Lloyds Bank
Services National Australia Bank Limited
SAFECO Union Bank of Switzerland
USERS Incorporated Nationwide Building Society
Wachovia Bank
Wells Fargo
Government: Hydro-Quebec Australian Department of Defence
Industry Canada Chinese Service Center for Scholarly
New Brunswick Dept. of Supply & Services Exchange
U.S. Army Frankfurt Airport Authority
U.S Army Medical Command Swedish Car Test
U.S. Department of the Treasury Swedish Health Organization
U.S. Postal Service UK Department of Social Security (DSS)
U.S. Social Security Administration
Pennsylvania Department of Public Welfare
State of Wisconsin
Other: Kodak DaimlerChrysler
Nestle Ford Motor Company
GE Aircraft Schindler Corp.
Dr Pepper/7Up SNCF
Bombardier Inc. Volvo AB
Minnesota Mining and Manufacturing Co Merck
Owens Corning Axel Springer Verlag
Procter & Gamble Company
Technology: Hewlett-Packard Company Siemens Nixdorf Informationssysteme AG
Microsoft Corporation
Symantec Corporation
</TABLE>
Product Development
As of April 30, 2000, the Company employed 152 full time employees in its
research and development group. JetForm's development team is engaged in
development, testing, product management, quality assurance and documentation
focused primarily on e-process, e-document presentment and e-forms and related
technologies. The research and development team, located in Ottawa, consists of
people with a broad base of experience built within JetForm, other product
development companies and the IT industry. The Company's innovative research and
development projects focus efforts in each of JetForm's global product lines to
take full advantage of Web-centric solutions in the e-process market. This work
builds on the key strengths of the Company's current product lines, provides
maintenance and enhancements for current product lines and integration with the
dynamic hardware and software technology environment.
Competition
The market for JetForm's software and services is highly competitive, quickly
evolving and subject to rapid technological change. Management expects
competition to intensify in the future. JetForm's potential competitors vary in
size and in the scope and breadth of the products and services offered. The
Company's competitors fit into three separate areas. The first is process
automation solutions from organizations such as Vitria and Staffware. The second
is electronic document output from organizations such as Optio, StreamServe,
Xenos and AFP Technology. The third is electronic forms from organizations such
as Adobe, Cardiff, PureEdge and Shana.
Management believes that JetForm is differentiated relative to its competitors
due to its XML technology, which allows for integration between cross-functional
and cross-enterprise applications, and the end-to-end automation solutions it
offers. Management believes that, to the best of its knowledge, none of
JetForm's competitors provide all of this functionality.
Intellectual Property
The Company distributes its products under software license agreements that
generally grant customers perpetual licenses to use, rather than own, the
Company's products and that contain various provisions protecting the Company's
ownership and confidentiality of the underlying technology. The source code of
the Company's products is protected as a trade secret and as unpublished
copyrighted work. The Company also periodically obtains licenses to use or copy
software written or supplied by third parties for inclusion into or as part of
the functionality of the Company's products. Such licenses usually are perpetual
in nature, subject to the regular payment of royalties by the Company as
specified in the licenses and generally on terms and conditions comparable to
those terms on which the Company licenses its own products. The Company has
registered JetForm as a trademark in the United States and Canada and has
applications issued or pending in all foreign countries in which it has
distributor representation. The Company acquired, as part of the Delrina Assets,
all of Delrina's relevant trademarks including FormFlow.
Employees
As of April 30, 2000, the Company had 549 employees of which 524 were full-time
employees. Employees include 152 in research and development, 82 in North
American sales, 71 in international sales, 30 in marketing, 120 in systems and
consulting services and 69 in management and internal corporate services. Of the
full-time employees, 384 are located in Canada, 39 are located in the United
States, 14 are located in the United Kingdom, 17 are located in France, 30 are
located in Ireland, 11 are located in Germany, 10 are located in Sweden, 3 are
located in China and 16 are located in Japan. None of the Company's employees is
represented by a labor union or subject to a collective bargaining agreement,
and the Company believes that its relations with its employees are good.
<PAGE>
RISK FACTORS
In considering an investment in the securities of the Company, a
prospective purchaser should consider the following risk factors.
Variability in Quarterly Results
The Company's revenues and operating results have varied substantially from
period to period. Product revenues are difficult to forecast due to the fact
that the Company's sales cycle, from initial trial to multiple copy licenses,
varies substantially from customer to customer. The sales cycle for the
Company's three lines of business; e-process, e-Document Presentment and e-forms
generally ranges from three to 18 months. The Company has in the past relied to
a great extent on revenue derived from small numbers of large product licenses
in every quarter. Orders are generally filled when they are received and the
Company does not operate with a material order backlog. Therefore, product
revenues in any period are substantially dependent on orders booked and shipped
or the fulfillment in that period of the Company's obligations under Irrevocable
Commitment Licenses, and variations in the timing of product sales or
fulfillment of its obligations can cause material variations in operating
results from period to period. In addition, the Company typically has realized a
disproportionately high amount of its revenues and income in the last month of
each quarter and, as a result, the magnitude of quarterly fluctuations may not
become evident until late in, or at the end of, a given quarter. Accordingly,
delays in product delivery or in the closing of sales near the end of a quarter
could cause quarterly revenues and, to a greater degree, net income, to fall
substantially short of anticipated levels. Due to the foregoing factors, the
Company believes that period to period comparisons of its operating results are
not necessarily meaningful and that such comparisons cannot be relied upon as
indicators of future performance. There can be no assurance that future revenues
and operating results will not vary substantially. It is also possible that in
one or more quarters the Company's revenues or operating results will fall below
the expectations of public market analysts and investors. In either case, the
price of the Common Shares could be materially adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Competition
The market for JetForm's software and services is highly competitive, quickly
evolving and subject to rapid technological change. Management expects
competition to intensify in the future. JetForm's current and potential
competitors vary in size and in the scope and breadth of the products and
services offered. The Company's competitors fit into three separate areas. The
first is process automation solutions from organizations such as Vitria and
Staffware. The second is electronic document output from organizations such as
Optio, StreamServe, Xenos and AFP Technology. The third is electronic forms from
organizations such as Adobe, Cardiff, PureEdge and Shana.
Rapid Technological Change
The market for the Company's products and services is characterized by rapidly
changing technology, evolving industry standards and new product introductions.
The Company's future success will depend in part upon its ability to enhance its
existing products and services and to develop and introduce new products and
services to meet changing client requirements. The process of developing
software products and solutions such as those offered by the Company is
extremely complex and is expected to become increasingly complex and expensive
in the future with the introduction of new platforms and technologies. There can
be no assurance that the Company will successfully complete the development of
new products and solutions in a timely fashion or that the Company's current or
future products and solutions will satisfy the future needs of its customers.
Management of Growth
The Company intends to expand its worldwide sales force and distribution
channels. Rapid growth, including geographic expansion, could place a
significant strain on the Company's management, operations and other resources.
The Company's ability to manage its growth will require it to continue to invest
in its operations, including its financial and management information systems
and controls, and to retain, motivate and effectively manage its employees. If
the Company's management is unable to manage the Company's growth effectively,
the quality of the Company's products and services, the Company's ability to
retain key personnel and its results of operations could be materially adversely
affected.
Third Party Dependence
The Company's ability to remain competitive and respond to technological change
is in part dependent upon the products and services of third parties, including
vendors of application solutions. In the event that the products of such third
parties have design defects or flaws, or if such products are unexpectedly
delayed in their introduction, the Company's business, financial condition and
results of operations could be materially adversely affected.
Dependence Upon Key Personnel
The success of the Company will be largely dependent on certain key employees
including A. Kevin Francis, its President and Chief Executive Officer. The loss
of the services of Mr. Francis or certain other key employees could have a
material adverse effect on the Company's business and prospects. The Company's
success is highly dependent on its continuing ability to identify, hire, train,
retain and motivate highly qualified management, technical, sales and marketing
personnel, including recently appointed officers and other employees.
Competition for such personnel is intense, and there can be no assurance that
the Company will be able to attract, integrate or retain highly qualified,
technical, sales, marketing and managerial personnel in the future. The
inability to attract and retain the necessary management, technical and sales
and marketing personnel could have a material adverse effect on the Company's
business, financial condition and results of operations.
International Operations and Geographic Concentration
Sales of the Company's products outside of the United States and Canada
represented approximately 42% of the Company's product revenues for the year
ended April 30, 2000, and approximately 37% and 27% of the Company's product
revenues for the years ended April 30, 1999 and 1998, respectively. The Company
anticipates that sales outside of the United States and Canada will continue to
account for a significant portion of total revenue. These revenues are subject
to certain risks including exchange rate changes, imposition of government
controls, export license requirements, restrictions on the import/export of
technology, political instability, trade restrictions, changes in tariffs and
taxes, differences in copyright protection and difficulties in managing accounts
receivable and term accounts receivable. There can be no assurance that these
factors will not have a material adverse effect on the Company's future results
of operations.
Exchange Rate Risks; Currency Fluctuations
Most of the Company's revenues are denominated in U.S. dollars, although the
Company's expenses are primarily incurred in Canadian dollars and it reports its
financial results in Canadian dollars. Fluctuations in the exchange rate between
the U.S. dollar and the Canadian dollar could have a material adverse effect on
the Company's reported results. As the Company continues to expand its European
and Rest of World operations, its risk exposure to currencies other than the
U.S. dollar and the Canadian dollar will also increase.
Reliance on Intellectual Property
The Company's success is heavily dependent upon its proprietary technology. The
Company does not hold any patents relating to its software products. The Company
regards its software products as proprietary and relies for protection upon
copyright, trademark and trade secret laws as well as restrictions on disclosure
and transferability contained in its software license agreements with customers.
In spite of these precautions, it may be possible for unauthorized third parties
to copy or otherwise obtain and use the Company's products or technology. In
addition, effective copyright, trademark and trade secret protection may be
unavailable or limited in certain foreign countries. The Company also
periodically obtains licenses to use or copy software written or supplied by
third parties for use in the Company's products. If such licenses are terminated
by such third parties, there can be no assurance that any necessary licenses or
rights could be obtained on terms satisfactory to the Company to allow continued
use of such third party software which may be necessary for the functionality or
features of the Company's products.
Certain of the Company's software products and solutions could infringe existing
intellectual property rights of others. A number of companies, including leading
software companies, have obtained patents, some of which could be found to be
infringed by the Company's products and solutions. If any infringement of
intellectual property rights does exist in JetForm's products, there can be no
assurance that the necessary licenses or rights could be obtained on terms
satisfactory to the Company or that the Company would not be required to modify
or discontinue distributing the infringing software products. A finding of
infringement could have a material adverse effect on the Company's business,
financial condition and results of operations. The threat or commencement of
litigation against the Company by third parties to enforce alleged intellectual
property rights, whether or not such intellectual property rights are found to
exist or to have been infringed by the Company, could have a material adverse
impact on the market price of the Common Shares, could prove costly for the
Company to defend and could direct significant management resources away from
the operations of the Company.
Product Defects and Product Liability
The Company's software products are highly complex and sophisticated and could
from time to time contain design defects or software errors that could be
difficult to detect and correct. Errors, bugs or viruses may result in loss of
or delay in market acceptance or loss of client data. Although the Company has
not experienced material adverse effects resulting from any software defects or
errors to date, there can be no assurance that, despite testing by the Company
and its clients, errors will not be found in new products. In addition, the
Company regularly provides a warranty with its products. There can be no
assurance that the financial impact of these obligations will not be significant
in the future, especially in the event of a major product defect. The Company's
products are used by many of its clients to perform mission critical functions.
As a result, design defects, software errors, misuse of the Company's products,
incorrect data from external sources or other potential problems that may arise
from the use of the Company's products could result in claims for financial or
other damages from the Company's customers. As is customary in the software
industry, the Company does not maintain product liability insurance. Although
the Company's license agreements with its customers typically contain provisions
designed to limit the Company's exposure to potential claims, such provisions
may not effectively protect the Company against such claims and related
liabilities and costs. Accordingly, any such claim could have a material adverse
effect upon the Company's business, financial condition and results of
operations.
Volatility of Stock Price
On the basis of the history of the trading prices of the Common Shares and the
stock prices of other technology companies, the market price of the Common
Shares may be highly volatile and may be affected by factors other than the
Company's results. Factors such as announcements of technological innovations or
new products by the Company's competitors, changes in the conditions of the
e-forms, e-process and e-document presentment markets, changes in public market
analysts' expectations regarding future earnings and fluctuations in the rate of
exchange between foreign currencies and the Canadian dollar may have an impact
on the market price of the Common Shares. In addition, general economic,
political and market conditions, such as recessions, economic treaties,
elections or military conflicts, may adversely affect the market price of the
Common Shares.
Item 2. PROPERTIES
Facilities
The following table sets forth the location of the principal offices of the
Company, their uses, and the lease expiry date. The Company considers its
facilities to be in good condition. The specific location of these facilities is
not material to the Company's business.
<TABLE>
<CAPTION>
Location Use Lease Expiry
<S> <C> <C>
Ottawa, Ontario, Canada Executive offices, customer support, consulting September, 2006
services, training services, sales, marketing and
administration
Toronto, Ontario, Canada Regional sales office November, 2000
Falls Church, Virginia, USA U.S. Government sales and marketing headquarters, April, 2000
regional sales
Dallas, Texas, USA Regional sales office November, 2000
Mountain View, California, USA Regional sales office October, 2000
Oak Brook, Illinois, USA Regional sales office June, 2000
New York, New York, USA Regional sales office April, 2005
Atlanta, Georgia, USA Regional sales office November, 2000
Boston, Massachusetts, USA Regional Sales Office December, 2000
Boulogne, France Regional sales office July, 2002
Falkenberg, Sweden Regional sales office June, 2000
Ratingen, Germany Regional sales office April, 2002
Thames Valley, UK Regional Sales Office November, 2000
Dublin, Ireland European Services Centre January, 2024
Tokyo, Japan Asia Pacific Office January, 2002
Beijing, China Regional sales office March, 2000
</TABLE>
Item 3. LEGAL PROCEEDINGS
The Company is not a party to any material litigation.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the year ended April 30, 2000.
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Price Range of Common Shares
The Company's Common Shares are quoted on the NASDAQ National Market under
the symbol "FORM", the Pacific Stock Exchange under the symbol "JTF", and on The
Toronto Stock Exchange under the symbol "JFM". The following table sets forth,
for the periods indicated, the high and low closing sales prices of the Common
Shares as reported on the NASDAQ National Market.
High Low
Year Ended April 30, 1999
First Quarter....................... US$22.88 US$15.63
Second Quarter...................... 20.38 12.25
Third Quarter....................... 15.25 9.63
Fourth Quarter...................... 11.63 3.13
Year Ended April 30, 2000
First Quarter....................... US$ 5.12 US$ 3.12
Second Quarter...................... 4.40 3.12
Third Quarter....................... 7.56 3.43
Fourth Quarter...................... 12.31 5.12
Holders
As of July 20, 2000, there were 228 holders of record of Common Shares. A
substantial number of Common Shares of the Company are held by depositories,
brokerage firms and financial institutions in "street name". Based upon the
number of annual reports and proxy statements requested by such nominees,
management of the Company estimates that there are more than 16,500 beneficial
holders of Common Shares.
Dividends
During the fiscal years ended April 30, 2000, 1999 and 1998, the Company did not
declare or pay cash dividends on its Common Shares, and does not anticipate
paying any dividends in the foreseeable future, but intends to retain future
earnings for reinvestment to finance its business.
Limitations Affecting Security Holders
There is no law or government decree or regulation in Canada that restricts the
export or import of capital, or affects the remittances of dividends, insurance
or other payments to a non-resident holder of Common Shares, other than the
withholding tax requirements described below.
Taxation
The following discussion summarizes certain tax considerations relevant to an
investment by individuals and corporations who, for income tax purposes, are
resident in the United States and not in Canada, hold Common Shares as capital
property, and do not use or hold the Common Shares in carrying on business
through a permanent establishment or in connection with a fixed base in Canada
(collectively, "Unconnected US Shareholders"). The Canadian tax consequences of
an investment in the Common Shares by investors who are not Unconnected US
Shareholders may be expected to differ substantially from the tax consequences
discussed herein. The discussion is based upon the provisions of the Income Tax
Act (Canada) (the "Tax Act"), the Convention between Canada and the United
States of America with respect to taxes on Income and on Capital (the
"Convention") and the published administrative practices of Revenue Canada,
Taxation and judicial decisions, all of which are subject to change. This
discussion does not take into account the tax laws of the various provinces or
territories of Canada.
This discussion is intended to be a general description of the Canadian tax
considerations and does not take into account the individual circumstances of
any particular shareholder.
Any cash dividends and stock dividends on the Common Shares payable to
Unconnected US Shareholders generally will be subject to Canadian withholding
tax. Under the Convention, the rate of withholding tax generally applicable to
Unconnected US Shareholders is 15%. In the case of a United States corporate
shareholder owning 10% or more of the voting shares of the Company, the
applicable withholding tax under the Convention is 5%. Capital gains realized on
the disposition of Common Shares by Unconnected US Shareholders will not be
subject to tax under the Tax Act unless such Common Shares are taxable Canadian
property within the meaning of the Tax Act. Common Shares will generally not be
taxable Canadian property to a holder unless, at any time during the five-year
period immediately preceding a disposition, the holder, or persons with whom the
holder did not deal at arm's length, or any combination thereof, owned 25% or
more of the issued shares of any class or series of the Company. If the Common
Shares are considered taxable Canadian property to a holder, the Convention will
generally exempt Unconnected US Shareholders from tax under the Tax Act in
respect of a disposition of Common Shares provided the value of the shares of
the Company is not derived principally from real property situated in Canada.
Neither Canada nor any province thereof currently imposes any estate taxes or
succession duties.
Item 6. SELECTED FINANCIAL DATA
The selected consolidated financial data as at and for each of the years in the
five year period ended April 30, 2000, have been derived from the Company's
audited Consolidated Financial Statements and Notes thereto, included in Item 8.
"Financial Statements and Supplementary Data", and should be read in conjunction
therewith.
The Consolidated Financial Statements are prepared on the basis of U.S. GAAP and
are expressed in Canadian dollars. See Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
Year ended April 30,
-----------------------------------------------------------------------------
2000 1999 1998 1997 1996
--------- ----------- ----------- ------------ -----------
(in thousands of Canadian dollars, except share and per share amounts)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues
Product......................... $ 52,583 $ 66,662 $ 74,781 $ 54,935 $ 31,600
Service......................... 41,734 47,550 36,446 21,679 11,855
--------- ----------- ----------- ------------ -----------
94,317 114,212 111,227 76,614 43,455
--------- ----------- ----------- ------------ -----------
Costs and expenses
Cost of product................. 12,053 9,164 7,539 4,677 2,491
Cost of service................. 12,373 19,058 15,259 10,805 6,125
Sales and marketing............. 45,097 53,315 40,214 29,140 16,697
General and administrative...... 12,168 10,722 9,846 8,618 5,513
Research and development........ 15,423 15,384 10,620 7,422 3,905
Depreciation and
amortization.................... 10,300 11,568 11,631 8,190 3,593
Gain on sale of assets(1)....... (1,813) -- -- -- --
Restructuring(2)................ (1,106) 30,503 -- -- --
Repurchase of Moore
Options(3)...................... -- -- -- 47,084 --
In process research and
development(4).................. -- -- -- 106,962 --
--------- ----------- ----------- ------------ -----------
104,495 149,714 95,109 222,898 38,324
--------- ----------- ----------- ------------ -----------
Operating income (loss)......... (10,178) (35,502) 16,118 (146,284) 5,131
Investment and other income
(expense)....................... 3,163 3,815 (3,564) (2,003) 1,466
--------- ----------- ----------- ------------ -----------
Income (loss) before taxes...... (7,015) (31,687) 12,554 (148,287) 6,597
Provision for (recovery of)
income taxes.................... 1,086 (2,552) 1,690 193 2,449
--------- ----------- ----------- ------------ -----------
Net income (loss)............... $ (8,101) $(29,135) $ 10,864 $ (148,480) $4,148
========= =========== =========== ============ ===========
Basic income (loss) per
share...........................
