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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934. (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
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Commission file number: 00114367
DATALINK CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0856543
(State or other jurisdiction (IRS Employer Identification Number)
of incorporation)
7423 WASHINGTON AVENUE SOUTH
MINNEAPOLIS, MN 55439
(Address of Principal Executive Offices)
(612) 944-3462
(Registrants Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: Common
Stock, $0.001 par value.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ ] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of
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registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
At November 16, 1999, the latest practicable date, the aggregate market
value of the voting and non-voting common equity held by non-affiliates of the
registrant was: $85,159,460
At November 16, 1999, the number of shares outstanding of each of the
registrant's classes of common stock was: 8,772,537
Documents incorporated by reference:
(1) Not Applicable
(2) Not Applicable
(3) Certain portions of the definitive Prospectus filed with the
Securities and Exchange Commission on August 6, 1999, pursuant to Rule 424(b)(1)
under the Securities Act of 1933, SEC File No. 333-55935 (the "Definitive
Prospectus") are incorporated by reference as indicated in Parts I, II, III and
IV below.
EXPLANATORY NOTE
This Form 10-K relates to fiscal years prior to consummation of Datalink
Corporation's initial public offering. Datalink is filing this report solely
because Datalink's registration statement on Form 8-A under the Securities
Exchange Act of 1934, as amended, became effective on August 4, 1998, sixty days
after its initial filing.
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. This report on Form 10-K
contains forward-looking statements, which reflect the Company's views with
respect to future events and financial performance. These forward-looking
statements are subject to certain risks and uncertainties, including those
identified below, which could cause actual results to differ materially from
historical results or those anticipated. The words "aim," "believe," "expect,"
"anticipate," "intend," "estimate" and other expressions which indicate future
events and trends identify forward-looking statements. Actual future results and
trends may differ materially from historical results or those anticipated
depending upon a variety of factors, including, but not limited to: the
Company's dependence on supplier relationships, competition in the market for
open systems storage, competitive pricing pressures, dependence of the Company
on key personnel, possible strain placed on the Company's resources by growth
and expansion, the Company's reliance of its suppliers to meet the needs of
rapid technological change, risks associated with possible future acquisitions,
fluctuations in quarterly operating results, risk associated with the Company's
use of proceeds from its initial public offering, the possibility of denial of
the Company's prior S corporation status by the Internal Revenue Service for any
or all of the periods during which the Company claimed such status and the
consequent tax burden on its income and the impact of Year 2000 issues on the
Company and its operations. The Company recommends that readers refer to the
discussion of these and other
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risks as contained in the Definitive Prospectus under the caption "Risk Factors"
beginning on page 6.
PART I
ITEM 1. BUSINESS.
The information contained under the caption "Business" beginning at
page 26 of the Definitive Prospectus is incorporated herein by reference.
ITEM 2. PROPERTIES.
The information contained under the caption "Facilities" beginning at
page 34 of the Definitive Prospectus is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS.
As of the date hereof, the Company is not involved in any material
legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted during the fourth quarter of the Company's
1998 fiscal year to a vote of security holders, through the solicitation of
proxies or otherwise.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
There was no established public trading market for the Company's Common
Stock during the Company's 1998 fiscal year. At December 31, 1998, there were 10
holders of the Company's Common Stock.
The information contained under the caption "Termination of S
Corporation Status and Put Option and Dividend Policy" on page 13 of the
Definitive Prospectus is incorporated herein by reference.
In connection with the acquisition of assets of Direct Connect Systems,
Inc. ("DCSI") in July 1998, the Company issued 200,000 shares of Common Stock to
four former stockholders of DCSI, each of whom was an accredited investor. The
Company believes the sale of these shares was exempt from registration under
Section 4(2) of the Securities Act. In August 1999, pursuant to the original
acquisition agreement, the Company issued an additional 26,668 shares of the
Company's Common Stock to these former DCSI stockholders.
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ITEM 6. SELECTED FINANCIAL DATA.
The information contained in the first paragraph and under the
following captions of the section entitled "Selected Historical Financial Data"
beginning at page 17 of the Definitive Prospectus is incorporated herein by
reference:
-- "Statement of Operations Data" for the Years Ended December 31, 1994
through 1998 and related footnotes and
-- "Balance Sheet Data" at December 31, 1994, 1995, 1996, 1997 and 1998
and related footnotes.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
The information contained under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations" beginning at page
19 of the Definitive Prospectus, exclusive of the section labeled "Comparison of
Six Months Ended June 30, 1999 and 1998" on pages 20-21, is incorporated herein
by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following financial statements and information contained in the
Definitive Prospectus are incorporated herein by reference:
-- the "Report of Independent Accountants" at page F-5;
-- the "Consolidated Balance Sheets" on page F-6;
-- the "Year Ended December 31," columns labeled "1998," "1997" and
"1996" on page F-7 entitled "Consolidated Statements of Operations;"
-- the "Consolidated Statement of Stockholders' Equity (Deficiency) on
page F-8, excluding the table information below the line labeled "Balances,
December 31, 1998;"
-- the "Year Ended December 31," columns labeled "1998," "1997" and
1996" on page F-9 entitled "Consolidated Statements of Cash Flows" and
-- the "Notes to Consolidated Financial Statements" beginning on page
F-10 and continuing through and including page F-19.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The information contained under the caption "Change of Accountants" on
page 46 of the Definitive Prospectus is incorporated herein by reference.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information contained under the caption "Management" beginning at
page 35 of the Definitive Prospectus is incorporated herein by reference.
