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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2010 | ||
OR | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to . |
Delaware | 56-2127592 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
6501 Weston Parkway, Suite 200 Cary, North Carolina (Address of principal executive offices) | 27513 (Zip Code) |
Title of Each Class | Name of Exchange on Which Registered | |
Common Stock, $0.001 par value | The NASDAQ Stock Market LLC (NASDAQ Global Market) |
Large accelerated filer o | Accelerated filer o | |
Non-accelerated filer x | Smaller reporting company o | |
(Do not check if a smaller reporting company) |
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ITEM 1. | BUSINESS |
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• | identify which suppliers have the required goods and services; | |
• | negotiate purchasing or contractual relationships; | |
• | establish a mechanism to transact business; | |
• | find, compare, approve and order the necessary goods and services; | |
• | receive, inspect and pay for the goods and services; and | |
• | analyze spending for potential savings and contract compliance. |
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• | Lack of clearly defined procurement guidelines and awareness of preferred suppliers. In many cases, because processes are cumbersome, ill-defined and time consuming, many employees have difficulty following the procurement approval processes and fail to purchase from preferred suppliers. As a result, buying the right goods and services from the right suppliers at the right prices rarely occurs. Employees frequently purchase indirect materials from a local retail outlet or from a generic online retailer, such as Amazon.com. This maverick spending can result in the organization purchasing products at unfavorable prices. | |
• | Limited ability to analyze spend. Given the lack of automation and centralized reporting, organizations have difficulty analyzing what they are buying from suppliers. This limits the ability to negotiate better contracts or understand the organization’s compliance with spending limits. Additionally, without the proper systems, it is difficult to enforce supplier compliance with all negotiated contract terms. | |
• | Dissatisfied employees. Employees prefer an efficient and user-friendly procurement process. Manual, non-integrated processes often lead to excess costs, delays and errors, resulting in a frustrating experience. In addition, employees are unable to track the goods and supplies already on-hand, thus leading to excess purchases. |
• | are implemented on-premise, and thus are expensive to deploy and maintain; | |
• | are generalized horizontal market solutions with limited industry-specific supplier participation, content and functionality; | |
• | require each organization to have its own customizedone-to-one connections to each supplier; and | |
• | lack managed service capabilities to enable suppliers. |
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• | Significant return on investment (“ROI”). Our solution enables organizations to realize the benefits of strategic procurement by identifying and establishing contracts with preferred suppliers, driving spend to those contracts and promoting process efficiencies through electronic transactions. As a result, customers are able to achieve significant returns on investment through savings associated with contract compliance and strategic procurement. These savings result from negotiated discounts, automated requisition/order processing, contract lifecycle management, settlement automation and sourcing (such as the ability to conduct on-line bidding processes). | |
• | Content and functionality specific to our vertical markets. While we offer a single solution, our software has specific configurable functionality that meets the unique needs of our targeted vertical markets. We have a critical mass of suppliers to achieve economies of scale, and new suppliers can be readily added as the needs of our customers dictate. | |
• | Easier access to customers’ supplier network. Customers can easily access their preferred suppliers using a single solution and avoid the costs and inefficiencies associated with traditionalone-to-one supplier management. | |
• | Greater adoption by employees. Our intuitive shopping interface provides employees with easy and automated visibility and access to goods and services. Streamlining the procurement process spurs user adoption and increases the level of spend under management, meaning spend that occurs pursuant to a pre-established contract with the supplier. | |
• | Greater adoption by suppliers. Suppliers typically are motivated to join our network due to ease of enablement and lack of supplier fees. This allows our solution to support a robust supplier network in which our customers benefit from economies of scale. | |
• | Visibility into spending patterns and activity. Our solution provides granular detail into user spending behavior and provides detailed analytics that allow organizations to continually improve their purchasing practices. | |
• | Visibility into suppliers. Our solution provides customers with greater insight into their supplier base by identifying supplier data and qualities, such as supplier capabilities and diversity qualifications, that may impact purchasing decisions. | |
• | Ease of deployment via integration with existing systems. Our highly-configurable solution integrates with many leading ERP systems to speed deployment and facilitate the interchange of transaction, accounting, settlement and user data. |
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• | Focus on customer value. Delivering value to our customers is at the core of our business philosophy. We focus extensively on ensuring that customers achieve maximum benefit from our solution, and we proactively engage with our customers to continually improve our software and services. To this end, each of our customers is partnered with a member of our client partner organization that proactively assists that customer to maximize the ROI and related benefits from their implementation of our solution. This has led to a 27% compound annual growth rate in the average transaction volume by customers through our system over the last four years. In addition, each customer has access to our separate client support staff. Our customer-centric focus, significant domain expertise and integrated solution have led to the establishment of consistent long-term customer relationships, exemplified by an average annual customer renewal rate, on a dollar basis, of approximately 100% over the last three fiscal years. | |
• | Expertise in our targeted vertical markets. Because we have developed a solution that solves specific procurement problems for customers in our target vertical markets, we are able to differentiate ourselves from other solution providers that are horizontally focused. As a result, we are able to drive greater value to customers through increased cost savings and improved contract compliance. Additionally, our focus on a core set of vertical markets allows us to be more efficient in our sales and marketing efforts through an understanding of the specific needs and requirements of our customers. Our domain expertise allows us to provide our customers with a highly tailored and differentiated solution that is difficult for our competitors to replicate. | |
• | Extensive content and supplier network. Essential to our solution is building a critical mass of suppliers within a vertical market. Suppliers are not charged any fees or transaction costs for purchases consummated through the SciQuest Supplier Network, which has facilitated the growth of our network to over 30,000 unique suppliers servicing the higher education, life sciences, healthcare and state and local government markets. Upon signing of a new customer, we seek to add that customer’s suppliers to our supplier network. We charge our customers for each of their suppliers with whom they interact on our supplier network. Therefore, to the extent that a customer’s suppliers are already on our supplier network, our costs to enable these suppliers are reduced, allowing us to benefit from improved operating margins and other economies of scale. | |
• | Ability to manage costs. While we manage our business to maximize customer benefit, we also seek to optimize returns to our stockholders and employees by managing our cost structure. Our culture of lean management principles extends from our senior management throughout our company, including our development processes and our professional services engagements. This lean management of our cost structure has kept our capital expenditures low and helped lower our operating expenses as a percentage of revenues from 95% in 2007 to 75% in 2010. | |
• | High visibility business model. Our customers pay us subscription fees and implementation service fees for the use of our solution under multi-year contracts that are generally three to five years in length, and we typically receive cash payments annually in advance. The recurring nature of our revenues provides high visibility into future performance, and the upfront payments result in cash flow generation in advance of revenue recognition. For each of the last three fiscal years, greater than 80% of our revenues were recognized from contracts that were in place at the beginning of the year. |
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• | Further penetrating our existing vertical markets. Over 80% of our customers currently come from the higher education and life sciences vertical markets, where we have a significant operating history, with the remainder of our customers primarily coming from our newer healthcare and state and local government markets. We will continue to focus our efforts on acquiring new customers in our vertical markets, including investing in sales and marketing to increase our profile in the healthcare and state and local government markets while increasing our emphasis on mid-sized customer acquisition opportunities in the higher education and life sciences markets. | |
