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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ x ] Annual Report Under Section 13 or
15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2004
or
[ ] Transition Report Pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number 001-31344
PLUMTREE SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
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Delaware |
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52-2303761 |
(State or other jurisdiction of
incorporation or organization) |
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(I.R.S. Employer
identification no.) |
500 SANSOME STREET, SAN FRANCISCO, CA 94111
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code:
(415) 263-8900
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE
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. [ x ]
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the
Act). Yes [ x ] No [ ]
The aggregate market value of the voting stock held by
non-affiliates of the registrant as of June 30, 2004 was
approximately $76,211,699 based on the number of shares held by
non-affiliates of the registrant as of June 30, 2004, and
based on the reported last sale price of common stock on
June 30, 2004, which is the last business day of the
registrant’s most recently completed second fiscal quarter.
This calculation does not reflect a determination that persons
are affiliates for any other purposes. Shares of stock held by
five percent stockholders have been excluded from this
calculation as they may be deemed affiliates.
The number of shares outstanding of the issuer’s common
stock as of January 31, 2005 was 32,492,416.
DOCUMENTS INCORPORATED BY REFERENCE
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| Document Description |
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10-K Part | |
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Portions of the definitive Proxy Statement for the Annual
Meeting of Stockholders (the “Proxy Statement”) to be
held on May 20, 2005, and to be filed pursuant to
Regulation 14A within 120 days after registrant’s
fiscal year ended December 31, 2004 are incorporated by
reference into Part III of this Report |
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III |
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page one
plumtree
software • 2004
annual report
TABLE OF CONTENTS
plumtree
software • 2004
annual report
page two
Forward-Looking Statements
In addition to historical information, this Annual Report on
Form 10-K contains forward-looking statements that involve
risks and uncertainties that could cause our actual results to
differ materially from those stated or suggested by such
forward-looking statements. Factors that might cause or
contribute to such differences include, but are not limited to,
those discussed in the section entitled “Management’s
Discussion and Analysis of Financial Position and Results of
Operations — Risk Factors That May Affect Our Future
Results and the Market Price of Our Stock.” When used in
this report, the words “expects,”
“anticipates,” “intends,” “plans,”
“believes,” “seeks,” “estimates,”
and similar expressions are generally intended to identify
forward-looking statements. You should not place undue reliance
on these forward-looking statements, which reflect our opinions
only as of the date of this Annual Report. We undertake no
obligation to publicly release any revisions to the
forward-looking statements after the date of this document. You
should carefully review the risk factors described in other
documents we file from time to time with the Securities and
Exchange Commission, including the Quarterly Reports on
Form 10-Q to be filed in 2005.
part i
Item 1. Business
Overview
Plumtree Software, Inc. (“we”, “our”,
“Plumtree” or “the Company”), was
incorporated in California on July 18, 1996 and
reincorporated in Delaware on May 31, 2002. Our initial
public offering of 5,000,000 shares of common stock was
completed on June 4, 2002.
We develop, market and sell a suite of software products
integrated into a common platform for deploying advanced Web
applications. These applications are constructed by assembling,
with our platform, independent services that may be hosted on
different computers, by different organizations. Applications
that combine components in this way are called composite
applications.
Our product suite combines portal, collaboration, content
management, search, workflow and integration software into an
integrated environment our customers use to deploy portals,
collaborative communities for employees and powerful new
composite applications to support user audiences within and
between enterprises.
Strategy
Plumtree’s mission is to provide the market-leading
integration platform for composite applications. Our strategy is
based on three principles:
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True Openness: a philosophy for integrating systems,
technologies, platforms and languages from every major vendor,
and with an equal commitment to both Java and .Net, giving
developers the ultimate level of flexibility to build value on
our platform; |
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Service-Oriented Applications: offering in one
cohesive suite, a complete solution for assembling, managing and
delivering Web applications, including portal, collaboration,
content publishing, search, workflow and integration; and |
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Enterprise Productivity: building on our strength in
knowledge management and collaboration, creating a work
environment that the entire extended enterprise can use to find
information, manage projects, share documents and publish
content. |
Integrated Activity Management
We have a history of building software that enhances human
performance, and our strategy is governed by that continuing
pursuit. The market for portal software, which we helped
pioneer, was driven largely by the need to
page three
plumtree
software • 2004
annual report
improve end-user productivity. Portals provide organizations the
technology to assemble diverse resources from across the
enterprise into personal Web environments, reducing the
complexity of accessing and using systems and improving the
return on existing technology assets. Today, our portal software
is commonly used to deploy a new generation of Web application,
one that builds on the portal’s ability to span and
assemble systems and content, weaving those assembled resources
around a business process to help the end users work more
efficiently. We call this class of service-oriented application
Integrated Activity Management.
Integrated Activity Management applications bring together
systems, people and processes in a distinct way, defining the
experience according to the needs of the end-user rather than
the generic prescriptions of the software. Integrated Activity
Management applications are built around a business process,
integrating multiple enterprise software systems and
incorporating tools that support that process. This approach is
designed to help people complete the activities that drive a
particular business process forward, from creating documents to
assembling content contextualized to an individual user’s
needs. As an example, such an application would provide sales
people with access to systems that support the sales process,
like a Customer Relationship Management (CRM) or an
inventory management system, as well as with tools for
publishing a close plan and information about their competitors
on specific opportunities that the CRM system is tracking. These
applications allow our customers to redefine business processes,
especially processes that span multiple systems and business
boundaries, and help streamline processes with a more
collaborative method for users to accomplish their work. For
example, an application to improve retail store performance can
combine for retail associates and store managers product catalog
information from an enterprise resource planning
(ERP) database with additional product detail from a
supplier’s online system, and offer collaborative tools to
enable more knowledgeable cross-selling on the store floor among
high-turnover employees.
We believe an enterprise environment for delivering integrated
Web applications cannot be based on one application, one
application server, or one language. Our products are designed
to operate as a new layer, open to all applications, application
servers and languages. We believe our approach distinguishes us
from traditional vendors of application infrastructure such as
Microsoft, IBM and Oracle who host on an ad hoc basis, the
components of a service-oriented application. In contrast, as an
open and independent solutions provider, we remain committed to
integrating these various applications, hardware and operating
system components into new applications designed to meet the
needs of our customers.
Products
Plumtree offers a broad range of software products its customers
deploy to realize even greater potential from their existing
technology investments, transforming those systems into new
applications, delivered through the Web to the business faster
than through traditional application development approaches. The
ability to create a large number of applications, based on an
integrated set of shared services and managed in one
environment, allows organizations to deliver a level of service
over the Web that was previously cost-prohibitive: customized
applications for every customer, product, process, partner or
project.
Our products are marketed and sold as part of our Enterprise Web
Suite. Within the suite, Plumtree offers three distinct product
lines:
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Plumtree Corporate Portal: a portal and applications
management framework for assembling and conjoining into new
composite applications elements from existing systems with new
features for collaboration, search and publishing |
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Plumtree Integration Products: used to integrate for
the portal and application framework important resources from
existing systems that new applications are built with, including
users, user profiles, content, search engines and application
services |
plumtree
software • 2004
annual report
page four
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Plumtree Server Products: provide the core features,
as integrated services, that are a common foundation for new Web
applications — search, collaboration, content
publishing and workflow — assembled by the application
framework. |
Plumtree Corporate Portal
The Plumtree Corporate Portal provides dynamic and personalized
access to content, services and other users. The portal also
provides the interface to other Plumtree products in the
Enterprise Web suite, and hosts the user experiences of
composite applications constructed from services the portal has
assembled and secured. The portal provides facilities for
scanning, indexing and organizing content from a variety of
enterprise content repositories, assembling and managing links
to that content in an enterprise-wide knowledge management
system. The portal integrates content, applications, search,
security and user attributes from other systems through
Plumtree’s integration products, and delivers additional
features of applications, such as collaboration and publishing
services, through Plumtree’s server products.
The corporate portal hosts three primary user experiences:
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Personalized pages: an individual user’s
personalized view of content and applications assembled by the
portal. The page typically shows a user key services from a wide
range of complex systems, such as call center queues from a
customer support application or expense report requests from a
Human Resources system. |
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Knowledge directory: an enterprise-wide taxonomy for
organizing content from a multitude of disparate content
systems, including Web sites, document databases, email and
“GroupWare”, applications like Microsoft Exchange and
Lotus Notes, and file systems, as well as other resources within
the portal such as portlets, communities and users. Without such
a directory, all the applications and content created within the
portal often results in sprawl, where resources are rarely
re-used and information is impossible to find. |
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Communities: a framework for assembling content and
services shared by a group of users, used to create online
workspaces and package services as applications. Customers often
use communities to bring teams of users together to collaborate
on a project or replace a departmental Intranet. Communities are
built using services drawn from otherwise silo-ed enterprise
systems, are assembled using portlets, and can be created from
templates that control the community’s functionality and
appearance. |
Plumtree Integration Products
Plumtree’s Integration Products bring together resources
and services from systems across the enterprise, creating
building blocks that may be used to build richer portals,
communities and composite applications. Integration is a core
Plumtree strength.
Plumtree offers five types of integration products. These
products go beyond simple views of applications to combine the
full range of resources from corporate systems into new
composite applications:
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Plumtree Portlets: for integrating enterprise
applications and delivering new services to the portal; |
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Crawler Web Services: for discovering content in
corporate repositories to be indexed and categorized in the
portal’s knowledge management system and presented in new
applications; |
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Authentication Web Services: for synchronizing user
membership and security from traditional systems of record,
including Lightweight Directory Access Protocol and Windows
domains; |
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Profile Web Services: for gathering attributes about
users from different systems they use, including LDAP,
PeopleSoft and SAP, and using this information to build a master
composite profile of the user; |
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Search Web Services: for sending searches from the
portal to other indexes and third-party search engines. |
page five
plumtree
software • 2004
annual report
Plumtree Server Products
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Plumtree Collaboration
Server |
Collaboration Server supports collaboration from the Web, the
desktop, applications and projects. The product offers key
collaborative features, integrated into the portal and new
applications assembled by and delivered through the portal. The
features include calendaring, document sharing and management,
tasks management and idea exchange through moderated discussions
and bulletin boards. The product features Web services
programming interfaces, with both .Net and Java clients for
those interfaces, providing developers flexible access to
leverage collaborative services in new composite applications.
Content Server supports highly distributed Web content
publishing, bringing Intranet, Extranet and Internet sites into
the Plumtree security, navigation and knowledge management
framework. The product offers key publishing features,
integrated into the portal and new applications assembled by and
delivered through the portal. As an example, a sales application
can feature a forms-based publishing process to help capture
win/loss reports from field sales people. The product features
Web services programming interfaces, with both .Net and Java
clients for those interfaces. These features provide developers
flexible access to leverage publishing services in new composite
applications.
Search Server indexes the resources assembled and available
through the portal and composite applications. These resources
include content indexed from file systems, Web sites and
document databases; project documents and Web pages created
through the Collaboration Server and Content Server
environments; and applications, portlets, communities and users.
Search Server indexes content discovered through Plumtree
Integration Products from a wide range of repositories,
normalizing metadata from more than 200 document types. The
product secures every item in its index, mirroring security
where available from native documents. The product features Web
services programming interfaces, with both .Net and Java clients
for those interfaces, providing developers flexible access to
leverage search services in new composite applications.
Studio Server provides tools to portal managers to create
forms-based portlets and application components without coding.
Components commonly created include telephone lists, work order
processes, calendars and surveys. These components feature a
configurable user interface, application logic and a database.
Studio Server is designed to lower the cost of deploying new
end-user functionality, and to empower portal managers to
populate the portal, communities and applications without
burdening or relying on IT.
Services
In addition to offering software, we offer customers, systems
integrators and technology vendors deployment and support
services.
We offer professional services to deploy Plumtree products at
customer sites, and to train technology vendors and systems
integrators. Our consultants also participate in joint
deployments with systems integrators, increasing our capacity to
deploy at a large number of customer sites.
We provide customer care through technical support and assigned
account managers. Technical support is offered worldwide via
e-mail and telephone through our support centers in
San Francisco, London, Sydney and Tokyo 24 hours per
day, seven days per week. Customers, systems integrators and
technology vendors may also receive technical support through
Plumtree’s Support Center, powered by a deployment of our
own software. In addition, local account managers act as
advocates within Plumtree to assist customers in defining
plumtree
software • 2004
annual report
page six
their business requirements and obtaining the needed resources
for a successful deployment. Plumtree also offers enterprise
level support, which includes developer support, dedicated
account management and on-site support.
We offer a series of training classes that are designed to
provide our customers with the knowledge and tools necessary to
deploy, administer and expand their deployments. Offered both at
customer sites and at training centers in various cities, these
classes train individuals from customer and alliance member
organizations.
Customers
We have licensed our products to over 700 customers. Our clients
represent a broad spectrum of industries and public sector
entities. For the year ended December 31, 2004 no customer
accounted for 10% or more of our total revenue.
Sales and Marketing
We market and sell our products through our direct sales force
and through a growing indirect sales channel of systems
integrators, value-added resellers and original equipment
manufacturers (OEMs). We expect to continue to establish
relationships with large industry leaders and specialists, and
strategically selected regional partners who will build
solutions on our platform and expand distribution opportunities.
Our direct sales force is distributed in multiple field offices
throughout the United States and Canada and in eleven locations
internationally across Europe and Asia Pacific.
We use a variety of marketing programs to build our brand and
identity and promote our products, including market research,
analyst briefings, seminars, advertising, trade shows, speaking
engagements, newsletters, customer advisory boards and focus
groups, and Web marketing. Our marketing department also
develops material for distribution to customers and prospective
customers, and to our channel partners, including presentation
materials, product brochures, white papers, fact sheets and
demonstrations. We also host annual user conference for our
customers and for developers working with our platform.
Research and Development
Since inception, we have devoted significant resources to
develop our products and technology. We believe our future
success depends in large part on continuing innovation and rapid
development. Our engineering organization is responsible for
product architecture and technology, engineering and quality
assurance. As of December 31, 2004, our engineering
organization consisted of 137 employees. In 2004, 2003 and 2002
our research and development expenses totaled
$24.5 million, $20.7 million and $18.1 million,
respectively. We expect to continue to devote substantial
resources to our research and development activities.
Competition
The market for our products is intensely competitive and highly
fragmented, subject to rapid technological change, evolving
industry standards and changes in customer needs. While we
believe we offer the most cohesive suite of integrated products
and the strongest support for heterogeneity in enterprise
systems, we compete with various vendors of infrastructure and
integration software, including IBM, Microsoft, BEA and Oracle.
These companies generally offer an environment customers will
choose to build similar functionality and integration offered
within our product. We believe we offer a more complete and
integrated suite of products than our competition, reducing the
need for expensive configurations and customizations, and
lowering the total cost of ownership for the customer.
We compete principally on the basis of:
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Product features, quality and performance; |
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Interoperability of our solution with existing applications,
content repositories and security systems; |
page seven
plumtree
software • 2004
annual report
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Range of applications that customers can build on our
solution; and |
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Strength of sales and service channels |
We believe we compete favorably with our competitors on the
basis of these factors. In particular, we believe that our
commitment to openness and support for heterogeneity is unique
and distinguishing. Traditional infrastructure vendors generally
support their own platforms, but do not compete effectively when
applications draw on different platforms and development
environments. We believe that we offer customers equal support
for each of the customer’s application servers and
development environments as compared to our principal
competitors that primarily broker all services through a single
application server.
Many of our competitors have longer operating histories, greater
financial, technical, product development and marketing
resources, greater name recognition and larger customer bases
than we do. Our present or future competitors may be able to
develop products comparable or superior to those we offer, adapt
more quickly than we do to new technologies, evolving industry
trends or customer requirements, offer more aggressive pricing
policies, or devote greater resources to the development,
promotion and sale of their products than we do. Accordingly, we
may not be able to compete effectively in our markets, or
competition may intensify or emerge and have a material adverse
effect on our business, financial condition and operating
results.
Employees
As of December 31, 2004, we had 399 full-time
employees, of whom 346 were based in the United States and 53
were based in Canada, Europe and Asia Pacific. Of these
employees, 130 were in sales and marketing, 137 were in
engineering, 95 were in professional services, technical support
and training, and 37 were in finance, human resources,
information systems and administrative functions. Our employees
are not represented by any collective bargaining agreements and
we have never experienced a work stoppage, and we consider our
relations with our employees to be good.
International Operations
Our revenue originating outside of the United States, as a
percentage of our total revenue, was approximately 28% in 2004,
21% in 2003 and 19% in 2002. We have no material long-lived
assets located outside of the United States.
Most of our sales in international markets in 2001, 2002 and
2003 were made by foreign sales subsidiaries. In 2004, we began
to contract all international license and maintenance
transactions directly from the United States. In countries with
low sales volumes, we expect sales to be made primarily through
various local representatives and distributors. Services are
delivered and arranged locally depending on the location of the
customer.
Our international business is subject to risks customarily
encountered in foreign operations. These risks include changes
in a specific country’s or region’s political or
economic conditions, trade protection measures, import or export
licensing requirements, changes in tax laws and regulatory
requirements, difficulty in staffing and managing operations,
differing labor regulations and differing protection of
intellectual property. We are also exposed to foreign currency
exchange rate risk inherent in our sales commitments,
anticipated sales, and assets and liabilities denominated in
currencies other than the local functional currency. The U.S.
and international response to recent terrorist activities could
exacerbate these risks. See also Note 12 in our notes to
the consolidated financial statements.
Investor Information
We are subject to the informational requirements of the
Securities Exchange Act of 1934 (the “Exchange Act”).
Therefore, we file periodic reports, proxy statements and other
information with the Securities and Exchange Commission (the
“SEC”). Such reports, proxy statements and other
information may be obtained by visiting the Public Reference
Room of the SEC at 450 Fifth Street, NW, Washington, DC
20549 or by calling the
plumtree
software • 2004
annual report
page eight
SEC at 1-800-SEC-0330. In addition, the SEC maintains an
Internet site (http://www.sec.gov) that contains reports, proxy
and information statements and other information regarding
issuers that file electronically.
You can access financial and other information at our Investor
Relations website. The address is www.plumtree.com/ir. We make
available, free of charge, copies of our annual report on
Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K and amendments to those reports filed
or furnished pursuant to Section 13(a) or 15(d) of the
Exchange Act as soon as reasonably practicable after filing such
material electronically or otherwise furnishing it to the SEC.
Our Corporate Governance Standards, the charters of our Audit
and Finance Committee, our Compensation Committee, our Executive
Committee and our Nominating/Corporate Governance Committee and
our Code of Business Conduct and Ethics (including code of
ethics provisions that apply to our principal executive officer,
principal financial officer, controller and senior financial
officers) are available on our website at www.plumtree.com/ir
under “Corporate Governance Policies.” These items are
also available in print to any stockholder who requests them by
calling (877) GET-PLUM (877-438-7586) in the U.S. and
Canada, and (415) 399-2554 outside the U.S. and Canada.
Our principal headquarters facility is comprised of two
locations with approximately 59,000 square feet of office
space in San Francisco, California under leases expiring
through October 2006. Our international headquarters facility is
located in approximately 6,000 square feet of office space
in Maidenhead, United Kingdom under a lease expiring in July
2005. We believe our facilities are adequate for our current
needs, however alternative locations at reduced rates will be
considered in the future.
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Legal Proceedings |
The material set forth in Note 7 of Notes to Consolidated
Financial Statements in Item 15 of this Form 10-K is
incorporated herein by reference.
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| Item 4. |
Submission of Matters to a Vote of Security Holders |
None.
part ii
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| Item 5. |
Market for Registrant’s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities |
Our common stock is traded on the NASDAQ National Market under
the symbol “PLUM” and has been traded on NASDAQ since
our initial public offering on June 4, 2002. According to
the records of our transfer agent, we
page nine
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annual report
had 99 stockholders of record as of December 31, 2004. The
following table sets forth the high and low sale price of our
common stock, based on the last daily sale, in each of the
quarters since our initial public offering:
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Low Sale Price | |
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High Sale Price | |
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2004
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Fourth Quarter
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$ |
3.17 |
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$ |
4.52 |
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Third Quarter
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2.95 |
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3.58 |
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Second Quarter
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3.14 |
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4.21 |
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First Quarter
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3.93 |
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5.61 |
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2003
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Fourth Quarter
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$ |
4.08 |
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$ |
5.67 |
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Third Quarter
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3.63 |
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4.65 |
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Second Quarter
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3.09 |
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4.51 |
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First Quarter
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2.63 |
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4.50 |
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Dividend Policy
We have never declared or paid dividends on our capital stock.
We presently anticipate that we will retain all of our future
earnings to finance the development and expansion of our
business and provide working capital. Therefore, we do not
anticipate paying any cash dividends on our common stock for the
foreseeable future. The terms of our existing Silicon Valley
Bank line of credit and security agreement prohibit the payment
of dividends, except in specified circumstances.
plumtree
software • 2004
annual report
page ten
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| Item 6. |
Selected Consolidated Financial Data |
The consolidated statements of operations data for the years
ended December 31, 2004, 2003, 2002, 2001 and 2000 and the
consolidated balance sheet data at December 31, 2004, 2003,
2002, 2001 and 2000, are derived from our audited consolidated
financial statements that have been prepared in accordance with
accounting principles generally accepted in the United States of
America. The following data should be read in conjunction with
our consolidated financial statements and related notes and
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” included elsewhere in
this report.
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Years Ended December 31, | |
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2004 | |
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2003 | |
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2002 | |
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2001 | |
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2000 | |
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(In thousands, except per share data) | |
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Revenue
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$ |
84,148 |
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$ |
71,452 |
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$ |
82,919 |
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$ |
81,473 |
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$ |
35,111 |
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Gross margin
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62,151 |
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57,673 |
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64,761 |
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62,350 |
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20,758 |
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Income (loss) from operations
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(10,328) |
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(2,068) |
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2,852 |
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(7,132) |
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(22,046) |
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Net income (loss)
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(9,626) |
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(1,467) |
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2,390 |
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(7,805) |
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(21,683) |
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Net income (loss) per share, basic
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(0.30) |
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(0.05) |
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0.12 |
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(1.21) |
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(3.97) |
|
|
Net income (loss) per share, diluted
|
|
|
(0.30) |
|
|
|
(0.05) |
|
|
|
0.08 |
|
|
|
(1.21) |
|
|
|
(3.97) |
|
|
Cash and cash equivalents and short-term investments
|
|
|
65,034 |
|
|
|
67,689 |
|
|
|
65,322 |
|
|
|
24,040 |
|
|
|
13,098 |
|
|
Working capital
|
|
|
50,310 |
|
|
|
55,177 |
|
|
|
49,185 |
|
|
|
3,769 |
|
|
|
5,102 |
|
|
Total assets
|
|
|
90,811 |
|
|
|
90,762 |
|
|
|
90,722 |
|
|
|
51,260 |
|
|
|
38,001 |
|
|
Long-term liabilities
|
|
|
2,216 |
|
|
|
1,109 |
|
|
|
454 |
|
|
|
437 |
|
|
|
368 |
|
|
Total stockholders’ equity
|
|
|
51,006 |
|
|
|
57,891 |
|
|
|
55,352 |
|
|
|
11,443 |
|
|
|
10,362 |
|
|
|
| Item 7. |
Management’s Discussion and Analysis of Financial
Condition and Results of Operations |
The following discussion of our financial condition and
results of operations should be read in conjunction with our
Consolidated Financial Statements and the related “Notes to
Consolidated Financial Statements” in Item 15, in this
Annual Report on Form 10-K. This discussion contains
forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934. Our
actual results could differ materially from those projected in
the forward-looking statements as a result of a number of
factors, risks and uncertainties, including the risk factors set
forth in this discussion, especially under the caption
“Risk Factors that May Affect our Future Results and the
Market Price of our Stock,” and elsewhere in this
Form 10-K. Generally, the words “may,”
“will,” “could,” “would,”
“anticipate,” “expect,” “intend,”
“believe,” “continue,” or the negatives of
such terms, or other comparable terminology and similar
expressions identify forward-looking statements. The information
included in this Form 10-K is as of the filing date with
the Securities and Exchange Commission and future events or
circumstances could differ significantly from the
forward-looking statements included herein. Accordingly, you
should not place undue reliance on these forward-looking
statements, which reflect our opinions only as of the date of
this Annual Report. We undertake no obligation to publicly
release any revisions to the forward-looking statements after
the date of this document. You should carefully review the risk
factors described in other documents we file from time to time
with the Securities and Exchange Commission, including the
Quarterly Reports on Form 10-Q to be filed in 2005.
Overview and Executive Summary
The following is a summary of the discussion of our financial
condition and results of operations and is qualified in its
entirety by the more complete discussion contained in this
Item 7. This summary should be read in conjunction with
Part I, Item 1, “Business” and is qualified
in its entirety by the risk factors set forth in Item 7 as
described below under “Risk Factors that May Affect Our
Future Results and the Market Price of Our Stock.”
page eleven
plumtree
software • 2004
annual report
Plumtree Software, Inc. (“we”, “Plumtree” or
the “Company”), was incorporated in California on
July 18, 1996 and reincorporated in Delaware on
May 31, 2002. Our initial public offering of
5,000,000 shares of common stock was completed on
June 4, 2002.
We develop, market and sell a suite of software products
integrated into a common platform for deploying advanced Web
applications. These applications are constructed by assembling
with our platform independent services that may be hosted on
different computers, by different organizations. Applications
that combine components in this way are called composite
applications.
We derive our revenue and generate cash from customers from
primarily two sources: (i) product license revenue, and
(ii) software maintenance and services, consisting of
professional services and training revenue. For 2004 and 2003,
our total revenue was $84.1 million and $71.5 million,
respectively, and our net loss for each year was
$9.6 million and $1.5 million, respectively. During
the past three years in general, we have experienced weaknesses
in corporate technology spending, with many customers delaying
new or expanded technology solution implementations.
