<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM 10-Q/A-1
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Quarterly Period Ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-27670
ENGINEERING ANIMATION, INC.
[Exact Name Of Registrant As Specified In Its Charter]
Delaware 42-1323712
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification Number)
2321 North Loop Drive
Ames, Iowa 50010
(Address Of Principal Executive Offices)
-----------
(515) 296-9908
(Registrant's Telephone Number, Including Area Code)
-----------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ____
As of November 6, 1998, there were 11,196,812 shares of the Registrant's
$0.01 par value common stock outstanding.
<PAGE> 2
ENGINEERING ANIMATION, INC.
FORM 10-Q/A-1
<TABLE>
<CAPTION>
INDEX
PAGE
----
<S> <C> <C>
PART I............... FINANCIAL INFORMATION
Item 1............... Financial Statements
Condensed Consolidated Balance Sheets
At September 30, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Operations
For the three and nine months ended September 30,
1998 and 1997 4
Condensed Consolidated Statements of Cash Flows
For the nine months ended September 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2............... Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II.............. OTHER INFORMATION
Item 6............... Exhibits and Reports on Form 8-K 14
</TABLE>
SIGNATURES 15
2
<PAGE> 3
ENGINEERING ANIMATION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION> ------------- ------------
Restated Restated
September 30, December 31,
1998 1997
------------- ------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 17,220 $25,468
Short-term investments 11,889 15,406
Accounts receivable:
Billed 27,068 18,604
Unbilled 11,997 6,891
Deferred income taxes 701 701
Prepaid expenses 2,203 1,649
-------- -------
Total current assets 71,078 68,719
Property and equipment, net 18,094 12,598
Other assets:
Notes receivable 1,598 1,524
Software development costs, net 1,826 1,396
Goodwill and developed technology, net 11,623 5,063
Deferred income taxes 1,665 78
Other 1,720 725
-------- -------
Total assets $107,604 $90,103
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,505 $ 3,123
Accrued compensation and other expenses 8,522 5,715
Deferred revenue 2,267 2,965
Bank debt, current portion of long term debt
and capital lease obligations 3,252 1,679
Income taxes payable 3,085 292
-------- -------
Total current liabilities 21,631 13,774
Long term debt and lease obligations due after
one year 1,592 1,569
Stockholders' equity 84,381 74,760
-------- -------
Total liabilities and stockholders'
equity $107,604 $90,103
======== =======
</TABLE>
Note: The balance sheet at December 31, 1997 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See accompanying notes.
3
<PAGE> 4
ENGINEERING ANIMATION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data; unaudited)
<TABLE>
<CAPTION>
--------------------- -------------------
Three months ended Nine months ended
September 30 September 30,
1998 1997 1998 1997
Restated Restated
--------- ---- -------- ----
<S> <C> <C> <C> <C>
Net revenues:
Software products $20,291 $13,638 $53,182 $33,488
Interactive products 5,797 4,108 17,385 13,929
------- ------- ------- -------
Total revenues 26,088 17,746 70,567 47,417
Cost of revenues 8,334 5,710 22,927 17,094
------- ------- ------- -------
Gross profit 17,754 12,036 47,640 30,323
Operating expenses:
Sales and marketing 5,890 4,789 16,233 12,249
General and administrative 2,648 2,326 8,003 6,202
Research and development 4,436 3,068 12,034 7,873
Acquisition costs and
non-recurring expenses 5,685 14 12,391 42
------- ------- ------- -------
Total operating expenses 18,659 10,197 48,661 26,366
------- ------- ------- -------
Income (loss) from operations (905) 1,839 (1,021) 3,957
Interest and other income, net 372 581 1,395 1,079
------- ------- ------- -------
Income (loss) before income (533) 2,420 374 5,036
taxes and minority interest
Income tax expense 1,571 896 2,809 1,828
------- ------- ------- -------
Net income (loss) before (2,104) 1,524 (2,435) 3,208
minority interest
Minority interest -- (51) -- (119)
------- ------- ------- -------
Net income (loss) $(2,104) $ 1,473 $(2,435) $ 3,089
======= ======= ======= =======
Earnings (loss) per share:
Basic $ (0.19) $ 0.15 $ (0.22) $ 0.34
======= ======= ======= =======
Diluted $ (0.19) $ 0.13 $ (0.22) $ 0.29
======= ======= ======= =======
Weighted average shares
outstanding 11,166 10,146 10,922 9,216
======= ======= ======= =======
Weighted average shares
outstanding and assumed
conversion 11,166 11,663 10,922 10,634
======= ======= ======= =======
</TABLE>
See accompanying notes.
