================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 8-K/A
Amendment No. 1
----------
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 14, 2000
Commission File Number 000-27548
LIGHTPATH TECHNOLOGIES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 86-0708398
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6820 Academy Parkway East, NE
Albuquerque, New Mexico 87109
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(505) 342-1100
----------------------------------------------------
(Registrant's telephone number, including area code)
================================================================================
<PAGE>
LIGHTPATH TECHNOLOGIES, INC.
FORM 8-K/A-1
LightPath Technologies, Inc. hereby amends the following items, financial
statements, exhibits, or other portions of its Current Report on Form 8-K,
originally filed with the Securities and Exchange Commission on April 19, 2000
(the "Form 8-K") as set forth in the pages attached hereto:
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of the Businesses Acquired.
The audited financial statements of Horizon Photonics, Inc. are attached as
Exhibit 99.2.
(b) Pro Forma Financial Information.
The unaudited pro forma consolidated financial statements of LightPath
Technologies, Inc. are attached as Exhibit 99.3.
(c) Exhibits.
Exhibit Description
------- -----------
23.1 Consent of Windes & McClaughry Accountancy Corporation (1)
99.1 Press release issued April 17, 2000 (2)
99.2 Financial statements of Horizon Photonics, Inc. (1)
99.3 Pro Forma financial statements of LightPath Technologies, Inc. (1)
----------
(1) Filed herewith.
(2) Filed on Form 8-K dated April 19, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed in its behalf by the
undersigned, thereunto duly authorized.
LIGHTPATH TECHNOLOGIES, INC.
By: /s/ Donald Lawson May 17, 2000
------------------------------------
Donald Lawson
CEO and President
2
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
23.1 Consent of Windes & McClaughry Accountancy Corporation
99.2 Financial statements of Horizon Photonics, Inc.
99.3 Pro Forma financial statements of LightPath Technologies, Inc.
To the Board of Directors
of LightPath Technologies, Inc.
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement (No.'s 333-23511, 333-23515,
333-41705, 333-92017, and 333-96083) on Form S-8 and (No.'s 333-37443,
333-39641, and 333-94303) on Form S-3 of LightPath Technologies, Inc. of our
report dated May 3, 2000, relating to the financial statements of Horizon
Photonics, Inc., which appears in the Current Report on Form 8-K/A-1 of
LightPath Technologies, Inc. dated May 17, 2000.
/s/ WINDES & McCLAUGHRY ACCOUNTANCY CORPORATION
Long Beach, California
May 17, 2000
FINANCIAL STATEMENTS OF HORIZON PHOTONICS, INC.
MARCH 31, 2000 AND 1999
Independent Auditors' Report.............................................. 1
Balance Sheets............................................................ 2
Statements of Operations.................................................. 3
Statements of Stockholders' Equity........................................ 4
Statements of Cash Flows.................................................. 5
Notes to Financial Statements............................................. 6-17
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of Horizon Photonics, Inc.
We have audited the accompanying balance sheets of Horizon Photonics, Inc.
(formerly Horizon Photonics, LLC) as of March 31, 2000 and 1999, and the related
statements of operations, 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 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 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 Horizon Photonics, Inc. as of
March 31, 2000 and 1999, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
/s/ WINDES & McCLAUGHRY ACCOUNTANCY CORPORATION
Long Beach, California
May 3, 2000
1
<PAGE>
HORIZON PHOTONICS, INC.
BALANCE SHEETS
MARCH 31,
-------------------------
2000 1999
ASSETS ----------- -----------
CURRENT ASSETS
Cash and cash equivalents $ 108,699 $ 5,970
Trade accounts receivable 476,406 56,682
Related party receivable 600,000
Inventories 709,852 46,383
Prepaid expenses 8,469
----------- -----------
1,903,426 109,035
----------- -----------
PROPERTY AND EQUIPMENT, net 1,112,267 166,737
----------- -----------
INTANGIBLE ASSETS, net 29,016 19,432
----------- -----------
TOTAL ASSETS $ 3,044,709 $ 295,204
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 299,305 $ 10,697
Accrued liabilities 86,007 55,678
Capital lease obligations, current portion 19,420 17,293
----------- -----------
404,732 83,668
----------- -----------
NONCURRENT LIABILITIES
Capital lease obligations, net of
current portion 43,699 63,120
Note payable to stockholder 250,000 250,000
----------- -----------
293,699 313,120
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 9, 10 and 11)
STOCKHOLDERS' EQUITY
Preferred stock, $0.0001 par value, 235,405 shares
authorized; Series A convertible shares, 235,405
issued and outstanding 3,200,000
Common stock, $0.0001 par value, 915,405 shares
authorized; 510,000 shares issued and outstanding 15,000
Accumulated deficit or members'
capital account (868,722) (101,584)
----------- -----------
2,346,278 (101,584)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,044,709 $ 295,204
=========== ===========
The accompanying notes are an integral part of these statements.
