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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-26170
Eagle Point Software Corporation
(Exact name of registrant as specified in its charter)
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Delaware 42-1204819
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
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4131 Westmark Drive, Dubuque, Iowa 52002-2627, (319) 556-8392
(Address of principal executive offices,including zip code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of Class)
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_______
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_].
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of September 20, 2000 was $9,945,237. This calculation does not
reflect a determination that persons are affiliates for any other purposes.
Number of shares of common stock outstanding as of September 20, 2000:
4,857,691.
Documents Incorporated by Reference:
Part III - Portions of the registrant's definitive proxy statement to be issued
in conjunction with registrant's annual stockholders' meeting to be held on
December 6, 2000 (the "Proxy Statement").
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PART I
Item 1. Business.
Eagle Point Software Corporation (the "Company" or "Eagle Point") is a
developer and marketer of application software for use by professionals in the
architecture, engineering, and construction ("AEC") industries. The Company's
product line includes software modules that can be used by civil engineers,
surveyors, architects, home builders, structural engineers, landscape architects
and hydrologists to automate various design, analysis, drafting and engineering
functions. The Company focuses on developing and marketing technologically
advanced software application products that are designed to provide AEC
professionals with the functionality associated with high-end proprietary CAD
systems at a price suitable for more economical desktop systems. Most of the
Company's products have been designed for use in conjunction with either
AutoCAD, MicroStation, or IntelliCAD general purpose computer-aided design
("CAD") drafting software tools developed by Autodesk, Inc. ("Autodesk"),
Bentley Systems, Inc. ("Bentley Systems") and the IntelliCAD Technology
Consortium ("ITC"), respectively. Accordingly, the Company's business and
financial results are linked to the continued market acceptance of AutoCAD,
MicroStation and IntelliCAD. See "Risk Factors - Dependence on Autodesk,
IntelliCAD and Bentley Systems."
The Company, originally incorporated in Iowa in 1983, reincorporated
in Delaware in May, 1995. In June, 1995 the Company completed an initial public
offering of its Common Stock, $.01 par value ("Common Stock"). In January, 1995
the Company acquired substantially all of the assets and business and assumed
certain of the liabilities of LANDCADD, Inc. ("LANDCADD"), a Colorado-based
developer of software applications for landscape architecture and irrigation
design (the "LANDCADD Acquisition"). In March, 1995 the Company acquired certain
assets of Facility Mapping Systems, Inc. ("FMS"), a California-based developer
of computer-aided pre-design software applications for planning and managing
parcels of land, streets, sewer systems, water systems, lighting, buildings,
electrical systems, natural gas systems, land use planning, telephone systems,
census information or analysis (the "FMS Acquisition"). In November, 1995 the
Company merged with ECOM Associates, Inc.("ECOM"), a Wisconsin-based developer
of software applications for structural engineers (the "ECOM Merger"). In July,
1996 the Company acquired substantially all of the assets of Computer Integrated
Building Corporation ("CIBC"), a California-based developer of software
applications for home building professionals (the "CIBC Acquisition"). In
December, 1999 the Company acquired substantially all of the assets of Surveyors
Module International, LLC ("SMI"), a Tennessee based developer of software
applications for mobile field data collection (the "SMI Acquisition"). Unless
otherwise indicated, all references herein to the "Company" refer to Eagle Point
Software Corporation and its predecessors.
The AEC Software Market
The Company's software products are principally designed for use by
professionals in the AEC industries. These professionals use AEC-related
software in a variety of applications, including: automated mapping; facilities
management; plant and power design, pre-design planning; asset management; civil
engineering/surveying; architecture and building design; hydrology/hydraulics;
landscape; structural engineering; and construction.
Historically, design and drafting tasks were accomplished manually.
In order to reduce the costs and time necessary to complete projects, however,
such tasks have become increasingly automated. This automation was initially
provided by several large companies that marketed expensive integrated
proprietary hardware and software solutions directly to large users. However,
the widespread availability of increasingly powerful and inexpensive desktop
personal computers and workstations, together with the continued development of
open-architecture general purpose CAD software, has resulted in rapid acceptance
of desktop based systems. The demand for these products has come both from
large users, who have generally found such systems to be more cost effective
than proprietary
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systems, as well as from many smaller and mid-sized firms and governmental
agencies that previously had been unable to justify the cost of a proprietary
system. This trend among users to seek lower cost alternatives to proprietary
systems has particularly benefited suppliers of open-architecture CAD-based
graphic engines, such as AutoCAD, MicroStation, and IntelliCAD.
The market for desktop AEC application software is highly fragmented,
with over 100 companies estimated to be offering some form of AEC software
application product. These companies range from a few large firms such as
Autodesk and its subsidiary, Softdesk, Inc. offering a wide selection of
products and having substantial financial and marketing resources, to numerous
small entities offering only a few specialized products and having limited
financial and marketing capabilities.
Market for the Company's Products; Customers
The Company has traditionally targeted the segment of the AEC market
consisting of medium-sized consulting, engineering, architectural and
construction firms of 10 to 50 employees, as well as governmental agencies in
cities and counties with fewer than 100,000 people. The typical selling cycle
to this segment of the market is approximately 90 to 180 days.
The Company, to a lesser extent, has also focused resources on serving
the segments of the AEC market consisting of large organizations, such as
FORTUNE 1000 companies, large engineering and consulting firms and larger
city/state/federal government agencies. The selling cycle to large-sized
organizations is typically longer, ranging from 6 months to 3 years. As large
organizations increasingly focus on lower cost software solutions, the Company
continues to focus more resources and personnel to market products to this
market segment.
Small organizations in the AEC market, which generally consist of
consulting, engineering and architectural firms with fewer than 20 employees
such as, home builders, colleges and universities, contractors and specific in-
house departments of larger organizations, typically require a limited set of
application software products. Historically, because a large portion of the
Company's products required the use of AutoCAD, MicroStation or IntelliCAD, the
Company did not devote significant marketing efforts on serving this category of
users. However, the Company has to a lesser extent, devoted resources toward
penetrating this market segment as many of the Company's products are now
available for use in a stand-alone environment.
International. The Company distributes its products internationally
primarily through a network of over 50 resellers located in more than 50
countries. Currently, most of the Company's products distributed
internationally are in English. The Company believes that the international
distribution of its products will be enhanced by the translation of its products
into local languages and the incorporation of local engineering regulations and
requirements. The Company has translations of various products into Japanese,
Korean, Spanish, German, Russian and French. Additionally, other translations of
various products are currently under way and the Company anticipates that an
increasing number of its products may be translated into foreign languages,
contingent upon economic feasibility, in the future to enhance their appeal to
international customers. At this time the Company does not have any
international offices. The Company's international revenues (excluding Canada)
were $810,000 in fiscal 2000 or approximately 4.6% of the Company's revenues.
The Company's international revenues were adversely impacted by the poor
economic conditions of those regions of the world where the Company's product
are most widely distributed, namely the Asia-Pacific and Latin American regions.
The Company believes that the increased use of general purpose
drafting software worldwide creates opportunities for the Company to increase
the portion of its revenues derived from international markets. The
international portion of the Company's business is subject to a number of
inherent risks, including difficulties in opening and managing foreign offices,
establishing channels of distribution, establishing the credit worthiness of
foreign customers, the collection of outstanding
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accounts, localizing software to meet engineering regulations and requirements,
translating products into foreign languages, the lack of control over
fluctuations in the value of foreign currencies, import/export duties and
quotas, and unexpected regulatory, economic or political changes in foreign
markets. See "Risk Factors -- Foreign Operations."
Products
The Company's products are used for a number of diverse applications
including: Civil Engineering/Surveying; Building Design and Construction;
Hydrology/Hydraulics; Landscape Architecture; and Structural Engineering. Many
of the Company's products are integrated for use with one another and operate on
multiple CAD environments, including stand-alone. This integration enables
users to easily add new modules to their existing Eagle Point system. In
addition, several of the Company's products include a similar graphical user
interface, which makes it easier for users to learn to use additional Eagle
Point products. Suggested list prices for the Company's products range from
approximately $95 to $4,995 per module, although many of the Company's products
are sold directly by the Company at prices less than their suggested list
prices.
Historically, to facilitate additional sales of its software
application products, the Company resold AutoCAD and IntelliCAD. The Company
was notified by Autodesk, the manufacturer of AutoCAD, that as of January 31,
1998, the Company would no longer be allowed to resell AutoCAD. In July, 1999
Visio announced that by the end of 1999 they were no longer going to offer a
commercial version of IntelliCAD through Visio, but rather create a non-profit
open source consortium and offer the IntelliCAD product and source code free to
end-users through the consortium. The Company may provide its own commercial
version of IntelliCAD via the consortium, however there are no assurances that
the Company will actually provide a commercial version or if it does offer a
commercial version, that it will be accepted by the market. See "Risk Factors -
- Dependence on Autodesk, IntelliCAD, and Bentley Systems;--Competition" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Overview."
Civil Engineering/Surveying. Through the integration of the surveying
modules with the civil engineering design modules, users are able to gather
surveying data in the field electronically, download the data to the office,
complete the design and/or analysis, develop detailed construction documents and
upload the final design information to electronic surveying equipment for
construction staking purposes. Typical projects for which the Civil
Engineering/Surveying product series are used include the design/analysis of
road, railroads, airports, sites, subdivisions and landfills.
Building Design and Construction. The Building Design and
Construction product series can be used by architects and home builders to
design homes and buildings. Walls, windows, doors, floors and roofs, along with
internal utilities and fixtures, can be modeled to allow the user to develop
several design variations. Through the use of real time simulation features,
the building owner can then "walk through" the building to help in selecting the
favored design. Once selected, the designer can then complete final
construction documents and automatically estimate the building materials
necessary in order to prepare for the bidding and construction phase of the
project. A portion of the Building Design and Construction product line was
acquired by the Company in 1996 in connection with the CIBC Acquisition.
Mobile Field Data Collection and Stake Out. The mobile field data
collection product series is used by surveyors, civil engineers and construction
professionals to gather and analyze legal boundaries, topographic data and to
perform construction staking. These tasks must be performed whenever land
ownership is transferred, on all development projects, and infrastructure
projects such as subdivisions development, roads, airports, commercial buildings
and on a lesser degree on residential construction, landscape projects,
geologist and mapping professionals to map assets (utilities, power companies,
etc.). The entire mobile field data collection product line was acquired by the
Company in,
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December, 1999 in connection with the SMI Acquisition.
Hydrology/Hydraulics. The Hydrology/Hydraulics product series aids
users in designing and/or analyzing sewer systems, stream flow and surface water
run-off. Three dimensional ground terrain models developed through the Civil
Engineering/Surveying product series are used in conjunction with
Hydrology/Hydraulics products to develop an integrated model of the entire
hydrology or hydraulic project. This integrated model is then used to design
new storm or sanitary sewer networks including pipe sizes, flow line elevations
and hydraulic grade lines. Additionally, stream flows can be analyzed to
determine the flooding impact upstream from newly-constructed bridges or
culverts.
Landscape Architecture. The Landscape Architecture product series is
used by landscape architects, landscape contractors, nurseries, and government
planners to develop plans for plantings, park layouts, green zones and
irrigation systems, as well as analysis for site visibility, solar potential,
slope stability and other factors to determine development suitability and
environmental constraints. These modules provide the user with a database of
over 2,000 plants from every climactic zone around the world complete with
statistics which allow for complete growth simulation. Once the landscape plan
is modeled, the planner or owner can then "walk around" the newly and/or post-
growth plantings to view the overall aesthetics of the site. The Landscape
Architecture product line was acquired by the Company in 1995 in connection with
the LANDCADD Acquisition.
Structural Engineering. The Structural Engineering products series
can be used by structural engineers, architects and other building
professionals. Modules are designed to work independently or in concert with
one another and are classified under standard structural design disciplines.
Both structural analysis and design calculations may be performed for a variety
of materials including structural steel, reinforced concrete, aluminum, and a
variety of timber based products. A comprehensive 3-D finite element analysis
module is also integrated within the system, along with a series of foundation
design programs. The user inputs the geometry, material and connectivity data
into the system for it to perform the structural analysis and design
calculations. The Structural Engineering product line was acquired by the
Company in 1995 in conjunction with the ECOM Merger.
