<PAGE>
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 AND EXCHANGE ACT OF 1934
For Quarterly Period Ended June 30, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
Commission File Number: 0-28900
Rogue Wave Software, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 93-1064214
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5500 Flatiron Parkway, Boulder, Colorado 80301
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(Address of principal executive offices) (Zip Code)
(303) 473-9118
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(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 ___
-----
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding at June 30, 1999
----- ----------------------------
Common Stock, $0.001 par value 10,422,935
1.
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ROGUE WAVE SOFTWARE, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Condensed Consolidated Balance Sheets at September 30, 1998
and June 30, 1999................................................. 3
Consolidated Statements of Operations for the three and nine
months ended June 30, 1998 and 1999............................... 4
Consolidated Statements of Cash Flows for the
nine months ended June 30, 1998 and 1999.......................... 5
Notes to Consolidated Financial Statements.............................. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................... 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk.............. 20
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K........................................ 21
SIGNATURES.......................................................................... 23
</TABLE>
2.
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ROGUE WAVE SOFTWARE, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
September 30, June 30,
1998 1999
--------------- ---------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash, cash equivalents and short term investments..... $35,264 $27,205
Accounts receivable, net.............................. 7,341 9,381
Prepaid expenses and other current assets............. 2,799 2,650
------- -------
Total current assets............................... 45,404 39,236
Equipment, net........................................... 4,820 4,283
Goodwill, net............................................ 1,127 12,994
Other assets, net........................................ 3,176 3,102
------- -------
Total assets....................................... $54,527 $59,615
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................... $ 1,067 $ 226
Accrued expenses...................................... 2,862 4,964
Deferred revenue...................................... 7,577 10,290
Current portion of long-term obligations.............. 116 11
------- -------
Total current liabilities.......................... 11,622 15,491
Stockholders' equity:
Common stock.......................................... 9 10
Additional paid-in capital............................ 37,849 36,668
Retained earnings..................................... 5,073 7,495
Accumulated other comprehensive loss.................. (26) (49)
------- -------
Total stockholders' equity......................... 42,905 44,124
------- -------
Total liabilities and stockholders' equity......... $54,527 $59,615
======= =======
</TABLE>
See accompanying notes.
3.
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ROGUE WAVE SOFTWARE, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data, unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
June 30, June 30,
-------------------- -------------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
License revenue............................................ $ 7,396 $ 8,209 $20,859 $24,637
Service and maintenance revenue............................ 3,749 5,822 11,447 14,958
------- ------- ------- -------
Total revenue........................................... 11,145 14,031 32,306 39,595
------- ------- ------- -------
Cost of revenue:
Cost of license revenue.................................... 639 533 1,694 1,590
Cost of service and maintenance revenue.................... 1,418 2,025 3,574 5,363
------- ------- ------- -------
Total cost of revenue................................... 2,057 2,558 5,268 6,953
------- ------- ------- -------
Gross profit............................................ 9,088 11,473 27,038 32,642
------- ------- ------- -------
Operating expenses:
Product development........................................ 2,853 3,295 7,706 8,156
Sales and marketing........................................ 5,107 6,041 14,345 17,114
General and administrative................................. 1,065 1,325 3,186 3,922
Acquisition, relocation and goodwill amortization costs.... 580 384 1,789 486
------- ------- ------- -------
Total operating expenses................................ 9,605 11,045 27,026 29,678
------- ------- ------- -------
Income (loss) from operations........................... (517) 428 12 2,964
Other income, net............................................ 537 239 1,715 762
------- ------- ------- -------
Income before income taxes.............................. 20 667 1,727 3,726
Income tax expense........................................... 7 233 463 1,304
------- ------- ------- -------
Net income.............................................. $ 13 $ 434 $ 1,264 $ 2,422
======= ======= ======= =======
Pro forma net income data:
Income before income taxes, as reported.................... $ 1,727
Pro forma income tax expense............................... 604
-------
Pro forma net income.................................... $ 1,123
=======
Pro forma diluted earnings per share....................... $ 0.10
=======
Basic earnings per share..................................... $ 0.00 $ 0.04 $ 0.12 $ 0.23
======= ======= ======= =======
Diluted earnings per share................................... $ 0.00 $ 0.04 $ 0.12 $ 0.22
======= ======= ======= =======
Shares used in basic per share calculation................... 10,250 10,405 10,139 10,429
Shares used in diluted per share calculation................. 10,660 10,882 10,817 10,984
</TABLE>
See accompanying notes.
4.
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ROGUE WAVE SOFTWARE, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
<TABLE>
<CAPTION>
Nine months ended
June 30,
------------------------
1998 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income.................................................................. $ 1,264 $ 2,422
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization............................................. 2,116 2,892
Loss on disposal of assets................................................ -- 58
Changes in assets and liabilities:
Accounts receivable..................................................... (319) (1,858)
Prepaid expenses and other current assets............................... (1,357) 512
Other noncurrent assets................................................. (1,977) (1,001)
Accounts payable and accrued expenses................................... (771) 704
Deferred revenue....................................................... 609 2,420
-------- ---------
Net cash from operating activities.................................... (435) 6,149
-------- ---------
Cash flows from investing activities:
Purchase of business net of cash acquired................................... -- (11,840)
Equipment acquisitions...................................................... (3,169) (1,068)
-------- ---------
Net cash from investing activities.................................... (3,169) (12,908)
-------- ---------
Cash flows from financing activities:
Payments on long-term debt and capital lease obligations.................... (366) (105)
Net proceeds from issuance of common stock, net............................. 352 337
Purchase of treasury stock.................................................. -- (1,883)
Stock issuance costs........................................................ (177) --
Payments of dividends....................................................... (426) --
Proceeds from exercise of stock options..................................... 327 364
-------- ---------
Net cash from financing activities.................................... (290) (1,287)
-------- ---------
Effect of exchange rate changes on cash....................................... 13 (13)
-------- ---------
Net change in cash and cash equivalents............................... (3,881) (8,060)
Cash, cash equivalents and short term investments at beginning of period...... 35,737 35,264
-------- ---------
Cash, cash equivalents and short term investments at end of period............ $ 31,856 $ 27,205
======== =========
</TABLE>
See accompanying notes.
5.
