10-Q 1 b40049ece10-q.txt EPRISE CORPORATION 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001 OR [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______________ to _________________ Commission file number: 0-29319 EPRISE CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 04-3179480 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 200 CROSSING BOULEVARD FRAMINGHAM, MA 01702 (Address of principal executive offices) (508) 661-5200 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant 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). Yes [X] No [ ] Indicate by check mark whether the Registrant has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: As of August 3, 2001, there were 23,059,306 shares of the Registrant's Common Stock, $0.001 par value per share, outstanding. 2 EPRISE CORPORATION FORM 10-Q FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2001

2 3 PART I FINANCIAL INFORMATION ITEM 1. CONDENSED FINANCIAL STATEMENTS EPRISE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)

See notes to the condensed consolidated financial statements. 3 4 EPRISE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

See notes to the condensed consolidated financial statements. 4 5 EPRISE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)

See notes to the condensed consolidated financial statements. 5 6 EPRISE CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF BUSINESS Eprise Corporation and its subsidiaries develop, market and implement Web content management solutions that help businesses shape and direct e-business communications effectively and efficiently. We also provide design and other consultative services designed to help organizations maximize the value they derive from our Web content management solutions. Business is conducted primarily in the United States. 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION We prepared the accompanying unaudited condensed consolidated financial statements following the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read together with our audited financial statements and related footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2000. In the opinion of management, the accompanying unaudited consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the interim periods presented. The operating results for the interim periods presented are not necessarily indicative of the results which could be expected for the full year. SIGNIFICANT ACCOUNTING POLICIES REVENUE RECOGNITION Revenue from products is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable and collectibility is probable. When arrangements contain multiple elements and vendor specific objective evidence exists for all undelivered elements, we recognize revenue for the delivered elements using the residual method. For arrangements containing multiple elements wherein vendor specific objective evidence does not exist for all undelivered elements, revenue for the delivered and undelivered elements is deferred until vendor specific objective evidence exists or all elements have been delivered. Maintenance services revenues, whether sold separately or as part of a multiple element arrangement, are deferred and recognized ratably over the term of the maintenance contract, generally twelve months. Consulting revenue is recognized as services are performed. STOCK-BASED COMPENSATION Compensation expense associated with awards of stock or options to employees is measured using the intrinsic-value method. Compensation expense associated with awards to non-employees is measured using the fair-value method. NET LOSS PER SHARE PRO FORMA NET LOSS PER SHARE Pro forma net loss per share has been computed using the weighted-average number of shares of common stock outstanding during each period. In addition, for purposes of pro forma net loss per share, all shares of Series A, B and C preferred stock, which were converted into common stock upon closing of our initial public offering in March of 2000, have been treated as though they were common stock in all periods in which such shares were outstanding. In addition, no effect is given to accretion of the preferred stock for purposes of this computation. HISTORICAL NET LOSS PER SHARE 6 7 EPRISE CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Historical net loss per share has been computed using the weighted-average number of shares of common stock outstanding during each period. Diluted amounts per share would include the impact of our outstanding potential common shares, such as options and warrants (computed using the treasury stock method) and convertible preferred stock. However, the effect of these items would be antidilutive in all periods presented and they are excluded from the computation. CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS Our revenues are derived from various customers who generally are not required to provide collateral for amounts owed to the Company. We operate in one segment. Our customers are dispersed over a wide geographic area. For the quarter ended June 30, 2001, two customers each accounted for 17% and 12% of our revenue. For the six months ended June 30, 2001, there were no customers who individually accounted for more than 10% of our revenue. For the quarter and six months ended June 30, 2000, there were no customers who individually accounted for more than 10% of our revenue. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS DERIVATIVE INSTRUMENTS In June 1998, the Financial Accounting Standards Board released Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," effective for fiscal years beginning after June 15, 2000. The adoption of SFAS No. 133 on January 1, 2001 did not have a material impact on our financial position or results of operations. GOODWILL AND ACCOUNTING FOR BUSINESS COMBINATIONS In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations." SFAS 141 requires the purchase method of accounting for business combinations initiated after June 30, 2001 and eliminates the pooling-of-interests method. We do not believe that the adoption of SFAS 141 will have a significant impact on our financial statements. Also in July 2001, the FASB issued Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets", which is effective January 1, 2002. SFAS 142 requires, among other things, the discontinuance of goodwill amortization. We do not believe that the adoption of SFAS 141 will have a significant impact on our financial statements. 3. INCOME TAXES A reconciliation of the statutory federal rate to the effective rate for all periods is as follows: Statutory Federal rate benefit.................................... (34)% State, net of Federal effect...................................... (6) Non-deductible stock compensation................................. 2 Valuation allowance provided...................................... 38 --- Effective rate.................................................... ---% ===

