<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13
of the Securities Exchange Act of 1934
For the fiscal year ended
September 30, 1995 Commission File No. 0-11336
CIPRICO INC.
(Name of Small Business Issuer in its Charter)
DELAWARE 41-1749708
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2800 CAMPUS DRIVE
PLYMOUTH, MINNESOTA 55441
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number,
Including Area Code: (612) 551-4000
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirement for the past 90 days. Yes X No ___
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained herein, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ X ]
The Registrant's revenues for the fiscal year ended September 30, 1995 were
$15,966,203.
_______________________________
The aggregate market value of the Common Stock held by nonaffiliates of the
Registrant as of December 4, 1995 was approximately $19,419,220 (based upon the
last sale price of the Registrant's Common Stock on such date).
Shares of Common Stock outstanding at December 4, 1995: 2,270,871 shares.
______________________
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the 1996 Annual Meeting of
Shareholders are incorporated herein by reference in Part III, as indicated.
Transitional Small Business Disclosure Format (check one): Yes _____ No X
<PAGE> 2
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Ciprico Inc. and its subsidiaries (Ciprico, Company, Registrant)
design, manufacture, market and service disk arrays and SCSI controllers for
high-performance computer workstations in the visual computing industry. The
Company's products are compatible with industry standard architectures enabling
users from a wide variety of industries to benefit from high performance
capabilities through connectivity. The Company is ISO 9001 certified, an
international quality standard.
The Company was incorporated under the name Computer Products
Corporation in February 1978 and changed its name to Ciprico Inc. in May 1983.
The Company began development of its present line of products in January 1980
and shipped its first controller product in September of the same year. Until
September 1980, substantially all of the Company's revenues were generated from
engineering consulting services provided to manufacturers and end users of
computer systems.
In late 1990 the Company introduced for sale a disk array subsystem
which allowed five disk drives to function as one large drive to the computer.
In 1991, the Company introduced the NetArray(TM) product, which is comprised of
a disk array, SCSI controller and special utilities for the Novell network
market. In 1992, the Company developed its next generation disk array allowing
up to nine drives for storage and utilizing the latest disk drive technology.
Since that time, the Spectra disk array has been introduced. This disk array
is specifically designed for Silicon Graphics workstations and is marketed to a
broad range of visual computing markets.
NARRATIVE DESCRIPTION OF BUSINESS
(1) PRODUCTS AND SERVICES.
PRODUCTS. The Company's product line consists mainly of disk
arrays, with a smaller segment of sales made for controllers. Both product
lines carry the common theme of providing the highest levels of performance
while maintaining connectivity by adopting industry standards.
A disk array combines either five or nine independent disk drives into
a cost-effective system that acts like a high performance large single disk
drive to the computer. Ciprico's disk arrays offer high performance, capacity
and fault tolerant features that are required by today's imaging applications.
- 1 -
<PAGE> 3
The Company's disk arrays offer transfer rates of up to 40 megabytes
per second and can even be higher when combining disk arrays. Parallel data
transfers are combined with the highest performing standard SCSI-2 disk drives
to maximize the performance.
Storage capacity on the Company's disk arrays is limited only by the
capacity of the disk drives themselves. With a continual program of disk drive
qualification, the highest performing and highest quality disk drives are
offered with the disk array. A range of drive capacities are offered from 4 to
34 gigabytes per disk array, with new offerings to be over 70 gigabytes per
disk array.
Disk drive and power supply redundancy are features offered on the
Company's disk arrays. If a disk drive fails, normal computer operations
continue uninterrupted, while the failed drive is replaced. Users have
continual access to the data on the drives, while data on the failed drive is
not lost. If a power supply should fail, an automatic back-up power supply
engages, providing continuous power to the disk array.
The Spectra disk array contains all the software and accessories
necessary to integrate a Ciprico array with Silicon Graphics, Inc. ("SGI")
workstations. Custom drivers are included with Spectra arrays to maximize
performance. The Spectra disk arrays have achieved SGI's "Gold Seal Approval."
This accreditation signifies Ciprico's products have undergone extensive
testing by SGI.
The Company also develops and manufactures a line of SCSI controllers
for the VMEbus and EISA bus structures. When commanded by a computer's central
processing unit (CPU), the controller directs the data storage and retrieval
operations of the disk drive and controls the flow of data between the local
memory and the drive. Controllers manufactured by the Company incorporate
direct memory access capability and are said to be "intelligent" in that they
can perform several functions simultaneously and independently from the CPU.
This independent ability frees the CPU to perform other operations while data
storage or retrieval is taking place. The intelligence is derived from an on-
board microprocessor chip and the Company's advanced proprietary software which
directs the board's independent functions. Many of the controller products
interface to the Company's disk arrays and are sold as an integrated package.
The table below summarizes sales of the Company's principal products
for each of the three fiscal years ended September 30.
<TABLE>
<CAPTION>
Amount and Percentage of Net Sales
----------------------------------------------------------------------------------
Year ended September 30,
----------------------------------------------------------------------------------
1995 1994 1993
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Disk Arrays........ $11,786,550 73.8% $8,527,364 65.0% $1,718,480 18.7%
Controllers........ 3,186,528 20.0 4,137,524 31.5 7,024,552 76.2
Miscellaneous
Products and
Services......... 993,125 6.2 455,722 3.5 470,594 5.1
</TABLE>
- 2 -
<PAGE> 4
SERVICES. The Company believes that its ability to provide
prompt and reliable service is an important element in the marketing of its
products. It provides technical application support to its customers through
its staff of technical specialists located in Plymouth, Minnesota, and in
Newbury, England. Ciprico relies primarily on its customers to provide initial
installation support to their end-user customers. The Company provides a
return-to-factory parts and labor warranty against defects in materials and
workmanship covering a period from one to three years from the date of shipment
to customers. Extended warranty and maintenance services are also offered to
customers as the primary warranty expires. All repair work for the Company's
products is presently done at the Company's Plymouth, Minnesota, manufacturing
facility. Ciprico offers training to customers concerning the utilization,
repair and maintenance of its products. The Company believes that its domestic
repair facilities are adequate to handle factory repairs and provide acceptable
turn-around times for its domestic and foreign customers. All product orders
are shipped from the Plymouth, Minnesota manufacturing facility.
(2) MARKETING AND DISTRIBUTION.
MARKETS. The Company's market focus is visual computing
applications. These applications require editing or manipulating large image
files and the need to store and retrieve images in the shortest possible time.
When the applications require capturing data in real-time, it is also critical
to have high speed access for viewing the data captured. As application
requirements increase, the storage capacity needs also increase, and users need
to make sure their data is available 100% of the time. These requirements of
high performance, large storage capacity and fault tolerance are the base-line
features of the Company's products.
The Company is focusing on six major market opportunities - medical
imaging, oil and gas exploration, prepress, geographic information systems,
film/video and video services. All of these markets require the performance,
capacity and fault tolerant features of the Company's disk arrays.
The Company advertises its products in business, professional and
trade periodicals as well as feature articles to inform users about the
benefits of Ciprico products. The Company participates in industry trade
shows, seminars and forums. It also promotes its products through direct
mailings to potential customers and through various Company publications
featuring product descriptions and explanations of product applications.
DISTRIBUTION. The Company's products are sold primarily to OEMs for
inclusion in their computer systems, and to systems integrators and value added
resellers (VARs) who in turn sell to end users.
The Company markets its products through its own direct sales force,
independent sales representatives and a network of industry-specific value
added resellers (VARs). The Company has a direct sales presence in North
America, Europe and the Pacific Rim countries who contact key OEM customers,
system integrators and VARs. Direct sales locations in North America include
Plymouth, Minnesota; Raleigh, North Carolina; Boston, Massachusetts; Dallas
Texas; and Santa Clara, California. Additional offices are planned for the
West Coast. The international sales location is Newbury, England, with plans
to have an additional office in the Pacific Rim.
- 3 -
<PAGE> 5
Independent distributor organizations (IDOs) are used to assist
marketing the Company's products internationally. IDOs promote the Company's
products through advertising, trade shows, direct mailing and customer contact.
An IDO purchases products from the Company and resells such products to VARs,
dealers, small OEMs and end users. The IDO is responsible for providing
installation and technical support in order to service new accounts and meet
the emergency needs of existing accounts. Contracts with all IDOs may vary,
but in general, upon sixty days notice the Company may terminate any poor
performing IDO and may appoint another IDO to cover that market. Over the past
twelve months, the trend has been to appoint more Value Added Resellers and
system integrators directly, thus eliminating the need for IDOs. The Company
holds sales meetings from time to time where its domestic and international
manufacturers representatives, distributors and system integrators obtain
product application information to increase their selling abilities.
(3) STATUS OF NEW PRODUCTS. See item (10) below.
(4) COMPETITION. The market for disk array and controller
products is becoming increasingly competitive. Some of the Company's
competitors have substantially greater capital resources, larger research and
development facilities, and larger marketing and service organizations. The
Company has been effective in competing with these companies by focusing on
specific niche vertical markets, delivering superior performing products and
having advantages in the areas of application knowledge and customer support
programs.
The Company's continued success depends on its ability to develop and
market products which can be sold at competitive prices. Although the Company
believes its products have certain competitive advantages, there is no
assurance that other companies could not produce products with greater
performance, or at better pricing than the Company's products, thus reducing
the demand for the Company's products. The Company is devoted to obtaining and
maintaining the competitive advantages it deems necessary, through continued
product research and development.
(5) SOURCES AND AVAILABILITY OF RAW MATERIALS. The Company's
controller products are comprised of a printed circuit board made up of various
integrated circuits and miscellaneous electronic components. Many of the
components are industry standard parts and readily available from many
suppliers at competitive prices. The board assemblies are purchased from an
ISO 9000, independent board assembly firm which manufactures the assemblies to
the Company's specifications. The completed board assembly is received at the
Company's plant where it is subject to burn-in and test procedures to insure
product performance, reliability and quality.
The disk array is comprised mainly of a controller, metal cabinet,
disk dries, power supply and other miscellaneous parts. The metal enclosure
and power supply are specified to the Company's needs, but alternative sources
for the components are available. Some parts are on allocation from the
Company's supplier, which means supply could become difficult to obtain, and
thus have an adverse effect on the Company's results from operations. Rapid
growth in disk array product demand could cause difficulty in meeting customer
needs for product. The Company has strategic partners with which it works
closely to fill these needs. The principal suppliers are Anthem Electronics,
Manufacturing Services Limited and Fabrico Inc.
