U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MAY 31, 1997.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSISTION TO
Commission file number 0-23438
Effective Management Systems, Inc.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1292200
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12000 West Park Place
Milwaukee, WI 53224
(Address of principal executive offices,
including Zip Code)
414-359-9800
(Registrant's telephone number,
including area code)
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 registrant's
classes of common stock as of the latest practicable date.
Class Outstanding as of May 31, 1997
Common Stock, $.01 par value 4,054,783
<PAGE>
EFFECTIVE MANAGEMENT SYSTEMS, INC.
Form 10-Q
May 31, 1997
INDEX
PART 1 - FINANCIAL INFORMATION PAGE
Item 1 Financial Statements
Consolidated Balance Sheets at
May 31, 1997 and November 30, 1996 3
Consolidated Statements of Income - Three
and Six Months Ended May 31, 1997 and
May 31, 1996 5
Consolidated Statements of Cash Flows - Six 6
Months Ended May 31, 1997 and May 31, 1996
Notes to Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
PART II - OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security
Holders 14
Item 6 Exhibits and Reports on Form 8-K 14
SIGNATURES 15
<PAGE>
PART I Financial Information
Item 1 Financial Statements
EFFECTIVE MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands) (unaudited except for November 30, 1996 amounts)
ASSETS 31-May 30-Nov
1997 1996
CURRENT ASSETS
Cash $278 $866
Investments in available-for-sale
securities 1 505
Accounts Receivable:
Trade, less allowance for
doubtful accounts 10,000 11,146
Related Parties 830 693
Inventories 248 391
Refundable Income Taxes 0 159
Deferred Income Taxes 1,247 175
Prepaid Expenses and Other
Current Assets 347 288
------ -------
TOTAL CURRENT ASSETS 12,951 14,223
LONG TERM ASSETS
Computer Software, net 6,595 5,781
Investments in and Advances to
Unconsolidated Joint Ventures 199 199
Equipment and Leasehold
Improvements, net 4,260 3,961
Intangible Assets, net 2,576 2,690
Other Assets 616 592
------ -------
TOTAL LONG TERM ASSETS 14,246 13,223
------ -------
TOTAL ASSETS $27,197 $27,446
====== ======
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
EFFECTIVE MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data) (unaudited except for November 30, 1996
amounts)
LIABILITIES AND STOCKHOLDERS' EQUITY 31-May 30-Nov
1997 1996
CURRENT LIABILITIES
Accounts Payable $1,347 $2,026
Accrued Liabilities 1,600 2,846
Deferred Revenues 4,953 4,605
Customer Deposits 177 109
Current portion of
Long-term Obligations 128 127
------- -------
TOTAL CURRENT LIABILITIES 8,205 9,713
LONG TERM LIABILITIES
Deferred Revenue and Other
Long-term Liabilities 442 453
Long-term Obligations 4,577 2,123
Deferred Income Taxes 560 560
------- -------
TOTAL LONG TERM LIABILITIES 5,579 3,136
Commitments and Contingencies - -
STOCKHOLDERS' EQUITY
Preferred Stock, $.01 par value;
authorized 3,000,000 shares; none
issued or outstanding - -
Common Stock, $.01 par value;
authorized 20,000,000 shares; issued
4,067,408 and 4,011,018 shares;
outstanding 4,054,783 and 4,008,393
shares 41 41
Common Stock Warrants 4 4
Additional Paid-in Capital 11,274 11,137
Retained Earnings 2,154 3,420
Cost of Common Stock in Treasury
(12,625 shares) (60) (5)
------- -------
TOTAL STOCKHOLDERS' EQUITY 13,413 14,597
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $27,197 $27,446
====== ======
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
EFFECTIVE MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data) (unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
31-May 31-May 31-May 31-May
1997 1996 1997 1996
NET REVENUES:
Software license fees $5,317 $4,255 $9,528 $7,930
Services 4,020 3,780 8,266 7,397
Hardware 1,045 1,668 2,063 4,019
------- ------- ------- -------
Total net revenues $10,382 $9,703 $19,857 $19,346
COST OF PRODUCTS AND
SERVICES
Software license fees 1,485 803 2,662 1,665
Services 3,496 2,915 7,197 5,651
Hardware 724 1,275 1,606 3,088
------- ------- ------- -------
Total cost of
products and
services $5,705 $4,993 $11,465 $10,404
Selling and marketing
expenses 3,463 3,417 6,844 6,514
General and
administrative expenses 1,297 961 2,362 1,794
Product development expenses 492 490 1,196 967
------- ------- ------- -------
Total costs and
operating expenses $10,957 $9,861 $21,867 $19,679
------- ------- ------- -------
LOSS FROM OPERATIONS $(575) $(158) $(2,010) $(333)
Other (Income)/Expense
Equity (earnings)/loss of
unconsolidated joint
ventures (4) 0 (2) (3)
Interest (income) (13) (28) (28) (50)
Interest expense 92 23 167 37
------- ------- ------- -------
75 (5) 137 (16)
------- ------- ------- -------
LOSS BEFORE INCOME TAXES $(650) $(153) $(2,147) $(317)
Income Tax Benefit (269) (66) (883) (139)
------- ------- ------- -------
NET LOSS $(381) $(87) $(1,264) $(178)
======= ======= ======= =======
Loss per share ($0.09) ($0.02) ($0.31) ($0.05)
Weighted average common
and equivalent shares
outstanding 4,041 3,950 4,031 3,941
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
EFFECTIVE MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)
SIX MONTHS ENDED
31-May 31-May
1997 1996
OPERATING ACTIVITIES
Net Loss ($1,264) ($178)
Adjustments to reconcile net
income(loss) to net cash
provided(used) by operating
activities:
Depreciation and amortization 570 551
Amortization of capitalized computer
software development costs 1,348 943
Equity in earnings of joint ventures - -
Goodwill Amortization 113 133
Changes in operating assets and
liabilities:
Accounts Receivable 1,112 754
Inventories and other current
assets (661) 97
Accounts payable and other
liabilities (1,792) (1,531)
------ ------
Total adjustments 690 947
Net cash provided by(used in) in
operating activities (574) 769
INVESTING ACTIVITIES
Additions to equipment and leasehold
improvements (870) (634)
Proceeds from sale (purchase) of
securities 504 (237)
Software development costs capitalized (2,162) (1,617)
Other (23) (35)
------ ------
Net cash used in investing activities (2,551) (2,523)
FINANCING ACTIVITIES
Proceeds on long-term debt and other
notes payable 2,455 1,594
Additional paid in capital 82 (34)
------ ------
Net cash provided by financing
activities 2,537 1,560
------ ------
Net decrease in cash ($588) ($194)
Cash-beginning of period 866 335
Cash-end of period 278 141
====== ======
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
EFFECTIVE MANAGEMENT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1997
(Unaudited) (In Thousands)
Note 1 - Basis of Presentation
The accompanying consolidated interim financial statements included
herein have been prepared by Effective Management Systems, Inc. (the
"Company"), without an audit, in accordance with generally accepted
accounting principles for interim financial information and pursuant to
the rules and regulations of the Securities and Exchange Commission.
