We have audited the accompanying consolidated balance sheets of EdgeWave, Inc. (formerly St. Bernard Software, Inc.) and subsidiaries as of December 31, 2011 and 2010, and the related consolidated statements of operations, stockholders’ deficit and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company was not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that were appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. 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, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of EdgeWave, Inc. and subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Description of business
EdgeWave, Inc., a Delaware corporation (“we,” “us,” “our,” “EdgeWave,” or the “Company”) develops and markets on demand, on-premises, and hybrid Secure Content Management (“SCM”) solutions to the mid-enterprise and service provider markets. Customers can purchase our solutions directly from us, through a managed service provider (“MSP”), or via one of our Pro Partners around the world. On-premises purchases typically consist of an initial hardware purchase (appliance) and maintenance subscription, whereas our on-demand purchases contain only a subscription. Our primary customers are IT executives, managers and administrators as well as MSPs and Internet Service Providers (“ISPs”).
On June 15, 2011, the shareholders of the Company approved the amendment of the Company’s Certificate of Incorporation to change our corporate name from St. Bernard Software, Inc. to EdgeWave, Inc.
Basis of presentation and consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and includes the accounts of Edgewave and those of our inactive, wholly owned European and Australian subsidiaries which were closed in 2007. All inter-company balances and transactions have been eliminated in consolidation.
Use of estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Significant estimates used in preparing the consolidated financial statements include those assumed in computing revenue recognition, the allowance for doubtful accounts, warranty liability, the valuation allowance on deferred tax assets, testing goodwill for impairment, stock-based compensation and the estimated fair value of derivative financial instruments.
Basic and diluted loss per common share
Basic loss per common share is computed by dividing net loss available to common shareholders by the weighted average number of shares outstanding during the period. Diluted loss per common share gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible debt using the if-converted method. In computing diluted loss per common share, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted loss per common share excludes all dilutive potential shares if their effect is anti-dilutive. As of December 31, 2011 and 2010, the Company had 4,834,312 and 5,139,985 potentially dilutive securities outstanding, respectively, that were not included in the calculation of dilutive loss per share as their effect would have been anti-dilutive.
Segment Information
The Company presents its business as one reportable segment due to the similarity in nature of products provided, financial performance measures (revenue growth and gross margin), methods of distribution (direct and indirect) and customer markets (each product is sold by the same personnel to government and commercial customers, domestically and internationally). The Company’s chief operating decision making officer reviews financial information on its products on a consolidated basis.
Fair value of financial instruments
The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, line of credit, term loans, capital lease agreements, and warrant liability. The fair values of cash and cash equivalents, accounts receivables, accounts payable, and accrued expenses approximate their respective carrying values due to short-term maturities of these instruments. The fair value of the Company’s obligations under its line of credit, term loans, and capital leases approximates their carrying value as the stated interest rates of these instruments reflect rates which are otherwise currently available to the Company. The estimated fair value of warrant instruments classified as liabilities is measured at each reporting period, and the corresponding change in fair value is recorded in current earnings (See Notes 10 and 11).
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risk.
Freestanding warrants issued by the Company in connection with the issuance or sale of debt and equity instruments are considered to be derivative instruments, and are evaluated to determine whether the fair value of the warrants issued are required to be classified as equity or as a derivative liability
Cash and cash equivalents
The Company considers all highly liquid investments with original maturities of 90 days or less at the time of purchase to be cash equivalents.
Accounts receivable
The Company has established an allowance for doubtful accounts for potential credit losses that are expected to be incurred, based on historical information, customer concentrations, customer solvency, current economic and geographical trends, and changes in customer payment terms and practices. Accounts receivable with terms in excess of twelve months are classified as long term. Management has estimated that an allowance of approximately $25,000 and $30,000 for the years ended December 31, 2011 and 2010, respectively, was adequate to cover the potential credit losses.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market, and consist primarily of computer hardware which is categorized as finished goods. At December 31, 2011 and 2010, the Company has provided a reserve for obsolete inventory of approximately $20,000 and $25,000, respectively.
Research and development
The Company’s research and development expenses include payroll, employee benefits, stock-based compensation, offshore development and other head-count related costs associated with product development and are expensed as incurred. Research and development costs totaled approximately $5.0 million and $4.3 million in 2011 and 2010, respectively.
Fixed assets and depreciation
Property and equipment are carried at cost. Expenditures that extend the life of the asset are capitalized and depreciated. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the related assets or, in the case of leasehold improvements, over the lesser of the useful life of the related asset or the lease term. Estimated useful lives of fixed assets range from three to eight years. Depreciation includes amortization expense for assets capitalized under capital leases.
The Company does not capitalize software costs related to the development of software to be sold, leased or otherwise marketed.
Business combinations
The Company recognizes all of the assets acquired, liabilities assumed and contingent consideration at their fair value on the acquisition date. The purchase price allocation process requires management to make significant estimates and assumptions, especially at the acquisition date with respect to intangible assets acquired, estimated contingent consideration payments and pre-acquisition contingencies assumed. Unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions, estimates or actual results. Additionally, any change in the fair value of the acquisition-related contingent consideration, if any, subsequent to the acquisition date, including changes from events after the acquisition date, will be recognized in earnings in the period of the estimated fair value change.
Acquisition-related transaction costs, including legal and accounting fees and other external costs directly related to the acquisition are recognized separately from the acquisition and expensed as incurred in general and administrative expenses in the consolidated statements of operations (See Note 6).
Goodwill
The Company accounts for goodwill in accordance with Accounting Standards Codification ("ASC") 350-20, “Intangibles - Goodwill and Other - Goodwill”. The Company tests goodwill for potential impairment annually, or more frequently if it determines that events or circumstances may indicate that impairment has occurred. The impairment test consists of a two-step process. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired and the second step of the impairment test is unnecessary. If the carrying value of goodwill is greater than the fair value of the reporting unit, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.
