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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--August 15, 1996
STREAMLOGIC CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
0-12046 95-3093858
(Commission File Number) (I.R.S. Employer Identification No.)
21329 Nordhoff Street
Chatsworth, California 91311
(Address of principal executive offices) (Zip Code)
Copy to:
LEE N. HILBERT BRIAN G. CARTWRIGHT, ESQ.
Chief Financial Officer
StreamLogic Corporation Latham & Watkins
21329 Nordhoff Street 633 West Fifth Street Suite 4000
Chatsworth, California 91311 Los Angeles, California 90071
(818) 701-8400 (213) 485-1234
(Name, address, including zip code,
and telephone number, including area
code, of agent for service)
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StreamLogic Corporation
Current Report on Form 8-K
August 15, 1996
Table of Contents
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Item 5. Other Events 3
Item 7. Financial Statements and Exhibits 3
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Item 5. Other Events
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, StreamLogic Corporation (the "Company") is hereby
filing cautionary statements identifying important factors that could cause the
Company's actual results to differ materially from those projected in forward
looking statements of the Company made by, or on behalf of the Company.
Item 7. Financial Statements and Exhibits
The following is filed as an Exhibit to this Report.
Exhibit 99
DESCRIPTION
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
STREAMLOGIC CORPORATION
Date: August 15, 1996 By: /s/ Lee N. Hilbert
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Lee N. Hilbert
Chief Financial Officer
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Exhibit 99
Cautionary Statement For Purposes of the "Safe Harbor" Provisions of the Private
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Securities Litigation Reform Act of 1995
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StreamLogic Corporation desires to take advantage of the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995 and is filing
this Form 8-K in order to do so. Many of the following important factors
discussed below have been discussed in StreamLogic's prior SEC filings.
StreamLogic wishes to caution readers that the following important factors,
among others, in some cases have affected, and in the future could affect,
StreamLogic's actual results and could cause StreamLogic's actual consolidated
results for the second quarter of fiscal 1997, and beyond, to differ materially
from those expressed in any forward-looking statements made by, or on behalf of,
StreamLogic:
CUSTOMER CONCENTRATION
For the three-month period ended June 28, 1996, three customers, Peripheral
Technology Group, Ingram Micro and Micropolis (S) Pte Ltd ("MPL"), accounted for
15%, 11% and 21% of the Company's net sales, respectively. Ingram Micro has been
and is anticipated to continue to be a significant customer for the products
comprising the FWB hardware business acquired by StreamLogic effective July 1,
1996. MPL became a customer as a European distributor effective March 29, 1996
under the European Distribution Handling Agreement between the Company and MPL.
The Company and MPL elected to terminate the European Distribution Handling
Agreement effective August 2, 1996, at which time the Company began shipping
directly to other European distribution customers. Accordingly, MPL is no longer
a customer. The Company has no long-term purchase commitments from its
customers. Customers may cancel their orders under certain circumstances. There
can be no assurance that orders from existing customers, including the Company's
principal customers, will continue at their historical levels, or that the
Company will be able to obtain orders from new customers. In addition, there can
be no assurance that existing customers, including the Company's principal
customers, will not develop their own storage solutions internally and as a
result reduce or eliminate purchases from the Company. Loss of one or more of
the Company's current customers, particularly a principal customer, or
cancellation or rescheduling of orders already placed, could materially and
adversely affect the Company's operating results.
SUPPLIER AND COMPONENT DEPENDENCE
The Company depends heavily on its suppliers to provide high quality
materials on a timely basis and at reasonable prices. Although many of the
components for the Company's products are available from several sources at
competitive prices, certain of the disk drives used in its products are
purchased by the Company from a single source. Furthermore, because of increased
industry demand for many of those components, their manufacturers may, from time
to time, not be able to make delivery on orders on a timely basis. In addition,
manufacturers of components on which the Company relies may choose for numerous
reasons not to continue to make components, or the next generation of those
components, available to the Company.
Effective March 29, 1996 the Company and MPL have entered into an OEM
supply agreement. Among other things, the OEM Supply Agreement allows
StreamLogic to buy at prices equal to or slightly lower than the most favored
OEM customer of MPL. StreamLogic must offer all its disk drive business and
requirements to MPL on a right-of-first-refusal basis, subject to the ability of
MPL to meet certain quality, delivery and other
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standards. The agreement has an initial two-year term, after which it may be
renewed annually by mutual agreement.
