Edgar Filing: STELLENT INC

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------

FORM 10-K/A

(AMENDMENT NO. 2)

(MARK ONE)

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

FOR THE FISCAL YEAR ENDED MARCH 31, 2003
OR

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

FOR THE TRANSITION PERIOD FROM TO .

COMMISSION FILE NUMBER 0-19817

STELLENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

MINNESOTA 41-1652566
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

7777 GOLDEN TRIANGLE DRIVE
EDEN PRAIRIE, MINNESOTA 55344-3736
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

(952) 903-2000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: PREFERRED SHARE
PURCHASE RIGHTS; COMMON STOCK, PAR VALUE $.01 PER SHARE

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 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. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12 b-2) Yes [X] No [ ]

The aggregate market value of the registrant's common stock held by
non-affiliates of the registrant as of September 30, 2002, the last business day
of the registrant's most recently completed second fiscal quarter was
$75,156,299, based on the closing sale price for the registrant's common stock
on that date as reported by The Nasdaq Stock Market. For purposes of determining
such aggregate market value, all officers and directors of the registrant are
considered to be affiliates of the registrant, as well as shareholders holding
10% or more of the outstanding common stock as reflected on Schedules 13D or 13G
filed with the registrant. This number is provided only for the purpose of this
report on Form 10-K and does not represent an admission by either the registrant
or any such person as to the status of such person.

As of June 25, 2003, the registrant had 21,793,506 shares of common stock
issued and outstanding.
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STELLENT, INC.

FORM 10-K/A
FOR THE FISCAL YEAR ENDED MARCH 31, 2003

TABLE OF CONTENTS

DESCRIPTION PAGE
----------- ----

PART II
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 1
PART IV
Item 16. Exhibits, Financial Statement Schedules and Reports on Form
8K........................................................ 23
Signatures.............................................................. 28

EXPLANATORY NOTE

In accordance with Exchange Act Rule 12b-15, this Amendment No. 2 on Form
10-K/A amends certain items of the Annual Report on Form 10-K of Stellent, Inc.
(the "Company") for the fiscal year ended March 31, 2003, filed with the
Securities and Exchange Commission on June 30, 2003, and presents the relevant
text of the items amended. The amended items do not restate the Company's
consolidated financial statements previously filed in the Form 10-K, as
previously amended. This Form 10-K/A does not reflect events occurring after the
filing of the original Form 10-K or modify or update those disclosures affected
by subsequent events.

PART II

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

In 1997, we launched one of the first software product suites on the market
that was fully developed and created expressly for Web-based content and
document management. Currently, customers use our Stellent Universal Content
Management software to organize and maintain electronic information, created by
various sources using a broad range of software applications, and to publish
that information on public or private Web sites. The single architecture of our
content management software addresses each aspect of content management,
including Web content management, document management, collaboration, records
management and digital assets management. Additionally, software vendors and
manufacturers of electronic devices such as cell phones and personal data
organizers use our Content Component software to filter and convert electronic
information files so that they can be viewed using a Web browser or a
manufacturer's device.

FISCAL YEAR 2003 SUMMARY

MARKET TRENDS

We believe the trend toward companies increasingly using the Web for
communicating and publishing business information will continue. Moreover, we
believe that the trend toward more individuals creating more information that
companies will seek to organize, maintain and publish on public or private Web
sites will continue. However, as the software industry consolidates, the number
of software applications in which business information is created may contract.
In addition, we believe electronic devices will be used increasingly to view
electronic information.

While we believe the general and long-term market trends identified above
will create continued demand for our products, the market for content management
software and our products at any particular time is highly dependant on
information technology spending. Weak United States and international economic
conditions resulted in reduced information technology spending throughout our
fiscal year 2003. We cannot be certain whether, and if so, when, spending on
information technology will rebound. We believe continuing difficult economic
and market conditions are putting pressure on the ability of certain content
management software companies to survive as independent entities, if at all. We
believe customers increasingly have been concerned with vendor viability in
selecting content management software. In addition, we believe content
management software customers are focusing on a single software architecture
and/or a single vendor when making content management purchasing decisions. We
believe both of these trends will continue and may result in consolidation of
the content management software market. A consolidated content management
software market may be inviting to larger software vendors that traditionally
have marketed infrastructure, or

business transaction processing, software. If infrastructure software vendors,
some of which have access to significantly greater financial and technical
resources that we do, enter the content management software market, our business
and operation results may be significantly adversely affected. We cannot be
certain whether infrastructure software vendors will enter the content
management software market.

OPERATING RESULTS

In fiscal year 2003, our consolidated results of operations were adversely
impacted by weak economic conditions in the United States and internationally,
which resulted in substantially reduced spending on information technology
initiatives. Throughout fiscal year 2003, we continued our cost cutting efforts
through several restructuring actions and saw a significant decline in our
operating expenses. During fiscal year 2003, we continued to market and license
our products and services primarily through a direct sales force and augmented
our sales efforts through other relationships, such as with other software
vendors, systems integrators, resellers and others. Our total revenues generated
from operations outside of the United States increased slightly in fiscal year
2003 to 24% from 23%. No customer accounted for more than 10% of revenues in
fiscal year 2003.

ACQUISITIONS

In April 2002, we acquired certain assets and assumed certain liabilities
of Kinecta Corporation, a provider of software infrastructure for digital
networks, for approximately $2.6 million in cash. We acquired the Kinecta assets
primarily to obtain Kinecta's proprietary content distribution technology. We
have incorporated Kinecta's technology into our core content management product
line to maintain the competitive features of those products.

In March 2003, we acquired certain assets of Active IQ Corporation, a
provider of hosted solutions for the commercial real estate industry, for
approximately $0.7 million in cash. We acquired the Active IQ assets to expand
the market for our content management software products by expanding our access
to a particular market segment; the real estate industry.

RESTRUCTURINGS

Beginning in April 2002 and continuing through April 2003, we implemented
several cost cutting measures, including a reduction in work force of
approximately 24% since March 31, 2002 of 446 employees to 340 employees at
March 31, 2003. These restructuring measures were in response to the economic
slowdown both in the United States and internationally and were in all
functional areas and geographies. Although we implemented the restructurings to
reduce overall costs, we have recently been investing in certain areas in order
to expand our customer base and grow our revenues. Because of this, we
anticipate that the percentage of expenses as compared to total revenues
represented by sales and marketing expenses, research and development expenses
and general and administrative expenses will fluctuate from period to period
depending primarily on when we hire new personnel, the timing of certain sales
and marketing programs, the research programs that we put in place and the
potential expansion of operations. In addition, our limited operating history
makes it difficult for us to predict future operating results. We cannot be
certain that we will sustain revenue growth. A table summarizing our
restructuring plans is shown below:

RESTRUCTURING CHARGES
-----------------------------------------------------------------------------------------------
FIRST QUARTER '03 SECOND QUARTER '03 THIRD QUARTER '03 FOURTH QUARTER '03
------------------- ------------------- ------------------- -------------------
EMPLOYEE OTHER EMPLOYEE OTHER EMPLOYEE OTHER EMPLOYEE OTHER
TERMINATION EXIT TERMINATION EXIT TERMINATION EXIT TERMINATION EXIT
BENEFITS COSTS BENEFITS COSTS BENEFITS COSTS BENEFITS COSTS TOTAL
----------- ----- ----------- ----- ----------- ----- ----------- ----- -------

Balance at April 1,
2002............... $ -- $ -- $ -- $ -- $ -- $ -- $ -- $-- $ --
Expense.............. 2,100 404 -- -- -- -- -- -- 2,504
Payments............. (1,488) (316) -- -- -- -- -- -- (1,804)
------- ----- ----- ---- ----- ----- ---- --- -------

Balance at June 30,
2002............... 612 88 -- -- -- -- -- -- 700
Expense.............. -- -- 434 405 -- -- -- -- 839
Payments............. (612) (88) (230) (40) -- -- -- -- (970)
------- ----- ----- ---- ----- ----- ---- --- -------
Balance at September
30, 2002........... -- -- 204 365 -- -- -- -- 569
Expense.............. -- -- -- -- 382 292 -- -- 674
Payments............. -- -- (36) (24) (312) (256) -- -- (628)
------- ----- ----- ---- ----- ----- ---- --- -------
Balance at December
31, 2002........... -- -- 168 341 70 36 -- -- 615
Expense.............. -- -- -- -- -- -- 305 46 351
Payments............. -- -- (114) (37) (37) (36) (65) (3) (292)
------- ----- ----- ---- ----- ----- ---- --- -------
Balance at March 31,
2003............... $ -- $ -- $ 54 $304 $ 33 $ -- $240 $43 $ 674
======= ===== ===== ==== ===== ===== ==== === =======

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our significant accounting policies are more fully described in Note 1 to
our consolidated Financial Statements. The policies described below are
particularly important to understanding our financial position and results of
operations and may require management to make estimates or judgments 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.

Revenue Recognition

We currently derive all of our revenues from licenses of software products
and related services. We recognize revenue in accordance with Statement of
Position (SOP) 97-2, Software Revenue Recognition, as amended by SOP 98-9,
Modification of SOP 97-2, Software Revenue Recognition with Respect to Certain
Transactions, and Securities and Exchange Commission Staff Accounting Bulletin
101, "Revenue Recognition in Financial Statements."

Product license revenue is recognized under SOP 97-2 when (i) persuasive
evidence of an arrangement exists, (ii) delivery has occurred, (iii) the fee is
fixed or determinable, and (iv) collectibility is probable and supported and the
arrangement does not require services that are essential to the functionality of
the software.

Persuasive Evidence of an Arrangement Exists -- We determine that
persuasive evidence of an arrangement exists with respect to a customer under,
i) a signature license agreement, which is signed by both the customer and us,
or, ii) a purchase order, quote or binding letter-of-intent received from and
signed by the customer, in which case the customer has either previously
executed a signature license agreement with us or will receive a shrink-wrap
license agreement with the software. We do not offer product return rights to
end users or resellers.

Delivery has Occurred -- Our software may be either physically or
electronically delivered to the customer. We determine that delivery has
occurred upon shipment of the software pursuant to the billing terms of the
arrangement or when the software is made available to the customer through
electronic delivery. Customer acceptance generally occurs at delivery.

The Fee is Fixed or Determinable -- If at the outset of the customer
arrangement, we determine that the arrangement fee is not fixed or determinable,
revenue is typically recognized when the arrangement fee

becomes due and payable. Fees due under an arrangement are generally deemed
fixed and determinable if they are payable within twelve months.

Collectibility is Probable and Supported -- We determine whether
collectibility is probable and supported on a case-by-case basis. We may
generate a high percentage of our license revenue from our current customer
base, for whom there is a history of successful collection. We assess the
probability of collection from new customers based upon the number of years the
customer has been in business and a credit review process, which evaluates the
customer's financial position and ultimately their ability to pay. If we are
unable to determine from the outset of an arrangement that collectibility is
probable based upon our review process, revenue is recognized as payments are
received.

