UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 26, 2005
SBE, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-8419 94-1517641
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2305 Camino Ramon, Suite 200, San Ramon, California 94583
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (925) 355-2000
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.01 Completion of Acquisition or Disposition of Assets
On July 26, 2005, SBE, Inc., a Delaware corporation ("SBE") consummated
the transaction contemplated by that certain Agreement and Plan of Merger and
Reorganization (the "Merger Agreement") entered into with PyX Technologies,
Inc., a California corporation, ("PyX") on March 28, 2005, including the merger
of PyX with and into PyX Acquisition Sub, LLC, a wholly owned subsidiary of SBE
(the "Merger"). In accordance with the terms of the Merger Agreement, at the
effective time of the merger all outstanding shares of PyX will be automatically
converted into approximately 2,561,050 shares of SBE Common Stock and SBE will
assume options to purchase approximately 2,038,950 shares of SBE Common Stock.
Pursuant to the terms of an Escrow Agreement entered into in connection with the
Merger, approximately 460,000 shares of the SBE Common Stock to be issued in
connection with the Merger have been deposited into an escrow account and will
be available to satisfy certain rights of the Company to indemnification and
reimbursement arising out of breaches of and inaccuracies in certain
representations, warranties and covenants made by PyX in the Merger Agreement.
Mr. Ignacio C. Munio, our Vice President, Engineering, beneficially owns 0.25%
of the fully-diluted shares of PyX common stock prior to the Merger. In addition
to the shares of our common stock that Mr. Munio will receive in connection in
with the Merger, he currently beneficially owns approximately 5.7% of the
outstanding shares of SBE Common Stock based on the number of shares outstanding
on June 9, 2005. After the effective date of the Merger, Mr. Munio will
beneficially own 2.9% of the outstanding shares of SBE Common Stock, assuming no
further issuances of shares of SBE Common Stock after June 9, 2005 and no
exercise of outstanding stock options or warrants after such date.
Item 3.02. Unregistered Sales of Equity Securities
The shares of SBE Common Stock to be issued in connection with the
Merger will be issued in reliance upon an exemption from registration contained
in Section 4(2) of the Securities Act of 1933, as amended (the "Securities
Act"). SBE determined that this exemption was available based on the
representations and warranties made by the shareholders regarding their
investment intent, experience and sophistication, including representations
regarding receipt of or access to adequate information regarding SBE necessary
to make an informed investment decision. Based on these representations, SBE
reasonably believed that the shareholders were sophisticated within the meaning
of Section 4(2) of the Securities Act. In making this determination, the Company
relied in part upon representations made by each PyX shareholder. The Company
did not pay or give, directly or indirectly, any commission or other
remuneration, including underwriting discounts, to any broker, dealer, salesman
or other person for soliciting the Merger. The Company did not retain any
dealer, manager or other agent with respect to the Merger.
On July 26, 2005, SBE completed the private placement (the "Private
Placement") contemplated by the Unit Subscription Agreement entered into with
AIGH Investment Partners, LLC and other accredited investors (the "Investors")
on May 4, 2005. SBE issued and sold units at $2.50 per unit (the "Units"),
consisting of 2,060,000 shares of common stock (the "PIPE Shares") and warrants
to purchase approximately 1,030,000 shares of Common Stock, with an exercise
price of $3.33 per share (the "Warrants"), for an aggregate purchase price of
approximately $5,150,000 in the Private Placement.
The Units, the PIPE Shares, the Warrants and the shares of SBE Stock
issuable upon exercise of the Warrants were issued in reliance upon the
exemption from registration contained in Section 4(2) of the Securities Act. The
Company determined that this exemption was available based on the
representations and warranties made by the Investors regarding their investment
intent, experience and sophistication, including representations regarding the
Investors' qualifications as an "accredited investor," as such term is defined
under Rule 501 promulgated under the Securities Act. The Company did not pay or
give, directly or indirectly, any commission or other remuneration, including
underwriting discounts, to any broker, dealer, salesman or other person for
soliciting the Private Placement. The Company did not retain any dealer, manager
or other agent with respect to the Private Placement.
The contents of Item 2.01 is incorporated into this Item in their
entirety.
