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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended DECEMBER 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 000-26437
================================================================================
ACCRUE SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-3238684
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
48634 MILMONT DRIVE
FREMONT, CA 94538-7353
(Address of principal executive offices, including zip code)
(510) 580-4500
(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 [ ]
As of February 2, 2001, there were 30,350,413 shares of the registrant's
Common Stock outstanding.
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ACCRUE SOFTWARE, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
CONDENSED CONSOLIDATED BALANCE SHEETS
AT DECEMBER 30, 2000 AND MARCH 31, 2000 .................................................. 3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED
DECEMBER 30, 2000 AND DECEMBER 31, 1999 .................................................. 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 30, 2000 AND DECEMBER 31, 1999 ........................ 5
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ........................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS ................................................................. 7
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ............................ 21
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS .................................................................... 22
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS ............................................ 22
ITEM 3. DEFAULTS UPON SENIOR SECURITIES ...................................................... 22
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .................................. 22
ITEM 5. OTHER INFORMATION .................................................................... 22
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ..................................................... 22
SIGNATURES ............................................................................................ 24
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ACCRUE SOFTWARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)
DEC 30, MAR 31,
2000 2000
----------- ----------
ASSETS
Current assets:
Cash and cash equivalents........................... $ 20,717 $ 31,754
Accounts receivable, net............................ 8,069 6,279
Prepaid expenses and other current assets........... 1,930 1,032
----------- ----------
Total current assets.............................. 30,716 39,065
Property and equipment, net......................... 3,215 2,253
Goodwill and intangibles, net....................... 45,799 119,450
Other assets........................................ 65 131
----------- ----------
Total assets..................................... $ 79,795 $ 160,899
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................... $ 1,378 $ 429
Accrued liabilities................................. 5,211 2,781
Accrued liabilities, merger......................... 341 2,421
Deferred revenue.................................... 8,113 3,095
Short term debt..................................... 2,000 --
Current portion of long term debt................... -- 147
----------- ----------
Total current liabilities........................ 17,043 8,873
Long term debt, net of current portion................ -- 39
----------- ----------
Total liabilities................................ 17,043 8,912
----------- ----------
Stockholders' equity:
Common stock, $0.001 par value...................... 30 27
Additional paid-in capital.......................... 266,139 191,300
Notes receivable from stockholders.................. (213) (213)
Accumulated other comprehensive income.............. 31 --
Unearned compensation............................... (2,467) (4,237)
Accumulated deficit................................. (200,768) (34,890)
----------- ----------
Total stockholders' equity........................ 62,752 151,987
----------- ----------
Total liabilities and stockholders' equity........ $ 79,795 $ 160,899
=========== ==========
See accompanying notes to the condensed consolidated financial statements.
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ACCRUE SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------- -----------------------
DEC 30, DEC 31, DEC 30, DEC 31,
2000 1999 2000 1999
-------- -------- -------- --------
Net revenue:
Software license ...................... $ 462 $ 3,654 $ 14,112 $ 9,049
Maintenance and service ............... 2,038 963 8,173 2,304
--------- -------- --------- --------
Total revenue ...................... 2,500 4,617 22,285 11,353
--------- -------- --------- --------
Cost of revenues
Software license ...................... 162 129 651 329
Maintenance and service ............... 2,381 564 5,575 1,164
--------- -------- --------- --------
Total cost of revenues ............. 2,543 693 6,226 1,493
--------- -------- --------- --------
Gross profit (loss) ....................... (43) 3,924 16,059 9,860
--------- -------- --------- --------
Operating expenses:
Research and development .............. 2,697 985 6,692 2,815
Sales and marketing ................... 3,553 3,136 11,190 8,595
General and administrative ............ 1,974 576 4,020 1,690
Mergers and acquisitions .............. -- -- -- 3,560
Amortization of intangibles ........... 17,652 -- 44,755 --
In-process research and development ... -- -- 4,503
Stock-based compensation expense ...... 423 1,021 1,770 3,427
Goodwill impairment charge............. 110,000 -- 110,000 --
--------- -------- --------- --------
Total operating expenses ........... 136,299 5,718 182,930 20,087
--------- -------- --------- --------
Loss from operations ...................... (136,342) (1,794) (166,871) (10,227)
Other income (expense) .................... 243 502 993 746
--------- -------- --------- --------
Net loss .................................. $(136,099) $ (1,292) $(165,878) $ (9,481)
========= ======== ========= ========
Net loss per share, basic and diluted ..... $ (4.69) $ (0.06) $ (6.07) $ (0.67)
========= ======== ========= ========
Shares used in computing net loss per
share, basic and diluted .............. 29,039 23,171 27,331 14,183
========= ======== ========= ========
See accompanying notes to the condensed consolidated financial statements.
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ACCRUE SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)
NINE MONTHS ENDED
-----------------------
DEC 30, DEC 31,
2000 1999
-------- --------
Cash flows from operating activities:
Net loss ............................................................ $(165,878) $ (9,481)
Adjustments to reconcile net loss to net cash
used in operating activities:
Write-off of purchased in-process research and development ....... 4,503
Goodwill impairment charge........................................ 110,000 --
Depreciation and amortization .................................... 45,446 342
Provision for sales returns and doubtful accounts ................ 224 155
Amortization of discount on line of credit ....................... -- 7
Stock-based compensation expense ................................. 1,770 3,427
Changes in operating assets and liabilities:
Accounts receivable ............................................ (818) (2,500)
Prepaid expenses and other current assets ...................... (292) (354)
Notes receivable ............................................... -- (783)
Other assets ................................................... 68 75
Accounts payable ............................................... (479) 612
Accrued liabilities ............................................ 1,589 1,513
Accrued liabilities, merger .................................... (2,849) 598
Deferred revenue ............................................... 983 1,529
--------- --------
Net cash used in operating activities ....................... (5,733) (4,860)
--------- --------
Cash flows from investing activities:
Acquisition of property and equipment .......................... (1,802) (1,275)
Acquisitions of Infocharger and Pilot, net of cash acquired .... (4,964) --
--------- --------
Net cash used in investing activities ....................... (6,766) (1,275)
--------- --------
Cash flows from financing activities:
Proceeds from initial public offering, net of issuance costs ... -- 40,815
Proceeds from equipment loan ................................... -- 602
Proceeds from stock options and warrants exercised ............. 911 694
Proceeds from employee stock purchase plan program ............. 771 --
Proceeds from short-term debt................................... 2,000 --
Repurchase of common stock ..................................... (247) --
Repayment of equipment loan .................................... (186) (907)
Repayment of line of credit .................................... (1,450) --
--------- --------
Net cash provided by financing activities ................... 1,799 41,204
--------- --------
Effect of foreign exchange rate changes on cash ....................... (337) --
--------- --------
Net increase (decrease) in cash and cash equivalents .................. (11,037) 35,069
Cash and cash equivalents at beginning of period ...................... 31,754 2,862
--------- --------
Cash and cash equivalents at end of period ............................ $ 20,717 $ 37,931
========= ========
Supplemental disclosure of cash flow information:
Interest paid ....................................................... $ 40 $ 42
======== ========
See accompanying notes to the condensed consolidated financial statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements reflect
all adjustments (consisting only of normal recurring adjustments) which, in the
opinion of management, are necessary for a fair presentation of the financial
results for the periods shown. The balance sheet as of March 31, 2000 was
derived from audited financial statements, but does not include all required
disclosures required by generally accepted accounting principles.
These condensed consolidated financial statements should be read in conjunction
with the financial statements and notes thereto included in our Annual Report on
Form 10-K/A for the fiscal year ended March 31, 2000. The results of operations
for the current interim period are not necessarily indicative of results to be
expected for the entire current year or other future interim periods.
NOTE 2 - Fiscal Periods
Beginning October 2000, we have adopted fiscal accounting and reporting periods
with a year including 52 weeks ending nearest to March 31st. Our fiscal quarter
ended December 30, 2000 consists of a 13 week period.
NOTE 3 - NET LOSS PER SHARE
Basic net loss per share is computed by dividing the net loss available to
common stockholders for the period by the weighted average number of common
shares outstanding during the period. Diluted net loss per share is computed by
dividing the net loss for the period by the weighted average number of vested
common and potential common shares outstanding during the period. However, as we
generated net losses in all periods presented, potential common shares, composed
of incremental common shares issuable upon the exercise of stock options and
warrants, are not included in diluted net loss per share because such shares are
anti-dilutive.
Net loss per share for the three and nine months ended December 31, 1999 does
not include the effect of approximately 1,894,800 stock options outstanding and
approximately 20,000 common stock warrants outstanding, because their effects
are anti-dilutive.
Net loss per share for the three and nine months ended December 30, 2000 does
not include the effect of approximately 4,189,253 stock options outstanding,
because their effects are anti-dilutive.