In 2011, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2010-28 – “Intangibles – Goodwill and Other (“ASU 2010-28”). The guidance in ASU 2010-28 is applicable for all entities that have recognized goodwill and have one or more reporting units whose carrying value for the purposes of performing Step 1 of the goodwill impairment test is zero or negative. The amendments in ASU 2010-28 modify Step 1 so that for those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if, based on a qualitative assessment, it is determined that it is more likely than not that a goodwill impairment exists. The Company has determined that it has only one reporting unit, and at December 31, 2011 the carrying value of the reporting unit was negative. Accordingly, in accordance with ASU 2010-28, the Company completed the required qualitative assessment of factors that could indicate the existence of goodwill impairment. Based on this qualitative assessment, the Company concluded that it was not more likely than not that there was any impairment of goodwill, and as such it was not necessary to perform the Step 2 goodwill impairment analysis and that there was no goodwill impairment.
Impairment of long-lived assets
The Company accounts for impairment of long-lived assets in accordance with ASC 360-10, “Property, Plant, and Equipment”. Pursuant to this guidance, long-lived assets held for use are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The carrying amount of an asset is deemed to not be recoverable if the sum of undiscounted expected future cash flows is less than the carrying amount of the asset. An impairment loss is measured as the amount by which the carrying amount of the asset exceeds its fair value. As of December 31, 2011 and 2010, management of the Company concluded there was no impairment of long-lived assets.
Other intangible assets
Other intangible assets consist of technology and intellectual property acquired pursuant to the asset purchase agreement between the Company and Red Condor, Inc. (See Note 6), which are generally amortized on a straight-line basis over five years. The Company performs an annual review of identified intangible assets to determine if facts and circumstances indicate that the useful life is shorter than it had originally estimated or if there are any indicators of impairment. If indicators of impairment are present, the Company assesses the recoverability of identified intangible assets by comparing the projected undiscounted net cash flows associated with the related assets over their remaining lives against their respective carrying amounts. Impairments, if any, are based on the excess of the carrying amount over the fair value of those assets. If the useful life is shorter than originally estimated, the Company accelerates the rate of amortization and amortizes the remaining carrying value over the new shorter useful life.
Stock-based compensation
The Company uses the Black-Scholes option valuation model to estimate the fair value of its stock options at the date of grant. The Black-Scholes option valuation model requires the input of subjective assumptions to calculate the value of stock options. The Company uses historical data among other information to estimate the expected price volatility, the expected annual dividend, the expected option life and the expected forfeiture rate. The grant date estimated fair value is recognized over the period during which an employee is required to provide service in exchange for the award, which is generally the option vesting period. Restricted stock is measured based on the fair market values of the underlying stock on the dates of grant. See Note 3.
Revenue recognition
We recognize revenue when all of the following criteria have been met:
| | · | Persuasive evidence of an arrangement exists; |
| | · | Delivery has occurred, or services have been rendered; |
| | · | The price is fixed or determinable; and |
| | · | Collectability is probable. |
The Company generates revenue primarily through software subscriptions to its customers. The Company’s software arrangements typically include a subscription arrangement that provides for technical support and product updates, generally over renewable twelve to sixty month periods. Revenues from subscription agreements are recognized ratably over the term of the subscription period. Amounts relating to subscription revenues that are expected to be recognized in future periods are recorded as deferred revenues.
Certain sales to the Company’s customers include multi-element arrangements that include a delivered element (an appliance unit) and undelivered elements (such as subscription and support). In these instances, the Company determines if these elements can be separated into multiple units of accounting. The entire fee from the arrangement is allocated to each respective element based on its relative fair value. Revenue for each element is then recognized when revenue recognition criteria for that element is met. If the Company cannot establish fair value for any undelivered element, the Company would be required to recognize revenue for the whole arrangement at the time revenue recognition criteria for the undelivered element is met. Fair value for the delivered appliance element is based on the value received in transactions in which the appliance is sold on a stand-alone basis. Fair value for subscription is based on substantive renewal rates. Discounts applied to multiple-element sales are allocated to the elements based upon their respective VSOE of fair value (i.e. the price charged when the same element is sold separately.) If VSOE cannot be established for one element, discounts are applied to the revenue related to the delivered elements. The Company records shipping costs in both revenue and cost of revenue when it bills its customers for shipping. The costs incurred for shipping not billed to customers are reflected in cost of revenue.
The Company has deferred revenue as of December 31, 2011 relating to contracts that extend to 2018, pursuant to which revenues are expected to be recognized over the following periods:
The Company nets advanced billing receivable amounts for future unearned maintenance and support renewals against the related amount in deferred revenue until such time as the legal right to collection of the receivable amount has been established.
The Company generally does not grant a right of return to its customers. When a right of return exists, revenue is deferred until the right of return expires, at which time revenue is recognized provided that all other revenue recognition criteria are met.
Income taxes
Deferred income taxes are recognized for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the combination of the tax payable for the period and the change during the period in deferred tax assets and liabilities.
Advertising
The Company expenses advertising costs as incurred. Advertising expenses were $927,000 and $1.1 million for 2011 and 2010, respectively.
Indemnification and warranty obligations
The Company’s customer agreements generally include certain provisions for indemnifying such customers against liabilities if the Company’s products infringe a third party’s intellectual property rights. To date, the Company has not incurred any material costs as a result of such indemnifications and has not accrued any liabilities related to such obligations in the accompanying financial statements.
