-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UpwOdmN8rMLFgS15NAyaQCpn6WwhDL0XtCdOTqh8+YH7RpJ7Vq6d/3bj2JXj/qMO BF9GsU7+ttnQS9w32MxFcA== /in/edgar/work/20000828/0001095811-00-003063/0001095811-00-003063.txt : 20000922 0001095811-00-003063.hdr.sgml : 20000922 ACCESSION NUMBER: 0001095811-00-003063 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 20000828 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AXT INC CENTRAL INDEX KEY: 0001051627 STANDARD INDUSTRIAL CLASSIFICATION: [3674 ] IRS NUMBER: 943031310 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 000-24085 FILM NUMBER: 711182 BUSINESS ADDRESS: STREET 1: 4821 TECHNOLOGY DRIVE CITY: FREMONT STATE: CA ZIP: 94538 BUSINESS PHONE: 5106835900 MAIL ADDRESS: STREET 1: 4311 SOLAR WAY CITY: FREMONT STATE: CA ZIP: 94538 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN XTAL TECHNOLOGY DATE OF NAME CHANGE: 19971217 10-Q/A 1 e10-qa.txt AMENDMENT TO FORM 10-Q QUARTER ENDED 9/30/99 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------------- FORM 10-Q/A (Mark One) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 1999 or [ ] 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 0-24085 -------------------- AXT, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 94-3031310 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 4281 TECHNOLOGY DRIVE, FREMONT, CALIFORNIA 94538 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (510) 683-5900 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) ----------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the preceding 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. YES [X] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at September 30, 1999 ----------------------------- --------------------------------- Common Stock, $.001 par value 18,612,434 ================================================================================ 1 2 AXT, INC. TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets at September 30, 1999 and December 31, 1998 Condensed Consolidated Income Statements for the three and nine months ended September 30, 1999 and 1998 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 1999 and 1998 Notes To Condensed Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds Item 6. Exhibits and Reports on Form 8-K Signatures 2 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements AXT, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
September 30, December 31, 1999 1998 ------------- ------------ (Unaudited) Assets: Current assets Cash and cash equivalents $ 4,883 $ 16,438 Accounts receivable, net of allowance for doubtful accounts of $1,864 and $1,648 17,344 13,128 Inventories 33,447 25,300 Prepaid expenses and other current assets 8,328 3,271 Deferred income taxes 2,856 2,452 --------- --------- Total current assets 66,858 60,589 Property, plant and equipment 40,304 37,624 Other assets 2,087 1,927 Goodwill 2,394 2,843 --------- --------- Total assets $ 111,643 $ 102,983 ========= ========= Liabilities and Stockholders' Equity: Current liabilities Short-term bank borrowing $ 4,345 $ 1,928 Accounts payable 9,951 7,850 Accrued liabilities 10,967 5,242 Current portion of long-term debt 3,190 2,733 Current portion of capital lease obligation 1,092 1,192 --------- --------- Total current liabilities 29,545 18,945 Long-term debt, net of current portion 15,079 18,416 Long-term capital lease, net of current portion 5,904 3,854 Other long-term liabilities 501 604 --------- --------- Total liabilities 51,029 41,819 --------- --------- Stockholders' equity: Preferred stock $.001 par value per share; 2,000 shares authorized; 981 shares issued and outstanding 1 1 Additional paid-in capital 3,999 3,999 Common stock $.001 par value per share; 100,000 shares authorized; 18,612 and 18,393 shares issued and outstanding, respectively 19 18 Additional paid-in capital 45,992 45,248 Deferred compensation (244) (327) Retained earnings 10,807 12,198 Cumulative translation adjustments 40 27 --------- --------- Total stockholders' equity 60,614 61,164 --------- --------- Total liabilities and stockholders' equity $ 111,643 $ 102,983 ========= =========
See accompanying notes to these unaudited condensed consolidated financial statements. 3 4 AXT, INC. CONDENSED CONSOLIDATED INCOME STATEMENTS (Unaudited) (In thousands, except per share data)
