<PAGE>
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): OCTOBER 17, 2000
FINISAR CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 000-27999 94-3038428
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
1308 MOFFETT PARK DRIVE
SUNNYVALE, CALIFORNIA 94089
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 548-1000
<PAGE>
ITEM 2. ACQUISITION OF ASSETS.
This Form 8-K/A amends the Current Report on Form 8-K filed on November
1, 2000 to file the Financial Statements and Pro Forma Financial Information
identified in Items 7(a) and 7(b) below.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial statements of Sensors Unlimited, 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.
<PAGE>
SENSORS UNLIMITED, INC.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
TOGETHER WITH AUDITORS' REPORT
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Sensors Unlimited, Inc.:
We have audited the accompanying balance sheets of Sensors Unlimited, Inc. (a
New Jersey corporation) as of December 31, 1999 and 1998, and the related
statements of income, changes in stockholders' equity and cash flows for the
years 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 audits provide 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 Sensors Unlimited, Inc. as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States.
/s/ ARTHUR ANDERSEN LLP
Roseland, New Jersey
January 28, 2000
<PAGE>
SENSORS UNLIMITED, INC.
BALANCE SHEETS AS OF
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS 1999 1998
------ ----------- -----------
CURRENT ASSETS:
<S> <C> <C>
Cash $ 371,673 $ 7,911
Accounts receivable, less allowance for doubtful accounts of $40,000
and $10,000 in 1999 and 1998, respectively (Note 1) 1,809,325 956,272
Unbilled costs (Note 1) 464,524 354,949
Inventory (Note 1) 696,093 431,181
Prepaid expenses 24,763 20,118
----------- -----------
Total current assets 3,366,378 1,770,431
PROPERTY AND EQUIPMENT, net (Notes 1 and 2) 848,214 594,913
OTHER ASSETS 242,325 22,151
----------- -----------
Total assets $ 4,456,917 $ 2,387,495
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Short-term borrowings and current maturities of long-term debt (Note 3) $ 111,535 $ 122,948
Accounts payable 918,535 803,719
Accrued expenses 338,126 310,712
Deferred revenue (Note 1) 41,477 170,624
----------- -----------
Total current liabilities 1,409,673 1,408,003
LONG-TERM DEBT (Note 3) 43,816 987,824
----------- -----------
Total liabilities 1,453,489 2,395,827
----------- -----------
COMMITMENTS (Note 6)
STOCKHOLDERS' EQUITY (DEFICIT) (Note 4):
Preferred stock, $.01 par value, 2,000,000 shares authorized, none issued
or outstanding -- --
Common stock, $.01 par value, 5,000,000 shares authorized, 750,833
and 750,000 shares issued and outstanding as of December 31, 1999
and 1998, respectively 22,033 22,000
Retained earnings (deficit) 2,984,921 (26,806)
Treasury stock, 219 shares at cost (3,526) (3,526)
----------- -----------
Total stockholders' equity (deficit) 3,003,428 (8,332)
----------- -----------
Total liabilities and stockholders' equity (deficit) $ 4,456,917 $ 2,387,495
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
2
<PAGE>
SENSORS UNLIMITED, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
REVENUES (Note 1):
<S> <C> <C>
Net product sales $ 8,402,623 $ 2,790,703
Contract revenues 3,939,758 2,992,617
----------- -----------
12,342,381 5,783,320
----------- -----------
OPERATING EXPENSES:
Cost of product sales 2,380,632 1,053,264
Cost of contract revenues 2,933,042 1,981,562
Research and development expense 383,904 341,710
Selling, general and administrative expense 3,233,201 2,290,825
----------- -----------
8,930,779 5,667,361
----------- -----------
Operating income 3,411,602 115,959
OTHER EXPENSE -- Interest expense, net (Note 3) 75,700 104,038
----------- -----------
Income before income tax expense 3,335,902 11,921
INCOME TAX EXPENSE (Note 1) 284,675 200
----------- -----------
Net income $ 3,051,227 $ 11,721
=========== ===========
Net income per common share
Basic $ 4.01 $ 0.02
=========== ===========
Diluted $ 3.05 $ 0.01
=========== ===========
Shares used in computing net income per share
Basic 750,198 749,781
=========== ===========
Diluted 988,564 964,864
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
3
<PAGE>
SENSORS UNLIMITED, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Common Stock Retained Total
-------------------------- Earnings Treasury Stockholders'
Shares Amounts (Deficit) Stock Equity (Deficit)
----------- ----------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1997 750,000 $ 22,000 $ (38,527) $ (3,526) $ (20,053)
Net income -- -- 11,721 -- 11,721
----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1998 750,000 22,000 (26,806) (3,526) (8,332)
Distributions paid to stockholders -- -- (39,500) -- (39,500)
Exercise of stock options 833 33 -- -- 33
Net income -- -- 3,051,227 -- 3,051,227
----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1999 750,833 $ 22,033 $ 2,984,921 $ (3,526) $ 3,003,428
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
4
<PAGE>
SENSORS UNLIMITED, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 3,051,227 $ 11,721
Adjustments to reconcile net income to net cash provided by operating
activities-
Depreciation 218,389 198,308
Provision for bad debts 43,060 --
Provision for obsolescence 53,567 --
Change in assets and liabilities-
Increase in accounts receivable (896,113) (298,466)
Increase in unbilled costs (109,575) (72,980)
Increase in inventory (318,479) (150,152)
(Increase) decrease in prepaid expenses (4,645) 20,903
Increase in other assets (60,174) (12,433)
Increase in accounts payable 114,816 338,724
Increase (decrease) in accrued expenses 27,414 (31,735)
(Decrease) increase in deferred revenue (129,147) 49,290
----------- -----------
Net cash provided by operating activities 1,990,340 53,180
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (471,690) (142,569)
Deposit for construction (160,000) --
----------- -----------
(631,690) (142,569)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under subordinated convertible promissory
note
(776,000) 186,000
