UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
LIGHTPATH TECHNOLOGIES, INC.
LightPath Technologies, Inc. (the "Company" or "LightPath") acquired, on
September 20, 2000, all of the outstanding shares of Geltech, Inc. ("Geltech"),
for an aggregate purchase price of approximately $28.3 million, comprised of
822,737 shares of Class A common stock (valued at $27.5 million). The Company
also assumed approximately $1.7 million of indebtedness of Geltech. The number
of shares of Class A common stock issued to the former shareholders of Geltech
was based on the average closing price of the Class A common stock for five days
prior to the date of the purchase agreement, August 9, 2000. Geltech, a Delaware
corporation, is a leading manufacturer of precision molded aspherical optics
used in the active telecom components market to provide a highly efficient means
to couple laser diodes to fibers or waveguides. Additionally, Geltech has a
unique and proprietary line of all-glass diffraction gratings (StableSil(R)) for
telecom applications such as optical switching, mux/demux and laser tuning as
well as a product family of Sol-Gel based waveguides.
The acquisition will be accounted for under the purchase method, whereby the
purchase price will be allocated to the underlying assets acquired and
liabilities assumed based upon their estimated fair values. The allocation of
the purchase price is in process and it is expected that approximately $9.1
million of the purchase price will be allocated to in-process research and
development which, under generally accepted accounting principles, will be
immediately expensed by LightPath. The charge to earnings will be recoginized in
the quarter ending September 30, 2000.
The unaudited Pro Forma Consolidated Financial Statements reflect the following:
(1) adjustment for the purchase accounting and preliminary estimated fair value
allocation of the assets acquired and the obligations assumed; and (2) cash paid
for acquisition costs and issuance of Class A Common Stock to acquire Geltech.
Management does not expect the preliminary allocation of the purchase price to
materially differ from the final allocation. The unaudited Pro Forma
Consolidated Balance Sheet as of June 30, 2000, was prepared as if the
transaction had occurred on that date. The unaudited Pro Forma Consolidated
Statement of Operations for the year ended June 30, 2000 was prepared as if the
transaction had occurred on July 1, 1999. The operating results of Geltech for
the year ended June 30, 2000 were derived by subtracting the activity for the
six months ended June 30, 1999 from the year ended December 31, 1999 balances
and adding the activity for the six months ended June 30, 2000.
The unaudited Pro Forma Consolidated Financial Statements have been derived from
the historical financial statements of the Company and Geltech. In the opinion
of Company management, all adjustments necessary to present fairly such Pro
Forma Consolidated Financial Statements have been made based on the terms and
structure of the acquisition.
These unaudited Pro Forma Consolidated Financial Statements are not necessarily
indicative of what actual results would have been had the transaction occurred
at the beginning of the period nor do they purport to indicate the combined
results of future operations.
These unaudited Pro Forma Consolidated Financial Statements should be read in
conjunction with the accompanying notes and with the historical financial
statements for the Company (filed previously) and Geltech's financial statements
filed herewith.
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LIGHTPATH TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2000
<TABLE>
<CAPTION>
PRO FORMA
LPTH GELTECH ADJUSTMENTS PRO FORMA
------------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 58,728,130 $ 66,532 $ (792,000)(1) $ 58,002,662
Trade accounts receivable 841,533 1,467,385 2,308,918
Inventories 1,690,058 1,291,509 2,981,567
Advances to employees and related parties 17,733 -- 17,733
Prepaid expenses and other 225,451 72,725 298,176
------------- ----------- ------------ -------------
Total current assets 61,502,905 2,898,151 (792,000) 63,609,056
Property and equipment - net 6,482,039 1,397,376 7,879,415
Intangible assets:
Goodwill and intangible assets 31,727,811 796,080 20,740,000 52,536,175
(727,716)(4)
Investment in LightChip, Inc. 1,000,000 -- 1,000,000
------------- ----------- ------------ -------------
Total assets $ 100,712,755 $ 5,091,607 $ 19,220,284 $ 125,024,646
============= =========== ============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 2,043,302 $ 612,067 $ 2,777,521
Accrued payroll and benefits 330,734 332,284 540,866
Notes payable and capital lease obligations,
current portion -- 210,218 210,218
------------- ----------- ------------ -------------
Total current liabilities 2,374,036 1,154,569 3,528,605
Deferred taxes 3,036,671(4) 3,036,671
Notes payable and capital lease obligations, net
of current portion -- 1,497,597 1,497,597
Commitments and contingencies
Redeemable common stock - E1, E2, E3 40,221 -- 40,221
Stockholders' equity
Preferred stock 1 71,589 (71,589)(3) 1
Common stock 181,363 74,700 (74,700)(3) 189,590
8,227 (1)
Additional paid-in capital 142,559,848 9,885,059 (9,885,059)(3) 170,274,675
27,714,827 (1)
Accumulated deficit (44,442,714) (7,591,907) 7,591,907 (3) (53,542,714)
(9,100,000)(4)
------------- ----------- ------------ -------------
Total stockholders' equity 98,338,719 2,439,441 16,183,613 116,961,773
------------- ----------- ------------ -------------
Total liabilities and stockholders' equity $ 100,712,755 $ 5,091,607 $ 19,220,284 $ 125,024,646
============= =========== ============ =============
</TABLE>
See accompanying notes
