SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1999
COMMISSION FILE NUMBER: 0-24077
Mobius Management Systems, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-3078745
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
120 Old Post Road, Rye, New York 10580
(Address of registrant's principal executive offices) (Zip code)
914-921-7200
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class Name of Each Exchange on Which Registered
Common Stock, $.0001 par value NASDAQ
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) of the Act: NONE
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
1943 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |x| No | |
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K |x|
The aggregate market value of the voting stock held by non-affiliates
of the Registrant, based upon the closing sale price of common stock on
September 15, 1999 as reported on NASDAQ, was approximately $27.5 million.
Shares of common stock held by each officer and director and by each person who
owns 5% or more of the outstanding common stock have been excluded in that such
persons may be deemed affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
As of September 15, 1999, Registrant had outstanding 17,920,650 shares of common
stock.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Registrant's definitive proxy statement to be
filed no later than October 28, 1999 pursuant to Regulation 14A, are
incorporated by reference in Items 10 through 13 of Part III of this Annual
Report on Form 10-K.
<PAGE>
MOBIUS MANAGEMENT SYSTEMS, INC.
FISCAL YEAR 1998 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I.
ITEM 1. Business
ITEM 2. Properties
ITEM 3. Legal Proceedings
ITEM 4. Submission of Matters to a Vote of Security Holders
PART II.
ITEM 5. Market for Registrant's Common Equity and Related
Stockholder Matters
ITEM 6. Selected Consolidated Financial Data
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
ITEM 7A Quantitative and Qualitative Disclosures About Market Risk
ITEM 8. Financial Statements and Supplementary Data
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
PART III.
ITEM 10. Directors and Executive Officers of the Registrant
ITEM 11. Executive Compensation
ITEM 12. Security Ownership of Certain Beneficial
Owners and Management
ITEM 13. Certain Relationships and Related Transactions
PART IV.
ITEM 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K
SIGNATURES
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FORWARD LOOKING STATEMENTS
Statements contained in this annual report, other than historical
financial results, may contain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
involve risks and uncertainties. In particular, any statements contained herein
regarding expectations with respect to future sales and profitability, as well
as product development and/or introductions, are subject to known and unknown
risks, uncertainties and contingencies, many of which are beyond the Company's
control, which may cause actual results, performance or achievements to differ
materially from those projected or implied in such forward-looking statements.
Factors that might affect actual results, performance or achievements include,
among other things, those discussed in "Factors Affecting Future Performance" in
Item 1 - Business. Mobius accepts no obligation to update these forward-looking
statements and does not intend to do so.
ITEM 1. BUSINESS
Mobius Management Systems, Inc. (together with its consolidated
subsidiaries, "Mobius" or the "Company") is a leading provider of software
products designed to provide network- and Web-based access, presentation and
distribution of large volumes of diverse enterprise information. Major financial
services, healthcare, manufacturing, retail and telecommunications companies and
government entities use the Company's software to facilitate customer service
and other mission-critical functions. The Company's software products store,
retrieve and present computer and non-computer generated documents, such as
text, images, video or audio recordings, customer statements, checks, external
correspondence and remittance forms. The products can be used by a single
department, multiple departments or centrally by an entire enterprise.
Mobius was incorporated in New York in 1981 and reincorporated in
Delaware in 1997. The Company has foreign subsidiaries in the United Kingdom,
France, Germany, Italy, Sweden, Australia, Switzerland, Japan and the Benelux.
Mobius's company headquarters are located at 120 Old Post Road, Rye, NY 10580
and their telephone number is (914) 921-7200.
Industry Background
Organizations need to retain information for long periods of time to
meet operational, regulatory and legal requirements or to satisfy customer and
other inquiries. For example, credit card companies store records of each charge
transaction; brokerage firms store records of every trade; and telephone
companies store records of individual telephone calls. This voluminous
information must be quickly and accurately retrieved to support customer
service, meet legal requirements and reach more informed business decisions.
Customers have become dependent upon organizations to accurately account for
transaction, other information and demand rapid and consistent access to their
records. Increasingly, customers expect self-service access via the Internet
using readily available Web browser technology.
Organizations are also faced with the need to store and distribute
large volumes of report output produced by various applications, particularly
enterprise resource planning ("ERP") systems. Furthermore, organizations wish to
present customized views of this information to their employees, customers and
suppliers over intranets with easy to learn common graphical user interfaces
such as Web browsers.
<PAGE>
Traditional approaches such as paper, microfiche, and relational
databases, are usually cumbersome and do not lend themselves to a fully
integrated, comprehensive information management system solution. Moreover, many
organizations maintain a number of discrete, non-integrated systems, each of
which provides access to only a portion of the organization's stored
information. When the organization needs to access all information about a
particular customer or transaction, these disparate systems make retrieval
costly and time consuming. Mobius seeks to provide integrated system solutions
capable of storing, retrieving and presenting all information relevant to a
customer or transaction, regardless of format or storage site.
Products
Mobius's products include server products, which act as hosts on
central processing computers or networks, and client products that access the
host software whenever host resources are needed. The Company's primary products
are ViewDirect, which stores and retrieves documents; DocumentDirect, which
enables document viewing; DocumentDirect for the Internet, which makes
information available over the Internet and corporate intranets; DocumentDirect
Application Suite, a series of industry-specific application templates for
document viewing and DocuAnalyzer, a data mining tool. In addition, Mobius
offers INFOPAC-ABS which is a data center quality control product and until its
sale in January 1999 offered INFOPAC-TapeSaver for managing large tape storage
facilities.
ViewDirect. ViewDirect stores and presents virtually any record of a
business transaction, including computer-generated reports; print-formatted
documents, such as customer statements; scanned images; and undefined
transactions created in other computing environments for example, those created
for display devices such as generic Internet browsers. ViewDirect provides
direct, on-line access to information stored on disk, tape or optical devices.
It supports both host-based and network-based implementations, and operates on
desktop computers and on the largest enterprise servers or "mainframe"
computers.
DocumentDirect. DocumentDirect is a Windows-based full-function viewer.
It provides a common "dashboard" through which the user is able to access any
type or number of documents stored in ViewDirect archives. DocumentDirect can
simultaneously display diversely formatted documents and facilitates the
annotation and reformatting of documents.
DocumentDirect for the Internet. DocumentDirect for the Internet is
designed to provide secure, self-service access to documents over the Internet
and corporate intranets. DocumentDirect for the Internet makes all the documents
in ViewDirect archives available for viewing via Internet browsers. It supports
e-business applications such as electronic bill presentment and payment
("EBPP").
DocumentDirect Application Suite. DocumentDirect Application Suite is
designed to be used by those who need fast access to documents in a customized
environment. It provides customized report views with secured access to all
reports and documents across the enterprise as well as templates that meet a
wide range of vertical industry application needs in banking, insurance,
financial services, telecommunications and healthcare.
DocuAnalyzer. DocuAnalyzer is a Windows-based data mining product that
makes the data in the ViewDirect archive available for analysis without
re-keying. It simplifies the conversion of character data into a table format to
help with "drill-down", analysis, graphing and creation of new reports. Mobius
sells DocuAnalyzer in connection with a license arrangement with a third party.
<PAGE>
INFOPAC-ABS. INFOPAC-ABS (Automated Balancing System) is an enterprise
server-based data integrity and quality control software tool. Data in computer
systems, databases, and end user applications originates from many sources. Due
to the large number of input sources, computer systems can and do become
unsynchronized. INFOPAC-ABS provides cross-application balancing of numerical
data resident in databases, files and reports to detect and assist in the
correction of out-of-balance situations. INFOPAC-ABS is used in Year 2000
conversions to audit applications, verify the accuracy of output and load
databases that include dates beyond 2000.
INFOPAC-TapeSaver. INFOPAC-TapeSaver is an enterprise server-based
software product that is designed to optimize the utilization of tape and tape
devices. In January 1999, the Company sold this product to Technologic Software
Concepts, Incorporated of Irvine, California. See Note 17 of Notes to
Consolidated Financial Statements.
Sales and Marketing
The Company sells and markets its products primarily through a direct
sales force based in Chicago, with additional sales offices in Atlanta, GA;
Boston, MA; Dallas, TX; Denver, CO; Falls Church, VA; Fountain Valley, CA;
Morristown, NJ; Madison, WI; Minneapolis, MN; Rye, NY and St. Louis, MO.
In March 1993, Mobius established its first foreign subsidiary, Mobius
UK, in England. From fiscal 1995 to fiscal 1999, Mobius has established
subsidiaries in France, Germany, Italy, Australia, Switzerland, Sweden, Japan
and the Benelux. These subsidiaries provide Mobius with an international direct
sales force.
Customer Satisfaction
Mobius provides twenty-four hour, seven-day-a-week support services for
all of its products through its United States and foreign support centers.
Complex diagnostics and product corrections are provided exclusively through the
United States support center. In addition, Mobius hires independent professional
service organizations to provide customers with post sale assistance for their
products, on-site implementation services and customizations.
Research and Development
The Company intends to continue to make substantial investments in
research and development to maintain and enhance its product lines. Mobius
believes that its future success will, in large part, depend on its ability to
maintain and improve current products and develop new products that meet the
emerging needs of the marketplace. The Company's research and development
efforts focus on designing and developing reliable and easy-to-use products.
Mobius's product development cycle (from funding a product development project
until the new product is shipped to the marketplace) typically is less than six
months to take advantage of market opportunities and be responsive to customer
demands. Larger projects are broken down so that a specific product or product
enhancement can be available in the marketplace as quickly as possible. The
Company divides its development team into groups delineated by product
functionality and employs advanced Rapid Application Development ("RAD") tools
to facilitate short development cycles for functional enhancements while
maintaining product reliability.
Employees
As of June 30, 1999, Mobius employed 438 people: 252 in Sales and
Marketing; 47 in Customer Satisfaction; 82 in Research and Development; and 57
in General and Administrative. None of the employees are represented by a labor
union or are subject to a collective bargaining agreement. The Company has not
experienced any work stoppages and believes it has a good relationship with its
employees. The Company believes that its future success will depend to a
significant extent upon its ability to attract, train and retain highly skilled
technical, management, sales and marketing personnel.
Customers
No single customer accounted for 10% or more of consolidated revenues
in fiscal years 1997, 1998 or 1999.
Competition
The market for Mobius's products is intensely competitive, subject to
rapid change and significantly affected by new product introductions and other
market activities of industry participants. "Factors Affecting Future
Performance" below, includes a description of the competitive environment in
which the Company does business.
<PAGE>
FACTORS AFFECTING FUTURE PERFORMANCE
Fluctuations in Period to Period Results; Seasonality; Uncertainty of
Future Operating Results
Mobius's quarterly revenues and operating results have varied
significantly in the past and are likely to vary substantially from quarter to
quarter in the future. Quarterly revenues and operating results are expected to
fluctuate as a result of a variety of factors, including lengthy product sales
cycles, changes in the level of operating expenses, demand for Mobius's
products, introductions of new products and product enhancements by Mobius or
its competitors, changes in customer budgets, competitive conditions in the
industry and general domestic and international economic conditions.
The timing, size and nature of individual license transactions are
important factors in Mobius's quarterly operating results. Many of Mobius's
license transactions involve large dollar commitments by customers, and the
sales cycles for these transactions are often lengthy and unpredictable. There
can be no assurance that Mobius will be successful in closing large license
transactions within the fiscal period in which they are budgeted, if at all.
Mobius's business has experienced and is expected to continue to
experience significant seasonality, with revenues typically peaking primarily in
the fourth (June) fiscal quarter and to a lesser extent in the second (December)
fiscal quarter. These fluctuations are caused primarily by customer purchasing
patterns and Mobius's sales force incentive programs, which recognize and reward
sales personnel on the basis of achievement of annual and other periodic
performance quotas, as well as by the factors described above.
Due to all of the foregoing factors and other factors described below,
revenues for any period are subject to significant variation, and Mobius
believes that period-to-period comparisons of its operating results are not
necessarily meaningful. Such comparisons may not be reliable indicators of
future performance.
Technological Change
The market for Mobius's software is characterized by a high degree of
technological change, frequent new product introductions, evolving industry
standards and changes in customer demands. The introduction of competitive
products embodying new technologies and the emergence of new industry standards
could render Mobius's existing products obsolete and unmarketable. Mobius's
future success will depend in part on its ability to enhance existing products,
to develop and introduce new products to meet diverse and evolving customer
requirements, and to keep pace with technological developments and emerging
industry standards such as new operating systems, hardware platforms, user
interfaces and storage media. The development of new products or enhanced
versions of existing products and services entails significant technical risks.
There can be no assurance that Mobius will be successful in developing and
marketing product enhancements or that new products will respond to
technological change or evolving industry standards, or that Mobius will not
experience difficulties that could delay or prevent the successful development,
introduction, implementation and marketing of these products and enhancements,
or that any new products and product enhancements Mobius may introduce will
achieve market acceptance.
<PAGE>
Product Concentration
To date, a substantial portion of Mobius's revenues have been
attributable to the licensing of its ViewDirect and DocumentDirect software and
the provision of related maintenance services. Mobius currently expects this to
continue for the foreseeable future. As a result, factors adversely affecting
the pricing of, or demand for, these products and services, such as competition
or technological change, could have a material adverse effect on its business,
operating results and financial condition.
Competition
The market for Mobius's products is intensely competitive, subject to
rapid change and significantly affected by new product introductions and other
market activities of industry participants. The Company believes that the most
important competitive factors in the market for storage, retrieval and
presentation software are scalability, breadth of supported operating systems
and document formats, ease of use, product reputation, quality, performance,
price, sales and marketing effort and customer service. Mobius currently
encounters direct competition from a number of public and private companies
including Computer Associates International, Computron Software, Inc., FileNet
Corporation, International Business Machines Corp., Eastman Kodak Co., New
Dimension Software Ltd., Quest Software, Inc. and RSD S.A. Due to the relatively
low barriers to entry in the software market, additional competition from other
established and emerging companies is likely as the market for storage,
retrieval and presentation software continues to develop and expand. Some of
these companies are substantially larger than Mobius and have significantly
greater financial, technical and marketing resources, and a larger installed
base of customers, than Mobius. Some of such competitors also have extensive
direct and indirect channels of distribution. As a result, they may be able to
respond more quickly to new or emerging technologies and changes in customer
requirements, or to devote greater resources to the development, promotion and
sale of their products than Mobius. In addition, current and potential
competitors have established or may establish cooperative relationships among
themselves with prospective customers. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. Increased competition may result in price reductions,
reduced gross margins and loss of market share, any of which would have a
material adverse effect on the Company's business, operating results and
financial condition. There can be no assurance that Mobius will be able to
compete successfully against current or future competitors or that competitive
pressures will not have a material adverse effect on Mobius's business,
operating results and financial condition.
<PAGE>
International Sales and Operations
Mobius believes that its revenues and future operating results will
depend in part on its ability to increase sales in international markets. As a
group, the Company's international subsidiaries have not achieved budgeted sales
and have been unprofitable to date, and Mobius expects achieving profitability
will require significant management attention and financial resources. There can
be no assurance that Mobius will be able to maintain or increase international
market demand for its products or hire additional qualified personnel who will
successfully be able to market its products internationally. Mobius's
international sales are subject to the general risks inherent in doing business
abroad, including unexpected changes in regulatory requirements, tariffs and
other trade barriers, costs and difficulties of localizing products for foreign
countries, lack of acceptance of localized products in foreign countries, longer
accounts receivable payment cycles, difficulties in managing international
operations, potentially adverse tax consequences, restrictions on the
repatriation of earnings, the burdens of complying with a wide variety of
foreign laws and economic instability. There can be no assurance that such
factors will not have a material adverse effect on Mobius's future international
revenues and, consequently, on its business, operating results and financial
condition.
