<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 8-K/A
(AMENDMENT NO. 1 TO
CURRENT REPORT ON FORM 8-K DATED
JUNE 12, 1997)
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 12, 1997
------------------------------
i2 TECHNOLOGIES, INC.
- -------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
Delaware 0-28030 75-2294945
- -------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
909 E. Las Colinas Blvd., 16th Floor, Irving, Texas 75039
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: (214) 860-6000
-------------------------------
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(c) Exhibits.
No. Description
11.1* Supplemental Statement of Computation of Net Income per
Share.
23.1 Consent of Ernst & Young LLP.
27.1* Supplemental Financial Data Schedule.
99.1 Supplemental Selected Financial Data of the Registrant
as of and for the Years ended December 31, 1992, 1993,
1994, 1995 and 1996.
99.2* Supplemental Management's Discussion and Analysis of
Financial Condition and Results of Operations of the
Registrant for the Years ended December 31, 1994, 1995
and 1996.
99.3# The following Supplemental Consolidated Financial
Statements of the Registrant: Page
1. Report of Independent Auditors .................F-1
2. Supplemental Consolidated Balance Sheets
as of December 31, 1995 and 1996 .............F-2
3. Supplemental Consolidated Statements of
Income for the Years Ended December 31,
1994, 1995 and 1996 ..........................F-3
4. Supplemental Consolidated Statements of
Stockholders' Equity for the Years Ended
December 31, 1994, 1995 and 1996 .............F-4
5. Supplemental Consolidated Statements of
Cash Flows for the Years Ended
December 31, 1994, 1995 and 1996 .............F-5
6. Notes to Supplemental Consolidated Financial
Statements....................................F-6
-----------------------
* Previously filed.
# Previously filed in their entirety except for Note 13 of Notes
to Supplemental Consolidated Financial Statements. The
Supplemental Consolidated Financial Statements are being
refiled for the sole purpose of including Note 13.
-2-
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
i2 TECHNOLOGIES, INC.
Dated: July 1, 1997 By: /s/ David F. Cary
-----------------------------------
David F. Cary,
Vice President and
Chief Financial Officer
-3-
<PAGE> 4
EXHIBIT INDEX
Exhibit
Number
- -------
11.1* Supplemental Statement of Computation of Net Income per Share.
23.1 Consent of Ernst & Young LLP.
27.1* Supplemental Financial Data Schedule.
99.1 Supplemental Selected Financial Data of the Registrant as of and for
the Years ended December 31, 1992, 1993, 1994, 1995 and 1996.
99.2* Supplemental Management's Discussion and Analysis of Financial
Condition and Results of Operations of the Registrant for the Years
ended December 31, 1994, 1995 and 1996.
99.3# The following Supplemental Consolidated Financial Statements of
the Registrant:
Page
----
1. Report of Independent Auditors ................................F-1
2. Supplemental Consolidated Balance Sheets
as of December 31, 1995 and 1996 ............................F-2
3. Supplemental Consolidated Statements of
Income for the Years Ended December 31,
1994, 1995 and 1996 .........................................F-3
4. Supplemental Consolidated Statements of
Stockholders' Equity for the Years Ended
December 31, 1994, 1995 and 1996 ............................F-4
5. Supplemental Consolidated Statements of
Cash Flows for the Years Ended
December 31, 1994, 1995 and 1996 ............................F-5
6. Notes to Supplemental Consolidated Financial
Statements ..................................................F-6
- -----------------------
*Previously filed.
#Previously filed in their entirety except for Note 13 of Notes to Supplemental
Consolidated Financial Statements. The Supplemental Consolidated Financial
Statements are being refiled for the sole purpose of including Note 13.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements on
Form S-8 (File Nos. 333-03703, 333-27009 and 333-28147) and on Form S-3 (File
Nos. 333-29339 and 333-29341) of i2 Technologies, Inc. of our report dated June
12, 1997, with respect to the supplemental consolidated financial statements of
i2 Technologies, Inc. included in this Amendment No. 1 to Current Report on
Form 8-K dated June 12, 1997.
ERNST & YOUNG LLP
Dallas, Texas
June 30, 1997
<PAGE> 1
EXHIBIT 99.1
SUPPLEMENTAL SELECTED CONSOLIDATED FINANCIAL DATA
The following supplemental selected consolidated financial data should
be read in conjunction with the "Supplemental Management's Discussion and
Analysis of Financial Condition and Results of Operations" included as Exhibit
99.2 in the Company's Current Report on Form 8-K dated June 12, 1997. The
statement of income data for the years ended December 31, 1994, 1995 and 1996,
and the balance sheet data at December 31, 1995 and 1996 are derived from the
Supplemental Consolidated Financial Statements included in Exhibit 99.3 of this
Amendment No. 1 to Current Report on Form 8-K dated June 12, 1997 which have
been audited by Ernst & Young LLP, independent auditors. The balance sheet data
at December 31, 1994 are derived from financial statements not included herein
which have been audited by Ernst & Young LLP. The statement of income data for
the years ended December 31, 1992 and 1993 and the balance sheet data at
December 31, 1992 and 1993 are derived from unaudited financial statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues:
Software licenses $ 1,052 $ 4,324 $ 9,833 $ 20,535 $ 57,508
Services 2,231 1,957 3,334 6,767 22,230
Maintenance 72 318 1,036 3,225 8,178
--------- --------- --------- --------- ---------
Total revenues 3,355 6,599 14,203 30,527 87,916
--------- --------- --------- --------- ---------
Costs and expenses:
Cost of software licenses 10 76 95 135 151
Cost of services and maintenance 1,039 1,360 2,200 5,606 18,631
Sales and marketing 545 1,529 4,381 9,866 33,724
Research and development 739 1,251 2,483 5,506 17,005
General and administrative 750 1,144 1,931 4,648 8,734
--------- --------- --------- --------- ---------
Total costs and expenses 3,083 5,360 11,090 25,761 78,245
--------- --------- --------- --------- ---------
Operating income 272 1,239 3,113 4,766 9,671
Other income (expense), net (18) (74) (83) (117) 1,805
--------- --------- --------- --------- ---------
Income before income taxes 254 1,165 3,030 4,649 11,476
Provision for income taxes 22 456 1,294 1,584 4,274
--------- --------- --------- --------- ---------
Net income $ 232 $ 709 $ 1,736 $ 3,065 $ 7,202
========= ========= ========= ========= =========
Net income per share $ 0.01 $ 0.03 $ 0.07 $ 0.11 $ 0.23
Shares used in computing net income
per share 21,196 23,751 25,871 28,533 31,774
BALANCE SHEET DATA:
Working capital $ (67) $ 265 $ 1,900 $ 6,185 $ 58,824
Total assets 1,275 3,844 9,597 23,322 101,133
Long-term debt, less current portion 289 283 670 1,075 100
Total stockholders' equity 66 780 2,516 8,677 68,648
</TABLE>
<PAGE> 1
EXHIBIT 99.3
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
i2 Technologies, Inc.
