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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 000-30389
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EXE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 751719817
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
8787 STEMMONS FREEWAY
DALLAS, TEXAS 75247
(Address including zip code of principal executive offices)
(214) 775-6000
(Registrant's telephone number, including area code)
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of April 30, 2001.
Common stock, $0.01 par value, 45,347,893 shares outstanding
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EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements........................................ 3
Consolidated Balance Sheets................................. 3
Consolidated Statements of Operations....................... 4
Consolidated Statements of Cash Flows....................... 5
Notes to Consolidated Financial Statement................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 10
Item 3. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 14
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds................... 15
Item 6. Exhibits and Reports on Form 8-K............................ 16
Signatures.......................................................................... 17
Index to Exhibits and Exhibits...................................................... 18
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF AS OF
DECEMBER 31, MARCH 31,
2000 2001
------------ ------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 39,820,056 $ 35,004,538
Marketable securities..................................... 9,147,506 5,012,950
Accounts receivable, net of allowance for doubtful
accounts and adjustments of approximately $5,168,000 and
$4,287,000 at December 31, 2000 and March 31, 2001,
respectively............................................ 33,029,674 33,507,720
Other receivables and advances............................ 614,781 1,203,841
Prepaid and other current assets.......................... 3,180,221 3,797,842
------------ ------------
Total current assets.................................... 85,792,238 78,526,891
Marketable securities, long-term............................ 10,235,457 13,688,897
Property and equipment, net................................. 8,233,891 7,921,777
Other assets................................................ 2,175,655 2,503,979
Intangible assets........................................... 10,142,402 39,237,809
------------ ------------
Total assets............................................ $116,579,643 $141,879,353
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 6,065,703 $ 6,392,290
Accrued expenses.......................................... 9,931,202 8,599,517
Accrued payroll and benefits.............................. 2,812,071 3,028,483
Deferred revenue.......................................... 10,431,348 9,916,454
Current portion of long-term debt and capital lease
obligations............................................. 192,883 326,147
------------ ------------
Total current liabilities............................... 29,433,207 28,262,891
Long-term debt and capital lease obligations, net of
current portion......................................... 102,477 82,257
Commitments and contingencies
Minority interest......................................... -- 107,324
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value: shares
authorized--20,000,000; none issued or outstanding...... -- --
Common stock, voting, $.01 par value: shares
authorized--150,000,000; shares issued--44,487,495 and
46,336,376 at December 31, 2000 and March 31, 2001,
respectively............................................ 444,875 463,364
Additional paid-in capital................................ 149,691,336 179,234,943
Note receivable from stockholder.......................... -- (211,750)
Treasury stock, at cost, 999,483 shares of common stock at
December 31, 2000 and March 31, 2001.................... (3,431,464) (3,431,464)
Accumulated deficit....................................... (55,677,267) (57,464,696)
Deferred compensation..................................... (3,688,059) (5,157,737)
Other comprehensive loss.................................. (295,462) (5,779)
------------ ------------
Total stockholders' equity.............................. 87,043,959 113,426,881
------------ ------------
Total liabilities and stockholders' equity.............. $116,579,643 $141,879,353
============ ============
See accompanying notes.
3
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
-------------------------
2000 2001
----------- -----------
REVENUE:
Software license.......................................... $ 7,895,475 $ 9,985,182
Services and maintenance.................................. 16,034,310 17,672,076
Resale of software and equipment.......................... 1,548,402 1,699,973
----------- -----------
Total revenue......................................... 25,478,187 29,357,231
COSTS AND EXPENSES:
Cost of software licenses................................. 78,955 46,301
Cost of services and maintenance.......................... 13,105,715 11,635,926
Cost of resale of software and equipment.................. 1,337,811 1,326,112
Sales and marketing....................................... 5,972,423 7,312,229
Research and development.................................. 1,853,963 3,847,686
General and administrative................................ 3,362,785 4,418,367
Amortization of intangibles............................... 1,139,829 1,886,913
Warrant and stock compensation expense allocated to:
Cost of services and maintenance........................ 303,331 148,222
Sales and marketing..................................... 501,260 191,436
Research and development................................ 2,286 35,589
General and administrative.............................. 257,886 185,886
Restructuring costs....................................... -- 430,080
----------- -----------
Total costs and expenses................................ 27,916,244 31,464,747
----------- -----------
Operating loss............................................ (2,438,057) (2,107,516)
----------- -----------
OTHER INCOME (EXPENSE):
Interest income........................................... 105,319 831,099
Interest expense.......................................... (411,808) (7,704)
Other..................................................... (143,322) (404,415)
----------- -----------
Total other income (expense).............................. (449,811) 418,980
----------- -----------
Loss before minority interest and taxes................... (2,887,868) (1,688,536)
Minority interest in subsidiary income.................... -- (98,893)
----------- -----------
Loss before taxes......................................... (2,887,868) (1,787,429)
Income tax................................................ -- --
----------- -----------
Net loss.................................................. $(2,887,868) $(1,787,429)
=========== ===========
Net loss per common share--basic and diluted.............. $ (0.18) $ (0.04)
=========== ===========
Weighted average number of common shares
outstanding--basic and diluted.......................... 16,255,588 44,740,349
=========== ===========
See accompanying notes.
