SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996.
Commission File No. 1-9158
------------------------
MAI SYSTEMS CORPORATION
(Exact name of Registrant as Specified in its Charter)
Delaware 22-2554549
(State of Incorporation) (I.R.S. Employer
Identification Number)
9600 Jeronimo Road
Irvine, California 92718
(Address of Principal Executive Office)
Registrant's telephone number, including area code: (714) 580-0700
-------------------------------
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 and (2) has been subject to such filing
requirements for the past 90 days.
Yes No
/X/ ___
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
/X/ ___
As of August 12, 1996, 8,167,069 shares of the registrant's Common Stock, $0.01
par value, were outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
MAI Systems Corporation
Condensed Consolidated Balance Sheets
(Unaudited)
December 31, June 30,
1995 1996
(dollars in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 4,086 $ 10,664
Receivables, net................................
7,662 7,353
Inventories.....................................
3,769 4,297
Prepaids........................................
913 1,148
Total current assets......................... 16,430 23,462
Furniture, fixtures and equipment, net............. 3,766 3,783
Goodwill and other intangibles................. -- 3,336
Other assets....................................... 837 599
Total assets.............................. $ 21,033 $ 31,180
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt....... $ 620 $ 1,278
Customer deposits...............................
745 1,151
Accounts payable................................
4,778 5,062
Accrued liabilities............................. 6,432 3,688
Income taxes payable............................ 337 157
Unearned revenue................................ 3,181 3,354
Total current liabilities................ 16,093 14,688
Deferred income taxes..............................
132 15
Long-term debt.....................................
1,021 1,072
Other liabilities..................................
1,150 767
Minority interest in consolidated subsidiary....... 165 --
Total liabilities............................ 18,561 16,542
Stockholders' equity:
Common stock, par value $0.01 per share,
authorized 25,000,000
shares, 7,356,250 and
7,508,791 shares issuable......................... 74 75
Additional paid-in capital......................... 199,364 200,367
Cumulative translation adjustment.................. 28 (82)
Accumulated deficit................................ (196,994) (185,722)
Total stockholders' equity................... 2,472 14,638
Total liabilities and stockholders'equity....... $ 21,033 $ 31,180
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements
2
<PAGE>
<TABLE>
<CAPTION>
MAI Systems Corporation
Condensed Consolidated Statements of Operations
(Unaudited)
For the Three-Months For the Six-Months
Ended June 30, Ended June 30,
1995 1996 1995 1996
(dollars in thousands, (dollars in thousands,
except per share data) except per share data)
<S> <C> <C> <C> <C>
Revenue:
Software, networks and
professional services:
Software sales..... $ 842 $ 1,415 $ 2,247 $2,155
Network and computer
equipment.................. 3,471 3,110 7,365 6,467
Professional services.... 2,323 2,582 4,858 4,952
----- ----- ------ ------
Total............ 6,636 7,107 14,470 13,574
Legacy revenue........... 9,003 7,927 18,364 16,191
----- ------ ------ ------
Total revenue.... 15,639 15,034 32,834 29,765
Direct costs..................... 10,024 8,746 20,293 18,390
------ ----- ------ ------
Gross profit............ 5,615 6,288 12,541 11,375
Selling, general and
administrative expenses.......... 3,120 3,715 6,042 6,478
Research and development costs... 520 302 1,176 989
Other operating income........... (481) (7,294) (388) (7,294)
----- ------- ----- -------
Operating income...... 2,456 9,565 5,711 11,202
Interest expense-net............. 57 53 85 95
Minority interest in
consolidated subsidiary.......... (92) - 55 (165)
----- --- -- -----
Income before
income taxes............... 2,491 9,512 5,571 11,272
Provision (benefit) for income taxes
taxes........................ (199) - 23 -
Net income....... $ 2,690 $ 9,512 $ 5,548 $11,272
-------- ------- ------- --------
Primary income per share
of common stock............ $ 0.34 $ 1.13 $ 0.70 1.34
------- ------- ------- -----
Fully diluted income per share
of common stock............ $ 0.33 $ 1.13 $ 0.67 1.33
------- ------- ------- -----
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements
3
<PAGE>
<TABLE>
<CAPTION>
MAI Systems Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Six-Months Ended
June 30,
1995 1996
(dollars in thousands)
<S> <C> <C>
Net cash provided by operating activities............. $2,634 $8,216
Cash flows from investing activities:
Capital expenditures.............................. (985) (651)
Proceeds from disposal of furniture, fixtures and
equipment........................................ 42 -
---- ---
Net cash used in investing activities................. (943) (651)
Cash flows from financing activities:
Increase in notes receivable-net.................. - (458)
Repayments of long-term debt...................... (847) (516)
Proceeds from the exercise of stock options...
