UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___ to ___
Commission file number: 0-25713
AREMISSOFT CORPORATION
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(Exact name of Registrant as specified in its charter)
Delaware 68-0413929
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Goldsworth House, Denton Way, Woking, Surrey, United Kingdom GU21 3LG
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(Address of principal executive offices) (Zip Code)
011-44-1483-885-000
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(Registrants telephone number, including area code)
N/A
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of the Registrant's Common Stock:
Class Outstanding at April 22, 2000
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Common Stock, $.001 par value 15,201,595
<PAGE>2
AREMISSOFT CORPORATION
INDEX
<TABLE>
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PART I - FINANCIAL INFORMATION PAGE
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Item 1. Financial Statements:
Consolidated Balance Sheets as at 3
March 31, 2000 and December 31, 1999
Consolidated Statements of Operations 4
for the three ended March 31, 2000 and March 31, 1999
Consolidated Statements of Cash Flows 5
for the three months ended March 31, 2000 and 1999
Notes to Interim Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 9
Condition and Results of Operations
Item 3: Quantitative and Qualitative disclosures about market risk 14
PART II - OTHER INFORMATION
Item 1--Legal Proceedings 14
Item 2--Changes in Securities and Use of Proceeds 14
Item 3--Defaults upon Senior Securities 14
Item 4--Submission of Matters to a Vote of Security Holders 14
Item 5--Other Information 15
Item 6--Exhibits and Reports on Form 8-K 15
SIGNATURES 15
</TABLE>
<PAGE>3
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
AREMISSOFT CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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AS AT DEC. 31 AS AT MARCH 31
1999 2000
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ASSETS (unaudited)
Current Assets
Cash and cash equivalents $ 13,386 $ 15,238
Accounts receivable, less allowances for doubtful accounts
of $507 at Dec. 31,1999 and at March 31, 2000 18,115 19,648
Accounts receivable - disposition proceeds 2,592 -
Other receivables 705 1,129
Inventory 1,603 1,287
Deposits paid on service and maintenance contracts 3,712 2,736
Prepaid expenses and other assets 2,423 1,832
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Total Current Assets 42,536 41,870
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Investments 1,803 1,803
Property and equipment, net 1,847 1,960
Purchased and developed software, net of accumulated
Amortization of $5,893 and $ 5,967 at Dec. 31, 1999 and
March 31, 2000 respectively. 948 874
Intangible assets, net of accumulated amortization of $11,534 and
$12,685 at Dec. 31, 1999 and at March 31, 2000, respectively 13,810 12,659
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Total assets 60,944 59,166
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable 6,910 4,154
Accrued payroll taxes 574 348
Accrued value added taxes 1,055 338
Accrued income taxes 6,572 7,196
Current portion of capital lease obligations 24 -
Other accrued expenses 2,371 2,044
Bank loans and short term demand facility - 3
Deferred revenue 7,190 6,255
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Total Current Liabilities 24,696 20,338
Capital lease obligations, less current portion 2 2
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Total liabilities 24,698 20,340
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Stockholders' equity
Preferred stock, par value $0.001; 15,000,000 authorized;
no shares issued and outstanding at Dec. 31, 1999 and at
March 31, 2000 - -
Common stock, par value $0.001; authorized 85,000,000 shares;
15,192,831 and 15,201,595 shares issued and outstanding at
Dec. 31, 1999 and at March 31, 2000, respectively 15 15
Additional paid-in-capital 57,325 57,400
Accumulated deficit (18,921) (16,426)
Accumulated other comprehensive income (2,173) (2,163)
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Total stockholders' equity 36,246 38,826
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Total liabilities and stockholders' equity $ 60,944 $ 59,166
============= ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>4
AREMISSOFT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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For three months ended March 31
1999 2000
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(unaudited) (unaudited)
Revenues
Software Licenses $ 5,360 $ 11,137
Maintenance and Services 6,274 9,132
Hardware and other 1,478 1,248
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Total revenues 13,112 21,517
Cost of revenues
Software Licenses 716 1,192
Maintenance and Services 1,987 2,822
Hardware and other 1,037 988
Amortization of purchased software and capitalized software
Development cost 62 74
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Total cost of revenues 3,802 5,076
Gross Profit 9,310 16,441
Operating Expenses
Sales and marketing 4,865 8,053
Research and development 1,464 1,853
General and administrative 1,188 2,396
Amortization of intangible assets 88 1,151
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Total operating expenses 7,605 13,453
Profit from operations 1,705 2,988
Other income (expense):
Interest expense, net (507) -
Non operating income - 131
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Income before income taxes 1,198 3,119
Income tax expense 395 624
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Net income 803 2,495
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Basic net income per share $ 0.08 $ 0.16
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Diluted net income per share $ 0.08 $ 0.14
