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Under
THE SECURITIES ACT OF 1933
Wisconsin (State or other jurisdiction of incorporation or organization) | 39-1847269 (I.R.S. Employer Identification No.) | 3646 (Primary Standard Industrial Classification Code Number) |
Plymouth, WI 53073
(920) 892-9340
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Neal R. Verfuerth
President and Chief Executive Officer
Orion Energy Systems, Inc.
1204 Pilgrim Road
Plymouth, WI 53073
Tel: (920) 892-9340
Fax: (920) 892-4274
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Steven R. Barth, Esq. Carl R. Kugler, Esq. Foley & Lardner LLP 777 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Tel: (414) 271-2400 Fax: (414) 297-4900 | Daniel J. Waibel Chief Financial Officer and Treasurer Eric von Estorff, Esq. Vice President, General Counsel and Secretary Orion Energy Systems, Inc. 1204 Pilgrim Road Plymouth, Wisconsin 53073 Tel: (920) 892-9340 Fax: (920) 892-4274 | Kirk A. Davenport II, Esq. Latham & Watkins LLP 885 Third Avenue New York NY 10022-4834 Tel: (212) 906-1200 Fax: (212) 751-4864 |
Title of Each Class of | Proposed Maximum | Amount of | ||||||
Securities to be Registered | Aggregate Offering Price (1) | Registration Fee (1) | ||||||
Common Stock, no par value | $100,000,000 | $3,070 | ||||||
(1) | Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) under the Securities Act. Includes shares of common stock issuable upon exercise of the underwriters’ over-allotment option. |
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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
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Per Share | Total | |||||||
Public offering price | $ | $ | ||||||
Underwriting discount | $ | $ | ||||||
Proceeds, before expenses, to us | $ | $ | ||||||
Proceeds, before expenses, to the selling shareholders | $ | $ |
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• | we have a limited operating history, have previously incurred net operating losses, and only recently achieved profitability; | ||
• | some of our competitors are larger, have long-standing customer relationships at existing commercial and industrial facilities, and have greater resources than we have; | ||
• | we are dependent on the skills, experience and efforts of our senior management; | ||
• | our success depends on market acceptance of our energy management products and services; | ||
• | our component parts and raw materials are subject to price fluctuations, potential shortages and interruptions of supply; |
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• | we are dependent upon our intellectual property, and our inability to protect our intellectual property or enforce our rights could negatively affect our business and results of operations; | ||
• | if the price of electricity decreases, there may be less demand for our energy management products and services; | ||
• | we may fail to maintain adequate internal control over financial reporting; and | ||
• | our common stock has never traded publicly, and the market price of our common stock may fluctuate significantly. |
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Issuer | Orion Energy Systems, Inc. | |
Common stock offered by us | shares ( shares if the underwriters’ over-allotment option is exercised in full) | |
Common stock offered by the selling shareholders | shares | |
Common stock to be outstanding after the offering | shares ( shares if the underwriters’ over-allotment option is exercised in full) | |
Use of proceeds | We estimate that the net proceeds to us from this offering will be approximately $ million (or $ million if the underwriters’ over-allotment option is exercised in full), assuming an initial public offering price of $ per share, the midpoint of the range set forth on the cover page of this prospectus. We intend to use these proceeds for working capital and general corporate purposes, including to fund increased sales and marketing expenses, as well as for potential future acquisitions. We will not receive any proceeds from the sale of shares by the selling shareholders. See “Use of Proceeds.” | |
Dividend policy | We currently do not intend to pay any cash dividends on our common stock. | |
Directed share program | The underwriters intend to reserve up to shares for sale at the initial public offering price to employees, officers, directors and certain other persons associated with us who have expressed an interest in purchasing our common stock in this offering. See “Underwriting.” | |
Risk factors | You should carefully read and consider the information set forth under “Risk Factors,” together with all of the other information set forth in this prospectus, before deciding to invest in shares of our common stock. | |
Listing and trading symbol | We intend to apply to list our common stock on the Nasdaq Global Market under the symbol “OESX.” |
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• | reflects the automatic conversion upon closing of this offering of all of our outstanding shares of Series B preferred stock on a one-for-one basis into 2,989,830 shares of common stock; | ||
• | reflects the automatic conversion upon closing of this offering of all of our outstanding shares of Series C preferred stock on a one-for-one basis into 1,818,182 shares of common stock; | ||
• | reflects the automatic conversion upon closing of this offering of the Convertible Notes into 2,360,802 shares of common stock; | ||
• | excludes 954,390 shares of common stock issuable upon the exercise of warrants outstanding as of June 30, 2007 with a weighted average exercise price of $2.24 per share; | ||
• | excludes 4,712,077 shares of common stock issuable upon the exercise of options outstanding as of June 30, 2007 with a weighted average exercise price of $1.57 per share; | ||
• | excludes 646,700 shares of common stock reserved for future issuance as of June 30, 2007 under our stock option plans; | ||
• | assumes an initial public offering price of $ per share, the midpoint of the range set forth on the cover page of this prospectus; and | ||
• | assumes no exercise of the underwriters’ option to purchase from us up to additional shares to cover over-allotments. |
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Three Months Ended | ||||||||||||||||||||
Fiscal Year Ended March 31, | June 30, | |||||||||||||||||||
2005 | 2006 | 2007 | 2006 | 2007 | ||||||||||||||||
(unaudited) | ||||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||
Consolidated statements of operations data: | ||||||||||||||||||||
Revenue | $ | 21,783 | $ | 33,280 | $ | 48,183 | $ | 9,680 | $ | 16,721 | ||||||||||
Cost of revenue(1) | 14,043 | 22,524 | 32,487 | 6,255 | 11,118 | |||||||||||||||
Gross profit | 7,740 | 10,756 | 15,696 | 3,425 | 5,603 | |||||||||||||||
Operating expenses(1) | 9,090 | 12,037 | 13,699 | 2,998 | 4,119 | |||||||||||||||
Income (loss) from operations | (1,350 | ) | (1,281 | ) | 1,997 | 427 | 1,484 | |||||||||||||
Other income (expense) | (567 | ) | (1,046 | ) | (843 | ) | (252 | ) | (255 | ) | ||||||||||
Income (loss) before income tax and cumulative effect of change in accounting principle | (1,917 | ) | (2,327 | ) | 1,154 | 175 | 1,229 | |||||||||||||
Income tax expense (benefit) | (702 | ) | (762 | ) | 225 | 34 | 481 | |||||||||||||
Income (loss) before cumulative change in accounting principle | (1,215 | ) | (1,565 | ) | 929 | 141 | 748 | |||||||||||||
Cumulative effect of change in accounting principle | (57 | ) | — | — | — | — | ||||||||||||||
Net income (loss) | (1,272 | ) | (1,565 | ) | 929 | 141 | 748 | |||||||||||||
Accretion of redeemable preferred stock and preferred stock dividends(2) | (104 | ) | (3 | ) | (201 | ) | (1 | ) | (75 | ) | ||||||||||
Conversion of preferred stock(3) | (972 | ) | — | (83 | ) | — | — | |||||||||||||
Net income (loss) attributable to common shareholders | $ | (2,348 | ) | $ | (1,568 | ) | $ | 645 | $ | 140 | $ | 673 | ||||||||
Net income (loss) attributable to common shareholders: | ||||||||||||||||||||
Basic | $ | (0.36 | ) | $ | (0.18 | ) | $ | 0.07 | $ | 0.02 | $ | 0.07 | ||||||||
Diluted | $ | (0.36 | ) | $ | (0.18 | ) | $ | 0.04 | $ | 0.01 | $ | 0.04 | ||||||||
Weighted average shares outstanding: | ||||||||||||||||||||
Basic | 6,470 | 8,524 | 9,080 | 8,999 | 9,950 | |||||||||||||||
Diluted | 6,470 | 8,524 | 16,433 | 15,073 | 18,088 |
As of June 30, 2007 | |||||||||||||
Pro Forma As | |||||||||||||
Actual | Pro Forma(4) | Adjusted(5) | |||||||||||
(in thousands, unaudited) | |||||||||||||
Consolidated balance sheet data: | |||||||||||||
Cash and cash equivalents | $ | 696 | $ | 12,046 | $ | ||||||||
Total assets | 37,719 | 49,069 | |||||||||||
Long-term debt, less current maturities | 9,998 | 9,998 | |||||||||||
Convertible notes | — | 10,600 | |||||||||||
Temporary equity (Series C convertible redeemable preferred stock) | 5,028 | 5,028 | |||||||||||
Series B convertible preferred stock | 5,959 | 5,959 | |||||||||||
Treasury stock | (361 | ) | (1,739 | ) | |||||||||
Shareholder notes receivable | (2,128 | ) | — | ||||||||||
Temporary equity and shareholders’ equity | $ | 15,401 | $ | 16,151 | $ |
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Cumulative From December 1, | ||||
2001 Through | ||||
June 30, 2007 | ||||
(in thousands, unaudited) | ||||
Other information: | ||||
HIF lighting systems sold (6) | 853 | |||
Total units sold (including HIF lighting systems) | 1,108 | |||
Customer kilowatt demand reduction (7) | 243 | |||
Customer kilowatt hours saved(7) (8) | 2,914,625 | |||
Customer electricity costs saved(9) | $224,426 | |||
Indirect carbon dioxide emission reductions from customers’ energy savings (tons)(10) | 2,842 | |||
Square footage retrofitted(11) | 451,802 |
(1) | Cost of revenue includes stock-based compensation expense recognized under SFAS 123(R) of $24,000 and $21,000 for fiscal 2007 and our fiscal 2008 first quarter, respectively. Operating expenses include stock-based compensation expense recognized under SFAS 123(R) of $339,000 and $125,000 for fiscal 2007 and our fiscal 2008 first quarter, respectively. See note (1) under “Selected Historical Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates – Stock-Based Compensation.” |
(2) | For fiscal 2007 and our fiscal 2008 first quarter, represents the impact attributable to the accretion of accumulated dividends on our Series C preferred stock, plus accumulated dividends on our Series A preferred stock prior to its conversion into common stock on March 31, 2007. The Series C preferred stock will convert automatically into common stock on a one-for-one basis upon the closing of this offering and our obligation to pay accumulated dividends will be extinguished. For fiscal 2005 and 2006, represents accumulated dividends on our Series A preferred stock prior to its conversion into common stock. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Revenue and Expense Components – Accretion of Preferred Stock and Preferred Stock Dividends.” | |
(3) | Represents the estimatedfair market value of the premium paid to holders of Series A preferred stock upon induced conversion. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Revenue and Expense Components – Conversion of Preferred Stock.” | |
(4) | Gives effect to (i) the issuance of the Convertible Notes and the application of the gross proceeds therefrom to cash and cash equivalents and (ii) the repayment of approximately $2.1 million in aggregate principal amount of shareholder notes with $0.8 million in cash and 306,932 shares of common stock, as if each of these transactions had occurred on June 30, 2007. See “Related Party Transactions” and “Executive Compensation — Compensation Discussion and Analysis — Long-Term Equity Compensation.” | |
(5) | Gives effect to the pro forma adjustments described in note (4) and (i) the automatic conversion of the Convertible Notes into 2,360,802 shares of our common stock; (ii) the automatic conversion of 4,808,012 shares of our outstanding preferred stock into common stock on a one-for-one basis; and (iii) the receipt of estimated net proceeds of $ million from our sale of shares of common stock in this offering at an assumed initial public offering price of $ per share (the midpoint of the range set forth on the cover page of this prospectus), less estimated underwriting discounts and commissions and estimated offering expenses payable by us, as if each of these transactions had occurred on June 30, 2007. | |
(6) | “HIF lighting systems” includes all HIF units sold under the brand name “Compact Modular” and its predecessor, “Illuminator.” | |
(7) | A substantial majority of our HIF lighting systems, which generally operate at approximately 224 watts per six-lamp fixture, are installed in replacement of HID fixtures, which generally operate at approximately 465 watts per fixture in commercial and industrial applications. We calculate that each six-lamp HIF lighting system we install in replacement of an HID fixture generally reduces electricity consumption by approximately 241 watts (the difference between 465 watts and 224 watts). In retrofit |
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projects where we replace fixtures other than HID fixtures, or where we replace fixtures with products other than our HIF lighting systems, we generally achieve similar wattage reductions (based on an analysis of the operating wattages of each of our fixtures compared to the operating wattage of the fixtures they typically replace). We calculate the amount of kilowatt demand reduction by multiplying (i) 0.241 kilowatts per six-lamp equivalent unit we install by (ii) the number of units we have installed in the period presented, including products other than our HIF lighting systems (or a total of approximately 1.1 million units). | ||
(8) | We calculate the number of kilowatt hours saved on a cumulative basis by assuming the reduction of 0.241 kilowatts of electricity consumption per six-lamp equivalent unit we install and assuming that each such unit has averaged 7,500 annual operating hours since its installation. | |
(9) | We calculate our customers’ electricity costs saved by multiplying the cumulative total customer kilowatt hours saved indicated in the table by $0.077 per kilowatt hour. The national average rate for 2005, which is the most current full year for which this information is available, was $0.0814 per kilowatt hour according to the United States Energy Information Administration. | |
(10) | We calculate this figure by multiplying (i) the estimated amount of carbon dioxide emissions that result from the generation of one kilowatt hour of electricity (determined using the Emissions and Generation Resource Integration Database, or EGrid, prepared by the United States Environmental Protection Agency), by (ii) the number of customer kilowatt hours saved as indicated in the table. | |
(11) | Based on 1.1 million total units sold, which contain a total of approximately 6.0 million lamps. Each lamp illuminates approximately 75 square feet. The majority of our installed fixtures contain six lamps and typically illuminate approximately 450 square feet. |
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• | earthquake, fire, flood and other natural disasters; | ||
• | employee or other theft; |
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• | attacks by computer viruses or hackers; | ||
• | power outages; and | ||
• | computer systems, Internet, telecommunications or data network failure. |
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• | fluctuations in our financial performance; | ||
• | economic and stock market conditions generally and specifically as they may impact us, participants in our industry or comparable companies; | ||
• | changes in financial estimates and recommendations by securities analysts following our common stock or comparable companies; | ||
• | earnings and other announcements by, and changes in market evaluations of, us, participants in our industry or comparable companies; | ||
• | changes in business or regulatory conditions affecting us, participants in our industry or comparable companies; | ||
• | changes in accounting standards, policies, guidance, interpretations or principles; | ||
• | announcements or implementation by our competitors or us of acquisitions, technological innovations or new products, or other strategic actions by our competitors; or | ||
