|
&n bsp; |
FORM 10-K
|
(Mark One) |
||
|
[X] |
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE |
|
ACT OF 1934 |
||
|
For the fiscal year ended December 31, 2003 |
||
|
or |
||
|
[ ] |
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
|
EXCHANGE ACT OF 1934 |
||
|
For the transition period from __________________________ to __________________________ |
||
|
|
||
|
Commission File Number 001-12895 |
||
|
|
|
nStor Technologies, Inc. |
|
(Exact name of registrant as specified in its charter) |
|
|
|
|
|
Delaware |
95-2094565 |
|
|
(State or other jurisdiction of |
(I.R.S. Employer |
|
|
|
|
|
|
6190 Corte Del Cedro, |
|
|
|
(Address of principal executive offices) |
(Zip Code) |
|
|
|
|
|
|
Registrant's telephone number, including area code (760) 683-2500 |
||
|
|
||
|
|
||
|
Securities registered pursuant to Section 12(b) of the Act: None |
||
|
|
||
|
Securities registered pursuant to Section 12(g) of the Act: Common Stock, Par Value $0.05 Per Share |
||
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
[ ] Yes [X] No
AGGREGATE MARKET VALUE OF THE VOTING COMMON STOCK
HELD BY NONAFFILIATES OF THE REGISTRANT
Common Stock, par value $.05 per share (Common Stock), was the only class of voting common equity of the Registrant outstanding on December 31, 2003. Based on the last sales price of the Common Stock on the American Stock Exchange (AMEX) on June 30, 2003 ($.41), the aggregate market value of the approximately 38,880,000 shares of the voting Common Stock held by non-affiliates on that date was approximately $15.9 million.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. [ ] Yes [X] No
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date:
The number of shares outstanding of the Registrant’s Common Stock, par value $0.05 per share, as of February 29, 2004 was 165,067,838 shares.
2
TABLE OF CONTENTS
3
GENERAL
nStor Technologies, Inc., through its wholly-owned subsidiary, nStor Corporation, Inc. is a supplier of flexible, high-performance and intelligent data storage solutions (Storage Solutions). The Company’s product family includes application-driven storage platforms, Redundant Array of Independent Disks (RAID) controllers and storage management software. Since the Company’s June 2002 acquisition of Stonehouse Technologies, Inc. (Stonehouse), nStor is also a provider of telecommunications software and outsourcing solutions (Telemanagement Solutions) that help large enterprises, state and municipal governments, and other large organizations manage their telecommunications expenses, assets and processes. Incorporated as a Delaware corporation in 1959, the Storage Solutions business was acquired in 1996. References in this Form 10-K to “we”, “our”, “us”, the “Company”, and “nStor” refer to nStor Technologies, Inc. and/or its consolidated subsidiaries.
Our Storage Solutions and support services safeguard vital information assets for data-intensive businesses while easing storage management challenges. Our goal is to reduce the complexity and cost of implementing networked storage, thereby providing simplicity and ease of operation, with low total cost of ownership and high return on investment. Our products protect mission-critical data across a multitude of storage-intensive applications that require substantial storage performance and capacity such as document imaging, data warehousing, video and multimedia as well as transaction-intensive environments. As a result, our Storage Solutions form the storage foundation for businesses of all sizes as well as government agencies and universities.
Our offerings support a variety of operating environments, including Microsoft Windows, Linux, UNIX and Macintosh and utilize technology architectures such as Fibre Channel, Fibre-to-SCSI (Small Computer Systems Interface), SCSI, and Serial ATA (SATA). Our high-performance, scalable storage systems are marketed principally through a global network of original equipment manufacturers (OEM’s), value-added resellers (VAR’s) and systems integrators (SI’s), under the nStor brand or the unique brand of respective distribution partners.
Our Telemanagement Solutions include a suite of modular applications and consulting services, which allow enterprises to manage voice, data and wireless services by providing a systematic approach to automate order processing, monitor expenses, manage vendor invoices, track asset inventory, provide ongoing invoice reconciliation and allocate costs. We market our Telemanagement Solutions through a direct sales force and indirectly through channel partners.
Our executive and Storage Solutions business headquarters are located at 6190 Corte Del Cedro, Carlsbad, California 92009 and our telephone number is (760) 683-2500. The principal engineering offices for our Storage Solutions business are located at 100 Technology Park, Suite 175, Lake Mary, Florida 32746. The headquarters for our Telemanagement Solutions business are located at 14881 Quorum – Suite 800, Dallas, Texas 75254 and our telephone number is (972) 581-7300.
As a result of federal regulations, online services such as media-on-demand and an ever-growing dispersed workforce, the rising demand for centrally located information has sparked a revolution in the storage industry. Data storage capacity has grown dramatically to support the increasing digitization of environments that have relied traditionally on paper-based information. In particular, companies within the insurance, healthcare, education, financial services, legal and government sectors are embracing document imaging technology.
4
Meanwhile, broadcasting, entertainment, music and animation companies are transitioning their operations fully to the digital realm. This exponential growth of computerized data has accelerated the need for available and reliable data storage solutions. To meet this need, companies are investing in new storage infrastructures that accommodate current demands while laying the groundwork for increasing reliance on digital assets.
According to New York-based Access Markets International (AMI) Partners, the worldwide market for storage hardware, software and support services will grow from $59 billion in 2001 to $79 billion in 2006. The firm reports that despite intensifying competition, substantial opportunity exists for storage companies that have a keen understanding of market dynamics and a strong customer-focused strategy that solves a business problem.
nStor is dedicated to reducing data storage costs and complications by delivering high-performance technology combined with easy-to-use tools that streamline the implementation and management of storage networks. In order to differentiate us from the surge of competitors bringing Storage Area Network (SAN) and Network Attached Storage (NAS) products to the market, we have placed particular emphasis on technology innovation, strong integration expertise and a commitment to superior support services.
We have a long history in the data storage market, reinforced by more than two decades of experience designing storage components and subsystems. To solve specific customer challenges, we have expanded our offerings to provide completely integrated hardware, software and support solutions that can be tailored to meet a wide range of requirements while leveraging existing information and technology infrastructures.
