1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
January 16, 2001
Date of Report (Date of earliest event reported)
NEW FOCUS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-29811 33-0404910
------------------------------- ------------------------ -------------------
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation) Identification No.)
5215 Hellyer Avenue, Suite 100
San Jose, California 95138-1001
(Address of principal executive offices)
(408) 284-4700
(Registrant's telephone number, including area code)
2
This amendment to the Current Report on Form 8-K originally filed on January 24,
2001, is being filed in order to include the historical financial statements of
JCA Technology, Inc. ("JCA") and the unaudited pro forma financial information
listed below.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of business acquired.
The following financial statements of JCA are included in this
report:
Audited balance sheets of JCA as of January 31, 2000 and 1999,
and the related statements of income, stockholders' equity and
cash flows for the years then ended.
Unaudited balance sheet of JCA as of September 30, 2000 and the
unaudited statement of income, stockholders' equity and cash
flows for the nine months then ended.
(b) Pro forma financial information.
The following unaudited pro forma condensed financial information
is being filed herewith:
Unaudited Pro Forma Combined Condensed Balance Sheet as of
October 1, 2000.
Unaudited Pro Forma Combined Condensed Statements of Operations
for the year ended December 31, 1999 and for the nine months
ended October 1, 2000.
(c) Exhibits.
None.
3
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
4
JCA TECHNOLOGY, INC.
INDEPENDENT AUDITORS' REPORT
AND
FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 2000 AND 1999
INCLUDING UNAUDITED FINANCIAL STATEMENTS AS OF
SEPTEMBER 30, 2000 AND FOR THE NINE-MONTH PERIOD THEN ENDED
CONTENTS
- --------------------------------------------------------------------------------
PAGE
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Balance sheets 2
Statements of income 3
Statements of shareholders' equity 4
Statements of cash flows 5
Notes to financial statements 6-11
5
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
JCA Technology, Inc.
We have audited the accompanying balance sheets of JCA Technology, Inc. (the
"Company") as of January 31, 2000 and 1999 and the related statements of income,
stockholders equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of January 31,
2000 and 1999, and the results of its operations and its cash flows for the
years then ended, in conformity with generally accepted accounting principles.
/s/ Moss Adams LLP
Los Angeles, California
January 5, 2001
- --------------------------------------------------------------------------------
1
6
JCA TECHNOLOGY, INC.
BALANCE SHEETS
JANUARY 31, 1999 AND 2000 (UNAUDITED AT SEPTEMBER 30, 2000)
- --------------------------------------------------------------------------------
ASSETS
January 31,
--------------------------
1999 2000 September 30, 2000
---------- ---------- ------------------
(unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 716,088 $1,185,191 $1,941,632
Accounts receivable, net of
allowances of $0, $0 and $363,000 1,254,327 1,503,302 2,871,766
Other receivables 3,095 3,665 34,075
Inventories 500,000 787,700 1,523,323
Receivable from stockholder 48,048 48,048 --
Deferred tax asset 37,174 -- --
Prepaid expenses and other current assets 103,174 -- 105,582
---------- ---------- ----------
Total current assets 2,661,906 3,527,906 6,476,378
PROPERTY AND EQUIPMENT, at cost, net of
accumulated depreciation and amortization 928,947 819,153 1,531,988
OTHER ASSETS 3,942 3,942 3,942
---------- ---------- ----------
$3,594,795 $4,351,001 $8,012,308
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 240,783 $ 223,410 $ 646,809
Accrued liabilities 268,834 371,444 529,438
Income taxes payable -- 32,165 56,011
---------- ---------- ----------
Total current liabilities 509,617 627,019 1,232,258
STOCKHOLDERS' EQUITY
Common stock, no par value, 5,000,000 shares authorized,
4,060,000 shares issued and outstanding 4,600 4,600 4,600
Retained earnings 3,080,578 3,719,382 6,775,450
---------- ---------- ----------
3,085,178 3,723,982 6,780,050
---------- ---------- ----------
$3,594,795 $4,351,001 $8,012,308
========== ========== ==========
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 2
7
JCA TECHNOLOGY, INC.