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 such
rules and regulations, although the Company believes that the disclosures
made are adequate to make the information presented not misleading.
In the opinion of management, the information furnished for the
three-month and six-month periods ended May 31, 1997 and May 31, 1996
includes all adjustments, consisting solely of normal recurring accruals,
necessary for a fair presentation of the financial position and results of
the operations for the interim periods. The results of operation for the
three-month and six-month periods ended May 31, 1997 are not necessarily
indicative of the results of operations to be expected for the entire
fiscal year ending November 30, 1997. It is suggested that the interim
financial statements to read in conjunction with the audited consolidated
financial statements for the year ended November 30, 1996 included in the
Company's Form 10-KSB filed with the Securities and Exchange Commission.
Note 2 - Additional Financial Disclosure
Equipment and leasehold improvements consisted of the following:
5-31-97 11-30-96
Gross $9,044 $8,169
Less: Accumulated Depreciation <4,784> <4,208>
------ ------
Net $4,260 $3,961
Allowance for doubtful accounts consisted of the following:
5-31-97 11-30-96
Balance $380 $346
Provision for doubtful accounts consisted of the following:
5/31/97 11/30/96
Balance $45 $113
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company recorded an increase in total revenues (7.0%) and a net loss
of $381,000 for the second quarter of 1997 compared with a net loss of
$87,000 for the second quarter of 1996. Overall revenues were under
budgeted levels reflecting both a delay in the release of a new version
of the Company's software product and a corresponding decrease in the
anticipated level of new account sales. Software revenues increased by
25.0% over the comparable quarter of 1996 reflecting a growing customer
interest in the Company's products. For the first half of fiscal 1997,
the Company recorded an increase in total revenues (2.6%) and a net loss
of $1,264,000 compared with a net loss of $178,000 for the first half of
fiscal 1996. In addition to the reasons for the revenue shortfall
mentioned above, revenues also reflect a continued delay in the
finalization of a large contract. Although the Company currently expects
such contract to be finalized, to date it has been unsuccessful in
completing the sale. The increased net loss for all periods presented
resulted mainly from the expense of building the infrastructure necessary
to support higher levels of revenues which did not materialize. These
expenses related to strategic investments in product development and field
service infrastructure, which were related to personnel costs which the
Company views as fixed in nature.
In light of the losses incurred in recent quarters, the Company has
reallocated various oversight responsibilities among the members of its
management team. One of the primary goals of this action is to increase
the speed at which new technological developments are incorporated into
the Company's software products. Management is prepared to consider
additional actions if the Company's financial performance does not show
near-term improvement.
Results of Operations
Total Revenues
Net revenues increased to $10,382,000 for the three months ended May 31,
1997, which was an increase of 7.0% from the $9,703,000 for the same
quarter in the previous year. The mix of revenues comparing software,
services, and hardware revenues as a percentage of total revenues improved
to 51.2%, 38.7%, and 10.1%, respectively, in the second quarter of 1997 as
compared with 43.9%, 39.0%, and 17.1% , respectively, in the second
quarter of 1996. The overall increase in revenues for the three months
ended May 31, 1997, was attributable to a $1,062,000 increase in the level
of relatively high margin software revenues, and a $623,000 decrease in
relatively low margin hardware revenues.
Net revenues increased to $19,857,000 for the first half of 1997, which
was a increase of 2.6% from the $19,346,000 for the same period in the
previous year. The increase in revenues was attributable to a
$1,598,000 increase in the level of high margin software revenues, and a
$1,956,000 decrease in low margin hardware revenues. The mix of revenues
comparing software, services, and hardware revenues as a percentage of
total revenues improved to 48.0%, 41.6%, and 10.4%, respectively, in the
first half of 1997 as compared with 41.0%, 38.2%, and 20.8% ,
respectively, in the first half of 1996.
International revenues represented less than 10% of total revenues for
all periods presented.
The Company's operating revenues can vary substantially from quarter to
quarter based on the size and timing of customer orders and market
acceptance of new products. The Company has historically operated with
little backlog because software orders are generally shipped as orders are
received. As a result, product revenue in any quarter is substantially
dependent on orders booked and shipped during that quarter.
Software License Fees
Software license fees are customer charges for the right to use the
Company's software products. Software license fees increased 25.0% to
$5,317,000 in the second quarter of 1997 from $4,255,000 in the second
quarter of 1996. Software license fees increased 20.2% to $9,528,000 in
the first half of 1997 from $7,930,000 in the first half of 1996. The
increase in software license fees was attributable to higher software
sales per system unit of product sold. The Company also continued its
strategic plan to undertake efforts to incorporate new technologies into
its products and to integrate certain products into its product lines from
its acquisition of Intercim Corporation in fiscal 1995. These activities
are intended to be completed at various times in the future, and
management believes that the successful completion of these efforts will
ultimately provide the Company with significant competitive
differentiation and advantage.
Service Revenues
The Company offers a number of optional services to its customers
including such services as a telephone support program, systems
integration, custom software development, implementation consulting, and
formal classroom and on-site training. Service revenues increased 6.4% to
$4,020,000 for the three months ended May 31, 1997 from $3,780,000 for the
same period of the prior year. Service revenues increased 11.8% to
$8,266,000 for the six months ended May 31, 1997 from $7,397,000 for the
same period of the prior year. The increase in service revenues was
mainly the result of new customers, as well as requirements of the
established customer base.
Hardware Revenues
Hardware revenues decreased 37.4% to $1,045,000 in the second quarter of
1997 compared with $1,668,000 for the corresponding period of 1996.
