<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):MAY 28, 1999
AMERICAN XTAL TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
DELAWARE 0-24085 94-3031310
<S> <C> <C>
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer)
incorporation or organization) Identification No.)
</TABLE>
4821 TECHNOLOGY DRIVE 94538
FREMONT, CALIFORNIA
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 683-5900
<PAGE> 2
ITEM 2. ACQUISITION OF ASSETS.
This Form 8-K/A amends the Current Report on Form 8-K/A filed on August
11, 1999 to incorporate Item 7(a) and (b), Financial Statements and Pro Forma
Financial Information.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial statements of Lyte Optronics, Inc., required by Item
7(a) of Form 8-K, prepared pursuant to Rule 3-05 of Regulation
S-X and filed in accordance with Item 7(a)(4) of Form 8-K:
(b) Unaudited consolidated pro forma financial statements of
American Xtal Technology, Inc., giving effect to the
acquisition of Lyte Optronics, Inc., prepared pursuant to
Article 11 of Regulation S-X and filed in accordance with Item
7(b)(1) of Form 8-K.
(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
2.1* Agreement and Plan of Reorganization dated May 27, 1999.
2.2* Certificate of Merger dated May 27, 1999, filed with the
Secretary of State of the State of Delaware on May 28, 1999.
2.3* Articles of Merger dated May 27, 1999, filed with the Secretary
of State of the State of Nevada on May 28, 1999.
3.1* Certificate of Designations, Preferences and Rights of Series A
Preferred Stock, as filed with the Secretary of State of the
State of Delaware on May 27, 1999.
23.1* Consent of Arthur Andersen
99.1* Company press release dated May 27, 1999.
</TABLE>
----------------------
* Previously filed.
<PAGE> 3
LYTE OPTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998
TOGETHER WITH AUDITORS' REPORT
3
<PAGE> 4
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
of Lyte Optronics, Inc.:
We have audited the accompanying consolidated balance sheet of Lyte Optronics,
Inc. (a Nevada corporation) and Subsidiaries as of December 31, 1998, and the
related consolidated statements of operations, stockholders' investment and cash
flows for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Lyte Optronics, Inc. and
Subsidiaries as of December 31, 1998, and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Los Angeles, California
May 27, 1999
4
<PAGE> 5
LYTE OPTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - DECEMBER 31, 1998
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash $ 316,000
Accounts receivable, net of
allowance for doubtful
accounts of $1,098,000 3,640,000
Inventories 4,768,000
Income taxes receivable 312,000
Other current assets 452,000
------------
Total current assets 9,488,000
------------
PROPERTY AND EQUIPMENT, at cost:
Land 1,326,000
Building and improvements 3,238,000
Machinery and equipment 8,833,000
Computer equipment 525,000
Furniture and fixtures 518,000
Leasehold improvements 220,000
------------
14,660,000
Less - Accumulated depreciation
and amortization (3,483,000)
------------
11,177,000
------------
OTHER ASSETS:
Receivables from officer and stockholders 369,000
Goodwill, net of accumulated amortization
Of $149,000 2,843,000
Deposits 770,000
Other 788,000
------------
4,770,000
------------
$ 25,435,000
============
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
5
<PAGE> 6
LYTE OPTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - DECEMBER 31, 1998
LIABILITIES AND STOCKHOLDERS' INVESTMENT
<TABLE>
<S> <C>
CURRENT LIABILITIES:
Current portion of capital lease obligations $ 881,000
Current portion of long-term debt 1,314,000
Line of credit 1,016,000
Bank overdrafts 175,000
Accounts payable 5,246,000
Accrued expenses and other current liabilities 2,219,000
------------
Total current liabilities 10,851,000
------------
LONG-TERM LIABILITIES:
Amounts due to officers 604,000
Capital lease obligations, net of current portion 2,428,000
Long-term debt, net of current portion 3,495,000
------------
Total long-term liabilities 6,527,000
------------
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' INVESTMENT:
Preferred stock:
Series A Convertible, 750 shares authorized,
issued and outstanding 750,000
Series B 5 Percent, 4,000,000 shares
authorized, issued and outstanding 4,000,000
Common stock:
Class A, par value $0.01,
12,000,000 shares authorized
3,509,382 shares issued and outstanding 1,463,000
Class B, par value $0.01
6,000,000 shares authorized
5,033,040 shares issued and outstanding 7,500,000
Accumulated other comprehensive loss (5,000)
Accumulated deficit (5,651,000)
------------
8,057,000
------------
$ 25,435,000
============
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
6
<PAGE> 7
LYTE OPTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
NET SALES $ 18,137,000
COST OF SALES 13,661,000
------------
Gross profit 4,476,000
------------
OPERATING EXPENSES:
Selling and marketing 1,669,000
General and administrative 5,033,000
------------
6,702,000
------------
Loss from operations (2,226,000)
------------
OTHER (INCOME) EXPENSE:
Interest expense, net 700,000
Other (30,000)
------------
670,000
------------
Loss before provision
for income taxes (2,896,000)
PROVISION FOR INCOME TAXES 303,000
------------
NET LOSS $ (3,199,000)
============
</TABLE>
The accompanying notes are an integral part of this
consolidated financial statement.
7
<PAGE> 8
LYTE OPTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' INVESTMENT
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Accumulated
Common & Preferred Stock Other Accumulated
-------------------------- Comprehensive Earnings
Shares Amount Loss (Deficit) Total
------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1997 450,000 $ 470,000 $ (4,000) $(2,452,000) $(1,986,000)
Issuance of Class B common
Shares in connection with
Acquisition of Alpha 5,033,040 7,500,000 7,500,000
Issuance of Class A common
As settlement of trade payable 16,244 25,000 25,000
Reacquisition and retirement
Of Class A common shares (240,161)
Issuance of Class A common
In connection with financing,
Net of issuance costs 731,286 994,000 994,000
Private placement of Series A
Preferred shares, net of
Issuance costs 750 724,000 724,000
Issuance of Class B preferred
Shares in connection with
Acquisition of Alpha 4,000,000 4,000,000 4,000,000
Foreign currency translation -- -- (1,000) -- (1,000)
Net loss -- -- -- (3,199,000) (3,199,000)
----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1998 9,991,159 $13,713,000 $ (5,000) $(5,651,000) $ 8,057,000
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this
consolidated financial statement.
