x
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
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¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
Delaware
|
|
91-2145721
|
(State
or other jurisdiction of
incorporation
or organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
|
|
|
250
Williams Street
Atlanta,
GA 30303
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|
30303
|
(Address
of principal executive offices)
|
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(Zip
Code)
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Title
of Each Class
|
|
Name
of Exchange on Which Registered
|
Common
Stock, $0.001 par value
|
|
The
NASDAQ Stock Market LLC
(NASDAQ
Global Market)
|
Large
accelerated filer o
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Accelerated
filer x
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Non-accelerated
filer o
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Page
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PART
I
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6 | ||
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11 | ||
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22 | ||
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22 | ||
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22 | ||
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22 | ||
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PART
II
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22 | ||
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24 | ||
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26 | ||
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43 | ||
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44 | ||
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44 | ||
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44 | ||
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45 | ||
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PART
III
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46 | ||
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46 | ||
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46 | ||
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46 | ||
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46 | ||
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PART
IV
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||||
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47 | ||
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||||
51 |
· |
our
ability to achieve, sustain or increase profitability or positive
cash
flows;
|
· |
our
ability to meet our cash requirements for 2007;
|
· |
our
ability to secure adequate funding;
|
· |
the
retention of earnings for future growth;
|
· |
the
incurrence of additional restructuring
charges;
|
· |
the
results or benefits of our acquisition of VitalStream Holdings, Inc.,
or
VitalStream;
|
· |
the
integration of our service offerings with VitalStream and the costs
associated with such integration;
|
· |
our
ability to compete against existing and future
competitors;
|
· |
pricing
pressures;
|
· |
the
availability of services from Internet network service providers
and local
access providers on favorable terms, or at
all;
|
· |
failure
of suppliers to deliver their products and services as
agreed;
|
· |
failures
in our network operations centers, network access points or computer
systems;
|
· |
fluctuations
in our operating results;
|
· |
our
ability to respond to technological
change;
|
· |
our
ability to charge a premium for high performance managed Internet
connectivity services;
|
· |
the
impact of our data center services on profitability;
|
· |
our
ability to operate in light of restrictions in our credit facility,
including our ability to maintain ratios
set forth in the credit
facility;
|
· |
the
expansion and deployment of new network access
points;
|
· |
our
ability to successfully complete future
acquisitions;
|
· |
risks
associated with international
operations;
|
· |
our
ability to attract, assimilate and retain qualified
personnel;
|
· |
the
impact of litigation on our financial condition or operating
results;
|
· |
our
ability to protect our intellectual
property;
|
· |
litigation
based on claims of infringement of third party intellectual property
rights;
|
· |
evolution
of the high performance Internet connectivity and services
industry;
|
· |
our
ability to protect ourselves and our customers from security
breaches;
|
· |
effects
of terrorist activity;
|
· |
government
regulation of the Internet;
|
· |
ramifications
of not complying with section 404 of the Sarbanes-Oxley Act of 2002,
or
Sarbanes-Oxley, or a material weaknesses in our internal controls
identified as part of our evaluation under section 404 of Sarbanes-Oxley
at any time in the future;
|
· |
our
ability to design and implement effective financial
controls;
|
· |
the
impact of recent accounting
pronouncements;
|
· |
changes
in estimates regarding disputed costs;
|
· |
the
dilutive effects on our stock price of outstanding stock options
and
warrants;
|
· |
future
sales of stock; and
|
· |
volatility
of our stock price.
|
Internap
operated
|
|
Operated
under third party agreements
|
||
Atlanta
|
|
Boston
|
Chicago
|
Dallas
|
Boston
|
|
Denver
|
Los
Angeles
|
Miami
|
Houston
|
|
New
York
|
Orange
County
|
Philadelphia
|
New
York
|
|
Phoenix
|
San
Diego
|
San
Francisco
|
Seattle
|
|
San
Jose
|
Washington
DC
|
Toronto
|
|
|
London
|
Hong
Kong
|
Singapore
|
|
|
Sydney
|
Tokyo1
|
1
|
Through
our joint venture with NTT-ME Corp. of
Japan
|
·
|
network
service providers that provide connectivity services, including
AT&T,
Sprint, Verizon, Level 3 Communications, Global Crossing
Telecommunications, and Verio;
|
·
|
regional Bell operating companies that offer Internet access and managed services; |
·
|
global, national and regional ISPs such as Equant, Infonet and Savvis; |
· | providers of specific applications or solutions, such as content delivery, security or storage such as AKAMAI, Limelight Networks, Mirror Image Internet, Symantec Corporation, Network Appliance and Virtela Communications; |
· | software-based, Internet infrastructure companies focused on IP route control and wide area network optimization products such as Riverbed, F5 Networks and Radware; and |
· | colocation and data center providers, including Equinix, Terremark, Navisite, 365 Main, Savvis, and Globix. |
|
|
|
|
·
|
human
error;
|
|
|
|
|
·
|
physical
or electronic security breaches;
|
|
|
|
|
·
|
fire,
earthquake, flood and other natural disasters;
|
|
|
|
|
·
|
water
damage;
|
|
|
|
|
·
|
fiber
cuts;
|
|
|
|
|
·
|
power
loss;
|
|
|
|
|
·
|
sabotage
and vandalism; and
|
|
|
|
|
·
|
failure
of business partners who provide our resale
products.
|
|
|
|
|
·
|
competition
and the introduction of new services by our
competitors;
|
|
|
|
|
·
|
continued
pricing pressures resulting from competitors’ strategies or excess
bandwidth supply;
|
|
|
|
|
·
|
fluctuations
in the demand and sales cycle for our services;
|
|
|
|
|
·
|
fluctuations
in the market for qualified sales and other personnel;
|
|
|
|
|
·
|
changes
in the prices for Internet connectivity we pay to Internet network
service
providers;
|
|
|
|
|
·
|
the
cost and availability of adequate public utilities, including
power;
|
|
|
|
|
·
|
our
ability to obtain local loop connections to our network access points
at
favorable prices;
|
|
|
|
|
·
|
integration
of people, operations, products and technologies of acquired businesses,
including VitalStream; and
|
|
|
|
|
·
|
general
economic conditions.
|
|
·
|
the
ability to identify and consummate complementary
acquisitions;
|
|
|
|
|
·
|
the
possibility that we may not be able to integrate the operations,
personnel, technologies, products and services of the acquired companies
in a timely and efficient manner;
|
|
|
|
|
·
|
diversion
of management’s attention from other ongoing business
concerns;
|
|
|
|
|
·
|
insufficient
revenue to offset significant unforeseen costs and increased expenses
associated with the acquisitions;
|
|
|
|
|
·
|
challenges
in completing projects associated with in-process research and development
being conducted by the acquired businesses;
|
|
|
|
|
·
|
risks
associated with our entrance into markets in which we have little
or no
prior experience and where competitors have a stronger market
presence;
|
|
|
|
|
·
|
deferral
of purchasing decisions by current and potential customers as they
evaluate the likelihood of success of our acquisitions;
|
|
|
|
|
·
|
issuance
by us of equity securities that would dilute ownership of our existing
stockholders;
|
|
|
|
|
·
|
incurring
or assuming significant debt, contingent liabilities and amortization
expense;
|
|
|
|
·
|
incurring restructuring charges as a result of integrating acquired businesses; | |
|
·
|
difficulties
in successfully integrating the management teams and employees of
both
companies; and
|
|
|
|
|
·
|
loss
of key employees of the acquired
companies.
|
|
·
|
challenges
in establishing and maintaining relationships with foreign customers
as
well as foreign Internet network service providers and local vendors,
including data center and local network operators;
|
|
|
|
|
·
|
challenges
in staffing and managing network operations centers and network access
points across disparate geographic areas;
|
|
|
|
|
·
|
limited
protection for intellectual property rights in some
countries;
|
|
|
|
|
·
|
challenges
in reducing operating expense or other costs required by local
laws;
|
|
|
|
|
·
|
exposure
to fluctuations in foreign currency exchange
rates;
|
|
·
|
costs
of customizing network access points for foreign countries and
customers;
|
|
|
|
|
·
|
protectionist
laws and practices favoring local competition;
|
|
|
|
|
·
|
political
and economic instability; and
|
|
|
|
|
·
|
compliance
with governmental regulations.
|
|
|
|
|
·
|
employee
redeployment, relocation or severance;
|
|
|
|
|
·
|
conversion
of information systems;
|
|
|
|
|
·
|
integration
and implementation of accounting systems and internal
controls;
|
|
|
|
|
·
|
combining
research and development teams and processes; and
|
|
|
|
|
·
|
reorganization.
|
|
·
|
actual
or anticipated variations in our quarterly and annual results of
operations;
|
|
|
|
|
·
|
changes
in market valuations of companies in the Internet connectivity and
services industry;
|
|
|
|
|
·
|
changes
in expectations of future financial performance or changes in estimates
of
securities analysts;
|
|
|
|
|
·
|
fluctuations
in stock market prices and volumes;
|
|
|
|
|
·
|
future
issuances of common stock or other securities;
|
|
|
|
|
·
|
the
addition or departure of key personnel; and
|
|
|
|
|
·
|
announcements
by us or our competitors of acquisitions, investments or strategic
alliances.