The Company accrues for warranty expenses related to hardware products as part of its cost of revenue at the time related revenue is recognized, and maintains an accrual for estimated future warranty obligations based upon the relationship between historical and anticipated warranty costs and revenue volumes. If actual warranty expenses are greater than those projected, additional obligations and other charges against earnings may be required. If actual warranty expenses are less than projected, prior obligations could be reduced, providing a positive impact on reported results. The Company generally provides a warranty over the term of the purchased maintenance period for its products.
The following table presents the Company's warranty reserve activities:
| | | December 31, | |
| | | | 2011 | | | | 2010 | |
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Provisions, net of settlements | | | | | | | | |
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Adopted accounting pronouncements
In September 2011, the FASB issued ASU No. 2011-08, “Intangibles – Goodwill and Other (Topic 350): Testing of Goodwill for Impairment (“ASU 2011-08”)”. The revised standard is intended to reduce the cost and complexity of the annual goodwill impairment test by providing entities an option to perform a “qualitative” assessment to determine whether further impairment testing is necessary. If an entity believes, as a result of its qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for the fiscal year beginning after December 15, 2011, and early adoption is permitted. We have elected to early adopt this guidance and it was applied to our 2011 annual goodwill impairment testing conducted during the fourth quarter of 2011. This guidance did not have a material effect on our consolidated financial statements.
In December 2010, the FASB issued ASU 2010-28, “Intangibles-Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts” (“ASU 2010-28”). ASU 2010-28 modifies Step 1 of the goodwill impairment test so that for reporting units with zero or negative carrying amounts, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not based on an assessment of qualitative indicators that goodwill impairment exists. In determining whether it is more likely than not that goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that impairment may exist. ASU 2010-28 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2010. Early adoption is not permitted. Based on its early adoption of ASU 2011-08, as described above, the Company used the more robust qualitative assessment factors included in ASU 2011-08 in its qualitative analysis of potential goodwill impairment performed under the ASU 2010-28 guidance. The adoption of ASU 2010-28 during the first quarter of 2011 did not have a material impact on our consolidated financial statements.
In October 2009, the FASB issued ASU No. 2009-13, “Revenue Recognition (Topic 605): Multiple - Deliverable Revenue Arrangements - a consensus of the FASB Emerging Issues Task Force” (“ASU 2009-13”). ASU 2009-13 establishes the accounting and reporting guidance for arrangements including multiple revenue-generating activities. This ASU provides amendments to the criteria for separating deliverables, measuring and allocating arrangement consideration to one or more units of accounting. The amendments in this ASU also establish a selling price hierarchy for determining the selling price of a deliverable. Significantly enhanced disclosures are also required to provide information about a vendor’s multiple-deliverable revenue arrangements, including information about the nature and terms, significant deliverables, and its performance within arrangements. The amendments also require providing information about the significant judgments made and changes to those judgments and about how the application of the relative selling-price method affects the timing or amount of revenue recognition. The amendments in ASU 2009-13 are effective prospectively for revenue arrangements entered into or materially modified in the fiscal years beginning on or after September 15, 2010. The adoption of ASU 2009-13 during the first quarter of 2011 did not have a material impact on our consolidated financial statements.
In May 2011, the FASB issued ASU No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure in U.S. GAAP and IFRS” (“ASU 2011-04”), to provide consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements, particularly for level 3 fair value measurement. ASU 2011-04 is effective for periods beginning after December 15, 2011. We are currently evaluating the impact, if any, the adoption of ASU 2011-04 will have on fair value measures and disclosures.
Recent accounting pronouncements
In May 2011, the FASB issued ASU No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure in U.S. GAAP and IFRS” (“ASU 2011-04”), to provide consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements, particularly for level 3 fair value measurement. ASU 2011-04 is effective for periods beginning after December 15, 2011. We are currently evaluating the impact, if any, the adoption of ASU 2011-04 will have on fair value measures and disclosures.
Other accounting standards that have been issued by the FASB or other standards-setting bodies for which future adoption is pending are not expected to have a material impact on the Company’s consolidated financial statements.
Reclassifications
Certain prior year reclassifications have been made for consistent presentation. These reclassifications had no effect on previously reported results of operations or stockholders’ deficit.
Subsequent events
Management has evaluated events subsequent to December 31, 2011 through the date the accompanying consolidated financial statements were filed with the Securities and Exchange Commission for transactions and other events that may require adjustment of and/or disclosure in such financial statements.
2. Liquidity
As of December 31, 2011, the Company had approximately $2.6 million in cash and cash equivalents and a working capital deficit of $7.6 million. Approximately $10.5 million of our current liability balance at December 31, 2011 consisted of deferred revenue, which represents amounts that are expected to be amortized into revenue as they are earned in future periods. For the year ended December 31, 2011, the Company incurred a net loss of $4.6 million and as of December 31, 2011 has incurred a cumulative net loss of $57.9 million. For the year ended December 31, 2011 cash used by operating activities was $3.0 million.
As described in Note 7, the Company has an existing credit facility with Silicon Valley Bank (“SVB”) under which there is borrowing availability of $432,000 as of December 31, 2011. In addition, in December 2011, the Company received net proceeds of approximately $1.5 million in connection with a Securities Purchase Agreement (“2011 Purchase Agreement”) entered into with certain holders of convertible notes payable issued by the Company in 2010 (“2010 Notes”). Pursuant to the 2011 Purchase Agreement, the Company issued secured subordinated convertible promissory notes in the aggregate original principal amount of $4.5 million. Of this amount, approximately $3.0 million was used to retire $3.0 million of the 2010 Notes.
On January 30, 2012, EdgeWave entered into a Loan and Security Agreement with Partners for Growth III, L.P. (“PFG”), pursuant to which PFG provided EdgeWave with a loan in the amount of $1.5 million (See Note 7).
