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Exchange Act of 1934
þ | Preliminary Proxy Statement | |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
o | Definitive Proxy Statement | |
o | Definitive Additional Materials | |
o | Soliciting Material Pursuant to §240.14a-12 |
o | No fee required. | |
þ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Proxy Statement
2108 55th Street
Boulder, CO 80301
(303) 442-4333
Sincerely, | ||||
/s/ Tom Ward | ||||
President and Executive Officer | ||||
Many of our stockholders hold their shares through a stockbroker, bank or other nominee, rather than in their own name. If you hold your shares this way, we consider you abeneficial stockholder. To vote as a beneficial stockholder, you submit voting instructions to your broker in accordance with the voting instructions card that they included in this packet. The broker or bank then votes your shares per your instructions. | ||||
If you directly hold your shares in your name, we consider you aregisteredstockholder. You vote your shares by proxy directly with Exabyte. | ||||
This year, we have chosen ADP Investor Communication Services to provide voting services for our registered stockholders. Most brokers and banks participate in this program as well. |
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON _________, 2006
Time | [ , 2006] 9:00 am (Mountain Time) | |
Place | Exabyte Corporation — Executive Offices | |
2108 55th Street, Boulder, CO 80301 | ||
For those unable to attend in person, a live Web cast of the Special Meeting will be available at: | ||
www.exabyte.com under the Investor Relations section. The Web cast will also be archived and available for 30 days. | ||
Items of Business | 1. To approve the sale of substantially all of Exabyte’s assets pursuant to the Asset Purchase Agreement; | |
2. To approve the dissolution of Exabyte contingent on the sale of substantially all of Exabyte’s assets pursuant to the Asset Purchase Agreement; | ||
3. To approve a proposal to amend our Certificate of Incorporation to change our corporate name to “Midgard XXI, Inc.” contingent on the sale of substantially all of Exabyte’s assets pursuant to the Asset Purchase Agreement; and | ||
4. Conduct any other business properly presented at the meeting. | ||
Proxy Voting Information | Even if you plan to attend the Special Meeting, we urge you to submit your proxy as soon as possible so that your shares will be voted at this Special Meeting. |
Boulder, Colorado
[ , 2006]
• | the outstanding principal balance and accrued interest thereon under the Credit and Security Agreement with Wells Fargo Business Credit, Inc. (“Wells Fargo”) (estimated to be $10,000,000 for purposes of determining the total consideration); | ||
• | the repayment obligations under the Restructuring Agreements, as amended, with the holders (the “Noteholders”) of the our 10% Secured Subordinated Convertible Notes (the “Notes”) ($7,790,000); | ||
• | the payment obligation under the Amendment No. 1 to the Debt Restructuring Agreement with Solectron Corporation (“Solectron”) ($300,000); | ||
• | the payment obligation under the Second Amendment to the Memorandum of Understanding with Hitachi, Ltd. (“Hitachi”) ($2,000,000); | ||
• | the amount payable under the Note Restructuring Agreement with Imation Corp. (“Imation”) ($1,000,000); | ||
• | transaction fees payable at closing (not to exceed $1,200,000); and | ||
• | the cash balance to be retained by us subsequent to closing ($100,000). |
Pro Forma Condensed Consolidated Balance Sheet
June 30, 2006
(in thousands)
ASSETS | ||||
Current asset-cash | $ | 100 | ||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||
Current liabilities-accounts payable | $ | 250 | ||
Convertible subordinated notes payable | 50 | |||
Note payable-other | 3,060 | |||
Total liabilities | 3,360 | |||
Convertible preferred stock, net | 39,558 | |||
Stockholders’ deficit | (42,818 | ) | ||
Total liabilities and stockholders’ deficit | $ | 100 |
• | We will make a $1,000,000 payment of the principal balance of the Original Notes at closing; | ||
• | Imation will forgive payment of $2,000,000 of the principal amount of the Original Notes; | ||
• | Tandberg Data Corp. will issue a new note payable to Imation in the amount of $4,000,000, with interest at 10% and principal payable as follows: $1,000,000 in December 2008; $1,000,000 in December 2009; and $2,000,000 in December 2010; | ||
• | The new note payable will have a security interest in the assets of Tandberg Data Corp., subject to a subordination agreement with Tandberg Data ASA’s senior lender; and | ||
• | Imation will forgive payment of the remaining $4,000,000 principal balance of the Original Notes and agrees to waive all existing and future events of default under the terms of the Original Notes. |
• | “FOR” approval of the sale of substantially all of Exabyte’s assets pursuant to the Asset Purchase Agreement; |
• | “FOR” approval of the dissolution contingent on the sale of substantially all of Exabyte’s assets pursuant to the Asset Purchase Agreement; and | ||
• | “FOR” approval of the change of Exabyte’s name to “Midgard XXI, Inc.”contingent on the sale of substantially all of Exabyte’s assets pursuant to the Asset Purchase Agreement. |
• | filing a written notice of revocation with the Corporate Secretary no later than the meeting date; | ||
• | filing another executed proxy, which bears a later date, with the Corporate Secretary; or | ||
• | attending the Special Meeting and voting in person. Please note that attending the Special Meeting alone will NOT revoke your proxy. |
Investor Relations
2108 55th Street
Boulder, Colorado 80301
• | The overall terms of the transaction, including the consideration we would receive. | ||
• | The ability to provide our creditors with the highest overall level of debt repayment of any of our potential bidders. | ||
• | Our prospects for survival on a stand-alone basis in the near future. | ||
• | Our cash position, recurring losses and accumulated deficit, as well as declining revenues. | ||
• | The likely impact of the asset sale on our employees, vendors and customers. | ||
• | A comparison of the terms of the proposed transaction with other recent acquisitions of companies in similar financial circumstances to us, the review and evaluation of other information concerning the valuation of companies in our industry, an evaluation of the return to our creditors under a liquidation scenario, and other analyses and advice provided by St. Charles Capital. | ||
• | The opinion of St. Charles Capital that the consideration to be received by us in the asset sale is fair to us from a financial point of view. See “Opinion of Exabyte’s Financial Advisors,” beginning on page 13. | ||
• | The state of the data storage market industry generally and the increased competition brought about by consolidation and other factors, as well as the financial size and resources necessary to compete in this environment. | ||
• | Our relationships with customers and vendors. | ||
• | The fact that no proceeds would be available after the sale for distribution to holders of our Series AA preferred stock or common stock. | ||
• | The fact that certain liabilities that are not being assumed by Tandberg Data in the Purchase Agreement would remain behind in the corporate Exabyte entity, and that we would have no or extremely limited proceeds available from the asset sale with which to pay or settle with such creditors. | ||
• | The fact that we would dissolve immediately following the asset sale. | ||
• | The fact that some of our officers and directors have interests in the asset sale described under “Interests of our Directors, Executive Officers and Affiliates in the Asset Sale” that are in addition to and different from their interests as our stockholders. | ||
• | The fact that under the Purchase Agreement we cannot solicit competing proposals and a termination fee is payable to Tandberg Data Corp. under specified circumstances. |
(i) | Certain of our financial statements and other financial information, including our Audited Financial Statements for each of the years in the two year period ended December 31, 2005 as we filed such information with the Securities and Exchange Commission (the “SEC”) on Form 10-K, and our internal unaudited financial statements for the quarters ended March 31, 2006 and June 30, 2006 as filed with the SEC on Form 10-Q; | ||
(ii) | Our press releases and Form 8-K’s as we provided to and other of our filings with the SEC during the past 2 years; | ||
(iii) | Form 8-K dated May 3, 2004 that includes the Certificate of Designation of Preferences, Rights and Limitations of Series AA Convertible Preferred Stock; | ||
(iv) | Certain internal analyses compiled by our Chief Financial Officer and controller regarding debt payment schedules, cash projections and liquidation value of our assets; | ||
(v) | The reported prices and trading activity of our common stock; | ||
(vi) | Certain other internal information, primarily financial in nature, including projections concerning our business and operations that we furnished to St. Charles Capital by for purposes of its analysis; | ||
(vii) | Certain publicly available information with respect to certain other companies that St. Charles Capital believes to be comparable to us (due to industry focus or financial condition), and the trading markets for such other companies’ securities; | ||
(viii) | Certain publicly available information concerning the nature and terms of certain other transactions that we considered relevant to our inquiry; | ||
(ix) | Discussions with our Chief Executive Officer, Chief Financial Officer and Controller regarding, among other things, our business and prospects; and | ||
(x) | other matters St. Charles Capital believes relevant to its inquiry. |
• | Our December 31, 2005 Form 10-K filed with the SEC, in which our auditor cites our recurring losses and accumulated deficits as, among other things, raising substantial doubt about our ability to continue as a going concern; | ||
• | We posted negative earnings before interest, taxes, depreciation and amortization (“EBITDA”) in eleven of our last thirteen quarters; | ||
• | Strained relationships with key distributors of our products; | ||
• | At June 30, 2006, we triggered an event of default under our Wells Fargo bank facility, giving the bank the legal right to force us into receivership at any time; | ||
• | Management’s belief that we would experience a cash deficit and would be unable to continue operations beyond September 1, 2006 without access to additional capital through our bank facility; | ||
• | The data storage market is extremely competitive and subject to rapid technological change; and | ||
• | We compete with large, multi-national corporations that have greater access to capital and strong leadership positions in our key markets. |
Enterprise Value as a multiple to Last 12 Months Revenue | ||||
Mean | .31x | |||
Median | .23x |
Enterprise Value as a multiple to Last 12 Months Revenue | ||||
Mean | .47x | |||
Median | .49x |
• | Proxicom Inc. / Daou Systems, Inc. | ||
• | Pomeroy IT Solutions, Inc. / Alternative Resources Corp | ||
• | DSI Acquisition Inc. / DSI Toys Inc. | ||
• | SI Acquisition LLC / Successories Inc. | ||
• | CardioTech International, Inc. / Gish Biomedical Inc. |
• | SRAM Corp. / RockShox Inc. | ||
• | Eastman Kodak Co. / ENCAD Inc. | ||
• | RadiSys Corp. / Microwave Systems Corp. | ||
• | Monaco Coach Corp. / SMC Corp |
Enterprise Value as a multiple to Last 12 Months Revenue | ||||
Mean | .49x | |||
Median | .28x |
• | the outstanding principal balance and accrued interest thereon under the Credit and Security Agreement with Wells Fargo (estimated to be $10,000,000 for purposes of determining the total consideration); | ||
• | the repayment obligations under the Restructuring Agreements with the Noteholders ($7,790,000); | ||
• | the payment obligation under the Amendment No. 1 to the Debt Restructuring | ||
• | Agreement with Solectron ($300,000); | ||
• | the payment obligation under the Second Amendment to the Memorandum of Understanding with Hitachi ($2,000,000); | ||
• | the amount payable under the Imation Restructuring Agreement ($1,000,000); | ||
• | transaction fees payable at closing (not to exceed $1,200,000); and |
• | the cash balance to be retained by us subsequent to closing ($100,000). |
• | corporate organization, good standing and power to carry on business; | ||
• | the authorization, execution, delivery, performance and enforceability of the Purchase Agreement and related matters; | ||
• | governmental authorizations and third party consents; | ||
• | accuracy of financial statements; | ||
• | absence of undisclosed liabilities; | ||
• | title to all personal property and assets; | ||
• | absence of certain changes; | ||
• | real property, including leases; | ||
• | accounts payable and inventory; | ||
• | tax matters; | ||
• | ownership and use of intellectual property, including the non-infringement thereof; | ||
• | material contracts; | ||
• | employee benefit and labor matters; | ||
• | litigation; | ||
• | compliance with laws and regulations; | ||
• | environmental matters; | ||
• | insurance; | ||
• | accounts receivable, fixed assets and inventory; | ||
• | officers and directors and their compensation; | ||
• | transactions with affiliates; | ||
• | major customers and suppliers; | ||
• | corporate books and records; | ||
• | brokers fees and opinion of financial advisors; | ||
• | subsidiaries; | ||
• | compliance with SEC filing requirements; and | ||
• | compliance with state takeover laws. |
• | propose or adopt any change in to our charter or bylaws; | ||
• | split, combine or reclassify shares of our capital stock; | ||
• | issue, encumber or transfer any Equity Interests (as defined in the Purchase Agreement), or alter or amend any Contract (as defined in the Purchase Agreement) governing our outstanding Equity Interests; | ||
• | merge with or acquire any third-party; | ||
• | sell or otherwise dispose of any assets or securities with a market or book value in excess of $10,000 individually or $50,000 in the aggregate, other than inventory sold in the Ordinary Course of Business (as defined in the Purchase Agreement); | ||
• | incur any indebtedness or otherwise become liable for any debts or obligations other than in the Ordinary Course of Business; | ||
• | discharge or otherwise make any payment in respect of the Notes; | ||
• | increase the amount of compensation of any director or officer or pay any bonuses; | ||
• | authorize or incur any capital expenditure other than as specifically permitted under the Purchase Agreement; | ||
• | make any changes in our accounting methods, principles or practices; | ||
• | settle, pay or discharge, any litigation, investigation, arbitration, or proceeding for an amount in excess of $25,000; | ||
• | make or take certain tax-related actions; | ||
• | enter into any new line of business; | ||
• | except as set specifically provided for, adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization; | ||
• | grant any loan, advance, extensions of credit to current or former employees or forgiveness or deferral of any loans due from any employee; | ||
• | adopt new programs or change existing programs that relate to employee compensation or benefits; | ||
• | adopt, modify or waive any right under or amend or modify any material term of any Material Contract (as defined in the Purchase Agreement); | ||
• | take any action that would result in any of our representations or warranties contained in the Purchase Agreement being untrue in any material respect; | ||
• | except as required by applicable law or GAAP, reduce in any material respect any of our assets, including writing up or down the value of inventory in any material manner or writing-off notes or accounts receivable in any material manner, or reduce any of our reserves; | ||
• | allow any permits to lapse; | ||
• | sell, assign, license or encumber any of our intellectual property other than in the Ordinary Course of Business; or | ||
• | authorize, agree or commit to do any of the foregoing. |
• | file all tax returns and pay all taxes due; | ||
• | file all SEC reports; | ||
• | terminate all negotiations with other parties regarding the sale of our assets and not solicit any other proposals for such sale, except that we would be permitted to entertain unsolicited, bona fide proposals to the extent such proposals are superior to the asset sale pursuant to the Purchase Agreement; | ||
• | preserve the corporate records; | ||
• | coordinate all public announcements with Tandberg Data Corp.; | ||
• | provide notice of material events and access to our financial and operating records to Tandberg Data Corp.; | ||
• | call and convene a meeting of the stockholders for the purpose of approving the asset sale; | ||
• | change the name of the corporation and allow Tandberg Data Corp. to use the name “Exabyte”; and |
• | until the third anniversary of the Closing Date, not compete with or own or manage any business involving data storage devices. |
• | approval of the asset sale by our stockholders; and | ||
• | no governmental entity having issued any law or order prohibiting the consummation of the asset sale. |
• | We shall have performed in all material respects all of our obligations under the Purchase Agreement; | ||
• | We shall have obtained or made all required consents and notices from governmental entities or third parties; | ||
• | the Ancillary Agreements (as defined in the Purchase Agreement) shall have been consummated and shall be in full force and effect; | ||
• | there shall not have been or occurred any event or change that would reasonably be expected to have a Material Adverse Effect; and | ||
• | We shall have delivered all related and Ancillary Agreements, instruments, and documents required under the Purchase Agreement. |
• | Tandberg Data shall have performed in all material respects all of its obligations under the Purchase Agreement; | ||
• | Tandberg Data Corp shall have delivered the cash portion of the purchase price; and | ||
• | Tandberg Data shall have delivered all related or Ancillary Agreements and documents required by the Purchase Agreement. |
• | by mutually written agreement of the parties; | ||
• | by either party if the closing has not occurred by December 31, 2006, as such date may be extended under certain circumstances; | ||
• | by Tandberg Data Corp upon notice to us of a change in circumstances causing a Material Adverse Effect; | ||
• | by us upon notice to Tandberg Data Corp. of a change in circumstances causing a Purchaser Material Adverse Effect; | ||
• | by either party in the event of a final, nonappealable judgment or order prohibiting the asset sale; | ||
• | by either party in the event of a material violation or breach by the other party of its covenants or agreements; | ||
• | by either party if the approval of our stockholders for the asset sale is not obtained; | ||
• | by Tandberg Data Corp., if (a) we amend or withdraw the recommendation of the Board to the stockholders to vote for the asset sale or recommend approval of another transaction, or (b) we fail to comply with certain requirements regarding an superior offer or (c) if any other person acquires Beneficial Ownership (as defined in the Purchase Agreement) or a majority of our stock or if any other Third Party Acquisition (as defined in the Purchase Agreement) occurs; or | ||
• | by us, if we enter into a definitive agreement for a superior proposal in accordance with the provisions of Article 7 of the Purchase Agreement. |
• | We will make a $1,000,000 payment of the principal balance of the Original Notes; | ||
• | Imation will forgive payment of $2,000,000 of the principal amount of the Original Notes owed to us; | ||
• | Tandberg Data Corp. will issue a new note payable to Imation in the amount of $4,000,000, with interest at 10% and principal payable as follows: $1,000,000 in December 2008; $1,000,000 in December 2009; and $2,000,000 in December 2010; | ||
• | The new note payable will have a security interest in the assets of Tandberg Data Corp., subject to a subordination agreement with Tandberg Data ASA’s senior lender; and | ||
• | Imation will forgive payment of the remaining $4,000,000 principal balance of the Original Notes and agrees to waive all existing and future events of default against us under the terms of the Original Notes. The Imation Agreement is contingent upon the closing of the asset sale and payment of amounts due to Imation at the closing. |
• | Tandberg Data Corp. will pay at closing, as part of the consideration for our assets, 82% of the principal amount of the Notes; | ||
• | The holders of Notes will forgive the remaining 18% of principal, all accrued interest as of the date of the Restructuring Agreement, and all default premium, if any; |
• | Upon payment of the 82% restructured payment, the security interest in our assets that is held by the holders of the Notes will be released; and | ||
• | The holders of the Notes have waived existing and future events of default under the Notes Securities Agreement entered into in October 2005 and any rights under the Intercreditor and Subordination Agreement entered into in October 2005 among Exabyte, the holders of the Notes, Imation and Wells Fargo. |
substantially all of our assets pursuant to the Purchase Agreement.