7 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with our financial statements and related notes which appear elsewhere in this report. OVERVIEW Eprise, originally named Inner Circle Technologies and then NovaLink, was founded in 1992 as a provider of online interactive games. Between 1994 and 1997, our principal business shifted to creating and hosting Web sites for corporate clients. During this period, we encountered recurring problems arising out of the inadequacy of software tools that were commercially available to build and maintain Web sites. Realizing that there was an opportunity to streamline and automate these processes, we began to develop a software product called Eprise Participant Server to facilitate the construction and updating of Web sites. We shipped our first commercial product in early 1998. Eprise now markets and sells version 3.5 of Eprise Participant Server. We generate revenues from two principal sources: (1) license fees for our software products and (2) professional services and technical support revenues derived from consulting, implementation, training and maintenance services related to our software products. In the three-month period ended June 30, 2001, two customers each accounted for 17% and 12% of our total revenues. In the six-month period ended June 30, 2001, there were no individual customers accounting for 10% or more of our total revenues. In the three-month and six-month periods ended June 30, 2000, there were no individual customers accounting for 10% or more of our total revenues. License revenue represented 43% of total revenues in the first six months of 2001. License sales produce significantly higher margins than service sales due to lower costs associated with licenses and their delivery. Software licenses. Customers typically pay an up-front, one-time fee for a perpetual non-exclusive license of our software. Generally, the amount of the fee is based on the number of licensed servers. To date, software license revenues have principally come from direct sales to customers. The sales cycle for our products is typically three to six months. Although we have limited historical financial data, we believe that our quarterly operating results may experience seasonal fluctuations due to clients' fiscal year budgeting cycles and purchasing patterns. Because of our server-based licensing, we experience significant variation in the size of our licensing transactions. We generally recognize license fee revenues upon delivery of the product. If the product is subject to acceptance and/or return and refund, we defer revenues until acceptance has occurred or the refund period has expired. Services. Services revenues consist principally of revenues derived from professional services associated with the implementation and integration of our software products, training of customers' employees and ongoing customer support, which primarily includes customer technical support services and product enhancements. We deliver professional services on either a fixed price basis or a time and materials basis. We generally complete implementation and training services within six months following license contract signing. We recognize revenues from professional services as such services are performed. We recognize maintenance revenues, which are invoiced annually in advance, ratably over the term of the maintenance agreement, which is generally 12 months. Our maintenance revenues currently account for approximately 15% of total revenues. As part of these agreements, we provide product enhancements and technical support services to customers for an annual fee, which typically amounts to 20% of the license fee. While a 60-day warranty is included in the software license, maintenance agreements typically are entered into as of the date of the software license. Maintenance agreements are renewable at the discretion of the customer. As of June 30, 2001, there have been 141 customers who have entered into maintenance agreements with 8 9 Eprise. Of the 141 contracts, to date 26 have expired, of which 10 have been renewed. The remaining contracts have not yet come up for renewal. Backlog. Delivery lead times for our products are very short and, consequently, substantially all of our license fee revenues in each quarter result from orders received in that quarter. Accordingly, we generally only maintain a backlog for our professional services and maintenance activities, and we believe that our backlog at any point in time is not a reliable indicator of future revenues and earnings. Cost of revenues. Cost of software licenses revenues includes royalties paid to certain software companies for products sold or distributed with or embedded in Eprise Participant Server. In the six months ended June 30, 2001, these royalties amounted to 3.8% of total revenues, and may increase in the future as license sales increase. Other costs associated with software licenses, including CDs and packaging, arise primarily from the production of software products, and have not been significant in any period presented, nor are they expected to be significant in the foreseeable future. Cost of services revenues consists primarily of salaries and related personnel costs, costs of third party contractors and other allocated expenses of our consulting, support and training organizations. Research and development. We maintain a product development staff to enhance our existing products and to develop new products. Software costs are expensed as incurred until technological feasibility of the software is determined, after which any additional costs are capitalized. To date, we have expensed all software development costs because development costs incurred subsequent to the establishment of technological feasibility have been minimal. Selling and marketing. We license our products primarily through our direct sales force. Selling and marketing expenses consist primarily of costs associated with personnel, sales commissions, office facilities, travel and promotional events such as trade shows, seminars and technical conferences, advertising and public relations programs. General and administrative. General and administrative expenses include salaries and related personnel expenses and other costs of the finance, human resources, information technology, and administrative functions at Eprise. Recent events. On July 17, 2001, we completed a reduction in force, affecting approximately 20% of our workforce. We had 196 full-time employees as of June 30, 2001 compared to 154 as of June 30, 2000. As of July 31, 2001, we had 158 employees. On May 10, 2001, we commenced a voluntary stock option exchange program for our employees. Under the program, our employees were given the opportunity to elect to cancel outstanding stock options held by them in exchange for an equal number of new options to be granted at a future date. These elections had to be made by June 8, 2001 and had to include all options granted during the prior six months. A total of 624,675 options to purchase our common stock were tendered in return for promises to grant new options on the grant date of December 12, 2001. The exercise price of the new options will be equal to the fair market value of our common stock on the date of grant. 9 10 RESULTS OF OPERATIONS The following table sets forth our operating results for the periods indicated as a percentage of revenues.

THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2000 Software licenses. Revenues from software licenses decreased by 49.6% to approximately $1.8 million for the three months ended June 30, 2001 compared to approximately $3.6 million for the three months ended June 30, 2000. Software license revenues represented 44% and 77% of total revenues for the three months ended June 30, 2001 and 2000, respectively. The decrease in revenues from software licenses was primarily due to a lengthening in the customer decision making process resulting from market conditions and increased competition in the marketplace. Services. Revenues from services increased by 117.3% to approximately $2.3 million for the three months ended June 30, 2001 compared to approximately $1.1 million for the three months ended June 30, 2000. Services revenues represented 56% and 23% of total revenues for the three months ended June 30, 2001 and 2000, respectively. Approximately 57% of the increase in absolute dollars is attributable to consulting and 42% to maintenance revenue generated by new software license sales. The increase as a percentage of total revenues is attributable to implementation services for licenses sold in 2000 and the first quarter of 2001 and additional follow-on services provided to our existing customers. Follow-on services represented 35% of the total services revenues for the three months ended June 30, 2001. Cost of software licenses. Cost of software licenses revenues was $125,000, representing 7% of license revenues, for the three months ended June 30, 2001. These costs primarily represent royalties paid to certain software companies for products sold with or embedded in Eprise Participant Server. These products were released in the second half of 2000 and the first quarter of 2001. Depending on the mix of software licenses sold, the cost of license revenues as a percentage of total revenues may increase in the future due to our existing royalty agreements. Cost of services. Cost of services increased by 42.2% to approximately $2.4 million for the three months ended June 30, 2001 compared to approximately $1.7 million for the three months ended June 30, 2000. Cost of services represented 104% and 159% of services revenues for the three months ended June 30, 2001 and 2000, respectively. The increase in absolute dollars was due to the expansion of our professional services organization, including technical consulting, technical support and training. The decrease as a percentage of services revenues was primarily due to a 50% decrease in the use of third party 10 11 contractors, increased utilization of our services staff, and the increase in maintenance revenue as a percentage of services revenue in the three months ended June 30, 2001. We expect cost of services revenues as a percentage of total revenues to vary from period to period depending on the mix of services we provide, whether the services are provided by our staff or third party contractors and on the utilization rates of our staff. Since services revenues have substantially lower margins than license revenues, growth of our services business will result in a lower gross profit if our license revenues do not increase significantly in the same period. Research and development. Research and development expenses increased by 50.6% to approximately $2.0 million for the three months ended June 30, 2001 compared to approximately $1.3 million for the three months ended June 30, 2000. Research and development expenses represented 49% and 29% of total revenues for the three months ended June 30, 2001 and 2000, respectively. The increase in absolute dollars was primarily attributable to an increase in personnel and employee-related expenses incurred as well as utilizing contracted resources more extensively as part of our development effort for version 3.5 of Eprise Participant Server and future product releases. We believe that continued investment in research and development is critical to achieving our corporate objectives, and that the absolute dollar amounts of research and development expenses may increase in future periods. Selling and marketing. Selling and marketing expenses decreased by 3.1% to approximately $5.4 million for the three months ended June 30, 2001 compared to approximately $5.6 million for the three months ended June 30, 2000. Selling and marketing expenses represented 131% and 120% of total revenues for the three months ended June 30, 2001 and 2000, respectively. The decrease was primarily attributable to the launching of an extensive advertising and branding campaign in the second quarter of 2000. This decrease was offset by the expansion of our business development staff as we extended our market reach through the establishment of relationships with systems integrators. We anticipate that selling and marketing expenses will fluctuate from period to period as a percentage of total revenues as new sales personnel become productive, and based on the timing of marketing programs and new product releases. General and administrative. General and administrative expenses increased by 17.8% to approximately $1.5 million for the three months ended June 30, 2001 compared to approximately $1.3 million for the three months ended June 30, 2000. General and administrative expenses represented 36% and 27% of total revenues for the three months ended June 30, 2001 and 2000, respectively. The increase in absolute dollars primarily reflects personnel increases and the related costs associated with supporting our anticipated growth. We expect general and administrative costs to fluctuate based on the growth of our business. Compensation cost for stock options. For certain option grants made during 2000 and 1999, we have concluded that the exercise price of such options were less than the fair value of the underlying common stock on the date of grant. As a result, compensation cost has been incurred related to these options which aggregated approximately $1.4 million and $6.8 million, for grants in 2000 and 1999, respectively, which is being amortized to expense over the four year vesting period of the option grants. For the three months ended June 30, 2001 and 2000, compensation expense recorded related to these grants aggregated $371,000 and $529,000, respectively. Other income (expense). Other income and expense consisted primarily of interest income on invested cash balances and interest expense on borrowings. The decrease in other income between the two periods was the result of lower cash balances as we used the cash generated from our public offering in March 2000 for funding operations. Income taxes. During the three months ended June 30, 2001 and 2000, we reported losses for both financial and income tax purposes. No provision or benefit for income taxes was recorded in either period. SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2000 Software licenses. Revenues from software licenses decreased by 39.5% to approximately $3.5 million for the six months ended June 30, 2001 compared to approximately $5.8 million for the six months ended June 30, 2000. Software license revenues represented 43% and 80% of total revenues for the six months ended June 30, 2001 and 2000, respectively. The decrease in revenues from software licenses was primarily due to a lengthening in the customer decision making process resulting from market conditions and increased competition in the marketplace. 