NXSN Nexsan Corp (MM)

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As filed with the Securities and Exchange Commission on April 8, 2010

Registration No. 333-150446

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Pre-Effective
Amendment No. 6
To
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

NEXSAN CORPORATION
(Exact name of registrant as specified in its charter)

555 St. Charles Drive, Suite 202
Thousand Oaks, California 91360
(805) 418-2700
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

Philip Black
President and Chief Executive Officer
Nexsan Corporation
555 St. Charles Drive, Suite 202
Thousand Oaks, California 91360
(805) 418-2700
(Name, address, including zip code, and telephone number, including area code, of agent for service)

           Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

          If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  o

          If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

          If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

          If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

CALCULATION OF REGISTRATION FEE

(1)

Includes 750,000 shares issuable upon exercise of the underwriters' option to purchase additional shares from the Registrant.

(2)

Estimated pursuant to Rule 457(a) solely for the purpose of calculating the amount of the registration fee.

(3)

Previously paid.

           The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. The prospectus is not an offer to sell and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION. DATED APRIL 8, 2010.

5,000,000 Shares
Common Stock

Nexsan Corporation is selling 4,884,000 shares of our common stock and the selling stockholder named in this prospectus is selling an additional 116,000 shares. We will not receive any of the proceeds from the sale of the shares by the selling stockholder. We have granted the underwriters a 30-day option to purchase up to an additional 750,000 shares to cover over-allotments, if any.

This is an initial public offering of our common stock. We currently expect the initial public offering price to be between $10.00 and $12.00 per share. Our common stock has been approved for listing on the NASDAQ Global Market under the symbol "NXSN."

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 7.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is                                        , 2010.

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        You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell shares of common stock and seeking offers to buy shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the common stock.

        In this prospectus "Nexsan," "we," "us" and "our" refer to Nexsan Corporation, and where appropriate, its subsidiaries.

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PROSPECTUS SUMMARY

         This summary highlights information contained elsewhere in this prospectus and does not contain all of the information you should consider before buying shares of our common stock. Before deciding to invest in shares of our common stock, you should read the entire prospectus carefully, including our consolidated financial statements and the related notes and the information set forth under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," in each case included elsewhere in this prospectus.

Overview

        We are a leading provider of disk-based storage systems designed for the storage of digital information. Our systems are used to store information created in the new "digital-age" by the rapidly growing number of digital applications that are creating large amounts of information such as email, office documents, medical images and digital voice or video recordings. We have designed our products to bring enterprise-class storage features to the mid-tier market, which we define as mid-sized businesses and branch offices of larger organizations, and which has historically been underserved by legacy storage vendors. Our systems help these organizations store and access growing amounts of digital information over long periods of time by:

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meaningfully lowering the cost of storing digital information on disk;



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providing enterprise-class storage for mid-tier organizations;



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minimizing the use of data center floor space by providing storage with industry-leading densities;



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significantly reducing energy consumption in powering and cooling storage systems;



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ensuring reliability, accessibility, integrity and security of stored data;



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simplifying the management of storage; and



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enabling the rapid search and retrieval of files stored.

        As a pioneer of reliable disk-based storage systems optimized for capacity and cost, our ATA and subsequent SATA RAID technology solutions have significantly reshaped the economics of storage. We have been able to offer enterprise-class storage systems at price points that have historically been as low as 1/10th of the cost of traditional storage systems. Our storage systems are designed and priced to be used by the mid-tier market and these efforts have brought the benefits of enterprise-class storage systems within reach of a larger number of organizations and a wider range of applications. In addition, our storage systems are among the first to offer energy-saving "green" technology such as MAID, or Massive Array of Idle Disks. Our products include: block storage systems, which communicate with computers over SANs, or Storage Area Networks, through Fibre Channel and iSCSI block-mode protocols; and file storage systems, which send and receive files through standard file-mode interfaces such as NFS and CIFS.

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Block storage systems with Fibre Channel and iSCSI connectivity.   Our block storage systems are based on SAS and SATA disk drives, our high-performance RAID controllers and our capacity-optimized chassis and enclosures. Our systems can be used in a wide variety of applications and storage environments, including iSCSI and Fibre Channel, offer industry-leading density, are highly scalable and are priced to offer significant savings over traditional enterprise-class disk-based storage systems as well as a competitive replacement for tape-based storage systems.



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Intelligent and high-speed file storage systems with strong archiving capabilities.   Our software-based file storage systems typically integrate with our block storage systems to offer our customers scalable, clusterable, secure and searchable file storage and archival systems with encryption and de-duplication.

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        We sell our products through resellers, original equipment manufacturer, or OEM, partners and system integrators and to date have shipped over 24,000 systems worldwide. While our market focus is on the mid-tier market, our systems have also been installed in small businesses, as well as large global enterprises around the world.

Industry Background

        The amount of digital information being created and stored on disk by digital-age applications by businesses, governments and other organizations is growing rapidly. As disk-based storage solutions offer many advantages over tape and optical solutions in storing digital information, many organizations are increasingly using disk-based storage solutions and are reducing the use of tape or optical solutions.

        Digital information is being created by mid-tier organizations faster than ever before and this information needs to be stored longer and be readily available. Some of the key factors influencing these trends include:

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Increasing number of applications that create digital information.   Businesses and organizations of all sizes are utilizing applications that create significant amounts of digital information, such as e-commerce, digital security, digital multimedia, digital medical records, digital design software and digital imaging. Many of these applications are outside of the traditional data center and are becoming more widely-used, particularly by the mid-tier market.



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Larger sized and more frequently shared files.   The creation and storage of increasingly larger files associated with high-resolution video, photos, medical images and music and data-intensive documents, as well as the frequent sharing and re-saving of files, which results in the storage of duplicate data, is accelerating the growth of digital information.



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Evolving business practices to store information in digital form.   Many organizations are now retaining key information in digital form for indefinite timeframes. For example, local governments are now retaining records in digital form that had previously been kept in paper form.



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Increasing regulatory requirements.   Regulations resulting from legislation such as the Sarbanes-Oxley Act of 2002 and the Health Insurance Portability and Accountability Act, or HIPAA, require some companies to retain digital information for specified periods of time, and then often require guaranteed deletion of data when that time has elapsed. These regulations also require organizations to take reasonable measures to ensure the security and integrity of their data over sustained periods of time.

        Traditionally, high-cost disk drives optimized for performance, such as Fibre Channel and SCSI disks, have been used to store transaction-oriented database information, while less expensive, low-availability storage systems, such as tape and optical disk were used for long-term storage of digital information. However, as demands have been increasing for storing digital-age applications that create large amounts of digital content, the requirements for more cost-effective long-term disk storage have emerged. Organizations of all sizes are increasingly looking for cost-effective and energy-efficient storage solutions with high-availability that can scale to tackle the substantial growth of digital information.

        As the demand for digital content continues to increase, the result has been a shift from the need for performance-optimized storage to capacity-optimized storage. In addition, the need for ready access to information has led to the replacement of some tape and optical disk systems with disk drives.

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Limitations of Traditional Storage Systems

        Traditional disk and tape storage systems do not fully meet the needs of the mid-tier market for storing digital information. Tape-based solutions lack the reliability and performance characteristics of disk-based systems, while traditional disk-based systems typically cost significantly more, consume considerable floor space and are energy inefficient. Moreover, traditional systems also typically lack the ability to securely manage, store and protect digital information over the course of its life and unnecessarily store duplicate information, increasing the consumption of storage capacity and leading to higher storage costs.

        While the mid-tier market faces similar storage-related challenges as larger organizations, many storage solutions have been priced or designed for larger enterprises with complex storage needs, and which do not scale cost-effectively for smaller organizations.

        We believe there is an excellent opportunity to leverage our storage technology to capitalize on this market opportunity by providing solutions that help organizations efficiently, intelligently and securely store and manage digital information for the long term.

Strategy

        Our goal is to be the leading supplier of disk-based storage systems for the mid-tier market, with a focus on providing storage for digital applications. Key elements of our strategy include:

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Continuing our history of technical innovation and utilizing technology to drive growth and reduce cost.



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Continuing to focus on the attractive mid-tier market.



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Continuing to integrate storage application software in our products.



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Continuing to sell our products through channel partners.



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Increasing our global sales coverage and marketing efforts.

Recent Developments

        We have recently completed our third fiscal quarter. Although complete financial statements for this period and the nine months ended March 31, 2010 have not been reviewed by our independent registered public accounting firm and are not yet available, we anticipate that our revenue for the three months ended March 31, 2010 will be between $16.8 million and $17.3 million. We also anticipate that our gross profit will be between $6.5 million and $6.8 million.