|
Year
Ended December 31, 2006:
|
High
|
Low
|
|||||
Fourth
Quarter
|
$
|
21.25
|
$
|
14.10
|
|||
Third
Quarter
|
16.80
|
9.30
|
|||||
Second
Quarter
|
15.50
|
9.00
|
|||||
First
Quarter
|
10.60
|
4.20
|
|||||
|
Year
Ended December 31, 2005:
|
High
|
Low
|
|||||
Fourth
Quarter
|
$
|
5.20
|
$
|
3.60
|
|||
Third
Quarter
|
5.90
|
4.20
|
|||||
Second
Quarter
|
6.30
|
4.10
|
|||||
First
Quarter
|
11.00
|
5.10
|
Equity
Compensation Plan Information
|
|||||||
Plan
category
|
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights
(a)
|
Weighted-average
exercise price of outstanding options, warrants and rights
(b)
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column (a)
(c)
|
||||
Equity
compensation plans approved by security holders
|
2,700
|
(1) |
$11.07
|
6,123
|
(2) | ||
Equity
compensation plans not approved by security holders
|
—
|
—
|
—
|
||||
Total
|
2,700
|
$11.07
|
6,123
|
(1)
|
Excludes
purchase rights accruing under the 2004 Employee Stock Purchase
Plan
("Purchase Plan"). Under the Purchase Plan, each eligible employee
may
purchase up to $12,500 worth of common stock at each semi-annual
purchase date (the last business day of June and December each year),
but not more than $25,000 worth of such stock (determined on the
basis of
the fair market value per share on the date or dates such rights
are
granted) per calendar year his or her purchase right remains outstanding.
For all purchase periods up to and including the purchase period
ended
June 30, 2006, the purchase price payable per share was equal to
eighty-five percent (85%) of the lower of (i) the closing selling
price per share of common stock on the employee’s entry date into the six
month offering period in which that semi-annual purchase date occurs
and
(ii) the closing selling price per share of common stock on the
semi-annual purchase date. For all subsequent purchase periods,
the
purchase price payable per share will be equal to ninety-five percent
(95%) of the closing selling price per share of common stock on
the
semi-annual purchase date.
|
(2)
|
Includes
297,000 shares available for issuance under the Purchase
Plan.
|
Year
Ended December 31,
|
||||||||||||||||
|
2006(1)
|
2005
|
2004
|
2003
|
2002
|
|||||||||||
(in
thousands, except per share data)
|
||||||||||||||||
Consolidated
Statement of Operations Data:
|
|
|
|
|||||||||||||
Revenue
|
$
|
181,375
|
$
|
153,717
|
$
|
144,546
|
$
|
138,580
|
$
|
132,487
|
||||||
|
||||||||||||||||
Costs
and expense:
|
||||||||||||||||
Direct
cost of network and sales, exclusive of depreciation and amortization,
shown below(2)
|
97,854
|
82,535
|
77,569
|
78,334
|
85,734
|
|||||||||||
Direct
cost of customer support
|
11,566
|
10,670
|
10,180
|
9,483
|
12,913
|
|||||||||||
Product
development
|
4,475
|
4,864
|
6,412
|
6,982
|
7,447
|
|||||||||||
Sales
and marketing
|
27,173
|
25,864
|
23,411
|
21,491
|
21,641
|
|||||||||||
General
and administrative
|
22,104
|
20,096
|
24,772
|
16,711
|
20,907
|
|||||||||||
Depreciation
and amortization(2)
|
15,856
|
14,737
|
15,461
|
37,087
|
55,285
|
|||||||||||
Amortization
of deferred stock compensation
|
—
|
60
|
—
|
390
|
260
|
|||||||||||
Asset
impairment and restructuring cost (benefit)
|
323
|
44
|
3,644
|
1,084
|
(2,857
|
)
|
||||||||||
(Gain)
loss on disposals of property and equipment
|
(113
|
)
|
(19
|
)
|
(3
|
)
|
(53
|
)
|
3,722
|
|||||||
Pre-acquisition
liability adjustment
|
—
|
—
|
—
|
(1,313
|
)
|
—
|
||||||||||
Lease
termination expense
|
—
|
—
|
—
|
—
|
804
|
|||||||||||
Total
operating costs and expense
|
179,238
|
158,851
|
161,446
|
170,196
|
205,856
|
|||||||||||
Income
(loss) from operations
|
2,137
|
(5,134
|
)
|
(16,900
|
)
|
(31,616
|
)
|
(73,369
|
)
|
|||||||
Non-operating
(income) expense
|
(1,551
|
)
|
(87
|
)
|
772
|
2,158
|
1,055
|
|||||||||
Net
income (loss) before income taxes
|
3,688
|
(5,047
|
)
|
(17,672
|
)
|
(33,774
|
)
|
(74,424
|
)
|
|||||||
Provision
for income taxes
|
145
|
—
|
—
|
—
|
—
|
|||||||||||
Equity
in (earnings) loss of equity-method investment, net of
taxes
|
(114
|
)
|
(83
|
)
|
390
|
827
|
1,244
|
|||||||||
Less
deemed dividend related to beneficial conversion
feature (3)
|
—
|
—
|
—
|
34,576
|
—
|
|||||||||||
Net
income (loss)
|
$
|
3,657
|
$
|
(4,964
|
)
|
$
|
(18,062
|
)
|
$
|
(69,177
|
)
|
$
|
(75,668
|
)
|
||
|
||||||||||||||||
Net
income (loss) per share:
|
||||||||||||||||
Basic(4)
|
$
|
0.11
|
$
|
(0.15
|
)
|
$
|
(0.63
|
)
|
$
|
(3.96
|
)
|
$
|
(4.87
|
)
|
||
Diluted(4)
|
$
|
0.10
|
$
|
(0.15
|
)
|
$
|
(0.63
|
)
|
$
|
(3.96
|
)
|
$
|
(4.87
|
)
|
||
|
||||||||||||||||
Weighted
average shares used in per share calculations
|
||||||||||||||||
Basic(4)
|
34,748
|
33,939
|
28,732
|
17,460
|
15,555
|
|||||||||||
Diluted(4)
|
35,739
|
33,939
|
28,732
|
17,460
|
15,555
|
Year
Ended December 31,
|
||||||||||||||||
|
2006
|
2005
|
2004
|
2003
|
2002
|
|||||||||||
Consolidated
Balance Sheet Data:
|
|
|
|
|
|
|||||||||||
Cash,
cash equivalents and short-term
marketable
investments
|
$
|
58,882
|
$
|
40,494
|
$
|
45,985
|
$
|
18,885
|
$
|
25,219
|
||||||
Non-current
marketable investments
|
—
|
—
|
4,656
|
—
|
—
|
|||||||||||
Total
assets
|
173,702
|
155,369
|
168,149
|
135,839
|
166,334
|
|||||||||||
Note
payable and capital lease obligations, less current
portion
|
3,364
|
7,903
|
12,837
|
12,742
|
22,739
|
|||||||||||
Series
A convertible preferred stock
(5)
|
—
|
—
|
—
|
—
|
79,790
|
|||||||||||
Total
stockholders’ equity
|
126,525
|
109,728
|
113,738
|
70,524
|
(4,228
|
)
|
Year
Ended December 31,
|
||||||||||||||||
|
2006
|
2005
|
2004
|
2003
|
2002
|
|||||||||||
Other
Financial Data:
|
|
|
|
|||||||||||||
Purchases
of property and equipment
|
$
|
13,382
|
$
|
10,161
|
13,066
|
$
|
3,799
|
$
|
8,632
|
|||||||
Net
cash provided by (used in) operating activities
|
29,599
|
5,493
|
(1,150
|
)
|
(11,175
|
)
|
(40,331
|
)
|
||||||||
Net
cash (used in) provided by investing activities
|
(10,399
|
)
|
(9,428
|
)
|
(29,659
|
)
|
561
|
9,581
|
||||||||
Net
cash provided by (used in) financing activities
|
1,957
|
(5,454
|
)
|
45,747
|
4,280
|
(7,582
|
)
|
|
(1)
|
Effective
January 1, 2006, we adopted SFAS No. 123 (revised 2004),
“Share-Based Payment” (SFAS No. 123R) and related
interpretations, using the modified prospective transition method
and
therefore have not restated prior periods’ results. Prior to the adoption
of SFAS No. 123R on January 1, 2006, we accounted for
stock-based compensation plans under the recognition and measurement
provisions of Accounting Principles Board (APB) Opinion No. 25,
“Accounting for Stock Issued to Employees,” and related interpretations.