8
<PAGE> 9
LYTE OPTRONICS, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(3,199,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 911,000
Provision for doubtful accounts 458,000
Write-off of other assets 129,000
Deferred income taxes 268,000
Other 25,000
Decrease (increase) in:
Accounts receivable (1,753,000)
Inventories 1,144,000
Income taxes receivable 39,000
Other current assets 156,000
Other assets (404,000)
Increase (decrease) in:
Bank overdrafts (308,000)
Accounts payable (189,000)
Accrued expenses and other current liabilities 345,000
-----------
Net cash used in operating activities (2,378,000)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (790,000)
Receivables from officer and stockholders (83,000)
Net cash acquired in connection with purchase
of Alpha Photonics, Inc. 539,000
-----------
Net cash used in investing activities (334,000)
-----------
</TABLE>
9
<PAGE> 10
<TABLE>
<S> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line of credit 1,015,000
Payments of line of credit (3,335,000)
Proceeds from notes payable to officers 193,000
Proceeds from long-term debt 4,797,000
Payments of long-term debt (1,236,000)
Payments for capital lease obligations (263,000)
Proceeds from issuance of preferred stock, net
of issuance costs 724,000
Proceeds from issuance of common stock, net
of issuance costs 994,000
-----------
Net cash provided by financing activities 2,889,000
-----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (6,000)
-----------
NET INCREASE IN CASH 171,000
CASH, beginning of year 145,000
-----------
CASH, end of year $ 316,000
===========
</TABLE>
The accompanying notes are an integral part of this
consolidated financial statement.
10
<PAGE> 11
LYTE OPTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. Line of Business / Significant Risks
Lyte Optronics, Inc. and subsidiaries(the Company)(see Note 3)
manufacture and distribute micro-laser based products. At December 31,
1998, the Company had facilities in California, the People's Republic
of China and England.
The Company incurred a loss of $(3,199,000) for the year ended 1998. At
December 31, 1998, the Company had negative working capital of
$(1,363,000) and an accumulated deficit of $(5,651,000). Cash used in
operating activities during 1998 was $(2,378,000). The Company raised
additional funds in March 1999 (see Note 13). Effective May 27, 1999,
the Company was acquired by American Xtal Technology, Inc. (see Note
13).
2. Concentrations of Risk
Accounts receivable are unsecured and the Company is at risk to the
extent such amounts become uncollectable. Customers include O.E.M.
manufacturers, distributors and consumer product retailers and are
located primarily in the United States, Taiwan and Europe (United
Kingdom, France and Germany). Approximately 37 percent of net sales
were to customers located outside the United States as follows:
Taiwan 31 percent
Europe 6 percent
At December 31, 1998, two customers represented 16 and 12 percent of
accounts receivable. At December 31, 1998, the Company had a 23 percent
investment in the customer representing 16 percent of accounts
receivable (see Notes 3 and 12).
During 1998, the Company had one customer that represented 11 percent
of net sales.
During 1998, the Company purchased materials and sub-assembly units
from two vendors that accounted for 18 percent (a Japanese vendor) and
11 percent(a domestic vendor) of total purchases.
3. Summary of Significant Accounting Policies
Principles of Consolidation
11
<PAGE> 12
The accompanying consolidated financial statements include the accounts
of the Company's wholly-owned subsidiaries: Lyte Optronics Ltd. (a
United Kingdom company) and Advanced Semiconductor (a Xiamen, Peoples
Republic of China company). All significant intercompany accounts and
transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions. These estimates or assumptions affect the reported
amounts of assets, liabilities, revenues and expenses as reflected in
the consolidated financial statements. Actual results could differ from
those estimates.
Inventories
Inventories consist of raw materials, labor and manufacturing overhead
and are stated at the lower of cost (first-in, first-out) or market and
are as follows at December 31, 1998:
<TABLE>
<S> <C>
Raw materials $2,241,000
Work-in-process 1,112,000
Finished goods 1,415,000
----------
$4,768,000
==========
</TABLE>
Property and Equipment
Property and equipment are stated at cost. Depreciation and
amortization are computed using the straight-line method over the
following estimated useful lives:
<TABLE>
<S> <C>
Building and improvements 10 to 39 years
Machinery and equipment 3 to 5 years
Computer equipment 3 years
Furniture and fixtures 4 to 5 years
Leasehold improvements Lesser of 10 years or life of lease
</TABLE>
The Company capitalizes expenditures that materially increase asset
lives and charges maintenance and repairs to operations as incurred.
When assets are sold or otherwise disposed of, the cost and related
depreciation or amortization are removed from the accounts and any
resulting gain or loss is included in other (income) expense in the
accompanying consolidated statement of operations.
12
<PAGE> 13
Goodwill
The Company recorded goodwill in connection with the acquisition of
(see Note 10) Alpha Photonics, Inc. The goodwill is being amortized on
a straight-line basis over 5 years.
Management continuously reviews the value and period of amortization
for its goodwill and determines whether a permanent impairment exists
under the provisions of SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
Other Assets
Included in other assets is $223,000 related to an investment in a
joint venture. The Company has a 23 percent investment in On Lyte
Photonics (On Lyte), a company that is also a customer of the Company.
The Company accounts for this investment under the equity method of
accounting (see Notes 2 and 13).
Revenue Recognition
The Company recognizes revenue at the time of shipment. The Company
provides for estimated returns and allowances and warranty at the time
of shipment.
Warranty
The Company typically warrants its products against defects in material
and workmanship for a period of three months to one year from the date
of shipment. A provision for estimated future warranty costs is
recorded when products are shipped. To date, warranty costs have not
been material.
Consolidated Statement of Cash Flows
The Company prepares its consolidated statement of cash flows using the
indirect method as defined under SFAS No. 95. During the year, the
Company paid approximately $585,000 in interest and $42,000 in taxes.
During 1998, the Company obtained property and equipment under new
capital lease obligations totaling $1,673,000. In addition, the Company
issued $7,500,000 of Class B common shares and $4,000,000 of Series B
preferred shares in connection with the acquisition of Alpha Photonics,
Inc. At the time of the acquisition, the value of the shares issued
exceeded the value of Alpha's tangible net assets by $2,992,000. The
Company has recorded the $2,992,000 as goodwill.
Foreign Currency
The financial statements of Lyte Optronics, Ltd. and Advance
Semiconductor are measured using the local currency as the functional
currency. Foreign currency asset and liability accounts are translated
to the U.S. dollar using the exchange rates in effect at the end of the
accounting period. Revenue and expense accounts are translated at a
weighted
13
<PAGE> 14
average of exchange rates during the period. The cumulative effect of
translation is recorded as Accumulated Other Comprehensive Loss as a
separate component of stockholders' investment.