A reconciliation of shares used in the calculation of net loss per share
follows:
THREE MONTHS ENDED NINE MONTHS ENDED
DEC 30, DEC 31, DEC 30, DEC 31,
(IN THOUSANDS) 2000 1999 2000 1999
-------- -------- --------- --------
NET LOSS PER SHARE, BASIC AND DILUTED:
Net loss ............................................... $(136,099) $ (1,292) $(165,878) $ (9,481)
========= ======== ========= ========
Basic and diluted:
Weighted average shares of common stock outstanding .... 30,365 25,097 28,890 25,097
Less: Weighted average shares subject to repurchase .... (1,326) (1,877) (1,559) (1,877)
--------- -------- ---------- --------
Weighted average shares used in computing basic
and diluted net loss per common share .................. 29,039 23,220 27,331 23,220
========= ======== ========= =========
Net loss per share, basic and diluted................... $ (4.69) $ (0.06) $ (6.07) $ (0.41)
========= ======== ========= ==========
NOTE 4 - EQUITY TRANSACTIONS
For the three and nine months ended December 31, 1999, we recorded unearned
stock-based compensation expense of $0 and $3,652,282, respectively. For the
three and nine months ended December 30, 2000, we recorded unearned stock-based
compensation
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expense of zero, for the difference at the grant date between the exercise price
and the deemed fair value of the common stock underlying the options granted
during that period. Amortization of unearned compensation recognized for the
three and nine months ended December 31, 1999 was $1,021,213 and $3,427,908,
respectively. Amortization of unearned compensation recognized for the three and
nine months ended December 30, 2000 was $423,000 and $1,769,521, respectively.
During the three and nine months ended December 30, 2000, we granted options to
purchase an aggregate of 558,700 and 3,211,703 shares of common stock pursuant
to our stock option plans. Also 68,351 and 272,578 shares of common stock were
exercised pursuant to our stock option plans.
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NOTE 5 - SIGNIFICANT CUSTOMER AND GEOGRAPHIC INFORMATION
Revenue by geographic region is as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------- --------------------
DEC 30, DEC 31, DEC 30, DEC 31,
------- ------- ------- -------
(IN THOUSANDS) 2000 1999 2000 1999
------- ------- ------- -------
United States ...... $ 925 $ 3,986 $18,022 $ 9,988
Foreign ............ 1,575 631 4,263 1,365
------- ------- ------- -------
$ 2,500 $ 4,617 $22,285 $11,353
======= ======= ======= =======
One customer accounted for more than 10% of revenue for the three months ended
December 30, 2000 and no customer accounted for more than 10% of revenue for the
three and nine months ended December 31, 1999 and the nine months ended December
30, 2000.
NOTE 6 - GOODWILL IMPAIRMENT CHARGE
During the third quarter ended December 30, 2000, the Company performed an
impairment assessment of the identifiable intangibles and enterprise level
goodwill recorded upon the acquisition for stock of NeoVista Software, Inc.,
Infocharger division of Tantau Software International, Inc. and Pilot Software,
Inc., which the Company completed on January 14, July 18 and August 24, 2000,
respectively. The Company's assessment was performed primarily due to the
decline in its revenues in the third quarter ended December 30, 2000, the
anticipated decline in its projected operating results due to the overall
decline in the e-commerce industry and the significant decline in its stock
price since the date the shares issued in each acquisition were valued. Goodwill
significantly exceeded its market capitalization prior to the impairment charge.
As a result of the review, the Company recorded a $110.0 million impairment
charge to reduce its enterprise level goodwill. The charge was determined based
upon its estimated discounted cash flows using a discount rate of 20%. The
assumptions supporting its cash flows including the discount rate were
determined using its best estimates. The remaining goodwill and identifiable
intangibles balance of approximately $45.8 million will be amortized over the
remaining useful life of approximately two years which the Company consider
appropriate.
NOTE 7 - NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting Standard No.
133, ("SFAS No. 133"), "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133 establishes accounting and reporting standards for
derivative instruments, including derivative instruments embedded in other
contracts, and hedging activities. SFAS No. 133, as amended, is effective for
the Company's fiscal year ending March 2002. Accrue does not expect SFAS No. 133
to have a significant effect on its financial condition or results of
operations.
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 provides guidance on the recognition, presentation and
disclosure of revenue in financial statements. Accrue has reviewed the bulletin
and believes that its current revenue recognition policy is consistent with the
guidance of SAB No. 101.
In March 2000, the Financial Accounting Standards Board issued Interpretation
No. 44, "Accounting for Certain Transactions Involving Stock Compensation -- an
interpretation of APB Opinion No. 25" ("FIN 44"). This interpretation clarifies
the definition of employee for purposes of applying Accounting Practice Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), the
criteria for determining whether a plan qualifies as a noncompensatory plan, the
accounting consequence of various modifications to the terms of a previously
fixed stock option or award, and the accounting for an exchange of stock
compensation awards in a business combination. This Interpretation is effective
July 1, 2000, but certain conclusions in this Interpretation cover specific
events that occur after either December 15, 1998, or January 12, 2000. The
adoption of FIN 44 did not have a material impact on Accrue's financial position
or results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION
27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT
OF 1934, INCLUDING, WITHOUT LIMITATION, STATEMENTS REGARDING THE COMPANY'S
EXPECTATIONS, BELIEFS, INTENTIONS OR FUTURE STRATEGIES THAT ARE SIGNIFIED BY THE
WORDS "EXPECTS", "ANTICIPATES", "INTENDS", "BELIEVES", OR SIMILAR LANGUAGE. ALL
FORWARD-LOOKING STATEMENTS INCLUDED IN THIS DOCUMENT ARE BASED ON INFORMATION
AVAILABLE TO THE COMPANY ON THE DATE HEREOF, AND THE COMPANY ASSUMES NO
OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS. ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS. IN
EVALUATING THE COMPANY'S BUSINESS, PROSPECTIVE INVESTORS SHOULD CAREFULLY
CONSIDER THE INFORMATION SET FORTH BELOW UNDER THE CAPTION "RICK FACTORS" IN
ADDITION TO THE OTHER INFORMATION SET FORTH HEREIN. THE COMPANY CAUTIONS
INVESTORS THAT ITS BUSINESS AND FINANCIAL PERFORMANCE ARE SUBJECT TO SUBSTANTIAL
RISKS AND UNCERTAINTIES.
OVERVIEW
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Accrue Software was founded in 1996 and is headquartered in Fremont, California
with regional sales offices throughout the US, and international offices in the
United Kingdom, Canada, France, Germany and Singapore. Our products, Accrue
Insight, Accrue Hit List and our analytics platforms which include Pilot,
Decision Series, and InfoCharger are comprehensive solutions that we believe
help Internet businesses increase the number of visitors to their respective
websites, customer loyalty and online sales by collecting, storing, analyzing
and reporting Web site activity data at a level of detail and accuracy that
distinguishes our technology from others. We offer our products to customers for
a license fee and also provide related maintenance services. In addition, we
provide professional services to assist customers at every stage in their
deployment of Accrue products, from identification of their specific business
needs through enterprise integration and customization of e-business analysis
reporting, to delivery of a rapid and effective implementation.
Substantially all of our product revenues through December 30, 2000 were
attributable to licensing Accrue Insight, Accrue Hit List, Pilot and related
products and support services. We anticipate that these products will continue
to account for a substantial portion of our revenues for the foreseeable future.
Consequently, a decline in the price of or demand for Accrue Insight, Accrue Hit
List, Pilot or related products and services, or their failure to achieve broad
market acceptance, would seriously harm our business, financial condition and
results of operations.
We generally recognize license revenue, net of estimated returns allowance, upon
product shipment. Where multiple products or services are sold together under
one contract, we allocate revenue to each element based on its relative fair
value, with fair value being determined using the price charged when that
element is sold separately. We recognize maintenance service revenue ratably
over the term of the service agreement, and we recognize consulting service
revenue as such services are performed.
We market our products, both domestically and internationally, through our
direct sales force. Sales derived through indirect channels, which consist
primarily of international resellers and system integrators, accounted for
approximately 20% of our total revenue to date. We license our products to our
customers primarily on a perpetual basis. We offer multiple pricing models
including usage-based, server-based and CPU-based, allowing for additional
revenue as a customer's e-business expands. Under these pricing methods
customers are required to periodically report to us their usage and we bill them
in accordance with the software license terms. With the introduction of Insight
6.0, we will introduce pricing based on number of CPU's deployed for running the
software itself as opposed to number of CPU's monitoring the customer's Web
site. This change in pricing basis will allow customers to directly manage their
total cost of ownership of our product by determining what amount of CPU
resources to allocate to our product. We also offer subscription-based pricing
for Accrue Hit List. License fees for our products have typically ranged from
ten to several hundred thousand dollars. Annual support and maintenance
contracts, which are purchased with initial product licenses, entitle customers
to telephone support and upgrades, when and if available. The price for our
support and maintenance program is based on a percentage of list price and is
paid in advance. Consulting fees for implementation services and training are
charged on a time-and-materials basis or a fixed-fee basis for package services.