Hardware revenues decreased 48.7% to $2,063,000 in the first half of 1997
compared with $4,019,000 for the corresponding period of 1996. The
decrease was due to increased sales of software on platforms for which
the Company does not supply hardware and a higher percentage of sales to
established customers for which hardware was sold in a prior period.
Hardware revenues are generally impacted by three major influences.
First, and most significant, management has decided to focus its efforts
on sales of higher margin software and services. The Company offers its
software on a "software only basis" (no hardware) for those customers who
already have hardware or who may wish to purchase it from other vendors.
Second, as the volume of business grows, hardware revenues can increase
correspondingly. Finally, hardware revenues are related to the number of
hardware manufacturers represented at any one time by the Company. These
three factors in combination can work to increase or decrease hardware
revenues in any given period. To date, however, they have generally
resulted in a long-term decline in hardware sales as a percentage of total
revenue.
Cost of Software License Fees
The cost of software license fees as a percentage of related revenue was
27.9% for the second quarter of 1997, an increase from 18.9% for the
corresponding period of 1996. The cost of software license fees as a
percentage of related revenue was 27.9% for the first half of 1997, an
increase from 21.0% for the corresponding period of 1996. Cost of
software license fees is composed of both amortization of past investment
in software development and the third party costs associated with the
software revenues. Software amortization is related to past investment in
software development and does not vary consistently with variations in
software revenues. Due to this relationship, software amortization
accounted for an increase of 2.3% and 2.2% in the cost of software license
fees as a percent of software license fee revenues for the second quarter
and first half of 1997, respectively. Software amortization will cause
the cost of software license fees as a percentage of related revenue to
increase in future fiscal periods as the Company continues to increase its
investment in capitalized product development. The cost of software
license fees is also dependent on the level of third party costs
associated with certain software revenues and include such items as
purchased licenses and other components. The remaining increases in the
cost of software license fees as a percentage of related revenue was due
to these third party costs.
Cost of Services
The cost of services as a percentage of related revenue increased to 87.0%
for the three months ended May 31, 1997 as compared with 77.1% for the
same quarter in the previous year. The cost of services as a percentage of
related revenue increased to 87.1% for the six months ended May 31, 1997
as compared with 76.4% for the same period in the previous year. The
increase was mainly due to reduced growth in new account business, the
startup and training costs associated with newly hired personnel,
allocation of resources to perform warranty work, and additional costs
related to the building of a service infrastructure ($86,000 additional
for the second quarter of 1997 and $191,000 additional for the first half
of 1997) for both ongoing business growth and the establishment of new
third party selling relationships. The Company hired a net of 8 new
service personnel between May 31, 1996 and May 31,1997, most which related
to the building of the service infrastructure and additional field service
personnel for the Intercim division products. The service infrastructure
costs include investments to strengthen the support of national and
international third party suppliers of service in conjunction with the
continued expansion of distribution channels.
Cost of Hardware
The cost of hardware as a percentage of related revenue decreased from
76.4% in the second quarter of 1996 to 69.3% in the second quarter of
1997. The cost of hardware as a percentage of related revenue increased
from 76.8% in the first half of 1996 to 77.9% in the first half of 1997.
The cost of hardware as a percentage of related revenue varies with the
size of the system, the manufacturer of the equipment, and the competitive
pressure of the customer sale. Additionally, the cost of hardware as a
percentage of hardware revenues can vary due to the amount of lower margin
sales (cost plus 11%) to the Company's joint ventures, which were $205,000
and $443,000 in the second quarter of 1997 and 1996, respectively, and
which were $395,000 and $812,000 in the first half of 1997 and 1996,
respectively.
Selling and Marketing Expenses
Selling and marketing expenses increased $46,000 or 1.4% from $3,417,000
in the second quarter of 1996 to $3,463,000 in the second quarter of 1997.
Selling and marketing expenses increased $330,000 or 5.1% from $6,514,000
in the first half of 1996 to $6,844,000 in the first half of 1997. The
growth in selling and marketing expenses was at a slower pace than the
growth in software license fees, mainly as a result of higher software
sales per system unit of product sold.
General and Administrative Expenses
General and administrative expenses increased $336,000 or 35.0%, from
$961,000 in the second quarter of 1996 to $1,297,000 in the second quarter
of 1997. General and administrative expenses increased $568,000 or 31.7%,
from $1,794,000 in the first half of 1996 to $2,362,000 in the first half
of 1997. The increase was mainly due to rising expenses for both
telephone ($69,000, $175,000), reclassification of the salary and expenses
of the general manager of the Intercim division from sales to general
expense ($54,000, $116,000), and costs for internal systems support
($71,000, $91,000) in the second quarter and first half of 1997 as
compared to the second quarter and first half of 1996, respectively. As a
percentage of total revenues, general and administrative expenses were
12.5% and 9.9% in the second quarter of 1997 and 1996, respectively, as
compared with 11.9% and 9.3% in the first half of 1997 and 1996,
respectively. The Company also provides office space, accounting and
administrative services, computer processing time, and other miscellaneous
services to EMS Solutions, Inc., an affiliated entity. The amounts
received by the Company for these items were $45,000 in the second quarter
of 1997, as compared with $56,000 in the second quarter of 1996 and were
$91,000 in the first half of 1997, as compared with $138,000 in the first
half of 1996. Amounts received from EMS Solutions, Inc. are recorded as a
reduction of general and administrative expenses.
Product Development Expense
Product development expense increased only marginally from $490,000 in the
second quarter of 1996 to $492,000 in the second quarter of 1997. Product
development expense increased 23.7% from $967,000 in the first half of
1996 to $1,196,000 in the first half of 1997. The Company capitalizes
costs in accordance with Statement of Financial Accounting Standard (SFAS)
No. 86. The Company capitalized $1,224,000 of product development costs
in the second quarter of 1997 compared to $847,000 in the second quarter
of 1996 and $2,162,000 in the first half of 1997 compared to 1,617,000 in
the first half of 1996. As a percent of software license fees, the total
amount invested in software development was 32.3% and 31.4% in the second
quarter of 1997 and 1996, respectively, and was 35.2% and 32.6% in the
first half of 1997 and 1996, respectively. This increase was focused
mainly on the incorporation of various new technologies into the Company's
software products. Effective during the third quarter of 1997, the
Company will reassign two of its key managers in order to improve both the
time-to-market and the quality of its products. Subject to improved
financial performance, management expects to continue the level of
investment in product development at or slightly above the levels recorded
in the first half of 1997.