11 12 Services. Revenues from services increased by 227.8% to approximately $4.7 million for the six months ended June 30, 2001 compared to approximately $1.4 million for the six months ended June 30, 2000. Services revenues represented 57% and 20% of total revenues for the six months ended June 30, 2001 and 2000, respectively. Approximately 67% of the increase in absolute dollars is attributable to consulting and 33% to maintenance revenue generated by new software license sales. The increase as a percentage of total revenues is attributable to implementation services for licenses sold in 2000 and additional follow-on services provided to our existing customers. Cost of software licenses. Cost of software licenses revenues were $420,000, representing 12% of license revenues, for the six months ended June 30, 2001. These costs primarily represent royalties paid to certain software companies for products sold with or embedded in Eprise Participant Server. These products were released in the second half of 2000. Cost of services. Cost of services increased by 107.9% to approximately $5.5 million for the six months ended June 30, 2001 compared to approximately $2.6 million for the six months ended June 30, 2000. Cost of services represented 115% and 182% of services revenues for the six months ended June 30, 2001 and 2000, respectively. The increase in absolute dollars was due to the expansion of our professional services organization, including technical consulting, technical support and training. The decrease as a percentage of services revenues was primarily due to increased utilization of our services staff and the increase in maintenance revenue as a percentage of services revenue in the six months ended June 30, 2001. Research and development. Research and development expenses increased by 87.1% to approximately $4.3 million for the six months ended June 30, 2001 compared to approximately $2.3 million for the six months ended June 30, 2000. Research and development expenses represented 52% and 31% of total revenues for the six months ended June 30, 2001 and 2000, respectively. The increase in absolute dollars was primarily attributable to an increase in personnel and employee-related expenses incurred as well as utilizing contracted resources more extensively as part of our development effort for version 3.5 of Eprise Participant Server and future product releases. Selling and marketing. Selling and marketing expenses increased by 14.0% to approximately $10.8 million for the six months ended June 30, 2001 compared to approximately $9.5 million for the six months ended June 30, 2000. Selling and marketing expenses represented 130% of total revenues for each of the six months ended June 30, 2001 and 2000. Approximately 61% of the increase in absolute dollars was attributable to an increase in the number of sales and sales support personnel as we expanded our direct sales force nationally and globally. In addition, approximately 50% of the increase in absolute dollars was attributable to the expansion of our business development staff as we extended our market reach through the establishment of relationships with systems integrators. These increases were offset by a decrease in marketing programs in the second quarter of 2000, during which we launched an extensive advertising and branding campaign. General and administrative. General and administrative expenses increased by 49.7% to approximately $3.3 million for the six months ended June 30, 2001 compared to approximately $2.2 million for the six months ended June 30, 2000. General and administrative expenses represented 40% and 31% of total revenues for the six months ended June 30, 2001 and 2000, respectively. The increase in absolute dollars primarily reflects personnel increases and the related costs associated with supporting our anticipated growth. Compensation cost for stock options. For the six months ended June 30, 2001 and 2000, compensation expense recorded related to stock option grants aggregated $824,000 and $953,000, respectively. Other income (expense). Other income and expense consisted primarily of interest income on invested cash balances and interest expense on borrowings. Income taxes. During the six months ended June 30, 2001 and 2000, we reported losses for both financial and income tax purposes. No provision or benefit for income taxes was recorded in either period. The income tax expense of $31,000 for the six months ended June 31, 2001 primarily represents taxes paid on income earned on assets held by Eprise Securities Corporation, a wholly-owned subsidiary of Eprise Corporation. 12 13 LIQUIDITY AND CAPITAL RESOURCES From our inception through 1997, we primarily financed our operations and met our capital expenditure requirements through funds generated from operations, funds borrowed from several stockholders and a director, and funds borrowed from Silicon Valley Bank. Since December 1997, we have raised approximately $107.0 million in venture capital, private placement and initial public offering financing in order to expand the product development and sales and marketing efforts of the business and the infrastructure to support our future growth. At June 30, 2001, our primary source of liquidity consisted of cash totaling approximately $54.0 million as well as accounts receivable of approximately $3.5 million. On March 29, 2000, we raised cash proceeds of approximately $63.2 million, after expenses, from the sale of 4,600,000 shares of our common stock in our initial public offering. In addition, we had a working capital revolving line of credit with Silicon Valley Bank that provided for borrowings up to a maximum amount equal to the lesser of $1.0 million or a percentage of eligible accounts receivable. The working capital line of credit expired on June 30, 2001 and has not been renewed. At June 30, 2001, there was a term note outstanding relating to a previous equipment line of credit with Silicon Valley Bank totaling $35,798. Cash used in operating activities was approximately $11.2 million and $5.2 million in the six months ended June 30, 2001 and 2000, respectively. Net cash used in operating activities is primarily attributable to the net losses incurred in both periods. Cash used in investing activities was $912,000 and approximately $1.7 million in the six months ended June 30, 2001 and 2000, respectively. The cash used in investing activities was primarily used for purchases of computer systems and software for internal development used to support our growth, as well as furniture and equipment to accommodate our increase in personnel. Cash used for financing activities was approximately $2.4 million in the six months ended June 30, 2001. Cash provided by financing activities was approximately $63.6 million in the six months ended June 30, 2000 primarily representing the proceeds from our initial public offering. The cash used for financing activities was primarily used for the repurchase of our common stock under a stock repurchase program. We currently anticipate that our current cash and equivalents will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next 12 months. However, we may need to raise additional funds in future periods through public or private financings, or other arrangements. Any additional financings, if needed, might not be available on reasonable terms or at all. Failure to raise capital when needed could harm our business, financial condition and results of operations. If additional funds are raised through the issuance of equity securities, additional dilution could result. In addition, any equity securities issued might have rights, preferences or privileges senior to our common stock. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," effective for fiscal years beginning after June 15, 2000. We have adopted this accounting standard effective January 1, 2001, as required. The adoption of SFAS No. 133 did not have a significant impact on our financial statements. In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations." SFAS 141 requires the purchase method of accounting for business combinations initiated after June 30, 2001 and eliminates the pooling-of-interests method. We do not believe that the adoption of SFAS 141 will have a significant impact on our financial statements. Also in July 2001, the FASB issued Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets", which is effective January 1, 2002. SFAS 142 requires, among other things, the discontinuance of goodwill amortization. We do not believe that the adoption of SFAS 142 will have a significant impact on our financial statements. 