(Mark One) | ||
þ
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the fiscal year ended December 31, 2004 | ||
or | ||
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the transition period from to |
California
|
94-3125814 | |
(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer
Identification No.) |
Title of Each Class | Name of Each Exchange on Which Registered | |
none | none |
Item 1. | Business |
1
Storage Market Growth Drivers |
| New consumer electronics applications, such as digital video and audio recorders, video game platforms, emerging HDTV applications and streaming video require significant digital data storage capability. | |
| Personal computers have evolved from devices operating simple applications such as word processing, to powerful machines that are capable of playing, recording and creating multimedia content, such as images, audio and video. These capabilities have driven the demand for new personal computers and increasing requirements for data storage. TrendFocus estimates annual personal computer unit growth of 12.2% over the period from 2003 to 2007. | |
| Enterprise data storage requirements are increasing, as regulations and other business factors require companies to archive more information, such as documents and email. Additionally, companies are transitioning from paper-based storage to digital data-based storage and digital backup. | |
| Certain traditional analog storage applications are transitioning to digital hard disk-based storage. For example, the video surveillance industry, including home security, law enforcement, private security services, retail, transportation and government agencies, is transitioning from analog video tapes to digital hard disk storage. |
Hard Disk Drive Market Dynamics |
2
| Cost of Ownership. Cost of ownership of disk sputtering equipment includes factors such as equipment price, manufacturing yield, throughput, factory floor footprint and uptime. A lower cost of ownership for disk sputtering equipment is a key factor in lowering the manufacturers product cost. | |
| Extendibility and Flexibility. We believe magnetic disk manufacturers need sputtering equipment that can address the needs of their evolving technology roadmaps. This equipment must be capable of incorporating new process steps and technical capabilities, including the processes needed for producing magnetic disks capable of perpendicular recording. Additionally, these manufacturers are improving longitudinal processes and further developing the processes necessary for perpendicular recording, and as a result, they demand a modular, flexible system that supports process reconfigurations and expansions with a minimum of effort. | |
| Compatibility with Existing Equipment. We believe magnetic disk manufacturers prefer to standardize their processes around one or two disk sputtering equipment suppliers. Once a disk manufacturer has selected a particular suppliers equipment, that manufacturer generally relies upon that suppliers equipment for much of its production capacity and frequently will continue to purchase any additional equipment from the same supplier. There are significant economies of scale related to the use of a single platform in product design, product qualification, manufacturing and support. |
3
| Long-term Commitment of Supplier. We believe magnetic disk manufacturers need sputtering equipment providers that are committed to meeting current and future technology requirements and to supporting this equipment throughout its useful life. As a result, magnetic disk manufacturers increasingly demand a supplier with the stability and capability to be a long-term technology partner. |
Our Competitive Strengths |
| Broad Installed Base with Industry Leading Customers. Our MDP-250 disk sputtering system gained wide acceptance in the magnetic disk manufacturing industry and by the late 1990s was being used in the manufacture of approximately half of the magnetic disks used in hard disk drives worldwide. We believe that there are approximately 105 legacy MDP-250 systems and 12 next generation 200 Lean systems currently in use in production and research and development applications by customers such as Fuji Electric, Hitachi Global Storage Technology, Komag, Maxtor, Seagate and Showa Denko. We believe the majority of our active customers are now utilizing most of their capacity and that there is significant potential for these customers to both resume adding capacity and to upgrade the technical capability of their installed base to permit production of higher density disks capable of perpendicular recording. | |
| Technology Leadership with Modular Next Generation Advanced Platform. In December 2003, we first delivered our latest-generation disk sputtering system, the 200 Lean, which provides significantly enhanced capabilities relative to our installed base of MDP-250 systems. The 200 Lean provides higher throughput from a smaller footprint, which enables more disks to be manufactured per square-foot of clean-room space. The flexible design of the 200 Lean allows rapid reconfiguration to accommodate product changeovers and new disk technology. The modular design of the 200 Lean also allows disk manufacturers to add additional process steps, as advanced magnetic disk technologies, such as perpendicular recording, are introduced. | |
| Long-Term Commitment to Hard Disk Drive Industry. We have been a hard disk drive equipment provider since 1991. We are one of only two companies that have delivered next-generation disk sputtering equipment that can support perpendicular recording. We have continued to develop new technologies and introduced the 200 Lean disk sputtering system to meet the needs for additional process steps necessary to economically produce magnetic disks capable of perpendicular recording. In addition, our headquarters are located in close proximity to many of our customers hard disk drive development centers, and our support center in Singapore services our customers Southeast Asia manufacturing facilities. |
Our Equipment Strategy |
| Become Preferred Solutions Provider in the Magnetic Disk Industry. Our goal is to become a preferred solutions provider to magnetic disk manufacturers. We believe that our 200 Lean provides our customers with an advanced modular platform that can address their future disk sputtering needs. We believe we can integrate additional capabilities into the 200 Lean, such as automated handling of small-form-factor disks (disks of one inch diameter or less). We believe we are also the leading |
4
provider of disk lubrication equipment, the equipment that is used to apply ultra-thin coatings of lubricant to magnetic disks after sputtering. | ||
| Deliver Highest Customer Value Proposition. Our goal is to maintain our leadership in advanced disk sputtering equipment by providing flexible, extendable equipment with the lowest cost of ownership. The 200 Leans modular design provides customers the ability to reconfigure their disk manufacturing systems for rapid technology shifts and evolving technology roadmaps. The 200 Leans compact footprint and increased throughput relative to the legacy MDP-250 systems enables increased output per square foot of factory clean-room space. | |