We have audited the accompanying supplemental consolidated balance sheets of i2
Technologies, Inc. (formed as a result of the merger of i2 Technologies, Inc.,
Think Systems Corporation, Think Systems Private Limited and Optimax Systems
Corporation) as of December 31, 1995 and 1996, and the related supplemental
consolidated statements of income, stockholders equity, and cash flows for each
of the three years in the period ended December 31, 1996. The supplemental
consolidated financial statements give retroactive effect to the merger of i2
Technologies, Inc., Think Systems Corporation, Think Systems Private Limited
and Optimax Systems Corporation on May 15, 1997, which has been accounted for
using the pooling of interests method as described in the notes to the
supplemental consolidated financial statements. These supplemental financial
statements are the responsibility of the management of i2 Technologies, Inc.
Our responsibility is to express an opinion on these supplemental consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the supplemental consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of i2 Technologies, Inc. at December 31, 1995 and 1996, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1996, after giving retroactive effect to
the merger of i2 Technologies, Inc., Think Systems Corporation, Think Systems
Private Limited and Optimax Systems Corporation, as described in the notes to
the supplemental consolidated financial statements, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Dallas, Texas
June 12, 1997
F-1
<PAGE> 2
i2 TECHNOLOGIES, INC.
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,383 $ 36,078
Short-term investments -- 18,031
Accounts receivable, net of allowance for doubtful accounts
of $925 and $1,269, respectively 9,969 33,615
Notes receivable - stockholders -- 1,000
Income tax receivable 1,151 --
Prepaid and other current assets 560 2,219
Deferred income taxes 401 --
------------ ------------
Total current assets 19,464 90,943
Furniture and equipment, net 3,726 8,934
Deferred income taxes and other assets 132 1,256
------------ ------------
Total assets $ 23,322 $ 101,133
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,203 $ 4,583
Accrued liabilities 994 4,390
Accrued compensation and related expenses 1,311 3,794
Current portion of long-term debt 278 --
Due to stockholders 525 --
Current portion of deferred revenue 8,546 18,932
Income taxes payable 422 363
Deferred income taxes -- 57
------------ ------------
Total current liabilities 13,279 32,119
Long-term debt 1,075 100
Deferred income taxes 291 266
------------ ------------
Total liabilities 14,645 32,485
------------ ------------
Commitments
Stockholders' equity:
Preferred Stock, $.001 par value, 5,000,000 shares authorized,
none issued -- --
Common Stock, $.00025 par value, 50,000,000 shares
authorized, 25,697,184 and 28,883,410 shares issued
and outstanding, respectively 6 7
Additional paid-in capital 5,180 58,074
Deferred compensation (1,739) (1,865)
Retained earnings 5,230 12,432
------------ ------------
Total stockholders' equity 8,677 68,648
------------ ------------
Total liabilities and stockholders' equity $ 23,322 $ 101,133
============ ============
</TABLE>
See accompanying notes.
F-2
<PAGE> 3
i2 TECHNOLOGIES, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Software licenses $ 9,833 $ 20,535 $ 57,508
Services 3,334 6,767 22,230
Maintenance 1,036 3,225 8,178
----------- ----------- -----------
Total revenues 14,203 30,527 87,916
----------- ----------- -----------
Costs and expenses:
Cost of software licenses 95 135 151
Cost of services and maintenance 2,200 5,606 18,631
Sales and marketing 4,381 9,866 33,724
Research and development 2,483 5,506 17,005
General and administrative 1,931 4,648 8,734
----------- ----------- -----------
Total costs and expenses 11,090 25,761 78,245
----------- ----------- -----------
Operating income 3,113 4,766 9,671
Other income (expense), net (83) (117) 1,805
----------- ----------- -----------
Income before income taxes 3,030 4,649 11,476
Provision for income taxes 1,294 1,584 4,274
----------- ----------- -----------
Net income $ 1,736 $ 3,065 $ 7,202
=========== =========== ===========
Net income per share $ 0.07 $ 0.11 $ 0.23
Weighted average common and common
equivalent shares outstanding 25,871 28,533 31,774
</TABLE>
See accompanying notes.
