UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: DECEMBER 19, 2002
---------------------------------
(DATE OF EARLIEST EVENT REPORTED)
RF MICRO DEVICES, INC.
----------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHAPTER)
NORTH CAROLINA 0-22511 56-1733461
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(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
7628 THORNDIKE ROAD
GREENSBORO, NORTH CAROLINA 27409-9421
-------------------------- ----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(336) 664-1233
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
The Registrant hereby amends Item 7 to its Current Report on Form 8-K dated
December 19, 2002, in order to include the financial statements and pro forma
financial information required by Item 7(a), Item 7(b) and the exhibit required
by Item 7(c).
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
-------------------------------------------------------------------
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
------------------------------------------
Resonext Communications, Inc. (Resonext) audited balance sheets as of
December 31, 2001 and 2000, and audited statements of operations and
cash flows for each of the two years then ended, and unaudited balance
sheet as of September 30, 2002, and unaudited statements of operations
and cash flows for the six months ended September 30, 2002, are
included at pages 3 to 25 of this report.
Resonext Communications, Inc.
(a development stage company)
Consolidated Financial Statements
Years ended December 31, 2000 and 2001 and the period from
November 24, 1999 (inception) through December 31, 2001
CONTENTS
Report of Independent Auditors..........................................
Audited Consolidated Financial Statements
Consolidated Balance Sheets.............................................
Consolidated Statements of Operations...................................
Consolidated Statements of Stockholders' Equity.........................
Consolidated Statements of Cash Flows...................................
Notes to Consolidated Financial Statements..............................
Report of Independent Auditors
The Board of Directors and Stockholders
Resonext Communications, Inc.
We have audited the accompanying consolidated balance sheets of Resonext
Communications, Inc. (a development stage company) as of December 31, 2000 and
2001, and the related consolidated statements of operations, stockholders'
equity, and cash flows for the years then ended and for the period from November
24, 1999 (inception) through December 31, 2001. These consolidated 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 auditing standards generally accepted
in the United States. 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 consolidated financial position of Resonext
Communications, Inc. at December 31, 2000 and 2001, and the consolidated results
of its operations and its cash flows for the years then ended and for the period
from November 24, 1999 (inception) through December 31, 2001, in conformity with
accounting principles generally accepted in the United States.
March 8, 2002,
except for Note 9,
as to which the date is
June 17, 2002
Resonext Communications, Inc.
(a development stage company)
Consolidated Balance Sheets
DECEMBER 31, SEPTEMBER 30,
2000 2001 2002
---------------------------------------------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 23,597,639 $ 4,220,201 $ 11,355,013
Short-term investments - 5,004,585 24,000,000
Prepaid expenses and other current assets 87,025 76,834 551,392
---------------------------------------------------
Total current assets 23,684,664 9,301,620 35,906,405
Property and equipment, net 1,893,484 2,804,400 2,710,720
Other assets 54,083 114,837 109,179
---------------------------------------------------
Total assets $ 25,632,231 $ 12,220,857 $ 38,726,304
===================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 582,146 $ 884,121 $ 1,420,856
Accrued payroll and related liabilities 192,275 350,865 407,929
Other accrued liabilities 189,109 200,382 225,886
Current portion of capital equipment obligations 649,279 1,006,543 1,183,174
---------------------------------------------------
Total current liabilities 1,612,809 2,441,911 3,237,845
Capital equipment obligations, less current portion 1,048,978 630,860 979,000
Commitments
Stockholders' equity:
Series A convertible preferred stock, $0.001 par value:
Authorized shares - 7,500,000
Issued and outstanding shares - 7,250,000 at
December 31, 2000 and 2001 and September 30, 2002 7,250 7,250 7,250
Aggregate liquidation preference of $7,250,000 at
December 31, 2001
Series B convertible preferred stock, $0.001 par value:
Authorized shares - 7,000,000
Issued and outstanding shares - 6,184,211 at December 31, 2000
and 6,403,509 at December 31, 2001 and 6,491,228 at
September 30, 2002 6,184 6,403 6,491
Aggregate liquidation preferences of $21,900,001 at
December 31, 2001
Series C convertible preferred stock, $0.001 par value:
Authorized shares - 20,966,315
Issued and outstanding shares - 20,631,578 at September 30, 2002 - - 20,632
Common stock, $0.001 par value:
Authorized shares - 30,000,000
Issued and outstanding shares - 3,702,167 at December 31, 2000,
4,846,612 at December 31, 2001 and 6,563,249 at September 30,
2002 3,702 4,846 6,563
Additional paid-in capital 28,431,631 29,501,690 68,854,013
Stockholder notes receivable (9,900) (9,900) (9,900)
Deficit accumulated during the development stage (5,468,423) (20,362,203) (34,375,590)
---------------------------------------------------
Total stockholders' equity 22,970,444 9,148,086 34,509,459
---------------------------------------------------
Total liabilities and stockholders' equity $ 25,632,231 $ 12,220,857 $ 38,726,304
===================================================
SEE ACCOMPANYING NOTES.
Resonext Communications, Inc.
(a development stage company)
Consolidated Statements of Operations
PERIOD FROM
NOVEMBER 24,
1999
(INCEPTION)
YEARS ENDED THROUGH SIX MONTHS
DECEMBER 31, DECEMBER 31, ENDED SEPTEMBER 30
2000 2001 2001 2001 2002
--------------------------------- -------------------------------------------------
(unaudited)
Operating expenses:
Research and development $ 4,521,183 $ 12,671,260 $ 17,192,443 $ 7,009,903 $ 8,069,716
Sales and marketing 135,389 695,840 831,229 340,748 703,922
General and administrative 1,263,564 2,029,554 3,293,118 1,105,994 1,065,533
--------------------------------- -------------------------------------------------
Total operating expenses 5,920,136 15,396,654 21,316,790 8,456,645 9,839,171
Interest income 515,546 743,379 1,259,817 363,158 331,490
Interest expense (64,725) (240,505) (305,230) (114,626) (156,298)
--------------------------------- -------------------------------------------------
Net loss $ (5,469,315) $ (14,893,780) $ (20,362,203) $ (8,208,113) $ (9,663,979)
================================= =================================================
SEE ACCOMPANYING NOTES.
Resonext Communications, Inc.