• | Capitalizing on cross-selling opportunities into our installed customer base. As of December 31, 2010, our solution was being used by 195 customers in our vertical markets. Our existing customer base provides us with a significant opportunity to sell additional modules and new products that we may develop or acquire. For each of the past three fiscal years, approximately 20% of new sales have consisted of sales of additional modules and services to existing customers. We plan to developand/or acquire additional modules and products to sell to our existing customers by leveraging our position as a trusted strategic procurement solution vendor in our targeted vertical markets. In addition, we intend to leverage our acquisition of AECsoft by selling our full procurement software suite to AECsoft customers as well as selling the new AECsoft modules to our existing and prospective customers. | |
• | Selectively pursuing acquisitions. We may pursue acquisitions of businesses, technologies and solutions that complement our existing offerings in an effort to accelerate our growth, enhance the capabilities of our existing solution and broaden our solution offerings. For example, in January 2011, we acquired AECsoft, which is a leading provider of supplier management and sourcing technology. We also may pursue acquisitions that allow us to expand into new verticals or geographies where we do not have a significant presence. | |
• | Selectively expanding into new vertical markets. In the future, we intend to selectively expand into new vertical markets that are adjacent to, or have similarities to, our existing verticals and where we can leverage our market expertise. For instance, we expanded into the healthcare and state and local government markets because they are both adjacent to and have similar procurement characteristics as the higher education and life sciences markets. Vertical markets where procurement is still predominately handled through paper processing, with multiple suppliers of high volume, low-cost goods, offer potential expansion opportunities. We may pursue such expansion through internal product development, sales and marketing initiatives or strategic acquisitions. In addition, AECsoft has customers in other vertical markets that may represent opportunities for our vertical market expansion. | |
• | Investing in international expansion to acquire new customers. We believe that the market outside the United States offers us significant growth potential. Currently, we have customers operating in 15 countries and offer our solution in five languages and 22 currencies, although many of our international sales have consisted of sales to multinational organizations with operations in the United States. To date, sales to customers that are not based in the United States have represented an insignificant portion of our annual sales. We intend to continue our international expansion by increasing our international direct sales force and establishing additional third-party sales relationships in an effort to leverage our leadership position and reputation as a leading provider of strategic procurement solutions to organizations with global operations. |
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Module | Key Features | |||||
Sourcing Director* | • | Manages and expedites the bid creation process | ||||
• | Provides ability to create auctions, invite supplier participants and monitor and control the reverse auction process in real-time | |||||
• | Provides self-service access for registered suppliers to view events, enter responses, review award decisions and manage their own profiles | |||||
• | Allows buyers to post Requests for Proposal, or RFPs, online | |||||
• | Supports response and scoring for post-RFP analysis | |||||
Spend Director | • | Enables a critical mass of suppliers | ||||
• | Promotes preferred suppliers | |||||
• | Provides an intuitive procurement user environment | |||||
• | Provides visibility into spending | |||||
• | Enhances visibility into contract spending and compliance, including comparison of contract budget versus contract spending | |||||
Requisition Manager | • | Creates and submits error-free requisitions electronically | ||||
• | Previews approval workflow and tracks requisitions online | |||||
• | Routes requisitions electronically based on any requisition attribute | |||||
• | Provides buyers and managers flexible approval options and 24/7 remote access | |||||
• | Consolidates requisitions to minimize shipping fees and maximize discounts | |||||
• | Analyzes requisition data to identify savings opportunities and audit contract compliance | |||||
Order Manager | • | Exchanges purchase documents electronically and securely with suppliers | ||||
• | Manages purchase documents automatically, eliminating paper processes | |||||
• | Communicates order status to requisitioners electronically | |||||
• | Tracks order status automatically with participating suppliers | |||||
• | Integrates directly with SciQuest Requisition Manager or existing ERP and financial systems | |||||
• | Analyzes order data to identify saving opportunities | |||||
Settlement Manager | • | Integrates order/receipt/invoice data | ||||
• | Automates receipt creation | |||||
• | Supports automated matching of invoices with purchase orders and/or receipts | |||||
• | Streamlines invoice management | |||||
• | Avoids error-prone manual data entry | |||||
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Module | Key Features | |||||
Supplier Contract Management and Authoring | • | Creates a central repository to track contract information, such as pricing terms and expiration and renewal dates | ||||
• | Enables contract authoring by using pre-defined contract templates | |||||
• | Records contract history, including change orders, approvals and addendums | |||||
• | Tracks potential contract issues and resolution details | |||||
• | Enables RFP and contract management collaboration, including document redlining during contract negotiation phase | |||||
Total Supplier Manager* | • | Creates an online, centralized repository of all suppliers | ||||
• | Provides insights into supplier capabilities during the initial registration process by incorporating commodity/category specific information | |||||
• | Automates supplier setup processes to help migrate suppliers from prospect to active status | |||||
• | Identifies and classifies diverse suppliers and appends additional industry codes | |||||
• | Supports collection and validation of insurance certificates and other risk-related documentation | |||||
• | Collects and reports on supplier compliance and sustainability information | |||||
Supplier Diversity Manager* | • | Enables prospective suppliers to register and be listed in organization-wide diversity directory | ||||
• | Tracks suppliers’ diversity certifications and expiration dates | |||||
• | Automates communications regarding diversity certification notifications or expirations | |||||
• | Identifies and classifies diverse suppliers within the vendor master directory | |||||
• | Enables searching for diverse suppliers from over 300 databases using dynamic ranking and scoring | |||||
• | Supports 2nd tier (subcontractor) reporting of direct, indirect or project-based sub spends | |||||
Materials Management | • | Provides comprehensive, stockroom-level inventory management, reducing backorders and stockouts | ||||
• | Integrates available onsite inventory with product searches to avoid redundant purchases | |||||
• | Maintains trusted inventory count | |||||
• | Manages multiple inventory locations | |||||
• | Controls user access to inventory | |||||
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• | IT equipment; | |
• | office supplies; | |
• | laboratory and medical supplies; | |
• | MRO supplies; | |
• | services, such as temporary labor; | |
• | retail (books, CDs, appliances, etc.); | |
• | furniture; and | |
• | food and beverages. |
• | the Science Catalog, which is a list price catalog of approximately 400 niche and midsize suppliers that support diverse and specialized scientific research; | |
• | catalog consortium contracts which offer preferred pricing arrangements with industry-specific buying cooperatives; and | |
• | inventory management solutions for specialty materials. |
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Vertical | Representative Customers | |
Higher Education | Bryn Mawr College, East Tennessee State University, Emory University, Tulsa Community College, University of Michigan, University of Notre Dame, the University of Texas System, Yale University | |
Life Sciences | Bristol-Myers Squibb Company, Sanofi-Aventis, The Scripps Research Institute | |
Healthcare | AmSurg, Cincinnati Children’s Hospital, Memorial Sloan-Kettering Cancer Center, University of Texas Health Science Center at Houston | |
State and Local Government | Clint Independent School District, State of Georgia, State of Iowa |
• | realized 6-to-1 ROI, meaning that they realized $6 in savings benefits for every $1 paid to SciQuest for its solution, over the first three years of their agreement with SciQuest; | |
• | funded the investment in our solution from the existing procurement budget, generated by realized savings, with no budget increases or general fund expenses; and | |
• | determined that 45% of realized savings resulted from process efficiencies and 55% of realized savings resulted from negotiated discounts and contract compliance. |
• | decreased the time spent ordering supplies and managing orders by 85%; | |
• | decreased the requisition processing time from 14 days to two days; | |
• | generated an average savings of 7% on lab material purchases as a result of negotiating greater supplier discounts and increasing on-contract spend; and |
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• | exceeded user adoption goal of 450 by 300%, with 1,500 TSRI staff now using the SciQuestprocure-to-pay suite. |
• | increased spend under management, meaning spend that occurs pursuant to a pre-established contract with the supplier, from 6% to nearly 60% within the first 18 months; | |
• | negotiated new discounts from suppliers ranging from 5% to 20%; and | |
• | reduced paper-based expenses, including some departments going almost 100% paperless upon implementation. |
• | reduced average order turnaround time from 9.3 days to 3.7 days; | |
• | eliminated paper-based purchasing with 100% of purchase orders being processed electronically; | |
• | reallocated two procurement employees to other departments, resulting in a 44% reduction in procurement staff; and | |
• | improved ability to direct spending, with 41% of purchase orders being directed to preferred suppliers and 10% of spending directed to diversity suppliers. |
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• | breadth, depth and configurability of the solution; | |
• | brand name recognition; | |
