| [ X ] |
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2003 |
OR
| [ ] |
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to |
Commission file number: 0-23459
MADE2MANAGE SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Indiana (State or other jurisdiction of incorporation or organization) |
35-1665080 (I.R.S. Employer Identification Number) |
450 E. 96th Street, Suite 300, Indianapolis, IN (Address of principal executive offices) |
46240 (Zip Code) |
Registrant's telephone number, including area code: (317) 249-1200
Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirement for the past 90 days.
Yes [ X ]
No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ]
No [ X ]
As of April 30, 2003, there were 4,940,960 shares of Common Stock, no par value, outstanding.
- - 1 -
| PART I | FINANCIAL INFORMATION |
| Item 1. | Financial Statements |
|
Condensed Consolidated Balance Sheets (Unaudited) As of March 31, 2003 and December 31, 2002 |
3 |
|
Condensed Consolidated Statements of Operations (Unaudited) For the Three Months ended March 31, 2003 and 2002 |
4 |
|
Condensed Consolidated Statements of Cash Flows (Unaudited) For the Three Months ended March 31, 2003 and 2002 |
5 |
| Notes to Condensed Consolidated Financial Statements | 6 |
| Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
9 |
| Item 3. | Quantitative and Qualified Disclosures About Market Risk | 20 |
| Item 4. | Controls and Procedures | 20 |
| PART II | OTHER INFORMATION |
| Item 6. | Exhibits and Reports on Form 8-K | 21 |
| Signatures | 22 |
| Certifications | 23 |
| Index to Exhibits | 25 |
- - 2 -
MADE2MANAGE SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
| March 31, 2003 |
December 31, 2002 |
|---|
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 16,200 | $ | 15,613 | ||||
| Marketable securities | 439 | 900 | ||||||
| Trade accounts receivable, net | 4,469 | 5,475 | ||||||
| Prepaid expenses and other | 1,264 | 1,275 | ||||||
| Total current assets | 22,372 | 23,263 | ||||||
| Property and equipment, net | 1,731 | 1,865 | ||||||
| Total assets | $ | 24,103 | $ | 25,128 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 700 | $ | 476 | ||||
| Accrued liabilities | 1,882 | 2,256 | ||||||
| Current portion of capitalized lease | 116 | 112 | ||||||
| Deferred revenue | 9,001 | 9,619 | ||||||
| Total current liabilities | 11,699 | 12,463 | ||||||
| Capitalized lease | --- | 23 | ||||||
| Deferred revenue | 533 | 702 | ||||||
| Total liabilities | 12,232 | 13,188 | ||||||
| Shareholders' equity: | ||||||||
| Preferred stock, no par value; 2,000,000 shares authorized, no shares | ||||||||
| issued and outstanding at March 31, 2003 and December 31, 2002 | --- | --- | ||||||
| Common stock, no par value; 10,000,000 shares authorized, 4,940,948 and | ||||||||
| 4,925,447 issued and outstanding at March 31, 2003 and December 31, 2002, | ||||||||
| respectively | 22,971 | 22,920 | ||||||
| Accumulated deficit | (11,100 | ) | (10,980 | ) | ||||
| Total shareholders' equity | 11,871 | 11,940 | ||||||
| Total liabilities and shareholders' equity | $ | 24,103 | $ | 25,128 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
- - 3 -
MADE2MANAGE SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| Three Months Ended March 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2003 |
2002 | ||||||||||
| Revenues: | |||||||||||
| Software | $ | 1,733 | $ | 1,978 | |||||||
| Services | 5,394 | 5,298 | |||||||||
| Hardware | 216 | 158 | |||||||||
| Total revenues | 7,343 | 7,434 | |||||||||
| Costs of revenues: | |||||||||||
| Software | 400 | 430 | |||||||||
| Services | 2,008 | 2,085 | |||||||||
| Hardware | 168 | 113 | |||||||||
| Restructuring benefit | (51 | ) | --- | ||||||||
| Total costs of revenues | 2,525 | 2,628 | |||||||||
| Gross profit | 4,818 | 4,806 | |||||||||
| Operating expenses: | |||||||||||
| Sales and marketing | 2,510 | 2,902 | |||||||||
| Product development | 1,408 | 1,297 | |||||||||
| General and administrative | 1,066 | 1,022 | |||||||||
| Total operating expenses | 4,984 | 5,221 | |||||||||
| Operating loss | (166 | ) | (415 | ) | |||||||
| Other income, net | 56 | 81 | |||||||||
| Loss before income taxes | (110 | ) | (334 | ) | |||||||
| Income tax provision | 10 | --- | |||||||||
| Net loss | $ | (120 | ) | $ | (334 | ) | |||||
| Per share amounts - basic and diluted: | |||||||||||
| Net loss per share | $ | (0.02 | ) | $ | (0.07 | ) | |||||
| Weighted-average shares outstanding | 4,930 | 4,855 | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
- - 4 -
MADE2MANAGE SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Three Months Ended March 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2003 |
2002 | ||||||||||
| Operating activities: | |||||||||||
| Net loss | $ | (120 | ) | (334 | ) | ||||||
| Adjustments to reconcile net loss to net cash provided by operating | |||||||||||
| activities: | |||||||||||
| Depreciation | 412 | 398 | |||||||||
| Provision for doubtful accounts | 144 | (5 | ) | ||||||||
| Changes in assets and liabilities: | |||||||||||
| Trade accounts receivable | 862 | 908 | |||||||||
| Prepaid expenses and other | 11 | 234 | |||||||||
| Accounts payable | 224 | 214 | |||||||||
| Accrued liabilities | (374 | ) | (581 | ) | |||||||
