-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DRpLGcJPBVWzqdQoAfGP2pOj+xZ8CqbKHGixK+c+Xbbn+URMUnOEQhVy7qsexI9S STWh4OoWieEGo/HL1IBOow== 0001125282-06-006607.txt : 20061030 0001125282-06-006607.hdr.sgml : 20061030 20061030163620 ACCESSION NUMBER: 0001125282-06-006607 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20061030 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Termination of a Material Definitive Agreement ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20061030 DATE AS OF CHANGE: 20061030 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEOWARE INC CENTRAL INDEX KEY: 0000894743 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPUTERS [3571] IRS NUMBER: 232705700 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-21240 FILM NUMBER: 061172471 BUSINESS ADDRESS: STREET 1: 3200 HORIZON DR CITY: KING OF PRUSSIA STATE: PA ZIP: 19406 BUSINESS PHONE: 6102778300 MAIL ADDRESS: STREET 1: 3200 HORIZON DR CITY: KING OF PRUSSIA STATE: PA ZIP: 19406 FORMER COMPANY: FORMER CONFORMED NAME: NEOWARE SYSTEMS INC DATE OF NAME CHANGE: 19980928 FORMER COMPANY: FORMER CONFORMED NAME: HDS NETWORK SYSTEMS INC DATE OF NAME CHANGE: 19950313 FORMER COMPANY: FORMER CONFORMED NAME: INFORMATION SYSTEMS ACQUISITION CORP DATE OF NAME CHANGE: 19930108 8-K 1 b415462_8-k.txt FORM 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) October 30, 2006 Neoware, Inc. (Exact Name of Registrant as Specified in Its Charter) Delaware 000-21240 23-2705700 (State or Other Jurisdiction (Commission File Number) (IRS Employer of Incorporation) Identification No.) 3200 Horizon Drive, King of Prussia, Pennsylvania 19406 (Address of Principal Executive Offices) (Zip Code) (610) 277-8300 (Registrant's Telephone Number, Including Area Code) ________________________________________________________________________________ (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 (see General Instruction A.2. below): [_] 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. Item 1.02 Termination of a Material Definitive Agreement. On October 30, 2006, the Company announced that Klaus P. Besier, the current President of the Company and a director, has been appointed Chief Executive Officer succeeding Michael Kantrowitz, the current CEO. The Company entered into an employment offer letter with Klaus P. Besier, currently the Company's President and a member of the Board of Directors, defining the terms of his employment with the Company as Chief Executive Officer, reporting to the Board of Directors. Mr. Besier will also continue to serve as President of the Company. In his new position, Mr. Besier will receive an annual base salary of $375,000 and will be eligible for an annual executive bonus of up to $187,500, based on goals and individual performance under the Company's Senior Officer Bonus Plan, upon the determination of the Compensation and Stock Option Committee of the Board of Directors. The bonus can be increased or decreased at the Compensation and Stock Option Committee's discretion if the Company or Mr. Besier significantly exceeds or fails to achieve the goals. In addition, the Company has agreed to grant to Mr. Besier stock options to purchase 75,000 shares of the Company's common stock, which will have a term of 10 years, will vest in four equal annual installments commencing one year after grant and will have an exercise price equal to the closing selling price of the common stock on the date of grant. Under the terms of the letter, Mr. Besier will receive severance benefits equal to his base salary for a period of 12 months, an amount equal to his average annual bonus earned over the prior three fiscal years as Chief Executive Officer or President of the Company and health benefits for a period of 12 months upon a change in his position with the Company which materially reduces the duties and responsibilities of his position as President and CEO reporting solely to the Board of Directors or a relocation of his place of employment from the Philadelphia area, if the change or relocation is made by the Company without his consent, or upon his involuntary termination for reasons other than cause. In addition, in the event Mr. Besier is terminated other than for cause prior to July 12, 2007, any options from Mr. Besier's initial grant of 250,000 options upon becoming President of the Company that would have vested upon the completion of the initial year of employment commencing as of July 12, 2006, will be immediately vested and become exercisable on the last day of employment. In the event of a "change in control" (as defined in the Company's 2004 Equity Incentive Plan), if Mr. Besier is not offered the position as President and CEO reporting solely to the Board of Directors by the Company or the acquirer, or if he does not accept employment in any other capacity offered by the acquirer in his sole discretion, the Company will continue to pay his base salary and the Company's portion of his health care costs under COBRA for one year, pay an amount equal to the average of the annual bonus that he earned over the prior three years, and vest