- 4 -
<PAGE> 6
Assembly operations for the Company's products are performed in
Plymouth, Minnesota and are typical of the electronics industry with no unusual
methods or equipment required. The sophisticated nature of the Company's
products does, however, require extensive testing by skilled personnel. The
Company utilizes specialized testing equipment and maintains an internal test
engineering group to provide this product support.
(6) CUSTOMER DEPENDENCE. The Company's products are sold to a
broad base of customers. For the year ended September 30, 1995, no one
customer accounted for 10% or more of net sales. For the year ended September
30, 1994, sales to Eastman Kodak represented approximately 14% of net sales.
For the year ended September 30, 1993, sales to Data General, Eastman Kodak and
GE Medical represented approximately 13%, 12% and 10%, respectively, of net
sales.
(7) PATENTS AND TRADEMARKS. The Company has no patents, and does
not consider ownership of patents to be material to its business. The Company
believes that the rapidly changing technology in the computer industry makes
the Company's future success dependent more on the technical competence and
creative skills of its personnel than on any patents it may be able to obtain.
Protection of the Company's proprietary software incorporated in the Company's
products is very important to the Company. It relies upon trade secrecy and
confidentiality agreements with its employees and customers, rather than on
patent or copyright protection, to preserve its intellectual property rights in
this material. The Company has obtained registrations for the marks
Ciprico(TM), Tapemaster(TM), Rimfire(TM), Quartermaster(TM) and Net Array(TM)
and has a registration outstanding for the mark Spectra 6000, and
Data-On-Demand.
(8) GOVERNMENT APPROVALS. The Company is not required to obtain
government approval of its products.
(9) EFFECT OF GOVERNMENT REGULATIONS. The Company does not
believe that any existing or proposed governmental regulations will have a
material effect on its business.
(10) RESEARCH AND NEW PRODUCT DEVELOPMENT. The Company operates in
an industry which is subject to rapid technological change. The Company's
ability to compete and operate successfully is largely dependent on its ability
to anticipate and respond to such change. The Company continually develops new
products and improves and refines its existing products. Research and
Development expenses in fiscal 1995 and 1994 were $1,800,000 and $1,694,000,
respectively. All of the Company's research and development expenditures are
expensed as incurred. At November 30, 1995, the Company had 21 full-time
employees engaged in research and development activities, 19 of whom are
engineers.
The Company does not have significant firm orders for its development
stage products. There is no assurance that any of the Company's development
programs will be completed or that the resulting products, if any, will be
marketed successfully.
(11) ENVIRONMENTAL REGULATION. Compliance by the Company with
present federal, state and local provisions regulating the discharge of
material into the environment, or otherwise relating to the protection of the
environment, has not had and is not expected to have any material effect upon
the capital expenditures, earnings or competitive position of the Company.
- 5 -
<PAGE> 7
(12) EMPLOYEES. At November 30, 1995, the Company had 80 full-time
employees, of which 15 were engaged in manufacturing, 21 in engineering and
research and development, 35 in sales, sales support and marketing and 9 in
general management and administration. None of the Company's employees are
represented by a labor union. The Company has experienced no work stoppages
and believes that its employee relations are good.
Management believes that the future success of the Company will depend
in part on its ability to attract and retain qualified technical, management
and marketing personnel. Such experienced personnel are in great demand, and
the Company must compete for their services with other firms which may be able
to offer more favorable benefits.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's administrative headquarters, manufacturing and research
and development operations are located in one building in Plymouth, Minnesota,
totaling approximately 32,000 square feet. The Company believes that its
existing facilities and equipment are well maintained and in good operating
condition. The Company owns most of the equipment used in its operations.
Such equipment consists primarily of manufacturing and test equipment, tools
and fixtures.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to nor is any of its property subject to
any material pending legal proceedings, nor are any material legal proceedings
known to be contemplated by governmental authorities or others.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders through the
solicitation of proxies or otherwise during the fourth quarter of the Company's
fiscal year.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Ciprico common stock is traded on the NASDAQ National Market System under the
symbol CPCI. As of November 30, 1995, there were approximately 1,850
shareholder accounts of record. Closing stock sale price ranges for the years
ended September 30, 1995 and 1994, were:
<TABLE>
<CAPTION>
QUARTER 1995 High 1995 Low 1994 High 1994 Low
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First . . . . . . . . . . . . . . . . . . $5 1/8 $3 7/8 $5 3/4 $4 1/4
Second . . . . . . . . . . . . . . . . . 6 4 1/2 6 1/2 4 1/4
Third . . . . . . . . . . . . . . . . . . 8 1/8 5 1/8 5 4 1/4
Fourth . . . . . . . . . . . . . . . . . 11 1/2 6 4 3/4 3 1/2
</TABLE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
NET SALES increased by 22% to $16.0 million in 1995 compared to $13.1 million
in 1994 and $9.2 million in 1993. The increase in net sales is attributed to
wider acceptance of the Company's disk arrays in the visual computing markets.
Customer acceptance was very diverse in 1995 resulting in no major customers
accounting for greater than 10% of net sales, compared to one major customer
accounting for 14 percent of net sales in 1994, and three major customers
accounting for 35 percent of net sales in 1993.
Export sales grew to 35 percent of net sales in 1995, compared to 22 and 13
percent in 1994 and 1993, respectively. Sales in Japan accounted for 14
percent of total sales in 1995, compared to 4% in 1994 and minimal sales in
1993.
Ciprico continued its objective of expanding sales into the disk array markets,
as shown in the following table.
<TABLE>
<CAPTION>
Percent of Net Sales
1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Disk Arrays . . . . . . . . . . . . . . . . . . . . 74% 65% 19%
Controllers . . . . . . . . . . . . . . . . . . . . 20 32 76
Other . . . . . . . . . . . . . . . . . . . . . . . 6 3 5
---------------------------------------------------
Total. . . . . . . . . . . . . . . . . . . . . . 100% 100% 100%
---------------------------------------------------
</TABLE>
The Company's success is dependent on the continued acceptance of its current
disk array products and successful introductions of new products in
development. Application selling, combined with strategic partnering with
customers, has resulted in a large presence in the imaging markets.
Competitive pressures, changing technologies and disk drive costs are the major
risks in determining the company's future.
COST OF SALES AND GROSS PROFIT. Gross profit was $7.5 million or 47% of net
sales in 1995, compared to $6.3 and $4.6 million, or 48% and 50% in 1994 and
1993, respectively. The decrease in gross profit percentage is attributed to
the lower margin associated with disk array sales. Costs of raw materials held
relatively steady in 1995 compared to 1994. The Company continues to improve
its manufacturing efficiencies and cost reduction processes. Disk drives are
a significant cost component and there is no assurance the Company can sustain
the current gross margin levels given the price fluctuations of new generation
disk drives. The Company anticipates 1996 gross profit, as a percent of net
sales, will approximate the fiscal year 1995 level.
SALES AND MARKETING EXPENSES totaled $4.1 million or 26% of net sales in 1995,
compared to $3.7 million or 28% of net sales in 1994, and $3.6 million or 39%
of net sales in 1993. The increased expenditures reflect costs associated with
increased sales staff and promotion expenses. Sales and marketing expenses in
1996 are expected to increase in actual dollars to support anticipated growing
sales levels, but continue to decrease as a percent of net sales.
GENERAL AND ADMINISTRATIVE EXPENSES were $1.4 million or 9% of net sales in
1995, compared to $1.3 and $1.4 million or 10% and 15% of net sales for 1994
and 1993, respectively. The increase in expenses for 1995 is due to a general
increase in expenses associated with the higher sales levels. The Company
expects general and administrative expenses to increase during 1996 and be
lower as a percent of net sales.
RESEARCH AND DEVELOPMENT EXPENSES in 1995 were $1.8 million or 11% of sales,
compared to $1.7 million or 13% and 18% of net sales in 1994 and 1993,
respectively. Spending held relatively constant over the last three-year
period. The Company expects research and development expenses in 1996 to
increase due to new product development planned for future disk array products.
OTHER INCOME (EXPENSE) increased by $196,000 in 1995. Interest and dividend
income increased $47,000 and no additional charges for marketable security
valuations occurred in 1995, compared to prior years. Interest and dividend
income decreased $50,000 in 1994 and $46,000 in 1993 due to lower short-term
interest rates and average cash balances. Royalty income decreased $30,000 in
1995 and $52,000 in 1994 due to decreased usage of the related technology. In
1994 and 1993 there was a charge of $193,000 and $45,000, respectively, for a
cost-to-market adjustment for investments.
INCOME TAX EXPENSE incurred for 1995, 1994 and 1993 is described in footnote
four of the consolidated financial statements.
NET EARNINGS (LOSS) increased in 1995 to $396,000 compared to losses of
$(321,000) and $(1,778,000) in 1994 and 1993, respectively. The 1995 increase
is due to higher sales levels and no unfavorable adjustments to marketable
securities as experienced in prior years. The 1993 loss was a result of lower
sales, and the costs associated with the transition to disk array products.
LIQUIDITY AND CAPITAL RESOURCES:
Liquidity remains strong with cash and cash equivalents and marketable
securities totaling $4.7 million at year-end, compared to $3.5 million in 1994.
The company's working capital was $6,573,000 with a current ratio of 3.1 to 1
at September 30, 1995, compared to $5,244,000 and 3.6 to 1 at September 30,
1994.
Cash flows from operating activities in 1995 were largely attributed to net
earnings ($396,000) and the non-cash expense of depreciation ($712,000). The
increase in inventory ($742,000) and accounts receivable ($894,000) were
partially offset by an increase in accounts payable ($866,000) and accrued
expenses ($224,000). Accounts receivable increased to $3.3 million in 1995
compared to $2.5 million in 1994, due to increased sales. Inventory increased
in 1995 to $1.6 million compared to $1.1 million in 1994 due to demonstration
inventory for tradeshows and customers. Anticipated growth for fiscal year
1996 may require a use of cash to fund working capital needs. Inventory levels
will be managed to support expected shipments.
Cash flows used in investing activities were mainly for equipment purchases of
$683,000 in 1995 versus $612,000 in 1994. Looking ahead, this level of
investment is expected to increase significantly due to planned internal
computer system upgrades and development of next generation disk array
products.
Cash flows from financing activities in 1995 were largely the result of
proceeds from the issuance of common stock sold pursuant to the exercise of
employee stock options.
Funding of future working capital needs and equipment purchases may cause a net
reduction in the cash balances in 1996. The Company believes that current
levels of cash and marketable securities are adequate to fund 1996 operations
as currently planned.
