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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission file number: 333-38177
MADE2MANAGE SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-1665080
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
9002 Purdue Road, Indianapolis, IN 46268
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (317) 532-7000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
(Title of class)
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 and 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 filing
requirement for the past 90 days. Yes [X] No [ ]
Indicate by checkmark if disclosure of delinquent filers pursuant to item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of the voting common stock held by non-affiliates of
the registrant, based on the closing sale price of the common stock on March 1,
2001, as reported on The Nasdaq Stock Market(R) was $13,696,110. Common stock
held by executive officers, directors and persons who are known to own 5% or
more of the outstanding common stock have been excluded from the computation as
such persons may be deemed to be affiliates of the registrant. This
determination of affiliate status is not a conclusive determination for other
purposes.
As of March 1, 2001, the registrant had 4,812,112 shares of common stock, no par
value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for its 2001 Annual Meeting of
Shareholders are incorporated by reference in Part III hereof.
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TABLE OF CONTENTS
MADE2MANAGE SYSTEMS, INC.
FORM 10-K
PART I...................................................................... 1
ITEM 1. BUSINESS......................................................... 1
General.......................................................... 1
Markets and Customers............................................ 1
Sales and Marketing.............................................. 1
The Product...................................................... 1
Product Development.............................................. 3
Service and Support.............................................. 3
Competition...................................................... 4
Intellectual Property............................................ 4
Employees........................................................ 5
Executive Officers of the Registrant............................. 5
ITEM 2. PROPERTIES....................................................... 6
ITEM 3. LEGAL PROCEEDINGS................................................ 6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............. 7
PART II..................................................................... 8
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY
AND RELATED SHAREHOLDER MATTERS.................................. 8
ITEM 6. SELECTED FINANCIAL DATA.......................................... 9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.............................. 10
Overview......................................................... 10
Results of Operations............................................ 12
Comparisons of Years Ended December 31, 2000, 1999 and 1998...... 12
Liquidity and Capital Resources.................................. 15
Year 2000........................................................ 15
Inflation........................................................ 16
Recently Issued Accounting Pronouncements........................ 16
Business Environment and Risk Factors............................ 16
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....... 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................... 22
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.............................. 36
PART III.................................................................... 37
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.............. 37
ITEM 11. EXECUTIVE COMPENSATION.......................................... 37
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT........................................... 37
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................. 37
PART IV..................................................................... 38
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K......................................... 38
(This page has been left blank intentionally.)
PART I
ITEM 1. BUSINESS.
GENERAL
Made2Manage Systems, Inc., an Indiana corporation formed in 1986, develops,
markets, licenses and supports comprehensive enterprise application solutions
for small and midsize manufacturers. Our principal product, Made2Manage
Enterprise Edition, provides integrated solutions for all of the business
processes used by manufacturers, from selling and design, through manufacturing
and distribution. Our corporate offices are in Indianapolis, Indiana. We have a
subsidiary, Bridgeware, Inc., a California corporation that provides advanced
planning and scheduling software primarily for Made2Manage through its
subsidiary located in Israel. Our other operating subsidiary is Made2Manage
Systems, Ltd., which supports our sales and marketing efforts for the United
Kingdom. Made2Manage Systems' Web site address is www.made2manage.com.
MARKETS AND CUSTOMERS
Our target market consists primarily of small and midsize discrete manufacturers
with annual revenues of up to $250 million that are engaged in
engineer-to-order, make-to-order, assemble-to-order, make-to-stock and mixed
styles of production. Discrete manufacturers fabricate and assemble parts into a
finished product as distinguished from process manufacturers, which combine raw
materials to create finished products. Engineer-to-order manufacturing is a
subset of make-to-order where the product is expressly designed and manufactured
to meet a customer's unique requirements, often as a "one-time" item.
Make-to-order manufacturing involves fabricating and assembling products that
are either standardized or that meet a customer's unique specifications.
Assemble-to-order manufacturing involves assembling products that meet a
customer's unique specifications from standard, or stock, sub-component parts.
Make-to-stock refers to manufacturing in which standard products are fabricated,
assembled and placed in finished goods inventory based on projected customer
demand. Many manufacturing processes involve a combination of some or all of
these production techniques.
Based on data published by Dun & Bradstreet Corporation, we believe that there
are over 120,000 manufacturing operations in the United States and Canada that
meet our target market parameters, and over 30,000 in the United Kingdom.
SALES AND MARKETING
We market our products and services in the United States, Canada and the United
Kingdom. We have licensed Made2Manage for use at more than 1400 manufacturing
sites, primarily in the United States. Currently, approximately 99% of our
revenues are derived from customers in the United States. We use direct sales
representatives, supported by regional managers and manufacturing applications
consultants, and a network of Value Added Resellers ("VARs"). We have
experienced in the past, and expect to experience in the future, a seasonal
pattern in our sales, with the fourth quarter typically having the highest total
sales and the first quarter having lower sales.
THE PRODUCT
Made2Manage Enterprise Edition ("Made2Manage"), our core product, is designed to
meet the unique needs of small and midsize discrete manufacturers engaged in
engineer-to-order, make-to-order, assemble-to-order, make-to-stock and mixed
styles of production. The product is a comprehensive enterprise application
suite designed to be the only business software these manufacturers need to
effectively manage their entire organizations. It includes applications in
Enterprise Resource Planning ("ERP"), Customer Relationship Management ("CRM"),
Supply Chain Management ("SCM") and Business Intelligence ("BI"), as well as
Web-based applications including M2MVIP and M2MEXPERT. A brief description of
each of these applications follows:
M2MERP. Made2Manage's Enterprise Resource Planning solution provides a
comprehensive back-office system complete with all necessary process features
including:
- 1 -
o Sales and Distribution: Provides the ability to track sales, quotes and
order activity, to ship the order and to communicate with the customer
regarding status of the order. Sales Order Processing manages the
activities from the time the customer confirms the order, into production
and through shipment, including acknowledging the order, receiving stock
materials and handling multiple releases and partial shipments. The
Rules-Based Product Configurator allows the sales person to guide customers
through specific product choices to precisely meet their product needs
while assuring that quotes meet profitability and production guidelines.
o Engineering: Designed to help engineers accomplish their tasks more
efficiently and better coordinate with manufacturing and other parts of the
organization. It includes Engineering Change Management ("ECM") which helps
ensure that personnel follow proper change procedures during approval and
implementation. It also provides information to help identify the impact
that changes will have on the organization. Other features include a data
interface to AutoCAD(R) 14 that prevents engineering from entering the same
information twice, and a graphical Bill of Material ("BOM") creation and
editing tool.
o Production Management: Facilitates the coordination, execution and
monitoring of the manufacturing process. Job orders drive material and
production requirements and track jobs through the production process. Job
orders identify the part number, the bill of material, the routing, the
status and the job packet (i.e., the set of instructions, diagrams and
photographs required to manufacture the part). Actual material and labor
costs are tracked to jobs during the production process, typically using
bar coding technology.
o Quality Management: Provides capabilities that help manufacturers conform
to the requirements of their customers. Through our relationship with
Powerway, Inc., Made2Manage offers tools to help achieve and maintain
ISO9000 and other quality standards compliance through document authoring,
document management, and statistical process control software tools.
o Financial Management: Designed to be fully integrated with the other
functions of the Made2Manage system. Up-to-date records of income, expenses
and financial commitments flow through the product's extensive library of
financial reports. Standard features include Accounts Receivable, Accounts
Payable, Cash Flow Forecasting and Job Order Costing. The General Ledger
integrates the monetary flow from all aspects of Made2Manage. "Drill-down"
features, available throughout the product, finely detail many areas, such
as cost attributes of work in process, inventory and product shipped.
o Human Resources: Includes payroll and personnel tracking that integrate
Made2Manage with applications from leading providers ADP(R) and Best
Software. The interface to ADP provides users who prefer to outsource
payroll with an alternative that minimizes double data entry. For customers
who prefer to manage their own payroll internally, Made2Manage offers Best
Software's Abra(R) as well as their Human Resources applications.
M2MCRM. Made2Manage's Customer Relationship Management solution helps to
automate sales, marketing and customer service activities. It provides
capabilities for tracking all aspects of the customer relationship, especially
the selling process. CRM software tracks all contacts, proposals, quotations,
interactions, and data associated with any customer.
M2MSCM. Made2Manage's Supply Chain Management solution streamlines the entire
production process, connecting manufacturers with customers and suppliers. It
includes Materials Requirements Planning ("MRP") for controlling inventory
procurement and production job creation, as well as infinite and finite
production scheduling. Our Advanced Planning and Scheduling capabilities,
acquired with our subsidiary, Bridgeware, Inc., enable planners to consider both
materials and capacity constraints at the same time as building their production
plans. Demand planning does best fit curve analysis to provide useful demand
forecasts. Execution level support is provided through functions that include
cycle counting functionality, physical inventory capabilities and on-hand
availability. Lot Control enables companies to track raw materials,
sub-assemblies and final assemblies to their origins.
M2MBI. Made2Manage's Business Intelligence helps convert raw data into
easy-to-understand and easy-to-use reports. The Executive Information System
provides management with a tool to promote high level planning. Executives are
able to obtain an overview of their entire business, with automatic data
retrieval from sales, production and finance. Performance and exception results
are generated in report or graphical format, and can be easily customized or
exported to spreadsheets, word processors and other business tools. Data
Refinery allows for the aggregation and analysis of company operating data.
Made2Manage Explorer lets executives drill quickly down into any business
document and see out of tolerance conditions within the facility.
- 2 -
M2MVIP. Launched in third quarter 2000, M2MVIP is a Web-based application
service that offers small and midsize manufacturing companies a range of
collaborative opportunities with their customers, sales channels and suppliers.
We believe M2MVIP will assist the manufacturer in sustaining customer loyalty
through improved service.
M2MEXPERT. The M2MEXPERT Web site provides Made2Manage customers with Internet
resources, including virtual education courses, cyber consulting and support
services 24 hours per day, seven days a week through the use of an online
searchable information database for troubleshooting.
Made2Manage is an enterprise-wide, client/server software solution designed for
use on PCs running Windows 2000, Windows NT Workstation, Windows 98 or Windows
95 over networks that utilize Windows 2000, Windows NT or Novell Netware
servers. It is a native 32-bit application with an object-oriented structure
developed using Microsoft's Visual Studio. The object-oriented, standards-based
architecture shortens development cycles, reduces costs of product enhancements,
opens the product for use with other applications, such as Microsoft Office, and
provides a more efficient environment for customer support. Additionally,
beginning in mid-2000, Made2Manage is available via the Internet through a
hosted Application Service Provider option. This option is accessible through
our M2MEXPRESS Web site.
Made2Manage is designed to enable users to do their jobs more effectively on a
consistent basis. Made2Manage provides a set of applications specific to the
demands of our target market. We believe these unique features include:
o Easy-to-use screens designed for employees, customers, sales channels and
suppliers that are generalists, not specialists, in the use of computers;
o An emphasis on lower-cost, standard technology, specifically Microsoft
technology, because our customers have limited Information Systems staff
and resources; and
o Functionality that can be readily learned and can be effectively supported
by the software provider.
PRODUCT DEVELOPMENT
We seek to enhance our competitive position by incorporating additional
functionality in Made2Manage to meet the evolving needs of manufacturers in our
target market. Product enhancement ideas originate from existing customers,
prospective customers and industry trend analysis. Input is collected through
surveys, interviews, user groups and customer service and support activities. We
analyze this input and identify changes for future product releases. Our product
development personnel have experience in software development, quality assurance
and documentation and are familiar with the specific business areas addressed by
the changes.
Our development methodology incorporates comprehensive quality assurance
procedures. A substantial component of our development budget is allocated to
quality assurance. Our testing processes include component level tests, unit
tests, posting tests, validation tests, regression tests, installation tests, CD
tests and production tests. We maintain risk assessment documents throughout the
development process to identify potential roadblocks to a timely and quality
release early enough to allow corrective action. Criterion-based (as opposed to
date-based) release guidelines help ensure consistent release quality.
