SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(b)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File No. 333-5495
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0374596
(State of Incorporation) (I.R.S. Employer Identification No.)
Kungsgatan 12-14, Box 7733
103 95 Stockholm, Sweden
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (011)(468) 676-5000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period than the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES [ ] NO [X]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by this
report.
Class: Outstanding October 31, 1996:
Common Stock ($.01 par value) 15,606,053 shares
Class B Common Stock ($.01 par value) 12,088,200 shares
<PAGE>
<TABLE>
PART I. - FINANCIAL INFORMATION
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(in thousands, except per share figures)
<CAPTION>
10/31/96 4/30/96
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $20,925 $ 558
Accounts receivable, less allowance
for doubtful accounts of $272
and $321 at October 31, 1996 and
April 30, 1996, respectively 10,538 13,067
Accrued receivables 542 1,190
Prepaid expenses 1,461 1,160
Net assets of discontinued operations 1,426 1,111
Income taxes receivable 28 48
Other current assets 326 169
------ ------
Total current assets 35,246 17,303
Non-current assets:
Property and equipment, net 2,335 1,873
Deferred income taxes 2,786 1,988
Other non-current assets 249 160
----- -----
Total non-current assets 5,370 4,021
----- -----
Total Assets $40,616 $21,324
======= =======
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS EQUITY
<S> <C> <C>
Short term borrowings $ 0 $ 7,424
Current portion of capital
lease obligations 414 251
Accounts payable 2,067 1,464
Accrued expenses and other
current liabilities 1,934 3,777
Accrued payroll and employee benefits 2,633 3,365
Deferred revenue 2,461 2,386
------ ------
Total current liabilities 9,509 18,667
------ ------
Long-term liabilities:
Capital lease obligations 883 624
Accrued pensions liability 1,768 1,482
Deferred income taxes 4 49
----- -----
Total long-term liabilities 2,655 2,155
----- -----
Total liabilities $12,164 $20,882
======= =======
Shareholders' equity:
Convertible Preferred Stock;
$.01 par value; 15,000,000
shares authorized; 14,630,250
and 0 shares issued and out-
standing at April 30, 1996 and
October 31, 1996, respectively $ $ 146
Common Stock; voting, $.01 par value;
35,000,000 and 62,500,000 shares
authorized at April 30, 1996 and
October 31, 1996, respectively;
9,480,003 and 15,606,053 shares
issued and outstanding at April 30,
1996 and October 31, 1996, respectively 156 94
Class B Common Stock; non-voting,
$.01 par value; 12,500,000 shares
authorized; 384,000 and 12,088,200
shares issued and outstanding at
April 30, 1996 and October 31, 1996,
respectively 121 4
Additional paid-in capital 43,823 15,323
Accumulated deficit (11,383) (10,870)
Cumulative translation adjustment (1,639) (1,569)
Note receivable from stockholders (2,626) (2,626)
------- -------
Total shareholders' equity 28,452 502
------- -------
Total Liabilities and Shareholders' equity $40,616 $21,324
======== =======
The accompanying notes are an integral part of the condensed consolidated
financial statements.