Sales and Marketing
The Company markets and sells its products in the United States and
Canada primarily through the use of direct response marketing, Internet based
marketing, sales seminars, trade shows and advertising designed to generate
sales leads that can be pursued by the Company's in-house telesales force which
consisted of 69 professionals at June 30, 2000.
The Company believes that the use of telesales professionals provides
competitive advantages over those competitors which principally rely upon
resellers. The Company believes that its use of a telesales force allows it to
develop a stronger ongoing relationship with the customer than could be achieved
through the use of resellers and provides the Company a cost-effective channel
of distribution for its products. In addition, the Company's sales
professionals have the ability to offer certain customers trade-in or volume
discounts, extended free trials and other flexible pricing arrangements designed
to introduce the customer to Eagle Point products in the hope of increasing
sales to that customer in the future. The Company believes that it generally
has greater incentive than a reseller to invest in a longer selling cycle by
providing flexible initial pricing. As the Company expands its product
offerings through the addition or acquisition of new modules, the Company's
direct knowledge of its customers' existing software systems and applications
needs provide the Company with valuable information to identify cross-selling
opportunities. The Company believes that such information is not generally
available to software companies which rely on resellers to market their
products. In addition, the Company believes that a significant number of its
product enhancements released in recent years were initially developed as a
result of communications with customers regarding their specific software
requirements.
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Initial sales leads are primarily developed through direct mail
marketing, Internet based marketing and trade publication advertising, public
relations and promotional campaigns undertaken by the Company, as well as
through participation by the Company in various trade shows and sales and
training seminars. The Company has also been successful in placing its products
in various colleges, universities and secondary schools at reduced cost as a
means of increasing familiarity with its products among young professionals in
the AEC market. The Company, while maintaining a general database with over
280,000 names, also maintains a registered user data base which facilitates the
Company's ability to communicate periodically with current customers and to
pursue repeat sales and cross-selling opportunities.
Once sales leads are developed, the Company's telesales professionals
track such leads through an automated lead tracking system. A typical sales
cycle for the Company's products involves numerous communications between the
Company's telesales professionals and the potential customer. Frequently, the
potential customer is furnished a demonstration copy of the Company's product
and certain product literature, and invited to contact current customers to
discuss the product or observe its use. Potential customers may also be invited
to attend product demonstration seminars.
Training, Support, and Maintenance
The Company believes that providing its customers with direct and
value-added training, support, and maintenance services helps ensure that
customers obtain the maximum benefits offered by its products. The Company
believes that its training, support, and maintenance programs also enhance the
Company's relationships with customers and help to differentiate the Company
from CAD-based application developers that do not offer direct training, support
and maintenance. Moreover, the Company believes that the demand by users for
various training, support, and maintenance services provides the Company with
incremental revenue opportunities.
All purchasers of the Company's software are provided 60 days of
product support without charge. For support after the 60-day period, customers
can elect to obtain ongoing support on a one-year support contract basis, an as-
used fee basis, or a part of a one, two or three year VIP support and
maintenance contract. The Company also conducts training seminars to educate
customers on the functionality of the Company's products. For a fee, customers
may discuss products with, and receive technical assistance directly from, the
Company's in-house professionals who participated in the development of such
products. The Company believes that such programs help to foster customer
loyalty and allow the Company to develop product enhancements that can be
marketed to other users.
Approximately 30% of the Company's revenues for fiscal 2000 were
attributable to customer training, support, and maintenance services.
Product Development
The Company offers a broad range of products which are designed to
keep pace with technological developments in the marketplace and address the
increasingly sophisticated needs of its customers. A majority of the modules
offered were added to the Company's product line as a result of acquisitions by
the Company of products, businesses or technologies. Most of the Company's
products acquired through acquisitions were integrated into the Company's
product line and further enhanced by the Company's development staff.
The Company releases enhanced versions of its software modules on an
ongoing basis, and also typically introduces new product offerings each year.
The Company's software modules make use of leading development tools, including
Visual C and Visual Basic. The Company works closely with its existing and
prospective customers to determine their requirements and to design enhancements
and new products to meet their needs. Each product development project begins
with a review of the existing customer requests, which are derived from a
database generated by the Company's various
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customer support programs, interviews with certain key customers and competitive
analyses. Product specifications for the development project are then generated,
a development team is assembled, and a detailed development and release schedule
is produced.
Competition
Competition in the AEC market has been intense and continues to
increase. In March of 1997, Autodesk, who was primarily a CAD software
provider, acquired Softdesk, Inc. ("Softdesk"), an application solutions
provider and a principal competitor to the Company. In light of Autodesk's
cancellation of the Company's ability to resell AutoCAD, it appears that
Autodesk and Softdesk together have increased competitive pressures and may
continue to do so. The Company's inability to resell AutoCAD will have an
adverse effect on the Company's revenues and gross profit, and may also have an
adverse effect on the Company's ability to sell its own products. In addition,
the inability to market itself as an authorized reseller of AutoCAD may hurt the
perception of the Company in the marketplace. In 1996 Bentley Systems made an
equity investment of an undisclosed amount in GEOPAK Corporation, an application
solutions provider and competitor to the Company. In April of 2000 Bentley
Systems announced that it was acquiring the civil engineering software line from
Intergraph Corporation, an applications solution provider and competitor to the
Company.
The Company currently faces competition from two basic types of
competitors. The first category includes companies principally offering
integrated proprietary CAD software and application solutions. The primary
competitors within this group are Autodesk, Intergraph Corporation, Bentley
Systems and a number of mid-sized companies serving various foreign markets.
Most of the Company's competitors within this group have significantly greater
financial and marketing resources than the Company.
To a lesser extent, the Company competes with the second category of
competitors which includes companies which offer AEC application software
products, many of which are AutoCAD, MicroStation, or IntelliCAD-based, similar
to products offered by the Company. The primary competitor in this category was
Softdesk, which, as a subsidiary of Autodesk, offers a broad line of software
applications for the AEC market. Net Guru, GEOPAK, and Tripod Data Systems as
well as a number of smaller companies, also serve certain target markets within
the AEC market.
As previously stated, two of the sources of competition for the
Company are Autodesk, the developer of AutoCAD, and Bentley Systems, the
developer of MicroStation. Approximately 26.4% of the Company's net revenues
for fiscal 1999 were related to the sale of the Company's software products
designed for use with AutoCAD. In addition, 3.9% of the Company's net revenues
during such period were derived from the sale of the Company's software products
designed for use with MicroStation.
The Company believes that the principal basis for competition in the
AEC market are product functionality, product reliability, price/performance
characteristics, ease of product use, availability of products on popular
computer platforms, the ability to integrate the product with other
applications, user support, documentation and training, distribution networks,
size of installed client base and corporate reputation. No assurance can be
given that the Company will be able to compete successfully against current and
future sources of competition or that the competitive pressures faced by the
Company will not adversely affect its business, operating results or financial
condition. See "Risk Factors -- Competition."
Proprietary Rights
The Company relies primarily on a combination of contract, copyright,
trademark and trade secret laws, license and confidentiality agreements and
software security measures to protect its proprietary technology. The Company
distributes its products under "shrink-wrap" software license
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agreements which grant users licenses to (rather than ownership of) the
Company's products and which contain various provisions intended to protect the
Company's ownership and confidentiality of the underlying technology. The
Company's software is distributed with a locking mechanism which requires an
authorization code generated by the Company's internal systems to enable the
software to function. The Company also requires all of its employees and other
parties with access to its confidential information to execute agreements
prohibiting the unauthorized use or disclosure of the Company's technology. In
addition, the Company periodically reviews its proprietary technology for
patentability, although the Company does not have any current patents. Despite
these precautions, the Company believes that existing laws provide limited
protection for the Company's technology and that it may be possible for a third
party to misappropriate the Company's technology or to independently develop
similar technology. In addition, effective copyright and trade secret protection
may not be available in every jurisdiction where the Company distributes
products, particularly in foreign countries where the laws generally offer no
protection or less protection than those of the United States. Moreover,
"shrink-wrap" licenses, which are not signed by the end-user, may be
unenforceable in certain jurisdictions. See "Risk Factors -- Limited Protection
of Intellectual Property; Risk of Infringement."
Certain technology used in the Company's products is licensed from
third parties. Royalties are calculated and paid on either a monthly or
quarterly basis on a per copy fee or percentage of revenues basis. Sales of the
various modules of the Company's product offering which depend on licensed
technology accounted for approximately 17% of the Company's net revenues for
fiscal year 2000.
The Company is not engaged in any material disputes with other parties
with respect to the ownership or use of the Company's proprietary technology.
However, there can be no assurance that other parties will not assert technology
infringement claims against the Company in the future. The litigation of such a
claim may involve significant expense and management time. In addition, if any
such claim were successful, the Company could be required to pay monetary
damages and may also be required to either refrain from distributing the
infringing product or obtain a license from the party asserting the claim (which
license may not be available on commercially reasonable terms). As the number
of software products in the industry increases and the functionality of these
products further overlap, the Company believes that software developers may
become increasingly subject to infringement claims.
Employees
As of June 30, 2000, the Company had 210 employees, including 110 in
sales and marketing, 64 in product development and 36 in general and
administrative functions.
Risk Factors
The following risk factors should be considered carefully in addition
to the other information contained in this Annual Report on Form 10-K.
Dependence on Autodesk, IntelliCAD and Bentley Systems. In fiscal
2000, approximately 26.4% of the Company's net revenues were related to the sale
of Eagle Point software products designed for use with AutoCAD. In addition,
approximately 7.3% of the Company's net revenues were related to IntelliCAD,
including 7.0% from the sale of Eagle Point software products designed for use
with IntelliCAD and 0.3% derived from the resale by the Company of IntelliCAD.
In addition, 3.9% of the Company's net revenues in this period were derived from
the sale of Eagle Point software products designed for use with MicroStation.
The Company's business and financial results are linked to the continued market
acceptance of AutoCAD, MicroStation, and IntelliCAD. The timing of major
AutoCAD, MicroStation, or IntelliCAD releases may affect the timing of purchases
of the Company's products. The Company's product development efforts (insofar as
they relate to the compatibility of its products with those of Autodesk, the
developer of AutoCAD, ITC, the developer of IntelliCAD, or Bentley Systems, the
developer of MicroStation) have thus far been facilitated by
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cooperation from Autodesk's, ITC's and Bentley Systems' development personnel.
However, there exists no material contractual or other formal relationship
obligating Autodesk, Bentley Systems, or ITC to provide such cooperation.
Historically, to facilitate additional sales of its software
application products, the Company resold AutoCAD and IntelliCAD. The Company was
notified by Autodesk, the manufacturer of AutoCAD, that as of January 31, 1998,
the Company would no longer be allowed to resell AutoCAD. The Company's
inability to resell AutoCAD did have an adverse effect on revenues and gross
profit for fiscal year 1999. In September, 1999 Visio Corporation, who
previously owned and developed IntelliCAD, created the ITC, a non-profit open
source consortium. Visio donated the IntelliCAD source code to ITC which is made
available free to end users via the consortium. Commercial members of the ITC
may provide their own commercial versions of IntelliCAD. Currently the Company
has decided not to create its own commercial version of IntelliCAD. The change
in commercial availability of IntelliCAD could have an adverse effect on
revenues, gross profit and the Company's ability to sell its own products. Any
further adverse change in the business results of, or the Company's relationship
with, Autodesk, ITC or Bentley Systems could have a material adverse effect on
the Company's business, operating results or financial condition.
Competition. Competition in the AEC market has been intense and
continues to increase. In March of 1997, Autodesk, who was primarily a CAD
software provider, acquired Softdesk, Inc., an application solutions provider
and a principal competitor to the Company. In light of Autodesk's recent
cancellation of the Company's ability to resell AutoCAD, it appears that
Autodesk and Softdesk together have increased competitive pressures and may
continue to do so. The inability to market itself as an authorized reseller of
AutoCAD may hurt the perception of the Company in the marketplace. In 1996
Bentley Systems made an equity investment in an undisclosed amount in GEOPAK
Corporation, an application solutions provider and competitor to the Company. In
April of 2000 Bentley Systems announced that it was acquiring the civil
engineering software product line from Intergraph Corporation, an applications
solution provider and competitor to the Company.
