##### Table of Contents

---

UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D. C. 20549





---




FORM 10-Q





(Mark One)





|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ---------------------------------------------------------------------------------------




For the quarterly period ended October 31, 2002





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
    0-23057





LOGILITY, INC.(Exact name of registrant as specified in its charter)








Georgia

58-2281338(State or other jurisdiction ofincorporation or organization)

(IRS Employer Identification Number)








470 East Paces Ferry Road, N.E., Atlanta, Georgia

30305(Address of principal executive offices)

(Zip Code)








(404) 261-9777(Registrants telephone number, including area code)





None


(Former name, former address and former fiscal year, if changed since last report)





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. x





Indicate the
number of shares outstanding of the issuers common stock, as of the latest practicable date.





Class

Outstanding at December 12, 2002Common Stock, no par value

13,178,624 Shares





---



---

##### Table of Contents




LOGILITY, INC.





Form 10-Q





Quarter Ended October 31, 2002





Index


Page NumberPart IFinancial InformationItem 1.    Financial StatementsCondensed Combined Balance Sheets (Unaudited) October 31, 2002 and April 30, 2002

3Condensed Combined Statements of Operations (Unaudited) Three and Six Months Ended October 31, 2002 and 2001

4Condensed Combined Statements of Cash Flows (Unaudited) Six Months Ended October 31, 2002 and 2001

5Notes to Condensed Combined Financial Statements (Unaudited)

6-9Item 2.    
Managements Discussion and Analysis of Financial Condition and Results of Operations

10-20Item 3.    
Quantitative and Qualitative Disclosures About Market Risk

20Item 4.    
Controls and Procedures

21Part IIOther Information

21-22




2




---

##### Table of Contents




PART IFINANCIAL INFORMATION





Item 1.    Financial Statements





LOGILITY, INC.





Condensed Combined Balance Sheets (Unaudited)


(in thousands, except share data)


October 31, 2002


April 30, 2002Current Assets:Cash and cash equivalents

$
12,429


$
7,721Investmentscurrent


11,614



15,391Trade accounts receivable, less allowance for doubtful accounts of $173 and $326 at October 31, 2002 and April 30, 2002,
respectively:Billed


2,170



5,327Unbilled


1,868



701Due from American Software, Inc.


850



1,085Prepaid expenses and other current assets


339



409Total current assets


29,270



30,634Furniture and equipment, less accumulated depreciation and amortization


791



1,056Capitalized software, less accumulated amortization


7,377



7,490Other assets, net


884



933$
38,322


$
40,113Liabilities and Shareholders Equity:Current liabilities:Accounts payable

$
183


$
624Accrued compensation and related costs


1,241



1,551Other current liabilities


940



1,307Deferred revenues


4,244



4,966Total current liabilities


6,608



8,448Deferred income taxes


2,882



2,882Total liabilities


9,490



11,330Shareholders equity:Preferred stock: 2,000,000 shares authorized; no shares issued






Common stock, no par value; 20,000,000 shares authorized; 13,888,339 and 13,885,214 shares issued at October 31, 2002
and April 30, 2002, respectively






Additional paid-in capital


44,708



44,703Accumulated deficit


(11,251
)


(11,374
)Treasury stock, at cost689,665 and 663,107 shares at October 31, 2002 and April 30, 2002,
respectively


(4,625
)


(4,546
)Total shareholders equity


28,832



28,783Commitments and contingencies$
38,322


$
40,113





See accompanying notes to Condensed Combined financial statements.




3




---

##### Table of Contents




Item 1.    Financial Statements (continued)





LOGILITY, INC.





Condensed Combined Statements of Operations (Unaudited)


(In thousands, except per share data)





Three Months Ended October
31,


Six Months Ended October
31,2002


2001


2002


2001Revenues:License fees

$
1,275


$
1,704


$
3,013


$
4,253Services and other


1,396



2,365



2,777



5,097Maintenance


2,709



2,833



5,411



5,669Total revenues


5,380



6,902



11,201



15,019Cost of revenues:License fees


778



901



1,757



1,917Services and other


729



1,709



1,916



3,601Maintenance


496



468



947



956Total cost of revenues


2,003



3,078



4,620



6,474Gross margin


3,377



3,824



6,581



8,545Operating expenses:Research and development


1,320



1,428



2,735



2,885Less: capitalized development


(721
)


(706
)


(1,489
)


(1,635
)Sales and marketing


1,848



2,201



3,902



5,195General and administrative


910



825



1,692



1,721Total operating expenses


3,357



3,748



6,840



8,166Operating income (loss)


20



76



(259
)


379Other income


194



284



382



574Income before taxes


214



360



123



953Income taxes














Net earnings

$
214


$
360


$
123


$
953Basic net earnings per common share

$
0.02


$
0.03


$
0.01


$
0.07Diluted net earnings per common share

$
0.02


$
0.03


$
0.01


$
0.07Weighted average common shares outstanding:Basic


13,199



13,247



13,206



13,252Diluted


13,204



13,255



13,214



13,280








See accompanying notes to Condensed Combined
financial statements.




4




---

##### Table of Contents




Item 1.    Financial Statements (continued)





LOGILITY, INC.





Condensed Combined Statements of Cash Flows (Unaudited)


(in thousands)





Six Months Ended October
31,2002


2001Cash flows from operating activities:Net earnings

$
123


$
953Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization


1,905



2,273(Increase) decrease in assets:Accounts receivable


1,990



480Due from American Software, Inc.


235



116Prepaid expenses and other assets


119



69Increase (decrease) in liabilities:Accounts payable, accrued costs and other accrued liabilities


(1,118
)


(709
)Deferred revenues


(722
)


(894
)Net cash provided by operating activities


2,532



2,288Cash flows from investing activities:Additions to capitalized computer software development costs


(1,489
)


(1,635
)Additions to purchased computer software costs


(10
)


(30
)Proceeds from maturities of investments


53,487



20,516Purchases of investments


(49,710
)


(12,420
)Purchases of furniture and equipment


(28
)


(42
)Net cash provided by investing activities


2,250



6,389Cash flows from financing activities:Repurchases of common stock


(79
)


(52
)Proceeds from exercise of stock options


5



19Net cash used in financing activities


(74
)


(33
)Net change in cash and cash equivalents


4,708



8,644Cash and cash equivalents at beginning of period


7,721



5,376Cash and cash equivalents at end of period

$
12,429


$
14,020





See accompanying notes to condensed combined financial statements.