Net repayments under line of credit (74,000) (6,000)
Repayment of notes payable (105,421) (112,670)
Exercise of stock options 33 --
Distributions paid to stockholders (39,500) --
----------- -----------
Net cash (used in) provided by financing activities (994,888) 67,330
----------- -----------
Net increase (decrease) in cash 363,762 (22,059)
CASH, beginning of year 7,911 29,970
----------- -----------
CASH, end of year $ 371,673 $ 7,911
----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for-
Interest $ 68,249 $ 104,038
Income taxes 274,675 200
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
5
<PAGE>
SENSORS UNLIMITED, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
1. THE COMPANY AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
Sensors Unlimited, Inc. (the "Company") was established in 1991 to capitalize
on advances in III-V compound materials technology for telecommunications and
imaging applications in the 1.0 micrometer - 1.2 micrometer infrared
spectrum. The Company performs applied research and development and
manufacturing of state-of-the-art Indium Gallium Arsenide (InGaAs)
photodetector arrays and cameras. The Company is recognized as a leader in
the field of detector arrays for wavelength division multiplexing channel
monitors, cameras and imaging products. The arrays are used in dense
wavelength division multiplexing (DWDM) fiber optic systems addressing the
demand for bandwidth on the Internet.
USE OF 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 assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
REVENUE
Revenue derived from sales of products is recognized upon shipment, passage of
title and when all significant obligations of the Company have been satisfied.
Revenue derived from research and development contracts is recognized in the
same period as the professional services are rendered, related costs are
incurred and significant contract terms have been satisfied.
Revenue from research and development contracts that include performance
milestones is recognized in accordance with the terms of the respective
contracts. Revenue from achievement of milestone events is recognized when all
parties concur that the scientific results stipulated in the agreement have been
met. Unbilled costs represent revenues provided in excess of amounts billed.
Deferred revenue represents billings in excess of costs and earnings and
customer advances.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company provides an allowance for doubtful accounts, which is based upon a
review of outstanding receivables as well as historical collection information.
In determining the amount of the allowance, management is required to make
certain estimates and assumptions regarding the timing and amount of collection.
6
<PAGE>
SENSORS UNLIMITED, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
INVENTORY
Inventory is stated at the lower of cost (moving average method) or market. The
following is a summary of inventory at December 31, 1999 and 1998-
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Raw materials and spare parts $ 652,476 $ 400,669
Finished goods 103,617 70,512
--------- ---------
756,093 471,181
Inventory reserve (60,000) (40,000)
--------- ---------
$ 696,093 $ 431,181
========= =========
</TABLE>
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated using the
straight-line method over the estimated useful lives of the respective assets,
which range from three to seven years.
The Company reviews the recoverability of its long-lived assets when events or
changes in circumstances arise in order to identify business conditions which
may indicate a possible impairment. The Company believes that there have been no
such events or changes in circumstances. The assessment for potential impairment
is based primarily on the Company's ability to recover the unamortized balance
of its long-lived assets from expected future cash flows from its operations on
an undiscounted basis.
INCOME TAXES
The Company has elected to be treated as an "S" corporation for Federal income
tax purposes. The stockholders are liable for income taxes on the Company's
taxable income, as it passes through to the stockholders' individual income tax
returns. During 1999 and 1998, the Company has provided for state income taxes
at statutory rates. Effective January 1, 2000, the Company has elected to be
taxed as an "S" corporation in the State of New Jersey and will pay a reduced
(2%) state corporate income tax on its taxable income. Deferred state income
taxes for differences in timing in reporting income for financial statement and
tax purposes are not significant.
During 1999 and 1998, the Company utilized approximately $94,000 and $58,000,
respectively, of state net operating loss carryforwards to offset taxable
income. At December 31, 1999, all state net operating loss carryforwards have
been utilized.
Subsequent to the year-ended December 31, 1999, the Company anticipates making
distributions to stockholders to cover their income taxes relating to 1999
Company earnings.
STOCK-BASED COMPENSATION
The Financial Accounting Standards Board has issued Statement No. 123,
"Accounting for Stock-Based Compensation," which requires companies to measure
employee stock compensation plans based on the fair value method using an option
pricing model or to continue to apply APB No. 25, "Accounting for Stock Issued
to Employees," and provide pro forma footnote disclosures under the fair value
method. The Company continues to apply APB No. 25 and provides pro forma
footnote disclosures.
7
<PAGE>
SENSORS UNLIMITED, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
CONCENTRATIONS
In 1999 and 1998, approximately 32% and 52%, respectively, of revenues were
derived under contracts with agencies within the U. S. Government. In addition,
approximately 6% of 1999 revenues and 9% of 1998 revenues were derived from
export sales.
During 1999 and 1998, sales to one customer approximated 44% and 13% of
revenues, respectively. Accounts receivable from this customer as of December
31, 1999 and 1998 approximated $1,181,000 and $285,000, respectively.