Nevertheless, we experienced a 17.8% increase in revenues from
2003 to 2004 due primarily to positive contributions from new
management personnel added in 2004, strong public sector sales,
as well as the adoption of the newly released Java and .Net
versions of our principal product. We booked 5 arrangements in
2004 greater than $1 million as compared to 3 such
arrangements in 2003. In addition, international and domestic
services and maintenance revenues increased by
$11.0 million or 29.4% from 2003.
In addition to total revenue and net income (loss), in
evaluating our business, management considers, among many other
factors, the following:
|
|
| • |
Revenue by category (license, maintenance and professional
services and training): |
|
|
|
| |
• |
License. Our license revenue for the year ended
December 31, 2004 was $35.7 million, a 4.9% increase
over the year ended December 31, 2003, resulting primarily
from positive contributions made by new management personnel
added in 2004, strong public sector sales, as well as the
adoption of the newly released Java and .Net versions of our
product. In 2005, we plan to invest in the development of
additional products as well as international and channel sales
in an effort to increase our license revenue. |
| |
| |
• |
Maintenance, professional services and training. We offer
(i) professional services to deploy the Plumtree Corporate
Portal and other products at customer sites, and to train
alliance members, including technology vendors and systems
integrators; (ii) maintenance and customer care through
technical support and assigned account managers; and
(iii) training classes designed to provide our customers
and alliance members with the knowledge and tools necessary to
deploy, administer and expand the portal within the enterprise.
Revenue from maintenance and technical support in 2004 increased
$3.1 million, or 13.8%, from 2003 to $25.5 million,
primarily as a result of an increase in maintenance revenue from
our new customers as well as from renewals of maintenance
contracts by our installed base of customers. Revenue
attributable to professional services increased
$6.6 million, or 54.8%, from 2003 to $18.5 million in
2004. This increase was primarily the result of increased
headcount within the professional services department from 59
consultants in 2003 to 65 consultants in 2004 and an increase in
utilization from 65% in 2003 to 72% in 2004. We also used more
subcontractors to perform professional services in 2004.
Training revenue increased in 2004 by approximately
$1.1 million or 62.2% from 2003. We expect our maintenance,
professional services and training revenue in general to
increase in 2005, primarily due to increased maintenance revenue
from both new customers as well as renewals from our installed
customer base. |
plumtree
software • 2004
annual report
page twelve
|
|
| • |
Deferred revenue balances: |
|
|
|
| |
• |
Our total deferred revenue balance at December 31, 2004 was
$22.7 million, of which $692,000 relates to deferred
license revenue, $20.6 million relates to deferred
maintenance revenue and $1.4 million relates to deferred
professional services and training revenue. This compares to
total deferred revenue of $19.0 million at
December 31, 2003. The increase in deferred revenue during
2004 was driven by an increase in deferred maintenance revenue
of $4.0 million and an increase in deferred professional
services and training revenue of $138,000, offset by a decrease
in deferred license revenue of $506,000. In general, we enter
into maintenance contracts with customers that span a 12-month
period and are renewable on an annual basis. As a result of
increased maintenance contracts that span over multiple terms,
we have classified $1.9 million and $661,000 as long-term
deferred revenue as of December 31, 2004 and
December 31, 2003, respectively. |
| |
| |
• |
Deferred license revenue decreased $506,000 in 2004 as compared
to 2003 due primarily to the recognition of revenue on customer
contracts for which revenue recognition criteria were not met in
2003, but were met in 2004. These contracts include certain
third party subscription agreements that are resold by us as
well as contracts that include extended payment terms. |
| |
| |
• |
Deferred maintenance revenue increased $4.0 million in 2004
as compared to 2003, primarily as a result of an increase in
deferred maintenance revenue from new customers as well as
renewals of maintenance contracts by our installed base of
customers. In addition, more contracts in 2004 included
maintenance contracts that span over multiple terms. |
| |
| |
• |
Deferred professional services and training revenue increased
$138,000 in 2004 as compared to 2003 as more of our customers at
the end of 2004 prepaid for services and training than in 2003. |
|
|
| • |
The number of license revenue transactions and breakdown of new
customers versus repeat customers: During 2004, we closed 309
license transactions, including 127 new customers or 41% of our
total license transactions and 182 renewal orders or 59% of our
total license transactions. Since our inception, the total
number of customers is over 700. During 2003, we closed 322
license transactions, including 128 new customers or 40% of our
total license transactions and 194 renewal orders or 60% of our
total license transactions. |
| |
| • |
Revenue by geographic region: We operate our business in two
geographic regions: the United States and international, which
consists of Europe, Middle East and Africa (“EMEA”),
Japan and Asia-Pacific (“APAC”) and Canada. In 2004,
72% of our revenue was generated within the United States, with
international revenue accounting for 28% of our revenue.
International revenues increased 57% from $14.8 million in
2003 to $23.3 million in 2004. |
| |
| • |
Cash and cash equivalents and short-term investments: |
|
|
|
| |
• |
At December 31, 2004, our cash, cash equivalents and
short-term investments were $65 million, down 4% from
$67.7 million at December 31, 2003. We invested
heavily in the business and products during 2004. We expect that
our primary utilization of cash in 2005 will continue to be
salaries, commissions, bonuses and other payroll related costs. |
| |
| |
• |
Net cash used in operations in the year ended December 31,
2004 was $1.8 million compared to net cash provided by
operations of $862,000 for the year ended December 31,
2003. The decrease in net cash flows from operations was driven
primarily by management’s focus on investing money in the
business to facilitate current and future growth. This
contributed to a net loss of $9.6 million for 2004 as
compared to a net loss of $1.5 million in 2003. |
page thirteen
plumtree
software • 2004
annual report
Critical Accounting Policies
Our consolidated financial statements are prepared in accordance
with accounting principles generally accepted in the United
States of America or “GAAP.” These accounting
principles require us to make certain estimates, judgments and
assumptions. We believe that the estimates, judgments and
assumptions upon which we rely are reasonable based upon
information available to us at the time that these estimates,
judgments and assumptions are made. These estimates, judgments
and assumptions can affect the reported amounts of assets and
liabilities as of the date of the financial statements, as well
as the reported amounts of revenues and expenses during the
periods presented. To the extent there are material differences
between these estimates, judgments or assumptions and actual
results, our financial statements will be affected. The
significant accounting policies that we believe are the most
critical to aid in fully understanding and evaluating our
reported financial results include the following:
|
|
| • |
Software revenue recognition; |
| |
| • |
allowance for doubtful accounts; |
| |
| • |
income taxes; and |
| |
| • |
determination of the fair value of stock options granted to
employees. |
Software Revenue Recognition
Our software arrangements typically include: (i) an end
user license that provides for an initial fee in exchange for a
customer’s use of our products in perpetuity based on a
specified number of users or CPUs; (ii) a maintenance
arrangement that provides for technical support and product
updates over a period of 12 months; and (iii) a
professional service arrangement on a time and materials basis.
We recognize software revenue using the residual method pursuant
to the requirements of Statement of Position No. 97-2
“Software Revenue Recognition,” as amended by
Statement of Position No. 98-9, “Software Revenue
Recognition with Respect to Certain Arrangements.” Under
the residual method, revenue is recognized when
Plumtree-specific objective evidence of fair value exists for
all of the undelivered elements in the arrangement (i.e.,
professional services and maintenance), but does not exist for
one or more of the delivered elements in the arrangement (i.e.,
the software product). We allocate revenue to each undelivered
element based on its respective fair value, with the fair value
determined by the price charged when that element is sold
separately. We determine the fair value of the maintenance
portion of the arrangement based on consistent pricing of
maintenance and maintenance renewals as a percentage of net
license fees. If evidence of fair value cannot be established
for the undelivered elements of a license agreement, the entire
amount of revenue from the arrangement is deferred and
recognized over the period that these elements are delivered.
For substantially all of our software arrangements, we defer
revenue for the fair value of the maintenance and professional
services to be provided to the customer and recognize revenue
for the software license when persuasive evidence of an
arrangement exists and delivery has occurred, provided the fee
is fixed or determinable, and collection is deemed probable. We
evaluate each of these criteria as follows:
|
|
| • |
Evidence of an arrangement: We consider a non-cancelable
agreement signed by us and the customer to be evidence of an
arrangement. |
| |
| • |
Delivery: Delivery is considered to occur when media containing
the licensed programs is provided to a common carrier or, in the
case of electronic delivery, the customer is given access to the
licensed programs. |
| |
| • |
Acceptance: Our typical end user license agreement does not
include customer acceptance provisions. If the arrangement
specifies acceptance provisions, we defer the revenue until the
earlier of written acceptance by the customer or the
customer’s acceptance rights expire. |
plumtree
software • 2004
annual report
page fourteen
|
|
| • |
Fixed or determinable fee: We consider the fee to be fixed or
determinable if the fee is not subject to refund or adjustment
and is on standard payment terms. If the arrangement fee is not
fixed or determinable, we recognize the revenue as amounts
become due and payable. |
| |
| • |
Collection is deemed probable: We conduct reviews for all
significant transactions at the time of the arrangement to
determine the credit worthiness of the customer. Collection is
deemed probable if we expect that the customer will be able to
pay amounts under the arrangement as payments become due. If we
determine that collection is not probable, we defer the revenue
and recognize the revenue upon cash collection. |
We recognize revenue from arrangements involving the resale of
third party software based on the criteria outlined in EITF
99-19 “Reporting Revenue Gross as a Principal versus Net as
an Agent”. In addition, we require proof of sell-through
for sales to resellers.
Allowance for Doubtful Accounts
We have provided an allowance for doubtful accounts of $787,000
as of December 31, 2004 for estimated losses resulting from
the inability of our customers to make their required payments.
The allowance for doubtful accounts changes based on the overall
level of accounts receivable, past history of collection, and
the aging of customer accounts.
The total allowance for doubtful accounts is comprised of a
specific reserve and a general reserve. We regularly review the
adequacy of our allowance for doubtful accounts after
considering the size of the accounts receivable aging, the age
of each invoice, each customer’s expected ability to pay
and our collection history with each customer. Unless specific
indications arise earlier, we review any invoice greater than
120 days past due to determine if an allowance is
appropriate based on the risk category. In addition, we maintain
a general reserve for all invoices billed, and not included in
the specific reserve, by applying a percentage based on each
30-day age category. For unbilled invoices, we generally apply a
percentage to the entire balance. In determining these
percentages, we analyze our historical collection experience and
current economic trends.
In calculating the specific reserve, we identify specific
high-risk accounts where collection is deemed unlikely. In
calculating the general reserve, we reduce the gross accounts
receivable balance by any specific reserves as well as amounts
that have been billed, but not recognized as revenues (deferred
revenues). The remaining balance is segregated into 30-day aged
categories and a reserve percentage is applied to each category.
If the historical data we use to calculate the allowance
provided for doubtful accounts does not reflect the future
ability to collect outstanding receivables, additional
provisions for doubtful accounts may be needed and the future
results of operations could be materially affected. However,
historically the reserve has proven to be adequate.
Income Taxes
We provided a valuation allowance of $19.5 million against
the entire net deferred tax asset as of December 31, 2004.
The valuation allowance was recorded given the accumulated
losses we have incurred and uncertainties regarding our future
operating profitability and taxable income. Our income tax
provision is primarily related to income and withholding taxes
on sales and income generated in non-U.S. and domestic
state tax jurisdictions for which no U.S. benefit is
currently recognizable. For the years ended December 31,
2004 and 2003, we recorded an income tax provision of $581,000
and $824,000, respectively, related to these tax liabilities. We
continue to monitor and evaluate exposures related to doing
business in international jurisdictions.
Determination of Fair Value of Options Granted to
Employees
In connection with the granting of certain stock options, we
recorded deferred stock-based compensation charges in the
periods before our initial public offering representing the
difference between the deemed fair
page fifteen
plumtree
software • 2004
annual report
value of our common stock for accounting purposes and the option
exercise price. We determined the deemed fair value based upon
several factors including our operating performance, issuances
of our convertible preferred stock and valuations of comparable
publicly traded software companies. For the year ended
December 31, 2001, we recorded $4.4 million of
deferred stock-based compensation and we recognized
$4.5 million of stock-based compensation expense. For the
year ended December 31, 2002, we did not record any
deferred stock-based compensation and we recognized
$3.5 million of stock-based compensation expense. For the
years ended December 31, 2004 and 2003, we did not record
any deferred stock-based compensation and we recognized $480,000
and $1.4 million, respectively of stock-based compensation
expense. We apply the intrinsic value method in accounting for
employee stock options in accordance with Accounting Principles
Board Opinion No. 25 (“APB 25”),
Accounting for Stock Issued to Employees. Accordingly, we
recognize no compensation expense with respect to stock-based
awards to employees with exercise prices equal to the fair
market value of the award on the date of grant. Had different
assumptions or criteria been used to determine the deemed fair
value of the stock, materially different amounts of stock-based
compensation could have been reported. Had we applied fair value
accounting for our stock options as outlined in Statement of
Financial Accounting Standards No. 123, Accounting for
Stock Based Compensation, and Statement of Financial
Accounting Standards No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure, our operating
results (in thousands) would have been affected as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Years Ended December 31, | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
|
2002 | |
| | |
|
Net income (loss) as reported
|
|
$ |
(9,626) |
|
|
$ |
(1,467) |
|
|
$ |
2,390 |
|
|
Add: Stock-based employee compensation expense included in net
income (loss)
|
|
|
480 |
|
|
|
1,363 |
|
|
|
3,500 |
|
|
Deduct: Stock-based employee compensation expense determined
under fair value based method for all awards
|
|
|
(6,864) |
|
|
|
(8,429) |
|
|
|
(6,377) |
|
| |
|
|
|
Pro forma net loss under SFAS 123
|
|
$ |
(16,010) |
|
|
$ |
(8,533) |
|
|
$ |
(487) |
|
| |
|
|
|
Net income (loss) per common share—basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported under APB 25
|
|
$ |
(0.30) |
|
|
$ |
(0.05) |
|
|
$ |
0.12 |
|
|
Pro forma under SFAS 123
|
|
$ |
(0.50) |
|
|
$ |
(0.28) |
|
|
$ |
(0.02) |
|
|
Net income (loss) per common share—diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
As reported under APB 25
|
|
$ |
(0.30) |
|
|
$ |
(0.05) |
|
|
$ |
0.08 |
|
| |
Pro forma under SFAS 123
|
|
$ |
(0.50) |
|
|
$ |
(0.28) |
|
|
$ |
(0.02) |
|
plumtree
software • 2004
annual report
page sixteen
Results of Operations
The following table sets forth the statements of operations data
for each of the periods indicated as a percentage of total
revenue.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Years Ended | |
| |
|
December 31, | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
|
2002 | |
| | |
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Licenses
|
|
|
42.5 |
% |
|
|
47.6 |
% |
|
|
59.8 |
% |
| |
Services and maintenance
|
|
|
57.5 |
|
|
|
52.4 |
|
|
|
40.2 |
|
| |
|
|
| |
|
Total revenue
|
|
|
100.0 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cost of licenses
|
|
|
1.6 |
|
|
|
0.9 |
|
|
|
3.8 |
|
| |
Cost of services and maintenance
|
|
|
22.6 |
|
|
|
15.9 |
|
|
|
15.3 |
|
| |
Amortization of stock-based compensation and acquired technology
|
|
|
1.9 |
|
|
|
2.5 |
|
|
|
2.8 |
|
| |
|
|
| |
|
Total cost of revenue
|
|
|
26.1 |
|
|
|
19.3 |
|
|
|
21.9 |
|
| |
|
|
|
Gross margin
|
|
|
73.9 |
|
|
|
80.7 |
|
|
|
78.1 |
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Research and development
|
|
|
29.1 |
|
|
|
28.9 |
|
|
|
21.9 |
|
| |
Sales and marketing
|
|
|
43.3 |
|
|
|
42.8 |
|
|
|
40.1 |
|
| |
General and administrative
|
|
|
12.9 |
|
|
|
9.6 |
|
|
|
8.7 |
|
| |
Restructuring charge
|
|
|
0.4 |
|
|
|
0.7 |
|
|
|
0.5 |
|
| |
Amortization of stock-based compensation
|
|
|
0.4 |
|
|
|
1.6 |
|
|
|
3.4 |
|
| |
|
|
| |
|
Total operating expenses
|
|
|
86.1 |
|
|
|
83.6 |
|
|
|
74.6 |
|
| |
|
|
|
Operating income (loss)
|
|
|
(12.2) |
|
|
|
(2.9) |
|
|
|
3.5 |
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Interest income, net
|
|
|
1.3 |
|
|
|
1.4 |
|
|
|
0.9 |
|
| |
Other income (expense)
|
|
|
0.2 |
|
|
|
0.6 |
|
|
|
(0.1) |
|
| |
|
|
| |
|
Other income, net
|
|
|
1.5 |
|
|
|
2.0 |
|
|
|
0.8 |
|
| |
|
|
|
Income (loss) before income taxes
|
|
|
(10.7) |
|
|
|
(0.9) |
|
|
|
4.3 |
|
|
Provision for income taxes
|
|
|
0.7 |
|
|
|
1.2 |
|
|
|
1.4 |
|
| |
|
|
|
Net income (loss)
|
|
|
(11.4) |
% |
|
|
(2.1) |
% |
|
|
2.9 |
% |
| |
|
|
Year Ended December 31, 2004 and 2003
Revenue
Revenue, which consists of license revenue and service and
maintenance revenue increased from $71.5 million in 2003 to
$84.1 million in 2004.
page seventeen
plumtree
software • 2004
annual report
Licenses. License revenue increased from
$34.0 million in 2003 to $35.7 million in 2004, an
increase of 4.9%. The increase in license revenue was primarily
due to the positive contributions made by new management
personnel added in 2004, strong public sector sales, as well as
the adoption of the newly released Java and .Net versions of our
product. No customer accounted for more than 10% of our revenue
in 2004 and 2003.
Services and Maintenance. Services, including
professional services and training, and maintenance revenue
increased from $37.4 million in 2003 to $48.4 million
in 2004, an increase of 29.4%. Of this $11.0 million
increase, $7.9 million related to professional services,
training, and billed expenses and $3.1 million related to
maintenance revenue. The increase in services revenue resulted
primarily from an increase in domestic and international demand
for larger projects (driving higher utilization), the use of
subcontractors to perform services, the increase in the number
of professional services consultants, and the increased demand
for training on new products. Professional services utilization
in 2004 was 72%, compared to 65% in 2003. The increase in
maintenance revenue resulted primarily from an increased
customer base for 2004 license sales, as well as consistent
renewal rates on maintenance contracts by our installed base of
customers.
The number of professional services consultants increased from
59 to 65 and the number of employees in technical support
increased from 13 to 30 between these periods.
Cost of Revenue
Licenses. Our cost of license consists primarily of
royalty expenses paid to third-party technology vendors,
fulfillment costs for manuals and documentation, and the
amortization of acquired technology. Cost of license increased
from $2.2 million in 2003 to $2.9 million in 2004
primarily due to a one-time credit to expense of $525,000 in
2003 associated with a reduction in the estimated liability of
an expired contract. We also incurred additional royalty
expenses in 2004 related to two agreements with third party
software providers in which we resold their software to the
customer totaling $445,000. Referral fees paid to channel
partners were minimal in 2004, but we expect these fees to
increase in 2005 as we increase our transactions with channel
partners.
Services and Maintenance. Cost of services and
maintenance increased from $11.3 million in 2003 to
$19.0 million in 2004. Cost of professional services
includes all related costs associated with professional services
personnel as well as subcontract labor. Cost of services
increased from $9.1 million in 2003 to $15.3 million
in 2004. The $6.2 million increase in cost of professional
services is a result of an increase of $2.9 million for
salaries and related expenses, $1.7 million related to
subcontractors (primarily international projects), and
$1.6 million in billed and unbilled travel expenses and
other costs. Cost of maintenance includes all related costs
associated with technical support personnel as well as contract
labor. Cost of maintenance increased to $3.7 million in
2004 as compared to $2.2 million in 2003. The
$1.5 million increase in cost of maintenance is a result of
an increase of $1.4 million for salaries and related
expenses and $325,000 in other expenses, offset by a decrease of
$200,000 in contract labor costs. From 2003 to 2004, the number
of professional services employees increased from 59 to 65
employees, while the number of technical support employees
increased from 13 to 30 employees.
Amortization of Stock-Based Compensation and Acquired
Technology. Amortization of stock-based compensation related
to cost of revenue was $108,000 in 2004 and $247,000 in 2003.
The amortization of acquired technology was $1.5 million
and $1.6 million in 2004 and 2003, respectively. The
unamortized value of deferred stock-based compensation and
acquired technology remaining as of December 31, 2004 was
$165,000 and $0, respectively.
Operating Expenses
Research and Development. Research and development
expenses increased from $20.7 million in 2003 to
$24.5 million in 2004. This $3.8 million increase was
due primarily to a $2.9 million increase in salaries and
related costs, $800,000 in outsourced contract labor, and
$100,000 in travel and other costs. During 2004,
plumtree
software • 2004
annual report
page eighteen
we made significant investments in the development of the Java
and .Net versions of our product. As of December 31, 2003,
we had 128 employees in engineering, compared to 137 employees
as of December 31, 2004. In 2005, we plan to continue to
develop new products and releases as well as increasing
outsourced contract labor to achieve development timelines.
Accordingly, we expect our research and development expenses, in
absolute dollars, to increase.
Sales and Marketing. Sales and marketing expenses
increased from $30.6 million in 2003 to $36.4 million
in 2004. This $5.8 million increase was due primarily to an
increase in salaries and related costs of $2.9 million,
increased sales commissions expense of $1.7 million
resulting from increased license and maintenance sales, and an
increase in marketing program expenditures and other costs of
$1.2 million. As of December 31, 2003, we had 106
employees in sales and 17 employees in marketing as compared to
117 employees in sales and 13 in marketing as of
December 31, 2004. In 2005, we will increase focus on
channel sales opportunities and expand lead generation
activities, which are expected to contribute to an increase in
sales and marketing costs.
General and Administrative. General and administrative
expenses increased from $6.8 million in 2003 to
$10.9 million in 2004. This $4.1 million increase was
due primarily to an increase of $1.6 million in legal
costs, $700,000 for audit and tax compliance, $675,000 for
salaries and related costs, $450,000 for bad debt expenses as
prior year included a net benefit of $111,000, and $675,000 for
costs associated with being a publicly traded company and other
costs. The cost of continuing to be a publicly traded company,
specifically related to our compliance with the requirements of
the Sarbanes Oxley Act, will continue to be a significant
component of our general and administrative costs. As of
December 31, 2003 and 2004, we had 27 and 37 general and
administrative personnel respectively.
Restructuring Charge. In 2004 and 2003, we recorded
restructuring charges of $307,000 and $475,000, respectively,
primarily related to reductions in employee headcount.
Amortization of Stock-Based Compensation. Amortization of
stock-based compensation related to operating expenses was
$372,000 in 2004 and $1.1 million in 2003. The unamortized
value of deferred stock-based compensation remaining as of
December 31, 2004 was $165,000. Decline in expense is due
to the accelerate method used in accordance with FASB
Interpretation (FIN) No. 28 Accounting for Stock
Appreciation Rights and Other Variable Stock Option or Award
Plans.
Other Income, Net
Other income, net primarily consists of foreign currency gains
and losses on transactions denominated in foreign currencies,
interest income earned on cash and cash equivalents and interest
expense incurred on our financing obligations. The net balance
of other income decreased from $1.4 million in 2003 to
$1.3 million in 2004. Interest income on cash and
investments was $1.1 million in both 2004 and 2003. In
2004, we recognized a net gain of $118,000 on foreign currency
which consisted of net losses of $763,000 related to the
revaluation of international cash denominated in other than the
functional currencies, offset by a $881,000 gain on revaluation
of the short-term portion of an international inter-company
payable. See Note 2 in Consolidated Financial Statements.
In 2003, we recognized a $475,000 gain on the sale of an
investment, net of legal fees and commissions that was offset by
$140,000 in interest expense on financing obligations. We do not
expect to benefit from similar gains on revaluation of
international inter-company payables or sales of investments in
future periods. We enter into foreign currency contracts to
hedge known exposures related to foreign denominated receivables
and inter-company balances that are considered short-term in
nature and thus are marked to market with foreign exchange gains
and losses taken to the profit and loss statement. Our foreign
exchange policy is designed to mitigate known exposures as
identified. However, there is a risk that certain foreign
exchange exposures outside of our current program may adversely
affect earnings in future periods.
page nineteen
plumtree
software • 2004
annual report
Provision for Income Taxes
We recorded an income tax provision of $581,000 and $824,000 for
the years ended December 31, 2004 and 2003, respectively,
related to income and withholding taxes on sales and income
generated in non-U.S. and domestic state tax jurisdictions
for which no U.S. benefit is currently recognizable.
Year Ended December 31, 2003 and 2002
Revenue
Revenue decreased from $82.9 million in 2002 to
$71.5 million in 2003. No customer accounted for more than
10% of our revenue for the years ended December 31, 2003
and 2002.
Licenses. License revenue decreased from
$49.6 million in 2002 to $34.0 million in 2003, a
decrease of 31%. The decrease in license revenue was primarily
due to the downturn in the overall market for information
technology and software, offset in part by the addition of over
125 new license customers in 2003.
Services and Maintenance. Services and maintenance
revenue increased from $33.3 million in 2002 to
$37.4 million in 2003, an increase of 12%. This increase
was due primarily to an increase in maintenance revenue from new
customers as well as renewals of maintenance contracts by our
installed base of customers. This increase is comprised of
$4.0 million in additional maintenance revenue and an
increase of $80,000 in professional services, training, billed
expenses and partnership revenue. The number of professional
services consultants increased from 46 to 59 and the number of
employees in technical support increased from 12 to 13 between
these periods.
