Delaware
|
68-0370244
|
(State
or other jurisdiction of
|
(I.R.S.
Employer Identification No.)
|
incorporation
or organization)
|
Page
|
|||
PART
I. FINANCIAL INFORMATION
|
|||
Item
1.
|
Condensed
Consolidated Financial Statements (Unaudited)
|
||
Condensed
Consolidated Balance Sheets as of June 30, 2007 and March 31,
2007
|
3
|
||
Condensed
Consolidated Statements of Operations for the three months
ended June 30, 2007 and June 30, 2006
|
4
|
||
Condensed
Consolidated Statements of Cash Flows as of June 30, 2007 and June
30,
2006
|
5
|
||
Notes
to Condensed Consolidated Financial Statements
|
6
|
||
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
12
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
18
|
|
Item
4.
|
Controls
and Procedures
|
18
|
|
PART
II. OTHER INFORMATION
|
|||
Item
1.A.
|
Risk
Factors
|
19
|
|
Item
6.
|
Exhibits
|
25
|
|
Signatures
|
24
|
June
30
|
March
31
|
|||||||
2007
|
2007
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ |
23,349
|
$ |
25,776
|
||||
Accounts
receivable, net of allowances for sales returns and doubtful accounts
of
$318 and $413 at June 30, 2007 and March 31, 2007,
respectively
|
6,883
|
6,634
|
||||||
Inventories,
net
|
8,640
|
5,567
|
||||||
Prepaid
expenses and other current assets
|
1,350
|
991
|
||||||
Total
current assets
|
40,222
|
38,968
|
||||||
Property
and equipment, net
|
1,312
|
1,351
|
||||||
Intangible
assets, net
|
1,087
|
1,161
|
||||||
Other
assets
|
108
|
176
|
||||||
Total
assets
|
$ |
42,729
|
$ |
41,656
|
||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Notes
payable and bank lines of credit
|
$ |
—
|
$ |
10
|
||||
Accounts
payable
|
3,705
|
1,974
|
||||||
Accrued
product warranty
|
1,191
|
1,101
|
||||||
Deferred
revenue
|
968
|
1,064
|
||||||
Litigation
suspense
|
19,500
|
19,500
|
||||||
Accrued
expenses and other current liabilities
|
3,244
|
3,590
|
||||||
Total
current liabilities
|
28,608
|
27,239
|
||||||
Total
long term liabilities
|
—
|
—
|
||||||
Total
liabilities
|
28,608
|
27,239
|
||||||
Commitments
and contingencies (Note 7)
|
||||||||
Stockholders’
equity:
|
||||||||
Preferred
stock; $0.01 par value; 5,000,000 shares authorized; none issued
and
outstanding
|
—
|
—
|
||||||
Common
stock; $0.01 par value; 200,000,000 shares authorized; 7,113,372
and
7,106,867 shares
issued and outstanding at June 30, 2007 and March 31, 2007,
respectively
|
71
|
71
|
||||||
Additional
paid-in capital
|
122,871
|
122,473
|
||||||
Accumulated
other comprehensive income
|
184
|
240
|
||||||
Accumulated
deficit
|
(109,005 | ) | (108,367 | ) | ||||
Total
stockholders’ equity
|
14,121
|
14,417
|
||||||
Total
liabilities and stockholders’ equity
|
$ |
42,729
|
$ |
41,656
|
||||
Three
Months Ended
June
30,
|
||||||||
2007
|
2006
|
|||||||
Revenue
|
$ |
4,598
|
$ |
6,576
|
||||
Cost
of sales
|
2,977
|
4,078
|
||||||
Gross
profit
|
1,621
|
2,498
|
||||||
Operating
expenses:
|
||||||||
Research
and development expenses
|
778
|
996
|
||||||
Sales
and marketing expenses
|
1,006
|
1,044
|
||||||
General
and administrative expenses
|
1,203
|
2,302
|
||||||
Total
operating expenses
|
2,987
|
4,342
|
||||||
Operating
loss
|
(1,366 | ) | (1,844 | ) | ||||
Other
income (expense), net
|
728
|
42
|
||||||
Net
loss
|
$ | (638 | ) | $ | (1,802 | ) | ||
Net
loss per share, basic and diluted
|
$ | (0.09 | ) | $ | (0.26 | ) | ||
Shares
used in per share computation:
|
||||||||
Basic
and diluted
|
7,110
|
7,023
|
Three
Months Ended
June
30,
|
||||||||
2007
|
2006
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$ | (638 | ) | $ | (1,802 | ) | ||
Adjustments
to reconcile net loss to net cash provided by (used in) operating
activities:
|
||||||||
Depreciation
and
amortization
|
215
|
232
|
||||||
Stock
compensation expense
|
380
|
230
|
||||||
Stock
issued under stock purchase plan
|
8
|
—
|
||||||
Provision
for recovery of doubtful accounts and sales return
allowances
|
(95 | ) |
152
|
|||||
Loss
on disposal of property and
equipment
|
—
|
23
|
||||||
Fair
value of warrants and options issued for services rendered
|
9
|
26
|
||||||
Changes
in operating assets and liabilities, net of acquisitions:
