<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission File Number: 0-21393
SEACHANGE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-3197974
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
124 Acton Street, Maynard, MA 01754
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (978) 897-0100
-------------------------------------------------------------------------------
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 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 [X] NO [ ]
The number of shares outstanding of the registrant's Common Stock on September
11, 2000 was 21,818,810.
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<PAGE>
SEACHANGE INTERNATIONAL, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet
at July 31, 2000, December 31, 1999, January 31, 2000 and
April 30, 2000.................................................. 3
Consolidated Statement of Operations
Three and six months ended July 31, 2000 and June 30, 1999
and one month ended January 31, 2000 and April 30, 2000......... 4
Consolidated Statement of Cash Flows
Six months ended July 31, 2000 and June 30, 1999
and one month ended January 31, 2000 and April 30, 2000......... 5
Notes to Consolidated Financial Statements.......................6-10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations................11-15
Item 3. Quantitative and Qualitative Disclosures About
Market Risk............................................. 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 16
Item 2. Changes in Securities and Use of Proceeds................... 16
Item 4. Submission of Matters to a Vote of Security Holders......... 17
Item 6. Exhibits and Reports on Form 8-K............................ 17
SIGNATURES................................................................ 18
EXHIBIT INDEX............................................................. 19
2
<PAGE>
Item 1. Financial Statements
SeaChange International, Inc.
Consolidated Balance Sheet
(in thousands, except share-related data)
<TABLE>
<CAPTION>
July 31, December 31, January 31, April 30,
----------- ------------- ------------ ----------
2000 1999 2000 2000
------- ------- ------- ------
<S> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents $11,899 $11,318 $ 2,721 $ 1,042
Accounts receivable, net of allowance for doubtful
accounts of $641 at July 31, 2000,
$908 at December 31, 1999 and January 31, 2000
and $821 at April 30, 2000 20,623 17,840 16,756 16,442
Inventories 22,893 17,128 20,089 22,770
Prepaid expenses and other current assets 3,508 1,568 1,635 2,093
Deferred income taxes 3,399 2,243 3,399 3,400
------- ------- ------- -------
Total current assets 62,322 50,097 44,600 45,747
Property and equipment, net 12,817 10,538 10,492 11,517
Other assets 891 884 869 863
Goodwill and intangibles, net 545 785 751 648
------- ------- ------- -------
$76,575 $62,304 $56,712 $58,775
======= ======= ======= =======
Liabilities and Stockholders' Equity
Current liabilities
Current portion of equipment line of credit
and obligations under capital lease $ 2,078 $ 1,048 $ 1,045 $ 1,716
Accounts payable 13,766 15,038 10,451 10,588
Accrued expenses 1,939 3,499 2,776 1,900
Customer deposits 4,820 2,092 2,428 2,287
Deferred revenue 6,574 4,380 6,292 6,339
Income taxes payable 671 675 625 457
------- ------- ------- -------
Total current liabilities 29,848 26,732 23,617 23,287
------- ------- ------- -------
Long-term equipment line of credit and
obligations under capital lease 2,600 1,231 1,144 2,160
------- ------- ------- -------
Commitments and Contingencies (Note 8)
Stockholders' Equity
Common stock, $.01 par value; 100,000,000
shares authorized; 21,812,317, 21,285,855,
21,300,185 and 21,465,343 shares issued at July 31, 2000,
December 31, 1999, January 31, 2000 and April 30, 2000,
respectively 218 213 213 214
Additional paid-in capital 47,085 35,634 35,696 36,768
Accumulated deficit (3,037) (1,440) (3,898) (3,549)
Treasury stock, 60,750 shares (1) (1) (1) (1)
Accumulated other comprehensive loss (138) (65) (59) (104)
------- ------- ------- -------
Total stockholders' equity 44,127 34,341 31,951 33,328
------- ------- ------- -------
$76,575 $62,304 $56,712 $58,775
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
SeaChange International, Inc.
Consolidated Statement of Operations
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended One month ended
-------------------- ---------------- -------------------------
July 31, June 30, July 31, June 30, January 31, April 30,
---------- -------- -------- ---------- ----------- ---------
2000 1999 2000 1999 2000 2000
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Systems $20,059 $17,443 $36,927 $34,367 $ 226 $ 422
Services 5,508 4,231 10,976 8,118 1,484 1,654
------- ------- ------- ------- ------- -------
25,567 21,674 47,903 42,485 1,710 2,076
------- ------- ------- ------- ------- -------
Costs of revenues
Systems 10,928 10,080 20,200 19,953 633 709
Services 4,457 3,633 8,689 7,077 1,445 1,516
------- ------- ------- ------- ------- -------
15,385 13,713 28,889 27,030 2,078 2,225
------- ------- ------- ------- ------- -------
Gross profit (loss) 10,182 7,961 19,014 15,455 (368) (149)
------- ------- ------- ------- ------- -------
Operating expenses
Research and development 5,002 4,274 9,355 8,394 1,764 1,632
Selling and marketing 2,625 2,031 5,115 4,027 1,034 1,302
General and administrative 1,799 1,360 3,302 2,748 457 536
------- ------- ------- ------- ------- -------
9,426 7,665 17,772 15,169 3,255 3,470
------- ------- ------- ------- ------- -------
Income (loss) from operations 756 296 1,242 286 (3,623) (3,619)
Interest income (expense), net (1) 8 24 19 9 7
------- ------- ------- ------- ------- -------
Income (loss) before income taxes 755 304 1,266 305 (3,614) (3,612)
Provision (benefit) for income taxes 243 (96) 405 (63) (1,156) (1,157)
------- ------- ------- ------- ------- -------
Net income (loss) $ 512 $ 400 $ 861 $ 368 $(2,458) $(2,455)
======= ======= ======= ======= ======= =======
Basic and diluted earnings (loss)
per share $ 0.02 $ 0.02 $ 0.04 $ 0.02 $ (0.12) $ (0.11)
======= ======= ======= ======= ======= =======
Shares used in calculating:
Basic earnings per share 21,759 20,806 21,570 20,739 21,269 21,434
======= ======= ======= ======= ======= =======
Diluted earnings per share 23,306 21,494 23,138 21,293 21,269 21,434
======= ======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
SeaChange International, Inc.