(a development stage company)
Consolidated Statements of Stockholders' Equity
Period from November 24, 1999 (inception) through December 31, 2001
CONVERTIBLE PREFERRED STOCK COMMON STOCK
-----------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------
Issuance of founder's shares (common stock) at
$0.001 per share in November 1999 -- $ -- 3,493,000 $ 3,493
Issuance of Series A preferred stock at $1.00
per share for cash in December 1999, net of
issuance costs of $40,000 7,150,000 7,150 -- --
Net and comprehensive income -- -- -- --
-----------------------------------------------------------
Balance at December 31, 1999 7,150,000 7,150 3,493,000 3,493
Exercise of stock options by employees and
consultants for cash at $0.10 per share
throughout the year -- -- 206,000 206
Issuance of Series A preferred stock at $1.00
per share for cash in February, March, and
May 2000 100,000 100 -- --
Issuance of Series B preferred stock for $3.42
per share for cash in November and December
2000, net of issuance costs of $37,360 6,184,211 6,184 -- --
Exercise of stock options for employee notes
receivable at $0.10 per share in March 2000 -- -- 99,000 99
Repurchase of common stock previously issued
upon exercise of stock options in April 2000 -- -- (95,833) (96)
Value of warrants issued for 60,000 and 21,930
shares of Series A and Series B preferred
stock in February and
December 2000, respectively -- -- -- --
Net and comprehensive loss -- -- -- --
-----------------------------------------------------------
Balance at December 31, 2000 (carried forward) 13,434,211 13,434 3,702,167 3,702
===========================================================
DEFICIT
ACCUMULATED
ADDITIONAL STOCKHOLDER DURING THE TOTAL
PAID-IN NOTES DEVELOPMENT STOCKHOLDERS'
CAPITAL RECEIVABLE STAGE EQUITY
----------------------------------------------------------
Issuance of founder's shares (common stock) at
$0.001 per share in November 1999 $ -- $ -- $ -- $ 3,493
Issuance of Series A preferred stock at $1.00
per share for cash in December 1999, net of
issuance costs of $40,000 7,102,850 -- -- 7,110,000
Net and comprehensive income -- -- 892 892
----------------------------------------------------------
Balance at December 31, 1999 7,102,850 -- 892 7,114,385
Exercise of stock options by employees and
consultants for cash at $0.10 per share
throughout the year 20,394 -- -- 20,600
Issuance of Series A preferred stock at $1.00
per share for cash in February, March, and
May 2000 99,900 -- -- 100,000
Issuance of Series B preferred stock for $3.42
per share for cash in November and December
2000, net of issuance costs of $37,360 21,106,458 -- -- 21,112,642
Exercise of stock options for employee notes
receivable at $0.10 per share in March 2000 9,801 (9,900) -- --
Repurchase of common stock previously issued
upon exercise of stock options in April 2000 (9,487) -- -- (9,583)
Value of warrants issued for 60,000 and 21,930
shares of Series A and Series B preferred
stock in February and
December 2000, respectively 101,715 -- -- 101,715
Net and comprehensive loss -- -- (5,469,315) (5,469,315)
----------------------------------------------------------
Balance at December 31, 2000 (carried forward) 28,431,631 (9,900) (5,468,423) 22,970,444
==========================================================
Resonext Communications, Inc.
(a development stage company)
Consolidated Statements of Stockholders' Equity (continued)
Period from November 24, 1999 (inception) through December 31, 2001
CONVERTIBLE PREFERRED STOCK COMMON STOCK
---------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------
Balance at December 31, 2000 (brought forward) 13,434,211 $ 13,434 3,702,167 $ 3,702
Exercise of stock options by employees and
consultants for cash at $0.10 - $0.50 per
share throughout the year -- -- 1,072,705 1,072
Value of warrants issued for 38,011 shares of
Series B preferred stock in September 2001 -- -- -- --
Exercise of Series B warrant at $3.42 per
share in
August 2001 219,298 219 -- --
Issuance of common stock for services rendered
in
March and December 2001 -- -- 71,740 72
Value of stock options issued to consultants -- -- -- --
Net and comprehensive loss -- -- -- --
----------------------------------------------------
Balance at December 31, 2001 13,653,509 $ 13,653 4,846,612 $ 4,846
====================================================
SEE ACCOMPANYING NOTES.
DEFICIT
ACCUMULATED
ADDITIONAL STOCKHOLDER DURING THE TOTAL
PAID-IN NOTES DEVELOPMENT STOCKHOLDERS'
CAPITAL RECEIVABLE STAGE EQUITY
------------------------------------------------------
Balance at December 31, 2000 (brought forward) $ 28,431,631 $ (9,900) $ (5,468,423) $ 22,970,444
Exercise of stock options by employees and
consultants for cash at $0.10 - $0.50 per
share throughout the year 123,223 -- -- 124,295
Value of warrants issued for 38,011 shares of
Series B preferred stock in September 2001 108,952 -- -- 108,952
Exercise of Series B warrant at $3.42 per
share in
August 2001 749,780 -- -- 749,999
Issuance of common stock for services rendered
in
March and December 2001 35,798 -- -- 35,870
Value of stock options issued to consultants 52,306 -- -- 52,306
Net and comprehensive loss -- -- (14,893,780) (14,893,780)
---------------------------------------------------------
Balance at December 31, 2001 $ 29,501,690 $ (9,900) $(20,362,203) $ 9,148,086
=========================================================
SEE ACCOMPANYING NOTES.
Resonext Communications, Inc.
(a development stage company)
Consolidated Statements of Cash Flows
PERIOD FROM
NOVEMBER 24,
1999
(INCEPTION)
YEARS ENDED THROUGH SIX MONTHS
DECEMBER 31, DECEMBER 31, ENDED SEPTEMBER 30,
2000 2001 2001 2001 2001
-------------------------------------------------------------------------------------
(unaudited) (unaudited)
OPERATING ACTIVITIES
Net loss $ (5,469,315) $ (14,893,780) $ (20,362,203) $ (8,208,113) $ (9,663,979)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 330,241 1,066,395 1,396,636 535,812 814,733
Amortization of prepaid issuance
costs related to warrants
issued in conjunction with
capital equipment financing 16,660 39,883 56,543 16,952 34,886
Amortization of lease finance
charges - 69,429 69,429 34,714 31,122
Compensatory common stock grants - 35,870 35,870 - -
Stock issued in settlement of
technology purchases and
services rendered - 749,999 749,999 749,999 209,588
Value of stock options issued to
consultants - 52,306 52,306 20,037 -
Changes in operating assets and
liabilities:
Prepaid expenses and other assets (141,108) (50,563) (191,671) (25,169) (351,701)
Accounts payable 582,146 301,975 884,121 589,520 245,209
Accrued payroll and related
liabilities 192,275 158,590 350,865 173,960 43,622
Other accrued liabilities 149,109 11,273 200,382 351,591 (31,007)
-------------------------------------------------------------------------------------
Net cash used in operating activities (4,339,992) (12,458,623) (16,757,723) (5,760,697) (8,667,527)
INVESTING ACTIVITIES
Sales and maturities of short-term
investments - 11,000,000 11,000,000 5,300,000 2,600,000
Purchase of short-term investments - (16,004,585) (16,004,585) (6,177,677) (200,000)
Purchases of property and equipment (421,668) (1,384,597) (1,806,265) (775,967) (761,402)
-------------------------------------------------------------------------------------
Net cash provided by (used in) (421,668) (6,389,182) (6,810,850) (1,653,644) 1,638,598
investing activities
FINANCING ACTIVITIES
Proceeds from issuance of convertible
preferred stock, net of
issuance costs 21,212,642 - 28,322,642 - 13,925,155
Proceeds from issuance of common stock
for cash, net of
repurchased shares 11,017 124,295 138,805 13,521 63,933
Proceeds from equipment financing 231,994 148,068 380,062 148,068 1,222,124
Payments on equipment financing (250,739) (801,996) (1,052,735) (387,732) (638,643)
-------------------------------------------------------------------------------------
Net cash (used in) provided by financing 21,204,914 (529,633) 27,788,774 (226,143) 14,572,569
activities
-------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash
equivalents 16,443,254 (19,377,438) 4,220,201 (7,640,484) 7,543,640
Cash and cash equivalents at beginning
of period 7,154,385 23,597,639 - 11,646,691 3,811,373
-------------------------------------------------------------------------------------
Cash and cash equivalents at end of $23,597,639 $ 4,220,201 $ 4,220,201 $ 4,006,207 $ 11,355,013
period
=====================================================================================
Resonext Communications, Inc.
(a development stage company)
Consolidated Statements of Cash Flows (continued)
PERIOD FROM
NOVEMBER 24,
1999
(INCEPTION)
YEARS ENDED THROUGH SIX MONTHS
DECEMBER 31, DECEMBER 31, ENDED SEPTEMBER 30,
2000 2001 2001 2001 2002
-------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid for interest $ 48,065 $ 118,967 $ 167,032 $ 62,961 $ 132,475
Issuance of common stock in exchange for
notes $ 9,900 $ - $ 9,900 -- --
Prepaid debt issuance costs related to
warrants issued $ 101,715 $ 108,952 $ 210,667 -- --
Property and equipment acquired through
equipment financing,
net of sales-leaseback transactions $ 1,802,056 $ 592,714 $ 2,394,770 $ 453,959 --
SEE ACCOMPANYING NOTES.