New Authoritative Pronouncement
In June 1997, the Financial Accounting Standards Board issued SFAS No.
130, "Reporting Comprehensive Income" (SFAS No. 130). SFAS No. 130 is
effective for the year ending 1998. SFAS No. 130 establishes new
standards for the reporting and presentation of comprehensive income
and its components. The Company has presented a calculation of fiscal
1998 Comprehensive Loss within the accompanying consolidated statement
of stockholders' investment.
4. Receivables From Officer and Stockholders
The Company has an unsecured note receivable totaling $210,000 from its Chief
Executive Officer and stockholder. The note bears interest at an annual rate of
10 percent. The principal and accrued interest are due on demand.
The Company has advances receivable from various stockholders totaling $159,000.
The advances are non-interest bearing and are due on demand.
5. Line of Credit
At December 31, 1998, the Company had a $5,000,000 credit facility with a bank
expiring in February 2000. The facility is comprised of a term loan (see Note 6)
and a line of credit. Under the terms of the facility, as the term loan is paid
down, the maximum available under the line of credit is increased such that
total maximum availability under the entire facility is $5,000,000.
As of December 31, 1998, there was $921,000 outstanding under the line of credit
portion of this facility. The term loan balance at December 31, 1998 was
$1,395,000, resulting in a maximum availability under the line of credit of
$3,605,000. However, availability under the line of credit is limited to a
borrowing formula based on eligible accounts receivable and inventories. The
borrowings are secured by the Company's assets and bear interest at the bank's
prime rate plus 1.75 percent (9.5 percent at December 31, 1998). The Company is
subject to various financial and non-financial restrictive covenants under the
terms of this facility. The Company was either in compliance with or had
received a waiver for all such covenants as of December 31, 1998.
The Company also has a $333,000 line of credit facility in the United Kingdom
through its subsidiary, Lyte Optronics Ltd. The facility is secured by the
subsidiary's assets and bears interest at the bank's base rate plus 2 percent
(8.25 percent at December 31, 1998). As of December 31, 1998, there was $95,000
outstanding under this facility.
14
<PAGE> 15
6. Long-Term Debt
Long-term debt of the Company consists of the following as of December 31, 1998:
<TABLE>
<S> <C>
Note payable to a bank as part of an overall $5,000,000 credit
facility (see Note 5), secured by the Company's assets, bearing
interest at a rate of prime plus 1.75 percent (9.5 percent at
December 31, 1998), paid in full in January 1999 $1,395,000
Note payable to a bank, secured by land and a building, bearing
interest at a rate of prime plus .5 percent (8.25 percent at
December 31, 1998), payable in monthly installments of $4,000
plus accrued interest, final payment of $944,000 due October 2003 1,167,000
Note payable to a bank, secured by land and
a building, bearing interest at a rate of prime plus 1.25
percent (9.0 percent at December 31, 1998), payable in monthly
installments of $2,000 plus accrued interest, final payment of
$585,000 due October 2003 723,000
Note payable to a financing institution,
secured by the assets of the Company, but subordinate to the
bank loans above, bearing interest at a rate of 12 percent,
interest payable in monthly installments, principal payable in
escalating quarterly installments of $39,000 to $162,000 from
April 2001 through October 2003, final payment of $1,645,000
due December 2003, $2,600,000 face value, net of $1,102,000
of unamortized discount (see Note 11) 1,498,000
Other 26,000
-----------
Total long-term debt 4,809,000
Less - current portion (1,314,000)
-----------
$ 3,495,000
===========
</TABLE>
15
<PAGE> 16
The Company's long-term debt is due as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1999 $ 1,497,000
2000 76,000
2001 193,000
2002 349,000
2003 3,796,000
-----------
5,911,000
Less - Amounts representing
original issue discount (1,102,000)
-----------
4,809,000
Less - Current portion (1,314,000)
-----------
$ 3,495,000
===========
</TABLE>
7. Amounts Due To Officers
The Company has unsecured notes payable to officers as follows:
<TABLE>
<S> <C>
Chief Executive Officer $ 386,000
Chief Operating Officer 25,000
-----------
$ 411,000
===========
</TABLE>
In February 1998, both notes were subordinated to a debt agreement with a
financial institution. The notes bear interest at an annual rate of 10 percent
and are due in January 2000.
The Company also has non-interest bearing loans payable to the President of its
Advanced Semiconductor subsidiary totaling $193,000.
8. Income Taxes
Under SFAS 109, deferred income tax assets or liabilities are computed based on
the temporary differences between the financial statement and income tax bases
of assets and liabilities using the current marginal income tax rate. Deferred
income tax expenses or credits are based on the changes in deferred income tax
assets or liabilities from period to period.
16
<PAGE> 17
The provision for income taxes for the year ended December 31, 1998 consists of
the following:
<TABLE>
<S> <C>
Current:
Federal $ 33,000
State 1,000
--------
34,000
--------
Deferred 268,000
Foreign 1,000
--------
Provision for income taxes $303,000
========
</TABLE>
Differences between the benefit for income taxes and income taxes at the
statutory federal income tax rate are as follows:
<TABLE>
<S> <C> <C>
Income tax at the
statutory Federal rate $ (985,000) (34.0)%
State income taxes, net
of federal benefit (89,000) (3.1)
Foreign sales corporation (61,000) (2.1)
Change in valuation allowance 1,317,000 45.5
Foreign taxes 40,000 1.4
Other 81,000 2.8
----------- -----------
$ 303,000 10.5%
=========== ===========
</TABLE>
Under SFAS 109, deferred tax assets may be recognized for temporary differences
that will result in deductible amounts in future periods and for loss
carryforwards. A valuation allowance is recognized if, based on the weight of
available evidence, it is more likely than not that some portion or all of the
deferred tax asset will not be realized.
A detail of the Company's deferred tax asset at December 31, 1998 follows:
<TABLE>
<S> <C>
Allowance for doubtful accounts $ 423,000
Inventory valuation 321,000
Uniform inventory capitalization 57,000
Accrued expenses 220,000
Depreciation (275,000)
Federal NOL carryforwards 925,000
Other 468,000
-----------
2,139,000
Valuation allowance (2,139,000)
-----------
$ --
===========
</TABLE>
17
<PAGE> 18
At December 31, 1998, the Company had a net operating loss carryforward of
approximately $2,700,000 for federal income tax purposes expiring through 2019.
The future use of this net operating loss carryforward has been limited to
approximately $250,000 per year as a result of the acquisition of Alpha
Photonics, Inc. (see Note 10).
