UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-26008
CLICKACTION INC.
(Exact name of registrant as specified in its charter)
Delaware 77-0195362
(State or other jurisdiction (I.R.S. Employer Identification No.)
ofincorporation or organization)
2197 E. BAYSHORE ROAD
PALO ALTO, CA 94303
(Address of principal executive offices)
Registrant's telephone number, including area code: (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 [ ]
As of April 30, 2000, the registrant had 11,215,608 shares of common
stock outstanding on a post-split basis.
<PAGE>
CLICKACTION INC.
FORM 10-Q
For the Quarterly Period Ended March 31, 2000
Table of Contents
Part I. Financial Information Page
Item 1. Financial Statements
a) Condensed Consolidated Balance Sheets
as of March 31, 2000 and December 31, 1999 3
b) Condensed Consolidated Statements of Operations
for the three months ended March 31, 2000 and 1999 4
c) Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 2000 and 1999 5
d) Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 23
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds 24
Item 6. Exhibits and Reports on Form 8-K 24
Signatures 25
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CLICKACTION INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2000 and December 31, 1999
(in thousands except share data)
March 31, December 31,
2000 1999
----------- ------------
<S> <C> <C>
ASSETS (Unaudited) (Unaudited)
Current assets:
Cash and cash equivalents $ 5,597 $ 3,214
Accounts receivable, net 6,416 6,633
Inventories 1,592 1,538
Other current assets 199 288
---------- ----------
Total current assets 13,804 11,673
Property and equipment, net 2,739 780
Other assets 131 197
----------- -----------
Total assets $ 16,674 $ 12,650
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,185 $ 3,309
Accrued compensation 1,445 745
Other accrued liabilities 3,181 3,090
Deferred revenues 184 193
---------- ------------
Total current liabilities 7,995 7,337
Stockholders' equity:
Preferred stock; $0.0005
par value; 2,000,000
shares authorized; none
outstanding ----- -----
Common stock; $0.0005
par value; 20,000,000
shares authorized;
11,215,608 and 10,812,108
shares issued and outstanding 11 11
Deferred compensation (158) (171)
Additional paid-in capital 16,909 11,364
Accumulated deficit (8,083) (5,891)
----------- ------------
Total stockholders' equity 8,679 5,313
----------- ------------
Total liabilities and
stockholders' equity $ 16,674 $ 12,650
=========== ============
<FN> See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CLICKACTION INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended
March 31, 2000 and 1999
(Unaudited)
(in thousands except share data)
Three Months Ended March 31,
----------------------------
2000 1999
------------ --------------
<S> <C> <C>
Revenues: $ 4,892 $ 4,318
Net desktop applications
Email marketing services 1,114 18
------------ --------------
Total revenues 6,006 4,336
Cost of revenues 1,633 1,396
------------ --------------
Gross profit 4,373 2,940
------------ --------------
Operating expenses:
Product development 1,634 627
Sales and marketing 4,057 1,646
General and administrative 916 603
------------ --------------
6,607 2,876
------------ --------------
Operating income (loss) (2,234) 64
Interest income, net 41 66
------------ --------------
Income (loss) before taxes (2,193) 130
============ ==============
Income tax expense 0 9
------------ --------------
Net income (loss) $ (2,193) $ 121
============ ==============
Basic net income (loss) $ (0.20) $ 0.01
per share ============ ==============
Shares used in computing
basic net income (loss)
per share 10,897 9,534
============ ==============
Diluted net income (loss)
per share $ (0.20) $ 0.01
============ ==============
Shares used in computing
Diluted net income (loss)
per share 10,897 11,898
============ ==============
<FN> See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CLICKACTION INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended
March 31, 2000 and 1999
(Unaudited)
(in thousands)
Three Months Ended
March 31,
------------------
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating
activities:
Net (loss) $ (2,193) $ 121
Adjustments to reconcile net
(loss) to net cash used for
operating activities:
Depreciation and amortization 290 197
Amortization of deferred
Compensation 13 20
Provision for returns and
doubtful accounts (1,007) (36)
Changes in operating assets and
liabilities:
Accounts receivable 1,224 (1,932)
Inventories (54) (293)
Other assets 89 (200)
Accounts payable (124) 1,238
Accrued compensation 701 7
Deferred revenues (9) 871
Other accrued liabilities 91 (648)
Net cash used for operating ----------- ------------
Activities (979) (654)
----------- ------------
Cash flows from investing
activities:
Additions to property and
Equipment (2,170) (218)
Software production costs
and other assets (13) (61)
----------- ------------
Net cash used for investing
Activities (2,183) (280)
----------- ------------
Cash flows from financing
activities:
Proceeds from exercise of
stock options 295 391
Proceeds from sales of
common stock 5,250 ----
Net provided by financing ----------- ------------
Activities 5,545 391
----------- ------------
Net increase (decrease)
in cash and cash equivalents 2,383 (543)
Cash and cash equivalents
at beginning of period 3,214 5,440
----------- ------------
Cash and cash equivalents at
end of period $ 5,597 $ 4,898
=========== =============
</TABLE>
[FN] See accompanying notes to condensed consolidated financial
statements.
<PAGE>
CLICKACTION INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
In the opinion of management, the accompanying unaudited condensed consolidated
balance sheets, statements of operations, and statements of cash flows of
ClickAction, Inc. ("ClickAction" or the "Company") 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 Company's Annual Report on Form 10-KSB, as amended on Form 10-KSBA, for
the year ended December 31, 1999.
The accompanying condensed 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
condensed consolidated statements.
2. Per Share Computation
All common shares have been adjusted to reflect a two-for-one split effected
in the form of a stock dividend on April 20, 2000 to all holders of the
Company's common stock as of April 5, 2000. 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 March 31, 1999 is comprised of the weighted
average number of common stock options outstanding during these periods using
the treasury stock method. A total of 3,504,893 stock warrants and stock options
with weighted average exercise prices of $8.00 were not included in the
computation of diluted loss per share for the three-month period ended March
31, 2000 because their effect would have been antidilutive. In addition, 264,
798 shares of preferred stock, using the if-converted method, were not included
in the computation of diluted loss per share for the three month period ended
March 31, 1999 because their effect would have been antidilutive.