F-3
<PAGE> 4
i2 TECHNOLOGIES, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------------- PAID-IN DEFERRED RETAINED STOCKHOLDER'S
SHARES AMOUNT CAPITAL COMPENSATION EARNINGS EQUITY
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 19,342 $ 5 $ 176 $ -- $ 599 $ 780
Net income -- -- -- -- 1,736 1,736
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1994 19,342 5 176 -- 2,335 2,516
Exercise of stock options 5,703 1 323 -- -- 324
Deferred compensation related to
stock options -- -- 1,810 (1,810) -- --
Amortization of deferred compensation -- -- -- 71 -- 71
Issuance of Think and Optimax preferred
stock which was exchanged for
common stock in merger 652 -- 2,871 -- -- 2,871
Distributions to Think stockholders -- -- -- -- (170) (170)
Net income -- -- -- -- 3,065 3,065
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1995 25,697 6 5,180 (1,739) 5,230 8,677
Exercise of stock options and issuance
under stock purchase plan 519 -- 1,816 -- -- 1,816
Common stock issued, net of offering
costs of $4,288 2,390 1 43,715 -- -- 43,716
Tax benefit of stock options -- -- 1,353 -- -- 1,353
Deferred compensation related to
stock options -- -- 910 (910) -- --
Amortization of deferred compensation -- -- -- 784 -- 784
Issuance of Think preferred stock
which was exchanged for common
stock in merger 277 -- 5,100 -- -- 5,100
Net income -- -- -- -- 7,202 7,202
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 1996 28,883 $ 7 $ 58,074 ($ 1,865) $ 12,432 $ 68,648
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 5
i2 TECHNOLOGIES, INC.
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,736 $ 3,065 $ 7,202
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 494 1,059 2,611
Provision for losses on receivables 829 66 344
Amortization of deferred compensation -- 71 784
Deferred income taxes 109 (646) (3)
Tax benefit of stock options -- -- 1,353
Changes in operating assets and liabilities:
Accounts receivable (2,588) (6,213) (23,990)
Income tax receivable -- (1,151) 535
Prepaid and other assets (199) (365) (1,706)
Accounts payable 171 561 3,380
Accrued liabilities 380 310 3,396
Accrued compensation and related expenses 392 905 2,483
Income taxes payable (106) 324 (59)
Deferred revenue 2,037 5,384 10,361
---------- ---------- ----------
Net cash provided by operating activities 3,255 3,370 6,691
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Notes receivable - stockholders -- -- (1,000)
Purchases of furniture and equipment (1,351) (3,034) (7,819)
Proceeds from the sale of furniture and equipment 23 -- --
Purchases of short-term investments -- -- (37,531)
Proceeds from sale of short-term investments -- -- 19,500
---------- ---------- ----------
Net cash used in investing activities (1,328) (3,034) (26,850)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving line of credit 450 500 --
Payments on revolving line of credit -- (850) --
Proceeds from long-term debt 550 3,110 400
Payments on long-term debt (89) (2,642) (1,653)
Advances from stockholders, net 69 165 (525)
Distributions to stockholders -- (170) --
Issuance of Think and Optimax preferred stock which
was exchanged for common stock in merger -- 2,871 5,100
Net proceeds from sale of common stock
and exercise of stock options -- 324 45,532
---------- ---------- ----------
Net cash provided by financing activities 980 3,308 48,854
---------- ---------- ----------
Net increase in cash and cash equivalents 2,907 3,644 28,695
Cash and cash equivalents at beginning of period 832 3,739 7,383
---------- ---------- ----------
Cash and cash equivalents at end of period $ 3,739 $ 7,383 $ 36,078
========== ========== ==========
</TABLE>
See accompanying notes.
F-5
<PAGE> 6
i2 TECHNOLOGIES, INC.
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY
i2 Technologies, Inc. (the "Company"), incorporated in 1989, develops,
markets and sells client/server- based decision support software products for
supply chain management and related applications. The Company also provides
services such as consulting, training and maintenance. The Company's products
and services are primarily provided to large and medium sized manufacturing and
distribution companies which operate in many industries located throughout the
world.
In May 1997, the Company acquired Think Systems Corporation ("Think"),
a demand planner developer; acquired Optimax Systems Corporation ("Optimax"), a
scheduling and sequencing software company; and entered into an agreement to
acquire Think Systems Private Limited ("Think India"), an offshore development
house (see Note 3).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The accompanying consolidated financial
statements include the accounts of the Company and its subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation.
USE OF ESTIMATES. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates.
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS. Cash equivalents
are highly liquid investments with insignificant interest rate risk and
original maturities of 90 days or less and are stated at amounts which
approximate fair value, based on quoted market prices. At December 31, 1995,
cash equivalents consist principally of overnight repurchase agreements. At
December 31, 1996, cash equivalents consist principally of overnight repurchase
agreements and highly liquid debt securities of corporations, municipalities
and the U.S. Government.
The Company accounts for its cash equivalents and short-term
investments under Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." Management
determines the appropriate classification of debt securities at the time of
purchase and reevaluates such designation as of each subsequent balance sheet
date. The Company considers its debt securities as "available-for-sale" and, in
accordance with SFAS No. 115, would record its investments at fair value.
However, as the difference between cost and fair value was immaterial at
December 31, 1996, no adjustment has been made to the historical carrying value
of the investments and no unrealized gains or losses have been recorded as a
separate component of stockholders' equity. Realized gains and losses to date
have not been material. The cost of debt securities sold is based on the
specific identification method.
At December 31, 1995, the Company had no investment in debt
securities. At December 31, 1996, the Company's debt securities include $14.5
million from the U.S. Government, $16.7 million from state and local
municipalities and $9.0 million from corporations, all of which mature within
one year. At December 31, 1996, $22.2 million of debt securities were included
in cash equivalents.