Other Income\Expense-Net
Other income\expense-net was $5,000 of income for the second quarter of
1996 compared to $75,000 of expense for the second quarter of 1997. Other
income\expense-net was $16,000 of income for the first half of 1996
compared to $137,000 of expense for the first half of 1997. This decrease
was mainly the result of a reduction in interest income and an increase in
interest expense as a result of increased borrowings under the Company's
bank line of credit.
Income Tax
The effective income tax rate provided a benefit of 41.4% for the second
quarter of 1997 compared to a benefit of 43.1% for the second quarter of
1996. The effective income tax rate provided a benefit of 41.1% for the
first half of 1997 compared to a benefit of 43.8% for the first half of
1996. The change in the effective rate was mainly the result of
investments in tax-exempt securities.
Liquidity and Capital Resources
At May 31, 1997, the Company had cash and marketable securities
aggregating $279,000. During the first half of 1997, the Company's
operating activities used $574,000 of cash compared to providing $769,000
of cash for the same period of the prior year. This increase in the use
of cash was mainly attributable to the Company's operating losses.
Investing activities used cash of $2,551,000 in the first half of 1997
compared to $2,523,000 of cash in the first half of 1996. The principal
uses of the cash in the first half of 1997 included $2,162,000 for
capitalized product development and $870,000 for purchases of equipment
and furniture. The principal uses of the cash in the first half of 1996
included $1,617,000 for capitalized product development and $634,000 for
purchases of equipment and furniture. Management expects a decrease in
the current level of capital expenditures in conjunction with the
anticipated lower level of new employee hires.
Financing activities provided $2,537,000 of cash in the first half of 1997
compared with $1,560,000 in the first half of 1996. The cash provided in
1997 reflected borrowings under the Company's bank line of credit. As of
May 31, 1997, the Company had both $628,000 available under its
$5,000,000 line of credit, which is based on the level of the eligible
accounts receivable, and $500,000 available under a temporary extension to
that line of credit.
During fiscal 1997, the Company has entered into several amendments
to its bank line of credit to remain in compliance with certain
financial covenants. In the event that the Company's performance does not
improve in the near term, the Company will need to secure additional
amendments and\or alternative sources of financing. Although management
believes that additional amendments and\or alternative financing can be
obtained, no assurance can be given that either additional financing or
covenant relief will be available to the Company on acceptable terms.
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's annual meeting of shareholders held on April 30,
1997, Thomas M. Dykstra was elected as a director of the Company for a
term expiring at the annual meeting in 2000. The following table sets
forth certain information with respect to Mr. Dykstra's election as a
director at the annual meeting:
Name of Nominee Shares Voted For Shares Withholding
Authority
Thomas M. Dykstra 3,806,878 5,827
The following table sets forth the other directors of the Company
whose terms of office continued after the 1997 annual meeting:
Name of Director Term Expires
Helmut M. Adam 1998
Michael D. Dunham 1998
Scott J. Mermel 1999
Robert E. Weisenberg 1999
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(4.1) Seventh Amendment to Loan and Security Agreement, dated
February 27, 1997, by and between Bank One, Milwaukee,
National Association, and Effective Management Systems,
Inc., and certain affiliates.
(4.2) Eighth Amendment to Loan and Credit Agreement, dated
July 11, 1997, by and between Bank One, Milwaukee,
National Association, and Effective Management Systems,
Inc., and certain affiliates.
(10.1) Distributor Agreement with Pioneer Standard
Electronics, Inc.
(27) Financial Data Schedule [EDGAR version only]
(99) Press release - dated May 29, 1997 - relating to the
strategic alliance between Effective Management Systems,
Inc. and International Business Machines.
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K, dated March 6, 1997,
reporting under Item 5 a delay in the finalization of a significant
contract.
<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.
EFFECTIVE MANAGEMENT SYSTEMS, INC.
July 14, 1997 By: /s/ MICHAEL D. DUNHAM
Michael D. Dunham
President (principal executive officer)
By: /s/ JEFFREY J. FOSSUM
Jeffrey J. Fossum
Chief Financial Officer and Assistant
Treasurer (principal financial and
accounting officer)
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
(4.1) Seventh Amendment to Loan and Security Agreement, dated February
27, 1997, by and between Bank One, Milwaukee, National
Association, and Effective Management Systems, Inc., and certain
affiliates.
(4.2) Eighth Amendment to Loan and Credit Agreement, dated
July 11, 1997, by and between Bank One, Milwaukee, National
Association, and Effective Management Systems, Inc., and certain
affiliates.
(10.1) Distributor Agreement with Pioneer Standard Electronics, Inc.
(27) Financial Data Schedule [EDGAR version only]
(99) Press release - dated May 29, 1997 - relating to the strategic
alliance between Effective Management Systems, Inc. and
International Business Machines.
SEVENTH AMENDMENT TO THE LOAN AND CREDIT AGREEMENT
This Amendment ("Amendment") is made as of the 27th day of
February, 1997, by and between Effective Management Systems, Inc.("EMS"),
Effective Management Systems of Michigan, Inc., EMS-East, Inc., Intercim
Corp. f/k/a EMS Acquisition Corp., EMS Asia Pacific Limited and Effective
Management Systems of Illinois, Inc. (collectively the "Debtors") and
Bank One, Wisconsin (the "Secured Party").
WHEREAS, the Debtors and the Secured Party entered into a Loan and Security
Agreement dated April 23, 1993, which agreement has subsequently been
amended (the "Loan Agreement"); and
WHEREAS, the Secured Party and the Debtors (the "Parties") desire to further
amend the Loan Agreement as set forth below:
NOW, THEREFORE, the parties hereto agree as follows (All capitalized terms
not defined herein shall have the meanings assigned in the Loan Agreement.):
1. The definition of "Note A" is amended and restated such that
it shall mean Debtors' Amended and Restated Note A dated October 31,
1996, as modified by a Promissory Note Modification Agreement of even
date herewith, a copy of which Promissory Note Modification Agreement
is attached as Exhibit A.
