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Exhibit 99
CERTAIN FACTORS
Project Software & Development, Inc. (the "Company") is filing this Exhibit
with the Securities and Exchange Commission in order to set forth in a readily
available document certain significant risks and uncertainties that are
important considerations to be taken into account in conjunction with
consideration and review of the Company's reports, registration statements,
information statements, press releases, and other publicly-disseminated
documents (including oral statements concerning Company business information
made by others on behalf of the Company) that include forward-looking
information.
The nature of forward-looking information is that such information involves
assumptions, risks and uncertainties. Certain public documents of the Company
and oral statements made by authorized officers, directors, employees, agents
and representatives of the Company, acting on its behalf, may include
forward-looking information which will be influenced by the following and other
assumptions, risks and uncertainties. Forward-looking information requires
management of the Company to make assumptions, estimates, forecasts and
projections regarding the Company's future results as well as the future
effectiveness of the Company's strategic plans and future operational decisions.
Forward-looking statements made by or on behalf of the Company are subject to
the risk that the forecasts, projections, and expectations of management, or
assumptions underlying such forecasts, projections and expectations, may become
inaccurate. Accordingly, actual results and the Company's implementation of its
plans and operations may differ materially from forward-looking statements made
by or on behalf of the Company. The following discussion identifies certain
important factors that could affect the Company's actual results and actions and
could cause such results and actions to differ materially from any
forward-looking statements made by or on behalf of the Company that related to
such results and actions. Other factors, which are not identified herein, could
also have such an effect.
GENERAL ECONOMIC RISK FACTORS
Forward-looking statements of the Company are subject to the risk that
assumptions made by management of the Company concerning future general economic
conditions such as recession, inflation, interest rates, tax rates, consumer
spending and credit and other future conditions having an impact on software
markets and the Company's business may prove to be incorrect. Adverse changes in
such future economic conditions could have an adverse effect on the Company's
business.
RAPID TECHNOLOGICAL CHANGE
The computer software industry is characterized by rapid technological
advances, changes in customer requirements and frequent product introductions
and enhancements. The Company's success depends upon its ability to continue to
enhance its current products and to develop and introduce new products that keep
pace with technological developments, respond to evolving customer requirements
and achieve market acceptance. In particular, the
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Company believes that it must continue to respond quickly to users' needs for
broad functionality and to advances in hardware and operating systems. Any
failure by the Company to anticipate or respond adequately to technological
developments and customer requirements, or any significant delays in product
development or introduction, could result in a loss of competitiveness and
revenues. There can be no assurance that the Company will be successful in
developing and marketing new products or product enhancements, or that the
Company will not experience significant delays in developing such new products
or product enhancements, which delays could have a material adverse effect on
the Company's results of operations. In addition, there can be no assurance that
new products and product enhancements developed by the Company will achieve
market acceptance.
DEPENDENCE ON MAXIMO
The Company's revenues are primarily attributable to the licensing of its
MAXIMO product, introduced in 1991, and to related services and support.
Revenues from licenses of MAXIMO and related services and support accounted for
approximately 91.0% of the Company's total revenues in fiscal 1996. The
Company's financial performance in fiscal 1997 will depend on continued market
acceptance of MAXIMO. The Company believes that continued market acceptance of
MAXIMO will largely depend on its ability to enhance and broaden the
capabilities of MAXIMO, by, among other things, developing additional
application modules for MAXIMO, versions of MAXIMO that will utilize additional
industry standard databases and by developing and incorporating into the MAXIMO
product technologies that are emerging in connection with the Internet. Any
factor adversely affecting sales of MAXIMO, such as delays in development,
significant software flaws, incompatibility with significant hardware platforms,
operating systems or databases, increased competition or negative evaluations of
the products, would have a material adverse effect on the Company's business and
financial results.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS; SEASONALITY
The Company has experienced, and may in the future experience, significant
period-to-period fluctuations in revenues and operating results. The Company's
revenues and income from operations typically grow at a lower rate or decline in
the first quarter of each fiscal year, compared to the fourth quarter of the
preceding fiscal year. In addition, revenues are typically higher in the fourth
quarter than in other quarters of the year. The Company believes that these
quarterly patterns are partly attributable to the Company's sales commission
policies, which compensate members of the Company's direct sales force for
meeting or exceeding annual quotas. In addition, the Company's quarterly
revenues and operating results have fluctuated historically, due to the number
and timing of product introductions and enhancements, the budgeting and
purchasing cycles of customers, the timing of product shipments and the timing
of marketing and product development expenditures. The Company typically
realizes a significant portion of its revenue from software licenses in the last
month of a quarter, frequently in the last weeks or even days of
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a quarter. Large software license contracts may have a significant impact on
revenues for any quarter and could therefore result in significant fluctuations
in quarterly revenues and operating results. Accordingly, the Company believes
that period-to-period comparisons of its results of operations are not
necessarily meaningful and should not be relied upon as an indication of future
performance.