RESULTS OF OPERATIONS
Revenue. Total revenue was $2.5 million and $22.3 million for the three and nine
months ended December 30, 2000, respectively, a decrease of 46% from $4.6
million for the three months ended December 31, 1999 and an increase of 96%
from $11.4 million for the nine months ended December 31, 1999. One customer
accounted for more than 10% of revenue for the three months ended December 30,
2000, and no customer accounted for more than 10% of revenue for the three and
nine months ended December 31, 1999 and the nine months ended December 30, 2000.
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Software license revenue. Revenue from software licenses was $0.5 million for
the three months ended December 30, 2000, a decrease of $3.2 million, or 87%,
from $3.7 million for the three months ended December 31, 1999. For the nine
months ended December 30, 2000, revenue from software licenses was $14.1
million, an increase of $5.1 million, or 56%, over $9.0 million for the nine
months ended December 31, 1999. Software license revenue decreased during the
three month period ended December 30, 2000 in comparison to the three months
ended December 31, 1999, and in comparison to the three months ended September
30, 2000, due to lower than anticipated sales of our products as a result of a
decline in purchases from e-commerce companies and an increase in our product
sales cycle to enterprise customers. Software license revenue also decreased as
a result of sales during the quarter involving a greater percentage of
professional services causing us to defer the license revenue relating to these
contracts which we will recognize over the period the services are rendered. For
the period ended December 30, 2000, the amount of this deferred revenue was $0.7
million. We anticipate that we will be able to recognize this license revenue
over the next two fiscal quarters. In addition, software license revenue
decreased due to refunds of approximately $0.9 million to three customers due to
our decision to permit these customers to return products in this quarter.
Maintenance and service revenue. Maintenance and service revenues were $2.0
million and $8.2 million for the three and nine months ended December 30, 2000,
representing an increase of $1.0 million from $1.0 million and an increase of
$5.9 million from $2.3 million from the corresponding periods in fiscal 2000.
The $2.0 million of maintenance and service revenue for the three months ended
December 30, 2000 represents a decrease of $1.3 million from $3.3 million for
the three months ended September 30, 2000. The decrease in maintenance and
service revenue for the three months ended December 30, 2000 in comparison to
the three months ended September 30, 2000 is due to decline in volume of
services completed. Year over year growth is primarily due to expanded service
offerings and the inclusion of maintenance revenues related to our acquisition
of Pilot Software, Inc. We expect that historical percentage growth rates of our
maintenance and service revenue will not be sustainable in the future.
Maintenance and service revenues depends on the continued ability of our
customers to pay over time. If the creditworthiness of our customers
deteriorates, particularly customers that are dependent on revenues from
e-commerce, we may not be able to sustain our historic levels of maintenance and
service revenues in the future.
Cost of revenues. Cost of revenues consists of royalties paid to third parties
and the salaries and related expenses for maintenance and service personnel.
These costs were $2.5 million and $6.2 million, or 102% and 28% of revenue,
respectively, for the three and nine months ended December 30, 2000. This
compares to $0.7 million and $1.5 million, or 15% and 13%, respectively, of
revenue in the corresponding periods in fiscal 2000. The increase of cost of
revenues reflects primarily a substantial increase in maintenance and service
personnel headcount.
Gross profit. Gross profit (loss) were (2%) and 72% of revenue for the three and
nine months ended December 30, 2000, and 85% and 87% for the three and nine
months ended December 31, 1999, respectively. In the future, we expect that
sales derived through indirect channels will increase as a percentage of total
revenue. We also expect that maintenance and service revenue will increase as a
percentage of total revenue. Maintenance and service revenue have lower gross
margins than product revenue, as does the license of products through indirect
channels.
Operating expenses. Total operating expenses were $136.3 million for the three
months ended December 30, 2000, or 5,452% of revenues as compared to $5.7
million or 124% of revenues for the three months ended December 31, 1999. For
the nine months ended December 30, 2000, total operating expenses were $182.9
million, or 821% of revenue, as compared to $20.1 million, or 177% of revenue
for the nine months ended December 31, 1999. The increases in absolute dollars
were largely due to increased salaries, commissions and related expenses
associated with newly hired employees, merger related costs, goodwill impairment
charge, and amortization of intangibles.
Research and development expenses. Research and development expenses consist
primarily of salaries and related costs associated with the development of new
products, the enhancement of existing products, and the performance of quality
assurance and documentation activities. Research and development expenses were
$2.7 million for the three months ended December 30, 2000, or 108% of revenue,
as compared to $1.0 million, or 21% of revenue for the three months ended
December 31, 1999. For the nine months ended December 30, 2000, research and
development expenses were $6.7 million, or 30% of revenue, as compared to $2.8
million, or 25% of revenue for the nine months ended December 31, 1999. The
increases were primarily attributable to increased staffing and associated
support for software engineers required to expand and enhance our product and
services offerings. We believe that research and development expenses will
increase in dollar amount but decrease as a percentage of total revenue in the
future. Research and development expenditures are charged to operations as
incurred.
Sales and marketing expenses. Sales and marketing expenses consist primarily of
salaries, commissions and bonuses of sales and marketing personnel, and
promotional expenses. Sales and marketing expenses were $3.6 million, or 142% of
revenue, for the three months ended December 30, 2000, compared to $3.1 million,
or 68% of revenue for the three months ended December 31, 1999. For the nine
months ended December 30, 2000, sales and marketing expenses were $11.2 million,
or 50% of revenue, as compared to $8.6 million, or 76% of revenue for the nine
months ended December 31, 1999. The increases were primarily due to increased
headcount, commission expense, and marketing expenditures in our sales and
marketing departments. While sales and marketing expenses increased as a
percentage of total revenue in the three months ended December 30, 2000 due to a
decrease in our total revenue, we believe that sales and marketing expenses will
increase in dollar amount but decrease as a percentage of total revenue in the
future.
General and administrative expenses. General and administrative expenses consist
primarily of salaries and other personnel-related costs for executive,
financial, human resource, business development, and other related
administrative functions, as well as occupancy, legal, and accounting costs.
General and administrative expenses were $2.0 million, or 79% of revenue, for
the three months ended December 30, 2000, as compared to $0.6 million, or 12% of
revenue for the three months ended December 31, 1999. For the nine months ended
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December 30, 2000, general and administrative expenses were $4.0 million, or
18% of revenue, as compared to $1.7 million, or 15% of revenue for the nine
months ended December 31, 1999. The increases were primarily the result of
increased staffing and associated expenses necessary to manage and support our
growth. We believe that general and administrative expenses may increase in
dollar amounts as we incur additional expenses associated with operating as a
public company. While general and administrative expenses increased as a
percentage of total revenue in the three months ended December 30, 2000 due to
a decrease in our total revenue, we believe that general and administrative
expenses will decrease as a percentage of total revenue in the future.
Merger costs. During September 1999, we completed the acquisition of Marketwave
Corporation through the issuance of Accrue common stock. The acquisition was
accounted for using pooling of interest method. We incurred merger-related costs
of $3.6 million, or 31% of revenue for the nine months ended December 31, 1999.
These nonrecurring expenses related to transaction costs, employee termination
and transaction costs, legal and accounting costs, write-off of equipment and
other assets, and redundant facility and other costs.
Amortization of intangibles. Amortization of intangibles represents the
amortization of goodwill and intangibles associated with the acquisitions of
NeoVista Software, Inc., Infocharger division of Tantau Software International,
Inc., and Pilot Software, Inc., which were accounted for using purchase method.
It is being amortized over the estimated useful life of three years.
Amortization of intangibles charged to operations for the three and nine months
ended December 30, 2000 were $17.7 million and $44.8 million, or 706% and 201%
of revenue, respectively.
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Goodwill impairment charge. During the third quarter ended December 30, 2000,
we performed an impairment assessment of the identifiable intangibles and
enterprise level goodwill recorded upon the acquisition for stock of NeoVista
Software, Inc., Infocharger division of Tantau Software International, Inc. and
Pilot Software, Inc., which we completed on January 14, July 18 and August 24,
2000, respectively. Our assessment was performed primarily due to the decline in
our revenues in the third quarter ended December 30, 2000, the anticipated
decline in our projected operating results due to the overall decline in the
e-commerce industry and the significant decline in our stock price since the
date the shares issued in each acquisition were valued. Goodwill significantly
exceeded our market capitalization prior to the impairment charge. As a result
of our review, we recorded a $110.0 million impairment charge to reduce our
enterprise level goodwill. The charge was determined based upon our estimated
discounted cash flows using a discount rate of 20%. The assumptions supporting
our cash flows including the discount rate were determined using our best
estimates. The remaining goodwill and identifiable intangibles balance of
approximately $45.8 million will be amortized over the remaining useful life of
approximately two years which we consider appropriate.
