SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission file number 0-21200
MERIDIAN DATA, INC.
(Exact name of registrant as specified in its charter)
Delaware 77-0188708
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5615 Scotts Valley Drive, California 95066
- ------------------------------------ ----------
(Address of principal executive office) (Zip Code)
(831) 438-3100
(Registrant's telephone number, including area code)
Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant(1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding in 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X , No .
The number of shares of Common Stock, no par value, outstanding on August
10, 1998, was 8,851,828.
Exhibit index on page 19. Page 1 of 20
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
MERIDIAN DATA, INC.
BALANCE SHEETS June 30, December 31,
(in thousands, except per share data) 1998 1997
- --------------------------------------------------------------------------------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $12,389 $15,167
Marketable securities 13,053 16,722
Accounts receivable (net of allowance
for returns and doubtful accounts of
$473 and $543, respectively) 3,552 2,949
Inventories 2,331 1,795
Other assets 247 128
------ ------
Total current assets 31,572 36,761
Property and equipment at cost,
less accumulated depreciation 754 714
Other assets 15 16
------ ------
$32,341 $37,491
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,081 $ 2,371
Accrued payroll and related expenses 1,711 1,787
Accrued advertising and promotion 1,854 1,353
Other accrued liabilities 2,510 1,895
------ ------
Total current liabilities 9,156 7,406
------ ------
Stockholders' equity:
Preferred stock, $0.001 par value,
5,000 shares authorized, and
no shares outstanding - -
Common stock, $0.001 par value,
35,000 shares authorized,
8,852 and 8,785 shares issued
and outstanding 9 9
Additional paid-in capital 66,397 66,207
Accumulated deficit (43,221) (36,131)
------ ------
Total stockholders' equity 23,185 30,085
------ ------
$32,341 $37,491
====== ======
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
MERIDIAN DATA, INC.
STATEMENT OF OPERATIONS Three months ended June 30, Six months ended June 30,
(In thousands, except per share data) 1998 1997 1998 1997
------- ----- ------ ------
<S> <C> <C> <C> <C>
Product sales $ 4,237 $ 5,547 $ 7,560 $ 8,556
------- ----- ------ ------
Costs and expenses:
Cost of product sales 2,367 2,402 4,120 4,130
Research and development 1,852 859 3,491 2,712
Sales and marketing 4,554 2,604 6,469 4,896
General and administrative 702 610 1,346 1,562
----- ----- ------ ------
Total costs and expenses 9,475 6,475 15,426 13,300
----- ----- ------ ------
Loss from operations (5,238) (928) (7,866) (4,744)
Interest income, net 374 555 776 1,072
----- ----- ------ ------
Loss before income taxes (4,864) (373) (7,090) (3,672)
----- ----- ------ ------
Net loss $ (4,864) $ (373) $(7,090) $(3,672)
===== ===== ====== ======
Net loss per share:
Basic $ (0.55) $ (0.04) $ (0.80) $ (0.39)
===== ===== ====== ======
Diluted $ (0.55) $ (0.04) $ (0.80) $ (0.39)
===== ===== ====== ======
Weighted average common shares
and equivalents:
Basic 8,837 9,171 8,817 9,389
===== ===== ===== =====
Diluted 8,837 9,171 8,817 9,389
===== ===== ===== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
MERIDIAN DATA, INC.
STATEMENTS OF CASH FLOWS
Six months ended June 30,
(In thousands) 1998 1997
- --------------------------------------------------------------------------
Cash flows from operating activities:
Net loss $ (7,090) $ (3,672)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 255 156
Amortization of advance for research and
development arrangements - 800
Changes in assets and liabilities:
Accounts receivable (603) 380
Inventories (536) (441)
Other assets (118) ( 16)
Accounts payable 710 854
Accrued payroll and related expenses (76) 490
Accrued advertising and promotion 501 (122)
Other accrued liabilities 615 182
----- ------
Net cash used in operating activities (6,342) (1,389)
Cash flows from investing activities:
Purchases of property and equipment (295) (78)
Redemption of marketable securities 31,538 34,285
Additions to marketable securities (27,869) (37,365)
------ ------
Net cash provided by (used in)
investing activities 3,374 (3,158)
------ ------
Cash flows from financing activities:
Repurchase of common stock - (3,702)
Issuance of common stock related
to stock plans 190 222
------ ------
Net cash provided by (used in)
financing activities 190 (3,480)
------ ------
Net decrease in cash and cash equivalents (2,778) (8,027)
Cash and cash equivalents at:
beginning of period 15,167 24,809
------ ------
at end of period $ 12,389 $ 16,782
====== ======
Statement of cash flow supplemental disclosure:
Total cash paid for interest during the period $ 19 $ 6
Total cash paid for taxes during the period 38 29
The accompanying notes are an integral part of these financial statements.
<PAGE>
MERIDIAN DATA, INC.
NOTES TO FINANCIAL STATEMENTS
For The Three and Six Months Ended June 30, 1998,
and June 30, 1997
Note 1. General
The accompanying financial information is unaudited, but, in the opinion of
management, reflects all adjustments (which include only normally recurring
adjustments) necessary to present fairly the Company's financial position as of
the dates indicated and the results of operations for the periods then ended.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. While the Company believes that the
disclosures are adequate to make the information presented not misleading, the
financial information should be read in conjunction with the audited financial
statements, and notes thereto, for the year ended December 31, 1997, included in
the Company's Annual Report on Form 10-K. Results for the interim period are not
necessarily indicative of the results for the entire year.
Note 2. Income taxes
The Company made no provision for income taxes in the first quarters of 1997 and
1998 due to the net operating losses. Income taxes are computed using the asset
and liability method. Under this method, deferred income tax assets and
liabilities are determined based on the differences between the financial
reporting and tax bases of assets and liabilities and are measured using
currently enacted tax rules and laws. Based on the Company's evaluation of the
weight of available evidence it can not conclude that it is more likely than not
that deferred income tax assets will be realized and therefore the Company has
provided a full deferred income tax valuation allowance at June 30, 1998.
