þ
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the year ended June 30, 2007 | ||
or
|
||
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware
(State or other jurisdiction of incorporation or organization) |
3661
(Primary standard industrial code number) |
77-0443568
(I.R.S. employer identification no.) |
1
ITEM 1. | BUSINESS |
2
| ShoreWare desktop applications. ShoreWare desktop applications for end users include the following primary offerings: Personal Call Manager, Unified Messaging, Office Anywhere, Automated Attendant and a softphone. |
| Personal Call Manager. Personal Call Manager is an application that allows end users to manage their voice communications from their desktops. With the click of a mouse, end users can initiate, manage, terminate, and receive calls, convene and manage conference calls, and see the availability of others on the network. This functionality is enhanced by the integration of our Personal Call Manager application with Microsoft Outlook, which allows the end user to initiate calls from a contact list. |
3
| Unified Messaging. Unified Messaging integrates our voicemail application with Microsoft Outlook. This enables end users to receive, send, be notified of and play voice mail messages through their Microsoft Outlook email. | |
| Office Anywhere. Office Anywhere enables end users outside the office to manage calls with Personal Call Manager and to enjoy the same call handling productivity benefits as their office-based colleagues. Communications directed to the end users office phone are forwarded to the end users location, and the end users outbound calls appear to the called party as if they originated in the end users office. Using Office Anywhere, end users have the same call management and unified messaging features and functionality at remote locations as they have in their offices. | |
| Softphone. ShoreTels softphone application allows an end user to turn a PC into an IP phone by simply connecting a headset to the PC and activating the application. |
| Automated Attendant. Automated Attendant provides end users with a 24-hour automated call answering and routing capability that enables the enterprise to direct callers to appropriate individuals, workgroups or messages. | |
| Workgroup. Workgroup is an entry-level contact center application that provides real-time handling of incoming calls to enterprises, with call routing, queuing and reporting tools. | |
| ShoreWare system management. Our browser-based system management applications consist of ShoreWare Director and ShoreWare System Monitor. |
| ShoreWare Director. ShoreWare Director provides enterprises with a single point of system management, enabling IT administrators to view and manage the entire telecommunications system of the enterprise from any location using a single application. A new end users extension, mailbox and automated attendant profile can be added from a single management screen, avoiding the additional work required with most PBXs, voice mail systems and automated attendants. | |
| ShoreWare System Monitor. ShoreWare System Monitor is an IP voice management tool that is designed to continuously measure the performance of every link in the network, enabling an enterprise to identify and address voice quality issues. |
| Additional business applications. We offer other business applications, such as ShoreTel Contact Center, ShoreTel Converged Conferencing and salesforce.com integration. ShoreTel Contact Center allows enterprises to efficiently manage significant inbound or outbound call activities. ShoreTel Converged Conferencing enables enterprises to conduct large audio conferences and provides collaboration tools for application sharing, desktop sharing, instant messaging and end user availability information. Our salesforce.com integration application is designed to improve the productivity of end users that use salesforce.com by seamlessly integrating voice communications capabilities into their data driven workflow. |
| Post-contractual support services include web-based access support services and tools, access to technical support engineers, hardware replacement and software updates. These services are typically offered under support contracts with terms of up to five years. | |
| Training services include certification programs for channel partners, training programs at enterprise customer or channel partner locations and self-paced, desktop training programs. |
4
| System design and installation services include the assessment of the telecommunications requirements of a particular enterprise, the configuration of a system to maximize its efficiency, the management of the installation, and the subsequent testing and implementation of our systems. | |
| Professional services include software development to improve system performance, enable integration of our systems with third party applications or legacy systems, streamline business processes and address enterprise customer-specific business opportunities. |
| software that enables calling between switches and allows calls to be distributed among switches instead of using a single centralized switch; | |
| software that enables ShoreGear switches to obtain call routing information; | |
| software that monitors the bandwidth consumed on each WAN segment and prevents the system from exceeding bandwidth limitations; | |
| software that monitors all call activity on ShoreGear switches, and enables integration of ShoreTel and third-party applications; | |
| software that coordinates the functions of all servers on the system, allowing them to perform as a single, virtual server; | |
| software that enables remote ShoreTel and third-party applications to access and modify our systems; | |
| software that enables the switch to communicate with the application server, and receive system configuration information; | |
