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EXHIBIT 99.1
SAFE HARBOR COMPLIANCE STATEMENT FOR FORWARD-LOOKING STATEMENTS
You should consider the following factors in evaluating us and our
business. If any of the following or other risks actually occurs, our business,
financial condition and results of operations could be adversely affected. In
such case, the trading price of our common stock could decline.
OUR FAILURE TO MANAGE GROWTH OF OPERATIONS MAY ADVERSELY AFFECT US
We continue to increase the scope of our operations domestically and
internationally and have increased our number of employees substantially. For
example, at December 31, 1998, 1999 and 2000 we had a total of 517, 557 and 802
employees, respectively. This growth will continue to place a significant strain
on our management systems and resources. If we are unable to manage our growth
effectively, our business, financial condition and results of operations will be
adversely affected. We may further expand domestically or internationally
through internal growth or through acquisitions of related companies and
technologies. For us to effectively manage our growth, we must continue to:
- maintain continuity in our executive officers;
- improve our operational, financial and management controls;
- improve our reporting systems and procedures;
- enhance management and information control systems;
- develop the management skills of our managers and supervisors;
and
- train and motivate our employees.
OUR FLUCTUATING OPERATING RESULTS COULD CAUSE OUR STOCK PRICE TO FALL
Our quarterly revenue and operating results are difficult to predict
and may fluctuate significantly from quarter to quarter. If our quarterly
revenue or operating results fall below the expectations of investors or public
market analysts, the price of our common stock could fall substantially. Our
quarterly revenue is difficult to forecast for several reasons, including the
following:
- the varying sales cycle for our products and services from
customer to customer;
- demand for our products;
- customers' budgeting and purchasing cycles;
- delays in our implementations at customer sites;
- timing of hiring new services employees and the rate at which
these employees become productive;
- development and performance of our distribution channels; and
- timing of any acquisitions and related costs.
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As a result of these and other factors, our license revenue is
difficult to predict. Because our revenue from services is largely correlated to
our license revenue, a decline in license revenue could also cause a decline in
our services revenue in the same quarter or in subsequent quarters. In addition,
an increase or decrease in hardware sales, which provide us with lower gross
margins than sales of software licenses or services, may cause variations in our
quarterly operating results.
Most of our expenses, including employee compensation and rent, are
relatively fixed. In addition, our expense levels are based, in part, on our
expectations regarding future revenue increases. As a result, any shortfall in
revenue in relation to our expectations could cause significant changes in our
operating results from quarter to quarter and could result in quarterly losses.
As a result of these factors, we believe that period-to-period comparisons of
our revenue levels and operating results are not necessarily meaningful.
Although we have grown significantly during the past five years, we do not
believe that our prior growth rates are sustainable or a good predictor of
future operating results. You should not rely on our historical quarterly
revenue and operating results to predict our future performance.
OUR OPERATING RESULTS ARE SUBSTANTIALLY DEPENDENT ON ONE PRODUCT
A substantial portion of our revenue comes from the sale of our PkMS
software and related services and hardware, and we expect this pattern to
continue. Accordingly, our future operating results will depend on the demand
for PkMS and related services and hardware by future customers, including new
and enhanced releases that are subsequently introduced. We cannot assure you
that the market will continue to demand our current products or that we will be
successful in marketing any new or enhanced products. If our competitors release
new products that are superior to PkMS in performance or price, demand for our
products may decline. A decline in demand for PkMS as a result of competition,
technological change or other factors would reduce our total revenues and harm
our ability to maintain profitability.
OUR INFOLINK PRODUCTS MAY NOT BE ACCEPTED BY THE MARKET
We have been developing our Internet-based application, infolink, and
expect to release our initial version of this product in September 2000. Our
future success will in part depend upon the adoption of our infolink product.
While we have been collaborating with several retailers to develop and adopt
infolink, we cannot assure you that these retailers or their suppliers and
manufacturers will license infolink from us. Since we believe we are the first
company to offer a product such as infolink, we will need to undertake
substantial marketing efforts to make prospective customers aware of infolink
and to persuade them to accept our product. We expect to face competition in the
future with respect to this product offering. In light of these factors, the
market for infolink may fail to develop or develop more slowly than we expect.
