-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Od+nOxk2Nslgo34WFkkBQo1PPutyZViaglJGTKJ8CGb/Y+vVesO1LDHrHM6KbKk3 9eJF1SO7KIb/khhy9q4mEQ== 0000897069-98-000226.txt : 19980415 0000897069-98-000226.hdr.sgml : 19980415 ACCESSION NUMBER: 0000897069-98-000226 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980228 FILED AS OF DATE: 19980414 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: EFFECTIVE MANAGEMENT SYSTEMS INC CENTRAL INDEX KEY: 0000853372 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 391292200 STATE OF INCORPORATION: WI FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23438 FILM NUMBER: 98593359 BUSINESS ADDRESS: STREET 1: 12000 WEST PARK PL CITY: MILWAUKEE STATE: WI ZIP: 53224 BUSINESS PHONE: 4143599800 10-Q 1 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28, 1998 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 0-23438 Effective Management Systems, Inc. (Exact name of registrant as specified in its charter) Wisconsin 39-1292200 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 12000 West Park Place, Milwaukee, WI 53224 (Address of principal executive (Zip Code) offices) Registrant's telephone number, including area code: (414) 359-9800 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X___ No _______ Indicate the number of shares outstanding of each of the registrant's classes of common stock as of the latest practicable date. Class Outstanding as of February 28, 1998 Common Stock, $0.1 par value 4,079,455 EFFECTIVE MANAGEMENT SYSTEMS, INC. Form 10-Q February 28, 1998 INDEX PART 1 - FINANCIAL INFORMATION PAGE Item 1 Financial Statements Consolidated Balance Sheets at February 28, 1998 and November 30, 1997 3 Consolidated Statements of Operations - Three Months Ended February 28, 1998 and February 28, 1997 5 Consolidated Statements of Cash Flows - Three Months Ended February 28, 1998 and February 28, 1997 6 Notes to Consolidated Financial Statements 7 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3 Qualitative and Quantitative Disclosures About Market Risks 14 PART II - OTHER INFORMATION Item 6 Exhibits and Reports on Form 8-K 15 SIGNATURES 16 PART I Financial Information Item 1 Financial Statements EFFECTIVE MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands)(unaudited except for November 30, 1997 amounts) 28-Feb 30-Nov ASSETS 1998 1997 CURRENT ASSETS Cash $ 284 $ 14 Accounts Receivable: Trade, less allowance for doubtful accounts 11,049 12,370 Related Parties 566 604 Inventories 161 280 Refundable Income Taxes 312 312 Deferred income Taxes 0 0 Prepaid Expenses and Other Current Assets 355 146 ------ ------ TOTAL CURRENT ASSETS 12,727 13,726 LONG TERM ASSETS Computer Software, net 7,770 7,717 Investments in and Advances to Unconsolidated Joint Ventures 182 182 Equipment and Leasehold Improvements, net 3,639 3,917 Intangible Assets, net 2,386 2,444 Other Assets 803 811 ------ ------ TOTAL LONG TERM ASSETS 14,780 15,071 ------ ------ TOTAL ASSETS $27,507 $28,797 ====== ====== The accompanying notes are an integral part of these consolidated financial statements. EFFECTIVE MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share data)(unaudited except for November 30, 1997 amounts) 28-Feb 30-Nov LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997 CURRENT LIABILITIES Accounts Payable $ 1,967 $ 2,272 Accrued Liabilities 1,455 2,773 Deferred Revenues 6,090 5,887 Customer Deposits 188 63 Current portion of Long-term Obligations 918 946 ------- ------- TOTAL CURRENT LIABILITIES 10,618 11,941 LONG TERM LIABILITIES Deferred Revenue and Other Long-term Liabilities 1,074 317 Long-term Obligations 4,265 3,966 Deferred Income Taxes 0 0 ------- ------- TOTAL LONG TERM LIABILITIES 5,339 4,283 Commitments and Contingencies - - STOCKHOLDERS' EQUITY Preferred Stock, $.01 par value, authorized 3,000,000 shares; none issued or outstanding - - Common Stock, $.01 par value; authorized 20,000,000 shares; issued 4,079,455 and 4,067,310 shares; outstanding 4,066,830 and 4,054,685 shares 41 41 Common Stock Warrants 4 4 Additional Paid-in Capital 11,361 11,328 Retained Earnings 204 1,260 Cost of Common Stock in Treasury (12,625 shares) (60) (60) ------- ------- TOTAL STOCKHOLDERS' EQUITY 11,550 12,573 ------- ------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $27,507 $28,797 ======= ======= The accompanying notes are an integral part of these consolidated financial statements. EFFECTIVE MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) THREE MONTHS ENDED 28-Feb 