4
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
-------------------------
2000 2001
----------- -----------
CASH FLOW FROM OPERTATING ACTIVITIES:
Net loss.................................................... $(2,887,868) $(1,787,429)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization........................... 2,148,945 2,902,140
Provision for losses on receivables..................... 2,226,818 992,186
Amortization of deferred compensation................... 644,100 386,783
Issuance of warrants for services....................... 420,663 174,350
Minority interest....................................... -- 107,324
Changes in operating assets and liabilities, net of the
acquired balances:
Accounts receivable................................... (2,940,648) (1,108,451)
Other receivables and advances........................ 573,992 (589,060)
Prepaids and other assets............................. (545,857) (554,304)
Other long-term assets................................ (186,351) (299,720)
Accounts payable...................................... 1,569,054 (476,024)
Accrued payroll and benefits.......................... (508,250) (215,962)
Deferred revenue...................................... (245,970) (1,469,152)
Income tax payable.................................... 5,697 (23,411)
Accrued expenses...................................... 529,409 (1,419,633)
Other................................................. (103,733) 221,119
----------- -----------
Net cash provided by (used in) operating
activities.......................................... 700,001 (3,159,244)
CASH FLOW FROM INVESTING ACTIVITES:
Purchases of property and equipment......................... (366,450) (418,405)
Proceeds from sale of marketable securities................. -- 11,931,116
Purchase of marketable securities........................... -- (11,250,000)
Cash paid for AllPoints acquisition......................... -- (1,618,109)
----------- -----------
Net cash provided by (used in) investing
activities.......................................... (366,450) (1,355,398)
CASH FLOW FROM FINANCING ACTIVITIES:
Issuance of common stock for options and warrants........... 135,666 530,906
Payments on long-term debt.................................. (62,267) (81,782)
Proceeds from revolving line of credit...................... 1,323,270 --
Purchase of treasury stock.................................. (1,302) --
Retirement of AllPoints line of credit...................... -- (750,000)
----------- -----------
Net cash provided by (used in) financing
activities.......................................... 1,395,367 (300,876)
----------- -----------
Net increase (decrease) in cash and cash equivalents........ 1,728,918 (4,815,518)
Cash and cash equivalents at beginning of year.............. 8,932,073 39,820,056
----------- -----------
Cash and cash equivalents at end of year.................... $10,660,991 $35,004,538
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest...................................... $ 342,212 $ 14,153
=========== ===========
Cash paid for income taxes.................................. $ -- $ 5,190
=========== ===========
See accompanying notes.
5
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
EXE Technologies, Inc. (the Company or EXE) is a leading provider of
fulfillment, warehousing and distribution software for e-commerce and
traditional sales channels. The accompanying unaudited consolidated financial
statements include the accounts of EXE Technologies, Inc. and our wholly-owned
subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for fiscal year
end financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring entries) considered necessary for a fair
presentation of the results have been included for the interim periods
presented. Operating results for the three month period ended March 31, 2001 are
not necessarily indicative of the results that may be expected for any other
interim period or for the year ending December 31, 2001. These statements should
be read in conjunction with the Company's audited financial statements for the
year ended December 31, 2000.
2. ACQUISITION OF ALLPOINTS SYSTEMS, INC.
On January 25, 2001, the Company completed the acquisition of AllPoints
Systems, Inc. (Allpoints). The transaction was completed in a stock-for-stock
merger in which EXE issued 1,590,357 shares of EXE common stock and assumed
options for an additional 409,606 shares of EXE common stock in exchange for
all of the outstanding securities of AllPoints. The transaction was accounted
for as a purchase. The purchase price was approximately $30.2 million, which
includes approximately $2.4 million of net liabilities assumed and
transaction costs of approximately $1.6 million. The purchase price
allocation includes approximately $4.3 million of identifiable intangible
assets and approximately $26.7 million of goodwill. The goodwill is being
amortized over 6 years. The Company recorded deferred compensation related to
AllPoints options assumed by EXE of approximately $1.9 million. In addition,
the Company paid off and terminated AllPoints' $750,000 line of credit.