| software that allows each switch to maintain a comprehensive view of the system; and | |
| software that provides a graphical user interface for our phones. |
5
6
| avoid costly capital expenditures for the establishment of manufacturing operations; | |
| focus on the design, development, sales and support of our hardware products; and | |
| leverage the scale, expertise and purchasing power of specialized contract manufacturers. |
| Providers of IP systems, including 3Com and Cisco Systems; and | |
| Providers of hybrid systems, including Avaya, Alcatel-Lucent, Avaya, Inter-Tel, Mitel Networks (which recently acquired Inter-Tel) and Nortel Networks. |
7
| price of products and services and total cost of ownership; | |
| system reliability; | |
| voice quality and product features; | |
| ease of administration and installation, including system scalability; | |
| customer service and technical support; | |
| relationships with buyers and decision makers and brand recognition; | |
| an installed base of similar or related products; | |
| the ability to integrate various products into an enterprise customers existing networks, including the ability of a providers products to interoperate with other providers communications products; and | |
| size and financial stability of our operations compared to those of our competitors. |
8
Name
|
Age
|
Position
|
||||
John W. Combs
|
60 | Chairman, President and Chief Executive Officer | ||||
Edwin J. Basart
|
58 | Founder, Chief Technology Officer and Director | ||||
Michael E. Healy
|
46 | Chief Financial Officer | ||||
John Finegan
|
58 | Vice President, Finance | ||||
Pedro E. Rump
|
51 | Vice President, Engineering and Operations | ||||
Stephen G. Timmerman
|
48 | Vice President, Marketing | ||||
Joseph A. Vitalone
|
45 | Vice President, Sales | ||||
Walter Weisner
|
51 | Vice President, Global Services | ||||
Ava M. Hahn
|
34 | General Counsel and Secretary |
9
ITEM 1A. | RISK FACTORS |
10
| greater market presence, name recognition and brand reputation; | |
| a larger installed base of telecommunications and networking systems with enterprise customers; | |
| larger and more geographically distributed services and support organizations and capabilities; | |
| a broader offering of telecommunications and networking products, applications and services; | |
| a more established international presence to address the needs of global enterprises; | |
| substantially larger patent and intellectual property portfolios; | |
| longer operating histories; | |
| a longer history of implementing large-scale telecommunications or networking systems; | |
| more established relationships with industry participants, customers, suppliers, distributors and other technology companies; and | |
| the ability to acquire technologies or consolidate with other companies in the industry to compete more effectively. |
11
| initial costs of implementation for a new system; | |
| quality of infrastructure; | |
| security concerns; | |
| equipment, software or other technology failures; | |
| regulatory encroachments; | |
| inconsistent quality of service; |
12
| perceived unreliability or poor voice quality over IP networks as compared to circuit-switched networks; and | |
| lack of availability of cost-effective, high-speed network capacity. |
| the timing and volume of shipments of our products during a particular period; | |
| the timing and success of new product introductions by us or our competitors; | |
| the timing of recognition of revenue from sales to our customers; | |
| changes in our or our competitors pricing policies or sales terms; | |
| changes in the mix of our products and services sold during a particular period; | |
| the amount and timing of operating costs related to the maintenance and expansion of our business, operations and infrastructure; | |
| our ability to control costs, including third-party manufacturing costs and costs of components; | |
| our ability to obtain sufficient supplies of components; | |
| our ability to maintain sufficient production volumes for our products; | |
| volatility in our stock price, which may lead to higher stock compensation expenses pursuant to Statement of Financial Accounting Standards No. 123(R), Share-Based Payment , or SFAS 123(R); | |
| publicly-announced litigation, such as the lawsuit by Mitel; | |
| the timing of costs related to the development or acquisition of technologies or businesses; | |
| conditions specific to the IP telecommunications market, such as rates of adoption of IP telecommunications systems and introduction of new standards; | |
| changes in domestic and international regulatory environments affecting the Internet and telecommunications industries; | |
| seasonality in our target markets; and | |
| the purchasing and budgeting cycles of enterprise customers. |
13
| the timing of enterprise customers budget cycles and approval processes; | |
| a technical evaluation or trial by potential enterprise customers; | |
| our ability to introduce new products, features or functionality in a manner that suits the needs of a particular enterprise customer; | |
| the announcement or introduction of competing products; and | |
| the strength of existing relationships between our competitors and potential enterprise customers. |
14
| supplier capacity constraints; | |
| price increases; | |
| timely delivery; and | |
| component quality. |
15
16
| the ability of our products to compete with the products and solutions offered by our competitors; | |
| the cost of our products; | |
| the reliability of our products; | |
| the timeliness of the introduction and delivery of our products; and | |
| the market acceptance of our products. |
17
18
| our ability to comply with differing technical and environmental standards and certification requirements outside the United States; | |