29-Feb 1998 1997 NET REVENUES: Software license fees $5,335 $4,211 Services 4,239 4,246 Hardware 672 1,018 ------- ------- Total net revenues 10,246 9,475 COST OF PRODUCTS AND SERVICES Software license fees 1,723 1,177 Services 3,220 3,701 Hardware 527 882 ------- ------- Total cost of products and services 5,470 5,760 Selling and marketing expenses 3,625 3,381 General and administrative expenses 1,194 1,065 Product development expenses 837 704 ------- ------- Total costs and operating expenses 11,126 10,910 ------- ------- LOSS FROM OPERATIONS (880) (1,435) Other (Income)/ Expense Equity in (earnings)/loss of unconsolidated joint ventures 0 2 Interest (income) (10) (15) Interest expense 153 75 ------- ------- 143 62 ------- ------- LOSS BEFORE INCOME TAXES (1,023) (1,497) Income tax (benefit) expense 33 (614) ------- ------- NET LOSS ($1,056) ($883) ======= ======= Loss per share - basic and diluted ($0.26) ($0.22) ======= ======= The accompanying notes are an integral part of these consolidated financial statements. EFFECTIVE MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) THREE MONTHS ENDED 28-Feb 28-Feb 1998 1997 OPERATING ACTIVITIES Net Loss ($1,056) ($883) Adjustments to reconcile net income(loss) to net cash provided(used) by operating activities: Depreciation and amortization 352 281 Amortization of capitalized computer software development costs 954 644 Equity in earnings of joint ventures 0 0 Goodwill Amortization 58 58 Deferred income taxes 0 0 Changes in operating assets and liabilities: Accounts Receivable 1,270 917 Inventories and other current assets (1) (774) Accounts payable and other liabilities (538) (922) ------- ------- Total adjustments 2,095 204 Net cash provided by(used in) in operating activities 1,039 (679) INVESTING ACTIVITIES Additions to equipment and leasehold improvements (74) (454) Proceeds from sale of securities 0 250 Software development costs capitalized (1,008) (938) Other 8 (2) ------- ------- Net cash used in investing activities (1,074) (1,144) FINANCING ACTIVITIES Proceeds on long-term debt and other notes payable 272 1,016 Additional paid in capital 33 70 ------- ------- Net cash provided by financing activities 305 1,086 ------- ------- Net increase(decrease) in cash $270 ($737) Cash-beginning of period 14 866 Cash-end of period 284 129 ======= ======= The accompanying notes are an integral part of these consolidated financial statements. EFFECTIVE MANAGEMENT SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS February 28, 1998 (Unaudited) (In Thousands) Note 1 - Basis of Presentation The accompanying consolidated interim financial statements included herein have been prepared by Effective Management Systems, Inc. (the "Company"), without an audit, in accordance with generally accepted accounting principles for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading. In the opinion of management, the information furnished for the three-month periods ended February 28, 1998 and February 28, 1997 includes all adjustments, consisting solely of normal recurring accruals, necessary for a fair presentation of the financial position and results of operations for the interim periods. The results of operations for the three months ended February 28, 1998 are not necessarily indicative of the results of operations to be expected for the entire fiscal year ending November 30, 1998. It is suggested that the interim financial statements be read in conjunction with the audited consolidated financial statements for the year ended November 30, 1997 included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. Note 2 - Additional Financial Disclosure Equipment and leasehold improvements consisted of the following: 2-28-1998 11-30-1997 Gross $9,433 $9,359 Less: Accumulated Depreciation < 5,794> < 5,442> ------ ------ Net $3,639 $3,917 Allowance for doubtful accounts consisted of the following: 2-28-1998 11-30-1997 Balance $ 498 $ 462 Provision for doubtful accounts consisted of the following: 2-28-1998 11-30-1997 $ 36 $ 17 Note 3 - Net Loss Per Share In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share." SFAS No. 128 replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options and warrants. Earnings per share amounts for all periods have been presented and, where appropriate, restated to conform to SFAS No. 128 requirements. The following table sets forth the computation of basic and diluted earnings per share. February 28, 1998 1997 Denominator Denominator for basic