Our networked storage solutions deliver high levels of flexibility, performance and intelligence to accommodate the escalating demands of storage-intensive requirements. Our product line includes storage platforms, RAID controllers and storage management software. Our interoperability lab is dedicated to achieving the compatibility of our products with other key system components to provide seamless and cost-effective operation, even in complex environments. All of our products adhere to open standards and are backed by high quality service and support.
A continuing focus on the convergence of storage and networking enables us to create value-added offerings that can be customized for enterprise customers, departmental workgroups along with small-to-medium sized businesses (SMBs) across a number of key vertical markets, including:
|
|
· |
Financial services. New data-processing methodologies, shorter timeframes for transactions and new demands for better knowledge management are requiring financial services firms to improve their data storage infrastructures. Our solutions for enterprise storage enable these institutions to manage large amounts of data in a high-speed distributed infrastructure, allowing customers to leverage their existing technology investments and derive maximum value from their time-sensitive information. |
|
|
||
|
|
· |
Internet. Internet-focused businesses place considerable and often unpredictable demands on transaction-intensive, database-driven environments such as electronic mail (e-mail), World Wide Web (WWW), and electronic commerce (e-commerce). In a marketplace where retaining customer loyalty is paramount, Internet-focused businesses must have high performance and readily available data to ensure their customers do not seek alternative providers. Scalable distributed architectures based on our products improve data availability, scalability, and performance, while reducing the total cost of ownership. |
|
|
||
|
|
· |
Healthcare. Bioinformatics, research, and care providers are focused on developing vital new drugs, improving quality of patient care, and increasing their returns on investment. Our solutions enable fast access, integration, and sharing of massive amounts of scientific and medical imaging data, reduced time-to-market, and improvements in operational efficiency. |
5
To address the needs of these markets most effectively, we have incorporated the following design principles into our ongoing product development and support initiatives:
|
|
· |
Performance. File sharing and messaging applications are critical to successful operations. We offer highly available, scalable, and economical solutions that incorporate our storage platform and resource management software to deliver storage as well as the capability to add storage without downtime. By freeing up valuable infrastructure and staff resources, our solutions improve productivity, performance and profitability, while simplifying the complex backup and recovery process and accelerating time-to-recovery. This solution is accomplished through reduced operational costs, enabling immediate access to information and the elimination of backup windows. |
|
|
||
|
|
· |
Flexibility. Our architecture allows businesses to reduce management overhead, decrease deployment times and eliminate downtime. Our StorView management software utilizes visual tools and plain language to provide customers with ease of use. Our flexible approach to design allows our systems to be configured to meet customer requirements. This feature translates into protection of investment, reduced costs and common management control. |
|
|
||
|
|
· |
Business application integration and partnerships. Our goal is to deliver complete network storage solutions to customers. Our partners are vital to our success in this area, and we strive to have a number of partner relationships. These application partnerships enhance our ability to reduce implementation time and provide the highest level of solution support to customers. Technology and infrastructure solution partners enable seamless integration into customers’ existing environments, resulting in lower costs and more rapid deployment. |
Our Wahoo RAID controller technology and StorView software form the foundation for our NexStor 4000 family of turnkey systems that support Microsoft Window, Linux, UNIX and Macintosh operating environments, and allow us to act as a single source storage solution provider (enclosure technology, RAID controller, and StorView storage management software) and to continuously add new features and meet demanding customer support requirements. We believe our NexStor 4000 Series 2U (3.5 inches) product line is one of the industry leaders in terms of rack space density. These solutions are offered for Fibre Channel, SCSI, Fibre-to-SCSI, iSCSI and SATA architectures. Our storage enclosures feature fully redundant, hot-swappable components and support the industry’s fastest and most dense disk drives. NexStor’s design and capability are targeted to the mid-range to enterprise computing environment. The NexStor products designed by us include SAF-TE (SCSI Access Fault-Tolerant Enclosure Services) and SES-compliant (SCSI Enclosure Services) modules that can store up to 1.76TB (Terabytes) of data in a 3.5-inch, or 2U, increment of rack space, available in 12-bay versions.
Our NexStor 4000 series 2 Gbit Fibre Channel product line, released in February 2003, encapsulates storage solutions within a 2U form factor, has complete 2Gbit Fibre Channel host to drive connectivity, and takes advantage of the transition of 1-inch low profile disk drives. The 4000F Series is a 12-bay enclosure system that can be a stand-alone JBOD (4000F), a single RAID controller system (4310F with the Wahoo RAID controller; 4510F with the WahooXP RAID controller) or a dual RAID controller system (4320F with two Wahoo RAID controllers; 4520F with two WahooXP RAID controllers). Each NexStor 4000F JBOD system is shipped with the built-in flexibility of easily upgrading to a 4300F or 4500F series by simply adding the upgrade kit to the same unit without uninstalling the system from its current deployment. With twelve 147GB disk drives, the 4000F Series scales up to 14TB in 1.76TB, 3.5-inch modular increments. This modular design allows customers the ‘pay as you grow’ ability in a space-saving, high-performance, high-availability storage system.
6
The NexStor 4300F and 4500F series have been deployed in both the international and domestic marketplace. Traditionally found in SAN, server attached NAS, or simply direct-connect systems, these products provide interoperability to work with leading host bus adapters and switches and offer high-availability data protection for mission-critical database applications or shared storage resource environments.
The 4000S Series incorporates 12-bay enclosure technology and houses high-performance 15,000RPM and 147GB disk drives. The 4000S JBOD has an Ultra320 bus architecture that provides 320 MB/s single and 640 MB/s dual bus data paths. The 4000S JBOD is easily upgraded to the 4110S single RAID controller or the 4120S dual RAID controller system by simply integrating RAID controllers into the back of the enclosure, or it can be upgraded to host-based RAID by attaching to a PCI RAID controller. The ability to integrate SCSI RAID controllers directly into the back of the enclosure gives customers built-in flexibility to convert a JBOD into a high-availability RAID system.
Since most modern servers are shipped with on-board Ultra160 or Ultra320 host connectivity, we believe that SCSI remains as one of the most cost effective methods of attaching storage to a server.
The Wahoo RAID controller is a single board, single processor design with 512MB of cache and an integrated battery backup module. The WahooXP RAID controller is designed to add extending processing power (high-performance) through a second processor and doubling the cache to 1GB per controller. Being able to offer two versions of the controller provides us with product flexibility to meet performance applications or budget requirements. Both RAID controllers are based on the same firmware, which addresses either price sensitive requirements or higher performance feature-rich requirements without having to qualify different firmware code sets.