| difficulties and costs associated with staffing and managing foreign operations; | |
| greater difficulty collecting accounts receivable and longer payment cycles; | |
| the need to adapt our products for specific countries; | |
| availability of reliable broadband connectivity and wide area networks in targeted areas for expansion; | |
| unexpected changes in regulatory requirements; | |
| difficulties in understanding and complying with local laws, regulations and customs in foreign jurisdictions; | |
| tariffs, export controls and other non-tariff barriers such as quotas and local content rules; | |
| more limited protection for intellectual property rights in some countries; |
19
| adverse tax consequences; | |
| fluctuations in currency exchange rates, which could increase the price of our products outside of the United States, increase the expenses of our international operations and expose us to foreign currency exchange rate risk; | |
| restrictions on the transfer of funds; and | |
| new and different sources of competition. |
20
21
| issuing additional common stock or other equity securities; | |
| issuing debt securities; or | |
| borrowing funds under a credit facility. |
22
| prohibit stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders; | |
| limit who may call a special meeting of stockholders; | |
| establish a classified board of directors, so that not all members of our board of directors may be elected at one time; | |
| provide our board of directors with the ability to designate the terms of and issue a new series of preferred stock without stockholder approval; | |
| require the approval of two-thirds of the shares entitled to vote at an election of directors to adopt, amend or repeal our bylaws or repeal certain provisions of our certificate of incorporation; | |
| allow a majority of the authorized number of directors to adopt, amend or repeal our bylaws without stockholder approval; | |
| do not permit cumulative voting in the election of our directors, which would otherwise permit less than a majority of stockholders to elect directors; and | |
| set limitations on the removal of directors. |
ITEM 1B. | UNRESOLVED STAFF COMMENTS |
23
ITEM 2. | PROPERTIES |
ITEM 3. | LEGAL PROCEEDINGS |
ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
| The approval of our reincorporation in Delaware. | |
| The approval of the amendment and restatement of our certificate of incorporation to effect a 1-for-10 reverse stock split of our capital stock (including all outstanding warrants and options exercisable for shares of our capital stock). |
24
| The approval of the amendment and restatement of our certificate of incorporation and bylaws that became effective upon the completion of our initial public offering. | |
| The approval of the election of the incumbent board members. | |
| The approval and adoption of our 2007 employee stock purchase plan. | |
| The approval of a form of indemnification agreement to be entered into by us with each of our directors and officers. |
ITEM 5. | MARKET FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS |
| price and volume fluctuations in the overall stock market from time to time; | |
| significant volatility in the market price and trading volume of technology companies; | |
| actual or anticipated changes in our results of operations or fluctuations in our operating results; | |
| actual or anticipated changes in the expectations of investors or securities analysts; | |
| actual or anticipated developments in our competitors businesses or the competitive landscape generally; | |
| litigation involving us, our industry or both; | |
| regulatory developments in the United States, foreign countries or both; | |
| economic conditions and trends in our industry; | |
| major catastrophic events; | |
| sales of large blocks of our stock; or | |
| departures of key personnel. |
25
ITEM 6.
SELECTED
CONSOLIDATED FINANCIAL DATA
Year Ended June 30,
2007
2006
2005
2004
2003
(In thousands, except per share amounts)
$
87,095
$
55,300
$
31,970
$
16,587
$
8,537
10,732
6,308
3,512
2,241
1,755
97,827
61,608
35,482
18,828
10,292
29,751
21,855
13,961
7,725
4,401
6,837
5,425
2,907
1,660
1,539
36,588
27,280
16,868
9,385
5,940
61,239
34,328
18,614
9,443
4,352
17,224
9,720
7,034
5,517
6,575
26,126
15,699
10,050
8,004
6,934
11,673
4,936
3,045
2,166
2,884
55,023
30,355
20,129
15,687
16,393
6,216
3,973
(1,515
)
(6,244
)
(12,041
)
273
248
124
(7
)
19
6,489
4,221
(1,391
)
(6,251
)
(12,022
)
(408
)
(219
)
(11
)
6,081
4,002
(1,402
)
(6,251
)
(12,022
)
(50
)
(51
)
(32
)
(26
)
(38
)
$
6,031
$
3,951
$
(1,434
)
$
(6,277
)
$
(12,060
)
$
0.70
$
0.60
$
(0.27
)
$
(1.27
)
$
(10.97
)
$
0.17
$
0.12
(3)
$
(0.27
)
$
(1.27
)
$
(10.97
)
8,565
6,609
5,352
4,935
1,100
35,581
33,431
(3)
5,352
4,935
1,100
(1)
Includes stock-based compensation expense as follows:
Year Ended June 30,
2007
2006
2005
2004
2003
(In thousands)
$
12
$
$
$
$
99
16
384
14
533
7
1,658
45
82
45
446
$
2,686
$
82
$
82
$
45
$
446
26
Table of Contents
(2)
See Note 3 to our consolidated financial statements for a
description of the method used to compute basic and diluted net
income (loss) per share available to common shareholders, which
gives effect to the
1-for-10
reverse split of our outstanding common stock on June 22,
2007.
(3)
See Note 2 to our consolidated financial statements
regarding the restatement of diluted net income per common share
available to common shareholders and diluted shares used in
computing net income per share available to common shareholders
for the year ended June 30, 2006.
As of June 30,
2007
2006
2005
2004
2003
(In thousands)
$
17,326
$
12,333
$
5,373
$
723
$
3,451
23,018
16,208
10,741
1,320
3,720
53,034
30,885
20,960
7,962
8,231
56,341
56,332
56,281
46,300
42,814
(31,829
)
(41,168
)
(45,713
)
(44,596
)
(38,374
)
ITEM 7.