5




---

##### Table of Contents




Item 1.    Financial Statements (continued)





NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)





|A. |  | Basis of Presentation
|-- |  | ---------------------




| |  | The accompanying condensed combined financial statements of Logility, Inc. (the Company), are unaudited. Certain information and footnote
disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been Condensed Combined or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).
The financial information presented in the condensed combined financial statements reflects all normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the periods indicated. These financial
statements should be read in conjunction with the Companys Form 10-K for the fiscal year ended April 30, 2002 as filed with the SEC on July 26, 2002. The interim results reflected in the condensed combined financial statements are not
necessarily indicative of the results to be expected for the full year or for any other future period.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| |  | We are an approximately 86% owned subsidiary of American Software, Inc. (the Parent), a publicly held provider of enterprise resource planning
solutions (NASDAQ  AMSWA).
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|B. |  | Industry Segments
|-- |  | -----------------




| |  | We have adopted Statement of Financial Accounting Standards No. 131, Disclosures About Segments of an Enterprise and Related Information. The Company
operates and manages its business in one segment, providing business-to-business collaborative commerce solutions to optimize supply chain operations for manufacturers, distributors and retailers.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|C. |  | Comprehensive Income
|-- |  | --------------------




| |  | We have adopted Statement of Financial Accounting Standards No. 130 (SFAS No. 130), Reporting Comprehensive Income. SFAS No. 130 establishes
standards for reporting and presentation of comprehensive income and its components in a full set of financial statements. No statements of comprehensive income (loss) have been included in the accompanying condensed combined financial statements
since comprehensive income (loss) and net income (loss) presented in the accompanying condensed combined statements of operations would be the same.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|D. |  | Revenue Recognition
|-- |  | -------------------




| |  | We recognize revenue in accordance with Statement of Position (SOP) 97-2, Software Revenue Recognition, and SOP 98-9, Software Revenue
Recognition With Respect to Certain Transactions.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




License.    We recognize license revenues in connection with license agreements for standard proprietary and tailored software upon delivery of the software, provided we consider collection to be probable,
the fee is fixed or determinable, there is evidence of an arrangement, and vendor-specific evidence exists to defer any revenue related to undelivered elements of the arrangement.





Services.    Revenues derived from services primarily include consulting, implementation, and training. We bill under both time and materials and
fixed fee arrangements and recognize revenues as we perform the services.




6




---

##### Table of Contents




Item 1.    Financial Statements (continued)





NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED) (Continued)





We utilize the percentage-of-completion method of accounting to recognize revenue on service implementation projects for fixed amounts. We measure progress under the
percentage-of-completion method based on our best estimate of the cost of work completed in relation to the total cost of work to be performed under the contract. We recognize immediately in our condensed combined consolidated financial statements
any estimated losses on services or implementation projects for fixed amounts.





Maintenance.    Revenues we derive from maintenance contracts primarily include telephone consulting, product updates and releases of new versions of products that the customer previously purchased, as well
as error reporting and correction services. Typically, we enter into maintenance contracts for a separate fee, with initial contractual periods ranging from one to three years, with renewal for additional periods thereafter. Generally, we bill
maintenance fees annually in advance and recognize the resulting revenues ratably over the term of the maintenance agreement. In situations where we bundle the maintenance fee with the license fee, we determine Vendor Specific Objective Evidence
(VSOE) for maintenance based on stated renewal rates in the contract.





Deferred
Revenues.    Deferred revenues represent advance payments or billings for software licenses, services, and maintenance billed in advance of the time we recognize revenues.





Indirect Channel Revenues.    We recognize revenues from sales we make through indirect channels only when the distributor makes a sale to
an end-user. Revenues from indirect channels are recognized upon delivery of the software to the end-user assuming we meet all other conditions of SOP 97-2 and SOP 98-9.





E.     Net Earnings (Loss) Per Common Share





Basic earnings (loss) per common share available to common shareholders is based on the weighted-average number of common shares outstanding. Diluted earnings (loss) per common share available to common shareholders is based on the
weighted-average number of common shares outstanding and dilutive potential common shares, such as dilutive stock options.





The numerator in calculating both basic and diluted earnings (loss) per common share for each period is the same as net earnings (loss). The denominator is based on the following number of common shares:




7




---

##### Table of Contents




Item 1.    Financial Statements (continued)





NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED) (Continued)





Three Months ended October
31,

Six Months ended October
31,2002

2001

2002

2001(in thousands)

(in thousands)Common Shares:Weighted average common shares outstanding


13,199


13,247


13,206


13,252Dilutive effect of outstanding stock options


5


8


8


28Total


13,204


13,255


13,214


13,280Net earnings:

$
214

$
360

$
123

$
953Net earnings per common share:Basic

$
0.02

$
0.03

$
0.01

$
0.07Diluted

$
0.02

$
0.03

$
0.01

$
0.07





For both the three and six months ended October 31, 2002 we
excluded options to purchase 709,945 shares of common stock from the computation of diluted earnings per share. For the three months ended October 31, 2001 we excluded options to purchase 784,048 shares of common stock from that computation, and for
the six months ended October 31, 2001 we excluded options to purchase 455,168 shares of common stock. We excluded these option share amounts because the exercise prices of those options were greater than the average market price of the common stock.
As of October 31, 2002 we had a total of 736,445 options outstanding and as of October 31, 2001 we had a total of 809,548 options outstanding.





F.    Agreements with American Software, Inc. (ASI)





We
have entered into certain contractual arrangements with ASI, as described below. Because ASI owns a majority of our shares, the terms of these agreements do not reflect arms length negotiation.





Tax Sharing AgreementWe compute a separate, stand-alone income tax provision and settle balances due to or from
ASI on this basis. The Tax Sharing Agreement allocated all benefits derived from deferred tax assets as defined in the Agreement (which include net operating loss and tax credit carryforwards) that arose prior to our October 1997 initial public
offering ($5,768,000) to ASI. Accordingly, we will not receive any benefit from the $5,768,000 of contributed gross deferred tax assets. In addition, the agreement allocates certain deferred tax liabilities that arose prior to the initial public
offering to us (which gives rise to our net deferred tax liability of $2,882,000 at July 31, 2002). To the extent the tax computation produces a tax benefit for us, ASI is required to pay such amounts to us only if and when ASI realizes a reduction
in income taxes payable with respect to the current tax period. At April 30, 2002, ASI had net operating loss carryforwards of approximately $19.0 million that ASI must utilize before we would receive payment for any currently generated tax
benefits. Such net operating losses expire in varying amounts through 2022.