• | ability to meet a customer’s functional requirements and provide content specific to a vertical market; | |
• | on-demand software delivery model; | |
• | managed network and supplier services; | |
• | price; | |
• | ease and speed of implementation and use; | |
• | measurability of results, demonstrablereturn-on-investment and perceived value; | |
• | satisfaction of customer base; and | |
• | performance and reliability of the software. |
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ITEM 1A. | RISK FACTORS |
• | our failure to sustain our historical renewal rates, pricing and terms of our customer contracts would adversely affect our operating results; | |
• | if we are unable to attract new customers, or if our existing customers do not purchase additional products or services, the growth of our business and cash flows will be adversely affected; | |
• | continued economic weakness and uncertainty, which may result in a significant reduction in spending in our target markets, could adversely affect our business, lengthen our sales cycles and make it difficult for us to forecast operating results accurately; | |
• | we expect to continue to develop and acquire new product and service offerings with no guarantee that we will be able to market those acquired products and services successfully or to integrate any acquired businesses into our operations effectively; | |
• | we may experience service failures or interruptions due to defects in the hardware, software, infrastructure, third-party components or processes that comprise our solution, any of which could adversely affect our business; | |
• | if we do not successfully maintain the SciQuest brand in our existing vertical markets or successfully market the SciQuest brand in new vertical markets, our revenues and earnings could be materially adversely affected; | |
• | if we are unable to adapt our products and services to rapid technological change, our revenues and profits could be materially and adversely affected; | |
• | the market for on-demand strategic procurement and supplier enablement solutions is at a relatively early stage of development; if the market for our solution develops more slowly than we expect, our revenues may decline or fail to grow and we may incur operating losses; | |
• | our customers are concentrated in our targeted vertical markets, and adverse trends or events affecting these markets could adversely affect our revenue growth and profits; | |
• | we have been, and may continue to be, subject to claims that we or our technologies infringe upon the intellectual property or other proprietary rights of a third party. Any such claims may require us to incur significant costs, to enter into royalty or licensing agreements or to develop or license substitute technology, which may harm our business. |
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• | enhance our existing products and services; | |
• | develop new products, services and technologies that address the increasingly sophisticated and varied needs of our target markets; and | |
• | respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis. |
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• | their comfort with current purchasing and asset management procedures; | |
• | the costs and resources required to adopt new business procedures; | |
• | reductions in capital expenditures or technology spending budgets; | |
• | the price, performance and availability of competing solutions; | |
• | security and privacy concerns; or | |
• | general reticence about technology or the Internet. |
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• | potential customers’ internal approval processes; | |
• | budgetary constraints for technology spending; | |
• | customers’ concerns about implementing new procurement methods and strategies; and | |
• | seasonal and other timing effects. |
• | concentrated sales to large customers; | |
• | our ability to retain and increase sales to existing customers and to attract new customers; | |
• | the timing and success of new product and module introductions or upgrades by us or our competitors; | |
• | changes in our pricing policies or those of our competitors; | |
• | renewal rates of existing customers; | |
• | potential consolidation among our customers within the life sciences market; | |
• | potential foreign currency exchange gains and losses associated with expenses and sales denominated in currencies other than the U.S. dollar; | |
• | the amount and timing of expenditures related to development, adaptation or acquisition of technologies, products or businesses; | |
• | competition, including entry into the industry by new competitors and new offerings by existing competitors; and | |
• | general economic, industry and market conditions that impact expenditures for technology solutions in our target markets. |
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• | the integration of new operations, products, services and personnel; | |
• | the diversion of resources from our existing businesses, sites and technologies; |
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• | the inability to generate revenues from new products and services sufficient to offset associated acquisition costs; | |
• | the maintenance of uniform standards, controls, procedures and policies; | |
• | the acquired business requiring greater resources than anticipated; | |
• | accounting effects that may adversely affect our financial results; | |
• | the impairment of employee and customer relations as a result of any integration of new management personnel; | |
• | dilution to existing stockholders from the issuance of equity securities; and | |
• | liabilities or other problems associated with an acquired business. |
• | develop and enhance our solution; | |
• | continue to expand our technology development, salesand/or marketing organizations; | |
• | hire, train and retain employees; or | |
• | respond to competitive pressures or unanticipated working capital requirements. |
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• | devote greater resources to marketing and promotional campaigns; | |
• | devote substantially more resources to product development; | |
• | secure exclusive arrangements with indirect sales channels that impede our sales; | |
• | develop more extensive client bases and broader client relationships than we have; and | |
• | enter into strategic or commercial relationships with larger, more established and well-financed companies. |
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• | variations in our quarterly operating results; | |
• | decreases in market valuations of similar companies; | |
• | the failure of securities analysts to cover our common stock after this offering or changes in financial estimates by analysts who cover us, our competitors or our industry; | |
• | failure by us or our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market; and | |
• | fluctuations in stock market prices and volumes. |
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• | delaying, deferring or preventing a change in corporate control; | |
• | impeding a merger, consolidation, takeover or other business combination involving us; or | |
• | discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us. |
• | 24,902 shares became eligible for sale immediately upon the completion of our initial public offering, subject in some cases to volume and other restrictions of Rule 144 and Rule 701 under the Securities Act of 1933, as amended, or the Securities Act; and | |
• | 13,966,976 shares will be eligible for sale upon the expiration oflock-up agreements, subject in some cases to volume and other restrictions of Rule 144 and Rule 701 under the Securities Act. |
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• | a classified board of directors with three-year staggered terms; | |
• | not providing for cumulative voting in the election of directors; | |
• | authorizing the board of directors to issue, without stockholder approval, preferred stock with rights senior to those of our common stock; | |
• | prohibiting stockholder action by written consent; and | |
• | requiring advance notification of stockholder nominations and proposals. |
• | breach of a director’s duty of loyalty to the corporation or its stockholders; | |
• | act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; | |
• | unlawful payment of dividends or redemption of shares; or | |
• | transaction from which the director derives an improper personal benefit. |
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ITEM 1B. | UNRESOLVED STAFF COMMENTS |
ITEM 2. | PROPERTIES |
ITEM 3. | LEGAL PROCEEDINGS |
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ITEM 4. | (Removed and Reserved) |
Year Ended December 31, 2010: | High | Low | ||||||
October 1, 2010 through December 31, 2010 | $ | 14.11 | $ | 10.50 | ||||
September 24, 2010 through September 30, 2010 | 13.75 | 11.00 |
Equity Compensation Plan Information | ||||||||||||
Number of | ||||||||||||
securities | ||||||||||||
Number of | remaining | |||||||||||
securities | Weighted- | available | ||||||||||
to be issued upon | average | for future issuance | ||||||||||
exercise of | exercise price of | under equity | ||||||||||
outstanding | outstanding | compensation | ||||||||||
options, | options, | plans (excluding | ||||||||||
warrants and | warrants and | securities reflected | ||||||||||
rights | rights | in column (a)) | ||||||||||
Plan category | (a) | (b) | (c) | |||||||||
Equity compensation plans approved by security holders | 2,792,017 | $ | 1.15 | 1,462,498 | ||||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
Total | 2,792,017 | $ | 1.15 | 1,462,498 |
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Per Share | ||||||||||||
Number of | Exercise Price | Fair Value | ||||||||||
Date of Issuance | Options Granted | of Option | per Option(1) | |||||||||
January 21, 2010 | 223,599 | $ | 2.26 | $ | 1.82 | |||||||
April 20, 2010 | 79,500 | $ | 8.18 | $ | 6.61 |
(1) | The fair value per share of each option was estimated for the date of grant using the Black-Scholes option-pricing model. This model estimates the fair value by applying a series of factors including the exercise price of |
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the option, a risk free interest rate, the expected term of the option, expected share price volatility of the underlying common stock and expected dividends on the underlying common stock. |
Number of | Per Share | |||||||
Date of Issuance | Shares Issued | Exercise Price | ||||||
March 14, 2010 | 976 | $ | 0.16 | |||||
