<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
<TABLE>
<CAPTION>
<S> <C> <C>
(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, 1997
--------------------------------------------------
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)
</TABLE>
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 5, 1997
- ------------------------------------ -------------------------------
Class A Common Stock, $.10 par value 17,881,628 Shares
Class B Common Stock, $.10 par value 4,798,289 Shares
Exhibit Index on Page 14
Page 1 of 21
<PAGE>
AMERICAN SOFTWARE, INC. AND SUBSIDIARIES
Form 10-Q
Quarter ended October 31, 1997
Index
-----
Page
No.
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
- Unaudited - October 31, 1997 and April 30, 1997 3-4
Condensed Consolidated Statements of Operations
- Unaudited - Three Months and Six Months ended
October 31, 1997 and October 31, 1996 5
Condensed Consolidated Statement of Shareholders' Equity
- Unaudited - Six Months ended October 31, 1997 6
Condensed Consolidated Statements of Cash Flows
- Unaudited - Six Months ended October 31, 1997
and October 31, 1996 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
PART I FINANCIAL INFORMATION
- ------
Item 1. Financial Statements
2
<PAGE>
AMERICAN SOFTWARE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands except share data)
(Unaudited)
<TABLE>
<CAPTION>
October 31, 1997 April 30, 1997
---------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 29,499 $ 3,442
Investments 25,682 20,964
Trade accounts receivable, less allowance for
doubtful accounts of $1,182 at October 31, 1997
and April 30, 1997 18,832 15,919
Unbilled accounts receivable 5,666 5,569
Current deferred income taxes 1,995 1,995
Refundable income taxes 1,127 1,060
Prepaid expenses and other current assets 1,785 1,766
-------- -------
Total current assets 84,586 50,715
-------- -------
Property and equipment, at cost 42,391 41,647
Less accumulated depreciation and amortization 25,309 24,244
-------- -------
Net property and equipment 17,082 17,403
-------- -------
Capitalized computer software development costs, net 29,338 28,171
Purchased computer software costs, net 890 846
-------- -------
Total computer software costs 30,228 29,017
-------- -------
Other assets, net 2,215 2,374
-------- -------
$134,111 $99,509
======== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
(continued)
3
<PAGE>
AMERICAN SOFTWARE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets, Continued
(in thousands except share data)
(Unaudited)
<TABLE>
<CAPTION>
October 31, 1997 April 30, 1997
---------------- --------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,706 $ 5,221
Accrued compensation and related costs 4,595 5,077
Accrued royalties 488 839
Other current liabilities 3,543 4,063
Deferred revenue 14,348 13,718
------- -------
Total current liabilities 28,680 28,918
Deferred income taxes 4,860 3,134
------- -------
Total liabilities 33,540 32,052
------- -------
Minority interest in subsidiary 6,138 305
Shareholders' equity:
Common stock:
Class A, $.10 par value. Authorized 50,000,000
shares; issued 19,207,807 shares at
October 31, 1997 and 18,972,926 shares at
April 30, 1997 1,921 1,897
Class B, $.10 par value. Authorized 10,000,000
shares; issued and outstanding 4,798,289
shares at October 31, 1997 and 4,815,289 shares
at April 30,1997; convertible into Class A shares
on a one-for-one basis 480 482
Additional paid-in capital 55,219 31,317
Retained earnings 48,782 45,430
-------- -------
106,402 79,126
Less Class A treasury stock, 1,329,793 shares at
October 31, 1997 and 1,330,251 shares
at April 30, 1997, at cost 11,969 11,974
-------- -------
Total shareholders' equity 94,433 67,152
-------- -------
$134,111 $99,509
======== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
AMERICAN SOFTWARE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(in thousands except share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------- ----------------------
October 31, October 31,
---------------------- ----------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
License fees $ 8,172 $ 6,928 $ 16,720 $ 12,402
Services 11,890 7,577 22,694 15,021
Maintenance 5,814 5,444 11,578 10,652
---------- ---------- ---------- ----------
Total revenues 25,876 19,949 50,992 38,075
---------- ---------- ---------- ----------
Cost of revenues:
License fees 1,929 1,551 3,962 2,945
Services 7,828 6,601 15,913 13,230
Maintenance 1,939 2,087 3,932 3,902
---------- ---------- ---------- ----------
Total cost of revenues 11,696 10,239 23,807 20,077
---------- ---------- ---------- ----------
Research and development expenses 4,966 3,875 10,256 8,347