and accelerate exercisability of his outstanding stock options. In the event that Mr. Besier is offered a comparable position following a change in control, or he accepts employment in any other capacity offered by the acquirer, all of Mr. Besier's outstanding stock options will vest and 2 become exercisable one year after the change in control, provided that he is still working for the Company or the acquirer at that time. Mr. Besier's CEO employment arrangement replaces his previous letter of employment as President, dated July 12, 2006. Under the previous arrangement, Mr. Besier received an annual base salary of $325,000 and was eligible for an annual executive bonus of up to $162,500, based on quarterly and annual revenue and profitability goals and individual performance, upon the recommendation of the then Chief Executive Officer. The bonus was adjustable at the Compensation and Stock Option Committee's discretion if the Company or Mr. Besier significantly exceeded or failed to achieve the goals. In addition, upon his appointment as President, the Company granted to Mr. Besier stock options to purchase 250,000 shares of the Company's common stock, which have a term of 10 years, vest in four equal annual installments commencing one year after grant and have an exercise price equal to the closing selling price of the common stock on the date of grant. See Item 5.02 for a description of Mr. Kantrowitz's agreement, which is incorporated herein by reference. Item 2.02 Results of Operations and Financial Condition. On October 30, 2006, the Company issued a press release announcing its results for the first quarter ended September 30, 2006. The full text of the press release is set forth in Exhibit 99.1 hereto. Item 5.02. Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers. On October 30, 2006, the Company announced that effective on that date it had appointed its current President, Klaus P. Besier, as Chief Executive Officer of the Company. Mr. Besier has served as President of the Company since July 12, 2006 and as a director since December 2005. Mr. Besier served as President and Chief Executive Officer of FirePond, Inc., a global provider of e-business solutions for managing multi-channel selling, from July 1997 until his retirement in December 2003 after the sale of the company. Prior to joining FirePond, he held various management positions, including the position of Chief Executive Officer of SAP America, Inc., a subsidiary of SAP AG, a provider of business application software. Mr. Besier is 54 years old and holds a bachelor's degree in business management and finance from the University of Economics in Berlin. See Item 1.01 for a description of Mr. Besier's employment offer letter, which is incorporated herein by reference. On October 30, 2006, Mr. Kantrowitz resigned from his position as Chief Executive Officer of the Company and entered into an agreement to assume the position of Executive Chairman of the Board of Directors. Mr. Kantrowitz will receive a base salary equal to his current base salary as Chief Executive Officer, Company benefits 3 (excluding any bonus and other incentive plans) and the use of a Company-provided automobile for a six-month period, unless Mr. Kantrowitz's services are terminated earlier by either Mr. Kantrowitz or the Company. Under the agreement, Mr. Kantrowitz will receive severance benefits equal to his salary, health benefits and use of his Company-provided automobile for a period of 18 months, payment of an amount equal to one and one-half times his average annual bonus earned over the prior three fiscal years as Chief Executive Officer of the Company and full vesting of all of his outstanding, unvested stock options, which will have a 12-month post vesting exercise period. The agreement also contains a non-competition and non-solicitation agreement for the 18-month period in which Mr. Kantrowitz receives severance benefits. In exchange for the consideration provided by the Company, Mr. Kantrowitz executed a general release of claims in favor of the Company. The Company executed a limited release of claims related to Mr. Kantrowitz's performance of his employment duties in favor of Mr. Kantrowitz. Mr. Kantrowitz will continue to serve as a director of the Company. Item 9.01 Financial Statements and Exhibits. (c) Exhibits. The following documents are filed as exhibits to this report. 