March 31, 2010 | 859 | $ | 2.04 | |||||
May 3, 2010 | 2,000 | $ | 2.04 | |||||
May 10, 2010 | 7,552 | $ | 2.04 | |||||
August 12, 2010 | 875 | $ | 2.04 | |||||
August 19, 2010 | 625 | $ | 1.90 |
Number of | ||||||||||||
Shares of | Per Share | |||||||||||
Restricted | Purchase Price(s) of | Fair Value(s) | ||||||||||
Date of Issuance | Stock Granted | Restricted Stock | per Share(1) | |||||||||
January 21, 2010 | 95,861 | $ | 2.26 | $ | 1.58 |
(1) | The fair value per share of restricted stock was estimated for the date of grant using the Black-Scholes option-pricing model since the notes receivable are deemed non-recourse for accounting purposes. This model estimates the fair value by applying a series of factors including the exercise price of the option, a risk free interest rate, the expected term of the option, expected share price volatility of the underlying common stock and expected dividends on the underlying common stock. |
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ITEM 6. | SELECTED FINANCIAL DATA |
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Year Ended December 31, | ||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Statements of Operations Data: | ||||||||||||||||||||
Revenues | $ | 15,183 | $ | 20,107 | $ | 29,784 | $ | 36,179 | $ | 42,477 | ||||||||||
Cost of revenues(1)(2) | 4,766 | 6,101 | 6,723 | 7,494 | 9,361 | |||||||||||||||
Gross profit | 10,417 | 14,006 | 23,061 | 28,685 | 33,116 | |||||||||||||||
Operating expenses:(1) | ||||||||||||||||||||
Research and development | 6,124 | 6,908 | 8,307 | 8,059 | 8,395 | |||||||||||||||
Sales and marketing | 5,954 | 7,213 | 9,280 | 10,750 | 11,592 | |||||||||||||||
General and administrative | 2,531 | 2,717 | 3,942 | 3,703 | 5,810 | |||||||||||||||
Management bonuses associated with initial public offering | — | — | — | — | 5,888 | |||||||||||||||
Litigation settlement and associated legal expenses | — | — | — | 3,189 | — | |||||||||||||||
Amortization of intangible assets | 3,631 | 2,286 | 537 | 403 | 301 | |||||||||||||||
Total operating expenses | 18,240 | 19,124 | 22,066 | 26,104 | 31,986 | |||||||||||||||
Income (loss) from operations | (7,823 | ) | (5,118 | ) | 995 | 2,581 | 1,130 | |||||||||||||
Interest and other income (expense), net | (78 | ) | 118 | 113 | 27 | 1,727 | ||||||||||||||
Income (loss) before income taxes | (7,901 | ) | (5,000 | ) | 1,108 | 2,608 | 2,857 | |||||||||||||
Income tax benefit (expense) | — | — | 9 | 16,821 | (1,114 | ) | ||||||||||||||
Net income (loss) | (7,901 | ) | (5,000 | ) | 1,117 | 19,429 | 1,743 | |||||||||||||
Dividends on redeemable preferred stock | 2,038 | 2,207 | 2,395 | 2,595 | 2,079 | |||||||||||||||
Net income (loss) attributable to common stockholders | $ | (9,939 | ) | $ | (7,207 | ) | $ | (1,278 | ) | $ | 16,834 | $ | (336 | ) | ||||||
Net income (loss) attributable to common stockholders per share: | ||||||||||||||||||||
Basic | $ | (0.76 | ) | $ | (0.53 | ) | $ | (0.09 | ) | $ | 1.20 | $ | (0.02 | ) | ||||||
Diluted | $ | (0.76 | ) | $ | (0.53 | ) | $ | (0.09 | ) | $ | 1.16 | $ | (0.02 | ) | ||||||
Weighted average shares outstanding used in computing per share amounts: | ||||||||||||||||||||
Basic | 13,058 | 13,492 | 13,800 | 14,061 | 15,754 | |||||||||||||||
Diluted | 13,058 | 13,492 | 13,800 | 14,450 | 15,754 | |||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Non-GAAP Operating Data: | ||||||||||||||||||||
Adjusted Net Income (3) | $ | (4,270 | ) | $ | (2,604 | ) | $ | 1,285 | $ | 4,149 | $ | 5,536 | ||||||||
Adjusted Free Cash Flow (4) | $ | 1,636 | $ | 3,636 | $ | 6,003 | $ | 6,785 | $ | 10,563 |
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December 31, | ||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||
Cash and cash equivalents | $ | 5,218 | $ | 7,791 | $ | 13,502 | $ | 17,132 | $ | 17,494 | ||||||||||
Short-term investments | — | — | — | — | 20,000 | |||||||||||||||
Working capital excluding deferred revenues | 4,899 | 7,631 | 14,273 | 19,963 | 41,147 | |||||||||||||||
Total assets | 24,883 | 26,332 | 32,922 | 55,211 | 76,687 | |||||||||||||||
Deferred revenues | 19,164 | 26,124 | 31,590 | 34,275 | 38,201 | |||||||||||||||
Redeemable preferred stock | 26,778 | 28,985 | 31,477 | 34,072 | — | |||||||||||||||
Total stockholders’ equity (deficit) | (26,403 | ) | (33,461 | ) | (34,391 | ) | (17,158 | ) | 34,235 |
(1) | Amounts include stock-based compensation expense, as follows: |
Year Ended December 31, | ||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Cost of revenues | $ | — | $ | 3 | $ | 25 | $ | 33 | $ | 83 | ||||||||||
Research and development | — | 56 | 53 | 86 | 236 | |||||||||||||||
Sales and marketing | — | 42 | 150 | 83 | 167 | |||||||||||||||
General and administrative | — | 9 | 158 | 163 | 602 | |||||||||||||||
$ | — | $ | 110 | $ | 386 | $ | 365 | $ | 1,088 | |||||||||||
(2) Cost of revenues includes amortization of capitalized software development costs of: | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Amortization of capitalized software development costs | $ | 235 | $ | 114 | $ | 154 | $ | 167 | $ | 241 | ||||||||||
(3) | Adjusted Net Income, a non-GAAP operating measure, consists of net income (loss) plus our non-cash, stock-based compensation expense, amortization of intangible assets, acquisition costs incurred in 2010, compensation expense relating to management bonuses paid in connection with our initial public offering in 2010, a stock contribution to fund a charitable trust established by us in 2010 and settlement and legal costs related to a patent infringement lawsuit settled in 2009, less the gain realized upon the sale of a warrant in 2010 and the tax benefit in 2009 from the reduction of the valuation reserve on our deferred tax asset. Adjusted Net Income is determined on a tax-effected basis. For 2010, we used our quarterly effective tax rate to determine the tax effect for Adjusted Net Income. For 2009 and 2008, we used our pro forma effective tax rate assuming the reduction of the valuation reserve had occurred the prior year to determine the tax effect for Adjusted Net Income. We use Adjusted Net Income as a measure of operating performance because it assists us in comparing performance on a consistent basis, as it removes from our operating results the impact of our capital structure, acquisition-related costs, the one-time costs associated with non-recurring events and such non-cash items such as stock-based compensation expense and amortization of intangible assets, which can vary depending upon accounting methods. We believe Adjusted Net Income is useful to an investor in evaluating our operating performance because it is widely used by investors, securities analysts and other interested parties in our industry to measure a company’s operating performance without regard to non-cash items such as stock-based compensation expense and amortization of intangible assets, which can vary depending upon accounting methods, and to present a meaningful measure of corporate performance exclusive of our capital structure and the method by which assets were acquired. | |
Our use of Adjusted Net Income has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are: |
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• | Adjusted Net Income does not reflect changes in, or cash requirements for, our working capital needs; | |
• | Adjusted Net Income does not consider the potentially dilutive impact of equity-based compensation; | |
• | Adjusted Net Income does not reflect acquisition-related costs, one-time cash bonuses paid to our management or cash payments in connection with a settlement of a lawsuit, all of which reduced the cash available to us; | |
• | we must make certain assumptions in order to determine the tax effect adjustments for Adjusted Net Income, which assumptions may not prove to be accurate; and | |
• | other companies, including companies in our industry, may calculate Adjusted Net Income differently, which reduces its usefulness as a comparative measure. |
Year Ended December 31, | ||||||||||||||||||||
2006 | �� | 2007 | 2008 | 2009 | 2010 | |||||||||||||||
(In thousands) | ||||||||||||||||||||
Net income (loss) | $ | (7,901 | ) | $ | (5,000 | ) | $ | 1,117 | $ | 19,429 | $ | 1,743 | ||||||||
Stock based compensation | — | 110 | 386 | 365 | 1,088 | |||||||||||||||
Amortization of intangibles | 3,631 | 2,286 | 537 | 403 | 301 | |||||||||||||||
Non-recurring stock contribution for a charitable trust established by the company | — | — | — | — | 238 | |||||||||||||||
Acquisition-related costs | — | — | — | — | 265 | |||||||||||||||
Gain on sale of investment | — | — | — | — | (1,700 | ) | ||||||||||||||
Management bonuses associated with initial public offering | — | — | — | — | 5,888 | |||||||||||||||
Litigation settlement and associated legal expenses | — | — | — | 3,189 | — | |||||||||||||||
Deferred tax asset valuation reserve reduction | — | — | — | (16,800 | ) | — | ||||||||||||||
Tax effect of adjustments(a) | — | — | (755 | ) | (2,437 | ) | (2,287 | ) | ||||||||||||
Adjusted Net Income (Loss) | $ | (4,270 | ) | $ | (2,604 | ) | $ | 1,285 | $ | 4,149 | $ | 5,536 | ||||||||
(a) | For the years ended December 31, 2008 and 2009, respectively, the tax effect of adjustments has been calculated on the assumption that the $16,800 deferred tax asset valuation reserve reduction had taken place prior to the commencement of each such fiscal year, and a pro forma effective tax rate of 37% was applied for each of such years. For the year ended December 31, 2010, the tax effect was determined on a quarterly basis using our effective tax rate for the applicable quarter. |
(4) | Free Cash Flow consists of net cash provided by operating activities, less purchases of property and equipment and less capitalization of software development costs. Adjusted Free Cash Flow consists of Free Cash Flow plus one-time settlement and legal costs related to a patent infringement lawsuit in 2009 as well as acquisition costs and one-time bonus payments incurred in 2010. We use Adjusted Free Cash Flow as a measure of liquidity because it assists us in assessing our ability to fund our growth through our generation of cash. We believe Adjusted Free Cash Flow is useful to an investor in evaluating our liquidity because Adjusted Free Cash Flow and similar measures are widely used by investors, securities analysts and other interested parties in our industry to measure a company’s liquidity without regard to revenue and expense recognition, which can vary depending upon accounting methods. |