In-process research and development. In-process research and development
represents the associated costs of research and development projects that had
not yet reached technological feasibility and had no alternative future uses at
the date of acquisition. The value of the purchased in-process research and
development was determined by estimating the projected net cash flows related to
the products, including costs to complete the development of the technology and
the future revenues to be earned upon commercialization of the products. These
cash flows were then discounted back to their net present value. The projected
net cash flows from the projects were based on management's estimates of
revenues and operating profits related to the projects. We incurred a one-time
charge of $4.5 million, or 20% of revenue for the nine months ended December 30,
2000, for in-process research and development associated with our acquisitions
of the Infocharger division of Tantau Software International, Inc. and Pilot
Software, Inc.
Regarding our purchases, actual results to date have been consistent, in all
material respects, with our assumptions at the time of the acquisition as they
relate to the value of purchased in-process research and development. The
assumptions primarily consist of an expected completion date for the in-process
projects, estimated costs to complete the projects and revenue and expense
projections once the products have entered the market. There have been no
product shipments to date from acquired technologies related to the in-process
research and development, therefore, it is difficult to determine the accuracy
of overall revenue projections early in the technology or product lifecycle.
Failure to achieve the expected levels of revenue and net income from these
products may negatively impact the return on investment expected at the time
that the acquisition was completed.
Stock-based compensation. Total stock-based compensation expense of
approximately $0.4 million and $1.8 million, or 17% and 8% of revenue were
amortized for the three and nine months ended December 30, 2000, respectively.
Total stock-based compensation of approximately $1.0 million and $3.4 million,
or 22% and 30% of revenue were amortized for the three and nine months ended
December 31, 1999, respectively. The remaining balance of $2.5 million will
continue to be amortized over the vesting of the related options.
Other income (expense), net. Other income (expense), net consists of interest
income, interest expense, other income and other expense. Other income
(expense), net was $0.2 million and $1.0 million for the three and nine months
ended December 30, 2000 and $0.5 million and $0.7 million for the three and nine
months ended December 31, 1999. The increase for the nine months ended December
30, 2000 over the comparable period in 1999, is primarily due to interest income
on proceeds invested from the funds raised in our initial public offering.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations principally through private
sales of preferred stock with net proceeds of $15.5 million, our initial public
offering with net proceeds of $40.8 million, and cash generated from operations.
We used cash primarily to fund our net losses from operations and to pay for
acquisition related expenses.
Operating activities utilized cash of $5.7 million and $4.9 million for the nine
months ended December 30, 2000 and December 31, 1999, respectively. Cash used
for operating activities during the nine months ended December 30, 2000 resulted
primarily from our net loss of $165.9 million, an increase in accounts
receivable of $0.8 million, a decrease in accrued liabilities related to mergers
and acquisitions of $2.8 million, a decrease in accounts payable of $0.5
million, offset by depreciation and amortization expenses of $45.4 million,
stock-based compensation expense of $1.8 million, write-off of purchased
in-process research and development expense of $4.5 million, impairment in
goodwill of $110.0 million and an increase in accrued liabilities and deferred
revenue of $2.6 million. Three accounts receivable balances related to charges
for additional CPU's totaling $1.8 million are past due and the customers are
disputing the amounts. We believe that under the terms of the customers'
contracts the amounts are due and are pursuing all remedies available to them to
recover these receivables.
Investing activities utilized cash of $6.8 million and $1.3 million for the nine
months ended December 30, 2000 and December 31, 1999, respectively. Cash used by
investing activities during the nine months ended December 30, 2000 was
primarily attributable to the cash of $5.0 million paid for our acquisition of
the Infocharger Division of Tantau Software International, Inc. and $1.8 million
paid for purchases of property and equipment.
Financing activities provided cash of $1.8 million and $41.2 million during the
nine months ended December 30, 2000 and December 31, 1999, respectively. The
fiscal 2001 activity consists primarily of proceeds from stock options
exercised, proceeds from employee stock purchase plan programs, proceeds from
short-term debt, net against repayment of line of credit, repurchase of common
stock and treasury stock issuance and repayment of an equipment loan. The
overall net decrease of $11.0 million in cash during the nine months ended
December 30, 2000 also includes a decrease in cash of $0.3 million as the effect
of foreign exchange rate changes on cash.
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We have moved a $2.0 million working capital line of credit from Comerica Bank
to Silicon Valley Bank. The Comerica Bank line of credit was drawn down by Pilot
Software, Inc. prior to our acquisition. Prior to drawing $2.0 million under the
Silicon Valley Bank line of credit, we repaid the Comerica Bank $1.45 million
line of credit. The Silicon Valley Bank line of credit will expire in June 2001.
The interest expense is payable monthly.
We expect to experience a short term decrease in cash resources as a result of
our reduction in projected revenue and subsequent collection. We anticipate that
our operating expenses, as well as planned capital expenditures, will continue
to constitute a material use of our cash resources. We believe that our cash and
cash equivalents and funds generated from operations will provide adequate
liquidity to meet our normal operating requirements for at least the next nine
months. In the event additional financing is required, we may not be able to
raise it on acceptable terms.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting Standard No.
133, ("SFAS No. 133"), "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133 establishes accounting and reporting standards for
derivative instruments, including derivative instruments embedded in other
contracts, and hedging activities. SFAS No. 133, as amended, is effective for
the Company's fiscal year ending March 31, 2002. Accrue does not expect SFAS No.
133 to have a significant effect on its financial condition or results of
operations.
The Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin
(SAB) No. 101, "Revenue Recognition in Financial Statements." SAB No. 101, as
amended, provides guidance on the recognition, presentation and disclosure of
revenue in financial statements. We have reviewed the bulletin and believe that
our current revenue recognition policy is consistent with the guidance of SAB
No. 101.
In March 2000, the Financial Accounting Standards Board issued Interpretation
No. 44, "Accounting for Certain Transactions Involving Stock Compensation -- an
interpretation of APB Opinion No. 25" ("FIN 44"). This interpretation clarifies
the definition of employee for purposes of applying Accounting Practice Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), the
criteria for determining whether a plan qualifies as a noncompensatory plan, the
accounting consequence of various modifications to the terms of a previously
fixed stock option or award, and the accounting for an exchange of stock
compensation awards in a business combination. This Interpretation is effective
July 1, 2000, but certain conclusions in this Interpretation cover specific
events that occur after either December 15, 1998, or January 12, 2000. The
adoption of FIN 44 did not have a material impact on Accrue's financial position
or results of operations.
YEAR 2000 READINESS
"Year 2000 Issues" refer generally to the problems that some software may have
in determining the correct century for the year. For example, software with
date-sensitive functions that is not Year 2000 compliant may not be able to
distinguish whether "00" means 1900 or 2000, which may result in failures or the
creation of erroneous results.
We have defined Year 2000 compliant as the ability to:
o Correctly handle date information needed for the December 31, 1999 to
January 1, 2000 date change;
o Function according to the product documentation provided for this date
change, without changes in operation resulting from the advent of a
new century, assuming correct configuration;
o Respond to two-digit date input in a way that resolves the ambiguity
as to century in a disclosed, defined and predetermined manner; Store
and provide output of date information in ways that are unambiguous as
to century if the date elements in interfaces and data storage specify
the century; and
o Recognize the Year 2000 as a leap year.
We designed our current products to be Year 2000 compliant when configured and
used in accordance with the related documentation, and provided that the
underlying operating system of the host machine and any other software used with
or in the host machine or our products are Year 2000 compliant. We have tested
our products for Year 2000 compliance.
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As of December 30, 2000, we have not experienced any significant issues as a
result of Year 2000 problems and do not anticipate incurring material
incremental costs in future periods due to such issues.
RISK FACTORS
The following is a discussion of certain factors which currently impact or may
impact our business, operating results and/or financial condition. Anyone making
an investment decision with respect to our capital stock or other securities is
cautioned to carefully consider these factors, along with the factors discussed
in our Registration Statement on Form S-1 (File No. 333-79491) and its periodic
reports filed pursuant to the Exchange Act.
WE HAVE A LIMITED OPERATING HISTORY, MAKING IT DIFFICULT TO EVALUATE OUR
BUSINESS
Accrue was formed in February 1996, and we introduced Accrue Insight 1.0, our
first software product, in January 1997. For the fiscal years ended March 31,
1998, 1999 and 2000, we generated $2.0 million, $4.7 million and $18.9 million
in revenue, respectively. For the nine months ended December 2000, we generated
$22.3 million in revenue. Thus, we have a limited operating history, making it
difficult to evaluate our business and prospects. Due to our limited operating
history, it is difficult or impossible for us to predict future results of
operations. For example, we cannot forecast operating expenses based on our
historical results because they are limited, and we are required to forecast
expenses in part on future revenue projections. Most of our expenses are fixed
in the short term and we may not be able to quickly reduce spending if our
revenue is lower than we had projected, therefore net losses in a given quarter
would be greater than expected. In addition, our ability to forecast accurately
our quarterly revenue is limited due to a number of factors described in detail
below, making it difficult to predict the quarter in which sales will occur.