earnings per share - weighted average common shares 4,075 4,025 Effect of dilutive securities - stock options and warrants ------ ------- Denominator for diluted earnings per share - adjusted weighted average common shares 4,075 4,025 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview The Company recorded an increase in net revenues (8.1%) and a net loss of $1,056,000 for the first quarter of fiscal 1998 compared with a net loss of $883,000 for the first quarter of fiscal 1997. The first quarter of fiscal 1998 does not reflect a tax benefit relating to the loss since for book purposes the Company is in a loss carryforward position. On an operating income basis, the Company recorded a net loss of $880,000 for the first quarter of fiscal 1998 compared with a net loss of $1,435,000 for the first quarter of fiscal 1997. Software revenues were up significantly (26.7%) in the first quarter of fiscal 1998 compared to the same period in the prior year. Management believes this increase in software revenues to be mainly from increased sales of the Company's latest version of its software introduced in November 1997. The new version of the product basically completed two major development projects, namely the inclusion of a Microsoft Windows user interface, and the development of an integrated manufacturing execution system (MES). As a result of disappointing financial results, the Company is currently reviewing strategic alternatives as well as restructuring options in an attempt to enhance its recent financial performance. No assurance can be given that these various measures will enable the Company to return to profitability. On April 13, 1998, the Company announced a material restructuring of the corporation which will incude a reduction of staff, internal reorganization, the write-off of some assets and the closing of some field offices. Although the Company has not finalized the details of the restructuring, it currently estimates that the restructuring will result in a one time charge against earnings of approximately $6 million during the fiscal second quarter. In an additional announcement on April 13, 1998, the Company announced a strategic alliance with Baan Company under which the Company will package the Baan Enterprise Resource Planning (ERP) software with its Manufacturing Execution System (MES) technology to mid-market manufacturers. The alliance also includes the KeyLink Systems Division of Pioneer-Standard Electronics, Inc., which will provide bundled hardware along with pre-installed software to the Company for installation at customer sites. Management of the Company believes that this move represents a significant enhancement of its product line-up for the heart of its market-the mid-range discrete manufacturer. Results of Operations Total Revenues Net revenues increased to $10,246,000 for the three months ended February 28, 1998, which was an increase of 8.1% from the $9,475,000 for the same quarter in the previous year. The mix of revenues comparing software, services, and hardware revenues as a percentage of net revenues improved to 52.0%, 41.4%, and 6.6%, respectively, in the first quarter of fiscal 1998, from 44.4%, 44.8%, and 10.8% , respectively, in the first quarter of fiscal 1997. The overall increase in revenues for the three months ended February 28, 1998 was attributable, in part, to a $1,124,000 increase in the level of relatively high margin software revenues, offset in part by a $346,000 decrease in relatively low margin hardware revenues. International revenues represented less than 10% of net revenues for all periods presented. The Company's operating revenues can vary substantially from quarter to quarter based on the size and timing of customer orders and market acceptance of new products. The Company has historically operated with little backlog because software orders are generally shipped as orders are received. As a result, product revenue in any quarter is substantially dependent on orders booked and shipped during that quarter. Software License Fees Software license fees are customer charges for the right to use the Company's software products. Software license fees increased 26.7% to $5,335,000 in the first quarter of fiscal 1998 from $4,211,000 in the first quarter of fiscal 1997. The increase in software license fees was mainly attributable to the introduction of a new version of the Company's software product which resulted in increased sales, particularly in the eastern domestic