RE: 10-Q Highlights
(Thanks to "SyQuested" on the Yahoo! SYQT thread for posting the following highlights from the current 10-Q):
As of July 31, 1998, 128,492,371 shares of the Registrant's common stock, $0.0001 par value, were issued and outstanding.
Adverse market conditions in the personal computer and data storage industries have resulted in lower than anticipated unit shipments and sales prices of the Company's products. As a result, the Company has experienced significant revenue shortfalls, negative cash flow, a lack of liquidity and excess inventory. The Company anticipates continuing losses during its fourth quarter ending September 30, 1998, commensurate with the losses incurred during the first three quarters of fiscal 1998.
The Company's existing capital resources are insufficient to fund operations through the remainder of its fiscal year ending September 30, 1998. The Company will look to proceeds from the exercise of outstanding warrants issued in connection with previously completed financings, or from sales of common or preferred stock, or debt securities to fund operations until market conditions improve. The Company has no agreements with investors or potential investors to exercise warrants or sell equity or debt securities, however, and there is no assurance that the Company will be able to secure such additional financing. Without such additional funding, there is no assurance that the Company will be able to continue as a going concern.
From March through June 1998, the Company sold a total of 17,475,736 shares of common stock to certain investors at par value as incentives for the investors to exercise their outstanding warrants.
Inventories are comprised of the following:
JUNE 30, SEPTEMBER 30,
1998 1997
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(IN THOUSANDS)
Raw materials $14,307 $13,675
Work in process 6,486 6,840
Finished goods 25,859 6,222
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$46,652 $26,737
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The Company's lender has verbally notified the Company that a written waiver of the Financial Covenants for the Company's third quarter ended June 30, 1998, will be provided if the Company does not comply with the Financial Covenants. Without such a waiver, the Company would be in default under its line of credit.
CURRENT YEAR PRIOR YEAR
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Q3 Q3
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Legacy products 3.5% 26.5%
EZ Flyer and SyJet products 25% 73.5%
SparQ products 71.5% 0%
Total 100% 100%
The Company's current negative cash flow position and liquidity problems could jeopardize existing terms under which SyQuest purchases key components from suppliers. The Company has exceeded 60 days in its payables to several suppliers, and consequently faces the risk that such suppliers could again require cash on delivery payments.
Assuming the conversion of all outstanding preferred stock, the exercise of outstanding warrants and the fulfillment of other existing commitments to issue common stock, approximately 89.5 million additional shares of common stock would be issued based on existing preferred stock and warrant balances outstanding as of July 31, 1998. Total shares outstanding at that date were approximately 128 million, providing a total of 217.5 million common shares outstanding if all convertible preferred stock is converted and warrants and options are exercised.
The continuing listing requirements for inclusion on the Nasdaq National Market require that the Company's securities trade at over $1.00 per share. If the Company's common stock closes below $1.00 for 30 consecutive trading days, common stock will be delisted from the Nasdaq National Market unless the stock closes at or above $1.00 for at least 10 consecutive trading days during the 90 day period following such notification. In addition, there are other minimum listing requirements that the Company must continually satisfy.
The Company has entered a Stipulation of Settlement with the parties to the State Court Lawsuits and a separate Stipulation of Settlement with the parties to the Derivative Lawsuit. The State Court has preliminarily approved the settlement of the State Court Lawsuits. A hearing for final approval of both Stipulations of settlement has been scheduled for October 14, 1998, before the Alameda Superior Court. Each Stipulation of Settlement (which can be obtained from the Company on request) contains a number of conditions including, but not limited to, the dismissal with prejudice of such conditions have been met.
Regards - Dale |