13 14 RISK FACTORS You should carefully consider the risks described below together with the other information about Eprise in this report. If one or more of the following risks actually occurs, our business, results of operations and financial condition could be materially adversely affected. Some of the statements under "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere in this report constitute forward-looking statements. These statements are identified by terminology such as "may," "will," "could," "should," "expects," "plans," "intends," "seeks," "anticipates," "believes," "estimates," "potential," or "continue" or the negative of such terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on these forward-looking statements. Actual events or results may differ materially. In evaluating these statements, you should specifically consider various important factors, including the risks outlined below. These factors may cause our actual results to differ materially from any forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements after the date of this report to conform such statement to actual results. RISKS RELATED TO OUR FINANCIAL RESULTS AND CONDITION WE HAVE A HISTORY OF LOSSES, AND MAY NOT BE ABLE TO ACHIEVE OR SUSTAIN PROFITABILITY. We incurred net losses of $14.4 million for the six months ended June 30, 2001 and $16.7 million for the year ended December 31, 2000. As of June 30, 2001, we had an accumulated deficit of $67.3 million. We have not yet achieved profitability and we expect to incur net losses for the foreseeable future. To date, we have funded our operations from the sale of equity securities and have not generated cash from operations. We expect to continue to incur significant research and development, selling and marketing, and general and administrative expenses and, as a result, we will need to generate significant revenues to achieve and maintain profitability. Although our revenues have grown significantly year over year, we cannot be certain that we can sustain these growth rates or that we will achieve sufficient revenues for profitability. If we do achieve profitability, we cannot be certain that we can sustain or increase profitability on a quarterly or annual basis in the future. See "Summary Financial Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the financial statements and notes to those statements found elsewhere in this Form 10-Q. OUR LIMITED OPERATING HISTORY MAKES EVALUATING OUR BUSINESS DIFFICULT. Eprise was founded in 1992 as a provider of online interactive games. We made the transition to our current business in 1997 and, as a result, have a limited operating history. We are still in the early stages of our development, which makes the evaluation of our business operations and our prospects difficult. We shipped our first commercial Web content management software product in February 1998. Since that time, we have derived substantially all of our revenues from licensing our Eprise Participant Server product and related services. As a result of our limited operating history, we cannot forecast operating expenses based on our historical results. Our ability to forecast accurately our quarterly revenue is limited because our software products have a long sales cycle, making it difficult to predict the quarter in which sales revenue will be recognized. We would expect our business, operating results and financial condition to be materially adversely affected if our revenues do not meet our projections, and that net losses in a given quarter could be even greater than expected. UNCERTAINTY IN THE OVERALL ECONOMY AND IN THE INTERNET BUSINESS SECTOR IN PARTICULAR COULD HAVE A NEGATIVE IMPACT ON OUR FUTURE REVENUES. The economy, and the Internet business sector in particular, have been unstable and declining over the past year, and particularly in the past several quarters. We cannot predict whether this instability will continue, and if it does continue, how long it will last. Potential purchasers of our products are more carefully considering their technology expenditures and/or reducing their information technology budgets. As a result of this less favorable economic 14 15 climate, potential purchasers may decide not to purchase our products or may delay their purchases indefinitely. Such decisions would have a negative impact on future revenues and our ability to grow our business. OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY AND YOU SHOULD NOT RELY ON THEM TO PREDICT OUR FUTURE PERFORMANCE. Our revenues and operating results may vary significantly from quarter to quarter. A number of factors are likely to cause these variations, including: - demand for our products and services; - the timing of sales of our products and services; - the timing of customer orders and product implementation; - unexpected delays in introducing new products and services; - increased expenses, whether related to selling and marketing, research and development or general and administrative; - changes in the rapidly evolving market for Web content management solutions; - the mix of product license and service revenue; and - the timing and size of sales derived through our strategic partners. Accordingly, we believe that quarter-to-quarter comparisons of our operating results are not necessarily meaningful. Investors should not rely on the results of one quarter as an indication of our future performance. We may increase our operating expenditures to expand our sales and marketing operations, develop new distribution channels, fund greater levels of research and development, broaden professional services and support and improve operational and financial systems. If our revenues do not increase along with these expenses, our business, operating results or financial condition could be materially adversely affected and net losses in a given quarter could be greater than expected. Although we have limited historical financial data, we believe that our quarterly operating results may experience seasonal fluctuations due to clients' fiscal year budgeting cycles and purchasing patterns. RISKS RELATED TO OUR BUSINESS ONLY A LIMITED NUMBER OF CUSTOMERS HAVE LICENSED OUR PRODUCT, AND OUR WEB CONTENT MANAGEMENT SOLUTION MAY NEVER ACHIEVE BROAD MARKET ACCEPTANCE. We first introduced Eprise Participant Server in February 1998 and delivered subsequent major releases in April 1999, November 2000, and June 2001. To date, only a limited number of customers have licensed Eprise Participant Server, and an even smaller number are operating Web sites using the most recent version. Therefore, we have not demonstrated broad market acceptance of Eprise Participant Server. If our product does not gain broad market acceptance, or if it fails to meet customer expectations, our business would be harmed. OUR QUARTERLY RESULTS OFTEN DEPEND ON A SMALL NUMBER OF RELATIVELY LARGE SALES. We typically derive a significant portion of our software license revenues in each quarter from a small number of relatively large orders. Although we do not believe that the loss of any particular customer would have a material adverse effect on our business or financial condition, our operating results could be materially adversely affected if we were unable to complete one or more substantial license sales in any future period. In the first, second, third and fourth quarters of 2000, our five largest customers accounted for approximately 50%, 26%, 33%, and 34%, respectively, of total revenues in those quarters. In the first and second quarter of 2001, our five largest customers accounted for approximately 33% and 42% of total revenues, respectively. 