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
27
Table of Contents
28
Table of Contents
29
Table of Contents
30
Table of Contents
Year Ended June 30,
2007
2006
2005
(In thousands)
$
87,095
$
55,300
$
31,970
10,732
6,308
3,512
97,827
61,608
35,482
29,751
21,855
13,961
6,837
5,425
2,907
36,588
27,280
16,868
61,239
34,328
18,614
17,224
9,720
7,034
26,126
15,699
10,050
11,673
4,936
3,045
55,023
30,355
20,129
6,216
3,973
(1,515
)
273
248
124
6,489
4,221
(1,391
)
(408
)
(219
)
(11
)
$
6,081
$
4,002
$
(1,402
)
(1)
Includes stock-based compensation as follows:
Year Ended June 30,
2007
2006
2005
$
12
$
$
99
16
384
14
533
7
1,658
45
82
$
2,686
$
82
$
82
31
Table of Contents
Year Ended June 30,
2007
2006
2005
89
%
90
%
90
%
11
%
10
%
10
%
100
%
100
%
100
%
30
%
35
%
40
%
7
%
9
%
8
%
37
%
44
%
48
%
63
%
56
%
52
%
18
%
16
%
20
%
27
%
26
%
28
%
12
%
8
%
8
%
57
%
50
%
56
%
6
%
6
%
(4
)%
6
%
6
%
(4
)%
%
6
%
6
%
(4
)%
32
Table of Contents
33
Table of Contents
34
Table of Contents
Three Months Ended
Jun. 30,
Mar. 31,
Dec. 31,
Sep. 30,
Jun. 30,
Mar. 31,
Dec. 31,
Sep. 30,
2007
2007
2006
2006
2006
2006
2005
2005
(In thousands)
$
25,622
$
23,142
$
19,864
$
18,467
$
17,328
$
14,474
$
13,498
$
10,000
3,301
2,867
2,616
1,948
1,756
2,119
1,219
1,214
28,923
26,009
22,480
20,415
19,084
16,593
14,717
11,214
8,480
7,997
6,767
6,507
6,132
6,011
5,668
4,044
1,984
1,813
1,595
1,445
1,483
1,755
1,109
1,078
10,464
9,810
8,362
7,952
7,615
7,766
6,777
5,122
18,459
16,199
14,118
12,463
11,469
8,827
7,940
6,092
5,774
4,282
4,051
3,117
3,200
2,386
2,083
2,051
7,685
7,009
5,755
5,677
4,843
3,916
3,873
3,067
3,290
2,973
2,837
2,573
1,828
1,238
995
875
16,749
14,264
12,643
11,367
9,871
7,540
6,951
5,993
1,710
1,935
1,475
1,096
1,598
1,287
989
99
280
231
(395
)
157
151
61
6
30
1,990
2,166
1,080
1,253
1,749
1,348
995
129
(97
)
(126
)
22
(207
)
(79
)
(76
)
(51
)
(13
)
$
1,893
$
2,040
$
1,102
$
1,046
$
1,670
$
1,272
$
944
$
116
(1)
Includes stock-based compensation as follows:
Three Months Ended
Jun. 30,
Mar. 31,
Dec. 31,
Sep. 30,
Jun. 30,
Mar. 31,
Dec. 31,
Sep. 30,
2007
2007
2006
2006
2006
2006
2005
2005
(In thousands)
$
5
$
3
$
3
$
1
$
$
$
$
44
26
24
5
2
14
194
91
82
17
8
6
202
123
111
97
5
2
187
353
415
703
21
2
13
9
$
632
$
596
$
635
$
823
$
36
$
10
$
13
$
23
35
Table of Contents
As a Percentage of Total Revenue
Three Months Ended
Jun. 30,
Mar. 31,
Dec. 31,
Sep. 30,
Jun. 30,
Mar. 31,
Dec. 31,
Sep. 30,
2007
2007
2006
2006
2006
2006
2005
2005
89
%
89
%
88
%
90
%
91
%
87
%
92
%
89
%
11
%
11
%
12
%
10
%
9
%
13
%
8
%
11
%
100
%
100
%
100
%
100
%
100
%
100
%
100
%
100
%
29
%
31
%
30
%
32
%
32
%
36
%
39
%
36
%
7
%
7
%
7
%
7
%
8
%
11
%
8
%
10
%
36
%
38
%
37
%
39
%
40
%
47
%
46
%
46
%
64
%
62
%
63
%
61
%
60
%
53
%
54
%
54
%
20
%
16
%
18
%
15
%
17
%
14
%
14
%
18
%
27
%
27
%
26
%
28
%
25
%
24
%
26
%
27
%
11
%
11
%
13
%
13
%
10
%
7
%
7
%
8
%
58
%
55
%
56
%
56
%
52
%
45
%
47
%
53
%
6
%
7
%
7
%
5
%
8
%
8
%
7
%
1
%
1
%
1
%
(2
)%
1
%
1
%
0
%
0
%
0
%
7
%
8
%
5
%
6
%
9
%
8
%
7
%
1
%
0
%
0
%
0
%
(1
)%
0
%
0
%
0
%
0
%
7
%
8
%
5
%
5
%
9
%
8
%
6
%
1
%
36
Table of Contents
Year Ended June 30,
2007
2006
2005
(In thousands)
$
7,910
$
7,266
$
(4,957
)
(2,224
)
(1,293
)
(590
)
(693
)
987
10,197
37
Table of Contents
Payments Due by Period
Less Than
Total
1 Year
1-3 Years
3-5 Years
Thereafter
(In thousands)
$
3,528
$
1,367
$
2,161
$
$
11,875
11,875
$
15,403
$
13,242
$
2,161
$
$
(1)
Purchase obligations represent commitments under non-cancelable
orders for finished goods inventory with our contract
manufacturers.
38
Table of Contents
Revenue recognition;
Allowance for doubtful accounts;
Stock-based compensation;
Inventory valuation; and
Accounting for income taxes.
39
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40
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Year Ended June 30, 2007
Class One
Class Two
6.08 years
4.0 years
4.6-4.8%
4.6-4.8%
71
55
0
0
41
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42
Table of Contents
43
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ITEM 7A.
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
44
Table of Contents
ITEM 8.