3. Business Combination
On August 5, 1999, the Company issued 1,453,606 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 317,522 shares of the Company's common
stock. This business combination has been accounted for as a pooling-of-
interests combination and, accordingly, the condensed consolidated financial
statements for periods prior to the combination have been restated to include
the accounts and results of operations of MarketHome. The results of operations
previously reported by the separate companies and the combined amounts presented
in the accompanying condensed consolidated financial statements are summarized
below (in thousands).
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999
------------
<S> <C>
Net revenues
ClickAction $ 4,318
MarketHome 18
------------
Combined $ 4,336
============
</TABLE>
<PAGE>
CLICKACTION INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
4. Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133 (SFAS 133), Accounting for Derivative Instruments and Hedging
Activities, which establishes standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities. It requires an entity to recognize all derivatives as either assets
or liabilities in the statement of financial position and measure those
instrumentsat fair value. In June 1999, the FASB issued SFAS No. 137, Accounting
for Derivative Instruments and Hedging Activities -Deferral of the Effective
Date of FASB Statement No. 133, an Amendment of FASB Statement No. 133, which
defers the effective date of SFAS 133 from fiscal years beginning after June 15,
1999 to fiscal years beginning after June 15, 2000. Earlier application of SFAS
No.133,as amended, is encouraged but should not be applied retroactively to
financial statements of prior periods. The Company expects that the adoption of
this statement will not have a material impact on the Company's financial
position, results of operations or cash flows since the Company does not
currently hold derivative instruments or engage in hedging transactions.
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements.
SAB No. 101 summarized certain of the SEC Staff's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
SAB No. 101, and any resulting change in accounting principles that we would
have to report, is effective no later than our fiscal quarter ending June 30,
2000. We do not expect the application of SAB No. 101 to have a material effect
on the Company's financial position, results of operations or cash flows.
5. Common Stock Issuance
In March 2000, we issued and sold an aggregate of 254,776 shares of our
common stock in private placements to certain strategic and institutional
investors for an average price per share of $20.61 (post split). We received
proceeds in the aggregate amount of $5,250,000 from this issuance of common
stock. In connection with these transactions, we also issued warrants entitling
the investors to purchase an aggregate of 25,478 shares of common stock over a
three year period at an average per share price of $20.61 (post split). The
issuance of the shares of common stock and the warrants were exempt from the
registration requirements of the Securities Act of 1933, as amended, pursuant to
Section 4(2) thereof.
6. Segment and Geographic Information
The Company is principally engaged in providing email relationship
management products and services and developing, marketing and manufacturing a
line of desktop software applications for small businesses and home offices.
Commencing January 1, 2000, the Company combined the reporting of its annuity
products and services with the reporting of its desktop applications. The
Company identifies and evaluates such segments based principally upon the type
of products or services sold. The accounting policies of these reportable
segments are the same as those described for the consolidated entity. The
Company evaluates the performance of its operating segments based on revenues,
gross profit and segment operating income. The Company does not assess the
performance of its segments on other measures of income or expense, such as
depreciation and amortization, interest revenue and expense, income taxes or
net income. In addition, as the Company's assets are primarily located in its
corporate office in Palo Alto, California and not allocated to any specific
segment, the Company does not produce reports for, or measure the performance
of, its segments based on any asset-based metrics. Therefore, segment
information is presented only for revenues and modified operating income.
<PAGE>
CLICKACTION INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The Company has not separately reported segment information on a geographic
basis, as international sales represent less than 1% of net revenues to date.
The following segment information is provided for the quarters ended
March 31, 2000 and 1999 (in thousands):
<TABLE>
<CAPTION>
Segment Information
For the quarter ended March 31, 2000
Net Desktop Email
Applications Marketing Total
-------------- --------------- ---------------
<S> <C> <C> <C>
Net revenues $ 4,892 $ 1,114 $ 6,006
Cost of revenues 1,431 202 1,633
-------------- --------------- ---------------
Gross profit 3,461 912 4,373
Segment
operating expenses 2,824 2,694 5,518
------------- ------------- ---------------
Segment
profit (loss) $ 637 $ (1,782) (1,145)
============= =============
General and administrative
Expenses (916)
Bonus expense not allocated to segments (173)
Interest income, net 41
---------------
Loss before taxes, as reported $ (2,193)
===============
</TABLE>
<TABLE>
<CAPTION>
Segment Information
For the quarter ended March 31, 1999
-----------------------------------------------
Net Desk Email
Applications Marketing Total
-------------- --------------- ---------------
<S> <C> <C> <C>
Net revenues $ 4,318 $ 18 $ 4,336
Cost of revenues 1,396 -- 1,396
-------------- --------------- ---------------
Gross profit 2,922 18 2,940
Segment
operating expenses 2,112 161 2,273
-------------- --------------- ---------------
Segment
profit (loss) $ 810 $ (143) 667
============== ===============
General and
administrative expenses (603)
Interest income, net 66
---------------
Income before taxes, as reported $ 130
===============
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
You should read the following discussion of our financial condition and
results of operations along with our condensed consolidated financial statements
and the related notes. 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. Our
actual results could differ significantly from the results discussed in these
forward-looking statements. Factors that could cause or contribute to these
differences include the factors discussed below under "Factors Which May Impact
Future Operating Results." You should not place undue reliance on these forward
- -looking statements, which speak only as of the date hereof. Except as otherwise
required by federal securities laws, we do not intend to update any of the
forward-looking statements after the date of this Form 10-Q to conform them
to actual results or to reflect new information or changed circumstances.
Overview
We incorporated in 1986 and commenced sales of our desktop application
software products in 1987. Following the acquisition of MarketHome in August
1999, we shifted our strategic focus to Web-based email relationship management,
or ERM, products and services, although we continued to develop, market and
manufacture our line of desktop software application programs for small
businesses and home offices. During the three months ended March 31, 2000, we
generated 81.5% of our total revenues from the sale of our desktop applications
and 18.5% of our total revenues from the sale of our ERM products and services.