| Expand Consumables, Spare Parts and Service Offerings. We plan to increase the sale of disk sputtering equipment consumables, spare parts and service in order to increase our revenue opportunity per customer. In addition, growing these offerings will enable us to deepen and enhance our customer relationships. We believe the expected revenue from these offerings will help mitigate the impact of cyclical downturns in the disk sputtering equipment business. We believe that the close proximity of our service center in Singapore to a large number of hard disk drive manufacturers facilities gives us a competitive advantage. We are planning to add additional support centers as required in order to maintain close proximity to our customers media factories as they begin deployment of 200 Lean systems. | |
| Leverage Existing Technology into New Markets. In addition to expansion within our existing customer base, we intend to target other markets where we can apply our expertise in complex manufacturing equipment. Our expertise includes the ability to design and manufacture complex, highly automated vacuum manufacturing systems. We are currently in the concept and feasibility stage of developing a new manufacturing system that addresses a market other than our traditional hard disk drive manufacturing equipment market. We are devoting a significant portion of our research and development resources to this new system. If we conclude that this new system addresses a sufficiently large market and that we can achieve significant profitable market share, then we plan to manufacture and ship a number of evaluation units to key customers. We do not expect that these activities will result in any revenue during 2005 and cannot accurately predict when, if ever, we will generate significant revenue from these activities. |
Our Equipment Products |
200 Lean Disk Sputtering System |
| Modular Design. The 200 Leans modular design allows our customers to accommodate any number of disk manufacturing process steps required by their evolving technology roadmaps. The 200 Lean consists of a front-end robotic module that loads and unloads disks from the system, combined with any number of four-station process modules. Typical configurations of the 200 Lean have from four to five of these four-station process modules, which results in systems capable of 16 to 20 process steps. Additional process modules can be easily added to already installed systems. For example, a customer could buy a three-module (12-station) 200 Lean to manufacture longitudinal media and at a later date upgrade the system to a five-module (20-station) system to manufacture perpendicular media. | |
| Easy to Reconfigure. Magnetic disk manufacturers produce many different designs that have short product life cycles, leading to frequent reconfiguration of disk sputtering equipment. The mechanical design and software control system of the 200 Lean allows rapid reconfiguration of systems by our customers. The 200 Lean is also easily reconfigured to process disks with glass or aluminum substrates of varying diameters and thicknesses. |
5
| Higher Throughput with Smaller Footprint. The 200 Lean offers higher throughput (up to 800 disks per hour) and more process stations in a more compact package than our previous MDP-250 system. We believe that the 200 Lean has the highest disk throughput per square foot of factory space for a system capable of manufacturing perpendicular media. | |
| High Availability. The 200 Lean is designed to operate seven days a week, 24 hours a day with high availability. The 200 Lean can be run continuously for a week or more between preventative maintenance cycles. | |
| Single Disk Processing. The 200 Lean processes each individual disk sequentially through a series of single-disk, vacuum-isolated, process chambers. Single-disk processing assures that each individual disk follows an identical path through the system, which leads to disk-to-disk uniformity since each disk sees the same process conditions. The vacuum-isolated single-disk process also eliminates the disk-to-disk interaction that can occur in systems that process more than one disk in each process chamber. | |
| High-Vacuum Capability. The 200 Lean operates at significantly better vacuum levels compared to the installed base of MDP-250s. Better vacuum levels generally lead to improved magnetic media performance. | |
| Suite of Process Station Options. The 200 Lean offers a wide range of process stations, providing capabilities such as metal deposition, heating, cooling and carbon overcoating onto both aluminum and glass disks. The 200 Lean is also easily configurable to manufacture disks in a variety of diameters and thicknesses. |
MDP-250 Disk Sputtering System |
Equipment Business Sales and Marketing |
6
Equipment Business Customers |
Equipment Business Customer Support |
Equipment Business Competition |
7
Imaging Industry Overview |
Our Imaging Solution |
8
Low Light Imaging Market Opportunity |
Our Imaging Strategy |
9
Our Imaging Products |
Imaging Sales and Marketing |
10
Imaging Business Competition |
11
Our operating results fluctuate significantly from quarter to quarter, which may cause the price of our stock to decline. |
| delays or problems in the introduction and acceptance of our new products, or delivery of existing products; | |
| changes in the demand, due to seasonality and other factors, for the computer systems, storage subsystems and consumer electronics containing disks our customers produce with our systems; and | |
| announcements of new products, services or technological innovations by us or our competitors. |
12
If the projected growth in demand for hard disk drives does not materialize and our customers do not replace or upgrade their installed base of disk sputtering systems, then future sales of our disk sputtering systems will suffer. |
We have a recent history of significant losses and may not regain annual profitability. If we do not establish profitable operations in the future, then our share price is likely to decline. |
We are exposed to risks associated with a highly concentrated customer base. |
13
The majority of our future revenue is dependent on new products. If these new products are not successful, then our results of operations will be adversely affected. |
Demand for capital equipment is cyclical, which subjects our business to long periods of depressed revenues interspersed with periods of unusually high revenues. |
14
We are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 and any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have an adverse effect on our stock price. |
Recently enacted and proposed changes in securities laws and regulations will increase our costs. |
15
Our products are complex, constantly evolving and often must be customized to individual customer requirements. |