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ROGUE WAVE SOFTWARE, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles. However, certain information or
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed, or omitted, pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, the
statements include all adjustments necessary (which are of a normal and
recurring nature) for the fair presentation of the results of the interim
periods presented. These financial statements should be read in conjunction
with the Company's audited consolidated financial statements and notes
thereto (the Consolidated Financial Statements) for the year ended
September 30, 1998, as included in the Company's annual report on Form
10-K.
2. Common Stock Repurchase
In October 1998, the Board of directors authorized the Company to
repurchase up to the lesser of 500,000 shares of the Company's common stock
or $10,000,000. The Company purchased 230,000 shares ($1.9 million) of its
common shares during the nine months ended June 30, 1999. The Company has
used 178,053 of the repurchased shares for employee benefit plans as of
June 30, 1999.
3. Acquisition
On March 1, 1999, the Company acquired 100% of the outstanding stock of
NobleNet,Inc. (NobleNet) for $11.8 million in cash. The acquisition has
been accounted for under the purchase method and accordingly, the
accompanying financial statements include NobleNet's results beginning with
the acquisition date. The purchase price has been allocated to the assets
of NobleNet based on their respective fair values. The excess of the
purchase price over assets acquired approximated $12.0 million and is being
amortized over 10 years. The pro forma information that follows assumes
that the acquisition of NobleNet took place as of October 1, 1997. The
unaudited pro forma information is not necessarily indicative of either the
results of operations that would have occurred had the purchase been made
during the periods presented or the future results of the combined
operations.
<TABLE>
<CAPTION>
Nine Months Ended
June 30, 1998 June 30, 1999
<S> <C> <C>
Revenue $33,977 $40,234
Net Loss (1,798) (462)
Basic Earnings Per Share (0.13) (0.04)
Diluted Earnings Per Share (0.12) (0.04)
</TABLE>
4. Earnings Per Share
Basic earnings per share is computed on the basis of the weighted average
number of common shares outstanding. Diluted earnings per share is computed
on the basis of the weighted average number of common shares outstanding
plus the effect of outstanding stock options using the "treasury stock"
method. The difference between basic earnings per share and diluted
earnings per share is due to the effect of outstanding stock options.
5. Pro Forma Net Income
Pro forma data is reflected for the nine months ended June 30, 1998 due to
Stingray, which was acquired in February 1998 in a pooling of interests
business combination, being a subchapter S corporation prior to its
acquisition.
6.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in this section, as well as in
the section "Risk Factors" and "Business" in the Company's Annual Report on Form
10-K for the year ended September 30, 1998. Readers are cautioned not to place
undue reliance on these forward-looking statements which reflect management's
analysis only as of the date hereof. The Company undertakes no obligation to
publicly release the results of any revision to these forward-looking statements
which may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
Overview
Rogue Wave was founded in 1989 to provide reusable software parts for the
development of object-oriented software applications. The Company operated as a
Subchapter S corporation until June 1994. In October 1995, Rogue Wave merged
with Inmark Development Corporation ("Inmark"), a privately held corporation
specializing in the development, distribution and support of an object-oriented
graphical user interface library written in the C++ programming language. In
February 1998, the Company merged with Stingray Software, Inc. ("Stingray"), a
privately held corporation specializing in the development and distribution of
object-oriented development tools for Windows programmers and a leading provider
of Visual C++ class libraries. Both transactions were accounted for as a
pooling-of-interests business combination. In March 1999, the Company merged
with NobleNet, Inc.(NobleNet) in a purchase business combination. NobleNet
specialized in building and marketing software products that allow existing
information technology (IT) systems to communicate and interoperate across
corporate networks and the Internet. The products are used to build
sophisticated, enterprise-wide, distributed applications that run on more than
forty platforms.
To date, the Company's revenue has been derived from licenses of its
software products and related maintenance, training and consulting services.
License revenue is recognized upon execution of a license agreement and shipment
of the product if no significant contractual obligations remain and collection
of the resulting receivable is probable. Allowances for credit risks and for
estimated future returns are provided for upon shipment. Returns to date have
not been material. Service and maintenance revenue consists of fees that are
charged separately from the product licenses. Maintenance revenue consists of
fees for ongoing support and product updates and is recognized ratably over the
term of the contract, which is typically 12 months. Service revenue consists of
training and consulting services and is recognized upon completion of the
related activity. The Company's revenue recognition policies are in compliance
with American Institute of Certified Public Accountants Statements of Position
97-2 and 98-4, relating to Software Revenue Recognition.
The Company markets its products primarily through its direct sales force,
and to a lesser extent through the Internet and an indirect channel consisting
of OEMs, VARs, dealers and distributors. The Company's direct sales force
consist of an inside telesales group that focuses on smaller orders ($50,000 or
less), and an outside sales force that focuses on larger site licenses. The
Company makes all of its products available for sale and distribution over the
Internet. Revenue through this channel has not been significant to date, and
there can be no assurance that the Company will be successful in marketing its
products through this channel.
International revenue accounted for approximately 24%, 28% and 24% of total
revenue in fiscal 1997, 1998 and the nine months ended June 30, 1999,
respectively. In January 1996, the Company
7.
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established a wholly owned subsidiary in Germany to market and support the
Company's products in Germany and neighboring countries. In February 1997, the
Company expanded its European operations by acquiring Precision, a distributor
of Rogue Wave software products in Germany, the United Kingdom, France and the
Benelux countries. The Company anticipates further expansion in foreign
countries and expects that international license and service and maintenance
revenue will account for an increasing portion of its total revenue in the
future. The Company has committed and continues to commit significant management
time and financial resources to developing direct and indirect international
sales and support channels. The Company has initiated a management
reorganization that is expected to support accelerated European growth. There
can be no assurance, however, that the Company will be able to maintain or
increase international market demand for its products.
The majority of the Company's international revenue is generated by the
Company's European subsidiaries and is denominated in local currencies. The
Company may enter into forward foreign exchange contracts to reduce the risk
associated with currency fluctuations. Although exposure to currency
fluctuations to date has been insignificant, to the extent international revenue
is denominated in local currencies, foreign currency translations may contribute
to significant fluctuations in, and could have a material adverse effect upon,
the Company's business, financial condition and results of operations. See
"Risk Factors- Risks Inherent in International Operations."