In the opinion of management, its existing cash resources as of December 31, 2011, proceeds from the January 2012 PFG loan, projected improved operating results, collections on future billings, and borrowing availability under existing credit facilities, will provide sufficient liquidity for the Company to meet its continuing obligations for the next twelve months. However, there can be no assurances that projected collections will be realized or that the Company will improve operating results so that positive cash flow from operating activities will be achieved. The Company believes that if necessary, they will be able to raise additional needed capital through subsequent debt or equity financing transactions, and in this regard, has current Board of Director authorization to issue additional convertible notes payable in the principal amount of $2.5 million on the same terms as those issued pursuant to the 2011 Purchase Agreement.
3. Stock-Based Compensation Expense
Share option plans
The Company has three share-based compensation plans (collectively, the “Plans”), which provide for the issuance of options, stock grants, and stock-based awards to employees and others as deemed appropriate by the Board of Directors. Terms of options issued under the Plans generally include an exercise price equal to the estimated fair value of the underlying common stock at the date of grant, vesting periods generally between three and five years, and expiration dates not to exceed ten years from the date of grant. As of December 31, 2011, the Company had 3,470,351 option shares outstanding and 1,223,707 option shares available for issuance, of which 252,687 shares of restricted stock are outstanding but unvested under the Plans. Stock-based compensation expenses of approximately $244,000 and $174,000 for the years ended December 31, 2011 and 2010, respectively, were charged to operating expenses. The effect on loss per share as a result of the stock based compensation expense was approximately $0.01 for the years ended December 31, 2011 and 2010. The tax effect was immaterial.
Calculating stock-based compensation expense requires the input of highly subjective assumptions, including the expected life of the stock options granted, the expected stock price volatility factor, and the pre-vesting option forfeiture rate. The fair value of options granted during the years ended December 31, 2011 and 2010 was calculated using the Black-Scholes option pricing model (“Black-Scholes”) using the valuation assumptions in the table below. The Company estimates the expected life of stock options granted based upon management’s consideration of the historical life of the options and the vesting and contractual period of the options granted. The Company estimates the expected volatility factor based on the weighted average of the historical volatility of three publicly traded surrogates of the Company and the Company’s implied volatility from its common stock price. The Company applies its risk-free interest rate based on the U.S. Treasury yield in effect at the time of the grant. The Company has no history or expectation of paying any cash dividends on its common stock. Forfeitures are estimated based on historical experience.
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Average expected life (years) | | | | | | | | |
Average expected volatility | | | | | | | | |
Average risk-free interest rate | | | | | | | | |
Average expected dividend yield | | | | | | | | |
The following is a summary of stock option activity under the Plans as of December 31, 2011 and changes during fiscal years 2011 and 2010:
| | | Number of Shares Outstanding | | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Term | | Aggregate Intrinsic Value | | Weighted Average Grant Date Fair Value |
Options outstanding at December 31, 2009 | | | | | | | | | | | | | | | |
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Options outstanding at December 31, 2010 | | | | | | | | | | | | | | | |
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Options outstanding at December 31, 2011 | | | | | | | | | | | | | | | |
Options vested and expected to vest at December 31, 2011 | | | | | | | | | | | | | | | |
Options exercisable at December 31, 2011 | | | | | | | | | | | | | | | |
Additional information regarding options outstanding as of December 31, 2011 is as follows:
Range of Exercise Prices | | | Number of Shares Outstanding | | | Weighted Average Remaining Contractual Life in Years | | | Weighted Average Exercise Price | | | Number Exercisable | | | Weighted Average Exercise Price | |
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The aggregate intrinsic value of options outstanding and options exercisable at December 31, 2011 was approximately $206,000 and $135,000, respectively. The aggregate intrinsic value represents the total intrinsic value based upon the stock price of $0.30 at December 31, 2011. The aggregate intrinsic value of options outstanding and options exercisable at December 31, 2010 was approximately $1.1 million and $497,000, respectively.
Cash received from stock option exercises during the year ended December 31, 2011 was $107,000. As of December 31, 2011, there was approximately $310,000 of total unrecognized compensation expense related to unvested share-based compensation arrangements granted under the option plans. This cost is expected to be recognized over a weighted average period of 2.59 years.
The following is a summary of restricted stock activity as of the year ended December 31, 2011 and changes during fiscal years 2011 and 2010:
| | | Number of Shares Outstanding* | | | Weighted Average Fair Value | |
Restricted stock unreleased at December 31, 2009 | | | | | | | | |
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Restricted stock unreleased at December 31, 2010 | | | | | | | | |
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| Released | | | | | | | | |
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Restricted stock unreleased at December 31, 2011 | | | | | | | | |
* Represents the total amount of restricted stock outstanding but unvested.
Employee stock purchase plan
The Company’s Employee Stock Purchase Plan (“ESPP”) was approved by our shareholders in June 2007. The ESPP provides a means by which employees of the Company may be given an opportunity to purchase Common Stock of the Company at semi-annual intervals through payroll deductions. Initially, the Company reserved 400,000 shares for issuance pursuant to the ESPP. Under this plan, a participant may contribute up to 15% of his or her compensation through payroll deductions, and the accumulated deductions will be applied to the purchase of shares on the purchase date, which is the last trading day of the offering period. The purchase price per share will be equal to 85% of the fair market value per share on the start date of the offering period or the end of the offering period, whichever is lower. In addition, the number of shares available for issuance under the ESPP may be increased annually on the first day of each Company fiscal year by an amount equal to the least of: (i) the difference between four hundred thousand (400,000) and the number of shares remaining authorized for issuance after the last purchase of shares, (ii) four hundred thousand (400,000) shares of Common Stock, or (iii) an amount determined by the Board of Directors or a committee of the Board of Directors appointed to administer the ESPP.