Section 16(a) Beneficial Ownership Reporting Compliance. During the
year ended December 31, 1998 (which was prior to Datalink's initial public
offering), the following persons failed to timely file a Form 3 report under the
Securities Exchange Act of 1934, as amended: Greg R. Meland, Robert D. DeVere,
Stephen M. Howe, Scott D. Robinson, Robert M. Price, James E. Ousley, Margaret
A. Loftus and Paul F. Lidsky.
ITEM 11. EXECUTIVE COMPENSATION.
The information contained under the captions "Director Compensation" on
page 36 and "Executive Compensation" on page 37 on the Definitive Prospectus is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information contained under the caption "Principal Stockholders" on
page 41 of the Definitive Prospectus is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information contained under the caption "Certain Transactions" beginning at
page 39 of the Definitive Prospectus is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
1. FINANCIAL STATEMENTS. The following financial statements contained in
the Definitive Prospectus are filed as part of this report (as incorporated
by reference above):
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-- the "Report of Independent Accountants" at page F-5;
-- the "Consolidated Balance Sheets" on page F-6;
-- the "Year Ended December 31," columns labeled "1998," "1997" and "1996"
on page F-7 entitled "Consolidated Statements of Operations;"
-- the "Consolidated Statement of Stockholders' Equity (Deficiency) on page
F-8, excluding the table information below the line labeled "Balances, December
31, 1998;"
-- the "Year Ended December 31," columns labeled "1998," "1997" and 1996"
on page F-9 entitled "Consolidated Statements of Cash Flows" and
-- the "Notes to Consolidated Financial Statements" beginning on page F-10
and continuing through and including page F-19.
2. FINANCIAL STATEMENT SCHEDULES. The "Report of Independent Accountants on
Financial Statement Schedule" and the "Schedule II -- Valuation and Qualifying
Accounts for the Years Ended December 31, 1997 and 1998" beginning at page S-1
of Amendment No. 5 to the Registration Statement on Form S-1, SEC Reg. No.
333-55935 ("Amendment No. 5"), is filed herewith and incorporated herein by
reference.
3. (a) EXHIBITS. The following exhibits are filed as part of this Form 10-K:
Exhibit Method of
Number Title Filing
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3.1 Amended and Restated Articles of Incorporation of
the Company *
3.2 Restated Bylaws of the Company *
4.1 Form of Common Stock Certificate *
10.1 Employee Stock Purchase Plan *
10.2 1999 Incentive Compensation Plan *
10.3 Credit Agreement with Norwest Bank Minneapolis,
N.A. *
10.4 Form of Indemnification Agreement *
10.5 Lease Agreement with Washington Avenue L.L.P. *
10.6 Deferred Compensation Agreement with
Stanley I. Clothier *
10.7 Agreement and Plan of Reorganization with
Direct Connect Systems, Inc. (excluding Schedules
and Exhibits which the Registrant will provide to
the Commission upon request) *
10.8 Second Lease Agreement with Washington Avenue
L.L.P. *
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10.9 Lease Extension Agreement with Washington Avenue
L.L.P. *
16.1 Letter from Hansen, Jergenson, Nergaard & Co.,
LLP regarding change in certifying accountant *
23.1 Consent of PriceWaterhouseCoopers LLP Filed herewith
23.2 Consent of Hansen, Jergenson, Nergaard & Co.,
LLP Filed herewith
27.1 Financial Data Schedule (Edgar filing only)
99.1 Pages of the Definitive Prospectus and of
Amendment No. 5 (deemed to be filed
only to the extent as incorporated by
reference into this report above) Filed herewith
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* Incorporated by reference to the exhibit of the same number in the Company's
Registration Statement on Form S-1, Reg. No. 333-55935
(b) REPORTS OF FORM 8-K. No reports on Form 8-K were filed during the last
quarter of the period covered by this report.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
DATALINK CORPORATION
Date: November 12, 1999
By: /s/ Greg R. Meland
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Greg R. Meland, Chief Executive Officer
By: /s/ Daniel J. Kinsella
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Daniel J. Kinsella, Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
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/s/ Greg R. Meland President and Chief November 12, 1999
- --------------------------------- Executive Officer
Greg R. Meland and Director (Principal
Executive
Officer)
/s/ Daniel J. Kinsella Chief Financial Officer November 12, 1999
- --------------------------------- (Principal Financial
Daniel J. Kinsella And Accounting Officer)
/s/ Robert M. Price Director November 12, 1999
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Robert M. Price
/s/ James E. Ousley Director November 12, 1999
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James E. Ousley
/s/ Margaret A. Loftus Director November 12, 1999
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Margaret A. Loftus
/s/ Paul F. Lidsky Director November 12, 1999
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Paul F. Lidsky
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