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
Page
46
47
48
49
50
51
45
Table of Contents
46
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47
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48
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Redeemable
Notes
Convertible
Deferred
Receivable
Total
Preferred Stock
Common Stock
Stock
from
Accumulated
Shareholders
Shares
Amount
Shares
Amount
Compensation
Shareholders
Deficit
Deficit
(Amounts in thousands)
18,599
$
46,300
5,741
$
49,595
$
(118
)
$
(594
)
$
(93,479
)
$
(44,596
)
4,717
9,949
32
(32
)
(32
)
252
13
13
82
82
222
222
(1,402
)
(1,402
)
23,316
56,281
5,993
49,576
(36
)
(372
)
(94,881
)
(45,713
)
51
(51
)
(51
)
3,429
521
521
381
(299
)
82
(46
)
(141
)
141
(87
)
(9
)
(9
)
4,002
4,002
23,316
56,332
9,289
50,277
(335
)
(231
)
(90,879
)
(41,168
)
50
(50
)
(50
)
901
573
573
2,588
98
2,686
12
12
228
228
(41
)
(58
)
(410
)
219
(191
)
6,081
6,081
23,316
$
56,341
10,132
$
53,206
$
(237
)
$
$
(84,798
)
$
(31,829
)
49
Table of Contents
Year Ended June 30,
2007
2006
2005
(In thousands)
$
6,081
$
4,002
$
(1,402
)
956
716
592
2,686
82
82
38
160
508
(191
)
238
250
202
(8,170
)
(2,395
)
(4,688
)
(2,401
)
7
(3,537
)
(2,520
)
(335
)
(338
)
(55
)
4
39
2,034
809
1,020
463
605
198
864
1,856
34
7,379
1,505
2,841
7,910
7,266
(4,957
)
(2,106
)
(1,308
)
(590
)
15
(118
)
(2,224
)
(1,293
)
(590
)
1,000
6,000
(1,000
)
(6,000
)
(1
)
(7
)
(26
)
9,949
573
1,003
52
(9
)
12
222
(1,277
)
(693
)
987
10,197
4,993
6,960
4,650
12,333
5,373
723
$
17,326
$
12,333
$
5,373
$
$
31
$
21
697
82
11
$
50
$
51
$
32
536
141
265
79
28
1,476
41
228
50
Table of Contents
1.
THE
COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
51
Table of Contents
June 30,
2007
2006
2005
$
378
$
200
$
119
238
250
202
(296
)
(72
)
(121
)
$
320
$
378
$
200
52
Table of Contents
53
Table of Contents
June 30,
2007
2006
2005
$
206
$
100
$
112
512
646
190
(416
)
(540
)
(202
)
(135
)
$
167
$
206
$
100
54
Table of Contents
Year Ended June 30,
2007
2006
2005
$
12
$
$
99
16
384
14
533
7
1,658
45
82
$
2,686
$
82
$
82
55
Table of Contents
56
Table of Contents
2.
RESTATEMENT
As Previously
Reported
Adjustment
As Restated
$
0.39
$
(0.27
)
$
0.12
10,114,513
23,316,406
33,430,919
57
Table of Contents
3.
NET
INCOME (LOSS) PER COMMON SHARE
Year Ended June 30,
2007
2006
2005
(As restated for
diluted EPS.
See Note 2)
(Amounts in thousands, except
per share amounts)
$
6,031
$
3,951
$
(1,434
)
9,713
7,402
5,801
(1,148
)
(793
)
(449
)
8,565
6,609
5,352
1,148
793
2,484
2,650
68
63
23,316
23,316
35,581
33,431
5,352
$
0.70
$
0.60
$
(0.27
)
$
0.17
$
0.12
$
(0.27
)
58
Table of Contents
4.
BALANCE
SHEET COMPONENTS
As of June 30,
2007
2006
(Amounts in thousands)
$
47
$
325
100
6,685
4,556
$
7,057
$
4,656
$
2,595
$
786
772
5
66
$
3,372
$
852
$
3,573
$
4,143
982
1,034
403
350
203
311
5,161
5,838
2,228
4,282
$
2,933
$
1,556
$
2,618
$
233
11,333
6,339
$
13,951
$
6,572
5.
RELATED-PARTY
TRANSACTIONS
59
Table of Contents
6.
DEBT
7.
INCOME
TAXES
Year Ended June 30,
2007
2006
2005
$
178
$
114
$
4
199
99
31
6
7
$
408
$
219
$
11
June 30,
2007
2006
2005
$
2,206
$
1,450
$
(478
)
380
(242
)
(214
)
423
102
(284
)
(284
)
288
99
530
327
129
(3,521
)
(1,131
)
858
$
408
$
219
$
11
60
Table of Contents
June 30,
2007
2006
$
26,209
$
31,246
4,677
4,514
3,261
1,908
34,147
37,668
(34,147
)
(37,668
)
$
$
8.
