<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended 30 September 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ to ________
Commission file number 0-26376
ON TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-3162846
(State of incorporation) (IRS Employer Identification Number)
Waltham Woods
880 Winter Street, Building 4
Waltham, MA 02451-1449
(781) 487-3300
(Address and telephone of principal executive offices)
-----------
Indicate by check mark whether 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, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
--- ---
12,743,951 shares of the registrant's Common stock, $0.01 par value, were
outstanding as of November 11, 1999.
THIS DOCUMENT CONTAINS 24 PAGES.
------
THE EXHIBIT INDEX IS ON PAGE 23.
<PAGE>
ON TECHNOLOGY CORPORATION AND SUBSIDIARIES
FORM 10-Q, September 30, 1999
CONTENTS
Item Number Page
- ----------- ----
PART I: FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Balance sheets:
September 30, 1999 and December 31, 1998 3
Statements of operations:
Three and nine months ended September 30, 1999 and 1998 4
Statements of cash flows:
Nine months ended September 30, 1999 and 1998 5
Notes to condensed consolidated financial statements 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-20
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
SIGNATURES 22
EXHIBIT INDEX 23
2
<PAGE>
ON TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 6,648 $ 8,001
Accounts receivable, net of allowance for doubtful accounts and
sales returns of $897 and $954, respectively 4,525 3,384
Inventories 85 74
Prepaid expenses and other current assets 1,182 755
-------- --------
Total current assets 12,440 12,214
-------- --------
Property and equipment, at cost:
Computers and equipment 4,235 3,774
Equipment under capital leases --- 193
Furniture and fixtures 239 239
-------- --------
Less--Accumulated depreciation 3,138 2,370
-------- --------
1,336 1,836
-------- --------
Other assets and deposits 80 80
Purchased intangibles, net of $1,882 and $1,539 of accumulated
amortization, respectively 197 539
-------- --------
$ 14,053 $ 14,669
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of capital lease obligations $ --- $ 10
Accounts payable 4,188 4,399
Accrued expenses 1,101 1,257
Reserve for distributor inventories 120 120
Deferred revenue 3,360 1,742
-------- --------
Total current liabilities 8,769 7,528
-------- --------
Stockholders' Equity:
Common stock, $.01 par value Authorized - 20,000,000 shares
Issued and outstanding 12,598,161 shares and 12,376,095
shares, respectively 126 124
Additional paid in capital 63,052 62,793
Accumulated deficit (57,847) (55,695)
Cumulative translation adjustment --- (34)
Treasury stock (15,000 shares at cost) (47) (47)
-------- --------
Total stockholders' equity 5,284 7,141
-------- --------
$ 14,053 $ 14,669
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
ON TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- -------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
Revenue:
- -------
<S> <C> <C> <C> <C>
Net product revenue $ 6,129 $ 4,031 $ 17,213 $ 10,922
Other revenue 2,155 1,219 5,320 3,513
----------- ----------- ----------- -----------
Total revenue 8,284 5,250 22,533 14,435
----------- ----------- ----------- -----------
Operating expenses:
- ------------------
Cost of product revenue 2,078 980 4,452 2,910
Sales and marketing 2,971 2,603 10,052 7,594
Research and development 2,489 2,143 7,374 6,729
General and administrative 1,046 873 3,151 2,567
Gain on sale of assets --- --- --- (6,518)
----------- ----------- ----------- -----------
Income (loss) from operations (300) (1,349) (2,496) 1,153
----------- ----------- ----------- -----------
Interest income, net 6 92 126 213
Other income 13 12 216 12
----------- ----------- ----------- -----------
Income (loss) before provision
for income taxes (281) (1,245) (2,154) 1,378
Provision for income taxes --- 5 --- 27
=========== =========== =========== ===========
Net Income (loss) $ (281) $ (1,250) $ (2,154) $ 1,351
=========== =========== =========== ===========
Basic earnings (loss) per share $ (0.02) $ (0.10) $ (0.17) $ 0.11
=========== =========== =========== ===========
Diluted earnings (loss) per share $ (0.02) $ (0.10) $ (0.17) $ 0.11
=========== =========== =========== ===========
Basic shares used in
per share calculation 12,524,788 12,312,326 12,479,809 12,256,211
=========== =========== =========== ===========
Diluted shares used in
per share calculation 12,524,788 12,312,326 12,479,809 12,604,164
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
ON TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
------------------------------
1999 1998
------ ------
<S> <C> <C>
Cash Flows from Operating Activities
Net income (loss) $(2,154) $ 1,351
Adjustments to reconcile net income (loss)
to net cash used in operating activities
Gain on sale of assets --- (6,518)
Amortization of deferred compensation --- 229
Depreciation and amortization 1,306 1,218
Changes in assets and liabilities:
Accounts receivable (1,139) (567)
Inventories (11) 138
Prepaid expenses and other current assets (421) 1,548
Accounts payable (427) (803)
Accrued expenses (156) (1,877)
Reserve for distributor inventories --- (96)
Deferred revenue 1,618 854
-------- --------
Net cash used in operating activities (1,384) (4,523)
-------- --------
Cash Flows From Investing Activities
Increase in other assets and deposits --- (4)
Purchase of property and equipment, net (463) (293)
Purchase of csd Software GmbH, net of cash acquired --- (34)
Net proceeds from assets held for sale, net of deal costs --- 8,273
-------- --------
Net cash provided by (used in) investing activities (463) 7,942
-------- --------
Cash Flows From Financing Activities
Exercise of stock options 120 65
Stock purchase through ESPP 143 66
Principal repayments on obligation under capital lease (10) (328)
-------- --------
Net cash (used in) provided by financing activities 253 (197)
-------- --------
Net effect of exchange rates on cash & cash equivalents 241 (300)
Net increase (decrease) in cash and cash equivalents (1,353) 2,922
Cash and cash equivalents, beginning of period 8,001 6,679
-------- --------
Cash and cash equivalents, end of period $ 6,648 $ 9,601
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for -
Interest paid $ 18 $ 58
Income taxes paid $ --- $ 27
======== ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
Return of property and equipment under capital leases - $ --- $ 1,049
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
ON TECHNOLOGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FORM 10-Q, September 30, 1999
(dollars in thousands, except per share amount)
(unaudited)
1. Interim Financial Statements
----------------------------
The accompanying consolidated financial statements have been presented
by ON Technology Corporation (together with its consolidated subsidiaries, the
"Company") without audit (except for the balance sheet information as of
December 31, 1998) in accordance with generally accepted accounting principles
for interim financial statements and with the instructions to Form-10Q and
Regulation S-X pertaining to interim financial statements. Accordingly, these
interim financial statements do not include all information and footnotes
required by generally accepted accounting principles for complete financial
statements. The financial statements reflect all adjustments and accruals which
management considers necessary for a fair presentation of financial position as
of September 30, 1999 and December 31, 1998, and results of operations for the
three and nine months ended September 30, 1999 and September 30, 1998. The
results for the interim periods presented are not necessarily indicative of
results to be expected for any future period. The financial statements should
be read in conjunction with the audited financial statements and the notes
thereto included in the Company's Registration Statement on Form 10-K.