</TABLE>
PAGE
<PAGE>
<TABLE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share figures)
<CAPTION>
THREE MONTHS ENDED
10/31/96 10/31/95
__________________ __________________
<S> <C> <C>
Revenues
Licenses $ 4,836 $ 1,536
Service and maintenance 7,875 5,770
Other 793 506
------- -------
Total revenues 13,504 7,812
------- -------
Cost of revenues:
Licenses 653 152
Service and maintenance 5,741 3,908
Other 404 369
------- -------
Total cost of revenues 6,798 4,429
------- -------
Gross profit 6,706 3,383
------- -------
Operating expenses:
Product development 2,624 1,557
Sales and marketing 2,782 1,629
General and administrative 1,084 907
------- -------
Total operating expenses 6,490 4,093
------- -------
Income (loss) from operations 216 (710)
Other income (expense):
Interest income 88 0
Interest expense (103) (196)
Miscellaneous expense (104) 258
------- -------
Income (loss) from continuing operations
before income taxes 97 (648)
Benefit for income taxes (87) (301)
------- -------
Income (loss) from continuing operations 184 (347)
Income (loss) from discontinued operations 365 134
------- -------
Net income (loss) $ 549 $ (213)
======= =======
Earnings per share $ 0.02
=======
Weighted average number of
shares outstanding 25,568,000
==========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
</TABLE>
PAGE
<PAGE>
<TABLE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share figures)
<CAPTION>
SIX MONTHS ENDED
10/31/96 10/31/95
__________________ __________________
<S> <C> <C>
Revenues
Licenses $ 7,132 $ 1,733
Service and maintenance 14,654 10,042
Other 935 762
------- -------
Total revenues 22,721 12,537
------- -------
Cost of revenues:
Licenses 753 155
Service and maintenance 10,819 7,487
Other 500 573
------- -------
Total cost of revenues 12,072 8,215
------- -------
Gross profit 10,649 4,322
------- -------
Operating expenses:
Product development 4,580 2,925
Sales and marketing 5,375 3,014
General and administrative 2,070 1,735
------- -------
Total operating expenses 12,025 7,674
------- -------
Income (loss) from operations (1,376) (3,352)
Other income (expense):
Interest income 101 4
Interest expense (230) (385)
Miscellaneous expense (167) 242
------- -------
Income (loss) from continuing operations
before income taxes (1,672) (3,491)
Benefit for income taxes (792) (865)
------- -------
Income (loss) from continuing operations (880) (2,626)
Income (loss) from discontinued operations 367 56
------- -------
Net income (loss) $ (513) $(2,570)
======= =======
Earnings per share $ (0.02)
=======
Weighted average number of
shares outstanding 25,035,000
==========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
</TABLE>
PAGE
<PAGE>
<TABLE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
<CAPTION>
SIX MONTHS ENDED
10/31/96 10/31/95
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (513) $(2,570)
------- -------
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization 462 371
Provision for doubtful accounts (63) (16)
Deferred income taxes (747) (225)
(Gain) loss on disposal of plant
Property and equipment (2) 0
Write-down on plant and equipment 3 0
Changes in operating assets
and liabilities:
Accounts receivable 3,064 2,025
Accrued receivables and
prepaid expenses 454 1,539
Income taxes 22 (357)
Other assets (231) (184)
Accounts payable 929 (686)
Accrued expenses and other
current liabilities (2,379) (21)
Accrued payroll, employee benefits
and deferred revenue (910) (630)
Accrued pensions liability 217 (11)
------- -------
Net cash provided by continuing
operations 306 (765)
Net assets of discontinued
operations (265) (75)
------- -------
Net cash provided by operating
activities 41 (840)
------- -------
Cash flows from investing activities:
Additions to property and equipment (435) (185)
Proceeds from sale of property
and equipment 7 7
------- -------
Net cash flows used in investing
activities (428) (178)
------- -------
Cash flows from financing activities:
Net borrowings (payments) under
lines of credit (7,764) 2,848
(Payments) on short-term borrowings (97) (2,841)
Principal payments on capital
lease obligations (190) (70)
Issuance of shares 28,532 1,225
Other 250 (296)
------- -------
Net cash flows used in financing
activities 20,731 866
------- -------
Translation differences on cash and
cash equivalents 23 8
------- -------
Net increase (decrease) in cash and
cash equivalents $20,367 ($144)
======= =======
Cash and cash equivalents at beginning
of period $ 558 $ 160
Cash and cash equivalents at end ------- -------
of period $20,925 $ 16
------- -------
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 305 $ 388
------- -------
Income taxes $ 4 $ 0
------- -------
The accompanying notes are an integral part of the condensed consolidated
financial statements.
</TABLE>
<PAGE>
<PAGE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Interim Financial Statements
The unaudited condensed consolidated financial statements included
herein have been prepared by Industri-Matematik International Corp. and its
subsidiaries (collectively, the "Company") pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, they
do not contain all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, the accompanying unaudited condensed consolidated
financial statements reflect all adjustments (consisting of normal recurr-
ing adjustments) considered necessary for a fair presentation of the
Company's financial condition at October 31, 1996 and the results of
operations and cash flows for the six months ended October 31, 1995 and
1996. These financial statements should be read in conjunction with the
audited consolidated financial statements of the Company as presented in
the registration statement for the Company's initial public offering dated
September 25, 1996. Results of operations and cash flows for the period
ending October 31, 1996 are not necessarily representative of the results
that may be expected for the fiscal year ending April 30, 1997 or any other
future period.
