R
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
OF 1934
|
For
the fiscal year ended December 31, 2006
|
|
OR
|
|
£
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
|
For
the transition period from to
|
Delaware
|
93-1214598
|
(State
or Other Jurisdiction
|
(I.R.S.
Employer
|
of
Incorporation or Organization)
|
Identification
No.)
|
Title
of Each Class
|
Name
of Each Exchange on Which Registered
|
Common
Stock, $0.001 Per Share Par Value
|
NASDAQ
Global Market
|
|
|
Page
|
PART
I.
|
||
PART
II.
|
|
|
PART
III.
|
||
PART
IV.
|
||
· |
Increase
business productivity by giving workers seamless connectivity in
the
office, at home and on the road
|
· |
Extend
ubiquitous broadband access to teleworkers across the U.S. and
Canada
|
· |
Simplify
remote access management by reducing your number of providers and
leveraging the iPass Portal
|
· |
Enables
a seamless user experience.
Users always connect to the Internet through the award-winning
iPassConnect universal client.
|
· |
Extends
ubiquitous broadband access.
Teleworkers enjoy the aggregated connectivity of more than 150 cable
and
DSL providers in the U.S. and Canada. Mobile employees gain worldwide
access through Wi-Fi, wired Ethernet, dial, GSM, ISDN, PHS and mobile
data
connections.
|
· |
Simplifies
remote access management.
IT
staff benefit from aggregated connectivity, iPass-managed Wi-Fi gateways,
the iPass Portal and a single, consolidated bill for all remote and
mobile
access.
|
Low
Sale Price
|
High
Sale Price
|
||||||
Fiscal
year ended December 31, 2006:
|
|||||||
First
Quarter
|
$
|
6.40
|
$
|
8.01
|
|||
Second
Quarter
|
5.11
|
8.52
|
|||||
Third
Quarter
|
4.16
|
5.75
|
|||||
Fourth
Quarter
|
4.25
|
5.92
|
|||||
Fiscal
year ended December 31, 2005:
|
|||||||
First
Quarter
|
$
|
5.87
|
$
|
7.08
|
|||
Second
Quarter
|
5.17
|
6.60
|
|||||
Third
Quarter
|
5.08
|
6.40
|
|||||
Fourth
Quarter
|
5.32
|
7.00
|
7/24/03
|
9/30/03
|
12/31/03
|
3/31/04
|
6/30/04
|
9/30/04
|
12/31/04
|
3/31/05
|
6/30/05
|
9/30/05
|
12/31/05
|
3/31/06
|
6/30/06
|
9/30/06
|
12/31/06
|
||||||||||||||||||||||||||||||||
iPass
Inc.
|
100.00
|
125.87
|
85.75
|
58.54
|
56.72
|
32.08
|
39.64
|
32.78
|
32.46
|
28.82
|
35.14
|
42.90
|
29.99
|
25.07
|
31.49
|
|||||||||||||||||||||||||||||||
Russell
2000 Index
|
100.00
|
102.45
|
116.99
|
124.01
|
124.79
|
120.87
|
137.46
|
129.76
|
134.95
|
140.89
|
142.03
|
161.42
|
152.98
|
153.17
|
166.28
|
|||||||||||||||||||||||||||||||
Nasdaq
Market Index
|
100.00
|
103.26
|
115.67
|
115.43
|
118.83
|
110.28
|
126.78
|
116.78
|
120.85
|
126.26
|
129.82
|
137.70
|
128.54
|
133.67
|
143.27
|
Total
Number of Shares
Purchased
|
|
Average
Price Paid per Share
|
|
Total
Number of Shares
Purchased as Part
of Publicly Announced
Program
|
|
Approximate
Dollar Value
of Shares that May
Yet Be Purchased under
the Program
|
|||||||
October
1, 2006 to October 31, 2006
|
407,000
|
$
|
4.97
|
2,225,474
|
$
|
18,026
|
|||||||
November
1, 2006 to November 30, 2006
|
325,000
|
$
|
5.50
|
2,550,474
|
$
|
16,238
|
|||||||
December
1, 2006 to December 31, 2006
|
425,000
|
$
|
5.65
|
2,975,474
|
$
|
13,835
|
|||||||
Total
|
1,157,000
|
$
|
5.37
|
2,975,474
|
$
|
13,835
|
|
Year
Ended December 31,
|
|||||||||||||||
|
2006
|
2005
|
2004
|
2003
|
2002
|
|||||||||||
(In
thousands, except per share data)
|
||||||||||||||||
Statement
of Operations Data
|
||||||||||||||||
Revenues
|
$
|
182,711
|
$
|
169,373
|
$
|
166,319
|
$
|
136,078
|
$
|
92,830
|
||||||
Total
operating expenses
|
202,001
|
151,474
|
137,353
|
113,721
|
86,178
|
|||||||||||
Operating
income (loss)
|
(19,290
|
)
|
17,899
|
28,966
|
22,357
|
6,652
|
||||||||||
Net
income (loss)
|
(8,089
|
)
|
12,895
|
19,068
|
13,902
|
29,759
|
(1)
|
|||||||||
Net
income (loss) per share:
|
||||||||||||||||
Basic
|
(0.13
|
)
|
0.20
|
0.31
|
0.26
|
2.34
|
||||||||||
Diluted
|
(0.13
|
)
|
0.19
|
0.29
|
0.23
|
0.57
|
|
As
of December 31,
|
|||||||||||||||
|
2006
|
2005
|
2004
|
2003
|
2002
|
|||||||||||
(In
thousands)
|
||||||||||||||||
Balance
Sheet Data
|
||||||||||||||||
Total
assets
|
$
|
263,467
|
$
|
254,474
|
$
|
230,513
|
$
|
190,117
|
$
|
75,442
|
||||||
Line
of credit and loans payable
|
—
|
—
|
—
|
—
|
10,375
|
|||||||||||
Total
stockholders’ equity
|
223,307
|
226,251
|
207,222
|
171,722
|
49,600
|
|
December
31,
|
|
||||||||||||||||||||
|
|
|
|
Change
|
|
|
|
Change
|
|
|||||||||||||
|
2006
|
$
|
%
|
2005
|
|
$
|
|
%
|
2004
|
|||||||||||||
(In
thousands, except percentages)
|
||||||||||||||||||||||
Total
Revenue
|
$
|
182,711
|
$
|
13,338
|
7.9
|
%
|
$
|
169,373
|
$
|
3,054
|
1.8
|
%
|
$
|
166,319
|
|
December
31,
|
|
||||||||||||||||||||
|
|
|
|
Change
|
|
|
|
Change
|
|
|
|
|||||||||||
|
|
2006
|
|
$
|
%
|
|
2005
|
$
|
%
|
2004
|
||||||||||||
(In
thousands, except percentages)
|
||||||||||||||||||||||
Network
access expenses
|
$
|
56,929
|
$
|
14,820
|
35.2
|
%
|
$
|
42,109
|
$
|
4,770
|
12.8
|
%
|
$
|
37,339
|
||||||||
As
a percent of revenue
|
31.2
|
%
|
—
|
6.3
|
%
|
24.9
|
%
|
—
|
2.4
|
%
|
22.5
|
%
|
|
December
31,
|
|||||||||||||||||||||
|
|
Change
|
|
Change
|
|
|||||||||||||||||
|
|
2006
|
|
$
|
%
|
|
2005
|
$
|
%
|
2004
|
||||||||||||
(In
thousands, except percentages)
|
||||||||||||||||||||||
Network
operations expenses
|
$
|
32,013