Resonext Communications, Inc.
(a development stage company)
Notes to Consolidated Financial Statements
December 31, 2001
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
Resonext Communications, Inc. (Resonext or the Company), formerly known as
NeoSilicon, Inc., was incorporated in the state of Delaware on November 24,
1999. The Company is developing high-speed, cost effective IC solutions for
wireless networks.
The Company's principal activities to date have been obtaining financing,
developing technology, and recruiting personnel. The Company has not derived any
revenues from its principal business through December 31, 2001 and is therefore
in the development stage.
The accompanying consolidated financial statements include the financial
statements of the Company and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.
INTERIM FINANCIAL INFORMATION
The interim financial information at September 30, 2002 and for the six-month
periods ended September 30, 2002 and 2001 is unaudited but, in the opinion of
management, includes all adjustments, consisting only of normal recurring
accruals, which the Company considers necessary for a fair presentation of the
financial position and results of operations for the interim periods. The
results of operations for the six-month period ended September 30, 2002 are not
necessarily indicative of the results to be expected for the full fiscal year.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Resonext Communications, Inc.
(a development stage company)
Notes to Consolidated Financial Statements
December 31, 2001
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of cash, cash equivalents, and short-term
investments. The Company uses a local bank and a financial institution to invest
its excess cash, principally in short-term, highly liquid investments. The
Company is exposed to credit risk in the event of default by this institution to
the extent of the amount recorded on the balance sheet.
CASH EQUIVALENTS
Cash equivalents consist of short-term, highly liquid financial instruments,
principally money market funds with insignificant interest rate risk that are
readily convertible to cash and have a maturity of three months or less from the
date of purchase. All cash equivalents are carried at fair market value, which
approximates cost.
SHORT-TERM INVESTMENTS
The portfolio of short-term investments is currently held with one financial
institution. The funds are currently invested in municipals, commercial paper,
and money market funds with a variety of maturity dates extending beyond one
year from the balance sheet date. The investments are classified as short-term
investments since the Company intends to sell these securities within one year,
regardless of the maturity date.
ADVERTISING EXPENSE
The cost of advertising is expensed as incurred. Advertising expense for the
years ended December 31, 2000 and 2001 and for the period from November 24, 1999
(inception) through December 31, 2001 was insignificant.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Property and equipment are depreciated for financial reporting purposes using
the straight-line method over the estimated useful lives of three or five years.
Leasehold improvements and assets recorded under capital lease arrangements are
amortized over the shorter of their estimated useful lives, three years, or the
term of the lease. Amortization of assets recorded under capital leases is
included in depreciation expense.
Resonext Communications, Inc.
(a development stage company)
Notes to Consolidated Financial Statements
December 31, 2001
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION
The Company accounts for employee stock options in accordance with Accounting
Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES (APB
Opinion No. 25), and has adopted the "disclosure only" alternative described in
Statement of Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION (FAS 123).
INCOME TAXES
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, ACCOUNTING FOR INCOME TAXES (FAS 109). Under FAS 109,
deferred tax assets and liabilities are determined based on the differences
between the financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates that will be in effect when the differences
are expected to reverse.
RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141, BUSINESS COMBINATIONS ("SFAS 141").
SFAS 141 establishes new standards for accounting and reporting for business
combinations and will require that the purchase method of accounting be used for
all business combinations initiated after June 30, 2001. Use of the
pooling-of-interests method will be prohibited. The Company does not anticipate
a material effect on our financial condition or results of operations from the
adoption of SFAS 141.
In July 2001, the FASB issued Statement of Financial Accounting Standards No.
142, GOODWILL AND OTHER INTANGIBLE ASSETS ("SFAS 142"), which supersedes APB
Opinion No. 17, INTANGIBLE ASSETS. SFAS 142 establishes new standards for
goodwill, including the elimination of goodwill amortization to be replaced with
methods of periodically evaluating goodwill for impairment. The Company does not
anticipate a material effect on our financial condition or results of operations
from the adoption of SFAS 142.
Resonext Communications, Inc.
(a development stage company)
Notes to Consolidated Financial Statements
December 31, 2001
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
In October 2001, the FASB issued Statement of Financial Accounting Standards No.
144 ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS ("SFAS 144").
SFAS 144 addresses financial accounting for the impairment or disposal of
long-lived assets. SFAS 144 provides guidance on issues relating to the
implementation of SFAS No. 121 ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED
ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF, and develops a model for
long-lived assets to be disposed of by sale, whether previously held and used or
newly acquired. SFAS 144 is effective for financial statements issued for fiscal
years beginning after December 15, 2001 and interim periods within those fiscal
years. The Company does not anticipate a material effect on our financial
condition or results of operations from the adoption of SFAS 144.
In June 2002, the FASB issued Statement of Financial Accounting Standards No.
146, ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES ("SFAS
146"), which nullified Emerging Issues Task Force (EITF) Issue No. 94-3,
LIABILITY RECOGNITION FOR CERTAIN EMPLOYEE TERMINATION BENEFITS AND OTHER COSTS
TO EXIT AN ACTIVITY (INCLUDING CERTAIN COSTS INCURRED IN A RESTRUCTURING). SFAS
146 requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred, and eliminates the
definition and requirements for recognition of exit costs in Issue 94-3. The
Company does not anticipate a material effect on our financial condition or
results of operations from the adoption of SFAS 146, the provisions of which are
effective for exit or disposal activities initiated after December 31, 2002.
2. PROPERTY AND EQUIPMENT
Property and equipment, at cost, consist of the following:
DECEMBER 31, SEPTEMBER 30,
2000 2001 2002
----------------------------------------------------
(unaudited)
Computer equipment $ 1,123,536 $ 1,886,777 $ 2,610,672
Software 929,117 2,015,235 2,369,058
Furniture and fixtures 130,700 198,181 195,073
Leasehold improvements 40,372 100,843 115,441
----------------------------------------------------
2,223,725 4,201,036 5,290,244
Less accumulated depreciation (330,241) (1,396,636) (2,579,524)
----------------------------------------------------
$ 1,893,484 $ 2,804,400 $ 2,710,720
====================================================
Resonext Communications, Inc.
(a development stage company)
Notes to Consolidated Financial Statements
December 31, 2001
3. STOCKHOLDER NOTES RECEIVABLE
In connection with the exercise of stock options in March 2000, a member of the
Board of Directors executed a promissory note in the principal amount of $9,900.
The note bears interest at a rate of 6.69% per annum and is due and payable four
years from the date of the issuance. The note is full recourse and is secured by
99,000 shares of the Company's common stock.
4. CAPITAL EQUIPMENT FINANCING
The Company finances certain equipment purchases through the use of capital
lease lines. The lease lines are collateralized by the underlying assets. At
December 31, 2000 and 2001, property and equipment with a cost of $2,034,050 and
$2,764,316, respectively, were subject to such financing arrangements. Related
accumulated depreciation at December 31, 2000 and 2001 amounted to $306,214 and
$1,142, respectively. Of the amounts subject to financing agreements, $231,994
and $148,068 relate to equipment sold and leased back to the Company in the
years ended December 31, 2000 and 2001, respectively. Future minimum payments
under the equipment financing arrangements are as follows:
AT AT
DECEMBER 31, SEPTEMBER 30,
2001 2002
------------------ -------------------
(unaudited)
2002 $ 1,117,928 $ 525,067
2003 687,269 1,146,683
2004 150,339 686,234
2005 - 100,203
------------------ -------------------
Total payments 1,955,536 2,458,188
Less amount representing interest (165,353) (195,563)
Less amount associated with warrant discount (152,780) (100,451)
------------------ -------------------
Present value of minimum lease payments 1,637,403 2,162,174
Less current portion (1,006,543) (1,183,174)
------------------ -------------------
$ 630,860 $ 979,000
================== ===================
Resonext Communications, Inc.