Note 3. Inventories consist of the following (in thousands):
June 30, 1998 December 31, 1997
------------- -----------------
(unaudited)
Raw materials $1,701 $1,390
Work-in-progress 630 405
----- -----
$2,331 $1,795
===== =====
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
The Company is engaged in the business of developing CD ROM/DVD
software products and selling CD ROM/DVD networking software both separately and
integrated with CD ROM/DVD network servers. In order to bring its skills and
expertise in networking systems and channel distribution to a larger market,
Meridian embarked on the development of its first non-CD ROM/DVD networking
system in late 1996.
On March 30, 1998, the Company announced its Snap! Server. The Snap!
Server is a protocol-independent, plug and play network-attached storage ("NAS")
device targeted for the PC-LAN environment. The Company believes that the Snap!
Server provides superior ease-of-use and installation over competing products or
methods for adding storage capacity to PC LAN networks. According to Peripheral
Concepts, Inc., an independent market research firm, the market for NAS was
approximately $800 million in 1997 and is projected to grow to $1.2 billion in
1998. The Snap! Server will require different marketing, sales and distribution
strategies than those for the Company's current CD ROM/DVD products. There can
be no assurance that the Company's distributors, value-added resellers ("VARs"),
or retailers will choose or be able to effectively market this new product or
that the Company will be successful in developing alternate channels of
distribution. Nor can there be any assurance that the Snap! Server will be a
commercial success. There can be no assurance that the Company's current or
potential competitors will not develop products comparable or superior to the
Snap! Server or adapt more quickly than the Company to new or emerging
technologies, evolving industry trends or changing customer requirements. The
failure of the Company's distributors, VARs, and retailers to successfully
market the Company's new products, the Company's failure to adapt quickly to new
technologies, the Company's failure to develop new channels of distribution, or
the failure to obtain market acceptance for the Snap! Server would have a
material adverse effect on the Company's business, financial condition and
results of operations.
Because the Company generally ships its products within a short period
after receipt of an order, the Company typically does not have a material
backlog of unfilled orders, and total revenues in any quarter are substantially
dependent on orders booked in that quarter. The Company's quarterly operating
results may also vary significantly depending on other factors such as: price
and other forms of competition; seasonality; the introduction of new products by
the Company's competitors; market acceptance of new products; mix of software
and systems sales; adoption of new technologies and standards, the long and
complex sales cycle for site licenses; the timing of site license revenue; the
cost, quality and availability of third party components used in the Company's
systems; changes in the Company's distribution arrangements; and the inability
of the Company to accurately monitor end-user demand for its products due to the
sale of products through distributors and VARs.
In 1997, identifiable sales to federal governmental agencies accounted
for approximately 14% of the Company's product sales, and the Company
anticipates that such sales will continue to account for a significant
percentage of the Company's revenues for the foreseeable future. In the event
that there is any reduction or deferral in spending by such governmental
agencies, the Company's quarterly and annual results of operations would be
adversely affected. Similarly, if such government agencies reduced their
purchases of Meridian products in favor of those of its competitors, the
Company's quarterly and annual results of operations would be adversely
affected. Moreover, the Company's business has experienced and is expected to
continue to experience seasonality in the form of higher sales for its products
during the quarters ending in September and December and weaker sales during the
quarters ending in March and June. The Company's operating results will also be
affected by the economic condition of the personal computer industry, which has
from time to time experienced cyclical, depressed business conditions, often in
connection with or in anticipation of a decline in general economic conditions.
Due to all of the foregoing factors, the Company's total revenues or operating
results may in one or more future quarters be below the expectations of stock
market analysts and investors. In such event, the price of the Company's Common
Stock would likely decline, perhaps substantially.
Forward-looking statements in this report are made pursuant to the safe
harbor provisions of Section 27A of the Securities Act of 1933, as amended, and
Section 216 of the Securities Exchange Act of 1934, as amended. Investors are
cautioned that such forward-looking statements involve risks and uncertainties,
including, without limitation, risks disclosed under the caption "Risk Factors"
beginning on page 10 of this report; and other risks detailed from time to time
in the Company's filings with the Securities and Exchange Commission. The
Company's actual results may differ significantly from the results discussed in
the forward-looking statements.
Results of operations
Revenues
Product sales
Product sales in the second quarter and first six months of 1998
decreased by $1.3 million and $1.0 million, or 24% and 12% respectively, over
the corresponding periods of 1997. This decrease was due to a market driven
shift from enterprise-wide CD ROM/DVD products towards plug-and-play CD ROM/DVD
storage products. The Company does not expect that sales from its plug-and-play
systems will grow sufficiently to offset lower sales of its enterprise-wide CD
ROM/DVD systems. As such, CD ROM/DVD revenues are anticipated to be less in 1998
than in 1997. The markets for Meridian's products are extremely competitive, and
the Company expects that Meridian's revenue could be adversely impacted as
competition continues to consolidate, change and expand product offerings and
react to prior market moves made by the Company.
The Company began shipping the Snap! Server in early May 1988. As a
result of Meridian's introduction of the Snap! Server product line, all related
revenue has been deferred to allow for channel sell through and end user
acceptance. The markets for the Company's products are extremely competitive,
and the Company expects that competition will continue to increase as existing
competitors consolidate, change and expand their product offerings.
For a discussion of certain other risks that may affect the Company's
future product sales, see "Risk Factors-Operating losses; Fluctuations in
Quarterly Operating Results," "-Rapid Technological Change; -Potential for
Product Defects" and "-Emerging Markets; Product Concentration."
Gross Margin
The Company's gross margin decreased to 44% and 46% in the second
quarter and first six months of 1998, respectively, from 57% and 52% in the
comparable periods of 1997. The decrease in gross margin was primarily due to a
shift in sales towards lower margin plug-and-play CDR/DVD products, continued
pricing pressure, and lower software sales.
As a result of the continuing shift in the Company's product sales
towards systems with lower price points and pricing pressures, Meridian
anticipates that gross margins from its CD ROM/DVD networking products will
continue to decrease in 1998. The Company expects that the Snap! Server product
line will generate gross margins lower than its existing CD ROM/DVD products.