Moreover, due to our limited operating history, any evaluation of our business
and prospects must be made in light of the risks and uncertainties often
encountered by early-stage companies in Internet-related products and services
markets, which is new and rapidly evolving. Many of these risks are discussed
under the sub-headings below. We may not be able to successfully address any or
all of these risks and our business strategy may not be successful.
WE HAVE INCURRED SUBSTANTIAL LOSSES
We have not achieved profitability. We incurred net losses of $4.2 million for
the fiscal year ended March 31, 1998, $7.6 million for the fiscal year ended
March 31, 1999, $21.1 million for the fiscal year ended March 31, 2000, and
$165.8 million for the nine months ended December 30, 2000. As of December 30,
2000, we had an accumulated deficit of $200.7 million. If we do achieve
profitability, we cannot be certain that we can sustain or increase
profitability on a quarterly or annual basis in the future, or at all.
WE EXPECT OPERATING EXPENSES TO INCREASE IN THE LONGER TERM, WHICH MAY IMPEDE
OUR ABILITY TO ACHIEVE PROFITABILITY
As we grow our business we expect operating expenses to increase significantly
in the longer term, and as a result, we will need to generate increased
quarterly revenue to achieve and maintain profitability. In particular, we
expect to incur additional costs and expenses related to:
o the expansion of our sales force and distribution channels;
o the expansion of our product and services offerings;
o development of relationships with strategic business partners;
o the expansion of management and infrastructure; and
o brand development, marketing and other promotional activities.
IF WE CANNOT FUND OPERATIONS FROM CASH GENERATED BY OUR BUSINESS, WE MAY BE
REQUIRED TO SELL ADDITIONAL STOCK, WHICH COULD DEPRESS OUR COMMON STOCK PRICE
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To date, we have been unable to fund operations from cash generated by our
business and have funded operations primarily by selling securities. If our
revenue fails to offset operating expenses, we may be required to fund future
operations through the sale of additional common stock, which could cause our
common stock price to decline.
FLUCTUATIONS IN OUR OPERATING RESULTS MAKE IT DIFFICULT TO PREDICT OUR FUTURE
PERFORMANCE AND MAY RESULT IN VOLATILITY IN THE MARKET PRICE OF OUR COMMON STOCK
Our annual and quarterly operating results have fluctuated in the past and may
fluctuate significantly in the future due to a variety of factors, particularly
as a result of the risks we describe in this section. Because our operating
results are volatile and difficult to predict, you should not rely on the
results of one quarter as an indication of future performance. It is likely that
in some future quarter our operating results will fall below the expectations of
securities analysts and investors. In this event, the trading price of our
common stock may fall significantly. For example, our operating results for the
quarter ended December 30, 2000 were below analysts' expectations.
THE LOSS OF KEY MANAGEMENT PERSONNEL COULD HARM OUR BUSINESS AND DECREASE THE
VALUE OF YOUR INVESTMENT
Our success depends largely upon the continued services of our key management
and technical personnel, the loss of which could seriously harm our business. In
particular, we rely on Greg Walker, our Chief Financial Officer and Interim
Chief Executive Officer, Bob Page, Chief Technical Officer, and Tom Lefort, Vice
President of Product Development. Messrs. Walker, Page and Lefort do not have
employment or non-competition agreements and could therefore terminate their
employment with us at any time without penalty. We do not maintain key person
life insurance policies on any of our employees.
WE FACE INTENSE COMPETITION WHICH COULD MAKE IT DIFFICULT FOR US TO ACQUIRE AND
RETAIN CUSTOMERS NOW AND IN THE FUTURE
The market for e-business analysis solutions is intensely competitive, evolving
and subject to rapid technological change. We expect the intensity of
competition to increase in the future. Competitors vary in size and in the scope
and breadth of the products and services they offer. Our principal competitors
today include:
o vendors of software that target e-business customer data collection
and analysis markets such as Macromedia, net.Genesis Corporation,
WebTrends Corporation, Broadbase Software, Inc. and E.piphany, Inc.;
o developers of software that address only certain technology components
of our products;
o asp vendors such as Coremetrics, Inc. and Primary Knowledge, Inc.;
o providers of business intelligence tools, such as Hyperion Solutions,
Corp., Microstrategy Inc., Business Objects S. A. and Informatica
Corp.;
o traditional CRM vendors, such as Siebel Systems, Inc., Nortel
Networks, Inc. and PeopleSoft USA, Inc.; and
o in-house development efforts by potential customers or partners.
We expect that if we are successful in our strategy to expand the scope of our
products and services, we may encounter many additional, market-specific
competitors. In addition, because there are relatively low barriers to entry in
the software market, we expect additional competition from traditional business
intelligence and enterprise software vendors as the Internet software market
continues to develop and expand. Some of these companies, as well as some other
competitors, have longer operating histories, significantly greater financial,
technical, marketing and other resources, significantly greater name recognition
and a larger installed base of customers than we have. In addition, many of our
competitors have well-established relationships with current and potential
customers of ours, have extensive knowledge of our industry and are capable of
offering a single-vendor solution. As a result, our competitors may be able to
respond more quickly to new or emerging technologies and changes in customer
requirements, devote greater resources to the development, promotion and sale of
their products, or adopt more aggressive pricing policies to gain market share.
In addition, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase the
ability of their products to address customer needs. Accordingly, it is possible
that new competitors or alliances among competitors may emerge and rapidly
acquire significant market share. We also expect that competition will increase
as a result of software industry consolidations.
Increased competition is likely to result in price reductions, reduced gross
margins and loss of market share, any of which could seriously harm our
business, financial condition and results of operations. We may not be able to
compete successfully against current and future competitors, in which case our
business could suffer.
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IF WE ARE UNABLE TO MEET THE RAPID CHANGES IN E-COMMERCE TECHNOLOGY, OUR PRODUCT
REVENUE COULD DECLINE
The market for our products is characterized by rapid technological change,
frequent new product introductions, Internet-related technology enhancements,
uncertain product life cycles, changes in client demands and evolving industry
standards. We cannot be certain that we will successfully develop and market new
products, new product enhancements or new products compliant with present or
emerging Internet technology standards. In developing our products, we have
made, and will continue to make, assumptions with respect to which standards
will be adopted by the industry, our customers and competitors, and the level of
features and complexity that our customers may require. If the standards adopted
are different from those, which we have chosen to support, market acceptance of
our products may be significantly reduced or delayed and our business will be
seriously harmed. Similarly, if our products do not meet customer requirements
for features and functionality, our business will be seriously harmed. In
addition, we may be required to make significant expenditures to adapt our
products to changing or emerging technologies. New products based on new
technologies or new industry standards can render existing products obsolete and
unmarketable. To succeed, we will need to enhance our current products and
develop new products on a timely basis to keep pace with developments related to
Internet technology and to satisfy the increasingly sophisticated requirements
of our clients. E-business analysis technology is complex and new products and
product enhancements can require long development and testing periods. Any
delays in developing and releasing enhanced or new products could harm our
business, operating results and financial condition.
THE FAILURE TO RETAIN AND ATTRACT KEY TECHNICAL PERSONNEL COULD HARM OUR
BUSINESS AND DECREASE THE VALUE OF YOUR INVESTMENT
Because of the complexity of our products and technologies, we are substantially
dependent upon the continued service of our existing product development
personnel. In addition, we intend to hire a number of engineers with high levels
of experience in designing and developing software and Internet-related products
in time-pressured environments. The competition in Silicon Valley for qualified
engineers in the computer software and Internet markets is intense. New
personnel will require training and education and take time to reach full
productivity. Our future success depends on our ability to attract, train and
retain these key personnel.
FAILURE TO EXPAND OUR SALES OPERATIONS AND CHANNELS OF DISTRIBUTION IN THE
FUTURE WOULD LIMIT OUR GROWTH
In order to maintain and increase our market share and revenue, we will need to
expand our direct and indirect sales operations and channels of distribution. We
have recently restructured our direct sales force and plan to hire additional
sales personnel. As of January 31, 2001, our direct sales and support
organization consisted of 24 employees. Competition for qualified sales
personnel is intense, and we might not be able to hire the kind and number of
sales personnel we are targeting. New hires will require extensive training and
typically take several months to achieve productivity. In addition, we need to
expand our relationships with domestic and international channel partners,
distributors, value-added resellers, systems integrators, online and other
resellers, Internet service providers, original equipment manufacturers, and
other partners to build our indirect sales channel.