With regard to software arrangements involving multiple elements, we
allocate revenue to each element based on the relative fair value of each
element. Our determination of fair value of each element in multiple-element
arrangements is based on vendor-specific objective evidence ("VSOE"). We limit
our assessment of VSOE for each element to the price charged when the same
element is sold separately. We have analyzed all of the elements included in our
multiple-element arrangements and have determined that we have sufficient VSOE
to allocate revenue to consulting services and post-contract customer support
("PCS") components of our license arrangements. We sell our consulting services
separately, and have established VSOE on this basis. VSOE for PCS is determined
based upon the customer's annual renewal rates for these elements. Accordingly,
assuming all other revenue recognition criteria are met, revenue from perpetual
licenses is recognized upon delivery using the residual method in accordance
with SOP 98-9, and revenue from PCS is recognized ratably over their respective
terms, typically one year.

Our direct customers typically enter into perpetual license arrangements.
Our Content Components Division generally enters into term-based license
arrangements with its customers, the term of which generally exceeds one year in
length. We recognize revenue from time-based licenses at the time the license
arrangement is signed, assuming all other revenue recognition criteria are met,
if the term of the time-based license arrangement is greater than twelve months.
If the term of the time-based license arrangement is twelve months or less, we
recognize revenue ratably over the term of the license arrangement.

Services revenue consists of fees from consulting services and PCS.
Consulting services include needs assessment, software integration, security
analysis, application development and training. We bill consulting services fees
either on a time and materials basis or on a fixed-price schedule. In general,
our consulting services are not essential to the functionality of the software.
Our software products are fully functional upon delivery and implementation and
generally do not require any significant modification or alteration for customer
use. Customers purchase our consulting services to facilitate the adoption of
our technology and may dedicate personnel to participate in the services being
performed, but they may also decide to use their own resources or appoint other
professional service organizations to provide these services. Software products
are billed separately from professional services. We recognize revenue from
consulting services as services are performed. Our customers typically purchase
PCS annually, and we price PCS based on a percentage of the product license fee.
Customers purchasing PCS receive product upgrades, Web-based technical support
and telephone hot-line support.

Customer advances and billed amounts due from customers in excess of
revenue recognized are recorded as deferred revenue.

Cost of Revenues

We expense all manufacturing, packaging and distribution costs associated
with product license revenue as cost of revenues. We expense all technical
support service costs associated with service revenue as cost of revenues. We
also expense amortization of capitalized software from acquisitions as cost of
revenues.

In January 2002, the FASB issued Emerging Issues Task Force (EITF) Issue
No. 01-14, Income Statement Characterization of Reimbursements Received for
Out-of-Pocket Expenses Incurred, which requires companies to report
reimbursements of "out-of-pocket" expenses as revenues and the corresponding
expenses incurred as costs of revenues within the income statement. We report
our out-of-pocket expenses reimbursed

by customers as revenue and the corresponding expenses incurred as costs of
revenues within the statement of operations. As a result, this EITF did not have
a material effect on our consolidated financial statements.

Investments in and Notes with Other Companies

Investments in other equity securities and related notes with other
companies in the software industry are classified as long-term as we anticipate
holding them for more than one year. We hold less than 20% interest in, and do
not directly or indirectly exert significant influence over, any of the
respective investees. A portion of these investments are publicly traded and are
deemed by management to be available for sale. We use the specific
identification method to determine cost and fair value for computing gains and
losses. Accordingly, these investments are reported at fair value with net
unrealized gains or losses reported within shareholders' equity as accumulated
other comprehensive income or loss. No sales of available for sale investments
have occurred through March 31, 2003. During fiscal 2001, 2002 and 2003, we
determined that permanent declines in the value of these publicly traded
investments had occurred. As a result, we recorded write-downs of $0.4 million,
$0.1 million, and $1.1 million during the years ended March 31, 2001, 2002 and
2003, respectively. Investments in other companies also include investments in
several non-public, start-up technology companies for which we use the cost
method of accounting. For the years ended March 31, 2002 and 2003, we determined
that a permanent decline in value of certain investments had occurred and
recorded a $5.6 million and $0.7 million write-down on the investments in and
advances to these entities. We determined the permanent declines in value of
these public and non-public companies using quarterly procedures such as
reviewing their operating results and financial position, discussions with
company management and review of the overall business climate.

Accounts Receivable

Our accounts receivable balances are due from companies across a broad
range of industries -- Government, Finance, Manufacturing, Consumer, Aerospace
and Transportation, Health Care/Insurance, and High Tech/Telecom. Credit is
extended based on evaluation of a customer's financial condition and, generally,
collateral is not required. Accounts receivable from sales of services are
typically due from customers within 30 days and accounts receivable from sales
of licenses are due over terms ranging from 30 days to nine months. Accounts
receivable balances are stated at amounts due from customer net of an allowance
for doubtful accounts. Accounts outstanding longer than the contractual payments
terms are considered past due. We determined our allowance by considering a
number of factors, including the length of time trade receivables are past due,
our previous loss history, the customer's current ability to pay its obligation
to us, and the condition of the general economy and the industry as a whole. We
write-off accounts receivable when they become uncollectible, and payments
subsequently received on such receivables are credited to the allowance for
doubtful accounts.

No customer accounted for 10% or more of our revenues in the years ended
March 31, 2001, 2002, and 2003.

Goodwill and Other Acquired Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of
net assets acquired. Prior to April 1, 2002, goodwill was amortized on a
straight-line basis over three years. Effective April 1, 2002, we adopted
Statement of Financial Accounting Standards (SFAS) 142, Goodwill and Other
Intangible Assets, which provides that goodwill, as well as identifiable
intangible assets with indefinite lives, should not be amortized but reviewed
for impairment annually. Accordingly, we ceased amortization of goodwill as of
April 1, 2002.

At March 31, 2002, other acquired intangible assets represented core
technology, customer base, workforce, capitalized software, trademarks, and
other intangible assets acquired through business acquisitions, and were
amortized on a straight-line basis over three to four years. Effective April 1,
2002, we adopted SFAS 141, Business Combinations, which requires that all
business combinations be accounted for utilizing the purchase method of
accounting and specifies the criteria to use in determining whether intangible
assets

identified in purchase accounting must be recorded separately from goodwill. We
determined that our acquired workforce did not meet the separability criteria of
SFAS 141, and therefore the net unamortized balance at March 31, 2002 was
reclassified to goodwill effective April 1, 2002, and amortization of the
balance ceased. The remaining other acquired intangible assets continue to be
amortized on a straight-line basis over their remaining, definite useful lives.

The carrying value of goodwill and other intangible assets is tested for
impairment on an annual basis or when factors indicating impairment are present.
We completed our transitional goodwill impairment test on April 1, 2002 and
determined that no impairment existed at that time. We have elected to complete
the annual impairment test of goodwill on January 1 of each year. We engaged an
independent outside professional services firm to assist us in our impairment
testing of goodwill. Based on this assistance, we completed our annual goodwill
impairment test on January 1, 2003 and determined that there was no impairment
of goodwill at that time. Additionally, no circumstances occurred during the
fourth quarter of the year ended March 31, 2003 which would have created an
impairment loss at March 31, 2003.

Impairment of Long-Lived Assets

We evaluate the recoverability of its long-lived assets in accordance with
SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS
144 requires recognition of impairment of long-lived assets in the event that
events or circumstances indicate an impairment may have occurred and when the
net book value of such assets exceeds the future undiscounted cash flows
attributed to such assets. We assess the impairment of long-lived assets
whenever events or changes in circumstances indicate that the carrying value may
not be recoverable. No impairment of long-lived assets has occurred through the
year ended March 31, 2003.

New Accounting Pronouncements

In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest
Entities, which requires the assets, liabilities and results of operations of
variable interest entities (VIE) be consolidated into the financial statements
of the company that has controlling financial interest. FIN 46 is not
anticipated to have a material effect on our consolidated financial statements.

Accounting for Income Taxes

Deferred tax liabilities and deferred tax assets reflect the net tax
effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. The valuation allowance has been established due to the uncertainty of
future taxable income, which is necessary to realize the benefits of the
deferred tax assets. The Company had net operating loss (NOL) carryforwards of
approximately $84,300 at March 31, 2003, which begin to expire in 2011. These
NOL's are subject to annual utilization limitations due to prior ownership
changes.

Realization of the NOL carryforwards and other deferred tax temporary
differences are contingent on future taxable earnings. The deferred tax asset
was reviewed for expected utilization using a "more likely than not" approach as
required by SFAS No. 109, Accounting for Income Taxes, by assessing the
available positive and negative evidence surrounding its recoverability.
Accordingly, in fiscal 2003 we increased the valuation allowance to fully offset
the deferred tax asset. The increase in the valuation allowance has been
recognized as a reduction in paid in capital to the extent that a tax benefit
from employee stock option exercises was previously recognized as additional
paid in capital.

We will continue to assess and evaluate strategies that will enable the
deferred tax asset, or portion there of, to be utilized, and will reduce the
valuation allowance appropriately at such time when it is determined that the
"more likely than not" approach is satisfied.

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. In general, these estimates and
assumptions are based on historical experience of our management; but may
include consideration of industry trends or information from other outside
sources. Actual results could differ from those estimates.

RESULTS OF OPERATIONS -- FISCAL YEAR ENDED MARCH 31, 2003 COMPARED TO FISCAL
YEAR ENDED MARCH 31, 2002

REVENUES

Total revenues decreased by $22.9 million, or 26%, to $65.4 million for the
year ended March 31, 2003 from $88.3 million for the year ended March 31, 2002.
The decrease in revenues was due to a $26.5 million decrease in our product
license revenues as a result of the worldwide economic slowdown, which has
resulted in a reduction in overall customer spending in information technology
initiatives, partially offset by a $3.7 million increase in revenues for
services due to a larger base of installed products.

Product Licenses. Revenues for product licenses decreased by $26.5
million, or 40%, to $40.4 million for the year ended March 31, 2003 from $66.9
million for the year ended March 31, 2002. The decrease in revenues was
attributable to a decrease of approximately $20.5 million in Universal Content
Management and $6.5 million in Content Components software revenues in the
United States partially offset by a $0.5 million increase in software revenues
internationally. The decrease in our Universal Content Management and Content
Components software licenses was due to less than expected demand and longer
than expected sales cycles for those products, both resulting from reduced
information technology spending. The market for content management software and
our products at any particular time is highly dependant on information
technology spending and we cannot be uncertain whether, and if so, when,
spending on information technology will rebound.

