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EX-5.1 - ZCO LIQUIDATING Corp | v191017_ex5-1.htm |
EX-23.1 - ZCO LIQUIDATING Corp | v191017_ex23-1.htm |
EX-23.2 - ZCO LIQUIDATING Corp | v191017_ex23-2.htm |
United
States
Securities
And Exchange Commission
Washington,
D.C. 20549
Amendment
No. 3
to
Form
S-1
Registration
Statement Under The Securities Act Of 1933
OCZ
Technology Group, Inc.
(Exact
name of Registrant as specified in its charter)
Delaware
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3572
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04-3651093
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(State or other jurisdiction
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(Primary
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(I.R.S.
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of
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Standard
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Employer
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incorporation
or
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Industrial
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Identification
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organization)
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Classification
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No.)
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Code
number)
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6373
San Ignacio Avenue
San
Jose, California 95119
(408)
733-8400
(Address,
including zip code, and telephone number, including area code, of Registrant’s
principal executive offices)
Ryan
M. Petersen
President
and Chief Executive Officer
OCZ
Technology Group, Inc.
6373
San Ignacio Avenue
San
Jose, California 95119
(408)
733-8400
(Name,
address, including zip code, and telephone number, including area code, of agent
for service)
Copies
to:
Kerry
T. Smith, Esq.
Chief
Financial Officer
OCZ
Technology Group, Inc.
6373
San Ignacio Avenue
San
Jose, California 95119
(408)
733-8400
and
Edward
H. Batts, Esq.
DLA
Piper LLP (US)
2000
University Avenue
East
Palo Alto, California 94303
(650)
833-2073
Approximate
date of commencement of proposed sale to the public:
From time
to time after the Registration Statement becomes effective.
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act, check the
following box. x
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement number for the
same offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.
Large
accelerated filer ¨
|
Accelerated
filer ¨
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Non-accelerated
filer x (Do
not check if smaller reporting company)
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Smaller
reporting company ¨
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Calculation
Of Registration Fee
Title of Each Class of Securities
to be Registered
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Amount to be Registered
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Proposed Maximum Offering Price
Per Unit
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Proposed Maximum Aggregate
Offering Price
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Amount of Registration Fee
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||||||||||||
Common stock to be offered for
resale by the Selling Stockholders, $0.0025 par value
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5,218,395 | (1) | $ | 4.04 | (2) | $ | 21,082,315.80 | $ | 1,503.17 | |||||||
Common stock acquirable upon the
exercise of warrants by the Selling Stockholders
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2,756,091 | (3) | $ | 5.25 | $ | 14,469,477.75 | $ | 1,031.67 | ||||||||
Common stock acquirable by
placement agent upon the exercise of warrants
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154,550 | (4) | $ | 3.00 | $ | 463,650.00 | $ | 33.06 | ||||||||
Total
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8,129,036 | $ | 36,015,443.55 | $ | 2,567.90 |
(1)
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Consisting
of shares of common stock issued to the Selling Stockholders hereunder.
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(2)
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Estimated
solely for the purposes of calculating the registration fee pursuant to
Rule 457(o) under the Securities Act of 1933, as amended, (the “ Securities
Act ”) based upon the closing sales price of the common stock on
May 14, 2010, as reported on The NASDAQ Capital Market, which was $4.04
per share.
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(3)
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Consisting
of up to (i) 2,575,833 shares of common stock issuable upon the exercise
of warrants, which are immediately exercisable on a cashless basis at an
exercise price of $5.25 per share and which will expire on March 23, 2015;
(ii) 46,082 shares of common stock issuable upon the exercise of warrants,
which are immediately exercisable at an exercise price of $5 per
share; and (iii) 134,176 shares of common stock issuable upon
the exercise of warrants, which are immediately exercisable at exercise
prices ranging between $2.25 and $3.90 per share, and of which warrants to
exercise 97,354 shares will expire on September 16,
2013. Estimated pursuant to Rule 457(g) under the Securities
Act solely for the purposes of calculating the registration fee.
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(4)
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Consisting
of up to 154,550 shares of common stock issuable upon the exercise of
placement agent warrants issuable pursuant to a placement agent commission
granted to the placement agent (the “Placement
Agent Warrant ”). The Placement Agent Warrant is
exercisable immediately on a cashless basis at an exercise price of $3.00
per share and expires on March 23, 2015. Estimated pursuant to
Rule 457(g) under the Securities Act solely for the purposes of
calculating the registration fee.
|
The
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act or until the Registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a), may
determine.
Prospectus
The
information in this preliminary prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission (“SEC”) is
effective. This prospectus is not an offer to sell these securities
and it is not soliciting an offer to buy these securities in any jurisdiction
where the offer or sale is not permitted.
Subject
to Completion,
dated ,
2010
OCZ
TECHNOLOGY GROUP, INC.
5,218,395
Shares of Common Stock
2,910,641
Shares of Common Stock issuable upon the exercise of outstanding Warrants
This
prospectus relates to the resale by selling stockholders identified in the
section entitled “Selling
Stockholders” on page 25 of up to an aggregate of 8,129,036 shares
of common stock, par value $0.0025 per share, of OCZ Technology Group, Inc.
(“OCZ”),
which consists of:
|
§
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5,218,395
shares of common stock; and
|
|
§
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2,910,641 shares
of common stock issuable upon the exercise of outstanding warrants.
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The
Selling Stockholders (which term as used herein includes their pledgees,
assignees, or other successors-in-interest) may offer and sell any of the shares
of common stock from time to time at fixed prices, at market prices or at
negotiated prices, and may engage a broker, dealer or underwriter to sell the
shares. For additional information on the possible methods of sale that
may be used by the Selling Stockholders, you should refer to the section
entitled “Plan of
Distribution” on page 36 of this prospectus. We will not receive
any proceeds from the sale of the shares of common stock by the Selling
Stockholders.
No
underwriter or other person has been engaged to facilitate the sale of shares of
our common stock in this offering. The Selling Stockholders may be
deemed underwriters of the shares of our common stock that they are
offering. We will bear all costs, expenses and fees in connection
with the registration of these shares. The Selling Stockholders will
bear all commissions and discounts, if any, attributable to their respective
sales of shares.
Our
common stock is currently listed on The NASDAQ Capital Market under the symbol
“OCZ”. On
May 14, 2010, the last reported sales price of our shares on The NASDAQ Capital
Market was $4.04 per share. You should rely only on the information
contained in this prospectus.
You should consider carefully the
risks that we have described in the section entitled “Risk
Factors” beginning on page 6 before deciding whether to invest in
our common stock.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is
truthful and complete. Any representation to the contrary is a criminal
offense.
This
prospectus is dated
, 2010.
You should rely only on the
information contained in this prospectus. We have not authorized anyone to
provide you with information different from that contained in this
prospectus. The Selling Stockholders are offering to sell, and seeking
offers to buy, shares of our common stock only in jurisdictions where offers and
sales are permitted. The information in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of our common
stock.
Page | 2
Table of
Contents
Part
I
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||||
Prospectus
Summary
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4 | |||
Risk
Factors
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6 | |||
Cautionary
Statements Regarding Forward Looking Statements
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19 | |||
Use
of Proceeds
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20 | |||
Market
Price Of and Dividends on Common Stock and Related Stock
Matters
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20 | |||
Selected
Historical Consolidated Financial Data
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20 | |||
Supplementary
Financial Information
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21 | |||
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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24 | |||
Business
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24 | |||
Management
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24 | |||
Executive
Compensation – Compensation Discussion and Analysis
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24 | |||
Security
Ownership of Certain Beneficial Owners and Management
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24 | |||
Certain
Relationships and Related Transactions
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24 | |||
Selling
Stockholders
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25 | |||
Description
of Securities
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32 | |||
Plan
of Distribution
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36 | |||
Legal
Matters
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37 | |||
Experts
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37 | |||
Material
Changes
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37 | |||
Where
You Can Find More Information
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38 | |||
Incorporation
of Certain Information by Reference
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38 | |||
Financial
Statements
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40 | |||
Part
II
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Information
Not Required in Prospectus
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42 | |||
Signatures
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45 | |||
Exhibit
Index
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46 |
Page | 3
Part
I
Prospectus
Summary
This
summary highlights selected information more fully described elsewhere in this
prospectus. You should read the following summary together with the entire
prospectus, including the more detailed information regarding us and the common
stock being sold in this offering and our financial statements and the related
notes appearing elsewhere in this prospectus. You should carefully
consider, among other things, the matters discussed in the section entitled
“Risk
Factors” beginning on page 6 before deciding to invest in our common
stock. Unless otherwise stated or the context requires otherwise,
references in this prospectus to “we,” “our” or “us” refer to OCZ Technology
Group, Inc. and our subsidiaries.
Overview
We are a
leading provider of high performance solid state drives (“SSDs”) and
memory modules for computing devices and systems.
Historically,
we primarily sold high performance memory modules to individual computing
enthusiasts through catalog and online retail channels. However, SSDs
have emerged as a strong market alternative to conventional disk drive
technology and SSDs are rooted in much of the same basic technological concepts
as our legacy memory module business. Today, as part of a
diversification strategy which began in fiscal year 2009, our product mix is
significantly more weighted toward the sale of SSDs and the SSD product line has
become central to our business. As a result, our target customers are
increasingly enterprises and original equipment manufacturers (or “OEMs”).
In
addition to our SSD and memory module product lines, we design, develop,
manufacture and distribute other high performance components for computing
devices and systems, including thermal management solutions and AC/DC switching
power supply units (“PSUs”). We
offer our customers flexibility and customization by providing a broad array of
solutions which are interoperable and can be configured alone or in combination
to make computers run faster, more reliably, efficiently and cost
effectively. Through our diversified and global distribution channel,
we offer more than 450 products to 376 customers, including leading retailers,
on-line retailers (or “etailers”),
OEMs and computer distributors.
Corporate
Information
We were
founded in 2002 and incorporated in Delaware in December 2004. We
have two subsidiaries, OCZ Canada, Inc., a Canadian corporation, and OCZ
Technology Ireland Limited, an Irish corporation.
Our
principal executive offices are located at 6373 San Ignacio Avenue, San Jose
California, 95119, and our telephone number is (408) 733-8400. Our website
address is www.ocztechnology.com. The
information on, or that can be accessed through, our website is not part of this
prospectus.
The
Offering
Shares
outstanding prior to offering:
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As
of our fiscal year ended February 28, 2010, we had issued and
outstanding:
§
21,278,643 shares of our common stock;
§
60,990 shares of our Series A preferred stock, which were
converted into 62,733 shares of common stock on May 4, 2010;
§ options to
purchase up to an aggregate of 2,779,111 shares of our common
stock;
§ warrants to
purchase an aggregate of up to 140,520 shares of our Series A
preferred stock, which were converted into warrants to purchase 144,541
shares of common stock on May 4, 2010;
and
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Page | 4
§ warrants to
purchase an aggregate of up to 142,577 shares of our common stock.
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||
Common
Stock offered for resale to the public by the Selling
Stockholders:
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Up
to 8,129,036 shares of our common stock, which consists of:
§
Up to 5,218,395
shares of common stock; and
§ Up to 2,910,641
shares of common stock issuable upon the exercise of outstanding
warrants.
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|
Use
of Proceeds:
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Proceeds
from the sale of common stock covered by this prospectus will be received
by the Selling Stockholders. We will not receive any proceeds
from the sale of the shares of common stock covered by this
prospectus. We may receive proceeds from the exercise of the
warrants whose underlying shares of common stock are covered by this
prospectus.
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The
NASDAQ Capital Market symbol for our common stock:
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“OCZ”
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Risk
Factors:
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See
“Risk
Factors” and the other information included in this prospectus for
a discussion of risk factors you should carefully consider before deciding
to invest in our common
stock.
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Page | 5
Risk
Factors
You
should carefully consider the risks described below before making a decision to
buy our common stock. If any of the following risks actually occurs, our
business, financial condition and results of operations could be harmed.
In that case, the trading price of our common stock could decline and you might
lose all or part of your investment in our common stock. You should also
refer to the other information set forth in this prospectus, including our
financial statements and the related notes.
Risks
Related to Our Business
We
are subject to the cyclical nature of the markets in which we compete and a
continued downturn could adversely affect our business.
The
markets in which we compete, including SSDs, flash, memory, thermal management
and power supply markets, are highly cyclical and characterized by constant and
rapid technological change, rapid product obsolescence and price erosion,
evolving standards, short product life cycles and wide fluctuations in product
supply and demand. These markets have experienced significant
downturns often connected with, or in anticipation of, maturing product cycles
of both manufacturers’ and their customers’ products and declines in general
economic conditions. These downturns have been characterized by
diminished product demand, production overcapacity, high inventory levels and
accelerated erosion of average selling prices.
Our
historical operating results have been subject to substantial fluctuations and
we may experience substantial period-to-period fluctuations in future operating
results. A downturn in these markets could have a material adverse
effect on the demand for our products and therefore a material adverse effect on
our business, financial condition and results of
operations. Moreover, changes in end-user demand for the products
sold by any individual customer can have a rapid and disproportionate effect on
demand for our products from that customer in any given period,
particularly if the customer has accumulated excess inventories of products
purchased from us. There can be no assurance that our net sales and
results of operations will not be materially and adversely affected in the
future due to changes in demand from individual customers or cyclical changes in
the industries utilizing our products.
We
have experienced quarterly and annual losses in the past and may experience
losses in the future.
We have
experienced losses on a quarterly and annual basis in the past. We
have expended, and will continue to expend, substantial funds to pursue
engineering, research and development projects, enhance sales and marketing
efforts and otherwise operate our business. There can be no assurance
that we will be profitable on a quarterly or annual basis in the
future.
Declines
in our average selling prices of DRAM may result in declines in our net sales
and gross profit.
Our
average selling prices may decline due to several factors. Over the
last few years, overcapacity in the DRAM memory component market resulted in
significant declines in component prices, which negatively impacted our average
selling prices and net sales. During periods of overcapacity, our net
sales may decline if we do not increase unit sales of existing products or fail
to introduce and sell new products in quantities sufficient to offset declines
in selling prices. Our efforts to increase unit sales, reduce costs
and develop new products to offset the impact of further declines in average
selling prices may not be successful. Declines in DRAM prices, which
represent a significant component of our memory sales, could also (as they have
in the past) affect our gross profit and the valuation of our inventory, which
could harm our financial results.
Declines
in average selling prices would enable OEMs to pre-install higher capacity based
memory into new systems at existing price points and thereby reduce the demand
for future memory upgrades. Further, our net sales and gross profit
may be negatively affected by shifts in our product mix during periods of
declining average selling prices.
Page | 6
In
addition, the continued transition to smaller design geometries and the use of
300 millimeter wafers by existing memory manufacturers could lead to a
significant increase in the worldwide supply of DRAM. Increases in
the worldwide supply of memory components could also result from manufacturing
capacity expansions. If not offset by increases in demand, these
increases would likely lead to further declines in the average selling prices of
our products and have a material adverse effect on our business, financial
condition and results of operations. Furthermore, even if supply
remains constant, if demand were to decrease, it would harm our average selling
prices.
Sales
to a limited number of customers represent a significant portion of our net
sales, and the loss of any key customer would materially harm our
business.
Our
dependence on a limited number of customers means that the loss of a major
customer or any reduction in orders by a major customer would materially reduce
our net sales and adversely affect our results of operations. We
expect that sales to relatively few customers will continue to account for a
significant percentage of our net sales for the foreseeable
future. However, there can be no assurance that any of these
customers or any of our other customers will continue to utilize our products at
current levels, if at all. We have no firm, long-term volume
commitments from any of our major customers and we generally enter into
individual purchase orders with our customers, in certain cases under master
agreements that govern the terms and conditions of the
relationship. We have experienced cancellations of orders and
fluctuations in order levels from period to period and expect that we will
continue to experience such cancellations and fluctuations in the
future. Customer purchase orders may be cancelled and order volume
levels can be changed, cancelled or delayed with limited or no
penalties. The replacement of cancelled, delayed or reduced purchase
orders with new orders cannot be assured.
For our
fiscal years ended February 28, 2010, February 28, 2009 and February 29, 2008,
our ten largest customers accounted for 51%, 49% and 47% of net sales,
respectively. For our fiscal years ended February 28, 2010, February
28, 2009 and February 29, 2008, NewEgg accounted for 19%, 19% and 12% of our net
sales, respectively. During these periods, no other customers
accounted for more than 10% of our net sales.
If
a standardized memory solution which addresses the demands of our customers is
developed, our net sales and market share may decline.
Many of
our memory subsystems are specifically designed for our OEM customers’ high
performance systems. In a drive to reduce costs and assure supply of
their memory module demand, our OEM customers may endeavor to design JEDEC
standard DRAM modules into their new products. This trend could
reduce the demand for our higher priced customized memory solutions which in
turn would have a negative impact on our financial results. In addition,
customers deploying custom memory solutions today may in the future choose to
adopt a JEDEC standard, and the adoption of a JEDEC standard module instead of a
previously custom module might allow new competitors to participate in a share
of our customers’ memory module business.
If our
OEM customers were to adopt JEDEC standard modules, our future business may be
limited to identifying the next generation of high performance memory demands of
OEM customers and developing solutions that addresses such
demands. Until fully implemented, this next generation of products
may constitute a much smaller market, which may reduce our net sales and market
share.