Consolidated Statement of Cash Flows
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (IN THOUSANDS)
<TABLE>
<CAPTION>
For the six months ended For the one month ended
------------------------ -------------------------
July 31, June 30, January 31, April 30,
--------- -------- ----------- ---------
<S> <C> <C> <C> <C>
2000 1999 2000 2000
------- ------- ------- -------
Cash flows from operating activities
Net income (loss) $ 861 $ 368 $(2,458) $(2,455)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)operating activities:
Depreciation and amortization 2,267 2,045 355 391
Inventory valuation allowance 92 288 -- --
Deferred income taxes -- -- (1,156) (1,157)
Changes in operating assets and liabilities:
Accounts receivable (3,867) 696 1,084 4,429
Inventories (2,446) 1,076 (2,961) (2,360)
Prepaid expenses and other assets (1,974) (298) (46) 123
Accounts payable 3,314 420 (4,587) (3,972)
Accrued expenses (836) (275) (723) (329)
Customer deposits 2,392 1,108 336 14
Deferred revenue 282 1,696 1,912 (703)
Income taxes payable 141 (117) (50) (50)
------- ------- ------- -------
Net cash provided by (used in) operating activities 226 7,007 (8,294) (6,069)
------- ------- ------- -------
Cash flows from investing activities
Purchases of property and equipment (4,836) (775) (275) (535)
------- ------- ------- -------
Net cash used in investing activities (4,836) (775) (275) (535)
------- ------- ------- -------
Cash flows from financing activities
Proceeds from borrowings under equipment line of credit 3,240 1,106 -- --
Repayments under line of credit and equipment line of credit (625) (2,245) (72) (127)
Repayments of obligation under capital lease (126) (31) (18) (15)
Proceeds from issuance of common stock 11,299 810 62 386
------- ------- ------- -------
Net cash provided by (used in) financing activities 13,788 (360) (28) 244
------- ------- ------- -------
Net increase (decrease) in cash and cash equivalents 9,178 5,872 (8,597) (6,360)
Cash and cash equivalents, beginning of period 2,721 5,442 11,318 7,402
------- ------- ------- -------
Cash and cash equivalents, end of period $11,899 $11,314 $ 2,721 $ 1,042
======= ======= ======= =======
Supplemental disclosure of cash flow information:
Income taxes paid $ 314 $ 28 $ -- $ --
Interest paid $ 147 $ 64 $ 19 $ 18
Supplemental disclosure of noncash activity:
Transfer of items originally classified as inventories to
fixed assets $ -- $ 2,154 $ -- $ --
Transfer of items originally classified as fixed assets to
inventories $ 450 $ 109 $ -- $ 77
Equipment acquired under capital leases $ -- $ 336 $ -- $ --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
SEACHANGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED; IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of SeaChange International, Inc. and its subsidiaries. The
Company believes that the unaudited consolidated financial statements
reflect all adjustments (consisting of only normal recurring adjustments),
necessary for a fair statement of the Company's financial position, results
of operations and cash flows at the dates and for the periods indicated.
The results of operations for the three and six month periods ended July
31, 2000 are not necessarily indicative of results expected for the full
fiscal year or any other future periods. The unaudited consolidated
financial statements should be read in conjunction with the consolidated
financial statements and related notes for the year ended December 31,
1999, included in the Company's Annual Report on Form 10-K for such fiscal
year.
2. REVENUE RECOGNITION
Revenues from sales of systems are recognized upon shipment provided title
and risk of loss has passed to the customer, there is evidence of an
arrangement, fees are fixed or determinable and collection of the related
receivable is probable. Installation and training revenue is deferred and
recognized as these services are performed. Revenue from technical support
and maintenance contracts is deferred and recognized ratably over the
period of the related agreements, generally twelve months. Customers are
billed for installation, training and maintenance at the time of the
product sale. Revenue from content fees, primarily movies, is recognized in
the period earned based on noncancelable agreements.
3. EARNINGS PER SHARE
For the one month ended January 31, 2000 and April 30, 2000, common shares
of 1,674,000 and 1,578,000, respectively, issuable upon the exercise of
stock options, are antidilutive because the Company recorded a net loss for
the period, and therefore, have been excluded from the diluted earnings per
share computation.
Below is a summary of the shares used in calculating basic and diluted
earnings per share for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED ONE MONTH ENDED
JULY 31, JUNE 30, JULY 31, JUNE 30, JANUARY 31, APRIL 30,
-----------------------------------------------------------------------------------------
2000 1999 2000 1999 2000 2000
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Weighted average shares used
in calculating earnings per
share- Basic.................... 21,759,000 20,806,000 21,570,000 20,739,000 21,269,000 21,434,000
Dilutive stock options............ 1,547,000 688,000 1,568,000 554,000 -- --
-----------------------------------------------------------------------------------------
Weighted average shares used in
calculating earnings per
share- Diluted................... 23,306,000 21,494,000 23,138,000 21,293,000 21,269,000 21,434,000
========== ========== ========== ========== ========== ==========
</TABLE>
6
<PAGE>
SEACHANGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; in thousands, except share and per share data)
4. INVENTORIES
<TABLE>
<CAPTION>
JULY 31, DECEMBER 31, JANUARY 31, APRIL 30,
2000 1999 2000 2000
--------------------------------------------------
<S> <C> <C> <C>
Components and assemblies $18,787 $14,739 $17,602 $19,679
Finished products 4,106 2,389 2,487 3,091
--------------------------------------------------
$22,893 $17,128 $20,089 $22,770
======= ======== ======== =======
</TABLE>
5. COMPREHENSIVE INCOME (LOSS)
For the three months and six months ended July 31, 2000 and June 30, 1999
and the months ended January 31, 2000 and April 30, 2000, the Company's
comprehensive income (loss) was as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED ONE MONTH ENDED
JULY 31, JUNE 30, JULY 31, JUNE 30, JANUARY 31, APRIL 30,
--------------------------------------------------------------------------
2000 1999 2000 1999 2000 2000
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net income (loss) $ 512 $ 400 $ 861 $ 368 $(2,458) $(2,455)
Other comprehensive income (expense), net
of tax:
Foreign currency translation adjustment,
net of tax of ($11), ($5), ($25) , $2,
$--, and $--,respectively (23) (7) (54) 3 6 3
--------------------------------------------------------------------------
Other comprehensive income (expense) (23) (7) (54) 3 6 3
--------------------------------------------------------------------------
Comprehensive income (loss) $ 489 $ 393 $ 807 $ 371 $(2,452) $(2,452)
====== ====== ====== ===== ======= =======
</TABLE>
6. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards for derivative instruments,
including derivative instruments embedded in other contracts, collectively
referred to as derivatives, and for hedging activities. The Company will
adopt SFAS 133 as required by SFAS 137, "Deferral of the Effective Date of
FASB Statement No. 133," in fiscal year 2002. To date the Company has not
utilized derivative instruments or hedging activities and, therefore, the
adoption of SFAS 133 is not expected to have a material impact on the
Company's financial position or results of operations.