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Basic weighted average shares outstanding 10,000 15,202
Diluted weighted average shares outstanding 10,015 17,261
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>5
AREMISSOFT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
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For three months ended March 31
1999 2000
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(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 803 2,495
Adjustments to reconcile net income to net cash
provided by in operating activities:
Depreciation 250 188
Amortization 150 1,225
Changes in assets and liabilities:
Accounts receivable 1,316 (1,533)
Accounts receivable - disposition proceeds - 2,592
Other receivables (39) (424)
Inventory (303) 316
Deposits paid on service and maintenance contract 2,526 976
Prepaid expenses and other assets (905) 591
Accounts payable 1,145 (2,756)
Deferred revenue (883) (935)
Accrued taxes payable (1,307) (319)
Other accrued expenses (1,336) (327)
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Net cash provided by operating activities 1,417 2,089
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (461) (301)
Loan to related party (net) (12) -
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Net cash (used in) investing activities (473) (301)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of warrants - 75
Loan from related party 13 -
Principal payments of capital lease obligations - (24)
Short-term demand facility - 3
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Net cash provided by financing activities 13 54
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Net increase (decrease) in cash & cash equivalents 957 1,842
Effect of foreign currency exchange rates on cash and (24) 10
cash equivalents
Cash and cash equivalents, at beginning of period 149 13,386
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Cash and cash equivalents, at end of period $ 1,082 $15,238
============ ===========
Supplemental disclosure:
Interest paid $ 507 $ 0
Income taxes paid $ 0 $ 128
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>6
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements and notes thereto
have been prepared in accordance with generally accepted accounting principles
for interim financial information and pursuant to the rules and regulations of
the Securities and Exchange Commission. Interim results of operations for the
three-month period ended March 31, 2000 are not necessarily indicative of
operating results for the full fiscal year.
In the opinion of management, all adjustments consisting of normal recurring
entries necessary for the fair presentation of the consolidated financial
position, results of operations, and changes in cash flows for the periods
presented have been included. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
2. FOREIGN CURRENCY TRANSLATION
The functional currency of the Company and its United Kingdom subsidiaries is
the British pound. The functional currencies of the other subsidiaries are their
local currencies.
For reporting purposes, the financial statements are presented in United States
dollars and in accordance with Statement of Financial Accounting Standard No.
52, "Foreign Currency Translation". The consolidated balance sheets are
translated into United States dollars at the exchange rates prevailing at the
balance sheet dates and the statements of operations and cash flows at the
average rates for the relevant periods. Gains and losses resulting from
translation are included as a component of accumulated other comprehensive
income (loss).
Net gains and losses resulting from foreign exchange transactions are included
in the consolidated statements of operations
<PAGE>7
3. NET INCOME PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share (in thousands, except per share data):
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For three Months Ended
March 31
1999 2000
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Numerator used for both basic and diluted earnings per share 803 2,495
Denominator for basic earnings per share:
Weighted average shares outstanding 10,000 15,202
Denominator for diluted earnings per share:
Denominator for basic earnings per share 10,000 15,202
Effect of dilutive securities:
Options and Warrants 15 2,059
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10,015 17,261
Basic Earnings per share $0.08 $0.16
Diluted Earnings per share $0.08 $0.14
</TABLE>
4. COMPREHENSIVE INCOME
During June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130 establishes
standards for the reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements. The Company
adopted SFAS No. 130 during 1999. Included within accumulated other
comprehensive income are the cumulative amounts for foreign currency translation
adjustments.
Comprehensive income for the three months ended March 31, 1999 and 2000 are as
follows (in thousands)
1999 2000
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Net income $ 803 $ 2,495
Foreign currency translation adjustments (24) 10
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Comprehensive income $ 779 $ 2,505
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5. SEGMENT REPORTING INFORMATION
The Company has adopted SFAS 131 "Disclosure about Segments of an Enterprise and
Related Information" during 1999, which changes the way the Company reports
certain information about its operating segments.
<PAGE>8
The Company develops, markets, implements and supports enterprise-wide
applications software targeted at mid-sized organizations mainly in the
manufacturing, healthcare, hospitality, and construction industries. Management
considers each industry to be a reportable segment, with each industry
representing a strategic business that offers products and services to various
customers. These industries are managed separately because each requires
different product and marketing strategies.
