<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1996
--------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________________ to ________________
Commission File Number: 0-12456
---------------------------------------------------
AMERICAN SOFTWARE, INC.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-1098795
- ------------------------------- -----------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
470 East Paces Ferry Road, N.E., Atlanta, Georgia 30305
- ------------------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
(404) 261-4381
-------------------------------------------------
(Registrant's telephone number, including area code)
None
- ------------------------------------------------------------------------------
(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
------- ------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Classes Outstanding at December 11, 1996
- ------------------------------------- --------------------------------
Class A Common Stock, $.10 par value 17,542,665 Shares
Class B Common Stock, $.10 par value 4,815,289 Shares
<PAGE>
AMERICAN SOFTWARE, INC. AND SUBSIDIARIES
Form 10-Q
Quarter ended October 31, 1996
Index
-----
Page
No.
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
- Unaudited - October 31, 1996 and April 30, 1996 3-4
Condensed Consolidated Statements of Operations
- Unaudited - Three Months and Six Months ended October 31, 1996 and
October 31, 1995 5
Condensed Consolidated Statement of Shareholders' Equity
- Unaudited - Six Months ended October 31, 1996 6
Condensed Consolidated Statements of Cash Flows
- Unaudited - Six Months ended October 31, 1996 and October 31, 1995 7
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 9-11
PART II - OTHER INFORMATION 12-13
2
<PAGE>
PART I FINANCIAL INFORMATION
- ------
Item 1. Financial Statements
AMERICAN SOFTWARE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
October 31, 1996 April 30, 1996
---------------- --------------
ASSETS
<S> <C> <C>
Current assets:
Cash $ 2,790,956 $ 1,947,249
Investments 19,075,422 24,207,169
Trade accounts receivable, less allowance for
doubtful accounts of $1,429,495 at October 31, 1996
and $1,200,000 at April 30, 1996 11,791,458 14,106,363
Unbilled accounts receivable 3,537,129 953,089
Current deferred income taxes 1,938,373 1,938,059
Refundable income taxes 797,047 1,021,915
Prepaid expenses and other current assets 1,956,690 1,880,485
----------- -----------
Total current assets 41,887,075 46,054,329
----------- -----------
Property and equipment, at cost 39,904,909 39,423,021
Less accumulated depreciation and amortization 22,977,343 21,804,448
----------- -----------
Net property and equipment 16,927,566 17,618,573
----------- -----------
Capitalized computer software development costs, net 26,415,858 22,943,859
Purchased computer software costs, net 946,344 1,231,076
----------- -----------
Total computer software costs 27,362,202 24,174,935
----------- -----------
Other assets, net 2,614,570 2,934,117
----------- -----------
$88,791,413 $90,781,954
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
(continued)
3
<PAGE>
AMERICAN SOFTWARE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets(Unaudited), Continued
<TABLE>
<CAPTION>
October 31, 1996 April 30, 1996
---------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 4,562,454 $ 4,940,084
Accrued compensation and related costs 4,054,071 3,656,371
Accrued royalties 1,278,127 946,548
Other current liabilities 2,859,616 3,493,964
Deferred revenue 10,359,582 11,505,860
----------- -----------
Total current liabilities 23,113,850 24,542,827
Deferred income taxes 1,983,729 1,983,729
----------- -----------
Total liabilities 25,097,579 26,526,556
----------- -----------
Shareholders' equity:
Common stock:
Class A, $.10 par value. Authorized 50,000,000
shares; issued 18,854,282 shares at
October 31, 1996 and 18,769,083 shares at
April 30, 1996 1,885,429 1,876,910
Class B, $.10 par value. Authorized 10,000,000
shares; issued and outstanding 4,815,289
shares at October 31, 1996 and 4,836,889 shares
at April 30,1996; convertible into Class A shares
on a one-for-one basis 481,529 483,689
Additional paid-in capital 30,965,857 30,776,204
Retained earnings 42,338,336 43,097,649
----------- -----------
75,671,152 76,234,452
Less Class A treasury stock, 1,330,777 shares at
October 31, 1996 and 1,331,119 shares
at April 30, 1996, at cost 11,977,317 11,979,054
----------- -----------
Total shareholders' equity 63,693,834 64,255,398
----------- -----------
$88,791,413 $90,781,954
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
AMERICAN SOFTWARE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the For the
--------------------------------- ----------------------------
Three Months Ended Six Months Ended
