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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
----------------------------
OLICOM A/S
(Translation of registrant's name into English)
Nybrovej 114
DK-2800 Lyngby
Denmark
(Address of principal executive offices)
-----------------------------
[Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F
Form 20-F [X] Form 40-F [ ]
[Indicate by check mark whether the registrant by finishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 13g3-2(b) under the Securities
Exchange Act of 1934.
Yes [ ] No [X]
[If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 13g3-2(b): Not Applicable
This Form 6-K shall be incorporated by reference to the registrant's
registration statement on Form F-4 under the Securities Act of 1933, as
amended, registration statement no. 333-24655.
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OLICOM A/S
FORM 6-K
TABLE OF CONTENTS
Page
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ITEM 1. FINANCIAL INFORMATION
Consolidated Balance Sheets as of
December 31, 1996 and March 31, 1997 3
Consolidated Statements of Income
for the three months ended March 31, 1996
and March 31, 1997 4
Consolidated Statements of Cash Flows for the three months
ended March 31, 1996
and March 31, 1997 5
Notes to Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 8
ITEM 3. EXHIBITS. 13
EXHIBIT
NO. DESCRIPTION
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99.1 Press Release
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OLICOM A/S
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 MARCH 31, 1997
----------------- --------------
(UNAUDITED)
ASSETS (IN THOUSANDS)
Current assets:
Cash and cash equivalents $ 41,663 $ 40,270
Short term investments 9,887 9,791
Accounts receivable, less allowance of
$1,055 in 1996 and $1,225 in 1997 37,712 40,757
Other receivables 1,913 2,060
Inventories 22,252 21,232
Deferred tax 945 963
Prepaid expenses 1,769 2,816
--------- ---------
Total current assets 116,141 117,889
Property and equipment 11,032 11,222
Purchased intangibles 751 694
--------- ---------
Total assets $ 127,924 $ 129,805
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 0 $ 0
Accounts payable 21,083 14,454
Accrued payroll and related expenses 3,424 3,359
Accrued product warranty expense 823 865
Other accrued expenses 1,834 6,980
Income taxes payable 2,570 1,178
--------- ---------
Total current liabilities 29,734 26,836
Minority interests 681 763
Shareholders' equity:
Common shares, DKK 0.25 nominal value
authorized and issued -
15,938 in 1996, 15,938 in 1997 614 614
Additional paid - in capital 52,348 52,348
Retained earnings 56,849 61,446
Treasury stock - 1,255 in 1996 and 1,236 in 1997 (11,831) (11,634)
Unrealized gains/losses on securities (471) (568)
Currency translation adjustments 0 0
--------- ---------
Total shareholders' equity 97,509 102,206
--------- ---------
Total liabilities and shareholders' equity $ 127,924 $ 129,805
========= =========
See accompanying notes
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OLICOM A/S
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED
MARCH 31,
---------------------------------
1996 1997
--------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Net Sales $ 32,147 $ 48,404
Cost of Sales 20,330 26,149
--------- ---------
Gross profit 11,817 22,255
--------- ---------
Operating expenses:
Sales and marketing 9,843 10,486
Research and development 3,131 2,896
General and administrative 1,540 2,095
Acquisition related expenses 3,787 0
Special charge re. management change 1,402 0
--------- ---------
Total operating expenses 19,703 15,477
--------- ---------
Income from operations (7,886) 6,778
Sale of minority interest in related party 2,878 0
Interest income (expense) and other, net 860 420
--------- ---------
Income before income taxes (4,148) 7,198
Income taxes (1,283) 2,520
--------- ---------
Income before minority interests (2,865) 4,678
Minority interests 373 82
--------- ---------
Net income $ (3,238) $ 4,596
========= =========
Net income per share $ (0.22) $ 0.31
========= =========
Weighted average shares outstanding 14,810 14,934
========= =========
See accompanying notes
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OLICOM A/S
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
MARCH 31,
------------------------
1996 1997
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(UNAUDITED)
(IN THOUSANDS)
Operating activities:
Net income $ (3,238) $ 4,597
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 848 981
Gain on sale of affiliate (2,878) 0
Minority interest in earnings 373 99
Exchange rate adjustment re. minority interest 0 (17)
Adjustment minority interest re. acquisition of affiliate (482) 0
Deferred income taxes (490) (18)
Purchased research and development 2,431 0
Change in operating assets and liabilities:
Accounts receivable 4,105 (3,101)
Other receivables 111 (147)
Inventories (1,156) 1,020
Inventories - corr. Lasat exchange rate 94 0
Prepaid expenses (707) (1,125)