15 16 IF WE DO NOT SUCCESSFULLY EXPAND OUR DIRECT SALES AND SERVICES ORGANIZATIONS, WE MAY NOT BE ABLE TO INCREASE OUR SALES OR SUPPORT OUR CUSTOMERS. In the fiscal year ended December 31, 2000 and the first six months of 2001, we licensed substantially all of our products through our direct sales organization. As of August 3, 2001, we had 18 direct sales representatives. Our future success depends on substantially increasing the size and scope of our direct sales force, both domestically and internationally. There is intense competition for personnel, and we cannot guarantee that we will be able to attract, assimilate or retain additional qualified sales personnel on a timely basis. Moreover, we believe that as our sales increase, and given the large-scale deployment required by our customers, we will need to hire and retain a number of highly trained customer service and support personnel. As of August 3, 2001, our customer service and support organization included 52 individuals. We cannot guarantee that we will be able to increase the size of our customer service and support organization on a timely basis to provide the high quality of support required by our customers. Failure to add additional sales and customer service representatives would have a material adverse effect on our business, operating results and financial condition. IF WE DO NOT SUCCESSFULLY MAINTAIN AND EXPAND OUR RELATIONSHIPS WITH INDUSTRY PARTNERS, OUR SALES COULD DECLINE OR GROW MORE SLOWLY THAN EXPECTED. To offer products and services to a larger customer base, our direct sales force must establish and expand relationships with alliance partners, including systems integrators, consulting firms, Web developers and application service providers who build customer solutions based on Eprise Participant Server. We are currently investing, and we intend to continue to invest, significant resources to develop these relationships. If our efforts are unsuccessful, our sales growth would be adversely affected. We cannot guarantee that we will be able to market our products effectively through our established partners. Further, these third parties are under no obligation to recommend or support our products. These companies could recommend or give higher priority to the products of other companies or to their own products. A significant shift by these companies toward favoring competing products could negatively affect our license and service revenues. We cannot guarantee that we will be able to attract additional distribution partners for desired distribution arrangements. The loss of distribution partners or failure to establish new relationships could materially adversely affect our business, operating results and financial condition. WE NEED TO INCREASE MARKET AWARENESS OF OUR PRODUCT TO REMAIN COMPETITIVE AND CONTINUE TO INCREASE OUR REVENUES. Our customer base is relatively small compared to some of our competitors, and we are facing increasing competition in our business sector. We are engaged in marketing and business development activities to increase our visibility as a provider of content management solutions. However, if we are unable to achieve greater market awareness of our product, it will become more difficult for us to compete successfully for new customers, and therefore more difficult to gain market acceptance and increase our license revenues. WE NEED TO MANAGE OUR GROWTH EFFECTIVELY TO REMAIN COMPETITIVE AND CONTINUE TO EXPAND OUR OPERATIONS. We have expanded our operations rapidly since inception. We expect to expand in the future to pursue potential opportunities. Rapid growth could place a significant demand on management, administrative and operations resources. Our ability to compete effectively and to manage our anticipated future growth requires us to continue to improve our financial and management controls, reporting systems and procedures on a timely basis. We must add personnel to maintain our ability to grow in the future. We cannot guarantee that we will be able to do so successfully. Failure to manage our growth effectively could have a material adverse effect upon our business, operating results and financial condition. WE MUST HIRE AND RETAIN SKILLED PERSONNEL IN A TIGHT LABOR MARKET. Qualified personnel are in great demand throughout the computer software, hardware and networking industries. The demand for qualified personnel is particularly acute in the New England area because of the large number of software and other high technology companies and the low unemployment rate in the region. Our success depends in 16 17 large part upon our ability to attract, train, motivate and retain highly-skilled employees, particularly sales and marketing personnel, software engineers, and technical support personnel. We have had difficulty hiring these highly-skilled employees in the past. If we are unable to attract and retain the highly-skilled technical personnel that are integral to our sales, marketing, product development and customer support teams, the rate at which we can generate sales and develop new products or product enhancements may be limited. This inability could have a material adverse effect on our business, operating results and financial condition. COMPETITION COULD REDUCE OUR REVENUES AND MARKET SHARE, AND PREVENT US FROM EXPANDING IN THE FUTURE. The market for Web content management software and services is rapidly evolving and highly competitive and there are a number of products that compete directly with our software solutions. Our clients' requirements and the technology available to satisfy those requirements continually change. Some of our current and potential competitors have significantly greater financial, marketing, technical and other competitive resources than we do. This may enable them to adapt more quickly to new or emerging technologies and changes in customer requirements, or to devote greater resources to the development, promotion and sale of their products. In addition, other companies could develop new products or incorporate additional functionality into their existing products that could directly compete with our products. Barriers to entering the software market are relatively low. Furthermore, cooperative relationships among our competitors could increase their ability to address the Web site content management needs of our prospective customers, and they could rapidly acquire significant market share. We cannot guarantee that we will compete successfully against existing or new competitors. Further, competitive pressures may require us to lower the prices of our software and services. Failure to compete successfully would have a material adverse effect on our business, operating results and financial condition. IF WE ARE UNABLE TO ENHANCE AND EXPAND OUR PRODUCT LINE TO MEET THE RAPID CHANGES IN THE MARKET FOR WEB CONTENT MANAGEMENT TECHNOLOGY, OUR BUSINESS WILL BE UNABLE TO GROW. To succeed, we will need to enhance our current Eprise Participant Server product and develop new products on a timely basis to keep pace with developments related to Internet technology and to satisfy the increasingly sophisticated requirements of our customers. The market for our products is marked by rapid technological change, frequent new product introductions and Internet-related technology enhancements, uncertain product life cycles, changes in client demands and evolving industry standards. We cannot be certain that we will successfully develop and market new products or new product enhancements compliant with present or emerging Internet technology standards. New products based on new technologies or new industry standards can rapidly render existing products obsolete and unmarketable. Internet commerce technology is complex and new products and product enhancements can require long development and testing periods. Any delays in developing, testing and releasing enhanced or new products could harm our business. New products or upgrades may not be released according to schedule or may contain defects when released. Either situation could result in adverse publicity, loss of sales, delay in market acceptance of our products or customer claims against us, any of which could harm our