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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 8, 1999
ANDATACO, INC.
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(Exact name of Registrant as specified in its charter)
MASSACHUSETTS
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(State or other jurisdiction of incorporation)
0-10370 04-2511897
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(Commission File Number) (I.R.S. Employer
Identification No.)
10140 Mesa Rim Rd., San Diego, California 92121
(Address of principal executive offices and Zip Code)
(619) 453-9191
(Registrant's Telephone Number, including area code)
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Item 1. Change in Control of Registrant
On June 8, 1999 nStor Technologies, Inc., a Delaware corporation ("nStor"),
purchased (the "Change in Control") 18,021,281 shares of Andataco, Inc.'s (the
"Company") common stock, representing approximately 75.7% of the total issued
and outstanding common stock of the Company from W. David Sykes, President of
the Company ("Sykes"), the Sykes Family Trust and the Sykes Children's Trust,
for $5.1 million. The purchase price was paid in the form of two 9.5%
subordinated promissory notes of nStor. The principal balance of the notes is
due on June 17, 2004 and interest is payable monthly. The press release
including the announcement of the Change in Control is filed as exhibit 99.1 of
this Form 8-K.
As part of the purchase, nStor also acquired from Sykes the subordinated
promissory note (the "Shareholder Note") in the original principal amount of
$5,196,000 payable by the Company to Sykes. The purchase price for the
Shareholder Note was: $500,000 in cash, $150,000 of which had been paid prior to
the closing; 4,654 shares of nStor's newly-issued Series F Convertible Preferred
Stock which is convertible into 1,551,333 shares of nStor's common stock based
on a conversion price of $3.00 per share; and three-year warrants to purchase an
additional 155,133 shares of nStor's common stock for $3.30 per share. The
Series F Convertible Preferred Stock requires quarterly dividends at the
following annual rates: 8% during the first year, 9% during the second year and
10% thereafter.
Sykes has entered into a three year employment agreement with nStor Corporation,
a wholly-owned subsidiary of nStor, which will become effective upon the
acquisition by nStor of the remaining 24.3% of the outstanding shares of common
stock of the Company. Sykes will continue to serve as the President of the
Company. In connection with his employment agreement, Sykes received an option
(the "Option") to purchase 1.1 million shares of nStor's common stock at an
exercise price of $2.00 per share. The Option will vest over a period of three
years following the effective date of the employment agreement and shall be
exercisable for a period of five years, regardless of Sykes' termination of
employment for any reason.
Following the completion of the Change in Control, H. Irwin Levy, Chairman and a
principal shareholder of nStor ("Levy"), entered into a letter agreement with
Sykes pursuant to which (i) Sykes granted Levy an option, through September 30,
1999 to purchase, for $3.00 per share, $3.2 million of nStor's common stock
owned by Sykes (at an agreed upon value of $3.00 per share), less any amounts
received by Sykes as a result of public sales of such shares of common stock
during the option period, and (ii) Levy agreed to purchase from Sykes, at Sykes'
option, during the period from February 1, 2000 through February 5, 2000, shares
of nStor's common stock owned by Sykes for a purchase price of $3.00 per share,
provided however, that Levy shall not be obligated to purchase more than $3.2
million of nStor's common stock owned by Sykes (at an agreed upon value of $3.00
per share), less any amounts received by Sykes as a result of public sales of
such shares of common stock prior to February 1, 2000.
nStor intends to acquire the remaining outstanding shares of common stock of the
Company by the earliest practicable date. Pursuant to the purchase agreement
with Sykes, nStor has agreed that if it acquires the balance of the Company's
outstanding shares, the purchase price will be equal to the greater of the per
share amount paid to Sykes ($0.283) or the fair market value as determined by an
independent valuation.
2
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Item 7. Financial Statements and Exhibits
(c) Exhibits
Exhibit
Number Description of Document
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2.1 Purchase Agreement, dated as of March 2, 1999, by and among nStor
Technologies, Inc., W. David Sykes and the Sykes Children's Trust of
1993 dated November 22, 1993, filed as Exhibit 2.1 to the Current
Report on Form 8-K dated June, 23, 1999 filed by nStor Technologies,
Inc.
2.2 Amendment No. 1 to Purchase Agreement, dated as of April 26, 1999, by
and among nStor Technologies, Inc., W. David Sykes, the Sykes Family
Trust and the Sykes Children's Trust of 1993 dated November 22, 1993,
filed as Exhibit 2.2 to the Current Report on Form 8-K dated June 23,
1999 filed by nStor Technologies, Inc.
