SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2000
-------------------------------------------------
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from____________________________ to___________________
Commission File Number: 0-27977
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Lumenon Innovative Lightwave Technology, Inc.
---------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 98-0213257
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
8851 Trans-Canada Highway, Ville Saint-Laurent (QC) Canada H4S 1Z6
---------------------------------------------------------- -------
(Address of Principal Executive Offices) (Zip Code)
(514) 331-3738
--------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check whether the registrant: (1) has filed all reports to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.(X) Yes ( ) No
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: 36,069,153 shares of Common Stock,
$.001 par value, as of November 8, 2000.
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
LUMENON INNOVATIVE LIGHTWAVE
TECHNOLOGY, INC.
(a Development Stage Enterprise)
Consolidated Balance Sheets
(Unaudited)
(in thousands of dollars)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
September 30, September 30, June 30,
2000 2000 2000
----------------------------------------------------------------------------------------------------------------------------
(US$) (CAN$) (CAN$)
(note 6)
Assets
Current assets:
<S> <C> <C> <C>
Cash and cash equivalents $ 304 $ 458 $ 1,125
Term deposits 30,866 46,515 4,300
Interest and sales tax receivable 1,313 1,979 366
Research tax credits receivable 201 303 191
Prepaid expenses 77 116 77
----------------------------------------------------------------------------------------------------------------------
32,761 49,371 6,059
Deposits (note 7) 1,229 1,852 1,525
Property and equipment (note 3) 12,618 19,016 4,603
Other assets 11 16 13
----------------------------------------------------------------------------------------------------------------------------
$ 46,619 $ 70,255 $ 12,200
============================================================================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 4,293 $ 6,470 $ 1,047
Accrued liabilities 387 583 325
Obligations under capital leases 357 538 235
----------------------------------------------------------------------------------------------------------------------
5,037 7,591 1,607
Convertible notes (note 4) 14,120 21,278 -
Obligations under capital leases 514 775 279
Stockholders' equity:
Share capital (note 5) 35 53 49
Additional paid-in capital (note 5) 194,211 292,676 234,864
Accumulated deficit (167,298) (252,118) (224,599)
----------------------------------------------------------------------------------------------------------------------
26,948 40,611 10,314
Commitments (note 7)
Subsequent events (note 9)
----------------------------------------------------------------------------------------------------------------------------
$ 46,619 $ 70,255 $ 12,200
============================================================================================================================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
On behalf of the Board:
______________________ Director
______________________ Director
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<PAGE>
LUMENON INNOVATIVE LIGHTWAVE
TECHNOLOGY, INC.
(a Development Stage Enterprise)
Consolidated Statements of Operations
(Unaudited)
(in thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Three months Three months hree months From
ended ended ended inception to
September 30, September 30, ptember 30, September 30,
------------------------------------------------------------------------------------------------------------------------------------
2000 2000 1999 2000
------------------------------------------------------------------------------------------------------------------------------------
(US$) (CAN$) (CAN$) (CAN$)
(note 6)
<S> <C> <C> <C> <C>
Expenses:
Research and
development $ 966 $ 1,457 $ 2,069 $ 220,926
Research tax credits (75) (113) (35) (439)
------------------------------------------------------------------------------------------------------------------------------------
891 1,344 2,034 220,487
General and administrative
expenses 2,415 3,639 487 8,519
Depreciation 364 548 91 1,441
------------------------------------------------------------------------------------------------------------------------------------
2,779 4,187 578 9,960
Other expenses (income):
Loss (gain) on foreign
exchange (472) (711) 55 (782)
Interest expense 484 729 13 771
Interest income (526) (793) (16) (1,081)
Financing charges (note 4) 15,105 22,763 - 22,763
------------------------------------------------------------------------------------------------------------------------------------
14,591 21,988 52 21,671
------------------------------------------------------------------------------------------------------------------------------------
Net loss $ 18,261 $ 27,519 $ 2,664 $ 252,118
------------------------------------------------------------------------------------------------------------------------------------
Net loss per share $ 0.53 $ 0.80 $ 0.13
-----------------------------------------------------------------------------------------------------------
Weighted average number
of shares outstanding 34,511,352 34,511,352 21,116,992
-----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-3-
<PAGE>
LUMENON INNOVATIVE LIGHTWAVE
TECHNOLOGY, INC.