Services. Revenues for services, consisting of consulting services,
training and post-contract customer support, increased by $3.7 million, or 17%,
to $25.1 million for the year ended March 31, 2003 from $21.4 million for the
year ended March 31, 2002, as follows (in thousands):

YEAR ENDED YEAR ENDED
MARCH 31, 2003 MARCH 31, 2002
--------------- ---------------

Consulting services and training...................... $ 7,772 31% $ 9,644 45%
Post-contract support................................. 17,298 69 11,788 55
------- --- ------- ---
Total services revenues............................... $25,070 100% $21,432 100%
======= === ======= ===

The increase in revenues for services was attributable to an increase in
post-contract customer support of approximately $5.5 million due to a larger
installed base of Universal Content Management and Content Component products.
As we license our products, whether perpetual for our Universal Content
Management software or term for our Content Components software, our installed
base of products increases. Since the rate of annual renewal of post contract
customer support services on our Universal Content Management and Content
Component software has remained high, our post contract customer support
revenues grow because we have a larger installed base of products. Also,
Universal Content Management revenues related to consulting services work can
increase as a result of a larger installed base of products. Because we expect
the trend toward companies increasingly using the Web for communicating and
publishing business information and the trend toward electronic devices being
used increasingly to view electronic information to continue, we expect our
installed base of products to continue to grow and our services revenues
attributable to post-contract customer support to continue to increase.

The increase in revenues for services was partially offset by a decrease in
Universal Content Management consulting services of approximately $1.9 million
due to a decrease in product license revenue, which led to a decreased need for
implementation services. Our consulting services revenue is derived almost
exclusively from our Universal Content Management software, as our Content
Component software is licensed to other companies that embed our technology in
their products and require very limited to no consulting services work. Because
our revenues for Universal Content Management consulting services are highly
dependent on our Universal Content Management product licensing revenues, they
are difficult to predict.

COST OF REVENUES AND GROSS PROFIT

Total cost of revenues increased by $1.1 million, or 6%, to $20.5 million
for the year ended March 31, 2003 from $19.4 million for the year ended March
31, 2002. Total cost of revenues as a percentage of total revenues was 31% for
the year ended March 31, 2003 compared to 22% for the year ended March 31, 2002.
Gross profit decreased by $24.1 million, or 35%, to $44.9 million for the year
ended March 31, 2003 from $69.0 million for the year ended March 31, 2002. Total
gross profit as a percentage of total revenues was 69% for the year ended March
31, 2003 compared to 78% for the year ended March 31, 2002. The decrease in
gross profit dollars and percentage was attributable to the decrease in product
license revenues described above. The increase in cost of revenues was due to
increased amortization of prepaid royalties and capitalized software.

Product Licenses. Cost of revenues for product licenses increased by $1.5
million or 29%, to $6.5 million for the year ended March 31, 2003 from $5.0
million for the year ended March 31, 2002. Gross profit as a percentage of
revenues for product licenses was 84% for the years ended March 31, 2003 and 93%
for the year ended March 31, 2002. The increase in cost of revenues was
attributable to the increased amortization of prepaid royalties of approximately
$1.1 million and the increased amortization of capitalized software developed
for us by a third party or purchased from a third party of approximately $0.4
million. As new versions of our Universal Content Management software continue
to be released, we have elected to license or purchase more third party software
to be included in our Universal Content Management products in order for us to
provide certain functionality that we believe is necessary to be competitive. We
expect to continue to license or purchase third party software to be included in
our Universal Content Management products, which may cause our costs of revenues
to increase. The fixed costs associated with the amortization of these prepaid
royalties and capitalized software was approximately $3.1 million for the year
ended March 31, 2003 versus approximately $2.0 million for the year ended March
31, 2002.

Amortization of Capitalized Software from Acquisitions. Cost of revenues
related to amortization of capitalized software from acquisitions increased $0.9
million for the year ended March 31, 2003 to $1.9 million from $1.0 million for
the year ended March 31, 2002. The increase in cost of revenues for amortization
of capitalized software from acquisitions was attributable to the amortization
over a three year period of $2.7 million of capitalized software obtained in the
acquisition of the assets of Kinecta Corporation in April 2002. We acquired
Kinecta for its proprietary content distribution technology and have
incorporated the technology into our Universal Content Management products in
order to maintain competitive functionality. We expect to continue to evaluate
selective potential acquisitions. To the extent we consummate additional
acquisitions, and depending on the structure of such acquisitions, the assets
acquired and the consideration paid, our costs of revenues related to
amortization of capitalized software from acquisitions may increase.

Services. Cost of revenues, consisting of personnel for consulting
services, training and post-contract customer support, decreased by $1.3
million, or 9%, to $12.1 million for the year ended March 31, 2003 from $13.4
million for the year ended March 31, 2002, as follows (in thousands):

YEAR ENDED YEAR ENDED
MARCH 31, 2003 MARCH 31, 2002
--------------- ---------------

Consulting services and training...................... $ 8,381 69% $10,044 75%
Post-contract support................................. 3,765 31 3,348 25
------- --- ------- ---
Total services cost of revenues....................... $12,146 100% $13,392 100%
======= === ======= ===

The increase in the gross profit dollars of approximately $4.9 million was
primarily due to the increase in revenues from post-contract customer support
from a larger installed base of Universal Content Management products, with
little additional support staff needed, and a higher installed base of Content
Component software, which requires very little support staff needed as support
is generally provided by the company that embeds our software. In general, we
have had a fairly consistent rate of annual post-contract support renewals in
both our Universal Content Management and Content Component software and better
utilization of consulting services personnel related to our Universal Content
Management software. During the current economic slowdown, we have seen less
competition for skilled software post-contract customer support personnel than
we experienced during stronger economic periods. If economic conditions improve,
competition for skilled software post-contract customer support personnel may
increase and our services costs of revenues may increase.

OPERATING EXPENSES

Sales and Marketing. Sales and marketing expenses decreased by $8.4
million, or 18%, to $38.3 million for the year ended March 31, 2003 from $46.7
million for the year ended March 31, 2002. Sales and marketing expenses as a
percentage of total revenues were 59% for the year ended March 31, 2003 compared
to 53% for the year ended March 31, 2002. Approximately $6.4 million of the
decrease in sales and marketing expense was due to decreased staffing and
related costs attributable to the restructurings of our company during the year
ended March 31, 2003, reduced commission expense of approximately $1.5 million
as a result of decreased sales and decreased travel expense of approximately
$0.5 million. Sales and marketing expenses increased as a percentage of revenues
due primarily to the decrease in product license revenues as described above. We
reduced sales and marketing expenses in connection with management's plan to
reduce costs and improve operating efficiencies to better align our operations
with our revenue base. During the current economic slowdown, we have seen less
competition for general software sales and marketing personnel than we
experienced during stronger economic periods. However, competition has
intensified for sales personnel who have been successful in the current market
conditions. If economic conditions improve, competition for general software
sales and marketing personnel may increase and our sales and marketing expenses
may increase.

General and Administrative. General and administrative expenses decreased
by $0.6 million, or 5%, to $11.3 million for the year ended March 31, 2003 from
$11.9 million for the year ended March 31, 2002. General and administrative
expenses as a percentage of total revenues were 17% for the year ended March 31,
2003 and 13% for the year ended March 31, 2002. General and administrative
expense dollars decreased due to decreased personnel expenses associated with
fewer personnel as a result of the restructurings of approximately $1.6 million,
partially offset by an increase in the bad debt expense of approximately $1.0
million. The increase in bad debt was caused by certain of our customers
becoming unable to pay their debts due to the downturn in their business, or
discontinuation of their business caused by the downturn in the economy and the
reduction in spending for high technology products. In response to recent
business and market developments, Congress, the Securities and Exchange
Commission and the national stock exchanges have enacted or proposed various
corporate governance regulations for publicly traded companies. We expect to be
subject to increasing corporate governance regulations and may be required to
increase general and administrative spending to comply with such regulations.

Research and Development. Research and development expenses decreased by
$1.8 million, or 10%, to $15.8 million for the year ended March 31, 2003 from
$17.6 million for the year ended March 31, 2002. Research and development
expenses as a percentage of total revenues were 24% for the year ended March 31,
2003 and 20% for the year ended March 31, 2002. The decrease in research and
development expense dollars was due to decreased staffing and related costs as a
result of the restructurings. We reduced research and development expenses in
connection with management's plan to reduce costs and improve operating
efficiencies to better align our operations with our revenue base. The
downsizing is not anticipated to affect any of our new products currently in
development or new version releases of our current products, but may delay or
prevent progress on potential products not yet in development, particularly with
our Content Component products.

Acquisition and Related Costs. Acquisition and related costs were $1.1
million in the year ended March 31, 2003 and $0.2 million in the year ended
March 31, 2002. For the year ended March 31, 2003, $0.7 million of these costs
were related to a potential transaction with a Japanese company that would have
given us new wireless technologies and an avenue to generate revenues for our
Universal Content Management software. After proceeding with the due-diligence,
it was determined that the target company was not situated well enough for us to
accomplish previously established goals. The expenses associated with this
project represent funds that we advanced to the company for a trade show,
product integration testing and test marketing costs of the products. The
remaining $0.4 million of acquisition costs represent final development
milestone and bonus payments related to the acquisition of Kinecta Corporation
in April 2002 and the acquisition of selected assets of Active IQ Corporation.
Because we believe market trends may result in consolidation of the content
management software market, from time to time we may seek to acquire businesses,
products or technologies that are complementary to our business. Depending on
the size, nature and structure of any future business acquisitions, our
acquisition and related costs expense may increase substantially.

Amortization of Acquired Intangible Assets and Other. Amortization of
intangible assets acquired related to our acquisition of Content Components
Division (CCD) in July 2000, our acquisition of RESoft in July 2001, and our
acquisition of Kinecta in April 2002. Amortization of goodwill and acquired
workforce ceased as of April 1, 2002 in connection with the adoption of SFAS
142. As a result, amortization expense decreased $6.3 million for the year ended
March 31, 2003 as compared to fiscal year 2002. We believe the technology that
was acquired in these acquisitions is necessary functionality to be competitive.
From time to time we may acquire additional intangible assets based on market
conditions and technological developments. Depending on the size, nature and
structure of any such acquisitions of additional intangible assets, our
amortization of acquired intangible assets and other expense may increase
substantially. Absent any acquisitions of additional intangible assets, we
expect our amortization of acquired intangible assets and other expense to
decrease substantially over the next twelve months due to the completion of
amortization of the intangible assets related to our acquisition of CCD.