Corporate Information

        We were incorporated in Delaware in November 2000 and are currently headquartered in Thousand Oaks, California, with 126 employees throughout North America and Europe as of December 31, 2009. Our website address is www.nexsan.com . The information contained on our website is not a part of this prospectus. We have three principal operating subsidiaries, Nexsan Technologies Incorporated, a Delaware corporation, Nexsan Technologies Limited, a United Kingdom, U.K., corporation, and Nexsan Technologies Canada Inc., a Canadian corporation. Our principal executive offices are located at 555 St. Charles Drive, Suite 202, Thousand Oaks, California 91360, and our telephone number is (805) 418-2700.

        Nexsan and logo, Nexsan Technologies and logo, Assureon, and SATABeast are our United States, U.S., registered trademarks. We have also filed a U.S. trademark application for SASBeast, SASBoy, DeDupe SG and Nexsan iSeries. DATABeast, iSeries and SATABoy are other trademarks of ours. Other trade names, trademarks or service marks referred to in this prospectus are the property of their respective owners.

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THE OFFERING

        The common stock outstanding after this offering is based on 11,739,967 shares outstanding as of December 31, 2009 and excludes:

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1,993,015 shares issuable upon exercise of options outstanding as of December 31, 2009, at a weighted average exercise price of $6.21 per share, including 403,570 shares subject to options that are subject to call options held by us, exercisable as of December 31, 2009 at $9.48 per share;



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732,358 shares issuable upon exercise of options granted between January 1, 2010 and March 31, 2010, at a weighted average exercise price of $9.21 per share;



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292,316 shares issuable upon exercise of warrants outstanding as of December 31, 2009, at a weighted average exercise price of $8.03 per share; and



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476,857 shares reserved for future issuance under our 2001 stock plan as of March 31, 2010 and to be transferred into our 2010 equity incentive plan and 193,045 shares reserved for future issuance under our 2010 employee stock purchase plan, such plans to be effective upon completion of this offering.

Except as otherwise noted, all information in this prospectus:

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reflects the filing of our restated certificate of incorporation prior to the completion of this offering;



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reflects the conversion of all of our outstanding shares of convertible preferred stock into an aggregate of 6,516,176 shares of common stock, effective upon the completion of this offering;



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reflects the exchange of all of the outstanding exchangeable shares of our wholly-owned Canadian subsidiary into an aggregate of 464,283 shares of our common stock;



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assumes the issuance of 362,598 IPO Bonus Shares on an after-tax basis, based on an assumed initial public offering price of $11.00 per share of our common stock, immediately prior to the completion of this offering.



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reflects, on a retroactive basis, a 10.5-for-1 reverse split of our common stock, Series A and C convertible preferred stock and exchangeable shares effected in March 2010; and



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assumes no exercise of the underwriters' over-allotment option.

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SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)

        The following tables summarize our consolidated financial data. The consolidated statements of operations data for the fiscal years ended June 30, 2007, 2008 and 2009 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The consolidated statement of operations data for the six months ended December 31, 2008 and 2009, and the consolidated balance sheet data as of December 31, 2009, have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited consolidated financial statements have been prepared on a basis consistent with our audited financial statements and include, in the opinion of management, all adjustments, that management considers necessary for the fair presentation of the financial information set forth in those financial statements. You should read this data together with our consolidated financial statements and related notes to those statements included elsewhere in this prospectus and the information under "Management's Discussion and Analysis of Financial Condition and Results of Operations." Our historical results are not necessarily indicative of the results to be expected in any future period.

(1)

Includes stock-based compensation expense (credit) as follows:

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      The actual consolidated balance sheet data as of December 31, 2009 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. The pro forma consolidated balance sheet data set forth below give effect to (1) the conversion of all outstanding shares of convertible preferred stock into common stock upon the completion of this offering; and (2) the exchange of all outstanding exchangeable shares of our Canadian subsidiary into 464,283 shares of our common stock upon the completion of this offering. The pro forma as adjusted balance sheet data set forth below give effect to our receipt of the estimated net proceeds from the sale of 4,884,000 shares of common stock offered by us at an assumed initial public offering price of $11.00 per share, which is the midpoint of the range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us and the issuance of the IPO Bonus Shares to certain executive officers valued at $7,201,000, based on an assumed initial public offering price of $11.00 per share, the midpoint of the range set forth on the cover page of this prospectus, resulting in a Pre-IPO value of approximately $137.5 million. We will pay the bonus in cash of $3,213,000, representing the amount of the recipients' tax liability, and issue approximately 362,598 shares valued at $3,988,000.

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RISK FACTORS

         An investment in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information contained in this prospectus, including our consolidated financial statements and the related notes, before deciding whether to invest. Each of these risks could materially adversely affect our business, operating results and financial condition. As a result, the trading price of our common stock could decline and you might lose all or part of your investment.

Risks Related to Our Business and Industry

Our recent profitability and growth rates may not be indicative of our future profitability or growth, and we may not be able to continue to maintain or increase our profitability or growth.

        While we have been profitable in recent periods, we had an accumulated deficit of $34.1 million as of December 31, 2009. This accumulated deficit is attributable to net losses incurred from our inception through the end of fiscal 2008. We expect to make expenditures related to expanding our business, including expenditures for additional sales and marketing, research and development, and general and administrative personnel. As a public company, we will also incur significant legal, accounting and other expenses that we did not incur as a private company. As a result of these increased expenditures, we will need to generate and sustain substantially increased revenue to maintain or increase our recent profitability. Our revenue growth trends in prior periods may not be indicative of future revenue and our recent results of operations may not be indicative of our results of operations for fiscal 2010 or future periods. Accordingly, we may not be able to maintain profitability, and we may incur losses in the future.

Our operating results may fluctuate significantly, which makes our future operating results difficult to predict. If our operating results fall below expectations, the price of our common stock could decline.

        Our annual and quarterly operating results have fluctuated in the past and may fluctuate significantly in the future due to a variety of factors, many of which are outside of our control. As a result, predicting our future operating results is extremely difficult.

        Our quarterly and annual expenses as a percentage of our revenue may be significantly different from our historical rates, and our operating results in future quarters may fall below expectations. For these reasons, comparing our operating results on a period-to-period basis may not be meaningful. You should not rely on our past results as an indication of our future performance.

        Factors that may affect or result in period-to-period variability in our operating results include:

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fluctuations in demand for our products;



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reductions in customers' budgets for information technology purchases and delays in their budgeting and purchasing cycles;



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pricing and availability of components;



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the length of time between our receipt of orders and the timing of recognition of revenue from those orders, particularly for our Assureon product;



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fluctuations in the size of our individual sale transactions;



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potential seasonality in some markets;



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lengthy sales cycles for our Assureon product;

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our ability to develop, introduce and ship, in a timely manner, new products and product enhancements;



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our ability to control costs;



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the timing of product releases or upgrades by us or by our competitors; and



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pricing changes by our competitors.

        Furthermore, since we sell our products through indirect sales channels rather than a direct sales force, we often lack visibility into the demand for our products and the timing of customer orders. Accordingly, it is difficult for us to accurately predict quarter-to-quarter demand.

        In addition, we expect to incur additional cash and non-cash sales and marketing and general and administrative expenses in the quarter in which our initial public offering is completed, including payment of applicable withholding taxes, as a result of the issuance of IPO Bonus Shares immediately prior to the completion of this offering. Based on an assumed initial public offering price of $11.00 per share, the midpoint of the range set forth on the cover page of this prospectus, we expect to incur expenses of approximately $7.2 million related to these IPO Bonus Shares in the quarter in which they are issued. Please refer to the section of this prospectus entitled "Executive Compensation—Employment, Severance and Change of Control Arrangements," for a further discussion of the IPO Bonus Shares.

Current uncertainty in global economic conditions makes it particularly difficult to predict demand for our products, and makes it more likely that our actual results could differ materially from expectations.

        Our operations and performance depend on worldwide economic conditions, which have been depressed in the United States, or U.S., and other countries and may remain depressed for the foreseeable future. These conditions make it difficult for our customers and potential customers to accurately forecast and plan future business activities and could cause our customers and potential customers to slow or reduce spending on capital equipment such as our products. These economic conditions could also cause our competitors to drastically reduce prices or take unusual actions to gain a competitive edge, which could force us to provide similar discounts and thereby reduce our profitability. We cannot predict the timing, strength or duration of any economic slowdown or subsequent economic recovery, worldwide, in the U.S., or in our industry. These and other economic factors could have a material adverse effect on demand for our products and services and on our financial condition including profitability and operating results.

We face intense competition from a number of established companies and expect competition to increase in the future, which could prevent us from increasing our revenue and end user base.

        The market for our products is highly competitive, and we expect competition to intensify in the future. This competition could make it more difficult for us to sell our products and result in increased pricing pressure, reduced margins, increased sales and marketing expenses and failure to increase, or the loss of, market share, any of which would likely seriously harm our business.