Three Months Ended Nine Months Ended September 30, September 30, ------------------------- ------------------------- 1999 1998 1999 1998 -------- -------- -------- -------- Revenue $ 20,017 $ 13,942 $ 59,697 $ 40,660 Cost of revenue 13,077 8,911 43,288 26,244 -------- -------- -------- -------- Gross profit 6,940 5,031 16,409 14,416 Operating expenses: Selling, general and administrative 3,113 2,540 9,956 7,238 Research and development 670 819 2,190 2,173 Acquisition costs -- -- 2,810 -- -------- -------- -------- -------- Total operating expenses 3,783 3,359 14,956 9,411 -------- -------- -------- -------- Income (loss) from operations 3,157 1,672 1,453 5,005 Interest expense (752) (325) (1,535) (837) Other income and expense 235 248 380 219 -------- -------- -------- -------- Income (loss) before provision for income taxes 2,640 1,595 298 4,387 Provision for income taxes 1,003 559 1,181 1,704 -------- -------- -------- -------- Net Income (loss) before extraordinary item 1,637 1,036 (883) 2,683 Extraordinary item -- -- 508 -- -------- -------- -------- -------- Net Income (loss) $ 1,637 $ 1,036 $ (1,391) $ 2,683 ======== ======== ======== ======== Basic income (loss) per share: Income before extraordinary item $ 0.09 $ 0.06 $ (0.05) $ 0.17 Extraordinary item (0.03) Net income 0.09 0.06 (0.07) 0.17 Diluted income (loss) per share: Income before extraordinary item $ 0.08 $ 0.06 $ (0.05) $ 0.17 Extraordinary item (0.03) Net income 0.08 0.06 (0.07) 0.17 Shares used in per share calculations: Basic 18,482 16,915 18,610 15,388 Diluted 19,946 17,705 18,610 16,178
See accompanying notes to these unaudited condensed consolidated financial statements. 4 5 AXT, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
Nine Months Ended September 30, ------------------------- 1999 1998 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss): $ (1,391) $ 2,683 Adjustments to reconcile net income (loss) to cash used in operations: Depreciation 4,097 1,961 Deferred income taxes (404) (1,152) Amortization of goodwill 449 -- Stock compensation 83 (134) Changes in assets and liabilities: Accounts receivable (4,216) (1,174) Inventories (8,147) (5,057) Prepaid expenses and other current assets (5,057) (1,796) Other assets (160) (81) Accounts payable 2,101 2,102 Accrued liabilities 5,725 (85) Other long-term liabilities (103) -- -------- -------- Net cash provided by (used in) operating activities (7,023) (2,733) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment (4,123) (15,029) -------- -------- Net cash used in investing activities (4,123) (15,029) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from (payments of): Issuance of common stock 745 34,577 Issuance of preferred stock -- (7,829) Capital leases (704) (99) Short-term bank borrowings 2,417 2,556 Long-term debt borrowings (2,880) 601 -------- -------- Net cash provided by financing activities (422) 29,806 -------- -------- Effect of exchange rate changes 13 (33) -------- -------- Net increase (decrease) in cash and cash equivalents (11,555) 12,011 Cash and cash equivalents at the beginning of the period 16,438 3,199 -------- -------- Cash and cash equivalents at the end of the period $ 4,883 $ 15,210 ======== ======== Non cash activity: Purchase of PP&E through capital leases $ 2,654 $ -- ======== ========
See accompanying notes to these unaudited condensed consolidated financial statements. 5 6 AXT, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1. Basis of Presentation As previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 1999, the results of operations for the quarters ended ended March 31, June 30 and September 30, 1999 were restated for certain corrections to the account balances of Lyte Optronics, Inc. This report on Form 10-Q/A amends the previously filed report on Form 10-Q to reflect these corrections. The accompanying condensed consolidated financial statements for the three-month and nine-month periods ended September 30, 1999 and 1998 are unaudited. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, considered necessary to present fairly the financial position, results of operations and cash flows of AXT, Inc. (the "Company") and its subsidiaries for all periods presented. Certain prior period reclassifications have been made to conform to the current period presentation. Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these condensed consolidated financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. The results of operations are not necessarily indicative of the results to be expected in the future or for the full fiscal year. It is recommended that these condensed consolidated financial statements be read in conjunction with the Company's consolidated financial statements and the notes thereto included in its 1998 Annual Report on Form 10-K and the separate financial statements of Lyte Optronics, Inc. included in the Form 8-K/A filed with the Securities and Exchange Commission. Note 2. Acquisition On May 28, 1999, the Company completed a merger with Lyte Optronics, Inc., a Nevada corporation