F-6
<PAGE> 7
CONCENTRATION OF CREDIT RISK. Financial instruments which potentially
subject the Company to a concentration of credit risk principally consist of
accounts receivable. As of December 31, 1995, approximately 44% of accounts
receivable were concentrated with three customers. As of December 31, 1996,
approximately 27% of accounts receivable were concentrated with three different
customers. The Company generally does not require collateral on accounts
receivable as the Company's customers are generally large, well established
companies. The Company periodically performs credit evaluations of its
customers and maintains reserves for potential losses.
FURNITURE AND EQUIPMENT. Furniture and equipment are stated at cost.
Depreciation expense is calculated using the straight-line method over seven
years for office furniture and fixtures and three years for computer equipment.
REVENUE RECOGNITION. The Company's revenues consist of software
license revenues, service revenues and maintenance revenues. Software license
revenues consist of sales of software licenses which are recognized upon
execution of a contract and shipment of the software, provided that no
significant vendor obligations remain outstanding, amounts are due within one
year and collection is considered probable by management. Service revenues are
derived from fees for consulting and training services and are recognized as
services are performed. Maintenance revenues are derived from customer support
agreements generally entered into in connection with the initial license sales
and subsequent renewals. Maintenance revenues are recognized ratably over the
term of the maintenance period. Payments for maintenance fees are generally
made in advance.
Customer payment terms vary. Amounts received in advance of satisfying
revenue recognition criteria are classified in current and long-term
liabilities as deferred revenue in the accompanying consolidated balance
sheets.
The Company generally warrants that its products will function
substantially in accordance with documentation provided to customers for
approximately six to twelve months following initial shipment to the customer.
As of December 31, 1996, the Company had not incurred any significant expenses
related to warranty claims.
COST OF SERVICES AND MAINTENANCE REVENUES. Cost of services and
maintenance consists primarily of costs associated with consulting and training
services. Cost of services and maintenance also includes the cost of providing
software maintenance to customers such as hotline telephone support, new
releases of software and updated user documentation.
SOFTWARE DEVELOPMENT COSTS. In accordance with SFAS No. 86,
"Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed," software development costs are expensed as incurred until
technological feasibility has been established, at which time such costs are
capitalized until the product is available for general release to customers. To
date, the establishment of technological feasibility of the Company's products
and general release of such software have substantially coincided. As a result,
software development costs qualifying for capitalization have been
insignificant and therefore, the Company has not capitalized any software
development costs.
NET INCOME PER SHARE. Net income per common share is computed based
upon the weighted average number of common shares outstanding and the effect of
dilutive common stock equivalents from the exercise of stock options using the
treasury stock method. In accordance with Securities and Exchange Commission
Staff Accounting Bulletins and Staff Policy, common and common equivalent
shares issued during the twelve month period prior to the date of the initial
filing of the Company's Registration Statement on Form S-1 have been included
in the net income per share calculations for 1994 and 1995 as if they were
outstanding for the entire period using the treasury stock method. Share and
per share amounts for 1994 and 1995 have been adjusted to reflect two stock
splits during 1995 (see Note 7). Fully diluted earnings per share is the same
as, or not materially different from, primary earnings per share and
accordingly, is not presented. The computation also gives retroactive effect to
the exchange of common shares in connection with the Think, Think India and
Optimax mergers (see Note 3).
F-7
<PAGE> 8
STOCK-BASED COMPENSATION PLANS. The Company has elected to continue to
account for its stock-based compensation plans utilizing the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," because, as discussed in Note 7, the alternative fair value
accounting provided for under SFAS No. 123, "Accounting for Stock-Based
Compensation," requires use of option valuation models that were not developed
for use in valuing employee stock options. However, SFAS No. 123 requires
disclosure of pro forma information regarding net income and net income per
share based on fair value accounting for stock-based compensation plans.
FOREIGN CURRENCY TRANSLATION. The Company has determined that the
functional currency of each of its foreign subsidiaries is the local currency.
The financial statements of its foreign subsidiaries are translated into U.S.
dollars using the current rate method in accordance with SFAS No. 52, "Foreign
Currency Translation." To date, translation adjustments and foreign currency
gains and losses have not been significant and accordingly, have not been
separately presented.
3. BUSINESS COMBINATIONS
On May 15, 1997, the Company entered into definitive agreements to
merge with Think and Optimax and to acquire Think India. Under the terms of
these agreements, the Company will issue 3,823,337 shares, 1,372,618 shares and
35,663 shares of its common stock for all the outstanding capital stock and all
unexpired and unexercised options of Think, Optimax and Think India,
respectively. The acquisition of Think India is subject to a number of
conditions, including requisite Indian regulatory approval. The Company expects
to obtain the necessary regulatory approvals by the end of 1997.
Think provides premium demand chain solutions, including an integrated
line of flexible, client/server- based software applications, for sales,
marketing and logistics departments representing a variety of industries
including consumer packaged goods, high technology, pharmaceutical, apparel,
automotive and other product driven specializations. Think India is controlled
by the former principal shareholders of Think and is engaged primarily in
research and development services provided to Think. Optimax develops, markets
and implements supply chain sequencing software using unique genetic algorithms
for customer-driven, make-to-order manufacturing.