The Company acquired a controlling interest in HotData, Inc. ("HotData")
for $1.3 million on October 1, 1997. HotData began operations during 1997 and
has developed technology relating to the collection and verification of data
across the Internet. On September 1, 1998, HotData issued common stock to
additional investors thereby reducing the Company's percentage ownership from
78% to 42%. The HotData investment was accounted for using the equity method of
accounting for fiscal 1998 and 1999. As of June 30, 1999, the Company's share
of HotData's losses had reduced the Company's investment balance to zero.
In February 1998, the Company acquired all of the outstanding shares of
Stingray common stock in a business combination accounted for as a pooling of
interests for approximately 1.65 million shares of Rogue Wave common stock.
Stingray is a privately held company that develops and distributes development
tools for Windows programmers. The merger added several new product lines to
Rogue Wave's current slate of object-oriented C++ and Java TM class libraries
and builders. Stingray offers an extensive line of add-on libraries that extend
and enhance the Microsoft Foundation Classes (MFC), providing additional,
prebuilt functionality for creating sophisticated GUI controls, grids, diagrams
and charts. Stingray also offers ActiveX components, and several Java class
libraries that will further strengthen Rogue Wave's offerings in the Java
marketplace. The Company incurred approximately $700,000 in merger related
costs during fiscal 1998 primarily in the quarter ended March 31, 1998. The
financial results for all periods presented include the accounts of the Company
and Stingray.
In June 1998, the Company implemented a reorganization and realignment of
its product strategy. Cost saving actions were taken which resulted in the
closing of its Mountain View, California, and Charlotte, North Carolina,
development operations, reducing its domestic administration staff and began the
process of consolidating the Oregon operations into one facility. In connection
with these actions, the Company incurred a $580,000 reorganization charge
primarily consisting of severance and lease termination costs in the quarter
ended June 30, 1998.
In March 1999, the Company acquired all of the outstanding shares of
NobleNet common stock which was accounted for under the purchase method for
approximately $11.8 million in cash. NobleNet's Nouveau technology, the
industry's first Internet-generation Object Request Broker (ORB), will expand
Rogue Wave's product offering by providing a unified architecture for building
high
8.
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performance, distributed applications that interoperate across an enterprise or
over the Internet. The synergy between Rogue Wave's component technology and
NobleNet's ORB technology will provide solutions that offer flexibility,
performance and scalability to build and deploy complete, reliable Internet
applications. The Company incurred approximately $486,000 in goodwill
amortization costs during fiscal 1999.
9.
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Results of Operations
The following table sets forth for the periods indicated the percentage of
net revenues represented by certain line items in the Company's Consolidated
Statements of Operations.
<TABLE>
<CAPTION>
Percentage of Total Net Revenues
----------------------------------------------
Three months ended Nine months ended
June 30, June 30,
-------------------- ---------------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
License revenue................................ 66% 59% 65% 62%
Service and maintenance revenue................ 34% 41% 35% 38%
---- ---- ---- ----
Total revenue................................ 100% 100% 100% 100%
---- ---- ---- ----
Cost of revenue:
Cost of license revenue........................ 6% 4% 5% 4%
Cost of service and maintenance revenue........ 13% 14% 11% 14%
---- ---- ---- ----
Total cost of revenue........................ 19% 18% 16% 18%
---- ---- ---- ----
Gross profit 81% 82% 84% 82%
---- ---- ---- ----
Operating expenses:
Product development............................ 25% 23% 24% 21%
Sales and marketing............................ 46% 43% 44% 43%
General and administrative..................... 10% 10% 10% 10%
Merger, reorganization and relocation costs.... 5% 3% 6% 1%
---- ---- ---- ----
Total operating expenses..................... 86% 79% 84% 75%
---- ---- ---- ----
Income (loss) from operations................ (5)% 3% 0% 7%
Other income, net............................... 5% 2% 5% 2%
---- ---- ---- ----
Income before income taxes................... (0)% 5% 5% 9%
Income tax expense.............................. (0)% 2% 1% 3%
---- ---- ---- ----
Net income.................................. . (0)% 3% 4% 6%
==== ==== ==== ====
</TABLE>
Revenue
Total revenue for the three and nine months ended June 30, 1999 was $14.0
million and $39.6 million, respectively, versus $11.1 million and $32.3 million
for the three and nine months ended June 30, 1998, representing an increase of
26% and 23%, respectively. License revenue for the three and nine months ended
June 30, 1999 were $8.2 million and $24.6 million, respectively, versus $7.4
million and $20.9 million for the three and nine months ended June 30, 1998,
representing an increase of 11% and 18%, respectively. License revenue
increased primarily as a result of an expanded market and increased market
awareness, expansion of the Company's telesales and direct sales organization,
and an increase of average order size.
Service and maintenance revenue for the three and nine months ended June
30, 1999 was $5.8 million and $15.0 million, respectively, versus $3.7 million
and $11.4 million for the three and nine months ended June 30,1998, representing
an increase of 55% and 31%, respectively. These increases in service and
maintenance revenue were primarily attributable to increased sales volume of the
Company's support and maintenance services related to the Company's larger
installed base.
10.
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Cost of Revenue
Cost of license revenue for the three and nine months ended June 30, 1999
were $533,000 and $1.6 million respectively versus $639,000 and $1.7 million for
the three and nine months ended June 30, 1998, representing a decrease of 17%
and 6%, respectively. As a percentage of total revenue, cost of license revenue
was 4% for the three and nine months ended June 30, 1999 versus 6% and 5% for
the three and nine months ended June 30, 1998. The decrease in cost of license
revenue is primarily the result of varying levels of royalties paid, changes in
product mix and the timing of large site license sales.
Cost of service and maintenance revenue for the three and nine months ended
June 30, 1999 were $2.0 million and $5.4 million, respectively, versus $1.4
million and $3.6 million for the three and nine months ended June 30, 1998
representing an increase of 43% and 50% respectively. As a percentage of total
revenue cost of service and maintenance revenue was 14% for the three and nine
months ended June 30, 1999 versus 13% and 11% for the three and nine months
ended June 30, 1998. The increases in cost of service and maintenance revenue
was due primarily to the use of outside contractors during the quarter and nine
months ended June 30, 1999 to help provide consulting services. While the
Company expects that service and maintenance revenue will continue to grow, the
Company does not believe the cost of such revenue will increase as a percentage
of total revenue.