2. Net Loss per Share
For the three and six months ended October 31, 1996 net loss per share
was based on the weighted average number of shares of stock outstanding
during the period. The Company's common stock equivalents have an anti-
dilutive effect on the net loss per share and, therefore, have not been
used in determining the total weighted average number of shares outstand-
ing. Historical net loss per share data has not been presented as such
information is not considered to be relevant or meaningful.
3. Accrued Expenses and Other Current Liabilities
<TABLE>
<CAPTION>
October 31, 1996 April 30, 1996
---------------- --------------
(unaudited)
(in thousands)
<S> <C> <C>
Accrued purchases $ 960 $1,731
Accrued royalty 300 1,372
Accrued for contract loss 237
Accruals for contract
expenses 151 153
Value-added tax 65 131
Other 458 153
------ ------
$1,934 $3,777
====== ======
</TABLE>
The accrual for contract loss relates to a reserve for obsolete soft-
ware that was part of an operating lease contract for computer hardware.
The amount accrued represents the software portion of the future minimum
lease payments based on the fair value of the software in relation to the
fair value of both the hardware and software provided under the total lease
contract. Accruals for contract expenses are primarily license fees to
third parties for software included in the sale of System ESS.
4. Accrued Payroll and Employee Benefits
<TABLE>
<CAPTION>
October 31, 1996 April 30, 1996
---------------- --------------
(unaudited)
(in thousands)
<S> <C> <C>
Accrued commissions $ 408 $ 776
Accrued payroll taxes 666 960
Accrued vacation pay 549 750
Accrued salaries and bonus 1,010 879
------ ------
$2,633 $3,365
====== ======
</TABLE>
5. Income Taxes
For the three and six month periods ended October 31, 1995 and 1996, a
deferred tax asset was recognized relating to the Company's net operating
loss for the period. At October 31, 1996, the Company had approximately
$5.6 million of gross deferred tax assets comprised primarily of net
operating loss carryforwards in Sweden. During the three and six month
periods ended October 31, 1995 and 1996, the Company reduced its valuation
allowance relating to its net operating loss carryforwards based upon
evidence indicating an increased likelihood of the utilization of such net
operating loss carryforwards in offsetting future tax expense. Estimated
future earnings necessary to fully realize the net deferred tax asset are
$9.95 million. Such earnings are forecasted to be realized within approxi-
mately three years. There can be no assurance that future earnings, if
any, will meet currently forecasted levels; however it is management's
opinion that the realization of such earnings in the future is more likely
than not.
6. Stock Options
Under the Industri-Matematik International Corp. Stock Option Plan,
205,000 options were granted during the six months ended October 31, 1996,
85,000 of which were previously issued options which were cancelled and
reissued. All options were issued or reissued at an exercise price of
$9.00 per share of Common Stock, which was equal to the estimated fair
market value at the date of grant.
7. Stockholder's Equity
During the quarter ended October 31, 1996, the Company completed an
initial public offering of 3,200,000 shares of Common Stock at an offering
price of $10.00 per share. The net proceeds, after underwriting discounts
and offering expenses payable by the Company, were approximately $28.5
million. A portion of the proceeds was used to pay off short-term bor-
rowings. Upon the completion of the Company's initial public offering, in
accordance with the Restated Certificate of Incorporation of the Company
then in effect, all of the Company's Convertible Preferred Stock out-
standing as of that date was converted 20% to Common Stock and 80% Class B
Common Stock.
PAGE
<PAGE>
ITEM 2.
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This report contains forward-looking statements that involve risks and
uncertainties. The actual future results of the Company could differ
materially from those statements. Factors that could cause or contribute
to such differences include, but are not limited to, uncertainties regard-
ing continued market acceptance of new products and product enhancements,
delays in the introduction of new products and product enhancements, and
risks associated with managing the Company's rapid growth, as well as
factors discussed in the Company's Prospectus dated September 25, 1996,
relating to the initial public offering of its Common Stock.