2
<PAGE>
HORIZON PHOTONICS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED
MARCH 31,
-----------------------------
2000 1999
----------- -----------
REVENUES
Product sales $ 937,437 $ 348,709
Contract manufacturing 382,737
R&D services 60,000 14,384
System design 5,700 226,112
----------- -----------
1,385,874 589,205
----------- -----------
COSTS AND EXPENSES
Cost of goods sold 963,286 215,083
Selling, general and administrative 550,964 197,694
Research and development 647,472 216,213
----------- -----------
2,161,722 628,990
----------- -----------
OPERATING LOSS (775,848) (39,785)
----------- -----------
OTHER INCOME (EXPENSE)
Interest income 38,462
Interest expense (33,421) (31,577)
Other expense (3,531) (7,366)
----------- -----------
1,510 (38,943)
----------- -----------
LOSS BEFORE PROVISION FOR INCOME TAX (774,338) (78,728)
PROVISION FOR INCOME TAX 800 800
----------- -----------
NET LOSS $ (775,138) $ (79,528)
=========== ===========
The accompanying notes are an integral part of these statements.
3
<PAGE>
HORIZON PHOTONICS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
PREFERRED COMMON ACCUMULATED
STOCK STOCK DEFICIT
----------- ----------- -----------
Balance at April 1, 1998 $ (36,256)
Member contributions 14,200
Net Loss (79,528)
-----------
Balance at March 31, 1999 (101,584)
Member contributions 8,000
Issuance of Stock $ 3,200,000 $ 15,000
Net Loss (775,138)
----------- ----------- -----------
Balance at March 31, 2000 $ 3,200,000 $ 15,000 $ (868,722)
=========== =========== ===========
The accompanying notes are an integral part of these statements.
4
<PAGE>
HORIZON PHOTONICS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED
MARCH 31,
---------------------------
2000 1999
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITES
Net loss $ (775,138) $ (79,528)
Adjustments to reconcile net loss to net cash
from operating activities
Depreciation and amortization 184,572 71,895
Changes in assets and liabilities:
(Increase) decrease in:
Trade accounts receivable (419,724) (41,750)
Inventories (663,469) 261
Prepaid expenses (8,469)
Increase in:
Accounts payable 288,608 3,955
Accrued liabilities 30,329 47,345
----------- -----------
Net Cash Provided By (Used In)
Operating Activities (1,363,291) 2,178
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Intangible assets (9,584) (19,432)
Purchases of property and equipment (1,130,102) (12,934)
----------- -----------
Net Cash Used In Investing Activities (1,139,686) (32,366)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Members' contributions 8,000 14,200
Payments on capital lease obligations (17,294) (24,450)
Proceeds from issuance of preferred
and common stock 2,615,000
----------- -----------
Net Cash Provided By (Used In)
Financing Activities 2,605,706 (10,250)
----------- -----------
CHANGE IN CASH AND CASH EQUIVALENTS 102,729 (40,438)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 5,970 46,408
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 108,699 $ 5,970
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 33,421 $ 31,577
Income taxes $ 800 $ 800
NONCASH FINANCING ACTIVITIES
Preferred stock was issued in exchange for cash of $2,600,000 and a receivable
of $600,000. The Company acquired capital leases totaling $104,863 during fiscal
1999.
The accompanying notes are an integral part of these statements.
5
<PAGE>
HORIZON PHOTONICS, INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Horizon Photonics, Inc. (Corporation) was incorporated in California on February
24, 1999 as the successor to Horizon Photonics, LLC, a Delaware limited
liability company (LLC) founded in July 1997. Horizon Photonics, Inc. and its
predecessor formally merged effective May 20, 1999 (the Company).