(a Development Stage Enterprise)
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands of dollars)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Three months Three months Three months From
ended ended ended inception to
September 30, September 30, September 30, September 30,
------------------------------------------------------------------------------------------------------------------------------------
2000 2000 1999 2000
------------------------------------------------------------------------------------------------------------------------------------
(US$) (CAN$) (CAN$) (CAN$)
(note 6)
Cash flows from:
<S> <C> <C> <C> <C>
Operating activities:
Net loss $ (18,261) $ (27,519) $ (2,664) $ (252,118)
Adjustment for items not
involving cash:
Depreciation 364 548 91 1,441
Interest expense on
convertible notes 15,587 23,489 23,489
Compensation cost 469 707 - 999
Shares issuable for
services - - 1,892 217,359
Unrealized loss on
foreign exchange 431 650 - 650
Net change in operating assets
and liabilities (note 8) (805) (1,211) (231) (954)
------------------------------------------------------------------------------------------------------------------------------------
(2,215) (3,336) (912) (9,134)
Financing activities:
Proceeds from issuance of
common shares 3,911 5,893 3,985 23,141
Cash from the acquisition of a
subsidiary - - - 814
Share issue expenses (18) (27) (292) (1,125)
Principal repayments of
capital lease (54) (81) - (171)
Proceeds from issuance of
convertible notes 34,003 51,243 - 51,542
Debt issue costs (1,898) (2,861) (2,861)
------------------------------------------------------------------------------------------------------------------------------------
35,944 54,167 3,693 71,340
Investing activities:
Additions to property and
equipment (5,941) (8,953) (535) (13,365)
Deposits (217) (327) - (1,852)
Purchases of term deposits (38,594) (58,162) (2,787) (77,975)
Disposals of term deposits 10,582 15,947 - 31,460
Additions to other assets (2) (3) - (16)
------------------------------------------------------------------------------------------------------------------------------------
(34,172) (51,498) (3,322) (61,748)
------------------------------------------------------------------------------------------------------------------------------------
(Decrease) increase in cash
and cash equivalents (443) (667) (541) 458
Cash and cash equivalents,
beginning of period 747 1,125 1,723 -
------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 304 $ 458 $ 1,182 $ 458
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
-4-
<PAGE>
LUMENON INNOVATIVE LIGHTWAVE
TECHNOLOGY, INC.
(a Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Unaudited)
Three-month periods ended September 30, 2000 and 1999 and period from inception
(March 2, 1998) to September 30, 2000 (in thousands of Canadian dollars, except
per share amounts)
--------------------------------------------------------------------------------
In the opinion of management, the accompanying unaudited interim financial
statements, prepared in accordance with US generally accepted accounting
principles, contain all adjustments (consisting of normal recurring
accruals) necessary to present fairly the Corporation's financial position
as at September 30, 2000, June 30, 2000, its results of operations and
cash flows for the three months ended September 30, 2000 and 1999 and from
inception to September 30, 2000.
While management believes that the disclosures presented are adequate to
make the information not misleading, these consolidated financial
statements and notes should be read in conjunction with the Corporation's
Consolidated Financial Statements at June 30, 2000.
1. Organization and business activities:
The Corporation's principal business activity is to develop products
related to the Dense Wavelength Division Multiplexing market and other
photonics markets.
The Corporation is subject to a number of risks, including successful
development and marketing of its technology and attracting and retaining
key personnel. The Corporation has entered into the process of
establishing its production facilities during the three-month period ended
September 30, 2000. In order to achieve its business plan, the Corporation
anticipates the need to raise additional capital.
2. Molex agreements:
(a) Stock Restriction Agreement:
As part of financing arrangements of 1999 with Molex Incorporated
("Molex"), the Corporation entered into a stock restriction
agreement whereby no primary stockholders can sell any share to
competitors of Molex without Molex's prior consent. The agreement
includes Right of First Refusal and Preemptive rights except that
Lumenon can issue 6,000 units (one common share and a warrant for
the purchase of one common share at a price not less than $1.32
(US$0.90) per share) at a price not less than $0.74 (US$0.50) per
unit to raise capital within 24 months from the date of the
agreement.
Certain rights or restrictions might be terminated upon completion
of a Public Sale or a Public Offering as defined in the agreement.
-5-
<PAGE>
LUMENON INNOVATIVE LIGHTWAVE
TECHNOLOGY, INC.
(a Development Stage Enterprise)
Notes to Consolidated Financial Statements, Continued
(Unaudited)
Three-month periods ended September 30, 2000 and 1999 and period from inception
(March 2, 1998) to September 30, 2000 (in thousands of Canadian dollars, except
per share amounts)
--------------------------------------------------------------------------------
2. Molex agreement (continued):
(b) Teaming Agreement:
Under the terms of a teaming agreement, Molex is committed to
purchase a certain number of photonic devices of Lumenon for the
first twelve months. After the twelve-month period, Molex will have
the option to purchase up to 50% of the excess capacity of Lumenon
and both Lumenon and Molex will share Molex's profit upon resale of
those devices. Under certain circumstances, Molex may have the right
to manufacture all components of the devices in return of a royalty
as defined in the agreement.