Our sales cycle is long and unpredictable, which requires us to incur high sales and marketing expenses with no assurance that a sale will result. |
We operate in an intensely competitive marketplace, and our competitors have greater resources than we do. |
16
Our Imaging business depends heavily on government contracts, which are subject to immediate termination and are funded in increments. The termination of or failure to fund one or more of these contracts could have a negative impact on our operations. |
We may not be successful in maintaining and obtaining the necessary export licenses to conduct operations abroad, and the United States government may prevent proposed sales to foreign customers. |
Our sales of disk sputtering systems are dependent on substantial capital investment by our customers, far in excess of the cost of our products. |
17
Our stock price is volatile. |
| our perceived prospects; | |
| variations in our operating results and whether we achieve our key business targets; | |
| sales or purchases of large blocks of our stock; | |
| changes in, or our failure to meet, our revenue and earnings estimates; | |
| changes in securities analysts buy or sell recommendations; | |
| differences between our reported results and those expected by investors and securities analysts; | |
| announcements of new contracts, products or technological innovations by us or our competitors; | |
| market reaction to any acquisitions, joint ventures or strategic investments announced by us or our competitors; | |
| our high fixed operating expenses, including research and development expenses; | |
| developments in the financial markets; and | |
| general economic, political or stock market conditions in the United States and other major regions in which we do business. |
Changes in existing financial accounting standards or practices or taxation rules or practices may adversely affect our results of operations. |
18
Our future success depends on international sales and the management of global operations |
Our dependence on suppliers for certain parts, some of them sole-sourced, makes us vulnerable to manufacturing interruptions and delays, which could affect our ability to meet customer demand. |
Our business depends on the integrity of our intellectual property rights. |
| any of our pending or future patent applications will be allowed or that any of the allowed applications will be issued as patents; | |
| any of our patents will not be invalidated, deemed unenforceable, circumvented or challenged; | |
| the rights granted under our patents will provide competitive advantages to us; | |
| any of our pending or future patent applications will issue with claims of the scope that we sought, if at all; | |
| other parties will not develop similar products, duplicate our products or design around our patents; or | |
| our patent rights, intellectual property laws or our agreements will adequately protect our intellectual property or competitive position. |
Failure to protect our intellectual property rights adequately could have a material adverse effect on our business. |
19
Our business is based in Northern California, where operating costs are high and competition for employees is intense. |
Business interruptions, such as earthquakes or other natural or man-made disasters, could disrupt our operations and adversely affect our business. |
Changes in demand caused by fluctuations in interest and currency exchange rates may reduce our international sales. |
We routinely evaluate acquisition candidates and other diversification strategies. |
20
We use hazardous materials and are subject to risks of non-compliance with environmental and safety regulations. |
Future sales of shares of our common stock by our officers, directors and affiliates could cause our stock price to decline. |
Anti-takeover provisions in our charter documents and under California law could prevent or delay a change in control, which could negatively impact the value of our common stock by discouraging a favorable merger or acquisition of us. |
Item 2. | Properties |
21
Item 3. | Legal Proceedings |
Item 4. | Submission of Matters to a Vote of Security-Holders |
Name | Age | Position | ||||
Executive Officers and Directors:
|
||||||
Norman H. Pond
|
66 | Chairman of the Board | ||||
Kevin Fairbairn
|
51 | President, Chief Executive Officer and Director | ||||
Verle Aebi
|
50 | President of Photonics Technology Division | ||||
Charles B. Eddy III
|
54 | Vice President, Finance and Administration, Chief Financial Officer, Treasurer and Secretary | ||||
Luke Marusiak
|
42 | Chief Operating Officer | ||||
David Dury(1)(3)
|
56 | Director | ||||
Stanley J. Hill(3)
|
63 | Director | ||||
David N. Lambeth(2)
|
57 | Director | ||||
Robert Lemos(1)(2)
|
64 | Director | ||||
Arthur L. Money(1)
|
65 | Director | ||||
Other Key Officers:
|
||||||
Kimberly Burk
|
39 | Director, Human Resources | ||||
Stephen Gustafson
|
33 | Director, Imaging Operations | ||||
Ralph Kerns
|
58 | Vice President, Business Development, Equipment Products | ||||
Christopher Lane
|
38 | Vice President and General Manager, Commercial Imaging Division |
(1) | Member of Audit Committee |
(2) | Member of Compensation Committee |
(3) | Member of Nominating and Governance Committee |
22
23
Item 5. | Market for Registrants Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities |
High | Low | ||||||||
Fiscal 2003:
|
|||||||||
First Quarter
|
$ | 5.07 | $ | 3.52 | |||||
Second Quarter
|
6.87 | 3.75 | |||||||
Third Quarter
|
9.95 | 6.72 | |||||||
Fourth Quarter
|
17.35 | 9.70 | |||||||
Fiscal 2004:
|
|||||||||
First Quarter
|
$ | 17.92 | $ | 9.86 | |||||
Second Quarter
|
11.39 | 8.47 | |||||||
Third Quarter
|
9.46 | 3.92 | |||||||
Fourth Quarter
|
7.95 | 5.01 |
24
Item 6. | Selected Consolidated Financial Data |
Year Ended December 31, | ||||||||||||||||||||||
2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||||
Consolidated Statement of Operations Data:
|
||||||||||||||||||||||
Net revenues:
|
||||||||||||||||||||||
Systems and components
|
$ | 61,326 | $ | 27,738 | $ | 27,625 | $ | 43,599 | $ | 30,074 | ||||||||||||
Technology development
|
8,289 | 8,556 | 6,159 | 7,885 | 5,975 | |||||||||||||||||
Total net revenues
|
69,615 | 36,294 | 33,784 | 51,484 | 36,049 | |||||||||||||||||
Cost of net revenues:
|
||||||||||||||||||||||
Systems and components
|
45,528 | 19,689 | 20,009 | 30,025 | 20,658 | |||||||||||||||||
Technology development
|
6,856 | 6,032 | 5,150 | 7,988 | 6,022 | |||||||||||||||||
Goodwill write-off
|
| | | | 1,056 | |||||||||||||||||
Inventory provisions
|
1,375 | 743 | 1,316 | 3,716 | 6,323 | |||||||||||||||||
Total cost of net revenues
|
53,759 | 26,464 | 26,475 | 41,729 | 34,059 | |||||||||||||||||
Gross profit
|
15,856 | 9,830 | 7,309 | 9,755 | 1,990 | |||||||||||||||||
Operating expenses:
|
||||||||||||||||||||||
Research and development
|
11,580 | 12,037 | 10,846 | 14,478 | 10,576 | |||||||||||||||||
Selling, general and administrative
|
9,525 | 8,448 | 7,752 | 6,745 | 4,415 | |||||||||||||||||
Restructuring and other
|
| | | | (638 | ) | ||||||||||||||||
Total operating expenses
|
