<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT ON FORM 8-K
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Lightbridge, Inc.
- -------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 000-21319 04-3065140
- -------------------------------------------------------------------------------
(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
67 South Bedford Street, Burlington, Massachusetts 01803
- -------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code (781)359-4000
-----------------------------
Not Applicable
- -------------------------------------------------------------------------------
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
--------------
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8-K dated
November 7, 1997, as set forth in the pages attached hereto:
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
CORAL SYSTEMS, INC.
Report of Independent Accountants
Balance Sheets as of December 31, 1995 and 1996 and September 30,
1997 (unaudited)
Statements of Operations for the years ended December 31, 1994, 1995
and 1996 and the nine months ended September 30, 1996 and 1997
(unaudited)
Statements of Changes in Stockholders' Equity (Deficit) for the
years ended December 31, 1994, 1995 and 1996 and the nine months
ended September 30, 1997 (unaudited)
Statements of Cash Flows for the years ended December 31, 1994, 1995
and 1996 and the nine months ended September 30, 1996 and 1997
(unaudited)
Notes to Financial Statements
(b) Pro Forma Financial Information.
LIGHTBRIDGE, INC.
Overview
Basis of Accompanying Unaudited Pro Forma Condensed Consolidated
Financial Statements
Pro Forma Adjustments
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
September 30, 1997
Unaudited Pro Forma Condensed Consolidated Statements of Operations
for the year ended December 31, 1996 and the nine months ended
September 30, 1997
1
<PAGE>
(c) Exhibits.
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.1* Agreement and Plan of Reorganization dated as of September 9, 1997
among Lightbridge, Inc., SeeCross Acquisition Corp. and Coral
Systems, Inc., and form of Voting Agreement (Exhibit B), form of
Affiliate's Agreement (Exhibit E), form of Employment Agreements
(Exhibit F), form of Non-Competition Agreement (Exhibit G) and form
of Escrow Agreement (Exhibit H)
2.2** Amendment No. 1 dated as of October 9, 1997 among Lightbridge,
Inc., SeeCross Acquisition Corp. and Coral Systems, Inc. to
Agreement and Plan of Reorganization filed as Exhibit 2.1
2.3*** Amendment No. 2 dated as of November 6, 1997 among Lightbridge,
Inc., SeeCross Acquisition Corp. and Coral Systems, Inc. to
Agreement and Plan of Reorganization filed as Exhibit 2.1
2.4 Amendment No. 3 dated as of December 23, 1997 among Lightbridge,
Inc., SeeCross Acquisition Corp. and Coral Systems, Inc. to
Agreement and Plan of Reorganization filed as Exhibit 2.1
4.1**** Rights Agreement dated as of November 14, 1997, between
Lightbridge, Inc. and American Stock Transfer and Trust Company,
including form of Certificate of Designation of Series A
Participating Cumulative Preferred Stock of Lightbridge, Inc.
(Exhibit A) and form of Right Certificate (Exhibit B)
23.1 Consent of Price Waterhouse LLP
- ------------
* Incorporated by reference to Registration Statement on Form S-4 of
Lightbridge, Inc. (File No. 333-36801). In accordance with Item 601(b)(2)
of Regulation S-K, Lightbridge, Inc. has omitted certain exhibits and
schedules to the Agreement and Plan of Reorganization from this filing.
Lightbridge, Inc. agrees to provide any omitted schedules and exhibits
supplementally to the Securities and Exchange Commission upon request.
** Incorporated by reference to Current Report on Form 8-K of Lightbridge,
Inc. dated October 9, 1997.
*** Filed previously with Current Report on Form 8-K of Lightbridge, Inc.
dated November 7, 1997.
**** Incorporated by reference to Registration Statement on Form 8-A of
Lightbridge, Inc. filed with the Securities and Exchange Commission on
November 21, 1997.
2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Coral Systems, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of changes in stockholders' equity (deficit) and of cash flows
present fairly, in all material respects, the financial position of Coral
Systems, Inc. at December 31, 1996 and 1995, and the results of its operations
and its cash flows for each of the three years in the period ended December
31, 1996, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 12 to the
financial statements, the Company has suffered recurring losses from operations
and has an accumulated deficit that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 12. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Price Waterhouse LLP
Boulder, Colorado
April 9, 1997, except as to Note 10 and Note 12,
which are as of September 30, 1997
F-1
<PAGE>
CORAL SYSTEMS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ SEPTEMBER 30,
1995 1996 1997
----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............. $ 1,022,500 $ 2,334,900 $ 6,900
Accounts receivable................... 1,119,300 1,929,800 2,388,500
Other current assets.................. 149,300 123,800 303,600
----------- ----------- ------------
Total current assets................ 2,291,100 4,388,500 2,699,000
Property and equipment, net............ 625,800 1,341,900 1,352,100
Other assets........................... 41,100 39,100 46,700
----------- ----------- ------------
$ 2,958,000 $ 5,769,500 $ 4,097,800
=========== =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable...................... $ 412,900 $ 680,300 $ 943,500
Accrued liabilities................... 526,100 1,066,300 1,899,000
Current portion of long-term debt..... 796,700 403,600 1,530,100
Deferred revenue...................... 463,700 1,375,500 2,615,700
----------- ----------- ------------
Total current liabilities........... 2,199,400 3,525,700 6,988,300
Deferred revenue and other............. 475,200 385,000 385,000
Long-term debt......................... 145,800 286,300 90,100
Commitments and contingencies
Stockholders' Equity (Deficit)
Series A preferred stock, $.001 par
value; 2,000,000 shares authorized,
issued and outstanding............... 2,000 2,000 2,000
Series B preferred stock, $.001 par
value; 2,083,333 shares authorized,
issued and outstanding............... 2,083 2,083 2,083
Series C preferred stock, $.001 par
value; 1,850,000 shares authorized;
1,824,920 shares issued and
outstanding at December 31, 1996 and
September 30, 1997 (unaudited)....... -- 1,825 1,825
Preferred stock, $.001 par value;
9,066,667 shares authorized; no
shares issued or outstanding......... -- -- --
Common stock, $.001 par value;
20,000,000 shares authorized at
December 31, 1995; 30,000,000 shares
authorized at December 31, 1996, and
September 30, 1997 (unaudited); 4,265,508,
3,256,397 and 3,297,509 shares issued
at December 31, 1995 and 1996, and
September 30, 1997 (unaudited),
respectively......................... 4,265 3,256 3,297
Additional paid-in capital............ 6,449,252 10,484,536 10,530,695
Accumulated deficit................... (6,296,000) (8,921,000) (13,905,200)
Less treasury stock at cost; 966,965,
750 and 1,500 shares at December 31,
1995 and 1996, and September 30, 1997
(unaudited), respectively............ (24,000) (200) (300)
----------- ----------- ------------
Total stockholders' equity
(deficit).......................... 137,600 1,572,500 (3,365,600)
----------- ----------- ------------
Total liabilities and
stockholders' equity............. $ 2,958,000 $ 5,769,500 $ 4,097,800
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
CORAL SYSTEMS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------- ------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Software licenses...... $ 1,036,400 $ 2,484,600 $ 7,263,300 $ 5,828,700 $ 3,003,800
Services and other..... 239,700 624,700 637,700 408,400 957,300
Hardware............... 140,800 780,500 790,800 615,300 168,000
----------- ----------- ----------- ----------- -----------
Total revenue......... 1,416,900 3,889,800 8,691,800 6,852,400 4,129,100
Cost of revenue:
Software licenses...... 122,000 526,000 560,600 419,100 453,400
Services and other..... 258,000 644,700 816,000 584,800 701,100
Hardware............... 128,300 738,300 617,900 469,600 495,900
----------- ----------- ----------- ----------- -----------