REDEEMABLE
CONVERTIBLE PREFERRED STOCK AND PREFERRED STOCK
WARRANTS
June 30, 2007
Shares
Shares
Carrying
Redemption and
Authorized
Outstanding
Value
Liquidation Value
(In thousands)
3,386
3,179
$
29,759
$
20,000
13,471
13,408
10,727
10,750
2,012
2,012
3,485
3,500
4,717
4,717
9,981
10,000
2,389
23,586
23,316
$
56,341
$
44,250
61
Table of Contents
June 30, 2006
Shares
Shares
Carrying
Redemption and
Authorized
Outstanding
Value
Liquidation Value
(In thousands)
3,386
3,179
$
29,746
$
20,000
13,471
13,408
10,712
10,750
2,012
2,012
3,475
3,500
4,717
4,717
9,969
10,000
2,430
23,586
23,316
$
56,332
$
44,250
62
Table of Contents
Warrants to purchase 685 shares of common stock issued with
respect to the equipment lease line signed in June 1998,
exercisable at $21.18 per share.
Warrants to purchase 1,271 shares of common stock issued
with respect to the equipment lease line signed in March 2000,
exercisable at $39.33 per share.
Warrants to purchase 1,224 shares of common stock issued in
February 2001 for consulting services, exercisable at $26.22 per
share.
Warrants to purchase 5,336 shares of Series E
redeemable convertible preferred stock issued with respect to
the line of credit in March 2001, exercisable at $9.37 per share
which shares are convertible to 5,336 shares of common
stock.
Warrants to purchase 62,367 shares of Series F
redeemable convertible preferred stock issued with respect to
the line of credit in September 2003, exercisable at $0.80 per
share which shares are convertible to 62,367 shares of
common stock.
63
Table of Contents
9.
COMMON
STOCK
9,130
3,179
13,408
2,012
4,717
72
32,518
10.
STOCK
OPTION PLAN
64
Table of Contents
65
Table of Contents
Shares
Weighted-
Shares
Subject to
Average
Available
Options
Exercise
for Grant
Outstanding
Price
(Amounts in thousands, except per share amounts)
844
2,673
$
0.70
2,532
(471
)
471
0.40
(2,510
)
2,510
0.30
(252
)
0.90
66
(66
)
1.60
461
5,336
$
0.40
1,500
(449
)
449
0.80
(851
)
851
0.60
(3,429
)
0.30
133
1.10
129
(129
)
0.50
923
3,078
$
0.60
6,030
(2,094
)
2,094
8.89
(530
)
530
2.75
(901
)
0.64
175
(175
)
1.07
4,504
4,626
$
4.57
2,133
$
1.11
66
Table of Contents
As of June 30, 2007
Weighted
Average
Weighted
Remaining
Average
Aggregate
Exercise
Options
Contractual
Exercise
Intrinsic
Outstanding
Life (Years)
Price
Value
(Amounts in thousands, except per share data)
750
6.24
$
0.21
663
7.95
$
0.40
759
8.23
$
0.92
149
8.15
$
2.51
673
9.28
$
3.20
90
9.46
$
3.60
28
3.21
$
6.00
212
9.99
$
10.50
738
9.79
$
11.30
564
9.89
$
11.40
4,626
8.54
$
4.57
$
25,423
2,133
7.54
$
1.11
$
17,896
3,900
8.31
$
4.22
$
22,616
11.
COMMITMENTS
AND CONTINGENCIES
$
1,367
1,590
571
$
3,528
67
Table of Contents
12.
EMPLOYEE
BENEFIT PLAN
68
Table of Contents
13.
SEGMENT
INFORMATION
Year Ended June 30,
2007
2006
2005
$
95,448
$
60,954
$
34,863
2,379
654
619
$
97,827
$
61,608
$
35,482
14.
QUARTERLY
RESULTS OF OPERATIONS (Unaudited)
Three Months Ended
Jun. 30,
Mar. 31,
Dec. 31,
Sep. 30,
Jun. 30,
Mar. 31,
Dec. 31,
Sep. 30,
2007
2007
2006
2006
2006
2006
2005
2005
(In thousands, except per share amounts)
$
28,923
$
26,009
$
22,480
$
20,415
$
19,084
$
16,593
$
14,717
$
11,214
18,459
16,199
14,118
12,463
11,469
8,827
7,940
6,092
1,893
2,040
1,102
1,046
1,670
1,272
944
116
(13
)
(12
)
(13
)
(12
)
(13
)
(13
)
(13
)
(12
)
1,880
2,028
1,089
1,034
1,657
1,259
931
104
$
0.20
$
0.23
$
0.13
$
0.13
$
0.22
$
0.19
$
0.15
$
0.02
$
0.05
$
0.05
$
0.03
$
0.03
$
0.05
$
0.04
$
0.03
$
0.00
15.
SUBSEQUENT
EVENT
69
Table of Contents
ITEM 9.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
ITEM 9A.
CONTROLS
AND PROCEDURES
ITEM 9B.
OTHER
INFORMATION
ITEM 10.
DIRECTORS
AND EXECUTIVE OFFICERS OF THE REGISTRANT AND CORPORATE
GOVERNANCE
70
Table of Contents
ITEM 11.
EXECUTIVE
COMPENSATION
ITEM 12.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
ITEM 13.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, DIRECTOR
INDEPENDENCE
ITEM 14.
PRINCIPAL
ACCOUNTING FEES AND SERVICES
ITEM 15.
EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES.
71
Table of Contents
Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
September 27, 2007
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
September 27, 2007
Director
September 27, 2007
Director
September 27, 2007
Director
September 27, 2007
Director
September 27, 2007
Director
September 27, 2007
Director
September 27, 2007
Director
September 27, 2007
72
Table of Contents
73
Table of Contents
Exhibit
3
.1
Third Restated Certificate of
Incorporation of the Registrant
3
.2
Second Amended and Restated Bylaws
of the Registrant.