- 43
---- ----
Net cash used in financing activities................. (847) (931)
---- -----
Effect of exchange rate changes on cash and cash
equivalents........................................... 14 (56)
---- ----
Net change in cash and cash equivalents............... 858 6,578
Cash and cash equivalents at beginning of period...... 3,151 4,086
----- -----
Cash and cash equivalents at end of period............ $ 4,009 $ 10,664
----- ------
Cash paid during the period for:
Interest.......................................... $ 141 $ 159
--- ---
Income taxes.................................. $ - 167
--- ---
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements
4
<PAGE>
MAI Systems Corporation
Notes to Condensed Consolidated Financial Statements
Six-Months Ended June 30, 1996
(Unaudited)
(1) Basis of Presentation
Companies for which this report is filed are MAI Systems Corporation and
its wholly-owned subsidiaries (the "Company"). The information contained herein
is unaudited, but gives effect to all adjustments (which are normal recurring
accruals) necessary, in the opinion of Company management, to present fairly the
condensed consolidated financial statements for the interim period. All
significant intercompany transactions and accounts have been eliminated in
consolidation.
(2) Inventories
<TABLE>
<CAPTION>
Inventories are summarized as follows:
December 31, June 30,
1995 1996
---------------------------------
(dollars in thousands)
<S> <C> <C>
Finished goods $ 2,649 $2,897
Replacement parts 1,120 1,400
-------- ------
Total $ 3,769 $4,297
</TABLE>
(3) Plan of Reorganization
In 1993, the Company emerged from a voluntary proceeding under the
bankruptcy protection laws. Notwithstanding the confirmation and effectiveness
of its Plan of Reorganization (the "Plan"), the Bankruptcy Court continues to
have jurisdiction to resolve disputed pre-petition claims against the Company to
resolve matters related to the assumptions, assignment or rejection of executory
contracts pursuant to the Plan and to resolve other matters that may arise in
connection with the implementation of the Plan.
Shares of common stock are currently being distributed by the Company to
its former creditors. As of August 12, 1996, 6,707,236 shares of common stock
had been issued pursuant to the Plan and were outstanding. The Company
estimates that approximately 7,356,250 shares will be issued to creditors.
(4) Business Acquisitions
In May 1996, the Company acquired the remaining 30% of the outstanding
shares of Gaming Systems International ("GSI") for approximately $2.4 million,
which was financed through the issuance 98,462 shares of MAI common stock and
cash (which is payable in installments through May 1998). The Company now owns
100% of the outstanding shares of GSI. In addition, the Company reacquired the
distribution rights to MANBASE 8.0, a manufacturing software application, from
Sextant Corporation for approximately $530,000.
(5) Settlement of Claims Arising from Disposition of Subsidiaries
During the three months ended June 30, 1996, the Company reached
an agreement and received $8.5 million in full settlement of a claim
relating to the disposition of certain subsidiaries that were disposed
of in 1993. This amount (net of litigation expenses) is included in other
operating income in the accompanying condensed consolidated statement of
operations.
5
<PAGE>
(6) Net Income per Share
Primary and fully diluted income per share are computed using 7,356,250
shares of common stock (adjusted for the August 1995 stock split) expected to be
issued in accordance with the Plan of Reorganization and the weighted average
number of shares and equivalent shares of common stock outstanding during the
period. Common stock equivalents consist of dilutive outstanding stock options
and warrants and are calculated using the treasury stock method.
