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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2001,
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-19092
ROSS SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 94-2170198
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(State or other jurisdiction of (IRS Employer
incorporation or organization Identification Number
Two Concourse Parkway,
Suite 800, Atlanta, Georgia 30328
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(Address of principal executive offices) (Zip code)
(770) 351-9600
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(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 issuer's classes
of common stock, as of the latest practicable date:
Outstanding
Class March 31, 2001
----- --------------
Common stock, $0.001 par value 25,647,734
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ROSS SYSTEMS, INC.
QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED MARCH 31, 2001
TABLE OF CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements............................................................................1
Condensed Consolidated Balance Sheets - March 31, 2001 and June 30, 2000........................1
Condensed Consolidated Statements of Operations - Three months and nine months
ended March 31, 2001 and 2000...........................................................2
Condensed Consolidated Statements of Cash Flows - Nine months ended March 31, 2001
and 2000................................................................................3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..........11
Item 3. Quantitative and Qualitative Disclosures About Market Risk.....................................18
PART II. OTHER INFORMATION
Item 2. Changes in Securities..........................................................................18
Item 6. Exhibits and Reports on Form 8-K...............................................................19
SIGNATURE .......................................................................................................21
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ROSS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share related data)
March 31, June 30,
2001 2000
ASSETS (unaudited) (audited)
-------------- ---------------
Current assets:
Cash and cash equivalents $ 4,172 $ 2,010
Accounts receivable, less allowance
for doubtful accounts 12,106 21,927
Prepaids and other current assets 2,777 1,501
-------------- ---------------
Total current assets 19,055 25,438
Property and equipment, net 1,744 3,009
Computer software costs, net 27,821 32,637
Other assets 2,581 3,211
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Total assets $ 51,201 $ 64,295
============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of debt $ 5,322 $ 10,148
Accounts payable 7,017 6,949
Accrued expenses 4,259 5,459
Income taxes payable 356 248
Deferred revenues 11,829 17,974
-------------- ---------------
Total current liabilities 28,534 40,778
-------------- ---------------
Long-term debt, less current installments 1,163 2,627
-------------- ---------------
Shareholders' equity:
Common stock, $.001 par value; 35,000,000 shares authorized, 25,647,734 26 24
and 23,804,191 shares issued and outstanding at March 31, 2001 and June
30, 2000, respectively. Preferred stock, no par value; 5,000,000 shares
authorized, 0 outstanding.
Additional paid-in capital 86,918 85,780
Accumulated deficit (64,275) (63,034)
Accumulated comprehensive deficit (1,414) (1,880)
-------------- ---------------
Total shareholders' equity 21,255 20,890
-------------- ---------------
Total liabilities and shareholders' equity $ 51,201 $ 64,295
============== ===============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
1
ROSS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three months ended Nine months ended
March 31, March 31,
(unaudited) (unaudited)
2001 2000 2001 2000
---------- ---------- ----------- -----------
Revenues:
Software product licenses $ 2,407 $ 4,146 $ 6,764 $ 14,929
Consulting and other services 3,206 7,402 12,336 27,436
Maintenance 5,881 6,929 19,144 21,217
---------- ---------- ----------- -----------
Total revenues 11,494 18,477 38,244 63,582
---------- ---------- ----------- -----------
Operating expenses:
Costs of software product licenses 352 759 1,160 2,692
Costs of consulting, maintenance and other services 3,333 9,760 13,446 31,667
Sales and marketing 3,038 4,858 11,544 15,498
Product development 2,615 2,524 8,736 7,289
General and administrative 1,117 1,914 3,869 5,780
Provision for uncollectible accounts 245 770 1,080 2,006
Amortization of other assets 158 237 518 757
Non-recurring costs - 1,145 790 1,145
---------- ---------- ----------- -----------
Total operating expenses 10,858 21,967 41,143 66,834
---------- ---------- ----------- -----------
Operating earnings (loss) 636 (3,490) (2,899) (3,252)
Other expenses, net (219) (359) (833) (1,034)
---------- ---------- ----------- -----------
Earnings before taxes 417 (3,849) (3,732) (4,286)
Extraordinary item, net of tax effect 2,372 2,372
Income tax expense (benefit) 2 4 (119) 295
---------- ---------- ----------- -----------
Net earnings (loss) $ 2,787 $ (3,853) $ (1,241) $ (4,581)
========== ========== =========== ===========
Net earnings (loss) per common share - basic $ 0.11 $ (0.16) $ (0.05) $ (0.20)
========== ========== =========== ===========
Net earnings (loss) per common share - diluted $ 0.11 $ (0.16) $ (0.05) $ (0.20)
========== ========== =========== ===========
Shares used in per share computation - basic 25,648 23,416 25,648 23,250
========== ========== =========== ===========
Shares used in per share computation - diluted 25,648 23,416 25,648 23,250
========== ========== =========== ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
ROSS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)
Nine months ended
March 31,
----------------------------------
2001 2000
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Cash flows from operating activities:
Net earnings (loss) $ (3,614) $ (4,581)
Adjustments to reconcile net earnings (loss) to net cash provided by
operating activities:
Extraordinary gain on sale of product line 2,372 -
Depreciation and amortization of property and equipment 1,282 1,954
Amortization of computer software costs 5,810 4,977
Amortization of other assets 517 757
Provision for uncollectable accounts 1,080 2,006
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable 8,930 8,275
Prepaids and other current assets (286) 1,692
Income taxes payable / recoverable 116 (43)
Accounts payable 140 (2,768)
Accrued expenses (317) (1,271)
Deferred revenues (8,160) (2,994)
------------- --------------
Net cash provided by operating activities 7,870 8,004
------------- --------------
Cash flows from investing activities:
Purchases of property and equipment (129) (306)
Computer software costs capitalized (5,222) (9,355)
Net assets and liabilities transferred with product line sale 2,362 -
Other 513 (25)
------------- --------------
Net cash used for investing activities (2,476) (9,686)
------------- --------------
Cash flows from financing activities:
Net line of credit activity (2,608) (1,594)
Capital lease payments (622) 567
Proceeds from issuance of common stock 29 52
------------- --------------
Net cash used for financing activities (3,201) (975)
------------- --------------
Effect of exchange rate changes on cash (31) (47)
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Net decrease in cash and cash equivalents 2,162 (2,704)
Cash and cash equivalents at beginning of period 2,010 6,294
------------- --------------
Cash and cash equivalents at end of period $ 4,172 $ 3,590
============= ==============
Non-cash investing and financing activities:
Conversion of convertible debentures $ 584 $ 848
Supplementary disclosure:
Income taxes paid - -
============= ==============
Interest paid 864 1,070
============= ==============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
ROSS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Ross Systems, Inc. (the "Company") reflect all adjustments of a normal recurring
nature which are, in the opinion of management, necessary to present a fair
statement of its financial position as of March 31, 2001, and the results of its
operations and cash flows for the interim periods presented. The Company's
results of operations for the three and nine months ended March 31, 2001 are not
necessarily indicative of the results to be expected for the full year.
These unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions for Form 10-Q and, therefore,
certain information and footnote disclosures normally contained in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These financial statements should be read in
conjunction with the Consolidated Financial Statements and notes thereto
included in the Company's Annual Report to Stockholders on Form 10-K for the
fiscal year ended June 30, 2000 filed with the Securities and Exchange
Commission on October 13, 2000.
Certain fiscal 2000 amounts have been reclassified to conform to the fiscal 2001
financial statement presentation.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern, which contemplates the
realization of assets and the liquidation of liabilities in the normal course of
business. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
2) PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include accounts of the Company and
its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated.
3) CAPITALIZED COMPUTER SOFTWARE COSTS AND OTHER ASSETS
It is the Company's policy to follow paragraph 8 of SFAS 86, "Accounting
for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed" in
the computation of annual amortization expense of software costs. The
straight-line method has historically yielded the greatest annual expense when
compared to the ratio of current gross revenues to current and anticipated
future gross revenues. Accordingly, the straight-line method is generally used
to amortize previously capitalized software costs.
It is the Company's policy to assess all its long-lived assets and
intangible assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of the assets may not be recoverable.
Impairment losses, if applicable, would be calculated as the difference between
the carrying value of the asset and the sum of anticipated future undiscounted
cash flows. The calculation would be performed on an individual item basis.
4) ACCOUNTS RECEIVABLE
As of the dates shown, accounts receivable consisted of the following (in
thousands):
4
ROSS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, June 30,
2001 2000
---------- ----------
Trade accounts receivable $ 14,446 $ 25,498
Less allowance for doubtful accounts and returns (2,340) (3,571)
---------- ----------
$ 12,106 $ 21,927
========== ==========
5) PROPERTY AND EQUIPMENT
As of the dates shown, property and equipment consisted of the following
(in thousands):
March 31, June 30,
2001 2000
---------- ----------
Computer equipment $ 9,093 $ 13,113
Furniture and fixtures 2,009 3,007
Leasehold improvements 1,404 1,705
---------- ----------
12,506 17,825
Less accumulated depreciation and amortization (10,762) (14,816)
---------- ----------
$ 1,744 $ 3,009
========== ==========
7) CONVERTIBLE DEBT
On February 6, 1998, the Company closed a private placement of up to
$10,000,000 of convertible subordinated debentures to certain institutional
investors (the "Investors") pursuant to Regulation D promulgated under the
Securities Act of 1933, as amended. The investors invested $6,000,000 on
February 6, 1998 and $4,000,000 on June 11, 1998. As of March 31, 2001, the
remaining balance after conversions and redemptions is $759,000. The material
agreements between the Company and each Investor have been filed as exhibits to
the Current Report on Form 8-K filed with the Securities and Exchange Commission
by the Company on February 12, 1998. The salient points of the convertible
subordinated debenture agreement are as follows:
Interest: The interest rate is four percent per annum for the first six
months after the original issuance date of the convertible debenture and six
percent per annum thereafter, subject to increases (up to the legal maximum
rate) if the Company is in default under the convertible debenture. Accrued
interest is due and payable in shares of the Company's Common Stock
semi-annually on the last day of June and December of each year. The value for
such shares of Common Stock is the average of the two lowest closing bid prices
for the Company's Common Stock as reported by the Bloomberg Service for the
thirty trading days immediately before the interest payment date.
Conversion Price: The conversion price for the convertible debentures is (P
+ I) divided by the Conversion Date Market Price where P equals the outstanding
principal amount of the convertible debenture submitted for conversion, I equals
accrued but unpaid interest as of the conversion date and Conversion Date Market
Price equals the lesser of the maximum conversion price (as defined below) or
101% of the average of the two lowest closing bid prices for the Company's
Common Stock as reported by the Bloomberg Service for the thirty trading days
immediately before the conversion date. The maximum conversion price is 115% of
the average closing bid price of the Company's Common Stock as reported by the
Bloomberg Service over the 1998 calendar year. The average closing bid price for
this period was $35.718 per post-split share ($3.5718 per pre-split share),
which results in a maximum conversion price of $41.0757
5
ROSS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
per post-spit share ($4.10757 per pre-split share). A portion of the convertible
debentures issued in June 1998 (the "Second Closing Debentures") were redeemed
by the Company. See paragraph (H) below and "Part I, Item 2 of this Quarterly
Report on Form 10-Q Management's Discussion and Analysis of Financial Condition
and Results of Operations" for a description of the company's redemption of a
portion of the second closing debentures.
As of October 27, 2000 the Company had issued an aggregate amount of shares
equal to 19.99% of the number of common shares outstanding on February 6, 1998,
the date of the original transaction. As such, NASDAQ capitalization regulations
preclude further issuances without shareholder approval or waiver by the NASDAQ.