--------------------------------- ----------------------------
October 31, October 31,
--------------------------------- ----------------------------
1996 1995 1996 1995
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
License fees $ 6,928,149 $ 7,334,989 $12,402,087 $14,784,497
Services 7,576,993 8,209,769 15,021,191 15,818,619
Maintenance 5,444,311 5,863,484 10,652,197 11,762,796
----------- ----------- ----------- -----------
Total revenues 19,949,453 21,408,242 38,075,475 42,365,912
----------- ----------- ----------- -----------
Cost of revenues:
License fees 2,412,094 3,041,407 4,691,533 6,522,612
Services 6,600,734 6,356,437 13,229,508 12,266,342
Maintenance 2,087,336 1,945,542 3,902,585 3,924,730
----------- ----------- ----------- -----------
Total cost of revenues 11,100,164 11,343,386 21,823,626 22,713,684
----------- ----------- ----------- -----------
Research and development expenses 3,013,766 4,000,400 6,600,915 7,546,605
Less: Capitalizable software (2,260,260) (2,806,321) (5,327,731) (5,461,655)
Marketing and sales expenses 4,893,622 5,301,213 10,050,488 10,523,265
General and administrative expenses 3,186,378 3,525,112 6,235,079 6,974,442
----------- ----------- ----------- -----------
Operating earnings (loss) 15,783 44,450 (1,306,902) 69,571
Other income, net 509,834 616,699 629,359 1,205,575
----------- ----------- ----------- -----------
Earnings (loss) before
income taxes 525,617 661,149 (677,543) 1,275,146
Income tax expense 81,770 252,226 81,770 498,261
----------- ----------- ----------- -----------
Net earnings (loss) $ 443,847 $ 408,923 $ (759,313) $ 776,885
=========== =========== =========== ===========
Earnings (loss) per common and
common equivalent share $.02 $.02 $(.03) $.03
=========== =========== =========== ===========
Weighted average number of
common and common
equivalent shares outstanding 23,449,388 23,725,016 22,312,898 23,744,367
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
AMERICAN SOFTWARE, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Shareholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Six months ended October 31, 1996
------------------------------------------------------------------------------------------------------
Common stock
----------------------------------------------
Class A Class B Additional Total
---------------------- ---------------------- paid-in Retained Treasury shareholders'
Shares Amount Shares Amount capital earnings stock equity
---------- ---------- ----------- --------- ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
April 30, 1996 18,769,083 $1,876,910 4,836,889 $483,689 $30,776,204 $43,097,649 $(11,979,054) $64,255,398
Net earnings -- -- -- -- -- (759,313) -- (759,313)
Proceeds from stock
options exercised 63,599 6,359 -- -- 183,449 -- -- 189,808
Proceeds from dividend
reinvestment and stock
purchase plan -- -- -- -- -- -- 1,737 1,737
Conversion of Class B
shares into
Class A shares 21,600 2,160 (21,600) (2,160) -- -- -- --
Grants of compensatory
stock options -- -- -- -- 6,204 -- -- 6,204
---------- ---------- ---------- -------- ----------- ----------- ------------ -----------
Balance at
October 31, 1996 18,854,282 $1,885,429 4,815,289 $481,529 $30,965,857 $42,338,336 $(11,977,317) $63,693,834
========== ========== ========== ======== =========== =========== ============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
AMERICAN SOFTWARE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the
Six Months Ended
----------------------------
October 31,
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (759,313) $ 776,885
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Depreciation and amortization 3,439,662 5,699,210
Loss on disposal of fixed assets 94 18,807
Equity in loss of investee 181,019 54,794
Net gain on investments (276,348) (310,742)
Grants of compensatory stock options 6,204 10,422
Deferred income taxes (314) (848,366)
Change in operating assets and liabilities:
Net (increase) decrease in money market funds 944,975 (1,577,874)
Purchases of investments (35,539) (3,349,465)
Proceeds from sales and maturities of investments 4,498,659 3,544,112
Accounts receivable (269,135) (1,140,533)
Prepaids and other assets (63,970) (666,627)
Accounts payable and other accrued liabilities (282,699) 568,401
Income taxes 224,868 5,507,681
Deferred revenue (1,146,278) (885,297)
----------- -----------
Net cash provided by operating activities 6,461,885 7,401,408
----------- -----------
Cash flows from investing activities:
Capitalized software development costs (5,327,731) (5,461,655)
Purchases of property and equipment (481,992) (887,516)
----------- -----------
Net cash used in investing activities (5,809,723) (6,349,171)
----------- -----------
Cash flows from financing activities:
Repurchases of common stock - (32,500)