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• | Adjusted Free Cash Flow does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness; | |
• | Adjusted Free Cash Flow does not reflect one-time litigation expense payments or one-time management bonuses associated with the initial public offering, which reduced the cash available to us; | |
• | Adjusted Free Cash Flow does not include acquisition costs; | |
• | Adjusted Free Cash Flow removes the impact of accrual basis accounting on asset accounts and non-debt liability accounts; and | |
• | other companies, including companies in our industry, may calculate Adjusted Free Cash Flow differently, which reduces its usefulness as a comparative measure. |
Year Ended December 31, | ||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Net cash provided by operating activities | $ | 2,227 | $ | 4,693 | $ | 6,582 | $ | 4,501 | $ | 5,890 | ||||||||||
Purchase of property and equipment | (531 | ) | (695 | ) | (480 | ) | (685 | ) | (832 | ) | ||||||||||
Capitalization of software development costs | (60 | ) | (362 | ) | (99 | ) | (220 | ) | (648 | ) | ||||||||||
Free Cash Flow | 1,636 | 3,636 | 6,003 | 3,596 | 4,410 | |||||||||||||||
Litigation settlement and associated legal expenses | — | — | — | 3,189 | — | |||||||||||||||
Acquisition-related costs | — | — | — | — | 265 | |||||||||||||||
Management bonuses associated with initial public offering | — | — | — | — | 5,888 | |||||||||||||||
Adjusted Free Cash Flow | $ | 1,636 | $ | 3,636 | $ | 6,003 | $ | 6,785 | $ | 10,563 | ||||||||||
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• | Adjusted Net Income does not reflect changes in, or cash requirements for, our working capital needs; | |
• | Adjusted Net Income does not consider the potentially dilutive impact of equity-based compensation; | |
• | Adjusted Net Income does not reflect acquisition-related costs, one-time cash bonuses paid to our management or cash payments in connection with a settlement of a lawsuit, all of which reduced the cash available to us; | |
• | we must make certain assumptions in order to determine the tax effect adjustments for Adjusted Net Income, which assumptions may not prove to be accurate; and | |
• | other companies, including companies in our industry, may calculate Adjusted Net Income differently, which reduces its usefulness as a comparative measure. |
Year Ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
(Unaudited; in thousands) | ||||||||||||
Net income | $ | 1,117 | $ | 19,429 | $ | 1,743 | ||||||
Stock based compensation | 386 | 365 | 1,088 | |||||||||
Amortization of intangibles | 537 | 403 | 301 | |||||||||
Non-recurring stock contribution for a charitable trust established by the company | — | — | 238 | |||||||||
Acquisition-related costs | — | — | 265 | |||||||||
Gain on sale of investment | — | — | (1,700) | |||||||||
Management bonuses associated with initial public offering | — | — | 5,888 | |||||||||
Litigation settlement and associated legal expenses | — | 3,189 | — | |||||||||
Deferred tax asset valuation reserve reduction | — | (16,800) | — | |||||||||
Tax effect of adjustments(1) | (755) | (2,437) | (2,287) | |||||||||
Adjusted Net Income | $ | 1,285 | $ | 4,149 | $ | 5,536 | ||||||
(1) | For the years ended December 31, 2008 and 2009, respectively, the tax effect of adjustments has been calculated on the assumption that the $16,800 deferred tax asset valuation reserve reduction had taken place prior to the commencement of each such fiscal year, and a pro forma effective tax rate of 37% was applied for each of such years. For the year ended December 31, 2010, the tax effect was determined on a quarterly basis using our effective tax rate for the applicable quarter. |
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• | Adjusted Free Cash Flow does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness; | |
• | Adjusted Free Cash Flow does not reflect one-time litigation expense payments or one-time management bonuses associated with the initial public offering, which reduced the cash available to us; | |
• | Adjusted Free Cash Flow does not include acquisition costs; | |
• | Adjusted Free Cash Flow removes the impact of accrual basis accounting on asset accounts and non-debt liability accounts; and | |
• | other companies, including companies in our industry, may calculate Adjusted Free Cash Flow differently, which reduces its usefulness as a comparative measure. |
Year Ended December 31, | ||||||||||||||||
2008 | 2009 | 2010 | ||||||||||||||
(Unaudited; in thousands) | ||||||||||||||||
Net cash provided by operating activities | $ | 6,582 | $ | 4,501 | $ | 5,890 | ||||||||||
Purchase of property and equipment | (480 | ) | (685 | ) | (832 | ) | ||||||||||
Capitalization of software development costs | (99 | ) | (220 | ) | (648 | ) | ||||||||||
Free Cash Flow | 6,003 | 3,596 | 4,410 | |||||||||||||
Litigation settlement and associated legal expenses | — | 3,189 | — | |||||||||||||
Acquisition-related costs | — | — | 265 | |||||||||||||
Management bonuses associated with initial public offering | — | — | 5,888 | |||||||||||||
Adjusted Free Cash Flow | $ | 6,003 | $ | 6,785 | $ | 10,563 | ||||||||||
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2008 | 2009 | 2010 | ||||
Estimated dividend yield | 0% | 0% | 0% | |||
Expected stock price volatility | 100.0% | 100.0% | 100.0% | |||
Weighted-average risk-free interest rate | 2.6% – 3.6% | 1.9% – 2.8% | 1.3% – 3.0% | |||
Expected life of award (in years) | 6.25 | 6.25 | 6.25 |
Number of Shares Subject | Per Share Exercise | Fair Value | ||||||||||
Grant Date | to Options Granted | Price of Option(1) | per Option(2) | |||||||||
January 23, 2008(3) | 73,561 | $ | 2.60 | $ | 2.10 | |||||||
July 23, 2008(3) | 31,500 | $ | 3.16 | $ | 2.56 | |||||||
January 22, 2009 | 174,547 | $ | 2.04 | $ | 1.63 | |||||||
July 22, 2009 | 17,500 | $ | 1.90 | $ | 1.53 | |||||||
January 21, 2010 | 223,599 | $ | 2.26 | $ | 1.82 | |||||||
April 20, 2010 | 79,500 | $ | 8.18 | $ | 6.61 | |||||||
October 29, 2010 | 28,500 | $ | 11.45 | $ | 9.12 | |||||||
November 1 – December 31, 2010 | 9,000 | $ | 10.99 – 13.38 | $ | 8.75 – 10.68 |
(1) | The per share exercise price of option from January 23, 2008 to April 20, 2010 represents the determination by our board of directors of the fair value of our common stock on the date of grant, as determined by taking into account our most recent valuation of common stock. After September 24, 2010, the per share exercise price of option represents the closing sale price of our common stock on the date of grant. | |
(2) | As described above, the fair value per share of each option was estimated for the date of grant using the Black-Scholes option-pricing model. This model estimates the fair value by applying a series of factors including the exercise price of the option, a risk free interest rate, the expected term of the option, expected share price volatility of the underlying common stock and expected dividends on the underlying common stock. Additional information regarding the valuation of our common stock and option awards is set forth in Note 10 to our financial statements included elsewhere in this Report. |
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(3) | Represents stock options that were amended to reduce the exercise price for substantially all of the shares subject to stock options granted on January 23, 2008 and July 23, 2008. The amendments reduced the exercise price of the previously granted options to $2.04 per share, which was the fair value of our common stock on the date of the amendments. The amendments did not affect the vesting provisions or the number of shares subject to any of the option awards. For financial statement reporting, we treat the previously granted options as being forfeited and the amendments as new option grants. |
Per Share | ||||||||||||
Number of Shares of | Purchase Price(s) of | Fair Value(s) | ||||||||||
Grant Date | Restricted Stock Granted | Restricted Stock(1) | per Share(2) | |||||||||
January 23, 2008 | 292,137 | $ | 2.60 | $ | 1.38 – $1.81 | |||||||
January 22, 2009 | 159,024 | $ | 2.04 | $ | 1.41 – $2.04 | |||||||
January 21, 2010 | 95,861 | $ | 2.26 | $ | 1.58 |
(1) | The per share purchase price of restricted stock represents the determination by our board of directors of the fair value of our common stock on the date of grant, as determined by taking into account our most recent valuation of common stock. | |
(2) | As described above, the fair value per share of restricted stock was estimated for the date of grant using the Black-Scholes option-pricing model since the notes receivable are deemed non-recourse for accounting purposes. This model estimates the fair value by applying a series of factors including the exercise price of the option, a risk free interest rate, the expected term of the option, expected share price volatility of the underlying common stock and expected dividends on the underlying common stock. |
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Year Ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
(In thousands) | ||||||||||||
Revenues | $ | 29,784 | $ | 36,179 | $ | 42,477 | ||||||
Cost of revenues | 6,723 | 7,494 | 9,361 | |||||||||
Gross profit | 23,061 | 28,685 | 33,116 | |||||||||
Operating expenses: | ||||||||||||
Research and development | 8,307 | 8,059 | 8,395 | |||||||||
Sales and marketing | 9,280 | 10,750 | 11,592 | |||||||||
General and administrative | 3,942 | 3,703 | 5,810 | |||||||||
Management bonuses associated with initial public offering | — | — | 5,888 | |||||||||
Litigation settlement and associated legal expenses | — | 3,189 | — | |||||||||
Amortization of intangible assets | 537 | 403 | 301 | |||||||||
Total operating expenses | 22,066 | 26,104 | 31,986 | |||||||||
Income from operations | 995 | 2,581 | 1,130 | |||||||||
Interest and other income, net | 113 | 27 | 1,727 | |||||||||
Income before income taxes | 1,108 | 2,608 | 2,857 | |||||||||
Income tax benefit (expense) | 9 | 16,821 | (1,114) | |||||||||
Net income | $ | 1,117 | $ | 19,429 | $ | 1,743 | ||||||
Year Ended December 31, | ||||||||||||
2008 | 2009 | 2010 | ||||||||||
Revenues | 100 | % | 100 | % | 100 | % | ||||||
Cost of revenues | 23 | 21 | 22 | |||||||||
Gross profit | 77 | 79 | 78 | |||||||||
Operating expenses: | ||||||||||||
Research and development | 28 | 22 | 20 | |||||||||
Sales and marketing | 31 | 30 | 27 | |||||||||
General and administrative | 13 | 10 | 13 | |||||||||
Management bonuses associated with initial public offering | — | — | 14 | |||||||||
Litigation settlement and associated legal expenses | — | 9 | — | |||||||||