2. Debtors hereby acknowledge and agree that, in accordance with the
currently existing performance grid, borrowings under the Credit
Facility "A", effective from 03/01/97, shall be increased by .25%
Reference Rate + .75% and Libor Rate + 3.00%.
3. Secured Party has agreed to extend to Debtors a 500,000.00 90 day
temporary overline shall be evidenced by Note A.
4. The definition for the defined terms "Default", "Minimum" and "Target"
levels of Consolidated adjusted Net Earnings From Operations are
amended and restated as follow:
"Default", "Minimum" and "Target" levels of Consolidated adjusted Net
Earnings From Operations shall be determined in accordance with the
following table, for the periods set forth therein, as follows:
Consolidated Adjusted
Period Net Earnings From Operations
Four fiscal quarters
ending: Default Minimum Target
Qtr ending 2/28/97 (650,000) 300,000 800,000
Qtr ending 5/31/97 (525,000) 300,000 800,000
Qtr ending 8/31/97 (100,000) 300,000 800,000
Thereafter 800,000 1,000,000 1,250,000
As used herein, amounts in parenthesis are negative numbers and
a "Default" hereof constitutes an "event of default" as that term is
used in Section 9 of the Loan Agreement.
5. Section 4./ "COLLATERAL-OBLIGATION RATIO"
The section bearing the title "Collateral-Obligation Ratio" of
the Loan Agreement is reinstated and amended to read as follows:
Without Secured Party's written consent, Debtors shall not at
any time permit the sum of the aggregate amount of those Obligations
reflected by the loan account ledger for Credit facility A plus all
Letter of Credit Liabilities to exceed the lesser of (a) $5,500,000
until September 30, 1997, and $5,000,000 at September 30, 1997, and
at all times thereafter or (b) eighty percent (80%) of the amount
owing on Qualified Accounts minus amounts owing by Debtors to IBM.
In addition to other required payments, Debtors shall pay Secured
Party, in reduction of the Obligations owing to Secured Party at
any time, such sums as may be necessary from time to time to maintain
the foregoing advance limits. Such ratio is stated only for the purpose
of advances under this Agreement and not for valuation of the Collateral.
If, for the four quarters ending 11/30/97 or any quarterly fiscal
calculation date thereafter (in the event the Loan Agreement is
extended), the Debtors' Consolidated Net Earnings from Operations
exceeds the "Minimum" level set forth herein, Section 4 of the Loan
Agreement shall be automatically amended, by deleting this section.
6. Section 7./ "DEBTORS AFFIRMATIVE COVENANTS"
Section 7(a) Business Records; Reports. Paragraph (3) of the
Loan Agreement is hereby reinstated and amended to read as follows:
(3) "Monthly and at such other times as Secured Party may request, a
report in the form required by the Secured Party reflecting the
Collateral-Obligation Ratio (based on daily Qualified Accounts figures)
as of the end of the prior business month end, together with such
information relating to the Collateral as Secured Party may request,
certified by an authorized signatory of each of the Debtors. If for the
four quarters ending 11/30/97 or any quarterly fiscal calculation date
thereafter (in the event the Loan Agreement is extended), the Debtors'
Consolidated Net Earnings from Operations exceeds the "Minimum" level
set forth herein, Section 4 of the Loan Agreement shall be automatically
amended, by deleting this section.
7. Paragraph (2) of Section 7(a) is amended by deleting "quarter" and
inserting "month" in each place it appears in that Paragraph. If, for
the four quarters ended 11/30/97 or any quarterly fiscal calculation
date thereafter (in the event the Loan Agreement is extended), the
Consolidated Adjusted Net Earnings from Operations exceeds the "minimum"
level set forth herein, Paragraph (2) of Section 7(a) shall be
automatically amended by deleting "month" and inserting in it's place
"quarter" in each place it appears in that paragraph.
8. The Debtors represent and warrant that (a) the representations and
warranties contained in the Credit Agreement are true and correct in all
material respects as of the date of this Amendment, (b) no condition, act
or event which could constitute an "event of default" under Section 9 of
the Loan Agreement exists, and (c) no condition, event, act or omission
has occurred, which, with the giving of notice or passage of time, would
constitute an "event of default" under Section 9 of the Loan Agreement.
9. The Debtor agrees to pay a $5,000.00 amendment fee to Secured Party.
10. This Amendment shall become effective only after it is fully executed by
the Debtor and the Secured Party, and the Secured Party shall have
received from the Debtors the following:
(a) Promissory Note Modification Agreement (Note A)
(b) $5,000 Amendment Fee
(c) Borrowing Resolution and Certificate of Incumbency
(d) Other Documents as Secured Party may reasonably request
Except as specifically amended by this Amendment, the Loan Agreement
shall remain in full force and effect in accordance with its terms.
11. This Amendment is a modification only and not a novation. Except for
the above-quoted modification(s), the Loan Agreement, any agreement
or security document, and all the terms and conditions thereof, shall
be and remain in full force and effect with the changes herein deemed
to be incorporated therein. This Amendment is to be considered attached
to the Loan Agreement and made a part thereof. This Amendment shall
not release or affect the liability of any guarantor, surety or endorser
of the Loan Agreement or release any owner of collateral securing the
Loan Agreement. The validity, priority and enforceability of the Loan
Agreement shall not be impaired hereby. To the extent that any provision
of this Amendment conflicts with any term or condition set forth in the
Loan Agreement, or any agreement or security document executed in
conjunction therewith, the provisions of this Amendment shall supersede
and control. Debtors acknowledge that as of the date of this Amendment
they have no offsets with respect to all amounts owed by Debtors to
Secured Party and Debtors waive and releases all claims which they
each may have against Secured Party arising under the Loan Agreement on
or prior to the date of this Amendment.
12. Debtors acknowledge and agree that this Amendment is limited to the
terms outlined above, and shall not be construed as an amendment of
any other terms or provisions of the Loan Agreement; The Debtors hereby
specifically ratify and affirm the terms and provisions of the Loan
Agreement. Debtors release the Secured Party from any and all claims
which may have arisen, known or unknown, in connection with the Loan
Agreement on or prior to the date hereof. This Amendment shall not
establish a course of dealing or be construed as evidence of any
willingness on the Secured Party's part to grant other or future
amendments, should any be requested.
13. All obligations of Debtors under the Loan Agreement and this Amendment
shall be their jointed several obligations.