Either outcome would limit the growth of our total revenues and make it more
difficult for us to maintain profitability.
OUR LENGTHY SALES CYCLE AND DELAYS IN IMPLEMENTATIONS OF OUR PRODUCTS COULD
ADVERSELY IMPACT US
Due to the size and complexity of most of our software implementations,
our implementation cycle can be lengthy and may result in delays. These delays
could cause customer dissatisfaction, which could harm our reputation.
Additional delays could result if we fail to attract, train and retain services
personnel, or if our alliance companies fail to commit sufficient resources
towards implementing our software. These delays and resulting customer
dissatisfaction could harm our reputation and cause our revenue to decline.
OUR INABILITY TO ATTRACT AND RETAIN MANAGEMENT AND OTHER PERSONNEL MAY ADVERSELY
AFFECT US
Our success greatly depends on the continued service of our executives,
several of whom joined the Company since October 1999, as well as our other key
senior management, technical and sales personnel. The loss of any of our senior
management or other key research, development, sales and marketing personnel,
particularly if lost to competitors, could impair our ability to grow our
business. We do not maintain key man life insurance on any of our executive
officers. Our future success will depend in large part upon our ability to
attract, retain and motivate highly skilled employees. We face significant
competition for individuals with the skills required to perform the services we
offer. We cannot assure you that we will be able to attract and retain
sufficient numbers of these highly
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skilled employees or to motivate them. Because of the complexity of the
distribution center management software market, we may experience a significant
time lag between the date on which technical and sales personnel are hired and
the time at which these persons become fully productive.
FLUCTUATIONS IN HARDWARE SALES MAY ADVERSELY AFFECT US
A significant portion of our revenue in any period is comprised of the
resale of a variety of third-party hardware products to purchasers of our
software. Our customers may choose to purchase this hardware directly from
manufacturers or distributors of these products. Revenue from hardware sales as
a percentage of total revenue decreased in 1998 and 1999, and may continue to
decrease in the future. If we are not able to increase our revenue from software
licenses and services or maintain our hardware revenue, our ability to maintain
profitability may be adversely affected.
IMMIGRATION RESTRICTIONS MAY HINDER OUR EMPLOYEE RETENTION AND HIRING
A number of our employees are Indian nationals employed pursuant to
non-immigrant work-permitted visas issued by the United States Immigration and
Naturalization Service, or INS. There is a limit on the number of new visas
issued by the INS each year. In years in which this limit is reached, we may be
unable to retain or hire additional foreign employees. The federal government
may in the future further restrict the issuance of new visas. If we are unable
to retain or hire additional foreign employees, we may incur additional labor
costs and expenses or not have sufficient qualified personnel to carry on our
business, which could harm our ability to successfully continue and grow our
business.
WE MAY NOT BE ABLE YOU CONTINUE TO COMPETE SUCCESSFULLY WITH OTHER COMPANIES
We compete in markets that are intensely competitive and are expected to
become more competitive as current competitors expand their product offerings
and new competitors enter the market. Our current competitors come from many
segments of the software industry and offer a variety of solutions directed at
various aspects of the supply chain, as well as the enterprise as a whole. We
face competition for product sales from:
- supply chain execution vendors, including, Catalyst
International, Inc., EXE Technologies, Inc., Optum, Inc., and
McHugh Software International, Inc. among others;
- Enterprise Resource Planning ("ERP") or Supply chain
Management ("SCM") application vendors that offer varying
degrees of warehouse management functionality or modules of
their product suites, such as ReTek, JD Edwards or SAP;
- the corporate information technology departments of potential
customers capable of internally developing solutions; and
- smaller independent companies that have developed or are
attempting to develop distribution center management software.
We may face competition in the future from business application software
vendors that may broaden their product offerings by developing or acquiring
distribution center management software, in addition to ERP, SCM and e-commerce
applications vendors. These ERP and SCM vendors have a large number of strong
customer relationships, which could provide a significant competitive advantage.
New competitors or alliances among current and new competitors may emerge and
rapidly gain significant market share. Many of our current or potential future
competitors have longer operating histories, greater financial, technical,
marketing and other resources, greater name recognition, and a larger installed
base of customers than we do. To be successful, we must continue to produce
products based on the leading technology in our market. If we cannot maintain
our technological leadership or assemble the development, marketing, sales and
customer service resources to meet any competitive threat, we may lose market
share and suffer reductions in sales prices and gross margins. These
developments could substantially harm our business and operating results.