For a discussion of certain other risks that may affect the Company's
future cost of product sales, see "Risk Factors-Dependence on Third party
Suppliers" and "-Expansion of International Operations; Foreign Currency
Fluctuations."
Operating Expenses
Research and development
Research and development expense increased to $1.9 million and $3.5
million in the second quarter and first six months of 1998, respectively, from
$859,000 and $2.7 million for the comparable periods of 1997. These increases
were related to the development of the Snap! server primarily due to higher
payroll and related expenses. The Company anticipates that research and
development expenses will increase as it begins development on future products
in the Snap!
family of products.
The Company believes that due to CD ROM/DVD server hardware
increasingly becoming a commodity item, it is difficult to create a significant
competitive advantage solely through hardware development. As such, the Company
devotes substantially all of its engineering resources towards software and new
product development. The Company's inability to anticipate and respond to
technological and market changes or the Company's failure to incorporate new
technologies in a timely manner could have a material adverse effect on the
Company's business, financial condition and results of operations. The Company
anticipates that it will incur significant amounts of non-recurring engineering
expenses with respect to the development of the Snap! Server and its other new
products. As such, Meridian anticipates that research and development expense
will continue to increase through at least the end of the year. In addition,
there can be no assurance that Meridian's research and development efforts will
result in the introduction of new products or that any of such products, if
developed, will be commercially successful. For a discussion of certain other
risks that may relate to the Company's research and development, see "Risk
Factors-Rapid Technological Change; Potential for Product Defects."
Sales and marketing
Sales and marketing expense increased to $4.6 million and $6.5 million
in the second quarter and first six months of 1998, respectively, from $2.6
million and $4.9 million for the corresponding periods of 1997. These increases
were due primarily to higher marketing and advertising costs related to the
Snap! product launch, and continuing Snap! marketing efforts. Meridian
anticipates that sales and marketing expenses will continue to increase. Sales
and marketing expense consists primarily of payroll and related expenses
(including commissions), and advertising and promotional related expenses.
On March 30, 1998, Meridian announced the release of its first non-CD
ROM/DVD product, the Snap! Server. The Company anticipates that the likelihood
of other competitors entering this market is high. The Company has initiated an
aggressive launch campaign for its Snap! Server and anticipates that it will
incur significantly higher promotional costs related to the introduction of this
new product than it has for other products in the past. Accordingly, sales and
marketing expenses increased significantly in the second quarter. In addition,
there can be no assurance that Meridian's sales and marketing efforts will
result in the successful introduction of new products, including the Snap!
Server, or that any of such products will be commercially successful. For a
discussion of certain other risks that may relate to the Company's sales and
marketing, see "Risk Factors-Dependence on Third Party Distributors" and
"Product Concentration."
General and administrative
General and administrative expense increased to $702,000 in the second
quarter of 1998 from $610,000 in the second quarter of 1997, due primarily to
higher payroll and payroll related expenses. The first six months of 1998
general and administrative expenses decreased to $1.4 million from $1.6 million
for the comparable period of 1997. This decrease was due to lower legal expenses
partially offset by higher payroll related expenses.
Interest income
Interest income decreased to $374,000 and $776,000 in the second
quarter and first six months of 1997 from $555,000 and $1.1 million for the
corresponding periods if 1997. This decrease was due to lower invested cash
balances. Future interest income will vary depending on the average invested
balance and interest rates.
Income taxes
The Company made no provision for income taxes in the first six months
of 1998 due to a net operating loss. Income taxes are computed using the asset
and liability method. Under this method, deferred income tax assets and
liabilities are determined based on the differences between the financial
reporting and tax bases of assets and liabilities and are measured using
currently enacted tax rules and laws. Based on the Company's evaluation of the
weight of available evidence it can not conclude that it is more likely than not
that deferred income tax assets will be realized and therefore the Company has
provided a full deferred income tax valuation allowance at June 30, 1998.
Capital resources and liquidity
Meridian's cash flow from operations for the first six months of 1998
was adversely impacted by the net operating loss of $7.1 million, an increase in
accounts receivable, due to the timing of shipments in the quarter, and higher
inventories, due to the build up of the Company's new Snap! product line. These
were partially offset by an increase in accrued expenses. At June 30, 1998, the
Company's principal source of liquidity consisted of cash and marketable
securities totaling $25.4 million. Meridian believes that its current cash and
marketable securities will satisfy its working capital and capital expenditures
for at least the next twelve months.
The Company's entry into the NAS market will entail the expenditures of
substantial funds for the completion of the Snap! Server, implementing a
nation-wide marketing campaign, and developing distribution channels for the
Snap! Server. These expenditures may be funded by internally generated cash,
marketable securities, debt, or the sale of additional equity. The sale of
additional equity would result in dilution in the equity ownership of the
Company's stockholders.
Meridian believes that success in its industry requires substantial
capital in order to maintain the flexibility to take advantage of opportunities
as they may arise. The Company may, from time to time, as market and business
conditions warrant, invest in or acquire complementary businesses, products or
technologies. The costs of such investments could be charged to expense. Such
investment or acquisitions may be funded by internally generated cash,
marketable securities, or the sale of additional equity. The sale of additional
equity would result in dilution in the equity ownership of the Company's
stockholders.
Risk Factors
The following risk factors should be considered carefully in addition
to the other information presented in this report. This report contains
forwardlooking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21G of the Securities Exchange Act of 1934,
as amended, that involve risks and uncertainties. The Company's actual results
may differ significantly from the results discussed in the forwardlooking
statements. Factors that might cause such differences include, but are not
limited to, the following risk factors.