IN WITNESS WHEREOF, the parties have entered into this Amendment
as of the day and year first above written.
BANK ONE, WISCONSIN EFFECTIVE MANAGEMENT SYSTEMS INC.
By: /s/ William E. Shaw By: /s/ Michael D. Dunham
William E. Shaw
Title: Vice President Title: _________________________
EFFECTIVE MANAGEMENT SYSTEMS OF
MICHIGAN, INC.
By: /s/ Michael D. Dunham
Title: ______________________________
EMS-EAST, INC.
By: /s/ Michael D. Dunham
Title: ______________________________
INTERCIM CORP. f/k/a EMS ACQUISITION
CORP.
By: /s/ Michael D. Dunham
Title: ______________________________
EFFECTIVE MANAGEMENT SYSTEMS OF
ILLINOIS, INC.
By: /s/ Michael D. Dunham
Title: ______________________________
EMS ASIA PACIFIC LIMITED
By: /s/ Michael D. Dunham
Title: ______________________________
<PAGE>
ACKNOWLEDGMENT AND AGREEMENT BY GUARANTOR(S) AND/OR OWNER(S)
OF COLLATERAL SECURING THE PROMISSORY NOTE.
The undersigned (i) consent to the modification of the Credit
Agreement and all other matters in the foregoing Amendment and,
if a guarantor (ii) reaffirm the __________________ Guaranty,
dated ____________, 19 _____ and any other agreements, documents
and instruments securing or otherwise relating thereto
("Guarantor Documents"), (iii) acknowledge that the Guarantor
Documents continue in full force and effect, remain unchanged,
except as specifically modified hereby, and are valid, binding
and enforceable in accordance with their respective terms, (iv)
agree that all references, if any, in the Guarantor Documents to
the Credit Agreement are modified to refer to that document as
modified by the Amendment, and (v) agree to be bound by the
release of Bank set forth in the Amendment.
_________________________________ __________________________
_________________________________ __________________________
_________________________________ __________________________
EIGHTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
This Eighth Amendment to Loan and Security agreement is dated as of
July 11, 1997 by and between Bank One, Wisconsin successor by merger to
Bank One, Milwaukee, NA, its successors and assigns (the "Secured Party")
and Effective Management Systems, Inc. ("EMS"), Effective Management
Systems of Michigan, Inc., EMS-East, Inc., Intercim Corp., Effective
Management Systems of Illinois, Inc., and EMS Asia Pacific Limited
(collectively, the "Debtors").
WHEREAS, the Secured Party and certain of the Debtors entered into a
Loan and Security Agreement dated as of April 23, 1993, which agreement
has subsequently been amended (as amended, the "Loan Agreement"); and
WHEREAS, the Secured Party and the Debtors desire to further amend
the Loan Agreement as hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows (all capitalized
terms used but not defined herein shall have the meaning assigned in the
Loan Agreement):
1. The definition of "Note A" is amended and restated to mean the
Debtors' amended and restated Note A of even date herewith, a copy of
which is attached as Exhibit A.
2. The definitions for the defined terms "Default," "Minimum" and
"Target" levels of Consolidated Adjusted Net Earnings From Operations are
amended and restated as follows:
"Default," "Minimum" and "Target" levels of Consolidated
Adjusted Net Earnings From Operations shall be determined in
accordance with the following table, for the periods set forth
therein, as follows:
Period Consolidated Adjusted
Net Earnings From Operations
Four Fiscal quarters Default Minimum Target
ending:
May 31, 1997 ($950,000) $ 300,000 $ 800,000
August 31, 1997 ($425,000) $ 300,000 $ 800,000
November 30, 1997 ($250,000) $ 300,000 $1,000,000
February 28, 1998 $650,000 $1,000,000 $1,250,000
each quarter end thereafter $800,000 $1,000,000 $1,250,000
As used herein, amounts within parentheses are negative numbers and a
"Default" hereof constitutes an "event of default" as that term is used in
Section 9 of the Loan Agreement.
3. Section 2(a) of the Loan Agreement is amended by deleting
"$5,000,000" appearing therein and inserting "$5,500,000" in its place.
4. Section 4(a) shall be amended by deleting "until September 30,
1997, and $5,000,000 at September 30, 1997, and at all times thereafter"
to read "(a) $5,500,000 or" and the balance of the Section shall remain
unchanged.
5. Section 7(a)(3) of the Loan Agreement shall be amended by adding
the following to the end of the paragraph: "Secured Party may request and
Debtors agree to provide thereafter such reports weekly reflecting the
Collateral-Obligation Ratio as of the prior business week end, certified
by an authorized signatory of each of the Debtors."
6. The Debtors, jointly and severally, represent and warrant that
(a) the representations and warranties contained in the Credit Agreement
are true and correct in all material respects as of the date of this
Amendment, (b) no condition, act or event which could constitute and
"event of default" under Section 9 of the Loan Agreement exists, and (c)
no condition, event, act or omission has occurred, which, with the giving
of notice or passage of time, would constitute an "event of default" under
Section 9 of the Loan Agreement.
7. The Debtors, jointly and severally, agree to pay (a) a $5,000.00
amendment fee to Secured Party upon execution and delivery of this
Amendment, and (b) all costs of field examinations of the Collateral by
the Secured Party up to $2,500.00 for each exam. In addition, the Debtors
agree, jointly and severally, to pay all fees and out-of-pocket
disbursements incurred by the Bank in connection with this Amendment,
including legal fees incurred by the Bank in the preparation,
consummation, administration and enforcement of this Amendment.
8. Section 2 of this Amendment shall become effective as of May 31,
1997 notwithstanding the date of execution, and every other provision of
this Amendment shall be effective as of the date hereof, but only after it
is fully executed by the Debtors and the Secured Party, and the Secured
Party shall have received from the Debtors the following:
(a) Amended and Restated Note A, duly executed by an authorized
officer of each Debtor.
(b) $5,000.00 Amendment Fee.
(c) Borrowing Resolution and Certificate of Incumbency, for
each Debtor certified by an authorized officer of such Debtor.
(d) Other documents reasonably requested by Secured Party.
Except as specifically amended by this Amendment, the Loan Agreement shall
remain in full force and effect in accordance with its terms.