Overview.
The Company develops, markets and supports client/server application
software that enables manufacturers, distributions, wholesalers, and third-
party logistics companies to manage more effectively the "demand chain".
Demand chain management encompasses the execution of multiple customer-
centric order fulfillment processes, including order management, dis-
tribution logistics, inventory replenishment, and demand planning. The
Company's principal product, System ESS, has been designed specifically to
meet complex or high-volume demand chain management requirements of large
manufacturers, distributors, wholesalers, and third-party logistics
companies. System ESS allows customers to leverage the value of their
existing systems by integrating with legacy and new client/server manu-
facturing, planning, and financial information systems.
Results of Operations
The following table sets forth, for the periods indicated, the per-
centages that selected items in the unaudited Condensed Consolidated
Statements of Operations bear to total revenues. The period to period
comparisons of financial results are not necessarily indicative of future
results.
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
October 31, October 31,
---------------- ------------------
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Licenses 31.4% 13.8% 35.8% 19.7%
Service and maintenance 64.5 80.1 58.3 73.8
Other 4.1 6.1 5.9 6.5
----- ----- ----- -----
Total revenues 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
Cost of revenues:
Licenses 3.3% 1.2% 4.8% 1.9%
Service and maintenance 47.6 59.7 42.5 50.0
Other 2.2 4.6 3.0 4.8
----- ----- ----- -----
Total cost of revenues 53.1 65.5 50.3 56.7
----- ----- ----- -----
Gross profit 46.9 34.5 49.7 43.3
----- ----- ----- -----
Operating expenses:
Product Development 20.2 23.3 19.4 19.9
Sales and marketing 23.7 24.0 20.6 20.9
General & administrative 9.1 13.8 8.0 11.6
----- ----- ----- -----
Total operating expenses 53.0 61.1 48.0 52.4
----- ----- ----- -----
Income (loss) from operations (6.1) (26.6) 1.7 ( 9.1)
----- ----- ----- -----
Other income (expenses):
Interest income 0.4 0.0 0.7 0.0
Interest expense (1.0) (3.1) (0.8) (2.5)
Miscellaneous expense (0.7) 1.9 (0.8) 3.3
----- ----- ----- -----
Income (loss) from continuing
operations before income taxes (7.4) (27.8) 0.8 (8.3)
Benefit for income taxes (3.5) (6.9) (0.6) (3.9)
----- ----- ----- -----
Income (loss) from continuing
operations (3.9) (20.9) 1.4 (4.4)
Income (loss) from discontinued
operations 1.6 0.4 2.7 1.7
----- ----- ----- -----
Net Income (loss) (2.3%) (20.5%) 4.1% (2.7%)
===== ===== ===== =====
</TABLE>
REVENUES
The Company's revenues consist of software license revenues, service
and maintenance revenues, and other 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, training, and client-specific development
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 main-
tenance period. Payments for maintenance fees are generally made in
advance. Other revenues are primarily third-party hardware sales necessary
to help certain customers implement System ESS.
Total revenues increased 72.9% to $13.5 million in the quarter ended
October 31, 1996 from $7.8 million in the quarter ended October 31, 1995.
In the first six months of fiscal 1997, total revenues increased 81.2% to
$22.7 million from $12.5 million in the first six months of fiscal 1996.
The Company currently derives substantially all of its revenues from System
ESS licenses and related service and maintenance. As a result of the
Company's dependence on the continued market acceptance of System ESS,
there can be no assurance that total revenues will continue to grow at the
rates experienced in prior periods, if at all.
The Company's U.S. revenues were approximately 46% and 26% of total
revenues in the quarters ended October 31, 1996 and 1995, respectively.
U.S. revenues were approximately 38% and 26% of total revenues in the first
six months of fiscal 1997 and fiscal 1996, respectively. The significant
increase in U.S. revenues in fiscal 1997 from 1996 is primarily due to the
expansion of the Company's U.S. sales and services operations in the 12
months ended October 31, 1996.