Our
customers are primarily in the computing markets and fluctuations in demand in
these markets may adversely affect sales of our products.
Sales of
our products are dependent upon demand in the computing markets. We
may experience substantial period-to-period fluctuations in future operating
results due to factors affecting the computing markets. From time to
time, these markets have experienced downturns, often in connection with, or in
anticipation of, declines in general economic conditions. A decline
or significant shortfall in demand in any one of these markets could have a
material adverse effect on the demand for our products and therefore a material
adverse effect on our business, financial condition and results of
operations.
Page | 7
Customer
demand is difficult to accurately forecast and, as a result, we may be unable to
optimally match production to customer demand.
We make
significant decisions, including determining the levels of business that we will
seek and accept, production schedules, component procurement commitments,
personnel needs and other resource requirements, based on our estimates of
customer’s future requirements. The short-term nature of commitments
by many of our customers and the possibility of unexpected changes in demand for
their products reduces our ability to accurately estimate future customer
requirements. On occasion, customers may require rapid increases in
production, which can challenge our resources and can reduce
margins. We may not have sufficient capacity at any given time to
meet our customers’ demands. Conversely, downturns in the markets in
which our customers compete can, and have, caused our customers to significantly
reduce the amount of products ordered from us or to cancel existing orders
leading to lower-utilization of our facilities. Because many of our
costs and operating expenses are relatively fixed, reduction in customer demand
would have an adverse effect on our gross margins, operating income and cash
flow.
During an
industry downturn, there is also a higher risk that our trade receivables would
be uncollectible, which would be materially adverse to our cash flow and
business.
Order
cancellations or reductions, product returns and product obsolescence could
result in substantial inventory write-downs.
To the
extent we manufacture products in anticipation of future demand that does not
materialize, or in the event a customer cancels or reduces outstanding orders,
we could experience an unanticipated increase in our
inventory. Slowing demand for our products may lead to product
returns which would also increase our inventory. In the past, we have had to
write-down inventory due to obsolescence, excess quantities and declines in
market value below our costs.
We
may be less competitive if we fail to develop new or enhanced products and
introduce them in a timely manner.
The
markets in which we compete are subject to rapid technological change, product
obsolescence, frequent new product introductions and enhancements, changes in
end-user requirements and evolving industry standards. Our ability to
successfully compete in these markets and to continue to grow our business
depends in significant part upon our ability to develop, introduce and sell new
and enhanced products on a timely and cost-effective basis, and to anticipate
and respond to changing customer requirements.
The
markets for our products are characterized by frequent transitions in which
products rapidly incorporate new features and performance
standards. A failure to develop products with required feature sets
or performance standards or a delay as short as a few months in bringing a new
product to market could significantly reduce our net sales for a substantial
period, which would have a material adverse effect on our business, financial
condition and results of operations.
We have
experienced, and may in the future experience, delays in the development and
introduction of new products. These delays could provide a competitor
a first-to-market opportunity and allow a competitor to achieve greater market
share. Defects or errors found in our products after commencement of
commercial shipment could result in delays in market acceptance of these
products. Lack of market acceptance for our new products will
jeopardize our ability to recoup research and development expenditures, hurt our
reputation and harm our business, financial condition and results of
operations. Accordingly, there can be no assurance that our future
product development efforts will result in future profitability or market
acceptance.
Our
dependence on a small number of suppliers for components, including integrated
circuit devices, and inability to obtain a sufficient supply of these components
on a timely basis could harm our ability to fulfill orders and therefore
materially harm our business.
Typically,
integrated circuit (“IC”)
devices represent a significant majority of our component costs for our memory
and SSD products. We are dependent on a small number of
suppliers that supply key components used in the manufacture of our
products. Since we have no long-term supply contracts, there is no
assurance that our suppliers will agree to supply the quantities of components
we may need to meet our production goals. Samsung, Toshiba and Intel
currently supply substantially all of the IC devices used in our Flash memory
products. Micron, Elpida and PSC (Powerchip) currently supply
substantially all of the DRAM IC devices used in our DRAM
products.
Page | 8
Additionally,
because of constraints on working capital, we have delayed payments to a number
of vendors which could have an adverse effect on our ability to source
product. Moreover, from time to time, our industry experiences shortages
in IC devices and foundry services which have resulted
in foundries putting their customers, ourselves included, on component
allocation. While to date neither delayed payment nor component
shortages has disrupted our business in a material way, in the future,
we may not be able to obtain the materials that we need to fill orders in a
timely manner or at competitive prices. As a result, our reputation could
be harmed, we may lose business from our customers, our revenues may decline,
and we may lose market share to our competitors.
The
markets in which we compete are constantly evolving and competitive, and we may
not have rights to manufacture and sell certain types of products utilizing
emerging formats, or we may be required to pay a royalty to sell products
utilizing these formats.
The
markets in which we compete are constantly undergoing rapid technological change
and evolving industry standards. For example, many consumer devices,
such as digital cameras, PDAs and smartphones, are transitioning to emerging
flash memory formats, such as the Memory Stick and xD Picture Card formats,
which we do not currently manufacture and do not have rights to manufacture, and
which could result in a decline in demand, on a relative basis, for other
products that we manufacture such as CompactFlash and secured digital USB
drives. If we decide to manufacture products utilizing emerging
formats such as those mentioned, we will be required to secure licenses to give
us the right to manufacture such products which may not be available at
reasonable rates or at all. If we are not able to supply formats at
competitive prices or if we were to have product shortages, our net sales could
be adversely impacted and our customers would likely cancel orders or seek other
suppliers to replace us.
Our
growth strategy includes expanding our presence in the SSD and high performance
memory markets both of which are highly competitive.
SSD and
high performance memory markets are highly competitive. Certain of
our competitors are more diversified than us and may be able to sustain lower
operating margins in their SSD and high performance memory businesses based on
the profitability of their other businesses. We expect competition in
these markets to increase as existing manufacturers introduce new products and
process technologies, new manufacturers enter the market, industry-wide
production capacity increases and competitors aggressively price products to
increase market share. We only have limited experience competing in
these markets. Our growth strategy includes expanding our presence in these
markets, and there can be no assurance that we will be successful in doing
so.
The
market for enterprise Flash-based SSD products is relatively new and evolving,
which makes it difficult to forecast end user adoption rates and customer
demand, for our products.
The
enterprise Flash-based SSD market is new and rapidly evolving. As a
result, we may encounter risks and uncertainties related to our business and
future prospects. It is difficult to predict, with any precision, end
user adoption rates, customer demand for our products or the future growth rate
and size of this market. The rapidly evolving nature of the markets
in which we sell our products, as well as other factors that are beyond our
control, reduce our ability to accurately evaluate our future outlook and
forecast quarterly or annual performance. Furthermore, our ability to
predict future sales is limited and our SSD product may never reach mass
adoption.
Industry
consolidation could adversely affect our business by reducing the number of our
potential significant customers and increasing our reliance on our existing key
customers.
Many
significant participants in our customers’ industries are merging and
consolidating as a result of competitive pressures and we expect this trend to
continue. Consolidation will likely decrease the number of potential
significant customers for our products and services. Fewer
significant customers will increase our reliance on key customers and, due to
the increased size of these companies, may negatively impact our bargaining
position and profit margins. Consolidation in some of our customers’
industries may result in increased customer concentration and the potential loss
of customers. The loss of, or a reduced role with, key customers due
to industry consolidation could negatively impact our business.
Page | 9
We
may make acquisitions which involve numerous risks. If we are not
successful in integrating the acquisition, our operations may be adversely
affected.
As part
of our business and growth strategy, we expect to acquire or make significant
investments in businesses, products or technologies that allow us to complement
our existing product offering, expand our market coverage, increase our
engineering workforce or enhance our technological capabilities. For
example in 2007, we acquired PC Power and Cooling, Inc., a producer of PC
thermal management products, and substantially all the assets of Silicon Data
Inc., doing business as Hypersonic PC Systems, a manufacturer of boutique high
performance gaming PCs and laptops. We stopped the manufacture and
sale of certain Hypersonic PC products in our fiscal year ended February 28,
2010. Any future acquisitions or investments would expose us to the
risks commonly encountered in acquisitions of businesses. Such risks include,
among others:
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lower
than anticipated sales and
profitability;
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problems
integrating the purchased operations, technologies or
products;
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costs
associated with the acquisition;
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negative
effects on profitability resulting from the
acquisition;
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adverse
effects on existing business relationships with suppliers and
customers;
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risks
associated with entering markets in which we have no or limited prior
experience;
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loss
of key employees of the acquired business;
and
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litigation
arising from the acquired company’s operations before the
acquisition.
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Our
inability to overcome problems encountered in connection with any acquisition
could divert the attention of management, utilize scarce corporate resources and
otherwise harm our business. In addition, we are unable to predict whether
or when any prospective acquisition candidate will become available or the
likelihood that any acquisition will be completed. Even if we do find
suitable acquisition opportunities, we may not be able to consummate the
acquisitions on commercially acceptable terms or realize the anticipated
benefits of any acquisitions we do undertake.
We
may make acquisitions that are dilutive to existing stockholders, result in
unanticipated accounting charges or otherwise adversely affect our results of
operations.
We may
grow our business through business combinations or other acquisitions of
businesses, products or technologies that allow us to complement our existing
product offerings, expand our market coverage, increase our engineering
workforce or enhance our technological capabilities. If we make any
future acquisitions, we could issue stock that would dilute our stockholders’
percentage ownership, incur substantial debt, reduce our cash reserves or assume
contingent liabilities. Furthermore, acquisitions may require
material charges and could result in adverse tax consequences, substantial
depreciation, deferred compensation charges, in-process research and development
charges, the amortization of amounts related to deferred compensation and
identifiable purchased intangible assets or impairment of goodwill, any of which
could negatively impact our results of operations.
We
may not be able to maintain or improve our competitive position because of the
intense competition in the markets we serve.
We
conduct business in markets characterized by intense competition, rapid
technological change, constant price pressures and evolving industry
standards. Our competitors include many large domestic and
international companies that have substantially greater financial, technical,
marketing, distribution and other resources, broader product lines, lower cost
structures, greater brand recognition and longer-standing relationships with
customers and suppliers than we do. As a result, our competitors may
be able to respond better to new or emerging technologies or standards and to
changes in customer requirements. Further, some of our competitors
are in a better financial and marketing position from which to influence
industry acceptance of a particular industry standard or competing technology
than we are. Our competitors may also be able to devote greater
resources to the development, promotion and sale of products, and may be able to
deliver competitive products at a lower price.
We
compete against global technology vendors such as Intel Corporation and Samsung
Electronics Co., Ltd. Our primary competitors in the specialized
memory module and flash products industry include Kingston Technology, SanDisk,
Crucial Memory and Corsair. Our primary competitors in the solid
state storage maker industry include STEC, Fusion I/O and Mtron. Our
primary competitors in the specialized power supply chassis and cooling
manufacturing industry include Antec, Inc., Thermaltake Technology Inc. USA and
Enermax Technology Corporation.
Page | 10
We expect
to face competition from existing competitors and new and emerging companies
that may enter our existing or future markets with similar or alternative
products, which may be less costly or provide additional features. In
the PC market in Asia, we expect to face increasing competition from local
competitors such as A-DATA Technology Co., Ltd. and GSkill International
Enterprise. We also face competition from current and prospective
customers that evaluate our capabilities against the merits of manufacturing
products internally. In addition, some of our significant suppliers,
including Samsung Electronics Co., Ltd., Infineon Technologies AG and Micron
Technology, Inc., are also our competitors, many of whom have the ability to
manufacture competitive products at lower costs as a result of their higher
levels of integration. Competition may also arise due to the
development of cooperative relationships among our current and potential
competitors or third parties to increase the ability of their products to
address the needs of our prospective customers. Accordingly, it is
possible that new competitors or alliances among competitors may emerge and
rapidly acquire significant market share.
We expect
that our competitors will continue to improve the performance of their current
products, reduce their prices and introduce new products that may offer greater
performance and improved pricing, any of which could cause a decline in sales or
loss of market acceptance of our products. In addition, our
competitors may develop enhancements to, or future generations of, competitive
products that may render our technology or products obsolete or
uncompetitive.
The
future growth of our OEM-focused products is dependent on achieving design wins
into commercially successful OEM systems and the failure to achieve design wins
or of OEM customers to incorporate our products in their systems could adversely
affect our operating results and prospects.
We rely
on OEMs to select our OEM-focused products to be designed into their systems,
which we refer to as a design win. We often incur significant
expenditures in the development of a new product without any assurance that an
OEM will select our product for design into its system. Additionally,
in some instances, we may be dependent on third parties to obtain or provide
information that we need to achieve a design win. Some of these third
parties may not supply this information to us on a timely basis, if at
all. Furthermore, even if an OEM designs one of our products into its
system, we cannot be assured that its product will be commercially successful or
that we will receive any net sales as a result of that design
win. Our OEM customers are typically not obligated to purchase our
products and can choose at any time to stop using our products if their own
systems are not commercially successful, if they decide to pursue other systems
strategies, or for any other reason. If we are unable to achieve
design wins or if our OEM customers’ systems incorporating our products are not
commercially successful, our net sales would suffer.
Our
future success is dependent on our ability to retain key personnel, including
our executive officers, and attract qualified personnel. If we lose
the services of these individuals or are unable to attract new talent, our
business will be adversely affected.
Our
future operating results depend in significant part upon the continued
contributions of our key technical and senior management personnel, many of whom
would be difficult to replace. We are particularly dependent on the
continued service of Ryan M. Petersen, our chief executive officer, Kerry T.
Smith, our chief financial officer, and Alex Mei, our chief marketing
officer. Our future operating results also depend in significant part
upon our ability to attract, train and retain qualified management,
manufacturing and quality assurance, engineering, marketing, sales and support
personnel. We are continually recruiting such
personnel. However, competition for such personnel is intense, and
there can be no assurance that we will be successful in attracting, training or
retaining such personnel now or in the future. There may be only a
limited number of persons with the requisite skills to serve in these positions
and it may be increasingly difficult for us to hire such persons over
time. The loss of any key employee, the failure of any key employee
to perform in his or her current position, our inability to attract, train and
retain skilled employees as needed or the inability of our officers and key
employees to expand, train and manage our employee base could materially and
adversely affect our business, financial condition and results of
operations.
We
have and will continue to incur increased costs as a result of becoming a public
reporting company.
We have
incurred, and will continue to face, increased legal, accounting, administrative
and other costs as a result of becoming a reporting company that we did not
incur as a private company. The Sarbanes-Oxley Act of 2002, as well
as rules subsequently implemented by the Securities and Exchange Commission (the
“SEC”), and
the Public Company Accounting Oversight Board, have required changes in the
corporate governance practices of public companies. We expect these
rules and regulations to increase our legal and financial compliance costs and
to make legal, accounting and administrative activities more time-consuming and
costly. We have also incurred substantially higher costs to obtain
directors’ and officers’ insurance. In addition, as we gain experience with the
costs associated with being a reporting company, we may identify and incur
additional overhead costs.
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If
we fail to maintain an effective system of internal controls over financial
reporting, we may not be able to report our financial results accurately or
detect fraud, which could harm our business and the trading price of our common
stock.
Effective
internal controls are necessary for us to produce reliable financial reports and
are important in our effort to prevent financial fraud. Beginning
with our fiscal year ended February 28, 2011, we are required to periodically
evaluate the effectiveness of the design and operation of our internal
controls. These evaluations may result in the conclusion that
enhancements, modifications or changes to our internal controls are necessary or
desirable. While management evaluates the effectiveness of our
internal controls on a regular basis, these controls may not always be
effective. There are inherent limitations on the effectiveness of
internal controls including collusion, management override, and failure of human
judgment. Because of this, control procedures are designed to reduce
rather than eliminate business risks. If we fail to maintain an
effective system of internal controls or if management or our independent
registered public accounting firm were to discover material weaknesses in our
internal controls, we may be unable to produce reliable financial reports or
prevent fraud and it could harm our financial condition and results of
operations and result in loss of investor confidence and a decline in our share
price.
Our
indemnification obligations to our customers and suppliers for product defects
could require us to pay substantial damages.
A number
of our product sales and product purchase agreements provide that we will
defend, indemnify and hold harmless our customers and suppliers from damages and
costs which may arise from product warranty claims or claims for injury or
damage resulting from defects in our products. We maintain insurance
to protect against certain claims associated with the use of our products, but
our insurance coverage may not be adequate to cover all or any part of the
claims asserted against us. A successful claim brought against us
that is in excess of, or excluded from, our insurance coverage could
substantially harm our business, financial condition and results of
operations.
Our
operations in the United States and foreign countries are subject to political
and economic risks, which could have a material adverse effect on our business
and operating results.
Our
financial success may be sensitive to adverse changes in general political and
economic conditions in the United States such as changes in regulatory
requirements, taxes, recession, inflation, unemployment and interest
rates. Such changing conditions could reduce demand in the
marketplace for our products or increase the costs involved for us to
manufacture our products.