The Company generally ships its products upon receipt of orders and
maintains no significant backlog. As a result, revenues from license fees in any
quarter are substantially dependent on orders booked and shipped in that
quarter. A delay in or loss of orders can cause significant variations in
operating results. A significant portion of the Company's operating expenses are
fixed in the short term, and planned expenditures are based primarily on sales
forecasts. Accordingly, if revenues do not meet the Company's expectations in
any given quarter, operating results may be materially adversely affected.
COMPETITION
The market for applications software is intensely competitive and rapidly
changing. While the Company believes that it has competed effectively to date,
competition in its industry is likely to intensify as current competitors expand
their product lines and new companies enter the market. To remain successful in
the future, the Company must respond promptly and effectively to the challenges
of technological change, evolving standards and its competitors' innovations by
continually enhancing its own product, services and support offerings, as well
as its marketing programs. There can be no assurance that the Company will
continue to be able to compete successfully in the future.
The market for asset maintenance software is fragmented by geography, by
hardware platform and by industry orientation, and is characterized by a large
number of competitors. Currently, the Company's client/server versions of
MAXIMO, MAXIMO Enterprise and Workgroup, compete with products of a number of
large vendors which have traditionally provided maintenance software running on
mainframes and minicomputers and are now offering systems for use in the
client/server environment. MAXIMO Enterprise also competes with integrated
enterprise management systems which are provided by several large vendors and
which include maintenance modules. MAXIMO ADvantage competes with a number of
competitors, including a national vendor and other various small regional
companies. The Company expects that in the future MAXIMO Enterprise and
Workgroup may encounter competition from vendors of low cost maintenance
management systems designed initially for use by a single user or limited number
of users as vendors of these products upgrade their functionality in an attempt
to enter the client/server market.
Certain of the Company's competitors have greater financial, marketing,
service and support and technological resources than the Company. To the extent
that such competitors increase their focus on the asset maintenance or planning
and cost systems markets, the Company could be at a competitive disadvantage.
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INTERNATIONAL OPERATIONS
A significant portion of the Company's total revenues are derived from
operations outside the United States. The Company derived 40.5%, 38.4%, and
39.7% of its total revenue from sales outside the United States in fiscal years
1996, 1995, and 1994, respectively. This international business is subject to
various risks common to international activities, including exposure to currency
fluctuations, greater difficulty in collecting accounts receivable, political
and economic instability, the greater difficulty of administering business
abroad and the need to comply with a wide variety of foreign import and United
States export laws and regulatory requirements. A significant portion of the
Company's total revenue is derived from international operations which are
conducted in foreign currencies. Changes in the values of these foreign
currencies relative to the United States dollar have in the past adversely
affected, and may in the future affect, the Company's results of operations and
financial position. Gains and losses on translation to United States dollars and
settlement of receivables from international subsidiaries may contribute to
fluctuations in the Company's results of operations. To date, the Company has
not engaged in currency hedging transactions. The Company may in the future
undertake currency hedging, although there can be no assurance that hedging
transactions, if entered into, would materially reduce the effects of
fluctuations in foreign currency exchange rates on the Company's results of
operations.
DEPENDENCE ON THIRD PARTIES
MAXIMO Enterprise and Workgroup operate with the ORACLE, SYBASE and Centura
Corporation's SQLBase database management systems. The Company is developing an
interface for MAXIMO Enterprise to the SQLServer database management system, but
such additional version is not yet available. MAXIMO ADvantage runs on the
Microsoft Access database. Introduction and increased market acceptance of
database management systems with which the Company's products do not operate, or
failure of ORACLE, SYBASE, SQLBase or Access to achieve continued market
acceptance, could adversely affect the market for the Company's products.
The Company has entered into non-exclusive license agreements with Centura
Corporation, Management Information Technology, Incorporated and Netronic
Software GmbH, pursuant to which the Company incorporates into its products
software providing certain application development, user interface and graphics
capabilities developed by these companies. If the Company were unable to renew
these licenses, or if any of such vendors were to become unable to support and
enhance its products, the Company could be required to devote additional
resources to the enhancement and support of these products or to acquire or
develop software providing equivalent capabilities, which could cause delays in
the development and introduction of products incorporating such capabilities.