        Currently, we face competition from traditional providers of storage systems. In addition, we also face competition from other public and private companies, as well as recent market entrants, that offer products with similar functionality as ours. Our products compete with Compellent, Dell, EMC, Hewlett-Packard, Hitachi Data Systems, Infortrend, IBM, NetApp, Promise Technology and Sun Microsystems, among others. In addition, we compete against internally developed storage solutions, as well as combined third-party software and hardware solutions. Many of our current competitors have, and some of our potential competitors could have, longer operating histories, greater name

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recognition, larger customer bases and significantly greater financial, technical, sales, marketing and other resources than we have. Given their capital resources and broad product and service offerings, many of these competitors may be able to offer reduced pricing for their products that are competitive with ours, which in turn could cause us to reduce our prices to remain competitive. Potential customers may have long-standing relationships with our competitors, whether for storage or other network equipment, and potential customers may prefer to purchase from their existing suppliers rather than a new supplier regardless of product performance or features. Many of our competitors benefit from established brand awareness and long-standing relationships with key decision makers at many of our current and prospective customers. We expect that our competitors will seek to leverage these existing relationships to encourage customers to purchase their products.

        We expect increased competition from other established and emerging companies, including companies such as storage software and networking infrastructure companies that provide complementary technology and functionality. We also expect that some of our competitors may make acquisitions of businesses that would allow them to offer more directly competitive and comprehensive solutions than they had previously offered. For example, EMC acquired Data Domain, Dell acquired EqualLogic, HP acquired LeftHand Networks and Oracle proposes to acquire Sun Microsystems. Our current and potential competitors, including any of our suppliers, may also establish cooperative relationships among themselves or with third parties. If so, new competitors or alliances that include our competitors may emerge that could acquire significant market share. In addition, third parties currently selling our products also market products and services that compete with ours. Any of these competitive threats, alone or in combination with others, could seriously harm our business.

As our product offerings become more complex, the timing of our revenue recognition may become less predictable.

        As we expand the range of products and functionality we offer, the revenue recognition requirements that apply to our revenue streams will become more complex than those that apply to our standalone products, for which we generally recognize revenue when the product is shipped. We expect this trend to continue as we expand our offerings. For example, for revenue recognition purposes, our Assureon product is considered a software system sale, which is a multiple-element system that includes hardware, software and software support. We determine the fair value of each element of the multiple-element arrangement based on vendor-specific objective evidence, or VSOE. Effective in the fourth quarter of fiscal 2008, we were able to establish VSOE of fair value for post-contract customer support services on certain Assureon sale transactions based on a stated renewal rate for post-contract customer support services, and in these instances, we allocate revenue to the delivered elements using the residual method. As we offer new products and features, we could be required to recognize revenue under the more complex revenue recognition rules, which could make predicting our future revenue more difficult.

We rely heavily on value-added resellers and other channel partners to sell our products. Any disruptions to, or failure to develop and manage, our relationships with these third parties could have an adverse effect on our existing end user relationships and on our ability to maintain or increase revenue.

        We do not use a direct sales force. Instead, we rely on third-parties such as resellers, OEM partners and systems integrators to sell our products. Accordingly, over the past year we have invested, and we intend to continue to invest in, increasing our sales personnel, who sell to, manage, market to, and support our channel partners. Our future success highly depends upon maintaining and managing the existing relationships with our channel partners and establishing relationships with new channel partners. Recruiting and retaining qualified channel partners and

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training them in our technology and product offerings requires significant time and resources. To develop and expand our relationships with our channel partners, we must continue to scale and improve our processes and procedures that support our channel partners, including investments in systems and training. This may become increasingly complex, difficult and expensive to manage, particularly as the geographic scope of our end user base expands. Any failure on our part to train our channel partners and to manage their sales activities could harm our business.

        Our agreements with channel partners generally are short-term, have no minimum sales commitment and do not prohibit them from offering products and services that compete with ours. Accordingly, our channel partners may choose to discontinue offering our products, promote competing products or may not devote sufficient attention and resources toward selling our products. From time to time, our competitors might provide more favorable incentives to our existing and potential channel partners to promote or sell their products, which could have the effect of reducing sales of our products.

Because we rely on channel partners to sell our products, we have less contact with end users, which makes it difficult for us to manage the sales process, quality of service, respond to end user needs and forecast future sales.

        Because we rely on third parties to sell our products, we have less contact with our end users and less control over the sales process, quality of service and responsiveness to end user needs. As a result, it may be more difficult for us to ensure the proper delivery and installation of our products and to adequately predict the needs of our end users for enhancements to existing products or for new products. Furthermore, a negative end user experience with our channel partners could cause customers to be dissatisfied with us or our products, which could harm our business. In addition, we have less visibility into future sales than we might otherwise have using a direct sales force, which makes it more difficult for us to forecast demand for our products.

Failure to adequately expand and ramp our sales personnel and further develop and expand our indirect sales channel will impede our growth.

        We have invested in growing the number of our sales personnel and channel partners and we plan to continue to expand and ramp our sales force who sell to, manage, market to, support our channel partners and engage additional channel partners, both domestically and internationally. Identifying and recruiting these people and entities and training them in our systems require significant time, expense and attention. This expansion will require us to invest significant financial and other resources. Our business will be seriously harmed if our efforts to expand and ramp our sales personnel and expand our indirect sales channels do not generate a corresponding significant increase in revenue.

We derive the substantial majority of our revenue from sales of our block storage systems, and a decline in demand for these products would harm our business.

        Historically, we have derived more than 90% of our revenue from sales of our block storage systems. We expect to continue to depend on sales of our block storage systems for the foreseeable future and, accordingly, will be vulnerable to fluctuations in demand for these products, whether as a result of competition, product obsolescence, technological change, customer budgetary constraints or other factors. A decline in demand for our block storage systems would harm our business.

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Our gross margins may decrease with decreases in the average selling prices of our current products, changes in our product mix, or increasing costs which may adversely impact our operating results.

        To maintain our selling prices and increase our gross margins, we must develop and introduce on a timely basis new products and product enhancements, as well as continually reduce our product costs. Our failure to do so would likely cause our revenue and gross margins to decline, which could harm our operating results and cause the price of our stock to decline. Our industry has historically experienced a decrease in average selling prices for similar types of products. The average selling prices of our products could decrease in response to competitive pricing pressures, evolving technologies and new product introductions by us or our competitors. In addition, increases in the cost of our components could increase our cost of revenue. We also anticipate that our gross margins will fluctuate from period to period as a result of the mix of products we sell in any given period. If our sales of higher margin products do not significantly expand as a percentage of revenue, our overall gross margins and operating results would be adversely impacted.

Our inability to increase sales of our Assureon product, which we sell primarily through OEM partners and systems integrators, could harm our business.

        Our Assureon product was commercially released in February 2006 and constituted less than 10% of our total revenues in the six months ended December 31, 2009. We cannot assure you that our Assureon product will become widely accepted or that we will be able to derive substantial revenue from the sale of this product. Our principal competitors for our Assureon product include EMC and NetApp, which are substantially larger, have greater resources than we do and may utilize a direct sales force to sell their competing products. For us to substantially increase sales of our Assureon product, we must develop additional relationships with OEM partners and systems integrators. As a result, we may need to hire additional sales personnel and expend additional resources developing these relationships. Our failure to increase sales of our Assureon product for any reason could harm our business.

Our sales cycle for our Assureon product can be long and unpredictable. As a result, our sales are difficult to predict and may vary substantially from quarter to quarter, which may cause our operating results to fluctuate.

        Sales of our Assureon product can involve substantial education of prospective customers about the use and benefits of the product. Sales are also subject to prospective customers' budget constraints and approval processes, and a variety of unpredictable administrative, processing and other delays. Accordingly, it is difficult to predict future sales activity for this product. Because of the larger size of Assureon product sales as compared to our other products, if Assureon sales expected from specific customers for a particular quarter are not realized in that quarter or at all, our results of operations for that quarter may be materially and adversely affected.

We purchase our disk drives, power supplies and certain components for our products from a limited number of suppliers. If these or any of our other suppliers are not able to meet our requirements, it could negatively impact our ability to fulfill customer orders and harm our business.

        Our products incorporate sophisticated components, including disk drives, high-density memory components and chips, from a variety of suppliers. In particular, we rely on Bell Microproducts Inc., a value-added distributor, to provide us with disk drives. Bell Microproducts generally obtains disk drives from Hitachi Global Storage Technologies, Seagate Technology LLC and Western Digital Corporation. In addition, we obtain our power supplies from BluTek Power, Inc. and our microprocessors from PMC-Sierra, Inc. and servers from Dell Inc. Qualifying components for our

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products can take up to several months, as this process involves lengthy testing and substantial work to ensure they are compatible with our products. Accordingly, if we needed to find new suppliers of components, it could take a significant amount of time to transition to the new supplier, which could delay our ability to ship products. Component quality is particularly significant with respect to our disk drives, and we could in the future experience quality control issues and delivery delays with our suppliers, which could negatively impact our ability to ship products, which could harm our business.