(a development stage company)
Notes to Consolidated Financial Statements
December 31, 2001
4. CAPITAL EQUIPMENT FINANCING (CONTINUED)
On August 31, 2001, the Company executed an agreement with a financial
institution for a $2 million capital equipment credit facility (the "Facility").
The Facility is secured by eligible equipment financed. Borrowings under the
Facility will bear 9.75% interest per annum. The term of the Facility expires on
June 30, 2002, and borrowings are repaid over a 36-month period. As of December
31, 2001, there were no borrowings under the Facility.
From January 1 to June 30, 2002, the Company borrowed approximately $527,000
under this Facility of which approximately $500,000 remained outstanding at
September 30,2002.
5. COMMITMENTS
The Company leases office facilities under noncancelable operating leases that
expire in 2003 and 2004. Future minimum lease payments under the operating
leases at December 31, 2001 are as follows:
2002 $ 666,873
2003 422,595
2004 14,006
--------------------
Total payments $ 1,103,474
====================
Rental expense charged to operations for the years ended December 31, 2000 and
2001 and for the period from November 24, 1999 (inception) to December 31, 2001
was $206,382, $617,489 and $823,871 respectively.
6. STOCKHOLDERS' EQUITY
COMMON STOCK
For the period from November 24, 1999 (inception) through December 31, 2001, the
Company sold 1,088,250 shares of common stock pursuant to option agreements
containing early exercise provisions established by the Board of Directors. The
Company has a right to repurchase unvested shares at the original sale price
when the holder of the option is terminated or leaves the Company. During the
year ended December 31, 2000, the Company repurchased 95,833 of these shares. At
December 31, 2001, 540,085 shares were subject to repurchase.
Resonext Communications, Inc.
(a development stage company)
Notes to Consolidated Financial Statements
December 31, 2001
6. STOCKHOLDERS' EQUITY (CONTINUED)
CONVERTIBLE PREFERRED STOCK
The Company has 15,000,000 shares of convertible preferred stock authorized.
These shares are issuable in series with a par value of $0.001 per share and
include 7,500,000 shares of Series A convertible preferred stock (Series A) and
7,000,000 shares of Series B convertible preferred stock (Series B). During
1999, the Company sold 7,150,000 shares of Series A at $1.00 per share for gross
proceeds of $7,150,000.
During 2000, the Company sold an additional 100,000 shares of Series A at $1.00
per share for gross proceeds of $100,000. The Company also sold 6,184,211 shares
of Series B at $3.42 per share for gross proceeds of approximately $21,150,000.
The holders of Series A and Series B are entitled to receive noncumulative
annual dividends of $0.08 and $0.28 per share, respectively, when and if
declared by the Board of Directors. Series A and Series B dividends are paid
prior to dividends declared or paid on common stock. No dividends have been
declared through December 31, 2001. In addition, the holders of Series A and
Series B are entitled to share in dividends on the common stock (on an
as-converted basis) if and when declared. In the event of liquidation, any
shares of Series A and Series B that remain outstanding have a liquidation
preference over common stock of $1.00 and $3.42 per share, respectively, plus
all declared and unpaid dividends. The preferred stock has a further liquidation
preference such that its holders receive a proportionate share (on an
as-converted basis) with the common stockholders of any remaining amount after
the initial liquidation, up to $2.50 per Series A preferred share and $8.55 per
Series B preferred share (subject to adjustment for recapitalization).
Each share of Series A and Series B is convertible by the holder, at any time,
into common stock on an one-to-one basis, subject to adjustment from time to
time as defined by the agreement for the Series A and Series B in effect at the
time of conversion. Series A and Series B will automatically convert into common
stock at the then effective conversion price upon the affirmative vote of the
holders of at least a 66-2/3% majority of the outstanding shares of the Series A
and Series B, voting together as a single class. In addition, Series A and
Series B will also automatically convert upon the closing of an underwritten
public offering of the Company's common stock with a per share price of at least
$9.00, as adjusted for certain future dilutive transactions, and an aggregate
gross offering price of not less than $30 million.
Resonext Communications, Inc.
(a development stage company)
Notes to Consolidated Financial Statements
December 31, 2001
6. STOCKHOLDERS' EQUITY (CONTINUED)
CONVERTIBLE PREFERRED STOCK (CONTINUED)
Except as otherwise required by law, each Series A and Series B stockholder is
entitled to the number of votes equal to the number of shares of common stock
into which such shares of preferred stock could be converted at the record date.
1999 STOCK OPTION PLAN
On November 24, 1999, the Company adopted the 1999 Stock Option Plan (the 1999
Plan) that provides for the grant of incentive and nonstatutory stock options to
employees, officers, directors, and consultants of the Company.
Incentive stock options and nonstatutory options granted under the 1999 Plan
have ten-year terms. In the case of incentive stock options, the exercise price
may be established at an amount not less than the fair market value at the date
of grant, while nonstatutory stock options may have exercise prices not less
than 85% of the fair market value as of the date of grant.
The options are exercisable as determined by the Board of Directors. Options
generally vest with respect to 25% of the shares one year after the options'
grant date and the remainder ratably over the following three years. The options
expire upon the earlier of ten years from the date of grant or three months
following termination of services provided to the Company.
Resonext Communications, Inc.
(a development stage company)
Notes to Consolidated Financial Statements
December 31, 2001
6. STOCKHOLDERS' EQUITY (CONTINUED)
STOCK OPTION SUMMARY
A summary of activity under the 1999 Plan is as follows:
WEIGHTED
SHARES OPTIONS EXERCISE AVERAGE
AVAILABLE OUTSTANDING PRICE EXERCISE PRICE
--------------------------------------------------------------------
Options authorized 3,565,000 - $ - $ -
---------------------------------
Balance at December 31, 1999 3,565,000 - $ - $ -
Options authorized 1,500,000 - $ - $ -
Options granted (3,391,500) 3,391,500 $0.10 - $0.35 $0.11
Options exercised - (305,000) $0.10 $0.10
Options canceled 335,500 (335,500) $0.10 $0.10
Options repurchased 95,833 - $0.10 $0.10
---------------------------------
Balance at December 31, 2000 2,104,833 2,751,000 $0.10 - $0.35 $0.11
Options granted (2,222,305) 2,222,305 $0.50 $0.50
Options exercised - (1,072,705) $0.10 - $0.50 $0.12
Options canceled 342,990 (342,990) $0.10 - $0.50 $0.31
---------------------------------
Balance at December 31, 2001 225,518 3,557,610 $0.10 - $0.50 $0.33
=================================
OPTIONS OUTSTANDING OPTIONS VESTED
------------------------------------------------------ ------------------------------------
WEIGHTED WEIGHTED
NUMBER OF SHARES WEIGHTED AVERAGE AVERAGE OPTIONS VESTED AVERAGE
EXERCISE AS OF DECEMBER 31, REMAINING EXERCISE AT DECEMBER 31, EXERCISE
PRICE 2001 CONTRACTUAL LIFE PRICE 2001 PRICE
- ---------------------------------------------------------------------- ------------------------------------
(YEARS)
$0.10 1,465,835 8.50 $0.10 684,929 $0.10
$0.35 82,000 8.92 $0.35 22,204 $0.35
$0.50 2,009,775 9.25 $0.50 327,817 $0.50
------------------- ------------------
3,557,610 8.94 $0.33 1,034,950 $0.23
=================== ==================
There were 2,254,302 and 1,070,250 shares granted under the 1999 Plan,
exercisable at December 31, 2001 and 2000; however, shares exercised but not
vested are subject to repurchase. At December 31, 2000 and 2001, 89,083 and
540,085 shares, respectively, exercised under the 1999 Plan were subject to
repurchase.