9. Commitments and Contingencies
The Company leases its office space, manufacturing facilities and certain
property and equipment under long-term operating leases expiring at various
dates through December 2006. Total rent expense under these operating leases was
approximately $371,000 in 1998.
Included in property and equipment is approximately $4,608,000 of equipment
which is leased under noncancellable leases accounted for as capital leases
which expire at various dates through November 2003.
Total minimum lease payments under the above leases are as follows as of
December 31, 1998:
<TABLE>
<CAPTION>
Capital Operating
Year ending December 31: Leases Leases Total
----------- ----------- -----------
<S> <C> <C> <C>
1999 $ 1,236,000 $ 266,000 $ 1,502,000
2000 1,073,000 266,000 1,339,000
2001 934,000 266,000 1,200,000
2002 501,000 266,000 767,000
2003 362,000 131,000 493,000
Thereafter -- 228,000 228,000
----------- ----------- -----------
4,106,000 $ 1,423,000 $ 5,529,000
=========== ===========
Less--Amounts representing
interest at 8.25-22.8
percent (797,000)
-----------
3,309,000
Less--Current portion (881,000)
-----------
$ 2,428,000
===========
</TABLE>
The Company is currently a defendant in various lawsuits arising out of the
normal course of business. In the opinion of management, the outcome of these
lawsuits will not have a material effect on the Company's financial position or
results of operations.
18
<PAGE> 19
10. Acquisition Of Alpha Photonics, Inc.
On September 29, 1998, the Company consummated a merger with Alpha Photonics,
Inc., a California Corporation that manufactures and distributes laser diodes
and other laser products. The transaction was accounted for as a purchase of
Alpha by the Company.
The Company issued 5,033,040 shares of Class B common stock (including 179,184
shares under an anti-dilution provision described below) and 4,000,000 shares of
Series B preferred stock to the former stockholders of Alpha in exchange for all
the outstanding shares of Alpha stock. The Company recorded goodwill of
$2,992,000, representing the excess of the value of the shares issued by the
Company over the net book value of Alpha. The Company is amortizing the goodwill
on a straight-line basis over 5 years.
In November 1998, the Company completed a round of financing with a mezzanine
lender. Upon completion of the financing, pursuant to an anti-dilution
arrangement, the Company issued the Class B common stockholders 179,184
additional shares and a warrant for 107,511 additional shares.
As a result of the merger, the stockholders of the Company held Class A common
and Series A Convertible preferred stock equivalent to 40 percent of the total
equity ownership of the surviving company. The former stockholders of Alpha held
Class B common equivalent to 60 percent of the total equity ownership of the
surviving company and Series B preferred stock, which is non-convertible. The
Class A common stockholders, together with the Series A preferred stockholders
of the Company are entitled to elect five members of the Board of Directors of
the surviving entity. The Class B Common stockholders of are entitled to elect
four members of the Board of Directors of the surviving company. The Class A
common stockholders will maintain control of the Board of Directors for a period
of 10 years or until the Company completes an initial public offering of common
stock.
11. Stockholders' Investment
Stock Split
In September 1998, in connection with the acquisition of Alpha, the
Company split its shares of common stock 6.67114 for 1. This stock
split has been reflected as though it had occurred at the beginning of
the period.
Preferred Stock
The Company's capital structure consists of the following classes of
preferred stocks (as amended on May 14, 1999, see Note 13):
- Series A Preferred - These shares carry a 5 percent
annual dividend and are convertible into Class A
common shares at $1.54 per share. These shares vote
based on the Class A common shares that would be
issued upon conversion.
19
<PAGE> 20
These shares also have a $750,000 liquidation
preference over both classes of common shares.
- Series B Preferred - These shares carry a 5 percent
annual dividend and have a $4,000,000 liquidation
preference over both classes of common shares. These
shares do not have voting rights.
Private Placement of Series A Convertible Preferred
In July 1998, the Company raised $750,000 ($724,000 net of issuance
costs) through the issuance of 750 shares of Series A convertible
preferred stock.
Reacquisition and Retirement of Shares
Pursuant to a 1996 Share Issuance Agreement, among other terms, the
Company had previously issued 240,161 shares of common stock as a
deposit toward a potential acquisition of certain assets. No
acquisition of these assets occurred. In October 1998, under a
Settlement Agreement, these shares were returned to the Company. All
240,161 shares were cancelled in connection with this transaction.
Share Issuance in Connection With Debt Financing
In November 1998, the Company entered into a Loan and Stock
Subscription Agreement with a lender. The Company issued 731,286 shares
of Class A common stock. Total debt and equity financing amounted to
$2,600,000, with an option to borrow up to additional $1,000,000. The
agreement entitles the lender to a Put Option to require the Company to
repurchase a portion or all of the shares (based on a formula price as
defined in the agreement). The Put Option is exercisable by the lender
during the 5 year period from the date the note is paid in full
(December 2003). In addition, the agreement also allows the Company two
"claw back" options as follows: (1) 137,116 of the shares if the
additional $1,000,000 is never funded and (2) 137,116 of the shares in
the event the $2,600,000 is paid off in full prior to December 31,
2001, accompanied by a $300,000 fee. On May 26, 1999, the Company
notified the lender that the Company would not borrow the additional
$1,000,000 and was exercising its option to reacquire 137,116 shares of
common stock (see Note 13).
The Company computed the original issue discount and allocated
$1,126,000 of the proceeds to the Class A common shares. The discount
was recorded against the note payable and is being amortized over the
term of the debt (see Note 6).
Stock Options
In 1998, the Company adopted the 1998 Stock Option Plan (the Plan).
Under the terms of the Plan, the Company is authorized to issue
incentive and non-qualified stock options to its directors, officers,
key employees and consultants totaling up to 3,250,000 shares of common
stock. At December 31, 1998, 2,793,068 shares are available for future
grant under these plans. Options are generally granted at exercise
prices not less than the fair market value, as determined by the Board
20
<PAGE> 21
of Directors, on the date of grant and expire ten years after the date
of grant. Options granted under these plans vest over varying terms
ranging from immediate vesting to four years.