Net income (loss) per
share........................... $ (0.41) $(1.47) $ 0.65 $ (10.03) $ 0.39
Weighted average number of
shares.......................... 19,915,893 19,826,057 16,622,835 14,796,852 10,650,807
Fully diluted income (loss) per
share...........................
Net income (loss) per
share........................... $ (0.41) $(1.47) $ 0.62 $ (10.03) $ 0.34
Weighted average number of
shares.......................... 19,915,893 19,826,057 17,615,595 14,796,852 12,137,946
</TABLE>
(1) On May 1, 1999 the Company sold all of the Common and Preferred shares of
its multimedia subsidiary, Why Interactive, to a third party for total
consideration of $6.4 million.
(2) On March 17, 1999 the Company announced a restructuring plan which included
the write-down of certain capital assets, reductions in the number of
employees, closure of certain facilities and other costs totaling $30.5
million. See Note 15 to the Consolidated Financial Statements included
elsewhere in this Form 10-K. During the year ended April 30, 2000 the
Company was successful in reducing its total expected liability under
facilities leases and severance arrangements by $ 1.1 million.
(3) Effective June 27, 1996, the Company repurchased the Moore options for
consideration of US$34.0 million, paid for by the issuance of 1,813,334
Common Shares.
(4) On September 10, 1996, the Company acquired certain assets including title
to intellectual property, that were formerly part of the E-Forms software
group of Delrina Corporation. During the year ended April 30, 1997, the
Company recorded a non-recurring charge of $107.0 million for purchased in
process research and development relating to this acquisition.
<TABLE>
<CAPTION>
As at April 30,
---------------------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ----------- ----------- ----------- -----------
(in thousands of Canadian dollars)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents............... $42,092 $47,262 $ 91,604 $ 34,450 $ 20,198
Accounts receivable..................... 21,416 29,274 31,347 24,276 8,482
Term accounts receivable................ 5,466 19,576 13,187 11,676 11,260
Working capital......................... 33,568 43,744 70,370 30,409 29,716
Total assets............................ 121,336 156,705 216,567 142,988 88,879
Long term debt including current
maturities.............................. 10,000 32,557 73,404 101,518 --
Shareholders' equity.................... 76,302 84,930 112,149 16,089 67,033
</TABLE>
The Company publishes its consolidated financial statements in Canadian dollars.
The following table sets forth, for the periods indicated, certain exchange
rates based on the exchange rates reported by the Federal Reserve Bank of New
York as the noon buying rates in New York City for cable transfers in foreign
currencies, as certified for customs purposes (the "Noon Buying Rate"). Such
rates quoted are the number of U.S. dollars per Canadian dollar and are the
inverse of the Noon Buying Rate.
<TABLE>
<CAPTION>
Year ended April 30,
---------------------------------------------------------------------
2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
High....... US$0.6969 US$0.6882 US$0.7317 US$0.7513 US$0.7527
Low........ 0.6607 0.6341 0.6832 0.7145 0.7224
Average(1). 0.6803 0.6601 0.7093 0.7329 0.7344
Period End. 0.6748 0.6863 0.6992 0.7157 0.7342
</TABLE>
(1) The average of the month-end exchange rates during such periods.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Introduction
The following discussion of the Company's results of operations and of its
liquidity and capital resources should be read in conjunction with the
information contained in the Consolidated Financial Statements and related Notes
thereto. The following discussion provides a comparative analysis of material
changes for the years ended April 30, 2000, 1999 and 1998, in the financial
condition and results of operations of the parent company ("JetForm") and its
wholly-owned subsidiaries: JetForm Corporation (a Delaware corporation), JetForm
Pacific Pty Limited ("JetForm Pacific"), JetForm Scandinavia AB ("JetForm
Nordic"), JetForm France SA ("JetForm France"), JetForm UK Limited ("JetForm
UK"), JetForm Deutschland GmbH ("JetForm Germany"), JetForm Technologies Limited
("JetForm Ireland"), JetForm Japan K.K. ("JetForm Japan") and JetForm PTE Ltd
("JetForm Singapore"). JetForm and its wholly-owned subsidiaries are
collectively referred to herein as the "Company".
Results of Operations
The Company's revenues and operating results have varied substantially from
period to period. With the exception of its consulting services operation, the
Company has historically operated with little backlog of orders because its
software products are generally shipped as orders are received. The Company
records product revenue from packaged software and irrevocable commitments to
purchase products when persuasive evidence of an arrangement exists, the
software product has been shipped, there are no significant uncertainties
surrounding product acceptance, the fees are fixed and determinable and
collection is considered probable. As a result, product revenue in any period is
substantially dependent on orders booked and shipped in that period and on the
receipt of irrevocable commitment license agreements. Product revenue is
difficult to forecast due to the fact that the Company's sales cycle, from
initial trial to multiple copy licenses, varies substantially from customer to
customer. As a result, variations in the timing of product sales can cause
significant variations in operating results from period to period. Product
revenue represented 56% of total revenue for the year ended April 30, 2000.
Service revenue primarily consists of consulting services, training and
technical support. Consulting services include assisting customers to configure,
implement and integrate the Company's products and, when required, customize
products and design automated processes to meet customers' specific business
needs. Service revenue represented 44% of total revenue for the year ended April
30, 2000.
Costs and expenses are comprised of cost of product, cost of service, sales and
marketing, general and administrative, research and development, depreciation
and amortization and other expenses. Cost of product consists of third party
commissions, the cost of disks, manuals, packaging, freight, royalty payments to
vendors whose software is bundled with certain products, amortization of
deferred product development costs and provisions for bad debts. Cost of service
includes all costs of providing technical support, training, consulting, custom
forms development and application development services. Sales and marketing
expenses are principally related to salaries and commissions paid to sales and
marketing personnel and the cost of marketing programs. Research and development
expenses include personnel and occupancy costs as well as the costs of software
development, testing, product management, quality assurance and documentation.
Depreciation and amortization includes depreciation and amortization of fixed
assets and amortization of other assets, goodwill and distribution rights
relating to various acquisitions. The Company amortizes goodwill and
distribution rights over their expected useful lives. The Company periodically
reviews the carrying value of its capital assets. Any impairments in the
carrying value are recognized at that time.
The following table sets forth, on a comparative basis for the periods
indicated, the components of the Company's product margin, service margin and
product and service margin:
<TABLE>
<CAPTION>
Year ended April 30,
----------------------------------------------------------------------------
2000 1999 1998
---------------------- ------------------------ ----------------------
(in thousands of Canadian dollars)
<S> <C> <C> <C> <C> <C> <C>
Product revenue.... $52,583 100% $66,662 100% $74,781 100%
Cost of product.... 12,053 23% 9,164 14% 7,539 10%
---------- -------- ---------- ---------- ---------- ---------
Product margin..... $40,530 77% $57,498 86% $67,242 90%
========== ======== ========== ========== ========== =========
Service revenue.... $41,734 100% $47,550 100% $36,446 100%
Cost of service.... 12,373 30% 19,058 40% 15,259 42%
---------- -------- ---------- ---------- ---------- ---------
Service margin..... $29,361 70% $28,492 60% $21,187 58%
========== ======== ========== ========== ========== =========
Total revenue...... $ 94,317 100% $114,212 100% $111,227 100%
Costs of product and service 24,426 26% 28,222 25% 22,798 20%
---------- -------- ---------- ---------- ---------- ---------
Product and service margin $69,891 74% $85,990 75% $ 88,429 80%
========== ======== ========== ========== ========== =========
</TABLE>
The following table presents, for the periods indicated, consolidated statement
of operations data expressed as a percentage of total revenues:
<TABLE>
<CAPTION>
Year ended April 30,
---------------------------------------------
2000 1999 1998
------------- ------------ ------------
<S> <C> <C> <C>
REVENUES
Product................................ 56% 58% 67%
Service................................ 44% 42% 33%
------------- ------------ ------------
100% 100% 100%
------------- ------------ ------------
COSTS AND EXPENSES
Cost of product........................ 13% 8% 7%
Cost of service........................ 13% 17% 14%
Sales and marketing.................... 48% 47% 36%
General and administrative............. 13% 9% 9%
Research and development............... 16% 13% 10%
Depreciation and amortization.......... 11% 10% 10%
Gain on sale of assets................. -2% -- --
Restructuring........................... -1% 27% --
------------- ------------ ------------
111% 131% 86%
------------- ------------ ------------
OPERATING INCOME (LOSS).................. -11% -31% 14%
Interest and other income (expense)...... 3% 3% -3%
------------- ------------ ------------
INCOME (LOSS) BEFORE TAXES............... -7% -28% 11%
Provision for income taxes............... -1% 2% -2%
------------- ------------ ------------
NET INCOME (LOSS)........................ -9% -26% 10%
============= ============ ============
</TABLE>
The following table provides details of product revenue by geographic segment
and, within Canada and the United States of America, by distribution channel:
<TABLE>
<CAPTION>
Year ended April 30, Period to Period Increase
(Decrease)
---------------------------------------- ------------------------------------
2000 1999 1998 1999 to 2000 1998 to 1999
---------- ---------- ------------ --------------- ---------------
(in thousands of Canadian dollars)
<S> <C> <C> <C> <C> <C>
Product revenue by region
United States and Canada $ 30,294 $ 42,286 $ 54,226 -28% -22%
Europe 18,076 20,051 16,832 -10% 19%
Rest of World 4,213 4,325 3,723 -3% 16%
---------- ---------- ------------
$ 52,583 $ 66,662 $ 74,781 -21% -11%
========== ========== ============
Product revenue by channel in the
United States and Canada
Reseller and OEM $ 17,555 $ 24,779 $ 36,614 -29% -32%
Direct Sales 12,739 17,507 17,612 -27% -1%
---------- ---------- ------------
$ 30,294 $ 42,286 $ 54,226 -28% -22%
========== ========== ============
</TABLE>
Year Ended April 30, 2000, Compared to the Year Ended April 30, 1999
Revenues
Total Revenues: Total revenues decreased 17% to $94.3 million for the year ended
April 30, 2000, from $114.2 million for the year ended April 30, 1999. Total
revenues consisted of 56% product revenue and 44% service revenue for the year
ended April 30, 2000.
Product Revenue: Product revenue decreased 21% to $52.6 million for the year
ended April 30, 2000, from $66.7 million for the year ended April 30, 1999.
Product revenue derived from North America, Europe and Rest of World represented
58%, 34% and 8%, respectively, of product revenue for the year ended April 30,
2000, as compared to 63%, 30% and 7%, respectively, of product revenue for the
year ended April 30, 1999.
The Company attributes the decrease in product revenue primarily to external
market factors including the Year 2000 issue, a shift towards Internet based
solutions from traditional client/server solutions, and the emergence of new
competitors.
The Year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date sensitive systems may recognize the
Year 2000 as 1900 or some other date, resulting in errors when information using
Year 2000 dates is processed. As a result, the Company's primary customer base,
large financial services organizations and government agencies, who are deeply
affected by the Year 2000 problem due to their reliance on computer systems,
focused their information technology resources on ensuring Year 2000 readiness.
This had an impact on the Company's ability to sell enterprise wide licenses to
these customers during the years ended April 30, 2000 and 1999.
The Company also experienced a shift of focus by its customers to Internet-based
solutions from more traditional client/server solutions and the emergence of new
competitors in the areas of process automation, document presentment and
pre-packaged solutions. The Company has developed a comprehensive strategy to
address the market for Internet-based solutions and the increase in competition.
However, there can be no assurance that revenue derived from this strategy will
be sufficient to offset the decrease in revenue from the Company's client/server
products.
Product revenue derived from North America decreased 28% to $30.3 million for
the year ended April 30, 2000, from $42.3 million for the year ended April 30,
1999. Reseller and OEM sales, which represented 58% of North American product
revenue, decreased 29% to $17.6 million for the year ended April 30, 2000, from
$24.8 million for the year ended April 30, 1999. Product revenue from direct
sales, which represented 42% of North American product revenue, decreased 27% to
$12.7 million for the year ended April 30, 2000, from $17.5 million for the year
ended April 30, 1999.
Product revenue derived from Europe decreased 10% to $18.1 million for the year
ended April 30, 2000, from $20.1 million for the year ended April 30, 1999,
primarily due to decreased license revenue from Germany and Sweden.
Product revenue derived from Rest of World decreased 3% to $4.2 million for the
year ended April 30, 2000, from $4.3 million for the year ended April 30, 1999,
primarily due to decreased license revenue from Australia.
Service Revenue: Service revenue decreased 12% to $41.7 million for the year
ended April 30, 2000, from $47.6 million for the year ended April 30, 1999. For
the year ended April 30, 2000, maintenance and support revenue increased 10% to
$24.2 million from $21.9 million for the year ended April 30, 1999. The
Company's consulting revenue decreased 31% to $17.5 million for the year ended
April 30, 2000, from $25.6 million for the year ended April 30, 1999. For the
year ended April 30, 1999, consulting revenue included $4.0 million from a
former subsidiary of the Company, Why Interactive, which was sold in May 1999.
Excluding revenue from Why Interactive, consulting revenue decreased 19%,
primarily due to the general decrease in product sales and resulting consulting
engagements.
Costs and Expenses
Total Costs and Expenses: Total costs and expenses were $104.5 million for the
year ended April 30, 2000, a decrease of 30% from $149.7 million for the year
ended April 30, 1999. Excluding non-recurring items of $2.9 million in fiscal
year 2000 and $30.5 million in fiscal year 1999, costs and expenses for the year
ended April 30, 2000, decreased by 10%.
Cost of Product: Cost of product increased 32% to $12.1 million for the year
ended April 30, 2000, from $9.2 million for the year ended April 30, 1999,
primarily as a result of an increase in provisions for bad debts. During the
year ended April 30, 2000, the Company provided for two large accounts, which
amounted to $1.7 million. The product margin decreased to 77% for the year ended
April 30, 2000, from 86% for the year ended April 30, 1999, primarily due to
lost economies of scale resulting from the decrease in product revenue and the
bad debt provisions.
Cost of Service: Cost of service decreased 35% to $12.4 million for the year
ended April 30, 2000, from $19.1 million for the year ended April 30, 1999,
primarily as a result of a decrease in the number of employees resulting from
the Company's restructuring in the fourth quarter of fiscal year 1999 and the
sale of Why Interactive in May 1999. The service margin increased to 70% for the
year ended April 30, 2000, from 60% for the year ended April 30, 1999, primarily
as a result of the increased maintenance and support revenue, which
traditionally has higher margins than other services.
Costs of Product and Service: Costs of product and service decreased 13% to
$24.4 million for the year ended April 30, 2000, from $28.2 million for the year
ended April 30, 1999. Product and service margin decreased to 74% for the year
ended April 30, 2000, from 75% for the year ended April 30, 1999.
Sales and Marketing: Sales and marketing expenses decreased 15% to $45.1 million
for the year ended April 30, 2000 from $53.3 million for the year ended April
30, 1999, primarily as a result of a decrease in the number of employees
resulting from the Company's restructuring in the fourth quarter of fiscal year
1999. The Company expects to expand its direct and indirect sales force during
fiscal year 2001. As a percentage of total revenues, sales and marketing
increased to 48% for the year ended April 30, 2000, from 47% for the year ended
April 30, 1999.
General and Administrative: General and administrative expenses increased 13% to
$12.2 million for the year ended April 30, 2000, from $10.7 million for the year
ended April 30, 1999, primarily due to approximately $2.3 million relating to
the write-off of an investment and the departure of certain executives. As a
percentage of total revenues, general and administrative expenses increased to
13% for the year ended April 30, 2000, from 9% for the year ended April 30,
1999. Excluding these charges, general and administrative expenses decreased 8%
to $9.9 million for the year ended April 30, 2000. As a percentage of total
revenues, general and administrative expense (excluding the write-off and
departure charges) was 10% for the year ended April 30, 2000, compared to 9% for
the year ended April 30, 1999.
Research and Development: Research and development expenses remained constant at
$15.4 million for both the years ended April 30, 2000 and 1999. During both the
years ended April 30, 2000, and April 30, 1999, the Company capitalized
approximately $3.6 million of software development costs. Research and
development expense was 29% and 23% of product revenue for the years ended April
30, 2000 and 1999, respectively.
Depreciation and Amortization: Depreciation and amortization decreased 11% to
$10.3 million for the year ended April 30, 2000, from $11.6 million for the year
ended April 30, 1999, primarily as a result of the write down of certain
intangible assets in the fourth quarter of fiscal year 1999.
Restructuring: During the year ended April 30, 2000, the Company was successful
in reducing its total expected liability under facilities leases and severance
arrangements by approximately $1.1 million.
Gain on sale of assets: In May, 1999 the Company sold all of the Common and
Preferred shares of its multimedia subsidiary, Why Interactive, to a third party
for $6.4 million in cash, debt and convertible debt. This resulted in a gain of
$1.8 million. As at April 30, 2000, the Company had received all amounts owed
from the third party.
Operating Income (Loss): Operating loss was $10.2 million for the year ended
April 30, 2000, compared to $35.5 million for the year ended April 30, 1999.
Investment and Other Income (Expense): Investment and other income was $3.2
million for the year ended April 30, 2000, compared to $3.8 million for the year
ended April 30, 1999, primarily due to a decrease in interest income offset by a
gain of $1.5 million from the sale of securities.
Provision for Income Taxes: The Company recorded a provision for current income
taxes of $1.1 million for the year ended April 30, 2000, compared to a provision
for current income taxes of $2.1 million and a recovery of deferred income tax
of $4.6 million for the year ended April 30, 1999.
Year Ended April 30, 1999, Compared to the Year Ended April 30, 1998
Revenues
Total Revenues: Total revenues increased 3% to $114.2 million for the year ended
April 30, 1999, from $111.2 million for the year ended April 30, 1998. Total
revenues consisted of 58% product revenue and 42% service revenue for the year
ended April 30, 1999.
Product Revenue: Product revenue decreased 11% to $66.7 million for the year
ended April 30, 1999, from $74.8 million for the year ended April 30, 1998.
Product revenue derived from North America, Europe and Rest of World represented
63%, 30% and 7%, respectively, of product revenue for the year ended April 30,
1999, as compared to 72%, 23% and 5%, respectively, of product revenue for the
year ended April 30, 1998.
The Company attributes the decrease in product revenue primarily to external
market factors including the Year 2000 issue, a shift towards Internet based
solutions from traditional client/server solutions and the emergence of new
competitors selling pre-packaged solutions.
Product revenue derived from North America decreased 22% to $42.3 million for
the year ended April 30, 1999, from $54.2 million for the year ended April 30,
1998. Reseller and OEM sales, which represented 59% of North American product
revenue, decreased 32% to $24.8 million for the year ended April 30, 1999, from
$36.6 million for the year ended April 30, 1998, primarily due to significant
sales from U.S. government resellers and minimum commitments for resale by Moore
Corporation Limited in fiscal year 1998. Product revenue from direct sales,
which represented 41% of North American product revenue, decreased 1% to $17.5
million for the year ended April 30, 1999, from $17.6 million for the year ended
April 30, 1998.