        Additionally, we periodically need to transition our product lines to incorporate new technologies developed by us or our suppliers. For example, from time to time our suppliers may discontinue production of underlying components and products due to new technologies that have been incorporated into such components and products or due to the acquisition of a supplier by another entity. Such a discontinuance can occur on short notice, and we and our suppliers may require a significant amount of time to qualify the new technologies to ensure that they are compatible with our products. We also may incur significant expenses to purchase "end of life" components.

        We do not have long-term contracts with any of our current suppliers, and we purchase all components on a purchase-order basis. If any of our suppliers were to cancel or materially change any commitment they may have with us, or fail to meet the quality or delivery requirements needed to satisfy customer orders for our products, we could lose time-sensitive customer orders, be unable to develop or sell certain products cost-effectively or on a timely basis, if at all, and have significantly decreased revenue.

Any price increases, shortages or interruptions of supply of components for our products would adversely affect our revenue and gross profits.

        We may be vulnerable to price increases for components. In addition, in the past we have occasionally experienced shortages or interruptions in supply for certain components, which caused us to purchase these items at a higher cost than we had initially forecast. To help address these issues, we have in the past and we could in the future, decide to purchase quantities of these items that are above our foreseeable requirements. As a result, we could be forced to increase our excess and obsolete inventory reserves to account for excess quantities. If we experience any shortage of components or receive components of unacceptable quality or if we are not able to procure components from alternate sources at acceptable prices and within a reasonable period of time, our revenue and gross profit could decrease significantly.

If we fail to develop and introduce new products in a timely manner, or if we fail to manage product transitions, we could experience decreased revenues.

        Our future growth depends on our ability to develop and introduce new products successfully. Due to the complexity of our products, there are significant technical risks that may affect our ability to introduce new products successfully. If we are unable to develop and introduce new products in a timely manner or in response to changing market conditions or customer requirements, or if these products do not achieve market acceptance, our growth could be negatively impacted and our operating results could be materially and adversely affected.

        In addition, components used in our products are periodically discontinued by our suppliers, which could result in our having to change our product designs. We are also periodically required to redesign some of our products in order to remain competitive because of increased functionality or higher performance afforded by new components. If these redesigns are not timely, of if they result in unexpected issues related to quality or performance, sales of our products could be adversely affected.

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        Product introductions by us in future periods may also reduce demand for our existing products. As new or enhanced products are introduced, we must successfully manage the transition from older products, avoid excessive levels of older product inventories and ensure that sufficient supplies of new products can be delivered to meet customer demand. Our failure to do so could adversely affect our operating results.

We rely principally on two contract manufacturers and other third parties to assemble portions of our products, perform printed circuit board, or PCB, layout, agency testing and assembling. If we fail to accurately forecast demand for our products or successfully manage our relationships with our contract manufacturers or other third-party service providers, our ability to ship and sell our products could be negatively impacted.

        We rely principally on two contract manufacturers to manufacture our block and file storage products, manage our supply chain and negotiate costs for some components. Specifically, we rely on AWS Cemgraft in England and Cal Quality in California to manufacture our products. We also rely on third parties to perform PCB layout and testing and assembly. Our reliance on third parties for these services reduces our control over the manufacturing process, production costs and product supply. In addition, none of our contract manufacturers is contractually obligated to perform manufacturing services for us, and they may elect not to perform these services or perform at levels that are insufficient to meet our manufacturing needs. If we fail to manage our relationships with our contract manufacturers or if any of our contract manufacturers experiences delays, disruptions, capacity constraints or quality control problems in their operations, our ability to ship products could be impaired and our competitive position, reputation, customer relationships, product sales and revenue could be harmed. If we are required to change any of our contract manufacturers for any reason, we may lose revenue, incur increased costs and damage our customer relationships.

        Our contract manufacturers also manufacture products for other companies. If our contract manufacturers experience demand for their services beyond their capacity, they may give priority to other customers, particularly those who place larger orders than us, and this could impact our ability to timely ship our products.

        We intend to introduce new products and product enhancements, which could require us to achieve volume production rapidly. We may need to increase our component purchases, contract manufacturing capacity and internal test and quality functions if we experience increased demand. If our contract manufacturers are unable to provide us with adequate supplies of high-quality products, or if we or any of our contract manufacturers are unable to obtain adequate quantities of components, it could cause a delay in our order fulfillment and harm our business.

If we fail to adequately manage our product inventory, we may incur excess product inventory costs and write downs or we may have insufficient quantities to meet customer demand and our financial results could be adversely affected.

        We must effectively manage our product inventory. We place orders to manufacture our products based on rolling forecasts. Since we utilize an indirect, rather than direct, sales channel, our future sales are difficult to predict with certainty. We may seek to increase orders during periods of product shortages or delay orders in anticipation of new products, and as a result may have insufficient quantities of products available to meet customer demand. On the other hand, if we manufacture more products than we need, we could incur excess manufacturing and component costs and could be required to write down inventory for any obsolete or excess products. As we introduce new products, we risk creating obsolete or excess inventory of our existing products. For example, in fiscal 2006, we incurred an inventory write down of approximately $1.0 million related to the excess inventory of our ATA products as we introduced new products.

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If our products do not interoperate with our end users' existing network infrastructure, including hardware, software and other networking equipment, installations will be delayed or cancelled and our financial results could be adversely affected.

        Our products must interoperate with end users' existing networks, which often have different specifications, utilize multiple protocol standards and products from multiple vendors, and contain multiple generations of products that have been added over time. We may be required to modify our software or hardware, so that our products will interoperate with our end users' existing network infrastructure. This could cause longer installation times for our products, result in reduced new orders for our products, and could cause order delays or cancellations, any of which would adversely affect our business.

Our products are complex and may contain undetected software or hardware errors, which could harm our reputation and future product sales.

        Our products are complex and it is possible that despite our testing, defects, incompatibilities with products from other vendors or other errors may not be discovered until after a product has been installed and used by customers. Errors, defects, incompatibilities or other problems with our products or other products within a larger system could result in a number of negative effects on our business, including:

•

loss of customers;



•

loss of or delay in revenue;



•

loss of market share;



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damage to our brand and reputation;



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inability to attract new customers or achieve market acceptance;



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diversion of development resources;



•

increased service and warranty costs;



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legal actions by our customers; and



•

increased insurance costs.

        If any of these occurs, our operating results could be harmed.

If our channel partners do not properly install our products or integrate our products with other products, our reputation and business may be harmed.

        Because we rely on channel partners to sell, install and integrate our products, we have limited control over how our products are used. If any of our channel partners incorporate any of our products into a storage system that does not perform as an end user customer expects, our reputation and business could be harmed, even if our product performs properly.

Our products handle important data for our customers and are highly technical in nature. If end user data is lost or corrupted, or our products contain software errors or hardware defects, our reputation and business could be harmed.

        Our products store important data for our end users. The process of storing that data is highly technical and complex. If any data is lost or corrupted in connection with the use of our products, our reputation could be seriously harmed and market acceptance of our products could suffer. In addition, our products could contain software errors, hardware defects or security vulnerabilities. Some software errors or defects in the hardware components of our products may be discovered

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only after a product has been installed and used by our end users. Any such errors, defects or security vulnerabilities discovered in our products could result in lost revenue or customers, increased service and warranty costs, harm to our reputation and diversion of attention of our management and technical personnel, any of which could significantly harm our business. In addition, we could face claims for product liability, tort or breach of warranty. Defending a lawsuit, regardless of its merit, is costly and may divert management's attention and adversely affect the market's perception of us and our products.

If we do not successfully anticipate market needs and develop products and product enhancements that meet those needs, or if those products do not gain market acceptance, our business could be adversely affected.

        We compete in a market characterized by rapid technological change, frequent new product introductions, evolving industry standards and changing customer needs. We cannot assure you that we will be able to anticipate future market needs or be able to develop new products or product enhancements to meet those needs in a timely manner, or at all. The product development process can be lengthy, and we may experience unforeseen delays in developing new products, product enhancements or technologies. In addition, although we invest a considerable amount of money into our research and development efforts, any new products or product enhancements that we develop may not achieve widespread market acceptance. As competition increases in the storage industry and the IT industry in general, it may become even more difficult for us to stay abreast of technological changes or develop new technologies or introduce new products as quickly as our competitors, many of which have substantially greater financial, technical and engineering resources than we do. Additionally, risks associated with the introduction of new products or product enhancements include difficulty in predicting customer needs or preferences, transitioning existing products to incorporate new technologies, the capability of our suppliers to deliver high-quality components required by such new products or product enhancements in a timely fashion, and unknown defects in such new products or product enhancements. If we are unable to keep pace with rapid industry, technological or market changes, our business could be harmed.