4
<PAGE> 5
ENGINEERING ANIMATION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS
(in thousands, unaudited)
<TABLE>
<CAPTION>
-------------------------------
Nine months ended September 30,
1998 1997
Restated
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (2,435) $ 3,089
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 4,225 1,604
Deferred income taxes (487) (505)
Income tax benefit of stock options --- 552
Write off of purchased in-process
research and development costs 1,918 ---
Non-cash compensation expense 1,038 ---
Increase in billed accounts receivable (8,487) (4,259)
Increase in unbilled accounts receivable (5,013) (2,897)
Increase in prepaid expenses (521) (968)
Increase in accounts payable 240 799
Increase in accrued expenses 403 1,293
Increase (decrease) in taxes payable 2,793 (594)
Increase (decrease) in deferred revenue (749) 632
Minority interest income --- 119
-------- --------
Net cash used in operating activities (7,075) (1,135)
INVESTING ACTIVITIES
Purchases of property and equipment (7,727) (6,905)
Development of software (828) (947)
Maturities of marketable securities 44,951 14,500
Purchases of marketable securities (41,433) (38,704)
Other assets (1,373) ---
-------- --------
Net cash used in investing activities (6,410) (32,056)
FINANCING ACTIVITIES
Decrease in restricted cash 69 213
Net increase in short term borrowing 2,473 680
Proceeds from note receivable 116 30
Proceeds from long-term debt 162 362
Payments on long-term debt and capital lease
obligations (1,353) (1,002)
Net proceeds from exercise of options and warrants 2,017 375
Net proceeds from issuance of common stock 1,598 29,409
-------- --------
Net cash provided by financing activities 5,082 30,067
-------- --------
Net decrease in cash and cash equivalents (8,403) (3,124)
Foreign currency translation 155 (19)
Cash and cash equivalents at beginning of period 25,468 10,916
-------- --------
Cash and cash equivalent at end of period $ 17,220 $ 7,773
======== ========
</TABLE>
See accompanying notes.
5
<PAGE> 6
ENGINEERING ANIMATION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
---------------------
The consolidated financial statements include the accounts of Engineering
Animation, Inc. and the Company's subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation. The unaudited
condensed consolidated financial statements included herein reflect all
adjustments, consisting only of normal recurring accruals which in the opinion
of management are necessary to fairly state the Company's financial position,
results of operations, and cash flows for the periods presented. These financial
statements should be read in conjunction with the Company's audited financial
statements as included in the Company's 1997 Annual Report on Form 10-K/A-2 as
filed with the Securities and Exchange Commission. The results of operations for
the nine month period ended September 30, 1998 are not necessarily indicative of
the results that may be expected for any subsequent quarter or for the fiscal
year ending December 31, 1998. The December 31, 1997 balance sheet was derived
from audited financial statements, but does not include all disclosures required
by generally accepted accounting principles.
The consolidated financial statements are presented giving retroactive
effect to the Company's November 1997 acquisitions of Technology Company
Ventures, L.L.C. ("TCV") and Cimtech, Inc. ("Cimtech") which have been accounted
for as a pooling of interests.
Certain prior year financial information has been reclassified to conform
to the 1998 financial statement presentation.
Restatement
- -----------
The Company has restated its financial statements for the third quarter of
1998 to reflect the modification of methods used to value acquired in-process
research and development recorded and written off in connection with the
Company's November, 1997 acquisition of Rosetta Technologies, Inc. ("Rosetta")
and the Company's June, 1998 acquisition of Sense8 Corporation ("Sense8"). The
revised calculations of the value of the acquired in-process technology are
based on adjusted after-tax cash flows that gives explicit consideration to the
SEC Staff's views on in-process research and development as set forth in its
September 9, 1998 letter to the American Institute of Certified Public
Accountants.
The in-process research and development charge for Rosetta and Sense8 were
reduced from $5.6 million to $1.7 million, and from $9.1 million to $1.9
million, respectively, resulting in an increase to goodwill and developed
technology of $11.1 million. As a result, an additional amortization expense of
$554,000 was recorded during the third quarter.