Product revenue derived from Europe increased 19% to $20.1 million for the year
ended April 30, 1999, from $16.8 million for the year ended April 30, 1998,
primarily due to increased license revenue from Germany.
Product revenue derived from Rest of World increased 16% to $4.3 million for the
year ended April 30, 1999, from $3.7 million for the year ended April 30, 1998,
primarily due to increased license revenue from Japan.
Service Revenue: Service revenue increased 30% to $47.6 million for the year
ended April 30, 1999, from $36.4 million for the year ended April 30, 1998. For
the year ended April 30, 1999, maintenance and support revenue increased 25% to
$21.9 million from $17.5 million for the year ended April 30, 1998. The
Company's other service revenue increased 35% to $25.6 million for the year
ended April 30, 1999, from $19.0 million for the year ended April 30, 1998.
Costs and Expenses
Total Costs and Expenses: Total costs and expenses were $149.7 million for the
year ended April 30, 1999, an increase of 57% from $95.1 million for the year
ended April 30, 1998. Excluding the provision for restructuring costs of $30.5
million, costs and expenses for the year ended April 30, 1999, increased by 25%.
Cost of Product: Cost of product increased 22% to $9.2 million for the year
ended April 30, 1999 from $7.5 million for the year ended April 30, 1998,
primarily as a result of an increase in third party royalties and amortization
of deferred development costs. For the year ended April 30, 1999, total deferred
costs charged to cost of product increased to $3.3 million from $2.2 million for
the year ended April 30, 1998. The product margin decreased to 86% for the year
ended April 30, 1999 from 90% for the year ended April 30, 1998, primarily due
to lost economies of scale resulting from the decrease in product revenue.
Cost of Service. Cost of service increased 25% to $19.1 million for the year
ended April 30, 1999, from $15.3 million for the year ended April 30, 1998,
primarily as a result of an increase in the number of employees, particularly in
Ireland, due to the expansion in the Company's service revenues. The service
margin increased to 60% for the year ended April 30, 1999, from 58% for the year
ended April 30, 1998, primarily as a result of gained economies of scale
resulting from increased maintenance and support revenue.
Costs of Product and Service: Costs of product and service increased 24% to
$28.2 million for the year ended April 30, 1999, from $22.8 million for the year
ended April 30, 1998. Product and service margin decreased to 75% for the year
ended April 30, 1999, from 80% for the year ended April 30, 1998.
Sales and Marketing: Sales and marketing expenses increased 33% to $53.3 million
for the year ended April 30, 1999, from $40.2 million for the year ended April
30, 1998, primarily as a result of increased sales and marketing staff,
commission rates and general marketing activity. As a percentage of total
revenues, sales and marketing increased to 47% for the year ended April 30,
1999, from 36% for the year ended April 30, 1998.
General and Administrative: General and administrative expenses increased 9% to
$10.7 million for the year ended April 30, 1999, from $9.8 million for the year
ended April 30, 1998, primarily due to increased spending on management
information systems and facilities. As a percentage of total revenues, general
and administrative remained constant at 9% for the years ended April 30, 1999
and 1998.
Research and Development: Research and development expenses increased 45% to
$15.4 million for the year ended April 30, 1999, from $10.6 million for the year
ended April 30, 1998, primarily due to an increase in the number of employees
and related costs. During the years ended April 30, 1999 and 1998, the Company
capitalized approximately $3.6 million and $2.8 million, respectively, of
software development costs. Research and development expense were 23% and 14% of
product revenue for the years ended April 30, 1999 and 1998, respectively.
Depreciation and Amortization: Depreciation and amortization remained constant
at $11.6 million for both the year ended April 30, 1999 and 1998, primarily as a
result of increased purchases of computer equipment and leasehold improvements
offset by the write-down of certain assets relating to the restructuring of the
Company.
Restructuring: During the year ended April 30, 1999, the Company recorded a
provision for restructuring costs of $30.5 million. The restructuring plan
announced by the Company included: i) consolidation of management
responsibilities and reduction in headcount; ii) closure of redundant
facilities; iii) reduction in the carrying value of certain capital assets
primarily related to past acquisitions; and iv) cancellation of trade shows and
other commitments.
Operating Income (Loss): Operating loss was $35.5 million for the year ended
April 30, 1999, compared to operating income of $16.1 million for the year ended
April 30, 1998, primarily due to the provision for restructuring costs.
Excluding this charge, operating loss was $5.0 million for the year ended April
30, 1999.
Investment and Other Income: Investment and other income was $3.8 million for
the year ended April 30, 1999, compared to a net interest expense of $3.6
million for the year ended April 30, 1998 primarily due to a reduction in
interest charges on the Delrina obligation and an increase in investment income
on cash and cash equivalents. On February 12, 1998, the Company and Delrina
re-negotiated certain terms of the asset purchase agreement whereby the Company
agreed to accelerate payment of its obligation in consideration for a reduction
in the effective interest rate which resulted in a reduction of imputed interest
charges (see "Liquidity and Capital Resources - Delrina Obligation"). In April
1998, the Company received net proceeds of $63.7 million from the issuance of
2.2 million special warrants to Canadian investors.
Income Taxes: The Company recorded a provision for current income taxes of $2.1
million and a recovery of deferred income tax of $4.6 million for the year ended
April 30, 1999, compared to a provision for current income taxes of $2.0 million
and a recovery of deferred income tax of $355,000 for the year ended April 30,
1998. As at April 30, 1999, the Company had a deferred tax asset of $56.8
million primarily made up of deductible temporary differences related to the
Delrina Assets and the provision for restructuring costs. The Company believes
sufficient uncertainty exists regarding the realizability of this net deferred
tax asset such that a valuation allowance of $49.2 million has been applied.
Liquidity and Capital Resources
As at April 30, 2000, and April 30, 1999, the Company had $42.1 million and
$47.3 million of cash and cash equivalents respectively. During the year ended
April 30, 2000, the Company's cash and cash equivalents decreased by $5.2
million, primarily due to five payments to Delrina totaling $22.6 million offset
by cash generated by operations, the sale of certain accounts receivable, and
the proceeds from sales of other assets.
Operations
The Company decreased its investment in the non-cash operating components of
working capital during the year ended April 30, 2000, by approximately $17.1
million, primarily due to collections and sales of accounts receivable offset by
decreases in accounts payable and accrued liabilities.
The Company purchased approximately $5.0 million of fixed assets in the year
ended April 30, 2000. The purchases of fixed assets included computer hardware
and software, office equipment, furniture and leasehold improvements. During the
year ended April 30, 2000, the Company increased its investment in other assets
by $3.8 million related primarily to capitalized development costs, prepaid
royalties and purchases of other assets.
During the year ended April 30, 2000, the Company generated cash of
approximately $1.1 million relating to the Company's stock purchase plan and the
exercise of stock options by employees and others.
Accounts Receivable and Term Accounts Receivable
Total accounts receivable and term accounts receivable decreased $22.0
million to $26.9 million at April 30, 2000 from $48.9 million at April 30, 1999,
primarily due to the reduction in revenue, the sale of receivables under the
Company's receivable purchase agreements, the Company's increased focus on
collections and the Company's decision to significantly reduce its previous
practice of granting extended payment terms. Accounts receivable decreased to
$21.4 million at April 30, 2000 from $29.3 million at April 30, 1999. Term
accounts receivable, which are accounts receivable with contracted payment dates
exceeding the Company's customary trade terms, decreased by $14.1 million to
$5.5 million for the year ended April 30, 2000, from $19.6 million on April 30,
1999.
Term accounts receivable primarily arise from the recording of revenue from
Irrevocable Commitment Licenses. Under an Irrevocable Commitment License, a
customer commits to pay a minimum amount over a specified period of time in
return for the right to use or resell up to a specific number of copies of a
delivered product for a fixed amount. The amount of revenue recorded is the
amount of the minimum commitment over the term of the license, less deemed
interest for that part of the license term that is beyond the Company's
customary trade terms.
Payments under Irrevocable Commitment Licenses are generally received from the
customer on the earlier of (i) installation of the Company's products by the
customer or delivery to its customers or end users and (ii) specified minimum
payment dates in the license agreement. Amounts by which revenues recorded
exceed payments received are recorded as accounts receivable. Payments that are
expected beyond the Company's customary trade terms are recorded as term
accounts receivable. Payments that are expected to be received more than one
year from the balance sheet date, are recorded as non-current term accounts
receivable. Total license fees over the term of the Irrevocable Commitment
License may be greater than the minimum commitment initially recorded as
revenue. Revenues from installations or sales of the Company's products in
excess of the minimum commitment are recorded by the Company as and when they
are reported by the customer.
Restructuring
On March 17, 1999, the Corporation announced a restructuring plan directed at
reducing costs. The key restructuring actions included:
o Consolidation of management responsibilities and reduction in
headcount.
o Closure of redundant facilities.
o Reduction in the carrying value of certain capital assets primarily
related to past acquisitions. o Cancellation of certain commitments
and other costs.
The following table summarizes the activity in the restructuring costs during
the year ended April 30, 1999 and the year ended April 30, 2000:
<TABLE>
<CAPTION>
Employee Non Cash Total
Termination Facilities Other Total Costs Costs Provision
-------------------------------------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Restructuring.... $5,252 $ 2,914 $ 726 $ 8,892 $ 21,611 $ 30,503
Cash payments.... (1,175) (36) (207) (1,418) -- (1,418)
Non-cash items... -- -- -- -- (21,611) (21,611)
-------------------------------------------------------- ---------------------------
Balance,
April 30, 1999... $4,077 $ 2,878 $ 519 $ 7,474 $ -- $ 7,474
Cash payments.... (2,921) (1,092) (124) (4,137) -- (4,137)
Reductions....... (566) (540) -- (1,106) -- (1,106)
-------------------------------------------------------- ---------------------------
Balance,
April 30, 2000... $ 590 $ 1,246 $ 395 $ 2,231 $ -- $ 2,231
======================================================== ===========================
Long term $ -- $1,059 $ 279 $ 1,338 $ -- $ 1,338
balance..
============== ============= ============= ============ =========== ============
</TABLE>
Employee terminations totaled 105 and included 46 in sales and marketing, 40 in
research in development, 12 in internal corporate services, and 7 in systems and
consulting services. Employee terminations include salary continuance for which
the Company is contractually obligated to pay. All employees were terminated on
or before April 30, 1999. During the year ended April 30, 2000, the Company's
liability for bonuses and other compensation to terminated employees was reduced
by $566,000.
Facilities costs consisted primarily of $2.1 million and $780,000 related to the
closure of the Company's UK and Toronto facilities, respectively. The provision
for redundant facilities includes management's best estimates of the total
future operating costs of these vacant facilities for the remainder of their
respective lease terms. Actual costs could differ from these estimates. During
the year ended April 30, 2000, the Company bought out its lease obligation of
its vacant Toronto facilities for $420,000 and was successful in subleasing one
of its vacant facilities in the United Kingdom. The Company has not been
successful in finding alternative arrangements regarding its other vacant
facility in the United Kingdom, the lease for which extends to 2010. During the
year ended April 30, 2000, the Company's liability for vacant facilities was
reduced by $540,000.
Other cash costs related primarily to the cancellation of trade shows and other
commitments.
Non-cash costs include impairment losses of $21.6 million related to assets held
for use. The losses are comprised of $16.6 million related to marketing and
distribution rights, $3.1 million related to goodwill and $1.9 million related
to other capital assets.
Delrina Obligation
On September 10, 1996, the Company acquired certain assets, including title to
intellectual property, related to the forms software group (the "Delrina
Assets") of Delrina Corporation ("Delrina"), a subsidiary of Symantec
Corporation of Cupertino, California, USA, for a non-interest bearing obligation
of US$100.0 million.
Under the asset purchase agreement, the Company was required to make unequal
quarterly payments to Delrina, from September 27, 1996 to June 27, 2000. This
was a non-interest bearing obligation which was originally valued using a
discount rate of 6%.
On February 12, 1998, the Company and Delrina re-negotiated certain terms of the
asset purchase agreement whereby the Company agreed to accelerate payment of its
obligation in consideration for a reduction in the effective interest rate,
resulting in a reduction in imputed interest charges.
As at April 30, 2000, the Company had satisfied its payment obligation to
Delrina and no further amount was outstanding under the Delrina debt.
Financial Instruments and Credit Facility
The Company has entered into receivable purchase agreements with certain third
party purchasers. Under the agreements, the Company has the option to sell
certain accounts receivable on a recourse basis. The Purchasers have recourse in
the event of a trade dispute as defined in the receivables purchase agreements
and upon the occurrence of other specified events. As at April 30, 2000, and
April 30, 1999, the outstanding balance of accounts receivable sold under these
agreements was approximately US$9.7 million and US$ 6.9 million, respectively.
The Company believes that none of the receivables sold are at risk of recourse.
These sales meet all of the requirements of SFAS 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities," for off
balance sheet reporting.
The Company has a committed $20 million credit facility with the Royal Bank of
Canada. The credit facility is made up of (i) a $10 million term facility which
bears interest at a rate of 1.5% over the Bankers Acceptance rate of the Bank
from time to time and is payable on February 1, 2001; and (ii) a $10 million
revolving line of credit which bears interest at the prime rate of the Bank from
time to time. As at April 30, 2000, the Company had drawn all of the $10 million
term loan facility and fixed the interest rate until July 19, 2000, at 7.11%.
The Company had no borrowings against its revolving line of credit as at April
30, 2000. The Company has granted, as collateral for the $20 million credit
facility, a general security agreement over JetForm's assets, including a pledge
of the shares of certain subsidiaries.
The Company believes that it's existing cash and cash equivalents will provide
sufficient liquidity to meet the Company's business requirements in the
foreseeable future. However, should the Company continue to incur operating
losses, its ability to meet its liquidity requirements and to raise additional
capital through debt or equity financing may be compromised.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued the
Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"). This statement
establishes accounting and reporting standards for derivative instruments and
hedging activities and is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. In June, 1999, the FASB issued SFAS No.137, which
delays the effective date of SFAS 133 until fiscal years beginning after June
15, 2000. Currently, as the Company has no derivative instruments, the adoption
of SFAS No. 133 would have no impact on the Company's financial condition or
results of operations. To the extent the Company begins to enter into such
transactions in the future, the Company will adopt the Statement's disclosure
requirements in the quarterly and annual financial statements for the year
ending April 30, 2002.
On March 31, 2000, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 44, Accounting for Certain Transactions involving Stock
Compensation - an interpretation of APB Opinion No. 25 (FIN 44), providing new
accounting rules for stock-based Compensation under APB Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25). FIN 44 does not change FASB
Statement No. 123, Accounting for Stock based compensation (FAS 123). The new
rules are significant and will result in compensation expense in several
situations in which no expense is typically recorded under current practice,
including option repricing, purchase business combinations and plans that permit
tax withholdings. FIN 44 is generally effective for transactions occurring after
July 1, 2000, but apply to repricings and some other transactions after December
15, 1998. The Company does not expect the adoption of this Interpretation to
have a material impact on its results of operations or financial position.
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements,
which was amended in March 2000 by SAB 101A. The SAB summarizes certain of the
SEC staff views in applying generally accepted accounting principles to revenue
recognition in financial statements. This SAB is effective beginning the
Company's first quarter of fiscal 2001. The Company does not expect the adoption
of this SAB to have a material impact on its results of operations or financial
position.
The Year 2000
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems, which use certain dates in 1999 to represent something other than a
date. Although the change in date has occurred, it is not possible to conclude
that all aspects of the Year 2000 Issue that may affect the entity, including
those related to customers, suppliers or other third parties, have been fully
resolved.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company is primarily exposed to market risks associated with fluctuations in
interest rates and foreign currency exchange rates.
Interest rate risks
The Company's exposure to interest rate fluctuations relates primarily to its
investment portfolio and its credit facility with its bank. The Company
primarily invests its cash in short-term high-quality securities with reputable
financial institutions. The interest income from these investments is subject to
interest rate fluctuations which management believes would not have a material
impact on the financial position of the Company.
The Company has a committed $20 million credit facility with the Royal Bank of
Canada. The credit facility is made up of (i) a $10 million term loan facility
which bears interest at a rate of 1.5% over the Bankers Acceptance rate of the
Bank from time to time and is payable on February 1, 2001; and (ii) a $10
million revolving line of credit which bears interest at the prime rate of the
Canadian Bank from time to time. As at April 30, 2000, the Company had drawn all
of the $10 million term loan facility and fixed the interest rate until July 19,
2000 at 7.11%. The Company had no borrowings against its revolving line of
credit as at April 30, 2000.
The impact on net interest income of a 100 basis point adverse change in
interest rates for the fiscal year ended April 30, 2000 would have been less
than $100,000.
Foreign Currency Risk
The Company has net monetary asset and liability balances in foreign currencies
other than the Canadian Dollar, including the U.S. Dollar ("US$"), the Pound
Sterling ("GBP"), the Australian dollar ("AUD"), the Swedish Krona ("SEK"), the
German Mark ("DM"), the French Franc ("FF"), the Irish Punt ("IEP"), the Euro
("EUR"), and the Japanese Yen ("JPY").
The Company's cash and cash equivalents are primarily held in Canadian and U.S.
dollars. As a result, fluctuations in the exchange rate of the U.S. dollar will
have an impact on the Company's reported cash position. As at April 30, 2000, a
10% adverse change in foreign exchange rates would not have had a material
impact on the Company's reported cash and cash equivalents balance.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
Management's Statement of Responsibility 30
Auditors' Report 31
Consolidated Balance Sheets 32
Consolidated Statements of Operations 33
Consolidated Statements of Comprehensive Income 34
Consolidated Statements of Shareholders' Equity 35
Consolidated Statements of Cash Flows 36
Notes to Consolidated Financial Statements 37
MANAGEMENT'S STATEMENT OF RESPONSIBILITY
Management is responsible for the preparation of the financial statements and
all other information in the Form 10-K filing with the U.S. Securities and
Exchange Commission. The financial statements have been prepared in accordance
with generally accepted accounting principles and reflect management's best
estimates and judgments. The financial information presented elsewhere in the
annual report is consistent with the consolidated financial statements.
Management has developed and maintains a system of internal controls to provide
reasonable assurance that all assets are safeguarded and to facilitate the
preparation of relevant, reliable and timely financial information. Consistent
with the concept of reasonable assurance, the Company recognizes that the
relative cost of maintaining these controls should not exceed their expected
benefits.
The Audit Committee, which is comprised of independent directors, reviews the
consolidated financial statements, considers the report of the external auditor,
assesses the adequacy of the Company's internal controls, and recommends to the
Board of Directors the independent auditors for appointment by the shareholders.
The financial statements were reviewed by the Audit Committee and approved by
the Board of Directors.
The financial statements were audited by PricewaterhouseCoopers LLP, the
external auditors, in accordance with generally accepted auditing standards on
behalf of the shareholders.
/s/ A. Kevin Francis /s/ Jeffrey McMullen
A. Kevin Francis Jeffrey McMullen
President and Chief Executive Officer Vice President Finance and Chief
Financial Officer
PricewaterhouseCoopers refers to the Canadian firm of PricewaterhouseCoopers LLP
and other members of the worldwide PricewaterhouseCoopers organization.