Resonext Communications, Inc.
(a development stage company)
Notes to Consolidated Financial Statements
December 31, 2001
6. STOCKHOLDERS' EQUITY (CONTINUED)
OPTIONS ISSUED FOR SERVICES
From time to time, the Company issues options to purchase shares of common stock
in exchange for services. The value of the services was based upon the fair
value of the common stock using the Black-Scholes valuation model. During the
years ended December 31, 2000 and 2001, the Company issued 450,000 and 68,400
options, respectively, to purchase common stock in exchange for services
rendered.
These options were originally deemed to have a fair value of $92,000 and $29,000
for the years ended December 31, 2000 and 2001. These amounts are being
amortized over the period in which the services are being rendered, using the
straight-line method, and are subject to additional adjustments based on changes
in the value of the Company's deemed fair value of the common stock. As of
December 31, 2001, 318,900 of these shares were vested. The expense related to
these options for the year ended December 31, 2001 was $52,306, while for the
year ended December 31, 2000, the expense was deemed to be insignificant.
WARRANTS TO PURCHASE PREFERRED STOCK
In conjunction with the Company's capital equipment financing, warrants to
purchase 60,000 shares of Series A preferred stock and 21,930 shares of Series B
preferred stock were issued during 2000, and warrants to purchase 38,011 shares
of Series B preferred stock were issued during 2001. These warrants to purchase
Series A and B preferred stock have an exercise price of $1.00 and $3.42 per
share, respectively. The warrants to purchase Series A preferred stock may be
exercised until the earlier of five years from the effective date of the
warrant, the effective date of the Company's initial public offering, or until
the effective date of a merger in which the Company is not the surviving entity.
The warrants to purchase Series B preferred stock may be exercised until the
earlier of ten years from the effective date of the warrant, five years from the
effective date of the Company's initial public offering, or until the effective
date of a merger in which the Company is not the surviving entity. At December
31, 2001, these warrants remained outstanding.
Resonext Communications, Inc.
(a development stage company)
Notes to Consolidated Financial Statements
December 31, 2001
6. STOCKHOLDERS' EQUITY (CONTINUED)
WARRANTS TO PURCHASE PREFERRED STOCK (CONTINUED)
These warrants have been valued using the Black-Scholes valuation model and were
determined to have fair values of approximately $40,000 related to the warrants
to purchase Series A preferred stock and $62,000 and $108,000 related to the
warrants to purchase Series B preferred stock that were issued in 2000 and 2001,
respectively. These amounts are being amortized over the lives of the leases as
interest expense. During the years ended December 31, 2000 and 2001,
approximately $17,000 and $40,000, respectively, were expensed.
In conjunction with the Company's purchase of technology, warrants to purchase
292,397 shares of Series B preferred stock were issued. These warrants have an
exercise price of $3.42 per share. The warrants to purchase Series B preferred
stock may be exercised within three years from the effective date of the
warrant. As of December 31, 2001, 219,298 warrants had been exercised with a
value of $749,999. This amount was expensed as a research and development cost
during the year. The remaining 73,099 warrants were not exercisable as of
December 31, 2001. These warrants will become exercisable solely upon the
achievement of certain predetermined milestones. Accordingly, at December 31,
2001, no value was placed on these contingent warrants.
EMPLOYEE STOCK-BASED COMPENSATION
As permitted under FAS 123, the Company has elected to follow APB Opinion No. 25
in accounting for stock-based awards to employees. Under APB Opinion No. 25, the
Company generally does not recognize compensation expense with respect to such
awards.
Resonext Communications, Inc.
(a development stage company)
Notes to Consolidated Financial Statements
December 31, 2001
6. STOCKHOLDERS' EQUITY (CONTINUED)
EMPLOYEE STOCK-BASED COMPENSATION (CONTINUED)
Pro forma information regarding net loss is required by FAS 123 for awards
granted as if the Company had accounted for its stock-based awards to employees
under the fair value method of FAS 123. The fair value of the Company's
stock-based awards to employees was estimated using the minimum value option
pricing model. The fair value of the Company's stock-based awards to employees
was estimated using the following weighted average assumptions:
YEARS ENDED
DECEMBER 31,
2000 2001
---------------------------------
Expected life 5 years 5 years
Risk-free interest rate 6.0% 5.0%
Dividend yield 0% 0%
The option valuation models were developed for use in estimating the fair value
of traded options that have no vesting restrictions and are fully transferable.
In addition, option valuation models require the input of highly subjective
assumptions, including the expected option life. Because the Company's employee
stock options have characteristics significantly different from those of traded
options and because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its
employee stock options.
The weighted average fair value of options granted where the exercise price is
equal to the deemed fair value of common stock on the date of grant for the
years ended December 31, 2000 and 2001 was $0.03 and $0.13, respectively. No
options were granted to employees where the exercise price was less than the
deemed fair value of common stock on the date of grant for the years ended
December 31, 2000 and 2001.
Resonext Communications, Inc.
(a development stage company)
Notes to Consolidated Financial Statements
December 31, 2001
6. STOCKHOLDERS' EQUITY (CONTINUED)
EMPLOYEE STOCK-BASED COMPENSATION (CONTINUED)
Had compensation cost for the Company's stock-based compensation plan been
determined consistent with the method of FAS 123, the Company's net loss for the
years ended December 31, 2001 and 2000 would have changed to the pro forma
amounts indicated below:
2000 2001
--------------------------------------
Net loss:
As reported $ (5,469,315) $ (14,893,780)
Pro forma (5,476,107) (14,983,427)
Because the 1999 Plan has only been in effect since 2000, the pro forma effect
will not be fully reflected until 2004 and thereafter.
SHARES RESERVED
Common stock reserved for future issuance was as follows at December 31, 2001:
Stock option plan outstanding 3,557,610
Reserved for future stock option grants 225,518
Conversion of preferred stock issuable under warrants 193,040
Conversion of Series A preferred stock 7,250,000
Conversion of Series B preferred stock 6,403,509
-------------------
Total common stock reserved for future issuance 17,629,677
====================
7. INCOME TAXES
As of December 31, 2001 and 2000, the Company had deferred tax assets of
approximately $8,500,000 and $2,200,000, respectively. Realization of the
deferred tax assets is dependent upon future taxable income, if any, the amount
and timing of which are uncertain. Accordingly, the net deferred tax assets have
been fully offset by a valuation allowance. The valuation allowance increased by
approximately $2,200,000 and $6,300,000 during the years ended December 31, 2000
and 2001, respectively. Deferred tax assets primarily relate to net operating
loss and tax credit carryforwards.
Resonext Communications, Inc.
(a development stage company)
Notes to Consolidated Financial Statements
December 31, 2001
7. INCOME TAXES (CONTINUED)
As of December 31, 2001, the Company had net operating loss carryforwards of
approximately $19,700,000 for federal and state purposes. The Company also had
federal and state research and development tax credit carryforwards of
approximately $283,000 and $246,000, respectively. The net operating loss and
federal tax credit carryforwards will expire at various dates beginning in 2008,
if not utilized.
Utilization of the net operating loss carryforwards and credits may be subject
to a substantial annual limitation due to the ownership change limitations
provided by the Internal Revenue Code of 1986, as amended, and similar state
provisions. The annual limitation may result in the expiration of net operating
losses and credits before utilization.
8. EMPLOYEE SAVINGS PLAN
Effective August 31, 2000, the Company established a 401(k) plan, which covers
all employees, age 21 or older. Employees may make contributions of up to 15% of
their salaries or the statutory limit of $10,500. The Company elected to make
contributions of approximately $88,655 during the year ended December 31, 2001.