There can be no assurance that the Company will be able to obtain, at all
or on a timely basis, all of the components it requires. If the Company cannot
obtain essential components as required, the Company could be unable to meet
demand for its products, thereby materially adversely affecting its operating
results and allowing competitors to gain market share. In addition, scarcity of
such components could result in cost increases and adversely affect the
Company's operating results.
COMPETITION
The market for all levels of RAID disk arrays and related products is
highly competitive and characterized by price erosion over the life of a
product. Competitors in the Company's markets include other disk array
manufacturers, systems integrators that market computer systems containing
general purpose RAID disk arrays, companies offering standard computer systems
with video specific software and companies offering specially designed video
server systems. Such competitors often offer systems at lower prices than those
offered by the Company and the Company must compete on the basis of product
performance in specific applications. Many of these competitors have greater
financial, manufacturing and marketing resources than those of the Company.
The Company's ability to compete successfully depends upon its ability to
continue to develop high performance products that obtain market acceptance and
can be sold at increasingly competitive prices. Although the Company believes
that its disk array products have certain competitive advantages, there can be
no assurance that the Company will be able to compete successfully in the future
or that other companies may not develop products with greater performance and
thus reduce the demand for the Company's product. Furthermore, as more companies
enter the disk array market, the Company may encounter increased price
competition for such products which could materially and adversely affect the
Company's operating results. Also, the Company's OEM customers and other
manufacturers could develop their own disk arrays or could integrate competitive
disk arrays into their systems rather than the Company's products, which could
materially and adversely affect the Company's operating results.
NEW PRODUCTS
Markets for the Company's products are characterized by rapidly changing
technology, evolving industry standards and relatively short product life
cycles. The Company's ability to compete successfully will depend on its ability
to enhance its existing products and introduce new products on a timely and
cost-effective basis. There can be no assurance that the Company will be
successful in introducing such new products or enhancements. Delays in product
enhancements and developments or the failure of the Company's new products or
enhancements to gain market acceptance would have an adverse effect on the
Company's business and operating results. In addition, there can be no assurance
that new products or technologies developed by others, or the emergence of new
industry standards, will not render the Company's products or technologies
noncompetitive or obsolete. Despite testing, new products may be affected by
quality, reliability or interoperability problems, which could result in
returns, delays in collecting accounts receivable, unexpected service or
warranty expenses, reduced orders, and a decline in the Company's competitive
position.
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS
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The Company has experienced and expects to continue to experience
significant fluctuations in its quarterly operating results due to a variety of
factors. Such factors may include but are not limited to the acquisition of the
FWB hardware business as of July 1, 1996, the timing of receipt and shipment of
significant orders, the cost and timing of new product releases and product
enhancements by the Company and its competitors, variations in the Company's
product mix, market acceptance of new or enhanced versions of the Company's
products, changes in pricing and promotion policies by the Company and its
competitors, the cost and availability of disk drives and other key components,
and general economic conditions. Quarterly sales depend on the volume and timing
of orders received during a quarter, which are difficult to forecast. The
Company's expenses during a quarter are based, in part, on its expectations as
to customer demand for its products. Demand falling below expectations in any
quarter could have a material adverse effect on operating results. In addition,
the need for continued expenditures for research and development, marketing and
customer service and support would make it difficult for the Company to reduce
its expenses in a particular quarter if the Company's sales forecasts for such
quarter were not met.