Total cost of
revenue.............. 508,300 1,909,000 1,994,500 1,473,500 1,650,400
----------- ----------- ----------- ----------- -----------
Gross profit.......... 908,600 1,980,800 6,697,300 5,378,900 2,478,700
----------- ----------- ----------- ----------- -----------
Operating expenses:
Research and
development........... 572,700 2,159,700 2,792,300 1,953,100 2,492,500
Sales and marketing.... 645,300 1,869,700 3,578,600 2,614,000 2,483,100
General and
administrative........ 885,600 1,351,000 2,533,700 1,765,400 2,501,300
Stock offering costs... -- -- 676,100
----------- ----------- ----------- ----------- -----------
Total operating
expenses............. 2,103,600 5,380,400 9,580,700 6,332,500 7,476,900
----------- ----------- ----------- ----------- -----------
Loss from operations.... (1,195,000) (3,339,600) (2,883,400) (953,600) (4,998,200)
Other income (expense),
net.................... (32,800) 8,700 15,100 (31,400) 14,000
----------- ----------- ----------- ----------- -----------
Loss before
extraordinary item..... (1,227,800) (3,390,900) (2,868,300) (985,000) (4,984,200)
Extraordinary gain on
extinguishment of debt
and other liabilities.. -- -- 243,300 243,300 --
----------- ----------- ----------- ----------- -----------
Net loss................ $(1,227,800) $(3,390,900) $(2,625,000) $ (741,700) $(4,984,200)
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
CORAL SYSTEMS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL
---------------- ---------------- ---------------- ------------------ PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
--------- ------ --------- ------ --------- ------ ---------- ------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1993............ 3,731,728 $3,732 $ 173,768 $ (1,677,300)
Exercise of
stock options
and warrants.... 196,758 197 1,303
Conversion of
bridge loan..... 195,872 195 129,805
Private
placement of
Series A
preferred stock,
net............. 2,000,000 $2,000 1,858,300
Net loss........ (1,227,800)
--------- ------ --------- ------ --------- ------ ---------- ------ ----------- ------------
Balance at
December 31,
1994............ 2,000,000 2,000 4,124,358 4,124 2,163,176 (2,905,100)
Private
placement of
Series B
preferred stock,
net............. 2,083,333 $2,083 4,269,317
Exercise of
stock options
and warrants and
other stock
issued for
services........ 141,150 141 16,759
Purchase of
treasury stock..
Net loss........ (3,390,900)
--------- ------ --------- ------ --------- ------ ---------- ------ ----------- ------------
Balance at
December 31,
1995............ 2,000,000 2,000 2,083,333 2,083 4,265,508 4,265 6,449,252 (6,296,000)
Purchase of
treasury stock..
Retirement of
treasury stock.. (1,074,400) (1,074) (187,326)
Private
placement of
Series C
preferred stock,
net............. 1,824,920 $1,825 4,191,375
Exercise of
stock options
and warrants.... 65,289 65 31,235
Net loss........ (2,625,000)
--------- ------ --------- ------ --------- ------ ---------- ------ ----------- ------------
Balance at
December 31,
1996............ 2,000,000 2,000 2,083,333 2,083 1,824,920 1,825 3,256,397 3,256 10,484,536 (8,921,000)
Exercise of
stock options
and warrants
(unaudited)..... 41,112 41 8,659
Expense upon
issuance of
stock options
(unaudited)..... 37,500
Purchase of
treasury stock
(unaudited).....
Net loss
(unaudited)..... (4,984,200)
--------- ------ --------- ------ --------- ------ ---------- ------ ----------- ------------
Balance at
September
30, 1997
(unaudited)..... 2,000,000 $2,000 2,083,333 $2,083 1,824,920 $1,825 3,297,509 $3,297 $10,530,695 $(13,905,200)
========= ====== ========= ====== ========= ====== ========== ====== =========== ============
<CAPTION>
TOTAL
TREASURY STOCK STOCKHOLDERS'
---------------------- EQUITY
SHARES AMOUNT (DEFICIT)
----------- ---------- -------------
<S> <C> <C> <C>
Balance at
December 31,
1993............ 676,887 $(18,000) $(1,517,800)
Exercise of
stock options
and warrants.... 1,500
Conversion of
bridge loan..... 130,000
Private
placement of
Series A
preferred stock,
net............. 1,860,300
Net loss........ (1,227,800)
----------- ---------- -------------
Balance at
December 31,
1994............ 676,887 (18,000) (753,800)
Private
placement of
Series B
preferred stock,
net............. 4,271,400
Exercise of
stock options
and warrants and
other stock
issued for
services........ 16,900
Purchase of
treasury stock.. 290,078 (6,000) (6,000)
Net loss........ (3,390,900)
----------- ---------- -------------
Balance at
December 31,
1995............ 966,965 (24,000) 137,600
Purchase of
treasury stock.. 108,185 (164,600) (164,600)
Retirement of
treasury stock.. (1,074,400) 188,400
Private
placement of
Series C
preferred stock,
net............. 4,193,200
Exercise of
stock options
and warrants.... 31,300
Net loss........ (2,625,000)
----------- ---------- -------------
Balance at
December 31,
1996............ 750 (200) 1,572,500
Exercise of
stock options
and warrants
(unaudited)..... 8,700
Expense upon
issuance of
stock options
(unaudited)..... 37,500
Purchase of
treasury stock
(unaudited)..... 750 (100) (100)
Net loss
(unaudited)..... (4,984,200)
----------- ---------- -------------
Balance at
September
30, 1997
(unaudited)..... 1,500 $ (300) $ (3,365,600)
=========== ========== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
CORAL SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------------- ------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss................ $(1,227,800) $(3,390,900) $(2,625,000) $ (741,700) $(4,984,200)
Adjustments to reconcile
net loss to net cash
used in
operating activities:
Depreciation and
amortization.......... 90,100 198,700 460,100 296,100 475,000
Write-offs of
uncollectible
receivables........... -- -- 175,700 101,900 --
(Gain) loss on disposal
of property and
equipment............. -- (2,600) (5,500) (5,300) 5,000
Extraordinary gain..... -- -- (243,300) (243,300) --
Stock option
compensation expense.. -- 37,500
Changes in:
Accounts receivable.... (604,000) (378,500) (1,107,600) (1,553,200) (458,700)
Other assets........... (7,000) (177,600) (106,500) (310,800) (187,400)
Accounts payable and
accrued liabilities... 158,600 576,900 1,008,000 719,000 1,095,900
Deferred revenue....... 291,200 163,400 905,900 1,010,000 1,240,200
----------- ----------- ----------- ----------- -----------
Net cash used in
operating activities.. (1,298,900) (3,010,600) (1,538,200) (727,300) (2,776,700)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Proceeds from sale of
property and
equipment.............. -- 198,300 206,800 206,400 --
Property and equipment
additions.............. (195,400) (514,000) (729,200) (542,900) (490,200)
----------- ----------- ----------- ----------- -----------
Net cash used in
investing activities.. (195,400) (315,700) (522,400) (336,500) (490,200)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from sale of
preferred stock, net... 1,580,300 3,874,500 4,193,200 4,193,100 --
Proceeds from sale of
common stock........... 1,500 13,900 31,300 14,000 8,700
Purchase of treasury
stock.................. -- (6,000) (164,600) (164,600) (100)
Proceeds from the
issuance of bridge
loans and long-term
debt................... 205,200 760,000 250,000 250,000 1,820,000
Payment on borrowings... (271,900) (376,500) (936,900) (877,700) (889,700)
----------- ----------- ----------- ----------- -----------
Net cash from financing
activities............ 1,515,100 4,265,900 3,373,000 3,414,800 938,900
----------- ----------- ----------- ----------- -----------
Net increase (decrease)
in cash and cash
equivalents............ 20,800 939,600 1,312,400 2,351,000 (2,328,000)
Cash and cash
equivalents, beginning
of period.............. 62,100 82,900 1,022,500 1,022,500 2,334,900
----------- ----------- ----------- ----------- -----------
Cash and cash
equivalents, end of
period................. $ 82,900 $ 1,022,500 $ 2,334,900 $ 3,373,500 $ 6,900
=========== =========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURE
OF NONCASH ACTIVITIES
AND OTHER CASH FLOW
INFORMATION:
Conversion of bridge
loans to preferred
stock.................. $ 280,000 $ 400,000 $ -- $ -- $ --
Conversion of accrued
liabilities to debt.... 36,200 11,600 5,000 5,000 --
Conversion of bridge
loan to common stock... 130,000 -- -- -- --
Capital lease
obligations............ -- 253,000 515,000 458,700 --
Issuance of note payable