The following summary, prepared on an unaudited pro forma basis, reflects
the condensed consolidated results of operations for the three months ended
March 31, 2000 and 2001 assuming AllPoints had been acquired at the beginning of
the periods presented:
PRO FORMA
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
-------------------------
2000 2001
----------- -----------
Revenue............................................ $27,437,833 $29,545,603
Net loss........................................... (4,110,191) (2,567,886)
----------- -----------
Net loss per common share - basic and diluted...... $ (0.23) $ (0.06)
=========== ===========
The pro forma results are not necessarily indicative of what would have
occurred if the acquisition had been in effect for the periods presented. In
addition they are not intended to be a projection of future results and do not
reflect any synergies that might be affected from combined operations.
6
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
2. ACQUISITION OF ALLPOINTS SYSTEMS, INC. (CONTINUED)
The Company recorded deferred compensation expense for differences
between the exercise price and the deemed fair market value of the Company's
common stock on the grant date for certain options granted. Deferred
compensation of approximately $4.6 million was incurred during 2000 and $1.9
million was incurred during the three months ended March 31, 2001. The
deferred compensation recorded in 2001 relates to the Company's acquisition
of AllPoints. The deferred compensation is amortized ratably over the vesting
period of the individual options, generally three to four years. Compensation
expense relating to stock options recognized for the three months ended March
31, 2000 and 2001 was approximately $.6 million and $.4 million, respectively.
3. EARNINGS PER SHARE
The Company computes net income (loss) per share in accordance with the
provisions of SFAS No. 128, "Earnings per Share." Basic net income (loss) per
common share is computed using the weighted average number of shares of common
stock outstanding during each period.
Diluted net income (loss) per common share is computed using the weighted
average number of shares of common stock outstanding during each period and
common equivalent shares consisting of preferred stock, warrants and stock
options (using the treasury stock method), if dilutive. Diluted loss per common
share is the same as basic loss per common share for all periods presented
because all potentially dilutive securities were anti-dilutive. The following
table sets forth anti-dilutive securities which have been excluded from diluted
earnings per share for the periods presented:
THREE MONTHS ENDED
MARCH 31,
----------------------
2000 2001
---------- ---------
Common stock options.................................. 4,999,558 9,054,659
Warrants.............................................. 1,085,000 --
Preferred stock....................................... 17,687,562 --
---------- ---------
Total anti-dilutive securities excluded............... 23,772,120 9,054,659
========== =========
4. COMPREHENSIVE LOSS
Comprehensive loss includes foreign currency translation gains (losses) and
unrealized gains (losses) on securities available for sale. The following table
sets forth the calculation of comprehensive loss for the periods presented:
THREE MONTHS ENDED
MARCH 31,
-------------------------
2000 2001
----------- -----------
Net loss........................................... $(2,887,868) $(1,787,429)
Foreign currency translation gains (losses)........ (69,607) 174,441
Unrealized gain (loss) on securities available for
sale............................................. -- 115,242
----------- -----------
Total comprehensive loss........................... $(2,957,475) $(1,497,746)
=========== ===========
7
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
5. DERIVATIVE FINANCIAL INSTRUMENTS
Effective January 1, 2001, the Company adopted the provisions of Financial
Accounting Standards Board Statement No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES, (FASB 133). The adoption of FASB 133 had no
material impact on the Company's financial position or operating results for the
quarterly period ended March 31, 2001.
As of March 31, 2001, the Company had outstanding forward currency
exchange contracts of $3.0 million to sell yen which hedge net balance sheet
exposures. Gains and losses arising from the changes in the fair value of
forward currency exchange contracts is recognized as a component of other
income (expense). At March 31, 2001, the current market settlement values of
the forward contracts were not significant. There were no forward contracts
outstanding at December 31, 2000.