(7) Subsequent Event
On August 9, 1996, the Company acquired substantially all the assets
and assumed certain liabilities of Hotel Information Systems, Inc.
for 1,307,305 shares of common stock and cash of approximately
$1,750,000.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, working capital increased to $8,774,000 from $337,000 at
December 31, 1995. Excluding deferred revenue (which will not give rise to cash
disbursements) of $3,354,000, the Company's working capital is $12,128,000 or a
ratio of current assets to current liabilities of 2.07 to 1.0. The improvement
in the Company's working capital is attributable to the improved operating
results of the business (which includes the net settlement arising
from the disposition of subsidiaries of $7,294,000).
Cash and cash equivalents were $10,664,000 at June 30, 1996, compared to
$4,086,000 at December 31, 1995. The Company continues to have available a
$4,000,000 secured revolving credit facility. The availability of this line of
credit is based on a calculation reflecting the age and nature of certain
accounts receivable. At June 30, 1996, the available balance was approximately
$2,800,000; however, no balances were drawn down under this facility at June 30,
1996.
Net cash used in investing activities for the six-months ended June 30,
1996, totaled $651,000, relating to capital expenditures.
Net cash used in financing activities for the six-months ended June 30,
1996, totaled $931,000, comprising $516,000 used to repay long-term debt and
$458,000 relating to notes receivable partially offset by $43,000 proceeds from
the exercise of stock options.
Stockholders' equity increased to $14,638,000 at June 30, 1996 from
$2,472,000 at December 31, 1995, principally due to net income for the
six-months ended June 30, 1996 of $11,272,000.
The Company believes it will continue to have sufficient cash available to
fund its operating and capital requirements through 1996.
As of August 9, 1996, the Company had issued 6,707,236 shares of common
stock to its former unsecured creditors in satisfaction of their claims against
the Company.
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS
THREE-MONTHS ENDED JUNE 30, 1995 COMPARED TO THREE-MONTHS ENDED JUNE 30, 1996
Three-Months ended Percentage Three-Months ended Percentage
June 30, 1996 of Revenues June 30, 1996 of Revenues
(dollars in thousands)
<S> <C> <C> <C> <C>
Revenues $15,639 100.0% $15,034 100.0%
Gross profit 5,615 35.9% 6,288 41.8%
Selling, general &
administrative expenses 3,120 20.0% 3,715 24.7%
Research and development
costs 520 3.3% 302 2.0%
Other operating income (481) (3.1%) (7,294) (48.5%)
Provision (benefit)
for income taxes (199) (1.3%) - -
Minority Interest (92) (0.6%) - -
</TABLE>
7
<PAGE>
Revenues for the three months ended June 30, 1995 were $15,639,000
compared to $15,034,000 (a 3.8% decline) for the comparable period of 1996. The
decrease in revenues was attributable to an anticipated decline of $1,076,000
(12%) in the Company's legacy revenues, partially offset by an increase of
$471,000 in software, networks and professional services revenues. The $471,000
increase is net of a $1,201,000 decline in revenues from the Company's gaming
solutions subsidiary and an increase of $1,672,000 in non-gaming software,
networks and professional services revenues. The non-gaming software, networks
and professional services revenues increase of $1,672,000 represented an
increase of 33.9% over the comparable period of the prior year. In conjunction
with the acquisition of the remaining 30% of the outstanding shares of GSI, the
Company consolidated certain activities of the two companies to achieve
operating efficiencies and benefit from certain economies of scale.
Gross profit for the three months ended June 30, 1995 was $5,615,000
compared to $6,288,000 for the comparable period of 1996. The increase in the
gross profit percentage from 35.9% in the three months ended June 30, 1995 to
41.8% for the comparable period of 1996, reflects improved profit margins for
both the software, networks and professional services business and the legacy
business.