Sales
outside of the United States accounted for approximately 57% of net sales for
the fiscal year ended February 28, 2010. Sales outside of the United
States accounted for approximately 61% and 63% of net sales in fiscal years
ended February 28, 2009 and February 29, 2008, respectively. We
anticipate that international sales will continue to constitute a meaningful
percentage of our total net sales in future periods. In addition, a
significant portion of our design and manufacturing is performed at our
facilities in Taiwan. As a result, our operations may be subject to
certain risks, including changes in regulatory requirements, tariffs and other
barriers, increased price pressure, timing and availability of export licenses,
difficulties in accounts receivable collections, difficulties in protecting our
intellectual property, natural disasters, difficulties in staffing and managing
foreign operations, difficulties in managing distributors, difficulties in
obtaining governmental approvals for products that may require certification,
restrictions on transfers of funds and other assets of our subsidiaries between
jurisdictions, foreign currency exchange fluctuations, the burden of complying
with a wide variety of complex foreign laws and treaties, potentially adverse
tax consequences and uncertainties relative to regional, political and economic
circumstances.
We are
also subject to the risks associated with the imposition of legislation and
regulations relating to the import or export of high technology
products. We cannot predict whether quotas, duties, taxes or other
charges or restrictions upon the importation or exportation of our products will
be implemented by the United States or other countries. Some of our
customers’ purchase orders and agreements are governed by foreign laws, which
often differ significantly from those of the United
States. Therefore, we may be limited in our ability to enforce our
rights under such agreements and to collect damages, if
awarded. These factors may have a material adverse effect on our
business, financial condition and results of operations.
Our
inability to effectively manage our operations in foreign countries could harm
our operating results.
A
significant portion of our design and manufacturing operations are carried out
outside of the United States at our foreign facilities. Further,
international sales have accounted for a significant portion of our overall
sales. In some of the countries in which we operate or sell our
products, it is difficult to recruit, employ and retain qualified personnel to
manage and oversee our local operations, sales and other
activities. Further, given our executive officers’ existing
managerial burdens, their lack of physical proximity to the activities being
managed and the inherent limitations of cross-border information flow, our
executive officers who reside in the United States may be unable to effectively
oversee the day-to-day management of our foreign subsidiaries and
operations. The inability of or failure by our domestic and
international management to effectively and efficiently manage our overseas
operations could have a negative impact on our business and adversely affect our
operating results.
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Worldwide
economic and political conditions may adversely affect demand for our
products.
The
current economic slowdown in the United States and worldwide has adversely
affected and may continue to adversely affect demand for our
products. Another decline in the worldwide computing markets or a
future decline in economic conditions or consumer confidence in any significant
geographic area would likely decrease the overall demand for our products, which
could have a material adverse effect on us. For example, a decline in
economic conditions in China could lead to declining worldwide economic
conditions. If economic conditions decline, whether in China or
worldwide, we could be materially adversely affected.
The
occurrence and threat of terrorist attacks and the consequences of sustained
military action in the Middle East have in the past, and may in the future,
adversely affect demand for our products. In addition, terrorist
attacks may negatively affect our operations directly or indirectly and such
attacks or related armed conflicts may directly impact our physical facilities
or those of our suppliers or customers. Furthermore, these attacks
may make travel and the transportation of our products more difficult and more
expensive, ultimately affecting our sales.
Also as a
result of terrorism, the United States has been and may continue to be involved
in armed conflicts that could have a further impact on our sales, our supply
chain and our ability to deliver products to our customers. Political
and economic instability in some regions of the world could negatively impact
our business. The consequences of armed conflicts are unpredictable
and we may not be able to foresee events that could have a material adverse
effect on us.
More
generally, any of these events could cause consumer confidence and spending to
decrease or result in increased volatility to the United States economy and
worldwide financial markets. Any of these occurrences could have a
material adverse effect on our business, financial condition and results of
operations.
Unfavorable
currency exchange rate fluctuations could result in our products becoming
relatively more expensive to our overseas customers or increase our
manufacturing costs, each of which could adversely affect our
profitability.
Our
international sales and our operations in foreign countries make us subject to
risks associated with fluctuating currency values and exchange
rates. Because sales of our products have been denominated to date
primarily in U.S. dollars, increases in the value of the U.S. dollar could
increase the price of our products so that they become relatively more expensive
to customers in the local currency of a particular country, leading to a
reduction in sales and profitability in that country. Future
international activity may result in increased foreign currency denominated
sales. Gains and losses on the conversion to U.S. dollars of accounts
receivable, accounts payable and other monetary assets and liabilities arising
from international sales or operations may contribute to fluctuations in our
results of operations. In addition, as a result of our foreign sales
and operations, we have revenues, costs, assets and liabilities that are
denominated in foreign currencies. Therefore, decreases in the value
of the U.S. dollar could result in significant increases in our manufacturing
costs that could have a material adverse effect on our business and results of
operations.
Our
worldwide operations could be subject to natural disasters and other business
disruptions, which could materially adversely affect our business and increase
our costs and expenses.
Our
worldwide operations could be subject to natural disasters and other business
disruptions, which could harm our future revenue and financial condition and
increase our costs and expenses. For example, our corporate
headquarters in San Jose, California and our manufacturing facilities in Taiwan
are located near major earthquake fault lines. Taiwan is also subject
to typhoons during certain times of the year. In the event of a major
earthquake, typhoon or hurricane, or other natural or manmade disaster, we could
experience business interruptions, destruction of facilities and/or loss of
life, any of which could materially adversely affect our business and increase
our costs and expenses.
Our
ability to compete successfully and achieve future growth will depend, in part,
on our ability to protect our intellectual property, as well as our ability to
operate without infringing the intellectual property of others.
We
attempt to protect our intellectual property rights through trade secret laws,
non-disclosure agreements, confidentiality procedures and employee disclosure
and invention assignment agreements. To a lesser extent, we also
protect our intellectual property through patents, trademarks and
copyrights. It is possible that our efforts to protect our
intellectual property rights may not:
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prevent
our competitors from independently developing similar products,
duplicating our products or designing around the patents owned by
us;
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prevent
third-party patents from having an adverse effect on our ability to do
business;
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provide
adequate protection for our intellectual property
rights;
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prevent
disputes with third parties regarding ownership of our intellectual
property rights;
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prevent
disclosure of our trade secrets and know-how to third parties or into the
public domain;
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prevent
the challenge, invalidation or circumvention of our existing
patents;
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result
in patents that lead to commercially viable products or provide
competitive advantages for our products;
and
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result
in issued patents and registered trademarks from any of our pending
applications.
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If any of
our issued patents are found to be invalid or if any of our patent applications
are rejected, our ability to exclude competitors from making, using or selling
the same or similar products as ours could be compromised. We have
occasionally applied for and may in the future apply for patent protection in
foreign countries. The laws of foreign countries, however, may not
adequately protect our intellectual property rights. Many U.S. companies
have encountered substantial infringement problems in foreign countries.
Because we conduct a substantial portion of our operations and sell some
of our products overseas, we have exposure to foreign intellectual property
risks.
In
addition, the industries in which we compete are characterized by vigorous
protection and pursuit of intellectual property rights. We believe
that it may be necessary, from time to time, to initiate litigation against one
or more third parties to preserve our intellectual property
rights. From time to time, we have received, and may receive in the
future, notices that claim we have infringed upon, misappropriated or misused
other parties’ proprietary rights. Any of the foregoing events or
claims could result in litigation. Such litigation, whether as
plaintiff or defendant, could result in significant expense to us and divert the
efforts of our technical and management personnel, whether or not such
litigation is ultimately determined in our favor. In the event of an
adverse result in such litigation, we could be required to pay substantial
damages, cease the manufacture, use and sale of certain products, expend
significant resources to develop or acquire non-infringing technology,
discontinue the use of certain processes or obtain licenses to use the infringed
technology. Product development or license negotiating would likely
result in significant expense to us and divert the efforts of our technical and
management personnel. We cannot assure you that we would be
successful in such development or acquisition or that necessary licenses would
be available on reasonable terms, or at all.
Our
indemnification obligations for the infringement by our products of the
intellectual property rights of others could require us to pay substantial
damages.
We
currently have in effect a number of agreements in which we have agreed to
defend, indemnify and hold harmless our customers and suppliers from damages and
costs which may arise from the infringement by our products of third-party
patents, trademarks or other proprietary rights. We may periodically
have to respond to claims and litigate these types of indemnification
obligations. Any such indemnification claims could require us to pay
substantial damages. Our insurance does not cover intellectual
property infringement.
We
could incur substantial costs as a result of violations of or liabilities under
environmental laws.
Our
business involves purchasing finished goods as components from different vendors
and then assembly of these components into finished products at our
facilities. We therefore are not involved in the actual manufacturing
of components, which can often involve significant environmental regulations
with respect to the materials used, as well as work place safety
requirements. Our operations and properties, however, do remain
subject in particular to domestic and foreign laws and regulations governing the
storage, disposal and recycling of computer products. For example,
our products may be subject to the European Union’s Directive 2002/96/EC Waste
Electrical and Electronic Equipment and Directive 2002/95/EC on Restriction on
the Certain Hazardous Substances in Electrical and Electronic
Equipment. Our failure to comply with present and future requirements
could cause us to incur substantial costs, including fines and penalties,
investments to upgrade our product cycle or curtailment of
operations. Further, the identification of presently unidentified
environmental conditions, more vigorous enforcement by regulatory agencies,
enactment of more stringent laws and regulations, or other unanticipated events
may arise in the future and give rise to material environmental liabilities and
related costs which could have a material adverse effect on our business,
financial condition and results of operations.
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We
are subject to a variety of federal, state and foreign laws and regulatory
regimes. Failure to comply with governmental laws and regulations
could subject us to, among other things, mandatory product recalls, penalties
and legal expenses which could have an adverse effect on our
business.
Our
business is subject to regulation by various federal and state governmental
agencies. Such regulation includes the radio frequency emission
regulatory activities of the Federal Communications Commission, the anti-trust
regulatory activities of the Federal Trade Commission and Department of Justice,
the consumer protection laws of the Federal Trade Commission, the import/export
regulatory activities of the Department of Commerce, the product safety
regulatory activities of the Consumer Products Safety Commission, the regulatory
activities of the Occupational Safety and Health Administration, the
environmental regulatory activities of the Environmental Protection Agency, the
labor regulatory activities of the Equal Employment Opportunity Commission and
tax and other regulations by a variety of regulatory authorities in each of the
areas in which we conduct business. We are also subject to regulation
in other countries where we conduct business. In certain
jurisdictions, such regulatory requirements may be more stringent than in the
United States. We are also subject to a variety of federal and state employment
and labors laws and regulations, including the Americans with Disabilities Act,
the Federal Fair Labor Standards Act, the WARN Act and other regulations related
to working conditions, wage-hour pay, over-time pay, employee benefits,
anti-discrimination, and termination of employment.
We have
voluntarily disclosed potential violations of the Iranian Transaction
Regulations and the Export Administration Regulations of the U.S. Department of
Treasury, Office of Foreign Assets Control and the U.S. Department of Commerce,
Office of Export Enforcement as a result of recently discovered actions by a
former employee.
Noncompliance
with applicable regulations or requirements could subject us to investigations,
sanctions, mandatory product recalls, enforcement actions, disgorgement of
profits, fines, damages, civil and criminal penalties, or
injunctions. In addition from time to time we have received, and
expect to continue to receive, correspondence from former employees terminated
by us who threaten to bring claims against us alleging that we have violated one
or more labor and employment regulations. In certain instances former
employees have brought claims against us and we expect that we will encounter
similar actions against us in the future. An adverse outcome in any
such litigation could require us to pay contractual damages, compensatory
damages, punitive damages, attorneys’ fees and costs.
Any
enforcement action could harm our business, financial condition and results of
operations. If any governmental sanctions are imposed, or if we do
not prevail in any possible civil or criminal litigation in the future, our
business, financial condition and results of operations could be materially
adversely affected. In addition, responding to any action will likely
result in a significant diversion of management’s attention and resources and an
increase in professional fees.
Changes
in the applicable tax laws could materially affect our future
results.
We
operate in different countries and are subject to taxation in different
jurisdictions. As a result, our future effective tax rates could be
impacted by changes in the applicable tax laws of such jurisdictions or the
interpretation of such tax laws. For example, on May 5, 2009,
President Obama and the U.S. Treasury Department proposed changing certain tax
rules for U.S. corporations doing business outside the U.S. The
proposed changes would restrict the ability of U.S. corporations to transfer
funds between foreign subsidiaries without triggering U.S. income tax, limit the
ability of U.S. corporations to deduct expenses attributable to un-repatriated
foreign earnings and modify the foreign tax credit rules. These
changes have been proposed to be effective beginning January 1,
2011. We cannot determine whether these proposals will be enacted
into law or what changes, if any, may be made to such proposals prior to their
being enacted into law. Depending on their content, such proposals
(if enacted) or other changes in the applicable tax laws could increase our
effective tax rate and adversely affect our after-tax
profitability.
Page | 15
Risks
Related to our Debt
Our
indebtedness could impair our financial condition, harm our ability to operate
our business, limit our ability to borrow additional funds or capitalize on
acquisition or other business opportunities.
We have
entered into a Sale of Accounts and Security Agreement with Faunus Group
International, Inc, pursuant to which we may factor our foreign receivables up
to $10 million in the aggregate (as amended, the “FGI
Agreement”). We have entered into a Loan and Security
Agreement with Silicon Valley Bank dated as of July 2009 (as amended, the “SVB
Agreement” and collectively with the FGI Agreement, the “Factoring Loan
Agreements”) to factor all our domestic receivables up to $10 million in
the aggregate. The SVB Agreement also caps the aggregate debt under
both Factoring Loan Agreements to $17.5 million. Under the Factoring
Loan Agreements we have guaranteed our obligations thereunder and have pledged
substantially all of our assets as security. As of our fiscal year
ended February 28, 2010, the outstanding loan balances under the Factoring Loan
Agreements were $10.4 million in the aggregate. Also, we may incur
additional debt in the future, subject to certain limitations contained in our
debt instruments.
The
degree to which we are leveraged and the restrictions governing this
indebtedness, such as a minimum Quick Ratio, (our cash and accounts receivable
divided by current liabilities) could have important consequences including, but
not limited to, the following:
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it
may limit our ability to service all of our debt
obligations;
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it
may impair our ability to incur additional indebtedness or obtain
additional financing in the future for working capital, capital
expenditures, acquisitions, general corporate purposes or other
purposes;
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some
of our debt is and will continue to be at variable rates of interest,
which may result in higher interest expense in the event of increases in
interest rates;
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our
debt agreements contain, and any agreements to refinance our debt likely
will contain, financial and restrictive covenants, and our failure to
comply with them may result in an event of default which, if not cured or
waived, could have a material adverse effect on
us;
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our
level of indebtedness will increase our vulnerability to general economic
downturns and adverse industry
conditions;
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our
debt service obligations could limit our flexibility in planning for, or
reacting to, changes in our business and our industry;
and
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it may limit our ability to
engage in certain transactions or capitalize on acquisition or other
business opportunities.
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The
Factoring Loan Agreements also have “material adverse change” provisions that
essentially grant the lenders broad discretion in determining whether to
accelerate the payment of all amounts due under the Factoring Loan Agreements
when adverse events occur with respect to OCZ, its business, financial
condition, results of operation, assets, liabilities or prospects. As
of November 30, 2008 and February 28, 2009 we failed to comply with one or more
loan covenants under the loan agreement with Silicon Valley Bank which was the
predecessor to the Factoring Loan Agreements. We received a waiver from
Silicon Valley Bank for such non-compliances. We cannot assure that we
will not violate one or more loan covenants in the future. As we are in
violation of covenants in either of the Factoring Loan Agreements and do not
receive a waiver, the lender could choose to accelerate payment on all
outstanding loan balances. There can be no assurance that we would be able
to quickly obtain equivalent or suitable replacement financing in this event.
If we are unable to secure alternative sources of funding, such
acceleration would have a material adverse impact on our financial
condition.
To
service our debt, we will require cash and we may not be able to generate
sufficient cash flow from operations to satisfy these obligations or to
refinance these obligations on acceptable terms, or at all.
Our
ability to generate cash depends on many factors beyond our
control. Our ability to make payments on our debt and to fund working
capital requirements, capital expenditures and research and development efforts
will depend on our ability to generate cash in the future. Our
historical financial results have been, and we expect our future financial
results will be, subject to substantial fluctuation based upon a wide variety of
factors, many of which are not within our control including, among others, those
described in this section.
Unfavorable
changes in any of these factors could harm our operating results and our ability
to generate cash to service our debt obligations. If we do not
generate sufficient cash flow from operations to satisfy our debt obligations,
we may have to undertake alternative financing plans, such as refinancing or
restructuring our debt, selling assets, reducing or delaying capital investments
or seeking to raise additional capital. Also, certain of these
actions would require the consent of our lenders. The terms of our
financing agreements contain limitations on our ability to incur
debt. We cannot assure you that any refinancing would be possible,
that any assets could be sold, or, if sold, of the timing of the sales and the
amount of proceeds realized from those sales, or that additional financing could
be obtained on acceptable terms, if at all, or would be permitted under the
terms of our various debt instruments then in effect. Our inability
to generate sufficient cash flow to satisfy our debt obligations, or to
refinance our obligations on commercially reasonable terms, would have an
adverse effect on our business, financial condition and results of
operations.
Page | 16
Risks
Related to our Common Stock and this Offering
The
price of our common stock may be volatile and subject to wide
fluctuations.