21
<PAGE> 22
A summary of the Company's outstanding options and activity follows:
<TABLE>
<CAPTION>
December 31,
1998
--------------------------
Weighted
Shares Average
Under Exercise
Option Price
-------- --------
<S> <C> <C>
OPTIONS OUTSTANDING,
beginning of year 82,643 $ 3.42
Granted 390,967 2.17
Canceled (16,678) 3.23
-------- --------
OPTIONS OUTSTANDING,
end of year 456,932 $ 1.97
======== ========
Options exercisable
at end of year 52,589 $ 1.15
======== ========
Weighted average fair
value of options
granted during the year $ 0.58
========
</TABLE>
In September 1998, the Company repriced 62,643 options that had been previously
granted at an exercise price of $4.35 per share. The options were repriced at an
exercise price of $1.54 per share, reflecting the current fair value at the time
of the repricing.
The following table summarizes information about the options as of
December 31, 1998:
<TABLE>
<CAPTION>
Options Weighted Average Options
Range of Outstanding at Remaining Exercisable at
Exercise Prices December 31, 1998 Contractual Life December 31, 1998
--------------- ----------------- ---------------- -----------------
<S> <C> <C> <C>
$0.05 10,000 7.0 years 10,000
$1.00 10,000 7.0 years 10,000
$1.50 6,671 9.7 years --
$1.54 90,261 9.1 years 32,589
$2.00 280,000 9.8 years --
$3.00 60,000 9.9 years --
--------- -------
456,932 52,589
========= =======
</TABLE>
22
<PAGE> 23
The Company has elected to continue to measure compensation costs
associated with its stock option plan under APB No. 25, "Accounting for
Stock Issued to Employees" and comply with the pro forma disclosure
requirements of SFAS No. 123, "Accounting for Stock-Based Compensation"
(SFAS No. 123).
Had the Company applied the fair value based method of accounting,
which is not required, to all grants of stock options, under SFAS No.
123, the Company would have recorded additional compensation expense of
$52,000 and computed pro forma net loss of $(3,251,000).
These pro forma amounts were determined by computing the fair value of
each option on its grant date using the Black-Scholes option pricing
model with the following assumptions:
- Risk Free Interest Rate: 5.7 to 6.3 percent
- Expected Life of Options: 10 years
- Volatility: None
- Dividends: None
12. Related Party Transactions
The Company has various receivables from officers and stockholders (see Note 4).
The Company has various payables to officers and stockholders (see Note 7).
The Company had $906,000 of sales to On Lyte, a company that was owned in part
by the Company (see Notes 3 and 13). At December 31, 1998, there was $779,000
included in accounts receivable due from On Lyte.
The Company had sales of $263,000 to a company that is also a minority
stockholder of the Company. At December 31, 1998, there was $184,000 included in
accounts receivable due from this customer
13. Subsequent Events
Separation Agreement
In January 1999, the Company and the former Chief Financial Officer
(CFO) entered into a Separation Agreement. Under the Agreement, among
other terms, the Company granted the former CFO a Put Option to sell
his vested and unexercised stock options
23
<PAGE> 24
back to the Company. The CFO sold 18,412 vested options to the Company
at a negotiated price of $4.00 per option, less the $1.54 exercise
price.
Investment in Joint Venture
At December 31, 1998, the Company had a 23 percent investment in On
Lyte, also a customer of the Company (see Notes 3 and 12). In February
1999, the Company accepted inventories and equipment and a forgiveness
of trade payables as settlement for trade receivables. The
consideration received by the Company was in excess of the trade
receivables. The Company recorded this excess amount as a reduction in
their investment in On Lyte, reducing their investment to zero.
Financing From Stockholder
On March 25, 1999, the Company borrowed $1,222,000 from a company owned
by certain stockholders of the Company. The loan is unsecured and bears
interest at an annual rate of 25 percent. Interest is payable monthly
and the principal and any accrued but unpaid interest is due in full on
June 5, 1999.
Amendment to Articles of Incorporation
In May 1999, the Company amended it articles of incorporation to
increase the authorized number of shares of Class A common shares to
12,000,000 and Class B common shares to 6,000,000. The accompanying
consolidated financial statements reflect this increase in authorized
shares.
Reacquisition of Common Shares
On May 26, 1999, pursuant to a "claw-back" option from its November
1998 Loan and Stock Subscription Agreement (see Note 11), the Company
reacquired 137,116 shares of previously issued common stock.
Acquisition of Company
Effective May 27, 1999, the Company was acquired by American Xtal
Technology, Inc. (AXT). Under the terms of the acquisition agreement,
AXT will issue up to 2,403,292 shares of common stock in exchange for
all the outstanding shares of the Company's Class A and Class B common
stock as well as the outstanding shares of the Company's Series A
preferred stock. AXT will also issue up to 1,000,000 shares of
preferred stock in exchange for all the outstanding shares of the
Company's Series B preferred stock.
24
<PAGE> 25
American Xtal Technology, Inc.
Notes to Pro Forma Condensed Combined Financial Statements
(unaudited)
The following unaudited pro forma combined financial statements give
effect to both (i) the merger of American Xtal Technology, Inc. ("AXT" or the
"Company") with Lyte Optronics, Inc. ("Lyte") on May 28, 1999, which was
accounted for as a pooling of interests, and (ii) acquisition by Lyte of Alpha
Photonics, Inc. ("Alpha") on September 29, 1998, which was accounted for as a
purchase. The unaudited pro forma condensed balance sheet presents the combined
financial position of AXT and Lyte as of March 31, 1999, assuming that the
merger had occurred as of March 31, 1999. Such pro forma information is based
upon the historical balance sheet data of AXT and Lyte as of that date. The
unaudited pro forma condensed statements of operations give effect to the merger
of AXT and Lyte by combining the results of operations of AXT and Lyte for each
of the three years in the period ended December 31, 1998 and the three months
ended March 31, 1998 and 1999, on a pooling of interests basis. The unaudited
pro forma condensed statements of operations for the year ended December 31,
1998 and the three months ended March 31, 1998 also give effect to the
acquisition by Lyte of Alpha by combining Alpha's operating results for the
period from January 1, 1998 to September 28, 1998 and the three months ended
March 31, 1998 with the pro forma statements of operations of AXT and Lyte for
the year ended December 31, 1998 and the three months ended March 31, 1998,
respectively. Alpha's operating results for the period from September 29, 1998
to December 31, 1998 and the three months ended March 31, 1999 have been
included in Lyte's consolidated statements of operations for the year ended
December 31, 1998 and the three months ended March 31, 1999, respectively. These
unaudited pro forma financial statements should be read in conjunction with the
historical financial statements and notes thereto of AXT included in its Annual
Report on Form 10-K for the year ended December 31, 1998 and the historical
financial statements and notes thereto of Lyte included as a exhibit herein.