The Wahoo and WahooXP Fibre Channel RAID controllers have two host and two drive channels for high-performance computing applications and are designed to operate independently (single controller) or in a high-availability, mission-critical data environment (active/active controllers). These RAID controllers are SAN-ready with switched fabric and arbitrated Fibre Channel Loop support. They also support up to 124 drives and take full advantage of the Fibre Channel architecture by addressing each disk drive through redundant loops. These controllers are designed for integration into our 2U NexStor 4000F Fibre Channel enclosures (NexStor 4300F and 4500F) with monitoring and management capabilities through nStor’s StorView storage management software as well as being integrated into non-nStor Fibre Channel enclosures.
Our newly released Wahoo-SATA (Serial ATA) RAID controller product line, announced in late 2003, takes advantage of the cost effective SATA drives that provide an affordable storage solution for businesses. Our Serial ATA solutions bring cost-effective, continuous data protection and advanced storage management and include both Fibre Channel to SATA and SCSI to SATA models. These solutions are based on our core technology foundation, which includes the Wahoo Fibre Channel RAID engine and StorView storage management software, and are designed to reduce the cost and complexity of supporting data-intensive applications while easing storage management challenges.
We currently maintain two storage management software packages: StorView and AdminiStor. StorView remotely monitors our Fibre Channel and Serial ATA storage devices, while AdminiStor is designed to support the management and monitoring functions of our SCSI storage devices.
7
StorView
Our StorView storage management software is HTML-based and fully supports our entire Wahoo family of controllers. It is the fifth generation of software management tools which we have developed and it allows IT administrators to configure, manage, and monitor the entire network from anywhere in the world. Written in HTML-based GUI (graphical user interface) to manage the NexStor Series, our web-based StorView works with the industry’s leading web browsers making it easy to customize local or network based management and fault reporting. With access through a secure firewall, IT administrators have the ability to change RAID configurations and LUN permissions on the fly without server re-boots or disruption to data access. StorView provides local or remote monitoring and management with remote notification for Microsoft Windows, Linux, UNIX and Macintosh environments, allowing users to manage data from remote locations.
AdminiStor has been upgraded to support our legacy 3000 SCSI and Fibre series as well as our 4000S SCSI JBOD and RAID series of products. AdminiStor has a JAVA GUI that provides a drill-down, tree-like structure to allow users to access installed RAID and storage controllers, physical components and logical arrays, all using point-and-click technology. The Administor, running from any JAVA-enabled browser, allows users to manage nStor storage resources securely from anywhere in the world.
We rely upon various patents, copyrights and trademarks, as well as non-disclosure and confidentiality agreements with employees and customers, to establish, protect and preserve our proprietary rights. Our registered patents include (i) data storage chassis with adjustable rack mounting, (ii) disk drive storage enclosure with isolated cooling path for storage media, and (iii) front bezel for disk drive storage enclosure. For a discussion of certain risks relating to the protection of our intellectual property rights, see Risk Factors - Potential Infringement of Intellectual Property Rights.
We market our products and services primarily through a global network of OEM partners and volume channels, such as SI’s and VAR’s, and a few select direct channels.
Direct and indirect product sales represented 31% and 69%, respectively, of our Storage Solutions sales in 2003. Sales to three indirect customers accounted for 44% of our Storage Solutions sales.
OEM-grade products are primarily sold directly to OEM’s for integration into their product offerings. Generally, the OEM products are labeled under the OEMs’ brand name where our products are frequently packaged as part of a complete data processing system or combined with other storage devices to deliver a storage subsystem. We believe OEM channel sales provide significant revenue opportunity, market visibility and credibility, and can serve as a proving ground for new technologies that can later be marketed and sold in the distribution channel. OEMs are strategic in nature and, therefore, require unique sales strategies. The sales and support organization must be highly technical and generally involves several corporate resources.
The sales model for product distribution in Europe and the Asia/Pacific-Rim is similar to the domestic OEM and channel model, utilizing SI’s and VAR’s. Complementary pricing, margin structures and marketing programs support each sales channel. We believe this strategy allows our customers to effectively sell and market our products to their specific marketplace while maintaining channel integrity.
Our marketing efforts are driven by an industry trend towards the implementation of storage to maximize simplicity, performance and availability.
8
We offer a 24 hours a day, 7 days a week technical support hotline paging system for customers worldwide via phone, fax or email, providing a variety of flexible services and support programs that allow customers to choose the level of support appropriate for their needs. Various levels of on-site service for our products are available for customers who purchase service agreements. These services are contracted with an outside subcontractor. Our support staff follows up with the subcontractor and the customer to ensure that service is performed efficiently and promptly. We offer spare parts and advanced exchange for customers who do not have service agreements.
Our Help Desk routes and supports incoming technical support calls, collects the necessary information, documents the trouble call and then tracks that call throughout the support.
Our standard warranty is a three-year return-to-factory policy, which covers both parts and labor. We pass on to the customer the warranty provided by the manufacturers for products that we distribute, including an up to five-year warranty for disk drives. We have not experienced material warranty claims; however, there can be no assurance that future warranty claims will not have a material adverse effect on our future financial condition and operating results.
Since mid-2002, we have utilized contract manufacturing on a turn key basis to manufacture our enclosures and controllers. This process minimizes our investment in staff and equipment. ACT-Electronics currently serves as our primary contract manufacturer. Finished product is generally shipped directly from our contract manufacturer to our volume OEM customers; enclosures and controllers for our other customers are shipped to our Carlsbad facility for integration and testing with disk drives and attach kits prior to customer shipments.
Our products are assembled from components and prefabricated parts, such as controllers, cabinets, disk drives and power supplies, manufactured and supplied by others. We require our contract manufacturer to purchase components from specified suppliers based on the suppliers’ ability to provide quality parts and components that meet our specifications and volume requirements. A number of our parts and components are designed specifically for integration into our products.
We place orders with our contract manufacturer approximately once per quarter, depending on actual sales orders. Contract manufacturer lead times are sixty to ninety days depending on the product. We purchase certain critical components ourselves, principally power supplies and fans, with greater lead times and generally provide those components to our contract manufacturer.