99.1 Press Release dated October 30, 2006 reporting the quarter ended September 30, 2007 99.2 Press Release dated October 30, 2006 announcing the appointment of a new CEO and resignation of former CEO. 4 SIGNATURES 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 duly authorized. NEOWARE, INC. Dated: October 30, 2006 By: /s/ Keith D. Schneck ----------------------------------- Keith D. Schneck, Executive Vice President and Chief Financial Officer 5 EX-99.1 2 b415462_ex99-1.txt EXHIBIT 99.1 [neoware LOGO] PRESS RELEASEED FOR IMMEDIATE RELEASE NEOWARE REPORTS FIRST QUARTER FY07 RESULTS KING OF PRUSSIA, Pa., October 30, 2006 -- Neoware, Inc. (Nasdaq: NWRE), the leading supplier of thin client software and devices, today reported financial results for its first quarter of fiscal year 2007. Q1 FINANCIAL HIGHLIGHTS: o Revenues were $21,560,000 in the September 2006 quarter, compared to $26,543,000 in the prior year first quarter. The September 2005 quarter included revenue of $9.0 million from two large enterprise customers who contributed $1.5 million of revenue in the September 2006 quarter. o Gross profit was 34% of revenue, compared to 40% of revenue in the prior year first quarter. Non-GAAP gross profit was 36% of revenue, compared to 41% of revenue in the prior year first quarter. Cost of sales in the September 2006 quarter include a $1.5 million write off of unfinished goods inventory for certain acquired products and a $350,000 charge related to purchase commitments for third party software products. The gross profit margin in the Sept 2005 quarter was impacted by $5.8 million of sales of the Neoware e900 product which has lower gross margin as a percentage of revenue. o Operating expenses were $9,425,000, or 44% of revenue, compared to $8,066,000, or 30% of revenue, in the prior year first quarter. Non-GAAP operating expenses were $7,929,000, or 37% of revenue, compared to $7,050,000, or 27% of revenue, in the prior year first quarter. Operating expenses in the September 2006 quarter included $260,000 of severance charges due to staff changes. o Non-GAAP net income for the quarter was $.03 per fully diluted share, compared to $.17 per fully diluted share in the prior year first quarter. o GAAP net loss for the quarter was ($.05) per diluted share, compared to a GAAP net income of $.11 per diluted share in the prior year first quarter. o The Company ended the quarter with $110 million of cash and short-term investments.. o Non-GAAP results exclude amortization of acquisition-related intangibles and stock-based compensation and apply an effective tax rate of 16% and 33% in the first quarters of fiscal 2007 and 2006, respectively, for the purpose of showing a comparable view of the Company's performance from period to period. The effective tax rate has declined due to the favorable impact of tax free investment income generated in fiscal 2007. "Since joining Neoware as President three months ago, I have developed an appreciation of our strengths, and of what we need to do to move our business forward aggressively," commented Klaus Besier, Neoware's CEO. "And we have seen some positives this quarter in the growth of our EMEA revenue base as well as growth in our SMB business. "Our strategy for rebuilding growth will involve strong marketing, sales, and product development efforts. Some of this will require a refocusing of priorities and resources that will have a near term financial impact, as experienced this quarter. "Our focus on large enterprises has shown success for the Company, and we are continuing with that strategy, but enterprise accounts require time to develop. To improve our ability to achieve growth objectives, we also need to expand our business partnerships to include additional channels, such as systems integrators and independent software vendors. "We firmly believe the thin client market is a very attractive area, and we are continuing our investments in both people and programs to regain our growth. We see more potential today, in more verticals than ever before in areas like retail, healthcare, transportation, financial services and the Federal Government. The good news is that we have talented people and financial resources to help us fully exploit this potential. "I'm excited to be here and to work with an outstanding group of dedicated employees to take the company forward to its next level." FISCAL YEAR 2007 GUIDANCE Based upon currently available information, the Company believes its revenues to be approximately $100 million for our fiscal 2007. Gross profit margin is expected to be in the 40% range and fluctuate based on product mix and competitive pricing strategies. The Company is revising its operating model for the remainder of fiscal 2007 including hiring and spending plans and expects to provide full guidance updates before the end of the December 2006 quarter. CONFERENCE CALL INFORMATION Neoware will host a conference call at 5:00 PM on October 30, 2006. The conference call will be available live at www.vcall.com and on the Neoware website at www.neoware.com. To participate, please go to the website 10 minutes prior to the call to register, download and install any necessary audio software. If you are unable to attend the live conference call, an Internet replay of the call will be archived and available after the call through December 31, 2006. The call will also be accessible by dialing 1-800-974-9436 for domestic U.S. calls and +1-641-297-7617 for international calls. The conference ID will be NEOWARE. A replay of the call will be available through December 31, 2006, by dialing 1-800-645-7959 in the U.S. and +1- 973-854-1361 internationally. A copy of the press release announcing the Company's earnings and other financial and statistical information about the period to be presented in the