WE MAY BE UNABLE TO ADEQUATELY DEVELOP A PROFITABLE PROFESSIONAL SERVICES
ORGANIZATION, WHICH COULD NEGATIVELY AFFECT BOTH OUR OPERATING RESULTS AND OUR
ABILITY TO ASSIST OUR CUSTOMERS WITH THE IMPLEMENTATION OF OUR PRODUCTS
Customers that license our software typically engage our professional services
organization to assist with support, training, consulting and implementation of
their e-business analysis solutions. We believe that growth in our product sales
depends on our ability to provide our customers with these services and to
educate third-party resellers on how to use and distribute our products. We
expect our services revenue to increase in absolute dollars as we continue to
provide consulting and training services that complement our products and as our
installed base of customers grows. We generally bill our clients for our
services on a fixed-price basis; however, from time to time we bill our clients
on a time-and-materials basis. Failure to estimate accurately the resources and
time required for an engagement, to manage our customers' expectations
effectively regarding the scope of services to be delivered for an estimated
price or to complete fixed-price engagements within budget, on time and to the
customer's satisfaction could expose us to risks associated with cost overruns,
and in some cases, penalties, and may harm our business. Although we plan to
expand our services in order to address our customers' needs, we cannot be
certain that we will be able to expand our professional services organization to
meet customer requirements.
OUR GROWTH COULD BE LIMITED IF WE FAIL TO EXECUTE OUR PLAN TO EXPAND
INTERNATIONALLY
Licenses and services sold to clients located outside the United States for the
three and nine months ended December 30, 2000 were 63% and 19% of our total
revenue, respectively, and 14% and 12% of our revenue, respectively, for the
three and nine months ended December 31, 1999. We expect international revenue
to account for an increasing percentage of total revenue in the future. We
believe that we must expand our international sales activities in order to be
successful.
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Continued expansion into international markets will require management attention
and resources. We also intend to enter into a number of international alliances
as part of our international strategy and rely extensively on these business
partners to conduct operations, coordinate sales and marketing efforts, and
provide software localization services. As of December 30, 2000, we had
non-exclusive alliances with Sumisho Electronics Company, Ltd., a subsidiary of
Sumitomo Corporation, and Itochu Techno-Science Corporation for distribution of
our products in Japan, and a number of value added resellers and distributors
for distribution of our products in Europe and Latin America. These alliances
are not subject to binding agreements, have no specified performance
requirements by us or our alliance partners, and may be terminated by either
party at any time. Our success in international markets will depend on the
success of our business partners and their willingness to dedicate sufficient
resources to our relationships. We cannot be certain that we will be successful
in expanding internationally. International operations are subject to other
inherent risks, including:
o protectionist laws and business practices that favor local
competition;
o difficulties and costs of staffing and managing foreign operations;
o dependence on local vendors;
o multiple, conflicting and changing governmental laws and regulations;
o longer sales and collection cycles;
o foreign currency exchange rate fluctuations;
o political and economic instability;
o reduced protection for intellectual property rights in some countries;
o seasonal reductions in business activity; and
o expenses associated with localizing products for foreign countries.
If we fail to address these risks adequately our business may be seriously
harmed.
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OUR VARIED SALES CYCLES MAKE IT DIFFICULT TO BUDGET AND FORECAST OUR OPERATING
RESULTS
We have varied sales cycles because we generally need to educate potential
customers regarding the use and benefits of our product applications. The
stability of our sales cycle continues to evolve as our products and markets
mature. We have experienced an expansion in our sales cycle due to a greater mix
of products sold to enterprise companies as opposed to e-commerce companies. Our
sales cycles make it difficult to predict the quarter in which sales may fall
and to budget and forecast operating results. In addition, a significant portion
of our sales fall within the last month of a quarter, making it difficult to
predict revenue until late in the quarter and to adjust expenses accordingly.
OUR OPERATING RESULTS MAY BE ADVERSELY AFFECTED BY SMALL DELAYS IN CUSTOMER
ORDERS OR PRODUCT INSTALLATIONS
Small delays in customer orders can cause significant variability in our license
revenue and operating results for any particular period. We derive a substantial
portion of our revenue from the sale of software products and related services.
Our revenue recognition policy requires us to deliver the software prior to
recognizing any revenue for the product and to substantially complete the
implementation of our product before we can recognize service revenue. On
certain products we may defer license and service revenue until we have
completed the installation of the product. Any end of quarter delays in orders
for delivery or product installation schedules could harm operating results for
that quarter.
IF WE FAIL TO GENERATE REPEAT OR EXPANDED BUSINESS FROM OUR CURRENT AND FUTURE
CUSTOMERS, OUR BUSINESS WILL BE SERIOUSLY HARMED
Our success is dependent on the continued growth of our customer base and the
retention of our customers. For the fiscal year ended March 31, 1999 and 2000,
approximately 15 - 20% and 25 - 30% of our revenue, respectively, was derived
from sales of products and services to existing customers. For the three and
nine months ended December 30, 2000, approximately 92% and 46%, respectively, of
our revenue was derived from sales of products and services to existing
customers. We expect to continue to derive a significant amount of revenue from
our existing customers. If we fail to generate repeat and expanded business from
our current and future customers, particularly from maintenance contract
renewals, our operating results would be seriously harmed. Our ability to
attract new customers will depend on a variety of factors, including the
accuracy, scalability, reliability and cost-effectiveness of our products and
services and our ability to effectively market our products and services. In the
past, we have lost potential customers to competitors for various reasons,
including lower prices and other incentives not matched by us. Many of our
current customers initially purchase a license for our products and services for
installation on a limited number of servers. If an installation is successful,
the customer may purchase additional licenses to expand the use of our products
in its organization, license additional products and services from us, or renew
maintenance fees.
IF WE FAIL TO SUCCESSFULLY PROMOTE OUR ACCRUE BRAND NAME OR IF WE INCUR
SIGNIFICANT EXPENSES PROMOTING AND MAINTAINING OUR ACCRUE BRAND NAME, OUR
BUSINESS COULD BE HARMED
Due in part to the emerging nature of the market for e-business analysis
solutions and the substantial resources available to many of our competitors,
there may be a time-limited opportunity for us to achieve and maintain a
significant market share. Developing and maintaining awareness of the Accrue
brand name is critical to achieving widespread acceptance of our e-business
analysis solutions. Furthermore, the importance of brand recognition will
increase as competition in the market for our products increases. Successfully
promoting and positioning the Accrue brand will depend largely on the
effectiveness of our marketing efforts and our ability to develop reliable and
useful products at competitive prices. Therefore, we may need to increase our
financial commitment to creating and maintaining brand awareness among potential
customers.
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ACCRUE INSIGHT, OUR MOST IMPORTANT PRODUCT, IS NOT PROTECTED BY A PATENT. IF
ANOTHER PARTY WERE TO USE THIS TECHNOLOGY, OUR BUSINESS WOULD SUFFER
We regard substantial elements of our e-business analysis solutions as
proprietary and attempt to protect them by relying on patent, trademark, service
mark, trade dress, copyright, and trade secret laws and restrictions, as well as
confidentiality procedures and contractual provisions. However, Accrue Insight,
our most important product, is not protected by a patent. Any steps we take to
protect our intellectual property may be inadequate, time consuming, and
expensive. In addition, despite our efforts, we may be unable to prevent third
parties from infringing upon or misappropriating our intellectual property,
which could have a material adverse effect on our business. Furthermore, legal
standards relating to the validity, enforceability, and scope of protection of
intellectual property rights in Internet-related industries are uncertain and
still evolving, and the future viability or value of any of our intellectual
property rights is uncertain. Effective trademark, copyright, and trade secret
protection may not be available in every country in which our products are
distributed or made available through the Internet. Furthermore, our competitors
may independently develop similar technology that substantially limits the value
of our intellectual property or design around patents issued to us.
OTHERS MAY BRING INFRINGEMENT CLAIMS AGAINST US WHICH COULD HARM OUR BUSINESS,
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
In addition to the technology we have developed internally, we also use code
libraries developed and maintained by third parties and have acquired or
licensed technologies from other companies. Our internally developed technology,
the code libraries, or the technology we acquired or licensed may infringe a
third party's intellectual property rights who may bring claims against us
alleging infringement of their intellectual property rights. In recent years,
there has been significant litigation in the United States involving patents and
other intellectual property rights. We are not currently involved in any
intellectual property litigation. However, as the number of entrants into our
market increases, the possibility of an intellectual property claim against us
grows and we may be a party to litigation in the future to protect our
intellectual property or as a result of an alleged infringement of others'
intellectual property. These claims and any resulting litigation could subject
us to significant liability for damages and invalidation of our proprietary
rights, would likely be time-consuming and expensive to defend and would divert
management time and attention. Any potential intellectual property litigation
could also force us to do one or more of the following:
o cease selling, incorporating, or using products or services that
incorporate the challenged intellectual property;
o obtain from the holder of the infringed intellectual property right a
license to sell or use the relevant technology, which license may not
be available on reasonable terms, or at all; and/or
o redesign those products or services that incorporate infringing
technology.
Any of these results could seriously harm our business.