21,105 | 20,485 | 18,598 | 21,223 | 14,353 | |||||||||||||||||
Operating loss
|
(5,249 | ) | (10,655 | ) | (11,289 | ) | (11,468 | ) | (12,363 | ) | ||||||||||||
Interest expense
|
(55 | ) | (1,787 | ) | (2,981 | ) | (2,912 | ) | (3,033 | ) | ||||||||||||
Interest income and other income, net
|
1,070 | 177 | 16,452 | 2,473 | 3,072 | |||||||||||||||||
Income (loss) before income taxes
|
(4,234 | ) | (12,265 | ) | 2,182 | (11,907 | ) | (12,324 | ) | |||||||||||||
Provision for (benefit from) income taxes
|
110 | 38 | (6,592 | ) | 5,029 | | ||||||||||||||||
Net income (loss)
|
$ | (4,344 | ) | $ | (12,303 | ) | $ | 8,774 | $ | (16,936 | ) | $ | (12,324 | ) | ||||||||
Basic earnings per share:
|
||||||||||||||||||||||
Net income (loss)
|
$ | (0.22 | ) | $ | (0.95 | ) | $ | 0.73 | $ | (1.42 | ) | $ | (1.04 | ) | ||||||||
Shares used in per share calculations
|
19,749 | 12,948 | 12,077 | 11,955 | 11,803 | |||||||||||||||||
Diluted earnings per share:
|
||||||||||||||||||||||
Net income (loss)
|
$ | (0.22 | ) | $ | (0.95 | ) | $ | 0.66 | $ | (1.42 | ) | $ | (1.04 | ) | ||||||||
Shares used in per share calculations
|
19,749 | 12,948 | 15,262 | 11,955 | 11,803 | |||||||||||||||||
Consolidated Balance Sheet Data:
|
||||||||||||||||||||||
Cash, cash equivalents and short-term investments
|
$ | 42,034 | $ | 19,507 | $ | 28,457 | $ | 18,157 | $ | 38,403 | ||||||||||||
Working capital
|
53,100 | 22,638 | 31,309 | 27,160 | 41,093 | |||||||||||||||||
Total assets
|
79,622 | 55,975 | 60,298 | 60,165 | 83,936 | |||||||||||||||||
Long-term debt
|
| | 30,568 | 37,545 | 41,245 | |||||||||||||||||
Total shareholders equity
|
69,375 | 30,869 | 10,545 | 1,408 | 17,804 |
25
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
26
27
Revenue Recognition |
Inventories |
Warranty |
28
29
30
31
32
Payments Due by Period
Total
<1 Year
1-3 Years
3-5 Years
>5 Years
(In thousands)
$
16,459
$
3,387
$
5,527
$
3,288
$
4,257
2,143
2,143
$
18,602
$
5,530
$
5,527
$
3,288
$
4,257
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
2005 | 2006 | 2007 | Beyond | Total | Fair Value | |||||||||||||||||||||
Cash equivalents
|
||||||||||||||||||||||||||
Fixed rate amounts
|
$ | 9,980 | | | | $ | 9,980 | $ | 9,976 | |||||||||||||||||
Weighted-average rate
|
2.16 | % | ||||||||||||||||||||||||
Variable rate amounts
|
$ | 5,941 | $ | 5,941 | $ | 5,941 | ||||||||||||||||||||
Weighted-average rate
|
1.96 | % | | | | |||||||||||||||||||||
Short-term investments
|
||||||||||||||||||||||||||
Fixed rate amounts
|
$ | 24,579 | | | | $ | 24,579 | $ | 24,492 | |||||||||||||||||
Weighted-average rate
|
1.87 | % | | | | |||||||||||||||||||||
Long-term investments
|
||||||||||||||||||||||||||
Fixed rate amounts
|
| $ | 8,052 | | | $ | 8,052 | $ | 7,959 | |||||||||||||||||
Weighted average rate
|
| 2.13 | % | | | |||||||||||||||||||||
Total investment portfolio
|
$ | 40,500 | $ | 8,052 | | | $ | 48,552 | $ | 48,368 |
33
Item 8. | Financial Statements and Supplementary Data |
Page | ||||
Report of Independent Registered Public Accounting Firm
|
35 | |||
Consolidated Balance Sheets
|
36 | |||
Consolidated Statements of Operations and Comprehensive Income
(Loss)
|
37 | |||
Consolidated Statement of Shareholders Equity
|
38 | |||
Consolidated Statements of Cash Flows
|
39 | |||
Notes to Consolidated Financial Statements
|
40 |
34
35
/s/ Grant Thornton LLP
Table of Contents
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
Table of Contents
Years Ended December 31,
2004
2003
2002
(In thousands, except
per share amounts)
$
61,326
$
27,738
$
27,625
8,289
8,556
6,159
69,615
36,294
33,784
45,528
19,689
20,009
6,856
6,032
5,150
1,375
743
1,316
53,759
26,464
26,475
15,856
9,830
7,309
11,580
12,037
10,846
9,525
8,448
7,752
21,105
20,485
18,598
(5,249
)
(10,655
)
(11,289
)
(55
)
(1,787
)
(2,981
)
634
269
284
436
(92
)
16,168
(4,234
)
(12,265
)
2,182
110
38
(6,592
)
$
(4,344
)
$
(12,303
)
$
8,774
30
34
67
30
34
67
$
(4,314
)
$
(12,269
)
$
8,841
$
(0.22
)
$
(0.95
)
$
0.73
19,749
12,948
12,077
$
(0.22
)
$
(0.95
)
$
0.66
19,749
12,948
15,262
Table of Contents
Accumulated
Retained
Common Stock
Other
Earnings
Total
Comprehensive
(Accum.
Shareholders
Shares
Amount
Income
Deficit)
Equity
(In thousands)
12,004
$
19,093
$
122
$
(17,807
)
$
1,408
13
19
19
108
273
273
4
4
67
67
8,774
8,774
12,125
$
19,389
$
189
$
(9,033
)
$
10,545
530
2,988
2,988
78
200
200
4,220
29,375
29,375
30
30
34
34
(12,303
)
(12,303
)
16,953
$
51,982
$
223
$
(21,336
)
$
30,869
178
856
856
82
403
403
2,969
41,561
41,561
30
30
(4,344
)
(4,344
)
20,182
$
94,802
$
253
$
(25,680
)
$
69,375
Table of Contents
Years Ended December 31,
2004
2003
2002
(In thousands)
$
(4,344
)
$
(12,303
)
$
8,774
2,031
1,963
2,577
1
87
672
233
1,375
743
1,316
(287
)
(15,428
)
(324
)
(23
)
30
4
86
841
13
9,261
(8,804
)
2,264
(4,309
)
2,028
3,359
161
(152
)
(492
)
(1,749
)
1,657
(890
)
449
(526
)
118
(12,599
)
4,473
(1,120
)
(5,060
)
2,053
(7,954
)
(9,404
)
(10,250
)
820
(45,864
)
13,000
287
17,780
10
7
535
(1,620
)
(2,199
)
(1,480
)
(34,474
)
(1,905
)
16,835
42,820
3,188
292
(1,025
)
(225
)
(7,483
)
41,795
3,188
(7,416
)
31
17
61
(2,052
)
(8,950
)
10,300
19,507
28,457
18,157
$
17,455
$
19,507
$
28,457
$
33
$
1,987
$
2,456
2
2
2
(214
)
(6,369
)
$
706
$
$
(514
)
29,375
Table of Contents
1.
Business and Nature of Operations
2.
Summary of Significant Accounting Policies
Basis of Presentation
Revenue Recognition
Table of Contents
Table of Contents
Trade Receivables and Doubtful Accounts
Warranty
2004
2003
(In thousands)
$
534
$
845
(1,024
)
(909
)
1,994
474
(388
)
124
$
1,116
$
534
December 31,
2004
2003
(In thousands)
$
909
$
534
207
$
1,116
$
534
Table of Contents
Guarantees
International Distribution Costs
Customer Advances
Cash, Cash Equivalents and Short-term Investments
December 31,
December 31,
2004
2003
(In thousands)
$
28,017
$
4,614
$
32,631
$
$
24,579
$
8,052
$
32,631
$
$
32,450
$
Table of Contents
Valuation of Long-lived and Intangible Assets
significant underperformance relative to expected historical or
projected future operating results;
significant changes in the manner of our use of the acquired
assets or the strategy for our overall business; and
significant negative industry or economic trends.
Prototype Costs
Foreign Exchange Contracts
Financial Instruments
Table of Contents
Inventories
December 31,
2004
2003
(In thousands)
$
5,624
$
3,306
3,496
4,371
6,255
5,431
$
15,375
$
13,108
Property, Plant and Equipment
Intangible Assets
Comprehensive Income
Table of Contents
Employee Stock Plans
Table of Contents
2004
2003
2002
(In thousands, except
per share data)
$
(4,344
)
$
(12,303
)
$
8,774
(1,378
)
(683
)
(157
)
$
(5,722
)
$
(12,986
)
$
8,617
$
(0.22
)
$
(0.95
)
$
0.73
$
(0.29
)
$
(1.00
)
$
0.71
$
(0.22
)
$
(0.95
)
$
0.66
$
(0.29
)
$
(1.00
)
$
0.65
Financial Presentation
Net income (loss) per share
2004
2003
2002
(In thousands)
$
(4,344
)
$
(12,303
)
$
8,774
1,338
$
(4,344
)
$
(12,303
)
$
10,112
19,749
12,948
12,077
137
3,048
3,185
19,749
12,948
15,262
(1)
Diluted EPS for the twelve-month periods ended December 31,
2004 and 2003 excludes as converted treatment of the
convertible notes, as their inclusion would be anti-dilutive.