conference call will be available on the Company's website at www.neoware.com/events. NON-GAAP FINANCIAL MEASURES Neoware presents the following non-GAAP financial measures: non-GAAP gross profit and margin; non-GAAP operating expenses; non-GAAP operating income and margin; non-GAAP effective income tax rate; non-GAAP income taxes; non-GAAP net income; and non-GAAP earnings per share. We exclude the following items in the development of the non-GAAP financial measures presented: Stock-based compensation expenses. Our non-GAAP financial measures exclude stock-based compensation expenses, which consist of expenses for stock-based compensation that we began recording under SFAS 123(R) in the first quarter of fiscal 2006. We exclude these expenses from our non-GAAP financial measures primarily because (i) they are expenses that we exclude when assessing the performance of our business, and (ii) exclusion of these expenses allows more meaningful comparisons against financial models prepared by our investors and securities analysts that also present information on a GAAP and non-GAAP basis. In addition, stock-based compensation amounts are difficult to forecast, because the magnitude of the charges depends upon the volume and timing of stock option and other equity-based compensation grants, which can vary dramatically from period to period, and external factors such as interest rates and the trading price and volatility of our common stock. Excluding these stock-based compensation amounts improves comparability of the performance of the business across periods. Amortization of acquired intangible assets. In accordance with GAAP, cost of sales and operating expenses include amortization of acquired intangible assets such as intellectual property, customer lists and covenants not to compete. We exclude these items from our non-GAAP financial measures because (i) they are expenses that we exclude when assessing the performance of our business, as the timing and amount of the expenses vary from period to period as we have a history of acquiring businesses which result in continued additions to amortization expense, and (ii) exclusion of these expenses better allows comparison against financial models prepared by our investors and securities analysts that also present information on a GAAP and non-GAAP basis. Income taxes. We use the effective tax rate applied to income before taxes adjusted to exclude the stock based compensation expense and amortization of acquired intangible assets. The Company believes that its non-GAAP financial measures provide meaningful supplemental information regarding the Company's operating results because they exclude amounts that the Company excludes as part of its monitoring of operating results and assessing the performance of the business. For example, the Company uses non-GAAP measures, including gross profit, operating expense and operating income excluding amortization and stock-based compensation expense, in its financial and operational decision making, including decisions regarding staffing, future management priorities and how the Company will direct future operating expenses on the basis of non-GAAP financial measures. In addition, the Company has established incentive compensation programs utilizing, in part, such non-GAAP financial measures, including non-GAAP operating income. For the same reasons, management also uses this information in its budgeting and forecasting activities and in quarterly reports to its Board of Directors. Non-GAAP financial measures should not be considered as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. Neoware's non-GAAP financial measures do not reflect a comprehensive system of accounting, and they differ from GAAP measures with similar names and from non-GAAP financial measures with the same or similar names that are used by other companies. We strongly urge investors and potential investors in our securities to review the reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures that are included in this release, and our consolidated financial statements, including the notes thereto, and the other financial information contained in our periodic filings with the SEC and not to rely on any single financial measure to evaluate our business. The principal limitation of Neoware's non-GAAP financial measures is that they exclude significant expenses that are required by GAAP to be recorded. In addition, non-GAAP financial measures are subject to inherent limitations because they reflect the exercise of judgments by management about which charges are excluded from the non-GAAP financial measures. To mitigate this limitation, Neoware presents its non-GAAP financial measures in connection with its GAAP results, and recommends that investors do not give undue weight to its non-GAAP financial measures. A reconciliation between non-GAAP and GAAP measures can be found in the accompanying schedule and in the News section of our web site at www.neoware.com. About Neoware Neoware, Inc. (Nasdaq:NWRE), provides enterprises throughout the world with thin client computing