2. Earnings (loss) per Share
-------------------------
The Company calculates earnings (loss) per share in accordance with
Statement of Financial Accounting Standards No. 128 "SFAS 128", Earnings Per
Share. Basic earnings per share is calculated by dividing net income (loss) by
the weighted average number of common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution of stock options that
could share in the earnings of the Company.
Basic and diluted EPS as required by SFAS 128, are as follows:
<TABLE>
<CAPTION>
(dollars in thousands, except per share data) Three Months Nine Months
Ended September 30, Ended September 30,
------------------------------ ------------------------------
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net income (loss) $ (281) $ (1,250) $ (2,154) $ 1,351
Basic weighted average shares outstanding 12,525 12,312 12,480 12,256
Weighted average common equivalent shares --- --- --- 348
------- -------- --------- -------
Diluted weighted average shares outstanding 12,525 12,312 12,480 12,604
======= ======== ========= =======
Basic earnings (loss) per share $ (0.02) $ (0.10) $ (0.17) $ 0.11
======= ======== ========= =======
Diluted earnings (loss) per share $ (0.02) $ (0.10) $ (0.17) $ 0.11
======= ======== ========= =======
Anti-dilutive securities, that were not
included in the above table are as follows:
Stock Options: 952 1,370 1,110 891
======= ======== ========= =======
</TABLE>
6
<PAGE>
3. Gain on Sale of Assets
----------------------
In connection with the Sale of Assets to Elron Software Inc., the
Company received net proceeds of $8,823 and incurred $550 of deal costs. The
Sale of Assets that had a carrying value of $1,755, resulted in a net gain of
$6,518, which was recorded in the first quarter of 1998.
4. Reporting Comprehensive Income
------------------------------
The Company adopted SFAS 130, "Reporting Comprehensive Income",
effective January 1, 1998. SFAS 130 establishes standards for reporting and
display of comprehensive income and its financial statements. The Company's
only item of other comprehensive income relates to foreign currency translation
adjustments, and is presented separately on the balance sheet as required.
If presented on the accompanying statements of operations for the three months
ended September 30, 1999 and September 30, 1998, comprehensive loss would be
$22 higher and $26 lower, respectively, than the reported net loss, due to
foreign currency translation adjustments. If presented on the statement of
operations for the nine months ended September 30, 1999, comprehensive loss
would be $34 lower. If presented on the statement of operations for the nine
months ended September 30, 1998, comprehensive income would be $11 lower.
7
<PAGE>
5. Segment Reporting
-----------------
During the three and nine months ended September 30, 1999 and 1998,
the Company had two reportable segments: Desktop Management and Groupware
Continuing. Management has organized the segments based on differences in
products and services because each segment requires different technology and
marketing strategies. The Desktop Management segment constitutes the ON Command
CCM product line, which develops, markets and supports enterprise desktop
management products. The Groupware Continuing segment develops, markets and
supports real-time group scheduling products
The Company evaluates segment performance based on gross margin from
operations and does not capture segment net income (loss) or segment assets.
The following tables illustrate segment operating data for the three and nine
months ended September 30, 1999 and 1998.
<TABLE>
<CAPTION>
THREE MONTHS ENDED, DESKTOP GROUPWARE TOTAL
SEPTEMBER 30, MANAGEMENT CONTINUING
1999
<S> <C> <C> <C>
Net Product Revenue
$ 4,475 $1,654 $ 6,129
Other Revenue 1,628 527 2,155
------- ------ -------
Total Revenue 6,103 2,181 8,284
Cost of Product Revenue 1,935 143 2,078
------- ------ -------
Gross Margin $ 4,168 $2,038 $ 6,206
1998
Net Product Revenue $ 2,061 $1,970 $ 4,031
Other Revenue 793 426 1,219
------- ------ -------
Total Revenue 2,854 2,396 5,250
Cost of Product Revenue 817 163 980
------- ------ -------
Gross Margin $ 2,037 $2,233 $ 4,270
NINE MONTHS ENDED,
SEPTEMBER 30,
1999
Net Product Revenue $12,904 $4,309 $17,213
Other Revenue 3,927 1,393 5,320
------- ------ -------
Total Revenue 16,831 5,702 22,533
Cost of Product Revenue 3,959 493 4,452
------- ------ -------
Gross Margin $12,872 $5,209 $18,081
1998
Net Product Revenue $ 5,564 $5,358 $10,922
Other Revenue 2,194 1,319 3,513
------- ------ -------
Total Revenue 7,758 6,677 14,435
Cost of Product Revenue 2,253 656 2,909
------- ------ -------
Gross Margin $ 5,505 $6,021 $11,526
</TABLE>
8
<PAGE>
ON TECHNOLOGY CORPORATION AND SUBSIDIARIES
Management Discussion and Analysis of Financial Condition
and Results of Operations
FORM 10-Q, September 30, 1999
(unaudited)
OVERVIEW
ON Technology Corporation and Subsidiaries (the "Company") is engaged
in providing open and scalable desktop management solutions that result in
financial, operational and strategic benefits for enterprise networks.