Item 8.01. Other Events.
On July 26, 2005, the Company issued a press releases announcing the
closing of the PyX acquisition. A copy of the press release is filed as Exhibit
99.1 to this report and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
Report of Independent Registered Public Accounting Firm
Board of Directors
PyX Technologies, Inc.
San Ramon, California
We have audited the accompanying balance sheets of PyX Technologies, Inc. (the
"Company") as of December 31, 2004 and 2003 and the related statements of
operations, stockholders' equity (deficit), and cash flows for the year ended
December 31, 2004, the period from inception (November 26, 2002) through
December 31, 2003, and the period from inception (November 26, 2002) through
December 31, 2004. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting.
Our audit included consideration of internal control over financial reporting as
a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PyX Technologies, Inc. as of
December 31, 2004 and 2003, and the results of its operations and its cash flows
for the year ended December 31, 2004, the period from inception (November 26,
2002) through December 31, 2003, and the period from inception (November 26,
2002) through December 31, 2004, in conformity with accounting principles
generally accepted in the United States of America.
/s/ BDO Seidman, LLP
March 3, 2005, except for Note 5, which is as of March 28, 2005 San Francisco,
California
PYX TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(unaudited)
March 31, December 31,
2005 2004 2003
------------ ------------ ------------
Assets
Current Assets
Cash $ 78,847 $ 4,869 $ 392
Accounts receivable 15,050 -- --
------------ ------------ ------------
Total current assets 93,897 4,869 392
Property and equipment, net 20,467 12,580 11,982
Other assets 84,500 24,000 --
------------ ------------ ------------
Total Assets $ 198,864 $ 41,449 $ 11,982
============ ============ ============
Liabilities and Shareholders' Equity
Current Liabilities
Loans $ 10,400 $ 10,200 $ --
Accounts payable 68,608 82,870 1,992
Accrued payroll and employee benefits 26,179 44,352 --
Deferred revenues 102,000 82,500 --
------------ ------------ ------------
Total current liabilities 207,187 219,922 1,992
Total liabilities 207,187 219,922 1,992
------------ ------------ ------------
Commitments and contingencies
Stockholders' equity (deficit)
Common stock
($0.001 par value); authorized 10,000,000, 10,000,000
and 200,000 shares; issued and outstanding 5,567,500,
5,102,500 and 100,450 1,549 1,084 1,004
Additional paid-in capital 4,607,271 111,416 31,496
Deferred compensation (3,858,915) -- --
Deficit accumulated during the development stage (758,228) (290,973) (22,510)
------------ ------------ ------------
Total shareholders' equity (deficit) (8,323) (178,473) 9,990
------------ ------------ ------------
Total liabilities and shareholders' equity (deficit) $ 198,864 $ 41,449 $ 11,982
============ ============ ============
The accompanying notes are an integral part of these financial statements.
PYX TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(unaudited) (unaudited)
January 1, January January 1, Period from Cumulative from
2005 to 1, 2004 2004 to Inception Inception to
March 31, to March December to December March, 31
2005 31, 2004 31, 2004 31, 2003 2005
-------------- -------------- -------------- -------------- --------------
Service contract revenues $ -- $ -- $ -- $ 5,000 $ 5,000
-------------- -------------- -------------- -------------- --------------
Total revenues -- -- -- 5,000 5,000
-------------- -------------- -------------- -------------- --------------
Costs and expenses
Product research and development 46,732 3,379 142,625 13,808 203,165
Selling, general and administrative 419,523 3,200 124,807 12,888 557,218
-------------- -------------- -------------- -------------- --------------
Total operating expenses 466,255 6,579 267,432 26,696 760,383
-------------- -------------- -------------- -------------- --------------
Operating loss (466,255) (6,579) (267,432) (21,696) (755,383)
Interest expense 200 -- 200 -- 400
-------------- -------------- -------------- -------------- --------------
Loss before income taxes (466,455) (6,579) (267,632) (21,696) (755,783)
Income tax expense 800 -- 831 814 2,445
-------------- -------------- -------------- -------------- --------------
Net loss $ (467,255) $ (6,579) $ (268,463) $ (22,510) $ (758,228)
============== ============== ============== ============== ==============
The accompanying notes are an integral part of these financial statements.