| Deferred revenue | (787 | ) | (813 | ) | |||||||
| Net cash provided by operating activities | 372 | 21 | |||||||||
| Investing activities: | |||||||||||
| Purchases of property and equipment | (278 | ) | (118 | ) | |||||||
| Purchases of marketable securities | (439 | ) | (894 | ) | |||||||
| Sales of marketable securities | 900 | 2,343 | |||||||||
| Net cash provided by investing activities | 183 | 1,331 | |||||||||
| Financing activities: | |||||||||||
| Principal payments under capitalized leases | (19 | ) | (32 | ) | |||||||
| Proceeds from issuance of common stock | 14 | 13 | |||||||||
| Proceeds from exercise of stock options | 37 | 102 | |||||||||
| Net cash provided by financing activities | 32 | 83 | |||||||||
| Change in cash and cash equivalents | 587 | 1,435 | |||||||||
| Cash and cash equivalents, beginning of period | 15,613 | 12,688 | |||||||||
| Cash and cash equivalents, end of period | $ | 16,200 | $ | 14,123 | |||||||
Supplemental schedule of non-cash investing activities:
A capital lease obligation of approximately $255 was incurred in the first quarter of 2002 when the Company entered into a lease for new computers.
The accompanying notes are an integral part of these condensed consolidated financial statements.
- - 5 -
Made2Manage Systems, Inc. (the “Company”), an Indiana corporation formed in 1986, develops, markets, licenses and supports comprehensive enterprise software for small and midsize manufacturers located primarily in the United States. The Company is dependent upon its principal product, the Made2Manage® Enterprise Business System, which provides fully integrated solutions automating major business processes used by manufacturers, from selling and design, to manufacturing and distribution, finance and human resources, and customer service and support. This comprehensive enterprise business system features Made2Manage Enterprise Resource Planning (“M2M™ ERP”), Made2Manage Supply Chain Management (“M2M SCM”), Made2Manage Customer Relationship Management (“M2M CRM”), Made2Manage Business Intelligence (“M2M BI”), Made2Manage Business Collaboration (“M2M VIP”) and Made2Manage Enterprise Integration (“M2M Link”). The system is supported by a host of user services, including M2M Expert, the Web site that provides the Company’s customers with Internet resources including support services 24 hours per day, seven days a week, cyber-consulting, and virtual education courses.
The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2002 Annual Report to Shareholders and Annual Report on Form 10-K for the year ended December 31, 2002. In management’s opinion, this information has been prepared on the same basis as the annual consolidated financial statements and includes all adjustments (consisting only of normal and recurring adjustments) necessary for a fair presentation of the consolidated financial position, results of operations and cash flows for each period presented.
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 accounting principles generally accepted in the United States of America 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.
The Company’s revenue recognition policy is consistent with the requirements of Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (“SAB 101”), Statement of Position No. 97-2, Software Revenue Recognition (“SoP 97-2”), and other applicable revenue recognition guidance and interpretations. In general, the Company records revenue when it is realized, or realizable, and earned. Revenues from software licenses and hardware are recognized upon shipment, delivery or customer acceptance, based upon the substance of the arrangement or as defined in the sales agreement provided there are no significant remaining vendor obligations to be fulfilled and collectibility is reasonably assured. Software revenues are generated from licensing software to new customers and from licensing additional users and new applications to existing customers. Hardware revenues are generated primarily from the sale of bar-code and data collection equipment used in connection with the Made2Manage Enterprise Business System and constitute a relatively small component of total revenues.
- - 6 -
The Company’s sales arrangements typically include services in addition to software and hardware. Service revenues are generated from support and maintenance agreements and also from implementation, education, consulting, and customization services. For sales arrangements that include bundled software, hardware and services, the Company accounts for any undelivered service offering as a separate element of a multiple-element arrangement. These services are usually not essential to the functionality of the software and hardware. Amounts deferred for services are determined based upon vendor-specific objective evidence of the fair value of the elements as prescribed in SoP 97-2. Support and education revenues are recognized on a straight-line basis over the term of the agreement. Revenues from implementation, consulting, and customization services are recognized as provided to customers. If the services are essential to the functionality of the software and hardware, revenue from the software and hardware components is deferred until the essential services are complete.