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IF WE CANNOT INTEGRATE ACQUIRED COMPANIES WITH OUR BUSINESS, OUR PROFITABILITY
MAY BE ADVERSELY AFFECTED
We acquired Performance Analysis Corporation, or PAC, in February 1998,
the Distribution Center Management Systems software product and related assets
of Kurt Salmon Associates in October 1998, and Intrepa, L.L.C. in October 2000.
We may from time to time acquire companies with complementary products and
services. These acquisitions will continue to expose us to increased risks and
costs, including the following:
- difficulties in assimilating new operations and personnel;
- diverting financial and management resources from existing
operations; and
- difficulties in integrating acquired technologies.
We may not be able to generate sufficient revenue from any of these
acquisitions to offset the associated acquisition costs. We will also be
required to maintain uniform standards of quality and service, controls,
procedures and policies. Our failure to achieve any of these standards may hurt
relationships with customers, employees, and new management personnel. In
addition, future acquisitions may result in additional stock issuances which
could be dilutive to our shareholders.
We may also evaluate joint venture relationships with complementary
businesses. Any joint venture we enter into would involve many of the same risks
posed by acquisitions, particularly the following:
- risks associated with the diversion of resources;
- the inability to generate sufficient revenue;
- the management of relationships with third parties; and
- potential additional expenses.
Many business acquisitions must be accounted for using the purchase
method of accounting. Many acquisition candidates have significant intangible
assets, and an acquisition of these businesses, if accounted for as a purchase,
would result in substantial goodwill amortization charges to us, reducing future
earnings. In addition, these acquisitions could involve acquisition-related
charges, such as one-time acquired research and development charges. The
acquisitions of PAC and Intrepa resulted in non-recurring, one-time charges of
$1.6 million and $3.0 million, respectively, in 1999 and 2000, respectively.
OUR GROWTH IS DEPENDENT UPON THE SUCCESSFUL DEVELOPMENT OF OUR DIRECT AND
INDIRECT SALES CHANNELS
We believe that future growth also will depend on developing and
maintaining successful strategic relationships with systems integrators and
third-party software application providers. Our strategy is to continue to
increase the proportion of customers served through these indirect channels. We
are currently investing, and plan to continue to invest, significant resources
to develop these indirect channels. This investment could adversely affect our
operating results if these efforts do not generate license and service revenue
necessary to offset this investment. Also, our inability to recruit and retain
qualified systems integrators could adversely affect our results of operations.
Because lower unit prices are typically charged on sales made through indirect
channels, increased indirect sales could reduce our average selling prices and
result in lower gross margins. In addition, sales of our products through
indirect channels will reduce our consulting service revenues as the third-party
systems integrators provide these services. As indirect sales increase, our
direct contact with our customer base will decrease, and we may have more
difficulty accurately forecasting sales, evaluating customer satisfaction and
recognizing emerging customer requirements. In addition, these systems
integrators and third-party software providers may develop, acquire or market
products competitive with our products.
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Our strategy of marketing our products directly to customers and
indirectly through systems integrators and third-party software application
providers may result in distribution channel conflicts. Our direct sales efforts
may compete with those of our indirect channels and, to the extent different
systems integrators target the same customers, systems integrators may also come
into conflict with each other. Any channel conflicts which develop may have a
material adverse effect on our relationships with systems integrators or hurt
our ability to attract new systems integrators.
MACRO-ECONOMIC OR OTHER EXTERNAL INFLUENCES MAY AFFECT OUR PERFORMANCE
Approximately 85% of our revenues and the vast majority of our profits
and cash flows are derived within the United States. Beginning in the fourth
quarter of 2000 and progressing into 2001, a declining United States economy
began to adversely impact the performances of many businesses particularly
within the technology sector. We are a technology company selling
technology-based solutions with total pricing, in many cases, exceeding $1.0
million. A reduction in the capital budgets of our customers and prospective
customers could have an adverse impact on our ability to sell our solutions. A
prolonged recession of the U.S. economy will likely result in less capital
expenditures, which may adversely impact our business and/or our ability to
compete. It is likely to further intensify our already competitive markets.