PYX TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
Common Stock and
Additional
Paid-in Capital
Additional Paid-in Deferred Accumulated
Shares Par Value Capital Compensation Deficit Total
------------ ------------ ------------ ------------ ------------ ------------
Balance, November 26, 2002 $ -- $ -- $ -- $ -- $ -- $ --
Stock issued to founders 5,000,000 1,000 9,000 -- -- 10,000
Stock issued in connection with private --
placement 22,500 4 22,496 -- 22,500
Net loss -- -- -- -- (22,510) (22,510)
------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 2003 5,022,500 1,004 31,496 -- (22,510) 9,990
------------ ------------ ------------ ------------ ------------ ------------
Stock issued in connection with private --
placement 80,000 80 79,920 -- 80,000
Net loss -- -- -- -- (268,463) (268,463)
------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 2004 5,102,500 1,084 111,416 -- (290,973) (178,473)
------------ ------------ ------------ ------------ ------------ ------------
Stock issued in connection with private --
placement 250,000 250 249,750 -- 250,000
Warrants to purchase stock issued in --
connection with employment 215,000 215 305,085 -- 305,300
Deferred compensation included in common --
stock 3,941,020 3,941,020
Deferred compensation (3,858,915) (3,858,915)
Net loss -- -- -- -- (467,255) (467,255)
------------ ------------ ------------ ------------ ------------ ------------
Balance, March 31, 2005 5,567,500 $ 1,549 $ 4,607,271 $ (3,858,915) $ (758,228) $ (8,323)
------------ ------------ ------------ ------------ ------------ ------------
The accompanying notes are an integral part of these financial statements.
PYX TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
Period
from
Inception
(November 26, Period from
2002) Inception
(unaudited) (unaudited) Year Ended through (November 26,
Quarter Ended Quarter Ended December 31, December 31, 2002) through
March 31, 2005 March 31, 2004 2004 2003 March 31, 2005
------------ ------------ ------------ ------------ ------------
Cash flows from operating activities:
Net loss (467,255) (6,579) (268,463) (22,510) (758,228)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 2,125 1,116 5,447 1,812 9,384
Stock based compensation expense 385,255 -- -- 385,255
Changes in operating assets and liabilities:
Account receivable (15,050) -- -- -- (15,050)
Other assets (60,500) -- (24,000) -- (84,500)
Accounts payable (14,062) -- 80,879 1,992 68,608
Accrued payroll and commissions (18,173) -- 44,351 -- 26,179
Deferred revenues 19,500 5,000 82,500 -- 102,000
------------ ------------ ------------ ------------ ------------
Net cash used in operating activities (168,160) (463) (79,286) (18,706) (266,352)
------------ ------------ ------------ ------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (10,012) (734) (6,437) (13,402) (29,851)
------------ ------------ ------------ ------------ ------------
Net cash used in investing activities (10,012) (734) (6,437) (13,402) (29,851)
------------ ------------ ------------ ------------ ------------
Cash flows from financing activities:
Loan -- -- 10,200 -- 10,400
Proceeds from issuance of common stock 252,150 30,000 80,000 32,500 364,650
------------ ------------ ------------ ------------ ------------
Net cash provided by financing activities 252,150 30,000 90,200 32,500 375,050
------------ ------------ ------------ ------------ ------------
Net increase in cash and cash equivalents 73,978 28,803 4,477 392 79,847
Cash at beginning of year 4,869 392 392 -- --
------------ ------------ ------------ ------------ ------------
Cash at end of year 78,847 29,195 4,869 392 78,847
============ ============ ============ ============ ============
Interest paid -- -- -- -- --
Income tax paid -- -- 800 -- 800
The accompanying notes are an integral part of these financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company and Basis of Presentation:
PyX Technologies, Inc. (the Company) is a technology company incorporated under
the laws of the State of California on November 26, 2002 (inception). The
Company is in the research and development stage of software products for the
Internet Small Computer System Interface ("iSCSI") Enterprise Storage market.
Since inception, the Company's efforts have been devoted to the development of
iSCSI software and raising capital. The Company has not received any significant
revenues from the sale of its products or services since inception. Accordingly,
through the date of these financial statements, the Company is considered to be
in the development stage and the accompanying financial statements represent
those of a development stage enterprise.