7
<PAGE>
SEACHANGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; in thousands, except share and per share data
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in
Financial Statements." SAB 101 summarizes the SEC's view in applying
generally accepted accounting principles to selected revenue recognition
issues. The application of the guidance in SAB 101 will be required in the
Company's fourth quarter of its current fiscal year. The effects of
applying this guidance, if any, will be reported as a cumulative effect
adjustment resulting in a change in accounting principle. The Company's
evaluation of SAB 101 is not yet complete.
7. SEGMENT INFORMATION
The Company has three reportable segments: broadband systems, broadcast
systems and services. The broadband systems segment provides products to
digitally manage, store and distribute digital video for television
operators and telecommunications companies. The broadcast systems segment
provides products for the storage, archival, on-air playback of advertising
and other video programming for the broadcast television industry. The
service segment provides installation, training, product maintenance and
technical support for all of the above systems and content which is
distributed by the broadband product segment. The Company does not measure
the assets allocated to the segments. The Company measures results of the
segments based on the respective gross profits. There were no inter-segment
sales or transfers. Long-lived assets are principally located in the United
States. The Company has changed its reportable segments from the prior
quarter and prior year-end and has reclassed prior period amounts to
conform to these current segments. The following summarizes the revenues
and cost of revenues by reportable segment:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED ONE MONTH ENDED
------------------------------- -------------------------- ----------------------
JULY 31, JUNE 30, JULY 31, JUNE 30, JANUARY 31, APRIL 30,
2000 1999 2000 1999 2000 2000
------------------------------- -------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Broadband $14,072 $13,248 $27,663 $27,041 $ 190 $ 414
Broadcast 5,987 4,195 9,264 7,326 36 8
Services 5,508 4,231 10,976 8,118 1,484 1,654
------- ------- ------- ------- ------- ------
Total $25,567 $21,674 $47,903 $42,485 $1,710 $2,076
------- ------- ------- ------- ------- ------
Costs of revenues
Broadband $ 7,698 $ 7,942 $15,132 $15,980 $ 503 $ 709
Broadcast 3,230 2,138 5,068 3,973 130 --
Services 4,457 3,633 8,689 7,077 1,445 1,516
------- ------- ------- ------- ------- ------
Total $15,385 $13,713 $28,889 $27,030 $2,078 $2,225
------- ------- ------- ------- ------ ------
The following summarizes revenues by geographic locations:
Revenues
United States $21,710 $15,777 $41,227 $33,275 $ 1,398 $1,851
Canada and South America 414 1,493 1,793 2,349 44 75
Europe 990 3,367 2,259 4,990 234 108
Asian Pacific and rest
of world 2,453 1,037 2,624 1,871 34 42
------- ------- ------- ------- ------ ------
$25,567 $21,674 $47,903 $42,485 $ 1,710 $2,076
------- ------- ------- ------- ------ ------
</TABLE>
For the three and six months ended July 31, 2000 and June 30, 1999 certain
customers accounted for more than 10% of the company's revenue. Individual
customers accounted for 17% and 10% of revenues in the three months ended July
31, 2000; 27% and
8
<PAGE>
SEACHANGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; in thousands, except share and per share data
10% of revenues in the three months ended June 30, 1999; 13%, 12%, 12% and
11% in the six months ended July 31, 2000; and 22% and 13% in the six months
ended June 30, 1999.
8. LEGAL PROCEEDINGS
One of the Company's customers is subject to a lawsuit in Civil Action No.
00-CV-195, pending in the federal courts in the Eastern District of
Virginia, whereby a third party has made a claim of patent infringement
against the Company's customer, which claim is believed to relate at least
in part to such customer's use of the Company's products. There are no
direct allegations pending against the Company in connection with this
matter. On Friday, May 19, 2000 the Company filed a motion seeking to
intervene in the action between its customer and the third party, and to
transfer the case to the District Court of Massachusetts. On June 23, 2000,
the Court granted the Company's intervention motion and deferred ruling on
the issue of transfer until at least the end of September 2000. Also on June
23, 2000, the Company filed its Intervenor Complaint in the action seeking,
among other things, a declaratory judgment of non-infringement, invalidity
and unenforceability regarding U.S. Patents Nos. 4,814,883 and 5,200,825. In
addition, the Company has agreed to indemnify its customer for claims
brought against the customer that are related to the customer's use of the
Company's products.
On June 13, 2000, the Company filed a lawsuit against one of its
competitors, nCube Corp., for patent infringement. The lawsuit alleges that
nCube, with the advent of its MediaCube-4 video server, infringes the
Company's patented and highly strategic MediaCluster technology. The lawsuit
is scheduled to go to trial in late September 2000.
On June 14, 1999, the Company filed a complaint against an investment
banker, an investment bank and a competitor that alleges that the competitor
conspired with the investment bankers to injure the business and reputation
of the Company in the marketplace and to drive down the price of the
Company's stock to benefit them. In addition, the complaint alleges that the
competitor, through its employees, provided the investment bankers with
inside information to further these efforts. On June 14, 2000, one of the
defendants in this suit filed a counterclaim under seal against the Company
seeking unspecified damages.
The Company cannot be certain of the outcome of the foregoing litigation,
but does plan to oppose the allegations against it and assert its claims
against other parties vigorously.