Competitors with greater capital resources and operational efficiencies than us
are likely better positioned to prevail in a prolonged recession.
THERE ARE MANY RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
We continue to expand our international operations, and these efforts
require significant management attention and financial resources. We may not be
able to successfully penetrate international markets or if we do, there can be
no assurance that we will grow these markets at the same rate as in North
America. Because of the complex nature of this expansion, it may adversely
affect our business and operating results.
We have committed resources to the opening and integration of
additional international sales offices and the expansion of international sales
and support channels. Our efforts to develop and expand international sales and
support channels may not be successful. International sales are subject to many
risks, including the following:
- difficulties in staffing and managing foreign operations;
- difficulties in managing international systems integrators;
- difficulties and expenses associated with complying with a
variety of foreign laws;
- difficulties in producing localized versions of our products;
- import and export restrictions and tariffs;
- difficulties in collecting accounts receivable;
- unexpected changes in regulatory requirements;
- currency fluctuations; and
- political and economic instability abroad.
Our principal international presence is in the United Kingdom and the
Netherlands. Seasonal fluctuations may arise from the lower sales that typically
occur during the summer months in Europe and other parts of the world.
Additionally, our concentration of international operations in Europe may give
rise to greater foreign currency exchange risk.
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WE MUST CONTINUE TO ADVANCE OUR TECHNOLOGY TO REMAIN COMPETITIVE
The market for our products is characterized by rapid technological change,
frequent new product introductions and enhancements, changes in customer demands
and evolving industry standards. Our existing products could be rendered
obsolete if we fail to continue to advance our technology. We have also found
that the technological life cycles of our products are difficult to estimate,
partially because of changing demands of other participants in the supply chain.
We believe that our future success will depend upon our ability to continue to
enhance our current product line while we concurrently develop and introduce new
products that keep pace with competitive and technological developments. These
developments require us to continue to make substantial product development
investments. Although we are presently developing a number of product
enhancements to the PkMS product suite, we cannot assure you that these
enhancements will be completed on a timely basis or gain customer acceptance.
WE MAY FACE LIABILITY TO CLIENTS IF OUR SYSTEMS FAIL
Our products are often critical to the operations of our customers'
businesses and provide benefits that may be difficult to quantify. We have
guaranteed that our products will comply with certain labeling requirements of
the top 100 consumer goods retailers as ranked by Stores Magazine. If our
products fail to function as required, we may be subject to claims for
substantial damages. Courts may not enforce provisions in our contracts which
would limit our liability or otherwise protect us from liability for damages.
Although we maintain general liability insurance coverage, including coverage
for errors or omissions, this coverage may not continue to be available on
reasonable terms or in sufficient amounts to cover claims against us. In
addition, our insurer may disclaim coverage as to any future claim. If claims
exceeding the available insurance coverage are successfully asserted against us,
or our insurer imposes premium increases, large deductibles or co-insurance
requirements on us, our business and results of operations could be adversely
affected.
OUR SOFTWARE MAY CONTAIN UNDETECTED ERRORS OR "BUGS," RESULTING IN HARM TO OUR
REPUTATION AND OPERATING RESULTS
Software products as complex as those offered by us might contain
undetected errors or failures when first introduced or when new versions are
released. We cannot assure you, despite testing by us and by current and
prospective customers, that errors will not be found in new products or product
enhancements after commercial release. Any errors found may cause substantial
harm to our reputation and result in additional unplanned expenses to remedy
any defects as well as a loss in revenue.
OUR FAILURE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS MAY ADVERSELY AFFECT US
Our success and ability to compete is dependent in part upon our
proprietary technology. We cannot assure you that we will be able to protect our
proprietary rights against unauthorized third-party copying or use. We rely on a
combination of copyright, trademark and trade secret laws, as well as
confidentiality agreements and licensing arrangements, to establish and protect
our proprietary rights. Despite our efforts to protect our proprietary rights,
existing copyright, trademark and trade secret laws afford only limited
protection. In addition, the laws of certain foreign countries do not protect
our rights to the same extent as do the laws of the United States. Attempts may
be made to copy or reverse engineer aspects of our products or to obtain and use
information that we regard as proprietary. Any infringement of our proprietary
rights could negatively impact our future operating results. Furthermore,
policing the unauthorized use of our products is difficult and litigation may be
necessary in the future to enforce our intellectual property rights, to protect
our trade secrets or to determine the validity and scope of the proprietary
rights of others. Litigation could result in substantial costs and diversion of
resources and could negatively impact our future operating results.