Our product development expenditures were $6.4 million in 2000, $6.5 million in
1999, and $4.1 million in 1998. Development costs were expensed as incurred.
Software design and development is a complicated process, and there can be no
assurance that we will be able to complete features and products currently under
development in a timely manner or to develop features and products that find
market acceptance in the future.
SERVICE AND SUPPORT
We offer a full complement of services that allow our customers to maximize the
benefits that they receive from using Made2Manage, including implementation
assistance using our Time2Value tools and services, customer support and
education programs.
- 3 -
Time2Value Tools and Services
Time2Value tools and services are designed to help the manufacturer achieve a
quick, successful implementation that brings the manufacturer value in the
shortest amount of time. Time2Value tools and services include planning and
implementation guides, computer-based training tools, procedure analyses and
data conversion automation from legacy business systems.
Customer Support
We provide ongoing product support services under our support arrangements.
Support services are typically purchased by customers for a one-year term at the
time of entering into the sales agreement, and may be renewed for additional
annual periods. Support services include telephone support, electronic support
24 hours a day, seven days a week through our online searchable information
database and case management system, and periodic software updates. Over 90
percent of Made2Manage customers maintain an annual support arrangement.
Education Programs
We provide customers with a cost effective and convenient method to educate
their employees by use of Virtual Classroom. Virtual Classroom offers hands-on
instruction by demonstrating software functions in an interactive classroom
environment over the Internet. Each course includes hands-on exercises using the
software in the context of the user's typical workflow.
Additionally, traditional classroom education courses are offered for each of
the major user roles present in a small and midsize manufacturing business.
These courses are offered at our corporate offices, at regional locations and
on-site at the customer's facility.
Beginning in 2001,virtual and classroom education courses are offered via
Time2Learn, a subscription-based education program, which is accessible through
the M2MEXPERT Web site.
COMPETITION
The business management applications software market is fragmented, intensely
competitive and rapidly changing. We face competition from a large number of
independent software vendors, including application software vendors, software
tool vendors and relational database management system vendors. Several large
technology companies have recently expanded into the business management systems
market by acquiring established vendors in the market. Additionally, several
software companies that have traditionally marketed business management systems
to larger manufacturers have announced initiatives to market business management
systems to small and midsize manufacturers. Compared to us, many of our existing
competitors, as well as a number of potential competitors, have significantly
greater financial, technical and marketing resources and a larger base of
customers.
The technologies we use to develop Made2Manage are generally available and
widely known, including technology developed by Microsoft. Made2Manage competes
with other products principally on the basis that it is specifically designed
for small and midsize manufacturers, is relatively easy to implement and use,
and is supported by a well-developed system of service and support. In addition,
we believe that advanced features for messaging and Internet access
differentiate Made2Manage. We believe that Made2Manage compares favorably with
the products offered by competitors, but there can be no assurance that we will
continue to compete successfully against such products or that we will be able
to compete successfully against future competitors.
INTELLECTUAL PROPERTY
We regard our software products as proprietary in that title to and ownership of
the software we develop resides exclusively with Made2Manage Systems, Inc. We
license our software via a Certificate of License, which grants the user a
perpetual license to use the Made2Manage products. We rely largely upon our
license agreements with customers, dealer agreements with suppliers, our own
software protection tools, confidentiality agreements and employee agreements to
maintain the trade secret aspects of our products. We seek to protect our
programs, documentation and other written materials under copyright law.
- 4 -
We have a United States patent for software related to Materials Requirements
Planning regeneration and patent applications pending for software included in
Made2Manage related to a navigational interface and an e-commerce hosting
approach for the enterprise. We have no other patents or pending patent
applications.
We believe that we have all necessary rights to market our products, although
there can be no assurance that third parties will not assert infringement claims
in the future.
EMPLOYEES
As of December 31, 2000, we had 262 employees, consisting of 80 in sales and
marketing, 64 in product development, 85 in services and 33 in administration.
Each employee signs a confidentiality and nondisclosure agreement upon joining
Made2Manage Systems, Inc. We believe our employee relations are good.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of Made2Manage Systems, Inc., and their ages as of
December 31, 2000, are as follows:
Name Age Position with Company
- ---- --- ---------------------
David B. Wortman........ 49 Chairman of the Board, President and
Chief Executive Officer
D. Kirk Loncar.......... 54 Senior Vice President, Sales
Christopher D. Clapp.... 41 Vice President and General Manager, C-com Group
Traci M. Dolan.......... 43 Vice President, Finance and Administration,
Chief Financial Officer
J. David Koch........... 47 Vice President, Marketing
Gary W. Rush............ 43 Vice President, Chief Technology Officer
Joseph S. Swern......... 47 Vice President, Service and Support
DAVID B. WORTMAN joined Made2Manage Systems, Inc., in September 1993 as senior
vice president. He has served as president and chief executive officer and a
director since January 1994, and as chairman of the board since April 2000.
Prior to joining the Company, Mr. Wortman held a succession of senior executive
positions and served as a director of Pritsker Corporation, a computer software
company he co-founded in 1973. Mr. Wortman is a director of Walker Information,
Inc., and the Indiana Technology Partnership. He is a past president of the
Indiana Information Technology Association and the Institute of Industrial
Engineers. Mr. Wortman holds B.S. and M.S. degrees in industrial engineering
from Purdue University.
D. KIRK LONCAR joined Made2Manage Systems, Inc., as senior vice president, sales
in May 2000. Mr. Loncar is the former president and CEO of Sonigistix
Corporation, a British Columbia, Canada firm that specializes in flat panel
audio technology. He has held a number of senior positions in the computer and
software industries including IBM with both U.S. and international assignments.
He also built a European subsidiary for a U.S.-based software company, and later
was responsible for the company's strategic development of the Asia-Pacific
market. Mr. Loncar's undergraduate work was at Michigan State with graduate work
at the University of Munich and Harvard.
CHRISTOPHER D. CLAPP joined Made2Manage Systems, Inc., as vice president,
marketing in April 1996 and became vice president and general manager, C-com
group in January 2000. From November 1993 to February 1996, Mr. Clapp was
employed by Centillion Data Systems, Inc., serving as vice president and general
manager of that company's communications division. From January 1989 to November
1993, Mr. Clapp was employed at Pritsker Corporation, holding various positions,
including product manager and manager, sales operations, where he designed and
implemented the worldwide marketing strategy for that company's manufacturing
planning and scheduling software system. Mr. Clapp holds a B.S. degree in
industrial engineering from Purdue University.
- 5 -
TRACI M. DOLAN joined Made2Manage Systems, Inc., as vice president, finance and
administration and chief financial officer in March 2000. Ms. Dolan was
previously vice president of finance and operations at Indianapolis-based
Macmillan Publishing USA, one of the world's largest reference publishers. While
at Macmillan, Ms. Dolan was involved with helping the book publisher expand its
position into the Internet space, via an online content division. Her background
also includes 12 years of public accounting experience at PricewaterhouseCoopers
in Indianapolis. Ms. Dolan is a graduate of Indiana University with a B.S.
degree in accounting.
J. DAVID KOCH joined Made2Manage Systems, Inc., as vice president, marketing in
April 2000. Prior to joining Made2Manage Systems, Mr. Koch gained experience in
software development as the director of product development with the Walt Disney
Corporation. Before that, he was vice president for Saban Entertainment's
Interactive Division and held other senior high tech positions in Hollywood, CA.
His strengths include extensive experience in corporate branding and
positioning. His advertising experience focuses on attracting prospects and lead
generation. Mr. Koch is a Navy veteran and a graduate of University of Hawaii.
GARY W. RUSH joined Made2Manage Systems, Inc., as vice president, development in
May 1994 and was named chief technology officer in June 2000. Mr. Rush was
president of Micro Data Base Systems, Inc., a provider of relational and network
database management software, prior to joining Made2Manage Systems. During his
14-year tenure at Micro Data Base Systems, Mr. Rush held various other
positions, including chief operating officer, vice president of development, and
vice president of consulting. Mr. Rush holds a B.S.E.E. and an M.S.M. with a
focus on management information systems from Purdue University.
JOSEPH S. SWERN joined Made2Manage Systems, Inc., in September 1995 as vice
president, service and support. Prior to joining Made2Manage Systems, Mr. Swern
served as vice president of professional services at Symix Computer Systems,
Inc., During his seven-year tenure at Symix, Mr. Swern also served as director
of consulting services, manager of implementation consulting and senior
implementation consultant. Preceding his employment with Symix. Mr. Swern spent
ten years working in both discrete and process manufacturing, holding various
management positions. He has a Certification in production and inventory
management from the American Production and Inventory Control Society. Mr. Swern
holds a B.S. degree in industrial management from Franklin University and an
M.B.A. from Capital University.
Officers are elected by the Board of Directors at each annual meeting and serve
at the pleasure of the Board of Directors.
DIRECTOR NOT STANDING FOR RE-ELECTION
John M. Dillon, age 51
President and Chief Executive Officer, salesforce.com
Member of the Compensation Committee and Audit Committee
Mr. Dillon was named president and chief executive officer of salesforce.com in
September 1999. Salesforce.com is a provider of salesforce automation and
customer relationship solutions over the Internet. Previously, Mr. Dillon served
as interim president and CEO for Perfecto Technologies. Prior to Perfecto, Mr.
Dillon was president and CEO of Hyperion, a leading provider of enterprise
software for business reporting and analysis. Mr. Dillon has also been the past
president of Arbor Software and has served in various sales management positions
at Oracle Corporation. He holds an M.B.A. degree from Golden Gate University and
a B.S. degree in engineering from the United States Naval Academy.
- 6 -
ITEM 2. PROPERTIES.
Our headquarters are located in Indianapolis, Indiana, where we lease space
housing administrative, sales and marketing, customer service and product
development activities. In addition, we lease office space in San Bruno,
California, Malvern, Pennsylvania and Haifa, Israel. We believe that our
facilities are adequate for the present, but anticipate expanding our
facilities, as necessary, in the future.
ITEM 3. LEGAL PROCEEDINGS.
We are not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
- 7 -
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.
Our common stock is traded on The Nasdaq Stock Market(R) under the symbol MTMS.
As of March 1, 2001, we had 54 shareholders of record and approximately 1,350
beneficial holders of our common stock.
We have never declared or paid any cash dividends on our common stock. We
currently intend to retain all earnings to finance future growth, and we do not
anticipate paying any cash dividends in the foreseeable future.
The following table presents the high and low sales prices for our common stock
as reported by The Nasdaq Stock Market.
High Low
---- ---
Fiscal Year 2000
----------------
First Quarter....................................$ 10.50 $ 7.63
Second Quarter................................... 8.88 5.38
Third Quarter.................................... 6.00 3.13
Fourth Quarter................................... 3.50 1.66
Fiscal Year 1999
----------------
First Quarter....................................$ 14.75 $ 7.50
Second Quarter................................... 12.25 7.88
Third Quarter.................................... 8.50 6.06
Fourth Quarter................................... 10.25 5.63
- 8 -
ITEM 6. Selected Financial Data.
Year Ended December 31,
----------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- ------- ------ -------
(in thousands, except per share data)
Statement of Operations Data:
Total revenues.................................... $ 32,890 $ 31,062 $ 27,242 $ 16,167 $ 9,379
Operating income (loss) (3)....................... (4,607) (3,157) 603 1,014 700
Income tax provision (benefit).................... (1,433) (1,040) 1,038 366 (1,028)(1)
Net income (loss) (3)............................. (2,547) (1,539) 144 613 1,606
Per share amounts:
Basic:
Net income (loss) per share (3).......... (0.54) (0.33) 0.03 1.17 4.29
Weighted average shares outstanding...... 4,739 4,600 4,331 524 375
Diluted:
Net income (loss) per share (3).......... (0.54) (0.33) 0.03 0.25 0.73
Weighted average shares outstanding...... 4,739 4,600 5,025 2,440 2,200
Cash dividends declared per share................. --- --- --- --- ---
At December 31,
----------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- ------- ------ -------
(in thousands)
Balance Sheet Data:
Cash and cash equivalents......................... $ 11,336 $ 12,610 $ 15,496 $ 16,805(2) $ 1,139
Total assets...................................... 31,745 31,624 33,894 25,560 6,666
Long-term obligations, less current portion....... --- --- --- --- 436
Total shareholders' equity........................ 16,921 18,871 19,938 18,304 2,116
(1) The income tax benefit for 1996 resulted from the reversal of a valuation allowance that had been
established to offset the future tax benefits of net operating loss carryforwards. The valuation
allowance was reversed during 1996 based on management's analysis, which considered our profitable
operating results and future outlook because of the market acceptance of Made2Manage. As a result of
this analysis, management determined it was more likely than not that the deferred income taxes at
December 31, 1996, would be realized. For subsequent periods we have provided for income taxes
utilizing federal and state statutory income tax rates.
