SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(MARK ONE)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2001

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 0-22292

ACTIONPOINT, INC.
(Exact name of registrant as specified in its charter)

 

Delaware	77-0104275
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification number)

1299 Parkmoor Avenue
San Jose, California    95126
(Address of principal executive offices including zip code)

(408) 325-3800
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title or each class None

Name of each exchange on which registered None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.01 par value Preferred Share Purchase Rights

      Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes [X]    No [   ]

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [   ]

      The aggregate market value of voting stock held by non-affiliates of the registrant as of February 28, 2002, was to the best of the registran's knowledge approximately $8.7 million (based upon the February 28, 2002 closing price for shares of the registrant's Common Stock as reported by the Nasdaq National Market). Shares of Common Stock held by each officer, director and holder of 5% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

      On February 28, 2002, approximately 4,374,874 shares of the registrant's Common Stock, $0.01 par value, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

1. Portions of the registrant's proxy statement for the 2002 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within 120 days after the end of registrant's fiscal year, are incorporated by reference into Part III.

ACTIONPOINT, INC.

FORM 10-K

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

TABLE OF CONTENTS

Part I.		Page
Item 1.	Business	4
Item 2.	Properties	14
Item 3.	Legal Proceedings	14
Item 4.	Submission of Matters to a Vote of Security Holders	14
Part II.
Item 5.	Market for the Registrant's Common Equity and Related Stockholder Matters	14
Item 6.	Selected Consolidated Financial Data	15
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
Item 7a.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 8.	Financial Statements and Supplementary Data	21
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	21
Part III.
Item 10.	Directors and Officers of the Registrant	21
Item 11.	Executive Compensation	21
Item 12.	Security Ownership of Certain Beneficial Owners and Management	21
Item 13.	Certain Relationships and Related Transactions	21
Part IV.
Item 14.	Exhibits, Financial Statements Schedules and Reports on Form 10-K	22
Signatures		37

Item 1. Business

We develop, market and service information capture software. Information capture software enables organizations to collect, organize and input paper and fax-based information into their installed computing systems, providing a critical bridge between the paper world and the digital world. Our customers have traditionally been large ("global 1000") businesses and governmental agencies that use our InputAccel software to convert transaction-related documents, such as order forms, claim forms, or loan applications, into an appropriate electronic format and to transport images of and information from these documents to storage on Web sites, compact disks, or internal databases for subsequent search, retrieval or further processing. Additionally, we market software tools under our Pixel Translations brand to various hardware and software providers.

On March 4, 2002, we entered into a merger agreement with Captiva Software Corporation, a privately held company that provides forms processing software products and services. Pursuant to the merger agreement, Captiva will become a wholly owned subsidiary and we will change our name to Captiva Software Corporation. The merger is subject to necessary approvals from the stockholders of both companies and is expected to be completed in the second quarter of 2002. In connection with the merger, we will file a registration statement with the SEC on Form S-4, which will include additional information about the merger and the merger agreement.

Today, most global 1000 companies and governmental agencies worldwide have installed computerized enterprise resource planning, document management and intranet applications, all of which have had a profound impact on how these entities manage their internal information and internal business operations. But, these same organizations continue to receive a significant amount of information from customers, suppliers, partners and others outside the enterprise in the form of paper, faxes, microfilm and even incompatible electronic files. Dealing with paper and fax in a computerized environment is a challenge in all industries; it is particularly problematic in services industries such as financial services, insurance, health care, telecommunications, transportation and government. Paper- and fax-based information from customers and partners is vital to running these businesses, but this information is incompatible with the installed enterprise computer systems making it difficult to provide the desired levels of customer service and operating efficiencies.

Information capture solutions enable organizations to collect, organize and input paper and fax-based information into their installed computing systems, providing a critical bridge between the paper world and the digital world. The result is improved customer satisfaction, increased productivity and reduced operating costs.

InputAccel has, in recent years, been our main software product. InputAccel began shipping in November 1995. With InputAccel, enterprises of various sizes and document capture volume requirements can standardize their systems on our enterprise information capture solution, yet customize the system to meet the needs of either a transaction or content processing operation at various levels of input volume. We have selling relationships with established providers such as Documentum, IBM and Tower Systems.

InputAccel utilizes an open integration architecture and set of software modules designed to automate the conversion and indexing of paper documents into formats compatible with computerized business systems. InputAccel is a client server application. The ActionPoint Enterprise Server is the system's architectural backbone. InputAccel modules plug into the Enterprise Server platform and perform specific information capture tasks such as scanning, image enhancement, or data extraction.

The Windows NT-based Enterprise Server is the foundation of our InputAccel system. It manages and controls various scanning processes-- acting as a work-queue manager, performing automatic workload balancing and collecting performance data that system managers need to control the capture process and insure efficiency and productivity. When capture tasks are complete Enterprise Server provides the connectivity between paper format and digital format by delivering data and images to selected enterprise database systems.

InputAccel modules plug into the Enterprise Server platform and perform such image enhancement or data capture tasks including the following:

In addition to ActionPoint's InputAccel modules, over a dozen third-party technology developers offer InputAccel-compatible modules worldwide. These technology developers help make InputAccel a standard platform and as a result of the variety of available modules for building information capture solutions, giving customers the flexibility they need. These third-party relationships also help extend ActionPoint's reach into many niche markets requiring such specialized functionality as handprint or bar code recognition.