Accounts payable 261 (5,941)
Accrued payroll and related expenses (3,463) 131
Accrued product warranty expense (66) 42
Other accrued liabilities 3,105 5,169
Income taxes payable (2,166) (1,285)
-------- --------
Net cash provided by (used in)
operating activities (3,318) 405
Investing activities:
Capital expenditures (2,037) (1,117)
Proceeds from sale of property and affiliated company 7,193 0
Aquisition of Lasat net of cash acquired (3,509) 0
-------- --------
Net cash provided by (used in)
investing activities 1,647 (1,117)
Financing activities:
Borrowings (repayments) (6,378) (0)
Proceeds from warrants/options exercised 28 197
Sale (purchase) of treasury stock 0 0
-------- --------
Net cash used in financing activities (6,350) 197
Effect of exchange rate changes on cash (257) (879)
-------- --------
Net increase (decrease) in cash and cash equivalents (8,278) (1,394)
Cash and cash equivalents at beginning of period 34,029 41,664
-------- --------
Cash and cash equivalents at end of period $ 25,751 $ 40,270
======== ========
Interest paid during the period $ 63 $ 4
======== ========
Tax paid during the period $ 1,335 $ 3,944
======== ========
See accompanying notes
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OLICOM A/S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements as of March 31, 1997 and 1996, are
unaudited. In the opinion of the management of Olicom A/S (the "Company"), such
unaudited financial statements include only such normally recurring adjustments
necessary for a fair presentation of the results of operations for the interim
periods presented and of the financial position of the Company at the date of
the interim balance sheet. The results for such interim periods are not
necessarily indicative of the results for the entire year.
It is recommended that this financial data be read in conjunction with the
audited consolidated financial statements and notes thereto included in the
1996 Annual Report.
1. NET INCOME PER SHARE
Net income per share is computed based on the weighted average number of
common shares and common stock equivalents outstanding during each period.
Common stock equivalents are determined under the assumption that
outstanding warrants and options are exercised. Outstanding warrants and
options have been included in earnings per share computations based on the
treasury stock method.
2. INVESTMENTS IN FINANCIAL INSTRUMENTS
The Company invests cash resources not required for current operations in
various financial instruments. The Company considers highly liquid
investments with maturities of three months or less from the acquisition
date of the instrument to be cash equivalents. Short-term investments
consist primarily of shares in a U.S. mutual fund. The fund's investment
policy is that a major part of its assets is invested in U.S. Government
bonds and other securities rated AAA by Standard & Poor's. The expected
average maturity is approximately three to five years.
3. INVENTORIES
Inventories are stated as the lower of cost or market with cost determined
on the basis of the first-in, first-out method. Raw materials inventories
are sold at the Company's cost to subcontractors who assemble products to
the Company's specifications. Finished goods inventories include completed
products purchased from subcontractors. Inventories consist of:
DECEMBER 31, 1996 MARCH 31, 1997
----------------- --------------
(UNAUDITED)
(In thousands)
Finished goods $13,967 $12,294
Raw materials 8,285 8,938
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Total inventories $22,252 $21,232
======= =======
4. LEASEHOLD IMPROVEMENTS AND EQUIPMENT
Leasehold improvements and equipment are carried at cost. Depreciation is
charged on a straight-line basis to cost and expensed over the expected
useful lives of the assets. Equipment is depreciated over four years, and
leasehold improvements are amortized over the shorter of their estimated
lives or non-cancelable term of the lease. Leasehold improvements and
equipment consist of:
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OLICOM A/S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 MARCH 31, 1997
----------------- --------------
(UNAUDITED)
(In thousands)
Leasehold improvements $ 2,280 $ 2,328
Equipment 17,740 18,495
-------- --------
20,020 20,823
Accumulated depreciation 8,988 9,601
-------- --------
Total property and equipment $ 11,032 $ 11,222
======== ========
5. REPORTING CURRENCY
Although the Company and its Danish subsidiaries maintain their books and
records in Danish kroner, as required by Danish law, the Consolidated
Financial Statements have been prepared in U.S. dollars because the U.S.
dollar is the currency of the primary economic environment in which the
Company and its subsidiaries conduct their operations.
The majority of the Company's sales are billed and collected in U.S.
dollars, and the majority of the Company's purchases of raw materials and
finished goods inventories are invoiced and paid in U.S.
dollars.