• | trading volume of our common stock or the sale of stock by our management team, directors or principal shareholders. |
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• | institute a comprehensive compliance function; | ||
• | prepare and distribute periodic and current public reports in compliance with our obligations under the federal securities laws; | ||
• | establish new internal policies, such as those relating to internal controls over financial reporting, disclosure controls and procedures and insider trading; | ||
• | maintain appropriate committees of our board of directors; | ||
• | prepare public reports of our audit and finance committee and our compensation committee; | ||
• | involve and retain to a greater degree outside counsel and accountants in the above activities; and | ||
• | establish and maintain an investor relations function, including the provision of certain information on our website. |
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• | delaying, deferring, or preventing a change of control, even at a per share price that is in excess of the then current price of our common stock; | ||
• | impeding a merger, consolidation, takeover, or other business combination involving us, even at a per share price that is in excess of the then current price of our common stock; or | ||
• | discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, even at a per share price that is in excess of the then current price of our common stock. |
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• | our estimates regarding our future revenue, cost of revenue, gross margin, expenses, capital requirements, liquidity and borrowing capacity and our needs for additional financing; | ||
• | our estimates of market sizes and anticipated uses of and benefits from our products and services; | ||
• | our ability to market and achieve market acceptance for our products and services; | ||
• | our anticipated use of the net proceeds of this offering and of our Convertible Notes placement; | ||
• | our business strategy and our underlying assumptions about trends in our industry and about market data, including the relative demand for and cost of energy; | ||
• | our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others; and | ||
• | management’s goals, expectations and objectives and other similar expressions concerning matters that are not historical facts. |
• | our limited operating history; | ||
• | our ability to compete in a highly competitive market; | ||
• | our ability to respond successfully to market competition; |
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• | the retention of our senior management; | ||
• | the market acceptance of our products and services; | ||
• | our dependence on our customers’ capital budgets to generate sales of our products and services; | ||
• | price fluctuations, shortages or interruptions of component supplies and raw materials used to manufacture our products; | ||
• | loss of one or more key customers; | ||
• | delivery of satisfactory components by our current suppliers; | ||
• | loss of one or more key suppliers; | ||
• | warranty and product liability claims; | ||
• | our ability to develop new products and services; | ||
• | the success of potential acquisitions or investments in new product lines; | ||
• | our ability to protect our intellectual property or to respond to any intellectual property litigation brought by others; | ||
• | exercising our option to acquire intellectual property rights owned by our chief executive officer; | ||
• | reduction in the price of electricity; | ||
• | the cost to comply with, and the effects of, any current and future government regulations, laws and policies; | ||
• | increased competition from government subsidiaries and utility incentive programs; | ||
• | the failure of our information technology systems; | ||
• | the discovery of environmental contamination at our manufacturing facility or the expenses and responsibility associated with disposal of hazardous materials; | ||
• | our ability to effectively manage our anticipated growth; | ||
• | our ability to obtain additional capital; | ||
• | fluctuations in our quarterly results; | ||
• | our ability to use our net operating losses; | ||
• | the costs associated with being a public company and our ability to comply with the internal control and financial reporting obligations of the SEC and Sarbanes-Oxley; and | ||
• | other factors discussed in more detail under “Risk Factors.” |
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• | on an actual basis; | ||
• | on a pro forma basis to give effect to (i) the issuance of the Convertible Notes and the application of the gross proceeds therefrom to cash and cash equivalents and (ii) the repayment of approximately $2.1 million in aggregate principal amount of shareholder notes with $0.8 million in cash and 306,932 shares of common stock (see “Related Party Transactions” and “Executive Compensation — Compensation Discussion and Analysis — Long-Term Equity Compensation”); and | ||
• | on a pro forma as adjusted basis to give effect to the pro forma adjustments above, as well as (i) the automatic conversion of the Convertible Notes into 2,360,802 shares of our common stock; (ii) the automatic conversion of 4,808,012 shares of our outstanding preferred stock into common stock on a one-for-one basis; and (iii) the receipt of estimated net proceeds of $ million from our sale of shares of common stock in this offering at an assumed initial public offering price of $ per share (the midpoint of the range set forth on the cover of this prospectus), less the estimated underwriting discounts and commissions and estimated offering expenses payable by us. |
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As of June 30, 2007 | ||||||||||||
Pro Forma | ||||||||||||
Actual | Pro Forma | as Adjusted | ||||||||||
(In thousands, except share and per share data, unaudited) | ||||||||||||
Cash and cash equivalents | $ | 696 | $ | 12,046 | $ | |||||||
Long-term debt, less current maturities | $ | 9,998 | $ | 9,998 | $ | |||||||
Convertible notes | — | 10,600 | ||||||||||
Temporary equity: | ||||||||||||
Series C convertible redeemable preferred stock ($0.01 par value 1,818,182 shares issued and outstanding, actual and pro forma; no shares issued and outstanding, pro forma as adjusted) | 5,028 | 5,028 | ||||||||||
Shareholders’ equity: | ||||||||||||
Series B convertible preferred stock ($0.01 par value 2,989,830 shares issued and outstanding, actual and pro forma; no shares issued and outstanding, pro forma as adjusted) | 5,959 | 5,959 | ||||||||||
Common stock (no par value 80,000,000 shares authorized and 12,219,969 shares outstanding, actual; 80,000,000 shares authorized and 11,913,037 shares outstanding, pro forma; 200,000,000 shares authorized and shares outstanding, pro forma as adjusted) | — | — | ||||||||||
Additional paid-in capital | 9,993 | 9,993 | ||||||||||
Treasury stock | (361 | ) | (1,739 | ) | ||||||||
Shareholder notes receivable | (2,128 | ) | — | |||||||||
Accumulated deficit | (3,090 | ) | (3,090 | ) | ||||||||
Total temporary equity and shareholders’ equity | 15,401 | 16,151 | ||||||||||
Total capitalization | $ | 25,399 | $ | 36,749 | $ | |||||||
• | 954,390 shares of common stock issuable upon the exercise of outstanding warrants with a weighted average exercise price of $2.24 per share; | ||
• | 4,712,077 shares of common stock issuable upon the exercise of outstanding options with a weighted average exercise price of $1.57 per share; and | ||
• | 646,700 shares of common stock reserved for future issuance under our stock option plans. |
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Assumed initial public offering price per share | $ | ||||||
Pro forma net tangible book value as of June 30, 2007 | $ | 0.83 | |||||
Increase in pro forma net tangible book value per share attributable to new investors in this offering | $ | ||||||
Pro forma as adjusted net tangible book value after this offering | $ | ||||||
Dilution per share to new investors | $ | ||||||
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Shares Purchased(1) | Total Consideration | Average Price | ||||||||||||||||||
Number | Percent | Amount | Percent | Per Share | ||||||||||||||||
Existing shareholders | % | % | $ | |||||||||||||||||
New public investors | % | % | $ | |||||||||||||||||
Total | 100 | % | $ | 100 | % | |||||||||||||||
(1) | The number of shares for existing shareholders includes shares being sold by the selling shareholders in this offering. The number of shares disclosed for the new public investors does not include the shares being purchased by the new public investors from the selling shareholders in this offering. |
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Three Months | ||||||||||||||||||||||||||||
Fiscal Year Ended March 31, | Ended June 30, | |||||||||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | 2006 | 2007 | ||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||||||||||||||
Consolidated statements of operations data: | ||||||||||||||||||||||||||||
Revenue | $ | 9,018 | $ | 12,423 | $ | 21,783 | $ | 33,280 | $ | 48,183 | $ | 9,680 | $ | 16,721 | ||||||||||||||
Cost of revenue(1) | 5,091 | 7,376 | 14,043 | 22,524 | 32,487 | 6,255 | 11,118 | |||||||||||||||||||||
Gross profit | 3,927 | 5,047 | 7,740 | 10,756 | 15,696 | 3,425 | 5,603 | |||||||||||||||||||||
General and administrative expenses(1) | 1,434 | 1,927 | 3,461 | 4,875 | 6,162 | 1,269 | 1,571 | |||||||||||||||||||||
Sales and marketing expenses(1) | 1,772 | 2,381 | 5,416 | 5,991 | 6,459 | 1,518 | 2,111 | |||||||||||||||||||||
Research and development expenses(1) | 139 | 261 | 213 | 1,171 | 1,078 | 211 | 437 | |||||||||||||||||||||
Income (loss) from operations | 582 | 478 | (1,350 | ) | (1,281 | ) | 1,997 | 427 | 1,484 | |||||||||||||||||||
Interest expense | 108 | 222 | 570 | 1,051 | 1,044 | 253 | 295 | |||||||||||||||||||||
Dividend and interest income | — | — | 3 | 5 | 201 | 1 | 40 | |||||||||||||||||||||
Income (loss) before income tax and cumulative effect of change in accounting principle | 474 | 256 | (1,917 | ) | (2,327 | ) | 1,154 | 175 | 1,229 | |||||||||||||||||||
Income tax expense (benefit) | 173 | 102 | (702 | ) | (762 | ) | 225 | 34 | 481 | |||||||||||||||||||
Income (loss) before cumulative change in accounting principle | 301 | 154 | (1,215 | ) | (1,565 | ) | 929 | 141 | 748 | |||||||||||||||||||
Cumulative effect of change in accounting principle | — | — | (57 | ) | — | — | — | — | ||||||||||||||||||||
Net income (loss) | 301 | 154 | (1,272 | ) | (1,565 | ) | 929 | 141 | 748 | |||||||||||||||||||
Accretion of redeemable preferred stock and preferred stock dividends(2) | (122 | ) | (122 | ) | (104 | ) | (3 | ) | (201 | ) | (1 | ) | (75 | ) | ||||||||||||||
Conversion of preferred stock(3) | — | — | (972 | ) | — | (83 | ) | — | — | |||||||||||||||||||
Net income (loss) attributable to common shareholders | $ | 179 | $ | 32 | $ | (2,348 | ) | $ | (1,568 | ) | $ | 645 | $ | 140 | $ | 673 | ||||||||||||
Net income (loss) attributable to common shareholders: | ||||||||||||||||||||||||||||
Basic | $ | 0.03 | $ | 0.01 | $ | (0.36 | ) | $ | (0.18 | ) | $ | 0.07 | $ | 0.02 | $ | 0.07 | ||||||||||||
Diluted | $ | 0.02 | $ | 0.00 | $ | (0.36 | ) | $ | (0.18 | ) | $ | 0.04 | $ | 0.01 | $ | 0.04 | ||||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||||||||||
Basic | 5,964 | 6,197 | 6,470 | 8,524 | 9,080 | 8,999 | 9,950 | |||||||||||||||||||||
Diluted | 9,169 | 10,218 | 6,470 | 8,524 | 16,433 | 15,073 | 18,088 |
As of March 31, | As of June 30, | |||||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | 2007 | |||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Consolidated balance sheet data: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 175 | $ | 107 | $ | 493 | $ | 1,089 | $ | 285 | $ | 696 | ||||||||||||
Total assets | 6,397 | 11,147 | 21,397 | 24,738 | 33,583 | 37,719 | ||||||||||||||||||
Long-term debt, less current maturities | 1,058 | 4,796 | 7,921 | 10,492 | 10,603 | 9,998 | ||||||||||||||||||
Temporary equity (Series C convertible redeemable preferred stock) | — | — | — | — | 4,953 | 5,028 | ||||||||||||||||||
Series A convertible preferred stock | 1,007 | 1,007 | 116 | 116 | — | — | ||||||||||||||||||
Series B convertible preferred stock | — | 779 | 4,167 | 5,591 | 5,959 | 5,959 | ||||||||||||||||||
Shareholder notes receivable | (105 | ) | (104 | ) | (246 | ) | (398 | ) | (2,128 | ) | (2,128 | ) | ||||||||||||
Temporary equity and shareholders’ equity | $ | 2,192 | $ | 3,448 | $ | 5,699 | $ | 6,622 | $ | 14,308 | $ | 15,401 |
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(1) | Includes stock-based compensation expense recognized under SFAS 123(R) as follows: |
Fiscal Year Ended | Three Months Ended | ||||||||
March 31, 2007 | June 30, 2007 | ||||||||
(unaudited) | |||||||||
(in thousands) | |||||||||
Cost of revenue | $ | 24 | $ | 21 | |||||
General and administrative expenses | 154 | 65 | |||||||
Sales and marketing expenses | 153 | 52 | |||||||
Research and development expenses | 32 | 8 | |||||||
Total stock-based compensation expense | $ | 363 | $ | 146 | |||||
(2) | For fiscal 2007 and our fiscal 2008 first quarter, represents the impact attributable to the accretion of accumulated dividends on our Series C preferred stock, plus accumulated dividends on our Series A preferred stock prior to its conversion into common stock on March 31, 2007. The Series C preferred stock will convert automatically into common stock on a one-for-one basis upon the closing of this offering and our obligation to pay accumulated dividends will be extinguished. For fiscal 2005 and 2006, represents accumulated dividends on our Series A preferred stock prior to its conversion into common stock. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Revenue and Expense Components – Accretion of Preferred Stock and Preferred Stock Dividends.” | |
(3) | Represents the estimatedfair market value of the premium paid to holders of Series A preferred stock upon induced conversion. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Revenue and Expense Components – Conversion of Preferred Stock.” |
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OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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No. 123(R),Share-Based Payment.Prior to fiscal 2007, we accounted for our stock option awards under the intrinsic value method under the provisions of Accounting Principles Board Opinion (APB) No. 25,Accounting for Stock Issued to Employees, and we did not recognize the fair value expense of our stock option awards in our statements of operations, although we did report our pro forma stock option award fair value expense in the footnotes to our financial statements. We recognized $0.4 million of stock-based compensation
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Fiscal Year Ended March 31, | Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2005 | 2006 | 2007 | 2006 | 2007 | ||||||||||||||||||||||||||||||||||||||||||||||||
% of | % of | % of | % of | % of | ||||||||||||||||||||||||||||||||||||||||||||||||
Amount | Revenue | Amount | Revenue | % Change | Amount | Revenue | % Change | Amount | Revenue | Amount | Revenue | % Change | ||||||||||||||||||||||||||||||||||||||||
Revenue | $ | 21,783 | 100.0 | % | $ | 33,280 | 100.0 | % | 52.8 | % | $ | 48,183 | 100.0 | % | 44.8 | % | $ | 9,680 | 100.0 | % | $ | 16,721 | 100.0 | % | 72.7 | % | ||||||||||||||||||||||||||
Cost of revenue | 14,043 | 64.5 | % | 22,524 | 67.7 | % | 60.4 | % | 32,487 | 67.4 | % | 44.2 | % | 6,255 | 64.6 | % | 11,118 | 66.5 | % | 77.7 | % | |||||||||||||||||||||||||||||||
Gross profit | 7,740 | 35.5 | % | 10,756 | 32.3 | % | 39.0 | % | 15,696 | 32.6 | % | 45.9 | % | 3,425 | 35.4 | % | 5,603 | 33.5 | % | 63.6 | % | |||||||||||||||||||||||||||||||
General and administrative expenses | 3,461 | 15.9 | % | 4,875 | 14.6 | % | 40.9 | % | 6,162 | 12.8 | % | 26.4 | % | 1,269 | 13.1 | % | 1,571 | 9.4 | % | 23.8 | % | |||||||||||||||||||||||||||||||
Sales and marketing expenses | 5,416 | 24.9 | % | 5,991 | 18.0 | % | 10.6 | % | 6,459 | 13.4 | % | 7.8 | % | 1,518 | 15.7 | % | 2,111 | 12.6 | % | 39.1 | % | |||||||||||||||||||||||||||||||
Research and development expenses | 213 | 1.0 | % | 1,171 | 3.5 | % | 449.8 | % | 1,078 | 2.2 | % | (7.9 | %) | 211 | 2.2 | % | 437 | 2.6 | % | 107.1 | % | |||||||||||||||||||||||||||||||