Operating Losses; Fluctuations in Quarterly Operating Results. The Company (then
known as Parallan Computer, Inc.) fundamentally changed its business in December
1994 with the purchase of Meridian Data, Inc. During 1994, the Company exited
its prior business and product line, which had generated substantial losses. In
the first half of 1995, the Company incurred an operating loss, excluding
certain non-recurring revenue. From that point the Company operated profitably
until the first quarter of 1997, when it again began incurring net losses. There
can be no assurance that the Company will achieve profitability, or that if
achieved, will be able to sustain profitability. In late 1996 and early 1997,
the Company made several decisions to address the disappointing systems revenue
growth experienced in the last three quarters of 1996. Late in the fourth
quarter of 1996, Meridian increased its sales and promotional expenditures and,
at the end of January 1997, significantly reduced system prices in response to
competitive pressures. Even if unit shipments were to increase in the future,
there can be no assurance that prices for the Company's products will not
decrease further due to competitive pricing pressures. Accordingly, the Company
may not meet its total revenue goals and the Company's business, financial
condition and results of operations would be materially adversely affected. As a
result of expenses related to completing the engineering development and
developing and implementing the initial marketing campaign of Meridian's new
Snap! Server, the Company anticipates that it will operate at a substantial net
operating loss for at least the remainder of 1998.
The Company generally ships its software and systems within a short
period after receipt of an order, therefore the Company typically does not have
a material backlog of unfilled orders. Accordingly, total revenues in any
quarter are substantially dependent on orders booked in that quarter. This may
result in quarterly fluctuations in revenue. The Company's expense levels are
based, in part, on its expectations as to future sales. As a result, if sales
levels are below expectations, net income may be disproportionately affected.
The Company's quarterly operating results may also vary significantly depending
on other factors, including the introduction of new products by the Company's
competitors; market acceptance of the Company's new products; mix of software
and systems sales; adoption of new technologies and standards; price and other
forms of competition; the long and complex sales cycle for site licenses; the
timing of site license revenue; the cost, quality and availability of third
party components used in the Company's systems; changes in the Company's
distribution arrangements; and the inability of the Company to accurately
monitor end user demand for its products due to the sale of products through
distributors and VARs.
In 1997, identifiable sales to federal governmental agencies accounted
for approximately 14% of the Company's product sales, and the Company
anticipates that such sales will continue to account for a significant
percentage of the Company's revenues for the foreseeable future. In the event
that there is any reduction or deferral in spending by such governmental
agencies, the Company's quarterly and annual results would be adversely
affected. Similarly, if such government agencies reduced their purchases of
Meridian products in favor of those of its competitors, the Company's quarterly
results would be adversely affected. Moreover, the Company's business has
experienced and is expected to continue to experience seasonality in the form of
higher sales for its products during the quarters ending in September and
December and weaker sales during the quarters ending in March and June. The
Company's operating results will also be affected by the economic condition of
the personal computer industry, which has from time to time experienced
cyclical, depressed business conditions, often in connection with or in
anticipation of a decline in general economic conditions. Due to all of the
foregoing factors, the Company's total revenues or operating results may in one
or more future quarters be below the expectations of stock market analysts and
investors. In such event, the price of the Company's Common Stock would likely
decline, perhaps substantially. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
New Product Development. The Company is actively developing products for entry
into non-CD ROM/DVD networking markets, such as the new Snap! Server. Such entry
entails substantially higher risks to the Company in the form of new and well
established competition, and competitive dynamics different than those
experienced in the CD ROM/DVD networking market. In attempting to successfully
enter the NAS market and other new markets, the Company will have to commit to
significant levels of engineering, sales and marketing expenditures. With
respect to NAS, Meridian must also successfully educate the market concerning
the practicality of changing from conventional means of adding storage capacity
to PC networks to installing its new Snap! Server. There can be no assurance
that the Company will be successful in developing and marketing its new Snap!
Server or other new products, that the Company will not experience difficulties
that could delay or prevent the successful development, introduction and
marketing of the new Snap! Server or other new products, or that its new Snap!
Server or other new products will adequately meet the requirements of the
marketplace and achieve market acceptance. If the Company is unable, for
technological or other reasons, to develop and introduce its new Snap! Server or
other new products in a timely manner in response to changing market conditions
or customer requirements, the Company's business, financial condition, and
results of operations will all be materially adversely affected. The Company's
potential new products and Snap! Server are subject to significant technical
risk due to their complexity and the difficulty in gauging the engineering
effort required to produce such products. There can be no assurance that the
Snap! Server and other potential new products will be introduced on a timely
basis or at all. In addition, there can be no assurance that the Company will be
able to offer the functionality and ease-of-use that it believes the Snap!
Server requires for a successful introduction. If the new products are delayed,
do not offer the functionality and ease-of-use envisioned, or do not achieve
market acceptance, the Company's business, financial condition and operating
results will be materially adversely affected. As a result of uncertainty with
respect to Snap! Server revenues and anticipated expenses required to
successfully develop and market this product, the Company anticipates that it
will operate at a substantial net loss for at least the remainder of 1998.
Dependence on Third Party Distributors. The Company derives substantially all of
its product sales through distributors and VARs. Two distributors accounted for
21% and 19%, respectively, of the Company's 1997 product sales. The loss of
either of these distributors, or certain other distributors or VARs, would have
a material adverse effect on the Company's business, financial condition, and
results of operations. The Company's contractual relationships with its
distributors and VARs can generally be canceled upon notice to the Company.
Certain of the Company's distributors and VARs also act as distributors for
competitors of the Company and could devote greater effort and resources to
marketing competitive products. In addition, effective distributors and VARs
must devote significant technical, marketing and sales resources to an often
lengthy sales cycle. There can be no assurance that the Company's current
distributors and VARs will continue to market the Company's products effectively
or that economic or industry conditions will not adversely affect such
distributors and VARs. Because the Company sells a significant portion of its
products through distributors and VARs, it is difficult for the Company to
monitor end user demand for its products on a current basis. Initial stocking
orders from distributors or retailers may not be indicative of long-term end
user demand. The Company's distributors and retailers typically are allowed by
contract to return products, subject to certain limitations, without charge or
penalty. While the Company provides for a reserve for future returns, there can
be no assurance that the reserve will adequately cover actual product returns.
