UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-26008
CLICKACTION INC.
STATE OF INCORPORATION: DELAWARE
IRS EMPLOYER I.D. NUMBER: 77-0195362
2197 E. BAYSHORE ROAD
PALO ALTO, CA 94303
(650) 473-3600
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 .
The number of shares outstanding of the registrant's common stock as of
September 30, 1999 was 5,283,533.
Transitional Small Business Disclosure Format (check one):
Yes No X
<PAGE>
CLICKACTION INC.
FORM 10-QSB
For the Quarterly Period Ended September 30, 1999
Table of Contents
Part I. Financial Information Page
Item 1. Financial Statements
a) Condensed Consolidated Balance Sheets as of
September 30, 1999 and December 31, 1998 3
b) Condensed Consolidated Statements of Operations for
the three and nine months ended September 30, 1999
and 1998 4
c) Condensed Consolidated Statements of Cash Flows for
the nine months ended September 30, 1999 and 1998 5
d) Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of
Operation 10
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
<PAGE>
<TABLE>
<CAPTION>
Part I. Financial Information
Item 1. Financial Statements
CLICKACTION INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1999 and December 31, 1998
(Unaudited)
(in thousands, except share data)
September 30, December 31,
------------- ------------
1999 1998
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,861 $ 5,440
Accounts receivable, net 5,058 3,361
Inventories 745 266
Other current assets 141 133
------------- ------------
Total current assets 10,805 9,200
Property and equipment, net 420 218
Other assets 282 619
------------- ------------
Total assets $ 11,507 $ 10,037
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,752 $ 1,126
Accrued compensation 618 460
Other accrued liabilities 2,481 2,189
Deferred revenue 729 599
------------- ------------
Total current liabilities 5,580 4,374
Stockholders' equity:
Preferred stock; $0.001 par value; 2,000,000
shares authorized; none and 132,399 shares
issued and outstanding ----- -----
Common stock; $0.001 par value; 20,000,000
shares authorized; 5,283,533 and 4,741,959
shares issued and outstanding 5 5
Deferred compensation (190) (249)
Additional paid-in capital 10,551 9,574
Accumulated deficit (4,439) (3,667)
----------- ----------
Total stockholders' equity 5,927 5,663
----------- ----------
Total liabilities and stockholders' equity $ 11,507 $ 10,037
=========== ==========
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CLICKACTION INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
(Unaudited)
(in thousands, except per share data)
Three Months Ended Nine Months Ended
--------------------------- ---------------------------
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net revenues $ 5,203 $ 3,760 $ 14,450 $ 10,351
Cost of revenues 1,368 971 4,107 2,954
------------ ------------ ------------ ------------
Gross profit 3,835 2,789 10,343 7,397
------------ ------------ ------------ ------------
Operating expenses:
Product development 747 372 2,087 1,155
Sales and marketing 2,803 1,661 6,744 4,615
General and
administrative 905 677 2,217 1,836
Merger-related 232 --- 232 ---
------------ ------------ ------------ ------------
4,687 2,710 11,280 7,606
------------ ------------ ------------ ------------
Operating income
(loss) (852) 79 (937) (209)
Interest income, net 63 58 184 180
------------ ------------ ------------ ------------
Income (loss)
before taxes (789) 137 (753) (29)
Income tax expense --- 5 19 6
------------ ------------ ------------ ------------
Net income (loss) $ (789) $ 132 $ (772) $ (35)
============ ============ ============ ============
Basic net income
(loss) per share $ (0.15) $ 0.03 $ (0.16) $ (0.01)
============ ============ ============ ============
Shares used in
computing basic net
income (loss) per
share 5,128 4,690 4,909 4,633
============ ============ ============ ============
Diluted net income
(loss) per share $ (0.15) $ 0.03 $ (0.16) $ (0.01)
============ ============ ============ ============
Shares used in
computing diluted
net income (loss)
per share 5,128 5,123 4,909 4,633
=========== ============ ============ ============
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CLICKACTION INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended
September 30, 1999 and 1998
(Unaudited)
(in thousands)
1999 1998
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (772) $ (35)
Adjustments to reconcile net loss to net
cash provided by (used for) operating
activities:
Depreciation and amortization 574 563
Amortization of deferred compensation 59 7
Provision for returns and doubtful accounts 51 (987)
Changes in operating assets and liabilities:
Accounts receivable (2,065) (549)
Inventories (479) 221
Other assets (8) 826
Accounts payable 626 203
Accrued compensation 158 (45)
Deferred revenues 130 ----
Other accrued liabilities 610 197
------------ -----------
Net cash provided by (used for)
operating activities (1,116) 401
------------ -----------
Cash flows from investing activities:
Additions to property and equipment (363) (92)
Software production costs and other assets (77) (575)
------------ -----------
Net cash used for investing activities (440) (667)
Cash flows from financing activities:
Proceeds from exercise of stock options 309 308
Proceeds from sale of common stock ---- 17
Proceeds from sale of preferred stock 668 300
------------ -----------
Net cash provided by financing activities 977 625
------------ -----------
Net change in cash and cash equivalents (579) 359
Cash and cash equivalents at beginning of
period 5,440 5,036
------------ -----------
Cash and cash equivalents at end of period $ 4,861 $ 5,395
============ ===========
Supplemental cash flow information:
Deferred compensation associated with stock
compensation $ ---- $ 262
============ ===========
Conversion of preferred stock to common
stock upon close of business combination $ 408 $ ----
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
CLICKACTION INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
In the opinion of management, the accompanying unaudited condensed balance
sheets, statements of operations, and statements of cash flows include all
material adjustments necessary for their fair presentation. The interim
results presented are not necessarily indicative of results for a full year.
Certain reclassifications have been made for consistent presentation. For
further information, refer to the financial statements and footnotes thereto
included in the ClickAction Inc.'s (the "Company"), formerly MySoftware
Company, 1998 Annual Report on Form 10-KSB.
The accompanying consolidated financial statements include the accounts of
ClickAction and its wholly owned-subsidiary, MarketHome. All significant
intercompany accounts and transactions have been eliminated in the
consolidated statements.
2. Per Share Computation
Basic net income (loss) per share is computed using the weighted average
number of common shares outstanding during each period presented. Diluted net
income (loss) per share is computed using the weighted average number of
shares of common stock and potential common stock using the treasury stock
method, when dilutive. The difference between shares used for basic net
income per share and diluted net income per share for the three-month period
ended September 30, 1998 is comprised of the weighted average number of
common stock options outstanding during these periods using the treasury stock
method. A total of 1,097,067, 1,064,513, and 275,314 stock options with
weighted average exercise prices of $3.41, $3.43, and $2.12 were not
included in the computation of diluted loss per share for the three-month
period ended September 30, 1999, nine-month period ended September 30, 1999
and nine-month period ended September 30, 1998, respectively, because their
effect would have been antidilutive. In addition, 132,399 shares of preferred
stock, using the if-converted method, were not included in the computation of
diluted loss per share for the nine month period ended September 30, 1998
because their effect would have been antidilutive.
3. Business Combination
On August 5, 1999, the Company issued 726,803 shares of its common stock in
exchange for all outstanding common stock of MarketHome, an email marketing
services company. In addition, options to acquire MarketHome's common stock
were exchanged for options to acquire 158,776 shares of the Company's common
stock. This business combination has been accounted for as a pooling-of-
interests combination and, accordingly, the consolidated financial statements
for periods prior to the combination have been restated to include the
accounts and results of operations of MarketHome. The Company recorded
merger-related expenses totaling $232,000 which consisted primarily of legal
and accounting fees.
The results of operations previously reported by the separate companies and
the combined amounts presented in the accompanying condensed consolidated
statements are summarized below (in thousands).