2. PROPERTY AND EQUIPMENT, NET
Property and equipment as of December 31, 1999 and 1998 consists of the
following-
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Laboratory equipment $1,195,346 $ 851,405
Computer equipment and software 234,473 192,731
Furniture and fixtures 177,032 100,125
Leasehold improvements 137,001 127,901
---------- ----------
1,743,852 1,272,162
Less- Accumulated depreciation 895,638 677,249
---------- ----------
$ 848,214 $ 594,913
========== ==========
</TABLE>
3. BORROWINGS
Borrowings as of December 31, 1999 and 1998 consist of the following-
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Equipment loan $ 148,975 $ 236,607
Note payable 6,376 24,165
Subordinated convertible promissory note -- 776,000
Lines of credit -- 74,000
---------- ----------
155,351 1,110,772
Less- Current maturities 111,535 122,948
---------- ----------
$ 43,816 $ 987,824
========== ==========
</TABLE>
On October 5, 1999, a bank extended a $1,900,000 line of credit to the Company,
secured by substantially all Company assets and partially guaranteed by the
Company's president and primary stockholder. The proceeds are restricted for use
by the Company solely for the purchase of equipment related to the Company's
business and to finance the construction of additional space within the
Company's place of business (see Note 5). The line of credit terminates on April
15, 2000, and is expected to be converted into a promissory note payable. As of
December 31, 1999, there were no amounts outstanding under the line of credit.
8
<PAGE>
SENSORS UNLIMITED, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
Pursuant to a subordinated convertible promissory note dated March 5, 1997, the
Company borrowed $800,000 from its president, and primary stockholder, and
utilized the proceeds to repay a note payable due April 30, 1997 to a bank. The
subordinated convertible promissory note was convertible into the Company's
common stock on a mandatory basis upon the consummation of an initial equity
financing by the Company, such number of shares being equal to the outstanding
principal and interest under the note outstanding divided by the price per share
paid in connection with the initial equity financing. The note was also
convertible at the option of the holder at any time into shares of Company
common stock, cash or any combination thereof. During 1999, the Company repaid
the balance on the subordinate convertible promissory note. On August 6, 1999,
the credit agreement was amended to allow borrowings in amounts up to $300,000.
On March 6, 1997, a bank extended a $300,000 line of credit to the Company,
secured by substantially all Company assets and guaranteed by the Company's
president. On August 6, 1999, the line of credit was increased to $1,000,000,
and was amended to bear interest at the bank's base rate, as defined, plus 1%
(9.5% as of December 31, 1999). As of December 31, 1999 and 1998, $0 and $74,000
was outstanding under the line of credit, respectively. During 1999, all amounts
outstanding were repaid by the Company. This facility matures on April 30, 2000
and it is the Company's intent to renew the facility.
On August 31, 1995, the Company entered into a note payable agreement with a
bank for $500,000. On March 31, 1998, the Company refinanced the remaining note
balance of $315,476. The refinanced note requires 36 monthly installments of
$8,763 plus interest at the prime rate plus 1.5% (10% as of December 31, 1999).
The principal balance outstanding was $148,975 and $236,607 as of December 31,
1999 and 1998, respectively.
The Company's debt agreements contain covenant restrictions, which, among other
things, require minimum financial ratios and the maintenance of minimum net
worth, as defined.
On April 17, 1995, the Company entered into a note payable with a third party
for $75,000. The note has an annual interest rate of 11.0% and requires 60
monthly installments of $1,631 which commenced May 1, 1995. The principal
balance outstanding was $6,376 and $24,165 as of December 31, 1999 and 1998,
respectively.
The future principal amounts due under the aforementioned loans are as follows-
<TABLE>
<CAPTION>
<S> <C>
2000 $ 111,535
2001 43,816
------------
$ 155,351
============
</TABLE>
4. STOCK OPTION PLAN
The Company established the 1993 Stock Option Plan ("1993 Plan") to offer
employees and consultants to the Company, incentive to enhance the long-term
objectives of the Company. The 1993 Plan includes both incentive and
nonqualified stock options. 230,000 shares of the Company's common stock have
been reserved for issuance under the 1993 Plan. Options are issued at the
discretion of the Board of Directors and at such amounts that the Board of
Directors has determined is the fair value at the date of grant. Options vest
25% on the first anniversary of the grant and then ratably over 36 months
following the first anniversary.
9
<PAGE>
SENSORS UNLIMITED, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
During 1997, the Company established the 1997 Stock Option Plan ("1997 Plan") to
attract and retain personnel, to provide additional incentive to employees,
nonemployee members of the Board and consultants of the Company. The 1997 Plan
includes both incentive and nonqualified stock options. 150,000 shares of the
Company's common stock has been reserved for issuance under the 1997 Plan. A
committee appointed by the Board of Directors determines option grants, their
related fair value at the date of grant, the related exercise prices and the
vesting period.