The Company faces competition from companies offering stand-alone CAD
systems as well as from companies offering AutoCAD-based, MicroStation-based, or
IntelliCAD-based software applications including Autodesk, Bentley Systems, and
Visio. Many of the Company's competitors have and potential competitors may have
significantly greater financial, technological and marketing resources than the
Company. Barriers to entry in the AEC software industry are relatively low and
the risk of new competitors entering the market is high. In addition, the AEC
software industry is experiencing consolidation which has resulted in existing
competitors increasing their market position or breadth of product offerings
through acquisitions. Competitive pressures could force the Company to reduce
its prices, resulting in reduced margins. There can be no assurance that the
Company will be able to compete successfully against current and future sources
of competition or that competitive pressures will not have a material adverse
effect on the Company's business, operating results or financial condition. See
"Business --Competition."
Losses from Operations. The Company has incurred operating losses for
the past two quarters. Though the Company was profitable for the prior eight
fiscal quarters, there can be no assurances that the Company will be profitable
in the future.
Acquisitions. In the past, the Company has pursued acquisitions of
businesses, products and technologies that are complementary to those of the
Company. The Company's management has had limited experience in making
acquisitions. The Company may make additional acquisitions in the future.
Integrating acquired products and businesses requires a significant amount of
management time and skill and may place significant demands on the Company's
operations and financial resources. There can be no assurance that the Company
will be successful in finding potential acquisition candidates. Any failure to
effectively integrate future acquisitions could have a material adverse effect
on the Company's
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business, operating results or financial condition. Acquisitions may also give
rise to the assumption of contingent liabilities by the Company.
Variability of Quarterly Operating Results and Seasonality. The
Company has experienced in the past, and may experience in the future,
significant quarter-to-quarter fluctuations in its operating results. Factors
such as the timing of new product introductions and upgrades by the Company, the
Company's competitors, Autodesk, Bentley Systems, or ITC (See "--Dependence on
Autodesk, IntelliCAD, and Bentley Systems"), customer acceptance of software
applications, product development expenses, announcements or changes in pricing
policies by competitors, the timing of significant orders, the mix of products
sold, the mix of domestic versus international revenues, the existence of
product errors or bugs, and the hiring and training of additional staff could
contribute to this variability of quarterly results. In addition, the Company's
operating results may be adversely impacted by the market's acceptance of new,
or changes in existing hardware, software or Internet technology, including
without limitation, Windows95/NT/98/2000, the Internet, CD ROM Technology, etc.
The Company is also becoming aware of certain conditions in the market place
which could have a potential adverse affect. Certain other companies in the
market place have indicated that their results of operations have been adversely
impacted by declining demand from their customers who focused their automation
spending on Internet initiatives and Y2K preparation in 1999. Economic and other
factors affecting the civil engineering, surveying, architectural, homebuilding,
structural engineering, landscape and hydrological industries could also affect
demand for the Company's products in one or more particular quarters. The
Company historically has operated with little or no backlog. A significant
portion of the Company's net revenues in a quarter are derived from orders
received late in that quarter, which makes the Company's financial performance
more susceptible to an unexpected downturn in business and quarterly results
difficult to forecast. In addition, the Company's expense levels are based in
part on expectations of future revenue levels, and a shortfall in revenues could
result in a disproportionate decrease in the Company's net income. As the
markets in which the Company competes mature and new and existing companies
compete for customers, price competition is likely to intensify and such
competition could affect quarterly operating results. In addition, operating
results historically have been seasonally lower during the first and fourth
quarters than during the other quarters of the fiscal year. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations-
Liquidity and Capital Resources."
Dependence on Zeiss Resales. In connection with the SMI Acquisition,
the Company acquired software products that work in conjunction with mobile
surveying instruments manufactured by Carl Zeiss, Inc. ("Zeiss"). In order to
facilitate sales of software, the Company resells Zeiss instruments. Resales of
Zeiss instruments comprised approximately 8.4% of the Company's net revenue and
approximately 1.3% of the Company's gross profits in fiscal year 2000. On
September 21, 2000, Zeiss' parent company, Trimble Navigation Ltd., announced
that they were acquiring Tripod Data Systems, a competitor to the Company. Since
no contract or formal relationship exists between Zeiss and the Company, Zeiss
could prevent the Company from reselling their instruments. Any decision to
cease supplying Zeiss instruments to the Company for resale may adversely affect
the Company's revenues, and to a lesser extent, the Company's gross profits.
Technological Demands of the Marketplace. The software industry is
characterized by rapid technological changes and advances which can result in
relatively short product lifecycles. The Company's future success will depend
upon its ability to enhance its current products and introduce new products that
keep pace with technological developments in the marketplace and address the
increasingly sophisticated needs of its customers. To meet this goal the
Company periodically upgrades certain of its products. There can be no
assurance that the Company will be successful in introducing and marketing
product enhancements or new products, or that such products will be accepted by
the market. The Company's software products, like software products generally,
may contain undetected errors or bugs when introduced, or as new versions are
released. While the Company's current products have not experienced significant
post-release software error bugs to date, there can be no assurance that such
problems will not occur in the future, particularly as the Company expands its
product offerings and its
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<PAGE>
products become more complex and sophisticated. Any such defective software may
result in a loss of or delay in market acceptance of the Company's products or
an increased warranty expenses or product recalls. See "Business -- Products"
and "Business -- Product Development."
Limited Protection of Intellectual Property; Risk of Infringement. The
Company's success is heavily dependent upon its proprietary technology. The
Company does not have any patents on its technology and relies upon copyright,
trademark and trade secret laws, license and confidentiality agreements and
software security measures to establish and protect its proprietary technology.
The Company enters into confidentiality and/or license agreements with its
resellers and potential customers and limits access to and distribution of its
software, documentation and other proprietary information. The Company's
products are, however, generally distributed under "shrink-wrap" licenses that
are not signed by the customer and therefore may be unenforceable in certain
jurisdictions. In addition, effective copyright and trade secret protection may
not be available to the Company, particularly in foreign countries where the
laws generally provide either no protection or less protection than the laws of
the United States. There can be no assurance that the steps taken by the Company
to protect its proprietary technology will be adequate to prevent
misappropriation. The Company has a policy of requiring all of its employees to
sign an agreement which prohibits disclosure of confidential information and a
covenant not to compete with the Company or be employed by competitors of the
Company. There can be no assurance, however, that such restrictive provisions
contained in such agreements would be enforceable by the Company. In addition,
as the number of software applications in the industry increase and
functionality of these applications further overlap, the Company believes that
software developers may become increasingly subject to infringement claims. The
Company is not engaged in any material disputes with other parties with respect
to the ownership or use of the Company's proprietary technology. However, there
can be no assurance that other parties will not assert technology infringement
claims against the Company in the future. Any such claims so asserted, with or
without merit, may be time consuming and expensive to defend. See "Business --
Proprietary Rights".
Dependence on Management. The Company's operations have been largely
dependent on the services of its executive officers, in particular Rodney L.
Blum, its Chairman, President and Chief Executive Officer, John F. Biver, its
Vice President, Civil Division, and Dennis J. George, its Chief Financial
Officer. The Company's operations will continue to depend largely upon the
services of Rodney L. Blum and Dennis J. George. John F. Biver, however, will no
longer serve as the Company's Vice President, Civil Division as Mr. Biver's
employment with the Company terminated in September, 2000. Until Mr. Biver's
successor has been fully integrated, the Company's business may be adversely
effected in the short-term. The additional loss of other executive officers
could also adversely effect the Company's business. The company's future success
will also be dependent, in part, upon the Company's ability to attract and
retain additional qualified managers and other personnel. Competition for
qualified personnel in the AEC software industry is intense and there can be no
assurance that the Company will be successful in attracting and retaining such
personnel.
Foreign Operations. Approximately 4.6% of the Company's revenues in
fiscal 2000 were derived from sales to customers located outside of the United
States and Canada. The international portion of the Company's business is
subject to a number of inherent risks, including difficulties in opening and
managing foreign offices, establishing channels of distribution, establishing
the credit worthiness of foreign customers, the collection of outstanding
accounts, localizing software to meet engineering regulations and requirements,
in translating products into foreign languages, the lack of control over
fluctuations in the value of foreign currencies, import/export duties and
quotas, and unexpected regulatory, economic or political changes in foreign
markets. There can be no assurance that these factors will not adversely affect
the Company's international revenues or its overall financial performance.
Reliance on Headquarters. Substantially all of the Company's
administrative, sales, marketing, training, customer service, product
development and product ordering and shipping activities are conducted from a
single facility located in Dubuque, Iowa (the "Dubuque Facility"). A loss with
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respect to all or part of this facility or a disruption in the Company's
telecommunications and management information systems would have a material
adverse effect on the Company's results of operations.
Control by Management and Principal Stockholders. Messrs. Blum,
George, and Biver, together with their affiliates, own approximately 54% of the
Company's outstanding Common Stock. As a result, these stockholders, acting
together, will be able to control the outcome of actions requiring stockholder
approval, such as the election of directors, amendments to the Company's charter
and the sale of the Company.
Anti-Takeover Provisions: Possible Issuance of Preferred Stock. The
Company's Certificate of Incorporation and By-laws contain various provisions,
including, without limitation, certain notice provisions and provisions
authorizing the Company to issue Preferred Stock, that may make it more
difficult for a third party to acquire, or may discourage acquisition bids for,
the Company and could limit the price that certain investors might be willing to
pay in the future for shares of the Company's Common Stock. The ownership by the
Company's officers, directors and their affiliates of substantial shares of
Common Stock could also discourage such bids. In addition, the rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of any holders of Preferred Stock that may be issued in the future
and that may be senior to the rights of the holders of Common Stock.
Item 2. Properties.
The following table sets forth a brief description of the properties of the
Company:
<TABLE>
<CAPTION>
Location General Description
-------- -------------------
<S> <C>
Eagle Point Software Corporation: Corporate headquarters and
Dubuque, Iowa principal operating facility of
77,000 square feet (the "Dubuque Facility") (owned)
Former SMI operations: Operating Facility consisting of
Churchill, Tennessee 2,100 square feet (leased)
</TABLE>
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Since June 16, 1995, the Common Stock has been traded on The Nasdaq
National Market ("Nasdaq") under the symbol EGPT. The approximate number of
stockholders of record of common stock at September 20, 2000 was 196, some of
which are street name holders and depository trusts representing beneficial
shareholders. The Company has more than 1,000 beneficial holders of
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<PAGE>
common stock.
The Company has never paid cash dividends on the Common Stock. The
Company has a restrictive debt covenant which precludes any payment of cash
dividend on the Common Stock. In the event the Company would retire the
outstanding debt obligation, the Company intends to retain any earnings for
future growth and therefore does not anticipate paying any cash dividends on the
Common Stock in the foreseeable future.
On September 20, 2000 the closing sales price of the Company's Common
Stock was $4.375. The following table sets forth for the periods indicated the
high and low sales prices per share of the Common Stock as reported by Nasdaq.
QUARTER ENDED HIGH LOW
------------- ------------------
September 30, 1998........................ $10.47 $6.50
December 31, 1998......................... $10.13 $7.00
March 31, 1999............................ $ 9.50 $6.63
June 30, 1999............................. $ 7.38 $5.75
September 30, 1999........................ $ 6.75 $5.06
December 31, 1999......................... $ 7.88 $4.50
March 31, 2000............................ $ 7.13 $5.00
June 30, 2000............................. $ 6.31 $4.13
Item 6. Selected Financial Data.
The statement of operations data presented below for each of the
fiscal years ended June 30, 2000, 1999, and 1998 and the balance sheet data at
June 30, 2000 and 1999 have been derived from the Company's financial
statements, which have been audited by Deloitte & Touche LLP, independent
auditors, whose report thereon is included elsewhere in this Report on Form 10-
K. The statement of operations data presented below for each of the fiscal years
ended June 30, 1997 and 1996 and the balance sheet data at June 30, 1998, 1997
and 1996 have also been audited by Deloitte & Touche but are not included in
this Report on Form 10-K. The selected combined financial data presented below
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and with the financial statements
and the notes thereto appearing elsewhere in this Report on Form 10-K.
