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Exhibit 99.1
GADZOOX NETWORKS AMENDS FIRST FISCAL QUARTER 2000 FINANCIAL RESULTS DUE TO
CHANGE IN METHOD OF ACCOUNTING RELATED TO SMARTSAN SYSTEMS ACQUISITION
SAN JOSE, CALIFORNIA, AUGUST 7, 2000 - Gadzoox Networks, Inc. (Nasdaq: ZOOX)
announced today that it amended its previously announced financial results for
the quarter ended June 30, 2000 due to a change in the method of accounting for
the acquisition of SmartSAN Systems, Inc. from pooling-of-interest accounting to
purchase accounting. The Company completed the acquisition on April 5, 2000, and
previously announced its results for the quarter ended June 30, 2000 in its
press release dated July 13, 2000.
The Company recently learned that an affiliated shareholder traded stock during
the pooling holding period for the SmartSAN acquisition. As a result, the
transaction does not qualify for the pooling-of-interest accounting method.
"The basics of the acquisition are still valid. We used our stock to purchase
SmartSAN, and all of the adjustments being recorded to effect purchase
accounting are of a non-cash nature that in no way reflects on the Company's
performance," said Chris Munson, Gadzoox Networks Chief Financial Officer. Over
the next five years, the Company will amortize approximately $21,000,000 of
goodwill which was recorded as a result of utilizing purchase accounting. "The
amortization is a non-cash accounting entry," added Munson.
Loss per share for the quarter ended June 30, 2000, which now includes the
amortization of goodwill and a one-time write-off for in-process research and
development costs, is $0.52 per share versus $0.35 per share as previously
stated. Loss per share for the June 2000 quarter, excluding amortization of
deferred compensation costs of approximately $168,000, amortization of goodwill
of approximately $1,048,000 and the one-time write off for in-process research
and development costs of approximately $4,900,000, would have been approximately
$0.30 per share. No changes to net revenues, cost-of-goods sold or operating
expenses, except for acquisition related expenses, were made as a result of the
adjustment from the pooling-of-interest method of accounting to purchase
accounting. Also adjusted were the results for the quarter ended June 30, 1999
to exclude SmartSAN expenses of approximately $246,000. As revised, the loss per
share was $0.17 rather than the previously reported loss per share of $0.18.
Shareholders' equity now reflects the additional common stock issued for the
acquisition, including those to be issued upon the exercise of outstanding
SmartSAN stock options. Additionally, SmartSAN's accumulated deficit previously
recorded as a pooling-of-interest entry was removed to reflect purchase
accounting.
The statements in this news release relating to the future benefits of the
SmartSAN acquisition involve known and unknown risks and uncertainties which may
cause Gadzoox' actual results in future periods to be materially different from
any performance suggested in this release. Such factors include, but may not
necessarily be limited to, fluctuations in customer demand, both in
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timing and in volume, the fact that the SAN market is new and evolving, the
Company's dependence on a limited number of products, a significant portion of
which are sold to a limited number of partners including OEM and distribution
channel partners, the ability or willingness of our partners to sell our
products, market acceptance of new products, including but not limited to
Capellix, Geminix and Axxess, and the timing of such acceptance, the Company's
dependence on its contract manufacturer, competition in the Company's industry
and the timing of new technology, product introductions and the Company's
ability to effectively and efficiently integrate the SmartSAN products into the
existing Gadzoox product line. In the context of forward looking information
provided in this news release, reference is made to the discussion of risk
factors detailed in the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 2000, as well as subsequent filings.
ABOUT GADZOOX NETWORKS
Gadzoox Networks, Inc. (NASDAQ: ZOOX) is a leader in SAN (storage area
network) products. The Company provides networking solutions for enterprise
storage with scalable, managed SAN solutions based on Gadzoox' Fibre Channel
switches, routers, storage pooling, hubs and management products. Serving as
modular building blocks, Gadzoox' products are designed to address the growth in
enterprise data through the evolving capabilities of SANs. Gadzoox is an ISO
9001 certified company. Gadzoox corporate headquarters is located at 5850
Hellyer Ave., San Jose, Calif., 95138. For more information, visit the company's
web site at www.gadzoox.com or call 888.423.3222.
Press contact: Investor Contact:
Rosie Sundell Christine Munson
Corporate Communications Director Chief Financial Officer
Gadzoox Networks, Inc. Gadzoox Networks, Inc.
408.360.6011 408.361.6191
[email protected] [email protected]
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GADZOOX NETWORKS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
----------------------
June 30, June 30,
2000 1999
-------- --------
<S> <C> <C>
Net revenues $ 9,002 $ 9,211
Cost of revenues 5,223 5,414
-------- --------
Gross margin 3,779 3,797
-------- --------
Operating expenses:
Research and development 5,519 3,917
Sales and marketing 5,727 1,888
General and administrative 1,484 764
In-process research and development costs 4,900 --
Amortization of goodwill 1,048 --
Amortization of deferred compensation 168 322
-------- --------
Total operating expenses 18,846 6,891
-------- --------
Loss from operations (15,067) (3,094)
Total other income (expense), net 885 (142)
-------- --------
Net Loss $(14,182) $ (3,236)
======== ========
Basic net loss per share $ (0.52) $ (0.58)
======== ========
Weighted average shares used in computing
basic net loss per share 27,125 5,626
======== ========
Pro forma basic net loss per share $ (0.52) $ (0.17)
======== ========
Weighted average shares used in computing
pro forma basic net loss per share 27,125 19,533
======== ========
Pro forma basic net loss per share excluding
amortization of deferred compensation,
goodwill amortization and the one-time
write-off of in-process research and
development costs $ (0.30) $ (0.15)
======== ========
Weighted average shares used in computing
pro forma basic net loss per share excluding
deferred compensation, goodwill and write-off
of in-process research and development costs 27,125 19,533
======== ========
</TABLE>
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GADZOOX NETWORKS, INC.
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
June 30, March 30,
2000 1999
--------- ---------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 28,029 $ 42,830
Short-term investment 32,125 30,619
Accounts receivable, net 12,388 14,131
Inventories 10,204 6,665
Prepaid expenses and other current assets 3,736 2,464
--------- ---------
Total current assets 86,482 96,709
Property and equipment, net 7,197 6,495
Goodwill 19,917 --
Other assets 1,459 292
--------- ---------
$ 115,055 $ 103,496
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of note payable $ 3,195 $ 196
Current portion of capital lease obligations 1,415 1,545
Accounts payable 7,944 7,079
Compensation related accruals 1,748 1,534
Deferred revenue and other 2,892 2,008
--------- ---------
Total current liabilities 17,194 12,362
Convertible note -- 3,052
Capital lease obligations, net of current portion 1,008 1,292
--------- ---------
Total liabilities 18,202 16,706
--------- ---------
Stockholders' equity:
Common stock 138 134
Additional paid-in capital 151,323 127,251
Deferred compensation (971) (1,140)
Accumulated deficit (53,637) (39,455)
--------- ---------
Total stockholders' equity 96,853 86,790
--------- ---------
$ 115,055 $ 103,496
========= =========
</TABLE>
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(Note to editor: Gadzoox and the Gadzoox logo are registered trademark of
Gadzoox Networks, Inc. Bitstrip, Denali, Gibraltar, Geminix, Ventana, SANtools
and Capellix are trademarks of Gadzoox Networks, Inc. All other trademarks are
property of their respective owners.)
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