<PAGE>
PRICEWATERHOUSECOOPERS
PRICEWATERHOUSECOOPERS LLP
Chartered Accountants
99 Bank Street
Suite 800
Ottawa Ontario
Canada K1P 1E4
Telephone +1 (613) 237 3702
Telephone +1 (613) 237 3936
AUDITORS' REPORT
TO THE SHAREHOLDERS OF JETFORM CORPORATION
We have audited the consolidated balance sheets of JetForm Corporation as of
April 30, 2000 and 1999 and the consolidated statements of operations,
comprehensive income, shareholders' equity and cash flows for the years ended
April 30, 2000, 1999, and 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in Canada. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of April 30, 2000
and 1999 and the results of its operations and its cash flows for the years
ended April 30, 2000, 1999 and 1998 in accordance with accounting principles
generally accepted in the United States.
On June 20, 2000, we reported separately to the shareholders of JetForm
Corporation on the consolidated financial statements for the same period,
prepared in accordance with accounting principles generally accepted in Canada.
/s/ PricewaterhouseCoopers LLP
Chartered Accountants
Ottawa, Canada
June 20, 2000
<PAGE>
JETFORM CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands of Canadian dollars, except share amounts)
<TABLE>
<CAPTION>
April 30, April 30,
2000 1999
-------------- ------------
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents................................ $ 42,092 $ 47,262
Accounts receivable (Note 2)............................. 21,416 29,274
Term accounts receivable (Note 2)........................ 5,224 13,486
Unbilled receivables..................................... 4,492 3,455
Inventory................................................ 1,084 1,139
Prepaid expenses ........................................ 2,956 3,727
Asset held for sale...................................... - 3,417
-------------- ------------
77,264 101,760
Term accounts receivable (Note 2)........................ 242 6,090
Deferred income tax assets (Note 9) ..................... 5,604 4,364
Fixed assets (Note 3).................................... 16,556 18,620
Other assets (Note 4).................................... 21,670 25,871
-------------- ------------
$121,336 $156,705
============== ============
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities
Accounts payable......................................... $ 7,423 $ 7,874
Accrued liabilities...................................... 10,685 15,656
Unearned revenue......................................... 15,588 12,463
Term loan (Note 6)....................................... 10,000 -
Current portion of Delrina obligation (Note 14).......... - 22,023
-------------- ------------
43,696 58,016
Accrued liabilities (Note 15)............................ 1,338 3,225
Term loan (Note 6)....................................... - 9,998
Delrina obligation (Note 14)............................. - 536
-------------- ------------
45,034 71,775
-------------- ------------
Commitments (Note10)
<CAPTION>
Shareholders' equity
<S> <C> <C>
Capital stock (Issued and outstanding -- 19,592,314 Common Shares and
450,448 Preference Shares at April 30, 2000; 19,421,428 Common Shares,
450,448 Preference at April 30,
1999) (Note 7) .......................................... 248,210 247,119
Cumulative translation adjustment........................ (2,670) (1,052)
Deficit.................................................. (169,238) (161,137)
-------------- ------------
76,302 84,930
--------------
------------
$ 121,336 $ 156,705
============== ============
(the accompanying notes are an integral part of these consolidated financial statements)
</TABLE>
Signed on behalf of the Board:
/s/ A. Kevin Francis /s/ Abraham Ostrovsky
<PAGE>
JETFORM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of Canadian dollars except share and per share amounts)
<TABLE>
<CAPTION>
Year ended April 30,
------------------------------------------------
2000 1999 1998
------------- ------------- -------------
<S> <C> <C> <C>
Revenues
Product...................................... $ 52,583 $ 66,662 $ 74,781
Service...................................... 41,734 47,550 36,446
------------- ------------- -------------
94,317 114,212 111,227
------------- ------------- -------------
Costs and expenses
Cost of product.............................. 12,053 9,164 7,539
Cost of service.............................. 12,373 19,058 15,259
Sales and marketing.......................... 45,097 53,315 40,214
General and administrative................... 12,168 10,722 9,846
Research and development (Note 5)............ 15,423 15,384 10,620
Depreciation and amortization................ 10,300 11,568 11,631
Restructuring (Note 15) ..................... (1,106) 30,503 --
Gain on sale of assets....................... (1,813) -- --
------------- ------------- -------------
104,495 149,714 95,109
------------- ------------- -------------
Operating income (loss)...................... (10,178) (35,502) 16,118
Net investment income (expense) (Note 12) 2,868 3,826 (3,564)
Other income (expense)....................... 295 (11) --
------------- ------------- -------------
Income (loss) before taxes................... (7,015) (31,687) 12,554
Provision for current taxes (Note 9) (1,086) (2,073) (2,045)
Recovery of deferred taxes (Note 9) -- 4,625 355
------------- ------------- -------------
Net income (loss)............................ $ (8,101) $ (29,135) $ 10,864
============= ============= =============
Basic income (loss) per share (Note 8).......
Net income (loss) per share.................. $ (0.41) $ (1.47) $ 0.65
Weighted average number of shares ........... 19,915,893 19,826,057 16,622,835
Fully diluted income (loss) per share
(Note 8)
Net income (loss) per share.................. $ (0.41) $ (1.47) $ 0.62
Weighted average number of shares............ 19,915,893 19,826,057 17,615,595
(the accompanying notes are an integral part of these consolidated financial statements)
</TABLE>
<PAGE>
JETFORM CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands of Canadian dollars)
<TABLE>
<CAPTION>
Year ended April 30,
-------------------------------------------------
2000 1999 1998
------------- ------------- --------------
<S> <C> <C> <C>
Net income (loss)............................ $(8,101) $(29,135) $10,864
Other comprehensive income (loss):
Cumulative translation adjustment......... (1,618) (1,052) --
------------- ------------- --------------
Comprehensive income (loss).................. $(9,719) $(30,187) $10,864
============= ============= ==============
(the accompanying notes are an integral part of these consolidated financial statements)
</TABLE>
<PAGE>
JETFORM CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands of Canadian dollars except share amounts)
<TABLE>
<CAPTION>
Number issued and outstanding Stated Value
---------------------------------- ----------------------------------------------------------------------------
Total Cumulative Total
Common Special Preference Common Special Preference Capital Translation Shareholders'
Stock Warrants Stock Stock Warrants Stock Stock Adjustment Deficit Equity
---------- ------------ ---------- -------- --------- ---------- -------- ----------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as at
April 30, 1997... 15,693,623 -- 450,448 $154,016 $ -- $4,939 $158,955 $ -- $(142,866) $ 16,089
Issuance of
Common Shares:
Pursuant to
acquisitions.... 6,918 -- -- 144 -- -- 144 -- -- 144
Repayment of
Delrina
obligation...... 715,654 -- -- 15,485 -- -- 15,485 -- -- 15,485
Exercise of
stock options... 611,946 -- -- 5,917 -- -- 5,917 -- -- 5,917
Issuance of Spe-
cial Warrants -- 2,200,000 -- -- 63,650 -- 63,650 -- -- 63,650
Net income
for the year..... -- -- -- -- -- -- -- -- 10,864 10,864
---------- ---------- ------- -------- -------- ------ -------- -------- ---------- ---------
Balance as at
April 30, 1998... 17,028,141 2,200,000 450,448 175,562 63,650 4,939 244,151 -- (132,002) 112,149
Issuance of
Common Shares:
Pursuant to
acquisitions.... 6,918 -- -- 242 -- -- 242 -- -- 242
Share purchase
plan............ 20,768 -- -- 375 -- -- 375 -- -- 375
Exercise of
stock options... 165,601 -- -- 2,259 -- -- 2,259 -- -- 2,259
options...........
Conversions of
Special War-
rants........... 2,200,000 (2,200,000) -- 63,742 (63,650) -- 92 -- -- 92
Cumulative
translation
adjustment....... -- -- -- -- -- -- -- (1,052) -- (1,052)
Net Loss for
the year......... -- -- -- -- -- -- -- -- (29,135) (29,135)
---------- ---------- ------- -------- -------- ------ -------- -------- ---------- ---------
Balance as at
April 30, 1999 19,421,428 -- 450,448 242,180 -- 4,939 247,119 (1,052) (161,137) 84,930
Issuance of
Common Shares:
Pursuant to
acquisitions.... 6,918 -- -- 44 -- -- 44 -- -- 44
Share purchase
plan............ 49,141 -- -- 282 -- -- 282 -- -- 282
Exercise of
stock options... 114,827 -- -- 765 -- -- 765 -- -- 765
Cumulative
translation
adjustment....... -- -- -- -- -- -- -- (1,618) -- (1,618)
Net Loss for
the year......... -- -- -- -- -- -- -- -- (8,101) (8,101)
---------- ---------- ------- -------- -------- ------ -------- -------- ---------- ---------
Balance as at
April 30, 2000 19,592,314 -- 450,448 $243,271 -- $4,939 $248,210 $(2,670) $(169,238) $ 76,302
========== ========== ======= ======== ======== ====== ======== ======== ========== =========
(the accompanying notes are an integral part of these consolidated financial statements)
</TABLE>
<PAGE>
JETFORM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of Canadian dollars)
<TABLE>
<CAPTION>
Year ended April 30,
-------------------------------------------------------
2000 1999 1998
-------------- --------------- ----------------
<S> <C> <C> <C>
Cash provided from (used in):
Operating activities
Net income (loss)........................... $(8,101) $(29,135) $10,864
Items not involving cash:
Depreciation and amortization............. 13,941 14,838 13,629
Deferred income taxes..................... -- (4,615) (338)
Other non-cash items...................... (246) (3,368) 4,034
Gain on sale of assets.................... (1,813) -- --
Gain on sale of securities................ (1,497) -- --
Restructuring (Note 15) ................... (1,106) 21,611 --
Net change in operating components
of working capital (Note 11).............. 17,083 8,055 (6,520)
-------------- --------------- ----------------
18,261 7,386 21,669
-------------- --------------- ----------------
Investing activities
Proceeds from sale of assets................ 5,000 -- --
Proceeds from sale of securities............ 2,854 -- --
Purchase of fixed assets.................... (4,990) (8,503) (8,467)
Increase in other assets.................... (3,774) (5,949) (9,263)
-------------- --------------- ----------------
(910) (14,452) (17,730)
-------------- --------------- ----------------
Financing activities
Proceeds from issuance of shares............ 1,091 2,968 69,567
Issuance of debt............................ -- 9,998 --
Repayment of Delrina obligation............. (22,560) (50,845) (16,663)
-------------- --------------- ----------------
(21,469) (37,879) 52,904
-------------- --------------- ----------------
Effect of exchange rate changes on cash..... (1,052) 603 311
-------------- --------------- ----------------
Increase (decrease) in cash and cash
equivalents............................... (5,170) (44,342) 57,154
Cash and cash equivalents, beginning
of year................................... 47,262 91,604 34,450
Cash and cash equivalents, end of
year...................................... $ 42,092 $47,262 $91,604
============== =============== ================
(the accompanying notes are an integral part of these consolidated financial statements)
</TABLE>
<PAGE>
JETFORM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of presentation
These consolidated financial statements have been prepared by management in
accordance with accounting principles generally accepted in the United States
("U.S. GAAP"), and include all assets, liabilities, revenues and expenses of
JetForm Corporation ("JetForm") and its wholly-owned subsidiaries: JetForm
Corporation (a Delaware corporation), JetForm Pacific Pty Limited ("JetForm
Pacific"), JetForm Scandinavia AB ("JetForm Nordic"), JetForm France SA
("JetForm France"), JetForm UK Limited ("JetForm UK"), JetForm Deutschland GmbH
("JetForm Germany"), JetForm Technologies Limited ("JetForm Ireland"), JetForm
Japan K.K. ("JetForm Japan"), and JetForm PTE Ltd ("JetForm Singapore"). JetForm
and its wholly-owned subsidiaries are collectively referred to herein as the
"Company". Investments in businesses that the Company does not control, but over
which it can exert significant influence, are accounted for using the equity
method. Such investments are periodically evaluated for impairment and
appropriate adjustments are recorded, if necessary.
(b) Nature of operations
The Company develops Web based software solutions for the e-business market
in the electronic processes, electronic document presentment and electronic
forms arenas. The Company's e-process, e-document presentment and e-forms
technologies provide organizations with the capability to adopt e-business
models, giving them a competitive advantage in their respective industries.
These solutions are complemented by the Company's professional services team,
which facilitates product implementation, and its customer services team, which
provides ongoing training and support. The Company sells its products and
services internationally through multiple channels, which include direct sales
to end users, strategic partnerships with system integrators, solution partners,
international distributors and original equipment manufacturers.
(c) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
(d) Revenue recognition
The Company recognizes revenue in accordance with Statement of Position
("SOP") 97-2, "Software Revenue Recognition," issued by the American Institute
of Certified Public Accountants ("AICPA") in October 1997 and SOP 98-9 issued in
December 1998.
The Company records product revenue from packaged software and irrevocable
commitments to purchase products when persuasive evidence of an arrangement
exists, the software product has been shipped, there are no significant
uncertainties surrounding product acceptance, the fees are fixed and
determinable and collection is considered probable. Revenues from irrevocable
commitments to purchase products with payment terms exceeding the Company's
customary trade terms are recorded at the amount receivable less deemed
interest. The Company amortizes the difference between the face value of the
receivable and the discounted amount over the term of the receivable and records
the discount as interest income.
Revenue from software product licenses which include significant
customization and revenue from services are recognized on a percentage of
completion basis, whereby revenue is recorded, based on labor input hours, at
the estimated realizable value of work completed to date. Estimated losses on
contracts are recognized when they become probable. Unbilled receivables
represent consulting work performed under contract and not yet billed.
Revenue from maintenance agreements is recognized ratably over the term of
the agreement. Unearned revenue represents payments received from customers for
services not yet performed.
(e) Income Taxes
The Company accounts for income taxes under the asset and liability method
that requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the carrying
amounts and tax basis of assets and liabilities. The Company provides a
valuation allowance on net deferred tax assets when it is more likely than not
that such assets will not be realized.
(f) Investment tax credits
Investment tax credits ("ITCs"), which are earned as a result of qualifying
research and development expenditures, are recognized when the expenditures are
made and their realization is more likely than not, and are applied to reduce
research and development expense in the year.
(g) Fixed assets
Fixed assets are recorded at cost. Computer software purchased by the
Company is recorded as fixed assets when acquired. Costs for internal use
software that are incurred in the preliminary project stage and in the post
implementation/operation stage are expensed as incurred. Costs incurred during
the application development stage, including appropriate website development
costs, are capitalized and amortized over the estimated useful life of the
software.
Depreciation and amortization are calculated using the following rates and
bases.
Computer equipment.................. 30% declining balance and straight line
over 2 to 4 years
Software............................ 30% declining balance
Furniture and fixtures.............. 20% declining balance
Software licenses and purchased
rights to improve, market
and/or distribute products....... Straight-line over the lesser of the lives
of the license or right and 15 years
Leasehold improvements.............. Straight-line over the term of the lease
The carrying value of fixed assets is periodically reviewed by management,
and impairment losses, if any, are recognized when the expected non-discounted
future operating cash flows derived from the fixed asset is less than the
carrying value of such asset. In the event of an impairment in fixed assets, the
discounted cash flows method is used to arrive at the estimated fair value of
such asset.
(h) Goodwill and other intangibles
Goodwill, which represents the purchase price paid for an acquired business
in excess of the fair values assigned to identifiable assets, is amortized on a
straight-line basis over its expected useful life. In general, goodwill has been
expected to have a useful life of seven years.
Depreciation and amortization are calculated using the following rates and
bases.
Delrina technology........................ Straight-line over 3 to 5 years
Trademarks, trade names, workforce and
other assets............................ Straight-line or declining balance
over the useful lives of the assets
which range from 3 to 15 years
The carrying value of goodwill and enterprise goodwill is periodically reviewed
by management, and impairment losses, if any, are recognized when the expected
non-discounted future operating cash flows derived from the related business
acquired are less than the carrying value of such goodwill. In the event of an
impairment in goodwill, the discounted cash flows method is used to arrive at
the estimated fair value of such goodwill.
(i) Software development costs
Costs related to the development of proprietary software are expensed as
incurred unless the costs relate to technically feasible and complete products
and can reasonably be regarded as assured of recovery through future revenues in
which case the costs are deferred and amortized, based on estimated future
revenues, on a straight-line basis over the useful life of the product, not to
exceed three years.
(j) Foreign currency translation
The financial statements of the parent company and its subsidiaries have
been translated into Canadian dollars in accordance with Statement of Financial
Accounting Standards("SFAS") No. 52, "Foreign Currency Translation". The
Company's subsidiaries use their local currency as their functional currency.
All balance sheet amounts with the exception of Shareholders' Equity have been
translated using the exchange rates in effect at year end. Income statement
amounts have been translated using the average exchange rate for the year. The
gains and losses resulting from the translation of foreign currency statements
into the Canadian dollar are reported in comprehensive income and as a separate
component of Shareholders' Equity.
(k) Cash equivalents
Cash equivalents are defined as liquid investments, which have a term to
maturity at the time of purchase of less than ninety days.
(l) Stock based compensation
The Company has elected to continue to follow Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), and to
present the pro forma information that is required by SFAS No. 123 "Accounting
for Stock Based Compensation" ("SFAS 123").
2. ACCOUNTS RECEIVABLE
Accounts receivable and term accounts receivable are net of an allowance
for doubtful accounts of $2.4 million at April 30, 2000, and $1.9 million at
April 30, 1999.
The Company records revenues from irrevocable commitments to purchase
products which do not conform to the Company's customary trade terms at the
minimum amount receivable less deemed interest ("Term Accounts Receivable"). The
Company uses a discount rate equal to its net cost of borrowing at the time the
revenue is recorded, which is 6.5% at April 30, 2000. Under an irrevocable
commitment to purchase product, the customer commits to pay a minimum amount
over a specified period of time in return for the right to use or resell up to a
specific number of copies of a delivered product.
The Company records Term Accounts Receivable as non current to the extent
that management estimates payment will be received more than one year from the
balance sheet date. Payment of Term Accounts Receivable is generally due the
earlier of: (i) delivery of the Company's products by the customer to its
customers or end users; and (ii) specific dates in the license agreement
("Minimum Payment Dates"). The gross amount of these receivables at April 30,
2000, and April 30, 1999 was $7.2 million and $22.0 million, respectively. As at
April 30, 2000, total Term Accounts Receivable with Minimum Payment Dates
exceeding one year were approximately $242,000. As at April 30, 1999, total Term
Accounts Receivable with Minimum Payment Dates exceeding one year were
approximately $6.1 million.
The Company's customer base consists of large numbers of diverse customers
dispersed across many industries and geographies. As a result, concentration of
credit risk with respect to accounts receivable and term accounts receivable is
not significant.