Operating Expenses
Product development expense for the three and nine months ended June 30,
1999 were $3.3 million and $8.2 million, respectively, versus $2.9 million and
$7.7 million for the three and nine months ended June 30, 1998 representing an
increase of 15% and 6%, respectively. As a percentage of total revenue product
development expenses was 23% and 21% respectively for the three and nine months
ended June 30, 1999 versus 25% and 24% for the three and nine months ended June
30, 1998. The increase in product development expenses was primarily
attributable to the hiring of additional product development personnel. The
decrease in product development expenses as a percentage of revenue is due
primarily to the slower growth in development expense relative to the growth in
revenue. The Company anticipates that it will continue to devote substantial
resources to product development and that product development expenses will
increase throughout fiscal 1999.
Sales and marketing expense for the three and nine months ended June 30,
1999 were $6.0 million and $17.1 million, respectively, versus $5.1 million and
$14.3 million for the three and nine months ended June 30, 1998 representing an
increase of 18% and 19%, respectively. As a percentage of total revenue, sales
and marketing expenses were 43% for the three and nine months ended June 30,
1999 versus 46% and 44% for the three and nine months ended June 30, 1998. The
increase in sales and marketing expense was primarily due to continued
investment in systems and personnel to expand the Company's sales channels and
the addition of telesales and field sales personnel. The decrease in sales and
marketing expense as a percentage of revenue is due primarily to the slower
growth in sales and marketing expense relative to the growth in revenue. While
the Company expects that sales and marketing expenses will continue to grow, the
Company does not believe such expenses will increase as a percentage of total
revenue.
General and administrative expense for the three and nine months ended June
30, 1999 were $1.3 million and $3.9 million, respectively, versus $1.1 million
and $3.2 million for the three and nine months ended June 30, 1998 representing
an increase of 24% and 23%, respectively. The increase in general and
administrative expenses were primarily due to increased staffing, investment in
infrastructure and associated expenses necessary to manage and support the
Company's growing operations.
11.
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Acquisition, relocation and goodwill amortization costs were $384,000 and
$486,000 for the three and nine months ended June 30, 1999 and $580,000 and $1.8
million for the three and nine months ended June 30, 1998. The costs incurred
during fiscal 1999 were related to the amortization of goodwill related to
NobleNet. The costs incurred during fiscal 1998 were related to the business
combination with Stingray and the move of the Company's administrative
operations to Boulder, Colorado.
Other Income, Net
The decrease in other income for the three and nine months ended June 30,
1999 versus the three and nine months ended June 30, 1998 is due primarily to a
reduction of short term investment interest income. The majority of other
income consists of interest income on the Company's short-term investments.
Income Tax Expense
The Company's effective tax rate for three and nine months ended June 30,
1999, was 35% compared to 35% and 27% for the three and nine months ended June
30, 1998 respectively. The effective rate for the nine months ended June 30,
1998 reflects the exclusion of earnings due to the Subchapter S status of
Stingray. The Company anticipates its fiscal 1999 effective tax rate will be
approximately 35% percent; however, this rate could change based on a change in
the percentage of total revenue derived from international sources.
Liquidity and Capital Resources
The increase in cash flows from operations was due primarily to an increase
in net income and changes in working capital. The Company's investing activities
consist primarily of the purchase and sale of short-term investments and
purchases of equipment. Short-term investments primarily consist of commercial
paper with original maturities of 180 days or less which are held as securities
available for sale. In addition, the company acquired NobleNet using $11.8
million of available cash. The Company believes that expected cash flow from
operations combined with existing cash and cash equivalents and short-term
investments will be sufficient to meet its cash requirements for the foreseeable
future. See "Risk Factors - Uncertainty of Future Operating Results;
Fluctuations in Quarterly Operating Results," and "-Future Acquisitions."
Uncertainty of the Effects of the Year 2000 on Computer Programs and Systems
Many currently installed computer systems and software programs were
designed to use only a two-digit date field. These date code fields will need
to accept four digit entries to distinguish 21st century dates from 20th century
dates. Until the date fields are updated, the systems and programs could fail
or give erroneous results when referencing dates following December 31, 1999.
Such failure or errors could occur prior to the actual change in century.
We are currently reviewing and testing all of our products for the
transition to the 21st century. In addition we have developed and circulated to
our customers a standard for evaluating software reliability during the century
transition and provides information on compliance with existing standards
addressing the year 2000 problem.
We have identified year 2000-related issues with five of our currently
supported products: NobleNet RPC and EZ-RPC, Tools.h++, Objective Grid, and
Objective Toolkit.
12.
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The Unix versions of NobleNet RPC and EZ-RPC prior to version v3.5 that are
licensed for evaluation purposes under a temporary license may fail to operate
if the temporary license expires in the year 2000. The operation of this
software is not affected by other termination dates, and software issued under
perpetual licenses is not affected. The abnormality relates to the license
management function of the software and has been remedied in Versions 3.5 and
above.
The Rogue Wave product Tools.h++ contains a date-related limitation that
appears in class RWTime. As implemented in all Tools.h++ versions, RWTime
permits creation of dates limited to the range of 1901 to 2037 on computer
platforms that implement 32 bit unsigned long integers. Version 8.0.0 of
Tools.h++ will eliminate this year 2037 restriction in RWTime by introducing a
new class, RWDateTime. Furthermore, in Tools.h++ v7.0.x and earlier, a two-
digit year input of `00' will be converted to the four-digit year `1900.'
Tools.h++ v7.0.3 and later introduces the macro RW_CENTURY_REQD, which limits
valid year inputs to four digits. However, all versions of Tools.h++ accept
four-digit year input.
Objective Grid version 7.0 and earlier may, under certain circumstances,
use two different algorithms to convert two-digit date input into four-digit
year input. However, as with Tools.h++, Objective Grid does accept four-digit
year inputs. This year 2000-related issue has been eliminated in the version
7.01 release of Objective Grid. Objective Toolkit versions 5.21 and later are
year 2000 compliant when used with Visual C++ versions 4.2 or later.
Although our products have and are continuing to undergo normal quality
testing procedures, there can be no assurance that these products contain all
necessary date code changes. Any system malfunctions due to the onset of the
year 2000 and any disputes with customers relating to year 2000 compliance,
including licensees of non-compliant products that we are unable to locate,
could have a material adverse effect on our business.