6
<PAGE> 7
2. Acquisitions
------------
On September 22, 1998, the Company completed the acquisition of Variation
Systems Analysis, Inc. ("VSA"), a privately held company based in St. Clair
Shores, Michigan. The Company issued approximately 542,000 shares of common
stock in exchange for all of the outstanding preferred and common stock of VSA
in a transaction valued at approximately $26.0 million. This acquisition was
accounted for as a pooling of interests.
On September 22, 1998, the Company completed the acquisition of Transom
Technologies, Inc. ("Transom"), a privately held company based in Ann Arbor,
Michigan. The Company issued approximately 192,000 shares of common stock in
exchange for all of the outstanding preferred and common stock of Transom in a
transaction valued at approximately $13.0 million. This acquisition was
accounted for as a pooling of interests.
In connection with these September 1998 acquisitions, the Company posted a
charge of $5.0 million for acquisition costs.
On June 17, 1998, the Company completed the acquisition of Sense8, a
privately-held company in Mill Valley, California. This acquisition was
accounted for using the purchase method. The Company issued approximately
158,000 shares of its common stock valued at approximately $7.0 million in
exchange for all of the outstanding preferred and common stock of Sense8 and
assumed Sense8's net liabilities of approximately $2.4 million. In connection
with this acquisition, the Company posted a non-recurring charge for purchased
technology, which resulted in additional net expense of $1.9 million, and
recorded $4.1 million of goodwill and $3.6 million of developed technology. Both
are being amortized on a straight-line basis over five years. The following
table shows the pro forma consolidated results of operations as if Sense8 had
been acquired as of the beginning of the period presented.
<TABLE>
<CAPTION>
(in thousands, except per share data) Nine months ended
September 30, 1998
------------------
<S> <C> <C>
Revenues $ 71,178
Net loss $ (5,255)
Net loss per share $ (0.48)
</TABLE>
The pro forma results are not necessarily indicative of what actually would
have occurred if the acquisition had been in effect for the entire periods
presented. In addition, they are not intended to be a projection of future
results and do not reflect any synergies that might be achieved from combined
operations.
3. Public Offerings
----------------
In June 1997, the Company completed a follow-on offering of 1,000,000
shares of its common stock and received approximately $26.6 million of cash, net
of underwriting discounts and other offering costs. In March 1998, certain
stockholders of the Company sold 966,000
7
<PAGE> 8
shares of common stock to or through agents or dealers. The Company did not
receive any of the proceeds from the sale of the common stock.
4. Stock Split
-----------
The Company completed a three-for-two stock split in the form of a stock
dividend paid to stockholders of record as of February 12, 1998. Accordingly,
all share, per share, weighted average share and stock option information has
been restated to reflect the split.
5. Earnings Per Share
------------------
The following table sets forth the computation of basic and diluted
earnings per share, adjusted for the three-for-two stock split:
<TABLE>
<CAPTION>
-------------------------------- --------------------------------
(in thousands, except per share data) Three months ended September 30, Nine months ended September 30,
1998 1997 1998 1997
------------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C>
Numerator:
Net income (loss) $ (2,104) $ 1,473 $ (2,435) $ 3,089
============= ================ ================ ==============
Denominator
Denominator for basic earnings per share-
weighted average shares 11,166 10,146 10,922 9,216
Stock options -- 1,517 -- 1,418
------------- ---------------- ---------------- --------------
Denominator for diluted earnings per share-
adjusted weighted average shares and
assumed conversion 11,166 11,663 10,922 10,634
------------- ---------------- ---------------- --------------
Basic earnings (loss) per share $ (0.19) $ 0.15 $ (0.22) $ 0.34
============= ================ ================ ==============
Diluted earnings (loss) per share $ (0.19) $ 0.13 $ (0.22) $ 0.29
============= ================ ================ ==============
</TABLE>
8
<PAGE> 9
ENGINEERING ANIMATION, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
NET REVENUES
The Company's revenues are derived from sales of software products and
interactive products. Revenues from sales of software products are recognized
upon delivery of the software product to the customer and satisfaction of
significant related obligations, if any. Revenues from software development
contracts, professional services, customer support and maintenance are included
in software product revenues. Customer support and maintenance revenues are
deferred and recognized ratably over the period the customer support services
are provided. The Company recognizes revenues from professional services,
software development contracts and interactive products based upon labor and
other costs incurred and progress to completion on contracts.
The Company's total revenues increased 47% to $26.1 million for the three months
ended September 30, 1998 from $17.7 million for the three months ended September
30, 1997, and increased 49% to $70.6 million for the nine months ended September
30, 1998 from $47.4 million for the nine months ended September 30, 1997.