Income (loss) from operations | (1,350 | ) | (6.2 | %) | (1,281 | ) | (3.8 | %) | 5.1 | % | 1,997 | 4.1 | % | NM | 427 | 4.4 | % | 1,484 | 8.9 | % | 247.5 | % | ||||||||||||||||||||||||||||||
Interest expense | 570 | 2.6 | % | 1,051 | 3.2 | % | 84.4 | % | 1,044 | 2.2 | % | 0.7 | % | 253 | 2.6 | % | 295 | 1.8 | % | 16.6 | % | |||||||||||||||||||||||||||||||
Dividend and interest income | 3 | 0.0 | % | 5 | 0.0 | % | 66.7 | % | 201 | 0.4 | % | NM | 1 | 0.0 | % | 40 | 0.2 | % | NM | |||||||||||||||||||||||||||||||||
Income (loss) before income taxes and cumulative effect of change in accounting principle | (1,917 | ) | (8.8 | %) | (2,327 | ) | (7.0 | %) | (21.4 | %) | 1,154 | 2.4 | % | NM | 175 | 1.8 | % | 1,229 | 7.4 | % | 602.3 | % | ||||||||||||||||||||||||||||||
Income tax expense (benefit) | (702 | ) | (3.2 | %) | (762 | ) | (2.3 | %) | 8.5 | % | 225 | 0.5 | % | NM | 34 | 0.4 | % | 481 | 2.9 | % | ||||||||||||||||||||||||||||||||
Net income (loss) before cumulative change in accounting principle | (1,215 | ) | (5.6 | %) | (1,565 | ) | (4.7 | %) | (28.8 | %) | 929 | 1.9 | % | NM | 141 | 1.5 | % | 748 | 4.5 | % | 430.5 | % | ||||||||||||||||||||||||||||||
Cumulative effect of change in accounting principle, net of tax | (57 | ) | (0.3 | %) | — | 0.0 | % | 100.0 | % | — | 0.0 | % | NM | — | 0.0 | % | — | 0.0 | % | — | ||||||||||||||||||||||||||||||||
Net income (loss) | (1,272 | ) | (5.8 | %) | (1,565 | ) | (4.7 | %) | (23.0 | %) | 929 | 1.9 | % | NM | 141 | 1.5 | % | 748 | 4.5 | % | 430.5 | % | ||||||||||||||||||||||||||||||
Accretion of redeemable preferred stock and preferred stock dividends | (104 | ) | (0.5 | %) | (3 | ) | (0.0 | %) | 97.1 | % | (201 | ) | (0.4 | %) | NM | (1 | ) | (0.0 | %) | (75 | ) | (0.4 | %) | NM | ||||||||||||||||||||||||||||
Conversion of preferred stock | (972 | ) | (4.5 | %) | — | 0.0 | % | 100.0 | % | (83 | ) | (0.2 | %) | 100 | % | — | 0.0 | % | — | 0.0 | % | 0.0 | % | |||||||||||||||||||||||||||||
Net income (loss) attributable to common shareholders | $ | (2,348 | ) | (10.8 | %) | $ | (1,568 | ) | (4.7 | %) | 33.2 | % | $ | 645 | 1.3 | % | NM | $ | 140 | 1.4 | % | $ | 673 | 4.0 | % | 380.7 | % | |||||||||||||||||||||||||
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For the Three Months Ended | ||||||||||||||||||||||||||||||||||||
June 30, | Sept 30, | Dec 31, | Mar 31, | June 30, | Sept 30, | Dec 31, | Mar 31, | June 30, | ||||||||||||||||||||||||||||
2005 | 2005 | 2005 | 2006 | 2006 | 2006 | 2006 | 2007 | 2007 | ||||||||||||||||||||||||||||
(in thousands, unaudited) | ||||||||||||||||||||||||||||||||||||
Revenue | $ | 5,004 | $ | 7,984 | $ | 8,898 | $ | 11,394 | $ | 9,680 | $ | 10,631 | $ | 13,563 | $ | 14,309 | $ | 16,721 | ||||||||||||||||||
Cost of revenue | 3,799 | 5,509 | 5,759 | 7,457 | 6,255 | 7,378 | 9,200 | 9,654 | 11,118 | |||||||||||||||||||||||||||
Gross profit | 1,205 | 2,475 | 3,139 | 3,937 | 3,425 | 3,253 | 4,363 | 4,655 | 5,603 | |||||||||||||||||||||||||||
General and administrative expenses | 966 | 1,100 | 1,509 | 1,300 | 1,269 | 1,336 | 1,614 | 1,943 | 1,571 | |||||||||||||||||||||||||||
Sales and marketing expenses | 1,690 | 1,376 | 1,369 | 1,556 | 1,518 | 1,608 | 1,551 | 1,782 | 2,111 | |||||||||||||||||||||||||||
Research and development expenses | 239 | 330 | 269 | 333 | 211 | 229 | 257 | 381 | 437 | |||||||||||||||||||||||||||
Income (loss) from operations | (1,690 | ) | (331 | ) | (8 | ) | 748 | 427 | 80 | 941 | 549 | 1,484 | ||||||||||||||||||||||||
Interest expense | 215 | 228 | 376 | 232 | 253 | 260 | 261 | 270 | 295 | |||||||||||||||||||||||||||
Dividend and interest income | — | — | 1 | 4 | 1 | 11 | 16 | 173 | 40 | |||||||||||||||||||||||||||
Income (loss) before income taxes | (1,905 | ) | (559 | ) | (383 | ) | 520 | 175 | (169 | ) | 696 | 452 | 1,229 | |||||||||||||||||||||||
Income tax expense (benefit) | (623 | ) | (183 | ) | (126 | ) | 170 | 34 | (33 | ) | 136 | 88 | 481 | |||||||||||||||||||||||
Net income (loss) | (1,282 | ) | (376 | ) | (257 | ) | 350 | 141 | (136 | ) | 560 | 364 | 748 | |||||||||||||||||||||||
Accretion of redeemable preferred stock and preferred stock dividends | 0 | (1 | ) | (1 | ) | (1 | ) | (1 | ) | (45 | ) | (79 | ) | (76 | ) | (75 | ) | |||||||||||||||||||
Conversion of preferred stock | — | — | — | — | — | — | — | (83 | ) | — | ||||||||||||||||||||||||||
Net income (loss) attributable to common shareholders | $ | (1,282 | ) | $ | (377 | ) | $ | (258 | ) | $ | 349 | $ | 140 | $ | (181 | ) | $ | 481 | $ | 205 | $ | 673 | ||||||||||||||
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For the Three Months Ended | ||||||||||||||||||||||||||||||||||||
June 30, | Sept 30, | Dec 31, | Mar 31, | June 30, | Sept 30, | Dec 31, | Mar 31, | June 30, | ||||||||||||||||||||||||||||
2005 | 2005 | 2005 | 2006 | 2006 | 2006 | 2006 | 2007 | 2007 | ||||||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||||||||||
Revenue | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||||||
Cost of revenue | 75.9 | % | 69.0 | % | 64.7 | % | 65.4 | % | 64.6 | % | 69.4 | % | 67.8 | % | 67.4 | % | 66.5 | % | ||||||||||||||||||
Gross margin | 24.1 | % | 31.0 | % | 35.3 | % | 34.6 | % | 35.4 | % | 30.6 | % | 32.2 | % | 32.6 | % | 33.5 | % | ||||||||||||||||||
General and administrative expenses | 19.3 | % | 13.8 | % | 17.0 | % | 11.4 | % | 13.1 | % | 12.6 | % | 11.9 | % | 13.6 | % | 9.4 | % | ||||||||||||||||||
Sales and marketing expenses | 33.8 | % | 17.2 | % | 15.4 | % | 13.7 | % | 15.7 | % | 15.1 | % | 11.4 | % | 12.5 | % | 12.6 | % | ||||||||||||||||||
Research and development expenses | 4.8 | % | 4.1 | % | 3.0 | % | 2.9 | % | 2.2 | % | 2.1 | % | 1.9 | % | 2.7 | % | 2.6 | % | ||||||||||||||||||
Income (loss) from operations | (33.8 | %) | (4.1 | %) | (0.1 | %) | 6.6 | % | 4.4 | % | 0.8 | % | 6.9 | % | 3.8 | % | 8.9 | % | ||||||||||||||||||
Interest expense | 4.3 | % | 2.9 | % | 4.2 | % | 2.0 | % | 2.6 | % | 2.4 | % | 1.9 | % | 1.8 | % | 1.7 | % | ||||||||||||||||||
Dividend and interest income | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | 1.2 | % | 0.2 | % | ||||||||||||||||||
Income (loss) before income taxes | (38.1 | %) | (7.0 | %) | (4.3 | %) | 4.6 | % | 1.8 | % | (1.6 | %) | 5.1 | % | 3.2 | % | 7.4 | % | ||||||||||||||||||
Income tax expense (benefit) | (12.5 | %) | (2.3 | %) | (1.4 | %) | 1.5 | % | 0.3 | % | (0.3 | %) | 1.0 | % | 0.7 | % | 2.9 | % | ||||||||||||||||||
Net income (loss) | (25.6 | %) | (4.7 | %) | (2.9 | %) | 3.1 | % | 1.5 | % | (1.3 | %) | 4.1 | % | 2.5 | % | 4.5 | % | ||||||||||||||||||
Accretion of redeemable preferred stock and preferred stock dividends | 0.0 | % | (0.0 | %) | (0.0 | %) | (0.0 | %) | (0.0 | %) | (0.4 | %) | (0.6 | %) | (0.5 | %) | (0.5 | %) | ||||||||||||||||||
Conversion of preferred stock | — | — | — | — | — | — | — | (0.6 | %) | — | ||||||||||||||||||||||||||
Net income (loss) attributable to common shareholders | (25.6 | %) | (4.7 | %) | (2.9 | %) | 3.1 | % | 1.5 | % | (1.7 | %) | 3.5 | % | 1.4 | % | 4.0 | % | ||||||||||||||||||
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Fiscal Year Ended March 31, | Three Months Ended June 30, | |||||||||||||||||||
2005 | 2006 | 2007 | 2006 | 2007 | ||||||||||||||||
(unaudited) | ||||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Operating activities | $ | (863 | ) | $ | (3,401 | ) | $ | (6,234 | ) | $ | (755 | ) | $ | 1,822 | ||||||
Investing activities | (5,888 | ) | (162 | ) | (969 | ) | (209 | ) | (706 | ) | ||||||||||
Financing activities | 7,137 | 4,159 | 6,399 | 181 | (705 | ) | ||||||||||||||
Increase (decrease) in cash and cash equivalents | $ | 386 | $ | 596 | $ | (804 | ) | $ | (783 | ) | $ | 411 | ||||||||
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Payments Due By Period | ||||||||||||||||||||
Less than | More than | |||||||||||||||||||
Total | 1 Year | 1-3 Years | 3-5 Years | 5 Years | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Debt and capital leases,including interest(1)(2) | $ | 13,338 | $ | 1,290 | $ | 8,186 | $ | 1,346 | $ | 2,516 | ||||||||||
Operating leases | 1,503 | 853 | 412 | 238 | — | |||||||||||||||
Non-cancellable purchase commitments(3) | 3,021 | 3,021 | — | — | — | |||||||||||||||
Total | $ | 17,862 | $ | 5,164 | $ | 8,598 | $ | 1,584 | $ | 2,516 | ||||||||||
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(1) | Does not include any payment amounts under our 6% convertible subordinated notes issued on August 3, 2007, which notes will convert automatically upon the closing of this offering into shares of our common stock. See “Description of Capital Stock.” | |
(2) | Debt and capital leases includes fixed contractual interest payments by period of $554,000 (less than 1 year); $667,000 (1-3 years); $346,000 (3-5) years); and $324,000 (more than 5 years). | |
(3) | Reflects non-cancellable purchase commitments for certain inventory items and capital expenditure commitments entered into in order to secure better pricing and ensure materials on hand. |
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Three Months | ||||||||||||||||
Fiscal Year Ended March 31, | Ended | |||||||||||||||
2005 | 2006 | 2007 | June 30, 2007 | |||||||||||||
Expected term | 6 Years | 6 Years | 6.6 Years | 7.6 Years | ||||||||||||
Risk-free interest rate | 4.32 | % | 4.35 | % | 4.62 | % | 4.58 | % | ||||||||
Estimated volatility | 39 | % | 50 | % | 60 | % | 60 | % | ||||||||
Estimated forfeiture rate | N/A | N/A | 6 | % | 6 | % | ||||||||||
Expected dividend yield | 0 | % | 0 | % | 0 | % | 0 | % |
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Financial | ||||||||||||||||
Number of shares | reporting | |||||||||||||||
underlying options | Exercise price per | Fair market value | intrinsic value | |||||||||||||
Date of grant | granted | share(1) | per share(2) | per share(3) | ||||||||||||
April 2006 | 40,000 | $ | 2.25 – 2.50 | $ | 2.20 | $ | — | |||||||||
May 2006 | 40,000 | 2.50 | 2.20 | — | ||||||||||||
June 2006 | 150,000 | 2.50 | 2.20 | — | ||||||||||||
July 2006 | 27,000 | 2.50 | 2.20 | — | ||||||||||||
August 2006 | 5,000 | 2.50 | 2.20 | — | ||||||||||||
September 2006 | 2,000 | 2.75 | 2.20 | — | ||||||||||||
October 2006 | 2,000 | 2.75 | 2.20 | — | ||||||||||||
November 2006 | 35,000 | 2.75 | 2.20 | — | ||||||||||||
December 2006 | 920,000 | 2.20 | 2.20 | — | ||||||||||||
March 2007 | 436,500 | 2.20 | 4.15 | 1.95 | ||||||||||||
April 2007 | 50,000 | 2.20 | 4.15 | 1.95 | ||||||||||||
July 2007 | 429,432 | 4.49 | 4.49 | — |
(1) | The exercise price per share was at least equal to the fair market value of our common stock on each applicable stock option grant date as determined by our compensation committee and board of directors on the basis described in the paragraphs below. For option grants made between April 2006 and November 2006, the per share exercise price was established principally based on the per share issuance price of our then recent preferred stock placements to third-party investors and, in our opinion, such per share exercise prices were above the then current fair market value of our common stock. | |
(2) | The fair market value per share was determined by our compensation committee and board of directors on each applicable stock option grant date on the basis described in the paragraphs below. However, for option grants in March and April 2007, fair market value per share was reassessed subsequent to the grant dates for financial statement reporting purposes as described in the paragraphs below. | |
(3) | The financial reporting intrinsic value per share is the difference between the subsequently reassessed fair value per share for financial statement reporting purposes as described in the paragraphs below and the fair market value exercise price per share as established on each applicable stock grant date by our compensation committee and board of directors on the basis described in the paragraphs below. |
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• | Thirty-two states have, through legislation or regulation, ordered utilities to design and fund programs that promote or deliver energy efficiency. | ||
• | Twelve states have implemented, or are in the process of implementing, Energy Efficiency Resource Standards, which generally require utilities to allocate funds to energy efficiency programs to meet near-term savings targets set by state governments or regulatory authorities. These states include California, Texas, Colorado, New Jersey and Illinois. | ||
• | In recent years, there has also been an increasing focus on “decoupling,” a regulatory initiative designed to break the linkage between utility kWh sales and revenues, in order to remove the disincentives for utilities to promote load reducing initiatives. Decoupling aims to encourage utilities to actively promote energy efficiency by allowing utilities to generate revenues and returns on investment from employing energy management solutions. To date, nearly half of all states have adopted or are adopting forms of decoupling for gas or electric utilities. |
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• | comprehensive site assessment, which includes a review of the current lighting requirements and energy usage at the customer’s facility; | ||
• | site field verification, where we perform a test implementation of our energy management system at a customer’s facility upon request; | ||
• | utility incentive and government subsidy management, where we assist our customers in identifying, applying for and obtaining available utility incentives or government subsidies; | ||
• | engineering design, which involves designing a customized system to suit our customer’s facility lighting and energy management needs, and providing the customer with a written analysis of the potential energy savings and lighting and environmental benefits associated with the designed system; | ||
• | project management, which involves our working with the electrical contractor in overseeing and managing all phases of implementation from delivery through installation; | ||
• | installation services, which we provide through our national network of qualified installers; and | ||
• | recycling in connection with our retrofit installations, where we remove, dispose of and recycle our customer’s legacy lighting fixtures. |
American Standard International Inc. | Gap, Inc. | OfficeMax, Inc. | SYSCO Corp. | |||
Avery Dennison Corporation | General Electric Co. | Pepsi Americas Inc. | Textron, Inc. | |||
Big Lots Inc. | Kraft Foods Inc. | Sealed Air Corp. | Toyota Motor Corp. | |||
Blyth Inc. | Newell Rubbermaid Inc. | Sherwin-Williams Co. | United Stationers Inc. | |||
Ecolab, Inc. |
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• | Portions of our core HIF lighting technology (including our optically efficient reflector and some of our thermally efficient fixture I-frame constructions) are patented. | ||
• | Our ballast assembly method is patent pending. |
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• | Our light pipe technology and its manufacturing methods are patent pending. | ||
• | Our wireless lighting control system is patent pending. | ||
• | The technology and methodology of our shared savings programis patent pending. |
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Name | Age | Position | ||||
Neal R. Verfuerth | 48 | President, Chief Executive Officer and Director | ||||
Daniel J. Waibel | 47 | Chief Financial Officer and Treasurer | ||||
Michael J. Potts | 43 | Executive Vice President and Director | ||||
Eric von Estorff | 42 | Vice President, General Counsel and Secretary | ||||
Patricia A. Verfuerth | 48 | Vice President of Operations | ||||
John H. Scribante | 42 | Senior Vice President of Business Development | ||||
Erik G. Birkerts | 40 | Vice President of Strategic Initiatives | ||||
Thomas A. Quadracci | 59 | Chairman of the Board | ||||
Diana Propper de Callejon | 44 | Director | ||||
James R. Kackley | 65 | Director | ||||
Eckhart G. Grohmann | 71 | Director | ||||
Patrick J. Trotter | 51 | Director |
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• | to motivate our executive officers to achieve strong financial performance, particularly sales, profitability growth and increased shareholder value; | ||
• | to provide stability during our development stage; and | ||
• | to align the interests of our executive officers with the interests of our shareholders. |