4
.1**
Form of Registrants Common
Stock certificate.
4
.2**
Seventh Amended and Restated
Rights Agreement dated October 20, 2004 by and among the
Registrant and certain of its equityholders.
10
.1**
Form of Indemnity Agreement
between the Registrant and each of its directors and executive
officers.
10
.2** +
1997 Stock Option Plan and forms
of stock option agreement and stock option exercise agreement.
10
.3** +
2007 Equity Incentive Plan and
forms of stock option agreement and stock option exercise
agreement.
10
.4** +
Description of ShoreTel Executive
Bonus Incentive Plan for the first and second half of fiscal
2007.
10
.5** +
Offer Letter, dated as of
July 14, 2004, by the Registrant and John W. Combs.
10
.6** +
Offer Letter, dated as of
March 10, 2003, by the Registrant and John Finegan.
10
.7** +
Offer Letter, dated as of
September 8, 2005, by the Registrant and Joseph A. Vitalone.
10
.8** +
Offer Letter, dated as of
April 13, 2005, by the Registrant and Walter Weisner.
10
.9** +
Change of Control Agreement, dated
as of August 5, 2004, between the Registrant and John W.
Combs.
10
.10**+
Change of Control Agreement, dated
as of May 7, 2003, between the Registrant and John Finegan.
10
.11**+
Change of Control Agreement, dated
as of August 1, 2001, between the Registrant and Edwin J.
Basart.
10
.12**+
Separation Agreement, dated as of
August 9, 2004, between the Registrant and Thomas van
Overbeek.
10
.13**
Sublease, dated as of October
1998, between Registrant and Applied Materials, Inc., as amended.
10
.14**
ODM Product Development and
Purchase Agreement, dated as of March 19, 2004, between
Registrant and Giant Electronics Ltd., as amended.
10
.15**
Manufacturing Services Agreement,
dated October 28, 2005, between Registrant and Jabil
Circuit, Inc.
10
.16**
Office Lease Oakmead West, dated
April 20, 2007, between Registrant and Carr NP Properties,
L.L.C.
10
.17**+
Offer Letter, dated April 22,
2007, by the Registrant and Michael E. Healy
10
.18+
ShoreTel Executive Bonus Plan
10
.19+
2007 Employee Stock Purchase Plan
21
Subsidiaries
23
.1
Consent of Deloitte &
Touche LLP, independent registered public accounting firm.
24
.1
Power of Attorney (included on the
signature page hereto).
31
.1
Rule 13a-14(a)/15d-14(a)
Certification of Chief Executive Officer
31
.2
Rule 13a-14(a)/15d-14(a)
Certification of Chief Financial Officer
32
.1
Section 1350 Certification of
Chief Executive Officer.
32
.2
Section 1350 Certification of
Chief Financial Officer.
**
Previously filed as an exhibit to the Registrants
Registration Statement on
Form S-1
(333-140630).
+
Management Compensatory Plan or Arrangement
Confidential treatment has been granted with respect to selected
portions of this agreement has been filed with the Commission.
74
SHORETEL, INC.
|
||||
By: | /s/ John W. Combs | |||
John W. Combs, President | ||||
-1-
-2-
-3-
-4-
-5-
PAGE | ||||||||
Article I STOCKHOLDERS | ||||||||
Section 1.1: |
Annual Meetings
|
1 | ||||||
Section 1.2: |
Special Meetings
|
1 | ||||||
Section 1.3: |
Notice of Meetings
|
1 | ||||||
Section 1.4: |
Adjournments
|
1 | ||||||
Section 1.5: |
Quorum
|
2 | ||||||
Section 1.6: |
Organization
|
2 | ||||||
Section 1.7: |
Voting; Proxies
|
2 | ||||||
Section 1.8: |
Fixing Date for Determination of Stockholders of Record
|
2 | ||||||
Section 1.9: |
List of Stockholders Entitled to Vote
|
3 | ||||||
Section 1.10: |
Inspectors of Elections
|
3 | ||||||
Section 1.11: |
Notice of Stockholder Business; Nominations
|
4 | ||||||
Article II BOARD OF DIRECTORS | ||||||||
Section 2.1: |
Number; Qualifications
|
7 | ||||||
Section 2.2: |
Election; Resignation; Removal; Vacancies
|
7 | ||||||
Section 2.3: |
Regular Meetings
|
7 | ||||||
Section 2.4: |
Special Meetings
|
7 | ||||||
Section 2.5: |
Remote Meetings Permitted
|
8 | ||||||
Section 2.6: |
Quorum; Vote Required for Action
|
8 | ||||||
Section 2.7: |
Organization
|
8 | ||||||
Section 2.8: |
Written Action by Directors
|
8 | ||||||
Section 2.9: |
Powers
|
8 |
-i-
PAGE | ||||||||
Section 2.10: |
Compensation of Directors
|
8 | ||||||
Article III COMMITTEES | ||||||||
Section 3.1: |
Committees
|
9 | ||||||
Section 3.2: |
Committee Rules
|
9 | ||||||
Article IV OFFICERS | ||||||||
Section 4.1: |
Generally
|
9 | ||||||
Section 4.2: |
Chief Executive Officer
|
9 | ||||||
Section 4.3: |
Chairperson of the Board
|
10 | ||||||
Section 4.4: |
Lead Independent Director
|
10 | ||||||
Section 4.5: |
President
|
10 | ||||||
Section 4.6: |
Vice President
|
11 | ||||||
Section 4.7: |
Chief Financial Officer
|
11 | ||||||
Section 4.8: |
Treasurer
|
11 | ||||||
Section 4.9: |
Controller or Principal Accounting Officer
|
11 | ||||||
Section 4.10: |
Secretary
|
11 | ||||||
Section 4.11: |
Delegation of Authority
|
11 | ||||||
Section 4.12: |
Removal
|
12 | ||||||
Article V STOCK | ||||||||
Section 5.l: |