9. This Amendment is a modification only and not a novation.
Except for the above-quoted modification(s), the Loan Agreement, any
agreement or security document, and all the terms and conditions thereof,
shall be and remain in full force and effect with the changes herein
deemed to be incorporated therein. This Amendment is to be considered
attached to the Loan Agreement and made a part thereof. This Amendment
shall not release or affect the liability of any guarantor, surety or
endorser of the Loan Agreement or release any owner of collateral securing
the Loan Agreement. The validity, priority and enforceability of the Loan
Agreement shall not be impaired hereby. To the extent that any provision
of this Amendment conflicts with any term or condition set forth in the
Loan Agreement, or any agreement or security document executed in
conjunction therewith, the provisions of this Amendment shall supersede
and control. Each Debtor acknowledges that as of the date of this
Amendment they have no offsets with respect to all amounts owed by Debtors
to Secured Party and each Debtor waives and releases all claims which they
may have against Secured Party arising under the Loan Agreement on or
prior to the date of this Amendment.
10. The Debtors acknowledge and agree that this Amendment is limited
to the terms outlined above, and shall not be construed as an amendment of
any other terms or provisions of the Loan Agreement. The Debtors hereby
specifically ratify and affirm the terms and provisions of the Loan
Agreement. Each Debtor releases the Secured Party from any and all claims
which may have arisen, known or unknown, in connection with the Loan
Agreement on or prior to the date hereof. This Amendment shall not
establish a course of dealing or be construed as evidence of any
willingness on the Secured Party's part to grant other or future
amendments, should any be requested.
11. All obligations of the Debtors under the Loan Agreement and this
Amendment shall be their joint and several obligations.
IN WITNESS WHEREOF, the parties have entered into this Amendment as
of the day and year first above written.
BANK ONE, WISCONSIN
By: /s/ William E. Shaw
William E. Shaw, Vice President
EFFECTIVE MANAGEMENT SYSTEMS, INC.
By: /s/ Michael D. Dunham
Title:
[ ALL OTHER BORROWERS' SIGNATURES ON FOLLOWING PAGE ]
EFFECTIVE MANAGEMENT SYSTEMS OF MICHIGAN, INC.
By: /s/ Michael D. Dunham
Title:
EMS-EAST, INC.
By: /s/ Michael D. Dunham
Title:
INTERCIM CORP. f/k/a EMS ACQUISITION CORP.
By: /s/ Michael D. Dunham
Title:
EFFECTIVE MANAGEMENT SYSTEMS OF ILLINOIS, INC.
By: /s/ Michael D. Dunham
Title:
EMS ASIA PACIFIC LIMITED
By: /s/ Michael D. Dunham
Title:
<PAGE>
EXHIBIT A
AMENDED AND RESTATED NOTE A
Dated: July 11, 1997 Executed at
Stated Principal: $5,500,000 Milwaukee, Wisconsin
FOR VALUE RECEIVED, on or before February 28, 1998, Effective
Management Systems, Inc., a Wisconsin corporation, Effective Management
Systems of Michigan, Inc, a Michigan corporation, EMS-East, Inc., a
Massachusetts corporation, Intercim Corp., a Minnesota corporation,
Effective Management Systems of Illinois, Inc., an Illinois corporation
and EMS Asia Pacific Limited, a corporation
(collectively, "Borrowers"), hereby promise to pay, jointly and severally,
to the order of Bank One, Wisconsin, its successors and assigns (the
"Secured Party") at its Milwaukee office at 111 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202, the principal sum of Five Million Five Hundred
Thousand Dollars ($5,500,000) or the aggregate unpaid principal amount of
all advances made by the Secured Party hereunder pursuant to the Loan
Agreement hereinafter referred to and to pay interest from the date hereof
on the unpaid balances hereof at the rate set forth in Section 2 of the
Loan Agreement and to pay interest at a rate equal to 2.5% per annum above
the Reference Rate (as defined in the Loan Agreement) after default or
maturity. Any change in interest hereon shall be effective on the date of
each such change in the Reference Rate. In the absence of a default,
interest (computed on the basis of actual days elapsed and a year of 360
days) for each calendar month shall be due and payable as of the first day
of the next succeeding month, commencing on the first such date after the
date hereof, and at Secured Party's sole discretion may be debited to
Borrowers' loan account ledger for Credit Facility A (as defined in the
Loan Agreement) or debited to any Borrowers' commercial demand account
maintained with Secured Party, and all principal and accrued but unpaid
interest shall be due and payable at maturity.
All payments received hereunder shall be applied first to interest
accrued and unpaid to date of receipt and then to repay principal.
No deferral of time of payment shall be valid unless the holder
consents in writing and if such deferral is granted, the deferred balance
including interest thereof at 2.5% in excess of the Reference Rate shall
be an additional obligation under this Note. The undersigned and each
endorser hereby waive presentment, demand, protest, notice of protest and
notice of dishonor and give consent to the holder to extend time and to
compound, release or delay enforcement of rights against the undersigned
or the security.
The Borrowers jointly and severally agree to pay all costs of
collection, including reasonable attorney's fees, before and after
judgment.
This Note shall be governed by the laws of the State of Wisconsin.
This Note is the Note A referred to in the Loan and Security
Agreement dated as of November 9, 1992, as amended by the First Amendment
to Loan and Security Agreement dated as of April 23, 1993, by the Second
Amendment to Loan and Security Agreement dated as of February 8, 1994, by
Third Amendment to Loan and Security Agreement dated as of May 11, 1995,
by Fourth Amendment to Loan and Security Agreement dated as of January 26,
1996, by Fifth Amendment to Loan and Security Agreement dated as of May
31, 1996, by Sixth Amendment to Loan and Security Agreement dated as of
October 31, 1996, by Seventh Amendment to the Loan and Credit Agreement
dated as of February 27, 1997, and by the Eighth Amendment to Loan and
Security Agreement of even date herewith, between the undersigned, or some
of the undersigned, and the Secured Party (as the same may be amended,
modified, supplemented or restated from time to time, the "Loan
Agreement") and evidences indebtedness incurred under, and is entitled to
the benefits of, the Loan Agreement, together with all future amendments,
modifications, waivers, supplements and replacements thereof, to which
Loan Agreement reference is made for a statement of the terms and
provisions under which the due date of this Note may be accelerated or
this Note may be prepaid. This Note is secured as provided in the Loan
Agreement and reference is made thereto for a statement of the terms and
provisions thereof.