and all of its subsidiaries, including Alpha Photonics, Inc., Lyte Optronics Ltd. (a United Kingdom company) and Advanced Semiconductor (a Xiamen, Peoples Republic of China company). Lyte Optronics, Inc. and its subsidiaries manufacture and distribute visible semiconductor laser diode chips, high brightness visible light emitting diodes and laser pointers. Under the terms of the merger agreement, the Company issued approximately 2.3 million shares of common stock in exchange for all the outstanding shares of Lyte's common stock as well as the outstanding shares of Lyte's Series A preferred stock. The Company also issued approximately 981,000 shares of Series A preferred stock in exchange for all the outstanding shares of Lyte's Series B preferred stock. In addition, the Company assumed and converted Lyte's options and warrants representing approximately 115,000 shares of the Company's common stock. The merger has been accounted for as a pooling of interests; accordingly, all prior period consolidated financial statements have been restated to include the combined results of operations, financial position, and cash flows of Lyte Optronics, Inc. 6 7 The Company incurred costs of approximately $2.8 million associated with the merger, which was charged to operations during the quarter ended June 30, 1999, the period in which the merger was consummated. Note 3. Net Income Per Share Basic earnings per common share is calculated by dividing net earnings by the weighted average number of common shares outstanding during the period. Diluted earnings per share includes the dilutive effect of common stock equivalents outstanding during the period calculated using the treasury stock method. Common stock equivalents consist of the shares issuable upon the exercise of stock options. A reconciliation of the numerators and denominators of the basic and diluted net income per share calculations is as follows (in thousands except per share data):
Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ------------------------ 1999 1998 1999 1998 ------- ------- -------- ------- Numerator: Net income (loss) $ 1,637 $ 1,036 $ (1,391) $ 2,683 ======= ======= ======== ======= Denominator: Denominator for basic earnings per share - weighted average common shares 18,482 16,915 18,610 15,388 Effect of dilutive securities: Common stock options 1,464 790 -- 790 ------- ------- -------- ------- Denominator for dilutive earnings per share 19,946 17,705 18,610 16,178 ======= ======= ======== ======= Basic earnings per share $ 0.09 $ 0.06 $ (0.07) $ 0.17 Diluted earnings per share $ 0.08 $ 0.06 $ (0.07) $ 0.17
Note 4. Inventories The components of inventory are summarized below (in thousands):
September 30, December 31, 1999 1998 ------------- ------------ Inventories: Raw materials $13,904 $ 9,928 Work in process 13,012 13,171 Finished goods 6,531 2,201 ------- ------- $33,447 $25,300 ======= =======
Note 5. Comprehensive Income The components of comprehensive income are summarized below (in thousands): 7 8
Three Months Ended Nine Months Ended September 30, September 30, --------------------- ----------------------- 1999 1998 1999 1998 ------ ------- ------- ------- Net Income (loss) $1,637 $ 1,036 $(1,391) $ 2,683 Foreign currency translation gain (loss) 66 (63) 13 (26) ------ ------- ------- ------- Comprehensive income $1,703 $ 973 $(1,378) $ 2,657 ====== ======= ======= =======
Note 6. Segment Information Selected industry segment information is summarized below (in thousands):
Three Months Ended Nine Months Ended September 30, September 30, ------------------------ ------------------------- 1999 1998 1999 1998 -------- -------- -------- -------- Substrates Net revenues from external customers $ 15,030 $ 11,395 $ 41,167 $ 31,915 Gross profit 6,225 4,554 16,606 12,992 Operating income 4,371 2,708 8,394 7,752 Identifiable assets 83,500 66,380 83,500 66,380 Visible emitters Net revenues from external customers 3,889 - 13,280 - Gross profit (loss) 920 - 810 - Operating income (loss) 97 - (2,787) - Identifiable assets 22,547 - 22,547 - Consumer products Net revenues from external customers 1,098 2,547 5,250 8,745 Gross profit (loss) (205) 477 (1,007) 1,424 Operating loss (1,311) (1,036) (4,154) (2,747) Identifiable assets 5,596 4,973 5,596 4,973 Total Net revenues from external customers 20,017 13,942 59,697 40,660 Gross profit 6,940 5,031 16,409 14,416 Operating income (loss) 3,157 1,672 1,453 5,005 Identifiable assets 111,643 71,353 111,643 71,353