o | each director; | ||
o | each current named executive officer; | ||
o | all of Exabyte’s directors and the named executive officers as a group; and | ||
o | all those known to be beneficial owners of more than five percent of Exabyte’s common stock. |
Beneficial Ownership (1) | ||||||||||||||||
Shares to | ||||||||||||||||
Vote at the | Percent of | |||||||||||||||
Number of | Percent | Meeting | Outstanding | |||||||||||||
Beneficial Owner | Shares | of Total | (10) | Votes (9) | ||||||||||||
Meritage Investment Partners LLC(2) | 20,114,311 | 65.61 | % | 15,412,124 | 55.86 | % | ||||||||||
1600 Wynkoop | ||||||||||||||||
Suite 300 | ||||||||||||||||
Denver, CO 80202 | ||||||||||||||||
Imation Corp.(7) | 4,123,100 | 20.94 | % | 1,686,811 | 6.11 | % | ||||||||||
1 Imation Place | ||||||||||||||||
Oakdale, MN 55128 | ||||||||||||||||
Crestview Capital Master, LLC(8) | 1,563,438 | 8.38 | % | 157,328 | * | |||||||||||
Northbrook, IL 60062 | ||||||||||||||||
Juan A. Rodriguez(3) | 862,135 | 4.77 | % | 49,595 | * | |||||||||||
Tom W. Ward(3)(5) | 5,633,805 | 25.55 | % | 2,472,055 | 8.96 | % | ||||||||||
Leonard W. Busse(3) | 79,683 | * | 21,313 | * | ||||||||||||
John R. Garrett(3) | 75,355 | * | 19,835 | * | ||||||||||||
A. Laurence Jones(3) | 103,924 | * | 27,054 | * | ||||||||||||
Stephanie Smeltzer McCoy(3) | 93,217 | * | 36,347 | * | ||||||||||||
Thomas E. Pardun(3) | 85,153 | * | 23,283 | * | ||||||||||||
G. Jackson Tankersley, Jr.(3)(4) | 20,549,513 | 66.26 | % | 15,490,788 | 56.15 | % | ||||||||||
Carroll A. Wallace(3) | 642,684 | 3.59 | % | 11,784 | * | |||||||||||
Executive Officers and Directors as a group (9 persons)(6) | 28,106,909 | 79.53 | % | 18,152,052 | 65.79 | % |
* | Less than one percent. | |
(1) | This table is based upon information supplied by officers, directors and principal stockholders and by Schedules 13D and 13G, if any, filed with the SEC. Subject to footnotes below and community property laws, where applicable, each of the stockholders named has sole power to vote and dispose of the shares indicated as beneficially owned. As required by Rule 13d-3(d), each of the names indicated in the table are deemed to be the beneficial owner of shares that the person has the right to acquire beneficial ownership of within 60 days of September 1, 2006. | |
Applicable percentages are based on 17,250,112 shares outstanding on September 1, 2006, adjusted as required by Rule 13d-3(d)(1). | ||
(2) | This information is based on a Schedule 13D, dated November 1, 2005, filed with the SEC and subsequent information separately provided by Meritage Private Equity Fund, L.P. (“Meritage Fund”), private equity investment fund, and Meritage Investment Partners, LLC (“Meritage Investment”), a manager of private equity investment funds and the sole general partner of Meritage Fund. | |
Includes shares directly beneficially owned by Meritage Fund as follows: 5,883,743 shares of common stock, 7,630,859 shares of Series AA preferred stock (as-converted), 1,948,333 shares related to the conversion of 10% Convertible Subordinated Notes Payable and 2,174,334 shares of common stock issuable upon the exercise of warrants. | ||
Also includes shares owned indirectly beneficially by Meritage Investment through two other funds in which it is the sole general partner as follows: 825,303 shares of common stock, 1,072,219 shares of Series AA preferred stock (as-converted), 273,889 shares related to the conversion of 10% Convertible Subordinated Notes Payable and 305,631 shares of common |
Proxy Statement
Page 29
stock issuable upon the exercise of warrants. | ||
Meritage Fund is shown to have sole voting and dispositive power over 17,637,269 shares, representing 60.81% of the common stock. Meritage Investment is shown to have sole voting and dispositive power over all of the shares. | ||
(3) | Includes shares issuable upon the exercise of outstanding stock options that are exercisable within 60 days of September 1, 2006, as follows: Mr. Rodriguez, 812,540 shares; Mr. Ward, 3,161,750 shares; Mr. Busse, 58,370 shares; Mr. Garrett, 55,520; Mr. Jones, 76,870 shares; Ms. McCoy, 56,870 shares; Mr. Pardun, 61,870 shares; Mr. Tankersley, 57,870 shares; and Mr. Wallace, 630,900 shares. | |
(4) | Includes the shares listed for Meritage Investment Partners LLC under footnote 2, as to which Mr. Tankersley has voting and dispositive power by virtue of being a managing member of Meritage Investment Partners, LLC. Mr. Tankersley disclaims beneficial ownership of such shares. Also includes the following shares held by the following entities: Millennial Holdings LLC, 24,415 shares of common stock; 156,236 shares of Series AA preferred stock (as-converted) and 8,436 shares of common stock issuable upon the exercise of warrants; The Millennial Fund, 8,936 shares of common stock; 56,290 shares of Series AA preferred stock (as-converted) and 3,039 shares of common stock issuable upon the exercise of warrants; and Tankersley Family Limited Partnership, 11,849 shares of common stock, 70,842 shares of Series AA preferred stock (as-converted) and 3,825 shares of common stock issuable upon the exercise of warrants. Mr. Tankersley is the managing member of Millennial Holdings LLC and sole general partner of Tankersley Family Limited Partnership and may be deemed to posses voting and dispositive power over shares held by such entities. Mr. Tankersley disclaims beneficial ownership of all such shares. The Millennial Fund is not a separate legal entity and Mr. Tankersley is the direct beneficial owner of all shares held in that name. | |
(5) | Includes 1,636,509 shares of Series AA preferred stock owned directly by Mr. Ward. | |
(6) | Includes shares described in the notes above, as applicable. | |
(7) | Includes shares directly beneficially owned by Imation Corp. as follows: 1,686,811 shares of common stock, 1,599,895 shares of Series AA preferred stock (as-converted) and 836,394 shares of common stock issuable upon the exercise of warrants. | |
(8) | Includes shares directly beneficially owned by Crestview Capital Master, LLC as follows: 157,328 shares of common stock, 833,333 shares of Series AA preferred stock (as-converted), 277,777 shares related to the conversion of 10% Convertible Subordinated Notes Payable and 295,000 shares of common stock issuable upon the exercise of warrants. | |
(9) | Total voting power consists of votes of common stock actually outstanding as of September 1, 2006 and common stock issued upon conversion of Series AA preferred stock owned by the Meritage Entities and Mr. Ward pursuant to the Voting Agreement described in this proxy statement. Other holders may convert Series AA preferred stock into shares of common stock between September 1, 2006 and the record date, which conversion would change the percentage of votes at the meeting represented in this column. | |
(10) | Includes only outstanding common stock owned by the named persons or group as of September 1, 2006 and common stock issuable upon conversion of Series AA preferred Stock owned by the Meritage Entities and Mr. Ward. The Voting Agreement requires the Meritage Entities and Mr. Ward to convert their shares of Series AA preferred stock into common stock prior to the record date. |
Carroll Wallace
Corporate Secretary
[ , 2006]
Proxy Statement
Page 30
EXABYTE CORPORATION
FOR | AGAINST ABSTAIN | |||
o | o | o |
FOR | AGAINST ABSTAIN | |||
o | o | o |
FOR | AGAINST ABSTAIN | |||
o | o | o |
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT | o |
Page 1
SEE REVERSE SIDE | CONTINUED ON REVERSE SIDE | SEE REVERSE SIDE |
Page 2
Article I DEFINITIONS | 2 | |||||
1.1 | Certain Definitions | 2 | ||||
1.2 | Terms Defined Elsewhere in this Agreement | 7 | ||||
1.3 | Other Definitional and Interpretive Matters | 9 | ||||
Article II PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES | 9 | |||||
2.1 | Purchase and Sale of Assets | 9 | ||||
2.2 | Excluded Assets | 11 | ||||
2.3 | Assumption of Liabilities | 11 | ||||
2.4 | Excluded Liabilities | 12 | ||||
2.5 | Further Conveyances and Assumptions; Consent of Third Parties | 12 | ||||
2.6 | Purchase Price Allocation | 13 | ||||
2.7 | Receivables | 13 | ||||
2.8 | Senior Management Retention Plan Escrow | 13 | ||||
Article III CONSIDERATION | 13 | |||||
3.1 | Consideration | 13 | ||||
3.2 | Payment of Purchase Price | 14 | ||||
Article IV CLOSING AND TERMINATION | 14 | |||||
4.1 | Closing Date | 14 | ||||
4.2 | Termination of Agreement | 14 | ||||
4.3 | Extension of Termination Date | 15 | ||||
4.4 | Procedure upon Termination | 15 | ||||
4.5 | Effect of Termination | 16 | ||||
Article V REPRESENTATIONS AND WARRANTIES OF SELLER | 16 | |||||
5.1 | Corporate Organization; Foreign Qualification | 16 | ||||
5.2 | Corporate Authorization | 17 | ||||
5.3 | Noncontravention; Approvals and Consents | 17 | ||||
5.4 | Financial Statements | 18 | ||||
5.5 | No Undisclosed Liabilities | 18 | ||||
5.6 | Title to Purchased Assets; Sufficiency | 18 |
5.7 | Absence of Certain Changes | 18 | ||||
5.8 | Taxes | 20 | ||||
5.9 | Real Property | 21 | ||||
5.10 | Accounts Payable and Inventory | 22 | ||||
5.11 | Intellectual Property | 22 | ||||
5.12 | Material Contracts. | 24 | ||||
5.13 | Employee Benefits. | 25 | ||||
5.14 | Labor Matters | 27 | ||||
5.15 | Litigation | 28 | ||||
5.16 | Compliance with Laws; Permits | 28 | ||||
5.17 | Environmental Matters | 28 | ||||
5.18 | Insurance | 29 | ||||
5.19 | Accounts Receivable | 29 | ||||
5.20 | Personnel | 29 | ||||
5.21 | Affiliate Transactions | 30 | ||||
5.22 | Major Suppliers and Customers | 30 | ||||
5.23 | Minute Books | 30 | ||||
5.24 | Brokers and Finders; Opinion of Financial Advisor | 30 | ||||
5.25 | Subsidiaries | 30 | ||||
5.26 | SEC Documents | 31 | ||||
5.27 | Takeover Law | 31 | ||||
Article VI REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT | 31 | |||||
6.1 | Corporate Organization; Foreign Qualification | 31 | ||||
6.2 | Corporate Authorization | 31 | ||||
6.3 | Certain Legal Proceedings | 32 | ||||
6.4 | Noncontravention; Approvals and Consents | 32 | ||||
6.5 | Sufficient Funds | 32 | ||||
6.6 | Brokers and Finders | 32 | ||||
Article VII COVENANTS | 32 | |||||
7.1 | Seller Interim Operations | 32 | ||||
7.2 | Taxes | 34 | ||||
7.3 | SEC Reports | 34 | ||||
7.4 | Acquisition Proposals; Board Recommendation | 34 | ||||
7.5 | Efforts and Assistance | 36 | ||||
7.6 | Preservation of Records | 36 | ||||
7.7 | Public Announcements | 36 |
7.8 | Access to Information; Notification of Certain Matters | 37 | ||||
7.9 | Further Assurances | 38 | ||||
7.10 | Disposition of Litigation | 38 | ||||
7.11 | Confidentiality Agreement | 38 | ||||
7.12 | Stockholder Meeting; Proxy Statement | 38 | ||||
7.13 | Use of Names | 39 | ||||
7.14 | Non-Competition | 39 | ||||
7.15 | Letter of Credit | 39 | ||||
Article VIII EMPLOYEES AND EMPLOYEE BENEFITS | 39 | |||||
8.1 | Employment | 39 | ||||
8.2 | Standard Procedure | 40 | ||||
8.3 | Employee Benefits | 40 | ||||
Article IX CONDITIONS TO CLOSING | 40 | |||||
9.1 | Conditions to the Obligations of Each Party | 40 | ||||
9.2 | Conditions to the Obligations of Purchaser | 41 | ||||
9.3 | Conditions to the Obligations of Seller | 41 | ||||
Article X TAXES | 42 | |||||
10.1 | Transfer Taxes | 42 | ||||
10.2 | Cooperation on Tax Matters | 42 | ||||
Article XI MISCELLANEOUS | 42 | |||||
11.1 | Fees and Expenses | 42 | ||||
11.2 | Jurisdiction | 42 | ||||
11.3 | Amendments; No Waivers | 43 | ||||
11.4 | Governing Law | 43 | ||||
11.5 | Notices | 43 | ||||
11.6 | Severability | 44 | ||||
11.7 | Successors and Assigns | 44 | ||||
11.8 | Non-Recourse | 44 | ||||
11.9 | Guarantee of Purchaser Obligations | 44 | ||||
11.10 | Survival | 45 | ||||
11.11 | Third Party Beneficiaries | 45 | ||||
11.12 | Enforcement of Agreement | 45 | ||||
11.13 | Entire Agreement | 45 | ||||
11.14 | Authorship | 45 | ||||
11.15 | Counterparts; Effectiveness | 45 |
Schedule | Name | |
Schedule 1.1 | Excluded Contracts | |
Schedule 5.1 | Corporate Organization; Foreign Qualification | |
Schedule 5.3 | Noncontravention; Approvals and Consents | |
Schedule 5.5 | No Undisclosed Liabilities | |
Schedule 5.7 | Absence of Certain Changes | |
Schedule 5.8 | Taxes | |
Schedule 5.9 | Real Property | |
Schedule 5.10 | Accounts Payable and Inventory | |
Schedule 5.11 | Intellectual Property | |
Schedule 5.12 | Material Contracts | |
Schedule 5.13 | Employee Benefits | |
Schedule 5.14 | Labor Matters | |
Schedule 5.15 | Litigation | |
Schedule 5.16 | Compliance with Laws; Permits | |
Schedule 5.17 | Environmental Matters | |
Schedule 5.18 | Insurance | |
Schedule 5.19 | Accounts Receivable | |
Schedule 5.20 | Personnel | |
Schedule 5.21 | Affiliate Transactions | |
Schedule 5.22 | Major Suppliers and Customers | |
Schedule 5.24 | Brokers and Finders | |
Schedule 5.25 | Subsidiaries | |
Schedule 5.26 | SEC Documents | |
Schedule 7.1 | Seller Interim Operations | |
Schedule 8.3 | Employee Benefits |
Appendix A — Asset Purchase Agreement
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Term | Section | |
Agreement | Introductory Paragraph | |
Asset Acquisition Statement | 2.6 | |
Assumed Liabilities | 2.3 | |
Balance Sheet Date | 5.5 | |
Closing | 4.1 | |
Closing Date | 4.1 |
Appendix A — Purchase Agreement
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Term | Section | |
Trade Secrets | 1.1 (in Intellectual Property definition) | |
Confidentiality Agreement | 7.11 | |
Convertible Notes | Preliminary Statements | |
Copyrights | 1.1 (in Intellectual Property definition) | |
Daisytek Agreement | 2.2(i) | |
Default | 5.12(c) | |
ERISA Affiliate | 5.13(c) | |
Excluded Assets | 2.2 | |
Excluded Employee | 8.1(b) | |
Excluded Liabilities | 2.4 | |
Expense Reimbursement | 4.5(b) | |
FIRPTA Affidavit | 9.2(e) | |
Foreign Plan | 5.13(k) | |
Hitachi | Preliminary Statements | |
Hitachi Agreement | Preliminary Statements | |
Imation | Preliminary Statements | |
Imation Agreement | Preliminary Statements | |
Insurance Policies | 5.18 | |
Letter of Credit | 7.15 | |
Major Customers | 5.22 | |
Major Suppliers | 5.22 | |
Marks | 1.1 (in Intellectual Property definition) | |
Material Contracts | 5.12(a) | |
Nonassignable Assets | 2.5(c) | |
Noteholders | Preliminary Statements | |
Parent | Introductory Paragraph | |
Patents | 1.1 (in Intellectual Property definition) | |
Proxy Statement | 7.12(b) | |
Purchase Price | 3.1 | |
Purchased Assets | 2.1 | |
Purchaser | Introductory Paragraph | |
Purchaser 401(k) Plan | 8.3(d) | |
Purchaser Documents | 6.2 | |
Purchaser Plans | 8.3(a) | |
Real Property | 5.9 | |
Restricted Business | 7.14(a) | |
Restructuring Agreements | Preliminary Statements | |
Revised Statements | 2.6 | |
Sarbanes-Oxley Act | 5.26(a) | |
SEC Documents | 5.26(a) | |
Seller | Introductory Paragraph | |
Seller 401(k) Plan | 8.3(d) | |
Seller Balance Sheet | 5.5 | |
Seller Bylaws | 5.1 | |
Seller Charter | 5.1 | |
Seller Documents | 5.2 | |
Seller Employee Plans | 5.13(a) | |
Seller Marks | 7.13 | |
Seller Registered Intellectual Property | 5.11(a) | |
Seller Recommendation | 7.4(d) | |
Seller Restructuring Agreements | Preliminary Statements | |
Seller Software | 5.11(g) | |
Solectron | Preliminary Statements | |
Solectron Agreement | Preliminary Statements | |
Stockholder Approval | 5.2 |
Appendix A — Purchase Agreement
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Term | Section | |
Stockholder Meeting | 7.12(a) | |
Termination Date | 4.2(a) | |
Termination Fee | 4.5(c) | |
Total Consideration | 3.1 | |
Transfer Taxes | 10.1 | |
Transferred Employees | 8.1(a) | |
Voting Agreement | Preliminary Statements | |
Wells Fargo | 1.1 (in Credit Agreement definition) |
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2108 55th Street
Boulder, Colorado 80301
Attention: Tom Ward
Facsimile No.: (303) 417-7900
Appendix A — Asset Purchase Agreement
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Facsimile No.: +47 22830795
200 Crescent Court, Suite 300
Dallas, Texas 75201
Attention: R. Scott Cohen
Facsimile No.: (214) 746-7777
Appendix A — Asset Purchase Agreement
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Appendix A — Asset Purchase Agreement
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PURCHASER: | ||||||||||
TANDBERG DATA CORP. | ||||||||||
By: | /s/ Gudmundur Einarsson | |||||||||
Title: CEO | ||||||||||
PARENT: | ||||||||||
SOLELY FOR PURPOSES OF ARTICLE VI AND SECTION 11.9: | ||||||||||
TANDBERG DATA ASA | ||||||||||
By: | /s/ Gudmundur Einarsson | |||||||||
Title: CEO | ||||||||||
SELLER: | ||||||||||
EXABYTE CORPORATION | ||||||||||
By: | /s/ Tom Ward | |||||||||
Title: CEO and President |
Appendix A — Asset Purchase Agreement
Page 46
Boulder, CO 80301
(i) | Certain financial statements and other financial information of the Company, including the Audited Financial Statements of the Company for each of the years in the two year period ended December 31, 2005 as filed by the Company with the Securities and Exchange Commission (the “SEC”) on Form 10-K, and internal unaudited financial statements for the Company for the quarters ended March 31, 2006 and June 30, 2006 as filed by the Company with the SEC on Form 10-Q; | ||
(ii) | Company press releases and form 8-K’s as provided by the Company and other Company filings with the SEC during the past 2 years; |
Appendix B — Opinion of Financial Advisor
Page 1
(iii) | Form 8-K dated May 3, 2004 that includes the Certificate of Designation of Preferences, Rights and Limitations of Series AA Convertible Preferred Stock; | ||
(iv) | Certain internal analyses compiled by Company’s Chief Financial Officer and controller regarding debt payment schedules and cash projections; | ||
(v) | The reported prices and trading activity of the Company’s Common Stock; | ||
(vi) | Certain other internal information, primarily financial in nature, including projections concerning the business and operations of the Company furnished to us by the Company for purposes of our analysis; | ||
(vii) | Certain publicly available information with respect to certain other companies that we believe to be comparable to the Company (due to industry focus or financial condition), and the trading markets for such other companies’ securities; | ||
(viii) | Certain publicly available information concerning the nature and terms of certain other transactions that we considered relevant to our inquiry; | ||
(ix) | Discussions with the Chief Executive Officer, Chief Financial Officer and Controller of the Company regarding, among other things, the business and prospects of the Company; | ||
(x) | the solicitations of interest and other results of the marketing of the Company; and | ||
(xi) | Other matters we believe relevant to our inquiry |
Appendix B — Opinion of Financial Advisor
Page 2
Very truly yours, | ||
St. Charles Capital, LLC |
Appendix B — Opinion of Financial Advisor
Page 3
OF EXABYTE CORPORATION
TO
CERTIFICATE OF INCORPORATION
OF
EXABYTE CORPORATION
General Corporation Law
1. | The name of the corporation (hereinafter called the “Corporation”) is Exabyte Corporation. | ||
2. | The Certificate of Incorporation of the Corporation, as filed with the Secretary of State of the State of Delaware on June 5, 1985 is hereby amended by deleting Article FIRST in its entirety and by inserting the following new Article FIRST in lieu thereof: |
3. | The amendment of the Certificate of Incorporation herein certified has been duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. |
Name: Tom W. Ward | ||