Our software tools are designed to enable hardware and software developers to save both time and money by using stable libraries of software code, supported and maintained by ActionPoint, to drive document- imaging hardware peripherals such as scanners, printers and displays. We provide PixTools software tools that allow imaging software applications to work with virtually any scanner, controller board, or display.

The customers of our InputAccel products are primarily Global 1000 companies and government entities. Some of our larger U.S. customers include: Delta Airlines, Wachovia Bank, Fidelity Investments, Metropolitan Life, Amgen, Searle, Prudential and the U.S. Patent Office.

We sell or license our software tools to hardware and software suppliers such as Fujitsu, Canon, IBM and FileNet.

Sales

Our revenues largely come from the sale of InputAccel product licenses. We offer to sell InputAccel using volume-based perpetual licenses, meaning customers may process pre-determined volumes of documents on a per day basis, or transaction-based licenses, and meaning customers may process a pre- determined volume of documents over any period of time. As these licenses are volume-based, customers are able to make initial purchases at attractive prices. As a customer's system expands, as defined by document volume throughput, purchases of additional licenses are required. Historically, our customers have predominantly been Global 1000 companies and governmental agencies.

Additionally revenues are obtained from annual software maintenance subscriptions and professional consulting/implementation services. These service/support revenues represented 30% of our total revenues in 2001, with the majority of this coming from software maintenance.

InputAccel software is typically used in connection with complex enterprise computer systems that include important software and hardware components supplied by other vendors. As a result, purchasers of these enterprise computer systems often rely on system integrators and value-added resellers to oversee the acquisition and installation of key hardware and software components of the overall system. Most of our products are sold by a combination of direct and indirect channels. We employ a sales force of approximately thirteen account representatives and nine sales engineers located across several U.S. and two international field offices. Historically worldwide, approximately one-half of our InputAccel sales are made directly to end-users and one-half through an established channel of systems integration companies such as EDS, IBM, and Xerox. International revenues represented 30% of total revenues in 2001.

Our Pixel software tools are generally sold or licensed on a royalty basis through a direct sales program to hardware and software suppliers such as Fujitsu, Canon, IBM and FileNet.

Our marketing objectives include building market awareness and acceptance of ActionPoint and our products, as well as generating qualified customer leads. We attend industry trade shows and seminars, such as the Association for Information and Image Management International's annual conference, and provide information about our company and our products on our Web site. Our executives speak at industry events and provide briefings to industry analysts and trade press. We also conduct public relations activities, advertise in trade publications to promote our products to our target markets and host an annual user's conference.

Our marketing goals include the following:

• to plan and build an integrated program addressing both internal and external audiences, including prospects, customers, business and trade press, industry analysts and investors;
• to position us as a leader in providing information capture applications;
• to design and implement media and tactical programs that communicate effectively with our target audiences; and
• to clearly and consistently communicate our positioning in our marketing programs.

We believe that our future success will depend in large part on our ability to enhance our current product line, develop new products, maintain technological competitiveness and satisfy an evolving range of customer requirements. We have assembled a team of skilled software developers and software quality assurance engineers with significant industry experience. This development group is responsible for exploring new directions and applications of core technologies, incorporating new technologies into products and maintaining strong research relationships with other software developers. We seek to build upon our direct investment in research and development by supporting efforts by independent software vendors to develop complementary products and participate actively in the development of industry standards.

An important element in our strategy is to provide comprehensive support of our products. We believe that responsive technical support is essential to satisfy customer requirements. We provide support for our products primarily through our customer support staff based in our San Jose, California facility. Our support activities include direct support to our customers through our Web site, which offers technical information designed to assist in answering frequently asked questions and in problem diagnosis and resolution. We also provide telephone support via help desk, e-mail support and remote control support that provide direct access from our support personnel to our customers' systems for problem diagnosis and resolution. Most customers buy an annual maintenance contract when they initially license our software and most renew this contract on an annual basis. Additionally, we provide a variety of training and professional consulting services to the majority of our customers, which assist them to more efficiently, implement their systems.

We typically provide a ninety-day warranty program from defects for all of our products. Our standard terms and conditions provide that a customer may return a defective product for repair or replacement during the warranty period.

We have invested significantly in the development of proprietary technology for our products and our operations frequently incorporate proprietary and confidential information. We rely upon a combination of copyright and trademark laws and non-disclosure and other intellectual property contractual arrangements to protect our proprietary rights. We protect our software, documentation and other written materials under trade secret and copyright laws, which only provide limited protection. We do not hold any patents and currently have no patent applications pending. We also enter into confidentiality or license agreements with our employees, consultants and corporate partners and control access to and distribution of our software, documentation and other proprietary information.

Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our products or technology. Monitoring unauthorized use of our products is difficult and we cannot be certain that the steps we have taken will prevent misappropriation of our technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. In addition, our competitors might independently develop similar technology or duplicate our product or circumvent any patents or our other intellectual property rights. Due to rapid technological change in our market, we believe the various legal protections available for our intellectual property are of limited value. Instead, we seek to establish and maintain a technology leadership position by leveraging technological and creative skills of our personnel, new product developments and enhancements to existing products.

The market for our products is highly competitive, evolving and subject to rapid technological change. We believe the principal competitive factors are product features, support, price and reputation. In addition, support of our product architecture by independent software vendors and ease of product implementation are important competitive factors for InputAccel. We believe that we currently compete favorably in these areas.