The Company has been denied waiver by the NASDAQ. Through a properly called
special meeting and vote of the shareholders, the Company has also been denied
shareholder approval to convert the remaining debentures into equity. The total
outstanding debentures are $759,000. The debenture holder may, at its option,
require settlement in cash plus a premium of 15% over the face value of the
debentures then outstanding.
7) SOFTWARE REVENUE RECOGNITION
The company recognizes revenue on software transactions in accordance with
Statement of Position No. 97-2 "Software Revenue Recognition" ("SOP 97-2). The
financial statements contained herein have been prepared in accordance with the
requirements of SOP 97-2.
8) COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
130, "Reporting Comprehensive Income" as of July 1, 1998. SFAS 130 requires
disclosure of total non-stockholder changes in equity in interim periods and
additional disclosures of the components of non-stockholder changes on an annual
basis. Total non-stockholder changes in equity include all changes in equity
during a period except those resulting from investments by and distributions to
stockholders. The components of comprehensive income (loss) for the three and
nine month periods ended March 31, 2001 and 2000 were as follows (in thousands):
Three months ended Nine months ended
March 31, March 31,
----------------------- ------------------------
2001 2000 2001 2000
--------- ---------- ---------- ----------
Net earnings (loss) $ 2,787 $ (3,853) $ (1,241) $ (4,581)
Foreign currency translation adjustments 213 (191) 466 (402)
--------- ---------- ---------- ----------
Total comprehensive income (loss) $ 3,000 $ (4,044) $ (775) $ (4,983)
========= ========== ========== ==========
9) NET EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Basic earnings (loss) per common share are computed by dividing net
earnings or net loss by the weighted average number of common shares outstanding
during the period. Diluted earnings per common and common equivalent share is
computed by dividing net earnings by the weighted average number of common and
common equivalent shares outstanding during the period. Common stock equivalents
are not considered in the calculation of net loss per share when their effect
would be antidilutive.
6
ROSS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following is a reconciliation of the numerators of diluted earnings per
share, (in thousands):
Three months ended Nine months ended
March 31, March 31,
2001 2000 2001 2000
----------- ---------- ---------- ----------
Net earnings (loss) $ 2,787 $ (3,853) $ (1,241) $ (4,581)
Payment in kind interest on convertible debentures 13 - - -
----------- ---------- ---------- ----------
Numerator for diluted calculation $ 2,800 $ (3,853) $ (1,241) $ (4,581)
=========== ========== ========== ==========
In periods when the Company is profitable, the only difference between the
denominator for basic and diluted net earnings per share is the effect of common
stock equivalents. In periods of a loss, the denominator does not change because
it would be anti-dilutive.
10) OTHER MATTERS
On September 1, 1998, the Board of Directors of the Company approved a
Preferred Shares Rights Agreement dated September 4, 1998, whereby the Board has
declared a dividend distribution of one Preferred Shares Purchase Right (the
"Rights") on each outstanding share of the Company's Common Stock. Each Right
will entitle stockholders to buy 1/1000th of a share of the Company's Series B
Participating Preferred Stock at an exercise price of $21.75. The Rights will
become exercisable following the tenth day after a person or group announces the
acquisition of 15% or more of the Company's Common Stock or announces
commencement of a tender offer the consummation of which would result in
ownership by the person or group of 15% or more of the Common Stock. The Company
will be entitled to redeem the Rights at $.01 per Right at any time on or before
the tenth day following acquisition by a person or group of 15% or more of the
Company's Common Stock.
On September 18, 1998 the Board of Directors of the Company approved an
adjustment to the exercise price for certain outstanding stock options held by
all current employees, which have an exercise price of $3.00 and above. In
consideration for this repricing offer, officers of the Company participating in
the option repricing were required to forfeit 10% of the shares subject to each
option being repriced, while non-officer employees participating in the option
repricing are subject to a one year limitation on the exercising of repriced
options subject to certain exceptions. The one year limitation on ability to
exercise expired on September 28, 1999. The revised exercise price was
established by reference to the closing price of the Company's Common Stock on
September 28, 1998, which was approximately $2.59. Approximately 90 employees
participated in the repricing with approximately 1,336,000 options being
repriced. Of the stock options repriced, options to purchase approximately
831,000 shares were held by executive officers of the Company.
On January 7, 1999, the Company entered into employment agreements with
each of J. Patrick Tinley, the Company's Chairman of the Board and Chief
Executive Officer and Dennis V. Vohs, the Company's former Chairman of the Board
of Directors and former Chief Executive Officer (the Employment Agreements). In
addition to a salary and benefits, Mr. Tinley's employment agreement provides
the employee with a continuation of salary and benefits for a twenty-four month
period immediately following the employee's termination of employment by the
Company "without cause" (as that term is defined in the Employment Agreement).
In addition, if within the first nine months following a "change of control" of
the Company Mr. Tinley terminates his employment of the surviving corporation
for "good reason" or the surviving corporation terminates the employee's
employment for any reason other than "cause" or "disability" (as each of these
terms in quotes is defined in the Employment Agreements), the employee shall
then be entitled to a continuation of then applicable salary for the twenty-four
month period immediately following the termination date and all unvested stock
options and similar rights shall become vested and exercisable. On
7
ROSS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, Mr. Vohs ceased his employment with the Company, but remains
on the Board of Directors, and in a consulting capacity. As such, his Employment
Agreement terminated on December 31, 2000. Mr. Tinley's and Mr. Vohs Employment
Agreements have been filed as Exhibit 10.3 and Exhibit 10.4, respectively to the
Company's Annual Report on Form 10-K for the fiscal year 2000, Filed October 13,
2000.
On September 17, 1999, the Company entered into an employment agreement
with Robert B. Webster, Executive Vice President and Secretary of the Company.