region ($819,000). The new version of the product basically completed two major development projects, namely the inclusion of a Microsoft Windows user interface, and the development of an integrated manufacturing execution system (MES). Management believes that the completion of these projects will enhance the Company's competitive advantage and provide significant customer benefit. Service Revenues The Company offers a number of optional services to its customers, including such services as a telephone support program, systems integration, custom software development, implementation consulting, and formal classroom and on-site training. Service revenues remained substantially unchanged at $4,239,000 for the three months ended February 28, 1998, as compared with $4,246,000 for the same period of the prior year. The Company has reduced the level of service personnel through attrition which, in turn, has resulted in a reduction in growth of associated revenues. Hardware Revenues Hardware revenues decreased 34.0% to $672,000 in the first quarter of fiscal 1998 compared with $1,018,000 for the corresponding period of 1997. The decrease was mainly due to increased sales of software on platforms for which the Company does not supply hardware and the discontinuation of hardware sales to an affiliate of the Company, EMS Solutions, Inc. ($174,000)(See General and Administrative Expenses below). Management expects the trend of declining hardware sales to continue due to the increasing sales of software licenses operating on the Microsoft Windows NT platform. Hardware used with the Microsoft Windows NT platform is either generally already in place at the customer site or readily available from local suppliers who can also provide local support. Cost of Software License Fees The cost of software license fees as a percentage of related revenue was 32.3% for the first quarter of fiscal 1998, an increase from 28.0% for the corresponding period of 1997. Cost of software license fees is composed of both amortization of past investment in software development and the third party costs associated with the software revenues. Software amortization is related to past investment in software development and does not vary consistently with variations in software revenues. Software amortization accounted for an increase of 2.7% in the cost of software license fees as a percentage of software license fee revenues for the first quarter of fiscal 1998 as compared to the first quarter of fiscal 1997. Software amortization will increase in future fiscal periods based on the past increases of investment in capitalized product development. The cost of software license fees is also dependent on the level of third party costs associated with certain software revenues and includes such items as purchased licenses and other components. The remaining increases in the cost of software license fees as a percentage of related revenue was due to these third party costs. Cost of Services The cost of services as a percentage of related revenue decreased to 76.0% for the three months ended February 28, 1998, as compared with 87.2% for the same quarter in the previous year. The decrease was mainly due to increased levels of billing generated by existing personnel. The Company is restructuring its service organization on an ongoing basis to match its costs more closely with its current revenue levels. Accordingly, the Company is currently slowly reducing personnel levels through normal attrition. The Company is also refocusing its service staff to reduce the level of internal non-billable projects and increase the level of billable customer work. Cost of Hardware The cost of hardware as a percentage of related revenue decreased to 78.4% in the first quarter of fiscal 1998 from 86.6% in the first quarter of fiscal 1997. The cost of hardware as a percentage of related revenue varies with the size of the system, the margin mix of items comprising the system being sold, and the competitive pressure of the customer sale. The cost of hardware as a percentage of related revenue also varies with the amount of low margin hardware sales to affiliates. Hardware sales to affiliates declined in the first quarter of fiscal 1998 compared to the first quarter of fiscal 1997. Selling and Marketing Expenses Selling and marketing expenses increased $244,000, or 7.2%, from $3,381,000 in the first quarter of fiscal 1997 to $3,625,000 in the first quarter of fiscal 1998. This growth in selling