to acquire stock....... -- -- -- -- --
Interest paid........... 73,700 26,700 86,400 64,600 82,200
Transfer of other assets
to property and
equipment.............. -- -- 134,000 134,000 --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
CORAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Coral Systems, Inc. (the "Company") was incorporated in August 1991. The
Company develops and provides software solutions for the wireless
telecommunications industry. The solutions enable carriers to reduce fraud and
customer turnover and increase operating efficiencies.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Company generates revenue from software licenses; services (including
maintenance, installation and training); development and consulting contracts;
and certain hardware sold in conjunction with software licenses. The Company's
software license agreements typically provide for an initial license fee and
annual maintenance based on a defined number of subscribers, as well as
additional license and maintenance fees for net subscriber additions. The
Company also has entered into license agreements that provide for either a
one-time license fee or a monthly license fee with no additional fees based on
incremental subscriber growth.
Revenue from initial license fees with end users is recognized when the
product has been delivered and the Company has satisfied all significant
performance obligations, unless terms of the sales arrangement provide for
customer acceptance that is based on non-standard performance or other terms.
In the latter case, revenue is recognized when the customer accepts the
product pursuant to those terms. Revenue for incremental subscriber growth, if
any, is recognized at the date subscriber growth is calculated and the revenue
is earned pursuant to the terms of the relevant software license agreement.
Monthly license fees are recognized as earned on a monthly basis. Maintenance
revenue is recognized ratably over the term of the maintenance agreement.
Service revenue for installation and training is recognized as the services
are performed. Revenue from development and consulting contracts is generally
recognized as the services are performed, using the percentage of completion
method. Hardware is sold only in conjunction with software licenses when
required by the customer and such revenue is deferred until the related
license revenue is recognized.
Sales agreements with distributors typically do not include any rights of
return or provisions for the future adjustment of the selling price. The
Company recognizes revenue from these transactions at the time the products
are shipped to the distributor, unless payment terms are contingent on the
distributor's subsequent resale or other significant matters. In those latter
cases, revenue is not recognized until the contingencies are resolved.
Concentration of Credit Risk
Accounts receivable are concentrated in the wireless telecommunications
industry, with both domestic and international customers. During the years ended
December 31, 1994, 1995 and 1996, and the nine months ended September 30, 1997,
the Company recognized approximately 89%, 77%, 59% and 76% (unaudited) of its
revenue from four, five, two, and two (unaudited) customers, respectively.
Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily accounts receivable and cash
equivalents. The Company performs ongoing credit evaluations of its customers'
financial condition and, generally, requires no collateral from its customers.
The Company has a cash investment policy which restricts investments to ensure
preservation of principal and maintenance of liquidity.
Cash and Cash Equivalents
The Company considers cash on hand, deposits in banks, and investment
instruments purchased with original maturities of less than three months to
cash and cash equivalents. Cash equivalents are carried at amortized cost
which approximates fair value.
F-6
<PAGE>
CORAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Property and Equipment
Property and equipment are recorded at cost. Depreciation is computed using
straight-line and accelerated methods over the estimated useful lives of the
respective assets which range from three to seven years. Maintenance and
repairs are expensed as incurred.
Software Development Costs
Research and development costs are expensed as incurred. Statement of
Financial Accounting Standards No. 86 (SFAS No. 86) requires the
capitalization of certain software development costs once technological
feasibility is established. The capitalized cost is then amortized on a
straight-line basis over the estimated product life, or on the ratio of
current revenue to total projected product revenue, whichever is greater. To
date, the period between achieving technological feasibility and the general
availability of such software has been short. Consequently, software
development costs qualifying for capitalization have been insignificant and
therefore, the Company has not capitalized any software development costs to
date.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities as well as the reported amounts of
revenue and expenses. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The carrying amounts of the Company's financial instruments, including cash,
short-term trade receivables and payables and long-term debt, approximate
their fair values.
Stock Compensation Plans
The Company applies APB Opinion No. 25, Accounting for Stock Issued to
Employees, in accounting for its stock option and employee stock purchase
plans. The Company has adopted the disclosure provisions of SFAS No. 123,
Accounting for Stock-Based Compensation.
Export Sales
The Company had export sales to the following countries:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1994 1995 1996
-------- ---------- ----------
<S> <C> <C> <C>
Sweden ..................................... $378,900 $ 43,100 $ --
Mexico ..................................... -- 231,700 41,300
Germany .................................... -- 266,900 209,500
Puerto Rico ................................ 7,300 118,900 72,000
Malaysia ................................... -- 689,300 6,000
Great Britain .............................. -- -- 742,600
-------- ---------- ----------
$386,200 $1,349,900 $1,071,400
======== ========== ==========
</TABLE>
F-7
<PAGE>
CORAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Adoption of New Accounting Standards
The Company has adopted Statement of Financial Accounting Standards No. 121
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of. Adoption of this standard did not have a material effect on
the Company's financial position of operations.
Unaudited Interim Financial Data
The interim financial data as of September 30, 1997, and for the nine months
ended September 30, 1996, and September 30, 1997, is unaudited; however, in the
opinion of management of the Company, the unaudited interim data includes all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the results for the interim periods presented. All data
presented in these notes at such date and for such periods is unaudited.
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1996
--------- ----------
<S> <C> <C>
Furniture and office equipment........................ $ 410,000 $ 804,900
Computer equipment.................................... 293,300 982,900
Purchased software.................................... 210,700 280,700
--------- ----------
914,000 2,068,500
Less accumulated depreciation and amortization........ (288,200) (726,600)
--------- ----------
$ 625,800 $1,341,900
========= ==========
Included in property and equipment are the following amounts for equipment
under capital lease:
<CAPTION>
DECEMBER 31,
---------------------
1995 1996
--------- ----------
<S> <C> <C>
Equipment under capital lease......................... $ 253,000 $ 768,000
Less accumulated amortization......................... (30,400) (244,100)
--------- ----------
$ 222,600 $ 523,900
========= ==========
</TABLE>
3. ACCRUED LIABILITIES
At December 31, 1996, accrued liabilities greater than 5% of total current
liabilities consist of accrued compensation of $300,500 and accrued vacation
of $206,100, while at December 31, 1995, accrued liabilities greater than 5%
of total current liabilities consisted of accrued reseller fees of $229,000
and accrued interest of $129,600.