This Note is, in part, in substitution and replacement of the Amended
and Restated Note A executed by the undersigned, or some of the
undersigned, and delivered to Secured Party dated October 31, 1996 in the
original principal amount of $5,000,000 as modified by the Promissory Note
Modification Agreement dated as of February 27, 1997 (the "Prior Note").
Borrower acknowledges and agrees that the remaining indebtedness evidenced
by the Prior Note has not been repaid or extinguished and that the
execution and delivery hereof does not constitute a novation of the Prior
Note.
EFFECTIVE MANAGEMENT SYSTEMS, INC.
By:
Title:
EFFECTIVE MANAGEMENT SYSTEMS OF MICHIGAN, INC.
By:
Title:
EMS-EAST, INC.
By:
Title:
INTERCIM CORP. f/k/a EMS ACQUISITION CORP.
By:
Title:
EFFECTIVE MANAGEMENT SYSTEMS OF ILLINOIS, INC.
By:
Title:
EMS ASIA PACIFIC LIMITED
By:
Title:
Contract Start Date 05/01/97 Duration 24 months
Unless we specify otherwise in writing, the Agreement will be renewed
automatically for subsequent two year periods. Each of us is responsible
to provide the other three months' written notice if the Agreement will
not be renewed.
Products and Services you are approved to market:
Products(1) Value Added Products Value Added
Enhancement Enhancement
Required (yes/no) Required (yes/no)
RS/6000 yes
(1) When we approve you to market these Products, you are also approved
to market their associated Product Services.
If you are approved to market the following Services, you may do so
without the requirement to have marketed a Machine or Program to the End
User.
Minimal Annual Attainment:
When the following Section is completed, you agree to meet the following:
Product Minimum Annual Measurement
Attainment Period Dates
Volume/Revenue
RS/6000 $50,000 05/01/97 - 4/30/98
You acquire Products and Services you market from the IBM Distributors
specified (personal computer Products may be acquired from any IBM
approved Distributor).
Distributor. Name and address (if required) of Distributor.
Pioneer Standard Electronics, Inc.
4800 East 131st Street
Cleveland, OH 44105
Value Added Enhancement
Value added enhancement description:
See Attached Sheet For Value-Add.
This Agreement is the complete agreement regarding this relationship, and
replaces any prior oral or written communications between us. Once this
Agreement is signed, 1) any reproduction of this Agreement made by
reliable means (for example, photocopy or facsimile) is considered an
original, to the extent permissible under applicable law, and 2) all
Products and Services you perform under this Agreement are subject to it.
If you have not already signed an Agreement for Exchange of Confidential
Information (AECI), your signature on this Agreement includes your
acceptance of the AECI.
Agreed to: Agreed to:
Effective Management Systems, Inc. IBM Corporation
By: /s/Michael R. Brennolt By: /s/Terry Webb
(Authorized Signature) (Authorized Signature)
Name (type or Name (type or print): Terry Webb
print): Michael R. Brennolt
Date: April 30, 1997 Date: April 30, 1997
IBM Business Partner Address: IBM Address:
12000 W. Park Place 4111 NorthsideParkway
Milwaukee, WI 53224 Atlanta, GA 30327
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF EFFECTIVE MANAGEMENT SYSTEMS, INC. AS OF AND
FOR THE SIX MONTHS ENDED MAY 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> MAY-31-1997
<CASH> 278
<SECURITIES> 1
<RECEIVABLES> 11,210
<ALLOWANCES> 380
<INVENTORY> 248
<CURRENT-ASSETS> 12,951
<PP&E> 9,044
<DEPRECIATION> 4,784
<TOTAL-ASSETS> 27,197
<CURRENT-LIABILITIES> 8,205
<BONDS> 0
0
0
<COMMON> 41
<OTHER-SE> 13,372
<TOTAL-LIABILITY-AND-EQUITY> 27,197
<SALES> 2,063
<TOTAL-REVENUES> 19,957
<CGS> 1,606
<TOTAL-COSTS> 21,867
<OTHER-EXPENSES> 137
<LOSS-PROVISION> 45
<INTEREST-EXPENSE> 139
<INCOME-PRETAX> (2,147)
<INCOME-TAX> (883)
<INCOME-CONTINUING> (1,264)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,264)
<EPS-PRIMARY> (.31)
<EPS-DILUTED> 0<F1>
<FN>
<F1>Not required to be calculated in accordance with generally accepted accounting
principles.
</FN>
</TABLE>
IBM/EMS Alliance Shift Announced
May 29, 1997 8:23 PM EDT
MILWAUKEE, May 29 /PRNewswire/ -- Effective Management Systems, Inc.
(Nasdaq: EMSI, EMSIW), the first provider of pre-integrated manufacturing
software, said that the General Business Industrial Sector of IBM (NYSE:
IBM) has informed EMS as well as other participating IBM partners that it
is transitioning away from the direct selling of the partners' Enterprise
Resource Planning (ERP) software toward a cooperative marketing alliance.
EMS was informed that the shift in strategy does not suggest a reduced
commitment by IBM. This change is intended to allow IBM and EMS to
continue to work together in an effective manner.
"Our very substantial growth in revenue over the last couple of years has
been achieved independently from this program with IBM", says Michael
Dunham, president and chief executive officer of EMS.
"We have made an investment in EMS infrastructure associated with his
program over the past two years. While we are disappointed that a part of
our initial investment will not be leveraged to the extent that we had
hoped, we are pleased that EMS and IBM will continue to strengthen our
overall relationship".
"Over the past two years, we have developed excellent relationships with
IBM personnel around the country," adds Tom Allen, vice president of sales
and marketing for EMS. "We are please that IBM will continue to
complement our EMS field-sales efforts going forward".
EMS's pre-integrated TCM and FACTORYnet I/S software supports management
of manufacturing operations in discrete-manufacturing plants in the U.S.,
Asia and Europe. SOURCE Effective Management Systems, Inc.
PR Newswire All rights reserved.
Additional sources of information
Tell Me More - From Infoseek
Company Profile - From E*TRADE: EMSI, IBM
Stock Charts - From Quote.Com: EMSI, IBM
SEC Filings - From EDGAR Online: EMSI, IBM
Company Capsule - From Hoover's Online: EMSI, IBM