In accordance with Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation" (FAS 123), the fair value of option
grants is estimated on the date of grant using the Black-Scholes option-pricing
model for proforma footnote purposes with the following assumptions used for
grants in all years-dividend yield of 0%, risk-free interest rate of 6% and
expected option life of 10 years. The weighted average fair value of options
granted during 1999 and 1998 was $2.23 and $0.74, respectively. The activity and
options outstanding under the Plans are as follows-
<TABLE>
<CAPTION>
Weighted
Average
Number of Exercise
Shares Price
------- ---------
<S> <C> <C>
Outstanding, December 31, 1997 (191,480 exercisable)- 243,000 0.19
Granted 27,500 1.65
Forfeited (13,000) 1.65
------- ---------
Outstanding, December 31, 1998 (214,438 exercisable)- 257,500 $ 0.27
Granted 18,000 1.65
Exercised (1,000) 0.04
Forfeited (11,000) 1.65
------- ---------
Outstanding, December 31, 1999 263,500 $ 0.31
------- ---------
Exercisable, December 31, 1999 229,563 $ 0.16
======= =========
</TABLE>
The following table summarizes information about stock options outstanding at
December 31, 1999-
<TABLE>
<CAPTION>
Number Weighted Weighted Number
Outstanding at Average Average Exercisable at
December 31, Remaining Exercise December 31,
Exercise Prices 1999 Life Price 1999
--------------- -------------- --------- -------- --------------
<S> <C> <C> <C> <C>
$ 0.04 219,000 3.0 $ 0.04 212,854
1.65 44,500 6.6 1.65 16,709
0.04 to 1.65 263,500 3.6 0.31 229,563
</TABLE>
Subsequent to December 31, 1999, the Company granted stock options to purchase
99,000 shares of the Company's common stock at an exercise price of $5.00, the
estimated fair value at the date of grant.
10
<PAGE>
SENSORS UNLIMITED, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
As permitted by FAS 123, the Company has chosen to continue accounting for stock
options at their intrinsic value. Accordingly, no compensation expense has been
recognized for its stock option compensation plans. Had the fair value method of
accounting been applied to the Company's stock option plans, the tax-effected
impact would be as follows-
<TABLE>
<CAPTION>
1999 1998
------------- ----------
<S> <C> <C>
Net income as reported $ 3,051,227 $ 11,721
Estimated fair value of the year's option grants, net of tax 11,156 5,928
------------- ----------
Net income adjusted $ 3,040,071 $ 5,793
============= ==========
</TABLE>
This proforma impact only takes into account options granted since January 1,
1995 and is likely to increase in future years as additional options are granted
and amortized over the vesting period.
5. COMMITMENTS
In January 1996, the Company signed a Patent and Technical information License
Agreement with a third party research provider. The Agreement grants the Company
a nonexclusive, worldwide license relating to certain technology for a period of
twelve years. The Company is obligated to pay to the third party research
provider a royalty equal to specified percentages of net product sales, as
defined. Royalty rates are as follows-
<TABLE>
<CAPTION>
Net Product Sales Rate
----------------- ------
<S> <C>
Up to $1,000,000 10%
$1,000,000 - $3,000,000 8%
$3,000,000 - $5,000,000 6%
$5,000,000 - $10,000,000 4%
In excess of $10,000,000 3%
</TABLE>
Royalty expense under this agreement was approximately $23,000 and $25,000 in
1999 and 1998, respectively.
The Company rents office space under a noncancellable lease agreement that
expires January 1, 2001. The future minimum lease obligations under the
agreement are as follows-
2000 $ 173,000
============
During 1999 and 1998, rent expense approximated $173,000 and $136,000,
respectively.
On November 4, 1999, the Company entered into an $800,000 agreement with a
contractor for the construction of additional space within the Company's place
of business to be completed in 2000. During 1999, the Company paid a $160,000
down payment on the construction which is included in other assets as of
December 31, 1999.
11
<PAGE>
Sensors Unlimited, Inc.
Unaudited Financial Statements
September 30, 2000
--------------------------------------------------------------------------------
SENSORS UNLIMITED, INC.
UNAUDITED BALANCE SHEET
SEPTEMBER 30, 2000
(in thousands)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash $ 427
Accounts receivable, net 3,695
Accounts receivable, other 357
Inventory 1,615
Prepaid expenses 194
----------
Total current assets 6,288
Property and equipment, net 4,464
Other assets 85
----------
Total assets $10,837
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current maturities of long-term debt $ 1,141
Accounts payable 1,504
Accrued compensation 553
Other accrued liabilities 501
Dividend payable 5,723
Income tax payable 40
----------
Total current liabilities 9,462
Long term debt 1,515
Stockholder's deficit:
Preferred stock -
Common stock 382
Accumulated deficit (522)
----------
Total stockholders' deficit (140)
----------
Total liabilities and stockholders' equity $10,837
==========
</TABLE>
See accompanying notes to unaudited financial statements.
-------------------------------------------------------------------------------
12
<PAGE>
SENSORS UNLIMITED, INC.
UNAUDITED STATEMENTS OF OPERATIONS
Nine months ended September 30
(in thousands, except per share data)
<TABLE>
<CAPTION>
2000 1999
-------------------------------
<S> <C> <C>
Revenue $ 14,597 $ 5,087
Cost of revenue 5,228 1,626
-------------- --------------
Gross profit 9,369 3,461
Operating expenses:
Research and development 1,338 --
Sales and marketing 1,738 629
General and administrative 1,551 562
-------------- --------------
Total operating expenses 4,627 1,191
-------------- --------------
Operating income 4,742 2,270
Interest expense 36 73
-------------- --------------
Income before income tax expense 4,706 2,197
Income tax expense 100 100
-------------- --------------
Net income $ 4,606 $ 2,097
============== ==============
Net income (loss) per common share
Basic $ (4.50) $ 2.75
============== ==============
Diluted $ (4.50) $ 2.09
============== ==============
Shares used in computing net income (loss) per share
Basic 780 750
============== ==============
Diluted 780 989
============== ==============
</TABLE>
See accompanying notes to unaudited financial statements.
-----------------------------------------------------------------------------
13
<PAGE>
SENSORS UNLIMITED, INC.