For the years ended December 31, 2011 and 2010, stock purchases of Common stock under the ESPP were 267,374 shares and 139,886 shares, respectively. Compensation expense recorded in connection with this plan was immaterial.
Shares available for issuance under the Company’s Employee Stock Purchase Plan are as follows:
| | | Number of Shares | |
Shares reserved for issuance at December 31, 2009 | | | | |
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Shares reserved for issuance at December 31, 2010 | | | | |
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Shares reserved for issuance at December 31, 2011 | | | | |
4. Fixed Assets
Fixed assets consisted of the following:
| | | December 31, | |
| | | | 2011 | | | | 2010 | |
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Less accumulated depreciation and amortization | | | | | | | | |
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Depreciation and amortization expense was approximately $497,000 and $423,000 for 2011 and 2010, respectively.
5. Goodwill and Other Intangible Assets – Net
Goodwill
As of December 31, 2011 the carrying value of goodwill was approximately $8.3 million. During the year ended December 31, 2010 the Company recorded additional goodwill in the amount of $711,000 in connection with the asset purchase agreement between the Company and Red Condor (See Note 6). There were no additions, impairments or other adjustments to the carrying value of goodwill recorded during the year ended December 31, 2011.
Other intangible assets - net
Other intangible assets - net at December 31, 2011 consisted of technology and intellectual property acquired pursuant to the asset purchase agreement between the Company and Red Condor, and are amortized on a straight-line basis over five years (See Note 6). There were no impairment charges related to identifiable intangible assets during the year ended December 31, 2011.
Other intangible assets - net consists of the following at December 31:
| | | December 31, 2011 | | | December 31, 2010 | |
Identifiable intangible assets acquired during 2010 | | | | | | | | |
| Less: accumulated amortization | | | (128,000 | ) | | | (53,000 | ) |
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Other intangible assets - net | | | | | | | | |
Amortization of intangible assets amounted to $128,000 for 2011 and $53,000 for 2010.
Future estimated amortization of intangible assets as of December 31, 2011 is as follows:
| Year Ending December 31, | | | |
| | $ | 128,000 | |
| | | 128,000 | |
| | | 128,000 | |
| | | 75,000 | |
| | $ | 459,000 | |
6. Business Combination
Asset purchase agreement
On July 28, 2010, the Company entered into an Asset Purchase Agreement (“APA”) with Red Condor, Inc., a private Delaware corporation, based in Rohnert Park, CA ("Red Condor") and certain note holders (the “Noteholders”) of Red Condor. Pursuant to the APA, EdgeWave purchased substantially all of the assets and assumed certain liabilities of Red Condor in exchange for restricted shares of common stock of EdgeWave, and the forgiveness of debt owed by Red Condor to the Company as described below. The assumed liabilities included approximately: (i) $420,000 in accounts payable and (ii) $42,000 of accrued vacation time. Included in the acquired assets was approximately $638,000 in Red Condor accounts receivable.
The transaction closed on August 2, 2010 (the “Closing Date”). On the Closing Date, the Company issued to the Noteholders of Red Condor, 2,416,272 unregistered shares of common stock valued at approximately $821,000, based on the closing price of the Company’s common stock on that date, and the Company agreed to forgive the repayment of a previous advance to Red Condor in the aggregate amount of $220,000. Of the total shares of common stock issued to the Noteholders, 483,254 shares are being held in escrow for an 18 month period in connection with the Purchaser indemnification provisions of the APA.
Under the APA, the Company agreed to offer employment to 34 employees of Red Condor, and agreed to continue relationships with certain independent contractors after the closing date.
Goodwill associated with the acquisition of Red Condor
The acquisition of Red Condor’s assets has been accounted for using the purchase method of accounting and, accordingly, the tangible and intangible assets acquired and liabilities assumed from Red Condor were recorded at their estimated fair values as of the date of the acquisition. The total purchase consideration paid by the Company was approximately $1,041,000. The purchase price allocation is shown below.
| | | Amount | |
Net tangible assets and liabilities | | | | |
| | | | |
| | | | |
| | | | | |
The amount allocated to the intangible assets represents the Company’s estimate of the fair value of identifiable intangible assets acquired from Red Condor, consisting of the Red Condor technology and intellectual property. Approximately $711,000 of the purchase price has been allocated to goodwill. Goodwill represents the excess of the purchase price over the fair value of the net tangible assets.
7. Credit Facility and Debt Agreements
Silicon Valley Bank (“SVB”)
In 2007, the Company entered into the SVB Loan Agreement. The Company borrows and makes repayments under the revolving credit facility depending on its liquidity position. On June 30, 2011 and September 8, 2011, the SVB Loan Agreement was most recently amended. The primary revisions incorporated by these amendments include (i) increasing the revolving line balance to $3.0 million (from $2.3 million), (ii) modifying the tangible net worth covenant to no less than negative $21.5 million at all times, (iii) increasing the borrowing base to eighty-five percent (85%) of eligible accounts, (iv) extending the maturity date for the revolving credit line and Term Loan A to June 30, 2013, and (v) providing for an additional term loan facility (“Term Loan C”) totaling $200,000 that will be used for general working capital.
At December 31, 2011, the total amount outstanding under the Revolving Line was $1.7 million and the Company had a remaining borrowing availability of $432,000. As of December 31, 2011, the applicable interest rate for the Revolving Line was 6.00% and for the year ended December 31, 2011 interest expense relating to the revolving line was approximately $73,000. At December 31, 2011, the total amount outstanding under Term Loans A, B, and C was $558,000, which represents the total amount available pursuant to these loans. As of December 31, 2011, the applicable interest rates for Term Loan A, Term Loan B, and Term Loan C were 6.00%, 7.50%, and 7.00%, respectively, and the total interest expense for these loans for the year ended December 31, 2011 was approximately $33,000.