An increase in the value of the U.S. dollar relative to foreign
currencies could make Mobius's products more expensive, and, therefore,
potentially less competitive in those markets. Although Mobius does not
currently engage in international currency hedging transactions, we are
exploring the possibility of doing so in the future. To the extent that the U.S.
dollar strengthens against foreign currencies in international markets in which
the Company maintains operations, its net assets that are denominated in such
foreign currencies will be devalued, resulting in a foreign currency translation
loss. For more information on its international operations, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
Item 7 and Notes 2 and 16 of Notes to Consolidated Financial Statements.
Expansion of Indirect Channels
To date, sales through indirect sales channels have not been
significant although Mobius intends to invest resources to develop these
channels. Mobius's ability to achieve revenue growth in the future will be
affected by its success in expanding existing and establishing additional
relationships with strategic partners. Mobius expects to receive lower unit
prices when selling through indirect channels; therefore, if Mobius is
successful in selling products through indirect channels, its gross margins as a
percentage of revenue will decrease.
Extended Payment Risk
Terms of sale are a competitive factor in Mobius's markets. Mobius
offers extended payment terms to some of its customers, generally three years
for server products and five years for client products. The license revenue for
these extended payment agreements is recorded at the time of sale as the present
value of the contract payments expected over the life of the agreement, net of
bundled maintenance fees. Interest income from these agreements is recognized
over the term of the financing based on the discount rate used by the Company to
determine present value. Although Mobius has established reserves against
possible future bad debts and believes that these installment contracts are
enforceable and that ultimate collection is probable, there can be no assurances
that customers will not default under such financing arrangements, or that any
such default would not have a material adverse effect on Mobius's business,
operating results and financial condition. For more information on these
extended payment agreements see Notes 2 and 3 of Notes to Consolidated Financial
Statements.
<PAGE>
Protection of Intellectual Property
Mobius's success is heavily dependent upon its confidential and
proprietary intellectual property. Mobius has no patents or patent applications
pending covering any aspect of its software products. Mobius relies primarily on
a combination of confidentiality agreements, copyright, trademark and trade
secret laws and confidentiality procedures to protect its proprietary rights.
Trade secret and copyright laws afford only limited protection. Despite Mobius's
efforts to protect its proprietary rights, unauthorized parties may attempt to
copy aspects of its products or obtain and use information that Mobius regards
as proprietary. In addition, the laws of some foreign countries do not protect
its proprietary rights to as great an extent as do the laws of the United
States. There can be no assurance that its means of attempting to protect
Mobius's proprietary rights will be adequate or that its competitors will not
independently develop similar or competitive technology.
Mobius's products are generally provided to customers in object code
format only. However, Mobius enters into arrangements with its customers that
releases the source code to the customer upon the occurrence of certain events,
such as bankruptcy or insolvency of Mobius or certain material breaches of the
license agreement by Mobius. In the event of any release of the source code
pursuant to these arrangements, the customer's license is generally limited to
use of the source code to maintain, support and configure its software products.
Notwithstanding such provision, the delivery of source code to customers may
increase the likelihood of misappropriation or other misuse of its intellectual
property.
Mobius is not aware that any of its products infringe on the
proprietary rights of third parties. There can be no assurance, however, that
third parties will not claim infringement by Mobius with respect to current or
future products. Defense of any such claims, with or without merit, could be
time-consuming, result in costly litigation, cause product shipment delays or
require Mobius to enter into royalty or licensing agreements. Such royalty or
licensing agreements, if required, may not be available on terms acceptable to
Mobius or at all, which could have a material adverse effect on its business,
operating results and financial condition.
Dependence on Licensed Technology
Mobius relies on certain software and other information that it
licenses from third parties, including software that is used to perform certain
functions in its products. Although Mobius believes that there are alternatives
for these products, any significant interruption in the availability of such
third-party software could have a material adverse impact on its sales unless
and until the Company can replace the functionality provided by these products.
In addition, Mobius is to a certain extent dependent upon such third parties'
abilities to enhance their current products, to develop new products on a timely
and cost-effective basis and to respond to emerging industry standards and other
technological changes. There can be no assurance that Mobius would be able to
replace the functionality provided by the third party software currently offered
in conjunction with its products in the event that such software becomes
obsolete or incompatible with future versions of its products or is otherwise
not adequately maintained or updated. The absence of or any significant delay in
the replacement of that functionality could have a material adverse effect on
its business, operating results and financial condition.
Risk of Product Defects; Product Liability
Software products as complex as those offered by Mobius frequently
contain defects, especially when first introduced or when new versions are
released. Although Mobius conducts extensive product testing, Mobius has in the
past discovered software defects in certain of its new products and enhancements
after their introduction. Mobius could in the future lose, or delay recognition
of, revenues as a result of software errors or defects. Mobius believes that its
customers and potential customers are highly sensitive to defects in the
Company's software. Although Mobius's business has not been materially adversely
affected by any such errors to date, there can be no assurance that, despite
testing by Mobius and by current and potential customers, errors will not be
found in new products or releases after commencement of commercial shipments,
resulting in loss of revenue or delay in market acceptance, diversion of
development resources, damage to Mobius's reputation, or increased service and
warranty costs, any of which could have a material adverse effect on its
business, operating results and financial condition.
Mobius's license agreements with its customers typically contain
provisions designed to limit its exposure to potential product liability claims.
However, it is possible that the limitation of liability provisions contained in
its license agreements may not be effective under the laws of certain
jurisdictions. Although Mobius has not experienced any product liability claims
to date, the sale and support of products by Mobius may entail the risk of such
claims, and there can be no assurance that the Company will not be subject to
such claims in the future. Mobius does not maintain product liability insurance.
A successful product liability claim brought against Mobius could have a
material adverse effect on its business, operating results and financial
condition.
Year 2000 Compliance
Many currently installed operating systems and software products are coded
to accept only two digit entries in the date code field. These date code fields
need additional digits to distinguish 21st century dates from 20th century
dates. As a result, computer systems and/or software used by many companies may
need to be upgraded to comply with such "Year 2000" requirements. Significant
uncertainty exists in the software industry concerning the potential effects
associated with such compliance. For a discussion on Year 2000 compliance by
Mobius and how Year 2000 compliance may affect its future performance, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Item 7.
Management of Growth; Dependence on Senior Management and Other Key Employees
Mobius's ability to effectively manage its future growth, if any, will
require it to continue to improve the Company's operational, financial and
management controls, accounting and reporting systems, and other internal
processes. There can be no assurance that Mobius will be able to make such
improvements in an efficient or timely manner or that any such improvements will
be sufficient to manage its growth, if any. If Mobius is unable to manage growth
effectively, its business, operating results and financial condition would be
materially adversely affected.
Mobius's success depends to a significant extent upon its senior
management and certain other key employees of Mobius. The loss of the service of
senior management or other key employees could have a material adverse effect on
Mobius. Furthermore, the Company believes that its future success will also
depend to a significant extent upon its ability to attract, train and retain
highly skilled technical, management, sales and marketing personnel. Competition
for such personnel is intense, and Mobius expects that such competition will
continue for the foreseeable future. Mobius has from time to time experienced
difficulty in locating candidates with appropriate qualifications. The failure
to attract or retain such personnel could have a material adverse effect on
Mobius's business, operating results and financial condition.
<PAGE>
ITEM 2. PROPERTIES
Mobius is headquartered in Rye, New York, where it leases an aggregate
of approximately 57,200 square feet of space. Administrative, marketing, product
development and customer support and service operations are located in the Rye
space. Sales operations are based in Chicago. Mobius leases an aggregate of
approximately 87,900 additional square feet of space domestically and
internationally for its other sales offices. Mobius believes that these
facilities are adequate to meet its current needs and that suitable additional
space will be available as needed to accommodate physical expansions of
corporate operations and for additional sales and service field offices.
ITEM 3. LEGAL PROCEEDINGS
From time to time, Mobius is involved in litigation relating to claims
arising out of its operations in the normal course of business. Mobius is not a
party to any legal proceedings, the adverse outcome of which, individually or in
the aggregate, would have a material adverse effect on its business, operating
results and financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 1999.
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Mobius's common stock has been quoted on the NASDAQ National Market
under the symbol of MOBI since the initial public offering on April 27, 1998.
According to records of Mobius's transfer agent, Mobius had approximately 65
stockholders of record as of September 15, 1999. Because many of such shares are
held by brokers and other institutions on behalf of stockholders, Mobius is
unable to estimate the total number of stockholders represented by the record
holders. The following table sets forth the high and low sales prices of the
Common Stock on the NASDAQ National Market for the periods indicated.
High Low
Quarter ended June 30, 1998(beginning April 27, 1998) $19.75 $11.50
Quarter ended September 30, 1998 $16.25 $5.62
Quarter ended December 31, 1998 $14.88 $5.88
Quarter ended March 31, 1999 $24.44 $13.00
Quarter ended June 30, 1999 $20.75 $7.38
Mobius has never paid any cash dividends on its common stock and does
not anticipate paying any cash dividends in the foreseeable future. Mobius
currently intends to retain future earnings to fund the development and growth
of its business. Payment of future dividends, if any, will be at the discretion
of its Board of Directors after taking into account various factors, including
Mobius's financial condition, operating results, current and anticipated cash
needs and plans for expansion.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below under the
captions "Consolidated Statement of Income Data" and "Consolidated Balance Sheet
Data" as of and for each of the years in the five year period ended June 30,
1999 are derived from the consolidated financial statements of Mobius, which
statements have been audited by KPMG LLP, independent certified public
accountants. The consolidated financial statements as of June 30, 1998 and 1999
and for each of the years in the three year period ended June 30, 1999, and the
report thereon, are included elsewhere in this Form 10-K. The data set forth
below should be read in conjunction with, and are qualified by reference to,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and Notes thereto,
included elsewhere in this Form 10-K. <TABLE> <CAPTION>
Years Ended June 30,
1995 1996 1997 1998 1999
------ ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Consolidated Statement of Income Data
(in thousands, except per share data):
Revenues:
Software license revenues $12,729 $18,769 $26,112 $37,929 $48,811
Maintenance and other revenues 9,676 12,189 15,215 18,598 25,025
------- ------- ------- ------- -------
Total revenues 22,405 30,958 41,327 56,527 73,836
------- ------- ------- ------- -------
Costs of revenues:
Software license revenues 614 626 1,336 1,443 1,223
Maintenance and other revenues 2,049 2,716 2,923 3,593 5,011
------- ------- ------- ------- ------
Total costs of revenues 2,663 3,342 4,259 5,036 6,234
------- ------- ------- ------- ------
Gross profit 19,742 27,616 37,068 51,491 67,602
Operating expenses:
Sales and marketing 12,523 15,136 21,971 28,171 41,074
Research and development 3,478 4,600 5,904 7,925 10,478
General and administrative 2,063 2,832 4,350 6,430 9,362
Stock compensation expense -- -- -- 642 1,046
------- ------- ------- ------- ------
Total operating expenses 18,064 22,568 32,225 43,168 61,960
------- ------- ------- ------- ------
Income from operations 1,678 5,048 4,843 8,323 5,642
License and other interest income 375 339 922 1,871 2,920
Interest expense (58) (41) (22) (14) (16)
Foreign currency transaction gains (losses) 34 (72) (12) (15) (191)
------- ------- ------- ------- ------
Income before income taxes
2,029 5,274 5,731 10,165 8,355
Provision for income taxes 880 2,657 3,348 5,500 4,057
Accretion on Preferred Stock -- -- -- 102 --
------- ------- ------- ------- ------
Net income available to common stock $ 1,149 $ 2,617 $ 2,383 $ 4,563 $ 4,298
======= ======= ======= ======= =======
Basic earnings per share(1) $ 0.08 $ 0.17 $ 0.17 $ 0.38 $ 0.24
Basic weighted average shares outstanding(1) 15,000 15,000 14,318 12,156 17,813
Diluted earnings per share(1) $ 0.08 $ 0.17 $ 0.15 $ 0.27 $ 0.23
Diluted weighted average shares outstanding(1) 15,000 15,000 15,882 16,738 18,964
Consolidated Balance Sheet Data
(in thousands):
Total assets $12,713 $18,446 $28,502 $78,800 $89,201
Total long term obligations 479 1,639 5,176 8,776 7,612
Convertible preferred stock -- -- 11,898 -- --
Stockholders' equity (deficit) 2,586 5,226 (4,344) 46,122 $51,528
<FN>
(1) For a description of the basic and diluted earnings per share ("EPS")
calculations and the basic and diluted weighted average shares
outstanding, see Note 2 of Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
In this section, readers are given a more detailed assessment of the
Company's operating results and changes in financial position over the periods
discussed. This section should be read in conjunction with the Company's
Consolidated Financial Statements and related Notes. Please note that references
in this section to "this year" and "last year" refer to its fiscal years ended
June 30, 1999 and June 30, 1998, respectively.
Overview
Mobius is a leading provider of software products designed to provide
network- and Web-based access, presentation and distribution of large volumes of
diverse enterprise information. Major financial services, healthcare,
manufacturing, retail and telecommunications companies and governmental entities
use the Company's products to facilitate customer service and other
mission-critical functions. Founded in 1981, the Company provided information
storage, retrieval and presentation products and support, as well as consulting
services throughout its first decade. In 1991, the Company decided to focus
primarily on developing and marketing software products and, as a result, sold
its consulting services business.
In April 1998, the Company's registration statement was declared
effective for its initial public offering ("IPO") of 2.5 million shares of
common stock at a price of $14.50 per share. Further detail about the IPO is
provided in the "Liquidity and Capital Resources" section below and in Notes 8
and 9 of the Notes to the Consolidated Financial Statements.
The Company's total revenues have increased over each of the past three
fiscal years, from $41.3 million in fiscal 1997 to $56.5 million in fiscal 1998
and to $73.8 million in fiscal 1999. The Company derives its revenues primarily
from server and client product license fees and related annual maintenance fees.
This year 66.1% of total revenues were generated by software license fees and
33.9% were generated by maintenance and other fees.
License revenues of ViewDirect and DocumentDirect products have
historically accounted for a majority of the Company's license revenues and for
a significant portion of total revenues. This year license revenues for these
products accounted for approximately 89.6% of license revenues and approximately
59.3% of total revenues. Last year license revenues for these products accounted
for approximately 84.3% of license revenues and approximately 56.6% of total
revenues. The Company anticipates in the foreseeable future that license revenue
from these products will continue to account for a significant portion of
license and total revenues.
Mobius's growing customer base has led to continued growth in
maintenance revenues, from $15.2 million in fiscal 1997 to $18.6 million last
year to $25.0 million this year. Maintenance consists primarily of revenue from
customer support by the Company for its products. Other revenue results when
Mobius occasionally hires independent professional service organizations to
provide customers with post-sale assistance.
International revenues increased this year to $9.5 million from $7.2
million last year and $3.2 million in fiscal 1997. As a group, the Company's
international subsidiaries have not achieved budgeted sales and have been
unprofitable to date, and Mobius expects achieving profitability will require
significant management attention and financial resources. The Company intends to
expand its international sales activities as part of its business strategy. The
majority of Mobius's current international revenues are derived from the
operations of its wholly-owned subsidiaries and through agents. The Company
receives a royalty that is a percent of agent or subsidiary sales of software
licenses and maintenance contracts to international customers. The Company's
subsidiaries conduct business in the currency of the country in which they
operate, exposing Mobius to currency fluctuations and currency transaction
losses or gains, which are outside of Mobius's control. To date, most of these
subsidiaries have operated at a loss, which cannot be consolidated for United
States income tax purposes. Consequently, the Company has a substantially higher
effective tax rate than the U.S. Federal statutory rate as no tax benefit has
been provided for the majority of these foreign losses. To the extent that the
Company is successful at bringing its foreign subsidiaries to profitability, the
Company's effective tax rate will be below the U.S. Federal tax statutory rate
as a result of realizing the benefit of the tax loss carryforwards currently
being generated outside of the United States. In addition, to the extent that
Mobius uses different tax structures for new foreign subsidiaries, which would
permit consolidation of losses for U.S. tax purposes, the effective tax rate
will approach the U.S. Federal statutory rate.