We also provided disclosures in accordance with SFAS No. 123,
“Accounting for Stock-Based Compensation,” as amended by
SFAS No. 148, “Accounting for Stock-Based Compensation —
Transition and Disclosures — an Amendment of FASB Statement
No. 123.” Accordingly, no expense was recognized for options to
purchase our common stock that were granted with an exercise price
equal
to fair market value at the date of grant and no expense was recognized
in
connection with purchases under employee stock purchase plans for
any
periods prior to January 1,
2006.
|
|
(2)
|
Prior
to 2006, direct cost of network and sales did not include amortization
of
purchased technology and such amounts were included in depreciation
and
amortization. In accordance with Question 17 of the Financial Accounting
Standards Board (FASB) Implementation Guide to Statement of Financial
Accounting Standard (SFAS) No. 86, “Accounting for the Costs of Computer
Software to Be Sold, Leased, or Otherwise Marketed,” we have reclassified
these costs from “Depreciation and amortization” to “Direct cost of
network and sales”. These reclassifications had no effect on previously
reported operating loss or net
loss.
|
|
(3)
|
In
August 2003, we completed a private placement of our common stock,
which
resulted in a decrease of the conversion price of our series A preferred
stock to $9.50 per share and an increase in the number of shares
of common
stock issuable upon conversion of all shares of series A preferred
stock
by 3.5 million shares. We recorded a deemed dividend of $34.6 million
in
connection with the conversion price adjustment, which is attributable
to
the additional incremental number of shares of common stock issuable
upon
conversion of our series A preferred
stock.
|
|
(4)
|
Adjusted
to reflect the one-for-ten reverse stock split of our common stock
on
July 11, 2006.
|
|
(5)
|
In
July 2003, we amended the deemed liquidation provisions of our charter
to
eliminate the events that could result in payment to the series A
preferred stockholders such that the events giving rise to payment
would
be within our control. As a result, 2,887,661 shares of our series
A
preferred stock, with a recorded value of $78.6 million, were reclassified
from mezzanine financing to stockholders’ equity during 2003. Effective
September 14, 2004, all shares of our outstanding series A convertible
preferred stock were mandatorily converted into common stock in accordance
with the terms of our Certificate of
Incorporation.
|
· |
Due
to the nature of the services we provide, we generally price our
Internet
connectivity services at a premium to the services offered by conventional
Internet connectivity service providers. We believe customers with
business-critical Internet applications will continue to demand
the
highest quality of service as their Internet connectivity needs
grow and
become even more complex and, as such, will continue to pay a premium
for
our high performance managed Internet connectivity
services.
|
· |
Our
success in executing our premium pricing strategy depends, to a
significant degree, on our ability to differentiate our connectivity
solutions from lower cost alternatives. The key measures of our
success in achieving this differentiation are revenue and customer
growth.
During 2006, we added more than 180 net new customers, bringing
our total to more than 2,250 enterprise customers as of December
31, 2006.
Revenue for the year ended December 31, 2006 increased 18% to $181.4
million, compared to revenue of $153.7 million for the year ended
December
31, 2005.
|
· |
Solidified
management team is focused on achieving profitability and revenue
by
leveraging operating efficiencies. In November 2005, James P.
DeBlasio, a 20-year technology veteran and former Lucent executive,
was
appointed CEO. Throughout 2006, our management team implemented
a renewed
emphasis on aggressive cost containment with a focus on reducing
net
losses and driving gross profit to achieve cost savings to benefit
gross
profit to improve stockholder
value.
|
· |
We
intend to increase revenue by leveraging the capabilities of our
existing
network access points.
In our existing markets, we realize incremental margins as new
customers
are added. Additional volume in an existing market allows improved
utilization of existing facilities and an improved ability to
cost-effectively predict and acquire additional network capacity.
The
company experienced a net increase in customers from 2005 to 2006.
Conversely, decreases in the number of customers in an established
market
lead to decreased facility utilization and increase the possibility
that
direct network resources are not cost-efficiently employed. These
factors
have a direct bearing on our financial position and results of
operations.
|
· |
Approximately
two-thirds of our new monthly recurring revenue is from new
customers. Selling new monthly recurring revenue to new customers
allows us to expand our customer base, as well as guard against
customer
loss.
|
· |
While
we have limited traditional advertising over the past year, we
are focused
on increasing brand awareness through appropriate marketing vehicles.
We will continue to develop integrated marketing campaigns that
identify
qualified leads, generate interest and promote business benefits
among key
audiences. We will also conduct public relations efforts focused
on
securing third party recognition of our products and services from
the
media and industry analysts. Our marketing organization is also
responsible for creating our product strategy based upon primary
and
secondary market research and the advancement of new
technologies.
|
·
|
|
costs
for connecting to and accessing Internet network service providers
and
competitive local exchange providers;
|
·
|
costs
incurred for providing additional third party services to our
customers;
|
|
·
|
costs incurred for providing additional third party services to our customers; | |
·
|
costs of Flow Control Platform solution and similar products sold and; | |
·
|
amortization
of technology-based intangible assets.
|
Year
Ended December 31,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Revenue
|
100
|
%
|
100
|
%
|
100
|
%
|
||||
|
||||||||||
Costs
and expense:
|
||||||||||
Direct
cost of network and sales, exclusive of depreciation and amortization
shown below
|
54
|
54
|
54
|
|||||||
Direct
cost of customer support
|
6
|
7
|
7
|
|||||||
Product
development
|
3
|
3
|
4
|
|||||||
Sales
and marketing
|
15
|
17
|
16
|
|||||||
General
and administrative
|
12
|
13
|
17
|
|||||||
Depreciation
and amortization
|
9
|
9
|
11
|
|||||||
Other
operating costs and expense
|
—
|
—
|
3
|
|||||||
Total
operating costs and expense
|
99
|
103
|
112
|
|||||||
|
||||||||||
Income
(loss) from operations
|
1
|
(3
|
)
|
(12
|
)
|
|||||
|
||||||||||
Total
other (income) expense, net
|
(1
|
)
|
—
|
—
|
||||||
|
||||||||||
Net
income (loss)
|
2
|
%
|
(3
|
)%
|
(12
|
)%
|
|
Year
Ended December 31,
|
||||
|
2006
|
|
2005
|
||
Revenue:
|
|
|
|
|
|
Internet
protocol (IP) services
|
$
|
104,393
|
|
$
|
99,848
|
Data
center services
|
|
53,996
|
|
|
36,226
|
Other/reseller
services
|
|
22,986
|
|
|
17,643
|
|
$
|
181,375
|
|
$
|
153,717
|
Direct
cost of customer support
|
$
|
1,102
|
||
Product
development
|
628
|
|||
Sales
and marketing
|
2,145
|
|||
General
and administrative
|
2,067
|
|||
Total
stock-based compensation
|
$
|
5,942
|
|
Year
Ended December 31,
|
||||
|
2005
|
|
2004
|
||
Revenue:
|
|
|
|
|
|
IP
Services
|
$
|
99,848
|
|
$
|
101,103
|
Data
Center Services
|
|
36,226
|
|
|
25,737
|
Other/Reseller
Services
|
|
17,643
|
|
|
17,706
|
|
$
|
153,717
|
|
$
|
144,546
|
|
Payments
Due by Period
|
|||||||||||||||
|
Total
|
Less
than
1
year
|
1-
3
Years
|
3-5
Years
|
More
than
5
years
|
|||||||||||
|
|
|
|
|
|
|||||||||||
Note
payable (1)
|
$
|
7,656
|
$
|
4,375
|
$
|
3,281
|
$
|
—
|
$
|
—
|
||||||
Capital
lease obligations (2)
|
456
|
367
|
89
|
—
|
—
|
|||||||||||
Operating
lease commitments
|
186,977
|
20,083
|
37,062
|
34,399
|
95,433
|
|||||||||||
Service
commitments
|
33,367
|
12,490
|
13,672
|
3,496
|
3,709
|
|||||||||||
|
||||||||||||||||
|
$
|
228,456
|
$
|
37,315
|
$
|
54,104
|
$
|
37,895
|
$
|
99,142
|
(1)
|
Note
payable does not include interest expense of $0.4 million and $0.1
million
due in less than one year and between one and three years,
respectively.
|
(2)
|
Capital
lease obligations include imputed interest expense of less than $0.1
million.
|
|
·
|
The
exercise price per share of each replacement option granted in the
exchange offer was $14.46, the average of the closing prices of the
common
stock as reported by the American Stock Exchange and the NASDAQ Global
Market, as applicable, for the 15 consecutive trading days ending
immediately prior to the grant date of the replacement
options;
|
|
·
|
For
all eligible options with an exercise price per share greater than
or
equal to $20.00, the exchange ratio was 1-for-2;
and
|
|
·
|
Each
new option has a three-year vesting period, vesting in equal monthly
installments over three years, so long as the grantee continues to
be a
full-time employee of the company and a ten-year
term.
|
|
2007
|
2008
|
Fair
Value
|
|||||||
Long-term
debt:
|
|
|
|
|||||||
Term
loan
|
$
|
4,375
|
$
|
3,281
|
$
|
7,656
|
||||
Interest
rate
|
7.5
|
%
|
7.5
|
%
|
7.5
|
%
|
(a)
|
Documents
filed as a part of the
report:
|
(1)
|
Consolidated
Financial Statements.
|
|
|
Page
|
Report
of Independent Registered Public Accounting Firm
|
|
F-2
|
Consolidated
Statements of Operations
|
|
F-4
|
Consolidated
Balance Sheets
|
|
F-5
|
Consolidated
Statement of Stockholders’ Equity and Comprehensive Loss
|
|
F-6
|
Consolidated
Statements of Cash Flows
|
|
F-7
|
Notes
to Consolidated Financial Statements
|
|
F-9
|
(2)
|
Financial
Statement Schedule.
|
|
|
Page
|
Schedule
II - Valuation and Qualifying Accounts for the Three Years Ended
December
31, 2006
|
|
S-1
|
(3)
|
Index
to Exhibits.
|
Exhibit
Number
|
|
Description
|
2.1
|
|
Agreement
and Plan of Merger dated October 12, 2006, by and among the Company,
Ivy
Acquisition Corp. and VitalStream Holdings, Inc. (incorporated herein
by
reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K,
filed on October 12, 2006).
|
|
|
|
3.1
|
|
Certificate
of Incorporation of the Company, as amended (incorporated by reference
herein to Exhibit 4.1 to the Company’s Registration Statement on Form S-3,
filed on September 8, 2003, File No. 333-108573).
|
|
|
|
3.2
|
|
Certificate
of Amendment of Certificate of Incorporation of the Company (incorporated
by reference herein to Exhibit 3.1 to the Company’s Current Report on Form
8-K filed on July 11, 2006).
|
|
|
|
3.2
|
|
Amended
and Restated Bylaws of the Company (incorporated by reference herein
to
Exhibit 4.2 to the Company’s Registration Statement on Form S-3, filed
September 8, 2003, File No. 333-108573).
|
|
|
|
10.1
|
|
Form
of Indemnification Agreement between the Company and each of its
directors
and certain of its officers (incorporated herein by reference to
Exhibit
10.1 to the Company’s Registration Statement on Form S-1, File No.