The unaudited pro forma information is presented for illustrative
purposes only and is not necessarily indicative of the operating results or
financial position that would have occurred if the merger had been consummated
at the beginning of the periods presented, nor is it necessarily indicative of
future operating results or financial position.
1
<PAGE> 26
AMERICAN XTAL TECHNOLOGY, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 1999
------------------------------------------------------------------
Pro Forma
AXT LYTE ADJUSTMENTS COMBINED
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 14,371 $ (7) $ -- $ 14,364
Accounts receivable, net 10,448 2,497 (494) A 12,451
Inventories 22,890 4,813 (217) B 27,486
Deferred tax assets 322 1,440 -- 1,762
Receivables from officers and stockholders -- 159 -- 159
Prepaid expenses and other current assets 4,066 22 1,955 L 6,043
--------- --------- --------- ---------
Total current assets 52,097 8,924 1,244 62,265
Property and equipment, net 27,530 13,145 -- 40,675
Goodwill -- 2,693 -- 2,693
Note receivable 1,200 -- (1,200) C --
Other assets -- 881 -- 881
--------- --------- --------- ---------
Total assets $ 80,827 $ 25,643 $ 44 $ 106,514
========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank borrowings $ 1,980 $ -- $ -- $ 1,980
Accounts payable 3,652 5,885 (494) A 9,043
Accrued expenses 3,485 5,292 -- 8,777
Current portion of long-term debt 1,918 2,567 (1,200) C 3,285
Current portion of capital lease obligations -- 882 -- 882
--------- --------- --------- ---------
Total current liabilities 11,035 14,626 (1,694) 23,967
Long-term debt, net of current portion 15,876 3,560 -- 19,436
Capital lease obligations, net of current portion -- 2,310 -- 2,310
Notes payable to officers -- 680 -- 680
--------- --------- --------- ---------
Total Liabilities 26,911 21,176 (1,694) 46,393
--------- --------- --------- ---------
Stockholders' equity
Preferred stock -- 4,750 -- 4,750
Common stock 16 2 -- 18
Additional paid-in capital for common stock 36,241 8,926 -- 45,167
Deferred compensation (299) -- -- (299)
(217) B
1,955 L
---------
Retained earnings 18,004 (9,206) 1,738 10,536
Cumulative translation adjustment (46) (5) -- (51)
--------- --------- --------- ---------
Total stockholders' equity 53,916 4,467 1,738 60,121
--------- --------- --------- ---------
Total Liabilities and Stockholder's Equity $ 80,827 $ 25,643 $ 44 $ 106,514
========= ========= ========= =========
</TABLE>
See accompanying notes to pro forma condensed combined financial information.
F-2
<PAGE> 27
AMERICAN XTAL TECHNOLOGY, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1999
---------------------------------------------------------------
Pro Forma
AXT LYTE ADJUSTMENTS COMBINED
-------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Net revenues
(135) E
Product revenues $ 11,885 $ 7,301 $ (571) E $ 18,480
Contract revenues 417 -- -- 417
-------- -------- -------- --------
$ 12,302 $ 7,301 $ (706) $ 18,897
-------- -------- -------- --------
Cost of net revenues:
217 B
(135) E
(571) E
--------
Cost of product revenues 7,238 9,257 (489) 16,006
Cost of contract revenues 234 -- -- 234
-------- -------- -------- --------
Total cost of net revenues 7,472 9,257 (489) 16,240
-------- -------- -------- --------
Gross profit 4,830 (1,956) (217) 2,657
-------- -------- -------- --------
Operating expenses:
Sales, general and administrative 1,436 2,211 -- 3,647
Research and development 536 126 -- 662
-------- -------- -------- --------
Total operating expenses 1,972 2,337 -- 4,309
-------- -------- -------- --------
Income (loss) from operations 2,858 (4,293) -- (1,652)
Interest and other income (expense) 790 (97) -- 693
Interest expense (270) (360) -- (630)
-------- -------- -------- --------
Income (loss) before provision for income taxes 3,378 (4,750) (217) (1,589)
Provision for income taxes 1,284 67 (1,955) L (604)
-------- -------- -------- --------
Net income (loss) $ 2,094 $ (4,817) $ 1,738 $ (985)
======== ======== ======== ========
Net income (loss) per share:
Basic $ 0.13 $ (2.01) $ (0.05)
======== ======== ========
Diluted $ 0.12 $ (2.01) $ (0.05)
======== ======== ========
Weighted average shares:
Basic 16,184 2,398 18,582
======== ======== ========
Diluted 17,255 2,398 18,582
======== ======== ========
</TABLE>
See accompanying notes to pro forma condensed combined financial information.
F-3
<PAGE> 28
AMERICAN XTAL TECHNOLOGY, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ALPHA
THREE MONTHS ENDED MARCH 31, 1998 THREE MONTHS
----------------------------------------------- ENDED
PRO FORMA MARCH 31, PRO FORMA
AXT LYTE ADJUSTMENTS COMBINED 1998 ADJUSTMENTS COMBINED
-------- -------- ---------- -------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues:
Product revenues $ 9,238 $ 3,456 $ -- $ 12,694 $ 5,452 $ -- $ 18,146
Contract revenues 492 -- -- 492 -- -- 492
-------- -------- -------- -------- -------- -------- --------
Total net revenues 9,730 3,456 -- 13,186 5,452 -- 18,638
-------- -------- -------- -------- -------- -------- --------
Cost of net revenues:
Cost of product revenues 5,460 2,419 -- 7,879 2,406 -- 10,285
Cost of contract revenues 265 -- -- 265 -- -- 265
-------- -------- -------- -------- -------- -------- --------
Total cost of net revenues 5,725 2,419 -- 8,144 2,406 -- 10,550
-------- -------- -------- -------- -------- -------- --------
Gross profit 4,005 1,037 -- 5,042 3,046 -- 8,088
-------- -------- -------- -------- -------- -------- --------
Operating expenses:
Sales, general and administrative 966 1,494 -- 2,460 688 150 I 3,298
Research and development 640 -- -- 640 99 -- 739
-------- -------- -------- -------- -------- -------- --------
Total operating expenses 1,606 1,494 -- 3,100 787 150 4,037
-------- -------- -------- -------- -------- -------- --------
Income (loss) from operations 2,399 (457) -- 1,942 2,259 (150) 4,051
Interest and other income (expense) 21 (2) -- 19 26 -- 45
Interest expense (181) (57) -- (238) (82) -- (320)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before provision
for income taxes 2,239 (516) -- 1,723 2,203 (150) 3,776
Provision for income taxes 854 (54) (93) 707 1,217 -- 1,924
-------- -------- -------- -------- -------- -------- --------
Net income (loss) $ 1,385 $ (462) $ 93 K $ 1,016 $ 986 $ (150) $ 1,852
======== ======== ======== ======== ======== ======== ========
Net income (loss) per share:
Basic $ 0.45 $ (0.61) $ 0.27 $ 0.78 $ 0.36
======== ======== ======== ======== ========
Diluted $ 0.10 $ (0.61) $ 0.07 $ 0.78 $ 0.12
======== ======== ======== ======== ========
Weighted average shares:
Basic 3,052 759 3,811 1,272 5,083
======== ======== ======== ======== ========
Diluted 13,516 759 14,275 1,272 15,547
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to pro forma condensed combined financial information.