Revenues from our ERM products and services consist of setup revenue for
installing our ERM system for our clients, email usage revenues based on the
number of emails sent by our clients, email list management fees, professional
services performed in connection with our clients' email marketing campaigns,
and licensing fees from the license of our ERM system. We account for revenues
related to our ERM products and service as two separate components: set-up fees
and email usage services. We recognize revenue on set-up fees in an amount equal
to incremental direct costs incurred related to the set-up activities. The
remaining set-up fees are then recognized on a straight-line basis over the
term of the service contract. We recognize email usage revenue based on the
number of emails delivered and the related per email delivery charge. We
recognize email list management fees based on the number of email lists
downloaded and delivered, and we recognize professional services fees ratably
over the period the services are rendered.
Distributors and retailers may return our desktop software products
according to negotiated terms or pursuant to any promotional terms that may be
in effect. We also provide end-users with a 30-day money-back guarantee.
Accordingly, we are exposed to the risk of product returns from retailers,
distributors and end-users, particularly during times of product transition. In
addition, promotional or other activities of competitors could cause returns to
increase sharply at any time. We establish reserves based on estimated future
returns ofproducts, taking into account promotional activities, the timing of
new product introductions, distributor and retailer inventories of our products
and other factors. Product returns that exceed our reserves could materially
adversely affect our business.
Effective January 1, 1998, we adopted Statement of Position (SOP) 97-2,
Software Revenue Recognition, which superseded SOP 91-1 and provides guidance
on generally accepted accounting principles for recognizing revenue on software
transactions. Prior to 1998, we recognized revenue in accordance with SOP 91-1.
Under SOP 91-1, revenue was recognized upon shipment of products provided there
were no remaining significant obligations and collection was probable. We
established reserves for estimated returns of product sales to distributors
and retail dealers and accrued for estimated costs of providing customer
support.
<PAGE>
SOP 97-2 requires that revenue recognized from software arrangements be
allocated to each element of the arrangement based on the relative fair values
of the elements, such as software products, upgrades, enhancements, post
contract customer support, installation and training. Under SOP 97-2, the
determination of fair value is based on objective evidence which is specific
to the vendor. If such evidence of fair value for each element of the
arrangement does not exist, all revenue from the arrangement is deferred
until such time that evidence of fair value does exist or until all elements
of the arrangement are delivered. SOP 97-2 was amended in February 1998 by
Statement of Position 98-4 (SOP 98-4) "Deferral of the Effective Date of a
Provision of SOP 97-2" and was amended again in December 1998 by Statement of
Position 98-9 (SOP 98-9) "Modification of SOP 97-2, Software Revenue Recognition
with Respect to Certain Transactions." Those amendments deferred and then
clarified, respectively, the specification of what was considered vendor
specific objective evidence of fair value for the various elements in a
multiple element arrangement. We adopted the provisions of SOP 97-2 and SOP
98-4 as of January 1, 1998 and, as a result, changed certain business practices.
We adopted the provisions of SOP 98-9 for fiscal year 1999. The adoption of
this statement did not have a material impact on our operating results,
financial position or cash flows.
Results of Operations
Total revenues for the three months ended March 31, 2000 increased $1.7
million, or 39%, to $6.0 million, compared with total revenues of $4.3 million
for the corresponding period in 1999. The increase was due primarily to
increased sales of our Web-based ERM products and services and, to a lesser
extent, increased net desktop application revenues. ERM revenues for the three
months ended March 31, 2000 were $1.1 million, or 18.5% of total revenues,
compared with ERM revenues of $18,000, or 0.4% of total revenues, for the
corresponding period in 1999. Net desktop application revenues for the three
months ended March 31, 2000 were $4.9 million, or 81.5% of total revenues,
compared with net desktop application revenues of $4.3 million, or 99.6% of
total revenues, for the corresponding period in 1999. Due to our shift in
strategic focus, we expect revenues from our ERM products and services to
increase as a percentage of total revenues in future periods.
Gross profit for the three months ended March 31, 2000 increased 49% to $4.4
million from $2.9 million in the corresponding period in 1999. Gross margin
for the three months ended March 31, 2000 was 72.8%, compared to 67.8% for the
corresponding period in 1999. The increase as primarily due to the lower cost
of goods associated with our ERM products and services. Our gross margins vary
from period to period due primarily to changes in product mix, the direct cost
associated with our ERM set-up activities and professional services, the timing
and nature of promotional activities, changes in product return levels,
and the amortization of capitalized software production costs.
Total operating expenses for the three months ended March 31, 2000 increased
130% to $6.6 million from $2.9 million for the corresponding period in 1999. The
increase in operating expenses resulted primarily from the investment in product
development and increased marketing and selling expenses related to our ERM
products and services.
Product development expenses increased 161% to $1.6 million in the three
months ended March 31, 2000 from $627,000 in the corresponding period in 1999.
As a percentage of total revenues, product development expenses were 27.2% for
the three months ended March 31, 2000 compared to 14.5% for the corresponding
period in 1999. The increase in product development expenses was primarily due
to the development of the most recent version of our email relationship
management product, ERM 5.0. We expect our product development expenses to
increase as a percentage of total revenues during the remainder of 2000 due to
the continued development of our next generation of ERM products and services.
<PAGE>
Sales and marketing expenses increased 147% to $4.1 million in the three
months ended March 31, 2000 from $1.6 million for the corresponding period in
1999. As a percentage of total revenues, sales and marketing expenses were 67.6%
for the three months ended March 31, 2000 compared to 38.0% for the
corresponding period in 1999. Sales and marketing expenses increased principally
as a result of higher marketing, client services and selling expenses associated
with our ERM products and services, as well as seasonal promotional expenses
associated with our desktop application software products. We expect our
marketing and sales expenses to increase as a percentage of total revenues
during the remainder of 2000 as we continue to expand and enhance our ERM
products and services by building brand awareness and improving our client
services and professional services infrastructure, as well as providing retail
promotional activities for our desktop products.
General and administrative expenses increased 52% to $916,000 in the three
months ended March 31, 2000 from $603,000 in the corresponding period in 1999.