Excessive or unanticipated returns could materially adversely affect the
Company's business, financial condition, and results of operations. The
Company's business, financial condition, and results of operations could also be
materially adversely affected by changes in distributors' inventory strategies,
which could occur rapidly, and in many cases may be unrelated to end user
demand. There can be no assurance that the Company's distributors and VARs will
to continue to market the Company's existing products. A failure of the
Company's distributors and VARs to successfully market the Company's products
would have a material adverse effect on the Company's business, financial
condition, and results of operations
The Company began shipping its new Snap! Server in the second quarter
of 1998. The Snap! Server requires different marketing, sales and distribution
strategies than those for the Company's current CD ROM/DVD products. As such, it
entails significant new risks to Meridian. There can be no assurance that the
Company's distributors, VARs, and retailers will choose or be able to
effectively market this new product or that the Company will be successful in
developing alternate channels of distribution. Initial stocking orders from
distributors or retailers may not be indicative of long-term end user demand.
The Company anticipates that its contracts will allow its distributors and
retailers of the Snap! Server and other new products to return products, subject
to certain limitations, without charge or penalty. The Company will provide for
a reserve for returns based on its contractual obligations. A failure of the
Company's distributors, VARs, and retailers to successfully market this product,
or the failure to establish other means of marketing, sales, and distribution,
would have a material adverse effect on the Company's business, financial
condition and results of operations.
Dependence on Retail Distribution for the Snap! Server. The Company anticipates
that retail distribution will play a significant role in its sales strategy.
None of the Company's existing CD ROM/DVD products utilizes retail distribution
and instead depend on direct sales/telemarketing to generate end-user demand.
With respect to the Snap! Sever, the Company must implement marketing strategies
designed to indirectly generate end-user demand. There can be no assurance that
the Company will be able to effectively design and implement such strategies or
that such strategies will be successful in generating such end-user demand. The
Company's agreements or purchase orders with its retailers typically allow for
extended payment terms and substantial rights of return. While the Company will
provide for a reserve for future returns, there can be no assurance that the
reserve will adequately cover actual product returns. Excessive or unanticipated
returns could materially adversely affect the Company's business, financial
condition, and results of operations. The Company's business, financial
condition, and results of operations could also be materially adversely affected
by changes in retailers' inventory strategies, which could occur rapidly, and in
many cases may be unrelated to end user demand. A failure of the Company's
retailers to successfully market the Company's products would have a material
adverse effect on the Company's business, financial condition, and results of
operations. As a result of the extended payment terms required by the Company's
retail customers, the Company's liquidity may be adversely impacted by the
timing of payments required by its vendors preceding the receipt of payments
from retail customers.
Dependence on Third Party Suppliers. The Company is dependent on a small number
of suppliers for certain key components used in its products, including CD ROM
and DVD drives, microprocessors, integrated circuits and power modules. The
Company purchases these components pursuant to periodic purchase orders, does
not carry significant inventories of these components, and has no long-term
supply arrangements. In addition, certain subassemblies used in the Company's
products are manufactured by a single third party vendor. The loss of a key
supplier or a disruption to the business of a key supplier could have a material
adverse effect upon the Company's business, financial condition and results of
operations. Although the Company believes that alternative sources of components
or subassemblies could be arranged, the process of qualifying new suppliers
could be lengthy. There can be no assurance that any additional source would be
available to the Company on a timely basis or at a cost acceptable to the
Company. Any disruption or reduction in the future supply of any key components
currently obtained from limited sources could have a material adverse effect on
the Company's business, financial condition and results of operations. In the
past, there has been unexpected significant growth in the demand for CD ROM/DVD
drives, which has caused temporary supply disruptions. These components are only
available from a limited number of manufacturers, most of which are Japanese
manufacturers. The Company has experienced in the past, and may experience in
the future, an adverse impact on the cost in dollars of certain components
purchased from Japanese manufacturers due to fluctuations in the exchange rate
for the yen. Moreover, the Company has been required to make spot market
purchases for certain components at premium prices. In the third quarter of
1995, the Company experienced temporary delays in obtaining the drives required
for its products. If such delays reoccur or the Company is required to purchase
components at a higher cost due to fluctuating currency exchange rates, spot
market shortages or other factors, the Company may be unable to ship products on
the schedule anticipated or may sustain higher product costs with a resulting
adverse effect on the Company's business, financial condition and results of
operations.
The Company anticipates that the manufacturing of its new Snap! Server,
including final assembly and testing, will contracted out to third party
vendors, some of whom may be located in Asia. Initially, Meridian will be
dependent on a few third party contractors. Like its CD ROM/DVD counterparts,
the Snap! Server will be dependent on a small number of suppliers for certain
key components and parts, including microprocessors, integrated circuits and
power modules. In addition, certain subassemblies used will be manufactured by a
single third party vendor. Financial, market or other developments adversely
affecting the Company's key component suppliers, or the loss of a key
subassembly manufacturer, could have an adverse effect on their ability to
supply the Company with components or assemblies and, consequently, could have a
material adverse effect upon the Company's business, financial condition and
results of operations. The process of qualifying new suppliers would be lengthy,
and there can be no assurance that any additional source would be available to
the Company on a timely basis or at a cost acceptable to the Company. Any
disruption or reduction in the future supply of any key components currently
obtained from limited sources could have a material adverse effect on the
Company's business, financial condition and results of operations
Rapid Technological Change; Potential for Product Defects. The market for the
Company's products is characterized by rapid technological advances, evolving
industry standards in computer hardware and software technology, changes in
customer requirements and frequent new product introductions and enhancements.
The Company's future success will depend on its ability to continue to enhance
its current product line and to continue to develop and introduce new products
that keep pace with competitive product introductions and technological
developments, satisfy diverse and evolving customer requirements and otherwise
achieve market acceptance. There can be no assurance that the Company will be
successful in continuing to develop and market on a timely and cost-effective
basis new products or product enhancements that respond to technological
advances by others, or that these products will achieve market acceptance. In
addition, companies in the industry have in the past experienced delays in the
development, introduction and marketing of new and enhanced products, and there
can be no assurance that the Company will not experience delays in the future.
