x |
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
DELAWARE
|
13-3861628
|
(State
of incorporation)
|
(I.R.S.
employer identification number)
|
462
SEVENTH AVENUE, 21st FLOOR
|
|
NEW
YORK, NEW YORK
|
10018
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Page
|
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2
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2
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11
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24
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24
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24
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24
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25
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25
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26
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27
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38
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39
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65
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65
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67
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67
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67
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67
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67
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68
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68
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68
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68
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·
|
Maximize
revenue opportunities, improve online conversion rates and reduce
abandonment rates
|
·
|
Increase
customer satisfaction, retention and
loyalty
|
·
|
Deepen
relationships and reinforce customer
advocacy
|
·
|
Acquire
and retain customers across multiple online
channels
|
·
|
Reduce
operating costs and increase
productivity
|
·
|
Timpani
Chat.
Timpani Chat enhances customer service with live support, while reducing
interaction costs and churn. A real-time service, it strengthens
customer
loyalty and increases satisfaction levels while improving agent
productivity and lowering service costs. The solution’s single agent
desktop promotes multi-tasking and includes productivity tools that
speed
time to resolution.
|
·
|
Timpani
Email.
Timpani Email efficiently manages inbound email traffic and Web form
queries while improving customer satisfaction and increasing agent
productivity. This extensive email management solution funnels all
messages through an automated process that evaluates the business
requirement and triggers a related action—such as generating an
auto-response, routing to an agent queue, deleting spam or escalating
to
another channel—for each message.
|
·
|
Timpani
Self-Service.
Timpani Self-Service delivers relevant and immediate answers to Web
site
visitors searching for information while optimizing the user experience
and lowering support costs. The sophisticated knowledgebase learns
dynamically and automatically
updates based on visitor searches and behavior. It also allows issues
that
require further attention to be escalated to other communication
channels,
such as live chat, email or
telephone.
|
Ameritrade
|
EarthLink
|
NETELLER
|
AT&T
|
eLuxury.com
|
Overstock.com
|
Bank
of America
|
FXCM
(Forex Capital Markets)
|
QVC
|
Bell
Canada
|
Hewlett-Packard
|
Qwest
|
Bell
South
|
Intel
|
Rackspace
|
Citibank
Home Equity
|
Kaplan
Education
|
SunTrust
Bank
|
Computer
Associates
|
Maersk
|
VeriSign
|
Digital
Insight
|
Microsoft
|
Verizon
|
·
|
Direct
Sales.
Our sales process focuses on how our solutions and domain expertise
deliver financial and operational value that support our clients’
strategic initiatives. The Timpani Sales and Marketing value proposition
is targeted to business executives whose primary responsibility is
to
maximize online customer acquisition. These executives have a vested
interest in improving conversion rates, increasing application completion
rates and increasing average order value. The value proposition for
Timpani Contact Center appeals to professionals who hold top- and
bottom-line responsibility for customer service and technical support
functions within their organization. Timpani Contact Center enables
these
organizations to provide effective customer service using the online
channel while deflecting costly phone calls and shifting service
interactions to more cost efficient channels. Whether we typically
engage
with individuals or teams responsible for online sales or service,
LivePerson’s Timpani platform supports any organization with a
company-wide strategic initiative to improve the overall online customer
experience.
|
·
|
Indirect
Sales.
During the second half of 2005, we invested in the development of
an
indirect sales channel to develop revenue-generating programs through
original equipment manufacturer (OEM), channel and partner relationships.
By maximizing market coverage via partners who provide complementary
products and services, this channel will increase LivePerson’s revenue
opportunities and accelerate market penetration without incurring
the
traditional costs associated with direct
sales.
|
·
|
Online
consumer purchasing habits
|
·
|
Methodologies
to correctly engage customers
|
·
|
Metrics
proving return on investment
|
·
|
Technology
innovation opportunities
|
·
|
Longer
operating histories
|
·
|
Greater
brand recognition
|
·
|
More
diversified lines of products and
services
|
·
|
Significantly
greater financial, marketing and research and development
resources
|
·
|
Undertake
more extensive marketing campaigns
|
·
|
Adopt
more aggressive pricing policies
|
·
|
Make
more attractive offers to businesses to induce them to use their
products
or services
|
·
|
Our
clients are supported by a secure, scalable server infrastructure.
In
North America, our primary servers are hosted in a fully secured
third-party server center in the Eastern United States and are supported
by a backup server facility located in the Southwestern United States.
In
Europe, our primary servers are hosted in a fully secured third-party
server center in London and are supported by a backup server facility
located in the Greater London area.
|
·
|
Our
network, hardware and software are designed to accommodate our clients’
demand for secure, high-quality 24-hours per day/seven-days per week
service.
|
·
|
As
a hosted service, we are able to add additional capacity and new
features
quickly and efficiently. This has enabled us to immediately provide
these
benefits simultaneously to our entire client base. In addition, it
allows
us to maintain a relatively short development and implementation
cycle.
|
·
|
Java
|
·
|
XML
(Extensible Mark-up Language)
|
·
|
HTML
(Hypertext Mark-up Language)
|
·
|
SQL
(Structured Query Language)
|
·
|
HTTP
(Hypertext Transfer Protocol)
|
·
|
market
acceptance by companies doing business online of real-time sales,
marketing and customer service
solutions;
|
·
|
our
clients’ business success;
|
·
|
our
clients’ demand for our services;
|
·
|
our
ability to attract and retain
clients;
|
·
|
the
amount and timing of capital expenditures and other costs relating
to the
expansion of our operations, including those related to
acquisitions;
|
·
|
the
introduction of new services by us or our competitors;
and
|
·
|
changes
in our pricing policies or the pricing policies of our
competitors.
|
·
|
economic
conditions specific to the Internet, electronic commerce and online
media;
and
|
·
|
general
economic and political conditions.
|
·
|
enhance
the features and performance of the LivePerson
services;
|
·
|
develop
and offer new services that are valuable to companies doing business
online and Internet users; and
|
·
|
respond
to technological advances and emerging industry standards and practices
in
a cost-effective and timely manner.