2.3 Amendment No. 2 to Purchase Agreement, dated as of June 8, 1999, by and
among nStor Technologies, Inc., W. David Sykes, the Sykes Family Trust
and the Sykes Children's Trust of 1993 dated November 22, 1993, filed
as Exhibit 2.3 to the Current Report on Form 8-K dated June 23, 1999
filed by nStor Technologies, Inc.
99.1 Press release dated June 15, 1999
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ANDATACO, INC.
Dated: June 23, 1999 By: /s/ Harris Ravine
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Harris Ravine
Chairman of the Board of Directors and
Chief Executive Officer
3
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EXHIBIT 99.1
FOR IMMEDIATE RELEASE
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Editorial Contact: W. David Wright
Reporting and Investor Relations Manager
Phone: (800) 334-9191, (619) 453-9191
Fax: (619) 453-9294
Email: [email protected]
ANDATACO, Inc. Reports Second Quarter Results
SAN DIEGO - June 15, 1999 - ANDATACO, INC. (OTC BB: ANDA) today reported results
for the second fiscal quarter of 1999, which ended April 30, 1999.
Revenues for the quarter ended April 30, 1999 were $14,992,000, with a net loss
of $894,000, or $0.04 per share, compared to revenues of $20,996,000, with a
net loss of $189,000, or $0.01 per share, for the second quarter of fiscal 1998.
Net loss for the quarter ended April 30, 1999 includes $418,000 for amortization
of goodwill and $426,000 for depreciation. Net loss for the quarter ended April
30, 1998 includes $418,000 for amortization of goodwill and $399,000 for
depreciation.
Revenues for the six-month period ended April 30, 1999 were $31,370,000, with a
net loss of $1,591,000, or $0.07 per share, compared to revenues of $42,756,000,
with a net loss of $609,000 or $0.03 per share for the first six months ended
April 30, 1998. The net loss for the first six months of fiscal 1999 includes
$836,000 of amortization of goodwill and $879,000 of depreciation. The net loss
for the first six months of fiscal 1998 included $836,000 of goodwill
amortization and depreciation expense of $769,000.
During the first six months of fiscal 1999, the Company generated $873,000 of
cash from operations, primarily from improvement in working capital. Offsetting
the cash generated from operations was cash used to reduce the Company's line of
credit by $462,000 and purchases of property and equipment of $411,000. At April
30, 1999, the Company was not in compliance with the financial covenant
concerning the Company's minimum net tangible worth; however, effective June 11,
1999, the bank notified the Company that it will temporarily waive its rights
and remedies associated with this default subject to further negotiations. The
bank and the Company
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are currently negotiating the terms and conditions of the temporary waiver,
which will include applying a default interest rate of 10.5% during the waiver
period.
Harris Ravine, Chief Executive Officer and Chairman of the Company's Board of
Directors, commented, "although the financial results for the second quarter are
disappointing, we are pleased with the progress we have made in gaining customer
acceptance of our Storage Area Network Solutions as well as the integration of
the nStor Technologies, Inc. ("nStor") product line.
"Andataco has been advised that nStor completed its purchase of W. David Sykes'
block of shares in Andataco, (representing 75.7% of the outstanding common stock
of Andataco, Inc.) and the note in the principal amount of $5,196,000 owed by
Andataco, Inc. to Mr. Sykes, as of June 8, 1999 and that nStor has stated that
it intends to acquire the remaining outstanding shares of Andataco, for an
amount to be determined by an independent valuation of the Andataco shares, in a
transaction which should be completed by September 30, 1999. In conjunction with
the change in control the existing members of the board of directors have
indicated an intention to tender their resignation. The Company is in the
process of working out an orderly transition of the board of directors which is
expected prior to month's end.
"Steps are underway to affect the integration of the nStor product line with the
Andataco product line which will allow us to offer a complete line of storage
solutions to our customers."
ANDATACO is a global leader in innovative storage solutions for Windows NT and
UNIX environments. The company offers SCSI, RAID and RAID-ready disk arrays,
tape backup and restore products and storage management software. ANDATACO is
leading the way in the latest SCSI technology storage systems serving customers'
current needs and providing a cost-effective product migration next generation
SCSI architectures.