|
$
|
11,067
|
52.8
|
%
|
$
|
20,946
|
$
|
1,570
|
8.1
|
%
|
$
|
19,376
|
||||||||
As
a percent of revenue
|
17.5
|
%
|
—
|
5.1
|
%
|
12.4
|
%
|
—
|
0.8
|
%
|
11.6
|
%
|
|
December
31,
|
|||||||||||||||||||||
|
|
Change
|
|
Change
|
|
|||||||||||||||||
|
2006
|
$
|
%
|
2005
|
$
|
%
|
2004
|
|||||||||||||||
(In
thousands, except percentages)
|
||||||||||||||||||||||
Research
and development expenses
|
$
|
22,557
|
$
|
4,811
|
27.1
|
%
|
$
|
17,746
|
$
|
3,590
|
25.4
|
%
|
$
|
14,156
|
||||||||
As
a percent of revenue
|
12.3
|
%
|
—
|
1.8
|
%
|
10.5
|
%
|
—
|
2.0
|
%
|
8.5
|
%
|
|
December
31,
|
|||||||||||||||||||||
|
|
Change
|
|
Change
|
|
|||||||||||||||||
|
2006
|
$
|
%
|
2005
|
$
|
%
|
2004
|
|||||||||||||||
(In
thousands, except percentages)
|
||||||||||||||||||||||
Sales
and marketing expenses
|
$
|
58,620
|
$
|
7,907
|
15.6
|
%
|
$
|
50,713
|
$
|
3,579
|
7.6
|
%
|
$
|
47,134
|
||||||||
As
a percent of revenue
|
31.9
|
%
|
—
|
2.0
|
%
|
29.9
|
%
|
—
|
1.6
|
%
|
28.3
|
%
|
|
December
31,
|
|||||||||||||||||||||
|
|
Change
|
|
Change
|
|
|||||||||||||||||
|
2006
|
$
|
%
|
2005
|
$
|
%
|
2004
|
|||||||||||||||
(In
thousands, except percentages)
|
||||||||||||||||||||||
General
and administrative expenses
|
$
|
23,178
|
$
|
5,585
|
31.7
|
%
|
$
|
17,593
|
$
|
(1,298
|
)
|
(6.9
|
)%
|
$
|
18,891
|
|||||||
As
a percent of revenue
|
12.7
|
%
|
—
|
2.3
|
%
|
10.4
|
%
|
—
|
(1.0
|
)%
|
11.4
|
%
|
Year
ending December 31:
|
||||
2007
|
$
|
1,901
|
||
2008
|
1,066
|
|||
2009
|
266
|
|||
$
|
3,233
|
Year
ending December 31:
|
||||
2007
|
$
|
7,444
|
||
2008
|
6,113
|
|||
2009
|
5,718
|
|||
2010
|
2,755
|
|||
2011
and thereafter
|
3,456
|
|||
$
|
25,486
|
|
Payments
Due by Period
|
|
||||||||||||||
Contractual
Obligations
|
|
Total
|
|
Less
Than 1
Yr
|
|
1-3
Years
|
|
3-5
Years
|
|
More
Than 5
Yrs
|
||||||
Operating
Lease Obligations
|
$
|
25,486
|
$
|
7,444
|
$
|
14,586
|
$
|
1,797
|
$
|
1,659
|
||||||
Purchase
Obligations
|
3,233
|
1,901
|
1,332
|
—
|
—
|
|||||||||||
Total
Contractual Obligations
|
$
|
28,719
|
$
|
9,345
|
$
|
15,918
|
$
|
1,797
|
$
|
1,659
|
Expected
Maturity Date for Par Value Amounts
for
the Year Ended
December 31,
|
As
of
Dec. 31, 2006
|
|||||||||||||||
2007
|
|
2008
|
|
2009
|
|
Total
Cost
Value
|
|
Total
Fair Value
|
||||||||
Government
agencies
|
$
|
32,205
|
$
|
23,990
|
$
|
1,770
|
$
|
58,818
|
$
|
58,656
|
||||||
Auction
rate and money market securities
|
25,100
|
—
|
—
|
25,051
|
25,052
|
|||||||||||
Total
|
$
|
57,305
|
$
|
23,990
|
$
|
1,770
|
$
|
83,869
|
$
|
83,708
|
|
Quarter
Ended
|
|
|||||||||||
|
|
March
31
|
|
June
30
|
|
September
30
|
|
December
31
|
|
||||
Year
Ended December 31, 2006
|
|||||||||||||
Revenues
|
$
|
44,270
|
$
|
47,384
|
$
|
45,900
|
$
|
45,157
|
|||||
Operating
income
|
(2,255
|
)
|
(5,142
|
)
|
(4,695
|
)
|
(7,198
|
)
|
|||||
Net
income
|
(65
|
)
|
(2,054
|
)
|
(2,209
|
)
|
(3,761
|
)
|
|||||
Basic
net income per share
|
$
|
(0.00
|
)
|
$
|
(0.03
|
)
|
$
|
(0.03
|
)
|
$
|
(0.06
|
)
|
|
Diluted
net income per share
|
$
|
(0.00
|
)
|
$
|
(0.03
|
)
|
$
|
(0.03
|
)
|
$
|
(0.06
|
)
|
|
Quarter
Ended
|
|
|||||||||||
|
|
March
31
|
|
June
30
|
|
September
30
|
|
December
31
|
|||||
Year
Ended December 31, 2005
|
|||||||||||||
Revenues
|
$
|
44,072
|
$
|
43,125
|
$
|
41,881
|
$
|
40,295
|
|||||
Operating
income
|
5,961
|
4,536
|
4,683
|
2,719
|
|||||||||
Net
income
|
4,089
|
3,331
|
4,210
|
1,265
|
|||||||||
Basic
net income per share
|
$
|
0.07
|
$
|
0.05
|
$
|
0.07
|
$
|
0.02
|
|||||
Diluted
net income per share
|
$
|
0.06
|
$
|
0.05
|
$
|
0.06
|
$
|
0.02
|
|
Page
|
Consolidated
Financial Statements:
|
|
Exhibit
Number
|
Description
of Document
|
2.1
|
Agreement
and Plan of Merger dated October 26, 2004 by and among iPass Inc.,
Montage
Acquisition Corp., Mobile Automation, Inc. and David Strohm, as
Stockholders’ Agent.(1)
|
2.2
|
Agreement
of Merger among iPass Inc., Keystone Acquisition Sub, Inc. and GoRemote
Internet Communications, Inc. dated December 9,
2005.(2)
|
3.1
|
Amended
and Restated Certificate of Incorporation.(3)
|
3.2
|
Bylaws,
as amended.(3)
|
4.1
|
Reference
is made to Exhibits 3.1 and 3.2
|
4.2
|
Specimen
stock certificate.(3)
|
10.1*
|
2003
Equity Incentive Plan and form of related agreements, as
amended.(3)
|
10.1.1*
|
Form
of Stock Option Grant Notice under the 2003 Equity Incentive Plan
(containing additional vesting terms).(4)
|
10.2*
|
2003
Non-Employee Directors Plan, as amended.(5)
|
10.3*
|
1999
Stock Option Plan and form of related agreements.(3)
|
10.4*
|
1997
Stock Option Plan and form of related agreements.(3)
|
10.5*
|
Interim
1999 Stock Option Plan.(3)
|
10.6*
|
Restricted
Stock Purchase Agreement by and between the Registrant and Anurag
Lal
dated November 8, 1999.(3)
|
10.7*
|
2003
Employee Stock Purchase Plan and form of related agreements, as
amended.(3)
|
10.8
|
Lease
Agreement, dated October 26, 1999, between Registrant and Westport
Joint
Venture (as amended).(3)
|
10.9
|
Amended
and Restated Investor Rights Agreement, dated August 8, 2000, between
Registrant, founders and holders of the Registrant’s Preferred
Stock.(3)
|
10.10
|
Form
of Indemnity Agreement.(3)
|
10.11*
|
Employment
Agreement, dated November 13, 2001, between Registrant and Kenneth
D.
