There were $147K in one time charges that hit in Q4 related to a legal settlement. Here is the related text from the 10-K:
“On or about June 19, 2009, Richard A. Sajac, a former employee and executive officer of the Company, filed suit against the Company in Anne Arundel County Circuit Court of Maryland, Case No. 02-C-09-141795. The complaint alleged that the Company breached its obligations under an employment agreement and stock option agreement. The plaintiff sought treble damages in the amount of $382,500, plus 1,062,500 stock options and reasonable attorney’s fees, costs and unreimbursed expenses. On July 17, 2009, the Company filed a notice removing the case from state court to federal court in the United States District Court for the District Of Maryland (Northern Division). The new case number was 1:09-cv-01888(CCB). On July 24, 2009, the Company filed an answer in federal court denying the allegations contained in the complaint. On December 29, 2009, the Company reached an agreement in principle with Mr. Sajac under which the Company agreed to settle all claims arising out of the complaint filed by Mr. Sajac. The terms of a definitive settlement agreement provided that as consideration for the settlement of the lawsuit and release from Mr. Sajac the Company would pay Mr. Sajac an aggregate of $11,000 in cash, payable on or before January 28, 2010 and issue to Mr. Sajac 800,000 shares of the Company’s common stock. The definitive settlement agreement was executed and entered with the court on January 26, 2010. The Company has issued all shares of common stock and paid all cash amounts due under the settlement agreement. The shares were valued at the closing price on the date of grant, resulting in $136,000 of compensation expense in the accompanying income statement.”
There was also a non-cash amortization of debt discount that is present due to the loans that were taken out to facilitate the share repurchase. That was $21,370 for Q4.
The basic EPS for Q4 ignoring the one-time item would have been $0.005/share which is a nice number for a $0.13 stock.
I think there was also a $75K one time charge related to the "Woot" settlement as the text seems to incorrectly indicate that the write-down happened in 2008. “On or about January 16, 2009, the Company filed suit against Woot, Inc., a Texas corporation (“Woot”) in the United States District Court of the Southern District of Florida, Miami Division, Case No. 09-20143-Civ-Seitz/O’Sullivan. The complaint alleged that on or about July 29, 2008, the Company agreed to purchase from Woot, and Woot agreed to sell to the Company, ten thousand (10,000) Lexmark printers and digital camera bundles (the “Goods”) for the purchase price of $370,000 (the “Contract Price”). The Company paid Woot the Contract Price and instructed Woot to ship the Goods to a third party. The complaint further alleges Woot breached the contract by failing to deliver the Goods to the third party as directed. The Company demanded Woot return the full Contract Price to the Company, but Woot has failed and refused to do so. As a result of Woot’s alleged breaches, the Company sought damages in the amount of $320,000, plus pre-judgment interest and costs. On March 9, 2009, Woot filed a motion to dismiss for lack of personal jurisdiction and an alternative motion to transfer venue. On April 14, 2009, an order was entered granting the defendant’s request for a change of venue and transferring the case to the United States District Court of the Eastern District of Texas. On May 5, 2009, Woot filed an answer denying liability to the Company, and on May 11, 2009, Woot filed third party complaints against the parties Chiragnee, Inc. and Zenith Distributors, Inc. On January 21, 2010, the Company entered into a compromise settlement agreement and mutual release whereby the Company agreed to accept $245,000 in full settlement of its claims. The settlement consideration is payable to the Company pursuant to the terms of the settlement agreement on or about the following dates: $45,000 on or about January 30, 2010 by the defendant Woot; $50,000 on or about January 30, 2010 and an additional $50,000 on February 15, 2010 by the defendants Zenith and Chiragnee; an additional $50,000 on May 15, 2010 and a final payment of $50,000 on August 15, 2010 by defendant Zenith. As of December 31, 2009 the amount was previously classified as a long-term asset. As of December 21, 2008, as a result of the settlement, the value of the long-term asset was written down to $245,000 and reclassed to prepaid current assets on the accompanying consolidated balance sheet.”
Assuming I am correct that there was a one-time charge in Q4'09 relating to the Woot settlement, the basic EPS would have been $0.007 excluding one-time items!
One very bright spot in the quarter was that GM was 30.4% which is much higher than the peak quarterly GM of 20.9% that they have made since Q2'07 (I haven't calculated GM prior to that).
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