In addition to a salary and benefits, the employment agreement provides the
employee with a continuation of salary and benefits for a twelve-month period
immediately following the employee's termination of employment by the Company
"without cause" (as that term is defined in the Employment Agreement). In
addition, if within the first nine months following a "change of control" of the
Company the employee terminates his employment of the surviving corporation for
"good reason" or the surviving corporation terminates the employee's employment
for any reason other than "cause" or "disability" (as each of these terms in
quotes is defined in the Employment Agreements), the employee shall then be
entitled to a continuation of then applicable salary for the twelve month period
immediately following the termination date and all unvested stock options and
similar rights shall become vested and exercisable. Mr. Webster's Employment
Agreement has been filed as Exhibit 10.5 to the Company's Annual Report on Form
10-K for the fiscal year 2000, filed October 13, 2000.
During the third quarter of fiscal year 2000, the Company recorded a
$1,145,000 expense to cover the liability arising from severance costs
associated with 19 employees employed in sales, marketing, services, and product
development in North America and Europe. The costs were accrued in accordance
with EITF Issue 94-3, "Liability Recognition for Certain Employee Terminations,
Benefits and Other Costs to Exit an Activity". At December 31, 2000, all of the
costs had been paid.
On September 12, 2000, the Company announced a strategic restructuring
aimed at reducing costs and improving efficiencies. Under the restructuring, the
Company reduced 125 positions across the company as well as accelerated efforts
to eliminate unneeded office space, improve productivity through the use of
technology and focus on increased revenues through the use of distributors. Cost
savings associated with the restructuring were expected to be $12,000,000 on an
annualized basis. As a result of these actions, during the first quarter of
fiscal year 2001, the Company recorded a $790,000 expense to cover the liability
arising from associated employee separation costs. The costs were accrued in
accordance with EITF Issue 94-3, "Liability Recognition for Certain Employee
Terminations, Benefits and Other Costs to Exit an Activity". At March 31, 2001,
all of the costs had been paid.
On October 24, 2000 the Company entered into a plan to cease all direct
sales, service and support activities in France as a result of a pattern of
significant and sustained losses. As such, for purposes of the accompanying
consolidated financial statements, the balance sheet of the French subsidiary
has been eliminated as of October 31, 2001. For purposes of the accompanying
statement of operations, the French subsidiary had revenues and expenses netting
to a loss of $497,000 for the quarter ended September 30, 2000 which have been
included in these consolidated results. Management believes that potential
future costs of this action cannot be reasonably estimated at this time but does
not anticipate that the resolution of this uncertainty will have a material
adverse effect on the financial statements taken as a whole.
11) NASDAQ Listing and Subsequent Event
On October 31, 2000, the Company was informed by Nasdaq staff that the
closing bid price of its common stock had fallen below the $1 minimum bid level
required by Nasdaq Marketplace Rule 4450(a)(5)
8
ROSS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for a period of thirty consecutive trading days, and that the Company would be
delisted if it failed to regain compliance. On March 9, 2001, the Company met
with the Nasdaq listings qualifications panel (the panel) and presented a plan
to effect a reverse stock split in order to cure the non-compliance regarding
minimum bid price. The panel accepted this plan, and on April 26, 2001, the
Company held a properly called special meeting of its shareholders and received
shareholder vote approval for a one for ten (1 for 10) reverse stock split. The
reverse stock split became effective on April 27, 2001, and the condition of
non-compliance on minimum bid price, has been cured. The Company meets the other
quantitative maintenance criteria for the National Market.
12) Extraordinary Item
Effective February 28, 2001, the Company closed the sale of certain assets
related to its Human Resource and Payroll product line to Now Solutions, LLC, a
private company. At the same time the Company executed a distribution agreement
with Now Solutions to continue to sell the product under license from Now
Solutions as a complement to its enterprise systems for process manufacturing
companies. The gross asset sale price is $6.1 million excluding incentives.
After fees and expenses the transaction generated an extraordinary gain on the
sale of approximately $2.4 million before incentives. The twofold purpose of the
transaction is to strengthen the Company's balance sheet and to enable the
Company to focus on its core competencies in the process manufacturing sector.
Sales, services and maintenance revenues related to this product line for the
eight months ended February 28, 2001 were approximately $4,806,000. The product
lines total revenues for years ended June 30, 2000 and 1999 were $8,052,000 and
$8,882,000, respectively. The net book value of the intellectual property
transferred in this sale was $3,936,000, $4,134,000, and $3,749,000 at February
28, 2001, June 30, 2000 and June 30, 1999, respectively.
13) NEW ACCOUNTING PRONOUNCEMENTS
In June, 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities" ("Statement 133"). Statement 133 establishes accounting
and reporting standards for derivative instruments including certain derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. The adoption of Statement 133 is
required for the Company's fiscal year 2001. The adoption of Statement 133 has
not had a material impact on the Company's financial statements.
In 1999, the staff of the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 summarizes the SEC staff's views in applying generally
accepted accounting principles to the recognition of revenues. The Company's
adoption of SAB No. 101 has not had a material impact on its consolidated
results of operations, financial position, or cash flows.
14) GEOGRAPHIC SEGMENT INFORMATION
The Company has adopted the Financial Accounting Standards Board's
statement of Financial Accounting Standards No. 131, or SFAS 131, "Disclosures
about Segments of an Enterprise and Related Information," effective for fiscal
years beginning after December 15, 1997. SFAS 131 supersedes Statement of
Financial Accounting standards No. 14, or SFAS 14, Financial Reporting for
Segments of a Business
9
Enterprise. SFAS 131 changes current practice under SFAS 14 by establishing a
new framework on which to base segment reporting and also requires interim
reporting of segment information.