Proceeds from exercise of stock options 189,808 14,799
Proceeds from dividend reinvestment
and stock purchase plan 1,737 1,555
----------- -----------
Net cash provided by (used in) financing activities 191,545 (16,146)
----------- -----------
Net increase (decrease) in cash 843,707 1,036,091
Cash at beginning of period 1,947,249 1,228,461
----------- -----------
Cash at end of period $ 2,790,956 $ 2,264,552
=========== ===========
Supplemental disclosure of cash paid (received) during the
period for income taxes $ 89,813 $(4,161,054)
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE>
AMERICAN SOFTWARE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
October 31, 1996
A. Basis of Presentation
---------------------
The accompanying condensed consolidated financial statements are
unaudited. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules
and regulations of the Securities and Exchange Commission. These financial
statements should be used in conjunction with the consolidated financial
statements and related notes contained in the 1996 Annual Report on Form 10-
K. The financial information presented in the condensed consolidated
financial statements reflects all normal recurring adjustments which are, in
the opinion of management, necessary for a fair presentation of the period
indicated. Certain reclassifications were made to fiscal 1996 amounts to
conform to classifications adopted in fiscal 1997.
B. Earnings (Loss) Per Common and Common Equivalent Share
------------------------------------------------------
Earnings (loss) per common and common equivalent share are based on
the weighted average number of Class A and B shares outstanding, since the
Company considers the two classes of common stock as one class for the
purposes of the earnings (loss) per share computation, and share equivalents
from dilutive stock options outstanding during each period. Share
equivalents are excluded from the aforementioned computation during loss
periods.
8
<PAGE>
AMERICAN SOFTWARE, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
ITEM 2
RESULTS OF OPERATIONS
- ---------------------
For the quarter ended October 31, 1996 revenues totaled $19,949,453, down 7%
from $21,408,242 in the corresponding quarter of fiscal 1996. Revenues for the
six months ended October 31, 1996 totaled $38,075,475, down 10% from $42,365,912
in the prior year period. Software license fee revenues were 6% lower than the
second quarter of fiscal 1996 and 16% lower for the six month period ended
October 31, 1996 compared to the prior year. The most significant dynamic in
license fee revenues from last year to this year was the change in the product
mix from older to newer products. In fiscal 1996, 63% of license fee revenues
for the second quarter were from older technology products with the remainder
being recently developed client server products. For the first six months of
last fiscal year older products constituted 61% of total license fee revenues.
For the second quarter of this fiscal year the relationship is reversed, with
62% of license fees coming from recently developed products. For the six month
period ended October 31, 1996 newer client server products accounted for 60% of
total license fee revenues. Additionally, while overall license fee revenues
are smaller for the three month and six month period this year versus last, the
trend is positive. License fee revenues declined to a low of $4.5 million in
the third quarter of fiscal 1996 and have increased every quarter since.
Highlights in license fee revenues this quarter include approximately $1.9
million in license fee revenues from the Company's new Flow Manufacturing
product, which is the first available product from its model driven development
project codenamed K2. The Company also received its first revenues from its
recently released Warehouse P\\&\\RO product. Additionally, Supply Chain
Planning license fee revenues contributed $1.9 million.
Services revenues were 8% lower than the corresponding quarter a year ago and
declined 5% on a six month basis versus fiscal 1996. Services revenues from its
outsourcing/network services and the Company's internet commerce activities
increased while its consulting and software customization revenues declined.
The most significant factor contributing to the decline in consulting and
software customization services revenues was the continued decline in older
technology software sales. Sales of those products, largely mainframe software,
typically have generated higher services revenues from both implementation
consulting and customization than have the newer generation products. In the
near term, services revenues should be bolstered by increasing activity related
to assisting customers enable their installed software to operate up to and
beyond the year 2000.