and marketing expense was mainly due to increased levels of performance compensation related to the corresponding growth in software revenues. As a percentage of total revenues, selling and marketing expense was 35.4% in the first quarter of fiscal 1998 compared to 35.7% in the corresponding period of 1997. General and Administrative Expenses General and administrative expenses increased $129,000, or 12.1%, from $1,065,000 in the first quarter of fiscal 1997 to $1,194,000 in the first quarter of fiscal 1998. The increase in general and administrative expenses was mainly due to rising expenses for professional and consulting fees ($79,000). As a percentage of net revenues, general and administrative expenses were 11.7% and 11.2% in the first quarter of fiscal 1998 and 1997, respectively. During the third quarter of fiscal 1997, the Company discontinued the practice of providing office space, accounting and administrative services, computer processing time, and other miscellaneous services to EMS Solutions, Inc., an affiliated entity. EMS Solutions, Inc. now operates as a stand-alone entity with no material ongoing relationship with the Company. Product Development Expense Product development expense increased 18.9% from $704,000 in the first quarter of fiscal 1997 to $837,000 in the first quarter of fiscal 1998. This increase was primarily related to the incorporation of various new technologies into the Company's software products. The Company capitalizes costs in accordance with Statement of Financial Accounting Standard (SFAS) No. 86. The Company capitalized $1,008,000 of product development costs in the first quarter of fiscal 1998 compared to $938,000 in the first quarter of fiscal 1997. As a percentage of software license fees, the total amount invested in software development was 34.7% and 39.0% in the first quarter of fiscal 1998 and fiscal 1997, respectively. With the completion of two major development projects and with the Company's plan to control its overall costs, the Company expects to reduce the level of investment in product development in the near future. Other Income\Expense-Net Other income\expense-net was $62,000 of expense for the first quarter of fiscal 1997 compared to $143,000 of expense for the first quarter of fiscal 1998. The increase in the level of expense was mainly the result of an increase in interest expense as a result of increased borrowings under the Company's borrowing facilities. Income Tax A small income tax expense ($33,000 for state and local taxes) and no income tax benefit was recorded for the first quarter of fiscal 1998 compared to a benefit of 41.0% for the first quarter of fiscal 1997. At February 28, 1998, the Company, for book purposes, is in a tax loss carryforward position. Generally accepted accounting principles prohibit the Company from recording a tax benefit under the circumstances. Liquidity and Capital Resources At February 28, 1998, the Company had cash and marketable securities aggregating $284,000. During the first quarter of fiscal 1998, the Company's operating activities provided $1,039,000 of cash compared to using $679,000 of cash for the same period of the prior year. This decrease in the use of cash was mainly attributable to the Company's reduced operating losses and increased non-cash software amortization. Investing activities used cash of $1,074,000 in the first quarter of fiscal 1998 compared to $1,144,000 of cash in the first quarter of fiscal 1997. The principal use of the cash in the first quarter of fiscal 1998 was $1,008,000 for capitalized product development. The principal uses of cash in the first quarter of fiscal 1997 included $938,000 for capitalized product development and $454,000 for purchases of equipment and furniture. Financing activities provided $305,000 of cash in the first quarter of fiscal 1998 compared with $1,086,000 in the first quarter of fiscal 1997. The cash provided in fiscal 1998 mainly reflected borrowings under the Company's borrowing facilities. As of February 28, 1998, the Company had $4,088,000 of availability under its $6,000,000 line of credit, which is based on the level of eligible accounts receivable. On December 31, 1997, the Company entered into a loan and security agreement with Foothill Capital Corporation, that includes a revolving line of credit providing for maximum borrowings of $6,000,000 and a three- year term note for $3,112,000. Borrowings under the agreement are secured by substantially all assets of