333-84035 dated July 29, 1999).+
|
10.2
|
|
Form
of Employment Agreement, dated December 31, 2002, between the Company
and
David L. Abrahamson (incorporated herein by reference to Exhibit
10.5 to
the Company’s Annual Report on Form 10-K for the year ended December 31,
2002, filed on April 15, 2003).+
|
|
|
|
10.3
|
|
Amended
and Restated Internap Network Services Corporation 1998 Stock Option/Stock
Issuance Plan (incorporated herein by reference to Exhibit 10.1 to
the
Company’s Quarterly Report on Form 10-Q for the quarter ended September
30, 2000, filed on November 14, 2000).+
|
|
|
|
10.4
|
|
Internap
Network Services Corporation 1999 Non-Employee Directors’ Stock Option
Plan (incorporated herein by reference to Exhibit 10.2 to the Company’s
Registration Statement on Form S-1, File No. 333-84035 dated July
29,
1999).+
|
|
|
|
10.5
|
|
Internap
Network Services Corporation 1999 Employee Stock Purchase Plan
(incorporated herein by reference to Exhibit 10.4 to the Company’s
Registration Statement on Form S-1, File No. 333-84035 dated July
29,
1999).+
|
|
|
|
10.6
|
|
Amended
and Restated Internap Network Services Corporation 1999 Stock Incentive
Plan for Non-Officers (incorporated herein by reference to Exhibit
10.2 to
the Company’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2000, filed on November 14, 2000).+
|
10.7
|
|
Amended
Internap Network Services Corporation 1999 Equity Incentive Plan
(incorporated herein by reference to Exhibit 10.7 to the Company’s
Registration Statement on Form S-1, File No. 333-95503 dated January
27,
2000).+
|
|
|
|
10.8
|
|
Form
of 1999 Equity Incentive Plan Stock Option Agreement (incorporated
herein
by reference to Exhibit 10.8 to the Company’s Registration Statement on
Form S-1, File No. 333-84035 dated July 29, 1999).+
|
|
|
|
10.9
|
|
Internap
Network Services Corporation 2000 Non-Officer Equity Incentive Plan
(incorporated herein by reference to Exhibit 99.1 to the Company’s
Registration Statement on Form S-8, File No. 333-37400 dated May
19,
2000).+
|
|
|
|
10.10
|
|
Internap
Network Services Corporation 2002 Stock Compensation Plan (incorporated
herein by reference to Exhibit 99(d)(1) to the Company’s Tender Offer
Statement on Schedule TO, filed on November 18, 2002).+
|
|
|
|
10.11
|
|
Form
of Nonstatutory Stock Option Agreement under the Internap Network
Services
Corporation 2002 Stock Compensation Plan (incorporated herein by
reference
to Exhibit 99(d)(2) to the Company’s Tender Offer Statement on Schedule
TO, filed on November 18, 2002).+
|
|
|
|
10.12
|
|
Form
of Employee Confidentiality, Nonraiding and Noncompetition Agreement
used
between Company and its Executive Officers (incorporated herein by
reference to Exhibit 10.11 to the Company’s Registration Statement on Form
S-1, File No. 333-84035 dated July 29, 1999).
|
|
|
|
10.13
|
|
Form
of Warrant (incorporated herein by reference to Appendix E to the
Company’s Definitive Proxy Statement dated August 10,
2001).
|
|
|
|
10.14
|
|
Loan
and Security Agreement, dated October 21, 2002, and Amendments to
Loan
Documents, dated October 21, 2002 and October 29, 2002, between Company
and Silicon Valley Bank (incorporated herein by reference to Exhibit
10.1
to the Company’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2002, filed on November 14, 2002).
|
|
|
|
10.15
|
|
Amendment
to Loan Documents between the Company and Silicon Valley Bank, dated
March
25, 2003 (incorporated herein by reference to Exhibit 10.32 to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2002,
filed on April 15, 2003).
|
|
|
|
10.16
|
|
Amendment
to Loan Documents between the Company and Silicon Valley Bank, dated
September 30, 2004, and Amended and Restated Schedule to Loan and
Security
Agreement, dated September 30, 2004 (incorporated herein by reference
to
Exhibits 10.1 and 10.2 to the Company’s Current Report on Form 8-K dated
September 30, 2004).
|
|
|
|
10.17
|
|
Limited
Waiver and Amendment to Loan Documents between the Company and Silicon
Valley Bank dated November 18, 2004 (incorporated herein by reference
to
Exhibit 10.1 to the Company’s Current Report on Form 8-K dated November
18, 2004).
|
|
|
|
10.18
|
|
Employment
Agreement dated February 1, 2004 between the Company and David A.
Buckel (incorporated by reference to Exhibit 10.20 to the Company’s Annual
Report of Form 10-K for the year ended December 1, 2004 filed on
April 1,
2005). +
|
|
|
|
10.19
|
|
Limited
Waiver and Amendment to Loan Documents between the Company and Silicon
Valley Bank dated March 14, 2005 (incorporated herein by reference
to
Exhibit 10.21 to the Company’s Annual Report on Form 10-K for the year
ended December 31, 2004, filed on April 1, 2005.
|
|
|
|
10.20
|
|
Employment
Agreement, dated May 1, 2004 between the Company and David A. Buckel
(incorporated herein by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K, filed on May 10, 2005).
|
|
|
|
10.21
|
|
Amended
and Restated 2005 Incentive Stock Plan, dated March 15, 2006 (incorporated
by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form
10-Q for the quarter ended March 31, 2006, filed on May 10,
2006).+
|
|
|
|
10.22
|
|
Employment
Agreement dated as of September 30, 2005 between the Company and
James
DeBlasio (incorporated herein by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K, filed on October 6,
2005).
|
|
|
|
10.23
|
|
Amendment
to Loan Documents dated as of September 28, 2005 (incorporated herein
by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K,
filed on October 11, 2005).
|
|
|
|
10.24
|
|
Limited
Waiver and Amendment to Loan Documents dated November 3, 2005
(incorporated herein by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K, filed on November 7,
2005).
|
10.25
|
|
General
Release Agreement dated as of December 15, 2005 between the Company
and
Gregory Peters (incorporated herein by reference to Exhibit 10.1
to the
Company’s Current Report on Form 8-K, filed on December 20,
2005).
|
|
|
|
10.26
|
|
Amendment
to Loan Documents dated as of December 27, 2005 between the Company
and
Silicon Valley Bank (incorporated herein by reference to Exhibit
10.1 to
the Company’s Current Report on Form 8-K, filed on December 30,
2005).
|
|
|
|
10.27
|
|
Employment
Agreement dated as of February 1, 2004 between the Company and Eric
Suddith (incorporated herein by reference to Exhibit 10.27 to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2005,
filed on March 10, 2006). +
|
|
|
|
10.28
|
|
Employment
Agreement dated as of May 2, 2005 between the Company and Robert
Smith
(incorporated herein by reference to Exhibit 10.28 to the Company’s Annual
Report on Form 10-K for the year ended December 31, 2005, filed on
March
10, 2006). +
|
|
|
|
10.29
|
|
Employment
Agreement dated as of June 15, 2005 between the Company and Eric
Klinker
(incorporated herein by reference to Exhibit 10.29 to the Company’s Annual
Report on Form 10-K for the year ended December 31, 2005, filed on
March
10, 2006). +
|
|
|
|
10.30
|
|
Amended
and Restated 2004 Internap Network Services Corporation Employee
Stock
Purchase Plan, dated January 11, 2006 (incorporated by reference
to
Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2006, filed on May 10, 2006).+
|
|
|
|
10.31
|
|
Form
of Stock Grant Certificate under the Amended and Restated Internap
Network
Services Corporation 2005 Incentive Stock Plan (incorporated by reference
to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2006, filed on August 8, 2006).+
|
|
|
|
10.32
|
|
Form
of Stock Option Grant Certificate under the Amended and Restated
Internap
Network Services Corporation 2005 Incentive Stock Plan (incorporated
by
reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2006, filed on August 8,
2006).+
|
10.33
|
Employment
Agreement dated as of October 12, 2006 between the Company and Christopher
Dion (incorporated by reference to Exhibit 10.1 to the Company’s
Registration Statement on Form S-4, filed on November 29, 2006, File
No.