The Company does not provide forecasts of the future financial
performance of the Company. From time to time, however, the information provided
by the Company or statements made by its employees may contain forward-looking
statements. In particular, statements contained in this Form 10-Q that are not
historical statements (including, but not limited to, statements concerning
estimates of future revenues, operating expense levels and such operating
expense levels relative to the Company's total revenues) constitute forward-
looking statements under the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. See "Certain Factors That May Affect Future
Results."
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
financial data as percentages of the Company's total revenue:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------------- ----------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Net product revenue 74.0 % 76.8 % 76.4 % 75.7 %
Other revenue 26.0 % 23.2 % 23.6 % 24.3 %
-------------------------------- -------------------------------
Total revenue 100.0 % 100.0 % 100.0 % 100.0 %
-------------------------------- -------------------------------
Operating expenses:
Cost of product revenue 25.1 % 18.7 % 19.8 % 20.2 %
Sales and marketing 35.9 % 49.6 % 44.6 % 52.6 %
Research and development 30.0 % 40.8 % 32.7 % 46.6 %
General and administrative 12.6 % 16.6 % 14.0 % 17.8 %
Gain on sale of assets --- --- --- (45.2)%
-------------------------------- -------------------------------
Income (loss) from operations (3.6)% (25.7)% (11.1)% 8.0 %
-------------------------------- -------------------------------
Interest income, net 0.1 % 1.8 % 0.5 % 1.5 %
Other income 0.1 % 0.2 % 1.0 % 0.1 %
-------------------------------- -------------------------------
Net income (loss) before
Provision for income taxes (3.4)% (23.7)% (9.6)% 9.6 %
-------------------------------- -------------------------------
Provision for income taxes --- (0.1)% --- (0.2)%
-------------------------------- -------------------------------
Net income (loss) (3.4)% (23.8)% (9.6)% 9.4 %
================================ ===============================
</TABLE>
NET PRODUCT REVENUE. The Company's net product revenue is derived
primarily from the licensing of software products. For the three and nine months
ended September 30, net product revenue increased $2.1 million (52.0%) and
$6.3 million (57.6%), respectively, from 1998 to 1999. The increase is due
primarily to higher sales associated with the Company's Desktop Management
software business of $2.4 million (117.1%) and $7.3 million (131.9%) over each
of the respective periods. The increase in the Company's Desktop Management
software business was offset by a decline in Groupware continuing sales of
approximately $316 thousand (16.0%) and $1.0 million (19.6%).
9
<PAGE>
Other Revenue. The Company's other revenue consists of maintenance
revenue and professional services. For the three and nine months ended
September 30, other revenue increased $936 thousand (76.8%) and $1.8 million
(51.4%), respectively from 1998 to 1999. The increase is attributed to increased
maintenance sales and professional services associated with the sales of the
Company's Desktop Management software business.
COST OF PRODUCT REVENUE. Cost of product revenue primarily consists
of expenses associated with product documentation, production and fulfillment
costs and royalty fees associated with products that are licensed from third
party developers. In addition, cost of product revenue includes the amortization
of purchased intangibles. For the three and nine months ended September 30, cost
of product revenue increased $1.1 million (112.0%) and $1.5 million (53.0%),
respectively from 1998 to 1999. This increase was primarily the result of
increased product revenue.
SALES AND MARKETING EXPENSE. Sales and marketing expense primarily
consists of compensation and benefits paid to sales and marketing personnel.
Sales and marketing expense also includes the costs associated with public
relations, trade shows and conferences. For the three and nine months ended
September 30, sales and marketing expenses increased $368 thousand (14.1%) and
$2.5 million (32.4%), respectively from 1998 to 1999. The increase is due to the
Company's expansion of its Desktop Management software business.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense
includes costs associated with the development of new products, the enhancement
of existing products, and the provision of technical support. For the three and
nine months ended September 30, research and development expense increased
$346 thousand (16.1%) and $645 thousand (9.6%). The increase is attributed to
additional investments in the Company's Desktop Management software business.
The Company plans to continue to make significant investments in research and
development related to the Company's Desktop Management Software business.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative
expense includes administrative executive compensation, executive support costs,
accounting operations, planning, and business development operations. For the
three and nine months ended September 30, general and administrative expense
increased $173 thousand (19.8%) and $584 thousand (22.8%), respectively from
1998 to 1999. The increase in absolute dollars is due to higher investor
relations charges as well as costs associated with the investigation of a former
officer, as previously disclosed. General and administrative expense as a
percentage of total revenue decreased due to an increase in the Company's
revenues.
GAIN ON SALE OF ASSETS. In connection with the sale of certain assets
to Elron Software in 1998 (the "Elron Transaction"), the Company received net
proceeds of $8.8 million and incurred $550 thousand of direct transaction costs.
As a result of the Elron Transaction, assets were sold that had a carrying value
of $1.8 million and the Company recorded a gain of $6.5 million.
INTEREST INCOME, NET. Interest income consists primarily of interest
income earned on cash and cash equivalents. For the three and nine months ended
September 30, interest income decreased by $86 thousand (93.5%) and $87 thousand
(40.8%), respectively from 1998 to 1999 due to a decrease in funds available for
investment.
OTHER INCOME. Other income of $13 thousand and $216 thousand for the
three and nine month periods ended September 30, 1999, respectively, resulted
from an insurance receivable.