The number of as converted shares excluded from the
twelve-month periods ended December 31, 2004 and 2003 was
Table of Contents
8,568 and 3,619,134, respectively. $29.4 million of the
notes were converted in the fourth quarter of 2003 and the
$1.0 million balance of the notes was repaid in March 2004.
(2)
Potentially dilutive securities, consisting of shares issuable
upon exercise of employee stock options, are excluded from the
calculation of diluted EPS as their effect would be
anti-dilutive. The weighted average number of employee stock
options excluded from the twelve-month periods ended
December 31, 2004, 2003 and 2002 was 1,605,593, 1,731,305
and 1,328,278, respectively.
Use of Estimates
New Accounting Pronouncements
Table of Contents
3.
Concentrations
Credit Risk and Significant Customers
Table of Contents
Products
4.
Sale of Rapid Thermal Processing Product Line
$
18,000
(594
)
(1,911
)
163
(10
)
(220
)
$
15,428
5.
Equity Investments
601 California Avenue LLC
Table of Contents
6.
Commitments
$
3,387
3,486
2,042
1,605
1,682
4,257
$
16,459
7.
Employee Benefit Plan
8.
Convertible Notes
Table of Contents
9.
Segment Reporting
Segment Description
Segment Profit or Loss and Segment Assets
Business Segment Net Revenues
2004
2003
2002
(In thousands)
$
60,490
$
26,748
$
27,100
9,125
9,546
6,684
$
69,615
$
36,294
$
33,784
Table of Contents
Business Segment Profit & Loss
2004
2003
2002
(In thousands)
$
(377
)
$
(3,993
)
$
(5,139
)
(4,114
)
(4,155
)
(3,829
)
(758
)
(2,507
)
(2,321
)
(5,249
)
(10,655
)
(11,289
)
(55
)
(1,787
)
(2,981
)
634
269
284
436
(92
)
16,168
$
(4,234
)
$
(12,265
)
$
2,182
(1)
Includes inventory provisions of $1,263,000, $451,000 and
$847,000 in 2004, 2003 and 2002, respectively.
(2)
Includes inventory provisions of $112,000, $292,000 and $469,000
in 2004, 2003 and 2002, respectively.
Business Segment Assets
2004
2003
(In thousands)
$
19,407
$
25,462
7,135
7,702
53,080
22,811
$
79,622
$
55,975
Business Segment Property, Plant &
Equipment
Additions
2004
2003
(In thousands)
$
1,024
$
1,196
900
788
402
310
$
2,326
$
2,294
(1)
Includes inventory transferred to fixed assets of $706 in 2004.
Depreciation
2004
2003
2002
(In thousands)
$
561
$
456
$
1,346
1,188
1,240
860
282
267
371
$
2,031
$
1,963
$
2,577
Table of Contents
Geographic Area Net Trade Revenues
2004
2003
2002
(In thousands)
$
22,545
$
13,133
$
16,332
46,452
23,155
17,150
618
301
6
1
$
69,615
$
36,294
$
33,784
10.
Shareholders Equity
Stock Option/ Stock Issuance Plans
Table of Contents
2004
2003
2002
Weighted-Average
Weighted-Average
Weighted-Average
Options
Exercise Price
Options
Exercise Price
Options
Exercise Price
1,426,285
$
5.26
1,850,082
$
5.02
1,802,022
$
5.22
618,000
8.30
259,000
8.03
429,800
3.19
(177,371
)
4.83
(530,248
)
5.64
(13,400
)
1.46
(153,959
)
9.29
(152,549
)
5.73
(368,340
)
4.00
1,712,955
6.04
1,426,285
5.26
1,850,082
5.02
906,353
$
5.89
840,518
$
5.67
1,188,382
$
5.81
$
4.39
$
3.64
$
1.58
Options Outstanding
Options Exercisable
Number
Number
Outstanding as of
Weighted Average
Exercisable as of
December 31,
Remaining
Weighted Average
December 31,
Weighted Average
Range of Exercise Prices
2004
Contractual Life
Exercise Price
2004
Exercise Price
371,780
6.87 yrs
$
2.80
213,933
$
2.78
516,250
7.97 yrs
$
4.04
215,870
$
4.05
470,175
4.57 yrs
$
6.40
344,800
$
6.35
219,000
9.06 yrs
$
9.92
82,625
$
10.43
123,250
9.02 yrs
$
14.39
36,625
$
15.18
12,500
1.37 yrs
$
21.25
12,500
$
21.25
1,712,955
6.97 yrs
$
6.04
906,353
$
5.89
11.
Income Taxes
Years Ended December 31,
2004
2003
2002
$
$
$
(6,585
)
(6,585
)
115
2
2
115
2
2
(5
)
36
(9
)
$
110
$
38
$
(6,592
)
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December 31,
2004
2003
$
958
$
1,041
1,501
1,431
3,388
3,803
375
21
698
557
12,010
9,046
1,063
836
19,993
16,735
(19,943
)
(16,685
)
$
50
$
50
$
50
$
50
$
50
$
50
$
$
Years Ended December 31,
2004
2003
2002
$
(1,472
)
$
(4,159
)
$
766
75
(434
)
109
(44
)
(142
)
(1,751
)
73
(181
)
3,258
4,602
(7,144
)
$
110
$
38
$
(6,592
)
Table of Contents
12.
Other Accrued Liabilities
December 31,
2004
2003
(In thousands)
$
909
$
534
865
54
377
1,290
792
765
$
2,943
$
2,643
13.
Quarterly Consolidated Results of Operations (Unaudited)
Three Months Ended
March 27,
June 26,
Sept. 25,
Dec. 31,
2004
2004
2004
2004
(In thousands, except per share data)
As restated
As restated
As restated
As restated
$
6,435
$
17,764
$
35,029
$
10,387
1,619
5,680
6,410
2,147
(3,360
)
677
1,371
(3,032
)
$
(0.18
)
$
0.03
$
0.07
$
(0.15
)
(0.18
)
0.03
0.07
(0.15
)
Three Months Ended
March 29,
June 28,
Sept. 27,
Dec. 31,
2003
2003
2003
2003
(In thousands, except per share data)
$
12,015
$
4,587
$
7,616
$
12,076
1,160
1,119
2,880
4,671
(4,006
)
(4,797
)
(2,899
)
(601
)
$
(0.33
)
$
(0.39
)
$
(0.24
)
$
(0.04
)
(0.33
)
(0.39
)
(0.24
)
(0.04
)
(1)
Net income (loss) for the three months ended December 31,
2003 includes a gain of $287,000 from the sale of the Rapid
Thermal Processing product line.