- 6 -
<PAGE> 8
ITEM 7. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
Ciprico Inc. and Subsidiaries
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,425,471 $ 2,176,125
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,267,482 1,300,412
Trade accounts receivable, less allowance for doubtful accounts of
$180,000 in 1995 and $249,000 in 1994 . . . . . . . . . . . . . . . . . . . . . . . . . 3,227,535 2,335,847
Related party receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 106,737
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,751 14,335
------------------------
Total accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,315,286 2,456,919
Inventories:
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 949,044 459,026
Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231,622 261,097
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397,172 423,521
------------------------
Total inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,577,838 1,143,644
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,490 161,990
------------------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,701,567 7,239,090
FURNITURE AND EQUIPMENT, AT COST:
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332,418 316,890
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,665,683 4,520,663
------------------------
4,998,101 4,837,553
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,785,667) (3,495,258)
------------------------
Net furniture and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,212,434 1,342,295
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,066 1,835
------------------------
$10,920,067 $ 8,583,220
========================
Liabilities and Stockholders' Equity
CURRENT LIABILITIES:
Current installments of obligations under capital leases . . . . . . . . . . . . . . . . . $ 27,330 $ 20,880
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,346,639 1,480,645
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 354,611 228,754
Warranty accrual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,000 53,000
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,454 72,991
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169,297 82,822
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,548 56,202
------------------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,128,879 1,995,294
Long-term installments of obligations under capital leases . . . . . . . . . . . . . . . . 40,102 48,140
Deferred rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,822 66,264
------------------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,223,803 2,109,698
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 1,000,000 shares authorized;
none issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
Common stock, $.01 par value; 9,000,000 shares authorized; issued and
outstanding 2,265,946 shares in 1995 and 2,066,616 shares in 1994 . . . . . . . . . . . 22,659 20,666
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,633,034 5,867,971
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 997,509 601,432
Unrealized gain on marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . 60,400 --
Accumulated translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17,338) (16,547)
------------------------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,696,264 6,473,522
------------------------
Commitments (NOTE 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,920,067 $ 8,583,220
========================
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an integral
part of these consolidated financial statements.
- 7 -
<PAGE> 9
CONSOLIDATED STATEMENTS OF OPERATIONS
Ciprico Inc. and Subsidiaries
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,966,203 $13,120,610 $ 9,213,626
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,498,374 6,847,643 4,609,314
-----------------------------------------------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,467,829 6,272,967 4,604,312
Sales and marketing expenses . . . . . . . . . . . . . . . . . . . . 4,129,493 3,693,255 3,592,686
General and administrative expenses . . . . . . . . . . . . . . . . . 1,432,373 1,307,632 1,386,675
Research and development expenses . . . . . . . . . . . . . . . . . . 1,799,547 1,693,619 1,651,277
-----------------------------------------------
Earnings (loss) from operations . . . . . . . . . . . . . . . . . . . 106,416 (421,539) (2,026,326)
Other income (expenses):
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . (7,101) (5,736) (10)
Interest and dividend income . . . . . . . . . . . . . . . . . . 203,309 156,542 206,298
Royalty income . . . . . . . . . . . . . . . . . . . . . . . . . 91,950 122,200 173,950
Gain (loss) on marketable securities . . . . . . . . . . . . . . 4,093 (148,920) (45,221)
Gain (loss) on sale of fixed assets . . . . . . . . . . . . . . . 27,476 1,030 (79,970)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,066) (3,200) 17,188
-----------------------------------------------
317,661 121,916 272,235
Earnings (loss) before income taxes . . . . . . . . . . . . . . . . . 424,077 (299,623) (1,754,091)
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . 28,000 21,000 24,000
-----------------------------------------------
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . $ 396,077 $ (320,623) $(1,778,091)
Earnings (loss) per common share -- Primary . . . . . . . . . . . . . $ .18 $ (.16) $ (.87)
Earnings (loss) per common share -- Fully diluted . . . . . . . . . . $ .17 $ (.16) $ (.87)
-----------------------------------------------
Common and common equivalent shares -- Primary . . . . . . . . . . . 2,262,719 2,062,581 2,045,256
Common and common equivalent shares -- Fully diluted . . . . . . . . 2,288,085 2,062,581 2,045,256
</TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Ciprico Inc. and Subsidiaries
<TABLE>
<CAPTION>
Unrealized
gain on
Common stock Accumulated securities
and additional Retained translation available
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993 Shares paid-in capital earnings adjustments for sale Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1992 . . . . . . . . 2,038,816 $5,806,219 $2,700,146 $ (435) $ -- $8,505,930
Stock issued in connection with
exercise of employee stock options . . . 15,602 44,186 -- -- -- 44,186
Net loss. . . . . . . . . . . . . . . . . . -- -- (1,778,091) -- -- (1,778,091)
Foreign currency adjustment . . . . . . . . -- -- -- (12,538) -- (12,538)
------------------------------------------------------------------------------
Balance, September 30, 1993 . . . . . . . . 2,054,418 $5,850,405 $ 922,055 $(12,973) -- $6,759,487
------------------------------------------------------------------------------
Stock issued in connection with
exercise of employee stock options. . . . 12,198 38,232 -- -- -- 38,232
Net loss. . . . . . . . . . . . . . . . . . -- -- (320,623) -- -- (320,623)
Foreign currency adjustment . . . . . . . . -- -- -- (3,574) -- (3,574)
------------------------------------------------------------------------------
Balance, September 30, 1994 . . . . . . . . 2,066,616 $5,888,637 $ 601,432 $(16,547) -- $6,473,522
------------------------------------------------------------------------------
Stock issued in connection with
exercise of employee stock options. . . . 198,277 702,588 -- -- -- 702,588
Restricted stock issued . . . . . . . . . . 1,053 5,002 -- -- -- 5,002
Net earnings. . . . . . . . . . . . . . . . -- -- 396,077 -- -- 396,077
Foreign currency adjustment . . . . . . . . -- -- -- (791) -- (791)
Excess of fair value over option price
for stock options exercised. . . . . . . . -- 59,466 -- -- -- 59,466
Change in unrealized gain on securities
available for sale . . . . . . . . . . . . -- -- -- -- 60,400 60,400
------------------------------------------------------------------------------
Balance, September 30, 1995 2,265,946 $6,655,693 $ 997,509 $(17,338) $60,400 $7,696,264
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an integral
part of these consolidated financial statements.
- 8 -
<PAGE> 10
CONSOLIDATED STATEMENTS OF CASH FLOWS
Ciprico Inc. and Subsidiaries
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . $ 396,077 $ (320,623) $(1,778,091)
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . 712,476 690,969 724,852
Provision for inventory obsolescence . . . . . . . . . . . . . . . 307,380 142,418 195,000
Provision for bad debt expense . . . . . . . . . . . . . . . . . . 36,029 63,303 38,000
(Gain) Loss on retirement of fixed assets . . . . . . . . . . . . . (27,476) (1,030) 79,970
Gain on sale of marketable securities . . . . . . . . . . . . . . . (4,093) -- --
Security valuation adjustment to market value . . . . . . . . . . . -- 192,779 45,221
Excess of fair value over option price
for stock options exercised . . . . . . . . . . . . . . . . . . 59,466 -- --
Changes in operating assets and liabilities:
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . (741,574) 50,795 83,440
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . (894,396) (1,077,421) 662,943
Other current assets . . . . . . . . . . . . . . . . . . . . . . . 46,500 (43,493) 9,731
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . 865,994 812,916 39,025
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . 224,332 14,709 (17,341)
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . 3,463 (4,029) (31,707)
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . 33,346 56,202 --
Deferred rent . . . . . . . . . . . . . . . . . . . . . . . . . . (11,442) (10,151) 19,541
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . (790) (2,617) (14,628)
-----------------------------------------------
NET CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . 1,005,292 564,727 55,956
CASH FLOWS FROM INVESTING ACTIVITIES:
Equipment purchases . . . . . . . . . . . . . . . . . . . . . . . . . (682,616) (611,997) (718,738)
Proceeds from sale of equipment . . . . . . . . . . . . . . . . . . . 146,145 100,569 28,854
Decrease in restricted cash . . . . . . . . . . . . . . . . . . . . . -- 450,000 --
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . (4,231) 1,706 9,782
Investment in marketable securities . . . . . . . . . . . . . . . . . -- (288,412) (25,348)
Proceeds from sale of marketable securities . . . . . . . . . . . . . 97,422 107,000 95,000
-----------------------------------------------
NET CASH FLOWS USED IN
INVESTING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . (443,280) (241,134) (610,450)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under capital lease obligations . . . . . . . . . (20,256) (11,575) (4,585)
Proceeds from issuance of common stock . . . . . . . . . . . . . . . 707,590 38,232 44,186
-----------------------------------------------
NET CASH FLOWS PROVIDED BY
FINANCING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . 687,334 26,657 39,601
-----------------------------------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . 1,249,346 350,250 (514,893)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . . . . . . . . . . 2,176,125 1,825,875 2,340,768
-----------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR . . . . . . . . . . . . . . $ 3,425,471 $ 2,176,125 $ 1,825,875
===============================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,101 $ 5,736 $ 10
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,537 25,029 55,707
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITY:
During fiscal 1995, 1994 and 1993, the company entered into capital
leases for equipment and incurred obligations of $68,208, $59,480 and
$37,078, respectively.
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an integral
part of these consolidated financial statements.
- 9 -
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Ciprico Inc. and Subsidiaries
September 30, 1995, 1994 and 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS: The principal business activity of Ciprico Inc. and subsidiaries
(the Company) is the design, manufacture, marketing and service of disk array
solutions for use in high performance computer systems for the visual computing
markets.
CONSOLIDATION: The accompanying consolidated financial statements include the
accounts of Ciprico Inc. and its wholly owned subsidiaries, Ciprico
International Limited and Ciprico FSC, Inc. (a foreign sales corporation). All
significant intercompany balances and transactions have been eliminated.
REVENUE RECOGNITION: Revenue is recognized upon shipment of products. Revenue
from extended warranty and maintenance agreements are recognized on the
straight-line basis over the term of the agreement.
PRODUCT WARRANTY COSTS: Estimated future warranty costs are provided at the
time of revenue recognition.
ROYALTY INCOME: Royalties are recognized when payment is received.
STATEMENTS OF CASH FLOWS: For purposes of reporting cash flows, all temporary
cash investments having initial maturities of three months or less are
considered cash equivalents.