INCOME TAXES. For the three and nine months ended September 30,
1998, there was a $5 thousand and $22 thousand income tax adjustment as a result
of a prior year review. There were no tax provisions for the three and nine
months ended September 30, 1999.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations to date primarily through
private and public placements of capital stock and the net proceeds received
from the Elron Transaction. At September 30, 1998 and 1999, the Company had
available cash and cash equivalents of $9.6 million and $6.6 million
respectively. As of September 30, 1999, the Company has a $1.0 million letter of
credit guarantee outstanding for a subsidiary against a line of credit with a
foreign bank and a $0.7 million letter of credit guarantee outstanding securing
our new facility lease. The Company has an unused and available line of credit
of $5.0 million with a commercial bank. The Company can borrow under this line
of credit up to the greater of $5.0 million or the sum of 80% of qualified
domestic accounts receivable. Advances pursuant to the line of credit are
secured by liens granted on the Company's accounts receivable. At September 30,
1999, the Company did not have an outstanding balance under the line of credit
agreement.
Net cash used in operating activities for the nine months ended
September 30, 1998 and September 30, 1999, was $4.5 million and $1.4 million
respectively. For the nine months ended September 30, 1998, net cash used in
operating activities consisted primarily of net income of $1.4 million which is
offset by a $6.5 million gain on sale of assets and net change in depreciation
and amortization, amortization of deferred compensation and operating assets and
liabilities of $644 thousand. For the nine months ended September 30, 1999, net
cash used in operating activities consisted primarily of net loss of
$2.2 million coupled with the net change in operating assets and liabilities of
$536 thousand offset with depreciation and amortization of $1.3 million.
Net cash provided by (used in) investing activities for the nine
months ended September 30, 1998 and September 30, 1999 was $7.9 million and
$(463) thousand, respectively. For the nine months ended September 30, 1998 cash
provided by investing activities was primarily a result of net proceeds from
assets held for sale of $8.3 million. For the nine months ended September 30,
1999 cash used in investing activities consisted of the purchases of property
and equipment of $463 thousand.
Net cash (used in) provided by financing activities for the nine
months ended September 30, 1998 and September 30, 1999 was $(197) thousand and
$253 thousand, respectively. For the nine months ended September 30, 1998, net
cash used in financing activities consisted of principal repayment on
obligations under capital lease of $328 thousand, partially offset by the
exercises of stock options and stock purchases through the Company's Employees
Stock Purchase Plan ("ESPP") of $131 thousand. For the nine months ended
September 30, 1999, net cash provided by financing activities consisted of the
exercises of stock options and stock purchases through the ESPP of $263 thousand
offset by principal repayment on obligations under capital lease of
$10 thousand.
11
<PAGE>
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
SOME STATEMENTS CONTAINED IN THIS FORM 10-Q THAT ARE NOT HISTORICAL
STATEMENTS (INCLUDING BUT NOT LIMITED TO, STATEMENTS CONCERNING ESTIMATES OF
FUTURE REVENUES, OPERATING EXPENSE LEVELS AND SUCH OPERATING EXPENSE LEVELS
RELATIVE TO THE COMPANY'S TOTAL REVENUES) CONSTITUTE FORWARD-LOOKING STATEMENTS
UNDER THE SAFE HARBOUR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995. THE FOLLOWING RISK FACTORS, AMONG OTHER FACTORS (INCLUDING THE
ACCURACY OF THE COMPANY'S INTERNAL ESTIMATES OF REVENUE AND OPERATING EXPENSE
LEVEL AND OTHER RISKS DETAILED FROM TIME TO TIME IN THE COMPANY'S FILINGS WITH
THE SECURITIES AND EXCHANGE COMMISSION), MAY CAUSE THE COMPANY'S ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THE RESULTS STATED IN SUCH FORWARD LOOKING STATEMENTS.
CCM PRODUCT MARKETING STRATEGY
The target market for the CCM products is entirely different from the
target market for the products the Company has marketed and sold through its
thirty day free trial marketing system used prior to 1998. The target market for
CCM products consists primarily of large corporations such as Deutsche Telekom,
MCI Worldcom and AutoNation (all existing CCM customers). In addition, CCM
product sales per customer are generally in the range of $20,000 to $500,000, as
opposed to an average sale per customer for the Company's Groupware products of
approximately $2,500. Sales of CCM products pose significantly greater financial
risks, and require greater up-front investments in marketing, technical and
financial resources, than sales of the Company's historical products. As a
result, the Company is adopting a new and untested marketing strategy using a
direct sales force and in-field service organization. This marketing strategy
requires significant investments in additional marketing and technical
personnel, retraining of existing personnel, ongoing product development and
creation of an in-field service organization. The Company has developed valuable
experience and expertise in Europe, however, there can be no assurance that the
Company will be able to continue to transfer such experience and expertise to
the North American market.
Currently, only two customers account for more than 10% of the
Company's net revenue. For the twelve months ended December 31, 1998, one
customer accounted for $3.5 million, or 18% of net revenue from the Company's
current products. For the nine months ended September 30, 1999, two customers
accounted for $7.4 million, or 43.0% of net revenue. It is possible that the
Company's change in marketing strategy will result in other customers accounting
for more than 10% of the Company's net revenues.
TECHNOLOGICAL REQUIREMENTS OF THE CCM PRODUCTS; PRODUCT DEVELOPMENT
The technological demands of the CCM products require a commitment of
significant ongoing financial, technical and personnel resources to product
development, training of service technicians and customer training. Because the
Company's historical products were not as technologically sophisticated as the
CCM products, the Company has not to date made the required investment and has
not proven that it can develop and maintain the organization required to support
such products. The Company believes that its experience with the CCM products in
Europe will provide a valuable base on which to build the necessary financial,
technical and personnel resources to sell, market, develop and support the CCM
products in North America; however, there can be no assurance that the Company
will be able to expand and develop its resources to support CCM products in
North America.