The
market price of the securities of technology companies has been especially
volatile. In addition, our common stock was listed on the OTCBB since
January 14, 2009 and only recently began trading on The NASDAQ Capital Market on
April 23, 2010. Accordingly, we have an extremely limited history of
public trading of our common stock within the United States. Thus,
the market price of our common stock may be subject to wide
fluctuations. If our net sales do not increase or increase less than
we anticipate, or if operating or capital expenditures exceed our expectations
and cannot be adjusted accordingly, or if some other event adversely affects us,
the market price of our common stock could decline. Broad market and
industry factors may adversely affect the market price of our common stock,
regardless of our actual operating performance. Factors that could
cause fluctuations in our stock price may include, among other
things:
|
§
|
actual
or anticipated variations in quarterly operating
results;
|
|
§
|
changes
in financial estimates by us or by any securities analysts who might cover
our stock, or our failure to meet the estimates made by securities
analysts;
|
|
§
|
changes
in the market valuations of other companies operating in our
industry;
|
|
§
|
announcements
by us or our competitors of significant acquisitions, strategic
partnerships or divestitures;
|
|
§
|
additions
or departures of key personnel; and
|
|
§
|
a general downturn in the stock
market.
|
The
market price of our stock also might decline in reaction to events that affect
other companies in our industry, even if these events do not directly affect us.
In the past, companies that have experienced volatility in the market
price of their stock have been the subject of securities class action
litigation. If we were to become the subject of securities class action
litigation, it could result in substantial costs and a diversion of management’s
attention and resources.
We
may experience significant period-to-period quarterly and annual fluctuations in
our net sales and operating results, which may result in volatility in our share
price.
We may
experience significant period-to-period fluctuations in our net sales and
operating results in the future due to a number of factors and any such
variations may cause our share price to fluctuate. It is likely that
in some future period our operating results will be below the expectations of
securities analysts or investors. If this occurs, our share price
could drop significantly.
A number
of factors, in addition to those cited in other risk factors applicable to our
business, may contribute to fluctuations in our sales and operating results,
including:
|
§
|
the
timing and volume of orders from our
customers;
|
|
§
|
the
rate of acceptance of our products by our customers, including the
acceptance of design wins;
|
|
§
|
the
demand for and life cycles of the products incorporating our
products;
|
|
§
|
the
rate of adoption of our products in the end markets we
target;
|
|
§
|
cancellations
or deferrals of customer orders in anticipation of new products or product
enhancements from us or our competitors or other
providers;
|
|
§
|
changes
in product mix; and
|
|
§
|
the
rate at which new markets emerge for products we are currently developing
or for which our design expertise can be utilized to develop products for
these new markets.
|
Page | 17
The
sale of our outstanding common stock and exercise of outstanding warrants and
options are not subject to lock-up restrictions and may have an adverse effect
of the market price of the our stock.
As of our
fiscal year ended February 28, 2010, we had 60,990 shares of Series A preferred
stock outstanding (which were converted into 62,733 shares of common stock on
May 4, 2010), 21,278,643 shares of common stock outstanding, 2,779,111 options
to purchase an aggregate of 2,779,111 shares of common stock outstanding,
140,520 warrants to purchase an aggregate of 140,520 shares of Series A
preferred stock outstanding (which were converted into warrants to purchase
144,541 shares of common stock on May 4, 2010) and 142,577 warrants to purchase
an aggregate of 142,577 shares of common stock
outstanding. Since only 1,405,199 shares of our common stock
are subject to lock-up restrictions, we cannot assure investors that the holders
of our stock will not sell substantial amounts of their holdings of our
stock. The sale or even the possibility of sale of such stock or the
stock underlying the options and warrants could have an adverse effect on the
market price for our securities or on our ability to obtain a future public
financing. If and to the extent that warrants and/or options are
exercised, stockholders could be diluted.
Future
sales of shares could depress our share price.
As of our
fiscal year ended February 28, 2010, we had 21,278,643 shares of common stock
outstanding. The registration statement, of which this prospectus is
a part, registers the resale of 5,218,395 shares of common stock, as well as
shares issuable upon the exercise of warrants, for a total of 8,129,036 shares
of our common stock. Sales by the Selling Stockholders hereunder,
especially if in heavy volume and at the same time, could negatively affect our
stock price. Moreover, the perception in the public market that these
stockholders might sell our common stock could depress the market price of the
common stock. Additionally, we may sell or issue shares of common
stock in a public offering or in connection with acquisitions, which will result
in additional dilution and may adversely affect market prices for our common
stock.
No
prediction can be made as to the precise effect, if any, that sales of shares of
our common stock or the availability of such shares for sale will have on the
market prices prevailing from time to time. Nevertheless, the
possibility that substantial amounts of common stock may be sold in the public
market may adversely affect prevailing market prices for our common stock and
could impair our ability to raise capital through the sale of our equity
securities.
Anti-takeover
provisions in our organizational documents may discourage our acquisition by a
third party, which could limit your opportunity to sell your shares at a
premium.
Our
fourth amended and restated certificate of incorporation (“Certificate of
Incorporation”) includes provisions that could limit the ability of
others to acquire control of us, modify our structure or cause us to engage in
change of control transactions, including, among other things, provisions that
restrict the ability of our stockholders to call meetings and provisions that
authorize our board of directors, without action by our stockholders, to issue
additional common stock. These provisions could deter, delay or
prevent a third party from acquiring control of us in a tender offer or similar
transactions, even if such transaction would benefit our
stockholders.
Page | 18
Cautionary
Statement Regarding Forward-Looking Statements
Some of
the statements contained in this prospectus are forward-looking statements,
including, in particular, statements about our plans, strategies and prospects,
objectives, expectations, intentions, adequacy of resources, and industry
estimates. These statements identify prospective information and include
words such as “expects,” “plans,” “anticipates,” “believes,” “estimates,”
“predicts,” “projects” and similar expressions.
Forward-looking
statements are based on information available to us as of the date of this
prospectus. Current expectations, forecasts and assumptions involve a
number of risks, uncertainties and other factors that could cause actual results
to differ materially from those anticipated by these forward-looking statements.
We caution you therefore that you should not rely on any of these
forward-looking statements as statement of historical fact or as guarantees of
future performance. These forward-looking statements should not be relied
upon as representing our views as of any subsequent date, and we undertake no
obligation to update forward-looking statements to reflect events or
circumstances after the date they were made.
Factors
that could cause actual results to differ materially from those expressed or
implied by forward-looking statements include, but are not limited
to:
§
|
our
ability to implement our business strategy, including the expansion of our
solid state drive (SSD) product line through distributors and direct
sales;
|
§
|
our
ability to obtain additional financing and continue to fund order
fulfillment to match the demand for our
products;
|
§
|
our
limited operating history, which is principally in products that are not
our SSD product line, which has emerged as our core
focus;
|
§
|
unknown
liabilities associated with past and future
acquisitions;
|
§
|
our
ability to manage growth;
|
§
|
significant
competition amid with technology that is rapidly
evolving;
|
§
|
our
ability to attract and retain talented
employees; and
|
§
|
other
risks described under the headings “Risk
Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.”
|
Market
data and industry statistics used throughout this prospectus are based on
independent industry publications and other publicly available
information. We believe these sources of information are reliable and
that the information fairly and reasonably characterizes our
industry. Although we take responsibility for compiling and
extracting the data, we have not independently verified this
information.
Page | 19
Use
Of Proceeds
We are
registering these shares pursuant to the registration rights granted to the
Selling Stockholders in connection with a registration rights agreement with the
Selling Stockholders. The Selling Stockholders will receive all of
the net proceeds from the sale of the shares of our common stock offered for
resale by them under this prospectus. We will not receive any proceeds
from the resale of shares of our common stock by the Selling Stockholders
covered by this prospectus; however, we will receive proceeds from cash payments
made in connection with the exercise of warrants held by Selling Stockholders
that are covered by this prospectus. We expect to use the proceeds received
from the exercise of the warrants, if any, for working capital and general
corporate purposes.
Market
Price Of And Dividends On Common Stock And Related Stockholder
Matters
Information
required by this section is incorporated herein by reference to Part II, Item 5
entitled “Market for
Registrant’s Common Equity. Related Stockholder matters and Issuer Purchases of
Equity Securities” of OCZ Technology Group, Inc.’s Annual Report filed on
Form 10-K with the Securities and Exchange Commission on May 20, 2010 (“Annual
Report”).
Selected
Historical Consolidated Financial Data
Information
required by this section is incorporated herein by reference to Part II, Item 6
entitled “Selected
Financial Data” of OCZ Technology Group, Inc.’s Annual
Report.
Page | 20
Supplementary
Financial Information
The
following table sets forth our quarterly consolidated statements of operations
for each of the ten most recent quarters. We have prepared the
unaudited quarterly financial information on a basis consistent with the audited
consolidated financial statements presented in this document, and the financial
information reflects all necessary adjustments for a fair presentation of our
financial positions and operating results for the quarters
presented. The results of operations for any quarter are not
necessarily indicative of the results of the operations for any future
period.
February
28, 2010
|
February
28, 2009
|
February
29, 2008
|
||||||||||||||||||||||||||||||||||||||
Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | |||||||||||||||||||||||||||||||
Feb
28
|
Nov
30
|
Aug
31
|
May
31
|
Feb
28
|
Nov
30
|
Aug
31
|
May
31
|
Feb
29
|
Nov
30
|
|||||||||||||||||||||||||||||||
Revenue
|
||||||||||||||||||||||||||||||||||||||||
Sales
– net
|
$ | 32,369 | $ | 38,024 | $ | 37,795 | $ | 35,771 | $ | 41,119 | $ | 35,230 | $ | 41,859 | $ | 37,774 | $ | 33,679 | $ | 33,346 | ||||||||||||||||||||
Cost
of revenue
|
30,126 | 31,567 | 31,534 | 32,076 | 34,369 | 34,892 | 35,954 | 30,976 | 26,841 | 28,130 | ||||||||||||||||||||||||||||||
Gross
profit
|
2,243 | 6,457 | 6,261 | 3,695 | 6,750 | 338 | 5,905 | 6,798 | 6,839 | 5,217 | ||||||||||||||||||||||||||||||
Expenses
|
||||||||||||||||||||||||||||||||||||||||
Sales
and marketing
|
2,521 | 2,520 | 2,552 | 2,656 | 2,493 | 3,547 | 2,847 | 2,513 | 2,665 | 2,329 | ||||||||||||||||||||||||||||||
Research
and development
|
1,309 | 1,328 | 1,204 | 1,490 | 770 | 719 | 577 | 509 | 277 | 466 | ||||||||||||||||||||||||||||||
General,
admin and ops
|
3,497 | 3,659 | 3,806 | 3,848 | 3,859 | 5,118 | 4,107 | 3,626 | 4,017 | 2,772 | ||||||||||||||||||||||||||||||
Impairment
of intangible assets
|
911 | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
Total
operating expenses
|
8,238 | 7,507 | 7,562 | 7,895 | 7,123 | 9,384 | 7,530 | 6,648 | 6,959 | 5,567 | ||||||||||||||||||||||||||||||
Operating
profit/(loss)
|
(5,995 | ) | (1,050 | ) | (1,301 | ) | (4,200 | ) | (373 | ) | (9,046 | ) | (1,625 | ) | 150 | (120 | ) | (350 | ) | |||||||||||||||||||||
Other
income/(expense)
|
||||||||||||||||||||||||||||||||||||||||
Other
income – net
|
58 | 600 | (65 | ) | 134 | (11 | ) | (88 | ) | (66 | ) | (5 | ) | 163 | 85 | |||||||||||||||||||||||||
Interest
and financing cost
|
(568 | ) | (522 | ) | (373 | ) | (253 | ) | (166 | ) | (141 | ) | (156 | ) | (136 | ) | (117 | ) | (60 | ) | ||||||||||||||||||||
(510 | ) | 78 | (438 | ) | (119 | ) | (177 | ) | (229 | ) | (222 | ) | (141 | ) | 45 | 25 | ||||||||||||||||||||||||
Profit/(loss)
before tax
|
(6,505 | ) | (972 | ) | (1,739 | ) | (4,319 | ) | (550 | ) | (9,275 | ) | (1,847 | ) | 9 | (75 | ) | (326 | ) | |||||||||||||||||||||
Tax
(expense) benefit
|
- | - | - | 1 | (26 | ) | (475 | ) | 443 | (3 | ) | 236 | 1,000 | |||||||||||||||||||||||||||
Net profit/(loss)
|
$ | (6,505 | ) | $ | (972 | ) | $ | (1,739 | ) | $ | (4,318 | ) | $ | (576 | ) | $ | (9,750 | ) | $ | (1,404 | ) | $ | 6 | $ | 161 | $ | 674 | |||||||||||||
Earnings
per share – basic
|
||||||||||||||||||||||||||||||||||||||||
Earnings/(loss)
per share – cents
|
$ | (0.31 | ) | $ | (0.05 | ) | $ | (0.08 | ) | $ | (0.20 | ) | $ | (0.03 | ) | $ | (0.46 | ) | $ | (0.07 | ) | $ | 0.00 | $ | 0.01 | $ | 0.03 | |||||||||||||
Weighted
average number of shares
|
21,300 | 21,300 | 21,300 | 21,300 | 21,300 | 21,000 | 20,900 | 20,900 | 20,700 | 20,600 | ||||||||||||||||||||||||||||||
Earnings
(loss) per share - diluted
|
||||||||||||||||||||||||||||||||||||||||
Earnings/(loss)
per share – cents
|
$ | (0.31 | ) | $ | (0.05 | ) | $ | (0.08 | ) | $ | (0.20 | ) | $ | (0.03 | ) | $ | (0.46 | ) | $ | (0.07 | ) | $ | 0.00 | $ | 0.01 | $ | 0.03 | |||||||||||||
Weighted
average number of shares
|
21,300 | 21,300 | 21,300 | 21,300 | 21,300 | 21,000 | 20,900 | 21,400 | 21,200 | 21,200 |
Page | 21
The
following table sets forth our historical operating results, as a percentage of
net sales for the periods indicated:
February
28, 2010
|
February
28, 2009
|
February
29, 2008
|
||||||||||||||||||||||||||||||||||||||
Q4
|
Q3
|
Q2
|
Q1
|
Q4
|
Q3
|
Q2
|
Q1
|
Q4
|
Q3
|
|||||||||||||||||||||||||||||||
Feb
28
|
Nov
30
|
Aug
31
|
May
31
|
Feb
28
|
Nov
30
|
Aug
31
|
May
31
|
Feb
29
|
Nov
30
|
|||||||||||||||||||||||||||||||
Revenue
|
||||||||||||||||||||||||||||||||||||||||
Sales
– net
|
100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||||||||||
Cost
of revenue
|
93.1 | 83.0 | 83.4 | 89.7 | 83.6 | 99.0 | 85.9 | 82.0 | 79.7 | 84.4 | ||||||||||||||||||||||||||||||
Gross
profit
|
6.9 | 17.0 | 16.6 | 10.3 | 16.4 | 1.0 | 14.1 | 18.0 | 20.3 | 15.6 | ||||||||||||||||||||||||||||||
Expenses
|
||||||||||||||||||||||||||||||||||||||||
Sales
and marketing
|
7.8 | 6.6 | 7.0 | 7.4 | 6.1 | 10.1 | 6.8 | 6.7 | 7.9 | 7.0 | ||||||||||||||||||||||||||||||
Research
and development
|
4.0 | 3.5 | 3.6 | 4.2 | 1.9 | 2.0 | 1.4 | 1.3 | 0.8 | 1.4 | ||||||||||||||||||||||||||||||
General, admin and ops
|
10.8 | 9.6 | 9.4 | 10.5 | 9.4 | 14.6 | 9.8 | 9.6 | 12.0 | 8.3 | ||||||||||||||||||||||||||||||
Impairment
of intangible assets
|
2.8 | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
Total
operating expenses
|
25.4 | 19.7 | 20.0 | 22.1 | 17.3 | 26.7 | 18.0 | 17.6 | 20.7 | 16.7 | ||||||||||||||||||||||||||||||
Operating
profit/(loss)
|
(18.5 | ) | (2.8 | ) | (3.4 | ) | (11.8 | ) | (0.9 | ) | (25.7 | ) | (3.9 | ) | 0.4 | (0.4 | ) | (1.1 | ) | |||||||||||||||||||||
Other
income/(expense)
|
||||||||||||||||||||||||||||||||||||||||
Other
income – net
|
0.2 | 1.6 | (0.2 | ) | 0.4 | (- | ) | (0.2 | ) | (0.2 | ) | (- | ) | 0.5 | 0.3 | |||||||||||||||||||||||||
Interest
and financing cost
|
(1.8 | ) | (1.4 | ) | (1.0 | ) | (0.7 | ) | (0.4 | ) | (0.4 | ) | (0.4 | ) | (0.4 | ) | (0.3 | ) | (0.2 | ) | ||||||||||||||||||||
Profit/(loss)
before tax
|
(20.1 | ) | (2.6 | ) | (4.6 | ) | (12.1 | ) | (1.3 | ) | (26.3 | ) | (4.5 | ) | - | (0.2 | ) | (1.0 | ) | |||||||||||||||||||||
Tax
(expense) benefit
|
- | - | - | - | (0.1 | ) | (1.3 | ) | 1.1 | (- | ) | 0.7 | 3.0 | |||||||||||||||||||||||||||
Net profit/(loss)
|
(20.1 | )% | (2.6 | )% | (4.6 | )% | (12.1 | )% | (1.4 | )% | (27.6 | )% | (3.4 | )% | - | % | 0.5 | % | 2.0 | % |
Quarterly
results for the fiscal years ended February 28, 2010, February 28, 2009 and the
3rd
Quarter and 4th Quarter
of fiscal year ended February 29, 2008.