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• | We propose to enter into new, standardized employment agreements with our NEOs. The agreements will outline the executive’s position, base salary and incentive and benefit plan participation during a specified term. The agreements will automatically renew unless either party gives written notice in advance of the expiration of the term. The agreements also will provide for employment protections and severance benefits in the event of certain terminations, and for enhanced protections and benefits following a change of control. Our compensation committee’s goals in putting these agreements in place are to secure and retain our executive officers and to ensure stability and structure during our development stage, particularly as a new public company. These employment agreements would replace the existing employment agreements we have with certain of our NEOs. | ||
• | We have amended and restated our 2004 Equity Incentive Plan, which will be renamed the Orion Energy Systems, Inc. 2004 Stock and Incentive Awards Plan. Among other things, the amendment and restatement does the following: |
• | Increases the shares available under the plan from 1.0 million to 3.5 million shares; | ||
• | Replaces the authority of our chief executive officer to make grants of awards with the ability of our board of directors to delegate to another committee of the board, including a committee comprised solely of our chief executive officer, the ability to make grants of awards, subject to various restrictions and limitations on such delegated authority; | ||
• | Expands the list of performance goals that may be used for IRC Section 162(m) awards; |
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• | Permits the grant of annual and long-term cash bonus awards for IRC Section 162(m) purposes; | ||
• | Includes a provision requiring that awards be adjusted in certain circumstances, such as in the event of a stock split, to avoid potential adverse accounting consequences; | ||
• | Imposes a 10-year limit on the term of a stock option; | ||
• | Permits cashless exercises of stock options through a broker-dealer; | ||
• | Adds restricted stock units as a form of award available under the plan; | ||
• | Caps the amount of an award that may vest or be paid upon a change of control to the extent needed to preserve our deduction under the IRC “excess parachute payment” rules; | ||
• | Permits awards to be assumed under the plan in the event we acquire another entity; | ||
• | Prohibits the repricing or backdating of stock options and stock appreciation rights; and | ||
• | Expands the list of plan provisions that may be amended only with shareholder approval. |
• | We have revised and amended our compensation committee charter to reflect our compliance with current rules and guidelines of the Nasdaq Global Market, the Exchange Act, and Sarbanes Oxley. | ||
• | We are considering a management cash bonus program connected to the closing of this offering and the post-offering price performance of our common stock. |
• | Base salary; | ||
• | Short-term incentive cash bonus compensation and other cash bonus compensation; | ||
• | Long-term equity incentive compensation; and | ||
• | Retirement and other benefits. |
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Fiscal | Option Awards | All Other | ||||||||||
Name and Principal Position | Year | Salary ($) | Bonus ($) | ($)(1) | Compensation ($) | Total ($) | ||||||
Neal R. Verfuerth President and Chief Executive Officer | 2007 | 270,000 | — | 18,572 | 156,739 (2) | 445,311 | ||||||
Daniel J. Waibel Chief Financial Officer & Treasurer | 2007 | 150,000 | 20,000 | 18,562 | 13,014 (3) | 201,576 | ||||||
John H. Scribante Senior Vice President of Business Development | 2007 | 149,375 | 50,000 | 53,291 | 15,764 (4) | 268,430 | ||||||
Michael J. Potts Executive Vice President | 2007 | 150,000 | 20,000 | 16,705 | 15,053 (3) | 201,758 | ||||||
Patricia A. Verfuerth Vice President of Operations | 2007 | 150,000 | 20,000 | 14,848 | 12,366 (5) | 197,214 | ||||||
Bruce Wadman Former Chief Operating Officer (6) | 2007 | 160,413 | — | 17,042 | 112,589 | 290,044 | ||||||
James L. Prange Former Vice President of Business Development (7) | 2007 | 126,500 | — | 13,419 | 40,306 | 180,225 |
(1) | Represents the amount of expense recognized for financial accounting purposes pursuant to SFAS 123(R) for fiscal 2007 in our financial statements included elsewhere in this prospectus. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. |
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(2) | Includes (i) $77,880 in guarantee fees we paid to Mr. Verfuerth in exchange for his personal guarantee of certain of our outstanding indebtedness (see “Related Party Transactions”); (ii) $36,667 in forgiveness of outstanding indebtedness pursuant to Mr. Verfuerth’s existing employment agreement (see “Related Party Transactions”); (iii) $27,000 in intellectual property fees we paid to Mr. Verfuerth pursuant to his existing employment agreement; (iv) an automobile allowance of $12,000; and (v) $3,192 in life insurance premiums and health club membership dues. | |
(3) | Includes (i) an automobile allowance of $12,000; (ii) matching contributions under our 401(k) Plan; and (iii) life insurance premiums. | |
(4) | Includes (i) an automobile allowance of $1,000; (ii) life insurance premiums; and (iii) reimbursement of health and disability insurance premiums pursuant to the terms of Mr. Scribante’s employment agreement. | |
(5) | Includes (i) an automobile allowance of $12,000 and (ii) life insurance premiums. | |
(6) | Mr. Wadman’s employment with us ended on February 19, 2007. The amounts shown in “All Other Compensation” include (i) $101,439 of payments and other benefits pursuant to a separation agreement that we entered into in connection with Mr. Wadman’s termination of employment (see “Payments upon Termination or Change of Control”); (ii) $11,000 as an automobile allowance; and (iii) matching contributions under our 401(k) Plan. | |
(7) | Mr. Prange’s employment with us ended on March 12, 2007. The amounts shown in “All Other Compensation” consist of payments for services rendered in fiscal years prior to fiscal 2007 that we made to Mr. Prange pursuant to a separation agreement in connection with the termination of his employment (see “Payments upon Termination or Change of Control”). |
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All Other | |||||||||||||||||||||||||||||
Option | Grant | ||||||||||||||||||||||||||||
Awards: | Date | ||||||||||||||||||||||||||||
Estimated Future Payouts | Number of | Exercise | Fair | ||||||||||||||||||||||||||
Under Non-Equity | Securities | Price of | Value of | ||||||||||||||||||||||||||
Incentive Plan Awards(1) | Underlying | Option | Option | ||||||||||||||||||||||||||
Grant | Threshold | Target | Max | Options | Awards | Awards | |||||||||||||||||||||||
Name | Date | ($) | ($) | ($) | (#)(2) | ($/Sh) | ($)(3) | ||||||||||||||||||||||
Neal R. Verfuerth | — | 162,000 | (4) | 270,000 | 270,000 | ||||||||||||||||||||||||
12/20/2006 | — | — | — | 250,000 | 2.20 | (5) | 329,965 | ||||||||||||||||||||||
Daniel J. Waibel | 12/20/2006 | — | — | — | 100,000 | 2.20 | (5) | 131,986 | |||||||||||||||||||||
John H. Scribante | — | 90,000 | (4) | 150,000 | 150,000 | — | — | — | |||||||||||||||||||||
6/2/2006 | — | — | — | 100,000 | 2.50 | (6) | 126,697 | ||||||||||||||||||||||
Michael J. Potts | 12/20/2006 | — | — | — | 75,000 | 2.20 | (5) | 98,990 | |||||||||||||||||||||
Patricia A. Verfuerth | 12/20/2006 | — | — | — | 50,000 | 2.20 | (5) | 65,993 | |||||||||||||||||||||
Bruce Wadman | — | — | 52,499 | — | — | — | — | ||||||||||||||||||||||
James L. Prange | — | — | — | — | — | — | — |
(1) | Amounts in the three columns below represent possible payments for the cash bonus incentive compensation awards that we granted with respect to the performance period of fiscal 2007. No amounts were actually earned under these awards, although we did pay Messrs. Scribante, Potts and Waibel and Ms. Verfuerth discretionary bonuses of $50,000, $20,000, $20,000 and $20,000, respectively. | |
(2) | We granted the stock options listed in this column under our 2004 Equity Incentive Plan in fiscal 2007. As described under “Compensation Discussion and Analysis – Elements of Compensation – Long-Term Equity Incentive Compensation” we granted stock options on July 27, 2007 to Mr. Verfuerth and Ms. Verfuerth for 180,958 shares and 125,974 shares, respectively, at an exercise price of $4.49 per share, in connection with their satisfaction of certain loans from us through their redemption of an equal number of shares of our common stock. | |
(3) | Represents the grant date fair value of the stock options computed in accordance with SFAS 123(R). | |
(4) | Represents the maximum discretionary payout of 60% of the target payout for achievement of 75% of target performance with respect to each performance measure under the award. |
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(5) | The exercise price per share was equal to the fair market value of a share of our common stock on the grant date, as determined by our compensation committee and board of directors. | |
(6) | The exercise price per share of $2.50 was equal to the price at which we offered shares in our most recent offering of our Series B preferred stock at the time of the option grant. |
Option Awards | |||||||||||||||||
Number of Shares | Number of Shares | ||||||||||||||||
Underlying | Underlying | ||||||||||||||||
Unexercised | Unexercised | Option | Option | ||||||||||||||
Options (#) | Options (#) | Exercise Price | Expiration | ||||||||||||||
Name | Exercisable | Unexercisable (1) | ($) | Date | |||||||||||||
Neal R. Verfuerth | — | 250,000 | (1)(2) | 2.20 | 12/20/2016 | ||||||||||||
Daniel J. Waibel | — | 100,000 | (3) | 2.20 | 12/20/2016 | ||||||||||||
John H. Scribante | 20,000 | 80,000 | (4) | 2.50 | 06/02/2016 | ||||||||||||
50,000 | 125,000 | (5) | 2.25 | 07/31/2014 | |||||||||||||
24,000 | 16,000 | (6) | 2.25 | 03/24/2014 | |||||||||||||
Michael J. Potts | — | 75,000 | (7) | 2.20 | 12/20/2016 | ||||||||||||
250,000 | — | 0.938 | 10/01/2011 | ||||||||||||||
340,318 | — | 0.688 | 06/01/2011 | ||||||||||||||
Patricia A. Verfuerth | — | 50,000 | (1)(8) | 2.20 | 12/20/2016 | ||||||||||||
50,000 | — | 0.938 | 10/01/2011 | ||||||||||||||
16,666 | — | 0.688 | 10/01/2011 | ||||||||||||||
Bruce Wadman (9) | 20,000 | — | 2.25 | 05/20/2007 | |||||||||||||
James L. Prange (10) | 172,222 | — | 0.688 | 06/10/2007 |
(1) | Does not reflect the July 27, 2007 grant of options to purchase 180,958 and 125,974 shares of our common stock, respectively, to Mr. Verfuerth and Ms. Verfuerth described above under “Compensation Discussion and Analysis – Elements of |
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Compensation — Long-Term Equity Incentive Compensation,” because such stock options were not outstanding as of March 31, 2007. | ||
(2) | The option will vest with respect to 50,000 shares on December 20 of each of 2007, 2008, 2009, 2010 and 2011, contingent on Mr. Verfuerth’s continued employment through the applicable vesting date. | |
(3) | The option will vest with respect to 20,000 shares on December 20 of each of 2007, 2008, 2009, 2010 and 2011, contingent on Mr. Waibel’s continued employment through the applicable vesting date. | |
(4) | The option will vest with respect to 20,000 shares on March 31 of each of 2008, 2009, 2010 and 2011, contingent on Mr. Scribante’s continued employment through the applicable vesting date. | |
(5) | The option will vest with respect to 50,000 shares on March 31 of each of 2008 and 2009, and with respect to 25,000 shares on March 31, 2010, contingent on Mr. Scribante’s continued employment through the applicable vesting date. | |
(6) | The option will vest with respect to 8,000 shares on March 31 of each of 2008 and 2009, contingent on Mr. Scribante’s continued employment through the applicable vesting date. | |
(7) | The option will vest with respect to 15,000 shares on December 20 of each of 2007, 2008, 2009, 2010 and 2011, contingent on Mr. Potts’s continued employment through the applicable vesting date. | |
(8) | The option will vest with respect to 10,000 shares on December 20 of each of 2007, 2008, 2009, 2010 and 2011, contingent on Ms. Verfuerth’s continued employment through the applicable vesting date. | |
(9) | Subsequent to March 31, 2007, in connection with Mr. Wadman’s termination of employment, we entered into a separation agreement with Mr. Wadman in which we agreed to amend his option agreement to permit Mr. Wadman to exercise the option with respect to an additional 20,000 shares during a nine-month period between June 30, 2009 and March 31, 2010, so long as he complies with his obligations under his separation agreement. The amendment also extends the exercise period of the option with respect to the original 20,000 shares beyond the normal expiration date of the option. | |
(10) | Subsequent to March 31, 2007, in connection with Mr. Prange’s termination of employment, we entered into a separation agreement with Mr. Prange in which we agreed to amend his existing option agreement covering 220,222 shares of our common stock, which was exercisable with respect to 172,222 shares of common stock on the date of termination, to permit Mr. Prange to exercise the option with respect to the 48,000 shares not otherwise exercisable during a 90-day period following the effective date of his separation agreement. We also agreed to amend Mr. Prange’s option agreement to permit him to exercise his option with respect to 17,222 shares for a 90-day period commencing on the closing of our initial public offering, and to exercise his option with respect to the remaining 172,222 shares (less any of the 17,222 shares he acquires following our initial public offering) between March 12, 2009 and June 10, 2009, in each case so long as Mr. Prange complies with his obligations under his separation agreement. |
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Option Awards | |||||||||
Number of Shares Acquired on | |||||||||
Name | Exercise (#) | Value Realized on Exercise ($) (1) | |||||||
Neal R. Verfuerth | 1,000,000 | 1,387,500 | |||||||
Daniel J. Waibel | 650,000 | 920,625 | |||||||
John H. Scribante | 75,000 | — | |||||||
Michael J. Potts | 59,682 | 90,239 | |||||||
Patricia A. Verfuerth | 783,334 | 1,134,776 | |||||||
Bruce Wadman | — | — | |||||||
James L. Prange | — | — |
(1) | Represents the difference, if any, between the fair market value on the date of exercise of the shares purchased as determined by our compensation committee and our board of directors and the aggregate exercise price paid by the executive. |
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Employment | Renewal | Noncompete and | ||||||
Executive | Severance | Term | Term | Confidentiality | ||||
Chief executive officer | 2 X Salary + | 2 Years | 2 Years | Yes | ||||
Avg. Bonus | ||||||||
Chief financial officer | 1 X Salary + | 1 Year | 1 Year | Yes | ||||
General counsel Executive vice presidents | Avg. Bonus | |||||||
Vice presidents | 1/2 X Salary + | 1 Year | 1 Year | Yes | ||||
Avg. Bonus |
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Post Change | ||||||||||
of Control | ||||||||||
Employment | Excise Tax | |||||||||
Executive | Severance | Term | Trigger | Gross-Up | Valley | |||||
Chief executive officer | 3 X Salary + | 3 Years | Double | No | Yes | |||||
Avg. Bonus | ||||||||||
Chief financial officer | 2 X Salary + | 2 Years | Double | No | Yes | |||||
General counsel Executive vice presidents | Avg. Bonus | |||||||||
Vice presidents | 1 X Salary + | 1 Years | Double | No | Yes | |||||
Avg. Bonus |
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After Change in Control Without | |||||||||||||||||
Cause or for Good Reason | |||||||||||||||||
Before Change in | Before | ||||||||||||||||
Control Without | Application of | After Application of | |||||||||||||||
Cause or for Good | “Valley” | “Valley” | |||||||||||||||
Name | Benefit | Reason ($) | Provision ($)(1) | Provision ($)(1) | |||||||||||||
Neal R. Verfuerth | Severance | 583,200 | 874,800 | ||||||||||||||
Pro Rata Target Bonus | 71,901 | 71,901 | |||||||||||||||
Benefits | 11,029 | 11,029 | |||||||||||||||
Total | 666,130 | 957,730 | |||||||||||||||
Daniel J. Waibel | Severance | 171,667 | 336,667 | ||||||||||||||
Pro Rata Target Bonus | — | — | |||||||||||||||
Benefits | 16,304 | 16,304 | |||||||||||||||
Total | 187,971 | 352,971 | |||||||||||||||
John H. Scribante | Severance | 166,667 | 316,667 | ||||||||||||||
Pro Rata Target Bonus | 36,986 | 36,986 | |||||||||||||||
Benefits | — | — | |||||||||||||||