Administrative expenses relating to the plan are insignificant.
9. SUBSEQUENT EVENTS
On February 7, 2002 and May 29, 2002, the Company amended its Articles of
Incorporation. Under the amended articles, the Company increased the number of
shares of authorized convertible preferred stock to 34,827,484 shares. These
shares are issuable in series with a par value of $0.001 per share and include
7,310,000 shares of Series A, 6,551,169 shares of Series B, and 20,966,315
shares of Series C. In addition, the Company has 47,234,998 shares of common
stock authorized and increased the shares reserved for the 1999 Plan by
2,000,000 to a total of 7,065,000 shares.
On February 14, June 6, and June 17, 2002, the Company sold a total of
20,526,315 shares of Series C at $1.90 per share for gross proceeds of
$39,000,000. In connection with the sale of Series C shares, the Company
reserved an additional 1,777,786 shares of Series B stock to be issued upon
conversion of the Series B shares into common stock.
Resonext Communications, Inc.
(a development stage company)
Notes to Consolidated Financial Statements
December 31, 2001
9. SUBSEQUENT EVENTS (CONTINUED)
The holders of Series C are entitled to receive noncumulative annual dividends
of $0.15 per share, when and if declared by the Board of Directors. Series C
dividends are paid prior to dividends declared or paid on Series A and Series B
preferred and common stock. In addition, the holders of Series C are entitled to
share in dividends on the common stock (on an as-converted basis) if and when
declared. In the event of liquidation, any shares of Series C that remain
outstanding have a liquidation preference over Series A, Series B, and common
stock of $2.85 per share, plus all declared and unpaid dividends. The Series C
has a further liquidation preference such that its holders receive a
proportionate share (on an as-converted basis) with the common stockholders of
any remaining amount after the initial liquidation, up to $4.75 per share
(subject to adjustment for recapitalization).
Each share of Series C is convertible by the holder, at any time, into common
stock, which is determined by dividing the issuance price of $1.90 by the
conversion price of $1.90 per share, subject to adjustment from time to time as
defined by the agreement for the Series C in effect at the time of conversion.
In addition, the Series C will automatically convert into common stock at the
then effective conversion price upon the affirmative vote of the holders of at
least an 80% majority of the outstanding shares of the Series C, voting together
as a separate class or immediately upon the closing of an underwritten public
offering of the Company's common stock with a per share price of at least $6.00,
as adjusted for certain future dilutive transactions, and an aggregate gross
offering price of not less than $30 million.
Except as otherwise required by law, each Series C stockholder is entitled to
the number of votes equal to the number of shares of common stock into which
such shares of preferred stock could be converted at the record date.
10. SUBSEQUENT EVENTS (UNAUDITED)
In December 2002, RF Micro Devices, Inc. (RFMD) issued $133 million in RFMD
stock for all outstanding shares of Resonext, including shares issuable upon the
exercise of outstanding warrants and employee stock options.
(b) PRO FORMA FINANCIAL INFORMATION.
The following pro forma financial statements are included at pages 27 to 36 of
this report.
Unaudited Pro Forma Combined Statement of Operations for the six months ended
September 30, 2002.
Unaudited Pro Forma Combined Statement of Operations for the fiscal year ended
March 31, 2002 for RF Micro Devices, Inc. and December 31, 2001 for Resonext.
Unaudited Pro Forma Combined Balance Sheet as of September 30, 2002.
Notes to Unaudited Pro Forma Combined Financial Statements.
INTRODUCTION TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
On December 19, 2002, RF Micro Devices, Inc. (the Company) completed
the acquisition of Resonext Communications, Inc. (Resonext), a privately held
company providing, highly integrated silicon complementary
metal-oxide-semiconductor (CMOS) wireless local area network (WLAN) solutions
for 802.11a and multi-band (802.11a/b/g) platforms. The acquisition of Resonext
expands the Company's total addressable market and is expected to complement the
Company's growing presence in 802.11b products. Resonext provides highly
integrated two-chip CMOS solutions for 5GHz and dual band WLAN platforms.
The following unaudited pro forma combined financial statements give
effect to the Company's acquisition of Resonext as a purchase transaction. The
unaudited pro forma combined financial statements are based on the respective
historical consolidated financial statements and the accompanying notes of the
Company and Resonext. The Company reports its financial results on a fiscal year
basis ending March 31. Resonext reports its financial results on a calendar year
basis ending December 31. The unaudited pro forma combined balance sheet assumes
that the acquisition took place on September 30, 2002 and combines the Company's
September 30, 2002 unaudited consolidated balance sheet with Resonext's
September 30, 2002 unaudited consolidated balance sheet. The unaudited pro forma
combined statements of operations assume that the acquisition took place as of
the beginning of the periods presented. The Company's unaudited consolidated
statement of operations for the six months ending September 30, 2002 has been
combined with Resonext's unaudited consolidated statement of operations for the
six months period from April 1, 2002 to September 30, 2002, which includes
Resonext's second and third quarter financial data. The Company's audited
consolidated statement of operations for the fiscal year ended March 31, 2002
has been combined with Resonext's audited consolidated statement of operations
for the year ended December 31, 2001. The Company uses a 52- or 53-week fiscal
year ending on the Saturday closest to March 31 of each year, and the second
fiscal quarter of each fiscal year ends on the Saturday closest to September 30;
however, in this report the Company's fiscal year is described as ending on
March 31 and the second quarter of each fiscal year is described as ending on
September 30.
The unaudited pro forma combined financial statements are based on the
assumptions set forth in the notes to such statements. The unaudited pro forma
adjustments made in connection with the development of the unaudited pro forma
information have been made solely for purposes of developing such unaudited pro
forma information for illustrative purposes necessary to comply with the
disclosure requirements of the Securities and Exchange Commission (SEC). The
unaudited pro forma combined financial statements do not purport to be
indicative of the results of operations for future periods or the combined
financial position or the results that actually would have been realized had the
entities been a single entity during these periods.
The Company does not expect any additional tax benefits as a result of
the transaction as each entity is currently in a net operating loss position and
any such benefits would be fully offset by a valuation allowance. As a result,
there is no estimated tax effect recorded in the unaudited pro forma
adjustments.
These unaudited pro forma combined financial statements should be read
in conjunction with the Company's audited consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for the year
ended March 31, 2002 and the audited consolidated financial statements and notes
thereto of Resonext included at pages 3 to 25 of this report.