Our international sales and operations introduce risks that can harm our business.

        In fiscal 2009 and the six months ended December 31, 2009, we derived approximately 35% and 33%, respectively, of our revenue from customers outside the U.S., and we expect to continue to expand our international operations. We have personnel in the U.S., Canada and the U.K. and sales personnel and channel partners worldwide. We expect to continue to hire additional personnel and add channel partners worldwide, and as a result may need to expand our existing international facilities and establish additional international subsidiaries and offices. Our international operations could subject us to a variety of risks, including:

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increased exposure to foreign currency exchange rate risk;



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the potential inability to attract, hire and retain qualified management and other personnel in our international offices;



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the increased travel, infrastructure and legal compliance costs associated with multiple international locations;



•

difficulties in enforcing contracts, collecting accounts receivable and managing longer payment cycles, especially in emerging markets;



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tariffs and trade barriers and other regulatory or contractual provisions limiting our ability to sell or develop our products in certain foreign markets;



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export controls, especially for encryption technology; and

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•

reduced protection for intellectual property rights in some countries.

        As we continue to expand our business globally, our success will depend, in large part, on our ability to anticipate and effectively manage these and other risks associated with our international operations. Our failure to manage any of these risks successfully could harm our international operations and reduce our international sales.

Failure to comply with the U.S. Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.

        We are subject to the U.S. Foreign Corrupt Practices Act, which generally prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some we may work with, may not be subject to these prohibitions. While we maintain policies that require compliance with these rules, we cannot assure you that our employees, agents or other business partners will not engage in such conduct for which we might be held responsible. If our employees, agents or other business partners are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.

If we fail to manage future growth effectively, our business could be harmed.

        In recent years, we have experienced growth in the size and scope of our business, and if that growth continues, it will continue to place significant demands on our management, infrastructure and other resources. We have also expanded the geographic scope of our business, establishing operations in Canada as a result of our acquisition of AESign Evertrust Inc. in March 2005 and establishing and managing our reseller networks in China and Japan.

        We expect to continue to expand in select international markets. Continued growth in the size and scope, including the geographic scope, of our business operations will require substantial management attention with respect to:

•

recruiting, hiring, integrating and retaining highly skilled and motivated individuals;



•

managing increasingly dispersed geographic locations and facilities; and



•

establishing an integrated information technology infrastructure; and establishing company-wide systems, processes and procedures.

        We intend to rely on third parties to provide some of these services for us. For example, we have contracted with a third party to administer our human resources training, compensation benefit management and compliance activities. If any of these third-party providers are unable to adequately provide the support for which we have retained them, we could be unable to find a suitable replacement service provider or be subject to regulatory actions related to our compliance activities. Our business could be harmed if we are not successful in effectively managing any future growth.

If we fail to establish and maintain proper and effective internal control over financial reporting, our operating results and our ability to operate our business could be harmed.

        The Sarbanes-Oxley Act of 2002 requires, among other things, that we establish and maintain adequate disclosure controls and procedures and internal control over financial reporting. In connection with the audit of our financial statements for the fiscal year ended June 30, 2007, material weaknesses in our internal control over financial reporting were noted. Subsequent to that audit, we increased the size of our finance organization by hiring additional technical personnel,

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implemented new controls and improved processes and no material weaknesses were noted in the audit of our financial statements for the fiscal years ended June 30, 2008 and 2009. We cannot provide assurance that we will not have material weaknesses in the future, which could cause us to be unable to timely report financial information, cause the market price of our stock to decline or subject us to investigations or litigation by regulatory authorities or other persons or entities.

As a public company we will be required to assess our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act and file periodic reports with the SEC. If we are unable to comply with these requirements in a timely manner, or if material weaknesses or significant deficiencies persist, the market price of our stock could decline and we could be subject to sanctions or regulatory investigations, which could harm our business.

        Commencing with our fiscal year ending June 30, 2011, we must perform an assessment of our internal control over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our compliance with Section 404 of the Sarbanes-Oxley Act will require that we incur substantial accounting expenses and expend significant management efforts. Prior to this offering, we have never been required to test our internal controls within a specified period, and, as a result, we may experience difficulty in meeting these reporting requirements in a timely manner, particularly if material weaknesses or significant deficiencies persist. In addition, SEC rules require that, as a public company following completion of this offering, we file periodic reports containing our financial statements within a specified time following the completion of quarterly and annual periods. If we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act or the SEC reporting requirements in a timely manner, or if we or our independent registered public accounting firm continue to note or identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the stock exchange upon which our common stock is listed, the SEC or other regulatory authorities, which would require additional financial and management resources and increase our operating expenses.

If our third-party providers of on-site product support fail to adequately support the end users of our products, our reputation and business could be harmed.

        We rely primarily on Eastman Kodak Company, or Kodak, and on other service providers, in various geographic locations, to provide on-site support for our products. Since Kodak and our other service providers work directly with the end users of our products for their on-site support needs, we have limited contact with our end users that require on-site support. If our end users are not satisfied with the support that they receive from these service providers, our end users may become dissatisfied with our products and purchase products from our competitors in the future.

We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in international markets.

        Our products include technology that subjects us to export control laws that limit where and to whom we sell our products. In addition, various countries regulate the import of certain technologies and have enacted laws that could limit our ability to distribute our products or could limit our end users' ability to deploy our products in those countries. Changes in our products or changes in export and import regulations may create delays in the introduction of our existing and new products in international markets, prevent end users with international operations from deploying our products throughout their global systems, or in some cases, prevent the export or

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import of our products to certain countries altogether. Any change in export or import laws, shift in the enforcement or scope of existing laws, or change in the countries, persons or technologies targeted by such laws, could decrease our ability to export or sell our products outside of the United States.

A decrease in government spending on the storage market could adversely affect our revenue and financial results.

        Sales to government entities have recently contributed to our revenue. Future revenue from government entities is unpredictable and subject to shifts in government spending patterns. Government agencies are subject to budgetary processes and expenditure constraints that could lead to delays or decreased capital expenditures in information technology spending. If the government or individual agencies within the government reduce or shift their capital spending patterns, our revenues and financial results may be adversely affected.

If we are unable to protect our intellectual property rights, our competitive position could be harmed and we could be required to incur significant expenses to enforce our rights.

        We depend on our ability to protect our proprietary information and technology. We rely on trade secret, patent, copyright and trademark laws and confidentiality agreements with employees and third parties, all of which offer only limited protection. Despite our efforts, the steps we have taken to protect our intellectual property rights may not be adequate to preclude misappropriation of our proprietary information or infringement of our intellectual property rights, particularly outside of the U.S. Further, with respect to patent rights, we do not know whether our pending patent application will result in the issuance of a patent or whether the examination process will require us to narrow our claims, and even if the patent is issued, it may be contested, circumvented or invalidated over the course of our business. Moreover, the rights granted under our issued patents or patents that may be issued in the future may not provide us with proprietary protection or competitive advantages, and competitors may be able to develop similar or superior technologies to our own now or in the future. Protecting against the unauthorized use of our proprietary rights can be expensive and difficult. Litigation may be necessary in the future to enforce or defend our intellectual property rights, to protect our trade secrets or to determine the validity and scope of the proprietary rights of others. This litigation could result in substantial costs and diversion of management resources, either of which could harm our business. Furthermore, many of our current and potential competitors have the ability to dedicate substantially greater resources to enforce their intellectual property rights than us. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property.

Claims by others that we infringe their intellectual property rights could harm our business.

        The storage industry is characterized by a large number of patents and frequent patent litigation. We may in the future be contacted by third parties suggesting that we seek a license to certain of their intellectual property rights that they may believe we are infringing upon. We expect that infringement claims against us may increase as the number of products and competitors in our market increases and overlaps occur. In addition, as a publicly traded company, we believe that we will face a higher risk of being the subject of intellectual property infringement claims. Any claim of infringement by a third party, even those without merit, could cause us to incur substantial costs defending against the claim, and could distract our management from our business. Furthermore, a party making such a claim, if successful, could secure a judgment that requires us to pay substantial damages. A judgment against us could also include an injunction or other court order that could prevent us from offering our products. In addition, we might be required to seek a license for the use of such intellectual property, which may not be available on commercially reasonable terms, or

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at all. Alternatively, we may be required to develop non-infringing technology, which could require significant effort and expense and may ultimately not be successful. Any of these events could seriously harm our business. Third parties may also assert infringement claims against our customers, channel partners and authorized service providers. Because we generally indemnify our customers, channel partners and authorized service providers if our products infringe upon the proprietary rights of third parties, any such claims could require us to initiate or defend protracted and costly litigation on their behalf, regardless of the merits of these claims. If any of these claims succeed, we may be forced to pay damages on behalf of our customers, channel partners and authorized service providers.