Services
AgreementWe purchase or sell various services from or to ASI based upon various cost methodologies as described below:




8




---

##### Table of Contents




Service

Cost methodology

Expense for the three months ended October 31, 2002

Expense for the three months ended October 31, 2001

Expense for the six months ended October 31, 2002

Expense for the six months ended October 31, 2001

General corporate services, including accounting and insurance expense

Apportioned based on formula to all ASI subsidiaries

$
302,500

$
316,700

$
606,500

$
647,700

Professional services to our customers (services are available unless ASI determines it is not economic or otherwise feasible)

Cost plus billing with the percentage of costs and expenses to be negotiated


1,200


99,500


20,200


235,500

Employee benefits services

Apportioned based on formula to all ASI subsidiaries


3,500


12,700


7,000


16,200





Facilities AgreementWe lease various properties
from ASI for specified square foot rates. The stated term of the agreement is for two years with automatic one year extensions; however, it may be terminated by either party after a 90-day notice. ASI allocates utility expenses based on our
percentage of occupancy. Also included in these costs are utilities, telephone, and security expenses. The parties valued the services related to this agreement at $111,000 for the three months ended October 31, 2002, $122,000 for the three months
ended October 31, 2001, $240,000 for the six months ended October 31, 2002, and $251,000 for the six months ended October 31, 2001.





Marketing License AgreementEffective August 1, 2002, we entered into a Marketing License Agreement (the Marketing License Agreement) with American Software, USA (USA) in which USA
agreed to act as a nonexclusive marketing representative for licensing of our products. We pay ASI 30% of net license fees for its services. This agreement replaced a similar agreement executed by the parties in 1997. It has a term of one year and
may be extended by the agreement of both parties. The parties valued the services related to this agreement at $23,000 for the three months ended October 31, 2002, $8,000 for the three months ended October 31, 2001, $63,000 for the six months ended
October 31, 2002, and $24,000 for the six months ended October 31, 2001.





Technology License
AgreementWe have granted ASI a nonexclusive, nontransferable, worldwide perpetual right and license to use, execute, reproduce, display, etc. our Supply Chain Planning and Execution Solutions (which ASI had transferred to us) so that
ASI may maintain and support end-users of the software products. The license is fully paid and royalty-free.





Stock Option AgreementWe have granted ASI an option to purchase our common stock to enable ASI to maintain the necessary ownership percentage required to consolidate Logility in ASIs consolidated Federal
income tax return. The purchase price of the option is the average of the closing price on each of the five business days immediately preceding the date of payment.





G.    Lease Commitments





We occupy our
principal office facilities under a facilities agreement with ASI dated August 1, 1997, that is cancelable upon 90-day notice by either party (see note F). Amounts allocated to the Company for rent expense for these facilities were
$82,073 for the three months ended October 31, 2002, $84,660 for the three months ended October 31, 2001, $166,733 for the six months ended October 31, 2002, and $169,320 for the six months ended October 31, 2001. In addition, we have various other
operating facilities leases. Rent expense under these leases was $34,838 for the three months ended October 31, 2002, $116,488 for the three months ended October 31, 2001, $152,172 for the six months ended October 31, 2002, and $273,426 for the six
months ended October 31, 2001.




9




---

##### Table of Contents




Item 2.    
Managements Discussion and Analysis of Financial Condition and Results of Operations





FORWARD-LOOKING
STATEMENTS





This report on Form 10-Q contains forward-looking statements relating to our future financial performance, business
strategy, financing plans and other future events that involve uncertainties and risks. You can identify these statements by forward-looking words such as anticipate, intend, plan, continue,
could, grow, may, potential, predict, strive, will, seek, estimate, believe, expect, and similar expressions that
convey uncertainty of future events or outcomes. Any forward-looking statements we make herein are pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements
concerning future:





| |  |  | results of operations;
| | - |  | ----------------------

| |  |  | liquidity, cash flow and capital expenditures;
| | - |  | ----------------------------------------------

| |  |  | demand for and pricing of our products and services;
| | - |  | ----------------------------------------------------

| |  |  | acquisition activities and the effect of completed acquisitions;
| | - |  | ----------------------------------------------------------------

| |  |  | industry conditions and market conditions; and
| | - |  | ----------------------------------------------

| |  |  | general economic conditions.
| | - |  | ----------------------------




Although we believe that the goals, plans, expectations, and prospects that our forward-looking statements reflect are reasonable in view of the information currently available to us, those statements are not guarantees of
performance. There are many factors that could cause our actual results to differ materially from those anticipated by forward-looking statements made herein. These factors include, but are not limited to, continuing economic uncertainty, the timing
and degree of business recovery, unpredictability and the irregular pattern of future revenues, competitive pressures, delays and other risks associated with new product development, the difficulty of predicting the effectiveness and duration of
third-party marketing agreements, undetected software errors, and risks associated with market acceptance of our products and services. The terms fiscal 2003, fiscal 2002, and fiscal 2001 refer to our fiscal years
ended April 30, 2003, 2002, and 2001, respectively.





OVERVIEW





We provide collaborative supply chain solutions to streamline and optimize the management, production and distribution of products between manufacturers, suppliers, distributors, retailers, carriers
and other organizations and their respective trading partners. The supply chain refers to the complex network of relationships that organizations maintain with trading partners (customers, suppliers and carriers) to source, manufacture, and deliver
products and services to the customer and includes demand chain, supply chain, logistics, warehouse management and business-to-business process management for collaborative relationships between customers, suppliers and carriers. Our solutions
enable enterprises to build competitive advantages and increase profitability by significantly improving efficiencies, collaborating with suppliers and customers, more effectively responding to market demand and engaging in dynamic business
relationships via the Internet.





Leveraging our supply chain management expertise, we have been an innovator in developing and deploying
collaborative supply chain management solutions, with our first Internet-based collaborative planning solution implemented in 1996. We continue to invest and expand our e-Business offerings and innovative solutions, which support the Voluntary
Interindustry Commerce Standards Association (VICS), collaborative planning, forecasting




10




---

##### Table of Contents

and replenishment (CPFR ® ) standards, as well as other emerging collaborative supply chain management standards for transportation and distribution center management. In addition to enterprise supply chain optimization and collaboration, we
designed ourLogility Voyager Solutions suite and related services to power the emerging Internet trading exchanges and private marketplaces for collaborative planning and procurement of direct materials and collaborative transportation
management. We market our solution worldwide, primarily to large enterprises that require comprehensive supply chain planning, warehouse management and logistics solutions. We make sales through a dedicated sales force and through relationships with
third-party vendors (including American Software) and service providers.