6. SEGMENTS
The Company is engaged in the design, development, marketing and support of
fulfillment, warehousing and distribution software for e-commerce and
traditional sales channels. All financial information is reviewed on a
consolidated basis with additional information by geographic region used to make
operating decisions and assess the results of the Company. The Company's
geographic information as of and for the three months ended March 31, 2000 and
2001 is as follows:
EUROPE
UNITED AND THE ASIA
STATES MIDDLE EAST PACIFIC ELIMINATIONS TOTAL
------------ ----------- ---------- ------------ ------------
Three months ended
March 31, 2000
Revenue........................ $ 14,475,763 $ 6,093,025 $4,909,399 $ -- $ 25,478,187
Amortization of intangibles.... 1,139,829 -- -- -- 1,139,829
Warrant and stock compensation
expense...................... 1,064,763 -- -- -- 1,064,763
Operating income (loss)........ (2,279,227) (4,518) (154,312) -- (2,438,057)
As of March 31, 2000
Property and equipment, net.... 7,277,294 948,992 1,161,627 -- 9,387,913
Total assets................... 58,596,547 10,481,204 2,619,598 (3,174,456) 68,522,893
Three months ended
March 31, 2001
Revenue........................ 16,237,168 4,810,093 8,309,970 -- 29,357,231
Amortization of intangibles.... 1,869,034 13,827 4,052 -- 1,886,913
Warrant and stock compensation
expense...................... 324,993 102,460 133,680 -- 561,133
Restructuring costs............ 430,080 -- -- -- 430,080
Operating income (loss)........ (2,329,823) (905,597) 1,127,904 -- (2,107,516)
As of March 31, 2001
Property and equipment, net.... 5,889,008 1,417,145 615,624 -- 7,921,777
Total assets................... $134,777,144 $ 4,179,079 $6,031,164 $(3,108,034) $141,879,353
8
EXE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
7. RESTRUCTURING
In August 1999, the Company implemented a restructuring plan to reduce costs
and improve operating efficiency. The Company recorded a pretax charge of
$1,952,256 for its restructuring plan. The Company recorded liabilities
associated with the restructuring in the amounts of approximately $709,000 for
severance and other employee related costs for the termination of 97 services,
sales, development and administrative employees, $803,000 for the abandonment of
certain leased office space less estimated sublease rentals at the Company's
North American and Australian facilities, $179,000 for the abandonment of leased
equipment and $261,000 for the disposal of other fixed assets. The Company
recorded approximately $1,325,000, $400,000 and $114,000 of cash charges against
the original restructuring reserve during 1999, 2000 and 2001, respectively. The
remaining liability at March 31, 2001 is approximately $147,000 and is expected
to be paid out through the end of 2003.
In January 2001, the Company implemented a restructuring plan to reduce
costs and improve operating efficiency. The Company recorded a pretax charge of
approximately $430,000 for costs associated with severance and other employee
related costs for the termination of 18 services, sales and marketing,
development and administrative employees. The Company recorded approximately
$226,000 of cash charges against the reserve during 2001. The remaining
liability at March 31, 2001 is approximately $204,000 and is expected to be paid
out through the end of 2001.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
EXE Technologies, Inc. is a leading provider of fulfillment, warehousing and
distribution software for e-commerce and traditional sales channels. Our
software allows companies to efficiently manage and control the flow of
inventory throughout the supply chain using the Internet and traditional
communication methods. Companies use our software to reduce distribution costs,
manage inventory across the supply chain, and increase customer loyalty and
satisfaction. We provide global service and support for our software from
established facilities in North America, Europe, the Middle East, Asia, and
Australia.
We derive our revenue from the sale of software licenses; product related
consulting, training, maintenance and support (collectively, "services and
maintenance"); and the resale of software and equipment.
We recognize license revenue under Statement of Position, or SOP, No. 97-2.
Under SOP No. 97-2, software license revenue is recognized upon execution of a
contract and delivery of the software, provided that the license fee is fixed
and determinable, no significant production, modification or customization of
the software is required, vendor-specific objective evidence of fair value
exists to allow the allocation of the total fee to elements of the arrangement
and collection of the license fee is considered probable by management. Product
related maintenance and support revenue is recognized ratably over the term of
the contract, which is typically one year, and revenue from product related
consulting and training is recognized as such services are performed.
On January 25, 2001 we completed the acquisition of AllPoints Systems,
Inc. (AllPoints) of Norwood, Massachusetts. The transaction was completed in
a stock-for-stock merger in which we issued 1,590,357 shares of our common
stock and assumed options for an additional 409,606 shares of our common
stock in exchange for all of the outstanding securities of AllPoints. The
acquisition is intended to strengthen our global leadership by deepening our
vertical market presence and expanding our software and service offerings.
The transaction was accounted for as a purchase.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
2000
REVENUE
TOTAL REVENUE. Total revenue increased by $3.9 million, or 15.2%, to
$29.4 million for the three months ended March 31, 2001, from $25.5 million for
the three months ended March 31, 2000. International revenue accounted for 44.7%
of total revenue during the three months ended March 31, 2001 and 43.2% of total
revenue during the three months ended March 31, 2000. No single customer
accounted for more than 10.0% of total revenue during the three months ended
March 31, 2001 or 2000.