Net Sales. Our net
sales had increased each quarter from November 30, 2007 to August 31, 2008
primarily due to increases in unit volumes and the impact of
acquisitions. The decrease in the quarter ended November 30,
2008 of $6.6 million was due primarily to a significant decrease in the
cost of memory components as well as an overall downturn in the global
economy. The increase in the quarter ended February 28, 2009 of
$5.9 million was primarily due to a partial recovery of memory component
prices as well as increased unit sales due to the Christmas
season. The decrease in net sales in the quarter ended May 31,
2009 of $5.3 million was primarily due to the working capital constraints
which did not allow us to purchase all the components necessary to fill
demand. The increases in net sales in the quarter ended
August 31, 2009 of $2.0 million and in the quarter ended November 30,
2009 of $0.2 million were primarily due to additional working capital being
available from new financing arrangements in those quarters to support
sales. The decrease in net sales in the quarter ended February 28,
2010 of $5.7 million was primarily due to working capital constraints which did
not allow us to purchase all of the components necessary to fill
demand.
Cost of
Revenue. Cost of revenue fluctuated from quarter to quarter
depending on the level of net sales, costs of memory components, product mix and
unit volume. Costs of sales as a percentage of net sales gradually increased
from 84.4% to 85.9% for the quarter ended November 30, 2007 to August 31, 2009
which was primarily due to a decrease in lower average selling prices of
products due to falling prices of memory components. The increase of
cost of revenue as a percentage of sales in the quarter ended November 30,
2008 to 99% was primarily due to a precipitous drop of average selling prices of
products in that quarter as well as an overall downturn in the global
economy. The decrease in the cost of revenue as a percentage of sales
for the quarters ended February 28, 2009 was primarily due to a recovery of
average selling prices of products in that quarter as well as lower costs for
inventory that was purchased in the prior quarter and sold in the quarter ended
February 28, 2009. Cost of revenue remained relatively flat for the
quarters ended August 31, 2009 and November 30, 2010 as a percentage of
sales. The increase in the cost of revenue as a percentage of sales
in the quarter ended February 28, 2010 to 93.1 % was primarily due the higher
sales discounts given to sell off discontinued DDR2 memory
products.
Sales and Marketing
Expenses. Sales and marketing expenses increased in the two
quarters ended February 29, 2008 but declined in the quarter ended
May 31, 2008. The sales and marketing expense increases in the
two quarters ended February 29, 2008 were primarily due to increase
expenditures of marketing programs to support the sales growth in those quarters
while the decrease in the quarter ended May 31, 2008 was primarily due to a
reduction of certain programs because of our concerns over falling gross
profits. Sales and marketing expenses for the quarters ended
August 31, 2008 and November 30, 2008 increased $334,000 and $700,000
respectively over the prior quarters due to the marketing of new product lines.
In the quarter ended February 28, 2009 sales and marketing expenses were
reduced by $1.1 million to allocate more cash to the purchasing of memory
components. Sales and marketing expenses remained relatively flat in
the four quarters ended May 31, 2009, August 31, 2009, November 30,
2009 and February 28, 2010 in terms of absolute dollars. Sales and
marketing expenses as a percentage of net sales vary from quarter to quarter
primarily due to changes in sales and marketing programs used to support
sales.
Page | 22
Research and Development
Expenses. Research and development expenses have increased
steadily from $466,000 in the quarter ended November 30, 2007 to $770,000 in the
quarter ended February 28, 2009. These increases were due to our
increased emphasis on the development of new products and in particular our
solid state drive products. Our research and development expense more
than doubled in the quarter ended May 31, 2009 compared to the immediately
preceding quarter to $1.49 million as we increased our focus on solid state
drive research and development. From the quarter ended May 31, 2009
to the quarter ended November 30, 2009 we reduced our research and development
expenses by $162,000 as we further adjusted our research and development team.
Our research and development expense remained flat in terms of absolute dollars
for the quarter ended February 28, 2010. Research and development
expenses quarterly variations have also occurred because of timing associated
with new product introductions and reimbursed engineering expenses.
General, administrative and
operations. General, administrative and operations generally
increased from the quarter ended November 30, 2007 to the quarter ended
August 31, 2008 as we increased headcount and our administrative and
operation infrastructure to support the 74% increase in sales over that period
of time. The increase in general administrative and operations for
the quarter ended November 30, 2008 of $1.1 million from the quarter ended
August 31, 2008 was primarily due to increased bad debt write offs and inventory
write downs. The decrease in general administrative and operations
from the quarter ended February 28, 2009 to the quarter ended August 31, 2009 of
$314,000 was primarily due to the lower regulatory costs from delisting off the
AIM in April 2009. The decrease in general administrative and
operations from the quarter ended August 31, 2009 to the quarter ended November
30, 2009 of $147,000 was primarily due to a decrease in head count because of
working capital constraints. The decrease in general administrative
and operation from the quarter ended November 30, 2009 to February 28, 2010 of
$162,000 was primarily due to a decrease in shipping costs because of lower
sales volume.
Impairment of goodwill and
intangible assets. In February 2010, we stopped the
manufacture and sale of Hypersonic PC Systems products which we purchased from
Silicon Data in 2007. Therefore, the goodwill and related intangibles
recorded from that acquisition were determined to be fully impaired and were
written off in their entirety.
Page | 23
Management’s
Discussion And Analysis Of
Financial
Condition And Results Of Operations
Information
required by this section is incorporated herein by reference to Part II, Item 7
entitled “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations”, Part II, Item 9 entitled “Changes In and
Disagreements with Accountants on Accounting and Financial Disclosure”
and Part II, Item 7A entitled “Quantitative and
Qualitative Disclosures About Market Risk” of OCZ Technology Group,
Inc.’s Annual Report.
Business
Information
required by this section is incorporated herein by reference to Part I, Item 1
entitled “Business”,
Part I, Item 2 entitled “Properties”
and Part I, Item 3 entitled “Legal
Proceedings”) of OCZ Technology Group, Inc.’s Annual Report
Management
Information
required by this section is incorporated herein by reference to Part III, Item
10 entitled “Directors,
Executive Officers and Corporate Governance” of OCZ Technology Group,
Inc.’s Annual Report.
Executive
Compensation
Compensation
Discussion And Analysis
Information
required by this section is incorporated herein by reference to Part III, Item
11 entitled “Executive
Compensation” of OCZ Technology Group, Inc.’s Annual Report.
Security
Ownership of Certain Beneficial Owners and Management
Information
required by this section is incorporated herein by reference to Part III, Item
12 entitled “Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters” of OCZ Technology Group, Inc.’s Annual Report.
Certain
Relationships and Related Transactions
Information
required by this section is incorporated herein by reference to Part III, Item
13 entitled “Certain
Relationships and Related Transactions and Director Independence” of OCZ
Technology Group, Inc.’s Annual Report.
Page | 24
Selling
Stockholders
An
aggregate of 8,129,036 shares of common stock, which consists of 5,218,395
shares of common stock and 2,910,641 shares of common stock issuable upon
the exercise of our warrants, may be offered for sale and sold from time to time
pursuant to this prospectus by the Selling Stockholders. The term
“Selling Stockholders” includes the stockholders listed below and their
pledgees, assignees, or other successors-in-interest. We have agreed to
register all of the shares offered hereby for resale by the Selling Stockholders
under the Securities Act and to pay all of the expenses in connection with such
registration and the sale of the shares, other than selling commissions and the
fees and expenses of counsel and other advisors to the Selling
Stockholders. Information concerning the Selling Stockholders may
change from time to time, and any changed information will be set forth if and
when required in prospectus supplements or other appropriate forms permitted to
be used by the SEC.
The
following table sets forth, for each of the Selling Stockholders to the extent
known by us, the number of shares of our common stock beneficially owned, the
number of shares of our common stock offered hereby and the number of shares and
percentage of outstanding common stock to be owned after completion of this
offering, assuming all shares offered hereby are sold.
Unless
otherwise indicated, the Selling Stockholders have sole voting and investment
power with respect to their shares of common stock. All of the information
contained in the table below is based upon information provided to us by the
Selling Stockholders, and we have not independently verified this information.
The Selling Stockholders may have sold, transferred or otherwise disposed
of, or may sell, transfer or otherwise dispose of, at any time or from time to
time since the date on which it provided the information regarding the shares
beneficially owned, all or a portion of the shares beneficially owned in
transactions exempt from the registration requirements of the Securities
Act.
The
number of shares outstanding and the percentages of beneficial ownership are
based on 26,460,015 shares of our common stock issued and outstanding as of
April 30, 2010.
For the
purposes of the following table, the number of shares of our common stock
beneficially owned has been determined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”) and such
information is not necessarily indicative of beneficial ownership for any other
purpose. Under Rule 13d-3, beneficial ownership includes any shares as to
which a selling stockholder has sole or shared voting power or investment power
and also any shares which that selling stockholder has the right to acquire
within 60 days of the date of this prospectus through the exercise of any stock
option, restricted stock unit, warrant or other rights.
In
connection with various prior private placements, we issued shares of
common stock and warrants
that are or have been exercisable for either shares of our common stock or
shares of our Series A preferred stock. The transactions under which
such shares of
common stock warrants
have been issued and the terms of each such warrants instruments are described
below. The shares underlying each such warrant are registered
pursuant to this registration statement.
Common
Stock
In
March 2010, we issued an aggregate of 5,151,662 shares of our common stock at
$3.00 per share in connection with a private placement. In addition,
we issued 4,000 shares of common stock to Merriman Curhan Ford & Co. as an
engagement fee in connection with the March 2010 private
placement. These shares were issued in the United States in reliance
of Rule 506 of Regulation D under the Securities Act and all recipients of our
common stock were “accredited” as defined under the rules of the
SEC. As part of the private placement offering, we also issued
warrants to purchase up to (i) 2,575,831 shares of our common stock at $5.25 per
share (the “$5.25 Warrants”) and (ii) 154,550 shares of our common stock at
$3.00 per share (the “$3.00 Warrants”). The terms of the $5.25
Warrants and the $3.00 Warrants are described immediately
below.
During
the fiscal year ended February 28, 2010, OCZ issued 60,990 shares of its Series
A preferred stock at $5.00 per share, which were converted into 62,733 shares of
common stock on May 4, 2010. These shares were issued in reliance on
Rule 506 of the Securities Act.
Common
Stock Warrants
We issued
warrants on April 28, 2006, June 12, 2006 and October 12, 2006 to John East
& Partners Limited as part of fee arrangements relating to our initial and
follow-on offerings on AIM and a previous private placement. The remaining
warrants are convertible into an aggregate of 142,577 shares of our common
stock, of which warrants to exercise 97,354 shares expire on September 16, 2013,
and warrants to exercise the remaining shares expire on June 21, 2011. The
exercise prices of the shares subject to warrants are 121.88 pence
(approximately $1.85 at current exchange rates) for 45,210 shares, 162.50 pence
(approximately $2.45 at current exchange rates) for 92,194 shares and 200.00
pence (approximately $3.00 at current exchange rates). The exercise prices are
subject to appropriate adjustment in the event of stock splits or stock
dividends, and the numbers presented in this paragraph have been adjusted to
reflect a 1 for 2.5 reverse stock split.
In
addition, we issued warrants on March 23, 2010 to various investors and our
placement agent in connection with a private placement
transaction. The investors received warrants to purchase up to an
aggregate of 2,575,831 shares of our common stock at an exercise price of $5.25
per share (the “Purchase
Warrants”). The Purchase Warrants were exercisable upon
issuance, will expire on March 23, 2015 and may be exercised by the holders on a
cashless basis. Furthermore, we issued a warrant to our placement
agent to purchase up to 154,550 shares of our common stock at an exercise price
of $3.00 per share (the “Placement Agent
Warrant”). The Placement Agent Warrant is exercisable until
March 23, 2015 and may be exercised on a cashless basis.
Series
A Preferred Stock Warrants
We issued
warrants in January and February 2010 to various investors in connection with
such investors agreeing to enter into a lock-up agreement under which such
investors agreed not to sell their shares for a period of time. These warrants
were exercisable into an aggregate of 140,520 shares of our Series A preferred
stock and expire between July 20 and August 24, 2010 (the “Series A Warrants”) at the
exercise price of $5.00 per share. On May 4, 2010, all of these warrants were
converted into warrants to purchase 144,541 shares of common stock with an
exercise price of $4.86 per share.
Page | 25
Shares
of Common Stock Beneficially
Owned
Prior to this Offering
|
Shares
of Common Stock Beneficially Owned
After
this Offering
|
|||||||||||||||||||
Name
of Selling Stockholder
|
Number
of Shares Owned Prior to the Offering
|
%
of Outstanding Shares (1)
|
Number
of Shares Offered
|
Number
of Shares Owned After the Offering
|
%
of Outstanding Shares (1)
|
|||||||||||||||
Adam
Epstein
727
Carolina Street
San
Francisco, CA 94107
|
159,998 | (2) | 0.60 | % | 49,998 | 110,000 | 0.41 | % | ||||||||||||
ALB
Private Investments, LLC(3)
c/o
Scarsdale Equities LLC
10
Rockefeller Plaza Suite 720
New
York, NY 10020
|
30,000 | (4) | 0.11 | % | 30,000 | - | - | |||||||||||||
Almond
Investment Fund, LLC(5)
P.O.
Box
Mill
Valley, CA 94942
|
495,000 | (6) | 1.86 | % | 495,000 | - | ||||||||||||||
Anthony
Low-Beer
c/o
Scarsdale Equities LLC
10
Rockefeller Plaza Suite 720
New
York, NY 10020
|
150,000 | (7) | 0.57 | % | 150,000 | - | - | |||||||||||||
Capital
Ventures International (8)
101
California Street Suite 3250
San
Francisco, CA 94111
|
150,000 | (9) | 0.57 | % | 150,000 | - | - | |||||||||||||
Columbus
Capital Offshore Fund, Ltd. (10)
1
Market Street Suite 3790
San
Francisco, CA 94105
|
180,000 | (11) | 0.68 | % | 180,000 | - | - | |||||||||||||
Columbus
Capital Partners, L.P. (10)
1
Market Street Suite 3790
San
Francisco, CA 94105
|
1,320,000 | (12) | 4.91 | % | 1,320,000 | - | - | |||||||||||||
Empery
Asset Master, Ltd (13)
120
Broadway Suite 1019
New
York, NY 10271
|
100,001 | (14) | 0.38 | % | 100,001 | - | - | |||||||||||||
Empire
Capital Partners Enhanced Master Fund, Ltd (15)
c/o
Empire Capital Management, LLC
1
Gorham Island Suite 201
Westport,
CT 06880
|
576,623 | (16) | 2.16 | % | 576,623 | - | - | |||||||||||||
Empire
Capital Partners, LP (17)
c/o
Empire Capital Management, L.L.C.
1
Gorham Island Suite 201
Westport,
CT 06880
|
496,304 | (18) | 1.86 | % | 496,304 | - | - | |||||||||||||
Empire Capital Partners,
Ltd (15)
c/o
Empire Capital Management, L.L.C.
1
Gorham Island Suite 201
Westport,
CT 06880
|
427,074 | (19) | 1.61 | % | 427,074 | - | - | |||||||||||||
Fairfield
Investment Group, LLC (20)
2
Central Avenue
Madison,
NJ 07940
|
50,001 | (21) | 0.19 | % | 50,001 | - | - | |||||||||||||
Grand
Slam Capital Master Fund, Ltd. (22)
2200
Fletcher Ave.
Fort
Lee, NJ, 07024
|
105,000 | (23) | 0.40 | % | 105,000 | - | - |
Page | 26
Iroquois
Master Fund, Ltd. (24)
641
Lexington Avenue 26th Floor
New
York, NY 10022
|
99,999
|
(25)
|
0.38
|
%
|
99,999
|
-
|
-
|
|||||||||||||
Warrant
Strategies Fund, LLC(26)
350
Madison Avenue 11th Floor
New
York, NY 10017
|
150,000
|
(27)
|
0.57
|
%
|
150,000
|
-
|
-
|
|||||||||||||
D.