Less: Capitalizable software (2,295) (2,260) (4,373) (5,327)
Marketing and sales expenses 5,982 4,894 11,962 10,051
General and administrative expenses 2,811 3,185 5,562 6,234
---------- ---------- ---------- ----------
Operating earnings (loss) 2,716 16 3,778 (1,307)
Other income, net 551 510 1,533 630
Minority interest (232) - (232) -
---------- ---------- ---------- ----------
Earnings (loss) before
income taxes 3,035 526 5,079 (677)
Income tax expense 1,032 82 1,727 82
---------- ---------- ---------- ----------
Net earnings (loss) $ 2,003 $ 444 $ 3,352 $ (759)
========== ========== ========== ==========
Earnings (loss) per common and
common equivalent share $ .08 $ .02 $ .14 $ .(03)
========== ========== ========== ==========
Weighted average number of
common and common
equivalent shares outstanding 24,790,986 23,449,388 24,573,837 22,312,898
========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
AMERICAN SOFTWARE, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Shareholders' Equity
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended October 31, 1997
- ---------------------------------------------------------------------------------------------------------------------------------
Common stock Additional Total
--------------------------------------
Class A Class B 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, 1997 18,973 $1,897 4,815 $482 $31,317 $45,430 $(11,974) $67,152
Net earnings -- -- -- -- -- 3,352 -- 3,352
Proceeds from issuance of
subsidiary common
stock -- -- -- -- 28,829 -- -- 28,829
Minority interest resulting from
issuance of subsidiary stock -- -- -- -- (5,601) -- -- (5,601)
Proceeds from stock
options exercised 218 22 -- -- 663 -- -- 685
Conversion of Class B shares
into Class A shares 17 2 (17) (2) -- -- -- --
Grants of compensatory
stock options -- -- -- -- 11 -- -- 11
Proceeds from dividend
reinvestment and stock
purchase plan -- -- -- -- -- -- 5 5
------ ------ ------ ---- ------- ------- -------- -------
Balance at
October 31, 1997 19,208 $1,921 4,798 $480 $55,219 $48,782 $(11,969) $94,433
====== ====== ====== ==== ======= ======= ======== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
AMERICAN SOFTWARE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands except share data)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
------------------
October 31,
------------------
1997 1996
------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 3,352 $ (759)
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Depreciation and amortization 4,860 3,440
Loss on disposal of fixed assets 208 1
Equity in loss of investee -- 181
Minority interest in subsidiary earnings (232) --
Net gain on investments (1,041) (276)
Grants of compensatory stock options 11 6
Deferred income taxes 1,727 (3)
Change in operating assets and liabilities:
Net (increase) decrease in money market funds (4,458) 945
Purchases of investments (1,815) (35)
Proceeds from sales and maturities of investments 2,597 4,499
Accounts receivable (3,010) (269)
Prepaids and other assets (301) (64)
Accounts payable and other accrued liabilities (406) (283)
Income taxes (67) 225
Deferred revenue 630 (1,146)
------- -------
Net cash provided by operating activities 2,055 6,462
------- -------
Cash flows from investing activities:
Capitalized software development costs (4,373) (5,328)
Purchases of property and equipment (1,144) (482)
------- -------
Net cash used in investing activities (5,517) (5,810)
------- --------
Cash flows from financing activities:
Proceeds, net, from initial public offering of
Logility, Inc. 28,829 --
Proceeds from exercise of stock options 685 190
Proceeds from dividend reinvestment
and stock purchase plan 5 2
------- --------
Net cash provided by financing activities 29,519 192
-------- --------
Net increase in cash 26,057 844
Cash at beginning of period 3,442 1,947
------- ------
Cash at end of period $29,499 $2,791
======= ======
Supplemental disclosure of cash paid during the
period for income taxes $ 56 $ 90
======= ======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE>
AMERICAN SOFTWARE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
October 31, 1997
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 1997 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 1997 amounts to
conform to classifications adopted in fiscal 1998.
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.
C. Completion of Initial Public Offering
-------------------------------------
On October 10, 1997, Logility, Inc., a subsidiary of the Company,
successfully completed its initial public offering of common stock.