The Company markets its products and related services primarily in North
America, Europe and Asia and primarily measures its business performance based
upon geographic results of operations. Selected balance sheet and income
statement information pertaining to the various significant geographic areas of
operation are as follows:
As of and for the quarter ended March 31, 2001:
Net Income Depreciation Capital
Gross Assets Revenue (Loss) and Amortization Expenditures
------------ ----------- ---------- ---------------- ------------
Belgium................................ $ 267 $ 155 $ (16) $ 4 $ 8
Netherlands............................ 1,109 682 65 11 14
Germany................................ 252 237 71 0 0
Spain.................................. 3,861 1,221 212 41 28
United Kingdom......................... 3,579 1,630 42 32 0
North America.......................... 42,133 7,569 2,413 319 13
-------- ---------- --------- ------ -----
Total.................................. $ 51,201 $ 11,494 $ 2,787 $ 407 $ 63
======== ========== ========= ====== =====
As of and for the quarter ended March 31, 2000:
Net Income Depreciation Capital
Gross Assets Revenue (Loss) and Amortization Expenditures
------------ ---------- ---------- ---------------- ------------
Belgium................................ $ 359 $ 293 $ (160) $ 43 $ 0
Netherlands............................ 920 602 (120) 14 0
France................................. 2,948 646 (1,338) 17 10
Germany................................ 478 515 61 1 0
Spain.................................. 4,617 1,289 (89) 43 0
United Kingdom......................... 3,378 1,834 (380) 46 8
North America.......................... 57,638 13,298 (1,827) 631 55
--------- --------- --------- ------ ------
Total.................................. $ 70,338 $ 18,477 $ (3,853) $ 795 $ 73
========= ========= ========= ====== ======
10
ROSS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
Variability of Quarterly Results
The Company's software product license revenues can fluctuate from quarter
to quarter depending upon, among other things, such factors as overall trends in
the United States and international economies, new product introductions by the
Company, hardware vendors and other software vendors, and customer buying
patterns. Because the Company typically ships software products within a short
period after orders are received, and therefore maintains a relatively small
backlog, any weakening in customer demand can have an almost immediate adverse
impact on revenues and operating results. Moreover, a substantial portion of the
revenues for each quarter is attributable to a limited number of sales and tends
to be realized in the latter part of the quarter. Thus, even short delays or
deferrals of sales near the end of a quarter can cause substantial fluctuations
in quarterly revenues and operating results. Finally, certain agreements signed
during a quarter may not meet the Company's revenue recognition criteria
resulting in deferral of such revenue to future periods. Because the Company's
operating expenses are based on anticipated revenue levels and a high percentage
of the Company's expenses are relatively fixed, a small variation in the timing
of the recognition of specific revenues can cause significant variation in
operating results from quarter to quarter.
Business Summary
Description of Business
The Company is a supplier of enterprise-wide business systems and related
services to companies installing internet-enabled e-business software products,
in particular in the process manufacturing markets. Customers are primarily
medium-sized companies (with annual sales of $50 million to $2 billion)
upgrading internal systems to improve profitability through the availability of
timely and accurate information, or to modernize their management information
systems operations in order to reduce costs and provide business-to-business
(B2B) linkage with suppliers and customers. The Company licenses its products to
customers through a direct sales force in North America and Western Europe as
well as independent distributors in 24 other markets worldwide. Since the
Company's inception in 1988, the Company has licensed software products to an
installed base of over 3,400 customers worldwide.
The Company has developed a series of products designed for the Internet
environment which allow users to access and manipulate data from their personal
computers using a portal for functional personalization of the user's desktop.
These products incorporate an integrated, modular, feature-rich and
user-friendly operating environment. The integration of these products allows
the sharing of data between application products with a common user interface
while integrating frequently visited Web sites and other software tools. The
Company's open systems applications function in a relational database management
system ("RDBMS") environment that provides for a high degree of data
availability and integrity. Additionally, because the Company's iRenaissance
financial, manufacturing and distribution applications were developed with the
GEMBASE fourth generation language ("4GL"), the Company believes they are easily
modified and expanded. GEMBASE is a programming environment that delivers a
central data dictionary, complete screen painting, editing and debugging
capabilities, and links to several popular RDBMSs. GEMBASE itself is written in
the C programming language to facilitate portability across multiple
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ROSS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
hardware and RDBMS platforms. Because the iRenaissance financial, manufacturing
and distribution products were developed in GEMBASE, customers often find it
easy to customize their own applications.
The Company offers a comprehensive Enterprise Resource Planning ("ERP")
solution with functionality specifically tailored to the unique formula and
specifications-based requirements of process manufacturers, including food and
beverage, consumer packaged goods, pharmaceutical and biotechnology, chemical,
primary metals, and pulp and paper companies. The Company believes that this
native functionality is superior to the alternative presented by many of the
Company's competitors, which is to adapt systems designed primarily for the
discrete manufacturing sector. The product may be deployed in a thin client mode
to permit the greatest performance advantage for companies using remote
communications over the internet.
In fiscal 2000, the Company introduced its Resynt suite of internet
applications and services which include a wide range of e-commerce,
business-to-business (B2B) features and technology to connect traditional ERP
(enterprise resource planning) systems over the internet to customers and
suppliers. This enables tight linkages in trading partner supply chains to
achieve sustainable competitive advantage. These applications are designed to
allow companies the ability to leverage the technology of the Internet in order
to automate business processes and effectively manage business resources
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ROSS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Results of Operations
Revenues
Total revenues for the third quarter and three month period ended March 31,
2001 decreased 38% to $11,494,000 from $18,477,000, in fiscal 2000. Software
product license revenues decreased 42%, consulting and other services revenues
decreased 57%, and maintenance revenues decreased 15% from the comparable period
in the prior year, respectively.
For the nine month period ended March 31, 2001, total revenues decreased
40% to $38,244,000 from $63,582,000 in fiscal 2000. Software product license
revenues decreased 55%, consulting and other services revenues decreased 55%,
and maintenance revenues decreased 10% from the comparable period in the prior
year, respectively.
For the three month period ended March 31, 2001 revenues have decreased by
$5,646,000 in North America and by $1,337,000 in Europe and the Pacific Rim
(International). The largest decrease in Europe was $647,000 in respect of
France, which reflects the closure of the Paris office. New arrangements for
sales through a local French distributor have been concluded. The company
believes that global decreases in software product licenses is principally a
result of an industry-wide slowdown in customer's willingness to purchase fully
integrated ERP software in favor of similar but modular internet enabled
enterprise systems and business to business internet applications.
The decrease in software revenues for the nine month period ended March 31,
2001 was $8,165,000 or 55%, from the same period in fiscal 2000 and is
attributable to the industry-wide slowdown, as explained above.