3. Property and equipment:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
September 30, 2000
--------------------------------------------------------------------------------------------------
Accumulated Net book
Cost depreciation value
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computer equipment and software $ 672 $ 91 $ 581
Office equipment and fixtures 782 57 725
Leasehold improvements 1,550 140 1,410
Pilot plant equipment and
laboratory installation 6,601 1,153 5,448
Production equipment and laboratory
installation 10,852 - 10,852
-------------------------------------------------------------------------------------------------
$ 20,457 $ 1,441 $ 19,016
-------------------------------------------------------------------------------------------------
</TABLE>
Cost and net book value of pilot plant and production equipment held under
capital leases amount to $1,528 and $1,395 respectively as at September
30, 2000.
The Corporation is in the process of establishing its production
facilities. No depreciation was recorded with respect to production
equipment and laboratory installation.
-6-
<PAGE>
LUMENON INNOVATIVE LIGHTWAVE
TECHNOLOGY, INC.
(a Development Stage Enterprise)
Notes to Consolidated Financial Statements, Continued
(Unaudited)
Three-month periods ended September 30, 2000 and 1999 and period from inception
(March 2, 1998) to September 30, 2000 (in thousands of Canadian dollars, except
per share amounts)
--------------------------------------------------------------------------------
4. Convertible notes:
On July 25, 2000, the Corporation closed a financing involving the
issuance of $51,243 (US$35,000,000) five-year convertible notes bearing
interest at 7.5% per annum. Interest is payable upon the earlier to occur
of the repayment or conversion of the notes. The notes are convertible at
any time into the Corporation's common stock at a conversion price based
on the closing bid price of the common stock at the time of conversion
with a floor of US$7 and a ceiling of US$25.
The investors also received five-year common stock purchase warrants
entitling them to acquire a total of 5,000,800 shares exercisable on or
after January 25, 2002 and expiring on July 25, 2005. Exercise price of
the warrants is based on a formula whereby such price may vary from US$10
to US$30. In addition, the exercise price will be lower than the fair
market value except if the fair market value is equal or lower than US$10.
Related debt issue costs amounted to $2,861.
The Corporation applied APB-14 ("Accounting for Convertible Debt and Debt
Issued with Stock Purchase Warrants") and EITF 98-5 ("Accounting for
Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios"). As a result, the convertible notes were
discounted by $34,394 and are presented net of the debt discount which is
amortized over the term of the notes. Interest expense with respect to the
beneficial conversion feature of convertible notes and amortization of
debt discount was recorded in the amount of $20,960. Additional paid-in
capital was increased by $51,243 as a result of the amount allocated to
the stock purchase warrants and the beneficial conversion feature of the
notes.
-7-
<PAGE>
LUMENON INNOVATIVE LIGHTWAVE
TECHNOLOGY, INC.
(a Development Stage Enterprise)
Notes to Consolidated Financial Statements, Continued
(Unaudited)
Three-month periods ended September 30, 2000 and 1999 and period from inception
(March 2, 1998) to September 30, 2000 (in thousands of Canadian dollars, except
per share amounts)
5. Share capital:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
September 30, June 30,
2000 2000
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Authorized:
1,000,000 preferred shares, par value
of US$0.001 per share
100,000,000 common shares, par value
of US$0.001 per share
Issued and outstanding:
35,452,739 common shares (June 30, 2000 - 32,970,039) $ 53 $ 49
-----------------------------------------------------------------------------------------------------------
</TABLE>
During the three-month period ended September 30, 2000, the Corporation
concluded the following share capital transactions:
(a) Issue of shares:
2,482,700 common shares were issued for a cash consideration of
$5,893 upon exercise of options and warrants.
(b) Stock option plan:
Changes in outstanding options for the three-month period ended
September 30, 2000 were as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
Weighted average
Number exercise price per share
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding, June 30, 2000 2,277,150 $13.92 (US$9.24)
Granted 1,105,000 $35.67 (US$23.67)
Exercised (144,500) $1.53 (US$1.03)
--------------------------------------------------------------------------------------------------------
Options outstanding, September 30, 2000 3,237,650 $21.90 (US$14.53)
--------------------------------------------------------------------------------------------------------
</TABLE>
At September 30, 2000, 204,650 outstanding options are exercisable
and 3,033,000 outstanding options vest over a period of one to seven
years.
-8-
<PAGE>
LUMENON INNOVATIVE LIGHTWAVE
TECHNOLOGY, INC.