Each of these business combinations was accounted for as a pooling of
interests, and accordingly, the supplemental consolidated financial statements
give retroactive effect to the mergers and include the combined operations of
i2 Technologies, Think, Optimax and Think India for all periods presented. The
following is a summary of the results of operations of the separate entities
for periods prior to the mergers (in thousands):
<TABLE>
<CAPTION>
i2 Technologies
(Prior to Think Pooling
Mergers) Think Optimax India Adjustments Combined
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1996:
Revenues $ 76,342 $ 11,376 $ 2,504 $ 789 $ (3,095) $ 87,916
Net income (loss) 6,092 (128) 48 203 987 7,202
1995:
Revenues $ 25,946 $ 4,977 $ 1,104 $ 665 $ (2,165) $ 30,527
Net income (loss) 3,774 58 51 169 (987) 3,065
1994:
Revenues $ 11,498 $ 2,272 $ 433 $ 340 $ (340) $ 14,203
Net income (loss) 2,186 (390) (123) 63 -- 1,736
</TABLE>
F-8
<PAGE> 9
Pooling adjustments have been recorded to eliminate (i) revenues and
expenses associated with software license royalties, consulting services and
maintenance charges provided to i2 Technologies by Think, and (ii) revenues and
expenses associated with research and development services provided to Think by
Think India.
The Company expects to incur approximately $5.3 million in certain
expenses related to these transactions. These costs include, among other
things, investment banking, legal and accounting fees and expenses. The Company
anticipates that these expenses will be recorded in the second quarter of 1997.
On April 1, 1997, the Company completed the acquisition of the
Operations Planning Group ("OPG"), a business activity of Computer Sciences
Corporation ("CSC"), for a cash purchase price of $1.0 million. OPG provides
operation planning environment ("OPE") optimization software for planning and
scheduling for customers in the consumer packaged goods industry. The Company
has assumed and is committed to the contractual obligations of the OPE customer
base in return for maintenance revenue, and as part of the agreement, all
employees of OPG became employees of the Company. The acquisition will be
accounted for under the purchase accounting method, and a substantial portion
of the purchase price will be recorded as in-process research and development
and expensed during the second quarter of 1997. Additionally, the Company has
agreed to make available a certain amount of consulting revenue opportunities
to CSC within a three-year period from the date of the acquisition. If the
agreed upon consulting revenue opportunities are not made available to CSC, the
Company will be required to make an additional cash payment to CSC at the end
of the three-year period equal to the gross profit typically realized on such
consulting revenue. Such payment, if any, would be recorded as an increase in
the purchase price.
4. FURNITURE AND EQUIPMENT
Furniture and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1996
-------- --------
<S> <C> <C>
Computer equipment $ 4,724 $ 10,498
Furniture and fixtures 1,041 2,563
-------- --------
5,765 13,061
Less accumulated depreciation (2,039) (4,127)
-------- --------
$ 3,726 $ 8,934
======== ========
</TABLE>
5. BORROWINGS
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1996
--------- ---------
<S> <C> <C>
Revolving Credit Agreement $ 100 $ 100
Term Note 753 --
New Equipment Credit Agreement 500 --
--------- ---------
1,353 100
Less current maturities (278) --
--------- ---------
$ 1,075 $ 100
========= =========
</TABLE>
F-9
<PAGE> 10
The Company's revolving credit agreement (the "Revolving Credit
Agreement") with NationsBank of Texas, N.A. (the "Lender"), which was amended
and extended until June 1, 1998, is unsecured and is no longer subject to a
borrowing base limitation. The maximum amount of borrowings under the Revolving
Credit Agreement is $3.0 million, and the Revolving Credit Agreement provides
for a commitment fee of 1/2 of 1% of the average daily unused portion of the
commitment amount. At December 31, 1996, the Company had $100,000 of borrowings
outstanding under the Revolving Credit Agreement which bear interest at the
Lender's prime lending rate (8.25% at December 31, 1996). The Revolving Credit
Agreement contains certain financial covenants and restrictions as to various
matters including the Company's ability to make certain investments or incur
additional indebtedness and the maintenance of specified levels of tangible net
worth and certain financial ratios. At December 31, 1996, the Company was in
compliance with such covenants and restrictions.
In June 1996, the Company repaid all of the outstanding balances under
the Term Note and the New Equipment Credit Agreement of approximately $1.2
million.
Cash paid for interest in 1994, 1995 and 1996 was approximately
$86,000, $255,000 and $248,000, respectively.
6. COMMITMENTS
The Company leases its office facilities and certain office equipment
under operating leases which expire at various dates through 2001. Some of the
Company's leases provide for escalating minimum rent. Rent expense is
recognized on a straight-line basis over the life of such leases. The Company
has renewal options for most of its operating leases. Total rent expense
incurred during 1994, 1995 and 1996 was approximately $244,000, $580,000 and
$2.1 million, respectively.
Future minimum lease payments under all noncancellable operating
leases as of December 31, 1996 are as follows (in thousands):
<TABLE>
<S> <C> <C>
1997 $3,018
1998 2,815
1999 2,115
2000 1,729
2001 161
------
Total minimum lease payments $9,838
======
</TABLE>
7. STOCKHOLDERS' EQUITY
INITIAL PUBLIC OFFERING. In May 1996, the Company completed the
initial public offering of its Common Stock. A total of 2,390,400 shares of
Common Stock were sold by the Company resulting in net proceeds to the Company
of $43.7 million after deducting expenses of the offering of $745,000 and the
underwriting discount.
STOCK SPLITS. In April 1995 and again in December 1995, the Company's
Common Stock was split two-for-one. All share and per share amounts have been
adjusted to reflect both stock splits as though they had occurred at the
beginning of the initial period presented.