Consulting and other service revenues for the three month period ended
March 31, 2001 decreased 57% to $3,206,000 from $7,402,000 in fiscal 2000.
Revenues from consulting and other services (which are recognized as performed)
are generally correlated with software product license revenues (which are
recognized upon delivery), therefore, service revenues fluctuate based upon
related fluctuations in software product revenue. For this period, North
American services revenues decreased by $3,689,000, or 63%, and International
services revenues decreased $507,000, or 26% respectively. These decreases in
consulting and other service revenues are attributable to lower software product
licensing activity during the previous quarters.
The total decrease in consulting and other services revenues for the nine
month period is $15,100,000, or 55%. Declining software revenues and associated
reduction in service revenues are the primary causes of this decrease.
Maintenance revenues for the three month period ended March 31, 2001
decreased by $1,048,000, or 15% from the same quarter in fiscal 2000. This
change is essentially made up of a decrease in Europe and Asia of $594,000 and a
decrease of $ 454,000 in North America. Within North America, the Company
estimates that $335,000 of this $454,000 decrease is due to the sale of the
Human Resource and Payroll product line on February 28, 2001. Other decreases
are principally attributable to lower software licensing activity during fiscal
2000. Maintenance contracts sold by third party distributors are included by the
Company in software product license revenues because the Company has no support
obligations to any of the distributors' customers.
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ROSS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the nine month period ended 31 December, 2000, the decline of
$2,073,000 in maintenance revenues, is attributable to a decrease in
International operations of $1,446,000 or 26%, and a decrease in North America
of $627,000 or 4% (of which an estimated $335,000 is related to the sale of the
Human Resource and Payroll product line).
For the three and the nine month period ended March 31, 2001, North
American revenues constituted 70% of the total revenue of the Company.
Operating Expenses
Costs of software product licenses include expenses related to royalties
paid to third parties and product documentation and packaging. Third party
royalty expenses will vary from quarter to quarter based on the number of third
party products being sold by the Company. Major third party products sold by the
Company include Oracle databases and other optional software including
implementation, reporting, and productivity tools. Costs of software product
licenses for the second quarter and the nine month period of fiscal 2001
decreased by 54% and 57% respectively, consistent with the decrease in software
license sales. As a percentage of software product license revenue, the costs of
software product licenses in the third quarter decreased from 18% in fiscal year
2000 to 15% in fiscal 2001. This change reflects the proportionately lesser mix
of third party products sold in this quarter of fiscal 2001, when compared to
the prior year.
Costs of consulting, maintenance and other services include expenses
related to consulting and training personnel, personnel providing customer
support pursuant to maintenance agreements, and other costs of sales. The
Company also uses outside consultants to supplement Company personnel in meeting
peak customer consulting demands. Costs of consulting, maintenance and other
services decreased by 66% to $3,333,000 in the third quarter of fiscal 2001, as
compared to $9,760,000 in the third quarter of fiscal 2000. This reflects the
reduction in headcount in the consulting organization, which has effectively
matched the resources to the decreased demand resulting from slowed software
sales activity mentioned earlier. The decrease of $6,427,000 in the third
quarter of fiscal year 2001, as compared to the prior year, consists of $943,000
attributable to third party consulting, and $5,484,000 is a reduction in
employee expenses. The Company's gross margin resulting from consulting,
maintenance and other services revenues for the third quarter of fiscal 2001 was
63%, up from 32% in the same quarter of fiscal 2000. The improvement in the
gross profit margin for the three month period was due largely to decreased use
of third party consultants, lower spending across the services organization, and
a reflection of the higher proportion that maintenance revenue has in the total
profitability of consulting and maintenance.
For the nine month period ended March 31, 2001, the gross profit percentage
on consulting, maintenance and other revenue is 57%, up from 35% in the prior
year period. This improvement in gross profit margin is due to the improved
utilization of consulting resources, as a result of matching the staff levels to
the demand for consulting services, and is a reflection of the higher proportion
that maintenance revenue has in the total profitability of consulting and
maintenance
Sales and marketing expenses for the three month period ended March 31,
2001 are $1,820,000, or 37% lower than the prior year. This reflects significant
savings in employee costs in the second quarter, due to reduced headcount, and
an associated reduction in employee-related expenses. Stringent cost-cutting
measures have also realized savings in marketing costs.
Sales and marketing costs have decreased by 26% for the nine month period,
as compared to the same period in the prior year. This decrease was due to cost
saving measures implemented over the period.
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ROSS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Measured as a percentage of total revenues, net product development
(research and development) expenditure for the third quarter, 2001 increased to
23% of total revenues, compared to 14% for the third quarter, 2000. Product
development expenditures during fiscal 2001 have focused on new internet enabled
modules and continued enhancements to the underlying technology of released
products and developing new web enabled products.
Net product development expenditure for the quarter ended March 31, 2001
was virtually unchanged as compared to the same quarter in the prior year.
However, actual gross research and development expenditure has declined due to a
closer matching of the Company's research and development activities with
current levels of business activity, and the termination of development of the
Human Resource and Payroll product line. The decline in research and development
was 56% for the third quarter of fiscal 2001 as compared to the third quarter of
fiscal 2000. The increase in net product development expense for the nine month
period in comparison to the prior year is due to decreased capitalization as a
percent of expenditure, while amortization of previously capitalized amounts
continues to add to the current expense level. This is true for both the quarter
and six-month period.
General and administrative expenses for the third quarter, 2001 decreased
by 42%, to $1,117,000 from $1,914,000 for the third quarter, 2000. The major
reason for the decrease in these expenses from the same period in the prior year
was the decreased spending on employee and recruitment. These cost savings are a
result of headcount reduction and cost control measures. The Company's
administrative infrastructure is now more productive, and more closely matched
to current levels of revenue generating activity.
For the nine month period, general and administrative expenses have
decreased by 33% over the prior nine month period.