<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
--------------------------
2000(6) 1999 1998 1997 1996(1)
------- ---- ---- ---- ------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Income Data(2):
Net revenues:
Product sales $12,342 $10,460 $10,439 $12,213 $14,580
Training and support 5,360 4,099 3,382 3,592 4,582
------- ------- ------- ------- -------
Total net revenues 17,702 14,559 13,821 15,805 19,162
------- ------- ------- ------- -------
Cost of revenues
Cost of product sales, training, & support 5,044 2,697 3,792 4,782 5,073
Charge for revaluation of capitalized software - - - 294(3) -
------- ------- ------- ------- -------
Total cost of revenues 5,044 2,697 3,792 5,076 5,073
------- ------- ------- ------- -------
Gross profit 12,658 11,862 10,029 10,729 14,089
------- ------- ------- ------- -------
Operating expenses:
Selling and marketing 6,430 4,735 4,902 5,594 6,421
Research and product development 3,388 2,761 2,769 3,817 3,511
General and administrative 3,084 2,525 2,174 2,476 1,680
Other 261(6) - - 866(4) 43
------- ------- ------- ------- -------
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Total operating expenses 13,163 10,021 9,845 12,753 11,655
------- ------- ------- ------- -------
Operating income (loss) (505) 1,841 184 (2,024) 2,434
------- ------- ------- ------- -------
Interest income, net 784 765 679 601 711
Other income, net 116 7 36 126 31
------- ------- ------- ------- -------
Income (loss)
Before income taxes 395 2,613 899 (1,297) 3,176
Income tax expense (benefit) 140 844 246 (633) 1,100
------- ------- ------- ------- -------
Net income (loss) $ 255 $ 1,769 $ 653 $ (664) $ 2,076
======= ======= ======= ======= =======
Per Share:
Basic net income (loss) $ .05 $ .37 $ .14 $ (.13) $ .42
Weighted average number of basic common
shares outstanding(5) 4,846 4,827 4,802 4,930 4,957
Balance Sheet Data(2)(at period end):
Working capital $12,019 $15,029 $10,609 $11,429 $12,215
Total assets 27,220 26,143 25,421 22,967 24,596
Total debt 64 135 320 578 901
Stockholders' equity(5) 22,510 22,182 20,325 19,756 20,929
</TABLE>
(1) On November 9, 1995, the Company merged with ECOM Associates, Inc. The
statement of income data for the fiscal year ended June 30, 1996 includes
the results of operations of ECOM from the merger date.
(2) The data presented was derived from the Company's financial statements.
(3) During fiscal year 1997, the Company incurred a charge of $294,000 related
to the charge for revaluation of certain capitalized software products to
more accurately reflect anticipated future revenues for those products.
(4) In connection with the CIBC Acquisition the portion of the aggregate
purchase price related to the research and development that had not yet
reached technological feasibility and had no alternative use as of the date
of acquisition, was recorded as a charge for purchased research and
development in the amount of $475,000. During fiscal year 1997, the Company
incurred a charge of $235,000 reflecting claims, settlements, and
contingencies related to issues asserted by former employees and the U.S.
Department of Labor based on the 1938 Fair Labor Standards Act.
Additionally, during fiscal year 1997 the Company made a decision to
consolidate operations from certain of it's remote offices to the home
office resulting in charges of $156,000 relating to office closings and
restructuring due to those closings.
(5) The Board of Directors for the Company authorized in May, 1997, subject to
certain business and market conditions, the repurchase of up to 500,000
shares of the Company's Common Stock in the open market from time to time
or in privately negotiated transactions. The Company had repurchased as
treasury stock 123,000 shares at an aggregate cost to the Company of
$508,875 at June 30, 1997 and 171,200 shares at an aggregate cost to the
Company of $673,000 at June 30, 1998. Effective July 14, 2000, the
Company's Board of Directors authorized the repurchase of up to 500,000
shares of the Company's stock.
(6) On December 1, 1999, the Company purchased substantially all of the assets
of Surveyors Module International, LLC (SMI). The SMI Acquisition was
accounted for under the purchase method, and accordingly, the results of
its operations are included in the Company's results from the date
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<PAGE>
acquisition. In connection with the SMI Acquisition, the portion of the
aggregate purchase price related to the research and development that had
not yet reached technological feasibility and had no alternative use as of
the date of acquisition, was recorded as a charge for purchased research
and development in the amount of $78,600 of other acquisition related
charges. The Company incurred $182,000 of other acquisition related
charges.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Overview
The Company was founded in 1983 and during the remainder of the 1980s
focused on developing and marketing a software application product for use by
roadway design professionals. In 1990, the Company, under new management, began
to expand significantly its product line to include complementary software
application products for use by a variety of AEC professionals. The expansion of
its product line was accomplished through both internal development and through
acquisitions.
On July 29, 1996, the Company added 2 modules of building designed
construction software as a result of the CIBC Acquisition. On December 1, 1999,
the Company added nine modules of land surveying software as a result of the SMI
Acquisition. These acquisitions were each accounted for under the purchase
method, and accordingly, the results of operations of such businesses are
included in the Company's results from their respective dates of acquisition.
For each acquisition, the aggregate cost over the fair value of acquired net
assets has been assigned principally to purchased research and development and
software development costs based on their estimated fair market values. The
portion of the aggregate purchase prices allocated to research and development
that had not yet reached technological feasibility and had no alternative future
use was charged to expense on the date of purchase. Accordingly, the Company's
results of operations reflect a non-recurring charge for purchased research and
development of approximately $79,000 for fiscal 2000.
In 1997 Autodesk, the company whose CAD platform the majority of the
Company's business is based upon bought Softdesk, a major competitor of Eagle
Point. Additionally, in 1996 Bentley Systems, the developer of the Microstation
CAD platform upon which a portion of the Company's civil engineering/surveying
modules are based, purchased an equity interest in GeoPak, also a competitor of
the Company. In 2000 Bentley Systems also acquired the civil engineering product
line from Intergraph Corporation, also a competitor of the Company. As a result
of these situations, Eagle Point began to compete with companies with whom it
previously did not compete. As further evidence of the increased competitive
pressures, during fiscal year 1998, Autodesk notified Eagle Point that Eagle
Point would no longer be allowed to resell AutoCAD. AutoCAD resales accounted
for approximately 15%, or $2.0 million, of the Company's revenues and 3%, or
$326,000, of the Company's gross profit for fiscal 1998. There were no AutoCAD
resales in fiscal year 1999 or in fiscal year 2000. The inability to resell
AutoCAD has had an adverse effect on the Company's revenues and gross profit.
See "Risk Factors -- Competition."
The Company has experienced in the past, and may experience in the
future, significant quarter-to-quarter fluctuations in its operating results.
Factors such as the timing of new product introductions and upgrades by the
Company, the Company's competitors or Autodesk, customer acceptance of software
applications, product development expenses, announcements or changes in pricing
policies by competitors, the timing of significant orders, the mix of products
sold, the mix of domestic versus international revenues, the existence of
product errors or bugs, and the hiring and training of additional staff could
contribute to this variability of quarterly results. Economic and other factors
affecting the civil engineering, surveying, architectural, home building,
structural engineering, landscape and hydrological industries could also affect
demand for the Company's products in one or more particular quarters. A
significant portion of the Company's net revenues in a quarter are derived from
orders received in the latter part of the quarter, which makes the Company's
financial performance
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<PAGE>
more susceptible to an unexpected downturn in business and quarterly results
difficult to forecast. In addition, the Company's expense levels are based in
part on expectations of future revenue levels, and a shortfall in revenues could
result in a disproportionate decrease in the Company's net income. As the
markets in which the Company competes mature and new and existing companies
compete for customers, price competition is likely to intensify and such
competition could affect quarterly operating results. See "Risk Factors --
Variability of Quarterly Operating Results and Seasonality."
Forward Looking Information.
This Annual Report on Form 10-K contains forward looking statements,
including, without limitation, the acceptance by the marketplace of the
Company's products, the Company's attempts to reduce its reliance on AutoCAD,
the impact of recent acquisitions, the ability of the Company to sell more
products internationally, the competitive advantages of the Company's telesales
professionals, the effect of the Company's training and support programs on its
customer relationships, and the ability of the Company to keep pace with
technological developments. These forward looking statements involve risks and
uncertainties, which could cause actual results to differ from those projected.
The Company may not be correct in its predictions with respect to the issues
addressed in such forward looking statements.
Fiscal 2000 Compared to Fiscal 1999.
Net revenues increased $3.1 million, or 21.6% to $17.7 million for the
fiscal year ended June 30, 2000 ("the 2000 Period"), from $14.6 million for the
fiscal year ended June 30, 1999 ("the 1999 Period"). The Company experienced an
increase in both product sales and in training and support revenues. While
product sales increased overall, the portion of product sales attributable to
Eagle Point products (as opposed to the resale of third party products)
decreased $200,000 or 2.0% to $10.0 million in the 2000 Period from $10.2
million in the 1999 Period. However, resales of third party products increased
$2.2 million or 872.4% to $2.4 million in the 2000 Period from $243,000 in the
1999 Period. The decrease in the Eagle Point portion of product sales is
attributable to the fact that $1.6 million of previously deferred software
revenues were recognized in the 1999 Period as compared to $0.2 million for the
2000 Period. These revenues were initially deferred as part of an ongoing
upgrade promotion. Revenues were recognized as the product upgrades, for which
the revenue was initially deferred, were shipped. The increase in resale
revenues was primarily attributable to the Company's SMI acquisition. A portion
of the SMI software products work in conjunction with various robotic and field
data collection hardware units, some of which are also resold by the Company.
See "Risk Factors--Dependence on Zeiss Resales." Training and support revenues
were favorably affected by the release of new products in the previous and
current fiscal years, as well as an increased emphasis by the Company on support
and maintenance programs.
Gross profit increased $795,000 or 6.7% to $12.7 million in the 2000 Period from
$11.9 in the 1999 Period. This increase is primarily attributable to the growth
in sales volume in the 2000 Period. Gross profit as a percentage of net revenues
decreased to 71.5% in the 2000 Period from 81.5% in the 1999 Period. Gross
profit as a percentage of net revenues relating to product sales decreased to
63.1% in the 2000 Period from 78.5% in the 1999 Period. These decreases are
attributable to a shift of the sales mix. Resales of third party products, which
have lower gross profit margins than sales of Eagle Point products, increased to
19.2% of product sales in the 2000 Period as compared to 2.3% in the 1999 Period
as a result of the Company's SMI acquisition noted above. Gross profit as a
percentage of corresponding net revenue relating to training and support
increased to 90.9% in the 2000 period from 89.1% in the 1999 Period.
Selling and marketing expenses increased $1.7 million or 35.8% to $6.4 million
in the 2000 Period from $4.7 million in the 1999 Period. As a percentage of net
revenues selling and marketing expenses
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<PAGE>
increased to 36.3 % in the 2000 Period from 32.5% in the 1999 Period. These
increases are primarily attributable to higher personnel costs associated with
an increase in the sales and marketing staff. Due, in part, to the Company's
efforts to increase demand for its products and services and also due to the SMI
acquisition.
Research and development expense increased $628,000 or 22.7% to $3.4 million in
the 2000 Period from $2.8 million in the 1999 Period. The increase is primarily
attributable to higher personnel costs associated with an increase in the
research and development staff. A portion of which was a result of the SMI
acquisition. As a percentage of net revenues, research and development expense
remained fairly steady at 19.1% in the 2000 Period and 19.0% in the 1999 Period
due to the increase in sales volume in the 2000 Period.
General and administrative expense increased $600,000 or 22.1% to $3.1 million
in the 2000 Period from $2.5 million in the 1999 Period. The increase is
primarily attributable to higher personnel costs associated with an increase in
the general and administrative staff. As a percentage of net revenues, general
and administrative expense remained fairly steady at 17.4% in the 2000 Period
and 17.3% in the 1999 Period due to the increase in sales volume in the 2000
Period.