33-138993 ) +
|
|
10.34
|
Employment
Agreement dated as of October 12, 2006 between the Company and Philip
Kaplan (incorporated by reference to Exhibit 10.2 to the Company’s
Registration Statement on Form S-4, filed on November 29, 2006, File
No.
33-138993 ) +
|
|
10.35
|
Employment
Agreement dated as of October 12, 2006 between the Company and Patrick
Ritto (incorporated by reference to Exhibit 10.4 to the Company’s
Registration Statement on Form S-4, filed on November 29, 2006, File
No.
33-138993 ) +
|
|
|
|
|
23.1*
|
|
Consent
of PricewaterhouseCoopers LLP, Independent Registered Public Accounting
Firm.
|
|
|
|
31.1*
|
|
Rule
13a-14(a)/15d-14(a) Certification, executed James P. DeBlasio, President,
Chief Executive Officer and Director the Company.
|
|
|
|
31.2*
|
|
Rule
13a-14(a)/15d-14(a) Certification, executed by David A. Buckel, Vice
President and Chief Financial Officer of the Company.
|
|
|
|
32.1*
|
|
Section
1350 Certification, executed by James P. DeBlasio, President, Chief
Executive Officer and Director the Company.
|
|
|
|
32.2*
|
|
Section
1350 Certification, executed by David A. Buckel, Vice President and
Chief
Financial Officer of the Company.
|
*
|
Documents
filed herewith.
|
+
|
Management
contracts and compensatory plans and arrangements required to be
filed as
exhibits pursuant to Item 15(c) of this
Report.
|
|
|
INTERNAP
NETWORK SERVICES CORPORATION
|
||
Date:
March 13, 2007
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/
David A. Buckel
|
|
|
|
|
David
A. Buckel
Vice
President and Chief Financial
Officer
|
|
Page
|
Report
of Independent Registered Public Accounting Firm
|
F-2
|
Consolidated
Statements of Operations
|
F-4
|
Consolidated
Balance Sheets
|
F-5
|
Consolidated
Statement of Stockholders' Equity and Comprehensive Loss
|
F-6
|
Consolidated
Statements of Cash Flows
|
F-7
|
Notes
to Consolidated Financial Statements
|
F-9
|
Financial
Statement Schedule
|
S-1
|
Year
Ended December 31,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Revenue
|
$
|
181,375
|
$
|
153,717
|
$
|
144,546
|
||||
Costs
and expense:
|
||||||||||
Direct
cost of network and sales, exclusive of depreciation and amortization,
shown below
|
97,854
|
82,535
|
77,569
|
|||||||
Direct
cost of customer support
|
11,566
|
10,670
|
10,180
|
|||||||
Product
development
|
4,475
|
4,864
|
6,412
|
|||||||
Sales
and marketing
|
27,173
|
25,864
|
23,411
|
|||||||
General
and administrative
|
22,104
|
20,096
|
24,772
|
|||||||
Depreciation
and amortization
|
15,856
|
14,737
|
15,461
|
|||||||
Asset
impairment and restructuring
|
323
|
44
|
3,644
|
|||||||
Amortization
of deferred stock compensation
|
—
|
60
|
—
|
|||||||
Gain
on disposals of property and equipment
|
(113
|
)
|
(19
|
)
|
(3
|
)
|
||||
Total
operating costs and expense
|
179,238
|
158,851
|
161,446
|
|||||||
Income
(loss) from operations
|
2,137
|
(5,134
|
)
|
(16,900
|
)
|
|||||
|
||||||||||
Non-operating
(income) expense:
|
||||||||||
Interest
expense
|
883
|
1,373
|
1,981
|
|||||||
Interest
income
|
(2,305
|
)
|
(1,284
|
)
|
(665
|
)
|
||||
Other,
net
|
(129
|
)
|
(176
|
)
|
(544
|
)
|
||||
Total
non-operating (income) expense
|
(1,551
|
)
|
(87
|
)
|
772
|
|||||
Net
income (loss) before income taxes and equity in earnings
of unconsolidated subsidiary
|
3,688
|
(5,047
|
)
|
(17,672
|
)
|
|||||
Provision
for income taxes
|
145
|
—
|
—
|
|||||||
Equity
in (earnings) loss of equity-method investment,
net of taxes
|
(114
|
)
|
(83
|
)
|
390
|
|||||
Net
income (loss)
|
$
|
3,657
|
$
|
(4,964
|
)
|
$
|
(18,062
|
)
|
||
|
||||||||||
Net
income (loss) per share:
|
||||||||||
Basic
|
$
|
0.11
|
$
|
(0.15
|
)
|
$
|
(0.63
|
)
|
||
Diluted
|
$
|
0.10
|
$
|
(0.15
|
)
|
$
|
(0.63
|
)
|
||
Weighted
average shares used in per share calculations
|
||||||||||
Basic
|
34,748
|
33,939
|
28,732
|
|||||||
Diluted
|
35,739
|
33,939
|
28,732
|
December
31,
|
|||||||
2006
|
2005
|
||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
45,591
|
$
|
24,434
|
|||
Short-term
investments in marketable securities
|
13,291
|
16,060
|
|||||
Accounts
receivable, net of allowance of $888 and $963,
respectively
|
20,282
|
19,128
|
|||||
Inventory
|
474
|
779
|
|||||
Prepaid
expenses and other assets
|
3,818
|
2,741
|
|||||
Total
current assets
|
83,456
|
63,142
|
|||||
Property
and equipment, net
|
47,493
|
50,072
|
|||||
Investments
|
2,135
|
1,999
|
|||||
Intangible
assets, net
|
1,785
|
2,329
|
|||||
Goodwill
|
36,314
|
36,314
|
|||||
Deposits
and other assets
|
2,519
|
1,513
|
|||||
Total
assets
|
$
|
173,702
|
$
|
155,369
|
|||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Note
payable, current portion
|
$
|
4,375
|
$
|
4,375
|
|||
Accounts
payable
|
8,776
|
5,766
|
|||||
Accrued
liabilities
|
8,689
|
7,267
|
|||||
Deferred
revenue, current portion
|
3,260
|
2,737
|
|||||
Capital
lease obligations, current portion
|
347
|
559
|
|||||
Restructuring
liability, current portion
|
1,400
|
1,202
|
|||||
Other
current liabilities
|
84
|
—
|
|||||
Total
current liabilities
|
26,931
|
21,906
|
|||||
Note
payable, less current portion
|
3,281
|
7,656
|
|||||
Deferred
revenue, less current portion
|
1,080
|
533
|
|||||
Capital
lease obligations, less current portion
|
83
|
247
|
|||||
Restructuring
liability, less current portion
|
3,384
|
5,075
|
|||||
Deferred
rent
|
11,432
|
9,185
|
|||||
Other
long-term liabilities
|
986
|
1,039
|
|||||
Total
liabilities
|
47,177
|
45,641
|
|||||
Commitments
and contingencies
|
|||||||
Stockholders’
equity:
|
|||||||
Series
A convertible preferred stock, $0.001 par value, 3,500 shares designated,
no shares issued or outstanding
|
—
|
—
|
|||||
Common
stock, $0.001 par value, 60,000 shares authorized, 35,873 and
34,168 shares issued and outstanding, respectively
|
36
|
34
|
|||||
Additional
paid-in capital
|
982,624
|
970,221
|
|||||
Deferred
stock compensation
|
—
|
(420
|
)
|
||||
Accumulated
deficit
|
(856,455
|
)
|
(860,112
|
)
|
|||
Accumulated
items of other comprehensive income
|
320
|
5
|
|||||
Total
stockholders’ equity
|
126,525
|
109,728
|
|||||
Total
liabilities and stockholders’ equity
|
$
|
173,702
|
$
|
155,369
|
Series
A Convertible |
Common
Stock
|
||||||||||||||||||||||||||||||
Shares
|
Par Value |
Shares
|
Par Value |
Additional Paid-In |
Treasury
Stock |
Deferred Stock |
Accumulated Deficit |
Accumulated Items
of |
Total Stockholders’ |
||||||||||||||||||||||
Balance,
December
31, 2003
|
1,751
|
$
|
51,841
|
22,875
|
$
|
23
|
$
|
855,446
|
$
|
—
|
$
|
—
|
$
|
(837,086
|
)
|
$
|
300
|
$
|
70,524
|
||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(18,062
|
)
|
—
|
(18,062
|
)
|
|||||||||||||||||||
Change
in unrealized gains and losses on investments
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
68
|
68
|
|||||||||||||||||||||
Foreign
currency translation adjustment
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
229
|
229
|
|||||||||||||||||||||
Total
comprehensive loss
|
(17,765
|
)
|
|||||||||||||||||||||||||||||
Conversion
of Series
A convertible
preferred
stock
|
(1,751
|
)
|
(51,841
|
)
|
5,900
|
6
|
51,835
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||||
Issuance
of common stock,
net of issuance
cost
|
—
|
—
|
4,025
|
4
|
55,928
|
—
|
—
|
—
|
—
|
55,932
|
|||||||||||||||||||||
Stock
compensation plans activity
|
—
|
—
|
897
|
1
|
4,972
|
—
|
—
|
—
|
—
|
4,973
|
|||||||||||||||||||||
Exercise
of warrants
|
—
|
—
|
118
|
—
|
74
|
—
|
—
|
—
|
—
|
74
|
|||||||||||||||||||||
Balance,
December
31, 2004
|
—
|
—
|
33,815
|
34
|
968,255
|
—
|
—
|
(855,148
|
)
|
597
|
113,738
|
||||||||||||||||||||
Net
loss
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(4,964
|
)
|
—
|
(4,964
|
)
|
|||||||||||||||||||
Change
in unrealized gains and losses on investments
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(118
|
)
|
(118
|
)
|
|||||||||||||||||||
Foreign
currency translation adjustment
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
(474
|
)
|
(474
|
)
|
|||||||||||||||||||
Total
comprehensive loss
|
(5,556
|
)
|
|||||||||||||||||||||||||||||
Deferred
stock compensation grant
|
—
|
—
|
—
|
—
|
480
|
—
|
(480
|
)
|
—
|
—
|
—
|
||||||||||||||||||||
Amortization
of deferred stock compensation
|
—
|
—
|
—
|
—
|
—
|
—
|
60
|
—
|
—
|
60
|
|||||||||||||||||||||
Stock
compensation plans activity
|
—
|
—
|
353
|
—
|
1,486
|
—
|
—
|
—
|
—
|
1,486
|
|||||||||||||||||||||
Balance,
December
31, 2005
|
—
|
—
|
34,168
|
34
|
970,221
|
—
|
(420
|
)
|
(860,112
|
)
|
5
|
109,728
|
|||||||||||||||||||
Net
income
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
3,657
|
—
|
3,657
|
|||||||||||||||||||||
Change
in unrealized gains and losses on investments
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
80
|
80
|
|||||||||||||||||||||
Foreign
currency translation adjustment
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
235
|
235
|
|||||||||||||||||||||
Total
comprehensive income
|
3,972
|
||||||||||||||||||||||||||||||
Reclassification
of deferred stock compensation resulting from implementation of SFAS
No.