We depend heavily on our suppliers to provide high quality materials on a timely basis and at reasonable prices. Although many of the components for our products are currently available from numerous sources at competitive prices, some of the components used in our products are presently available from a limited number of suppliers, or from a single supplier. Further, because of increased industry demand for many of those components, their manufacturers may, from time to time, be unable to make delivery of our orders on a timely basis. In addition, manufacturers may choose, for numerous reasons, not to continue to make those components, or the next generation of those components, available to us. The inability to obtain a key product component as needed may cause a reduction in our sales volume.
We have no long-term supply contracts. There can be no assurances that we will be able to obtain, on a timely basis, all of the components we require. If we cannot obtain essential components as required, we could be unable to meet demand for our products, thereby materially adversely affecting our operating results and allowing competitors to gain market share. In addition, scarcity of such components could result in cost increases, which could materially adversely affect our operating results.
9
The sophisticated nature of our products requires extensive testing by skilled personnel. We utilize specialized testing equipment and maintain an internal test-engineering group to provide this product support. We provide and control the final test procedure used at the contract manufacturer and the contract manufacturer is required to have a continuous improvement process and provide weekly quality data.
Our products are manufactured based on a forecast of near-term demand. Accordingly, we generally maintain inventory in advance of receipt of firm orders from many of our customers. We have no long-term purchase commitments from our customers and, in general, our OEM customers may cancel or reschedule orders on 30-60 days notice with little or no penalty. As a result, our backlog at any given time is not necessarily indicative of future sales levels.
There can be no assurances that orders from existing customers will continue at their historical levels, that we will be able to obtain orders from new customers, or that existing customers will not develop their own storage solutions internally and as a result reduce or eliminate purchases. Loss of one or more of our principal customers, or cancellation or rescheduling of material orders already placed, could materially and adversely affect our operating results.
We have two engineering centers to facilitate our product development. Each of these centers of competency is focused on a different aspect of our product development strategy.
Lake Mary, Florida is the competency center for(i) our enclosure technology and development, and (ii) for the development of our RAID controller technology and drive firmware qualification for our controllers. In addition to designing, developing and testing our storage enclosures, engineers in Lake Mary are also responsible for the design, development and successful integration of our RAID controllers into our enclosure technology. All disk drive compatibility testing with our product lines is conducted in Lake Mary.
The competency center for our integrated solutions, including our applications and interoperability lab, is located in Carlsbad, California. Engineers in Carlsbad integrate total storage solutions that include internally developed and third party software and hardware components for a variety of operating systems and applications. The interoperability lab focuses on component selection, validation, integration and delivery of OEM solutions. In conjunction with the applications and interoperability lab, Carlsbad hosts the StorView software development and testing.
The information storage industry is subject to rapid technological change. Our ability to compete successfully is largely dependent upon the timely development and introduction of new products and our ability to anticipate and respond to change. We use engineering design teams that work with marketing managers, application engineers and customers to develop products and product enhancements. As part of our development strategy, we actively seek industry leaders with whom we can initiate co‑development activities in the hardware, software and systems businesses.
The market for storage solutions is subject to intense competition. We compete not only with other enclosure and disk array manufacturers, but also with manufacturers of proprietary integrated computer systems and SI’s who sell computer systems containing general purpose RAID subsystems, most of which may have significantly greater financial and technological resources or larger distribution capabilities than nStor.
10
Certain competitors may offer their products at lower sales prices than ours. Accordingly, we must often compete on the basis of product quality, performance and reliability in specific applications. Our ability to compete will largely depend upon our ability to continue to develop high performance products at competitive prices while continuing to provide superior technical support and customer service. For a discussion of our major competitors, see Risk Factors – Intense Competition.
The intensely competitive storage market is characterized by rapidly changing technology. These competitive factors include: product performance and price; support for new industry and customer standards; scalability; interoperability with other network devices; features and functionality; availability; reliability; technical service and support; quality of system integration; existence and accessibility of differentiating features; and quality and availability of supporting value-add software. Our failure to compete successfully with respect to any of these or other factors could have a material adverse effect on our results of operations and financial condition.
Our entry into the Telemanagement Solutions business began on June 7, 2002 when we acquired 100% of Stonehouse, a Dallas, Texas based operation with regional offices in Florida and Virginia. Stonehouse is a comprehensive resource for Communications Services Management applications and services providing sophisticated telemanagement software and services solutions to help large enterprises in both the private and government arenas manage their communications expenses, assets and processes.
Stonehouse was established in 1978 as an independent consulting firm providing telemanagement solutions to the operators of both public and private telecommunications networks. In 1983, Stonehouse introduced MONIESâ (Management of Network Income, Expense and Services) 5.0 telemanagement software, positioning Stonehouse as a leader in comprehensive telemanagement systems. In mid-2003, we completed the development of MONIESâ10.0, our new, re-architectured, web-based telemanagement software solution. Stonehouse software systems have been licensed to many customers in the U.S., Mexico, Canada, Europe, Australia, Saudi Arabia, and Japan. See Target Market for a discussion of industries and organizations in which we provide services.
Stonehouse solutions include a suite of modular applications, with multiple delivery options, consulting services provided by hands-on professionals, and outsourced managed services. Stonehouse’s Communications Services Management solutions enable enterprises to manage voice, data and wireless services by providing a systematic approach to automate order processing, monitor expenses, manage vendor invoices, track inventory of assets and accurately allocate costs. Customers realize benefits of cost savings, increased management control, and productivity improvements.
With telecommunication deregulation and the onset of the Internet, businesses are facing an increasingly complex operating environment and escalating expenses. Today’s corporate telecommunications managers have to keep track of local, long distance and wireless services and equipment, wide-area networking, Internet access, voice and data circuits, pagers and other wireless devices. In addition to the increasing number of service plans, there are a growing number of providers; all of who have their own billing formats, pricing schemes, and service level guarantees. Organizations today are devoting more and more financial and human resources to managing their communications function, while pressure increases for reducing expenses. The management issue is becoming even more complex as networks converge where multiple voice and data services are provided via a single network and managers are forced to track how bandwidth is used and allocated. Most companies are currently managing their telecommunications services expenses and assets with point solutions and homegrown spreadsheets. As businesses manage more complex and evolving communications services, the need for a comprehensive, systematic solution is growing daily.