Total | 203,653 | 353,653 | |||||||||||||||
Michael J. Potts | Severance | 171,667 | 336,667 | ||||||||||||||
Pro Rata Target Bonus | — | — | |||||||||||||||
Benefits | 16,304 | 16,304 | |||||||||||||||
Total | 187,971 | 352,971 | |||||||||||||||
Patricia A. Verfuerth | Severance | 171,667 | 336,667 | ||||||||||||||
Pro Rata Target Bonus | — | — | |||||||||||||||
Benefits | 11,029 | 11,029 | |||||||||||||||
Total | 182,696 | 347,696 | |||||||||||||||
Total for all NEOs | 1,428,421 | 2,365,021 |
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(1) | The valley provision in the proposed new employment agreements provides that all amounts payable under the employment agreement and any other of our agreements or plans that constitute change of control payments will be cut back to one dollar less than three times the executive’s “base amount,” as defined by Code Section 280G, unless the executive would retain a greater amount by receiving the full amount of the payment and paying the excise taxes. |
• | With certain exceptions, any “person” (as such term is used in sections 13(d) and l4(d) of the Exchange Act), becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities representing more than 50% of the voting power of our then outstanding securities. |
• | Our shareholders approve (or, if shareholder approval is not required, our board approves) an agreement providing for (i) our merger or consolidation with another entity where our shareholders immediately prior to the merger or consolidation will not beneficially own, immediately after the merger or consolidation, securities of the surviving entity representing more than 50% of the voting power of the then outstanding securities of the surviving entity, (ii) the sale or other disposition of all or substantially all of our assets, or (iii) our liquidation or dissolution. |
• | Any person has commenced a tender offer or exchange offer for 30% or more of the voting power of our then outstanding shares. |
• | Directors are elected such that a majority of the members of our board shall have been members of our board for less than two years, unless the election or nomination for election of each new director who was not a director at the beginning of such two-year period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period. |
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Number of Option | Weighted Average Exercise | ||||||||||||
Name | Shares Cashed Out (#) | Price per Option Share ($) | Value Realized ($) | ||||||||||
Neal R. Verfuerth (1) | 250,000 | 2.20 | |||||||||||
Daniel J. Waibel | 100,000 | 2.20 | |||||||||||
John H. Scribante | 315,000 | 2.33 | |||||||||||
Michael J. Potts | 665,318 | 0.952 | |||||||||||
Patricia A. Verfuerth (2) | 116,666 | 1.44 |
(1) | The option shares shown in this table for Mr. Verfuerth do not reflect his receipt of the July 27, 2007 grant of options to purchase 180,958 shares of our common stock at an exercise price of $4.49 per share, which is described above under “Compensation Discussion and Analysis – Elements of Compensation – Long-Term Equity Incentive Compensation,” because such stock options were not outstanding as of March 31, 2007. If the stock options granted to Mr. Verfuerth on July 27, 2007 were reflected in the table, his total value realized would be $ . | |
(2) | The option shares shown in this table for Ms. Verfuerth do not reflect her receipt of the July 27, 2007 grant of options to purchase 125,974 shares of our common stock at an exercise price of $4.49 per share, which is described above under “Compensation Discussion and Analysis – Elements of Compensation – Long-Term Equity Incentive Compensation,” because such stock options were not outstanding as of March 31, 2007. If the stock options granted to Ms. Verfuerth on July 27, 2007 were reflected in the table, her total value realized would be $ . |
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Fees Earned | Option | ||||||||||||||||
or Paid in | Awards | All Other | |||||||||||||||
Name | Cash ($) | ($)(1)(2) | Compensation ($) | Total ($) | |||||||||||||
Thomas A. Quadracci | 7,000 | — | — | 7,000 | |||||||||||||
James R. Kackley | 12,000 | 26,827 | 5,000 | 43,827 | |||||||||||||
Eckhart G. Grohmann | 6,000 | 5,225 | — | 11,225 | |||||||||||||
Patrick J. Trotter | 9,000 | 4,180 | 5,000 | 18,180 | |||||||||||||
Diana Propper de Callejon(3) | — | — | — | — |
(1) | Represents the amount of expense recognized for financial accounting purposes pursuant to SFAS 123(R) for fiscal 2007 as reflected in our financial statements included elsewhere in this prospectus. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. | |
(2) | The aggregate number of option awards outstanding as of March 31, 2007 for each director was as follows: Mr. Kackley held options to purchase an aggregate of 114,000 shares of our common stock at a weighted average exercise price of $1.44 per share; Mr. Grohmann held an option to purchase 20,000 shares of our common stock at an exercise price of $0.75 per share; and Mr. Trotter held an option to purchase 20,000 shares of our common stock at an exercise price of $0.75 per share. The grant date fair value of our special fiscal 2007 option grant to Mr. Kackley, computed in accordance with SFAS 123(R), was $53,110. We also granted our non-employee directors additional stock options on July 27, 2007, as follows: Messrs. Kackley, Quadracci and Grohmann each received an option to purchase 10,000 shares of our common stock, and Ms. Propper de Callejon and Mr. Trotter each received an option to purchase 5,000 shares of our common stock. All of the options granted on July 27, 2007 have an exercise price of $4.49 per share. | |
(3) | Ms. Propper de Callejon, who is associated with Clean Technology Fund II, LP, one of our principal shareholders, received no additional compensation in fiscal 2007 for her service as a director. |
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• | each person (or group of affiliated persons) known to us to be the beneficial owner of more than 5% of our common stock (assuming the conversion of all of our preferred stock into 4,808,012 shares of common stock on a one-for-one basis and the conversion of our Convertible Notes into 2,360,802 shares of common stock upon closing of this offering); | |
• | each of our named executive officers; | |
• | each of our directors; | |
• | all of our directors and current and certain former executive officers as a group; and | |
• | all selling shareholders. |
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Percentage of Shares Beneficially Owned | |||||||||||||||||||||||||
Number of Shares | Number of | After Offering | |||||||||||||||||||||||
Beneficially Owned | Shares to be | if Over- | |||||||||||||||||||||||
Before | After | Sold in | Before | After | allotment | ||||||||||||||||||||
Offering | Offering | Offering | Offering | Offering | is Exercised | ||||||||||||||||||||
Directors and current and certain former executive officers | |||||||||||||||||||||||||
Neal R. Verfuerth (1) | 3,341,993 | 17.2 | % | ||||||||||||||||||||||
Daniel J. Waibel (2) | 1,050,000 | 5.4 | |||||||||||||||||||||||
Michael J. Potts (3) | 806,986 | 4.0 | |||||||||||||||||||||||
John Scribante (4) | 270,340 | 1.4 | |||||||||||||||||||||||
Patricia A. Verfuerth (5) | 3,341,993 | 17.2 | |||||||||||||||||||||||
Thomas A. Quadracci (6) | 36,409 | * | |||||||||||||||||||||||
Diana Propper de Callejon (7) | 2,193,157 | 11.3 | |||||||||||||||||||||||
James R. Kackley (8) | 211,000 | 1.1 | |||||||||||||||||||||||
Eckhart G. Grohmann (9) | 1,270,000 | 6.5 | |||||||||||||||||||||||
Patrick J. Trotter (10) | 514,790 | 2.7 | |||||||||||||||||||||||
Bruce Wadman (11) | 20,000 | * | |||||||||||||||||||||||
James L. Prange (12) | 72,023 | * | |||||||||||||||||||||||
All directors and current and certain former executive officers as a group (14 individuals) | 9,906,698 | 48.2 | % | ||||||||||||||||||||||
Principal shareholders | |||||||||||||||||||||||||
Clean Technology Affiliates(13) | 2,193,157 | 11.3 | % | ||||||||||||||||||||||
GEEFS Indirect Affiliate (14) | 1,781,737 | 9.2 | |||||||||||||||||||||||
Richard J. Olsen (15) | 1,011,639 | 5.2 |
* | Indicates less than 1%. | |
(1) | Includes (i) 2,534,328 shares of common stock, 75,000 of which have been pledged as security for a personal loan; (ii) 750,000 shares of common stock held by Mr. Verfuerth’s wife, Patricia A. Verfuerth; and (iii) 57,665 shares of common stock issuable upon the exercise of vested and exercisable options held by Mr. Verfuerth’s wife, Patricia A. Verfuerth. The number does not reflect 250,000 shares of common stock subject to options held by Mr. Verfuerth on June 30, 2007 that will not become exercisable within 60 days. The number also does not reflect Mr. Verfuerth’s redemption of 180,958 shares in repayment of the principal amount of a loan or the offsetting grant of an option to purchase 180,958 shares, each effective on July 27, 2007. See “Executive Compensation – Compensation Discussion and Analysis – Elements of Compensation – Long-Term Equity Incentive Compensation.” Additionally, the number does not reflect Mr. Verfuerth’s gift of 125,974 shares to Ms. Verfuerth in connection with the repayment of the principal amount of a loan. See note (5) below. |
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(2) | Does not include 100,000 shares of common stock subject to an option held by Mr. Waibel that will not become exercisable within 60 days. | |
(3) | Includes (i) 216,668 shares of common stock and (ii) 590,318 shares of common stock issuable upon the exercise of vested and exercisable options. The number does not include 75,000 shares of common stock subject to options that will not become exercisable within 60 days. | |
(4) | Includes (i) 157,110 shares of common stock; (ii) 19,230 shares of common stock issuable upon the conversion of Series B preferred stock; and (iii) 94,000 shares of common stock issuable upon the exercise of vested and exercisable options. The number does not include 221,000 shares of common stock subject to an option that will not become exercisable within 60 days. | |
(5) | Includes (i) 750,000 shares of common stock; (ii) 2,534,328 shares of common stock held by Ms. Verfuerth’s husband, Neal R. Verfuerth, 75,000 of which have been pledged as security for a loan; and (iii) 57,665 shares of common stock issuable upon the exercise of vested and exercisable options. The number does not reflect 50,000 shares of common stock subject to options held by Ms. Verfuerth on June 30, 2007 that will not become exercisable within 60 days. The number also does not reflect Ms. Verfuerth’s receipt of 125,974 shares gifted from Mr. Verfuerth. See note (1) above. Additionally, the number does not reflect Ms. Verfuerth’s redemption of such shares in repayment of the principal amount of a loan, or the offsetting grant of an option to purchase 125,974 shares, each effective on July 27, 2007. See “Executive Compensation – Compensation Discussion and Analysis – Elements of Compensation – Long-Term Equity Incentive Compensation.” | |
(6) | Excludes an option of 10,000 shares granted on July 27, 2007. | |
(7) | Includes (i) 1,636,364 shares of common stock issuable upon the conversion of Series C preferred stock owned by Clean Technology and (ii) 556,793 shares of common stock issuable upon the conversion of the Convertible Note held by Clean Technology. Ms. Propper de Callejon is the managing member of Expansion Capital Partners II – General Partner, LLC, which is the general partner of Expansion Capital Partners II, LP, which is the general partner of Clean Technology. Ms. Propper de Callejon disclaims beneficial ownership of the shares held by Clean Technology, except to the extent of her pecuniary interest therein. The address of Clean Technology is 90 Park Avenue, Suite 1700, New York, NY 10016. Excludes an option of 5,000 shares granted on July 27, 2007. | |
(8) | Includes (i) 207,000 shares of common stock and (ii) 4,000 shares of common stock issuable upon the exercise of options that are vested and exercisable or that will become vested and exercisable in the next 60 days. The number does not include 104,000 shares of common stock subject to an option held by Mr. Kackley on June 30, 2007 that will not become exercisable within 60 days. Excludes an option of 10,000 shares granted on July 27, 2007. | |
(9) | Includes (i) 620,000 shares of common stock; (ii) 480,000 shares of common stock issuable upon the conversion of Series B preferred stock; (iii) 160,000 shares of common stock issuable upon the exercise of warrants; and (iv) 10,000 shares of common stock issuable upon the exercise of vested and exercisable options. The number does not include 10,000 shares of common stock subject to an option held by Mr. Grohmann on June 30, 2007 that will not become exercisable within 60 days, or the July 27, 2007 option grant for 10,000 shares. | |
(10) | Includes (i) 504,790 shares of common stock and (ii) 10,000 shares of common stock issuable upon the exercise of vested and exercisable options. The number does not include 10,000 shares of |
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common stock subject to an option held by Mr. Trotter on June 30, 2007 that will not become exercisable within 60 days. Excludes an option of 5,000 shares granted on July 27, 2007. | ||
(11) | Includes 20,000 shares of common stock issuable upon the exercise of vested and exercisable options. The number does not include 20,000 shares of common stock subject to an option held by Mr. Wadman that will not become exercisable within 60 days. | |
(12) | Includes (i) 6,801 shares of common stock; (ii) 48,000 shares of common stock issuable upon the exercise of vested and exercisable options; and (iii) 17,222 shares of common stock subject to an option that will become exercisable during a 90-day period commencing upon the closing of this offering. The number does not include 155,000 shares of common stock subject to an option that will not become exercisable within 60 days. | |
(13) | Includes (i) 1,636,364 shares of common stock issuable upon the conversion of Series C preferred stock and (ii) 556,793 shares of common stock issuable upon the conversion of the Convertible Notes. Clean Technology is the name we use for Clean Technology Fund II, LP. The address of Clean Technology is 90 Park Avenue, Suite 1700, New York, NY 10016. | |
(14) | Includes 1,781,737 shares of common stock issuable upon the conversion of its Convertible Note. GEEFS is the name we use for GE Capital Equity Investments, Inc., an indirect affiliate of GE Energy Financial Services, Inc. GEEFS’ indirect affiliate, GE Capital Equity Investments, Inc., is the holder of the Convertible Note. The address of GEEFS is c/o GE Capital Equity Investments, Inc., 201 Merritt 7, P.O. Box 5201, Norwalk, Connecticut 06851. | |
(15) | Does not include 50,000 shares of common stock subject to an option held by Mr. Olsen that will not become exercisable within 60 days. Mr. Olsen is our vice president of technical services and a former director. |
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• | a “related person” means any of our directors, executive officers, nominees for director, holder of 5% or more of our common stock or any of their immediate family members; and | ||
• | a “related person transaction” generally is a transaction (including any indebtedness or a guarantee of indebtedness) in which we were or are to be a participant and the amount involved exceeds $120,000, and in which a related person had or will have a direct or indirect material interest. |
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• | In December 2004, we refinanced a mortgage loan agreement with a local bank to provide a $1.1 million note, as amended, for the purpose of acquiring our manufacturing facility. The note expires in September 2014 and bears interest a prime plus 2.0% per annum. The note is secured by a first mortgage on our manufacturing facility and was previously secured by a personal guarantee of Mr. Verfuerth, which was released effective August 15, 2007. As of March 31, 2007, the remaining note balance was $1.1 million. | ||