PRODUCT DEFECTS COULD LEAD TO LOSS OF CUSTOMERS WHICH COULD HARM OUR BUSINESS,
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
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Despite internal testing and testing by current and potential customers, our
current and future products may contain serious defects, including Year 2000
errors, the occurrence of which could result in adverse publicity, loss of or
delay in market acceptance, or claims by customers against us, any of which
could harm our business, results of operations, and financial condition. In
addition, our products and product enhancements are very complex and may from
time to time contain errors or result in failures that we did not detect or
anticipate when introducing our products or enhancements to the market. The
computer hardware environment is characterized by a wide variety of non-standard
configurations that make pre-release testing for programming or compatibility
errors very difficult and time consuming. Despite our testing, errors may still
be discovered in some new products or enhancements after the products or
enhancements are delivered to customers.
WE ARE SUBJECT TO POTENTIAL PRODUCT LIABILITY CLAIMS THAT COULD REQUIRE
CONSIDERABLE EFFORT AND EXPENSE TO DEFEND AND WHICH COULD HARM OUR BUSINESS
Our products are used to monitor the traffic data of our customers' Web sites,
and to segment, analyze and report this data. These and other functions that our
products provide are often critical to our customers, especially in light of the
considerable resources many organizations spend on the development and
maintenance of their Web sites. Our end-user licenses contain provisions that
limit our exposure to product liability claims, but these provisions may not be
enforceable in all jurisdictions. Additionally, we maintain limited product
liability insurance. To the extent our contractual limitations are unenforceable
or these claims are not covered by insurance, a successful product liability
claim could harm our business.
WE MAY ACQUIRE TECHNOLOGIES OR COMPANIES IN THE FUTURE, AND THESE ACQUISITIONS
COULD RESULT IN THE DILUTION OF OUR STOCKHOLDERS AND DISRUPTION OF OUR BUSINESS
We may acquire technologies or companies in the future. Entering into an
acquisition entails many risks of any which could materially harm our business,
including:
o diversion of management's attention from other business concerns;
o failure to assimilate the acquired company with our pre-existing
business;
o potential loss of key employees from either our pre-existing business
or the acquired business;
o dilution of our existing stockholders as a result of issuing equity
securities; and
o assumption of liabilities of the acquired company.
EVOLVING REGULATION OF THE INTERNET MAY HARM OUR BUSINESS
As e-commerce continues to evolve, increasing regulation by federal, state, or
foreign agencies becomes more likely. This regulation is likely in the areas of
user privacy, pricing, content, quality of products and services, taxation,
advertising, intellectual property rights, and information security. In
particular, laws and regulations applying to the solicitation, collection, or
processing of personal or consumer information could negatively affect our
activities. Typically, our products capture traffic data when consumers,
business customers or employees visit a Web site. The perception of security and
privacy concerns, whether or not valid, may indirectly inhibit
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market acceptance of our products. In addition, legislative or regulatory
requirements may heighten these concerns if businesses must notify Web site
users that the data captured after visiting Web sites may be used by marketing
entities to unilaterally direct product promotion and advertising to that user.
We are not aware of any similar legislation or regulatory requirements currently
in effect in the United States. Other countries and political entities, such as
the European Economic Community, have adopted legislation or regulatory
requirements. The United States may adopt similar legislation or regulatory
requirements. If consumer privacy concerns are not adequately addressed, our
business could be harmed. Moreover, the applicability to the Internet of
existing laws governing issues such as intellectual property ownership and
infringement, copyright, trademark, trade secret, obscenity and libel is
uncertain and developing. Furthermore, any regulation imposing fees or assessing
taxes for Internet use could result in a decline in the use of the Internet and
the viability of e-commerce. Any new legislation or regulation, or the
application or interpretation of existing laws or regulations, may decrease the
growth in the use of the Internet, may impose additional burdens on e-commerce
or may require us to alter how we conduct our business. This could decrease the
demand for our products and services, increase our cost of doing business,
increase the costs of products sold through the Internet or otherwise have a
negative effect on our business, results of operations and financial condition.
OUR SUCCESS DEPENDS ON CONTINUED USE AND EXPANSION OF THE INTERNET
Continued expansion in the sales of our e-business analysis solutions will
depend upon the continued growth of the Internet as a widely used medium for
commerce and communication. Rapid growth in the use of the Internet is a recent
phenomenon. Acceptance and use may not continue to develop at historical rates
and a sufficiently broad base of customers may not adopt or continue to use the
Internet and online services as a medium of commerce and communication. Demand
and market acceptance for recently introduced products and services relating to
the Internet are subject to a high level of uncertainty and few proven products
and services exist. If the Internet does not continue to grow as a widespread
communications medium and commercial marketplace, the demand for our e-business
analysis solutions could be significantly reduced. The Internet may not prove to
be a viable commercial marketplace because of inadequate development of the
necessary infrastructure, such as a reliable network backbone, or timely
development of complementary products, such as high speed modems. The Internet
infrastructure may not be able to support the demands placed on it by continued
growth. Additionally, the Internet could lose its viability due to delays in the
development or adoption of new standards and protocols to handle increased
levels of Internet activity, security, reliability, cost, ease of use,
accessibility, and quality of service.
BECAUSE ACCRUE'S OFFICERS AND DIRECTORS OWN APPROXIMATELY 14% OF THE OUTSTANDING
COMMON STOCK, INVESTORS WILL HAVE MINIMAL INFLUENCE ON STOCKHOLDER DECISIONS
As of December 30, 2000, our officers and directors beneficially owned
approximately 14% of our outstanding common stock. As a result, they will be
able to exercise significant influence over all matters requiring stockholder
approval, and you and other investors will have minimal influence over the
election of directors or other stockholder actions. As a result, these
stockholders could approve or cause Accrue to take actions which you disapprove
or that are contrary to your interests and those of other investors. Our
certificate of incorporation and bylaws do not provide for cumulative voting;
therefore, our controlling stockholders will have the ability to elect all of
our directors. The controlling stockholders will also have the ability to
approve or disapprove significant corporate transactions without further vote by
the investors who purchase common stock pursuant to this offering. This ability
to exercise influence over all matters requiring stockholder approval could
prevent or significantly delay another company or person from acquiring or
merging with us.
THE EFFECTS OF ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND IN DELAWARE
LAW COULD PREVENT A CHANGE IN CONTROL OF ACCRUE WHICH MAY REDUCE THE MARKET
PRICE OF OUR COMMON STOCK
Provisions of our certificate of incorporation and bylaws may have the effect of
delaying or preventing a merger or sale of Accrue, or making a merger or
acquisition less desirable to a potential acquirer, even where stockholders may
consider the acquisition or merger favorable. These provisions could also have
the effect of making it more difficult for a third party to effect a change of
control of the board of directors. The issuance of preferred stock may have the
effect of delaying, deferring, or preventing a change in control without further
action by the stockholders. Any issuance of preferred stock may harm the market
price of the common stock. The issuance of preferred stock may also result in
the loss of the voting control of holders of common stock to the holders of the
preferred stock.
THE MARKET PRICE FOR OUR COMMON STOCK, LIKE OTHER TECHNOLOGY STOCKS, MAY BE
VOLATILE
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The stock markets have, in general, and with respect to Internet companies in
particular, recently experienced extreme stock price and volume volatility,
resulting in significant decreases in companies' stock prices. The decreases in
stock prices for many companies in the technology and emerging growth sector
have often been unrelated to the operating performance of these companies in
many cases. Fluctuations such as these have affected the market price of our
common stock. Our common stock is trading at level significantly below its
historic levels, and there can be no assurance that our stock price will
increase significantly in the foreseeable future. In addition, if we fail to
address any of the risks described in this section, the market price for our
common stock, and consequently, the value of your investment, could decline
further.
SIGNIFICANT FLUCTUATIONS IN THE MARKET PRICE OF OUR COMMON STOCK COULD RESULT IN
SECURITIES CLASS ACTION CLAIMS AGAINST US, WHICH COULD SERIOUSLY HARM OUR
BUSINESS
Securities class action claims have been brought against companies in the past
where volatility in the market price of that company's securities has taken
place. This kind of litigation could be very costly and divert our management's
attention and resources, and any adverse determination in this litigation could
also subject us to significant liabilities, any or all of which could seriously
harm our business.