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This Management's Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking statements that reflect current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated. In this report, the words "anticipates," "believes," "expects," "future," "intends," and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. This discussion should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's Annual Report on Form 10-K for the year ended December 31, 1998 as filed with the Securities and Exchange Commission and the condensed consolidated financial statements included elsewhere in this report. 8 9 Results of Operations The following table sets forth certain information relating to the operations of the Company expressed as a percentage of total revenues for the periods indicated:
Three Months Ended Nine Months Ended September 30, September 30, -------------------- -------------------- 1999 1998 1999 1998 ----- ----- ----- ----- Revenues 100.0% 100.0% 100.0% 100.0% Cost of revenues 65.3 63.9 72.5 64.5 ----- ----- ----- ----- Gross profit 34.7 36.1 27.5 35.5 Operating expenses: Selling, general and administrative 15.6 18.2 16.7 17.8 Research and development 3.3 5.9 3.7 5.3 Acquisition costs -- -- 4.7 -- ----- ----- ----- ----- Total operating expenses 18.9 24.1 25.1 23.1 ----- ----- ----- ----- Income (loss) from operations 15.8 12.0 2.4 12.3 Interest expense (3.8) (2.3) (2.6) (2.1) Other income and expense 1.2 1.8 0.6 0.5 ----- ----- ----- ----- Income (loss) before provision for income taxes 13.2 11.4 0.5 10.8 Provision for income taxes 5.0 4.0 2.0 4.2 ----- ----- ----- ----- Net income (loss) before extra ordinary item 8.2 7.4 (1.5) 6.6 Extraordinary item -- -- 0.9 -- ----- ----- ----- ----- Net Income (loss) after extra ordinary item 8.2% 7.4% 2.3% 6.6% ===== ===== ===== =====
Revenues. Total revenues increased 43.6% from $13.9 million for the three months ended September 30, 1998 to $20.0 million for three months ended September 30, 1999. The increase in product revenues for the three month and nine month periods ended September 30, 1999, reflected an increase in the volume of sales of GaAs and InP substrates to existing domestic and international customers and the addition of new customers, which offset a decline in Lyte Optronics' sales. In addition, the 1999 results include the sale of laser diodes and LED's in the amount of $3.9 million and $13.2 million for the three months and nine months, respectively, which were not included in the 1998 results. We introduced LED's in the second quarter of 1999. Ge substrate sales were $315,000 lower in the third quarter of 1999 when compared to the third quarter of 1998, and were $527,000 lower in sales for the nine months ended September 30, 1999 when compared to the nine months ended September 30, 1998. These decreases were due in part to a request by a major Ge customer for a two-month suspension in shipments due to their excess inventory. International revenues, excluding Canada, increased from 17.2% of total revenues for the three months ended September 30, 1998 to 44.7% of total revenues for the three months ended September 30, 1999, and increased from 22.3% of total revenues for the nine months ended September 30, 1998 to 43.5% for the nine months ended September 30, 1999. These increases primarily reflect increased sales in Europe and Asia for GaAs substrates used for the LED market, and the inclusion of Alpha division's sales in 1999 results, which are sold primarily to Asian markets. Gross margin. Total gross margin decreased from 36.1% to 34.7% of total revenues for the three months ended September 30, 1998, and September 30, 1999, respectively. This decrease is due to a mix of different factors. 9 10 The inclusion of the Alpha laser-diode and LED divisions in the 1999 amounts resulted in an increase in gross margin. Alpha's laser-diode and LED division benefited from the transition of manufacturing operations to China in the first quarter of 1999, and Lyte's consumer products division benefited from the 1998 closing of their Arizona manufacturing facility, which lowered our labor costs and improved our gross margins in 1999. In 1999, gross margins from Ge substrates were lower, which offset, in part, the higher yields achieved in GaAs and InP production. The lower gross margins from Ge substrates in 1999 were primarily the result of pricing declines in the Ge industry generally. The decrease in gross margin for the nine months ended September 30, 1999 is primarily due to charges for returned merchandise and increased warranty amounts for the consumer products division. Selling, general and administration expenses. Selling, general and administrative expenses increased from $2.5 million for the three months ended September 30, 1998 to $3.1 million for the three months ended September 30, 1999, and increased 38.9% from $7.2 