Our principal competitors are established software companies, some of which that have a broad range of software offerings and consultants that provide customized software solutions for their client companies. These competitors include Kofax, FileNet, Readsoft and Captiva.

We expect additional competition from other established and emerging companies if the market continues to develop and expand. Many of these competitors and potential competitors may have significant competitive advantages, including greater name recognition; more resources to apply to the development, marketing and sales of their products and more established sales channels. In addition, many of our competitors have well-established relationships with our current and potential customers and have extensive knowledge of our industry. As a result, our competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements, or to devote greater resources to the development, promotion and sale of their products than we can. 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.

As of December 31, 2001, we had 129 employees. We employ 19 people in finance and administrative functions; 79 in marketing, sales, services; and support and 31 in engineering and product development. In addition, we hire temporary employees on an as-needed basis to meet production requirements. None of the employees are represented by a labor union or are subject to a collective bargaining agreement. We believe that our employee relations are good.

Our executive officers are as follows:

Name                Age Position
- ------------------- --- ----------------------------------
Stephen Francis     40  President, Chief Executive Officer
                        and Director

Matt Albanese       43  Vice President-Professional Servic

John Finegan        52  Chief Financial Officer, Secretary
                        and Director

David Sharp         37  Vice President-Engineering

John Stetak         43  Vice President-Marketing

Jim Vickers         42  Vice President-Sales

Stephen Francis joined ActionPoint in 1994 as Vice President when the company he co-founded, Pixel Translations, was acquired by ActionPoint. Mr. Francis became Vice President, Business Development in 1999 after serving as General Manager of the Pixel Division since 1997 and was elected President and CEO in June 2001. Prior to joining Pixel Translations, Mr. Francis held engineering and marketing management roles at Calera, now part of ScanSoft Corporation, a developer of recognition software. Mr. Francis holds a BS in Electrical Engineering/Computers from Stanford University.

Matt Albanese joined ActionPoint as Director of Engineering for the Software Division in 1995 and was promoted to Vice President, Professional Services in December 1997. Prior to joining ActionPoint, Mr. Albanese was the Director of Engineering for Plexus Software, a Division of Banctec, a computer products firm. Mr. Albanese holds a BS in Computer Science from San Jose National University.

John Finegan joined ActionPoint in 1989 as Vice President-Finance, was elected Chief Financial Officer in 1990, Secretary in 1993, and Director in 1997. Prior to joining ActionPoint he was Vice President of Finance for the Paradise Systems Division of Western Digital Corporation, a developer of computer peripherals. Mr. Finegan holds an MBA from the University of Massachusetts and a BS in Engineering from Tufts University.

David Sharp joined ActionPoint in 1994 as senior software engineer when the company with which he was previously employed, Pixel Translations, was acquired by ActionPoint. Mr. Sharp became Director of software Quality Assurance in 1998 after serving as SQA Manager since 1996 and was promoted to Vice President of Engineering in June, 2001. Mr. Sharp holds a BS in Computer Science from California Polytechnic State University in San Luis Obispo.

John Stetak joined ActionPoint as Vice President of Marketing in May 1998. From 1992 to 1998 he served as Director of Marketing for the Data Management Market Group of Autodesk, a software developer. Previously Mr. Stetak was Manager of Product Marketing for EDS.

James Vickers joined ActionPoint as Vice President of Sales in December 2001. Prior to joining ActionPoint, Mr. Vickers served as Executive Vice President for Sales and Marketing at TR Systems, a provider of software solutions for digital document communications. From 1995 to 2000 Mr. Vickers served in a variety of senior sales positions for Electronics for Imaging. Mr. Vickers holds a BS in Business Administration from California State University at Long Beach.

In addition to the other information in this Report, the following risk factors should be considered carefully in evaluating us and our business.

We incurred a net loss of $1.9 million for 2001. In recent periods we have not generally generated cash from operations. Even if we achieve profitability, given the competitive and evolving nature of our industry we may not be able to sustain or increase profitability on a quarterly or annual basis. As a result, we will need to generate higher revenues while containing costs and operating expenses to become and remain profitable. Our failure to do so may cause the price of our stock to decline.

Our quarterly revenues, expenses and operating results have varied significantly in the past and are likely to vary significantly in the future due to a variety of factors, including:

• the introduction of new or enhanced products;
• fluctuations in the size and timing of significant orders;
• uncertainty in the budgeting cycles of our customers; and
• possible delays in recognizing licensing revenues and the trend within the software industry for a large portion of orders to be booked late in a calendar quarter.

We operate with virtually no order backlog because our software products are shipped shortly after orders are received. That makes product revenues in any quarter substantially dependent on orders booked and shipped throughout that quarter. In addition, we achieve a significant portion of revenues from indirect sales channels over which we have little control. Moreover, our expense levels are based to a significant extent on our expectations of future revenues and therefore are relatively fixed in the short term. If revenue levels are below expectations, our operating results are likely to be harmed because only small portions of the expenses vary with revenues.

Also, in recent years, we have had relatively stronger demand for our products during the quarter ending December 31 and relatively weaker demand in the quarter ending March 31. We believe that, adjusting for the negative impact in late 1999 caused by Year 2000 concerns, this pattern will continue. This seasonality makes it more difficult to forecast quarterly revenues. Therefore, it is likely that in some future quarter operating results will fall below expectations and as a result, the price of our common stock may be harmed.