In June 1997, the Company accrued $264,200 for a severance agreement with an
officer of the Company. The severance will be paid in equal payments over 18
months. As of September 30, 1997, the Company had $221,000 remaining to be paid
on this obligation.
F-8
<PAGE>
CORAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. LONG-TERM DEBT, EXTRAORDINARY ITEM AND AVAILABLE CREDIT
Long-term debt, including capitalized lease obligations consists of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Line of credit with bank; interest at bank's prime rate
2% through May 1995, prime plus 1.50% from June 1995 to
May 1996, and prime plus 1.25% thereafter (actual rate
of 9.5% at December 31, 1996); due April 1998; secured
by all cash, accounts receivable, equipment, inventory
and transferable third-party rights.................... $ 207,000 $ 150,000
Capital lease obligation; interest at 11.55%; payable in
monthly installments of $25,300 through September 1999;
secured by equipment................................... 223,900 539,900
Convertible note payable to systems integrator; interest
at 8% through May 31, 1995, 18% thereafter; due June 1,
1995; unsecured........................................ 500,000 --
Note payable to bank; interest at prime rate plus 2%
(actual rate of 10.5% at December 31, 1995); payable in
monthly installments of $2,700 through
May 1996; secured by equipment......................... 11,600 --
--------- ---------
942,500 689,900
Less current portion.................................... (796,700) (403,600)
========= =========
$ 145,800 $ 286,300
========= =========
</TABLE>
At September 30, 1997, the Company had drawn the entire amount on two lines of
credit with a bank totaling $1,280,000.
Future maturities of long-term debt at December 31, 1996, are as follows:
<TABLE>
<S> <C>
1997.......................................................... $454,400
1998.......................................................... 260,000
1999.......................................................... 47,500
--------
761,900
Less amount representing interest............................. (72,000)
--------
$689,900
========
</TABLE>
In September 1996, the Company extinguished a previously recorded net
liability of $658,300, consisting of a $500,000 note payable plus accrued
interest, and a separate liability due to a systems integrator, partially
offset by receivables owed to the Company by the systems integrator. The
Company paid $415,000 resulting in a net gain of $243,300 which was recorded
as an extraordinary item. The Company also paid $127,200 of legal expenses
associated with this matter, which were included in general and administrative
expenses.
F-9
<PAGE>
CORAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. CAPITAL STOCK, OPTIONS AND WARRANTS
Stock Split
In October 1996, a one-for-two reverse split of the Company's common stock
was consummated. All common stock share and per share information and all
preferred stock conversion rates presented in these financial statements have
been restated for all periods presented to reflect the reverse stock split.
Preferred Stock
In March 1996, the Company's certificate of incorporation was amended to
increase the authorized shares of preferred stock from 5,000,000 shares to
15,000,000 shares consisting of: 2,000,000 shares of Series A preferred stock,
2,083,333 shares of Series B preferred stock, 1,850,000 shares of Series C
preferred stock and 9,066,667 shares undesignated as to series.
Series A and Series C preferred stock are convertible at the option of the
holder into common stock on a two-for-one basis; Series B preferred stock is
convertible on a one-for-one basis. In the event of a qualified public
offering, all preferred shares will automatically convert to common stock.
Additionally, all preferred shares have certain voting rights on an as-
converted basis and a liquidation preference equal to the original purchase
price plus a pro rata portion of remaining liquidation proceeds in excess of
the liquidation preference proceeds paid to common stockholders.
Employee Stock Purchase Plan
In August 1996, the Company's Board of Directors approved the Employee Stock
Purchase Plan (the "Purchase Plan") with 450,000 shares of common stock
reserved for issuance thereunder. The Purchase Plan is intended to qualify as
an employee stock purchase plan within the meaning of Section 423 of the
Internal Revenue Code. Under the Purchase Plan, the Board of Directors may
authorize participation by eligible employees, including officers, in periodic
offerings following the adoption of the Purchase Plan. Employees, other than
part-time or seasonal employees and 5% stockholders, are eligible to
participate in the currently authorized offerings if they are employed by the
Company or an affiliate of the Company incorporated in the U.S. Employees may
elect to have up to 15% of their earnings withheld and applied to the purchase
of common stock at a price equal to 85% of the lower of their fair market
value of the common stock on the commencement date of each of the offering
period or the relevant purchase date. The Board has currently authorized an
offering commencing on the effective date of an initial public offering of the
Company's common stock. No shares of common stock have been issued to
participants in the Purchase Plan to date.
Stock Options and Warrants
In October 1992, the Company adopted a stock option plan with 941,690 shares
reserved for issuance to employees, directors and consultants of the Company.
Subsequent to 1992, the Board of Directors increased the number of authorized
shares reserved under the Company's 1992 Stock Option Plan to 2,089,189.
Options granted under the plan expire ten years from the date of grant and
generally vest over a period of three to four years.
The Company had 958,723 warrants outstanding and fully exercisable at
December 31, 1996. At December 31, 1996, 503,007 of the warrants were held by
an officer, a present director and a former director of the Company. The
warrants have five to ten year terms and expire from 1998 through 2003.
F-10
<PAGE>
CORAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The following is a summary of stock option and warrant activity for the years
ended December 31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
WARRANTS PRICE OPTIONS PRICE
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Outstanding December 31, 1993........... 1,204,236 $0.1641 545,045 $0.0926
Granted............................... 43,002 2.0000 149,500 0.2000
Forfeited............................. (112,852) 0.0027 (52,843) 0.1117
Exercised............................. (146,284) 0.0027 (50,474) 0.0265
--------- ------- --------- -------
Outstanding December 31, 1994........... 988,102 0.2864 591,228 0.1237
Granted............................... 29,000 0.2000 457,753 0.1853
Forfeited............................. -- -- (158,925) 0.2732
Exercised............................. (18,331) 0.0027 (108,819) 0.1238
--------- ------- --------- -------
Outstanding December 31, 1995........... 998,771 0.2891 781,237 0.1326
Granted............................... -- -- 469,250 4.2112
Forfeited............................. -- -- (49,150) 0.2165
Exercised............................. (40,048) 0.7431 (25,241) 0.0585
--------- ------- --------- -------
Outstanding December 31, 1996........... 958,723 $0.2701 1,176,096 $1.7641
========= ======= ========= =======
</TABLE>
The weighted average minimum value of options granted during the year ended
December 31, 1995 and 1996, was $.06 per share and $1.33 per share,
respectively. The weighted average minimum value of warrants granted during the
year ended December 31, 1995, is $.06 per share.
The following table summarizes information about exercisable stock options
and warrants as of the following dates:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
------- ----------------
<S> <C> <C> <C>
December 31, 1995.......................... Options 284,009 $.09
Warrants 998,771 $.29
December 31, 1996.......................... Options 463,846 $.10
Warrants 958,723 $.27
</TABLE>
The following table summarizes information about stock options and warrants
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
REMAINING
RANGE OF OUTSTANDING CONTRACTUAL LIFE
EXERCISE PRICE AT 12/31/96 12/31/96
-------------- ----------- ----------------
<S> <C> <C> <C>
Options.......................... $0.027-$1.50 891,846 7.36
Options.......................... $6.00 -$9.00 284,250 9.00
Warrants......................... $0.003-$2.00 958,723 4.31
</TABLE>
At December 31, 1996, there were 728,559 shares available for grant under the
stock option plan.
