EXAR » Topics » Note 5. Related Party Transactions

This excerpt taken from the EXAR 10-Q filed Feb 6, 2009.

NOTE 8. RELATED PARTY TRANSACTIONS

Affiliates of Future Electronics Inc. (“Future”), Alonim Investments Inc. and two of its affiliates (collectively “Alonim”), own approximately 7.7 million shares, or approximately 18% of our outstanding common stock as of December 28, 2008. As such, Alonim is our largest stockholder.

Our sales to Future are made under an agreement that provides protection against price reduction for its inventory of our products and other sales allowances. We recognize revenue on sales to Future under the distribution agreement when Future sells the products to its end customers. Future has historically accounted for a significant portion of our net sales. It is our largest distributor worldwide and accounted for 35% and 18% of our total net sales for the three months ended December 28, 2008 and December 30, 2007, respectively. It accounted for 35% and 19% of our total net sales for the nine months ended December 28, 2008 and December 30, 2007, respectively.

We reimbursed Future for approximately $21,000 and $27,000 of expenses for marketing promotional materials for the three months ended December 28, 2008 and December 30, 2007, respectively. We reimbursed Future for approximately $38,000 and $45,000 of expenses for marketing promotional materials for the nine months ended December 28, 2008 and December 30, 2007, respectively.

This excerpt taken from the EXAR 10-Q filed Nov 7, 2008.

NOTE 7. RELATED PARTY TRANSACTIONS

Affiliates of Future Electronics Inc. (“Future”), Alonim Investments Inc. and two of its affiliates (collectively “Alonim”), own approximately 7.7 million shares, or approximately 18% of our outstanding common stock as of September 28, 2008. As such, Alonim is our largest stockholder.

Our sales to Future are made under an agreement that provides protection against price reduction for its inventory of our products and other sales allowances. We recognize revenue on sales to Future under the distribution agreement when Future sells the products to end customers. Future has historically accounted for a significant portion of our net sales. It is our largest distributor worldwide and accounted for 34% and 19% of our total net sales for the second quarters of fiscal 2009 and fiscal 2008, respectively. It accounted for 36% and 20% of our total net sales for the first six months of fiscal 2009 and fiscal 2008, respectively.

We reimbursed Future for approximately $11,000 and $5,000 of expenses for marketing promotional materials for the second quarters of fiscal 2009 and fiscal 2008, respectively. We reimbursed Future for approximately $20,000 and $5,000 of expenses for marketing promotional materials for the first six months of fiscal 2009 and fiscal 2008, respectively.

This excerpt taken from the EXAR 10-Q filed Aug 8, 2008.

NOTE 5. RELATED PARTY TRANSACTIONS

Affiliates of Future, Alonim Investments Inc. and two of its affiliates (collectively “Alonim”), own approximately 7.7 million shares or approximately 18% of our outstanding common stock as of June 29, 2008. As such, Alonim is our largest stockholder.

Our sales to Future are made under an agreement that provides protection against price reduction for its inventory of our products and other sales allowances. We recognize revenue on sales to Future under the distribution agreement when Future sells the products to end customers. Future has historically accounted for a significant portion of our net sales. It is our largest distributor worldwide and accounted for 37% and 22% of our total net sales for the first fiscal quarters of 2009 and 2008, respectively.

We reimbursed Future for approximately $9,000 and $4,000 of expenses for marketing promotional materials for the first fiscal quarters of 2009 and 2008, respectively.

This excerpt taken from the EXAR 10-Q filed Feb 8, 2008.

NOTE 3. RELATED PARTY TRANSACTIONS

Alonim Investments Inc., our largest stockholder, and an affiliate of Future, owns approximately 7.6 million shares or approximately 16% of our outstanding common stock as of December 30, 2007. Sales to Future are made under an agreement that provides protection against price reduction for its inventory of our products. We recognize revenue on sales to Future under the distribution agreement when Future sells the products to end customers. Future has historically accounted for a significant portion of our net sales. It is our largest distributor worldwide and accounted for 18% and 19% of our total net sales for the three months ended December 30, 2007 and December 31, 2006, respectively, and accounted for 19% and 20% of our total net sales for the nine months ended December 30, 2007 and December 31, 2006, respectively.

We reimbursed Future for approximately $27,000 and $45,000 of expenses for marketing promotional materials for the three and nine months ended December 30, 2007, respectively. We reimbursed approximately $2,000 of such expenses for both the three and nine months ended December 31, 2006.

Upon our merger with Sipex, we appointed an executive vice president and chief financial officer of Future to our board of directors. The board of directors has determined that this director is not independent within the meaning of The Marketplace Rule 4200(a)(15) of The NASDAQ Stock Market by virtue of our relationship with Future.

This excerpt taken from the EXAR 10-Q filed Nov 9, 2007.

NOTE 3. RELATED PARTY TRANSACTIONS

An affiliate of Future owns approximately 7.6 million shares or approximately 15% of Exar’s outstanding common stock as of September 30, 2007. Sales to Future are made under an agreement that provides protection against price reduction for its inventory of Exar’s products. We recognize revenue on sales to Future under the distribution agreement when Future sells the products to end customers. Future has historically accounted for a significant portion of our net sales. It is our largest distributor worldwide and accounted for 19% of our total net sales for both the three months ended September 30, 2007 and 2006, and accounted for 20% of our total net sales in both the six months ended September 30, 2007 and, 2006.