Denman.(3)
|
10.12*
|
Form
of Offer Letter to Executive Officers.(3)
|
10.13
|
OEM
Service Provider License Agreement, dated February 29, 2000, between
RSA
Security, Inc. and the Registrant, and amendments
thereto.(4)
|
10.14
|
Support
Agreement, dated February 29, 2000, by and between RSA Security,
Inc.(4)
|
10.15
|
Loan
and Security Agreement dated September 4, 2001 between Silicon Valley
Bank
and the Registrant, and modifications thereto.(3)
|
10.16*
|
2007
Annual Executive Management Bonus Plan.(6)
|
10.17*
|
Outside
Director Compensation Arrangement.(7)
|
10.18*
|
Executive
Officer Cash Compensation Arrangement.(8)
|
10.19*
|
Offer
Letter to Thomas Thimot dated December 9, 2005.(9)
|
10.20*
|
Transition
Agreement with John Thuma dated January 20, 2006.(10)
|
10.21*
|
Letter
Agreement pursuant to which Michael J. McConnell and Peter C. Clapman
were
elected to Registrant’s Board of Directors.(11)
|
24.1
|
Power
of Attorney (reference is made to the signature page of this Form
10-K).
|
|
As
of December 31,
|
||||||
|
2006
|
2005
|
|||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
15,492
|
$
|
37,829
|
|||
Short-term
investments
|
83,708
|
145,473
|
|||||
Accounts
receivable, net of allowance for doubtful accounts of $3,282 and
$2,040,
respectively
|
28,579
|
23,347
|
|||||
Prepaid
expenses and other current assets
|
6,341
|
5,031
|
|||||
Deferred
tax assets
|
8,070
|
4,555
|
|||||
Total
current assets
|
142,190
|
216,235
|
|||||
Property
and equipment, net
|
10,519
|
9,210
|
|||||
Other
assets
|
3,344
|
1,561
|
|||||
Long-term
deferred tax assets
|
14,952
|
—
|
|||||
Acquired
intangibles, net
|
13,705
|
8,776
|
|||||
Goodwill
|
78,757
|
18,692
|
|||||
Total
assets
|
$
|
263,467
|
$
|
254,474
|
|||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable
|
$
|
14,830
|
$
|
12,669
|
|||
Accrued
liabilities
|
16,482
|
12,523
|
|||||
Deferred
revenue—short term
|
5,411
|
3,031
|
|||||
Total
current liabilities
|
36,723
|
28,223
|
|||||
Deferred
revenue—long term
|
1,468
|
—
|
|||||
Other
long term liabilities
|
1,969
|
—
|
|||||
Total
liabilities
|
40,160
|
28,223
|
|||||
Commitments
(Note 13)
|
|||||||
Stockholders’
equity:
|
|||||||
Common
stock, $.001 par value; authorized 250,000,000 shares; issued and
outstanding 63,467,796 and 64,202,765 shares, respectively
|
63
|
64
|
|||||
Additional
paid-in capital
|
249,800
|
245,456
|
|||||
Deferred
stock-based compensation
|
—
|
(593
|
)
|
||||
Accumulated
other comprehensive loss
|
(98
|
)
|
(307
|
)
|
|||
Accumulated
deficit
|
(26,458
|
)
|
(18,369
|
)
|
|||
Total
stockholders’ equity
|
223,307
|
226,251
|
|||||
Total
liabilities and stockholders’ equity
|
$
|
263,467
|
$
|
254,474
|
|
For
the Year Ended December 31,
|
|||||||||
|
2006
|
2005
|
2004
|
|||||||
Revenues
|
$
|
182,711
|
$
|
169,373
|
$
|
166,319
|
||||
Operating
expenses (1):
|
||||||||||
Network
access
|
56,929
|
42,109
|
37,339
|
|||||||
Network
operations
|
32,013
|
20,946
|
19,376
|
|||||||
Research
and development
|
22,557
|
17,746
|
14,156
|
|||||||
Sales
and marketing
|
58,620
|
50,713
|
47,134
|
|||||||
General
and administrative
|
23,178
|
17,593
|
18,891
|
|||||||
Restructuring
charges
|
4,733
|
—
|
—
|
|||||||
Amortization
of acquired intangibles
|
3,971
|
2,367
|
457
|
|||||||
Total
operating expenses
|
202,001
|
151,474
|
137,353
|
|||||||
Operating
income (loss)
|
(19,290
|
)
|
17,899
|
28,966
|
||||||
Interest
income
|
3,659
|
3,899
|
2,298
|
|||||||
Income
(loss) before income taxes
|
(15,631
|
)
|
21,798
|
31,264
|
||||||
Provision
for (benefit from) income taxes
|
(7,195
|
)
|
8,903
|
12,196
|
||||||
Net
income (loss) before cumulative effect of change in accounting
principle
|
(8,436
|
)
|
12,895
|
19,068
|
||||||
Cumulative
effect of change in accounting principle, net of zero tax
effect
|
(347
|
) |
—
|
—
|
||||||
Net
income (loss)
|
$
|
(8,089
|
)
|
$
|
12,895
|
$
|
19,068
|
|||
Net
income (loss) per share before cumulative effect of change in accounting
principle:
|
||||||||||
Basic
|
$
|
(0.13
|
)
|
$
|
0.20
|
$
|
0.31
|
|||
Diluted
|
$
|
(0.13
|
)
|
$
|
0.19
|
$
|
0.29
|
|||
Per share effect of cumulative change in accounting principle: | ||||||||||
Basic
|
$ | — | $ | — | $ | — | ||||
Diluted
|
$ | — | $ | — | $ | — | ||||
Net income (loss) per share: | ||||||||||
Basic
|
$ | (0.13 | ) | $ | 0.20 | $ | 0.31 | |||
Diluted
|
$ | (0.13 | ) | $ | 0.19 | $ | 0.29 | |||
Number
of shares used in per share calculations:
|
||||||||||
Basic
|
64,572,603
|
63,353,779
|
60,770,680
|
|||||||
Diluted
|
64,572,603
|
66,277,342
|
65,645,757
|
|||||||
(1)
Stock-based compensation is included in the following expense line
items:
|
||||||||||
Network
operations
|
$
|
1,031
|
$
|
163
|
$
|
335
|
||||
Research
and development
|
1,235
|
175
|
352
|
|||||||
Sales
and marketing
|
2,206
|
265
|
554
|
|||||||
General
and administrative
|
1,706
|
534
|
1,101
|
Common
Stock
|
Additional
Paid-In
Capital
|
Notes
Receivable
from
Stock-
holders
|
Deferred
Stock-Based
Compensation
|
Accumulated
Comprehensive
Income
(Loss)
|
Accumulated
Deficit
|
Total
Stock-
holders’
Equity
|
Comprehensive
Income
(loss)
|
|||||||||||||||||||||
Shares
|
Amount
|
|||||||||||||||||||||||||||
Balances,
December 31, 2003
|
60,483
|
$
|
60
|
$
|
229,026
|
$
|
(2,831
|
)
|
$
|
(4,326
|
)
|
$
|
125
|
$
|
(50,332
|
)
|
$
|
171,722
|
$
|
14,027
|
||||||||
Exercise
of stock options
|
1,886
|
2
|
5,239
|
—
|
—
|
—
|
—
|
5,241
|
—
|
|||||||||||||||||||
Employee
stock purchase plan — common stock issued
|
388
|
1
|
2,735
|
—
|
—
|
—
|
—
|
2,736
|
—
|
|||||||||||||||||||
Payment
of stockholder notes receivable
|
—
|
—
|
—
|
2,887
|
—
|
—
|
—
|
2,887
|
—
|
|||||||||||||||||||
Interest
earned on stockholder note receivable
|
—
|
—
|
—
|
(56
|
)
|
—
|
—
|
—
|
(56
|
)
|
—
|
|||||||||||||||||
Cancellation
of unvested stock options
|
—
|
—
|
(202
|
)
|
—
|
202
|
—
|
—
|
—
|
—
|
||||||||||||||||||
Amortization
of stock-based compensation
|
—
|
—
|
—
|
—
|
2,342
|
—
|
—
|
2,342
|
—
|