The financial statements present the results of operations for the period from
inception to March 31, 2005. While the Company was incorporated on November 26,
2002, it had no operations during the period November 26, 2002 to December 31,
2002.
Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires the Company to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash:
Substantially all of the Company's cash is held with one large financial
institution and may at times be above insured limits.
Property and Equipment:
Property and equipment are carried at cost. The Company records depreciation
charges on a straight-line basis over the assets' estimated useful lives of
three years for computers and related equipment used to develop its software
products.
When assets are sold or otherwise disposed of, the cost and accumulated
depreciation are removed from the accounts and any gain or loss on sale or
disposal is recognized in operations. Maintenance, repairs and minor renewals
are charged to expense as incurred.
The Company reviews property and equipment for impairment whenever events or
changes in circumstances indicate the carrying value of an asset may not be
recoverable. In performing the review for recoverability, The Company estimates
the future gross cash flows expected to result from the use of the asset and its
eventual disposition. If such gross cash flows are less than the carrying amount
of the asset, the asset is considered impaired. The amount of the impairment
loss, if any, would then be calculated based on the excess of the carrying
amount of the asset over its fair value.
Revenue Recognition:
The Company will derive revenues from the following sources: (1) software, which
includes new iSCSI Target and Initiator software licenses and (2) services,
which include consulting.
When the Company exits the development stage, new software license revenues will
represent all fees earned from granting customers licenses to use the Company's
iSCSI software. While the basis for software license revenue recognition is
substantially governed by the provisions of Statement of Position No. 97-2,
Software Revenue Recognition, issued by the American Institute of Certified
Public Accountants, the Company exercises judgment and uses estimates in
connection with the determination of the amount of software and services
revenues to be recognized in each accounting period.
For software license arrangements that do not require significant modification
or customization of the underlying software, the Company will recognize new
software license revenue when: (1) it enters into a legally binding arrangement
1
with a customer for the license of software; (2) it delivers the products; (3)
customer payment is deemed fixed or determinable and free of contingencies or
significant uncertainties; and (4) collection is reasonably assured.
Substantially all of the Company's new software license revenue is recognized in
this manner. No software license revenue has been recognized to date.
Certain of the Company's software arrangements include consulting implementation
services sold separately under consulting engagement contracts. Consulting
revenues from these arrangements are generally accounted for separately from new
software license revenues because the arrangements qualify as service
transactions as defined in SOP 97-2. The more significant factors considered in
determining whether the revenue should be accounted for separately include the
nature of services (i.e., consideration of whether the services are essential to
the functionality of the licensed product), degree of risk, availability of
services from other vendors, timing of payments and impact of milestones or
acceptance criteria on the realizability of the software license fee. Revenues
for consulting services are generally recognized as the services are performed.
If there is a significant uncertainty about the project completion or receipt of
payment for the consulting services, revenue is deferred until the uncertainty
is sufficiently resolved. Service revenues of $0 and $5,000 were recognized in
the year ended December 31, 2004 and the period from inception (November 26,
2002) to December 31, 2003, respectively.
Product Research and Development Expenditures:
Research and development costs are expensed as incurred.
Stock-based Compensation
On February 28, 2005, the Company granted three employees warrants to
purchase a total of 215,000 shares of the Company's common stock for $0.01 per
share in lieu of cash salary. The difference between the $0.01 exercise price
and the estimated fair market value on the grant date of $1.00 is included in
the general and administrative expense as compensation expense.
Income Taxes:
The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. SFAS No. 109 requires recognition of deferred tax
liabilities and assets for the expected future tax consequences of items that
have been included in the financial statements or tax returns. Deferred income
taxes represent the future net tax effects resulting from temporary differences
between the financial statement and tax bases of assets and liabilities, using
enacted tax rates in effect for the year in which the differences are expected
to reverse. Valuation allowances are recorded against net deferred tax assets
where, in our opinion, realization is uncertain. The provision for income taxes
represents the net change in deferred tax amounts, plus income taxes payable for
the current period.