This increase was primarily a result of an increase in the headcount and
infrastructure expenses to support our growth. As a percentage of total revenues
, general and administrative expenses were 15.3% for the three months ended
March 31, 2000 compared to 13.9% for the corresponding period in 1999. We
expect our general and administrative expenses to increase slightly as a
percentage of total revenues for the remainder of 2000 to support our
anticipated growth in ERM products and services.
Net interest income was $41,000 for the three months ended March 31, 2000
compared to $66,000 for the corresponding period in 1999. The decrease was due
primarily to lower average cash balances in the three months ended March 31,
2000 compared to the corresponding period in 1999.
We did not record any income tax expense for the three months ended March
31, 2000 since we had an operating loss for this period, compared to an income
tax expense of $9,000 for the corresponding period in 1999 as a result of our
operating loss for the three months ended March 31, 2000.
As a result of the foregoing factors, we incurred a net loss for the
three months ended March 31, 2000 of $2.2 million, compared to net income of
$121,000 in the corresponding period in 1999.
Liquidity and Capital Resources
Since inception, we have financed our activities almost exclusively from
cash generated by operations and equity financings. Operating activities used
cash of $979,000 for the three months ended March 31, 2000 compared to $654,000
for the corresponding period in 1999. Our cash and cash equivalents balance was
$5.6 million on March 31, 2000. We have no interest bearing debt. We believe
that our existing cash and cash generated by our operations, together with
our ability to obtain additional credit or equity financing, will be sufficient
to meet our capital needs through December 31, 2000. However, any projections
of future cash needs and cash flows are subject to substantial uncertainty.
If current cash, cash equivalents and cash that may be generated from operations
are insufficient to satisfy our liquidity requirements, we will likely seek to
sell additional equity or debt
instruments. The sale of additional equity or equity-related
securities could result in additional dilution to our stockholders. In
addition, we will from time to time consider the acquisition of or
investment in complementary businesses, products, services and
technologies, which might impact our liquidity requirements or cause us
to issue additional equity or debt securities. Financing may not be
available in amounts or on terms acceptable to us, or at all.
In March 2000, we issued and sold an aggregate of 254,776 shares of our
common stock in private placements to certain strategic and institutional
investors. We received net proceeds in the amount of $5,250,000 from the
issuance of these shares. In connection with these transactions, we also issued
warrants for the purchase of 25,478 shares of our common stock with exercise
prices equal to the fair market value of our common stock on the warrant
issuance dates.
<PAGE>
Stock Spilt
On March 22, 2000, our Board of Directors approved a two-for-one stock
split in the form of a stock dividend, effected on April 20, 2000 to all holders
of our common stock as of April 5, 2000 (the "Stock Split"). The accompanying
condensed consolidated financial statements have been adjusted to reflect the
Stock Split.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133 (SFAS 133), Accounting for Derivative Instruments and Hedging
Activities, which establishes standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities. It requires an entity to recognize all derivatives as either assets
or liabilities in the statement of financial position and measure those
instruments at fair value. In June 1999, the FASB issued SFAS No. 137,
Accounting for Derivative Instruments and Hedging Activities -Deferral of the
Effective Date of FASB Statement No. 133, an Amendment of FASB Statement No.
133, which defers the effective date of SFAS 133 from fiscal years beginning
after June 15, 1999 to fiscal years beginning after June 15, 2000. Earlier
application of SFAS No.133, as amended, is encouraged but should not be applied
retroactively to financial statements of prior periods. We do not expect that
the adoption of this statement to have a material impact on our financial
position, results of operations or cash flows since we do not currently hold
derivative instruments or engage in hedging transactions.
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements.
SAB No. 101 summarized certain of the SEC Staff's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
SAB No. 101, and any resulting change in accounting principles that we would
have to report, is effective no later than our fiscal quarter ending June 30,
2000. We do not expect the application of SAB No. 101 to have a material effect
on our financial position, results of operations or cash flows.
Year 2000 Disclosure
Since entering the year 2000, we have not experienced any significant year
2000-related disruption in the operation of our systems. Although most year
2000 problems should have become evident on January 1, 2000, additional year
2000-related problems may become evident only after that day. We will continue
to monitor our operations and systems, but we do not expect to experience any
significant issues related to year 2000.
Factors Which May Impact Future Operating Results
In addition to the factors discussed in the "Overview" and "Liquidity
and Capital Resources" sections of this "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the following risk factors may
affect our business, financial condition and results of operations.
Risks Related to Our Email Relationship Management Business
Our business and future prospects are difficult to evaluate because we have a
limited operating history in email marketing.
Following our acquisition of MarketHome in August 1999, we shifted our
strategic focus to Web-based email marketing products and services. During
the three months ended March 31, 2000, we derived only 18.5% of our total
revenues from sales of our email relationship management products and services.
Therefore, we have a limited operating history in email marketing upon which you
can evaluate our business and future prospects. In addition, our
<PAGE>
management does not have past experience in email marketing. These factors make
predicting our future operating results difficult.
If email marketing is not widely accepted or if use of the Internet by
consumers does not continue to grow, there will be a decreased demand for our
email marketing products and services.
The market for email marketing products and services is new and rapidly
evolving. If email marketing does not gain widespread acceptance as a means
of marketing to consumers, our business will suffer. Businesses that have
relied upon traditional means of attracting new customers and maintaining
customer relationships may not accept, or may be slow in accepting, our email
marketing products and services because:
* they have already invested substantial resources in other more
traditional marketing methods;
* they have allocated a limited portion of their marketing budgets
to email marketing;
* they may find email marketing to be less effective for promoting their
products and services;
* their customers may have concerns about security and privacy on the Internet
or confuse our permission-based emails with unsolicited emails; or
* the effectiveness of email marketing may diminish significantly if the volume
of direct marketing email results in a negative reaction from consumers.
Our success also depends on the growth and acceptance of the Internet as a
medium for executing transactions. If consumers do not continue to purchase
products online, then the market for our email marketing solution may disappear.
If that happens, or if the number of business-to-consumer electronic commerce
transactions grows more slowly than we anticipate, our business would suffer.