SOFTWARE LICENSE. Software license revenue increased $2.1 million, or
26.5%, to $10.0 million for the three months ended March 31, 2001, from
$7.9 million for the three months ended March 31, 2000. This increase was due to
continued growth in the sales of our EXceed Fulfill and predecessor products.
Sales of our EXceed Fulfill and predecessor products increased by $2.3 million
for the three months ended March 31, 2001, as compared to the three months ended
March 31, 2000. This increase was offset by a $0.2 million decline in sales from
our EXceed 2000 warehouse management system product. Software license revenue as
a percentage of total revenue was 34.0% for the three months ended March 31,
2001 versus 31.0% for the three months ended March 31, 2000. Our EXceed Fulfill
and predecessor products accounted for 94.2% of total software license revenue
during the three months
10
ended March 31, 2001 and 89.7% of total software license revenue during the
three months ended March 31, 2000.
SERVICES AND MAINTENANCE. Services and maintenance revenue increased
$1.7 million, or 10.2%, to $17.7 million for the three months ended March 31,
2001 from $16.0 million for the three months ended March 31, 2000. Services and
maintenance revenue from our EXceed Fulfill and predecessor products increased
$2.9 million, while services and maintenance revenue from our EXceed 2000
warehouse management system and mainframe products decreased $1.2 million for
the three months ended March 31, 2001. Services and maintenance revenue as a
percentage of total revenue was 60.2% for the three months ended March 31, 2001
versus 62.9% for the three months ended March 31, 2000. The decline was due to
the increasing portion of our revenue derived from our EXceed Fulfill products,
which are more easily deployable and require less personnel to install than our
EXceed 2000 warehouse management system and mainframe products. Our EXceed
Fulfill and predecessor products accounted for 60.8% of total services and
maintenance revenue for the three months ended March 31, 2001 versus 48.9% of
total services and maintenance revenue for the three months ended March 31,
2000.
RESALE SOFTWARE AND EQUIPMENT. Resale software and equipment revenue
increased $0.2 million, or 9.8%, to $1.7 million for the three months ended
March 31, 2001, from $1.5 million for the three months ended March 31, 2000. The
increase was due to higher software license sales for the three months ended
March 31, 2001 as compared to the three months ended March 31, 2000, which
generated greater resale software and equipment revenue opportunities. Resale
software and equipment as a percentage of total revenue was 5.8% for the three
months ended March 31, 2001 versus 6.1% for the three months ended March 31,
2000. The decline reflects the continued shift in demand to our EXceed Fulfill
products, which have a lower opportunity for resale of software and equipment
than the EXceed 2000 warehouse management system and mainframe products.
COSTS AND EXPENSES
COST OF SOFTWARE LICENSES. Cost of software licenses consists primarily of
royalties associated with software used to develop our software products, the
cost of reproduction, and the cost of complementary software applications that
we purchase to sell to our customers. Cost of software licenses represented 0.5%
of software license revenue for the three months ended March 31, 2001 and 1.0%
for the three months ended March 31, 2000.
COST OF SERVICES AND MAINTENANCE. Cost of services and maintenance consists
primarily of salaries of professional staff and costs associated with
implementation, consulting and training services, hotline telephone support, new
releases of software and updating user documentation. Cost of services and
maintenance decreased $1.5 million, or 11.2%, to $11.6 million for the three
months ended March 31, 2001, from $13.1 million for the three months ended
March 31, 2000. The decrease was related primarily to a reduction in the number
of fulltime and contract services and maintenance employees. As a percentage of
services and maintenance revenue, cost of services and maintenance decreased to
65.8% for the three months ended March 31, 2001, from 81.7% for the three months
ended March 31, 2000. The decrease in cost as a percentage of services and
maintenance revenue was due to an increase in productivity (i.e., higher revenue
generated per employee) as we continued the transition from our EXceed 2000
warehouse management system and mainframe products to our EXceed Fulfill
products.
COST OF RESALE SOFTWARE AND EQUIPMENT. Cost of resale software and
equipment consists primarily of the costs of the database software tools and
hardware we purchase to resell to our customers. Cost of resale software and
equipment was $1.3 million for the three months ended March 31, 2001 and 2000.
As a percentage of resale software and equipment revenue, cost of resale
software and equipment decreased to 78.0% for the three months ended March 31,
2001, from 86.4% for the three months ended March 31, 2000.
