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Table of Contents
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-K
 
(Mark One)
x
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 
SECURITIES
 
EXCHANGE ACT OF 1934
 
 
For
 
the fiscal year ended January 31, 2002 OR
 
¨
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
 
SECURITIES
 
EXCHANGE ACT OF 1934
 
 
For
 
the transition period from                           to                           
 
Commission File Number: 1-15529
 
 
OPTIO SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
 
Georgia
  
58-1435435
(State or other jurisdiction
of incorporation or organization)
  
(I.R.S. Employer
Identification No.)
 
3015 Windward Plaza,
Windward Fairways II,
Atlanta, Georgia
  
30005
(Address of principal executive offices)
  
(Zip Code)
 
Registrant’s telephone number, including area code: (770) 576-3500
 
Securities registered pursuant to Section 12(b) of the Act:
 
None
 
Securities registered pursuant to Section 12(g) of the Act:
 
Common Stock, no par value
 
(Title of Class)
 
 
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 the Form 10-K.  ¨
 
        The aggregate market value of the voting stock held by nonaffiliates of the Registrant, based upon the closing sale price for the Common Stock on April 29, 2002 as reported by the Nasdaq National Market System, was approximately $4,478,790. The shares of Common Stock held by each officer and director and by each person known to the Registrant who owns 5% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
 
There were 18,668,332 shares of the Registrant’s common stock outstanding as of April 29, 2002.
 
DOCUMENTS INCORPORATED BY REFERENCE
 
Parts of the Registrant’s Definitive Proxy Statement on Schedule 14A for its 2002 Annual Meeting of Stockholders are incorporated by reference in Part III of this Annual Report on Form 10-K. The Proxy Statement will be filed within 120 days of the end of the fiscal year covered by this Annual Report on Form 10-K.
 

Table of Contents
 
OPTIO SOFTWARE, INC.
2002 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
 
         
Page
PART I
Item 1.   
   
Business
   
1
Item 2.   
   
Properties
   
12
  
Legal Proceedings
   
12
Item 4.   
   
Submission of Matters to a Vote of Security Holders
   
13
  
Executive Officers of the Registrant
   
13
PART II
Item 5.   
   
Market for Registrant’s Common Equity and Related Shareholder Matters
   
14
Item 6.   
   
Selected Financial Data
   
15
Item 7.   
   
Management’s Discussion and Analysis of Financial Condition and Results of Operations
   
17
  
Quantitative and Qualitative Disclosures about Market Risk
   
25
Item 8.   
   
Financial Statements and Supplementary Data
   
25
Item 9.   
   
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
   
25
PART III
   Item 10.
   
Directors and Executive Officers of the Registrant
   
**
Item 11.
   
Executive Compensation
   
**
Item 12.
   
Security Ownership of Certain Beneficial Owners and Management
   
**
Item 13.
   
Certain Relationships and Related Transactions
   
**
PART IV
  
Exhibits, Financial Statement Schedules, and Reports on Form 8-K
   
26
**
 
The information required by Items 10, 11, 12 and 13 of Part III is hereby incorporated by reference to the Registrant’s Definitive Proxy Statement on Schedule 14A to be filed not more than 120 days after January 31, 2002.

Table of Contents
FORWARD-LOOKING STATEMENTS
 
In addition to historical information, this Annual Report contains forward-looking statements that involve risks and uncertainties. Such forward-looking statements are made pursuant to the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act and are made based on management’s current expectations or beliefs as well as assumptions made by, and information currently available to, management. These forward-looking statements include, among other things, statements regarding Optio Software, Inc.’s (“Optio”) anticipated costs and expenses, Optio’s capital needs and financing plans, product and service development, Optio’s growth strategies, market demand for Optio’s products and services, relationships with Optio’s strategic marketing alliances, and competition. These forward-looking statements include, among others, those statements including the words “expects,” “anticipates,” “intends,” “believes” and similar language. Optio’s actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, risks associated with Optio’s reliance on strategic marketing and reseller relationships, fluctuations in operating results because of acquisitions or dispositions, changes in competition, delays in developing new software, market acceptance of new products, expectation of achieving and sustaining operating profits and earnings, including timing of such company performance, disputes regarding Optio’s intellectual property, risks relating to the potential delisting of our stock, possible adverse results or pending or future litigation, or risks associated with Optio’s international operations. These and additional factors are set forth in “Safe Harbor Compliance Statement for Forward-Looking Statements” included as Exhibit 99.8 to this Annual Report on Form 10-K. You should carefully review these risks and additional risks described in other documents Optio files from time to time with the Securities and Exchange Commission, including the Quarterly Reports on Form 10-Q that Optio has filed. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. Optio undertakes no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.
 