As a result of these factors, we believe that quarter-to- quarter comparisons of our revenue, expenses and operating results are likely to vary significantly in the future and that period-to-period comparisons of our operating results are not necessarily meaningful. In any event, such comparisons should not be relied upon as indications of our future performance. In addition, our operating results in one or more future quarters may fail to meet the expectations of securities analysts or investors. If this occurs, we could experience an immediate and significant decline in the trading price of our stock.

The market for our products is intensely competitive and subject to rapid change. In addition, because there are relatively low barriers to entry in the software market, we may encounter additional competition from many established and emerging companies. Many of our competitors have longer operating histories, significantly greater financial, technical, marketing and other resources than us, significantly greater name recognition and a large installed base of customers. As a result, our competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements, or to devote greater resources to the development, promotion and sale of competitive products than we can. There is also a substantial risk that announcements of competing products by large competitors could result in the delay or postponement of customer orders in anticipation of the introduction of such new products.

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. These cooperative relationships may limit our ability to sell our products through particular reseller partners. Accordingly, new competitors or competitive cooperative relationships may emerge and rapidly gain significant market share. We also expect that competition will increase as a result of software industry consolidation. Increased competition is likely to result in price reductions, fewer customer orders, reduced margins and loss of market share, any of which could harm our revenues and business.

The market for information capture software is fragmented and extremely competitive. We have spent, and intend to continue to spend; considerable resources educating potential customers about our software products and the information capture market generally. Our expenditures may fail to achieve any additional degree of market acceptance for our products. The rate at which organizations have adopted our existing products has varied significantly, and we expect to continue to experience such variations in the future. If the market for our products grows more slowly than we currently anticipate, our revenues will not grow and our operating results will suffer.

We derive substantially all of our revenues from the InputAccel product family and Pixtools software tools. Therefore, our future operating results depend heavily upon continued and widespread market acceptance for our InputAccel products and enhancements to those products. A decline in the demand for InputAccel products as a result of competition, technological change or other factors, would cause our revenues to suffer.

The market for information capture is characterized by rapid technological change, frequent new product introductions and enhancements, uncertain product life cycles, changes in customer demands and evolving industry standards. The introduction of products embodying new technologies and the emergence of new industry standards can render existing products obsolete and unmarketable. Our future success will depend upon our ability to continue to enhance our current products and to develop and introduce new products on a timely basis that keep pace with technological developments and satisfy increasingly sophisticated customer requirements. As a result of the complexities inherent in our software, new products and product enhancements can require long development and testing periods. As a result, significant delays in the general availability of such new releases or significant problems in the installation or implementation of such new releases could harm our operating results and financial condition. We have experienced delays in the past in the release of new products and new product enhancements. We may fail to develop and market on a timely and cost effective basis new products or new product enhancements that respond to technological change, evolving industry standards or customer requirements. We may experience difficulties that could delay or prevent the successful development, introduction or marketing of these products or that our new products and product enhancements will achieve market acceptance.

Our software products are complex and may contain errors or defects, particularly when first introduced or when new versions or enhancements are released. In the past, we have discovered software errors in certain of our new products after their introduction. In addition, our products are combined with complex products developed by other vendors. As a result, should problems occur, it may be difficult to identify the source of the problem. Defects and errors, or end-user perception of defects and errors, found in current versions, new versions or enhancements of our products after commencement of commercial shipments may result in:

• loss of customers;
• damage to our brand reputation;
• delay in market acceptance of our current and future products;
• diversion of development and engineering resources; and
• legal actions by our customers.

The occurrence of any one or more of these factors could harm our revenues and gross margins.

In 2001, international sales represented approximately 30% of our revenues, and we anticipate that for the foreseeable future a significant portion of our revenues will be derived from sources outside North America. In addition, we intend to continue to expand our sales and support operations internationally. In order to successfully expand international sales, we may establish additional foreign operations, expand our international sales channel management and support organizations, hire additional personnel, customize our products for local markets, recruit additional international resellers and attempt to increase the productivity of existing international resellers. If we are unable to do these things in a timely and cost-effective manner, our sales growth internationally, if any, will be limited, and our business, operating results and financial condition would be harmed. Even if we are able to successfully expand our international operations, we may not be able to maintain or increase international market demand for our products.

Our international operations are generally subject to a number of risks, including:

• costs of customizing products for foreign countries;
• protectionist laws and business practices favoring local competition;
• compliance with multiple, conflicting and changing government laws and regulations;
• longer sales cycles;
• greater difficulty or delay in accounts receivable collection;
• difficulties in staffing and managing foreign operations;
• foreign currency exchange rate fluctuations; and
• political and economic instability.

To date, the majority of our revenues and costs have been denominated in U.S. dollars. However, we expect that in the future an increasing portion of our revenues and costs will be denominated in foreign currencies. Although we may undertake foreign exchange hedging transactions to reduce our foreign currency transaction exposure, we do not currently attempt to eliminate all foreign currency transaction exposure.

Our products and technologies are complex, and we are substantially dependent upon the continued service of our existing key management, sales and marketing, technical support and research and development personnel. Substantially all of our key employees do not have employment agreements. The loss of the services of one or more of our key employees could harm our business and slow our product development processes or sales and marketing efforts.