Subscription-based offerings include support and maintenance and M2M University, which are included in service revenues, and M2M Express and M2M VIP, which are included in software revenues. M2M University provides flexible, comprehensive educational opportunities to customers via the Web and also through traditional classroom training. The M2M Express thin client option is designed to provide small and midsize manufacturing companies access to the Made2Manage Enterprise Business System via the Internet through a hosted application service provider. The M2M VIP enterprise portal offers manufacturing companies a range of collaborative opportunities with their customers, sales channels and suppliers. Subscription revenues are recognized ratably over the subscription period.
The Company has sustained tax operating losses over the past four years, resulting in accumulated net operating loss carryforwards that could be used to reduce income tax expense in future periods. Although these loss carryforwards do not begin to substantially expire until 2019, current economic conditions make it difficult to predict full recoverability of these deferred tax assets in a period comparable to the period over which they originated. Therefore, a full valuation allowance has been provided against these deferred tax assets. As a result, the Company has not and does not anticipate recording significant tax charges or benefits in 2002 or 2003. Amounts recorded in the first quarter of 2003 represent minimum taxes required by certain states and foreign taxes related to the Company’s operations in the United Kingdom.
Basic earnings per share (“EPS”) is determined in accordance with Statement of Financial Accounting Standards No. 128, Earnings Per Share (“SFAS 128”), and is calculated by dividing net income by the weighted-average number of common shares outstanding for the period. The calculation of diluted EPS is similar to basic, except that the weighted-average number of shares outstanding includes the impact of common equivalent shares. Diluted common equivalent shares consist of stock options (using the treasury stock method) as prescribed by SFAS 128. Common equivalent shares are included in the diluted EPS calculation when dilutive. Under the treasury stock method, the assumed proceeds from the exercise of stock options are applied solely to the repurchase of common stock.
No options were included in the computation of diluted EPS for the three months ended March 31, 2003 and 2002, since the Company had a net loss for those periods. Otherwise, for the three months ended March 31, 2003 and 2002, options to purchase approximately 846,000 and 1.3 million shares of common stock, respectively, would have been included in the computation of diluted EPS, which translates into approximately 79,000 and 443,000 common equivalent shares, respectively, net of shares repurchased under the treasury stock method. Options to purchase approximately 1.4 million and 849,000 shares of common stock would not have been included in the computation of diluted EPS for the three months ended March 31, 2003 and 2002, respectively, because the options’ exercise prices were greater than the average market price of common shares.
- - 7 -
The Company accounts for its stock-based compensation using the intrinsic value-based method prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), and related interpretations, which require compensation expense for options to be recognized when the market price of the underlying stock exceeds the exercise price on the date of grant. Additionally, the Company follows disclosure provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-based Compensation (“SFAS 123”), and Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of FAS 123 (“SFAS 148”). 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 123.
|
Three Months Ended March 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2002 |
2003 | |||||||
| Net loss as reported | $ | (120 | ) | $ | (334 | ) | ||
| Compensation expense included in reported net loss | --- | --- | ||||||
| Compensation expense under FAS 123 | (270 | ) | (278 | ) | ||||
| Pro forma net loss | $ | (390 | ) | $ | (612 | ) | ||
| Pro forma net loss per diluted share | $ | (0.0 | ) | $ | (0.13 | ) | ||
During the first quarter of 2001, management approved a restructuring plan designed to align the Company’s operations with the current technological and economic environment. One of the elements of the restructuring plan was facilities rationalization. In March of 2003, the Company obtained an early release for one of the office facilities included in the restructuring plan, which had remaining net lease obligations of $51,000. This amount was accounted for as a reduction of costs of revenues in the consolidated statement of operations for the quarter ended March 31, 2003. The remaining restructuring liabilities of $43,000 are recorded as a current liability in the consolidated balance sheet as of March 31, 2003 and represent the Company’s best estimate of non-recoverable costs and expenses associated with a sublet facility.
- - 8 -
Item 2. 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. All such forward-looking statements speak only as of the date of this Form 10-Q. 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, 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 Annual Report on Form 10-K for the year ended December 31, 2002.
Overview
Since our inception in 1986, we have developed, marketed, licensed and supported
comprehensive enterprise software 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, the Made2Manage®
Enterprise Business System, provides fully integrated solutions automating major
business processes used by manufacturers, from selling and design, to
manufacturing and distribution, finance and human resources, and customer
service and support. This comprehensive enterprise business system features
Made2Manage Enterprise Resource Planning (“M2M™ ERP”),
Made2Manage Supply Chain Management (“M2M SCM”), Made2Manage Customer
Relationship Management (“M2M CRM”), Made2Manage Business Intelligence
(“M2M BI”), Made2Manage Business Collaboration (“M2M VIP”),
and Made2Manage Enterprise Integration (“M2M Link”). The system is
supported by a host of user services, including M2M Expert, the Web site that
provides our customers with Internet resources including support services 24
hours per day, seven days a week, cyber-consulting, and virtual education
courses.