STATEMENTS OF INCOME
YEARS ENDED JANUARY 31, 1999 AND 2000 (UNAUDITED NINE-MONTHS ENDED SEPTEMBER 30,
2000)
- --------------------------------------------------------------------------------
Year Ended January 31,
----------------------------- Nine Months Ended
1999 2000 September 30, 2000
----------- ----------- ------------------
(unaudited)
NET SALES $ 8,559,774 $ 9,665,525 $13,295,371
COST OF SALES 3,470,404 3,617,690 4,161,498
----------- ----------- -----------
Gross profit 5,089,370 6,047,835 9,133,873
----------- ----------- -----------
OPERATING EXPENSES
Selling, general and administrative 3,519,204 4,112,408 4,638,430
Research and development 791,226 805,465 863,966
----------- ----------- -----------
4,310,430 4,917,873 5,502,396
----------- ----------- -----------
Income from operations 778,940 1,129,962 3,631,477
----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest income 10,802 24,015 25,440
Loss on disposal of property
and equipment -- (47,147) --
Miscellaneous -- 62,500 12,500
----------- ----------- -----------
10,802 39,368 37,940
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 789,742 1,169,330 3,669,417
INCOME TAX PROVISION (314,760) (530,526) 8,465
----------- ----------- -----------
NET INCOME $ 474,982 $ 638,804 $ 3,677,882
=========== =========== ===========
EARNINGS PER COMMON SHARE
Net Income $ 0.12 $ 0.16 $ 0.91
=========== =========== ===========
Number of shares used in computation 4,060,000 4,060,000 4,060,000
=========== =========== ===========
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 3
8
JCA TECHNOLOGY, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED JANUARY 31, 1999 AND 2000 (UNAUDITED NINE-MONTHS ENDED SEPTEMBER 30,
2000)
- --------------------------------------------------------------------------------
Common stock, 5,000,000 authorized,
no par value
----------------------------------- Total
Shares Issued Retained Stockholder's
and Outstanding Amount Earnings Equity
---------------- -------------- ---------- -------------
BALANCE,
January 31, 1998 4,060,000 $ 4,600 $2,605,596 $2,610,196
Net income for the year -- -- 474,982 474,982
---------- ---------- ---------- ----------
BALANCE,
January 31, 1999 4,060,000 4,600 3,080,578 3,085,178
Net income for the year -- -- 638,804 638,804
---------- ---------- ---------- ----------
BALANCE,
January 31, 2000 4,060,000 4,600 3,719,382 3,723,982
Add: loss for the one-month period
ended January 31, 2000 183,186 183,186
Distributions (805,000) (805,000)
Income for the nine-month period
ended September 30, 2000 -- -- 3,677,882 3,677,882
---------- ---------- ---------- ----------
UNAUDITED BALANCE
September 30, 2000 4,060,000 $ 4,600 $6,775,450 $6,780,050
========== ========== ========== ==========
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 4
9
JCA TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 31, 1999 AND 2000 (UNAUDITED NINE-MONTHS ENDED SEPTEMBER 30,
2000)
- --------------------------------------------------------------------------------
Year Ended January 31,
----------------------------- Nine Months Ended
1999 2000 September 30, 2000
----------- ----------- ------------------
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 474,982 $ 638,804 $ 3,677,882
Depreciation and amortization 218,156 287,309 258,737
Deferred income taxes (17,991) 37,174 --
Allowance for doubtful accounts -- -- 363,000
Increase (decrease) in cash due
to changes in operating assets and liabilities
Accounts receivable (356,073) (248,975) (904,370)
Other receivables 2,809 (570) (30,480)
Inventories 59,615 (287,700) (820,323)
Receivable from stockholder (65,957) -- 48,048
Prepaid income taxes (93,431) 103,174 (105,582)
Accounts payable (61,760) (17,373) 404,203
Accrued liabilities 102,690 102,610 158,665
Income taxes payable (6,642) 32,165 (149,905)
----------- ----------- -----------
Net cash provided by operating activities 256,398 646,618 2,899,875
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (306,166) (177,515) (949,839)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid -- -- (805,000)
----------- ----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS (49,768) 469,103 1,145,036
CASH AND CASH EQUIVALENTS, beginning of period 765,856 716,088 796,596
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 716,088 $ 1,185,191 $ 1,941,632
=========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for income taxes $ 433,000 $ 358,000 $ 141,440
=========== =========== ===========
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 5