Many of our agreements with our customers do not contain a minimum payment
obligation, but rather only require the customer to pay us based on the number
of emails actually sent. Our business would be harmed if these customers were
to cease using us for their email marketing campaigns.
Our business will be harmed if we fail to meet the demands of our email
marketing clients.
The success of our email marketing business depends to a significant extent
on our ability to provide satisfactory services to our clients and meet their
demands. The success of our email marketing business also depends on our
ability to successfully deliver emails over the Internet. Software programs
exist that limit or prevent advertising from being delivered to a user's
computer. Widespread adoption of this software by Web users would significantly
undermine the commercial viability of Internet advertising and marketing. Our
business could also be harmed if we fail to prevent the distribution of
unsolicited bulk email, or spam. Spam-blocking efforts by others may also
result in the blocking of our clients' legitimate messages. In addition, our
ability to perform our email marketing services may be adversely impacted by
computer viruses initiated by third parties. Any of these events may cause
clients to become dissatisfied with our email marketing services and terminate
<PAGE>
their use of our email marketing services. In addition, because we provide our
clients with a 100% service guarantee, if our clients are not completely
satisfied with our service, they may require us to refund the delivery fees or
resend an email marketing campaign at our own expense. If these refunds are
large in aggregate amount, or we are required to resend many email marketing
campaigns, our business and financial results could be adversely affected.
Unplanned system interruptions and capacity constraints could disrupt our
business and damage our reputation.
We must offer clients reliable, secure and continuous service to attract
and retain clients and persuade them to increase their reliance on our email
marketing solution. As the volume of emails generated by our clients increases,
we must continuously upgrade and enhance our technical infrastructure to
accommodate the increased demands placed on our systems. Our operations also
depend in part on our ability to protect our systems, currently located in one
facility, against physical damage from fire, earthquakes, power loss,
telecommunications failures, computer viruses, unauthorized user access or
hacker attacks, physical break-ins and similar events. Any interruption or
decrease in response time of our email marketing services could damage our
reputation, reduce customer satisfaction and decrease usage of our services.
If our system security is breached, our business and reputation could suffer.
A fundamental requirement for online communications and transactions is
the secure transmission of confidential information over public networks. Third
parties may attempt to breach our security or that of our clients or their
customers. Any breach in our online security could result in liability to our
clients or their customers, damage to our reputation and harm to our business.
Our servers are vulnerable to computer viruses or software programs that disable
or impair computers, physical or electronic break-ins and similar disruptions,
which could lead to loss of data. We may need to spend significant resources to
license technologies to protect against security breaches or to address problems
caused by a security breach.
If we are unable to license third-party technologies that we need to produce
our ERM products and services, our business will be harmed.
We are highly dependent on technologies we license from third parties to
enable us to send email through the Internet and to offer a variety of database
management and targeted marketing capabilities. The email marketing industry is
rapidly evolving, and we may need to license additional technologies to remain
competitive. We may not be able to license these technologies on commercially
reasonable terms, or at all. The failure to license these technologies could
adversely affect our ability to offer competitive email marketing products and
services.
Increasing governmental regulation of electronic commerce and legal
uncertainties could decrease demand for our email marketing service or increase
our cost of doing business.
We are subject not only to regulations applicable to businesses generally,
but also to laws and regulations directly applicable to privacy and electronic
commerce, including, without limitation, the Federal Childrens' Online Privacy
Protection Act and the rules and regulations of the Federal Trade Commission
related to this act. Although there are currently few of these laws and
regulations, state, federal and foreign governments may adopt more of these laws
and regulations. The adoption of new laws or the adaptation of existing laws
<PAGE>
to the Internet may decrease the growth in the use of the Internet, which could
in turn decrease the demand for our email marketing services, increase our cost
of doing business or otherwise harm our business. Federal, state, local and
foreign governments are considering a number of legislative and regulatory
proposals relating to Internet commerce. As a result, a number of laws or
regulations may be adopted regarding:
* user privacy;
* the pricing and taxation of goods and services offered over the Internet;
* intellectual property ownership; and
* the characteristics and quality of products and services offered over the
Internet.
In particular, a number of states have already passed statutes prohibiting
unsolicited commercial email. A number of statutes have also been introduced
in Congress and state legislatures to impose penalties for sending unsolicited
emails which, if passed, could impose additional restrictions on our business.
In addition, courts are increasing recognizing that unsolicited email
distribution may be actionable as an illegal trespass for which the sender could
be subject to monetary damages or injunctive relief.
The application of existing laws to the Internet in areas such as property
ownership, copyright, trademark and trade secrets is also uncertain. The recent
growth of Internet commerce has been attributed by some to the lack of sales and
value-added taxes on interstate sales of goods and services over the Internet.
Numerous state and local authorities have expressed a desire to impose these
taxes on sales to consumers and businesses in their jurisdictions. The Internet
Tax Freedom Act of 1998 prevents imposition of these taxes through October
2001. If the federal moratorium on state and local taxes on Internet sales is
not renewed, or if it is terminated before its expiration, sales of goods and
services over the Internet could be subject to multiple overlapping tax schemes,
which could substantially hinder the growth of Internet commerce, including the
use of our email marketing products and services.
The Internet generates privacy concerns which could result in market
perceptions or legislation which could result in reduced sales of our email
marketing products and services.
We gather and maintain data related to consumers' buying behavior.
Recently, lawsuits have been brought alleging, among other things, that at
least one company, which combines information from online and other sources
regarding users, has improperly collected and used information concerning
Internet users in violation of federal electronics privacy statutes and other
privacy laws. The United States Federal Trade Commission has launched an
informal inquiry to determine whether that company has engaged in unfair or
deceptive practices in collecting and using information concerning Internet
users. We may be sued or investigated regarding our practices. Any similar
legal actions, whether against us or others, could limit our ability to sell
our email marketing products and services or otherwise seriously harm our
business.