The Company has established a year 2000 project team to develop and
implement a comprehensive four-phase year 2000 readiness plan for its worldwide
operations relating to the Company's internal IT and non-IT systems and third
party customers, vendors and others with whom the Company does business. Phase
One (Inventory) consists of identifying all potential business disruption
problems, including those with products and systems, as well as potential
disruption from suppliers and other third parties. Phase Two (Assessment)
involves determining the Company's current state of year 2000 readiness for
those areas identified in the inventory phase and prioritizing the areas that
need to be fixed. Phase Three (Remediation) consists of programs to solve or
mitigate any identified year 2000 problems. Phase Four (Contingency) consists
of developing contingency plans to attain year 2000 readiness.
With respect to its most critical internal IT systems, consisting of
accounting, data processing and other systems, the Company has completed the
Inventory, and Assessment phases. The Remediation phase is approximately 95%
complete with an anticipated completion date of September 30, 1999. The Company
believes that its internal computer systems will be year 2000 compliant and that
the risk of major disruption from these systems due to year 2000 issues is
minimal. No system implementations will be undertaken for the sole purpose of
becoming year 2000 compliant but rather in the course of introducing new systems
and system upgrades to support the Company's recent rapid growth, including
growth through acquisitions. The cost related to year 2000 compliance involved
in system implementations is estimated at approximately $60,000.
13.
<PAGE>
With respect to non-critical IT systems, consisting primarily of security
systems, fax machines, and other miscellaneous systems, and non-IT embedded
systems, the Company initiated formal communications with its significant
suppliers and financial institutions to evaluate their year 2000 compliance
plans and state of readiness. The Company has completed the Inventory and
Assessment phases and Remediation phase is approximately 95% complete. The
Company expects to fund any remediation costs from operating cash flows and has
not established any specific reserves for those costs. The Company has not yet
incurred any material costs specifically related to becoming year 2000 compliant
in its non-critical IT and non-IT embedded systems but anticipates the cost to
be approximately $75,000. As with critical IT systems, discussed above, many of
the Company's non-critical IT systems have been, or will be, replaced or
upgraded to accommodate expanded business processes due to recent growth and
merger activity. No system implementations will be undertaken for the sole
purpose of becoming year 2000 compliant.
The above discussion regarding costs, risks and estimated completion dates
for the year 2000 is based on the Company's best estimates given information
that is currently available, and is subject to change. There can be no
assurance that actual costs will not substantially exceed the Company's
assessment due to internal year 2000 problems or year 2000 problems associated
with the Company's IT and non-IT systems and products. In addition, while the
Company believes it has achieved year 2000 compliance with respect to its
software products and critical IT systems, there could be unanticipated year
2000 related failures in such products or systems that could have a material and
adverse effect on the Company's results of operations and financial condition.
Further, there can be no guarantee that the systems of other companies on which
the Company's systems rely will be remediated in a timely manner, or that a
failure to remediate by another company, including without limitation any of the
Company's vendors, customers, or partners, or a remediation that is incompatible
with the Company's systems would not have a material adverse effect on the
Company.
Factors That May Affect Future Results
In evaluating the Company's business, prospective investors should
carefully consider the following factors in addition to the other information
presented in this report.
Uncertainty of Future Operating Results. Our future operating results are
difficult to predict due to a variety of factors, many of which are outside of
our control. These factors include:
. the demand for our products and services;
. the level of product and price competition;
. the size, type and timing of individual license transactions;
. the delay or deferral of customer implementations;
. our success in expanding our direct sales force and indirect distribution
channels;
. the timing of new product introductions and product enhancements;
. levels of international sales;
. changes in our pricing policy or that of our competitors;
. publication of opinions about us, our products and object-oriented,
component technology by industry analysts;
. our ability to retain key employees and hire new employees; and
. our ability to develop and market new products and control costs.
One or more of the foregoing factors may cause our operating expenses to be
disproportionately high during any given period or may cause our net revenue and
operating results to fluctuate
14.
<PAGE>
significantly. Based on the preceding factors, we may experience a shortfall in
revenue or earnings or otherwise fail to meet public market expectations, which
could materially adversely affect our business, financial condition and the
market price of our common stock. For example, our financial results for the
second fiscal quarter of 1998 and the third fiscal quarter of 1999 were below
the expectations of public market financial analysts. The primary factors
leading to the lower than expected results were (1) the delay of a number of
large orders, several due to industry mergers, and (2) the lingering effects of
our sales force reorganization during the fall of 1997 and the European
reorganization during the spring of 1999. After each such announcement of
financial results, the price of our common stock declined materially.
Fluctuations in Quarterly Operating Results. We generally ship orders as
received and as a result typically have little or no backlog. The lack of
significant backlog means that quarterly revenue and operating results depend
substantially on the volume and timing of orders we receive during the quarter,
which are difficult to forecast due to a number of reasons, many of which are
outside our control. Such reasons include:
. lack of a reliable means to assess overall customer demand;
. historically we have earned a substantial portion of our revenue in the
last weeks, or even days, of each quarter;
. larger customer orders are subject to long sales cycles and are frequently
delayed; and
. our service and maintenance revenue tends to fluctuate as consulting
contracts are undertaken, renewed, completed or terminated.
We base operating expenses on anticipated revenue trends and a high
percentage of these expenses are relatively fixed. As a result, a delay in the
recognition of revenue from a limited number of transactions could cause
significant variations in operating results from quarter to quarter and could
lead to significant losses. As a result of these factors, operating results and
growth rates for any particular quarter or other fiscal period may not be
indicative of future operating results. Furthermore, fluctuations in our
quarterly operating results will likely result in volatility in the price of our
Common Stock in the future.
Management of Growth. Our business has grown rapidly in the recent years.
This growth has placed a significant strain on our management systems and
resources. To manage future growth we must continue to (1) improve our
financial and management controls, reporting systems and procedures on a timely
basis and (2) expand, train and manage our employee work force. If we fail to
manage our growth effectively, our business, financial condition and results of
operations could be materially and adversely affected.