Any failure by the Company to anticipate or respond adequately to changes in
technology and customer preferences, or any significant delays in product
development or introduction, would have a material adverse effect on the
Company's business, financial condition and results of operations.
Due to their complexity and sophistication, the Company's products from
time to time may contain hardware or software defects or "bugs" which can be
difficult to correct. Furthermore, as the Company continues to develop and
enhance its products, there can be no assurance that the Company will be able to
identify and correct defects in a manner that will permit the timely
introduction of such products. Moreover, despite extensive testing, the Company
has from time to time discovered defects only after its products have been
commercially released. There can be no assurance that such defects will not
cause delays in product introductions and shipments or loss of or delay in
market acceptance, result in increased costs, require design modifications,
impair customer satisfaction, or result in customer returns. Any such event
could materially adversely affect the Company's business, financial condition
and results of operations.
Over the past two years, CD ROM/DVD drive technology has advanced
significantly. Additionally, the pace of new drive introductions has increased.
As a result, the Company may find itself holding an inventory of obsolete
drives. Further, the Company's contracts with its distributors and retailers
allow for product return, or price protection credits, based on current
inventory levels of current and obsolete products under certain limited
circumstances. Meridian estimates and accrues its required allowance for such
occurrences, but there can be no assurance that actual inventory writedowns,
product returns, or price protection credits will not exceed the Company's
estimate. Such an event could materially adversely affect the Company's
business, financial condition and results of operations.
Competition. The markets for the Company's CD ROM/DVD products are extremely
competitive. The Company expects that competition will increase if more
companies enter the market and as existing competitors continue to change and
expand their product offerings. Pricing is very aggressive in the Company's
industry, and the Company expects pricing pressures to continue to intensify.
The Company's current competitors in the CD ROM/DVD networking market include
other suppliers of CD ROM/DVD networking software and hardware such as Procom
Technology, Inc., Microtest, Inc. and Microdesign International. The Company
also competes indirectly with suppliers of personal computers, such as Dell
Computer Corporation ("Dell"), Compaq Computer Corporation ("Compaq"), and
International Business Machines Corporation ("IBM"), and network operating
systems such as Microsoft Corporation and Novell, Inc., to the extent such
companies include CD ROM/DVD networking utilities as part of their operating
systems. The Company's potential competitors in the hardware area include
companies in the personal computer market and certain CD ROM/DVD manufacturers.
These companies in particular, and the Company's competitors in general, include
large domestic and international companies, many of which have significantly
greater financial, technical, manufacturing, marketing, sales and distribution
resources than the Company. There can be no assurance that the Company's current
or potential competitors will not develop products comparable or superior to
those developed by the Company or adapt more quickly than the Company to new or
emerging technologies, evolving industry trends or changing customer
requirements. There can be no assurance that the Company will have the financial
resources, technical expertise, or marketing, sales, distribution and customer
service and technical support capabilities to compete successfully.
Initially, the Company's Snap! Server will compete with alternative
methods of adding storage to PC-LAN networks such as adding new PC servers from
companies such as Dell, Compaq and IBM, and adding additional disk drives from
manufacturers such as Seagate Technology, Inc. and Maxtor Corporation to
existing servers. These companies in particular, and the Company's competitors
in general, include large domestic and international companies, many of which
have significantly greater financial, technical, manufacturing, marketing, sales
and distribution resources than the Company. There can be no assurance that the
Company's current or potential competitors will not develop products comparable
or superior to the Snap! Server or adapt more quickly than the Company to new or
emerging technologies, evolving industry trends or changing customer
requirements. There can be no assurance that the Company will have the financial
resources, technical expertise, or marketing, sales, distribution and customer
service and technical support capabilities to compete successfully.
The Company believes that its ability to compete successfully in the CD
ROM/DVD networking and NAS markets will depend upon a number of factors both
within and outside of its control, including price, quality, product performance
and features; timing of new product introductions by the Company, its customers
and competitors; customer service and technical support; and the ability of the
Company to respond more quickly than current or potential competitors to new or
emerging technologies, evolving industry trends and changes in customer
requirements and to devote greater resources than current or potential
competitors to the development, promotion and sale of products. The Company
believes that it competes favorably with respect to these factors. There can be
no assurance however that the Company will have the financial resources,
technical expertise, or marketing, sales, distribution and customer service and
technical support capabilities to compete successfully.
Expansion of International Operations. There can be no assurance that the
Company will be able to successfully localize, market, sell and deliver its
products internationally. The inability of the Company to successfully expand
its international operations in a timely and cost effective manner could
materially adversely affect the Company's business, financial condition and
results of operations. International product sales were approximately 12% of
total product sales in 1997. The Company's business, financial condition, and
results of operations could be materially adversely affected by risks inherent
in conducting business internationally, such as changes in currency exchange
rates, longer payment cycles, difficulties in staffing and managing
international operations, problems in collecting accounts receivable, slower
acceptance of technology advances compared with the United States, lack of
published CD ROM/DVD content, seasonal reductions in business activity during
the summer months in Europe and certain other parts of the world, and tariffs,
duties and other trade barriers. For a discussion of the effect of fluctuations
in the exchange rate of the Japanese yen on the cost of certain components used
in the Company's products, see "Risk Factors - Dependence on Third Party
Suppliers."
Product Concentration. The Company's future financial performance will depend in
part on the growth in market share for CD ROM/DVD networking products and its
success in the new NAS market. While there is a substantial installed base of CD
ROM/DVD drives in the United States, growth in the CD ROM/DVD networking market
is primarily in entry-level systems with low price points. There can be no
assurance that the Company's products will be widely accepted in this market. If
demand for the Company's CD ROM/DVD networking products continues to decrease,
the Company's business, financial condition and results of operations would be
materially adversely affected. In addition, if CD ROM/DVD server products were
to become generally available, the Company anticipates that, as a percentage of
product sales, systems sales could decline and software sales may increase. In
the event that software sales do not increase in an amount sufficient to offset
a decline in systems sales, the Company's business, financial condition and
results of operations will be materially adversely affected.