• | In December 2004, we entered into a debenture payable issued by a certified development company to provide $1.0 million for the purpose of acquiring our manufacturing and warehousing facility. The instrument expires in December 2024 and carries an effective interest rate, including service fees, of 6.18% per annum. The note is guaranteed by the United States Small Business Administration 504 program and is secured by a second mortgage position on our manufacturing facility. Mr. Verfuerth previously personally guaranteed the note, which guarantee was released effective August 2, 2007. As of March 31, 2007, the remaining balance on the note was $1.0 million. | ||
• | In March 2005, we entered into a loan and security agreement with the State of Wisconsin to provide a $0.5 million federal block grant loan to be used for the purchase of manufacturing equipment. The loan expires in October 2012 and bears interest at a rate of 2.0% per annum. The loan is secured by a purchase money security interest and was previously secured by a personal guarantee of Mr. Verfuerth, which was released effective June 25, 2007. As of March 31, 2007, the remaining balance on the loan was $0.4 million. | ||
• | In September 2005, we entered into an agreement with the Industrial Development Corporation of the City of Manitowoc to provide a $0.5 million loan for the purpose of acquiring manufacturing equipment for our manufacturing facility. The loan expires in October 2011 and bears interest a fixed rate of 2.925% per annum. The loan is secured by a |
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purchase money security interest and was also previously secured by a personal guarantee of Mr. Verfuerth, which was released effective July 5, 2007. As of March 31, 2007, the remaining balance on the loan was $0.4 million. | |||
• | In March 2004, we received a secured note from a local bank to provide a $3.3 million loan for working capital purposes. We pay principal and interest payments of $24,755 per month on the note, which are payable through the expiration of the note in February 2014. The note bears interest at a fixed rate of 6.9% per annum. The note is 75% guaranteed by the United States Department of Agriculture Rural Development Association and was also previously guaranteed by a personal guarantee of Mr. Verfuerth, which was released effective August 15, 2007. As of March 31, 2007, the remaining balance on the note was $1.6 million. |
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• | decreasing the amount of earnings and assets available for distribution to holders of common stock; | ||
• | restricting dividends on the common stock; | ||
• | diluting the voting power of the common stock; | ||
• | impairing the liquidation rights of the common stock; or |
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• | delaying, deferring or preventing changes in our control or management. |
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• | a merger or share exchange; | ||
• | a sale, lease, exchange, mortgage, pledge, transfer or other disposition of assets equal to 5% or more of the market value of the stock or consolidated assets of the resident domestic corporation or 10% of its consolidated earning power or income; | ||
• | the issuance of stock or rights to purchase stock with a market value equal to 5% or more of the outstanding stock of the resident domestic corporation; | ||
• | the adoption of a plan of liquidation or dissolution; or | ||
• | certain other transactions involving an interested shareholder. |
• | its principal offices are located in Wisconsin; | ||
• | it has significant business operations located in Wisconsin; | ||
• | more than 10% of the holders of record of its shares are residents of Wisconsin; or | ||
• | more than 10% of its shares are held of record by residents of Wisconsin. |
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• | the board of directors approved the acquisition of the stock prior to such shareholder’s acquisition date; | ||
• | the business combination is approved by a majority of the outstanding voting stock not beneficially owned by the interested shareholder; or | ||
• | the consideration to be received by shareholders meets certain fair price requirements of the statute with respect to form and amount. |
• | the aggregate value of the per share consideration is equal to the highest of: |
• | the highest price paid for any common shares of the corporation by the significant shareholder in the transaction in which it became a significant shareholder or within two years before the date of the business combination; | ||
• | the market value of the corporation’s shares on the date of commencement of any tender offer by the significant shareholder, the date on which the person became a significant shareholder or the date of the first public announcement of the proposed business combination, whichever is higher; or | ||
• | the highest preferential liquidation or dissolution distribution to which holders of the shares would be entitled; and |
• | either cash, or the form of consideration used by the significant shareholder to acquire the largest number of shares, is offered. |
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• | a willful failure to deal fairly with us or our shareholders in connection with a matter in which the director or officer has a material conflict of interest; | ||
• | a violation of criminal law, unless the director or officer had reasonable cause to believe his or her conduct was unlawful; | ||
• | a transaction from which the director or officer derived an improper personal profit; or | ||
• | willful misconduct. |
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• | shares, which are not subject to the 180-day lock-up period described under the caption “Underwriting”, may be sold immediately upon the date of this prospectus; | ||
• | shares, which are not subject to the 180-day lock-up period described under the caption “Underwriting”, may be sold beginning 90 days after the date of this prospectus; | ||
• | additional shares may be sold upon expiration of the 180-day lock-up period described under the caption “Underwriting”, of which would be subject to volume, manner of sale and other limitations under Rule 144; and | ||
• | the remaining shares will be eligible for resale pursuant to Rule 144 upon the expiration of various one-year holding periods during the six months following the expiration of the 180-day lock-up period. |
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• | one percent of our then-outstanding shares of common stock, which is expected to equal approximately shares immediately after this offering; and | ||
• | the average weekly trading volume of our common stock on the Nasdaq Global Market during the four calendar weeks preceding the filing of a notice of the sale on Form 144. |
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CONSIDERATIONS FOR NON-UNITED STATES HOLDERS OF OUR COMMON STOCK
• | an individual who is a citizen or resident of the United States; | ||
• | a corporation, partnership or any other organization taxable as a corporation or partnership for United States federal income tax purposes, created or organized in the United States or under the laws of the United States or of any state thereof or the District of Columbia; | ||
• | an estate, the income of which is included in gross income for United States federal income tax purposes regardless of its source; or | ||
• | a trust (A) if (i) a United States court is able to exercise primary supervision over the trust’s administration and (ii) one or more United States persons have the authority to control all of the trust’s substantial decisions or (B) that has a valid election in effect under applicable United States Treasury Regulations to be treated as a United States person. |
• | insurance companies; | ||
• | real estate investment companies, regulated investment companies or grantor trusts; |
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• | corporations that accumulate earnings to avoid United States federal income tax; | ||
• | tax-exempt organizations; | ||
• | financial institutions; | ||
• | brokers or dealers in securities or currencies; | ||
• | partnerships and other pass-through entities; | ||
• | pension plans; | ||
• | holders that own or are deemed to own more than 5% of our common stock; | ||
• | owners that hold our common stock as part of a straddle, hedge, conversion transaction, synthetic security or other integrated investment; | ||
• | persons that received our common stock as compensation for performance of services; | ||
• | persons that have a functional currency other than the United States dollar; and | ||
• | certain former citizens or residents of the United States. |
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• | the gain is effectively connected with your conduct of a trade or business in the United States (and if an applicable United States income tax treaty so provides, is also attributable to a permanent establishment or a fixed base in the United States maintained by you), in which case you generally (unless an applicable tax treaty provides otherwise) will be taxed at the graduated United States federal income tax rates applicable to United States persons and, if you are a corporation, the additional branch profits tax described above in “Distributions on Our Common Stock” may apply; or |
• | you are an individual who is present in the United States for 183 days or more in the taxable year of the sale, exchange or disposition and certain other conditions are met, in which case you will be subject to a 30% tax on the net gain derived from the disposition, which may be offset by your United States source capital losses, if any. |
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Number of | ||
Underwriter | Shares | |
Thomas Weisel Partners LLC | ||
Canaccord Adams Inc. | ||
Pacific Growth Equities, LLC | ||
Total | ||
Total | ||||||||||||
With | Without | |||||||||||
Per Share | Over-Allotment | Over-Allotment | ||||||||||
Public offering price | ||||||||||||
Underwriting discount | ||||||||||||
Proceeds, before expenses, to us | ||||||||||||
Proceeds, before expenses, to the selling shareholders |
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(a) | to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; | ||
(b) | to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; or | ||
(c) | in any other circumstances which do not require the publication by the Issuer of a prospectus pursuant to Article 3 of the Prospectus Directive. |
(a) | it has not made or will not make an offer of shares to the public in the United Kingdom within the meaning of section 102B of the Financial Services and Markets Act 2000 (as amended), or FSMA except to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities or otherwise in circumstances which do not require the publication by us of a prospectus pursuant to the Prospectus Rules of the Financial Services Authority, or FSA; | ||
(b) | it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) to persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 or in circumstances in which section 21 of FSMA does not apply to us; and | ||
(c) | it has complied with, and will comply with, all applicable provisions of FSMA with respect to anything done by it in relation to the shares in, from or otherwise involving the United Kingdom. |
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Page | ||
Number | ||
Report of Independent Registered Public Accounting Firm | F-2 | |
Consolidated Balance Sheets | F-3 | |
Consolidated Statements of Operations | F-4 | |
Consolidated Statements of Temporary Equity and Shareholders’ Equity | F-5 | |
Consolidated Statements of Cash Flows | F-6 | |
Notes to Consolidated Financial Statements | F-7 |
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REGISTERED PUBLIC ACCOUNTING FIRM
Orion Energy Systems, Inc.
August 16, 2007
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CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
March 31, | June 30, 2007 | |||||||||||
2006 | 2007 | (Unaudited) | ||||||||||
Assets | ||||||||||||
Cash and cash equivalents | $ | 1,089 | $ | 285 | $ | 696 | ||||||
Accounts receivable, net of allowances of $38, $89 and $83 (unaudited) | 6,051 | 11,197 | 13,172 | |||||||||
Inventories | 6,167 | 9,496 | 10,672 | |||||||||
Deferred tax assets | 419 | 345 | 458 | |||||||||
Prepaid expenses and other current assets | 745 | 1,296 | 1,457 | |||||||||
Total current assets | 14,471 | 22,619 | 26,455 | |||||||||
Property and equipment, net | 8,106 | 7,588 | 7,946 | |||||||||
Patents and licenses, net | 194 | 243 | 316 | |||||||||
Investment | — | 794 | 794 | |||||||||
Deferred tax assets | 1,607 | 1,907 | 1,354 | |||||||||
Other long-term assets | 360 | 432 | 854 | |||||||||
Total assets | $ | 24,738 | $ | 33,583 | $ | 37,719 | ||||||
Liabilities, Temporary Equity and Shareholders’ Equity | ||||||||||||
Accounts payable | $ | 4,767 | $ | 5,607 | $ | 8,116 | ||||||
Accrued expenses | 1,889 | 2,196 | 3,326 | |||||||||
Current maturities of long-term debt | 859 | 736 | 707 | |||||||||
Total current liabilities | 7,515 | 8,539 | 12,149 | |||||||||
Long-term debt, less current maturities | 10,492 | 10,603 | 9,998 | |||||||||
Other long-term liabilities | 109 | 133 | 171 | |||||||||
Total liabilities | 18,116 | 19,275 | 22,318 | |||||||||
Commitments and contingencies (See Note E) | ||||||||||||
Temporary equity: | ||||||||||||
Series C convertible redeemable preferred stock, $0.01 par value: zero shares issued and outstanding at March 31, 2006 and 1,818,182 at March 31, 2007 and June 30, 2007 (unaudited) | — | 4,953 | 5,028 | |||||||||
Shareholders’ equity: | ||||||||||||
Preferred stock, $0.01 par value: Shares authorized including Series C convertible redeemable preferred stock: 20,000,000 at March 31, 2006 and 2007 and June 30, 2007 (unaudited) | ||||||||||||
Series A convertible preferred stock, $0.01 par value: 20,000 shares issued and outstanding at March 31, 2006 and none at March 31, 2007 and June 30, 2007 (unaudited) | 116 | — | — | |||||||||
Series B convertible preferred stock, $0.01 par value: 2,847,400, 2,989,830 and 2,989,830 shares issued and outstanding at March 31, 2006 and 2007 and June 30, 2007 (unaudited) | 5,591 | 5,959 | 5,959 | |||||||||
Common stock, no par value: Shares authorized: 80,000,000 as of March 31, 2006 and 2007 and June 30, 2007 (unaudited); shares issued: 8,982,764, 12,107,573 and 12,289,043 as of March 31, 2006 and 2007 and June 30, 2007 (unaudited); shares outstanding: 8,920,900, 12,038,499 and 12,219,969 as of March 31, 2006 and 2007 and June 30, 2007 (unaudited) | — | — | — | |||||||||
Additional paid-in capital | 5,859 | 9,438 | 9,993 | |||||||||
Treasury stock: 61,864, 69,074 and 69,074 common shares as of March 31, 2006 and 2007 and June 30, 2007 (unaudited) | (345 | ) | (361 | ) | (361 | ) | ||||||
Shareholder notes receivable | (398 | ) | (2,128 | ) | (2,128 | ) | ||||||
Accumulated deficit | (4,201 | ) | (3,553 | ) | (3,090 | ) | ||||||
Total shareholders’ equity | 6,622 | 9,355 | 10,373 | |||||||||
Total liabilities, temporary equity and shareholders’ equity | $ | 24,738 | $ | 33,583 | $ | 37,719 | ||||||
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CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
Three months ended | ||||||||||||||||||||
Fiscal year ended | June 30, | |||||||||||||||||||
March 31, | (unaudited) | |||||||||||||||||||
2005 | 2006 | 2007 | 2006 | 2007 | ||||||||||||||||
Revenue | $ | 21,783 | $ | 33,280 | $ | 48,183 | $ | 9,680 | $ | 16,721 | ||||||||||
Cost of revenue | 14,043 | 22,524 | 32,487 | 6,255 | 11,118 | |||||||||||||||
Gross profit | 7,740 | 10,756 | 15,696 | 3,425 | 5,603 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
General and administrative | 3,461 | 4,875 | 6,162 | 1,269 | 1,571 | |||||||||||||||
Sales and marketing | 5,416 | 5,991 | 6,459 | 1,518 | 2,111 | |||||||||||||||
Research and development | 213 | 1,171 | 1,078 | 211 | 437 | |||||||||||||||
Total operating expenses | 9,090 | 12,037 | 13,699 | 2,998 | 4,119 | |||||||||||||||
Income (loss) from operations | (1,350 | ) | (1,281 | ) | 1,997 | 427 | 1,484 | |||||||||||||
Other income (expense): | ||||||||||||||||||||
Interest expense | (570 | ) | (1,051 | ) | (1,044 | ) | (253 | ) | (295 | ) | ||||||||||
Dividend and interest income | 3 | 5 | 201 | 1 | 40 | |||||||||||||||
Total other income (expense) | (567 | ) | (1,046 | ) | (843 | ) | (252 | ) | (255 | ) | ||||||||||
Income (loss) before income tax and cumulative effect of change in accounting principle | (1,917 | ) | (2,327 | ) | 1,154 | 175 | 1,229 | |||||||||||||
Income tax expense (benefit) | (702 | ) | (762 | ) | 225 | 34 | 481 | |||||||||||||