|
·
|
Online
consumer purchasing habits
|
·
|
Methodologies
to correctly engage customers
|
·
|
Metrics
proving return on investment
|
·
|
Technology
innovation opportunities
|
·
|
longer
operating histories;
|
·
|
greater
brand recognition;
|
·
|
more
diversified lines of products and services;
and
|
·
|
significantly
greater financial, marketing and research and development
resources.
|
·
|
undertake
more extensive marketing campaigns;
|
·
|
adopt
more aggressive pricing policies;
and
|
·
|
make
more attractive offers to businesses to induce them to use their
products
or services.
|
·
|
damage
to our reputation;
|
·
|
lost
sales;
|
·
|
delays
in or loss of market acceptance of our products;
and
|
·
|
unexpected
expenses and diversion of resources to remedy
errors.
|
·
|
difficulties
in integrating operations, technologies, products and personnel with
LivePerson;
|
·
|
diversion
of financial and management resources from efforts related to the
LivePerson services or other then-existing operations; risks of entering
new markets beyond providing real-time sales, marketing and customer
service solutions for companies doing business
online;
|
·
|
potential
loss of either our existing key employees or key employees of any
companies we acquire; and
|
·
|
our
inability to generate sufficient revenue to offset acquisition or
investment costs.
|
·
|
any
issued patent or patents issued in the future may not be broad enough
to
protect our intellectual property
rights;
|
·
|
any
issued patent or any patents issued in the future could be successfully
challenged by one or more third parties, which could result in our
loss of
the right to prevent others from exploiting the inventions claimed
in the
patents;
|
·
|
current
and future competitors may independently develop similar technologies,
duplicate our services or design around any patents we may have;
and
|
·
|
effective
patent protection may not be available in every country in which
we do
business, where our services are sold or used, where the laws may
not
protect proprietary rights as fully as do the laws of the U.S. or
where
enforcement of laws protecting proprietary rights is not common or
effective.
|
·
|
The
continuation of the Internet as a viable commercial marketplace is
subject
to a number of factors, including:
|
·
|
continued
growth in the number of users;
|
·
|
concerns
about transaction security;
|
·
|
continued
development of the necessary technological
infrastructure;
|
·
|
development
of enabling technologies;
|
·
|
uncertain
and increasing government regulation;
and
|
·
|
the
development of complementary services and
products.
|
·
|
variations
in our quarterly operating results;
|
·
|
changes
in market valuations of publicly-traded companies in general and
Internet
and other technology companies in
particular;
|
·
|
our
announcements of significant client contracts, acquisitions and our
ability to integrate these acquisitions, strategic partnerships,
joint
ventures or capital commitments;
|
·
|
our
failure to complete significant
sales;
|
·
|
additions
or departures of key personnel;
|
·
|
future
sales of our common stock;
|
·
|
changes
in financial estimates by securities analysts;
and
|
·
|
terrorist
attacks against the United States or in Israel, the engagement in
hostilities or an escalation of hostilities by or against the United
States or Israel, or the declaration of war or national emergency
by the
United States or Israel.
|
High
|
Low
|
||||||
Year
ended December 31, 2004:
|
|||||||
First
Quarter
|
$
|
6.13
|
$
|
3.52
|
|||
Second
Quarter
|
$
|
6.23
|
$
|
2.98
|
|||
Third
Quarter
|
$
|
3.78
|
$
|
2.07
|
|||
Fourth
Quarter
|
$
|
3.55
|
$
|
1.87
|
|||
Year
ended December 31, 2005:
|
|||||||
First
Quarter
|
$
|
3.23
|
$
|
2.29
|
|||
Second
Quarter
|
$
|
3.30
|
$
|
2.24
|
|||
Third
Quarter
|
$
|
4.10
|
$
|
2.83
|
|||
Fourth
Quarter
|
$
|
5.71
|
$
|
3.79
|
Year
Ended December 31,
|
||||||||||||||||
2005
|
2004
|
2003
|
2002
|
2001
|
||||||||||||
(in
thousands, except share and per share data)
|
||||||||||||||||
Consolidated
Statement of Operations Data:
|
||||||||||||||||
Revenue
|
$
|
22,277
|
$
|
17,392
|
$
|
12,023
|
$
|
8,234
|
$
|
7,806
|
||||||
Operating
expenses:
|
||||||||||||||||
Cost
of revenue
|
4,297
|
2,888
|
2,028
|
1,604
|
6,547
|
|||||||||||
Product
development
|
2,699
|
2,000
|
1,641
|
1,283
|
3,328
|
|||||||||||
Sales
and marketing
|
6,975
|
5,183
|
3,555
|
2,177
|
5,465
|
|||||||||||
General
and administrative
|
4,458
|
4,456
|
3,610
|
3,176
|
6,369
|
|||||||||||
Amortization
of goodwill and intangibles
|
931
|
792
|
1,014
|
357
|
2,975
|
|||||||||||
Non-cash
compensation credit related to restructuring, net
|
—
|
—
|
—
|
—
|
(1,720