Amortization of intangible assets | 2 | 1 | 1 | |||||||||
Total operating expenses | 74 | 72 | 75 | |||||||||
Income from operations | 3 | 7 | 3 | |||||||||
Interest and other income, net | 1 | — | 4 | |||||||||
Income before income taxes | 4 | 7 | 7 | |||||||||
Income tax benefit (expense) | — | 47 | (3 | ) | ||||||||
Net income | 4 | % | 54 | % | 4 | % | ||||||
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Payments Due by Period | ||||||||||||||||||||
Less Than | More Than | |||||||||||||||||||
Contractual Obligations | Total | 1 Year | 1-3 Years | 3-5 Years | 5 Years | |||||||||||||||
(In thousands) | ||||||||||||||||||||
Operating lease commitments | $ | 5,645 | $ | 668 | $ | 2,075 | $ | 1,832 | $ | 1,070 |
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Page | ||
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm | F-2 | |
Balance Sheets as of December 31, 2010 and 2009 | F-3 | |
Statements of Operations for the years ended December 31, 2010, 2009 and 2008 | F-4 | |
Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2010, 2009 and 2008 | F-5 | |
Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008 | F-6 | |
Notes to Financial Statements | F-7 |
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Exhibit | ||||
Number | Description | |||
3 | .1* | Amended and Restated Certificate of Incorporation of SciQuest, Inc. | ||
3 | .2* | Amended and Restated Bylaws of SciQuest, Inc. | ||
4 | .1 | Specimen Certificate representing shares of common stock of SciQuest, Inc. (incorporated herein by reference to Exhibit 4.1 to Amendment No. 5 toForm S-1 Registration Statement, filed September 2, 2010) | ||
4 | .2 | Stockholders Agreement, by and among SciQuest, Inc. and certain of its stockholders, dated July 28, 2004 (incorporated herein by reference to Exhibit 4.2 toForm S-1 Registration Statement, filed March 26, 2010) | ||
4 | .3 | Amendment No. 1 to Stockholders Agreement, by and among SciQuest, Inc. and certain of its stockholders, dated August 2, 2010 (incorporated herein by reference to Exhibit 4.3 to Amendment No. 5 toForm S-1 Registration Statement, filed September 2, 2010) | ||
10 | .1 | SciQuest, Inc. 2004 Stock Incentive Plan+ (incorporated herein by reference to Exhibit 10.1 toForm S-1 Registration Statement, filed March 26, 2010) | ||
10 | .2 | Amendment No. 2 to SciQuest, Inc. 2004 Stock Incentive Plan+ (incorporated herein by reference to Exhibit 10.2 toForm S-1 Registration Statement, filed March 26, 2010) | ||
10 | .3 | Amendment No. 3 to SciQuest, Inc. 2004 Stock Incentive Plan+ (incorporated herein by reference to Exhibit 4.5 toForm S-8 Registration Statement, filed November 5, 2010) | ||
10 | .4 | Form of Stock Option Grant Certificate under the SciQuest, Inc. 2004 Stock Incentive Plan+ (incorporated herein by reference to Exhibit 10.3 toForm S-1 Registration Statement, filed March 26, 2010) | ||
10 | .5 | Form of Management Subscription Agreement under the SciQuest, Inc. 2004 Stock Incentive Plan+ (incorporated herein by reference to Exhibit 10.4 toForm S-1 Registration Statement, filed March 26, 2010) | ||
10 | .6 | Employment Agreement by and between SciQuest, Inc. and Stephen J. Wiehe, dated February 5, 2002+ (incorporated herein by reference to Exhibit 10.7 toForm S-1 Registration Statement, filed March 26, 2010) | ||
10 | .7 | Change of Control Agreement by and between SciQuest, Inc. and Stephen J. Wiehe, dated January 1, 2004+ (incorporated herein by reference to Exhibit 10.8 toForm S-1 Registration Statement, filed March 26, 2010) | ||
10 | .8 | Change of Control Agreement by and between SciQuest, Inc. and James B. Duke, dated January 1, 2004+ (incorporated herein by reference to Exhibit 10.9 toForm S-1 Registration Statement, filed March 26, 2010) | ||
10 | .9 | Change of Control Agreement by and between SciQuest, Inc. and Rudy C. Howard, dated January 1, 2010+ (incorporated herein by reference to Exhibit 10.10 toForm S-1 Registration Statement, filed March 26, 2010) | ||
10 | .10 | Amended and Restated Subscription Agreement by and between SciQuest, Inc. and Daniel F. Gillis, dated January 21, 2010+ (incorporated herein by reference to Exhibit 10.11 toForm S-1 Registration Statement, filed March 26, 2010) | ||
10 | .11 | Subscription Agreement by and between SciQuest, Inc. and Daniel F. Gillis, dated January 21, 2010+ (incorporated herein by reference to Exhibit 10.12 toForm S-1 Registration Statement, filed March 26, 2010) | ||
10 | .12 | Form of Indemnification Agreement (incorporated herein by reference to Exhibit 10.13 to Amendment No. 1 toForm S-1 Registration Statement, filed May 11, 2010) |
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Exhibit | ||||
Number | Description | |||
10 | .13 | Office Lease by and between SciQuest, Inc. and Duke Realty Limited Partnership, dated May 17, 2005 (incorporated herein by reference to Exhibit 10.14 toForm S-1 Registration Statement, filed March 26, 2010) | ||
10 | .14 | First Amendment to Office Lease by and between SciQuest, Inc. and Duke Realty Limited Partnership, dated February 21, 2008 (incorporated herein by reference to Exhibit 10.15 toForm S-1 Registration Statement, filed March 26, 2010) | ||
10 | .15 | Second Amendment to Office Lease by and between SciQuest, Inc. and Duke Realty Limited Partnership, dated February 27, 2008 (incorporated herein by reference to Exhibit 10.16 toForm S-1 Registration Statement, filed March 26, 2010) | ||
10 | .16 | Assignment of Lease by and between SciQuest, Inc. and Kroy Building Products, Inc., dated February 11, 2008 (incorporated herein by reference to Exhibit 10.17 toForm S-1 Registration Statement, filed March 26, 2010) | ||
10 | .17 | Office Lease by and between Duke Realty Limited Partnership and Kroy Building Products, Inc., dated September 29, 2006 (incorporated herein by reference to Exhibit 10.18 toForm S-1 Registration Statement, filed March 26, 2010) | ||
10 | .18 | Second Amendment to Office Lease by and between SciQuest, Inc. and Duke Realty Limited Partnership, dated February 21, 2008 (incorporated herein by reference to Exhibit 10.19 toForm S-1 Registration Statement, filed March 26, 2010) | ||
10 | .19 | Master Agreement for U.S. Availability Services between SunGard Availability Services LP and SciQuest, Inc. (incorporated herein by reference to Exhibit 10.20 to Amendment No. 1 toForm S-1 Registration Statement, filed May 11, 2010) | ||
10 | .20 | Third Amendment to Office Lease, dated as of October 28, 2010, by and between Duke Realty Limited Partnership and the Company (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report onForm 8-K, filed November 2, 2010) | ||
10 | .21 | Third Amendment to Office Lease, dated as of October 28, 2010, by and between Duke Realty Limited Partnership and the Company, as successor in interest to Kroy Building Products, Inc. (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report onForm 8-K, filed November 2, 2010) | ||
10 | .22 | Stock Purchase Agreement, dated December 21, 2010, by and amont SciQuest, Inc., Tom (Yitao) Ren, Ying (Lily) Xiong, John Paul Gutierrez and Ronald Dressin (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report onForm 8-K, filed December 22, 2010) | ||
21 | .1* | List of Subsidiaries | ||
23 | .1* | Consent of Ernst & Young LLP | ||
31 | .1* | Rule 13a-14(a)/15d-14(a) Certification, executed by Stephen J. Wiehe, President, Chief Executive Officer and Director of the Company | ||
31 | .2* | Rule 13a-14(a)/15d-14(a) Certification, executed by Rudy C. Howard, Chief Financial Officer of the Company | ||
32 | .1* | Section 1350 Certification, executed by Stephen J. Wiehe, President, Chief Executive Officer and Director of the Company | ||
32 | .2* | Section 1350 Certification, executed by Rudy C. Howard, Chief Financial Officer of the Company |
* | Documents filed herewith. | |
+ | Management contracts and compensatory plans and arrangements required to be filed as exhibits pursuant to Item 15(c) of this Report. |
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By: | /s/ Stephen J. Wiehe |
Officer
Signature | Title | Date | ||||
/s/ Stephen J. Wiehe Stephen J. Wiehe | President, Chief Executive Officer and Director (Principal Executive Officer) | March 9, 2011 | ||||
/s/ Rudy C. Howard Rudy C. Howard | Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | March 9, 2011 | ||||
/s/ Noel J. Fenton Noel J. Fenton | Chairman of the Board of Directors | March 9, 2011 | ||||
/s/ Jeffrey T. Barber Jeffrey T. Barber | Director | March 9, 2011 | ||||
/s/ Timothy J. Buckley Timothy J. Buckley | Director | March 9, 2011 | ||||
/s/ Daniel F. Gillis Daniel F. Gillis | Director | March 9, 2011 |
- 71 -
Table of Contents
SciQuest, Inc. — Financial Statements | Page | |||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 |
F-1
Table of Contents
F-2
Table of Contents
As of December 31, | ||||||||
2010 | 2009 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 17,494 | $ | 17,132 | ||||
Short-term investments | 20,000 | — | ||||||
Restricted cash | — | 350 | ||||||
Accounts receivable | 6,400 | 4,846 | ||||||
Prepaid expenses and other current assets | 1,297 | 834 | ||||||
Deferred tax assets | 207 | 177 | ||||||
Total current assets | 45,398 | 23,339 | ||||||
Property and equipment, net | 1,993 | 1,307 | ||||||
Goodwill | 6,765 | 6,765 | ||||||
Intangible assets, net | 1,039 | 1,340 | ||||||
Deferred project costs | 5,667 | 5,148 | ||||||
Deferred tax assets | 15,675 | 16,623 | ||||||
Other | 150 | 43 | ||||||
Total assets | $ | 76,687 | $ | 54,565 | ||||
Liabilities and Redeemable Preferred Stock | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 51 | $ | 46 | ||||
Accrued liabilities | 4,200 | 2,980 | ||||||
Line of credit | — | 350 | ||||||
Deferred revenues | 28,305 | 27,066 | ||||||
Total current liabilities | 32,556 | 30,442 | ||||||
Deferred revenues, less current portion | 9,896 | 7,209 | ||||||
Series A redeemable preferred stock at redemption value, $0.001 par value; 222,073 shares authorized; zero and 222,073 shares issued and outstanding at December 31, 2010 and 2009, respectively | — | 34,072 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ Equity (Deficit) | ||||||||
Common stock, $0.001 par value; 50,000,000 shares authorized; 20,532,443 and 14,342,284 shares issued and outstanding as of December 31, 2010 and 2009, respectively | 20 | 14 | ||||||
Additional paid-in capital | 50,462 | — | ||||||
Notes receivable from stockholders | (15 | ) | (769 | ) | ||||
Accumulated deficit | (16,232 | ) | (16,403 | ) | ||||
Total stockholders’ equity (deficit) | 34,235 | (17,158 | ) | |||||
Total liabilities, redeemable preferred stock, and stockholders’ equity (deficit) | $ | 76,687 | $ | 54,565 | ||||