MARKETABLE SECURITIES: Marketable securities at September 30, 1995 and 1994
consist of mutual funds investing in mortgage backed debt securities. The
Company adopted the provisions of Statement of Financial Accounting Standards
No. 115, Accounting for Certain Investments in Debt and Equity Securities (SFAS
No.115) at September 30, 1994. Under SFAS No. 115, the Company's marketable
securities are classified as available-for-sale and recorded at fair value.
Unrealized holding gains and losses on available-for-sale securities are
excluded from operations and are reported as a separate component of
stockholders' equity until realized. A decline in the market value of any
available-for-sale security that is below cost and deemed other than temporary,
results in a charge to operations and the establishment of a new cost basis for
the security.
Prior to adoption of SFAS No. 115, unrealized losses resulted in a charge to
operating results. Adoption of this statement did not impact the Company's
financial position or results of operation for the fiscal year ended September
30, 1994. The previously recorded decline in the fair value of the Company's
investments has been deemed other than temporary.
INVENTORIES: Inventories are stated at the lower of cost or replacement
market. Cost is determined using the first-in, first-out (FIFO) method.
Inventory costs include outside assembly charges, allocated manufacturing
overhead and direct material costs. The allocated overhead component totaled
$58,810 in 1995 and $30,000 in 1994.
FURNITURE AND EQUIPMENT: Furniture and equipment is carried at cost, less
accumulated depreciation. Depreciation is provided using the straight line
method over estimated useful lives of three to seven years. Major replacements
and improvements are capitalized; repairs and maintenance are expensed as
incurred.
INCOME TAXES: Deferred income taxes are recognized for income and
expense items that are reported in different years for financial reporting
purposes and income tax purposes. The Company's method of accounting for income
taxes conforms with FASB Statement No.109--"Accounting for Income Taxes".
RESEARCH AND DEVELOPMENT COSTS: Research and development costs are charged to
expense as incurred.
FOREIGN CURRENCY: The financial statements of Ciprico International Limited
have been translated into U.S. dollars in accordance with the provisions of
Statement of Financial Accounting Standards No. 52 "Foreign Currency
Translation" (SFAS No. 52). Under SFAS No. 52, assets and liabilities are
translated into U.S. dollars at the year-end exchange rate, while income and
expenses are translated at the average exchange rates during the year. The
resulting translation adjustments are reflected as a separate component of
stockholders' equity.
RECLASSIFICATION: Certain 1994 amounts have been reclassified to conform to
the 1995 presentation.
2. MARKETABLE SECURITIES
The cost, gross unrealized gain, and fair market value from the sale of
available-for-sale securities were as follows:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cost $1,207,082 $1,300,412
Gross unrealized gain 60,400 --
Fair value 1,267,482 1,300,412
</TABLE>
Proceeds from the sale of marketable securities in 1995, 1994 and 1993 were
$97,422, $107,000 and $95,000, respectively. Net realized gains included in
income in 1995, 1994 and 1993 were $4,093, $42,165 and $0, respectively.
3. OTHER ACCRUED EXPENSES
Other accrued expenses consist of the following:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Marketing expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 64,220 $ --
Commission expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,044 24,832
Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,895 26,952
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,194 12,000
Payroll taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,443 12,653
Miscellaneous, other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,501 6,385
----------------------------------
Total $169,297 $ 82,822
==================================
</TABLE>
- 10 -
<PAGE> 12
4. INCOME TAXES
Effective for the year ended September 30, 1993, the Company adopted Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes.
The provisions for income tax expense consist of :
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,000 $ -- $ --
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000 -- 5,000
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000 21,000 19,000
-------------------------------------------
Total current . . . . . . . . . . . . . . . . . . . . . . . . . . 28,000 21,000 24,000
-------------------------------------------
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- --
-------------------------------------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $28,000 $21,000 $24,000
===========================================
</TABLE>
The actual tax expense differs from the expected tax expense computed by
applying the U.S. federal corporate rate to earnings (loss) before income taxes
as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed expected tax
expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . $148,100 $(101,900) $(596,400)
State taxes, net of federal
income tax effect . . . . . . . . . . . . . . . . . . . . . . . . 3,700 -- 3,300
Limitation/(utilization) of net
operating loss carryforwards . . . . . . . . . . . . . . . . . . -- 119,800 616,300
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . (130,100) -- --
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,300 3,100 800
---------------------------------------------
Actual tax expense . . . . . . . . . . . . . . . . . . . . . . . . . $ 28,000 $ 21,000 $ 24,000
=============================================
</TABLE>
The tax effects of temporary differences that give rise to
significant portions of the Company's deferred tax assets
(liabilities) are as follows:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. and State net operating
loss and tax credit carryforward . . . . . . . . . . . . . . . . $ 657,000 $ 932,500
Reserve for inventory obsolescence . . . . . . . . . . . . . . . . . 79,600 55,500
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22,000) (64,700)
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . 85,100 --
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . 66,600 92,100
Accrued vacation pay . . . . . . . . . . . . . . . . . . . . . . . . 64,800 52,900
Warranty accrual . . . . . . . . . . . . . . . . . . . . . . . . . . 24,100 19,600
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 7,400
---------------------------------------------
Total gross deferred tax asset . . . . . . . . . . . . . . . . . . . 965,200 1,095,300
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . (965,200) (1,095,300)
---------------------------------------------
Net deferred tax asset (liability) . . . . . . . . . . . . . . . . . $ -- $ --
=============================================
</TABLE>
The Company has net operating loss carryforwards at September 30, 1995, for
income tax purposes of approximately $1,700,000 and tax credit carryforwards of
$30,000. If not used, these carryforwards will begin to expire in 2002.
5. EARNINGS (LOSS) PER COMMON SHARE
For the year ended September 30, 1995, earnings per common share primary and
fully diluted were computed using the weighted average number of common and
common equivalent shares outstanding. Common equivalent shares result from
dilutive stock options. For the years ended September 30, 1994 and 1993, loss
per common share primary was computed using the weighted average number of
common shares outstanding. Stock options were excluded due to their
antidilutive effect. Fully diluted loss per share would not differ from
primary because the result is antidilutive.
6. STOCK OPTIONS
The Company has four stock option plans under which the officers, directors and
employees have been or may be granted incentive and nonqualified stock options
to purchase the Company's common stock at fair market value on the date of
grant. The options become exercisable over varying periods and expire up to 10
years from date of grant.
Summarized information at September 30, 1995, regarding stock option plans is
as follows:
<TABLE>
<CAPTION>
Plan years 1983 1986 1992 1994 Total
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total reserved for
under the plan 200,000 300,000 150,000 250,000 900,000
Exercised 64,130 135,623 40,451 25,531 265,735
Outstanding 78,500 15,625 76,434 215,472 386,031
Exercisable 43,500 15,375 58,490 25,625 142,990
Exercise price $3.13-4.38 $3.00-3.25 $3.59-5.96 $4.08-6.63 $3.00-6.63
Available for grant -- -- 33,115 8,997 42,112
</TABLE>
7. 401(k) PLAN
The Company participates in a 401(k) savings plan covering substantially all of
its employees. Minimum contributions to the plan by the Company are 50 percent
of the first 2 percent of participants' salaries. The Company's contributions
to this plan in 1995, 1994 and 1993 were $29,854, $27,881 and $24,261,
respectively.
8. RELATED PARTY TRANSACTIONS
In 1994, the Company cancelled its distributor and international sales
representative agreements with Diamond Point International, Inc., (DPI), a
company owned by a former director of the Company. Total sales to DPI under the
distributor agreement for the years ended September 30, 1995, 1994 and 1993,
were $0, $100,940 and $230,538, respectively. Trade accounts receivable
relating to these sales as of September 30, 1995, 1994 and 1993, were $0,
$106,737 and $160,867, respectively. Commission expense under the sales
representative agreement in 1994 and 1993 totaled $19,680 and $3,407
respectively. There were no outstanding commissions payable as of September 30,
1995,1994 and 1993.
9. REVENUE
The consolidated statements of operations included sales to significant
customers as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30 1995 1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Customer A . . . . . . . . . . . . . . . . . 9% 14% 12%
Customer B . . . . . . . . . . . . . . . . . -- 3 13
Customer C . . . . . . . . . . . . . . . . . -- 2 10
----------------------------------------------------
Total . . . . . . . . . . . . . . . . . . 9% 19% 35%
====================================================
</TABLE>
- 11 -
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Ciprico Inc. and Subsidiaries
September 30, 1995, 1994 and 1993
10. FINANCIAL INFORMATION BY GEOGRAPHIC AREA (UNAUDITED)
The Company's revenue, earnings (loss) from operations and total assets
summarized by geographic area is as follows:
<TABLE>
<CAPTION>
Revenue 1995 1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
North America . . . . . . . . . . . $10,341,928 $10,306,793 $ 8,023,853
UK Subsidiary . . . . . . . . . . . 2,781,651 1,622,584 870,021
Other foreign . . . . . . . . . . . 2,842,624 1,191,233 319,752
----------------------------------------------------------
Total . . . . . . . . . . . . . . $15,966,203 $13,120,610 $ 9,213,626
==========================================================
Earnings (Loss) from operations
- --------------------------------------------------------------------------------------------------
North America
and other foreign . . . . . . . . $ (499,231) $ (498,869) $(1,874,645)
UK Subsidiary . . . . . . . . . . . 605,647 77,330 (151,681)
-----------------------------------------------------------
Total . . . . . . . . . . . . . . $ 106,416 $ (421,539) $(2,026,326)
===========================================================
Total Assets
- --------------------------------------------------------------------------------------------------
North America . . . . . . . . . . . $10,738,735 $ 8,400,215 $ 7,884,353
UK Subsidiary . . . . . . . . . . . 436,764 354,585 262,435
Eliminations . . . . . . . . . . . (255,432) (171,580) (183,680)
-----------------------------------------------------------
Total . . . . . . . . . . . . . . $10,920,067 $ 8,583,220 $ 7,963,108
</TABLE>
11. COMMITMENTS
LEASES: The Company has operating and capital leases for office and
manufacturing space and other equipment which expire through September 1998.
Future minimum payments under these leases are $293,220, $258,381 and $33,159
for 1996, 1997 and 1998, respectively. For the years ended September 30, 1995,
1994 and 1993, operating lease expenses were $237,579, $231,379 and $243,650,
respectively.
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND STOCKHOLDERS -- CIPRICO INC.