Operating income decreased $1.3 million to an operating loss of $506,000 in the
2000 Period from operating income of $1.8 million in the 1999 Period, and as a
percentage of net revenues, decreased to -2.9% in the 2000 Period from 12.6% in
the 1999 Period. The Company incurred $261,000 of acquisition-related charges in
the 2000 Period, which included a $79,000 charge for purchased research and
development in connection with the SMI acquisition, and $182,000 of other
acquisition related charges. Excluding these charges, operating income decreased
$1.04 million to an operating loss of $245,000 in the 2000 Period from operating
income of $1.8 million in the 1999 Period, and as a percentage of net revenues,
decreased to 1.4% in the 2000 Period from 12.6% in the 1999 Period.
Interest expense decreased $11,200 to $1,300 in the 2000 Period from $12,500 in
the 1999 Period. Interest income increased $8,000 to $785,000 in the 2000 Period
from $777,000 in the 1999 Period. Other income increased $110,000 to $117,000 in
the 2000 Period from $7,000 in the 1999 Period. The increase in other income is
primarily attributable to a refund of use taxes paid in a prior period and due
to income received for rents collected for office space in a portion of the
Company's corporate headquarters.
Fiscal 1999 Compared to Fiscal 1998.
Net revenues increased $0.8 million, or 5.3% to $14.6 million for the
fiscal year ended June 30, 1999 ("the 1999 Period"), from $13.8 million for the
fiscal year ended June 30, 1998 (the "1998 Period"). The Company experienced an
increase in product sales and in training and support revenues. While product
sales increased slightly overall, the portion of product sales attributable to
Eagle Point products (as opposed to the resale of third party products)
increased $2.1 million or 25.9% to $10.2 million in the 1999 Period from $8.1
million in the 1998 Period primarily as the result of the release of new
products and product upgrades. This increase in Eagle Point product sales offset
the decrease in the resales of third party products from $2.4 million in the
1998 Period to $0.2 million in the 1999 Period. The decrease of the resales of
third party products was due to the Company no longer being authorized to resell
AutoCAD as of the end of the third quarter in the 1998 Period. $223,000 of the
third party resales during the 1999 Period were represented by resales of
IntelliCAD. In July, 1999 Visio Corporation announced that by the end of
calendar year 1999 they were no longer going to offer a commercial version of
IntelliCAD, but rather create a non-profit open source consortium and offer the
IntelliCAD product and source code free to end-users. As a result, the Company
does not expect to generate significant revenues from the resale of IntelliCAD
in the future. Training and support revenues were favorably affected in the 1999
Period by the release of the new products and product upgrades as well as an
increased emphasis by the Company on support and maintenance programs. $387,000
of the 1999 Period's software revenues that were part of a continuing upgrade
promotion were deferred.
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<PAGE>
Additionally, $1.6 million of previously deferred software revenues were
recognized during the 1999 Period as the product upgrades, for which the revenue
was initially deferred, were shipped.
Despite the increase in revenues, the Company is becoming aware of
certain conditions in the market place which could have a potential adverse
affect on the Company's business in the future. Certain other companies in the
market place have indicated that their results of operations have been adversely
impacted by declining demand from their customers who have focused their
automation spending on Internet initiatives and Y2K preparedness.
Gross profit increased $1.9 million or 18.3% to $11.9 million in the
1999 Period from $10.0 million in the 1998 Period. Gross profit as a percentage
of net revenues increased to 81.5% in the 1999 Period from 72.6% in the 1998
Period. Gross profit as a percentage of net revenues relating to product sales
increased to 78.5% in the 1999 Period from 69.1% in the 1998 Period. This
increase is attributable to a shift in the mix of product sales. Sales of Eagle
Point products, which have higher gross profit margins than resales of third
party products (i.e. AutoCAD and IntelliCAD), increased to 97.7% of product
sales in the 1999 Period from 77.1% in the 1998 Period as the Company no longer
resells AutoCAD. Gross profit as a percentage of corresponding net revenue
relating to training and support increased to 89.1% in the 1999 Period from
83.1% in the 1998 Period, primarily due to an improvement in the sales mix
toward support and maintenance revenues, which carry higher profit margins than
training revenues.
Selling and marketing expense decreased $0.2 million or 3.4% to $4.7
million in the 1999 Period from $4.9 million in the 1998 Period. As a percentage
of net revenues, selling and marketing expenses decreased to 32.5% in the 1999
Period, from 35.5% in the 1998 Period. The decrease as a percentage of net
revenues is as a result of the growth in sales volume while sales and marketing
expenses decreased due to lower personnel costs.
Research and development expense remained steady at $2.8 million for
both the 1999 Period and the 1998 Period. As a percentage of net revenues,
research and development expenses decreased slightly to 19.0% in the 1999 Period
from 20.0% in the 1998 Period.
General and administrative expense increased $0.3 or 16.1% to $2.5
million in the 1999 Period from $2.2 million in the 1998 Period. As a percentage
of net revenues general and administrative expenses increased to 17.3% for the
1999 Period, from 15.7% in the 1998 Period. The increase is due primarily to
higher personnel costs and an increase in the general and administrative staff.
Operating income from continuing operations increased to $1.8 million
in the 1999 Period, from $184,000 in the 1998 Period. As a percentage of net
revenues, operating income from continuing operations was 12.6% in the 1999
Period, as compared to 1.3% in the 1998 Period. The increase in operating income
was due to the factors stated above.
Interest expense increased $6,000 to $12,500 in the 1999 Period from
$6,500 in the 1998 Period. Interest income increased $91,000 to $777,000 in the
1999 Period from $686,000 in the 1998 Period. The increase in interest was
primarily attributed to higher balances of cash, cash equivalents, and
investments.
The Company's effective tax rate for the 1999 Period increased to
32.3% from 27.4% for the 1998 Period. The primary reason for this is due to
lower research and development tax credits as a percentage of overall tax
expense due to higher income levels in the 1999 period compared to the 1998
period.
Liquidity and Capital Resources
-18-
<PAGE>
The Company's financial position remains strong, with working capital
of $12.0 million and long term debt of only $29,000. Cash and short-term and
long-term investments aggregated approximately $14.2 million at June 30, 2000.
The Company also has available a $2.0 million unsecured line of credit from its
principal commercial bank. As of June 30, 2000, the Company had no borrowings
outstanding under this line of credit.
Effective September, 2000 the employment of John Biver, the Vice
President-Civil Division of the Company, terminated. Pursuant to the terms of
Mr. Biver's employment agreement, he will receive severance benefits totaling
approximately $425,000, substantially all of which will be paid in the first or
second quarter of fiscal year 2001.
Inflation and Foreign Currency Exchange
Inflation has not had a significant impact on the Company's operating
results to date, nor does the Company expect it to have a significant impact in
fiscal year 2001. The Company has experienced insignificant gains or losses on
foreign currency transactions since substantially all of its international sales
to date have been billed in U.S. dollars. As the Company continues its
international operations, it may begin billing in foreign currencies which would
increase the Company's exposure to gains and losses on foreign currency
transactions. The Company may choose to limit such exposure by the purchase of
forward foreign exchange contracts if deemed appropriate at that time.
Item 8. Financial Statements and Supplementary Data.
The response to this item is submitted as a separate section of this Report on
Form 10-K. See Item 14.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Directors of the Registrant
---------------------------
The information contained under the headings "Nominees for Directors,"
"Members of Board of Directors Continuing in Office" and "Compliance With
Section 16 of the Exchange Act" in the Proxy Statement (which Proxy Statement
will be filed with the Securities and Exchange Commission on or before October
28, 2000) is incorporated herein by reference.
Executive Officers of the Registrant
------------------------------------
Information with respect to executive officers of the Company.
Name Age Position
---- --- --------
Rodney L. Blum 45 Chairman of the Board, President and
Chief Executive Officer
Dennis J. George 37 Vice President, Chief Financial Officer,
Treasurer and Secretary; Director
John F. Biver 45 Vice President - Civil Division; Director
Edward T. Graham 36 Vice President - Building Design and Services
Division
-19-
<PAGE>
Brent A. Straka 32 Vice President - SMI Division
Randy K. Ambrosy 31 Vice President -International and Landscaping
Divisions
William P. Le May 46 Chief Technology Officer
Rodney L. Blum has served as Chairman of the Board, President and Chief
Executive Officer of the Company since January, 1990. From May, 1988 until he
joined the Company in 1990, Mr. Blum was Director of Sales and Marketing of
D.D.S., a provider of turn-key computer systems to the auto, large truck and
implement dealer markets. From 1980 until May, 1988 he served in various
marketing and management positions at CyCare Systems, Incorporated, a provider
of computerized information processing systems to the healthcare industry.
Dennis J. George has served as Vice President, Chief Financial Officer,
Treasurer, Secretary and a director of the Company since April, 1989. During
1988 he was the Financial Budget Analyst for the Ertl Company, a manufacturer of
agricultural model toys. During 1987 he served as Finance Manager for D.D.S.
John F. Biver co-founded the Company in 1983 and served as Vice President -
Civil Division from January, 1990 until September, 2000. Mr. Biver's employment
with the Company terminated in September, 2000. Mr. Biver has served as a
director of the Company since its inception. Prior to founding the Company, Mr.
Biver was a registered Professional Engineer with the civil engineering firm of
Wright, Kilby, Sejkoara and Associates.
Edward T. Graham has been employed by the Company in various sales
capacities since January, 1990. Mr. Graham currently serves as Vice President -
Building Design and Services Division. From May, 1989 until he joined the
Company, Mr. Graham was a principal of Prism Marketing, a provider of marketing
systems and services.
Brent A. Straka has been employed by the Company since November, 1990 in
various sales, marketing-related, and management positions. Since December,
1999, Mr. Straka has served as Vice President of the SMI Division. From July,
1996 to November of 1999, he served as Vice President of Marketing and Business
Development. From June, 1989 until he joined the Company, Mr. Straka held
various marketing positions with Land's End, Inc., a mail-order provider of
apparel and specialty products.
Randy K. Ambrosy has been employed by the Company since September, 1991 in
various sales and management positions. Since April, 1998 Mr. Ambrosy has served
as Vice President - International and Landscaping Divisions. From June, 1990,
until he joined the Company, Mr. Ambrosy was a sales engineer at Sencore
Electronics a manufacturer of electronic test equipment.
William P. Le May has been employed by the Company since October, 1992 in
various research and development and management positions. Since December, 1995
Mr. Le May has served as Chief Technology Officer. From March, 1984 until he
joined the Company, Mr. Le May was a product manager at Accugraph Corporation, a
developer of software applications for the civil engineering market.
Item 11. Executive Compensation.
Except for information referred to in Item 402(a)(8) of Regulation S-K, the
information contained under the headings "Executive Officer Compensation" and
"Directors Meetings and Committees" in the Proxy Statement (which Proxy
Statement will be filed with the Securities and Exchange Commission on or before
October 28, 2000) is incorporated herein by reference.
-20-
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information contained under the heading "Security Ownership of Directors,
Officers and Principal Stockholders" in the Proxy Statement (which Proxy
Statement will be filed with the Securities and Exchange Commission on or before
October 28, 2000) is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
Except for the information relating to Item 11 hereof and except for information
referred to in Item 402(a)(8) of Regulation S-K, the information contained under
the headings "Executive Officer Compensation," "Directors Meetings and
Committees" and "Certain Relationships and Related Transactions" in the Proxy
Statement (which Proxy Statement will be filed with the Securities and Exchange
Commission on or before October 28, 2000) is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a)(1) Financial Statements
--------------------
The following financial statements are filed as part of this report:
. Report of Independent Auditors on Financial Statements.
. Financial Statements:
Balance Sheets - June 30, 2000 and June 30, 1999.
Statements of Operations - years ended June 30, 2000, June 30,
1999 and June 30, 1998.
Statements of Stockholders' Equity - years ended June 30, 2000,
June 30, 1999 and June 30, 1998.
Statements of Cash Flows - years ended June 30, 2000, June 30,
1999 and June 30, 1998.
Notes to financial statements - June 30, 2000.
(a)(2) Financial Statement Schedules
-----------------------------
. Schedule II - Allowances - years ended June 30, 2000, June 30, 1999
and June 30, 1998.
(a)(3) Exhibits
--------
The following exhibits are filed herewith or are incorporated by
reference to exhibits previously filed with the Securities and Exchange
Commission.