Selling, general and administrative expenses increased from $3,120,000 for
the three months ended June 30, 1995, to $3,715,000 for the comparable period of
1996. The increase is principally attributable to increased marketing efforts
which resulted in increased non-gaming related software, networks and
professional services revenues in the three months ended June 30, 1996 compared
to the comparable period of 1995.
Research and development costs were $520,000 for three months ended June
30, 1995 compared to $302,000 for the comparable period of 1996. The decrease is
primarily attributable to the capitalization of certain software development
costs which qualify for capitalization as product enhancement costs in the three
months ended June 30, 1996. Research and development costs primarily relate to
costs incurred for the Company's gaming and hospitality products.
Other operating income for the three months ended June 30, 1995 related to
a settlement (net of expenses during the period) that arose in connection with a
lawsuit the Company instituted against certain competitors which the Company
alleged were infringing upon its software copyright. In the three months ended
June 30, 1996, other operating income related to a settlement (net of expenses)
of a claim relating to the disposition of certain subsidiaries that were
disposed of in 1993.
The income tax benefit in the three months ended June 30, 1995 reflected
a reduction in the year-to-date tax provision for the Company's gaming
solutions subsidiary (which at the time did not qualify to be part of the
Company's consolidated tax group) due to losses in the three months ended
June 30, 1995. There is no tax provision required in 1996 due to the
availability of net operating losses and other timing differeces.
The minority interest credit for the three months ended June 30, 1995
reflects the share of losses attributable to the then minority shareholders in
the Company's gaming solutions subsidiary. In May 1996, the Company acquired the
remaining 30% of the outstanding share capital from the minority shareholders.
<TABLE>
<CAPTION>
Six-Months Ended June 30, 1995 Compared to Six-Months Ended June 30, 1996
Six Months Ended Percentage Six Months Ended Percentage
June 30, 1995 of Revenues June 30, 1996 of Revenues
(dollars in thousands)
<S> <C> <C> <C> <C>
Revenues $32,834 100.0% $29,765 100.0%
Gross profit 12,541 38.2% 11,375 38.2%
Selling, general &
administrative expenses 6,042 18.4% 6,478 21.8%
Research and development
costs 1,176 3.6% 989 3.3%
Other operating income (388) (1.2%) (7,294) (24.5%)
Provision for income taxes 23 0.1% - -
Minority Interest 55 0.2% (165) (0.6%)
</TABLE>
8
<PAGE>
Revenues for the six months ended June 30, 1995 were $32,834,000 compared
to $29,765,000 for the comparable period of 1996. The decrease in revenues of
$3,069,000 in the six months ended June 30, 1996 compared to the six months
ended June 30, 1995 is attributable to an anticipated decline in legacy revenues
of $2,173,000 (11.8%) and a decline in software, networks and professional
services revenues of $896,000. The $896,000 decrease is net of a decrease of
$3,583,000 in gaming revenues and an increase in non-gaming software, networks,
and professional services revenues of $2,687,000. The non-gaming software,
networks and professional services revenues increase of $2,687,000, represented
an increase of 27.3% over the comparable period of the prior year. In
conjunction with the acquisition of the remaining 30% of the outstanding shares
of GSI, the Company consolidated certain activities of the two companies to
achieve operating efficiencies and benefit from certain economies of scale.
Gross profit for the six months ended June 30, 1995 was $12,541,000
compared to $11,375,000 for the comparable period of 1996 representing a gross
profit percentage of 38.2% for both 1995 and 1996.
Selling, general and administrative expenses increased from $6,042,000 in
the six months ended June 30, 1995, to $6,478,000 in the comparable period of
1996. The increase is principally attributable to increased marketing efforts
which resulted in increased non-gaming software, networks and professional
services revenues in 1996 compared to 1995.
Research and development costs were $1,176,000 for the six months ended
June 30, 1995 compared to $989,000 for the comparable period of 1996. The
decrease in research and development costs in the six months ended June 30, 1996
is primarily attributable to the capitalization of certain software development
costs which qualify for capitalization as product enhancement costs in 1996.