INTERNATIONAL OPERATIONS
Net sales to customers outside the United States accounted for
approximately 34% of net sales in the three months ended June 28, 1996. The
Company expects that international sales will continue to represent a
significant portion of the Company's net sales. Sales to customers outside the
United States are subject to risks, including the imposition of governmental
controls, the need to comply with a wide variety of foreign and United States
import and export laws, political and economic instability, trade restrictions,
changes in tariffs and taxes, longer payment cycles typically associated with
international sales, and the greater difficulty of administering business
overseas. In addition, fluctuations in the value of foreign currencies relative
to the U.S. dollar could make the Company's products less price competitive and,
since the Company denominates certain of its sales in foreign currencies, losses
could result from foreign currency transactions. Furthermore, although the
Company endeavors to meet technical standards established by foreign regulatory
bodies, there can be no assurance that the Company will be able to comply with
changes in foreign standards in the future. The inability of the Company to
design products to comply with foreign standards could have a material adverse
effect on the Company. In addition, the laws of certain foreign countries may
not protect the Company's intellectual property to the same extent as do the
laws of the United States.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant degree upon the continued
contributions of key personnel, many of whom would be difficult to replace and
are not subject to noncompetition agreements. If any of these employees were to
leave the Company, the Company's operating results could be materially adversely
affected. The Company believes its future success will also depend, in large
part, upon its ability to hire and retain highly skilled engineering,
managerial, sales and marketing personnel. Competition for such personnel is
intense, and there can be no assurance that the Company will be successful in
attracting and retaining such personnel.
POSSIBLE VOLATILITY OF STOCK PRICE
The Company's Common Stock has experienced in the past, and could
experience in the future, substantial price volatility as a result of a number
of factors, including quarter to quarter variations in the actual or anticipated
financial results of the Company, announcements by the Company, its competitors
or its customers, government regulations,
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and developments in the industry. In addition, the stock market has experienced
extreme price and volume fluctuations which have affected the market price of
many technology companies in particular and which have at times been unrelated
to the operating performance of the specific companies whose stock is traded.
Broad market fluctuations and general economic conditions may affect the market
price of the Company's Common Stock.
DIVIDEND POLICY
The Company has never declared or paid any dividends on the Common Stock,
and it is not contemplated that the Company will pay dividends on the Common
Stock in the foreseeable future.
INTEGRATION OF ACQUIRED BUSINESS
The Company acquired the FWB hardware business as of July 1, 1996. Such
acquisition could result in amortization expenses related to goodwill and
intangible assets that could adversely affect the Company's operating results.
In addition, gross margins of acquired products, necessary product or technology
development expenditures and other factors involved in the FWB hardware business
or any other acquired business could result in dilution to the Company's
earnings. Such acquisition also may involve numerous other risks, including
difficulties in the assimilation of the operations and products of the acquired
business, dependence on new products and processes, the diversion of
management's attention from other business concerns, risks of entering markets
in which the Company has no or limited direct prior experience, the potential
loss of key employees of the acquired business and difficulties in attracting
additional key employees necessary to absorb added management responsibilities.
The Company has commenced a number of programs to integrate the FWB hardware
business into that of StreamLogic, including the relocation of certain of its
office and possibly manufacturing space and the upgrading of its internal
computer systems. If the Company is unable to manage the assimilation process
effectively or hire and retain qualified personnel, the Company's business and
operating results could be materially and adversely affected. No assurance can
be given as to the effect of this or any future acquisition on the Company's
business or operating results.
PROPOSED TENDER OFFER
On June 17, 1996 the Company announced an agreement (the "Bond Agreement")
in principle with Loomis Sayles & Co., L.P. ("Loomis Sayles"), an entity which
advises investors that collectively hold approximately 79% of the Company's $75
million issue of 6% Convertible Subordinated Debentures (the "Debentures") to
exchange such Debentures for a package of cash, common stock and warrants to
purchase common stock. Pursuant to the Bond Agreement, the Company plans to
commence a tender offer for the Debentures during August 1996. In the tender
offer, the Company will offer to exchange its Debentures such that, for each
$1,000 face amount of debentures tendered, the holders will receive (a) $233.33
in cash, (b) $520 in StreamLogic Common Stock, and (c) warrants to purchase 40
shares of StreamLogic Common Stock at an initial exercise price of 150% of
market value of the Common Stock as defined in the Bond Agreement. The exercise
price of the warrants is subject to downward adjustment in certain
circumstances, and contains antidilution adjustments. The Company believes
shareholder approval is required pursuant to Nasdaq rules and regulations, and
accordingly, such shareholder approval is being sought.