Title: President and Chief Executive Officer |
for the fiscal year ended December 31, 2005
for the quarter ended June 30, 2006
• | Increase the capacity and performance of tape storage products, and | ||
• | Reduce the price of storage on tape compared to other media. |
1
2
Year | % of Revenue | |||
2003 | 30 | % | ||
2004 | 32 | % | ||
2005 | 23 | % |
Year | % of Revenue | |||
2003 | 14 | % | ||
2004 | 24 | % | ||
2005 | 37 | % |
3
430 convenient rack – mount accommodated data storage for distributed networking environments 30 catridges, up to 4.5 tb (compressed ) 4 vxa – 2 packet drives, up to 173 gb/hr ( compressed ultra 2 lvd scsi x tape :x23, x 101 , x61 |
vxa – 320 packet loader 1x 10 1 u vxa – 320 automated backup solution with best in class rack data density, and economy,l 10 catridges, up to 3.2 tb (compressed) up to 66.4 gb / hr ( compressed) hd lvd scsi 3 ultra 160 x taPE ; x 23, X 101, X 51 |
VXA – 2 TO VXA – 320 packet loader upgrade kit double the speed and capacity of existing vxa –2 packet loader 1x 10 u instatous in minutes. Double vxa-2 packet loader 1x10 1u up to 3.2 tb ( capacity ( compressed) up to 86.4 gb/hr ( compressed) hd lvd scsi 3 ultra 160 x tape x 23 , x101 , x61 |
VXA – 2 Packet Loader 1x 10 1U VXA – 2 automated tape backup in a space – saving 1u rack mount design 10 catridges, up to 1.6 TB(compressed) Up to 43.2 hour ( compressed) Ultra2 LVD SCSI and FireWire x Tape: x23, x101 , x61 |
VXA –2 Packet Loader 1x7 Affordable desktop automation – an ideal first step into automated data storage 7 cartridges, up to 1.1 TB(compressed) Ultra 2 LVD SCSI x Tape : X 23 , x101 x61 |
VXA – 320 Packet Drive Latest Generation of products built around the disaster tested VXA Packet Technology 160 GB (native 320 GB(compressed) 6MB/sec 21 GB/hr (native) LVD, IDEIATAPI and Fire Wire X Tape: X23, X101, X61 |
VXA –1 Packet Drive Four times the capacity and twice the speed of DDS –4 80 GB native 160 GB (compressed) 6 MB/sec 21 GB/hr ( native) LDV, IDE/ATAPI and Fire Wire VXATape : V17, V10 ,V6 |
VXA –1 Packet Drive Replacement technology of choice for end-of-life DDS drives 33 GB(compressed) 3MB/sec 10.8 GB/hr (native LVD,IDE/ATAPI and FireWire VXATAPE: V17,V10,v6 |
Magnum 6x60 Expandable, feature-rich enterprise class library at midrange pricing office with LTO-1, LTO-2 or LTO-3 drives 143 cartridges, up to 28.6 TB WITH lto-1 57.2 TB WITH LTO-2 114.4 TB with lto-3 8 lto –1/ lto-2/lto-3 drives 864 gb/hr lto-1 2tb/hr lto-1 2tb/hr lto-2 4.6 tb/hr lto-3 ultra 2 lvd scsi fibre channel ultrum lto –1, lto –2, & lto-3 data cartridges. |
magnum 6x60 Expandable, feature-rich enterprise-class library at midrange pricing. Offered with LTO-1,LTO-2 or lto-3 drives 60 cartridges, up to 12 tb with lto-1 24 tb with lto-2 48 tb with lto-3 6 lto –1 lto-2/ lto-3 drives 648 gb/hr lto-1 1.5 tb/hr lto –2 3.4 tb/hr lto-3 ultra 2 lvd scsi fibre channel ultrium lto-1, lto-2 & lto –3 data cartridges |
221l the most cost-effective lto automated tape library in its class. Offered with lto-1, lto-2 or lto-3 drives. 21 cartridges, up to 4.2 tb with lto-1 8.4 tb with lto-2 16.8 tb with lto-3, 2 lto drives. up to 216 gb.hr with lto –1 , 504 gb/hr with lto-2 1.1 tb/hr with lto-3 / ultra 2 lvd scsi fibre channel Exabyte lto-1, lto-2, or lto-3 exapaks. |
110l compact, affordable lto alternative to standalone tape drives. Offered with lto-1, lto-2, or lto-3 drives 10 catridges, up to 2 tb with lto –1, 4 tb with lto-2, 8 tb with lto-3 lto drives, up to 108 gb/hr with lto-1 252 gb/hr with lto-2 576 gb/hr with lto-3 ultra 2 lvd scsi exabyte lto-1,lto-2 or lto-3 exapaks. |
Magnum 1x7 ultra-compact, most affordable and feature rich lto autoloader on the market. offered with lto –2 or lto –3 drives , 7 cateridges, 2.8 tb with lto-2 5.6 tb with lto – 3 lto drive. 187 gb/ hr with lto –2 576 gb/hr with lto –3 ultra 2 lvd scsi ultrium lto –1 , lto –2 or lto –3 data cartridges |
magnum tape drives (Lto –2) Exabyte’s entry leval, high performance1/2* tape drive, delivering enterprise class capacity and throughput 200 gb ( native ) lto drive. 400 gb/ compressed) lto drive. 252 gb/ hr ultra – 160 lvd scsi ultrium lto –1 & lto –2 data cartridges |
Magnum tape drive lto –3 exabyte’s entry leval, high performance1/2 tape drive, delivering true enterprise class capacity and throughput 400 gb(native) 800 gb (compressed) lto drive. 578 gb/hr ultra –160 lvd scsi ultrum lto –1 lto –2 and lto –3 data cartridges |
4
Year | % of Revenue | |||
2003 | 47 | % | ||
2004 | 40 | % | ||
2005 | 39 | % |
5
• | manufacturing of hardware and media products; | ||
• | repair and onsite service, including warranty services; | ||
• | world-wide technical support operations which includes response to customer inquiries; and | ||
• | distribution of our media products to our customers and end-users. |
Year | % of Revenue | |||
2003 | 10 | % | ||
2004 | 7 | % | ||
2005 | 6 | % |
6
Year | % of Revenue | |||
2003 | 20 | % | ||
2004 | 24 | % | ||
2005 | 23 | % |
• | distribution; | ||
• | financial terms and conditions; | ||
• | pre-sales, sales and/or post-sales system upgrades; or | ||
• | other value-added products and/or services. |
Year | % of Revenue | |||
2003 | 64 | % | ||
2004 | 70 | % | ||
2005 | 73 | % |
7
Year | % of Revenue | |||
2003 | 31 | % | ||
2004 | 29 | % | ||
2005 | 30 | % |
2003 | 2004 | 2005 | ||||||||||
Imation | 9 | % | 40 | % | 41 | % | ||||||
Tech Data | 16 | % | 11 | % | 16 | % | ||||||
Ingram Micro | 16 | % | 9 | % | 12 | % | ||||||
Fujitsu Siemens | 6 | % | 9 | % | 10 | % | ||||||
IBM | 7 | % | 13 | % | 9 | % |
• | Matsushita Electric Industrial Co. Ltd. (“MEI”); | ||
• | TDK Corporation (“TDK”); and | ||
• | Sony Corporation (“Sony”). |
8
9
• | timely development and introduction; | ||
• | customer acceptance; | ||
• | adequacy of supply capacity; | ||
• | customer transition to these future products; | ||
• | OEM qualification and adoption; and | ||
• | media availability. |
• | Optical Disk | ||
• | Optical Tape | ||
• | DVD | ||
• | Holographic Storage | ||
• | Magneto-optics | ||
• | Magnetic Disk |
10
Business Group | Employees | |||
Corporate and Business | 34 | |||
Engineering, Research and Development | 153 | |||
Customer Unit | 58 | |||
Sales | 73 |
Business Group | Employees | |||
Corporate and Business | 35 | |||
Engineering, Research and Development | 62 | |||
Customer Unit | 52 | |||
Sales | 50 |
Business Group | Employees | |||
Corporate and Business | 30 | |||
Engineering, Research and Development | 67 | |||
Customer Unit | 37 | |||
Sales | 48 |
Business Group | Employees | |||
Corporate and Business | 29 | |||
Engineering, Research and Development | 66 | |||
Customer Unit | 25 | |||
Sales | 42 |
11
12
• | reduced intellectual property protections; | ||
• | foreign government regulations; | ||
• | foreign tax regulations; | ||
• | foreign exchange control regulations; | ||
• | import/export restrictions; | ||
• | foreign economic and/or political instability; and | ||
• | tariffs, trade barriers and other trade restrictions by the U.S. government in products or components shipped from or to foreign sources. |
13
• | delivering components on schedule; | ||
• | manufacturing a high volume of components; | ||
• | maintaining the highest possible product quality when manufacturing; and | ||
• | managing manufacturing costs. |
14
• | rapid development of tape drive technologies; | ||
• | customer and OEM adoption of VXA technology and our LTO automation products; | ||
• | compatibility of tape drives to other data storage products; | ||
• | data storage density and transfer rate; | ||
• | customer confidence and familiarity with our products and technologies; | ||
• | product reliability; and | ||
• | price. |
• | delay product development schedules; |
• | interrupt team continuity; |
• | result in losing proprietary information to competitors or other third parties; |
• | increase our administrative costs; and |
• | adversely affect our results of operations. |
15
OFFICE TYPE | DOMESTIC | INTERNATIONAL | ||
R&D & Mfg. | Boulder, CO | |||
Procurement | Boulder, CO | Tokyo, Japan | ||
Service | Boulder, CO | Singapore | ||
Sales & Support | Boulder, CO | Singapore | ||
Frankfurt, Germany | ||||
Shanghai, China | ||||
Hong Kong, China | ||||
Paris, France | ||||
Beijing, China | ||||
Sydney, Australia |
16
AND RELATED STOCKHOLDER MATTERS
Fiscal Year | High | Low | ||||||
2004 | ||||||||
First Quarter | $ | 17.60 | $ | 7.00 | ||||
Second Quarter | 9.70 | 7.10 | ||||||
Third Quarter | 8.60 | 4.30 | ||||||
Fourth Quarter | 7.20 | 3.00 | ||||||
2005 | ||||||||
First Quarter | $ | 5.40 | $ | 2.60 | ||||
Second Quarter | 4.40 | 1.80 | ||||||
Third Quarter | 3.20 | 1.70 | ||||||
Fourth Quarter | 2.95 | 0.75 | ||||||
2006 | ||||||||
First Quarter (through March 1, 2006) | $ | 1.27 | $ | 0.75 |
17
18
Number of securities | ||||||||||||
remaining available for | ||||||||||||
future issuance under | ||||||||||||
Number of securities to | Weighted-average | equity compensation | ||||||||||
be issued upon exercise | exercise price of | plans (excluding | ||||||||||
of outstanding options, | outstanding options, | securities reflected in | ||||||||||
warrants and rights | warrants and rights | column (a)) | ||||||||||
Plan Category | (a) | (b) | (c) | |||||||||
Equity compensation plans approved by security holders (1) | 2,659,265 | $ | 8.7884 | 1,087,720 | ||||||||
Equity compensation plans not approved by security holders (2) | 7,857,219 | $ | 1.7880 | 1,312,862 | ||||||||
Total | 10,516,484 | $ | 3.5582 | 2,400,582 |
(1) | Amount includes shares issued under a stock option plan approved by stockholders on July 30, 2002 for the issuance of options to Mr. Ward of up to 700,000 shares and the 2004 Employee Stock Option Plan, which was approved by stockholders on June 11, 2004. | |
(2) | Amount includes the 1997 Non-Officer Stock Option Plan, under which options may be granted to employees who are not officers or directors of the Company, the stock option plan approved by the Board of Directors in 2003 for the issuance of options to Mr. Ward for an additional 700,000 shares, and the 2005 Employee Stock Option Plan, which was approved by the Board of Directors on December 1, 2005. A description of these compensation plans not approved by stockholders is contained below in Item 11 and Note 5 to the consolidated financial statements. |
19
20
As of or For Fiscal Years Ended | ||||||||||||||||||||
Dec. 31, 2004 | ||||||||||||||||||||
Dec. 29, 2001 | Dec. 28, 2002 | Jan. 3, 2004 | (Restated)(1) | Dec. 31, 2005 | ||||||||||||||||
Consolidated Statements of Operations Data: | ||||||||||||||||||||
Net revenue | $ | 158,438 | $ | 133,191 | $ | 94,169 | $ | 102,051 | $ | 90,968 | ||||||||||
Cost of goods sold | 132,143 | 110,948 | 78,576 | 76,997 | 65,395 | |||||||||||||||
Gross profit | 26,295 | 22,243 | 15,593 | 25,054 | 25,573 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Selling, general and administrative | 36,759 | 27,316 | 30,084 | 23,783 | 20,913 | |||||||||||||||
Engineering, research and development | 25,184 | 23,713 | 9,826 | 9,244 | 9,395 | |||||||||||||||
Lease terminations and related costs | — | — | 4,707 | — | — | |||||||||||||||
Total operating expenses | 61,943 | 51,029 | 44,617 | 33,027 | 30,308 | |||||||||||||||
Loss from operations (2) | (35,648 | ) | (28,786 | ) | (29,024 | ) | (7,973 | ) | (4,735 | ) | ||||||||||
Other income (expense): | ||||||||||||||||||||
Gain from sale of investment | 1,719 | 1,500 | — | — | — | |||||||||||||||
Sale of technology | — | 1,200 | — | — | — | |||||||||||||||
Interest income | 86 | 27 | — | — | — | |||||||||||||||
Interest expense (4) | (1,715 | ) | (2,051 | ) | (12,859 | ) | (1,581 | ) | (1,960 | ) | ||||||||||
Change in estimated fair value of derivative financial instruments | — | — | — | 35,074 | (3,807 | ) | ||||||||||||||
Other financing costs | — | — | — | (1,330 | ) | (1,964 | ) | |||||||||||||
Gain (loss) on foreign currency translation | 124 | (803 | ) | (1,851 | ) | (105 | ) | 793 | ||||||||||||
Litigation settlements, net | — | — | — | — | 75 | |||||||||||||||
Other, net | 338 | (561 | ) | 130 | (208 | ) | (312 | ) | ||||||||||||
Total other income (expense) | 552 | (688 | ) | (14,580 | ) | 31,850 | (7,175 | ) | ||||||||||||
Earnings (loss) before income taxes and equity in loss of investee | (35,096 | ) | (29,474 | ) | (43,604 | ) | 23,877 | (11,910 | ) | |||||||||||
Income tax (expense) benefit (3) | 6 | 402 | (88 | ) | (47 | ) | (160 | ) | ||||||||||||
Equity in loss of investee | (343 | ) | — | — | — | — | ||||||||||||||
Net earnings (loss) | (35,433 | ) | (29,072 | ) | (43,692 | ) | 23,830 | (12,070 | ) | |||||||||||
Deemed dividends: | ||||||||||||||||||||
Beneficial conversion of preferred stock | — | (4,557 | ) | (556 | ) | — | — | |||||||||||||
Exchange of preferred stock | — | — | — | (4,225 | ) | — | ||||||||||||||
Issuance of Series AA convertible preferred stock and amortization of related discount | — | — | — | (45,404 | ) | (990 | ) | |||||||||||||
Net loss available to common stockholders | $ | (35,433 | ) | $ | (33,629 | ) | $ | (44,248 | ) | $ | (25,799 | ) | $ | (13,060 | ) | |||||
Basic and diluted loss per share | $ | (14.73 | ) | $ | (10.18 | ) | $ | (6.96 | ) | $ | (2.44 | ) | $ | (1.10 | ) | |||||
Weighted average common shares used in calculation of basic and diluted loss per share | 2,405 | 3,302 | 6,362 | 10,583 | 11,912 | |||||||||||||||
21
As of or For Fiscal Years Ended | ||||||||||||||||||||
Dec. 31, 2004 | ||||||||||||||||||||
Dec. 29, 2001 | Dec. 28, 2002 | Jan. 3, 2004 | (Restated)(1) | Dec. 31, 2005 | ||||||||||||||||
Consolidated Balance Sheets Data: | ||||||||||||||||||||
Working capital (deficit) | $ | 11,266 | $ | (5,199 | ) | $ | (6,561 | ) | $ | 2,988 | $ | (1,042 | ) | |||||||
Total assets | 83,230 | 72,125 | 46,129 | 39,979 | 34,715 | |||||||||||||||
Notes payable, less current portion | — | — | 13,960 | 9,183 | 8,898 | |||||||||||||||
Derivative financial instruments | — | — | — | 11,165 | 27,060 | |||||||||||||||
Deferred revenue and other non-current liabilities, less current portions | 9,594 | 3,424 | 18,419 | 16,443 | 5,503 | |||||||||||||||
Convertible preferred stock | — | — | — | 37,941 | 38,931 | |||||||||||||||
Stockholders’ equity (deficit) | 24,754 | 4,532 | (28,416 | ) | (60,858 | ) | (70,891 | ) | ||||||||||||
Consolidated Cash Flow Data: | ||||||||||||||||||||
Net cash provided (used) by operating activities | $ | (11,913 | ) | $ | (13,267 | ) | $ | 23,258 | $ | (13,357 | ) | $ | (4,880 | ) | ||||||
Net cash provided (used) by investing activities | 2,828 | (2,054 | ) | (2,393 | ) | (1,761 | ) | (1,855 | ) | |||||||||||
Net cash provided (used) by financing activities | 8,123 | 13,788 | (14,550 | ) | 8,583 | 6,721 |
(1) | Amounts as of and for the year ended December 31, 2004 are as restated, as discussed more fully in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” | |
(2) | The Company recorded restructuring charges in 2001 and 2002 totaling $498,000 and $4,791,000, respectively, and $549,000, $251,000 and $470,000 of charges relating to workforce reductions in 2003, 2004 and 2005, respectively. See Note 10 to the Consolidated Financial Statements for information regarding workforce reduction charges included in loss from operations in 2003, 2004 and 2005. | |
(3) | The Company has recorded a valuation allowance equal to total deferred tax assets as of and for all periods presented. See Note 9 to the Consolidated Financial Statements for information on income tax expense or benefit and net operating loss carry forwards. | |
(4) | Interest expense in 2003 includes $10,146,000 of stock-based interest expense as discussed in Note 4 to the Consolidated Financial Statements |
22
SUPPLEMENTARY FINANCIAL INFORMATION
Three Months Ended | ||||||||||||||||||||||||||||||||
June 30, | September 30, | December 31, | ||||||||||||||||||||||||||||||
March 31, | 2004 | 2004 | 2004 | |||||||||||||||||||||||||||||
2004 | (Restated)(1) | (Restated)(1) | (Restated)(1) | |||||||||||||||||||||||||||||
$ | % | $ | % | $ | % | $ | % | |||||||||||||||||||||||||
Net revenue | $ | 26,139 | 100.0 | $ | 26,620 | 100.0 | $ | 23,566 | 100.0 | $ | 25,726 | 100.0 | ||||||||||||||||||||
Cost of goods sold | 20,053 | 76.7 | 19,173 | 72.0 | 18,604 | 78.9 | 19,167 | 74.5 | ||||||||||||||||||||||||
Gross profit | 6,086 | 23.3 | 7,447 | 28.0 | 4,962 | 21.1 | 6,559 | 25.5 | ||||||||||||||||||||||||
Operating expenses: (2) | ||||||||||||||||||||||||||||||||
Selling, general and administrative | 6,069 | 23.2 | 6,064 | 22.8 | 6,236 | 26.5 | 5,414 | 21.0 | ||||||||||||||||||||||||
Engineering, research and development | 2,130 | 8.2 | 2,513 | 9.4 | 2,240 | 9.5 | 2,361 | 9.2 | ||||||||||||||||||||||||
Total operating expenses | 8,199 | 31.4 | 8,577 | 32.2 | 8,476 | 36.0 | 7,775 | 30.2 | ||||||||||||||||||||||||
Loss from operations | (2,113 | ) | (8.1 | ) | (1,130 | ) | (4.2 | ) | (3,514 | ) | (14.9 | ) | (1,216 | ) | (4.7 | ) | ||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||||||||
Interest expense | (528 | ) | (2.0 | ) | (426 | ) | (1.6 | ) | (284 | ) | (1.2 | ) | (343 | ) | (1.3 | ) | ||||||||||||||||
Change in estimated fair value of derivative financial instruments | — | — | (3,961 | ) | (14.9 | ) | 30,387 | 128.9 | 8,648 | 33.6 | ||||||||||||||||||||||
Other financing costs | — | — | (1,330 | ) | (5.0 | ) | — | — | — | — | ||||||||||||||||||||||
Gain (loss) on foreign currency translation | (603 | ) | (2.3 | ) | 1,091 | 4.1 | 72 | .3 | (665 | ) | (2.6 | ) | ||||||||||||||||||||
Other, net | (28 | ) | (0.1 | ) | — | — | (149 | ) | (0.5 | ) | (32 | ) | (0.1 | ) | ||||||||||||||||||
Total other income (expense) | (1,159 | ) | (4.4 | ) | (4,626 | ) | (17.4 | ) | 30,026 | 127.5 | 7,608 | 29.6 | ||||||||||||||||||||
Loss before income taxes | (3,272 | ) | (12.5 | ) | (5,756 | ) | (21.6 | ) | 26,512 | 112.6 | 6,392 | 24.9 | ||||||||||||||||||||
Income tax (expense) benefit | (38 | ) | (0.2 | ) | 9 | — | (5 | ) | (0.1 | ) | (12 | ) | (0.1 | ) | ||||||||||||||||||
Net earnings (loss) | (3,310 | ) | (12.7 | ) | (5,747 | ) | (21.6 | ) | 26,507 | 112.5 | 6,380 | 24.8 | ||||||||||||||||||||
Deemed dividends: | ||||||||||||||||||||||||||||||||
Exchange of preferred stock | — | — | (4,225 | ) | (15.9 | ) | — | — | — | — | ||||||||||||||||||||||
Issuance of Series AA convertible preferred stock and amortization of related discount | — | — | (45,024 | ) | (169.1 | ) | (181 | ) | (0.8 | ) | (199 | ) | (0.8 | ) | ||||||||||||||||||
Net earnings (loss) available to common stockholders | $ | (3,310 | ) | (12.7 | ) | $ | (54,996 | ) | (206.6 | ) | $ | 26,326 | 111.7 | $ | 6,181 | 24.0 | ||||||||||||||||
Basic earnings (loss) per share | $ | (0.34 | ) | $ | (5.12 | ) | $ | 2.41 | $ | 0.56 | ||||||||||||||||||||||
Diluted loss per share | $ | (0.34 | ) | $ | (5.12 | ) | $ | (0.24 | ) | $ | (0.14 | ) | ||||||||||||||||||||
23
Three Months Ended | ||||||||||||||||||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||||||||||||||||||
2005 | 2005 | 2005 | 2005 | |||||||||||||||||||||||||||||
(Restated)(1) | (Restated)(1) | (Restated)(1) | ||||||||||||||||||||||||||||||
$ | % | $ | % | $ | % | $ | % | |||||||||||||||||||||||||
Net revenue | $ | 24,623 | 100.0 | $ | 23,776 | 100.0 | $ | 21,306 | 100.0 | $ | 21,263 | 100.0 | ||||||||||||||||||||
Cost of goods sold | 17,455 | 70.9 | 16,708 | 70.3 | 15,484 | 72.7 | 15,748 | 74.1 | ||||||||||||||||||||||||
Gross profit | 7,168 | 29.1 | 7,068 | 29.7 | 5,822 | 27.3 | 5,515 | 25.9 | ||||||||||||||||||||||||