14.
Restatement
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Six
Nine
Three Months Ended
Months
Months
Ended
Ended
March 27,
June 26,
Sept. 25,
Dec. 31,
June 26,
Sept. 25,
2004
2004
2004
2004
2004
2004
$
6,499
$
17,980
$
34,871
$
10,265
$
24,479
$
59,350
6,435
17,764
35,029
10,387
24,199
59,228
(64
)
(216
)
158
122
(280
)
(122
)
4,834
12,189
28,496
8,240
17,023
45,519
4,816
12,084
28,619
8,240
16,900
45,519
(18
)
(105
)
123
(123
)
246
307
271
254
553
824
249
303
264
254
552
816
3
(4
)
(7
)
(1
)
(8
)
(3,317
)
792
1,343
(3,154
)
(2,525
)
(1,182
)
(3,360
)
677
1,371
(3,032
)
(2,683
)
(1,312
)
(43
)
(115
)
28
122
(158
)
(130
)
(0.18
)
0.04
0.07
(0.16
)
(0.13
)
(0.06
)
(0.18
)
0.03
0.07
(0.15
)
(0.14
)
(0.07
)
(0.01
)
0.01
(0.01
)
(0.01
)
(0.18
)
0.04
0.07
(0.16
)
(0.13
)
(0.06
)
(0.18
)
0.03
0.07
(0.15
)
(0.14
)
(0.07
)
(0.01
)
0.01
(0.01
)
(0.01
)
Table of Contents
Item 9. | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure |
Item 9A. | Controls and Procedures |
Imaging Business - We determined during the course of our year-end audit that projected, rather than approved, billing rates were used to calculate revenue for cost-plus-fixed-fee technology development contracts. In addition, journal entries for revenue recognition and the related documentation were not subjected to adequate review and approval. | |
We also determined during the course of our year-end audit that firm fixed-price technology development contracts were not being accounted for in accordance with U.S. GAAP for firm fixed-price contracts. This would have resulted in an overstatement of revenue and operating profit had it not been discovered prior to the public release of our 2004 earnings. During the first quarter of 2005, we retrained our accounting staff in proper application of revenue recognition policies and implemented policies regarding analyzing contracts for proper revenue recognition accounting. | |
We determined during the course of our year-end audit that a receivable greater than one year old had not been reserved as a bad debt. During the fourth quarter of 2004, we implemented a bad debt policy that required receivables aged more than one year to be fully reserved. Our review did not include unbilled receivables and we did not establish the appropriate bad debt reserve. This would have resulted |
59
in an understatement of bad debt expense and an overstatement of operating profit had it not been discovered prior to the public release of our earnings. We have changed our process for evaluating accounts receivable to ensure that all balances are reviewed for collectibility on a regular basis. | |
Approval of Inventory Cycle Count Adjustments We routinely cycle count our stockroom inventories and make corrections to our inventory balances as a result of those cycle counts. We determined late in 2004 that the cycle count adjustments were being made, but without written approval by management as required by our internal control policies. Management authorization of cycle count adjustments is necessary to reduce the potential of an employee using a cycle count adjustment to conceal a theft of inventory. The requirement for the appropriate management approval of all cycle count adjustments was re-emphasized in December of 2004. | |
Documentation of Excess and Obsolete Inventory Reserve Calculation Review and Approval We determine, on a quarterly basis, the level of reserves required related to excess and obsolete inventory. Excess and obsolete inventory reserves are an estimate which requires significant judgment on the part of management. Our Chief Financial Officer reviews and approves these estimates on a quarterly basis. Given the significant nature of the estimate, we determined during the course of our internal controls evaluations that improved documentation of those reviews was needed. We will document the quarterly management reviews of excess and obsolete calculations beginning with the reviews performed in the first quarter of 2005. |
/s/ Kevin Fairbairn | /s/ Charles B. Eddy III |
60
61
62
The lack of appropriate internal controls over the Imaging
Business,
The approval of inventory cycle count adjustments, and
The documentation related to the companys quarterly review
and approval of excess and obsolete inventory reserves.
Table of Contents
/s/ GRANT THORNTON LLP
Table of Contents
Item 9B. | Other Information |
Item 10. | Directors and Executive Officers of the Registrant |
Item 11. | Executive Compensation |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
(a) | (b) | (c) | ||||||||||
Number of Securities | Number of Securities | |||||||||||
to be Issued upon | Weighted-Average | Remaining Available | ||||||||||
Exercise of | Exercise Price of | for Future Issuance | ||||||||||
Outstanding Options, | Outstanding Options, | Under Equity | ||||||||||
Plan Category | Warrants and Rights | Warrants and Rights | Compensation Plans(1) | |||||||||
Equity compensation plans approved by security holders(2)
|
1,712,955 | $ | 6.04 | 1,121,290 | ||||||||
Equity compensation plans not approved by security holders
|
| $ | | | ||||||||
Total
|
1,712,955 | $ | 6.04 | 1,121,290 | ||||||||
(1) | Excludes securities reflected in column (a). |
(2) | Included in the column (c) amount are 276,013 shares available for future issuance under Intevacs 2003 Employee Stock Purchase Plan. |
Item 13. | Certain Relationships and Related Transactions |
63
Item 14. | Principal Accountant Fees and Services |
Item 15. | Exhibits and Financial Statement Schedules |
Report of Grant Thornton LLP, Independent Registered Public Accounting Firm | |
Consolidated Balance Sheets December 31, 2004 and 2003 | |
Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2004, 2003 and 2002 | |
Consolidated Statement of Shareholders Equity for the years ended December 31, 2004, 2003 and 2002 | |
Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002 | |
Notes to Consolidated Financial Statements Years Ended December 31, 2004, 2003 and 2002 |
Schedule II Valuation and Qualifying Accounts |
Exhibit | ||||
Number | Description | |||
***2 | .1 | Asset Purchase Agreement between Intevac, Inc. and Photon Dynamics, Inc. dated as of October 22, 2002 | ||
*3 | .1 | Amended and Restated Articles of Incorporation of the Registrant | ||
*3 | .2 | Bylaws of the Registrant | ||