million for the nine months ended September 30, 1998 to $10.0 million for the nine months ended September 30, 1999. These increases resulted primarily from the inclusion of the Alpha division in the 1999 results. The Alpha division added $652,000 and $2.6 million to the selling, general and administrative expenses in the three months and nine months ended September 30, 1999, respectively. This increase was partially offset by a decrease in selling, general and administrative expenses by the Lyte division, as a result of the closing of a manufacturing facility located in Arizona in 1998 as mentioned above. Selling, general and administrative expenses as a percentage of total revenues decreased from 18.2% for the three months ended September 30, 1998 to 15.6% for the three months ended September 30, 1999, and decreased as a percentage of total revenues from 17.8% for the nine months ended September 30, 1998 to 16.7% for the nine months ended September 30, 1999. These decreases primarily reflect the closing of the facility in Arizona by Lyte and the control of our expenses combined with an increase in our total revenues. Research and development expenses. Research and development expenses decreased 18.2% from $819,000 for the three months ended September 30, 1998 to $670,000 for the three months ended September 30, 1999, and were flat at $2.2 million for the nine months ended September 30, 1998 and 1999. The decrease for the three months ended September 30, 1999 was primarily due to a reduction of consulting fees and materials purchased at the substrate division. Acquisition cost. As part of the acquisition of Lyte Optronics in May 1999, we incurred a number of one-time expenses associated with the transaction in the approximate amount of $2.8 million. Such expenses include the fees paid to our investment bankers, accountants, attorneys, and other outside consultants and related transaction expenses. Interest expense. Interest expense increased from $325,000 for the three months ended September 30, 1998 to $752,000 for the three months ended September 30, 1999, and increased from $837,000 for the nine months ended September 30, 1998 to $1.5 million for the nine months ended September 30, 1999. These increases primarily reflect the inclusion of the laser-diode and LED business in the 1999 results. As part of the acquisition, we added about $11.0 million in debt, of which we repaid approximately $6.0 million in June 1999. The additional interest from the inclusion of the laser-diode and LED business was $213,000 and $599,000 for the three months and nine months ended September 30, 1999, respectively. Other income and expense. Other income and expense decreased 5.2% from $248,000 for the three months ended September 30, 1998 to $235,000 for the three months ended September 30, 1999. Other income and expense increased from $219,000 for the nine months ended September 30, 1998 to $380,000 for the nine months ended September 30, 1999. The decrease for the three months ended September 30, 1999 was primarily due to lower interest income on short-term investments offset by exchange rate gains. The increase for the nine months ended September 30, 1999 was primarily due to exchange rate gains. Provision for income taxes. Income tax expense, as adjusted for acquisition costs of $2.8 million in 1999, declined from 38.8% of income before provision of income taxes for the nine months ended September 30, 1998 to 38.0% for the nine months ended September 30, 1999. 10 11 Extraordinary Item, net of tax benefits. In connection with the acquisition of Lyte, we incurred prepayment penalties associated with a loan that we repaid as part of the transaction. This one-time charge is shown, net of tax benefits, as an extraordinary item in the second quarter of 1999, which is reflected in the nine months ended September 30, 1999. Liquidity and Capital Resources During the past five years, we have funded our operations primarily from cash provided by operations, short-term and long-term borrowings and a private financing of $5.9 million for Preferred Stock completed in March 1997. We completed our initial public offering in May 1998, and raised approximately $25.8 million, net of offering expenses. In December 1998 we completed our taxable bond offering and raised approximately $11.6 million. As of September 30, 1999, we had working capital of $37.3 million, including cash and cash equivalents of $4.9 million, compared to working capital at December 31, 1998 of $41.6 million, including cash and cash equivalents of $16.4 million. During the nine months ended September 30, 1999, net cash used in operations of $7.0 million was primarily due to increases in