UNAUDITED STATEMENT OF CASH FLOWS
Nine months ended September 30
(in thousands)
<TABLE>
<CAPTION>
2000 1999
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 4,606 $ 2,097
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 439 141
Changes in operating assets and liabilities
Accounts receivable (1,430) (86)
Accounts receivable, other (348) (526)
Inventory (919) (135)
Prepaid expenses (169) (34)
Other assets 157 --
Accounts payable 571 (182)
Accrued compensation 401 (135)
Other accrued liabilities 298 (25)
Income tax payable 30 --
---------- ----------
Net cash provided by operating activities 3,636 1,115
---------- ----------
INVESTING ACTIVITIES:
Purchases of property and equipment (4,055) (221)
---------- ----------
FINANCING ACTIVITIES:
Net borrowings under line of credit 800 --
Net borrowings under notes payable 1,702 (724)
Proceeds from exercise of stock options 363 --
Dividends payable 5,723 --
Distributions paid to stockholders (8,113) (34)
---------- ----------
Net cash provided by financing activities 475 (758)
---------- ----------
Net increase in cash 56 136
Cash, beginning of period 371 8
---------- ----------
Cash, end of period $ 427 $ 144
========== ==========
</TABLE>
See accompanying notes to unaudited financial statements.
-----------------------------------------------------------------------------
14
<PAGE>
SENSORS UNLIMITED, INC.
Notes to Unaudited Financial Statements
September 30, 2000
(1) Basis of Presentation
The accompanying unaudited condensed financial statements as of September 30,
2000, and for the nine months period ended September 30, 2000 and 1999 have
been prepared in accordance with generally accepted accounting principles for
interim financial statements and pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in annual financial statements prepared in
accordance with accounting principles generally accepted in the United States
have been condensed or omitted pursuant to such rules and regulations. In the
opinion of management, the unaudited condensed financial statements reflect
all adjustments (consisting only of normal recurring adjustments) necessary
for a fair presentation of the financial position at September 30, 2000 and
the operating results for the nine months ended September 30, 2000 and 1999
and the cash flows for the nine months ended September 30, 2000 and 1999.
These unaudited condensed financial statements should be read in conjunction
with the Company's audited financial statements and notes for the years ended
December 31, 1999 and 1998 included above in this 8-K/A filing.
The results of operations for the nine months ended September 30, 2000 and
1999 are not necessarily indicative of results that may be expected for any
other interim period or for the full fiscal year ending December 31, 2000.
(2) Earnings per Common Share
Basic and diluted net income per common share is presented in conformity with
the Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" (FAS 128). In accordance with FAS
128, basic net income per common share has been computed using the
weighted-average number of shares of common stock outstanding during the
period. Diluted net income per share has been computed using the
weighted-average number of shares of common stock and dilutive potential
common shares from options (under the treasury stock method) outstanding
during the period.
15
<PAGE>
(b) Unaudited consolidated pro forma financial statements of Finisar
Corporation, giving effect to the acquisition of Sensors Unlimited,
Inc., prepared pursuant to Article 11 of Regulation S-X and filed
in accordance with Item 7(b)(1) of Form 8-K.
Proforma Financial Information
The Unaudited Pro Forma Condensed Statement of Operations for the year ended
April 30, 2000 and the three months ended July 31, 2000 and the Unaudited Pro
Forma Condensed Balance Sheet as of July 31, 2000 are based on the historical
financial statements of Finisar Corporation ("Finisar") and Sensors
Unlimited, Inc. ("Sensors"), after giving effect to the acquisition of
Sensors under the purchase method of accounting and the assumptions and
adjustments described in the accompanying Notes to the Unaudited Pro Forma
Condensed Financial Statements. The Unaudited Pro Forma Condensed Statements
of Operations are presented as if the combination had taken place on May 1,
1999.
The Unaudited Pro Forma Condensed Statement of Operations for the three
months ended July 31, 2000 combines the historical three months ended July
31, 2000 for Finisar and the three months ended June 30, 2000 for Sensors.
The Unaudited Pro Forma Condensed Statement of Operations for the year ended
April 30, 2000 combines the historical year ended April 30, 2000 for Finisar
and the twelve months ended March 31, 2000 for Sensors. The Unaudited Pro
Forma Condensed Balance Sheet is presented to give effect to the acquisition
as if it occurred on July 31, 2000 and combines the balance sheet for Finisar
as of July 31, 2000 with the balance sheet of Sensors as of July 31, 2000.
The Unaudited Pro Forma Condensed Financial Statements should be read in
conjunction with the historical financial statements of Finisar and Sensors.
The pro forma information does not purport to be indicative of the results
that would have been reported if the above transaction had been in effect for
the period presented or which may result in the future.