Maintenance revenues decreased 7% from second quarter 1996 and are down 10% for
the current six months compared to fiscal 1996. The decrease for both the
quarter and the six months ended October 31, 1996 is due to reduced license
fees, from which maintenance fees are initially generated. The trend for
maintenance revenues is improving. During the quarter ended October 31, 1996,
maintenance revenues increased on a quarter to quarter basis for the first time
since the first quarter of fiscal 1996. Increased numbers of customers using
the Company's mainframe and midrange software are renewing their maintenance
agreements at higher rates due primarily to available upgrades to the year 2000
9
<PAGE>
enabled software. This apparent trend as well as new customers signing up for
maintenance caused the sequential quarter increase. The Company expects this
trend to continue in the near term as the year 2000 approaches.
The cost of revenues for license fees decreased 21% compared to the second
quarter of fiscal 1996 and decreased 28% for the six months ended October 31,
1996 due to attrition and lower amortization expense from capitalized computer
software development costs as a result of the write-off of certain older
technology products in the fourth quarter of fiscal 1996. Services costs
increased 4% for the quarter and increased 8% for the six months ended October
31, 1996 compared to the prior year periods due to increased outsourcing
activities. In addition, maintenance costs increased 7% compared to the year ago
second quarter, and remained flat for the six months ended October 31, 1996
compared to the six months ended October 31,1995 due to increased maintenance
activities during the current quarter.
Research and development expenditures decreased 24% as compared to the second
quarter of fiscal 1996 and decreased 12% for the six months ended October 31,
1996, with a 5% and 9% increase respectively in the amount of these expenditures
that were capitalizable. This was due to an increase in capitalized software
projects which closed during the respective periods.
Marketing and sales expense decreased 8% compared to the second quarter of
fiscal 1996 and decreased 4% for the six months ended October 31, 1996,
compared to the prior year period.
General and administrative expenses decreased 10% for the quarter and decreased
11% for the six months over the same periods in fiscal 1996. These expenses
decreased in several categories due to management's continued attention to cost
control.
Other income decreased 17% compared to the second quarter of fiscal 1996 and
decreased 48% for the six months ended October 31, 1996 due to reduced interest
income on the investment portfolio.
The effective tax rate in the current quarter was 16% compared to 38% in the
second quarter of fiscal 1996.
FINANCIAL CONDITION
- -------------------
The Company's operating activities provided cash of approximately $6.5 million
for the six months ended October 31, 1996 and approximately $7.4 million in the
prior year period. This decrease of approximately $900,000 occurred while the
Company had net loss of apprimately $759,000 for the six months ended October
31, 1996 and net earnings of approximately $777,000 for the prior year period.
Cash used for investing activities was approximately $5.8 million for the six
months ended October 31, 1996 and approximately $6.4 million in the prior year
period. Comparing these two periods, capitalized software development costs
decreased approximately $133,000 and purchases of property and equipment
decreased approximately $405,000 as between the six months ended October 31,
1996 and 1995.
Cash provided by financing activities was approximately $192,000 for the six
months ended October 31, 1996 and cash used by financing activities was
10
<PAGE>
approximately $16,000 in the prior year period. The increase in cash provided
between these two periods was due to the increase in employee stock option
exercises during the six months ended October 31, 1996.
The Company's consolidated balance sheet remains strong with a current ratio of
1.8 to 1. Liquidity also remains strong with cash and short-term investments
totaling 25% of total assets. The Company believes that existing cash and
short-term investments as well as cash from operations will be sufficient to
meet its operational objectives for at least the next twelve month period.
IMPORTANT CONSIDERATIONS RELATED TO FORWARD-LOOKING STATEMENTS
- --------------------------------------------------------------
It should be noted that this discussion contains forward-looking statements
which are subject to substantial risks and uncertainties. There are a number of
factors which could cause actual results to differ materially from those
anticipated by statements made herein. Such factors include changes in general
economic conditions, the growth rate of the market for the Company's products
and services, the timely availability and market acceptance of these products
and services, the effect of competitive products and pricing, and the irregular
pattern of revenues, as well as a number of other risk factors which could
effect the future performance of the Company.