Logility, Inc. sold 2.2 million shares of Common Stock in the initial public
offering for $31.9 million less issuance costs of $3.1 million. After the
offering, the Company owned 83.7% of Logility, Inc.'s common stock.
On November 6, 1997, Logility, Inc. sold 330,000 shares of Common Stock as
part of the underwriters' overallotment from the initial public offering for
$4.8 million less issuance costs of approximately $335,000. After the
overallotment closing, the Company owns 81.7% of Logility, Inc.'s common
stock.
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, 1997 revenues totaled $25,876, up 30% from
$19,949 in the corresponding quarter of fiscal 1997. Revenues for the six
months ended October 31, 1997 totaled $50,992, up 34% from $38,075 in the prior
year period. Software license fee revenues were 18% higher than the second
quarter of fiscal 1997 and 35% higher for the six month period ended October 31,
1997 compared to the prior year. License fee revenues from the Company's client
server offerings (which include Flow Manufacturing and subsidiary Logility's
products) constituted 66% and 58%, respectively, of the total license fee
revenues for the three and six month periods ended October 31, 1997 compared to
the prior year comparable periods, when they comprised 62% and 60% of those
revenues, respectively.
Services revenues were 57% higher than the corresponding quarter a year ago and
51% higher on a six month basis versus fiscal 1997. The Company believes this
was caused by 1) the increase in license fee revenues, 2) an increase in the
demand for professional services in assisting customers to prepare their
software for the year 2000, 3) an improvement in the Company's ability to offer
a more comprehensive package of services for its client server offerings and 4)
an increase in the average rates charged for professional services.
Maintenance revenues increased 7% from the second quarter of fiscal year 1997
and increased 9% for the six months ended October 31,1997 compared to the prior
year period. The increase for both the quarter and the six months ended October
31, 1997 is due to increased license fees realized in prior quarters, as new
license fees are the source of new maintenance customers and therefore future
maintenance income streams.
The cost of revenues for license fees increased 24% compared to the second
quarter of fiscal 1997 and 35% for the six month comparable period due primarily
to higher amortization of capitalized software. The cost of license fee revenues
is expected to increase further in future quarters as the Company introduces its
new ERP client server product offerings into the marketplace and the capitalized
software development costs of those products begin amortization. The cost of
services increased 19% versus the same quarter a year ago and 20% for the six
month comparable period due to increased headcount in the professional services
area to meet a higher volume of professional services contracts. This increase
was offset by a decrease in operating expense levels in the network management
area. Maintenance costs decreased 7% compared to the year ago second quarter and
increased 1% during the six month comparable period due to the amount of time
spent by Company personnel in support of customers on paid maintenance contracts
during the respective periods and the time spent maintaining the software.
9
<PAGE>
Research and development expenditures increased 28% and 23% as compared to the
second quarter and six months of fiscal 1997, respectively, with a 12% and 21%
decrease in the amount of these expenditures that were capitalized for those
respective periods. The increase in research and development expense is due to
increased headcount levels in the product development groups. The decrease in
the amounts of those research and development expenses capitalized primarily
relate to higher amounts of time spent by Company personnel in designing new
products, as the time spent in design is expensed currently. Marketing and sales
expenses increased 22% over the corresponding quarter of fiscal 1997, due to an
increase in sales and marketing personnel and marketing related activities.
General and administrative expenses decreased 12% for the quarter and decreased
11% for the six months over the same periods in fiscal 1997. These expenses
decreased in several categories and were specifically reduced by the closure of
a sales office in Singapore in May 1997 and the elimination of rented space at
the Company's Atlanta offices in March 1997.
Other income increased 8% compared to the second quarter of fiscal 1997 and
increased 143% for the six months ended October 31, 1997 compared to the prior
year period due principally to changes in the market value of the Company's
investment portfolio, which is treated as a "trading" portfolio under SFAS 115.
Logility, Inc., a subsidiary of the Company, completed its initial public
offering of 16.3% of its Common Stock on October 10, 1997. A minority interest
in subsidiary earnings has been recorded for the portion of Logility, Inc.'s
earnings not belonging to the Company from the date of the offering through the
end of the quarter.