License Revenues. Revenues from software licenses increased 214.8% to
$4.8 million in the quarter ended October 31, 1996 from $1.5 million in the
quarter ended October 31, 1995. In the first six months of fiscal 1997,
revenues from software licenses increased 311.5% to $7.1 million from $1.7
million in the first six months of fiscal 1996. The significant increase
in software license revenues was due primarily to the growing market
acceptance of System ESS and the expansion of the Company's sales and
marketing organizations in the U.S. and Europe.
Service and Maintenance Revenues. Revenues from service and main-
tenance increased 36.5% to $7.9 million in the quarter ended October 31,
1996 from $5.8 million in the quarter ended October 31, 1995. In the first
six months of fiscal 1997, revenues from service and maintenance increased
45.9% to $14.7 million from $10.0 million in the first six months of fiscal
1996. The increase in the absolute dollar amounts of service and main-
tenance revenues was related primarily to an increase in the number of
System ESS licenses sold during fiscal 1997 from fiscal 1996 and a signifi-
cant expansion of the Company's consulting organization in the U.S. and
Europe. The increase in service and maintenance revenues is lower than the
increase in license revenues as a result of the Company's use, where advan-
tageous, of third-party consultants to provide services to the Company's
customers as well as the fact that service and maintenance revenues are not
necessarily proportional to license revenues. Service and maintenance
revenues as a percentage of total revenues have decreased to 58.3% in the
quarter ended October 31, 1996 from 73.9% in the quarter ended October 31,
1995 and have decreased to 64.5% in the first six months of fiscal 1997
from 80.1% in the first six months of fiscal 1996.
Other Revenues. Other revenues are primarily third-party hardware
sales to help certain customers implement System ESS. Other revenues
increased 56.7% to $793,000 in the quarter ended October 31, 1996 from
$506,000 in the quarter ended October 31, 1995. In the first six months of
fiscal 1997, other revenues increased 22.7% to $935,000 from $762,000 in
the first six months of fiscal 1996. Other revenues as a percentage of
total revenues decreased to 5.9% in the quarter ended October 31, 1996 from
6.1% in the quarter ended October 31, 1995 and decreased 4.1% in the first
six months of fiscal 1997 from 6.5% in the first six months of fiscal 1996.
The decrease in other revenues as a percentage of total revenues reflects a
reduction by the Company in its efforts to provide third-party hardware and
support.
Cost of Revenues
Cost of License Revenues. Cost of software licenses consists primarily
of license fees paid with respect to third-party software. Cost of license
revenues was $653,000 and $152,000 in the quarters ended October 31, 1996
and 1995, representing 13.5% and 9.9% of license revenues, respectively.
Cost of license revenues was $753,000 and $155,000 in the first six months
of fiscal 1997 and 1996, representing 10.6% and 8.9% of license revenues,
respectively. The increases in cost of license revenues both in absolute
dollar amounts and as a percentage of license revenues were primarily due
to the license fees paid to a third-party vendor during the period.
Cost of Service and Maintenance Revenues. Cost of services and main-
tenance consists primarily of costs associated with consulting, imple-
mentation, and training services and, occasionally, the use by the Company
of third-party consultants to perform implementation services for the
Company's customers. Cost of service and maintenance revenues also in-
cludes the cost of providing software maintenance to customers, such as
telephone hotline support.
Cost of service and maintenance revenues was $5.7 million and $3.9
million in the quarters ended October 31, 1996 and 1995, representing 72.9%
and 67.7% of service and maintenance revenues, respectively. Cost of
service and maintenance revenues was $10.8 million and $7.5 million in the
first six months of fiscal 1997 and fiscal 1996, representing 73.8% and
74.6% of service and maintenance revenues, respectively. The increases in
cost of services and maintenance both in absolute dollar amounts and as a
percentage of service and maintenance revenues were primarily due to the
increase in the number of consultants, product support, and training staff
and the increased use of third-party consultants. The Company expects to
continue to increase the number of consultants and product support and
training staff in the future as the number of System ESS licenses
increases.