the Company, with the revolving line of credit secured mainly by the Company's accounts receivable. The new agreement contains certain restrictive covenants relating to income (EBITDA), tangible net worth, and level of capital expenditures. In the first quarter of 1998, the Company required and obtained a waiver from the lender as a result of its failure to meet the tangible net worth and EBITDA covenants. In order to meet covenants in the future, the Company will need positive operational results in the short term. In the event that the Company's performance does not improve in the short term, the Company will need to secure additional waivers and/or alternative sources of financing. The Company is reviewing both strategic alternatives and/or a business restructuring to deal with its current financial status. Although management believes that waivers and/or additional financing can be obtained, if needed, no assurance can be given that waivers or such additional financing will be available to the Company on acceptable terms. In the event that the Company is unable to secure additional financing, it would likely have a material adverse effect on the Company's liquidity, Including its ability to fund continuing operations at current levels. Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 IN ADDITION TO HISTORICAL INFORMATION, THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS "FORWARD-LOOKING STATEMENTS", INCLUDING INFORMATION REGARDING FUTURE ECONOMIC PERFORMANCE AND PLANS AND OBJECTIVES OF MANAGEMENT, WHICH ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE REFLECTED IN THE FORWARD-LOOKING STATEMENTS. SUCH UNCERTAINTIES, AND RISKS INCLUDE, BUT ARE NOT LIMITED TO, PRODUCT DEMAND AND MARKET ACCEPTANCE FOR THE COMPANY'S PRODUCTS; THE IMPACT OF COMPETITIVE PRODUCTS; THE COMPANY'S ABILITY TO MAINTAIN EFFICIENT MARKETING AND DISTRIBUTION OPERATIONS WITH RESPECT TO NEW PRODUCTS; FUTURE ECONOMIC, COMPETITIVE AND MARKET CONDITIONS; THE COMPANY'S ABILITY TO RETAIN KEY TECHNICAL AND MANAGEMENT PERSONNEL; THE COMPANY'S SUCCESS IN IMPROVING ITS FINANCIAL PERFORMANCE; TIMING OF PRODUCT DEVELOPMENT; PRODUCT PRICING AND OTHER FACTORS DETAILED IN THIS QUARTERLY REPORT ON FORM 10-Q AND IN OTHER FILINGS MADE BY THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION. Item 3. Quantitative and Qualitative Disclosure About Market Risk Not Applicable Part II - Other Information Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 4.1 Loan and Security Agreement by and between Foothill Capital Corporation and Effective Management Systems, Inc., EMS-East, Inc. and Effective Management Systems of Illinois, Inc., dated December 31, 1997. [Incorporated by reference to Exhibit 4.14 to Effective Management Systems, Inc.'s Form 10-K for the year ended November 30, 1997] 10.1 Relationship Agreement by and between CIMX, an Ohio Limited Liability Company, and Effective Management Systems, Inc., dated December 31, 1997 [Incorporated by reference to Exhibit 10.20 to Effective Management Systems, Inc.'s Form 10-K for the year ended November 30, 1997] 27 Financial Data Schedule [EDGAR version only] (b) Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EFFECTIVE MANAGEMENT SYSTEMS, INC. April 14, 1998 By: /s/ MICHAEL D. DUNHAM Michael D. Dunham President (principal executive officer) By: /s/JEFFREY J. FOSSUM Jeffrey J. Fossum Chief Financial Officer and Assistant Treasurer (principal financial and accounting officer) Exhibit Index Exhibit Number 4.1 Loan and Security Agreement by and between Foothill Capital Corporation and Effective Management Systems, Inc., EMS-East, Inc. and Effective Management Systems of Illinois, Inc., dated December 31, 1997. [Incorporated by reference to Exhibit 4.14 to Effective Management Systems, Inc.'s Form 10-K for the year ended November 30, 1997] 10.1 Relationship Agreement by and between CIMX, an Ohio Limited Liability Company, and Effective Management Systems, Inc., dated December 31, 1997 [Incorporated by reference to Exhibit 10.20 to Effective Management Systems, Inc.'s Form 10-K for the year ended November 30, 1997] 27 Financial Data Schedule [EDGAR version only] EX-27 2
5 3-MOS NOV-30-1998 DEC-01-1997 FEB-28-1998 284 0 12,113 498 161 12,727 9,433 (5,794) 27,507 10,618 0 0 0 41 11,361 27,507 672 10,246 527 11,126 143 36 143 (1,023) 33 (1,056) 0 0 0 (1,056) (.26) 0 Not required to be calculated in accordance with generally accepted accounting principles.
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