We have audited the accompanying consolidated balance sheets of Ciprico Inc.
and subsidiaries as of September 30, 1995 and 1994, and the related statements
of operations, stockholders' equity and cash flows for each of the years in the
three-year period ended September 30, 1995. These consolidated financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Ciprico Inc. and
subsidiaries as of September 30, 1995 and 1994, and the results of their
operations and their cash flows for each of the years in the three-year period
ended September 30, 1995, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 3, 1995
- 12 -
<PAGE> 14
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The names, ages and positions of the Company's executive officers are
as follows:
<TABLE>
<CAPTION>
Name Age Position(s)
---- --- ----------
<S> <C> <C>
Robert H. Kill 48 President, Chief Executive
Officer and Director
Cory J. Miller 42 Vice President of Finance,
Chief Financial Officer and
Secretary
</TABLE>
Officers are elected annually by and serve at the discretion of the
Board of Directors. There is no family relationship between the executive
officers of the Company.
Robert H. Kill has been President of the Company since March 1988 and
a director since September 1987. Mr. Kill was Executive Vice President of the
Company from September 1987 to March 1988, Secretary from September 1987 to
July 1988 and from November 1989 to October 1993, and Vice President and
General Manager from August 1986 to September 1987. Mr. Kill held several
marketing and sales positions at Northern Telecom, Inc. from 1979 to 1986, his
latest position being Vice President, Terminals Distribution.
Cory J. Miller was elected Vice President of Finance-Chief Financial
Officer in October 1992 and Secretary in October 1993. Mr. Miller served as
the Company's Controller/CFO from December 1989 to October 1992 and as
Controller from October 1987 to December 1989. Mr. Miller was Director of
Finance at VTC Incorporated, a semiconductor manufacturer, from 1985 to 1987
prior to joining Ciprico.
The information required by Item 9 relating to directors is
incorporated herein by reference to the section labeled "Election of Directors"
which appears in the Registrant's definitive Proxy Statement for its 1996
Annual Meeting of Shareholders.
- 13 -
<PAGE> 15
ITEM 10. EXECUTIVE COMPENSATION
The information required by Item 10 is incorporated herein by
reference to the section labeled "Executive Compensation" which appears in the
Registrant's definitive Proxy Statement for its 1996 Annual Meeting of
Shareholders.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 11 is incorporated herein by
reference to the sections labeled "Principal Shareholders" and "Management
Shareholdings" which appear in the Registrant's definitive Proxy Statement for
its 1996 Annual Meeting of Shareholders.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
ITEM 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K
(a) Exhibits. See "Exhibit Index" on page following signatures.
(b) Reports on Form 8-K.
No report on Form 8-K was filed by the Company during the fourth quarter of
fiscal 1995.
- 14 -
<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CIPRICO INC.
(the "Registrant")
Date: December 14, 1995 By /s/ Robert H. Kill
------------------------
Robert H. Kill, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
(Power of Attorney)
Each person whose signature appears below constitutes and appoints
ROBERT H. KILL and CORY J. MILLER his true and lawful attorneys-in-fact and
agents, each acting alone, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign
any or all amendments to this Annual Report on Form 10-KSB and to file the
same, with all exhibits thereto, and other documents in connection therewith
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully and to all intent and purposes as he might or
could do in person, hereby ratifying and confirming all said attorneys-in-fact
and agents, each acting alone, or his substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Robert H. Kill Director and President December 14, 1995
-------------------------------- (Principal executive officer)
Robert H. Kill
/s/ Cory J. Miller Vice President Finance/Chief December 14, 1995
-------------------------------- Financial Officer (Principal
Cory J. Miller financial and accounting officer)
/s/ William N. Wray Director December 14, 1995
--------------------------------
William N. Wray
/s/ Donald H. Soukup Director December 14, 1995
--------------------------------
Donald H. Soukup
/s/ Ronald B. Thomas Director December 14, 1995
--------------------------------
Ronald B. Thomas
/s/ Gary L. Deaner Director December 14, 1995
-------------------------------
Gary L. Deaner
</TABLE>
- 15 -
<PAGE> 17
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBIT INDEX TO FORM 10-KSB
For the fiscal year ended Commission File No.: 0-11336
September 30, 1995
________________________________________________________________________________
CIPRICO INC.
________________________________________________________________________________
<TABLE>
<CAPTION>
Exhibit Description
- ----------------------------
<S> <C>
2 Agreement and Plan of Merger of Ciprico Inc. (a Minnesota corporation) into Ciprico Inc. (a Delaware
corporation)--incorporated by reference to Exhibit 2 of the Registrant's Form 10-Q for the quarter ended
March 31, 1988*
3.1 The Registrant's Certificate of Incorporation, as amended to date--incorporated by reference to Exhibit 19.1
of the Registrant's Form 10-Q for the quarter ended March 31, 1988*
3.2 The Registrant's Bylaws, as amended to date--incorporated by reference to Exhibit 19.2 of the Registrant's
Form 10-Q for the quarter ended March 31, 1988*
10.1 Lease Agreement, dated December 3, 1991, relating to manufacturing space located at 2800 Campus Drive, Plymouth,
Minnesota and corporate office space located at 2955 Xenium Lane, Plymouth Minnesota--incorporated by reference
to Exhibit 10.1 of the Registrant's Form 10-K for the fiscal year ended September 30, 1991*
10.2** Registrant's Incentive Stock Option Plan--incorporated by reference to Exhibit 10.7 of the Registrant's Form 10-K
for the fiscal year ended September 30, 1983*
10.3** Specimen of Incentive Stock Option Agreement--incorporated by reference to Exhibit 10.8 of the Registrant's
Form 10-K for the fiscal year ended September 30, 1983*
</TABLE>
__________________________
* Incorporated by reference - Commission File No. 0-11336
** Indicates a management contract or compensatory plan or arrangement required
to be filed as an exhibit to this Form 10-KSB.
- i -
<PAGE> 18
<TABLE>
<S> <C>
10.4** Amendment to Registrant's Incentive Stock Option Plan--incorporated by reference to Exhibit 10.13 of the
Registrant's Form 10-K for the fiscal year ended September 30, 1984*
10.5** Registrant's 1986 Nonqualified Stock Option Plan--incorporated by reference to Exhibit 10.12 of the Registrant's
Form 10-K for the fiscal year ended September 30, 1986*
10.6** Specimen of Nonqualified Stock Option Agreement under 1986 Nonqualified Stock Option Plan--incorporated by
reference to Exhibit 10.13 of the Registrant's Form 10-K for the fiscal year ended September 30, 1986*
10.7** 1986 Amendment to Registrant's Incentive Stock Option Plan--incorporated by reference to Exhibit 10.14 of the
Registrant's Form 10-K for the fiscal year ended September 30, 1986*
10.8 License Agreement between Cottrill, Inc. and TechSource Inc., Registrant's subsidiary, dated December 18, 1987--
incorporated by reference to Exhibit 10.18 of the Registrant's Form 10-K for the fiscal year ended September 30,
1988*
10.9** Registrant's 1992 Nonqualified Stock Option Plan--incorporated by reference to Exhibit 10.13 of the Registrant's
Form 10-K for the fiscal year ended September 30, 1992*
10.10** Specimens of Nonqualified Stock Option Agreements under 1992 Nonqualified Stock Option Plan--incorporated by
reference to Exhibit 10.14 of the Registrant's Form 10-K for the fiscal year ended September 30, 1992*
10.11** Amendment No. 1 to Registrant's 1992 Nonqualified Stock Option Plan
10.12** Amendment No. 2 to Registrant's 1992 Nonqualified Stock Option Plan
10.13** Registrant's 1994 Incentive Stock Option Plan--incorporated by reference to Exhibit 10.13 of the Registrant's
Form 10-KSB for the fiscal year ended September 30, 1993*
10.14** Specimen of Incentive Stock Option Agreement under 1994 Incentive Stock Option Plan--incorporated by reference to
Exhibit 10.14 of the Registrant's Form 10-KSB for the fiscal year ended September 30, 1993*
10.15** Registrant's 1996 Restricted Stock Plan
</TABLE>
__________________________
* Incorporated by reference - Commission File No. 0-11336
** Indicates a management contract or compensatory plan or arrangement required
to be filed as an exhibit to this Form 10-KSB.
- ii -
<PAGE> 19
<TABLE>
<S> <C>
10.16** Specimen of Restricted Stock Agreement under 1996 Restricted Stock Plan
10.17 Restricted Stock Agreement dated December 30, 1994 between Registrant and Robert H. Kill--incorporated by
reference to Exhibit 10.1 of the Registrant's Form 10-QSB for the quarter ended June 30, 1995.*
22 Subsidiaries of the Registrant
------------------------------
Jurisdiction
Name of Incorporation
---- ----------------
Ciprico FSC, Inc. Virgin Islands
Ciprico (Europe) Limited England
23 Consent of KPMG Peat Marwick LLP
24 Power of Attorney from Certain Directors--see Signature Page
27 Financial Data Schedule (filed in electronic format only)
</TABLE>
29948
__________________________
* Incorporated by reference - Commission File No. 0-11336
** Indicates a management contract or compensatory plan or arrangement required
to be filed as an exhibit to this Form 10-KSB.
- iii -
<PAGE> 1
EXHIBIT 10.11
AMENDMENT NO. 1
TO
CIPRICO INC.
1992 NONQUALIFIED STOCK OPTION PLAN
THIS AMENDMENT, made this 26th day of January, 1995, by Ciprico Inc., a
Delaware corporation (the "Company") to the Ciprico Inc. 1992 Nonqualified Stock
Option Plan (the "1992 Option Plan");
WHEREAS, the Company has elected to comply with new Rule 16b-3 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended; and
WHEREAS, the Company desires to amend certain provisions of the 1992
Option Plan to conform with the requirements under new Rule 16b-3.
NOW, THEREFORE, RESOLVED, that the Ciprico Inc. 1992 Nonqualified Stock
Option Plan be and it hereby is amended, as follows:
1. Paragraph (f) of Section 1 of the 1992 Option Plan shall be
amended in its entirety to read as follows:
(f) "Committee" shall mean a Committee of two or more directors
who shall be appointed by and serve at the pleasure of the Board.
Each of the members of the Committee shall be a "disinterested" person
within the meaning of Rule 16b-3, as then in effect, of the General
Rules and Regulations under the Securities Exchange Act of 1934 as
amended. A "disinterested" person under Rule 16b-3 generally means a
person who has not been, at any time within one year prior to his or
her appointment to the Committee and who will not be, while serving on
such Committee, granted or awarded options under the Plan, or under
any other plan of the Company entitling participants to acquire stock,
stock options, stock appreciation rights or similar rights that have
an exercise or conversion privilege or a value derived from equity
securities issued by the Company, except to the extent permitted by
Rule 16b-3, or any successor provision.