9. FISCAL YEAR CHANGE
In April 2000, the Company's Board of Directors voted to change the
Company's fiscal accounting year from December 31 to January 31, such that
the Company's current fiscal year began on February 1, 2000 and will end on
January 31, 2001. The following unaudited condensed consolidated financial
data summarizes the operating results and selected balance sheet information
of the Company for the comparable three and six month periods ended July
31, 1999 and the one month transition periods ended January 31, 1999 and
April 30, 1999 (in thousands, except per share data):
9
<PAGE>
SEACHANGE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited; in thousands, except share and per share data
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS MONTH MONTH
ENDED ENDED ENDED ENDED
JULY 31, 1999 JULY 31, 1999 JANUARY 31, 1999 APRIL 30, 1999
<S> <C> <C> <C> <C>
Revenues $22,628 $43,917 $ 1,908 $ 2,387
Gross profit 8,134 15,927 189 488
Operating expenses 7,419 15,183 2,293 2,552
Income (loss) from operations 715 744 (2,104) (2,064)
Income (loss) before taxes 717 751 (2,095) (2,061)
Net income (loss) 813 814 (1,404) (1,402)
Basic earnings (loss) per common share $ 0.04 $0.04 $(0.07) $(0.07)
Diluted earnings (loss) per common $ 0.04 $0.04 $(0.07) $(0.07)
share
Weighted average common shares 20,933 20,793 20,901 21,001
outstanding- basic
Weighted average common shares 22,014 21,736 20,901 21,001
outstanding- diluted
Working capital $21,912 $21,912 $20,816 $20,913
Total assets 52,579 52,579 48,237 50,082
Deferred revenue 5,194 5,194 4,976 4,888
Long-term liabilities 1,664 1,664 981 841
Total liabilities 21,692 21,692 18,937 20,603
Total stockholders' equity 30,887 30,887 29,300 29,479
</TABLE>
10. MICROSOFT INVESTMENT
On May 23, 2000, the Company and Microsoft Corporation entered into an
agreement to collaborate on extending Microsoft Windows Media Technologies
from Broadband Internet delivery to cable and broadcast television systems.
As part of the agreement, Microsoft purchased 277,162 shares of the
Company's common stock for $10 million. In addition, Microsoft has agreed to
purchase additional shares of the Company's common stock based upon the
achievement of mutually agreed upon development milestones.
10
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Any statements contained in this Form 10-Q that do not describe historical
facts, including without limitation statements concerning expected revenues,
earnings, product introductions and general market conditions, may constitute
forward-looking statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. Any such forward-looking statements contained
herein are based on current expectations, but are subject to a number of risks
and uncertainties that may cause actual results to differ materially from
expectations. The factors that could cause actual future results to differ
materially from current expectations include the following: the Company's
ability to integrate the operations of acquired subsidiaries; fluctuations in
demand for the Company's products and services; the Company's ability to manage
its growth; the Company's ability to develop, market and introduce new and
enhanced products and services on a timely basis; the rapid technological change
which characterizes the Company's markets; the Company's significant
concentration of customers; the Company's dependence on certain sole source
suppliers and third-party manufacturers; the risks associated with international
sales as the Company expands its markets; and the ability of the Company to
compete successfully in the future. Further information on factors that could
cause actual results to differ from those anticipated is detailed in various
filings made by the Company from time to time with the Securities and Exchange
Commission, including but not limited to, those appearing under the caption
"Certain Risk Factors" in the Company's Annual Report on Form 10-K for the year
ended December 31, 1999. Any forward-looking statements should be considered in
light of those factors.
OVERVIEW
The Company develops, markets, licenses and sells broadband and broadcast
systems and related services and movie content to television operators,
telecommunications companies and broadcast television companies. Revenues from
systems sales are recognized upon shipment provided title and risk of loss has
passed to the customer, there is evidence of an arrangement, fees are fixed or
determinable and collection of the related receivables is probable. Installation
and training revenue is deferred and recognized as these services are performed.
Revenue from technical support and maintenance contracts is deferred and
recognized ratably over the period of the related agreements, generally twelve
months. Customers are billed for installation, training and maintenance at the
time of the product sale. Revenue from content fees, primarily movies, is
recognized in the period earned based on noncancelable agreements.
The Company has experienced fluctuations in the number of orders being placed
from quarter to quarter. The Company believes this is principally attributable
to the buying patterns and budgeting cycles of television operators and
broadcast companies, the primary buyers of digital advertising insertion systems
and broadcast systems, respectively. The Company expects that there will
continue to be fluctuations in the number and value of orders received and that
at least in the near future, the Company's revenue and results of operations
will reflect these fluctuations.
The Company's results are significantly influenced by a number of factors,
including the Company's pricing, the costs of materials used in the Company's
products and the expansion of the Company's operations. The Company prices its
products and services based upon its costs as well as in consideration of the
prices of competitive products and services in the marketplace. The costs of the
Company's products primarily consist of the costs of components and
subassemblies that have generally declined over time. As a result of the growth
of the Company's business, operating expenses of the Company have increased in
the areas of research and development, selling and marketing, customer service
and support and administration.
In April 2000, the Company's Board of Directors voted to change the Company's
fiscal accounting year from December 31 to January 31, such that the Company's
current fiscal year began on February 1, 2000 and will end on January 31, 2001.
The Company has not recast the comparable prior year periods as there are no
seasonal or other factors that affect the comparability of the periods
presented.
Revenues, including both systems and services revenues, for the one month period
ended January 31, 2000 were $1.7 million compared to $1.9 million for the one
month period will end January 31, 1999. In the one month period ended January
31, 2000, the Company's gross margin was a negative $368,000 compared to a gross
margin of $189,000 in the one month period ended January 31, 1999. The net loss
for the one month period ended January 31, 2000 and 1999 were $2.5 million and
$1.4 million, respectively. For the month ended January 31, 2000, the Company's
cash and cash equivalents decreased $8.6 million primarily due to a net loss for
the month of $2.5 million, an increase in inventory of $3.0 million as a result
of future shipment requirements, a decrease of $4.6 million in accounts payable
due to the timing of vendor payments. These items that used cash from operations
were offset in part by a decrease in accounts receivable of $1.1 million and an
increase in deferred revenue of $1.9 million.