Research and development costs primarily relate to costs incurred for the
Company's gaming and hospitality products.
Other operating income in the six months ended June 30, 1995 related to a
settlement (net of expenses during the period) that arose in connection with a
lawsuit the Company instituted against certain competitors which the Company
alleged were infringing upon its software copyright. In the six months ended,
June 30, 1996, other operating income related to a settlement (net of expenses)
of a claim relating to the disposition of certain subsidiaries that were
disposed in 1993.
The provision for income taxes in the six months ended June 30, 1995
reflected tax provision for the Company's gaming solutions subsidiary
(which at the time did not quailify to be part of the Company's
consolidated tax group) off-set by foreign tax adjustments. There is no tax
provision required in 1996 due to the availability of net operating losses and
the reversal of certain timing differences.
The minority interest charge in the six months ended June 30, 1996
reflects the share of income attributable to the then minority shareholders in
the Company's gaming solutions subsidiary. The $165,000 credit for the minority
interest which arose in the three months ended March 31, 1996, eliminated all
liabilities to the minority shareholders. In May 1996, the Company acquired the
remaining 30% of the outstanding shares of GSI.
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As a consequence of the commencement of the Company's bankruptcy
proceedings, the Company has filed objections to a large number of proofs of
claim. Sums determined to be due to claimants, as a result of settlement or
judicial determinations, will be treated under the Plan of Reorganization as
claims and claimants will receive either cash or shares of common stock in
exchange for their claims. The Company does not believe the outcome of these
objections to be material.
Further, the Company instituted several adversary proceedings prior to the
effective date of the Plan of Reorganization. None of those proceedings involve
allegations of material claims against the Company.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Registrant held its Annual Meeting of Stockholders May 21, 1996.
(b) The following persons were elected to serve as directors of the
Registrant: George G. Bayz, Alan A. Gleicher, Richard S. Ressler and
Morton O. Schapiro.
(c) The following matters were voted upon by the stockholders of the
Registrant, and the number of votes cast for, against, and broker
non-votes, including the nominees for directors of the Registrant, are set
forth below:
<TABLE>
<CAPTION>
Subject Votes Votes Non-Votes
For Against
<S> <C> <C> <C>
Amendment to Amended and Restated Certificate 5,219,634 241,174 7,924
of Incorporation increasing number of
authorized shares of $0.01 par value Common
Stock from 10,000,000 to 25,000,000 shares.
Amendments to 1993 Employee Stock Option Plan 5,286,055 169,775 12,902
increasing the number of shares reserved
for issuance thereunder by 182,500 shares
from 817,500 shares to 1,000,000 shares; and
permitting the Board of Directors, the
Compensation Committee of the Board of
Directors or such other Committee as the
Board of Directors may designate, to
administer the 1993 Employee Stock Option
Plan.
</TABLE>
<TABLE>
<CAPTION>
Approval of the Non-Employee Directors' Stock 5,235,796 213,962 18,974
Option Plan
Election of Directors Votes Votes
For Withheld
<S> <C> <C>
George G. Bayz 5,407,969 61,036
Alan A. Gleicher 5,407,654 61,078
Richard S. Ressler 5,407,111 61,621
Morton O. Schapiro 5,407,654 61,078
</TABLE>
10
<PAGE>
Item 5. Other Information
ACQUISITION OF HOTEL INFORMATION SYSTEMS, INC.
On August 9, 1996, the Registrant completed its acquisition of
substantially all of the assets and certain of the liabilities of Hotel
Information Systems, Inc. pursuant to an Asset Purchase Agreement dated as of
June 30, 1996 (as amended July 10, 1996 by Amendment No. 1 to Asset Purchase
Agreement) (as amended, the "Asset Purchase Agreement").
The assets which have been acquired from Hotel Information Systems, Inc.
("HIS") are used in the business of software design, engineering and service
relating to hotel information systems. The assets also include subsidiaries of
HIS in Singapore, Hong Kong, Australia and Mexico.