11
SALES AND MARKETING. Sales and marketing expenses consist primarily of
salaries, commissions, bonuses, recruiting costs, travel, marketing materials
and trade shows. Sales and marketing expenses increased $1.3 million, or 22.4%,
to $7.3 million for the three months ended March 31, 2001, from $6.0 million for
the three months ended March 31, 2000. The increase was due primarily to an
increase in the number of sales and marketing personnel, as well as higher sales
commissions resulting from increased software license sales. As a percentage of
total revenue, sales and marketing expenses increased to 24.9% for the three
months ended March 31, 2001, from 23.4% for the three months ended March 31,
2000. The increase in sales and marketing costs as a percentage of total revenue
was a result of lower than anticipated revenue growth for the three months ended
March 31, 2001 due to the current economic environment.
RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of salaries and other personnel-related costs for our product
development activities. Research and development expenses increased $1.9
million, or 107.5%, to $3.8 million for the three months ended March 31,
2001, from $1.9 million for the three months ended March 31, 2000. The
increase in research and development expenses was due primarily to an
increase in the number of employees obtained through the AllPoints
acquisition and hired externally to enhance our EXceed Collaborate Suite. As
a percentage of total revenue, research and development expenses increased to
13.1% for the three months ended March 31, 2001, from 7.3% for the three
months ended March 31, 2000.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries and other personnel-related costs of our finance, human
resources, information systems, administrative, legal and executive
departments, insurance costs and the costs associated with legal, accounting,
and other administrative services. General and administrative costs increased
$1.0 million, or 31.4%, to $4.4 million for the three months ended March 31,
2001, from $3.4 million for the three months ended March 31, 2000. The
increase in general and administrative expenses was due to higher
personnel-related expenses associated with the acquisition of AllPoints,
opening new offices in Benelux, France, and Germany, and upgrading our human
resources, information systems, and investor relations headquarters
functions. As a percentage of total revenue, general and administrative
expenses increased to 15.1% for the three months ended March 31, 2001, from
13.2% for the three months ended March 31, 2000.
AMORTIZATION OF INTANGIBLES. Amortization of intangibles relates
primarily to intangibles acquired in connection with the 1997 acquisition of
Dallas Systems and the 2001 acquisition of AllPoints. Amortization of
intangibles increased $0.8 million to $1.9 million for the three months ended
March 31, 2001, from $1.1 million for the three months ended March 31, 2000.
The increase in amortization was due to intangibles acquired in connection
with the acquisition of AllPoints.
NON-CASH WARRANT AND STOCK COMPENSATION. Non-cash warrant and stock
compensation expense decreased $0.5 million to $0.6 million for the three months
ended March 31, 2001, from $1.1 million for the three months ended March 31,
2000. Warrant expense associated with a sales and marketing agreement with an
independent third party decreased $0.2 million for the three months ended
March 31, 2001 versus the three months ended March 31, 2000. Additionally, stock
compensation expense decreased $0.3 million for the three months ended
March 31, 2001 versus 2000 due to the amortization of deferred compensation
recorded primarily in connection with stock options granted to employees. The
deferred compensation recorded represented the difference between the exercise
price and the deemed fair value of our common stock on the date of grant of
these options.
RESTRUCTURING COSTS. During the three months ended March 31, 2001 we
implemented a restructuring plan to reduce costs and improve operating
efficiency. In connection with this plan, we recorded a charge of $0.4 million
for severance and other employee related costs for the termination of 18
services, sales and marketing, development, and administrative employees.
12
OTHER INCOME (EXPENSE). Other income (expense) consists of gains and losses
from currency fluctuations, interest expense and loan cost amortization on
outstanding debt, and interest income on investments. Other income (expense)
increased $0.8 million to $0.4 million for the for the three months ended
March 31, 2001, from ($0.4) million for the three months ended March 31, 2000.
The increase was due to an increase in interest income of $0.7 million and a
decrease in interest expense of $0.4 million, partially offset by an increase in
foreign exchange losses of $0.3 million.
INCOME TAX. No income tax benefit was recognized for operating losses
recorded for the three months ended March 31, 2001 and 2000 due to the
uncertainty of the timing and amount of future taxable income.
LIQUIDITY AND CAPITAL RESOURCES
We have funded our operations through the issuance of our preferred and
common stock, bank borrowings and cash flow from operations. As of March 31,
2001 we had $35.0 million in cash and cash equivalents, $5.0 million in
short-term marketable securities, $13.7 million in long-term marketable
securities and $50.3 million in working capital.
