EXHIBIT 99.1
SAFE HARBOR COMPLIANCE STATEMENT FOR FORWARD-LOOKING STATEMENTS
You should consider the following factors in evaluating our business or
an investment in our common stock. 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 OPERATING RESULTS ARE DIFFICULT TO PREDICT AND 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.
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 six years, we do not
believe that our prior growth rates are sustainable or a good indicator of
future operating results. You should not rely on our historical quarterly
revenue and operating results to predict our future performance.
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 ABILITY TO SUCCESSFULLY COMPETE WITH OTHER COMPANIES MAY FAIL.
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 extended supply chain, as well as the enterprise as a
whole. We face competition for product sales from:
- the corporate information technology departments of current or
potential customers capable of internally developing
solutions;
- supply chain execution vendors, including Catalyst
International, Inc., RedPrairie Corporation, Optum, Inc.,
Provia Software, Inc., Highjump (3M) and SSA Global
Technologies, Inc. among others;
- ERP or SCM application vendors with products or modules of
their product suite offering varying degrees of supply chain
execution ("SCE") functionality, such as Retek, Inc.,
Manugistics Group, Inc., i2 Technologies, Oracle Corp. and SAP
AG; and
- smaller independent companies that have developed or are
attempting to develop distribution center management software
that competes with our SCE solutions.
We may face competition in the future from ERP and SCM applications
vendors and business application software vendors that may broaden their product
offerings by internally developing or by acquiring or partnering with
independent developers of supply chain execution software. To the extent such
ERP and SCM vendors develop or acquire systems with functionality comparable or
superior to our products, their significant installed customer bases,
long-standing customer relationships and ability to offer a broad solution could
provide a significant competitive advantage over our products. In addition, it
is possible that new competitors or alliances among current and new competitors
may emerge and rapidly gain significant market share. Increased competition
could result in price reductions, fewer customer orders, reduced gross margins
and loss of market share. Both Oracle and SAP have entered the market for SCM
applications. We believe that the domain expertise required to compete provides
us with a competitive advantage and is a significant barrier to market entry.
However, some of our competitors have significant resources at their disposal,
and the degree to which we will compete with these new products in the
marketplace is still undetermined.
Many of our competitors and potential competitors have longer operating
histories, significantly greater financial, technical, marketing and other
resources, greater name recognition and a larger installed base of customers
than we do. In order to be successful in the future, we must continue to respond
promptly and effectively to technological change and competitors' innovations.
We cannot assure you that our current or potential competitors will not develop
products comparable or superior in terms of price and performance features to
those developed by us. In addition, we cannot assure you that we will not be
required to make substantial additional investments in connection with our
research, development, marketing, sales and customer service efforts in order to
meet any competitive threat, or that we will be able to compete successfully in
the future. Increased competition may result in reductions in market share,
pressure for price reductions and related reductions in gross margins, any of
which could materially and adversely affect our ability to achieve our financial
and business goals. We cannot give assurance that in the future we will be able
to successfully compete against current and future competitors.
OUR PERFORMANCE MAY BE NEGATIVELY IMPACTED BY MACRO-ECONOMIC OR OTHER
EXTERNAL INFLUENCES.
Beginning in the fourth quarter of 2000, 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, including software and services,
in many cases, exceeding $1.0 million. Reductions in the capital budgets of our
customers and prospective
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customers could have an adverse impact on our ability to sell our solutions.
During 2003, we continued to experience effects from a weak spending environment
for information technology in both the United States and Europe, in the form of
delayed and cancelled buying decisions by customers for our software, services
and hardware, deferrals by customers of service engagements previously scheduled
and pressure by our customers and competitors to discount our offerings. We
believe that prolonged continuation of or further deterioration in the current
business climates, and the continued delay in capital spending within the United
States and/or other geographic regions in which we operate, principally the
United Kingdom and continental Europe, could have a material adverse impact on
our business and our ability to compete, and is likely to further intensify our
intensely competitive markets.
OUR INTERNATIONAL OPERATIONS HAVE MANY ASSOCIATED RISKS.
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.
In 2002, we opened new offices in Germany, France, Australia, India and
Japan. These openings constituted a substantial expansion of our international
presence, which, prior to 2002, consisted principally of offices in the United
Kingdom and the Netherlands. We have committed resources to the opening and
integration of 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.
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 moves into other geographical markets may give rise to greater
foreign currency exchange risk, in addition to further concentration of risk in
Europe.
OUR OPERATING RESULTS ARE SUBSTANTIALLY DEPENDENT ON ONE LINE OF BUSINESS.