Capitalization of internally developed software costs is required once
technological feasibility is established. The period between achieving
technological feasibility, which we have defined as the establishment of a
working model, and the general availability of such software has been short and,
therefore, software development costs qualifying for capitalization have been
insignificant. Accordingly, the Company has not capitalized any software
development costs and currently does not anticipate having significant
development costs that are eligible for capitalization in the foreseeable
future. Software development costs are included in research and development and
are expensed as incurred. For more information on the Company's capitalization
of software development costs see Note 2 of Notes to Consolidated Financial
Statements.
Results of Operations
The following table sets forth certain items from the Company's
Consolidated Statement of Income as a percentage of total revenues for the
fiscal years indicated:
Years Ended June 30,
1997 1998 1999
---- ---- ----
Revenues:
Software license revenues 63.2% 67.1% 66.1%
Maintenance and other revenues 36.8 32.9 33.9
----- ----- -----
Total revenues 100.0 100.0 100.0
----- ----- -----
Costs of revenues:
Software license revenues 3.2 2.5 1.6
Maintenance and other revenues 7.1 6.4 6.8
----- ----- -----
Total costs of revenues 10.3 8.9 8.4
----- ----- -----
Gross profit 89.7 91.1 91.6
Operating expenses:
Sales and marketing 53.2 49.9 55.6
Research and development 14.3 14.0 14.2
General and administrative 10.5 11.4 12.7
Stock compensation expense -- 1.1 1.4
----- ----- -----
Total operating expenses 78.0 76.4 83.9
----- ----- -----
Income from operations 11.7 14.7 7.7
License and other interest income 2.3 3.3 3.9
Interest expense (0.1) -- (0.3)
Foreign currency transaction gains(losses) -- -- --
----- ----- -----
Income before income taxes 13.9 18.0 11.3
Provision for income taxes 8.1 9.7 5.5
Accretion on Preferred Stock -- 0.2 --
----- ----- -----
Net income available to common stock 5.8% 8.1% 5.8%
===== ===== =====
<PAGE>
Year Ended June 30, 1997 Compared to Year Ended June 30, 1998 Compared
to Year Ended June 30, 1999
Revenues. Total revenues increased 36.8% from $41.3 million in fiscal
1997 to $56.5 million in fiscal 1998 and 30.6% to $73.8 million in fiscal 1999.
Domestic revenues increased 29.2% from $38.2 million in fiscal 1997 to $49.3
million in fiscal 1998 and increased 30.4% to $64.3 million in fiscal 1999.
International revenues increased 127.6% from $3.2 million in fiscal 1997 to $7.2
million in fiscal 1998 and increased 32.3% to $9.5 million in fiscal 1999. Total
revenues have increased primarily because the Company sold more licenses for its
products to new and existing customers.
Software license revenues increased 45.3% from $26.1 million in fiscal
1997 to $37.9 million in fiscal 1998 and increased 28.7% to $48.8 million in
fiscal 1999. These increases were primarily attributable to increased sales of
licenses for ViewDirect and DocumentDirect products.
Maintenance and other revenues increased 22.2% from $15.2 million in
fiscal 1997 to $18.6 million in fiscal 1998 and increased 34.4% to $25.0 million
in fiscal 1999. The increases in maintenance and other revenues during these
years were primarily attributable to the growth in the amount of licensed
software covered by maintenance agreements and to a lesser extent, increases in
the maintenance fees charged by the Company. Other revenues for all periods were
not significant.
Costs of Revenues.
The costs of software license revenues increased 8.0% from $1.3 million
in fiscal 1997 to $1.4 million in fiscal 1998 and decreased 15.2% to $1.2
million in fiscal 1999, representing 5.1%, 3.8% and 2.5%, respectively, of
software license revenues in those years. The costs of software license revenue
as a percentage of software license revenues decreased in fiscal 1998 and 1999
primarily due to increased license revenues from products that were developed
exclusively by the Company and therefore do not require royalty payments.
The costs of maintenance and other revenues increased 22.9% from $2.9
million in fiscal 1996 to $3.6 million in fiscal 1998 and increased 39.5% to
$5.0 million in fiscal 1999, representing 19.2%, 19.3% and 20.0%, respectively,
of maintenance and other revenues in those years. The increases in costs of
maintenance and other revenues were primarily attributable to increased staffing
and personnel-related costs.
Operating Expenses.
Sales and marketing expenses increased 28.2% from $22.0 million in
fiscal 1997 to $28.2 million in fiscal 1998 and increased 45.8% to $41.1 million
in fiscal 1999, representing 53.2%, 49.9% and 55.6%, respectively, of total
revenues in those years. Sales and marketing expenses have increased primarily
because the Company paid more commissions and bonuses for selling more software
licenses, hired additional sales personnel and increased personnel-related
costs.
Research and development expenses increased 34.2% from $5.9 million in
fiscal 1997 to $7.9 million in fiscal 1998 and increased 32.2% to $10.5 million
for fiscal 1999, representing 14.3%, 14.0% and 14.2%, respectively, of total
revenues in those years. The increases in research and development expenses were
primarily attributable to increased staffing and personnel-related costs for
technical staff.
General and administrative expenses increased 47.8% from $4.4 million
in fiscal 1997 to $6.4 million in fiscal 1998 and increased 45.6% to $9.4
million in fiscal 1999, representing 10.5%, 11.4% and 12.7%, respectively, of
total revenues in those years. The increases were generally attributable to
increased professional services fees, costs for additional personnel and
$600,000 in legal and professional fees relating to an acquisition that the
Company does not believe will be completed.
Stock compensation expense of $642,000 in fiscal 1998 and $1.0 million
in fiscal 1999 was due to certain stock option grants made in fiscal 1998 at
below fair market value. There is approximately $547,000, $264,000, $134,000 and
$37,000 of expense relating to these 1998 option grants to be recognized in
fiscal years 2000, 2001, 2002 and 2003, respectively. For further information
see Note 10 of the Notes to the Consolidated Financial Statements.
License and other interest income; interest expense; foreign currency
transaction gains (losses). License and other interest income was $0.9 million,
$1.9 million and $2.9 million in fiscal 1997, 1998, and 1999, respectively. The
increase was primarily due to the increase in earnings on higher cash balances.
During fiscal 1997, 1998 and 1999 interest expense was insignificant. Foreign
currency transaction losses were $12,000, $15,000 and $191,000 in fiscal 1997,
1998 and 1999, respectively. These losses are the result of foreign currency
fluctuations in the foreign jurisdictions within which the Company does
business.
Provision for Income Taxes. The provision for income taxes was $3.3
million in fiscal 1997, $5.5 million in fiscal 1998 and $4.1 million in fiscal
1999. The Company had effective tax rates of approximately 58.4%, 54.1% and
48.6% in fiscal years 1997, 1998 and 1999, respectively. The difference between
these rates and the U.S. Federal statutory rate is primarily attributable to the
Company not being able to consolidate foreign subsidiary losses for U.S. tax
purposes. The changes in the effective tax rate from fiscal 1997 to fiscal 1999
principally reflect the impact of changes in the amount of operating losses of
the Company's foreign subsidiaries. For more information see Note 7 of Notes to
Consolidated Financial Statements.
Selected Quarterly Operating Results
The following table presents certain consolidated statement of income
data for the eight fiscal quarters in the period ended June 30, 1999. In
management's opinion, this unaudited information has been prepared on the same
basis as the audited Consolidated Financial Statements appearing elsewhere in
this Form 10-K and includes all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the information for the
quarters presented, when read in conjunction with the audited Consolidated
Financial Statements and Notes thereto included elsewhere herein. The results of
operations for any quarter are not necessarily indicative of results for any
future period.
<PAGE>
<TABLE>
<CAPTION>
Quarters Ended
Sept. 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31, March 31, June 30,
1997 1997 1998 1998 1998 1998 1999 1999
------ ------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Software license revenues $5,697 $8,596 $8,075 $15,561 $10,169 $13,253 $11,223 $14,166
Maintenance and other revenues 4,183 4,595 4,816 5,004 5,587 5,852 6,660 6,926
------ ------ ------- ------- ------- ------- ------- -------
Total revenues 9,880 13,191 12,891 20,565 15,756 19,105 17,883 21,092
Costs of revenues:
Software license revenues 366 312 217 548 311 232 282 398
Maintenance and other revenues 692 862 866 1,173 1,304 1,174 1,209 1,324
------ ------ ------- ------- ------- ------- ------- -------
Total costs of revenues 1,058 1,174 1,083 1,721 1,615 1,406 1,491 1,722
------ ------ ------- ------- ------- ------- ------- -------
Gross profit 8,822 12,017 11,808 18,844 14,141 17,699 16,392 19,370
Operating expenses:
Sales and marketing 4,700 6,097 6,566 10,808 8,346 9,702 9,684 13,342
Research and development 1,681 1,869 1,975 2,400 2,571 2,706 2,630 2,571
General and administrative 1,462 1,542 1,740 1,686 1,654 2,326 2,098 3,284
Stock compensation expense -- -- 313 329 323 343 213 167
------ ------ ------- ------- ------- ------- ------- -------
Total operating expenses 7,843 9,508 10,594 15,223 12,894 15,077 14,625 19,364
------ ------ ------- ------- ------- ------- ------- -------
Income from operations 979 2,509 1,214 3,621 1,247 2,622 1,767 6
License and other interest income 325 507 541 498 672 766 700 782
Interest expense (4) (2) (3) (5) (7) (4) (4) (1)
Foreign currency transaction gains
(losses) (3) (3) (5) (4) (33) (60) (9) (89)
------ ------ ------ ------ ------- ------- ------- -------
Income before income taxes 1,297 3,011 1,747 4,110 1,879 3,324 2,454 698
Provision for income taxes 750 1,605 979 2,166 988 1,595 1,174 300
Accretion on Preferred Stock -- 102 -- -- -- -- -- --
------ ------ ------ ------- ------- ------- ------- -------
Net income available to common stock $ 547 $1,304 $ 768 $ 1,944 $ 891 $ 1,729 $ 1,280 $ 398
====== ====== ====== ======= ======= ======= ======= =======
Basic earnings per share $0.05 $0.12 $0.07 $0.12 $0.05 $0.10 $0.07 $0.02
===== ===== ===== ===== ===== ===== ===== =====
Diluted earnings per share $0.03 $0.08 $0.05 $0.11 $0.05 $0.09 $0.07 $0.02
===== ===== ===== ===== ===== ===== ===== =====
As a Percentage of Total Revenues
Revenues:
Software license revenues 57.7% 65.2% 62.6% 75.7% 64.5% 69.4% 62.8% 67.2
Maintenance and other revenues 42.3 34.8 37.4 24.3 35.5 30.6 37.2 32.8
----- ----- ----- ----- ----- ----- ----- -----
Total revenues 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Costs of revenues:
Software license revenues 3.7 2.4 1.7 2.7 2.0 1.2 1.6 1.9
Maintenance and other revenues 7.0 6.5 6.7 5.7 8.3 6.2 6.7 6.3
----- ----- ----- ----- ----- ----- ----- -----
Total costs of revenues 10.7 8.9 8.4 8.4 10.3 7.4 8.3 8.2
----- ----- ----- ----- ----- ----- ----- -----
Gross profit 89.3 91.1 91.6 91.6 89.7 92.6 91.7 91.8
Operating expenses:
Sales and marketing 47.6 46.2 51.0 52.5 53.0 50.7 54.2 63.2
Research and development 17.0 14.2 15.3 11.7 16.3 14.2 14.7 12.2
General and administrative 14.8 11.8 13.5 8.2 10.5 12.2 11.7 15.6
Stock compensation expense -- -- 2.4 1.6 2.0 1.8 1.2 0.8
----- ---- ----- ----- ----- ----- ----- -----
Total operating expenses 79.4 72.2 82.2 74.0 81.8 78.9 81.8 91.8
Income from operations 9.9 18.9 9.4 17.6 7.9 13.7 9.9 --
License and other interest income 3.2 3.8 4.2 2.4 4.0 3.7 3.8 3.7
Interest expense -- -- -- -- -- -- -- --
Foreign currency transaction gains(losses) -- 0.1 -- -- -- -- -- (0.4)
----- ----- ----- ----- ----- ----- ----- -----
Income before income taxes 13.1 22.8 13.6 20.0 11.9 17.4 13.7 3.3
Provision for income taxes 7.6 12.2 7.6 10.5 6.2 8.3 6.5 1.4
Accretion on Preferred Stock -- 0.7 -- -- -- -- -- --
----- ----- ----- ----- ----- ----- ----- -----
Net income available to common stock 5.5% 9.9% 6.0% 9.5% 5.7% 9.1% 7.2% 1.9%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
The Company's quarterly revenues and operating results have varied
significantly in the past and are likely to vary substantially from quarter to
quarter in the future. Quarterly revenues and operating results are expected to
fluctuate as a result of a variety of factors, including lengthy product sales
cycles, changes in the level of operating expenses, demand for the Company's
products, introductions of new products and product enhancements by Mobius or
Mobius's competitors, changes in customer budgets, competitive conditions in the
industry and general domestic and international economic conditions. License
revenues typically peak during the fourth fiscal quarter and to a lesser extent
in the second fiscal quarter. These fluctuations are caused primarily by
customer purchasing patterns and the Company's sales force incentive programs
which recognize and reward sales personnel on the basis of achievement of annual
and other periodic performance quotas, as well as the factors described above.
<PAGE>
Liquidity and Capital Resources
Since its inception, Mobius has funded its operations principally
through cash flows from operating activities and, to a lesser extent, bank
financings and capital leases. As of June 30, 1999, Mobius had cash and cash
equivalents of $33.5 million, a decrease of $8.7 million from the $42.2 million
held at June 30, 1998. This decrease is primarily the result of the Company
investing $10.9 million in marketable securities and long-term investments.
Net cash provided by operating activities was $2.5 million, $5.2
million and $6.8 million in fiscal 1997, 1998 and 1999, respectively. Software
license installments, which, in total, increased 11.3% from $21.0 million at the
end of fiscal 1998 to $23.4 million at end of fiscal 1999, represent payments
due from customers for license fees that are paid over the term of the
installment agreement. These payments are typically made over 3 to 5 year terms.
Since payments are made over multiple reporting periods, software license
installments can fluctuate with the amount of license revenue sold on an
installment basis.
The Company's cash position has also benefited from the stability in
deferred maintenance revenue, which was $17.0 million at the end of fiscal 1998
and $16.7 million at the end of fiscal 1999. Deferred maintenance revenue
represents the unrecognized portion of maintenance billings and the unrecognized
portion of maintenance revenue unbundled from customer license agreements which
are recognized ratably over the maintenance period.
Cash used in investing activities was $1.0 million, $1.8 million and
$15.4 million in fiscal 1997, 1998 and 1999, respectively. In each of the years
ended June 30, 1997, 1998 and 1999, cash of $1.0 million, $1.8 million and $4.5
million was used for the purchase of computer equipment and leasehold
improvements. In fiscal 1999, Mobius also purchased marketable securities
totaling $10.9 million.
Cash used in financing activities was $252,000 in fiscal 1997 and was
the result of raising $11.9 million from a private placement of Series A
Convertible Preferred Stock, repurchasing $12.0 million of Common Stock and
payment of $150,000 of capital lease obligations. In fiscal 1998, cash provided
by financing activities was $33.1 million primarily due to the Company's IPO of
2,500,000 shares of common stock at a price of $14.50 per share. As a result of
the IPO, its outstanding Series A Convertible Stock and Class A Non-Voting
Common Stock were converted into an aggregate of 4,171,000 shares of Common
Stock. This year, cash provided by financing activities of $227,000 was
primarily due to cash received from the exercise of stock options.
The Company believes that its existing cash balances and cash flows
expected from future operations will be sufficient to meet the Company's capital
requirements for at least 12 months. The Company's line of credit expired on
October 20, 1998 and the Company continues negotiations to reinstate a line of
credit for working capital purposes. In compliance with the lease of the
Company's corporate headquarters in Rye, NY, the landlord holds a letter of
credit with Silicon Valley Bank for $275,000. This letter of credit is secured
by a certificate of deposit.