11
<PAGE>
PART II OTHER INFORMATION
- -------
Item 1. Legal Proceedings
- ------- -----------------
Not applicable
Item 2. Changes in Securities
- ------- ---------------------
Not applicable
Item 3. Defaults Upon Senior Securities
- ------- -------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
The Registrant's Annual Meeting of Shareholders was held on September
25, 1996. At that meeting, in addition to re-election of directors, the
shareholders voted upon a proposed amendment to the 1991 Employee Stock
Option Plan to increase the base number of option shares authorized
under that Plan from 2,150,000 to 2,400,000. On a weighted basis,
5,906,099 shares were voted in favor of the amendment, 450,620 shares
were voted against the amendment and 60,461 shares abstained from
voting on the amendment.
Item 5. Other Information
- ------- -----------------
Not applicable
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibit 10.1 Amended and Restated 1991 Employee Stock Option Plan
effective September 25, 1996.
Exhibit 11 Statement re: computation of Per Share Earnings
(Loss).
(b) No reports on Form 8-K were filed during the quarter
ended October 31, 1996.
12
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN SOFTWARE, INC.
DATE December 13, 1996 /s/James C. Edenfield
------------------------------ --------------------------------
James C. Edenfield
President, Chief Executive Officer
and Treasurer
DATE December 13, 1996 /s/Peter W. Pamplin
------------------------------ --------------------------------
Peter W. Pamplin
Chief Accounting Officer
13
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Page
------- ----
10.1 Amended and Restated Employee Stock Option Plan
effective September 25, 1996. 15
11 Statement re: computation of Per Share Earnings (Loss) 20
14
<PAGE>
AMERICAN SOFTWARE, INC.
1991 EMPLOYEE STOCK OPTION PLAN
(Amended and Restated Effective September 25, 1996)
1. PURPOSE. This Plan shall be known as the "1991 Employee Stock Option
-------
Plan" (hereinafter referred to as "the Plan" or "this Plan"). The purpose of
the Plan is to provide certain key employees of American Software, Inc. (the
"Company") and its subsidiaries with additional incentive to increase their
efforts on the Company's behalf and to remain in the employ of the Company or
any of its subsidiaries by granting key employees from time to time options to
purchase Class A Common Shares of the Company.
The options granted under this Plan may, but need not, constitute
"incentive stock options" (referred to herein as "Incentive" options) within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). An option granted which does not constitute an Incentive option shall
for purposes of the Plan constitute a "Non-Qualified" option. The terms
"subsidiary" or "subsidiaries" mean and include any corporation or other entity
at least a majority of the outstanding voting shares of which is, at the time,
directly or indirectly owned by the Company or by one or more subsidiaries.
2. SHARES. The shares to be optioned under the Plan shall be the
------
Company's Class A Common Shares, $0.10 par value (the "Shares"), which Shares
may either be authorized but unissued Shares or treasury Shares. The aggregate
number of Shares for which options may be granted under the Plan shall (subject
to the provisions of paragraph 8) be (i) 2,400,000 Shares (inclusive of the
total number of Shares with respect to which no options have been granted under
the Company's Incentive Stock Option Plan and Nonqualified Stock Option Plan
(collectively the "Prior Plans") on the Effective Date as provided in paragraph
15), plus (ii) the total number of Shares as to which options granted under the
Prior Plans or this Plan terminate (including options terminated upon the
granting of replacement options or otherwise) or expire without being wholly
exercised. New options may be granted under this Plan covering the number of
Shares to which such termination or expiration relates.
3. ADMINISTRATION. The Plan shall be administered by the Employee Stock
--------------
Option Plan Committee (the "Committee") of the Company's Board of Directors (the
"Board"). The Committee shall consist of such members (not less than two) of
the Board as shall be appointed from time to time by the Board. No member of
the Committee while serving as such shall be eligible for participation in the
Plan. Subject to the provisions of the Plan, the Committee shall have exclusive
power to select the employees to whom options will be granted under the Plan, to
determine the number of options to be awarded to each employee selected and to
determine the time or times when options will be awarded. The Committee shall
have full power and authority to administer and interpret the Plan and to adopt
such rules, regulations, agreements and instruments for implementing the Plan
and for the conduct of its business as the Committee deems necessary or
advisable. The Committee's interpretation of the Plan, and all determinations
made by the Committee pursuant to the powers vested in it hereunder, shall be
conclusive and binding on all persons having any interest in the Plan or in any
options granted hereunder.