|
)
|
||||||||||
Restructuring
and impairment charges
|
—
|
—
|
1,024
|
1,186
|
12,740
|
|||||||||||
Total
operating expenses
|
19,360
|
15,319
|
12,872
|
9,783
|
35,704
|
|||||||||||
Income
(loss) from operations
|
2,917
|
2,073
|
(849
|
)
|
(1,549
|
)
|
(27,898
|
)
|
||||||||
Other
income (expense):
|
||||||||||||||||
Other
income (expense)
|
—
|
—
|
(8
|
)
|
—
|
109
|
||||||||||
Interest
income
|
300
|
77
|
41
|
126
|
538
|
|||||||||||
Interest
expense
|
—
|
—
|
—
|
(10
|
)
|
(10
|
)
|
|||||||||
Total
other income, net
|
300
|
77
|
33
|
116
|
637
|
|||||||||||
Income
(loss) before cumulative effect of accounting change
|
3,217
|
2,150
|
(816
|
)
|
(1,433
|
)
|
(27,261
|
)
|
||||||||
Cumulative
effect of accounting change (1)
|
—
|
—
|
—
|
(5,338
|
)
|
—
|
||||||||||
Income
(loss) before provision for income taxes
|
3,217
|
2,150
|
(816
|
)
|
(6,771
|
)
|
(27,261
|
)
|
||||||||
Provision
for income taxes
|
675
|
58
|
—
|
—
|
—
|
|||||||||||
Net
income (loss) attributable to common stockholders
|
$
|
2,542
|
2,092
|
$
|
(816
|
)
|
$
|
(6,771
|
)
|
$
|
(27,261
|
)
|
||||
Basic
net income (loss) per common share:
|
||||||||||||||||
Income
(loss) before cumulative effect of accounting change
|
$
|
0.07
|
0.06
|
$
|
(0.02
|
)
|
$
|
(0.04
|
)
|
$
|
(0.80
|
)
|
||||
Cumulative
effect of accounting change
|
—
|
—
|
—
|
(0.16
|
)
|
—
|
||||||||||
Net
income (loss)
|
$
|
0.07
|
0.06
|
$
|
(0.02
|
)
|
$
|
(0.20
|
)
|
$
|
(0.80
|
)
|
||||
Diluted
net income (loss) per common share:
|
||||||||||||||||
Income
(loss) before cumulative effect of accounting change
|
$
|
0.06
|
0.05
|
$
|
(0.02
|
)
|
$
|
(0.04
|
)
|
$
|
(0.80
|
)
|
||||
Cumulative
effect of accounting change
|
—
|
—
|
—
|
(0.16
|
)
|
—
|
||||||||||
Net
income (loss)
|
$
|
0.06
|
0.05
|
$
|
(0.02
|
)
|
$
|
(0.20
|
)
|
$
|
(0.80
|
)
|
||||
Weighted
average shares outstanding used in basic net income (loss) per common
share calculation
|
37,557,722
|
37,263,378
|
34,854,802
|
34,028,702
|
33,987,895
|
|||||||||||
Weighted
average shares outstanding used in diluted net income (loss) per
common
share calculation
|
39,885,328
|
39,680,304
|
34,854,802
|
34,028,702
|
33,987,895
|
December
31,
|
||||||||||||||||
2005
|
2004
|
2003
|
2002
|
2001
|
||||||||||||
(in
thousands)
|
||||||||||||||||
Consolidated
Balance Sheet Data:
|
||||||||||||||||
Cash
and cash equivalents
|
$
|
17,117
|
$
|
12,425
|
$
|
10,898
|
$
|
8,004
|
$
|
10,136
|
||||||
Working
capital
|
15,668
|
11,283
|
8,486
|
6,137
|
7,878
|
|||||||||||
Total
assets
|
21,426
|
17,150
|
13,537
|
10,837
|
17,627
|
|||||||||||
Total
stockholders’ equity
|
17,213
|
13,554
|
9,336
|
7,888
|
14,271
|
·
|
compensation
costs relating to employees who provide customer service to our
clients;
|
·
|
compensation
costs relating to our network support
staff;
|
·
|
allocated
occupancy costs and related overhead;
and
|
·
|
the
cost of supporting our infrastructure, including expenses related
to
server leases and Internet connectivity, as well as depreciation
of
certain hardware and software.
|
2005
|
2004
|
2003
|
||||||||
(in
thousands)
|
||||||||||
December
2002 warrant granted for investor relations services (discussed
below)
|
$
|
—
|
$
|
—
|
$
|
298
|
||||
Acceleration
of deferred compensation charges related to certain employee
terminations
|
—
|
—
|
45
|
|||||||
May
2004 warrant granted for investor relations services (discussed
below)
|
—
|
246
|
—
|
|||||||
Total
|
$
|
—
|
$
|
246
|
$
|
343
|
Payments
due by period
|
||||||||||||||||
(in
thousands)
|
||||||||||||||||
Contractual
Obligations
|
Total
|
Less
than
1
year
|
1-3
years
|
3-5
years
|
More
than
5
years
|
|||||||||||
Operating
leases
|
$
|
1,225
|
$
|
679
|
$
|
546
|
$
|
—
|
$
|
—
|
||||||
Total
|
$
|
1,225
|
$
|
679
|
$
|
546
|
$
|
—
|
$
|
—
|
40
|
|
41
|
|
42
|
|
43
|
|
44
|
|
45
|
|
46
|
December
31,
|
|||||||
2005
|
2004
|
||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
17,117
|
$
|
12,425
|
|||
Accounts
receivable, less allowance for doubtful accounts of $67 and $54,
in 2005
and 2004, respectively
|
1,727
|
1,641
|
|||||
Prepaid
expenses and other current assets
|
591
|
475
|
|||||
Total
current assets
|
19,435
|
14,541
|
|||||
Property
and equipment, net
|
575
|
384
|
|||||
Intangibles,
net
|
790
|
1,721
|
|||||
Security
deposits
|
180
|
166
|
|||||
Other
assets
|
446
|
338
|
|||||
Total
assets
|
$
|
21,426
|
$
|
17,150
|
|||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable
|
$
|
346
|
$
|
262
|
|||
Accrued
expenses
|
1,803
|
1,666
|
|||||
Deferred
revenue
|
1,618
|
1,330
|
|||||
Total
current liabilities
|
3,767
|
3,258
|
|||||
Other
liabilities
|
446
|
338
|
|||||
Commitments
and contingencies
|
|||||||
Stockholders’
equity:
|
|||||||