The Made2Manage Enterprise Business System is sold in the United States, Canada and the United Kingdom. Historically, approximately 99% of our revenues have been derived from customers in North America.
Our revenues are derived from software licenses, services and hardware. Our revenue recognition policy is consistent with the requirements of Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (“SAB 101”), Statement of Position No. 97-2, Software Revenue Recognition (“SoP 97-2”), and other applicable revenue recognition guidance and interpretations. In general, we record revenue when it is realized, or realizable, and earned. Revenues from software licenses and hardware are recognized upon shipment, delivery or customer acceptance, based upon the substance of the arrangement or as defined in the sales agreement provided there are no significant remaining vendor obligations to be fulfilled and collectibility is reasonably assured. Software revenues are generated from licensing software to new customers and from licensing additional users and new applications to existing customers. Hardware revenues are generated primarily from the sale of bar-code and data collection equipment used in connection with the Made2Manage Enterprise Business System and constitute a relatively small component of total revenues.
- - 9 -
Our sales arrangements typically include services in addition to software and hardware. Service revenues are generated from support and maintenance agreements and also from implementation, education, consulting, and customization services. For sales arrangements that include bundled software, hardware and services, we account for any undelivered service offering as a separate element of a multiple-element arrangement. These services are usually not essential to the functionality of the software and hardware. Amounts deferred for services are determined based upon vendor-specific objective evidence of the fair value of the elements as prescribed in SoP 97-2. Support and education revenues are recognized on a straight-line basis over the term of the agreement. Revenues from implementation, consulting, and customization services are recognized as provided to customers. If the services are essential to the functionality of the software and hardware, revenue from the software and hardware components is deferred until the essential services are complete.
Subscription-based offerings include support and maintenance and M2M University, which are included in service revenues, and M2M Express and M2M VIP, which are included in software revenues. M2M University provides flexible, comprehensive educational opportunities to customers via the Web and also through traditional classroom training. The M2M Express thin client option is designed to provide small and midsize manufacturing companies access to the Made2Manage Enterprise Business System via the Internet through a hosted application service provider. The M2M VIP enterprise portal offers manufacturing companies a range of collaborative opportunities with their customers, sales channels and suppliers. Subscription revenues are recognized ratably over the subscription period.
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.
The following table sets forth the percentage of total revenues and percent increase or decrease from the prior year dollar amount represented by certain items included in our unaudited, condensed consolidated statements of operations for the periods indicated.
| Three Months Ended March 31, |
Percent Increase | ||||||
|---|---|---|---|---|---|---|---|
| 2003 |
2002 |
(Decrease) | |||||
| Revenues: | |||||||
| Software | 23 | .6% | 26 | .6% | (12 | .4)% | |
| Services | 73 | .5 | 71 | .3 | 1 | .8 | |
| Hardware | 2 | .9 | 2 | .1 | 36 | .7 | |
| Total revenues | 100 | .0 | 100 | .0 | (1 | .2) | |
| Costs of revenues: | |||||||
| Software | 5 | .4 | 5 | .8 | (7 | .0) | |
| Services | 27 | .4 | 28 | .1 | (3 | .7) | |
| Hardware | 2 | .3 | 1 | .5 | 48 | .7 | |
| Restructuring benefit | (0 | .7) | --- | N | M | ||
| Total costs of revenues | 34 | .4 | 35 | .4 | (3 | .9) | |
| Gross profit | 65 | .6 | 64 | .6 | 0 | .2 | |
| Operating expenses: | |||||||
| Sales and marketing | 34 | .2 | 39 | .0 | (13 | .5) | |
| Product development | 19 | .2 | 17 | .5 | 8 | .6 | |
| General and administrative | 14 | .5 | 13 | .7 | 4 | .3 | |
| Total operating expenses | 67 | .9 | 70 | .2 | (4 | .5) | |
| Operating loss | (2 | .3) | (5 | .6) | 60 | .0 | |
| Other income, net | 0 | .8 | 1 | .1 | (30 | .9) | |
| Loss before income taxes | (1 | .5) | (4 | .5) | 67 | .1 | |
| Income tax provision | 0 | .1 | --- | N | M | ||
| Net loss | (1 | .6)% | (4 | .5)% | 64 | .1% | |
NM – Not Meaningful
- - 10 -
Revenues
Revenues are derived from software licenses, service fees and hardware sales. For the three months ended March 31, 2003, total revenues decreased by $91,000, or 1.2%, to $7.3 million from $7.4 million for the three months ended March 31, 2002. The slight decline in total revenues resulted from a shortfall in software license revenues offset by continued growth in our service revenues and increased hardware sales. We have not historically recognized significant annual revenues from any single customer.