Revenues, including both systems and service revenues, for the one month period
ended April 30, 2000 were $2.1 million compared to $2.4 million for the one
month period ended April 30, 1999. In the one month period ended April 30, 2000,
the Company's gross margin was a negative $149,000 compared to a gross margin
of $488,000 in the one month ended April 30, 1999. The net loss for the one
month period ended April 30, 2000 and 1999 were $2.5 million and $1.4 million,
respectively. For the month ended April 30, 2000, the Company's cash and cash
equivalents decreased $6.1 million primarily due to a net loss for the month of
$2.5 million, an increase in inventory of $2.4 million as a result of future
shipment requirements, a decrease of $4.0 million in accounts payable due to
timing of vendor payments. These items that used cash from operations were
offset in part by a decrease in accounts receivable of $2.4 million.
THREE MONTHS ENDED JULY 31, 2000 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1999
Revenues
Systems. The Company's systems revenues consist of sales of its digital
advertising and interactive television systems (collectively "broadband
systems") and broadcast systems. Systems revenues increased 15% from $17.4
million in the three months ended June 30, 1999 to $20.1 million in the three
months ended July 31, 2000. This increase in systems revenues resulted from
an increase of $800,000 and $1.8 million in broadband and broadcast systems
revenues, respectively.
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For the three-month periods ended July 31, 2000 and June 30, 1999, certain
customers accounted for more than 10% of the Company's total revenues.
Single customers accounted for 17% and 10% of total revenues in three months
ended July 31, 2000 and 27% and 10% of total revenues in the three months
ended June 30, 1999. The Company believes that revenues from current and
future large customers will continue to represent a significant proportion of
total revenues.
International sales accounted for approximately 15% and 27% of total revenues
in the three-month periods ended July 31, 2000 and June 30, 1999,
respectively. The Company expects that international sales will continue to
fluctuate quarter to quarter and will remain a significant portion of the
Company's business in the future. As of July 31, 2000, substantially all
sales of the Company's products were made in United States dollars. The
Company does not expect to change this practice in the foreseeable future.
Therefore, the Company has not experienced, nor does it expect to experience
in the near term, any material impact from fluctuations in foreign currency
exchange rates on its results of operations or liquidity. If this practice
changes in the future, the Company will reevaluate its foreign currency
exchange rate risk.
Services. The Company's services revenues consist of fees for installation,
training, product maintenance, technical support services and movie content.
The Company's services revenues increased over 30% to $5.5 million in three
months ended July 31, 2000 from $4.2 million in the three months ended June
30, 1999. This increase in services revenues primarily resulted from the
renewals of maintenance and support contracts, price increases on certain
annual maintenance contracts, the impact of a growing installed base of
systems and a higher level of technical support contracts.
GROSS PROFIT
Systems. Costs of systems revenues consist primarily of the cost of
purchased components and subassemblies, labor and overhead relating to the
final assembly and testing of complete systems and related expenses. Costs of
systems revenues increased 8% from $10.1 million in the three months ended
June 30, 1999 to $10.9 million in the three months ended July 31, 2000. In
the three months ended July 31, 2000, the increase in costs of systems
revenues reflects higher systems revenue.
Systems gross profit as a percentage of systems revenues was 46% and 42% in
the three months ended July 31, 2000 and June 30, 1999, respectively. The
increase in systems gross profit in the three month ended July 31, 2000 was
primarily due to lower material and other manufacturing costs as a percentage
of systems revenue. The gross profits in the three months ended July 31,
2000 were impacted by an increase of approximately $92,000 in the Company's
inventory valuation allowance. The Company evaluates inventory levels and
expected usage on a periodic basis and provides a valuation allowance for
estimated inactive, obsolete and surplus inventory.
Services. Costs of services revenues consist primarily of labor, materials
and overhead relating to the installation, training, product maintenance and
technical support services provided by the Company and costs associated with
providing movie content. Costs of services revenues increased 23% from $3.6
million in the three months ended June 30, 1999 to $4.5 million in the three
months ended July 31, 2000, primarily as a result of increased revenues and
the costs associated with the Company hiring and training additional service
personnel to provide worldwide support for the growing installed base of
broadband and broadcast systems and costs associated with providing movie
content. Services gross profit as a percentage of services revenue was 19% in
the three months ended July 31, 2000 and 14% in the three months ended June
30, 1999. Improvements in the services gross profit in the three months
ended July 31, 2000 reflect the increase in the installed base of systems
under service contracts, higher volume of technical support contracts and
price increases on certain annual maintenance contracts. The Company expects
that it will continue to experience fluctuations in gross profit as a
percentage of services revenue as a result of the timing of revenues from
product and maintenance support and other services to support the growing
installed base of systems and the timing of costs associated with the
Company's ongoing investment required to build a service organization to
support the installed base of systems and new products.
RESEARCH AND DEVELOPMENT. Research and development expenses consist primarily
of compensation of development personnel, depreciation of equipment and an
allocation of related facilities expenses. Research and development expenses
increased 17% from $4.3 million in the three months ended June 30, 1999 to
$5.0 million in the three months ended July 31, 2000. The increase in the
dollar amount in the three months ended July 31, 2000 was primarily
attributable to the hiring and contracting of additional development
personnel which reflects the Company's continuing investment in the
development of new technology. All internal software development costs to
date have been expensed by the Company. The Company expects that research and
development expenses will continue to increase in dollar amount as the
Company continues to focus on the development of new technology and support
of new and existing products.
SELLING AND MARKETING. Selling and marketing expenses consist primarily of
compensation expenses, including sales commissions, travel expenses and
certain promotional expenses. Selling and marketing expenses increased 29%
to $2.6 million
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in the three months ended July 31, 2000 from $2.0 million in the three months
ended June 30, 1999. The increase was primarily due to the hiring of
additional sales personnel for the Company's product segments and higher
marketing costs.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of compensation of executive, finance, human resource and
administrative personnel, legal and accounting services and an allocation of
related facilities expenses. General and administrative expenses increased
32% from $1.4 million in the three-month period ended June 30, 1999 to $1.8
million in the three-month period ended July 31, 2000. This increase is
primarily due to increased legal expenses associated with various litigation
matters.
INTEREST INCOME, NET. Interest income/(expense), net was approximately
($1,000) and $8,000 in the three months ended July 31, 2000 and June 30,
1999, respectively. The decrease in interest income, net in the three months
ended July 31, 2000 primarily resulted from interest expense on borrowings.