RF MICRO DEVICES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEETS
(In thousands)
RESONEXT
RF MICRO COMMUNICATIONS
AS OF AS OF
SEPTEMBER 30, SEPTEMBER 30, PRO FORMA PRO FORMA
2002 2002 ADJUSTMENTS NOTES COMBINED (1)
----------------- ------------ ------------- -------- --------------
ASSETS
Current assets:
Cash and cash equivalents $ 172,182 $ 11,355 $ - $ 183,537
Short-term investments 165,462 24,000 - 189,462
Accounts receivable, net 62,796 - - 62,796
Recoverable income tax 6,329 - - 6,329
Inventories 61,289 - - 61,289
Other current assets 4,942 551 - 5,493
----------------- ------------ ------------- --------------
Total current assets 473,000 35,906 - 508,906
Property and equipment, net 227,358 2,711 - 230,069
Intangible assets, net 10,846 - 47,900 2, 4 58,746
Goodwill 34,525 - 67,835 2 102,360
Other non-current assets 3,710 109 - 3,819
----------------- ------------ ------------- --------------
TOTAL ASSETS $ 749,439 $ 38,726 $ 115,735 $ 903,900
================= ============ ============= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 24,756 $ 1,421 $ 2,040 2 $ 28,217
Accrued liabilities 15,359 634 - 15,993
Current obligations under capital leases 1,320 1,183 - 2,503
----------------- ------------ ------------- --------------
Total current liabilities 41,435 3,238 2,040 46,713
Long-term debt, net 295,048 - - 295,048
Obligations under capital leases, less current 15 979 - 994
maturities
Other long-term liability 12,295 - - 12,295
----------------- ------------ ------------- --------------
Total liabilities 348,793 4,217 2,040 355,050
Shareholders' equity:
Preferred stock, no par value; 5,000 shares
authorized; no shares issued and outstanding - 34 (34) -
Common stock, no par value; 500,000 shares
authorized; (RFMD: 168,973 shares; 182,313 on a
pro forma combined basis) 282,576 7 154,639 2 437,222
Additional paid-in capital 64,665 68,854 (61,139) 72,380
Shareholder notes receivable - (10) 10 -
Deferred compensation (17,616) - (3,657) 3 (21,273)
Accumulated other comprehensive loss, net of tax (8,622) - - (8,622)
Retained earnings 79,643 (34,376) 23,876 2, 5 69,143
----------------- ------------ ------------- --------------
Total shareholders' equity 400,646 34,509 113,695 548,850
----------------- ------------ ------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 749,439 $ 38,726 $ 115,735 $ 903,900
================= ============ ============= ==============
RF MICRO DEVICES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(In thousands)
RESONEXT
RF MICRO DEVICES COMMUNICATIONS
SIX MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, PRO FORMA PRO FORMA
2002 2002 ADJUSTMENTS NOTES COMBINED (1)
------------------- -------------- ---------- ------- -------------
Revenue:
Product sales $ 223,379 $ $ - $ 223,379
Engineering revenue 298 - - 298
------------------- -------------- ---------- -----------------
Total revenue 223,677 - - 223,677
Operating costs and expenses:
Cost of goods sold 136,242 - 313 4 136,555
Research and development 45,621 8,070 2,937 3, 4 56,628
Marketing and selling 17,146 704 310 3, 4 18,160
General and administrative 8,977 1,065 - 10,042
Other operating expenses 1,353 - - 1,353
------------------- -------------- ---------- -----------------
Total operating costs and expenses 209,339 9,839 3,560 222,738
------------------- -------------- ---------- -----------------
Income (loss) from operations 14,338 (9,839) (3,560) 939
Other income (expense):
Interest income 3,492 331 - 3,823
Interest expense (8,952) (156) - (9,108)
Other, net 27 - - 27
------------------- -------------- ---------- -----------------
Income (loss) before income taxes 8,905 (9,664) (3,560) (4,319)
------------------- -------------- ---------- -----------------
Income tax expense 71 - - 71
------------------- -------------- ---------- -----------------
Net income (loss) $ 8,834 $ (9,664) $(3,560) $ (4,390)
=================== ============== ========== =================
Net income (loss) per share :
Basic $ 0.05 $ (0.02)
Diluted $ 0.05 $ (0.02)
Weighted average shares outstanding used in per share calculation:
Basic 168,246 13,340 2 181,586
Diluted 173,866 7,720 2 181,586
RF MICRO DEVICES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(In thousands)
RF MICRO RESONEXT
FISCAL YEAR ENDED COMMUNICATIONS
MARCH 31, CALENDAR YEAR ENDED PRO FORMA PRO FORMA
2002 DECEMBER 31, 2001 ADJUSTMENTS NOTES COMBINED (1)
------------------ ----------------- -------------- ------- ---------------
Revenue:
Product sales $ 367,387 - - $ 367,387
Engineering revenue 1,921 - - 1,921
------------------ ----------------- -------------- ---------------
Total revenue 369,308 - - 369,308
Operating costs and expenses:
Cost of goods sold 248,965 625 4 249,590
Research and development 74,445 12,671 6,037 3, 4 93,153
Marketing and selling 28,993 696 658 3, 4 30,347
General and administrative 14,224 2,030 - 16,254
Other operating expenses 14,085 - - 14,085
Impairment of long-lived assets 6,801 - - 6,801
------------------ ----------------- -------------- ---------------
Total operating costs and expenses 387,513 15,397 7,320 410,230
------------------ ----------------- -------------- ---------------
Loss from operations (18,205) (15,397) (7,320) (40,922)
Other income (expense):
Interest income 12,166 743 - 12,909
Interest expense (17,195) (240) - (17,435)
Other, net (4,179) - - (4,179)
------------------ ----------------- -------------- ---------------
Loss before income taxes (27,413) (14,894) (7,320) (49,627)
------------------ ----------------- -------------- ---------------
Income tax benefit (6,829) - - (6,829)
------------------ ----------------- -------------- ---------------
Net loss $ (20,584) (14,894) $(7,320) $ (42,798)
================== ================= ============== ===============
Net loss per share:
Basic $ (0.12) ($0.24)
Diluted $ (0.12) ($0.24)
Weighted average shares outstanding used in per share calculation:
Basic 165,827 13,340 2 179,167
Diluted 165,827 13,340 2 179,167
RF MICRO DEVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
1. PERIODS COMBINED
The Company's unaudited consolidated balance sheet as of September 30,
2002 has been combined with Resonext's unaudited consolidated balance sheet as
of September 30, 2002. The Company's financial results are reported on a fiscal
year basis ending March 31. Resonext's financial results are reported on a
calendar year basis ending December 31. The Company uses a 52- or 53-week fiscal
year ending on the Saturday closest to March 31 of each year and, the second
fiscal quarter of each year ends on the Saturday closest to September 30;
however, in this report the Company's fiscal year is described as ending on
March 31 and the second quarter of each fiscal year is described as ending on
September 30.
The acquisition was accounted for in accordance with the Statement of
Financial Accounting Standard No. 141 "Business Combinations" (SFAS 141) using
the purchase method of accounting. There are no significant differences between
the accounting policies of the Company and Resonext. The total cost of the
acquisition has been preliminarily allocated to the assets acquired and
liabilities assumed based upon their respective fair values as determined
through preliminary appraisals by an independent valuation firm. The actual
allocation of the purchase price, and the resulting effect on income (loss), may
differ from the unaudited pro forma amounts included herein once the independent
firm has completed the final valuation analysis.
The Company's unaudited consolidated statement of operations for the
six months ended September 30, 2002 has been combined with Resonext's unaudited
consolidated statement of operations for the six months period from April 1,
2002 to September 30, 2002, which includes the second and third quarter
unaudited financial data and excludes Resonext's unaudited consolidated
statement of operations for the first quarter ended March 31, 2002. Resonext
reported sales of $0.0 million and net loss of $4.3 million for its first
quarter ended March 31, 2002. The Company's audited consolidated statement of
operations for the fiscal year ended March 31, 2002 has been combined with
Resonext's audited consolidated statement of operations for the year ended
December 31, 2001.
The periods combined for purposes of presenting the unaudited pro forma
combined statements of operations are not necessarily indicative of the periods
expected to be combined for purposes of the Company's Annual Report on Form 10-K
for the year ended March 31, 2003, which is expected to be filed with the
Securities and Exchange Commission (SEC) in June 2003.