Exhibit No. Description
----------- -----------
3.1* -- Certificate of Incorporation of the Company.
-21-
<PAGE>
3.2****** -- Amended and Restated By-laws of the Company.
10.1* -- Loan Agreement between the Company and the City of Dubuque,
dated January 20, 1992.
10.2* -- Loan Agreement between the Company and the City of Dubuque,
dated July 6, 1993.
10.3* -- Loan Agreement between the Company and the City of Dubuque,
dated May 16, 1994.
10.4* -- Community Economic Betterment Account Agreement between the
Company and the Iowa Department of Economic Development,
dated July 18, 1991.
10.5* -- Community Economic Betterment Account Agreement between the
Company and the Iowa Department of Economic Development,
dated July 15, 1993.
10.6* -- Asset Purchase Agreement between the Company and Facility
Mapping Systems, Inc., dated March 31, 1995.
10.7* -- Asset Purchase Agreement between the Company and LANDCADD,
Inc., dated January 1, 1995.
.10.8**** -- Employment Agreement with Rodney L. Blum.
.10.9**** -- Employment Agreement with Dennis J. George.
.10.10**** -- Employment Agreement with John F. Biver.
.10.11** -- Eagle Point Software Corporation Stock Option Plan.
.10.12*** -- Eagle Point Software Corporation, 1995 Employee Stock
Purchase Plan.
10.13* -- Purchase Agreement between VisionOne Partnership and the
Company, dated as of May 1, 1995.
10.14***** -- Merger Agreement between the Company and ECOM Associates,
Inc., dated November 9, 1995.
10.15***** -- Asset Purchase Agreement between the Company and Computer
Integrated Building Corporation, dated July 29, 1996.
10.16+ -- Asset Purchase Agreement between the Company and Surveyors
Module International, LLC, dated December 1, 1999.
.10.17++ -- Eagle Point Software(TM) Corporation 1999 Stock Option Plan.
.10.18+++ -- Amended and restated Eagle Point Software(TM) Corporation
1995 Employee Stock Purchase Plan.
11.1# -- Statement re: computation of per share earnings.
21.1# -- Subsidiaries
-22-
<PAGE>
23.1# -- Consent of Deloitte & Touche LLP.
23.2# -- Independent Auditors' Report on Schedule
27# -- Financial Data Schedule
_______________________
* Incorporated by reference from the Company's Registration Statement on
Form S-1 (File No. 33-91950)
** Incorporated by reference from the Company's Registration Statement on
Form S-8 (File No. 33-96914)
*** Incorporated by reference from the Company's Registration Statement on
Form S-8 (File No. 33-96918)
**** Incorporated by reference from the Company's 1995 Annual Report on Form
10-K
***** Incorporated by reference from the Company's 1996 Annual Report on Form
10-K
****** Incorporated by reference from the Company's Quarterly Report on Form 10-
Q for the period ended December 31, 1998
_______________
+ Incorporated by reference from the Company's report on Form 8-K filed
December 13, 1999
++ Incorporated by reference from the Company's Registration Statement on
Form S-8 (File No. 333-32708)
+++ Incorporated by reference from the Company's Registration Statement on
Form S-8(File No. 333-32712)
# Filed herewith.
. Indicates management contract or compensatory plan or arrangement.
_________________________
(b) Reports on Form 8-K
-------------------
None.
-23-
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Eagle Point Software Corporation and Subsidiary
We have audited the accompanying consolidated balance sheets of Eagle Point
Software Corporation and subsidiary as of June 30, 2000 and 1999, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended June 30, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Eagle Point Software Corporation
and subsidiary at June 30, 2000 and 1999, and the results of their operations
and their cash flows for each of the three years in the period ended June 30,
2000, in conformity with accounting principles generally accepted in the United
States of America.
Des Moines, Iowa
August 1, 2000
(September 28, 2000 as to Note 12)
-24-
<PAGE>
EAGLE POINT SOFTWARE CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 2000 1999
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,161,045 $ 5,481,640
Short-term investments 8,995,468 11,040,912
Accounts receivable (net of allowances of $270,429 and
$218,309, respectively) 2,577,368 1,654,487
Interest receivable 93,859 83,914
Inventories 1,199,873 120,531
Prepaid expenses and other assets 120,956 82,671
Income taxes receivable 180,114 3,942
Deferred income taxes 176,626 242,927
----------- -----------
Total current assets 16,505,309 18,711,024
INVESTMENTS 1,996,950
PROPERTY & EQUIPMENT, NET 6,256,045 6,555,782
SOFTWARE DEVELOPMENT COSTS (net of accumulated
amortization of $392,030 and $335,941, respectively) 1,022,323 157,967
NON-COMPETE AGREEMENTS (net of accumulated
amortization of $366,904 and $286,963, respectively) 58,161 148,202
GOODWILL (net of accumulated amortization of $63,677) 768,730
DEFERRED INCOME TAXES 612,543 570,505
----------- -----------
TOTAL ASSETS $27,220,061 $26,143,480
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 35,771 $ 71,434
Accounts payable 468,219 112,773
Accrued expenses 1,173,920 1,094,578
Deferred revenues 2,808,802 2,403,456
----------- -----------
Total current liabilities 4,486,712 3,682,241
LONG-TERM DEBT 28,571 64,342
DEFERRED REVENUES 195,181 214,692
----------- -----------
Total liabilities 4,710,464 3,961,275
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 1,000,000 shares authorized; none issued at
June 30, 2000 and 1999 49,417 49,417
Common stock, $.01 par value; 20,000,000 shares authorized;
4,941,730 shares issued and outstanding at June 30, 2000 and 1999 17,624,290 17,624,290
Additional paid-in capital 5,312,961 5,058,091
----------- -----------
Retained earnings 22,986,668 22,731,798
Treasury stock, at cost; 95,224 and 108,877 shares, respectively (477,071) (549,593)
----------- -----------
Total stockholders' equity 22,509,597 22,182,205
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $27,220,061 $26,143,480
=========== ===========
</TABLE>
See notes to consolidated financial statements.
-25-
<PAGE>
EAGLE POINT SOFTWARE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FISCAL YEARS ENDED JUNE 30, 2000, 1999, AND 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999 1998
<S> <C> <C> <C>
Net revenues:
Product sales $ 12,341,989 $ 10,460,011 $ 10,438,778
Training and support 5,359,874 4,099,494 3,382,360
------------ ------------ ------------
Total net revenues 17,701,863 14,559,505 13,821,138
------------ ------------ ------------
Cost of revenues:
Product sales 4,555,455 2,251,624 3,220,424
Training and support 488,597 445,363 571,177
------------ ------------ ------------
Total cost of revenues 5,044,052 2,696,987 3,791,601
------------ ------------ ------------
Gross profit 12,657,811 11,862,518 10,029,537
------------ ------------ ------------
Operating expenses:
Selling and marketing 6,430,180 4,735,154 4,902,045
Research and development 3,388,487 2,760,577 2,769,364
General and administrative 3,083,514 2,525,251 2,174,181
Acquisition related charges 261,136
------------ ------------ ------------
Total operating expenses 13,163,317 10,020,982 9,845,590
------------ ------------ ------------
Operating income (loss) (505,506) 1,841,536 183,947
Other income (expense):
Interest income 785,177 777,116 686,065
Interest expense (1,301) (12,537) (6,467)
Other income, net 117,034 6,786 35,805
------------ ----------- ------------
Income before income taxes 395,404 2,612,901 899,350
Income tax expense 140,480 843,897 246,613
------------ ----------- ------------
Net income $ 254,924 $ 1,769,004 $ 652,737
============ =========== ============
Weighted average common shares outstanding 4,846,488 4,826,785 4,802,375
============ =========== ============
Basic income per share $ 0.05 $ 0.37 $ 0.14
============ =========== ============
Weighted average common and common equivalent
shares outstanding 4,940,858 4,984,647 4,861,947
============ =========== ============
Diluted income per share $ 0.05 $ 0.35 $ 0.13
============ =========== ============
</TABLE>
See notes to consolidated financial statements.
-26-
<PAGE>
EAGLE POINT SOFTWARE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE FISCAL YEARS ENDED JUNE 30, 2000, 1999, AND 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Additional
Common Paid-In Retained Treasury
Stock Capital Earnings Stock Total
<S> <C> <C> <C> <C> <C>
BALANCES AT JULY 1, 1997 $ 49,417 $ 17,535,942 $ 2,679,788 $ (508,875) $ 19,756,272
Purchase of 48,200 shares of
treasury stock (164,178) (164,178)
Issuance of 20,924 shares of
treasury stock under employee
stock purchase plan (6,068) 86,521 80,453
Net income 652,737 652,737
-------- ------------ ----------- ---------- ------------
BALANCE AT JUNE 30, 1998 49,417 17,535,942 3,326,457 (586,532) 20,325,284
Exercise of 17,396 stock options 88,348 (37,370) (54,234) (3,256)
Issuance of 24,003 shares of
treasury stock under employee
stock purchase plan 91,173 91,173
Net income 1,769,004 1,769,004
-------- ------------ ----------- ---------- ------------
BALANCE AT JUNE 30, 1999 49,417 17,624,290 5,058,091 (549,593) 22,182,205
Exercise of 30 stock options (54) 151 97
Issuance of 13,623 shares of
treasury stock under employee
stock purchase plan 72,371 72,371
Net income 254,924 254,924
-------- ------------ ----------- ---------- ------------
BALANCE AT JUNE 30, 2000 $ 49,417 $ 17,624,290 $ 5,312,961 $ (477,071) $ 22,509,597
======== ============ =========== ========== ============
</TABLE>
See notes to consolidated financial statements.
-27-
<PAGE>
EAGLE POINT SOFTWARE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED JUNE 30, 2000, 1999, AND 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999 1998
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 254,924 $ 1,769,004 $ 652,737
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,170,940 1,106,909 1,079,738
Amortization 461,327 253,266 87,455
Charge for purchased research and development 78,600
Deferred income taxes 24,263 463,540 (285,593)
Gain on sale of property and equipment (4,697)
Changes in assets and liabilities, net of assets acquired:
Accounts receivable (922,881) (54,205) 200,416
Interest receivable (9,945) 3,729 (87,643)
Inventories (799,330) 16,540 372,257
Prepaid expenses and other assets (38,285) 54,803 (33,155)
Accounts payable 355,446 (77,524) (295,520)
Income taxes payable/receivable (176,172) (55,196) 578,748
Accrued expenses 79,342 (1,135) 52,935
Deferred revenues 385,835 (731,132) 2,244,240
Other 90,138 (9,334) 64,852
----------- ----------- ------------
Net cash provided by operating activities 954,202 2,734,568 4,631,467
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (821,834) (614,614) (602,402)
Proceeds from sale of property and equipment 4,697
Software development costs:
Capitalized costs (241,496) (105,401) (271,507)
Purchases of software (48,510) (5,000) (35,000)
Purchase of investments (10,998,500) (9,077,910) (15,040,940)
Proceeds from maturities of investments 11,046,994 8,050,982 7,515,572
Payments to acquire companies, net of cash acquired (2,212,388) (75,000)
----------- ----------- ------------
Net cash used in investing activities (3,275,734) (1,822,246) (8,434,277)
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt (71,434) (184,425) (257,347)
Purchase of treasury stock (164,178)
Proceeds from issuance of treasury stock under employee
stock purchase plan 72,371 91,173 80,453
----------- ----------- ------------
Net cash provided by (used in) financing activities 937 (93,252) (341,072)
----------- ----------- ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (2,320,595) 819,070 (4,143,882)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 5,481,640 4,662,570 8,806,452
----------- ----------- ------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 3,161,045 $ 5,481,640 $ 4,662,570
----------- ----------- ------------
</TABLE>
(Continued)
-28-
<PAGE>
EAGLE POINT SOFTWARE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED JUNE 30, 2000, 1999, AND 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999 1998
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW
INFORMATION:
Cash paid for:
Interest $ 1,670 $ 5,766 $ 6,375
=========== ========== ==========
Income taxes $ 308,389 $ 169,387 $ 416,525
=========== ========== ==========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Exercise of employee stock options $ 97 $ 91,604
=========== ==========
Assets acquired in connection with the acquisition of a business:
Inventories $ 280,012
Property and equipment 49,369
Developed product technology 972,000
Purchased research and development 78,600
Goodwill 832,407
-----------
$ 2,212,388
===========
</TABLE>
(Concluded)
See notes to consolidated financial statements.