We incurred expense to Future totaling approximately $5,000 for marketing promotional materials for both the three and six months ended September 30, 2007, respectively. No such expenses were recorded for the three and six months ended September 30, 2006.

Upon the merger with Sipex, Exar appointed one executive vice president of Future to its Board of Directors. The Board of Directors has determined that the new director is not independent within the meaning of The Marketplace Rule 4200(a)(15) of The NASDAQ Stock Market by virtue of our relationships with Future.

This excerpt taken from the EXAR 8-K filed Nov 5, 2007.

Note 5. Related Party Transactions

Future is a related party and its affiliates own approximately 8.6 million shares or 45% of Sipex’s outstanding common stock as of June 30, 2007. Sipex has a distribution agreement that provides for Future to act as the Company’s sole distributor for certain products within North America and Europe. Sales to Future are made under an agreement that provides protection against price reduction for its inventory of Sipex’s products. The Company recognizes revenue on sales to Future under the distribution agreement when Future sells the products to end customers. Future has historically accounted for a significant portion of the Company’s revenues. It is the Company’s largest distributor worldwide and accounted for 46% and 45%, respectively, of its total net sales for the three months ended June 30, 2007 and July 1, 2006, and accounted for 47% and 46%, respectively, of its total net sales for the six months ended June 30, 2007 and July 1, 2006.

From time to time, Future provides services and/or incurs expenses on behalf of the Company. The fair value of the unreimbursed expenses and uncompensated services rendered by Future has been recorded in the Company’s condensed consolidated financial statements as capital contributions. For the three and six months ended June 30, 2007, there were no such un-reimbursed expenses or uncompensated services rendered by Future. For the three and six months ended July 1, 2006, the Company recorded none and $5,000 of such expenses, respectively.

In addition, Sipex incurred expense to Future totaling approximately $35,000 and $37,000 for marketing promotional materials, temporary accounting services and used furniture sold to the Company for the three and six months ended June 30, 2007. No such expenses were recorded for the three and six months ended July 1, 2006.

On January 19, 2006, Sipex completed a $7.0 million private loan financing in which the Company issued a 9% secured note with convertible interest due January 19, 2008 to the affiliates of Future, which could provide these affiliates with the opportunity to obtain additional shares of Sipex’s common stock. The loan was repaid in March 2006. For the three and six months ended July 1, 2006, Sipex incurred interest expense totaling $86,000 related to the $7.0 million note with Future.

As discussed in Note 13, on May 16, 2006, Sipex placed $30.0 million of its 5.5% Redeemable Convertible Senior Notes (“2006 Notes”) due 2026 and related warrants in a private placement transaction to accredited investors in reliance on Regulation D under the Securities Act of 1933, as amended (the “Securities Act”). Rodfre Holdings LLC (“Rodfre”), an affiliate of Alonim Investments Inc., Sipex’s largest stockholder, and an affiliate of Future, purchased 50% of the 2006 Notes or $15.0 million aggregate principal amount being placed in this offering. The 2006 Notes will mature on May 18, 2026 and bear interest at an annual rate of 5.5% payable semi-annually on May 15 and November 15 of each year, beginning on November 15, 2006. On December 21, 2006, Rodfre paid $2.7 million to exercise its warrant for 419,776 shares of Sipex common stock at $6.432 per share. Rodfre has agreed to convert its $15 million aggregate principal amount of the 2006 Notes into Sipex common stock with such conversion to be effective immediately prior to the effective time of the merger. As of June 30, 2007, the affiliates of Future held 8.6 million shares, or 45% of the Company’s outstanding common stock.

Interest expense incurred by Sipex relating to the $15.0 million portion of the 2006 Notes sold to Rodfre totaled $265,000 and $496,000 for the three and six months ended June 30, 2007. For the three and six months ended July 1, 2006, interest expenses incurred by Sipex relating to the $15.0 million portion of the 2006 Notes were $140,000.

On September 8, 2006, Sipex appointed two executive vice presidents of Future to its Board of Directors. The Board has determined that both new directors are not independent within the meaning of Rule 4200(a) (15) of the NASDAQ Manual by virtue of their relationships with Future. Accordingly, the Board does not expect to appoint them to any standing committees of the Board. In connection with their appointment as directors, both new directors have agreed to recuse themselves from any Board discussions that relate to transactions between Sipex and Future.

On March 29, 2007, the Company entered into a Securities Purchase Agreement with Rodfre to provide an unsecured promissory note facility of up to $10.0 million. This facility expires, and the borrowings and accrued interest under any notes issued under this facility are due and payable, on June 30, 2008, or upon certain other events such as a change of control. Borrowings under this promissory note facility bear interest of 9% per annum subject to an increased interest rate of up to 20% in case of default or after maturity. This promissory note facility is subordinate to the Company’s Loan and Security Agreement with Silicon Valley Bank and to its 5.5% Redeemable Convertible Senior Notes due in 2026. No borrowing was made under the promissory note facility in the three and six months ended June 30, 2007.

 

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Table of Contents

SIPEX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

 

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