<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 July 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
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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.
<TABLE>
<CAPTION>
Classes Outstanding at September 11, 1997
- ------------------------------------ ---------------------------------
<S> <C>
Class A Common Stock, $.10 par value 17,817,343 Shares
Class B Common Stock, $.10 par value 4,810,289 Shares
</TABLE>
<PAGE>
AMERICAN SOFTWARE, INC. AND SUBSIDIARIES
Form 10-Q
Quarter ended July 31, 1997
Index
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<TABLE>
<CAPTION>
Page
No.
----
<S> <C>
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - Unaudited - July 31, 1997
and April 30, 1997 3-4
Condensed Consolidated Statements of Operations
- Unaudited - Three Months ended July 31, 1997 and 1996 5
Condensed Consolidated Statement of Shareholders' Equity
- Unaudited - Three Months ended July 31, 1997 6
Condensed Consolidated Statements of Cash Flows
- Unaudited - Three Months ended July 31, 1997 and July 31, 1996 7
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9-10
Part II - Other Information 11
</TABLE>
2
<PAGE>
PART I FINANCIAL INFORMATION
- ------
Item 1. Financial Statements
AMERICAN SOFTWARE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands except share data)
<TABLE>
<CAPTION>
July 31, 1997 April 30, 1997
------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 1,615 $ 3,442
Investments 25,818 20,964
Trade accounts receivable, less allowance for
doubtful accounts of $1,182 at July 31, 1997
and April 30, 1997 17,310 15,919
Unbilled accounts receivable 2,640 3,172
Current deferred income taxes 1,995 1,995
Refundable income taxes 1,060 1,060
Prepaid expenses and other current assets 1,970 1,766
-------- -------
Total current assets 52,408 48,318
-------- -------
Property and equipment, at cost 41,780 41,647
Less accumulated depreciation and amortization 24,687 24,244
-------- -------
Net property and equipment 17,093 17,403
-------- -------
Capitalized computer software development costs, net 28,809 28,171
Purchased computer software costs, net 814 846
-------- -------
Total computer software costs 29,623 29,017
-------- -------
Other assets, net 2,303 2,374
-------- -------
$101,427 $97,112
======== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
(continued)
3
<PAGE>
AMERICAN SOFTWARE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets(Unaudited), Continued
(in thousands except share data)
<TABLE>
<CAPTION>
July 31, 1997 April 30, 1997
------------- --------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,576 $ 5,221
Accrued compensation and related costs 5,212 5,077
Accrued royalties 635 839
Other current liabilities 5,034 4,368
Deferred revenue 12,942 11,321
-------- -------
Total current liabilities 29,399 26,826
Deferred income taxes 3,134 3,134
-------- -------
Total liabilities 32,533 29,960
-------- -------
Shareholders' equity:
Common stock:
Class A, $.10 par value. Authorized 50,000,000
shares; issued 19,097,352 shares at
July 31, 1997 and 18,972,926 shares at
April 30, 1997 1,910 1,897
Class B, $.10 par value. Authorized 10,000,000
shares; issued and outstanding 4,819,289
shares at July 31, 1997 and April 30, 1997;
convertible into Class A shares
on a one-for-one basis 482 482
Additional paid-in capital 31,696 31,317
Retained earnings 46,778 45,430
-------- -------
80,866 79,126
Less Class A treasury stock, 1,330,038 shares at
July 31, 1997 and 1,330,251 shares
at April 30, 1997, at cost 11,972 11,974
-------- -------
Total shareholders' equity 68,894 67,152
-------- -------
$101,427 $97,112
======== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
AMERICAN SOFTWARE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(in thousands except share and per share data)
<TABLE>
<CAPTION>
For the
--------------------------
Three Months Ended
--------------------------
July 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Revenues:
License fees $ 8,548 $ 5,474
Services 10,804 7,444
Maintenance 5,764 5,208
----------- -----------
Total revenues 25,116 18,126
----------- -----------
Cost of revenues:
License fees 2,033 1,394
Services 8,085 6,629
Maintenance 1,993 1,815
----------- -----------
Total cost of revenues 12,111 9,838
----------- -----------
Research and development expenses 5,290 4,472
Less: Capitalizable software (2,078) (3,067)
Marketing and sales expenses 5,980 5,157
General and administrative expenses 2,751 3,049
----------- -----------
Operating earnings (loss) 1,062 (1,323)
Other income, net 982 120
----------- -----------
Earnings (loss) before income taxes 2,044 (1,203)
Income tax expense 695 -
----------- -----------
Net earnings (loss) $ 1,349 $ (1,203)
=========== ===========
Earnings (loss) per common and
common equivalent share $.06 $(.05)
=========== ===========
Weighted average number of
common and common
equivalent shares outstanding 24,228,887 22,297,778
=========== ===========
</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>
Three months ended July 31, 1997
-------------------------------------------------------------------------------------------------------
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, 1997 18,972,926 $1,897,294 4,815,289 $481,529 $31,317,194 $45,429,506 $(11,973,776) $67,151,747
Net earnings -- -- -- -- -- 1,348,826 -- 1,348,826
Proceeds from stock
options exercised 124,426 12,443 -- -- 379,156 -- -- 391,599
Proceeds from dividend
reinvestment and stock
purchase plan -- -- -- -- -- -- 1,757 1,757
---------- ---------- --------- ---------- ----------- ----------- ------------ -----------
Balance at
July 31, 1997 19,097,352 $1,909,737 4,815,289 $481,529 $31,696,350 $46,778,332 $(11,972,019) $68,893,929
========== ========== ========= ========== =========== =========== ============ ===========
</TABLE>
See accompanying notes to Condensed consolidated financial statements.