In January 1999, the Company sold the INFOPAC-TapeSaver product to
Technologic Software Concepts, Incorporated of Irvine, California for
approximately $3.0 million. Under the terms of the sale, Technologic will assume
responsibility for maintenance support for all existing TapeSaver licenses. As a
result of this arrangement, the Company will recognize $3.0 million of license
revenue as Technologic makes payments over the next five years, and
approximately $1.0 million of maintenance revenue through December 31, 1999. For
the year ended June 30, 1999, the Company recognized $666,000 of license revenue
and $795,000 of maintenance revenue related to this arrangement. Future license
revenue will be variable through December 31, 1999 as Technologic sells the
TapeSaver product to customers and will be $112,500 each quarter thereafter for
the remaining four year term of the contract.
<PAGE>
Year 2000 Compliance
Many currently installed operating systems and software products are
coded to accept only two digit entries in the date code field. These date code
fields need additional digits to distinguish 21st century dates from 20th
century dates. As a result, computer systems and/or software used by many
companies may need to be upgraded to comply with such "Year 2000" requirements.
Significant uncertainty exists in the software industry concerning the potential
effects associated with such compliance. Since the Company's products are
designed for long-term storage and retrieval of data with end of life dates well
beyond 2000, Mobius believes that its products are and have been Year 2000
compliant. There can be no assurance that the Company's products will not
experience Year 2000 compliance difficulties, or that third party products,
including operating systems, that are not Year 2000 compliant will not have a
detrimental effect on the operation of the Company's products.
The Company believes that Year 2000 issues may significantly affect the
purchasing patterns of its customers and potential customers. Many companies
have expended significant resources to correct or modify their current software
systems for Year 2000 compliance. These expenditures may result in reduced funds
available to purchase software products such as those the Company offers.
Management has implemented a Company-wide program to prepare its
internal computer systems and applications (such as its accounting and word
processing programs) for Year 2000 compliance. The Company expects to incur
internal staff costs as well as other expenses necessary during the course of
such efforts and the Company expects to both replace some systems and upgrade
others. Maintenance or modification costs will be expensed as incurred. The
total cost is not expected to be material. In addition the Company has obtained
assurance from its primary service and product providers regarding their
remediation efforts for the Year 2000 problem.
In light of the above, the Company does not anticipate any serious Year
2000 problems. However, in compliance with the SEC Release No. 34-40649, the
Company is required to estimate the impact of a broad systemic failure that is
caused by the "Y2K" problem. While the Company does not expect this to occur, if
the Company's primary service and product providers have not completed their
remediation efforts for the Year 2000 problem, it could impact the Company's
ability to develop and maintain its products, apply cash collections and make
electronic disbursements, since these activities are dependent upon the
continued operation of the national power and telephony grids and the banking
system. Other aspects of Mobius's operations could be maintained manually, at
substantially reduced efficiency, until these systems were restored to
operation.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 requires companies to recognize all derivatives as assets or liabilities
measured at their fair value. Gains and losses resulting from changes in the
values of those derivatives would be accounted for depending on the use of the
derivative and whether it qualifies for hedge accounting. In July 1999, SFAS No.
137 was issued to defer the effective date of SFAS No. 133 to fiscal years
beginning after June 15, 2000. The Company does not believe the adoption of SFAS
No. 133 will have a material effect on its financial position or results of
operations.
On December 15, 1998, the AICPA issued SOP 98-9, "Modification of SOP
97-2, Software Revenue Recognition, With Respect to Certain Transactions." SOP
98-9, which is effective for transactions entered into in fiscal years beginning
after March 15, 1999, requires the application of the "residual method" for
certain multiple element arrangements. Under this method, the arrangement fee is
recognized as follows: (1) the total fair value of the undelivered elements, as
indicated by vendor-specific objective evidence, is deferred and subsequently
recognized in accordance with the relevant sections of SOP 97-2 and (2) the
difference between the total arrangement fee and the amount deferred for the
undelivered elements is recognized as revenue related to the delivered elements.
All other provisions of SOP 97-2 remain in effect. The Company will adopt SOP
98-9 for software transactions beginning July 1, 1999. The Company believes its
current accounting policies substantially comply with SOP 98-9 and therefore
does not expect the adoption of SOP 98-9 will have a material effect on its
operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated financial statements are included in Item 14 (a)(1).
Selected Quarterly Financial Data is included in Item 7 Management's Discussion
and Analysis of Financial Condition and Results of Operations.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this item is incorporated by reference to the
Company's definitive proxy statement to be filed not later than October 28, 1999
pursuant to Regulation 14A of the General Rules and Regulations under Securities
Exchange Act of 1934, as amended.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item is incorporated by reference to the
Company's definitive proxy statement to be filed not later than October 28, 1999
pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item is incorporated by reference to the
Company's definitive proxy statement to be filed not later than October 28, 1999
pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is incorporated by reference to the
Company's definitive proxy statement to be filed not later than October 28, 1999
pursuant to Regulation 14A.
<PAGE>
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
MOBIUS MANAGEMENT SYSTEMS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report
Consolidated Balance Sheets as of June 30, 1998 and 1999 Consolidated Statements
of Income for the Years Ended June 30, 1997,
1998 and 1999
Consolidated Statements of Stockholders' Equity for the Years Ended
June 30, 1997, 1998, and 1999
Consolidated Statements of Cash Flows for the Years Ended June 30,
1997, 1998, and 1999
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts and Reserves
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Mobius Management Systems, Inc.:
We have audited the consolidated financial statements and financial
statement schedule of Mobius Management Systems, Inc. and subsidiaries as listed
in the accompanying index. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule 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
misstatement. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Mobius
Management Systems, Inc. and subsidiaries as of June 30, 1998 and 1999 and the
results of their operations and their cash flows for each of the years in the
three-year period ended June 30, 1999, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects the
information set forth therein.
KPMG LLP
July 27, 1999
Stamford, CT
<PAGE>
MOBIUS MANAGEMENT SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data and per share data)
June 30,
1998 1999
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 42,222 $ 33,546
Marketable securities, at market -- 9,362
Accounts receivable, net of allowance for doubtful
accounts of $612 and $860, respectively 10,733 12,631
Software license installments, current portion 7,330 10,603
Other current assets 1,682 2,281
------- -------
Total current assets 61,967 68,423
Software license installments, non-current portion,
net of allowance for doubtful accounts of $767
and $812, respectively 13,686 12,778
Investment, at cost -- 1,501
Property and equipment, net 2,932 6,039
Other assets 215 460
-------- --------
Total assets $ 78,800 $ 89,201
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 9,471 $ 13,892
Deferred maintenance revenue 11,408 12,840
Deferred income taxes 2,054 3,293
Other liabilities 969 36
-------- --------
Total current liabilities 23,902 30,061
-------- --------
Deferred maintenance revenue 5,616 3,811
Deferred income taxes 3,124 3,801
Capital lease obligations, less
current portion 36 --
Stockholders' equity:
Common stock $.0001 par value;
authorized 40,000,000 shares; issued
21,785,500 and 21,996,150 shares, respectively;
outstanding 17,694,500 and 17,905,150
shares, respectively 2 2
Additional paid-in capital 47,994 48,409
Retained earnings 12,199 16,497
Deferred stock compensation (2,076) (982)
Accumulated other comprehensive income 3 (398)
Treasury stock, at cost, 4,091,000
and 4,091,000 shares, respectively (12,000) (12,000)
-------- --------
Total stockholders' equity 46,122 51,528
-------- --------
Total liabilities and stockholders' equity $ 78,800 $ 89,201
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
MOBIUS MANAGEMENT SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Years Ended June 30,
1997 1998 1999
---- ---- ----
Revenues:
Software license revenues $26,112 $37,929 $48,811
Maintenance and other revenues 15,215 18,598 25,025
------- ------- -------
Total revenues 41,327 56,527 73,836
------- ------- -------
Costs of revenues:
Software license revenues 1,336 1,443 1,223
Maintenance and other revenues 2,923 3,593 5,011
------- ------- -------
Total costs of revenues 4,259 5,036 6,234
------- ------- -------
Gross profit 37,068 51,491 67,602
------- ------- -------
Operating expenses:
Sales and marketing 21,971 28,171 41,074
Research and development 5,904 7,925 10,478
General and administrative 4,350 6,430 9,362
Stock compensation expense -- 642 1,046
------- ------- -------
Total operating expenses 32,225 43,168 61,960
------- ------- -------
Income from operations 4,843 8,323 5,642
License and other interest income 922 1,871 2,920
Interest expense (22) (14) (16)
Foreign currency transaction losses (12) (15) (191)
------- ------- -------
Income before income taxes 5,731 10,165 8,355
Provision for income taxes 3,348 5,500 4,057
Accretion on Preferred Stock -- 102 --
------- ------- -------
Net income available to
common stock $ 2,383 $ 4,563 $ 4,298
======= ======= =======
Basic earnings per share $ 0.17 $ 0.38 $ 0.24
Basic weighted average shares
outstanding 14,318 12,156 17,813
Diluted earnings per share $ 0.15 $ 0.27 $ 0.23
Diluted weighted average
shares outstanding 15,882 16,738 18,964
See accompanying notes to consolidated financial statements.
<PAGE>
MOBIUS MANAGEMENT SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Accumulated Total
Additional Other Stockholders'
Common Stock Paid-in Retained Deferred Comprehensive Treasury Stock (Deficit)
Shares Amount Capital Earnings Compensation Income Shares Amount Equity
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1996 16,727 $ 2 $ 77 $5,306 $ - $ (28) 1,727 $ (131) $5,226
Net income - - - 2,383 - - - - 2,383
Change in other comprehensive income - - - - - 47 - - 47
------
Comprehensive income - - - - - - - - 2,430
Retirement of treasury stock (1,727) (1) (77) (53) - - (1,727) 131 -
Shares repurchased in connection with
issuance of preferred stock (4,091) - - - - - 4,091 (12,000) (12,000)
-------- ----------------------------------------------------------------------------------
Balance at June 30, 1997 10,909 1 - 7,636 - 19 4,091 (12,000) (4,344)
Net income - - - 4,563 - - - - 4,563
Change in other comprehensive income - - - - - (16) - - (16)
------
Comprehensive income - - - - - - - - 4,547
Issuance of common stock 2,500 - 33,034 - - - - - 33,034
Conversion of Seris A Preferred Stock 4,091 1 11,999 - - - - - 12,000
Conversion of Class A Common Stock 80 - 100 - - - - - 100
Stock options exercised 115 - 143 - - - - - 143
Deferred compensation - - 2,718 - (2,718) - - - -
Change in deferred compensation
- - - - 642 - - - 642
-------------------------------------------------------------------------------------------
Balance at June 30, 1998 17,695 2 47,994 12,199 (2,076) 3 4,091 (12,000) 46,122
Net income - - - 4,298 - - - - 4,298
Change in other comprehensive income - - - - - (401) - - (401)
-----
Comprehensive income - - - - - - - - 3,897
Stock options exercised 210 - 463 - - - - - 463
Change in deferred compensation - - (48) - 1,094 - - - 1,046
-------------------------------------------------------------------------------------------
Balance at June 30, 1999 17,905 $ 2 $48,409 $16,497 $ (982) $(398) 4,091 $(12,000) $51,528
===========================================================================================
</TABLE>
See accompanying notes to consolitedfinancial statements.
<PAGE>
MOBIUS MANAGEMENT SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended June 30,
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Cash flows provided by operating activities:
Net income $ 2,383 $ 4,563 $ 4,298
------- ------- -------
Adjustments to reconcile net income to net cash provided by operating
activities:
Deferred income taxes 1,857 2,207 1,916
Depreciation and amortization 406 760 1,372
Stock compensation expense -- 642 1,046
Accretion of Preferred Stock -- 102 --
Loss on disposal of fixed assets -- 78 --
Change in operating assets
and liabilities:
Accounts receivable, net (465) (2,940) (1,898)
Software license installments (7,497) (8,530) (2,365)
Other assets (235) (1,236) (644)
Accounts payable and accrued expenses 2,112 2,878 4,421
Other liabilities (94) 835 (933)
Deferred maintenance revenue 4,002 5,869 (373)
------- ------ -------
Total adjustments 86 665 2,542
------- ------ -------
Net cash provided by operating activities 2,469 5,228 6,840
------- ------ -------
Cash flows used in investing activities:
Purchase of marketable securities -- -- (9,403)
Purchase of investments, non-current -- -- (1,501)
Capital expenditures (1,039) (1,780) (4,479)
------- ------ -------
Net cash used in investing activities (1,039) (1,780) (15,383)
------- ------ -------
Cash flows (used) provided by financing activities:
Cash received from sale of preferred
stock, net of issuance costs 11,898 -- --
Cash received from sale of common stock -- 33,713 --
Payments relating to sale of common stock -- (679) --
Cash received from exercise of stock options -- 143 263
Cash payment for repurchase of common stock (12,000) -- --
Payments on capital lease obligations (150) (59) (36)
------- ------ -------
Net cash (used) provided by financing activities (252) 33,118 227
------- ------ -------
Effect of exchange rate changes on
cash and cash equivalents 47 (16) (360)
------- ------ -------
Net change in cash and cash equivalents 1,225 36,550 (8,676)
Cash and cash equivalents at beginning
of period 4,447 5,672 42,222
------- ------- -------
Cash and cash equivalents at end of period $ 5,672 $42,222 $33,546
======= ======= =======
Supplemental disclosure of cash flow information: Cash paid during the period
for:
Interest $ 22 $ 14 $ 16
Income taxes 1,544 2,419 3,304
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
MOBIUS MANAGEMENT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Organization
Mobius Management Systems, Inc., together with its wholly-owned
subsidiaries (the "Company"), is a provider of enterprise software products
designed to provide network- and Web-based access, presentation and distribution
of large volumes of diverse enterprise information. The Company is incorporated
in the State of Delaware and operates wholly-owned subsidiaries in the United
Kingdom, France, Germany, Italy, Sweden, Switzerland, Australia, Japan and the
Benelux.
(2) Significant Accounting Policies
Principles of consolidation
The Company and its subsidiaries are consolidated for financial
statement purposes after the elimination of all significant intercompany
transactions.
Revenue recognition
License and maintenance revenue are recognized in accordance with
Statement of Position 97-2, "Software Revenue Recognition" ("SOP 97-2"). Revenue
from software license contracts includes license fees related to long-term
licenses, typically 5 or 15 years, and fees for term license contracts, which
are generally 3 to 5 years. Revenue from executed software license contracts is
recognized upon delivery of the software to the customer if no significant
vendor obligations remain and collection of the resulting receivable is
probable. Software license revenue includes the present value of future payments
under non-cancelable license arrangements which provide for payment in
installments generally over periods from 3 to 5 years. A portion of the discount
is recognized as interest income over the term of the arrangement.
SOP 97-2 generally requires revenue earned on multiple element software
arrangements, such as additional software products, upgrades or enhancements,
rights to exchange or return software, maintenance or services, including
elements deliverable only on a when-and-if-available basis, to be allocated to
the various elements of such sale based on "vendor-specific objective evidence
of fair values" allocable to each such element. If sufficient vendor-specific
objective evidence of fair market values does not exist, revenue from the sale
could be deferred until such sufficient evidence exists, or until all elements
have satisfied the requirements for revenue recognition.
According to these guidelines, when the Company sells a software
license contract that includes maintenance, the maintenance revenue is unbundled
from the initial license fee and recognized ratably over the maintenance period,
starting from the inception of the software license agreement. The unearned
portion of such maintenance revenue is classified as deferred maintenance
revenue with amounts extending beyond one-year reported as non-current.
Revenue on maintenance contracts is recognized on a straight-line basis
over the term of the maintenance contract, generally twelve months. The unearned
portion of maintenance revenue is classified as deferred maintenance revenue.