123R
|
—
|
—
|
—
|
—
|
(420
|
)
|
—
|
420
|
—
|
—
|
—
|
||||||||||||||||||||
Stock-based
compensation
|
—
|
—
|
578
|
1
|
5,985
|
(395
|
)
|
—
|
—
|
—
|
5,591
|
||||||||||||||||||||
Stock
compensation plans activity
|
—
|
—
|
576
|
1
|
3,030
|
395
|
—
|
—
|
—
|
3,426
|
|||||||||||||||||||||
Exercise
of warrants
|
—
|
—
|
551
|
—
|
3,808
|
—
|
—
|
—
|
—
|
3,808
|
|||||||||||||||||||||
Balance,
December
31, 2006
|
—
|
—
|
35,873
|
$
|
36
|
$
|
982,624
|
$
|
—
|
$
|
—
|
$
|
(856,455
|
)
|
$
|
320
|
$
|
126,525
|
Year
Ended December 31,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Cash
flows from operating activities:
|
||||||||||
Net
income (loss)
|
$
|
3,657
|
$
|
(4,964
|
)
|
$
|
(18,062
|
)
|
||
Adjustments
to reconcile net income (loss) to net
cash provided by (used in) operating activities:
|
||||||||||
Depreciation
and amortization
|
16,372
|
15,314
|
16,040
|
|||||||
Gain
on disposal of property and equipment,
net
|
(113
|
)
|
(19
|
)
|
(3
|
)
|
||||
Provision
for doubtful accounts
|
548
|
1,431
|
2,415
|
|||||||
Equity
in (earnings) loss of equity-method investment
|
(114
|
)
|
(83
|
)
|
390
|
|||||
Non-cash
changes in deferred rent
|
2,247
|
2,690
|
879
|
|||||||
Stock-based
compensation expense
|
5,942
|
75
|
—
|
|||||||
Asset
impairment
|
319
|
—
|
—
|
|||||||
Lease
incentives
|
—
|
713
|
—
|
|||||||
Non-cash
interest expense on capital lease obligations
|
—
|
—
|
904
|
|||||||
Other,
net
|
212
|
(397
|
)
|
176
|
||||||
Changes
in operating assets and liabilities:
|
||||||||||
Accounts
receivable
|
(1,702
|
)
|
(3,616
|
)
|
(3,771
|
)
|
||||
Inventory,
prepaid expense and other assets
|
(1,778
|
)
|
(170
|
)
|
1,633
|
|||||
Accounts
payable
|
3,010
|
(5,433
|
)
|
851
|
||||||
Accrued
liabilities
|
1,422
|
805
|
(1,316
|
)
|
||||||
Deferred
revenue
|
1,070
|
1,023
|
(1,743
|
)
|
||||||
Accrued
restructuring
|
(1,493
|
)
|
(1,876
|
)
|
457
|
|||||
|
||||||||||
Net
cash flows provided by (used in) operating
activities
|
29,599
|
5,493
|
(1,150
|
)
|
||||||
|
||||||||||
Cash
flows from investing activities:
|
||||||||||
Purchases
of investments in marketable securities
|
(17,427
|
)
|
(18,710
|
)
|
(16,753
|
)
|
||||
Maturities
of marketable securities
|
20,277
|
19,350
|
—
|
|||||||
Purchases
of property and equipment
|
(13,382
|
)
|
(10,161
|
)
|
(13,066
|
)
|
||||
Proceeds
from disposal of property and equipment
|
133
|
17
|
51
|
|||||||
Reduction
of restricted cash
|
—
|
76
|
49
|
|||||||
Other,
net
|
—
|
—
|
60
|
|||||||
|
||||||||||
Net
cash flows (used in) provided by investing
activities
|
(10,399
|
)
|
(9,428
|
)
|
(29,659
|
)
|
||||
|
Year
Ended December 31,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Cash
flows from financing activities:
|
||||||||||
Change
in revolving credit facility
|
—
|
—
|
(8,392
|
)
|
||||||
Proceeds
from note payable
|
—
|
—
|
17,500
|
|||||||
Principal
payments on notes payable
|
(4,375
|
)
|
(6,483
|
)
|
(4,051
|
)
|
||||
Payments
on capital lease obligations
|
(538
|
)
|
(512
|
)
|
(20,289
|
)
|
||||
Proceeds
from issuance of common stock, net
of issuance costs
|
—
|
—
|
55,932
|
|||||||
Proceeds
from exercise of warrants
|
3,808
|
—
|
74
|
|||||||
Proceeds
from exercise of stock options and employee
stock purchase plan
|
3,031
|
1,471
|
4,973
|
|||||||
Other,
net
|
31
|
70
|
—
|
|||||||
|
||||||||||
Net
cash flows provided by (used in) financing
activities
|
1,957
|
(5,454
|
)
|
45,747
|
||||||
|
||||||||||
Net
increase(decrease) in cash and cash
equivalents
|
21,157
|
(9,389
|
)
|
14,938
|
||||||
Cash
and cash equivalents at beginning of
period
|
24,434
|
33,823
|
18,885
|
|||||||
|
||||||||||
Cash
and cash equivalents at end of period
|
$
|
45,591
|
$
|
24,434
|
$
|
33,823
|
||||
Supplemental
disclosure of cash flow information:
|
||||||||||
Cash
paid for interest, net of amounts capitalized
|
$
|
793
|
$
|
1,223
|
$
|
1,767
|
||||
Cash
paid for taxes
|
149
|
—
|
—
|
|||||||
Non-cash
acquisition of property and equipment
|
162
|
971
|
1,597
|
|||||||
Capitalized
stock-based compensation
|
43
|
—
|
—
|
|||||||
Conversion
of preferred stock to common stock
|
—
|
—
|
51,841
|
1.
|
DESCRIPTION
OF THE COMPANY AND NATURE OF
OPERATIONS
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
|
Year
Ended December 31,
|
|||||||||
2006
|
2005
|
2004
|
||||||||
Net
income (loss)
|
$
|
3,657
|
$
|
(4,964
|
)
|
$
|
(18,062
|
)
|
||
Weighted
average shares used in per share calculations
|
||||||||||
Basic
|
34,748
|
33,939
|
28,732
|
|||||||
Diluted
|
35,739
|
33,939
|
28,732
|
|||||||
Net
income (loss) per share:
|
||||||||||
Basic
|
$
|
0.11
|
$
|
(0.15
|
)
|
$
|
(0.63
|
)
|
||
Diluted
|
$
|
0.10
|
$
|
(0.15
|
)
|
$
|
(0.63
|
)
|
||
Anti-dilutive
securities not included in diluted net
income (loss) per share calculation:
|
||||||||||
Options
to purchase common stock
|
1,408
|
35,562
|
43,949
|
|||||||
Restricted
stock
|
—
|
1,000
|
—
|
|||||||
Warrants
to purchase common stock
|
—
|
14,998
|
14,998
|
|||||||
1,408
|
51,560
|
58,947
|
|
Year
Ended
December
31,
|
||||||
|
2005
|
2004
|
|||||
|
|
|
|||||
Direct
cost of network and sales, exclusive of depreciation and amortization
show
below:
|
|
|
|||||
Previously
reported
|
$
|
81,958
|
$
|
76,990
|
|||
Reclassification
|
577
|
579
|
|||||
As
reclassified
|
$
|
82,535
|
$
|
77,569
|
|||
|
|||||||
Depreciation
and amortization:
|
|||||||
Previously
reported
|
$
|
15,314
|
$
|
16,040
|
|||
Reclassification
|
(577
|
)
|
(579
|
)
|
|||
As
Reclassified
|
$
|
14,737
|
$
|
15,461
|
3.