PROVISION FOR INCOME TAXES. The Company's effective tax provision rate was
32% in the three months ended July 31, 2000. The Company's effective tax
benefit rate was 31.5% in the three months ended June 30, 1999 due to the
utilization of operating tax loss carryforwards associated with the
acquisition of Digital Video Arts, Ltd. in 1999 which was accounted for as a
pooling of interests.
The Company had net deferred tax assets of $2,243,000 at July 31, 2000 and
December 31, 1999. The Company has made the determination it is more likely
than not that it will realize the benefits of the net deferred tax assets.
SIX MONTHS ENDED JULY 31, 2000 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1999
REVENUES
Systems. Systems revenues increased 7% from $34.4 million in the six months
ended June 30, 1999 to $36.9 million in the six months ended July 31, 2000.
This increased systems revenues resulted primarily from increased broadcast
and broadband revenue of $1.9 million and $0.6 million, respectively.
For the six months ended July 31, 2000 and June 30, 1999, certain customers
accounted for more than 10% of the Company's total revenues. Individual
customers accounted for 13%, 12%, 12% and 11% of revenues for the six months
ended July 31, 2000 and 22% and 13% of revenues in the six months ended June
30, 1999. The Company believes that revenues from current and future large
customers will continue to represent a significant portion of total revenues.
International sales accounted for approximately 14% and 22% of total revenues
for the six months ended July 31, 2000 and June 30, 1999, respectively. The
Company expects that international sales will continue to fluctuate quarter
to quarter and will remain a significant portion of revenues of the Company
in the future. As of July 31, 2000, substantially all sales of the Company's
products were made in United States dollars. The Company does not expect any
material change to this practice in the foreseeable future. Therefore, the
Company has not experienced, nor does it expect to experience in the near
term, any material impact from fluctuations in foreign currency exchange
rates on its results of operations or liquidity. If this practice changes in
the future, the Company will reevaluate its foreign currency exchange rate
risk.
Services. The Company's services revenues increased over 35% from
approximately $8.1 million in the six months ended June 30, 1999 to $11.0
million in the six months ended July 31, 2000. These increases in services
revenues resulted primarily from increased systems revenues, renewals of
maintenance and support contracts, the impact of a growing installed base
of systems and a higher level of technical support contracts.
GROSS PROFIT
Systems. Costs of systems revenues increased 1% from $20.0 million in the
six months ended June 30, 1999 to $20.2 million in the six months ended July
31, 2000. For the six months ended July 31, 2000, the increase in cost of
systems revenues primarily reflects increased material and manufacturing
labor and overhead costs incurred to support increases in systems revenue and
changes in the product mix, including the introduction of the broadcast
products.
Systems gross profit as a percentage of systems revenues was 45% and 42% in
the six months ended July 31, 2000 and June 30, 1999, respectively. The
increase in systems gross profit in 2000 was primarily due to higher systems
revenue and lower material and manufacturing costs as a percentage of systems
revenues. The gross profits in the six months ended July 31, 2000 and June
30, 1999 were impacted by increases of approximately $92,000 and $288,000,
respectively, in the Company's inventory valuation allowance. The Company
evaluates inventory levels and expected usage on a periodic basis and
provides a valuation allowance for estimated inactive, obsolete and surplus
inventory.
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Services. Costs of services revenues increased nearly 23% from approximately
$7.1 million in the six months ended June 30, 1999 to $8.7 million in the six
months ended July 31, 2000, primarily as a result of the costs associated
with the Company hiring and training additional service personnel to provide
worldwide support for the growing installed base of broadband and broadcast
systems and costs associated with providing movie content. Services gross
profit as a percentage of services revenue increased to 21% in the six months
ended July 31, 2000 compared to a gross profit margin of 13% in the six
months ended June 30, 1999. The Company expects that it will continue to
experience fluctuations in gross profit as a percentage of services revenue
as a result of the timing of revenues from product and maintenance support
and other services to support the growing installed base of systems and the
timing of costs associated with the Company's ongoing investment required to
build a service organization to support the installed base of systems and new
products.
RESEARCH AND DEVELOPMENT. Research and development expenses increased 11%
from approximately $8.4 million, or 20% of total revenues in the six months
ended June 30, 1999 to $9.4 million, or 20% of total revenues in the six
months ended July 31, 2000. The increase in the dollar amount was primarily
attributable to the hiring and contracting of additional development
personnel which reflects the Company's continuing investment in the
development of new technology. The Company expects that research and
development expenses will continue to increase in dollar amount as the
Company continues to focus on the development of new technology and support
of new and existing products.
SELLING AND MARKETING. Selling and marketing expenses increased 27% from
$4.0 million, or 9% of total revenues, in the six months ended June 30, 1999,
to $5.1 million or 11% of total revenues in the six months ended July 31,
2000, respectively. This increase is primarily due to the hiring of
additional sales personnel for the Company's broadcast and interactive
television products and higher marketing expenses.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
20% from $2.7 million, or 6% of total revenues in the six months ended June
30, 1999 to $3.3 million, or 7% of total revenues in the six months ended
July 31, 2000. This increase is primarily due to increased legal expenses
associated with various litigation matters.
INTEREST INCOME, NET. Interest income, net, was approximately $24,000 and
$19,000 in the six months ended July 31, 2000 and June 30, 1999,
respectively. The increase in 2000 in interest income, net, primarily
resulted from interest earned on invested balances.
PROVISION (BENEFIT) FOR INCOME TAXES. The Company's effective tax provision
rate was 32% in the six months ended July 31, 2000. The Company's effective
tax benefit rate was 20.6% in the six months ended June 30, 1999 due to the
utilization of operating tax loss carryforwards associated with the
acquisition of Digital Video Arts, Ltd. in 1999 which was accounted for as a
pooling of interests.
The Company had net deferred tax assets of $2,243,000 at July 31, 2000 and
December 31, 1999. The Company has made the determination it is more likely
than not that it will realize the benefits of the net deferred tax assets.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations and capital expenditures primarily
with the proceeds of the Company's common stock, borrowings and cash flows
generated from operations. Cash, cash equivalents and marketable securities
increased $9.2 million from $2.7 million at January 31, 2000 to $11.9 million
at July 31, 2000. Working capital increased from approximately $19.8 million
at January 31, 2000 to approximately $31.3 million at July 31, 2000.