10
JCA TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 2000 IS UNAUDITED)
- --------------------------------------------------------------------------------
The accompanying balance sheet at September 30, 2000 and related statements of
income, retained earnings and cash flows for the period then ended have not been
audited. They do not include all information and footnotes necessary for a fair
presentation of financial position and results of operations and cash flows in
conformity with generally accepted accounting principles. In the opinion of
management, all adjustments (consisting of normal recurring adjustments and
accruals) considered necessary for a fair presentation have been included in the
interim period. Operating results for the nine months ended September 30, 2000
are not necessarily indicative of the results that may be expected for the year
ending January 31, 2001.
NOTE 1 - NATURE OF BUSINESS
JCA Technology, Inc. ("the Company") manufactures microwave signal
amplifiers for customers throughout the United States and international markets.
Manufacturing and administrative operations are conducted in Southern
California. The operations of the Company comprise a single segment for
financial reporting purposes.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION - The Company recognizes revenue when products are
shipped to customers. The customer does not have unconditional right of return.
INVENTORIES - Inventories are stated at the lower of cost (standard cost
which approximates actual cost on a first-in, first-out basis) or market (see
Note 3).
DEPRECIATION AND AMORTIZATION - Depreciation and amortization of property
and equipment are provided using accelerated methods over the estimated useful
lives of the assets of five to thirty-nine years. (see Note 4)
IMPAIRMENT OF LONG-LIVED ASSETS - The Company evaluates long-lived assets
for impairment whenever events or changes in circumstances indicate that the
carrying value of an asset may not be recoverable. If the estimated future cash
flows (undiscounted and without interest charges) from the use of an asset are
less than the carrying value, a write down would be recorded to reduce the
related asset to its estimated fair value. To date no such write-downs have
occurred.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.
- --------------------------------------------------------------------------------
6
11
JCA TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 2000 IS UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES - For the years ended January 31, 1999 and 2000 the Company
was a "C" corporation for income tax purposes. As a C Corporation, deferred
income tax assets and liabilities were recognized for differences between the
financial statement and income tax bases of assets and liabilities. Such
deferred income tax asset and liability computations were based on enacted tax
laws and rates applicable to periods in which the differences were expected to
reverse. Income tax expense is the tax payable or refundable for the period plus
or minus the change during the period in deferred income tax assets and
liabilities.
Effective February 1, 2000 the Company elected to be treated as an "S"
corporation for federal and state income tax purposes. Pursuant to this
election, from February 1, 2000 the income of the Company will be included in
the income tax returns of its stockholders. Accordingly the Company will not be
subject to federal income taxes effective February 1, 2000. Under California
state law, state income taxes of 1.5% of taxable income is imposed upon "S"
corporations. (see Note 7).
ADVERTISING - Advertising costs are expensed as incurred. Advertising
expense for the years ended January 31, 1999 and 2000 amounted to $182,369 and
$226,730, respectively. Advertising expense for the nine-month period ended
September 30, 2000 amounted to $248,603.
CONCENTRATIONS OF CREDIT RISK - Financial instruments that potentially
subject the Company to credit risk consist primarily of cash equivalents and
accounts receivable. Credit risk with respect to accounts receivable is
mitigated due to the geographic dispersion of its customers and the large number
of customers comprising the customer base. The Company conducts on-going credit
evaluations of its customers but does not obtain collateral or other forms of
security. Management believes that a valuation allowance against accounts
receivable is not necessary for the year ended January 31, 1999 and 2000.
