SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
GENTIA SOFTWARE PLC
Tuition House
St George's Road
Wimbledon
London SW19 4EU
United Kingdom
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
---------- -----------
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
------------- -------------
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b):
82- N.A.
Page 1 of 16 Pages
Exhibit Index Appears on Page 12
GENTIA SOFTWARE PLC
FORM 6-K
TABLE OF CONTENTS
Page
Financial Information:
Condensed Consolidated Balance Sheets as of June 30, 2000 (Unaudited)
and December 31, 1999 (Audited) 3
Condensed Consolidated Statements of Operations for the three months and
six months ended June 30, 2000 and 1999 (Unaudited) 4
Condensed Consolidated Statements of Cash Flows for the six months
Ended June 30, 2000 and 1999 (Unaudited) 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6
Management's Discussion and Analysis of Financial Condition and Results of Operations. 7
Exhibit Index 12
Exhibit A. Second Quarter Press Release 13
2
GENTIA SOFTWARE PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
2000 1999
---------------- -----------------
(UNAUDITED) (AUDITED)
(IN THOUSANDS)
US$ US$
ASSETS
Current assets:
Cash and cash equivalents..................................... $ - $2,968
Accounts receivable, net of allowances........................ 13,248 7,757
Trade accounts receivable............................. 15,775 11,214
Less: Allowance for doubtful debt..................... (2,527) (3,457)
Prepaid expenses and other current assets..................... 1,136 559
-------------- ------------
Total current assets..................................................... $14,384 $11,284
Property and equipment, net.......................................... 1,068 1,153
Purchased Software, net of amortization of $870
(Dec 31, 1999 - $609).......................................... 1,739 2,000
Goodwill on acquisition, net of amortization of $2,608
(Dec 31, 1999 - $2,286)........................................ 5,360 3,831
-------------- ------------
Total assets............................................................. $22,551 $18,268
============== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank Overdraft................................................. $1,142 $ -
Current portion of lease obligations........................... 74 46
Accounts payable............................................... 2,679 2,784
Accrued liabilities............................................ 1,951 2,624
Deferred revenues.............................................. 3,918 3,259
Other accounts payable......................................... 917 1,289
Short-term loans............................................... 1,103 4,442
-------------- ------------
Total current liabilities................................................. $11,784 $14,444
Non current liabilities:
Long-term portion of lease obligations......................... 102 121
-------------- ------------
Total Liabilities $11,886 $14,565
Shareholders' equity:
Ordinary shares................................................ 2,980 2,481
Additional paid-in capital..................................... 35,222 29,009
Retained (deficit)............................................. (26,502) (26,695)
Cumulative translation adjustment.............................. (1,035) (1,092)
-------------- ------------
Total shareholders' equity................................................ $10,665 $3,703
-------------- ------------
Total liabilities and shareholders' equity................................ $22,551 $18,268
============== ============
See accompanying notes
3
GENTIA SOFTWARE PLC
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------------------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2000 1999 2000 1999
----------------------------------------------------------
US$ US$ US$ US$
Revenues:
License.............................................. $5,242 $2,366 $8,926 $4,660
Services and other................................... 2,761 3,586 5,740 7,243
----------- ----------- ----------- -----------
8,003 5,952 14,666 11,903
Cost of revenues:
License.............................................. 176 868 387 1,000
Services and other................................... 1,619 2,303 3,258 4,918
----------- ----------- ----------- -----------
1,795 3,171 3,645 5,918
Gross profit.............................................. 6,208 2,781 11,021 5,985
Operating expenses:
Sales and marketing.................................. 4,104 4,778 6,705 8,436
Research and development............................. 864 1,547 1,837 3,134
General and administrative........................... 863 1,025 1,574 2,014
Restructuring costs.................................. - 1,376 - 1,876
Goodwill amortization................................ 323 384 584 584
----------- ----------- ----------- -----------
Total operating expenses............. 6,154 9,110 10,700 16,044
Income/(loss) from operations............................. 54 (6,329) 321 (10,059)
Other (expense)/income.................................... (38) 28 (128) 69
----------- ----------- ----------- -----------