3. FIXED ASSETS
<TABLE>
<CAPTION>
April 30, 2000
-----------------------------------------------
Accumulated
depreciation Net book
Cost and amortization value
--------- ----------------- --------
(in thousands of Canadian dollars)
<S> <C> <C> <C>
Computer equipment....... $16,407 $10,852 $ 5,555
Furniture and fixtures... 8,600 4,258 4,342
Software................. 9,896 5,864 4,032
Leasehold improvements... 4,053 1,426 2,627
--------- ----------------- --------
$38,956 $22,400 $16,556
========= ================= ========
<CAPTION>
April 30, 1999
-----------------------------------------------
Accumulated
depreciation Net book
Cost and amortization value
--------- ---------------- --------
(in thousands of Canadian dollars)
<S> <C> <C> <C>
Computer equipment....... $15,051 $ 8,030 $ 7,021
Furniture and fixtures... 8,410 2,961 5,449
Software................. 7,916 4,065 3,851
Leasehold improvements... 3,270 971 2,299
--------- ----------------- --------
$34,647 $16,027 $18,620
========= ================= ========
</TABLE>
4. OTHER ASSETS
<TABLE>
<CAPTION>
April 30, 2000
-----------------------------------------------
Accumulated Net book
Cost amortization value
--------- ------------ --------
(in thousands of Canadian dollars)
<S> <C> <C> <C>
Delrina technology,
trademarks, trade
names and workforce.... $16,081 $ 9,425 $ 6,656
Goodwill................. 1,216 512 704
Licenses, marketing
and distribution
rights.................. 6,857 2,632 4,225
Deferred development
costs................... 14,724 7,905 6,819
Other assets............. 5,618 2,352 3,266
--------- ------------ --------
$44,496 $22,826 $21,670
========= ============ ========
<CAPTION>
April 30, 1999
-----------------------------------------------
Accumulated Net book
Cost amortization value
--------- ------------ --------
(in thousands of Canadian dollars)
<S> <C> <C> <C>
Delrina technology,
trademarks, trade
names and workforce..... $16,081 $ 7,510 $ 8,571
Goodwill................. 1,159 226 933
Licenses, marketing
and distribution
rights................. 8,482 3,244 5,238
Deferred development
costs................... 11,125 4,784 6,341
Other assets............. 6,624 1,836 4,788
--------- ------------ --------
$43,471 $17,600 $25,871
========= ============ ========
</TABLE>
5. RESEARCH AND DEVELOPMENT EXPENSE
The following table provides a summary of development costs deferred and
the related amortization charged to cost of product in the years ended April 30,
2000, 1999 and 1998.
<TABLE>
<CAPTION>
Year ended April 30,
--------------------------------------------
2000 1999 1998
-------- -------- --------
(in thousands of Canadian dollars)
<S> <C> <C> <C>
Research and development costs.... $ 20,713 $ 20,559 $ 14,123
Investment tax credits............ (1,690) (1,575) (728)
Deferred development costs........ (3,600) (3,600) (2,775)
--------- --------- ---------
Net research and development
expense......................... $ 15,423 $ 15,384 $ 10,620
Amortization of development
costs charged to cost of
product.......................... $ 3,121 $ 2,636 $ 1,726
========= ========= =========
</TABLE>
6. FINANCIAL INSTRUMENTS AND CREDIT FACILITIES
For certain of the Company's financial instruments, including accounts
receivable, unbilled receivables, accounts payable, and short term accrued
liabilities, the carrying amount approximates the fair value due to their short
maturities. The carrying amount of term accounts receivable, after applying an
appropriate discount rate, approximates their fair value. Cash and cash
equivalents, term loan, the Delrina obligation and long term accrued liabilities
are carried at cost, which approximates their fair value.
The Company has entered into receivable purchase agreements with third
party purchasers. Under the agreements, the Company has the option to sell
certain accounts receivable on a recourse basis. The Purchasers have recourse in
the event of a trade dispute as defined in the receivables purchase agreements
and upon the occurrence of other specified events. As at April 30, 2000, and
April 30, 1999, the outstanding balance of accounts receivable sold under these
agreements were approximately US$9.7 million and US$ 6.9 million, respectively.
The Company believes that none of the receivables sold are at risk of recourse.
These sales meet all of the requirements of SFAS 125 "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities," for off
balance sheet reporting.
The Company has a committed $20 million credit facility with the Royal Bank
of Canada. The credit facility is made up of (i) a $10 million term loan
facility which bears interest at a rate of 1.5% over the Bankers Acceptance rate
of the Bank from time to time and is payable on February 1, 2001; and (ii) a $10
million revolving line of credit which bears interest at the prime rate of the
Canadian Bank from time to time. As at April 30, 2000, the Company had drawn all
of the $10 million term loan facility and fixed the interest rate until July 19,
2000, at 7.11%. The effective rate of interest on this term loan facility for
the year ended April 30, 2000, was approximately 6.51%. The Company had no
borrowings against its revolving line of credit as at April 30, 2000. The
Company has granted as collateral for the $20 million credit facility a general
security agreement over JetForm's assets, including a pledge of the shares of
certain subsidiaries.
7. CAPITAL STOCK
The authorized capital stock of the Company consists of an unlimited number
of Common Shares ("Common Shares") and 2,263,782 Convertible Preference Shares
("Preference Shares").
Holders of Common Shares are entitled to one vote for each share held on
all matters submitted to a vote of shareholders and do not have cumulative
voting rights. Holders of Common Shares are entitled to receive ratably such
dividends, if any, as may be declared by the Board of Directors at its
discretion from funds legally available therefor. Upon the liquidation,
dissolution or winding up of the Company the holders of Common Shares are
entitled to receive ratably, together with the Preference Shares, the net assets
of the Company available after the payment of debts and other liabilities.
Holders of Common Shares have no pre-emptive, subscription, redemption or
conversion rights.
Holders of the Preference Shares are not entitled to receive a fixed
dividend but are entitled to receive a dividend as and when declared by the
Board of Directors of the Company equal to the dividend declared on its Common
Shares. The holders of the Preference Shares are entitled to convert such shares
into fully paid and non-assessable Common Shares at a rate equal to one Common
Share per Preference Share held (subject to adjustment for share
re-classification, reorganizations or for other changes). In the event of the
liquidation, dissolution or winding-up of the Company, the holders of the
Preference Shares shall rank pari passu, share for share, with the holders of
the Common Shares.
During the year ended April 30, 1998, the Company issued 2,200,000 special
warrants ("Special Warrants") to Canadian investors at a price of US$21.25 per
Special Warrant. The net proceeds from the offering after deducting underwriting
discounts, fees and expenses were $63.7 million. The Special Warrants were
deemed to have been exercised by the holders thereof on June 26, 1998, without
payment of additional consideration on the basis of one Common Share for each
Special Warrant so held. On June 19, 1998, the Company filed a final prospectus
with Canadian securities regulators to register the 2,200,000 Common Shares
issuable on exercise of the Special Warrants. The Company does not intend to
register such Common Shares under the United States Securities Act of 1933.
In June 1990, the Company adopted an Employee Stock Option Plan (the "1990
Plan") pursuant to which 400,000 Common Shares were reserved for the grant of
options. On March 4, 1993, the Board of Directors voted to terminate the 1990
Plan effective as of the consummation of the Company's initial public offering
dated April 20, 1993, at which time the 1993 Employee Stock Option Plan (the
"1993 Plan") became effective.
On March 4, 1993, the Board of Directors adopted the 1993 Plan. The 1993
Plan is administered by the Compensation Committee of the Board of Directors and
options are not granted at less than the fair market value of the Common Shares
on the date of grant. Options outstanding under the 1993 Plan remain in effect
pursuant to their terms. Options granted under the 1993 Plan generally have a
term of five years and vest at the rate of one-third of the shares covered on
each of the first three anniversary dates of the date of grant. Options granted
under the 1993 Plan are not transferable and are exercisable only by the
optionee during the optionee's lifetime.
The Company established the 1995 Plan on June 28, 1995, to replace the 1993
Plan. The 1995 Plan is administered by the Compensation Committee of the Board
of Directors and provides for the grant to all eligible full-time employees,
directors, officers and others of options to purchase Common Shares at a price
based upon the last trading price of the Common Shares on the NASDAQ National
Market on the trading day immediately preceding the date of grant. Pursuant to
the 1995 Plan, the aggregate number of Common Shares available to be issued is
4,425,763, of which 656,000 are still available for grant as at April 30, 2000.
Options granted under the 1995 Plan have a term of four, five or seven years and
vest ratably during the first three years following grant. Options also vest
automatically on a change in control of the Company. Options granted are
non-transferable.
On September 11, 1997, the Shareholders of the Company approved the 1997
Employee Stock Purchase Plan (the "Stock Purchase Plan"). A total of 400,000
Common Shares of the Company have been reserved for issuance pursuant to the
Stock Purchase Plan. Shares may be purchased under the Stock Purchase Plan by
employees through payroll deduction. The purchase price of Common Shares issued
under the Stock Purchase Plan is the lower of 95% of the fair market of the
Common Shares of the Company at the beginning of each six month offering period
and 95% of the fair market value of the Common Shares of the Company at the end
of each six month offering period.
<PAGE>
The following table presents the number of options and warrants outstanding
and exercisable, and the weighted average exercise price:
<TABLE>
<CAPTION>
Weighted
average
Other exercise
IPO options price in
1995 1993 1990 Underwriter's and U.S.
Plan Plan Plan warrants Moore warrants Total dollars
--------- --------- -------- ------------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Number of outstanding
options and warrants
Balance at April 30, 1,152,054 781,139 84,250 77,478 116,216 90,000 2,301,137 12.70
1997 Grants........... 2,048,905 -- -- -- -- 5,000 2,053,905 13.39
Cancellations and
Forfeitures.......... (164,557) (31,830) -- -- -- (2,219) (198,606) 15.25
Exercises............. (60,261) (342,176) (84,250) (77,478) -- (47,781) (611,946) 6.95
---------- --------- -------- ------------- ---------- ----------- ----------
Balance at April 30, 2,976,141 407,133 -- -- 116,216 45,000 3,544,490 13.95
1998 Grants........... 1,037,960 63,550 -- -- -- -- 1,101,510 4.50
Cancellations and
Forfeitures.......... (360,813) (175,059) -- -- -- -- (535,872) 12.49
Exercises............. (47,485) (98,116) -- -- -- (20,000) (165,601) 9.38
---------- --------- -------- ------------- ---------- ----------- ----------
Balance at April 30, 3,605,803 197,508 -- -- 116,216 25,000 3,944,527 11.71
1999 Grants........... 775,112 -- -- -- -- -- 775,112 6.00
Cancellations and
Forfeitures........... (725,759) (99,259) -- -- -- -- (825,018) 12.60
Exercises.............. (38,910) (75,917) -- -- -- -- (114,827) 4.71
---------- --------- -------- ------------- ---------- ----------- -----------
Balance at April 30,
2000.................. 3,616,246 22,332 -- -- 116,216 25,000 3,779,794 10.63
========== ========= ======== ============= ========== =========== ===========
Weighted average
exercise price at
April 30, 1998,
in U.S. dollars....... $ 14.73 $ 7.70 N/A N/A $ 16.50 $ 11.54 $ 13.95
========== ========= ======== ============= ========== =========== ==========
Weighted average
exercise price at
April 30, 1999,
in U.S. dollars........ $ 11.78 $ 6.93 N/A N/A $ 16.50 $ 15.98 $ 11.71
========== ========= ======== ============= ========== =========== ==========
Weighted average
exercise price at
April 30, 2000,
in U.S. dollars........ $ 10.39 $ 13.15 N/A N/A $ 16.50 $ 15.98 $ 10.63
========== ========= ======== ============= ========== =========== ==========
Number of exercisable
options and warrants
April 30, 1998......... 509,854 397,974 -- -- 77,478 38,334 1,023,640 12.88
April 30, 1999......... 1,397,776 180,759 -- -- 116,216 25,000 1,719,751 14.44
April 30, 2000......... 1,958,369 22,332 -- -- 116,216 25,000 2,121,917 13.52
Range of exercise
prices in U.S.
dollars at April
30, 2000
From............. $ 3.75 $ 11.75 N/A N/A $ 16.50 $ 15.25 $ 3.75
To............... $ 22.00 $ 16.00 N/A N/A $ 16.50 $ 18.88 $ 22.00
Range of expiry dates
at April 30, 2000
From............. Feb 2001 June 2000 N/A N/A Mar 2001 Aug 2000 June 2000
To............... Dec 2004 June 2000 N/A N/A Mar, 2001 Oct. 2001 Dec 2004
</TABLE>
<PAGE>
The following table presents the exercise prices and average remaining life
of the outstanding options as at April 30, 2000.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Range of exercise prices Options Outstanding Options exercisable
--------------------------- ------------------------------------------------- -------------------------------
Weighted Weighted Weighted
From Number average average average
From To Price exercise remaining life Number exercise price
------------ ------------ ------------- -------------- --------------- ------------- ---------------
(U.S. dollars) (U.S. dollars) (Years) (U.S. dollars)
<S> <C> <C> <C> <C> <C> <C>
$ 3.75 $ 3.94 871,877 $ 3.81 2.97 279,124 $ 3.81
4.06 12.88 739,500 6.30 3.80 26,420 11.04
13.00 13.50 1,313,604 13.32 2.57 992,136 13.32
14.31 22.00 854,813 17.12 2.33 824,237 17.12
------------- -------------
3,779,794 10.61 2.85 2,121,917 13.52
============= =============
</TABLE>
Options and warrants outstanding at April 30, 1999, had a weighted average
remaining contractual life of approximately 3.53 years. The exercise price of
all options granted during the years ended April 30, 2000, 1999 and 1998 was
equal to the fair market value of the underlying shares at the date of grant. No
compensation expense has been recorded in the Consolidated Statements of
Operations for stock based compensation.
The following table presents net income and earnings per share for the
periods presented on a pro forma basis after recording the pro forma
compensation expense relating to stock options granted to employees, in
accordance with SFAS 123:
Year ended April 30,
-----------------------------------------------
2000 1999 1998
------------- ------------- -------------
(in thousands of Canadian dollars,
except per share amounts)
Net income (loss)
reported.................... $ (8,101) $(29,135) $10,864
Pro forma compensation
expense..................... $ (1,384) (6,770) (5,430)
------------- ------------- -------------
Pro forma net income
(loss)...................... $ (9,485) $(35,905) $ 5,434
============= ============= =============
Pro forma basic income
(loss) per share............ $ (0.48) $ (1.81) $ 0.33
============= ============= =============
Pro forma fully diluted
income (loss) per share..... $ (0.48) $ (1.81) $ 0.31
============= ============= ==============
SFAS 123 requires that pro forma compensation expense be recognized over
the vesting period, based on the fair value of options granted to employees. The
pro forma compensation expense presented above has been estimated using the
Black Scholes option pricing model. Assumptions used in the pricing model
include: (i) risk free interest rates for the periods of between 4.80% and
6.27%; (ii) expected volatility of 40% for the year ended April 30, 2000; 40%
for the year ended April 30, 1999; and 35% for the year ended April 30, 1998;
(iii) expected dividend yield of nil; and (iv) an estimated average life of
three to four years.
SFAS 123 requires that pro forma compensation expense be reported for
options granted in fiscal years beginning after December 15, 1994, which in the
case of the Company, was the year ended April 30, 1996. Since the compensation
expense is recognized over the vesting period, the pro forma compensation
expense presented above is not necessarily indicative of the pro forma
compensation expense that will be reported in future periods if the Company
continues to grant options.
8. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings Per Share", which was required to be adopted on December
31, 1997. As a result, the Company has changed the method used to compute income
per share and has restated all prior periods.
The Common Shares and Preference Shares represent equivalent residual
interests and have been included in the computation of weighted average number
of shares outstanding for purposes of the earnings per share computation.
The reconciliation of the numerator and denominator for the calculation of
net income per share and diluted net income per share is as follows:
Year ended April 30,
------------------------------------------
2000 1999 1998
------------ ------------ ------------
(in thousands of Canadian dollars
except share and per share amount)
Basic income (loss) per share
Net income (loss)............... $ (8,101) $ (29,135) $ 10,864
============ ============ ============
Weighted average number of
shares outstanding............... 19,915,893 19,826,057 16,622,835
============ ============ ============
Net income (loss) per share....... $ (0.41) $ (1.47) $ 0.65
============ ============ ============
Fully diluted income (loss)
per share
Net income (loss)................. $ (8,101) $ (29,135) $ 10,864
============ ============ ============
Weighted average number of
shares outstanding............... 19,915,893 19,826,057 16,622,835
Dilutive effect of stock
options*......................... -- -- 992,760
============ ============ ============
Adjusted weighted average
number of shares outstanding..... 19,915,893 19,826,057 17,615,595
============ ============ ============
Net income (loss) per share....... $ (0.41) $ (1.47) $ 0.62
============ ============ ============
* All anti-dilutive options have been excluded
9. INCOME TAXES
The Company operates in several tax jurisdictions. Its income is subject to
varying rates of tax, and losses incurred in one jurisdiction cannot be used to
offset income taxes payable in another.
The income (loss) before income taxes consisted of the following:
Year ended April 30,
----------------------------------
2000 1999 1998
-------- -------- --------
(in thousands of Canadian dollars)
Domestic income (loss)............ $(2,980) $(12,664) $ 8,584
Foreign income (loss)............. (4,035) (19,023) 3,970
-------- --------- -------
Income (loss) before income taxes $(7,015) $(31,687) $12,554
======== ========= =======
The provision (recovery) for income taxes consist of the following:
Year ended April 30,
----------------------------------
2000 1999 1998
------ -------- --------
(in thousands of Canadian dollars)
Domestic:
Current income taxes $ 375 $ 771 $ 587
Deferred income taxes -- 220 (355)
------ -------- -------
$ 375 $ 991 $ 232
Foreign:
Current income taxes $ 711 $ 1,302 1,458
Deferred income taxes -- (4,845) --
------ -------- -------
$ 711 $(3,543) $1,458
------ -------- -------
Provision for (recovery of)
income taxes $1,086 $(2,552) $1,690
====== ======== =======
The Company has domestic non-capital loss carryforwards of $107.0 million
which expire between 2003 and 2006. In addition, the Company has approximately
$6.0 million in domestic investment tax credits which begin to expire in 2006.
A reconciliation of the combined Canadian federal and provincial income tax
rate with the Company's effective income tax rate is as follows:
Year ended April 30,
----------------------------------
2000 1999 1998
-------- -------- --------
(in thousands of Canadian dollars)
Expected statutory rate
(recovery)..................... (44.52%) (44.62%) 44.62%
Expected provision for
(recovery of) income tax....... $(3,130) $(14,134) $5,601
Effect of foreign tax rate
differences.................... 711 2,816 (313)
Non-taxable portion of
capital gain................... (372) -- --
Income tax rate changes......... 573 -- --
Provincial tax incentive........ (426) -- --
Non-deductible restructuring
charges........................ -- 1,372 --
Change in valuation allowance... 3,393 6,884 (3,824)
Other items................... 337 510 226
-------- -------- --------
Provision for income taxes...... $1,086 $(2,552) $ 1,690
======== ======== ========
The primary temporary differences which gave rise to deferred taxes at
April 30, 2000 and 1999 are:
Year ended April 30,
-------------------------------
2000 1999
------------- ------------
(in thousands of Canadian
dollars)
Deferred tax assets:
Scientific research and experimental
development
expenditures............................. $6,762 $ 3,195
Net operating loss carryforwards........... 20,773 18,670
Depreciation and amortization.............. (4,075) (5,616)
Restructuring ............................. 1,081 3,331
In process research and development........ 29,866 31,147
Investment tax credits..................... 3,288 2,954
Marketing and distribution rights.......... (69) (164)
Accrued severance and other................ 524 --
------------- ------------
Total deferred tax asset 58,150 53,517
Less, valuation allowance.................. (52,546) (49,153)
------------- ------------
5,604 4,364
============= ============
The valuation allowance for deferred taxes is required due to the Company's
operating history and management's assessment of various uncertainties related
to their future realization. Since the realization of deferred tax assets is
dependent upon generating sufficient taxable income in the tax jurisdictions
which gave rise to the deferred tax asset, the amount of the valuation allowance
for deferred taxes may be reduced if it is demonstrated that positive taxable
income in the various tax jurisdictions is sustainable in the future.