Restructuring Charges. For the fiscal year ended March 31, 2003, in
connection with management's plan to reduce costs and improve operating
efficiencies, we recorded restructuring charges of approximately $4.4 million,
compared to no restructuring charges in the fiscal year ended March 31, 2002.
These restructuring expenses were taken in the June 30, 2002 quarter of $2.5
million, the September 30, 2002 quarter of $0.8 million, the December 31, 2002
quarter of $0.7 million and the March 31, 2003 quarter of $0.4 million. We
assessed many factors in making our decisions on a quarterly basis, with a
significant issue being the continued sluggishness or decline in the market for
information technology in the United States and in Europe. These restructuring
charges were comprised primarily of severance pay and benefits related to the
involuntary termination of employees of approximately $3.2 million and the
closing of facilities and other exit costs of approximately $1.2 The effect on
expenses and cash flows over the next year associated with the termination of
these employees is expected to be a decrease in expenses and increase in cash
flow of approximately $13.4 million. The effect on expenses over the next year
associated with the closing of the facilities and other exit costs is expected
to be a decrease of approximately $0.2 million, but is expected to have an
immaterial effect on cash flows. The combined expense decrease of approximately
$13.6 million is anticipated to be in the areas of cost of revenues for services
of $1.6 million, selling and marketing of $5.0 million, research and development
of $4.1 million and general and administrative of $2.9 million. These cost
reduction measures were taken to better align our business with our current
revenue base and what we believe will be continued slow spending by companies in
the high tech sector over the next year. However, we may be required to
re-invest in certain areas to expand our customer base, grow our revenues and
invest in product development, which may eliminate or exceed these cost savings.

OTHER INCOME (EXPENSE)

Interest income. Interest income was $2.0 million for the year ended March
31, 2003 compared to $3.8 million for the year ended March 31, 2002. Interest
income for both years was primarily related to short-term investments purchased
with the proceeds of our public stock offerings completed in June 1999 and

March 2000. The decrease in net interest income was due to decreases in the
interest rates earned by invested funds resulting from decreases in market
interest rates, which have declined over 50%.

Investment impairment. During the year ended March 31, 2003, our
investment impairment was approximately $1.7 million. In the March 31, 2003
quarter, after purchasing certain assets of Active IQ and reviewing its public
disclosures, which stated it was selling the remaining operating assets of the
company to another party. We determined that a permanent decline in value had
occurred and recorded a write-down of approximately $1.1 million. During the
first nine months in the year ended March 31, 2003, we determined that a
permanent decline in the value of certain of its investments in other companies
had occurred. We made this determination after reviewing financial statements of
these companies or discussing their future business plans and prospects with
their management. As a result, we recorded a write-down on the investments in
these companies of approximately $0.6 million for the year ended March 31, 2003.
During the year ended March 31, 2002, we determined that a permanent decline in
the value of certain of its investments in other companies had occurred. We made
this determination after reviewing financial statements of these companies or
discussing their future business plans and prospects with their management. As a
result, we recorded a write-down on the investments in these companies of
approximately $5.7 million for the year ended March 31, 2002.

RESULTS OF OPERATIONS -- FISCAL YEAR ENDED MARCH 31, 2002 COMPARED TO FISCAL
YEAR ENDED MARCH 31, 2001

REVENUES

Total revenues increased by $21.6 million, or 32%, to $88.3 million for the
year ended March 31, 2002 from $66.7 million for the year ended March 31, 2001.
The increase in revenues was attributable to the growth in our Universal Content
Management customer base and increased sales to existing customers of
approximately $8.8 million, an increase of approximately $7.8 million in sales
of our products and services in Europe and an increase of approximately $5.0
million in sales of our Content Component products. As we license our products,
whether perpetual for our Universal Content Management software or term for our
Content Components software, our installed base of products increases. Since the
rate of annual renewal of post contract customer support services on our
Universal Content Management and Content Component software has remained high,
our post contract customer support revenues grow because we have a larger
installed base of products. Also, Universal Content Management revenues related
to consulting services work can increase as a result of a larger installed base
of products since more of our customers continue to elect to have our consulting
services employees perform the work versus having the customers' internal staff
perform the work. We expect this trend to continue.

Product Licenses. Revenues for product licenses increased by $13.0
million, or 24%, to $66.9 million for the year ended March 31, 2002 from $53.9
million for the year ended March 31, 2001. The increase in revenues was
attributable to an increase of approximately $6.1 million in sales of our
products and services in Europe, the growth in our Universal Content Management
customer base and increased sales to existing customers of approximately $4.2
million and an increase of approximately $2.7 million in sales of our Content
Component products.

Services. Revenues for services, consisting of consulting services,
training and post-contract customer support, increased by $8.6 million, or 67%,
to $21.4 million for the year ended March 31, 2002 from $12.9 million for the
year ended March 31, 2001, as follows (in thousands).

YEAR ENDED YEAR ENDED
MARCH 31, 2002 MARCH 31, 2001
--------------- ---------------

Consulting services and training...................... $ 9,644 45% $ 6,398 50%
Post-contract support................................. 11,788 55 6,470 50
------- --- ------- ---
Total services revenues............................... $21,432 100% $12,868 100%
======= === ======= ===

The increase in revenues for services was attributable to an increase in
post-contract customer support of approximately $5.3 million due to a larger
installed base of products and an increase in consulting services of

approximately $3.4 million due to an increase in product license revenues, which
lead to an increased need for services. Our consulting services revenue is
derived almost exclusively from our Universal Content Management software, as
our Content Component software is licensed to other companies that embed our
technology in their products and require very limited or no consulting services
work.

COST OF REVENUES AND GROSS PROFIT

Total cost of revenues increased by $7.6 million, or 64%, to $19.4 million
for the year ended March 31, 2002 from $11.8 million for the year ended March
31, 2001. Total cost of revenues as a percentage of total revenues was 22% for
the year ended March 31, 2002 compared to 18% for the year ended March 31, 2001.
Gross profit increased by $14.1 million, or 26%, to $69.0 million for the year
ended March 31, 2002 from $54.9 million for the year ended March 31, 2001. Total
gross profit as a percentage of total revenues was 78% for the year ended March
31, 2002 compared to 82% for the year ended March 31, 2001. The increase in
gross profit dollars was attributable to the increase in product license
revenues while the decrease in gross profit percentage was due to lower gross
profits on services.

Product Licenses. Cost of revenues for product licenses increased by $1.1
million or 28%, to $5.0 million for the year ended March 31, 2002 from $3.9
million for the year ended March 31, 2001. Gross profit as a percentage of
revenues for product licenses was 93% for the years ended March 31, 2002 and
2001.

Amortization of Capitalized Software from Acquisitions. Cost of revenues
related to amortization of capitalized software from acquisitions increased $0.3
million for the year ended March 31, 2002 to $1.0 million from $0.7 million for
the year ended March 31, 2001. The increase in cost of revenues for amortization
of capitalized software from acquisitions was attributable to the amortization
of capitalized software obtained in the acquisition of the assets of RESoft in
July 2001.

Services. Cost of revenues, consisting of personnel for consulting
services, training and post-contract customer support, increased by $6.2
million, or 86%, to $13.4 million for the year ended March 31, 2002 from $7.2
million for the year ended March 31, 2001, as follows (in thousands):

YEAR ENDED YEAR ENDED
MARCH 31, 2002 MARCH 31, 2001
--------------- --------------

Consulting services and training............................ $10,044 75% $5,249 73%
Post-contract support....................................... 3,348 25 1,941 27
------- --- ------ ---
Total services cost of revenues............................. $13,392 100% $7,190 100%
======= === ====== ===

The increase in the gross profit dollars of approximately $2.5 million was
due to the increase in gross profit dollars of approximately $3.9 million from
post-contract customer support offset by a decrease in gross profit dollars of
approximately $1.4 million from consulting services. The decrease in the gross
profit from consulting services was due to increased employee headcount and
other staffing costs associated with increased training for our partners for
which we receive minimal revenue, and an increase in the amount of services work
performed by our partners, which typically would have been performed by us and
which led to under-utilization of certain of our employees in the quarters ended
September 30, 2001 and December 31, 2001.

OPERATING EXPENSES

Sales and Marketing. Sales and marketing expenses increased by $17.2
million, or 58%, to $46.7 million for the year ended March 31, 2002 from $29.5
million for the year ended March 31, 2001. Sales and marketing expenses as a
percentage of total revenues were 53% for the year ended March 31, 2002 compared
to 44% for the year ended March 31, 2001. Sales and marketing expenses increased
as a result of increased headcount and increased spending on marketing
communications and programs which management intended to better align business
operations with expected revenues. Sales and marketing expenses increased as a
percentage of total revenues due to the decrease in fourth quarter fiscal year
2002 revenues.

General and Administrative. General and administrative expenses increased
by $2.9 million, or 32%, to $11.9 million for the year ended March 31, 2002 from
$9.0 million for the year ended March 31, 2001. General and administrative
expenses as a percentage of total revenues were 13% for the years ended March
31, 2002 and 2001. General and administrative expense dollars increased due to
increased personnel expenses of approximately $2.4 million, increased
professional services of approximately $0.3 million and an increase of
approximately $0.2 million in the bad debt expense. We increased our general and
administrative expenses to better align our operations with our revenue base.
The increase in personnel costs was caused primarily by the addition of more
personnel from the acquisition of CCD in July 2000, expansion of European
operations and the addition of a president and chief operating officer and other
senior staff at our headquarters.

Research and Development. Research and development expenses increased by
$7.8 million, or 80% to $17.6 million for the year ended March 31, 2002 from
$9.8 million for the year ended March 31, 2001. Research and development
expenses as a percentage of total revenues were 20% for the year ended March 31,
2002 and 15% for the year ended March 31, 2001. The increase in research and
development expenses was due to increased staffing and related costs of $6.3
million and purchased services of $0.7 million. We increased our research and
development expenses to better align our operations with our revenue base. The
increase in personnel costs was caused by the addition of more personnel from
the acquisition of CCD in July 2000, more personnel to support the development
of our Universal Content Management Software and the overall general increase in
wages that was required to retain our personnel. Most of the personnel acquired
in the acquisition of CCD were associated with research and development. The
services that were purchased were certain translation and development services
for our Universal Content Management software.

Acquisition and Related Costs. Acquisition costs of approximately $0.2
million in the year ended March 31, 2002 consisted of uncapitalized costs
related to our acquisition of RESoft in July 2001 and the costs associated with
developing the Japanese market through a potential acquisition. The acquisition
costs of approximately $0.8 million in the fiscal year ended March 31, 2001
consisted of uncapitalized costs related to our acquisition of CCD in July 2000,
accounted for as a purchase.

Amortization of Acquired Intangible Assets and Other. Amortization of
intangible assets acquired related to our acquisition of CCD in July 2000, and
our acquisition of RESoft in July 2001, accounted for as purchases. Amortization
of goodwill and acquired workforce ceased as of April 1, 2002 in connection with
the adoption of SFAS 142.

OTHER INCOME (EXPENSE)

Interest income was $3.8 million for the year ended March 31, 2002 compared
to $7.0 million for the year ended March 31, 2001. Interest income for both
years was related to short-term investments purchased with the proceeds of our
public stock offerings completed in June 1999 and March 2000. The decrease in
net interest income was due to decreases in the interest rates earned by
invested funds resulting from decreases in market interest rates, which have
declined over 50%.