Operating expenses: (2) | ||||||||||||||||||||||||||||||||
Selling, general and administrative | 5,501 | 22.3 | 5,437 | 22.8 | 5,555 | 26.1 | 4,420 | 20.8 | ||||||||||||||||||||||||
Engineering, research and development | 2,452 | 10.0 | 2,520 | 10.6 | 2,316 | 10.8 | 2,107 | 9.9 | ||||||||||||||||||||||||
Total operating expenses | 7,953 | 32.3 | 7,957 | 33.4 | 7,871 | 36.9 | 6,527 | 30.7 | ||||||||||||||||||||||||
Loss from operations | (785 | ) | (3.2 | ) | (889 | ) | (3.7 | ) | (2,049 | ) | (9.6 | ) | (1,012 | ) | (4.8 | ) | ||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||||||||
Interest expense | (402 | ) | (1.6 | ) | (353 | ) | (1.5 | ) | (387 | ) | (1.8 | ) | (818 | ) | (3.8 | ) | ||||||||||||||||
Change in estimated fair value of derivative financial instruments | 5,099 | 20.7 | (4,311 | ) | (18.1 | ) | (25,972 | ) | (121.9 | ) | 21,377 | 100.5 | ||||||||||||||||||||
Other financing costs | — | — | — | — | — | — | (1,964 | ) | (9.2 | ) | ||||||||||||||||||||||
Gain on foreign currency translation | 295 | 1.2 | 198 | 0.7 | 200 | 0.9 | 100 | 0.5 | ||||||||||||||||||||||||
Litigation settlements | — | — | (1,125 | ) | (4.7 | ) | — | — | 1,200 | 5.6 | ||||||||||||||||||||||
Other, net | (31 | ) | (0.1 | ) | (33 | ) | (0.1 | ) | (54 | ) | (0.2 | ) | (193 | ) | (0.9 | ) | ||||||||||||||||
Total other income (expense) | 4,961 | 20.2 | (5,624 | ) | (23.7 | ) | (26,213 | ) | (123.0 | ) | 19,702 | 92.7 | ||||||||||||||||||||
Earnings (loss) before income taxes | 4,176 | 17.0 | (6,513 | ) | (27.4 | ) | (28,262 | ) | (132.6 | ) | 18,690 | 87.9 | ||||||||||||||||||||
Income tax expense | (8 | ) | (0.1 | ) | (5 | ) | — | (6 | ) | (0.1 | ) | (141 | ) | (0.7 | ) | |||||||||||||||||
Net earnings (loss) | 4,168 | 16.9 | (6,518 | ) | (27.4 | ) | (28,268 | ) | (132.7 | ) | 18,549 | 87.2 | ||||||||||||||||||||
Deemed dividend related to issuance of Series AA convertible preferred stock and amortization of related discount | (217 | ) | (0.9 | ) | (237 | ) | (1.0 | ) | (257 | ) | (1.2 | ) | (279 | ) | (1.3 | ) | ||||||||||||||||
Net earnings (loss) available to common stockholders | $ | 3,951 | 16.0 | $ | (6,755 | ) | (28.4 | ) | $ | (28,525 | ) | (133.9 | ) | $ | 18,270 | 85.9 | ||||||||||||||||
Basic earnings (loss) per share | $ | 0.35 | $ | (0.59 | ) | $ | (2.44 | ) | $ | 1.37 | ||||||||||||||||||||||
Diluted loss per share | $ | (0.06 | ) | $ | (0.59 | ) | $ | (2.44 | ) | $ | (0.05 | ) | ||||||||||||||||||||
(1) | Amounts are as restated, as discussed more fully in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” | |
(2) | See Note 10 to the Consolidated Financial Statements for information regarding workforce reduction charges included in loss from operations in 2004 and 2005. |
24
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
25
26
27
28
Fiscal Years Ended | ||||||||||||||||||||||||||||||||
January 3, 2004 | December 31, 2004 (1) | December 31, 2005 | ||||||||||||||||||||||||||||||
% | % | |||||||||||||||||||||||||||||||
% of | Increase | % of | Increase | % of | ||||||||||||||||||||||||||||
$ | Revenue | (decrease) | $ | Revenue | (decrease) | $ | Revenue | |||||||||||||||||||||||||
Net revenue | $ | 94,169 | 100.0 | 8.4 | $ | 102,051 | 100.0 | (10.9 | ) | $ | 90,968 | 100.0 | ||||||||||||||||||||
Cost of goods sold | 78,576 | 83.4 | (2.0 | ) | 76,997 | 75.4 | (15.1 | ) | 65,395 | 71.9 | ||||||||||||||||||||||
Gross profit | 15,593 | 16.6 | 60.7 | 25,054 | 24.6 | 2.1 | 25,573 | 28.1 | ||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||
Selling, general and administrative | 30,084 | 31.9 | (20.9 | ) | 23,783 | 23.3 | (12.1 | ) | 20,913 | 23.0 | ||||||||||||||||||||||
Engineering, research and development | 9,826 | 10.4 | (5.9 | ) | 9,244 | 9.1 | 1.6 | 9,395 | 10.3 | |||||||||||||||||||||||
Lease terminations and related costs | 4,707 | 5.0 | (100.0 | ) | — | — | — | — | — | |||||||||||||||||||||||
Total operating expenses | 44,617 | 47.3 | (26.0 | ) | 33,027 | 32.4 | (8.2 | ) | 30,308 | 33.3 | ||||||||||||||||||||||
Loss from operations | (29,024 | ) | (30.7 | ) | 72.5 | (7,973 | ) | (7.8 | ) | 40.6 | (4,735 | ) | (5.2 | ) | ||||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||||||||
Interest expense | (12,859 | ) | (13.7 | ) | 87.7 | (1,581 | ) | (1.5 | ) | (24.0 | ) | (1,960 | ) | (2.2 | ) | |||||||||||||||||
Change in estimated fair value of derivative financial instruments | — | — | 100.0 | 35,074 | 34.3 | (110.9 | ) | (3,807 | ) | (4.2 | ) | |||||||||||||||||||||
Other financing costs | — | — | 100.0 | (1,330 | ) | (1.3 | ) | (48.0 | ) | (1,964 | ) | (2.2 | ) | |||||||||||||||||||
Gain (loss) on foreign currency translation | (1,851 | ) | (2.0 | ) | 94.3 | (105 | ) | (0.1 | ) | 855.2 | 793 | 0.9 | ||||||||||||||||||||
Litigation settlements, net | — | — | — | — | — | 100.0 | 75 | 0.1 | ||||||||||||||||||||||||
Other, net | 130 | 0.1 | (259.2 | ) | (208 | ) | (0.2 | ) | (49.5 | ) | (312 | ) | (0.3 | ) | ||||||||||||||||||
Total other income (expense) | (14,580 | ) | (15.6 | ) | 318.5 | 31,850 | 31.2 | (122.6 | ) | (7,175 | ) | (7.9 | ) | |||||||||||||||||||
Earnings (loss) before income taxes | (43,604 | ) | (46.3 | ) | 154.8 | 23,877 | 23.4 | (149.9 | ) | (11,910 | ) | (13.1 | ) | |||||||||||||||||||
Income tax expense | (88 | ) | (0.1 | ) | 46.6 | (47 | ) | — | (240.4 | ) | (160 | ) | (0.2 | ) | ||||||||||||||||||
Net earnings (loss) | (43,692 | ) | (46.4 | ) | 154.6 | 23,830 | 23.4 | (150.7 | ) | (12,070 | ) | (13.3 | ) | |||||||||||||||||||
Deemed dividends: | ||||||||||||||||||||||||||||||||
Beneficial conversion of preferred stock | (556 | ) | (0.6 | ) | (100.0 | ) | — | — | — | — | — | |||||||||||||||||||||
Exchange of preferred stock | — | — | 100.0 | (4,225 | ) | (4.1 | ) | 100.0 | — | — | ||||||||||||||||||||||
Issuance of Series AA convertible preferred stock and amortization of related discount | — | — | (100.0 | ) | (45,404 | ) | (44.5 | ) | 97.8 | (990 | ) | (1.1 | ) | |||||||||||||||||||
Net loss available to common stockholders | $ | (44,248 | ) | (47.0 | ) | 143.2 | $ | (25,799 | ) | (25.2 | ) | 49.3 | $ | (13,060 | ) | (14.4 | ) | |||||||||||||||
Basic and diluted loss per share | $ | (6.96 | ) | 126.0 | $ | (2.44 | ) | 54.9 | $ | (1.10 | ) | |||||||||||||||||||||
(1) | Amounts are as restated, as discussed more fully herein and in Note 8 to the consolidated financial statements. |
29
Fiscal Year Ended | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
Drives | $ | 28,415 | $ | 32,666 | $ | 20,685 | ||||||
Automation | 13,444 | 24,036 | 33,431 | |||||||||
Media | 44,457 | 41,146 | 35,705 | |||||||||
Service and other | 9,077 | 7,413 | 5,355 | |||||||||
Sales allowances | (1,224 | ) | (3,210 | ) | (4,208 | ) | ||||||
$ | 94,169 | $ | 102,051 | $ | 90,968 | |||||||
Fiscal Year Ended | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
Drives | 30.2 | % | 32.0 | % | 22.7 | % | ||||||
Automation | 14.3 | 23.5 | 36.8 | |||||||||
Media | 47.2 | 40.3 | 39.2 | |||||||||
Service and other | 9.6 | 7.3 | 5.9 | |||||||||
Sales allowances | (1.3 | ) | (3.1 | ) | (4.6 | ) | ||||||
100.0 | % | 100.0 | % | 100.0 | % | |||||||
Fiscal Year Ended | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
VXA | $ | 31,974 | $ | 58,193 | $ | 49,337 | ||||||
Legacy | 52,007 | 28,200 | 17,721 | |||||||||
LTO | 7,962 | 12,259 | 23,915 | |||||||||
Other, non-allocable | 2,226 | 3,399 | (5 | ) | ||||||||
$ | 94,169 | $ | 102,051 | $ | 90,968 | |||||||
Fiscal Year Ended | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
VXA | 34.0 | % | 57.0 | % | 54.2 | % | ||||||
Legacy | 55.2 | 27.6 | 19.5 | |||||||||
LTO | 8.4 | 12.0 | 26.3 | |||||||||
Other, non-allocable | 2.4 | 3.4 | — | |||||||||
100.0 | % | 100.0 | % | 100.0 | % | |||||||
30
31
Fiscal Year Ended | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
Distributor/Reseller | 68.5 | % | 70.0 | % | 73.0 | % | ||||||
OEM | 20.4 | 24.3 | 23.1 | |||||||||
End user and other | 11.1 | 5.7 | 3.9 | |||||||||
100.0 | % | 100.0 | % | 100.0 | % | |||||||
Fiscal Year Ended | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
United States | 69.1 | % | 71.2 | % | 69.6 | % | ||||||
Europe | 22.7 | 22.8 | 26.5 | |||||||||
Asia Pacific | 7.7 | 4.5 | 3.5 | |||||||||
Other | 0.5 | 1.5 | 0.4 | |||||||||
100.0 | % | 100.0 | % | 100.0 | % | |||||||
32
Fiscal Year Ended | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
Imation | 8.8 | % | 39.8 | % | 40.6 | % | ||||||
Tech Data | 16.2 | 10.5 | 16.1 | |||||||||
Ingram Micro | 16.0 | 9.0 | 11.7 | |||||||||
Fujitsu Siemens | 5.9 | 8.7 | 9.8 | |||||||||
IBM | 6.8 | 12.9 | 8.5 |
33
34
35
36
37
As of or for the three months ended | ||||||||||||||||||||||||
June 30, 2004 | September 30, 2004 | December 31, 2004 | ||||||||||||||||||||||
As reported | As restated | As reported | As restated | As reported | As restated | |||||||||||||||||||
Statement of Operations: | ||||||||||||||||||||||||
Net revenue | $ | 26,620 | $ | 26,620 | $ | 23,566 | $ | 23,566 | $ | 25,726 | $ | 25,726 | ||||||||||||
Gross Profit | 7,447 | 7,447 | 4,962 | 4,962 | 6,559 | 6,559 | ||||||||||||||||||
Loss from operations | (1,130 | ) | (1,130 | ) | (3,514 | ) | (3,514 | ) | (1,216 | ) | (1,216 | ) | ||||||||||||
Change in estimated fair value of derivative financial instruments | — | (3,961 | ) | — | 30,387 | — | 8,648 | |||||||||||||||||
Other financing costs | — | (1,330 | ) | — | — | — | — | |||||||||||||||||
Net earnings (loss) | (456 | ) | (5,747 | ) | (3,881 | ) | 26,507 | (2,267 | ) | 6,380 | ||||||||||||||
Deemed dividends — issuance of Series AA and amortization of related discount | — | (45,024 | ) | — | (181 | ) | — | (199 | ) | |||||||||||||||
Net earnings (loss) available to common shareholders | (4,681 | ) | (54,996 | ) | (3,881 | ) | 26,326 | (2,267 | ) | 6,181 | ||||||||||||||
Basic earnings (loss) per share | (0.44 | ) | (5.12 | ) | (0.37 | ) | 2.41 | (0.20 | ) | 0.56 | ||||||||||||||
Diluted loss per share | (0.44 | ) | (5.12 | ) | (0.37 | ) | (0.24 | ) | (0.20 | ) | (0.14 | ) | ||||||||||||
Balance Sheet: | ||||||||||||||||||||||||
Current assets | $ | 35,972 | $ | 35,972 | $ | 28,635 | $ | 28,635 | $ | 29,093 | $ | 29,093 | ||||||||||||
Current liabilities | 26,561 | 26,561 | 21,925 | 21,925 | 26,105 | 26,105 | ||||||||||||||||||
Notes payable, less current portion | 8,217 | 8,217 | 10,090 | 10,090 | 9,183 | 9,183 | ||||||||||||||||||
Derivative financial instruments, at estimated fair value | — | 50,200 | — | 19,813 | — | 11,165 | ||||||||||||||||||
Deferred revenue and other non-current liabilities | 17,694 | 17,694 | 16,757 | 16,757 | 16,443 | 16,443 | ||||||||||||||||||
Series AA convertible preferred stock, net | — | 37,561 | — | 37,742 | — | 37,941 | ||||||||||||||||||
Stockholders’ deficit | (5,625 | ) | (93,386 | ) | (9,484 | ) | (67,039 | ) | (11,752 | ) | (60,858 | ) |
38
As of or for the year ended | ||||||||
December 31, 2004 | ||||||||
As reported | As restated | |||||||
Statement of Operations: | ||||||||
Net revenue | $ | 102,051 | $ | 102,051 | ||||
Gross Profit | 25,054 | 25,054 | ||||||
Loss from operations | (7,973 | ) | (7,973 | ) | ||||
Change in estimated fair value of derivative financial instruments | — | 35,074 | ||||||
Other financing costs | — | (1,330 | ) | |||||
Net earnings (loss) | (9,914 | ) | 23,830 | |||||
Deemed dividends — issuance of Series AA and amortization of related discount | — | (45,404 | ) | |||||
Net loss available to common shareholders | (14,139 | ) | (25,799 | ) | ||||
Basic and diluted loss per share | (1.34 | ) | (2.44 | ) | ||||
Balance Sheet: | ||||||||
Current assets | $ | 29,093 | $ | 29,093 | ||||
Current liabilities | 26,105 | 26,105 | ||||||
Notes payable, less current portion | 9,183 | 9,183 | ||||||
Derivative financial instruments, at estimated fair value | — | 11,165 | ||||||
Deferred revenue and other non-current liabilities | 16,443 | 16,443 | ||||||
Series AA convertible preferred stock, net | — | 37,941 | ||||||
Stockholders’ deficit | (11,752 | ) | (60,858 | ) |
As of or for the three months ended | ||||||||||||||||||||||||
March 31, 2005 | June 30, 2005 | September 30, 2005 | ||||||||||||||||||||||
As | As | As | As | As | As | |||||||||||||||||||
reported | restated | reported | restated | reported | restated | |||||||||||||||||||
Statement of Operations: | ||||||||||||||||||||||||
Net revenue | $ | 24,623 | $ | 24,623 | $ | 23,776 | $ | 23,776 | $ | 21,306 | $ | 21,306 | ||||||||||||
Gross Profit | 7,168 | 7,168 | 7,068 | 7,068 | 5,822 | 5,822 | ||||||||||||||||||
Loss from operations | (785 | ) | (785 | ) | (889 | ) | (889 | ) | (2,049 | ) | (2,049 | ) | ||||||||||||
Change in estimated fair value of derivative financial instruments | — | 5,099 | — | (4,311 | ) | — | (25,972 | ) | ||||||||||||||||
Net earnings (loss) | (931 | ) | 4,168 | (2,207 | ) | (6,517 | ) | (2,296 | ) | (28,268 | ) | |||||||||||||
Deemed dividends — amortization of discount of Series AA | — | (217 | ) | — | (237 | ) | — | (257 | ) | |||||||||||||||
Net earnings (loss) available to common shareholders | (931 | ) | 3,951 | (2,207 | ) | (6,754 | ) | (2,296 | ) | (28,525 | ) | |||||||||||||
Basic earnings (loss) per share | (0.08 | ) | 0.35 | (0.19 | ) | (0.59 | ) | (0.20 | ) | (2.44 | ) | |||||||||||||
Diluted loss per share | (0.08 | ) | (0.06 | ) | (0.19 | ) | (0.59 | ) | (0.20 | ) | (2.44 | ) | ||||||||||||
Balance Sheet: | ||||||||||||||||||||||||
Current assets | $ | 28,970 | $ | 28,970 | $ | 26,638 | $ | 26,638 | $ | 22,546 | $ | 22,546 | ||||||||||||
Current liabilities | 29,047 | 29,047 | 30,843 | 30,843 | 30,651 | 30,651 | ||||||||||||||||||
Notes payable, less current portion | 7,410 | 7,410 | 6,078 | 6,078 | 4,827 | 4,827 | ||||||||||||||||||
Derivative financial instruments, at estimated fair value | — | 6,066 | — | 10,377 | — | 36,349 | ||||||||||||||||||
Deferred revenue and other non-current liabilities | 16,059 | 16,059 | 15,510 | 15,510 | 15,039 | 15,039 | ||||||||||||||||||
Series AA convertible preferred stock, net | — | 38,158 | — | 38,395 | — | 38,652 | ||||||||||||||||||
Stockholders’ deficit | (12,644 | ) | (56,868 | ) | (14,794 | ) | (63,566 | ) | (17,045 | ) | (92,046 | ) |
39
• | Obtaining additional capital from debt or equity fund raising activities; | ||
• | Strategic alliance or business combination and related funding from such a relationship; | ||
• | Continued restructuring of current operations to decrease operating costs and improve gross margins; | ||
• | Sale of all or a portion of operations or technology rights; or | ||
• | Restructuring of notes payable and trade payables to certain suppliers to provide for extended payment periods. |
40
41
42
43
1 - 3 | ||||||||||||||||
(In thousands) | Less than 1 year | years | After 3 years | Total | ||||||||||||
Notes payable | $ | 8,112 | $ | 8,898 | $ | 319 | $ | 17,329 | ||||||||
Operating leases | 903 | 2,591 | 439 | 3,933 | ||||||||||||
Capital lease obligations | 21 | — | — | 21 | ||||||||||||
$ | 9,036 | $ | 11,489 | $ | 758 | $ | 21,283 | |||||||||
44
45
46
47
48
49
50
• | base salary; | ||
• | incentive bonus awards; and | ||
• | stock option awards (long-term compensation). |
• | financial performance; | ||
• | stock performance; | ||
• | long-term strategic decisions; and | ||
• | response to a rapidly changing competitive environment. |
51
Thomas E. Pardun, Chairman | ||||
John R. Garrett | Leonard W. Busse | |||
Stephanie Smeltzer McCoy | A. Laurence Jones |
52
Long-Term | ||||||||||||||||||||
Compensation | ||||||||||||||||||||
Annual Compensation | Awards | |||||||||||||||||||
Securities | All Other | |||||||||||||||||||
Salary | Bonus | Underlying | Compensation | |||||||||||||||||
Name and Principal Position | Year | ($)(1) | ($)(2) | Options(#)(3) | ($)(4)(5) | |||||||||||||||
Tom W. Ward(6) | 2005 | 300,000 | — | 2,250,000 | 810 | |||||||||||||||
President and Chief Executive | 2004 | 300,000 | 145,500 | (2) | 3,750 | 810 | ||||||||||||||
Officer | 2003 | 300,000 | 225,000 | (2) | 700,000 | 810 | ||||||||||||||
Juan A. Rodriguez(7) | 2005 | 225,014 | — | 600,000 | 3,176 | |||||||||||||||
Chairman of the Board and | 2004 | 225,014 | 98,000 | (2) | 152,500 | 3,176 | ||||||||||||||
Chief Technologist | 2003 | 225,014 | 50,000 | (2) | 94,000 | 3,176 | ||||||||||||||
Carroll A. Wallace(8) | 2005 | 200,000 | — | 540,000 | 1,805 | |||||||||||||||
Chief Financial Officer | 2004 | 200,000 | 98,000 | (2) | 152,500 | 1,805 | ||||||||||||||
2003 | 15,384 | 50,000 | (2) | 40,000 | 74 |
(1) | Includes amounts earned but deferred at the election of the Named Executive Officers under the 401(k) plan. | |
(2) | 2003 bonus amountsinclude the value of 745,214 shares issued to Mr. Ward, 52,631 shares issued to Mr. Rodriguez, and 52,631 shares issued to Mr. Wallace for bonuses earned in 2003. | |
2004 bonus amountsinclude the value of 161,378 shares issued to Mr. Ward, 65,210 shares issued to Mr. Rodriguez, and 65,210 shares issued to Mr. Wallace for bonuses earned in 2004. | ||
(3) | We have not granted any SARs or restricted stock awards. | |
(4) | As permitted by SEC rules, we have not shown amounts for certain perquisites where the amounts do not exceed the lesser of 10% of bonus plus salary or $50,000. | |
(5) | 2005 compensationincludes the dollar value of executive life insurance premiums paid by Exabyte for the benefit of the Named Executive Officers as follows: Mr. Ward, $810; Mr. Rodriguez, $3,176; and Mr. Wallace, $1,805. | |
2004 compensationincludes the dollar value of executive life insurance premiums paid by Exabyte for the benefit of the Named Executive Officers as follows: Mr. Ward, $810; Mr. Rodriguez, $3,176; and Mr. Wallace, $1,805. | ||
2003 compensationincludes the dollar value of executive life insurance premiums paid by Exabyte for the benefit of the Named Executive Officers as follows: Mr. Ward, $810; Mr. Rodriguez, $3,176; and Mr. Wallace, $74. | ||
(6) | Mr. Tom Ward was hired and appointed President and Chief Executive Officer on June 3, 2002. | |
(7) | Mr. Rodriguez was appointed Interim Chief Executive Officer and President on January 20, 2002. He served in this position until June 2002, at which time he was appointed Chairman of the Board and Chief Technologist. | |
(8) | Mr. Wallace was appointed Chief Financial Officer of Exabyte on November 1, 2003. |
53
54
Individual Grants | ||||||||||||||||||||||||
Number of | % of Total | Potential Realizable | ||||||||||||||||||||||
Securities | Options | Value at Assumed Annual | ||||||||||||||||||||||
Underlying | Granted to | Rates of Stock Price | ||||||||||||||||||||||
Options | Employees in | Exercise | Expiration | Appreciation for Option | ||||||||||||||||||||
Name | Granted (#) | Fiscal Year(3) | Price ($/SH) | Date | Term(4) | |||||||||||||||||||
5% ($) | 10% ($) | |||||||||||||||||||||||
Tom W. Ward | 2,250,000 | (2) | 35.55 | % | $ | 1.15 | 12/1/2015 | $ | 1,627,828 | $ | 4,125,561 | |||||||||||||
Juan A. Rodriguez | 600,000 | (2) | 9.48 | % | $ | 1.15 | 12/1/2015 | $ | 433,937 | $ | 1,099,682 | |||||||||||||
Carroll A. Wallace | 40,000 | (1) | 0.63 | % | $ | 2.00 | 9/10/2015 | $ | 50,312 | $ | 127,499 | |||||||||||||
500,000 | (2) | 7.90 | % | $ | 1.15 | 12/1/2015 | $ | 361,614 | $ | 916,402 |
(1) | Options under the 2004 Plan generally vest at the rate of 2% of the total grant per month, beginning one month from the date of grant, for a period of 50 months. Options may only be non-statutory options. The exercise price of options granted under the 2004 Plan must be at least equal to the fair market value of the common stock on the date of grant. In accordance with the option agreements issued under the 2004 Plan, options granted to certain executive officers and other members of management pursuant to the 2004 Plan will fully vest upon a change in control. Pursuant to the Company’s bylaws, the Board may not reprice options granted under any of its option plans without approval of the stockholders by a majority vote. | |