10. COMMITMENTS
As at April 30, 2000, the Company was committed under certain operating
leases for rental of office premises and equipment as follows:
(in thousands of Canadian dollars)
Years ending April 30, 2001 $ 4,861
2002 $ 4,555
2003 $ 4,629
2004 $ 4,470
2005 and beyond $15,723
Total rent expense for the years ended April 30, 2000, 1999 and 1998 was
$4.9 million, $5.9 million and $3.6 million, respectively.
11. NET CHANGE IN OPERATING COMPONENTS OF WORKING CAPITAL
The net change in operating components of working capital is comprised of:
Year ended April 30,
----------------------------------
2000 1999 1998
-------- -------- --------
(in thousands of Canadian dollars)
Decrease (increase) in:
Accounts receivable and term
accounts receivable............. $21,176 $(6,658) $(8,095)
Unbilled receivables............. (1,124) 2,984 (3,908)
Inventory........................ 55 (14) (47)
Prepaid expenses and deferred
charges......................... 715 (569) 438
Other........................... (1,231) (1,605) (727)
Increase (decrease) in:
Accounts payable................. (116) 3,759 (330)
Accrued liabilities.............. (5,671) 6,449 3,967
Unearned revenue................. 3,279 3,709 2,182
-------- -------- --------
$17,083 $ 8,055 $(6,520)
======== ======== ========
12. NET INVESTMENT INCOME
The net investment income is comprised of:
Year ended April 30,
----------------------------------
2000 1999 1998
-------- -------- --------
(in thousands of Canadian dollars)
Interest income $2,853 $5,910 $ 853
Interest expense (1,482) (2,084) (4,417)
Gain on sale of securities 1,497 -- --
------- ------- -------
Net investment income (expense) $2,868 $3,826 $(3,564)
======= ======= ========
13. SEGMENTED INFORMATION
In June 1997, FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" that was effective for fiscal years
beginning after December 15, 1997. The Company adopted this new Statement in
fiscal year 1999 and has restated all prior periods.
Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
Company's chief decision maker in deciding how to allocate resources and
assessing performance. The Company's chief decision maker is the Chief Executive
Officer.
The Company's reportable segments include Product, Consulting and Customer
Support. The Product segment engages in business activities from which it earns
license revenues from the Company's software products. The Consulting segment
earns revenues from assisting customers in configuring, implementing and
integrating the Company's products and, when required, customizing products and
designing automated processes to meet the customers specific business needs as
well as providing all necessary training. The Customer Support segment earns
revenues through after sale support for software products as well as providing
software upgrades under the Company's maintenance and support programs.
The accounting policies of the Company's operating segments are the same as
those described in Note 1. The Company evaluates performance based on the
contribution of each segment. The Product segment costs include all costs
associated with selling product licenses, consulting services and customer
support. The costs of the Consulting and Customer Support segments include all
costs associated with the delivery of the service to the customer. Inter-segment
revenues as well as charges such as depreciation and amortization, interest
expense and overhead allocation are not included in the calculation of segment
profit. The Company does not use a measure of segment assets to assess
performance or allocate resources. As a result, segment asset information is not
presented.
<TABLE>
<CAPTION>
Year ended April 30, 2000
--------------------------------------------------------
Product Consulting Customer Total
Support
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $52,583 $17,549 $24,185 $94,317
Costs 35,402 8,920 3,453 47,775
-----------------------------------------------
Contribution $17,181 $ 8,629 $20,732 46,542
==================================
Research and development (15,423)
Other expenses (41,053)
Restructuring 1,106
Gain on sale of assets 1,813
Provision for income taxes (1,086)
--------
Net loss $(8,101)
========
<CAPTION>
Year ended April 30, 1999
--------------------------------------------------------
Product Consulting Customer Total
Support
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $66,662 $25,612 $21,938 $114,212
Costs 43,756 8,843 3,904 56,503
------------------------------------------------
Contribution $22,906 $16,769 $18,034 57,709
================================================
Research and development (15,384)
Other expenses (43,509)
Restructuring (30,503)
Recovery of income taxes 2,552
---------
Net loss $(29,135)
=========
<CAPTION>
Year ended April 30, 1998
--------------------------------------------------------
Product Consulting Customer Total
Support
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $74,781 $18,959 $17,487 $111,227
Costs 38,974 6,947 1,874 47,795
------------------------------------------------
Contribution $35,807 $12,012 $15,613 63,432
===================================
Research and development (10,620)
Other expenses (40,258)
Provision for income taxes (1,690)
--------
Net income $10,864
=======
</TABLE>
The following table details the revenue and assets attributable to Canada
(the Company's country of domicile), the United Sates and all other foreign
jurisdictions. The Company attributes revenue to geographic areas based on the
location of the customer to which the products or services were sold.
<TABLE>
<CAPTION>
Year ended April 30,
------------------------------------------------------------------------------
2000 1999 1998
----------------------- ------------------------ ------------------------
Revenue Fixed and Revenue Fixed and Revenue Fixed and
Other Other Other
Assets Assets Assets
(in thousands of Canadian dollars)
<S> <C> <C> <C> <C> <C> <C>
Canada $ 5,611 $31,800 $ 6,584 $35,110 $ 15,637 $41,815
United States 55,831 2,592 72,616 3,299 65,915 4,343
Other 32,875 3,834 35,012 6,082 29,675 20,678
----------- ----------- ----------- ------------ ---------- -------------
$94,317 $38,226 $114,212 $44,491 $111,227 $66,836
=========== =========== =========== ============ ========== =============
</TABLE>
14. DELRINA OBLIGATION
On September 10, 1996, the Company acquired certain assets, including title
to intellectual property, related to the forms software group (the "Delrina
Assets") of Delrina Corporation ("Delrina"), a subsidiary of Symantec
Corporation of Cupertino, California, USA, for a non-interest bearing obligation
of US$100.0 million. This non-interest bearing obligation was originally valued
using a discount rate of 6%.
Under the asset purchase agreement, the Company was required to make
unequal quarterly payments to Delrina, from September 27, 1996 to June 27, 2000.
On February 12, 1998, the Company and Delrina re-negotiated certain terms
of the asset purchase agreement whereby the Company agreed to accelerate payment
of its obligation in consideration for a reduction in the effective interest
rate, resulting in a reduction in imputed interest charges.
As at April 30, 2000, the Company had satisfied its payment obligation to
Delrina and no further amount was outstanding under the Delrina debt.
15. RESTRUCTURING
On March 17, 1999, the Corporation announced a restructuring plan directed
at reducing costs. The key restructuring actions included:
o Consolidation of management responsibilities and reduction in
headcount.
o Closure of redundant facilities.
o Reduction in the carrying value of certain capital assets primarily
related to past acquisitions. o Cancellation of certain commitments
and other costs.
The following table summarizes the activity in the provision for
restructuring costs during the years ended April 30, 1999 and April 30, 2000:
<TABLE>
<CAPTION>
Employee Non Cash Total
Termination Facilities Other Total Costs Costs Provision
------------------------------------------------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Restructuring
provision........... $5,252 $ 2,914 $726 $8,892 $21,611 $30,503
Cash payments........ (1,175) (36) (207) (1,418) -- (1,418)
Non-cash items....... -- -- -- -- (21,611) (21,611)
------------------------------------------------- -------- ---------
Balance,
April 30, 1999...... $4,077 $ 2,878 $519 $7,474 $ -- $ 7,474
Cash payments........ (2,921) (1,092) (124) (4,137) -- (4,137)
Reductions........... (566) (540) -- (1,106) -- (1,106)
------------------------------------------------- -------- ---------
Balance,
April 30, 2000...... $ 590 $ 1,246 $395 $2,231 $ -- $ 2,231
================================================= ======== =========
Long term balance.... $ -- $ 1,059 $279 $1,338 $ -- $ 1,338
================================================= ======== =========
</TABLE>
Employee terminations totaled 105 and included 46 in sales and marketing,
40 in research in development, 12 in internal corporate services and 7 in
systems and consulting services. All employees were terminated on or before
April 30, 1999. Employee terminations include salary continuance for which the
Company is contractually obligated to pay. During the year ended April 30, 2000,
the Company's liability for bonuses and other compensation to terminated
employees was reduced by $566,000.
Facilities costs consisted primarily of $2.1 million and $780,000 related
to the closure of the Company's UK and Toronto facilities, respectively. The
provision for redundant facilities includes management's best estimates of the
total future operating costs of these vacant facilities for the remainder of
their respective lease terms. Actual costs could differ from these estimates.
During the year ended April 30, 2000, the Company bought out its lease
obligation of its vacant Toronto facilities for $420,000 and was successful in
subleasing one of its vacant facilities in the United Kingdom. The Company has
not been successful in finding alternative arrangements, the lease for which
extends to 2010. During the year ended April 30, 2000, the Company's liability
for vacant facilities was reduced by $540,000.
Other cash costs related primarily to the cancellation of trade shows and
other commitments.
Non-cash costs include impairment losses of $21.6 million related to assets
held for use. The losses are comprised of $16.6 million related to marketing and
distribution rights, $3.1 million related to goodwill, and $1.9 million related
to other capital assets.
16. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued the
Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"). This statement
establishes accounting and reporting standards for derivative instruments and
hedging activities and is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. In June, 1999, the FASB issued SFAS No.137 which
delays the effective date of SFAS 133 until fiscal years beginning after June
15, 2000. Currently, as the Company has no derivative instruments, the adoption
of SFAS No. 133 would have no impact on the Company's financial condition or
results of operations. To the extent the Company begins to enter into such
transactions in the future, the Company will adopt the Statement's disclosure
requirements in the quarterly and annual financial statements for the year
ending April 30, 2002.
On March 31, 2000, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 44, Accounting for Certain Transactions involving Stock
Compensation - an interpretation of APB Opinion No. 25 (FIN 44), providing new
accounting rules for stock-based Compensation under APB Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25). FIN 44 does not change FASB
Statement No. 123, Accounting for Stock based compensation (FAS 123). The new
rules are significant and will result in compensation expense in several
situations in which no expense is typically recorded under current practice,
including option repricing, purchase business combinations and plans that permit
tax withholdings. FIN 44 is generally effective for transactions occurring after
July 1, 2000, but apply to repricings and some other transactions after December
15, 1998. The Company does not expect the adoption of this Interpretation to
have a material impact on its results of operations or financial position.
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements,
which was amended in March 2000 by SAB 101A. The SAB summarizes certain of the
SEC staff views in applying generally accepted accounting principles to revenue
recognition in financial statements. This SAB is effective beginning the
Company's first quarter of fiscal 2001. The Company does not expect the adoption
of this SAB to have a material impact on its results of operations or financial
position.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company is a "foreign private issuer" and as such is not subject to
section 16(a) of the Securities and Exchange Act of 1934.
The following table sets forth certain information concerning the executive
officers and directors of the Company:
Name Age Title
----------------------------- -------- -----------------------------------------
Abraham E. Ostrovsky....... 57 Chairman and Director
Kevin Francis.............. 50 President and Chief Executive Officer and
Director
James Bursey................ 42 Senior Vice President & General Manager,
Operations
Edward D. Capes............ 46 Vice President, Customer Services and
Business Processes
Jeffrey McMullen........... 40 Vice President Finance and Chief Financial
Officer
Gwen Avery................. 37 Vice President, Marketing Operations
Donna Morris............... 32 Vice President, Human Resources and Training
Eric Stevens............... 39 Vice President, Research and Technology
Evangelism
David Welch................ 37 Vice President and General Manager, e-Forms
Business Group
Don Henderson.............. 51 Vice President and General Manager,
e-Document Presentment Business Group
David Antila............... 40 Vice President and General Manager,
e-Process Business Group
Declan Kelly............... 39 Senior Vice President and General Manager,
European Solution Group
Deborah L. Weinstein...... 40 Secretary
John B. Kelly.............. 60 Director (1)
John Gleed................. 54 Director
Thomas E. Hicks............ 47 Director (1)
Robert F. Allum............ 54 Director (1)
Eric R. Goodwin............ 58 Director (1)
Stephen A. Holinski........ 53 Director
Graham C. Macmillan........ 47 Director (1)
Dennis B. Maloney.......... 53 Director (1)
John B. Millard............ 61 Director (1)
Donald J. Payne............ 67 Director (1)
Michael Rousseau........... 42 Director
Murray Shaw................ 54 Director (1)
Paul K. Bates.............. 49 Director nominee
Patrick Martin............. 59 Director nominee
(1) Messrs. John Kelly, Hicks, Allum, Goodwin, MacMillan, Maloney, Millard,
Payne and Shaw are not nominees for reappointment as directors at the
annual and special meeting of the shareholders of the company to be held on
September 6, 2000.
Mr. Ostrovsky joined the Corporation in August 1991 as Executive Vice
President and Chief Operating Officer. He served as President and Chief
Executive Officer from November 1991 to March 1994 and as the Corporation's
Chairman and Chief Executive Officer from March 1994 to August 1995, when he
resigned as Chief Executive Officer. Mr. Ostrovsky has been Chairman of the
Board of Directors and Chief Executive Officer of Compressent Corporation from
March 1996 to December 1997. Mr. Ostrovsky is a director of SEEC, Inc., Ixla,
Digital Now, CenterBeam and Net Manage.
Mr. Francis joined the Corporation on May 15, 2000 as President and Chief
Executive Officer. Prior to joining the Corporation, Mr. Francis held a variety
of positions with Xerox Canada, most recently as President, Chief Executive
Officer and Chairman. Beginning in 1972 as a sales representative, Mr. Francis'
extensive experience with Xerox Canada included roles in sales, marketing,
customer service, process re-engineering, administration, information systems,
general management, customer satisfaction and quality.
Mr. Bursey joined the Corporation as Vice President of Services in May
1995. He was promoted to his current position in February 1999. Prior to joining
the Corporation, Mr. Bursey was Managing Director Financial Services at SHL
Systemhouse and Executive Director at Datacor Atlantic. Mr. Bursey has resigned
from the Corporation effective July 31, 2000.
Mr. Capes joined the Corporation in January 1999 as Vice President,
Product/Program Management. In February 1999 he was promoted to Vice President,
Product Development and Customer Services and in June 2000 was appointed Vice
President and General Manager, Customer Satisfaction and Business Process Unit.
Prior to joining the Corporation, Mr. Capes was Vice President of Public Carrier
Networks at Nortel, where he had worked since 1988.
Mr. McMullen joined the Corporation in October 1994 as Controller. He was
promoted to Vice President and Controller in June 1997 and to his current
position as Vice President Finance and Chief Financial Officer in September
1998.
Ms. Avery joined the Corporation in October 1998 as Director, Industry
Solutions. In March 1999, she became Director, Marketing Communications and was
promoted to Vice President, Marketing Operations in November 1999. Prior to
joining the Corporation, Ms. Avery was Director, Communications at Fulcrum
Technologies and previously held marketing positions at Cognos Incorporated.
Ms. Morris joined the Corporation in February 1998 as Manager, Human
Resources. In December 1999, Ms. Morris was promoted to Vice President, Human
Resources. Prior to joining the Corporation, Ms. Morris was the Manager of Human
Resources at Fulcrum Technologies, and previously also held human resources
specialist and generalist roles in public, private, and union and non-union
organizations.
Mr. Stevens joined the Corporation in September 1996. He has held positions
as Director, Marketing Strategies and Chief Technical Evangelist within the
Company. In March 2000, he was promoted to Vice President, Research and
Technology Evangelism. Prior to joining the Corporation, Mr. Stevens was Group
Product Manager with Symantec and Delrina.
Mr. Welch joined the Corporation in June 1985 as a software developer.
During his 15 years with the Corporation, he has held various management
positions within the software development, consulting services and alliance
management areas. In April 2000, Mr. Welch was promoted to Vice President and
General Manager, e-forms Business Unit.
Mr. Henderson joined the Corporation in September 1987. Since that time he
has held senior positions in sales, alliance programs and product management.
Mr. Henderson left the Corporation in 1998 for a period of two (2) years as
president of a startup in the mobile computing space. He rejoined the
Corporation in May 2000 as Vice President and General Manager of the Electronic
Document Presentment business unit. Prior to 1987 Mr. Henderson was president of
a small software firm and held various positions with SHL-Systemhouse.
Mr. Antila joined the Corporation in January 1998 as Director of
Technology, Services. In June 1998 he was promoted to Director and Group Product
Manager, a position which he held until June 2000 when he was promoted to his
current role as Vice President and General Manager for the e-process Business
Unit. Prior to joining the Corporation, Mr. Antila was a co-founder and Chief
Technology Officer of WorkFlow Partners & Technology Services, a workflow
consultancy acquired by JetForm in 1998.
Mr. Declan Kelly joined the Corporation, in January of 1998 as Managing
Director of the European Services Operation. In October 1999, Mr. Kelly assumed
overall responsibility for the European, Middle East and African operations of
the Corporation. Prior to joining the Corporation, Mr. Kelly worked for ICL, a
UK based international systems integration house.
Ms. Weinstein has served as secretary of the Corporation since September
1993. Ms. Weinstein is a founding partner of LaBarge Weinstein, Canadian legal
counsel to the Corporation. From February 1991 to January 1997, Ms. Weinstein
was a partner with the law firm of Blake, Cassels & Graydon. Ms. Weinstein
currently acts as a director and/or secretary of MOSAID Technologies
Incorporated and AIT Advanced Information Technologies Corporation.
Mr. John B. Kelly joined the Corporation on March 31, 1994 as President and
Chief Operating Officer and was appointed Chief Executive Officer on August 24,
1995. Prior to joining the Corporation he was President and Chief Executive
Officer of Why Interactive Inc. (formerly DVS Communications Inc.), a
multi-media based integrated learning systems company between 1985 and March
1994. Effective December 1, 1999 Mr. Kelly was no longer employed by the
Corporation.
Mr. Gleed is a founder of the Corporation and was its President from June
1982 until June 1990, when he was appointed to the position of Senior Vice
President and Chief Technology Officer with the Corporation, which he held until
his retirement on June 30, 1999. See "Termination of Employment". During fiscal
year 2000, Mr. Gleed served as interim Chief Executive Officer from December
1999 to May 2000. Mr. Gleed also served as Chairman of the Board from June 1990
to March 1994.
Mr. Hicks is a founder of the Corporation and served as a senior project
manager from the Corporation's inception until September 1991, when he was
appointed Vice President, Systems Engineering. In March 1994, he was appointed
Vice President, Strategic Programs and became Vice President and Chief
Information Officer in January 1997. In May 1998, he became Vice President Group
Product Manager for the Corporation's Output Products, a position he held until
his retirement in June 2000.
Mr. Allum has served as a director of the Corporation since 1983. He is a
founder of the Corporation and was Chairman of the Board from 1983 until June
1990, when he was appointed to the position of Executive Vice President--
Consulting Services, which he held until March 1994. From March 1994 until April
1996, Mr. Allum was the Corporation's Vice President Special Projects. In April
1996, Mr. Allum resigned as an officer of the Corporation.
Mr. Goodwin has served as a director of the Corporation since September
1996. He is a founder of Fulcrum Technologies Inc., a provider of text retrieval
software, and was its President and Chief Executive Officer from 1990 until
January 1997, when he became its Chairman and Chief Executive Officer. He is
currently Chief Executive Officer of Flonetwork Inc.
Mr. Holinski has been Executive Vice President and Chief Financial Officer
of North American Gateway Inc. since May 1999. Prior to joining North American
Gateway, he was the Senior Vice President and Chief Financial Officer of Moore
Corporation Limited between May 1994 and May 1999. Prior to joining Moore, Mr.
Holinski was Treasurer of Northern Telecom Ltd. from March 1994 until May 1994,
and Vice President Product Finance from September 1993 until March 1994. Mr.
Holinski was Vice President Finance with Northern Telecom Europe from January
1991 until September 1993.