The Company's future financial performance will depend in large part on
the success of its Snap! Server and growth in demand for NAS products. The
market for NAS appliances is new and undeveloped. There can be no assurance that
the Company's products will be widely accepted in this emerging market. If
demand for the Snap! Server fails to develop, or develops more slowly than the
Company currently anticipates, the Company's business, financial condition and
results of operations would be materially adversely affected.
Dependence on Key Personnel; Management of Growth. Due to the specialized nature
of the Company's business, the Company's future success is highly dependent upon
the continued services of its key engineering personnel and executive officers
and upon its ability to attract and retain qualified engineering, sales and
marketing, management and manufacturing personnel for its operations.
Competition for such personnel is intense. There can be no assurance that the
Company will be successful in attracting or retaining such personnel. The loss
of any key personnel or the Company's inability to attract and retain qualified
employees could have a material adverse effect on the Company's business,
financial condition and results of operations. None of the Company's key
employees has an employment agreement with the Company, and the Company does not
maintain key man insurance policies on the lives of its key employees. Although
the Company's senior executives have lengthy experience in the computer
industry, they have no experience with the NAS market that the Company has
entered. To manage its growth, the Company must continue to implement and
improve its operational, financial and management information systems and
expand, train and manage its workforce. Meridian believes that success in its
industry requires substantial capital in order to maintain the flexibility to
take advantage of opportunities as they may arise. The Company may, from time to
time, as market and business conditions warrant, invest in or acquire
complementary businesses, products or technologies. Such investment or
acquisitions may be funded by internally generated cash, marketable securities,
or the sale of additional equity. The sale of additional equity would result in
dilution in the equity ownership of Meridian's stockholders. The Company's
failure to manage growth effectively could have a material adverse effect on the
Company's business, financial condition and results of operations.
Dependence on Proprietary Rights. The Company's success depends in part upon
protecting its proprietary technology. The Company relies on a combination of
intellectual property laws, nondisclosure agreements and other protective
measures to protect its proprietary information. There can be no assurance,
however, that the steps taken by the Company will be adequate to deter
misappropriation or independent third party development of its technology or
that its intellectual property rights can be successfully defended if
challenged. Litigation may be necessary to protect the Company's proprietary
rights. Any such litigation may be time-consuming and costly. In addition, the
laws of certain foreign countries do not protect the Company's intellectual
property rights to the same extent as the laws of the United States. Given the
rapid development of technology, there can be no assurance that certain aspects
of the Company's products do not or will not infringe upon the existing or
future proprietary rights of others or that, if licenses or rights are required
to avoid infringement, such licenses or rights could be obtained or obtained on
terms that are acceptable to the Company. The Company is not currently aware of
any infringement of its proprietary rights, nor is it aware of any claims that
its products infringe the rights of others.
Possible Volatility of Stock Price. The Company believes that factors such as
announcements of developments related to the Company's business, announcements
by competitors, quarterly fluctuations in the Company's financial results,
conditions in the CD ROM/DVD networking and NAS industries, changes in the
general economy and other factors could cause the price of the Company's Common
Stock to fluctuate, perhaps substantially. In addition, in recent years the
stock market in general, and the market for shares of small capitalization
technology stocks in particular, have experienced extreme price fluctuations,
which have often been unrelated to the operating performance of affected
companies. Such fluctuations could have a material adverse effect on the market
price of the Company's Common Stock.
Anti-Takeover Effect of Stockholder Rights Plan and Certain Charter and Bylaw
Provisions. In July 1997, the Company's Board of Directors adopted a Preferred
Shares Rights Plan (the "Rights Plan"). The Rights Plan provides for a dividend
distribution of one Preferred Shares Purchase Right (a "Right") on each
outstanding share of the Company's Common Stock. The Rights will become
exercisable following the tenth day after a person or group announces
acquisition of 15% or more of the Company's Common Stock, or announces
commencement of a tender offer, the consummation of which would result in
ownership by the person or group of 15% or more of the Company's Common Stock.
The Company will be entitled to redeem the Rights at $0.01 per Right at any time
on or before the tenth day following acquisition by a person or group of 15% of
more of the Company's Common Stock.
The Rights Plan and certain provisions of the Company's Certificate of
Incorporation and Bylaws may have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from attempting to
acquire, control of the Company. The Company's Certificate of Incorporation
allows the Company to issue Preferred Stock without any vote or further action
by the stockholders, and certain provisions of the Company's Certificate of
Incorporation and Bylaws specify procedures for director nominations by
stockholders and submission of other proposals for consideration at stockholder
meetings, and eliminate cumulative voting in the election of directors. Certain
provisions of Delaware law could also delay or make more difficult a merger,
tender offer or proxy contest involving the Company, including Section 203,
which prohibits a Delaware corporation from engaging in any business combination
with any interested stockholder for a period of three years unless certain
conditions are met. The Rights Plan, the possible issuance of Preferred Stock,
the procedures required for director nominations and stockholder proposals and
Delaware law could have the effect of delaying, deferring or preventing a change
in control of the Company, including without limitation, discouraging a proxy
contest or making more difficult the acquisition of a substantial block of the
Company's Common Stock. These provisions could also limit the price that
investors might be willing to pay in the future for shares of the Company's
Common Stock.
Item 5. Other Information.
With respect to stockholders proposals not included in the Company's
proxy statement for the 1999 Annual Meeting of Stockholders, the persons named
in management's proxy for the 1999 Annual Meeting of Stockholders will be
entitled to exercise the discretionary voting power conferred by such proxy
under the circumstances specified in rule 14a-4(c) under the Securities Exchange
Act of 1934, as amended, including with respect to proposals received by the
Company within forty-five (45) days of the date of the mailing of the proxy
statement for the 1999 annual Meeting of Stockholders.
Item 6. Exhibits and Reports on Form 10-K.
(a) Exhibits.
2.0 Agreement and Plan of Reorganization among Parallan Computer, Inc.,
PAC Acquisition Subsidiary, Inc. and Meridian Data, Inc. dated
December 1, 1994 previously filed as Exhibit 2 to the Current Report
on Form 8-K and incorporated herein by reference.