The perception of security and privacy concerns, whether or not valid, may
inhibit market acceptance of our email marketing services. Privacy concerns may
also cause consumers who use the Internet to decide not to opt in to receive
email marketing. In addition, legislative or regulatory requirements may
<PAGE>
heighten these concerns if businesses must notify users that the data captured
after visiting Web sites may be used to direct product promotions and
advertising to that user. For example, the European Union recently enacted its
own privacy regulations that may result in limits on the collection and use of
some user information. The United States and other countries may adopt similar
legislation or regulatory requirements. If privacy legislation is enacted or
consumer privacy concerns are not adequately addressed, our business could be
harmed.
We may be exposed to liability for information displayed on our Web sites or
within their marketing partners' Web sites or their email messages.
Because our email marketing services often require us to provide a
connection to the Web sites of our clients and partners, we may be perceived
as being associated with the content of these Web sites. We do not and cannot
screen all of the content generated by our clients and partners. As a result,
we may face claims for defamation, negligence, copyright, patent or trademark
infringement and other proceedings based on the materials displayed on our
clients' and partners' sites and their email messages. We may also suffer a
loss of clients or damage to our reputation based on these legal proceedings.
Furthermore, some foreign governments have enforced laws and regulations
related to content distributed over the Internet that are more strict than
those currently in place in the United States.
Risks Related to Our Desktop Software Business
Because we rely on sales of our desktop software to a limited number of
retailers and distributors, our business could be harmed if these
retailers and distributors cease doing business with us or
significantly reduce the level of their purchases.
We sell our desktop products principally to a limited number of major
retailers and to distributors for resale to retailers. These sales have
historically constituted, and may continue to constitute, a majority of our
total revenues. For the year-ended December 31, 1999, one distributor accounted
for 34% of our total revenues and another retailer accounted for 31% of our
total revenues. None of our distributors or retailers has a minimum purchase
obligation. The loss of, or significant reduction in, sales volume attributable
to any of our principal distributors or retail accounts could materially and
adversely affect our business. We could also be adversely affected if a channel
for distribution of software other than the retail channel were to become a
major vehicle for distributing software.
Our financial results could be harmed if we are unable to collect outstanding
receivables.
Our sales of desktop software products are made on unsecured credit terms,
which means we do not hold collateral to secure payment. We maintain accounts
receivable insurance that covers only a portion of our accounts and we may not
be able to maintain or increase this insurance on acceptable terms or at all.
The inability to collect any significant receivable in a timely manner could
adversely affect our financial results.
significant returns of our desktop software products could adversely affect our
operating results and financial condition.
Distributors and retailers may return our desktop software products
according tonegotiated terms or pursuant to any promotional terms that may be in
effect. We also provide end-users with a 30-day money-back guarantee.
Accordingly, we are exposed to the risk of product returns from retailers,
<PAGE>
distributors and end-users, particularly during times of product transition. In
addition, promotional or other activities of competitors could cause returns to
increase sharply at any time. We establish reserves based on estimated future
returns of products, taking into account promotional activities, the timing of
new product introductions, distributor and retailer inventories of our products
and other factors. Product returns that exceed our reserves could materially
adversely affect our business.
If we fail to maintain relationships with our third-party service providers,
suppliers and facilities, our desktop software business will be harmed.
We rely on third-party service providers to perform most of our customer
technical support and product assembly functions for our desktop software
products. One independent firm provides substantially all customer technical
support for our desktop software products. Our agreement with this firm may be
terminated with or without cause on 60 days notice by either party. This firm
also provides services to several larger companies, and demands from these
companies or other factors could cause this firm to terminate its agreement with
us. The unavailability of this firm to perform customer technical support for
us would result in significant disruption to our operations, could lead to
customer dissatisfaction and could have a material adverse effect on our
business and operations. In addition, we rely on two printers for packaging and
two assembly houses to assemble and package our desktop software products and
have only limited sources for some of our supplies. We do not have contracts
with these assembly houses or suppliers. All of our inventory of packaging
components is maintained at third-party facilities. Our ability to assemble
and package our products depends on continued relationships with these third
parties. The failure of these third-party vendors to continue to provide
supplies and services to us on a timely basis, or at all, could adversely affect
our business.
Our success depends on postal regulations and availability of postal
information.
We have developed a line of mailing software products, which in the
aggregate accounted for 16.4% of our total revenues in the year ended December
31, 1999 and 12.1% of our total revenues in the three months ended March 31,
2000, based on current United States Postal Service regulations. Changes in
these regulations, which historically have occurred frequently, could
necessitate updating these products or could eliminate or reduce the usefulness
of these products. We license, from an independent third-party, address
information software used in some of our desktop software products. We may
not be able to maintain or renew our relationship with this third party and
the software we license may not be error free or perform to our specifications
or in accordance with Postal Service regulations. Significant changes in
Postal Service regulations or the inability to maintain or renew our license
agreement with the independent party on acceptable terms, or at all, could
damage our business. We must also obtain Postal Service certification on a
bi-monthly basis in order to supply updates to our end-users in a timely manner.
We may not be able to continue to secure this certification on a timely basis,
if at all, and the failure to do so could damage our business.
<PAGE>
Risks Related to Our Overall Business
We expect to incur significant future operating losses.
We incurred a net loss of $2.2 million for the year ended December 31, 1999
and a net loss of $2.2 million for the three months ended March 31, 2000. As of
March 31, 2000, we had an accumulated deficit of $8.1 million. We expect to
incur significant operating losses for the foreseeable future because we
anticipate that our operating expenses relating to our email marketing business
will increase more quickly than our total revenues. We rely to a significant
extent on the revenues and cash flow generated from the sale of our desktop
software products to fund the development and expansion of our email marketing
strategy. Our ability to continue to do so would be harmed if we were to
experience a decline in sales of our desktop software products. Our ability
to achieve profitability in the future will depend upon our ability to continue
development of new email marketing products and services, enhance our
infrastructure and expand our customer base and brand awareness. To achieve
these goals, we need to increase spending on product development, sales and
marketing and technology. To the extent that our email marketing revenues do
not significantly increase as a result of this increased spending, we may not
achieve profitability. Even if we do achieve profitability, we may not be able
to sustain or increase our profitability on a quarterly or annual basis in the
future.