F-11
<PAGE>
CORAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company applies APB Opinion 25 in accounting for its stock compensation
plans through December 31, 1996, and no compensation expense has been
recognized in the financial statements as all grants were made with exercise
prices not less than fair value. Had compensation expense for the Company's
stock option plan been determined based on the minimum values at the grant
dates for awards under the plan for grants made in 1995 and 1996 consistent
with the method of accounting prescribed by FASB Statement 123, the Company's
net loss and loss per share would have been increased to the pro forma amounts
indicated below;
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1996
----------- -----------
<S> <C> <C> <C>
Net loss............................... As reported $(3,390,900) $(2,625,000)
Pro forma (3,398,100) (2,788,200)
</TABLE>
In accordance with the guidance provided under SFAS 123, fair values are
based on minimum values. The fair value of each option grant is estimated on
the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for grants in the year ended
December 31, 1995 and 1996: dividend yield of zero; expected volatility of
zero; risk-free interest rates ranging from 5.62% to 7.13%; and an expected
term of six years. The risk-free rate used in the calculation is the yield on
the grant date of a U.S. Treasury Strip with a maturity equal to the expected
term of the option.
6. INCOME TAXES
The Company's net deferred tax assets consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996
----------- -----------
<S> <C> <C>
Net operating loss carryforwards...................... $ 2,146,500 $ 3,040,900
Deferred revenue and other............................ 163,600 227,500
Tax credit carryforwards.............................. 125,000 125,000
----------- -----------
Gross deferred tax assets........................... 2,435,100 3,393,400
Less deferred tax asset valuation allowance........... (2,435,100) (3,393,400
=========== ===========
Net deferred tax asset.............................. $ -- $ --
=========== ===========
</TABLE>
Based upon the Company's accumulated deficit and history of recurring net
losses, the ultimate realization of the deferred tax asset does not appear to
be more likely than not. Accordingly, a valuation allowance has been provided
against all potential future tax benefits.
The benefit for income taxes differs from the amount computed by applying
the U.S. federal income tax rate of 34% to loss before income taxes as follows
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1994 1995 1996
--------- ----------- ---------
<S> <C> <C> <C>
U.S. federal income tax benefit at statutory
rate....................................... $ 417,500 $ 1,152,900 $ 892,500
Increases (decreases) resulting from:
Unrecognized benefit of net operating loss
carryforwards and future net deductions.. (492,000) (1,288,800) (958,300)
Non-deductible items and other............ 74,500 135,900 65,800
--------- ----------- ---------
Benefit for income taxes.................... $ -- $ -- $ --
========= =========== =========
</TABLE>
F-12
<PAGE>
CORAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
At December 31, 1996, the Company has net operating loss carryforwards
aggregating approximately $8,109,000 which expire between 2006 and 2010. The
Internal Revenue Code places certain limitations on the annual amount of net
operating loss carryforwards which can be utilized if certain changes in the
Company's ownership occur. Such defined changes occurred in 1994 and 1995.
Those changes have substantially limited the amount of net operating loss
benefit that may be utilized in any given taxable year to approximately
$30,000 for pre-January 1994 net operating losses and approximately $180,000
for pre-March 1995 net operating losses. Future changes in the Company's
ownership may further limit the use of the carryforward benefits. There can be
no assurance that the IRS will not challenge the Company's factual and legal
determination related to ownership changes.
7. RELATED PARTY TRANSACTIONS
During the years ended December 31, 1994, 1995 and 1996, and the nine months
ended September 30, 1997 (unaudited), the Company paid directors of the Company
approximately $85,000, $58,500, $79,800, and $54,200, respectively, for their
services and expenses as Board members and consultants.
During 1995, the Company paid an additional $54,000 and issued 14,000 shares
of common stock to a director of the Company for services performed in
connection with the Series B preferred stock private placement.
8. EMPLOYEE BENEFITS
During 1995, the Company established a 401(k) defined contribution plan
covering substantially all employees meeting minimum age and service
requirements. Participation in the plan is optional. Employer contributions
are made to the plan solely at the discretion of the Board of Directors. To
date, no Company contributions have been made.
9. COMMITMENTS
The Company conducts its operations from leased facilities. Future minimum
non-cancelable rental payments for this facilities lease and other equipment
leases are as follows as of December 31, 1996:
<TABLE>
<CAPTION>
OPERATING
LEASE OBLIGATIONS
-----------------
<S> <C>
1997.................................................. $312,500
1998.................................................. 219,300
1999.................................................. 201,800
2000.................................................. 23,800
--------
$757,400
========
</TABLE>
Rent expense related to the above operating leases approximated $80,000,
$147,500, and $216,000 for the years ended December 31, 1994, 1995 and 1996,
respectively.
F-13
<PAGE>
CORAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
10. CONTINGENCIES
Subsequent to December 31, 1996, an interference proceeding was declared by
the United States Patent and Trademark office between an issued patent and a
patent application of the Company and patent application by another company (the
"Interference"). The Company's patent and patent application involve certain
technology that is an essential part of its current FraudBuster/(R)/ product.
The Company is currently in negotiations with the other company regarding the
Interference. The Company is currently unable to determine whether it will be
able to settle the Interference on terms satisfactory to the Company or the
ultimate outcome or the range of possible loss in this matter.
The outcome of this uncertainty could have a material adverse effect on the
Company's financial position, results of operations or cash flows.
UNAUDITED
On December 10, 1997, the Company entered into a Patent License and Settlement
Agreement pursuant to which the Company agreed to pay $425,000 to the counter
party in the Interference and the counter party granted the Company and the
Company's acquiror a license to certain patents. These financial statements
reflect a liability as of September 30, 1997 and charge to expense for the
nine-month period ended September 30, 1997 in the amount of $425,000 related to
this Patent License and Settlement Agreement.
11. STOCK OFFERING COSTS
During 1996, the Company incurred $676,100 of costs associated with the
filing of a registration statement with the Securities and Exchange Commission
for the sale of shares of its common stock to the public. Subsequent to
December 31, 1996, the Company suspended the initial public offering. As a
result, costs associated with the offering have been expensed in the statement
of operations for the year ended December 31, 1996.
12. SUBSEQUENT EVENTS
Subsequent to December 31, 1996, the Company's financial position has
deteriorated. The Company has incurred a net loss of $2,181,600 and experienced
net cash outflows from operations of $2,022,800 for the six-month period ended
June 30, 1997 (unaudited). At June 30, 1997, the Company has an
accumulated deficit of $11,102,600 (unaudited). As of September 30, 1997, the
Company had exhausted substantially all available lines of credit. As a result,
there is substantial doubt about whether the Company can continue as a going
concern. During July 1997, the Company entered into a plan and agreement of
merger with another company. Management believes that consummation of the merger
will provide the Company with sufficient working capital and other financial
resources to allow the Company to continue operations.
Subsequent to December 31, 1996, the Company drew an additional $240,000 on
the line of credit discussed in Note 4. In addition, on July 22, 1997, the
Company entered into a second line of credit arrangement with a bank for
$530,000, which matures on October 22, 1997. The Company had drawn the entire
amount of its available credit at September 30, 1997.