F-4
<PAGE> 29
AMERICAN XTAL TECHNOLOGY, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ALPHA
PERIOD FROM
YEAR ENDED DECEMBER 31, 1998 JANUARY 1,
----------------------------------------------- 1998 TO
PRO FORMA SEPTEMBER 28, PRO FORMA
AXT LYTE ADJUSTMENTS COMBINED 1998 ADJUSTMENTS COMBINED
-------- -------- ---------- -------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues:
Product revenues $ 41,493 $ 18,137 $ (113) F $ 59,517 $ 12,943 $ (702) H $ 71,758
Contract revenues 1,797 -- -- 1,797 -- -- 1,797
-------- -------- -------- -------- -------- -------- --------
Total net revenues 43,290 18,137 (113) 61,314 12,943 (702) 73,555
-------- -------- -------- -------- -------- -------- --------
Cost of net revenues:
(113) F
47 G
--------
Cost of product revenues 24,550 13,661 (66) 38,145 9,315 (702) H 46,758
Cost of contract revenues 804 -- -- 804 -- -- 804
-------- -------- -------- -------- -------- -------- --------
Total cost of net revenues 25,354 13,661 (66) 38,949 9,315 (702) 47,562
-------- -------- -------- -------- -------- -------- --------
Gross profit 17,936 4,476 (47) 22,365 3,628 -- 25,993
-------- -------- -------- -------- -------- -------- --------
Operating expenses:
Sales, general and administrative 5,016 6,522 -- 11,538 1,604 450 I 13,592
Research and development 2,504 180 -- 2,684 323 -- 3,007
-------- -------- -------- -------- -------- -------- --------
Total operating expenses 7,520 6,702 -- 14,222 1,927 450 16,599
-------- -------- -------- -------- -------- -------- --------
Income (loss) from operations 10,416 (2,226) (47) 8,143 1,701 (450) 9,394
Interest and other income (expense) 568 30 -- 598 52 -- 650
Interest expense (781) (700) -- (1,481) (283) -- (1,764)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
provision for income taxes 10,203 (2,896) (47) 7,260 1,470 (450) 8,280
Provision for income taxes 3,877 303 (1,204) K 2,976 513 -- 3,489
-------- -------- -------- -------- -------- -------- --------
Net income (loss) $ 6,326 $ (3,199) $ 1,157 $ 4,284 $ 957 $ (450) $ 4,791
======== ======== ======== ======== ======== ======== ========
Net income (loss) per share:
Basic $ 0.42 $ (2.79) $ 0.27 $ 1.00 $ 0.28
======== ======== ======== ======== ========
Diluted $ 0.42 $ (2.79) $ 0.26 $ 1.00 $ 0.28
======== ======== ======== ======== ========
Weighted average shares:
Basic 14,928 1,148 16,076 954 17,030
======== ======== ======== ======== ========
Diluted 15,177 1,148 16,325 954 17,279
======== ======== ======== ======== ========
</TABLE>
F-5
<PAGE> 30
AMERICAN XTAL TECHNOLOGY, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------------------------------
PRO FORMA
AXT LYTE ADJUSTMENTS COMBINED
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
Net revenues:
Product revenues $ 23,014 $ 17,978 $ -- $ 40,992
Contract revenues 2,321 -- -- 2,321
-------- -------- -------- --------
Total net revenues 25,335 17,978 -- 43,313
-------- -------- -------- --------
Cost of net revenues:
Cost of product revenues 13,674 14,423 -- 28,097
Cost of contract revenues 1,553 -- -- 1,553
-------- -------- -------- --------
Total cost of net revenues 15,227 14,423 -- 29,650
-------- -------- -------- --------
Gross profit 10,108 3,555 -- 13,663
-------- -------- -------- --------
Operating expenses:
Sales, general and administrative 2,959 6,962 -- 9,921
Research and development 1,289 -- -- 1,289
-------- -------- -------- --------
Total operating expenses 4,248 6,962 -- 11,210
-------- -------- -------- --------
Income (loss) from operations 5,860 (3,407) -- 2,453
Interest and other income (expense) (34) (23) -- (57)
Interest expense (570) (223) -- (793)
-------- -------- -------- --------
Income (loss) before provision for income taxes 5,256 (3,653) -- 1,603
Provision for income taxes 1,998 (433) -- 1,565
-------- -------- -------- --------
Net income (loss) $ 3,258 $ (3,220) $ -- $ 38
======== ======== ======== ========
Net income (loss) per share:
Basic $ 1.11 $ 4.24 $ 0.01
======== ======== ========
Diluted $ 0.25 $ 4.24 $ --
======== ======== ========
Weighted average shares:
Basic 2,938 759 3,697
======== ======== ========
Diluted 12,839 759 13,598
======== ======== ========
</TABLE>
F-6
<PAGE> 31
AMERICAN XTAL TECHNOLOGY, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------------------
PRO FORMA
AXT LYTE ADJUSTMENTS COMBINED
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
Net revenues:
Product revenues $ 14,222 $ 15,045 $ -- $ 29,267
Contract revenues 2,005 -- -- 2,005
-------- -------- -------- --------
Total net revenues 16,227 15,045 -- 31,272
-------- -------- -------- --------
Cost of net revenues:
Cost of product revenues 9,270 10,972 -- 20,242
Cost of contract revenues 795 -- -- 795
-------- -------- -------- --------
Total cost of net revenues 10,065 10,972 -- 21,037
-------- -------- -------- --------
Gross profit 6,162 4,073 -- 10,235
-------- -------- -------- --------
Operating expenses:
Sales, general and administrative 2,033 3,501 -- 5,534
Research and development 592 -- -- 592
-------- -------- -------- --------
Total operating expenses 2,625 3,501 -- 6,126
-------- -------- -------- --------
Income from operations 3,537 572 -- 4,109
Interest and other income (expense) (72) -- -- (72)
Interest expense (170) -- -- (170)
-------- -------- -------- --------
Income before provision for income taxes 3,295 572 -- 3,867
Provision for income taxes 1,249 267 -- 1,516
-------- -------- -------- --------
Net income $ 2,046 $ 305 $ -- $ 2,351
======== ======== ======== ========
Net income per share:
Basic $ 0.71 $ 0.43 $ 0.65
======== ======== ========
Diluted $ 0.17 $ 0.43 $ 0.19
======== ======== ========
Weighted average shares:
Basic 2,882 713 3,595
======== ======== ========
Diluted 11,811 713 12,524
======== ======== ========
</TABLE>
F-7
<PAGE> 32
AMERICAN XTAL TECHNOLOGY, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BASIS OF PRESENTATION
As previously disclosed in the Company's Annual Report on Form 10-K for
the year ended December 31, 1999, the results of operations for the quarter
ended March 31, 1999 were restated for certain corrections to the account
balances of Lyte Optronics, Inc. This report on Form 8-K/A amends the previously
filed report on Form 8-K to reflect these corrections.