As consideration for the assets received from HIS, MAI issued
1,307,305 shares of its Common Stock ("Common Stock")
and paid approximately $1,750,00 in cash. Such shares are (i) "Ordinary
Consideration Shares" equal in value to $4.6 million (497,298 shares at the
Per Share Price) based on the Per Share Price, rounded up to the nearest
whole number and (ii) "Put/Call Consideration Shares" equal in value to
$3,492,549 million (810,007 shares at the Per Share Price) based on the Per
Share Price, rounded up to the nearest whole number. The Per Share Price
initially is $9.25 and increases periodically following the closing of the
acquisition based on the yield of US government securities.
The actual number of Consideration Shares to be issued is subject to
change based on certain purchase price adjustments.
The Consideration Shares were delivered to an escrow agent pursuant to an
Escrow Agreement (the "Escrow Agreement"), among MAI, HIS and City National
Bank, which is acting as the escrow agent, to be held in escrow pending (i) in
the case of all Consideration Shares, resolution of purchase price adjustments
following the closing of the acquisition, (ii) in the case of Ordinary
Consideration Shares, resolution of disputes prior to the first anniversary of
the closing of the acquisition, or (iii) in the case of Put/Call Consideration
Shares, sale of such shares pursuant to a registration statement or any put or
call of such shares as described below.
All of the Consideration Shares are entitled to certain demand and
piggyback registration rights contained in the Put/Call and Registration Rights
Agreement (the "Put/Call and Registration Rights Agreement"), between MAI and
HIS. Any of the 810,007 Put/Call Consideration Shares may be called at the Per
Share Price upon exercise of the registration rights applicable to such shares
pursuant to the Put/Call and Registration Rights Agreements. MAI may not
exercise such call right directly but may transfer such right to a third party
(the "Caller"). If such call right is not exercised by a Caller and the Put/Call
Consideration Shares are sold pursuant to a registration statement during the
period ending August 8, 2001, the amount of Put/Call Consideration Shares may
increase or decrease depending on whether the price at which such shares are
sold is below or above the Per Share Price. After August 8, 2001, the Put/Call
Consideration Shares not previously disposed of may be called by MAI or may be
put to MAI at the Per Share Price.
UNAUDITED PRO FORMA COMBINED REVENUE DATA, MAI SYSTEMS CORPORATION,
MANBASE SOFTWARE ACQUISITION AND HOTEL INFORMATION SYSTEMS, INC.
The following unaudited proforma combined revenue data represents the
Proforma Combined Revenues for the year ended December 31, 1995 and gives effect
to the re-acquisition of the distribution rights to MANBASE, which occurred May
21, 1996, and the acquisition of Hotel Information Systems, Inc. ("HIS"), which
occurred August 9, 1996, as if they were consummated on January 1, 1995.
The Registrant will file unaudited Proforma Combined Financial
Data for the HIS acquisition on Form 8K/A.
11
<PAGE>
This unaudited pro forma data is provided for comparative purposes
only. It does not purport to be indicative of the revenues that actually
would have occurred if the acquisitions had been consummated on the date
indicated or which may occur in the future.
<TABLE>
<CAPTION>
Historical Pro forma
Adjustments Combined
MAI MANBASE HIS (Decrease) Total
<S> <C> <C> <C> <C> <C>
Revenue:
Software, networks and
professional services
Software $4,250 $ 574 $5,591 $ (544) $ 9,871
Network and computer
equipment 16,602 12 7,735 (146) 24,203
Professional services 9,528 1,246 12,529 (2,147) 21,156
Total 30,380 1,832 25,855 (2,837) 55,230
Legacy revenue 35,914 - - - 35,914
Total revenue $66,294 $ 1,832 $25,855 $ (2,837) $ 91,144
</TABLE>
Note: the adjustments reflect revenues included in the HIS revenues for a
subsidiary that was disposed of during 1995.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
99.1 Directors' Stock Option Certificate.
(b) Reports on Form 8-K.