Investment impairment. During the year ended March 31, 2002, the Company
determined that a permanent decline in the value of certain of its investments
in other companies had occurred. The Company made this determination after
reviewing financial statements of these companies or discussing their future
business plans and prospects with their management. As a result, the Company
recorded a write-down on the investments in these companies of approximately
$5.7 million for the year ended March 31, 2002.

QUARTERLY RESULTS

The following tables present unaudited consolidated statements of
operations data both in absolute dollars and as a percentage of total revenues
for each of our last eight quarters. This data has been derived from unaudited
consolidated financial statements that have been prepared on the same basis as
the annual audited consolidated financial statements and, in our opinion,
include all normal recurring adjustments necessary for a fair presentation of
such information. These unaudited quarterly results should be read in
conjunction with the Consolidated Financial Statements and related Notes
appearing elsewhere in this Annual Report on Form 10-K. The consolidated results
of operations for any quarter are not necessarily indicative of the results for
any future period.

THREE MONTHS ENDED
---------------------------------------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
2001 2001 2001 2002 2002 2002 2002 2003
-------- --------- -------- -------- -------- --------- -------- --------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues:
Product licenses................ $19,072 $17,968 $21,563 $ 8,305 $ 11,118 $ 9,600 $ 9,650 $ 9,996
Services........................ 5,527 5,199 5,005 5,701 5,937 5,958 6,358 6,817
------- ------- ------- -------- -------- ------- ------- -------
Total revenues.................... 24,599 23,167 26,568 14,006 17,055 15,558 16,008 16,813
------- ------- ------- -------- -------- ------- ------- -------
Cost of revenues:
Product licenses................ 1,071 847 1,569 1,518 1,799 1,545 1,676 1,460
Amortization of capitalized
software from acquisitions.... 233 233 256 244 474 474 474 470
Services........................ 2,984 3,587 3,463 3,358 3,076 2,927 2,877 3,266
------- ------- ------- -------- -------- ------- ------- -------
Total cost of revenues............ 4,288 4,667 5,288 5,120 5,349 4,946 5,027 5,196
------- ------- ------- -------- -------- ------- ------- -------
Gross profit...................... 20,311 18,500 21,280 8,886 11,706 10,612 10,981 11,617
------- ------- ------- -------- -------- ------- ------- -------
Operating expenses:
Sales and marketing............. 11,277 11,578 12,827 10,990 10,307 9,663 9,606 8,767
General and administrative...... 2,432 2,475 2,603 4,374 2,722 2,360 2,836 3,383
Research and development........ 4,151 4,595 4,211 4,644 4,724 4,790 3,049 3,203
Acquisitions and related
costs......................... -- -- -- 237 -- 739 263 125
Amortization of acquired
intangible assets and other... 3,148 3,251 3,139 3,376 1,661 1,662 1,661 1,651
Restructuring charges........... -- -- -- -- 2,504 839 674 351
------- ------- ------- -------- -------- ------- ------- -------
Total operating expenses.......... 21,008 21,899 22,780 23,621 21,918 20,053 18,089 17,480
------- ------- ------- -------- -------- ------- ------- -------
Income (loss) from operations..... (697) (3,399) (1,500) (14,735) (10,212) (9,441) (7,108) (5,863)
Other income (expense):
Interest income net............. 1,258 981 699 817 601 567 453 336
Investment impairment........... -- (2,223) -- (3,499) -- -- (650) (1,083)
------- ------- ------- -------- -------- ------- ------- -------
Net income (loss)................. $ 561 $(4,641) $ (801) $(17,417) $ (9,611) $(8,874) $(7,305) $(6,610)
======= ======= ======= ======== ======== ======= ======= =======
Net income (loss) per common share
Basic........................... $ 0.03 $ (0.21) $ (0.04) $ (0.78) $ (0.43) $ (0.40) $ (0.33) $ (0.30)
Diluted......................... 0.02 (0.21) (0.04) (0.78) (0.43) (0.40) (0.33) (0.30)

AS A PERCENTAGE OF TOTAL REVENUES:
Revenues:
Product licenses................ 77.5% 77.6% 81.2% 59.3% 65.2% 61.7% 60.3% 59.5%
Services........................ 22.5 22.4 18.8 40.7 34.8 38.3 39.7 40.5
------- ------- ------- -------- -------- ------- ------- -------
Total revenues.................... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
------- ------- ------- -------- -------- ------- ------- -------
Cost of revenues:
Product licenses................ 4.4 3.7 5.9 10.8 10.5 9.9 10.5 8.7
Amortization of capitalized
software from acquisitions.... 0.9 1.0 1.0 1.7 2.8 3.0 3.0 2.8
Services........................ 12.1 15.5 13.0 24.0 18.0 18.8 18.0 19.4
------- ------- ------- -------- -------- ------- ------- -------
Total cost of revenues............ 17.4 20.2 19.9 36.5 31.3 31.7 31.5 30.9
------- ------- ------- -------- -------- ------- ------- -------
Gross profit...................... 82.6 79.8 80.1 63.5 68.7 68.3 68.5 69.1
------- ------- ------- -------- -------- ------- ------- -------
Operating expenses:
Sales and marketing............. 45.8 50.0 48.3 78.5 60.4 62.1 60.0 52.1
General and administrative...... 9.9 10.7 9.8 31.2 16.0 15.2 17.7 20.1
Research and development........ 16.9 19.8 15.8 33.2 27.7 30.8 19.0 19.1
Acquisition and related costs... -- -- -- 1.7 -- 4.7 1.6 0.7
Amortization of acquired
intangible assets and other... 12.8 14.0 11.8 24.1 9.7 10.7 10.4 9.8
Restructuring charges........... -- -- -- -- 14.7 5.4 4.2 2.1
------- ------- ------- -------- -------- ------- ------- -------
Total operating expenses.......... 85.4 94.5 85.7 168.7 128.5 128.9 112.9 103.9
------- ------- ------- -------- -------- ------- ------- -------
Income (loss) from operations..... (2.8) (14.7) (5.6) (105.2) (59.8) (60.6) (44.4) (34.8)
Other income (expense):
Interest income, net............ 5.1 4.2 2.6 5.8 3.5 3.6 2.8 2.0
Investment impairment........... -- (9.6) -- (25.0) -- -- (4.1) (6.4)
------- ------- ------- -------- -------- ------- ------- -------
Net income (loss)................. 2.3% (20.1)% (3.0)% (124.4)% (56.3)% (57.0)% (45.7)% (39.2)%
======= ======= ======= ======== ======== ======= ======= =======

As a result of our limited operating history and the significant changes
that are occurring in the Web content management software sector in which we
compete, it is difficult for us to forecast our revenues or earnings accurately.
It is possible that in some future periods our results of operations may not
meet or exceed the expectations of current and future public market analysts and
investors. For instance, if revenues or earnings per share do not meet
projections, we expect our business, operating results and financial condition
to be materially adversely affected and the price of our common stock to
decline. We expect our revenues and operating results may vary significantly
from quarter to quarter. Factors that have caused our results to fluctuate in
the past, and will likely cause fluctuations in the future, include:

- demand for our products and services;

- the timing of new product introductions and sales of our products and
services;

- unexpected delays in introducing new products and services;

- increased expenses, whether related to sales and marketing, research and
development or administration;

- changes in the rapidly evolving market for Web content management
solutions;

- the mix of revenues from product licenses and services, as well as the
mix of products licensed;

- the mix of services provided and whether services are provided by our
staff or third-party contractors;

- the mix of domestic and international sales;
15

- costs related to possible acquisitions of technology or businesses;

- general economic conditions; and

- public announcements by our competitors.

In addition, our products are typically shipped when the orders are
received, so our license backlog at the beginning of any quarter in the past has
represented only a small portion of expected license revenues for that quarter.
Further, we recognize a substantial percentage of product license revenues in
the last month of the quarter, frequently in the last week or even the last days
of the quarter. As a result, our sales pipeline at the beginning of a quarter
may not give us reasonable assurance about the sales that will be closed in that
quarter, and the delay or cancellation of any large orders could result in a
significant shortfall from anticipated revenues. Since our expenses are
relatively fixed in the near term, any shortfall from anticipated revenues could
result in significant variations in operating results from quarter to quarter.

As a result of these and other factors, we believe that period-to-period
comparisons of our results of operations may not be meaningful and should not be
relied upon as indicators of our future performance.

NET OPERATING LOSS CARRYFORWARDS

As of March 31, 2003, we had net operating loss carryforwards of
approximately $84.3 million. The net operating loss carryforwards will expire at
various dates beginning in 2011, if not utilized. The Tax Reform Act of 1986
imposes substantial restrictions on the utilization of net operating losses and
tax credits in the event of an "ownership change" of a corporation. Our ability
to utilize net operating loss carryforwards on an annual basis will be limited
as a result of "ownership changes" in connection with the sale of equity
securities. We have provided a valuation allowance against the entire amount of
the deferred tax asset as of March 31, 2003 because of uncertainty regarding its
full realization. Our accounting for deferred taxes involves the evaluation of a
number of factors concerning the realizability of our deferred tax assets. In
concluding that a valuation allowance was required, management considered such
factors as our history of operating losses, potential future losses and the
nature of our deferred tax assets. See Note 7 to the Consolidated Financial
Statements included in Item 16 (a)1.

LIQUIDITY AND CAPITAL RESOURCES

We have funded our operations and satisfied our capital expenditure
requirements primarily through revolving working capital and term loans from
banking institutions, private placements and public offerings of securities and
proceeds from the sales of assets related to prior lines of business. Net cash
used in operating activities was $8.0 million for the year ended March 31, 2003,
compared to net cash used in operating activities of $2.9 million for the year
ended March 31, 2002. The increase in cash used in operations is due primarily
to the net loss generated by operations.

To date, we have invested our capital expenditures primarily in property
and equipment, consisting largely of computer hardware and software. Capital
expenditures for the year ended March 31, 2003 and 2002 were $1.0 and $3.4
million, respectively. We have also entered into capital and operating leases
for facilities and equipment. We expect that our capital expenditures will
increase as our employee base grows. At March 31, 2003, we did not have any
material commitments for capital expenditures.

As of March 31, 2003, we had $81.2 million in cash and marketable
securities and $69.8 million in working capital. Net cash used in financing
activities was $2.7 million for the year ended March 31, 2003 while net cash
provided by financing activities was $1.1 million for the year ended March 31,
2002. In March 2000, we completed a public offering of our common stock that
raised approximately $100.1 million in proceeds for us, net of underwriting
discounts and offering costs of approximately $5.7 million. In April 2000, the
underwriters exercised their over-allotment option, raising additional net
proceeds of approximately $22.7 million.