Our quarterly operating results are subject to significant fluctuations due to
many factors, any of which could adversely affect our stock price.
We have experienced, and may continue to experience, significant
fluctuations in our quarterly operating results due to a variety of factors,
many of which are outside our control. These factors include:
* the rate of growth of the use of the Internet as a medium for
consumer and business communications and transactions, and the size and
rate of growth of the market for email marketing products and services;
* the rate of growth of sales of our ERM products and services;
* the timing and number of product enhancements and new product and
services introductions by us and our competitors;
* the timing and number of email marketing campaigns conducted by
our customers;
* the timing and delivery of strategic alliance arrangements;
* changes in pricing policies by us and our competitors;
* our ability to upgrade and expand our infrastructure;
* technical difficulties or system downtime affecting use of our email
marketing products or services;
<PAGE>
* the seasonal nature of our desktop software business and our
mail relationship management business;
* changes in the level of our operating expenses to support our
growth;
* domestic and international regulation of email marketing, including privacy
legislation;
* timing of the receipt of orders for our desktop software products from major
retailer and distributor customers;
* the amount of desktop software product returns;
* cancellations or terminations by retail or distributor accounts;
* reductions in shelf space for our desktop software products; and
* delays in shipment of our desktop software products.
Due to these factors, we believe that quarter-to-quarter comparisons of our
operating results may not be meaningful and should not be relied upon as an
indication of our future performance. In addition, a significant portion of
our operating expenses, particularly labor costs and rent, are relatively fixed,
and planned expenditures are based, in part, on expectations with regard to
future sales. As a result, we will likely be unable, or may elect not to,
reduce spending quickly enough to offset any unexpected revenue shortfall.
In the event of a revenue shortfall or unanticipated expenses in any given
quarter, our operating results may be below the expectations of securities
analysts or investors. If this occurs, the market price of our common stock
may decline significantly.
Intense competition could impair our ability to grow and achieve profitability.
The market for email marketing products and services is intensely
competitive and rapidly evolving. We expect competition to increase
significantly in the future because of the attention the Internet has
received as a means of advertising and direct marketing and because there are
relatively low barriers to entry in our market. We also compete directly with
publicly traded email service providers such as Digital Impact, MessageMedia and
Exactis.com, as well as numerous private companies. We compete with the
information technology departments of current and prospective clients who use
in-house email systems to manage and deliver email marketing campaigns. We also
compete with companies providing software and services for outsourced solutions
such as email distribution, list management, reporting and bounce processing,
email consulting and campaign analysis.
The market for our desktop software products is also intensely competitive,
and is characterized by pressure to reduce prices, capture limited retail shelf
space, increase marketing and promotional activity, incorporate new features and
release new product versions. The competition for retail shelf space is likely
to increase. Failure to achieve and maintain unit sales volumes may result in
loss of shelf space, which may, in turn, lead to further reductions in sales
volumes. Existing software companies may broaden or enhance their product lines
to compete with our desktop software products, and other potential new
competitors, including computer hardware manufacturers, diversified media
<PAGE>
companies, and small business service companies, may enter or increase their
focus on the small business software market, resulting in even greater
competition.
Many of our current and potential competitors in both the market for email
marketing products and services and the desktop software market have longer
operating histories, greater name recognition, larger customer bases, more
diversified lines of products and services and significantly greater resources
than we have. These competitors may be able to devote significant resources to
sales and marketing, adopt more aggressive pricing policies and deliver superior
solutions. If we are not able to compete effectively with our current or future
competitors, our business would be harmed.
Our current products and services may become obsolete and unmarketable if we are
not able to adequately respond to rapidly changing technology and customer
demands.
Our industry is characterized by rapid changes in technology and customer
demands. As a result, our current products and services may quickly become
obsolete and unmarketable. We believe that our future success depends in large
part upon our ability to keep pace with competitive offerings and customer
requirements, to adapt to new operating systems, hardware platforms, media
and industry standards, and to provide additional functionality by enhancing
our existing products and services and introducing new products and services
on a timely and cost-effective basis. We may be unable to do this due to
resource constraints or technological or other reasons. Any failure or delay
in adapting to technological advances or emerging industry standards or
developing, introducing or marketing new products and services could cause us
to lose clients or fail to gain new clients. If this happens, our business
could suffer and our stock price could decline.
Our business could be harmed if external coding contractors on which we depend
compete with us or are not available to provide us with their coding services.
We generally develop internally the specifications for both new products
and updates of our existing products. From time to time, we also license third-
party products that are complementary to our core product line. In addition to
our own development team, we have relied on two independent firms to assist us
with the coding of our desktop product software products. While we generally
own the code that is developed by these firms, the base code used in developing
our brochures and business cards products is owned by the third-party coder.
With respect to these products, we hold an irrevocable, non-exclusive license
to copy and distribute the executable code compiled from the base code and to
make limited modifications. Although the agreements with these firms contain
various protective terms, these provisions may not effectively protect our
interests and third-party coders may develop or market products that compete
with our products or services. Independent coders are in high demand, and
independent coders, including those who have developed products for us in the
past, may not be available to provide coding services to us in the future. In
addition, we may not be able to obtain or renew coding or licensing agreements
on favorable terms, or at all.
We may not be able to hire and retain the qualified personnel necessary to
support our growth.
The success of our business depends on the continued services of our key
technical, sales and senior management personnel, particularly our president and
chief executive officer Gregory W. Slayton, and our chief technical officer,
Kentyn Reynolds. Any officer or employee can terminate his or her relationship
<PAGE>
with us at any time, and we do not maintain key man insurance policies for
either Mr. Slayton or Mr. Reynolds. In addition, the future growth of our
business will depend to a significant extent on our ability to attract and
retain qualified, highly-skilled employees, particularly persons with marketing,
Internet and information technology experience. Because of the recent
substantial growth in email marketing and Internet related industries,
Competition for these employees with technical, management, marketing, sales,
product development and other specialized skills is intense. We may not be
successful in attracting and retaining these personnel.
Our business would suffer if we are not able to manage our growth and implement
our email marketing strategy.