Within each industry, the Company has adopted tailored sales and marketing
strategy. This strategy includes advertisements in leading trade publications,
participation in trade shows and sponsorship of user groups. In addition, the
Company has developed corporate sales and marketing materials as well as general
financial and technical materials that are distributed to each of our
subsidiaries for inclusion in their sales materials, thereby promoting a
consistent portrayal of our image and products. The Company markets its products
primarily through a direct sales force in each of the industries. In the
manufacturing and hospitality industries, the Company also relies, to a limited
extent, on distributors to sell our products.
The accounting policies adopted by each industry are the same as those described
in the summary of significant accounting policies. Management evaluates
performance based on profit/(loss) from operations before interest and income
taxes.
Summarized financial information concerning our reportable segments is shown in
the following table:
<TABLE>
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MANUFACTURING HEALTHCARE HOSPITALITY CONSTRUCTION OTHER TOTAL
Segmental analysis for the three months ended March 31, 2000
Revenues from external customers $6,797 $6,786 $5,199 $1,555 $1,180 $21,517
Depreciation and amortization 326 358 333 75 321 1,413
Profit (loss) from operations 1,544 682 756 155 (149) 2,988
Total segment assets 16,875 14,124 12,787 3,347 12,033 59,166
Segmental analysis for the three months ended March 31, 1999
Revenues from external customers $4,145 $3,984 $3,438 $1,102 $443 $13,112
Depreciation and amortization 72 84 80 17 147 400
Profit (loss) from operations 942 344 451 101 (133) 1,705
Total segment assets 11,803 6,302 5,977 1,227 1,054 26,363
</TABLE>
The following table represents revenue by country based on country of customer
domicile and long-lived assets by country on the location of the assets.
Revenues Long-Lived Assets
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Mar 31,1999 Mar 31, 2000 Mar 31,1999 Mar 31,2000
----------- ------------ ----------- -----------
United Kingdom $ 7,748 $ 8,856 $ 1,886 $ 1,536
Rest of Europe 3,257 7,160 465 470
United States 378 666 124 98
Asia 449 1,590 532 15,178
Rest of World 1,280 3,245 10 14
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$ 13,112 $ 21,517 $ 3,017 $17,296
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<PAGE>9
6. SUBSEQUENT EVENT
In December 1999 AremisSoft Corporation reported on its balance sheet an
investment in Globalsoft.com with cost value of $1.8 million. On April 27th
Globalsoft's IPO was declared effective on the Cyprus stock exchange giving
AremisSoft's holding in Globalsoft.com a market value of approximately $110
million.
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The discussion in this report on Form 10-Q contains forward-looking statements
that involve risks and uncertainties. The statements contained in this report
that are not purely historical are forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, including statements on our
expectations, beliefs, intentions or strategies regarding the future. In some
cases, you can identify forward-looking statements by terminology such as "may,"
"will," "should," "could," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential" or "continue" or the negative of these
terms or comparable terminology. These statements are only predictions and
involve known and unknown risks, uncertainties and other factors, including the
risks outlined in the section entitled "Risk Factors" in our Form 10-K Annual
Report for the year ended December 31, 1999 and the risks discussed in our other
Securities and Exchange Commission filings, that may cause our or our industries
actual results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements. You
should not rely on these forward-looking statements, which reflect only our
opinion as of the date of this report. We do not intend to update any of these
forward-looking statements. You should also carefully review the risk factors
set forth in other reports or documents we file from time to time with the
Securities and Exchange Commission, including this and following quarterly
reports on Form 10-Q and any current reports on Form 8-K.
As used in this report, the terms "we," "us," "our," "AremisSoft" and the
"Company" mean AremisSoft Corporation and its subsidiaries, unless otherwise
indicated.
OVERVIEW
We develop, market, implement and support enterprise-wide software applications
primarily for mid-sized organizations in the manufacturing, healthcare,
hospitality and construction industries. Our fully-integrated suite of
Internet-enabled products allows our customers to manage and execute many
mission-critical functions within their organization, including accounting,
purchasing, manufacturing, customer service, and sales and marketing. The
modular design of our products enables us to provide customers with a
cost-effective scalable solution which can be easily implemented. We focus on
mid-sized organizations with annual revenues of less than $200 million to
capitalize on a market we believe is receptive to our cost-effective solutions
and shorter implementation periods. To date, we have licensed our software
applications to more than 6,000 customers in over twenty countries.