*****4 | .4 | Registration Rights Agreement, dated January 16, 2004, between the Company, Redemco, LLC and Foster City LLC | ||
*10 | .1+ | The Registrants 1991 Stock Option/Stock Issuance Plan | ||
*10 | .2+ | The Registrants 1995 Stock Option/Stock Issuance Plan, as amended | ||
*10 | .3+ | The Registrants Employee Stock Purchase Plan, as amended | ||
******10 | .4+ | The Registrants 2004 Equity Incentive Plan | ||
**10 | .5 | Lease, dated February 5, 2001 regarding the space located at 3560, 3570 and 3580 Bassett Street, Santa Clara, California | ||
10 | .6 | First Amendment to Lease, dated February 23, 2004 regarding the space at 3560, 3570 and 3580 Bassett Street, Santa Clara, California | ||
*10 | .7 | 601 California Avenue LLC Limited Liability Operating Agreement, dated July 28, 1995 | ||
*10 | .8+ | The Registrants 401(k) Profit Sharing Plan |
64
Exhibit | ||||
Number | Description | |||
****10 | .9+ | The Registrants 2005 Executive Incentive Plan | ||
21 | .1 | Subsidiaries of the Registrant | ||
23 | .1 | Consent of Independent Registered Public Accounting Firm | ||
24 | .1 | Power of Attorney (see page 66) | ||
31 | .1 | Certification of President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
31 | .2 | Certification of Vice-President, Finance and Administration, Chief Financial Officer, Treasurer and Secretary Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
32 | .1 | Certifications Pursuant to U.S.C. 1350, adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
*
|
Previously filed as an exhibit to the Registration Statement on Form S-1 (No. 33-97806) | |
**
|
Previously filed as an exhibit to the Companys Annual Report on Form 10-K for the year ended December 31, 2000 | |
***
|
Previously filed as an exhibit to the Companys Report on Form 8-K filed November 14, 2002 | |
****
|
Previously filed as an exhibit to the Companys Report on Form 8-K filed February 7, 2005 | |
*****
|
Previously filed as an exhibit to the Companys Annual Report on Form 10-K for the year ended December 31, 2003 | |
******
|
Previously filed as an Exhibit to the Companys Proxy Statement filed on March 31, 2004 | |
+
|
Management compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 15(c) of Form 10-K |
65
INTEVAC, INC. |
By: | /s/ CHARLES B. EDDY III |
|
|
Charles B. Eddy, III | |
Vice President, Finance and Administration, | |
Chief Financial Officer, Treasurer and Secretary | |
(Principal Financial and Accounting Officer) |
Signature | Title | Date | ||||
/s/
KEVIN FAIRBAIRN
|
President, Chief Executive Officer and Director (Principal Executive Officer) | March 31, 2005 | ||||
/s/
NORMAN H. POND
|
Chairman of the Board | March 31, 2005 | ||||
/s/
CHARLES B.
EDDY III
|
Vice President, Finance and Administration, Chief Financial Officer Treasurer and Secretary (Principal Financial and Accounting Officer) | March 31, 2005 | ||||
/s/
DAVID DURY
|
Director | March 31, 2005 | ||||
/s/
STANLEY J. HILL
|
Director | March 31, 2005 |
66
Signature | Title | Date | ||||
/s/
DAVID N. LAMBETH
|
Director | March 31, 2005 | ||||
/s/
ROBERT LEMOS
|
Director | March 31, 2005 | ||||
/s/
ARTHUR L. MONEY
|
Director | March 31, 2005 |
67
Additions (Reductions)
Charged
Charged
Balance at
(Credited) to
(Credited)
Balance at
Beginning
Costs and
to Other
Deductions-
End of
Description
of Period
Expenses
Accounts
Describe
Period
(In thousands)
$
225
$
73
$
$
29
(1)
$
269
12,661
1,316
(229
)
4,189
(2)
9,559
$
269
$
(143
)
$
6
$
110
(1)
$
22
9,559
743
588
698
(2)
10,192
$
22
$
218
$
(23
)
$
$
217
10,192
1,375
(121
)
1,583
(2)
9,863
(1) | Write-offs of amounts deemed uncollectible. |
(2) | Write-off of inventory having no future use or value to the Company |
68
Exhibit | ||||
Number | Description | |||
***2 | .1 | Asset Purchase Agreement between Intevac, Inc. and Photon Dynamics, Inc. dated as of October 22, 2002 | ||
*3 | .1 | Amended and Restated Articles of Incorporation of the Registrant | ||
*3 | .2 | Bylaws of the Registrant | ||
*****4 | .4 | Registration Rights Agreement, dated January 16, 2004, between the Company, Redemco, LLC and Foster City LLC | ||
*10 | .1+ | The Registrants 1991 Stock Option/Stock Issuance Plan | ||
*10 | .2+ | The Registrants 1995 Stock Option/Stock Issuance Plan, as amended | ||
*10 | .3+ | The Registrants Employee Stock Purchase Plan, as amended | ||
******10 | .4+ | The Registrants 2004 Equity Incentive Plan | ||
**10 | .5 | Lease, dated February 5, 2001 regarding the space located at 3560, 3570 and 3580 Bassett Street, Santa Clara, California | ||
10 | .6 | First Amendment to Lease, dated February 23, 2004 regarding the space at 3560, 3570 and 3580 Bassett Street, Santa Clara, California | ||
*10 | .7 | 601 California Avenue LLC Limited Liability Operating Agreement, dated July 28, 1995 | ||
*10 | .8+ | The Registrants 401(k) Profit Sharing Plan | ||
****10 | .9+ | The Registrants 2005 Executive Incentive Plan | ||
21 | .1 | Subsidiaries of the Registrant | ||
23 | .1 | Consent of Independent Registered Public Accounting Firm | ||
24 | .1 | Power of Attorney (see page 65) | ||
31 | .1 | Certification of President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
31 | .2 | Certification of Vice-President, Finance and Administration, Chief Financial Officer, Treasurer and Secretary Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
32 | .1 | Certifications Pursuant to U.S.C. 1350, adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
*
|
Previously filed as an exhibit to the Registration Statement on Form S-1 (No. 33-97806) | |
**
|
Previously filed as an exhibit to the Companys Annual Report on Form 10-K for the year ended December 31, 2000 | |
***
|
Previously filed as an exhibit to the Companys Report on Form 8-K filed November 14, 2002 | |
****
|
Previously filed as an exhibit to the Companys Report on Form 8-K filed February 7, 2005 | |
*****
|
Previously filed as an exhibit to the Companys Annual Report on Form 10-K for the year ended December 31, 2003 | |
******
|
Previously filed as an Exhibit to the Companys Proxy Statement filed on March 31, 2004 | |
+
|
Management compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 15(c) of Form 10-K |
69
Exhibit 10.6
FIRST AMENDMENT TO LEASE
This First Amendment to Lease (Amendment), is made and entered into this 23 rd day of February, 2004 by and between Mission West Properties, L.P. III, a Delaware limited partnership (Mission or Lessor) and Intevac Corporation, a California corporation (Lessee).