IF WE CANNOT RAISE FUNDS, IF NEEDED, ON ACCEPTABLE TERMS, WE MAY NOT BE ABLE TO
DEVELOP OR ENHANCE OUR PRODUCTS AND SERVICES, TAKE ADVANTAGE OF FUTURE
OPPORTUNITIES OR RESPOND TO COMPETITIVE PRESSURES OR UNANTICIPATED CAPITAL
REQUIREMENTS WHICH COULD HARM OUR BUSINESS
We expect the net proceeds from our public offering in August 1999, cash on
hand, cash equivalents and commercial credit facilities to meet our working
capital and capital expenditure needs for at least the next nine months
following December 30, 2000. Accordingly, we may need to raise additional funds
and we cannot be certain that we would be able to obtain additional financing on
favorable terms, if at all. Further, if we issue equity securities, stockholders
may experience additional dilution particularly as a result of our lower stock
price, or the new equity securities may have rights, preferences or privileges
senior to those of existing holders of common stock. If we incur indebtedness to
help us meet our future capital requirements, this debt could contain covenants
which restrict our operations. If we cannot raise funds, if needed, on
acceptable terms, we may not be able to develop or enhance our products and
services, take advantage of future opportunities or respond to competitive
pressures or unanticipated capital requirements, which could harm our business,
operating results and financial condition.
SUBSTANTIAL SALES OF OUR COMMON STOCK COULD CAUSE OUR STOCK PRICE TO DECLINE
Sales of a substantial number of shares of common stock in the public market, or
the perception that these sales may occur, could adversely affect the market
price of the common stock by potentially introducing a large number of sellers
of our common stock into a market in which the common stock price is already
volatile, thus driving the common stock price down. In addition, the sale of
these shares could impair our ability to raise capital through the sale of
additional equity securities. As of February 2, 2001, we had 30,350,413 shares
of common stock outstanding. 4,485,000 shares of our common stock, including the
underwriter's option to purchase additional shares which was exercised in full,
were registered in connection with the initial public offering of our common
stock. Of the 3,225,261 shares of our common stock issued to the stockholders of
Marketwave Corporation in connection with our acquisition of that company,
1,088,309 shares are registered on a registration statement on Form S-3 declared
effective on December 14, 2000. 1,666,667 shares of our common stock were issued
to Tantau Software, Inc. in connection with our purchase of certain assets from
Tantau and its wholly owned subsidiary, Tantau Software International, Inc., and
registered pursuant to a registration statement on Form S-3/A declared effective
by the Securities and Exchange Commission on December 14, 2000. 974,273 shares
of our common stock were issued to Aviator Holding Corporation and its direct
and indirect subsidiaries, including its wholly owned subsidiary Pilot Software,
Inc., and registered pursuant to a registration statement on Form S-3 declared
effective by the Securities and Exchange Commission on December 14, 2000. The
foregoing shares issued to the Marketwave, Tantau and Aviator shareholders, may
be sold subject to the terms of the applicable registration statement without
restriction or further registration under the federal securities laws unless
held by our "affiliates" as that term is defined in Rule 144 while the
respective registration statements remain effective. The remaining 22,136,164
shares of common stock outstanding are "restricted securities" as that term is
defined in Rule 144; however, virtually all of these shares are eligible for
sale, in some cases only subject to the volume, manner of sale and notice
requirements of Rule 144. In addition, we have registered a total of 11,274,407
shares of our common stock under our existing stock option and employee stock
purchase plans.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
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We have limited exposure to financial market risks, including changes in
interest rates and foreign currency exchange rates.
INTEREST RATE RISK
Our exposure to interest rate risk relates primarily to our investment portfolio
and credit facilities. All investments are classified as cash equivalents and
are deposited with financial institutions carried at cost, which approximate
market value. We do not plan to use derivative financial instruments in our
investment portfolio. If market rates were to increase immediately and uniformly
by 10% from levels as of December 31, 1999 and December 30, 2000, the decline in
fair value of the portfolio would not be material. We plan to ensure the safety
and preservation of our invested principal funds by limiting default risks,
market risk and reinvestment risk. We plan to mitigate default risk by investing
in high-credit quality securities.
FOREIGN CURRENCY RISK
Although we have foreign sales offices in Europe and Asia, to date, our exposure
to foreign currency rate fluctuations has not been significant. International
sales are transacted in U.S. dollars and operating expenses of foreign offices
are funded from time to time in U.S. dollars. However, as we continue to
increase our international business we could be subject to risks typical of an
international business, including but not limited to differing economic
conditions, changes in political climate, differing tax structures, other
regulations and restrictions, and foreign exchange rate volatility. Accordingly,
our future results could be materially adversely impacted by changes in these or
other factors.
To date, we do not use derivative financial instruments for speculative trading
purposes, nor do we hedge any foreign currency exposure in a manner that
entirely offsets the effects of changes in foreign exchange rates.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In February 1999, Execplan Sistemas Executivos LTDA, a Brazilian based software
distributor, filed a complaint against Pilot Software, Inc., which we
subsequently acquired in September 2000, alleging breach of a Distribution
Agreement by Pilot and seeking damages of $15 million. Pilot filed an answer and
counterclaim denying plaintiff's claims, alleging proper termination of the
Distribution Agreement and alleging breach of the Distribution Agreement by
claimant. Pursuant to the arbitration provision of the Distribution Agreement,
the parties have each selected an aribitrator and are in the process of choosing
a third arbitrator. Together, the three arbitrators will decide the matter.
Discovery has not yet been conducted and a date for arbitration has not yet been
established. However, we believe the claim is without merit.
ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS
a. Not applicable
b. Not applicable
c. Securities sold during the quarter ended December 30, 2000 that were not
registered under the Securities Act.
None.
d. Use of proceeds from sale of Registered Securities.
On August 4, 1999, we completed an initial public offering of our Common Stock,
$0.001 par value. The managing underwriters in the offering were BancBoston
Robertson Stephens and Thomas Weisel Partners, LLC, (the "Underwriters"). The
shares of Common Stock sold in the offering were registered under the Securities
Act of 1933, as amended, on a Registration Statement on Form S-1 (the
"Registration Statement") (Reg. No. 333-79491) that was declared effective by
the SEC on July 29, 1999. The offering commenced on July 30, 1999, on which date
3,900,000 shares of Common Stock registered under the Registration Statement
were sold at a price of $10.00 per share. The Underwriters also had an
overallotment option to purchase 585,000 shares, which closed on August 26,
1999. The aggregate price of the entire offering (including the Underwriters'
overallotment) was $44,850,000. The aggregate underwriting discounts and
commissions to the Underwriters was $3,139,500 and the aggregate net proceeds to
us was approximately $40.8 million after deducting offering expenses of
$856,000.
We currently expect to use the net proceeds primarily for working capital and
general corporate purposes, including funding product development and expanding
the sales and marketing organization. We have not yet determined the actual
expected expenditures and thus cannot estimate the amounts to be used for each
of these purposes. The amounts and timing of these expenditures will vary
depending on a number of factors, including the amount of cash generated by our
operations, competitive and technological developments and the rate of growth,
if any, of our business. In addition, we have used a portion and may continue to
use a portion of the net proceeds for further development of our product lines
through acquisitions of products, technologies and businesses. On
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September 30, 1999, we acquired Marketwave Corporation. Approximately $3.3
million of cash was used to pay for the acquisition related expenses. On January
14, 2000, we acquired NeoVista Software, Inc. Approximately $5.0 million of cash
was used to pay for the acquisition related expense. On July 14, 2000, we
acquired certain assets of the Infocharger division of Tantau Software, Inc.
Approximately $0.2 million of cash was used to pay for the acquisition related
expenses. On September 20, 2000, we acquired Aviator Holding Corporation and its
direct and indirect subsidiaries, including its wholly owned subsidiary Pilot
Software, Inc. Approximately $2.4 million of cash was used to pay for the
acquisition related expense.
None of our net proceeds of the offering were paid directly or indirectly to any
director, officer, general partner of Accrue or their associates, persons owning
10% or more of any class of equity securities of Accrue, or an affiliate of
Accrue.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
In January 2001, Richard Kreysar stepped down as President and Chief Executive
Officer of the Company and Greg Walker, our Vice President and Chief Financial
Officer, was named to serve as Interim Chief Executive Officer while we complete
a search for a new CEO. Also, on December 31, 2000, Brooke Seawell resigned from
the Board of Directors and the Board elected Jonathan Nelson, former Chief
Executive Officer of Organic Online, Inc. who previously served as our Chairman
of the Board until late 1999, to replace him.
In January 2001, we commenced some reorganization changes which included a
reduction in head count of 35 employees representing approximately 20% of our
work force in order to reduce our operating expenses in the short term.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. The following exhibits are attached hereto:
None.
b. A current report on Form 8-K was filed with the Securities and Exchange
Commission by us on October 27, 2000 to announce our financial results for
the three and six months periods ended September 30, 2000, and to clarify
reported earnings and related matters.
A current report on Form 8-K was filed with the Securities and Exchange
Commission by us on November 21, 2000 to report unaudited pro-forma
combined financial data for the six months ended September 30, 2000 that
present the effect of our acquisition of specific assets of the Infocharger
division of Tantau Software, Inc.
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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.
ACCRUE SOFTWARE, INC.
By: /s/ GREGORY C. WALKER
----------------------------------
GREGORY C. WALKER
CHIEF FINANCIAL OFFICER
(PRINCIPAL ACCOUNTING AND FINANCE OFFICER)
Date: February 13, 2001
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