We have experienced periods of growth that have placed, and are expected to
continue to place, a significant strain on our financial, management,
operational and other resources. Our ability to manage growth and execute our
email marketing strategy effectively will require us to continue to improve our
operational, financial and information management systems and controls on a
timely basis. If our management is unable to manage growth, and expand our
ability to offer email marketing products and services, our business could be
harmed.
Our limited protection of intellectual property and proprietary rights may
adversely affect our business.
We rely primarily on a combination of trademarks, copyright and trade secret
laws, employee and third-party nondisclosure agreements and other methods to
protect our proprietary rights. These measures may not be adequate to prevent
unauthorized use of our proprietary technology and other intellectual property
rights. We have no patents. We do not include in our desktop software products
any mechanism to prevent or inhibit unauthorized copying. Unauthorized copying
occurs frequently within the software industry, and if a significant amount of
unauthorized copying of our products were to occur, our business could be
adversely affected. In addition, as the number of software products in the
industry increases and the functionality of these products further overlaps,
software developers and publishers may increasingly become subject to
infringement claims. Third parties may assert infringement claims against us
in the future with respect to current or future products. Use of third-party
coders or publishing of licensed products may increase the risk of infringement.
In the event that our third-party coders or licensors were to use infringing
code in our products, we could be required to pay damages or be subject to an
injunction to prevent us from shipping our products. The third-party coders'
liability to us for any infringement of copyrights, trade secrets, or patents is
contractually limited to amounts received from us. There has been substantial
litigation regarding copyright, trademark and other intellectual property rights
in our industry. Any claims or litigation, with or without merit, could be
costly to defend or litigate and divert resources and our management's
attention. Adverse determinations in any claim or litigation could also require
us to pay damages or change our technologies.
Our growth may be impaired and our business may suffer if we do not successfully
address risks associated with acquisitions.
As part of our growth strategy, we may pursue the acquisition of
businesses, technologies or products that are complementary to our business. We
may encounter a number of risks associated with acquisitions that could harm our
business, including the diversion of management's attention, the assimilation of
<PAGE>
the operations, technologies, products and personnel of the acquired companies,
the amortization or write-off of acquired intangible assets and the potential
loss of key employees or clients of acquired companies. Our failure to address
these risks or unexpected difficulties encountered during expansion could harm
our business.
We have implemented anti-takeover provisions that could delay or prevent a
change in control that may offer you a premium.
Various provisions of our certificate of incorporation and bylaws, our
stockholder rights plan and Delaware law may have the effect of delaying or
preventing changes in control or management, even if the change in control
would be beneficial to you. These provisions may deprive you of an opportunity
to sell your shares at a premium over prevailing prices. The potential
inability of our stockholders to obtain a control premium could adversely affect
the market price of our common stock.
Risks Related to Securities Markets
Our stock price has been volatile, and this volatility could result in
substantial losses for individual stockholders.
The market price of our common stock has been, and is likely to continue to
be, volatile. Fluctuations in market price and volume are particularly common
among securities of Internet and other technology companies. As a result, you
may not be able to resell your shares at or above your purchase price. The
market priceof our common stock may fluctuate significantly in response to the
following factors, some of which are beyond our control:
* quarterly fluctuations in our revenues or results of operations;
* general conditions in the computer software and Internet industries;
* announcements of new products and services by us or by our competitors;
* new regulations or interpretations of existing regulations applicable to our
email marketing activities;
* announcements of alliances by us or by our competitors;
* system slowdowns or failure by us or by our competitors;
* changes in earnings estimates by securities analysts and in analyst
recommendations; and
* changes in market valuations of other Internet companies.
Substantial sales of our common stock could cause our stock price to fall.
If our stockholders sell substantial amounts of our common stock, including
shares issued upon the exercise of outstanding options, the market price of our
common stock could fall. These sales might also make it more difficult for us
<PAGE>
to sell equity or equity-related securities in the future at a time and price
that we deem appropriate.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We currently provide our services to clients primarily in the United
States. As a result, it is unlikely that our financial results would be
directly affected by factors such as changes in foreign currency exchange rates
or weak economic conditions in foreign markets. All of our sales are currently
denominated in United States dollars.
Our exposure to market risk for changes in interest rates relates primarily
to the increase or decrease in the amount of interest income we can earn on our
investment portfolio. Given the short-term nature of these investments, we
believe we are not subject to significant interest rate risk with respect to
these investments. We currently have no interest bearing debt outstanding and
we do not plan to use derivative financial instruments in our investment
portfolio.
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In March 2000, we issued and sold an aggregate of 254,776 shares of our
common stock in private placements to certain strategic and institutional
investors for an average price per share of $20.61 (post split). We received
proceeds in the aggregate amount of $5,250,000 from this issuance of common
stock. In connection with these transactions, we also issued warrants entitling
the investors to purchase an aggregate of 25,478 shares of common stock over a
three year period at an average per share price of $20.61 (post split). The
issuance of the shares of common stock and the warrants were exempt from the
registration requirements of the Securities Act of 1933, as amended, pursuant to
Section 4(2) thereof.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27. Financial Data Schedule.
(b) A report on Form 8-K under Item 5 with respect to the Stock Spilt
was filed on March 22, 2000.
<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: May 12, 2000 By: /s/Sharon S. Chiu
-----------------------
Sharon S. Chiu
Chief Financial Officer
[ARTICLE] 5
<TABLE>
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[FISCAL-YEAR-END] DEC-31-2000
[PERIOD-END] MAR-31-2000
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[ALLOWANCES] 0
[INVENTORY] 1,592
[CURRENT-ASSETS] 13,804
[PP&E] 2,739
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[CURRENT-LIABILITIES] 7,995
[BONDS] 0
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[PREFERRED] 0
[COMMON] 11
[OTHER-SE] 8,668
[TOTAL-LIABILITY-AND-EQUITY] 16,674
[SALES] 6,066
[TOTAL-REVENUES] 6,006
[CGS] 1,633
[TOTAL-COSTS] 1,633
[OTHER-EXPENSES] 6,607
[LOSS-PROVISION] 0
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[INCOME-PRETAX] (2,193)
[INCOME-TAX] 0
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