EMPLOYEE STOCK PURCHASE PLAN. In March 1996, the Board adopted and the
stockholders approved an Employee Stock Purchase Plan. In November 1996, the
Board adopted an International Employee Stock Purchase Plan for employees of
its wholly-owned subsidiaries. The Employee Stock Purchase Plan and the
International Employee Stock Purchase Plan (collectively, the "Purchase Plans")
are designed to allow eligible employees of the
F-10
<PAGE> 11
Company to purchase shares of Common Stock through periodic payroll
deductions. The Company has reserved 500,000 shares of Common Stock for
issuances under the Purchase Plans.
Payroll deductions may not exceed the lesser of 15% of a participant's
base salary or $21,250 per year, and employees may purchase a maximum of 1,000
shares per purchase period under the Purchase Plans. The purchase price per
share will be 85% of the lesser of the fair market value of the Common Stock on
the start of the purchase period or the fair market value at the end of the
purchase period. Participation may be terminated at any time by the employee
and automatically ends upon termination of employment with the Company. Six
month offering periods will commence on each November 1 and May 1, except for
the initial offering period which commenced on April 25, 1996 and ended on
October 31, 1996. Under the Purchase Plans, 60,145 shares were issued in
connection with the offering period ended October 31, 1996.
1992 STOCK PLAN. Under the Company's 1992 Stock Plan, the Company's
Board of Directors (the "Board") granted incentive stock options to employees
of the Company and nonqualified options to a consultant of the Company. The
options generally vest over a four year period commencing on or before the date
of grant.
1995 STOCK OPTION/STOCK ISSUANCE PLAN. In September 1995, the
stockholder and the Board approved the 1995 Stock Option/Stock Issuance Plan
(the "1995 Plan") which replaced the 1992 Stock Plan. All options outstanding
under the 1992 Stock Plan were incorporated into the 1995 Plan. Under the 1995
Plan, the amount of shares of Common Stock originally reserved for issuance was
10,000,000 shares which was subsequently increased to 12,000,000 shares. The
1995 Plan is divided into the following three equity programs: (i) the
Discretionary Option Grant Program, (ii) the Stock Issuance Program and (iii)
the Automatic Option Grant Program.
The Discretionary Option Grant Program provides for the grant of
incentive stock options ("Incentive Options") to employees of the Company and
for the grant of nonqualified stock options to employees, directors and
consultants of the Company. Exercise prices may not be less than 100% and 85%
of the fair market value at the date of grant for Incentive Options and
nonqualified options, respectively. Options granted under the Discretionary
Option Grant Program generally vest in four equal annual increments and expire
after ten years. Some options granted under the Discretionary Option Grant
Program are immediately exercisable, subject to a right of repurchase by the
Company at the original exercise price for all unvested shares.
Under the Stock Issuance Program, the Board or a committee of the
Board (the "Plan Administrator") may grant shares of the Company's Common Stock
to any person at any time, at such price and on such terms as established by
the Plan Administrator. The purchase price per share cannot be less than 85% of
the fair market value of the Company's Common Stock on the issuance date.
Under the Automatic Option Grant Program, each person who is first
elected or appointed as a non-employee Board member shall automatically be
granted a nonqualified option to purchase 1,000 common shares of the Company.
On the date of each Annual Stockholders Meeting each non-employee Board member
shall automatically be granted an additional option to purchase 1,000 shares of
the Company's Common Stock, subject to certain conditions.
THINK STOCK OPTION PLANS. Think's Board of Directors have adopted and
the shareholders have approved incentive stock option plans for employees,
directors and consultants of Think (the "Think Plans"). Under the Think Plans,
the Board of Directors granted incentive and nonqualified stock options to
employees, directors and consultants at prices not less than the estimated fair
market value of Think's common stock at the date of grant.
In connection with the acquisition of Think, all of the options
outstanding under the Think Plans were assumed by the Company and immediately
vested.
F-11
<PAGE> 12
OPTIMAX STOCK OPTION PLAN. During 1996, Optimax's Board of Directors
adopted and the shareholders approved the Optimax Systems Corporation Stock
Option Plan (the "Optimax Stock Option Plan"). Under the Optimax Stock Option
Plan, the Board of Directors granted nonqualified stock options to employees of
Optimax at prices equal to the estimated fair market value of Optimax's common
stock on the date of grant. The options generally vest over a five year period
commencing on or before the date of grant. In connection with the acquisition
of Optimax, all such options were assumed by the Company.
Option activity under the Company's stock option plans, including
Think and Optimax, is as follows:
<TABLE>
<CAPTION>
SHARES OPTIONS OUTSTANDING
-------------------------------------------
AVAILABLE NUMBER WEIGHTED-AVERAGE
FOR GRANT OF SHARES EXERCISE PRICE
---------- ---------- ----------------
<S> <C> <C> <C>
Balance, December 31, 1993 784,668 7,612,180 $ 0.02
Granted (1,124,132) 1,124,132 0.10
Canceled 486,000 (486,000) 0.03
---------- ----------
Balance, December 31, 1994 146,536 8,250,312 0.03
Authorized 1,603,152 -- --
Granted (1,125,667) 1,125,667 0.63
Exercised -- (5,703,242) 0.06
Canceled 23,300 (23,300) 0.05
---------- ----------
Balance, December 31, 1995 647,321 3,649,437 0.17
Authorized 2,683,125 -- --
Granted (1,606,317) 1,606,317 9.71
Issued (615) -- 14.33
Exercised -- (458,058) 1.66
Canceled 87,672 (87,672) 11.71
---------- ----------
Balance, December 31, 1996 1,811,186 4,710,024 3.07
========== ==========
</TABLE>
Under the 1995 Plan, each outstanding option and unvested stock
issuance will be subject to accelerated vesting under certain circumstances
upon an acquisition of the Company in a stockholder-approved merger or asset
sale. In addition, the Plan Administrator has the discretion to accelerate
vesting of outstanding options upon consummation of any other transaction which
results in a change in control of the Company.