We previously conducted our business and operations as three
separate business units of American Software: a supply chain planning software group, a warehouse management software group, and a transportation management software group. In 1997, American Software transferred to us substantially all of its Supply
Chain Planning division and its WarehousePROsoftware and substantially all associated operations (including research and development), assets and liabilities. Also in 1997, American Softwares wholly-owned subsidiary, Distribution
Sciences, Inc., was merged into Logility, transferring its business, operations, assets and liabilities, including the Transportation Planning and Transportation Management software, to us.





We derive revenues primarily from three sources: software licenses, services, and maintenance. We base software license fees generally on the number of modules,
servers, users and/or sites licensed. Services revenues consist primarily of fees from software implementation, training, consulting and customization services. Maintenance agreements typically are for a one- to three-year term and usually are
entered into at the time of the initial product license.





CRITICAL ACCOUNTING POLICIES AND ESTIMATES





We have based this discussion and analysis of financial condition and results of operations upon our combined financial statements, which we have prepared in
accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities,
and disclosures of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. On an ongoing basis, we evaluate our estimates, including, but not limited to,
those related to bad debts, income taxes and contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for judgments
we make about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results could differ from these estimates under different assumptions or conditions.





The critical accounting policies listed below affect significant judgments and estimates we use in preparing the combined financial statements.





Revenue Recognition.    We recognize revenue in accordance with Statement of Position (SOP) 97-2, Software Revenue
Recognition, and SOP 98-9, Software Revenue Recognition with Respect to Certain Transactions.We recognize license revenues in connection with license agreements for standard proprietary and tailored software upon
delivery of the software, provided we deem collection to be probable, the fee is fixed or determinable, there is evidence of an arrangement, and vendor-specific evidence exists to defer any revenue related to undelivered elements of the arrangement.
We generally bill maintenance fees annually in advance and recognize the resulting revenues ratably over the term of the maintenance agreement. We derive revenues from services which primarily include consulting, implementation, and training. We
bill for these services under both time and materials and fixed fee arrangements and recognize fees as we perform the services. Deferred revenues represent advance payments or billings for software licenses, services, and maintenance billed in
advance of the time we recognize revenues. We record revenues from sales of third-party products in accordance with Emerging Issues Task Force Issue 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent.




11




---

##### Table of Contents




Generally, our software products do not require significant modification or customization. Installation
of the products is normally routine and is not essential to the functionality of the product. Our sales frequently include maintenance contracts and professional services with the sale of our software licenses. We have established vendor-specific
objective evidence of fair value (VSOE) for our maintenance contracts and professional services. We determine fair value based upon the prices we charge to customers when we sell these elements separately. We defer maintenance revenues, including
those we sell with the initial license, based on VSOE, which we typically derive from by the renewal rate of the annual maintenance contract, and recognize the revenues ratably over the maintenance contract period. We recognize consulting and
training service revenues, including those sold with license fees, as we perform the services based on their established VSOE. We determine the amount of revenue we allocate to the licenses sold with services or maintenance using the residual
method of accounting. Under the residual method, we allocate the total value of the arrangement first to the undelivered elements based on their VSOE and allocate the remainder to license fees.





Allowance for Doubtful Accounts.    We maintain allowances for doubtful accounts for estimated losses resulting from the inability of
customers to make required payments. If the financial condition of these customers were to deteriorate, resulting in an impairment of their ability to make payments, we may require additional allowances or we may defer revenue until we determine
that collectibility is probable or we decide to charge off the account. We specifically analyze accounts receivable and historical bad debts, customer creditworthiness, current economic trends and changes in customer payment terms when we evaluate
the adequacy of the allowance for doubtful accounts.





Valuation of Long-Lived and Intangible Assets.    In
accordance with Financial Accounting Standards Board Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, (SFAS No. 144) and Statement No. 86, Accounting for the Costs of Computer
Software to be Sold, Leased, or Otherwise Marketed (SFAS No. 86), we review the carrying value of intangible assets and other long-lived assets (asset group), including, but not limited to, capitalized computer software
development costs, on a regular basis for the existence of facts or circumstances that may suggest impairment. Factors we consider important that could trigger an impairment review include:





| |  |  | significant under-performance relative to historical or projected future operating results;
| | - |  | -------------------------------------------------------------------------------------------

| |  |  | significant negative industry or economic trends;
| | - |  | -------------------------------------------------

| |  |  | significant decline in our stock price for a sustained period;
| | - |  | --------------------------------------------------------------

| |  |  | significant decline in our technological value as compared to the market; and
| | - |  | -----------------------------------------------------------------------------

| |  |  | our market capitalization relative to net book value.
| | - |  | -----------------------------------------------------




If such circumstances exist, we evaluate the carrying value of long-lived assets (asset group) to determine if impairment exists based upon estimated undiscounted future cash flows over the remaining useful life of the
assets and comparing that value to the carrying value of the assets. If the carrying value of the asset is greater than the estimated future cash flows, we write down the asset to the net realizable value for software or the estimated fair value for
other long-lived and intangible assets. We determine the estimated fair value of the assets on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risks inherent in our current business
model. In determining expected future cash flows, we group assets at the lowest level for which cash flows are identifiable and independent of cash flows from other asset groups. We estimate cash flows using appropriate and customary assumptions and
projections.





Income taxes.    Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases. We measure deferred tax assets and liabilities using enacted statutory tax rates in effect in the year
in which we expect




12




---

##### Table of Contents

the differences to reverse. We establish a deferred tax asset for the expected future benefit of net operating loss and credit carry-forwards.
Under Statement of Financial Accounting Standards No. 109 (SFAS No. 109), Accounting for Income Taxes, we cannot recognize a deferred tax asset for the future benefit of our net operating losses, tax credits and
temporary differences unless we can establish that it is more likely than not that we would realize the deferred tax asset. Due to our history of net losses, we have not recognized a tax asset and have recorded a full valuation allowance
against our otherwise recognizable deferred tax asset, in accordance with SFAS No. 109. Future events could cause us to conclude that it is more likely than not that we will realize a portion of the deferred tax asset. If we reach such a conclusion,
we would reduce the valuation allowance and recognize the deferred tax asset.