Software Revenues. For the three months ended March 31, 2003, software license revenues decreased by $245,000, or 12.4%, to $1.7 million from $2.0 million for the three months ended March 31, 2002. Software revenues constituted 23.6% and 26.6% of total revenues for the three months ended March 31, 2003 and 2002, respectively. The shortfall in software revenues reflected the ongoing recession in our target market, the small and midsize manufacturing sector. Our existing customers and prospective customers have delayed spending as a result of the uncertain economic and political environment. During the first quarter of 2003, we partnered with Infoscan Software Systems to deliver a warehouse management solution to small and midsize manufacturers. Sales of the Infoscan Warehouse Management System were largely responsible for the increase in third party software revenues in the first quarter of 2003 compared to the same period a year ago. The percentage of software sales from third party products was 22% in the first quarter of 2003 as compared to 16% in the first quarter of 2002.
Services Revenues. For the three months ended March 31, 2003, service revenues increased by $96,000, or 1.8%, to $5.4 million from $5.3 million for the three months ended March 31, 2002. These revenues constituted 73.5% and 71.3% of total revenues for the three months ended March 31, 2003 and 2002, respectively. The growth in service revenues was primarily driven by our expanding installed base of customers on support and maintenance contracts. At March 31, 2003, over 80% of our customers were on support and maintenance, which is consistent with the rate at December 31, 2002.
Hardware Revenues. For the three months ended March 31, 2003, hardware revenues increased by $58,000, or 36.7%, to $216,000 from $158,000 for the three months ended March 31, 2002. These revenues constituted 2.9% and 2.1% of total revenues for the three months ended March 31, 2003 and 2002, respectively. In addition to increasing third party software revenues, our new partnership with Infoscan Software Systems discussed in “Software Revenues” above also contributed to increased hardware sales of bar-code and data collection equipment, which are necessary to utilize the Infoscan Warehouse Management System and certain other features of the Made2Manage Enterprise Business System.
International Revenues. International revenues from our operations in the United Kingdom typically represent less than 1% of our total revenues. There were no new system sales in the first quarter of 2003 or 2002.
Costs of Revenues
Costs of Software Revenues. For the three months ended March 31, 2003 and 2002, costs of software revenues totaled $400,000 and $430,000, respectively, resulting in gross profits of 76.9% and 78.3% of software revenues, respectively. The decrease in the gross profit percentage was primarily attributable to a higher proportion of software revenues being generated from third party products, including the Infoscan Warehouse Management System discussed in “Software Revenues” above, which carry a higher cost than our proprietary products. Also impacting software margins, but to a lesser degree, were slightly higher discounts in the first quarter of 2003 versus the same period a year ago.
- - 11 -
Costs of Service Revenues. For the three months ended March 31, 2003 and 2002, costs of service revenues totaled $2.0 million and $2.1 million, respectively, resulting in gross profits of 62.8% and 60.6% of service revenues, respectively. The improvement in the gross profit percentage demonstrates our ability to continue to provide quality services to an expanding customer base while reducing costs. We have been successful in reducing costs by advancing our use of technology, including the M2M Expert Web site, which has allowed us to operate with fewer staff and eliminate travel costs by providing education, consulting and support resources over the Internet.
Costs of Hardware Revenues. For the three months ended March 31, 2003 and 2002, costs of hardware revenues totaled $168,000 and $113,000, respectively, resulting in gross profits of 22.2% and 28.5% of hardware revenues, respectively. The decrease in the gross profit percentage was impacted by bar-code and data collection equipment sold in conjunction with the Infoscan Warehouse Management System discussed in “Hardware Revenues” above, which have lower margins than the bar-code and data collection equipment that we have typically sold in the past.
Restructuring Benefit. During the first quarter of 2001, management approved a restructuring plan designed to align our operations with the current technological and economic environment. One of the elements of the restructuring plan was facilities rationalization. In March of 2003, we obtained an early release for one of the office facilities included in the restructuring plan, which had remaining net lease obligations of $51,000. This amount was accounted for as a reduction of costs of revenues in the consolidated statement of operations for the quarter ended March 31, 2003. The remaining restructuring liabilities of $43,000 are recorded as a current liability in the consolidated balance sheet as of March 31, 2003 and represent our best estimate of non-recoverable costs and expenses associated with a sublet facility.
Operating Expenses
Sales and Marketing Expenses. For the three months ended March 31, 2003 and 2002, sales and marketing expenses were $2.5 million and $2.9 million, respectively, representing 34.2% and 39.0% of total revenues, respectively. The reduction in sales and marketing expenses largely reflected changes in the structure of the sales organization, which were implemented during the third quarter of 2002 and enabled us to reduce headcount and personnel related expenses. Additionally, the shortfall in software revenues in the first quarter of 2003 compared to the same period a year ago resulted in lower commissions.