Beyond SCSI, ANDATACO offers customized Storage Area Networks (SAN) using Fibre
Channel and SCSI technologies from best-of-breed industry leading manufacturers.
Since 1986, ANDATACO has provided more than 10,000 customers with industry-
leading technology to protect mission critical data and outstanding service and
support provided by over 200 employees world-wide. To learn more about
ANDATACO's products and the OEM "Keep the Drive Alive" Partnership Program,
please visit http://www.andataco.com
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This press release contains forward-looking statements that are subject to risks
and uncertainties. These forward-looking statements include the Company's
strategy, and goals of increasing sales and sales productivity and the intention
stated by nStor with regard to a possible acquisition of the remaining shares of
Andataco. There are a number of factors that could cause actual results to
differ materially from any forward-looking statements contained in this release.
Any such statements are based on the assumptions and expectations of the
Company's management at the time these statements are made. These factors
include, but are not limited to: rapid technological and market changes which
could shorten the life cycle of existing products; dependence on key personnel
and suppliers; competitive pressures; continued new product introductions;
market acceptance of the Company's new product introductions; and new product
introductions by competitors. Additional information on potential factors that
could affect the Company's financial results are included in the Company's
Annual Report to the SEC on Form 10-K for the fiscal year ended October 31, 1998
and the Company's other periodic reports.
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ANDATACO, INC.
<TABLE>
<CAPTION>
Consolidated Balance Sheet
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April 30, October 31,
1999 1998
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash....................................................................................... $ 23,000 $ 23,000
Accounts receivable, net................................................................... 6,257,000 10,628,000
Inventories................................................................................ 6,451,000 4,923,000
Other current assets....................................................................... 1,056,000 634,000
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Total current assets...................................................................... 13,787,000 16,208,000
Goodwill, net............................................................................... 5,156,000 5,993,000
Property and equipment, net................................................................. 2,947,000 3,415,000
Other assets................................................................................ 96,000 66,000
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$21,986,000 $25,682,000
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</TABLE>
Liabilities and Shareholders' Equity
<TABLE>
<CAPTION>
Current liabilities:
<S> <C> <C>
Accounts payable .......................................................................... $ 6,515,000 $ 7,853,000
Accrued expenses .......................................................................... 2,420,000 2,610,000
Deferred revenue .......................................................................... 2,102,000 2,259,000
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Total current liabilities ................................................................ 11,037,000 12,722,000
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Long-term liabilities:
Bank line of credit ....................................................................... 5,000,000 5,462,000
Shareholder loan .......................................................................... 5,196,000 5,196,000
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Total long-term liabilities .............................................................. 10,196,000 10,658,000
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Shareholders' equity:
Common stock .............................................................................. 238,000 238,000
Additional paid in capital ................................................................ 10,149,000 10,107,000
Accumulated deficit ....................................................................... (9,634,000) (8,043,000)
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Total shareholders' equity ............................................................... 753,000 2,302,000
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$21,986,000 $25,682,000
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</TABLE>
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ANDATACO, INC.
<TABLE>
<CAPTION>
Consolidated Statement of Operations
(Unaudited)
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Three months ended Six months ended
April 30, April 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Sales................................. $14,992,000 $20,996,000 $31,370,000 $42,756,000
Cost of sales......................... 10,503,000 14,325,000 22,375,000 29,300,000
----------- ----------- ----------- -----------
Gross profit ....................... 4,489,000 6,671,000 8,995,000 13,456,000
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Operating expenses:
Selling, general and
administrative ..................... 4,879,000 6,048,000 9,432,000 12,463,000
Rent expense to shareholder ......... 83,000 83,000 166,000 166,000
Research and development ............ 184,000 473,000 506,000 914,000
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Total operating expenses ........... 5,146,000 6,604,000 10,104,000 13,543,000
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(Loss) income from operations......... (657,000) 67,000 (1,109,000) (87,000)
Interest expense ..................... 120,000 139,000 248,000 288,000
Interest expense to shareholder ...... 117,000 117,000 234,000 234,000
----------- ----------- ----------- -----------
Net loss.............................. $ (894,000) $ (189,000) $(1,591,000) $ (609,000)
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Net loss per share (basic
and diluted) ........................ $(0.04) $(0.01) $(0.07) $(0.03)
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Shares used in computing
net loss per share (basic
and diluted
.................................... 23,819,399 23,819,399 23,819,399 23,819,399
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</TABLE>