|
||||||||
Accounts
receivables
|
(159 | ) | (1,017 | ) | ||||
Inventories
|
(3,137 | ) |
235
|
|||||
Prepaid
expenses and other
assets
|
(302 | ) | (13 | ) | ||||
Accounts
payable
|
1,736
|
211
|
||||||
Accrued
expenses and other current
liabilities
|
(360 | ) |
225
|
|||||
Accrued
product
warranty
|
114
|
112
|
||||||
Deferred
revenue
|
(96 | ) |
87
|
|||||
Net
cash provided by (used in) operating
activities
|
$ | (2,325 | ) | $ | (1,299 | ) | ||
Cash
flows used in investing activities:
|
||||||||
Purchases
of property and
equipment
|
(102 | ) | (20 | ) | ||||
Net
cash used in investing
activities:
|
(102 | ) | (20 | ) | ||||
Cash
flows provided by financing activities:
|
||||||||
Net
proceeds from issuance of common
stock
|
—
|
4
|
||||||
Borrowings
under notes payable and bank lines of
credit
|
(10 | ) |
94
|
|||||
Payments
on capital lease
financing
|
—
|
(2 | ) | |||||
Net
cash (used in) provided by financing
activities
|
(10 | ) |
96
|
|||||
Effect
of exchange rates on cash and cash
equivalents
|
10
|
76
|
||||||
Net
increase (decrease) in cash and cash
equivalents
|
(2,427 | ) | (1,147 | ) | ||||
Cash
and cash equivalents at beginning of
period
|
25,776
|
13,787
|
||||||
Cash
and cash equivalents at end of
period
|
$ |
23,349
|
$ |
12,640
|
Three
Months Ended June 30,
|
||||||||
2007
|
2006
|
|||||||
Expected
life (years):
|
||||||||
Stock
options
|
3.22
|
4.0
|
||||||
ESPP
|
0.5
|
|
0.5
|
|||||
Volatility:
|
|
|||||||
Stock
options
|
82.40
|
%
|
82.40 | % | ||||
ESPP
|
82.40 | % | 82.40 | % | ||||
Risk-free
interest rate
|
5.25 | % | 5.25 | % | ||||
Dividend
yield
|
0.00 | % | 0.00 | % | ||||
Weighted
|
||||||||||
Weighted
|
Average
|
|||||||||
Average
|
Remaining
|
Aggregate
|
||||||||
Exercise
|
Contractual
|
Intrinsic
|
||||||||
Shares
|
Price
|
Term
(in Years)
|
Value
|
|||||||
Beginning
outstanding
|
2,051,746
|
$ |
11.36
|
|||||||
Granted
|
||||||||||
Price
= market value
|
—
|
$ |
0.00
|
|||||||
Total
|
—
|
$ |
0.00
|
|||||||
Exercised
|
—
|
$ |
0.00
|
|||||||
Cancelled
|
||||||||||
Forfeited
|
(793 | ) | $ |
12.36
|
||||||
Expired
|
(14,457 | ) | $ |
8.53
|
||||||
Total
|
(15,250 | ) | $ |
8.73
|
||||||
Ending
outstanding
|
2,036,496
|
$ |
11.39
|
4.48
|
$698
|
|||||
Ending
vested and expected to vest
|
1,967,897
|
$ |
11.61
|
|
4.31
|
$584
|
||||
Ending
exercisable
|
1,744,802
|
$ |
12.48
|
|
3.69
|
$207
|
Weighted
|
||||||||||||||||||||||||||
Number
|
Average
|
Number
|
Weighted
|
|||||||||||||||||||||||
Outstanding
|
Remaining
|
Exercisable
|
Average
|
|||||||||||||||||||||||
Range
of
Exercise Prices
|
As
of
June
30,
2007
|
Contractual
Term
(in
years)
|
Weighted
Average
Exercise
Price
|
As
of
June
30,
2007
|
Exercise
Price
As
of June 30,
2007
|
|||||||||||||||||||||
$ |
4.20
|
$ |
4.20
|
16,344
|
1.19
|
$ |
4.20
|
16,344
|
$ |
4.20
|
||||||||||||||||
4.60
|
4.60
|
304,653
|
9.18
|
4.60
|
50,000
|
4.60
|
||||||||||||||||||||
4.68
|
7.08
|
222,902
|
5.27
|
6.16
|
188,108
|
6.14
|
||||||||||||||||||||
7.20
|
8.28
|
62,079
|
7.60
|
8.18
|
62,079
|
8.18
|
||||||||||||||||||||
12.00
|
12.00
|
1,284,990
|
3.18
|
12.00
|
1,284,990
|
12.00
|
||||||||||||||||||||
12.36
|
73.50
|
136,869
|
3.90
|
26.19
|
134,622
|
26.38
|
||||||||||||||||||||
92.26
|
92.26
|
416
|
2.69
|
92.26
|
416
|
92.26
|
||||||||||||||||||||
92.52
|
92.52
|
4,165
|
2.63
|
92.52
|
4,165
|
92.52
|
||||||||||||||||||||
99.00
|
99.00
|
2,498
|
2.74
|
99.00
|
2,498
|
99.00
|
||||||||||||||||||||
105.00
|
105.00
|
1,580
|
1.55
|
105.00
|
1,580
|
105.00
|
||||||||||||||||||||
$ |
4.20
|
$ |
105.00
|
2,036,496
|
4.47
|
$ |
11.39
|
1,744,802
|
$ |
12.48
|
Number
of
Shares
|
Weighted
Average
Grant
Date
Fair
Value
|
|||||||
Balance,
March 31, 2007
|
485,683
|
$ |
4.73
|
|||||
Granted
|
—
|
—
|
||||||
Vested
|
—
|
—
|
||||||
Forfeited
|
—
|
—
|
||||||
Distributed
|
(5,000 | ) |
4.75
|
|||||
Balance,
June 30,2007
|
480,683
|
$ |
6.45
|
June
30
2007
|
March
31
2007
|
|||||||
Raw
materials
|
$ |
3,932
|
$ |
1,315
|
||||
Work
in
progress
|
3,427
|
2,928
|
||||||
Finished
goods and
spares
|
1,281
|
1,324
|
||||||
$ |
8,640
|
$ |
5,567
|
Warranty