devices, software that turns PCs into thin clients, and services that adapt thin client technology to virtually any enterprise computing environment. Neoware's software powers, manages and secures thin client devices and traditional personal computers, enabling them to run Windows(r) and Web applications across a network, stream operating systems on demand, and connect to mainframes, mid-range, UNIX and Linux systems. Headquartered in King of Prussia, PA, USA, Neoware has offices in Australia, Austria, China, France, Germany, and the United Kingdom. Neoware's products are available worldwide from select, knowledgeable resellers, as well as via its partnerships with IBM, Lenovo and ClearCube. Neoware can be reached by email at info@neoware.com. Neoware is a registered trademark of Neoware, Inc. All other names products and services are trademarks or registered trademarks of their respective holders. # # # This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding: This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding: our strategy for rebuilding growth based on marketing, sales and product development efforts; our refocusing of our priorities and resources having a near-term financial impact; ; our belief in our market; continuing our investments in people and programs to regain growth; our focus on large enterprise accounts and our planned expansion of our business partnerships to include additional channels; our talented people; increased interest in our solutions from more vertical markets; our expectations as to revenues and gross profit for fiscal 2007; and our revision of our operating model for the balance of fiscal 2007. Factors that could cause actual results to differ materially from those predicted in such forward-looking statements include: our success in implementing our expanded marketing, sales and product development initiatives within our planned timeframe; higher than expected severance payments; additional write offs of inventory; our success in increasing sales to the targeted customers and our continued dependence on enterprise customers; our inability to manage our expanded organization; our inability to successfully integrate our recent acquisitions; the timing and receipt of future orders; our timely development and customers' acceptance of our products; pricing pressures; rapid technological changes in the industry; growth of overall thin client sales; our ability to maintain our partnerships; our dependence on our suppliers and distributors; increased competition; our continued ability to sell our products through Lenovo to IBM's customers; our ability to attract and retain qualified personnel; adverse changes in customer order patterns; our ability to identify and successfully consummate and integrate future acquisitions; adverse changes in general economic conditions in the U. S. and internationally; risks associated with foreign operations; and political and economic uncertainties associated with current world events. These and other risks are detailed from time to time in Neoware's periodic reports filed with the Securities and Exchange Commission, including, but not limited to, our annual report on Form 10-K for the year ended June 30, 2006. Neoware is a trademark of Neoware, Inc. All other names products and services are trademarks or registered trademarks of their respective holders. NEOWARE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) SEPTEMBER 30, JUNE 30, ASSETS 2006 2006 ------------- -------- Current assets: Cash and cash equivalents $ 21,657 $ 19,328 Short-term investments 88,756 94,798 Accounts receivable, net 15,145 16,877 Inventories 9,405 7,734 Prepaid expenses and other 5,319 3,231 Deferred income taxes 1,866 1,866 -------- -------- Total current assets 142,148 143,834 Goodwill 38,093 37,761 Intangibles, net 11,312 12,175 Deferred income taxes 4,093 4,156 Property and equipment, net 1,559 1,586 Other 80 61 -------- -------- $197,285 $199,573 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 4,827 $ 8,989 Accrued compensation and benefits 1,768 2,021 Restructuring Reserve 545 600 Income taxes payable 150 158 Other accrued expenses 5,059 4,159 Deferred revenue 1,038 973 -------- -------- Total current liabilities 13,387 16,900 Deferred income taxes 773 755 Deferred revenue 316 316 -------- -------- Total liabilities 14,476 17,971 -------- -------- Stockholders' equity: Preferred stock -- -- Common stock 20 20 Additional paid-in capital 160,337 158,671 Treasury stock, 100,000 shares at cost (100) (100) Accumulated other comprehensive income 1,053 556 Retained earnings 21,499 22,455 -------- -------- Total stockholders' equity 182,809 181,602 -------- -------- $197,285 $199,573 ======== ======== NEOWARE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) THREE MONTHS ENDED SEPTEMBER 30, ------------------ 2006 2005 -------- ------- Net revenues $21,560 $26,543 ------- ------- Cost of revenues Cost of products (a) 13,923 15,569 Amortization of intangibles 336 273 ------- ------- Total cost of revenues 14,259 15,842 ------- ------- Gross profit 7,301 10,701 ------- ------- Operating expenses Sales and marketing 4,412 4,169 Research and development 1,774 1,284 General and administrative 2,650 2,298 Amortization of intangibles 589 315 ------- ------- Total operating expenses (b) 9,425 8,066 ------- ------- Operating income (loss) (2,124) 2,635 Foreign exchange gain (loss) (27) 9 Interest income, net 981 244 Other 33 -- ------- ------- Income before income taxes (1,137) 2,888 Income tax expense (benefit) (182) 1,047 ------- ------- Net income (loss) $ (955) $ 1,841 ======= ======= Earnings (loss) per share: Basic $ (.05) $ .11 ======= ======= Diluted $ (.05) $ .11 ======= ======= Weighted average number of common shares outstanding: Basic 19,943 16,271 ======= ======= Diluted 19,943 16,434 ======= ======= (a) includes stock-based compensation expense of $25 and $19 for the three months ended September 30. (b) includes stock-based compensation expense of $907 and $701 for the three months ended September 30. NEOWARE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
THREE MONTHS ENDED SEPTEMBER 30, ------------------- 2006 2005 -------- -------- Cash flows from operating activities: Net income (loss) $ (955) $ 1,841 Adjustments to reconcile net income to net cash provided by operating activities- Amortization of intangibles 925 588 Depreciation 138 89 Non-cash share-based compensation 933 720 Deferred income taxes 65 -- Changes in operating assets and liabilities- net of effect from acquisition- Accounts receivable 1,813 (410) Inventories (1,671) (587) Prepaid expenses and other (2,104) 605 Accrued compensation and benefits (255) (953) Accounts payable (4,164) (130) Other accrued expenses 834 25 Income taxes payable (8) (1,271) Deferred revenue 59 5 -------- -------- Net cash provided by (used in) operating activities (4,390) 522 -------- -------- Cash flows from investing activities: Purchase of short-term investments (34,455) (900) Sales of short-term investments 40,496 4,250 Purchases of property and equipment (110) (174) -------- -------- Net cash provided by investing activities 5,931 3,176 -------- -------- Cash flows from financing activities: Repayments of capital leases -- (2) Proceeds from issuance of common stock, net of expenses (3) -- Exercise of stock options and warrants 36 161 Tax benefit from share-based payment arrangements 699 446 -------- -------- Net cash provided by financing activities 732 605 -------- -------- Effect of foreign exchange rate changes on cash 56 (38) -------- -------- Increase in cash equivalents 2,329 4,265 Cash and cash equivalents, beginning of period 19,328 8,285 -------- -------- Cash and cash equivalents, end of period $ 21,657 $ 12,550 ======== ======== Supplemental disclosures: Cash paid for income taxes $ 309 $ 2,647
NEOWARE, INC. RECONCILIATION OF GAAP TO NON GAAP AMOUNTS (in thousands, except per share data) (UNAUDITED)
THREE MONTHS ENDED THREE MONTHS ENDED SEPTEMBER 30, 2006 SEPTEMBER 30, 2005 -------------------------------- --------------------------------- GAAP ADJUSTMENTS NON-GAAP GAAP ADJUSTMENTS NON-GAAP ------- ----------- -------- ------- ----------------------- Gross profit 7,301 361 A, B 7,662 10,701 292 A, B 10,993 ======= ====== ======= ======= ====== ======= Gross profit percentage 34% 36% 40% 41% Operating expenses Sales and marketing 4,412 (355)A 4,057 4,169 (250)A 3,919 Research and development 1,774 (95)A 1,679 1,284 (105)A 1,179 General and administrative 2,650 (457)A 2,193 2,298 (346)A 1,952 Amortization of intangibles 589 (589)B -- 315 (315)B -- ------- ------ ------- ------- ------ ------- Operating expenses 9,425 (1,496) 7,929 8,066 (1,016) 7,050 ======= ====== ======= ======= ====== ======= Operating income (loss) (2,124) 1,857 A, B (267) 2,635 1,308 A, B 3,943 ======= ====== ======= ======= ====== ======= Income tax expense (benefit) (182) 297 C 115 1,047 338 C 1,385 ======= ====== ======= ======= ====== ======= Net income (loss) $ (955) $ 605 $ 1,841 $ 2,811 ======= ======= ======= ======= Earnings (loss) per share - diluted $ (0.05) $ 0.03 $ 0.11 $ 0.17 ======= ======= ======= ======= Weighted average shares outstanding - diluted 19,943 19,943 16,434 16,434 ======= ======= ======= =======
A - To exclude the effect of stock-based compensation expense. B - To exclude the effects of the amortization of intangible assets related to business combinations. C - To adjust to an effective tax rate of 16% and 33% for the three months ended September 30, 2006 and 2005 respectively. EX-99.2 3 b415462_ex99-2.txt EXHIBIT 99.2 [neoware LOGO] PRESS RELEASETED FOR IMMEDIATE RELEASE NEOWARE APPOINTS KLAUS BESIER AS CEO AND NAMES MICHAEL KANTROWITZ EXECUTIVE CHAIRMAN OF THE BOARD KING OF PRUSSIA, Pa., October 30, 2006 -- Neoware, Inc. (Nasdaq: NWRE), the leading supplier of thin client software and devices, today announced that Klaus Besier has been named Chief Executive Officer and that Michael Kantrowitz has been named Executive Chairman of the Board. Mr. Kantrowitz served as CEO of Neoware since February 2000, and as Chairman and CEO since 2002. During his tenure as CEO, Neoware grew revenues from $10 million to over $100 million. Under