|||||||||||||||||||
Tax
benefit from employee stock option plans
|
—
|
—
|
3,831
|
—
|
—
|
—
|
—
|
3,831
|
—
|
|||||||||||||||||||
Unrealized
loss on available-for-sale investments, net
|
—
|
—
|
—
|
—
|
—
|
(549
|
)
|
—
|
(549
|
)
|
(549
|
)
|
||||||||||||||||
Net
income
|
—
|
—
|
—
|
—
|
—
|
—
|
19,068
|
19,068
|
19,068
|
|||||||||||||||||||
Balances,
December 31, 2004
|
62,757
|
$
|
63
|
$
|
240,629
|
—
|
$
|
(1,782
|
)
|
$
|
(424
|
)
|
$
|
(31,264
|
)
|
$
|
207,222
|
$
|
18,519
|
|||||||||
Exercise
of stock options
|
1,041
|
1
|
1,960
|
—
|
—
|
—
|
—
|
1,961
|
—
|
|||||||||||||||||||
Employee
stock purchase plan — common stock issued
|
405
|
—
|
1,840
|
—
|
—
|
—
|
—
|
1,840
|
—
|
|||||||||||||||||||
Cancellation
of unvested stock options
|
—
|
—
|
(52
|
)
|
—
|
52
|
—
|
—
|
—
|
—
|
||||||||||||||||||
Amortization
of stock-based compensation
|
—
|
—
|
—
|
—
|
1,137
|
—
|
—
|
1,137
|
—
|
|||||||||||||||||||
Tax
benefit from employee stock option plans
|
—
|
—
|
1,079
|
—
|
—
|
—
|
—
|
1,079
|
—
|
|||||||||||||||||||
Unrealized
gain on available-for-sale investments, net
|
—
|
—
|
—
|
—
|
—
|
117
|
—
|
117
|
117
|
|||||||||||||||||||
Net
income
|
—
|
—
|
—
|
—
|
—
|
—
|
12,895
|
12,895
|
12,895
|
|||||||||||||||||||
Balances,
December 31, 2005
|
64,203
|
$
|
64
|
$
|
245,456
|
—
|
$
|
(593
|
)
|
$
|
(307
|
)
|
$
|
(18,369
|
)
|
$
|
226,251
|
$
|
13,012
|
|||||||||
Exercise
of stock options
|
1,831
|
2
|
5,622
|
—
|
—
|
—
|
—
|
5,624
|
—
|
|||||||||||||||||||
Employee
stock purchase plan — common stock issued
|
409
|
—
|
1,884
|
—
|
—
|
—
|
—
|
1,884
|
—
|
|||||||||||||||||||
Outstanding
common stock repurchased and retired
|
(2,975
|
)
|
(3
|
)
|
(16,188
|
)
|
—
|
—
|
—
|
—
|
(16,191
|
)
|
—
|
|||||||||||||||
Reversal
of unearned stock-based compensation upon adoption of SFAS No.
123(R)
|
—
|
—
|
(593
|
)
|
—
|
593
|
—
|
—
|
—
|
—
|
||||||||||||||||||
Cumulative
effect of change in accounting principle
|
—
|
—
|
(347
|
)
|
—
|
—
|
—
|
—
|
(347
|
)
|
—
|
|||||||||||||||||
Fair
value of options assumed in acquisition of GoRemote
|
—
|
—
|
5,826
|
—
|
—
|
—
|
—
|
5,826
|
—
|
|||||||||||||||||||
Stock-based
compensation
|
—
|
—
|
6,178
|
—
|
—
|
—
|
6,178
|
—
|
||||||||||||||||||||
Excess
tax benefit from employee stock option plans
|
—
|
—
|
1,962
|
—
|
—
|
—
|
—
|
1,962
|
—
|
|||||||||||||||||||
Unrealized
gain on available-for-sale investments, net
|
—
|
—
|
—
|
—
|
—
|
209
|
—
|
209
|
209
|
|||||||||||||||||||
Net
income (loss)
|
—
|
—
|
—
|
—
|
—
|
—
|
(8,089
|
)
|
(8,089
|
)
|
(8,089
|
)
|
||||||||||||||||
Balances,
December 31, 2006
|
63,468
|
$
|
63
|
$
|
249,800
|
$
|
—
|
$
|
—
|
$
|
(98
|
)
|
$
|
(26,458
|
)
|
$
|
223,307
|
$
|
(7,880
|
)
|
|
For
the Year Ended December 31,
|
|
||||||||
|
|
2006
|
|
2005
|
|
2004
|
||||
Cash
flows from operating activities:
|
||||||||||
Net
income (loss)
|
$
|
(8,089
|
)
|
$
|
12,895
|
$
|
19,068
|
|||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||||
Amortization
of stock-based compensation for employees
|
6,178
|
1,137
|
2,342
|
|||||||
Amortization
of acquired intangibles
|
3,971
|
2,367
|
457
|
|||||||
Depreciation
and amortization
|
5,989
|
4,732
|
4,762
|
|||||||
Tax
benefit from employee stock option plans
|
—
|
1,079
|
3,831
|
|||||||
Excess
tax benefit from employee stock option plans
|
(1,962
|
)
|
—
|
—
|
||||||
Deferred
income taxes
|
(6,739
|
)
|
5,700
|
10,842
|
||||||
Interest
on shareholder notes receivable
|
—
|
—
|
(56
|
)
|
||||||
Provision
for doubtful accounts
|
1,056
|
163
|
1,100
|
|||||||
Cumulative
effect of change in accounting principle
|
(347
|
)
|
—
|
—
|
||||||
Realized
loss on investments, net
|
—
|
31
|
98
|
|||||||
Changes
in operating assets and liabilities, net of assets acquired and
liabilities assumed:
|
||||||||||
Accounts
receivable
|
868
|
374
|
(3,433
|
)
|
||||||
Prepaid
expenses and other current assets
|
(1,102
|
)
|
(616
|
)
|
250
|
|||||
Other
assets
|
(1,015
|
)
|
(337
|
)
|
30
|
|||||
Accounts
payable
|
(38
|
)
|
3,515
|
1,733
|
||||||
Accrued
liabilities
|
(4,226
|
)
|
1,011
|
(4,026
|
)
|
|||||
Deferred
revenue
|
3,848
|
47
|
1,132
|
|||||||
Other
liabilities
|
1,969
|
—
|
—
|
|||||||
Net
cash provided by operating activities
|
361
|
32,098
|
38,130
|
|||||||
Cash
flows from investing activities:
|
||||||||||
Purchases
of short-term investments
|
(140,490
|
)
|
(170,422
|
)
|
(156,310
|
)
|
||||
Maturities
of short-term investments
|
207,695
|
141,839
|
130,696
|
|||||||
Purchases
of property and equipment
|
(5,222
|
)
|
(3,882
|
)
|
(6,186
|
)
|
||||
Acquisition
of GoRemote, net of cash acquired
|
(77,960
|
)
|
—
|
—
|
||||||
Acquisition
of Safe3w, net of cash acquired
|
—
|
—
|
(8,481
|
)
|
||||||
Acquisition
of Mobile Automation, net of cash acquired
|
—
|
—
|
(19,964
|
)
|
||||||
Net
cash used in investing activities
|
(15,977
|
)
|
(32,465
|
)
|
(60,245
|
)
|
||||
Cash
flows from financing activities:
|
||||||||||
Proceeds
from issuance of common stock
|
7,508
|
3,801
|
7,977
|
|||||||
Cash
used in repurchase of common stock
|
(16,191
|
)
|
—
|
—
|
||||||
Tax
benefit from employee stock option plans
|
1,962
|
—
|
—
|
|||||||
Proceeds
from payment of stockholder notes receivable
|
—
|
—
|
2,887
|
|||||||
Net
cash provided by (used in) financing activities
|
(6,721
|
)
|
3,801
|
10,864
|
||||||
Net
increase (decrease) in cash and cash equivalents
|
(22,337
|
)
|
3,434
|
(11,251
|
)
|
|||||
Cash
and cash equivalents at beginning of year
|
37,829
|
34,395
|
45,646
|
|||||||
Cash
and cash equivalents at end of year
|
$
|
15,492
|
$
|
37,829
|
$
|
34,395
|
||||
Supplemental
disclosures of cash flow information:
|
||||||||||
Cash
paid for interest
|
$
|
—
|
$
|
—
|
$
|
—
|
||||
Assumption
of GoRemote options
|
$
|
5,826
|
$
|
—
|
$
|
—
|
||||
Cash
paid for taxes
|
$
|
1,471
|
$
|
1,094
|
$
|
1,485
|
Consolidated
Statements of Operations
|
|||||||||||||||||||||||||
Network
operations
|
Research
and development
|
Sales
and marketing
|
General
and administrative
|