The obligations of the holders advised by Loomis Sayles to participate in
the tender
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offer under the Bond Agreement are subject to various conditions including,
without limitation, satisfaction of all necessary regulatory requirements, 95%
participation by bond holders, and the average price of StreamLogic's Common
Stock for the five trading days immediately prior to the expiration of the
tender offer falling within the range of $4.00 to $7.50. As a result, there can
be no assurance that the tender offer will be consummated. Offers to exchange
the Debentures will be made only pursuant to the tender offer, and no offer is
being made at this time.
If the holders of 100% of the outstanding debentures accept the exchange,
the Company would exchange the debentures for (a) $17.5 million in cash, (b)
issue between 5.2 and 9.8 million shares of Common Stock, and (c) issue warrants
to purchase approximately 3.0 million shares of Common Stock, therefore, the
transaction would increase the Company's net tangible assets by more than $50
million.
Control by Principal Shareholder
If such exchange is consummated at an exchange price of $4.00 per share,
investors advised by Loomis Sayles would beneficially own up to 34% of the
Company's then outstanding Common Stock. As a result, Loomis Sayles may be able
to control matters requiring approval by the shareholders of the Company,
including the election of Directors and the amendment of the Company's
Certificate of Incorporation. As a shareholder, Loomis Sayles will not be
prohibited from acting in its own interest in respect of, among other things,
the voting or disposition of its shares of Common Stock. Loomis Sayles is not
subject to any agreement restricting the sale of the Company shares it
beneficially holds. Sales of substantial amounts of shares of Common Stock in
the public market after the offering hereby could adversely affect the market
price of the Company's Common Stock.
Failure of Tender Offer to be Consummated
If the tender offer is not consummated on the terms of the Bond Agreement,
the Company intends to seek to renegotiate the Bond Agreement with Loomis
Sayles; however, there can be no assurance that such an agreement will be
reached, or that such agreement will not be on terms less favorable to holders
of the Common Stock than the terms of the Bond Agreement as a result of greater
dilution to the current holders of Common Stock, greater cash payments, or
otherwise. Failure to reach an agreement with Loomis Sayles could result in the
delisting of the Common Stock from the Nasdaq National Market ("Nasdaq NMS").
The Company currently does not meet the net tangible assets requirement for
continued inclusion on the Nasdaq NMS, and Nasdaq's grant of the Company's
request for continued inclusion of the Common Stock on the Nasdaq NMS is
conditioned upon consummation of the tender offer by October 4, 1996. If the
Common Stock is delisted from the Nasdaq NMS and the Company cannot obtain
listing elsewhere, trading, if any, in the Company's Common Stock may thereafter
be conducted in the over-the-counter market, and the Company's Common Stock
quoted in the so-called "pink sheets" or, if then available, the "OTC Bulletin
Board Service." As a result, it could be more difficult to trade, or to obtain
accurate quotations as to the value of, the Company's Common Stock, and the
spread between the "bid" and "ask" prices for the Company's Common Stock could
materially increase. In addition, the sale of the Common Stock could become
subject to a Commission rule that imposes various sales practices on sales of
securities governed by the rule to persons other than established customers and
accredited investors. For these types of transactions, the broker-dealer must
make a special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. Consequently, the
rule may have an adverse effect on the ability of the broker-dealer to sell the
Common Stock on behalf of its customers. Such adverse effects could have a
material adverse effect on the Company's ability to access equity
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capital markets in the future.
In addition, if the Company were unable to reach an agreement for the
restructuring of the Debentures with Loomis Sayles, the Company would remain
obligated to make semi-annual interest payments of $2.25 million, as well as
annual sinking fund payments of $3.75 million beginning on March 15, 1997, on
the Debentures. Furthermore, failure to reach an agreement with Loomis Sayles
may result in a situation in which the Company would suspend payment on the
Debentures in an effort to expedite a resolution of the restructuring of such
indebtedness. In such an event, the holders of the Debentures would have the
right to accelerate the maturity of the Debentures, which could result in the
commencement of bankruptcy proceedings.
ANTI-TAKEOVER PROVISIONS
The Company has adopted a stockholder rights plan designed to deter
potentially coercive takeover attempts. In addition, the Company has authorized
a class of preferred stock, issuable in series with such rights, preferences,
privileges and restrictions as the Board of Directors may determine without any
further stockholder approval. These provisions could have the effect of delaying
or preventing a change in control or other corporate action.
