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Table of Contents
terminate the settlement, which was granted by Court Order. On August 14, 2007, the plaintiffs filed Amended Master Allegations. On September 27, 2007,
the Plaintiffs filed a renewed Motion for Class Certification. Defendants filed a Motion to Dismiss on November 9, 2007. On March 26, 2008, the Court
denied the Motion to Dismiss the focus cases, except as to a small-group of Section II plaintiffs.
On October 3, 2007, Vanessa Simmonds filed a complaint against the Company's former lead underwriters Credit Suisse Group and Bank of America
(Lead Underwriters), with the Company named as a nominal defendant, in the U.S. District Court for the Western District of Washington alleging violations
of Section 16(b) in connection with the Company's initial public offering and associated transactions in the Company's stock in the six month period following
the Company's initial public offering by the Company's Lead Underwriters. On or about December 3, 2007, Ms. Simmonds delivered a copy of the complaint
to the Company. The complaint itself is directed solely at the initial public offering underwriters, not at the Company itself, and does not seek any damages or
recovery from the Company itself. On February 25, 2008, the plaintiff filed an amended complaint which is substantially similar to the initial complaint, but
which also names Credit Suisse Securities (USA), Bank of America Corporation, and Robertson Stevenson, Inc. as defendants in the amended complaint that
continues to name the Company only as a nominal defendant. The Company may incur expenses in connection with this litigation that may become material
in the future. No loss is considered probable or estimable at this time.
The Company is involved in numerous lawsuits and receives numerous threats of litigation in the ordinary course of its business. The Company
assesses potential liabilities in connection with these lawsuits and threatened lawsuits under SFAS No. 5. The Company accrues an estimated loss for these
loss contingencies if both of the following conditions are met: information available prior to issuance of the financial statements indicates that it is probable
that a liability has been incurred at the date of the financial statements and the amount of loss can be reasonably estimated. As of January 31, 2008, the
Company has not accrued any liability for any lawsuits filed against the Company as the conditions for accrual have not been met. The Company expenses
legal costs as they are incurred.
Facilities Leases
The Company's corporate headquarters consists of two buildings located in Alviso, California, which are used for administrative, sales and marketing,
customer service, and product research and development activities. On April 27, 2006, the Company entered into the First Amendment to Lease Agreement,
dated as of February 1, 2006, which amends the Lease Agreement, dated as of October 6, 1999. Under the Amendment, the Company extended for an
additional three years, from March 9, 2007 to January 31, 2010, the original Lease Agreement. Under the terms of the Amendment, monthly rent is
approximately $165,000 with built-in base rent escalations periodically throughout the lease term. The lease is classified as an operating lease. Rent expense is
recognized using the straight-line method over the lease term and for fiscal years ended January 31, 2008, 2007, and 2006 was $2.1 million, $2.1 million, and
$3.0 million, respectively.
Additionally, the Company delivered a letter of credit totaling $477,000, to the landlord as collateral for performance by the Company of all of its
obligations under the lease. The letter of credit is to remain in effect the entire term of the lease, but the amount does decrease over time. The Company also
has operating leases for sales and administrative office space in New York City, New York and Chicago, Illinois.
Operating lease cash payments for the fiscal years ended January 31, 2008, 2007, and 2006 were $3.1 million, $1.8 million, and $3.3 million,
respectively. Future minimum operating lease payments as of January 31, 2008, are as follows:
Fiscal Year Ending Lease Payments
(In thousands)
January 31, 2009 2,428
January 31, 2010 2,433
Total $ 4,861
10. STOCKHOLDERS EQUITY/(DEFICIT)
Common Stock
On September 11, 2006 the Company sold 8,264,463 shares of its common stock, to institutional investors at $7.865 per share. The shares were
registered pursuant to the Company's $100 million universal shelf registration statement on Form S-3 (File No. 333-113719). The net proceeds from this sale
were approximately $64.5 million after deducting the Company's offering expenses of $442,000.
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