(a Development Stage Enterprise)
Notes to Consolidated Financial Statements, Continued
(Unaudited)
Three-month periods ended September 30, 2000 and 1999 and period from inception
(March 2, 1998) to September 30, 2000 (in thousands of Canadian dollars, except
per share amounts)
5. Share capital:
(c) Warrants:
The following warrants are outstanding at September 30, 2000:
-----------------------------------------------------------------------------
Warrants Expiry date Exercise price per share
-----------------------------------------------------------------------------
10,000 October 2000 $23.36 (US$15.50)
43,011 December 2000 $45.21 (US$30.00)
700,000 June 2001 $2.26 (US$1.50)
14,000 July 2003 $37.68 (US$25.00)
5,000,800 July 2005 *
-----------------------------------------------------------------------------
5,767,811
-----------------------------------------------------------------------------
* The exercise price per share, to be established in 18 months,
may vary from $15.07 (US$10.00) to $45.21 (US$30.00) subject
to the then traded value of the stock (note 4).
6. Functional currency and convenience translation:
The functional currency of the Corporation is the Canadian dollar.
US dollar amounts presented on the balance sheets, statements of
operations and cash flows are provided for convenience of reference only
and are based on the closing exchange rate at September 30, 2000, which
was $1.507 Canadian dollar per US dollar.
-9-
<PAGE>
LUMENON INNOVATIVE LIGHTWAVE
TECHNOLOGY, INC.
(a Development Stage Enterprise)
Notes to Consolidated Financial Statements, Continued
(Unaudited)
Three-month periods ended September 30, 2000 and 1999 and period from inception
(March 2, 1998) to September 30, 2000 (in thousands of Canadian dollars, except
per share amounts)
7. Commitments:
(a) Since July 1, 2000, the Corporation entered in new capital leases at
interest rate varying from 11.75% to 13.96%. Minimum lease payments
under capital lease agreements for the next four years are as
follows:
--------------------------------------------------------------------------------
2001 $ 277
2002 279
2003 236
2004 3
--------------------------------------------------------------------------------
$ 795
--------------------------------------------------------------------------------
(b) As at September 30, 2000, the Corporation is committed to purchase
equipment in the amount of $2,469 for which $1,852 was disbursed and
recorded under deposits.
(c) In addition, the Corporation is committed to acquire equipment
through capital leases in the amount of $1,464 repayable over a
period of approximately three years.
(d) On July 21, 2000, the Corporation entered into a non-exclusive
license agreement with a third party. Under the terms of this
agreement, Lumenon is committed to pay royalties on sales of
products as defined in the agreement.
-10-
<PAGE>
LUMENON INNOVATIVE LIGHTWAVE
TECHNOLOGY, INC.
(a Development Stage Enterprise)
Notes to Consolidated Financial Statements, Continued
(Unaudited)
Three-month periods ended September 30, 2000 and 1999 and period from inception
(March 2, 1998) to September 30, 2000 (in thousands of Canadian dollars, except
per share amounts)
--------------------------------------------------------------------------------
8. Supplemental cash flow disclosure:
(a) Net change in operating assets and liabilities:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Three months Three months Three months From
ended ended ended inception to
September 30, September 30, September 30, September 30,
2000 2000 1999 2000
------------------------------------------------------------------------------------------------------------------------------------
(US$) (CAN$) (CAN$) (CAN$)
Interest and sales
<S> <C> <C> <C> <C>
tax receivable $ (1,071) $ (1,613) $ (136) $ (1,979)
Research tax credits
receivable (75) (113) (38) (303)
Prepaid expenses (26) (39) 23 (116)
Accounts payable and
accrued liabilities 367 554 (80) 1,444
------------------------------------------------------------------------------------------------------------------------------------
$ (805) $ (1,211) $ (231) $ (954)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(b) Non-cash investing and financing activities:
Acquisition of property and equipment through capital leases amounts
to $880 for the three- month period ended September 30, 2000.
Capital expenditures of $5,127 are included in accounts payable at
September 30, 2000.
9. Subsequent events:
(a) On October 16, 2000, $10,549 (US$7,000) of the principal amount of
the convertible notes plus interest were converted into 616,414
common shares.
(b) In October 2000, the Corporation granted under its stock option
incentive plan 352,500 options to certain employees for the purchase
of 352,500 common shares at price varying from $23.92 (US$15.87) to
$41.50 (US$27.54)
-11-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LUMENON INNOVATIVE LIGHTWAVE
TECHNOLOGY, INC.
By: /s/ S. Iraj Najafi
-------------------------------------
S. Iraj Najafi
President and Chief Executive Officer
By:/s/ Vincent Belanger
-------------------------------------
Vincent Belanger
Vice President Finance,
Chief Financial Officer and
Treasurer (Principal Financial
Officer and Chief Accounting Officer)
Dated: November 16, 2000
-12-