The Company designs and manufactures fiber optic components for the telecom and
datacom industries. The Company has developed a family of passive products that
utilize a proprietary micro-fixture design and robotic platform process. This
automated process allows for micro-optics to be mounted in small transferable
fixtures that are processed in arrays and converted into a variety of optical
components and component subsystems. The Company is currently manufacturing a
qualified line of OEM isolators, and expects to qualify a series of other
products and contract assemblies during the next fiscal year.
BASIS OF PRESENTATION
The operations for the year ended March 31, 2000 include the accounts of the
Corporation from the date of the merger to March 31, 2000 and the accounts of
the LLC from April 1, 1999 through May 20, 1999. The operations for the year
ended March 31, 1999 consists of the LLC accounts only. During the year ended
March 31, 2000, the Company completed a private placement of convertible
preferred stock to raise additional capital to fund research and development of
its product and manufacturing processes.
The Company is using the proceeds from the private placement to complete
construction of its manufacturing facilities, including clean rooms, equipment
purchases, research and development, and to finance the Company's working
capital needs. The Company is also developing and building equipment to create a
"second source" for its own manufacturing processes with its major customer, who
is also the preferred stock owner. The revenues from such equipment development
are designed to cover the cost of construction and development.
6
<PAGE>
HORIZON PHOTONICS, INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIS OF PRESENTATION (CONTINUED)
The Company has certain products that are in production and are being sold as of
March 31, 2000. The revenues from product sales and machinery construction are
not currently sufficient to finance operations of the Company on its own. As a
result, the Company continues to be dependent upon its sources of capital until
sales increase to a sustainable level. As disclosed in Notes 10 and 11, the
Company has significant sources of new capital available.
STATEMENT OF CASH FLOWS - CONCENTRATION OF CREDIT RISK
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with an original maturity of three months or
less to be cash equivalents. At March 31, 2000 and throughout the periods, the
Company has maintained cash balances at its financial institution in excess of
federally insured limits.
INVENTORIES
Inventories consist principally of raw materials and finished goods and are
stated at the lower of cost or market, on a first-in, first-out basis.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and depreciated using straight-line and
accelerated methods over the estimated useful lives of the related assets,
ranging from three to seven years.
INCOME TAXES
Income taxes are accounted for under the provisions of Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, which requires an
asset and liability approach to financial accounting and reporting for income
taxes.
7
<PAGE>
HORIZON PHOTONICS, INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES (CONTINUED)
Deferred income tax assets and liabilities are computed for differences between
the financial statement and tax bases of assets and liabilities that will result
in taxable or deductible amounts in the future based upon enacted tax laws and
rates applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized.
PRO FORMA NET INCOME (UNAUDITED)
Prior to May 20, 1999, the Company's members elected to be treated as a Limited
Liability Company (LLC) for federal and state income tax purposes. The Company
terminated its LLC upon merger into the Corporation on May 20, 1999 (Note 6).
Pro forma net income is approximately equivalent to reported amounts, and
represents net income after a pro forma tax provision, using a tax rate of 40%,
net of a valuation allowance, for the two years ended March 31, 2000, to reflect
the estimated income tax expense of the Company as if it had been subject to
normal federal and state income taxes during the respective reporting periods.
REVENUE RECOGNITION
Revenue recognition occurs from sales of products upon shipment or as earned
under product development agreements.
RESEARCH AND DEVELOPMENT
Costs related to designing and developing new products are expensed as research
and product development expenses are incurred.
STOCK-BASED COMPENSATION
Stock-based compensation is accounted for using the intrinsic value method as
prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting for
Stock Issued to Employees, under which no compensation expense is recognized
when the exercise price of the employee's stock option equals or exceeds the
market price of the underlying stock on the date of grant.
8
<PAGE>
HORIZON PHOTONICS, INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION (CONTINUED)
Pro forma information required by Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based Compensation, has been presented under the
fair value method using a Black-Scholes option-pricing model.
USE OF ESTIMATES AND ASSUMPTIONS
Management uses estimates and assumptions in preparing financial statements in
accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported revenues and
expenses. Actual results could vary from the estimates that were assumed in
preparing the financial statements.
FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair values of financial instruments of the Company are disclosed as required by
Statement of Financial Accounting Standards No. 107, Disclosures About Fair
Values of Financial Instruments. The carrying amounts of cash and cash
equivalents, trade accounts receivable, account payable and notes payable to
stockholder approximate fair value.
NOTE 2 - INVENTORIES
The composition of inventories is:
MARCH 31,
-----------------------
2000 1999
-------- --------
Raw materials $550,683 $ 46,383
Finished goods 17,194
Work in progress 48,630
Lucent machinery 93,345
-------- --------
$709,852 $ 46,383
======== ========
9
<PAGE>
HORIZON PHOTONICS, INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
MARCH 31,
-------------------------
2000 1999
---------- ----------
Manufacturing equipment $1,125,438 $ 222,499
Computer equipment and software 23,117 21,808
Furniture and fixtures 19,384 3,933
Leasehold 210,403
---------- ----------
1,378,342 248,240
Less: accumulated depreciation (266,075) (81,503)
---------- ----------
$1,112,267 $ 166,737
========== ==========
NOTE 4 - INTANGIBLE ASSETS
Intangible assets consist of capitalized patent application costs for the
product and processes involved. The Company will begin amortization of the
patents once they are issued or will expense such amounts if approval is denied.
NOTE 5 - CAPITAL LEASE OBLIGATIONS
The Company is obligated under four capital leases. The total cost of equipment
under the capital leases was $104,863 at March 31, 2000 and 1999. The total
accumulated depreciation was $46,142 and $20,973 at March 31, 2000 and 1999,
respectively. One of the leases expires in 2001, and the other three expire in
2003. The monthly payments total approximately $2,100.
10
<PAGE>
HORIZON PHOTONICS, INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
NOTE 5 - CAPITAL LEASE OBLIGATIONS (CONTINUED)
Future minimum lease payments on the capital leases, excluding purchase option,
are:
Year Ending
March 31,
-----------
2001 $25,715
2002 22,956
2003 22,116
2004 4,450
-------
Total minimum lease payments 75,237
Less: amounts representing interest 12,118
-------
Present value of minimum
lease payments $63,119
=======
Future maturities of capital lease obligations are as follows:
Year Ending
March 31,
-----------
2001 $19,420
2002 19,322
2003 20,357
2004 4,020
-------
$63,119
=======
NOTE 6 - NOTE PAYABLE TO STOCKHOLDER
At March 31, 2000 and 1999, the Company has a note payable to a stockholder in
the amount of $250,000, with interest at 10%, payable semi-annually, commencing
February 1, 2000 and continuing until February 1, 2002. The $250,000 principal
balance and any remaining accrued interest is due and payable on August 1, 2002,
subject to certain limitations based on the Company's "free cash flow" at the
time of payment. In addition, as of March 31, 2000 and 1999, respectively, the
Company owes the stockholder accrued interest of $4,167 and $19,107. (See Note
11.)
11
<PAGE>
HORIZON PHOTONICS, INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
NOTE 7 - INCOME TAXES
Major components of the Company's income tax provision are:
MARCH 31,
------------------------
2000 1999
--------- ---------
Currently payable:
Federal None None
State $ 800 $ 800
--------- ---------
800 800
--------- ---------
Deferred:
Provision for deferred tax None None
--------- ---------
$ 800 $ 800
========= =========
The annual tax provision is different from the amount which would be provided by
applying the statutory federal and state tax rates to the Company's pre-tax
income. The reasons for the differences are as follows:
MARCH 31,
------------------------
2000 1999
--------- ---------
Computed statutory credit $(307,175) $ (17,496)
Permanent differences 1,001 396
Tax credits (140,000) (10,000)
Valuation allowance 446,974 27,900
--------- ---------
$ 800 $ 800
========= =========
The Company's total deferred tax assets and liabilities are as follows:
Total deferred tax assets - noncurrent $ 474,874 $ 27,900
Valuation allowance (474,874) (27,900)
--------- ---------
Net deferred tax asset None None
========= =========
12
<PAGE>
HORIZON PHOTONICS, INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
NOTE 7 - INCOME TAXES (CONTINUED)
At March 31, 2000, the Company has net operating loss carryforwards for federal
and California income tax purposes of approximately $800,000 and $400,000, which
will begin to expire in 2020 (federal) and 2008 (California), respectively, if
not previously utilized. The Company also has research and development credit
carryforwards and Manufacturers Investment Tax Credit carryforwards of
approximately $140,000, which will begin to expire in 2020, if not previously
utilized.