Jonathan Merriman Trust(28)
600
California Street Floor 9
San
Francisco, CA 94108
|
15,000
|
(29)
|
0.06
|
%
|
15,000
|
-
|
-
|
|||||||||||||
Lacuna
Hedge Fund, LLLP(30)
1100
Spruce Street
Boulder,
CO 80302
|
375,000
|
(31)
|
1.41
|
%
|
375,000
|
-
|
-
|
|||||||||||||
Lacuna
Venture Fund, LLLP(32)
1100
Spruce Street
Boulder,
CO 80302
|
250,001
|
(33)
|
0.94
|
%
|
250,001
|
-
|
-
|
|||||||||||||
Mark
Green
45
Popham Road Apt. 5B
Scarsdale,
NY 10583
|
42,501
|
(34)
|
0.16
|
%
|
42,501
|
-
|
-
|
|||||||||||||
Merriman
Curhan Ford & Co. (35)
600
California Street 9th Floor
San
Francisco, CA 94108
|
208,548
|
(36)
|
0.78
|
%
|
208,548
|
-
|
-
|
|||||||||||||
Palo
Alto Technology Master Fund, L.P. (37)
470
University Avenue
Palo
Alto, CA 94301
|
499,998
|
(38)
|
1.88
|
%
|
499,998
|
-
|
-
|
|||||||||||||
Phyllis
M. Esposito
c/o
Scarsdale Equities LLC
10
Rockefeller Plaza Suite 720
New
York, NY 10020
|
75,000
|
(39)
|
0.28
|
%
|
75,000
|
-
|
-
|
|||||||||||||
Precept
Capital Master Fund, G.P. (40)
200
Crescent Court Suite 1450
Dallas,
TX 75201
|
499,998
|
(41)
|
1.88
|
%
|
499,998
|
-
|
-
|
|||||||||||||
Rockmore
Investment Master Fund, Ltd (42)
c/o
Rockmore Capital, LLC
150
East 58th Street
New
York, NY 10155
|
100,002
|
(43)
|
0.38
|
%
|
100,002
|
-
|
-
|
Page | 27
First
Bank & Trust As Custodian of Ronald L. Chez IRA
820
Church Street
Evanston,
IL 60201
|
499,998 | (44) | 1.88 | % | 499,998 | - | - | |||||||||||||
Sandor
Capital Master Fund, L.P. (45)
2828
Routh Street Suite 500
Dallas,
TX 75201
|
240,000 | (46) | 0.90 | % | 240,000 | - | - | |||||||||||||
STG
Capital Fund, Ltd(47)
c/o
STG Capital Management, LP
780
Third Avenue Suite 301
New
York, NY 10017
|
175,947 | (48) | 0.66 | % | 175,947 | - | - | |||||||||||||
STG
Capital Partners (QP), LP(49)
780
Third Avenue Suite 301
New
York, NY 10017
|
124,053 | (50) | 0.47 | % | 124,053 | - | - | |||||||||||||
Valor
Holdings, Inc. (51)
711
Fifth Avenue 15th Floor
New
York, NY 10022
|
150,000 | (52) | 0.57 | % | 150,000 | - | - | |||||||||||||
WHI
Technology Fund, LLC (53)
191
N. Wacker Drive Suite 1500
Chicago,
IL 60606
|
249,999 | (54) | 0.94 | % | 249,999 | - | - | |||||||||||||
Gary
Gibbs
2412
Foothill Blvd., Suite 4
Calistoga,
CA 94515
|
3,085 | 0.01 | % | 3,085 | - | - | ||||||||||||||
Timothy
Nolan
12701
S. 82nd Avenue
Palos
Park, IL 60464
|
5,143 | 0.02 | % | 5,143 | - | - | ||||||||||||||
Patrick
Yu Huai Hsu
Unit
6, 128 Compton Road Underwood
Brisbane
QLD Australia 4119
|
1,028 | 0.00 | % | 1,028 | - | - | ||||||||||||||
Coolmod
Informatica SL (55)
P.I.
La Plana c/ Historico
Reino
De Valencia, 2-12550
Almazora
– Castellon, Spain
|
2,057 | 0.01 | % | 2,057 | - | - | ||||||||||||||
Rebecca
Whitacre
Entrust
Administration Inc. FBO
Rebecca
Whitacre IRA# 36798LA
555
12th
Street, Suite 1250
Oakland,
CA 94607
|
20,562
|
0.08
|
% |
20,562
|
- | - | ||||||||||||||
Nancy
Marshall
Entrust
Administration FBO
Nancy
Marshall IRA #36789A
555
12th
Street, Suite 1250
Oakland,
CA 94607
|
30,858
|
0.12 | % |
30,858
|
- | - | ||||||||||||||
Andrew
Scott
c/o
Bidhi Bhoma
Merchant
John East Securities Limited
10
Finsbury Square
London EC2A
1AD, United Kingdom
|
494,082
|
(56) | 1.86 | % |
46,082
|
448,000
|
1.69 | % | ||||||||||||
Merchant
John East Securities Limited (57)
51-55
Gresham Street,
London,EC2V7HQ
United
Kingdom
|
97,354
|
(58) | 0.37 | % |
97,354
|
- | - | |||||||||||||
Johnny
Townsend
Buxhall
Vale, Buxhall, Stowmarket,
Suffolk
IP14 3DH
United
Kingdom
|
22,651 | (59) | 0.09 | % | 22,651 | - | - | |||||||||||||
Virginia
Bull
c/o
Merchant John East Securities Limited
51-55
Gresham Street,
London,
EC2V 7HQ
United
Kingdom
|
1,390 | (60) | 0.01 | % | 1,390 | - | - | |||||||||||||
Jeffrey
Coburn
c/o
Merchant John East Securities Limited
51-55
Gresham Street,
London,
EC2V 7HQ
United
Kingdom
|
2,781 | (61) | 0.01 | % | 2,781 | - | - | |||||||||||||
David
Worlidge
c/o
Merchant John East Securities Limited
51-55
Gresham Street,
London,
EC2V 7HQ
United
Kingdom
|
10,000 | (62) | 0.04 | % | 10,000 | - | - |
Page | 28
(1)
|
Based
on 26,460,015 shares of common stock outstanding as of April 30, 2010.
|
(2)
|
Includes
16,666 shares of common stock issuable upon the exercise of outstanding
warrants and 110,000 shares of immediately exercisable options.
|
(3)
|
Anthony
B Low-Beer IRA is the beneficial owner of 30,000 shares held by ALB
Private Investments, LLC (“ALB”).
Francis A. Mlynarczyk, Jr., as Managing Member of ALB, has sole
voting and dispositive power over such shares. Mr. Mlynarczyk
disclaims any beneficial ownership over such shares.
|
(4)
|
Includes
10,000 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(5)
|
Charles
M. Almond, as manager of Almond Investment Fund, LLC, has sole voting and
dispositive power with respect to these shares. Mr. Almond
disclaims any beneficial ownership over such shares.
|
(6)
|
Includes
165,000 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(7)
|
Includes
50,000 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(8)
|
Heights
Capital Management, Inc., the authorized agent of Capital Ventures
International (“CVI”),
has discretionary authority to vote and dispose of the shares held by CVI
and may be deemed to be the beneficial owner of such
shares. Martin Kobinger, in his capacity as Investment Manager
of Heights Capital Management, Inc., may also be deemed to have investment
discretion and voting power over the shares held by CVI. Mr.
Kobinger disclaims any such beneficial ownership of such shares.
|
(9)
|
Includes
50,000 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(10)
|
Columbus
Capital Management, LLC (“CCM”)
is the general partner of Columbus Capital Partners, L.P. (“CCP”),
investment manager of Columbus Capital Offshore Fund, Ltd. (“Columbus
Offshore”), and Matthew D. Ockner is the managing member of
CCM. Mr. Ockner exercises sole voting and dispositive power
over the shares.
|
(11)
|
Includes
60,000 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(12)
|
Includes
440,000 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(13)
|
Empery
Asset Management, LP, the authorized agent of Empery Asset Master Ltd
(“EAM”),
has discretionary authority to vote and dispose of the shares held by EAM
and may be deemed to be the beneficial owner of these
shares. Martin Hoe and Ryan Lane, in their capacity as
investment managers of Empery Asset Management LP, may also be deemed to
have investment discretion and voting power over the shares held by EAM.
Mr. Hoe and Mr. Lane disclaim any beneficial ownership of these shares.
|
(14)
|
Includes
33,334 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(15)
|
Empire GP,
L.L.C. is the general partner of, and has investment discretion over, the
shares held by Empire Capital Partners, LP. Scott A. Fine
and Peter J. Richards are the managing members of Empire GP,
L.L.C. and, in such capacity, have voting and dispositive power with
respect to such shares. Each of Empire Capital Partners, LP,
Scott A. Fine and Peter J. Richards disclaims beneficial ownership of
these shares.
|
(16)
|
Includes
192,208 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(17)
|
Empire
Capital Management, L.L.C. is the investment manager to, and has
investment discretion over, the shares held by Empire Capital
Partners, Ltd. and Empire Capital Partners Enhanced Master Fund,
Ltd. Scott A. Fine and Peter J. Richards are the managing
members of Empire Capital Management L.L.C. and, in such capacity,
have voting and dispositive power with respect to such shares. Each
of Empire Capital Partners, Ltd., Empire Capital Partners Enhanced
Master Fund, Ltd., Scott A. Fine and Peter J. Richards
disclaims beneficial ownership of these shares.
|
(18)
|
Includes
165,435 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(19)
|
Includes
142,358 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(20)
|
Fairfield
Advisors LLC (“Fairfield
Advisors”) is the Trading Advisor of Fairfield Investment Group,
LLC. Jeffrey Benton and Gary Eisenreich, in their respective
capacities as co managers of Fairfield Advisors, exercise shared voting
power with respect to these shares.
|
(21)
|
Includes
16,667 shares of common stock issuable upon the exercise of outstanding
warrants.
|
Page | 29
(22)
|
Mitchell
Sacks, as Partner of Grand Slam Capital Master Fund Ltd (“Grand Slam
Capital”), has sole voting and dispositive power over the shares
held by Grand Slam Capital.
|
(23)
|
Includes
35,000 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(24)
|
Iroquois
Capital Management L.L.C. (“Iroquois Capital”)
is the investment manager of Iroquois Master Fund, Ltd (“IMF”).
Iroquois Capital has voting control and investment discretion over
securities held by IMF. Joshua Silverman and Richard Abbe have
voting and dispositive power over shares held by Iroquois Capital in their
respective capacities as investment managers to IMF.
|
(25)
|
Includes
33,333 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(26)
|
J.
Mitchell Hill, as Managing Member of Warrant Strategies Fund LLC (“Warrant
Strategies”), has sole voting and dispositive power over the shares
held by Warrant Strategies.
|
(27)
|
Includes
50,000 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(28)
|
D.
Jonathan Merriman, as Trustee of the D. Jonathan Merriman Trust, has sole
voting and dispositive power with respect to these shares.
|
(29)
|
Includes
5,000 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(30)
|
These
shares are held by Lacuna Hedge Fund LLLP (“Lacuna
Hedge”) and are indirectly owned by Lacuna LLC and Lacuna Hedge GP
LLLP (“Lacuna
Hedge GP”). Lacuna LLC serves as the sole general
partner of Lacuna Hedge GP, which serves as the sole general partner of
Lacuna Hedge. Neither Lacuna LLC nor Lacuna Hedge GP directly
owns any securities of OCZ. Each of Lacuna LLC and Lacuna Hedge
GP disclaims beneficial ownership of the securities held by Lacuna Hedge,
except to the extent of its pecuniary interest
therein. Rawleigh Ralls, as General Partner of Lacuna Hedge,
and Rich O’Leary, as Partner of Lacuna Hedge, have shared voting and
dispositive power with respect to the shares.
|
(31)
|
Includes
125,000 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(32)
|
These
shares are held by Lacuna Venture Fund LLLP (“Lacuna
Venture”) and are indirectly owned by Lacuna LLC (“Lacuna
LLC”) and Lacuna Ventures GP LLLP (“Lacuna
Ventures GP”). Lacuna LLC serves as the sole general partner of
Lacuna Ventures GP, which serves as the sole general partner of Lacuna
Venture. Neither Lacuna LLC nor Lacuna Ventures GP directly owns any
securities of OCZ. Each of Lacuna LLC and Lacuna Ventures GP disclaims
beneficial ownership of the securities held by Lacuna Venture, except to
the extent of its pecuniary interest
therein. Rawleigh Ralls, as General Partner
of Lacuna Hedge, and Rich O’Leary, as Partner of Lacuna Hedge, have shared
voting and dispositive power with respect to the shares.
|
(33)
|
Includes
83,334 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(34)
|
Includes
14,167 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(35)
|
Merriman
Curhan Ford & Co. (“Merriman
Curhan”) is an SEC registered broker-dealer that acted as placement
agent in our March 23, 2010 private placement. Each
of Peter Coleman and Michael Doran, in their respective
capacities as Chief Executive Officer and General Counsel of Merriman
Curhan, have shared voting and dispositive power over these shares.
|
(36)
|
Includes
171,216 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(37)
|
William
L. Edwards, the Chairman, Chief Executive Officer and Chief Investment
Officer, and A. Joon Yun, MD, the President of Palo Alto Investors, LLC,
the investment advisor and general partner of Palo Alto Technology Master
Fund, L.P., have voting power and investment power over shares of common
stock held by Palo Alto Technology Master Fund, LP., but disclaim
beneficial ownership of such common stock except to the extent of their
pecuniary interest in Palo Alto Technology Master Fund, L.P.
|
(38)
|
Includes
166,666 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(39)
|
Includes
25,000 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(40)
|
D.
Blair Baker is the Managing Member of Precept Management, LLC (“Precept
Management”). Precept Management is the general partner
of Precept Capital Management, LP, which is the agent and attorney in fact
of Precept Capital Master Fund, G.P. Precept Management
exercises sole voting and dispositive power over these shares.
|
(41)
|
Includes
166,666 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(42)
|
Rockmore
Capital, LLC (“Rockmore
Capital”) and Rockmore Partners, LLC (“Rockmore
Partners”), each a limited liability company formed under the laws
of the State of Delaware, serve as the investment manager and general
partner, respectively, to Rockmore Investments (US) LP, a Delaware limited
liability partnership, which invests all of its assets through Rockmore
Investment Master Fund Ltd., an exempted company formed under the laws of
Bermuda (“Rockmore
Master Fund”). By reason of such relationships, Rockmore
Capital and Rockmore Partners may be deemed to share dispositive power
over these shares. Rockmore Capital and Rockmore Partners
disclaim beneficial ownership of such shares. Rockmore Partners
has delegated authority to Rockmore Capital regarding the portfolio
management decisions with respect to the shares owned by Rockmore Master
Fund and, as of May 20, 2010, Mr. Bruce T. Bernstein and Mr. Brian Daly,
as officers of Rockmore Capital, are responsible for the portfolio
management decisions of shares owned by Rockmore Master
Fund. By reason of such authority, Messrs. Bernstein and Daly
disclaim beneficial ownership of such shares and neither of such persons
has legal right to maintain such authority. No other person has
sole or share voting or dispositive power with respect to the shares as
those terms are used for purposes under Regulation 13D-G of the Exchange
Act. No person or “group” (as that term is used in Section
13(d) of the Exchange Act, or the SEC’s Regulation 13D-G) controls
Rockmore Master Fund.
|
(43)
|
Includes
33,334 shares of common stock issuable upon the exercise of outstanding
warrants.
|
Page |30
(44)
|
Includes
166,666 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(45)
|
Sandor
Advisors, LLC, is the General Partner of Sandor Capital Master Fund LP
(“Sandor
Master Fund”). John S. Lemak, as the Manager of Sandor
Advisors, LLC, has voting and dispositive power over the shares held by
Sandor Master Fund.
|
(46)
|
Includes
80,000 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(47)
|
Steven
T. Glass, the Director of STG Capital Fund, Ltd (“STG
Fund”) and Portfolio Manager of STG Capital Management, LP (“STG
Management”), has sole voting and dispositive power over the shares
held by STG Fund.
|
(48)
|
Includes
58,649shares of common stock issuable upon the exercise of outstanding
warrants.
|
(49)
|
Steven
T. Glass, the Managing Member of STG Capital Partners (QP), LP (“STG
Partners”) and Portfolio Manager of STG Capital Management, LP
(“STG
Management”), has sole voting and dispositive power over the shares
held by STG Partners.
|
(50)
|
Includes
41,351 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(51)
|
Russell
M. Sarachek, the Managing Member of Valor Holdings, Inc., has sole voting
and dispositive power over the shares. Mr. Sarachek disclaims
beneficial ownership over these shares except to the extent of his
pecuniary interest in Valor Holdings, Inc.
|
(52)
|
Includes
50,000 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(53)
|
William
Harris Investors, Inc. (“WHI”)
is the managing member of and investment advisor to WTI Technology Fund,
LLC (“WHI
Technology Fund”). Each of Michael S. Resnick, executive
vice president of WHI, and Len Wanger, portfolio manager of the WHI
Technology Fund, may exercise voting and dispositive power with respect to
these shares on behalf of WHI.
|
(54)
|
Includes
83,333 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(55)
|
Messrs.
Francisco Fábrega Sánchez and Mario Hellweg Gómez as partners of Coolmod
Informatica SL, a limited liability company, have shared voting and
dispositive power over these shares.
|
(56)
|
Includes
46,082 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(57)
|
Merchant
John East Securities Limited is a wholly owned subsidiary of Merchant
Securities plc, which has investment discretion over the shares held
by Merchant John East Securities Limited. The board of
directors of Merchant Securities plc (consisting of Patrick Claridge, John
East, John Foster-Powell, John Green and Charles Price (“MS
Board”)) has voting and dispositive power with respect to such
shares. The MS Board disclaims beneficial ownership of these shares.
|
(58)
|
Includes
97,354 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(59)
|
Includes
22,651 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(60)
|
Includes
1,390 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(61)
|
Includes
2,781 shares of common stock issuable upon the exercise of outstanding
warrants.
|
(62)
|
Includes
10,000 shares of common stock issuable upon the exercise of outstanding
warrants.
|
Page | 31
Description
Of Securities
The following discussion is a
summary of the material terms of our capital stock. The following description of the
material terms of our capital stock does not purport to be complete and is
qualified by reference to our certificate of incorporation and bylaws,
which documents are
incorporated by reference as exhibits to the registration statement of which
this prospectus is a part and the applicable provisions of
the General Corporation Law of the State of Delaware.
