8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) December 19, 2005

SIMPLETECH, INC.

(Exact name of registrant as specified in charter)

California	000-31623	33-0399154
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

3001 Daimler Street, Santa Ana, California	92705-5812
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (949) 476-1180

N/A

(Former Name or Former Address, if Changed Since Last Report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 1.01.  Entry into a Material Definitive Agreement.

On December 19, 2005, the Board of Directors of SimpleTech, Inc. (“SimpleTech” or the “Company”) approved the acceleration of the vesting of all currently unvested stock options awarded under its 2000 Stock Incentive Plan. As a result of this action, options to purchase approximately 5.6 million shares of common stock became exercisable effective December 19, 2005, representing approximately 56% of the Company’s total current outstanding options. All other terms and conditions applicable to such options, including the exercise prices, remain unchanged.

The decision to accelerate vesting of these options was made primarily to avoid recognizing the related compensation expense in the Company’s future consolidated financial statements with respect to these unvested stock options upon adopting Financial Accounting Standards Board Statement No. 123(R) “Share-Based Payment” (“SFAS 123(R)”). Adoption of SFAS 123(R) is required on or before January 1, 2006, and will require that compensation expense associated with stock options unvested at December 31, 2005 be recognized in the Company’s consolidated statement of operations. It is anticipated that the accelerated vesting of these options will eliminate potential pre-tax compensation expense recognition in future periods beginning January 1, 2006 of approximately $9.4 million, of which approximately $3.8 million would have been incurred during the year ending December 31, 2006. Based upon the December 19, 2005 closing price of the Company’s common stock on the Nasdaq National Market of $3.79 per share, our historical employee turnover rates and estimate of future employee separation, this action is expected to result in a non-cash stock compensation expense of approximately $374,000 in the fourth quarter of 2005.

The following table summarizes the outstanding options subject to accelerated vesting:

	Aggregate Number of Shares Issuable Under Accelerated Options (#)	Weighted Average Exercise Price per Share ($)		Value of In-the-Money Accelerated Options at December 19, 2005 ($) (1) (3)
Total Non-Employee Directors	170,000	$	3.59	$	34,320
Total Named Executive Officers (2)	1,475,001	$	3.53	$	427,951
Total All Other Employees	3,998,831	$	4.02	$	888,378

(1) ”Value of In-the-Money Accelerated Options” is based upon the market price of $3.79 per share, determined on the basis of the closing selling price per share of the Company’s common stock on the Nasdaq National Market on December 19, 2005, less the option exercise price payable per share. Options are “In-the-Money” if the fair market value of the underlying options exceeds the exercise price of the option.

(2) Consists of those persons named in the Summary Compensation Table in the Company’s 2005 Proxy Statement filed with the Securities and Exchange Commission.

(3) Of the total “Value of In-the-Money Accelerated Options” at December 19, 2005, the Company expects to recognize a compensation charge of $374,000 after considering expected employee turnover rates to reflect, absent the acceleration, the award that would have been forfeited (unvested) pursuant to the original terms. Based on actual results, the Company will reevaluate the expected employee turnover rates, and adjustments to compensation expense may be required in future periods.

In light of the new accounting guidance provided in SFAS 123(R), to be adopted by the Company at the beginning of its 2006 fiscal year, the efficacy of granting of stock options in the future as an appropriate form of incentive compensation is under active consideration by management and the Board of Directors.

On December 22, 2005, SimpleTech issued a press release disclosing additional information relating to its acceleration of options. A copy of this press release is filed herewith as Exhibit 99.1 and is incorporated herein by reference.

ITEM 1.02.  Termination of a Material Definitive Agreement.

On December 19, 2005, the Board of Directors of SimpleTech terminated the Company’s Employee Stock Purchase Plan (the “ESPP”) effective as of such date. The ESPP, a broad-based employee benefit plan, allowed eligible employees an opportunity to purchase a limited number of shares of the Company’s common stock at semi-annual intervals through accumulated payroll deductions of up to 15% of the participant’s compensation. The purchase price per share is equal to 85% of the fair market value per share on the start date of the offering period in which the participant is enrolled or, if lower, 85% of the fair market value per share on the last date of the offering period. No participants have been enrolled in the ESPP since the end of the ESPP’s last offering period on July 30, 2005. The decision to terminate the ESPP was made primarily to avoid recognizing the related compensation expense associated with the shares issued under the ESPP in the Company’s future consolidated financial statements as a result of the Company’s adoption of SFAS 123(R) on January 1, 2006.

ITEM 9.01.  Financial Statements and Exhibits.

(d) Exhibits.

The following exhibit is furnished as part of this report:

Exhibit Number	Description of Exhibit
99.1	Press Release of SimpleTech, Inc., dated December 22, 2005, announcing stock option acceleration.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SimpleTech, Inc.
Date: December 22, 2005	By:	/s/ Dan Moses
		Dan Moses Chief Financial Officer

Exhibit Index

Exhibit Number	Description of Exhibit
99.1	Press Release of SimpleTech, Inc., dated December 22, 2005, announcing stock option acceleration.