The CCM product is typically larger and more complex than the products
that the Company has previously developed. The Company's ability to continue to
enhance the CCM product to meet customer and market requirements will depend
substantially on its ability to effectively manage its development effort, to
attract and retain the required development personnel in Cambridge,
Massachusetts and Starnberg, Germany and to coordinate and manage geographically
remote development efforts.
12
<PAGE>
FINANCIAL RESOURCES REQUIRED BY THE CCM PRODUCTS
The Company has estimated that the product development, marketing and
sales costs of the CCM products are approximately $1.0 to $1.5 million per
month. The Company believes that it has sufficient financial resources to fund
these costs through at least December 1999. There can be no assurance that the
Company's estimate of the marketing, sales and product development costs of the
CCM products will prove correct, that such costs will not increase beyond the
Company's available financial resources, or that additional sources of capital,
if and when needed, will be sufficient or available.
RAPID TECHNOLOGICAL CHANGE
The Enterprise Desktop Management and Groupware software markets are
characterized by rapid technological developments, changes in customer
requirements, evolving industry standards and frequent new product
introductions. The Company's future success will depend, in part, upon its
ability to enhance its existing applications, develop and introduce new products
that take advantage of technological advances, and respond promptly to new
customer requirements and evolving industry standards. The Company has made a
strategic decision to limit its Groupware marketing efforts to exclusively
selling new seats to its existing customer base. The Company has identified a
number of enhancements to CCM which it believes are important to its continued
success in the Enterprise Desktop Management software market. There can be no
assurance that the Company will be successful in developing and marketing, on a
timely basis, enhancements to its existing products or new products, or that its
new products will adequately address the changing needs of the marketplace.
Failure by the Company in any of these areas could materially and adversely
affect the Company's business, condition (financial and otherwise), prospects
and results of operations. In addition, from time to time the Company or its
competitors may announce new products with capabilities or technology that could
have a potential to replace or shorten the life cycles of the Company's existing
products or render such products obsolete. There can be no assurance that
announcements by the Company or its competitors of new products will not cause
customers to defer purchasing the Company's existing products. In addition,
there can be no assurance that future changes in DOS, Windows, Windows NT, UNIX,
NetWare, Mac-OS or other popular operating systems would not result in
incompatibility with the Company's products. The Company's failure to introduce
new products on a timely basis that are compatible with operating systems and
environments preferred by desktop customer users would have a material adverse
effect on the Company's business, condition (financial or otherwise), prospects
and results of operations.
COMPETITION
The market for the Company's products is highly competitive, and the
Company expects competition to increase in the future. The Company believes that
the principal competitive factors affecting the market for its products include
performance, functionality, ease of use, ease of installation, quality, customer
support, breadth or product line, speed of product delivery, frequency of
upgrades and updates, brand name recognition, company reputation, adherence to
industry standards, integration with third-party solutions and price. Certain of
the criteria upon which the performance and quality of the Company's Groupware
software compete includes speed of response, ease of use, ease of installation,
interoperability with other messaging systems and simplicity of administration.
The Company believes that it generally competes favorably with respect to each
of these factors; however, there can be no assurance that the Company will be
able to continue to compete successfully against current and future competitors.
Certain of the Company's competitors have been in the market longer than the
Company, and other competitors are larger and may have greater name recognition
than the Company. As is the case in many segments of the software industry, the
Company may encounter increasing price competition in the future. This could
reduce average selling prices and, therefore, profit margins. Competitive
pressures could result not only in sustained price reductions but also in a
decline in sales volume, which could have a material adverse effect on the
Company's business, condition (financial or otherwise), prospects and results of
operations. There can be no assurance that the Company will continue to compete
effectively against existing and potential competitors in these markets, many of
whom have substantially greater financial, technical, marketing and support
resources and name recognition than the Company.
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<PAGE>
PRODUCT DEVELOPMENT
The Company has in the past experienced delays in software
development, and there can be no assurance that it will not experience further
delays in connection with its current or future product development activities.
The Company puts all of its products through alpha and beta test cycles and
makes significant efforts to debug all products before commercial release. The
Company makes well-marked alpha and beta versions of its software available for
evaluation and testing and solicits and responds to input from evaluators.
However, there can be no assurance that the Company's products will not contain
undetected errors or version compatibility issues, particularly when first
introduced or when new versions are released, resulting in loss of or delay in
market acceptance. Delays and difficulties associated with new product
introductions or product enhancements could have a material adverse effect on
the Company's business, condition (financial or otherwise), prospects and
results of operations.
In addition to developing new products, the Company's internal
development staff is focused on developing upgrades and updates to existing
products and modifying, enhancing and completing any acquired products and
incomplete projects. Future enhancements may, among other things, include
additional functionality, respond to user problems or address issues of
compatibility with changing operating systems and environments. Failure to
release such enhancements on a timely basis could have a material adverse effect
on the Company's business, condition (financial or otherwise), prospects and
results of operations. There can be no assurance that the Company will be
successful in these efforts.
The Company licenses certain products as development tools or as
components of its products. If the Company believes that a licensed product
continues to be valuable after the expiration of the initial license term, it
will seek to extend the term of the license. There can no assurance that the
Company will be able to extend the term of expiring licenses, or that the
economic arrangements for such extensions would be comparable to the
arrangements in effect during the initial license term.
INCLUSION OF CCM AND GROUPWARE IN SYSTEM SOFTWARE AND APPLICATION SUITES
In the future, vendors of operating system software and applications
sold for a single price (generally referred to as application suites) may
continue to enhance their products to include certain functions that are
currently provided most often by Enterprise Desktop Management and Groupware
software or may bundle these products in their application suites at no
additional charge. The widespread inclusion of the functions provided by the
Company's products as standard features of operating system software could,
particularly if the quality of such functions were comparable to that of the
Company's products, render the Company's products obsolete and unmarketable.