Cost of Revenue
Licenses. Cost of license decreased from
$4.8 million in 2002 to $2.2 million in 2003 primarily
due to a $2.6 million decrease in royalty expense. We
released enhanced versions of our portal product which
incorporate proprietary technology not subject to royalty
payments replacing certain royalty bearing functionality
previously provided by third-party vendors. In 2003 we also had
a one-time credit to expense of $525,000 associated with a
reduction in the estimated liability of an expired contract.
Services and Maintenance. Cost of services and
maintenance decreased from $12.7 million in 2002 to
$11.3 million in 2003. Cost of professional services
decreased from $10.5 million in 2002 to $9.1 million
in 2003 primarily due to a reduction in our use of third-party
consultants to deploy our products offset in part by an increase
in the number of professional services staff. Cost of
maintenance was $2.2 million in both 2002 and 2003.
Amortization of Stock-Based Compensation and Acquired
Technology. Amortization of stock-based compensation related
to cost of services was $694,000 in 2002 and $246,000 in 2003.
The amortization of acquired technology was $1.6 million in
both 2003 and 2002.
Operating Expenses
Research and Development. Research and development
expenses increased from $18.1 million in 2002 to
$20.7 million in 2003. This increase was due to an increase
in the average number of employees within our in-house
development staff tasked to the enhancement and expansion of our
product line. At December 31, 2002, we had 105 employees in
engineering, compared to 128 employees at December 31, 2003.
Sales and Marketing. Sales and marketing expenses
decreased from $33.3 million in 2002 to $30.6 million
in 2003. This decrease was due primarily to reduced sales
commissions expense of $2.8 million resulting from
decreased license sales offset by an increase in the number of
sales and marketing personnel. At December 31, 2002, we had
92 employees in sales and 15 employees in marketing as compared
to 106 employees in sales and 17 in marketing at
December 31, 2003.
plumtree
software • 2004
annual report
page twenty
General and Administrative. General and administrative
expenses decreased from $7.2 million in 2002 to
$6.8 million in 2003. This decrease was primarily due to a
reduction in bad debt expense of approximately $600,000 in 2003
as compared to 2002. At December 31, 2002 and 2003, we had
24 and 27 general and administrative personnel respectively.
Restructuring Charge. In 2003, we recorded a
restructuring charge of $475,000 primarily related to reductions
in employee headcount. In 2002, we recorded a restructuring
charge of $441,000 primarily related to reductions in employee
headcount.
Amortization of Stock-Based Compensation. Amortization of
stock-based compensation related to operating expenses was
$2.8 million in 2002 and $1.1 million in 2003.
Other Income (Expense), Net
Other income, net primarily consists of foreign currency gains
and losses on transactions denominated in foreign currencies,
interest income earned on cash and cash equivalents and interest
expense incurred on our financing obligations. The net balance
of other income increased from $718,000 in 2002 to
$1.4 million in 2003 primarily due to a gain on the sale of
an investment and an increase in interest income, net of
expenses, offset by a decrease in the gain (loss) on foreign
currency transactions. During 2003 we recognized a $475,000 gain
on the sale of an investment, net of legal fees and commissions.
We do not expect to benefit from similar gains on sales of
investments in future periods. Interest income, net of interest
expense, increased to $970,000 for 2003 from $773,000 in 2002
primarily from a increase in interest income primarily from the
full year of interest earned on our cash proceeds from our
initial public offering and a decrease in interest expense due
to the expiration of our capital lease liability in 2003. The
effect of foreign currency transactions was a loss of $(45,000)
for 2003 as compared to a gain of $70,000 in 2002.
Provision for Income Taxes
We recorded an income tax provision of $1.2 million and
$824,000 for the years ended December 31, 2002 and 2003,
respectively related to income and withholding taxes on sales
and income generated in non-U.S. and domestic state tax
jurisdictions for which no U.S. benefit is currently
recognizable.
Liquidity and Capital Resources
Since 2001, we have primarily financed our operations and
capital expenditures through cash flow from operations. In June
2002, we completed our initial public offering resulting in net
proceeds of $37.9 million. As of December 31, 2004, we
had $65.0 million of cash and cash equivalents and
short-term investments and $50.3 million in working capital.
Net cash used in operations in the year ended December 31,
2004 was $1.8 million compared to net cash provided by
operations of $862,000 for the year ended December 31,
2003. The decrease in net cash flows from operations was driven
primarily by management’s focus on investing money in the
business to facilitate current and future growth. This
contributed to a net loss of $9.6 million for 2004 as
compared to a net loss of $1.5 million in 2003.
Capital expenditures were $2.2 million and $823,000 for the
years ended December 31, 2004 and 2003, respectively. Our
capital expenditures consisted of purchases of items to manage
our operations, including computer hardware and software, office
furniture and equipment and leasehold improvements.
In addition, the Company recorded $2.5 million in cash
provided by financing activities resulting from the exercise of
stock options and purchases of common stock through the
Company’s Employee Stock Purchase Plan (ESPP).
We have a $3.1 million revolving line of credit with
Silicon Valley Bank that matured in August 2004. On
October 25, 2004 we signed an amended agreement with
Silicon Valley Bank that increased our credit limit to
$4 million and eliminated the minimum cash balance
requirement that previously existed related to
page twenty-one
plumtree
software • 2004
annual report
United States bank accounts and replaced this requirement
with other financial covenants. To secure any outstanding loans,
we have granted Silicon Valley Bank a security interest in our
assets, including our accounts receivable. Interest on the
revolving line of credit is payable monthly and accrues at one
percentage point above the prime rate as announced by Silicon
Valley Bank. As of December 31, 2004, no amounts were
outstanding under this facility. We have issued a letter of
credit for $2.5 million to the landlord of our corporate
headquarters, which is enforceable against the facility. We have
limitations on declaring and paying dividends, incurring any
non-permitted indebtedness and acquiring the capital stock of
any other company under our loan agreements with Silicon Valley
Bank. As of December 31, 2004, we were in compliance with
all financial covenants under the new revolving line of credit
agreement with Silicon Valley Bank.
We expect to maintain our current level of operating expenses
for the foreseeable future in order to execute our business
plan. As a result, these operating expenses, as well as planned
capital expenditures, may constitute a material use of our cash
resources. In addition, we may utilize cash resources to fund
acquisitions of complementary businesses, technologies or
product lines. We believe that our cash and cash equivalents and
short-term investments on hand will be sufficient to meet our
cash requirements for at least the next 12 months,
including working capital requirements and planned capital
expenditures.
Contractual Obligations
The following table summarizes information about our contractual
obligations as of December 31, 2004 (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Payments Due by Period |
| |
|
|
|
|
| |
|
|
|
Less than | |
|
1-3 | |
|
3-5 |
|
More Than |
| Contractual Obligations |
|
Total | |
|
1 Year | |
|
Years | |
|
Years |
|
5 Years |
| |
|
Operating Lease Obligations
|
|
$ |
6,089 |
|
|
$ |
3,537 |
|
|
$ |
2,552 |
|
|
$ |
— |
|
|
$ |
— |
|
|
Liabilities reflected on the balance sheet(1)
|
|
|
16,785 |
|
|
|
16,785 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
| |
Total
|
|
$ |
22,874 |
|
|
$ |
20,322 |
|
|
$ |
2,552 |
|
|
$ |
— |
|
|
$ |
— |
|
| |
|
|
|
|
| (1) |
Includes only expected cash payments and therefore excludes
deferred revenue as well as deferred rent. |
Off-Balance Sheet Arrangements
As part of our ongoing business, we do not participate in
transactions that generate relationships with unconsolidated
entities or financial partnerships, such as entities often
referred to as structured finance or special purpose entities,
often established for the purpose of facilitating off-balance
sheet arrangements or other contractually limited purposes. All
of our subsidiaries are 100% owned by us and are fully
consolidated into our consolidated financial statements.
Recent Accounting Pronouncements
See Note 2 of the Consolidated Financial Statements for a
full description of recent accounting pronouncements including
their respective expected dates of adoption and effects on
results of operations and financial condition.
Risk Factors that May Affect Our Future Results and the
Market Price of Our Stock
Risks Relating to Our Business
|
|
|
Our efforts to establish and
maintain the Enterprise Web Suite and related products as an
enterprise-wide platform or to develop and market Integrated
Activity Management products and services may fail and, as a
result, our revenue may decrease and our ability to compete
successfully may be impaired. |
We have expended, and plan to continue to expend, significant
resources to establish our Enterprise Web Suite as an
enterprise-wide platform for integrating an organization’s
diverse systems and applications and for
plumtree
software • 2004
annual report
page twenty-two
building new applications. Plumtree Collaboration Server,
Plumtree Studio Server and Content Server are our most
significant new product developments since the introduction of
the Plumtree Corporate Portal. We are also beginning to focus
our strategic efforts on Integrated Activity Management
(“IAM”), a new category of composite applications that
integrates systems, people and processes. To succeed, we must
develop and market both enhancements to our historic core
Plumtree Corporate Portal and related products and introduce new
products that define the IAM product category. These and other
new products and subsequent major version releases of our
products may not achieve widespread market acceptance.
Even if we are successful in establishing our products as an
enterprise-wide platform or in introducing IAM product and
services, we face, among others, the following risks:
|
|
| • |
We will likely face new competitors, and some of our current
system integrators and technology partners with whom we work
closely may come to view our new products and services as
competitive with their own products and services. |
| |
| • |
Our Enterprise Web Suite is designed to be open and integrate
existing data and processes from enterprise’s systems. To
remain competitive, we must increase the number of systems and
applications that can be integrated into and built with our
portal platform as Web services. These activities have strained
and will increasingly strain our development and support
infrastructure and may require us to add significant additional
personnel. |
| |
| • |
The IAM market is new. We may expend significant time,
engineering, marketing and other resources in attempting to
enter into and develop products for the IAM market, which may
not develop in the near-term or at all. Our efforts to address
the IAM market may also detract from our Enterprise Web Suite
focus and historic Plumtree Corporate Portal business or result
in customer or market confusion regarding our strategy. |
| |
| • |
The industry may develop and adopt technology standards
different from the standards presently incorporated in our
products resulting in our products failing to achieve market
acceptance or becoming less competitive. |
|
|
|
We have a history of losses, and
given expected increases in operating expenditures, we may never
sustain profitability on a quarterly or annual basis, which
would have a harmful effect on our business and the value of our
common stock. |
Other than brief profitability in 2002, we incurred substantial
net losses in each year since inception in 1996. For the year
ended December 31, 2004 and 2003, we had a net loss of
$9.6 million and $1.5 million, respectively. As of
December 31, 2004, we had an accumulated deficit of
approximately $50.6 million.
In 2004, our total operating expenses increased from
$59.7 million to $72.5 million. As we continue to
invest in the business, our results of operations may fluctuate.
If our revenue does not increase or if our expenses increase at
a greater pace than our revenue, we will not be able to achieve
or sustain operating profitability on a consistent basis, if at
all. Our ability to increase revenue and achieve and sustain
operating profitability also will be affected by other risks and
uncertainties described in this section and in
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations.” Our failure to
operate profitably or control negative cash flows on a quarterly
or annual basis could harm our business and the value of our
common stock.
|
|
|
Because our quarterly operating
results are volatile and difficult to predict, our operating
results in one or more future periods are likely to fluctuate
significantly, and if we fail to meet the expectations of
securities analysts or investors, our stock price could decline
significantly. |
As a result of the evolving nature of the market in which we
compete, our quarterly operating results have varied
significantly in the past and are likely to continue to vary
significantly in the future. Our success depends
page twenty-three
plumtree
software • 2004
annual report
upon our ability to increase sales of our products and services
to our new and existing customers. Our license revenue is
comprised substantially of one-time license fees. As a result,
we will be required to regularly and increasingly attract and
contract with additional customers for substantial license fees
on a timely basis to realize comparable or increased license
revenue. Our services and maintenance revenue historically has
been comprised almost entirely of consulting fees and technical
support and maintenance fees. Our services revenue has a
substantially lower gross margin than our license revenue. To
the extent the percentage of our services revenue increases
compared to the percentage of license revenue, our profitability
would be impaired. Our maintenance contracts are generally
renewable for 12-month periods. If our customers elect not to
renew their maintenance contracts or seek to renegotiate price
each year, our revenue could decline.
We expect to continue to experience significant fluctuations in
our results of operations due to a variety of factors, some of
which are outside of our control, including:
|
|
| • |
introduction of products and services and enhancements by us and
our competitors; |
| |
| • |
competitive factors that affect our pricing; |
| |
| • |
the timing and magnitude of our capital expenditures, including
costs relating to the management and expansion of our operations
within the United States and internationally; |
| |
| • |
increase in the amount of third party products and services that
we use in our products or resell with royalties attached; |
| |
| • |
the size and timing of customer orders and deployments,
particularly large orders and deployments, some of which may
represent more than 10% of total revenue during a particular
quarter; and |
| |
| • |
costs associated with litigation, regulatory compliance and
other corporate events such as operational reorganizations. |
As a result of these factors, we believe that quarter-to-quarter
comparisons of our revenue and operating results are not
necessarily meaningful, and that these comparisons are not
accurate indicators of future performance. Because our staffing
and operating expenses are based on anticipated revenue levels,
and because a high percentage of our costs are fixed, small
variations in the timing of the recognition of specific revenue
could cause significant variations in operating results from
quarter to quarter. If we are unable to adjust spending in a
timely manner to compensate for any revenue shortfall, any
significant revenue shortfall would likely have an immediate
negative effect on our operating results. If our operating
results in one or more future quarters fail to meet the
expectations of securities analysts or investors, we would
expect to experience an immediate and significant decline in the
trading price of our stock.
|
|
|
If we do not expand our customer
base, we may be unable to increase our revenue and our stock
price will likely decline. |
The market for our products and services is newly emerging and
additional customers may not adopt our products. Accordingly, we
cannot accurately estimate the potential demand for our products
and services. We believe that market acceptance of our products
and services depend principally on our ability to:
|
|
| • |
withstand downturns in general economic conditions or conditions
that slow corporate spending on software products, such as the
downturn we are currently experiencing in the overall software
market; |
| |
| • |
enhance our products to meet changing customer demand; |
| |
| • |
effectively market the Enterprise Web Suite and related products
and services; |
| |
| • |
hire, train and retain a sufficient number of qualified,
engineering, sales and marketing personnel; |
| |
| • |
provide high-quality and reliable customer support for our
products; |
plumtree
software • 2004
annual report
page twenty-four
|
|
| • |
distribute and price our products and services to be more
appealing to customers than those of our competitors or of our
customers’ internally-developed solutions; and |
| |
| • |
develop and maintain a favorable reputation among our customers,
potential customers and participants in the software industry
who can serve as reference accounts for our products and
services. |
Some of these factors are beyond our control. If our customer
base does not expand, we may never become consistently
profitable.
|
|
|
Because our quarterly results
often depend on a small number of large orders, if we were
unable to complete one or more of these orders during any future
period, our quarterly operating results and the trading price of
our stock could be harmed. |
We derive a significant portion of our software license revenue
in each quarter from a small number of relatively large orders.
For example, in the quarter ended December 31, 2004, our
top 10 customers accounted for approximately 23% of our total
revenue. Our operating results and stock price would be harmed
if we were unable to complete one or more substantial license
sales during any future quarterly period.
|
|
|
We typically do substantial
business with the United States government and other domestic
and international public entities, and our ability to sell to
governments is susceptible to unpredictable budgetary and policy
changes and involves specific risks that could harm our
business. |
We derive a significant portion of our software license and
service revenue from governmental entities. Sales to government
entities can be adversely affected by budgetary cycles, changes
in policy and other political events outside of our control.
Governments often retain the ability to cancel contracts at
their convenience in times of emergency or under other
circumstances. Additionally, the government may require special
intellectual property rights and other license terms generally
more favorable those typical in private commercial contracts,
these requirements involve more licensing cost and increased
contract risk for us. The government procurement process in
general can be long and complex and being a government vendor
subjects us to additional regulations. The government often
retains the right to audit its vendors for compliance. In
February 2005, we became aware that in connection with certain
sales entered into during the fourth quarter of 2004, we did not
comply with the terms of an agreement with the U.S. General
Services Administration (GSA). As a result, we voluntarily
offered GSA a temporary price reduction. In response, the matter
was referred for further consideration within the GSA. The GSA
may decide to accept our offer of a temporary price reduction,
or it may elect to take other action, such as an audit of our
compliance with the terms of the applicable GSA contract. Any
such audit could prove costly and may distract our management.
In addition, as a result of such audit, the U.S. government
may require a further discount on future orders under the GSA
contract, or seek other remedies. Any such action may adversely
affect our business and operating results.
|
|
|
Our business currently depends
on revenue related to our flagship product suite, the Enterprise
Web Suite, and if the market does not increasingly accept this
product and related products and services, our revenue may
decline. |
We generate our revenue from licenses of the Enterprise Web
Suite and related products and services, including Plumtree
Portlets (formerly known as “gadget web services”),
the building blocks from which users assemble a personalized Web
page as well as our Server Products, which provide significant
ancillary functionality to our Portal Platform of the Enterprise
Web Suite. We also resell third party products and services that
offer complementary functionality to the Enterprise Web Suite.
We expect that our Enterprise Web Suite products, and future
upgraded versions of these products will continue to account for
a large portion of our revenue in the foreseeable future. Our
future financial performance will depend on increasing
acceptance of our current product and on the successful
development, introduction and customer acceptance of new and
enhanced versions of our products. For example, in June 2003 we
released version 5.0 of our portal product and in September 2004
we released version 5.0J for Java platforms. If new and future
versions and updates of our products and services, including our
new versions or updates to our Plumtree Corporate Portal and our
page twenty-five
plumtree
software • 2004
annual report
Collaboration Server and Content Server, do not gain market
acceptance when released commercially, or if we fail to deliver
the product enhancements and complementary third party products
that customers want, demand for our products and services, and
our revenue, may decline.
|
|
|
Our sales and implementation
cycles are long, unpredictable and subject to seasonal
fluctuations, making it difficult to accurately forecast our
revenue and causing it to fluctuate, which could harm our
operating results. |
The nature of our products, and the emerging and rapidly
evolving nature of the market in which we compete, the typical
sales cycle of our portal product is long and unpredictable. A
successful sales cycle may last nine to twelve months or longer
and typically includes presentations to both business and
technical decision makers, often requiring us to expend
substantial resources educating prospective customers about the
benefits of our software to their business. The implementation
of our product can be time-consuming and often involves a
significant commitment of resources by prospective customers.
Our sales cycle is also affected by a number of other factors,
some of which we have little or no control over, including the
volatility of the overall software market, the business
conditions of each prospective customer, seasonal fluctuations
as a result of customers’ fiscal year budgeting and
purchasing cycles and the selection and performance of our
technology and of our technology partners, systems integrators
and resellers, any of which could harm our operating results.
Actions being taken to improve our sales execution could also
result in a lengthening of our sales cycle.
|
|
|
Efforts taken to improve our
sales focus and shorten our sales cycle, may not be effective
and the expected benefits may not be realized when expected or
at all. |
To improve our sales focus and shorten our sales cycle, we have,
among other things, recently reorganized our sales force;
focused training efforts for some sales personnel around selling
our products into specific industries such as pharmaceuticals
and consumer retail; taken action to improve our customer lead
generation; and hired a new Chief Operating Officer, Vice
President of World Wide Sales and several other sales managers
who are implementing changes in our sales methodology. While
these initiatives are intended to improve our sales focus and
reduce our typical sales cycle, we may not achieve the expected
benefits of these actions to the extent anticipated in the long
term. The new additions to management may not be as effective as
anticipated. The implementation of new sales methodologies and
the retraining process involved in developing industry focused
sales teams may result in longer sales cycles during the period
of transition, which could harm our operating results and
business.
|
|
|
We depend on technology licensed
from third-party software developers to build and enhance our
products, and our ability to develop and sell our products and
services could be delayed or impaired if we fail to maintain
these license arrangements. |
We incorporate into our products and in certain cases resell
third-party software that enables, enhances or compliments
aspects of our products’ functionality. This third-party
software may not continue to be available on commercially
reasonable terms or with acceptable levels of customer support,
or at all. In many cases use of third party software increases
the risk of warranties and indemnification contained in our
customer contracts. Some of these third-party software
developers offer products that compete with the Enterprise Web
Suite and our other products. Our loss of or inability to
maintain these software licenses on current terms could delay or
impair the sale of our products and services until equivalent
software, if available, is identified, licensed or developed,
and integrated, which could adversely affect our business and
impair our future growth.
|
|
|
We depend on our direct sales
force to sell our products, and if we fail to hire and train new
sales personnel, our future growth will be impaired. |
We sell our products primarily through our direct sales force
and, although we are seeking to expand our indirect sales
channels, we expect to continue to rely on direct sales in the
immediate future. Our ability to achieve revenue growth in the
future will depend on our ability to recruit, train and retain
qualified direct sales personnel. We have in the past and may in
the future experience difficulty in recruiting and retaining
qualified
plumtree
software • 2004
annual report
page twenty-six
sales personnel. The complexity of our product and the length of
our sales cycle typically results in a lead time of nine to nine
months or more before newly-hired direct sales people become
productive and can generate revenue. In addition to recently
hiring a new Chief Operating Officer and Vice President of World
Wide Sales, we added a number of new sales executives. These
management changes and reorganization efforts have resulted in
and in the near-term are expected to continue to result in
attrition in our sales force. Our inability to rapidly and
effectively expand and train our direct sales force could impair
our growth and cause our stock price to fall.
|
|
|
If we are unable to establish
and maintain relationships with systems integrators and
resellers, our ability to market, sell and deploy our products
and services will be harmed. |
We have relationships with a number of systems integrators and
resellers, such as Exceptional Software, HandySoft, Bantu,
Logicon, Booz Allen, Bearing Point, Lexis Nexis, Lockheed
Martin, Nexzone, Webegg, Project Performance Corporation, SAIC
and SRA International. Our relationships with these parties who
market, sell and deploy our products have been a key factor in
our overall business strategy. We are currently seeking to
expand our indirect sales channels and recently hired a new head
of channel sales. Our efforts to expand our relationships with
integrators and resellers may not succeed and these
relationships involve a number of risks, including:
|
|
| • |
Systems integrators and resellers may not view their
relationships with us as valuable or significant to their own
businesses. The related arrangements typically may be terminated
by either party with limited notice and in some cases are not
covered by a formal agreement. |
| |
| • |
Under our co-deployment model, we often rely on our system
integrators’ and resellers’ employees to perform
implementations. If we fail to work together effectively, or if
these parties perform poorly, our reputation may be harmed and
deployment of our products may be delayed or inadequate. |
| |
| • |
Systems integrators may attempt to market their own products and
services rather than ours. |
| |
| • |
Our competitors may have stronger relationships with these
parties and, as a result, these systems integrators and
resellers may recommend a competitor’s products and
services over ours. |
| |
| • |
If we lose our relationships with our systems integrators and
resellers, we will not have the personnel necessary to deploy
our products effectively, and we will need to commit significant
additional sales and marketing resources in an effort to reach
the markets and customers served by these parties. |
|
|
|
If our alliances with technology
and content providers are discontinued, our future growth will
be impaired. |
We have relationships with technology providers, such as Sun
Microsystems, Cognos, MediaEdge, SEEC, Project Performance
Corporation, Stellent, Inxight, Oblix, BEA, Handysoft, Swan
Labs, Thomson Publishing, and EMC, to provide our customers with
support of many applications and services. Although these
relationships are a key factor in our overall business strategy,
our alliance members may not view their relationships with us as
significant to their own businesses. A number of our competitors
may have stronger relationships with these or other technology
and content vendors and, as a result, these alliance members may
be more likely to support our competitors’ products and
services over ours. In addition, our technology providers may
offer products and services that are competitive to ours. Our
arrangements generally do not establish minimum performance
requirements but instead rely on voluntary efforts. In addition,
most of our agreements with these entities may be terminated by
either party with limited notice. In some cases these
arrangements are not covered by a formal agreement. We currently
invest significant resources to develop these alliances and plan
to continue to do so. If we are unable to maintain our existing
relationships or fail to enter into additional relationships,
our ability to increase our sales could be harmed, and we could
also lose anticipated
page twenty-seven
plumtree
software • 2004
annual report
customer introductions and co-marketing benefits. Even if we
succeed in establishing and maintaining these relationships,
they may not result in additional customers or revenue.
|
|
| |
If our software or software we furnish contains errors, our
ability to develop and market our products and services will be
harmed and we may lose customers or experience reduced market
acceptance of our products. |
Our software products are inherently complex and may contain
defects and errors that are detected only when the product is in
use. We periodically release updated versions of our products,
which increases the risk of undetected defects or errors. It is
also possible that our products including version 5.0 (released
in June 2003) and 5.0J (released in September 2004) of our
portal product, and upcoming portal product version releases,
our server products, and new product introductions may contain
undetected defects or errors that are discovered after release.
In addition, third-party software that we bundle with, resell or
incorporate into our products, or with which we integrate to
build or deploy our products, has contained, and may in the
future contain, defects or errors for which we may become
liable. Further, we often render implementation, consulting and
other technical services, the performance of which typically
involves working with sophisticated software, computing and
networking systems. As a result of product defects or our
failure to meet project milestones for services, we may not be
paid for work performed subject to acceptance rights or fixed
price bidding, we may lose customers, customers may not
implement our products more broadly within their organization,
we may experience reduced market acceptance of our products, and
we may be subject to warranty and product liability claims by
our customers.