Software products revenues increased 49% to $20.3 million for the three months
ended September 30, 1998 from $13.6 million for the three months ended September
30, 1997, and increased 59% to $53.2 million for the nine months ended September
30, 1998 from $33.5 million for the nine months ended September 30, 1997 as a
result of increased sales of product visualization solutions. Interactive
product revenues increased 41% to $5.8 million for the three months ended
September 30, 1998 from $4.1 million for the three months ended September 30,
1997, and increased 25% to $17.4 million for the nine months ended September 30,
1998 from $13.9 million for the nine months ended September 30, 1997, primarily
due to additional projects for interactive products.
COST OF REVENUES
The Company's cost of revenues includes cost of production, direct labor and
other costs associated with funded development and professional services,
packaging and distribution costs, royalties and amortization of capitalized
software costs. The Company's cost of revenues increased 46% to $8.3 million for
the three months ended September 30, 1998 from $5.7 million for the three months
ended September 30, 1997, and increased 34% to $22.9 million for the nine months
ended September 30, 1998 from $17.1 million for the nine months ended September
30, 1997, primarily due to expanded software product sales, software product
development and professional service contracts and development costs for
interactive products. The Company's cost of revenues as a percentage of revenues
remained at 32% for the three months ended
9
<PAGE> 10
September 30, 1998 and 1997 and decreased to 32% for the nine months ended
September 30, 1998 from 36% for the nine months ended September 30, 1997.
OPERATING EXPENSES
Sales and Marketing. Sales and marketing expenses include personnel costs
related to sales, marketing and customer service activities, as well as facility
costs, advertising, promotional materials, trade shows and other costs. The
Company's sales and marketing expenses increased 23% to $5.9 million for the
three months ended September 30, 1998 from $4.8 million for the three months
ended September 30, 1997, and increased 33% to $16.2 million for the nine months
ended September 30, 1998 from $12.2 million for the nine months ended September
30, 1997, primarily due to costs associated with expansion of the sales force,
increased marketing costs and equipment depreciation. Sales and marketing
expenses decreased to 23% of total revenues for the three months ended September
30, 1998 from 27% for the three months ended September 30, 1997, and decreased
to 23% of total revenues for the nine months ended September 30, 1998 from 26%
for the nine months ended September 30, 1997. The decrease in sales and
marketing expenses as a percentage of revenues was primarily the result of
spreading expenses over higher revenues.
General and Administrative. General and administrative expenses consist
primarily of personnel costs for administrative, executive and accounting
personnel, as well as certain consulting expenses, insurance costs, professional
fees, depreciation and amortization expenses and other costs. The Company's
general and administrative expenses increased 14% to $2.6 million for the three
months ended September 30, 1998 from $2.3 million for the three months ended
September 30, 1997, and increased 29% to $8.0 million for the nine months ended
September 30, 1998 from $6.2 million for the nine months ended September 30,
1997, primarily a result of increased administrative staff. General and
administrative expenses decreased to 10% of total revenues for the three months
ended September 30, 1998 compared to 13% for the three months ended September
30, 1997 and decreased to 11% of total revenues for the nine months ended
September 30, 1998 from 13% for the nine months ended September 30, 1997. The
decrease of general and administrative expenses as a percentage of revenues was
primarily a result of spreading expenses over higher revenues.
Research and Development. The Company's research and development focuses on
product development and consists primarily of personnel costs, related facility
costs, equipment costs and outside consulting fees. The Company's research and
development expenses increased 45% to $4.4 million for the three months ended
September 30, 1998 from $3.1 million for the three months ended September 30,
1997, and increased 53% to $12.0 million for the nine months ended September 30,
1998 from $7.9 million for the nine months ended September 30, 1997. Research
and development expenses remained at 17% of total revenues for the three months
ended September 30, 1998 and 1997, and for the nine months ended September 30,
1998 and 1997.
Acquisition costs and non-recurring expenses. On September 22, 1998, the Company
completed the acquisitions of Variation Systems Analysis, Inc. ("VSA") and
Transom Technologies, Inc.
10
<PAGE> 11
("Transom"). In connection with these September 1998 transactions, the Company
posted a $5.0 million charge for acquisition costs and employee related
expenses.