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LIGHTPATH TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
LPTH GELTECH ADJUSTMENTS COMBINED
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 2,266,264 $ 8,064,473 $ -- $ 10,330,737
Cost of goods sold 1,309,711 5,097,393 6,407,104
Selling, general and administrative expenses 5,942,029 2,086,753 8,028,782
Research and development expenses 1,449,347 858,061 2,307,408
Stock based compensation 3,144,980 -- 3,144,980
Acquired in-process R&D charge 4,200,000 -- 4,200,000
Amortization of intangible assets 2,418,119 58,430 5,094,167 (4)
(35,283)(4) 7,535,433
------------ ----------- ------------ ------------
Operating loss (16,197,922) (18,522) (5,058,884) (21,292,970)
Other income(expense) 587,855 (231,145) (47,520)(5) 326,832
------------ ----------- ------------ ------------
Net loss (15,610,067) (249,667) (5,106,404) (20,966,138)
Imputed dividends and premiums on Preferred Stock (2,231,943) -- (2,231,943)
------------ ----------- ------------ ------------
Net loss applicable to common shareholders $(17,842,010) $ (249,667) $ (5,106,404) $(23,198,081)
============ =========== ============ ============
Basic and diluted net loss per share $ (1.86) $ (2.23)
============ ============
Number of shares used in per share calculation 9,586,817 822,737 (6) 10,409,554
============ ============ ============
</TABLE>
See accompanying notes
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LIGHTPATH TECHNOLOGIES, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
1. Adjustment to cash and stockholders equity consists of the following:
Acquisition costs $ 792,000
Issuance of 822,737 shares of LightPath
Class A common stock 27,500,000
Estimated fair value of stock options and
warrants based on the Black-Scholes
valuation model 223,054
-----------
Cost of acquisition $28,515,054
===========
The warrants were valued using the following assumptions: exercise price of
$25.27; contractual life of 3.75 years; discount rate of 7%; dividend yield
of 0%; and expected volatility of 100%.
2. Excess of estimated cost of acquisition over the fair value of the tangible
net assets acquired and the liabilities assumed:
Purchase price plus acquisition costs $28,515,054
Less the fair value of the tangible net
assets acquired and liabilities assumed of
Geltech 1,711,725
-----------
Excess purchase price $26,803,329
===========
3. Elimination of Geltech historical stockholders' equity.
4. The purchase price was allocated to the tangible net assets (estimated
value of $1,711,725) and identifiable intangible assets. The value of the
tangible net assets acquired approximated their historical book value at
the date of the acquisition excluding previously acquired goodwill and
certain licensed technology at the acquisition date (historical
amortization of $35,283 was also eliminated). In addition, a deferred tax
liability of approximately $8.3 million will be recorded together with a
reduction in the Company's deferred tax valuation allowance of
approximately $5.3 million at the acquisition date. The estimated fair
value of identifiable intangible assets based on assessment of management
along with their estimated lives for amortization, are as follows:
Annual
Life Fair Value Amortization
---- ---------- ------------
In-process research and development * $ 9,100,000 --
Developed technology 4 $15,600,000 $3,900,000
Customer related intangibles 8 $ 2,700,000 $ 337,500
Licensed technology 5 $ 600,000 $ 120,000
Covenants not-to-compete 3 $ 1,100,000 $ 366,667
Acquired work force 2 $ 740,000 $ 370,000
----------- ----------
Total $29,840,000 $5,094,167
=========== ==========
----------
* The Company will record an immediate write-off of in-process research and
development based on an assessment of purchased technology of Geltech at
the acquisition date. A non-recurring charge of approximately $9.1 million
will be reflected in the actual financial statements of the Company in the
quarter ending September 30, 2000. The in-process research and development
charge is not reflected in the unaudited pro forma consolidated income
statements for the year ended June 30, 2000. The assessment determined that
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$9.1 million of Geltech's purchase price represented technology that did
not meet the accounting definitions of "completed technology," and thus
should be charged to earnings under generally accepted accounting
principles. This assessment analyzed certain diffractive gratings,
waveguides, lens arrays and sub-assembly technologies that were under
development at the time of acquisition. These programs were in various
stages of completion ranging from 30% to 50% of completion, with estimated
completion dates through December 2001. This in-process research will have
no alternative future uses if the products are not feasible. Revenues from
in-process products are estimated primarily beginning in fiscal 2002, with
projected research and development costs-to-complete of approximately $2.25
million. The fair value of these development programs was determined in
accordance with views expressed by the staff of the Securities and Exchange
Commission.
5. Reduction of interest income for the year ended June 30, 2000 due to the
use of cash investments to fund a portion of the purchase price.
6. The number of shares used in Basic net loss per common share calculation
was adjusted as if the 822,737 shares for the acquisition were issued as of
July 1, 1999. Basic net loss per common share is computed based upon the
weighted average number of common shares outstanding during each period
presented. The computation of Diluted net loss per common share does not
differ from the basic computation because potentially issuable securities
would be anti-dilutive.