<PAGE>
<TABLE>
<CAPTION>
CLICKACTION INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Six Months Nine Months
Ended Ended Years Ended December 31,
June 30, September 30, ------------------------
1999 1998 1998 1997
---------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Net revenues
ClickAction Inc. $ 9,172 $ 10,351 $ 15,038 $ 12,353
MarketHome 75 ---- 6 ----
---------- ------------ ----------- ------------
Combined $ 9,247 $ 10,351 $ 15,044 $ 12,353
========== ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
Six Months Nine Months
Ended Ended Years Ended December 31,
June 30, September 30, ------------------------
1999 1998 1998 1997
---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net income (loss)
ClickAction Inc. $ 605 $ 114 $ 479 $ (4,031)
MarketHome (588) (149) (259) (6)
---------- ----------- ----------- ------------
Combined $ 17 $ (35) $ 220 $ (4,037)
========== =========== =========== ============
</TABLE>
[FN]
There were no significant transactions between ClickAction Inc. and
MarketHome prior to the combination.
4. Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards for derivative financial instruments and hedging
activities and requires the Company to recognize all derivatives as either
assets or liabilities on the balance sheet and measure them at fair value.
Gains and losses resulting from changes in fair value would be accounted for
depending on the use of the derivative and whether it is designated and
qualifies for hedge accounting. The Company will be required to implement
SFAS No. 133 as amended by SFAS No 137, for fiscal 2001 and does not believe
its adoption will have an effect on its financial statements.
In December 1998, the AICPA issued SOP 98-9, Modification of SOP 97-2,
Software Revenue Recognition, with Respect to Certain Transactions. SOP 98-9
establishes the method of recognizing revenue for certain multiple-element
software arrangements. The Company will be required to adopt SOP 98-9 for
transactions entered into beginning January 1, 2000. The Company expects
that the adoption of SOP 98-9 will not have a material impact on the
Company's financial position, results of operations or cash flows.
5. Segment and Geographic Information
The Company is principally engaged in the development, marketing and
manufacturing of small business marketing application programs, and
e-marketing web-related products and services. The Company's main products
and services provide solutions for web email relationship management
services, creating
<PAGE>
CLICKACTION INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
customized, professional-quality mailing lists, brochures, labels, business
cards, invoices/estimates, and other marketing communications materials. The
Company also markets annuity-based mailing products and services which
complement the Company's existing mailing software products as well as other
related annuity-based products and services.
The Company identifies such segments based principally upon the type of
products or services sold. The Company has modified the composition of its
operating segments to better represent how these lines are being managed by
the Company. Prior period amounts have been restated to conform to the
current composition of the Company segments.
The following segment information is provided for the three months and nine
months ended September 30, 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
Small
Business
Marketing Annuity Web
Products Services Services Total
----------- ---------- ---------- -------
<S> <C> <C> <C> <C>
For the three months ended
September 30, 1999
Net revenues $ 4,115 $ 641 $ 447 $ 5,203
Cost of revenues 1,180 176 12 1,368
----------- ---------- ---------- --------
Gross profit 2,935 465 435 3,835
Segment operating expenses 1,736 390 1,424 3,550
----------- ---------- ---------- --------
Segment profit (loss) $ 1,199 $ 75 $ (989) 285
=========== ========== ==========
General and administrative expenses 905
Merger related expenses 232
Interest income, net 63
--------
Loss before taxes, as reported $ (789)
========
</TABLE>
<TABLE>
<CAPTION>
Small
Business
Marketing Annuity Web
Products Services Services Total
----------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
For the three months ended
September 30, 1998
Net revenues $ 3,167 $ 593 $ ---- $ 3,760
Cost of revenues 757 214 ---- 971
----------- ---------- ---------- ---------
Gross profit 2,410 379 ---- 2,789
Segment operating expense 1,532 414 87 2,033
----------- ---------- ---------- ---------
Segment profit (loss) $ 878 $ (35) $ (87) 756
=========== ========== ==========
General and administrative expenses 677
Interest income, net 58
---------
Income before taxes, as reported $ 137