Such errors or defects may produce a number of risks, including:
|
|
| • |
Some of our customers may require enhanced modifications or
fixes of our software for their specific needs which will divert
the attention of our engineering team away from new product
development and upgrades of existing products. |
| |
| • |
Some of our customers may make increasingly frequent and
disproportionate demands on our support personnel, which could
result in impaired technical support response times to all of
our installed base. |
| |
| • |
Our professional services consultants may be required to assist
in the implementation of software modifications and corrections
of errors or defects, thereby reducing their ability to perform
revenue-generating services. |
| |
| • |
Frequent modifications intended to correct errors may increase
the likelihood of undetected defects or errors and may further
drain our engineering, customer care and consulting services
resources. |
| |
| • |
We may lose customers, customers may not implement our products
more broadly within their organization, customers may choose not
to renew their maintenance contracts with us or they may choose
to abandon their projects. |
| |
| • |
We may lose valuable customer references and our reputation in
the industry may diminish, making our sales and marketing
efforts more difficult. |
| |
| • |
We may experience reduced demand for our products, reduced
market acceptance of our products and loss of overall
competitiveness. |
| |
| • |
We may be subject to product liability or warranty claims by our
customers. |
|
|
| |
If we are unable to develop products that are compatible and
can be integrated with a large variety of hardware, software,
database and networking systems, our ability to attract and
retain customers will be harmed. |
The Enterprise Web Suite is designed to integrate with and
support a broad set of software applications and online services
through Plumtree Portlet Web Services. To gain broad market
acceptance, and to execute on
plumtree
software • 2004
annual report
page twenty-eight
our strategy of “radical openness,” we believe that we
must support an increased number of technology standards,
operating environments, applications and services in the future.
If the underlying applications and services are upgraded or
changed, maintaining this support may be difficult or
impossible. If we are unable to support an increased number of
technology standards, applications and services in the future or
if we are unable to maintain compatibility with these systems,
our ability to attract and retain customers will be harmed.
Furthermore, providers of competitive products and services may
cease cooperating with our development efforts to integrate our
Enterprise Web Suite with products in their portfolio.
|
|
| |
Some of our customers are in the preliminary phase of
implementing our products and this implementation may not
proceed on a timely basis or at all. |
Some of our customers, such as Discount Tire, HP Financial,
Paraexel, ABN AMRO, Kids II, Seyfarth Shaw, Sericol,
Defense Commissionary Agengy, Electic Power Research Institute,
Fleishman Hillard, OMSNIC, J.M. Smucker,
KOS Pharmaceuticals, Novartis, National Academy of Science,
MessageLabs, and others are currently in a pre-deployment or
preliminary stage of implementing our products and may encounter
delays or other problems in introducing them. These delays or
other problems may result from matters specific to the customer
and unrelated to us or our products. A customer’s decision
not to implement our product, or a delay in implementation,
could result in a delay or loss in related service revenue or
otherwise harm our business or prospects. We cannot predict when
or if any customer currently in a pilot or preliminary phase
will choose to implement broader use of our products.
|
|
| |
If we fail to adequately address our customer support
demands, our ability to attract and retain customers will
suffer. |
We expect that our customers increasingly will demand
enhancements to the technical support services we provide. To
meet these demands, we must develop and implement expanded
customer support services and programs. In addition, if we
increase our customer base, we expect the demands on our
technical support resources to grow rapidly, and we may
experience difficulties in responding to customer demand for our
services and providing technical support in accordance with our
customers’ expectations. We expect that these demands will
require not only the addition of new management personnel, but
also the development of additional expertise by existing
personnel and the establishment of long-term relationships with
third-party service vendors. If we are unable to address these
customer demands, our ability to attract and retain customers
will suffer.
|
|
| |
Security breaches with our software may lead to unexpected
capital expenditures and cause a loss in revenue and
reputation. |
The Enterprise Web Suite is designed to facilitate the secure
transmission of sensitive business information to specified
parties outside the business over the Internet. This includes
product information, competitive intelligence, sales and
inventory data, sales reports and corporate e-mail. As a result,
the reputation of our software for providing security is vital
to its acceptance by customers. Many of our government
customers, and those in highly regulated industries such as
banking, insurance and pharmaceuticals, are highly sensitive to
issues of security and data privacy. Problems caused by security
breaches associated with our products or products furnished by
us could result in loss of or delay in revenue, loss of market
share, failure to achieve market acceptance, diversion of
research and development resources, harm to our reputation,
customer claims against us, government regulatory enforcement
against us, increased insurance costs or increased service and
warranty costs. Because the techniques used by computer hackers
to access or sabotage networks change frequently and generally
are not recognized until launched against a target, we may be
unable to anticipate these techniques. Moreover, our products
may be even more susceptible to security breaches, since portals
and integrated framework software require the aggregation of
many different Web applications on many different servers, with
different security standards and protocols.
page twenty-nine
plumtree
software • 2004
annual report
|
|
| |
Capacity restrictions of our software could reduce the demand
for and use of our products, which may limit our ability to
generate license revenue. |
Our products are designed to support enterprise-wide deployments
with up to hundreds of thousands of users. However, the maximum
amount of information and the maximum number of concurrent users
that our products can support in any particular deployment is
uncertain. It is also subject to factors outside of our control
such as customer architecture. If the capacity boundaries of our
products are reached, or significant changes or additions to
customers’ architecture is necessary to support the number
and type of intended users, our customers may be dissatisfied,
and we may lose customers or fail to gain new customers,
existing customers may seek products with more use capacity and
overall demand for our products could decline.
|
|
| |
If we are unable to retain key personnel, our growth will be
limited. |
We are highly dependent on certain members of our management
staff, including, without limitation, our Chief Executive
Officer, John Kunze, our Chief Operating Officer, Paul
Ciandrini, hired in March of 2004, and our Vice President of
Engineering, Eric Zocher. Our ability to continue to deliver
products and services that are responsive to customer needs,
which is critical to our success, also depends on our ability to
retain several members of our sales & marketing,
management and engineering teams. The loss of one or more of
these officers, sales or marketing managers, or key engineers
may impede the achievement of our business objectives. None of
our officers or key employees is bound by an employment
agreement for any specific term, and no one is constrained from
terminating his or her employment relationship with us at any
time. Recent additions to the management team and reorganization
in sales and operations have resulted and may continue to result
in increased employee attrition. In addition, since a number of
our long-standing employees have most of their stock options
vested, their economic incentive to remain in our employ may be
diminished.
|
|
| |
If we are unable to recruit and train new personnel, our
operations will be disrupted and our growth impaired. |
Recruiting and retaining qualified sales, management and
technical personnel is critical to our success. If our business
grows, we will also need to recruit a significant number of
management, technical and other personnel for our business.
Competition for specialized employees in our industry can be
intense. If we are not able to continue to attract and retain
skilled and experienced personnel on acceptable terms, our
growth may be limited due to our limited capacity to develop and
market our product. We are currently recruiting for skilled
technical personnel for our engineering, professional services
group, and customer support staff. It may take an extended
period of time to hire a sufficient number of new technical
professionals. With some of our senior operations executives in
place for only a short period our sales force may lack direction
and our sales process and productivity may suffer. Similarly, we
may not be able to meet customer demand for professional
services and technical support. Once hired, new personnel will
need time to familiarize themselves with our products and
business practices. The integration of new personnel, including
members of management and key personnel in engineering, sales
and marketing, has resulted and will continue to result in some
unavoidable disruption to our ongoing operations. Our failure to
complete this integration in an efficient manner could harm our
business and prospects.
|
|
| |
Managing the breadth of our operations will continue to
strain managerial, operational and financial resources, and if
we are unable to do so our business and operating results could
be harmed. |
The planned conduct of our operations, coupled with planned
increases and reallocations in headcount and pursuit of the
Integrated Activity Management market will place a significant
strain on our management, financial controls, operations
systems, personnel and other resources. We recently experienced
significant turnover in our general and administrative
organizations, sales and engineering departments, both in the
U.S. and internationally. Although we have replaced a number of
these individuals this turnover may strain our organization as
these individuals will require time to become more efficient in
their job capacities.
plumtree
software • 2004
annual report
page thirty
Our ability to manage our business and achieve growth depends in
large part upon a number of factors, including our ability to
rapidly:
|
|
| • |
build and train our sales and marketing staff to create an
effective presence in the evolving corporate portal market, and
keep them sufficiently trained over time regarding the technical
features, issues and key selling points of our product; |
| |
| • |
attract and retain qualified technical personnel in order to
continue to develop reliable and scalable products and services
that address evolving customer needs; |
| |
| • |
develop and improve our customer support capacity, especially if
sales of our products increase, so that we can provide customer
support without diverting resources from product development
efforts; and |
| |
| • |
Maintain and expand our internal management, legal and financial
controls significantly, so that we can maintain control over our
operations and provide support to other functional areas within
Plumtree and ensure compliance with increasing government
regulation, and changing accounting standards applied to public
companies. |
Our inability to achieve any of these objectives could harm our
business and operating results.
We may be unable to manage or
grow our international operations, which could impair our
overall growth.
We have invested substantial capital and management resources in
expanding our international operations, and we are seeking to
increase the portion of our revenue that is derived from sources
outside the United States. Our revenue from sales outside the
United States constituted approximately 28% and 21% of our total
revenue during the year ended December 31, 2004 and 2003,
respectively. If we are unable to grow our international
operations, we may not generate sufficient revenue to offset the
expenditures required to establish and maintain the
international sales and marketing operations, which could slow
our overall growth and impair operating margins.
We have committed substantial resources to modify our products
for selected international markets, including France, Germany,
South Korea, Italy, Spain, Brazil, Portugal, China, the
Netherlands and Japan. We expect to continue to commit
additional resources to modify our products for other select
international markets and to develop our international sales and
support organization. We are also investing resources in
attracting and developing more distributors and resellers in
local markets. However, even if we successfully expand our
international operations and successfully modify our products,
we may be unable to maintain or increase international market
demand for our products.
Our international operations are subject to a number of risks,
including:
|
|
| • |
costs of modifying our products for foreign countries; |
| |
| • |
compliance with multiple, conflicting and changing foreign
governmental laws and regulations, including taxes, intellectual
property, securities and employment laws; |
| |
| • |
increased reliance on systems integrators and resellers abroad; |
| |
| • |
longer sales cycles; |
| |
| • |
import and export restrictions and tariffs; |
| |
| • |
fluctuations in foreign currency exchange rates; |
| |
| • |
difficulties in staffing and managing international operations; |
| |
| • |
greater difficulty in enforcing our intellectual property
rights; and |
| |
| • |
greater difficulty or delay in accounts receivable collection. |
page thirty-one
plumtree
software • 2004
annual report
We have historically structured our operations so that certain
international license contracts between certain foreign
customers and our Swiss subsidiary, Plumtree Software GmbH, are
not subject to tax at source. There is a risk that local
jurisdictions may challenge the characterization of these
transactions. In the event these transactions are challenged by
local tax authorities, the review process would divert
management attention and resources and we may incur substantial
costs. If we fail to comply with complex and changing tax
requirements some tax authorities may seek to collect applicable
taxes from our customers and we may in turn become subject to
claims by our customers seeking reimbursement for any tax
assessed. We have recently changed our method of licensing in
international markets, choosing to license our products through
Plumtree Software, Inc. (Delaware).
Product liability claims
could divert management’s attention and be costly to
defend.
Our license agreements with customers and arrangements with our
systems integrators and technology vendors typically contain
provisions designed to limit our exposure to potential product
liability claims. Not all domestic and international
jurisdictions may enforce these limitations. Although we have
not experienced any significant product liability claims to
date, we may encounter this type of claim in the future. Product
liability claims brought against us, whether or not successful,
could divert the attention and resources of our management and
key personnel, could be costly to defend and could require us to
pay significant monetary damages or impair our ability to market
our products.
If we are unable to
effectively protect our proprietary rights, our competitors may
be able to copy important aspects of our products or product
presentations, which would undermine the relative appeal of our
products to customers and reduce our sales.
We believe that proprietary rights are important to our
business. We have one issued patent. We have fifteen
non-provisional patent applications pending with the
U.S. Patent and Trademark Office including eight published
U.S. applications, two international patent applications
pending with the World Intellectual Property Organization, two
international patent applications pending in the Canadian Patent
Office, two patent applications pending in the Chinese
(PRC) Patent Office, six patent applications pending in the
European Patent Office including two published European
applications and two Hong Kong extensions, two patent
applications pending in the Indian Patent Office, three patent
applications pending in the Japanese Patent Office, one patent
application pending in the Australian patent office and one
patent application pending in the Korean Patent Office. However,
current or future patent applications may not be granted, and it
is possible that any patents issued to us may be circumvented by
our competitors or otherwise may not provide significant
protection or commercial advantage to us. Similarly, our
trademark, service mark and copyright rights may not provide
significant protection or commercial advantage to us, and the
measures we take to maintain the confidentiality of our trade
secrets may not be effective.
As described in Note 7 to our financial statements and
elsewhere in this report, we were involved in a trademark
dispute, which was settled, primarily to protect the value of
our Plumtree trademarks in Europe.
Despite our efforts to protect our proprietary rights,
unauthorized parties may attempt to copy or otherwise obtain and
use our software product or technology without authorization.
Policing unauthorized use of our products is difficult and
costly, especially matters that require litigation, 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 those in the United States.
We generally enter into confidentiality or license agreements
with our employees, consultants and alliance members, control
access to our source code and other proprietary technology and
limit distribution of our software, documentation and other
proprietary information. These measures afford only limited
protection and may be inadequate. Others may develop
noninfringing technologies that are similar or superior to our
own.
plumtree
software • 2004
annual report
page thirty-two
If our products employ
technology that infringes the proprietary rights of others, we
may be subject to infringement claims, forced to pay high prices
to license technology or required to stop selling our
products.
We expect that software products, including ours, may be
increasingly subject to third-party infringement claims as the
number of competitors in our industry segment grows and the
functionality of products in different industry segments expands
and overlaps. Third parties have claimed and others may claim in
the future that our products infringe their intellectual
property rights. Regardless of whether these claims have any
merit, they could:
|
|
| • |
be time-consuming to defend; |
| |
| • |
result in costly litigation; |
| |
| • |
divert our management’s attention and resources; |
| |
| • |
require us to indemnify technology vendors, system integrators
or customers; |
| |
| • |
require us to refund license fees; |
| |
| • |
cause product shipment delays; |
| |
| • |
require us to enter into royalty or licensing agreements, which
may not be available on terms acceptable to us, if at
all; or |
| |
| • |
result in court orders limiting our ability to license our
products. |
As described in Note 7 to our consolidated financial
statements and elsewhere in this report, we are currently
involved in a patent suit where the plaintiff, Datamize, has
alleged we were infringing one of its patents. The court in this
matter recently granted our motion on summary judgment, holding
that the patent which was the subject of the litigation was
invalid. However, Datamize recently appealed entry of summary
judgment of invalidity. Also, based on prior communications, we
believe that Datamize might bring an action alleging
infringement of two other patents issued to Datamize. We have
filed an action for a declaratory judgment seeking a
determination that we are not infringing these other patents.
Datamize is seeking to dismiss this action. We intend to
vigorously defend against Datamize’s allegations of
infringement and vigorously pursue its claim for declaratory
relief.
During 2004, our defense costs related to this litigation have
increased substantially, and may continue to increase based on
related events. The tactical direction and pace of litigation,
especially in complex patent matters, are inherently difficult
to predict. Therefore, our legal costs may fluctuate
substantially with little notice which could affect our
financial results.
A successful claim of infringement against us or our failure or
inability to license the infringed or similar technology could
damage our business to the extent that we are required to pay
substantial monetary damages or if, as result of a successful
claim, we became unable to sell our products without
redeveloping them or otherwise were forced to incur significant
additional expenses.
We may be subject to
misappropriation and other claims by former employers of our
personnel, which could be costly and disruptive to our
business.
From time to time, we hire or retain employees or consultants
who have worked for independent software vendors or other
companies developing products similar to those offered by us.
Those prior employers may claim that our products are based on
their products and that we have misappropriated their
intellectual property. Any claims of that variety, with or
without merit, could cause a significant diversion of management
attention, result in costly and protracted litigation, cause
product shipment delays, require us to indemnify our alliance
members and customers, require us to refund license fees or
require us to enter into royalty or licensing agreements. Those
royalty or licensing agreements, if required, may not be
available on terms
page thirty-three
plumtree
software • 2004
annual report
acceptable to us or at all, which could harm our business. We
have and are likely in the future to hire employees subject to
agreements containing non-competition clauses and
non-solicitation covenants which purport to limit their ability
to work for us, interact with some or all of our customers or
prospective customers, or to solicit former colleagues or others
for employment at Plumtree. Although these types of restrictions
are often difficult to enforce, especially in California, we may
still be subject to claims that we violated these restrictions.
Such claims against the Company or our employees, with or
without merit, could cause a significant diversion of management
attention or the employees’ attention, and result in costly
and protracted litigation.
Acquisitions of companies or
technologies may result in disruptions to our business and
management due to difficulties in assimilating personnel,
acquired products and technology and operations and may dilute
stockholder value.
We have made, and in the future may make acquisitions or
investments in other companies or technologies. We may not
realize the anticipated benefits of any acquisitions or
investments we undertake. Acquisitions such as these require us
to assimilate the operations, products, technology and personnel
of the acquired businesses and train, retain and motivate key
personnel from the acquired businesses. We may be unable to
maintain uniform standards, controls, procedures and policies if
we fail in these efforts. Similarly, acquisitions may cause
disruptions in our operations and divert management’s
attention from day-to-day operations, which could impair our
relationships with our current employees, customers and
strategic partners. If we consummate acquisitions through an
exchange of our securities, our existing stockholders could
suffer significant dilution. In addition, our profitability may
suffer because of acquisition-related costs or impairment costs
for acquired goodwill and other intangible assets, or
undisclosed liabilities of the acquired business. Finally, the
terms of our existing contractual obligations may restrict or
prohibit acquisitions that we may seek to consummate.
If we are required to raise
additional funds, we may be unable to obtain these funds on
terms acceptable to us or at all.
The development and expansion of our business will require
significant capital to fund our operating expenses, working
capital needs and capital expenditures. During the next
18 months, we expect to meet our cash requirements with
existing cash and cash equivalents and short-term investments,
cash flow from sales of our products and services and proceeds
from existing and future working capital lines of credit and
other borrowings. Our failure to generate sufficient cash flows
from sales of products and services or to raise sufficient funds
may require us to delay or abandon some or all of our
development and expansion plans or otherwise forego market
opportunities.
Future equity or debt financing may not be available to us on
favorable terms or at all. The terms of our existing loan
agreement with Silicon Valley Bank limit our ability, among
other things, to incur additional indebtedness. Future borrowing
instruments, such as credit facilities and lease agreements, are
also likely to contain restrictive covenants and will likely
require us to pledge assets as security for borrowings under
those future arrangements. If we raise additional funds through
the issuance of equity securities, the issuance could result in
substantial dilution to existing stockholders. Our inability to
obtain additional capital on satisfactory terms may result in a
delay or failure to develop and enhance our products, acquire
new technologies or businesses, expand operations and hire and
train employees.
We may incur losses
associated with currency fluctuations and may not be able to
effectively hedge our exposure.
Our operating results are subject to fluctuations in foreign
currency exchange rates. We attempt to mitigate a portion of
these risks through foreign currency hedging. We have
established a hedging program to hedge only known asset and
liability exposures denominated in foreign currencies. We
regularly review our hedging
plumtree
software • 2004
annual report
page thirty-four
program and will make adjustments based on our judgment. Our
hedging activities may not offset more than a portion of the
adverse financial impact resulting from unfavorable movement in
foreign currency exchange rates.
Changes in, or
interpretations of, accounting rules and regulations, such as
expensing of stock options, could result in unfavorable
accounting charges.
We prepare our consolidated financial statements in conformity
with accounting principles generally accepted in the United
States of America. These principles are subject to
interpretation by the Securities and Exchange Commission (the
“SEC”) and various bodies formed to interpret and
create appropriate accounting policies. A change in these
policies can have a significant effect on our reported results
and may even retroactively affect previously reported
transactions. Our accounting policies that recently have been or
may be affected by changes in the accounting rules are as
follows:
|
|
| • |
software revenue recognition |
| |
| • |
accounting for share-based payments |
| |
| • |
accounting for income taxes |
In particular, the FASB recently enacted SFAS 123R which
will have a significant adverse effect on our reported financial
results and may impact the way in which we conduct our business
(see Note 2).
Compliance with changing
regulation of corporate governance and public disclosure may
result in additional expenses.
Changing laws, regulations and standards relating to corporate
governance and public disclosure, including the Sarbanes-Oxley
Act of 2002, new SEC regulations and NASDAQ National Market
rules, are creating uncertainty for companies such as ours.
These new or changed laws, regulations and standards are subject
to varying interpretations in many cases due to their lack of
specificity, and as a result, their application in practice may
evolve over time as new guidance is provided by regulatory and
governing bodies, which could result in continuing uncertainty
regarding compliance matters and higher costs necessitated by
ongoing revisions to disclosure and governance practices. We are
committed to maintaining high standards of corporate governance
and public disclosure. As a result, our efforts to comply with
evolving laws, regulations and standards have resulted in, and
are likely to continue to result in, increased general and
administrative expenses and a diversion of management time and
attention from revenue-generating activities to compliance
activities. In particular, our efforts to comply with
Section 404 of the Sarbanes-Oxley Act of 2002 and the
related regulations regarding our required assessment of our
internal controls over financial reporting and our external
auditors’ audit of that assessment has required the
commitment of significant financial and managerial resources. In
addition, it has become more difficult and more expensive for us
to obtain director and officer liability insurance, and we have
purchased reduced coverage at substantially higher cost than in
the past. We expect these efforts to require the continued
commitment of significant resources. Further, our board members,
chief executive officer and chief financial officer could face
an increased risk of personal liability in connection with the
performance of their duties. As a result, we may have difficulty
attracting and retaining qualified board members and executive
officers, which could harm our business. If our efforts to
comply with new or changed laws, regulations and standards
differ from the activities intended by regulatory or governing
bodies due to ambiguities related to practice, our reputation
may be harmed.
page thirty-five
plumtree
software • 2004
annual report
Risks Relating to Our Industry
|
|
|
Intense competition and
consolidation in our industry could limit our ability to attract
and retain customers. |
The market for our products is intensely competitive and highly
fragmented, subject to rapid technological change, evolving
industry standards and changes in customer needs. Our current
competitors include established software vendors that are
Web-enabling their applications or are building infrastructure
software, emerging companies offering competitive products and
companies choosing to build their own solutions. Some of our
large competitors may expand their competitive product offerings
through acquisitions. For example, Vignette acquired Epicentric,
Inc. in December 2002; Open Text Corporation acquired
Corechange, Inc. in February 2003; WebMethods acquired certain
assets of Data Channel in October 2003; and Vignette acquired
Intraspect in December 2003. Many of our competitors have longer
operating histories, greater financial, technical, product
development and marketing resources, greater name recognition
and larger customer bases than we do. Our present or future
competitors may be able to develop products comparable or
superior to those we offer, adapt more quickly than we do to new
technologies, evolving industry trends or customer requirements,
offer more aggressive pricing policies, or devote greater
resources to the development, promotion and sale of their
products than we do. Accordingly, we may not be able to compete
effectively in our markets, or competition may intensify or
emerge and have a material adverse effect on our business,
financial condition and operating results.
|
|
|
Downturns in the software market
may decrease our revenue and margins. |
The market for our products is affected by economic conditions
of the broader software market. Downturns in the economy may
cause businesses and governments to delay or cancel corporate
portal projects, reduce their overall information technology
budgets or reduce or cancel orders for our products. In this
environment, customers may experience financial difficulty, fail
to or defer the budget for the purchase of our products or cease
operations. This, in turn, may lead to longer sales cycles,
delays or failures in payment and collection, and price
pressures, causing us to realize lower revenues and margins. In
particular, capital spending in the information technology
sector generally has been limited in most of the past
36 months, and many of our customers and potential
customers have experienced volatile declines in their revenues
and operations. We believe that, in light of these events, some
businesses and governments may curtail or eliminate capital
spending on information technology. If capital spending in our
markets declines, it may be necessary for us to gain significant
market share from our competitors in order to achieve our
financial goals or to sustain annual or quarterly profitability.
|
|
|
Our failure to introduce new
products and enhancements in a timely manner will make market
acceptance of our products less likely. |
New products, platforms and language support can require long
development and testing periods. Any delays in developing and
releasing new products could harm our business. New products or
enhancements may not be released according to schedule or may
contain defects when released. Version 5.0 of the Plumtree
Corporate Portal, the Plumtree Collaboration Server, Plumtree
Studio Server and Plumtree Content Server as well as
version 5.0J of the Plumtree Corporate Portal were released
in the past twelve months or have been recently updated,
increasing the risk of undetected defects or errors. Efforts to
correct any such errors or defects could divert our engineers
from or delay development of new products. In addition, our
efforts to develop and release new products of the Plumtree
Corporate Portal, and applications, such as dashboard and score
carding with Cognos, an Enterprise Web customer service
application for insurers with SEEC and an electronic courtroom
management application with MediaEdge, could be delayed or
hindered by development problems. Product release delays or
product defects could result in adverse publicity, loss of
sales, delay in market acceptance of our products or customer
claims against us, any of which could harm our business. We may
be unable to successfully develop and market product
enhancements or new products that respond to technological
changes, shifting customer tastes or evolving industry
standards, and may experience difficulties
plumtree
software • 2004
annual report
page thirty-six
that could delay or prevent the successful development,
introduction and marketing of new or enhanced products. If we
are unable to develop and introduce new products or enhancements
of existing products in a timely manner or if we experience
delays in the commencement of commercial shipments of new
products and enhancements, our ability to attract and retain
customers will be harmed.
|
|
|
If we fail to manage
technological change, demand for our products and services will
drop and our revenue will decline. |
The market for our products is still in an early stage of
development and is characterized by rapidly changing technology,
evolving industry standards, frequent new service and product
introductions and changes in customer demands. Our future
success will depend to a substantial degree on our ability to
offer products and services that incorporate leading
technologies and respond to technological advances and emerging
industry standards and practices on a timely and cost-effective
basis. You should be aware that:
|
|
| • |
our technology or systems may become obsolete upon the
introduction of alternative technologies; |
| |
| • |
the technological life cycles of our products may end abruptly
and, in any event, are difficult to estimate; |
| |
| • |
we may not have sufficient resources to develop or acquire new
technologies or to introduce new services capable of competing
with future technologies or service offerings; and |
| |
| • |
the price of the products and services we provide may decline as
rapidly as, or more rapidly than, the price of any competitive
alternatives, particularly if the unique features of our
products become widely adopted through new technologies. |
We may not be able to effectively respond to the technological
requirements of the changing market for our corporate portal and
the other products comprising the Enterprise Web product suite.