-------------------------------------------------------------------------------
16
<PAGE>
Unaudited Pro Forma Condensed Statement of Operations
Finisar and Sensors
Year ended April 30, 2000
(in thousands, except per share data)
<TABLE>
<CAPTION>
FINISAR SENSORS FINISAR
YEAR ENDED 12 MONTHS ENDED PRO FORMA PRO FORMA
30-APR-2000 31-MAR-2000 ADJUSTMENTS 30-APR-2000
------------------------------- ------------------------------
<S> <C> <C> <C> <C>
Revenue $ 67,147 $ 11,254 $ - $ 78,401
Cost of revenues 34,190 3,472 10,986 (A) 48,648
---------- --------- -------- --------
Gross profit 32,957 7,782 (10,986) 29,753
Research and development 13,806 690 - 14,496
Sales and marketing 7,122 1,196 - 8,318
General and administrative 3,516 993 - 4,509
Amortization of deferred stock compensation 5,530 - 2,915 (A) 8,445
Amortization of intangibles - - 59,028 (A) 59,028
---------- --------- -------- --------
Total operating expenses 29,974 2,879 61,943 94,796
---------- --------- -------- --------
Income (loss) from operations 2,983 4,903 (72,929) (65,043)
Interest income (expense) 3,252 (31) - 3,221
Other income (expense), net (99) - - (99)
---------- --------- -------- --------
Income (loss) before income taxes 6,136 4,872 (72,929) (61,921)
Provision for income taxes 3,255 284 (6,286)(A) (1,570)(B)
1,177 (B)
---------- --------- -------- --------
Net income (loss) $ 2,881 $ 4,588 $(67,820) $(60,351)
---------- --------- -------- --------
---------- --------- -------- --------
Net income (loss) per share:
Basic $ 0.03 $ (0.49)
---------- --------
Diluted $ 0.02 $ (0.49)
---------- --------
Shares used in computing net income (loss) per share:
Basic 113,930 123,411 (C)
---------- --------
Diluted 144,102 123,411 (C)
---------- --------
</TABLE>
See accompanying notes to Finisar and Sensors unaudited pro forma
condensed financial statements.
17
<PAGE>
Unaudited Pro Forma Condensed Statement of Operations
Finisar and Sensors
Three months ended July 31, 2000
(in thousands, except per share data)
<TABLE>
<CAPTION>
FINISAR SENSORS FINISAR
3 MONTHS ENDED 3 MONTHS ENDED PRO FORMA PRO FORMA
31-JUL-2000 30-JUN-2000 ADJUSTMENTS 31-JUL-2000
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $ 27,212 $ 5,182 $ - $ 32,394
Cost of revenues 16,471 1,735 2,747 (A) 20,953
---------- ----------- --------- ---------
Gross profit 10,741 3,447 (2,747) 11,441
Research and development 4,314 428 - 4,742
Sales and marketing 2,507 598 - 3,105
General and administrative 1,385 571 - 1,956
Amortization of deferred stock compensation 1,699 - 729 (A) 2,428
Amortization of intangibles - - 14,757 (A) 14,757
---------- ----------- --------- ---------
Total operating expenses 9,905 1,597 15,486 26,988
---------- ----------- --------- ---------
Income (loss) from operations 836 1,850 (18,233) (15,547)
Interest income (expense) 4,445 (3) - 4,442
Other income (expense), net (22) - - (22)
---------- ----------- --------- ---------
Income (loss) before income taxes 5,259 1,847 (18,233) (11,127)
Provision for income taxes 2,036 80 (1,572)(A) 1,018 (B)
474 (B)
---------- ----------- --------- ---------
Net income (loss) $ 3,223 $ 1,767 $ (17,135) $ (12,145)
---------- ----------- --------- ---------
---------- ----------- --------- ---------
Net income (loss) per share:
Basic $ 0.02 $ (0.07)
---------- ---------
Diluted $ 0.02 $ (0.07)
---------- ---------
Shares used in computing net income (loss) per share:
Basic 149,951 159,432 (C)
---------- ---------
Diluted 165,313 159,432 (C)
---------- ---------
</TABLE>
See accompanying notes to Finisar and Sensors unaudited pro forma condensed
financial statements.
18
<PAGE>
Unaudited Pro Forma Condensed Balance Sheet
Finisar and Sensors
July 31, 2000
(in thousands)
<TABLE>
<CAPTION>
FINISAR
FINISAR SENSORS PRO FORMA PROFORMA
31-JUL-2000 31-JUL-2000 ADJUSTMENTS 31-JUL-2000
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 103,022 $ 1,582 $ - $ 104,604
Short-term investments 212,083 - - 212,083
Accounts receivable, net 20,215 1,857 - 22,072
Accounts receivable, other 1,079 810 - 1,889
Inventories 23,594 1,250 - 24,844
Income tax receivable 148 - - 148
Deferred income taxes 2,524 - - 2,524
Prepaid expenses 473 113 - 586
------------ ----------- --------- -----------
Total current assets 363,138 5,612 - 368,750
Other assets 733 85 - 818
Property, equipment and improvements, net 11,694 3,620 - 15,314
Intangible assets - - 61,706 (A) 61,706
Goodwill - - 286,070 (A) 286,070
------------ ----------- --------- -----------
Total assets $ 375,565 $ 9,317 $ 347,776 $ 732,658
------------ ----------- --------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current maturities
of long term debt $ - $ 359 $ - $ 359
Accounts payable 8,397 1,828 - 9,910
Accrued compensation 1,934 263 - 2,197
Other accrued liabilities 3,163 505 26,111 (A) 30,094
Income tax payable 2,099 40 - 2,139
------------ ----------- --------- -----------
Total current liabilities 15,593 2,995 26,111 44,699
Long term liabilities:
Deferred tax liability 392 - 28,180 (A) 28,572
Long term debt - 1,561 - 1,561
Other long term liabilities 132 - - 132
------------ ----------- --------- -----------
Total long term liabilities 524 1,561 28,180 30,265
Stockholders' equity:
Common stock 386,087 33 330,017 (A) 716,104
- - (33)(A) -
Notes receivable from stockholders (2,921) - - (2,921)
Deferred stock compensation (7,705) - (8,744)(A) (16,449)
Accumulated other comprehensive income 194 - - 194
Retained earnings (accumulated deficit) (16,207) 4,728 (4,728)(A) (39,234)
- - (23,027)(A) -
------------ ----------- --------- -----------
Total stockholders' equity 359,448 4,761 293,485 657,694
Total liabilities and stockholders' equity $ 375,565 $ 9,317 $ 347,776 $ 732,658
------------ ----------- --------- -----------
</TABLE>
See accompanying notes to Finisar and Sensors unaudited pro forma condensed
financial statements.