During 1995 and 1996, 595,359 shares were purchased under options with
a weighted-average exercise price of $1.44 per share for which the optionee was
not vested as of December 31, 1996. These purchased but unvested shares are
held in escrow until the optionee vests in the shares and the optionee has all
rights as a shareholder with respect to these shares. These shares are reported
as issued and outstanding in the accompanying consolidated financial
statements.
All options outstanding at December 31, 1996 are Incentive Options
except for 381,822 options which are nonqualified options.
F-12
<PAGE> 13
Other information regarding options outstanding as of December 31,
1996 is as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF WEIGHTED AVERAGE REMAINING
SHARES EXERCISE PRICE CONTRACTUAL LIFE
--------------- ----------------------- --------------------
<S> <C> <C> <C>
Exercise price of $0.0175 - $12.11 4,391,974 $ 1.12 6.63 yrs.
Exercise price of $24.375 - $37.50 318,050 29.88 9.77
---------
Total options outstanding 4,710,024 3.07 6.84
=========
</TABLE>
As of December 31, 1996, 3,051,412 shares underlying options were
exercisable at prices ranging from $0.0175 to $12.11 per share with a weighted
average exercise price of $1.07 per share, and 1,000 shares underlying options
were exercisable at a price of $29.00 per share. As of December 31, 1995,
2,467,172 shares underlying options were exercisable at a weighted average
exercise price of $0.16 per share.
The Company recorded deferred compensation expense of $1.8 million and
$910,000 in 1995 and in the first quarter of 1996, respectively, for the
difference between the grant price and the deemed fair market value of the
Company's Common Stock underlying certain options granted. These amounts are
being amortized over the vesting period of the individual options, generally
four years.
PRO FORMA NET INCOME AND NET INCOME PER SHARE. Pro forma information
regarding net income and net income per share has been determined as if the
Company had accounted for its employee stock options and shares issued under
the Purchase Plans using the fair value method of SFAS No. 123. The fair value
for the stock options issued under the 1995 Plan was estimated at the date of
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 1995 and 1996, respectively: risk-free
interest rates of 6.32% and 6.17%; a volatility factor of the expected market
price of the Company's Common Stock of 0.46; a weighted-average expected life
of the option of 4 years; and no dividend yields. The fair value of the stock
options issued under the 1996 Think Plan was estimated at the date of grant
using the minimum value method for non-public companies permitted by SFAS No.
123 with the following assumptions: weighted-average risk-free interest rates
of 6.5%; no dividends; and a weighted-average expected life of the options of 7
years. The fair value of stock options issued under the Optimax Stock Option
Plan is not presented as the impact is immaterial.
The fair value for the shares issued under the Purchase Plans was
estimated as of the initial day of the purchase period using a Black-Scholes
option pricing model with the following weighted-average assumptions: a risk
free interest rate of 5.22%; a volatility factor of the expected market price
of the Company's Common Stock of 0.46; a weighted-average expected life of the
purchase right of 0.5 years; and no dividend yields. The weighted-average fair
value of the purchase rights granted under the Purchase Plans during 1996 was
$6.15.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value estimate,
in management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options and
Purchase Plan shares.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period and the
estimated fair value of the Purchase Plan shares is amortized to expense over
the purchase period.
F-13
<PAGE> 14
The Company's pro forma information follows (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
1995 1996
------------- ------------
<S> <C> <C>
Pro forma net income $3,083 $6,281
Pro forma net income per share 0.11 0.20
</TABLE>
The pro forma disclosures only include the effect of options granted
subsequent to January 1, 1995. Accordingly, the effects of applying SFAS No.
123 for the pro forma disclosures are not indicative of future effects of such
application.
Information regarding exercise prices and fair values of options
granted is as follows:
<TABLE>
<CAPTION>
1995 1996
------------- -------------
<S> <C> <C>
Number of options issued at fair market value of stock 181,800 1,296,047
Weighted-average exercise price per share $ 0.13 $ 11.15
Weighted-average fair value of options 0.06 4.55
Number of options issued at less than fair market value of stock 943,867 310,270
Weighted-average exercise price per share $ 0.72 $ 3.69
Weighted-average fair value of options 2.10 4.21
</TABLE>
8. INCOME TAXES
The Company's provision for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal $ 1,175 $ 1,730 $ 3,630
State 11 455 390
Foreign -- 37 264
Deferred
Federal (71) (477) 272
State 179 (101) (79)
Foreign -- (60) (203)
---------- ---------- ----------
Total $ 1,294 $ 1,584 $ 4,274
========== ========== ==========
</TABLE>
F-14
<PAGE> 15
The Company's provision for income taxes reconciles to the amount
computed by applying the statutory U.S. federal rate of 34% to income before
income taxes as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Expense computed at statutory rate $ 1,030 $ 1,581 $ 3,902
State taxes, net of federal tax benefit 106 139 266
Stock option compensation -- -- 215
Research and development tax credits (24) (175) (144)
Losses for which no tax benefits were recognized due to
Think's status as an S-Corporation 133 -- --
Other 49 39 35
----------- ----------- -----------
Provision for income taxes $ 1,294 $ 1,584 $ 4,274
=========== =========== ===========
</TABLE>
Deferred tax assets and liabilities at December 31, 1995 and December
31, 1996 are comprised of the following (in thousands):
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Deferred tax assets:
Foreign tax credits $ -- $ 612
Deferred revenue 888 848
Accrued liabilities 42 136
Bad debt allowance 163 229
Domestic net operating loss carryforwards 180 312
International net operating loss carryforwards -- 186
Research and development tax credits 67 78
Other 19 150
----------- -----------
Total deferred tax asset 1,359 2,551
----------- -----------
Deferred tax liabilities:
Depreciation (94) (127)
State income taxes (35) (28)
Cash method of accounting, net (627) (1,212)
Other (106) (68)
----------- -----------
Total deferred tax liability (862) (1,435)
----------- -----------
Net deferred tax asset $ 497 $ 1,116
=========== ===========
</TABLE>
The Company considers the earnings of foreign subsidiaries to be
permanently reinvested outside the United States. Accordingly, no United States
income tax on these earnings has been provided. The Company believes that any
United States income taxes due upon the repatriation of such earnings would be
fully offset by foreign tax credits.