Income/(loss) before provision for income taxes........... 16 (6,301) 193 (9,990)
Provision for income taxes................................ - - - -
----------- ----------- ----------- -----------
Net income/(loss)......................................... $16 ($6,301) $193 ($9,990)
=========== =========== =========== ===========
Basic income/(loss) per share............................. $0.00 ($0.62) $0.02 ($0.98)
Diluted income/(loss) per share........................... $0.00 ($0.62) $0.01 ($0.98)
Shares used to compute basic EPS..................... 12,044 10,214 11,388 10,205
Shares used to compute diluted EPS................... 14,758 10,214 13,897 10,205
See accompanying notes
4
GENTIA SOFTWARE PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
---------------------- -- ----------------------
JUNE 30, JUNE 30,
2000 1999
---------------------- ----------------------
(IN THOUSANDS)
US$ US$
CASH FLOWS FROM OPERATING ACTIVITIES
Net income/(loss)........................................... $195 $(9,990)
Adjustments to reconcile net income/(loss) to net cash
utilized in operating activities:
Depreciation........................................ 318 615
Goodwill amortization............................... 518 549
Gain on disposal of assets.......................... (1) (2)
Loss on disposal of subsidiary...................... - 2
Changes in operating assets and liabilities:
Accounts receivable............................. (4,483) 2,721
Provision for bad debts......................... (938) 903
Prepaid expenses and other receivables.......... (479) 677
Accounts payable................................ (157) 571
Accrued liabilities and other expenses.......... (1,184) 590
Deferred revenues............................... 659 308
----------------- ----------------
Net cash utilized in operating activities............................. (5,552) (3,056)
----------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds on sale of assets.......................... 1 72
Forgiveness of debt on sale of subsidiary........... - (821)
Purchases of assets................................. (39) (373)
----------------- ----------------
Net cash utilized in investing activities............................. (38) (1,122)
----------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds on shares issued....................... 760 13
Short term loan acquired............................ 729 -
Generation of capital lease obligations............. 10 104
----------------- ----------------
Net cash provided by financing activities............................. 1,499 117
----------------- ----------------
Effect of exchange rate changes on cash...................... (23) (87)
----------------- ----------------
Net (decrease) in cash....................................... (4,114) (4,148)
Cash at beginning of period.................................. 2,968 5,314
----------------- ----------------
Cash at end of period........................................ ($1,146) $1,166
================= ================
See accompanying notes
5
GENTIA SOFTWARE PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Gentia Software plc (the "Company") is incorporated in England and Wales. The
Company is a leading supplier of analytical applications that enable clients to
maximize their competitive position through enterprise-wide deployment of
strategic management and predictive decision making solutions.
BASIS OF PRESENTATION
The consolidated financial statements are stated in United States dollars and
are prepared under United States generally accepted accounting principles.
INTERIM FINANCIAL INFORMATION
The financial information at June 30, 2000 and the results of operations for the
three months and six months ended June 30, 2000, and 1999 are unaudited but
include all adjustments which the Company considers necessary for a fair
presentation of the financial position at such date and the operating results
and cash flows for those periods. Results for the three month period ended June
30, 2000 are not necessarily indicative of results that may be expected for the
entire year. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with United States generally
accepted accounting principles have been condensed or omitted pursuant to the
Securities and Exchange Commission Rules and Regulations. In accordance with SOP
98-1, the Company has capitalized computer software obtained for internal use.
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements consolidate the accounts of the Company
and its wholly and majority owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
FOREIGN EXCHANGE
The consolidated balance sheets of the Company and its foreign subsidiaries are
translated from their respective functional currencies to United States dollars
at period-end exchange rates and the statements of operations and cash flows at
average exchange rates for the relevant periods. Gains and losses resulting from
translation are accumulated as a separate component of shareholders' equity. Net
gains and losses resulting from foreign exchange transactions, which are not
material in any of the reporting periods, are included in the consolidated
statement of operations.