||||||||||||||||||||||
2005
|
2004
|
2005
|
2004
|
2005
|
2004
|
2005
|
2004
|
||||||||||||||||||
As
previously reported
|
$
|
20,783
|
$
|
19,041
|
$
|
17,571
|
$
|
13,804
|
$
|
50,448
|
$
|
46,580
|
$
|
17,059
|
$
|
17,790
|
|||||||||
Reclassification
|
163
|
335
|
175
|
352
|
265
|
554
|
534
|
1,101
|
|||||||||||||||||
As
reported
|
20,946
|
19,376
|
17,746
|
14,156
|
50,713
|
47,134
|
17,593
|
18,891
|
Consolidated
Statements of Cash Flows
|
Consolidated
Balance Sheet
|
||||||||||||||||||||||||||||||
Depreciation
and amortization
|
Net
cash provided by operating activities
|
Maturities
of short term investments
|
Net
cash used in investing activities
|
Short
term investments
|
Prepaid
expenses and other current assets
|
||||||||||||||||||||||||||
2005
|
2004
|
2005
|
2004
|
2005
|
2004
|
2005
|
2004
|
2005
|
2005
|
||||||||||||||||||||||
As
previously reported
|
$
|
4,783
|
$
|
4,386
|
$
|
32,149
|
$
|
37,754
|
$
|
141,788
|
$
|
131,072
|
$
|
(32,516
|
)
|
$
|
(59,869
|
)
|
$
|
146,727
|
$
|
3,777
|
|||||||||
Reclassification
|
(51
|
)
|
376
|
(51
|
)
|
376
|
51
|
|
(376
|
)
|
51
|
(376
|
)
|
(1,254
|
)
|
1,254
|
|||||||||||||||
As
reported
|
4,732
|
4,762
|
32,098
|
38,130
|
141,839
|
130,696
|
(32,465
|
)
|
(60,245
|
)
|
145,473
|
5,031
|
|
Year
Ended December 31,
|
|
||||||||
|
|
2006
|
|
2005
|
|
2004
|
||||
Net
income (loss)
|
$
|
(8,089
|
)
|
$
|
12,895
|
$
|
19,068
|
|||
Comprehensive
income (loss):
|
||||||||||
Change
in accumulated unrealized gain (loss) on available-for-sale securities,
net of taxes
|
209
|
117
|
(549
|
)
|
||||||
Total
comprehensive income (loss)
|
$
|
(7,880
|
)
|
$
|
13,012
|
$
|
18,519
|
|
For
the Year Ended December 31,
|
|
|||||
|
|
2005
|
|
2004
|
|||
Net
income — as reported
|
$
|
12,895
|
$
|
19,068
|
|||
Add:
Stock-based employee compensation expense included in the reported
net
income, net of related tax effects
|
671
|
1,429
|
|||||
Deduct:
Stock-based employee compensation expense using the fair value method,
net
of related tax effects
|
(3,570
|
)
|
(3,699
|
)
|
|||
Pro
forma net income
|
$
|
9,996
|
$
|
16,798
|
|||
Basic
net income per common share:
|
|||||||
As
reported
|
$
|
0.20
|
$
|
0.31
|
|||
Pro
forma
|
$
|
0.16
|
$
|
0.28
|
|||
Diluted
net income per common share:
|
|||||||
As
reported
|
$
|
0.19
|
$
|
0.29
|
|||
Pro
forma
|
$
|
0.15
|
$
|
0.26
|
|
Employee
Stock Options For
the Year Ended December 31,
|
|
Employee
Stock Purchase Plan For
the Year Ended December 31,
|
|
|||||||||
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|||||
Risk-free
rate
|
3.9
|
%
|
3.0
|
%
|
3.7
|
%
|
1.6
|
%
|
|||||
Expected
dividend yield
|
0
|
%
|
0
|
%
|
0
|
%
|
0
|
%
|
|||||
Expected
volatility
|
35-41
|
%
|
41-47
|
%
|
36-41
|
%
|
32-52
|
%
|
|||||
Expected
life
|
3
Years
|
3
Years
|
.5
Years
|
.5
Years
|
Cash
consideration for common and preferred stockholders
|
$
|
75,806
|
||
Estimated
fair value of options assumed
|
5,826
|
|||
Direct
transaction costs
|
3,097
|
|||
Total
purchase price
|
$
|
84,729
|
Cash
acquired
|
$
|
6,706
|
||
Accounts
receivable
|
7,138
|
|||
Other
tangible assets acquired
|
2,550
|
|||
Deferred
tax assets, net
|
11,011
|
|||
Amortizable
intangible assets:
|
||||
Customer
relationships
|
7,600
|
|||
Supplier
contracts
|
950
|
|||
Internally
developed software
|
350
|
|||
Goodwill
|
60,578
|
|||
Deferred
revenues
|
(1,025
|
)
|
||
Restructuring
liabilities
|
(1,249
|
)
|
||
Other
liabilities assumed
|
(9,880
|
)
|
||
Total
purchase price
|
$
|
84,729
|
Fiscal
Year
|
|
|||
2007
|
$
|
1,834
|
||
2008
|
1,834
|
|||
2009
|
1,834
|
|||
2010
|
685
|
|||
2011
|
521
|
|||
2012
|
521
|
|||
2013
|
66
|
|||
$
|
7,295
|
|
Year
Ended December
31,
|
||||||
|
2006
|
2005
|
|||||
Total
revenue
|
$
|
187,734
|
$
|
212,492
|
|||
Net
income (loss) before cumulative change in accounting
principle
|
$
|
(13,124
|
)
|
$
|
1,935
|
||
Net
income (loss)
|
$
|
(12,777
|
)
|
$
|
1,935
|
||
Net
income (loss) per share:
|
|||||||
Basic
|
$
|
(0.20
|
)
|
$
|
0.03
|
||
Diluted
|
$
|
(0.20
|
)
|
$
|
0.03
|
||
Number
of shares used in per share calculations:
|
|||||||
Basic
|
64,572,779
|
63,353,779
|
|||||
Diluted
|
64,572,779
|
66,277,342
|
Cash
acquired
|
$
|
37
|
||
Accounts
receivable
|
893
|
|||
Other
tangible assets acquired
|
52
|
|||
Amortizable
intangible assets:
|
||||
Existing
technology
|
5,000
|
|||
Patent/core
technology
|
1,700
|
|||
Maintenance
agreements and certain relationships
|
400
|
|||
Customer
relationships
|
500
|
|||
Goodwill
|
14,228
|
|||
Total
assets acquired
|
22,810
|
|||
Deferred
tax liability, net
|
(1,297
|
)
|
||
Liabilities
assumed
|
(1,326
|
)
|
||
Transaction
costs
|
(187
|
)
|
||
Net
assets acquired
|
$
|
20,000
|
Cash
acquired
|
$
|
7
|
||
Other
tangible assets acquired
|
96
|
|||
Amortizable
intangible assets:
|
||||
Existing
technology
|
2,900
|
|||
Patent/core
technology
|
1,100
|
|||
Goodwill
|
5,785
|
|||
Total
assets acquired
|
9,888
|
|||
Deferred
tax liability, net
|
(953
|
)
|
||
Liabilities
assumed
|
(135
|
)
|
||
Transaction
costs
|
(300
|
)
|
||
Net
assets acquired
|
$
|
8,500
|
|
Short-Term
Investments
|
|
|||||||||||
December
31, 2006
|
|
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair
Value
|
|||||
Government
agencies
|
$
|
58,818
|
$
|
19
|
$
|
(181
|
)
|
$
|
58,656
|
||||
Auction
rate and money market securities
|
25,051
|
1
|
—
|
25,052
|
|||||||||
$
|
83,869
|
$
|
20
|
$
|
(181
|
)
|
$
|
83,708
|
Short-Term
Investments
|
|
||||||||||||
December
31, 2005
|
|
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair
Value
|
|||||
Government
agencies
|
$
|
119,012
|
$
|
—
|
$
|
(473
|
)
|
$
|
118,539
|
||||
Corporate
notes
|
15,991
|
—
|
(57
|
)
|
15,934
|
||||||||
Auction
rate and money market securities
|
10,972
|
28
|
—
|
11,000
|
|||||||||
$
|
145,975
|
$
|
28
|
$
|
(530
|
)
|
$
|
145,473
|
Expected
Maturity Date for Par Value Amounts
for
the Year Ended
December 31,
|
|
As
of
Dec. 31, 2006
|
|
|||||||||||||
|
|
2007
|
|
2008
|
|
2009
|
|
Total
Cost
Value
|
|
Total