11
These trends have offered us a window of opportunity to participate in the telecommunications services management market and growth. We believe we have competitive advantages, including a comprehensive suite of applications used by Fortune 500 and large government organizations; customers who have been with Stonehouse, on average, over ten years; a recurring revenue stream from product maintenance; and an experienced management team.
Our principal business is to provide applications, professional and managed services for solving day-to-day challenges in managing communication services expenses, assets and processes.
MONIESâ 5.0, a modular, fully integrated software solution assists customers in centralizing their processing and tracking of communications assets, expenses and processes, reduces billing errors, consolidates inventory and invoice data, and streamlines internal ordering processes. MONIESâ 5.0 is available in several versions including mainframe, designed for IBM SNA environments or RS/390 servers, and in OS/2 or UNIX AIX (RS/390) environments.
MONIESâ10.0, our new, re-architectured, robust web-based software solution is built on a component-based architecture using standard operating software and is implemented using the Oracle Database Management System and JAVA standards. Requiring only a browser, MONIESâ 10.0 provides total workstation independence for the end-user and runs on Windows NT, UNIX, Oracle and most enterprise JAVA application servers. MONIESâ 10.0 provides a feature-rich browser-based web interface enabling users to access the system from anywhere with an Internet connection. MONIESâ 10.0 was developed during 2002 and 2003 and has been available to our customers since mid- 2003.
Stonehouse’s Communication Services Management Applications provide fully integrated modular applications. Modules include:
|
|
· |
Order management for streamlining the service request process for moves, adds, and changes, and automatically updating the inventory database; |
|
|
· |
Inventory management to centralize data on assets and services; |
|
· |
Invoice management to consolidate bills and reconcile against inventory; |
|
|
· |
Billing management to efficiently and accurately allocate expenses |
MONIESâ5.0 and MONIESâ10.0 are available as on-site solutions or as hosted applications in an ASP (hosted application services) environment. The ASP offering provides full remote access to the Communication Services Management solution with minimal up-front investment in hardware, software and personnel. Our solutions feature built in security, on-line access, over 200 reports and virtually unlimited multi-site, multi-user capability. Access to the data center can be direct or over the Internet.
We offer a flexible range of Professional Services and a standard services methodology, Pathway, to assist with implementation and provide assessments, reviews and advice. Experienced industry professionals provide:
|
|
· |
Process and procedure optimization; |
|
|
· |
Vendor invoice review and audit; |
|
· |
Comprehensive asset inventory creation; |
|
|
· |
Requirements definition and RFP (Request for Proposal) support; |
|
|
· |
Applications installation and implementation; and |
|
|
· |
Customized product and process training. |
12
We offer customers the convenience of implementing flexible outsourcing services. Our Telemanagement Outsourcing Services team offers a variety of services, including, order management, invoice management, invoice reconciliation and billing management, providing such potential benefits as:
|
|
· |
Cost-center based chargeback, reporting and visibility; |
|
|
· |
Elimination of vendor errors; |
|
· |
Automated G/L, A/P feeds and manual processes; |
|
|
· |
Changing user behavior; |
|
|
· |
Inventory optimization; |
|
|
· |
Integration with call accounting. |
Our Professional Services team provides the installation, integration, training and consulting support. As customer requirements expand, we also offer turnkey managed solutions from assuming responsibility for one function, such as billing management, to complete outsourcing of a customer’s communications operations. Implementing our applications and services can help companies reduce communications services expenses, improve productivity, and gain management control of their operating environment.
Our applications and services are targeted to large corporations (greater than 1,000 employees), educational institutions, state and municipal governments and other organizations with large and complex public, private, and hybrid communications networks. The solution set is aimed at organizations that require comprehensive management, including billing, work order, inventory, and problem management as well as network and traffic analysis functions. Our target markets include industries and organizations in government, education, finance, petroleum and chemical, transportation, entertainment, utilities and telecommunications.
Currently, we market our products and services through a direct sales force as our primary source of distribution, augmented by informal co-marketing and other partnership arrangements.
As of February 29, 2004, we employed 96 full-time employees, of which 58 are employed in our Storage Solutions business (27 in engineering, product development and technical support, 13 in sales and marketing, 6 in manufacturing and operations, and 12 in finance, management and administration) and 38 are employed in our Telemanagement Solutions business (4 in sales and marketing, 17 in custom operations/outsourcing, 4 in customer care, 5 in technology services and 8 in finance, management and administration). Our employees are not covered by collective bargaining agreements and there have been no work stoppages. We believe our employee relations are good.
We believe that our future success will largely depend upon our ability to continue to attract, employ and retain competent qualified technical, marketing and management personnel. Experienced personnel are in great demand and we must compete with other technology firms, some of which may offer more favorable economic incentives to attract qualified personnel.
13
In addition to the various risks ordinarily attendant to investments in entities in the technology industry, certain other material risk factors relating to our company and its business present a particularly high degree of risk. The specific risks set forth below are not considered, or deemed, to be exhaustive or definitive of all the material risks involved in our business.
Our Auditor's Have Expressed Substantial Doubt as to Our Ability to
Continue as a “Going Concern”
The auditors’ reports for our consolidated financial statements for the years ended December 31, 2003, 2002 and 2001 state that given our recurring operating losses and our continued experience of negative cash flows from operations, there is substantial doubt about our ability to continue as a going concern. A “going-concern” opinion indicates that although there is substantial doubt, the financial statements have been prepared on a going-concern basis and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
We have experienced substantial net losses for the years ended December 31, 2003, 2002, and 2001 of $6 million, $8 million and $14 million, respectively, as well as negative cash flows from operations during those years. As of December 31, 2003, we had negative working capital of $8.4 million, which includes borrowings of $6.9 million from H. Irwin Levy, our Chief Executive Officer, Chairman of the Board and a principal shareholder, or companies controlled by Mr. Levy (collectively, Mr. Levy). There can be no assurances that we will be able to achieve or maintain profitability on a quarterly or annual basis or that we will be able to achieve revenue growth.
Since January 1, 2002, and through February 29, 2004, we obtained $9.8 million of equity and debt financing from private investors, including $6.7 million from Mr. Levy.