=========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CLICKACTION INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Small
Business
Marketing Annuity Web
Products Services Services Total
----------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
For the nine months ended
September 30, 1999
Net revenues $ 10,289 $ 2,984 $ 1,177 $ 14,450
Cost of revenues 3,400 690 17 4,107
----------- ---------- ---------- ---------
Gross profit 6,889 2,294 1,160 10,343
Segment operating expenses 4,253 1,295 3,283 8,831
----------- ---------- ---------- ---------
Segment profit (loss) $ 2,636 $ 999 $ (2,123) 1,512
=========== ========== ========== =========
General and administrative expenses 2,217
Merger related expenses 232
Interest income, net 184
---------
Loss before taxes, as reported $ (753)
=========
</TABLE>
<TABLE>
<CAPTION>
Small
Business
Marketing Annuity Web
Products Services Services Total
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
For the nine months ended
September 30, 1998
Net revenues $ 7,816 $ 2,535 $ ---- $ 10,351
Cost of revenues 2,273 681 ---- 2,954
---------- ---------- ---------- ---------
Gross profit 5,543 1,854 ---- 7,397
Segment operating expense 4,155 1,495 120 5,770
---------- ---------- ---------- ---------
Segment profit (loss) $ 1,388 $ 359 $ (120) 1,627
========== ========== ==========
General and administrative expenses 1,836
Interest income, net 180
---------
Loss before taxes, as reported $ (29)
=========
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
In addition to historical information contained herein, the following
discussion contains words such as "intends," "believes," "anticipates,"
"plans," "expects" and similar expressions which are intended to identify
forward-looking statements that involve risks and uncertainties. The
Company's actual results could differ significantly from the results
discussed in these forward-looking statements. Factors that could cause or
contribute to such differences include the factors discussed below as well as
the factors discussed in the Company's Form 10-KSB for the fiscal year ended
December 31, 1998. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The
Company undertakes no obligation to release the results of any revision to
these forward-looking statements which may be made to reflect events or
circumstances occurring after the date hereof or to reflect the occurrence of
unanticipated events.
Overview
With the MarketHome aquisition in August 1999, the Company began to shift its
strategic focus to the web-based email marketing products and services. The
Company intends to invest in the development, marketing and selling of such
e-marketing web-based products and services. However, the Company has
continued to invest in growing its core business in the areas of retail
desktop products and annuities services with the intent of offering its small
business customers web-based products and services in the near future. Due to
such shift in strategy and investment in the web-based product and services, the
Company's management is anticipating operating losses in the near future.
Results of Operations
Three Months Ended September 30, 1999 and 1998
- ----------------------------------------------
Net revenues for the three months ended September 30, 1999 increased $1.4
million, or 38 percent, to $5.2 million, compared with net revenues of $3.8
million for the corresponding quarter in 1998. The increase in third quarter
revenue was due primarily to the continued success in its retail, Original
Equipment Manufacturers (OEM) and direct sales channels with respect to its
small business marketing products and services. During the third quarter of
1999 the Company also benefited from the tripling of its E-mail relationship
management ("ERM") service revenue as well as the additional revenue from
four seasonal holiday retail products and four applications designed for the
Macintosh platform which were introduced in the third quarter of 1999. The
Company also launched its ERM 4.0 system, designed to provide enterprises
with solutions for getting targeted prospects to their web site and enabling
them to build profitable, one-to-one relationships with their customers.
Gross profit for the three months ended September 30, 1999 increased 38
percent to $3.8 million, from $2.8 million in the same period in 1998. Gross
margin for the third quarter of 1999 was 73.7 percent, compared to 74.2
percent for the same period in 1998. The decrease in the gross profit for
the quarter was primarily due to increased cost of goods sold associated with
promotional activities. The Company's gross margins vary from period to
period due primarily to changes in product mix, the timing and nature of
promotional activities, changes in product return levels, and the amortization
of capitalized software production costs.