We currently believe that our cash and cash equivalents on hand will be
sufficient to meet our working capital requirements for the foreseeable future,
particularly through March 31, 2004. On a longer term basis,

we may require additional funds to support our working capital requirements or
for other purposes and may seek to raise such additional funds through public or
private equity financings or from other sources. We cannot be certain that
additional financing will be available on terms favorable to us, or on any
terms, or that any additional financing will not be dilutive.

We continue to evaluate potential strategic acquisitions that could utilize
equity and/or cash resources. Such opportunities could develop quickly due to
market and competitive factors.

We lease all of our facilities under operating leases that have various
expiration dates. Our contractual obligations as of March 31, 2003 consisted of
a total of $13.4 million, of which, $3.9 million is payable in the next year,
$2.7 million in one to two years, $2.0 million in three to four years, and $4.8
million after four years. The amounts reflected for operating leases represent
primarily noncancelable lease payments on our office facility locations.

RELATED PARTY TRANSACTIONS

In December 2001 we entered into a note receivable of $3.5 million with a
distributor. Through March 2002, the distributor had paid the minimum payments
required under the note receivable with its own cash, and at the end of March
2002, it paid off the remaining note receivable with short-term bridge
financing. The distributor completely repaid this short-term bridge financing in
April 2002 through a traditional banking relationship. The short-term bridge
financing was provided at normal market rates by Beartooth Capital, a venture
financing organization controlled and funded by Robert F. Olson, a shareholder
and our Chairman, President and Chief Executive Officer. There was no
relationship prior to the bridge financing, and there is no existing
relationship between Beartooth Capital and the distributor. Furthermore, we
provided no compensation or guarantees to Beartooth Capital or Robert F. Olson
for the short-term bridge financing, nor were we otherwise involved in this
transaction.

During the year ended March 31, 2002, we held investments in five
non-public companies in which we recognized license revenue of approximately
$2.0 million from companies in which we had an equity investment, including
approximately $1.4 million from Active IQ in December 2001. At March 31, 2003,
we had no accounts receivable balance associated from these transactions. No
license revenue was generated in our fiscal year ended March 31, 2003 from any
company in which we held an investment. License revenue recognized for the year
ended March 31, 2001 from companies in which we had an equity investment was
approximately $2,400. We also acquired intellectual property from Active IQ in
April 2001 for approximately $706, which was capitalized and is being amortized
over a three-year period.

At March 31, 2003 we held remaining investments in two non-public start-up
technology companies, owning approximately 8% and 11% of these companies, and in
a publicly traded technology company listed on Nasdaq, Active IQ, of which we
owned 5.3%, excluding warrants. The value of these investments at March 31, 2003
is approximately $1.1 million. We wrote down to zero our investment in Active IQ
during the March 2003 quarter. Certain officers and a director also held
investment interests in Active IQ through February 2002 approximating 2%,
excluding warrants, at which time those investments were sold.

In December 2001 and March 2003, we entered into software license
agreements with H.B. Fuller Company for approximately $0.3 million and $0.4
million, respectively. H.B. Fuller's Chief Financial Officer is a member of our
Board of Directors. The terms and conditions, including fees, with respect to
the H.B. Fuller transactions were substantially similar to those with
unaffiliated third parties negotiated at arms length.

RECENT ACCOUNTING PRONOUNCEMENTS

In November 2002, the FASB issued FASB Interpretation Number (FIN) 45,
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN 45 addresses the disclosure
requirements of a guarantor in its interim and annual financial statements about
its obligations under certain guarantees that it has issued. FIN 45 also
requires a guarantor to recognize, at the inception of guarantee, a liability
for the fair value of the obligation undertaken in issuing the guarantee. The
disclosure requirements of FIN 45 were effective for our quarter ended December
31, 2002. The liability

recognition requirements are applicable to all guarantees issued or modified
after December 31, 2002. Other than the additional disclosure requirements
related to warranties and our indemnification obligations, this pronouncement is
not anticipated to have a material effect on our consolidated financial position
or results of operations.

In December 2002, the FASB issued SFAS 148, Accounting for Stock-Based
Compensation -- Transition and Disclosure: an amendment of FASB Statement 123
(SFAS 123). This statement provides alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. Additionally, the statement amends the disclosure
requirements of SFAS 123, Accounting for Stock-Based Compensation, to require
prominent disclosure in both annual and interim financial statements about the
method of accounting for stock based employee compensation and the effect of the
method used on reported results. We utilize the intrinsic value method for
stock-based employee compensation, and they elected not to adopt the
transitional provision to the fair value method under SFAS 148; however, we did
adopt the expanded annual disclosure provisions of SFAS 148 effective March 31,
2003. We will adopt the interim disclosure provisions of SFAS 148 during the
first quarter of fiscal year 2004.

In November 2002, the FASB reached a consensus on EITF Issue No. 00-21,
Accounting for Revenue Arrangements with Multiple Deliverables. This EITF sets
out criteria for whether revenue can be recognized separately from other
deliverables in a multiple deliverable arrangement. The criteria considers
whether the delivered item has stand-alone value to the customer, whether the
fair value of the delivered item can be reliably determined and the rights of
returns for the delivered item. We are required to adopt this EITF beginning
April 1, 2004. The adoption of this EITF is not anticipated to have a material
effect on our consolidated financial statements.

RISK FACTORS

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-K for the fiscal year ended March 31, 2003 contains certain
forward-looking statements within the meaning of the safe harbor provisions of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such forward-looking statements are
based on the beliefs of our management as well as on assumptions made by, and
information currently available to, us at the time such statements were made.
When used in this Form 10-K, the words "anticipate", "believe", "estimate",
"expect", "intend" and similar expressions, as they relate us, are intended to
identify such forward-looking statements. Although we believe these statements
are reasonable, readers of this Form 10-K should be aware that actual results
could differ materially from those projected by such forward-looking statements
as a result of the risk factors listed below. Readers of this Form 10-K should
consider carefully the factors listed below, as well as the other information
and data contained in this Form 10-K. We caution the reader, however, that such
list of factors under the caption "Risk Factors" in our Form 10-K may not be
exhaustive and that those or other factors, many of which are outside of our
control, could have a material adverse effect on us and our results of
operations. All forward-looking statements attributable to us or persons acting
on our behalf are expressly qualified in their entirety by the cautionary
statements set forth hereunder. We undertake no obligation to update publicly
any forward-looking statements for any reason, even if new information becomes
available or other events occur in the future.

FLUCTUATIONS IN OUR OPERATING RESULTS MAY MAKE IT DIFFICULT TO PREDICT OUR
FUTURE PERFORMANCE.

While our products and services are not seasonal, our revenues and
operating results are difficult to predict and may fluctuate significantly from
quarter to quarter. If our quarterly revenues or operating results fall below
the expectations of investors or securities analysts, the price of our common
stock could fall
18

substantially. A large part of our sales typically occurs in the last month of a
quarter, frequently in the last week or even the last days of the quarter. If
these sales were delayed from one quarter to the next for any reason, our
operating results could fluctuate dramatically. In addition, our sales cycles
may vary, making the timing of sales difficult to predict. Furthermore, our
infrastructure costs are generally fixed. As a result, modest fluctuations in
revenues between quarters may cause large fluctuations in operating results.
These factors all tend to make the timing of revenues unpredictable and may lead
to high period-to-period fluctuations in operating results.

Our quarterly revenues and operating results may fluctuate for several
additional reasons, many of which are outside of our control, including the
following:

- demand for our products and services;

- the timing of new product introductions and sales of our products and
services;

- unexpected delays in introducing new products and services;

- increased expenses, whether related to sales and marketing, research and
development or administration;

- changes in the rapidly evolving market for Web content management
solutions;

- the mix of revenues from product licenses and services, as well as the
mix of products licensed;

- the mix of services provided and whether services are provided by our
staff or third-party contractors;

- the mix of domestic and international sales;

- costs related to possible acquisitions of technology or businesses;

- general economic conditions; and

- public announcements by our competitors.

POTENTIAL ACQUISITIONS MAY BE DIFFICULT TO COMPLETE OR TO INTEGRATE AND MAY
DIVERT MANAGEMENT'S ATTENTION.

We may seek to acquire or invest in businesses, products or technologies
that are complementary to our business. If we identify an appropriate
acquisition opportunity, we may be unable to negotiate favorable terms for that
acquisition, successfully finance the acquisition or integrate the new business
or products into our existing business and operations. In addition, the
negotiation of potential acquisitions and the integration of acquired businesses
or products may divert management time and resources from our existing business
and operations. To finance acquisitions, we may use a substantial portion of our
available cash or we may issue additional securities, which would cause dilution
to our shareholders.

WE MAY NOT BE PROFITABLE IN THE FUTURE.

Our revenues may not grow in future periods and we may not achieve
quarterly pro forma profitability. If we do not regain our pro forma
profitability, the market price of our stock may fall. Our ability to regain our
pro forma profitable operations depends upon many factors beyond our direct
control. These factors include, but are not limited to:

- the demand for our products;

- our ability to quickly introduce new products;

- the level of product and price competition;

- our ability to control costs; and

- general economic conditions.

THE INTENSE COMPETITION IN OUR INDUSTRY MAY REDUCE OUR FUTURE SALES AND PROFITS.

The market for our products is highly competitive and is likely to become
more competitive. We may not be able to compete successfully in our chosen
marketplace, which may have a material adverse effect on our business, operating
results and financial condition. Additional competition may cause pricing
pressure, reduced sales and margins, or prevent our products from gaining and
sustaining market acceptance. Many of our current and potential competitors have
greater name recognition, access to larger customer bases, and substantially
more resources than we have. Competitors with greater resources than ours may be
able to respond more quickly than we can to new opportunities, changing
technology, product standards or customer requirements.

WE DEPEND ON THE CONTINUED SERVICE OF OUR KEY PERSONNEL.

We are a small company and depend greatly on the knowledge and experience
of our senior management team and other key personnel. If we lose any of these
key personnel, our business, operating results and financial condition could be
materially adversely affected. Our success will depend in part on our ability to
attract and retain additional personnel with the highly specialized expertise
necessary to generate revenue, engineer, design and support our products and
services. Like other software companies, we face intense competition for
qualified personnel. We may not be able to attract or retain such personnel.

WE HAVE RELIED AND EXPECT TO CONTINUE TO RELY ON SALES OF OUR UNIVERSAL CONTENT
MANAGEMENT SOFTWARE AND CONTENT COMPONENT SOFTWARE PRODUCTS FOR OUR REVENUES.