Mr. Kantrowitz's leadership, Neoware's market share of the thin client segment of the PC industry grew from under five percent to approaching 20 percent, and Neoware's cash and marketable securities grew from under $1 million to over $100 million, with no debt. "Klaus brings to Neoware solid experience in growing technology companies," commented Michael Kantrowitz, Neoware's Chairman of the Board. "As a $100 million company, both our future challenges and our opportunities are greater today than at any time in the Company's history. We're providing Klaus the resources he needs to grow this business beyond $100 million by naming him CEO. As executive Chairman of the Board I will focus on initiatives that can build our business strategically in order to return the greatest possible value to our shareholders." "Mike and his team have built Neoware to a $100 million business in a short time period," commented Klaus Besier, President and CEO of Neoware. "As Neoware enters its next phase of growth, I am excited to provide the leadership that will enable Neoware to address the issues it will encounter and capitalize on its prospects. I am excited about the opportunity that Neoware has to grow its business and to build upon its leadership position." Mr. Besier has served as a director of the Company since December 2005 and as President since July 2006. He served as President and Chief Executive Officer of FirePond, Inc., a global provider of e-business solutions for managing multi-channel selling, from 1997 until his retirement in December 2003 after the sale of the company. Prior to joining FirePond, he served as President and Chief Executive Officer of SAP America, Inc., the largest subsidiary of SAP AG, a provider of business application software, from 1991 to 1996. Before joining SAP America, Mr. Besier was General Manager and Corporate Vice President of a subsidiary of Hoechst Celanese, a global chemicals and fiber conglomerate. He holds a bachelor's degree in business management and finance from the University of Economics in Berlin. About Neoware Neoware, Inc. (Nasdaq:NWRE), provides enterprises throughout the world with thin client computing devices, software that turns PCs into thin clients, and services that adapt thin client technology to virtually any enterprise computing environment. Neoware's software powers, manages and secures thin client devices and traditional personal computers, enabling them to run Windows(r) and Web applications across a network, stream operating systems on demand, and connect to mainframes, mid-range, UNIX and Linux systems. Headquartered in King of Prussia, PA, USA, Neoware has offices in Australia, Austria, China, France, Germany, and the United Kingdom. Neoware's products are available worldwide from select, knowledgeable resellers, as well as via its partnerships with IBM, Lenovo and ClearCube. Neoware can be reached by email at info@neoware.com. Neoware is a registered trademark of Neoware, Inc. All other names products and services are trademarks or registered trademarks of their respective holders. # # # This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding: This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding: our future challenges and opportunities; providing Mr. Besier with the tools and resources necessary to grow the business; our focus on initiatives to build our business strategically to return value to our shareholders; and the opportunity to grow our business and build on our leadership position. Factors that could cause actual results to differ materially from those predicted in such forward-looking statements include: our ability to retain Mr. Besier; our success in implementing our expanded marketing and sales initiatives and increasing sales to the targeted customers; our inability to manage our expanded organization; our inability to successfully integrate our recent acquisitions; the timing and receipt of future orders; our timely development and customers' acceptance of our products; pricing pressures; rapid technological changes in the industry; growth of overall thin client sales; our ability to maintain our partnerships; our dependence on our suppliers and distributors; increased competition; our continued ability to sell our products through Lenovo to IBM's customers; our ability to attract and retain qualified personnel; adverse changes in customer order patterns; our ability to identify and successfully consummate and integrate future acquisitions; adverse changes in general economic conditions in the U. S. and internationally; risks associated with foreign operations; and political and economic uncertainties associated with current world events. These and other risks are detailed from time to time in Neoware's periodic reports filed with the Securities and Exchange Commission, including, but not limited to, our annual report on Form 10-K for the year ended June 30, 2006. Neoware is a trademark of Neoware, Inc. All other names products and services are trademarks or registered trademarks of their respective holders. -----END PRIVACY-ENHANCED MESSAGE-----