The Company's total operating expenses for the three months ended
September 30, 1999 increased 73 percent to $4.7 million, from $2.7 million
for the corresponding period in 1998. The operating expenses for the quarter
ended September 30, 1999 included merger-related expenses of $232,000
associated with the MarketHome acquisition. Without these merger related
expenses, total operating expenses for the period ended September 30, 1999
would have been $4.5 million. The increase in total operating expenses
resulted primarily from higher product development, marketing and selling
expenses associated with its new Internet ERM services as well as the costs
associated with the corporate name change from MySoftware Company to
ClickAction Inc. in the third quarter 1999.
<PAGE>
Product development expenses increased 101 percent to $747,000 in the three
months ended September 30, 1999, from $372,000 in the same period in 1998.
The increase in product development expenses was mainly due to the
development of the Company's Internet ERM services.
Sales and marketing expenses increased 65 percent to $2.8 million in the
third quarter of 1999, from $1.7 million for the corresponding period in
1998. Sales and marketing expenses increased principally as a result of
higher marketing expenses due to branding and advertising efforts associated
with the Company's name change, its new Internet ERM services, the build-up
of its client service group for its enterprise customers in the e-mail space,
the build-up of its field sales forces in the ERM services, and channel
promotional selling expenses for the retail channel.
General and administrative expenses increased 34 percent to $905,000 in the
three months ended September 30, 1999, from $677,000 in the same period in
1998, primarily as a result of an increase in information technology system
expenses and headcount to support the development of the Company's Internet
services, the cost associated with the name change and the post-merger
integration expenses.
The Company also incurred merger-related expenses of $232,000 associated with
its acquisition of MarketHome for the three months period ended
September 30, 1999. These merger-related expenses are primarily comprised of
legal and accounting expenses. No similar expense was recorded in the three
months ended September 30, 1998.
The Company had an operating loss of $852,000 for the three months ended
September 30, 1999, compared to an operating income of $79,000 in the
corresponding period in 1998.
Net interest income was $63,000 for the quarter ended September 30, 1999,
compared to $58,000 for the corresponding period in 1998. The increase in
interest income was due primarily to higher average daily cash balances in
the third quarter of 1999 compared to the third quarter in 1998.
The Company did not record any tax provision for the three months ended
September 30, 1999 as compared to a $5,000 income tax expense for the same
period in 1998. The Company has NOL carryforwards available to offset current
taxable income and continues to maintain a full valuation allowance against
its deferred tax assets due to uncertainty about their realization.
The resulting net loss for the three months ended September 30, 1999 was
$789,000, compared to a net income of $132,000 in the comparable period in
1998.
Nine Months Ended September 30, 1999 and 1998
- ---------------------------------------------
For the nine months ended September 30, 1999, net revenues increased $4.1
million, or 40 percent to $14.5 million, compared with net revenues of $10.4
million for the corresponding period in 1998. The increase was primarily
attributable to its continued success in the retail, OEM and direct sales
channels with respect to its small business marketing products and services
as well as the increased sales from the Company's Internet web services.
For the nine months ended September 30, 1999, gross profit increased 40
percent to $10.3 million, from $7.4 million for the corresponding period in
1998. Gross margin for the nine months ended September 30, 1999 was 71.6
percent, compared to 71.5 percent for the same period in 1998. The increase
in gross margin in 1999 was primarily due to increase in OEM sales and the
increase of services revenue from such OEM sales during the first nine months
of 1999 compared to the same period in 1998.
<PAGE>
For the nine months ended September 30, 1999, total operating expenses
increased 48 percent to $11.3 million, from $7.6 million for the
corresponding period in 1998. The nine-month operating expenses included
merger-related expenses of $232,000. With such merger-related expenses, total
operating expenses for the nine months ended September 30, 1999 were $11.0
million.
For the nine months ended September 30, 1999, product development expenses
were up 81 percent to $2.1 million, compared to $1.2 million for the
corresponding period in 1998. The increase in product development expenses
was primarily due to the increase in headcount and development expenses for
the Company's Internet e-marketing web services.