If we are unable to obtain the rights necessary to use or continue to use third-party intellectual property in our products, our business could be harmed.

        Certain of our products include intellectual property owned by third parties. From time to time we may be required to renegotiate with these third parties, or negotiate with other third parties, to include their technology in our existing products, in new versions of our existing products or in new products. We may not be able to negotiate or renegotiate licenses on reasonable terms on a timely basis, or at all. If we are unable to obtain the rights necessary to use or continue to use third-party intellectual property in our products, we may not be able to sell the affected products, we could face delays in product releases until alternative technology can be identified, licensed or developed, and integrated into our current or future products. Any of these issues, if they occur, could harm our business.

Our use of open source software could impose limitations on our ability to develop or ship our products.

        We incorporate open source software into our products. The terms of many open source licenses have not been interpreted by U.S. courts, and there is a risk that these licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to market our products. In such event, we could be required to seek licenses from third parties to continue offering our products, make generally available, in source code form, proprietary code that links to certain open source modules, re-engineer our products, discontinue the sale of our products if re-engineering could not be accomplished on a cost-effective and timely basis, or become subject to other consequences, any of which could adversely affect our business.

We may seek to expand our business through acquisitions of, or investments in, other companies, each of which could divert management's attention, be viewed negatively, lead to integration problems, disrupt our business, increase our expenses, reduce our cash, cause dilution to our stockholders or otherwise harm our business.

        In the future, we may seek to acquire additional companies or assets that we believe may enhance our product offerings or market position. We may not be able to find suitable acquisition candidates and we may not be able to complete acquisitions on favorable terms, if at all. If we complete acquisitions, these transactions may be viewed negatively by our customers, financial markets or investors. In addition, any acquisitions that we make could lead to difficulties in integrating personnel and operations from the acquired businesses and in retaining and motivating key personnel from these businesses. Acquisitions may disrupt our ongoing operations, divert management from day-to-day responsibilities and increase our expenses. Future acquisitions may reduce our cash available for operations and other uses and could result in an increase in amortization expense related to intangible assets acquired, potentially dilutive issuances of equity securities or the incurrence of debt, any of which could harm our business.

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The issuance of new accounting standards or future interpretations of existing accounting standards could adversely affect our operating results.

        We prepare our financial statements to conform to accounting principles generally accepted in the U.S. A change in those principles could have a significant effect on our reported results and might affect our reporting of transactions completed before a change is announced. Generally accepted accounting principles in the U.S. are issued by and are subject to interpretation by the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, the American Institute of Certified Public Accountants, or AICPA, the SEC, and various other bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change. The regulatory bodies listed above continue to issue interpretations and guidance for applying the relevant accounting standards to a wide range of sales practices and business arrangements applicable to us. The issuance of new accounting standards or future interpretations of existing accounting standards, or changes in our business practices could result in future changes in our revenue recognition or other accounting policies that could have a material adverse effect on our results of operations.

We will incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial time to compliance efforts.

        As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and NASDAQ, impose additional requirements on public companies, including enhanced corporate governance practices. For example, NASDAQ listing requirements require that listed companies satisfy certain corporate governance requirements relating to independent directors, audit committees, distribution of annual and interim reports, stockholder meetings, stockholder approvals, solicitation of proxies, conflicts of interest, stockholder voting rights and codes of business conduct. Our management and other personnel will need to devote a substantial amount of time to comply with these requirements. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we incurred approximately $3.9 million of costs in preparing for this offering through June 30, 2009 that we would not have incurred if we remained private. These rules and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors and board committees or as executive officers.

Our future success depends on our ability to attract and retain key personnel, and our failure to do so could harm our ability to grow our business.

        Our success highly depends upon the performance of our senior management and key accounting and finance, technical and sales personnel. Our management and employees can terminate their employment at any time, and the loss of the services of one or more of our executive officers or other key employees could harm our business. Our success also is substantially dependent upon our ability to attract additional personnel for all areas of our organization, particularly in our finance, sales, and research and development departments. Our dependence on attracting and retaining qualified personnel is particularly significant as we attempt to grow our organization. Competition for qualified personnel in our industry and in the finance area is intense, and we may not be successful in attracting and retaining such personnel on a timely basis, on competitive terms, or at all. If we are unable to attract and retain the necessary technical, sales and other personnel on a cost-effective basis, our business could be harmed.

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We are subject to laws and regulations governing the environment and may incur substantial environmental regulation costs, which could harm our operating results.

        We are subject to various state, federal and international laws and regulations governing the environment, including those restricting the presence of certain substances in electronic products and making producers of those products financially responsible for the collection, treatment, recycling and disposal of certain products. These laws and regulations have been enacted in several jurisdictions in which we sell our products, including various European Union, or EU, member countries. For example, the EU enacted the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment, or RoHS, and the Waste Electrical and Electronic Equipment, or WEEE, directives. RoHS regulates the use of certain substances, including lead, in certain products, including hard drives, sold after July 1, 2006. Similar legislation may be enacted in other locations where we sell our products. We will need to ensure that we comply with these laws and regulations as they are enacted, and that our component suppliers also comply with these laws and regulations.

        If we or our component suppliers fail to comply with the legislation, our customers may refuse or be unable to purchase our products, or we could incur penalties or other costs, any of which could harm our business. In addition, in connection with our compliance with these environmental laws and regulations, we could incur substantial costs and be subject to disruptions to our operations and logistics. Furthermore, if we were found to be in violation of these laws, we could be subject to governmental fines and liability to our customers. If we have to make significant capital expenditures to comply with environmental laws, or if we are subject to significant expenses in connection with a violation of these laws, our business could suffer.

If we need additional capital in the future, it may not be available on favorable terms, or at all, which could adversely impact our business.

        We have historically relied on outside financing to fund our operations, capital expenditures and expansion. However, we may require additional capital from equity or debt financing in the future to fund our operations, or respond to competitive pressures or strategic opportunities. We may not be able to secure additional financing on favorable terms, or at all. The terms of additional financing may place limits on our financial and operating flexibility. If we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into or exercisable for equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any new securities we issue could have rights, preferences or privileges senior to those of existing or future holders of our common stock, including shares of common stock sold in this offering. If we are unable to obtain necessary financing on terms satisfactory to us, if and when we require it, our ability to grow or support our business and to respond to business challenges could be significantly limited.

Interruption or failure of our information technology and communications systems or other interruptions in our operations or those of our suppliers, manufacturers and channel partners could impair our ability to operate our business, which could harm our operating results.

        Our systems, facilities and operations and those of our suppliers, manufacturers, channel partners and other supply chain participants are vulnerable to damage or interruption from earthquakes, pandemics, work stoppages, floods, fires, terrorist attacks, power losses, telecommunications failures, computer viruses, computer denial of service attacks or other attempts to harm these systems. If any of these events were to occur, our ability to operate our business could be seriously impaired. In addition, we may not have adequate insurance to cover our losses resulting from natural disasters or other significant business interruptions. Any significant losses that

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are not recoverable under our insurance policies could seriously impair our business and financial condition.

Risks Related to the Offering

We cannot assure you that a market will develop for our common stock or what the market price of our common stock will be.

        Before this offering, there was no public trading market for our common stock, and we cannot assure you that one will develop or be sustained after this offering. If a market does not develop or is not sustained, it may be difficult for you to sell your shares of common stock at an attractive price or at all. We cannot predict the prices at which our common stock will trade. The initial public offering price for our common stock will be determined through our negotiations with the underwriters and may not bear any relationship to the market price at which our common stock will trade after this offering or to any other established criteria of the value of our business. As a result of these and other factors, the price of our common stock may decline, and you could lose some or all of your investment.

The price of our common stock may be volatile and the value of your investment could decline.

        The stock market in general, and the market for technology stocks in particular, have been experiencing high levels of volatility. The trading price of our common stock following this offering may fluctuate substantially. The price of our common stock that will prevail in the market after this offering may be higher or lower than the price you pay, depending on many factors, some of which are beyond our control and may not be related to our operating performance. These fluctuations could cause you to lose all or part of your investment in our common stock. Factors that could cause fluctuations in the trading price of our common stock include the following:

•

price and volume fluctuations in the overall stock market from time to time;



•

significant volatility in the market price and trading volume of technology companies;



•

actual or anticipated changes in our results of operations or fluctuations in our operating results;



•

actual or anticipated changes in the expectations of investors or securities analysts;



•

actual or anticipated developments in our competitors' businesses or the competitive landscape generally;



•

litigation involving us, our industry or both;



•

regulatory developments in the U.S., foreign countries or both;



•

economic conditions and trends in our industry;



•

major catastrophic events;



•

sales of large blocks of our stock; or



•

departures of key personnel.