PER SHARE INFORMATION
Net income per share information is computed based on the weighted average
number of shares outstanding, as described in FAS 128.
2 LITIGATION
In the opinion of management, there are presently no outstanding claims against
the Company which are expected to materially effect its financial position.
3 ACQUISITION OF ebi SOLUTIONS LLC
On April 25, 2000 the Company purchased ebi Solutions LLC for a consideration of
$1.95 million plus $50 expenses which was met by issuing 400,000 shares in
Gentia Software plc to the partners of the limited liability company. ebi
Solutions LLC was a privately held provider of eBusiness applications and
services. The integration of Gentia's new product suite, thinkCRA and ebi's
OASIS offers an advanced solution set encompassing the ability to analyze both
online and offline commerce. The result is an intelligent and predictive
solution that optimizes the ability to understand, respond to and manage
customer relationships.
6
GENTIA SOFTWARE PLC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
THREE MONTHS ENDED JUNE 30, 2000 AND THREE MONTHS ENDED JUNE 30, 1999.
REVENUES
Revenues were $8.0 million in the 3 months ended June 30, 2000, an increase of
approximately 34% compared to revenues of $6.0 million for the 3 months ended
June 30, 1999. License revenues were $5.2 million in the 3 months ended June 30,
2000, an increase of 122% compared to license revenues of $2.4 million for the 3
months ended June 30, 1999. The USA sales operation, achieved total license
revenues of $1.2 million for the quarter. In addition $1.0 million license
revenue was generated from the new Customer Relationship Analytic (CRA)
division.
Services and other revenues were $2.8 million in the 3 months ended June 30,
2000 a decrease of approximately 23% compared to $3.6 million for the 3 months
ended June 30, 1999. The decrease in service revenue on the second quarter of
last year can in part be attributed to the sale of our South African and
Australian operations during the second half of last year, combined with the
reduction of direct professional services revenue as we focus on application
specific, high margin business and the cancellation of maintenance on legacy
products. Services and other revenue comprised 34.5% of total revenues for the
three months ended June 30, 2000, compared to 60.2% for the three months ended
June 30, 1999. The change is attributable to an increase in license revenue
sales relative to total revenue.
GROSS PROFIT
Gross profit was $6.2 million or 77.6% of revenues for the 3 months ended June
30, 2000, compared to $2.8 million or 46.7% revenues for the 3 months ended June
30, 1999. The increase in gross margin is attributed to the higher level of
direct license fee sales and the improved gross margins achieved on services and
other revenue. Gross margins on services and other revenue increased from 35.8%
for the three months ended June 30, 1999 to 41.4% for the same period in 2000.
The increase is attributed to a focus on application specific, high margin
business in the professional services division as well as the cost saving
benefits from the restructuring of the support and maintenance services
division.
SALES AND MARKETING
Sales and marketing costs were $4.1 million in the 3 months ended June 30, 2000,
a decrease of 14.1% compared to $4.8 million in the 3 months ended June 30,
1999. During the quarter ended June 30,1999 an allowance for doubtful accounts
of $1.7 million was made, excluding this amount from the costs results in sales
and marketing costs of $3.1 million. Comparison on a like for like basis shows
the current quarters costs having increased by approximately 32.3% on the
corresponding quarter's costs from the prior year. This increase is largely
attributable to the launch of thinkCRA, an increase in the number of revenue
generating staff employed, the acquisition of ebi Solutions LLC and the
establishemnt of a US sales force in the EPM division.
RESEARCH AND DEVELOPMENT
Research and development costs were $0.9 million in the 3 months ended June 30,
2000, lower than the $1.5 million recorded in the 3 months ended June 30, 1999.