UNAUDITED
Subsequent to June 30, 1997, the Company's financial position has continued to
deteriorate. The Company has incurred a net loss of $4,984,200 (unaudited) and
experienced cash outflows from operations of $2,776,700 (unaudited) for the
nine-month period ended September 30, 1997. At September 30, 1997, the Company
has an accumulated deficit of $13,905,200.
On November 7, 1997, the Company consummated a business combination accounted
for as a purchase by Lightbridge, Inc. in which all of the Company's outstanding
stock was acquired in exchange for cash and stock of Lightbridge, Inc.
F-14
<PAGE>
LIGHTBRIDGE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET AND STATEMENTS OF OPERATIONS
OVERVIEW
On September 9, 1997, Lightbridge, Inc. (Lightbridge) and Coral Systems,
Inc. (Coral) entered into an agreement and plan of reorganization, pursuant to
which Lightbridge proposed to acquire all of the outstanding shares of Coral
capital stock and to assume all of Coral's outstanding options and warrants. The
acquisition was effected on November 7, 1997 by a merger of a wholly
owned subsidiary of Lightbridge with and into Coral, with Coral as the surviving
corporation, becoming a wholly owned subsidiary of Lightbridge. Coral provides
client-server software products for the wireless telecommunications industry to
enable carriers to reduce fraud and customer turnover, or "churn," and increase
operating efficiencies.
Pursuant to the merger, each of the outstanding shares of Coral capital
stock was converted into a fraction of a share of Lightbridge common stock
determined as set forth in the agreement and plan of reorganization. An
aggregate of 892,073 shares of Lightbridge common stock were issued on behalf of
former holders of Coral's capital stock.
In addition, as a result of the merger, each Coral option and warrant
outstanding at November 7, 1997, whether vested or unvested, entitled its
holder, upon exercise (if and when vested) following November 7, 1997, to
receive that number of whole shares of Lightbridge common stock equal to the
product of the number of shares of Coral common stock that were issuable upon
exercise of such option or warrant immediately prior to November 7, 1997
(without regard to vesting) multiplied by the conversion rate for a single share
of Coral common stock, rounded down to the nearest whole number of shares of
Lightbridge common stock. In addition, following November 7, 1997, the per share
exercise price for the Lightbridge common stock issuable upon exercise of each
option and warrant equalled the per share exercise price thereof immediately
prior to November 7, 1997 divided by the conversion rate for a single share of
Coral common stock. The Coral options and warrants are exercisable to purchase
an aggregate of 114,345 shares of Lightbridge common stock at prices ranging
from $0.05 to $34.35, with a weighted average exercise price of $7.21.
The acquisition of Coral by Lightbridge included approximately $16 million
of in-process research and development technology written-off by Lightbridge in
the quarter ended December 31, 1997.
The Unaudited Pro Forma Condensed Consolidated Financial Statements of
Lightbridge consist of an Unaudited Pro Forma Condensed Consolidated Balance
Sheet as of September 30, 1997 and Unaudited Pro Forma Condensed Consolidated
Statements of Operations for the year ended December 31, 1996 and the nine
months ended September 30, 1997. The Unaudited Pro Forma Condensed Consolidated
Financial Statements and related pro forma adjustments thereto should be read in
conjunction with the Consolidated Financial Statements of Lightbridge and Notes
thereto, as well as the Financial Statements of Coral and Notes thereto,
appearing elsewhere in this Amended Report.
BASIS OF ACCOMPANYING UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
The results of Coral's operations will be included in Lightbridge's
operating results after the Closing on November 7, 1997. The Unaudited Pro
Forma Condensed Consolidated Balance Sheet assumes that Lightbridge's
acquisition of Coral occurred on September 30, 1997. The Unaudited Pro Forma
Condensed Consolidated Statements of Operations combine the historical results
of operations for Lightbridge and Coral for the year ended December 31, 1996 and
the nine months ended September 30, 1997 and assume that the acquisition
occurred on January 1, 1996. The Unaudited Pro Forma Condensed
P-1
<PAGE>
Consolidated Financial Statements do not reflect any cost savings and synergies
that might be achieved from the merger.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet includes the
effect of the write-off of certain in-process research and development
technology of $16,041,265. However, the Unaudited Pro Forma Condensed
Consolidated Statements of Operations do not consider the effect of this write-
off or other non-recurring charges, expected by Lightbridge management to
approximate $750,000, that may result from the integration of Coral into
Lightbridge. Lightbridge expects to incur these charges during the quarters
ending December 31, 1997 and March 31, 1998.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet includes
Lightbridge's direct transaction costs associated with the merger. These direct
costs consist principally of investment advisory, legal, accounting and
appraisal fees. The actual allocation of the final purchase price may differ
from the preliminary estimate reflected in the Unaudited Pro Forma Condensed
Consolidated Financial Statements. There can be no assurance that Lightbridge
will not incur additional charges in subsequent quarters to reflect costs
associated with the Merger or that Lightbridge will be able to integrate the
operations of Coral successfully.
Lightbridge management believes that the assumptions underlying the pro
forma adjustments used to prepare the Unaudited Pro Forma Condensed Consolidated
Financial Statements provide a reasonable basis for presenting the significant
effects of the Merger. The Unaudited Pro Forma Condensed Consolidated Financial
Statements are not necessarily indicative of the results that would have been
reported had such events actually occurred on the date specified, nor are they
indicative of Lightbridge's future results of operations.
PRO FORMA ADJUSTMENTS
The following is a summary of the pro forma adjustments made in connection
with the preparation of the Unaudited Pro Forma Condensed Consolidated Financial
Statements. Such adjustments are based upon a preliminary purchase price of:
<TABLE>
<S> <C>
892,073 shares of Lightbridge common stock at
an average stock price of $17.325 per share $15,455,165
Assumed liabilities:
Accounts payable and accrued expenses 3,767,000
Short-term borrowings and current
portion of subordinated notes payable 1,530,100
Deferred revenues 3,000,700
Long-term debt 90,100
Lightbridge transaction fees:
Investment advisory 500,000
Professional fees 300,000
Coral transaction fees:
Investment advisory 500,000
Professional fees 150,000
-----------
Total $25,293,065
===========
</TABLE>
P-2
<PAGE>
Pro Forma Condensed Consolidated Balance Sheet Adjustments
------------------------------------------------------------
(1) To record Coral property and equipment at its fair value at September
30, 1997.
(2) To record preliminary goodwill pursuant to the Merger.
(3) To record acquired technology pursuant to the Merger.
(4) To record direct costs of the merger, including (a) financial
advisory, legal, accounting and appraisal fees incurred by Lightbridge
and (b) certain legal, accounting and other professional fees incurred
or to be incurred by Coral that are payable by Lightbridge pursuant to
the Reorganization Agreement.
(5) To record a deferred tax liability related to the acquired technology,
at an assumed tax rate of 38%.
(6) To record the 892,073 shares of Lightbridge common stock to be issued
by Lightbridge in connection with the Merger, based on a calculation
price of $17.325 per share.
(7) To record the write-off of certain in-process research and development
technology.
(8) To eliminate Coral Stockholders' Equity at September 30, 1997.
Pro Forma Condensed Consolidated Statements of Operations Adjustments
-----------------------------------------------------------------------
(9) To record the amortization of acquired technology over the remaining
life of the existing version of the acquired technology (twenty-six
months).