RECITALS
A. | Lessee currently leases from Lessor approximately 119,583 square feet of space located at 3560-3580 Bassett Street, Santa Clara, California (the Premises) pursuant to that certain lease dated February 5, 2001 (the Lease). | |||
B. | The term of the Lease expires on March 31, 2007. | |||
C. | Lessee has elected and Mission has agreed to extend the term of Lease until March 31, 2012 subject to the terms and conditions set forth herein: |
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties hereto agree to amend the Lease as follows:
1. |
TERM: The term of the Lease is hereby extended for five (5) years until March 31, 2012..
|
|||
2. | BASIC RENT: The base rent shall be adjusted to and payable on 4/1/07 as follows: |
Base rent | Estimated CAC | Total | ||||||||||
4/1/07 through 3/31/08
|
$ | 113,604 | $ | 2,200 | $ | 115,804 |
*CAC subject to annual adjustment.
Monthly base rent to increase each year by the lesser of: (i) $.05 per square foot per month or (ii) the increase in the Bay Area Consumer Price Index, during the prior year on April 1 of each year during this extended term over the prior years rent rounded to the nearest dollar. (Example if consumer price increased by 7% from 4/1/07 to 3/31/08 then the amount of increase would be lesser of $.05 +.95 = $1.00 or $.95 x 107% = $1.0165 times 119,583.)
3. | COMMON AREA CHARGES: Lessee shall continue to pay to Mission its share of common area charges as provided for in the Lease during the extended term. | |||
4. | BROKERAGE COMMISSION: Each party represents and warrants to the other party that it has not utilized or contacted a real estate broker or finder with respect to this Amendment and each party agrees to indemnify and hold each other harmless against any claim, cost, liability or cause of action asserted by any broker or finder claiming through either party. Mission and Lessee agree that Mission shall not be obligated to pay any broker leasing commissions, consulting fees, finders fees or any other fees or commissions arising out of the negotiation and execution of this Amendment or relating to any extended term of the Lease or to any expansion or relocation of the Premises. |
5. | LESSEE CERTIFICATION: As a condition of Lessors agreeing to this Amendment, Lessee | |||
hereby certifies and confirms that as of the date of this Amendment, Lessee is not in violation of any government regulations, ordinances, rules or laws, including those pertaining to Hazardous Waste and/or Hazardous Materials. Lessee is accepting Premises in an as is condition. | ||||
6. | RATIFICATION OF LEASE: Except as modified herein, the Lease is hereby ratified, approved and confirmed upon all the terms, covenants, and conditions. | |||
7. | AUTHORITY: Each party executing this Amendment represents and warrants that he or she is duly authorized to execute and deliver this Amendment. If executed on behalf of a corporation, that this Amendment is executed in accordance with the by-laws of said corporation (or a partnership that this Amendment is executed in accordance with the partnership agreement of such partnership), that no other partys approval or consent to such execution and delivery is required, and that this Amendment is binding upon said individual, corporation (or partnership) as the case may be in accordance with its terms. |
MISSION WEST PROPERTIES, L.P. III,
a Delaware limited partnership |
INTEVAC CORPORATION,
a Delaware corporation |
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|
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By:
|
/s/ Carl E. Berg | By: | /s/ Charles B. Eddy III | |||
|
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|
Carl E. Berg | Charles B. Eddy III | ||||
|
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Title: CEO of the General Partner | Title: CFO | |||||
|
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Date: 2/24/04 | Date: 2/23/04 |
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
1. | Lotus Technologies, Inc. California | |||
2. | Intevac Foreign Sales Corporation Barbados | |||
3. | Intevac Asia Private Limited Singapore | |||
4. | Intevac Malaysia Sdn Bhd Malaysia | |||
5. | IRPC, Inc. California |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our reports dated March 22, 2005, accompanying the consolidated financial
statements and managements assessment of the effectiveness of internal control over financial
reporting included in the Annual Report of Intevac, Inc. on Form 10-K for the year ended December
31, 2004. We hereby consent to the incorporation by reference of said reports in the Registration
Statements (Form S-8 Nos. 33-99648, 333-35801, 333-65421, 333-96529, 333-50166, 333-106960 and
333-109260) pertaining to the 1995 Stock Option/Stock Issuance Plan, the Employee Stock Purchase
Plan and the 2003 Employee Stock Purchase Plan and in the Registration Statements (Form S-3 No.
333-24275, No. 333-111342 and No. 333-112497).
/s/ GRANT THORNTON LLP
San Jose, California
March 22, 2005
Exhibit 31.1
Certifications
I, Kevin Fairbairn certify that:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal controls over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation;
and
(d) Disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter (the registrants
fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants internal control over financial
reporting; and
(a) All significant deficiencies and material weaknesses in the design or operation of
internal controls over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrants internal control over financial reporting.
Date: March 31, 2005
1.
I have reviewed this Annual Report on Form 10-K of Intevac, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
2.
Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report;
4.
The registrants other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
5.
The registrants other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
functions):
/s/ KEVIN FAIRBAIRN
Kevin Fairbairn
President, Chief Executive Officer and Director
Exhibit 31.2
Certifications
I, Charles B. Eddy certify that:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal controls over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation;
and
(d) Disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter (the registrants
fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrants internal control over financial
reporting; and
(a) All significant deficiencies and material weaknesses in the design or operation of
internal controls over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrants internal control over financial reporting.
Date: March 31, 2005
1.
I have reviewed this Annual Report on Form 10-K of Intevac, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report;
4.
The registrants other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
5.
The registrants other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
functions):
/s/ CHARLES B. EDDY III
Charles B. Eddy III
Vice President, Finance and Administration,
Chief Financial Officer, Treasurer and Secretary
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
I, Kevin Fairbairn, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of Intevac, Inc. on Form 10-K
for the period ended December 31, 2004 fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-K
fairly presents in all material respects the financial condition and results of operations of
Intevac, Inc.
I, Charles B. Eddy III, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of Intevac, Inc. on Form 10-K
for the period ended December 31, 2004 fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-K
fairly presents in all material respects the financial condition and results of operations of
Intevac, Inc.
A signed original of this written statement required by Section 906 has been provided to
Intevac, Inc. and will be retained by Intevac, Inc. and furnished to the Securities and Exchange
Commission or its staff upon request.
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
By:
/s/ KEVIN FAIRBAIRN
Name:
Kevin Fairbairn
Title:
President, Chief Executive Officer and Director
By:
/s/ CHARLES B. EDDY III
Name:
Charles B. Eddy III
Title:
Vice President, Finance and Administration,
Chief Financial Officer, Treasurer and Secretary