(2) On December 19, 1997, we completed our initial public offering of common stock. We received net
proceeds of $15.5 million, of which $1.0 million was used to repay outstanding indebtedness.
(3) See "Management's Discussion and Analysis of Financial Condition and Results of Operations -
Acquired In-Process Technology" for comparative pro forma results excluding the acquired in-process
technology charge and the write-down and amortization of intangible assets related to the
acquisition of Bridgeware for the years ended December 31, 2000, 1999 and 1998.
- 9 -
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This report contains certain "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended. These statements reflect our expectations regarding our
strategic plans, future growth, results of operations, performance, business
prospects and opportunities. Words such as "estimates," "believes,"
"anticipates," "plans" and similar expressions may be used to identify these
forward-looking statements, but are not the exclusive means of identifying these
statements. These statements reflect our current beliefs and are based on
information currently available to us. Accordingly, these statements are subject
to known and unknown risks, uncertainties and other factors that could cause our
actual growth, results, performance, business prospects and opportunities to
differ from those expressed in, or implied by, these statements. In light of the
uncertainties inherent in any forward-looking statement, the inclusion of a
forward-looking statement herein should not be regarded as a representation by
us that our plans and objectives will be achieved. Actual results or events
could differ materially from those anticipated in any forward-looking statements
for the reasons discussed in this section, in the "Business Environment and Risk
Factors" section below, and elsewhere in this report, or for other reasons. We
are not obligated to update or revise these forward-looking statements to
reflect new events or circumstances or otherwise. Additional information
concerning factors that could cause actual results to differ materially from
those in the forward-looking statements is contained in the Company's SEC
reports, including the report on Form 10-K for the year ended December 31, 2000.
OVERVIEW
Since our inception in 1986, we have developed, marketed, licensed and supported
comprehensive enterprise application solutions for small and midsize
manufacturers engaged in engineer-to-order, make-to-order, assemble-to-order,
make-to-stock and mixed styles of production. Our principal product, Made2Manage
Enterprise Edition ("Made2Manage"), provides fully integrated solutions for all
of the business processes used by manufacturers, from selling and design,
through manufacturing and distribution. This comprehensive enterprise
application suite includes applications in Enterprise Resource Planning ("ERP"),
Customer Relationship Management ("CRM"), Supply Chain Management ("SCM") and
Business Intelligence ("BI"). It also incorporates Web-based applications
including M2MVIP, which offers manufacturing companies a range of collaborative
opportunities with their customers, sales channels and suppliers, and M2MEXPERT,
which provides our customers with Internet resources including support services
24 hours per day, seven days a week, cyber-consulting and virtual education
courses.
During 1998, we acquired Bridgeware, Inc., a company that offers advance
planning and scheduling software, for a combination of cash and common stock
totaling $4.5 million.
Made2Manage is sold in the United States, Canada and the United Kingdom. In
January 2000, we entered into a distributor relationship with 4Front
Technologies, Inc., to sell, market and support our product in Europe. 4Front
Technologies, Inc., was recently acquired by NCR Corporation. The impact of this
acquisition on our European sales activity has not yet been determined.
Currently, approximately 99% of our revenues are derived from customers in the
United States.
- 10 -
Our revenues are derived from software licenses, services and hardware. Software
revenues are generated from licensing software to new customers, and from
current customers increasing the number of licensed users and licensing new
applications. We recognize revenue from software license fees and hardware upon
shipment to the customer following execution of a sales agreement. Services
revenues are generated from annual fees paid by customers to receive support
services and software upgrades and also from implementation, education and
consulting services. Support is typically purchased as part of the initial sales
agreement and is renewable annually. Support fees are recognized ratably over
the term of the agreement. Services revenues from implementation, education and
consulting services are generally included in the initial agreement. We
recognize revenue from these services as they are performed. Beginning in
2001,virtual and classroom education courses are offered via Time2Learn, a
subscription-based education program, which is accessible through the M2MEXPERT
Web site. Subscription revenues from M2MEXPRESS and M2MVIP are also reflected in
services revenues and are recognized ratably over the subscription period.
Hardware revenues are generated primarily from the sale of bar-coding and data
collection equipment used in connection with Made2Manage and constitute a
relatively small component of total revenues.
Software revenues for a particular quarter depend substantially on orders
received and products shipped in that quarter. Furthermore, large orders may be
significant to operating income in the quarter in which the corresponding
revenue is recognized.
- 11 -
RESULTS OF OPERATIONS
The following table sets forth the percentage of total revenues represented by
certain items included in our statements of operations for the periods
indicated.
Percent
Increase (Decrease)
Year Ended December 31, ------------------------
------------------------------- 2000 over 1999 over
2000 1999 1998 1999 1998
---- ---- ---- ---- ----
Revenues:
Software......................... 45.3% 44.2% 59.2% 8.5% (14.8)%
Services......................... 51.4 52.3 37.8 4.1 57.9
Hardware......................... 3.3 3.5 3.0 (0.5) 30.5
----- ----- -----
Total revenues............... 100.0 100.0 100.0 5.9 14.0
----- ----- -----
Costs of revenues:
Software......................... 5.6 5.1 3.7 17.4 56.3
Write-down and amortization of
purchased technology......... 4.3 1.3 0.6 258.5 139.6
Services......................... 25.8 28.2 20.7 (3.2) 55.2
Hardware......................... 2.3 2.3 2.1 3.5 31.7
----- ----- -----
Total costs of revenues...... 38.0 36.9 27.1 9.1 55.5
----- ----- -----
Gross profit................. 62.0 63.1 72.9 4.0 (1.4)
----- ----- -----
Operating expenses:
Sales and marketing.............. 40.4 37.5 36.2 14.0 18.2
Product development.............. 19.4 21.0 15.1 (2.5) 59.2
General and administrative....... 13.5 13.9 12.1 3.0 30.5
Write-down and amortization of
goodwill..................... 2.7 0.8 0.4 257.7 140.8
Acquired in-process technology... --- --- 6.9 --- (100.0)
----- ----- -----
Total operating expenses..... 76.0 73.2 70.7 9.8 18.1
----- ----- -----
Operating income (loss)............... (14.0) (10.1) 2.2 (45.9) (623.5)
Other income, net..................... 1.9 1.8 2.1 8.5 (0.2)
----- ----- -----
Income (loss) before income taxes..... (12.1) (8.3) 4.3 (54.3) (318.2)
Income tax provision (benefit)........ (4.4) (3.3) 3.8 (37.8) (200.2)
Net income (loss)..................... (7.7)% (5.0)% 0.5% (65.5) NM
===== ===== =====
NM - Not Meaningful
COMPARISONS OF YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
REVENUES
Revenues are derived from software licenses, service and support fees and
hardware sales. Total revenues increased by $1.8 million, or 5.9%, to $32.9
million in 2000 from $31.1 million in 1999. Total revenues increased by $3.8
million, or 14.0%, in 1999 from $27.2 million in 1998. The increase in 2000 was
driven by increases in software and services revenues, while the increase in
1999 was primarily due to an increase in services revenues. We have not
historically recognized significant annual revenues from any single customer.
Although revenues increased year over year in 2000 and 1999, we believe we were
adversely affected by the industry-wide trend of delays in new business system
purchases, as evidenced by the decrease in the number of new system orders year
over year in 2000 and 1999. The slow-down, which began around the middle of 1999
and continued through the first half of 2000, was due in part to Year 2000
impacts on buying decisions. We also believe manufacturers were experiencing
some confusion regarding e-commerce solutions, which further delayed buying
decisions. See "Business Environment and Risk Factors - Year 2000 Market
Dynamics" for a description of Year 2000 market dynamics and potential revenue
impact.
- 12 -
Software Revenues. Software license revenues increased by $1.2 million, or 8.5%,
to $14.9 million in 2000 from $13.7 million in 1999 and decreased by $2.4
million, or 14.8%, in 1999 from $16.1 million in 1998. Software license revenues
constituted 45.3%, 44.2% and 59.2% of total revenues in 2000, 1999 and 1998,
respectively. The increase in software revenues in 2000 was attributed to an
increase in the average order size, which offset the decrease in the number of
license transactions. The decrease in software revenues in 1999 compared to 1998
was mainly due to a lower volume of license transactions and, to a lesser
extent, a decrease in the average contract size.
Services Revenues. Services revenues increased by $661,000, or 4.1%, to $16.9
million in 2000 from $16.2 million in 1999 and increased by $6.0 million, or
57.9%, in 1999 from $10.3 million in 1998. Services revenues constituted 51.4%,
52.3% and 37.8% of total revenues in 2000, 1999 and 1998, respectively. The
increases in services revenues were largely due to support fees from an
expanding user base. However, while other services revenues increased in 1999
due to greater utilization by customers of our expanded consulting,
customization and education offerings, these revenues decreased in 2000 as a
result of the decrease in the number of new system orders.
Hardware Revenues. Hardware revenues in 2000 were substantially flat compared to
1999 at $1.1 million and increased by $252,000, or 30.5%, in 1999 from $827,000
in 1998. Hardware revenues constituted 3.3%, 3.5% and 3.0% of total revenues in
2000, 1999 and 1998, respectively. The hardware equipment sold was bar-coding
and data collection equipment necessary to utilize certain features of
Made2Manage. Although the number of new system orders decreased, hardware
revenues remained flat in 2000 and even increased in 1999 due to increased
demand for this equipment as a result of continued expansion of the number of
customers using our software.
Subscription Revenues. Subscription revenues from M2MEXPRESS, which was
introduced mid-2000, totaled $44,000 for the year. There were no revenues from
M2MVIP, which was launched in the third quarter 2000. However, more than 50
customers were signed up for M2MVIP services by the end of the year.
Subscription revenues are included in services revenues in the consolidated
statements of operations.
International Revenues. International revenues totaled $278,000 in 2000 for
software, hardware and support and represented 0.8% of total revenues.
COSTS OF REVENUES
Costs of Software Revenues. Costs of software revenues totaled $1.9 million,
$1.6 million and $1.0 million in 2000, 1999 and 1998, respectively, resulting in
gross profits of 87.5%, 88.5% and 93.7% of software revenues, respectively. The
decreases in gross profit percentages in 2000 and 1999 were due to a greater
proportion of software revenues generated from third-party products.
Additionally, royalties associated with the upgrade of Made2Manage to the
Microsoft SQL server database were introduced in the third quarter 2000 and are
reflected in costs of software revenues.
Write-down and Amortization of Purchased Technology. In August 1998, we acquired
Bridgeware, Inc., which gave rise to the purchased technology asset. During the
third quarter 2000, we decided to accelerate development of an integrated
multi-level planning suite that will largely replace the acquired technology.
That decision resulted in an impairment of the purchased technology asset, which
was written down to its net realizable value. The non-cash write-down and
amortization of purchased technology in 2000 was $1.4 million as compared to
amortization of $393,000 and $164,000 in 1999 and 1998, respectively. See
"Operating Expenses - Acquired In-Process Technology" for comparative pro forma
results of operations excluding the acquired in-process technology charge and
the write-down and amortization of intangible assets related to the acquisition
of Bridgeware.