Product Development Expenses. For the three months ended March 31, 2003 and 2002, product development expenses were $1.4 million and $1.3 million, respectively, representing 19.2% and 17.5% of total revenues, respectively. In the first quarter of 2003, we incurred severance expenses due to a change in personnel in the development organization, which we did not have in the first quarter of 2002. We did not capitalize any software development costs during these periods, since the capitalizable portion was not significant.
General and Administrative Expenses. For the three months ended March 31, 2003 and 2002, general and administrative expenses were $1.1 million and $1.0 million, respectively, representing 14.5% and 13.7% of total revenues, respectively. The increase in general and administrative expenses primarily consisted of directors and officers insurance premiums, which were higher than in prior years.
Other Income, Net
For the three months ended March 31, 2003 and 2002, other income, net was $56,000 and $81,000, respectively, representing 0.8% and 1.1% of total revenues, respectively. The decrease in other income in the first quarter of 2003 compared to the first quarter of 2002 was due primarily to lower interest rates on invested securities.
- - 12 -
Income Tax Provision
We have sustained tax operating losses over the past four years, resulting in accumulated net operating loss carryforwards that could be used to reduce income tax expense in future periods. Although these loss carryforwards do not begin to substantially expire until 2019, current economic conditions make it difficult to predict full recoverability of these deferred tax assets in a period comparable to the period over which they originated. Therefore, a full valuation allowance has been provided against these deferred tax assets. As a result, we have not and do not anticipate recording significant tax charges or benefits in 2002 or 2003. Amounts recorded in the first quarter of 2003 represent minimum taxes required by certain states and foreign taxes related to our operations in the United Kingdom
As of March 31, 2003, we had $16.6 million of cash, cash equivalents and marketable securities, reflecting an increase of $126,000 for the three months ended March 31, 2003. We generated $372,000 of cash from operating activities, which have funded our operations. Our investing activities reflected $278,000 of spending for capital expenditures primarily for information systems equipment. Financing activities for the quarter included proceeds from the issuance of common stock of $51,000 under the stock option plan and the employee stock purchase plan, offset by payments of $19,000 for an existing capital lease.
At March 31, 2003, we had working capital of $10.7 million, which primarily consisted of $16.6 million in cash, cash equivalents and marketable securities, $4.5 million of accounts receivable, net of allowance for doubtful accounts, and the current portion of deferred revenues of $9.0 million. The average net accounts receivable days sales outstanding (“DSO”) continues to improve at 55 days at March 31, 2003 as compared to 65 days at December 31, 2002, due to our focus on credit and collection efforts. Deferred revenues decreased to $9.5 million as of March 31, 2003, from $10.3 million as of December 31, 2002, and principally relate to support agreements and contracted services. The current portion of deferred revenues is expected to be recognized in revenue during the next twelve months. We have no bank debt.
We believe that cash and cash equivalents, marketable securities and cash flow from operations will be sufficient to meet our currently anticipated working capital and capital expenditure requirements at least through the next 12 months.
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 revenues in each quarter is from software 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 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.
- - 13 -
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 the Made2Manage Enterprise Business System 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.
Product and Market Concentration
Our revenues are currently derived from licenses of the Made2Manage Enterprise Business System and related services and third party software and hardware products. In the near term, the Made2Manage Enterprise Business System and related services are expected to continue to account for the majority of our revenues. Accordingly, any event that adversely affects the sale of the Made2Manage Enterprise Business System to new customers as well as the continued use of the Made2Manage Enterprise Business System by our installed base of customers, such as competition from other products, significant quality problems, negative publicity or evaluation, reduced market acceptance of, or obsolescence of the hardware platforms on, or software environments in which the Made2Manage Enterprise Business System operates, could have a material adverse effect on our business, financial condition and results of operations. Additionally, as our sales of third party software and hardware products have increased, incompatibility with those products could also have a material adverse effect.
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 our target regions 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
The Made2Manage Enterprise Business System uses a variety of third-party technologies, including operating systems, tools and other applications developed and supported by Microsoft Corporation. The Made2Manage Enterprise Business System relies heavily on Microsoft Visual Studio, Microsoft SQL Server, and Microsoft.NET. Other Microsoft programming tools and applications used by the Made2Manage Enterprise Business System include VBA, ActiveX, OLE, ODBC, OLEDB, MSMQ, and Internet Information Server. There can be no assurance that Microsoft Corporation will continue to support the operating systems, tools and other applications utilized by the Made2Manage Enterprise Business System or that they will continue to be widely accepted in our target market. Additionally, we use Visual Objects from Computer Associates and certain optimization software from ILOG Inc.
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We resell various third-party products, including products from Microsoft, Infoscan, Powerway, Best Software, Concord Business Systems, ADS Inc., LiveVault, and Inovis and bar code hardware. 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 the Made2Manage Enterprise Business System 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 developments 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 has changed the way businesses operate and therefore the software needs of our customers. We believe our 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, which could improve predictability of future revenues but delay revenue recognition and cash collections as compared to the current method. Although we have not yet seen evidence of it, a rapid change to the ASP business model could materially and adversely impact our near term financial results and financial position.