As of December 31, 2004 the Company had net operating loss (NOL) carryforwards
of approximately $99,000 and $2,000 for federal and state income tax purposes
expiring in varying amounts from 2023 through 2024. Because management could not
determine it was more likely than not that deferred tax assets, primarily
relating to the NOLs, would be realized, a valuation allowance has been provided
to eliminate all of the deferred tax assets of approximately $40,000 at December
31, 2004. The Company did pay the required California state minimum income taxes
in 2003 and 2004.
Pursuant to the provision of the Tax Reform Act of 1986, utilization of the NOL
carryforwards may also be subject to an annual limitation if a greater than 50%
change in the ownership of the Company occurs within a three-year period.
2
2. PROPERTY AND EQUIPMENT
Property and equipment are comprised of the following:
March 31, December 31, December 31,
2005 2004 2003
-------- -------- --------
Computer hardware $ 29,851 $ 19,839 $ 13,402
Less accumulated depreciation and amortization (9,384) (7,259) (1,812)
-------- -------- --------
$ 20,467 $ 12,580 $ 11,590
======== ======== ========
Depreciation expense totaled $2,125, $5,447 and $1,812 for the three months
ended March 31, 2005 and years ended December 31, 2004 and 2003, respectively.
3. SHAREHOLDERS' EQUITY
In January 1, 2003, the Company sold 100,000 shares to the Company's founders in
exchange for the assignment to the Company of certain technology and related
rights owned by the purchasers valued at $10,000. In July 2003, 450 shares of
common stock were sold to investors for $50.00 per share. On November 30, 2003,
the Company increased its authorized number of shares of common stock from
200,000 to 10,000,000 and simultaneously declared a 50 to 1 stock split of its
common stock. In March 2004, 80,000 shares of the Company's Common Stock have
been sold to investors for $1.00 per share. On January 20, 2005, the Company
issued $250,000 of preferred stock for $250,000 cash. The preferred stock has a
liquidation preference to the Company's common stock holders. The preferred
stock is convertible into common stock simultaneously with the sale of the
Company to SBE. The Company also entered into an employment agreement with two
of the holders of the preferred stock. The employees will receive 175,000 shares
of the Company's preferred stock vested monthly over the period January 2005
though July 2005 in lieu of cash compensation. For financial statement
reporting, all shares and par value amounts have been adjusted to reflect such
stock split.
4. LOANS
On September 27, 2004, the Company entered into a loan agreement with a relative
of one of the founders for $10,000 at an annual interest rate of 8% due October
31, 2005. As of March 31, 2005, the outstanding principal and interest totaled
$10,400.
5. SUBSEQUENT EVENTS
On March 28, 2005, the Company entered into a definite agreement to be acquired
by SBE, Inc ("SBE"), a Delaware corporation listed on the Nasdaq SmallCap Market
under symbol SBEI. In the acquisition, the Company will be merged with and into
a wholly-owned subsidiary of SBE and each outstanding share of the Company's
Common Stock will be automatically converted into 0.46 shares of SBE Common
Stock . The closing of the merger is subject to certain closing conditions
including approval by SBE's stockholders, SBE entering into a definitive
agreement for raising at least $5 million in cash from investors (with the
closing being subject only to the closing of the merger), amendment of the
Company's agreement with Pelco and customary closing conditions. The merger is
expected to close in SBE's third fiscal quarter, ending July 31, 2005. An
officer of SBE, Inc. is also a shareholder of the Company.
3
(b) Pro Forma Financial Information.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF SBE
SBE, Inc.