NOTE 8 - STOCKHOLDERS' EQUITY
STOCK OPTION PLAN
In April 1999, the Company implemented the Horizon Photonics, Inc. 1999 Stock
Option Plan (Option Plan), pursuant to which 160,000 shares of common stock have
been reserved for issuance to employees and consultants. The Company applies APB
Opinion No. 25 and related Interpretations in accounting for the Option Plan. No
compensation costs have been recognized for its stock option grants where the
"fair market value" of the underlying common stock equaled the option price at
the date of grant.
As of March 31, 2000, incentive options to purchase an aggregate of 119,000
shares had been granted to twelve employees at exercise prices ranging from
$1.00 to $8.15 per share. The options were granted at "fair market value" as of
the date of grant, vest over an average period of four years, and terminate no
more than ten years from the date of grant. The fair value for the $1.00 per
share options was determined by the Company when no readily determinable value
existed and, as such, the Company used the best information available
considering sales revenues and multiples in the industry. The $8.15 per share
option price was determined based upon the valuation established by the
preferred stockholder, subject to discounts. All outstanding options immediately
vest in the event of a sale or merger of the Company.
13
<PAGE>
HORIZON PHOTONICS, INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
NOTE 8 - STOCKHOLDERS' EQUITY (CONTINUED)
STOCK OPTION PLAN (CONTINUED)
A summary of the status of the Option Plan as of March 31, 2000 is presented
below:
Outstanding at April 1, 1999 None
Granted 119,000
Exercised --
Lapsed or canceled --
---------
Outstanding at March 31, 2000 119,000
=========
Options exercisable at March 31, 2000 10,000
=========
The following table summarizes information about stock options outstanding at
March 31, 2000:
NUMBER NUMBER
OUTSTANDING AT REMAINING EXERCISABLE AT
EXERCISE MARCH 31, CONTRACTUAL MARCH 31,
PRICE 2000 LIFE 2000
-------- -------- ---------- -------
$1.00 70,000 9.2 years 10,000
$8.15 49,000 9.7 years
-------- -------
$1 to $8.15 119,000 9.4 years 10,000
======== =======
The weighted-average grant date fair values of options granted under the Option
Plan during the period ended March 31, 2000 totaled $3.94.
The fair value of each incentive option grant is estimated on the date of grant
using the Black-Scholes option-pricing model, with the following
weighted-average assumptions used for grants for the year ended March 31, 2000:
dividend yield of 0%; expected volatility of 0%; risk-free interest rate of
6.50%; and expected lives ranging from 1 to 4 years. Had the Company elected to
measure compensation cost based on the fair value of the stock options, the net
loss for the period would have increased by approximately $57,000.
14
<PAGE>
HORIZON PHOTONICS, INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
NOTE 8 - STOCKHOLDERS' EQUITY (CONTINUED)
COMMON STOCK
The holders of common stock are entitled to normal common voting rights and
dividends.
PREFERRED STOCK
The holder of Series A Preferred Stock has certain voting rights and is entitled
to receive dividends, pro rata with the common stock, on an as-converted basis.
In the event of any liquidation, dissolution or winding up of the Company, the
holder of Series A Preferred Stock is entitled to receive, prior and in
preference to any distribution to the holders of common stock, an amount equal
to $13.59 per share, plus declared but unpaid dividends. The preferred stock is
convertible into common stock at any time, at the option of the holder, at an
initial conversion price of $13.59 per share, subject to adjustment for certain
dilutive issuances, splits and combinations. The Series A Preferred Stock
automatically converts into common stock upon the public offering of the
Company's common stock, resulting in cash proceeds to the Company of at least
$25,000,000.
NOTE 9 - COMMITMENTS
Effective November 11, 1999, the Company entered into a four-year lease for the
rental of office and manufacturing space. Rent expense recognized for the period
ended March 31, 2000 and 1999 was $77,062 and $17,892, respectively. Commitments
under this operating lease are $80,556 per year for 2000-2002 and $67,130 for
2003.