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.
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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 distribute the Made2Manage Enterprise Business System in the United Kingdom. We rely on MacroScope Ltd., which replaced NCR Corporation as our reseller in the United Kingdom, to sell and service the United Kingdom market place. There can be no assurance that MacroScope Ltd. will be successful in expanding our presence in the international arena. 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, financial condition or results of operations.
Insufficient Customer Commitment
To obtain the benefits of the Made2Manage Enterprise Business System, 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 the Made2Manage Enterprise Business System. 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 and Industry Consolidation
The enterprise software market for small and midsize manufacturers is fragmented, intensely competitive and rapidly changing. We face competition from a variety of software vendors, including application software vendors, software tool vendors and relational database management system vendors. Additionally, several software companies that have traditionally marketed enterprise software to larger manufacturers have begun to target small and midsize manufacturers. We have also noted consolidations in the market, including acquisitions of established vendors by large technology companies looking to expand into the enterprise software market, as well as mergers of well-known vendors. 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. There can be no assurance that such competitors will not offer or develop products that are superior to the Made2Manage Enterprise Business System or that achieve greater market acceptance. If such competition were to result in significant price declines or loss of market share for the Made2Manage Enterprise Business System, our business, financial condition and results of operation would be adversely affected.
- - 16 -
The technologies we use to develop the Made2Manage Enterprise Business System are generally available and widely known, including technology developed by Microsoft Corporation. The Made2Manage Enterprise Business System 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 the Made2Manage Enterprise Business System. We believe that the Made2Manage Enterprise Business System 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 products.
Relationships with Value Added Resellers
We distribute our software products through a direct sales force and a network of value added resellers (“VARs”). A portion of licenses of the Made2Manage Enterprise Business System sold to new customers is sold by VARs. Additionally, we rely on MacroScope Ltd., which replaced NCR Corporation as our reseller in the United Kingdom, to sell and service the United Kingdom market place. If some or all of the VARs reduce their efforts to sell the Made2Manage Enterprise Business System, promote competing products, cease doing business, 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.
Product Liability and Insufficient 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 the Made2Manage Enterprise Business System or third-party technologies utilized by the Made2Manage Enterprise Business System.
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. Additionally, we are subject to other legal proceedings and claims in the normal course of business. 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 the Made2Manage Enterprise Business System 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.
- - 17 -
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.
Effect of Antitakeover Provisions
The Amended and Restated Articles of Incorporation of Made2Manage Systems, Inc. (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., Employee Stock Option Plan (the “Stock 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.
Our Board of Directors believes that it is imperative to diminish the inevitable distraction of key executive employees by the personal uncertainties and risks created by a pending or threatened change in control. In order to encourage such executives’ full undivided time, attention, loyalty, and dedication, the Board of Directors has approved the Made2Manage Systems, Inc., Executive Salary Continuation Plan (the “Salary Continuation Plan”). Pursuant to the terms of the Salary Continuation Plan, we have entered into agreements with the President and each of the Vice Presidents of the company pursuant to which each of them will receive certain severance payments in the event their employment with the company is terminated within twelve months of a change in control or ownership of the company.
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 Company’s stock has limited trading volume which can result in increased price volatility. Also, 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 our 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 April 30, 2003, we had 4,940,960 shares of common stock outstanding, of which 532,706 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 April 30, 2003, there were 2,385,781 options outstanding to purchase shares of common stock at a weighted average price of $5.51 per share under the Company’s stock option plans, of which options to purchase 1,350,155 shares of common stock were then vested and exercisable. At April 30, 2003, we had reserved 945,271 shares of common stock for future grant under the 1999 Made2Manage Systems, Inc., Employee Stock Option Plan (the “Stock Option Plan”). We have reserved 200,000 shares of common stock for issuance under the Made2Manage Systems, Inc., Employee Stock Purchase Plan (the “Stock Purchase Plan”). As of April 30, 2003, 94,864 shares have been issued under the Stock Purchase Plan. We have filed registration statements registering shares of common stock issued pursuant to the Stock Option Plan and the Stock Purchase Plan on August 20, 1999 and January 30, 1998, respectively. Accordingly, shares issued pursuant to these plans will be saleable in the public market upon issuance, subject to certain restrictions.
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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.
- - 19 -
Interest Rate and Investment Risk. We have a significant amount of cash and short-term investments. This investment portfolio exposes us to interest rate risk as short-term investment rates have fallen, resulting in reductions to interest income. Given the short-term maturities and high-grade investment quality of our investment portfolio, we believe that we are not subject to material fluctuations in principal. However, there is no assurance the issuers of the securities will not default on their obligations, which could result in losses of principal and accrued interest
We do not have any material debt outstanding, other than a capital lease with a fixed interest rate. Therefore, we do not currently have any significant interest rate risk from a liability perspective.