Our software applications use our internally developed three-tiered, object
oriented software architecture, which we call the Aremis architecture. This
architecture enables us to develop software solutions rapidly and
cost-effectively by taking advantage of the common requirements of customers in
our target markets. In addition, we believe that, with 212 developers based in
<PAGE>10
our facilities in India, we have established a cost-effective model for
implementing, supporting and enhancing our software applications
In the past six years, we have experienced rapid growth, both internally and
through acquisitions, with revenues increasing from $6.4 million in 1994 to
$73.4 million in 1999. During this period, we successfully acquired and
integrated the operations of eleven businesses, which were principally operating
in the United Kingdom. In each acquisition, we sought to reduce expenses,
rejuvenate the existing products of the acquired business and transition the
customers to products that utilize the Aremis Architecture. Our software
development and support facility in India provides us with access to
highly-skilled technical personnel who are responsible for rejuvenating the
acquired products and developing new products in a cost-effective manner.
Our objective is to be a leading provider of enterprise-wide applications
software in the Targeted Markets. Our strategy for achieving this objective
includes (i) targeting mid-sized organizations, including divisions and business
units of larger companies, (ii) focusing on strategic markets, (iii) leveraging
our cost-efficient India operations, (iv) capitalizing on our investment in the
Aremis Architecture, (v) expanding our marketing, sales, support and service
capabilities and (vi) acquiring related software businesses, products or
technologies.
RESULTS OF OPERATIONS
Revenues
Total revenues increased 64.1% to $21.5 million for the three months ended March
31, 2000 from $13.1 million for the three months ended March 31, 1999. This
increase was due to higher software license revenues as a result of an increase
in the sale of higher margin licenses, and associated maintenance and service
contract revenues and also the effect of additional revenue of e-nnovations.com
of $ 1.2 million. The effect of the e-nnovations.com acquisition on revenues is
mainly reflected in the three months ended March 31, 2000, since the acquisition
of e-nnovations.com was recorded in December 1999.
Software license revenues increased 107.8% to $11.1 million for the three months
ended March 31, 2000 from $5.4 million for the three months ended March 31,
1999. This increase was primarily due to the growth in the number of installed
customers, increased sales of licenses for our Aremis 4.0 products, and price
increases. As a percentage of total revenues, license revenues increased to
51.8% for the three months ended March 31, 2000 from 40.9% for the period ended
March 31, 1999.
Maintenance and service contract revenues increased 45.6% to $9.1 million for
the three months ended March 31, 2000 from $6.3 million for the three months
ended March 31, 1999, as a result of the increase in the number of installed
customers and the growth in software license revenues. As a percentage of total
revenues, maintenance and service contract revenues decreased to 42.4% for three
months ended March 31, 2000 from 47.9% for the period ended March 31, 1999.
Hardware and other revenues decreased 15.6% to $1.2 million for the three month
ended March 31, 2000 from $1.5 million for the three month ended March 31, 1999.
As a percentage of total revenues, hardware and other revenues decreased to 5.8%
for the three months ended March 31, 2000 from 11.3% for the three months ended
March 31, 1999, reflecting our strategy to reduce the sale and installation of
lower margin third-party hardware.
<PAGE>11
Cost of Revenues
The cost of revenues increased 33.5 % to $5.1 million for the three months ended
March 31, 2000 from $3.8 million for the three months ended March 31, 1999. As a
percentage of total revenues, cost of revenues decreased to 23.6% for the three
month ended March 31, 2000 from 29.0% for the three months ended March 31, 1999.
The effect of e-nnovations.com on the cost of revenue was $ 0.3 million for the
three months ended March 31, 2000.
Software license costs increased 66.4% to $1.2 million for the three months
ended March 31, 2000 from $0.72 million for the three months ended March 31,
1999. This increase was primarily due to the growth in the number of installed
customers, increased sales of licenses for our Aremis 4.0 products. As a
percentage of total revenues, license costs remained at 5.5% for both the period
ended March 31, 2000 and March 31, 1999.
Maintenance and service contract costs increased 42.1% to $2.8 million for the
three months ended March 31, 2000 from $2.0 million for the three months ended
March 31, 1999, as a result of the increase in the number of installed customers
and the growth in software license revenues. As a percentage of total revenues,
maintenance and service contract costs decreased to 13.1% for three months ended
March 31, 2000 from 15.2% for 1999.