For example, the acquisition of Stingray Software, Inc. resulted in our
product development team being distributed in four separate sites across the
country. The difficulty of managing this distribution contributed to our
decision during 1998 to close two of our four development sites. The closures
resulted in one-time charges of approximately $580,000 and caused disruption to
our development efforts. In addition, in 1998 we moved our administrative
operations from Corvallis, Oregon, to Boulder, Colorado. This move resulted in
the distribution of our senior management team, which may make managing our
operations in the future more difficult. More recently, we completed the
acquisition of NobleNet in the Boston, Massachusetts area, and established a
development team in Boulder, Colorado, again adding to the number of development
sites and distribution of senior management.
15.
<PAGE>
Dependence on Emerging Market for C++, Visual C++/MFC and Java. Our
product lines are designed for use in object-oriented software application
development, specifically the C++, Visual C++/MFC and Java programming
languages. To date, a substantial majority of our revenue has been attributable
to sales of products and related maintenance and consulting services related to
C++ programming and development. We believe that while the market for object-
oriented technology is growing, our growth depends upon broader market
acceptance of object-oriented technology. Object-oriented programming languages
are very complex and the number of software developers using them is relatively
small compared to the number of developers using other software development
technology. Our financial performance will depend in part upon continued growth
in object-oriented technology and markets and the development of standards that
our products address. There can be no assurance that the market will continue
to grow or that we will be able to respond effectively to the evolving
requirements of the market.
We have also developed several products for use in the Java market. We
have spent and will continue to devote resources to the development of new and
enhanced products that address the Java market. There can be no assurance that
we will be successful in marketing our Java products or that the market for Java
products will grow. If the Java market fails to grow, or grows more slowly than
we currently anticipate, our business could be adversely affected.
Competition. Our products target the emerging market for network-based
applications, C++, Visual C++/MFC, Visual Basic/ActiveX and Java software parts
and programming tools. Direct competitors in the network based application and
C++ market include Microsoft (with its Microsoft Foundation Classes, "MFC"),
IBM, ILOG, IONA Technologies, BEA Systems, and Inprise and several privately
held companies. Microsoft is a particularly strong competitor due to its large
installed base and the fact that it bundles its MFC library with its own and
other C++ compilers. Microsoft may decide in the future to devote more
resources to or broaden the functions of MFC in order to address and more
effectively compete with the functionality of our products. We face direct
competition in the Java market from Inprise, JavaSoft (a business unit of Sun
Microsystems), Microsoft, Sybase, Symantec and other companies for our Java
products and expect to face significant competition in the future from such
companies with respect to other Java products we may introduce.
Software applications can also be developed using software parts and
programming tools in environments other than C++ or Java. Indirect competitors
with such offerings include Microsoft (with its ActiveX technology), Inprise,
Oracle, and Powersoft (a subsidiary of Sybase). Many of these competitors have
significantly greater resources, name recognition and larger installed bases of
customers than we do. In addition, several database vendors, such as Informix,
Oracle and Sybase are increasingly developing robust software parts for
inclusion with their database products and may begin to compete with us in the
future. These potential competitors have well-established relationships with
current and potential customers and have the resources to enable them to more
easily offer a single vendor solution. Like our current competitors, many of
these companies have longer operating histories, significantly greater resources
and name recognition and larger installed bases of customers than we do. As a
result, these potential competitors may be able to respond more quickly to new
or emerging technologies and changes in customer requirements, or to devote
greater resources to the development, promotion and sale of their products than
we may.
We also face competition from systems integrators and our customers'
internal information technology departments. Many systems integrators possess
industry specific expertise that may enable them to offer a single vendor
solution more easily, and already have a reputation among potential customers
for offering enterprise-wide solutions to software programming needs. Systems
integrators may market competitive software products in the future.
16.
<PAGE>
There are many factors that may increase competition in the market for
object-oriented software parts and programming tools, including (1) entry of new
competitors, (2) alliances among existing competitors and (3) consolidation in
the software industry. Increased competition may result in price reductions,
reduced gross margins or loss of market share, any of which could materially
adversely affect our business, operating results and financial condition. If we
cannot compete successfully against current and future competitors or overcome
competitive pressures, our business, operating results and financial condition
may be adversely affected.
Risk Associated with New Versions and New Products; Rapid Technological
Change. The software market in which we compete is characterized by (1) rapid
technological change, (2) frequent introductions of new products, (3) changing
customer needs and (4) evolving industry standards. To keep pace with
technological developments, evolving industry standards and changing customer
needs, we must support existing products and develop new products. We may not
be successful in developing, marketing and releasing new products or new
versions of our products that respond to technological developments, evolving
industry standards or changing customer requirements. We may also experience
difficulties that could delay or prevent the successful development,
introduction and sale of these enhancements. In addition, these enhancements
may not adequately meet the requirements of the marketplace and may not achieve
any significant degree of market acceptance. If release dates of any future
products or enhancements are delayed, or if these products or enhancements fail
to achieve market acceptance when released, our business, operating results and
financial condition could be materially and adversely affected. In addition,
new products or enhancements by our competitors may cause customers to defer or
forgo purchases of our products, which could have a material adverse effect on
our business, financial condition and results of operations.
Risks of Future Acquisitions. In the second fiscal quarter of 1998 we
completed a business combination with Stingray Software, Inc. Completing the
acquisition and commencing the integration of the acquired business required
significant attention from our management and caused disruption to our ongoing
business. We believe that such disruption had a material adverse effect on the
Company's financial results for the second fiscal quarter of 1998. In the
second fiscal quarter of 1999, we completed the acquisition of NobleNet, Inc.
We believe that the longer sales cycle and product learning curve had a material
adverse effect on our financial results for the third fiscal quarter of 1999.
In addition, the continued integration of these acquisitions may result in
material adverse results in future quarters.
We frequently evaluate strategic opportunities available to us and may in
the future pursue additional acquisitions of complementary technologies,
products or businesses. Future acquisitions of complementary technologies,
products or businesses will result in the diversion of management's attention
from the day-to-day operations of our business and may include numerous other
risks, including difficulties in the integration of the operations, products and
personnel of the acquired companies. Future acquisitions may also result in
dilutive issuance of equity securities, the incurrence of debt and amortization
expenses related to goodwill and other intangible assets. Our failure to
successfully manage future acquisitions may have a material adverse effect on
our business and financial results.