As of December 31, 2011, the Company was in compliance with the covenants under the SVB Loan and Security Agreement, as amended.
Convertible Notes Payable
On December 5, 2011, the Company entered into the 2011 Purchase Agreement pursuant to which the Company issued convertible notes payable in the amount of $4.5 million (“2011 Convertible Notes”) to certain holders of the convertible notes payable issued by the Company in 2010 (“2010 Convertible Notes”). Approximately $3.0 million of the total gross proceeds from the 2011 Convertible Notes was used to retire the 2010 Convertible Notes. 2011 Convertible Notes in the principal amount of $1.7 million were issued to a venture capital fund, which is controlled by a member of the Company’s Board of Directors.
The 2011 Convertible Notes bear interest at the rate of 7.00% per annum with accrued interest and principal due and payable on the maturity date of December 4, 2015. The note holders may convert the 2011 Convertible Notes in whole or in part at any time prior to the maturity date into shares of Common Stock of the Company at a conversion price of $0.70. Following the occurrence of any period of 60 consecutive trading days where the average closing price of the Common Stock of the Company is equal to or greater than $1.00 per share, the entire unpaid principal amount of the 2011 Convertible Notes together with any unpaid interest shall be converted into Common Stock of the Company at the conversion price of $0.70.
The 2011 Convertible Notes may be prepaid in whole or in part from time to time and at any time prior to maturity without penalty or premium subject to the Investors’ right to convert the Notes upon receipt of notice of such prepayment. The obligations represented by the 2011 Convertible Notes are secured by a security interest in the assets of the Company, subordinated to the SVB and PFG loan agreements. Upon the occurrence of any event of default, the holders of the 2011 Convertible Notes may elect to call the principal amount, plus all accrued but unpaid interest on the 2011 Convertible Notes then outstanding immediately due and payable.
The terms of the 2011 Convertible Notes also provided that in the event that prior to December 5, 2012, the Company issued a new Note (or Notes) for an aggregate consideration in excess of $25,000 with a conversion price less than the current conversion price of the 2011 Convertible Notes, then going forward the conversion price of the portion of the 2011 Convertible Notes that had not previously been converted into equity securities would automatically be reduced to the new Note conversion rate. In March 2012, the terms of the 2011 Convertible Notes were amended, effective as of the original issuance date of the 2011 Convertible Notes, to eliminate the above referenced conversion price adjustment provision and to include a provision that restricts that Company from issuing a new convertible note or series of new convertible notes with a conversion rate less than the then current conversion rate of the 2011 Convertible Notes prior to December 5, 2012.
As of December 31, 2011 principal and accrued interest on the Notes totaled $4.5 million.
One of the 2010 Convertible Notes in the original principal amount of $300,000 was not repaid in connection with the issuance of the 2011 Convertible Notes and remain outstanding at December 31, 2011. The interest on the outstanding principal balance on these 2010 Notes accrues at a rate of three percent (3.0%) per annum and accrued interest is added to the balance of the 2010 Note. All unpaid principal and interest is due and payable at maturity, which is July 30, 2014, and may be converted at any time into shares of the Company’s Common Stock at a fixed conversion price of $1.10. Following the occurrence of any period of 60 consecutive trading days where the average closing price of the Company’s common stock is equal to or greater than $1.25 per share, the entire unpaid principal amount together with any unpaid interest shall be converted into the Company’s Common Stock at a conversion price of $1.10.
As of December 31, 2011 and 2010 principal and accrued interest on the 2010 Notes totaled $313,000 and $3.2 million, respectively. Interest expense recognized during 2011 on the 2010 and 2011 Convertible Notes totaled $114,000.
On January 4, 2012 the Company entered into a Purchase Agreement with an investor pursuant to which the Company issued secured subordinated convertible notes in the aggregate original principal amount of $100,000 on terms identical to the 2011 Convertible Notes, as amended.
Partners for Growth III, L.P. (“PFG”)
Effective January 30, 2012, the Company entered into a Loan and Security Agreement (the “PFG Loan Agreement”) with Partners for Growth III, L.P., pursuant to which PFG provided EdgeWave with a loan in the amount of $1.5 million (the “Loan”).
The Loan will be repaid in 36 monthly principal payments of approximately $42,000 each, plus interest, commencing on March 1, 2012. The principal of the Loan may not be prepaid in whole or in part during the first year. During the second year, EdgeWave may prepay the Loan in whole or in part subject to payment of a prepayment fee equal to three percent (3%) of the amount prepaid. During the third year, EdgeWave may prepay the Loan in whole or in part subject to payment of a prepayment fee equal to two percent (2%) of the amount prepaid. The annual interest rate on the Loan is 9.75%, fixed. The obligations under the Loan Agreement are secured by substantially all of EdgeWave’s assets, subordinated to the SVB loan agreements.
The Loan Agreement contains affirmative, negative and financial covenants customary for credit facilities of this type, including, among other things, limitations on indebtedness, liens, sales of assets, mergers, investments, and dividends. The Loan Agreement also requires that EdgeWave maintain a Cumulative Modified Net Income / Loss (as defined in the Loan Agreement) of not less than ($3.0 million) during the calendar year 2012 (with dollar figures in parentheses denoting a negative number). The Loan Agreement requires for each month during the first calendar quarter of 2013, on a rolling three-month basis, that EdgeWave maintain a Modified Net Income / (Loss) of at least eighty percent (80%) of EdgeWave’s Board-approved forecast/financial plan for Modified Net Income / (Loss) for such period. In addition, the Loan Agreement contains events of default provisions customary for credit facilities of this type (with grace or cure periods, as applicable).