To the extent we determine that new technologies and equipment
are required to remain competitive, the development, acquisition
and implementation of those technologies and equipment are
likely to continue to require significant capital investment by
us. We may not have sufficient capital for these purposes in the
future. Even if we successfully raise capital to develop new
technologies, investments in these technologies may not result
in commercially viable technological processes, or there may not
be commercial applications for those technologies. If we do not
develop and introduce new products and services, and achieve
market acceptance in a timely manner, demand for our products
and services will drop and our revenue will decline.
|
|
|
Terrorist activities and
resulting military and other actions could harm our
business |
The terrorist attacks of September 11, 2001 and the war in
Iraq, and expanded military action associated with the war on
terror, have disrupted commerce throughout the world. The
continued threat of terrorism continued military action and
heightened security measures in response to this threat have
diverted public and corporate spending priorities and
periodically disrupted commerce. To the extent that these events
result in a general decrease in corporate spending on
information technology, our business and results of operations
could be harmed. We are unable to predict whether these threats
or the responses thereto will result in any long-term commercial
disruptions or if such activities or responses will have a
long-term adverse effect on our business, results of operations
or financial condition. Additionally, if any attacks were to
affect the operation of the Internet or key data centers, our
business could be harmed.
|
|
|
Business disruptions in the
event of a catastrophic event. |
We are a highly automated business and a disruption or failure
of our systems in the event of a major earthquake, cyber-attack,
or other catastrophic event could cause delays in completing
sales and providing services. Our corporate headquarters, a
significant portion of our research and development activities,
and certain other critical business operations are located in
San Francisco California, which is near a major earthquake
fault. A catastrophic event that results in the destruction or
disruption of any of our critical
page thirty-seven
plumtree
software • 2004
annual report
business or information technology systems could severely affect
our ability to conduct normal business operations and, as a
result, our future operating results could be adversely affected.
|
|
| Item 7A. |
Quantitative and Qualitative Disclosures About Market Risk |
As of December 31, 2004, we had cash, cash equivalents and
short-term investments totaling $65.0 million. Our
investment portfolio consists of money market funds,
corporate-backed debt obligations, municipal bonds and
U.S. government discount notes, generally due within one to
two years. We place investments with high quality issuers and
limit the amount of credit exposure to any one issuer. These
securities are subject to interest rate risks. Based on the
duration of our portfolio and our ability to hold investments to
maturity, we believe that, if a significant change in interest
rates were to occur, it would not have a material effect on our
financial condition, although there can be no assurance of this.
For the year ended December 31, 2004, we earned
approximately 28% of our revenue from international markets,
most of which are denominated in various currencies. As a
result, our operating results are and may become subject to more
significant fluctuations based upon changes in the exchange
rates of some currencies in relation to the U.S. dollar and
diverging economic conditions in foreign markets. We have
implemented a hedging strategy which should mitigate our
exposure to currency fluctuation. We hedge our net recognized
foreign currency assets and liabilities with short-term forward
foreign exchange contracts to reduce the risk that our earnings
and cash flows will be adversely affected by changes in foreign
currency exchange rates. However, this may not provide absolute
assurance that exchange rate fluctuations will not adversely
affect our financial results in the future. There were no
outstanding contracts as of December 31, 2004.
We do not use derivative financial instruments for speculative
trading purposes, nor do we hedge our foreign currency exposure
in a manner that entirely offsets the effects of changes in
foreign exchange rates.
We regularly review our hedging program and may as part of this
review determine at any time to change our hedging program.
See also Note 12 in our notes to the consolidated financial
statements.
|
|
| Item 8. |
Financial Statements and Supplementary Data |
The response to this item is submitted as a separate section of
this Form 10-K. See Item 15 of this
Form 10-K.
|
|
| Item 9. |
Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure |
None
|
|
| Item 9A. |
Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
Based on their evaluation as of December 31, 2004, our
Chief Executive Officer and Chief Financial Officer, have
concluded that our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended) were sufficiently
effective to ensure that the information required to be
disclosed by us in this Annual Report in Form 10-K was
recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and instructions for
Form 10-K.
Management’s Report on Internal Control over Financial
Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting (as defined
in Rule 13a-15(f) under the Securities Exchange Act of
1934, as amended). Our management assessed the effectiveness of
our internal control over financial reporting as of
December 31, 2004. In making this assessment, our
management used the criteria set forth in the Internal
Control— Integrated Framework by the Committee of
Sponsoring Organizations of the Treadway Commission
(“COSO”). Our management has concluded that, as of
December 31, 2004, our internal control over financial
reporting is
plumtree
software • 2004
annual report
page thirty-eight
effective based on these criteria. Our independent registered
public accounting firm, KPMG LLP, have issued an audit report on
our assessment of our internal control over financial reporting,
which is included herein.
Changes in Internal Control over Financial Reporting
There were no changes to internal controls over financial
reporting during the quarter ended December 31, 2004, that
have materially affected, or are reasonably likely to materially
effect our internal control over financial reporting.
Limitations on the Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief
Financial Officer, does not expect that our disclosure controls
and procedures or our internal controls will prevent all error
and all fraud. A control system, no matter how well conceived
and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met.
Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Because of
the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control
issues and instances of fraud, if any, within Plumtree have been
detected. Notwithstanding these limitations, our disclosure
controls and procedures are designed to provide reasonable
assurance of achieving their objectives. Our Chief Executive
Officer and Chief Financial Officer have concluded that our
disclosure controls and procedures are, in fact, effective at
the “reasonable assurance” level.
Item 9B. Other Information
On March 10, 2005, we adopted a 2005 Employee Bonus Plan
for certain employees, including certain executive officers,
which was approved by the Compensation Committee of the Board of
Directors of the Company. The bonus plan is designed to attract,
retain and reward the employee participants of the plan for
their performance. The Plan is a discretionary bonus plan and
all payments thereunder are made solely at the discretion of
management.
The bonus amounts for manager-level employees are determined by
the performance of both the individual and the Company for the
quarter or year, as the case may be. The bonus amounts for the
executive team members are based exclusively on the
Company’s performance, which is primarily measured by
annual revenue growth and earnings performance to a lesser
extent. The Compensation Committee establishes the performance
measures for each year, and has the authority to modify these
measures quarterly throughout the year as appropriate.
This description of the 2005 Employee Bonus Plan is qualified in
its entirety by the plan, which is filed as Exhibit 10.23
to this Annual Report on Form 10-K and incorporated herein
by reference.
On March 10, 2005, the cash compensation plan for
Plumtree’s independent directors was increased. Set forth
below is the independent director cash compensation for 2003,
2004 and 2005.
Annual Retainer Schedule
| |
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|
|
|
|
|
|
|
|
|
|
| |
|
2003 | |
|
2004 | |
|
2005 | |
| Category |
|
| |
|
| |
|
| |
| |
|
|
|
|
|
|
|
Board Retainer
|
|
$ |
15,000 |
|
|
$ |
20,000 |
|
|
$ |
30,000 |
|
|
Chairman Retainer
|
|
|
— |
|
|
|
20,000 |
|
|
|
25,000 |
|
|
Audit Committee Chairman
|
|
|
20,000 |
|
|
|
20,000 |
|
|
|
25,000 |
|
|
Audit Committee Member
|
|
|
10,000 |
|
|
|
10,000 |
|
|
|
10,000 |
|
|
Compensation Committee Chairman
|
|
|
— |
|
|
|
10,000 |
|
|
|
15,000 |
|
|
Compensation Committee Member
|
|
|
— |
|
|
|
7,500 |
|
|
|
10,000 |
|
|
Nominating Committee Chairman
|
|
|
— |
|
|
|
10,000 |
|
|
|
10,000 |
|
|
Nominating Committee Member
|
|
|
— |
|
|
|
7,500 |
|
|
|
7,500 |
|
page thirty-nine
plumtree
software • 2004
annual report
All fees are paid quarterly in arrears. In addition, Plumtree
reimburses directors for reasonable travel and other expenses
incurred in attending meetings or participating in professional
development and education activities. All changes to the 2005
Director’s Compensation Plan are effective April 1,
2005.
This description of the 2005 Independent Director Cash
Compensation Plan is filed as Exhibit 10.24 to this Annual
Report on Form 10-K and incorporated herein by reference.
|
|
| Item 10. |
Directors and Officers of the Registrant |
Information regarding our directors and executive officers will
appear under “Directors and Officers of the Company”
in our Proxy Statement for the Annual Meeting of Stockholders
(the “Proxy Statement”), to be held May 20, 2005.
That portion of the Proxy Statement is incorporated by reference
into this report.
We have adopted a code of business conduct and ethics
(“Code of Business Conduct and Ethics”) that applies
to our principal executive officer and all members of our
finance department, including the principal financial officer
and principal accounting officer. This Code of Business Conduct
and Ethics, which applies to employees generally, is posted on
our Internet website. The Internet address for our website is
http://www.plumtree.com.
We intend to satisfy the disclosure requirement under
Item 5.05 of Form 8-K regarding an amendment to,
or waiver from, a provision of this Code of Business Conduct and
Ethics by posting such information on our website.
Section 16(a) Beneficial Ownership Reporting
Compliance
Information about compliance with Section 16(a) of the
Exchange Act will appear under “Section 16(a)
Beneficial Ownership Reporting Compliance” in the Proxy
Statement. That portion of the Proxy Statement is incorporated
by reference into this report.
|
|
| Item 11. |
Executive Compensation |
Information about compensation of our named executive officers
will appear under “Executive Compensation” in the
Proxy Statement. Information about compensation of our directors
appears under “Director Compensation” in the Proxy
Statement. Those portions of the Proxy Statement are
incorporated by reference into this report.
|
|
| Item 12. |
Security Ownership of Certain Beneficial Owners and
Management |
Information about security ownership of certain beneficial
owners and management will appear under “Security Ownership
of Certain Beneficial Owners and Management” in the Proxy
Statement. That portion of the Proxy Statement is incorporated
by reference into this report. Information regarding securities
authorized for issuance under equity compensation plans appears
in Item 5 of this report.
Item 13. Certain Relationships and Related
Transactions
Information about certain relationships and related transactions
will appear under “Certain Relationships and Related
Transactions” in the Proxy Statement. That portion of the
Proxy Statement is incorporated by reference into this report.
Item 14. Principal Accountant Fees and Services
Information about principal accountant fees and services as well
as related pre-approval policies will appear under “Fees
Paid to KPMG, LLP” and “Audit and Finance Committee
Pre-Approval of Audit and Permissible Non-Audit Services of
Independent Auditors” in the Proxy Statement. Those
portions of the Proxy Statement are incorporated by reference
into this report.
plumtree
software • 2004
annual report
page forty
Item 15. Exhibits
(a) 1. Financial Statements
The following financial statements are filed as part of this
report:
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Page | |
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Reports of Independent Registered Public Accounting Firm
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42 |
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|
Consolidated Financial Statements:
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|
|
|
| |
Balance Sheets as of December 31, 2004 and 2003
|
|
|
44 |
|
| |
Statements of Operations for the years ended December 31,
2004, 2003 and 2002
|
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|
45 |
|
| |
Statements of Stockholders’ Equity and Comprehensive Income
(Loss) for the years ended December 31, 2004, 2003 and 2002
|
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|
46 |
|
| |
Statements of Cash Flows for the years ended December 31,
2004, 2003 and 2002
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47 |
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Notes to Consolidated Financial Statements
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48 |
|
(a) 2. Financial Statement Schedules
None. All schedules are omitted because they are not required or
the required information is shown in the financial statements or
notes thereto.
(a) 3. Exhibits
Exhibit Index
| |
|
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|
|
| Exhibit | |
|
Description |
| | |
|
|
| |
3.1 |
|
|
Amended and Restated Certificate of Incorporation of the
Registrant(1) |
| |
3.2 |
|
|
Bylaws of the Registrant(1) |
| |
4.1 |
|
|
Specimen common stock certificate(1) |
| |
4.2 |
|
|
Warrant to purchase Common Stock, dated May 31, 2000,
issued to WXI/SAN Realty, L.L.C.(1) |
| |
4.3 |
|
|
Warrant to purchase Common Stock, dated Sept. 20, 2000,
issued to WXI/SAN Realty, L.L.C.(1) |
| |
10.1* |
|
|
Form of Indemnification Agreement between the Registrant and
each of its directors, officers and certain other key
employees(1) |
| |
10.2* |
|
|
1997 Equity Incentive Plan, as amended, and form of agreements
thereunder(1) |
| |
10.3* |
|
|
2002 Stock Plan, as amended, and form of agreements thereunder(1) |
| |
10.4* |
|
|
2002 Employee Stock Purchase Plan, and form of agreements
thereunder(3) |
| |
10.5* |
|
|
2002 Director Option Plan, and form of agreements
thereunder(1) |
| |
10.6 |
|
|
Loan and Security Agreement, dated March 14, 2001, between
the Registrant and Silicon Valley Bank(1) |
| |
10.7 |
|
|
Office Lease for 500 Sansome Street, dated April 7,
1999, between the Registrant and BPG Sansome, L.L.C.(1) |
| |
10.8 |
|
|
First Amendment to Lease for 500 Sansome Street, dated
May 3, 2000, between the Registrant and WXI/SAN Realty,
L.L.C.(1) |
| |
10.9* |
|
|
Offer letter between the Registrant and John H. Kunze(1) |
| |
10.10* |
|
|
Offer letter between the Registrant and Eric Borrmann(1) |
| |
10.11 |
|
|
Second Amendment to Lease for 500 Sansome Street, dated
September 20, 2000, between the Registrant and WXI/SAN
Realty, L.L.C.(1) |
| |
10.12 |
|
|
Third Amendment to Lease for 500 Sansome Street, dated
November 22, 2000, between the Registrant and WXI/SAN
Realty, L.L.C.(1) |
| |
10.13 |
|
|
Fourth Amendment to Lease for 500 Sansome Street, dated
July 31, 2002, between the Registrant and WXI/SAN Realty,
L.L.C.(2) |
page forty-one
plumtree
software • 2004
annual report
| |
|
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|
|
| Exhibit | |
|
Description |
| | |
|
|
| |
10.14 |
|
|
Fifth Amendment to Lease for 500 Sansome Street, dated
July 21, 2003, between the Registrant and WXI/SAN Realty,
L.L.C.(2) |
| |
10.15* |
|
|
Offer letter between Registrant and Eric Zocher(2) |
| |
10.16* |
|
|
2004 Bonus Plan(3) |
| |
10.17* |
|
|
2004 Outside Director Stock in Lieu of Fees Plan(3) |
| |
10.18* |
|
|
Employment Agreement between the Registrant and Paul Ciandrini(4) |
| |
10.19* |
|
|
Employment Agreement between the Registrant and Ira Pollack(4) |
| |
10.20* |
|
|
Offer Letter between the Registrant and Adriana Chiocchi(4) |
| |
10.21 |
|
|
Office Lease for 505 Sansome Street, dated October 22,
2004, between Registrant and Transamerica Realty Investment
Properties, LLC.(5) |
| |
10.22 |
|
|
Revolving Line of Credit Amendment, dated October 25, 2004,
between Registrant and Silicon Valley Bank(5) |
| |
10.23* |
|
|
2005 Bonus Plan |
| |
10.24* |
|
|
2005 Independent Director Cash Compensation Plan |
| |
23.1 |
|
|
Consent of Independent Registered Public Accounting Firm |
| |
31.1 |
|
|
Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes Oxley Act of 2002
(“S-O Act”) |
| |
31.2 |
|
|
Certification of Chief Financial Officer pursuant to
Section 302 of the S-O Act |
| |
32.1 |
|
|
Certification of Chief Executive Officer pursuant to
Section 906 of the S-O Act |
| |
32.2 |
|
|
Certification of Chief Financial Officer pursuant to
Section 906 of the S-O Act |
|
|
| * |
Management contract or compensatory plan or arrangement. |
|
|
| (1) |
Incorporated by reference to Exhibits filed with Registration
Statement No. 333-45950, as amended, which became effective
on June 3, 2002. |
| |
| (2) |
Incorporated by reference to Exhibits filed with the
Registrant’s Form 10-Q for the quarter ended
September 30, 2003 and filed with the SEC on
November 3, 2003 (File No. 001-31344). |
| |
| (3) |
Incorporated by reference to Exhibits filed with the
Registrant’s Form 10-K for the year ended
December 31, 2003 and filed with the SEC on March 12,
2004 (File No. 001-31344). |
| |
| (4) |
Incorporated by reference to Exhibits Filed with
Registrant’s Form 10-Q for the quarter ended June 30,
2004 and filed with the SEC on August 6, 2004 (File No.
001-31344). |
| |
| (5) |
Incorporated by reference to Exhibits filed with Registrants
Form 10-Q for the quarter ended September 30, 2004 and
filed with SEC on November 5, 2004 (File No. 001-31344). |
plumtree
software • 2004
annual report
page forty-two
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of Plumtree Software,
Inc.:
We have audited management’s assessment, included in the
accompanying Management’s Report on Internal Control over
Financial Reporting appearing under Item 9A, that Plumtree
Software, Inc. maintained effective internal control over
financial reporting as of December 31, 2004, based on the
criteria established in Internal Control— Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Management of
Plumtree Software Inc. is responsible for maintaining effective
internal control over financial reporting and for its assessment
of the effectiveness of internal control over financial
reporting. Our responsibility is to express an opinion on
management’s assessment and an opinion on the effectiveness
of the Company’s internal control over financial reporting
based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, evaluating
management’s assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing
such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A company’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, management’s assessment that Plumtree
Software Inc. maintained effective internal control over
financial reporting as of December 31, 2004, is fairly
stated, in all material respects, based on criteria established
in Internal Control— Integrated Framework issued by
COSO. Also, in our opinion, Plumtree Software Inc. maintained,
in all material respects, effective internal control over
financial reporting as of December 31, 2004, based on the
criteria established in Internal Control— Integrated
Framework issued by COSO.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Plumtree Software Inc. and
subsidiaries as of December 31, 2004 and 2003, and the
related consolidated statements of operations,
stockholders’ equity and comprehensive income (loss), and
cash flows for each of the years in the three-year period ended
December 31, 2004, and our report dated March 7, 2005
expressed an unqualified opinion on those consolidated financial
statements.
/s/ KPMG LLP
Mountain View, California
March 7, 2005
page forty-three
plumtree
software • 2004
annual report
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Plumtree Software,
Inc.:
We have audited the accompanying consolidated balance sheets of
Plumtree Software, Inc. and subsidiaries as of December 31,
2004 and 2003, and the related consolidated statements of
operations, stockholders’ equity and comprehensive income
(loss) and cash flows for each of the years in the three-year
period ended December 31, 2004. These consolidated
financial statements are the responsibility of the
Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Standard Oversight Board (United
States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Plumtree Software, Inc. and subsidiaries as of
December 31, 2004 and 2003, and the results of their
operations and their cash flows for each of the years in the
three-year period ended December 31, 2004, in conformity
with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of Plumtree Software, Inc.’s internal control
over financial reporting as of December 31, 2004, based on
criteria established in Internal Control— Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO)”), and our
report dated March 7, 2005 expressed an unqualified opinion
on management’s assessment of and effective operation of,
internal control over financial reporting.