Net cash provided by operating activities was approximately $226,000 and $7.0
million for the six months ended July 31, 2000 and June 30, 1999,
respectively. The net cash provided by operating activities in the six
months ended July 31, 2000 was the result of the net income adjusted for non-
cash expenses including depreciation and amortization of $2.3 million and the
changes in certain assets and liabilities. The significant net changes in
assets and liabilities that provided cash in operations included an increase
in accounts payable of $3.3 million as a result of timing of vendor payments
and an increase in customer deposits of $2.4 million. These items that
provided cash from operations were offset by an increase in accounts
receivable of $3.9 million as a result of higher revenues, an increase in
inventories of $2.5 million due to expected future shipments and an increase
in prepaid expenses and other assets of $2.0 million.
Net cash used in investing activities was approximately $4.8 million and
$800,000 for the six months ended July 31, 2000 and June 30, 1999,
respectively. Investment activity consisted primarily of capital
expenditures related to construction to expand the current manufacturing
facility and the acquisition of computer equipment, office furniture, and
other capital equipment required to support the expansion and growth of the
business.
Net cash provided by financing activities was approximately $13.8 million for
the six months ended July 31, 2000. Net cash used in financing activities was
approximately $360,000 for the six months ended June 30, 1999. In the six
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months ended July 31, 2000, the cash provided by financing included $11.3
million received in connection with the issuance of common stock ($10 million
of which was issued to Microsoft Corporation) and $3.2 million in borrowings
under the equipment line of credit. During the same period, cash used in
financing activities included approximately $750,000 in principal payments
under the Company's equipment line of credit and capital lease obligations.
In July 2000, the Company renewed its revolving line of credit and equipment
line of credit with a bank. The revolving line of credit which expired in
March 2000 was extended until March 2001 and borrowings under the facility
increased to $7.5 million. The equipment line of credit which also expired
in March 2000 was extended to provide the Company additional equipment
financing of $4.0 million through March 2001. In addition, the Company
entered into a $3 million line of credit facility with the Export-Import Bank
of the United States which allows the Company to borrow money based upon
eligible foreign customer account balances. This facility also expires in
March 2001. Borrowings under all the lines of credit are secured by
substantially all of the Company's assets. Loans made under the revolving
line of credit would generally bear interest at a rate per annum equal to the
LIBOR rate plus 2% (9.05% at July 31, 2000). Loans under the EXIM line of
credit bear interest as a rate per annum equal to the Prime rate (9.5% at
July 31, 2000). Loans made under the equipment line of credit bear interest
at a rate per annum equal to the bank's base rate plus 1.0% (10.5% at July
31, 2000). The loan agreement relating to the lines of credit requires that
the Company provide the bank with certain periodic financial reports and
comply with certain financial ratios including the maintenance of total
liabilities, excluding deferred revenue, to net worth of at least .80 to 1.0.
At July 31, 2000 the Company was in compliance with all covenants. As of July
31, 2000, there were no borrowings against either line of credit and
borrowings outstanding under the equipment line of credit were $4.7 million.
The Company believes that existing funds together with available borrowings
under the lines of credit and equipment line facility are adequate to satisfy
its working capital and capital expenditure requirements for the foreseeable
future.
The Company had no material capital expenditure commitments as of July 31,
2000.
Effects of Inflation
Management believes that financial results have not been significantly
impacted by inflation and price changes.
Recent Accounting Pronouncements.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards for derivative instruments,
including derivative instruments embedded in other contracts, collectively
referred to as derivatives, and for hedging activities. The Company will
adopt SFAS 133 as required by SFAS 137, "Deferral of the Effective Date of
FASB Statement No. 133," in fiscal year 2002. To date the Company has not
utilized derivative instruments or hedging activities and, therefore, the
adoption of SFAS 133 is not expected to have a material impact on the
Company's financial position or results of operations.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 summarizes the SEC's view in applying generally
accepted accounting principles to selected revenue recognition issues. The
application of the guidance in SAB 101 will be required in the Company's
fourth quarter of its current fiscal year. The effects of applying this
guidance, if any, will be reported as a cumulative effect adjustment
resulting in a change in accounting principle. The Company's evaluation of
SAB 101 is not yet complete.
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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
The Company faces exposure to financial market risks, including adverse
movements in foreign currency exchange rates and changes in interest rates.
These exposures may change over time as business practices evolve and could have
a material adverse impact on the Company's financial results. The Company's
primary exposure has been related to local currency revenue and operating
expenses in Europe and Asia. Historically, the Company has not hedged specific
currency exposures as gains and losses on foreign currency transactions have not
been material to date. At July 31, 2000, the Company had $4,206,000 outstanding
related to variable rate U.S. dollar denominated debt. The carrying value of
these short-term borrowings approximates fair value due to the short maturities
of these instruments. Assuming a hypothetical 10% adverse change in the
interest rate, interest expense on these short-term borrowings would increase by
$44,000.
The carrying amounts reflected in the consolidated balance sheet of cash and
cash equivalents, trade receivables, and trade payables approximates fair value
at July 31, 2000 due to the short maturities of these instruments.
The Company maintains investment portfolio holdings of various issuers, types,
and maturities. The Company's cash and marketable securities include cash
equivalents, which the Company considers investments to be purchased with
original maturities of three months or less given the short maturities and
investment grade quality of the portfolio holdings at July 31, 2000, a sharp
rise in interest rates should not have a material adverse impact on the fair
value of the Company's investment portfolio. As a result, the Company does not
currently hedge these interest rate exposures.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
One of the Company's customers is subject to a lawsuit in Civil Action No. 00-
CV-195, pending in the federal courts in the Eastern District of Virginia,
whereby a third party has made a claim of patent infringement against the
Company's customer, which claim is believed to relate at least in part to such
customer's use of the Company's products. There are no direct allegations
pending against the Company in connection with this matter. On Friday, May 19,
2000 the Company filed a motion seeking to intervene in the action between its
customer and the third party, and to transfer the case to the District Court
of Massachusetts. On June 23, 2000, the Court granted the Company's
intervention motion and deferred ruling on the issue of transfer until at
least the end of September 2000. Also on June 23, 2000, the Company filed its
Intervenor Complaint in the action seeking, among other things, a declaratory
judgment of non-infringement, invalidity and unenforceability regarding U.S.