Fair Value
|
||||||
Government
agencies
|
$
|
32,205
|
$
|
23,990
|
$
|
1,770
|
$
|
58,818
|
$
|
58,656
|
||||||
Auction
rate and money market securities
|
25,100
|
—
|
—
|
25,051
|
25,052
|
|||||||||||
Total
|
$
|
57,305
|
$
|
23,990
|
$
|
1,770
|
$
|
83,869
|
$
|
83,708
|
Less
than 12 Months
|
12
Months or More
|
Total
|
|||||||||||||||||
|
Fair
Value
|
Gross
Unrealized Losses
|
Fair
Value
|
Gross
Unrealized Losses
|
Fair
Value
|
Gross
Unrealized Losses
|
|||||||||||||
Government
agencies
|
$
|
4,511
|
$
|
(7
|
)
|
$
|
54,145
|
$
|
(174
|
)
|
$
|
58,656
|
$
|
(181
|
)
|
||||
Auction
rate and money market securities
|
25,052
|
-
|
-
|
-
|
25,052
|
-
|
|||||||||||||
Total
|
$
|
29,563
|
$
|
(7
|
)
|
$
|
54,145
|
$
|
(174
|
)
|
$
|
83,708
|
$
|
(181
|
)
|
- |
The
length of time and extent to which the market value has been less
than
cost
|
- |
The
financial condition and near-term prospects of the
issuer
|
- |
The
Company’s intent and ability to retain its investment in the issuer for a
period of time sufficient to allow for any anticipated recovery in
market
value
|
- |
The
magnitude of the unrealized losses is such that they could be reversed
with a modest change in interest
rates
|
- |
The
probability that any of the issuers of these securities would be
unable to
meet its obligations to meet principal or interest payments is
negligible
|
- |
Based
on both the length of time and extent to which the market value has
been
less than cost and the financial condition and near-term prospects
of the
issuer, the Company concluded that none of the unrealized losses
at
December 31, 2006 constituted other-than-temporary
impairment.
|
|
Beginning
Balance
|
|
Provisions
|
|
Charge
Offs
|
|
Ending
Balance
|
||||||
Year
ended December 31, 2004
|
$
|
2,348
|
$
|
1,100
|
$
|
(1,377
|
)
|
$
|
2,071
|
||||
Year
ended December 31, 2005
|
$
|
2,071
|
$
|
163
|
$
|
(194
|
)
|
$
|
2,040
|
||||
Year
ended December 31, 2006
|
$
|
2,040
|
$
|
1,860
|
$
|
(618
|
)
|
$
|
3,282
|
|
December
31, 2006
|
|
December
31, 2005
|
||||
Equipment
|
$
|
30,283
|
$
|
19,839
|
|||
Furniture
and fixtures
|
3,794
|
3,498
|
|||||
Computer
software and equipment
|
10,705
|
4,919
|
|||||
Leasehold
improvements
|
2,502
|
2,002
|
|||||
47,284
|
30,258
|
||||||
Less:
Accumulated depreciation and amortization
|
(36,765
|
)
|
(21,048
|
)
|
|||
Property
and equipment, net
|
$
|
10,519
|
$
|
9,210
|
|
December
31, 2005
|
|
Adjustment
|
|
Acquisition
|
|
Amortization
|
|
December
31, 2006
|
|||||||
Goodwill
|
$
|
18,692
|
$
|
(513
|
)
|
$
|
60,578
|
$
|
—
|
$
|
78,757
|
|||||
Intangibles:
|
||||||||||||||||
Existing
technology
|
5,973
|
—
|
—
|
(1,612
|
)
|
4,361
|
||||||||||
Patent/Core
technology
|
2,127
|
—
|
—
|
(563
|
)
|
1,564
|
||||||||||
Maintenance
agreements and certain relationships
|
322
|
—
|
—
|
(66
|
)
|
256
|
||||||||||
Customer
relationships
|
354
|
—
|
7,600
|
(1,478
|
)
|
6,476
|
||||||||||
Supplier
contracts
|
—
|
—
|
950
|
(208
|
)
|
742
|
||||||||||
Internally
developed software
|
—
|
—
|
350
|
(44
|
)
|
306
|
||||||||||
$
|
27,468
|
$
|
(513
|
)
|
$
|
69,478
|
$
|
(3,971
|
)
|
$
|
92,462
|
|
Twelve
Months Ended December 31,
|
|
||||||||
|
|
2006
|
|
2005
|
|
2004
|
||||
Intangibles:
|
||||||||||
Existing
technology
|
$
|
(1,612
|
)
|
$
|
(1,613
|
)
|
$
|
(314
|
)
|
|
Patent/Core
technology
|
(563
|
)
|
(563
|
)
|
(111
|
)
|
||||
Maintenance
agreements and certain relationships
|
(66
|
)
|
(67
|
)
|
(11
|
)
|
||||
Customer
relationships
|
(1,478
|
)
|
(125
|
)
|
(21
|
)
|
||||
Supplier
contracts
|
(208
|
)
|
—
|
—
|
||||||
Internally
developed software
|
(44
|
)
|
—
|
—
|
||||||
$
|
(3,971
|
)
|
$
|
(2,367
|
)
|
$
|
(457
|
)
|
|
December
31, 2006
|
|
|||||||||||
|
|
Amortization
Life
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying Amount
|
|||||
Intangibles:
|
|||||||||||||
Existing
technology
|
4-8
yrs
|
$
|
7,900
|
$
|
(3,539
|
)
|
$ |
4,361
|
|||||
Patent/Core
technology
|
4-8
yrs
|
2,800
|
(1,236
|
)
|
1,564
|
||||||||
Maintenance
agreements and certain relationships
|
5
yrs
|
400
|
(144
|
)
|
256
|
||||||||
Customer
relationships
|
4-7
yrs
|
8,100
|
(1,624
|
)
|
6,476
|
||||||||
Supplier
contracts
|
4
yrs
|
950
|
(208
|
)
|
742
|
||||||||
Internally
developed software
|
7
yrs
|
350
|
(44
|
)
|
306
|
||||||||
$
|
20,500
|
$
|
(6,795
|
)
|
$
|
13,705
|
|
December
31, 2005
|
|
|||||||||||
|
|
Amortization
Life
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying Amount
|
|||||
Intangibles:
|
|||||||||||||
Existing
technology
|
4-8
yrs
|
$
|
7,900
|
$
|
(1,927
|
)
|
$
|
5,973
|
|||||
Patent/Core
technology
|
4-8
yrs
|
2,800
|
(673
|
)
|
2,127
|
||||||||
Maintenance
agreements and certain relationships
|
6
yrs
|
400
|
(78
|
)
|
322
|
||||||||
Customer
relationships
|
4
yrs
|
500
|
(146
|
)
|
354
|
||||||||
$
|
11,600
|
$
|
(2,824
|
)
|
$
|
8,776
|
Fiscal
Year
|
|
|||
2007
|
$
|
4,201
|
||
2008
|
3,901
|
|||
2009
|
2,401
|
|||
2010
|
1,241
|
|||
2011
|
1,021
|
|||
Thereafter
|
940
|
|||
$
|
13,705
|
|
December
31, 2006
|
December
31, 2005
|
|||||
Accrued
commissions
|
$
|
3,899
|
$
|
3,067
|
|||
Accrued
liabilities
|
5,809
|
4,399
|
|||||
Deferred
rent
|
1,013
|
1,618
|
|||||
Paid
time off payable
|
1,960
|
1,715
|
|||||
Income
taxes payable
|
1,504
|
1,724
|
|||||
Accrued
restructuring liabilities
|
2,297
|
--
|
|||||
$
|
16,482
|
$
|
12,523
|
|
Excess
Facility
Costs
|
Severance
Costs
|
Total
Restructuring Accrual
|
|||||||
Balance
as of December 31, 2005
|
$
|
—
|
$
|
—
|
$
|
—
|
||||
Restructuring
charges
|
3,028
|
1,705
|
4,733
|
|||||||
Reclassification
of deferred rent
|
461
|
—
|
461
|
|||||||
Payments
|
(444
|
)
|
(1,302
|
)
|
(1,746
|
)
|
||||
Balance
as of December 31, 2006
|
$
|
3,045
|
$
|
403
|
$
|
3,448
|
|
Excess
Facility
Costs
|
|||
Balance
as of December 31, 2005
|
$
|
—
|
||
Accrued
acquisition-related restructuring costs
|
1,249
|
|||
Payments
|
(432
|
)
|
||
Balance
as of December 31, 2006
|
$
|
817
|
|
2006
|
|
2005
|
|
2004
|
|||||
Current
|
||||||||||
U.S.