(10) To record property and equipment depreciation adjustments.
(11) To record the amortization of goodwill over three years.
(12) To record the income tax effect of pro forma adjustments at an assumed
tax rate of 38% of pre-tax income or loss.
(13) To eliminate the effect of anti-dilutive common stock equivalents on
the historical weighted average number of shares of common stock.
P-3
<PAGE>
LIGHTBRIDGE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Coral
Lightbridge, Inc. Systems, Inc. Pro Forma
Historical Historical Adjustments Pro Forma
------------------- ------------ ----------- ----------
ASSETS
- ---------------------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.................... $ 20,994,026 $ 6,900 $ 21,000,926
Accounts receivable--net.................... 10,441,474 2,388,500 12,829,974
Other current assets........................ 1,953,848 303,600 2,257,448
-------------- ----------- -------------
Total current assets................... 33,389,348 2,699,000 36,088,348
Property and equipment--net...................... 9,086,943 1,352,100 $ (55,000)(1) 10,384,043
Deferred tax asset............................... 931,752 -- 931,752
Goodwill......................................... -- -- 4,930,000 (2) 4,930,000
Other assets..................................... 1,429,105 46,700 450,000 (3) 1,925,805
-------------- ----------- ------------ -------------
Total assets......................... $ 44,837,148 $ 4,097,800 $ 5,325,000 $ 54,259,948
============== =========== ============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable and accrued liabilities.... $ 3,931,746 $ 2,842,500 $ 2,374,500 (4) $ 9,148,746
Short-term borrowings and current portion of
subordinated notes payable................ 805,205 1,530,100 -- 2,335,305
Current portion of obligations under capital
leases.................................... 318,396 -- -- 318,396
Deferred revenues........................... 346,349 2,615,700 2,962,049
Deferred tax liability...................... -- -- 171,000 (5) 171,000
Dividends payable on redeemable convertible
preferred stock........................... 166,876 -- -- 166,876
----------- ----------- ---------- ------------
Total current liabilities.............. 5,568,572 6,988,300 2,545,500 15,102,372
Obligations under capital leases................. 15,667 -- -- 15,667
Long-term debt................................... 229,071 90,100 -- 319,171
Deferred revenue and other....................... 399,946 385,000 -- 784,946
Subordinated notes payable....................... 1,227,478 -- -- 1,227,478
----------- ----------- ---------- ------------
Total liabilities.................... 7,440,734 7,463,400 2,545,500 17,449,634
----------- ----------- ---------- ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock............................. -- 5,908 (5,980)(8) --
Common stock................................ 155,507 3,297 8,921 (6)
(3,297)(8) 164,428
Additional paid-in capital................... 36,594,905 10,530,695 15,446,244 (6)
(10,530,695)(8) 52,041,149
Warrants.................................... 598,875 -- -- 598,875
Retained earnings (deficit)................. 1,672,090 (13,905,200) (16,041,265)(7)
13,905,200 (8) (14,369,175)
----------- ------------ ----------- -----------
Total................................... 39,021,377 (3,365,300) 2,779,200 38,435,277
Less treasury stock, at cost..................... (1,624,963) (300) 300 (8) (1,624,963)
----------- ------------ ----------- ------------
Total stockholders' equity
(deficiency)...................... 37,396,414 (3,365,600) 2,779,500 36,810,314
----------- ------------ ----------- ------------
Total liabilities and stockholders'
equity............................ $ 44,837,148 $ 4,097,800 $ 5,325,000 $ 54,259,948
============ =========== =========== ============
</TABLE>
P-4
<PAGE>
LIGHTBRIDGE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Coral
Lightbridge, Inc. Systems, Inc. Pro Forma Pro Forma
Historical Historical Adjustments Results
----------------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues............................... $29,544,852 $ 8,691,800 $ 38,236,652
Cost of revenues....................... 15,433,548 1,994,500 $ 208,000 (9) 17,636,048
----------- ----------- ------------ ------------
Gross profit........................... 14,111,304 6,697,300 (208,000) 20,600,604
----------- ----------- ------------ ------------
Operating expenses:
Development....................... 4,380,293 2,792,300 (41,320)(10) 7,131,273
Sales and marketing............... 4,225,302 3,578,600 52,150 (10) 7,856,052
General and administrative........ 2,768,424 2,533,700 (48,486)(10)
1,643,333 (11) 6,896,971
Stock offering costs.............. -- 676,100 676,100
----------- ----------- ------------ ------------
Total operating expenses............... 11,374,019 9,580,700 1,605,677 22,560,396
----------- ----------- ------------ ------------
Income (loss) from operations.......... 2,737,285 (2,883,400) (1,813,677) (1,959,792)
Other income (expense):
Interest income................... 421,608 -- -- 421,608
Interest expense.................. (753,623) -- -- (753,623)
Other non-operating income........ 26,727 15,100 -- 41,827
----------- ----------- ------------ ------------
Income (loss) before provision
for income taxes..................... 2,431,997 (2,868,300) (1,813,677) (2,249,980)
Provision for (benefit from)
income taxes......................... 159,500 -- (469,100)(12) (309,600)
----------- ----------- ------------ ------------
Net income (loss)...................... $ 2,272,497 $(2,868,300)(a) $ (1,344 577) $ (1,940,380)
=========== =========== ============ ============
Net income (loss) per common
share................................ $0.16 $(0.14)
===== ============
Weighted average number of shares of
common and common equivalent shares
outstanding.......................... 14,433,722 (1,758,657)(13)
=========== 892,073 (6) 13,567,138
============
</TABLE>
(a) Reflects Coral Systems, Inc.'s loss before extraordinary item
for the year ended December 31, 1996.
P-5
<PAGE>
LIGHTBRIDGE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Coral
Lightbridge, Inc. Systems, Inc. Pro Forma Pro Forma
Historical Historical Adjustments Results
------------------ ------------ ------------ ----------
<S> <C> <C> <C> <C>
Revenues................................... $27,287,970 $ 4,129,100 $31,417,070
Cost of revenues........................... 12,705,193 1,650,400 $ 156,000 (9) 14,511,593
----------- ------------ ------------ -----------
Gross profit............................... 14,582,777 2,478,700 (156,000) 16,905,477
----------- ------------ ------------ -----------
Operating expenses:
Development........................... 4,214,566 2,492,500 (20,660)(10) 6,686,406
Sales and marketing................... 3,854,030 2,483,100 26,075 (10) 6,363,205
General and administrative............ 3,219,990 2,501,300 (24,293)(10)
1,232,500 (11) 6,929,497
----------- ------------ ------------ -----------
Total operating expenses................... 11,288,586 7,476,900 1,213,622 19,979,108
----------- ------------ ------------ -----------
Income (loss) from operations.............. 3,294,191 (4,998,200) (1,369,622) (3,073,631)
Other income (expense):
Interest income....................... 939,545 -- -- 939,545
Interest expense...................... (279,736) -- -- (279,736)
Other non-operating income (expense).. 113,956 14,000 -- 127,956
----------- ------------ ------------ -----------
Income (loss) before provision
for income taxes......................... 4,067,956 (4,984,200) (1,369,622) (2,285,866)
Provision for income taxes................. 474,791 -- (934,391)(12) (459,600)
----------- ------------ ------------ -----------
Net income (loss).......................... $ 3,593,165 ($4,984,200) $ (435,231) $(1,826,266)
=========== ============ ============ ===========
Net income (loss) per common share......... $0.22 $(0.12)
=========== ===========
Weighted average number of shares of
common and common equivalent shares
outstanding.............................. 16,448,080 (1,801,799)(13)
=========== 892,073 (6) 15,538,354
===========
</TABLE>
P-6
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned hereunto duly authorized.