We are currently exploring alternatives for raising additional debt or equity capital to finance our short-term and long-term plans as well as operating deficits expected to be incurred until we begin to generate positive operating cash flows. However, due to conditions in the technology-related financial markets and other uncertainties, many of which are outside our control, there can be no assurances that such required additional funds will be available on terms acceptable to us, if at all, or that we will be able to generate positive cash flows from operating activities in the future. We have insufficient liquidity to fund our operating needs for the next twelve months.
Insufficient Funding
We have expended and may be required to expend substantial funds for research and development, and for other aspects of our business. Accordingly, we may need or elect to raise additional capital. Our capital requirements will depend on many factors, including:
|
|
· |
The problems, delays, expenses and complications frequently encountered by technology companies; |
|
· |
The progress of our research, development and product testing programs; |
|
|
· |
The success of our sales and marketing programs; |
|
|
· |
Costs in filing, prosecuting, defending and enforcing intellectual property rights; |
|
|
· |
The extent and terms of any collaborative research, manufacturing, marketing or other arrangements; and |
|
|
· |
Changes in economic, regulatory or competitive conditions or our planned business. |
Estimates about the adequacy of funding for our activities are based on certain assumptions, including the assumption that research, development and testing related to our products under development can be conducted at projected costs and within projected time frames and that such products can be successfully marketed.
14
To satisfy our capital requirements, we may seek to raise funds in the public or private capital markets. Our ability to raise additional funds in the public or private markets will be adversely affected if the results of our ongoing or future research and development programs are not favorable. We may seek additional funding through corporate collaborations and other financing vehicles. Such funding may not be available, or if available, it may not be available on acceptable terms. If adequate funds are not available, we may be required to curtail our operations significantly, or we may be required to obtain funds through arrangements with future collaborative partners or others that may require us to relinquish rights to some or all of our technologies or products under development. If we are successful in obtaining additional financing, the terms of the financing may have the effect of diluting or adversely affecting the holdings or the rights of the holders of our common stock.
We have experienced significant period-to-period fluctuations in our operating results. These fluctuations are partially due to product design, development, manufacturing and marketing expenditures. If significant variations were to occur between forecasts and actual orders with respect to our products, we may not be able to reduce our expenses proportionately and operating results could be materially adversely affected. Our revenues in any period are dependent on the timing of product shipments, the status of competing product introductions, as well as the availability from suppliers of component parts required for our products. Like many other technology companies, a disproportionately large percentage of our Storage Solutions sales may occur in the closing weeks of each period. Any forward-looking statements about operating results made by members of our management will be based on assumptions about the likelihood of closing anticipated sales and other factors management considers reasonable based in part on knowledge of performance in prior periods. The failure to consummate any of those sales may have a disproportionately negative impact on our operating results, due to our fixed costs, and may thus prevent management’s projections from being realized.
Inability to Attract and Retain Qualified Employees
Our ability to provide high-quality products on a timely basis requires that we employ an adequate number of skilled engineers and technicians. Accordingly, our ability to increase our productivity and profitability will be limited by our ability to attract and retain skilled personnel. We may not be able to maintain an adequate skilled labor force necessary to operate efficiently and to support our growth strategy and our labor expenses may increase as a result of a shortage in the supply of skilled personnel.
During 2002 and 2003, we introduced new products in both our Storage Solutions and Telemanagement Solutions businesses and are encouraging our customers to migrate to these new products. These activities entail a number of risks and uncertainties, all of which could have a material and adverse affect on our business. Those risks and uncertainties, include, but are not limited to, the following:
|
|
· |
Customer orders may be delayed while customers evaluate new products; |
|
|
· |
The new line of products may contain unknown defects or “bugs”; |
|
· |
Customers may not purchase the new products; and |
|
|
· |
It may be more difficult to accurately predict future sales and financial performance. |
Rapid Technological and Customer Preference Changes
Our businesses are characterized by rapid technological change, frequent new product introductions and evolving industry standards. Customer preferences in this market are difficult to predict and changes in those preferences
could render our current or future products unmarketable. The introduction by our competitors of products embodying new technologies and the emergence of new industry standards could render our existing products as well as our new
15
products being introduced obsolete and unmarketable. For example, if customers were to turn away from open systems computing, our Storage Solutions revenues would decline dramatically.
Our success depends upon our ability to address the increasing technical requirements of customers, to enhance existing products and to develop and introduce, on a timely basis, new competitive products (including new software and hardware and enhancements to existing software and hardware) that keep pace with technological developments and emerging industry standards. If we cannot successfully identify, manage, develop, manufacture and market product enhancements or new products, our business will be materially and adversely affected.
Intense Competition
The markets in which our businesses operate are intensely competitive. For example, in our Storage Solutions business, we compete with traditional suppliers of computer systems such as LSI Logic, EMC-CLARiiON and IBM, which market storage systems as well as other computer products. We also compete against independent storage system suppliers including, but not limited to, Dot Hill, Xyratex, Infortrend, Nexsan, JMR Electronics and MTI Technologies.
In our Telemanagement Solutions business, we compete with a variety of specialized software and outsourcing service providers. Many of these providers offer more limited software and services solutions than the solutions offered by Stonehouse.
Many of these competitors are significantly larger than our company, and have significantly greater financial, technical, marketing, purchasing and other resources than we do, and as a result, may be able to respond more aggressively to new or emerging technologies and changes in customer requirements, or devote greater resources to the development, promotion and sale of products than we can, or to deliver competitive products at a lower price.
Increased competition is likely to result in price reductions, reduced operating margins and loss of market share, any of which could have a material adverse effect on our business, operating results or financial condition. In fact, competitive pricing pressures have had, and may continue to have, an adverse effect on our revenues and earnings.
If we are unable to develop and market products to compete with our competitors’ products, our business will be materially adversely affected. In addition, if major customers who are also competitors cease purchasing our products so that they can concentrate on sales of their own products, our business could be materially adversely affected.