Our
Certificate of Incorporation provides that the total number of shares of capital
stock that we may issue is 120,000,000 shares of common stock, $0.0025 par value
per share, and 20,000,000 shares of preferred stock, $0.0025 par value per
share, of which 2,000,000 shares of preferred stock, $0.0025 par value per
share, have been designated Series A preferred stock.
Common
Stock
As of
April 30, 2010, there were 26,460,015 shares of our common stock
outstanding. The holders of our common stock are entitled to one vote
for each share held of record on all matters submitted to a vote of
stockholders. Holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Subject to preferences applicable to any
outstanding preferred stock, holders of common stock are entitled to receive
ratably any dividend declared by the Board. In the event of a
liquidation, dissolution or winding up of OCZ, holders of common stock are
entitled to share ratably in the assets remaining after payment of liabilities
and the liquidation preferences of any outstanding preferred
stock. Holders of our common stock have no preemptive, conversion or
redemption rights. Each outstanding share of common stock is, and all
shares of common stock to be outstanding after the completion of this offering
will be, fully paid and non-assessable.
Preferred
Stock
We have
authorized for issuance 20,000,000 shares of undesignated preferred stock, of
which 2,000,000 shares of preferred stock have been designated as Series A
preferred stock. Our Board has the authority, without further action
by the stockholders, to issue preferred stock in one or more
series. In addition, the Board may fix the rights, preferences and
privileges of any preferred stock it determines to issue. Any or all
of these rights may be superior to the rights of the common
stock. Preferred stock could thus be issued quickly with terms
calculated to delay or prevent a change in control of OCZ or to make removal of
management more difficult. Additionally, the issuance of preferred
stock may decrease the market price of our common stock. As of April
30, 2010, there were 60,990 shares of our Series A preferred stock issued and
outstanding. Under the terms of our certificate of incorporation with
respect to our Series A preferred stock, each share of Series A preferred stock
was to be automatically converted into shares of common stock on the sixtieth
(60th)
trading day following the commencement of trading of our common shares on a
public stock exchange, including OTCBB (“Mandatory
Conversion”). The trading of our common shares commenced on
OTCBB on February 10, 2010, and the 60th trading
day following the commencement of trading was May 4, 2010. The number
of shares of our common stock issued upon Mandatory Conversion was determined by
dividing $5.00 by the Denominator Price, which was determined as
follows: If the sixty (60) day per share average closing price of our
common stock on such public stock exchange (the “60 Day
Average”) is between $3.00 and $5.00, then the Denominator Price will be
the 60 Day Average. Based on the 60 Day Average of $4.86, and after
taking into account fractional shares, on May 4, 2010, 60,990 shares of our
Series A preferred stock were converted into 62,733 shares of our common stock,
and warrants to purchase 140,520 shares of our Series A preferred stock were
converted into warrants to purchase 144,541 shares of our common
stock.
Holders
of our preferred stock have voting rights and powers equal to those of the
holders of our common stock. In addition, each holder of our
preferred stock is entitled to dividends or distributions declared by our Board
as payable to the holders of our common stock.
Page | 32
Anti-Takeover
Provisions
Delaware
Law
We are
subject to Section 203 of the DGCL regulating corporate takeovers, which
prohibits a Delaware corporation from engaging in any business combination with
an “interested stockholder” during the three year period after such stockholder
becomes an “interested stockholder,” unless:
|
§
|
prior
to the date of the transaction, the board of directors of the corporation
approved either the business combination or the transaction which resulted
in the stockholder becoming an interested
stockholder;
|
|
§
|
the
interested stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of shares outstanding
(a) shares owned by persons who are directors and also officers, and
(b) shares owned by employee stock plans in which employee
participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange
offer; or
|
|
§
|
on or subsequent to the date of
the transaction, the business combination is approved by the Board and
authorized at an annual or special meeting of stockholders, and not by
written consent, by the affirmative vote of at least 66.67% of the outstanding voting stock
which is not owned by the interested
stockholder.
|
Except as
otherwise specified in Section 203, an “interested stockholder” is defined to
include:
|
§
|
any
person that is the owner of 15% or more of the outstanding voting
securities of the corporation, or is an affiliate or associate of the
corporation and was the owner of 15% or more of the outstanding voting
stock of the corporation at any time within three years immediately prior
to the date of determination; and
|
|
§
|
the
affiliates and associates of any such
person.
|
Certificate
of Incorporation and Bylaws
Our
Certificate of Incorporation and forth amended and restated bylaws (“Bylaws”)
provide that:
|
§
|
our
Board will be expressly authorized to make, alter or repeal our
Bylaws;
|
|
§
|
our
Board will be divided into three classes of service with staggered
three-year terms. This means that only one class of directors
will be elected at each annual meeting of stockholders, with the other
classes continuing for the remainder of their respective
terms;
|
|
§
|
our
Board will be authorized to issue preferred stock without stockholder
approval; and
|
|
§
|
we
will indemnify officers and directors against losses that may incur in
connection with investigations and legal proceedings resulting from their
services to us, which may include services in connection with takeover
defense measures.
|
These
provisions may make it more difficult for stockholders to take specific
corporate actions and could have the effect of delaying or preventing a change
in control of OCZ.
Warrants
We issued
warrant instruments on April 28, 2006, June 12, 2006 and October 12, 2006 to
John East & Partners Limited as part of fee arrangements relating to our
initial and follow-on offerings on AIM and a previous private placement. The
remaining warrants are convertible into an aggregate of 142,577 shares of
our common stock, of which warrants to exercise 97,354 shares expire on
September 16, 2013, and warrants to exercise the remaining shares expire on June
21, 2011. The exercise prices of the shares subject to warrants are 121.88 pence
(approximately $1.85 at current exchange rates) for 45,210 shares, 162.50 pence
(approximately $2.45 at current exchange rates) for 92,194 shares and 200.00
pence (approximately $3.00 at current exchange rates). The exercise prices are
subject to appropriate adjustment in the event of stock splits or stock
dividends, and the numbers presented in this paragraph have been adjusted to
reflect the recent 1 for 2.5 reverse stock split.
We issued
warrant instruments in January and February 2010 to various investors in
connection with a lockup agreement. These warrants are convertible into an
aggregate of 140,520 shares of our Series A preferred stock and expire between
July 20 and August 24, 2010 (the "Series A Warrants") at the exercise price of
$5.00 per share. On May 4, 2010, all of these warrants were converted into
warrants to purchase 144,541 shares of common stock with an exercise price of
$4.86 per share.
Page | 33
In addition, we issued warrant
instruments on March 23, 2010 to various investors and our placement agent in
connection with a private placement transaction. The investors
received warrants to purchase up to an aggregate of 2,575,833 shares of our
common stock at an exercise price of $5.25 per share (the “Purchase Warrants
”). The Purchase Warrants were exercisable upon issuance, will expire
on March 23, 2015 and may be exercised by the holders on a cashless
basis. Furthermore, we issued a warrant to our placement agent to
purchase up to 154,550 shares of our common stock at an exercise price of $3.00
per share(the “ Placement Agent Warrant”). The Placement Agent
Warrant is exercisable until March 23, 2015 and may be exercised on a cashless
basis.
Stock
Transfer Agent
The
transfer agent and registrar for our common stock is Computer Share Investor
Services.
Shares
Eligible for Future Sale
As of our
fiscal year ended February 28, 2010, we have outstanding an aggregate of
21,278,643 shares of our common stock, assuming no exercise of outstanding
options and warrants, and no grant of additional options or warrants. All
shares are “restricted shares,” as that term is defined in Rule 144 under
the Securities Act of 1933, as amended (the “Securities
Act”), and will be eligible for sale in the public market as
follows:
Rule 144. In
general, under Rule 144 as currently in effect, a person who is not deemed to
have been one of our affiliates for purposes of the Securities Act at any time
during the 90 days preceding a sale and who has beneficially owned shares
of our common stock for at least six months, including the holding period of
prior owners other than our affiliates, is entitled to sell those shares without
complying with the manner of sale, volume limitation or notice provision of Rule
144, subject to compliance with the public information requirements of Rule
144. If such person has beneficially owned the shares proposed to be
sold for at least one year, including the holding period of any prior owner
other than our affiliates, then that person is entitled to sell those shares
without complying with any of the requirements of Rule 144. Based
upon the number of shares outstanding as of our fiscal year ended February 28,
2010, an aggregate of approximately 11,214,206 shares of our common stock
will be eligible to be sold by non-affiliates without complying with the manner
of sale, public information, volume limitation or notice provisions of Rule
144.
In
general, under Rule 144 as currently in effect, our affiliates or persons
selling shares on behalf of our affiliates are entitled to sell within any
three-month period, a number of shares that does not exceed the greater of (a)
1% of the number of shares of our common stock then outstanding, which will
equal approximately 212,716 shares immediately as of the fiscal year ended
February 28, 2010, or (b) the average weekly trading volume of our common
stock during the four calendar weeks preceding the filing of a notice on Form
144 with respect to that sale. Sales under Rule 144 by our affiliates
or persons selling shares on behalf of our affiliates are also subject to
certain manner-of-sale provisions, notice requirements and the availability of
current public information about us. Based upon the number of shares
outstanding as of the fiscal year ended February 28, 2010, an aggregate of
approximately 10,064,436 shares of our common stock will be eligible to be
sold by our affiliates or persons selling shares on behalf of our affiliates
pursuant to Rule 144, subject to the volume restrictions described in the
previous sentence.
Rule 701. In general,
under Rule 701 of the Securities Act as currently in effect, shares of our
common stock acquired upon the exercise of currently outstanding options or
pursuant to other rights granted under our stock plans may be
resold by:
|
§
|
persons
other than affiliates, subject only to the manner-of-sale provisions of
Rule 144; and
|
|
§
|
our
affiliates, subject to the manner-of-sale, current public information and
filing requirements of Rule 144,
|
in each
case, without compliance with the one-year holding requirements of Rule
144.
An
aggregate of 21,278,643 shares of our common stock that were outstanding as of
our fiscal year ended February 28, 2010 and approximately 2,779,111 shares of
our common stock that may be acquired upon the exercise of options outstanding
as of our fiscal year ended February 28, 2010, are eligible to be sold pursuant
to Rule 701.
Page | 34
Stock Plans. A
total of 5,232,873 shares of common stock, par value $0.0025 per share, covered
by the Form S-8 registration statement we filed with the SEC on February 24,
2010 are eligible for sale in the public markets, subject to any applicable
lock-up agreements and to Rule 144 limitations applicable to
affiliates.
Page | 35
Plan
Of Distribution
Each
Selling Stockholder of our common stock and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock included in this prospectus on The NASDAQ Capital Market or any
other stock exchange, market or trading facility on which the shares are traded
or in private transactions. These sales may be at fixed or negotiated
prices. A Selling Stockholder may use any one or more of the
following methods when selling shares:
|
§
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
§
|
block
trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
§
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
|
|
§
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
§
|
privately
negotiated transactions;
|
|
§
|
settlement
of short sales entered into after the effective date of the registration
statement of which this prospectus is a
part;
|
|
§
|
broker-dealers
may agree with the Selling Stockholders to sell a specified number of such
shares at a stipulated price per
share;
|
|
§
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or
otherwise;
|
|
§
|
a
combination of any such methods of sale;
or
|
|
§
|
any
other method permitted pursuant to applicable
law.
|
The
Selling Stockholders may also sell shares under Rule 144 under the Securities
Act, if available, rather than under this prospectus.
Broker-dealers
engaged by the Selling Stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or
discounts from the Selling Stockholders (or, if any broker-dealer acts as agent
for the purchaser of shares, from the purchaser) in amounts to be negotiated,
but, except as set forth in a supplement to this Prospectus, in the case of an
agency transaction not in excess of a customary brokerage commission in
compliance with NASD Rule 2440 of the Financial Industry Regulatory Authority
(“FINRA”);
and in the case of a principal transaction a markup or markdown in compliance
with FINRA’s NASD IM-2440.
In
connection with the sale of the common stock or interests therein, the Selling
Stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the common
stock in the course of hedging the positions they assume. The Selling
Stockholders may also sell shares of the common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock o broker-dealers that in turn may sell these securities. The
Selling Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions for the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).
The
Selling Stockholders and any broker dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any
commissions received by such broker dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Each Selling
Stockholder has informed us that it does not have any written or oral agreement
or understanding, directly or indirectly, with any person to distribute the
common stock.
Page | 36
We are
required to pay certain fees and expenses incurred by us incident to the
registration of the shares, including SEC filing fees. We have agreed to
indemnify the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
Selling
Stockholders will comply with the prospectus delivery requirements in connection
with this offering. In addition, any securities covered by this
prospectus which qualify for sale pursuant to Rule 144 under the Securities Act
may be sold under Rule 144 rather than under this prospectus. Each
Selling Stockholder has advised us that they have not entered into any written
or oral agreements, understandings or arrangements with any underwriter or
broker-dealer regarding the sale of the shares registered
hereunder. There is no underwriter or coordinating broker acting in
connection with the proposed sale of the shares registered hereunder by the
Selling Stockholders.
We agreed
to keep this prospectus effective until the earlier of (i) the date on which the
shares may be resold by the Selling Stockholders without registration and
without regard to any volume limitations by reason of Rule 144 under the
Securities Act or any other rule of similar effect or (ii) all of the shares
have been sold pursuant to the prospectus or Rule 144 under the Securities Act
or any other rule of similar effect. The shares registered hereunder
will be sold only through registered or licensed brokers or dealers if required
under applicable state securities laws. In addition, in certain
states, such shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.
Under
applicable rules and regulations under the Exchange Act, any person engaged in
the distribution of the shares registered hereunder may not simultaneously
engage in market making activities with respect to the common stock for the
applicable restricted period, as defined in Regulation M, prior to the
commencement of the distribution. In addition, the Selling
Stockholders will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including Regulation M, which may limit
the timing of purchases and sales of shares of the common stock by the Selling
Stockholders or any other person. We will make copies of this
prospectus available to the Selling Stockholders and have informed them of the
need to deliver a copy of this prospectus to each purchaser at or prior to the
time of the sale, except where there is an exemption from such delivery
requirements under applicable securities laws.
Legal
Matters
The
validity of the common stock offered in this prospectus will be passed upon for
us by DLA Piper LLP (US).
Experts
The
consolidated financial statements of OCZ Technology Group, Inc. and our
subsidiaries for each of the three fiscal years in the three-year period ended
February 29, 2008, February 28, 2009 and February 28, 2010 have been included in
this prospectus and in the registration statement in reliance upon the reports
of both Horwath Clark Whitehill LLP (for
the fiscal years ended February 29, 2008 and February 28, 2009) and Crowe
Horwath LLP (for
the fiscal years ended February 29, 2008 and February 28, 2009), both of
which are independent registered public accounting firm, as stated in their
respective reports dated May 1, 2009 and May 20,
2010 each of which is incorporated by reference herein, and such
consolidated financial statements have been so incorporated by reference herein
in reliance upon the respective reports of such firms given upon their authority
as experts in accounting and auditing.
Material
Changes
There
have been no material changes since February 28, 2010 that have not been
described in our Annual Report on Form 10-K, a Form 10-Q or Form 8-K filed under
the Exchange Act, or this prospectus.
Page | 37
Where
You Can Find More Information
We have
filed with the SEC a Registration Statement on Form S-1 (such Registration
Statement, together with all amendments and exhibits thereto, being hereinafter
referred to as the “Registration
Statement”) under the Securities Act, for the registration under the
Securities Act of the shares of common stock offered hereby. This
prospectus does not contain all the information set forth in the Registration
Statement; certain parts of which are omitted in accordance with the rules and
regulations of the SEC. Reference is hereby made to the Registration
Statement which contains further information with respect to us and our common
stock. Statements herein concerning the provisions of documents filed as
exhibits to the Registration Statement are necessarily summaries of such
documents, and each such statement is qualified by reference to the copy of the
applicable document filed with the SEC.
We are
subject to the reporting requirements of the Exchange Act, and in accordance
therewith file reports, including annual and quarterly reports, proxy statements
and other information with the SEC. Such reports, proxy statements and
other information may be inspected and copied at prescribed rates at the public
reference facilities maintained by the SEC at the SEC’s Public Reference Room,
100 F Street, NE, Washington, D.C. 20549 on official business days during
the hours of 10:00 am to 3:00 pm. Please call the SEC at 1-800-SEC-0330
for more information about the operation of the Public Reference Room. Our
SEC filings are also available to the public at the SEC’s website at http://www.sec.gov.
You may
obtain a copy of any of our filings, at no cost, by writing or telephoning us
at:
6373 San
Ignacio Avenue
San Jose,
California 95119
(408)
733-8400
Incorporation
of Certain Information by Reference
We are “incorporating by reference”
certain documents we file with the SEC, which means that we can disclose
important information to you by referring you to those documents. The
information in the documents incorporated by reference is considered to be part
of this prospectus. Statements contained in documents that we file
with the SEC and that are incorporated by reference in this prospectus will
automatically update and supersede information contained in this prospectus,
including information in previously filed documents or reports that have been
incorporated by reference in this prospectus, to the extent the new information
differs from or is inconsistent with the old information. Except as
set forth below, the SEC file number for the documents incorporated by reference
in this prospectus is 001-3465.