Preferred
stock, $.001 par value per share; 5,000,000 shares authorized, 0
issued
and outstanding at December 31, 2005 and 2004
|
—
|
—
|
|||||
Common
stock, $.001 par value per share; 100,000,000 shares authorized,
37,979,271 shares issued and outstanding at December 31, 2005; 37,380,732
shares issued and outstanding at December 31, 2004
|
38
|
37
|
|||||
Additional
paid-in capital
|
118,556
|
117,440
|
|||||
Accumulated
deficit
|
(101,381
|
)
|
(103,923
|
)
|
|||
Total
stockholders’ equity
|
17,213
|
13,554
|
|||||
Total
liabilities and stockholders’ equity
|
$
|
21,426
|
$
|
17,150
|
|||
Year
Ended December 31,
|
||||||||||
2005
|
2004
|
2003
|
||||||||
Revenue
|
$
|
22,277
|
$
|
17,392
|
$
|
12,023
|
||||
Operating
expenses:
|
||||||||||
Cost
of revenue
|
4,297
|
2,888
|
2,028
|
|||||||
Product
development
|
2,699
|
2,000
|
1,641
|
|||||||
Sales
and marketing
|
6,975
|
5,183
|
3,555
|
|||||||
General
and administrative
|
4,458
|
4,456
|
3,610
|
|||||||
Amortization
of intangibles
|
931
|
792
|
1,014
|
|||||||
Restructuring
and impairment charges
|
—
|
—
|
1,024
|
|||||||
Total
operating expenses
|
19,360
|
15,319
|
12,872
|
|||||||
Income
(loss) from operations
|
2,917
|
2,073
|
(849
|
)
|
||||||
Other
income (expense):
|
||||||||||
Other
expense
|
—
|
—
|
(8
|
)
|
||||||
Interest
income
|
300
|
77
|
41
|
|||||||
Total
other income, net
|
300
|
77
|
33
|
|||||||
Income
(loss) before provision for income taxes
|
3,217
|
2,150
|
(816
|
)
|
||||||
Provision
for income taxes
|
675
|
58
|
—
|
|||||||
Net
income (loss)
|
2,542
|
2,092
|
(816
|
)
|
||||||
Basic
net income (loss) per common share
|
$
|
0.07
|
$
|
0.06
|
$
|
(0.02
|
)
|
|||
Diluted
net income (loss) per common share
|
$
|
0.06
|
$
|
0.05
|
$
|
(0.02
|
)
|
|||
Weighted
average shares outstanding used in basic net income (loss) per
common
share calculation
|
37,557,722
|
37,263,378
|
34,854,802
|
|||||||
Weighted
average shares outstanding used in diluted net income (loss) per
common
share calculation
|
39,885,328
|
39,680,304
|
34,854,802
|
|||||||
Common
Stock
|
Additional
Paid-in
|
Deferred
|
Accumulated |
Accumulated
Other
Comprehensive
Income
|
||||||||||||||||||
Shares
|
Amount
|
Capital
|
Compensation
|
Deficit
|
(loss)
|
Total
|
||||||||||||||||
Balance
at December 31, 2002
|
34,060,881
|
$
|
34
|
$
|
113,061
|
$
|
—
|
$
|
(105,199
|
)
|
$
|
(8
|
)
|
$
|
7,888
|
|||||||
Issuance
of common stock upon exercise of stock options and
warrants
|
2,755,534
|
2
|
1,911
|
—
|
—
|
—
|
1,913
|
|||||||||||||||
Deferred
stock based compensation
|
—
|
—
|
298
|
(298
|
)
|
—
|
—
|
—
|
||||||||||||||
Acceleration
of employee stock options
|
—
|
—
|
45
|
—
|
—
|
—
|
45
|
|||||||||||||||
Amortization
of deferred compensation
|
—
|
—
|
—
|
298
|
—
|
—
|
298
|
|||||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
(816
|
)
|
—
|
(816
|
)
|
|||||||||||||
Other
comprehensive loss
|
—
|
—
|
—
|
—
|
—
|
8
|
8
|
|||||||||||||||
Comprehensive
loss
|
(808
|
)
|
||||||||||||||||||||
Balance
at December 31, 2003
|
36,816,415
|
36
|
115,315
|
—
|
(106,015
|
)
|
—
|
9,336
|
||||||||||||||
Issuance
of common stock upon exercise of stock options and
warrants
|
193,423
|
—
|
122
|
—
|
—
|
—
|
122
|
|||||||||||||||
Issuance
of common stock related to asset acquisition
|
370,894
|
1
|
1,749
|
—
|
—
|
—
|
1,750
|
|||||||||||||||
Deferred
stock based compensation
|
—
|
—
|
246
|
(246
|
)
|
—
|
—
|
—
|
||||||||||||||
Amortization
of deferred compensation
|
—
|
—
|
—
|
246
|
—
|
—
|
246
|
|||||||||||||||
Tax
benefit from exercise of employee stock options
|
—
|
—
|
8
|
—
|
—
|
—
|
8
|
|||||||||||||||
Net
income
|
—
|
—
|
—
|
—
|
2,092
|
—
|
2,092
|
|||||||||||||||
Balance
at December 31, 2004
|
37,380,732
|
37
|
117,440
|
—
|
(103,923
|
)
|
—
|
13,554
|
||||||||||||||
Issuance
of common stock upon exercise of stock options and
warrants
|
598,539
|
1
|
450
|
—
|
—
|
—
|
451
|
|||||||||||||||
Tax
benefit from exercise of employee stock options
|
—
|
—
|
666
|
—
|
—
|
—
|
666
|
|||||||||||||||
Net
income
|
—
|
—
|
—
|
—
|
2,542
|
—
|
2,542
|
|||||||||||||||
Balance
at December 31, 2005
|
37,979,271
|
$
|
38
|
$
|
118,556
|
$
|
—
|
$
|
(101,381
|
)
|
$
|
—
|
$
|
17,213
|
||||||||
Year
Ended December 31,
|
||||||||||
2005
|
2004
|
2003
|
||||||||
Cash
flows from operating activities:
|
||||||||||
Net
income (loss)
|
$
|
2,542
|
$
|
2,092
|
$
|
(816
|
)
|
|||
Adjustments
to reconcile net income (loss) to net cash provided by operating
activities:
|
||||||||||
Non-cash
compensation expense, net
|
—
|
246
|
343
|
|||||||
Depreciation
|
171
|
217
|
321
|
|||||||
Amortization
of intangibles
|
931
|
792
|
1,014
|
|||||||
Provision
for doubtful accounts, net
|
30
|
30
|
15
|
|||||||
Deferred