Mr. Macmillan has served as a director of the Corporation since 1994. Mr.
Macmillan was a Director of Investment Banking at Richardson Greenshields of
Canada Ltd. ("Richardson Greenshields") from 1989 to November 1996. Mr.
Macmillan became a Vice President and Director of RBC Dominion Securities Inc.
following the acquisition of Richardson Greenshields by RBC Dominion Securities
Inc. in November 1996.
Mr. Maloney has served as a director of the Corporation since 1994 and is
currently President and Chief Operating Officer of HealthAxis.com, a leading
supplier of technology solutions to the health care industry. Prior to joining
HealthAxis, Mr. Maloney spent 20 years with SHL Systemhouse Inc., most recently
as President of the Global Outsourcing Division. Mr. Maloney began his career
with IBM
Dr. Millard has served as a director of the Corporation since June 1998.
Mr. Millard was President and Chief Executive Officer, and director of Mitel
Corporation between 1993 and 1998. Prior to joining Mitel, Dr. Millard was
Senior Vice President of NEC America from 1990 to 1993. Mr Millard is a director
of EGazelles, Mosaid Technologies Incorporated, SiGe Microsystems, Red Line
Communications and Positron Public Safety Systems
Mr. Payne has served as a director of the Corporation since 1995. He became
the Chief Operating Officer of Bitwise Designs Inc. in 1996. Mr. Payne was
President of the Air Courier Division, Federal Armored Express, Inc. from 1993
to 1996. From 1990 to 1993, he was President and Chief Executive Officer of
Enable Software, Inc. In June 1996, Mr. Payne was elected to the Board of
Directors of Flow Management Technologies, a developer of medical software and
effective October 1998, he became Director and President of FMT's HealthCare
Division.
Mr. Rousseau has served as a director of the Corporation since September
1999. He is currently Senior Vice President and Chief Financial Officer of Moore
Corporation Limited, and has been since May 1999. Prior to that time, Mr.
Rousseau served as Vice President and Chief Financial Officer of Silcorp
Limited.
Mr. Shaw has served as a director of the Corporation since June 2000. He is
currently Director of Business Development at Moore Corporation Limited.
Mr. Bates has been the President and CEO of Charles Schwab Canada Co.
("Schwab Canada") the Canadian subsidiary of the on-line brokerage firm Charles
Schwab & Co. Inc. since February 1999. Prior to joining Schwab Canada, Mr. Bates
was the founder and Chief Executive Officer of Priority Brokerage Inc. which was
acquired by Schwab Canada in February 1999. Mr. Bates has also served as
President and Chief Operating Officer of the brokerage firms Green Line Investor
Services Inc. and Marathon Brokerage Inc.
Mr. Martin has been the President and Chief Operating Officer and Chairman
of Storage Technology Corporation since July 11, 2000. Prior to joining Storage
Technology Corporation he spent 23 years at Xerox Corporation, most recently
serving as President, North American Solutions Group.
Committees of the Board of Directors
There are two standing Committees of the Board of Directors: the Audit
Committee and the Compensation Committee. The Board of Directors does not have a
Nominating Committee.
The Audit Committee oversees the Corporation's financial reporting process
and internal controls, and consults with management, the internal accountants,
and the Corporation's independent auditors on matters related to the annual
audit of the Corporation and the internal controls, published financial
statements, accounting principles and auditing procedures being applied. The
Committee also reviews management's evaluation of the auditors' independence,
and submits to the Board of Directors its recommendations for the appointment of
auditors. The members of the Audit Committee are Messrs. Stephen Holinski,
Robert Allum, and John Millard. The committee reports to the full Board each
time the committee meets.
The Compensation Committee has administered the Corporation's 1990 Employee
Stock Option Plan and 1993 Employee Stock Option Plan and currently administers
the 1995 Stock Option Plan and the 1997 Employee Stock Purchase Plan. The
Committee also consults generally with, and makes recommendations to, the Board
of Directors on matters concerning executive compensation, including individual
salary rates, supplemental compensation and special awards. The members of the
Compensation Committee are Messrs. Graham Macmillan, Robert Allum, and Donald
Payne. The committee reports to the full Board each time the committee meets.
Board and Board Committee Meetings
During the fiscal year ended April 30, 2000, the Board of Directors held 11
meetings, the Audit Committee held 5 meetings and the Compensation Committee
held 3 meetings. All Directors attended at least 75% of the aggregate of all
meetings of the Board and all committees on which they served.
Item 11. EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid to those
individuals who occupied the office of Chief Executive Officer during fiscal
year 2000, the four other most highly compensated executive officers of the
Company and the former executive officer whose compensation would have been
disclosed if he was still employed by the Company for the fiscal years ended
April 30, 2000, 1999 and 1998:
<TABLE>
<CAPTION>
Long term
Compensation
Annual Compansation Awards
--------------------- ------------
Name and Principal Position Year ended Number of Other
April 30, Salary (1) Bonus(1) Options(2) Compensation(1)
<S> <C> <C> <C> <C> <C>
John B. Kelly (3) 2000 $455,000 $ - - $ -
Former President and Chief 1999 $455,000 $ - 148,150 $ -
Executive Officer 1998 $348,750 $111,019 190,000 $ -
John Gleed (4) 2000 $247,500 $ - 35,000 $ -
President and Chief 1999 $211,250 $ - 25,300 $ -
Executive Officer 1998 $202,500 $ 64,463 82,000 $ -
James Bursey 2000 $250,000 $100,000 - $ -
Senior Vice President 1999 $229,628 $ 40,000 59,340 $ -
Operations 1998 $165,000 $ 80,000 47,000 $ -
Edward Capes 2000 $175,000 $ 15,000 - $ -
Vice President 1999 $ 51,664 $ - 30,300 $ -
Product Development 1998 $ - $ - - $ -
Jeffrey McMullen 2000 $170,000 $ - - $ -
Vice President Finance 1999 $145,000 $ 7,500 25,300 $ -
Chief Financial Officer 1998 $ 90,000 $ 25,125 24,260 $ -
Declan Kelly (5) 2000 $180,946 $144,856 10,000 $ -
Vice President 1999 $126,537 $ 31,992 9,560 $ -
European Operations 1998 $ - $ - - $ -
Andrew Jackson (6) 2000 $160,000 $ 35,000 - $ -
Former Senior Vice President 1999 $133,470 $ 12,300 25,000 $ -
Marketing 1998 $ 95,871 $ 17,750 5,180 $ -
(1) All references to "$" in this section are to Canadian dollars.
(2) The Company has not issued any stock appreciation rights.
(3) Base salary is annualised. Mr. Kelly served as President and Chief Executive Officer until December 1999. See "Termination of
Employment".
(4) Mr. Gleed served as interim President and interim Chief Executive Officer from December 1999 to May 2000 when he retired. See
"Employment Agreements" below.
(5) Mr. Declan Kelly's salary was converted from Irish Punts using the average exchange rate during the year.
(6) Mr. Jackson's employment with the Corporation ended in April 2000. Information regarding his compensation is set forth above
since Mr. Jackson would have qualified as one of the four most highly paid executive officers had he been serving as an
executive officer of the Corporation at the end of fiscal year 2000. See "Termination of Employment" below.
</TABLE>
The following table sets forth the stock options granted during the fiscal
year ended April 30, 2000 to each of the Company's executive officers named in
the Summary Compensation Table:
<TABLE>
<CAPTION>
2000 Stock Option Grants
-------------------------------------------------------------------------------------------------------------------
% of total Potential Realized Value
Shares options at Assumed Annual Rate
underlying granted to Exercise of Stock Price
number of employees Price per Appreciation over Option
options in Fiscal Share Term (2)
--------------------------
Name granted 2000 (in US$) Expiry 5% 10%
---- ------- ---- -------- ------ -- ---
<S> <C> <C> <C> <C> <C> <C>
John Gleed 35,000(1) 4.5% $ 4.750 December 1, 2003 53,029 114,200
John B. Kelly -- -- -- -- -- --
James Bursey -- -- -- -- -- --
Edward Capes -- -- -- -- -- --
Jeffrey McMullen -- -- -- -- -- --
Declan Kelly 10,000(1) 1.3% $ 4.063 October 1, 2003 12,960 27,909
Andrew Jackson -- -- -- -- -- --
Keith Sinclair -- -- -- -- -- --
(1) Options are exercisable starting 6 months after the date of grant, with one-sixth of the shares becoming exercisable at that
time and with an additional one-sixth of the option shares becoming exercisable on each successive six month period, with
full vesting occurring on the third anniversary date. All options expire on the fourth anniversary date.
(2) The calculated potential realized value is expressed in Canadian dollars using the exchange rate in effect at the date of
option grant.
</TABLE>
2000 Aggregate Option Exercises and Year-end Option Values
The following table sets forth the number of shares acquired on exercise of
stock options and the aggregate gains realised on exercise during the fiscal
year ended on April 30, 2000, by the Company's executive officers named in the
Summary Compensation Table. The table also sets forth the number of shares
covered by exercisable and unexercisable options held by such executives on
April 30, 2000, and the aggregate gains that would have been realised had these
options been exercised on April 30, 2000, even though the exercisable options
were not exercised, and the unexercisable options could not have been exercised,
on April 30, 2000.
<TABLE>
<CAPTION>
Acquired on Unexercised Options Options
Exercise at April 30, 2000 at April 30, 2000(b)
during Value ----------------------------- -----------------------------
Name Fiscal 2000 realized(a) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John B. Kelly 63,550 $239,078 249,867 104,733 $93,891 $187,783
John Gleed - - 98,768 73,532 28,081 124,147
James Bursey - - 93,114 50,226 65,857 131,714
Jeffrey McMullen - - 34,433 21,619 28,081 56,155
Edward Capes - - 10,101 20,199 28,081 56,155
Declan Kelly - - 10,189 17,371 15,548 45,877
Andrew Jackson - - 17,048 - 27,748 $ -
(a) Value is based on the closing price on the date of exercise less the exercise price and the closing exchange rate on the date
of exercise.
(b) Value of exercisable and unexercisable options is based on the April 30, 2000, closing bid price of US$ 6.0625 per share and
exchange rate of US$1.00 = Cdn. $1.4801, less the exercise price. Options are in-the-money if the market value of the shares
covered thereby is greater than the option exercise price.
</TABLE>
The Corporation does not maintain any long-term incentive plans.
Compensation of Directors
The Board of Directors has determined for the year ended April 30, 2001
that each non-employee, non-Moore nominated director be paid an annual fee of
US$10,000, plus US$1,000 per meeting in person and US$500 per meeting by
telephone. In addition, the Chairman of the Board and the Chairman of each
Committee of the Board will be paid an additional US$5,000. No directors were
granted stock options during the year ended April 30, 2000, except in their
capacity as employees of the Corporation, if applicable. Non-employee directors
are reimbursed for their reasonable expenses incurred in attending Board and
committee meetings.
Employment Agreements / Termination of Employment
The Corporation has entered into employment agreements with John B. Kelly,
James Bursey, Jeffrey McMullen, Edward Capes and Declan Kelly each of which,
except as noted below, contain substantially similar provisions.
Each employment agreement provides that the executive shall devote his full
time and attention to performing his duties for the Corporation. In the event of
termination by the executive for good reason (a material change in his
responsibilities, a failure to maintain his compensation and benefits, a
material breach by the Corporation under the employment agreement, or the
failure by the Corporation to have the employment agreement assumed by any
successor to the Corporation), or by the Corporation for other than cause,
death, disability or retirement, the Corporation will pay salary and vacation
pay earned to the date of termination as well as a multiple of the executive's
salary (the "Termination Payments"). Except as noted below, the Corporation will
also continue all granted options according to their terms. If the Executive
terminates their employment agreement on thirty (30) days notice within ninety
(90) days of a change in control of the Corporation, the Corporation shall be
obligated to make the Termination Payments. Additionally, all granted options
shall become immediately exercisable upon a change of control of the
Corporation. Each employment agreement provides that the executive maintain the
confidentiality of the Corporation's confidential information indefinitely and
further provides that the executive shall not compete with the Corporation nor
solicit its employees for a certain period of time following termination (the
"Non-compete Term").
Effective December 1, 1999 Mr. John B. Kelly's employment was terminated by
the Corporation for other than cause, death or disability in accordance with the
terms of his employment agreement. Mr. John B. Kelly's Termination Payments are
equal to three times his then current salary and up to $30,000 for job
relocation expenses. His Non-compete Term is for three years. All options will
continue to vest and be exercisable for a period of three years after
termination.
The Termination Payments for each of Mr. Bursey, Mr. McMullen, Mr. Capes
and Mr. Declan Kelly (the "Executives") are equal to one times their respective
then current salary and up to $15,000 for job relocation expenses. Non-compete
Term for each of the Executives is for one year. All options held by each of the
Executives will continue to vest and be exercisable for a period of one year
after termination by the Executive for good reason, or by the Corporation for
other than cause, death, disability or retirement. Mr. Bursey has tendered his
resignation from the Corporation to be effective July 31, 2000. In order to
induce Mr. Bursey to remain with the Corporation until July 31, 2000, the
Corporation has agreed to continue his current salary for a period of 18 months
thereafter, provided that he will continue to be paid only one-half his salary
in the event he obtains alternate employment during such time.
The Corporation entered into an employment agreement with Mr. Gleed to
outline the terms of his compensation and benefits in his role as the interim
President and Chief Executive Officer of the Corporation. The Corporation agreed
to pay Mr. Gleed $1,500 per day while he served as interim President and Chief
Executive Officer and thereafter a monthly retainer of $7,500 for professional
consulting services until April 30, 2002. All options granted to Mr. Gleed will
vest and continue to be exercisable until expiry notwithstanding Mr. Gleed's
retirement.
Directors' And Officers' Liability Insurance
The Corporation presently maintains directors' and officers' liability
insurance in the aggregate principal amount of US$10.0 million. The annual
premium payable for this insurance during the year ended April 30, 2000 was
$185,500. The by-laws of the Corporation generally provide that the Corporation
shall indemnify a director or officer of the Corporation and certain other
bodies corporate against liability incurred in such capacity to the extent
permitted or required by the Canada Business Corporations Act. To the extent the
Corporation is required to indemnify the directors or officers pursuant to the
by-laws, the insurance policy provides that the Corporation is liable for the
initial US$100,000 in the aggregate for each loss with respect to the insuring
agreement.
Compensation Committee Interlocks and Insider
Participation in Compensation Decisions
At April 30, 2000, the members of the Compensation Committee were Messrs.
Allum, Macmillan and Payne, all non-employee directors of the Company. Graham C.
Macmillan, a director of the Company and a member of the Compensation Committee,
is a Vice President and Director of RBC Dominion Securities Inc., a provider of
investment banking and other services to the Company. The Committee has a
mandate to: (a) monitor compliance with legislation applicable in respect of
employment practices of the Company, (b) determine the appropriate allocation of
options, (c) recommend Chief Executive Officer and senior officer compensation,
(d) monitor compliance with statutory requirements for employment matters
including remittances and legislation, and (e) review levels of compensation
generally for the Company. The Committee met three times in fiscal 2000 and
acted by way of resolution on other occasions.
Report on Executive Compensation
The philosophy of the Corporation in the determination of senior executive
compensation is to encourage performance in order to expand the position of the
Corporation in a highly competitive environment. For the year ended April 30,
2000, the process utilized by the Compensation Committee in determining
executive officer compensation levels was based upon the Committee's judgment,
taking into account both qualitative and quantitative factors. Among the factors
considered by the Committee were the recommendations of the Chief Executive
Officer with respect to the compensation of the Corporation's key executive
officers. However, the Committee made the final compensation decisions
concerning such officers. The Committee established the compensation payable for
John B. Kelly and John Gleed, both of whom served as President and Chief
Executive Officer. Mr. Kelly or Mr. Gleed, as applicable, then recommended,
subject to the Committee's review and the Board's approval, the compensation
payable to the other executive officers.
The Committee's fundamental policy is to offer the Corporation's executive
officers competitive compensation opportunities based upon overall Corporation
performance, their individual contribution to the financial success of the
Corporation, and their personal performance. It is the Committee's objective to
have a substantial portion of each officer's compensation contingent upon the
Corporation's performance, as well as upon his or her own level of performance.
Accordingly, each executive officer's compensation package comprises three
elements: (i) base salary, which is established primarily on the basis of
individual performance and market considerations; (ii) annual variable incentive
compensation awards payable in cash and tied to the Corporation's achievement of
financial performance goals and the executive's contribution and, (iii) stock
option grants at market price which strengthen the mutuality of interests
between the executive officers and the shareholders. Under the terms of the
stock option plan, options generally must be exercised within a period of four
or five years from the date of the grant. All options granted terminate 30 days
after termination of employment unless otherwise determined by the Chief
Executive Officer, or as provided in an executive's employment agreement.
Performance Graph
The Common Shares of the Company began trading on the NASDAQ Small Cap
Market System in April 1993. The following graph compares the yearly percentage
return since April 30, 1994 on the Company's Common Shares, compared with the
percentage change in the NASDAQ index of all US and foreign issues and the
NASDAQ index of computer and data processing companies.
700% -
A 676%
600% -
500% -
400% -
A O 373%
300% - X X
200% - X A
X A O O
100% - A O
O
O X 30%
0% -XOA X
April 30, April 30, April 30, April 30, April 30, April 30, April 30,
1994 1995 1996 1997 1998 1999 2000
X = Common Shares of the Company
O = NASDAQ index of US and Foreign Issues
A = NASDAQ index of Computer and Data Processing Companies
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Shares as of July 13, 2000: (i) by each person
who is known by the Company to own beneficially more than five percent of the
outstanding Common Shares, (ii) by each director and named executive officer of
the Company and (iii) by all directors and executive officers of the Company as
a group at any time during fiscal year ended April 30, 2000. There is no family
relationship between any directors or executive officers of the Company.
Number Percentage
of Shares of Shares
Beneficially Beneficially
Beneficial Owner(1) Owned Owned
Directors and Named Executive Officers
Robert F. Allum(2).......................... 228,978 1.17%
James Bursey(3) ............................ 83,780 *
Edward Capes(4)............................. 18,374 *
Kevin Francis............................... 17,450 *
John Gleed(5)............................... 297,080 1.5%
Eric R. Goodwin(6).......................... 24,668 *
Thomas E. Hicks(7).......................... 204,628 1.04%
Stephen A. Holinski (8)..................... 4,668 *
John B. Kelly(10)........................... 283,367 1.42%
Declan Kelly (9)............................ 14,934 *
Graham C. Macmillan(11)..................... 26,668 *
Dennis B. Maloney(12)....................... 29,668 *
Jeffrey McMullen(13) ....................... 36,561 *
John B. Millard(14)......................... 11,635 *
Abraham E. Ostrovsky(15).................... 151,312 *
Donald J. Payne(16)......................... 43,167 *
Michael Rousseau (17)....................... 2,558,748 12.96%
Murray Shaw (17)............................ 2,558,748 12.96%
All directors and executive officers (18) 1,515,276 7.38%
5% Shareholders
Moore Corporation Limited (19).............. 2,558,748 12.96%
----------
* Less than 1%
(1) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from July 21, 2000, whether pursuant
to the exercise of options, conversion of securities or otherwise. Each
beneficial owner's percentage of ownership is determined by assuming that
options or convertible preference shares that are held by such person (but
not those held by any other person) and which are exercisable (or
convertible) within 60 days of July 21, 2000 have been exercised. Unless
otherwise noted in the footnotes below, the Corporation believes that all
persons named in the table have sole voting power and investment power with
respect to all common shares beneficially owned by them. Statements as to
securities beneficially owned by directors, nominees for directors and
executive officers, or as to securities over which they exercise control or
direction, are based upon information obtained from such directors,
nominees and executives and from records available to the Corporation.