At December 31, 1996, certain foreign subsidiaries of the Company have
net operating loss carryforwards for tax purposes totaling approximately
$831,000 which may be used to offset future taxable income of the subsidiaries.
Approximately $95,000 and $178,000 expire in the years 2002 and 2003,
respectively. The remaining carryforwards have no expiration.
F-15
<PAGE> 16
The Company paid income taxes of approximately $1.3 million, $3.1
million and $2.0 million in 1994, 1995 and 1996, respectively.
9. EMPLOYEE RETIREMENT PLAN
The Company has established 401(k) retirement plans (the "Retirement
Plans") that cover a majority of the Company's employees. Each eligible
employee may contribute up to 18% of their compensation, subject to certain
limitations, to the Retirement Plans. The Company may make contributions to the
Retirement Plans at the discretion of the Board. As of December 31, 1996, no
contributions had been made by the Company.
10. INTERNATIONAL OPERATIONS
International revenues were approximately $1.3 million, $2.2 million
and $20.6 million in 1994, 1995 and 1996, respectively. The Company's
international revenues were primarily generated from customers located in Asia,
Canada and Europe. In 1996, revenues from customers located in Europe accounted
for 13% of total revenues. Total assets from international operations, composed
primarily of accounts receivable, were $11.4 million or 11% of total assets as
of December 31, 1996.
11. MAJOR CUSTOMERS
During 1995, two customers accounted for approximately 11% and 10% of
total revenues. During 1996, one customer accounted for approximately 13% of
total revenues. This customer also accounted for approximately 11% of total
revenues in 1995.
12. RELATED PARTY TRANSACTIONS
As of December 31, 1996, the Company had $1.0 million of notes
receivable from certain of its common stockholders. These notes bore interest
at 6.78% and were repaid in May 1997.
Due to stockholders represents advances from stockholders which bear
interest at 8% and are due on demand. As of December 31, 1995, the Company had
$525,000 of such advances outstanding, which included accrued interest. All
outstanding amounts were repaid during 1996.
F-16
<PAGE> 17
13. QUARTERLY INFORMATION (UNAUDITED)
Summarized quarterly consolidated financial information for 1995 and
1996 is as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
1995
Revenues:
Software licenses $ 3,160 $ 4,291 $ 5,840 $ 7,244
Services 1,138 1,348 2,266 2,015
Maintenance 727 663 718 1,117
---------- --------- ---------- ---------
Total Revenues 5,025 6,302 8,824 10,376
---------- --------- ---------- ---------
Costs and expenses:
Cost of software licenses 17 19 42 57
Cost of services and maintenance 917 1,058 1,430 2,201
Sales and marketing 1,352 2,295 2,729 3,490
Research and development 791 989 1,517 2,209
General and administrative 706 809 1,184 1,949
---------- --------- ---------- ---------
Total costs and expenses 3,783 5,170 6,902 9,906
---------- --------- ---------- ---------
Operating income 1,242 1,132 1,922 470
Other income (expense), net (19) (43) (33) (22)
---------- --------- ---------- ---------
Income before income taxes 1,223 1,089 1,889 448
Provision for income taxes 417 370 644 153
---------- --------- ---------- ---------
Net income $ 806 $ 719 $ 1,245 $ 295
========== ========= ========== =========
Net income per share $ 0.03 $ 0.03 $ 0.04 $ 0.01
Shares used in per share computation 26,611 28,147 28,622 28,850
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
---------- --------- ------------ -----------
<S> <C> <C> <C> <C>
1996
Revenues:
Software licenses $ 11,135 $ 11,517 $ 15,847 $ 19,009
Services 2,848 4,460 6,034 8,888
Maintenance 1,411 1,825 2,086 2,856
---------- --------- ---------- ---------
Total Revenues 15,394 17,802 23,967 30,753
Costs and expenses:
Cost of software licenses 15 28 49 59
Cost of services and maintenance 2,487 4,043 5,402 6,699
Sales and marketing 5,809 7,615 9,222 11,078
Research and development 3,080 3,421 4,721 5,783
General and administrative 1,705 2,125 2,424 2,480
---------- --------- ---------- ---------
Total costs and expenses 13,096 17,232 21,818 26,099
---------- --------- ---------- ---------
Operating income 2,298 570 2,149 4,654
Other income (expense), net 133 463 583 626
---------- --------- ---------- ---------
Income before income taxes 2,431 1,033 2,732 5,280
Provision for income taxes 905 385 1,018 1,966
---------- --------- ---------- ---------
Net income $ 1,526 $ 648 $ 1,714 $ 3,314
========== ========= ========== =========
Net income per share $ 0.05 $ 0.02 $ 0.06 $ 0.10
Shares used in per share computation 29,358 31,807 32,670 33,063
</TABLE>
F-17
