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SECURITIES AND EXCHANGE COMMISSION
the Securities Exchange Act of 1934
Delaware | 05-0567906 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
1600 North Desert Drive, Tempe, | Arizona 85281 | |
(Address of Principal Executive Offices) | (Zip Code) |
YESþ NOo
YESo NOþ
CLASS | OUTSTANDING AS OF JULY 31, 2005 | |||
Common | 7,322,605 | |||
Par value $.001 per share |
Page | ||||||||
PART I — FINANCIAL INFORMATION | ||||||||
FINANCIAL STATEMENTS: | ||||||||
Condensed Balance Sheets (unaudited) — June 30, 2005 and December 31, 2004 | 1 | |||||||
Condensed Statements of Operations (unaudited) — Three Months and Six Months Ended June 30, 2005 and 2004 | 2 | |||||||
Condensed Statements of Cash Flows (unaudited) — Six Months Ended June 30, 2005 and 2004 | 3 | |||||||
Notes to Condensed Financial Statements | 4 | |||||||
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 12 | |||||||
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 19 | |||||||
CONTROLS AND PROCEDURES | 19 | |||||||
PART II — OTHER INFORMATION | ||||||||
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS | 20 | |||||||
OTHER INFORMATION | 21 | |||||||
EXHIBITS | 21 | |||||||
SIGNATURES | 22 | |||||||
Ex-31.1 | ||||||||
Ex-31.2 | ||||||||
EX-32.1 | ||||||||
Ex-32.2 |
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CONDENSED BALANCE SHEETS
(in thousands)
June 30, | DECEMBER 31, | |||||||
2005 | 2004 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 1,172 | $ | 8,195 | ||||
Short-term investments | — | 13 | ||||||
Accounts receivable, net | 814 | 339 | ||||||
Inventories | 6,103 | 5,400 | ||||||
Other current assets | 535 | 368 | ||||||
Total current assets | 8,624 | 14,315 | ||||||
Property, plant and equipment, net | 5,480 | 6,082 | ||||||
Other investments | 1,119 | 1,119 | ||||||
Total Assets | $ | 15,223 | $ | 21,516 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 2,798 | $ | 1,230 | ||||
Accrued compensation | 183 | 216 | ||||||
Accrued liabilities | 564 | 1,462 | ||||||
Total current liabilities | 3,545 | 2,908 | ||||||
Long-term debt (net of $2,527 discount) | 1,973 | — | ||||||
Stockholders’ Equity: | ||||||||
Common stock | 7 | 7 | ||||||
Additional paid-in capital | 60,952 | 58,007 | ||||||
Deferred compensation | — | (616 | ) | |||||
Accumulated deficit | (51,254 | ) | (38,790 | ) | ||||
Total stockholders’ equity | 9,705 | 18,608 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 15,223 | $ | 21,516 | ||||
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CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
Three Months | Six Months | |||||||||||||||
Ended June 30, | Ended June 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Net product sales | $ | 1,006 | $ | 1,035 | $ | 1,864 | $ | 1,375 | ||||||||
Design and engineering services | — | 99 | — | 237 | ||||||||||||
Total net sales | 1,006 | 1,134 | 1,864 | 1,612 | ||||||||||||
Costs and Expenses: | ||||||||||||||||
Cost of sales — products | 4,007 | 2,586 | 7,159 | 4,848 | ||||||||||||
Cost of sales — design and engineering services | — | 67 | — | 189 | ||||||||||||
Selling, general, and administrative | 1,195 | 1,107 | 2,191 | 2,193 | ||||||||||||
Research and development | 2,764 | 2,104 | 4,757 | 4,558 | ||||||||||||
7,966 | 5,864 | 14,107 | 11,788 | |||||||||||||
Operating loss | (6,960 | ) | (4,730 | ) | (12,243 | ) | (10,176 | ) | ||||||||
Other Income (Expense): | ||||||||||||||||
Interest, net | (251 | ) | 64 | (221 | ) | 108 | ||||||||||
Realized loss on short-term investment | — | (41 | ) | — | (41 | ) | ||||||||||
Loss on investment in start-up company | — | (131 | ) | — | (131 | ) | ||||||||||
(251 | ) | (108 | ) | (221 | ) | (64 | ) | |||||||||
Net Loss | $ | (7,211 | ) | $ | (4,838 | ) | $ | (12,464 | ) | $ | (10,240 | ) | ||||
Loss per common share: | ||||||||||||||||
Basic and diluted | $ | (1.03 | ) | $ | (0.78 | ) | $ | (1.78 | ) | $ | (1.77 | ) | ||||
Weighted average number of common shares: | ||||||||||||||||
Basic and diluted | 6,992 | 6,188 | 6,988 | 5,784 | ||||||||||||
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CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Six Months Ended | ||||||||
June 30, | ||||||||
2005 | 2004 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net loss | $ | (12,464 | ) | $ | (10,240 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 1,232 | 1,730 | ||||||
Amortization of debenture discount and offering costs | 202 | — | ||||||
Stock compensation | 536 | 444 | ||||||
Stock issued to pay interest | 35 | — | ||||||
Stock issued for services | 138 | — | ||||||
Deferred revenue | — | 168 | ||||||
Provision for doubtful accounts | (1 | ) | 10 | |||||
Loss on investment in start-up company | — | 131 | ||||||