 
PART I
 
Item 1.     Business
 
Optio Software, Inc. (“Optio”), founded in 1981, provides software that captures, transforms and delivers information and data to allow automated processes. Our software allows our client’s existing hardware and software to communicate freely with vendors, customers and every part of their organization—no matter which system they run or what format they need. Information from a wide range of enterprise applications, databases and files is transformed by Optio’s software in real-time, customized in formats according to the business needs of an organization’s customers, suppliers and partners and then delivered to the appropriate destination. These destinations support a variety of business purposes and range from the Internet, wireless devices and other information systems to printers, faxes and e-mail. Optio’s software allows information to be transferred as XML, EDI, HTML, and customized documents, according to the customer’s own individual requirements. For example, customers can deliver customized business documents (invoices, purchase orders, packing slips, etc.), electronic payments, corporate presentations and business-to-business transactions around the globe by Web, e-mail, fax or print. Optio’s solutions are non-intrusive and can be deployed without modifying the software or the business processes that created the original information. Optio’s software provides a comprehensive, cost-effective solution for organizations that desire to enhance the benefits of their investments in existing information systems while taking advantage of the opportunities presented by e-business.
 
Optio currently also includes operations conducted through two wholly-owned foreign subsidiaries each of which is involved in the direct sales, marketing and support activities of Optio.
 
 
Wholly-Owned Subsidiaries
 
Optio Software Europe, S.A.
 
Optio Software Europe, S.A. (“Optio Europe”), a software product distributor in Europe, was acquired in August 1998. This acquisition provided entry into European markets. Optio Europe is directly involved in the sales, marketing and support activities for Optio’s products throughout mainland Europe as well as in the United Kingdom through its wholly-owned subsidiary Optio Software UK, Pvt. Limited (“Optio UK”).

1

Table of Contents
 
Optio Software, Asia Pacific
 
Optio Software, Asia Pacific (“Optio Australia”) was established in May 1999 in an effort to enhance Optio’s worldwide presence, specifically in the regions of Australia, Japan, Singapore, and India, as well as other countries in the Asia Pacific region. Optio Australia is directly involved in the direct sales, marketing and support activities in these regions of the world.
 
 
Segment Information
 
Optio is organized around geographic areas. Optio’s U.S. operations plus its two foreign subsidiaries, Optio Europe and Optio Australia, as well as Optio Europe’s subsidiary, Optio UK, represent Optio’s four reportable segments. The foreign locations principally function as distributors of products developed by Optio in the United States. The accounting policies, as described in the summary of significant accounting policies in Optio’s financial statements, are applied consistently across the segments. Intersegment sales are based on intercompany transfer prices to achieve a reasonable margin upon distribution.
 
Segment information for the years ended January 31, 2000, 2001 and 2002 is summarized below.
 
Year ended January 31, 2000
   
United
States
   
France
   
United
Kingdom
   
Australia
    
Combined
   
Eliminations
     
Consolidated
Revenue from external customers:
                                                    
License fees
   
$
14,521,000
   
$
1,689,000
   
$
796,000
   
$
108,000
 
  
$
17,114,000
   
$
—  
 
   
$
17,114,000
Services, maintenance and other
   
 
14,107,000
   
 
1,121,000
   
 
467,000
   
 
24,000
 
  
 
15,719,000
   
 
—  
 
   
 
15,719,000
Intersegment revenue
   
 
599,000
   
 
194,000
   
 
—  
   
 
—  
 
  
 
793,000
   
 
(793,000
)
   
 
—  
    
  
  
  
 
  
  
Total revenue
   
 
29,227,000
   
 
3,004,000
   
 
1,263,000
   
 
132,000
 
  
 
33,626,000
   
 
(793,000
)
   
 
32,833,000
Interest income
   
 
363,000
   
 
—  
   
 
—  
   
 
—  
 
  
 
363,000
   
 
—  
 
   
 
363,000
Interest expense
   
 
119,000
   
 
—  
   
 
—  
   
 
1,000
 
  
 
120,000
   
 
—  
 
   
 
120,000
Depreciation and amortization
   
 
1,177,000
   
 
47,000
   
 
2,000
   
 
1,000
 
  
 
1,227,000
   
 
—  
 
   
 
1,227,000
Income tax expense
   
 
1,260,000
   
 
133,000
   
 
208,000
   
 
—  
 
  
 
1,601,000
   
 
—  
 
   
 
1,601,000
Segment net income (loss)
   
 
1,783,000
   
 
162,000
   
 
390,000
   
 
(343,000
)
  
 
1,992,000
   
 
—  
 
   
 