Activity for the
Three
Months Ended
June
30,
|
||||||||
2007
|
2006
|
|||||||
Balance
at the beginning of the period
|
$ |
1,101
|
$ |
506
|
||||
Additional
warranty accruals for warranties issued during the period
|
247
|
322
|
||||||
Less
settlements made during the period
|
(157 | ) | (160 | ) | ||||
Balance
at the end of the period
|
$ |
1,191
|
$ |
668
|
Three
Months Ended
June
30,
|
||||||||
2007
|
2006
|
|||||||
Net
loss applicable to common stockholders
|
$ | (638 | ) | $ | (1,802 | ) | ||
Basic
and diluted:
|
||||||||
Weighted-average
common shares outstanding …………………..…...
|
7,110
|
7,023
|
||||||
Less
weighted-average common shares subject to repurchase…………
|
—
|
—
|
||||||
Weighted-average
common shares used in computing basic and diluted net loss per common
share ………………………..…………
|
7,110
|
7,023
|
||||||
Basic
and diluted net loss per common share ……………………………....
|
$ | (0.09 | ) | $ | (0.26 | ) |
Revenue
for the
Three
Months Ended
June
30,
|
||||||||
2007
|
2006
|
|||||||
Sales
to customers located in:
|
||||||||
United
States
|
$ |
729
|
$ |
2,544
|
||||
Asia,
excluding
Japan
|
353
|
2,679
|
||||||
Japan
|
5
|
524
|
||||||
Germany
|
574
|
707
|
||||||
Italy
|
—
|
54
|
||||||
Europe,
excluding Germany and Italy
|
2,937
|
68
|
||||||
Total
sales
|
$ |
4,598
|
$ |
6,576
|
Long-lived
Assets
as of
June
30,
|
||||||||
2007
|
2006
|
|||||||
Long-lived
assets at period-end:
|
||||||||
United
States
|
$ |
2,388
|
$ |
4,336
|
||||
Europe
|
11
|
14
|
||||||
Japan
|
—
|
10
|
||||||
Asia,
excluding Japan
|
—
|
2
|
||||||
Total
long-lived assets
|
$ |
2,399
|
$ |
4,362
|
Three
Months Ended
June
30,
|
||||||||
2007
|
2006
|
|||||||
Revenue
|
100.0 | % | 100.0 | % | ||||
Cost
of
sales
|
64.7 | % | 62.0 | % | ||||
Gross
profit
|
35.3 | % | 38.0 | % | ||||
Operating
expenses:
|
||||||||
Research
and
development
|
16.9 | % | 15.1 | % | ||||
Sales
and
marketing
|
21.9 | % | 15.9 | % | ||||
General
and
administrative
|
26.2 | % | 35.0 | % | ||||
Total
operating
expenses
|
65.0 | % | 66.0 | % | ||||
Other
income
|
15.8 | % | 0.6 | % | ||||
Net
loss
|
(13.9 | )% | (27.4 | )% |
Three
Months
Ended
June
30
|
||||||||
2007
|
2006
|
|||||||
Revenue
|
$ |
4,598
|
$ |
6,576
|
||||
Cost
of
sales
|
2,977
|
4,078
|
||||||
Gross
profit
|
1,621
|
2,498
|
||||||
Operating
expenses:
|
||||||||
Research
and
development
|
778
|
996
|
||||||
Sales
and
marketing
|
1,006
|
1,044
|
||||||
General
and
administrative
|
1,203
|
2,302
|
||||||
Total
operating
expenses
|
2,987
|
4,342
|
||||||
Other
income
|
728
|
42
|
||||||
Net
loss
|
$ | (638 | ) | $ | (1,802 | ) |
Contractual
obligations:
|
Total
|
Less
than
1
Year
|
1-3
Years
|
3-5
Years
|
After
5
Years
|
|||||||||||||||
Non-cancelable
operating lease obligations
|
1,111
|
636
|
430
|
45
|
—
|
|||||||||||||||
Total
contractual cash obligations
|
$ |
1,111
|
$ |
636
|
$ |
430
|
$ |
45
|
$ |
—
|
|
(a)
|
Evaluation
of Disclosure Controls and Procedures. - Under the
supervision and with the participation of our management, our Chief
Executive Officer and Chief Financial Officer have evaluated the
effectiveness of our disclosure controls and procedures, as such
term is
defined under Rule 13a-15(e) promulgated under the Securities
Exchange Act of 1934, as amended. Based upon that evaluation, our
Chief
Executive Officer and our Chief Financial Officer concluded that
the our
disclosure controls and procedures were effective as of the end of
the
period covered by this report.
|
|
(b)
|
Changes
in Internal Controls over financial reporting. - As required
by Rule 13a-15(d), our management, including our Chief Executive
Officer and Chief Financial Officer, also conducted an evaluation
of our
internal control over financial reporting to determine whether any
changes
occurred during the period covered by this report that have materially
affected, or are reasonably likely to materially affect, our internal
control over financial reporting. Based on that evaluation, there
has been
no such change during the period covered by this
report.
|
|
(c)
|
Limitations
of the effectiveness of internal control.
- A control system,