        In the past, following periods of volatility in the market price of a company's securities, securities class action litigation has often been brought against that company. If our stock price is volatile, we may become the target of securities litigation. Securities litigation could result in substantial costs and divert our management's attention and resources from our business.

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Future sales of outstanding shares of our common stock into the market in the future could cause the market price of our common stock to drop significantly, even if our business is doing well.

        If our existing stockholders sell a large number of shares of our common stock or the public market perceives that these sales may occur, the market price of our common stock could decline. Based on shares outstanding on December 31, 2009, upon the completion of this offering, assuming no outstanding options or warrants are exercised prior to the completion of this offering, we will have approximately 16,623,967 shares of common stock outstanding. All of the shares offered under this prospectus will be freely tradable without restriction or further registration under the federal securities laws, unless purchased by our affiliates. The remaining shares of our common stock outstanding after this offering will be restricted as a result of securities laws or lock-up agreements. These remaining shares will generally become available for sale in the public market as follows:

•

172,366 shares not subject to a lock-up or market standoff agreement with Thomas Weisel Partners, LLC or with us will be eligible for immediate sale upon the completion of this offering;



•

no restricted shares will be eligible for immediate sale upon the completion of this offering; and



•

beginning 181 days after the date of this prospectus, subject to extension, 2,818,600 shares will be tradable under Rule 144(b)(1), and 8,921,367 shares will be tradable subject to the limitations on shares held by affiliates under Rule 144(b)(2).

        Furthermore, following this offering, certain holders of our common stock, including common stock issued upon conversion of our preferred stock and issued upon exercise of warrants or options for common stock will be entitled to rights with respect to the registration of a total of 12,120,891 shares under the Securities Act. For a description of these rights, see the section of this prospectus entitled "Description of Capital Stock—Registration Rights." If we register their shares of common stock following the expiration of the lock-up agreements, these stockholders can immediately sell those shares in the public market.

        Following this offering, we intend to register on a registration statement on Form S-8 up to approximately 1,947,709 shares of common stock that may be issued upon exercise of outstanding stock options granted under our 2001 stock plan, 565,474 shares of our common stock that may be issued upon exercise of outstanding stock options granted outside of our equity incentive plans, 476,857 shares of common stock that are authorized for future issuance or grant under our 2010 equity incentive plan, 193,045 shares of common stock that are authorized for future issuance or grant under our 2010 employee stock purchase plan, such plans to be effective upon the completion of this offering, and the 362,598 IPO Bonus Shares. To the extent we register these shares they can be freely sold in the public market upon issuance, subject to the lock-up agreements referred to above and, with respect to affiliates, Rule 144(b)(2).

        In addition, 212,190 shares subject to outstanding stock options are not eligible for registration on Form S-8. Of these shares, 95,238 will be tradable beginning 181 days after the date of this prospectus, subject to the limitations on shares sold by affiliates under Rule 144(b)(2), and the remaining 116,952 shares will be tradable six months from the date of exercise of the options, subject to the limitations on shares sold by affiliates under Rule 144(b)(2).

If securities analysts do not publish research or reports about our business, or if they downgrade our stock, the price of our stock could decline.

        The trading market for our common stock will rely in part on the availability of research and reports that third-party industry or financial analysts publish about us. If analysts cover us and then

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one or more of the analysts who cover us downgrade our stock, our stock price may decline. If one or more of these analysts cease coverage of our company, we could lose visibility in the market, which in turn could cause the liquidity of our stock and our stock price to decline.

Concentration of ownership among our existing directors, executive officers, and principal stockholders may prevent new investors from influencing significant corporate decisions.

        Upon closing of this offering, assuming the underwriters' option to purchase additional shares is not exercised, based upon beneficial ownership as of February 28, 2010, our current directors, executive officers, holders of more than 5% of our common stock, including Fonds de solidarité des travailleurs du Québec (F.T.Q.), MFP Partners, L.P., the funds affiliated with RRE Ventures and VantagePoint Venture Partners, and their respective affiliates will, in the aggregate, beneficially own approximately 57% of our outstanding common stock. As a result, these stockholders may be able to exercise a controlling influence over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, and will have significant influence over our management and policies. Some of these persons or entities may have interests that are different from yours. For example, these stockholders may support proposals and actions with which you may disagree or which are not in your interests. The concentration of ownership could delay or prevent a change in control of our company or otherwise discourage a potential acquirer from attempting to obtain control of our company, which in turn could reduce the price of our common stock. In addition, these stockholders, some of whom have representatives sitting on our board of directors, could use their voting influence to maintain our existing management and directors in office, delay or prevent changes of control of our company, or support or reject other management and board proposals that are subject to stockholder approval, such as amendments to our employee stock plans and approvals of significant financing transactions.

We have broad discretion in the use of the net proceeds from this offering.

        We cannot specify with certainty the particular uses of the net proceeds we will receive from this offering. We will have broad discretion in the application of the net proceeds, including using the net proceeds for any of the purposes described in the section of this prospectus entitled "Use of Proceeds." Accordingly, you will have to rely upon the judgment of our board and management with respect to the use of the proceeds, with only limited information concerning their specific intentions. We may spend a portion or all of the net proceeds from this offering in ways that our stockholders may not desire or that may not yield a favorable return. Our failure to apply these funds effectively could harm our business. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

We do not intend to pay dividends for the foreseeable future.

        We have never declared or paid any cash dividends on our common stock. We intend to retain any earnings to finance the operation and expansion of our business, and we do not anticipate paying any cash dividends in the future. In addition, our loan agreement prohibits the payment of cash dividends without the lender's consent. As a result, you may only receive a return on your investment in our common stock if the market price of our common stock increases.

If you purchase shares of our common stock in this offering, you will experience substantial and immediate dilution.

        If you purchase shares of our common stock in this offering, you will experience substantial and immediate dilution in the pro forma net tangible book value per share after giving effect to this offering of $7.68 per share as of December 31, 2009, based on an assumed initial public offering price of $11.00 per share, which is the midpoint of the range set forth on the cover page of this

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prospectus, because the price that you pay will be substantially greater than the pro forma net tangible book value per share of the common stock that you acquire. This dilution is due in large part to the fact that our earlier investors paid substantially less than the initial public offering price when they purchased their shares of our capital stock. You will experience additional dilution upon exercise of warrants, upon exercise of options to purchase common stock under our equity incentive plans, if we issue restricted stock to our employees under our equity incentive plans or if we otherwise issue additional shares of our common stock.

Our charter documents and Delaware law may inhibit a takeover that stockholders consider favorable and could also limit the market price of our stock.

        Upon the completion of this offering, provisions of our restated certificate of incorporation and bylaws and applicable provisions of Delaware law may make it more difficult for or prevent a third party from acquiring control of us without the approval of our board of directors. These provisions:

•

prohibit stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders;



•

limit who may call a special meeting of stockholders;



•

provide our board of directors with the ability to designate the terms of and issue a new series of preferred stock without stockholder approval;



•

require the approval of two-thirds of the shares entitled to vote at an election of directors to adopt, amend or repeal our bylaws or repeal certain provisions of our certificate of incorporation;



•

allow a majority of the authorized number of directors to adopt, amend or repeal our bylaws without stockholder approval;



•

do not permit cumulative voting in the election of our directors, which would otherwise permit less than a majority of stockholders to elect directors; and



•

set limitations on the removal of directors.

        In addition, Section 203 of the Delaware General Corporation Law generally limits our ability to engage in any business combination with certain persons who own 15% or more of our outstanding voting stock or any of our associates or affiliates who at any time in the past three years have owned 15% or more of our outstanding voting stock. These provisions may have the effect of entrenching our management team and may deprive you of the opportunity to sell your shares to potential acquirers at a premium over prevailing prices. This potential inability to obtain a control premium could reduce the price of our common stock.

        See the section of this prospectus entitled "Description of Capital Stock—Anti-takeover Provisions" for a more detailed description of these provisions.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

        This prospectus, particularly in the sections entitled "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," contains forward-looking statements that are subject to substantial risks and uncertainties. All statements other than statements of historical facts contained in this prospectus, including, but not limited to, statements regarding our future financial position, statements regarding our business strategy, and plans and objectives for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as "believe," "may," "estimate," "continue," "anticipate," "intend," "should," "plan," "expect," "predict," or "potential," the negative of these terms or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions described in the section entitled "Risk Factors" and elsewhere in this prospectus. We qualify all of our forward-looking statements by these cautionary statements.

        Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Before investing in our common stock, investors should be aware that the occurrence of the events described in the section entitled "Risk Factors" and elsewhere in this prospectus could have a material adverse effect on our business, results of operations and financial condition.

        You should not rely upon forward-looking statements as predictions of future events. We cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus to conform these statements to actual results or to changes in our expectations.

        You should read this prospectus and the documents that we referenced in this prospectus and have filed with the SEC as exhibits to the registration statement of which this prospectus is a part with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we currently expect.