Hardware and other costs decreased 4.8% to $1.0 million for the three month
ended March 31, 2000 from $1.04 million for the three month ended March 31,
1999. As a percentage of total revenues, hardware and other costs decreased to
4.6% for the three months ended March 31, 2000 from 7.9% for the three months
ended March 31, 1999, reflecting our strategy to reduce the sale and
installation of lower margin third-party hardware.
Sales and Marketing
Sales and marketing expenses consist primarily of expenses related to sales and
marketing, personnel, advertising, promotion, trade shows participation and
public relations.
Our sales and marketing expenses increased 65.5% to $8.1 million for the three
months ended March 31, 2000 from $4.9 million for the three months ended March
31, 1999, primarily due to the expansion of sales and marketing activities
principally in the United States and Europe. As a percentage of total revenues,
sales and marketing expenses increased to 37.4% for three months ended March 31,
2000, from 37.1% for the three months ended March 31, 1999.
Research and Development
Our research and development expenses increased 26.6% to $1.9 million for the
period ended March 31, 2000 from $ 1.5 million for the three months ended March
31, 1999. As a percentage of total revenues, research and development expenses
decreased to 8.6% for the three months ended March 31, 2000 from 11.2% of
revenues for the three months ended March 31, 1999. The decrease was primarily
due to a significant portion of the planned expenditures relating to our new
generation of software products having been incurred in prior accounting
periods.
<PAGE>12
General and Administrative
General and administrative expenses increased 101.7% to $2.3 million for the
three months ended March 31, 2000 from $1.2 million for the three months ended
March 31, 1999. As a percentage of total revenues, general and administrative
expenses increased to 11.1% for the three months ended March 31, 2000 from 9.1%
for the three months ended March 31, 1999. The increase was primarily due to an
increase in operational and geographical activities compared to the previous
period.
Amortization of Intangible assets
Amortization of intangible assets increased to $ 1.2 million for the three
months ended March 31, 2000 from approximately $ 88,000 for the three months
ended March 31, 1999. The increase in amortization of intangible assets was due
to the goodwill recorded on the acquisition of e-nnovations.com in December
1999.
Net Interest Expense
Net interest expense reflects interest on our credit facilities, as reduced by
interest income on cash balances. Net interest expense was $0 million for the
three months ended March 31, 2000 as compared to $0.5 million for the three
months ended March 31, 1999. The decrease was primarily due to the repayment of
short and long term loans in 1998.
We received approximately $ 0.13 million net interest from deposits during the
three months ended March 31, 2000.
Income Tax Provision
There is a provision for income taxes for the three months ended March 31, 2000
of $0.6 million. There was a provision for income taxes for $0.4 million the
three months ended March 31, 1999. The increase in income taxes resulted from
the increase in our profitability in 2000. Our effective tax rate was assumed at
20%.
Recoverability of the deferred tax asset derived mainly from operating loss
carry forwards in the United Kingdom has been reviewed at March 31, 2000, and
although certain subsidiaries generated taxable income in the three months ended
March 31, 2000, no assurances can be given that the level of taxable income will
be sustained at an adequate level in the appropriate subsidiaries. It must
therefore be considered more likely than not that the deferred tax benefit will
not be recognized at this stage.
LIQUIDITY AND CAPITAL RESOURCES
We have funded our operations since inception primarily through borrowings under
bank credit facilities, private placements of equity securities and equity
contributions by our principal stockholder. As of March 31, 2000, we had $15.2
million of cash and cash equivalents. We had a working capital surplus of $ 21.5
million as of March 31, 2000.
<PAGE>13
We believe that the existing cash and cash equivalents, will be sufficient to
meet our working capital and currently planned expenditure requirements for the
next nine months. We may, from time to time, consider acquisitions of
complementary businesses, products or technologies, which may require additional
financing. In addition, continued growth in our business may, from time to time,
require additional capital. No assurances can be given that additional capital
will be available to us at such time or times as such capital may be required
or, if available, that it will be on commercially acceptable terms or would not
result in additional dilution to our stockholders.
We had an operating cash flow surplus of $2.1 million for the three months ended
March 31, 2000. This surplus was primarily due to operating profits and a
decrease in accounts receivable - disposition proceeds, partially offset by an
increase in trade accounts receivable and a decrease in accounts payable. We had
an operating cash flow surplus of $1.4 million for the three months ended March
31, 1999. Operating cash flow is affected by seasonality, among other factors.