NOTE 10 - RELATED PARTY TRANSACTIONS
In August 1999, Horizon closed a funding transaction with Lucent Technologies
Inc. (Lucent), pursuant to which Lucent purchased 235,405 shares of the
Company's Series A Preferred Stock. As consideration for the Series A Preferred
Stock, Lucent is obligated to pay an aggregate of $3,200,000, of which
$2,000,000 was paid in August 1999, $600,000 was paid in January 2000, and
$600,000 is due in April 2000. (See Note 11.) As part of the stock purchase
transaction, the Company, its founding stockholders, and Lucent entered into an
Investors' Rights Agreement, Right of First Refusal and Co-Sale Agreement,
Voting Agreement, Non-Competition Agreement and Commercial Agreement to cover
various matters related to equity, control and intellectual property. In
addition, the Company and Lucent are parties to separate manufacturing and
licensing agreements.
15
<PAGE>
HORIZON PHOTONICS, INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
NOTE 10 - RELATED PARTY TRANSACTIONS (CONTINUED)
The Company sold or purchased from Lucent approximately:
FOR THE YEAR ENDED
MARCH 31,
---------------------------
2000 1999
---------- ----------
Sales $1,188,000 $ 576,000
Purchases $ 534,000 $ 66,000
Additionally, accounts receivable with Lucent as of March 31, 2000 and 1999 are
$152,589 and $52,000, respectively. Accounts payable as of March 31, 2000 and
1999 are $2,405 and none. The related party receivable at March 31, 2000 of
$600,000 is due from Lucent.
NOTE 11 - SUBSEQUENT EVENTS
LUCENT
On April 4, 2000, the Company received Lucent's final installment of $600,000
against the aggregate purchase price for the Series A Preferred Stock.
LIGHTPATH MERGER
Effective April 14, 2000, the Company entered into a merger agreement (merger)
with LightPath Technologies, Inc., a Delaware corporation (LightPath), pursuant
to which all of the outstanding shares of the Company's Common Stock were
exchanged for $35,200,000 of LightPath's Class A Common Stock and $1,000,000 in
cash. The number of shares of LightPath's Class A Common Stock issued to the
former stockholders of the Company is subject to post-closing adjustment based
on the trading price of the Class A Common Stock over a specified time period.
Immediately prior to the closing of the merger, Lucent elected to convert all
shares of the Company's Series A Preferred Stock into shares of the Company's
Common Stock.
16
<PAGE>
HORIZON PHOTONICS, INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
NOTE 11 - SUBSEQUENT EVENTS (CONTINUED)
LIGHTPATH MERGER (CONTINUED)
In connection with the merger, LightPath fully retired the Company's note
payable to a stockholder by delivering the total sum of $258,115 directly to the
stockholder. (See Note 6.) This amount represented the entire $250,000 principal
balance and accrued interest to the date of repayment. In addition, LightPath
committed $5,250,000 to fund the Company's expansion. At the closing of the
merger, $4,000,000 of this amount was delivered to the Company, with the
remainder due on or about July 1, 2000.
At the closing of the merger, the Company's outstanding options to purchase
shares of the Company's Common Stock fully vested and converted into options to
purchase shares of LightPath Class A Common Stock. It is expected that the
Company will be operated as a wholly owned subsidiary of LightPath from the
Company's current facility in Walnut, California.
The Company's parent, LightPath, has incurred significant losses since its
inception in 1985. LightPath's financial statements for the year ended June 30,
1999 include a reference to various going-concern issues. The impact of its
parent operations on Horizon are not readably determinable.
17
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
LIGHTPATH TECHNOLOGIES, INC.
(UNAUDITED)
LightPath Technologies, Inc. (the "Company") acquired, on April 14, 2000, all of
the outstanding shares of Horizon Photonics, Inc. ("HPI"), for an aggregate
purchase price of approximately $36.2 million, comprised of approximately 1.2
million shares of Class A common stock and $1 million in cash. The Company also
assumed approximately $250,000 of indebtedness of HPI, which was repaid upon
closing of the transaction. The number of shares of Class A common stock issued
to the former shareholders of HPI is subject to post closing adjustment based on
the trading price of the Class A common stock as defined in the agreement but no
later than May 29, 2000. HPI, a California corporation, is an emerging leader in
the automated production of passive optical components for the
telecommunications and data communications markets.