15
<PAGE>
4. ELIGIBILITY. Participants in the Plan shall be selected by the
-----------
Committee from among key personnel of the Company or a subsidiary; provided,
however, that no director, officer or 10% shareholder (as such terms are defined
pursuant to Section 16 of the Securities Exchange Act of 1934, as amended) of
the Company shall be eligible to participate in the Plan. Options held by a
person who subsequently becomes a director, officer or 10% shareholder shall not
be affected by this restriction. Options shall be granted to individuals solely
in connection with their employment with the Company or a subsidiary.
5. GRANT OF OPTIONS. The Committee may from time to time grant options
----------------
to purchase Shares to such of the eligible employees as may be selected by the
Committee and for such number or numbers of shares as may be determined by the
Committee. Each grant of an option pursuant to this Plan shall be granted
within ten years from the date this Plan is adopted by the Board. Each grant of
an option pursuant to this Plan shall be made upon such terms and conditions as
may be determined by the Committee at the time of grant, subject to the terms,
conditions and limitations set forth in this Plan.
An individual optionee may be granted (i) an Incentive option, (ii) a Non-
Qualified option, or (iii) an Incentive option and a Non-Qualified option at the
same time.
6. TERMS, CONDITIONS AND FORM OF OPTIONS. Each option shall be evidenced
-------------------------------------
by a written agreement ("option agreement") in such form as the Board shall from
time to time approve, which agreement shall comply with and be subject to the
following terms and conditions:
6.1 OPTION EFFECTIVE DATE. Each option agreement shall specify an
---------------------
effective date, which shall be the date on which the option is granted by the
Committee.
6.2 OPTION TERM. (a) An option shall in no event be exercisable
-----------
after the expiration of ten years from the effective date of the option. In
addition, and in limitation of the above, the option period of any option shall
terminate three months after the termination of the option holder's employment
by the Company for any reason except the Retirement (as hereinafter defined),
death or disability of the option holder-employee (the "optionee").
(b) (i) The term "Retirement" means the voluntary termination of
employment by an option holder whose age and/or years of employment qualify that
employee for normal retirement under the policies of the Company in effect from
time to time.
(ii) For any option granted on or before August 23, 1994, the
Committee may in its discretion amend that option, on an individual basis, to
permit the exercise of such option beyond the date of Retirement, through the
expiration date of the option.
(iii) The Committee may in its discretion provide in standard
option grant agreements that any option granted after August 23, 1994 may be
exercised after the date of Retirement, through the expiration date of the
option.
(iv) Notwithstanding the foregoing, no option may be exercised
after the expiration of ten years from the effective date of the option, nor may
an option be exercised beyond the amount which is vested as of the date of
Retirement.
16
<PAGE>
(c) In the event of termination of employment due to the death or
disability of an optionee, the option period of the option held by him upon the
date of such termination shall terminate upon the earlier of (a) twelve months
after the date of the optionee's death or termination due to disability, as the
case may be, or (b) the date of termination of such option as determined by his
option agreement. In the event of termination of an optionee's employment due
to the death of the optionee, such optionee's options may be exercised during
the 12-month period by his estate or by the person who acquired the right to
exercise such options through bequest or inheritance.
As used herein, "disability" shall mean the inability of the employee
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in
death or has lasted or can be expected to last for a continuous period of at
least twelve months.
No transfer of an option by an optionee by will or by the laws of
descent and distribution shall be effective unless the Company shall have been
furnished with written notice thereof and a copy of the will and/or such other
evidence as the Committee may deem necessary to establish the validity of the
transfer and the acceptance by the successor-in-interest or successors-in-
interest of the terms and conditions of the option.
(d) If an optionee is placed on leave of absence status by the Company
or any subsidiary, any then exercisable option shall be suspended at such time.