On June 17, 1998, the Company completed the acquisition of Sense8 Corporation
("Sense8"). In connection with this acquisition, the Company posted a
non-recurring charge of $1.9 million for in-process purchased technology.
Goodwill and developed technology amortization was $1.2 million for the nine
months ended September 30, 1998.
In the first quarter of 1998, the Company formed strategic relationships with
General Electric Corporate Research and Development and Hewlett-Packard Company
to license technology to incorporate into EAI's VisProducts(TM) software. Both
transactions were accounted for as non-recurring charges to purchased technology
expense in the first quarter of 1998 in the aggregate amount of $4.2 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company historically has satisfied its cash requirements through borrowings,
customer advances, capital lease financing, aggregate net proceeds of
approximately $55.6 million from the Company's initial public offering of common
stock in February 1996, and a follow-on offering of common stock in June 1997.
The Company also received net proceeds of approximately $600,000, $1.2 million
and $3.0 million from private placements of common stock in June 1998, February
1998, and February 1997, respectively. As of September 30, 1998, the Company had
$29.1 million in cash, cash equivalents and short-term investments.
Net cash used in operating activities for the nine months ended September 30,
1998 was $7.1 million. Approximately $6.8 million of cash used in operating
activities was attributed to acquisition and non-recurring charges.
Net cash used by investing activities was $6.4 million for the nine months ended
September 30, 1998. The use of cash was primarily for office facilities and
leasehold improvements, computer equipment and office furniture to accommodate
the increased number of employees and office locations, and partially offset by
net maturities of marketable securities.
Net cash provided by financing activities was $5.1 million for the nine months
ended September 30, 1998. The main financing sources were proceeds from stock
option exercises, issuance of common stock and net increases in short-term
borrowing. A $3.5 million line of credit was put in place during September 1998
replacing an existing $2.5 million line of credit held by VSA of which $1.9
million was utilized at the time of acquisition. As of September 30, 1998, the
Company had drawn down $3.0 million to pay off the old line of credit and fund
operations.
The Company believes its current cash and short-term investment balances will be
sufficient to meet anticipated cash needs for working capital and capital
expenditures for at least the next twelve months. There can be no assurance that
additional capital beyond the amounts currently
11
<PAGE> 12
forecasted by the Company will not be required nor that any such required
additional capital will be available on reasonable terms, if at all, at such
time as required by the Company.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
The Company or its representatives may, from time to time, make or may have made
certain forward-looking statements, orally or in writing, including, without
limitations, any such statements made or to be made in Management's Discussion
and Analysis of Financial Condition and Results of Operations contained in its
various SEC filings. The Company wishes to ensure that such statements are
accompanied by meaningful cautionary statements, so as to ensure to the fullest
extent possible the protections of the safe harbor established in the Private
Securities Litigation Reform Act of 1995. Accordingly, such statements are
qualified in their entirety by reference to and are accompanied by the following
discussion of certain important factors that could cause actual results to
differ materially from those projected in such forward-looking statements.
The Company cautions the reader that this list of factors may not be exhaustive.
The Company operates in a continually changing business environment, and new
risk factors emerge from time to time. Management cannot predict such risk
factors, nor can it assess the impact, if any, of such risk factors on the
Company's business or the extent to which any factors, or combination of
factors, may cause actual results to differ materially from those projected in
any forward-looking statements. Accordingly, forward-looking statements should
not be relied upon as a prediction of actual results.
Variability of Operating Results. The Company has experienced and expects to
continue to experience fluctuations in its quarterly results. The Company's
revenues are affected by a number of factors, including the timing of the
introduction of new software products and interactive products by the Company
and its competitors, seasonality of certain customer purchases, product mix,
general economic conditions and the Company's ability to obtain agreements
directly from its customers, as well as its publishers and distributors to
market the Company's products. The Company's operating results also will vary
significantly depending on changes in pricing, changes in customer budgets and
changes in the volume and timing of orders received, which are difficult to
forecast. As a result of the foregoing and other factors, the Company may
experience material fluctuations in future revenues and operating results on a
quarterly or annual basis. Therefore, the Company believes that period to period
comparisons of its revenues and operating results are not necessarily meaningful
and should not be relied upon as indicators of future performance.
Year 2000. The Company is in the process of assessing its readiness in respect
to Year 2000 issues. It has begun to identify and evaluate its critical data
processing systems and has completed conversions where needed. It has also begun
to identify its critical vendors and has initiated
12
<PAGE> 13
communication with some vendors initially identified as critical regarding the
readiness of their systems in respect to Year 2000 issues.