Cost of Other Revenues. Cost of other revenues consists primarily of
the cost of third-party hardware supplied to certain customers. Cost of
other revenues was $404,000 and $369,000 in the quarters ended October 31,
1996 and 1995, representing 50.9% and 72.9% of other revenues, respec-
tively. Cost of other revenues was $500,000 and $573,000 in the first six
months of fiscal 1997 and fiscal 1996, representing 53.4% and 75.2% of
other revenues, respectively. The decrease in the cost of other revenues
as a percentage of total revenues reflects a reduction by the Company in
its efforts to provide third-party hardware and support.
Product Development. Product development expenses were $2.6 million
and $1.6 million in the quarters ended October 31, 1996 and 1995,
representing 19.4% and 19.9% of total revenues, respectively. These same
expenses were $4.6 million and $2.9 million in the first six months of
fiscal 1997 and 1996, representing 20.2% and 23.3% of total revenues,
respectively. The increases in product development expenses in dollar
amount were primarily due to an increase in the number of product
development personnel and other related costs incurred in connection with
expanding the Company's product development department and, to a lesser
extent, the costs relating to third-party translation work. The
Company expects that the dollar amount of product development expenses
will continue to increase as the Company continues to invest in developing
new applications, product enhancements, and localization and translation of
System ESS.
In accordance with Statement of Financial Accounting Standards No. 86,
software development expenses 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.
Sales and Marketing. Sales and marketing expenses include personnel
costs, commissions and related costs for sales and marketing personnel, as
well as the cost of office facilities, travel, promotional events, and
public relations programs. Sales and marketing expenses were $2.8 million
and $1.6 million in the quarters ended October 31, 1995 and 1996, repre-
senting 20.6% and 20.9% of total revenues, respectively. These same
expenses were $5.4 million and $3.0 million in the first six months of
fiscal 1997 and 1996, representing 23.7% and 24.0% of total revenues,
respectively. The increase in sales and marketing expenses in absolute
dollar amounts was primarily due to (i) increased staffing as the Company
established new sales offices and expanded its existing direct sales force
and (ii) increased sales commissions associated with significantly higher
license revenues. The Company expects to continue to increase signifi-
cantly its sales and marketing expenses in order to expand its interna-
tional sales operations and to enter into new vertical markets.
General and Administrative. Ongoing general and administrative
expenses consist primarily of salaries and costs of the Company's finance,
human resources, information systems, administrative, and executive staff
and the fees and expenses associated with legal, accounting and other
requirements. General and administrative expenses were $1.1 million and
$.9 million in the quarters ended October 31, 1996 and 1995, representing
8.0% and 11.6% of total revenues, respectively. These same expenses were
$2.1 million and $1.7 million in the first six months of fiscal 1997 and
1996, representing 9.1% and 13.8% of total revenues, respectively. The
increase in the absolute dollar amounts of general and administrative
expenses was primarily the result of increased staffing and related costs
associated with the growth of the Company's business during fiscal 1997 and
1996. The decrease in general and administrative expenses as a percentage
of total revenues was primarily due to the Company's ability to leverage
its staff to support expanded revenues. The Company expects that the
absolute dollar amounts, but not necessarily as a percentage of total
revenue, of general and administrative expenses will continue to increase
in the foreseeable future.
Other Income (Expense)
Other income (expense) consists of interest income on short-term
investments and interest expense on the Company's bank loans. Such bank
loans were repaid upon receipt of the proceeds of the Company's public
offering which closed on October 1, 1996. Other income (expense) also
include gains and losses from currency transactions. Other income
(expense) was ($119,000) and $62,000 in the quarters ended October 31, 1996
and 1995, representing (0.9)% and 0.8% of total revenues, respectively.
Other income (expense) was ($296,000) and ($139,000) in the first six
months of fiscal 1997 and 1996, representing (1.3%) and (1.1%) of total
revenues, respectively. The net increase in other expense both in absolute
dollar amounts and as a percentage of total revenues were primarily due to
currency transaction losses.
Liquidity and Capital Resources
As of October 31, 1996, the Company had $25.7 million of working
capital, including $20.9 million in cash, cash equivalents, and short-term
investments as compared to ($1.4) million of working capital as of April
30, 1996 including $0.6 million of cash and cash equivalents. To date the
Company only has invested in financial instruments that involve a low level
of complexity or risk. The increase in working capital was primarily
caused by the initial public offering of 3,200,000 shares of the Company's
common stock which closed on October 1, 1996 and generated net proceeds of
$28.5 million after deducting offering expenses payable by the Company and
underwriting discounts.