EX-99.1

Exhibit 99.1

SimpleTech Acts to Reduce Future Non-Cash Expense

Prior to Adoption of FASB Statement No. 123(R)

- Company Accelerates Vesting of All Unvested Stock Options and

Terminates Employee Stock Purchase Plan-

SANTA ANA, Calif., Dec. 22, 2005 (PRIMEZONE) – SimpleTech, Inc. (Nasdaq: STEC), a designer, manufacturer and marketer of custom and open-standard memory and storage solutions based on Flash memory, DRAM and hard disk drive technologies, today announced that its Board of Directors approved the accelerated vesting of all currently outstanding unvested stock options previously awarded to employees, consultants, officers and directors as of December 19, 2005. The purpose of the accelerated vesting of unvested stock options is to enable the company to reduce compensation expense associated with these options in future periods upon the company’s adoption of FASB Statement No. 123(R) (“Share-Based Payment”) on January 1, 2006. SimpleTech took the action based on the belief that it is in the best interests of its shareholders to reduce compensation expense related to the stock options in future periods.

Unvested stock options to purchase approximately 5.6 million shares of SimpleTech’s common stock are now immediately exercisable as a result of the accelerated vesting, representing approximately 56% of the company’s total outstanding stock options. These unvested stock options consist of both “in-the-money” as well as “out-of-the-money” options. Based upon the closing price of SimpleTech common stock of $3.79 per share on December 19, 2005, approximately 47% percent of the total accelerated stock options are “in-the-money” with a weighted average exercise price of approximately $3.20 per share. Of the accelerated stock options, options to purchase approximately 1.6 million shares of common stock are held by executive officers and non-employee directors (of which options to purchase approximately 895,000 shares of common stock are “in-the-money”).

As a result of the accelerated vesting, SimpleTech expects that it will not have to recognize compensation expense of approximately $9.4 million in future periods beginning January 1, 2006, including approximately $3.8 million of compensation expense in 2006. Based on the closing price of SimpleTech common stock on December 19, 2005, our historical employee turnover rates and estimate of future employee separation, the company estimates that it will incur a non-cash charge of approximately $374,000 as a result of the accelerated vesting in the fourth quarter of 2005.

SimpleTech’s Board of Directors also approved the termination of its Employee Stock Purchase Plan to further reduce future equity-based compensation expense following the adoption of FASB Statement No. 123(R).

About SimpleTech, Inc. (Nasdaq: STEC)

SimpleTech, Inc., designs, manufactures and markets custom and open-standard memory solutions based on Flash and DRAM memory technologies. Headquartered in Santa Ana, California, the company offers a comprehensive line of over 2,500 products and specializes in developing high-density memory modules, memory cards and storage drives. For information about SimpleTech, Inc., and to subscribe to the company’s “Email Alert” service, please visit our web site at www.simpletech.com, click “Investor” and then Email Alert.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:

This release contains forward-looking statements that involve risks and uncertainties, including, but not limited to, statements concerning the amount of compensation expense SimpleTech

expects not to be required to recognize in future periods and the amount of the non-cash charge in the fourth quarter of 2005 as a result of the accelerated vesting of stock options. Such forward-looking statements are based on current expectations and involve inherent risks and uncertainties, including factors that could delay, divert or change any of them, and could cause actual outcomes and results to differ materially from current expectations. Important factors which could cause actual results to differ materially from those expressed or implied in the forward-looking statements are detailed under “Risk Factors” in filings with the Securities and Exchange Commission made from time to time by SimpleTech, including its Annual Report on Form 10-K, its quarterly reports on Form 10-Q, and its current reports on Form 8-K. Other factors that could cause our actual results to differ materially from those expressed or implied in the forward-looking statements include the following risks: the cost of raw materials may fluctuate widely in the future, delays in the qualification process of our products with customers, slower than expected expansion of our international business, the impact of the implementation in 2006 of new accounting rules related to the expensing of stock options, we may not realize the anticipated benefits of our recent acquisition of Memtech SSD, Corp., excess availability of DRAM or Flash memory could reduce component pricing resulting in lower average selling prices and gross profit, DRAM or Flash memory supply may tighten requiring suppliers to place their customers, including us, on limited component allocation, effects of seasonality, interruptions or delays at the semiconductor manufacturing facilities that supply products to us, higher than expected operating expenses, new and changing technologies limiting the applications of our products, our inability to become more competitive in new and existing markets, our backlog may not result in future revenue, our inability to maintain and increase market share, difficulty competing in sectors characterized by aggressive pricing and low margins, higher than anticipated product returns, inventory write-downs, price protection and rebate charges, and new customer and supplier relationships may not be implemented successfully. The information contained in this press release is a statement of SimpleTech’s present intention, belief or expectation. SimpleTech may change its intention, belief or expectation, at any time and without notice, based upon any changes in such factors, in SimpleTech’s assumptions or otherwise. SimpleTech undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events.

The SimpleTech company logo can be found at:

http://www.primezone.com/newsroom/prs/?pkgid=1079.