<PAGE>
Software Development Costs
Statement of Financial Accounting Standards No. 86 (SFAS No. 86)
requires the capitalization of certain software development costs once
technological feasibility is established. The capitalized costs are then
amortized on a straight-line basis over the estimated product life, or on the
ratio of current revenues to total projected product revenues, whichever is
greater.
The Company determines technological feasibility based on the working
model method. The period between establishment of a working model and the
general availability of its software has historically been short and,
accordingly, software development costs qualifying for capitalization have been
insignificant. As a result, the Company has expensed all software development
costs.
Property and Equipment
Property and equipment are carried at cost. Depreciation is computed on
a straight-line basis over the estimated life of the related asset, ranging from
three to seven years. Assets acquired under capital leases are depreciated on a
straight-line basis over the shorter of the asset's life or the respective
lease.
Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109). SFAS
No. 109 requires using the asset and liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities, and their
respective tax bases. Deferred tax assets are recognized for deductible
temporary differences, net operating loss carryforwards, and tax credit
carryforwards if it is more likely than not that the tax benefits will be
realized. A valuation allowance is established if it is more likely than not
that a deferred tax asset will not be realized.
Foreign Currency Translation
Balance sheet accounts of the Company's foreign subsidiaries are
translated into U.S. dollars at exchange rates in effect at the balance sheet
date. Revenues, costs and expenses are translated into U.S. dollars at average
exchange rates for the year. Gains or losses that result from translation are
shown as a separate component of stockholders' equity. Net gains and losses
resulting from foreign exchange transactions are included in the determination
of net income.
Cash Equivalents
The Company considers investments with maturities at the date of
purchase of three months or less to be cash equivalents. At June 30, 1998 and
1999, cash equivalents were comprised of overnight deposits and money market
investments with financial institutions.
Marketable Securities
Marketable securities are categorized as available-for-sale securities,
as defined by Statement of Financial Accounting Standards No. 115, Accounting
for Certain Investments in Debt and Equity Securities. Unrealized holding gains
and losses are reflected as a net amount in a separate component of
stockholders' equity until realized. For the purpose of computing realized gains
and losses, cost is identified on a specific identification basis. Realized
gains and losses for the year ended June 30, 1999 are insignificant. As of June
30, 1999 the unamortized investment premium, and unrealized holding gains
and losses were insignificant.
<PAGE>
Concentration of Credit Risk
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of substantially all of the trade accounts
receivables and software license installments. The Company sells its products to
a large number of customers in diversified industries across many domestic and
international geographies.
Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments" (SFAS 107) defines the fair value of a
financial instrument as the amount at which the instrument could be exchanged in
a current transaction between willing parties. The fair value of the Company's
cash and cash equivalents, marketable securities, accounts receivable, software
license installments, non current investments, accounts payable, accrued
expenses and deferred maintenance amounts approximate their carrying value.
Earnings Per Share
Effective December 1997, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings Per Share". SFAS No. 128
stipulates that the calculation of earnings per share (EPS) be shown for all
historical periods as Basic EPS and Diluted EPS. Basic EPS is computed by
dividing income available to common shareholders by the weighted average number
of common shares outstanding during the period. The computation of Diluted EPS
is similar to the computation of Basic EPS except that it gives effect to all
potentially dilutive instruments that were outstanding during the period. Such
dilutive instruments include stock options, the conversion of Series A
Convertible Preferred Stock, and the conversion of the Class A Non-Voting Common
Stock.
The following is a reconciliation of the numerators and denominators
for the Basic and Diluted EPS calculations (in thousands, except per share
data):
<TABLE>
<CAPTION>
Years Ended June 30,
1998 1999
-------------- --------------- ------------ ------------- --------------- -----------
Net Income Shares Per Share Net Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net income $4,563 $4,298
====== ======
Weighted average shares
outstanding 12,156 17,813
Basic EPS $0.38 $0.24
===== =====
Diluted EPS:
Net income $4,563 $4,298
====== ======
Dilutive effect of
convertible securities 3,428 -
Dilutive effect of
stock options 1,154 1,151
------ ------
Diluted EPS 16,738 $0.27 18,964 $0.23
====== ===== ====== =====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended
June 30, 1997
------------- ---------------- ------------
Net Income Shares Per Share
(Numerator) (Denominator) Amount
<S> <C> <C> <C>
Basic EPS:
Net income $2,383
Weighted average shares ======
outstanding 14,318
Basic EPS $0.17
=====
Diluted EPS:
Net income $2,383
Dilutive effect of ======
convertible securities 682
Dilutive effect of
stock options 882
------
Diluted EPS 15,882 $0.15
====== =====
</TABLE>
For the year ended June 30, 1999 there were 62,000 weighted average
shares of options that were not included in the EPS calculation because their
effect was anti-dilutive. There were no anti-dilutive shares for 1997 or 1998.
Stock Based Compensation
The Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation", and elected to continue to apply the provisions of Accounting
Principles Board (APB) Opinion No. 25 in determining measurement of compensation
expense and provide pro forma net income and pro forma earnings per share
disclosures for employee stock option grants made in 1995 and future years as if
the fair value-based method, as defined in SFAS No. 123, had been applied. As
such, compensation expense is generally recorded on the date of grant only if
the current fair market value of the underlying stock exceeded the exercise
price.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
requires companies to recognize all derivatives as assets or liabilities
measured at their fair value. Gains and losses resulting from changes in the
values of those derivatives would be accounted for depending on the use of the
derivative and whether it qualifies for hedge accounting. In July 1999, SFAS No.
137 was issued to defer the effective date of SFAS No. 133 to fiscal years
beginning after June 15, 2000. The Company does not believe the adoption of SFAS
No. 133 will have a material effect on its financial position or results of
operations.
On December 15, 1998, the AICPA issued SOP 98-9, "Modification of SOP
97-2, Software Revenue Recognition, With Respect to Certain Transactions." SOP
98-9, which is effective for transactions entered into in fiscal years beginning
after March 15, 1999, requires the application of the "residual method" for
certain multiple element arrangements. Under this method, the arrangement fee is
recognized as follows: (1) the total fair value of the undelivered elements, as
indicated by vendor-specific objective evidence, is deferred and subsequently
recognized in accordance with the relevant sections of SOP 97-2 and (2) the
difference between the total arrangement fee and the amount deferred for the
undelivered elements is recognized as revenue related to the delivered elements.
All other provisions of SOP 97-2 remain in effect. The Company will adopt SOP
98-9 for software transactions beginning July 1, 1999. The Company believes its
current accounting policies substantially comply with SOP 98-9 and therefore
does not expect the adoption of SOP 98-9 will have a material effect on its
operations.
<PAGE>
(3) Software License Installments
The Company offers extended payment terms to some of its customers. For
software license contracts of 15 years, the related financing period is
generally 5 years. For software installment contracts of 3 to 5 years, the
payments are generally spread ratably over the term. Software license
installments are discounted at a market rate of interest at the date the
software license contract revenue is recognized. At June 30, 1998 and 1999 the
effective weighted average discount rate used for software license installments
was 7.61% and 7.41%, respectively. The discount is amortized to interest income
using the interest method over the term of the license contract.
The present values of software license installments to be received
after June 30, 1999 are as follows (in thousands):
Year Ended:
June 30, 2000 $12,307
June 30, 2001 7,932
June 30, 2002 4,965
June 30, 2003 2,253
June 30, 2004 50
-------
Total minimum payments to be received 27,507
Less unearned interest income (3,314)
Less allowance for doubtful accounts (812)
-------
Present value of software license installments, net 23,381
Less current portion, net 10,603
-------
Non-current portion, net $12,778
=======
(4) Property and Equipment
Property and equipment consists of the following (in thousands):
June 30,
1998 1999
------ ------
Furniture, fixtures and office equipment $ 508 $ 939
Computer equipment 4,410 7,803
Leasehold improvements 544 1,153
------ ------
5,462 9,895
Less accumulated depreciation and amortization (2,530) (3,856)
------ ------
Property and equipment, net $2,932 $6,039
====== ======
Depreciation and amortization expense on property and equipment, including
capital leases, was $406,000, $760,000 and $1,372,000 for the twelve months
ended June 30, 1997, 1998 and 1999, respectively. At the end of the years` ended
June 30, 1998 and 1999 there was $214,000 of equipment under capital leases
included in property and equipment with accumulated depreciation of $74,000 and
$104,000, respectively.
(5) Non-Current Investments
In June 1999, the Company invested $1,501,000 in equity securities of a
privately-held, information technology company. This investment was accounted
for under the cost method. The Company will regularly review the assumptions
underlying the operating performance and cash flow forecasts to assess this
investment's recoverability. If the events and circumstances indicate that this
investment may be impaired, the Company will record an impairment loss. As of
June 30, 1999, no impairment has been recorded.
<PAGE>
(6) Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following (in
thousands):
June 30,
1998 1999
---- ----
Accounts payable $ 801 $ 2,179
Compensation and related benefits 4,872 5,897
Royalties payable 1,318 1,358
Other 2,480 4,458
------ -------
$9,471 $13,892
====== =======
(7) Income Taxes
Income before provision for income taxes is as follows (in thousands):
Years Ended June 30,
1997 1998 1999
---- ---- ----
Domestic income $ 7,923 $13,261 $13,236
Foreign losses (2,192) (3,096) (4,881)
------- ------- -------
$ 5,731 $10,165 $ 8,355
======= ======= =======
The components of the provision for income taxes for the years ended June
30, 1997, 1998 and 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended June 30,
1997 1998 1999
----------------------------------------------------------------------------------------------------
Current Deferred Total Current Deferred Total Current Deferred Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal $1,200 $1,521 $2,721 $2,704 $1,807 $4,511 $1,736 $1,569 $3,305
State 276 336 612 542 400 942 350 347 697
Foreign 15 -- 15 47 -- 47 55 -- 55
------ ------ ------ ------ ------ ------ ------ ------ ------
$1,491 $1,857 $3,348 $3,293 $2,207 $5,500 $2,141 $1,916 $4,057
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
The following table reconciles the Federal statutory corporate rate of 34%
to the effective income tax rate for the years ended June 30, 1997, 1998 and
1999:
Years Ended June 30,
1997 1998 1999
---- ---- ----
Federal statutory corporate rate $1,949 $3,456 $2,840
State income taxes, net of Federal benefit 344 610 501
Losses of foreign subsidiaries 802 1,118 1,170
Research credit (57) -- (167)
Other 310 316 (287)
------ ------ ------
Total $3,348 $5,500 $4,057
====== ====== ======
Pre-Tax Income $5,731 $10,165 $8,355
====== ======= ======
Effective Tax Rate 58.4% 54.1% 48.6%
===== ===== =====
<PAGE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below (in thousands):
June 30,
1998 1999
---- ----
Deferred tax assets:
Accounts receivable, principally due
to allowance for doubtful accounts $ 401 $ 450
Foreign net operating loss carryforwards 3,067 3,550
------ -----
3,468 4,000
Valuation allowance (3,067) (3,550)
------ ------
Net deferred tax assets 401 450
Deferred tax liabilities:
Software license installments 5,376 7,274
Depreciation 203 232
Other -- 38
------ ------
Net deferred tax liability $5,178 $7,094
====== ======
The valuation allowance increased by $969,000, $1,390,000 and $483,000
for the years ended June 30, 1997, 1998 and 1999 primarily due to uncertainty of
realization of net operating losses incurred by certain foreign subsidiaries.
The Company will reduce the valuation allowance when it is concluded that it is
more likely than not that these deferred tax assets will be realized.
The expiration of net operating loss carryforwards varies by foreign
jurisdiction; some begin to expire in fiscal 2000 and others extend
indefinitely.
(8) Common Stock
Common Stock
The Company has authorized 40,000,000 shares of common stock with a
$.0001 par value. This includes 1,727,200 shares of common stock that were
retired during 1997, having previously been held in treasury stock.
On May 12, 1997, as part of the Preferred Stock Agreement (see note 9)
the Company repurchased 4,091,000 shares of common stock, $.0001 par value, from
its founders for $12,000,130. Such amount is being held in treasury stock at
June 30, 1999.
In April 1998, the Company sold 2,500,000 shares of common stock at a
price of $14.50 per share in an Initial Public Offering ("IPO"). The net
proceeds to the Company were $33,034,000 after deducting the underwriting
discount and offering expenses payable by the Company. In connection with the
IPO, the Company's outstanding Series A Convertible Preferred Stock and Class A
Non-Voting Common Stock were converted into an aggregate of 4,171,000 shares of
common stock.
Class A Non-Voting Common Stock
The Company had authorized 5,000,000 shares of Class A Non-Voting
Common Stock with a $.0001 par value. During fiscal 1998, 80,000 shares were
issued. Such shares of the Class A Non-Voting Common Stock were converted to
common stock upon completion of the IPO. In connection with the IPO, this class
of common stock was retired and no shares remain authorized or outstanding.
Stock Split
On February 19, 1998, the Board of Directors authorized a 100-to-one
stock split of the Company's common stock. All common share and per share
amounts have been retroactively adjusted in the accompanying consolidated
financial statements to reflect the stock split.
(9) Preferred Stock
The Company has authorized 1,000,000 shares of Preferred Stock with a
par value of $.01. Before any shares are issued, the Board of Directors shall
fix the specific provisions of the shares including the designation of series,
voting rights, dividend features, redemption and liquidation provision and other
features.
On May 12, 1997, the Company entered into a Stock Purchase Agreement
(the "Agreement") whereby certain investors purchased 40,910 shares of the
Preferred Stock that the Board of Directors designated as Series A Convertible
Preferred Stock ("Seris A Convertible Preferred Stock") for $12,000,130.
Such Seris A Convertible Preferred Stock was converted into 4,091,000
shares of the Company's common stock in connection with the IPO.
(10) Stock Option Plans
1996 Stock Incentive Plan
In November 1996, the Company adopted the 1996 Stock Incentive Plan
(the "Plan") pursuant to which the Company's Board of Directors may grant stock
options to officers, employees, directors and consultants. The Plan authorizes
grants of options to purchase up to 3,480,000 shares of authorized but unissued
common stock. Stock options are generally granted with an exercise price equal
to the stock's fair market value at the date of grant as determined by the
Company's Board of Directors. Stock options generally vest as to 20% of the
shares subject thereto on the first anniversary of the date of grant and the
remainder vest ratably over the subsequent 16 quarters.
1998 Non-Employee Directors' Stock Option Plan
In February 1998, the Board of Directors and stockholders of the
Company approved and adopted the 1998 Non-Employee Director Stock Option Plan
(the "Directors' Plan"). The purpose of the Directors' Plan is to provide an
incentive to the Company's non-employee directors to serve on the Board of
Directors and to maintain and enhance the Company's long-term performance. The
Directors' Plan provides for the issuance of a total of 250,000 authorized and
unissued shares of common stock, treasury shares and/or shares acquired by the
Company for purposes of the Directors' Plan.
The Directors' Plan provides for initial grants (i.e. upon adoption of
the Directors' Plan or upon a non-employee director's initial election to the
Board of Directors) of non-qualified stock options to purchase 10,000 shares of
common stock. At each annual meeting thereafter, each non-employee director will
receive an option to purchase 10,000 shares. Each option granted under the
Directors' Plan will have a term of ten years and will become exercisable upon
grant. The exercise price of each option granted under the Directors' Plan will
equal the fair market value of a share of common stock on the date of grant.