Costs of Services Revenues. Costs of services revenues totaled $8.5 million,
$8.8 million and $5.6 million in 2000, 1999 and 1998, respectively, resulting in
gross profits of 49.8%, 46.1% and 45.2% of services revenues, respectively. The
gross profit percentages continue to increase as services and support revenues
increase with our expanding customer base. At the same time, staffing levels,
which were increased in 1999 to accommodate the growing customer base, remained
relatively flat in 2000 due to operating efficiencies.
Costs of Hardware Revenues. Costs of hardware revenues totaled $761,000,
$735,000 and $558,000 in 2000, 1999 and 1998, respectively. Gross profits from
hardware were 29.1%, 31.9% and 32.5% of hardware revenues in 2000, 1999 and
1998, respectively.
- 13 -
OPERATING EXPENSES
Sales and Marketing Expenses. Sales and marketing expenses were $13.3 million,
$11.7 million and $9.9 million in 2000, 1999 and 1998, respectively,
representing 40.4%, 37.5% and 36.2% of total revenues, respectively. The
increases in sales and marketing expenses in 1999 and 2000 were primarily due to
increased (i) staffing for sales and marketing, (ii) marketing activities,
including promotional activities, (iii) travel expenses related to sales and
marketing efforts, (iv) costs associated with starting up the international
sales effort and (v) costs associated with marketing M2MEXPRESS and M2MVIP with
substantially no offsetting revenues.
Product Development Expenses. Product development expenses were $6.4 million,
$6.5 million and $4.1 million in 2000, 1999 and 1998, respectively, representing
19.4%, 21.0% and 15.1% of total revenues, respectively. We did not capitalize
any software development costs during these years, since the capitalizable
portion was not significant. Product development expense increases in 1999 were
related to (i) enhancements to existing products and development of new products
to meet the evolving needs of our customers, (ii) an expanded quality assurance
organization to increase customer satisfaction and (iii) the full year impact of
the Bridgeware development workforce, which was acquired in August 1998. In
2000, we were able to continue progress in the aforementioned areas while at the
same time containing costs.
General and Administrative Expenses. General and administrative expenses were
$4.5 million, $4.3 million and $3.3 million in 2000, 1999 and 1998,
respectively, representing 13.5%, 13.9% and 12.1% of total revenues,
respectively. The increase in expenses in 1999 resulted primarily from
additional costs incurred to support the growth of operations. This enhanced
infrastructure was also adequate to support the level of growth in 2000,
resulting in moderate expense increases in 2000.
Write-down and Amortization of Goodwill. In August 1998, we recorded purchased
technology and related goodwill associated with the acquisition of our
Bridgeware subsidiary. During the third quarter 2000, we decided to accelerate
development of an integrated multi-level planning suite that will largely
replace the acquired technology. That decision resulted in an impairment of the
purchased technology asset and related goodwill, which were written down to
their net realizable value. The non-cash write-down and amortization of goodwill
in 2000 was $887,000 as compared to amortization of $248,000 and $103,000 in
1999 and 1998, respectively. See "Operating Expenses - Acquired In-Process
Technology" for comparative pro forma results of operations excluding the
acquired in-process technology charge and the write-down and amortization of
intangible assets related to the acquisition of Bridgeware.
Acquired In-Process Technology. This charge of $1.9 million in 1998 was a result
of the amounts assigned to in-process technology in connection with the
acquisition of Bridgeware.
On a pro forma basis, exclusive of the Bridgeware acquisition charge for
in-process technology and write-down and amortization of intangible assets,
results of operations would be comparatively reported as follows.
Results excluding the acquired in-process technology charge and the write-down
and amortization of intangible assets related to the Bridgeware acquisition (1):
Year Ended December 31,
-----------------------
2000 1999 1998
---- ---- ----
(in thousands, except per share data)
Total revenues...................................$ 32,890 $ 31,062 $ 27,242
Operating income (loss).......................... (2,259) (2,464) 2,782
Net income (loss)................................ (740) (1,011) 2,255
Per share amounts:
Basic:
Net income (loss) per share...............$ (0.16) $ (0.22) $ 0.52
========= ========= =========
Average number of shares.................. 4,739 4,600 4,331
========= ========= =========
Diluted:
Net income (loss) per share..................$ (0.16) $ (0.22) $ 0.45
========= ========= =========
Average number of shares..................... 4,739 4,600 5,025
========= ========= =========
(1) Intangible assets include purchased technology, assembled workforce and
goodwill recorded in connection with the Bridgeware acquisition.
- 14 -
OTHER INCOME, NET
Other income, net was $627,000, $578,000 and $579,000 in 2000, 1999 and 1998,
respectively, representing 1.9%, 1.8% and 2.1% of total revenues, respectively.
Other income, net principally reflects interest earned on the remaining proceeds
of our initial public offering, which was completed in December 1997.
INCOME TAX PROVISION (BENEFIT)
The income tax provision (benefit) effective rate was (36.0%), (40.3%) and 87.8%
in 2000, 1999 and 1998, respectively. Excluding the write-down and amortization
of goodwill and the acquired in-process technology charge, the income tax
provision (benefit) effective rate was (46.3%), (44.6%) and 32.7% in 2000, 1999
and 1998, respectively. The write-down and amortization of goodwill and the
acquired in-process technology charge are not deductible for income tax
purposes.
LIQUIDITY AND CAPITAL RESOURCES
We have funded our operations primarily through equity capital, including the
initial public offering of common stock in December 1997, debt and cash
generated from operations. As of December 31, 2000, we had $12.0 million of
cash, cash equivalents and marketable securities.
The net change in cash, cash equivalents and marketable securities was a
reduction of $2.5 million, $2.2 million and $159,000 in 2000, 1999 and 1998,
respectively. Purchases of computer equipment and office furniture aggregated
$1.8 million, $2.8 million and $2.5 million in 2000, 1999 and 1998,
respectively. Additionally, in 1998, we generated $5.6 million of cash flows
from operations and used $3.5 million in connection with the acquisition of our
Bridgeware subsidiary.
At December 31, 2000, we had working capital of $10.7 million. Accounts
receivable, net of allowance for doubtful accounts, were $11.5 million and $7.4
million at December 31, 2000 and 1999, respectively. The average accounts
receivable days outstanding was 108 days at December 31, 2000, and 93 days as of
December 31, 1999. The increase in the average accounts receivable days
outstanding was primarily driven by increases in average order size, support
renewals and deferred revenues. Deferred revenue increased to $10.9 million at
December 31, 2000, from $9.4 million at December 31, 1999. Deferred revenue
principally relates to support agreements or contracted services, and the
current portion of deferred revenue is expected to be recognized in revenue
during the next twelve months. Deferred revenue increased primarily as a result
of high support renewal rates from the installed base of customers and from
sales of new systems that contain support and service components, which are
recognized on a straight-line basis over the support period or when the service
is delivered.
We have a revolving credit agreement with a commercial bank that expires on
April 30, 2001, borrowings under which bear interest at the prime rate (9.50% at
December 31, 2000). Loans under the revolving credit agreement are limited to $2
million. We have not borrowed under the revolving line of credit.
We believe that cash and cash equivalents, cash flow from operations and credit
commitments will be sufficient to meet our currently anticipated working capital
and capital expenditure requirements at least through 2001.
YEAR 2000
The Year 2000 issue relates to whether computer systems are able to properly
recognize and process information relating to dates in and after the year 2000.
Prior to January 1, 2000, significant uncertainty existed in the software
industry concerning the potential consequences that might have occurred from the
failure of software to adequately address the Year 2000 issue. We have not
encountered any Year 2000 compliance issues relating to our currently developed
and actively marketed software products or with our internal computer
information system and non-computer systems.
We expensed all costs related to preparation for Year 2000 issues. The total
costs of evaluation and compliance were not material.
- 15 -
INFLATION
We believe that inflation has not had a material impact on our operations.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission Staff issued Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB
101"), which provides guidance on the recognition, presentation, and disclosure
of revenue in the financial statements. Consistent with the requirements to
implement SAB 101 no later than the fourth quarter for fiscal years beginning
after December 15, 1999, we adopted the provisions of SAB 101 and the resulting
impact was immaterial to our consolidated financial position, results of
operations or cash flows.
BUSINESS ENVIRONMENT AND RISK FACTORS
In addition to other information contained in this report, the following factors
could affect our actual results and could cause such results to differ
materially from those achieved in the past or expressed in our forward-looking
statements.
Fluctuations of Quarterly Operating Results; Seasonality
We have experienced in the past, and expect to experience in the future,
significant fluctuations in quarterly operating results. A substantial portion
of our software license revenues in each quarter is from licenses signed and
product shipped in that quarter, and such revenues historically have been
recorded largely in the third month of the quarter, with a concentration of
revenues mostly in the last week of that third month. Accordingly, our quarterly
results of operations are difficult to predict, and delays in closings of sales
near the end of a quarter or product delivery could cause quarterly revenues
and, to a greater degree, net income to fall substantially short of anticipated
levels. In addition, we have experienced a seasonal pattern in our operating
results, with the fourth quarter typically having the highest total revenues and
operating income and the first quarter having historically reported lower
revenues and operating income compared to the fourth quarter of the preceding
year.
Other factors, many of which are beyond our control, that may contribute to
fluctuations in quarterly operating results include the size of individual
orders, the timing of product introductions or enhancements by us and our
competitors, competition and pricing in the manufacturing software industry,
market acceptance of new products, reduction in demand for existing products,
the shortening of product life cycles as a result of new product introductions
by us or our competitors, product quality problems, personnel changes,
conditions or events in the manufacturing industry, and general economic
conditions.
The sales cycle for Made2Manage typically ranges from three to nine months.
However, license signing may be delayed for a number of reasons outside of our
control. Since software is generally shipped as orders are received, we have
historically operated without significant backlog.
Because our operating expenses are based on anticipated revenue levels and a
high percentage of our expenses are relatively fixed in the short term, small
variations in the timing of revenue recognition can cause a significant
fluctuation in operating results from quarter to quarter and may result in
unanticipated quarterly earnings shortfalls or losses. In addition, we may
increase operating expenses in anticipation of continued growth and to fund
expanded product development efforts. To the extent such expenses precede, or
are not subsequently followed by, increased revenues, our business, financial
condition and results of operations could be materially and adversely affected.
Year 2000 Market Dynamics
We believe the Year 2000 phenomenon reduced demand for enterprise business
systems in 1999 and 2000. We believe that in 1999 certain customers and
potential customers were engaged in testing and correcting Year 2000 system
problems, and such customers may have chosen to defer system investments during
1999, negatively impacting our revenues. Additionally, each customer's
evaluation of its Year 2000 compliance with other internal systems potentially
lengthened the sales cycle. In contrast, 1998 sales may have been increased due
to customers' need to address their business system requirements in conjunction
with Year 2000 system issues.
- 16 -
Product and Market Concentration
Our revenues are currently derived from licenses of Made2Manage, including
optional modules and third-party software, and related support, services and
hardware. In the near term, Made2Manage and related services are expected to
continue to account for substantially all of our revenues. Accordingly, any
event that adversely affects the sale of Made2Manage, such as competition from
other products, significant quality problems, incompatibility with third-party
hardware or software products, negative publicity or evaluation, reduced market
acceptance of, or obsolescence of the hardware platforms on, or software
environments in which Made2Manage operates, could have a material adverse effect
on our business, financial condition and results of operations.
Our business depends substantially upon the software expenditures of small and
midsize manufacturers, which in part depend upon the demand for such
manufacturers' products. An economic slow-down or other adverse event affecting
manufacturing industries in the United States could impact such demand, causing
manufacturers in our target market to curtail or postpone capital expenditures
for business information systems. Any adverse change in the amount or timing of
software expenditures by our target customers could have a material adverse
effect on our business, financial condition and results of operations.
Dependence on Third-party Technologies
Made2Manage uses a variety of third-party technologies, including operating
systems, tools and other applications developed and supported by Microsoft
Corporation ("Microsoft"). There can be no assurance that Microsoft will
continue to support the operating systems, tools and other applications utilized
by Made2Manage or that they will continue to be widely accepted in our target
market. Made2Manage relies heavily on Microsoft Visual Studio and Microsoft SQL
Server, and there can be no assurance that Microsoft will not discontinue or
otherwise fail to support Visual Studio or SQL Server or any of its components.