-------------------------------------------------------------------------------
19
<PAGE>
Notes to Finisar and Sensors Unaudited Pro Forma Condensed Financial Statements
(A) On August 16, 2000 Finisar Corporation ("Finisar") and Sensors Unlimited,
Inc.("Sensors") entered into an Agreement and Plan of Reorganization (the
"Agreement") pursuant to which Finisar acquired Sensors. The transaction
closed on October 17, 2000. Sensors Unlimited is headquartered in Princeton,
New Jersey and is a leading supplier of optical components that monitor the
performance of dense wavelength division multiplexing or DWDM, systems.
Pursuant to the Agreement, Finisar issued 18,962,141 shares of its common stock
in exchange for the outstanding shares of Sensors common stock. In addition,
Finisar assumed options to purchase Sensors common stock and reserved 381,417
shares of Finisar common stock for issuance upon the exercise of the assumed
options. At the closing of the merger transaction, the assumed Sensor options
converted into Finisar options vested to the extent of the greater of (i) 25% of
the total number of shares subject to the option or (ii) the vested percentage
of the Sensors option at the closing of the transaction, up to a maximum of 50%
of the total number of shares subject to the option. The unvested portion of
each assumed option will vest in three approximately equal annual installments
on each of the first three anniversaries of the date of closing of the
transaction, subject to the option holder's continued service with Finisar or a
subsidiary.
At the closing of the transaction, certificates representing 9,481,109 shares
of Finisar common stock were issued to the former stockholders of Sensors
(the "Initial Consideration") and 9,481,032 shares of common stock, or
approximately one-half of the shares issued pursuant to the transaction, were
deposited into escrow with U.S. Bank Trust, National Association (the
"Deferred Consideration"). One-third of the shares deposited in escrow will
be released on each of the first three anniversaries of October 17, 2000, the
closing date, subject to the achievement of certain development milestones.
If the milestones are not achieved, the escrow shares will be cancelled and
returned to the status of authorized but unissued shares. Further, one-third
of the escrow shares that would otherwise be delivered to the principal
shareholders of Sensors on the third anniversary of the closing of the
transaction will be subject to claims for indemnification by Finisar under
the Agreement and the procedures specified in the escrow agreement. Those
shares will remain in escrow until all pending claims for indemnification
have been resolved.
In addition to the Initial Consideration and Deferred Consideration, on each of
the first three anniversaries of the closing of the transaction, Finisar will
issue and deliver to the former shareholders of Sensors, on a pro rata basis,
additional shares of Finisar common stock (valued on the basis of the average
closing trading price per share of such stock on the Nasdaq National Market for
the ten trading days preceding the applicable payment date)(the "Additional
Consideration"). These shares of Finisar common stock, with an estimated value
of $48 million, will be distributed as follows:
(1) If on the first anniversary of the closing of the transaction, at least
75% of the key management and technical employees originally employed
by Sensors, or equivalent replacement employees, are then employed by
Finisar, Finisar will issue and deliver Finisar shares having an
aggregate value of $2.375 multiplied by the total number of shares
initially deposited in escrow, rounded to the nearest whole share;
(2) If on the second anniversary of the closing of the transaction, at
least 65% of the key Sensors employees, or equivalent replacement
employees, are then employed by Finisar, Finisar will issue and deliver
Finisar shares having an aggregate value of $1.58333 multiplied by the
total number of escrow shares, rounded to the nearest whole share; and
(3) If on the third anniversary of the closing of the transaction, at least
50% of the key Sensors employees, or equivalent replacement employees,
are then employed by Finisar, and if prior to that date all six
development milestones set forth in the Agreement have been achieved,
Finisar will issue Finisar shares having an aggregate value of $0.79167
multiplied by the total number of escrow shares, rounded to the nearest
whole share.
Only the Initial Consideration has been recorded for accounting purposes
since the payment of the Deferred and Additional Consideration is contingent
upon future events that are not assured of occurring beyond a reasonable
doubt. The Deferred Consideration, if any, will be recorded as additional
purchase cost at the then current market price of the common stock when the
milestones are attained. The Additional Consideration, if any, will be
recorded as additional purchase cost at the then current market price of
common stock on the first, second and third anniversaries of the closing of
the transaction. Accordingly, Finisar's initial cost to acquire Sensors is
calculated to be $356,128,000 using the price of $33.47 per share of Finisar
common stock, which is the average of the closing market prices of Finisar's
20
<PAGE>
Notes to Finisar and Sensors Unaudited Pro Forma Condensed Financial
Statements (Continued)
common stock for a period from three days before through three days after
August 16, 2000, the day the transaction was announced. The fair value of the
assumed stock options of $12.7 million, as well as estimated direct
transaction expenses of $26.1 million, have been included as a part of the
total purchase cost. Sensors currently operates as a wholly-owned subsidiary
of Finisar.