2. Except as amended herein, all other terms and conditions of
the 1992 Option Plan shall remain in full force and effect.
CIPRICO INC.
By: /s/ Cory J. Miller
-----------------------------
Its: V.P. of Finance/CFO
-----------------------------
374759
<PAGE> 1
EXHIBIT 10.12
AMENDMENT NO. 2
TO
CIPRICO, INC. 1992 NONQUALIFIED STOCK OPTION PLAN
This Amendment No. 2 to the Ciprico, Inc. 1992 Nonqualified Stock
Option Plan (the "1992 Option Plan") was adopted by the Board of Directors of
the Company on November 15, 1995 and approved by the shareholders of the
Company on January 25, 1996.
1. Section 6 shall be amended to provide that Two Hundred Fifty
Thousand (250,000) shares of Common Stock shall be reserved and available for
options under the 1992 Option Plan.
2. Section 10 shall be amended in its entirety to read as follows:
"SECTION 10
NONQUALIFIED STOCK OPTIONS
FOR OUTSIDE DIRECTORS
(a) Automatic Grants. No person shall have any discretion to
select the nonemployee directors that shall be eligible for
nonqualified stock options or to determine the number of
shares of Common Stock to be subject to such options, the
option price per share, the term and exercisability for such
options or the date of grant. No action by the Board of
Directors or the Committee shall be required for the grant of
nonqualified stock options pursuant to this Section 10, it
being the intention of the Company that such stock option
grants will occur automatically.
(b) Annual Grants to Nonemployee Directors.
(1) At the annual shareholders' meeting occurring
in 1996, each individual who served as a
nonemployee director of the Company during
the year preceding such annual meeting shall
receive a nonqualified stock option for 4,000
shares. Any individual who served as a
nonemployee director for less than a full
year preceding the annual meeting shall
receive a nonqualified stock option for the
number of shares determined by multiplying
4,000 by a fraction, the numerator of which
is the number of months during the preceding
year that such individual served as a
nonemployee director and the denominator of
which is 12.
(2) Beginning with the annual shareholders'
meeting occurring in 1996 and on the date of
each annual shareholders' meeting thereafter,
each nonemployee director who is elected or
reelected to the Company's Board of Directors
at such meeting or who will continue to serve
as a director during the ensuing year by
virtue of membership in a class of directors
previously elected shall receive a
nonqualified stock option for 4,000 shares.
The option granted
pursuant to this Section 10(b)(2) to a
nonemployee director upon his reelection to
the Board of Directors at the 1996 annual
shareholders' meeting shall be in addition to
any option which such nonemployee director
receives for prior service under Section
10(b)(1) above.
(c) Exercise Price. The exercise price per share for each
nonqualified stock options granted pursuant to this Section 10
shall be equal to the average of the fair market values of the
Company's Common Stock for the ten (10) trading days ending
with the date of the annual meeting, unless the annual meeting
date is not a trading day, in which case the ten-trading day
period will end on the last trading day immediately preceding
such annual meeting.
(d) Term and Exercisability. Each nonqualified stock option
granted pursuant Section 10(b)(1) shall expire five (5) years
from the date of grant and shall be fully exercisable at all
times. Each nonqualified stock option granted pursuant to
Section 10(b)(2) shall become exercisable on the date of the
annual shareholders' meeting following the date of the meeting
on which the option was granted if the Optionee has served as
a director throughout such period, and shall expire seven (7)
years from the date of grant. Each nonqualified stock option
granted pursuant to this Section 10 shall be subject to such
additional terms and conditions not inconsistent with this
Plan as the Option Agreement issued to the Optionee by the
Company may contain."
3. Except as otherwise amended or modified herein, all other
provisions of the Plan shall remain in full force and effect.
CIPRICO, INC.
DATE: JANUARY 25, 1996 BY:________________________
ITS:____________________
471002
<PAGE> 1
EXHIBIT 10.15
CIPRICO, INC.
1996 RESTRICTED STOCK PLAN
SECTION 1.
DEFINITIONS
As used herein, the following terms shall have the meanings indicated
below:
(a) "Affiliates" shall mean a Parent or Subsidiary of the Company.
(b) "Committee" shall mean a Committee of two or more directors
who shall be appointed by and serve at the pleasure of the Board.
Each of the members of the Committee shall be a "disinterested" person
within the meaning of Rule 16b-3, or any successor provision, as then
in effect, of the General Rules and Regulations under the Securities
Exchange Act of 1934 as amended. As of the effective date of the
Plan, a "disinterested" person under Rule 16b-3 generally means a
person who, among other things, has not been, at any time within one
year prior to his or her appointment to the Committee (or, if shorter,
during the period beginning with the initial registration of the
Company's equity securities under Section 12 of the Securities
Exchange Act of 1934, as amended, and ending with the director's
appointment to the Committee) and who will not be, while serving on
such Committee, granted or awarded options under the Plan, or under
any other plan of the Company or any of its Affiliates entitling
participants to acquire stock, stock options, stock appreciation
rights or similar rights that have an exercise or conversion privilege
or a value derived from equity securities issued by the Company or its
Affiliate, except to the extent permitted by Rule 16b-3, or any
successor provision.
(c) The "Company" shall mean CIPRICO, INC., a Delaware corporation.
(d) The "Internal Revenue Code" is the Internal Revenue Code of
1986, as amended from time to time.
(e) "Parent" shall mean any corporation which owns, directly or
indirectly in an unbroken chain, fifty percent (50%) or more of the
total voting power of the Company's outstanding stock.
(f) The "Participant" is the employee or officer of the Company or
any Subsidiary to whom a restricted stock award has been granted.
(g) The "Plan" means the Ciprico, Inc. 1996 Restricted Stock Plan,
as amended hereafter from time to time, including the form of
restricted stock agreements as they may be modified by the Board from
time to time.
<PAGE> 2
(h) "Stock" shall mean Common Stock of the Company (subject to
adjustment as described in Section 11) reserved for restricted stock
awards pursuant to this Plan.
(i) A "Subsidiary" shall mean any corporation of which fifty
percent (50%) or more of the total voting power of outstanding stock
is owned, directly or indirectly in an unbroken chain, by the Company.
SECTION 2.
PURPOSE
The purpose of the Plan is to promote the success of the Company and
its Subsidiaries by facilitating the employment and retention of competent
personnel and by furnishing incentive to officers and employees upon whose
efforts the success of the Company and its Subsidiaries will depend to a large
degree.
It is the intention of the Company to carry out the Plan through the
granting of restricted stock awards. Adoption of this Plan shall be and is
expressly subject to the condition of approval by the shareholders of the
Company after the adoption of the Plan by the Board of Directors. In no event
shall the risks of forfeiture on any restricted stock awards lapse prior to the
date this Plan is approved by the shareholders of the Company. If shareholder
approval of this Plan is not obtained, any restricted stock awards previously
granted shall be revoked.
SECTION 3.
EFFECTIVE DATE OF PLAN
The Plan shall be effective upon its adoption by the Board of
Directors of the Company, subject to approval by the shareholders of the
Company as required in Section 2.
SECTION 4.
ADMINISTRATION
The Plan shall be administered by the Board of Directors of the
Company (hereinafter referred to as the "Board") or by a Committee which may be
appointed by the Board from time to time. The Board or the Committee, as the
case may be, shall have all of the powers vested in it under the provisions of
the Plan, including but not limited to, the exclusive authority (where
applicable and within the limitations described herein) to determine, in its
sole discretion, the individuals to whom, and the time or times at which,
restricted stock awards shall be granted, the number of shares of Stock subject
to each award, the price (if any) to be paid for such shares of Stock, the
risks of forfeiture that will apply to such shares of Stock and the manner in
which such risks of forfeiture will lapse, and all other terms and conditions
of each award.
The Board, or the Committee, shall have full power and authority to
administer and interpret the Plan, to make and amend rules, regulations and
guidelines for administering the
<PAGE> 3
Plan, to prescribe the form and conditions of the written restricted stock
agreements (which may vary from Participant to Participant) evidencing each
award and to make all other determinations necessary or advisable for the
administration of the Plan. The Board's, or the Committee's, interpretation of
the Plan, and all actions taken and determinations made by the Board or the
Committee pursuant to the power vested in it hereunder, shall be conclusive and
binding on all parties concerned. No member of the Board or the Committee
shall be liable for any action taken or determination made in good faith in
connection with the administration of the Plan.
In the event the Board appoints a Committee as provided hereunder, any
action of the Committee with respect to the administration of the Plan shall be
taken pursuant to a majority vote of the Committee members or pursuant to the
written resolution of all Committee members.
SECTION 5.
PARTICIPANTS
The Board or the Committee, as the case may be, shall from time to
time, at its discretion and without approval of the shareholders, designate
those officers and employees of the Company or of any Subsidiary to whom
restricted stock awards shall be granted under this Plan. The Board or the
Committee may grant additional restricted stock awards under this Plan to some
or all Participants then holding awards or may grant restricted stock awards
solely or partially to new Participants. In designating Participants, the
Board or the Committee shall also determine the number of shares to be awarded
to each such Participant, subject to the provisions of Section 8. The Board
may from time to time designate individuals as being ineligible to participate
in the Plan.
SECTION 6.
STOCK
Fifty Thousand (50,000) shares of authorized but unissued shares of
Stock shall be reserved and available for restricted stock awards under the
Plan; provided, however, that the total number of shares of Stock reserved for
restricted stock awards under this Plan shall be subject to adjustment as
provided in Section 11 of the Plan. In the event that all or any part of a
restricted stock award under the Plan is forfeited for any reason, the shares
of Stock allocable to the portion of such award for which the risks of
forfeiture have not lapsed shall continue to be reserved for restricted stock
awards under the Plan and may be subject to new restricted stock awards
hereunder.
SECTION 7.
DURATION OF PLAN
Restricted stock awards may be granted pursuant to the Plan from time
to time after the effective date of the Plan and until the Plan is discontinued
or terminated by the Board.
<PAGE> 4
SECTION 8.
TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS
Each restricted stock award granted pursuant to the Plan shall be
evidenced by a written restricted stock agreement. The restricted stock
agreement shall be in such form as may be approved from time to time by the
Board or the Committee and may vary from Participant to Participant; provided,
however, that each Participant and each restricted stock agreement shall comply
with and be subject to the following terms and conditions:
(a) Number of Shares. The restricted stock agreement shall state
the total number of shares covered by the restricted stock award.