Certificates, Uncertificated Shares
|
12 | ||||||
Section 5.2: |
Lost, Stolen or Destroyed Stock Certificates;
Issuance of New Certificates
|
12 | ||||||
Section 5.3: |
Other Regulations
|
12 |
-ii-
PAGE | ||||||||
Article VI INDEMNIFICATION | ||||||||
Section 6.1: |
Indemnification of Officers and Directors
|
12 | ||||||
Section 6.2: |
Advance of Expenses
|
13 | ||||||
Section 6.3: |
Non-Exclusivity of Rights
|
13 | ||||||
Section 6.4: |
Indemnification Contracts
|
13 | ||||||
Section 6.5: |
Nature of Rights
|
14 | ||||||
Article VII NOTICES | ||||||||
Section 7.l: |
Notice
|
14 | ||||||
Section 7.2: |
Waiver of Notice
|
15 | ||||||
Article VIII INTERESTED DIRECTORS | ||||||||
Section 8.1: |
Interested Directors; Quorum
|
15 | ||||||
Section 8.2: |
Quorum
|
16 | ||||||
Article IX MISCELLANEOUS | ||||||||
Section 9.1: |
Fiscal Year
|
16 | ||||||
Section 9.2: |
Seal
|
16 | ||||||
Section 9.3: |
Form of Records
|
16 | ||||||
Section 9.4: |
Reliance Upon Books and Records
|
16 | ||||||
Section 9.5: |
Certificate of Incorporation Governs
|
16 | ||||||
Section 9.6: |
Severability
|
16 | ||||||
Article X AMENDMENT | ||||||||
Section 10.1: |
Amendments
|
17 |
-iii-
-1-
-2-
-3-
-4-
-5-
-6-
-7-
-8-
-9-
-10-
-11-
-12-
-13-
-14-
-15-
-16-
/s/ Ava M. Hahn | ||||
Ava M. Hahn, Secretary | ||||
1
| Participation in this plan is not an agreement (express or implied) between the plan participant and ShoreTel that the participant will be employed by ShoreTel for any specific period of time, nor is there any agreement for continuing or long-term employment. The plan participant and ShoreTel each have right to terminate the employment relationship at any time for any reason. This at-will employment relationship can only be modified by an agreement signed by the participant and CEO or HR Manager. |
| Any determination of performance, payment or other matter under this plan by the Board of Directors or Compensation Committee is binding. |
| This summary highlights the principle features of the ShoreTel Executive Bonus Plan, but does not describe every situation that can occur. The Board of Directors retains the right to interpret, revise, modify or delete the plan at its sole discretion at any time. |
| The executive must be employed in a full time capacity for at least three consecutive months in the six-month bonus period to be eligible to participate in the executive bonus plan, and must be employed at the time bonuses are paid in order to receive a bonus. |
| This plan is intended to be effective for at least fiscal year 2008, and shall remain in effect until amended or terminated by the Board of Directors. |
2
1 | Share amounts herein have been adjusted to reflect a 1-for-10 reverse stock split approved by the Board in June 2007, following stockholder approval. |
- 1 -
- 2 -
- 3 -
- 4 -
- 5 -
- 6 -
- 7 -
- 8 -
Name of Subsidiary | Jurisdiction of Incorporation | |
| | ||
ShoreTel UK Limited
|
United Kingdom | |
ShoreTel GmbH
|
Germany | |
ShoreTel Pty. Limited
|
Australia |
1. | I have reviewed this annual report on Form 10-K of ShoreTel, Inc.; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
c. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. | ||
Date:
September 27, 2007
|
/s/ JOHN W. COMBS
|
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|
Chairman, President and Chief Executive Officer | |||
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(Principal Executive Officer) |
1. | I have reviewed this annual report on Form 10-K of ShoreTel, Inc.; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
c. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. | ||
Date:
September 27, 2007
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/s/ MICHAEL E. HEALY
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Chief Financial Officer | |||
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(Principal Accounting and Financial Officer) | |||
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Dated:
September 27, 2007
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By: | /s/ JOHN W. COMBS | ||||
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Name: | John W. Combs | ||||
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Title: | Chairman, President and Chief Executive Officer | ||||
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(Principal Executive Officer) |
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Dated:
September 27, 2007
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By: | /s/ MICHAEL E. HEALY | ||||
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Name: | Michael E. Healy | ||||
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Title: | Chief Financial Officer | ||||
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(Principal Accounting and Financial Officer) | |||||
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