income taxes
|
666
|
8
|
—
|
|||||||
Changes
in operating assets and liabilities, net of
acquisition:
|
||||||||||
Accounts
receivable
|
(116
|
)
|
(432
|
)
|
(648
|
)
|
||||
Prepaid
expenses and other current assets
|
(116
|
)
|
(157
|
)
|
(19
|
)
|
||||
Security
deposits
|
(14
|
)
|
(37
|
)
|
(5
|
)
|
||||
Other
assets and liabilities
|
—
|
19
|
—
|
|||||||
Accounts
payable
|
84
|
146
|
(21
|
)
|
||||||
Accrued
expenses
|
137
|
(911
|
)
|
454
|
||||||
Deferred
revenue
|
288
|
54
|
476
|
|||||||
Net
cash provided by operating activities
|
4,603
|
2,067
|
1,114
|
|||||||
Cash
flows from investing activities:
|
||||||||||
Purchases
of property and equipment, including capitalized software
|
(362
|
)
|
(260
|
)
|
(67
|
)
|
||||
Acquisition
of Island Data customer contracts
|
—
|
(8
|
)
|
(75
|
)
|
|||||
Acquisition
of FaceTime customer contracts
|
—
|
(394
|
)
|
—
|
||||||
Net
cash used in investing activities
|
(362
|
)
|
(662
|
)
|
(142
|
)
|
||||
Cash
flows from financing activities:
|
||||||||||
Proceeds
from issuance of common stock in connection with the exercise of
options
and warrants
|
451
|
122
|
1,914
|
|||||||
Net
cash provided by financing activities
|
451
|
122
|
1,914
|
|||||||
Effect
of foreign exchange rate changes on cash and cash
equivalents
|
—
|
—
|
8
|
|||||||
Net
increase in cash and cash equivalents
|
4,692
|
1,527
|
2,894
|
|||||||
Cash
and cash equivalents at the beginning of the year
|
12,425
|
10,898
|
8,004
|
|||||||
Cash
and cash equivalents at the end of the year
|
$
|
17,117
|
$
|
12,425
|
$
|
10,898
|
||||
Supplemental
disclosures:
|
||||||||||
Cash
paid during the year for Income taxes:
|
18
|
88
|
—
|
|||||||
(1)
|
Summary
of Operations and Significant Accounting
Policies
|
(a)
|
Summary
of Operations
|
(b)
|
Principles
of Consolidation
|
(c)
|
Use
of Estimates
|
(d)
|
Cash
and Cash Equivalents
|
(e)
|
Property
and Equipment
|
(f)
|
Impairment
of Long-Lived Assets
|
(g)
|
Accounts
Receivable
|
(h)
|
Revenue
Recognition
|
(i)
|
Income
Taxes
|
(j)
|
Advertising
Costs
|
(k)
|
Financial
Instruments and Concentration of Credit
Risk
|
(l)
|
Stock-based
Compensation
|
Year
Ended December 31,
|
||||||||||
2005
|
2004
|
2003
|
||||||||
Net
income (loss) as reported
|
$
|
2,542
|
$
|
2,092
|
$
|
(816
|
)
|
|||
Add:
Stock-based compensation expense included in net income (loss)
as
reported
|
—
|
—
|
45
|
|||||||
Deduct:
Pro forma stock-based compensation cost
|
(2,055
|
)
|
(1,308
|
)
|
(945
|
)
|
||||
Pro
forma net income (loss)
|
$
|
487
|
$
|
784
|
$
|
(1,716
|
)
|
|||
Basic
net income (loss) per common share:
|
||||||||||
As
reported
|
$
|
0.07
|
$
|
0.06
|
$
|
(0.02
|
)
|
|||
Pro
forma
|
$
|
0.01
|
$
|
0.02
|
$
|
(0.05
|
)
|
|||
Diluted
net income (loss) per common share:
|
||||||||||
As
reported
|
$
|
0.06
|
$
|
0.05
|
$
|
(0.02
|
)
|
|||
Pro
forma
|
$
|
0.01
|
$
|
0.02
|
$
|
(0.05
|
)
|
(m)
|
Basic
and Diluted Net Income (Loss) Per
Share
|
Year
Ended December 31,
|
||||||||||
2005
|
2004
|
2003
|
||||||||
Basic
|
37,557,722
|
37,263,378
|
34,854,802
|
|||||||
Effect
of assumed exercised options
|
2,327,606
|
2,416,926
|
—
|
|||||||
Diluted
|
39,885,328
|
39,680,304
|
34,854,802
|
(n)
|
Segment
Reporting
|
(o)
|
Comprehensive
Income (loss)
|
(p) |
Computer
Software
|
(q)
|
Intangible
Assets
|
(r)
|
Deferred
Rent
|
(s)
|
Product
Development Costs
|
(t) |
Foreign
Currency Translation
|
(u)
|
Restructuring
Activities
|
(v)
|
Recently
Issued Accounting
Pronouncements
|
(w)
|
Fair
Value of Financial
Instruments
|
(x) |
Intangible
Assets
|
As
of December 31, 2005
|
||||||||||
Gross
Carrying
Amount
|
Weighted
Average
Amortization
Period
|
Accumulated
Amortization
|
||||||||
Amortizing
intangible assets:
|
||||||||||
Certain
identifiable assets of Island Data
|
$
|
2,119
|
3.0
years
|
$
|
1,434
|
|||||
Certain
identifiable assets of FaceTime
|
394
|
2.0
years
|
289
|
|||||||
Total
|
$
|
2,513
|
$
|
1,723
|
As
of December 31, 2004
|
||||||||||
Gross
Carrying
Amount
|
Weighted
Average
Amortization
Period
|
Accumulated
Amortization
|
||||||||
Amortizing
intangible assets:
|
||||||||||
Certain
identifiable assets of Island Data
|
$
|
2,119
|
3.0
years
|
$
|
717
|
|||||
Certain
identifiable assets of FaceTime
|
394
|
2.0
years
|
75
|
|||||||
Total
|
$
|
2,513
|
$
|
792
|
(2)
|
Asset
Acquisitions
|
(3)
|
Balance
Sheet Components
|
December
31,
|
|||||||
2005
|
2004
|
||||||
Computer
equipment and software
|
$
|
1,936
|
$
|
1,712
|
|||
Furniture,
equipment and building improvements
|
182
|
44
|
|||||
2,118
|
1,756
|
||||||
Less
accumulated depreciation
|
1,543
|
1,372
|
|||||
Total
|
$
|
575
|
$
|
384
|
December
31,
|
|||||||
2005
|
2004
|
||||||
Payroll
and related costs
|
$
|
1,182
|
$
|
1,102
|
|||