1,992,000
Total segment assets
   
 
59,195,000
   
 
1,875,000
   
 
755,000
   
 
106,000
 
  
 
61,931,000
   
 
(1,289,000
)
   
 
60,642,000
Expenditures for long-lived assets
   
 
1,094,000
   
 
38,000
   
 
—  
   
 
3,000
 
  
 
1,135,000
   
 
—  
 
   
 
1,135,000
 
Year ended January 31, 2001
   
United
States
     
France
     
United
Kingdom
   
Australia
    
Combined
     
Eliminations
     
Consolidated
  
Revenue from external customers:
                                                            
License fees
   
$
12,022,000
 
   
$
1,033,000
 
   
$
770,000
   
$
206,000
 
  
$
14,031,000
 
   
$
—  
 
   
$
14,031,000
 
Services, maintenance and other
   
 
14,409,000
 
   
 
1,025,000
 
   
 
766,000
   
 
82,000
 
  
 
16,282,000
 
   
 
—  
 
   
 
16,282,000
 
Intersegment revenue
   
 
429,000
 
   
 
190,000
 
   
 
—  
   
 
—  
 
  
 
619,000
 
   
 
(619,000
)
   
 
—  
 
    
  
  
  
 
  
  
Total revenue
   
 
26,860,000
 
   
 
2,248,000
 
   
 
1,536,000
   
 
288,000
 
  
 
30,932,000
 
   
 
(619,000
)
   
 
30,313,000
 
Interest income
   
 
972,000
 
   
 
—  
 
   
 
—  
   
 
1,000
 
  
 
973,000
 
   
 
—  
 
   
 
973,000
 
Interest expense
   
 
28,000
 
   
 
2,000
 
   
 
—  
   
 
—  
 
  
 
30,000
 
   
 
—  
 
   
 
30,000
 
Depreciation and amortization
   
 
1,069,000
 
   
 
33,000
 
   
 
5,000
   
 
6,000
 
  
 
1,113,000
 
   
 
—  
 
   
 
1,113,000
 
Income tax expense
   
 
229,000
 
   
 
1,000
 
   
 
109,000
   
 
—  
 
  
 
339,000
 
   
 
—  
 
   
 
339,000
 
Segment net income (loss) including loss from discontinued operations
   
 
(14,211,000
)
   
 
(449,000
)
   
 
529,000
   
 
(977,000
)
  
 
(15,108,000
)
   
 
—  
 
   
 
(15,108,000
)
Total segment assets including assets of discontinued operations
   
 
55,366,000
 
   
 
2,078,000
 
   
 
1,193,000
   
 
277,000
 
  
 
58,914,000
 
   
 
(3,076,000
)
   
 
55,838,000
 
Expenditures for long-lived assets
   
 
26,297,000
 
   
 
69,000
 
   
 
—  
   
 
50,000
 
  
 
26,416,000
 
   
 
—  
 
   
 
26,416,000
 

2

Table of Contents
 
Year ended January 31, 2002
   
United
States
     
France
     
United
Kingdom
   
Australia
    
Combined
     
Eliminations
     
Consolidated
  
Revenue from external customers:
                                                            
License fees
   
$
10,655,000
 
   
$
1,125,000
 
   
$
691,000
   
$
121,000
 
  
$
12,592,000
 
   
$
—  
 
   
$
12,592,000
 
Services, maintenance and other
   
 
16,138,000
 
   
 
1,200,000
 
   
 
776,000
   
 
114,000
 
  
 
18,228,000
 
   
 
—  
 
   
 
18,228,000
 
Intersegment revenue
   
 
454,000
 
   
 
177,000
 
   
 
10,000
   
 
—  
 
  
 
641,000
 
   
 
(641,000
)
   
 
—  
 
    
  
  
  
 
  
  
Total revenue
   
 
27,247,000
 
   
 
2,502,000
 
   
 
1,477,000
   
 
235,000
 
  
 
31,461,000
 
   
 
(641,000
)
   
 
30,820,000
 
Interest income
   
 
231,000
 
   
 
39,000
 
   
 
3,000
   
 
—  
 
  
 
273,000
 
   
 
—  
 
   
 
273,000
 
Interest expense
   
 
91,000
 
   
 
11,000
 
   
 
1,000
   
 
—  
 
  
 
103,000
 
   
 
—  
 
   
 
103,000
 
Depreciation and amortization
   
 
1,325,000
 
   
 
53,000
 
   
 
28,000
   
 
11,000
 
  
 
1,417,000
 
   
 
—  
 
   
 
1,417,000
 
Income tax expense
   
 
—  
 
   
 
—  
 
   
 
15,000