(2) | Options under the 2005 Plan generally vest at the rate of 2% of the total grant per month, beginning one month from the date of grant, for a period of 50 months. Options granted under the 2005 Plan on December 1, 2005 were approximately 82% vested on that date, with the remainder vesting ratably over 50 months. Options may only be non-statutory options. The exercise price of options granted under the 2005 Plan must be at least equal to the fair market value of the common stock on the date of grant. In accordance with the option agreements issued under the 2005 Plan, options granted to certain executive officers and other members of management pursuant to the 2005 Plan will fully vest upon a change in control. Pursuant to the Company’s bylaws, the Board may not reprice options granted under any of its option plans without approval of the stockholders by a majority vote. | |
(3) | Based on options granted to Company employees during fiscal 2005 to purchase 6,330,000 shares. | |
(4) | The potential realizable value is based on the term of the option at the date of grant (10 years in each case). It is calculated by assuming that the stock price on the date of grant appreciates at the indicated annual rate, compounded annually for the entire term, and that the option is exercised and sold on the last day of the option term for the appreciated stock price. These amounts represent certain assumed rates of appreciation only, in accordance with SEC rules, and do not reflect our estimate or projection of future stock price performance. Actual gains, if any, are dependent on the actual future performance of the Company’s common stock. The amounts reflected in this table may never be achieved. |
55
Number of Securities | Value of Unexercised | |||||||||||||||||||||||
Shares | Underlying Unexercised | In-the-Money Options | ||||||||||||||||||||||
Acquired | Value | Options at FY-End | at FY-End | |||||||||||||||||||||
on Exercise | Realized | (#)(1) | ($)(2) | |||||||||||||||||||||
Name | (#) | ($) | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||||||||
Tom W. Ward | 0 | 0 | 2,940,750 | 713,000 | 0 | 0 | ||||||||||||||||||
Juan A. Rodriguez | 0 | 0 | 772,140 | 148,360 | 0 | 0 | ||||||||||||||||||
Carroll A. Wallace | 0 | 0 | 604,900 | 127,600 | 0 | 0 |
(1) | Includes both “in-the-money” and “out-of-the-money” options. “In-the-money” options are options with exercise prices below the market price of the Company’s common stock (as noted) on December 31, 2005. | |
(2) | Fair market value of the Company’s common stock on December 31, 2005, the last trading day of fiscal 2005 ($0.90, based on the closing sales price reported on the Over the Counter Bulletin Board) less the exercise price of the option. |
56
(1) | The material in this chart is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of Exabyte under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. |
57
• | each director; | ||
• | each current executive officer named in the Summary Compensation Table; | ||
• | all of Exabyte’s directors and the named Executive Officers as a group; and | ||
• | all those known to be beneficial owners of more than five percent of Exabyte’s common stock. |
Beneficial Ownership(1) | ||||||||||||
Percent of | ||||||||||||
Beneficial Owner | Number of Shares | Percent of Total | Outstanding Votes | |||||||||
Meritage Investment Partners LLC(2) | 19,142,232 | 69.88 | % | 41.01 | % | |||||||
1600 Wynkoop | ||||||||||||
Suite 300 | ||||||||||||
Denver, CO 80202 | ||||||||||||
Imation Corp.(7) | 4,041,912 | 24.61 | % | 11.48 | % | |||||||
1 Imation Place | ||||||||||||
Oakdale, MN 55128 | ||||||||||||
Crestview Capital Master, LLC(8) | 1,455,366 | 9.45 | % | * | ||||||||
Northbrook, IL 60062 | ||||||||||||
Juan A. Rodriguez(3) | 837,895 | 5.67 | % | * | ||||||||
Tom W. Ward(3)(5) | 5,417,796 | 29.04 | % | 5.38 | % | |||||||
Leonard W. Busse(3) | 76,131 | * | * | |||||||||
John R. Garrett(3) | 70,595 | * | * | |||||||||
A. Laurence Jones(3) | 100,372 | * | * | |||||||||
Stephanie Smeltzer McCoy(3) | 88,277 | * | * | |||||||||
Thomas E. Pardun(3) | 81,601 | * | * | |||||||||
G. Jackson Tankersley, Jr.(3)(4) | 19,558,117 | 70.49 | % | 41.46 | % | |||||||
Carroll A. Wallace(3) | 627,084 | * | * | |||||||||
Executive Officers and Directors as a group (9 persons)(6) | 26,857,868 | 84.23 | % | 48.17 | % |
* | Less than one percent. | |
(1) | This table is based upon information supplied by officers, directors and principal stockholders and by Schedules 13D and 13G, if any, filed with the SEC. Subject to footnotes below and community property laws, where applicable, each of the stockholders named has sole power to vote and dispose of the shares indicated as beneficially owned. As required by Rule 13d-3(d), each of the names indicated in the table are deemed to be the beneficial owner of shares that the person has the right to acquire beneficial ownership of within 60 days of March 1, 2006. | |
Applicable percentages are based on 13,988,458 shares outstanding on March 1, 2006, adjusted as required by Rule 13d-3(d)(1). | ||
(2) | This information is based on a Schedule 13D, dated November 1, 2005, filed with the SEC and subsequent information separately provided by Meritage Private Equity Fund, L.P. (“Meritage Fund”), private equity investment fund, and Meritage Investment Partners, LLC (“Meritage Investment”), a manager of private equity investment funds and the sole general partner of Meritage Fund. | |
Includes shares directly beneficially owned by Meritage Fund as follows: 5,031,389 shares of common stock, 7,630,859 shares of Series AA Preferred stock (as-converted), 1,948,333 shares related to the conversion of 10% Convertible Subordinated Notes Payable and 2,174,334 shares of common stock issuable upon the exercise of warrants. | ||
Also includes shares owned indirectly beneficially by Meritage Investment through two other funds in which it is the sole general partner as follows: 705,578 shares of common stock, 1,072,219 shares of Series AA Preferred stock (as-converted), 273,889 shares related to the conversion of 10% Convertible Subordinated Notes Payable and 305,631 shares of common stock issuable upon the exercise of warrants. |
58
Meritage Fund is shown to have sole voting and dispositive power over 16,784,915 shares, representing 67.04% of the common stock. Meritage Investment is shown to have sole voting and dispositive power over all of the shares. | ||
(3) | Includes shares issuable upon the exercise of outstanding stock options that are exercisable within 60 days of March 1, 2006, as follows: Mr. Rodriguez, 788,300 shares; Mr. Ward, 3,029,150 shares; Mr. Busse, 54,818 shares; Mr. Garrett, 70,595; Mr. Jones, 73,318 shares; Ms. McCoy, 53,318 shares; Mr. Pardun, 58,318 shares; Mr. Tankersley, 54,318 shares; and Mr. Wallace, 615,300 shares. | |
(4) | Includes the shares listed for Meritage Investment Partners LLC under footnote 2, as to which Mr. Tankersley has voting and dispositive power by virtue of being a managing member of Meritage Investment Partners, LLC. Mr. Tankersley disclaims beneficial ownership of such shares. Also includes the following shares held by the following entities: Millennial Holdings LLC, 16,485 shares of common stock; 156,236 shares of Series AA preferred stock (as-converted) and 8,436 shares of common stock issuable upon the exercise of warrants; The Millennial Fund, 6,081 shares of common stock; 56,290 shares of Series AA preferred stock (as-converted) and 3,039 shares of common stock issuable upon the exercise of warrants; and Tankersley Family Limited Partnership, 8,257 shares of common stock, 70,842 shares of Series AA preferred stock (as-converted) and 3,825 shares of common stock issuable upon the exercise of warrants. Mr. Tankersley is the managing member of Millennial Holdings LLC and sole general partner of Tankersley Family Limited Partnership and may be deemed to posses voting and dispositive power over shares held by such entities. Mr. Tankersley disclaims beneficial ownership of all such shares. The Millennial Fund is not a separate legal entity and Mr. Tankersley is the direct beneficial owner of all shares held in that name. | |
(5) | Includes 1,636,509 shares of Series AA preferred stock (as converted) owned directly by Mr. Ward. | |
(6) | Includes shares described in the notes above, as applicable. | |
(7) | Includes shares directly beneficially owned by Imation Corp. as follows: 1,605,623 shares of common stock, 1,599,895 shares of Series AA Preferred stock (as-converted) and 836,394 shares of common stock issuable upon the exercise of warrants. | |
(8) | Includes shares directly beneficially owned by Crestview Capital Master, LLC as follows: 49,256 shares of common stock, 833,333 shares of Series AA Preferred stock (as-converted), 277,777 shares related to the conversion of 10% Convertible Subordinated Notes Payable and 295,000 shares of common stock issuable upon the exercise of warrants. | |
(9) | Percentage of total voting power is based on votes of shares actually outstanding and owned by the stockholder and the total votes of outstanding shares as of March 1, 2006. Series AA Preferred stock is non-voting stock. |
59
FEE CATEGORY | 2005 | 2004 | ||||||
Audit Fees | $ | 142,000 | $ | 142,000 | ||||
Audit-Related Fees | $ | 0 | $ | 0 | ||||
Tax Fees | $ | 28,000 | $ | 26,500 | ||||
All Other Fees | $ | 13,000 | $ | 9,000 |
60
Page | ||
Reports of Independent Registered Public Accounting Firms | F-1 | |
Consolidated Balance Sheets –December 31, 2004 and 2005 | F-3 | |
Consolidated Statements of Operations – Years ended January 3, 2004 and December 31, 2004 and 2005 | F-5 | |
Consolidated Statements of Stockholders’ Equity (Deficit) – Years ended January 3, 2004 and December 31, 2004 and 2005 | F-6 | |
Consolidated Statements of Cash Flows – Years ended January 3, 2004 and December 31, 2004 and 2005 | F-8 | |
Notes to Consolidated Financial Statements | F-10 |
II | Valuation and Qualifying Accounts | S-1 |
61
Exabyte Corporation
Boulder, Colorado
/s/ Ehrhardt Keefe Steiner & Hottman PC | ||
Ehrhardt Keefe Steiner & Hottman PC | ||
March 8, 2006 | ||
Denver, Colorado |
F - 1
of Exabyte Corporation
/s/ PricewaterhouseCoopers LLP | ||
PricewaterhouseCoopers LLP | ||
Denver, Colorado | ||
March 30, 2004, except as to the reverse | ||
stock split described in Note 1, which | ||
is as of December 2, 2005 |
F - 2
Consolidated Balance Sheets
December 31, | December 31, | |||||||
2004 | 2005 | |||||||
(In thousands, except per share data) | (As restated, see Note 8) | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 444 | $ | 430 | ||||
Accounts receivable, less allowances for uncollectible accounts and sales returns and programs of $1,910 and $2,382, respectively | 13,929 | 14,171 | ||||||
Inventory, net | 12,398 | 7,765 | ||||||
Other | 2,322 | 1,488 | ||||||
Total current assets | 29,093 | 23,854 | ||||||
Equipment, product tooling and leasehold improvements, net (Note 2) | 2,601 | 2,720 | ||||||
Goodwill | 7,428 | 7,428 | ||||||
Other non-current assets | 857 | 713 | ||||||
Total non-current assets | 10,886 | 10,861 | ||||||
Total assets | $ | 39,979 | $ | 34,715 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 7,766 | $ | 5,149 | ||||
Accrued liabilities (Note 3) | 5,017 | 6,712 | ||||||
Current portion of deferred revenue (Note 11) | 3,460 | 2,001 | ||||||
Line of credit — Bank (Note 4) | 6,173 | 3,652 | ||||||
Current portion of notes payable — suppliers (Note 4) | 3,201 | 5,131 | ||||||
Note payable to customer (Note 11) | — | 2,000 | ||||||
Current portion of other liabilities | 488 | 251 | ||||||
Total current liabilities | 26,105 | 24,896 | ||||||
Convertible Subordinated Notes, net (Note 4) | — | 318 | ||||||
Derivative financial instruments, at estimated fair value (Note 7) | 11,165 | 27,060 | ||||||
Notes payable, less current portion (Notes 4 and 11): | ||||||||
Suppliers | 6,210 | 888 | ||||||
Customer | — | 5,000 | ||||||
Others | 2,973 | 3,010 | ||||||
9,183 | 8,898 | |||||||
Deferred revenue, less current portion (Note 11) | 15,025 | 4,211 | ||||||
Accrued warranties, less current portion | 845 | 1,012 | ||||||
Other liabilities, less current portion | 573 | 280 | ||||||
Total liabilities | $ | 62,896 | $ | 66,675 | ||||
F - 3
CONSOLIDATED BALANCE SHEETS (CONTINUED)
December 31, | December 31, | |||||||
2004 | 2005 | |||||||
(In thousands, except per share data) | (As restated, see Note 8) | |||||||
Series AA Convertible preferred stock, net of discount. Stated and liquidation value of $45,000; 55 shares authorized, 45 shares outstanding (Note 6) | $ | 37,941 | $ | 38,931 | ||||
Stockholders’ deficit (Notes 5 and 6): | ||||||||
Preferred stock; no series; $.001 par value; 18,350 shares authorized; no shares issued and outstanding | $ | — | $ | — | ||||
Preferred stock; series A; $.001 par value; 500 shares authorized; no shares issued and outstanding | — | — | ||||||
Series G convertible preferred stock; $.001 par value; 1,500 shares authorized; no shares issued and outstanding | — | — | ||||||
Series H convertible preferred stock; $.001 par value; 9,650 shares authorized; no shares issued and outstanding | — | — | ||||||
Series I convertible preferred stock; $.001 par value; 10,000 shares authorized; no shares issued and outstanding | — | — | ||||||
Common stock, $.001 par value; 350,000 shares authorized; 11,196 and 13,963 shares outstanding, respectively | 11 | 14 | ||||||
Additional paid-in capital | 51,508 | 53,542 | ||||||
Treasury stock, at cost; 10 shares | (578 | ) | (578 | ) | ||||
Accumulated deficit | (111,799 | ) | (123,869 | ) | ||||
Total stockholders’ deficit | (60,858 | ) | (70,891 | ) | ||||
Commitments and contingencies (Note 12) | ||||||||
Total liabilities and stockholders’ deficit | $ | 39,979 | $ | 34,715 | ||||
F - 4
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Years Ended | ||||||||||||
January 3, | December 31, | December 31, | ||||||||||
2004 | 2004 | 2005 | ||||||||||
(In thousands, except per share data) | (As restated, see Note 8) | |||||||||||
Net revenue | $ | 94,169 | $ | 102,051 | $ | 90,968 | ||||||
Cost of goods sold | 78,576 | 76,997 | 65,395 | |||||||||
Gross profit | 15,593 | 25,054 | 25,573 | |||||||||
Operating expenses: | ||||||||||||
Selling, general and administrative | 30,084 | 23,783 | 20,913 | |||||||||
Engineering, research and development | 9,826 | 9,244 | 9,395 | |||||||||
Lease terminations and related costs (Note 13) | 4,707 | — | — | |||||||||
Total operating expenses | 44,617 | 33,027 | 30,308 | |||||||||
Loss from operations | (29,024 | ) | (7,973 | ) | (4,735 | ) | ||||||
Other income (expense): | ||||||||||||
Interest expense (Note 4): | ||||||||||||
Stock-based | (10,146 | ) | (88 | ) | (163 | ) | ||||||
Amortization of debt discount | — | — | (318 | ) | ||||||||
Other | (2,713 | ) | (1,493 | ) | (1,479 | ) | ||||||
Total interest expense | (12,859 | ) | (1,581 | ) | (1,960 | ) | ||||||
Change in estimated fair value of derivative financial instruments (Note 7) | — | 35,074 | (3,807 | ) | ||||||||
Other financing costs (Note 4) | — | (1,330 | ) | (1,964 | ) | |||||||
Gain (loss) on foreign currency translation | (1,851 | ) | (105 | ) | 793 | |||||||
Litigation settlements, net (Note 12) | — | — | 75 | |||||||||
Other, net | 130 | (208 | ) | (312 | ) | |||||||
Total other income (expense) | (14,580 | ) | 31,850 | (7,175 | ) | |||||||
Earnings (loss) before income taxes | (43,604 | ) | 23,877 | (11,910 | ) | |||||||
Income tax expense (Note 9) | (88 | ) | (47 | ) | (160 | ) | ||||||
Net earnings (loss) | (43,692 | ) | 23,830 | (12,070 | ) | |||||||
Deemed dividends (Notes 6 and 7): | ||||||||||||
Beneficial conversion of preferred stock | (556 | ) | — | — | ||||||||
Exchange of preferred stock | — | (4,225 | ) | — | ||||||||
Issuance of Series AA convertible preferred stock and amortization of related discount | — | (45,404 | ) | (990 | ) | |||||||
Net loss available to common stockholders | $ | (44,248 | ) | $ | (25,799 | ) | $ | (13,060 | ) | |||
Basic and diluted loss per share | $ | (6.96 | ) | $ | (2.44 | ) | $ | (1.10 | ) | |||
Weighted average common shares used in calculation of basic and diluted loss per share | 6,362 | 10,583 | 11,912 | |||||||||
F - 5
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred Stock | Common Stock | Additional | Total | |||||||||||||||||||||||||||||||||
Series | Series | Series | Paid-In | Treasury | Accumulated | Stockholders’ | ||||||||||||||||||||||||||||||
(In thousands, except per share data) | G | H | I | Shares | Amount | Capital | Stock | Deficit | Equity (Deficit) | |||||||||||||||||||||||||||
Balances at December 29, 2002 | 1 | 10 | 8 | 3,361 | 3 | 98,507 | (2,060 | ) | (91,937 | ) | 4,532 | |||||||||||||||||||||||||
Common stock options exercised at $1.80 and $7.40 per share | — | — | — | 2 | — | 13 | — | — | 13 | |||||||||||||||||||||||||||
Common stock issued pursuant to employee stock purchase plan at $0.80 per share | — | — | — | 2 | — | 2 | — | — | 2 | |||||||||||||||||||||||||||
Issuance of 1,500 shares of Series I preferred stock at $1.00 per share (Note 9) | — | — | 1 | — | — | 1,499 | — | — | 1,500 | |||||||||||||||||||||||||||
Issuance of common stock warrants (Note 4) | — | — | — | — | — | 71 | — | — | 71 | |||||||||||||||||||||||||||
Common stock issued under loan guaranties (Note 4) | — | — | — | 5,004 | 5 | 8,439 | — | — | 8,444 | |||||||||||||||||||||||||||
Common stock issued for compensation | — | — | — | 26 | — | (1,151 | ) | 1,482 | — | 331 | ||||||||||||||||||||||||||
Common stock issued for settlement of accounts payable | — | — | — | 294 | — | 383 | — | — | 383 | |||||||||||||||||||||||||||
Common stock dividend | — | — | — | 22 | — | — | — | — | — | |||||||||||||||||||||||||||
Conversion of preferred stock to common stock | (1 | ) | (3 | ) | — | 591 | 1 | 3 | — | — | — | |||||||||||||||||||||||||
Net loss for the year | — | — | — | — | — | — | — | (43,692 | ) | (43,692 | ) | |||||||||||||||||||||||||
Balances at January 3, 2004 | $ | — | $ | 7 | $ | 9 | 9,302 | $ | 9 | $ | 107,766 | $ | (578 | ) | $ | (135,629 | ) | $ | (28,416 | ) | ||||||||||||||||
Common stock options exercised at prices ranging from $1.50 to $10.50 per share | — | — | — | 32 | — | 179 | — | — | 179 | |||||||||||||||||||||||||||
Common stock issued pursuant to employee stock purchase plan at $3.50 and $7.50 per share | — | — | — | 4 | — | 23 | — | — | 23 | |||||||||||||||||||||||||||
Conversion of preferred stock to common stock | — | (1 | ) | (3 | ) | 695 | 1 | 3 | — | — | — | |||||||||||||||||||||||||
Common stock issued upon exercise of warrants | — | — | — | 174 | — | — | — | — | — | |||||||||||||||||||||||||||
Exchange of preferred stock to Series AA preferred stock and reclassification | — | (6 | ) | (6 | ) | — | — | (13,825 | ) | — | — | (13,837 | ) | |||||||||||||||||||||||
Issuance of common stock warrants | — | — | — | — | — | 88 | — | — | 88 | |||||||||||||||||||||||||||
Common stock issued under loan guaranties (Note 4) | — | — | — | 370 | 1 | 1,630 | — | — | 1,631 | |||||||||||||||||||||||||||