COMPARISON OF RESULTS OF OPERATIONS





The following table sets forth certain revenue and expense items as a percentage of total revenues and the percentage changes in
those items for the three months ended October 31, 2002 and 2001:





Percentage of Total Revenues


Pct. Change in Dollars2002


2001


2002 vs 2001Revenues:License fees

24
%

25
%

(25
)%Services and other

26


34


(41
)Maintenance

50


41


(4
)Total revenues

100


100


(22
)Cost of revenues:License fees

14


13


(14
)Services and other

14


25


(57
)Maintenance

9


7


6Total cost of revenues

37


45


(35
)Gross margin

63


55


(12
)Operating expenses:Research and development

24


20


(8
)Less: Capitalized development

(13
)

(10
)

2Sales and marketing

34


32


(16
)General and administrative

17


12


10Total operating expenses

62


54


(10
)Operating income (loss)

1


1


(74
)Other income, net

3


4


(32
)Income before income taxes

4


5


(41
)Income taxes







Net income

4
%

5
%

(41
)







13




---

##### Table of Contents




The following table sets forth certain revenue and expense items as a percentage of total revenues and
the percentage increases or decreases in those items for the six months ended October 31, 2002 and 2001:





Percentage of Total Revenues


Pct. Change in Dollars2002


2001


2002 vs 2001Revenues:License fees

27
%

28
%

(29
)%Services and other

25


34


(46
)Maintenance

48


38


(5
)Total revenues

100


100


(25
)Cost of revenues:License fees

16


13


(8
)Services and other

17


24


(47
)Maintenance

8


6


(1
)Total cost of revenues

41


43


(29
)Gross margin

59


57


(23
)Operating expenses:Research and development

24


19


(5
)Less: Capitalized development

(13
)

(11
)

(9
)Sales and marketing

35


35


(25
)General and administrative

15


11


(2
)Total operating expenses

61


54


(16
)Operating income (loss)

(2
)

3


nmOther income, net

3


3


(33
)Income before income taxes

1


6


(87
)Income taxes







Net income

1
%

6
%

(87
)


nm  not meaningful





COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED OCTOBER 31, 2002 AND 2001:





REVENUES:





Our total revenues decreased 22% to approximately $5.4 million from $6.9 million for the comparable quarter a year ago. This
decrease was due primarily to decreases in license fees and services revenues, and to a lesser extent a decrease in maintenance revenues. International revenues represented approximately 12% of total revenues in the quarter ended October 31, 2002
compared to approximately 13% a year ago. No single customer accounted for more than 10% of our total revenues in the quarter ended October 31, 2002.





LICENSES.    License fee revenues decreased 25% to approximately $1.3 million from $1.7 million for the same quarter a year ago primarily as a result of slow general economic conditions. The direct sales channel
provided approximately 84% of license fee revenues for the quarter ended October 31, 2002, compared to approximately 94% in the comparable quarter a year ago. This decrease was due primarily to lower sales volume generated by the direct




14




---

##### Table of Contents

sales channel. For the quarter ended October 31, 2002, our margins after commissions on direct sales were approximately 91% and our margins
after commissions on indirect sales were approximately 89%.





SERVICES AND OTHER.    Services and other revenues
decreased 41% to approximately $1.4 million from $2.4 million for the same quarter a year ago. This decrease was primarily a result of a decrease in software implementation services which in turn resulted from lower license fees in recent quarters.





MAINTENANCE.    Maintenance revenues decreased 4% to approximately $2.7 million from $2.8 million for the same
quarter a year ago. Maintenance revenues have a direct relationship to current and historic license fee revenues, since new licenses are the potential source of new maintenance customers.





GROSS MARGIN:





Total gross margin for the quarter ended October 31,
2002 was 63% of total revenues, compared to 55% a year ago. This increase was primarily due to increased gross margins on services revenues, partially offset by decreases in gross margins on license fees and maintenance revenues. License fee gross
margin decreased to 39% from 47% a year ago, due to lower license fees combined with the relatively fixed level of cost of license fees. The gross margin on services revenues increased to 48% from 28% a year ago, due primarily to cost reduction
efforts. Maintenance gross margins decreased slightly to 82% versus 83% for the prior year quarter.





OPERATING EXPENSES:





RESEARCH AND DEVELOPMENT.    Gross product development costs include all non-capitalized and capitalized
software development costs. A breakdown of the research and development costs is as follows:





Three Months Ended (000s omitted)October 31, 2002


Percent Change


October 31, 2001Gross product development costs

$
1,320


(8
)%

$
1,428Percentage of total revenues


24
%





20
%Less:  Capitalized development


(721
)

2
%


(706
)Percentage of gross prod. dev. costs


55
%





49
%Product development expenses

$
599


(17
)%

$
722Percentage of total revenues


11
%





10
%





Gross product development costs decreased 8% in the quarter ended October 31, 2002
compared to a year ago, due to cost reduction efforts and the reallocation of some R&D resources to services and support activities. Capitalized development increased 2% from a year ago, and the rate of capitalized development as a percentage of
gross product development costs increased to 55% versus 49% a year ago, primarily as a result of lower levels of gross development costs. Product development expenses, as a percentage of total revenues, increased to 11% from 10% a year ago, due
primarily to decreased total revenues.





SALES AND MARKETING.    Sales and marketing expenses decreased 16% from the
same period a year ago, due primarily to cost reduction efforts. As a percentage of total revenues, sales and marketing expenses were 34% for the quarter ended October 31, 2002, compared to 32% for the quarter ended October 31, 2001.





GENERAL AND ADMINISTRATIVE.    General and administrative expenses increased 10% to approximately $910,000 from $825,000 a year
ago, mainly as a result of the timing of some professional services fees. For the three months ended October 31, 2002, the average number of total employees was approximately 125, compared to approximately 159 for the three months ended October 31,
2001. For the three months ended October 31, 2002, we




15




---

##### Table of Contents

incurred a provision for doubtful accounts of $45,000, compared to $5,000 taken in the prior year period.





OTHER INCOME:





Other income is comprised
of earnings from the investment of our cash reserves. Our investments are short-term in nature, and all investments mature within one year. Investments consist of money market funds, U.S. Government Securities, A1/P1 rated commercial paper, and
minimum A- rated corporate bonds. For the three months ended October 31, 2002, these investments generated an annualized yield of approximately 2.5%.