We require the services of a substantial number of qualified technical support and research and development personnel. The market for these personnel is characterized by intense competition, as well as a high level of employee mobility. These factors make it particularly difficult to attract and retain the qualified technical personnel we require. We have experienced, and we expect to continue to experience, difficulty in hiring and retaining highly skilled employees with appropriate technical qualifications. If we are unable to recruit and retain a sufficient number of technical personnel, we may not be able to complete development of, or upgrade or enhance, our products in a timely manner. Even if we are able to expand our staff of qualified technical personnel, it may require greater than expected compensation packages that would increase our operating expenses.

Our products are used in connection with critical business functions and may result in significant liability claims if they do not work properly. Limitation of liability provisions we include in our license agreements may not sufficiently protect us from product liability claims because of limitations in existing or future laws or unfavorable judicial decisions. Although we have not experienced any material product liability claims to date, the sale and support of our products may give rise to claims which may be substantial in light of the use of our products in business-critical applications. Liability claims could require us to spend significant time and money in litigation or to pay significant damages. Any claims for damages, whether or not successful, could seriously damage our reputation and our business.

We believe that the steps we have taken to safeguard our intellectual property afford only limited protection. We rely primarily on a combination of copyright, trademark and trade secret laws, confidentiality procedures and contractual provisions to protect our proprietary rights. We license our software products primarily under license agreements. Competitors may develop technologies that are similar or superior to our technology or design that do not infringe our copyrights and trade secrets, and this could reduce demand for our products. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use information that we regard as proprietary. Policing unauthorized use of our products is difficult, and although we are unable to determine the extent to which piracy of our software products exists, software piracy can be expected to be a persistent problem.

In addition, the laws of some foreign countries do not protect our proprietary rights as fully as do the laws of the U.S. In those countries, reverse engineering, unauthorized copying or other misappropriation of our proprietary technology could enable third parties to benefit from our technology without paying us for it, which would significantly harm our business.

We rely upon certain software that we license from third parties, including software that is integrated with our internally developed software and used in our products to perform key functions. There can be no assurance that these third-party software licenses will continue to be available to the Company on commercially reasonable terms, if at all. The loss of or inability to maintain any such software licenses could result in shipment delays or reductions until equivalent software could be developed identified, licensed and integrated. Such delays would materially adversely affect our business, operating results and financial condition.

Substantial litigation regarding intellectual property rights and brand names exists in our industry. We expect that software product developers increasingly will be subject to infringement claims as the number of products and competitors in our industry segment grows and the functionality of products in different industry segments overlaps. We are not aware that any of our products infringe any proprietary rights of third parties. However, third parties, some with far greater financial resources than us, may claim infringement by our products of their intellectual property rights. Any such claims, with or without merit, could:

• be time consuming to defend;
• result in costly litigation;
• divert management's attention and resources;
• cause product shipment delays; or
• require us to enter into royalty or licensing agreements.

If we are required to enter into royalty or licensing agreements to resolve an infringement claim, we may not be able to enter into these agreements on terms acceptable to us, if at all. A successful claim of product infringement against us or our failure or inability to either license the infringed or similar technology or develop alternative technology on a timely basis, may harm our operating results, and our financial condition could be harmed because we would not be able to sell the impacted product without redeveloping it or incurring significant additional expenses.

The market price of our common stock has historically varied from time to time. An investor in shares of our common stock may not be able to resell those shares at or above the price paid. Our common stock price may fluctuate significantly in the future due to:

• any deviations in our revenues, gross margins or net losses from levels expected by securities analysts;
• changes in financial estimates by securities analysts;
• changes in market valuations of other information capture software companies; and
• our future sales of common stock or other securities.

In addition, The Nasdaq National Market has experienced extreme volatility in recent years that has often been unrelated to the performance of particular companies. Future market fluctuations may cause our stock price to fall regardless of our performance.

Provisions of our certificate of incorporation and bylaws and a rights plan adopted by our board of directors may discourage, delay or prevent a merger or acquisition that our common stockholders may consider favorable. Provisions of our Certificate of Incorporation and bylaws:

• prohibit cumulative voting in the election of directors;
• eliminate the ability of stockholders to call special meetings; and
• establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings.

The rights granted pursuant to the rights agreement entered into as part of our rights plan have anti-takeover effects. The rights may cause substantial dilution to a person or group that attempts to acquire ActionPoint on terms that our board of directors determines are not in the best interests of our stockholders. Certain provisions of Delaware law also may discourage, delay or prevent someone from acquiring or merging with us, which may cause the market price of our common stock to decline.

Our principal administrative, sales, marketing and research and development facility is located in a building of approximately 46,000 square feet in San Jose, California. This facility is leased through February 2004. All of our functions except certain sales activities are performed at this facility. Our European sales activities are conducted from leased facilities near Munich, Germany and London, England. Certain other sales activities are conducted from rented offices in various states in the U.S. We believe that our facilities are adequate for our current needs.

Item 3. Legal Proceedings

There are no material pending legal proceedings to which we are a party or to which our subsidiaries are subject.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth quarter of the year ended December 31, 2001.

Price range of common stock

                                      Quarter Ended
                          ------------------------------------------
2001                      March 31,    June 30, Sept. 30,  Dec. 31,
- ------------------------  ---------  ---------  ---------  ---------

Stock prices:
  High                        6.19       5.16       3.00       1.80
  Low                         1.75       2.59       1.16       1.25

2000                      March 31,  June 30,   Sept. 30,  Dec. 31,
- ------------------------  ---------  ---------  ---------  ---------

Stock prices:
  High                       34.25      20.25       8.44       5.38
  Low                        10.88       7.00       4.13       2.00

Our common stock is traded on The Nasdaq National Market under the symbol ACTP. Our common stock began trading in September 1993. There were approximately 105 stockholders of record and approximately 2,500 beneficial shareholders of record at February 28, 2002.