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 a portion 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 June
30, 2000.
The unaudited Pro Forma Consolidated Financial Statements reflect the following:
(1) adjust for the purchase accounting and estimated fair value allocation of
the assets acquired and the obligations assumed; and (2) the use of a portion of
the Company's cash reserves and issuance of Class A Common Stock to acquire HPI.
The unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2000, was
prepared as if the transaction had occurred on that date. The unaudited Pro
Forma Statement of Operations for the nine month period ended March 31, 2000 and
the twelve month period ended June 30, 1999 were prepared as if the transaction
had occurred on July 1, 1998.
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 results of
future operations of the Company.
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 HPI financial statements filed
herewith.
1
<PAGE>
LIGHTPATH TECHNOLOGIES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, 2000 PRO FORMA
LPTH HPI ADJUSTMENTS PRO FORMA
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 41,867,441 $ 108,699 $ (2,408,115)(1) $ 39,568,025
Trade accounts receivable 350,766 476,406 827,172
Inventories 608,588 709,852 1,318,440
Advances to employees and related parties 16,773 600,000 616,773
Prepaid expenses and other 345,446 8,469 353,915
------------- ------------- ------------- -------------
Total current assets 43,189,014 1,903,426 (2,408,115) 42,684,325
Property and equipment - net 1,880,970 1,112,267 2,993,237
Intangible assets:
Intangible assets 573,999 29,016 21,820,000 (4) 22,423,015
Goodwill -- -- 11,752,335 (4) 11,752,335
Investment in LightChip, Inc. 1,000,000 1,000,000
------------- ------------- ------------- -------------
Total assets $ 46,643,983 $ 3,044,709 $ 31,164,220 $ 80,852,912
============= ============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 457,534 $ 385,312 $ (8,115)(1) $ 834,731
Accrued payroll and benefits 77,668 -- 77,668
Capital lease obligations, current portion -- 19,420 19,420
------------- ------------- ------------- -------------
Total current liabilities 535,202 404,732 (8,115) 931,819
Capital lease obligations, net of
current portion 43,699 43,699
Note payable to stockholder -- 250,000 (250,000)(1) --
Commitments and contingencies
Redeemable common stock - E1, E2, E3 40,178 -- 40,178
Stockholders' equity
Preferred stock 2 3,200,000 (3,200,000)(3) 2
Common stock 137,534 15,000 (15,000)(3) 149,605
12,071 (1)
Additional paid-in capital 78,830,257 37,956,542 (1) 116,786,799
Accumulated deficit (32,899,190) (868,722) 868,722 (3) (37,099,190)
(4,200,000)(4)
------------- ------------- ------------- -------------
Total stockholders' equity 46,068,603 2,346,278 31,422,335 79,837,216
------------- ------------- ------------- -------------
Total liabilities and stockholders' equity $ 46,643,983 $ 3,044,709 $ 31,164,220 $ 80,852,912
============= ============= ============= =============
</TABLE>
See accompanying notes
2
<PAGE>
LIGHTPATH TECHNOLOGIES, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
9 MONTHS ENDED 9 MONTHS ENDED
UNAUDITED MARCH 31, 2000 MARCH 31, 2000(1) PRO FORMA PRO FORMA
LPTH HPI ADJUSTMENTS COMBINED
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 880,075 $ 1,221,501 $ -- $ 2,101,576
Cost of goods sold 331,808 892,504 1,224,312
Selling, general and administrative expenses 3,890,420 467,559 4,357,979
Research and development expenses 668,286 600,004 1,268,290
Acquired in-process R&D charge -- -- -- --
Amortization of intangible assets -- -- 7,154,813(4) 7,154,813
------------ ------------ ------------ ------------
Operating loss (4,010,439) (738,566) (7,154,813) (11,903,818)
Other income(expense) (82,805) (25,037) (90,000)(5) (197,842)
------------ ------------ ------------ ------------
Net loss (4,093,244) (763,603) (7,244,813) (12,101,660)
Imputed dividends and premiums on
Preferred Stock (2,205,242) -- (2,205,242)
------------ ------------ ------------ ------------
Net loss applicable to common shareholders $ (6,298,486) $ (763,603) $ (7,244,813) $(14,306,902)
============ ============ ============ ============
Basic and diluted net loss per share $ (.83) $ (1.63)
============ ============
Number of shares used in per share calculation 7,550,091 1,207,158 (6) 8,757,249
============ ============
</TABLE>
The operating results of HPI for the nine month period ending March 31, 2000