We currently derive all of our revenues from product licenses and services
associated with our system of content management and viewing software products.
The market for content management and viewing software products is new and
rapidly evolving. We cannot be certain that a viable market for our products
will continue or that it will be sustainable. If we do not increase employee
productivity and revenues related to our existing products or generate revenues
from new products and services, our business, operating results and financial
condition may be materially adversely affected. We will continue to depend on
revenues related to new and enhanced versions of our software products for the
foreseeable future. Our success will largely depend on our ability to increase
sales from existing products and generate sales from product enhancements and
new products. We cannot be certain that we will be successful in upgrading and
marketing our existing products or that we will be successful in developing and
marketing new products and services. The market for our products is highly
competitive and subject to rapid technological change. Technological advances
could make our products less attractive to customers and adversely affect our
business. In addition, complex software product development involves certain
inherent risks, including risks that errors may be found in a product
enhancement or new product after its release, even after extensive testing, and
the risk that discovered errors may not be corrected in a timely manner.

OUR SUCCESS DEPENDS ON OUR ABILITY TO PROTECT OUR PROPRIETARY TECHNOLOGY.

If we are unable to protect our intellectual property, or incur significant
expense in doing so, our business, operating results and financial condition may
be materially adversely affected. Any steps we take to protect our intellectual
property may be inadequate, time consuming and expensive. We currently have no
patents and one pending patent application. Without significant patent or
copyright protection, we may be vulnerable to competitors who develop
functionally equivalent products. We may also be subject to claims that our
current products infringe on the intellectual property rights of others. Any
such claim may have a material adverse effect on our business, operating results
and financial condition.

We anticipate that software product developers will be increasingly subject
to infringement claims due to growth in the number of products and competitors
in our industry, and the overlap in functionality of products in different
industries. Any infringement claim, regardless of its merit, could be
time-consuming, expensive to

defend, or require us to enter into royalty or licensing agreements. Such
royalty or licensing agreements may not be available on commercially favorable
terms, or at all. We are not currently involved in any intellectual property
litigation.

We rely on trade secret protection, confidentiality procedures and
contractual provisions to protect our proprietary information. Despite our
attempts to protect our confidential and proprietary information, others may
gain access to this information. Alternatively, other companies may
independently develop substantially equivalent information.

OUR PRODUCTS MAY NOT BE COMPATIBLE WITH COMMERCIAL WEB BROWSERS AND OPERATING
SYSTEMS.

Our products utilize interfaces that are compatible with commercial Web
browsers. In addition, our Stellent Content Management System is a server-based
system written in Java that functions in both Windows NT and UNIX environments.
We must continually modify our products to conform to commercial Web browsers
and operating systems. If our products were to become incompatible with
commercial Web browsers and operating systems, our business would be harmed. In
addition, uncertainty related to the timing and nature of product introductions
or modifications by vendors of Web browsers and operating systems may have a
material adverse effect on our business, operating results and financial
condition.

WE COULD BE SUBJECT TO PRODUCT LIABILITY CLAIMS IF OUR PRODUCTS FAIL TO PERFORM
TO SPECIFICATIONS.

If software errors or design defects in our products cause damage to
customers' data and our agreements do not protect us from related product
liability claims, our business, operating results and financial condition may be
materially adversely affected. In addition, we could be subject to product
liability claims if our security features fail to prevent unauthorized third
parties from entering our customers' intranet, extranet or Internet Web sites.
Our software products are complex and sophisticated and may contain design
defects or software errors that are difficult to detect and correct. Errors,
bugs or viruses spread by third parties may result in the loss of market
acceptance or the loss of customer data. Our agreements with customers that
attempt to limit our exposure to product liability claims may not be enforceable
in certain jurisdictions where we operate.

FUTURE REGULATIONS COULD BE ADOPTED THAT RESTRICT OUR BUSINESS.

Federal, state or foreign agencies may adopt new legislation or regulations
governing the use and quality of Web content. We cannot predict if or how any
future laws or regulations would impact our business and operations. Even though
these laws and regulations may not apply to our business directly, they could
indirectly harm us to the extent that they impact our customers and potential
customers.

SIGNIFICANT FLUCTUATION IN THE MARKET PRICE OF OUR COMMON STOCK COULD RESULT IN
SECURITIES LITIGATION AGAINST US.

In the past, securities class action litigation has been brought against
publicly held companies following periods of volatility in the price of their
securities. If the we were subject to such litigation due to volatility in our
stock price, we may incur substantial costs. Such litigation could divert the
attention of our senior management away from our business, which could have a
material adverse effect on our business, operating results and financial
condition. The market price of our common stock has fluctuated significantly in
the past and may do so in the future. The market price of our common stock may
be affected by each of the following factors, many of which are outside of our
control:

- variations in quarterly operating results;

- changes in estimates by securities analysts;

- changes in market valuations of companies in our industry;

- announcements of significant events, such as major sales;

- acquisitions of businesses or losses of major customers;

- additions or departures of key personnel; and

- sales of our equity securities.

OUR PERFORMANCE WILL DEPEND ON THE CONTINUING GROWTH AND ACCEPTANCE OF THE WEB.

Our products are designed to be used with intranets, extranets and the
Internet. If the use of these methods of electronic communication does not grow,
our business, operating results and financial condition may be materially
adversely affected. Continued growth in the use of the Web will require ongoing
and widespread interest in its capabilities for communication and commerce. Its
growth will also require maintenance and expansion of the infrastructure
supporting its use and the development of performance improvements, such as high
speed modems. The Web infrastructure may not be able to support the demands
placed on it by continued growth. The ongoing development of corporate intranets
depends on continuation of the trend toward network-based computing and on the
willingness of businesses to reengineer the processes used to create, store,
manage and distribute their data. All of these factors are outside of our
control.

OUR EXISTING SHAREHOLDERS HAVE SIGNIFICANT INFLUENCE OVER US.

As of March 31, 2003, Robert F. Olson, our President, Chief Executive
Officer and the Chairman, of our Board of Directors holds approximately 10.0% of
our outstanding common stock. Accordingly, Mr. Olson is able to exercise
significant control over our affairs. As a group, our directors and executive
officers beneficially own approximately 14.9% of our common stock. These persons
have significant influence over our affairs, including approval of the
acquisition or disposition of assets, future issuances of common stock or other
securities and the authorization of dividends on our common stock. Our directors
and executive officers could use their stock ownership to delay, defer or
prevent a change in control of our company, depriving shareholders of the
opportunity to sell their stock at a price in excess of the prevailing market
price.

WE CAN ISSUE SHARES OF PREFERRED STOCK WITHOUT SHAREHOLDER APPROVAL, WHICH COULD
ADVERSELY AFFECT THE RIGHTS OF COMMON SHAREHOLDERS.

Our Articles of Incorporation permit us to establish the rights,
privileges, preferences and restrictions, including voting rights, of unissued
shares of our capital stock and to issue such shares without approval from our
shareholders. The rights of holders of our common stock may suffer as a result
of the rights granted to holders of preferred stock that may be issued in the
future. In addition, we could issue preferred stock to prevent a change in
control of our company, depriving shareholders of an opportunity to sell their
stock at a price in excess of the prevailing market price.

OUR SHAREHOLDER RIGHTS PLAN AND CERTAIN PROVISIONS OF MINNESOTA LAW MAY MAKE A
TAKEOVER OF STELLENT DIFFICULT, DEPRIVING SHAREHOLDERS OF OPPORTUNITIES TO SELL
SHARES AT ABOVE-MARKET PRICES.

Our shareholder rights plan and certain provisions of Minnesota law may
have the effect of discouraging attempts to acquire Stellent without the
approval of our Board of Directors. Consequently, our shareholders may lose
opportunities to sell their stock for a price in excess of the prevailing market
price.

PART IV

ITEM 16. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Documents filed as part of this report:

1. Financial Statements:

PAGE NUMBER IN THIS
DESCRIPTION ANNUAL REPORT
----------- -------------------

Audited Financial Statements:
Report of Independent Auditors....................... F-2
Consolidated Balance Sheets.......................... F-3
Consolidated Statements of Operations................ F-4
Consolidated Statements of Shareholders' Equity...... F-5
Consolidated Statements of Cash Flows................ F-6
Notes to Financial Statements........................ F-7

2. The following consolidated financial statement schedules of our
company are included in Item 16(d):

Schedule II Valuation and Qualifying Accounts

3. See Item 16(c) below for a listing of exhibits filed as part of
this Annual Report on Form 10K.

(b) Reports on Form 8-K

No reports on Form 8-K were filed for the quarter ended March 31, 2003.

The following exhibits are filed as part of this Annual Report on Form 10-K
for the year ended March 31, 2003.

EXHIBITS

FILE DESCRIPTION REFERENCE
---- ----------- ---------

10.2 InfoAccess, Inc. 1990 Stock Option Plan Incorporated by reference to Exhibit 99.1
as amended September 29, 1999 of the Registrant's Registration
Statement on Form S-8, File No. 333-90843
10.3 InfoAccess, Inc. 1995 Stock Option Plan Incorporated by reference to Exhibit 99.2
as amended September 29, 1999 of the Registrant's Registration
Statement on Form S-8, File No. 333-90843
10.5 Stellent, Inc. 1999 Employee Stock Option Incorporated by reference to Exhibit
and Compensation Plan 10.31 of the Registrant's Form 10-Q for
the three months ended September 30, 1999
10.6 Stellent, Inc. 2000 Stock Incentive Plan* Incorporated by reference to Exhibit B to
the Registrant's Definitive Proxy
statement on Schedule 14A, filed with the
Securities and Exchange Commission on
July 25, 2000
10.7 Stellent, Inc. amended and restated 2000 Incorporated by reference to Exhibit
Employee Stock Incentive Plan* 10.34 of the Registrant's Form 10-Q for
the three months ended September 30, 2001
10.8 Stellent, Inc. Amended and Restated 1997 Incorporated by reference to Exhibit B of
Directors Stock Option Plan* the Registrant's Definitive Proxy
Statement Schedule 14A, filed with the
Securities and Exchange Commission July
26, 2002
10.9 Stellent, Inc. Employee Stock Purchase Incorporated by reference to Exhibit A of
Plan the Registrant's Definitive Proxy
Statement filed with the Securities and
Exchange Commission July 29, 1999
10.37 Employment Agreement Dated April 1, 2001, Incorporated by reference to Exhibit
by and between the Registrant and Gregg 10.37 of the Registrant's Form 10-Q for
A. Waldon* the quarter ended June 30, 2001.
10.38 Employment Agreement Dated October 1, Incorporated by reference to Exhibit
2001, by and between the Registrant and 10.38 of the Registrant's Form 10-Q for
Vernon J. Hanzlik* the quarter ended September 30, 2001.
10.41 Employment Agreement Dated April 1, 2001 Incorporated by reference to Exhibit
by and between the Registrant and Daniel 10.41 of the Registrant's Form 10-Q for
Ryan * the quarter ended September 30, 2001.
10.42 Employment Agreement Dated March 9, 2001 Incorporated by reference to Exhibit
by and between the Registrant and Mitch 10.42 of the Registrant's Form 10-Q for
Berg* the quarter ended September 30, 2001.
10.43 Addendum to Employment Agreement dated Incorporated by reference to Exhibit
March 27, 2002 by and between the 10.43 of the Registrant's Form 10-K for
Registrant and Gregg Waldon* the fiscal year ended March 31, 2002.
10.44 Addendum to Employment Agreement dated Incorporated by reference to Exhibit
March 27, 2002 by and between the 10.44 of the Registrant's Form 10-K for
Registrant and Dan Ryan* the fiscal year ended March 31, 2002.
10.45 Addendum to Employment Agreement dated Incorporated by reference to Exhibit
March 27, 2002 by and between the 10.45 of the Registrant's Form 10-K for
Registrant and Mitch Berg* the fiscal year ended March 31, 2002.
10.46 French Annex to the Stellent, Inc. 2000 Incorporated by reference to Exhibit
Stock Incentive Plan 10.46 of the Registrant's Form 10-K for
the fiscal year ended March 31, 2002.