Furthermore, even if the Enterprise Desktop Management and Groupware software
functions provided as standard features by operating systems are more limited
than those of the Company's products, there is no assurance that a significant
number of customers would not elect to accept such functions in lieu of
purchasing additional software. If the Company were unable to develop new
Enterprise Desktop Management and Groupware software products to further enhance
operating systems and to replace successfully any obsolete products, the
Company's business, condition (financial or otherwise), prospects and results of
operations would be materially and adversely affected.
POTENTIAL ACQUISITIONS
The Company may in the future undertake additional acquisitions that
could present challenges to the Company's management, such as integrating and
incorporating new operations, product lines, technologies and personnel. If the
Company's management is unable to manage these challenges, the Company's
business, financial condition or results of operations could be materially
adversely affected. Any acquisition, depending on its size, could result in
significant dilution to the Company's stockholders. Furthermore, there can be no
assurance that any acquired products will gain acceptance in the Company's
markets.
14
<PAGE>
INDIRECT CHANNELS OF DISTRIBUTION
The Company markets its Enterprise Desktop Management and Groupware
products through distributors and resellers in addition to its direct sales
force. These distributors and resellers also sell other products that are
complementary to, or compete with, those of ON. There can be no assurance that
these distributors and resellers will not give greater priority to products of
other suppliers. They have no long-term obligation to purchase products from the
Company. Since the Company's agreements with its distributors provide for a
right of return, revenue recognized upon sales to distributors is subject to a
reserve for returns. Although management believes that the current reserve
balance is adequate to cover this exposure, there can be no assurance that any
future period reserves for returns will be adequate. In addition, the Company
may be unaware of the nature and scope of the representations made to customers
by these distributors and resellers. For example, they could make
representations to customers about the Company's current and future products
that are inaccurate or incomplete. This could result in the products not meeting
the customers' expectations or requirements. Although the Company's agreements
with its distributors generally provide the Company with recourse against
unauthorized action taken by the distributors, there can be no assurance that
the Company could recover adequate compensation to cover the damage caused by an
inaccurate representation.
PROPRIETARY TECHNOLOGY
The Company's success is heavily dependent upon its proprietary
software technology. The Company relies on a combination of contractual rights,
trademarks, trade secrets and copyrights to establish and protect its
proprietary rights in its software.
The Company uses a printed "shrink-wrap" license for users of its
Groupware products distributed through traditional distribution channels in
order to protect its copyrights and trade secrets in those products. Since these
shrink-wrap licenses are not signed by the licensee, many authorities believe
that they may not be enforceable under many state laws and the laws of many
foreign jurisdictions. If such licenses are not enforceable, the user would not
be bound by the terms thereof, including the terms which seek to protect the
Company's proprietary technology. If the printed shrink-wrap licenses prove to
be unenforceable, this may have a material adverse effect on the Company's
business, condition (financial or otherwise), prospects and results of
operations.
The Company uses either a printed "shrink-wrap" license or obtains
signed license agreements from users of its Enterprise Desktop Management
products to protect its copyrights and trade secrets in those products. The
licenses may not be enforceable under some state laws and the laws of many
foreign jurisdictions. If such licenses are not enforceable, the user would not
be bound by the terms thereof, including the terms which seek to protect the
Company's proprietary technology. If the signed license agreements prove to be
unenforceable, this may have a material adverse effect on the Company's
business, condition (financial or otherwise), prospects and results of
operations.
The laws of some foreign countries either do not protect the Company's
proprietary rights or offer only limited protection for those rights.
Furthermore, in countries with a high incidence of software piracy, the Company
may experience a higher rate of piracy of its products.
The Company has obtained registrations in the United States for the
following trademarks: ON Technology, Notework, Meeting Maker, ON Technology &
Design, ON Location, Instant Update and DaVinci email. The Company has filed for
the trademark "ON Command CCM" in the United States, the European Community,
Canada and Australia. The Company has obtained only four foreign registrations
of its Notework mark and two foreign registrations of its Meeting Maker mark,
due to significant costs involved in obtaining foreign registrations. As a
result, the Company may not be able to prevent a third party from using its
trademarks in many foreign jurisdictions. The Company has not to date registered
any of its copyrights.
There can be no assurance that the steps taken by the Company to
protect its proprietary software technology will be adequate to deter
misappropriation of this technology. Lesser sensitivity by corporate,
15
<PAGE>
government or institutional users to avoiding copyright infringement could have
a material adverse effect on the Company's business, condition (financial or
otherwise), prospects and results of operation.
There has been substantial litigation in the software industry
involving intellectual property rights of technology companies, although, to
date, the Company has not been subject to any such litigation. Although the
Company does not believe that it is infringing the intellectual property rights
of others, there can be no assurance that such claims, if asserted, would not
have a material adverse effect on the Company's business, condition (financial
or otherwise) prospects and results of operations. In addition, as the Company
may acquire or license a portion of the software included in its future products
from third parties, its exposure to infringement actions may increase because
the Company must rely upon such third parties for information as to the origin
and ownership of any software being acquired. The Company generally obtains
representations as to the origin and ownership of such acquired or licensed
software and generally obtains indemnification to cover any breach of such
representations. However, there can be no assurance that such representations
are accurate or that such indemnification will provide adequate compensation for
a breach of such representations. In the future, litigation may be necessary to
enforce and protect trade secrets and other intellectual property rights owned
by the Company. The Company may also be subject to litigation to defend against
claimed infringement of the rights of others or to determine the scope and
validity of the proprietary rights of others. Any such litigation could be
costly and cause diversion of management's attention, either of which could have
a material adverse effect on the Company's business, condition (financial or
otherwise) prospects or results of operations. Adverse determinations in such
litigation could result in the loss of the Company's proprietary rights, subject
the Company to significant liabilities, require the Company to seek licenses
from third parties or prevent the Company from manufacturing or selling its
products, any one of which could have a material adverse effect on the Company's
business, condition (financial or otherwise), prospects and results of
operations. Furthermore, there can be no assurance that any necessary licenses
will be available on reasonable terms, or at all.