Net cash used in operating activities was $3.2 million for the three months
ended March 31, 2001. Cash used in operating activities resulted primarily from
net income before non-cash charges for depreciation, amortization, provision for
losses on receivables, and warrant and stock compensation expense, offset by
increases in receivables and prepaid assets, as well as decreases in accounts
payable, deferred revenue and accrued expenses. Net cash provided by operating
activities was $0.7 million for the comparable three months ended March 31,
2000.
Net cash used in investing activities was $1.4 million for the three
months ended March 31, 2001. We incurred approximately $1.6 million in
expenses associated with the AllPoints acquisition, purchased property and
equipment of $0.4 million, and generated $0.7 million of cash from net sales
of marketable securities. Net cash used in investing activities was $0.4
million for the comparable three months ended March 31, 2000.
Net cash used in financing activities was $0.3 million for the three
months ended March 31, 2001. We paid off and terminated AllPoints' $0.8
million line of credit and generated cash of $0.5 million from the issuance
of common stock. Net cash provided by financing activities was $1.4 million
for the comparable three months ended March 31, 2000, and arose primarily
from the proceeds of a revolving line of credit.
We believe that our existing working capital will be sufficient to fund
our operations for at least the next year. However, there can be no
assurance that we will not require additional financing in the future. We
cannot be sure that we will be able to obtain this additional financing, or
that, if we can, the terms will be acceptable to us.
FORWARD-LOOKING STATEMENTS
In addition to historical information, this filing and our Annual Report on
Form 10-K may contain forward-looking statements. Any statements contained
herein (including without limitation statements to the effect that the Company
or its management "believes," "expects," "anticipates," "plans," and similar
expressions) that relate to future events or conditions, including, among
others, statements relating to the sufficiency of working capital, should be
considered forward-looking statements. These forward-looking statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those reflected in these forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed in the section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Certain Factors That May Affect
Future Results" in our Annual Report on Form 10-K. Readers are cautioned not to
place undue
13
reliance on these forward-looking statements, which reflect management's
opinions only as of the date hereof. The Company undertakes no obligations to
revise or publicly release the results of any revision to these forward-looking
statements, whether as a result of new information, future events, or otherwise.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We develop products in the United States and market our products in North
America, Europe, the Middle East, Asia, and Australia. As a result, our
financial results could be affected by factors such as changes in foreign
currency exchange rates or weak economic conditions in foreign markets. Some of
our revenue is denominated in currencies other than the U.S. dollar, in
particular the Japanese yen, the Singapore dollar and the Euro. However, most of
our sales are currently made in U.S. dollars and a strengthening of the dollar
could make our products less competitive in foreign markets.
We used a portion of the proceeds obtained from our August 2000 initial
public offering to repay all outstanding amounts under our revolving credit
facility and term loan, which we subsequently terminated. To the extent that we
enter into a new credit facility in the future, future interest expense could be
subject to fluctuations based on the general level of U.S. interest rates.
Pending their application, we have invested the remaining proceeds from our
initial public offering in investment grade corporate and government securities
and money market funds. The primary objective of our investment activities is to
preserve capital while at the same time maximizing the income we receive from
our investments without significantly increasing risk. Some of the securities
that we invest in may have market risk. This means that a change in prevailing
interest rates may cause the principal amount of the investment to fluctuate.
For example, if we hold a security that was issued with a fixed interest rate at
the then-prevailing rate and the prevailing interest rate later rises, the
principal amount of our investment will probably decline. As of March 31, 2001
we had $31.4 million of securities which mature in 90 days or less,
$5.0 million of securities which mature between 90 days and one year, and
$13.7 million of securities which mature between one and two years. We do not
believe that we have any material exposure to interest rate risk.
14
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(C) RECENT SALES OF UNREGISTERED SECURITIES
During the quarter ended March 31, 2001, we sold the securities set forth
below which were not registered under the Securities Act of 1933:
1. The Company issued an aggregate of 30,187 shares of common stock between
January 1, 2001 and February 9, 2001 upon the exercise of stock options
at exercise prices ranging from $0.75 per share to $5.00 per share.
2. On January 2, 2001, the Company issued options to purchase 50,000 shares
of common stock under its Amended and Restated 1997 Non-Employee
Directors Plan at an exercise price of $12.00 per share.
3. On January 25, 2001, the Company completed the acquisition of AllPoints.
The transaction was completed in a stock-for-stock merger in which EXE
issued 1,590,357 shares of EXE common stock and assumed options for an
additional 409,606 shares of EXE common stock in exchange for all of the
outstanding securities of AllPoints.