To date, we have not declared or paid any cash dividends on our common stock. We do not anticipate paying dividends on our common stock in the foreseeable future.

The following selected consolidated financial data should be read in conjunction with the consolidated financial statements and related Notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this document. The consolidated statement of operations data for each of the three years in the period ended December 31, 2001, and the balance sheet at December 31, 2001 and 2000, are derived from the audited consolidated financial statements included elsewhere in this document. The consolidated statement of operations data for the years ended December 31, 1998 and 1997 and the balance sheet at December 31, 1999, 1998 and 1997, are derived from the audited consolidated financial statements not included in this document. Our historical results are not necessarily indicative of results to be expected for future periods. See the Notes to Consolidated Financial Statements for a detailed explanation of the determination of the shares used to compute basic and diluted net loss per share.

                                               Year Ended December 31,
                                 -------------------------------------------------
                                   2001      2000      1999      1998      1997
                                 --------- --------- --------- --------- ---------
                                         (in thousands, except per share amounts)
                                
Consolidated Statements of
    Operations Data:            
- ----------------------------    
For continuing operations:      
Net revenues....................  $22,035   $25,042   $22,178   $17,409   $12,240
Gross profit....................   18,296    20,621    18,964    15,661    11,359
Operating income (loss).........   (2,551)   (8,353)     (848)      832       (91)
Net income (loss)...............   (1,915)   (8,758)     (141)    1,039       394
Basic and diluted net income
   (loss) per share.............   ($0.45)   ($2.09)   ($0.03)    $0.18     $0.05
                                
For discontinued operations:    
Net income (loss)...............                                ($1,351)     $687
Basic and diluted net income
   (loss) per share.............                                 ($0.24)    $0.10

Net income (loss)...............  ($1,915)  ($8,758)    ($141)    ($312)   $1,081
Basic and diluted net income
   (loss) per share.............   ($0.45)   ($2.09)   ($0.03)   ($0.06)    $0.15
Shares used in per share
   calculations.................    4,300     4,190     4,370     5,657     7,285
                                
Consolidated Balance
   Sheets Data:                 
- ----------------------------
Working capital *...............   $8,099    $4,960   $13,863   $19,030   $16,981
Total assets....................   15,328    17,801    23,178    26,877    37,693
Stockholders' equity............    8,157     9,922    17,378    21,357    33,923

* Working capital is current assets minus current liabilities including current portion of deferred revenue.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following table sets forth, for the periods indicated, certain financial data from our consolidated statements of operations as a percentage of revenues.

                                                         Year Ended December 31,
                                                      --------------------------
                                                        2001     2000     1999
                                                      -------- -------- --------
For continuing operations only                                                  
Net revenues
  License...........................................       70%      78%      81%
  Service...........................................       30%      22%      19%
                                                      -------- -------- --------
Total  revenues.....................................      100%     100%     100%

Cost of revenues....................................
  License...........................................        4%       2%       3%
  Service...........................................       13%      16%      12%
                                                      -------- -------- --------
Cost of revenues....................................       17%      18%      15%
                                                      -------- -------- --------
    Gross profit....................................       83%      82%      85%
                                                      -------- -------- --------

Research and development............................       25%      31%      25%
Sales and marketing.................................       55%      66%      50%
General and administrative..........................       15%      19%      14%
                                                      -------- -------- --------
    Operating loss..................................      -12%     -33%      -4%

Interest and other income (expense).................       22%      -2%       3%
                                                      -------- -------- --------
    Income (loss) before provision for income taxes.       10%     -35%      -1%
Provision (benefit) for income taxes................       19%       0%      -0%
                                                      -------- -------- --------
    Net loss from continuing operations.............       -9%     -35%      -1%
                                                      ======== ======== ========

We develop, market and service information capture software. Our customers have traditionally been large global 1000 businesses and governmental agencies that use our InputAccel software to convert transaction-related documents, such as order forms, claim forms, or loan applications, into an appropriate electronic format and to transport images of and information from these documents to storage on Web sites, compact disks, or internal databases for subsequent search, retrieval or further processing. Additionally, we market software tools under our Pixel Translations brand to various hardware and software providers.

We sold our Dialog Server product line to Chordiant Software, Inc. on May 17, 2001 for approximately $7.1 million consisting of $2.0 million in cash and 1.7 million shares of Chordiant common stock and recognized a pretax gain of approximately $4.6 million. We also established a valuation allowance against the remaining net deferred tax assets based on our assessment of the uncertainty of the realizability of such assets.

We have identified revenue recognition and accounting for income taxes as critical accounting policies to our company.

---------------------

We derive the majority of our revenues from product licensing and royalties. Our license revenues decreased by 21% in 2001 to $15.4 million from $19.4 million in 2000 and increased by 8% in 2000 from $17.9 million in 1999. The decrease in license revenue for 2001 is due in part to a weak economy, which led to extended sales cycles and general slowdowns in information technology spending. This contrasts to an increase in license revenue for 2000, which was derived primarily from increased revenues from our InputAccel product line. License and royalties accounted for 70%, 78% and 81% of 2001, 2000 and 1999 total revenues, respectively.