(2) Includes 129,976 common shares owned by Mr. Allum's spouse. Also includes
17,668 common shares subject to options. Mr. Allum disclaims any beneficial
interest in shares owned by his spouse.
(3) All common shares subject to options.
(4) Includes 10,101 common shares subject to options
(5) Includes 100,000 common shares owned by two holding companies controlled by
Mr. Gleed for the benefit of his children. Also includes 5,000 common
shares owned by Mr. Gleed's spouse. Also includes 120,433 common shares
subject to options and 11,492 common shares subject to options held by Mr.
Gleed's spouse. Mr. Gleed disclaims any beneficial interest in such common
shares and options owned by his spouse.
(6) All common shares subject to options.
(7) Includes 82,268 common shares owned by Mr. Hicks' spouse. Also includes
47,000 common shares subject to options. Also includes 4,571 common shares
subject to options owned by Mr. Hicks' spouse. Mr. Hicks disclaims any
beneficial interest in such common shares and options owned by his spouse.
(8) Includes 2,668 common shares subject to options.
(9) Includes 10,189 common shares subject to options.
(10) Includes 269,867 common shares subject to options.
(11) Includes 24,668 common shares subject to options.
(12) Includes 24,668 common shares subject to options.
(13) Includes 35,853 common shares subject to options.
(14) Includes 9,335 common shares subject to options.
(15) Includes 35,000 common shares owned by two trusts (17,500 common shares
each) of which Mr. Ostrovsky is the trustee, for the benefit of Mr.
Ostrovsky's two children. Also includes 60,668 common shares subject to
options.
(16) Includes 38,668 common shares subject to options.
(17) Includes 1,992,084 common shares, 450,448 convertible preference shares,
which are convertible at any time into 450,448 common shares, subject to
conditional provisions, and 116,216 common shares subject to options. All
such shares are beneficially owned by Moore Corporation Limited and are
deemed to be owned by Mr. Rousseau and Dr. Shaw by virtue of the fact that
they are the director nominees of Moore Corporation Limited.
(18) Includes common shares indirectly owned and 900,131 common shares that may
be acquired upon exercise of options. Excludes the 2,558,748 common shares
beneficially owned by Moore Corporation Limited, which are also deemed to
be beneficially owned by Mr. Rousseau and Dr. Shaw by virtue of the fact
that they are the director nominees of Moore Corporation Limited. The
beneficial ownership of such common shares by Moore Corporation Limited is
set forth above.
(19) Includes 1,992,084 common shares, 450,448 convertible preference shares,
which are convertible at any time into 450,448 common shares, subject to
conditional provisions, and 116,216 common shares subject to options.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Corporation concluded an investment agreement with Moore Corporation
Limited ("Moore") in August 1994 under which Moore acquired 2,263,782
convertible preference shares (the "preference shares") representing
approximately 18.5% of the Corporation's common share equivalents then
outstanding for net proceeds of approximately $24.8 million. Moore also acquired
an option to purchase 178,750 common shares of the Corporation for a price of
US$8.25 per share (the "Special Options") and a conditional option to acquire
7,726,375 common shares of the Corporation no later than December 30, 1999 at
prices ranging from US$15.00 per share to US$20.00 per share, subject to certain
anti-dilution provisions (the "Moore Options"). In accordance with these
anti-dilution rights, during the year ended April 30, 1996, Moore also acquired
an option to acquire 116,216 common shares of the Corporation at US$16.50 per
share.
In June 1996 the Corporation negotiated the repurchase of the Moore Options
in order to eliminate the perceived dilutive effect of the Moore Options on the
price of the Corporation's common shares. As a result, on June 27, 1996, the
Corporation entered into an agreement with Moore under which a subsidiary of the
Corporation repurchased the Moore Options for consideration of US$34.0 million
($46.3 million), paid for through the issuance by the Corporation to Moore of
1,813,334 common shares and incurred additional expenses associated with the
transaction of $749,000. The consideration paid for the options was determined
by arm's length negotiation between the parties. Subsequently, Moore sold to
various third parties 1,813,334 of its preference shares, which were converted
into an equal number of common shares, and Moore exercised the Special Options
to acquire 178,750 common shares at US$8.25 per share. As a result of the
foregoing, at April 30, 2000, Moore held 1,992,084 common shares, 450,448
preference shares and options to purchase 116,216 common shares or,
approximately 12% of all outstanding common and preference shares on a fully
diluted basis. The Corporation and Moore also entered into a long-term strategic
alliance in August 1994, under which sales of the Corporation's products and
services in certain vertical markets would be focused through Moore. Moore also
committed to make certain minimum purchases from the Corporation of its products
for resale. The Corporation and Moore amended the terms of the strategic
alliance as of June 27, 1996, April 30, 1997 and April 30, 1998. Pursuant to the
amended strategic alliance, effective January 1, 2000, Moore relinquished
exclusive marketing rights in all vertical markets and non-exclusive marketing
and distribution rights to all markets worldwide. The amended strategic alliance
continues to provide for the promotion by Moore and the Corporation of each
other's solutions. Under the amended strategic alliance, Moore is committed to
make purchases of the Corporation's products for resale of US$1.0 million in
each of calendar years 1998 through 2003.
Certain other agreements entered into with Moore in August 1994 were also
amended and restated as at June 27, 1996. As long as Moore beneficially owns at
least 10% of the outstanding common and preference shares of the Corporation,
Moore is entitled to nominate two directors to the Corporation's Board of
Directors and as long as Moore beneficially owns at least 5% of the outstanding
common and preference shares of the Corporation, Moore is entitled to nominate
one director to the Corporation's Board of Directors. Notwithstanding Moore's
ownership of more than 10% of the outstanding common and preference shares of
the Corporation, Moore has agreed to nominate only one director to the
Corporation's Board of Directors. For purposes of calculating Moore's beneficial
ownership, any common shares issued after June 27, 1996 pursuant to the exercise
of options or other rights granted after such date pursuant to employee stock
plans are treated as not outstanding. Certain insiders have agreed to vote their
shares in favour of Moore's nominees for election to the Corporation's Board of
Directors. So long as Moore owns not less than 10% of the outstanding common and
preference shares, Moore continues to be entitled to a pre-emptive right with
respect to issuances by the Corporation of additional equity shares or shares
convertible into equity shares, although the pre-emptive right does not apply to
securities issued by the Corporation pursuant to employee stock purchase or
stock option or other employee stock incentive plans. Prior to conversion, each
preference share is entitled to one vote and is to vote with the common shares
as a single class; provided that, if at any time Moore's beneficial ownership of
common and preference shares is less than 15% of the outstanding common and
preference shares, Moore has agreed to vote its preference shares as directed by
the Corporation, with certain exceptions.
The Corporation and Moore have also entered into a Registration Rights
Agreement pursuant to which Moore may require the Corporation to register common
shares issued upon conversion of the preference shares or exercise of the
options (a "Demand Registration") under the Securities Act of 1933 (the "Act"),
subject to certain limitations. Moore will be entitled to require up to three
Demand Registrations at any time, one of which must be paid for by the
Corporation, and participate in any other registration of the Corporation's
securities under the Act, subject to certain limitations. Moore may publicly
sell any common shares registered under the Act.
During fiscal year 1999, the Corporation (or its subsidiaries) entered into
certain agreements with Hugh Millikin ("Millikin"), a former Senior Vice
President, and Indigo Pacific Pty Limited ("Indigo"), a company controlled by
Millikin.
In July 1999, JetForm Pacific Pty Limited transferred certain assets and
liabilities to Indigo for a net purchase price of Cdn.$50,000 (after deducting
the value of assumed liabilities from the total purchase price of Cdn.$229,952).
Such assets included the assets used in the business of JetForm PTE Ltd., the
Corporation's Singapore subsidiary. In August 1999, the Corporation entered into
a distribution agreement with Indigo, permitting Indigo to distribute certain
software of the Corporation and to resell support services throughout the
Pacific Rim, exclusive of Japan and mainland China, and requiring Indigo to pay
royalty fees to the Corporation equal to 50% of the net resale price of all
software licenses and support services.
On November 30, 1999, Millikin resigned from all of his offices, positions
and directorships with the Corporation (and its subsidiaries and affiliates),
but retained the title "Senior Vice President and General Manager" of Asia
Pacific, for marketing purposes.
In December 1999, the Corporation and Indigo entered into a management
agreement. Millikin agreed to manage the business of JetForm Japan K.K. and the
representative office in China, on a month-to-month basis, for a monthly fee of
$15,000 (Australian dollars). Also in December 1999, the Corporation extended a
secured, interest-free loan for $225,000 (Australian dollars) to Indigo.
Millikin guaranteed repayment, which begins August 1, 2000 and ends May 1, 2002.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following Financial Statements are filed as part of this report under
Item 8 "Financial Statements and Supplementary Data".
Auditors' Report
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(a) 2. Financial Statement Schedule
The following financial statement schedule is filed as part of this report:
Schedule V Valuation and Qualifying Accounts
All other schedules are omitted as they are not required or the required
information is shown in the financial statements or notes thereto.
(a) 3. Exhibits
Exhibit
Number Description
3.1(1) Certificate of Incorporation of Registrant, as amended
3.2(1) By-laws of Registrant, as amended
10.4.1(3) Investment Agreement dated June 10, 1994, between the Registrant
and Moore Corporation Limited 10.4.2(6) Agreement to amend
Investment Agreement dated June 27, 1996 between the Registrant
and Moore Corporation Limited
10.5.1(3) Form of Option Agreement to be entered into between the
Registrant and Moore Corporation Limited
10.5.2(6) Assignment of Option Agreement between Moore Corporation Limited
and 3272303 Canada Inc., a wholly-owned subsidiary of the
Registrant
10.6.1(5) Strategic Alliance Agreement dated August 11, 1994 between the
Registrant and Moore Corporation Limited
10.6.2(8) Agreement to amend the Strategic Alliance Agreement dated June
27, 1996 between the Registrant and Moore Corporation Limited
10.6.3(8) Amendment to the Strategic Alliance Agreement dated April 30,
1998, between the Registrant and Moore Corporation Limited.
10.6.4(11) Amendment to the Strategic Alliance Agreement dated April 30,
1999, between the Registrant and Moore Corporation Limited.
10.8(5) Employment Agreement dated August 11,1994 between the Registrant
and John Gleed 10.10(2) Lease dated as of February 1, 1993,
between the Registrant and Arnon Development Corporation and Baix
Developments Inc. for Ottawa, Canada facility
10.11(4) Form of Amendment to Lease to be entered into between Registrant
and Arnon Development Corporation Limited and Baix Developments,
Inc.
10.12(5) Letter Agreement dated June 1995 between Arnon Development
Corporation and the Registrant
10.13(4) Lease dated April 24, 1991 between Arnon Development Corporation
and Baix Developments, Inc. and CCC Cable Consumer Channel Inc
(d/b/a Why Interactive) and amendment dated June 28, 1991.
10.14(4) Agency Agreement between the Registrant and Selling
Shareholders of the Registrant and Richardson Greenshields of
Canada Limited.
10.16(5) Employment Agreement dated August 1994 between the Registrant and
Philip Weaver
10.17(5) Employment Agreement dated August 1994 between the Registrant and
John Kelly
10.18(1) Registrant's 1990 Employee Stock Option Plan
10.19(l) Registrant's 1993 Employee Stock Option Plan
10.20(5) Registrant's 1995 Employee Stock Option Plan
10.21(7) Credit Facility dated October 25, 1996 between the Registrant and
Royal Bank of Canada
10.21.1(11) Credit Facility dated October 14, 1997 between the Registrant and
Royal Bank of Canada
10.21.2(12) Credit Facility dated April 7, 1999 between the Registrant and
Royal Bank of Canada
10.21.3 Amendment dated October 27, 1999, to Loan Agreement (April 7,
1999) between the Royal Bank of Canada and the Registrant
10.22(7) Receivable Purchase Agreement and Amendment Agreement dated July
31, 1996, between the Registrant and Royal Bank Export Finance
Co. Ltd.
10.23(9) Amendment to the Asset Purchase Agreement dated February 12, 1998
between the Registrant and Delrina Corporation
10.24(11) Registrant's 1997 Employee Stock Purchase Plan
10.25(10) Registrant's Shareholder Rights Plan Agreement dated June 25,
1998
10.26(11) Underwriting Agreement between the Registrant and RBC Dominion
Securities Inc., Midland Walwyn Capital Inc., Goldman Sachs
Canada and TD Securities Inc. dated April 2, 1998.
10.27(12) Amendment dated September 28, 1998 to the employment agreement
dated August 11, 1994 between the Registrant and John Gleed
10.28(12) Amendment dated September 26, 1998 to the employment agreement
dated August 11, 1994 between the Registrant and John Kelly
10.28.1 Termination Agreement dated December 1, 1999 between the
Registrant and John B. Kelly
10.29(12) Amendment dated September 25, 1998 to the employment agreement
dated August 11, 1994 between the Registrant and Phil Weaver
10.30(12) Employment Agreement dated September 22, 1998 between the
Registrant and Carlos Fox
10.31(12) Employment Agreement dated September 22, 1998 between the
Registrant and Ian Fraser
10.32(12) Employment Agreement dated September 22, 1998 between the
Registrant and James Bursey
10.33(12) Employment Agreement dated September 22, 1998 between the
Registrant and Hugh Millikin
10.34(12) Termination Agreement dated February 19, 1999 between the
Registrant and Phil Weaver
10.35(12) Termination Agreement dated April 29, 1999 between the Registrant
and Ian Fraser
10.36(12) Termination Agreement dated June 1, 1999 between the Registrant
and Carlos Fox
10.37 Employment Agreement dated February 8, 2000 between the
Registrant and James Bursey
10.37.1 Amendment dated February 8, 2000 to the employment agreement
dated February 8, 2000 between the Registrant and James Bursey
10.37.2 Amendment dated July 17, 2000 to the employment agreement dated
February 8, 2000 between the Registrant and James Bursey
10.38 Employment Agreement dated April 13, 2000 between the Registrant
and A. Kevin Francis
10.39 Employment Agreement dated October 21, 1999 between the
Registrant and Jeff McMullen
10.40 Employment Agreement dated October 21, 1999 between the
Registrant and Edward Capes
10.41 Employment Agreement dated May 4, 2000 between the Registrant and
Declan Kelly
10.42 Employment Agreement dated February 16, 2000 between the
Registrant and John Gleed
10.43 Share Purchase Agreement, dated May 19, 1999 between Calian
Technologies and the Registrant
10.44 Distribution Agreement, dated August 1, 1999 between Indigo
Pacific and the Registrant
21.1 Subsidiaries of the Registrant 23.0 Consent of
PricewaterhouseCoopers LLP
(1) Incorporated by reference to the exhibits filed with the Registrant's
Registration Statement on Form SB-2 (no. 33-47864-B) (previously filed on
Form S-18) filed on May 12, 1992, and amended on March 5, 1993, and April
19, 1993, which Registration Statement became effective April 20, 1993.
(2) Incorporated by reference to the exhibits filed with the Registrant's
Report on Form 10-KSB for the fiscal year ended April 30, 1993.
(3) Incorporated by reference to the exhibits filed with the Registrant's
Report on Form 8-K dated June 10, 1994.
(4) Incorporated by reference to the exhibits filed with the Registrant's
Report on Form 10-KSB for the fiscal year ended April 30, 1994.
(5) Incorporated by reference to the exhibits filed with the Registrant's
Report on Form 10-KSB for the fiscal year ended April 30, 1995.
(6) Incorporated by reference to the exhibits filed with the Registrant's
Report on Form 10-K for the fiscal year ended April 30, 1996.
(7) Incorporated by reference to the exhibits filed with the Registrant's
Statement on Form S-1 (no. 333-6368) (originally filed on Form S-3) filed
on April 30,1997, as amended on March 3, 1997 and March 17, 1997, which
Registration Statement became effective on March 19, 1997.
(8) Incorporated by reference to the exhibits filed with the Registrant's
Report on Form 10-K for the fiscal year ended April 30, 1997.
(9) Incorporated by reference to the exhibits filed with the Registrant's
Report on Form 10-Q for the three months ended January 31, 1998.
(10) Incorporated by reference to the exhibits filed with the Registrant's
Report on Form 8-K, filed July 23, 1998.
(11) Incorporated by reference to the exhibits filed with the Registrant's
Report on Form 10-K for the fiscal year ended April 30, 1998.
(12) Incorporated by reference to the exhibits filed with the Registrant's
Report on Form 10-K for the fiscal year ended April 30, 1999.
(b) Reports on Form 8-K
There were no reports on Form 8-K during the year.
<PAGE>
PRICEWATERHOUSECOOPERS
PricewaterhouseCoopers LLP
Chartered Accountants
99 Bank Street
Suite 800
Ottawa Ontario
Canada K1P 1E4
Telephone +1 (613) 237 3702
Telephone +1 (613) 237 3936
Our report on the consolidated financial statements of JetForm Corporation as of
April 30, 2000 and 1999 and for the years ended April 30, 2000, 1999 and 1998 is
included in Item 8 of their Form 10-K. In connection with our audits of such
financial statements, we have also audited the related financial statement
schedule V listing in Item 14(a)2 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information required to be
included therein.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Chartered Accountants
Ottawa, Ontario
June 20, 2000
PricewaterhouseCoopers refers to the Canadian firm of PricewaterhouseCoopers LLP
and other members of the worldwide PricewaterhouseCoopers organization.
<PAGE>
JETFORM CORPORATION
SCHEDULE V
VALUATION AND QUALIFYING ACCOUNTS
Balance as at April 30, 1997 $ 735
Bad debt expense for the year 1,045
Write-off/adjustments (381)
-------
Balance as at April 30, 1998 1,399
Bad debt expense for the year 2,528
Write-off/adjustments (2,003)
-------
Balance as at April 30, 1999 1,924
Bad debt expense for the year 6,056
Write-off/adjustments (5,556)
-------
Balance as at April 30, 2000 $2,424
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
JetForm Corporation
Dated: July 24, 2000 /s/ A. Kevin Francis
--------------------------------------------------
Kevin Francis
President and Chief Executive Officer and Director
(Principal ExecutiveOfficer)
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
/s/ Abraham Ostrobsky /s/ Jeffrey McMullen
--------------------------------------- ---------------------------------------
Abraham Ostrovsky Jeffrey McMullen
Chairman and Director Vice President, Finance and Chief
Financial Officer
(Principal Financial and Accounting
Officer)
/s/ John Gleed /s/ Michael Rousseau
--------------------------------------- ---------------------------------------
John Gleed Michael Rousseau
Director Director
/s/ Eric R. Goodwin /s/ Thomas E. Hicks
--------------------------------------- ---------------------------------------
Eric R. Goodwin Thomas E. Hicks
Director Director
/s/ Robert F. Allum /s/ Deborah L. Weinstein
--------------------------------------- ---------------------------------------
Robert F. Allum Deborah L. Weinstein
Director Secretary
/s/ Graham C. Macmillan /s/ Stephen A. Holinski
--------------------------------------- ---------------------------------------
Graham C. Macmillan Stephen A. Holinski
Director Director
/s/ Donald J. Payne /s/ Dennis B. Maloney
--------------------------------------- ---------------------------------------
Donald J. Payne Dennis B. Maloney
Director Director
/s/ Murray Shaw
---------------------------------------
Murray Shaw
Director