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INTELLECTUAL PROPERTY CLAIMS CAN BE COSTLY AND RESULT IN THE LOSS OF SIGNIFICANT
RIGHTS
It is possible that third parties will claim that we have infringed their
current or future products. We expect that distribution center management
software developers like us will increasingly be subject to infringement claims
as the number of products grow. Any claims, with or without merit, could be
time-consuming, result in costly litigation, cause product shipment delays, or
require us to enter into royalty or licensing agreements, any of which could
negatively impact our operating results. We cannot assure you that these royalty
or licensing agreements, if required, would be available on terms acceptable to
us, if at all. We cannot assure you that legal action claiming patent
infringement will not be commenced against us, or that we would prevail in
litigation given the complex technical issues and inherent uncertainties in
patent litigation. If a patent claim against us were successful and we could not
obtain a license on acceptable terms or license a substitute technology or
redesign to avoid infringement, we may be prevented from distributing our
software or caused to incur significant expense and delay in developing
non-infringing software.
EXISTING SHAREHOLDERS WILL CONTINUE TO CONTROL MANHATTAN AND MAY INFLUENCE OUR
AFFAIRS
Our directors, executive officers and greater-than-5% shareholders
together control approximately 59% of our outstanding common stock. In
particular, Alan J. Dabbiere, the Chairman of the Board, controls approximately
36% of our common stock. As a result, these shareholders, if they act together,
are able to influence the management and affairs of our company and all matters
requiring shareholder approval, including the election of directors and approval
of significant corporate transactions. This concentration of ownership may have
the effect of delaying or preventing a change in control of our company and
might affect the market price of the common stock.
WE MAY REQUIRE ADDITIONAL CAPITAL
We may require additional capital to finance our growth or to fund
acquisitions or investments in complementary businesses, technologies or product
lines. Our capital requirements will depend on many factors, including:
- demand for our products;
- the timing of and extent to which we invest in new technology;
- the level and timing of revenue;
- the expenses of sales and marketing and new product
development;
- the success and related expense of increasing our brand
awareness;
- the extent to which competitors are successful in developing
new products and increasing their market share; and
- the costs involved in maintaining and enforcing intellectual
property rights.
To the extent that our resources are insufficient to fund our future
activities, we may need to raise additional funds through public or private
financing. However, additional funding, if needed, may not be available on terms
attractive to us, or at all. Our inability to raise capital when needed could
have a material adverse effect on our business, operating results and financial
condition. If additional funds are raised through the issuance of equity
securities, the percentage ownership of Manhattan by our shareholders would be
diluted.
OUR STOCK PRICE HAS BEEN HIGHLY VOLATILE
The trading price of our common stock has fluctuated significantly
since our initial public offering in April 1998. In addition, the trading price
of our common stock could be subject to wide fluctuations in response to various
factors, including:
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- quarterly variations in operating results;
- announcements of technological innovations or new products by
us or our competitors;
- developments with respect to patents or proprietary rights;
and
- changes in financial estimates by securities analysts.
In addition, the stock market has experienced volatility that has
particularly affected the market prices of equity securities of many technology
companies and that often has been unrelated or disproportionate to the operating
performance of these companies. These broad market fluctuations may adversely
affect the market price of our common stock.
OUR ARTICLES OF INCORPORATION AND BYLAWS AND GEORGIA LAW MAY INHIBIT A TAKEOVER
OF OUR COMPANY
Our basic corporate documents and Georgia law contain provisions that
might enable our management to resist a takeover of our Company. These
provisions might discourage, delay or prevent a change in the control of our
Company or a change in our management. These provisions could also discourage
proxy contests and make it more difficult for you and other shareholders to
elect directors and take other corporate actions. The existence of these
provisions could limit the price that investors might be willing to pay in the
future for shares of the common stock.