Our service revenues, which are derived from software maintenance and professional consulting, increased by 19% in 2001 to $6.7 million from $5.6 million in 2000 and increased by 30% in 2000 from $4.3 million in 1999. This represents 30%, 22% and 19% of 2001, 2000 and 1999 total revenues. The increase in service revenues in both absolute and percentage terms was primarily attributable to a growing installed base of customers, most of which purchase ongoing software maintenance support.

Gross profit decreased by 11% to $18.3 million in 2001 from $20.6 million in 2000 and increased 9% in 2000 from $19.0 million in 1999. Gross profit margin increased to 83% in 2001 from 82% in 2000 and decreased in 2000 from 85% in 1999. Fluctuations in gross profit margins are generally attributable to the mix of product license revenues and lower margin services revenues. We expect revenues from maintenance and services to continue to increase as a percentage of overall revenues. Gross profit margin for product license revenues decreased to 94% from 97% in 2000 and 1999 as a result of additional use of third-party technology. Gross profit margin for services revenues increased to 57% in 2001 compared to 33% and 40% in 2000 and 1999 respectively, largely as a result of expense reductions.

Research and development expenses decreased by 29% in 2001 to $5.6 million from $7.9 million in 2001 and increased by 41% in 2000 from $5.6 million in 1999. The decrease in 2001 is largely related to the sale of the Dialog Server product line in May 2001. The increase in 2000 included significant expenditures incurred for the Dialog Server product line and a one- time stock related bonus expense of $710,000.

Research and development expenses decreased as a percentage of revenue to 25% in 2001, from 31% in 2000, which increased from 25% in 1999.

Sales and marketing expenses decreased by 27% in 2001 to $12.0 million from $16.4 million in 2000 and increased by 47% in 2000 from $11.2 million in 1999. The decrease in 2001 is largely due to reductions in programmatic and product marketing expenses incurred in 2000 and early 2001 for the Dialog Server product line, which was sold in May 2001. Additionally, there was a one-time stock related bonus expense of $638,000 in 2000.

Sales and marketing expenses decreased as a percentage of revenue to 55% in 2001, from 66% in 2000, which increased from 50% in 1999.

General and administrative expenses decreased by 31% in 2001 to $3.3 million from $4.7 million in 2000 and increased by 54% in 2000 from $3.0 million in 1999. Much of the fluctuation in this period relates to a $1.1 million of stock related bonus expense incurred in 2000.

General and administrative expenses decreased as a percentage of revenue to 15% in 2001, from 19% in 2000, which increased from 14% in 1999.

We sold our Dialog Server product line to Chordiant Software, Inc. on May 17, 2001 for approximately $7.1 million consisting of $2.0 million in cash and 1.7 million shares of Chordiant common stock and recognized a pretax gain of approximately $4.6 million. The Chordiant common stock was valued at $3 per share at the transaction date. Of these proceeds, $637,000 in cash remains in escrow at December 31, 2001 pursuant to the asset sale agreement and will be released in May 2002.

Based on its assessment of the likelihood to realize value, the Company wrote off a $500,000 minority equity interest in the first quarter of 2000. That minority equity investment was obtained in 1998 in conjunction with the sale of the Company's hardware division.

Interest and other income increased in 2001 to $239,000 from $95,000 in 2000 and decreased in 2000 from $631,000 in 1999. The increase in 2001 is due to the additional cash generated by the sale of the Dialog Server product line. The decrease in 2000 was due to a reduction of cash balances.

The income tax provision recorded in fiscal 2001 of $4.2 million is comprised of the following: tax on the gain from the sale of the Dialog Server product line of $1.7 million, the change in valuation allowance of $3.3 million to reduce net deferred tax assets based on management's assessment of the uncertainty of the realizability of such assets and the provision for foreign taxes of $169,000 offset by the utilization of net operating losses of $1.0 million. In 2000 there was no benefit for income taxes recorded as a result of the pretax losses generated during the year. In 1999, a benefit of $76,000 was recorded as a result of pretax losses.

At December 31, 2001, we had cash and cash equivalents of $8.3 million, an increase of $6.1 million from December 31, 2000. The increase is largely a result of the cash generated from the sale of the Dialog Server product line. At December 31, 2000, we had cash and cash equivalents of $2.2 million, a decrease of $7.0 million from December 31, 1999.

At December 31, 2001, working capital totaled $8.1 million, an increase of $3.1 million from December 31, 2000. At December 31, 2000, the working capital totaled $5.0 million, a decrease of $8.9 million from December 31, 1999.

Net cash provided by operating activities was $859,000 in 2001 compared to net cash used by operating activities of $6.9 million in 2000 and $413,000 in 1999. The increase in net cash provided by operations in 2001 is primarily due to reductions in operating expenses together with favorable net movements in working capital. In 2000 and 1999, the funds were utilized to support increased expenses, substantially related to our Dialog Server product family, and in 2000, for cash payments made under a stock-based incentive plan.

Net cash provided by investing activities was $5.1 million in 2001, made up of proceeds from the sale of the Dialog Server product line and related Chordiant common stock and partially offset by additions to property and equipment of $112,000. This compares to cash used for investing activities, exclusively additions to property and equipment of $921,000 in 2000 and $827,000 in 1999.