6
<PAGE>
AMERICAN SOFTWARE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
For the
Three Months Ended
------------------
July 31,
------------------
1997 1996
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 1,349 $(1,203)
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Depreciation and amortization 2,383 1,687
Loss on disposal of fixed assets 208 -
Equity in loss of investee - 35
Net (gain) loss on investments (1,180) 266
Grants of compensatory stock options - 3
Deferred income taxes - -
Change in operating assets and liabilities:
Net increase in money market funds (3,572) (837)
Purchases of investments (840) (34)
Proceeds from sales and maturities of investments 738 3,087
Accounts receivable (859) 780
Prepaids and other assets (309) (428)
Accounts payable and other accrued liabilities 952 160
Income taxes - 227
Deferred revenue 1,621 (506)
------- -------
Net cash provided by operating activities 491 3,237
------- -------
Cash flows from investing activities
Capitalized software development costs (2,178) (3,067)
Purchases of property and equipment (533) (366)
------- -------
Net cash used in investing activities (2,711) (3,433)
------- -------
Cash flows from financing activities:
Proceeds from exercise of stock options 391 106
Proceeds from dividend reinvestment
and stock purchase plan 2 1
------- -------
Net cash provided by financing activities 393 107
------- -------
Net decrease in cash (1,827) (89)
Cash at beginning of period 3,442 1,947
------- -------
Cash at end of period $ 1,615 $ 1,858
======= =======
Supplemental disclosure of cash paid during the
period for income taxes $ 50 $ 114
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE>
AMERICAN SOFTWARE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
July 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 Company's 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 the fiscal 1998 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
(dollar amounts in thousands)
ITEM 2.
RESULTS OF OPERATIONS
- ---------------------
For the quarter ended July 31, 1997, revenues totaled $25,116, up 39% from
$18,126 in the corresponding quarter of fiscal 1997. Software license fees were
56% higher than the first quarter of fiscal 1997. License fees from the
Company's mainframe and midrange ERP Solutions, along with its Warehouse PRO and
client server Value Chain Solutions, all contributed to the increase in license
fees revenue.
Services revenues were 45% higher than the corresponding quarter a year ago. The
Company believes the increase was caused by both the increase in license fees
and an improvement in the Company's ability to offer higher margin services for
its client server offerings.
Maintenance revenues increased 11% from first quarter 1997, continuing the trend
that began in the first quarter of fiscal 1997. Maintenance revenues generally
follow license fee revenues, as new license fees are the source of new
maintenance customers.
The cost of revenues for license fees increased 46% compared to the first
quarter of fiscal 1997 due primarily to higher amortization of capitalized
software. Services costs increased 22% versus the same quarter a year ago due
to increased service related activity corresponding to the increase in service
revenue. Similarly, maintenance costs increased 10% compared to the year ago
first quarter due to increased maintenance activities as compared to the quarter
ended July 31, 1996.
Research and development expenditures increased 18% as compared to first
quarter of fiscal 1997, with a 32% decrease in the amount of these expenditures
that were capitalized. The decrease in amounts capitalized relate to the
relative stages of completion of software projects. Marketing and sales expense
increased 16% over the corresponding quarter of fiscal 1997, due to an increase
in sales and marketing activities.
General and administrative expenses decreased 10% for the quarter ended July 31,
1997 over the same period in fiscal 1997. These expenses decreased in several
categories primarily due to management's continued attention to cost control.
Other income increased approximately $862,000 for the quarter over the same
period in fiscal 1997. The increase is primarily due to increases in the fair
market value of the Company's stock and bond portfolios, which are treated as a
"trading" portfolio under SFAS 115. Therefore, any increase in market value of
these portfolios has the effect of increasing other income.
The effective tax rate was 34% as compared to 0% in the first quarter of fiscal
1997, because the Company experienced net earnings in the quarter ended July
9
<PAGE>
31, 1997 and a net loss for the corresponding quarter a year ago. The Company
elected not to recognize a tax benefit from the loss incurred in the
corresponding quarter a year ago.
FINANCIAL CONDITION
- -------------------
The Company's operating activities provided cash of approximately $500,000 for
the three months ended July 31, 1997 and approximately $3.2 million in the prior
year period. This decrease of approximately $2.7 million occurred while the
Company had net earnings of approximately $1.3 million for the three months
ended July 31, 1997 and a net loss of approximately $1.2 million for the prior
year period. The primary reasons for this decrease are 1) the increase in
accounts receivable, 2) the increase in the market value of the Company's stock
and bond portfolio, and 3) the transfer of monies into the Company's investment
portfolio, as compared to the corresponding quarter a year ago, where sales and
maturities of investments were used to fund the Company's operating activities.