Accounts receivable increased to $19.6 million for March 31, 2000 from $14.9
million for March 31, 1999. Accounts receivable at December 31, 1999 were $ 18.1
million. The average days sales outstanding was 103 days for the three months
ended March 31, 1999 and 83 days for the three months ended March 31, 2000. The
increase in receivables was due to an increase in the sales for the period. The
decrease in average sales days outstanding reflects the higher collection rate
of accounts receivable.
Accrued taxes increased from $3.0 million at March 31, 1999 to approximately
$7.9 million at March 31, 2000. The increase was primarily due to increase in
income tax of company due to higher profits.
We utilized cash for investing activities of $0.3 million and $0.5 million for
the three months ended March 31, 2000 and March 31, 1999, respectively,
primarily the result of purchases of property and equipment.
Net cash provided by financing activities was approximately $54,000 and $ 13,000
for the three months ended March 31, 2000 and March 31, 1999, respectively. For
the three months ended March 31, 2000, cash provided by financing activities
resulted from proceeds received from the exercise of warrants, partially offset
by the repayment of capital lease obligations.
EURO CONVERSION
In January 1999, the Euro was introduced as the currency of a number of
participating nations in the European Union. Although the United Kingdom is not
currently a participating nation, the introduction of the Euro raises conversion
issues for business transacted with entities in participating nations. Our
products either include or have been upgraded to include the Euro and we do not
believe that the Euro conversion has had or will have a material adverse effect
on our business. Because our critical internal systems have been modified to
accommodate a conversion to the Euro, we believe we are adequately prepared in
the event the United Kingdom converts to the Euro in the future.
<PAGE>14
Item 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency Exchange Rates
A significant portion of our business is conducted in currencies other than the
United States dollar. As a result, we are subject to exposure from movements in
foreign currency exchange rates. We do not currently engage in hedging
transactions designed to manage currency fluctuation risks.
Interest Rate Sensitivity
Our exposure related to adverse movements in interest rates is primarily derived
from the variable rate on our credit facilities. Interest rates on our credit
facilities range from either Sterling LIBOR plus 3% to Sterling LIBOR plus 4% or
the lending bank's base rate plus the applicable margin. Increases in Sterling
LIBOR result in increases in our interest expense. As of March 31, 2000, we had
no borrowings outstanding under our credit facilities.
PART II - OTHER INFORMATION
Item 1: LEGAL PROCEEDINGS
None
Item 2: CHANGES IN SECURITIES AND USE OF PROCEEDS.
We issued 8,764 shares of our Common Stock at $8.56 per share in connection with
the exercise of outstanding warrants during the three months ended March 31,
2000. Consequently, we received approximately $75,020 from the proceeds of those
exercises. The proceeds were used for working capital and other general
corporate purposes. The shares were issued in reliance upon the exemptions from
registration contained in Section 4(2) of the Securities Act of 1933, as
amended, and Regulation D and Regulation S promulgated thereunder.
Item 3: DEFAULTS UPON SENIOR SECURITIES.
None
Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.
None
<PAGE>15
Item 5: OTHER INFORMATION
None
Item 6: EXHIBITS AND REPORTS ON FORM 8-K
None
<PAGE>16
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned,
thereunder duly authorized.
AREMISSOFT CORPORATION,
a Delaware Corporation
Date: May 12, 2000 /s/ DR. LYCOURGOS KYPRIANOU
--------------------------------
Dr. Lycourgos Kyprianou
Chairman of the Board &
Chief Executive Officer
Date: May 12, 2000 /s/ MICHAEL TYMVIOS
--------------------------------
Michael Tymvios
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 2000 FOR AREMISSOFT CORPORATION
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 15,238
<SECURITIES> 1,803
<RECEIVABLES> 20,155
<ALLOWANCES> (507)
<INVENTORY> 1,287
<CURRENT-ASSETS> 41,870
<PP&E> 1,960
<DEPRECIATION> 0
<TOTAL-ASSETS> 59,166
<CURRENT-LIABILITIES> 20,338
<BONDS> 0
0
0
<COMMON> 15
<OTHER-SE> 38,811
<TOTAL-LIABILITY-AND-EQUITY> 59,166
<SALES> 12,385
<TOTAL-REVENUES> 21,517
<CGS> 2,180
<TOTAL-COSTS> 5,076
<OTHER-EXPENSES> 13,484
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,119
<INCOME-TAX> 624
<INCOME-CONTINUING> 2,495
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,495
<EPS-BASIC> 0.16
<EPS-DILUTED> 0.14
</TABLE>