Patents Nos. 4,814,883 and 5,200,825. In addition, the Company has agreed to
indemnify its customer for claims brought against the customer that are
related to the customer's use of the Company's products.
On June 13, 2000, the Company filed a lawsuit against one of its
competitors, nCube Corp., for patent infringement. The lawsuit alleges that
nCube, with the advent of its MediaCube-4 video server, infringes the
Company's patented and highly strategic MediaCluster technology. The lawsuit
is scheduled to go to trial in late September 2000.
On June 14, 1999, the Company filed a complaint against an investment banker,
an investment bank and a competitor that alleges that the competitor conspired
with the investment bankers to injure the business and reputation of the
Company in the marketplace and to drive down the price of the Company's stock
to benefit them. In addition, the complaint alleges that the competitor,
through its employees, provided the investment bankers with inside information
to further these efforts. On June 14, 2000, one of the defendants in this suit
filed a counterclaim under seal against the Company seeking unspecified
damages.
The Company cannot be certain of the outcome of the foregoing litigation, but
does plan to oppose the allegations against it and assert its claims against
other parties vigorously.
Item 2. Changes in Securities and Use of Proceeds
On May 23, 2000, the Company sold two hundred seventy-seven thousand one
hundred sixty-two (277,162) shares of its Common Stock to Microsoft
Corporation in exchange for an aggregate purchase price of $10,000,004.96.
This sale was exempt from the registration requirements of the Securities Act
of 1933, as amended (the "Securities Act"), pursuant to Rule 506 of Regulation
D of the rules promulgated by the Securities and Exchange Commission pursuant
to the Securities Act as the Company did not make any general solicitation
relating to the sale of these shares and Microsoft Corporation represented to
the Company that it was an accredited investor, as such term in defined
pursuant to Rule 501 of Regulation D of the rules promulgated by the
Securities and Exchange Commission pursuant to the Securities Act. The Company
intends to use the proceeds from this sale for general working capital
purposes.
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Item 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of the security holders of the Company was held on May 24,
2000. Matters considered and acted upon the meeting included: (i) the election
of one (1) member to the Company's Board of Directors, to serve for a three-
year term as a Class I Director; (ii) the ratification and approval of the
Company's Amended and Restated 1995 Stock Option Plan, including an increase
in the number of shares of Common Stock available for issuance thereunder from
2,925,000 to 4,800,000 shares; and (iii) the approval of an amendment of the
Company's Amended and Restated Certificate of Incorporation increasing from
50,000,000 to 100,000,000 the number of authorized shares of Common Stock of
the Company.
William C. Styslinger, III was elected as the Class I Director of the Company
with 18,560,286 shares of Common Stock voted for and 444,823 shares of Common
Stock withheld from the election of Mr. Styslinger. In addition, after the
annual meeting, the following persons continued to serve as directors of the
Company: Martin R. Hoffmann, Paul H. Saunders and Carmine Vona.
With respect to the ratification and approval of the Company's Amended and
Restated 1995 Stock Option Plan, including an increase in the number of shares
of Common Stock available for issuance thereunder from 2,925,000 to 4,800,000
shares, 9,429,538 shares of Common Stock voted for, 3,604,800 shares of Common
Stock voted against, and 5,035 shares of Common Stock abstained from such
vote.
With respect to the approval of an amendment of the Company's Amended and
Restated Certificate of Incorporation increasing from 50,000,000 to
100,000,000 the number of authorized shares of Common Stock of the Company,
18,140,225 shares of Common Stock voted for, 861,849 shares of Common Stock
voted against, and 3,035 shares of Common Stock abstained from such vote.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.1 Second Loan Modification Agreement, dated as of July 25, 2000,
by and among SeaChange International, Inc., Silicon Valley Bank and Silicon
Valley Bank, doing business as Silicon Valley East
Exhibit 10.2 Export-Import Bank Loan and Security Agreement, dated as of
July 25, 2000, by and among SeaChange International, Inc., Silicon Valley
Bank and Silicon Valley Bank, doing business as Silicon Valley East
Exhibit 10.3 Common Stock Purchase Agreement, dated as of May 23, 2000, by
and between SeaChange International, Inc. and Microsoft Corporation
Exhibit 10.4 Registration Rights Agreement, dated as of May 23, 2000, by
and between SeaChange International, Inc. and Microsoft Corporation
Exhibit 27: Financial Data Schedule (For SEC Edgar Filing Only;
Intentionally Omitted)
(b) Reports on Form 8-K
On April 25, 2000, the Company filed a Form 8-K with the Securities and
Exchange Commission with disclosure therein under Item 8 of Form 8-K
relating to the change in the Company's fiscal year-end from December 31 to
January 31, such that the Company's current fiscal year began on February
1, 2000 and will end on January 31, 2001.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, SeaChange International, Inc. has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated: September 14, 2000
SEACHANGE INTERNATIONAL, INC.
by: /s/ William L. Fiedler
----------------------
William L. Fiedler
Vice President, Finance and Administration,
Chief Financial Officer, Secretary and
Treasurer (Principal Financial and
Accounting Officer; Authorized Officer)
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SEACHANGE INTERNATIONAL, INC.
EXHIBIT INDEX
Exhibit Number Description Page
-------------- ----------- ----
10.1 Second Loan Modification Agreement, dated as of
July 25, 2000, by and among SeaChange International,
Inc., Silicon Valley Bank and Silicon Valley Bank,
doing business as Silicon Valley East
10.2 Export-Import Bank Loan and Security Agreement,
dated as of July 25, 2000, by and among SeaChange
International, Inc., Silicon Valley Bank and Silicon
Valley Bank, doing business as Silicon Valley East
10.3 Common Stock Purchase Agreement, dated as of
May 23, 2000, by and between SeaChange International,
Inc. and Microsoft Corporation
10.4 Registration Rights Agreement, dated as of
May 23, 2000, by and between SeaChange International,
Inc. and Microsoft Corporation
27.1 Financial Data Schedule (For SEC Edgar Filing Only;
Intentionally Omitted)
27.2 Financial Data Schedule (For SEC Edgar Filing Only;
Intentionally Omitted)
19