Changes in assets and liabilities: | ||||||||
Increase in accounts receivable | (474 | ) | (408 | ) | ||||
Increase in inventories | (703 | ) | (1,161 | ) | ||||
(Increase) decrease in other assets | (167 | ) | 353 | |||||
Increase in accounts payable and accrued liabilities | 637 | 1,075 | ||||||
Net cash used in operating activities | (11,029 | ) | (7,898 | ) | ||||
Cash Flows from Investing Activities: | ||||||||
Purchases of property, plant, and equipment | (630 | ) | (1,920 | ) | ||||
Purchase of intangibles | — | (243 | ) | |||||
Purchase of investments | — | (79 | ) | |||||
Proceeds from maturities/sales of short-term investments | 13 | 12,067 | ||||||
Net cash provided by (used in) investing activities | (617 | ) | 9,825 | |||||
Cash Flows from Financing Activities: | ||||||||
Proceeds of debenture offering | 4,500 | — | ||||||
Proceeds of public stock offering | — | 11,969 | ||||||
Issuance of shares related to Employee Stock Purchase Plan | 123 | 96 | ||||||
Stock options exercised | — | 53 | ||||||
Net cash provided by financing activities | 4,623 | 12,118 | ||||||
Net increase (decrease) in cash and cash equivalents | (7,023 | ) | 14,045 | |||||
Cash and cash equivalents, beginning of period | 8,195 | 2,417 | ||||||
Cash and cash equivalents, end of period | $ | 1,172 | $ | 16,462 | ||||
Supplemental Cash Flow Information: | ||||||||
Cash paid for interest | $ | 21 | $ | — | ||||
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NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
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The successful introduction of an HDTV product to market and securing volume orders from consumer electronics retailers for HTDVs represent a key ingredient in our success. In the second quarter of 2004, we signed a supply agreement to provide HDTVs to Sears Roebuck and Company. In the third quarter of 2004, we began shipping HDTVs to Sears. Also in the third quarter of 2004, our supplier of light engines, a major sub-assembly of the HDTV, informed us that they were unable to supply us with the volume of light engines necessary to satisfy our requirements. As a result of our not being able to supply the required number of HDTVs, Sears exercised their option to terminate the supply agreement. In the fourth quarter of 2004, our light engine supplier informed us that they would not be able to manufacture the light engine in volume until the second quarter of 2005. In March 2005, we received authorization from our light engine supplier to have the light engine manufactured on our behalf by a third party manufacturer and granted us a perpetual license to the light engine technology. In April 2005, we selected Suntron Corporation to manufacture light engines on our behalf. We currently believe that light engine availability will begin to increase in the fourth quarter of 2005 and that capacity will exceed 1,000 units per month by the end of the fourth quarter of 2005.
June 30, | December 31, | |||||||||
2005 | 2004 | |||||||||
Raw materials | $ | 5,152 | $ | 4,479 | ||||||
Work-in-process | 614 | 806 | ||||||||
Finished goods | 337 | 115 | ||||||||
$ | 6,103 | $ | 5,400 | |||||||
June 30, | December 31, | ||||||||
2005 | 2004 | ||||||||
Leasehold improvements | $ | 569 | $ | 569 | |||||
Equipment | 16,815 | 16,185 | |||||||
Furniture | 78 | 78 | |||||||
17,462 | 16,832 | ||||||||
Less accumulated depreciation | (11,982 | ) | (10,750 | ) | |||||
$ | 5,480 | $ | 6,082 | ||||||
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North | |||||||||||||||||
America | Asia | Europe | Total | ||||||||||||||
Three months ended June 30, 2005 | |||||||||||||||||
Net sales | $ | 598 | $ | 16 | $ | 392 | $ | 1,006 | |||||||||
Three months ended June 30, 2004 | |||||||||||||||||
Net sales | $ | 433 | $ | 242 | $ | 459 | $ | 1,134 | |||||||||
Six months ended June 30, 2005 | |||||||||||||||||
Net sales | $ | 923 | $ | 31 | $ | 910 | $ | 1,864 | |||||||||
Six months ended June 30, 2004 | |||||||||||||||||
Net sales | $ | 747 | $ | 349 | $ | 516 | $ | 1,612 |
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Six Months | Three Months | Six Months | |||||||||||
Ended June 30, | Ended June 30, | Ended June 30, | |||||||||||
2005 | 2004 | 2004 | |||||||||||
Net loss as reported | $ | (12,464 | ) | $ | (4,838 | ) | $ | (10,240 | ) | ||||
Add stock-based compensation included in net loss as reported | 451 | 81 | 162 | ||||||||||
Deduct total stock-based employee compensation expense determined under fair value based method for all awards | (786 | ) | (387 | ) | (699 | ) | |||||||
Pro forma net loss | $ | (12,799 | ) | $ | (5,144 | ) | $ | (10,777 | ) | ||||
Basic and diluted net loss per share: | |||||||||||||