On July 10, 1996, the registrant filed a report on Form 8-K , without
financial statements, reporting that the Company had entered into an agreement
to purchase substantially all of the assets of Hotel Information Systems, Inc.
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.
MAI SYSTEMS CORPORATION
(Registrant)
Date: August 14, 1996 /s/ William Brian Kretzmer
--------------------------
William Brian Kretzmer
Vice-President, Chief Financial
Officer and Treasurer
13
DIRECTORS
STOCK OPTION CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH
SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATING THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
Option to Purchase ______________ Shares of Common Stock
INCORPORATED UNDER THE LAWS OF
THE STATE OF DELAWARE
MAI SYSTEMS CORPORATION
Void after _____________________________, 19__
THIS CERTIFICATE evidences the right of _______________________________
(the "Holder"), for value received, to purchase ____________________ shares of
Common Stock, $.01 par value (the "Shares"), of MAI Systems Corporation, a
Delaware corporation (the "Company"), at a price of $_______________ per Share
(the "Exercise Price") and subject in all respects to the terms, definitions and
provisions of the MAI Systems Non-Employee Directors' Option Plan (the "Plan")
which is incorporated herein. Unless the context herein otherwise requires, the
terms defined in the Plan shall have the same meaning when used herein.
1. Term of Option. The Option may be exercised only during the period
commencing on ___________________________, 19__ through the close of business on
______________________, 19__, but not later than one year after the Holder
ceases to be a director of the Company (the "Option Term"), and may be exercised
only in accordance with the Plan and the terms and conditions hereinafter set
forth.
2. Exercise of Options. The Option shall be exercisable as follows:
(a) Right to Exercise. From time to time during the Option Term, the
Holder shall have the right to exercise the Option to purchase the maximum
number of the Shares specified in the following table:
Aggregate Maximum No. of Shares
Portion of Option Term for Which Options are Exercisable
- --------------------------- --------------------------------
_________ through _________ _____ less any Shares purchased
upon previous exercise of the Option
_________ through _________ _____ less any Shares purchased
upon previous exercise of the Option
1
<PAGE>
_________ through _________ _____ less any Shares purchased
upon previous exercise of the Option
_________ through _________ _____ less any Shares purchased
upon previous exercise of the Option
_________ through _________ _____ less any Shares purchased
upon previous exercise of the Option
Notwithstanding the foregoing, if the Holder shall cease to be a director of the
Company for any reason or no reason ("Termination"), whether such Termination is
permanent or temporary, then after the effective date of such Termination and
through the end of the Option Term, or one year after Holder has ceased to be a
director of the Company, whichever occurs first, the Holder may exercise the
Option to purchase only such number of Shares that the Holder would have been
entitled to purchase on the effective date of such Termination in accordance
with the foregoing table. To the extent that the Holder shall not have been
entitled to exercise any portion of the Option on the effective date of such
Termination, such portion shall be deemed to have expired unexercised on such
effective date.
(b) Method of Exercise; Payment; Issuance of New Option; Transfer
and Exchange. The Option may be exercised by the Holder, in whole or in part, by
the surrender of this Certificate, properly endorsed, at the principal office of
the Company, by the payment to the Company by cash or check of the then
applicable Purchase Price. In the event of any exercise of the Option,
certificates for the Shares so purchased shall be delivered to the Holder within
a reasonable time after the Option shall have been so exercised and, unless the
Option has expired, a new Certificate representing the right to purchase the
number of Shares, if any, with respect to which the Option shall not then have
been exercised shall also be issued to the Holder within such time. All such new
certificates shall be dated the date hereof and shall be identical with this
Certificate except as to the number of Shares issuable pursuant thereto.
(c) Restrictions on Exercise. The Option may be exercised only if
the issuance and delivery of the Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, the Securities Exchange Act of 1934, applicable state securities laws or
the rules and regulations of any stock exchange upon which the Shares may then
be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance. As a condition to the exercise of the
Option, the Company may require the Holder to make such representations and
warranties to the Company as may be required by applicable law or regulation.