(b) Issuance of Restricted Shares. The Company shall cause to be
issued a stock certificate representing such shares of Stock in the
Participant's name, and shall deliver such certificate to the
Participant; provided, however, that the Company shall place a legend
on such certificate describing the risks of forfeiture and other
transfer restrictions set forth in the Participant's restricted stock
agreement and providing for the cancellation and return of such
certificate if the shares of Stock subject to the restricted stock
award are forfeited. Until such risks of forfeiture have lapsed or
the shares subject to such restricted stock award have been forfeited,
the Participant shall be entitled to vote the shares represented by
such stock certificates and shall receive all dividends attributable
to such shares, but the Participant shall not have any other rights as
a shareholder with respect to such shares.
(c) Withholding Taxes. In order to provide the Company with the
opportunity to claim the benefit of any income tax deduction which may
be available to it as from the grant of restricted stock awards to a
Participant under this Plan and to permit the Company to comply with
all applicable federal or state income tax laws or regulations, the
Company may take such action as it deems appropriate to insure that,
if necessary, all applicable federal or state payroll, income or other
taxes are withheld from any future wages or other amounts payable by
the Company to the Participant. If the Company is unable to withhold
such federal and state taxes, for whatever reason, the Participant
hereby agrees to pay to the Company an amount equal to the amount the
Company would otherwise be required to withhold under federal or state
law prior to the transfer of any certificates for the shares of Stock
subject to such restricted stock awards.
The Participant may, subject to the discretion of the Board or
the Committee, as the case may be, and such other administrative rules
it may deem advisable, elect to have all or a portion of such tax
withholding obligations satisfied by delivering previously-acquired
shares of Stock, including shares received pursuant to a restricted
stock award on which the risks of forfeiture have lapsed, such shares
having a fair market value, as of the date the amount of tax to be
withheld is determined under applicable tax law, equal to such
obligations. Such election shall comply with such rules as may be
adopted by the Board or the Committee to assure compliance with Rule
16b-3, or any successor provision, as then in effect, of the General
Rules and Regulations under the Securities Exchange Act of 1934, if
applicable.
<PAGE> 5
(d) For purposes of Section 8(c), the "fair market value" of the
Stock shall mean the last sale price of such stock as reported by
Nasdaq on the date the amount of tax to be withheld is determined or,
if no sale of such stock shall have occurred on that date, on the next
preceding day on which there was a sale of such stock.
(e) Other Provisions. The restricted stock agreement authorized
under this Section 8 shall contain such other provisions as the Board
or the Committee, as the case may be, shall deem advisable.
SECTION 9
TRANSFER OF AWARD
No restricted stock award shall be transferable, in whole or in part,
by the Participant, other than by will or by the laws of descent and
distribution, prior to the date the risks of forfeiture described in the
restricted stock agreement have lapsed. If the Participant shall attempt any
transfer of any restricted stock award granted under the Plan prior to such
date, such transfer shall be void and the restricted stock award shall
terminate.
SECTION 10.
CHANGE OF CONTROL
Notwithstanding anything in this Plan or any restricted stock
agreement to the contrary, all risks of forfeiture applicable to a
Participant's restricted stock awards shall immediately lapse upon a "change of
control." For purposes of this Section 10, a "change of control" shall mean
any of the following events:
(a) Any exchange, reorganization, reclassification, extraordinary
dividend, divestiture (including a spin-off), merger, consolidation or
similar transaction (collectively referred to as the "transaction") to
which the Company is a party, whether or not such transaction is
approved by the Company's Board of Directors, if the individuals and
entities who were shareholders of the Company immediately prior to the
effective date of such transaction have, immediately following the
effective date of such transaction, beneficial ownership (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934) of less than
fifty percent (50%) of the total combined voting power (with respect
to the election of directors) of all classes of securities issued by
the surviving corporation;
(b) A change in the direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of
securities of the Company representing, in the aggregate, a majority
of the total combined voting power of all classes of the Company's
then issued and outstanding securities by any person or entity or by a
group of associated persons or entities acting in concert;
<PAGE> 6
(c) The sale of substantially all of the properties and assets of
the Company to any person or entity which is not a wholly-owned
subsidiary of the Company;
(d) The approval of any plan or proposal for the liquidation of
the Company by its shareholders; or
(e) A change in the composition of the Board of Directors at any
time during any consecutive twenty-four (24) month period such that
the "Continuing Directors" cease for any reason to constitute at least
a seventy percent (70%) majority of the Board. For purpose of this
event, "Continuing Directors" means those members of the Board who
either (1) were directors at the beginning of such consecutive
twenty-four (24) month period; or (2) were elected by, or on the
nomination or recommendation of, at least a two-thirds (2/3) majority
of the then existing Board of Directors.
SECTION 11.
RECAPITALIZATION, SALE, MERGER, EXCHANGE
OR LIQUIDATION
In the event of an increase or decrease in the number of shares of
Stock resulting from a subdivision or consolidation of shares or the payment of
a stock dividend or any other increase or decrease in the number of shares of
Stock effected without receipt of consideration by the Company, the number of
shares of Stock reserved under Section 6 hereof and the number of shares of
Stock covered by each outstanding restricted stock award shall be adjusted by
the Board to reflect such change. Additional shares which may be credited
pursuant to such adjustment shall be subject to the same risks of forfeiture
and other restrictions as are applicable to the shares with respect to which
the adjustment relates.
Unless otherwise provided in the restricted stock agreement, in the
event of the sale by the Company of substantially all of its assets and the
consequent discontinuance of its business, or in the event of a merger,
consolidation, exchange, reorganization, reclassification, extraordinary
dividend, divestiture (including a spin-off) or liquidation of the Company
(collectively referred to as a "transaction"), the Board may, in connection
with the Board's adoption of the plan for such transaction, provide for one or
more of the following: (i) that all risks of forfeiture on any outstanding
restricted stock awards shall immediately lapse; (ii) that this Plan shall
completely terminate and any outstanding restricted stock awards for which the
risks of forfeiture have not lapsed prior to a date specified by the Board
shall be cancelled; and (iii) that this Plan shall continue with respect to the
any restricted stock awards which were outstanding as of the date of adoption
by the Board of such plan for such transaction and provide to Participants
holding such awards the right to receive an equivalent number of shares of
stock of the corporation succeeding the Company by reason of such transaction.
The grant of a restricted stock award pursuant to the Plan shall not limit in
any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, exchange or consolidate or to dissolve, liquidate, sell
or transfer all or any part of its business or assets.
<PAGE> 7
SECTION 12.
INVESTMENT PURPOSE
No shares of Stock issued pursuant to the Plan shall be transferred or
otherwise disposed of by a Participant unless and until there has been
compliance, in the opinion of Company's counsel, with all applicable legal
requirements, including without limitation, those relating to securities laws
and stock exchange listing requirements. As a condition to the issuance of
Stock to a Participant, the Board or the Committee may require the Participant
to (a) represent that the shares of Stock are being acquired for investment and
not resale and to make such other representations as the Board, or the
Committee, as the case may be, shall deem necessary or appropriate to qualify
the issuance of the shares as exempt from the Securities Act of 1933 and any
other applicable securities laws, and (b) represent that the Participant shall
not dispose of the shares of Stock in violation of the Securities Act of 1933
or any other applicable securities laws. The Company reserves the right to
place a legend on any stock certificate issued pursuant to the Plan to assure
compliance with this Section 12.
SECTION 13.
AMENDMENT OF THE PLAN
The Board may from time to time, insofar as permitted by law, suspend
or discontinue the Plan or revise or amend it in any respect; provided,
however, that no such revision or amendment, except as is authorized in Section
11, shall impair the terms and conditions of any restricted stock award which
is outstanding on the date of such revision or amendment to the material
detriment of the Participant without the consent of the Participant.
Notwithstanding the foregoing, no such revision or amendment shall (i)
materially increase the number of shares subject to the Plan except as provided
in Section 11 hereof, (ii) change the designation of the class of employees
eligible to receive restricted stock awards, or (iii) materially increase the
benefits accruing to Participants under the Plan, unless such revision or
amendment is approved by the shareholders of the Company.
SECTION 14.
NO OBLIGATION TO CONTINUE EMPLOYMENT
The granting of a restricted stock award hereunder shall not impose
upon the Company or any Subsidiary any obligation to retain the Participant in
its employ for any period.
<PAGE> 1
EXHIBIT 10.16
RESTRICTED STOCK AGREEMENT
THIS AGREEMENT, made effective as of this ______ day of
_______________________, 19___, by and between Ciprico, Inc., a Delaware
corporation (the "Company"), and _______________________________________
("Participant").
W I T N E S S E T H:
WHEREAS, the Participant on the date hereof is an officer or employee
of the Company; and
WHEREAS, the Company has adopted the Ciprico, Inc. 1996 Restricted
Stock Plan (the "Plan") and wishes to grant the Participant a restricted stock
award pursuant to the Plan; and
WHEREAS, the Company's Board of Directors has authorized the grant of
a restricted stock award for ____________________________ shares
of the Company's Common Stock ("Stock") to the Participant;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
1. GRANT OF RESTRICTED STOCK AWARD. The Company hereby grants to
Participant on the date set forth above a restricted stock award (the "Award")
for ______________________________________________ (________________) shares of
Stock on the terms and conditions set forth herein, and subject to adjustment
pursuant to Section 11 of the Plan. The Company shall cause to be issued a
stock certificate representing such shares of Stock in the Participant's name,
and shall deliver such certificate to the Participant; provided, however, that
the Company shall place a legend on such certificate describing the risks of
forfeiture and other transfer restrictions set forth in this Agreement and
providing for the cancellation and return of such certificate if such shares of
Stock are forfeited as provided in Section 2 below. Until such risks of
forfeiture have lapsed or the shares subject to this Award have been forfeited
pursuant to Section 2 below, the Participant shall be entitled to vote the
shares represented by such stock certificates and shall receive all dividends
attributable to such shares, but the Participant shall not have any other
rights as a shareholder with respect to such shares.
2. VESTING OF RESTRICTED STOCK.
a. The shares of Stock subject to this Award shall
remain forfeitable until the second anniversary of the date of the Award (the
"vesting date"). If the Participant's employment with the Company is
terminated for any reason, including the Participant's voluntary resignation or
retirement but excluding termination by the Company without "cause," at any
time prior to the vesting date for the Award, the Participant shall immediately
forfeit all shares of Stock subject to this Award. If the Participant's
employment is terminated by the Company without "cause" prior to the vesting
date for this Award, all risks of forfeiture on the shares of Stock subject to
this Award shall immediately lapse.