Income (loss) before cumulative change in accounting principle | (1,215 | ) | (1,565 | ) | 929 | 141 | 748 | |||||||||||||
Cumulative effect of change in accounting principle, net of income tax benefit of $38 | (57 | ) | — | — | — | — | ||||||||||||||
Net income (loss) | (1,272 | ) | (1,565 | ) | 929 | 141 | 748 | |||||||||||||
Accretion of redeemable preferred stock and preferred stock dividends | (104 | ) | (3 | ) | (201 | ) | (1 | ) | (75 | ) | ||||||||||
Conversion of preferred stock | (972 | ) | — | (83 | ) | — | — | |||||||||||||
Net income (loss) attributable to common shareholders | $ | (2,348 | ) | $ | (1,568 | ) | $ | 645 | $ | 140 | $ | 673 | ||||||||
Basic net income (loss) per common share attributable to common shareholders | $ | (0.36 | ) | $ | (0.18 | ) | $ | 0.07 | $ | 0.02 | $ | 0.07 | ||||||||
Weighted average common shares outstanding | 6,470,413 | 8,524,012 | 9,080,461 | 8,998,944 | 9,950,486 | |||||||||||||||
Diluted net income (loss) per common share attributable to common shareholders | $ | (0.36 | ) | $ | (0.18 | ) | $ | 0.04 | $ | 0.01 | $ | 0.04 | ||||||||
Weighted average common shares and share equivalents outstanding | 6,470,413 | 8,524,012 | 16,432,647 | 15,072,660 | 18,087,951 |
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CONSOLIDATED STATEMENTS OF TEMPORARY EQUITY AND SHAREHOLDERS’ EQUITY
Temporary Equity | Preferred Stock | Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Series C Redeemable | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Series A | Series B | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Additional | Shareholder | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Paid-in | Treasury | Notes | Accumulated | Shareholders’ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Capital | Shares | Receivable | Deficit | Equity | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2004 | — | $ | — | 732,010 | $ | 1,007 | 392,000 | $ | 710 | 6,355,776 | $ | 2,229 | $ | — | $ | — | $ | (392 | ) | $ | 3,554 | ||||||||||||||||||||||||||||||||||||||
Issuance of stock | — | — | — | — | 1,842,400 | 3,457 | 119,802 | 551 | — | (63 | ) | — | 3,945 | ||||||||||||||||||||||||||||||||||||||||||||||
Conversion of Series A shares to common stock | — | — | (648,010 | ) | (891 | ) | — | — | 1,944,030 | 1,863 | — | — | (972 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||
Purchase of stock for treasury | — | — | (64,000 | ) | — | — | — | (61,864 | ) | — | (345 | ) | — | — | (345 | ) | |||||||||||||||||||||||||||||||||||||||||||
Changes in shareholder notes receivable | — | — | — | — | — | — | — | — | — | 5 | — | 5 | |||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | — | (1,272 | ) | (1,272 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2005 | — | $ | — | 20,000 | $ | 116 | 2,234,400 | $ | 4,167 | 8,357,744 | $ | 4,643 | $ | (345 | ) | $ | (58 | ) | $ | (2,636 | ) | $ | 5,887 | ||||||||||||||||||||||||||||||||||||
Issuance of stock and warrants | — | — | — | — | 613,000 | 1,424 | 55,778 | 153 | — | — | — | 1,577 | |||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options and warrants for cash and notes | — | — | — | — | — | — | 483,378 | 445 | — | (375 | ) | — | 70 | ||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | — | 558 | — | — | — | 558 | |||||||||||||||||||||||||||||||||||||||||||||||
Changes in shareholder notes receivable | — | — | — | — | — | — | — | — | — | 35 | — | 35 | |||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock and warrants for services | — | — | — | — | — | — | 24,000 | 60 | — | — | — | 60 | |||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | — | (1,565 | ) | (1,565 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2006 | — | $ | — | 20,000 | $ | 116 | 2.847,400 | $ | 5,591 | 8,920,900 | $ | 5,859 | $ | (345 | ) | $ | (398 | ) | $ | (4,201 | ) | $ | 6,622 | ||||||||||||||||||||||||||||||||||||
Issuance of stock and warrants | 1,818,182 | 4,755 | — | — | 142,430 | 368 | — | — | — | — | — | 368 | |||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options and warrants for cash and notes | — | — | — | — | — | — | 3,064,809 | 2,582 | — | (1,753 | ) | — | 829 | ||||||||||||||||||||||||||||||||||||||||||||||
Conversion to common stock | — | — | (20,000 | ) | (116 | ) | — | — | 60,000 | 199 | — | — | (83 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||
Tax benefit from exercise of stock options | — | — | — | — | — | — | — | 435 | — | — | — | 435 | |||||||||||||||||||||||||||||||||||||||||||||||
Treasury stock purchase | — | — | — | — | — | — | (7,210 | ) | — | (16 | ) | — | — | (16 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | — | 363 | — | — | — | 363 | |||||||||||||||||||||||||||||||||||||||||||||||
Changes in shareholder notes receivable | — | — | — | — | — | — | — | — | — | 23 | — | 23 | |||||||||||||||||||||||||||||||||||||||||||||||
Accretion of redeemable preferred stock | — | 198 | — | — | — | — | — | — | — | — | (198 | ) | (198 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | — | — | — | 929 | 929 | |||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2007 | 1,818,182 | $ | 4,953 | — | $ | — | 2,989,830 | $ | 5,959 | 12,038,499 | $ | 9,438 | $ | (361 | ) | $ | (2,128 | ) | $ | (3,553 | ) | $ | 9,355 | ||||||||||||||||||||||||||||||||||||
Exercise of stock options and warrants for cash and notes (unaudited) | — | — | — | — | — | — | 181,470 | 376 | — | — | — | 376 | |||||||||||||||||||||||||||||||||||||||||||||||
Tax benefit from exercise of stock options (unaudited) | — | — | — | — | — | — | — | 33 | — | — | — | 33 | |||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation (unaudited) | — | — | — | — | — | — | — | 146 | — | — | — | 146 | |||||||||||||||||||||||||||||||||||||||||||||||
Accretion of preferred stock (unaudited) | — | 75 | — | — | — | — | — | — | — | — | (75 | ) | (75 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Changes in shareholder notes receivable (unaudited) | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
Adoption of FIN 48 (unaudited) | (210 | ) | (210 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income (unaudited) | — | — | — | — | — | — | — | — | — | — | 748 | 748 | |||||||||||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2007 (unaudited) | 1,818,182 | $ | 5,028 | — | $ | — | 2,989,830 | $ | 5,959 | 12,219,969 | $ | 9,993 | $ | (361 | ) | $ | (2,128 | ) | $ | (3,090 | ) | $ | 10,373 | ||||||||||||||||||||||||||||||||||||
F-5
Table of Contents
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three months ended | ||||||||||||||||||||
June 30, | ||||||||||||||||||||
Fiscal year ended March 31, | (unaudited) | |||||||||||||||||||
2005 | 2006 | 2007 | 2006 | 2007 | ||||||||||||||||
Operating activities | ||||||||||||||||||||
Net income (loss) | $ | (1,272 | ) | $ | (1,565 | ) | $ | 929 | $ | 141 | $ | 748 | ||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||||||||||
Depreciation and amortization | 539 | 941 | 1,063 | 247 | 270 | |||||||||||||||
Stock-based compensation expense | — | 618 | 363 | 58 | 146 | |||||||||||||||
Deferred income tax benefit | (740 | ) | (922 | ) | (213 | ) | 28 | 440 | ||||||||||||
Loss on write-off of patents and licenses | — | — | 13 | — | — | |||||||||||||||
Loss on sale of assets | — | 224 | 268 | 4 | — | |||||||||||||||
Other | — | 37 | 8 | — | 10 | |||||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||||||
Accounts receivable | (305 | ) | (2,757 | ) | (5,161 | ) | (27 | ) | (2,372 | ) | ||||||||||
Inventories | (3,472 | ) | 491 | (4,555 | ) | (2,223 | ) | (1,176 | ) | |||||||||||
Prepaid expenses and other current assets | 9 | (300 | ) | (524 | ) | (9 | ) | 315 | ||||||||||||
Accounts payable | 3,338 | (584 | ) | 840 | 1,233 | 2,509 | ||||||||||||||
Accrued expenses | 1,040 | 416 | 735 | (207 | ) | 932 | ||||||||||||||
Net cash provided by (used in) operating activities | (863 | ) | (3,401 | ) | (6,234 | ) | (755 | ) | 1,822 | |||||||||||
Investing activities | ||||||||||||||||||||
Purchase of property and equipment | (5,764 | ) | (871 | ) | (1,012 | ) | (169 | ) | (614 | ) | ||||||||||
Additions to patents and licenses | (40 | ) | (56 | ) | (81 | ) | (14 | ) | (78 | ) | ||||||||||
Proceeds from disposal of equipment | — | 735 | 263 | — | — | |||||||||||||||
Net decrease (increase) in amount due from shareholder | (84 | ) | 30 | (139 | ) | (26 | ) | (14 | ) | |||||||||||
Net cash used in investing activities | (5,888 | ) | (162 | ) | (969 | ) | (209 | ) | (706 | ) | ||||||||||
Financing activities | ||||||||||||||||||||
Purchase of treasury stock | (345 | ) | — | — | — | — | ||||||||||||||
Proceeds from issuance of long-term debt | 10,099 | 134 | 40 | 40 | — | |||||||||||||||
Payment of long-term debt | (5,840 | ) | (2,416 | ) | (1,263 | ) | (198 | ) | (175 | ) | ||||||||||
Net activity in revolving line of credit | (636 | ) | 4,853 | 1,211 | 201 | (460 | ) | |||||||||||||
Excess benefit for deferred taxes on stock-based compensation | — | — | 435 | 6 | 33 | |||||||||||||||
Proceeds from (additions to) shareholder notes receivable, net | 5 | 35 | 23 | (17 | ) | — | ||||||||||||||
Deferred finance and offering costs | (91 | ) | (94 | ) | — | — | (479 | ) | ||||||||||||
Proceeds from issuance of preferred stock, net | 3,857 | 1,454 | 5,123 | 134 | — | |||||||||||||||
Proceeds from issuance of common stock | 88 | 193 | 830 | 15 | 376 | |||||||||||||||
Net cash provided by (used in) financing activities | 7,137 | 4,159 | 6,399 | 181 | (705 | ) | ||||||||||||||
Net increase (decrease) in cash and cash equivalents | 386 | 596 | (804 | ) | (783 | ) | 411 | |||||||||||||
Cash and cash equivalents at beginning of period | 107 | 493 | 1,089 | 1,089 | 285 | |||||||||||||||
Cash and cash equivalents at end of period | $ | 493 | $ | 1,089 | $ | 285 | $ | 306 | $ | 696 | ||||||||||
Supplemental cash flow information: | ||||||||||||||||||||
Cash paid for interest | $ | 492 | $ | 1,003 | $ | 927 | $ | 231 | $ | 267 | ||||||||||
Cash paid for income taxes | — | — | 17 | — | 10 | |||||||||||||||
Supplemental disclosure of non-cash investing and financing activities | ||||||||||||||||||||
Capital leases entered into for purchase of equipment | $ | — | $ | 81 | $ | 40 | $ | 40 | $ | — | ||||||||||
Notes receivable issued to shareholders | 63 | 375 | 1,753 | — | — | |||||||||||||||
Long-term investment in affiliate acquired through sale of inventory | — | — | 794 | 307 | — | |||||||||||||||
Preferred stock dividends | 104 | 3 | 201 | 1 | 75 |
F-6
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-7
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2008 | $ | 190 | ||
2009 | 123 | |||
Total gross receivable | 313 | |||
Less: amount representing interest | (23 | ) | ||
Net contracts receivable | $ | 290 | ||
March 31, | March 31, | June 30, 2007 | ||||||||||
2006 | 2007 | (unaudited) | ||||||||||
Raw materials and components | $ | 1,762 | $ | 5,496 | $ | 5,983 | ||||||
Work in process | 386 | 358 | 495 | |||||||||
Finished goods | 4,019 | 3,642 | 4,194 | |||||||||
$ | 6,167 | $ | 9,496 | $ | 10,672 | |||||||
F-8
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, | June 30, 2007 | |||||||||||
2006 | 2007 | (unaudited) | ||||||||||
Land and land improvements | $ | 557 | $ | 557 | $ | 560 | ||||||
Buildings | 4,240 | 4,423 | 4,449 | |||||||||
Furniture, fixtures and office equipment | 1,298 | 1,441 | 1,492 | |||||||||
Plant equipment | 3,923 | 3,747 | 3,790 | |||||||||
Construction in progress | 141 | 130 | 625 | |||||||||
10,159 | 10,298 | 10,916 | ||||||||||
Less: accumulated depreciation and amortization | 2,053 | 2,710 | 2,970 | |||||||||
Net property and equipment | $ | 8,106 | $ | 7,588 | $ | 7,946 | ||||||
March 31, | June 30, 2007 | |||||||||||
2006 | 2007 | (unaudited) | ||||||||||
Equipment | $ | 1,498 | $ | 1,451 | $ | 1,206 | ||||||
Less: accumulated amortization | 328 | 531 | 328 | |||||||||
Net Equipment | $ | 1,170 | $ | 920 | $ | 878 | ||||||
Land improvements | 10 – 15 years | |||
Buildings | 10 – 39 years | |||
Furniture, fixtures and office equipment | 3 – 10 years | |||
Plant equipment | 3 – 10 years |
F-9
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-10
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, | ||||||||||||
March 31, | 2007 | |||||||||||
2006 | 2007 | (unaudited) | ||||||||||
Beginning of period | $ | 250 | $ | 332 | $ | 45 | ||||||
Credit from supplier | 412 | — | — | |||||||||
Provision to cost of revenue | 745 | 249 | 170 | |||||||||
Charges | (1,075 | ) | (536 | ) | (38 | ) | ||||||
End of period | $ | 332 | $ | 45 | $ | 177 | ||||||
• | persuasive evidence of an arrangement exists; | |
• | delivery has occurred and title has passed to the customer; | |
• | the sales price is fixed and determinable and no further obligation exists; and | |
• | collectibility is reasonably assured. |
F-11
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-12
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal year | ||||
ended March 31, 2007 | ||||
Income (loss) before income tax and cumulative effect of change in accounting principle | $ | 363 | ||
Net income | 292 | |||
Net income (loss) attributable to common shareholders | 292 | |||
Basic net income (loss) per common share attributable to common shareholders | .03 | |||
Diluted net income (loss) per common share attributable to common shareholders | .02 |
Fiscal year ended March | June 30, 2007 | |||||||||||||||
2005 | 2006 | 2007 | (unaudited) | |||||||||||||
Expected term | 6 years | 6 years | 6.6 years | 7.6 years | ||||||||||||
Risk-free interest rate | 4.32 | % | 4.35 | % | 4.62 | % | 4.58% | |||||||||
Expected volatility | 39 | % | 50 | % | 60 | % | 60 | % | ||||||||
Expected forfeiture rate | N/A | N/A | 6 | % | 6 | % | ||||||||||
Expected dividend yield | 0 | % | 0 | % | 0 | % | 0 | % |
F-13
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three months ended June 30, | ||||||||||||||||||||
Fiscal year ended March 31, | (unaudited) | |||||||||||||||||||
2005 | 2006 | 2007 | 2006 | 2007 | ||||||||||||||||
Weighted average common shares outstanding | 6,470,413 | 8,524,012 | 9,080,461 | 8,998,944 | 9,950,486 | |||||||||||||||
Weighted average effect of preferred stock, restricted stock and assumed conversion of stock option and warrants | — | — | 7,352,186 | 6,073,716 | 8,137,465 | |||||||||||||||
Weighted average common share and common share equivalents outstanding | 6,470,413 | 8,524,012 | 16,432,647 | 15,072,660 | 18,087,951 | |||||||||||||||
June 30, | ||||||||||||||||||||
March 31, | (unaudited) | |||||||||||||||||||
2005 | 2006 | 2007 | 2006 | 2007 | ||||||||||||||||
Series A preferred | 20,000 | 20,000 | — | 20,000 | — | |||||||||||||||
Series B preferred | 2,234,400 | 2,847,400 | 2,989,830 | 2,989,830 | 2,989,830 | |||||||||||||||
Series C redeemable preferred | — | — | 1,818,182 | — | 1,818,182 | |||||||||||||||
Common stock subject to non-recourse shareholder notes receivable | — | — | 2,150,000 | — | 2,150,000 | |||||||||||||||
Common stock options | 6,412,108 | 6,394,730 | 4,714,547 | 6,605,550 | 4,712,077 | |||||||||||||||
Common stock warrants | 1,064,314 | 1,098,574 | 1,109,390 | 1,097,908 | 954,390 | |||||||||||||||
Total | 9,730,822 | 10,360,704 | 12,781,949 | 10,713,288 | 12,624,479 | |||||||||||||||
F-14
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-15
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, | June 30, | |||||||||||
2006 | 2007 | 2007 (unaudited) | ||||||||||
Revolving credit agreement | $ | 4,853 | $ | 6,064 | $ | 5,604 | ||||||
Term note | 1,807 | 1,629 | 1,583 | |||||||||
First mortgage note payable | 1,073 | 1,062 | 1,059 | |||||||||
Debenture payable | 989 | 956 | 948 | |||||||||
Lease obligations | 1,150 | 850 | 771 | |||||||||
Other long-term debt | 1,212 | 778 | 740 | |||||||||
Stock note payable to former shareholder | 267 | — | — | |||||||||
Total long-term debt | 11,351 | 11,339 | 10,705 | |||||||||
Less current maturities | (859 | ) | (736 | ) | (707 | ) | ||||||
Long-term debt, less current maturities | $ | 10,492 | $ | 10,603 | $ | 9,998 | ||||||
F-16
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-17
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal 2008 | $ | 736 | ||
Fiscal 2009 | 750 | |||
Fiscal 2010 | 705 | |||
Fiscal 2011 | 509 | |||
Fiscal 2012 | 491 | |||
Thereafter | 2,084 | |||
$ | 5,275 | |||
March 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Current | $ | — | $ | 160 | $ | 438 | ||||||
Deferred | (740 | ) | (922 | ) | (213 | ) | ||||||
$ | (740 | ) | $ | (762 | ) | $ | 225 | |||||
2005 | 2006 | 2007 | ||||||||||
Federal | (628 | ) | $ | (517 | ) | $ | 295 | |||||