/s/ KPMG LLP
Mountain View, California
March 7, 2005
plumtree
software • 2004
annual report
page forty-four
| |
|
|
|
|
|
|
|
|
|
|
| |
|
As of December 31, | |
| (In thousands, except per share amounts) |
|
2004 | |
|
2003 | |
| | |
|
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
| |
Cash and cash equivalents
|
|
$ |
23,136 |
|
|
$ |
20,434 |
|
| |
Short-term investments
|
|
|
41,898 |
|
|
|
47,255 |
|
| |
Accounts receivable (net of allowance for doubtful accounts of
$787 and $522)
|
|
|
20,552 |
|
|
|
17,171 |
|
| |
Prepaid and other current assets
|
|
|
2,313 |
|
|
|
2,079 |
|
| |
|
|
| |
|
Total current assets
|
|
|
87,899 |
|
|
|
86,939 |
|
|
Property and equipment, net
|
|
|
2,532 |
|
|
|
1,798 |
|
|
Other assets
|
|
|
380 |
|
|
|
2,025 |
|
| |
|
|
| |
|
Total assets
|
|
$ |
90,811 |
|
|
$ |
90,762 |
|
| |
|
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
| |
Accounts payable
|
|
$ |
1,841 |
|
|
$ |
1,312 |
|
| |
Accrued and other current liabilities
|
|
|
14,944 |
|
|
|
12,084 |
|
| |
Current portion of deferred revenue
|
|
|
20,804 |
|
|
|
18,366 |
|
| |
|
|
| |
|
Total current liabilities
|
|
|
37,589 |
|
|
|
31,762 |
|
|
Deferred revenue, less current portion
|
|
|
1,856 |
|
|
|
661 |
|
|
Deferred rent
|
|
|
360 |
|
|
|
448 |
|
| |
|
|
| |
|
Total liabilities
|
|
|
39,805 |
|
|
|
32,871 |
|
| |
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
| |
Convertible preferred stock, $0.001 par value:
|
|
|
|
|
|
|
|
|
| |
|
Authorized—20,000 shares; Issued and
Outstanding—None
|
|
|
— |
|
|
|
— |
|
| |
Common stock, $0.001 par value:
|
|
|
|
|
|
|
|
|
| |
|
Authorized—100,000 shares, Issued and
Outstanding— 32,397 shares and 31,265 shares in
2004 and 2003
|
|
|
32 |
|
|
|
31 |
|
| |
Additional paid in capital
|
|
|
102,104 |
|
|
|
99,747 |
|
| |
Deferred stock-based compensation
|
|
|
(165) |
|
|
|
(868) |
|
| |
Accumulated other comprehensive loss
|
|
|
(412) |
|
|
|
(92) |
|
| |
Accumulated deficit
|
|
|
(50,553) |
|
|
|
(40,927) |
|
| |
|
|
| |
|
Total stockholders’ equity
|
|
|
51,006 |
|
|
|
57,891 |
|
| |
|
|
| |
|
Total liabilities and stockholders’ equity
|
|
$ |
90,811 |
|
|
$ |
90,762 |
|
| |
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
page forty-five
plumtree
software • 2004
annual report
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
For the Years Ended December 31, | |
| |
|
| |
| (In thousands, except per share amounts) |
|
2004 | |
|
2003 | |
|
2002 | |
| | |
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Licenses
|
|
$ |
35,727 |
|
|
$ |
34,044 |
|
|
$ |
49,581 |
|
| |
Services and maintenance
|
|
|
48,421 |
|
|
|
37,408 |
|
|
|
33,338 |
|
| |
|
|
| |
|
Total revenue
|
|
|
84,148 |
|
|
|
71,452 |
|
|
|
82,919 |
|
| |
|
|
|
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Licenses
|
|
|
1,369 |
|
|
|
625 |
|
|
|
3,181 |
|
| |
Services and maintenance
|
|
|
19,036 |
|
|
|
11,331 |
|
|
|
12,685 |
|
| |
Amortization of stock-based compensation and acquired technology
|
|
|
1,592 |
|
|
|
1,823 |
|
|
|
2,292 |
|
| |
|
|
| |
|
Total cost of revenue
|
|
|
21,997 |
|
|
|
13,779 |
|
|
|
18,158 |
|
| |
|
|
| |
|
Gross margin
|
|
|
62,151 |
|
|
|
57,673 |
|
|
|
64,761 |
|
| |
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Research and development
|
|
|
24,495 |
|
|
|
20,667 |
|
|
|
18,140 |
|
| |
Sales and marketing
|
|
|
36,416 |
|
|
|
30,637 |
|
|
|
33,281 |
|
| |
General and administrative
|
|
|
10,889 |
|
|
|
6,845 |
|
|
|
7,241 |
|
| |
Restructuring charges
|
|
|
307 |
|
|
|
475 |
|
|
|
441 |
|
| |
Amortization of stock-based compensation
|
|
|
372 |
|
|
|
1,117 |
|
|
|
2,806 |
|
| |
|
|
| |
|
Total operating expenses
|
|
|
72,479 |
|
|
|
59,741 |
|
|
|
61,909 |
|
| |
|
|
| |
|
Income (loss) from operations
|
|
|
(10,328) |
|
|
|
(2,068) |
|
|
|
2,852 |
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Interest income, net
|
|
|
1,089 |
|
|
|
970 |
|
|
|
773 |
|
| |
Other income (expense)
|
|
|
194 |
|
|
|
455 |
|
|
|
(55) |
|
| |
|
|
| |
|
Other income, net
|
|
|
1,283 |
|
|
|
1,425 |
|
|
|
718 |
|
| |
|
|
| |
|
Income (loss) before income taxes
|
|
|
(9,045) |
|
|
|
(643) |
|
|
|
3,570 |
|
| |
|
Provision for income taxes
|
|
|
581 |
|
|
|
824 |
|
|
|
1,180 |
|
| |
|
|
|
Net income (loss)
|
|
$ |
(9,626) |
|
|
$ |
(1,467) |
|
|
$ |
2,390 |
|
| |
|
|
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic
|
|
$ |
(0.30) |
|
|
$ |
(0.05) |
|
|
$ |
0.12 |
|
| |
|
|
| |
Diluted
|
|
$ |
(0.30) |
|
|
$ |
(0.05) |
|
|
$ |
0.08 |
|
| |
|
|
| |
Shares used in per share calculations:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic
|
|
|
32,039 |
|
|
|
30,640 |
|
|
|
19,861 |
|
| |
|
|
| |
Diluted
|
|
|
32,039 |
|
|
|
30,640 |
|
|
|
30,267 |
|
| |
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
plumtree
software • 2004
annual report
page forty-six
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Convertible | |
|
|
|
|
| |
|
Preferred Stock | |
|
Common Stock | |
|
Additional | |
| |
|
| |
|
| |
|
Paid in | |
| (In thousands) |
|
Shares | |
|
Amount | |
|
Shares | |
|
Amount | |
|
Capital | |
| | |
|
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND
COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2001
|
|
|
16,581 |
|
|
$ |
17 |
|
|
|
7,650 |
|
|
$ |
8 |
|
|
$ |
62,277 |
|
| |
Issuance of common stock from initial public offering, net of
issuance costs of $4,555
|
|
|
— |
|
|
|
— |
|
|
|
5,000 |
|
|
|
5 |
|
|
|
37,940 |
|
| |
Conversion of preferred stock to common stock
|
|
|
(16,581) |
|
|
|
(17) |
|
|
|
16,629 |
|
|
|
17 |
|
|
|
— |
|
| |
Repurchase of common stock
|
|
|
— |
|
|
|
— |
|
|
|
(75) |
|
|
|
— |
|
|
|
(56) |
|
| |
Exercise of warrants
|
|
|
— |
|
|
|
— |
|
|
|
187 |
|
|
|
— |
|
|
|
— |
|
| |
Exercise of stock options
|
|
|
— |
|
|
|
— |
|
|
|
48 |
|
|
|
— |
|
|
|
73 |
|
| |
Amortization of stock-based compensation
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
Cancellation of unvested options
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,850) |
|
| |
Unrealized gain on investments
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
Translation adjustment
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
Net income
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
Balance at December 31, 2002
|
|
|
— |
|
|
$ |
— |
|
|
|
29,439 |
|
|
$ |
30 |
|
|
$ |
98,384 |
|
| |
Issuance of common stock from ESPP
|
|
|
— |
|
|
|
— |
|
|
|
462 |
|
|
|
— |
|
|
|
1,272 |
|
| |
Exercise of stock options
|
|
|
— |
|
|
|
— |
|
|
|
1,377 |
|
|
|
1 |
|
|
|
823 |
|
| |
Repurchase of common stock
|
|
|
— |
|
|
|
— |
|
|
|
(13) |
|
|
|
— |
|
|
|
(12) |
|
| |
Repayment of notes receivable from stockholders
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
Amortization of stock-based compensation
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
Cancellation of unvested options
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(720) |
|
| |
Unrealized loss on investments
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
Translation adjustment
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
Net loss
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
Balance at December 31, 2003
|
|
|
— |
|
|
$ |
— |
|
|
|
31,265 |
|
|
$ |
31 |
|
|
$ |
99,747 |
|
| |
|
|
| |
Exercise of stock options
|
|
|
— |
|
|
|
— |
|
|
|
549 |
|
|
|
— |
|
|
|
931 |
|
| |
Issuance of common stock from ESPP
|
|
|
— |
|
|
|
— |
|
|
|
583 |
|
|
|
1 |
|
|
|
1,618 |
|
| |
Issuance of options to non-employee
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
30 |
|
| |
Amortization of stock-based compensation
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
Cancellation of unvested options
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(222) |
|
| |
Unrealized loss on investments
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
Translation adjustment
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
Net loss
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
Balance at December 31, 2004
|
|
|
— |
|
|
$ |
— |
|
|
|
32,397 |
|
|
$ |
32 |
|
|
$ |
102,104 |
|
| |
|
|
[Additional columns below]
[Continued from above table, first column(s) repeated]
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Accumulated | |
|
|
|
|
|
|
| |
|
Notes | |
|
|
|
Other | |
|
|
|
|
|
|
| |
|
Receivable | |
|
Deferred | |
|
Comprehensive | |
|
|
|
Total | |
|
|
| |
|
from | |
|
Stock-based | |
|
Income | |
|
Accumulated | |
|
Stockholders’ | |
|
Comprehensive | |
| (In thousands) |
|
Stockholders | |
|
Compensation | |
|
(Loss) | |
|
Deficit | |
|
Equity | |
|
Income (Loss) | |
| |
|
| |
|
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND
COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2001
|
|
$ |
(674) |
|
|
$ |
(8,301) |
|
|
$ |
(34) |
|
|
$ |
(41,850) |
|
|
$ |
11,443 |
|
|
$ |
(7,822) |
|
| |
Issuance of common stock from initial public offering, net of
issuance costs of $4,555
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
37,945 |
|
|
|
|
|
| |
Conversion of preferred stock to common stock
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
| |
Repurchase of common stock
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(56) |
|
|
|
|
|
| |
Exercise of warrants
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
| |
Exercise of stock options
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
73 |
|
|
|
|
|
| |
Amortization of stock-based compensation
|
|
|
— |
|
|
|
3,500 |
|
|
|
— |
|
|
|
— |
|
|
|
3,500 |
|
|
|
|
|
| |
Cancellation of unvested options
|
|
|
— |
|
|
|
1,850 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
| |
Unrealized gain on investments
|
|
|
— |
|
|
|
— |
|
|
|
229 |
|
|
|
— |
|
|
|
229 |
|
|
|
229 |
|
| |
Translation adjustment
|
|
|
— |
|
|
|
— |
|
|
|
(172) |
|
|
|
— |
|
|
|
(172) |
|
|
|
(172) |
|
| |
Net income
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,390 |
|
|
|
2,390 |
|
|
|
2,390 |
|
| |
|
|
|
Balance at December 31, 2002
|
|
$ |
(674) |
|
|
$ |
(2,951) |
|
|
$ |
23 |
|
|
$ |
(39,460) |
|
|
$ |
55,352 |
|
|
$ |
2,447 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Issuance of common stock from ESPP
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,272 |
|
|
|
|
|
| |
Exercise of stock options
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
824 |
|
|
|
|
|
| |
Repurchase of common stock
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(12) |
|
|
|
|
|
| |
Repayment of notes receivable from stockholders
|
|
|
674 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
674 |
|
|
|
|
|
| |
Amortization of stock-based compensation
|
|
|
— |
|
|
|
1,363 |
|
|
|
— |
|
|
|
— |
|
|
|
1,363 |
|
|
|
|
|
| |
Cancellation of unvested options
|
|
|
— |
|
|
|
720 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
| |
Unrealized loss on investments
|
|
|
— |
|
|
|
— |
|
|
|
(103) |
|
|
|
— |
|
|
|
(103) |
|
|
|
(103) |
|
| |
Translation adjustment
|
|
|
— |
|
|
|
— |
|
|
|
(12) |
|
|
|
— |
|
|
|
(12) |
|
|
|
(12) |
|
| |
Net loss
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,467) |
|
|
|
(1,467) |
|
|
|
(1,467) |
|
| |
|
|
|
Balance at December 31, 2003
|
|
$ |
— |
|
|
$ |
(868) |
|
|
$ |
(92) |
|
|
$ |
(40,927) |
|
|
$ |
57,891 |
|
|
$ |
(1,582) |
|
| |
|
|
| |
Exercise of stock options
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
931 |
|
|
|
|
|
| |
Issuance of common stock from ESPP
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,619 |
|
|
|
|
|
| |
Issuance of options to non-employee
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
30 |
|
|
|
|
|
| |
Amortization of stock-based compensation
|
|
|
— |
|
|
|
481 |
|
|
|
— |
|
|
|
— |
|
|
|
481 |
|
|
|
|
|
| |
Cancellation of unvested options
|
|
|
— |
|
|
|
222 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
| |
Unrealized loss on investments
|
|
|
— |
|
|
|
— |
|
|
|
(390) |
|
|
|
— |
|
|
|
(390) |
|
|
|
(390) |
|
| |
Translation adjustment
|
|
|
— |
|
|
|
— |
|
|
|
70 |
|
|
|
— |
|
|
|
70 |
|
|
|
70 |
|
| |
Net loss
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(9,626) |
|
|
|
(9,626) |
|
|
|
(9,626) |
|
| |
|
|
|
Balance at December 31, 2004
|
|
$ |
— |
|
|
$ |
(165) |
|
|
$ |
(412) |
|
|
$ |
(50,553) |
|
|
$ |
51,006 |
|
|
$ |
(9,946) |
|
| |
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
page forty-seven
plumtree
software • 2004
annual report
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
For the Years Ended December 31, | |
| |
|
| |
| (In thousands) |
|
2004 | |
|
2003 | |
|
2002 | |
| | |
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net income (loss)
|
|
$ |
(9,626) |
|
|
$ |
(1,467) |
|
|
$ |
2,390 |
|
| |
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Provision for doubtful accounts
|
|
|
265 |
|
|
|
(111) |
|
|
|
505 |
|
| |
|
Depreciation and amortization
|
|
|
1,487 |
|
|
|
1,722 |
|
|
|
1,846 |
|
| |
|
Loss on disposal of property & equipment
|
|
|
— |
|
|
|
— |
|
|
|
214 |
|
| |
|
Accretion of short-term investments
|
|
|
822 |
|
|
|
716 |
|
|
|
— |
|
| |
|
Gain on sale of investment
|
|
|
— |
|
|
|
(475) |
|
|
|
— |
|
| |
|
Amortization of stock-based compensation
|
|
|
480 |
|
|
|
1,363 |
|
|
|
3,500 |
|
| |
|
Amortization of acquired technology
|
|
|
1,484 |
|
|
|
1,577 |
|
|
|
1,597 |
|
| |
|
Issuance of options to non-employee
|
|
|
30 |
|
|
|
— |
|
|
|
— |
|
| |
|
Amortization of warrants issued for services
|
|
|
37 |
|
|
|
42 |
|
|
|
52 |
|
| |
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Accounts receivable
|
|
|
(3,646) |
|
|
|
(441) |
|
|
|
733 |
|
| |
|
|
Prepaid and other current assets
|
|
|
(271) |
|
|
|
68 |
|
|
|
(908) |
|
| |
|
|
Other assets
|
|
|
161 |
|
|
|
293 |
|
|
|
(395) |
|
| |
|
|
Accounts payable
|
|
|
529 |
|
|
|
(318) |
|
|
|
167 |
|
| |
|
|
Accrued and other current liabilities
|
|
|
2,860 |
|
|
|
(2,589) |
|
|
|
(791) |
|
| |
|
|
Deferred revenue
|
|
|
3,633 |
|
|
|
488 |
|
|
|
(2,060) |
|
| |
|
|
Other long-term liabilities
|
|
|
(88) |
|
|
|
(6) |
|
|
|
120 |
|
| |
|
|
| |
|
|
Net cash provided (used in) by operating activities
|
|
|
(1,843) |
|
|
|
862 |
|
|
|
6,970 |
|
| |
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Proceeds from sale of investment
|
|
|
— |
|
|
|
475 |
|
|
|
— |
|
| |
Purchases of short-term investments
|
|
|
(35,939) |
|
|
|
(41,267) |
|
|
|
(46,141) |
|
| |
Maturities of short-term investments
|
|
|
40,085 |
|
|
|
37,861 |
|
|
|
1,703 |
|
| |
Purchases of property and equipment
|
|
|
(2,221) |
|
|
|
(823) |
|
|
|
(1,824) |
|
| |
|
|
| |
|
|
Net cash provided by (used in) investing activities
|
|
|
1,925 |
|
|
|
(3,754) |
|
|
|
(46,262) |
|
| |
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Payments on capital lease obligations
|
|
|
— |
|
|
|
(74) |
|
|
|
(283) |
|
| |
Proceeds from short-term debt
|
|
|
— |
|
|
|
— |
|
|
|
1,600 |
|
| |
Repayments on short-term debt
|
|
|
— |
|
|
|
— |
|
|
|
(3,200) |
|
| |
Repayments of employee notes receivable
|
|
|
— |
|
|
|
674 |
|
|
|
— |
|
| |
Proceeds from initial public offering, net
|
|
|
— |
|
|
|
— |
|
|
|
37,945 |
|
| |
Proceeds from issuance of common stock
|
|
|
2,550 |
|
|
|
2,096 |
|
|
|
73 |
|
| |
Repurchase of common stock
|
|
|
— |
|
|
|
(12) |
|
|
|
(56) |
|
| |
|
|
| |
|
|
Net cash provided by financing activities
|
|
|
2,550 |
|
|
|
2,684 |
|
|
|
36,079 |
|
| |
|
|
|
Effect of change in exchange rates on cash and cash equivalents
|
|
|
70 |
|
|
|
(13) |
|
|
|
(172) |
|
| |
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
2,702 |
|
|
|
(221) |
|
|
|
(3,385) |
|
|
Cash and cash equivalents at beginning of year
|
|
|
20,434 |
|
|
|
20,655 |
|
|
|
24,040 |
|
| |
|
|
|
Cash and cash equivalents at end of year
|
|
$ |
23,136 |
|
|
$ |
20,434 |
|
|
$ |
20,655 |
|
| |
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Cash paid for income taxes
|
|
$ |
145 |
|
|
$ |
576 |
|
|
$ |
814 |
|
| |
|
|
| |
|
Cash paid for interest
|
|
$ |
16 |
|
|
$ |
155 |
|
|
$ |
113 |
|
| |
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
plumtree
software • 2004
annual report
page forty-eight
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
| 1. |
ORGANIZATION OF THE COMPANY |
Plumtree Software, Inc. (the “Company”) develops,
markets and sells a suite of software products integrated into a
common platform for deploying advanced Web applications. The
Company was originally incorporated in the State of California
on July 18, 1996 and reincorporated in the State of
Delaware on May 31, 2002 (see Note 3).
The Company is subject to a number of risks associated with
companies at a similar stage of development including
competition from larger, more established companies, dependence
on new product introductions, volatility of the industry,
ability to obtain adequate funding to support growth, dependence
on key individuals and the ability to attract and retain
additional qualified personnel to manage the anticipated growth
of the Company.
|
|
| 2. |
SIGNIFICANT ACCOUNTING POLICIES |
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries. All
significant inter-company accounts and transactions have been
eliminated.
Foreign Currency Translation
The functional currency of the Company’s subsidiaries is
the local currency (with the exception of Switzerland which uses
the Euro as its functional currency). Accordingly, all assets
and liabilities are translated into U.S. dollars at the
current exchange rate as of the applicable balance sheet date.
Revenues and expenses are translated at the average exchange
rate prevailing during the period. Gains and losses resulting
from the translation of the financial statements are reported as
a separate component of stockholders’ equity. Foreign
currency transaction gains and losses are included in other
income (expense).
In the fourth quarter of 2004, the Company finalized certain
critical steps associated with the liquidation of the
Switzerland entity as follows:
|
|
| • |
Completed the valuation of assets and liabilities of the entity |
| |
| • |
Developed a formal liquidation plan |
| |
| • |
Prepared tax ruling documents |
| |
| • |
Obtained approval to repatriate all cash balances currently held |
Through September 30, 2004, the Switzerland entity owed
approximately $17 million to Plumtree Software, Inc.
(United States) which was considered to be a long-term
investment in nature. As prescribed by Statement of Financial
Accounting Standard (SFAS) 52 “Foreign Currency
Translation”, the Company accounted for gains and losses on
fluctuations in foreign currency related to this inter-company
balance in accumulated comprehensive loss, as a separate
component of stockholder’s equity. However, as a result of
the steps taken in the fourth quarter, management, as required
by SFAS 52, evaluated the nature of the inter-company
balance and concluded that a portion of the amount payable to
the parent company (equal to the cash balances available for
repatriation) had became short term in nature. As a result, the
Company recorded a foreign currency transaction gain of
approximately $881,000, which was offset by $763,000 of foreign
exchange losses related to the revaluation of international cash
in other than the functional currency, for a total net gain of
$118,000. This amount is included in the other income (expense)
line in the accompanying consolidated statement of operations.
In January 2005, the Company repatriated certain cash balances
and proceeded with liquidation procedures.
page forty-nine
plumtree
software • 2004
annual report
Cash Equivalents and Short-Term Investments
Cash equivalents consist of highly liquid investments including
corporate debt securities and money market funds with maturities
of 90 days or less from the date of purchase.
The following is a chart of the principal amounts of short-term
investments by expected maturity (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Expected Maturity Date For the | |
|
|
| |
|
Years Ending December 31, | |
|
As of December 31, 2004 | |
| |
|
| |
|
| |
| |
|
2005 | |
|
2006 | |
|
Total Book Value | |
|
Unrealized Losses | |
|
Total Fair Value | |
| | |
|
Taxable auction rate securities
|
|
$ |
2,000 |
|
|
$ |
— |
|
|
$ |
2,000 |
|
|
$ |
— |
|
|
$ |
2,000 |
|
|
US Government agencies
|
|
|
12,903 |
|
|
|
9,500 |
|
|
|
22,403 |
|
|
|
(182 |
) |
|
|
22,221 |
|
|
Corporate notes
|
|
|
12,708 |
|
|
|
5,050 |
|
|
|
17,759 |
|
|
|
(82 |
) |
|
|
17,677 |
|
| |
|
|
| |
Total
|
|
$ |
27,612 |
|
|
$ |
14,550 |
|
|
$ |
42,162 |
|
|
$ |
(264 |
) |
|
$ |
41,898 |
|
| |
|
|
It is our policy to review our short term investments on a
regular basis to evaluate whether or not any investment is
impaired. With respect to the above investments we are exposed
to market risks for changes in interest rates. We place our
investments with high quality credit issuers that have a rating
by Moody’s of A-1 or higher, Fitch’s F-1 or higher or
Standard & Poors of P-1 or higher.
The Company’s general policy is to limit the risk of
principal loss and ensure the safety of invested funds by
limiting market and credit risk. The Company considers all
investments to be short-term investments, which are classified
in the balance sheet as current assets, because (1) the
investments can be readily converted at any time into cash or
into securities with a shorter remaining time to maturity and
(2) the investments are selected for yield management
purposes only and the Company is not committed to holding the
investments until maturity. The Company determines the
appropriate classification of its investments at the time of
purchase and re-evaluates such designations as of each balance
sheet date. All short-term investments and cash equivalents in
the Company’s portfolio are classified as
“available-for-sale” and are stated at fair market
value, with the unrealized gains and losses reported as a
component of accumulated other comprehensive income (loss). The
amortized cost of debt securities is adjusted for amortization
of premiums and accretion of discounts to maturity. Such
amortization and accretion is included in interest income, net.
The cost of securities sold is based on the specific
identification method.
In accordance with EITF 03-01, the following table
summarizes the fair value and gross unrealized losses related to
available-for-sale securities, aggregated by investment category
and length of time that individual securities have been in a
continuous loss position, at December 31, 2004:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Less Than 12 Months | |
|
12 Months or More | |
|
Total | |
| |
|
| |
|
| |
|
| |
| |
|
|
|
Gross | |
|
|
|
Gross | |
|
|
|
Gross | |
| |
|
|
|
Unrealized | |
|
|
|
Unrealized | |
|
|
|
Unrealized | |
| |
|
Fair Value | |
|
Losses | |
|
Fair Value | |
|
Losses | |
|
Fair Value | |
|
Losses | |
| | |
|
US Government Notes
|
|
$ |
20,717 |
|
|
$ |
(177 |
) |
|
$ |
1,504 |
|
|
$ |
(5 |
) |
|
$ |
22,221 |
|
|
$ |
(182 |
) |
|
Corporate Notes
|
|
|
8,346 |
|
|
|
(27 |
) |
|
|
9,331 |
|
|
|
(54 |
) |
|
|
17,677 |
|
|
|
(81 |
) |
| |
|
|
| |
Total:
|
|
$ |
29,063 |
|
|
$ |
(204 |
) |
|
$ |
10,835 |
|
|
$ |
(60 |
) |
|
$ |
39,898 |
|
|
$ |
(264 |
) |
| |
|
|
Market values were determined for each individual security in
the investment portfolio. The decline in value of investments is
primarily related to changes in interest rates and are
considered to be temporary in nature.
plumtree
software • 2004
annual report
page fifty
|
|
|
Concentration of Credit
Risk |
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash
equivalents, short-term investments and accounts receivable. The
Company places all of its cash and cash equivalents and
short-term investments with high credit issuers. Carrying
amounts of financial instruments held by the Company, which
include cash and cash equivalents, short-term investments and
accounts receivable, approximate fair value due to their short
duration. The Company performs ongoing credit evaluations of its
customers, generally requires customers to prepay for
maintenance and maintains reserves for potential losses. The
Company’s customer base is primarily composed of businesses
throughout the United States, Europe and Asia.
No customer accounted for greater than 10% of total revenue for
the years ended December 31, 2004, 2003 and 2002. As of
December 31, 2004 and 2003, no customer accounted for
greater than 10% of accounts receivable.
Below is a summary of the changes in the Company’s
allowance for doubtful accounts for the years ended
December 31, 2004, 2003 and 2002 (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Beginning | |
|
|
|
|
|
Ending | |
| |
|
Balance | |
|
Provision | |
|
Write-offs | |
|
Balance | |
| | |
|
Year ended December 31, 2004
|
|
$ |
522 |
|
|
$ |
265 |
|
|
$ |
— |
|
|
$ |
787 |
|
|
Year ended December 31, 2003
|
|
$ |
754 |
|
|
$ |
(111) |
|
|
$ |
121 |
|
|
$ |
522 |
|
|
Year ended December 31, 2002
|
|
$ |
1,184 |
|
|
$ |
505 |
|
|
$ |
935 |
|
|
$ |
754 |
|
Property and equipment are stated at cost. Depreciation and
amortization is provided using the straight-line method over the
shorter of the lease term or the estimated useful life of two to
four years.
Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities
from a change on tax rates is recognized in income in the period
the change is enacted. Valuation allowances are established,
when necessary, to reduce deferred tax assets to the amounts
expected to be recovered.
The Company recognizes commission expense in the period in which
the sales arrangement has been finalized, which may or may not
coincide with the recognition of revenue for the respective
contract.
Stock-Based Compensation
The Company has elected to follow the guidance in Accounting
Principles Board Opinion No. 25 (APB 25), Accounting
for Stock Issued to Employees to account for employee stock
options. Accordingly, the Company recognizes no compensation
expense with respect to stock-based awards to employees for
which the exercise price equals the fair market value of the
underlying stock on the date of grant. The Company has
determined pro forma information regarding net income (loss) and
net income (loss) per share as if the Company had accounted for
employee stock options under the fair value method under
Statement of Financial Accounting Standards No. 123
(SFAS 123), Accounting for Stock-Based Compensation,
and Statement of Financial Accounting Standards No. 148,
Accounting for Stock-Based Compensation-Transition and
Disclosure
page fifty-one
plumtree
software • 2004
annual report
(SFAS 148). The fair values of these stock-based
awards to employees were estimated using the Black-Scholes
option pricing model, using the following weighted average
assumptions:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Years Ended December 31, | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
|
2002 | |
| | |
|
Risk-free interest rate
|
|
|
3.0 |
% |
|
|
2.6 |
% |
|
|
3.6 |
% |
|
Expected life of the option
|
|
|
4 years |
|
|
|
4 years |
|
|
|
4 years |
|
|
Dividend yield
|
|
|
0 |
% |
|
|
0 |
% |
|
|
0 |
% |
|
Volatility
|
|
|
66 |
% |
|
|
94 |
% |
|
|
105 |
% |
The fair value of share purchase rights under the ESPP was
estimated using the Black-Scholes option pricing model, using
the following weighted average assumptions for 2004, 2003 and
2002 respectively: risk free interest rate of 1.34%, 2.4%, and
2.4%; expected life of 1.12, 1.25 and 1.25 years; dividend
yield of 0%, 0% and 0%; and volatility of 52%, 105% and 105%.
For pro forma purposes, the estimated fair value of the
Company’s stock-based awards to employees is amortized over
the options’ vesting period (generally four years) and the
ESPP’s look back period of up to two years. The
weighted-average estimated fair value of stock options issued
for the years ended December 31, 2004, 2003 and 2002 were
$2.17, $2.43 and $2.88 per share, respectively. The
weighted-average estimated fair value of share purchase rights
under the ESPP for the years ended December 31, 2004, 2003
and 2002 were $1.18, $1.36 and $4.94 per share,
respectively. The Company’s pro forma net loss (in
thousands) and pro forma net loss per share data under
SFAS No. 123 are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Years Ended December 31, | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
|
2002 | |
| | |
|
Net income (loss) as reported
|
|
$ |
(9,626) |
|
|
$ |
(1,467) |
|
|
$ |
2,390 |
|
|
Add: Stock-based employee compensation expense included in net
income (loss)
|
|
|
480 |
|
|
|
1,363 |
|
|
|
3,500 |
|
|
Deduct: Stock-based employee compensation expense determined
under fair value based method for all awards
|
|
|
(6,864) |
|
|
|
(8,429) |
|
|
|
(6,377) |
|
|
Pro forma net loss under SFAS 123
|
|
$ |
(16,010) |
|
|
$ |
(8,533) |
|
|
$ |
(487) |
|
| |
|
|
|
Net income (loss) per common share— basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported under APB 25
|
|
$ |
(0.30) |
|
|
$ |
(0.05) |
|
|
$ |
0.12 |
|
|
As reported under SFAS 123
|
|
$ |
(0.50) |
|
|
$ |
(0.28) |
|
|
$ |
(0.02) |
|
|
Net income (loss) per common share— diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
As reported under APB 25
|
|
$ |
(0.30) |
|
|
$ |
(0.05) |
|
|
$ |
0.08 |
|
| |
As reported under SFAS 123
|
|
$ |
(0.50) |
|
|
$ |
(0.28) |
|
|
$ |
(0.02) |
|
In connection with the grant of certain stock options to
employees during the year ended December 31, 2001, the
Company recorded deferred stock-based compensation of
approximately $4.4 million, representing the difference
between the deemed value of the common stock for accounting
purposes and the option exercise price or stock sale price at
the date of the option grant or stock sale. Such amount is
presented as a reduction of stockholders’ equity and
amortized on an accelerated basis over the vesting period of the
applicable options, generally four years. No deferred stock
based compensation was recorded during the years ended
December 31, 2004, 2003 and 2002. Approximately $480,000,
$1.4 million and $3.5 million was expensed during the
years ended December 31, 2004, 2003 and 2002, respectively.