Partially offsetting these decreases, deferred revenue increased by
approximately $2.1 million, accounts payable and other accrued liabilities
increased by approximately $.8 million and depreciation and amortization expense
increased by approximately $.7 million.
Cash used for investing activities was approximately $2.7 million for the three
months ended July 31, 1997 and approximately $3.4 million in the prior year
period. Comparing these two periods, one component of investing activities,
capitalized software development costs, decreased approximately $1.0 million.
Partially offsetting this decrease, purchases of property and equipment
increased approximately $200,000 as between the three months ended July 31, 1997
and 1996.
The Company's current ratio was 1.8 to 1 on July 31, 1997. Liquidity remains
strong, with cash and short-term investments totaling 27% 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, though it may seek additional capital to
fund its continuing software development.
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. Furthermore, any projections
regarding services revenues from preparing customers for the turn of the
millennium are even more uncertain due to the fact that there is no precedent
for providing these kinds of services.
10
<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 was held on August 26, 1997. 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 2,400,000 to 2,700,000. On a weighted basis, 5,730,084
shares were voted in favor of the amendment, 272,887 shares were voted
against the amendment and 3,232 shares abstained from voting on the
amendment. The shareholders also voted upon a proposed amendment to
the Director and Officer Stock Option Plan to increase the base number
of option shares authorized under that Plan from 900,000 to 1,000,000.
On a weighted basis, 5,741,108 shares were voted in favor of the
amendment, 262,081 shares were voted against the amendment and 3,734
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 August 26, 1997.
(b) Exhibit 10.2 Amended and Restated Director and Officer Stock
Option Plan effective August 26, 1997.
(c) Exhibit 11 Statement re: computation of Per Share Earnings
(Loss).
(d) No reports on Form 8-K were filed during the quarter ended
July 31, 1997.
11
<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 September 16, 1997 /s/James C. Edenfield
------------------------ ------------------------------------
James C. Edenfield
President, Chief Executive Officer
and Treasurer
DATE September 16, 1997 /s/David E. Weigand
------------------------ ------------------------------------
David E. Weigand
Vice President of Finance
and Chief Accounting Officer
12
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit Page
------- ----
<S> <C> <C>
10.1 Amended and Restated 1991 Employee Stock Option Plan
effective August 26, 1997.
10.2 Amended and Restated Director and Officer Stock Option Plan
effective August 26, 1997.
11 Statement re: computation of Per Share Earnings (Loss)
</TABLE>
13
<PAGE>
AMERICAN SOFTWARE, INC.
1991 EMPLOYEE STOCK OPTION PLAN
(Amended and Restated Effective August 26, 1997)
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) 2,700,000 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
<PAGE>
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 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.
-2-
<PAGE>
(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 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
-3-
<PAGE>
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 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
-4-
<PAGE>
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.
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").
-5-
<PAGE>
AMERICAN SOFTWARE, INC.
DIRECTOR AND OFFICER STOCK OPTION PLAN
(Amended and Restated Effective August 26, 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
<PAGE>
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.
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.
2
<PAGE>
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).
(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.
3
<PAGE>
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.
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.
4
<PAGE>
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.
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
5
<PAGE>
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.
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").
6
<PAGE>
EXHIBIT 11
AMERICAN SOFTWARE, INC. AND SUBSIDIARIES
Statement re: computation of Per Share Earnings (Loss)
<TABLE>
<CAPTION>
Three Months Ended
----------------------
July 31,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
Common stock:
Weighted average common
shares outstanding:
Class A shares 17,710,105 17,468,489
Class B shares 4,815,289 4,829,289
---------- ----------
22,525,394 22,297,778
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) 1,703,493 --
---------- ----------
Totals 24,228,887 22,297,778
========== ==========
Net earnings (loss) $1,348,826 $(1,203,160)
========== ==========
Earnings (loss) per common
and common equivalent share $ .06 $ (.05)
========== ==========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from American
Software, Inc. Consolidated and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> JUL-31-1997
<CASH> 1,615
<SECURITIES> 25,818
<RECEIVABLES> 21,132
<ALLOWANCES> 1,182
<INVENTORY> 0
<CURRENT-ASSETS> 52,408
<PP&E> 41,708
<DEPRECIATION> 24,687
<TOTAL-ASSETS> 101,427
<CURRENT-LIABILITIES> 29,399
<BONDS> 0
2,392
0
<COMMON> 0
<OTHER-SE> 78,474
<TOTAL-LIABILITY-AND-EQUITY> 101,427
<SALES> 0
<TOTAL-REVENUES> 25,116
<CGS> 0
<TOTAL-COSTS> 12,111
<OTHER-EXPENSES> 11,943
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,044
<INCOME-TAX> 695
<INCOME-CONTINUING> 1,349
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,349
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