Risks Associated with International Operations. A significant portion of
our revenues is derived from international sources. To service the needs of
these companies, we must provide worldwide product support services. We have
expanded, and intend to continue expanding, our international operations and
enter additional international markets. This will require significant
management attention and financial resources that could adversely affect our
operating margins and earnings. We may not be able to maintain or increase
international market demand for our products. If we do not, our international
17.
<PAGE>
sales will be limited, and our business, operating results and financial
condition could be materially and adversely affected.
Our international operations are subject to a variety of risks, including
(1) foreign currency fluctuations, (2) economic or political instability, (3)
shipping delays and (4) various trade restrictions. Any of these risks could
have a significant impact on our ability to deliver products on a competitive
and timely basis. Significant increases in the level of customs duties, export
quotas or other trade restrictions could also have an adverse effect on our
business, financial condition and results of operations. In situations where
direct sales are denominated in foreign currency, any fluctuation in foreign
currency or the exchange rate may adversely affect our business, financial
condition and results of operations.
Dependence Upon Key Personnel. Our future performance depends in
significant part upon the continued service of our key technical, sales and
senior management personnel, none of whom is bound by an employment agreement.
We believe that the technological and creative skills of our personnel are
essential to establishing and maintaining a leadership position, particularly in
light of the fact that our intellectual property, once sold to the public
market, is easily replicated. The loss of the services of one or more of our
executive officers or key technical personnel would have a material adverse
effect on our business. In particular, the services of Thomas Keffer and
Michael Scally, the Company's Chairman of the Board, and President and Chief
Executive Officer, respectively, would be difficult to replace. We have key
person life insurance policies in the amount of $2.0 million each for Dr. Keffer
and Mr. Scally.
Our future success also depends on our continuing ability to attract and
retain highly qualified technical, sales and managerial personnel. In the past,
we have experienced some difficulty in attracting key personnel. Competition
for such personnel is intense, and there can be no assurance that we can retain
key employees or that we can attract, assimilate or retain other highly
qualified personnel in the future.
Variability of Sales Cycles. We distribute our products through two
different direct sales channels, a telesales force and a field sales force, each
of which is subject to a variable sales cycle. Products sold by our telesales
force may be sold after a single phone call or may require several weeks of
education and negotiation before a sale is made. As such, the sales cycle
associated with telesales typically ranges from a few days to two months. On
the other hand, the purchase of products from our field sales force is often an
enterprise-wide decision and may require the sales person to provide a
significant level of education to prospective customers regarding the use and
benefits of our products. For these and other reasons, the sales cycle
associated with the sale of our products through our field sales force typically
ranges from two to six months and is subject to a number of significant delays
over which we have little or no control. As a result, quarterly revenue and
operating results can be variable and are difficult to forecast, and we believe
that period-to-period comparisons of quarterly revenue are not necessarily
meaningful and should not be relied upon as an indicator of future revenue.
Proprietary Rights, Risks of Infringement and Source Code Release. We rely
primarily on a combination of copyright, trademark and trade secret laws,
confidentiality procedures and contractual provisions to protect our proprietary
rights. We also believe that factors such as the technological and creative
skills of our personnel, new product developments, frequent product
enhancements, name recognition and reliable product maintenance are essential to
establishing and maintaining a technological leadership position. We seek to
protect our software, documentation and other written materials under trade
secret and copyright laws, which afford only limited protection. Despite our
efforts to protect our proprietary rights, unauthorized parties may attempt to
copy aspects of our products or to obtain and use information that we regard as
proprietary. The nature of many of our products requires the release of the
source code to all customers. As such, policing unauthorized use of our
products is
18.
<PAGE>
difficult, and while we are unable to determine the extent to which piracy of
our products exists, software piracy can be expected to be a persistent problem.
In addition, the laws of some foreign countries do not protect our proprietary
rights as fully as do the laws of the United States. There can be no assurance
that our means of protecting its proprietary rights in the United States or
abroad will be adequate or that competition will not independently develop
similar technology.
Although we do not believe that we are infringing any proprietary rights of
others, third parties may claim that we have infringed their intellectual
property rights. Furthermore, former employers of our former, current or future
employees may assert claims that such employees have improperly disclosed to us
the confidential or proprietary information of such former employers. Any such
claims, with or without merit, could (1) be time consuming to defend, (2) result
in costly litigation, (3) divert management's attention and resources, (4) cause
product shipment delays, and (5) require us to pay money damages or enter into
royalty or licensing agreements. A successful claim of intellectual property
infringement against us and our failure or inability to license or create a
workaround for such infringed or similar technology may materially and adversely
affect our business, operating results and financial condition.
Uncertainty of the Effects of the Year 2000 on Computer Programs and
Systems. Many currently installed computer systems and software programs were
designed to use only a two-digit date field. These date code fields will need
to accept four digit entries to distinguish 21st century dates from 20th century
dates. Until the date fields are updated, the systems and programs could fail
or give erroneous results when referencing dates following December 31, 1999.
Such failure or errors could occur prior to the actual change in century.
We are currently reviewing and testing all of our products for the
transition to the 21st century. In addition we have developed and circulated to
our customers a standard for evaluating software reliability during the century
transition and provides information on compliance with existing standards
addressing the year 2000 problem.
Although our products have and are continuing to undergo normal quality
testing procedures, there can be no assurance that these products contain all
necessary date code changes. For example, our testing has identified year 2000-
related issues in five of our currently supported products: NobleNet RPC and EZ-
RPC, Tools.h++, Objective Grid, and Objective Toolkit. While we have eliminated
these year 2000-related issues in current releases, additional problems may be
identified as we complete our year 2000 readiness plan. Any system malfunctions
due to the onset of the year 2000 and any disputes with customers relating to
year 2000 compliance, including licensees of non-compliant products that we are
unable to locate, could have a material adverse effect on our business.
While our current best estimates of the cost and risks posed by the year
2000 are that the year 2000 will not result in either material costs or
liabilities, these estimates are based on information that is currently
available, and is subject to change. There can be no assurance that actual
costs will not substantially exceed our assessment due to internal year 2000
problems or year 2000 problems associated with our IT and non-IT systems and
products. In addition, while we believe that we have achieved year 2000
compliance with respect to many of our software products and critical IT
systems, there could be unanticipated year 2000 related failures in such
products or systems that could have a material and adverse effect on our
business, results of operations and financial condition. Further, there can be
no guarantee that the systems of other companies on which our systems rely will
be remediated in a timely manner, or that a failure to remediate by another
company, including without limitation any of our vendors, customers, or
partners, or a remediation that is incompatible with our systems would not have
a material adverse effect on us.