FILE DESCRIPTION REFERENCE
---- ----------- ---------

10.47 Transition Agreement Dated March 31, 2003 Previously Filed
by and between the Registrant and Vernon
J. Hanzlik*
10.48 Employment Agreement Dated April 1, 2003 Previously Filed
by and between the Registrant and Vernon
J. Hanzlik*
21 Subsidiaries of Registrant Previously Filed
23 Consent of Grant Thornton LLP Previously Filed
24 Power of Attorney Previously Filed
31.1 Certification by Robert F. Olson, Electronic transmission
Chairman of the Board, President and
Chief Executive Officer, pursuant to
Section 302 of the Sarbanes-Oxley Act of
2002.
31.2 Certification by Gregg A. Waldon, Electronic transmission
Executive Vice President, Chief Financial
Officer, Secretary and Treasurer,
pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 Certification by Robert F. Olson, Electronic transmission
Chairman of the Board, President and
Chief Executive Officer, pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002.
32.2 Certification by Gregg A. Waldon, Electronic transmission
Executive Vice President, Chief Financial
Officer, Secretary and Treasurer,
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

---------------
* Management contract, compensation plan or arrangement.

(d) Schedule Stellent, Inc and Subsidiaries

SCHEDULE II VALUATION OF QUALIFYING ACCOUNTS

COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ---------- --------- ---------- ----------
BALANCE AT BALANCE AT
BEGINNING END OF
DESCRIPTION OF PERIOD ADDITIONS DEDUCTIONS PERIOD
----------- ---------- --------- ---------- ----------
(IN THOUSANDS)

Deducted From Assets:
Allowance for doubtful accounts:
Year ended March 31, 2001........................ $ 530 $3,273* $1,660 $2,143
====== ====== ====== ======
Year ended March 31, 2002........................ $2,143 $2,105 $2,911 $1,337
====== ====== ====== ======
Year ended March 31, 2003........................ $1,337 $3,679 $3,616 $1,400
====== ====== ====== ======

---------------
* Includes $1,389 of additions resulting from the acquisition of CCD in July
2000, not recognized as expense, and a valuation allowance related to foreign
currency transactions.

REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS ON SCHEDULE

To the Board of Directors and Shareholders
Stellent, Inc.

In connection with our audits of the consolidated financial statements of
Stellent, Inc. and subsidiaries referred to in our report dated April 28, 2003,
which is included in the Annual Report to Shareholders and incorporated by
reference in Part II of this form, we have also audited Schedule II for each of
the three years in the period ended March 31, 2003. In our opinion, this
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly, in all material respects, the information required to
be set forth therein.

/s/ GRANT THORNTON LLP

Minneapolis, Minnesota
April 28, 2003

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Amendment No. 2 to be
signed on its behalf by the undersigned thereunto duly authorized, on April 28,
2004.

STELLENT, INC.

By: /s/ ROBERT F. OLSON
------------------------------------
Robert F. Olson , Chief Executive
Officer and President

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Amendment No. 2 has been signed by the following persons on behalf of the
registrant and in the capacities indicated on April 28, 2004.

/s/ ROBERT F. OLSON
--------------------------------------
Robert F. Olson,
Chairman of the Board,
Chief Executive Officer and President
(Principal Executive Officer)

/s/ GREGG A. WALDON
--------------------------------------
Gregg A. Waldon,
Chief Financial Officer,
Secretary, Treasurer
(Principal Financial Officer
and Principal Accounting Officer)

*
--------------------------------------
Kenneth H. Holec, Director

*
--------------------------------------
Philip E. Soran, Director

*
--------------------------------------
Raymond A. Tucker, Director

*
--------------------------------------
Steven C. Waldron, Director
---------------

* Gregg A. Waldon, by signing his name hereto, does hereby sign this document on
behalf of each of the above-named officers and directors of the registrant
pursuant to powers of attorney duly executed by such persons.

By /s/ GREGG A. WALDON
------------------------------
Gregg A. Waldon
Attorney-in-Fact

EXHIBITS

FILE DESCRIPTION REFERENCE
---- ----------- ---------

3.1 Amended and Restated Articles of Incorporated by reference to Exhibit 3.1
Incorporation of the Registrant's Form 8-K dated August
29, 2001.
3.2 Bylaws Incorporated by reference to Exhibit 4.2
of the Registrant's Registration
Statement on Form S-8, File No.
333-75828.
4.1 Share Rights Agreement between the Incorporated by reference to Exhibit 99.1
Registrant and Wells Fargo Bank of the Registrant's Registration
Minnesota, N.A., as Rights Agent, dated Statement on Form 8-A12G, File No.
as of May 29, 2002 000-19817, filed June 3, 2002.
4.7 Warrant to purchase 225,000 shares of Incorporated by reference to Exhibit 4.7
common stock to Merrill, Lynch, Pierce, of the Registrant's form 10-K for the
Fenner & Smith dated February 22, 2000 fiscal year ended March 31, 2001.
10.1 Stellent, Inc. 1994-1997 Stock Option and Incorporated by reference to Exhibit A of
Compensation Plan* the Registrant's Definitive Proxy
Statement Schedule 14A, filed with the
Securities and Exchange Commission July
28, 1998
10.2 InfoAccess, Inc. 1990 Stock Option Plan Incorporated by reference to Exhibit 99.1
as amended September 29, 1999 of the Registrant's Registration
Statement on Form S-8, File No. 333-90843
10.3 InfoAccess, Inc. 1995 Stock Option Plan Incorporated by reference to Exhibit 99.2
as amended September 29, 1999 of the Registrant's Registration
Statement on Form S-8, File No. 333-90843
10.4 Employment Agreement Dated August 1,1999, Incorporated by reference to Exhibit
by and between the Registrant and Robert 10.30 of the Registrant's Form 10-Q for
F. Olson* the quarter ended September 30, 1999
10.5 Stellent, Inc. 1999 Employee Stock Option Incorporated by reference to Exhibit
and Compensation Plan 10.31 of the Registrant's Form 10-Q for
the three months ended September 30, 1999
10.6 Stellent, Inc. 2000 Stock Incentive Plan* Incorporated by reference to Exhibit B to
the Registrant's Definitive Proxy
statement on Schedule 14A, filed with the
Securities and Exchange Commission on
July 25, 2000
10.7 Stellent, Inc. amended and restated 2000 Incorporated by reference to Exhibit
Employee Stock Incentive Plan* 10.34 of the Registrant's Form 10-Q for
the three months ended September 30, 2001
10.8 Stellent, Inc. Amended and Restated 1997 Incorporated by reference to Exhibit B of
Directors Stock Option Plan* the Registrant's Definitive Proxy
Statement Schedule 14A, filed with the
Securities and Exchange Commission July
26, 2002
10.9 Stellent, Inc. Employee Stock Purchase Incorporated by reference to Exhibit A of
Plan the Registrant's Definitive Proxy
Statement filed with the Securities and
Exchange Commission July 29, 1999
10.37 Employment Agreement Dated April 1, 2001, Incorporated by reference to Exhibit
by and between the Registrant and Gregg 10.37 of the Registrant's Form 10-Q for
A. Waldon* the quarter ended June 30, 2001.

FILE DESCRIPTION REFERENCE
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10.38 Employment Agreement Dated October 1, Incorporated by reference to Exhibit
2001, by and between the Registrant and 10.38 of the Registrant's Form 10-Q for
Vernon J. Hanzlik* the quarter ended September 30, 2001.
10.41 Employment Agreement Dated April 1, 2001 Incorporated by reference to Exhibit
by and between the Registrant and Daniel 10.41 of the Registrant's Form 10-Q for
Ryan* the quarter ended September 30, 2001.
10.42 Employment Agreement Dated March 9, 2001 Incorporated by reference to Exhibit
by and between the Registrant and Mitch 10.42 of the Registrant's Form 10-Q for
Berg* the quarter ended September 30, 2001.
10.43 Addendum to Employment Agreement dated Incorporated by reference to Exhibit
March 27, 2002 by and between the 10.43 of the Registrant's Form 10-K for
Registrant and Gregg Waldon* the fiscal year ended March 31, 2002.
10.44 Addendum to Employment Agreement dated Incorporated by reference to Exhibit
March 27, 2002 by and between the 10.44 of the Registrant's Form 10-K for
Registrant and Dan Ryan* the fiscal year ended March 31, 2002.
10.45 Addendum to Employment Agreement dated Incorporated by reference to Exhibit
March 27, 2002 by and between the 10.45 of the Registrant's Form 10-K for
Registrant and Mitch Berg* the fiscal year ended March 31, 2002.
10.46 French Annex to the Stellent, Inc. 2000 Incorporated by reference to Exhibit
Stock Incentive Plan 10.46 of the Registrant's Form 10-K for
the fiscal year ended March 31, 2002.
10.47 Transition Agreement Dated March 31, 2003 Previously Filed
by and between the Registrant and Vernon
J. Hanzlik*
10.48 Employment Agreement Dated April 1, 2003 Previously Filed
by and between the Registrant and Vernon
J. Hanzlik*
21 Subsidiaries of Registrant Previously Filed
23 Consent of Grant Thornton LLP Previously Filed
24 Power of Attorney Previously Filed
31.1 Certification by Robert F. Olson, Electronic transmission
Chairman of the Board, President and
Chief Executive Officer, pursuant to
Section 302 of the Sarbanes-Oxley Act of
2002.
31.2 Certification by Gregg A. Waldon, Electronic transmission
Executive Vice President, Chief Financial
Officer, Secretary and Treasurer,
pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 Certification by Robert F. Olson, Electronic transmission
Chairman of the Board, President and
Chief Executive Officer, pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002.
31.2 Certification by Gregg A. Waldon, Electronic transmission
Executive Vice President, Chief Financial
Officer, Secretary and Treasurer,
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

---------------
* Management contract, compensation plan or arrangement.