In addition, we use a number of other programming tools and applications,
including ActiveX, OLE, ODBC, OLEDB, MSMQ, Site Server and Internet Information
Server.
We sublicense various third-party products, including Microsoft Visual FoxPro,
Microsoft SQL Server, Microsoft Project, products from Powerway, Best Software,
ADS Inc., Interact Commerce and FRx, and bar code hardware and software. There
can be no assurance that these third-party vendors will continue to support
these technologies or that these technologies will retain their level of
acceptance among manufacturers in our target market. The occurrence of any of
these events could have a material adverse effect on our business, financial
condition and results of operations.
Product Development and Rapid Technological Change
Our growth and future financial performance depend in part upon our ability to
enhance existing applications and to develop and introduce new applications to
incorporate technological advances that satisfy customer requirements or
expectations. As a result of the complexities inherent in product development,
there can be no assurance that either improvements to Made2Manage or
applications that we develop in the future will be delivered on a timely basis
or ultimately accepted in the market. Any failure by us to anticipate or respond
adequately to technological development or end-user requirements, or any
significant delays in product development or introduction, could damage our
competitive position and have a material adverse effect on our business,
financial condition and results of operations.
Internet and Potential for Subscription Revenue Business Model
We believe the Internet is changing the way businesses operate and therefore the
software needs of customers. We believe customers will increasingly require
e-business applications and software solutions that will enable them to engage
in commerce or service over the Internet. If we are unable to respond to
emerging industry standards and technological changes, we may not be able to
deliver products and services that meet our customers' changing needs. If we are
not successful in addressing these changing needs, our products may become
obsolete and our financial results may be materially and adversely impacted.
Furthermore, advances in Internet and e-commerce applications may lead the
enterprise business system market to rapid acceptance of Application Service
Provider ("ASP"), a hosted method of delivering business system solutions. The
ASP method of delivery uses a subscription revenue model, and although
subscriptions could improve predictability of future revenue, it delays revenue
recognition and cash collections as compared to the current method. Therefore,
if there is a rapid change to the ASP business model, our near term financial
results and financial position may be materially and adversely impacted.
- 17 -
Dependence on Key Personnel
Our success depends to a significant extent upon a number of key employees,
including members of senior management. No employee is subject to an employment
contract. Our ability to implement business strategy is substantially dependent
on our ability to attract, on a timely basis, and retain skilled personnel,
especially sales, service, support and development personnel. Competition for
such personnel is intense, and we compete for such personnel with numerous
companies, including larger, more established companies with significantly
greater financial resources. There can be no assurance that we will be
successful in attracting and retaining skilled personnel. The loss of the
services of one or more of the key employees or the failure to attract and
retain qualified employees could have a material adverse effect on our business,
financial condition and results of operations.
Management of Growth; International Expansion
We have experienced growth in our domestic business and operations. While we
have managed this growth to date, there can be no assurance that we will be able
to effectively do so in the future. Our ability to manage growth successfully is
contingent on a number of factors including our ability to implement and improve
operational, financial and management information systems and to motivate and
effectively manage employees.
We have begun to distribute Made2Manage in international markets, primarily the
United Kingdom. We have no significant experience in international markets, and
there can be no assurance that such expansion can be successfully accomplished
or that Made2Manage will be successfully adapted or accepted in the
international markets. Additionally, we rely extensively on our distributor in
the United Kingdom, 4Front Technologies, Inc., to sell and service the United
Kingdom market place. 4Front Technologies, Inc., was recently acquired by NCR
Corporation. The impact of this acquisition has not yet been determined. If
4Front Technologies, Inc., is unable or unsuccessful in promoting, selling and
servicing Made2Manage, our financial condition and results of operations could
be materially and adversely affected. At present, our international plans
include only Canada and the United Kingdom.
Risks Associated with Acquisitions
As part of our business strategy, we expect to review acquisition prospects that
would complement our existing product offerings, augment market coverage,
enhance technological capabilities, or that may otherwise offer growth
opportunities. Acquisitions could result in potentially dilutive issuances of
equity securities, the incurrence of debt and contingent liabilities or
amortization expenses related to goodwill and other intangible assets, any of
which could materially adversely affect operating results and/or the price of
our common stock. Acquisitions entail numerous risks, including difficulties in
the assimilation of acquired operations, technologies and products, diversion of
management's attention from other business concerns, risks of entering markets
in which we have no or limited prior experience and potential loss of key
employees of acquired organizations. No assurance can be given as to our ability
to successfully integrate any businesses, products, technologies or personnel
that might be acquired in the future, and the failure to do so could have a
material adverse effect on our business and financial condition or results of
operations.
Insufficient Customer Commitment
To obtain the benefits of Made2Manage, customers must commit resources to
implement and manage the product and to train their employees in the use of the
product. The failure of customers to commit sufficient resources to those tasks
or to carry them out effectively could result in customer dissatisfaction with
Made2Manage. If a significant number of customers became dissatisfied, our
reputation could be tarnished and our business, financial condition and results
of operations could be materially and adversely affected.
Competition
The business management applications software market is intensely competitive,
rapidly changing and significantly affected by new product offerings and other
market activities. We face competition from a variety of software vendors,
including application software vendors, software tool vendors and relational
database management system vendors. A number of companies offer products that
are directed at the market for business management systems. The technologies we
use to develop Made2Manage are generally available and widely known and include
technologies developed by Microsoft. There can be no assurance that competitors
will not develop products based on the same technology upon which Made2Manage is
based.
- 18 -
Our competitors include a large number of international, national and regional
software and system vendors, many of which are public companies. Several large
technology companies have recently expanded into the business management systems
market by acquiring established vendors in the market. Additionally, several
software companies that have traditionally marketed business management systems
to larger manufacturers have announced initiatives to market business management
systems to small and midsize manufacturers. Compared to us, many of the existing
competitors, as well as a number of potential competitors, have significantly
greater financial, technical and marketing resources and a larger installed base
of customers. There can be no assurance that such competitors will not offer or
develop products that are superior to Made2Manage or that achieve greater market
acceptance. If such competition were to result in significant price declines or
loss of market share for Made2Manage, our business, financial condition and
results of operation would be adversely affected.
Relationships with Value Added Resellers
We distribute our software products through a direct sales force and a network
of value added resellers ("VARs"). A significant portion of licenses of
Made2Manage sold to new customers is sold by VARs. If some or all of the VARs
reduce their efforts to sell Made2Manage, promote competing products or
terminate their relationships with us, our business, financial condition and
results of operation would be materially and adversely affected. Furthermore,
VARs frequently develop strong relationships with their customers, so if VARs
criticize us or our products to their customers, our reputation could be
damaged, which could have a material adverse effect on our business, financial
condition or results of operations.
Additionally, we rely extensively on our distributor in the United Kingdom,
4Front Technologies, Inc., to sell and service the United Kingdom market place.
4Front Technologies, Inc., was recently acquired by NCR Corporation. The impact
of this acquisition has not yet been determined. If 4Front Technologies, Inc.,
is unable or unsuccessful in promoting, selling and servicing Made2Manage, our
financial condition and results of operations could be materially and adversely
affected.
Product Liability and Lack of Insurance
We market, sell and support software products used by manufacturers to manage
their business operations and to store substantially all of their operational
data. Software programs as complex as those we offer may contain undetected
errors, despite testing, which are discovered only after the product has been
installed and used by customers. There can be no assurance that errors will not
be found in existing or future releases of our software or that any such errors
will not impair the market acceptance of these products. A customer could be
required to cease operations temporarily and some or all of its key operational
data could be lost or damaged if its information systems fail as the result of
human error, mechanical difficulties or quality problems in Made2Manage or
third-party technologies utilized by Made2Manage. We have insurance covering
product liability or damages arising from negligent acts, errors, mistakes or
omissions; however there can be no assurance that this insurance will be
adequate. A claim against us, if successful and of a sufficient magnitude, could
have a material adverse effect on our business, financial condition and results
of operations.
Dependence on Proprietary Rights; Risk of Infringement
We rely primarily on a combination of trade secret, copyright and trademark
laws, nondisclosure agreements and other contractual provisions and technical
measures to protect our proprietary rights. There can be no assurance that these
protections will be adequate or that competitors will not independently develop
products incorporating technology that is substantially equivalent or superior
to our technology. We have a United States patent for software related to
Materials Requirements Planning regeneration and patent applications pending for
software included in Made2Manage related to a navigational interface and an
e-commerce hosting approach for the enterprise. However, we have no other
patents or patent applications pending, and existing copyright laws afford only
limited protection. In the event that we are unable to protect our proprietary
rights, our business, financial condition and results of operations could be
materially and adversely affected.
- 19 -
There can be no assurance that we will not be subject to claims that our
technology infringes on the intellectual property of third parties, that we
would prevail against any such claims or that a licensing agreement will be
available on reasonable terms in the event of an unfavorable ruling on any such
claim. Any such claim, with or without merit, would likely be time consuming and
expensive to defend and could have a material adverse effect on our business,
financial condition and results of operations.
Substantial Control by Single Shareholder
As of March 1, 2001, Hambrecht & Quist ("H&Q") and its affiliates, as a group,
beneficially owned approximately 20.3% of our outstanding common stock. As a
result, H&Q and its affiliates will be able to exercise significant influence
over all matters requiring shareholder approval, including the election of
directors and approval of significant corporate transactions. Concentration of
stock ownership could also have the effect of delaying or preventing a change in
control.
Effect of Antitakeover Provisions
Our Amended and Restated Articles of Incorporation (the "Articles") authorize
the Board of Directors to issue, without shareholder approval, up to two million
shares of preferred stock with such rights and preferences as the Board of
Directors may determine in its sole discretion. The Made2Manage Systems, Inc.,
Stock Option Plan (the "Option Plan") provides that, unless the Board of
Directors or a committee of the Board of Directors decides to the contrary, all
outstanding options vest and become immediately exercisable upon a merger or
similar transaction. In addition, certain provisions of Indiana law could have
the effect of making it more difficult for a third party to acquire, or
discouraging a third party from attempting to acquire, control. Further, certain
provisions of Indiana law impose various procedural and other requirements that
could make it more difficult for shareholders to effect certain corporate
actions. The foregoing provisions could discourage an attempt by a third party
to acquire a controlling interest without the approval of management even if
such third party were willing to purchase shares of common stock at a premium
over its then market price.
Possible Volatility of Stock Price
The trading price of our common stock could be subject to wide fluctuations in
response to quarterly variations in operating results, announcements of
technological innovations or new applications by us or our competitors, the
failure of earnings to meet the expectations of securities analysts and
investors, as well as other events or factors. In addition, the stock market has
from time to time experienced extreme price and volume fluctuations which have
particularly affected the market price of many high technology companies and
which often have been unrelated to the operating performance of these companies.
These broad market fluctuations may adversely affect the market price of the
common stock.
Shares Eligible for Future Sale
The sale of a substantial number of shares of our common stock in the public
market could adversely affect the market price of the common stock. As of March
1, 2001, we had 4,812,112 shares of common stock outstanding, of which 976,793
shares of common stock are "Restricted Shares," which are subject to volume and
other limitations of Rule 144 and Rule 701 restrictions under the Securities
Act. As of March 1, 2001, there were 2,188,725 options outstanding to purchase
shares of common stock at a weighted average price of $6.15 per share under the
Company's stock option plans, of which options to purchase 1,014,400 shares of
common stock were then vested and exercisable. At March 1, 2001, we had reserved
171,659 shares of common stock for future grant under the Option Plan. We have
reserved 100,000 shares of common stock for issuance under the Made2Manage
Systems, Inc., Employee Stock Purchase Plan (the "Stock Purchase Plan"). As of
March 1, 2001, 49,030 shares have been issued under the Stock Purchase Plan. We
have filed registration statements registering shares of common stock issued
pursuant to the Made2Manage Systems, Inc., Stock Option Plan and Stock Purchase
Plan on January 30, 1998. Accordingly, shares issued pursuant to these plans
will be saleable in the public market upon issuance, subject to certain
restrictions.