<PAGE>
Total stock option activity during the periods indicated was as follows:
Weighted
Average
Number of Exercise
Shares Price
Balance at June 30, 1996 -- --
Granted 2,045,500 $ 1.25
Exercised -- --
Forfeited -- --
Expired -- --
---------
Balance at June 30, 1997 2,045,500 $ 1.25
Granted 1,248,500 8.88
Exercised (194,500) 1.25
Forfeited (702,000) 1.43
Expired -- --
---------
Balance at June 30, 1998 2,397,500 $ 5.17
Granted 374,000 10.10
Exercised (210,650) 1.25
Forfeited (78,000) 6.58
Expired -- --
---------
Balance at June 30, 1999 2,482,850 $ 6.20
=========
The following table summarizes information about the stock option
plans:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------- ---------------------
Number Weighted Weighted Number Weighted
Outstanding Average Average Exercisable Average
Range of as of Contractual Exercise as of Exercise
Exercise Prices June 30,1999 Life Price June 30, 1999 Price
$1.25 - $1.25 928,350 7.24 $1.25 310,600 $1.25
$5.28 - $9.75 656,500 8.56 $6.83 261,346 $6.32
$9.86 - $10.25 370,000 8.58 $9.88 112,500 $9.89
$11.00 - $11.00 375,000 8.66 $11.00 118,875 $11.00
$11.25 - $17.50 153,000 9.44 $12.85 - -
$1.25 - $17.50 2,482,850 8.14 $6.20 803,321 $5.55
At June 30, 1999, there were 632,000 shares available for grant under the
Plan and 210,000 shares available for grant under the Directors' Plan.
In January, February and March 1998 the Company granted 350,000 370,000
and 53,000 stock options, respectively, under the 1996 Stock Incentive Plan at
an exercise price of $9.86, $11.00 and $11.00 per share, respectively, which
were deemed by the Board of Directors to be fair market values for the shares on
these dates. The Company subsequently determined that these options were granted
at exercise prices below the fair market value of $14.00 per share, the low end
of the range of per share prices for the IPO in April 1998. As a result, the
Company recognized compensation expense of $642,000 and $1,046,000 for the years
ended June 30, 1998 and 1999, respectively. There is approximately $547,000,
$264,000, $134,000 and $37,000 of expense relating to these 1998 option grants
to be recognized in fiscal years 2000, 2001, 2002 and 2003, respectively, to be
adjusted for option holders' terminations.
<PAGE>
If the Company had determined compensation cost based on the fair value of
the option on the grant date for its stock options under SFAS No. 123, the
Company's net income and earnings per share would have been reduced to the
amounts indicated below.
Year Ended June 30,
1997 1998 1999
---- ---- ----
Net income and earnings per share
as would be reported under SFAS No. 123:
Net income $2,317 $4,209 $2,629
Basic earnings per share $ 0.16 $ 0.35 $ 0.15
Diluted earnings per share $ 0.15 $ 0.25 $ 0.14
The modified Black Scholes option pricing model was used for grants
prior to June 30, 1998 and the Black Scholes option pricing model has been used
for grants subsequent to July 1, 1998. The per share weighted average fair value
of stock options granted during the years ended June 30, 1997, 1998 and 1999 was
$0.80, $5.93 and $10.07 on the date of grant, respectively. The grants during
the years ended June 30, 1997 and 1998 assumed no volatility, expected dividend
yield of 0.0%, and an expected life of 7 years. Grants during the year ended
June 30, 1999 assumed 568% volatility, expected dividend yield of 0.0% and an
expected life of 3.2 years. The assumed risk free interest rate on the date of
grants was 6.5% in fiscal 1997, ranged between 5.7% and 6.8% in fiscal 1998 and
was 5.25% in fiscal 1999.
(11) 1998 Employee Stock Purchase Plan ("ESPP")
In February 1998, the Board of Directors and stockholders of the
Company approved and adopted the 1998 Employee Stock Purchase Plan (the "ESPP").
The purpose of the ESPP is to provide eligible employees who wish to acquire
common stock of the Company the opportunity to purchase shares from the Company
with accumulated payroll deductions. The ESPP is intended to constitute an
"employee stock purchase plan" under section 423 of the Internal Revenue Code.
The ESPP provides for the issuance of an aggregate of up to 300,000 authorized
and unissued shares of common stock, treasury shares and/or shares acquired by
the Company for the purposes of the ESPP. During fiscal 1998 and 1999 there were
no shares issued under this plan. As of June 30, 1999, 73,787 shares are
reserved for issuance and there were 226,213 remaining shares available to
purchase under this plan.
(12) Employee Savings Plan and Executive Incentive Plan
In fiscal 1995, the Company established a savings plan that qualifies
under Section 401(k) of the Internal Revenue Code. Under the plan, participating
U.S. employees may defer up to 20% of their pre-tax compensation, but not more
than Internal Revenue Code limitations. The Company, at the discretion of the
Board of Directors, may match the employee contributions. No matching
contributions were made in the years ended June 30, 1997, 1998 and 1999.
In February 1998, the Board of Directors and stockholders of the
Company have approved and adopted the Mobius Management Systems, Inc. Executive
Incentive Plan (the "Incentive Plan"). The Incentive Plan is administered by the
Compensation Committee of the Board. Participation in the Incentive Plan is
limited to those executives and key employees who, in the judgment of the
Compensation Committee, are in a position to have a significant impact on the
performance of the Company.
Awards under the Incentive Plan are based upon the extent to which
performance goals established by the Compensation Committee for a designated
performance period are satisfied. The Incentive Plan also provides for grants of
discretionary bonuses. As of June 30, 1999, there were no awards made under the
Incentive Plan.
(13) Comprehensive Income
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" requires the disclosure of comprehensive income, which
includes net income, foreign currency translation adjustments and unrealized
gains and losses on marketable securities classified as available-for-sale.
Comprehensive income for the years ended June 30, 1997, 1998 and 1999 is as
follows:
Year ended June 30,
1997 1998 1999
---- ---- ----
Net income $2,383 $4,563 $4,298
Unrealized marketable securities loss -- -- (41)
Unrealized translation gain (loss) 47 (16) (360)
-----------------------------
Comprehensive income $2,430 $4,547 $3,897
=============================
(14) Lease Commitments
The Company has operating leases for its office facilities which expire
on various dates through fiscal 2008 and provide for escalation and additional
payments relating to operating expenses. The Company leases some office
equipment under a capital lease which expires in fiscal 2000.
The following is a schedule of future minimum lease payments for capital
and operating leases as of June 30, 1999 (in thousands):
Capital Operating
Leases Leases
Year Ended:
June 30, 2000 $ 38 $ 2,649
June 30, 2001 -- 2,328
June 30, 2002 -- 1,969
June 30, 2003 -- 1,872
June 30, 2004 -- 1,890
Thereafter -- 5,932
---- -------
Total minimum lease payments 38 $16,640
=======
Less interest component ( 2)
----
Present value of minimum lease payments $ 36
====
Rental expense for all operating leases was approximately $1,046,000,
$1,521,000 and $2,419,000 for the years ended June 30, 1997, 1998 and 1999,
respectively.
(15) Commitments and Contingencies
In compliance with the lease of the corporate headquarters, the
Company's landlord holds a letter of credit with Silicon Valley Bank for
$275,000. This letter of credit is secured by a certificate of deposit.
(16) Segment and Geographic Information
In fiscal 1999, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS 131"). SFAS 131
establishes standards for reporting information about operating segments in
annual financial statements and requires that certain selected information about
operating segments be reported in interim financial statements. It also
establishes standards for related disclosures about products or services, and
geographic areas. Operating segments are defined as components of an enterprise
about which separate financial information is evaluated regularly by the chief
operating decision maker, or decision-making group, in deciding how to allocate
resources and in assessing performance. The Company operates in one principal
business segment across domestic and international markets. No foreign country
or geographic area accounted for more than 10% of revenue, 10% of net income or
10% of identifiable assets in any of the periods presented.
<PAGE>
United
States Foreign(a) Eliminations Total
------------------------------------------
Year Ended June 30, 1997:
Revenue:
From unaffiliated customers(b) $38,149 3,178 -- $41,327
Between geographic areas(c) 942 -- (942) --
------- ------- ------- -------
Total revenue $39,091 3,178 (942) $41,327
======= ======= ======= =======
Net income $ 4,888 (2,505) -- $ 2,383
Identifiable assets $31,304 3,758 (6,560) $28,502
Year Ended June 30, 1998:
Revenue:
From unaffiliated customers(b) $49,294 7,233 -- $56,527
Between geographic areas(c) 1,819 -- (1,819) --
------- ------- -------- -------
Total revenue $51,113 7,233 (1,819) $56,527
======= ======= ======== =======
Net income $ 6,755 (2,192) -- $ 4,563
Identifiable assets $81,284 9,028 (11,512) $78,800
Year Ended June 30, 1999:
Revenue:
From unaffiliated customers(b) $64,269 9,567 -- $73,836
Between geographic areas(c) 2,594 -- (2,594) --
------- ------- -------- -------
Total revenue $66,863 9,567 (2,594) $73,836
======= ======= ======== =======
Net income $ 5,436 (1,138) -- $ 4,298
Identifiable assets $95,082 12,225 (18,106) $89,201
(a) The Company operates wholly-owned subsidiaries in the United Kingdom,
France, Germany, Italy, Sweden, Switzerland, Australia, Japan and the
Benelux. Includes international sales with agents.
(b) Includes royalties paid to the Company and to its subsidiaries by
agents. Royalties from agents are a percentage of the license and
maintenance fees paid by customers to such agents.
(c) Represents royalties from foreign subsidiaries. Royalties from foreign
subsidiaries are a percentage of the license and maintenance fees paid
by customers to such foreign subsidiaries.
(17) Sale of INFOPAC-Tapesaver
In January 1999, the Company sold the INFOPAC-TapeSaver product to a
third party for approximately $3.0 million. Under the terms of the sale, the
buyer will assume responsibility for maintenance support for all existing
TapeSaver licenses. As a result of this arrangement, the Company will recognize
$3.0 million of license revenue as the buyer makes payments over the next five
years, and approximately $1.0 million of maintenance revenue through December
31, 1999. For the year ended June 30, 1999, the Company recognized $666,000 of
license revenue and $795,000 of maintenance revenue related to this arrangement.
Future license revenue will be variable through December 31, 1999 as the buyer
sells TapeSaver products to customers and will be $112,500 each quarter
thereafter for the remaining four year term of the contract.
<PAGE>
SCHEDULE II
MOBIUS MANAGEMENT SYSTEMS, INC.
Valuation and Qualifying Accounts
(In thousands)
<TABLE>
<CAPTION>
Additions
Balance at Charged to Charges Balance
beginning costs and to other at end
Description of period expenses accounts Deductions of period
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1997: Deductions from asset account:
Allowance for doubtful accounts $ 423 817 -- (519) $ 721
Year ended June 30, 1998:
Deductions from asset account:
Allowance for doubtful accounts $ 721 1,199 -- (541) $1,379
Year ended June 30, 1999:
Deductions from asset account:
Allowance for doubtful accounts $1,379 636 -- (343) $1,672
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or the
notes thereto.
<PAGE>
(a)(3) Exhibits
Exhibit No. Description
3.1* -- Form of Second Amended and Restated Certificate of
Incorporation of the Registrant.
3.2* -- Form of Restated By-Laws of the Registrant.
4.1* -- Specimen certificate representing the Common Stock.
10.1* -- Mobius Management Systems, Inc. 1996 Stock Incentive Plan.
10.2* -- Amendment No. 1 to Mobius Management Systems, Inc.
1996 Stock Incentive Plan.
10.3* -- Mobius Management Systems, Inc. 1998 Employee Stock Purchase
Plan.
10.4* -- Mobius Management Systems, Inc. 1998 Non-Employee Director
Stock Option Plan.
10.5* -- Mobius Management System, Inc. 1998 Executive Incentive Plan.
10.6* -- Form of Grantee Option Agreement.
10.7* -- Lease dated December 4, 1997 by and between Old Boston Post
Road Associates LLC and the Registrant.
10.8* -- Lease dated February 14, 1983 by and between American
National Bank and Trust Company of Chicago and the
Registrant.
10.9 -- Sublease dated January 5, 1999 by and between Fluor Daniel,
Inc. and the Registrant
10.10* -- Stock Purchase Agreement dated as of May 12, 1997 by and
among the Registrant and the other parties listed on
the signature pages thereto.
10.11* -- Stockholders' Agreement dated as of May 12, 1997 by and
among the Registrant and the other parties listed on
the signature pages thereto.
10.12* -- Registration Rights Agreement dated May 12, 1997 by and
among the Registrant and the other parties listed on
the signature pages thereto.
10.13* -- Employment Agreement between the Registrant and Mitchell
Gross, dated February 26, 1998.
10.14* -- Employment Agreement between the Registrant and Joseph
Albracht, dated February 26, 1998.
10.15* -- Severance Agreement dated as of September 30, 1997 between
the Registrant and Joseph Tinnerello.
10.16* -- Option Agreement dated as of September 30, 1997 between the
Registrant and Joseph Tinnerello.
10.17* -- Letter Agreement, dated as of December 28, 1997 between the
Registrant and Joseph Tinnerello.
10.18* -- Stockholder Agreement, dated as of December 30, 1997 between
the Registrant and Joseph Tinnerello.
10.19* -- Software Assets Purchase Agreement dated as of December 10,
1990 among the Registrant, Compucept of Nevada and
Software Assist Corporation.
10.20* -- OEM Agreement between the Registrant and CDP Communications,
Inc. dated as of October 15, 1993.
10.21* -- Source Code License and Amendment to OEM Agreement between
the Registrant and CDP Communications Inc. dated as
of August 12, 1997.
10.22* -- Amendment #1 to License and Amendment to OEM Agreement
between the Registrant and CDP Communications, Inc.
dated November 21, 1997.
<PAGE>
Exhibit No. Description
21.1 -- Subsidiaries of the Registrant.
23.1 -- Consent of KPMG LLP.
27.1 -- Financial Data Schedule (EDGAR only)
* Filed as an exhibit to Mobius' Registration Statement on Form S-1
(Registration Number 333-47117) or an amendment thereto and incorporated herein
by reference to the same exhibit number.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
MOBIUS MANAGEMENT SYSTEMS, INC.
By: /s/ Mitchell Gross
Mitchell Gross
Chairman of the Board, Chief
Executive Officer and President
(Principal Executive Officer and
President)
Date: September 24, 1999
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, this report has been signed below by the following persons in the
capacities and on the dates indicated.
Signatures Title(s) Date
/s/ Mitchell Gross Chairman of the Board, Chief September 24, 1999
Mitchell Gross Executive Officer, President
(Principal Executive Officer
and Director)
/s/ Joseph J. Albracht Executive Vice President, Chief September 24, 1999
Joseph J. Albracht Operating Officer, Secretary
and Director
/s/ E. Kevin Dahill Vice President, Finance, Chief September 24, 1999
E. Kevin Dahill Financial Officer and Treasurer
(Principal Financial
and Accounting Officer)
/s/ Peter J. Barris Director September 24, 1999
Peter J. Barris
/s/ Edward F. Glassmeyer Director September 24, 1999
Edward F. Glassmeyer
/s/ Kenneth P. Kopelman Director September 24, 1999
Kenneth P. Kopelman
/s/ Gary G. Greenfield Director September 24, 1999
Gary G. Greenfield
<PAGE>
(a)(3) Exhibits
Exhibit No. Description
3.1* -- Form of Second Amended and Restated Certificate of
Incorporation of the Registrant.
3.2* -- Form of Restated By-Laws of the Registrant.
4.1* -- Specimen certificate representing the Common Stock.
10.1* -- Mobius Management Systems, Inc. 1996 Stock Incentive Plan.
10.2* -- Amendment No. 1 to Mobius Management Systems, Inc. 1996 Stock
Incentive Plan.
10.3* -- Mobius Management Systems, Inc. 1998 Employee Stock Purchase
Plan.
10.4* -- Mobius Management Systems, Inc. 1998 Non-Employee Director
Stock Option Plan.
10.5* -- Mobius Management System, Inc. 1998 Executive Incentive Plan.
10.6* -- Form of Grantee Option Agreement.
10.7* -- Lease dated December 4, 1997 by and between Old Boston Post
Road Associates LLC and the Registrant.
10.8* -- Lease dated February 14, 1983 by and between American
National Bank and Trust Company of Chicago and the
Registrant.