Professional
services and consulting fees
|
461
|
448
|
|||||
Sales
commissions
|
99
|
90
|
|||||
Other
|
61
|
26
|
|||||
Total
|
$
|
1,803
|
$
|
1,666
|
(4)
|
Capitalization
|
(5)
|
Stock
Options and Employee Stock Purchase
Plan
|
Options
|
Weighted
Average
Exercise Price
|
||||||
Options
outstanding at December 31, 2002
|
7,828,334
|
$
|
1.23
|
||||
Options
granted
|
590,000
|
$
|
1.85
|
||||
Options
exercised
|
(2,478,624
|
)
|
$
|
0.77
|
|||
Options
cancelled
|
(216,710
|
)
|
$
|
2.05
|
|||
Options
outstanding at December 31, 2003
|
5,723,000
|
$
|
1.46
|
||||
Options
granted
|
2,090,000
|
$
|
2.80
|
||||
Options
exercised
|
(171,225
|
)
|
$
|
0.71
|
|||
Options
cancelled
|
(255,500
|
)
|
$
|
2.25
|
|||
Options
outstanding at December 31, 2004
|
7,386,275
|
$
|
1.83
|
||||
Options
granted
|
2,178,000
|
$
|
3.19
|
||||
Options
exercised
|
(603,277
|
)
|
$
|
0.78
|
|||
Options
cancelled
|
(660,945
|
)
|
$
|
3.20
|
|||
Options
outstanding at December 31, 2005
|
8,300,053
|
$
|
2.16
|
||||
Options
exercisable at December 31, 2003
|
2,672,447
|
$
|
2.21
|
||||
Options
exercisable at December 31, 2004
|
3,710,795
|
$
|
1.79
|
||||
Options
exercisable at December 31, 2005
|
4,472,803
|
$
|
1.72
|
2005
|
2004
|
2003
|
||||||||
December
2002 warrant granted for investor relations services
|
$
|
—
|
$
|
—
|
$
|
298
|
||||
Acceleration
of deferred compensation charges related to certain employee
terminations
|
—
|
—
|
45
|
|||||||
May
2004 warrant granted for investor relations services
|
—
|
246
|
—
|
|||||||
Total
|
$
|
—
|
$
|
246
|
$
|
343
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||||||||
Exercise
Price
|
Number
Outstanding
|
Weighted
Average Remaining
Contractual
Life
|
Weighted
Average Exercise Price
|
Number
Outstanding
|
Weighted
Average Exercise Price
|
|||||||||||
$0.00-$1.00
|
3,202,270
|
6.05
|
$
|
0.58
|
2,640,520
|
$
|
0.55
|
|||||||||
$1.01-$2.00
|
1,171,283
|
6.44
|
1.93
|
761,283
|
1.94
|
|||||||||||
$2.01-$5.00
|
3,517,375
|
8.42
|
3.14
|
715,625
|
3.24
|
|||||||||||
$5.01-$11.00
|
409,125
|
4.29
|
6.68
|
355,375
|
6.87
|
|||||||||||
8,300,053
|
$
|
2.16
|
4,472,803
|
$
|
1.72
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||||||||
Exercise
Price
|
Number
Outstanding
|
Weighted
Average Remaining
Contractual
Life
|
Weighted
Average Exercise Price
|
Number
Outstanding
|
Weighted
Average Exercise Price
|
|||||||||||
$0.00-$1.00
|
3,708,836
|
7.04
|
$
|
0.57
|
2,188,356
|
$
|
0.53
|
|||||||||
$1.01-$2.00
|
1,556,689
|
7.72
|
1.93
|
706,689
|
1.92
|
|||||||||||
$2.01-$5.00
|
1,558,625
|
8.15
|
3.06
|
457,375
|
3.49
|
|||||||||||
$5.01-$11.00
|
562,125
|
6.46
|
6.46
|
358,375
|
7.05
|
|||||||||||
7,386,275
|
$
|
1.83
|
3,710,795
|
$
|
1.79
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||||||||
Exercise
Price
|
Number
Outstanding
|
Weighted
Average Remaining
Contractual
Life
|
Weighted
Average Exercise Price
|
Number
Outstanding
|
Weighted
Average Exercise Price
|
|||||||||||
$0.00-$1.00
|
4,008,311
|
7.88
|
$
|
0.58
|
1,248,851
|
$
|
0.55
|
|||||||||
$1.01-$2.00
|
700,189
|
5.00
|
1.88
|
660,002
|
1.93
|
|||||||||||
$2.01-$5.00
|
637,375
|
7.08
|
3.29
|
415,875
|
3.58
|
|||||||||||
$5.01-$11.00
|
377,125
|
6.36
|
6.96
|
347,719
|
7.05
|
|||||||||||
5,723,000
|
1.46
|
2,672,447
|
$
|
2.21
|
(6) |
Restructuring
and Impairment Charges
|
Balance
as of
January
1, 2003
|
Provision
for
the
year ended
December
31, 2003
|
Net
(utilization)
reversals
during
the
year ended
December
31, 2003
|
Balance
as of
December
31, 2003
|
||||||||||
Contract
terminations (a)
|
$
|
615
|
$
|
1,024
|
$
|
(1,639
|
)
|
$
|
—
|
||||
Total
|
$
|
615
|
$
|
1,024
|
$
|
(1,639
|
)
|
$
|
—
|
||||
(a) |
In
the second quarter of 2003, the Company recorded an additional
restructuring charge of approximately $1,024 related to its 2001
restructuring initiatives. This charge reflected the amount of
the
judgment in a previously disclosed arbitration proceeding in excess
of the
$350 provision initially provided for in connection with the Company’s
original restructuring plan in
2001.
|
(7)
|
Valuation
and Qualifying Accounts
|
Balance
at
Beginning
of
Period
|
Additions
Charged
to
Costs
and
Expenses
|
Deductions/
Write-offs
|
Balance
at
End
of
Period
|
||||||||||
For
the year ended December 31, 2005
Allowance
for doubtful accounts
|
$
|
54
|
$
|
30
|
$
|
(17
|
)
|
$
|
67
|
||||
For
the year ended December 31, 2004
Allowance
for doubtful accounts
|
$
|
64
|
$
|
30
|
$
|
(40
|
)
|
$
|
54
|
||||
For
the year ended December 31, 2003
Allowance
for doubtful accounts
|
$
|
70
|
$
|
15
|
$
|
(21
|
)
|
$
|
64
|
(8)
|
Income
Taxes
|
Year
Ended December 31,
|
||||||||||
2005
|
2004
|
2003
|
||||||||
Current
incomes taxes:
|
||||||||||
U.S.