In the third quarter, 2001, the Company recorded a provision for doubtful
accounts of $245,000, as compared to $770,000 recorded in the third quarter,
2000. The fiscal 2001 and 2000 provisions consisted primarily of specific
customer accounts identified as being potentially uncollectible. These
provisions represent management's best estimate of the doubtful accounts for
each period. Reduced provisions reflect the steadily improving quality of the
Company's accounts receivable.
Amortization of other assets decreased to $158,000 in the third quarter of
fiscal 2001 from $237,000 in the same quarter of the prior year. This
amortization relates various acquisitions of other products and companies. The
decrease is attributable to previously purchased products and companies becoming
fully amortized.
There are no non-recurring costs reported for the third quarter, fiscal
2001. The non-recurring costs shown in the nine month period ended March 31,
2001, relate to a strategic restructuring announced by the Company on September
12, 2000. Under the restructuring, the Company reduced 125 positions across the
company as well as accelerated efforts to eliminate unneeded office space,
improve productivity through the
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ROSS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
use of technology and focus on increased revenues through the use of
distributors. As a result of these actions, during the first quarter of fiscal
year 2001, the Company recorded a $790,000 expense to cover the liability
arising from associated employee separation costs. At March 31, 2001, $11,050 of
the liability remained, of which $2,550 will be paid in fiscal 2001 and the
balance in fiscal 2002. In the third quarter of the prior year, the $1,145,000
non recurring costs related to a reduction in force occurring primarily in North
America, Spain and France, and aimed at refocusing the Company towards the then,
newly announced Resynt suite of products.
Other Expenses, Net
Other expenses for the third quarter, fiscal 2001 was $219,000, as compared
to $359,000 for the same period, 2000. These amounts primarily consisted of
interest expense related to borrowings under the Company's existing line of
credit facility. The comparison of the nine month period ended March 31, 2001
shows little change from the prior year for the same period.
Extraordinary Item
Effective February 28, 2001, the Company closed the sale of certain assets
related to its Human Resource and Payroll product line to Now Solutions, LLC, a
private company. At the same time the Company executed a distribution agreement
with Now Solutions to continue to sell the product under license from Now
Solutions as a complement to its enterprise systems for process manufacturing
companies. The gross asset sale price is $6.1 million excluding incentives.
After fees and expenses the transaction generated an extraordinary gain on the
sale of approximately $2.4 million before incentives. The twofold purpose of the
transaction is to strengthen the Company's balance sheet and to enable the
Company to focus on its core competencies in the process manufacturing sector.
Sales, services and maintenance revenues related to this product line for the
eight months ended February 28, 2001 were approximately $4,806,000. The product
lines total revenues for years ended June 30, 2000 and 1999 were $8,052,000 and
$8,882,000, respectively. The net book value of the intellectual property
transferred in this sale was $3,936,000, $4,134,000, and $3,749,000 at February
28, 2001, June 30, 2000 and June 30, 1999, respectively.
Income Tax Expense
The income tax benefit of $183,000 recorded in the first quarter of fiscal
2001 has been offset by an income tax expense in the second quarter of $62,000.
For the three month periods ended March 31, 2001, and March 31, 2000, the income
tax expense in nominal. The net tax benefit recorded in the first quarter of
fiscal 2001 relates to certain tax refunds that have been approved by associated
tax jurisdictions. Income tax expense relates to withholding taxes in certain
foreign jurisdictions where the Company had either no available net operating
losses or had to pay treaty-based taxes.
As at June 30, 2000 the Company had a net operating loss for North American
Federal Tax purposes of $36,003,000. The extraordinary gain of $2,372,000
related to the sale of the Human Resource and Payroll product line has caused a
small reduction in this net operating loss.
Liquidity and Capital Resources
In the first nine months of fiscal 2001, net cash provided by operating
activities decreased $134,000 compared to the same period of the prior year. An
aggregate net decrease in non-cash charges for depreciation, amortization and
provisions for bad debt of $1,005,000, an aggregate decrease in the combined
16
ROSS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
cash effect of prepaid and other current assets, taxes payable, accrued expenses
and deferred revenues of $6,030,000 and were offset by cash provided by
increased Company earnings of $967,000, the extraordinary gain of $2,372,000
from the sale of assets and decreased accounts receivable and increased accounts
payable totaling $3,563,000. The decreased receivable portfolio and deferred
revenue balance was a result of slowed software and services volumes and the
disposal of deferred revenues relating to the sale of assets.
In the first nine months of fiscal 2001, the Company required $2,476,000
for investing activities versus $9,686,000 over the same period of the prior
year, a decrease of $7,210,000. Investment in property and equipment decreased
by $177,000 over the same period of the prior year as a result of the Company's
cash conservation efforts and declining headcount. Investments in capitalized
computer software costs decreased by $4,133,000 due to lower development
headcount, and the disposal of the Human Resource and Payroll product line
during fiscal 2001 as compared to the year earlier period. In addition, the cash
used for investing purposes was augmented by the proceeds of $2,632,000 received
for the disposal of the net assets and liabilities relating to the sale of the
Human Resource and Payroll product line. Other investment items increased by
$538,000 primarily attributable to changes in the cumulative translation
adjustment related to capitalized software costs in foreign subsidiaries.
The Company financed its continuing operations for the nine months ended
March 31, 2001 through cash generated from operations and the sale of certain
assets. Repayments of amounts previously borrowed under the Company's line of
credit resulted in a decrease in cash of $2,608,000. $622,000 was applied in
ongoing capital lease payments. Proceeds from issuance of common stock pursuant
to the Company's Employee Stock Purchase Program as well as issuance pursuant to
interest in kind payments on convertible debt decreased by $23,000 from the
prior year period.
At March 31, 2001 the Company had $4,172,000 of cash and cash equivalents.
During the third quarter, fiscal 2001, the Company's revolving credit facility
with an asset-based lender was amended, reducing the credit line from a maximum
of $15,000,000, to a maximum of $5,000,000, with a maturity date of June, 30
2001, and an interest rate equal to the Prime Rate plus 2%. Borrowings under the
credit facility are collateralized by substantially all assets of the Company.