Compensation expense is
plumtree
software • 2004
annual report
page fifty-two
decreased in the period of forfeiture for any accrued but
unvested compensation arising from the termination of an option
holder. The Company’s stock-based compensation expense by
category is as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
For the Years Ended | |
| |
|
December 31, | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
|
2002 | |
| | |
|
Amortization of stock-based compensation included in cost of
revenue
|
|
$ |
108 |
|
|
$ |
246 |
|
|
$ |
694 |
|
| |
|
|
|
Amortization of stock-based compensation included in operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Research and development
|
|
$ |
170 |
|
|
$ |
510 |
|
|
$ |
1.247 |
|
| |
Sales and marketing
|
|
|
165 |
|
|
|
494 |
|
|
|
1,281 |
|
| |
General and administrative
|
|
|
37 |
|
|
|
113 |
|
|
|
278 |
|
| |
|
|
| |
|
Total stock-based compensation included in operating expenses
|
|
|
372 |
|
|
|
1,117 |
|
|
|
2,806 |
|
| |
|
|
| |
|
|
Total stock-based compensation
|
|
$ |
480 |
|
|
$ |
1,363 |
|
|
$ |
3,500 |
|
| |
|
|
Restructuring Charges
In June 2004, the Company undertook a workforce reduction and
incurred a charge of $307,000. The Company had paid for all of
the costs incurred as a result of the restructuring as of
December 31, 2004.
In July 2003, the Company undertook a workforce reduction and
incurred a charge of $475,000. The Company had paid for all of
the costs incurred as a result of the restructuring as of
December 31, 2003.
In October 2002, the Company undertook a workforce reduction and
incurred a charge of $441,000. The Company had paid for all of
the costs incurred as a result of the restructuring as of
December 31, 2002.
Software Development Costs
The Company accounts for internally generated software
development costs in accordance with SFAS No. 86,
“Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed.” Capitalization of software
development costs begins upon the establishment of technological
feasibility of the product, which the Company defines as the
development of a working model and further defines as the
completion of beta testing of the software. The establishment of
technological feasibility and the ongoing assessment of the
recoverability of these costs require considerable judgment by
management with respect to certain external factors, including,
but not limited to, anticipated future gross product revenue,
estimated economic life and changes in technology. Such costs
are reported at the lower of unamortized cost or net realizable
value. To date, internal software development costs that were
eligible for capitalization have been insignificant and the
Company has charged all software development costs to research
and development expense as incurred.
The Company has capitalized technology costs associated with the
acquisitions discussed in Note 5, as the technology
acquired had reached technological feasibility prior to
acquisition. The Company has fully amortized the capitalized
technology costs as of December 31, 2004.
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates. Significant estimates and
assumptions made by management include the valuation allowance
related to net deferred tax assets, the determination of the
fair value of stock options, allowance for doubtful accounts and
certain contingency items.
page fifty-three
plumtree
software • 2004
annual report
Revenue Recognition
License revenue consists principally of revenue from the
licensing of the Company’s software and is generally
recognized when a contract is executed, all delivery obligations
have been met, the fee is fixed or determinable, and
collectibility is probable. When licenses are sold together with
services, in accordance with the provisions of the American
Institute of Certified Public Accountants’ Statement of
Position 97-2, “Software Revenue Recognition”
(“SOP 97-2”), license fees are recognized upon
delivery, provided that (1) the above criteria have been
met, (2) payment of the license fees is not dependent upon
the performance of the services, (3) the services do not
include significant modifications to the features and
functionality of the software, and (4) the services are not
essential to the functionality of the software.
The Company has not established vendor specific objective
evidence of fair value (“VSOE”) for license sales and
recognizes revenue from arrangements with multiple elements
involving software licenses under the residual method as
outlined in SOP 97-2, as amended by SOP 98-9
“Modification of SOP 97-2, Software Revenue
Recognition, With Respect to Certain Arrangements”. To the
extent that a discount exists on any of the elements, the
Company follows the residual method and attributes that discount
entirely to the delivered elements.
The Company enters into certain arrangements involving the
resale of third party software. The revenue related to these
arrangements is reported gross if management determines that it
is acting as a principal in the arrangement and is assuming
certain risks and rewards or net if management determines that
it is acting as an agent in the arrangement, in accordance with
the provisions of EITF 99-19 “Reporting Revenue Gross as a
Principal versus Net as an Agent”. Management’s
determination is based on a number of factors including who is
the perceived as the primary obligor in the transaction, who is
assuming credit risk and the degree of pricing latitude the
Company maintains.
Service revenue consists of consulting, training and
installation services that the Company provides to its
customers. Revenue from such services is generally recognized as
the service is proportionately performed. If services are
included with a license agreement, and services are not
essential to the functionality of the software, amounts related
to services are unbundled from the license fee based on VSOE as
established by transactions where such services have been sold
separately.
Maintenance revenue relates to the technical support and
software updates the Company provides to its customers. Revenue
on maintenance contracts is recognized ratably over the term of
the contract. If maintenance is bundled with a license
agreement, amounts related to maintenance are unbundled from the
license fee based on VSOE as established by the consistent
renewals the Company charges in accordance with its contracts
and its established pricing.
Net Income (Loss) Per Share
Basic and diluted net income (loss) per share is presented in
conformity with SFAS No. 128, “Earnings per
Share,” for all periods presented. In accordance with
SFAS No. 128, basic net income (loss) per share is
calculated by dividing net income (loss) by the weighted average
common shares outstanding during the period, less shares subject
to repurchase. Diluted net income per share is calculated by
dividing net income by the weighted average common shares
outstanding adjusted for all potential common shares, which
includes shares issuable upon the exercise of outstanding common
stock options and warrants, and common stock
plumtree
software • 2004
annual report
page fifty-four
subject to repurchase, using the treasury stock method, and from
convertible preferred stock, using the “if-converted”
method (in thousands).
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Years Ended December 31, | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
|
2002 | |
| | |
|
Net income (loss)
|
|
$ |
(9,626) |
|
|
$ |
(1,467) |
|
|
$ |
2,390 |
|
| |
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of common stock outstanding
|
|
|
32,039 |
|
|
|
30,700 |
|
|
|
20,140 |
|
| |
|
Less: Weighted average shares subject to repurchase
|
|
|
— |
|
|
|
(60) |
|
|
|
(279) |
|
| |
|
|
|
Weighted average shares used in computing basic net income
(loss) per share
|
|
|
32,039 |
|
|
|
30,640 |
|
|
|
19,861 |
|
| |
|
|
|
Basic net income (loss) per share
|
|
$ |
(0.30) |
|
|
$ |
(0.05) |
|
|
$ |
0.12 |
|
| |
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used above
|
|
|
32,039 |
|
|
|
30,640 |
|
|
|
19,861 |
|
| |
Add: Weighted average shares subject to repurchase
|
|
|
— |
|
|
|
— |
|
|
|
279 |
|
| |
Add: Weighted average adjustment to reflect the effect of the
conversion of convertible preferred stock
|
|
|
— |
|
|
|
— |
|
|
|
6,996 |
|
| |
Add: Net additional shares related to assumed option and warrant
exercises under the treasury method
|
|
|
— |
|
|
|
— |
|
|
|
3,131 |
|
|
Weighted average shares used in computing diluted net Income
(loss) per share
|
|
|
32,039 |
|
|
|
30,640 |
|
|
|
30,267 |
|
| |
|
|
|
Diluted net income (loss) per share
|
|
$ |
(0.30) |
|
|
$ |
(0.05) |
|
|
$ |
0.08 |
|
| |
|
|
Potentially dilutive securities not included in diluted weighted
average shares outstanding include (in thousands):
| |
|
|
|
|
|
|
|
|
|
| |
|
As of December 31, | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
| | |
|
Common stock subject to repurchase
|
|
|
— |
|
|
|
16 |
|
|
Options to purchase common stock
|
|
|
11,777 |
|
|
|
10,366 |
|
|
Employee stock purchase plan
|
|
|
273 |
|
|
|
224 |
|
|
Warrants
|
|
|
41 |
|
|
|
41 |
|
| |
|
|
| |
Total
|
|
|
12,091 |
|
|
|
10,647 |
|
| |
|
|
Common stock subject to repurchase includes founders’ stock
and common stock issued pursuant to unvested option exercises.
Weighted average exercise price for options excluded was $3.92
and $4.13 for December 31, 2004 and 2003, respectively.
Comprehensive Income (Loss)
SFAS No. 130, “Reporting Comprehensive
Income,” establishes standards for reporting and display of
comprehensive income and its components in a full set of general
purpose financial statements. The objective of
SFAS No. 130 is to report a measure of all changes in
equity of an enterprise that result from transactions and other
economic events of the period other than transactions with
stockholders (“comprehensive income”). Comprehensive
income (loss) is the total of net income (loss) and all other
non-owner changes in stockholders’ equity, including
unrealized gains and losses on investments and foreign
translation adjustments.
page fifty-five
plumtree
software • 2004
annual report
Recent Accounting Pronouncements
In March 2004, the FASB issued EITF Issue No. 03-1
(“EITF 03-1”), “The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain
Investments.” EITF 03-1 includes new guidance for
evaluating and recording impairment losses on debt and equity
instruments, as well as new disclosure requirements for
investments that are deemed to be temporarily impaired. The
accounting guidance provided in EITF 03-1 is effective for
fiscal years beginning after June 15, 2004, while the
disclosure requirements for debt and equity securities accounted
for under FASB Statement No. 115, “Accounting for
Certain Investments in Debt and Equity Securities”, are
effective for annual periods ending after December 15,
2003. The Company does not expect the adoption of EITF 03-1
will have a material impact on its financial position, results
of operations, or cash flows. However, upon adoption, the
Company may be required to present certain of its
“available for sale” investments with stated
maturities greater than twelve months within long-term assets.
The effective date for the measurement and recognition guidance
contained in paragraphs 10 — 20 of EITF 03-1
has been delayed by the FASB until all deliberation has been
completed.
In December 2004, the FASB issued SFAS 123R
“Share-Based Payment.” SFAS 123R requires
entities to measure the cost of employee services received in
exchange for an award of equity instruments based on the
grant-date fair value of the award. This cost is recognized over
the period during which the employee is required to provide
service in exchange for the award (usually the vesting period).
The accounting guidance provided in SFAS 123R is effective
for the Company as of the beginning of the first interim
reporting period that begins after June 15, 2005. The
Company expects to apply the modified prospective approach for
the transition period beginning July 1, 2005. The
Company’s stock option plan and Employee Stock Purchase
Plan will be subject to the fair value provisions under
SFAS 123R. Historical proforma data is included in
Note 2. The Company expects this to have a material impact
on reported net income (loss) in future periods after adoption.
In December 2004, the FASB also issued Staff Position
SFAS No. 109-2, Accounting and Disclosure Guidance
for the Foreign Earnings Repatriation Provision (“FSP
No. 109-2”) within the American Jobs Creation Act of
2004. The Act provides for a one-time deduction of
85 percent of certain foreign earnings that are repatriated
in either an enterprise’s last tax year that began before
the date of enactment, or the first tax year that begins during
the one year period beginning on the date of enactment. FSP
No. 109-2 allows companies additional time to evaluate
whether foreign earnings will be repatriated under the
repatriation provisions of the new tax law and requires
specified disclosures for companies needing the additional time
to complete the evaluation. The Company does not expect this
pronouncement to have a significant affect on operations.
Certain prior year amounts for deferred revenues have been
reclassified to conform to the current period presentation. In
general, the Company enters into maintenance contracts with
customers that span a 12-month period and are renewable on an
annual basis. As a result of increased maintenance contracts
that span over multiple terms, we have classified
$1.9 million and $661,000 as long-term deferred revenue as
of December 31, 2004 and December 31, 2003,
respectively.
3. INITIAL PUBLIC OFFERING
On June 4, 2002, the Company closed the sale of
5,000,000 shares of common stock in an initial public
offering at a price of $8.50 per share. A total of
$42.5 million in gross proceeds was raised from this
transaction. After deducting the underwriting discount of
approximately $3.0 million and approximately
$1.6 million of offering expenses, net proceeds were
$37.9 million.
In connection with the IPO, the Board of Directors and
stockholders approved the reincorporation of the Company from
the State of California into the State of Delaware. The Company
effected the reincorporation on May 31, 2002.
plumtree
software • 2004
annual report
page fifty-six
Upon the closing of the Company’s IPO,
16,580,830 shares of the Company’s convertible
preferred stock converted into common stock. Due to the
anti-dilutive provisions of the Company’s Series E
convertible preferred stock, the holders of the outstanding
shares of Series E convertible preferred stock received an
additional 48,605 shares of common stock upon the
completion of the IPO.
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
| |
|
|
|
|
|
|
|
|
| |
|
As of December 31, | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
| | |
|
Software and computer equipment
|
|
$ |
4,607 |
|
|
$ |
6,165 |
|
|
Furniture and fixtures
|
|
|
329 |
|
|
|
570 |
|
|
Leasehold improvements and other
|
|
|
706 |
|
|
|
879 |
|
| |
|
|
| |
|
|
5,642 |
|
|
|
7,614 |
|
|
Accumulated depreciation and amortization
|
|
|
(3,110) |
|
|
|
(5,816) |
|
| |
|
|
| |
|
$ |
2,532 |
|
|
$ |
1,798 |
|
| |
|
|
Depreciation expense for the years ended December 31, 2004,
2003 and 2002 was $1.5 million, $1.7 million, and
$1.8 million, respectively.
During 2004, the Company disposed of $4.2 million of assets
that were fully depreciated.
5. OTHER ASSETS
Other assets consist of the following (in thousands):
| |
|
|
|
|
|
|
|
|
| |
|
As of December 31, | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
| | |
|
Acquired technology, net of accumulated amortization of $4,796
and $3,325, respectively
|
|
$ |
— |
|
|
$ |
1,484 |
|
|
Prepaid royalties, net of current portion
|
|
|
46 |
|
|
|
163 |
|
|
Other
|
|
|
334 |
|
|
|
378 |
|
| |
|
|
| |
|
$ |
380 |
|
|
$ |
2,025 |
|
| |
|
|
In November 2001, the Company acquired certain technology for
$85,000 and 60,000 shares of common stock. In November
2001, the Company also acquired a company (the “Acquired
Company”) for 297,594 shares of common stock. The
acquisition of the Acquired Company was accounted for under the
purchase method with the results of the Acquired Company
included in the consolidated statements of operations for the
year ended December 31, 2001 subsequent to the November
2001 acquisition date. In connection with these acquisitions,
the Company incurred approximately $70,000 of transaction
related costs. The common stock issued in connection with these
transactions was recorded at its estimated fair value for
accounting purposes of $12.60 per share on the date of
issuance. The purchase price was allocated to acquired
technology and was being amortized over its estimated useful
life of three years. Amortization is being recorded as cost of
revenue and was $1.5 million, $1.6 million and
$1.6 million for the years ended December 31, 2004,
2003 and 2002.
page fifty-seven
plumtree
software • 2004
annual report
|
|
| 6. |
ACCRUED AND OTHER CURRENT LIABILITIES |
Accrued liabilities consist of the following (in thousands):
| |
|
|
|
|
|
|
|
|
| |
|
As of December 31, | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
| | |
|
Accrued commissions and bonus
|
|
$ |
3,602 |
|
|
$ |
1,808 |
|
|
Accrued sales taxes
|
|
|
1,536 |
|
|
|
1,328 |
|
|
Accrued vacation
|
|
|
1,619 |
|
|
|
1,559 |
|
|
Accrued professional services
|
|
|
2,711 |
|
|
|
2,012 |
|
|
Accrued third party software
|
|
|
425 |
|
|
|
787 |
|
|
Accrued ESPP
|
|
|
739 |
|
|
|
623 |
|
|
Accrued other
|
|
|
4,312 |
|
|
|
3,967 |
|
| |
|
|
| |
|
$ |
14,944 |
|
|
$ |
12,084 |
|
| |
|
|
|
|
| 7. |
COMMITMENTS AND CONTINGENCIES |
|
|
|
Operating Lease
Commitments |
The Company leases its facilities under operating lease
agreements. The leases expire at various dates through 2006. As
of December 31, 2004, future minimum lease payments under
these agreements are as follows (in thousands):
| |
|
|
|
|
| Years Ended December 31, |
|
|
| | |
|
2005
|
|
$ |
3,537 |
|
|
2006
|
|
|
2,552 |
|
| |
|
|
|
| |
|
$ |
6,089 |
|
| |
|
|
|
Rent expense under operating leases was approximately
$4.6 million, $4.2 million, and $4.0 million for
the years ended December 31, 2004, 2003, and 2002,
respectively.
In connection with the Company’s operating lease agreement
for their corporate headquarters in San Francisco,
California, the Company is contractually obligated to complete
certain leasehold improvements during the lease term, which
expires in 2006. Management does not believe that the outcome of
this matter will have a material impact on the Company’s
financial position, liquidity or results of operations.
|
|
|
Notes Payable and Line of
Credit |
The Company has a $3.1 million revolving line of credit
with Silicon Valley Bank that matured in August 2004. Upon
expiration, the Company extended the current terms through the
end of October 2004 while negotiating an amendment to the credit
facility. On October 25, 2004, the Company signed an
amended agreement with Silicon Valley Bank that increased its
credit limit to $4 million and eliminated the minimum cash
balance requirement that previously existed related to United
States bank accounts and replaced this requirement with other
financial covenants. To secure any outstanding loans, the
Company has granted Silicon Valley Bank a security interest in
its assets, including its accounts receivable. Interest on the
revolving line of credit is payable monthly and accrues at one
percentage point above the prime rate as announced by Silicon
Valley Bank. As of December 31, 2004, no amounts were
outstanding under this facility. The Company has issued a letter
of credit for $2.5 million to the landlord of our corporate
headquarters, which is enforceable against the facility. The
Company has limitations on declaring and paying dividends,
incurring any non-permitted indebtedness and acquiring the
capital stock of any other company under its loan agreements
with Silicon Valley Bank. As of December 31, 2004, the
Company was in compliance with all financial covenants under the
new revolving line of credit agreement with Silicon Valley Bank.
plumtree
software • 2004
annual report
page fifty-eight
The Company has entered into various license arrangements with
other software providers to incorporate the software
provider’s software in the Company’s product. In
return for these licenses, the Company is required to pay
certain fees upon signing of the arrangements plus a certain
percentage of the Company’s net revenue, as defined in
these agreements, generated from the sales of its product.
Royalty expense is recognized in the period in which liability
is incurred. Up-front fees are amortized over the period
benefited or as the incorporated software is sublicensed, as
applicable. For the years ended December 31, 2004, 2003 and
2002, the Company incurred royalty expense of approximately
$1.2 million, $625,000 and $3.2 million, respectively,
related to these arrangements. The Company classifies all
royalty expenses as cost of revenues.
On May 17, 2002, Datamize, LLC filed a lawsuit against the
Company in the United States District Court for the District of
Montana (Civil Action No. 02-86-M-LBE). In its complaint,
Datamize alleged that it is the owner of U.S. Patent
Number 6,014,137 (“the ‘137 patent”), and
that the Company infringed one or more claims of the
‘137 patent. Datamize was seeking, among other things,
injunctive relief and unspecified damages. The Company moved the
Court (“Motion”) to dismiss the action for lack of
personal jurisdiction or, in the alternative, have the action
transferred to the Northern District of California. In early
July 2003, the Court granted the Motion and entered judgment in
favor of the Company on July 7, 2003 in accordance with
that order.
In December 2002, the Company filed a complaint for declaratory
relief against Datamize in United States District Court for the
Northern District of California (Civil Action
No. 02-5693 VRW). The Company sought a declaratory
judgment that it does not infringe any valid claim of the
‘137 patent, which Datamize claims to own. Datamize
filed its answer and a counterclaim alleging that the Company
infringes the ‘137 patent. In response to a procedural
motion, the Court realigned the parties so that the Company was
the defendant, and Datamize was the plaintiff. The parties
engaged in discovery, and began the process of construction of
the patent claims. On March 31, 2004, the Company filed a
motion for summary judgment, seeking to have the
‘137 patent held invalid on the grounds of
indefiniteness. On July 9, 2004, the Court granted the
Company’s motion, holding the ‘137 patent
invalid, and entered a judgment in favor of the Company. The
Company has filed a motion to recover its attorney’s fees.
Datamize has appealed the Court’s entry of summary judgment
of invalidity to the Federal Circuit, which appeal will likely
be heard during the first half of 2005.
In 2002 and 2003, Datamize was issued two new patents based on
continuation applications to the ‘137 patent,
U.S. Patent Nos. 6,460,040 (“the ‘040
patent”) and 6,658,418 (“the ‘418 patent”).
Datamize accused the Company of infringing one or more claims of
one or more of these patents. On July 12, 2004, the Company
filed a new complaint for declaratory relief against Datamize in
the United States District Court for the Northern District of
California (Civil Action No. 5:2004-CV-0277), seeking a
declaration that the Company does not infringe any valid claims
of the ‘040 patent or the ‘418 patent. On
October 15, 2004, Plumtree filed a motion for summary
judgment, seeking to invalidate the claims of the
‘040 patent and the ‘418 patent on grounds
of invalidity in light of the “on sale bar.” On
October 18, 2004, Datamize filed a motion to dismiss
Plumtree’s new declaratory judgment complaint, alleging
that there is no “case or controversy” with respect to
these patents. The Court will hear both parties’ motions on
May 5, 2005. The Company intends to vigorously pursue its
claim for declaratory relief.
On November 13, 2001, the Company commenced an action in
the District Court in The Hague against an individual, Werner
Linssen, to cancel his Benelux trademark registration for
“Plumtree”. The Company asked the Hague District Court
to (i) annul Mr. Linssen’s Benelux trademark
registration for “Plumtree” and (ii) bar
Mr. Linssen, pending the proceedings, from contacting the
Company’s customers in a threatening or unfair manner. On
September 24, 2003, the Hague District Court granted the
Company’s request for a preliminary
page fifty-nine
plumtree
software • 2004
annual report
injunction barring Mr. Linssen, pending the proceedings,
from contacting the Company’s customers in a threatening or
unfair manner.
On November 25, 2001, the Company also commenced a
proceeding before the Swiss Federal Institute of Intellectual
Property in opposition to Mr. Linssen’s trademark
registration for “Plumtree.” On December 18,
2003, Mr. Linssen commenced a proceeding before the Swiss
Federal Institute of Intellectual Property in opposition to the
Company’s trademark registration for “Plumtree
Software”.
On May 2, 2003, the Company initiated a civil lawsuit
against Mr. Linssen in the Commercial Court of the Canton
of Zurich, Switzerland, seeking (i) an injunction barring
Mr. Linssen’s use of the “Plumtree”
trademark, and (ii) the transfer of Mr. Linssen’s
Swiss trademark registration for “Plumtree”, or in the
alternative, the cancellation of Mr. Linssen’s Swiss
registration.
The Company and Mr. Linssen each also commenced proceedings
before the E.U.’s Office of Harmonisation of the Internal
Market in opposition to each other’s Community Trade Mark
applications.
On June 17, 2004, the Commercial Court of the Canton of
Zurich, Switzerland approved a global trademark settlement
between the parties, directing, among other things, that
Mr. Linssen’s trademark and associated applications
and registrations be transferred to Plumtree. Pursuant to the
settlement agreement, the parties have taken steps to record
transfer of ownership of Mr. Linssen’s trademark to
Plumtree and to terminate the various proceedings described
above.
On February 28, 2005, Advarion, Inc. (“Advarion”)
filed a complaint against the Company and six other defendants
in the U.S. District Court for the Southern District of
Texas, Case No. 4:04-CV-03841. The allegations of the
complaint appear to relate to the Company’s past
development efforts with co-defendant ClassFirst Foundation for
potential products intended for educational settings. The
complaint asserts purported claims for copyright infringement,
misappropriation of trade secrets, trade dress infringement,
unfair competition, and other state law claims. By its
complaint, Advarion seeks damages, preliminary and permanent
injunctive relief, declaratory judgment, costs, and
attorney’s fees.
The Company has only recently received a copy of the complaint
and has not been formally served. The Company promptly initiated
an investigation into the allegations set forth in the complaint
and, based on the information available to date; we do not
believe that the claims have merit. The Company plans vigorously
to defend against this action. Based on the information received
to date, we do not believe that this action will have a material
adverse impact on the Company or its continuing operations.
The results of the above issues and proceedings cannot be
predicted with certainty and potential exposure is not
estimable; however, in the opinion of management, the potential
liabilities associated with these complaints are not expected to
have a material adverse effect on the Company’s financial
position, liquidity or results of operations.
8. WARRANTS AND OPTIONS
In May 2000, in connection with the extension of a facilities
lease, a warrant was issued to the landlord to purchase
32,391 shares of common stock at $9.60 per share. The
right to purchase the common stock was immediately effective
upon signing and exercisable for a period of six years. The
estimated fair value of the warrant at the date of issuance was
approximately $155,000. This amount is being recognized as
additional rent expense over the term of the facilities lease,
which expires in 2006.
In September 2000, in connection with the extension of an
operating lease, a warrant was issued to the lessor to purchase
8,639 shares of common stock at $9.60 per share. The
right to purchase the common stock was immediately effective
upon signing and exercisable for a period of six years. The
estimated fair value of the warrant at the date of issuance was
approximately $79,000. This amount is being recognized as
additional rent expense over the term of the operating lease,
which expires in 2006.
plumtree
software • 2004
annual report
page sixty
The fair market value of warrants on the date of grant was
computed using the Black-Scholes pricing model with the
following assumptions: risk-free interest rates ranging from
5.6 percent to 6.8 percent, expected dividend yield of
0 percent, contractual lives of 6 years, and expected
volatility of 70 percent.