Unaudited Pro Forma Consolidated Balance Sheet)
April 30, 2005 March 31, 2005
Historical Historical Combined
SBE PyX Adjustments As Adjusted
------------ ------------ ------------ ------------
(in thousands
ASSETS
Current assets:
Cash and cash equivalents $ 1,221 $ 79 $ 4,800a $ 6,100
Trade accounts receivable, net 1,599 15 1,614
Inventories 1,474 -- 1,474
Other 262 -- 262
------------ ------------ ------------ ------------
Total current assets 4,556 94 4,800 9,450
Property and equipment, net 392 20 412
Capitalized software, net 149 -- 149
Intellectual property, net -- -- 9,987b 9,987
Other 288 85 373
------------ ------------ ------------ ------------
Total assets $ 5,385 $ 199 $ 14,787 $ 20,371
============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Loan $ -- $ 10 $ 10
Trade accounts payable 854 69 923
Accrued payroll and employee benefits 329 26 355
Other accrued expenses 164 -- 164
Deferred revenue -- 103 103
Capital lease obligations 27 -- 27
------------ ------------ ------------ ------------
Total liabilities 1,374 208 1,582
------------ ------------ ------------ ------------
Long term liabilities 135 -- 135
------------ ------------ ------------ ------------
Total Liabilities 1,509 208 1,717
------------ ------------ ------------ ------------
Stockholders' equity
Common Stock and additional paid in capital 16,175 365 11,862b 29,253
4,800a
Deferred compensation (88) -- (1,876)b (1,964)
Retained deficit (12,211) (374) (12,585)
------------ ------------ ------------ ------------
Total stockholders' equity 3,876 (9) 14,787 18,585
------------ ------------ ------------ ------------
Total liabilities and stockholders' equity $ 5,385 $ 199 $ 14,787 $ 20,371
============ ============ ============ ============
4
Footnotes to the Unaudited Pro Forma Condensed Consolidated Balance Sheet
as of April 30, 2005 for the Company and March 31, 2005 for PyX:
The Unaudited Pro Forma Condensed Consolidated Balance Sheet is presented
as if the transaction had occurred on April 30, 2005.
(a) Net cash received from selling 2,575,000 shares of the Company's common
stock, assuming a price per share of $2.00, and warrants to purchase
1,287,500 shares of the Company's common stock, assuming an exercise price
per share of $2.66, in the private placement, net of $350,000 of estimated
offering expenses and of expenses related to the PyX acquisition. The
assumed price per share is based on the lowest unit price at which the
Company is obligated to complete the private placement.
b) In the PyX acquisition, the Company will issue 2,561,050 shares of the
Company's common stock with an assumed value of $3.09 per share for
payment to the selling shareholders of PyX for the acquisition of PyX. The
assumed price per share is based on the average closing price for the
Company's common stock over the period beginning five trading days prior
to and ending five trading days after the date the merger agreement was
signed, March 28, 2005. In addition, the Company will assume the PyX stock
option plan with the outstanding PyX stock options converted into options
to purchase 2,038,950 shares of the Company's common stock. These
replacement options vest over 4 years and the PyX employees must continue
to be an employee of the Company during the vesting period. The fair value
of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 2005: Dividend yield of 0%: expected
volatility of 70.0%, risk-free interest rate of 3.0%, and expected life of
four years. The assumed price per share is based on the average closing
price for the Company's common stock over the period beginning five
trading days prior to and ending five trading days after the date the
merger agreement was signed, March 28, 2005.
The purchase price of $11,862,000 related to the shares of the Company's
common stock issued to selling shareholders of PyX and the issuance of
options to purchase the Company's common stock is allocated to as follows:
$9,987,000 to Intellectual Property, which is the estimated fair value of
the PyX intellectual property, associated with current and future products
acquired in the acquisition of PyX and $1,876,000 to deferred
compensation. The deferred compensation is calculated as the difference
between the stock option strike price of $2.17 per share and the assumed
value of $3.09 per share. The assumed price per share is based on the
average closing price for the Company's common stock over the period
beginning five trading days prior to and ending five trading days after
the date the merger agreement was signed, March 28, 2005. The Company
amortizes deferred compensation to expense on a straight-line basis over
the vesting period of the underlying options to purchase the Company's
common stock, in this case 4 years. Deferred compensation expense totaling
$281,000 per year will be included in the Company's product research and
development expense and deferred compensation expense totaling $188,000
per year will be included in the Company's sales and marketing expense for
a total of $469,000 of annual deferred compensation amortization expense.