If an optionee is placed on lay-off status by the Company or any subsidiary, any
then exercisable option may be exercised during the following period of three
months and shall be suspended thereafter. In either case, the unexercised
portion of the option shall either (i) terminate three months after the
optionee's termination of employment with the Company and its subsidiaries or
(ii) be reinstated upon such optionee being re-employed from leave of absence or
lay-off status by the Company or any subsidiary.
6.3 EXERCISE PRICE. The exercise price of options shall be the price
--------------
per share fixed by the Committee (the "Exercise Price"); provided, however, that
the Exercise Price per Share for Incentive options shall not be less than the
fair market value of a Share on the date the option is granted. In the event
that the Shares are then listed on an established stock exchange, such fair
market value shall be deemed to be the closing price of the Shares on such stock
exchange on the day the option is granted or, if no sale of the Shares shall
have been made on any stock exchange on that day, the fair market value shall be
determined as such price for the next preceding day upon which a sale shall have
occurred. In the event that the Shares are not listed upon an established
exchange but are quoted on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"), the fair market value shall be deemed to
be the closing price for the Shares as quoted on NASDAQ on the day the option is
granted. If no sale of the Shares shall have been made on NASDAQ on that day,
the fair market value shall be determined by such prices on the next preceding
day on which a sale shall have occurred. In the event that the Shares are
neither listed on an established stock exchange nor quoted on NASDAQ, the fair
market value on the day the option is granted shall be determined by the
Committee.
17
<PAGE>
6.4 NONTRANSFERABILITY OF OPTIONS. An option shall not be
-----------------------------
transferable by the optionee otherwise than by will, by the laws of descent and
distribution or by a qualified domestic relations order, and shall be exercised
during the lifetime of the optionee only by the optionee or by his guardian or
legal representative. No option or interest therein may be transferred,
assigned, pledged or hypothecated by the optionee during his lifetime, whether
by operation of law or otherwise, or be made subject to execution, attachment or
similar process.
7. EXERCISE OF OPTIONS. An option granted pursuant to this Plan shall be
-------------------
exercisable at any time within the option period, subject to the terms and
conditions of such option. Exercise of any option shall be made by the
delivery, during the period that such option is exercisable, to the Company in
person or by mail of (i) written notice from the optionee stating that he is
exercising such option and (ii) the payment of the aggregate purchase price of
all Shares as to which such option is then exercised. Such aggregate purchase
price shall be paid to the Company at the time of exercise. Payment shall
normally be made by cash or check; provided, however, that in its sole
discretion the Committee may approve of payment in whole or in part by the
giving of a note with adequate stated interest or by the surrender of common
stock. Upon the exercise of an option in compliance with the provisions of this
paragraph, and upon the receipt by the Company of the payment for said Shares,
the Company shall (i) deliver or cause to be delivered to the optionee so
exercising his option a certificate or certificates for the number of Shares
with respect to which the option is so exercised and payment is so made, and
(ii) register or cause such Shares to be registered in the name of the
exercising optionee.
8. CHANGES IN CAPITAL STRUCTURE. Appropriate adjustments shall be made
----------------------------
to the price of the Shares and the number of Shares subject to outstanding
options and the number of Shares issuable under this Plan if there are any
changes in the Shares by reason of stock dividends, stock splits, reverse stock
splits, mergers, recapitalizations or consolidations.
9. CONTROLLING TERMS. Option agreements pertaining to options granted
-----------------
pursuant hereto may include conditions that are more (but not less) restrictive
to the optionee than the conditions contained herein and, in such event, the
more restrictive conditions shall apply.
10. TERMINATION OF THE PLAN. This Plan shall terminate upon the close of
-----------------------
business of the day preceding the tenth anniversary of the approval of this Plan
by the Board unless it shall have been sooner terminated by the Board or by
reason of there having been granted and fully exercised stock options covering
all of the Shares subject to this Plan. Upon such termination, no further
options may be granted hereunder. If, after termination of this Plan upon the
tenth anniversary hereof or by Board action as provided above, there are
outstanding options which have not been fully exercised, such options shall
remain in effect in accordance with their terms and shall remain subject to the
terms of this Plan.