Common stock issued for compensation | — | — | — | 295 | — | 1,048 | — | — | 1,048 | |||||||||||||||||||||||||||
Common stock dividends | — | — | — | 324 | — | — | — | — | — | |||||||||||||||||||||||||||
Deemed dividend to record Series AA at stated liquidation value (Note 6) | — | — | — | — | — | (44,909 | ) | — | — | (44,909 | ) | |||||||||||||||||||||||||
Amortization of discount on Series AA preferred stock (Note 6) | — | — | — | — | — | (495 | ) | — | — | (495 | ) | |||||||||||||||||||||||||
Net earnings for the year | — | — | — | — | — | — | — | 23,830 | 23,830 | |||||||||||||||||||||||||||
Balances at December 31, 2004 (As restated, see Note 8) | $ | — | $ | — | $ | — | 11,196 | $ | 11 | $ | 51,508 | $ | (578 | ) | $ | (111,799 | ) | $ | (60,858 | ) | ||||||||||||||||
F-6
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)(CONTINUED)
Preferred Stock | Common Stock | Additional | Total | |||||||||||||||||||||||||||||||||
Series | Series | Series | Paid-In | Treasury | Accumulated | Stockholders’ | ||||||||||||||||||||||||||||||
(In thousands, except per share data) | G | H | I | Shares | Amount | Capital | Stock | Deficit | Equity (Deficit) | |||||||||||||||||||||||||||
Balances at December 31, 2004 (As restated, see Note 8) | $ | — | $ | — | $ | — | 11,196 | $ | 11 | $ | 51,508 | $ | (578 | ) | $ | (111,799 | ) | $ | (60,858 | ) | ||||||||||||||||
Common stock options exercised at $1.81 and $4.50 per share | — | — | — | 20 | — | 36 | — | — | 369 | |||||||||||||||||||||||||||
Common stock issued pursuant to employee stock purchase plan at $2.13 and $0.77 per share | — | — | — | 12 | — | 11 | — | — | 11 | |||||||||||||||||||||||||||
Common stock issued in connection with modification of media distribution agreement (Note 9) | — | — | — | 1,500 | 2 | 2,848 | — | — | 2,850 | |||||||||||||||||||||||||||
Common stock issued for compensation | — | — | — | 49 | — | 130 | — | — | 130 | |||||||||||||||||||||||||||
Common stock dividends | — | — | — | 1,186 | 1 | (1 | ) | — | — | — | ||||||||||||||||||||||||||
Amortization of discount on Series AA preferred stock | — | — | — | — | — | (990 | ) | — | — | (990 | ) | |||||||||||||||||||||||||
Net loss for the year | — | — | — | — | — | — | — | (12,070 | ) | (12,070 | ) | |||||||||||||||||||||||||
Balances at December 31, 2005 | $ | — | $ | — | $ | — | 13,963 | $ | 14 | $ | 53,542 | $ | (578 | ) | $ | (123,869 | ) | $ | (70,891 | ) | ||||||||||||||||
F-7
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Years Ended | ||||||||||||
January 3, | December 31, | December 31, | ||||||||||
2004 | 2004 | 2005 | ||||||||||
(In thousands) | (As restated, see Note 8) | |||||||||||
Cash flows from operating activities: | ||||||||||||
Net earnings (loss) | $ | (43,692 | ) | $ | 23,830 | $ | (12,070 | ) | ||||
Adjustments to reconcile net earnings (loss) to net cash provided (used) by operating activities: | ||||||||||||
Depreciation and amortization | 3,688 | 1,772 | 1,403 | |||||||||
Provision for uncollectible accounts receivable and sales returns and programs | 5,301 | 208 | 700 | |||||||||
Provision for excess and obsolete inventory | 9,814 | 1,150 | 1,600 | |||||||||
Lease terminations and related costs | 4,707 | — | — | |||||||||
Provision for settlement of litigation | — | — | 1,125 | |||||||||
Stock-based compensation expense | 331 | 854 | 130 | |||||||||
Stock-based interest expense | 10,146 | 88 | 163 | |||||||||
Amortization of deferred revenue related to media distribution agreement | (154 | ) | (1,850 | ) | (1,850 | ) | ||||||
Amortization of debt discount | — | — | 318 | |||||||||
Change in estimated fair value of derivative financial instruments | — | (35,074 | ) | 3,807 | ||||||||
Other non-cash financing costs | — | 1,330 | 1,964 | |||||||||
Loss (gain) on disposal of equipment and leasehold improvements | (124 | ) | 169 | — | ||||||||
Loss (gain) on foreign currency translation of non-current liability | 1,634 | (81 | ) | (781 | ) | |||||||
Changes in assets and liabilities: | ||||||||||||
Accounts receivable, net | 11,808 | 627 | (942 | ) | ||||||||
Inventory, net | 2,683 | (1,463 | ) | 3,033 | ||||||||
Other current assets | 74 | (546 | ) | 834 | ||||||||
Other non-current assets | 488 | (542 | ) | 144 | ||||||||
Accounts payable | (452 | ) | (1,077 | ) | (2,617 | ) | ||||||
Accrued liabilities | (2,318 | ) | (2,595 | ) | (1,593 | ) | ||||||
Deferred revenue | 18,416 | (140 | ) | 1 | ||||||||
Other non-current liabilities | 908 | (17 | ) | (249 | ) | |||||||
Net cash provided (used) by operating activities | 23,258 | (13,357 | ) | (4,880 | ) | |||||||
Cash flows from investing activities: | ||||||||||||
Purchase of equipment, product tooling and leasehold improvements | (2,695 | ) | (1,761 | ) | (1,855 | ) | ||||||
Proceeds from sale of equipment | 302 | — | — | |||||||||
Net cash used by investing activities | (2,393 | ) | (1,761 | ) | (1,855 | ) | ||||||
F-8
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Fiscal Years | ||||||||||||
January 3, | December 31, | December 31, | ||||||||||
2004 | 2004 | 2005 | ||||||||||
(In thousands) | (As restated, see Note 8) | |||||||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from issuance of common and preferred stock, net of offering costs | 1,515 | 23,811 | 47 | |||||||||
Borrowings under line of credit — Bank | 113,987 | 85,703 | 103,411 | |||||||||
Payments under line of credit — Bank | (126,050 | ) | (86,028 | ) | (105,932 | ) | ||||||
Proceeds from convertible subordinated notes | — | — | 9,550 | |||||||||
Proceeds from note payable to customer | — | — | 2,000 | |||||||||
Payments on notes payable and other non-current liabilities | (4,002 | ) | (14,903 | ) | (2,355 | ) | ||||||
Net cash provided (used) by financing activities | (14,550 | ) | 8,583 | 6,721 | ||||||||
Net increase (decrease) in cash and cash equivalents | 6,315 | (6,535 | ) | (14 | ) | |||||||
Cash and cash equivalents at beginning of year | 664 | 6,979 | 444 | |||||||||
Cash and cash equivalents at end of year | $ | 6,979 | $ | 444 | $ | 430 | ||||||
Supplemental disclosures of other cash and non-cash investing and financing activities: | ||||||||||||
Interest paid in cash | $ | (2,713 | ) | $ | (1,493 | ) | $ | (1,446 | ) | |||
Common stock issued in satisfaction of liability related to overadvance loan guarantees | — | 1,631 | — | |||||||||
Common stock issued in satisfaction of accrued bonuses | — | 330 | — | |||||||||
Conversion of accounts payable to notes payable | 20,946 | — | — | |||||||||
Conversion of accrued liabilities to notes payable | 4,049 | — | — | |||||||||
Common stock issued in settlement of accounts payable | 383 | — | — | |||||||||
Adjustment of fixed assets acquired through note payable | — | — | 333 | |||||||||
Note payable, common stock and warrants issued in connection with modification of media distribution agreement | — | — | 8,424 |
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
• | Obtaining additional capital from debt or equity fund raising activities; | ||
• | Strategic alliance or business combination and related funding from such relationship; | ||
• | Continued restructuring of current operations to decrease operating costs and improve gross margins; | ||
• | Sale of all or a portion of operations or technology rights; or | ||
• | Restructuring of notes payable and trade payables to certain suppliers to provide for extended payment terms. |
December 31, | December 31, | |||||||
(In thousands) | 2004 | 2005 | ||||||
Raw materials and component parts, net | $ | 5,068 | $ | 3,301 | ||||
Finished goods | 7,330 | 4,464 | ||||||
$ | 12,398 | $ | 7,765 | |||||
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) | 2004 | 2005 | ||||||
Balance at beginning of year | $ | 2,024 | $ | 1,583 | ||||
Accruals for warranties issued during the year | 882 | 1,375 | ||||||
Amortization during the year | (1,323 | ) | (1,582 | ) | ||||
Balance at end of year | $ | 1,583 | $ | 1,376 | ||||
F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2003 | 2004 | 2005 | ||||||||||
(As restated, see | ||||||||||||
(In thousands, except per share data) | Note 8) | |||||||||||
Net earnings (loss) | $ | (43,692 | ) | $ | 23,830 | $ | (12,070 | ) | ||||
Add stock-based compensation expense included in reported net loss, net of related tax effects | 331 | 854 | 130 | |||||||||
Deduct total stock-based compensation expense determined under fair-value based method for all awards, net of related tax effects (1) | (2,113 | ) | (6,354 | ) | (15,113 | ) | ||||||
Pro forma net earnings (loss) | $ | (45,474 | ) | $ | 18,330 | $ | (27,053 | ) | ||||
Deemed dividends related to beneficial conversion of preferred stock, exchange of preferred stock and issuance of Series AA preferred stock | (556 | ) | (49,629 | ) | (990 | ) | ||||||
Proforma net loss available to common stockholders | $ | (46,030 | ) | $ | (31,299 | ) | $ | (28,043 | ) | |||
Basic and diluted net loss per share: | ||||||||||||
As reported | $ | (6.96 | ) | $ | (2.44 | ) | $ | (1.10 | ) | |||
Pro forma | $ | (7.24 | ) | $ | (2.96 | ) | $ | (2.35 | ) |
(1) | Pro forma compensation expense for 2005 includes $10,800,000 of additional expense related to the acceleration of vesting of options, as discussed more fully in Note 5. |
2003 | 2004 | 2005 | ||||
Estimated dividends | None | None | None | |||
Expected volatility | 190% | 176% | 108% | |||
Risk-free interest rate | 1.5%-2.5% | 2.3%-3.3% | 3.4% - 4.4% | |||
Expected term (years) | 3.21 | 3.08 | 3.03 |
F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2004 | 2005 | |||||||
(In thousands) | ||||||||
Equipment and furniture | $ | 12,172 | $ | 12,741 | ||||
Product tooling | 31,076 | 14,295 | ||||||
Leasehold improvements | 142 | 142 | ||||||
Less accumulated depreciation and amortization | (40,789 | ) | (24,458 | ) | ||||
$ | 2,601 | $ | 2,720 | |||||
2004 | 2005 | |||||||
(In thousands) | ||||||||
Compensation and benefits | $ | 1,671 | $ | 1,395 | ||||
Current portion of warranty costs | 738 | 364 | ||||||
Deferred rent concessions | 894 | 993 | ||||||
Litigation settlement | — | 750 | ||||||
Liability related to modification of media distribution agreement | — | 2,000 | ||||||
Other | 1,714 | 1,210 | ||||||
$ | 5,017 | $ | 6,712 | |||||
F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2003 | 2004 | 2005 | ||||||||||||||||||||||
Shares | Weighted-Ave. | Shares | Weighted-Ave. | Shares | Weighted-Ave. | |||||||||||||||||||
(000s) | Exercise Price | (000s) | Exercise Price | (000s) | Exercise Price | |||||||||||||||||||
Outstanding at beginning of year | 1,902 | $ | 20.00 | 2,742 | $ | 8.30 | 4,132 | $ | 8.05 | |||||||||||||||
Granted at fair market value | 1,444 | 2.20 | 1,549 | 8.30 | 6,666 | 1.19 | ||||||||||||||||||
Exercised | (2 | ) | 6.50 | (32 | ) | 5.50 | (18 | ) | 1.81 | |||||||||||||||
Forfeited | (602 | ) | 31.40 | (127 | ) | 16.00 | (264 | ) | 14.21 | |||||||||||||||
Outstanding at end of year | 2,742 | $ | 8.30 | 4,132 | $ | 8.05 | 10,516 | $ | 3.56 | |||||||||||||||
Options exercisable at year end | 763 | $ | 15.10 | 1,336 | $ | 10.20 | 8,764 | $ | 4.00 | |||||||||||||||
Weighted-average fair value of options granted during the year | $ | 1.70 | $ | 7.10 | $ | 0.84 |
Options Outstanding | Options Exercisable | |||||||||||||||||||
Number | ||||||||||||||||||||
Outstanding | ||||||||||||||||||||
(000’s) | Weighted-Avg. | Weighted-Avg. | Number | Weighted-Avg. | ||||||||||||||||
Range of | Remaining | Exercise | Exercisable | Exercise | ||||||||||||||||
Exercise Prices | Contractual Life | Price | (000’s) | Price | ||||||||||||||||
$1.05 - 4.50 | 7,816 | 9.56 | $ | 1.27 | 6,066 | $ | 1.24 | |||||||||||||
4.51 - 8.20 | 1,788 | 8.01 | 7.83 | 1,786 | 7.83 | |||||||||||||||
8.21 - 14.00 | 842 | 6.64 | 11.73 | 842 | 11.73 | |||||||||||||||
14.01 – 175.00 | 70 | 4.19 | 51.71 | 70 | 51.71 | |||||||||||||||
10,516 | 9.03 | $ | 3.56 | 8,764 | $ | 4.00 | ||||||||||||||
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Percentage | Weighted | |||||||||||||||
Aggregate | of | average | ||||||||||||||
number of stock | aggregate | exercise | ||||||||||||||
Total | options for | number of | price of | |||||||||||||
outstanding | which vesting | accelerated | accelerated | |||||||||||||
options | was accelerated | options | options | |||||||||||||
Named Executive Officers (1) | 1,908 | 710 | 43.5 | % | $ | 10.60 | ||||||||||
Non-employee Directors | 161 | 45 | 2.8 | % | $ | 8.10 | ||||||||||
Total Executive Officers and Directors | 2,069 | 755 | 46.3 | % | $ | 10.40 | ||||||||||
All Other Employees | 1,889 | 877 | 53.7 | % | $ | 8.10 | ||||||||||
Total | 3,958 | 1,632 | 100.0 | % | $ | 9.20 | ||||||||||
(1) | Includes current executive officers, as named in the Company’s 2005 Proxy Statement filed with the Securities and Exchange Commission on June 15, 2005. |
2003 | 2004 | 2005 | ||||
Estimated dividends | None | None | None | |||
Expected volatility | 190% | 176% | 106% | |||
Risk-free interest rate | 1.9%-2.2% | 2.3%-3.1% | 3.7% - 4.4% | |||
Expected term (years) | 0.5 | 0.5 | 0.5 | |||
Weighted-average fair value of purchase rights granted | $1.30 | $5.90 | 1.53 |
F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in 000’s) | Series AA | |||||||||||||||||||
Conversion | Anti-dilution | |||||||||||||||||||
feature | feature | Total | Warrants | Total | ||||||||||||||||
Inception (May 3, 2004) | $ | 32,847 | $ | 3,283 | $ | 36,130 | $ | 10,109 | $ | 46,239 | ||||||||||
December 31, 2004 | 6,669 | 2,443 | 9,112 | 2,053 | 11,165 | |||||||||||||||
December 31, 2005 | 13,498 | 2,424 | 15,922 | 748 | 16,670 |
Convertible Notes | ||||||||||||||||||||
Conversion | Anti-dilution | |||||||||||||||||||
feature | feature | Total | Warrants | Total | ||||||||||||||||
Inception (December 1, 2005) | $ | 7,300 | $ | 564 | $ | 7,864 | $ | 3,650 | $ | 11,514 | ||||||||||
December 31, 2005 | 6,207 | 592 | 6,799 | 3,104 | 9,903 |
Imation Warrants | ||||||||||||||||||||
Conversion | Anti-dilution | |||||||||||||||||||
feature | feature | Total | Warrants | Total | ||||||||||||||||
Inception (December 1, 2005) | $ | — | $ | — | $ | — | $ | 574 | $ | 574 | ||||||||||
December 31, 2005 | — | — | — | 487 | 487 |
Total | ||||||||||||||||||||
Conversion | Anti-dilution | |||||||||||||||||||
feature | feature | Total | Warrants | Total | ||||||||||||||||
December 31, 2004 | $ | 6,669 | $ | 2,443 | $ | 9,112 | $ | 2,053 | $ | 11,165 | ||||||||||
December 31, 2005 | 19,705 | 3,016 | 22,721 | 4,339 | 27,060 |
F-24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Series AA | ||||||
Inception | December 31, 2004 | December 31, 2005 | ||||
Estimated dividends | None | None | None | |||
Expected volatility | 155.0% | 76.2% | 111.5% | |||
Risk-free interest rate | 3.26% | 3.21% | 4.39% | |||
Expected term (years) | 5.00 | 4.33 | 3.33 |
Convertible Notes and Imation Warrants | ||||
Inception | December 31, 2005 | |||
Estimated dividends | None | None | ||
Expected volatility | 106.3% | 111.5% | ||
Risk-free interest rate | 4.30% | 4.39% | ||
Contractual term (years) | 4.92 | 4.83 |
Series AA | ||||||
Inception | December 31, 2004 | December 31, 2005 | ||||
Estimated dividends | None | None | None | |||
Expected volatility | 155.0% | 76.2% | 111.5% | |||
Risk-free interest rate | 3.26% | 3.21% | 4.39% | |||
Expected term (years) | 1.92 - 5.00 | 1.17 - 4.25 | 0.17 - 3.25 | |||
Estimated probability of a future dilutive financing transaction | 10% | 10% | 10% |
Convertible Notes and Imation Warrants | ||||
Inception | December 31, 2005 | |||
Estimated dividends | None | None | ||
Expected volatility | 106.3% | 111.5% | ||
Risk-free interest rate | 4.30 – 4.35 | 4.39% | ||
Expected term (years) | 1.83 – 4.91 | 1.75 – 4.83 | ||
Estimated probability of a future dilutive financing transaction | 10% | 10% |
F-25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of or for the three months ended | ||||||||||||||||||||||||
June 30, 2004 | September 30, 2004 | December 31, 2004 | ||||||||||||||||||||||
As | As | As | As | As | As | |||||||||||||||||||
reported | restated | reported | restated | reported | restated | |||||||||||||||||||
Statement of Operations: | ||||||||||||||||||||||||
Net revenue | $ | 26,620 | $ | 26,620 | $ | 23,566 | $ | 23,566 | $ | 25,726 | $ | 25,726 | ||||||||||||
Gross Profit | 7,447 | 7,447 | 4,962 | 4,962 | 6,559 | 6,559 | ||||||||||||||||||
Loss from operations | (1,130 | ) | (1,130 | ) | (3,514 | ) | (3,514 | ) | (1,216 | ) | (1,216 | ) | ||||||||||||
Change in estimated fair value of derivative financial instruments | — | (3,961 | ) | — | 30,387 | — | 8,648 | |||||||||||||||||
Other financing costs | — | (1,330 | ) | — | — | — | — | |||||||||||||||||
Net earnings (loss) | (456 | ) | (5,747 | ) | (3,881 | ) | 26,507 | (2,267 | ) | 6,380 | ||||||||||||||
Deemed dividends — issuance of Series AA and amortization of related discount | — | (45,024 | ) | — | (181 | ) | — | (199 | ) | |||||||||||||||
Net earnings (loss) available to common shareholders | (4,681 | ) | (54,996 | ) | (3,881 | ) | 26,326 | (2,267 | ) | 6,181 | ||||||||||||||
Basic earnings (loss) per share | (0.44 | ) | (5.12 | ) | (0.37 | ) | 2.41 | (0.20 | ) | 0.56 | ||||||||||||||
Diluted loss per share | (0.44 | ) | (5.12 | ) | (0.37 | ) | (0.24 | ) | (0.20 | ) | (0.14 | ) | ||||||||||||
Balance Sheet: | ||||||||||||||||||||||||
Current assets | $ | 35,972 | $ | 35,972 | $ | 28,635 | $ | 28,635 | $ | 29,093 | $ | 29,093 | ||||||||||||
Current liabilities | 26,561 | 26,561 | 21,925 | 21,925 | 26,105 | 26,105 | ||||||||||||||||||
Notes payable, less current portion | 8,217 | 8,217 | 10,090 | 10,090 | 9,183 | 9,183 | ||||||||||||||||||
Derivative financial instruments, at estimated fair value | — | 50,200 | — | 19,813 | — | 11,165 | ||||||||||||||||||
Deferred revenue and other non-current liabilities | 17,694 | 17,694 | 16,757 | 16,757 | 16,443 | 16,443 | ||||||||||||||||||
Series AA convertible preferred stock, net | — | 37,561 | — | 37,742 | — | 37,941 | ||||||||||||||||||
Stockholders’ deficit | (5,625 | ) | (93,386 | ) | (9,484 | ) | (67,039 | ) | (11,752 | ) | (60,858 | ) |
F-27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of or for the year | ||||||||
ended | ||||||||
December 31, 2004 | ||||||||
As | As | |||||||
reported | restated | |||||||
Statement of Operations: | ||||||||
Net revenue | $ | 102,051 | $ | 102,051 | ||||
Gross Profit | 25,054 | 25,054 | ||||||
Loss from operations | (7,973 | ) | (7,973 | ) | ||||
Change in estimated fair value of derivative financial instruments | — | 35,074 | ||||||
Other financing costs | — | (1,330 | ) | |||||
Net earnings (loss) | (9,914 | ) | 23,830 | |||||
Deemed dividends — issuance of Series AA and amortization of related discount | — | (45,404 | ) | |||||
Net loss available to common shareholders | (14,139 | ) | (25,799 | ) | ||||
Basic and diluted loss per share | (1.34 | ) | (2.44 | ) | ||||
Balance Sheet: | ||||||||
Current assets | $ | 29,093 | $ | 29,093 | ||||
Current liabilities | 26,105 | 26,105 | ||||||
Notes payable, less current portion | 9,183 | 9,183 | ||||||
Derivative financial instruments, at estimated fair value | — | 11,165 | ||||||
Deferred revenue and other non-current liabilities | 16,443 | 16,443 | ||||||
Series AA convertible preferred stock, net | — | 37,941 | ||||||
Stockholders’ deficit | (11,752 | ) | (60,858 | ) |
F-28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of or for the three months ended | ||||||||||||||||||||||||
March 31, 2005 | June 30, 2005 | September 30, 2005 | ||||||||||||||||||||||
As | As | As | As | As | As | |||||||||||||||||||