|
ASSET
IMPAIRMENT AND RESTRUCTURING
COSTS
|
December
31, 2005 Restructuring Liability
|
Restructuring
Charges
|
Cash
Reductions
|
December
31 2006 Restructuring Liability
|
||||||||||
Restructuring
costs activity for 2001 restructuring charge:
|
|||||||||||||
Real
estate obligations
|
$
|
6,277
|
$
|
4
|
$
|
(1,497
|
)
|
$
|
4,784
|
December
31, 2004 Restructuring Liability
|
Restructuring
Charges
|
Cash
Reductions
|
December
31 2005 Restructuring Liability
|
||||||||||
Restructuring
costs activity for 2001 restructuring charge:
|
|||||||||||||
Real
estate obligations
|
$
|
8,153
|
$
|
44
|
$
|
(1,920
|
)
|
$
|
6,277
|
December
31, 2003 Restructuring Liability
|
Restructuring
Charges (Benefit)
|
Cash
Reductions
|
December
31 2004 Restructuring Liability
|
||||||||||
Restructuring
costs activity for 2001 restructuring charge:
|
|||||||||||||
Real
estate obligations
|
$
|
5,843
|
$
|
5,323
|
$
|
(3,013
|
)
|
$
|
8,153
|
||||
Network
infrastructure obligations
|
1,125
|
(951
|
)
|
(174
|
)
|
—
|
|||||||
Other
|
867
|
(867
|
)
|
—
|
—
|
||||||||
|
7,835
|
3,505
|
(3,187
|
)
|
8,153
|
||||||||
Net
asset write-downs for 2002 restructuring charge
|
(139
|
)
|
139
|
—
|
—
|
||||||||
$
|
7,696
|
$
|
3,644
|
$
|
(3,187
|
)
|
$
|
8,153
|
4.
|
INVESTMENTS
|
As
of Ended December 31, 2006
|
||||||||||
Cost
Basis
|
Unrealized
Gain
|
Recorded
Value
|
||||||||
Short-term
investments in marketable securities
|
$
|
13,264
|
$
|
27
|
$
|
13,291
|
As
of Ended December 31, 2005
|
||||||||||
Cost
Basis
|
Unrealized
Loss
|
Recorded
Value
|
||||||||
Short-term
investments in marketable securities
|
$
|
16,113
|
$
|
(53
|
)
|
$
|
16,060
|
Year
Ended December 31,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Investment
Balance, January 1,
|
$
|
823
|
$
|
861
|
$
|
1,195
|
||||
Proportional
share of net income (loss)
|
114
|
83
|
(390
|
)
|
||||||
Unrealized
foreign currency translation gain
(loss), net
|
21
|
(121
|
)
|
56
|
||||||
Investment
Balance, December 31,
|
$
|
958
|
$
|
823
|
$
|
861
|
5.
|
PROPERTY
AND EQUIPMENT
|
December
31,
|
|||||||
2006
|
2005
|
||||||
Network
equipment
|
$
|
65,430
|
$
|
67,186
|
|||
Network
equipment under capital lease
|
1,596
|
1,596
|
|||||
Furniture,
equipment and software
|
31,712
|
30,393
|
|||||
Leasehold
improvements
|
100,024
|
94,583
|
|||||
Property
and equipment, gross
|
198,762
|
193,758
|
|||||
Less:
Accumulated depreciation and amortization ($1,375
and $843 related to capital leases at December
31, 2006 and 2005, respectively)
|
(151,269
|
)
|
(143,686
|
)
|
|||
$
|
47,493
|
$
|
50,072
|
|
Year
ended December 31,
|
|||||||||
|
2006
|
2005
|
2004
|
|||||||
Direct
cost of network and sales
|
$
|
13,250
|
$
|
11,804
|
$
|
10,898
|
||||
Other
depreciation and amortization
|
2,606
|
2,933
|
4,563
|
|||||||
Subtotal
|
15,856
|
14,737
|
15,461
|
|||||||
Amortization
of purchased technology, included in direct cost of network and
sales
|
516
|
577
|
579
|
|||||||
Total
deprecation and amortization
|
$
|
16,372
|
$
|
15,314
|
$
|
16,040
|
6.
|
GOODWILL
AND OTHER INTANGIBLE
ASSETS
|
December
31, 2006
|
December
31, 2005
|
||||||||||||
Gross
Carrying Amount
|
Accumulated
Amortization
|
Gross
Carrying Amount
|
Accumulated
Amortization
|
||||||||||
Contract
based
|
$
|
14,518
|
$
|
(14,291
|
)
|
$
|
14,518
|
$
|
(14,263
|
)
|
|||
Technology
based
|
5,911
|
(4,353
|
)
|
5,911
|
(3,837
|
)
|
|||||||
$
|
20,429
|
$
|
(18,644
|
)
|
$
|
20,429
|
$
|
(18,100
|
)
|
2007
|
$
|
443
|
||
2008
|
443
|
|||
2009
|
443
|
|||
2010
|
339
|
|||
2011
|
28
|
|||
Thereafter | 89 | |||
|
$
|
1,785
|
7.
|
ACCRUED
LIABILITIES
|
December
31,
|
|||||||
2006
|
2005
|
||||||
Taxes
|
$
|
2,005
|
$
|
1,753
|
|||
Compensation
payable
|
4,075
|
2,463
|
|||||
Network
commitments
|
520
|
305
|
|||||
Insurance
payable
|
38
|
639
|
|||||
Other
|
2,051
|
2,107
|
|||||
$
|
8,689
|
$
|
7,267
|
8.
|
REVOLVING
CREDIT FACILITY AND NOTE
PAYABLE
|
2007
|
$
|
4,375
|
||
2008
|
3,281
|
|||
Total
maturities and principal payments
|
7,656
|
|||
Less:
current portion
|
(4,375
|
)
|
||
|
$
|
3,281
|
9.
|
CAPITAL
LEASES
|
2007
|
$
|
367
|
||
2008
|
63
|
|||
2009
|
26
|
|||
Remaining
capital lease payments
|
456
|
|||
Less:
amounts representing imputed interest
|
(26
|
)
|
||
Present
value of minimum lease payments
|
430
|
|||
Less:
current portion
|
(347
|
)
|
||
|
$
|
83
|
10.
|
INCOME
TAXES
|
Year Ended December 31,
|
|||||||
2006
|
2005
|
||||||
Current
|
|
|
|||||
Federal
|
$
|
145
|
$
|
—
|
|||
State
|
—
|
—
|
|||||
Total
current
|
145
|
—
|
|||||
Deferred
|
|||||||
Federal
|
—
|
—
|
|||||
State
|
—
|
—
|
|||||
Total
deferred
|
—
|
—
|
|||||
Income
tax provision
|
$
|
145
|
$
|
—
|
Year
Ending December 31,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Federal
income tax (benefit) at statutory rates
|
34
|
%
|
(34
|
%)
|
(34
|
%)
|
||||
State
income tax (benefit)
|
4
|
%
|
(4
|
%)
|
(4
|
%)
|
||||
Nondeductible
Stock Compensation
|
8
|
%
|
0
|
%
|
0
|
%
|
||||
Other
|
1
|
%
|
1
|
%
|
1
|
%
|
||||
Change
in valuation allowance
|
(43
|
%)
|
37
|
%
|
37
|
%
|
||||
Effective
tax rate
|
4
|
%
|
0
|
%
|
0
|
%
|
Year
Ending December 31,
|
|||||||
2006
|
2005
|
||||||
Current
deferred income tax assets:
|
|||||||
Provision
for doubtful accounts
|
$
|
115
|
$
|
329
|
|||
Deferred
revenue
|
1,225
|
860
|
|||||
Accrued
compensation
|
132
|
433
|
|||||
Restructuring
costs
|
532
|
457
|
|||||
Capital
loss carryforwards
|
—
|
5,383
|
|||||
Other
|
390
|
854
|
|||||
Current
deferred income tax assets
|
2,394
|
8,316
|
|||||
Less:
Valuation allowance
|
(2,379
|
)
|
(8,263
|
)
|
|||
15
|
53
|
||||||
Non-current
deferred income tax assets:
|
|||||||
US
Net operating loss carryforwards
|
128,527
|
133,917
|
|||||
Foreign
operating loss carryforwards
|
14,574
|
14,582
|
|||||
Tax
credit carryforwards
|
165
|
—
|
|||||
Property
and equipment
|
20,315
|
22,738
|
|||||
Investments
|
1,824
|
1,824
|
|||||
Stock
Compensation
|
216
|
—
|
|||||
Deferred
revenue, less current portion
|
386
|
367
|
|||||
Restructuring
costs, less current portion
|
1,286
|
1,438
|
|||||
Deferred
rent
|
4,344
|
3,413
|
|||||
Non-
current deferred income tax assets
|
171,637
|
178,279
|
|||||
Less:
Valuation allowance
|
(170,568
|
)
|
(177,249
|
)
|
|||
1,069
|
1,030
|
||||||
Non-current
deferred income tax liabilities:
|
|||||||
Purchased
intangibles
|
(1,084
|
)
|
(1,083
|
)
|
|||
Non-current
deferred income tax assets (liabilities), net
|
(15
|
)
|
(53
|
)
|
|||
Net
deferred tax assets (liabilities)
|
$
|
—
|
$
|
—
|
11.