-29-
<PAGE>
EAGLE POINT SOFTWARE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FISCAL YEARS ENDED JUNE 30, 2000, 1999, AND 1998
--------------------------------------------------------------------------------
1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Operations - Eagle Point Software Corporation and its
subsidiary (Company) is engaged in the development, production and sale of
software for the engineering, construction, structural architectural, and the
automated data collection surveying markets.
Cash and Cash Equivalents - The Company considers all highly liquid
investments with original maturities of three months or less when purchased
to be cash equivalents.
Investments - Investments consist of U.S. Treasury Notes. All of the
Company's investments are accounted for as held-to-maturity and reported at
amortized cost. All long-term investments mature September 2001.
Inventories - Inventories are stated at the lower of cost (first in, first
out) or market.
Property and Equipment - Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the following
estimated useful lives:
Years
Buildings and land improvements 20-40
Computer equipment and purchased software 3-5
Furniture and fixtures 7-10
Office equipment 5-7
Vehicles 5-7
Non-Compete Agreements - Non-compete agreements are being amortized using the
straight-line method over the five year term of the agreements.
Goodwill - Goodwill is being amortized using the straight-line method over
periods of four to seven years.
Income Taxes - The Company provides deferred tax assets or liabilities based
on the difference between the financial statement and tax basis of assets and
liabilities, measured using enacted tax rates.
Concentrations - The Company held approximately $11.0 million in various U.S.
Treasury Notes as of June 30, 2000 and 1999. The Company's temporary cash
investments of approximately $1.3 million and $1.2 million as of June 30,
2000 and 1999, respectively, were placed in a money market account with
William Blair Mutual Funds, Inc. and $1.9 million and $4.1 million as of June
30, 2000 and 1999, respectively, were placed in a money market repurchase
account at a local bank. These are primarily funds that were received from
the Company's public stock offering in 1995.
Revenues - The Company derives substantially all of its product revenues from
the license of its software products. Revenue is recognized upon shipment of
the product, provided that no product upgrade obligations remain outstanding
and collection of the resulting receivable is deemed probable. Dependent
upon the timing of future product upgrade releases and market conditions, the
Company may extend promotions where product upgrade obligations are
associated with the
-30-
<PAGE>
shipment of software products. Based upon the terms of the promotions extended,
a portion or all of the product revenues may be deferred until the promotional
product upgrade is released and subsequently shipped. The Company also derives
product revenues from the sale of equipment used in the automated data
collection surveying markets.
The Company recognizes its product support revenues from maintenance and support
contracts ratably over the period of the arrangements. These contracts generally
have terms of one year or less. The Company recognizes its service revenues from
training arrangements in the period in which the training occurs.
Cost of Revenues - Cost of revenues consists primarily of purchases of third
party products, costs of manuals and other materials, software development cost
amortization, royalties, costs related to the Company's system production
department and personnel and other costs associated with training and support.
Software Development Costs - Software development costs are stated at the lower
of unamortized cost or net realizable value. The Company capitalizes software
development costs subsequent to the establishment of technological feasibility
and until the product is available for general release. Costs incurred prior to
the establishment of technological feasibility are charged to research and
development expenses. Costs associated with product enhancements that extend the
original product's life are also capitalized upon technological feasibility.
Amortization of product development costs begins the month of general release
and extends on a straight line basis over 18 months, which results in
amortization expense no less than that which would result from using the ratio
of current gross revenues to total expected gross revenues. Purchased software
development costs are capitalized and amortized on a straight line basis over 18
to 48 months.
Earnings Per Share (EPS) - Basic EPS excludes dilution and is computed by
dividing net income by the weighted average of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that would occur if
securities or other contracts to issue common stock were exercised or converted
into common stock.
A reconciliation of the numerators and denominators used in the basic and
diluted net income per share amounts follows:
<TABLE>
<CAPTION>
Fiscal Year Ending June 30,
----------------------------------------------------
2000 1999 1998
<S> <C> <C> <C>
Numerator:
Numerator for basic and diluted net income
per share - net income $ 254,924 $ 1,769,004 $ 652,737
=========== =========== ===========
Denominator
Denominator for basic net income per
share - weighted average shares 4,846,488 4,826,785 4,802,375
Net effect of stock options based on the
treasury stock method using the average
market price during the period 94,370 157,862 59,572
----------- ----------- -----------
Denominator for diluted net income
per share 4,940,858 4,984,647 4,861,947
=========== =========== ===========
</TABLE>
Statement of Financial Accounting Standards In June of 1998, the Financial
Accounting Standards Board issued Statements of Financial Accounting Standard
No. 133 (SFAS 133), Accounting for Derivative Instruments and Hedging
Activities. SFAS 133 establishes accounting and reporting
-31-
<PAGE>
standards for derivative instruments, including certain derivative
instruments embedded in other contracts. This standard, as amended, is
effective for periods beginning after June 15, 2000. Company management has
evaluated the standard and the reporting implications thereof, and has
determined that there will not be a significant impact on Company operating
results.
Staff Accounting Bulletin - In December 1999, the United States Securities
and Exch ange Commission released Staff Accounting Bulletin No. 101 (SAB
No. 101), Revenue Recognition in Financial Statements, which provides
additional guidance on revenue recognition criteria and related disclosure
requirements. Implementation of SAB No. 101 is required no later than the
fourth fiscal quarter of fiscal years beginning after December 15, 1999,
but is effective retroactively to the beginning of that fiscal year.
Company management has evaluated the standard and the reporting
implications thereof, and has determined that there will not be a
significant impact on Company operating results.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Significant estimates include the allowance
for doubtful accounts and allowance for sales returns as well as
realization of intangible assets. Actual results could differ from those
estimates.
Fair Value Disclosure - The carrying value of the long term debt
approximates fair value as interest rates approximate the rate management
believes the Company could refinance the obligations, given the current
market conditions. Investments are carried at amortized cost, which
approximates fair value. Other financial assets and liabilities approximate
their fair values because of the short maturity of those instruments.
2. ACQUISITIONS
Computer Integrated Building Corporation
On July 29, 1996, the Company purchased substantially all assets of
Computer Integrated Building Corporation (CIBC), a developer and marketer
of computer software.
A final payment of $75,000 on March 12, 1999 completed the contingent cash
payments due to CIBC. This amount is included in non compete agreements in
the consolidated balance sheet.
Surveyors Module International, LLC
On December 1, 1999, the Company purchased substantially all the assets of
Surveyors Module International, LLC (SMI), a developer of software that is
integrated in and sold with hand held surveying data collection devices,
for approximately $2,100,000 in cash. Additionally, the Company is
obligated to make contingent cash payments during each of the next two
years following the date of the initial acquisition equal to (1) 70% of the
adjusted gross profits (as defined by the purchase agreement) attributable
to the acquired business of between $1,650,000 and $2,500,000, plus (2) 85%
of the adjusted gross profits above $2,500,000. Additional contingent cash
payments of approximately $120,000 were paid and allocated to goodwill
during the year ended June 30, 2000.
The SMI acquisition has been accounted for under the purchase method, and
accordingly, the results of operations are included in the Company's
results from the date of acquisition.
The purchase price allocated as follows:
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<PAGE>
Inventories $ 280,012
Property and equipment 49,369
Software development costs 972,000
Purchased research and development in process 78,600
Goodwill 832,407
----------
$2,212,388
==========
Pro-forma results of operations for the years ended June 30, 2000 and 1999
as if the acquisitions had occurred at the beginning of each year are as
follows:
2000 1999
Total net revenues $ 19,489,885 $ 17,729,426
Net income 325,710 1,787,036
Earnings per share
Basic $ 0.07 $ 0.37
Diluted 0.07 0.36
Acquisition related charges included in the accompanying consolidated
statements of operations consist of the following:
June 30,
2000
Charge for purchased research and development
in acquisition of SMI $ 78,600
Other acquisition related charges 182,536
------------
$ 261,136
============
3. INVENTORIES
Inventories consist of the following as of June 30:
2000 1999
Manuals and diskettes $ 139,339 $ 91,781
Finished software products 95,583 16,481
964,951 12,269
------------ ------------
Purchased hardware and other supplies $ 1,199,873 $ 120,531
============ ============
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<PAGE>
4. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consists of the following as of June 30:
2000 1999
Land $ 637,400 $ 637,400
Buildings and land improvements 4,089,437 4,059,340
Computer equipment and purchased software 5,394,193 5,037,409
Furniture and fixtures 1,405,528 1,369,839
Office equipment 732,651 627,240
Vehicles 76,691 76,691
------------ ------------
12,335,900 11,807,919
Accumulated depreciation (6,079,855) (5,252,137)
------------ ------------
$ 6,256,045 $ 6,555,782
============ ============
5. ACCRUED EXPENSES
Accrued expenses consist of the following as of June 30:
2000 1999
Salaries and commissions $ 571,762 $ 374,449
Other 602,158 720,129
----------- -----------
$ 1,173,920 $ 1,094,578
============ ============
6. NOTES PAYABLE
At June 30, 2000, the Company had a $2,000,000 unsecured operating line of
credit agreement with a bank which expires December 1, 2000. Borrowings
under the line of credit accrue interest at a floating rate based on the
prime rate (9.25% at June 30, 2000). At June 30, 2000 there were no
borrowings outstanding under the line.
7. LONG-TERM DEBT
As of June 30, 2000, long-term debt consists of loans with economic
development groups with interest rates ranging from 0% - 5%. Principal and
interest payments are due quarterly or annually with final maturity dates
ranging from October 2000 to November 2001. The amounts are collateralized
by the equipment purchased with the loan proceeds. Approximately $57,000 of
the loans are guaranteed by various stockholders of the Company. Certain of
the Company's loan agreements prohibit the payment of dividends on the
Company's capital stock without prior written consent. At June 30, 2000,
future principal payments on long-term debt for each of the two years in the
period ended June 30, 2002 are $35,771 and $28,571, respectively.
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<PAGE>
8. INCOME TAXES
Income tax expense consists of the following for the years ended June 30:
2000 1999 1998
Current:
Federal $ 112,439 $ 380,302 $ 524,106
State 3,778 55 8,100
---------- ---------- ----------
Total current 116,217 380,357 532,206
---------- ---------- ----------
Deferred:
Federal 23,571 450,296 (272,584)
State 692 13,244 (13,009)
---------- ---------- ----------
Total deferred 24,263 463,540 (285,593)
---------- ---------- ----------
Income tax expense $ 140,480 $ 843,897 $ 246,613
========== ========== ==========
The approximate tax effects of temporary differences that give rise to
deferred tax assets (liabilities) were as follows as of June 30:
2000 1999 1998
Product development costs $ (10,295) (27,324) $ (43,431)
Depreciation (214,269) (241,785) (236,886)
Prepaid expenses (41,584) (27,288) (38,462)
Purchased research and development 381,070 389,921 425,213
Deferred revenues 159,031 246,205 656,719
Allowance for bad debts 36,373 37,594 25,748
Land acquired from Partnership 79,625 79,625 79,625
Building acquired from Partnership 236,191 242,353 246,773
Other 163,027 114,131 161,673
Iowa new jobs credits 158,376 162,000 176,000
Valuation allowance (158,376) (162,000) (176,000)
---------- --------- ----------
$ 789,169 $ 813,432 $ 1,276,972
========== ========= ===========
The State of Iowa offers an income tax credit to corporations who have
entered into certain training agreements under Iowa Law. During the three
years ended June 30, 2000, the Company's management determined that
approximately $158,000, $162,000, and $176,000, respectively, of tax credits
were available to the Company since their agreement was entered into.
However, the Company incurs minimal Iowa taxes due to a small percentage of
the Company's gross revenues being generated in Iowa. The remaining credits
of $133,000 generated during the period ended June 30, 1995 can be carried
forward to reduce Iowa taxes through 2005. Additional credits of $25,000
earned but not utilized as of June 30, 1996 can be carried forward to reduce
Iowa taxes through 2006. Management has fully reserved the deferred tax
asset related to the credit carryforward as they believe it is more likely
than not that the benefit of the carryforward will not be realized prior to
expiration.