Net cash provided by operating activities was $41,000 for the six
months ended October 31, 1996. The Company repaid $7.8 million of short-
term borrowings in the same period.
Accounts receivable decreased to $10.5 million at October 31, 1996
from $13.1 million at April 30, 1996 and the average days' sales out-
standing, excluding contract receivables, was 70 days at October 31, 1996
as compared to 89 days at April 30, 1996. The decrease in average days'
sales outstanding was primarily due to the collection of several large
trade receivable balances outstanding at April 30, 1996. The Company
expects its average days' sales outstanding to increase in future periods
from the level at October 31, 1996. Average days' sales outstanding can
fluctuate for a variety of reasons including the timing and billing of
receivables for which the related revenues may not yet be recognizable.
The Company believes that existing cash and cash equivalent balances,
short-term investments, available borrowings under the revolving credit
agreement, and potential cash flow from operations will satisfy the
Company's working capital and capital expenditure requirements for at least
the next 12 months.
<PAGE>
<PAGE>
PART II. - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
a. Exhibits
Exhibit 11. Computation of Per Share Earnings
Exhibit 27. Financial Data Schedule
b. Reports on Form 8-K
No reports have been filed on Form 8-K during the quarter
ended October 31, 1996.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on it's behalf by the
undersigned thereunto duly authorized.
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
BY: s/ Stig Durlow
---------------------------
Stig Durlow
Principal Executive Officer
BY: s/ Lars-Goran Peterson
---------------------------
Lars-Goran Peterson
Principal Financial Officer
DATE: December 16, 1996
<TABLE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(in thousands, except per share figures)
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
10/31/96 10/31/96
---------------- ------------------
<S> <C> <C>
Income (loss) from
continuing operations $ (880) $ 184
Income (loss) from
discontinued operations 367 365
------- ------
Net income $ (513) $ 549
======= ======
Primary:
Weighted average common
shares outstanding 25,035 25,568
======= ======
Per share amounts:
Income (loss) from
continuing operations $ (0.03) $ 0.01
Income (loss) from
discontinued operations 0.01 0.01
------- ------
Net income $ (0.02) $ 0.02
======= ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF EARNINGS AND BALANCE SHEETS OF INDUSTRI-MATEMATIK
INTERNATIONAL CORP. AND SUBSIDIARIES ANNEXED HERETO AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001016243
<NAME> INDUSTRI-MATEMATIK INTERNATIONAL CORP.
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> APR-30-1996 APR-30-1996
<PERIOD-START> AUG-1-1996 MAY-1-1996
<PERIOD-END> OCT-31-1996 OCT-31-1996
<CASH> 20,925,000 20,925,000
<SECURITIES> 0 0
<RECEIVABLES> 10,810,000 10,810,000
<ALLOWANCES> 272,000 272,000
<INVENTORY> 0 0
<CURRENT-ASSETS> 35,246,000 35,246,000
<PP&E> 5,720,000 5,720,000
<DEPRECIATION> 3,385,000 3,385,000
<TOTAL-ASSETS> 40,616,000 40,616,000
<CURRENT-LIABILITIES> 9,509,000 9,509,000
<BONDS> 0 0
<COMMON> 277,000 277,000
0 0
0 0
<OTHER-SE> 28,175,000 28,175,000
<TOTAL-LIABILITY-AND-EQUITY> 40,616,000 40,616,000
<SALES> 12,711,000 21,786,000
<TOTAL-REVENUES> 13,504,000 22,721,000
<CGS> 6,394,000 11,572,000
<TOTAL-COSTS> 6,798,000 12,072,000
<OTHER-EXPENSES> 6,490,000 12,025,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 103,000 230,000
<INCOME-PRETAX> 97,000 (1,672,000)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 184,000 (880,000)
<DISCONTINUED> 365,000 367,000
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 549,000 (513,000)
<EPS-PRIMARY> .02 (.02)
<EPS-DILUTED> .02 (.02)
</TABLE>