federal
|
$
|
(600
|
)
|
$
|
1,972
|
$
|
584
|
|||
State
|
(364
|
)
|
828
|
583
|
||||||
Foreign
|
507
|
402
|
187
|
|||||||
(457
|
)
|
3,202
|
1,354
|
|||||||
Deferred
|
||||||||||
U.S.
federal
|
(5,966
|
)
|
5,182
|
9,371
|
||||||
State
|
(772
|
)
|
518
|
1,471
|
||||||
(6,738
|
)
|
5,700
|
10,842
|
|||||||
Total
provision for (benefit from) income taxes
|
$
|
(7,195
|
)
|
$
|
8,902
|
$
|
12,196
|
|
2006
|
|
2005
|
||||
Deferred
tax assets:
|
|||||||
Net
operating loss carryforwards
|
$
|
41,641
|
$
|
5,777
|
|||
Reserves
and accruals
|
8,401
|
4,304
|
|||||
Research
and development credits
|
4,907
|
1,667
|
|||||
Fixed
assets
|
1,679
|
77
|
|||||
Total
deferred tax assets
|
56,628
|
11,825
|
|||||
Valuation
allowance
|
(28,289
|
)
|
(3,582
|
)
|
|||
Net
deferred tax assets
|
$
|
28,339
|
$
|
8,243
|
|||
Deferred
tax liabilities:
|
|||||||
Acquired
intangibles
|
$
|
(5,316
|
)
|
$
|
(3,689
|
)
|
|
Total
net deferred tax assets
|
$
|
23,023
|
$
|
4,555
|
|
2006
|
|
2005
|
|
2004
|
|||||
Federal
statutory rate
|
(35
|
)%
|
35
|
%
|
34
|
%
|
||||
State
taxes, net of federal benefit
|
(4
|
)
|
5
|
6
|
||||||
Foreign
taxes
|
2
|
2
|
—
|
|||||||
Amortization
of stock-based compensation
|
2
|
1
|
(1
|
)
|
||||||
Research
and development benefit
|
(7
|
)
|
(4
|
)
|
(2
|
)
|
||||
Tax
exempt interest
|
(6
|
)
|
—
|
—
|
||||||
Other
|
2
|
2
|
2
|
|||||||
Provision
for (benefit from) income taxes
|
(46)
|
%
|
41
|
%
|
39
|
%
|
|
For
The Year Ended December
31, 2006
|
|||
Risk-free
rate
|
4.86
|
%
|
||
Expected
dividend yield
|
0
|
%
|
||
Expected
volatility
|
50
|
%
|
||
Expected
life
|
6.1
years
|
|
Shares
Available
for Grant
|
Options
Outstanding
|
Weighted
Average Exercise
Price
|
|||||||
Balance
as of December 31, 2003
|
8,467,166
|
7,887,573
|
$
|
3.46
|
||||||
Authorized
|
3,024,171
|
—
|
—
|
|||||||
Granted
|
(4,497,933
|
)
|
4,497,933
|
6.10
|
||||||
Exercised
|
—
|
(1,885,253
|
)
|
2.75
|
||||||
Cancelled
|
385,267
|
(385,267
|
)
|
3.11
|
||||||
Balance
as of December 31, 2004
|
7,378,671
|
10,114,986
|
$ |
4.78
|
||||||
Authorized
|
3,637,835
|
—
|
—
|
|||||||
Granted
|
(1,045,300
|
)
|
1,045,300
|
5.88
|
||||||
Exercised
|
—
|
(1,041,176
|
)
|
1.88
|
||||||
Cancelled
|
771,085
|
(771,085
|
)
|
6.09
|
||||||
Balance
as of December 31, 2005
|
10,742,291
|
9,348,025
|
$
|
5.12
|
||||||
Authorized
|
3,248,060
|
—
|
—
|
|||||||
Options
granted
|
(2,071,823
|
)
|
2,071,823
|
6.85
|
||||||
Awards
granted
|
(446,303
|
)
|
—
|
—
|
||||||
Assumed
in acquisition of GoRemote
|
—
|
1,710,353
|
18.58
|
|||||||
Exercised
|
—
|
(1,831,995
|
)
|
3.03
|
||||||
Cancelled
|
1,897,781
|
|
(1,897,781
|
) |
7.09
|
|||||
Balance
at December 31, 2006
|
13,370,006
|
9,400,425
|
$
|
7.96
|
||||||
Exercisable
as of December 31, 2004
|
4,055,123
|
$
|
3.83
|
|||||||
Exercisable
as of December 31, 2005
|
4,945,870
|
$
|
4.39
|
|||||||
Exercisable
as of December 31, 2006
|
5,703,614
|
$
|
8.85
|
|
Shares
|
|
Weighted
Average
Exercise
Price
per Share
|
|
Weighted
Average
Remaining
Contractual
Term
(Years)
|
|
Aggregate
Intrinsic
Value
|
||||||
(In
thousands, except share and per share amounts)
|
|||||||||||||
Options
outstanding at December 31, 2006
|
9,400,425
|
$
|
7.96
|
$
|
7.11
|
$
|
9,161
|
||||||
Options
vested and expected to vest at December, 31, 2006
|
8,972,276
|
$
|
8.03
|
$
|
7.03
|
$
|
9,103
|
||||||
Options
exercisable at December 31, 2006
|
5,703,614
|
$
|
8.85
|
$
|
6.22
|
$
|
8,349
|
|
Shares
|
|
Weighted
Average
Exercise
Price
per Share
|
||||
Exercise
price less than fair value
|
6,786
|
$
|
7.03
|
||||
Exercise
price equal to fair value
|
2,065,037
|
$
|
6.85
|
||||
Exercise
price more than fair value
|
—
|
—
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||||||||
Range
of Exercise
Prices
|
Number
Outstanding
|
Weighted-
Average
Remaining
Contractual
Life
(in Years)
|
Weighted-Average
Exercise
Price
per Share
|
Number
Exercisable
|
Weighted-Average
Exercise
Price
per Share
|
|||||||||||
$
0.10 — 2.00
|
1,051,462
|
5.37
|
$
|
0.97
|
1,047,995
|
$
|
0.97
|
|||||||||
2.01
— 4.75
|
1,136,599
|
4.81
|
3.79
|
1,100,154
|
3.80
|
|||||||||||
4.86
— 5.30
|
809,330
|
7.60
|
5.07
|
406,677
|
5.05
|
|||||||||||
5.33
— 5.35
|
1,487,321
|
7.57
|
5.35
|
862,709
|
5.35
|
|||||||||||
5.38
— 5.87
|
1,064,995
|
8.30
|
5.71
|
624,921
|
5.69
|
|||||||||||
5.91
— 6.36
|
961,247
|
8.64
|
6.24
|
186,329
|
6.20
|
|||||||||||
6.44
— 7.38
|
1,097,323
|
8.76
|
6.71
|
234,764
|
6.63
|
|||||||||||
7.40
— 10.60
|
1,015,301
|
6.73
|
8.69
|
558,591
|
8.58
|
|||||||||||
10.93
— 160.00
|
768,797
|
6.04
|
35.39
|
673,464
|
37.95
|
|||||||||||
250.00
— 250.00
|
8,050
|
3.07
|
250.00
|
8,050
|
250.00
|
|||||||||||
Total
|
9,400,425
|
7.11
|
7.96
|
5,703,614
|
8.85
|
Shares
|
Weighted
Average Grant Date Fair Value
|
||||||
Nonvested
at December 31, 2005
|
—
|
—
|
|||||
Granted
|
446,303
|
$
|
6.32
|
||||
Vested
|
—
|
—
|
|||||
Forfeited
|
(33,950
|
)
|
$
|
6.39
|
|||
Nonvested
at December 31, 2006
|
412,353
|
$
|
6.31
|
For
the year ended
December
31, 2006,
|
||||
Risk-free
rate
|
4.95
|