In connection with the execution of the Loan Agreement, EdgeWave issued warrants (the “Warrants”) to PFG and its designees which allow PFG and its designees to purchase up to 450,000 shares of EdgeWave common stock at an exercise of $0.35 per share. The Warrant expires on January 30, 2017.
8. Income Taxes
| | | Year ended December 31, 2011 | |
| | | Current | | | Deferred | | | Total | |
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| | | Year ended December 31, 2010 | |
| | | Current | | | Deferred | | | Total | |
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Deferred income tax assets and liabilities consist of the following:
| | | December 31, | |
| | | 2011 | | | 2010 | |
Allowance for doubtful accounts | | | | | | | | |
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Net operating loss carryforwards | | | | | | | | |
Tax credits carryforwards | | | | | | | | |
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A reconciliation of the actual income tax expense recorded to that based upon expected federal tax rates are as follows:
| | | December 31, | |
| | | 2011 | | | 2010 | |
Expected federal tax benefit | | | | | | | | |
Expected state benefit, net of federal tax effect | | | | | | | | |
Change in valuation allowance | | | | | | | | |
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Permanent differences and other | | | | | | | | |
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ASC 740, “Income Taxes”, requires that the Company reduce its deferred tax assets by a valuation allowance if, based on the weight of the available evidence, it is not more likely than not that all or a portion of a deferred tax asset will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. Management has determined that it is not more likely than not that the deferred tax asset will be realized. Accordingly as of December 31, 2011 and 2010, the Company had a valuation allowance of approximately $14.6 million and $12.7 million, respectively.
At December 31, 2011 and 2010, the Company had federal net operating loss carryforwards of approximately $20.8 and $17.4 million and state net operating loss carryforwards of approximately $20.4 million and $17.8 million, respectively. The federal and state tax net operating loss carryforwards will begin to expire in 2020 and 2015, respectively.
The future utilization of the Company’s NOL to offset future taxable income may be subject to a substantial annual limitation as a result of ownership changes that may have occurred previously or that could occur in the future. The Company has not yet determined whether such an ownership change has occurred, however, the Company plans to complete a Section 382 analysis regarding the limitation of the net operating losses and research and development credits. Until this analysis has been completed, the Company has removed the net deferred tax assets associated with NOL carryforwards before the merger with Sand Hill IT Security Acquisition Corp. (“Sand Hill”), which occurred in October 2005, of approximately $3.0 million from its deferred tax asset schedule and has recorded a corresponding decrease to its valuation allowance. When the Section 382 analysis is completed, the Company plans to update its unrecognized tax benefits under ASC 740-10-25. At this time, the Company cannot estimate how much the unrecognized tax benefits may change. Any carryforwards that will expire prior to utilization as a result of such limitations will be removed from deferred tax assets with a corresponding reduction of the valuation allowance. Due to the existence of the valuation allowance, future changes in our unrecognized tax benefits will not impact the Company’s effective tax rate.
The Company recognizes interest and/or penalties related to uncertain tax positions in income tax expense. To the extent accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period that such determination is made. There was no interest and penalties recorded for the year ended December 31, 2011.
9. Stockholders’ Deficit
Common stock
On August 2, 2010 the Company issued to the Noteholders of Red Condor, a total of 2,416,272 un-registered shares of Common Stock, of which 483,254 shares of Common Stock, are being held in Escrow until February 2, 2012.
Warrants
As of December 31, 2011 and 2010, a total of 1,363,961 shares of common stock, respectively, were reserved for issuance for the exercise of warrants at exercise prices ranging from $0.46 to $1.60 per share. During 2011, there were no warrants granted, exercised, or cancelled during the year.
During 2010, there were 210,111 warrants granted in connection with the issuance of convertible notes payable (See Note 7) and there were no warrants exercised or cancelled during the year ended December 31, 2010.
The following is a summary of our warrants activity as of December 31, 2011 and changes during fiscal year 2011 and 2010:
| | | Number of Shares | | | Per Share Exercise Price Range | | | Weighted Average Exercise Price | |
Outstanding warrants - December 31, 2009 | | | | | | | | | | | | |
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Outstanding warrants - December 31, 2010 | | | | | | | | | | | | |
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Outstanding warrants - December 31, 2011 | | | | | | | | | | | | |
Warrants exercisable - December 31, 2011 | | | | | | | | | | | | |
The detail of the warrants outstanding and exercisable as of December 31, 2011 is as follows:
| Exercise Price | | | Number Outstanding | | | Remaining Life (Years) | | | Weighted Average Exercise Price | |
| $ | 0.46 | | | | 450,000 | | | | 1.55 | | | $ | 0.46 | |
| $ | 0.57 | | | | 603,850 | | | | 3.07 | | | $ | 0.57 | |
| $ | 1.10 | | | | 210,111 | | | | 2.58 | | | $ | 1.10 | |
| $ | 1.60 | | | | 100,000 | | | | 0.38 | | | $ | 1.60 | |
| | | | | | 1,363,961 | | | | | | | $ | 0.69 | |
10. Warrant Derivative Liability
At December 31, 2011, there were 463,500 warrants classified as a derivative liability with an estimated fair value of $62,000 due to an exercise price re-set provision included in the underlying warrant agreement. The estimated fair value was determined using the binomial lattice pricing model (“binomial lattice model”). Key assumptions of the binomial lattice model include the market price of our stock, the exercise price of the warrants, applicable volatility rates, risk-free interest rates, expected dividends, probability of future financing, and the instrument's remaining term. These assumptions require significant management judgment. In addition, changes in any of these variables during a period can result in material changes in the fair value (gains or losses) of these derivative instruments. The decrease in the estimated fair value of the warrant derivative liability for the year ended December 31, 2011 of $58,000 is included in other expense in the accompanying statement of operations. (See Note 11).