The Company could be subjected to lawsuits by customers, past, present
or future, and others due to possible errors in the Company's software. The
Company is not aware of any material errors in its software or any pending or
threatened litigation. The Company maintains insurance covering software errors
and omissions of $2 million domestically and $1 million internationally in
addition to an umbrella policy covering liabilities of up to $10 million
globally. The Company believes that its insurance coverages are sufficient to
cover any such losses.
INTERNATIONAL REVENUE
For the years ended December 31, 1997 and 1998 and the nine months
ended September, 1999, total revenue from international licenses (license
revenue from outside the United States) represented approximately 37%, 54% and
54% respectively, of the Company's total revenue. The Company expects that
international revenue may constitute a significantly greater portion of the
Company's total revenue for fiscal year 1999. Accordingly, a greater percentage
of the Company's total revenue will be subject to the risks inherent in
international sales, including the impact of fluctuating exchange rates on
demand for its products, longer payment cycles, greater difficulty in protecting
intellectual property, greater difficulty in accounts receivable collection,
unexpected changes in legal and regulatory requirements, seasonality due to the
slowdown of European business activity in the third quarter and tariffs and
other trade barriers. There can be no assurance that these factors will not have
a material adverse effect on the Company's future international license revenue.
LOSS OF KEY MANAGEMENT PERSONNEL
The Company's success depends to a significant extent upon a number of
key technical and management employees. While the Company's employees are
required to sign standard agreements concerning confidentiality and ownership of
inventions, the employees, with the exception of Messrs. Herman DeLatte and
Stephen Wietrecki, are generally not otherwise subject to employment agreements
or noncompetition covenants. The loss of the services of any of the Company's
key employees could have a material adverse effect on the Company's business,
condition (financial or otherwise), prospects and results of operation. The
Company does not maintain life insurance policies on key employees. The
Company's success also depends in large part upon its ability to attract and
retain highly skilled technical, managerial, sales and marketing personnel.
16
<PAGE>
Competition in the software industry for such personnel is intense.
There can be no assurance that the Company will be successful in retaining its
existing key personnel and in attracting and retaining the personnel it
requires.
The Company announced the resignation of the Chief Financial Officer,
John Bogdan, and the appointment of Stephen Wietrecki as the interim Chief
Financial Officer on April 5, 1999. On April 8, 1999, the Company announced the
alerting to the U.S. Attorney as to possible misappropriation of Company funds
by John Bogdan. On May 6, 1999, the Company announced the appointment of Stephen
Wietrecki as Chief Financial Officer and Vice President of Finance.
The Company also announced on July 21, 1999 the resignations of
Robert Orr, Vice President, North American Sales and Support, and Roy Sanford,
Vice President, Worldwide Marketing, in an effort to streamline its senior sales
and marketing staff. In conjunction with this effort, the Company appointed
Hans-Till Freiherr von Ruexleben to Vice President Sales and Support on July 21,
1999.
GROUPWARE BUSINESS
The Company has made the strategic decision to limit its Groupware
marketing efforts to exclusively selling new seats to its existing customer
base, while focusing the majority of its management, financial and technical
resources on the CCM products. The Company believes that in the short-term the
Company can significantly reduce the costs associated with the Groupware
products while continuing to generate cash flow from the sale of these products.
However, there can be no assurance that cash flow from the sale of the Groupware
products will not decrease faster than expected. In addition, over the longer
term, the Company's strategic decision to cease marketing the Groupware products
to new customers will lead to an erosion of the customer base and a reduction of
revenue from such products.
The Company's ability to attract and retain the employees needed to
service the Groupware products may be materially adversely affected by the
Company's strategic decision to de-emphasize the Groupware products. Any loss of
revenue from the Groupware products may have a material adverse effect on the
Company's business, condition (financial or otherwise), prospects and results of
operation.
VARIABILITY OF QUARTERLY OPERATING RESULTS
The Company's licensing activity and results of operations can
fluctuate significantly on a quarterly basis. Causes of such fluctuations may
include, among other factors the volume and timing of new and repeat orders, the
introduction or announcement of new products or product enhancements by ON or
third parties, interruption in the Company's overnight delivery, telephone or
internal networks and databases, work stoppages, changes in product prices,
changes in operating expenses, changes in product mix, increase in international
sales as a percentage of total revenue, seasonality, trends in the computer
industry, unavailability of product, potential software viruses and perceived
threats thereof, customer order deferrals, general economic conditions,
extraordinary events such as acquisitions or litigation and the occurrence of
unexpected events. While to date, the Company has not experienced any work
stoppages or unavailability of products, there can be no assurance any of such
events will not occur in the future. The occurrence of any such event could have
a material adverse effect on the Company's business, condition (financial or
otherwise), prospects and results of operations. Because of the nature of its
distribution methods for its Groupware, the Company has virtually no backlog
with respect to such products and generally cannot predict when users will
license such products. As a result of the longer enterprise sales and product
roll-out cycle for CCM, the Company will be better able to assess anticipated
customer orders for CCM. Historically, repeat orders have accounted for a
significant portion of the Company's total revenue; however, there can be no
assurance that the Company will be able to sustain current repeat order rates in
the future, in light of the de-emphasis in marketing efforts for the Groupware
products. Furthermore, since the Company's cost of total revenue is relatively
low and its operating expenses are relatively fixed, any revenue shortfall in a
quarter will result in a substantially similar shortfall in net income. In
addition, significant quarterly fluctuations in licensing activity will cause
significant fluctuations in the Company's cash flows and cash equivalents,
accounts receivable and deferred revenue accounts on the Company's balance
sheet.