The Company's ability to meet its cash requirements for operations will
depend upon funds to be generated from operations and amounts available under
its line of credit facility. The Company may be required to seek additional
financing to replace its asset based credit line which expires June 30, 2001 if
not extended further beyond that date. The Company is currently negotiating
alternatives to raise additional funds through public and/or private financing
arrangements. The Company cannot be assured that additional funding will be
available on favorable terms. Furthermore, additional equity financing will be
dilutive to stockholders, and debt financing, if available, may involve
restrictive covenants. The Company's failure to raise capital when needed may
harm its business and operating results. See note 1 to the consolidated
financial statements, "Basis of Presentation".
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ROSS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Subsequent Events
Change in Members of Board Directors
Effective April 27, 2001, Mr. Mario Rosati stepped down as a member of the
Board of Directors. Mr. J. Patrick Tinley was elected Chairman of the Board,
replacing Mr. Dennis Vohs, who remains on the Board.
Special Meeting of Shareholders
A Special Meeting of Shareholders was held April 26, 2001. The purpose of
the meeting was to:
Proposal 1 - to approve an amendment to the certificate of incorporation
effecting a 1-for-10 ten reverse stock split and
Proposal 2 - to comply with the capitalization regulation of NASDAQ by
authorizing the Board of Directors to make further issues of Common Stock
to holders of convertible debentures.
Proposal 1, to approve the reverse stock split was carried by a majority of the
Company's stock holders. Proposal 2, to authorize further share issues to
debenture holders was not carried, and the proposal was denied.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Foreign Exchange: The company has a world-wide presence and as such
maintains offices and derives revenues from sources overseas. For the first
quarter of fiscal 2001,. International revenues as a percentage of total
revenues was approximately 27%. The company's international business is subject
to typical risks of an international business, including, but not limited to:
differing economic conditions, changes in political climates, differing tax
structures, other regulations and restrictions, and foreign exchange rate
volatility. Accordingly, the Company's future results could be materially
adversely impacted by changes in these or other factors. The effect of foreign
exchange rate fluctuations on the Company in the first three months of fiscal
2001 was not material.
Interest Rates: The Company's exposure to interest rates relates primarily
to the Company's cash equivalents and certain debt obligations. The company
invests in financial instruments with original maturities of three months or
less. Any interest earned on these investments is recorded as interest income on
the Company's statement of operations. Because of the short maturity of our
investments, a near-term change in interest rates would not materially effect
our financial position, results of operations, or cash flows. Certain of the
Company's debt obligations include a variable rate of interest. A significant,
near term change in interest rates could materially effect our financial
position, results of operations or cash flows.
PART II. OTHER INFORMATION
Item 2. Changes in Securities
During the first quarter of fiscal 2001, the Investors converted an
aggregate principal amount of $600,000 plus accrued interest through the date of
conversion into 629,925 shares of the Company's Common
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ROSS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Stock through several transactions which were priced and executed in accordance
with the convertible debenture agreement.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
The Exhibits listed on the accompanying Index to Exhibits are filed as part
of, or incorporated by reference into, this Report.
3.1 Certificate of Incorporation of the Registrant, as amended (1)
3.2 Bylaws of the Registrant (1)
4.3 Form of the subordinated debenture agreement due February 6,
2003 issued by the Registrant to each Investor (3)
4.4 Registration rights agreement between the Registrant and each
Investor (3)
10.1 Preferred Shares Rights Agreement, dated as of September 4,
1998 between the Registrant and BankBoston, N.A. (2)
10.2A Extension Agreement and Amendment to Loan Documents dated
March 21, 1997 between Registrant and Coast Business Credit, a
division of Southern Pacific Thrift and Loan Association (4)
10.2B Extension Agreement and Amendment to Loan Documents dated
August 18, 1995 between Registrant and CoastFed Business
Credit Corporation ("Coast") (4)
10.2C First Amendment to Loan and Security Agreement dated June 30,
1995 between Registrant and Coast (4)
10.2D Loan and Security Agreement dated October 11, 1994 between
Registrant and Coast (4)
10.3 Employment Agreement, dated as of January 7, 1999, between Mr.
Patrick Tinley and the Registrant (5)
10.4 Employment Agreement, dated as of January 7, 1999, between Mr.
Dennis Vohs and the Registrant (5)
10.5 Employment Agreement, dated as of September 17, 1999, between
Mr. Robert Webster and the Registrant (6)
27.1 Financial Data Schedule
(1) Incorporated by reference to the exhibit filed with the
Registrant's Registration Statement on Form 8-A filed
September 4, 1998.
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ROSS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Incorporated by reference to the exhibit filed with the
Registrant's Registration Statement on Form 10-K/A filed April
30, 1998.
(2) Incorporated by reference to the exhibit filed with the
Registrant's Current Report on Form 10-Q filed May 17, 1999.
(3) Incorporated by reference to the exhibit filed with the
Registrant's Current Report on Form 10-K filed September 28,
1999.
(b) Reports on Form 8-K
(1) Incorporated by reference to the exhibit filed with the
Registrant's Current Report on Form 8-K filed February 12,
1998.
(2) Incorporated by reference to the exhibit filed with the
Registrant's Current Report on form 8-K filed July 24, 1998.
(3) Incorporated by reference to the exhibit filed with the
Registrant's Current Report on Form 8-K filed March 16, 2001.
(4) Incorporated by reference to the exhibit filed with the
Registrant's Current Report on Form 8-K/A filed May 15, 2001.
ITEMS 1, 4 AND 5 HAVE BEEN OMITTED, AS THEY ARE NOT APPLICABLE.
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ROSS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURE
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.
ROSS SYSTEMS, INC.
Date: May 15, 2001 /s/ VEROME M. JOHNSTON
---------------------------------------
Verome M. Johnston
Vice President, Chief Financial Officer
(Principal Financial and Accounting
Officer and Duly Authorized Officer)
21