Foreign Currency 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, and we do not have any foreign currency swaps or derivatives. Consequently, we are not currently subject to material foreign currency exchange risk.
| (a) |
Evaluation of disclosure controls and procedures. The Company’s
chief executive officer and chief financial officer have reviewed and evaluated
the effectiveness of the Company’s disclosure controls and procedures (as
defined in the Exchange Act Rules 13a-14(c) and 15d-14(c)) as of a date within
ninety days before the filing date of this quarterly report. Based on that
evaluation, the chief executive officer and the chief financial officer have
concluded that the Company’s disclosure controls and procedures are
effective and designed to ensure that material information relating to the
Company and the Company’s consolidated subsidiaries are made known to them
by others within those entities. It should be noted that the design of any
system of controls is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions. |
| (b) |
Changes in internal controls. There were no significant changes in the
Company’s internal controls or in other factors that could significantly
affect those controls subsequent to the date of the evaluation, and there were
no significant deficiencies or material weaknesses which required corrective
actions. |
- - 20 -
| (a) |
Exhibits |
| (b) |
Reports on Form 8-K |
- - 21 -
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
Date: May 13, 2003 Date: May 13, 2003 |
MADE2MANAGE SYSTEMS, INC. (Registrant) /s/ David B. Wortman David B. Wortman Chairman of the Board, President and Chief Executive Office (Principal Executive Officer) /s/ Traci M. Dolan Traci M. Dolan Vice President, Finance and Administration, Chief Financial Officer, Secretary and Treasurer (Principal Financial Officer and (Principal Accounting Officer) |
- - 22 -
I, David B. Wortman, certify that:
| 1. |
I have reviewed this quarterly report on Form 10-Q of Made2Manage Systems, Inc.; |
| 2. |
Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report; |
| 3. |
Based on my knowledge, the financial statements and other financial information
included in this quarterly report fairly present, in all material respects, the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this quarterly report; |
| 4. |
The registrant’s other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: |
| a. |
designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared; |
| b. |
evaluated the effectiveness of the registrant’s disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the “Evaluation Date”); and |
| c. |
presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date; |
| 5. |
The registrant’s other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant’s auditors and the audit
committee of registrant’s board of directors (or persons performing the
equivalent function): |
| a. |
all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant’s ability to record, process,
summarize and report financial data and have identified for the
registrant’s auditors any material weaknesses in internal controls; and |
| b. |
any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant’s internal controls; and |
| 6. |
The registrant’s other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses. |
| Date: May 13, 2003 |
/s/ David B. Wortman David B. Wortman Chairman of the Board, President and Chief Executive Officer |
- - 23 -
I, Traci M. Dolan, certify that:
| 1. |
I have reviewed this quarterly report on Form 10-Q of Made2Manage Systems, Inc.; |
| 2. |
Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report; |
| 3. |
Based on my knowledge, the financial statements and other financial information
included in this quarterly report fairly present, in all material respects, the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this quarterly report; |
| 4. |
The registrant’s other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: |
| a. |
designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared; |
| b. |
evaluated the effectiveness of the registrant’s disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the “Evaluation Date”); and |
| c. |
presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date; |
| 5. |
The registrant’s other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant’s auditors and the audit
committee of registrant’s board of directors (or persons performing the
equivalent function): |
| a. |
all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant’s ability to record, process,
summarize and report financial data and have identified for the
registrant’s auditors any material weaknesses in internal controls; and |
| b. |
any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant’s internal controls; and |
| 6. |
The registrant’s other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses. |
| Date: May 13, 2003 |
/s/ Traci M. Dolan Traci M. Dolan Vice President, Finance and Administration, Chief Financial Officer Secretary and Treasurer |
- - 24 -
|
Number Assigned in Regulation S-K Item 601 |
Exhibit Number |
Description of Exhibit |
(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) |
10.1 |
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.)
|
10.2 |
1999 Made2Manage Systems, Inc., Employee Stock Option Plan
(Incorporated by reference to March 31, 1999 Form 10-Q.)
|
10.3 |
Amendment to the 1999 Made2Manage Systems, Inc., Employee Stock
Option Plan (Incorporated by reference to March 31, 2000 schedule
14-a, appendix 1.)
|
10.4 |
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.)
|
10.5 |
First Amendment to the Made2Manage Systems, Inc., Employee Stock
Purchase Plan (Incorporated by reference to June 30, 2002 Form
10-Q.)
|
10.6 |
Made2Manage Systems, Inc., Executive Salary Continuation Plan
(Incorporated by reference to September 30, 2001 Form 10-Q.)
|
(21) |
21.1 |
List of Subsidiaries (Incorporated by reference to December 31,
2000 Form 10-K.)
|
N/A |
99.1 |
CEO Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
N/A |
99.2 |
CFO Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
- - 25 -