State | (112 | ) | (245 | ) | (70 | ) | ||||||
$ | (740 | ) | $ | (762 | ) | $ | 225 | |||||
Fiscal year ended March 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Statutory federal tax rate | (34.0 | )% | (34.0 | )% | 34.0 | % | ||||||
State taxes, net | (5.4 | %) | (5.5 | )% | 7.9 | % | ||||||
Stock based compensation expense | 0.0 | % | 9.6 | % | 3.9 | % | ||||||
Federal tax credit | 0.0 | % | (3.2 | )% | (13.3 | )% | ||||||
State tax credit | 0.0 | % | (5.8 | )% | (16.5 | )% | ||||||
Change in tax contingency reserve | 0.0 | % | 8.9 | % | 0.0 | % | ||||||
Other, net | 2.6 | % | (2.7 | )% | 3.5 | % | ||||||
Effective income tax rate | (36.8 | )% | (32.7 | )% | 19.5 | % | ||||||
March 31, | ||||||||
2006 | 2007 | |||||||
Federal and state operating loss carryforwards | $ | 1,346 | $ | 857 | ||||
Tax credit carryforwards | 292 | 702 | ||||||
Inventory | 162 | 192 | ||||||
Fixed assets | (24 | ) | 252 | |||||
Accruals and reserves | 181 | 149 | ||||||
Other | 176 | 258 | ||||||
Total deferred tax assets | 2,133 | 2,410 | ||||||
Deferred tax liabilities | (107 | ) | (158 | ) | ||||
Net deferred tax assets | $ | 2,026 | $ | 2,252 | ||||
F-18
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2008 | $ | 853 | ||
2009 | 211 | |||
2010 | 201 | |||
2011 | 159 | |||
2012 | 79 |
• | senior rank to other classes and series of stock with respect to the payment of dividends and proceeds upon liquidation | ||
• | entitlement to receive cumulative dividends accruing at a non compounded annual rate of 6% upon the occurrence of certain events (accumulated dividends through March 31, 2007 and June 30, 2007 (unaudited) were $198,000 and $273,000) |
F-19
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
• | liquidation preference equal to the purchase price plus any accumulated dividends | ||
• | conversion into common stock at a one-to-one ratio upon certain qualifying exit events resulting in net proceeds to the Company of at least $30 million (upon conversion in a qualifying event, all rights related to accrued and unpaid dividends would be extinguished) | ||
• | weighted average dilution protection for any issuance of stock or other equity instruments (other than for stock options granted under existing stock plans) at a price per share less than the Series C purchase price of $2.75 | ||
• | proportional adjustment of the number of shares of common stock into which one share of Series C preferred stock may be converted in the event of stock splits, stock dividends reclassifications and similar events | ||
• | a redemption feature at the option of the holder, including accumulated dividends, if certain liquidity events are not achieved within five years from issuance | ||
• | right to vote with common stock on all matters submitted to a vote of shareholders |
• | a liquidation preference equal to the purchase price of the Series B shares | ||
• | automatic conversion to common stock at a one-to-one ratio upon registration of the common stock under a 1933 Act registration | ||
• | no dividend preference | ||
• | right to vote with common stock on all matters submitted to a vote of shareholders |
F-20
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-21
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three months ended June 30, | ||||||||||||
Fiscal year ended | (unaudited) | |||||||||||
March 31, 2007 | 2006 | 2007 | ||||||||||
Cost of revenue | $ | 24 | $ | 3 | $ | 21 | ||||||
General and administrative | 154 | 29 | 65 | |||||||||
Sales and marketing | 153 | 21 | 52 | |||||||||
Research and development | 32 | 5 | 8 | |||||||||
$ | 363 | $ | 58 | $ | 146 | |||||||
Available at March 31, 2004 | 1,077,200 | |||
Amendment to plan | 2,000,000 | |||
Granted | (599,000 | ) | ||
Forfeited | 27,000 | |||
Available at March 31, 2005 | 2,505,200 | |||
Granted | (735,000 | ) | ||
Forfeited | 278,000 | |||
Available at March 31, 2006 | 2,048,200 | |||
Granted | (1,657,500 | ) | ||
Forfeited | 280,000 | |||
Available at March 31, 2007 | 670,700 | |||
Granted (unaudited) | (50,000 | ) | ||
Forfeited (unaudited) | 26,000 | |||
Available at June 30, 2007 (unaudited) | 646,700 | |||
Number of | Fair value | |||||||||||||||
options granted | Exercise price | estimate per share | Intrinsic value | |||||||||||||
April 2006 | 40,000 | $ | 2.25- 2.50 | $ | 2.20 | $ | — | |||||||||
May 2006 | 40,000 | 2.50 | 2.20 | — | ||||||||||||
June 2006 | 150,000 | 2.50 | 2.20 | — | ||||||||||||
July 2006 | 27,000 | 2.50 | 2.20 | — | ||||||||||||
August 2006 | 5,000 | 2.50 | 2.20 | — | ||||||||||||
September 2006 | 2,000 | 2.75 | 2.20 | — | ||||||||||||
October 2006 | 2,000 | 2.75 | 2.20 | — | ||||||||||||
November 2006 | 35,000 | 2.75 | 2.20 | — | ||||||||||||
December 2006 | 920,000 | 2.20 | 2.20 | — | ||||||||||||
March 2007 | 436,500 | 2.20 | 4.15 | 851,000 | ||||||||||||
April 2007 (unaudited) | 50,000 | 2.20 | 4.15 | 98,000 |
F-22
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005 | March 31, 2006 | March 31, 2007 | June 30, 2006 | June 30, 2007 | ||||||||||||||||||||||||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||||||||||||||||||||||||
Weighted | Weighted | Weighted | Weighted | Weighted | ||||||||||||||||||||||||||||||||||||
average | average | average | average | average | ||||||||||||||||||||||||||||||||||||
exercise | exercise | exercise | exercise | exercise | ||||||||||||||||||||||||||||||||||||
Options | price | Options | price | Options | price | Options | price | Options | price | |||||||||||||||||||||||||||||||
Outstanding, beginning of period | 5,922,800 | $ | .89 | 6,412,108 | $ | 1.02 | 6,394,730 | $ | 1.06 | 6,394,730 | $ | 1.06 | 4,714,547 | $ | 1.56 | |||||||||||||||||||||||||
Granted | 599,000 | 2.24 | 735,000 | 1.87 | 1,657,500 | 2.26 | 230,000 | 2.50 | 50,000 | 2.20 | ||||||||||||||||||||||||||||||
Exercised | (82,692 | ) | .82 | (474,378 | ) | .91 | (3,057,683 | ) | .84 | (19,180 | ) | 0.69 | (26,470 | ) | 1.03 | |||||||||||||||||||||||||
Forfeited | (27,000 | ) | 1.16 | (278,000 | ) | 2.09 | (280,000 | ) | 2.25 | — | — | (26,000 | ) | 2.11 | ||||||||||||||||||||||||||
Outstanding, end of period | 6,412,108 | $ | 1.02 | 6,394,730 | $ | 1.06 | 4,714,547 | $ | 1.56 | 6,605,550 | $ | 1.10 | 4,712,077 | $ | 1.57 | |||||||||||||||||||||||||
Weighted average fair value of options granted | $ | 0.48 | $ | 1.54 | $ | 1.35 | $ | 1.27 | $ | 3.27 |
March 31, 2007 | June 30, 2007 (unaudited) | |||||||||||||||||||||||||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||||||||||||||||||||||||
average | Weighted | Weighted | average | Weighted | Weighted | |||||||||||||||||||||||||||||||||||||
remaining | average | average | remaining | average | average | |||||||||||||||||||||||||||||||||||||
contractual life | exercise | exercise | contractual life | exercise | exercise | |||||||||||||||||||||||||||||||||||||
Price | Outstanding | (years) | price | Vested | price | Outstanding | (years) | price | Vested | price | ||||||||||||||||||||||||||||||||
$ .69 | 1,260,627 | 4.1 | $ | .69 | 1,260,627 | $ | .69 | 1,240,157 | 3.9 | $ | 0.69 | 1,240,157 | $ | .069 | ||||||||||||||||||||||||||||
.75 - .94 | 657,420 | 4.7 | .91 | 571,420 | .93 | 657,420 | 4.5 | 0.91 | 575,420 | 0.93 | ||||||||||||||||||||||||||||||||
1.24 - 1.50 | 512,000 | 6.4 | 1.45 | 352,800 | 1.45 | 508,000 | 6.1 | 1.45 | 351,200 | 1.45 | ||||||||||||||||||||||||||||||||
2.20 - 2.25 | 1,993,500 | 9.1 | 2.22 | 308,800 | 2.25 | 2,015,500 | 8.8 | 2.22 | 306,800 | 2.25 | ||||||||||||||||||||||||||||||||
2.50 - 2.75 | 291,000 | 9.3 | 2.53 | 73,866 | 2.57 | 291,000 | 9.0 | 2.53 | 57,200 | 2.51 | ||||||||||||||||||||||||||||||||
4,714,547 | 6.8 | $ | 1.56 | 2,567,513 | $ | 1.09 | 4,712,077 | 6.6 | $ | 1.57 | 2,530,777 | $ | 1.08 | |||||||||||||||||||||||||||||
Aggregate Intrinsic Value | $ | 12,207,000 | $ | 7,861,100 | $ | 12,169,000 | $ | 7,772,000 |
Non-vested at March 31, 2006 | 1,334,200 | |||
Granted | 1,657,500 | |||
Vested | (579,266 | ) | ||
Forfeited | (265,400 | ) | ||
Non-vested at March 31, 2007 | 2,147,034 | |||
Granted (unaudited) | 50,000 | |||
Vested (unaudited) | (5,334 | ) | ||
Forfeited (unaudited) | (10,400 | ) | ||
Non-vested at June 30, 2007 (unaudited) | 2,181,300 | |||
Fiscal 2008 | $ | 684 | ||
Fiscal 2009 | 678 | |||
Fiscal 2010 | 576 | |||
Fiscal 2011 | 504 | |||
Thereafter | 547 | |||
$ | 2,989 | |||
Remaining weighted average expected term | 3.01 | yrs |
F-23
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
Dividend yield | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Weighted average risk-free interest rate | 4.32 | % | 4.35 | % | 4.62 | % | ||||||
Weighted average contractual term | 5 years | 5 years | 5 years | |||||||||
Expected volatility | 39 | % | 50 | % | 60 | % |
March 31, 2005 | March 31, 2006 | March 31, 2007 | June 30, 2006 | June 30, 2007 | ||||||||||||||||||||||||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||||||||||||||||||||||||
Weighted | Weighted | Weighted | Weighted | Weighted | ||||||||||||||||||||||||||||||||||||
average | average | average | average | average | ||||||||||||||||||||||||||||||||||||
exercise | exercise | exercise | exercise | exercise | ||||||||||||||||||||||||||||||||||||
price | price | price | price | price | ||||||||||||||||||||||||||||||||||||
Warrants | Warrants | Warrants | Warrants | Warrants | ||||||||||||||||||||||||||||||||||||
Outstanding, beginning of period | 239,766 | $ | 1.98 | 1,064,314 | $ | 2.22 | 1,098,574 | $ | 2.24 | 1,098,574 | $ | 2.24 | 1,109,390 | $ | 2.24 | |||||||||||||||||||||||||
Issued | 824,548 | 2.29 | 45,260 | 2.47 | 19,580 | 2.41 | — | — | — | — | ||||||||||||||||||||||||||||||
Exercised | — | — | (9,000 | ) | 1.50 | (7,966 | ) | 1.80 | (666 | ) | 2.30 | (155,000 | ) | 2.25 | ||||||||||||||||||||||||||
Cancelled | — | — | (2,000 | ) | 1.50 | (798 | ) | 1.50 | — | — | — | — | ||||||||||||||||||||||||||||
Outstanding, end of period | 1,064,314 | $ | 2.22 | 1,098,574 | $ | 2.24 | 1,109,390 | $ | 2.24 | 1,097,908 | $ | 2.24 | 954,390 | $ | 2.24 | |||||||||||||||||||||||||
June 30, 2007 | ||||||||||||
Exercise price | March 31, 2007 | (unaudited) | Expiration | |||||||||
$1.50 | 79,236 | 79,236 | Fiscal 2012 | |||||||||
$2.25 | 221,480 | 66,480 | Fiscal 2014 | |||||||||
$2.30 | 763,914 | 763,914 | Fiscal 2010 | |||||||||
$2.50 | 37,260 | 37,260 | Fiscal 2011 | |||||||||
$2.60 | 7,500 | 7,500 | Fiscal 2012 | |||||||||
Total | 1,109,390 | 954,390 | ||||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-25
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Canaccord Adams
Pacific Growth Equities, LLC
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SEC registration fee | $ | 3,070 | ||
NASD filing fee | 10,550 | |||
Nasdaq Global Market listing fee | * | |||
Printing costs | * | |||
Legal fees and expenses | * | |||
Accounting fees and expenses | * | |||
Blue sky fees and expenses | * | |||
Miscellaneous | * | |||
Total | $ | * | ||
* | To be completed by amendment |
• | a willful failure to deal fairly with us or our shareholders in connection with a matter in which the director or officer has a material conflict of interest; | ||
• | a violation of criminal law, unless the director or officer had reasonable cause to believe his or her conduct was unlawful; | ||
• | a transaction from which the director or officer derived an improper personal profit; or | ||
• | willful misconduct. |
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ORION ENERGY SYSTEMS, INC. | ||||
By: | /s/ Neal R. Verfuerth | |||
Neal R. Verfuerth | ||||
President and Chief Executive Officer | ||||
Signature | Title | |
/s/ Neal R. Verfuerth | President and Chief Executive Officer and Director (Principal Executive Officer) | |
/s/ Daniel J. Waibel | Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | |
/s/ Thomas A. Quadracci | Chairman of the Board | |
/s/ Michael J. Potts | Director and Executive Vice President | |
/s/ Diana Propper de Callejon | Director | |
/s/ James R. Kackley | Director | |
/s/ Eckhart G. Grohmann | Director | |
/s/ Patrick J. Trotter | Director |
S-1
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Number | Exhibit Title | |
1.1 | Form of Underwriting Agreement.* | |
2.1 | Form of Series C Senior Convertible Preferred Stock Purchase Agreement by and among Orion Energy Systems, Inc. and the signatories thereto. | |
2.2 | Note Purchase Agreement between Orion Energy Systems, Inc. and the signatories thereto dated August 3, 2007. | |
3.1 | Amended and Restated Articles of Incorporation of Orion Energy Systems, Inc. | |
3.2 | Amendment to Amended and Restated Articles of Incorporation of Orion Energy Systems, Inc. | |
3.3 | Form of Amended and Restated Articles of Incorporation of Orion Energy Systems, Inc. to be effective upon closing of this offering. | |
3.4 | Amended and Restated Bylaws of Orion Energy Systems, Inc. | |
3.5 | Form of Amended and Restated Bylaws of Orion Energy Systems, Inc. to be effective upon closing of this offering. | |
4.1 | Amended and Restated Investors’ Rights Agreement by and among Orion Energy Systems, Inc. and the signatories thereto, dated August 3, 2007. | |
4.2 | Amended and Restated First Offer and Co-Sale Agreement among Orion Energy Systems, Inc. and the signatories thereto, dated August 3, 2007. | |
4.3 | Form of Warrant to purchase Common Stock of Orion Energy Systems, Inc. | |
4.4 | Form of Warrant to purchase Common Stock of Orion Energy Systems, Inc. | |
4.5 | Credit and Security Agreement by and between Orion Energy Systems, Inc., Great Lakes Energy Technologies, LLC and Wells Fargo Bank, National Association, acting through its Wells Fargo Business Credit Operating Division, dated December 22, 2005, as amended January 26, 2006, June 30, 2006, March 29, 2007 and July 27, 2007. | |
4.6 | Convertible Subordinated Promissory Note in favor of GE Capital Equity Investments, Inc. dated August 3, 2007. | |
4.7 | Convertible Subordinated Promissory Note in favor of Clean Technology Fund II, L.P. dated August 3, 2007. | |
4.8 | Convertible Subordinated Promissory Note in favor of Capvest Venture Fund, LP, dated August 3, 2007. | |
4.9 | Convertible Subordinated Promissory Note in favor of Technology Transformation Venture Fund, LP, dated August 3, 2007. | |
5.1 | Opinion of Foley & Lardner LLP.* |
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Number | Exhibit Title | |
10.1 | Employment Agreement by and between Bruce Wadman and Orion Energy Systems, Inc. dated October 1, 2005. | |
10.2 | Employment Agreement by and between Neal Verfuerth and Orion Energy Systems, Inc. dated April 1, 2005. | |
10.3 | Separation Agreement by and between Orion Energy Systems, Inc. and Bruce Wadman, effective July 5, 2007.* | |
10.4 | Separation Agreement by and between Orion Energy Systems, Inc. and James Prange, effective July 18, 2007.* | |
10.5 | Employment Agreement by and between John Scribante and Orion Energy Systems, Inc. dated June 2, 2006. | |
10.6 | Orion Energy Systems, Inc. 2003 Stock Option Plan, as amended. | |
10.7 | Form of Stock Option Agreement under the Orion Energy Systems, Inc. 2003 Stock Option Plan. | |
10.8 | Amendment to Stock Option Agreement between Bruce Wadman and Orion Energy Systems, Inc. dated February 19, 2007.* | |
10.9 | Orion Energy Systems, Inc. 2004 Stock and Incentive Awards Plan. | |
10.10 | Form of Stock Option Agreement under the Orion Energy Systems, Inc. 2004 Equity Incentive Plan. | |
10.11 | Form of Stock Option Agreement under the Orion Energy Systems, Inc. 2004 Stock and Incentive Awards Plan. | |
10.12 | Form of Promissory Note and Collateral Pledge Agreement in favor of Orion Energy Systems, Inc. in connection with option exercises (all such notes were paid in full in July and August 2007). | |
10.13 | Patent and Trademark Security Agreement by and between Orion Energy Systems, Inc. and Wells Fargo Bank, National Association, Acting Through its Wells Fargo Business Credit Operating Division, dated December 22, 2005. | |
10.14 | Patent and Trademark Security Agreement by and between Great Lakes Energy Technologies, LLC and Wells Fargo Bank, National Association, Acting Through its Wells Fargo Business Credit Operating Division, dated December 22, 2005. | |
21.1 | Subsidiaries of Orion Energy Systems, Inc. | |
23.1 | Consent of Grant Thornton LLP. | |
23.2 | Consent of Foley & Lardner LLP (contained in Exhibit 5.1 hereto).* | |
23.3 | Consent of Wipfli LLP. | |
24.1 | Power of Attorney (contained on signature page hereto). |
* | To be filed by amendment |
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