reported | restated | reported | restated | reported | restated | |||||||||||||||||||
Statement of Operations: | ||||||||||||||||||||||||
Net revenue | $ | 24,623 | $ | 24,623 | $ | 23,776 | $ | 23,776 | $ | 21,306 | $ | 21,306 | ||||||||||||
Gross Profit | 7,168 | 7,168 | 7,068 | 7,068 | 5,822 | 5,822 | ||||||||||||||||||
Loss from operations | (785 | ) | (785 | ) | (889 | ) | (889 | ) | (2,049 | ) | (2,049 | ) | ||||||||||||
Change in estimated fair value of derivative financial instruments | — | 5,099 | — | (4,311 | ) | — | (25,972 | ) | ||||||||||||||||
Net earnings (loss) | (931 | ) | 4,168 | (2,207 | ) | (6,517 | ) | (2,296 | ) | (28,268 | ) | |||||||||||||
Deemed dividends – amortization of discount on Series AA | — | (217 | ) | — | (237 | ) | — | (257 | ) | |||||||||||||||
Net earnings (loss) available to common shareholders | (931 | ) | 3,951 | (2,207 | ) | (6,754 | ) | (2,296 | ) | (28,525 | ) | |||||||||||||
Basic earnings (loss) per share | (0.08 | ) | 0.35 | (0.19 | ) | (0.59 | ) | (0.20 | ) | (2.44 | ) | |||||||||||||
Diluted loss per share | (0.08 | ) | (0.06 | ) | (0.19 | ) | (0.59 | ) | (0.20 | ) | (2.44 | ) | ||||||||||||
Balance Sheets: | ||||||||||||||||||||||||
Current assets | $ | 28,970 | $ | 28,970 | $ | 26,638 | $ | 26,638 | $ | 22,546 | $ | 22,546 | ||||||||||||
Current liabilities | 29,047 | 29,047 | 30,843 | 30,843 | 30,651 | 30,651 | ||||||||||||||||||
Notes payable, less current portion | 7,410 | 7,410 | 6,078 | 6,078 | 4,827 | 4,827 | ||||||||||||||||||
Derivative financial instruments, at estimated fair value | — | 6,066 | — | 10,377 | — | 36,349 | ||||||||||||||||||
Deferred revenue and other non-current liabilities | 16,059 | 16,059 | 15,510 | 15,510 | 15,039 | 15,039 | ||||||||||||||||||
Series AA convertible preferred stock, net | — | 38,158 | — | 38,395 | — | 38,652 | ||||||||||||||||||
Stockholders’ deficit | (12,644 | ) | (56,868 | ) | (14,794 | ) | (63,566 | ) | (17,045 | ) | (92,046 | ) |
F-29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2003 | 2004 | 2005 | ||||||||||
(In thousands) | (as restated) | |||||||||||
Domestic | $ | (42,749 | ) | $ | 24,943 | $ | (11,007 | ) | ||||
Foreign | (855 | ) | (1,066 | ) | (903 | ) | ||||||
$ | (43,604 | ) | $ | 23,877 | $ | (11,910 | ) | |||||
2003 | 2004 | 2005 | ||||||||||
(In thousands) | (as restated) | |||||||||||
Current: | ||||||||||||
Federal | $ | — | $ | — | $ | — | ||||||
State | — | — | — | |||||||||
Foreign | 88 | 47 | 160 | |||||||||
$ | 88 | $ | 47 | $ | 160 | |||||||
2003 | 2004 | 2005 | ||||||||||
(In thousands) | (as restated) | |||||||||||
U.S. federal income tax expense (benefit) at statutory rate | $ | (15,261 | ) | $ | 8,343 | $ | (4,217 | ) | ||||
State income taxes, net of federal benefit | (1,390 | ) | 814 | (167 | ) | |||||||
Change in fair value of derivative financial instruments | — | (12,924 | ) | 2,210 | ||||||||
Valuation allowance | 16,381 | 3,330 | 1,963 | |||||||||
Foreign taxes in excess of 35% | 88 | 47 | 160 | |||||||||
Other | 270 | 437 | 211 | |||||||||
$ | 88 | $ | 47 | $ | 160 | |||||||
F-30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2004 | 2005 | |||||||
(In thousands) | (as restated) | |||||||
Current assets: | ||||||||
Warranty reserve | $ | 1,365 | $ | 1,289 | ||||
Allowance for uncollectible accounts receivable | 727 | 909 | ||||||
Reserves for excess or obsolete inventory | 3,615 | 3,043 | ||||||
Other | 2,512 | 1,429 | ||||||
8,219 | 6,670 | |||||||
Less: valuation allowance | (8,219 | ) | (6,670 | ) | ||||
$ | — | $ | — | |||||
Noncurrent assets: | ||||||||
Net operating loss carry forwards | $ | 79,613 | $ | 91,986 | ||||
Deferred revenue | 6,262 | 2,201 | ||||||
Equipment and leasehold improvements | 2,179 | 2,433 | ||||||
Credit carry forwards | 4,774 | 4,774 | ||||||
Goodwill | 358 | 244 | ||||||
Capitalized research and development for tax purposes | 28,047 | 23,855 | ||||||
Other | 2,302 | 1,632 | ||||||
123,535 | 127,125 | |||||||
Less: valuation allowance | (123,535 | ) | (127,125 | ) | ||||
$ | — | $ | — | |||||
F-31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) | ||||
2006 | $ | 903 | ||
2007 | 852 | |||
2008 | 873 | |||
2009 | 866 | |||
2010 | 439 | |||
$ | 3,933 | |||
F-33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accounts Receivable | Revenue | |||||||||||||||||||
December 31, | December 31, | Fiscal Year Ended | ||||||||||||||||||
2004 | 2005 | 2003 | 2004 | 2005 | ||||||||||||||||
Imation | 28.1 | % | 29.7 | % | 8.8 | % | 39.8 | % | 40.6 | % | ||||||||||
Tech Data | 13.1 | 26.1 | 16.2 | 10.5 | 16.1 | |||||||||||||||
Ingram-Micro | 17.8 | 22.5 | 16.0 | 9.0 | 11.7 | |||||||||||||||
Fujitsu Siemens | 12.9 | 14.8 | 5.9 | 8.7 | 9.8 | |||||||||||||||
IBM | 17.2 | 6.3 | 6.8 | 12.9 | 8.5 |
F-35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands) | 2003 | 2004 | 2005 | |||||||||
United States | $ | 65,075 | $ | 72,611 | $ | 63,322 | ||||||
Europe | 21,329 | 23,292 | 24,129 | |||||||||
Asia Pacific | 7,241 | 4,614 | 3,148 | |||||||||
Other | 524 | 1,534 | 369 | |||||||||
$ | 94,169 | $ | 102,051 | $ | 90,968 | |||||||
(In thousands) | 2003 | 2004 | 2005 | |||||||||
Drives | $ | 28,415 | $ | 32,666 | $ | 20,685 | ||||||
Automation | 13,444 | 24,036 | 33,431 | |||||||||
Media | 44,457 | 41,146 | 35,705 | |||||||||
Service and other | 9,077 | 7,413 | 5,355 | |||||||||
Sales allowances | (1,224 | ) | (3,210 | ) | (4,208 | ) | ||||||
$ | 94,169 | $ | 102,051 | $ | 90,968 | |||||||
2004 | ||||||||||||||||
(In thousands, except per share data, and as restated – see Note 8) | Q1 | Q2 | Q3 | Q4 | ||||||||||||
Net revenue | $ | 26,139 | $ | 26,620 | $ | 23,566 | $ | 25,726 | ||||||||
Gross profit | 6,086 | 7,447 | 4,962 | 6,559 | ||||||||||||
Net earnings (loss) | (3,310 | ) | (5,747 | ) | 26,507 | 6,380 | ||||||||||
Net earnings (loss) available to common stockholders | (3,310 | ) | (54,996 | ) | 26,326 | 6,181 | ||||||||||
Basic earnings (loss) per share | (0.34 | ) | (5.12 | ) | 2.41 | 0.56 | ||||||||||
Diluted loss per share | (0.34 | ) | (5.12 | ) | (0.24 | ) | (0.14 | ) |
2005 | ||||||||||||||||
(In thousands, except per share data, and as restated – see Note 8) | Q1 | Q2 | Q3 | Q4 | ||||||||||||
Net revenue | $ | 24,623 | $ | 23,776 | $ | 21,306 | $ | 21,263 | ||||||||
Gross profit | 7,168 | 7,068 | 5,822 | 5,515 | ||||||||||||
Net earnings (loss) | 4,168 | (6,518 | ) | (28,268 | ) | 18,549 | ||||||||||
Net earnings (loss) available to common stockholders | 3,951 | (6,755 | ) | (28,525 | ) | 18,270 | ||||||||||
Basic earnings (loss) per share | 0.35 | (0.59 | ) | (2.44 | ) | 1.37 | ||||||||||
Diluted loss per share | (0.06 | ) | (0.59 | ) | (2.44 | ) | (0.05 | ) |
F-36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-37
(In thousands)
Col. A | Col. B | Col. C (a) | Col. C (b) | Col. D | Col. E | |||||||||||||||||||||
Balance At | Charged to | |||||||||||||||||||||||||
Beginning of | Costs and | Charged to | Balance at | |||||||||||||||||||||||
Description | Period | Expenses | Other Accounts | Deduction | End of Period | |||||||||||||||||||||
Year Ended January 3, 2004: | ||||||||||||||||||||||||||
Allowance for doubtful accounts | $ | 512 | $ | 6,678 | $ | 1 | $ | (7,056 | ) | (1 | ) | $ | 135 | |||||||||||||
Reserves for sales returns and programs | 3,047 | — | (1,378 | ) | (2 | ) | — | 1,669 | ||||||||||||||||||
Inventory valuation reserves | 13,130 | 9,814 | — | (11,591 | ) | (3 | ) | 11,353 | ||||||||||||||||||
$ | 16,689 | $ | 16,492 | $ | (1,377 | ) | $ | (18,647 | ) | $ | 13,157 | |||||||||||||||
Year Ended December 31, 2004: | ||||||||||||||||||||||||||
Allowance for doubtful accounts | $ | 135 | $ | 130 | $ | 1 | $ | (102 | ) | (1 | ) | $ | 164 | |||||||||||||
Reserves for sales returns and programs | 1,669 | — | 77 | (2 | ) | — | 1,746 | |||||||||||||||||||
Inventory valuation reserves | 11,353 | 1,150 | — | (4,145 | ) | (3 | ) | 8,358 | ||||||||||||||||||
$ | 13,157 | $ | 1,280 | $ | 78 | $ | (4,247 | ) | $ | 10,268 | ||||||||||||||||
Year Ended December 31, 2005: | ||||||||||||||||||||||||||
Allowance for doubtful accounts | $ | 164 | $ | 110 | $ | (2 | ) | $ | (225 | ) | (1 | ) | $ | 47 | ||||||||||||
Reserves for sales returns and programs | 1,746 | — | 589 | (2 | ) | — | 2,335 | |||||||||||||||||||
Inventory valuation reserves | 8,358 | 1,600 | — | (5,856 | ) | (3 | ) | 4,102 | ||||||||||||||||||
$ | 10,268 | $ | 1,710 | $ | 587 | $ | (6,081 | ) | $ | 6,484 | ||||||||||||||||
S-1
Page | ||||
PART I. FINANCIAL INFORMATION | ||||
Item 1. Financial Statements | ||||
Consolidated Balance Sheets—December 31, 2005 and June 30, 2006 (unaudited) | 3-4 | |||
Consolidated Statements of Operations—Three and Six Months Ended June 30, 2005 and 2006 (unaudited) | 5-6 | |||
Consolidated Statements of Cash Flows— Six Months Ended June 30, 2005 and 2006 (unaudited) | 7-8 | |||
Notes to Consolidated Financial Statements (unaudited) | 9 | |||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 27 | |||
Item 3. Quantitative and Qualitative Disclosures About Market Risk | 44 | |||
Item 4. Controls and Procedures | 44 | |||
PART II. OTHER INFORMATION | ||||
Item 1. Legal Proceedings | 46 | |||
Item 1A. Risk Factors | 46 | |||
Item 3. Default Under Senior Securities | 46 | |||
Item 4. Submission of Matters to a Vote of Security Holders | 46 | |||
2
CONSOLIDATED BALANCE SHEETS
June 30, | ||||||||
December 31, | 2006 | |||||||
2005 | (unaudited) | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 430 | $ | 195 | ||||
Accounts receivable, less allowances for uncollectible accounts and sales returns and programs of $2,382 and $1,730, respectively | 14,171 | 13,212 | ||||||
Inventory, net | 7,765 | 7,513 | ||||||
Other | 1,488 | 1,999 | ||||||
Total current assets | 23,854 | 22,919 | ||||||
Equipment, product tooling and leasehold improvements, net | 2,720 | 2,842 | ||||||
Goodwill | 7,428 | — | ||||||
Other non-current assets | 713 | 675 | ||||||
Total non-current assets | 10,861 | 3,517 | ||||||
Total assets | $ | 34,715 | $ | 26,436 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 5,149 | $ | 8,155 | ||||
Accrued liabilities (Note 2) | 6,963 | 3,541 | ||||||
Current portion of deferred revenue (Note 8) | 2,001 | 1,962 | ||||||
Line of credit — Bank (Note 3) | 3,652 | 9,042 | ||||||
Current portion of notes payable — suppliers (Note 3) | 5,131 | 4,777 | ||||||
Note payable to customer (Note 8) | 2,000 | 2,000 | ||||||
Total current liabilities | 24,896 | 29,477 | ||||||
Convertible Subordinated Notes, net (Note 3) | 318 | 1,273 | ||||||
Derivative financial instruments, at estimated fair value (Note 5) | 27,060 | 4,311 | ||||||
Notes payable, less current portion (Notes 3 and 8): | ||||||||
Suppliers | 888 | — | ||||||
Customer | 5,000 | 5,000 | ||||||
Others | 3,010 | 3,054 | ||||||
8,898 | 8,054 | |||||||
Deferred revenue, less current portion (Note 8) | 4,211 | 3,987 | ||||||
Accrued warranties, less current portion | 1,012 | 509 | ||||||
Other liabilities, less current portion | 280 | 145 | ||||||
Total liabilities | $ | 66,675 | $ | 47,756 | ||||
3
CONSOLIDATED BALANCE SHEETS (CONTINUED)
June 30, | ||||||||
December 31, | 2006 | |||||||
2005 | (unaudited) | |||||||
Series AA Convertible preferred stock, net of discount. Stated and liquidation value of $45,000; 55 shares authorized, 45 shares outstanding (Note 4) | $ | 38,931 | $ | 39,558 | ||||
Stockholders’ deficit (Note 4): | ||||||||
Preferred stock; no series; $.001 par value; 18,350 shares authorized; no shares issued and outstanding | $ | — | $ | — | ||||
Preferred stock; series A; $.001 par value; 500 shares authorized; no shares issued and outstanding | — | — | ||||||
Series G convertible preferred stock; $.001 par value; 1,500 shares authorized; no shares issued and outstanding | — | — | ||||||
Series H convertible preferred stock; $.001 par value; 9,650 shares authorized; no shares issued and outstanding | — | — | ||||||
Series I convertible preferred stock; $.001 par value; 10,000 shares authorized; no shares issued and outstanding | — | — | ||||||
Common stock, $.001 par value; 350,000 shares authorized; 13,963 and 17,204 shares outstanding, respectively | 14 | 17 | ||||||
Additional paid-in capital | 53,542 | 53,843 | ||||||
Treasury stock, at cost; 10 shares | (578 | ) | (578 | ) | ||||
Accumulated deficit | (123,869 | ) | (114,160 | ) | ||||
Total stockholders’ deficit | (70,891 | ) | (60,878 | ) | ||||
Commitments and contingencies (Note 7) | ||||||||
Total liabilities and stockholders’ deficit | $ | 34,715 | $ | 26,436 | ||||
4
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended | ||||||||
June 30, | June 30, | |||||||
2005 | 2006 | |||||||
Net revenue | $ | 23,776 | $ | 19,455 | ||||
Cost of goods sold | 16,708 | 14,421 | ||||||
Gross profit | 7,068 | 5,034 | ||||||
Operating expenses: | ||||||||
Selling, general and administrative | 5,437 | 4,623 | ||||||
Engineering, research and development | 2,520 | 2,132 | ||||||
Total operating expenses | 7,957 | 6,755 | ||||||
Loss from operations | (889 | ) | (1,721 | ) | ||||
Other income (expense): | ||||||||
Interest expense (Note 3): | ||||||||
Stock-based | — | (253 | ) | |||||
Amortization of debt discount | — | (478 | ) | |||||
Other | (353 | ) | (599 | ) | ||||
Total interest expense | (353 | ) | (1,330 | ) | ||||
Change in estimated fair value of derivative financial instruments (Note 5) | (4,311 | ) | 14,910 | |||||
Gain (loss) on foreign currency translation | 198 | (47 | ) | |||||
Provision for impairment of goodwill | — | (7,428 | ) | |||||
Litigation settlements | (1,125 | ) | 501 | |||||
Other, net | (33 | ) | (180 | ) | ||||
Total other income (expense) | (5,624 | ) | 6,426 | |||||
Earnings (loss) before income taxes | (6,513 | ) | 4,705 | |||||
Income tax expense (Note 9) | (5 | ) | (39 | ) | ||||
Net earnings (loss) | (6,518 | ) | 4,666 | |||||
Deemed dividend — amortization of discount on Series AA convertible preferred stock (Note 4) | (237 | ) | (325 | ) | ||||
Net earnings (loss) available to common stockholders | $ | (6,755 | ) | $ | 4,341 | |||
Earnings (loss) per share (Note 1): | ||||||||
Basic | $ | (0.59 | ) | $ | 0.29 | |||
Diluted | $ | (0.59 | ) | $ | (0.21 | ) | ||
Weighted average common shares (Note 1): | ||||||||
Basic | 11,438 | 15,088 | ||||||
Diluted | 11,438 | 45,361 | ||||||
5
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Six Months Ended | ||||||||
June 30, | June 30, | |||||||
2005 | 2006 | |||||||
Net revenue | $ | 48,398 | $ | 41,074 | ||||
Cost of goods sold | 34,163 | 30,567 | ||||||
Gross profit | 14,235 | 10,507 | ||||||
Operating expenses: | ||||||||
Selling, general and administrative | 10,938 | 9,457 | ||||||
Engineering, research and development | 4,972 | 4,227 | ||||||
Total operating expenses | 15,910 | 13,684 | ||||||
Loss from operations | (1,675 | ) | (3,177 | ) | ||||
Other income (expense): | ||||||||
Interest expense (Note 3): | ||||||||
Stock-based | — | (502 | ) | |||||
Amortization of debt discount | — | (954 | ) | |||||
Other | (755 | ) | (1,086 | ) | ||||
Total interest expense | (755 | ) | (2,542 | ) | ||||
Change in estimated fair value of derivative financial instruments (Note 5) | 788 | 22,749 | ||||||
Gain (loss) on foreign currency translation | 493 | (49 | ) | |||||
Provision for impairment of goodwill | — | (7,428 | ) | |||||
Litigation settlements | (1,125 | ) | 501 | |||||
Other, net | (63 | ) | (268 | ) | ||||
Total other income (expense) | (662 | ) | 12,963 | |||||
Earnings (loss) before income taxes | (2,337 | ) | 9,786 | |||||
Income tax expense (Note 9) | (13 | ) | (78 | ) | ||||
Net earnings (loss) | (2,350 | ) | 9,708 | |||||
Deemed dividend — amortization of discount on Series AA convertible preferred stock (Note 4) | (454 | ) | (626 | ) | ||||
Net earnings (loss) available to common stockholders | $ | (2,804 | ) | $ | 9,082 | |||
Earnings (loss) per share (Note 1): | ||||||||
Basic | $ | (0.25 | ) | $ | 0.62 | |||
Diluted | $ | (0.25 | ) | $ | (0.26 | ) | ||
Weighted average common shares (Note 1): | ||||||||
Basic | 11,332 | 14,592 | ||||||
Diluted | 11,332 | 44,879 | ||||||
6
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended | ||||||||
June 30, | June 30, | |||||||
2005 | 2006 | |||||||
Cash flows from operating activities: | ||||||||
Net earnings (loss) | $ | (2,350 | ) | $ | 9,708 | |||
Adjustments to reconcile net earnings (loss) to net cash used by operating activities: | ||||||||
Depreciation and amortization | 704 | 764 | ||||||
Provision (credit) for uncollectible accounts receivable and sales returns and programs | 39 | (663 | ) | |||||
Provision for excess and obsolete inventory | 450 | 1,300 | ||||||
Provision for impairment of goodwill | — | 7,428 | ||||||
Provision for settlement of litigation | 1,125 | — | ||||||
Stock-based compensation expense | 73 | 373 | ||||||
Stock-based interest expense | — | 502 | ||||||
Amortization of deferred revenue related to media distribution agreement | (925 | ) | (265 | ) | ||||
Amortization of debt discount | — | 954 | ||||||
Change in estimated fair value of derivative financial instruments | (788 | ) | (22,749 | ) | ||||
Loss (gain) on foreign currency translation of non-current liability | (486 | ) | 133 | |||||
Changes in assets and liabilities: | ||||||||
Accounts receivable, net | 1,034 | 1,622 | ||||||
Inventory, net | 345 | (1,048 | ) | |||||
Other current assets | 485 | (511 | ) | |||||
Other non-current assets | 139 | 38 | ||||||
Accounts payable | (1,263 | ) | 3,006 | |||||
Accrued liabilities | (158 | ) | (3,756 | ) | ||||
Deferred revenue | 17 | 4 | ||||||
Other non-current liabilities | (100 | ) | (197 | ) | ||||
Net cash used by operating activities | (1,659 | ) | (3,357 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchase of equipment, product tooling and leasehold improvements | (1,289 | ) | (886 | ) | ||||
7
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(In thousands)
Six Months Ended | ||||||||
June 30, | June 30, | |||||||
2005 | 2006 | |||||||
Cash flows from financing activities: | ||||||||
Borrowings under line of credit — Bank | 55,102 | 47,139 | ||||||
Payments under line of credit — Bank | (51,570 | ) | (41,749 | ) | ||||
Payments on notes payable and other non-current liabilities | (709 | ) | (1,382 | ) | ||||
Proceeds from issuance of common and preferred stock, net of offering costs | 23 | — | ||||||
Net cash provided by financing activities | 2,846 | 4,008 | ||||||
Net decrease in cash and cash equivalents | (102 | ) | (235 | ) | ||||
Cash and cash equivalents at beginning of period | 444 | 430 | ||||||
Cash and cash equivalents at end of period | $ | 342 | $ | 195 | ||||
Supplemental disclosures of other cash and non-cash investing and financing activities: | ||||||||
Interest paid in cash | $ | 755 | $ | 1,086 | ||||
Adjustment of fixed assets acquired through note payable | 333 | — | ||||||
Common stock issued in satisfaction of accrued interest on Convertible Subordinated Notes | — | 557 |
8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9
December 31, | June 30, | |||||||
(In thousands) | 2005 | 2006 | ||||||
Raw materials and component parts, net | $ | 3,301 | $ | 3,485 | ||||
Finished goods | 4,464 | 4,028 | ||||||
$ | 7,765 | $ | 7,513 | |||||
10
11
Balance at December 31, 2005 | $ | 1,376 | ||
Adjustments to warranties issued | (342 | ) | ||
Amortization during the period | (286 | ) | ||
Balance at June 30, 2006 | $ | 748 | ||
12
FOR THE THREE MONTHS ENDED | FOR THE THREE MONTHS ENDED | |||||||||||||||||||||||
June 30, 2005 | June 30, 2006 | |||||||||||||||||||||||