11. Fair Value Measurements
Fair value hierarchy
Fair value is defined in ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are to be considered from the perspective of a market participant that holds the assets or owes the liability. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1: Quoted prices in active markets for identical or similar assets and liabilities.
Level 2: Quoted prices for identical or similar assets and liabilities in markets that are not active or observable inputs other than quoted prices in active markets for identical or similar assets and liabilities.
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Financial instruments measured at fair value on a recurring basis
ASC 820 requires disclosure of the level within the fair value hierarchy used by the Company to value financial assets and liabilities that are measured at fair value on a recurring basis. At December 31, 2011 and 2010, the Company had outstanding warrants to purchase common shares of our stock that are classified as warrant derivative liabilities with a fair value of $62,000 and $120,000, respectively. The warrants were valued using the binomial lattice pricing model, which utilizes significant unobservable inputs (Level 3), using the valuation assumptions in the table below.
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Average expected life (years) | | | | | | | | |
Average expected volatility | | | | | | | | |
Average risk-free interest rate | | | | | | | | |
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The following table reconciles the warrant derivative liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2011 and 2010:
Balance at January 1, 2010 | | | | |
Loss on change in fair value included in other expense (income) | | | | |
Balance at December 31, 2010 | | | | |
Gain on change in fair value included in other expense (income) | | | | |
Balance at December 31, 2011 | | | | |
12. Related Party Transactions
A director of the Company is a managing member of a venture capital firm that as of December 31, 2011 has loaned $1.7 million to the Company pursuant to the 2011 Convertible Notes (See Note 7).
13. Commitment and Contingencies
Litigation
In the normal course of business, the Company is occasionally named as a defendant in various lawsuits. On September 7, 2010, an action was filed in the United States District Court Eastern District of Texas by Wordcheck Tech, LLC (the “Plaintiff”) against the Company as well as other co-defendants, claiming certain products, which are manufactured by an unrelated third party and sold by the Company, allegedly infringe upon U.S. Patent No. 6,782,510 entitled “Word Checking Tool For Controlling The Language Content In Documents Using Dictionaries With Modifyable Status Fields” which was issued on August 24, 2004. On December 19, 2011, The Companies entered into a settlement agreement and the suit was dismissed with prejudice.
Operating leases
The Company leases approximately 37,000 square feet of office space in San Diego, CA pursuant to a lease agreement that expires in May 31, 2016. Pursuant to the terms of this lease agreement, the Company issued a Letter of Credit for the benefit of the lessor in the amount of $250,000.
The Company also leases approximately 12,000 square feet of office space in Rohnert Park, CA which is used primarily for technical support and research and development relating to its ePrism product line. The Rohnert Park lease expires on May 31, 2012.
Facilities rent expense totaled approximately $921,000 and $1.7 million for the years ended December 31, 2011 and 2010, respectively. The Company recognizes rent expense on a straight line basis based upon the average monthly contractual lease amount.
Future minimum payments under operating leases are as follows:
| Year Ending December 31, | | | |
| | $ | 842,000 | |
| | | 806,000 | |
| | | 831,000 | |
| | | 915,000 | |
| | | 393,000 | |
| | $ | 3,787,000 | |
Capital lease
As a component of its lease agreement for its office space in San Diego, CA, the Company received an allowance of approximately $217,000 that the Company used to purchase office cubicles and other furniture during January 2011. Accordingly, a capital lease has been recorded for this amount and a pro-rata portion of the monthly lease payment is allocated to the capital lease principal balance and interest based upon a term of sixty-five (65) months at an annual interest rate of 7.0%. As of December 31, 2011 current and long term capital lease obligations included in the accompanying consolidated balance sheet were $37,000 and $146,000, respectively, and for the year ended December 31, 2011, approximately $34,000 and $14,000 were allocated to reduce the principal balance on the capital lease and to record related interest expense, respectively.
14. Concentrations, Segment and Related Information
Credit risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable. Credit risk with respect to accounts receivable is mitigated by the large number of geographically diverse customers.
The Company maintains cash balances at financial institutions located in the United States and secured by the Federal Deposit Insurance Corporation up to $250,000. At times, balances may exceed federally insured limits. The Company has not experienced any losses in such accounts. Management believes that the Company is not exposed to any significant credit risk with respect to its cash and cash equivalents.
Supplier
The Company has a major vendor that accounted for approximately $2.2 million (17.1%) and $2.9 million (19.5%) of the Company’s total purchases during 2011 and 2010, respectively. At December 31, 2011 and 2010, the amount payable to this vendor was approximately $723,000 and $407,000, respectively. While the Company believes other suppliers are available if the vendor unexpectedly stops supplying the product, the Company could experience an interruption in its ability to supply its customers.
Major customers
During 2011 and 2010 there were no individual customers which accounted for more than 10% of the Company’s revenue.
Segment and related information
The Company operates under one operating segment, Secure Content Management (“SCM”). The Company’s chief operating decision makers allocate resources and make decisions based on financial data consistent with the presentation in the accompanying consolidated financial statements.
Long lived assets are located in the United States and all of the Company’s revenues are generated from external customers through products/services within this segment as shown in the accompanying statements of operations. For the years ended December 31, 2011 and 2010, approximately 96% of the Company’s revenue was in North America, the remaining 4% was disbursed over the rest of the world.
15. Other Expense (Income)
Change in fair value of warrant derivative liability
For the years ended December 31, 2011 and 2010, other expense (income) includes a gain of approximately $58,000 and a loss of $101,000, respectively, on the change in fair value of warrant derivative liability.
Legacy Accounts Payable
Other expense (income) includes a gain on the write off of previously outstanding legacy accounts payable of approximately $135,000 during the year ended December 31, 2011.
Pursuant to the requirements of Section 13 or 15(d) 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.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