6. RESEARCH AND DEVELOPMENT COSTS
Research and development costs, including costs of developing software
products, are expensed as incurred. Application of Statement of Financial
Accounting Standards No. 86, "Accounting for the Costs of Computer Software
to Be Sold, Leased, or Otherwise Marketed," has not had any material effect
on the Company's consolidated financial position or results of operations.
As of March 31, 1997, research and development costs are net of a $585,000
subsidy received from a Danish Government agency in support of ATM and LAN
switching activities. The subsidy will be repaid in the form of a royalty
if and when revenue from such switching products is realized.
7. SHARE REPURCHASE PROGRAM
On February 10, 1994, the Company announced a share repurchase program
relating to the acquisition of up to 500,000 shares at prevailing market
prices from time to time. Shares purchased have been and will be used in
connection with the employee stock incentive program and for other
corporate purposes. On December 7, 1994, the Company increased the number
of shares authorized under the program to 1,500,000 shares, representing
approximately 9.5% of the outstanding common shares. To date, approximately
1,299,000 common shares have been purchased under the share repurchase
program.
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OLICOM A/S
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996.
The following discussion should be read in conjunction with the information
contained in the Company's Annual Report on Form 20-F for the fiscal year ended
December 31, 1996, and the consolidated financial statements and related notes
included elsewhere herein.
RESULTS OF OPERATIONS
Net sales increased $16.3 million, or 50.6%, from the three months ended March
31, 1996, to the comparable period of 1997. The Company believes that the
increase in net sales during such period was due to several factors, including
increased sales in the U.S. where revenue during the first three months of 1996
was negatively impacted by a reorganization of Olicom's U.S. operations. Also,
continued strength in the Company's traditional lines of business (especially,
growth in sales of Token-Ring PCI adapters) contributed to the increase in
revenue.
Gross profit increased $10.4 million, or 88.3%, from the three months ended
March 31, 1996, to the comparable period of 1997, and increased as a percentage
of net sales from 36.8% to 46.0%. The increase in gross margins was primarily
due to gross margins during the first three months of 1996 being negatively
impacted by changes in Olicom's pricing policy that were implemented during
such period.
Sales and marketing expenses increased $643,000, or 6.5%, from the three months
ended March 31, 1996, to the comparable period of 1997, but decreased as a
percentage of net sales from 30.6% to 21.7%. The increase in the amount of such
expenses during such period was primarily due to increased marketing activities
both in the United States and Europe, including higher costs associated with
personnel expenses and promotional expenditures. The Company expects that
increased levels of sales activity will continue to require the commitment of
additional resources to the sales and marketing of Olicom- and Lasat-branded
products. Accordingly, marketing expenses are expected to continue to be a
significant percentage of net sales as a result of the planned continued
investment in the Company's sales and support organization.
Research and development expenses decreased $235,000, or 7.5%, from the three
months ended March 31, 1996, to the comparable period of 1997, and decreased as
a percentage of net sales from 9.7% to 6.0%. The decrease in such expenses was
primarily attributable to a $585,000 subsidy from a Danish Government agency in
support of ATM and LAN switching activities, which more than offset cost
increases associated with the hiring of additional personnel required to
support enhancements of current products and expenditures for new product
development, such as products based on ATM-technology and switching-technology.
All of the Company's research and development costs have been expensed as
incurred.
General and administrative expenses increased $555,000, or 36.0%, from the
three months ended March 31, 1996, to the comparable period of 1997, but
decreased as a percentage of net sales from 4.8% to 4.3%. The increase in the
amount of such expenses during such period reflected primarily additional
personnel and costs associated with the generally higher level of business
activity.
The Company's operating income for the first quarter of 1997 was $6.8 million,
compared to an operating loss of $7.9 million for the first quarter of 1996.
This increase in income from operations was primarily due to increased gross
margins, a decline in recurring operating expenses as a percentage of net
revenues, and the absence of non-recurring charges.
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LIQUIDITY AND CAPITAL RESOURCES
The Company has two unsecured line of credit facilities for an aggregate amount
of DKK 15.0 million ($2.3 million) and, in addition, a USD-denominated line of
credit facility for $8.5 million, of which $10.8 million was outstanding at
March 31, 1997. Under prevailing banking practice in Denmark, these lines of
credit are terminable by the lender on 14 days prior notice (even if the
Company is not in breach of the general conditions for such facilities) and are
terminable without notice in the event of a breach thereof by the Company
(subject to any applicable cure period).