Net | Weighted | Earnings | Net | Weighted | Earnings | |||||||||||||||||||
earnings | average | (loss) per | earnings | average | (loss) per | |||||||||||||||||||
(in thousands, except for per share data) | (loss) | Shares | Share | (loss) | Shares | Share | ||||||||||||||||||
Basic earnings (loss) per share: | ||||||||||||||||||||||||
Net earnings (loss) available to common stockholders | $ | (6,755 | ) | 11,438 | $ | (0.59 | ) | $ | 4,341 | 15,088 | $ | 0.29 | ||||||||||||
Effect of dilutive securities: | ||||||||||||||||||||||||
Imation warrants | — | — | (302 | ) | — | |||||||||||||||||||
Convertible notes payable, including warrants | — | — | (4,972 | ) | 5,306 | |||||||||||||||||||
Convertible preferred stock, including warrants | — | — | (8,579 | ) | 24,949 | |||||||||||||||||||
Common stock options | — | — | — | 18 | ||||||||||||||||||||
Diluted loss per share and net loss available to common stockholders after effect of dilutive securities, including assumed conversions | $ | (6,755 | ) | 11,438 | $ | (0.59 | ) | $ | (9,512 | ) | 45,361 | $ | (0.21 | ) | ||||||||||
FOR THE SIX MONTHS ENDED | FOR THE SIX MONTHS ENDED | |||||||||||||||||||||||
June 30, 2005 | June 30, 2006 | |||||||||||||||||||||||
Net | Weighted | Earnings | Net | Weighted | Earnings | |||||||||||||||||||
earnings | average | (loss) per | earnings | average | (loss) per | |||||||||||||||||||
(in thousands, except for per share data) | (loss) | Shares | Share | (loss) | Shares | Share | ||||||||||||||||||
Basic earnings (loss) per share: | ||||||||||||||||||||||||
Net earnings (loss) available to common stockholders | $ | (2,804 | ) | 11,332 | $ | (0.25 | ) | $ | 9,082 | 14,592 | $ | 0.62 | ||||||||||||
Effect of dilutive securities: | ||||||||||||||||||||||||
Imation warrants | — | — | (455 | ) | — | |||||||||||||||||||
Convertible notes payable, including warrants | — | — | (7,140 | ) | 5,306 | |||||||||||||||||||
Convertible preferred stock, including warrants | — | — | (13,070 | ) | 24,949 | |||||||||||||||||||
Common stock options | — | — | — | 31 | ||||||||||||||||||||
Diluted loss per share and net loss available to common stockholders after effect of dilutive securities, including assumed conversions | $ | (2,804 | ) | 11,332 | $ | (0.25 | ) | $ | (11,583 | ) | 44,878 | $ | (0.26 | ) | ||||||||||
13
Three months | Six months | |||||||
ended | ended | |||||||
June 30, | June 30, | |||||||
(In thousands, except per share data) | 2005 | 2005 | ||||||
Net loss, as reported | $ | (6,518 | ) | $ | (2,350 | ) | ||
Add: Stock-based compensation expense included in reported net loss, net of related tax effects | 47 | 73 | ||||||
Deduct: Total stock-based compensation expense determined under fair-value based method for all awards, net of related tax effects | (1,499 | ) | (3,174 | ) | ||||
Pro forma net loss | $ | (7,970 | ) | $ | (5,451 | ) | ||
Deemed dividend related to amortization of discount on Series AA convertible preferred stock | (237 | ) | (454 | ) | ||||
Pro forma loss available to common stockholders | $ | (8,207 | ) | $ | (5,905 | ) | ||
Basic earnings per share: | ||||||||
As reported | $ | (0.59 | ) | $ | (0.25 | ) | ||
Pro forma | $ | (0.72 | ) | $ | (0.52 | ) | ||
Diluted earnings per share: | ||||||||
As reported | $ | (0.59 | ) | $ | (0.25 | ) | ||
Pro forma | $ | (0.72 | ) | $ | (0.52 | ) | ||
14
Six months ended June 30, | ||||||||
2005 | 2006 | |||||||
Estimated dividends | None | None | ||||||
Expected volatility | 177 – 179 | % | 102 – 119 | % | ||||
Risk-free interest rate | 3.4 – 3.8 | % | 4.35 – 5.09 | % | ||||
Expected term (years) | 3.05 – 3.06 | 3.03 |
15
Percentage | Weighted | |||||||||||||||
Aggregate | of | average | ||||||||||||||
number of stock | aggregate | exercise | ||||||||||||||
Total | options for | number of | price of | |||||||||||||
outstanding | which vesting | accelerated | accelerated | |||||||||||||
options | was accelerated | options | options | |||||||||||||
Named Executive Officers (1) | 1,908 | 710 | 43.5 | % | $ | 10.60 | ||||||||||
Non-employee Directors | 161 | 45 | 2.8 | % | $ | 8.10 | ||||||||||
Total Executive Officers and Directors | 2,069 | 755 | 46.3 | % | $ | 10.40 | ||||||||||
All Other Employees | 1,889 | 877 | 53.7 | % | $ | 8.10 | ||||||||||
Total | 3,958 | 1,632 | 100.0 | % | $ | 9.20 | ||||||||||
(1) | Includes current executive officers, as named in the Company’s 2005 Proxy Statement filed with the Securities and Exchange Commission on June 15, 2005. |
Options Outstanding | Options Exercisable | |||||||||||||||||||
Number | Weighted-Avg. | Weighted-Avg. | Number | Weighted-Avg. | ||||||||||||||||
Range of | Outstanding | Remaining | Exercise | Exercisable | Exercise | |||||||||||||||
Exercise Prices | (000’s) | Contractual Life | Price | (000’s) | Price | |||||||||||||||
$ 0.31 — 2.00 | 7,632 | 9.11 | $ | 1.20 | 6,174 | $ | 1.19 | |||||||||||||
2.01 — 4.50 | 181 | 7.95 | 3.80 | 116 | 4.09 | |||||||||||||||
4.51 — 8.20 | 1,705 | 7.51 | 7.83 | 1,705 | 7.83 | |||||||||||||||
8.21 — 137.50 | 903 | 5.97 | 14.52 | 903 | 14.52 | |||||||||||||||
10,421 | 8.55 | $ | 3.48 | 8,898 | $ | 3.85 | ||||||||||||||
(In thousands) | December 31, 2005 | June 30, 2006 | ||||||
Compensation and benefits | $ | 1,395 | $ | 1,648 | ||||
Current portion of warranty costs | 364 | 239 | ||||||
Deferred rent concessions | 993 | 882 | ||||||
Litigation settlement | 750 | 125 | ||||||
Liability related to modification of media distribution agreement | 2,000 | — | ||||||
Other | 1,461 | 647 | ||||||
$ | 6,963 | $ | 3,541 | |||||
16
17
18
19
Series AA | ||||||||||||||||||||
Conversion | Anti-dilution | |||||||||||||||||||
(In thousands) | feature | feature | Total | Warrants | Total | |||||||||||||||
Inception (May 3, 2004) | $ | 32,847 | $ | 3,283 | $ | 36,130 | $ | 10,109 | $ | 46,239 | ||||||||||
December 31, 2005 | 13,498 | 2,424 | 15,922 | 748 | 16,670 | |||||||||||||||
June 30, 2006 | 539 | 2,403 | 2,942 | 30 | 2,972 |
Convertible Notes | ||||||||||||||||||||
Conversion | Anti-dilution | |||||||||||||||||||
feature | feature | Total | Warrants | Total | ||||||||||||||||
Inception (December 1, 2005) | $ | 7,300 | $ | 564 | $ | 7,864 | $ | 3,650 | $ | 11,514 | ||||||||||
December 31, 2005 | 6,207 | 592 | 6,799 | 3,104 | 9,903 | |||||||||||||||
June 30, 2006 | 411 | 691 | 1,102 | 205 | 1,307 |
20
Imation Warrants | ||||||||||||||||||||
Conversion | Anti-dilution | |||||||||||||||||||
feature | feature | Total | Warrants | Total | ||||||||||||||||
Inception (December 1, 2005) | $ | — | $ | — | $ | — | $ | 574 | $ | 574 | ||||||||||
December 31, 2005 | — | — | — | 487 | 487 | |||||||||||||||
June 30, 2006 | — | — | — | 32 | 32 |
Total | ||||||||||||||||||||
Conversion | Anti-dilution | |||||||||||||||||||
feature | feature | Total | Warrants | Total | ||||||||||||||||
December 31, 2005 | $ | 19,705 | $ | 3,016 | $ | 22,721 | $ | 4,339 | $ | 27,060 | ||||||||||
June 30, 2006 | 950 | 3,094 | 4,044 | 267 | 4,311 |
Series AA | ||||||||||||
Inception | December 31, 2005 | June 30, 2006 | ||||||||||
Estimated dividends | None | None | None | |||||||||
Expected volatility | 155.0 | % | 111.5 | % | 108.7 | % | ||||||
Risk-free interest rate | 3.26 | % | 4.39 | % | 5.09 | % | ||||||
Expected term (years) | 5.00 | 3.33 | 2.84 |
Convertible Notes and Imation Warrants | ||||||||||||
Inception | December 31, 2005 | June 30, 2006 | ||||||||||
Estimated dividends | None | None | None | |||||||||
Expected volatility | 106.3 | % | 111.5 | % | 108.7 | % | ||||||
Risk-free interest rate | 4.30 | % | 4.39 | % | 5.09 | % | ||||||
Expected term (years) | 4.92 | 4.83 | 4.34 |
21
Series AA | ||||||||||||
Inception | December 31, 2005 | June 30, 2006 | ||||||||||
Estimated dividends | None | None | None | |||||||||
Expected volatility | 155.0 | % | 111.5 | % | 108.7 | % | ||||||
Risk-free interest rate | 3.26 | % | 4.39 | % | 5.09 | % | ||||||
Expected term (years) | 1.92 – 5.00 | 0.17 – 3.25 | 0 – 2.84 | |||||||||
Estimated probability of a future dilutive financing transaction | 10 | % | 10 | % | 10 | % |
Convertible Notes | ||||||||||||
Inception | December 31, 2005 | June 30, 2006 | ||||||||||
Estimated dividends | None | None | None | |||||||||
Expected volatility | 106.3 | % | 111.5 | % | 108.7 | % | ||||||
Risk-free interest rate | 4.30 – 4.35 | 4.39 | % | 5.09 | % | |||||||
Expected term (years) | 1.83 – 4.91 | 1.75 – 4.83 | 1.26 – 4.34 | |||||||||
Estimated probability of a future dilutive financing transaction | 10 | % | 10 | % | 10 | % |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||||||
(In thousands) | 2005 | 2006 | 2005 | 2006 | ||||||||||||
United States | $ | 17,867 | $ | 14,804 | $ | 34,080 | $ | 30,535 | ||||||||
Europe/Middle East | 4,929 | 3,947 | 12,496 | 9,114 | ||||||||||||
Asia Pacific | 923 | 661 | 1,691 | 1,274 | ||||||||||||
Other | 57 | 43 | 131 | 151 | ||||||||||||
$ | 23,776 | $ | 19,455 | $ | 48,398 | $ | 41,074 | |||||||||
22
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||||||
(In thousands) | 2005 | 2006 | 2005 | 2006 | ||||||||||||
Drives | $ | 5,020 | $ | 3,977 | $ | 11,602 | $ | 9,238 | ||||||||
Automation | 9,545 | 6,991 | 17,522 | 14,055 | ||||||||||||
Media | 8,619 | 8,620 | 18,282 | 18,099 | ||||||||||||
Service and other | 1,526 | 906 | 2,896 | 1,895 | ||||||||||||
Sales allowances | (934 | ) | (1,039 | ) | (1,904 | ) | (2,213 | ) | ||||||||
$ | 23,776 | $ | 19,455 | $ | 48,398 | $ | 41,074 | |||||||||
Net Revenue | % of Total Net Revenue | |||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||||||
(In thousands) | 2005 | 2006 | 2005 | 2006 | ||||||||||||
Imation | $ | 8,916 | $ | 8,793 | 37.5 | % | 45.2 | % | ||||||||
Tech Data | $ | 4,799 | $ | 3,794 | 20.2 | % | 19.5 | % | ||||||||
IBM | $ | 1,969 | $ | 1,756 | 8.3 | % | 9.0 | % | ||||||||
Fujitsu Siemens | $ | 1,963 | $ | 1,936 | 8.3 | % | 9.9 | % | ||||||||
Ingram Micro | $ | 2,631 | $ | 947 | 11.1 | % | 4.9 | % |
Net Revenue | % of Total Net Revenue | |||||||||||||||
Six Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||||||
(In thousands) | 2005 | 2006 | 2005 | 2006 | ||||||||||||
Imation | $ | 18,841 | $ | 18,540 | 38.9 | % | 45.1 | % | ||||||||
Tech Data | $ | 9,003 | $ | 6,492 | 18.6 | % | 15.8 | % | ||||||||
IBM | $ | 4,000 | $ | 4,065 | 8.3 | % | 9.9 | % | ||||||||
Fujitsu Siemens | $ | 5,538 | $ | 3,915 | 11.4 | % | 9.5 | % | ||||||||
Ingram Micro | $ | 4,551 | $ | 3,809 | 9.4 | % | 9.3 | % |
23
24
25
26
27
28
29
30
Percentage | Weighted | |||||||||||||||
Aggregate | of | average | ||||||||||||||
number of stock | aggregate | exercise | ||||||||||||||
Total | options for | number of | price of | |||||||||||||
outstanding | which vesting | accelerated | accelerated | |||||||||||||
options | was accelerated | options | options | |||||||||||||
Named Executive Officers (1) | 1,908 | 710 | 43.5 | % | $ | 10.60 | ||||||||||
Non-employee Directors | 161 | 45 | 2.8 | % | $ | 8.10 | ||||||||||
Total Executive Officers and Directors | 2,069 | 755 | 46.3 | % | $ | 10.40 | ||||||||||
All Other Employees | 1,889 | 877 | 53.7 | % | $ | 8.10 | ||||||||||
Total | 3,958 | 1,632 | 100.0 | % | $ | 9.20 | ||||||||||
(1) | Includes current executive officers, as named in the Company’s 2005 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 15, 2006. |
31
32
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
June 30, 2005 | June 30, 2006 | June 30, 2005 | June 30, 2006 | |||||||||||||||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||||||||||||||||||
% of | % of | % of | % of | |||||||||||||||||||||||||||||
(in thousands except per share data) | $ | Revenue | $ | Revenue | $ | Revenue | $ | Revenue | ||||||||||||||||||||||||
Net revenue | $ | 23,776 | 100.0 | $ | 19,455 | 100.0 | $ | 48,398 | 100.0 | $ | 41,074 | 100.0 | ||||||||||||||||||||
Cost of goods sold | 16,708 | 70.3 | 14,421 | 74.1 | 34,163 | 70.6 | 30,567 | 74.4 | ||||||||||||||||||||||||
Gross profit | 7,068 | 29.7 | 5,034 | 25.9 | 14,235 | 29.4 | 10,507 | 25.6 | ||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||
Selling, general and administrative | 5,437 | 22.9 | 4,623 | 23.8 | 10,938 | 22.6 | 9,457 | 23.0 | ||||||||||||||||||||||||
Engineering, research and development | 2,520 | 10.6 | 2,132 | 11.0 | 4,972 | 10.3 | 4,227 | 10.3 | ||||||||||||||||||||||||
Total operating expenses | 7,957 | 33.5 | 6,755 | 34.8 | 15,910 | 32.9 | 13,684 | 33.3 | ||||||||||||||||||||||||
Loss from operations | (889 | ) | (3.8 | ) | (1,721 | ) | (8.9 | ) | (1,675 | ) | (3.5 | ) | (3,177 | ) | (7.7 | ) | ||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||||||||
Interest expense | (353 | ) | (1.5 | ) | (1,330 | ) | (6.8 | ) | (755 | ) | (1.6 | ) | (2,542 | ) | (6.2 | ) | ||||||||||||||||
Change in estimated fair value of derivative financial instruments | (4,311 | ) | (18.1 | ) | 14,910 | 76.6 | 788 | 1.6 | 22,749 | 55.4 | ||||||||||||||||||||||
Gain (loss) on foreign currency translation | 198 | 0.8 | (47 | ) | (0.2 | ) | 493 | 1.0 | (49 | ) | (0.1 | ) | ||||||||||||||||||||
Provision for impairment of goodwill | — | — | (7,428 | ) | (38.2 | ) | — | — | (7,428 | ) | (18.1 | ) | ||||||||||||||||||||
Litigation settlements | (1,125 | ) | (4.7 | ) | 501 | 2.6 | (1,125 | ) | (2.3 | ) | 501 | 1.2 | ||||||||||||||||||||
Other, net | (33 | ) | (0.1 | ) | (180 | ) | (0.9 | ) | (63 | ) | (0.1 | ) | (268 | ) | (0.7 | ) | ||||||||||||||||
Total other income (expense) | (5,624 | ) | (23.6 | ) | 6,426 | 33.1 | (662 | ) | (1.4 | ) | 12,963 | 31.5 | ||||||||||||||||||||
Earnings (loss) before income taxes | (6,513 | ) | (27.4 | ) | 4,705 | 24.2 | (2,337 | ) | (4.8 | ) | 9,786 | 23.8 | ||||||||||||||||||||
Income tax expense | (5 | ) | — | (39 | ) | (0.2 | ) | (13 | ) | (0.1 | ) | (78 | ) | (0.2 | ) | |||||||||||||||||
Net earnings (loss) | (6,518 | ) | (27.4 | ) | 4,666 | 24.0 | (2,350 | ) | (4.9 | ) | 9,708 | 23.6 | ||||||||||||||||||||
Deemed dividends – amortization of discount on Series AA convertible preferred stock | (237 | ) | (1.0 | ) | (325 | ) | (1.7 | ) | (454 | ) | (0.9 | ) | (626 | ) | (1.5 | ) | ||||||||||||||||
Net earnings (loss) available to common stockholders | $ | (6,755 | ) | (28.4 | ) | $ | 4,341 | 22.3 | $ | (2,804 | ) | (5.8 | ) | $ | 9,082 | 22.1 | ||||||||||||||||
Basic earnings (loss) per share | $ | (0.59 | ) | $ | 0.29 | $ | (0.25 | ) | $ | 0.62 | ||||||||||||||||||||||
Diluted loss per share (1) | $ | (0.59 | ) | $ | (0.21 | ) | $ | (0.25 | ) | $ | (0.26 | ) | ||||||||||||||||||||
(1) | See note 1 to the unaudited interim consolidated financial statements. |
33
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||||||
(In thousands) | 2005 | 2006 | 2005 | 2006 | ||||||||||||
Drives | $ | 5,020 | $ | 3,977 | $ | 11,602 | $ | 9,238 | ||||||||
Automation | 9,545 | 6,991 | 17,522 | 14,055 | ||||||||||||
Media | 8,619 | 8,620 | 18,282 | 18,099 | ||||||||||||
Service and other | 1,526 | 906 | 2,896 | 1,895 | ||||||||||||
Sales allowances | (934 | ) | (1,039 | ) | (1,904 | ) | (2,213 | ) | ||||||||
$ | 23,776 | $ | 19,455 | $ | 48,398 | $ | 41,074 | |||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||||||
2005 | 2006 | 2005 | 2006 | |||||||||||||
Drives | 21.1 | % | 20.4 | % | 24.0 | % | 22.5 | % | ||||||||
Automation | 40.1 | 35.9 | 36.2 | 34.2 | ||||||||||||
Media | 36.3 | 44.3 | 37.8 | 44.1 | ||||||||||||
Service and other | 6.4 | 4.7 | 5.9 | 4.6 | ||||||||||||
Sales allowances | (3.9 | ) | (5.3 | ) | (3.9 | ) | (5.4 | ) | ||||||||
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||||||
(In thousands) | 2005 | 2006 | 2005 | 2006 | ||||||||||||
VXA | $ | 13,551 | $ | 13,420 | $ | 26,079 | $ | 29,343 | ||||||||
Legacy | 3,994 | 2,448 | 10,195 | 4,390 | ||||||||||||
LTO | 6,042 | 4,473 | 11,768 | 9,209 | ||||||||||||
Other, non-allocable | 189 | (886 | ) | 356 | (1,868 | ) | ||||||||||
$ | 23,776 | $ | 19,455 | $ | 48,398 | $ | 41,074 |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||||||
2005 | 2006 | 2005 | 2006 | |||||||||||||
VXA | 57.0 | % | 69.0 | % | 53.9 | % | 71.4 | % | ||||||||
Legacy | 16.8 | 12.6 | 21.1 | 10.7 | ||||||||||||
LTO | 25.4 | 23.0 | 24.3 | 22.4 | ||||||||||||
Other, non-allocable | 0.8 | (4.6 | ) | 0.7 | (4.5 | ) | ||||||||||
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
34
35
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||||||
(In thousands) | 2005 | 2006 | 2005 | 2006 | ||||||||||||
Distributor/Reseller | $ | 17,915 | $ | 14,471 | $ | 35,178 | $ | 30,611 | ||||||||
OEM | 5,031 | 4,313 | 11,196 | 9,124 | ||||||||||||
End-users and other | 830 | 671 | 2,024 | 1,339 | ||||||||||||
$ | 23,776 | $ | 19,455 | $ | 48,398 | $ | 41,074 | |||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||||||
2005 | 2006 | 2005 | 2006 | |||||||||||||
Distributor/Reseller | 75.3 | % | 74.4 | % | 72.7 | % | 74.5 | % | ||||||||
OEM | 21.2 | 22.2 | 23.1 | 22.2 | ||||||||||||
End-users and other | 3.5 | 3.4 | 4.2 | 3.3 | ||||||||||||
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||
36
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||||||
2005 | 2006 | 2005 | 2006 | |||||||||||||
United States | 75.2 | % | 76.1 | % | 70.4 | % | 74.3 | % | ||||||||
Europe/Middle East | 20.7 | 20.3 | 25.8 | 22.2 | ||||||||||||
Asia Pacific | 3.9 | 3.4 | 3.5 | 3.1 | ||||||||||||
Other | 0.2 | 0.2 | 0.3 | 0.4 | ||||||||||||
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||||||
2005 | 2006 | 2005 | 2006 | |||||||||||||
Imation | 37.5 | % | 45.2 | % | 38.9 | % | 45.1 | % | ||||||||
Tech Data | 20.2 | % | 19.5 | % | 18.6 | % | 15.8 | % | ||||||||
IBM | 8.3 | % | 9.0 | % | 8.3 | % | 9.9 | % | ||||||||
Fujitsu Siemens | 8.3 | % | 9.9 | % | 11.4 | % | 9.5 | % | ||||||||
Ingram Micro | 11.1 | % | 4.9 | % | 9.4 | % | 9.3 | % |
37
38
39
40
41
42
Less than 1 | 1 - 3 | After | ||||||||||||||
(In thousands) | year | years | 3 years | Total | ||||||||||||
Notes payable | $ | 6,707 | $ | 8,054 | $ | 1,273 | $ | 16,034 | ||||||||
Operating leases | 862 | 2,633 | — | 3,495 | ||||||||||||
$ | 7,569 | $ | 10,687 | $ | 1,273 | $ | 19,529 | |||||||||
43
44
45
Votes Against or | Abstentions and | |||||||||||
Votes For | Withheld | Broker Non-Votes | ||||||||||
Proposal 1 – Election of Directors | ||||||||||||
Leonard W. Busse | 11,453,795 | 170,989 | N/A | |||||||||
Stephanie L. Smeltzer McCoy | 11,475,356 | 149,428 | N/A | |||||||||
Thomas W. Ward | 10,864,304 | 760,480 | N/A | |||||||||
Proposal 2 – Ratification of appointment of Ehrhardt Keefe Steiner & Hottman P.C. | 11,470,370 | 140,861 | 13,192 |
46
, 2006 Exabyte Corporation 2108 — 55th Street Boulder, Colorado 80301
Boulder, CO 80301
Telephone: 303-442-4333
Fax: 303-417-7170
17 Battery Place
New York, NY 10004
555 Seventeenth Street
Suite 3200
Denver, Colorado 80202
Exabyte Corporation
2108 — 55th Street
Boulder, CO 80301
303-442-4333
investor_relations@exabyte.com
7979 E. Tufts Avenue
Suite 400
Denver, Colorado 80237
Calendar Year | High | Low | ||||||
2006 | ||||||||
First Quarter | $ | 1.27 | $ | 0.42 | ||||
Second Quarter | $ | 0.85 | $ | 0.11 | ||||
2005 | ||||||||
First Quarter | $ | 5.40 | $ | 2.60 | ||||
Second Quarter | $ | 4.40 | $ | 1.80 | ||||
Third Quarter | $ | 3.20 | $ | 1.70 | ||||
Fourth Quarter | $ | 2.95 | $ | 0.75 | ||||
2004 | ||||||||
First Quarter | $ | 17.60 | $ | 7.00 | ||||
Second Quarter | $ | 9.70 | $ | 7.10 | ||||
Third Quarter | $ | 8.60 | $ | 4.30 | ||||
Fourth Quarter | $ | 7.20 | $ | 3.00 |
Exabyte Corporation
Elected 2002
Elected 2002
Meritage Private Equity Funds
Elected 2003
Aegis Management, LLC
Elected 1998
Elected 1995
Meritage Private Equity Funds
Elected 2002
Meritage Private Equity Funds
Elected 2001