- 20 -
Absence of Dividends
We do not anticipate paying any cash dividends on our common stock in the
foreseeable future. We currently intend to retain earnings, if any, for the
development of our business.
Investment Risk
Despite the high credit ratings on our cash equivalents and investments, there
is no assurance such agencies will not default on their obligations which could
result in losses of principal and accrued interest.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We transact limited business in various foreign currencies, primarily in the
British pound sterling and Canadian dollar. We do not have any significant
receivables or obligations denominated in foreign currencies. We do not have any
foreign currency swaps or derivatives, and we are not currently subject to
material foreign currency exchange risk.
- 21 -
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Page
----
Report of Independent Accountants....................................... 23
Consolidated Balance Sheets as of December 31, 2000 and 1999............ 24
Consolidated Statements of Operations for the Years
Ended December 31, 2000, 1999 and 1998.................................. 25
Consolidated Statements of Changes in Shareholders' Equity for
the Years Ended December 31, 2000, 1999 and 1998........................ 26
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2000, 1999 and 1998........................................ 27
Notes to Consolidated Financial Statements.............................. 28
- 22 -
Report of Independent Accountants
The Board of Directors and Shareholders
Made2Manage Systems, Inc.:
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of
Made2Manage Systems, Inc., and its subsidiaries at December 31, 2000 and 1999,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America. In addition, in
our opinion, the financial statement schedule listed in the index on page 37
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
These financial statements and financial statement schedule are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements and schedule in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Indianapolis, Indiana
January 19, 2001
- 23 -
MADE2MANAGE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
December 31,
----------------
2000 1999
---- ----
ASSETS
Current assets:
Cash and cash equivalents................................................... $ 11,336 $ 12,610
Marketable securities....................................................... 615 1,800
Trade accounts receivable, net of allowance for doubtful accounts of
$450 and $564 in 2000 and 1999, respectively............................. 11,532 7,376
Prepaid expenses and other.................................................. 1,267 1,074
Income taxes refundable..................................................... 47 849
Deferred income taxes....................................................... 215 737
--------- ---------
Total current assets..................................................... 25,012 24,446
Property and equipment, net..................................................... 4,679 4,795
Purchased technology and goodwill, net.......................................... -- 2,296
Deferred income taxes........................................................... 2,054 87
--------- ---------
Total assets............................................................. $ 31,745 $ 31,624
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................................ $ 1,197 $ 1,331
Accrued liabilities......................................................... 1,249 895
Accrued compensation and related expenses................................... 1,492 1,122
Deferred revenue............................................................ 10,342 8,986
--------- ---------
Total current liabilities................................................ 14,280 12,334
Deferred revenue................................................................ 544 419
--------- ---------
Total liabilities........................................................ 14,824 12,753
--------- ---------
Commitments (Note 8)
Shareholders' equity:
Preferred stock, no par value; 2,000,000 shares authorized,
no shares issued and outstanding in 2000 and 1999........................ --- ---
Common stock, no par value; 10,000,000 shares authorized, 4,758,112 and
4,652,168 shares issued and outstanding in 2000 and 1999, respectively... 22,486 21,889
Accumulated deficit......................................................... (5,565) (3,018)
--------- ---------
Total shareholders' equity............................................... 16,921 18,871
--------- ---------
Total liabilities and shareholders' equity............................... $ 31,745 $ 31,624
========= =========
The accompanying Notes are an integral part of these consolidated financial statements.
- 24 -
MADE2MANAGE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Year Ended December 31,
2000 1999 1998
----- ---- ----
Revenues:
Software...................................................... $ 14,918 $ 13,746 $ 16,130
Services...................................................... 16,898 16,237 10,285
Hardware...................................................... 1,074 1,079 827
--------- --------- ---------
Total revenues............................................. 32,890 31,062 27,242
--------- --------- ---------
Costs of revenues:
Software...................................................... 1,858 1,583 1,013
Write-down and amortization of purchased technology........... 1,409 393 164
Services...................................................... 8,478 8,756 5,641
Hardware...................................................... 761 735 558
--------- --------- ---------
Total costs of revenues.................................... 12,506 11,467 7,376
--------- --------- ---------
Gross profit............................................... 20,384 19,595 19,866
--------- --------- ---------
Operating expenses:
Sales and marketing........................................... 13,282 11,651 9,855
Product development........................................... 6,372 6,533 4,104
General and administrative.................................... 4,450 4,320 3,311
Write-down and amortization of goodwill....................... 887 248 103
Acquired in-process technology................................ --- --- 1,890
--------- --------- ---------
Total operating expenses................................... 24,991 22,752 19,263
--------- --------- ---------
Operating income (loss)........................................... (4,607) (3,157) 603
Other income, net................................................. 627 578 579
--------- --------- ---------
Income (loss) before income taxes................................. (3,980) (2,579) 1,182
Income tax provision (benefit).................................... (1,433) (1,040) 1,038
---------- --------- ---------
Net income (loss)................................................. $ (2,547) $ (1,539) $ 144
========= ========= =========
Per share amounts:
Basic:
Net income (loss) per share................................ $ (0.54) $ (0.33) $ 0.03
========= ========= =========
Weighted average shares outstanding........................ 4,739 4,600 4,331
========= ========= =========
Diluted:
Net income (loss) per share................................ $ (0.54) $ (0.33) $ 0.03
========= ========= =========
Weighted average shares outstanding........................ 4,739 4,600 5,025
========= ========= =========
The accompanying Notes are an integral part of these consolidated financial statements.
- 25 -
MADE2MANAGE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands, except share data)
Common Stock
------------ Total
Number Accumulated Shareholders'
of Shares Amount Deficit Equity
--------- ------ ------- ------
Balances, December 31, 1997......................... 4,214,803 $ 19,927 $ (1,623) $ 18,304
Issuance of common stock for
Bridgeware, Inc., Acquisition................. 91,135 997 --- 997
Exercise of stock options ....................... 210,587 219 --- 219
Tax benefits of stock option exercises........... --- 211 --- 211
Issuance of common stock under
Stock Purchase Plan........................... 6,753 63 --- 63
Net income....................................... --- --- 144 144
--------- --------- -------- --------
Balances, December 31, 1998.......................... 4,523,278 21,417 (1,479) 19,938
Exercise of stock options........................ 106,711 177 --- 177
Tax benefits of stock option exercises........... --- 121 --- 121
Issuance of common stock under
Stock Purchase Plan........................... 22,179 174 --- 174
Net loss......................................... --- --- (1,539) (1,539)
--------- --------- -------- --------
Balances, December 31, 1999.......................... 4,652,168 21,889 (3,018) 18,871
Exercise of stock options........................ 85,846 464 --- 464
Tax benefits of stock option exercises........... --- 28 --- 28
Issuance of common stock under
Stock Purchase Plan........................... 20,098 105 --- 105
Net loss......................................... --- --- (2,547) (2,547)
--------- --------- -------- --------
Balances, December 31, 2000......................... 4,758,112 $ 22,486 $ (5,565) $ 16,921
========= ========= ======== ========
The accompanying Notes are an integral part of these consolidated financial statements.
- 26 -
MADE2MANAGE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except share amounts)
Year Ended December 31,
-----------------------
2000 1999 1998
---- ---- ----
Operating activities:
Net income (loss) .................................................. $ (2,547) $ (1,539) $ 144
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Acquired in-process technology.................................. --- --- 1,890
Depreciation of property and equipment.......................... 1,880 1,564 1,012
Write-down and amortization of purchased
technology & goodwill......................................... 2,296 641 267
Provision for doubtful accounts................................. 836 649 650
Tax benefits of stock option exercises.......................... 28 121 211
Changes in assets and liabilities:
Trade accounts receivable.................................. (4,992) 1,088 (3,731)
Prepaid expenses and other................................. 609 (793) (292)
Deferred income taxes...................................... (1,445) (790) 7
Accounts payable and accrued liabilities................... 220 (175) 931
Accrued compensation and related expenses.................. 370 (1,134) 1,066
Deferred revenue........................................... 1,481 623 3,453
-------- -------- ---------
Net cash provided by (used in) operating activities............. (1,264) 255 5,608
-------- -------- ---------
Investing activities:
Acquisition of Bridgeware, Inc., net of cash acquired............... --- --- (3,451)
Purchases of property and equipment................................. (1,764) (2,842) (2,487)
Purchases of marketable securities.................................. (12,216) (9,900) (5,580)
Sales of marketable securities...................................... 13,401 9,250 4,430
-------- -------- ---------
Net cash used in investing activities........................... (579) (3,492) (7,088)
-------- -------- ---------
Financing activities:
Proceeds from issuance of common stock, net of issuance costs....... 105 174 63
Proceeds from exercise of stock options............................. 464 177 219
Payments on long-term obligations................................... --- -- (111)
-------- -------- ---------
Net cash provided by financing activities....................... 569 351 171
-------- -------- ---------
Change in cash and cash equivalents...................................... (1,274) (2,886) (1,309)
Cash and cash equivalents, beginning of period........................... 12,610 15,496 16,805
-------- -------- ---------
Cash and cash equivalents, end of period................................. $ 11,336 $ 12,610 $ 15,496
========= ======== =========
Supplemental disclosures:
Cash paid for:
Interest........................................................ $ --- $ --- $ 4
Income taxes.................................................... --- 1,038 403
Noncash investing and financing:
Issuance of 91,135 shares of common stock for Bridgeware, Inc.,
acquisition ............................................... --- --- 997
The accompanying Notes are an integral part of these consolidated financial statements.
- 27 -
MADE2MANAGE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Made2Manage Systems, Inc. (the "Company"), an Indiana corporation formed in
1986, develops, markets, licenses and supports comprehensive enterprise
application solutions for small and midsize manufacturers located primarily in
the United States. The Company is dependent upon its principal product,
Made2Manage Enterprise Edition ("Made2Manage"), which provides fully integrated
solutions for all of the business processes used by manufacturers, from selling
and design, through manufacturing and distribution. This comprehensive
enterprise application suite includes applications in Enterprise Resource
Planning ("ERP"), Customer Relationship Management ("CRM"), Supply Chain
Management ("SCM") and Business Intelligence ("BI"). It also incorporates
Web-based applications including M2MVIP, which offers manufacturing companies a
range of collaborative opportunities with their customers, sales channels and
suppliers, and M2MEXPERT, which provides Made2Manage customers with Internet
resources including support services 24 hours per day, seven days a week,
cyber-consulting and virtual education courses.
Basis of Presentation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All material intercompany accounts and
transactions have been eliminated.
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from these estimates.
Certain amounts in prior years have been reclassified to conform to the 2000
presentation.
Cash Equivalents and Marketable Securities
The Company considers highly liquid investments with original maturities of
three months or less to be cash equivalents. Marketable securities consist of
debt instruments with maturities between three and twelve months and are
classified as available-for-sale. Cash equivalents and marketable securities are
valued at cost, which approximates market value.
Property and Equipment
Property and equipment are stated at cost. Leasehold improvements are amortized
over the lesser of the term of the related lease or estimated useful life. All
other assets are depreciated using the straight-line method over their estimated
useful lives which range from two to ten years. Repairs and maintenance costs
are expensed as incurred.
Computer Software Development Costs
The Company accounts for computer software development costs in accordance with
Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of
Computer Software to be Sold, Leased or Otherwise Marketed." Costs incurred
prior to establishing the technological feasibility of computer software
products and enhancements to such products are expensed as incurred. Software
development costs incurred by the Company following technological feasibility,
defined by the Company as the existence of a working model of the product, and
prior to the time the product is available for general release to customers,
have not been material and, therefore, have not been capitalized in 2000, 1999
or 1998.
- 28 -
Revenue Recognition and Deferred Revenue
The Company recognizes revenue from the sale of its software and hardware upon
receipt of an executed sales agreement and shipment to the customer, provided
there are no significant remaining vendor obligations to be fulfilled and
collectibility is reasonably certain.
