Just For the Record, Anybody, Anyone Outhere.....
General
The Company's principal products are IBS-90, Abraxsys, IBS-IV Trade Finance, OpenTrade and TradeWizard. Abraxsys, IBS-90 and IBS-IV Trade Finance are back office
international banking software products running on mid range computer systems. Abraxsys and IBS-90 have been installed at approximately 75 locations in over 30
countries. Abraxsys is a complete re-development of IBS-90 and is now marketed as the Company's prime offering to banks to computerize their back office operation.
Abraxsys is written in the industry standard C language and runs on a variety of platforms and operating systems, the most significant of which is UNIX. By the end of the
current financial year, Abraxsys will have been ported to Microsoft Corporation's Windows NT operating system to offer a fully functioning banking solution on the most
popular emerging platform in the industry. IBS-IV Trade Finance has reached the technological feasibility phase and its development costs since acquisition from McDonnell
Information Systems ("MDIS") have been capitalized, accordingly. OpenTrade is a software product that provides a platform for distributing real-time financial information
within the trading room environment. OpenTrade is used by 50 customers supporting 6,000 trading positions. TradeWizard is an advanced software product for the
integration of information and applications at the users' desktop. It is installed at some 1,000 positions. The Company also markets and licenses its ManTec line of
integrated software packages for financial institutions through an agent. The Company no longer directly supports its ManTec product line. The Company's agent provides
support to certain clients. The ManTec product line runs on IBM and IBM-compatible mainframe computers.
The Company's revenues consist of license fees for the Company's software components, maintenance fees and customer service fees. In addition, the Company earns
revenues from selling other companies' hardware and software products. The Company accounts for revenue in conformity with Statements of Position
("SOP") 81-1.
The Company recognizes revenues from all products according to the percentage of completion method as costs are incurred (cost to cost basis) in conformity with SOP
81-1. A prudent estimate is made of the revenue attributable to work completed and is recognized once the outcome of the contract can be assessed with reasonable
certainty. If the estimate indicates a loss, the entire loss is accrued immediately. The amount by which revenue exceeds billings to customers is shown as unbilled accounts
receivable.
Maintenance revenues are recognized on an incremental basis over the period of the contract, the unrecognized portion is recorded as deferred income. Customer service
revenues are recognized as revenue as work is performed and invoiced by the Company. The Company's contracts with its customers typically provide for payments to be
made pursuant to specified schedules, some of which payments are received prior to delivery to the customer. Such payments received prior to delivery are not recognized by
the Company as revenue, but are reflected as deferred income on the Company's consolidated balance sheet. Revenues recognized in accordance with SOP-81-1 and not
yet invoiced are recorded as accrued income on the Company's consolidated balance sheet.
Cost of software products consisted of the amortization of capitalized software products, of the cost of third party products included in the Company's contractual deliverables
and of agency commission incurred. Other costs of software products, such as the costs of making copies from the product masters and physical packing of the Company's
software are immaterial. Costs are allocated to maintenance and customer service revenues in proportion to their respective revenues. Management believes that such
allocations are reasonable.
Comparison of fiscal quarters
Total revenues decreased to $4,287,000 from $5,812,000 for the three period ended January 31, 1997 and 1996, respectively, and increased to $17,305,000 from
$16,592,000 for the nine month period ended January 31, 1995, respectively.
Revenue from sales of software product decreased to $424,000 and $4,189,000 from $1,301 and $5,221,000 for the three month and nine month periods ended January 31,
1997 and 1996, respectively. The cost of software products decreased to $84,000 and $442,000 from $590,000 and $1,809,000 for the three and nine month periods ended
January 31, 1996, respectively. This decrease in cost is largely due to the decrease in sales of third party hardware products. Third party computer hardware sales generally
generate low contribution to profits.
The aggregate of maintenance fees and customer service fees decreased to $3,862,000 from $4,511,000 the three month periods ended January 31, 1997 and 1996,
respectively, and increased to $13,116,000 from $11,371,000 for the nine month periods ended January 31, 1997 and 1996, respectively. Maintenance fees and customer
service fees provides sustainable recurrent revenues, which lessens the impact of the peaks and troughs of software product revenue on the Company's cashflow. The
Company's objective is to achieve a position where new software license revenue represents an a lower percentage of the Company's total revenue.
Gross profit from maintenance and customer service decreased to $2,467,000 from $2,514,000 for the three month periods ended January 31, 1997 and 1996, respectively,
and increased to $7,138,000 from $5,532,000 for the nine month periods ended January 31, 1997 and 1996, respectively.
Gross profit from sales of software products, maintenance and customer service decreased to $2,808,000 from $3,225,000 for the three month period ended January
31, 1997 and 1996, respectively, and increased to $10,885,000 from $8,944,000 for the nine month periods ended January 31, 1997 and 1996, respectively.
Selling, general and administrative costs increased to $3,673,000 from $3,507,000 for the three periods ended January 31, 1997 and 1996, respectively, and decreased to
$12,510,000 from $13,658,000 for the nine month periods ended January 31, 1997 and 1996, respectively, as a result of the Company's successful strategy to streamline its
management structure, to rationalize its sales efforts and to consolidate its facilities in the United Kingdom, thus reducing overall facility cost and canceling certain lease
liabilities. It is also a result of the Company's greater reliance on distributors and partners to promote sales of its products without incurring high fixed costs.
The Company is reporting a $1,149,000 and $2,413,000 operating loss for the three and nine month periods ended January 31, 1997, respectively, versus an operating loss
of $673,000 and $5,980,000 for the three and nine month periods ended January 31, 1996, respectively.
The company incurs expenses in British pounds, Singapore dollars, US dollars, French francs and German marks. Similarly revenues are invoiced in a variety of currencies,
the most significant are UK pounds, US dollars, German marks, French francs and Swiss francs. The company does not engage in any hedging activities.
The company is not aware of any current or expected future impact as a result of new tax laws or the issuance of FASB statements.
Liquidity and Capital Resources
During the nine month period ended January 31, 1997 the Company issued convertible debt for a total gross consideration of approximately $8,811,000 and equity for a total
consideration of approximately $500,000.
At January 31, 1997 the Company had a working capital surplus of approximately $3,782,000 as compared to a working capital deficiency of $6,993,000 at April 30, 1996.
This improvement is a result of the use of proceeds of financing transactions to cure the Company's working capital deficiency.
The company's long term liquidity and its ability to continue as a going concern will ultimately depend on the company's continued ability to realize sufficient revenue from
operations.
Latter, Jimmio.
Julius. |