inventories of $8.1 million, accounts receivable of $4.2 million, prepaid and other assets of $5.1 million and a loss of $1.3 million, offset in part by depreciation of $4.1 million and increases in accounts payable and accrued liabilities of $7.8 million. The increases in accounts receivable, inventory and accounts payable and accrued liabilities were primarily the result of the 46.8% increase in total revenues from the prior nine months ended September 30. In addition, raw materials inventories increased in anticipation of large orders for the upcoming quarters. The increase in prepaid and other assets was primarily due to deposits for Ge raw material, prepaid research and development expenses. Net cash used in investing activities was $4.1 million for the nine months ended September 30, 1999, and was due primarily to the purchase of property, plant and equipment in our Fremont facilities as well as our new facility in Beijing, China. Net cash used in financing activities was $422,000 for the nine months ended September 30, 1999, and was generated primarily from our issuance of Common Stock in the amount of $956,000 and short-term borrowings of $2.4 million, offset by repayments of long-term borrowings and capital leases of $3.6 million. The Common Stock was issued primarily to employees exercising their stock options or purchasing stock through our employee stock purchase plan. We have generally financed our equipment purchases through secured equipment loans over five-year terms at interest rates ranging from 6.0% to 9.0% per annum. Our manufacturing facilities have been financed by long-term borrowings, which were repaid by the taxable variable rate revenue bonds in 1998. These bonds have a term of twenty-five years and mature in 2023 with an interest rate at 200 basis points below the prime rate and are traded in the public market. Repayment of principal and interest under the bonds is secured by a letter of credit from our bank and is paid on a quarterly basis. We have the option to redeem in whole or in part the bonds during their term. At September 30, 1999, $10.7 million was outstanding under the taxable variable rate revenue bonds. We currently have a $15.0 million line of credit with a commercial bank at an interest rate equal to the prime rate plus one-half percent. This line of credit is secured by all business assets, less equipment, and expires in November 1999. We are currently negotiating an extension to this line of credit. This line of credit is subject to certain financial covenants regarding current financial ratios and cash flow requirements, which were met as of September 30, 1999. We must obtain the lender's approval to obtain additional borrowings or to further pledge our assets, except for borrowings obtained in the normal course of business or the pledging of equipment. At September 30, 1999, $4.3 million was outstanding under the $15 million line of credit. We anticipate that the combination of existing working capital and the borrowings available under current credit agreements will be sufficient to fund working capital and capital expenditure requirements for the next 12 months. Our future capital requirements will be dependent on many factors including the rate of revenue growth, our profitability, the timing and extent of spending to support research and development programs, the expansion of 11 12 selling and marketing and administrative activities, and market acceptance of our products. We expect that we may need to raise additional equity or debt financing in the future, although we are not currently negotiating for additional financing nor have any plans to obtain additional financing. We cannot assure you that additional equity or debt financing, if required, will be available on the acceptable terms or at all. If we are unable to obtain such additional capital, if needed, we may be required to reduce the scope of our planned product development and selling and marketing activities, which would have a material adverse effect on our business, financial condition and results of operations. In the event that we do raise additional equity financing, further dilution to our investors will result. Item 3. Quantitative and Qualitative Disclosures About Market Risk Since many of the Company's Japanese and Taiwanese invoices are denominated in yen, the Company has purchased foreign exchange contracts to hedge against certain trade accounts receivable in Japanese yen. As of September 30, 1999, the Company's outstanding commitments with respect to the foreign exchange contracts had a total value of approximately $3.8 million. Many of the contracts were entered into six months prior to the due