no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the internal control
system
are met. Because of the inherent limitations of any internal control
system, no evaluation of controls can provide absolute assurance
that all
control issues, if any, within a company have been detected.
Notwithstanding these limitations, our disclosure controls and procedures
are designed to provide reasonable assurance of achieving their
objectives. Our Chief Executive Officer and Chief Financial Officer
have
concluded that our disclosure controls and procedures are, in fact,
effective at the “reasonable assurance”
level.
|
·
|
our
timing of new systems and technology announcements and releases and
ability to transition between product
versions;
|
·
|
seasonal
fluctuations in sales;
|
·
|
changes
in the mix of our revenues represented by our various products and
customers;
|
·
|
adverse
changes in the level of economic activity in the United States or
other
major economies in which we do
business;
|
·
|
foreign
currency exchange rate
fluctuations;
|
·
|
expenses
related to, and the financial impact of, possible acquisitions of
other
businesses; and
|
·
|
changes
in the timing of product orders due to unexpected delays in the
introduction of our customers’ products, due to lifecycles of our
customers’ products ending earlier than expected or due to market
acceptance of our customers’
products.
|
31.1
|
Certifications
of the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
31.2
|
Certifications
of the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
32
|
Certifications
of the Chief Executive Officer and Chief Financial Officer pursuant
to
Section 906 of the Sarbanes-Oxley Act of
2002.
|
TEGAL
CORPORATION
(Registrant)
|
||
/s/ CHRISTINE
HERGENROTHER
|
||
Dated:
August 14 , 2007
|
Christine
Hergenrother
Chief Financial
Officer
|
1.
|
I
have reviewed this quarterly report on Form 10-Q of Tegal
Corporation;
|
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
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-14(e)) for the registrant
and we 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;
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|
(b)
|
evaluated
the effectiveness of the registrant’s 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;
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|
(c)
disclosed in this report any change in the registrant’s internal control
over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant’s internal control over financial
reporting; and
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5.
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The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting,
to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
function):
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|
(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 registrant’s ability to record,
process, summarize and report financial information;
and
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|
(b)
|
any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal
controls over financial reporting.
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1.
|
I
have reviewed this quarterly report on Form 10-Q of Tegal
Corporation;
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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;
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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;
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4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-14(e)) for the registrant
and we 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 registrant’s 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;
|
|
(c)
disclosed in this report any change in the registrant’s internal control
over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting,
to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
function):
|
|
(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 registrant’s 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 registrant’s internal
controls over financial reporting.
|