business. If we do not develop, license or acquire new software products, or deliver enhancements to existing products on a timely and cost-effective basis, our business will be harmed. WE HAVE RELIED ON AND EXPECT TO CONTINUE TO RELY ON SALES OF OUR EPRISE PARTICIPANT SERVER LINE FOR OUR REVENUES. Since 1998, we have derived substantially all of our revenues from licenses of, and services related to, Eprise Participant Server. We expect that revenues from this product will continue to account for a significant portion of our revenues for the foreseeable future. A decline in the price of Eprise Participant Server or our inability to increase license sales of Eprise Participant Server would seriously harm our business and operating results. In addition, our future financial performance will depend upon the successful development, introduction and customer acceptance of enhanced versions of Eprise Participant Server and future products. Failure to deliver the enhancements or products that customers want could have a material adverse effect on our business, operating results and financial condition. OUR LENGTHY SALES CYCLES REQUIRE EXPENDITURE OF RESOURCES THAT WILL NOT NECESSARILY RESULT IN A SALE. 17 18 We typically experience long sales cycles. These sales cycles generally vary by customer from three to six months. Because the licensing of our products generally involves a significant capital expenditure by the customer, our sales process is subject to lengthy approval processes and delays. We often devote significant time and resources to a prospective customer, including costs associated with multiple site visits, product demonstrations and feasibility studies, without any assurance that the prospective customer will decide to license our products. IF OUR PRODUCTS FAIL TO REMAIN COMPATIBLE WITH MAJOR COMMERCIAL OPERATING PLATFORMS, OUR SALES WOULD DECREASE. Our products currently operate on the Microsoft Windows NT and Sun Solaris operating systems. In addition, our products are required to interoperate with Web servers, browsers and database servers. We must, therefore, continually modify and enhance our products to keep pace with changes in these operating systems and servers. If our products are not compatible with new operating systems, Web servers, browsers or database servers that achieve sufficient market penetration, our business will be harmed. In addition, uncertainties related to the timing and nature of new product announcements, or introductions or modifications by vendors of operating systems or browsers, could also harm our business. POTENTIAL DEFECTS IN OUR PRODUCTS COULD CAUSE SALES TO DECREASE AND COULD SUBJECT US TO FUTURE WARRANTY CLAIMS. Our products are complex and might contain undetected software errors or failures when new versions are released. We cannot guarantee that, despite testing by us and by current and prospective customers, we will not find errors in existing products, new products or product enhancements after commercial release. These errors may result in loss or delay of market acceptance, which could have a material adverse effect upon our business, operating results and financial condition. IF WE LOSE ANY KEY PERSONNEL, OR FAIL TO ATTRACT AND RETAIN ADDITIONAL PERSONNEL, WE MAY BE UNABLE TO CONTINUE EXPANDING OUR BUSINESS AND PRODUCT LINE. The loss of the services of one or more of our key personnel could have a material adverse effect on our business, operating results and financial condition. We do not maintain key person life insurance on any executive officers other than our Chief Executive Officer and Chief Technology Officer. We cannot guarantee that we will be able to retain our key personnel. Our future success also depends on our continuing ability to attract, assimilate and retain highly qualified sales, technical and managerial personnel. Competition for these individuals is intense, and there can be no assurance that we can attract, assimilate or retain necessary personnel in the future. WE HAVE A LIMITED ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, AND OTHERS COULD INFRINGE ON OR MISAPPROPRIATE OUR PROPRIETARY RIGHTS AND INFORMATION. Our software is proprietary and is protected by trade secret, copyright and trademark laws, license agreements, confidentiality agreements with employees and nondisclosure and other contractual requirements imposed on our customers, consulting partners and others. We cannot guarantee that these protections will adequately protect our proprietary rights or that our competitors will not independently develop products that are substantially equivalent or superior to our products. In addition, the laws of countries in which our products may be licensed in the future may not protect our products and intellectual property rights to the same extent as the laws of the United States. Although we believe that our products, trademarks and other proprietary rights do not infringe upon the proprietary rights of third parties, we cannot guarantee that third parties will not assert infringement claims against us. The cost of pursuing, enforcing or defending infringement claims can be substantial and can also require significant management attention. RISKS RELATED TO THE INTERNET INDUSTRY IF THE USE OF THE INTERNET DOES NOT EXPAND, THE DEMAND FOR OUR PRODUCTS MAY STAGNATE OR DECLINE. Our future success depends heavily on the Internet being accepted and widely used. If Internet use does not continue to grow or grows more slowly than expected, our business, operating results and financial condition would 18 19 be materially adversely affected. Consumers and businesses may reject the Internet as a viable communications medium for a number of reasons, including potentially inadequate network infrastructure, security concerns, slow development of enabling technologies or insufficient commercial support. The Internet infrastructure may not be able to support the demands placed on it by increased Internet usage and bandwidth requirements. In addition, delays in the development or adoption of new standards and protocols required to handle an increased level of Internet activity or increased government regulation could cause the Internet to lose its viability as a commercial medium. Even if the required infrastructure, standards, protocols or complementary products, services or facilities are developed, we may incur substantial expenses adapting our solutions to changing or emerging technologies. WE CANNOT BE SURE THAT A SUSTAINABLE MARKET FOR OUR PRODUCTS WILL DEVELOP. The market for Web content management software and services is new and rapidly evolving, and the size and potential growth of this new market and the direction of its development are uncertain. We have licensed our products to a small number of customers. We expect that we will continue to need intensive marketing and sales efforts to educate prospective clients about the uses and benefits of our products and services. Enterprises that have invested substantial resources in other methods of conducting business over the Internet may be reluctant to adopt a new approach that may replace, limit or compete with their existing systems. Any of these factors could inhibit the growth and market acceptance of our products and services. Accordingly, we cannot be certain that a viable market for our products will emerge, or if it does emerge, that it will be sustainable. IF THE INTERNET OR E-COMMERCE BECOMES SUBJECT TO GOVERNMENTAL REGULATION OR OTHER FUTURE LAWS, USE OF AND DEMAND FOR OUR PRODUCTS COULD DECLINE. We are not currently required to comply with direct regulation by any domestic or foreign governmental agency, other than regulations applicable to businesses generally and any laws or regulations directly applicable to the Internet. However, due to the increasing popularity of the Internet, it is possible that laws may be adopted regarding the Internet, any of which could materially harm our business. For example, because our products can be used