11. AMENDMENT OR DISCONTINUANCE OF PLAN. The Board may amend, suspend or
-----------------------------------
discontinue this Plan at any time without restriction; provided, however, that
the Board may not alter, amend, discontinue, revoke or otherwise impair any
outstanding options which have been granted pursuant to this Plan and which
remain unexercised, except in the event that there is secured the written
consent of the holder of the outstanding option proposed to be so altered or
amended. Nothing contained in this paragraph, however, shall in any way
condition or limit the termination of an option, as hereinabove provided, where
reference is made to termination of employment of an optionee, or as provided in
an option agreement.
18
<PAGE>
12. LIMITATION OF RIGHTS.
--------------------
12.1 NO IMPLIED EMPLOYMENT AGREEMENT. Neither this Plan nor the
-------------------------------
granting of an option nor any other action taken pursuant to this Plan, shall
constitute or be evidence of any agreement or understanding, express or implied,
that the Company or any subsidiary will retain any person as an employee for any
period of time.
12.2 NO RIGHTS AS SHAREHOLDER. An optionee shall have no rights as a
------------------------
shareholder with respect to Shares covered by his option until the date of
exercise of the option, and, except as provided in paragraph 8, no adjustment
will be made for dividends or other rights for which the record date is before
the date of such exercise.
13. LIQUIDATION OF THE COMPANY. In the event of the complete liquidation
--------------------------
or dissolution of the Company, other than as an incident to a merger,
reorganization or other adjustment referred to in paragraph 8, any options
granted pursuant to this Plan and remaining unexercised shall be deemed
cancelled without regard to or limitation by any other provisions of this Plan.
14. INTENTION OF CONSTRUCTION. To the extent options granted hereunder
-------------------------
are intended to constitute Incentive options and comply with Section 422 of the
Code and all provisions of this Plan, all such options and all option agreements
relating thereto shall be construed in such a manner as to effectuate that
intent.
15. SHAREHOLDER APPROVAL; EFFECTIVE DATE. This Plan shall become
------------------------------------
effective on the date it is approved by the shareholders of the Company (the
"Effective Date").
19
<PAGE>
EXHIBIT 11
AMERICAN SOFTWARE, INC. AND SUBSIDIARIES
Statement re: computation of Per Share Earnings (Loss)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------- -----------------------
October 31, October 31,
------------------------- -----------------------
1996 1995 1996 1995
------------ ----------- ---------- ----------
<S> <C> <C> <C> <C>
Common stock:
Weighted average common
shares outstanding:
Class A shares 17,509,881 17,423,040 17,494,761 17,423,050
Class B shares 4,818,137 4,840,489 4,818,137 4,840,489
---------- ---------- ---------- ----------
22,328,018 22,263,529 22,312,898 22,263,539
Dilutive effect of outstanding
Class A common stock
options (as determined by
the application of the treasury
stock method using the
average market price for
the period) 1,121,370 1,461,487 - 1,480,828
---------- ---------- ---------- ----------
Totals 23,449,388 23,725,016 22,312,898 23,744,367
========== ========== ========== ==========
Net earnings (loss) $ 443,847 $ 408,823 $ (759,313) $ 776,885
========== ========== ========== ==========
Earnings (loss) per common
and common equivalent share $ .02 $ .02 $ (.03) $ .03
========== ========== ========== ==========
</TABLE>
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AMERICAN
SOFTWARE, INC. CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 2,790,956
<SECURITIES> 19,075,422
<RECEIVABLES> 16,758,082
<ALLOWANCES> 1,429,495
<INVENTORY> 0
<CURRENT-ASSETS> 41,887,075
<PP&E> 39,904,909
<DEPRECIATION> 22,977,343
<TOTAL-ASSETS> 88,791,413
<CURRENT-LIABILITIES> 23,113,850
<BONDS> 0
0
0
<COMMON> 2,366,958
<OTHER-SE> 61,326,876
<TOTAL-LIABILITY-AND-EQUITY> 88,791,413
<SALES> 0
<TOTAL-REVENUES> 38,075,475
<CGS> 0
<TOTAL-COSTS> 21,823,626
<OTHER-EXPENSES> 17,558,751
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (677,543)
<INCOME-TAX> 81,770
<INCOME-CONTINUING> (759,313)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (759,313)
<EPS-PRIMARY> (0.3)
<EPS-DILUTED> 0
</TABLE>