For the nine months ended September 30, 1999, sales and marketing expenses
increased 46 percent to $6.7 million compared to $4.6 million for the
corresponding period in 1998, primarily as a result of the increased
marketing expenses for its Internet ERM services, branding expenses for the
corporate name change, the build-up of its client services group for the
Internet ERM services, the build-up of the field sales forces for its ERM
services and the promotional expenses for the Company's e-marketing products
in the retail channel.
For the nine months ended September 30, 1999, general and administrative
expenses increased 22 percent to $2.2 million compared to $1.8 million for
the corresponding period in 1998, primarily due to the increase in systems
expenses and headcount to support the development of the Company's Internet
services, the costs associated with the corporate name change as well as the
post-merger integration expenses.
The Company also incurred merger-related expenses of $232,000 associated with
its acquisition of MarketHome for the nine months period ended
September 30, 1999. These merger-related expenses are primarily comprised of
legal and accounting expenses. No similar expense was recorded in the nine
months ended September 30, 1998.
For the nine months ended September 30, 1999, the Company reported an
operating loss of $937,000, compared to an operating loss of $209,000 in the
corresponding period in 1998. Net operating loss for the nine months ended
September 30, 1999 would have been $705,000 without the merger-related
expenses of $232,000. The higher net operating loss for the nine months ended
September 30, 1999 compared to the same period in 1998 was mainly due to the
product development, marketing and selling expenses associated with the
Internet ERM services as well as higher general and administrative expenses
to support this investment, the corporate name change, and post-merger
integration expenses.
Interest income for the nine months ended September 30, 1999 was $184,000,
compared to $180,000 for the corresponding period in 1998. The increase in
interest income was primarily due to higher average cash balances in 1999.
The Company reported income tax expense of $19,000 for the nine months ended
September 30, 1999 as compared to $6,000 for the same period of 1998. The
income tax expense reported in 1999 represents alternative minimum taxes. The
Company has NOL carryforwards available to offset current taxable income and
continues to maintain a full valuation allowance against its deferred tax
assets due to uncertainty about their realization.
For the nine months ended September 30, 1999, the Company reported a net loss of
$772,000, compared to $35,000 in the corresponding period in 1998.
The Company's business has experienced and is expected to continue to experience
significant seasonality, primarily due to retailer, distributor and end-user
buying patterns. Typically, net revenues are weakest in the second and third
quarters. The Company expects its net revenues and operating results to
continue to reflect seasonality.
<PAGE>
For the nine months ended September 30, 1999, the Company reported a net loss
of $772,000, compared to $35,000 in the corresponding period in 1998.
The Company's business has experienced and is expected to continue to
experience, significant seasonality, primarily due to retailer, distributor and
end-user buying patterns. Typically, net revenues are weakest in the second
and third quarters. The Company expects its net revenues and operating results
to continue to reflect seasonality.
The Company has experienced, and may continue to experience, significant
fluctuations in operating results due to a variety of factors. These factors
include: the size and rate of growth of the market for task-specific
applications for small businesses and of the software market in general;
market acceptance of the Company's products and services and those of its
competitors; the development of new products and the enhancement of existing
services; the dependence of principal customers and partners; product
returns; changes in pricing policies by the Company and its competitors and
partners; accuracy of retailers' forecasts of consumer demand; the timing of
orders from major retailer and distributor customers; and cancellations or
terminations by retail or distributor accounts; shelf space reductions;
delays in shipment and overall market dynamics, economic conditions and industry
consolidation.
Liquidity and Capital Resources
Since its inception, the Company has financed its activities almost
exclusively from cash generated by operations and equity financing.
As of September 30, 1999, the Company had $4.9 million in cash and cash
equivalents and had no debt. The Company believes that its existing cash, its
ability to obtain additional credit, and cash generated by operations will be
sufficient to meet its working capital needs at least through mid-2000.
As a result of its recent acquisition and its investment in web-based products
and services, the Company experienced negative cash flows from operations for
the nine months ended September 30, 1999. The Company is currently in the
process of evaluating various financing options and its overall financing
strategy.
Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative financial instruments and hedging
activities and requires the Company to recognize all derivatives as either
assets or liabilities on the balance sheet and measure them at fair value.
Gains and losses resulting from changes in fair value would be accounted for
depending on the use of the derivative and whether it is designated and
qualifies for hedge accounting. The Company will be required to implement
SFAS No. 133 as amended by SFAS No. 137 for fiscal 2001 and does not believe
its adoption will have an effect on its financial statements.
In December 1998, the AICPA issued SOP 98-9, Modification of SOP 97-2,
Software Revenue Recognition, with Respect to Certain Transactions. SOP 98-9
establishes the method of recognizing revenue for certain multiple-element
software arrangements. The Company will be required to adopt SOP 98-9 for
transactions entered into beginning January 1, 2000. The Company expects that
the adoption of SOP 98-9 will not have a material impact on the Company's
financial position, results of operations or cash flows.
Year 2000 Issues
Background of Year 2000 Issues
Many currently installed computer systems and software use only two digits to
identify a year in the date field and are unable to distinguish between
twentieth and twenty-first century dates. Such systems, applications and/or
devices could result in system failures or miscalculations causing
disruptions of operations of many businesses, including, among other things, a
temporary disability to process transactions, send invoices or engage in
similar normal business activities. As a result, many companies' software and
computer systems may need to be upgraded or replaced to comply with such
"Year 2000" requirements.
<PAGE>
State of Readiness
The Company has undertaken various initiatives intended to help ensure that
its computer equipment and software, as well as its software products, will
function properly with respect to dates in the Year 2000 and thereafter. For
this purpose, the term "computer equipment and software" includes systems
that are commonly thought of as information technology systems, including
accounting, data processing, communications networks such as the Internet and
private Intranets, telephone/PBX systems, and other miscellaneous systems.
"Computer equipment and software" also includes systems that are not commonly
thought of as IT systems, such as fax machines, or other miscellaneous
systems. In addition, IT and non-IT systems may contain embedded technology,
which complicates the Company's Year 2000 assessment, remediation, and
testing efforts.
Company's External Software Products
As of September 30, 1999, all of the Company's current software products for
Windows 95 are Year 2000 compliant. Although the Company's software which is
designed for use with Windows 3.1 is not Year 2000 compliant, the Company
provides upgrades to Windows 95 software products for a fee. In addition, the
Company encourages its customers to upgrade to products compatible with
Windows 95 through its written materials and during oral communications with
end-users. There can be no assurance that customers whose computer equipment
and software are not Year 2000 compliant will not encounter unforeseen problems
or disruption to their systems.
Company's Internal Systems and Equipment
Based on an analysis of all systems potentially impacted by conducting
business in the year 2000 and beyond, the Company applies a phased approach
to make such systems and software applications. Beyond awareness of the
issues and the scope of systems involved, the phases of activities in
progress include: an assessment and evaluation of specific underlying computer
systems, software applications and/or hardware; remediation or replacement of
Year 2000 non-compliant technology; validation and testing of technologically
compliant Year 2000 solutions; and the implementation of Year 2000 compliant
solutions. The following table outlines the status and the timing of such
phased activities.
<TABLE>
<CAPTION>
Percentage Completed Expected
Impacted Systems As of September 30,1999 Completion Date
- ----------------------------- ------------------------- -----------------
<S> <C> <C>
Hardware and software systems
used to deliver services.... 90% Q4 1999
Telecommunication equipment.. 97% Q4 1999
Operability with internal
systems of customers and
suppliers................... 75% Q4 1999
</TABLE>
Company's Vendors and Suppliers
The Company relies on two outside software vendors for part of its software
coding. These vendors have reported to the Company that they are Year 2000
compliant. The Company's operational suppliers are for the most part not
date-sensitive for the services or capacity that they are providing the
Company. However, the Company cannot be certain such vendors will not
encounter operational problems due to unforeseen problems related to the Year
2000 issue. Such unforeseen problems could disrupt the services these vendors
provide the Company. If such interruption should occur, the Company does not
foresee any major problems in replacing these vendors or suppliers, and the
cost of replacing such vendors and suppliers, if necessary, is not expected
to materially adversely affect the Company financially.