On March 31, 1997, the Company's inventory levels had decreased 4.6% from that
recorded at December 31, 1996. The decrease during such period primarily
reflected improvements in production and material planning and control.
Trade accounts receivable at March 31, 1997, increased 8.1% to $40.8 million,
from that recorded at December 31, 1996. The increase during such period was
primarily attributable to increased levels of net sales.
Other than disclosed below (See "-- Subsequent Events) the Company had no
material commitments for capital expenditures at March 31, 1997.
SUBSEQUENT EVENTS
On June 12, 1997, the Company acquired CrossComm Corporation ("CrossComm"). In
connection therewith, the Company exchanged each outstanding share of common
stock in CrossComm for $5.00 in cash, 0.2667 shares of Common Shares and
three-year Warrants to acquire 0.1075 Common Shares at an exercise price of
$19.74 per full Common Share. No fractional Common Shares and no Warrants to
purchase fractional Common Shares were issued in connection with such
acquisition. The Company issued approximately 2,535,000 Common Shares, Warrants
to purchase approximately 1,023,000 additional Common Shares, and in addition,
assumed options to purchase approximately 943,000 additional Common Shares. The
acquisition will be accounted for using purchase accounting, and the Company
will recognize a significant non-recurring expense during the second quarter of
1997 in order to write off in-process research and development and certain
other acquisition-related expenses. There can be no assurance that the Company
will not incur additional charges to reflect costs associated with such
transaction. The Company funded the cash portion of the consideration (net of
acquired liquid assets) from available working capital. See "-- Business
Environment and Risk Factors" for a discussion of numerous issues that must be
successfully managed to obtain the anticipated benefits from such transaction.
The inability of management to successfully integrate the operations of the
Company and CrossComm could have an adverse effect on the business, financial
condition or results of operations of the combined company.
BUSINESS ENVIRONMENT AND RISK FACTORS
Certain statements included in this Report are forward-looking, such as
statements regarding potential synergies in connection with the acquisition of
CrossComm by the Company, expected transaction charges and expenses relating to
the integration of the two companies, new product introductions and
enhancements to existing products, rapidly changing technology, improvement of
manufacturing efficiencies and availability of licenses with respect to
intellectual property.
Such forward-looking statements, in addition to other information included in
this Report, are based on current expectations and are subject to a number of
risks and uncertainties that could cause actual results in the future to differ
significantly from results expressed or implied in any forward-looking
statements by, or on behalf of the Company. Further, the Company's future
operating results may be affected by various trends and factors which the
Company must successfully manage in order to achieve favorable operating
results. In addition, there are trends and factors that are beyond the
Company's control that may affect its business, financial condition or results
of operations.
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Such trends and factors include, without limitation, the following: overall
demand for communications and networking products, economic and other
considerations specific to the computer and networking industries, and general
economic conditions; rapid technological change, frequent new product
introductions, changes in customer requirements, continued emergence of
industry standards, and evolving methods of building and operating networks,
which require that the Company identify, develop, manufacture and market, on a
cost-effective and timely basis, new products and enhancements to existing
products that meet changing customer requirements and emerging industry
standards, and take advantage of technological advances; difficulties or delays
in the development, production and marketing of products, including, without
limitation, any failure to ship new products and technologies when anticipated,
the failure of manufacturing economies to develop when planned, customer delays
in purchasing products in anticipation of new product introductions or for
other reasons, and the activities of parties with whom the Company has joint
development projects; continued compatibility and interoperability of the
Company's products with products and architectures offered by various vendors;
fluctuations in the Company's revenues and operating results from quarter to
quarter, due to a variety of factors, including, without limitation, increased
competition, capital spending patterns of end-users, the timing and amount of
significant orders from distributors, value-added resellers ("VARs") and
original equipment manufacturer customers ("OEMs") (including decisions by such
customers as to the quantity of products to be maintained in inventories), the
mix of distribution channels and products, and pricing, purchasing, operational
and promotional decisions by distributors, VARs and OEMs (which could affect
their supply of, or end-user demand for, the Company's products); the absence
of long-term obligations on the part of distributors, VARs and OEMs to purchase
products from the Company (and the implicit risk of any unanticipated declines
in sales to any of the Company's material customers for competitive reasons or
because of the internalization of production of products purchased from the
Company on an OEM basis); declining average selling prices and short product
life cycles, both of which could adversely impact the sales and operating
margins of the Company; the Company's shipment of products shortly after
receipt of a purchase order, with the result that a substantial portion of the
Company's revenues for any quarter results from orders received during such
quarter, and minor shifts in the timing of purchase orders can have a
significant effect on net sales for any quarter; the Company's failure to