2.2 Agreement and Plan of Merger between Meridian Data, Inc., a California
corporation, and Meridian Data, Inc., a Delaware corporation, dated
May 29,1997 previously filed as Exhibit 2.2 to Registration of
Securities of Certain Successor Issues on Form 8-B and incorporated
herein by reference.
3.1 Certificate of Incorporation of Meridian Data, Inc., a Delaware
corporation, previously filed as Exhibit 3.1 to Registration of
Securities of Certain Successor Issues on Form 8-B and incorporated
herein by reference.
3.2 Bylaws of Meridian Data, Inc., a Delaware corporation, previously
filed as Exhibit 3.2 to Registration of Securities of Certain
Successor Issues on Form 8-B and incorporated herein by reference..
4.1 Specimen Common Stock certificate of Meridian Data, Inc., a Delaware
corporation, previously filed as Exhibit 4.1 to the Quarterly Report
on Form 10-Q for the period ended September 30, 1997, and incorporated
herein by reference.
4.2 Fourth Article of Certificate of Incorporation of Meridian Data, Inc.,
a Delaware corporation (see Exhibit 3.1 10.1 Form of Indemnification
Agreement by and among Meridian Data, Inc., a Delaware corporation, and its
directors and
officers previously filed as Exhibit 10.1B to Registration of
Securities of Certain Successor Issues on Form 8-B and incorporated
herein by reference.
10.2 Restated and Amended 1988 Incentive Stock Plan and forms of agreements
thereunder previously filed under Registration Statement on Form S-8
(Registration No. 333-3934) and incorporated herein by reference.
10.3 1992 Incentive Stock Plan and form of agreement thereunder previously
filed as Exhibit 10.3 to Registration Statement on Form S-1
(Registration No. 33-57976) and incorporated herein by reference.
10.4 1992 Key Employee Stock Plan and form of agreement thereunder
previously filed as Exhibit 10.4 to Registration Statement on Form S-1
(Registration No. 33-57976) and incorporated herein by reference.
10.5 Amended and Restated 1992 Employee Stock Purchase Plan and form of
subscription agreement thereunder.. 10.9 Marketing Agreement dated
as of June 1, 1992 between Parallan Computer, Inc. and IBM Corporation
previously filed as Exhibit 10.9 to Registration Statement on Form S-1
(Registration No. 33-57976) and incorporated herein by reference.
10.10 Master Work Agreement dated as of June 1, 1992 between Parallan
Computer, Inc. and IBM Corporation previously filed as Exhibit 10.10
to Registration Statement on Form S-1 (Registration No. 33-57976) and
incorporated herein by reference.
10.15 Amendment to the Master Work Agreement and Marketing Agreement dated
as of March 31, 1994, between Parallan Computer, Inc. and IBM
Corporation previously filed as Exhibit 10.15 to the Quarterly Report
on Form 10-Q for the period ended March 31, 1994, and incorporated
herein by reference.
10.16 Meridian Data, Inc. 1987 Incentive Stock Plan and form of subscription
agreement thereunder previously filed as Exhibit 4.3 to Registration
Statement on Form S-8 (Registration No. 33-89162) and incorporated
herein by reference.
10.17 Stock Option Assignment and Exercise Agreement between the Registrant,
International Business Machines Corporation and certain stockholders
of the Registrant dated March 6, 1996 previously filed as Exhibit
10.17 to the Annual Report on Form 10-K for the year ended December
31, 1995, and incorporated herein by reference.
10.18 Meridian Data, Inc. 1995 Director Stock Plan and form of subscription
agreement thereunder previously filed as Exhibit 4.3 to the
Registration Statement on Form S-8 (Registration No. 333-2622) and
incorporated herein by reference.
10.19 Meridian Data, Inc. 1997 Incentive Stock Plan and form of agreement
thereunder previously filed as Exhibit 10.19 to Registration of
Securities of Certain Successor Issues on Form 8-B and incorporated
herein by reference.
16.1 Letter regarding change in accountants previously filed as Exhibit
16.1 to Registration Statement on Form S-1 (Registration No. 33-57976)
and incorporated herein by reference.
27 Financial Data Schedule
(b) Reports on Form 8-K.
none
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
MERIDIAN DATA, INC.
Date: August 11, 1998
/S/ Gianluca U. Rattazzi
-----------------------------
GIANLUCA U.RATTAZZI, President and
Chief Executive Officer.
Date: August 11, 1998
/S/ Erik E. Miller
--------------------------------
ERIK E.Miller, Sr. Vice President,
Finance and Chief Financial Officer
(Principal Financial and Accounting
Officer).
<PAGE>
MERIDIAN DATA, INC.
INDEX TO EXHIBITS
Exhibit Item Page
- ------- ------------------------- ------
27 Financial Data Schedule 20
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
MERIDIAN DATA, INC.
Financial Data Schedule
Article 5 of Regulation SX
This schedule contains summary financial information extracted from the
Quarterly Report on Form 10-Q for the period ended June 30, 1998 and is
qualified in its entirety by reference to such financial statements
</LEGEND>
<CIK> 0000864568
<NAME> Meridian Data, Inc.
<MULTIPLIER> 1000
<CURRENCY> US dollars
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 12,389
<SECURITIES> 13,053
<RECEIVABLES> 4,025
<ALLOWANCES> 473
<INVENTORY> 2,331
<CURRENT-ASSETS> 31,572
<PP&E> 2,156
<DEPRECIATION> 1,402
<TOTAL-ASSETS> 32,341
<CURRENT-LIABILITIES> 9,156
<BONDS> 0
0
0
<COMMON> 66,406
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY>32,341
<SALES> 7,560
<TOTAL-REVENUES> 7,560
<CGS> 4,120
<TOTAL-COSTS> 4,120
<OTHER-EXPENSES> 11,306
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (776)
<INCOME-PRETAX> (7,090)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,090)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,090)
<EPS-PRIMARY> (0.80)
<EPS-DILUTED> (0.80)
</TABLE>