<PAGE>
Costs to Address Year 2000 Issues
The total cost associated with required modifications to become Year 2000
compliant is not expected to be material to the Company's financial position.
The estimated total cost of addressing Year 2000 issues is approximately
$200,000. As of September 30, 1999, the Company had incurred costs of
approximately $125,000 related to its Year 2000 identification, assessment,
upgrading, remediation and testing efforts.
Year 2000 Issues
The Company believes that the Year 2000 issues will not pose significant
operational problems for the Company. However, if all Year 2000 issues are
not properly identified, or if assessment, remediation and testing are not
effected timely with respect to Year 2000 problems that are identified, there
can be no assurance that the Year 2000 issue will not materially adversely
impact the Company's results of operations or adversely affect the Company's
relationship with customers or others. Additionally, the failure to correct a
material Year 2000 problem could result in an interruption in certain normal
business activities or operations. Such failure could materially and
adversely affect the Company's systems, results of operations, liquidity
and financial condition.
Contingency Plans
The Company expects to develop contingency plans for key internal systems by
mid-November 1999. This contingency planning includes, but is not limited to,
identifying additional vendors who could provide similar goods and services
on short notice. Management expects these plans to substantially reduce the
risk of interruption, delay, or failure of key processes required for the
Company's business operations.
<PAGE>
Part II. Other Information
Item 6. Exhibits and reports on form 8-K
(a) Exhibits
Exhibit 27. Financial Data Schedule.
(b) Reports on Form 8-K
A report on Form 8-K with respect to the Company's MarketHome
acquisition was filed on August 19, 1999.
A report on From 8-K with respect to the Company's corporate name
change from MySoftware Company to ClickAction Inc. was filed on
September 21, 1999.
<PAGE>
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.
ClickAction Inc.
Date: November 11, 1999 By: /s/ Sharon S. Chiu
------------------
Sharon S. Chiu
Chief Financial Officer
(Principal Financial and Accounting Officer)
[ARTICLE] 5
[MULTIPLIER] 1,000
<TABLE>
<S> <C> <C>
[PERIOD-TYPE] 9-MOS 9-MOS
[FISCAL-YEAR-END] DEC-31-1999 DEC-31-1998
[PERIOD-END] SEP-30-1999 SEP-30-1998
[CASH] 4,861 5,394
[SECURITIES] 0 0
[RECEIVABLES] 5,058 2,180
[ALLOWANCES] 0 0
[INVENTORY] 745 399
[CURRENT-ASSETS] 10,805 8,159
[PP&E] 420 227
[DEPRECIATION] 0 0
[TOTAL-ASSETS] 11,507 9,223
[CURRENT-LIABILITIES] 5,580 3,943
[BONDS] 0 0
[PREFERRED-MANDATORY] 0 0
[PREFERRED] 0 0
[COMMON] 5 4
[OTHER-SE] 5,922 5,276
[TOTAL-LIABILITY-AND-EQUITY] 11,507 9,223
[SALES] 14,450 10,351
[TOTAL-REVENUES] 14,450 10,351
[CGS] 4,107 2,954
[TOTAL-COSTS] 4,107 2,954
[OTHER-EXPENSES] 11,280 7,606
[LOSS-PROVISION] 0 0
[INTEREST-EXPENSE] 0 0
[INCOME-PRETAX] 184 180
[INCOME-TAX] 19 6
[INCOME-CONTINUING] 0 0
[DISCONTINUED] 0 0
[EXTRAORDINARY] 0 0
[CHANGES] 0 0
[NET-INCOME] (772) (35)
[EPS-BASIC] (0.16) (0.01)
[EPS-DILUTED] (0.16) (0.01)
</TABLE>