The cost to acquire Sensors has been allocated to the assets acquired and
liabilities assumed according to their respective fair values, with the excess
purchase price being allocated to goodwill. The fair value of the acquired
assets and liabilities is based upon an independent valuation.
The estimated total initial purchase cost of Sensors is as follows (in
thousands):
<TABLE>
<S> <C>
Value of securities issued......................................... $317,342
Assumption of Sensors common stock options......................... 12,675
Estimated transaction costs and expenses........................... 26,111
--------
$356,128
--------
--------
</TABLE>
The preliminary purchase price allocation as of July 31, 2000 is as follows (in
thousands):
<TABLE>
<CAPTION>
Annual
Useful Life in Amortization of
Amount Years Intangibles
-------------------------------------------------------
<S> <C> <C> <C>
Net tangible assets of Sensors $ 4,761
Intangible assets acquired:
Developed technology 54,930 5 $ 10,986
In-process research and development 23,027 N/A N/A
Assembled workforce 1,539 3 513
Customer base 1,901 3 634
Tradename 3,336 5 667
Deferred compensation 8,744 3 2,915
Goodwill 286,070 5 57,214
Deferred income tax (28,180) 3-5 (6,286)
------------------- --------------------
Total preliminary purchase price allocation $ 356,128 $ 66,643
------------------- --------------------
------------------- --------------------
</TABLE>
An independent valuation specialist performed an allocation of the total
purchase price of Sensors to its individual assets. The purchase price was
allocated to Sensors' tangible assets, specific intangible assets such as
assembled workforce, customer base, tradename, and developed technology and to
in-process research and development.
The acquired developed technology, which is comprised of products that are
already technologically feasible, mainly includes optical components that
monitor the performance of dense wavelength division multiplexing networks.
Sensors' technology enables telecommunications companies to optimize the use of
existing bandwidth in fiber optic networks. Finisar will amortize the acquired
developed technology of approximately $54.9 million on a straight-line basis
over an average estimated remaining useful life of five years.
The acquired assembled workforce is comprised of all the skilled employees and
includes the estimated cost to replace existing employees, including recruiting
and training costs and loss of productivity costs. Finisar will amortize the
value assigned to the assembled workforce of approximately $1.5 million on a
straight-line basis over an average estimated useful life of three years.
Acquired customer base is based on historical costs incurred and is comprised of
Sensors management's estimation of resources that have been devoted to the
development of the relationships with key customers.
21
<PAGE>
Notes to Finisar and Sensors Unaudited Pro Forma Condensed Financial
Statements (Continued)
Finisar will amortize the value assigned to customer relationships of
approximately $1.9 million on a straight-line basis over an average estimated
useful life of three years.
The acquired tradename is recognized for the intrinsic value of the Sensors
name and products in the marketplace. Finisar will amortize the value
assigned to the tradename of approximately $3.3 million on a straight-line
basis over an average estimated useful life of five years.
Deferred compensation expense is recognized for the intrinsic value of the
unvested Finisar options exchanged for options held by Sensors' employees. The
$8.7 million of deferred compensation will be amortized over the remaining
vesting period of approximately three years.
Goodwill, which represents the excess of the purchase price of an investment in
an acquired business over the fair value of the underlying net identifiable
assets and deferred compensation, will be amortized on a straight-line basis
over its estimated remaining useful life of five years.
In-process research and development represents that portion of the purchase
price of an acquisition related to the research and development activities
which: i) have not demonstrated their technological feasibility, and ii) have no
alternative future uses. Accordingly, the Company recognized an expense of $23.0
million during the quarter ended October 31, 2000 in conjunction with the
completion of this acquisition.
(B) Historically, Sensors elected to be treated as an "S" corporation for
Federal income tax purposes; therefore the Sensors stockholders were liable for
income taxes on Sensors' taxable income. The pro forma provision for income
taxes includes estimated income taxes on Sensor's income at a tax rate of 30%.
The pro forma combined provision for income taxes does not represent the amounts
that would have resulted had Finisar and Sensors filed consolidated income tax
returns during the periods presented.
(C) The pro forma basic and diluted net earnings per share are based on the
weighted average number of shares of Finisar common stock outstanding during the
period and the Initial Consideration of 9,481,109 shares issued by Finisar in
the transaction. Dilutive securities included options outstanding to purchase
common stock.
22
<PAGE>
(c) Exhibits.
Exhibit No. Description
----------- -----------
2.1* Agreement and Plan of Reorganization, dated as of
August 16, 2000, by and among Finisar Corporation, a
Delaware corporation, Gemstone Acquisition Corp., a
Delaware corporation and wholly owned subsidiary of
Finisar, and Sensors Unlimited, Inc., a New Jersey
corporation. Schedules and similar attachments to this
Exhibit have not been filed; Finisar will furnish
supplementally a copy of any omitted schedule to the
Commission upon request.
---------------------
* Previously filed.
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.
FINISAR CORPORATION
Date: December 29, 2000 By: /s/ Stephen K. Workman
-----------------------
Stephen K. Workman
Vice President, Finance and
Chief Financial Officer
23
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
2.1* Agreement and Plan of Reorganization, dated as of
August 16, 2000, by and among Finisar Corporation, a
Delaware corporation, Gemstone Acquisition Corp., a
Delaware corporation and wholly owned subsidiary of
Finisar, and Sensors Unlimited, Inc., a New Jersey
corporation. Schedules and similar attachments to this
Exhibit have not been filed; Finisar will furnish
supplementally a copy of any omitted schedule to the
Commission upon request.
---------------------
* Previously filed.