4. On January 25, 2001, the Company issued options to purchase 1,218,000
shares of common stock under its Amended and Restated 1997 Incentive and
Non-Qualified Stock Option Plan at an exercise price of $12.44 per share.
5. On January 31, 2001, the Company issued options to purchase 408,750
shares of common stock under its Amended and Restated 1997 Incentive and
Non-Qualified Stock Option Plan at an exercise price of $13.44 per share.
6. On February 8, 2001, the Company issued 22,243 shares of common stock
upon the exercise of a warrant previously granted to one of our service
providers at an exercise price of $7.50 per share.
We believe that the transactions described above were exempt from
registration under Section 3(b) or 4(2) of the Securities Act because the
subject securities were issued pursuant to a compensatory benefit plan pursuant
to Rule 701 under the Securities Act or because the subject securities were sold
to a limited group of persons, each of whom was believed to be a sophisticated
investor or to have had a pre-existing business or personal relationship with us
or our management and to have been purchasing for investment without a view to
further distribution. In addition, the recipients of securities in each such
transaction represented their intentions to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the certificates
issued in such transactions. All recipients had adequate access, though their
relationships with us, to information about us.
(D) USE OF PROCEEDS
The Company completed its initial public offering of 8.0 million shares of
its common stock pursuant to a Registration Statement on Form S-1 (Registration
No. 333-35106, effective August 3, 2000) on August 9, 2000. Total proceeds from
the offering, including the exercise of the over-allotment option, were
approximately $63.9 million, net of underwriting discounts and commissions of
approximately $5.0 million and other fees and expenses of approximately
$1.8 million.
Approximately $16.6 million of the offering proceeds were used to pay off
and terminate the Company's revolving line of credit and term loan in August
2000. In January 2001, we completed the acquisition of AllPoints.
Approximately $2.4 million was spent on acquisition costs and debt retirement
associated with this transaction. The remainder of the proceeds have been
invested in
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investment grade corporate and government securities and money market funds. We
intend to use the remaining proceeds for research and development activities;
expenditures on sales and marketing, consulting services, and general and
administrative personnel; systems costs; and working capital and general
corporate purposes, including possible acquisitions of, or investments in,
businesses and technologies that are complementary to our business.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS
2.1* Agreement and Plan of Merger, dated as of January 18, 2001,
by and among the Company, Almond Acquisition Corp. and
AllPoints Systems, Inc.
10.1 Summary of Terms for Ken Powell, dated as of March 20, 2001,
between the Company and Ken Powell.
10.2 Registration Rights Agreement, dated as of January 25, 2001,
by and among the Company and the individuals and entities
named on the signature pages thereto.
- ------------------------
* Incorporated by reference to Exhibit 2.1 to the Company's Current Report on
Form 8-K, filed on February 9, 2001.
(B) REPORTS ON FORM 8-K
During the quarter ended March 31, 2001, the Company filed the following
Current Report on Form 8-K:
The Company filed a Current Report on Form 8-K (Item 2) on February 9, 2001,
announcing the completion of the acquisition of AllPoints Systems, Inc.
Subsequent to the quarter ended March 31, 2001, the Company filed the
following Current Report on Form 8-K:
The Company filed a Current Report on Form 8-K/A (Item 2) on April 10, 2001,
announcing the completion of the acquisition of AllPoints Systems, Inc.,
including required financial statements.
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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.
EXE TECHNOLOGIES, INC.
By: /s/ RAYMOND R. HOOD
-----------------------------------------
Raymond R. Hood
Date: May 15, 2001 CHIEF EXECUTIVE OFFICER
By: /s/ MICHAEL A. BURSTEIN
-----------------------------------------
Michael A. Burstein
SENIOR VICE PRESIDENT, FINANCE, CHIEF
Date: May 15, 2001 FINANCIAL OFFICER AND TREASURER
17
INDEX TO EXHIBITS
2.1* Agreement and Plan of Merger, dated as of January 18, 2001,
by and among the Company, Almond Acquisition Corp. and
AllPoints Systems, Inc.
10.1 Summary of Terms for Ken Powell, dated as of March 20, 2001,
between the Company and Ken Powell.
10.2 Registration Rights Agreement, dated as of January 25, 2001,
by and among the Company and the individuals and entities
named on the signature pages thereto.
- ------------------------
* Incorporated by reference to Exhibit 2.1 to the Company's Current Report on
Form 8-K, filed on February 9, 2001.
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