The Company is currently evaluating a plan to be implemented by the end of 1998
or early 1999 that would coordinate its Year 2000 efforts Company-wide. This
plan will supplement the Y2K efforts the Company has undertaken to date, and
will encompass the Company's recent acquisitions. The plan calls for the Company
to continue its identification of its Year 2000 issues and assess the risks
these issues pose to IT and non-IT systems, including systems potentially
containing embedded chips. The plan also calls for the further identification
and assessment of third-party relationships. Based on these assessments, the
Company will develop and implement actions to address newly identified risks, if
any, which are considered business critical.
The Company currently anticipates that its identification, assessment and action
activities will continue into mid 1999. Once these activities are being
coordinated under the plan, the Company will be in a better position to identify
reasonably likely worst case scenarios given particular Year 2000 issues,
develop contingency plans, if warranted, and identify additional costs
associated with its efforts to address Year 2000 issues. The Company anticipates
completing any contingency planning activities by December 1999.
The Company has not tracked the costs associated with its Year 2000 efforts to
date, but believes that these costs have not been material. The funds used to
address Year 2000 efforts have been expensed as incurred. The Company
anticipates the majority of costs associated with Year 2000 efforts will be
incurred in 1999. The Company intends to initiate a process to track these costs
going forward. No IT projects have been deferred due to Year 2000 efforts.
The Company does not currently anticipate using vendors to assist it in its Year
2000 efforts, or for independent verification or validation of its Year 2000
efforts. The Company has cooperated with customers in their assessments of the
Year 2000 readiness of the Company's products.
Until the analysis of business critical risks is completed under the plan, the
Company will not be in a position to assess if the transition to Year 2000 will
materially adversely impact the Company, its systems, operations and financial
results. Even then, though, an unanticipated or inadequately addressed issue, as
well as third party readiness and contracting issues, may result in material
adverse impacts on the Company, its systems, operations and financial results.
For a more complete discussion of other risk factors affecting the Company, see
the Company's 1997 Annual Report on Form 10-K/A-2.
13
<PAGE> 14
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - See Index to Exhibits.
(b) Reports on Form 8-K.
June 17, 1998 (filed July 1, 1998 and amended July 31, 1998) - Item
2. Acquisition or Disposition of Assets. Re: Acquisition of Sense8
Corporation pursuant to a merger.
September 22, 1998 (filed September 25, 1998) - Item 2. Acquisition
or Disposition of Assets. Re: Acquisition of Transom Technologies,
Inc. pursuant to a merger and acquisition of Variation Systems
Analysis, Inc. pursuant to a merger.
14
<PAGE> 15
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.
DATE: MARCH 3, 1999 ENGINEERING ANIMATION, INC.
(Registrant)
By: /s/ Jerome M. Behar
------------------------------
Jerome M. Behar
Vice President Of Finance and
Chief Financial Officer
(Duly Authorized Officer And
Principal Financial Officer)
15
<PAGE> 16
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
2.5 Amended and Restated Agreement and Plan of Merger between the Company and
Transom Technologies, Inc., dated as of August 19, 1998 (incorporated herein
by reference from the Company's Registration Statement on Form S-4, SEC File
No. 333-61567)
2.6 Amended and Restated Agreement and Plan of Merger among the Company, EAI
Victory, Inc. and Variation Systems Analysis, Inc., dated as of August 19,
1998 (incorporated herein by reference from the Company's Registration
Statement on Form S-4, SEC File No. 333-61569)
3.1 Certificate of Incorporation, as amended*
27. Financial Data Schedule
- ---------------
* Previously filed
16
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 17,220
<SECURITIES> 11,889
<RECEIVABLES> 39,065
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 71,078
<PP&E> 18,094
<DEPRECIATION> 0
<TOTAL-ASSETS> 107,604
<CURRENT-LIABILITIES> 21,631
<BONDS> 1,592
0
0
<COMMON> 0
<OTHER-SE> 84,381
<TOTAL-LIABILITY-AND-EQUITY> 107,604
<SALES> 26,088
<TOTAL-REVENUES> 26,088
<CGS> 8,334
<TOTAL-COSTS> 8,334
<OTHER-EXPENSES> 18,659
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (372)
<INCOME-PRETAX> (533)
<INCOME-TAX> 1,571
<INCOME-CONTINUING> (2,104)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,104)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