date and the dates coincide with the receivable terms on customer invoices. By matching the receivable collection date and contract due date, the Company attempts to minimize the impact of foreign exchange fluctuations. PART II. OTHER INFORMATION Item 2. Changes in securities and use of proceeds (a) In connection with the acquisition of Lyte Optronics, our Board of Directors adopted resolutions designating 2,000,000 shares of Preferred Stock of the Company as Series A Preferred Stock (the "Series A Preferred Stock"), of which 980,655 shares were subsequently issued to the stockholders of Lyte Optronics in exchange for the shares of Series B Preferred Stock of Lyte Optronics, in connection with the Company's acquisition of Lyte Optronics. The holders of the Series A Preferred Stock shall be entitled to receive, out of any funds legally available therefor, dividends in cash in an amount equal to $0.20 per annum for each share of Series A Preferred Stock held by them, in each case as adjusted for stock splits, recapitalizations and the like. Unless we have paid all dividends that have accrued on the Series A Preferred Stock, so long as any shares of Series A Preferred Stock are outstanding we shall not pay or declare any dividend or distribution of any nature on shares of Common Stock. In the event of a liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, after our debts have been paid, the holders of Series A Preferred Stock shall be entitled to receive out of our assets an amount per share equal to $4.00 before any payment shall be made or any assets distributed to the holders of Common Stock. If the assets remaining after our debts have been paid or amounts set aside for such payment are insufficient to pay to the holders of Series A Preferred Stock the full amount to which they are entitled, then all of our assets available for distribution shall be distributed ratably among the holders of the Series A Preferred Stock. After payment in full of this liquidation preference plus accrued but unpaid dividends of the shares of the Series A Preferred Stock, no further participation in any distribution of our assets shall be allowed in respect of such shares, and the holders of the Common Stock shall be entitled to receive all of our remaining assets to be distributed. Except as otherwise required by law, shares of Series A Preferred Stock shall not be entitled to vote on any matter to be voted on by our stockholders. (b) In connection with the acquisition of Lyte Optronics, we issued an aggregate of 2,247,465 Common Stock and 980,655 shares of Series A Preferred Stock to the existing stockholders of Lyte Optronics in exchange for all of the outstanding shares of capital stock of Lyte Optronics, and we assumed options to acquire 101,501 shares of our Common Stock and warrants convertible into 13,557 shares of our Common Stock (collectively the "Merger Shares"). The Merger Shares were issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), afforded by Section 4(2). Lyte Optronics retained a purchaser representative on behalf of their stockholders who had knowledge and experience in financial and business matters such that the purchaser representative was capable of evaluating the merits and risks of the investment. The stockholders of Lyte Optronics had access to all relevant information regarding us necessary to evaluate the investment and represented that the shares were being acquired for investment intent. Additionally, the 12 13 stockholders of Lyte Optronics were provided with an information statement setting forth information about the Company and the Merger. There was no general solicitation or advertising involved in the acquisition. Prudential Securities, Inc., to whom we paid a fee of $800,000, advised us on the acquisition. Item 6. Exhibits and reports on Form 8-K a. Exhibits 27.1 Financial Data Schedule b. Reports on Form 8-K (1) On June 14, 1999, we filed a report on Form 8-K reporting the acquisition of Lyte Optronics, Inc. (2) On August 28, 2000, we filed a report on Form 8-K/A to amended the report on Form 8-K that was originally filed on June 14, 1999. 13 14 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) 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. AMERICAN XTAL TECHNOLOGY, INC. Dated: August 28, 2000 By: /s/ Donald L. Tatzin --------------------------------- Donald L. Tatzin Chief Financial Officer 14 EX-27.1 2 ex27-1.txt FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 4,883 0 17,344 1,864 33,447 66,858 40,304 4,097 111,643 29,545 0 0 4,000 46,011 0 111,643 0 59,697 0 43,288 0 0 1,535 298 1,181 (883) 0 508 0 (1,391) (.07) (.07)
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