RF MICRO DEVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
2. PURCHASE PRICE
Pursuant to the Agreement and Plan of Merger and Reorganization, dated
as of October 15, 2002 and amended as of November 21, 2002, between the Company
and Resonext (the "Agreement"), the Company agreed to issue $133.0 million in
common stock, subject to a collar on the Company's stock prices between $6.00
and $9.50 per share, for all the outstanding shares of capital stock of
Resonext, including shares issuable upon exercise of outstanding warrants and
employee stock options. Based on this Agreement, the Company's stock was valued
at $9.50 per share for the purpose of calculating the number of shares to be
issued in this transaction, as determined by a trailing 20-trading day average
price and a collar on the Company's stock price of between $6.00 and $9.50 per
share. On December 19, 2002 the Company issued 13,339,885 shares of common stock
for all of the outstanding shares of capital stock of Resonext. The Company
reserved an additional 660,115 shares of common stock for issuance upon exercise
of outstanding Resonext warrants and employee stock options. Of the 13.3 million
shares issued at the closing, 1.4 million shares were placed in escrow to secure
certain indemnification obligations of the former Resonext stockholders for a
period of one year.
The unaudited pro forma basic net loss per share assumes the 13.3
million vested common shares to be issued in connection with the acquisition
were outstanding as of the beginning of the period presented. The unaudited pro
forma dilutive net (loss) per share excludes the potential dilutive effect of
unvested shares and options reserved in connection with the acquisition
representing a total of approximately 0.7 million dilutive shares because the
effect of their inclusion will be anti-dilutive based on the unaudited pro forma
combined losses for each of the periods presented.
The aggregate purchase price value of the Resonext acquisition
determined in accordance with SFAS 141 was $160.8 million, including a total of
14.0 million shares of common stock and replacement stock options and warrants
valued at $158.8 million and $2.0 million of incurred transaction related fees.
The value of the 13.3 million common shares issued at closing was determined
based on a measurement date of November 29, 2002 in accordance with Emerging
Issues Task Force Issue No. 99-12 "Determination of the Measurement Date for the
Market Price of Acquirer Securities Issued in a Purchase Business Combination"
(EITF 99-12). The value of the Company's common shares for the purpose of
determining its purchase price was $11.67 and was calculated based on the
average of the closing prices of the Company's common stock in the period from
the three trading days prior to, including and subsequent to the measurement
date. The remaining 0.7 million options and warrants were valued based on the
fair value estimated at the measurement date using a Black-Scholes option
pricing model. The values assigned to these common shares, options and warrants
were adjusted for the outstanding unvested options and shares related to future
service, which was recorded as deferred compensation in accordance with FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation" (FIN 44).
RF MICRO DEVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
2. PURCHASE PRICE (CONTINUED)
The purchase price adjustment was based on the intrinsic value of the
unvested options and shares which was determined by the difference between the
value of the Company's common stock on the date of consummation and the exercise
price of such options and warrants. As a result of the acquisition, the Company
has incurred direct acquisition costs related to the business combination of
$2.0 million. The direct aquisition costs of $2.0 million were accounted for as
part of the Company's purchase price allocation. These costs consist of
investment banking, legal, accounting, filings with regulatory agencies,
financial printing and other related costs. The direct costs of the business
combination will be included in the Company's purchase price allocation in
accordance with the Financial Accounting Standards Board (FASB) Statement of
Financial Accounting Standards (SFAS) No. 141, "Business Combinations". The
unaudited pro forma combined balance sheets give effect to such direct costs as
if they had been incurred as of September 30, 2002.
The total purchase price components are as follows (in thousands):
Common stock issued $ 155,676
Value of options and warrants 6,697
Unvested equity compensation (3,657)
----------------
Total stock, options and warrants $ 158,716
Transaction costs - preliminary 2,040
----------------
Total purchase price $ 160,756
================
RF MICRO DEVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
2. PURCHASE PRICE (CONTINUED)
The total purchase price of $160.8 million was preliminary allocated to
the assets acquired and liabilities assumed based on their fair values as
determined by an independent appraisal as of December 19, 2002, as follows (in
thousands):
Total purchase price $ 160,756
================
Current assets, including cash of $27.7 million $ 28,420
Property, plant and equipment 2,398
Other assets 157
Identifiable intangible assets:
Core technology 45,100
In-process research & development 10,500
Developed technology 2,500
Customer contracts 300
----------------
Total assets acquired $ 89,375
================
Current liabilities $ 1,897
Long-term debt 1,701
----------------
Total liabilities assumed $ 3,598
================
Resulting goodwill $ 74,979
================
Had the acquisition occurred on September 30, 2002, the resulting
goodwill would have been $67.8 million using the above purchase price and
identifiable intangible assets as shown in the unaudited pro forma combined
balance sheet. The change in goodwill from the pro forma balances as of
September 30, 2002 as compared to the preliminary allocation of the purchase
price as of December 19, 2002 primarily relates to a change in Resonext's cash
on hand of $7.4 million used in operations during that period.
RF MICRO DEVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
3. DEFERRED COMPENSATION
In accordance with the FASB Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation" (FIN 44), the Company
recorded the intrinsic value of the unvested options and shares issued in
connection with the acquisition, measured as the difference between the value of
the Company's common stock on the date of consummation and the exercise price of
such options and warrants. Deferred stock compensation of $3.7 million was
recorded as a separate component of shareholders' equity and will be amortized
over the vesting term of the related options and shares.
Unaudited pro forma adjustments for amortization of deferred
compensation are estimated to be $0.3 million on a quarterly basis in fiscal
2003 and $1.9 million on an annual basis in fiscal 2004. Of the total deferred
compensation recorded, 81% relates to research and development personnel and 19%
to sales and marketing personnel. The deferred compensation will impact income
(loss) in the periods immediately subsequent to the acquisition and
progressively eliminate over the vesting periods; therefore, the estimated
effect of these purchase adjustments on reported results of operations are as
follows: (in thousands)
DEFERRED
COMPENSATION
FISCAL YEAR AMORTIZATION
------------------- -------------------
2003 $ 474
2004 1,945
THEREAFTER 1,238
-------------------
TOTAL $ 3,657
===================
The unaudited pro forma combined balance sheets give effect to such
charges as if they had been incurred as of September 30, 2002, and the unaudited
pro forma combined statements of operations give effect to such charges as if
the transaction had occurred at the beginning of the interim and annual periods
presented.
RF MICRO DEVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
4. INTANGIBLE AMORTIZATION
The Company recorded $58.4 million of acquired identifiable intangible
assets, of which $45.1 million represents the value of acquired core technology;
$2.5 million represents the value of acquired developed technology; $10.5
million represents the value of in-process research and development cost that
has no alternative future use (NOTE 5); and $0.3 million represents the value of
customer contracts. The core developed technology assets acquired is being
amortized over their estimated useful lives of four years and included in cost
of goods sold. The developed technology assets acquired are being amortized over
an estimated useful life of ten years and included in research and development
expense. The remaining customer contract value will be amortized over the
estimated useful life of one year and is included in selling and marketing
expense. Unaudited pro forma adjustments for amortization of such intangibles
will be $1.3 million on a quarterly basis and $5.2 million on an annual basis.
The unaudited pro forma combined balance sheet gives effect to such
charges as if they had been incurred as of September 30, 2002, and the unaudited
pro forma combined statements of operations presented give effect to such
charges as of the beginning of the interim periods ending September 30, 2002 and
the annual periods ended December 31, 2001 and March 31, 2002.
5. IN-PROCESS RESEARCH AND DEVELOPMENT
As a result of the acquisition, the Company recorded a one-time charge
of $10.5 million for purchased in-process research and development related to
development projects that have not reached technological feasibility, have no
alternative future use, and for which successful development is uncertain.
The unaudited pro forma combined balance sheet gives effect to such
charges as if they had been incurred as of September 30, 2002, but the effects
of these costs have not been reflected in the unaudited pro forma combined
statements of operations as they are nonrecurring in nature.
(c) EXHIBIT
23.1 Consent of Ernst & Young LLP, Independent Auditors.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RF Micro Devices, Inc.
By: /s/ William A. Priddy, Jr.
------------------------------
William A. Priddy, Jr.
Vice President, Finance and Administration
and Chief Financial Officer
Date: February 10, 2003