<PAGE> 2
b. For purposes of Section 2(a), the Participant shall
be terminated for "cause" if the termination results from any of the following
events:
(i) The Participant's conviction of a felony
under federal or state law, any act of
dishonesty or disloyalty (including, but not
limited to, the willful misappropriation of
the Company's funds), or the commission of
any act involving moral turpitude;
(ii) The Participant's willful and material breach
of the Company's policies or the
Participant's willful and material failure,
neglect or refusal to perform any of the
duties that may be assigned to him from time
to time by mutual agreement of the parties;
or
(iii) The Participant's willful misconduct that:
(A) materially and adversely effects the
reputation of the Company's business, (B) is
contrary to the best interests of the
Company, or (C) conflicts with or is
competitive with the business activities of
the Company;
provided, however, that an act or failure to act by the Participant shall not
be "willful" unless it is done, or omitted to be done, in bad faith and without
any reasonable belief that the Participant's action or omission was in the best
interests of the Company. With respect to the events listed in clause (ii) or
(iii) the Participant's employment shall not be deemed to have been terminated
for cause unless and until the Company provides the Participant with a written
notice that describes in detail the conduct supporting such termination for
cause and that grants the Participant a period of at least ten (10) days from
the date of such notice to take whatever steps are necessary to discontinue the
conduct described therein or to correct the effects of the Participant's prior
conduct to the satisfaction of the Company. If the Participant fails to
discontinue such conduct described in such written notice or cannot correct the
effects of such prior conduct within such ten-day period, the Participant's
employment shall immediately terminate upon the expiration of such ten-day
period, and such termination shall be deemed to be for cause.
3. CHANGE OF CONTROL. Notwithstanding anything in this Agreement
to the contrary, all risks of forfeiture applicable to this Award shall
immediately lapse upon a "change of control" as provided in Section 10 of the
Plan.
4. GENERAL PROVISIONS.
a. Employment. This Agreement shall not confer on the
Participant any right with respect to continuance of employment by the Company,
nor will it interfere in any way with the right of the Company to terminate
such employment.
b. Securities Law Compliance. The Participant shall not
transfer or otherwise dispose of the shares of Stock received pursuant to this
Award until such time as counsel to the Company shall have determined that such
transfer or other disposition will not violate any state or federal securities
or other laws. The Participant may be required by the Company, as a condition
of the effectiveness of this Award, to agree in writing that all Stock subject
to this Award shall be held, until such time that such Stock is registered and
freely tradable under
<PAGE> 3
applicable state and federal securities laws, for the Participant's own account
without a view to any further distribution thereof, that the certificates for
such shares shall bear an appropriate legend to that effect and that such
shares will be not transferred or disposed of except in compliance with
applicable state and federal securities laws.
c. Mergers, Recapitalizations, Stock Splits, Etc.
Pursuant and subject to Section 11 of the Plan, certain changes in the number
or character of the Stock of the Company (through sale, merger, consolidation,
exchange, reorganization, divestiture (including a spin-off), liquidation,
recapitalization, stock split, stock dividend or otherwise) shall result in an
adjustment, reduction or enlargement, as appropriate, in the number of shares
subject to this Award. Additional shares which may be credited pursuant to
such adjustment shall be subject to the same restrictions as are applicable to
the shares with respect to which the adjustment relates.
d. Shares Reserved. The Company shall at all times
during the term of the this Award reserve and keep available such number of
shares as will be sufficient to satisfy the requirements of this Agreement.
e. Withholding Taxes. In order to provide the Company
with the opportunity to claim the benefit of any income tax deduction which may
be available to it as from the grant of this Award and to permit the Company to
comply with all applicable federal or state income tax laws or regulations, the
Company may take such action as it deems appropriate to insure that, if
necessary, all applicable federal or state payroll, income or other taxes are
withheld from any amounts payable by the Company to the Participant. If the
Company is unable to withhold such federal and state taxes, for whatever
reason, the Participant hereby agrees to pay to the Company an amount equal to
the amount the Company would otherwise be required to withhold under federal or
state law prior to the transfer of any certificates for the shares of Stock
subject to this Award.
The Participant may, subject to the discretion of the
Board or the Committee, as the case may be, and such other administrative rules
it may deem advisable, elect to have all or a portion of such tax withholding
obligations satisfied by delivering previously-acquired shares of Stock,
including shares received pursuant to a restricted stock award on which the
risks of forfeiture have lapsed, such shares having a fair market value, as of
the date the amount of tax to be withheld is determined under applicable tax
law, equal to such obligations. Such election shall comply with such rules as
may be adopted by the Board or the Committee to assure compliance with Rule
16b-3, or any successor provision, as then in effect, of the General Rules and
Regulations under the Securities Exchange Act of 1934, if applicable.
For purposes of this Section 4(e), the "fair market
value" of the Stock shall mean the last sale price of such stock as reported by
Nasdaq on the relevant date or, if no sale of such stock shall have occurred on
that date, on the next preceding day on which there was a sale of such stock.
f. Amendment; Waiver. This Agreement may not be
modified, amended or waived in any manner except by an instrument in writing
signed by both parties hereto. The waiver by either party of compliance with
any provision of this Agreement by the other party
<PAGE> 4
shall not operate or be construed as a waiver of any other provision of this
Agreement, or of any subsequent breach by such party of a provision of this
Agreement.
g. Supersedes Previous Agreements. This Agreement supersedes
all prior or contemporaneous negotiations, commitments, agreements (written or
oral) and writings between the Company and the Participant with respect to the
subject matter hereof. All such other negotiations, commitments, agreements
and writings will have no further force or effect, and the parties to any such
other negotiation, commitment, agreement or writing will have no further rights
or obligations thereunder.
h. Governing Law. All matters affecting this Agreement,
including the validity thereof, are to be governed by, interpreted and
construed in accordance with the laws of the State of Minnesota.
i. Notices. Any notice hereunder by either party to
the other shall be given in writing by personal delivery, by telecopy (with
confirmation of transmission) or by certified mail, return receipt requested.
If addressed to the Participant, the notice shall be delivered or mailed to the
Participant at the address specified under the Participant's signature hereto,
or if addressed to the Company, the notice shall be delivered or mailed to the
Company at its executive offices to the attention of its Vice President. A
notice shall be deemed given, if by personal delivery or by telecopy, on the
date of such delivery or, if by certified mail, on the date shown on the
applicable return receipt.
j. Headings. The headings of Sections and paragraphs
herein are included solely for convenience of reference and shall not control
the meaning or interpretation of any of the provisions of this Agreement.
k. Scope of Agreement. This Agreement shall bind and
inure to the benefit of the Company and its successors and assigns and of the
Participant and his successors.
l. Arbitration. Any dispute arising out of or relating
to this Agreement or the alleged breach of it, or the making of this Agreement,
including claims of fraud in the inducement, shall be discussed between the
disputing parties in a good faith effort to arrive at a mutual settlement of
any such controversy. If, notwithstanding, such dispute cannot be resolved,
such dispute shall be settled by binding arbitration. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitrator shall be a retired state or federal judge or an
attorney who has practiced securities or business litigation for at least 10
years. If the parties cannot agree on an arbitrator within 20 days, any party
may request that the chief judge of the District Court for Hennepin County,
Minnesota, select an arbitrator. Arbitration will be conducted pursuant to the
provisions of this Agreement, and the commercial arbitration rules of the
American Arbitration Association, unless such rules are inconsistent with the
provisions of this Agreement. Limited civil discovery shall be permitted for
the production of documents and taking of depositions. Unresolved discovery
disputes may be brought to the attention of the arbitrator who may dispose of
such dispute. The arbitrator shall have the authority to award any remedy or
relief that a court of this state could order or grant; provided, however, that
punitive or exemplary damages shall not be awarded. The arbitrator may award
to the prevailing party, if any, as determined by the arbitrator, all of
<PAGE> 5
its costs and fees, including the arbitrator's fees, administrative fees,
travel expenses, out-of-pocket expenses and reasonable attorneys' fees.
Unless otherwise agreed by the parties, the place of any arbitration
proceedings shall be Hennepin County, Minnesota.
m. 1996 RESTRICTED STOCK PLAN. This Award evidenced by
this Agreement is granted pursuant to the Plan, a copy of which Plan has been
made available to the Participant and is hereby incorporated into this
Agreement. This Agreement is subject to and in all respects limited and
conditioned as provided in the Plan. All defined terms of the Plan shall have
the same meaning when used in this Agreement. The Plan governs this Award and,
in the event of any questions as to the construction of this Agreement or in
the event of a conflict between the Plan and this Agreement, the Plan shall
govern, except as the Plan otherwise provides.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on the day and year first above written.
CIPRICO, INC.
By:______________________________
Its:__________________________
_________________________________
Participant
463914
<PAGE> 1
EXHIBIT 23
Independent Auditors' Consent
The Board of Directors
Ciprico Inc.:
We consent to incorporation by reference in the registration statements
(No.2-89276, 33-47840, 2-96358, 33-5746, 33-14466 and 33-78116) on Form S-8 of
Ciprico Inc. of our report dated November 3, 1995, relating to the consolidated
balance sheets of Ciprico Inc. and subsidiaries as of September 30, 1995 and
1994, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
September 30, 1995, which report appears in the September 30, 1995 annual
report on Form 10-KSB of Ciprico Inc.
KPMG PEAT MARWICK LLP
Minneapolis, Minnesota
December 14, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<CASH> 3,425,471
<SECURITIES> 1,267,482
<RECEIVABLES> 3,407,535
<ALLOWANCES> 180,000
<INVENTORY> 1,577,838
<CURRENT-ASSETS> 9,701,567
<PP&E> 4,998,101
<DEPRECIATION> 3,785,667
<TOTAL-ASSETS> 10,920,067
<CURRENT-LIABILITIES> 3,128,879
<BONDS> 0
<COMMON> 7,653,202
0
0
<OTHER-SE> 43,062
<TOTAL-LIABILITY-AND-EQUITY> 10,920,067
<SALES> 15,966,203
<TOTAL-REVENUES> 15,966,203
<CGS> 8,498,374
<TOTAL-COSTS> 8,498,374
<OTHER-EXPENSES> 1,584,901
<LOSS-PROVISION> 36,029
<INTEREST-EXPENSE> 7,101
<INCOME-PRETAX> 424,077
<INCOME-TAX> 28,000
<INCOME-CONTINUING> 396,077
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 396,077
<EPS-PRIMARY> .18
<EPS-DILUTED> .17
</TABLE>