|
EMPLOYEE
RETIREMENT PLAN
|
12.
|
COMMITMENTS,
CONTINGENCIES, CONCENTRATIONS OF RISK AND
LITIGATION
|
2007
|
$
|
20,083
|
||
2008
|
19,740
|
|||
2009
|
17,322
|
|||
2010
|
16,924
|
|||
2011
|
17,475
|
|||
Thereafter
|
95,433
|
|||
$
|
186,977
|
2007
|
$
|
12,491
|
||
2008
|
8,532
|
|||
2009
|
5,140
|
|||
2010
|
1,722
|
|||
2011
|
1,773
|
|||
Thereafter
|
3,709
|
|||
$
|
33,367
|
13.
|
CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS’
EQUITY
|
Year
of Expiration
|
Weighted
Average Exercise Price
|
Shares
|
|||||
2008
|
$
|
9.50
|
34,080
|
14.
|
STOCK-BASED
COMPENSATION PLANS
|
|
·
|
The
exercise price per share of each replacement option granted in the
exchange offer was $14.46, the average of the closing prices of the
common
stock as reported by the American Stock Exchange and the NASDAQ Global
Market, as applicable, for the 15 consecutive trading days ending
immediately prior to the grant date of the replacement
options;
|
|
·
|
For
all eligible options with an exercise price per share greater than
or
equal to $20.00, the exchange ratio was 1-for-2;
and
|
|
·
|
Each
new option has a three-year vesting period, vesting in equal monthly
installments over three years, so long as the grantee continues to
be a
full-time employee of the company and a ten-year
term.
|
Year
ended
December
31,
2006
|
||||
Direct
cost of customer support
|
$
|
1,102
|
||
Product
development
|
628
|
|||
Sales
and marketing
|
2,145
|
|||
General
and administrative
|
2,067
|
|||
Total
stock-based compensation expense included in net income
|
$
|
5,942
|
|
Year
Ended December 31,
|
||||||
|
2005
|
2004
|
|||||
Net
loss, as reported
|
$
|
(4,964
|
)
|
$
|
(18,062
|
)
|
|
Add:
stock-based employee compensation expense included in reported net
loss
|
75
|
—
|
|||||
Adjust:
total stock-based employee compensation expense determined under
fair
value based method for all awards
|
(9,678
|
)
|
(15,364
|
)
|
|||
Pro
forma net loss
|
$
|
(14,567
|
)
|
$
|
(33,426
|
)
|
|
Loss
per share:
|
|||||||
Basic
and diluted—as reported
|
$
|
(0.15
|
)
|
$
|
(0.63
|
)
|
|
Basic
and diluted—pro forma
|
(0.43
|
)
|
(1.16
|
)
|
Shares
|
Weighted
Average Exercise Price
|
||||||
|
|||||||
Balance,
December 31, 2003
|
3,916
|
$
|
15.20
|
||||
|
|||||||
Granted
|
1,638
|
17.39
|
|||||
Exercised
|
(750
|
)
|
5.70
|
||||
Cancelled
|
(409
|
)
|
22.44
|
||||
|
|||||||
Balance,
December 31, 2004
|
4,395
|
16.96
|
|||||
Granted
|
948
|
4.92
|
|||||
Exercised
|
(202
|
)
|
4.51
|
||||
Cancelled
|
(1,585
|
)
|
19.15
|
||||
Balance,
December 31, 2005
|
3,556
|
13.49
|
|||||
Granted
|
752
|
9.30
|
|||||
Exercised
|
(497
|
)
|
5.84
|
||||
Cancelled
|
(1,112
|
)
|
19.94
|
||||
Balance,
December 31, 2006
|
2,699
|
$
|
11.07
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||||||||||||||||||||
Exercise
Prices
|
Number
of
Shares
|
Weighted
Average Remaining Contractual Life (In Years)
|
Weighted
Average
Exercise
Price
|
Number
of
Shares
|
Weighted
Average Remaining Contractual Life (In Years)
|
Weighted
Average
Exercise
Price
|
||||||||||||||||||||||
$0.30
- $4.60
|
282
|
5.8
|
$
|
2.80
|
269
|
5.7
|
$2.73
|
|||||||||||||||||||||
$4.80
- $5.20
|
746
|
8.4
|
4.81
|
342
|
8.0
|
4.81
|
||||||||||||||||||||||
$5.30
- $7.40
|
482
|
8.9
|
6.44
|
42
|
7.1
|
6.13
|
||||||||||||||||||||||
$7.70
- $11.30
|
281
|
6.0
|
9.99
|
229
|
5.6
|
10.07
|
||||||||||||||||||||||
$11.60
- $14.30
|
331
|
6.3
|
13.02
|
231
|
5.4
|
13.11
|
||||||||||||||||||||||
$14.46
- $18.70
|
321
|
7.9
|
16.02
|
142
|
5.6
|
17.72
|
||||||||||||||||||||||
$18.80
- $345.00
|
256
|
6.2
|
39.67
|
198
|
5.8
|
45.04
|
||||||||||||||||||||||
$0.30
- $345.00
|
2,699
|
7.4
|
$
|
11.07
|
1,453
|
6.2
|
$13.36
|
|
Shares
|
Weighted-Average
Grant Date Fair Value
|
|||||
Non-vested
balance, December 31, 2004
|
—
|
$
|
—
|
||||
Granted
|
104
|
4.78
|
|||||
Vested
|
(4
|
)
|
4.30
|
||||
Non-vested
balance, December 31, 2005
|
100
|
4.80
|
|||||
Granted
|
568
|
6.18
|
|||||
Vested
|
(158
|
)
|
5.68
|
||||
Forfeited
|
(90
|
)
|
5.61
|
||||
Non-vested
balance, December 31, 2006
|
420
|
$
|
6.17
|
|
Stock
Options
|
Restricted
Stock
|
Total
|
|||||||
Unrecognized
compensation
|
$
|
9,309
|
$
|
3,088
|
$
|
12,397
|
||||
Weighted-average
remaining recognition period (in years)
|
2.7
|
3.0
|
2.8
|
15.
|
RELATED
PARTY TRANSACTIONS
|
16.
|
SUBSEQUENT
EVENT - VITALSTREAM
ACQUISITION
|
17.
|
UNAUDITED
QUARTERLY RESULTS
|
|
Quarter
Ended
|
||||||||||||
2006
|
March
31
|
June
30
|
September
30
|
December
31
|
|||||||||
|
|
|
|
|
|||||||||
Revenue
|
$
|
42,625
|
$
|
43,905
|
$
|
45,874
|
$
|
48,971
|
|||||
Net
income
|
541
|
713
|
195
|
2,208
|
|||||||||
Basic
income per share
|
$
|
0.02
|
$
|
0.02
|
$
|
0.01
|
$
|
0.06
|
|||||
Diluted
income per share
|
0.01
|
0.02
|
0.01
|
0.06
|
|
Quarter
Ended
|
||||||||||||
2005
|
March
31
|
June
30
|
September
30
|
December
31
|
|||||||||
|
|
|
|
|
|||||||||
Revenue
|
$
|
37,855
|
$
|
37,571
|
$
|
37,999
|
$
|
40,292
|
|||||
Net
loss
|
(570
|
)
|
(1,046
|
)
|
(3,171
|
)
|
(177
|
)
|
|||||
Basic
and diluted net loss per share
|
$
|
(0.02
|
)
|
$
|
(0.03
|
)
|
$
|
(0.09
|
)
|
$
|
(0.01
|
)
|
|
Balance
at
Beginning
Of
Fiscal
Period
|
Charges
to
Costs
and
Expense
|
Charges
to
Other
Accounts
|
Deductions
|
Balance
at
End
of
Fiscal
Period
|
|||||||||||
Year
ended December 31, 2004
|
|
|
|
|
|
|||||||||||
Provision
for doubtful accounts
|
$
|
2,429
|
$
|
2,415
|
$
|
—
|
$
|
(3,720
|
)
|
$
|
1,124
|
|||||
Tax
valuation allowance
|
161,674
|
—
|
7,308
|
—
|
168,982
|
|||||||||||
Year
ended December 31, 2005
|
||||||||||||||||
Provision
for doubtful accounts
|
1,124
|
1,431
|
—
|
(1,592
|
)
|
963
|
||||||||||
Tax
valuation allowance
|
168,982
|
—
|
16,530
|
—
|
185,512
|
|||||||||||
Year
ended December 31, 2006
|
||||||||||||||||
Provision
for doubtful accounts
|
963
|
548
|
—
|
(623
|
)
|
888
|
||||||||||
Tax
valuation allowance
|
185,512
|
—
|
(12,569
|
)
|
—
|
172,943
|