The decrease in research and development costs can be attributed to the costs
savings as a result of a reduction in legal costs relating to the Arbour dispute
and the consolidation of research facilities. The current research and
development organization continues to focus on building the analytical
applications that surround the Scorecard combined with developing our new
Customer Relationship Analytic application. The Company's research and
development expenditure is predominantly incurred in pounds sterling.
GENERAL AND ADMINISTRATIVE
General and administrative costs were $0.9 million in the 3 months ended June
30, 2000, compared to $1.0 million for the 3 months ended June 30, 1999.
7
OTHER INCOME
Other income reduced from $28,000 in the three months ended June 30, 1999 to an
expense of $38,000 in the three months ended June 30, 2000. Interest incurred
relates to short term finance obtained during the three months ended.
8
GENTIA SOFTWARE PLC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
SIX MONTHS ENDED JUNE 30, 2000 AND SIX MONTHS ENDED JUNE 30, 1999.
REVENUES
Revenues were $14.7 million in the 6 months ended June 30, 2000, an increase of
approximately 23.2% compared to revenues of $11.9 million for the 6 months ended
June 30, 1999. License revenues were $8.9 million in the 6 months ended June 30,
2000, an increase of 91.5% compared to license revenues of $4.7 million for the
6 months ended June 30, 1999. Improvement in the USA and Distributor operations
combined with sales of the new thinkCRA products substantially gave rise to the
increase in license revenues.
Services and other revenues were $5.7 million in the 6 months ended June 30,
2000 a decrease of approximately 20.8% compared to $7.2 million for the 6 months
ended June 30, 1999. The decrease in service revenue on the 6 months ended June
30, 1999 can in part be attributed to the sale of our South African and
Australian operations during the second half of last year, combined with the
reduction of direct professional services revenue as we focus on application
specific, high margin business and cancellation of maintenance on legacy
products. Services and other revenue comprised 39.1% of total revenues for the
six months ended June 30, 2000, compared to 60.9% for the six months ended June
30, 1999. The change is attributable to an increase in license revenue sales
relative to total revenue.
GROSS PROFIT
Gross profit was $11.0 million or 75.1% of revenues for the 6 months ended June
30, 2000, compared to $6.0 million or 50.3% of revenues for the 6 months ended
June 30, 1999. The increase in gross margin is attributed to the higher level of
direct license fee sales and the improved gross margins achieved on services and
other revenue. Gross margins on services and other revenue increased from 32.1%
for the six months ended June 30, 1999 to 43.4% for the same period in 2000. The
increase is attributed to a focus on application specific, high margin business
in the professional services division as well as the cost saving benefits from
the restructuring of the support and maintenance services division.
SALES AND MARKETING
Sales and marketing costs were $6.7 million in the 6 months ended June 30, 2000,
a decrease of 20.5% compared to $8.4 million in the 6 months ended June 30,
1999. During the quarter ended June 30,1999 an allowance for doubtful accounts
of $1.7 million was made, excluding this amount from the costs results in sales
and marketing costs of $6.7 million. Therefore if costs are compared on a like
to like basis, the current 6 months costs have remained unchanged from those of
the same stage in the prior year, however included in the costs for the current
6 month period are costs relating to the launch of thinkCRA, an increase in
number of revenue generating staff employed, the acquisition of ebi Solutions
LLC and the establishment of a US sales force in the EPM division.
RESEARCH AND DEVELOPMENT
Research and development costs were $1.8 million in the 6 months ended June 30,
2000, lower than the $3.1 million recorded in the 6 months ended June 30, 1999.
The decrease in research and development costs can be attributed to the costs
savings as a result of a reduction in legal costs relating to the Arbour dispute
and the consolidation of research facilities. The current research and
development organization continues to focus on building the analytical
applications that surround the Scorecard combined with developing our new
Customer Relationship Analytic application. The Company's research and
development expenditure is predominantly incurred in pounds sterling.