5
SBE, Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations
for the six months ended
April 30, 2005 March 31, 2005
Historical Historical Combined
SBE PyX Adjustments Companies
------------ ------------ ------------ ------------
(in thousands, except for per share amounts)
Net Sales $ 4,520 $ -- $ -- $ 4,520
Cost of Sales 2,305 -- $ 1,664a 3,969
------------ ------------ ------------ ------------
Gross Profit 2,215 -- (1,664) 551
------------ ------------ ------------ ------------
Product research and development 1,048 91 367b 1,506
Sales and marketing 1,053 48 263c 1,364
General and administrative 795 34 -- 829
------------ ------------ ------------ ------------
Total operating expense 2,967 173 630 3,699
------------ ------------ ------------ ------------
Operating income loss (752) (173) (2,294) (3,148)
Interest income (expense) (3) -- -- (3)
------------ ------------ ------------ ------------
Net loss before income taxes (755) (173) (2,294) (3,151)
Provision for income taxes 5 -- -- 5
------------ ------------ ------------ ------------
Net loss $ (760) $ (173) $ (2,294) $ (3,156)
============ ============ ============ ============
Basic loss per share $ (0.15) $ $ $ (0.31)
============ ============ ============ ============
Diluted loss per share $ (0.15) $ $ $ (0.31)
============ ============ ============ ============
Basic - shares used in per share
computations 5,175 5,136d 10,311
============ ============ ============ ============
Diluted - shares used in per share
computations 5,175 5,136d 10,311
============ ============ ============ ============
Footnotes to the Unaudited Pro Forma Condensed Combined Statement of
Operations for the six months ended April 30, 2005 for the Company and March 31,
2005 for PyX:
(a) The intellectual property acquired in the PyX acquisition is amortized to
expense over 36 months. This $1,664,000 adjustment reflects six months of
amortization of intellectual property originally valued at $9,987,000
acquired in the PyX acquisition.
(b) Adjustment to reflect the difference between the current salaries plus
benefits of the PyX engineering employees and the expected salaries plus
benefits of the PyX engineering employees when they are hired by the
Company. Included in this adjustment is $141,000 of amortization expense
related to six-months of amortization of deferred compensation related to
the issuance of options to purchase the Company's common stock awarded to
the engineering employees of PyX as part of the purchase price of PyX. The
deferred compensation related to the purchase price of PyX totals
$1,876,000 and will be amortized to product research and development and
sales and marketing expense over the 4-year vesting period of the options.
This adjustment is for the six-month period from November 1, 2004 through
April 30, 2005.
6
(c) Adjustment to reflect the difference between the current salaries plus
benefits of the PyX sales employees and the expected salaries plus
benefits of the PyX sales employees when they are hired by the Company.
Included in this adjustment is $94,000 of amortization expense related to
six-months of amortization of deferred compensation related to the
issuance of options to purchase the Company's common stock awarded to the
sales and marketing employees of PyX as part of the purchase price of PyX.
The deferred compensation related to the purchase price of PyX totals
$1,876,000 and will be amortized to product research and development and
sales and marketing expense over the 4-year vesting period of the options.
This adjustment is for the six-month period from November 1, 2004 through
April 30, 2005.
(d) Combined pro forma shares include 2,561,050 shares of the Company's common
stock that the Company will be issuing to the shareholders of PyX, at an
assumed price of $3.09 per share based on the average closing price for
the Company's common stock over the period beginning five trading days
prior to and ending five trading days after the date the merger agreement
was signed, March 28, 2005, plus 2,575,000 shares of the Company's common
stock in the private placement equity transaction at an assumed price of
$2.00 per share, which is based on the lowest unit price at which the
Company is obligated to complete the private placement. The following
securities were not included in the computation of pro forma number of
shares because to do so would have been anti-dilutive for the periods
presented:
SBE outstanding employee stock options 2,307,627
Warrants to purchase SBE common stock 140,000
PyX outstanding employee stock options
to be assumed by SBE 2,038,950
Warrants to purchase SBE common stock issued
in conjunction with the private placement transaction 1,287,500
Total securities not included in pro forma number of shares 5,774,077
7
SBE, Inc.