        Industry and market data used throughout this prospectus were obtained through surveys and studies conducted by third parties, and industry and general publications. The information contained in the section of this prospectus entitled "Business—Industry Background" is based on studies, analyses and surveys prepared by the Enterprise Strategy Group and IDC which we believe were based on reasonable assumptions. We have not independently verified any of the data from third-party sources nor have we ascertained any underlying economic assumptions relied upon therein. Estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading "Risk Factors."

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USE OF PROCEEDS

        We estimate that we will receive net proceeds of $46.1 million from our sale of the 4,884,000 shares of common stock offered by us in this offering, based on an assumed initial public offering price of $11.00 per share, the midpoint of the range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any proceeds from the sale of shares by the selling stockholder. If the underwriters' over-allotment option is exercised in full, we estimate that our net proceeds will be approximately $7.7 million. Each $1.00 increase or decrease in the assumed initial public offering price of $11.00 per share would increase or decrease the net proceeds to us from this offering by approximately $4.1 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions payable by us.

        The principal purposes of this offering are to create a public market for our common stock and facilitate our future access to the public equity markets. We currently anticipate that we will use the net proceeds received by us from this offering for working capital and other general corporate purposes. In addition, we may use a portion of the proceeds of this offering for potential acquisitions of complementary businesses, technologies or other assets. We have no current agreements or commitments with respect to any such acquisitions.

        We currently have no specific plans for the use of the net proceeds to us from this offering. The amounts and timing of our actual expenditures will depend on numerous factors, including the amount of cash used in or generated by our operations, sales and marketing activities and competitive pressures. We may find it necessary or advisable to use our net proceeds for other purposes, and we will have broad discretion in the application of our net proceeds.

        Pending the uses described above, we intend to invest the net proceeds to us from this offering in short-term, interest-bearing, investment-grade securities. We cannot predict whether the net proceeds will yield a favorable return.

DIVIDEND POLICY

        We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business. We do not intend to pay cash dividends on our common stock for the foreseeable future. Our loan agreement prohibits the payment of cash dividends without the lender's consent.

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CAPITALIZATION
(in thousands, except share and per share data)

        The following table sets forth our cash and capitalization as of December 31, 2009:

•

on an actual basis;



•

on a pro forma basis to reflect upon the completion of this offering: (1) the conversion of all outstanding shares of preferred stock into 6,516,176 shares of our common stock; and (2) the exchange of all outstanding exchangeable stock of our Canadian subsidiary into 464,283 shares of our common stock; and



•

on a pro forma as adjusted basis to reflect the sale of the shares of our common stock offered by us at an assumed initial public offering price of $11.00 per share, the midpoint of the range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us and the issuance of the IPO Bonus Shares based on an assumed initial public offering price of $11.00 per share, the midpoint of the range set forth on the cover page of this prospectus, we will incur an expense in the amount of $7,201,000, resulting in an increase in pro forma as adjusted accumulated deficit. We will pay the bonus in cash of $3,213,000, representing the amount of the recipients' tax liability, and issue 362,598 shares valued at $3,988,000.

        You should read this table together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes, each included elsewhere in this prospectus.

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The information in the table above excludes:

•

1,993,015 shares issuable upon exercise of options outstanding as of December 31, 2009, at a weighted average exercise price of $6.21 per share, including 403,570 option shares that are subject to call options held by us, exercisable as of December 31, 2009 at $9.48 per share;



•

732,358 shares issuable upon exercise of options granted between January 1, 2010 and March 31, 2010, at a weighted average exercise price of $9.21 per share;



•

292,316 shares issuable upon exercise of warrants outstanding as of December 31, 2009, at a weighted average exercise price of $8.03 per share; and



•

476,857 shares reserved for future issuance under our 2001 stock plan as of March 31, 2010 to be transferred into our 2010 equity incentive plan and 193,045 shares reserved for issuance under our 2010 employee stock purchase plan, such plans to be effective upon completion of this offering.

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DILUTION

        If you invest in our common stock, your interest will be diluted immediately to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our outstanding common stock immediately after completion of this offering.

        As of December 31, 2009, we had a pro forma net tangible book value of $12.4 million, or $1.09 per share of common stock outstanding. Net tangible book value per share is equal to our total tangible assets (total assets less intangible assets) less total liabilities, divided by the number of outstanding shares of our common stock. The pro forma net tangible book value of our common stock represents net tangible book value adjusted to give effect, upon completion of this offering, to: (1) the conversion of all outstanding shares of convertible preferred stock into common stock, and (2) the exchange of all outstanding exchangeable stock of our Canadian subsidiary into 464,283 shares of our common stock. The pro forma as adjusted net tangible book value of our common stock represents pro forma net tangible book value as further adjusted to give effect to our application of the net proceeds of this offering and the issuance of the IPO Bonus Shares to certain executive officers valued at $7,201,000, based on an assumed initial public offering price of $11.00 per share, the midpoint of the range set forth on the cover page of this prospectus, resulting in a Pre-IPO value of approximately $137.5 million. We will pay the bonus in cash of $3,213,000, representing the amount of the recipients' tax liability, and issue approximately 362,598 shares valued at $3,988,000.

        Dilution in pro forma net tangible book value per share represents the difference between the amount per share paid by investors in this offering and pro forma as adjusted net tangible book value per share of our common stock immediately after the completion of this offering. After giving effect to the sale of 4,884,000 shares of common stock offered by us under this prospectus at an assumed initial public offering price of $11.00 per share, which is the midpoint of the range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us and the issuance of the IPO Bonus Shares, our pro forma as adjusted net tangible book value as of December 31, 2009 would have been approximately $55.2 million, or approximately $3.32 per share of common stock. This represents an immediate increase in pro forma net tangible book value of $2.23 per share to our existing stockholders and an immediate dilution of $7.68 per share to new investors purchasing shares in this offering. The following table illustrates this per share dilution:

        Each $1.00 increase or decrease in the assumed initial public offering price of $11.00 per share would increase or decrease, respectively, our pro forma as adjusted net tangible book value per share after giving effect to this offering by $0.24 per share and correspondingly decrease or increase the dilution per share to new investors in this offering by $0.24 per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions payable by us.

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        The following table shows, as of December 31, 2009, on the pro forma basis described above, the number of shares of common stock owned by, the total consideration paid by and the average price paid per share by existing stockholders and by new investors purchasing common stock in this offering at an assumed initial public offering price of $11.00 per share, which is the midpoint of the range set forth on the cover page of this prospectus, and before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

        If the underwriters exercise their over-allotment option in full, our pro forma as adjusted net tangible book value per share as of December 31, 2009 would be $3.62, representing an immediate increase in pro forma net tangible book value per share attributable to new investors in this offering of $2.53 to our existing stockholders and an immediate dilution per share to new investors in this offering of $7.38. If the underwriters' over-allotment option is exercised in full, our existing stockholders would own 67% and new investors would own 33% of the total number of shares of our common stock outstanding after this offering.

The information in the table above excludes:

•

1,993,015 shares issuable upon exercise of options outstanding as of December 31, 2009, at a weighted average exercise price of $6.21 per share, including 403,570 shares subject to options that are subject to call options held by us, exercisable as of December 31, 2009 at $9.48 per share;



•

732,358 shares issuable upon exercise of options granted between January 1, 2010 and March 31, 2010, at a weighted average exercise price of $9.21 per share;



•

292,316 shares issuable upon exercise of warrants outstanding as of December 31, 2009, at a weighted average exercise price of $8.03 per share; and



•

476,857 shares reserved for future issuance under our 2001 stock plan as of March 31, 2010 to be transferred into our 2010 equity incentive plan and 193,045 shares reserved for future issuance under our 2010 employee stock purchase plan, such plans to be effective upon the completion of this offering.

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SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)

        The following tables summarize our selected consolidated financial data. The selected consolidated statements of operations data for the fiscal years ended June 30, 2007, 2008 and 2009, and the selected consolidated balance sheet data as of June 30, 2008 and 2009 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected consolidated balance sheet data as of June 30, 2005, 2006 and 2007 and the selected consolidated statement of operations for the years ended June 30, 2005 and 2006 have been derived from our audited consolidated financial statements, which are not included in this prospectus. The selected consolidated statements of operations data for the six months ended December 31, 2008 and 2009, and the selected consolidated balance sheet data as of December 31, 2009 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited consolidated financial statements have been prepared on a basis consistent with our audited financial statements and include, in the opinion of management, all adjustments that management considers necessary for the fair presentation of the financial information set forth in those financial statements. You should read this data together with our consolidated financial statements and related notes to those statements included elsewhere in this prospectus and the information under "Management's Discussion and Analysis of Financial Condition and Results of Operations." Our historical results are not necessarily indicative of the results to be expected in any future period.

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