In June 2004, in connection with the recruitment of certain
executives, 10,000 fully vested options were issued to an
outside recruiter. The fair value of these options of $30,000
expensed during the second quarter in accordance with
EITF 96-18 “Accounting for Equity Instruments That are
Issued to Other Than Employees for Acquiring, or in Conjunction
with Selling, Goods or Services.” The fair market value of
these options on the date of grant was computed using the
Black-Scholes pricing model with the following assumptions:
risk-free interest rate of 4.72% percent, expected dividend
yield of 0 percent, contractual life of 10 years, and
expected volatility of 85 percent.
9. EMPLOYEE BENEFIT PLANS
Employee Savings and Retirement Plan
The Company has a 401(k) plan that allows eligible employees to
contribute up to 99% of their eligible compensation, subject to
annual limits. The Company currently does not match any 401K
contributions.
Employee Stock Purchase Plans
The Company has an employee stock purchase plan for all eligible
employees to purchase shares of common stock at 85% of the lower
of the fair market value on the grant date or purchase date of
the offering period. Employees may authorize the Company to
withhold up to 15% of their compensation during any offering
period, subject to certain limitations. Up to approximately
2,000,000 shares have been authorized for issuance under
the employee stock purchase plan plus an annual increase, which
has amounted to approximately 1,200,000 shares through
December 31, 2004. During fiscal 2004 and 2003 shares
totaling approximately 584,000 and 462,000 were issued under the
plan, respectively. At December 31, 2004, approximately
2,165,108 shares were reserved for future issuance.
Stock Option Plans
In June 1997, the Company adopted the 1997 Equity Incentive Plan
(the “1997 Plan”) and has reserved
12,700,000 shares of common stock for issuance thereunder.
Under the 1997 Plan, the board of directors may grant incentive
and nonqualified stock options to purchase shares of the
Company’s common stock to employees, directors and
consultants of the Company. The exercise price per share for an
incentive stock option cannot be less than 100% of the fair
market value as determined by the board of directors on the date
of grant. The exercise price per share for nonqualified stock
options cannot be less than 85% of the fair market value, as
determined by the board of directors, on the date of grant.
Options generally expire ten years after the date of grant and
generally vest over a one to four year period. In addition,
certain option holders are entitled to exercise prior to the
option’s vesting as long as they are employees. Should the
employee subsequently leave, the Company has the right to
repurchase unvested shares at the original exercise price.
In 2002, the Company adopted the 2002 Equity Incentive Plan and
has reserved 12,700,000 shares of common stock for issuance
thereunder. Shares authorized for issuance in connection with
the 2002 Equity Incentive Plan are subject to an automatic
annual increase of the lesser of 3,000,000 shares or
5 percent of the Company’s outstanding common stock or
an amount determined by the Board of Directors. Under the 2002
Equity Incentive Plan, the board of directors may grant
incentive and nonqualified stock options to purchase shares of
the Company’s common stock to employees, directors and
consultants of the Company. The exercise price per share for an
incentive stock option cannot be less than 100% of the fair
market value as determined by the board of directors on the date
of grant. The exercise price per share for nonqualified stock
options cannot be less than 85% of the fair market value, as
determined by the board of directors, on the date of grant.
Options generally expire ten years after the date of grant and
generally vest over a one to four year period.
page sixty-one
plumtree
software • 2004
annual report
In 2002, the Company adopted the 2002 Director Option Plan
and has reserved 400,000 shares of common stock for
issuance thereunder. Shares authorized for issuance in
connection with the 2002 Director Plan are subject to an
automatic annual increase of the lesser of 1,500,000 shares
or 2 percent of the Company’s outstanding common stock
or an amount determined by the Board of Directors. Under the
2002 Director Option Plan, the board of directors may grant
incentive and nonqualified stock options to purchase shares of
the Company’s common stock to employees, directors and
consultants of the Company. The exercise price per share for an
incentive stock option cannot be less than 100% of the fair
market value as determined by the board of directors on the date
of grant. The exercise price per share for nonqualified stock
options cannot be less than 85% of the fair market value, as
determined by the board of directors, on the date of grant.
Options generally expire ten years after the date of grant and
generally vest over a one to four year period.
Option activity under the Plans through December 31, 2004
were as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Weighted | |
| |
|
Shares | |
|
|
|
Weighted | |
|
Average | |
| |
|
Available for | |
|
Options | |
|
Average | |
|
Fair | |
| |
|
Grant | |
|
Outstanding | |
|
Exercise Price | |
|
Value | |
| | |
|
Balance at December 31, 2001
|
|
|
1,163,380 |
|
|
|
8,330,998 |
|
|
$ |
4.11 |
|
|
|
|
|
| |
Authorized
|
|
|
7,700,000 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
| |
Granted with exercise prices equal to fair value at date of grant
|
|
|
(1,175,300) |
|
|
|
1,175,300 |
|
|
|
7.27 |
|
|
$ |
2.88 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Exercised
|
|
|
— |
|
|
|
(47,587) |
|
|
|
1.54 |
|
|
|
|
|
| |
Repurchased
|
|
|
74,841 |
|
|
|
— |
|
|
|
0.74 |
|
|
|
|
|
| |
Cancelled
|
|
|
1,167,558 |
|
|
|
(1,167,558) |
|
|
|
7.17 |
|
|
|
|
|
| |
|
|
|
Balance at December 31, 2002
|
|
|
8,930,479 |
|
|
|
8,291,153 |
|
|
$ |
4.08 |
|
|
|
|
|
| |
|
|
| |
Authorized
|
|
|
1,471,633 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
| |
Granted with exercise prices equal to fair value at date of grant
|
|
|
(5,258,900) |
|
|
|
5,258,900 |
|
|
$ |
3.69 |
|
|
$ |
2.42 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Exercised
|
|
|
— |
|
|
|
(1,376,872) |
|
|
$ |
0.60 |
|
|
|
|
|
| |
Repurchased
|
|
|
13,165 |
|
|
|
— |
|
|
$ |
0.97 |
|
|
|
|
|
| |
Cancelled
|
|
|
1,806,716 |
|
|
|
(1,806,716) |
|
|
$ |
4.54 |
|
|
|
|
|
| |
|
|
|
Balance at December 31, 2003
|
|
|
6,963,093 |
|
|
|
10,366,465 |
|
|
$ |
4.13 |
|
|
|
|
|
| |
|
|
| |
Authorized
|
|
|
1,563,236 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
| |
Granted with exercise prices equal to fair value at date of grant
|
|
|
(4,230,500) |
|
|
|
4,230,500 |
|
|
$ |
3.80 |
|
|
$ |
2.17 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Exercised
|
|
|
— |
|
|
|
(551,818) |
|
|
$ |
1.71 |
|
|
|
|
|
| |
Cancelled
|
|
|
2,268,252 |
|
|
|
(2,268,252) |
|
|
$ |
3.97 |
|
|
|
|
|
| |
|
|
|
Balance at December 31, 2004
|
|
|
6,564,081 |
|
|
|
11,776,895 |
|
|
$ |
3.92 |
|
|
|
|
|
| |
|
|
plumtree
software • 2004
annual report
page sixty-two
The following table summarizes the options outstanding at
December 31, 2004:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Weighted | |
|
|
|
|
|
|
| |
|
|
|
Average | |
|
|
|
|
|
|
| |
|
Number of | |
|
Remaining | |
|
|
|
Number of | |
|
Weighted Average | |
| Range of |
|
Options | |
|
Contractual | |
|
Weighted Average | |
|
Options | |
|
Exercise Price of | |
| Exercise Prices |
|
Outstanding | |
|
Life (Years) | |
|
Exercise Price | |
|
Exercisable | |
|
Exercisable Options | |
| | |
|
$ 0.06 - $ 0.32
|
|
|
1,100,635 |
|
|
|
3.7 |
|
|
$ |
0.10 |
|
|
|
1,100,635 |
|
|
$ |
0.10 |
|
|
$ 2.00 - $ 2.83
|
|
|
1,659,070 |
|
|
|
6.3 |
|
|
$ |
2.51 |
|
|
|
1,268,919 |
|
|
$ |
2.45 |
|
|
$ 3.00 - $ 3.92
|
|
|
3,325,847 |
|
|
|
9.0 |
|
|
$ |
3.41 |
|
|
|
675,823 |
|
|
$ |
3.44 |
|
|
$ 4.05 - $ 4.69
|
|
|
2,969,334 |
|
|
|
8.9 |
|
|
$ |
4.18 |
|
|
|
496,406 |
|
|
$ |
4.20 |
|
|
$ 5.00 - $ 5.44
|
|
|
1,700,434 |
|
|
|
7.2 |
|
|
$ |
5.06 |
|
|
|
1,184,033 |
|
|
$ |
5.01 |
|
|
$ 6.00
|
|
|
88,750 |
|
|
|
5.6 |
|
|
$ |
6.00 |
|
|
|
88,750 |
|
|
$ |
6.00 |
|
|
$ 7.18
|
|
|
129,432 |
|
|
|
7.0 |
|
|
$ |
7.18 |
|
|
|
83,422 |
|
|
$ |
7.18 |
|
|
$ 9.00
|
|
|
579,643 |
|
|
|
6.1 |
|
|
$ |
9.00 |
|
|
|
555,870 |
|
|
$ |
9.00 |
|
|
$12.60
|
|
|
223,750 |
|
|
|
6.3 |
|
|
$ |
12.60 |
|
|
|
193,500 |
|
|
$ |
12.60 |
|
| |
|
$ 0.06 - $12.60
|
|
|
11,776,895 |
|
|
|
7.6 |
|
|
$ |
3.92 |
|
|
|
5,647,358 |
|
|
$ |
3.92 |
|
| |
The following is a geographic breakdown of income (loss) before
the provision for income taxes (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Years Ended December 31, | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
|
2002 | |
| | |
|
Domestic
|
|
$ |
(14,636) |
|
|
$ |
2,343 |
|
|
$ |
6,202 |
|
|
Foreign
|
|
|
5,591 |
|
|
|
(2,986) |
|
|
|
(2,632) |
|
| |
| |
Total
|
|
$ |
(9,045) |
|
|
$ |
(643) |
|
|
$ |
3,570 |
|
| |
The provision for income taxes consists of the following (in
thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Years Ended December 31, | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
|
2002 | |
| | |
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Federal
|
|
$ |
— |
|
|
$ |
71 |
|
|
$ |
— |
|
| |
State
|
|
|
32 |
|
|
|
96 |
|
|
|
164 |
|
| |
Foreign
|
|
|
549 |
|
|
|
657 |
|
|
|
1,016 |
|
| |
| |
|
Total provision
|
|
$ |
581 |
|
|
$ |
824 |
|
|
$ |
1,180 |
|
| |
The Company accounts for income taxes pursuant to the provisions
of SFAS No. 109, “Accounting for Income
Taxes.” SFAS 109 requires recognition of deferred tax
liabilities and assets for the expected future tax consequences
of events that have been included in the financial statements or
tax returns. Under this method, deferred tax liabilities and
assets are determined using the current applicable enacted tax
rate and provisions of the enacted tax law. Provision for income
taxes recorded to date primarily relates to income taxes payable
page sixty-three
plumtree
software • 2004
annual report
on income generated in foreign and domestic state tax
jurisdictions. The components of the net deferred tax asset are
as follows (in thousands):
| |
|
|
|
|
|
|
|
|
| |
|
As of December 31, | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
| | |
|
Cumulative net operating loss carryforwards
|
|
$ |
9,866 |
|
|
$ |
2,111 |
|
|
Research, development and other tax credit carryforwards
|
|
|
6,482 |
|
|
|
3,844 |
|
|
Alternative minimum tax credit
|
|
|
— |
|
|
|
71 |
|
|
Cumulative temporary differences
|
|
|
3,127 |
|
|
|
1,288 |
|
| |
|
|
|
Total deferred tax assets
|
|
|
19,475 |
|
|
|
7,314 |
|
|
Valuation allowance
|
|
|
(19,475) |
|
|
|
(7,314) |
|
| |
|
|
|
Net deferred tax assets
|
|
$ |
— |
|
|
$ |
— |
|
| |
|
|
The Company has federal and state net operating loss
carryforwards as of December 31, 2004 of approximately
$18.7 million and $72.8 million, respectively, to
offset future federal and state taxable income. The net
operating loss carryforwards expire at various dates through the
year 2024. Additionally, the Company has federal research
credits, expiring at various dates through the year 2024, of
approximately $2.5 million and state of California research
credits carrying forward indefinitely of approximately
$3.4 million. Foreign tax and other credit carryforwards
totaled approximately $600,000. A valuation allowance has been
recorded for the entire net deferred tax asset as a result of
management’s uncertainties regarding realization of the
asset including limited operating history of the Company, the
lack of sustained annual profitability and uncertainty over
future operating profitability and taxable income.
The Tax Reform Act of 1986 contains provisions, which may limit
the net operating loss and credit carryforwards to be used in
any given year upon the occurrence of certain events, including
a significant change in ownership interest.
The provision for income taxes differs from the expected amount
computed by applying the statutory Federal income tax rate of
34% to pre-tax income (loss) as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
As of December 31, | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
|
2002 | |
| | |
|
Federal statutory rate
|
|
|
(34.0) |
% |
|
|
(34.0) |
% |
|
|
34.0 |
% |
|
State taxes net of federal benefit
|
|
|
0.4 |
|
|
|
15.0 |
|
|
|
4.6 |
|
|
Alternative minimum taxes
|
|
|
— |
|
|
|
11.1 |
|
|
|
— |
|
|
Non-deductible compensation
|
|
|
2.1 |
|
|
|
82.7 |
|
|
|
37.9 |
|
|
Federal and state credits
|
|
|
(25.6) |
|
|
|
(177.6) |
|
|
|
(36.1) |
|
|
Other
|
|
|
2.2 |
|
|
|
— |
|
|
|
— |
|
|
Foreign taxes
|
|
|
5.9 |
|
|
|
102.1 |
|
|
|
27.1 |
|
|
Change in valuation allowance
|
|
|
55.3 |
|
|
|
(24.4) |
|
|
|
(215.1) |
|
|
Utilization of deferred tax assets not previously benefited
|
|
|
— |
|
|
|
153.2 |
|
|
|
180.7 |
|
| |
|
|
| |
|
|
6.3 |
% |
|
|
128.1 |
% |
|
|
33.1 |
% |
| |
|
|
SFAS No. 131, “Disclosures about Segments of an
Enterprise and Related Information,” established standards
for reporting information about operating segments. Operating
segments are defined as components of
plumtree
software • 2004
annual report
page sixty-four
an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating
decision maker, or decision making group, in deciding how to
allocate resources and in assessing performance.
The Company has organized its operations based on a single
operating segment: the development and delivery of corporate
portal, collaboration, content management and search software as
well as related maintenance and services for enterprises.
The disaggregated information reviewed on a product basis by the
CEO is as follows (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Years Ended December 31, | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
|
2002 | |
| | |
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
License
|
|
$ |
35,727 |
|
|
$ |
34,044 |
|
|
$ |
49,581 |
|
| |
Maintenance
|
|
|
25,542 |
|
|
|
22,451 |
|
|
|
18,462 |
|
| |
Professional services and training
|
|
|
22,879 |
|
|
|
14,957 |
|
|
|
14,876 |
|
| |
|
|
| |
|
Total
|
|
$ |
84,148 |
|
|
$ |
71,452 |
|
|
$ |
82,919 |
|
| |
|
|
The Company markets its products primarily from its operations
in the United States. International sales are made primarily to
customers in Europe, Japan and Asia Pacific. Substantially all
of our assets are located within the United States of America.
Information regarding the Company’s revenues in different
geographic regions is as follows (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Years Ended December 31, | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
|
2002 | |
| | |
|
Revenue by geographic region:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
United States of America
|
|
$ |
60,884 |
|
|
$ |
56,642 |
|
|
$ |
67,263 |
|
| |
International
|
|
|
23,264 |
|
|
|
14,810 |
|
|
|
15,656 |
|
| |
|
|
| |
|
Total
|
|
$ |
84,148 |
|
|
$ |
71,452 |
|
|
$ |
82,919 |
|
| |
|
|
|
|
| 12. |
FOREIGN EXCHANGE HEDGING |
In 2004, the Company began licensing technology and providing
maintenance to international customers through the United States
parent. As a result, certain additional exposures were created
related to receivables denominated in currencies other than USD.
The primary currencies include EURO, British Pounds, Japanese
Yen, Australian Dollars, and Canadian Dollars. In order to
reduce the risk of fluctuations in earnings, we hedge our net
recognized foreign currency assets and liabilities with
short-term forward foreign exchange contracts. These forward
contracts do not qualify for hedge accounting and accordingly,
gains and losses are recording in the statement of operations in
the current period. The forward contracts are denominated in
foreign currencies and are carried at fair value with changes in
fair value recorded as other income (loss).
|
|
| 13. |
RELATED PARTY TRANSACTIONS |
In August 2000, the Company entered into a note with an officer
of the Company in the amount of $520,000 to exercise options.
This note is full recourse at 6.0 percent per annum and is
payable upon demand. This note was repaid in full during 2003.
In October 2001, the Company entered into notes with two
employees for a total of $154,000. These notes are full recourse
at 6.0 percent per annum and mature in October 2003. These
notes were repaid in full during 2003.
page sixty-five
plumtree
software • 2004
annual report
|
|
| 14. |
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) |
The following table presents selected quarterly information for
2003 and 2004 (in thousands, except per share data):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
First | |
|
Second | |
|
Third | |
|
Fourth | |
| |
|
Quarter | |
|
Quarter | |
|
Quarter | |
|
Quarter | |
| | |
|
2003:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total revenue
|
|
$ |
17,169 |
|
|
$ |
17,031 |
|
|
$ |
18,480 |
|
|
$ |
18,772 |
|
| |
Gross margin
|
|
|
14,109 |
|
|
|
13,527 |
|
|
|
14,901 |
|
|
|
15,135 |
|
| |
Net income (loss)
|
|
$ |
529 |
|
|
$ |
(1,071) |
|
|
$ |
(373) |
|
|
$ |
(552) |
|
| |
|
|
| |
Basic net income (loss) per share
|
|
$ |
0.02 |
|
|
$ |
(0.04) |
|
|
$ |
(0.01) |
|
|
$ |
(0.02) |
|
| |
|
|
| |
Diluted net income (loss) per share
|
|
$ |
0.02 |
|
|
$ |
(0.04) |
|
|
$ |
(0.01) |
|
|
$ |
(0.02) |
|
| |
|
|
|
2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total revenue
|
|
$ |
17,723 |
|
|
$ |
19,468 |
|
|
$ |
22,484 |
|
|
$ |
24,473 |
|
| |
Gross margin
|
|
|
12,729 |
|
|
|
13,983 |
|
|
|
16,970 |
|
|
|
18,469 |
|
| |
Net income (loss)
|
|
$ |
(3,375) |
|
|
$ |
(3,687) |
|
|
$ |
(2,703) |
|
|
$ |
139 |
|
| |
|
|
| |
Basic net income (loss) per share
|
|
$ |
(0.11) |
|
|
$ |
(0.12) |
|
|
$ |
(0.08) |
|
|
$ |
0.00 |
|
| |
|
|
| |
Diluted net income (loss) per share
|
|
$ |
(0.11) |
|
|
$ |
(0.12) |
|
|
$ |
(0.08) |
|
|
$ |
0.00 |
|
| |
|
|
plumtree
software • 2004
annual report
page sixty-six
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
|
|
| |
|
| |
John Kunze, President and Chief Executive Officer |
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below hereby constitutes and appoints John
Kunze, Eric Borrmann and Adrianna Chiocchi and each of them
acting individually, as his or her attorney-in-fact, each with
full power of substitution, for him or her in any and all
capacities, to sign any and all amendments to this Report on
Form 10-K, and to file the same, with exhibits thereto and
other documents in connection therewith, with the SEC, hereby
ratifying and confirming all that each of said
attorneys-in-fact, or any substitute, may do or cause to be done
by virtue hereof.
| |
|
|
|
|
|
|
| |
|
Title |
|
Date |
| Signature |
|
|
|
|
| |
|
|
|
|
| |
/s/ John Kunze
John
Kunze |
|
President, Chief Executive Officer and Director (Principal
Executive Officer) |
|
March 11, 2005 |
| |
/s/ Eric Borrmann
Eric
Borrmann |
|
Chief Financial Officer (Principal Financial and Accounting
Officer) |
|
March 11, 2005 |
| |
/s/ John Dillon
John
Dillon |
|
Director |
|
March 11, 2005 |
| |
/s/ Rupen Dolasia
Rupen
Dolasia |
|
Director |
|
March 11, 2005 |
| |
/s/ James Richardson
James
Richardson |
|
Director |
|
March 11, 2005 |
| |
/s/ Bernard Whitney
Bernard
Whitney |
|
Director |
|
March 11, 2005 |
| |
/s/ David Pratt
David
Pratt |
|
Director |
|
March 11, 2005 |
page sixty-seven
plumtree
software • 2004
annual report
exhibit index
| |
|
|
|
|
| Exhibit | |
|
Description |
| | |
|
|
| |
3.1 |
|
|
Amended and Restated Certificate of Incorporation of the
Registrant(1) |
| |
3.2 |
|
|
Bylaws of the Registrant(1) |
| |
4.1 |
|
|
Specimen common stock certificate(1) |
| |
4.2 |
|
|
Warrant to purchase Common Stock, dated May 31, 2000,
issued to WXI/SAN Realty, L.L.C.(1) |
| |
4.3 |
|
|
Warrant to purchase Common Stock, dated Sept. 20, 2000,
issued to WXI/SAN Realty, L.L.C.(1) |
| |
10.1* |
|
|
Form of Indemnification Agreement between the Registrant and
each of its directors, officers and certain other key
employees(1) |
| |
10.2* |
|
|
1997 Equity Incentive Plan, as amended, and form of agreements
thereunder(1) |
| |
10.3* |
|
|
2002 Stock Plan, as amended, and form of agreements thereunder(1) |
| |
10.4* |
|
|
2002 Employee Stock Purchase Plan, and form of agreements
thereunder(3) |
| |
10.5* |
|
|
2002 Director Option Plan, and form of agreements
thereunder(1) |
| |
10.6 |
|
|
Loan and Security Agreement, dated March 14, 2001, between
the Registrant and Silicon Valley Bank(1) |
| |
10.7 |
|
|
Office Lease for 500 Sansome Street, dated April 7,
1999, between the Registrant and BPG Sansome, L.L.C.(1) |
| |
10.8 |
|
|
First Amendment to Lease for 500 Sansome Street, dated
May 3, 2000, between the Registrant and WXI/SAN Realty,
L.L.C.(1) |
| |
10.9* |
|
|
Offer letter between the Registrant and John H. Kunze(1) |
| |
10.10* |
|
|
Offer letter between the Registrant and Eric Borrmann(1) |
| |
10.11 |
|
|
Second Amendment to Lease for 500 Sansome Street, dated
September 20, 2000, between the Registrant and WXI/SAN
Realty, L.L.C.(1) |
| |
10.12 |
|
|
Third Amendment to Lease for 500 Sansome Street, dated
November 22, 2000, between the Registrant and WXI/SAN
Realty, L.L.C.(1) |
| |
10.13 |
|
|
Fourth Amendment to Lease for 500 Sansome Street, dated
July 31, 2002, between the Registrant and WXI/SAN
Realty, L.L.C.(2) |
| |
10.14 |
|
|
Fifth Amendment to Lease for 500 Sansome Street, dated
July 21, 2003, between the Registrant and WXI/SAN
Realty, L.L.C.(2) |
| |
10.15* |
|
|
Offer letter between Registrant and Eric Zocher(2) |
| |
10.16* |
|
|
2004 Bonus Plan(3) |
| |
10.17* |
|
|
2004 Outside Director Stock in Lieu of Fees Plan(3) |
| |
10.18* |
|
|
Employment Agreement between the Registrant and Paul Ciandrini(4) |
| |
10.19* |
|
|
Employment Agreement between the Registrant and Ira Pollack(4) |
| |
10.20* |
|
|
Offer Letter between the Registrant and Adriana Chiocchi(4) |
| |
10.21 |
|
|
Office Lease for 505 Sansome Street, dated October 22,
2004, between Registrant and Transamerica Realty Investment
Properties, LLC.(5) |
| |
10.22 |
|
|
Revolving Line of Credit Amendment, dated October 25, 2004,
between Registrant and Silicon Valley Bank(5) |
| |
10.23* |
|
|
2005 Bonus Plan |
| |
10.24* |
|
|
2005 Independent Director Cash Compensation Plan |
| |
23.1 |
|
|
Consent of Independent Registered Public Accounting Firm |
| |
31.1 |
|
|
Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes Oxley Act of 2002
(“S-O Act”) |
| |
31.2 |
|
|
Certification of Chief Financial Officer pursuant to
Section 302 of the S-O Act |
| |
32.1 |
|
|
Certification of Chief Executive Officer pursuant to
Section 906 of the S-O Act |
| |
32.2 |
|
|
Certification of Chief Financial Officer pursuant to
Section 906 of the S-O Act |
plumtree
software • 2004
annual report
page sixty-eight
|
|
|
| |
* |
Management contract or compensatory plan or arrangement. |
|
|
| (1) |
Incorporated by reference to Exhibits filed with Registration
Statement No. 333-45950, as amended, which became effective
on June 3, 2002. |
| |
| (2) |
Incorporated by reference to Exhibits filed with the
Registrant’s Form 10-Q for the quarter ended
September 30, 2003 and filed with the SEC on
November 3, 2003 (File No. 001-31344). |
| |
| (3) |
Incorporated by reference to Exhibits filed with
Registrant’s Form 10-K for the year ended December 31,
2003 and filed with the SEC on March 12, 2004 (File No.
001-31344). |
| |
| (4) |
Incorporated by reference to Exhibits filed with
Registrant’s Form 10-Q for the quarter ended
June 30, 2004 and filed with the SEC on August 6, 2004
(File No. 001-31344). |
| |
| (5) |
Incorporated by reference to Exhibits filed with
Registrant’s Form 10-Q for the quarter ended
September 30, 2004 and filed with SEC on November 5,
2004 (Filed No. 001-31344). |