We have filed the following documents
with the SEC and they are incorporated herein by reference as of their
respective dates of filing:
|
·
|
Our Annual Report on Form 10-K
for the fiscal year ended February 28, 2010, as filed with the SEC on May
20, 2010;
|
·
|
Our
Quarterly Report on Form 10-Q for the quarterly period ended May 31, 2010,
as filed with the SEC on July 12, 2010 and Amendment No. 1 thereto on Form
10Q/A, as filed with the SEC on July 19, 2010.
|
|
·
|
Our Current Reports on Form 8-K,
as filed with the SEC on March 26, 2010, March 29, 2010, April 8, 2010,
April 13, 2010, April 23, 2010, May 11, 2010, May 12, 2010, May 14, 2010,
May 27, 2010, June 3, 2010, June 28, 2010 and June 29, 2010.
|
A statement contained in a document
incorporated by reference into this prospectus shall be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained in this prospectus, any prospectus supplement or in any other
subsequently filed document which is also incorporated in this prospectus
modifies or replaces such statement. Any statements so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this prospectus.
Page | 38
You may request a copy of these
documents, which will be provided to you at no cost, by writing or telephoning
us at:
6373 San
Ignacio Avenue
San Jose,
California 95119
(408)
733-8400
You should rely only on the information
contained in this prospectus, including information incorporated by reference as
described above, or any prospectus supplement or that we have specifically
referred you to. We have not authorized anyone else to provide you with
different information. You should not assume that the information in
this prospectus or any prospectus supplement is accurate as of any date other
than the date on the front of those documents or that any document incorporated
by reference is accurate as of any date other than its filing
date. You should not consider this prospectus to be an offer or
solicitation relating to the securities in any jurisdiction in which such an
offer or solicitation relating to the securities is not
authorized. Furthermore, you should not consider this prospectus to
be an offer or solicitation relating to the securities if the person making the
offer or solicitation is not qualified to do so, or if it is unlawful for you to
receive such an offer or solicitation.
Page | 39
Consolidated
Financial Statements of OCZ Technology Group, Inc.
Financial
statements meeting the requirements of Regulation S-X are incorporated herein by
reference to Part II, Item 8 entitled “Financial
Statements and Supplementary Data” of OCZ Technology Group, Inc.’s Annual
Report.
Page | 40
Through
and including 90 days after the date of this prospectus, all dealers effecting
transactions in these securities, whether or not participating in this offering,
may be required to deliver a prospectus. This is in addition to the
dealers’ obligation to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
5,218,395
Shares of Common Stock
2,910,641 Shares of
Common Stock issuable upon the exercise of outstanding
Warrants
OCZ
Technology Group, Inc.
PROSPECTUS
,
2010
Page | 41
Part
II
Information
Not Required In Prospectus
Item
13
|
Other Expenses of Issuance and
Distribution
|
The
following table sets forth our estimates of the expenses in connection with the
sale and distribution of the securities being registered, all of which will be
paid by us.
Item
|
Amount
|
|||
SEC
registration fee
|
$ | 3,000 | ||
Legal
fees and expenses
|
$ | 116,300 | ||
Accounting
fees and expenses
|
$ | 160,000 | ||
Printing
fees and expenses
|
$ | 2,500 | ||
Transfer
Agent Fees
|
$ | 3,000 | ||
Miscellaneous
|
$ | 5,000 | ||
Total
|
$ | 289,800 |
Item
14
|
Indemnification of Directors
and Officers
|
As
permitted by the DGCL, our Certificate of Incorporation provides that our
directors will not be personally liable to us or our stockholders for monetary
damages for breach of fiduciary duty as a director, except for
liability:
|
§
|
for
any breach of the director’s duty of loyalty to us or our
stockholders;
|
|
§
|
for
acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law;
|
|
§
|
under
Section 174 of the DGCL, relating to unlawful payment of dividends or
unlawful stock purchase or redemption of stock;
or
|
|
§
|
for
any transaction from which the director derives an improper personal
benefit.
|
As a
result of this provision, we and our stockholders may be unable to obtain
monetary damages from a director for breach of his or her duty of
care.
Under
Section 145 of the DGCL, a corporation may indemnify a director, officer,
employee or agent of the corporation (or a person who is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise) against
expenses (including attorneys’ fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by the person if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. In the case of an action brought by or in the right of a
corporation, the corporation may indemnify a director, officer, employee or
agent of the corporation (or a person who is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise) against
expenses (including attorneys’ fees) actually and reasonably incurred by him if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, except that no indemnification
may be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent a court finds that, in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses as the
court shall deem proper. Section 145 of the DGCL also provides that a
corporation has the power to maintain insurance on behalf of its directors and
officers against any liability asserted against those persons and incurred by
them in their capacity as directors or officers, as applicable, whether or not
the corporation would have the power to indemnify them against liability under
the provisions of Section 145 of the DGCL.
Our
Certificate of Incorporation and Bylaws also provide for the indemnification of
our directors and officers to the fullest extent authorized by the
DGCL. The indemnification provided under our Certificate of
Incorporation and Bylaws includes the right to be paid expenses in advance of
any proceeding for which indemnification may be payable, provided that the
payment of these expenses incurred by a director or officer in advance of the
final disposition of a proceeding may be made only upon delivery to us of an
undertaking by or on behalf of the director or officer to repay all amounts so
paid in advance if it is ultimately determined that the director or officer is
not entitled to be indemnified. We intend to maintain director and
officer liability insurance on behalf of our directors and
officers.
Page | 42
The
foregoing summaries are necessarily subject to the complete text of the DGCL,
our Certificate of Incorporation and Bylaws.
Item
15
|
Recent Sales of Unregistered
Securities
|
Information required by this section is
incorporated herein by reference to Part II, Item 5 entitled “Market for
Registrant’s Common Equity. Related Stockholder Matters and Issuer
Purchases of Equity Securities” under the caption entitled “Recent Sales of
Unregistered Securities” of OCZ Technology Group, Inc.’s Annual
Report.
Item
16
|
Exhibits and Financial
Statements
|
(a)
|
See
the Exhibit Index of this Registration Statement for a list of exhibits
filed as part of this Registration Statement, which Exhibit Index is
incorporated herein by reference.
|
(b)
|
Financial
statements meeting the requirements of Regulation S-X are incorporated
herein by reference to Part II, Item 8 entitled “Financial
Statements and Supplementary Data” of OCZ Technology Group, Inc.’s
Annual Report.
|
Item
17
|
Undertakings
|
(a)
|
The
undersigned registrant hereby
undertakes:
|
(1) To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
i. To
include any prospectus required by Section 10(a)(3) of the Securities
Act;
ii. To
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in the
effective registration statement;
iii.
To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration
statement;
(2) That,
for the purpose of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
(4) That,
for the purpose of determining liability under the Securities Act to any
purchaser, each prospectus filed pursuant to Rule 424(b) as part of a
registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in reliance on
Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided,
however, that no statement made in a registration statement or prospectus that
is part of the registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with a time
of contract of sale prior to such first use, supersede or modify any statement
that was made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to such
date of first use.
Page | 43
(b) Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such
issue
Page | 44
Signatures
Pursuant
to the requirements of the Securities Act, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in San Jose, California on July 20, 2010.
OCZ
Technology Group, Inc.
|
|
By:
|
/s/
Ryan M. Petersen
|
Ryan
M. Petersen
|
|
President
and Chief Executive Officer
|
Power
of Attorney
Known
By All Men by these presents, that each person whose signature appears
below constitutes and appoints Ryan M. Petersen as his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any and all Amendments hereto, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent 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 to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant
to the requirements of the Securities Act, this Registration Statement has been
signed by the following persons in the capacities and on the dates
indicated.
Name
|
Title
|
Date
|
||
/s/ Ryan M. Petersen |
Chief
Executive Officer and Director
|
July
20, 2010
|
||
Ryan
M. Petersen
|
(Principal
Executive Officer)
|
|||
Chief
Financial Officer and Director
|
July
20, 2010
|
|||
/s/ Kerry T. Smith |
(Principal
Financial and Accounting
Officer)
|
|||
Kerry
T. Smith
|
||||
/s/ Adam Epstein |
Director
|
July
20, 2010
|
||
Adam
Epstein
|
||||
/s/ Richard L. Hunter |
Director
|
July
20, 2010
|
||
Richard
L. Hunter
|
||||
Director
|
July
20, 2010
|
|||
Russ
Knittel
|
Page | 45
Exhibit
Index
Exhibit
No.
|
Description
|
|
2.1
|
Agreement
and Plan of Merger dated December 17, 2004 of OCZ Technology Group,
Inc., an Indiana corporation, with and into OCZ Technology Group, Inc., a
Delaware corporation. (1)
|
|
2.2
|
Asset
Purchase Agreement dated May 25, 2007 by and among OCZ Technology
Group, Inc., PC Power and Cooling, Inc. and Douglas Dodson. (1)
|
|
2.3
|
Asset
Purchase Agreement dated October 25, 2007 by and among OCZ Technology
Group, Inc., Silicon Data Inc., a New York corporation, Fred Cohen, and
Eyal Akler. (1)
|
|
3.1
|
Fourth
Amended and Restated Certificate of Incorporation as filed with the
Delaware Secretary of State on September 30, 2009.
(1)
|
|
3.2
|
Fourth
Amended and Restated Bylaws. (1)
|
|
3.3
|
Certificate
of Designation as filed with the Delaware Secretary of State on November
4, 2009. (4)
|
|
4.1
|
Specimen
common stock certificate of OCZ Technology Group, Inc. (1)
|
|
5.1
|
Opinion
of DLA Piper (US) LLP. (12)
|
|
10.1
|
OCZ
Technology Group, Inc. 2004 Stock Incentive Plan.
(1)
|
|
10.2
|
Executive
Employment Agreement dated April 4, 2006 by and between OCZ
Technology Group, Inc. and Ryan M. Petersen.
(1)
|
|
10.3
|
Executive
Employment Agreement dated April 4, 2006 by and between OCZ
Technology Group, Inc. and Arthur Knapp.
(1)
|
|
10.4
|
Executive
Employment Agreement dated April 4, 2006 by and between OCZ
Technology Group, Inc. and Alex Mei.
(1)
|
|
10.5
|
Executive
Employment Agreement dated December 17, 2008 by and between OCZ
Technology Group, Inc. and Kerry Smith.
(1)
|
|
10.6
|
Offer
Letter dated June 13, 2006 memorializing the terms of Mr. George
Kynoch’s services as a non-executive director. (1)
|
|
10.7
|
Offer
Letter dated June 13, 2006 memorializing the terms of
Mr. Quentin Colin Maxwell Solt’s services as a non-executive
director.
(1)
|
|
10.8
|
Sub-Sublease
dated January 30, 2009 by and between Oracle USA, Inc. and OCZ
Technology Group, Inc. for the property located in San Jose, California,
USA. (1)
|
|
10.9
|
Lease
dated April 21, 2005 by and between Buckgolf Inc., & Greengolf
Inc. and OCZ Technology Group, Inc. dated for the property located in
Markham, Ontario, Canada. (1)
|
|
10.10
|
English
translation of lease dated August 7, 2005 by and between Vrodest
Delft C.V. and OCZ Technology Group, Inc. for the property located in
Delft, The Netherlands. (1)
|
|
10.11
|
English
summary of lease for the property located in Taipei County, Taiwan. (1)
|
|
10.12
|
English
summary of lease for the property located in Lujhu Township, Taiwan. (1)
|
Page | 46
10.13
|
Form
of Indemnification Agreement for Directors and Officers of OCZ Technology
Group, Inc. (1)
|
|
10.14
|
Executive
Employment Agreement dated November 30, 2007 by and between OCZ
Technology Group, Inc. and Justin Shong.
(1)
|
|
10.15
|
Loan
and Security Agreement dated July 2009 by and between OCZ Technology
Group, Inc. and Silicon Valley Bank. (1)
|
|
10.16
|
Sale
of Accounts and Security Agreement by and between OCZ Technology Group,
Inc. and Faunus Group International, Inc. dated July 6, 2009. (1)
|
|
10.17
|
Asset
Purchase Agreement dated August 31, 2009 by and between OCZ
Technology Group, Inc. and BCInet, Inc. (1)
|
|
10.18
|
Secured
Promissory Note, dated August 31, 2009, issued by BCInet, Inc. to OCZ
Technology Group, Inc. in the amount of $311,215. (1)
|
|
10.19
|
Secured
Promissory Note, dated August 31, 2009, issued by BCInet, Inc. to OCZ
Technology Group, Inc. in the amount of $170,000. (1)
|
|
10.20
|
Secured
Convertible Promissory Note, dated August 31, 2009, issued by BCInet,
Inc. to OCZ Technology Group, Inc. in the amount of $414,200. (1)
|
|
10.21
|
Series A
Preferred Stock Purchase Agreement dated August 31, 2009 by and
between BCInet, Inc. and OCZ Technology Group, Inc. (1)
|
|
10.22
|
Security
Agreement dated August 31, 2009 by and between BCI net, Inc. and OCZ
Technology Group, Inc.
(2)
|
|
10.23
|
Confidential
Resignation and Consulting Agreement and General Release dated March 12,
2009 by and between OCZ Technology Group, Inc. and Arthur Knapp. (3)
|
|
10.24
|
Promissory
Note dated August 19, 2009 from OCZ Technology Group, Inc. to The Ryan
Petersen and Sarita Nuez Family Trust. (3)
|
|
10.25
|
Distribution
Agreement dated
June 2009, by and between OCZ Technology Group, Inc. and Bell
Microproducts Canada. (5)
|
|
10.26
|
Securities
Purchase Agreement dated March 23, 2010 by and among OCZ Technology Group,
Inc. and the institutional and accredited investors listed therein (6)
|
|
10.27
|
Registration
Rights Agreement dated March 23, 2010 by and among OCZ Technology Group,
Inc. and the Purchasers (as defined therein). (6)
|
|
10.28
|
Form
of Warrant for the institutional and accredited investors. (6)
|
|
10.29
|
Form
of Warrant for Placement Agent (as defined therein). (6)
|
|
10.30
|
Second
Amendment to the Loan and Security Agreement dated May 10, 2010 by and
between OCZ Technology Group, Inc. and Silicon Valley Bank. (8)
|
|
10.31
|
Offer
Letter dated December 30, 2009 memorializing the terms of Mr. Adam
Epstein’s services as a non-executive director. (9)
|
|
10.32
|
Offer
Letter dated December 30, 2009 memorializing the terms of Mr. Richard
L. Hunter’s services as a non-executive director. (9)
|
|
10.33
|
Offer
Letter dated December 30, 2009 memorializing the terms of Mr. Sunit
Saxena’s services as a non-executive director. (9)
|
|
10.34 |
Lease
Extension Agreement dated May 21, 2010 by and between Buckgolf Inc., &
Greengolf Inc. and OCZ Canada, Inc. for the property located in Markham,
Ontario, Canada. (9)
|
|
10.35 |
Lease
Accommodation Agreement dated May 31, 2010 by and between OCZ Technology
Group, Inc. and Beleggingsmaatschappij Marcel B.V. for the property
located in Waddinxveen, The Netherlands. (10)
|
Page | 47
16.1
|
Letter regarding change in
certifying accountants dated April 5, 2010 from Horwath Clark Whitehill.
(7)
|
|
21.1
|
Subsidiaries
of OCZ Technology Group, Inc. (1)
|
|
23.1
|
Consent
of Independent Certified Public Accountant – Crowe Horwath, LLP. (12)
|
|
23.2
|
Consent
of Independent Certified Public Accountant – Horwath Clark Whitehill, LLP.
(12)
|
|
(1)
|
Incorporated
by reference to exhibit of the same number to the Registrant’s Form 10
filed on September 30, 2009.
|
(2) | Incorporated by reference to exhibit of the same number to the Registrant’s Form 10 filed on November 12, 2009. |
|
(3)
|
Incorporated
by reference to exhibit of the same number to the Registrant’s Form 10
filed on December 4, 2009.
|
|
(4)
|
Incorporated
by reference to Exhibit 3.1 to the Registrant’s Form 10-Q filed on January
14, 2010.
|
|
(5)
|
Incorporated
by reference to Exhibit 99.2 to the Registrant’s Form 8-K filed on January
25, 2010.
|
|
(6)
|
Incorporated
by reference Registrant’s Form 8-K filed on March 26,
2010.
|
|
(7)
|
Incorporated
by reference to Exhibit 16.1 to the Registrant’s Form 8-K filed on April
8, 2010.
|
|
(8)
|
Incorporated
by reference to Exhibit 99.1 to the Registrant’s Form 8-K filed on May 11,
2010.
|
|
(9)
|
Incorporated
by reference to exhibit of the same number to the Registrant’s Form 10-K
filed on May 20, 2010.
|
(10) |
Incorporated
by reference to Exhibit 99.1 to the Registrant's Form 8-K filed on May 27,
2010.
|
|
(11) | Incorporated by reference to Exhibits 10.1 and 10.2, respectively, to the Registrant's Form 8-K filed on June 3, 2010. | |
(12)
|
Filed
herewith.
|
Page | 48