INCOME TAXES:





We are included in the consolidated federal income tax return filed by American Software, Inc.
However, we provide for income taxes as if we were filing a separate income tax return. For the quarter ended October 31, 2002, we did not record any income taxes as a result of cumulative net operating losses in prior years.





SIX MONTHS ENDED OCTOBER 31, 2002 AND 2001:





REVENUES:





Our total revenues decreased 25% to approximately $11.2 million from $15.0 million for the
comparable period a year ago. This decrease was due primarily to decreases in services revenues and license fees, and to a lesser extent a decrease in maintenance revenues. International revenues represented approximately 11% of total revenues in
the six months ended October 31, 2002, compared to 14% for the same period a year ago. No single customer accounted for more than 10% of our total revenues in the six months ended October 31, 2002.





LICENSES.    License fee revenues decreased 29% to approximately $3.0 million from $4.3 million for the same period a year ago, due to slow
general economic conditions. The direct sales channel provided approximately 87% of license fee revenues for the six months ended October 31, 2002, compared to approximately 95% in the comparable period a year ago. This decrease is due primarily to
lower sales volume generated by the direct sales channel. For the six months ended October 31, 2002, our margins after commissions on direct sales were approximately 91% and our margins after commissions on indirect sales were approximately 78%.





SERVICES AND OTHER.    Services and other revenues decreased 46% to approximately $2.8 million from $5.1 million for
the same period a year ago as a result of a decrease in software implementation services which in turn resulted from lower license fees in recent quarters.





MAINTENANCE.    Maintenance revenues decreased 5% to approximately $5.4 million from $5.7 million for the same period a year ago. Maintenance revenues have a direct relationship to current and historic
license fee revenues, since new licenses are the potential source of new maintenance customers.





GROSS MARGIN:





Total gross margin in the six months ended October 31, 2002 increased to 59% of total revenues, compared to 57% a year ago. The gross margin on
license fee revenues decreased to 42% from 55% a year ago, primarily due to lower license fees combined with the relatively fixed level of cost of license fees. Services gross margin increased to 31% from 29% a year ago, primarily due to cost
reduction efforts. Maintenance gross margins decreased slightly to 82% from 83% in the prior year period.





OPERATING EXPENSES:




16




---

##### Table of Contents




RESEARCH AND DEVELOPMENT.    Gross product development costs include all
non-capitalized and capitalized software development costs. A breakdown of the research and development costs is as follows:





Six Months Ended (000s omitted)October 31, 2002


Percent Change


October 31, 2001Gross product development costs

$
2,735


(5
)%

$
2,885Percentage of total revenues


24
%





19
%Less:  Capitalized development


(1,489
)

(9
)%


(1,635
)Percentage of gross prod. dev. costs


54
%





57
%Product development expenses

$
1,246


0
%

$
1,250Percentage of total revenues


11
%





8
%





Gross product development costs decreased 5% in the six months ended October 31, 2002
compared to a year ago, due to cost reduction efforts and the reallocation of some R&D resources to services and support activities. Capitalized development decreased 9% from a year ago, and the rate of capitalized development as a percentage of
gross product development costs decreased to 54% versus 57% a year ago, primarily as a result of the completion of several capitalized projects during the last two quarters. Product development expenses, as a percentage of total revenues, increased
to 11% from 8% a year ago, due primarily to decreased total revenues.





SALES AND MARKETING.    Sales and marketing
expenses decreased 25% from the same period a year ago, due primarily to cost reduction efforts. As a percentage of total revenues, sales and marketing expenses were 35% for the six months ended October 31, 2002, unchanged from the prior year
period.





GENERAL AND ADMINISTRATIVE.    General and administrative expenses decreased 2% to approximately $1.7
million from a year ago, mainly as a result of a decrease in the number of employees. For the six months ended October 31, 2002, the average number of employees was approximately 137, compared to approximately 163 for the same period in the prior
year. For the six months ended October 31, 2002, we incurred a provision for doubtful accounts of $90,000, compared to $35,000 for the prior year period.





OTHER INCOME:





Other income is comprised of earnings from the investment of our cash reserves. Our
investments are short-term in nature, and all investments mature within one year. Investments consist of money market funds, U.S. Government Securities, A1/P1 rated commercial paper, and minimum A- rated corporate bonds. For the six months ended
October 31, 2002, these investments generated an annualized yield of approximately 2.6%.





INCOME TAXES:





We are included in the consolidated federal income tax return filed by ASI. However, we provide for income taxes as if we were filing a separate income tax
return. For the six months ended October 31, 2002, we did not record any income taxes as a result of cumulative net operating losses in prior years.





LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION





The following table shows information about our cash flows
during the six months ended October 31, 2002 and October 31, 2001. This table and the discussion that follows should be read in conjunction with our Condensed Combined statements of cash flows contained in Item 1. Financial Statements in
Part I of this report.




17




---

##### Table of Contents




Six Months Ended October 31 (000s omitted)2002


2001Net cash provided by operating activities

$
2,532


$
2,288Net cash provided by investing activities


2,250



6,389Net cash used in financing activities


(74
)


(33
)Net increase in cash and cash equivalents

$
4,708


$
8,644





We fund our operations and capital expenditures primarily with cash generated from
operating activities. The changes in net cash provided by operating activities generally reflect the changes in net income and non-cash operating items plus the effect of changes in operating assets and liabilities, such as trade accounts
receivable, trade accounts payable, accrued expenses and deferred revenue.





Our operating activities provided cash of approximately $2.5
million in the six months ended October 31, 2002, and approximately $2.3 million in the same period last year. For the six months ended October 31, 2002, cash provided by operations was composed primarily of the decrease in accounts in receivable
($2.0 million), and depreciation and amortization ($1.9 million). These were partially offset by the decrease in accounts payable and other accrued liabilities ($1.1 million) and the decrease in deferred revenues ($722,000). For the same period last
year, cash provided by operations was composed primarily of depreciation and amortization ($2.3 million), net income ($953,000), and the decrease in accounts receivable ($480,000). These were partially offset by the decrease in deferred revenues
($894,000) and the decrease in accounts payable and other accrued liabilities ($709,000).





Cash provided by investing activities was
approximately $2.3 million for the six months ended October 31, 2002. This was composed of the proceeds of maturities of investments of $53.5 million, partially offset by purchases of investments ($49.7 million), and additions to capitalized
software development costs ($1.5 million). For the same period last year, cash provided by investing activities was approximately $6.4 million, composed primarily of the proceeds of maturities of investments of $20.5 million, partially offset by
purchases of investments ($12.4 million), and additions to capitalized software development costs ($1.6 million).