10.9 -- Sublease dated January 5, 1999 by and between Fluor Daniel,
Inc. and the Registrant
10.10* -- Stock Purchase Agreement dated as of May 12, 1997 by and
among the Registrant and the other parties listed on
the signature pages thereto.
10.11* -- Stockholders' Agreement dated as of May 12, 1997 by and
among the Registrant and the other parties listed on
the signature pages thereto.
10.12* -- Registration Rights Agreement dated May 12, 1997 by and
among the Registrant and the other parties listed on
the signature pages thereto.
10.13* -- Employment Agreement between the Registrant and Mitchell Gross,
dated February 26, 1998.
10.14* -- Employment Agreement between the Registrant and Joseph Albracht
dated February 26, 1998.
10.15* -- Severance Agreement dated as of September 30, 1997 between the
Registrant and Joseph Tinnerello.
10.16* -- Option Agreement dated as of September 30, 1997 between the
Registrant and Joseph Tinnerello.
10.17* -- Letter Agreement, dated as of December 28, 1997 between the
Registrant and Joseph Tinnerello.
10.18* -- Stockholder Agreement, dated as of December 30, 1997 between
the Registrant and Joseph Tinnerello.
10.19* -- Software Assets Purchase Agreement dated as of December 10,
1990 among the Registrant, Compucept of Nevada and
Software Assist Corporation.
10.20* -- OEM Agreement between the Registrant and CDP
Communications, Inc. dated as of October 15, 1993.
10.21* -- Source Code License and Amendment to OEM Agreement between the
Registrant and CDP Communications Inc. dated as
of August 12, 1997.
10.22* -- Amendment #1 to License and Amendment to OEM Agreement
between the Registrant and CDP Communications, Inc.
dated November 21, 1997.
<PAGE>
Exhibit No. Description
21.1 -- Subsidiaries of the Registrant.
23.1 -- Consent of KPMG LLP.
27.1 -- Financial Data Schedule (EDGAR only)
* Filed as an exhibit to Mobius's Registration Statement on Form S-1
(Registration Number 333-47117) or an amendment thereto and incorporated herein
by reference to the same exhibit number.
SUBLEASE AGREEMENT
PARTIES
This instrument, for reference purposes only, dated as of this 5th day of
January 1999, by and between Fluor Daniel, Inc., a California corporation
("Sublessor") and Mobius Management Systems, a Delaware corporation
("Sublessee") as a Sublease under that certain Office Lease dated August 1, 1995
as amended by First Amendment dated May 1, 1996, entered into by The Equitable
Life Assurance Society of the United States as Landlord, and Sublessor as
Tenant. A copy of said Lease (hereinafter referred to as the Prime Lease) is
marked as Exhibit "A" and is attached hereto and made a part hereof. The term
Lessor or Landlord used in the Prime Lease is herein after referred to as Prime
Lessor. Initially capitalized but undefined terms shall have the meanings given
to such terms in the Prime Lease.
PREMISES
Sublessor leases to Sublessee and Sublessee hires from Sublessor the following
described premises situated in the City of Chicago, State of Illinois, known as
the entire twentieth floor of 120 South Riverside Plaza, consisting of
approximately 36,680 rentable square feet, hereinafter referred to as the
"Subleased Premises".
TERM
The term of this Sublease shall be for a period of eighty (83) months, and
fifteen (15) days, commencing on February 1st, 1999, and ending on January 15,
2006, unless sooner terminated pursuant to any provision hereof. Notwithstanding
said stated commencement date, if for any reason Sublessor cannot deliver
possession of the Subleased Premises to Sublessee on said date, Sublessor shall
not be subject to any liability therefor, nor shall such failure affect the
validity of this Sublease or the obligations of Sublessee hereunder or extend
the term hereof, but in such case the commencement date shall be the date on
which the Subleased Premises is tendered to Sublessee in the condition required
herein and Sublessee shall not be obligated to pay rent or additional rent or
other charges until two (2) months following the date on which possession of the
Subleased Premises is tendered to Sublessee at which date this Sublease shall
commence; provided however, that if Sublessor shall not have delivered
possession of the Subleased Premises by May 1, 1999, Sublessee may, at
Sublessee's option and as Sublessee's sole remedy, by notice in writing to
Sublessor within ten (10) days thereafter, cancel this Sublease. If this
Sublease is canceled as aforesaid, Sublessor shall return any moneys previously
deposited by Sublessee and the parties shall thereafter be discharged from all
liabilities hereunder. No delay in delivery of possession of the Subleased
Premises shall extend the stated expiration date of this Sublease.
In the event that Sublessor shall permit Sublessee to take possession of the
Subleased Premises for the purpose of installing its improvements prior to the
stated commencement date of the term and Sublessee shall take possession of the
same or any portion thereof, such possession shall be subject to all of the
provisions of this Sublease except the payment of rent and additional rent.
Commencing on the date Sublessee takes possession of the Subleased Premises,
Sublessee shall pay for electricity consumed within the Subleased Premises. Said
early possession shall not advance the termination date of this Sublease.
RENT
Commencing February 1, 1999, Sublessee shall pay to Sublessor as fixed rent for
the Subleased Premises, equal monthly installments of Thirty Thousand Two
Hundred Sixty One and NO/100 Dollars ($30,261.00) in advance, on the first day
of each month of the first twelve (12) months of the term hereof except that
fixed rent for the months of February and March of 1999 is hereby conditionally
waived. On the first anniversary of the commencement date and each anniversary
thereafter, fixed rent shall be increased by three percent (3%) over the
previous year's fixed rent. Sublessee shall pay Sublessor, upon the execution
hereof, the sum of Thirty Thousand Two Hundred Sixty One and No/100 Dollars
($30,261.00) as fixed rent for the first month of the term for which fixed rent
is due.
Commencing February 1, 1999, Sublessee shall also pay to Sublessor, concurrently
with each monthly payment of rent, as additional rent, Sublessee's Proportionate
Share (as hereinafter defined) of the Ownership Taxes and Operating Expenses
required to be paid by Sublessor to Prime Lessor under the Prime Lease.
Notwithstanding the foregoing, Sublessee's Proportionate share of Ownership
Taxes and Operating Expenses due for the months of February and March of 1999 is
hereby conditionally waived. Sublessee's Proportionate Share (33.33% of
Sublessor's Proportionate Share), is equivalent to five and 55/100s percent
(5.55%) of Taxes and Operating Expenses and is calculated by dividing 36,680,
the rentable square feet of the Subleased Premises by 660,703, the total
rentable area of the Premises and the office portion of the Building.
Accordingly, and initially based upon Sublessor's estimated 1999 costs of
Ownership Taxes and Operating Expenses, Sublessee's Proportionate Share of
Ownership Taxes and Operating Expenses shall be Thirty Five Thousand Four
Hundred Fifty Seven and Thirty Three Cents ($35,457.33) per month until
Sublessor's Proportionate Share of Ownership Taxes and Operating Expenses are
adjusted by Prime Lessor. Sublessee's Proportionate Share of Ownership Taxes and
Operating Expenses shall be apportioned during the first and last years of the
term of this Sublease based upon the portion of such year this Sublease is in
effect. Sublessee shall pay Sublessor, upon the execution hereof, the sum of
Thirty Five Thousand Four Hundred Fifty Seven Dollars and Thirty Three Cents
($35,457,33) as Sublessee's Proportionate Share of Ownership Taxes and Operating
Expenses for the first month of the term for which Ownership Taxes and Operating
Expenses are due. The obligations contained in this Paragraph shall survive the
expiration or other termination of this Sublease. Sublessee shall also pay to
Sublessor, as additional rent, Sublessee's Proportionate Share of the additional
rent and all other sums and charges (except fixed rent and Ownership Taxes and
Operating Expenses and any other sums solely related to those portions of the
Premises which are outside the Subleased Premises) required to be paid by
Sublessor to Prime Lessor under the Prime Lease, whether or not referred to as
additional rent (provided such additional rent and other charges are not due to
the acts or failures to act of Sublessor), at least five (5) days earlier than
the date on which such amounts are required to be paid by Sublessor to the Prime
Lessor under the terms of the Prime Lease. Except for Sublessee's obligation to
(i) pay rent and other amounts coming due under the terms of this sublease or
(ii) reimburse Sublessor in full for any fee paid by Sublessor for additional
services performed for Sublessee or for the Subleased Premises, Sublessee shall
not be obligated to (a) pay any amounts for which it is not otherwise obligated
by the terms of this Sublease or (b) pay to Sublessor any amount in excess of
its Proportionate Share of amounts owed by Sublessor to Prime Lessor. Sublessee
shall be obligated to pay its Proportionate Share of any shortfall in payment in
Ownership Taxes and Operating Expenses and shall similarly be entitled to a
refund of its Proportionate Share of any overpayment of Ownership Taxes or
Operating Expenses, as such reconciliation's shall be made by the Prime Lessor
pursuant to the Prime Lease.
Rent for any period during the term hereof which is for less than one month
shall be a pro rata portion of the monthly installment. Except as set forth
herein or in the Prime Lease, rent and additional rent and other charges shall
be payable without notice or demand, without any deduction, offset, or abatement
and in immediately available funds of the United States of America to Sublessor
at:
Fluor Daniel, Inc.
P.O. Box 8859
Los Angeles, California
90088-8859
or to such other person or at such other place as Sublessor may designate in
writing. In the event of a default by Sublessee, the unamortized portion of the
fixed rent, Taxes and Operating Expenses conditionally waived for the months of
February and March 1999 shall be considered as rent and additional rent.
PROVISIONS CONSTITUTING SUBLEASE; SUBORDINATE
POSITION OF THIS INSTRUMENT; CERTAIN COVENANTS, ETC.
(a) Except for Articles 1,2,3,4,5,7, & 8 of the First Lease Amendment; the
1st paragraph of Article 1, Article 2 (but solely as it applies to the
determination of Net Rent), the first sentence of Article 4(A), Articles
6,7,27,31,33(q), 36,37,38,39,41 & 42 of the Prime Lease; Exhibits D, E & G to
the Prime Lease; and except as the provisions of the Prime Lease may be in
conflict or inconsistent with the provisions set forth in this instrument
(including, for example, Sublessor's, as opposed to Sublessee's Proportionate
Share), all of the terms and conditions contained in the Prime Lease, as they
relate to the Subleased Premises, are incorporated herein as terms and
conditions of this Sublease, with each reference in the Prime Lease to Lessor or
Landlord and to Lessee or Tenant to be deemed to refer to Sublessor and
Sublessee, respectively, and such incorporated provisions together with all of
the provisions contained in this instrument shall be the complete terms and
conditions of this Sublease. It is understood that the various periods of time
referenced as bases for the application of additional rent adjustment formulae
or other charges provided in the Prime Lease shall continue to apply hereunder
without modification.
(b) This Sublease is subject to all of the terms and conditions of the
Prime Lease unless specifically excepted herein, and Sublessee shall assume and
perform the obligations of Sublessor as Tenant under said Prime Lease to the
extent said terms and conditions are applicable to the Subleased Premises.
Sublessee shall not commit or permit to be committed on the Subleased Premises,
any act or omission which shall violate any term or condition of the Prime
Lease. In the event of the termination of Sublessor's interest as Tenant under
the Prime Lease for any reason, then this Sublease shall terminate
coincidentally therewith without any liability of Sublessor to Sublessee.
Sublessor agrees not to voluntarily terminate or surrender the Prime Lease or
amend the Prime Lease in any manner that would have a material adverse affect on
the Sublessee or this Sublease. The foregoing notwthstanding, in the event of
Damage and Destruction or Condemnation to the degree required to trigger
Sublessor's right of termination, Sublessor may exercise that right under
Article 11 or 14 of the Prime Lease unless all of Sublessor's subtenants (i)
request Sublessor to allow the Prime Lease to continue and (ii) agree in writing
to waive their respective right of termination in that particular instance.
Provided Sublessee is not in default hereunder, Sublessor hereby agrees, with
respect to the Subleased Premises only, not to exercise its Option to Reduce the
Size of the Premises as provided in article 39 of the Prime Lease. Sublessor may
however, assign its interest under the Prime Lease or this Sublease to any other
party, including the Prime Lessor. Notwithstanding anything in this Sublease to
the contrary, in the event the Sublease is terminated solely as a result of a
default by Sublessor as Tenant under the Prime Lease then Sublessor shall be
liable to Sublessee for actual and proven damages, costs (including, without
limitation, reasonable attorneys fees and costs), liabilities and claims that
Sublessee may incur arising out of the termination of the Sublease. In the event
Sublessee is required (and agrees, which it may do in its sole discretion) to
pay to Prime Lessor or other party additional amounts (either as rent or
otherwise) in order to continue to occupy the Sublease Premises after a default
by Sublessor under the Prime Lease, Sublessor shall be liable to Sublessee for
all such costs incurred. The foregoing provisions shall survive the termination
of the Sublease.
(c) Sublessee hereby acknowledges that Sublessor does not occupy any
portion of the Premises and does not intend to become involved in the day to day
operation of the Premises or the Subleased Premises and Sublessee shall make
every effort to notify the Prime Lessor directly of its occasional need for
additional services, repairs, replacements, restoration and the performance of
Prime Lessor's other obligations under the Prime Lease. With respect to the
occasional need for after hours HVAC or additional janitorial services,
Sublessor's sole obligation with respect thereto is hereby fulfilled by
Sublessor's grant of a power of attorney to Sublessee so that, as long as
Sublessee is not in default hereunder, Sublessee may request such services of
the Prime Lessor on behalf of and in the name of Sublessor. With respect to
repairs, replacements, restoration, services (other than after hours HVAC or
additional janitorial services), and the performance of any other obligations
required of the Prime Lessor under the Prime Lease, and with respect to any
consent or approval required to be obtained of the Prime Lessor under the Prime
Lease, and provided Sublessee is not in default hereunder, Sublessor's sole
obligation with respect thereto, upon being requested in writing by Sublessee,
shall be to assign to Sublessee such rights as Sublessor may have, whether under
the Prime Lease or otherwise, to require compliance by the Prime Lessor with all
of the provisions of the Prime Lease insofar as they affect the Subleased
Premises or any part thereof or the use or occupancy thereof and to seek the
approval or consent of the Prime Lessor as well as such rights and remedies as
Sublessor may have as a result of the Prime Lessor's failure or refusal to
comply with such provisions. In the event, after Sublessee has pursued
reasonable efforts to obtain any of the foregoing services directly from the
Prime Lessor, Prime Lessor fails or refuses to provide such services, Sublessor
also agrees to promptly deliver to Prime Lessor any notice, request for consent,
request for additional service or other communication provided by Sublessee to
Sublessor with the intent of it being delivered by Sublessor to Prime Lessor.
Notwithstanding the foregoing, while it is the intent of both parties to work in
close cooperation to promptly pursue any failure to perform by Prime Lessor,
Sublessor shall not become legally liable for any delay or any damages resulting
therefrom unless and until Sublessor fails to respond to Sublessee's written
request within the period of ten (10) business days following Sublessor's
receipt thereof. Sublessee shall have the right to conduct such proceedings (in
court or elsewhere) as may be required, to obtain from the Prime Lessor any such
work and services, the performance of such obligations and such consent and
approval. The foregoing shall not be construed as waiving any requirement that
Sublessee obtain Sublessor's consent or approval on such matters as herein
provided. Such proceedings may be brought, at Sublessee's option, in its own
name or in Sublessor's name. Provided such may be rendered at no expense or risk
to Sublessor, Sublessor shall cooperate with Sublessee in connection therewith.
Sublessee shall indemnify Sublessor against any loss, liability, damages, costs
and expenses, including reasonable attorneys' fees, actually incurred by
Sublessor by reason of such action or proceeding. Sublessee acknowledges and
agrees that Sublessor shall not be liable to Sublessee with respect to any
delay, default or failure of the Prime Lessor in the performance by the latter
of its obligations and covenants under the Prime Lease unless such be due to
acts or misconduct of Sublessor and, except as set forth in the Prime Lease,
neither shall the fixed rent, additional rent, and other charges hereunder abate
nor shall any of the obligations of Sublessee hereunder be affected by reason
thereof and Sublessee agrees to look solely to the Prime Lessor for the
performance of same.