We continue to derive a substantial portion of our revenues from sales
of our software and related services and hardware. Any factor adversely
affecting the markets for SCE solutions could have an adverse effect on our
business, financial condition and results of operations. Accordingly, our future
operating results will depend on the demand for our products and related
services and hardware by our customers, including new and enhanced releases that
we subsequently introduce. We cannot assure you that the
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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 our products in performance or price, demand
for our products may decline. A decline in demand for our products as a result
of competition, technological change or other factors would reduce our total
revenues and harm our ability to maintain profitability.
OUR FAILURE TO MANAGE GROWTH OF OPERATIONS MAY ADVERSELY AFFECT US.
We plan to continue to increase the scope of our operations
domestically and internationally. This growth may 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 INABILITY TO ATTRACT, INTEGRATE AND RETAIN MANAGEMENT AND OTHER
PERSONNEL MAY ADVERSELY AFFECT US.
Our success greatly depends on the continued service of our executives,
as well as our other key senior management, technical and sales personnel. We
have recently entered into an employment agreement with Peter F. Sinisgalli,
which provides for Mr. Sinisgalli to serve as our Chief Operating Officer
beginning in April 2004 and to serve as our Chief Executive Officer beginning in
July 2004. Our success will depend on the ability of any new executive officers,
including Mr. Sinisgalli, to integrate themselves into our daily operations, to
gain the trust and confidence of our other employees and to work together as a
team. The loss of any of our senior management or other key professional
services, research and 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 skilled employees or to motivate them. Because of the complexity of
the SCE 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 OUR HARDWARE SALES MAY ADVERSELY AFFECT US.
A 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. We view sales of hardware as non-strategic. We
perform this service to our customers seeking a single source for their supply
chain execution needs. Hardware sales are difficult to forecast and fluctuate
from quarter to quarter, leading to unusual comparisons of total revenue and
fluctuations in profits. Revenue from hardware sales as a percentage of total
revenue decreased in 2001, 2002 and 2003, and may continue to decrease in the
future. If we are not
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able to increase our revenue from software licenses and services or maintain our
hardware revenue, our profitability may be adversely affected.
OUR EMPLOYEE RETENTION AND HIRING MAY BE HINDERED BY IMMIGRATION
RESTRICTIONS.
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 have been many changes within the INS as a
result of the events of September 11, 2001. We anticipate that there will be
additional restrictions placed on non-immigrant work-permitted visas, and we do
not know how such changes may affect us. In 2003, the INS reduced the number of
new non-immigrant work-permitted visas that will be issued each year. In years
in which this limit is reached, we may be unable to retain or hire additional
foreign employees. 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.
OUR BUSINESS AND OUR PROFITABILITY MAY BE ADVERSELY AFFECTED IF WE CANNOT
INTEGRATE ACQUIRED COMPANIES.
We acquired Intrepa, L.L.C. in October 2000, Logistics.com, Inc. in
December 2002, ReturnCentral, Inc. in June 2003, Streamsoft, L.L.C. in October
2003 and Avere, Inc. in January 2004. 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 issuances of stock that
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 acquisition candidates have significant intangible assets, and an
acquisition of these businesses would likely result in significant amounts of
goodwill and other intangible assets. Under new accounting rules, goodwill and
certain other intangible assets will no longer be amortized to income, but will
be subject to at least annual impairment reviews. If the acquisitions do not
perform as planned, future charges to income arising from such impairment
reviews could be significant. Likewise, future quarterly and annual earnings
could be significantly adversely affected. In addition, these acquisitions could
involve acquisition-related charges, such as one-time acquired research and
development charges. During the third
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quarter of 2003, we recorded expenses of $885,000 relating to fees incurred in
connection with two potential acquisitions that we decided not to consummate.
OUR GROWTH IS DEPENDENT UPON THE SUCCESSFUL DEVELOPMENT OF OUR DIRECT AND
INDIRECT SALES CHANNELS.
We believe that our future growth also will depend on developing and
maintaining successful strategic relationships with systems integrators and
other technology companies. 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 partner with other technology
companies and 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.
Our strategy of marketing our products directly to customers and
indirectly through systems integrators and other technology companies 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 that develop may have a material adverse
effect on our relationships with systems integrators or harm our ability to
attract new systems integrators.
OUR TECHNOLOGY MUST BE ADVANCED IF WE ARE 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 our product sets, we cannot assure you that these enhancements
will be completed on a timely basis or gain customer acceptance.
OUR LIABILITY TO CLIENTS MAY BE SUBSTANTIAL 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. 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 that
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.
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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.
OUR LIABILITY FOR 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 SCE software developers like us
will increasingly be subject to infringement claims as the number of products
grows. 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 was 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 required to
incur significant expense and delay in developing non-infringing software.
OUR BUSINESS 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;
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- 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 our company by our current 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:
- 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 also limit the price that investors might be willing to pay in
the future for shares of our common stock.
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