Cash used in financing
activities was $74,000 for the six months ended October 31, 2002, composed primarily of $79,000 in repurchases of our common stock, partially offset by $5,000 in cash proceeds from the exercise of stock options. For the same period last year, cash
used in financing activities of $33,000 was composed of $52,000 used for repurchases of our common stock, partially offset by $19,000 in cash proceeds from the exercise of stock options.





Days Sales Outstanding (DSO) in accounts receivable were 70 days as of October 31, 2002, compared to 80 days as of October 31, 2001. This decrease was due primarily to lower levels of billed
accounts receivable in the three months ended October 31, 2002.





Our current ratio on October 31, 2002 was 4.4 to 1 and we have
no debt. Our principal sources of liquidity are our cash and investments, which totaled approximately $24.0 million at October 31, 2002. We believe that our sources of liquidity and capital resources will be sufficient to satisfy our presently
anticipated requirements during at least the next twelve months for working capital, capital expenditures and other corporate needs. However, due to the uncertainty in the current economic environment, at some future date we may need to seek
additional sources of capital to meet our requirements. If such need arises, we may be required to raise additional funds through equity or debt financing. We do not currently have a bank line of credit. No assurance can be given that bank lines of
credit or other financing will be available on terms acceptable to us. If available, such financing may result in dilution to our shareholders or higher interest expense.





On December 15, 1997, our Board of Directors approved a resolution authorizing the repurchase of up to 350,000




18




---

##### Table of Contents

shares of our common stock through open market purchases at prevailing market prices. We completed this repurchase plan in November 1998. In
November 1998 our Board adopted an additional stock repurchase authorizing resolution for up to 800,000 shares. The timing of any future repurchases would depend on market conditions, the market price of our common stock and managements
assessment of our liquidity and cash flow needs. Under both resolutions, through December 12, 2002, we had purchased a cumulative total of 699,665 shares at a total cost of approximately $4.6 million.





RECENT ACCOUNTING PRONOUNCEMENTS





In June
2001, the Financial Accounting Standards Board (FASB) issued Statement No. 141, Business Combinations, which addressed financial accounting and reporting for business combinations. Statement 141 requires that the purchase method
of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. We adopted the provisions of Statement 141 effective May 1, 2002. The adoption had
no material impact on our financial condition, results of operations or cash flows.





In June 2001, the FASB issued Statement No. 142,
Goodwill and Other Intangible Assets, which addressed financial accounting and reporting for acquired goodwill and other intangible assets. Upon adoption of Statement No. 142, we were required to discontinue the amortization of
our goodwill and other intangible assets with indefinite lives. Additionally, we will be required to test our goodwill and other intangible assets for impairment during the first year of adoption and then at least annually, or when it is deemed
appropriate, thereafter. Because goodwill and certain intangible assets will not be amortized over a specific period but rather will be reviewed for impairment annually, there could be more volatility in reported earnings (loss) than under previous
accounting standards due to impairment losses occurring irregularly and in varying amounts. We were required to adopt Statement 142 in the quarter ended July 31, 2002. The adoption had no material impact on our financial condition, results of
operations or cash flows.





In August 2001, the FASB issued Statement No. 143 (SFAS No. 143), Accounting for Asset Retirement
Obligations. SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 applies to all entities. SFAS No.
143 applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development or the normal operation of a long-lived asset, except for certain obligation of leases. SFAS No. 143 is
effective for financial statements issued for fiscal years beginning after June 15, 2002. We do not anticipate the adoption of SFAS No. 143 to have a material effect on our financial condition or results of operations.





In August 2001, the FASB issued Statement No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets (Statement 144), which
supersedes both FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of (Statement 121) and the accounting and reporting provisions of APB Opinion No. 30,
Reporting the Results of OperationsReporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions (Opinion 30), for the disposal of a segment of a
business (as previously defined in that Opinion). Statement 144 retains the fundamental provisions in Statement 121 for recognizing and measuring impairment losses on long-lived assets held for use and long-lived assets to be disposed of by sale,
while also resolving significant implementation issues associated with Statement 121. For example, Statement 144 provides guidance on how a long-lived asset that is used as part of a group should be evaluated for impairment, establishes criteria for
when a long-lived asset is held for sale, and prescribes the accounting for a long-lived asset that will be disposed of other than by sale. Statement 144 retains the basic provisions of Opinion 30 on how to present discontinued operations in the
income statement but broadens that presentation to include a component of an entity (rather than a segment of a business). Unlike Statement 121, an impairment assessment under Statement 144 will never result in a write-down of goodwill. Rather, we
evaluate goodwill for impairment under Statement No. 142, Goodwill and Other Intangible Assets.




19




---

##### Table of Contents




We adopted Statement 144 effective May 1, 2002. The adoption of Statement 144 did not have a material
impact on our financial statements because the impairment assessment under Statement 144 is largely unchanged from Statement 121. The provisions of the Statement for assets held for sale or other disposal generally are required to be applied
prospectively after the adoption date to newly initiated disposal activities.





In April 2002, the FASB issued Statement of Financial
Accounting Standards No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections(SFAS 145). SFAS 145 rescinds FASB Statement No. 4, Reporting Gains
and Losses from Extinguishment of Debt, and an amendment of that Statement, FASB Statement No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements.It also rescinds FASB Statement No. 44,
Accounting for Intangible Assets of Motor Carriers.SFAS 145 amends FASB Statement No. 13, Accounting for Leases,to eliminate an inconsistency between the required accounting for sale-leaseback transactions and
the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. It also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings or
describe their applicability under changed conditions. SFAS 145 had no impact on our financial statements.





In June 2002, the FASB issued
Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities. Under the new rules, a liability for a cost associated with an exit or disposal activity must only be recognized when the liability is incurred.
Under the previous guidance of EITF No. 94-3, a liability for exit costs was recognized at the date of an entitys commitment to an exit plan. Statement No. 146 is effective for exit or disposal activities that are initiated after December 31,
2002. We do not anticipate that the adoption of Statement No. 146 will have a material impact on our financial condition, results of operations or cash flows.





Item 3.    
Quantitative and Qualitative Disclosures About Market Risk





Foreign Currency.    For
the three months ended October 31, 2002, we generated 12% of our revenues outside the United States. International sales usually are made by our foreign operations or value added resellers, and are denominated typically in U.S. Dollars, British
Pounds Sterling, or Euros. However, the expense incurred by foreign subsidiaries is denominated in the local currencies. The effect of foreign exchange rate fluctuations on us during the quarter ended October 31, 2002 was not material. We have not
engaged in any hedging activities.