Unaudited Pro Forma Condensed Combined State of Operations
for the year ended
October 31, 2004 December 31, 2004
Historical Historical Combined
SBE PyX Adjustments Companies
------------ ------------ ------------ ------------
(in thousands, except for per share amounts)
Net Sales $ 11,066 $ -- $ $ 11,066
Cost of Sales 6,646 -- 3,329a 9,975
------------ ------------ ------------ ------------
Gross Profit 4,420 -- 3,329 1,092
------------ ------------ ------------ ------------
Product research and development 2,411 143 735b 3,289
Sales and marketing 2,177 125 525c 2,827
General and administrative 1,755 -- 1,755
Loan reserve (239) -- (239)
------------ ------------ ------------ ------------
Total operating expense 6,104 268 1,260 7,632
------------ ------------ ------------ ------------
Operating loss (1,684) (268) (4,589) (6,541)
Interest income (expense) 5 -- 5
------------ ------------ ------------ ------------
Net loss before income taxes (1,679) (268) (4,589) (6,536)
Benefit for income taxes -- --
------------ ------------ ------------ ------------
Net loss $ (1,679) $ (268) $ (4,589) $ (6,536)
============ ============ ============ ============
Basic loss per share $ (0.33) $ $ $ (0.64)
============ ============ ============ ============
Diluted loss per share $ (0.33) $ $ $ (0.64)
============ ============ ============ ============
Basic - shares used in per share
computations 5,022 5,136d 10,158
============ ============ ============ ============
Diluted - shares used in per share computations 5,022 5,136d 10,158
============ ============ ============ ============
Footnotes to the Unaudited Pro Forma Condensed Combined Statement of
Operations for the year ended October 31, 2004 for the Company and December 31,
2004 for PyX:
(a) The intellectual property acquired in the PyX acquisition is amortized to
expense over 36 months. This $3,329,000 adjustment reflects twelve-months
amortization of intellectual property originally valued at $9,987,000
acquired in the PyX acquisition.
(b) Adjustment to reflect the difference between the current salaries plus
benefits of the PyX engineering employees and the expected salaries plus
benefits of the PyX engineering employees when they are hired by the
Company. Included in this adjustment is $281,000 of amortization expense
related to twelve-months of amortization of deferred compensation related
to the issuance of options to purchase the Company's common stock awarded
to the engineering employees of PyX as part of the purchase price of PyX.
The deferred compensation related to the purchase price of PyX totals
$1,876,000 and will be amortized to product research and development and
sales and marketing expense over the 4-year vesting period of the options.
This adjustment is for the twelve-month period from November 1, 2003
through October 31, 2004.
8
(c) Adjustment to reflect the difference between the current salaries plus
benefits of the PyX sales employees and the expected salaries plus
benefits of the PyX sales employees when they are hired by the Company.
Included in this adjustment is $188,000 of amortization expense related to
twelve-months of amortization of deferred compensation related to the
issuance of options to purchase the Company's common stock awarded to the
sales and marketing employees of PyX as part of the purchase price of PyX.
The deferred compensation related to the purchase price of PyX totals
$1,876,000 and will be amortized to product research and development and
sales and marketing expense over the 4-year vesting period of the options.
This adjustment is for the twelve-month period from November 1, 2003
through October 31, 2004.
(d) Combined pro forma shares include 2,561,050 shares of the Company's common
stock that the Company will be issuing to the shareholders of PyX, at an
assumed price of $3.09 per share is based on the average closing price for
the Company's common stock over the period beginning five trading days
prior to and ending five trading days after the date the merger agreement
was signed, March 28, 2005, plus 2,575,000 shares of the Company's common
stock that the Company will be selling to the purchasers in the private
placement equity transaction at an assumed price of $2.00 per share, which
is based on the lowest unit price at which the Company is obligated to
complete the private placement. The following securities were not included
in the computation of pro forma number of shares because to do so would
have been anti-dilutive for the periods presented:
SBE outstanding employee stock options 2,307,627
Warrants to purchase SBE common stock 140,000
PyX outstanding employee stock options
to be assumed by SBE 2,038,950
Warrants to purchase SBE common stock issued
in conjunction with the private placement transaction 1,287,500
Total securities not included in pro forma number of shares 5,774,077
(c) Exhibits.
Exhibit No. Description
99.1 Press Release, dated July 26, 2005, entitled "SBE,
Inc. Completes Acquisition of PyX Technologies."
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SBE, Inc.
July 29, 2005
By:/s/ David W Brunton
--------------------------------
David W Brunton
Chief Financial Officer
10