Pending Litigation
In February 2002, W. David Sykes, a former officer of our company filed a complaint against one of our subsidiaries in the Circuit Court of Palm Beach County, Florida, in which he claims he was wrongfully terminated under provisions of his employment agreement with us. We believe that we acted in accordance with the termination provisions of the agreement and that no further compensation or benefits are due. In May 2003, Mr. Sykes filed an amended complaint, adding nStor Technologies, Inc. as a defendant, based upon our guaranty of the terms and conditions of the employment agreement between Mr. Sykes and our subsidiary. In June 2003, we filed a counterclaim against Mr. Sykes for breach of fiduciary duty and unjust enrichment, based upon his sale of nStor stock while in possession of material, non-public information. The litigation is still in its preliminary stages. We intend to vigorously defend Mr. Sykes' claims and do not believe at this time that the litigation will have a material impact us.
Lack of Long Term Contracts
We generally do not enter into long-term purchase commitments with our customers and customers generally have certain rights to extend or to delay the shipment of their orders, as well as the right to return products and cancel orders under certain circumstances. The cancellation or rescheduling of orders placed by our customers, or the return of products shipped to them, could materially and adversely affect our business.
16
Product Defects
Our products may contain undetected software or firmware errors or hardware failures when first introduced or as new versions are released. We cannot be certain that, despite testing, errors will not be found in new products after commencement of commercial shipments.
Our standard warranties provide that if a system does not function to published specifications, we will repair or replace the defective component without charge. Although warranty costs have not been material, unexpected significant warranty costs could have a material adverse effect on our business.
Availability of Competing Products
In the United States, we sell our Storage Solutions through both a direct sales force and through indirect sale channels. Our OEMs, VARs and SIs may also carry competing product lines, and could reduce or discontinue sales of our products, which could have a material adverse effect on our operating results.
A Significant Percentage Of Our Expenses Are Fixed Which May
Affect Our Operating Results
Our expense levels are based in part on our expectations as to future sales, and a significant percentage of our expenses are fixed, which limits our ability to reduce expenses quickly in response to any revenue shortfalls. As a result, if revenues do not meet our revenue projections, operating results may be disproportionately affected. We may experience revenue shortfalls for various reasons, including:
|
|
· |
Sudden shortages of raw materials or fabrication, test or assembly capacity constraints that lead our suppliers to allocate available supplies or capacity to other customers, which, in turn, may harm our ability to meet our sales obligations; and |
|
· |
The reduction, rescheduling or cancellation of customer orders. |
In addition, we typically plan our Storage Solutions production and inventory levels based on internal forecasts of customer demand, which is highly unpredictable and can fluctuate substantially. In response to anticipated long lead times from our outside suppliers, we generally order certain materials in advance of anticipated customer demand. This advance ordering may result in excess inventory levels or unanticipated inventory write-downs if expected orders fail to materialize.
Lengthy Sales Cycles
Customer orders generally range in value from a few thousand dollars to hundreds of thousands of dollars. The length of time between initial contact with a potential customer and sale of a product or service, or “sales cycle”, can vary greatly and can be as long as twenty-four months. This is particularly true for the sale and installation of complex, turnkey solutions. Our revenues are likely to be affected by the timing of larger orders, which makes it difficult for usto predict such revenues. Revenue for a period could be reduced if large orders forecasted for a certain period are delayed or are not realized. Factors that could delay or defer an order include:
|
|
· |
Time needed for technical evaluation by customers; |
|
· |
Customer budget restrictions and changes to budgets during the course of a sales cycle; |
|
|
· |
Customer internal review and testing procedures; and |
|
|
· |
Engineering work needed to integrate our solutions with a customer’s system. |
17
Potential Infringement of Intellectual Property Rights
We rely on a combination of trade secrets, copyrights, trademarks, patents, domain names and employee and third-party nondisclosure agreements to protect our intellectual property rights. The steps taken to protect our rights may not be adequate to prevent misappropriation of our technology or to preclude competitors from developing products with features similar to our products. Furthermore, third parties may assert infringement claims against us or with respect to our products for which we have indemnification obligations to certain of our customers. Asserting our rights or defending against third-party claims could involve substantial expense, which could have a material adverse effect on our operating results. In the event a third party were successful in a claim that one of our products infringed the third party’s proprietary rights, we may have to pay substantial damages or royalties, remove that product from the marketplace or expend substantial amounts in order to modify the product so that it no longer infringes such proprietary rights, any of which could have a material adverse effect on our operating results.
Loss of Key Suppliers
We rely on other companies to supply certain key components for our Storage Solutions products. Our products are typically designed to operate with unique components that may only be available from a single source. For example, certain of our products are dependent upon RAID controllers designed by one supplier. Although we can use other suppliers, the delay in integrating these parts into our systems will increase product costs. Other critical components, while not dependent on one source, may, from time to time, be in short supply or unavailable while alternative sources can be identified. Modification to the particular products, requalification of the products with applicable regulatory agencies, and additional testing to assure software and hardware is compatible can result in lost or deferred revenue as well as higher product costs.
In addition, we resell subsystems, software and services from others. This leaves us vulnerable to inadequate supply, uneven allocation in times of shortage, delays in order fulfillment, and order cancellations.
Concentrated Customer Base
Since our June 2002 acquisition of Stonehouse, we operate in two business segments, Storage Solutions and Telemanagement Solutions. In 2003, sales to three customers accounted for 18%, 15% and 11% of our Storage Solutions sales and sales to a single customer accounted for 20% of our Telemanagement Solutions sales. In 2002, sales to two customers accounted for 42% and 13% of our Storage Solutions sales and sales to a single customer accounted for 29% of our Telemanagement Solutions sales.
A reduction in technological spending or a general economic downturn in any industry or geographical area targeted by us, or the loss of one or more customers, particularly a significant customer, could result in a material decrease in revenues, thereby materially adversely affecting our operating results.
Volatile Stock Price
Our common stock has experienced in the past, and could experience in the future, substantial price volatility as a result of a number of factors, including:
|
|
· |
Quarter to quarter variations in actual or anticipated financial results; |
|
· |
Announcements by us, our competitors or our customers; |
|
|
· |
Government regulations; and |
|
|
· |
Developments in the information storage and telecommunication management industries. |
18
The stock market has also experienced extreme price and volume fluctuations which has affected the market price of many companies and which has at times been unrelated to the operating performance of the specific companies whose stock is traded. Broad market fluctuations, developments in the technology industry, general economic conditions and political and current events may adversely affect the market price of our common stock.
In addition, if our security holders sell substantial amounts of our common stock in the public market, the market price of our common stock could fall.