F-3
Table of Contents
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Revenues | $ | 42,477 | $ | 36,179 | $ | 29,784 | ||||||
Cost of revenues | 9,361 | 7,494 | 6,723 | |||||||||
Gross profit | 33,116 | 28,685 | 23,061 | |||||||||
Operating expenses: | ||||||||||||
Research and development | 8,395 | 8,059 | 8,307 | |||||||||
Sales and marketing | 11,592 | 10,750 | 9,280 | |||||||||
General and administrative | 5,810 | 3,703 | 3,942 | |||||||||
Management bonuses associated with initial public offering | 5,888 | — | — | |||||||||
Litigation settlement and associated legal expenses | — | 3,189 | — | |||||||||
Amortization of intangible assets | 301 | 403 | 537 | |||||||||
Total operating expenses | 31,986 | 26,104 | 22,066 | |||||||||
Income from operations | 1,130 | 2,581 | 995 | |||||||||
Other income (expense): | ||||||||||||
Interest income | 40 | 37 | 200 | |||||||||
Interest expense | (2 | ) | (6 | ) | (22 | ) | ||||||
Other income (expense), net | 1,689 | (4 | ) | (65 | ) | |||||||
Total other income, net | 1,727 | 27 | 113 | |||||||||
Income before income taxes | 2,857 | 2,608 | 1,108 | |||||||||
Income tax (expense) benefit | (1,114 | ) | 16,821 | 9 | ||||||||
Net income | 1,743 | 19,429 | 1,117 | |||||||||
Dividends on redeemable preferred stock | 2,079 | 2,595 | 2,395 | |||||||||
Net (loss) income attributable to common stockholders | $ | (336 | ) | $ | 16,834 | $ | (1,278 | ) | ||||
Net (loss) income attributable to common stockholders per share: | ||||||||||||
Basic | $ | (0.02 | ) | $ | 1.20 | $ | (0.09 | ) | ||||
Diluted | $ | (0.02 | ) | $ | 1.16 | $ | (0.09 | ) | ||||
Weighted average shares outstanding used in computing per share amounts: | ||||||||||||
Basic | 15,754 | 14,061 | 13,800 | |||||||||
Diluted | 15,754 | 14,450 | 13,800 |
F-4
Table of Contents
Total | ||||||||||||||||||||||||
Common Stock | Additional Paid-In | Notes Receivable | Accumulated | Stockholders’ | ||||||||||||||||||||
Shares | Amount | Capital | from Stockholders | Deficit | Equity (Deficit) | |||||||||||||||||||
Balance as of December 31, 2007 | 13,981,729 | $ | 14 | $ | — | $ | (42 | ) | $ | (33,433 | ) | $ | (33,461 | ) | ||||||||||
Issuance of restricted stock | 292,137 | — | 760 | (724 | ) | — | 36 | |||||||||||||||||
Repurchase of restricted stock | (130,104 | ) | — | (229 | ) | 130 | — | (99 | ) | |||||||||||||||
Exercise of common stock options | 18,135 | — | 2 | — | — | 2 | ||||||||||||||||||
Payments on notes receivable from stockholders | — | — | — | 19 | — | 19 | ||||||||||||||||||
Issuance of common stock | 1,615 | — | 4 | — | — | 4 | ||||||||||||||||||
Stock-based compensation | 12,500 | — | 386 | — | — | 386 | ||||||||||||||||||
Dividends accrued on redeemable preferred stock | — | — | (923 | ) | — | (1,472 | ) | (2,395 | ) | |||||||||||||||
Net income | — | — | — | — | 1,117 | 1,117 | ||||||||||||||||||
Balance as of December 31, 2008 | 14,176,012 | 14 | — | (617 | ) | (33,788 | ) | (34,391 | ) | |||||||||||||||
Issuance of restricted stock | 159,024 | — | 196 | (171 | ) | — | 25 | |||||||||||||||||
Repurchase of restricted stock | (7,802 | ) | — | (16 | ) | 1 | — | (15 | ) | |||||||||||||||
Exercise of common stock options | 15,050 | — | 6 | — | — | 6 | ||||||||||||||||||
Payments on notes receivable from stockholders | — | — | — | 18 | — | 18 | ||||||||||||||||||
Stock-based compensation | — | — | 365 | — | — | 365 | ||||||||||||||||||
Dividends accrued on redeemable preferred stock | — | — | (551 | ) | — | (2,044 | ) | (2,595 | ) | |||||||||||||||
Net income | — | — | — | — | 19,429 | 19,429 | ||||||||||||||||||
Balance as of December 31, 2009 | 14,342,284 | 14 | — | (769 | ) | (16,403 | ) | (17,158 | ) | |||||||||||||||
Proceeds from public offering, net of underwriting discounts and offering costs | 6,000,000 | 6 | 50,583 | — | — | 50,589 | ||||||||||||||||||
Exercise of common stock options | 17,241 | — | 29 | — | — | 29 | ||||||||||||||||||
Contribution of stock to fund a charitable trust established by the Company | 25,000 | — | 238 | — | — | 238 | ||||||||||||||||||
Issuance of restricted stock | 95,861 | — | 216 | (177 | ) | — | 39 | |||||||||||||||||
Repurchase of restricted stock | (143,543 | ) | — | (273 | ) | — | — | (273 | ) | |||||||||||||||
Exercise of warrants | 195,600 | — | 15 | — | — | 15 | ||||||||||||||||||
Payments on notes receivable from stockholders | — | — | — | 4 | — | 4 | ||||||||||||||||||
Forgiveness of notes receivable | — | — | — | 927 | (927 | ) | — | |||||||||||||||||
Stock-based compensation | — | — | 1,088 | — | — | 1,088 | ||||||||||||||||||
Dividends accrued on redeemable preferred stock | — | — | (1,434 | ) | — | (645 | ) | (2,079 | ) | |||||||||||||||
Net income | — | — | — | — | 1,743 | 1,743 | ||||||||||||||||||
Balance as of December 31, 2010 | 20,532,443 | $ | 20 | $ | 50,462 | $ | (15 | ) | $ | (16,232 | ) | $ | 34,235 | |||||||||||
F-5
Table of Contents
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Cash flows from operating activities | ||||||||||||
Net income | $ | 1,743 | $ | 19,429 | $ | 1,117 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 1,093 | 1,214 | 1,285 | |||||||||
Gain on sale of investment | (1,700 | ) | — | — | ||||||||
Stock-based compensation expense | 1,088 | 365 | 386 | |||||||||
Contribution of stock to fund a charitable trust established by the Company | 238 | — | — | |||||||||
Deferred taxes | 918 | (16,800 | ) | — | ||||||||
Loss from disposal of property and equipment | 2 | 140 | — | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable | (1,554 | ) | (1,340 | ) | (285 | ) | ||||||
Prepaid expense and other current assets | (463 | ) | 40 | (117 | ) | |||||||
Deferred project costs and other assets | (626 | ) | (362 | ) | (833 | ) | ||||||
Accounts payable | 5 | (255 | ) | (181 | ) | |||||||
Accrued liabilities and other | 1,220 | (615 | ) | (257 | ) | |||||||
Deferred revenues | 3,926 | 2,685 | 5,467 | |||||||||
Net cash provided by operating activities | 5,890 | 4,501 | 6,582 | |||||||||
Cash flows from investing activities | ||||||||||||
Addition of capitalized software development costs | (648 | ) | (220 | ) | (99 | ) | ||||||
Purchase of property and equipment | (832 | ) | (685 | ) | (480 | ) | ||||||
Purchase of short-term investments | (20,000 | ) | — | — | ||||||||
Proceeds from sale of investment | 1,700 | — | — | |||||||||
Restricted cash returned | 350 | — | (350 | ) | ||||||||
Net cash used in investing activities | (19,430 | ) | (905 | ) | (929 | ) | ||||||
Cash flows from financing activities | ||||||||||||
Proceeds from public offering, net of underwriting discount | 53,010 | — | — | |||||||||
Initial public offering costs | (2,421 | ) | — | — | ||||||||
Redemption of preferred stock | (36,151 | ) | — | — | ||||||||
Issuance of common and restricted stock | 39 | 25 | 40 | |||||||||
Repurchases of restricted stock | (273 | ) | (15 | ) | (99 | ) | ||||||
Repayment of notes payable | (350 | ) | — | — | ||||||||
Collection of notes receivable from stockholders | 4 | 18 | 19 | |||||||||
Proceeds from exercise of warrants | 15 | — | — | |||||||||
Proceeds from exercise of common stock options | 29 | 6 | 2 | |||||||||
Issuance of preferred stock | — | — | 96 | |||||||||
Net cash provided by financing activities | 13,902 | 34 | 58 | |||||||||
Net increase in cash and cash equivalents | 362 | 3,630 | 5,711 | |||||||||
Cash and cash equivalents at beginning of year | 17,132 | 13,502 | 7,791 | |||||||||
Cash and cash equivalents at end of year | $ | 17,494 | $ | 17,132 | $ | 13,502 | ||||||
Supplemental disclosure of cash flow information | ||||||||||||
Cash paid for interest | $ | 2 | $ | 6 | $ | 22 | ||||||
Supplemental disclosure of non-cash flow information | ||||||||||||
Dividends on redeemable preferred stock | $ | 2,079 | $ | 2,595 | $ | 2,395 | ||||||
F-6
Table of Contents
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
1. | Description of Business |
2. | Summary of Significant Accounting Policies |
F-7
Table of Contents
NOTES TO FINANCIAL STATEMENTS — (Continued)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
F-8
Table of Contents
NOTES TO FINANCIAL STATEMENTS — (Continued)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
F-9
Table of Contents
NOTES TO FINANCIAL STATEMENTS — (Continued)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
F-10
Table of Contents
NOTES TO FINANCIAL STATEMENTS — (Continued)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
F-11
Table of Contents
NOTES TO FINANCIAL STATEMENTS — (Continued)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Basic: | ||||||||||||
Net income | $ | 1,743 | $ | 19,429 | $ | 1,117 | ||||||
Less: Dividends on redeemable preferred stock | 2,079 | 2,595 | 2,395 | |||||||||
Net (loss) income attributable to common stockholders | (336 | ) | 16,834 | (1,278 | ) | |||||||
Weighted average common shares, basic | 15,754,002 | 14,061,007 | 13,799,768 | |||||||||
Basic net (loss) income attributable to common stockholders per share | $ | (0.02 | ) | $ | 1.20 | $ | (0.09 | ) | ||||
Diluted: | ||||||||||||
Net (loss) income attributable to common stockholders | $ | (336 | ) | $ | 16,834 | $ | (1,278 | ) | ||||
Weighted average common shares, basic | 15,754,002 | 14,061,007 | 13,799,768 | |||||||||
Dilutive effect of: | ||||||||||||
Options to purchase common stock | — | 172,662 | — | |||||||||
Warrants to purchase common stock | — | 213,054 | — | |||||||||
Nonvested shares of restricted stock | — | 3,431 | — | |||||||||
Weighted average common shares, diluted | 15,754,002 | 14,450,154 | 13,799,768 | |||||||||
Diluted net (loss) income attributable to common stockholders per share | $ | (0.02 | ) | $ | 1.16 | $ | (0.09 | ) | ||||
Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Nonvested restricted stock | — | 39,191 | 228,087 | |||||||||
Common stock options | 111,000 | 5,125 | 296,882 | |||||||||
Common stock warrants | — | — | 221,680 | |||||||||
Total | 111,000 | 44,316 | 746,649 | |||||||||
F-12
Table of Contents
NOTES TO FINANCIAL STATEMENTS — (Continued)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
F-13
Table of Contents
NOTES TO FINANCIAL STATEMENTS — (Continued)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
3. | Cash Equivalents and Short-Term Investments |
Unrealized | Fair Market | |||||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
Cash Equivalents | $ | 8,755 | — | — | $ | 8,755 | ||||||||||
Short-term investments | 20,000 | — | — | 20,000 | ||||||||||||
Total | $ | 28,755 | — | — | $ | 28,755 | ||||||||||
Unrealized | Fair Market | |||||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