%
|
||
Expected
dividend yield
|
0
|
%
|
||
Expected
volatility
|
55
|
%
|
||
Expected
life
|
0.5
to 1 year
|
Year
ending December 31:
|
||||
2007
|
$
|
7,444
|
||
2008
|
6,113
|
|||
2009
|
5,718
|
|||
2010
|
2,755
|
|||
2011
and thereafter
|
3,456
|
|||
$
|
25,486
|
Year
ending December 31:
|
||||
2007
|
$
|
1,901
|
||
2008
|
1,066
|
|||
2009
|
266
|
|||
$
|
3,233
|
|
For
the Year Ended December 31,
|
|||||||||
|
2006
|
2005
|
2004
|
|||||||
Numerator:
|
||||||||||
Net
income (loss)
|
$
|
(8,089
|
)
|
$
|
12,895
|
$
|
19,068
|
|||
Denominator:
|
||||||||||
Denominator
for basic net income per common share
|
||||||||||
Weighted
average shares outstanding
|
64,572,603
|
63,353,779
|
60,770,680
|
|||||||
Effect
of dilutive securities:
|
||||||||||
Stock
options
|
--
|
2,923,563
|
4,875,077
|
|||||||
Denominator
for diluted net income (loss) per common share — adjusted
|
64,572,603
|
66,277,342
|
65,645,757
|
|||||||
Basic
net income (loss) per common share
|
$
|
(0.13
|
)
|
$
|
0.20
|
$
|
0.31
|
|||
Diluted
net income (loss) per common share
|
$
|
(0.13
|
)
|
$
|
0.19
|
$
|
0.29
|
|
For
the Year Ended December 31,
|
|
||||||||
|
|
2006
|
|
2005
|
|
2004
|
||||
Options
to purchase common stock
|
9,400,425
|
1,904,406
|
804,250
|
|||||||
Unvested
restricted stock awards
|
323,303
|
--
|
--
|
/s/ Kenneth D. Denman | /s/ Frank E. Verdecanna | ||
|
|
||
Kenneth
D.
Denman Chairman, President and Chief Executive Officer (Principal Executive Officer) |
Frank
E.
Verdecanna Vice President and Chief Financial Officer (Principal Financial Officer) |
Signature
|
Title
|
Date
|
/s/
Kenneth D. Denman
|
Chairman,
President, Chief Executive Officer and Director
|
March
28, 2007
|
Kenneth
D. Denman
|
||
/s/
Frank E. Verdecanna
|
Vice
President and Chief Financial Officer (Principal Financial
Officer)
|
March
28, 2007
|
Frank
E. Verdecanna
|
||
/s/
A. Gary Ames
|
Director
|
March
28, 2007
|
A.
Gary Ames
|
||
/s/
John D. Beletic
|
Director
|
March
28, 2007
|
John
D. Beletic
|
||
/s/
Peter G. Bodine
|
Director
|
March
28, 2007
|
Peter
G. Bodine
|
||
/s/
Peter C. Clapman
|
Director
|
March
28, 2007
|
Peter
C. Clapman
|
||
/s/
Michael J. McConnell
|
Director
|
March
28, 2007
|
Michael
J. McConnell
|
||
/s/
Arthur C. Patterson
|
Director
|
March
28, 2007
|
Arthur
C. Patterson
|
||
/s/
Olof Pripp
|
Director
|
March
28, 2007
|
Olof
Pripp
|
||
/s/
Allan R. Spies
|
Director
|
March
28, 2007
|
Allan
R. Spies
|
Exhibit
Number
|
Description
of Document
|
2.1
|
Agreement
and Plan of Merger dated October 26, 2004 by and among iPass Inc.,
Montage
Acquisition Corp., Mobile Automation, Inc. and David Strohm, as
Stockholders’ Agent.(1)
|
2.2
|
Agreement
of Merger among iPass Inc., Keystone Acquisition Sub, Inc. and GoRemote
Internet Communications, Inc. dated December 9,
2005.(2)
|
3.1
|
Amended
and Restated Certificate of Incorporation.(3)
|
3.2
|
Bylaws,
as amended.(3)
|
4.1
|
Reference
is made to Exhibits 3.1 and 3.2
|
4.2
|
Specimen
stock certificate.(3)
|
10.1*
|
2003
Equity Incentive Plan and form of related agreements, as
amended.(3)
|
10.1.1*
|
Form
of Stock Option Grant Notice under the 2003 Equity Incentive Plan
(containing additional vesting terms).(4)
|
10.2*
|
2003
Non-Employee Directors Plan, as amended.(5)
|
10.3*
|
1999
Stock Option Plan and form of related agreements.(3)
|
10.4*
|
1997
Stock Option Plan and form of related agreements.(3)
|
10.5*
|
Interim
1999 Stock Option Plan.(3)
|
10.6*
|
Restricted
Stock Purchase Agreement by and between the Registrant and Anurag
Lal
dated November 8, 1999.(3)
|
10.7*
|
2003
Employee Stock Purchase Plan and form of related agreements, as
amended.(3)
|
10.8
|
Lease
Agreement, dated October 26, 1999, between Registrant and Westport
Joint
Venture (as amended).(3)
|
10.9
|
Amended
and Restated Investor Rights Agreement, dated August 8, 2000, between
Registrant, founders and holders of the Registrant’s Preferred
Stock.(3)
|
10.10
|
Form
of Indemnity Agreement.(3)
|
10.11*
|
Employment
Agreement, dated November 13, 2001, between Registrant and Kenneth
D.
Denman.(3)
|
10.12*
|
Form
of Offer Letter to Executive Officers.(3)
|
10.13
|
OEM
Service Provider License Agreement, dated February 29, 2000, between
RSA
Security, Inc. and the Registrant, and amendments
thereto.(4)
|
10.14
|
Support
Agreement, dated February 29, 2000, by and between RSA Security,
Inc.(4)
|
10.15
|
Loan
and Security Agreement dated September 4, 2001 between Silicon Valley
Bank
and the Registrant, and modifications thereto.(3)
|
10.16*
|
2007
Annual Executive Management Bonus Plan.(6)
|
10.17*
|
Outside
Director Compensation Arrangement.(7)
|
10.18*
|
Executive
Officer Cash Compensation Arrangement.(8)
|
10.19*
|
Offer
Letter to Thomas Thimot dated December 9, 2005.(9)
|
10.20*
|
Transition
Agreement with John Thuma dated January 20, 2006.(10)
|
10.21*
|
Letter
Agreement pursuant to which Michael J. McConnell and Peter C. Clapman
were
elected to Registrant’s Board of Directors.(11)
|
24.1
|
Power
of Attorney (reference is made to the signature page of this Form
10-K).
|