were derived by subtracting the activity for the three months ending June 30,
1999 from the year end March 31, 2000 balances. The three month activity
excluded was as follows:
Revenue $164,373
Expense $201,655
Other income (expense) $ 25,757
Net loss $ 11,535
See accompanying notes
3
<PAGE>
LIGHTPATH TECHNOLOGIES, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
12 MONTHS ENDED 12 MONTHS ENDED
UNAUDITED JUNE 30, 1999 MARCH 31, 1999 PRO FORMA PRO FORMA
LPTH HPI ADJUSTMENTS COMBINED
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 1,086,126 $ 589,205 $ -- $ 1,675,331
Cost of goods sold 409,417 215,083 624,500
Selling, general and administrative expenses 2,918,184 197,694 3,115,878
Research and development expenses 615,371 216,213 831,584
Acquired in-process R&D charge -- -- -- --
Amortization of intangible assets -- -- 9,539,750(4) 9,539,750
------------ ------------ ------------ ------------
Operating loss (2,856,846) (39,785) (9,539,750) (12,436,381)
Other income(expense) (277,172) (39,743) (120,000)(5) (436,915)
------------ ------------ ------------ ------------
Net loss (3,134,018) (79,528) (9,659,750) (12,873,296)
Imputed dividends and premiums on
Preferred Stock (224,651) -- (224,651)
------------ ------------ ------------ ------------
Net loss applicable to common shareholders $ (3,358,669) $ (79,528) $ (9,659,750) $(13,097,947)
============ ============ ============ ============
Basic and diluted net loss per share $ (.79) $ (2.39)
============ ============
Number of shares used in per share
calculation 4,271,313 1,207,158 (6) 5,478,471
============ ============
</TABLE>
See accompanying notes.
4
<PAGE>
LIGHTPATH TECHNOLOGIES, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
1. Adjustment to cash and stockholders equity consists of the following:
Purchase price paid in cash plus
acquisition costs $ 2,408,115
Issuance of 1,207,158 shares of LightPath
Class A common stock 35,200,000
Estimated fair value of stock options based
on the Black-Scholes model 2,768,613
------------
Cost of acquisition $ 40,376,728
============
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 $ 40,376,728
Less the fair value of the tangible net assets
acquired and liabilities assumed of HPI 2,604,393
------------
Excess purchase price $ 37,772,335
============
3. Elimination of HPI historical stockholders' equity.
4. The purchase price was allocated to tangible net assets and identifiable
intangible assets with the unallocated purchase price attributed to
goodwill. The value of tangible assets acquired and liabilites assumed
approximated their historical book value at March 31, 2000. The estimated
fair value of identifiable intangible assets and goodwill, based on
assessment of management together with an independent valuation firm, along
with their estimated lives for amortization, are as follows:
Annual
Life Fair Value Amortization
---- ---------- ------------
In-process research and development * $ 4,200,000 *
Customer related intangibles 4 $15,900,000 $3,975,000
Developed technology 2 $ 2,400,000 $1,200,000
Covenants not-to-compete 3 $ 2,000,000 $ 666,666
Trademark & tradename 2 $ 1,300,000 $ 650,000
Acquired work force 2 $ 220,000 $ 110,000
Goodwill 4 $11,752,335 $2,938,084
* The Company will record an immediate write-off of in-process
research and development based on an assessment of purchased technology of
HPI at the acquisition date. A non-recurring charge of $4.2 million will be
reflected in the actual financial statements of the Company in the quarter
ending June 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, 1999 or the nine month period ended March 31, 2000. The
assessment determined that $4.2 million of HPI'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
Micro-Collimator products as well as active alignment and isolator
injection molding technologies that were under development at the time of
acquisition. These programs were in various stages of completion ranging
from 50% to 60% of completion, with estimated completion dates through June
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 the second quarter of fiscal 2001, with projected
research and development costs-to-complete
5
<PAGE>
of approximately $1.1 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, 1999 and the nine
months ended March 31, 2000, respectively 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 1,207,158 shares for the acquisition were issued as
of July 1, 1998. 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.
6