Cash Equivalents | $ | 16,776 | — | — | $ | 16,776 | ||||||||||
Short-term investments | — | — | — | — | ||||||||||||
Total | $ | 16,776 | — | — | $ | 16,776 | ||||||||||
4. | Fair Value Measurements |
• | Level 1 — Valuations based on quoted prices in active markets for identical instruments that the Company is able to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. | |
• | Level 2 — Valuations based on quoted prices in active markets for instruments that are similar, or quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant input and significant value drivers are observable in active markets. | |
• | Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
F-14
Table of Contents
NOTES TO FINANCIAL STATEMENTS — (Continued)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Cash equivalents | $ | 8,755 | $ | 8,755 | — | — | ||||||||||
Short-term investments | 20,000 | 20,000 | — | — | ||||||||||||
Total | $ | 28,755 | $ | 28,755 | — | — | ||||||||||
5. | Property and Equipment |
As of December 31, | ||||||||
2010 | 2009 | |||||||
Furniture and equipment | $ | 605 | $ | 579 | ||||
Computer software and equipment | 4,821 | 3,483 | ||||||
Leasehold improvements | 251 | 231 | ||||||
Total costs | 5,677 | 4,293 | ||||||
Less accumulated depreciation and amortization | (3,684 | ) | (2,986 | ) | ||||
Property and equipment, net | $ | 1,993 | $ | 1,307 | ||||
F-15
Table of Contents
NOTES TO FINANCIAL STATEMENTS — (Continued)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
6. | Goodwill and Other Intangible Assets |
December 31, 2010 | December 31, 2009 | |||||||||||||||||||||||
Gross Carrying | Accumulated | Net Carrying | Gross Carrying | Accumulated | Net Carrying | |||||||||||||||||||
Amount | Amortization | Amount | Amount | Amortization | Amount | |||||||||||||||||||
Goodwill | $ | 6,765 | $ | — | $ | 6,765 | $ | 6,765 | $ | — | $ | 6,765 | ||||||||||||
Acquired technology | 8,100 | (8,100 | ) | — | 8,100 | (8,100 | ) | — | ||||||||||||||||
Customer relationships | 5,200 | (4,591 | ) | 609 | 5,200 | (4,290 | ) | 910 | ||||||||||||||||
Trademarks | 430 | — | 430 | 430 | — | 430 | ||||||||||||||||||
Total | $ | 20,495 | $ | (12,691 | ) | $ | 7,804 | $ | 20,495 | $ | (12,390 | ) | $ | 8,105 | ||||||||||
2011 | $ | 225 | ||
2012 | 167 | |||
2013 | 125 | |||
2014 | 92 | |||
$ | 609 | |||
7. | Accrued Liabilities |
As of December 31, | ||||||||
2010 | 2009 | |||||||
Accrued compensation | $ | 3,502 | $ | 2,321 | ||||
Accrued consulting and professional services | 30 | 96 | ||||||
Accrued rent | 204 | 239 | ||||||
Other | 464 | 324 | ||||||
Total | $ | 4,200 | $ | 2,980 | ||||
8. | Debt |
F-16
Table of Contents
NOTES TO FINANCIAL STATEMENTS — (Continued)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
9. | Redeemable Preferred Stock |
F-17
Table of Contents
NOTES TO FINANCIAL STATEMENTS — (Continued)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
Number of | ||||||||
Redeemable | ||||||||
Redeemable Preferred | Preferred Shares | |||||||
Stock | Outstanding | |||||||
Balance as of December 31, 2008 | $ | 31,477 | 222,073 | |||||
Dividends accrued on redeemable preferred stock | 2,595 | — | ||||||
Balance as of December 31, 2009 | 34,072 | 222,073 | ||||||
Dividends accrued on redeemable preferred stock | 2,079 | — | ||||||
Redemption of preferred stock | (36,151 | ) | (222,073 | ) | ||||
Balance as of December 31, 2010 | $ | — | — | |||||
10. | Stockholders’ Equity (Deficit) |
F-18
Table of Contents
NOTES TO FINANCIAL STATEMENTS — (Continued)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
Weighted- | ||||||||
Average Grant | ||||||||
Number of Shares | Date Fair Value | |||||||
Nonvested as of December 31, 2008 | 222,691 | $ | 1.04 | |||||
Issued | 159,024 | 1.70 | ||||||
Vested | (204,338 | ) | 1.06 | |||||
Repurchased | (396 | ) | 0.94 | |||||
Nonvested as of December 31, 2009 | 176,981 | 1.62 | ||||||
Issued | 95,861 | 1.58 | ||||||
Vested | (98,554 | ) | 1.50 | |||||
Nonvested as of December 31, 2010 | 174,288 | $ | 1.66 | |||||
F-19
Table of Contents
NOTES TO FINANCIAL STATEMENTS — (Continued)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
Weighted- | Aggregate | |||||||||||||||||||
Average | Intrinsic Value | |||||||||||||||||||
Weighted- | Remaining | as of | ||||||||||||||||||
Number of Options | Range of Exercise | Average | Contractual | December 31, | ||||||||||||||||
Outstanding | Prices | Exercise Price | Term (In Years) | 2010 | ||||||||||||||||
Balance as of December 31, 2009 | 443,603 | $ | 0.08 - $3.16 | $ | 1.26 | 7.5 | $ | 3,067 | ||||||||||||
Options granted | 340,599 | $ | 2.26 - $13.38 | $ | 4.68 | |||||||||||||||
Options exercised | (17,241 | ) | $ | 0.08 - $2.26 | $ | 1.72 | ||||||||||||||
Options canceled | (33,310 | ) | $ | 0.08 - $8.18 | $ | 3.02 | ||||||||||||||
Balance as of December 31, 2010 | 733,651 | $ | 0.08 - $13.38 | $ | 2.76 | 7.7 | $ | 7,515 | ||||||||||||
Vested and expected to vest at December 31, 2010 | 659,327 | $ | 0.08 - $13.38 | $ | 2.61 | 7.6 | $ | 6,858 | ||||||||||||
Exercisable as of December 31, 2010 | 362,004 | $ | 0.08 - $8.18 | $ | 1.32 | 6.6 | $ | 4,230 | ||||||||||||
F-20
Table of Contents
NOTES TO FINANCIAL STATEMENTS — (Continued)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
Options Exercisable at | ||||||||||||||||||||
Options Outstanding at December 31, 2010 | December 31, 2010 | |||||||||||||||||||
Weighted-Average | ||||||||||||||||||||
Remaining | Weighted- | Weighted- | ||||||||||||||||||
Range of | Contractual Life | Average | Average | |||||||||||||||||
Exercise Price | Number | (Yrs.) | Exercise Price | Number | Exercise Price | |||||||||||||||
$0.08 – $0.14 | 170,540 | 4.8 | $ | 0.10 | 167,245 | $ | 0.10 | |||||||||||||
$1.90 – $2.04 | 227,965 | 7.8 | 2.03 | 128,342 | 2.04 | |||||||||||||||
$2.60 – $3.16 | 224,146 | 9.0 | 2.27 | 57,980 | 2.29 | |||||||||||||||
$8.18 – $13.38 | 111,000 | 9.5 | 9.38 | 8,437 | 8.18 | |||||||||||||||
Total | 733,651 | 7.7 | $ | 2.76 | 362,004 | $ | 1.32 | |||||||||||||
2010 | 2009 | 2008 | ||||||||||
Estimated dividend yield | 0% | 0% | 0% | |||||||||
Expected stock price volatility | 100.00% | 100.00% | 100.00% | |||||||||
Weighted-average risk-free interest rate | 1.3% - 3.0% | 1.9% - 2.8% | 2.6% - 3.6% | |||||||||
Expected life of options (in years) | 6.25 | 6.25 | 6.25 |
F-21
Table of Contents
NOTES TO FINANCIAL STATEMENTS — (Continued)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
11. | Income Taxes |
2010 | 2009 | 2008 | ||||||||||
Current | ||||||||||||
Federal | $ | (102 | ) | $ | 21 | $ | 9 | |||||
State | (95 | ) | — | — | ||||||||
(197 | ) | 21 | 9 | |||||||||
Deferred | ||||||||||||
Federal | (905 | ) | 12,535 | — | ||||||||
State | (12 | ) | 4,265 | — | ||||||||
(917 | ) | 16,800 | — | |||||||||
Income tax (expense) benefit | $ | (1,114 | ) | $ | 16,821 | $ | 9 | |||||
2010 | 2009 | |||||||
Deferred tax assets: | ||||||||
Net operating loss carryforwards | $ | 71,626 | $ | 73,587 | ||||
Research and development tax credits | 1,415 | 1,344 | ||||||
Compensation accruals | 207 | 177 | ||||||
Deferred revenues | 3,822 | 2,785 | ||||||
Depreciation and amortization | — | 25 | ||||||
Other credits | 177 | 74 | ||||||
Other | 174 | 4 | ||||||
Total gross deferred tax assets | 77,421 | 77,996 | ||||||
Less: valuation allowance for deferred tax assets | (60,550 | ) | (60,550 | ) | ||||
Net deferred tax assets | 16,871 | 17,446 | ||||||
Deferred tax liabilities: | ||||||||
Depreciation and amortization | 250 | — | ||||||
Customer contracts | 235 | 351 | ||||||
Trade names | 166 | 166 | ||||||
Stock compensation | 52 | — | ||||||
Capitalized software costs | 286 | 129 | ||||||
Total deferred tax liabilities | 989 | 646 | ||||||
Net deferred tax assets | $ | 15,882 | $ | 16,800 | ||||
F-22
Table of Contents
NOTES TO FINANCIAL STATEMENTS — (Continued)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
2010 | 2009 | 2008 | ||||||||||
Beginning balance | $ | 368 | $ | — | $ | — | ||||||
Increases related to prior year tax positions | 70 | 368 | — | |||||||||
Ending balance | $ | 438 | $ | 368 | $ | — | ||||||
Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
US federal tax at statutory rate | 34 | % | 34 | % | 34 | % | ||||||
State taxes (net of federal benefit) | 5 | % | 4 | % | 5 | % | ||||||
Change in valuation allowance | 0 | % | (695 | )% | (39 | )% | ||||||
Other nondeductible (benefit) expenses | 5 | % | 7 | % | 17 | % | ||||||
Increase in credit carryforwards | (6 | )% | 6 | % | (17 | )% | ||||||
Other | 1 | % | (1 | )% | (1 | )% | ||||||
Income tax benefit | 39 | % | (645 | )% | (1 | )% | ||||||
F-23
Table of Contents
NOTES TO FINANCIAL STATEMENTS — (Continued)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
12. | Commitments and Contingencies |
Operating Leases | ||||
2011 | $ | 668 | ||
2012 | 1,015 | |||
2013 | 1,060 | |||
2014 | 907 | |||
2015 | 925 | |||
2016 and thereafter | 1,070 | |||
Total future minimum lease payments | $ | 5,645 | ||
F-24
Table of Contents
NOTES TO FINANCIAL STATEMENTS — (Continued)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
13. | Employee Benefit Plan |
F-25
Table of Contents
NOTES TO FINANCIAL STATEMENTS — (Continued)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
14. | Subsequent Events |
15. | Quarterly Results of Operations (unaudited) |
March 31, | June 30, | September 30, | December 31, | |||||||||||||
2010 | 2010 | 2010 | 2010 | |||||||||||||
Revenues | $ | 10,126 | $ | 10,562 | $ | 10,771 | $ | 11,018 | ||||||||
Gross profit | 8,017 | 8,225 | 8,442 | 8,432 | ||||||||||||
Net income (loss) | 1,930 | 1,274 | (2,465 | ) | 1,004 | |||||||||||
Net income (loss) attributable to common stockholders | 1,259 | 581 | (3,180 | ) | 1,004 | |||||||||||
Net income (loss) attributable to common stockholders per share: | ||||||||||||||||
Basic | $ | 0.09 | $ | 0.04 | $ | (0.22 | ) | $ | 0.05 | |||||||
Diluted | $ | 0.09 | $ | 0.04 | $ | (0.22 | ) | $ | 0.05 |
F-26
Table of Contents
NOTES TO FINANCIAL STATEMENTS — (Continued)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
March 31, | June 30, | September 30, | December 31, | |||||||||||||
2009 | 2009 | 2009 | 2009 | |||||||||||||
Revenues | $ | 8,595 | $ | 8,811 | $ | 9,049 | $ | 9,724 | ||||||||
Gross profit | 6,748 | 6,910 | 7,170 | 7,857 | ||||||||||||
Net income (loss) | 738 | 999 | (1,321 | ) | 19,013 | |||||||||||
Net income (loss) attributable to common stockholders | 117 | 359 | (1,981 | ) | 18,339 | |||||||||||
Net income (loss) attributable to common stockholders per share: | ||||||||||||||||
Basic | $ | 0.00 | $ | 0.03 | $ | (0.14 | ) | $ | 1.30 | |||||||
Diluted | $ | 0.00 | $ | 0.02 | $ | (0.14 | ) | $ | 1.26 |
F-27