Our Board of Directors authorized the use of up to $25 million to repurchase our common stock. The repurchased stock is expected to be held by the company and may be used to meet our obligations under our stock plans and for other corporate purposes. Since inception of the plan in 1997 to December 31, 1999, 3.8 million shares have been repurchased for a total of $23.6 million. 1999 repurchases totaled $4.5 million. No purchases were made in 2001 and 2000 respectively. We used cash on hand to fund the purchases.

The Company believes that its cash and cash equivalents, and cash flows from operations will be sufficient to meet the Company's liquidity and capital requirements for at least the next 12 months. The Company may, however, seek additional equity or debt financing to fund further expansion. There can be no assurance that additional financing will be available at all or that it, if available, will be obtainable on terms favorable to the Company and would not be dilutive. Our only future commitment for cash in the next 12 months consists of operating leases (see Note 5.).

On March 4, 2002, we entered a merger agreement with Captiva Software Corporation, a privately held company that provides forms processing software products and services. Pursuant to the merger agreement, Captiva will become a wholly owned subsidiary and we will change our name to Captiva Software Corporation. The merger is subject to necessary approvals from the stockholders of both companies and is expected to be completed in the second quarter of 2002.

The following table sets forth our unaudited financial information for the eight quarters in the period ended December 31, 2001. This information has been prepared on the same basis as the audited financial statements and, in the opinion of management, contains all adjustments necessary for a fair presentation thereof.

ACTIONPOINT, INC.
CONSOLIDATED FINANCIAL INFORMATION
(unaudited - in thousands, except per share data)

                                      Quarter Ended
                          ------------------------------------------
2001                      March 31,  June 30,   Sept. 30,  Dec. 31,
- ------------------------  ---------  ---------  ---------  ---------

Net revenues                $6,595     $4,863     $4,694     $5,883
Gross profit                 5,566      3,940      3,800      4,990
Operating income (loss)       (350)    (1,456)    (1,065)       320
Net income (loss)             (315)    (436)     (1,471)        307
Basic and Diluted EPS:       (0.07)     (0.10)     (0.34)      0.07

2000
- ------------------------
Net revenues                $4,613     $6,026     $5,967     $8,436
Gross profit                 3,785      5,056      4,723      7,195
Operating income (loss)     (4,738)    (1,787)    (1,925)        97
Net income (loss)           (5,139)   (1,750)    (1,974)        105
Basic and Diluted EPS:       (1.24)     (0.42)     (0.47)      0.02

The Company's exposure to market risk for changes in interest rates relate primarily to its investment portfolio. The Company maintains an investment policy, which is intended to ensure the safety and preservation of its invested funds by limiting default risk, market risk and reinvestment risk. The Company does not currently use, nor has it historically used, derivative financial instruments to manage or reduce market risk. The Company mitigates default risk by investing in high credit quality securities such as debt instruments of the United States government and its agencies and high quality corporate issuers, as well as money market funds. The portfolio includes only marketable securities with active secondary or resale markets to ensure portfolio liquidity and maintains a prudent amount of diversification. As of December 31, 2001, the Company had $8.3 million of cash and cash equivalents.

The Company does not currently transact any significant portion of its business in functional currencies other than the United States dollar. To the extent that it continues to transact its business using the United States dollar as its functional currency, the Company does not believe that the fluctuations in foreign currency exchange rates will have a material adverse effect on the Company's results of operations.

Financial statements required pursuant to this item are presented on page 22 of this report.

Not applicable.

Certain information required by Part III of this Form 10-K is omitted because we will file a definitive proxy statement pursuant to Regulation 14A (the "Proxy Statement") not later than 120 days after the end of the fiscal year covered by this Form 10-K, and certain information to be included therein is incorporated herein by reference.

The information required by this item relating to our directors and nominees and disclosure relating to compliance with Section 16(a) of the Securities Exchange Act of 1934 is included in under the captions "Other Stockholder Proposals for the 2002 Annual Meeting of ActionPoint Stockholders -- Proposal to Elect Directors", "Information Concerning the Combined Company - - Management of the Combined Company" and "Information Concerning ActionPoint -- Compliance with Section 16(a) of the Securities Exchange Act of 1934" in our Proxy Statement for the 2002 Annual Meeting of Stockholders and is incorporated herein by reference. The information required by this item relating to our executive officers and key employees is included under the caption "Executive Officers and Key Employees" in Part I of this Form 10-K Annual Report.

The information required by this item is included under the caption "Information Concerning ActionPoint -- Executive Compensation and Related Information for ActionPoint's Executive Officers" in our Proxy Statement for the 2002 Annual Meeting of Stockholders and is incorporated herein by reference.

The information required by this item is included under the caption "Security Ownership of Certain Beneficial Holders and Management of ActionPoint Prior to the Merger" in our Proxy Statement for the 2002 Annual Meeting of Stockholders and is incorporated herein by reference.

The information required by this item is included under the caption "Information Concerning ActionPoint - ActionPoint's Related Transactions" in our Proxy Statement for the 2002 Annual Meeting of Stockholders and is incorporated herein by reference.

(a) The following documents are filed as part of this Annual Report on Form 10-K at the end of this item 14:

Report of Independent Accountants

Consolidated Balance Sheets as of December 31, 2001 and 2000

Consolidated Statements of Operations for each of the three years in the period ended December 31, 2001, 2000, and 1999

Consolidated Statements of Stockholders' Equity for each of the three years in the period ended 'December 31, 2001, 2000 and 1999

Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2001, 2000 and 1999

Notes to Consolidated Financial Statements

2. Financial Statement Schedules

1. Reports on Form 8-K.