Federal
|
$
|
675
|
$
|
58
|
$
|
—
|
||||
State
and local
|
—
|
—
|
—
|
|||||||
Foreign
|
—
|
—
|
—
|
|||||||
Total
current income taxes
|
$
|
675
|
$
|
58
|
$
|
—
|
2005
|
2004
|
||||||
Deferred
tax assets:
|
|||||||
Net
operating loss carryforwards
|
$
|
3,500
|
$
|
4,017
|
|||
Accounts
payable and accrued expenses
|
90
|
13
|
|||||
Deferred
revenue
|
—
|
396
|
|||||
Non-cash
compensation
|
2,059
|
2,012
|
|||||
Goodwill
and intangibles amortization
|
3,431
|
3,585
|
|||||
Allowance
for doubtful accounts
|
30
|
23
|
|||||
Other
|
76
|
58
|
|||||
Gross
deferred tax assets
|
9,186
|
10,104
|
|||||
Less:
valuation allowance
|
(9,163
|
)
|
(10,030
|
)
|
|||
Net
deferred tax assets
|
23
|
74
|
|||||
Deferred
tax liabilities:
|
|||||||
Plant
and equipment, principally due to differences in
depreciation
|
(23
|
)
|
(74
|
)
|
|||
Gross
deferred tax liabilities
|
(23
|
)
|
(74
|
)
|
|||
Net
deferred taxes
|
$
|
—
|
$
|
—
|
(9)
|
Commitments
and Contingencies
|
Year
ending December 31,
|
Operating
Leases
|
|||
2006
|
$
|
679
|
||
2007
|
474
|
|||
2008
|
72
|
|||
Thereafter
|
—
|
|||
Total
minimum lease payments
|
$
|
1,225
|
(10)
|
Legal
Matters
|
(11) |
Unaudited
Supplementary Financial Information - Quarterly Results of
Operations
|
Quarter
Ended
|
|||||||||||||||||||||||||
Dec.
31,
2005
|
Sept.
30,
2005
|
June
30,
2005
|
Mar.
31,
2005
|
Dec.
31,
2004
|
Sept.
30,
2004
|
June
30,
2004
|
Mar.
31,
2004
|
||||||||||||||||||
Revenue
|
$
|
6,316
|
$
|
5,724
|
$
|
5,283
|
$
|
4,954
|
$
|
4,596
|
$
|
4,381
|
$
|
4,342
|
$
|
4,073
|
|||||||||
Operating
expenses:
|
|||||||||||||||||||||||||
Cost
of revenue
|
1,300
|
1,114
|
1,019
|
863
|
771
|
730
|
694
|
693
|
|||||||||||||||||
Product
development
|
672
|
663
|
688
|
675
|
530
|
515
|
516
|
439
|
|||||||||||||||||
Sales
and marketing
|
2,086
|
1,715
|
1,690
|
1,485
|
1,462
|
1,327
|
1,240
|
1,154
|
|||||||||||||||||
General
and administrative
|
1,058
|
1,034
|
1,096
|
1,271
|
1,325
|
1,222
|
988
|
921
|
|||||||||||||||||
Amortization
of intangibles
|
232
|
232
|
232
|
235
|
230
|
204
|
179
|
179
|
|||||||||||||||||
Total
operating expenses
|
5,348
|
4,758
|
4,725
|
4,529
|
4,318
|
3,998
|
3,617
|
3,386
|
|||||||||||||||||
Income
from operations
|
968
|
966
|
558
|
425
|
278
|
383
|
725
|
687
|
|||||||||||||||||
Other
income (expense), net:
|
|||||||||||||||||||||||||
Interest
income
|
117
|
81
|
59
|
43
|
36
|
18
|
11
|
12
|
|||||||||||||||||
Total
other income, net
|
117
|
81
|
59
|
43
|
36
|
18
|
11
|
12
|
|||||||||||||||||
Income
before (benefit from) provision for income taxes
|
1,085
|
1,047
|
617
|
468
|
314
|
401
|
736
|
699
|
|||||||||||||||||
(Benefit
from) provision for income taxes
|
(63
|
)
|
358
|
216
|
164
|
—
|
25
|
33
|
—
|
||||||||||||||||
Net
income
|
$
|
1,148
|
$
|
689
|
$
|
401
|
$
|
304
|
$
|
314
|
$
|
376
|
$
|
703
|
$
|
699
|
|||||||||
Basic
net income per common share
|
$
|
0.03
|
$
|
0.02
|
$
|
0.01
|
$
|
0.01
|
$
|
0.01
|
$
|
0.01
|
$
|
0.02
|
$
|
0.02
|
|||||||||
Diluted
net income per common share
|
$
|
0.03
|
$
|
0.02
|
$
|
0.01
|
$
|
0.01
|
$
|
0.01
|
$
|
0.01
|
$
|
0.02
|
$
|
0.02
|
|||||||||
Weighted
average shares outstanding used in basic net income per common
share
calculation
|
37,750,875
|
37,555,696
|
37,487,015
|
37,433,446
|
37,370,093
|
37,336,792
|
37,318,804
|
37,010,432
|
|||||||||||||||||
Weighted
average shares outstanding used in diluted net income per common
share
calculation
|
40,616,738
|
39,839,001
|
39,400,983
|
39,448,922
|
39,410,072
|
39,294,832
|
39,590,800
|
39,385,526
|
Plan
Category
|
Number
of Securities to be Issued Upon
Exercise
of Outstanding
Options,
Warrants and Rights
(a)
|
Weighted-Average
Exercise
Price of Outstanding Options, Warrants and Rights
(b)
|
Number
of Securities Remaining Available for Future
Issuance
Under
Equity
Compensation
Plans (3)
(c)
|
|||||||
Equity
compensation plans approved by stockholders (1)
|
8,363,803
|
$
|
2.16
|
4,564,330
|
||||||
Equity
compensation plans not approved by stockholders (2)
|
124,500
|
$
|
0.69
|
—
|
||||||
Total
|
8,488,303
|
$
|
2.14
|
4,564,330
|
||||||
(1) |
Our
equity compensation plans which were approved by our stockholders
are the
2000 Stock Incentive Plan, as amended and restated, and the Employee
Stock
Purchase Plan.