19.
<PAGE>
Product Liability. Our license agreements with our customers typically
contain provisions designed to limit our exposure to potential product liability
claims. It is possible, however, that the limitation of liability provisions
contained in our license agreements may not be effective under the laws of
certain jurisdictions. A successful product liability claim brought against us
could have a material adverse effect upon our business, operating results and
financial condition.
Risk Of Product Defects. Software products frequently contain errors or
failures, especially when first introduced or when new versions are released.
Also, new products or enhancements may contain undetected errors, or "bugs", or
performance problems that, despite testing, are discovered only after a product
has been installed and used by customers. Errors or performance problems could
cause delays in product introduction and shipments or require design
modifications, either of which could lead to a loss in revenue. Our products
are typically intended for use in applications that may be critical to a
customer's business. As a result, we expect that our customers and potential
customers have a greater sensitivity to product defects than the market for
software products generally. Despite extensive testing by us and by current and
potential customers, errors may be found in new products or releases after
commencement of commercial shipments, resulting in loss of revenue or delay in
market acceptance, diversion of development resources, the payment of monetary
damages, damage to our reputation, or increased service and warranty costs, any
of which could have a material adverse effect upon our business and results of
operations.
ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risk exposure is the potential loss arising from
changes in interest rates and its impact on short-term investments and foreign
currency exchange rate fluctuations.
As of June 30, 1999, short-term investments of $16.9 million were held
available for sale with acquired maturities of less than 180 days. Short-term
investments consist primarily of high credit and highly liquid corporate
commercial paper and money market funds. A substantial reduction in overall
interest rates would not have a material affect on the financial position of the
Company.
Exposure to variability in foreign currency exchange rates is managed
primarily through the use of natural hedges, whereby funding obligations and
assets are both managed in the local currency. In addition, the Company will
from time to time enter into foreign currency exchange agreements to manage its
exposure arising from fluctuating exchange rates, primarily in the German mark.
The Company does not enter into any derivative transactions for speculative
purposes. The sensitivity of earnings and cash flows to variability in exchange
rates is assessed by applying an appropriate range of potential rate
fluctuations to the Company's assets, obligations and projected results of
operations denominated in foreign currencies. Based on the Company's overall
foreign currency rate exposure at June 30, 1999, movements in foreign currency
rates would not materially affect the financial position of the Company. As of
June 30, 1999, the Company had outstanding short-term forward exchange contracts
to exchange Euros for U.S. dollars in the amount of $500,000.
20.
<PAGE>
PART II - OTHER INFORMATION
Item 6. - EXHIBITS AND REPORTS ON FORM 8-K
2.1(1) Agreement and Plan of Reorganization between Registrant, Inmark
Development Corporation and RW Acquisitions, Inc., dated as of September
19, 1995.
2.2(1) Agreement and Plan of Merger between the Registrant and Rogue Wave
Software, Inc., an Oregon corporation.
2.3(3) Agreement and Plan of Merger and Reorganization among Rogue Wave
Software, Inc., a Delaware corporation, SR Acquisition Corp., a North
Carolina corporation, Stingray Software, Inc., a North Carolina corporation
and the shareholders of Stingray Software, Inc., dated as of January 19,
1998.
2.4(4) Articles of Merger and Plan of Merger dated February 27, 1998,
filed with the Secretary of State of North Carolina on February 27, 1998.
2.5(6) Agreement and Plan of Merger and Reorganization among Rogue Wave
Software, Inc., a Delaware corporation, NN Acquisition Corp., a Delaware
corporation, NobleNet, Inc., a Delaware corporation and Steve Lemmo, as
agent for the stockholders of NobleNet, dated as of February 11, 1999.
2.6(6) Certificate of Merger and Plan of Merger dated March 1, 1998,
filed with the Secretary of State of the State of Delaware on March 1,
1999.
3.1(2) Amended and Restated Certificate of Incorporation of Rogue Wave
Software, Inc., a Delaware corporation.
3.2(1) Bylaws of Rogue Wave Software, Inc., a Delaware corporation.
4.1(1) Reference is made to Exhibits 3.1 and 3.2.
4.2(1) Specimen Stock Certificate.
4.3(1) Amended and Restated Investors' Rights Agreement between the
Registrant and certain investors, dated November 10, 1995, as amended June
27, 1996.
10.1(1) Registrant's 1996 Equity Incentive Plan.
10.2(1) Registrant's Employee Stock Purchase Plan.
10.3(1) Form of Indemnity Agreement entered into between the Registrant
and its officers and directors.
10.4(1) Lease Agreement between Registrant and the State of Oregon, dated
May 1, 1996.
10.5(1) Lease Agreement between the Registrant and the Landmark, dated
April 22, 1996.
21.
<PAGE>
10.6(1) Loan and Security Agreement between the Registrant and Silicon
Valley Bank, dated October 16, 1996.
10.7(1) Collateral Assignment, Patent Mortgage and Security Agreement
between the Registrant and Silicon Valley Bank, dated October 16, 1996.
27 Financial Data Schedule.
(1) Filed as an Exhibit to the Registrant's Registration Statement on Form
SB-2, as amended (No. 333 -13517)
(2) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q
for the quarter ended December 31, 1996.
(3) Filed as Exhibit 2.1 to the Registrant's Form 8-K dated February 27,
1998 and filed on March 9, 1998.
(4) Filed as Exhibit 2.2 to the Registrant's Form 8-K dated February 27,
1998 and filed on March 9, 1998.
(5) Filed as Exhibit 4.1 to the Registrant's Form 8-K dated February 27,
1998 and filed on March 9, 1998.
(6) Filed as an exhibit to the Registrant's Form 8-K dated March 1, 1999
and filed on March 9, 1999.
Items 1, 2, 3, 4, and 5 are not applicable and have been omitted.
22.
<PAGE>
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.
ROGUE WAVE SOFTWARE, INC.
(Registrant)
Date: August 16, 1999 /s/ ROBERT M. HOLBURN, JR.
----------------------------------------
ROBERT M. HOLBURN, JR.
CHIEF FINANCIAL OFFICER
23.
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