Our executive and Storage Solutions, administrative, sales and operating headquarters are located in Carlsbad, California where we currently sublease approximately 20,000 square feet through September 2005. The present annual base rent for our Carlsbad facility is $188,000.
We lease approximately 7,000 square feet of office and warehouse space in Lake Mary, Florida as our principal engineering offices for our Storage Solutions business, under a lease agreement that expires in May 2006. The present annual base rent is approximately $55,000.
Our Telemanagement Solutions headquarters consists of 7,400 square feet in Dallas, Texas under a lease that expires in February 2009. The present annual base rent is $122,000. We have recently agreed to lease an additional 2,700 square feet in the same facility at an annual base rent of $44,000.
We believe our existing facilities are adequate to meet future needs. See Note 17 to Consolidated Financial Statements for information regarding the Company’s obligations under its facilities leases.
In June 1996, Jack Ehrenhuas, Mark Schindler, Eugene Stricker, Amnon Damty, Ehud Mendelson and Susan Felton filed a Complaint in the Supreme Court of the State of New York, County of Nassau, against us and Michael Wise, our then Chairman of the Board and a current director. The plaintiffs claim to have contractual and proprietary interests in the prospect of a transaction to purchase certain net assets acquired by us and seek compensatory damages plus punitive damages.
In August 1996, The Nais Corporation, Mark Schindler, Eugene Stricker, Amnon Damty, Ehud Mendelson and Susan Felton filed a Complaint in the same Court making similar allegations against one of our subsidiaries, its then president, R. Daniel Smith, and a company controlled by Mr. Smith. In this action, the plaintiffs seek compensatory damages plus punitive damages for alleged breach of contract.
Neither case is being actively prosecuted. Our counsel believes that we have good defenses to both claims and that we will not incur any material liability. We are unaware of any facts that would support any of the plaintiffs' claims and, accordingly, we believe that the claims are without merit.
In February 2002, W. David Sykes, our former Executive Vice President of Marketing and Sales, filed a complaint against one of our subsidiaries in the Circuit Court of Palm Beach County, Florida, in which Mr. Sykes claims he
was wrongfully terminated under provisions of his employment agreement with us. We believe that we acted in accordance with the termination provisions of the agreement and that no further compensation or benefits are due to Mr. Sykes. In May 2003,
Mr. Sykes filed an amended complaint, adding nStor Technologies, Inc. as a defendant, based upon our guaranty of the terms and conditions of the employment agreement between Mr. Sykes and our subsidiary. In June 2003, we filed a counterclaim against Mr. Sykes
for breach of fiduciary duty and unjust
19
enrichment, based upon his sale of nStor stock while in possession of material, non-public information. The litigation is still in its preliminary stages. We intend to vigorously defend Mr. Sykes' claims and do not believe at this time that the litigation will have a material impact on us.
On or about February 17, 2004, Michael Flannery, our former Vice President of Sales, North America, filed a complaint with the United States Department of Labor alleging discriminatory employment practices in violation of Section 806 of the Sarbanes-Oxley Act. More specifically, Mr. Flannery alleges that his employment was terminated as a result of his efforts to disclose allegedly untrue statements in certain of our periodic reports filed with the Securities and Exchange Commission. Mr. Flannery is seeking reinstatement and other damages.
We are preparing a response to Mr. Flannery’s complaint and have referred investigation of his complaint to our Audit Committee. We disagree with Mr. Flannery’s allegations concerning our periodic filings. Mr. Flannery’s termination was solely a result of his failure to perform his assigned duties. We intend to vigorously defend Mr. Flannery’s claim and do not believe that this matter will have a material impact on us.
From time to time, we are subject to legal proceedings and other claims arising in the ordinary course of business. In our opinion, we are not a party to any litigation the outcome of which would have a material adverse effect on our business or operations.
Item 4. Submission of Matters to a Vote of Security Holders
We did not submit any matters to the vote of our security holders during the fourth quarter of fiscal 2003.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Purchases of Equity
Securities
Our common stock is traded on the American Stock Exchange (AMEX) under the symbol NSO. The following table sets forth the high and low sales prices of our common stock for each quarter during the years ended December 31, 2003 and 2002 as reported by AMEX. During that period, we did not pay dividends on our common stock and we do not expect to pay any dividends in the near future.
|
Market Price Range |
|||||||
|
|
High |
Low |
|||||
|
|
|||||||
|
2003 |
|||||||
|
First quarter |
$ |
.34 |
$ |
.21 |
|||
|
Second quarter |
$ |
.61 |
$ |
.31 |
|||
|
Third quarter |
$ |
1.15 |
$ |
.41 |
|||
|
Fourth quarter |
$ |
.87 |
$ |
.45 |
|||
|
|
|||||||
|
2002 |
|||||||
|
First quarter |
$ |
.48 |
$ |
.20 |
|||
|
Second quarter |
$ |
.41 |
$ |
.21 |
|||
|
Third quarter |
$ |
.30 |
$ |
.20 |
|||
|
Fourth quarter |
$ |
.27 |
$ |
.19 |
|||
As of February 29, 2004, we had 165,067,838 shares of common stock outstanding and approximately 1,785 holders of record of such stock.
20
Recent Sales of Unregistered Securities and Use of Proceeds
There have been no recent sales of unregistered securities.
The following table summarizes certain selected consolidated financial data for the five years ended December 31, 2003.
Certain amounts for years prior to 2003 have been reclassified to conform to the 2003 presentation. These reclassifications had no impact on operating results previously reported. The selected financial data has been derived from our audited consolidated financial statements and is qualified by reference to, and should be read in conjunction with, the Consolidated Financial Statements and Notes thereto and “Management's Discussion and Analysis of Financial Condition and Results of Operations”, included elsewhere in this report:
|
|
Year Ended December 31, |
|||||||||||||||||||
|
|
(dollars in thousands, except per share data) |
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
2003 |
2002 (2) |
2001 |
2000 |
1999 (5) |
||||||||||||||||
|
|
||||||||||||||||||||
|
Sales |
$ |
12,602 |
$ |
10,790 |
$ |
17,886 |
$ |
40,197 |
$ |
41,089 |
||||||||||
|
Gross margin |
$ |
4,422 |
$ |
2,898 |
$ |
2,049 |
$ |
9,872 |
$ |
|||||||||||