|
(2) |
On
December 11, 2002, we issued a warrant to purchase 150,000 shares
of
common stock at $0.69 per share to Genesis Select Corp. in exchange
for
investor relations services. Because approval was not required at
the
time, our stockholders did not approve the issuance of the
warrant.
|
(3) |
Excludes
securities reflected in column (a). The number of shares of common
stock
available for issuance under the 2000 Stock Incentive Plan automatically
increases on the first trading day in each calendar year by an amount
equal to three percent (3%) of the total number of shares of our
common
stock outstanding on the last trading day of the immediately preceding
calendar year, but in no event shall such annual increase exceed
1,500,000
shares. The number of shares of common stock available for issuance
under
our Employee Stock Purchase Plan automatically increases on the first
trading day in each calendar year by an amount equal to one-half
of one
percent (0.5%) of the total number of shares of our common stock
outstanding on the last trading day of the immediately preceding
calendar
year, but in no event shall such annual increase exceed 150,000 shares.
Effective October 2001, we suspended our Employee Stock Purchase
Plan
until further notice. Also see Note 5 to our consolidated financial
statements.
|
1. |
Financial
Statements.
|
2. |
Financial
Statement Schedules.
|
3. |
Exhibits.
|
LIVEPERSON, INC. | ||
|
|
|
By: | /s/ ROBERT P. LOCASCIO | |
|
||
Name:
Robert P. LoCascio
Title:
Chief Executive Officer
|
||
Signature
|
Title(s)
|
|
/s/
ROBERT P. LOCASCIO
|
Chief
Executive Officer and Chairman of the Board of
Directors
|
|
Robert
P. LoCascio
|
(principal executive officer) | |
/s/
TIMOTHY E. BIXBY
|
President,
Chief Financial Officer, Secretary and Director
|
|
Timothy
E. Bixby
|
(principal financial and accounting officer) | |
|
||
/s/
STEVEN BERNS
|
Director
|
|
Steven
Berns
|
||
/s/
EMMANUEL GILL
|
Director
|
|
Emmanuel
Gill
|
||
/s/
KEVIN C. LAVAN
|
Director
|
|
Kevin
C. Lavan
|
||
/s/
WILLIAM G. WESEMANN
|
Director
|
|
William
G. Wesemann
|
Number
|
Description
|
|
2.1
|
Stock
Purchase Agreement, dated as of October 12, 2000, among LivePerson,
HumanClick Ltd. and the shareholders of HumanClick Ltd. named in
Schedule
I thereto (incorporated by reference to Exhibit 2 to LivePerson’s Current
Report on Form 8-K, dated October 12, 2000 and filed October 19,
2000)
|
|
3.1
|
Fourth
Amended and Restated Certificate of Incorporation (incorporated by
reference to the identically-numbered exhibit to LivePerson’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2000 and
filed March 30, 2001 (the “2000 Form 10-K”))
|
|
3.2
|
Second
Amended and Restated Bylaws, as amended (incorporated by reference
to the
identically-numbered exhibit to the 2000 Form 10-K)
|
|
4.1
|
Specimen
common stock certificate (incorporated by reference to the
identically-numbered exhibit to LivePerson’s Registration Statement on
Form S-1, as amended (Registration No. 333-96689) (“Registration
No. 333-96689”))
|
|
4.2
|
Second
Amended and Restated Registration Rights Agreement, dated as of
January 27, 2000, by and among LivePerson, the several persons and
entities named on the signature pages thereto as Investors, and Robert
LoCascio (incorporated by reference to the identically-numbered exhibit
to
Registration No. 333-96689)
|
|
4.3
|
See
Exhibits 3.1 and 3.2 for further provisions defining the rights of
holders
of common stock of LivePerson
|
|
10.1
|
Employment
Agreement between LivePerson and Robert P. LoCascio, dated as of
January 1, 1999 (incorporated by reference to the
identically-numbered exhibit to Registration
No. 333-96689)*
|
|
10.2
|
Employment
Agreement between LivePerson and Timothy E. Bixby, dated as of June
23,
1999 (incorporated by reference to Exhibit 10.3 to Registration
No. 333-96689)*
|
|
10.2.1
|
Modification
to Employment Agreement between LivePerson, Inc. and Timothy E. Bixby,
dated as of April 1, 2003 (incorporated by reference to the
identically-numbered exhibit to LivePerson’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2003 and filed August 13,
2003)*
|
|
10.3
|
Amended
and Restated 2000 Stock Incentive Plan, amended as of April 21, 2005
(incorporated by reference to the identically-numbered exhibit to
LivePerson’s Quarterly Report on Form 10-Q for the quarter ended June 30,
2005 and filed August 8, 2005)*
|
|
10.4
|
Employee
Stock Purchase Plan (incorporated by reference to the identically-numbered
exhibit to the 2000 Form 10-K)*
|
|
21.1
|
Subsidiaries
(incorporated by reference to the identically-numbered exhibit to
the 2000
Form 10-K)
|
|
23.1
|
Consent
of BDO Seidman, LLP
|
|
23.2
|
Consent
of KPMG LLP
|
|
31.1
|
Certification
by Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a),
as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
|
31.2
|
Certification
by Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a),
as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
|
32.1
|
Certification
by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
32.2
|
Certification
by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
* |
Management
contract or compensatory plan or
arrangement
|