for the solicitation of personal data from individual consumers, our business could be limited by laws regulating the solicitation, collection or processing of this data. The Telecommunications Act of 1996 prohibits the transmission of some types of information and content over the Internet. Legislation imposing potential liability for information collected or disseminated through our products could adversely affect our business. In addition, the increased attention focused upon liability issues as a result of the Telecommunications Act could limit the growth of Internet commerce, which could decrease demand for our products. Export regulations, either in their current form or as may be subsequently enacted, may limit our ability to distribute our software outside the United States. The unlawful export of our software could also harm our business. Although we take precautions against unlawful export of our software, the global nature of the Internet makes if difficult to effectively control the distribution of software. Furthermore, the growth and development of the Internet may lead to more stringent consumer protection laws that may impose additional burdens on companies conducting business online. The adoption of any additional laws may decrease Internet use or impede the growth of Internet use, which may lead to a decrease in the demand for our products and services or an increase in the cost of doing business. Further, the imposition of new sales or other taxes could limit the growth of Internet commerce generally and, as a result, the demand for our products. Although recent federal legislation limits the imposition of state and local taxes on Internet-related sales, there is a possibility that Congress may not renew this legislation, in which case state and local governments would be free to impose taxes on goods and services purchased on the Internet. RISKS RELATED TO THE SECURITIES MARKETS THE MARKET FOR OUR COMMON STOCK HAS BEEN VOLATILE. The market for securities of most high technology companies, including Eprise, has been highly volatile. It is likely that the market price of our common stock will fluctuate widely in the future. Factors affecting the trading price of our common stock are likely to include: 19 20 - responses to quarter-to-quarter variations in our results of operations; - the announcement of new products or product enhancements by us or our competitors; - technological innovation by us or our competitors; - general market conditions or market conditions specific to particular industries; and - changes in earnings estimates by analysts. WE HAVE ADOPTED ANTI-TAKEOVER PROVISIONS THAT COULD AFFECT THE MARKETABILITY OF OUR COMMON STOCK. Our amended and restated certificate of incorporation and by-laws contain provisions that could make it more difficult for a third party to acquire us or effect a change of control in our management, even if doing so would be beneficial to our stockholders. We have also adopted a shareholder rights plan designed to encourage potentially hostile acquirors to negotiate with the board before attempting a takeover of the company. In addition, the provisions of Delaware law and our stock incentive plans relating to an acquisition or change in control of Eprise may also have the effect of discouraging, delaying or preventing a sale. OUR STOCK IS CURRENTLY TRADING BELOW THE MINIMUM THRESHOLD REQUIRED BY THE NASDAQ STOCK MARKET, AND IF THE BID PRICE FOR OUR STOCK DOES NOT RISE ABOVE $1.00 PER SHARE WE MAY BE DELISTED. Our common stock trades on the Nasdaq National Market, which has several requirements for continued listing of common stock, including a minimum bid price of $1.00 per share. The closing bid price per share of our common stock has been less than $1.00 for more than 30 consecutive trading days. We received a letter from the Nasdaq Stock Market on June 20, 2001, informing us that we currently do not satisfy the stock price requirements for listing on the Nasdaq National Market, and that if the closing bid price for our stock does not reach $1.00 for at least ten consecutive trading days between now and September 18, 2001, we may be de-listed from the Nasdaq National Market. Although we intend to use our best efforts to avoid de-listing, including filing an appeal and requesting a hearing with Nasdaq, we may not be able to maintain our National Market listing. If we are de-listed, our stock would be traded on the over-the-counter bulletin board (reported in the "pink sheets"), which could decrease trading volume and investors' liquidity. In addition, delisting could have a significant negative impact on our business plan and operations by creating a negative market perception of the Company that could adversely affect our ability to compete and obtain new business. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK INTEREST RATE RISK As of June 30, 2001, we had approximately $54.0 million in cash equivalents and short-term investments that was subject to interest rate risk. The average interest rate as of June 30, 2001 was approximately 4.0%. The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. To achieve this objective, we maintain our portfolio of cash equivalents and short-term investments in a limited number of securities, including both government and corporate obligations and money market funds. We did not hold derivative financial instruments as of June 30, 2001, and have never held such instruments in the past. We had outstanding debt at June 30, 2001 of $35,798. 20 21 FOREIGN CURRENCY RISK Currently, the majority of our sales and expenses are denominated in U.S. dollars. As a result, we have experienced no significant foreign exchange gains or losses to date. While we do expect to effect some transactions in foreign currencies in 2001, we do not anticipate that foreign exchange gains or losses will be significant. We have not engaged in foreign currency hedging activities to date. 21 22 PART II OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS (b) Use of Proceeds from Sales of Registered Securities On March 29, 2000 the Company closed the initial public offering of its common stock. The shares of common stock sold in the offering were registered under the Securities Act on a Registration Statement on Form S-1 (the "Registration Statement") (Registration No. 333-94777) that was declared effective by the Securities and Exchange Commission on March 23, 2000. After deducting the underwriting discounts and commission and the offering expenses described above, the Company received net proceeds from the offering of approximately $63.2 million. None of the net proceeds of the offering were paid by the Company, directly or indirectly, to any director or officer of the Company or any of their associates, or to any persons owning ten percent or more of any class of the Company's equity securities, or any affiliates of the Company. The proceeds are primarily being used for working capital and general corporate purposes, including increased sales and marketing expenditures, increased research and development expenditures and capital expenditures. Pending these uses, the net proceeds are being invested in short-term, investment-grade, interest-bearing instruments. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS We held our Annual Meeting of Stockholders on May 15, 2001. The matters voted on and the results of such votes are set forth below:

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. None (b) The Company filed no reports on Form 8-K for the quarter ended June 30, 2001. 22 23 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EPRISE CORPORATION Dated: August 13, 2001 /s/ Joseph A. Forgione ------------------------------------------ Joseph A. Forgione President and Chief Executive Officer (Principal Executive Officer) Dated: August 13, 2001 /s/ Milton A. Alpern ------------------------------------------ Milton A. Alpern Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 23

EPRISE CORP 10-Q