Services revenues include support, education and consulting services. The
Company provides software support and product upgrades to its customers through
separately priced agreements. These support revenues are recognized on a
straight-line basis over the term of the agreement. Revenues from technical
training and consulting services are recognized as provided to customers.
Subscription revenues include M2MEXPRESS and M2MVIP and are reflected in
services revenues in the consolidated statements of operations. The M2MEXPRESS
Web site is designed to provide small and midsize manufacturing companies access
to Made2Manage via the Internet through a hosted Application Service Provider
option. The M2MVIP Web site offers small and midsize manufacturing companies a
range of collaborative opportunities with their customers, sales channels and
suppliers. Subscription revenues from these Web sites are recognized ratably
over the subscription period.
Net Income (Loss) Per Share
Earnings per share ("EPS") is determined in accordance with Statement of
Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings Per Share,"
and is based upon the weighted average number of common and common equivalent
shares outstanding for the period. Diluted common equivalent shares consist of
convertible preferred stock (using the "if converted" method), stock options and
warrants (using the treasury stock method) as prescribed by SFAS No. 128. Common
equivalent shares are included in the diluted earnings per share calculation
when dilutive. Under the treasury stock method, the assumed proceeds from the
exercise of stock options and warrants are applied solely to the repurchase of
common stock.
Stock-based Compensation
The Company accounts for its stock-based compensation under Accounting
Principles Board Opinion No. 25 ("APB Opinion No. 25"), "Accounting for Stock
Issued to Employees," and related interpretations, and follows disclosure
provisions of Statement of Financial Accounting Standards No. 123 ("SFAS No.
123"), "Accounting for Stock-based Compensation." The Company has elected to
apply the provisions of APB Opinion No. 25 and provide the pro forma disclosures
of SFAS No. 123.
Recent Accounting Pronouncements
In December 1999, the Securities and Exchange Commission Staff issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements," which provides guidance on the recognition, presentation, and
disclosure of revenue in the financial statements. Consistent with the
requirements to implement SAB 101 no later than the fourth quarter for fiscal
years beginning after December 15, 1999, we adopted the provisions of SAB 101
and the resulting impact was immaterial to the Company's consolidated financial
position, results of operations or cash flows.
- 29 -
2. ACQUISITION
On August 3, 1998, the Company acquired all of the outstanding capital stock of
Bridgeware, Inc., a privately held software company that develops, markets and
supports Advanced Planning and Scheduling software and related services
throughout North America, South America and Europe. The transaction was
consummated for approximately $3.5 million in cash and 91,135 shares of the
Company's common stock with a market value of $997,000 at the date of
acquisition.
The acquisition was accounted for using the purchase method. The purchase price
was allocated to identifiable tangible and intangible assets acquired and
liabilities assumed based on their estimated fair values. Amounts allocated to
acquired in-process technology were expensed at the time of acquisition. The
consolidated statements of operations reflect the results of operations of the
purchased company since the effective date of the acquisition. Pro forma
statements are not shown as they would not differ materially from reported
results.
To determine the fair value of the acquired in-process technology, the Company
considered three traditional approaches of value: the cost approach, the market
approach and the income approach. The Company relied primarily on the income
approach, whereby fair market value is a function of the future revenues
expected to be generated by an asset, net of all allocable expenses and charges
for the use of the contributory assets. The future net revenue stream is
discounted to present value based upon the specified level of risk associated
with achieving the forecasted asset earnings. The resulting value is further
reduced to reflect the percentage of completion of development as of the date of
acquisition. The income approach focuses on the income production capability of
the acquired assets and best represents the present value of the future economic
benefits expected to be derived from these assets.
The Company determined that the acquired in-process technologies had not reached
technological feasibility based on the status of design and development
activities that required future refinement and testing. The development
activities required to complete the acquired in-process technologies included
additional coding, quality assurance procedures and customer beta testing. Based
on appraisal amounts, the Company recorded a charge for acquired in-process
technology of $1.9 million in 1998.
The Company also acquired $785,000 in net tangible assets and assumed
liabilities of $844,000. The allocation of the remaining purchase price resulted
in an excess of the purchase price over the fair values of the net assets
acquired of approximately $3.6 million and a related deferred tax liability of
$862,000. These intangible assets relate to purchased technology, assembled
workforce and goodwill, all of which were being amortized on a straight-line
basis over useful lives of five or seven years.
During the third quarter 2000, the Company decided to accelerate development of
an integrated multi-level planning suite that will largely replace certain
acquired technology. That decision resulted in an impairment of the purchased
technology asset and related goodwill. The impaired assets were written down to
their net realizable value, which resulted in a non-cash, pre-tax charge of $2.0
million. The after-tax effect of the charge was $1.5 million.
- 30 -
The balances of the intangible assets are as follows (in thousands):
December 31,
------------
2000 1999
---- ----
Purchased technology................................................... $ 1,967 $ 1,967
Less write-down and accumulated amortization........................... 1,967 557
--------- ---------
$ --- $ 1,410
========= =========
Goodwill .............................................................. $ 1,237 $ 1,237
Less write-down and accumulated amortization........................... 1,237 351
--------- ---------
$ --- $ 886
========= =========
Assembled workforce (included in prepaid expenses and other)........... $ 364 $ 364
Less accumulated amortization.......................................... 126 74
--------- ---------
$ 238 $ 290
========= =========
3. CASH AND CASH EQUIVALENTS AND MARKETABLE SECURITIES
Cash and cash equivalents and marketable securities are summarized as follows
(in thousands):
December 31,
------------
2000 1999
---- ----
Cash and cash equivalents:
Cash................................................................. $ 2,798 $ 1,484
U.S Treasury Securities and obligations of U.S. government
agencies......................................................... 65 494
Municipal debt securities............................................ 2,000 6,800
Corporate debt securities............................................ 6,467 3,800
Other................................................................ 6 32
--------- ---------
$ 11,336 $ 12,610
========= =========
Marketable securities:
Corporate debt securities............................................ $ 615 $ 1,800
========= =========
4. PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows (in thousands):
December 31,
------------
2000 1999
---- ----
Software and computer equipment................................ $ 6,853 $ 5,283
Furniture and equipment........................................ 1,916 1,853
Leasehold improvements......................................... 837 739
--------- ---------
9,606 7,875
Less accumulated depreciation and amortization................. 4,927 3,080
--------- ---------
$ 4,679 $ 4,795
========= =========
The estimated lives for property and equipment are as follows: software and computer equipment -
two to five years; furniture and equipment - seven to ten years; and leasehold improvements - the
life of the lease, none of which have a remaining life of greater than five years. Depreciation
expense was $1,180,000 in 2000, $1,564,000 in 1999 and $1,012,000 in 1998.
- 31 -
5. LINE OF CREDIT AGREEMENT
The Company has a $2,000,000 working capital facility with a bank, under which
no amounts were outstanding at December 31, 2000 and 1999. This line of credit
expires April 30, 2001. Interest is at the prime rate (9.50% at December 31,
2000).
6. SHAREHOLDERS' EQUITY
Preferred Stock
Authorized preferred stock is issuable in series under such terms and conditions
as the Board of Directors may determine. None have been issued to date.
Common Stock Options
The Company's 1999 Stock Option Plan was adopted in April 1999, amended in April
2000, and authorizes the granting of incentive and non-qualified stock options.
No additional options will be granted under the Company's previous Stock Option
Plan, which was originally adopted in 1990. Initially 200,000 shares were
reserved for issuance under the 1999 Stock Option Plan with automatic increases
on January 1 of each year equal to 7% of the Base Shares. The Base Shares are
equal to the sum of (i) the number of shares of the Company's Common Stock
outstanding on the last day of the preceding fiscal year and (ii) the number of
shares of Common Stock reserved for issuance upon the exercise of options
outstanding on the last day of the preceding fiscal year. The exercise price of
the options must not be less than the fair market value of the common stock for
options. Options granted under the Option Plan generally vest over four years,
with 25% exercisable one year from date of grant and the remaining 75% at the
rate of 1/48th of the amount granted in each of the next 36 consecutive months.
Options granted prior to 1996 generally expire five years from the date of grant
and options granted subsequently expire ten years from date of grant. The April
2000 amendment to the 1999 Stock Option Plan authorizes the grant of options
under the 1999 Stock Option Plan covering an additional number of shares equal
to the number of shares covered by unexercised options that were forfeited under
the Company's original Stock Option Plan ("1990 Plan"). The 1999 Stock Option
Plan terminates in 2009.
At December 31, 2000, options for 125,262 shares of common stock were available
for future grants under the plan, which include the additional shares authorized
per the April 2000 amendment to the 1999 Stock Option Plan. In accordance with
the provisions of the plan, the number of shares available for grant
automatically increased by 466,136 shares to 591,398 shares on January 1, 2001
representing the aggregate of the calculated 7% of Base Shares and the available
shares at December 31, 2000.
Activity in the option plan is summarized as follows:
Year Ended December 31,
------------------------------------------------------------------
2000 1999 1998
-------------------- -------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ -------- ------ -------- ------ --------
Outstanding at beginning of year.... 1,581,938 $ 6.92 1,366,617 $ 5.88 1,104,931 $ 3.50
Granted.......................... 587,550 6.39 417,250 9.35 516,450 9.01
Exercised........................ (85,846) 5.41 (106,711) 1.66 (214,700) 1.21
Forfeited........................ (175,283) 8.33 (95,218) 8.48 (40,064) 5.49
--------- ---- --------- ---- --------- ----
Outstanding at end of year....... 1,908,359 6.70 1,581,938 6.92 1,366,617 5.88
========= ==== ========= ==== ========= ====
Options exercisable at end of year 1,061,383 6.20 842,123 5.26 534,900 3.45
- 32 -
Options outstanding at December 31, 2000, are summarized as follows:
Options Outstanding Options Exercisiable
----------------------------------------- --------------------------
Weighted-
Average Weighted- Weighted-
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
------------ ----------- ----------- -------- ----------- ---------
$0.20 - 0.40 58,500 2.67 years $ 0.22 58,500 $ 0.22
2.84 - 4.40 519,942 6.83 3.29 343,242 3.53
5.30 - 5.81 189,178 6.25 5.75 176,669 5.74
6.38 - 8.88 813,550 8.15 7.76 325,388 7.77
9.00 -13.31 327,189 8.01 11.18 157,584 11.45
The Company applies APB Opinion No. 25 and related Interpretations in accounting
for its option plan, and no compensation expense has been recognized. The
following table presents pro forma net loss had compensation cost been
determined based on the fair value at the grant date for awards under the plan
in accordance with SFAS No. 123.
2000 1999 1998
---- ---- ----
Pro forma net loss (in thousands)........... $ (3,786) $ (2,814) $ (655)
Pro forma diluted net loss per share........ (0.80) (0.61) (0.13)
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions: risk-free interest rate of 6.25% for 2000 and 5.5% for 1999 and
1998; expected life of one year beyond vesting date; and volatility of 67% for
2000, 65% for 1999 and 75% for 1998. In accordance with SFAS No. 123, only
options granted in 1995 and subsequently are included in these calculations.
Accordingly, the disclosures are not likely to be representative of the effect
on pro forma net income for future years because awards vest over several years,
and the disclosures do not take into consideration pro forma expense related to
grants made prior to 1995.
Based on the Black-Scholes option-pricing model, the weighted-average fair value
at grant date of options granted for the years ended December 31 were $4.57 in
2000, $6.50 in 1999 and $5.03 in 1998.
Employee Stock Purchase Plan
The Company's Employee Stock Purchase Plan ("Stock Purchase Plan") was
established in October 1997, and 100,000 shares of the Company's common stock
were reserved for issuance. Under the Stock Purchase Plan, employees are granted
the right to purchase shares of common stock at a price per share that is equal
to the greater of (i) 85% of the beginning of the quarter market price or (ii)
90% of the average market price during the quarter. Purchases are made at the
end of each fiscal quarter. Cumulative shares issued under this plan totaled
49,030, 28,932 and 6,753 at December 31, 2000, 1999 and 1998, respectively.