Interest rates.    We manage our interest rate risk by maintaining an
investment portfolio of held-to-maturity instruments with high credit quality and relatively short average maturities. These instruments include, but are not limited to, money-market instruments, bank time deposits, and taxable and tax-advantaged
variable rate and fixed rate obligations of corporations, municipalities, and national, state, and local government agencies, in accordance with our investment policy. These instruments are denominated in U.S. Dollars. The fair market value of
securities held at October 31, 2002 was approximately $23.0 million.





We also hold cash balances in accounts with commercial banks in the
United States and foreign countries. These cash balances represent operating balances only and are invested in short-term time deposits of the local bank. Such operating cash balances held at banks outside the United States are minor and denominated
in the local currency.





Many of our investments carry a degree of interest rate risk. When interest rates fall, our income from
investments in variable-rate securities declines. When interest rates rise, the fair market value of our investments in fixed-rate securities declines. Should our liquidity needs force us to sell fixed-rate securities prior to maturity, we may
experience a loss of principal. We attempt to limit our exposure to the risks associated with interest rate fluctuations by holding fixed-rate securities to maturity and by limiting our investments to those with relatively short maturities.
Accordingly, we believe that fluctuations in interest rates will not have a material affect on our financial condition or results of operations.




20




---

##### Table of Contents




Item 4.    
Controls and Procedures





| | (a) |  | Evaluation of Disclosure Controls and Procedures.    The Companys Chief Executive Officer and Chief Financial Officer have,
within 90 days of the filing date of this report, evaluated the Companys internal controls and procedures designed to ensure that information required to be disclosed in reports under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within specified time periods. After such review, the Companys Chief Executive Officer and Chief Financial Officer have concluded that said information was accumulated and communicated to management as appropriate to
allow timely decisions regarding required disclosure.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | (b) |  | Changes in Internal Controls.    There were no significant changes in the Companys internal controls or in other factors that
could significantly affect these controls subsequent to the evaluation referred to in paragraph (a) above.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







PART IIOTHER INFORMATION





Item 1.    Legal Proceedings





We are not currently involved in legal proceedings requiring disclosure under this item.





Item 2.    Changes in Securities and Use of Proceeds





None.





Item
3.    Defaults Upon Senior Securities





Not applicable.





Item 4.    Submission of Matters to a Vote of Security Holders.





| | (a) |  | The Company held its 2002 Annual Meeting of Shareholders on August 20, 2002.
| | --- |  | ----------------------------------------------------------------------------




| | (b) |  | The shareholders elected the following director at the meeting: James C. Edenfield
| | --- |  | ----------------------------------------------------------------------------------




The terms of the following directors continued after the meeting:





Parker H. Petit, Frederick E. Cooper, J. Michael Edenfield and John A. White





| | (c) |  | At the Companys 2002 Annual Meeting of Shareholders, the only Shareholder vote taken was with respect to the election of a single director. One current
director was nominated for re-election to a three-year term, and was re-elected. There were no other nominees for director. The specific results of that shareholder vote was as follows:
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




James C. Edenfield: Votes For: 12,108,750; Withholding Authority to Vote For: 8,163




21




---

##### Table of Contents




Item 5.    Other Information





None.





Item
6.    Exhibits and Reports on Form 8-K





| | (a) |  | Exhibits:
| | --- |  | ---------




Exhibit 10.1  Marketing License Agreement between American Software USA, Inc., and Logility, Inc. dated as of August 1, 2002.





| | (b) |  | No report on Form 8-K was filed during the quarter ended October 31, 2002.
| | --- |  | --------------------------------------------------------------------------



22




---

##### Table of Contents




Signatures, and Certifications of the Chief Executive Officer and the Chief Financial Officer of the
Company.





The following pages include the Signatures page for this Form 10-Q, and two separate Certifications of the Chief Executive
Officer (CEO) and the Chief Financial Officer (CFO) of the Company.





The first form of Certification is required by Rule 13a-14 under the
Securities Exchange Act of 1934 (the Exchange Act) in accord with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certification). The Section 302 Certification includes references to an evaluation of the effectiveness of the design
and operation of the Companys disclosure controls and procedures and its internal controls and procedures for financial reporting. Item 4 of Part I of this Quarterly Report presents the conclusions of the CEO and the
CFO about the effectiveness of such controls based on and as of the date of such evaluation (relating to Item 4 of the Section 302 Certification).





The second form of Certification is required by section 1350 of chapter 63 of title 18 of the United States Code.





---




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.








LOGILITY, INC.Date:    December 12, 2002



By:

/s/    J. MICHAEL EDENFIELDJ. Michael Edenfield President and Chief Executive Officer





Date:    December 12, 2002



By:

/s/    VINCENT C. KLINGESVincent C. Klinges Chief Financial Officer





Date:    December 12, 2002



By:

/s/    DEIRDRE J. LAVENDERDeirdre J. Lavender Controller and Principal Accounting Officer




23




---

##### Table of Contents




CERTIFICATION





I, J. Michael Edenfield, certify that:





1.    I have reviewed this
quarterly report on Form 10-Q of Logility, 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:    December 12, 2002



By:

/S/    J. MICHAEL EDENFIELDJ. Michael Edenfield Chief Executive Officer







24




---

##### Table of Contents




CERTIFICATION (continued)





I, Vincent C. Klinges, certify that:





1.    I have
reviewed this quarterly report on Form 10-Q of Logility, 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:    December 12, 2002



By:

/s/    VINCENT C. KLINGESVincent C. Klinges Chief Financial Officer




25




---

##### Table of Contents




CERTIFICATION (continued)





Each of the undersigned hereby certifies, for the purposes of section 1350 of chapter 63 of title 18 of the United States Code, in his capacity as an officer of Logility, Inc., that, to his
knowledge, the Quarterly Report of American Software, Inc. on Form 10-Q for the period ended October 31, 2002 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such
report fairly presents, in all material respects, the financial condition and results of operation of Logility, Inc.





Date:    December 12, 2002



By:

/S/    J. MICHAEL EDENFIELDJ. Michael Edenfield Chief Executive Officer





Date:    December 12, 2002



By:

/s/    VINCENT C. KLINGESVincent C. Klinges Chief Financial Officer




26