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<PAGE>
Reconciliations of income tax expense with income tax expense computed
using statutory federal rates are as follows for the years ended June 30:
<TABLE>
<CAPTION>
2000 1999 1998
<S> <C> <C> <C>
Computed statutory expense $ 138,391 $ 914,515 $ 314,772
State income taxes, net of federal tax benefit 2,451 6,881 (9,106)
Change in valuation allowance (3,624) (14,000) (2,000)
Research and development tax credits (39,165) (62,234)
Other 3,262 (24,334) 5,181
---------- ---------- ----------
Income tax expense $ 140,480 $ 843,897 $ 246,613
========== ========== ==========
</TABLE>
9. SEGMENT INFORMATION
The Company operates in two segments; sale of software and sale of training
and support. The consolidated statement of operations delineates information
on these two segments.
Net revenues consisted of the following for the years ended June 30:
2000 1999 1998
Domestic $ 16,452,691 $ 13,783,659 $ 12,406,406
Export - Canada 439,569 301,578 565,299
Export - other 809,603 474,268 849,433
------------ ------------ ------------
$ 17,701,863 $ 14,559,505 $ 13,821,138
============ ============ ============
10. EMPLOYEE BENEFITS
Profit Sharing - The Company has a 401(k) profit sharing plan. The plan
allows eligible employees to make contributions up to 15% of their
compensation. Under the plan, the Company may contribute to the plan an
amount of matching contributions which is determined at its discretion. For
the years ended June 30, 2000, 1999, and 1998, the Company's matching
contributions were approximately $22,000, $19,000, and $17,000,
respectively.
Employee Stock Purchase Plans - The Company has an employee stock purchase
plan. The Eagle Point Software Corporation Employee Stock Purchase Plan
(Purchase Plan) permits eligible employees of the Company to purchase shares
of common stock at below-market prices through payroll deductions. Shares
are purchased at the lesser of 85% of the fair market value of the common
stock on the first trading day in an annual participation period or 85% of
the fair market value of the common stock on the last trading day in such
period. Under the Purchase Plan, up to 150,000 shares may be sold. These
shares may be newly issued shares or shares acquired by the Company on the
open market. Unless terminated earlier by the Board of Directors, the
Purchase Plan will terminate when 150,000 shares have been sold. Total
shares sold under the Purchase Plan were 77,693 as of June 30, 2000.
Stock Options - The Company has an employee stock option plan. The Eagle
Point Software Corporation Stock Option Plan (Plan) allows for the issuance
of incentive stock options or nonqualified stock options. Under the Plan, up
to an aggregate of 1,000,000 shares of common stock may be issued upon the
exercise of stock options granted. The Plan also provides that option prices
may not be less than 100% of the fair market value of the shares on the date
of grant. Options granted to employees vest over 4 years from the date of
the grant and options to non-
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<PAGE>
employee directors vest on the date of grant. All options expire no later
than 10 years from the date of grant. No stock options may be issued under
the Plan after December 16, 2009. The benefit of income tax deductions due
to options exercised is credited to additional paid-in capital.
The Company applies APB Opinion 25 in accounting for its Plan. Accordingly,
no compensation cost has been recognized in the statements of operations for
the Plan for 2000, 1999, or 1998. Had compensation cost been determined on
the basis of fair value pursuant to SFAS No. 123, net income and income per
share would have been as follows:
2000 1999 1998
Net income:
As reported $ 254,924 $ 1,769,004 $ 652,737
Pro forma 130,969 1,630,279 486,083
Basic income per share:
As reported $ 0.05 $ 0.37 $ 0.14
Pro forma 0.03 0.34 0.10
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 2000, 1999, and 1998: dividend yield of 0%;
expected volatility of 40%; risk-free interest rate of 6.34% in 2000, 5.93%
in 1999, and 5.50% in 1998; and expected lives of 5 years from grant date. A
summary of the status of the stock option plan as of June 30, 2000, 1999,
and 1998, and the changes during the years then ending is presented below:
<TABLE>
<CAPTION>
2000 1999 1998
------------------------- -------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Fixed Options Shares Price Shares Price Shares Price
OUTSTANDING AT 525,608 $ 6.64 457,701 $ 6.06 288,256 $ 10.00
BEGINNING OF YEAR
Granted 158,824 5.69 154,150 7.72 282,570 3.70
Exercised (30) 3.09 (17,396) 3.54 -
Forfeited (17,873) 6.32 (68,847) 5.97 (113,125) (10.19)
-------- ------- --------- ------- --------- -------
OUTSTANDING AT
END OF YEAR 666,529 $ 6.42 525,608 $ 6.64 457,701 $ 6.06
======== ======= ======== ======= ========= =======
Options exercisable at year end 173,946 $ 9.47 104,518 $ 10.89 47,672 $ 10.90
======= ======= =======
Weighted-average grant date
fair value of options granted
during the year $ 2.56 $ 3.42 $ 1.61
</TABLE>
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<PAGE>
The following table summarizes information about stock options outstanding
at June 30, 2000:
Options Outstanding Options Exercisable
--------------------------- -------------------------
Weighted Weighted
Exercise Averag Average
Price Remaining Exercise
Range Number Contractual Life Number Price
$3.09 to $6.13 464,279 7.85 years 77,383 $ 4.26
$7.72 to $8.09 119,250 8.20 years 13,563 7.92
$9.38 to $13.00 54,400 4.99 years 54,400 12.67
$17.50 to $20.88 28,600 5.42 years 28,600 18.20
-------- --------
666,529 173,946
======== ========
11. LEASES
The Company leases certain office equipment and vehicles under operating
leases. Rent expense for the years ended June 30, 2000, 1999, and 1998, was
approximately $65,000, $55,000, and $76,000, respectively.
At June 30, 2000, future minimum rental payments due under operating leases
for each of the three years in the period ended June 30, 2003 are
approximately $68,000, $27,000, and $10,000, respectively.
In February 2000, the Company began leasing a portion of their office space
at their corporate headquarters to a tenant. Rent income for the year ended
June 30, 2000 was approximately $26,000.
At June 30, 2000, future minimum lease receipts due under this lease for
each of the three years in the period ended June 30, 2003 are approximately
$79,000, $79,000, and $13,000, respectively.
12. SUBSEQUENT EVENT
Effective July 14, 2000, the Company's Board of Directors authorized the
repurchase of up to 500,000 shares of the Company's stock which may be
purchased in the open market from time to time or in privately negotiated
transactions. The repurchased stock is expected to be held by the Company in
treasury to be used to meet the Company's obligations under its stock option
and stock purchase plans, as well as other corporate purposes.
Effective September, 2000 the employment of a vice president of the Company
terminated. Pursuant to the terms of his employment agreement, he will
receive severance benefits totaling approximately $425,000, substantially
all of which will be paid in fiscal year 2001.
* * * * *
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<PAGE>
SCHEDULE II
EAGLE POINT SOFTWARE CORPORATION AND SUBSIDIARY
ALLOWANCES
FOR THE FISCAL YEARS ENDED JUNE 30, 2000, 1999, AND 1998
Additions-
Balance, Charged to Deductions-
beginning of Cost and Accounts Balance, End
Description Year Expenses Charged-Off of Year
June 30, 2000 - Allowance
for doubtful accounts $ 107,411 $ 95,000 $ 98,488 $ 103,923
--------- ---------- ---------- ---------
June 30, 1999 - Allowance
for doubtful accounts $ 73,565 $ 85,000 $ 51,154 $ 107,411
--------- ---------- ---------- ---------
June 30, 1998 - Allowance
for doubtful accounts $ 121,768 $ 79,000 $ 127,203 $ 73,565
--------- ---------- ---------- ---------
June 30, 2000 - Allowance
for sales returns $ 110,898 $ 638,983 $ 583,375 $ 166,506
--------- ---------- ---------- ---------
June 30, 1999 - Allowance
for sales returns $ 87,980 $ 460,001 $ 437,083 $ 110,898
--------- ---------- ---------- ---------
June 30, 1998 - Allowance
for sales returns $ 84,607 $ 315,344 $ 311,981 $ 87,970
--------- ---------- ---------- ---------
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, this Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Date: September 28, 2000 EAGLE POINT SOFTWARE CORPORATION
/s/ Rodney L. Blum
-----------------------------------
Rodney L. Blum
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Registration Statement has been signed by the following persons in the
capacities indicated on this 28th day of September, 2000.
Name Capacity
---- --------
/s/ Rodney L. Blum Chairman of the Board,
------------------------
Rodney L. Blum President, Chief Executive Officer and
Director (principal executive officer)
/s/ Dennis J. George Vice President, Chief
------------------------
Dennis J. George Financial Officer, Secretary, Treasurer and
Director (principal financial and accounting
officer)
/s/ James P. Hickey Director
------------------------
James P. Hickey
/s/ Thomas O. Miller Director
------------------------
Thomas O. Miller
The above signatories constitute a majority of the Board of Directors.
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<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description
----------- -----------
3.1* --Certificate of Incorporation of the Company.
3.2****** --Amended and Restated By-laws of the Company.
10.1* --Loan Agreement between the Company and
the City of Dubuque, dated January 20, 1992.
10.2* --Loan Agreement between the Company and
the City of Dubuque, dated July 6, 1993.
10.3* --Loan Agreement between the Company and
the City of Dubuque, dated May 16, 1994.
10.4* --Community Economic Betterment Account
Agreement between the Company and the
Iowa Department of Economic Development,
dated July 18, 1991.
10.5* --Community Economic Betterment Account
Agreement between the Company and the
Iowa Department of Economic Development,
dated July 15, 1993.
10.6* --Asset Purchase Agreement between the
Company and Facility Mapping Systems,
Inc., dated March 31, 1995.
10.7* --Asset Purchase Agreement between the
Company and LANDCADD, Inc., dated
January 1, 1995.
(degree)10.8**** --Employment Agreement with Rodney L. Blum.
(degree)10.9**** --Employment Agreement with Dennis J. George.
(degree)10.10**** --Employment Agreement with John F. Biver.
(degree)10.11** --Eagle Point Software Corporation Stock
Option Plan
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<PAGE>
Exhibit No. Description
----------- -----------
(degree)10.12*** --Eagle Point Software Corporation Stock
Purchase Plan.
10.13* --Purchase Agreement between VisionOne
Partnership and the Company, dated as
of May 1, 1995.
10.14***** --Merger Agreement between the
Company and ECOM Associates,
Inc., dated November 9, 1995.
10.15***** --Asset Purchase Agreement between the
Company and Computer Integrated
Building Corporation dated July 29, 1996.
10.16+ --Asset Purchase Agreement between the
Company and Surveyors Module International,
LLC, dated December 1, 1999.
(degree)10.17++ --Eagle Point Software(TM) Corporation
1999 Stock Option Plan.
(degree)10.18+++ --Amended and restated Eagle Point Software(TM)
Corporation 1995 Employee Stock Purchase Plan.
11.1# --Statement re: computation of per share earnings.
21.1# --Subsidiaries
23.1# --Consent of Deloitte & Touche LLP.
23.2# --Independent Auditors' Report on Schedule
27# --Financial Data Schedule
-------------------------
* Incorporated by reference from the Company's Registration Statement
on Form S -1 (File No. 33-91950)
** Incorporated by reference from the Company's Registration Statement
on Form S -8 (File No. 33-96914)
*** Incorporated by reference from the Company's Registration Statement
on Form S -8 (File No. 33-96918)
**** Incorporated by reference from the Company's 1995 Annual Report on
Form 10-K
***** Incorporated by reference from the Company's 1996 Annual Report on
Form 10-K
****** Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the period ended December 31, 1998
+ Incorporated by reference from the Company's report on Form 8-K
filed December 13, 1999
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<PAGE>
++ Incorporated by reference from the Company's Registration Statement
on Form S-8 (File No. 333-32708)
+++ Incorporated by reference from the Company's Registration Statement
on Form S-8 (File N0. 333-32712)
# Filed herewith.
(degree) Indicates management contract or compensatory plan or arrangement.
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