GENERAL AND ADMINISTRATIVE
General and administrative costs were $1.6 million in the 6 months ended June
30, 2000, compared to $2.0 million for the 6 months ended June 30, 1999. The
reduction in costs from the same period in the prior year is due to the
centralization of the finance function in the United Kingdom, resulting in
significant savings being made due to the closure of facilities and termination
of regional staff.
9
OTHER INCOME
Other income decreased in the 6 months ended June 30, 2000 from $69,000 for
the 6 months ended June 30, 1999 to an expense of $128,000. Interest expense
incurred, relates to short-term finance that was obtained during the period,
some of which was converted into equity on March 24, 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company ended the second quarter of 2000 with bank borrowing of $1.1 million
compared to $3.0 million cash in the bank at December 31, 1999. In the six
months ended June 30, 2000 the Company's operating activities consumed cash of
$5.6 million compared to $3.1 million in the six months ended June 30, 1999.
Accounts receivable at June 30, 2000 were $13.2 million, an increase of 70.8%
compared to $7.8 million at December 31, 1999. This reflects the increased
levels of license revenue achieved in the first six months of 2000 of $8.9
million compared to $4.7 million in the first six months of 1999 and the
extended credit terms given. Substantially all of the license deals booked in
the second quarter of 2000, were booked in June with no corresponding cash
collections.
Investing activities utilized $38,000 in the six months ended June 30, 2000
compared to the utilization of $1.1 million in the six months ended June 30,
1999. Investing activities in the current six months consisted of the purchase
and sale of assets amounting to $38,000 compared to the prior years six months
purchase of assets of $373,000 and the forgiveness of debt on the sale of the
South African subsidiary of $821,000.
Financing activities generated $1.5 million in the six months ended June 30,
2000 compared to $117,000 in the six months ended June 30, 1999.
The Company's ability to satisfy its cash requirements for the remainder of the
year is dependent on meeting certain projected revenue targets, cash collection
targets, containing operating expenses and receiving additional equity
investment. The Company has, at times in the past, been unable to meet similar
targets, particularly license revenue targets. The Company is reliant on
receiving additional investment and is actively pursuing a private placement of
between $10 and $12 million for a portion of its 100% owned subsidiary
thinkAnalytics. There can be no assurance that the Company will meet its
projected revenue targets or that the equity investment will be received, the
failure of the Company to do so (or to obtain additional sources of financing,
which may not be available on suitable terms to the Company, if at all) will
have a material adverse effect on the Company's business and financial condition
and the value of the Company's American Depositary Shares.
This Report contains "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. All statements, other than statements of
historical facts, included in this Report (or incorporated herein by reference)
regarding the Company's financial position and business strategy may constitute
forward-looking statements. Although the Company believes that the expectations
reflected in, and the assumptions underlying, such forward-looking statements
are reasonable, it can give no assurance that such expectations will prove to
have been correct. Important factors that could cause actual results to differ
materially from the Company's expectations are included in the documents filed
by the Company with the Securities and Exchange Commission, including the
matters contained in the caption "Business Factors" in the Company's most recent
Annual Report on Form 20-F. In light of the foregoing, readers of this Report
are cautioned not to place undue reliance on the forward-looking statements
contained or incorporated by reference herein.
10
The information contained in Exhibit 1 hereto, consisting of the registrant's
unaudited financial statements for the six months ended June 30, 2000, has been
distributed to its security holders and is furnished to the Commission pursuant
to Rule 13a-16 under the Securities Exchange Act of 1934, as amended (the
"Act"). This report and the information furnished herewith shall not be deemed
to be "filed" for the purposes of Section 18 of the Act or otherwise subject to
the liabilities of that section.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused the Report to be signed on its behalf by the
undersigned, thereunto duly authorised.
GENTIA SOFTWARE plc
By: /s/ Nicholas P.S. Bray
Nicholas P. S. Bray
Chief Financial Officer
Date: October 5, 2000
11
EXHIBIT INDEX
Page
Exhibit A Second Quarter Press Release - (2000) 13
12