17
<PAGE>
The Company's business has experienced and is expected to continue to
experience seasonality, due in part to customer buying patterns. In recent
years, the Company generally has had greater demand for its products in the
fourth quarter and has had weaker demand for its products during the first
quarter. These fluctuations are caused primarily by customer budgeting and
purchasing patterns. The Company believes this pattern will continue.
The Company believes that period-to-period comparisons of its
financial results should not be relied upon as an indication of future
performance.
18
<PAGE>
YEAR 2000 ISSUE
As explained below, the Company has addressed Year 2000 issues.
However, because no single standard for Year 2000 compliance has been agreed
upon by any industry group or promulgated by any government body, there can be
no assurance that the Company's efforts to address Year 2000 issues will result
in its products and internal computerized information systems being Year 2000
compliant in accordance with the various standards that have developed and will
continue to develop in the industry.
The Company's management has evaluated, and believes that it has
adequately addressed the potential impact of the year 2000 on the processing of
date-sensitive information by the Company's internal computerized information
systems and the Company's software products being sold. The year 2000 problem is
the result of computer programs being written using two digits (rather than
four) to define the applicable year. Any of the Company's products that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000, which could result in miscalculation or system failures. The
Company's costs incurred in conjunction with evaluating and addressing Year 2000
issues have not had, and the Company's expected future 2000 related expenditures
will not have a material impact on the Company's business, condition (financial
or otherwise), prospects and results of operations. However, failure of the
Company, its customers or vendors to resolve any foreseen or unforeseen
processing issues in a timely manner, could have a material adverse effect on
the Company's business, condition (financial or otherwise), prospects and
results of operations.
Over the past year, the Company has made substantial modifications and
improvements to its operational software. An integral part of this process has
been to review all newly purchased and internally developed software for Year
2000 compliance. The Company completed an evaluation of all of the existing
software, hardware and equipment used in its internal systems and operations and
believes that it has undertaken all of the required actions to ensure that such
systems are now Year 2000 compliant, at an approximate cost of $250 thousand.
The Company believes that although these costs are not material to its business,
if there are any unforeseen processing issues which have not been adequately
addressed, the Year 2000 issue could have a material adverse impact on the
Company's business, condition (financial or otherwise), prospects and results of
operations.
The Company has also initiated and substantially completed formal
communications with its major suppliers, customers and service providers to
determine the extent to which the Company may be vulnerable to any failures by
any of these parties to remedy their own Year 2000 issues. At this time, the
aforementioned communications have led us to believe that the nature and extent
of any potential adverse impact resulting from the failure of third party
suppliers, customers and service providers to achieve Year 2000 compliance is
minimal. Because the cost and timing of Year 2000 compliance by third parties
such as suppliers, customers and service providers is not within the Company's
control, no assurance can be given with respect to the cost or timing of such
efforts or any potential adverse effects on the Company of any failure by these
third parties to achieve Year 2000 compliance.
The Company believes that it has adequately established contingency
plans to manage the impact of a failure by any of its third party suppliers,
customers or service providers to be Year 2000 compliant. The Company believes
that its relationships with multiple third party suppliers and service providers
and the diversity of its customer base should reduce, to some extent, the impact
of any such failures. There can be no assurance that the contingency plans
implemented by the Company will successfully mitigate issues resulting from
Year 2000 non-compliance, and in the event that such plans do not successfully,
in whole or in part, mitigate such issues, there could be a material adverse
affect on the Company's business, condition (financial or otherwise), prospects
or results of operations.
19
<PAGE>
VOLATILITY OF STOCK PRICE
The trading price of the Company's Common Stock has been, and in the
future may be, subject to wide fluctuations in response to actual or anticipated
quarterly operating results of the Company, announcements of technological
innovations or new applications by the Company or its competitors and general
market conditions in the software industry, as well as other events or factors.
In addition, stock markets have experienced extreme price and volume trading
volatility in recent years. This volatility has had a substantial effect on the
market price of many technology companies and has often been unrelated to the
operating performance of those companies. This volatility may adversely effect
the market price of the Company's Common Stock.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
20
<PAGE>
ON TECHNOLOGY CORPORATION AND SUBSIDIARIES
FORM 10-Q, September 30, 1999
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
If a stockholder intends to present a proposal at the Annual Meeting of
Stockholders of the Company in 2000 (the "2000 Annual Meeting") and does not
submit such proposal on or before December 31, 1999, such proposal will not be
included in the proxy statement and proxy card related to the 2000 Annual
Meeting. Nonetheless, such stockholder may raise such proposal at the 2000
Annual Meeting; however, as a result of the adoption by the SEC on May 21, 1998
of new rule 14a-4(c)(1) under the Securities and Exchange Act of 1934, as
amended, if such stockholder fails to notify the Company at least 45 days prior
to March 31, 2000 (i.e., the month and day of the mailing of the Company's proxy
statement and proxy card related to the Annual Meeting of Stockholders of the
Company in 1999) of its intent to raise such proposal at the 2000 Annual
Meeting, then management proxies would be allowed to use their discretionary
voting authority in the event such proposal is raised at the 2000 Annual
Meeting, without any discussion of the matter in the proxy statement related to
the 2000 Annual Meeting.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits listed in the accompanying Exhibit Index on page XX are
filed or incorporated by reference as part of this Report.
(b) Reports on Form 8-K
None
21
<PAGE>
ON TECHNOLOGY CORPORATION AND SUBSIDIARIES
FORM 10-Q, September 30, 1999
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ON TECHNOLOGY CORPORATION
/s/ Herman DeLatte
------------------
Date: November 15, 1999 Name: Herman DeLatte
Title: Chief Executive Officer
/s/ Stephen J. Wietrecki
------------------------
Date: November 15, 1999 Name: Stephen J. Wietrecki
Title: Vice President of Finance
and Chief Financial Officer
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