(d) Anything in this instrument to the contrary notwithstanding, Sublessor
shall not be liable for incidental, consequential or special damages even if
Sublessor is or has been apprised of the possibility thereof and its liability
shall be limited to the sum of Three Million Dollars ($3,000,000.00).
(e) Wherever in the Prime Lease Lessee or Tenant is required to give notice
to the Lessor or Landlord thereunder, Sublessee shall be required to give notice
to Sublessor at least an additional five (5) days in advance of the time
required of Lessee or Tenant thereunder. Whenever in the Prime Lease Lessee or
Tenant is required to do an act or cure a default within a specified period of
time, Sublessee shall perform such act and cure such default (to the extent it
is Sublessee's obligation hereunder to do so) at least five (5) days prior to
the time required of Lessee or Tenant thereunder.
(f) Wherever the consent or approval of Sublessor is requested by
Sublessee, Sublessor may withhold same without liability to Sublessee and
without affecting Sublessee's obligations hereunder if Sublessor requests same
under the Prime Lease and does not receive such consent or approval from the
Prime Lessor.
(g) Sublessor represents and agrees:
(1) That the Prime Lease is in full force and effect and that to the best
of its knowledge it is not in default thereunder, nor has it received actual
notice of Prime Lessor's default thereunder.
(2) That Sublessor has full right and authority under the Prime Lease to
enter into the within Sublease subject to the written approval of the Prime
Lessor, which approval Sublessor shall seek in good faith forthwith after the
mutual execution and delivery of this Sublease. If Sublessor does not obtain
such approval and provide the Sublessee with a copy thereof within forty-five
(45) days after the date hereof, this Sublease shall be deemed terminated and
neither party shall have any obligation to the other except that Sublessor shall
refund to Sublessee any moneys theretofore received from Sublessee hereunder
provided Sublessee shall theretofore have fully cooperated with Sublessor in
seeking such approval. Anything to the contrary notwithstanding in this
Sublease, the term hereof shall not commence in the absence of such approval.
(3) Sublessor has not received written notice that the Subleased Premises
are not in compliance with all applicable laws.
(h) Sublessor and Sublessee each shall have the right but not the
obligation to take any action required to be taken by the other party hereunder
where such action may be necessary to prevent a default under the terms of the
Prime Lease under circumstances wherein the other party has failed, after proper
notice to take such action, and the other party who has failed to take any such
action required of it hereunder shall thereupon reimburse the party taking such
action for any and all reasonable costs thereby incurred by it together with
interest from the date incurred to the date of reimbursement, inclusive, at a
rate equal to four points above the prime rate on short term commercial
borrowings charged by Chase Manhattan Bank N.A. (New York, New York), but in no
event higher than the usury or legal rate, if one be applicable thereto.
(i) Each party hereto agrees to indemnify and hold the other party and its
affiliated corporations and parent corporation harmless from any and all
liability, loss, damage, suits, actions, proceedings, costs and expenses,
including reasonable attorneys' fees by reason of any breach by the Indemnifying
party of any of the terms or conditions of this Sublease or of the Prime Lease
or the use, occupancy or operations of the indemnifying party on or about the
Subleased Premises.
(j) With respect to such insurance as is required to be maintained by the
Tenant or Lessee under the Prime Lease against claims by others for personal
injury, death and property damage, the applicable policies shall name as
insureds both the Sublessor and the Prime Lessor and any other entities which
the Prime Lease may require. In any case, where the Landlord or Lessor under the
Prime Lease is entitled to exculpation with respect to damages sustained by the
Tenant or Lessee under the Prime Lease, such exculpation shall run in favor of
both the Prime Lessor and the Sublessor.
(k) This Sublease and the rights granted to Sublessee hereunder are subject
and subordinate to the Prime Lease and to the rights of Prime Lessor thereunder
and of any present or future mortgages, deeds of trust, liens, encumbrances,
reservations, restrictions, easements, agreements, covenants and encroachments
affecting, or which may affect, the Prime Lease or the real property covered by
the Prime Lease. Without derogation of the foregoing, in the event of any
conflict between the terms of this Sublease and those of the Prime Lease, the
terms of the Prime Lease shall prevail and control.
(l) Sublessee acknowledges that neither Sublessor nor anyone on its behalf
has made representations or promises with respect to the said building or
Subleased Premises or otherwise except as herein expressly set forth. Nothing
herein contained shall be construed as warranting that the Subleased Premises
are in good condition or fit or suitable for any particular uses or purposes
whatsoever and the Sublessee hereby agrees that it has examined the Subleased
Premises and is fully satisfied with the physical condition thereof and (save
with respect to latent defects) accepts the same in vacant "as is" broom-clean
condition (after removal of such personal property and trade fixtures and
equipment of Sublessor as Sublessor may elect to remove prior to the delivery of
the Subleased Premises to Sublessee hereunder). If such removal causes damage to
improvements within the Subleased Premises which Sublessee had not planned on
demolishing, Sublessor agrees to pay the reasonable cost of repairing such
improvements.
m) All notices and demands required hereunder shall be in writing, sent by
registered or certified mail, return receipt requested, or by hand, or by
nationally recognized overnight courier, prepaid for the next business day
delivery as follows:
(1) If given to Sublessor by Sublessee:
Fluor Daniel, Inc.
3353 Michelson Drive
Irvine, California 92698
Attn: Director of Corporate Real Estate
(2) If given to Sublessee by Sublessor prior to the commencement date of
this Sublease:
Mobius Management Systems
120 Old Post Road
Rye, New York 10580
Attn: Chief Financial Officer
(3) If given to Sublessee by Sublessor on or after the commencement date of
this Sublease:
Mobius Management Systems
20th Floor, 120 South Riverside Plaza
Chicago, Illinois
Attn: Vice President, Sales,
with a copy as set forth in Paragraph 2 above
(4) To any subsequent address or to any other entity which either of the
parties may designate for such purpose in writing by similar notice.
(5) All notices shall be deemed to be given when received or when receipt
was rejected as evidenced by the Postal Service courier record.
(6) Sublessor and Sublessee each shall give to the other a copy of all
communications and notices given by either to the Prime Lessor in the same
manner and simultaneous with such notices and communications given to the Prime
Lessor. Sublessor and Sublessee shall promptly give to the other a copy of all
notices received from the Prime Lessor during the term of this Sublease.
(n) Sublessee warrants and represents to Sublessor that Sublessee has dealt
with no broker in connection with the negotiation of the Sublease other than
Grubb & Ellis and Sublessee agrees to indemnify and hold Sublessor harmless from
any claims, damages, liability, loss, cost and expense, including reasonable
attorneys' fees, arising out of or in connection with any claim for commission
or brokers' or finders' fees with respect to this transaction except for any fee
which may be due to Grubb & Ellis. Sublessor agrees to pay the commission of
Grubb and Ellis pursuant to a separate agreement.
(o) In any instance in which Sublessee requests or seeks Sublessor's
approval or consent, and Sublessor has obtained Prime Lessor's consent,
Sublessor agrees not to unreasonably withhold, condition or delay same.
SECURITY DEPOSIT
Sublessee shall deposit with Sublessor, upon execution hereof, the sum of Zero
Dollars ($0) as security for Sublessee's faithful performance of Sublessee's
obligations hereunder. If Sublessee fails to pay when due rent or additional
rent or other charges hereunder, Sublessor may, in addition to all of its rights
and remedies under this Sublease and at law, require Sublessee to immediately
deposit with Sublessor a Security Deposit equal to (1) month's fixed rent and
Sublessee's Proportionate Share of Ownership taxes and Operating Expenses.
Thereafter, Sublessor may use, apply or retain all of or any portion of said
deposit for the payment of rent, additional rent, or other charges for which
Sublessee may become obligated by reason of Sublessee's default and to
compensate Sublessor for any loss or damage which Sublessor may suffer thereby.
If Sublessor so uses, retains, or applies all or any portion of said deposit,
Sublessee shall, within ten (10) days after written demand therefor, deposit
cash with Sublessor in an amount sufficient to restore said deposit to the full
amount hereinabove stated and Sublessee's failure to do so shall be a breach of
this Sublease, and Sublessor may, at his option, terminate this Sublease.
Sublessor shall not be required to keep said deposit separate from its general
accounts. If Sublessee performs all of the Sublessee's obligations hereunder,
said deposit or so much thereof as had not theretofore been used, retained or
applied by Sublessor shall be returned to Sublessee (or, at Sublessor's option,
to the last assignee, if any, of Sublessee's interest hereunder) and without
interest for the use thereof within ten (10) days after the expiration of the
term hereof, or after Sublessee has vacated the Subleased Premises, whichever is
later.
USE
The Subleased Premises shall be used and occupied only for general office use.
ELECTRICITY
The Subleased Premises is equipped with a separate electrical meter serving only
the Subleased Premises. Sublessee shall make its own arrangement with the
utility company serving the Building and shall pay directly to the utility
company the cost of electricity consumed within the Subleased Premises.
Sublessee shall indemnify and hold harmless both Sublessor and Prime Lessor from
and against any and all cost, charge or expense resulting from Sublessee's
failure to pay its utility bills.
CONSTRUCTION OF SUBLESSEE'S IMPROVEMENTS
Sublessee hereby represents and warrants that it has inspected the Subleased
Premises and hereby (i) accepts (except as herein set forth) same in vacant as
is broom clean condition and (ii) assumes full responsibility to design, procure
and install any and all improvements Sublessee requires for its occupancy of the
Subleased Premises. Sublessee shall present working drawings of any and all
improvements to Sublessor for Sublessor's and Prime Lessor's approval. Sublessee
shall comply with all provisions of Article 9 of the Prime Lease in the design,
approval, permitting, selection of contractors and completion of Sublessee's
improvements. Sublessee shall cause the improvements to be completed in a
timely, good and workmanlike fashion and shall furnish Sublessor with insurance
certificates and lien waivers from all contractors and subcontractors retained
by Sublessee.
SUBLESSOR'S CONTRIBUTION FOR SUBLESSEE'S IMPROVEMENTS
As an inducement to Sublessee to enter into this transaction, Sublessor shall
provide an improvement allowance to fund the first $15.50 per rentable square
foot of Sublessee's improvement expenses, not to exceed the amount of Five
Hundred Sixty Eight Thousand Five Hundred Forty and No/100 Dollars ($568,540.00)
with any excess to be borne by Sublessee. Sublessor shall make payments on a
monthly basis directly to Sublessee's general contractor (and Architect and
Prime Lessor if necessary) upon receipt of contractor's affidavits as to percent
complete as approved by Sublessee. Ten percent (10%) of the cost of the
improvements shall be withheld as retainage until Sublessee presents Sublessor
with (i) lien waivers executed by all contractors and subcontractors involved in
the improvement project and (ii) a sign off by Sublessee of the project punch
list signifying satisfactory completion of the improvements. In the event the
improvements cost less than the allowance provided by Sublessor, Sublessee may
apply the balance of the allowance, first to its relocation expenses, as
evidenced by paid invoices for such services, and second as a credit against the
payment of fixed rent and additional rent. Notwithstanding anything contained in
this Sublease or the Prime Lease to the contrary, while Prime Lessor may charge
a supervision fee under the terms of the Prime Lease and Sublessee shall pay
such fee or reimburse Sublessor for such fee if Sublessor pays such fee to Prime
Lessor, Sublessor shall not charge such an additional supervisory fee.
ENTIRE AGREEMENT
This Sublease contains the entire understanding of the parties hereto and shall
supersede all prior agreements which are hereby deemed null and void. This
Sublease shall not be modified or amended or extended except by an instrument in
writing duly signed by the parties hereto, such being in the case of Sublessor,
an officer thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Instrument to be duly
executed as of the day and year first above written.
SUBLESSOR: Fluor Daniel, Inc.
WITNESS:
____________________________ BY: /s/ S.F. Hull
TITLE: Vice President & Treasurer
SUBLESSEE: Mobius Management Systems
WITNESS:
____________________________ BY: /s/ E. Kevin Dahill
TITLE: Chief Financial Officer
EXHIBIT 21.1
MOBIUS MANAGEMENT SYSTEMS, INC.
SUBSIDIARY LIST
1. Mobius Management Systems (Australia)
1601 Malvern Road
Glen Iris VIC 3146 Australia
Phone: 011-61-3-9823-4400
Fax: 011-61-3-9526-3643
2. Mobius Management Systems (France) S.a.r.l.
Tour Maine Montparnasse
33, Avenue du Maine
75015 Paris
Phone: 011-33-1-45-38-26-00
Fax: 011-33-1-45-38-26-20
3. Mobius Management Systems (Deutschland) GmbH.
Karl-Arnold-Str. 1
47877 Willich
Phone: 011-49-2154-92460
Fax: 011-49-2154-924646
4. Mobius Management Systems (Italy) S.r.l.
Strada 4, Palazzo A5
Milanofiori
20090 Assago (Milano)
Phone: 011-390-2-57501458
Fax: 011-390-2-57501706
5. Mobius Management Systems Japan K.K.
Izumikan-Kioicho 7F
4-3 Kioi-cho, Chiyoda-Ku
Tokyo 102-0094 Japan
Phone: 011-81-3-3556-7350
Fax: 011-81-3-3556-7351
6. Mobius Managements Systems (Sweden)
Kanalvagen 10C
S-194 61 Upplands Vasby
Phone: 011-46-8590-747-30
Fax: 011-46-8590-717-81
7. Mobius Management Systems (Switzerland) GmbH
Grossrietstrasse 7
CH 8606 Nanikon/Uster
Phone: 011-41-1-905-4747
Fax: 011-41-1-905-4748
8. Mobius Management Systems (UK) Ltd.
Cavendish House
5 the Avenue
Egham Surrey
England Tw20 9AB
Phone: 011-44-1784-484700
Fax: 011-44-1784-484701
9. Mobius Management Systems Benelux B.V. IO Perkinsbaan 11 3439 ND Nieuwegein
Phone: 011-31-306-30-0121 Fax: 011-31-306-30-0125
EXHIBIT 23.1
CONSENT OF KPMG LLP
The Board of Directors
Mobius Management Systems, Inc.
We consent to incorporation by reference in the registration statement (No.
33-57695) on Form S-8 of Mobius Management Systems, Inc. of our report dated
July 27, 1999 relating to the consolidated balance sheets of Mobius Management
Systems, Inc. and subsidiaries as of June 30, 1998 and 1999, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the years in the three-year period ended June 30, 1999, and the related
financial statement schedule, which report appears in the Form 10-K of Mobius
Management Systems, Inc.
KPMG LLP
Stamford, CT
September 27, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains Summary Financial Information
extracted from the Balance Sheet and Income Statement for
the twelve months ended June 30, 1999 for Mobius Management
Systems, Inc. and is qualified in its entirety by reference
to such Financial Statements.
</LEGEND>
<CIK> 0001025148
<NAME> MOBIUS MANAGEMENT SYSTEMS, INC.
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-1-1998
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1.0
<CASH> 33,546
<SECURITIES> 9,362
<RECEIVABLES> 13,491
<ALLOWANCES> 860
<INVENTORY> 0
<CURRENT-ASSETS> 68,423
<PP&E> 9,895
<DEPRECIATION> 3,856
<TOTAL-ASSETS> 89,201
<CURRENT-LIABILITIES> 30,601
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 51,526
<TOTAL-LIABILITY-AND-EQUITY> 89,201
<SALES> 73,836
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<CGS> 6,234
<TOTAL-COSTS> 47,308
<OTHER-EXPENSES> 20,886
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16
<INCOME-PRETAX> 8,355
<INCOME-TAX> 4,057
<INCOME-CONTINUING> 4,298
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,298
<EPS-BASIC> 0.24
<EPS-DILUTED> 0.23
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