The effective tax rate was 34% for the three and six month periods ended October
31, 1997 as compared to 16% in the second quarter of fiscal 1997. This increase
was due to the fact that the Company experienced a net loss in the quarter ended
July 31, 1996 and did not record a deferred tax asset for the net operating loss
carryforward. The effective tax rate was therefore lowered in subsequent
quarters of fiscal 1997 as the Company was profitable.
FINANCIAL CONDITION
- -------------------
The Company's operating activities provided cash of approximately $2.1 million
for the six months ended October 31, 1997 and approximately $6.5 million in the
prior year period. This decrease of approximately $4.4 million occurred while
the Company had a net loss of approximately $.8 million for the six months ended
October 31, 1996 and net earnings of approximately $3.4 million for the current
year period. The principal reason for this difference was the transfer of
approximately $4.5 million to money market accounts and a substantial increase
in accounts receivable in the current period.
Cash used for investing activities was approximately $5.5 million for the six
months ended October 31, 1997 and approximately $5.8 million in the prior year
period. Comparing these two periods, capitalized software development costs
decreased approximately $1 million and purchases of property and equipment
increased approximately $.7 million between the six months ended October 31,
1997 and 1996.
Cash provided by financing activities was approximately $29.5 million for the
six months ended October 31, 1997 and approximately $.2 million in the prior
year period. The increase in cash provided between these two periods was due to
the proceeds received by Logility, Inc. a subsidiary of the Company, from the
sale of 16.3% of its stock in an initial public offering, the initial closing of
which took place on October 10, 1997.
10
<PAGE>
The Company's consolidated balance sheet remains strong with a current ratio of
2.9 to 1. Liquidity also remains strong with cash and short-term investments
totaling 41% 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.
ITEM. 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ----------------------------------------------------------
Not applicable
11
<PAGE>
PART II OTHER INFORMATION
- -------
Item 1. Legal Proceedings
- ------- -----------------
Not applicable
Item 2. Changes in Securities and Use of Proceeds
- ------- -----------------------------------------
Not applicable
Item 3. Defaults Upon Senior Securities
- ------- -------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
Not applicable.
Item 5. Other Information
- ------- -----------------
Not applicable
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibit 10.1 Amended and Restated 1991 Director and Officer Stock
Option Plan effective October 1, 1997.
Exhibit 11 Statement re: computation of Per Share Earnings
(Loss).
(b) The Company filed a Form 8-K on August 21, 1997.
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 12, 1997 /s/James C. Edenfield
------------------- ------------------------------------------
James C. Edenfield
President, Chief Executive Officer
and Treasurer
DATE December 12, 1997 /s/David E. Weigand
------------------- ------------------------------------------
David E. Weigand
Chief Accounting Officer
13
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Page
------- ----
10.1 Amended and Restated Director and Officer Stock Option
Plan effective October 1, 1997. 15
11 Statement re: computation of Per Share Earnings (Loss) 20
14
<PAGE>
AMERICAN SOFTWARE, INC.
DIRECTOR AND OFFICER STOCK OPTION PLAN
(Amended and Restated Effective October 1, 1997)
1. PURPOSE. This Plan shall be known as the "Director and Officer Stock
-------
Option Plan" (hereinafter referred to as "the Plan" or "this Plan"). The
purpose of the Plan is to provide directors and officers 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 or to remain as directors of the Company by granting
to such persons 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 1,000,000 Shares, plus the total number of
Shares as to which options granted under 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 Director and
--------------
Officer 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 and
who shall be "disinterested persons" as defined in Rule 16b-3 under the
Securities Exchange Act of 1934, as amended. No member of the Committee while
serving as such shall be eligible for participation in the Plan and no member of
the Board may serve on the Committee if he or she received a grant of an option
under this Plan or any other stock option plan of the Company within twelve
months prior to serving on the Committee or while serving on the Committee,
except for options granted pursuant to paragraph 5(b). Subject to the
provisions of the Plan, the Committee shall have exclusive power to select the
persons 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.
4. ELIGIBILITY. Participants in the Plan shall be selected by the
-----------
Committee from among the directors and officers of the Company and its
subsidiaries.
15
<PAGE>
5. GRANT OF OPTIONS.
----------------
(a) the Committee may from time to time grant options to purchase
Shares to such of the directors and officers of the Company and its subsidiaries
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.