LIGHTBRIDGE, INC.
Date: January 21, 1998 By: /s/ William G. Brown
------------------------------------
William G. Brown
Chief Financial Officer, Vice
President of Finance and
Administration and Treasurer
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE NUMBER IN
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED COPY
- ------- ----------- --------------
<C> <S> <C>
2.1* Agreement and Plan of Reorganization dated as of September 9,
1997 among Lightbridge, Inc., SeeCross Acquisition Corp. and
Coral Systems, Inc., and form of Voting Agreement (Exhibit B),
form of Affiliate's Agreement (Exhibit E), form of Employment
Agreements (Exhibit F), form of Non-Competition Agreement
(Exhibit G) and form of Escrow Agreement (Exhibit H)
2.2** Amendment No. 1 dated as of October 9, 1997 among Lightbridge,
Inc., SeeCross Acquisition Corp. and Coral Systems, Inc. to
Agreement and Plan of Reorganization filed as Exhibit 2.1
2.3*** Amendment No. 2 dated as of November 6, 1997 among
Lightbridge, Inc., SeeCross Acquisition Corp. and Coral Systems,
Inc. to Agreement and Plan of Reorganization filed as Exhibit 2.1
2.4 Amendment No. 3 dated as of December 23, 1997 among
Lightbridge, Inc., SeeCross Acquisition Corp. and Coral Systems,
Inc. to Agreement and Plan of Reorganization filed as Exhibit 2.1
4.1**** Rights Agreement dated as of November 14, 1997, between
Lightbridge, Inc. and American Stock Transfer and Trust Company,
including form of Certificate of Designation of Series A
Participating Cumulative Preferred Stock of Lightbridge, Inc.
(Exhibit A) and form of Right Certificate (Exhibit B)
23.1 Consent of Price Waterhouse LLP
</TABLE>
- -------------
* Incorporated by reference to Registration Statement on Form S-4 of
Lightbridge, Inc. (File No. 333-36801). In accordance with Item 601(b)(2)
of Regulation S-K, Lightbridge, Inc. has omitted certain exhibits and
schedules to the Agreement and Plan of Reorganization from this filing.
Lightbridge, Inc. agrees to provide any omitted schedules and exhibits
supplementally to the Securities and Exchange Commission upon request.
** Incorporated by reference to Current Report on Form 8-K of Lightbridge,
Inc. dated October 9, 1997.
*** Filed previously with Current Report on Form 8-K of Lightbridge, Inc.
dated November 7, 1997.
**** Incorporated by reference to Registration Statement on Form 8-A of
Lightbridge, Inc. filed with the Securities and Exchange Commission on
November 21, 1997.
<PAGE>
Exhibit 2.4
AMENDMENT NO. 3
TO AGREEMENT AND PLAN OF REORGANIZATION
THIS AMENDMENT NO. 3 dated as of December 23, 1997 (this "Amendment") is
entered into among Lightbridge, Inc., a Delaware corporation ("Lightbridge"),
Coral Systems, Inc., a Delaware corporation (the "Surviving Corporation"), and
R.D. Bloomer, as Holders' Agent (the "Holders' Agent"), to amend the Agreement
and Plan of Reorganization dated as of September 9, 1997, as amended by
Amendment No. 1 thereto dated as of October 9, 1997 and by Amendment No. 2 dated
as of November 6, 1997 (as so amended, the "Agreement"). Capitalized terms used
but not defined in this Amendment shall have the respective meanings ascribed to
them in the Agreement.
RECITALS
On September 9, 1997, Lightbridge, Acquisition Corp. and Coral entered into
the Agreement and Plan of Reorganization in order to effect the Merger, pursuant
to which, among other things, issued and outstanding shares of Coral Capital
Stock would be converted into shares of Lightbridge Common. On October 9, 1997,
Lightbridge, Acquisition Corp. and Coral entered into Amendment No. 1 to such
Agreement and Plan of Reorganization in order to modify the definition of
Calculation Price. On November 6, 1997, Lightbridge, Acquisition Corp. and
Coral entered into Amendment No. 2 to such Agreement and Plan of Reorganization
in order to modify the procedure for determining any post-closing balance sheet
adjustments.
The Holders' Agent has been designated as attorney-in-fact and authorized and
empowered to act for and on behalf of the Stockholders pursuant to Section 8.1
of the Agreement as initially executed.
In connection with the final determination of post-closing balance
adjustments under the Agreement and related matters, the parties desire to
modify certain provisions of the Agreement as set forth herein.
NOW, THEREFORE, Lightbridge, the Surviving Corporation and the Holders' Agent
hereby agree as follows:
1. Section 1.4.4 of the Agreement is hereby deleted in its entirety, and the
following is substituted therefor:
The following terms used in this Section 1.4 shall have the indicated
meanings:
(a) The "Aggregate Preference" shall mean 820,024 shares of
Lightbridge Common.
(b) The "Aggregate Share Number" shall mean 1,006,472 shares of
Lightbridge Common.
(c) The "Calculation Price" shall equal $17.325.
(d) The "Common Consideration" shall mean 0.0582385 shares of
Lightbridge Common.
(e) The "Remainder Amount" shall equal 0.02014321 shares.
(f) The "Series A Consideration" shall mean 0.06779167 shares of
Lightbridge Common.
(g) The "Series B Consideration" shall mean 0.14481853 shares of
Lightbridge Common.
<PAGE>
(h) The "Series C Consideration" shall mean 0.14402255 shares of
Lightbridge Common.
(i) The "Stock Consideration Number" shall equal 892,073 shares.
2. Notwithstanding any other provision of the Agreement (including the
updated version of the Schedule delivered by Coral to Lightbridge on November 6,
1997), to the extent that any claims, costs, losses, expenses, liabilities or
other damages suffered or incurred by Lightbridge or the Surviving Corporation
by reason of or otherwise arising out of the claims made in the notice described
in paragraph 2.6.3(b) of the updated version of the Schedule exceed $50,000, the
excess shall constitute Damages for which Lightbridge and the Surviving
Corporation shall be indemnified under Article 7 of the Agreement, subject to
the provisions of Section 7.4 thereof.
3. Except as contemplated by the preceding paragraphs 1 and 2, the provisions
of the Agreement shall remain in full force and effect to the same extent as in
force and effect prior to the execution and delivery of this Amendment.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
LIGHTBRIDGE, INC.
By: /s/ Pamela D.A. Reeve
-------------------------------------
President and Chief Executive Officer
CORAL SYSTEMS, INC.
By: /s/ Pamela D.A. Reeve
-------------------------------------
Chief Executive Officer
HOLDERS' AGENT
By: /s/ R.D. Bloomer
-------------------------------------
R.D. Bloomer
<PAGE>
Exhibit 23.1
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (file Nos. 333-21585, 333-23937, and 333-39817) of
Lightbridge, Inc. of our report dated April 9, 1997, except for Note 10 and Note
12, which are as of September 30, 1997, relating to the financial statements of
Coral Systems, Inc. which appears on page F-1 of this Form 8-K/A.
/s/ PRICE WATERHOUSE LLP
Price Waterhouse LLP
Boulder, Colorado
January 20, 1998