7. INCOME TAXES
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which requires the
use of the asset and liability approach of accounting for deferred income taxes.
Deferred tax assets and liabilities are recognized on differences between the
book and tax bases of assets and liabilities using presently enacted tax rates.
The provision (benefit) for income taxes is the tax payable or recoverable for
the period and the change during the period in deferred tax assets and
liabilities.
- 33 -
The components of the income tax provision (benefit) are as follows (in
thousands):
Year Ended December 31,
2000 1999 1998
--------- --------- ---------
Current:
Federal............................................ $ (52) $ (296) $ 711
State.............................................. 35 (75) 320
--------- --------- ---------
(17) (371) 1,031
--------- --------- ---------
Deferred:
Federal............................................ (1,292) (600) (10)
State.............................................. (124) (69) 17
--------- --------- ---------
(1,416) (669) 7
--------- --------- ---------
$ (1,433) $ (1,040) $ 1,038
========= ========= =========
The provision (benefit) for income taxes differs from the federal statutory tax rate as
follows (in thousands):
Year Ended December 31,
2000 1999 1998
--------- --------- ---------
Federal tax at statutory rate.......................... $ (1,353) $ (877) $ 401
State income tax, net of federal tax benefit........... (101) (119) 223
Non-deductible acquired in-process technology.......... --- --- 643
Non-deductible amortization and other expenses......... 301 141 35
Non-taxable interest income............................ (103) (138) (125)
Research and experimentation credit.................... (182) (168) (211)
Business meals and entertainment....................... 54 51 35
Other.................................................. (49) 70 37
--------- --------- ---------
$ (1,433) $ (1,040) $ 1,038
========= ========= =========
Deferred tax assets and liabilities are comprised of the following (in thousands):
December 31,
2000 1999
--------- ---------
Deferred tax assets:
Net operating loss carryforward.................... $ 1,266 $ 441
Research and experimentation tax
credits carryforward............................. 667 457
Minimum tax credits carryforward................... 188 224
Accounts receivable allowance...................... 121 207
Accrued vacation pay............................... 73 127
Deferred revenue................................... 202 155
Other.............................................. 21 21
--------- ---------
2,538 1,632
Deferred tax liabilities:
Depreciation....................................... (181) (179)
Purchased technology............................... --- (521)
Workforce.......................................... (88) (108)
--------- ---------
(269) (808)
--------- ---------
$ 2,269 $ 824
========= =========
Recorded as:
Current deferred income tax asset.................. $ 215 $ 737
Long-term deferred income tax asset................ 2,054 87
--------- ---------
$ 2,269 $ 824
========= =========
- 34 -
As of December 31, 2000, the Company had net operating loss carryforwards of
$2,450,000 for federal and $4,700,000 for state income tax reporting purposes
which expire in 2010, research and experimentation tax credits of $667,000 that
expire commencing in 2009, and minimum tax credit carryforwards of $188,000.
8. COMMITMENTS
The Company has certain commitments, principally for office space, under
long-term operating leases. Future minimum lease payments required under these
noncancellable operating leases are as follows (in thousands):
Payable in:
2001.................................... $ 976
2002.................................... 972
2003.................................... 495
2004.................................... 290
2005 and thereafter..................... ---
---------
$ 2,733
=========
Rent expense was $1,162,000 in 2000, $1,067,000 in 1999 and $588,000 in 1998.
9. EMPLOYEE SAVINGS PLAN
The Company has an employee savings plan that is qualified under Section 401(k)
of the Internal Revenue Code. This plan covers substantially all employees who
meet minimum age requirements and allows participants to defer a portion of
their annual compensation on a pre-tax basis. Company contributions to the plan
may be made at the discretion of the Board of Directors. The Board of Directors
approved a matching contribution of 25% of the first 6% of employee
contributions beginning January 1996. The Company's matching contribution to the
savings plan was $173,000 in 2000, $167,000 in 1999 and $115,000 in 1998.
- 35 -
10. CONDENSED QUARTERLY FINANCIAL RESULTS (UNAUDITED)
The following table sets forth certain unaudited condensed operating results for
each of the eight quarters in the two-year period ended December 31, 2000. This
information has been prepared by the Company on the same basis as the
Consolidated Financial Statements appearing elsewhere in this report and
includes, in the opinion of management, all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of the
information when read in conjunction with the Consolidated Financial Statements
and notes thereto included elsewhere herein. The Company's operating results for
any one quarter are not necessarily indicative of results for any future period.
Earnings per share for each quarter are computed independently of earnings per
share for the year. The sum of the quarterly earnings per share may not equal
the earnings per share for the year because of (i) transactions affecting the
weighted average number of shares outstanding in each quarter and (ii) the
uneven distribution of earnings during the year.
Quarter Ended
----------------------------------------------------------------
March 31 June 30 September 30 December 31 Total
----------- ----------- ------------ ------------ -----------
(in thousands, except per share data)
2000:
Total revenues..................... $ 7,296 $ 7,701 $ 8,315 $ 9,578 $ 32,890
Gross profit....................... 4,708 4,864 4,444 6,368 20,384
Operating income (loss)............ (1,030) (1,303) (2,295) 21 (4,607)
Income tax provision (benefit)..... (294) (562) (646) 69 (1,433)
Net income (loss).................. (584) (596) (1,490) 123 (2,547)
Net income (loss) per share:
Basic.......................... (0.12) (0.13) (0.31) 0.03 (0.54)
Diluted........................ (0.12) (0.13) (0.31) 0.03 (0.54)
1999:
Total revenues..................... $ 8,871 $ 8,615 $ 6,413 $ 7,163 $ 31,062
Gross profit....................... 5,954 5,677 3,667 4,297 19,595
Operating income (loss)............ 413 22 (2,140) (1,452) (3,157)
Income tax provision (benefit)..... 205 62 (740) (567) (1,040)
Net income (loss).................. 348 108 (1,260) (735) (1,539)
Net income (loss) per share:
Basic.......................... 0.08 0.02 (0.27) (0.16) (0.33)
Diluted........................ 0.07 0.02 (0.27) (0.16) (0.33)
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
- 36 -
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Item is contained in the section captioned
"Election of Directors" and "Section 16(A) Beneficial Ownership Reporting
Compliance" of the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held on April 24, 2001 (the "Proxy Statement"), and is
incorporated herein by reference. Information with respect to Executive Officers
of the Company is set forth under the caption "Executive Officers of the
Registrant" in Part I, Item 1 of this Report.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item is contained in the section captioned
"Executive Compensation" of the Company's Proxy Statement and is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item is contained in the section captioned
"Stock Ownership" of the Company's Proxy Statement and is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not applicable.
- 37 -
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this Report.
1. Consolidated Financial Statements
The following information appears in Item 8 of Part II of this Report:
o Report of Independent Accountants o Consolidated Balance Sheets
as of December 31, 2000 and 1999
o Consolidated Statements of Operations for the Years Ended
December 31, 2000, 1999 and 1998
o Consolidated Statements of Changes in Shareholders' Equity for
the Years Ended December 31, 2000, 1999 and 1998
o Consolidated Statements of Cash Flows for the Years Ended
December 31, 2000, 1999 and 1998
o Notes to Consolidated Financial Statements
2. Financial Statement Schedule
The following financial statement schedule is included in this Report:
o Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not required, not
applicable, or the required information is otherwise shown in the
consolidated financial statements or the notes thereto.
- 38 -
3. Exhibits
Number Assigned in
Regulation S-K Exhibit
Item 601 Number Description of Exhibit
- ------------------ ------- ----------------------
(2) 2.0 Stock Purchase Agreement, dated August 3, 1998, among
Made2Manage Systems, Inc., and the stockholders of
Bridgeware, Inc. (Incorporated by reference to June 30, 1998
Form 10-Q.)
(3) 3.1 Amended and Restated Articles of Incorporation of
Made2Manage Systems, Inc. (Incorporated by reference to
Registration Statement on Form S-1, Registration No.
333-38177.)
3.2 Amended and Restated Code of By-Laws of Made2Manage Systems,
Inc. (Incorporated by reference to Registration Statement on
Form S-1, Registration No. 333-38177.)
(4) 4.1 Specimen Stock Certificate for Common Stock (Incorporated by
reference to Registration Statement on Form S-1,
Registration No. 333-38177.)
4.2 Other rights of securities holders - see Exhibits 3.1 and
3.2.
(10) 10.12 Form of Made2Manage Systems, Inc., Stock Option Agreement
(Incorporated by reference to Exhibit 10.16 to Registration
Statement on Form S-1, Registration No. 333-38177.)
10.18 Made2Manage Systems, Inc., Employee Stock Purchase Plan
(Incorporated by reference to Exhibit 10.22 to Registration
Statement on Form S-1, Registration No. 333-38177.)
10.28 Business Loan Agreement by and between Bank One, Indiana, NA
and Made2Manage Systems, Inc., dated March 19, 1999
(Incorporated by reference to March 31, 1999 Form 10-Q.)
10.29 Promissory Note by and between Bank One, Indiana, NA and
Made2Manage Systems, Inc., dated March 19, 1999
(Incorporated by reference to March 31, 1999 Form 10-Q.)
10.30 1999 Made2Manage Systems, Inc., Employee Stock Option Plan
(Incorporated by reference to March 31, 1999 Form 10-Q.)
10.31 Amendment to the 1999 Made2Manage Systems, Inc., Employee
Stock Option Plan (Incorporated by reference to March 31,
2000 schedule 14-a, appendix 1.)
10.32 First Amendment to Business Loan Agreement by and between
Bank One, Indiana, NA and Made2Manage Systems, Inc., dated
April 1, 2000 (Incorporated by reference to March 31, 2000
Form 10-Q.) Promissory Note Modification Agreement by and
between Bank One, Indiana, NA and Made2Manage Systems, Inc.,
dated April 1, 2000 (Incorporated by reference to March 31,
2000 Form 10-Q.)
(21) 21.1 List of Subsidiaries
(b) Reports on Form 8-K.
No reports on Form 8-K were filed in the quarter ended December 31, 2000.
- 39 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
MADE2MANAGE SYSTEMS, INC.
Date: March 30, 2001 By: /s/David B. Wortman
---------------------------------------------
David B. Wortman
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title (Capacity) Date
--------- ---------------- ----
/s/David B. Wortman Chairman of the Board, President March 30, 2001
- --------------------------------- and Chief Executive Officer
David B. Wortman (Principal Executive Officer)
/s/Traci M. Dolan Vice President, Finance and Administration, March 30, 2001
- --------------------------------- Chief Financial Officer, Secretary and
Traci M. Dolan Treasuer (Principal Financial Officer)
/s/Katherine L. Kinder Controller March 30, 2001
- --------------------------------- (Principal Accounting Officer)
Katherine L. Kinder
/s/Michael P. Cullinane Director March 30, 2001
- ---------------------------------
Michael P. Cullinane
/s/John M. Dillon Director March 30, 2001
- ---------------------------------
John M. Dillon
/s/Richard G. Halperin Director March 30, 2001
- ---------------------------------
Richard G. Halperin
- 40 -
Made2Manage Systems, Inc.
Schedule II - Valuation and Qualifying Accounts
(in thousands)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- --------------------------------- ------------- --------------------------- -------------- -------------
Additions
---------------------------
Charged Charged
Balance at to Costs to Balance
Beginning and Support at the
Description of Period Expenses Revenue Deductions End of Period
- --------------------------------- ------------- ------------- ------------- -------------- -------------
Year Ended December 31, 1998:
Deducted from asset accounts:
Allowance for doubtful accounts $ 290 $ 408 $ 242 $ (338) $ 602
Year Ended December 31, 1999:
Deducted from asset accounts:
Allowance for doubtful accounts $ 602 $ 498 $ 151 $ (687) $ 564
Year Ended December 31, 2000:
Deducted from asset accounts:
Allowance for doubtful accounts $ 564 $ 514 $ 322 $ (950) $ 450
- 41 -