(b) (i) Commencing October 31, 1994 and continuing on each
April 30 and October 31 thereafter during the term of this Plan, each member of
the Board of Directors then in office who is not a full-time employee of the
Company, including members of the Committee, shall receive on each such October
31 and April 30 an automatic grant of Non-Qualified options to purchase 5,000
Shares, reduced pro rata to the extent that the director shall have served as a
director of the Company for less than six full months prior to such date. This
5000-Share amount shall be adjusted automatically to reflect any stock
dividends, stock splits or similar events occurring after August 23, 1994.
(ii) The option price for each such grant shall be equal to
the closing market price of the Shares on the date of grant (or the next
preceding business day if the date of grant is not a business day).
(iii) The options shall not be exercisable until one year
after the date of grant, at which time the options shall be exercisable in full
and shall remain exercisable until ten years after the date of grant, regardless
of whether the option holder remains a director of the Company. In the event of
the death or disability of the option holder, the option may be exercised by his
or her heirs or personal representatives for the remaining term of the option.
(iv) The options shall be represented by option grants in
substantially the same forms as are used from time to time for other Non-
Qualified options granted under this Plan, subject only to the terms set forth
above.
6. TERMS, CONDITIONS AND FORM OF OPTIONS. Each option shall be evidenced
-------------------------------------
by 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, other than an option granted
pursuant to paragraph 5(b), shall terminate three months after the termination
of the option holder's employment (or service as a director) with the Company or
subsidiary for any reason except the Retirement (as hereinafter defined), death
or disability of the option holder (the "optionee"). An option granted pursuant
to paragraph 5(b) shall terminate in accordance with paragraph 5(b)(iii).
16
<PAGE>
(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.
(c) In the event of termination of employment (or service as a
director) 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 (i) twelve months after the date of the optionee's death or
termination due to disability, as the case may be, or (ii) 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
17
<PAGE>
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.
6.4 TEN PERCENT SHAREHOLDER. Notwithstanding the above, in regard to
-----------------------
a director or officer who possesses more than 10% of the total combined voting
power of all classes of stock of the Company or of its subsidiaries and who
receives an Incentive option, the exercise price hereunder shall not be less
than 110% of the fair market value of Common Stock on the date the Incentive
option is granted and the option by its terms shall not be exercisable after the
expiration of five years from the date such option is granted.
6.5 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.
18
<PAGE>
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. Notwithstanding the foregoing, Section 5(b), which provides
that nonemployee directors are eligible to receive stock options and specifies
the amount, option price and timing of stock option grants, may be amended no
more than once every six months except to comply with changes in the Code, the
Employee Retirement Income Security Act of 1974, as amended, or the rules and
regulations thereunder.
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,
----------------------- ---------------------
1997 1996 1997 1996
----------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Common stock:
Weighted average common
shares outstanding:
Class A shares 17,835,795 17,509,881 17,777,458 17,494,761
Class B shares 4,806,274 4,818,137 4,806,274 4,818,137
---------- ---------- ---------- ----------
22,642,069 22,328,018 22,583,732 22,312,898
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) 2,148,917 1,121,370 1,990,105 -
---------- ---------- ---------- ----------
Totals 24,790,986 23,449,388 24,573,837 22,312,898
========== ========== ========== ==========
Net earnings (loss) $2,003,386 $ 443,847 $3,352,212 $ (759,313)
========== ========== ========== ==========
Earnings (loss) per common
and common equivalent share $ .08 $ .02 $ .14 $ (.03)
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Americn
Software Inc. Consolidated Financial Statements and is qualified in its entirety
by reference to sch financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> OCT-31-1997
<CASH> 29,499
<SECURITIES> 25,682
<RECEIVABLES> 25,679
<ALLOWANCES> 1,182
<INVENTORY> 0
<CURRENT-ASSETS> 84,586
<PP&E> 42,391
<DEPRECIATION> 25,309
<TOTAL-ASSETS> 134,111
<CURRENT-LIABILITIES> 28,680
<BONDS> 0
0
0
<COMMON> 2,401
<OTHER-SE> 92,032
<TOTAL-LIABILITY-AND-EQUITY> 134,111
<SALES> 0
<TOTAL-REVENUES> 50,992
<CGS> 0
<TOTAL-COSTS> 23,807
<OTHER-EXPENSES> 23,407
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,079
<INCOME-TAX> 1,727
<INCOME-CONTINUING> 3,352
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,352
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