As reported | $ | (1.78 | ) | $ | (0.78 | ) | $ | (1.77 | ) | ||||
Pro forma | $ | (1.83 | ) | $ | (0.83 | ) | $ | (1.86 | ) |
Dividend yield: | N/A | ||||
Volatility: | 123 | % | |||
Risk-free interest rate: | 3.81 | % | |||
Expected life in years: | 10 |
Fiscal Year | Amount | ||||
2005 | $ | 698 | |||
2006 | 949 | ||||
2007 | 673 | ||||
Thereafter | 202 | ||||
$ | 2,522 | ||||
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June 30, | December 31, | |||||||
2005 | 2004 | |||||||
April 2005 7% Convertible Debentures maturing April 20, 2008, convertible at $1.57 per share | ||||||||
$ | 2,500 | $ | — | |||||
April 2005 9% Senior Secured Debentures maturing April 20, 2008, secured by a first lien on our assets | 2,000 | — | ||||||
4,500 | — | |||||||
Less: | ||||||||
Discount and beneficial conversion feature on convertible debentures | 2,338 | — | ||||||
Discount on secured debentures | 189 | — | ||||||
Total | $ | 1,973 | $ | — | ||||
2006 | $ | — | ||
2007 | — | |||
2008 | $ | 4,500 | ||
Total | $ | 4,500 | ||
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June 30, 2005 | June 30, 2005 | |||||||
Actual | Pro Forma | |||||||
Convertible debentures, net of discount | $ | 162 | $ | 162 | ||||
Secured debentures, net of discount | 1,811 | 2,644 | ||||||
Total long-term debt | 1,973 | 2,806 | ||||||
Stockholders’ equity | 9,705 | 15,872 | ||||||
Total capitalization | 11,678 | 18,678 |
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Amount of Commitment Expiration Per Period | ||||||||||||||||||||
Total Amounts | Less | |||||||||||||||||||
Other Commercial Commitments | Committed | than 1 Year | 1-3 Years | 4-5 Years | 6 Years and Over | |||||||||||||||
(in thousands) | ||||||||||||||||||||
Facilities leases | $ | 4,959 | $ | 1,156 | $ | 2,173 | $ | 1,630 | $ | — | ||||||||||
Purchase orders | $ | 3,231 | $ | 3,231 | $ | — | $ | — | $ | — | ||||||||||
Guarantee | $ | 265 | $ | 265 | $ | — | $ | — | $ | — |
• | $2.5 million principal of 7% convertible debentures due April 20, 2008. Interest is due quarterly and is payable in cash or, if certain conditions have been met, in Brillian common stock. These |
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convertible debentures are convertible into common stock at an initial conversion price of $1.57 per share, subject to certain anti-dilution provisions, if approved by our stockholders, and |
• | $5.0 million principal of 4% convertible debentures due July 12, 2008. Interest is due quarterly and is payable in cash or, if certain conditions have been met, in Brillian common stock. These convertible debentures are convertible into common stock at an initial conversion price of $2.63 per share, subject to certain anti-dilution provisions, if approved by our stockholders. |
• | $2.0 million principal of 9% senior secured debentures due April 20, 2008. Interest is due monthly and is payable in cash, and | ||
• | $2.075 million principal of 9% senior secured debentures due July 12, 2008. Interest is due monthly and is payable in cash. |
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Nominees | Votes in Favor | Votes Withheld | ||||||
Jack L. Saltich | 6,028,176 | 613,405 | ||||||
Vincent F. Sollitto, Jr. | 6,248,639 | 392,942 | ||||||
David P. Chavoustie | 6,166,616 | 474,965 | ||||||
David N.K. Wang | 6,162,213 | 479,368 | ||||||
John S. Hodgson | 6,179,106 | 462,475 |
Votes in Favor | Opposed | Abstain | ||||||
5,983,183 | 589,023 | 69,375 |
Votes in Favor | Opposed | Abstain | Broker Non-Votes | ||||||||||
1,954,549 | 740,834 | 204,226 | 3,741,972 |
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Votes in Favor | Opposed | Abstain | Broker Non-Votes | ||||||||||
2,214,544 | 602,208 | 78,857 | 3,741,972 |
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Exhibit | ||
Number | Exhibit | |
31.1 | Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended | |
31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Act of 1934, as amended | |
32.1 | Certification of President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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BRILLIAN CORPORATION | ||||
Date: August 15, 2005 | By: | /s/ Vincent F. Sollitto Jr. | ||
Vincent F. Sollitto, Jr. | ||||
President and Chief Executive Officer | ||||
By: | /s/ Wayne A. Pratt | |||
Wayne A. Pratt | ||||
Vice President, Chief Financial Officer, Secretary, and Treasurer | ||||
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Exhibit | ||
Number | Exhibit | |
31.1 | Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended | |
31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Act of 1934, as amended | |
32.1 | Certification of President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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