3. STOCK FULLY PAID, RESERVATION OF SHARES. The Company covenants and
agrees that all Shares will, upon issuance and payment in accordance herewith,
be fully paid, validly issued and nonassessable. The Company further covenants
and agrees that during the Option Term, subject to obtaining stockholder
approval of the Plan, the Company will at all times have authorized, and
reserved for the purpose of the issue upon exercise of the Option, at least the
maximum number of Shares as are issuable upon the exercise of the Option.
4. NO CHANGE IN CERTIFICATE. The form of this Certificate need not be
changed because of any adjustment in the Exercise Price or in the number of
Shares purchasable on exercise of the Option. The Exercise Price or the number
of Shares shall be considered to have been so changed as of the close of
business on the date of adjustment.
2
<PAGE>
5. FRACTIONAL SHARES. No fractional Shares will be issued in connection
with any exercise of the Option but, in lieu of such fractional Shares, the
Company shall make a cash payment therefor upon the basis of the fair market
value of the Shares.
6. NONTRANSFERABILITY OF OPTIONS. The Option may not be sold, pledged,
assigned, hypothecated, gifted, transferred or disposed of in any manner, in
whole or in part, either voluntarily or involuntarily by operation of law, other
than by will or the laws of descent or distribution, and may be exercised during
the lifetime of the Holder only by the Holder.
7. NO RIGHTS AS STOCKHOLDER. The Holder, as such, shall not be entitled to
vote or receive dividends or be considered a stockholder of the Company for any
purpose, nor shall anything in this Certificate be construed to confer on such
holder, as such, give or withhold consent to any corporate action, to receive
notice of meetings of stockholders, to receive dividends or subscription rights
or otherwise.
8. WITHHOLDING TAX LIABILITY. Upon exercise of the Option, the Company and
the Holder may incur liability for applicable state and federal income tax
withholding tax on the difference, if any, between the aggregate Purchase Price
and the then fair market value of the Shares acquired upon such exercise. The
Holder understands and agrees that the Company may be required to withhold part
or all of the Holder's director fees or other compensation paid by the Company
to pay the withholding tax and that if such fees or compensation is insufficient
the Company may require the Holder, as a condition to any exercise of the
Option, to pay in cash the amount of such withholding liability.
9. ACKNOWLEDGMENT OF RECEIPT OF PLAN. The Holder hereby acknowledges
receipt of the Plan.
10. ADJUSTMENTS FOR STOCK SPLITS, ETC.. Subject to any required action by
the stockholders of the Company, the number of Shares and the Exercise Price
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration". Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number of Shares or the Exercise Price. In the event of the proposed dissolution
3
<PAGE>
or liquidation of the Company, or in the event of a proposed sale of all or
substantially all of the stock or assets of the Company, or the merger,
consolidation or reorganization of the Company with or into another corporation,
the Option will terminate upon the effectiveness of such action, unless
otherwise provided by the Board. The Board may, in the exercise of its sole
discretion in such instances, declare that any Option shall terminate as of a
date fixed by the Board.
Dated: MAI SYSTEMS CORPORATION
By: _______________________
Stanley P. Witkow
V.P. Corporate and Legal
Affairs and Secretary
Dated: By: _________________________
Optionee
4
<PAGE>
ACKNOWLEDGMENT OF OPTIONEE
The Optionee acknowledges receipt of a copy of the 1995 Directors Stock Option
Plan, the Directors Stock Option Plan General Information Statement, and the
supporting documents (collectively referred to as the "Prospectus") relating
thereto, dated as of July __, 1996, copies of which are attached hereto,
represents that he has read and is familiar with all of the terms and provisions
thereof, and hereby accepts the Option set forth in this Option Agreement
subject to all of the terms, conditions and provisions thereof.
Dated: , 1996.
-----------------------
Signature of Optionee
------------------------
Address
------------------------
City State Zip
5
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<NAME> MAI SYSTEMS CORPORATION
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAR-31-1996
<PERIOD-END> JUN-30-1996
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0
0
<COMMON> 75
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