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PRODUCT DEVELOPMENT: INTERNET
The Company is currently developing software to incorporate into the MAXIMO
product technologies emerging in conjunction with the Internet. Internet
technologies and applications generally are developing and gaining acceptance
rapidly in the market. There can be no assurance that the Company will
successfully anticipate trends in this market, that the Company will be
successful in its Internet development efforts or that the Company's Internet
applications, if developed, will achieve market acceptance.
LIMITED INTELLECTUAL PROPERTY PROTECTION
The Company's success is dependent upon proprietary technology. The Company
currently has no patents and protects its technology primarily through
copyrights, trademarks, trade secrets and employee and third party
non-disclosure agreements. The Company's software products are often licensed to
customers under "shrink wrap" licenses included as part of the product
packaging. Although, in larger sales, the Company's shrink wrap licenses may be
accompanied by specifically negotiated agreements signed by the licensee, in
many cases its shrink wrap licenses are not negotiated with or signed by
individual licensees. Certain provisions of the Company's shrink wrap licenses,
including provisions protecting against unauthorized use, copying, transfer and
disclosure of the licensed program, may be unenforceable under the laws of
certain jurisdictions. In addition, the laws of some foreign countries do not
protect the Company's proprietary rights to the same extent as do the laws of
the United States. There can be no assurance that the steps taken by the Company
to protect its proprietary rights will be adequate to prevent misappropriation
of its technology or development by others of similar technology. Although the
Company believes that its products and technology do not infringe on any
existing proprietary rights of others, there can be no assurance that third
parties will not assert infringement claims in the future.
LACK OF A CHIEF EXECUTIVE OFFICER
Since August 1996, the Company has operated without a Chief Executive
Officer. Although the Board of Directors is currently engaged in a search for a
new Chief Executive Officer, no assurance can be given that an acceptable new
Chief Executive Officer will be identified or that if such person is identified,
such person will be successful in managing the Company or in obtaining
acceptance by the financial markets.
DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent on certain key executive officers and
technical employees, the loss of one or more of whom could have an adverse
impact on the future operations of the Company. The Company does not have
employment contracts with, and does not maintain key person life insurance
policies on, any personnel. In addition, the
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Company may need to hire additional skilled personnel to support the continued
growth of its business. There can be no assurance that the Company will be able
to retain its existing personnel or attract additional qualified employees.
MAXIMO ADVANTAGE; MAINTENANCE AUTOMATION CORPORATION
The core of the software constituting MAXIMO ADvantage was acquired by the
Company through its acquisition of Maintenance Automation Corporation ("MAC").
MAC's product, Chief ADvantage, has been renamed MAXIMO ADvantage and enhanced
since the acquisition. The software architecture for PC-based MAXIMO ADvantage
is significantly different from the client/server architecture of MAXIMO
Enterprise and Workgroup. Since its acquisition of MAC, the Company has incurred
significant additional and unexpected costs to complete the development of
MAXIMO ADvantage that meets the quality and functionality standards demanded by
the Company. In addition to these unexpected costs, there has been a delay in
excess of six months in completing the new release of this product. The Company
has restructured MAC's telesales distribution operation for MAXIMO ADvantage. No
assurance can be given that MAC will in the future be profitable or that its
telesales distribution operation for MAXIMO ADvantage will achieve the Company's
goals.
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock has increased significantly
since the Company's initial public offering in April 1994. Fiscal 1996 was
marked by generally rising stock prices, favorable industry conditions and
improved operating results by the Company, all of which are subject to change.
Factors such as announcements of technological innovations or new products by
the Company, its competitors and other third parties, as well as quarterly
variations in the Company's results of operations and market conditions in the
industry, may cause the market price of the Common Stock to fluctuate
significantly. In addition, the stock market in general has recently experienced
substantial price and volume fluctuations, which have particularly affected the
market prices of many software companies and which have often been unrelated to
the operating performance of such companies. These broad market fluctuations may
adversely affect the market price of the Common Stock.
LITIGATION RISKS
The Company is subject to the normal risks of litigation with respect to
its business operation.
FACTORS AFFECTING THE COMPANY'S BUSINESS ARE SUBJECT TO CHANGE
This Exhibit contains cautionary statements concerning certain factors that
may influence the business of the Company and are made as of the date of this
Exhibit. Such
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factors are subject to change. The cautionary statements set forth in this
Exhibit are not intended to cover all of the factors that may affect the
Company's business in the future. Forward-looking information disseminated
publicly by the Company following the date of this Exhibit may be subject to
additional factors hereinafter published by the Company.
NO REVISIONS OR UPDATES TO FORWARD-LOOKING STATEMENTS
The Company will have no obligation to release publicly any revision or
update to any forward-looking statements to reflect events or circumstances
after the date of such statements or to reflect the occurrence of anticipated or
unanticipated events.
December 27, 1996
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