accurately anticipate the demand for its products, due to, among other things,
the fact that the Company's expectations of future net sales as well as its
expenditures are based largely on its own estimate of future demand and not on
firm customer orders; unanticipated declines in the demand for network
interface cards, which accounted for approximately 74.4% of the Company's net
sales during 1996; the effect that consolidation in the LAN industry may have
on the competitive position of the Company and its revenues and operating
results; the acquisition of assets and businesses, including, without
limitation, the making or incurring of any expenditures and expenses in
connection therewith (including, without limitation, any research and
development expenses relating thereto) and expense attendant to the integration
of personnel, operations and products associated therewith; the Company's
ability to continue to improve its operational, management and financial
systems and controls, and to integrate new employees; any interruption in the
supply of any sole or limited source components, or the inability of the
Company to procure these components from alternate sources at acceptable prices
and within a reasonable time; product supply disruption and increased costs as
a result of the subcontracting of product assembly and aspects of component
procurement, or in the event of political unrest, unstable economic conditions
or developments that are adverse to trade in the countries in which certain of
the Company's subcontractors conduct operations; the activities of any parties
with whom the Company has an agreement or understanding, including, without
limitation, issues affecting joint development projects in which the Company is
a participant; the continued efficacy of steps taken by the Company to protect
its proprietary rights, or the independent development by competitors of
technologies that are substantially equivalent or superior to the Company's
technologies; the loss of software or other intellectual property licensed from
third parties; claims from third parties asserting that trademarks used by the
Company, or technology used in the Company's products, infringe or may infringe
the rights of third parties; risks associated with international operations,
including, without limitation, longer payment cycles, unexpected changes in
regulatory requirements and tariffs, export licenses, political instability,
difficulties in staffing and managing foreign operations, greater difficulty in
accounts receivable collection, potentially adverse tax consequences, and
seasonal fluctuations resulting from lower sales that typically occur during
the summer months in Europe and other parts of the world; the ability or
inability of the Company to hedge against foreign currency, foreign exchange
rates and fluctuations in such rates; and a change in the value of the U.S.
dollar (the Company's functional currency) relative to other currencies.
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In addition, there are certain factors and risks relating to the acquisition of
CrossComm by the Company, including, without limitation, whether the
integration of the two companies' businesses is accomplished in an efficient
manner, without diversion of resources from new product development, confusion
or dissatisfaction among existing customers of the combined company, or
temporary distraction of management attention from the day-to-day business of
the combined company; the ability of the combined company to realize
anticipated synergies; the continuation by distributors, VARs and OEMs of their
current buying patterns without regard to the acquisition; the Company's
success in implementing its distribution model in connection with the sale of
CrossComm products; the incurrence of additional unanticipated expenses
relating to the integration of CrossComm into the Company's operations; the
completion by the Company of in-process technologies acquired in connection
with the CrossComm transaction; and the ability of the Company to exploit the
new technologies as they are developed. Further, unfavorable changes in the
current political and economic environment in Poland (where CrossComm has
conducted and the Company presently conducts significant research and
development activities) or the imposition of restrictions on travel or
technology transfers between Poland and the United States could have a material
adverse effect on the business, financial condition or results of operations of
the combined company
In light of the foregoing factors, as well as other factors affecting the
Company's operating results, past trends should not be used by investors or
others to anticipate future trends, and prior operating performance may not be
an accurate indicator of future performance.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
With the exception of historical information, certain of the matters discussed
in this report and the press release included herewith are forward-looking
statements that involve risks and uncertainties, including, without limitation,
the risks and uncertainties described above under the caption "Business
Environment and Risk Factors", together with such risks and uncertainties as
are described in registration statements, reports and other documents filed by
the Company from time to time with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended, and the Securities Exchange
Act of 1934, as amended. Such risks and uncertainties could cause the Company's
actual consolidated results for 1997 and beyond to differ materially from those
expressed in any forward-looking statements made by, or on behalf of, the
Company.
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SIGNATURES
The registrant certifies that it meets all of the requirements for filing and
has duly caused this form to be signed on its behalf by the undersigned,
thereunto duly authorized.
Olicom A/S
Date: September 10, 1997 By: /s/ Boje Rinhart
---------------------
Boje Rinhart
Chief Financial Officer
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INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
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99.1 Press Release 14
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