Pro Forma Basis of Presentation
On September 29, 1998, Lyte acquired Alpha by issuing 5,033,000 shares
of Lyte Class B common stock and 4,000,000 shares of Series B preferred stock of
Lyte to the stockholders of Alpha in exchange for all the outstanding shares of
Alpha stock. The transaction was accounted for as a purchase of Alpha by Lyte.
Lyte recorded goodwill of $2,992,000, representing the excess of the fair value
of the shares issued by Lyte over the net book value of Alpha. The goodwill is
being amortized on a straight-line basis over 5 years.
On May 28, 1999, AXT acquired Lyte through the issuance of 2,363,000
shares of AXT common stock and 983,000 shares of preferred stock of AXT in
exchange for all of the issued and outstanding capital stock of Lyte. In
addition, Lyte's options and warrants representing 455,000 shares of Lyte common
stock were assumed by AXT and converted into AXT's options and warrants
representing 115,000 shares of AXT common stock. The merger of AXT and Lyte was
accounted for as a pooling of interests.
The unaudited pro forma combined financial statements have been
prepared to reflect the merger of AXT and Lyte as if AXT and Lyte had been
combined for all periods presented, and the acquisition of Alpha by Lyte as if
the acquisition had occurred on January 1, 1998.
The unaudited pro forma combined financial statements reflect the
issuance of 2,363,000 shares of AXT common stock and 983,000 shares of preferred
stock of AXT in exchange for all of the issued and outstanding capital stock of
Lyte as of the date of the merger, which resulted in exchange ratios of
approximately 0.252682 share of AXT common stock for each share of Lyte common
stock and 0.245765 share of AXT preferred stock for each share of Lyte preferred
stock.
2. MERGER TRANSACTION COSTS
AXT and Lyte incurred direct transaction costs of approximately
$2,810,000 associated with the merger, which were charged to operations during
the quarter ended June 30, 1999, the period in which the transaction was
consummated. There can be no assurance that AXT will not incur additional
charges in subsequent quarters to reflect costs associated with the merger or
that management will be successful in their efforts to integrate the operations
of the respective companies. This charge is an estimate and is subject to
change.
3. INCOME TAXES
The provision for income taxes does not reflect the benefit of Lyte's
net operating losses due to certain limitations in utilization and uncertainty
surrounding the realization of the tax benefits associated with such losses.
4. PRO FORMA ADJUSTMENTS
The following pro forma adjustments have been made to the historical
financial statements of AXT, Lyte and Alpha based upon preliminary estimates and
assumptions made by management for the purpose of preparing the unaudited pro
forma combined condensed financial statements.
A. To eliminate inter company accounts receivable and payable
balances between AXT and Lyte at March 31, 1999.
B. To eliminate inter company profit included in Lyte's inventory
at March 31, 1999.
C. To eliminate inter company notes receivable and payable
balances between AXT and Lyte at March 31, 1999.
D. To recapture inter company profit included in Lyte's inventory
at December 31, 1998.
2
<PAGE> 33
AMERICAN XTAL TECHNOLOGY, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
E. To eliminate inter company sales from AXT to Lyte for the
three months ended March 31, 1999.
F. To eliminate inter company sales from AXT to Lyte for the year
ended December 31, 1998.
G. To eliminate inter company profit included in Lyte's inventory
at December 31, 1998.
H. To eliminate inter company sales and purchases among AXT, Lyte
and Alpha during the period from January 1, 1998 to September
28, 1998.
I. To reflect the additional amortization expenses related to
goodwill resulting from the acquisition of Alpha.
J. To eliminate intercompany accounts receivable and payable
between AXT and Lyte at December 31, 1998.
K. To eliminate allowance for deferred tax asset at Lyte as the
combined entity is more likely than not to utilize the
deferred tax asset.
L. To realize tax benefit on net loss from Lyte's operations.
5. PRO FORMA NET INCOME (LOSS) PER SHARE
The pro forma combined basic and diluted net income (loss) per share is
based on the combined weighted average number of common shares of AXT Common
Stock and Lyte Common Stock outstanding for each period using the relevant
exchange ratios based on the issuance of approximately 2,247,465 shares of AXT
Common Stock and 980,655 shares of AXT Preferred Stock for all of the
outstanding shares of Lyte as of the acquisition date. All convertible preferred
stock, warrants and employee stock options have been included in the computation
of pro forma combined diluted net income per share using the treasury stock
method to the extent such instruments are dilutive for the periods presented.
3
<PAGE> 34
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
AMERICAN XTAL TECHNOLOGY, INC.
Date: August 28, 2000 By: /s/ Donald L. Tatzin
Donald L. Tatzin
Chief Financial Officer
4
<PAGE> 35
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
2.1* Agreement and Plan of Reorganization dated May 27, 1999.
2.2* Certificate of Merger dated May 27, 1999, filed with the
Secretary of State of the State of Delaware on May 28, 1999.
2.3* Articles of Merger dated May 27, 1999, filed with the
Secretary of State of the State of Nevada on May 28, 1999.
3.1* Certificate of Designations, Preferences and Rights of
Series A Preferred Stock, as filed with the Secretary of
State of the State of Delaware on May 27, 1999.
23.1* Consent of Arthur Andersen
99.1* Company press release dated May 27, 1999.
</TABLE>
----------------------
* Previously filed.