Accounts receivable is shown net of a valuation allowance of $363,000 at
September 30, 2000.
With respect to cash equivalents, at times cash may be in excess of FDIC
insured limits. The Company believes it has mitigated this risk by placing their
cash equivalents with highly reputable financial institutions.
EARNINGS PER SHARE - Earnings per share are based upon the weighted
average number of shares of common stock outstanding. There are no other
financial instruments outstanding that comprise common stock equivalents.
USE OF ESTIMATES - The preparation of the financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements. Actual results could differ from those estimates.
RECLASSIFICATIONS - Certain reclassifications have been made to prior
year amounts to conform with the current period financial statement
presentation.
- --------------------------------------------------------------------------------
7
12
JCA TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 2000 IS UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - The Financial Accounting
Standards Board has issued various accounting standards which either became
effective during the periods presented in the accompanying financial statements
or will become effective during future periods. The Company has determined that
these newly issued accounting pronouncements either do not apply to the Company,
or if applicable, will not significantly effect the Company's financial
position, results of operations, or disclosure matters.
NOTE 3 - INVENTORIES
January 31, September 30,
-------------------------- -------------
1999 2000 2000
---------- ---------- -------------
(unaudited)
Raw materials $ 240,816 $ 401,363 $1,052,175
Work in process 219,416 375,664 280,636
Finished goods 39,768 10,673 190,512
---------- ---------- ----------
$ 500,000 $ 787,700 $1,523,323
========== ========== ==========
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
Estimated January 31, September 30,
Useful ----------------------------- -------------
Lives 1999 2000 2000
--------- ----------- ----------- -------------
(unaudited)
Machinery and equipment 5 years $ 1,075,513 $ 1,245,850 $ 2,195,689
Building 39 years 390,000 390,000 390,000
Land -- 100,070 100,070 100,070
Office equipment, furniture
and fixtures 7 years 46,061 53,239 53,239
Transportation equipment 5 years 49,592 49,592 49,592
Leasehold improvements 39 years 49,723 -- --
----------- ----------- -----------
1,710,959 1,838,751 2,788,590
Less: Accumulated depreciation
and amortization (782,012) (1,019,598) (1,256,602)
----------- ----------- -----------
$ 928,947 $ 819,153 $ 1,531,988
=========== =========== ===========
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8
13
JCA TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 2000 IS UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 4 - PROPERTY AND EQUIPMENT (CONTINUED)
The land and building, which had a net carrying value of $426,320 at
January 31, 2000, are held for investment purposes. The Company is actively
seeking to lease the land and building which are currently unoccupied. In the
year ended January 31, 2000, the Company received $62,500 of rental income from
the land and building.
NOTE 5 - RECEIVABLE FROM STOCKHOLDER
As of January 31, 1999 and 2000, the Company had an unsecured,
non-interest bearing demand note receivable from its majority stockholder.
NOTE 6 - LINE OF CREDIT
The Company has a line of credit with a Bank providing for working
capital advances up to $1,000,000 expiring on November 1, 2001. The line of
credit is collateralized by the assets of the Company and bears interest at
prime plus .25%. No amounts were outstanding under the line of credit at January
31, 1999 or 2000, or September 30, 2000. The line of credit is subject to
various financial covenants, including minimum tangible net worth amounts and
net worth ratios.
NOTE 7 - INCOME TAXES
The components of the income tax provision are as follows:
January 31,
-------------------------
1999 2000
--------- ---------
Current $ 332,750 $ 493,352
Deferred (17,990) (19,222)
Valuation allowance due to
change in Company's tax status -- 56,396
--------- ---------
$ 314,760 $ 530,526
========= =========
Deferred income taxes reflect the tax effects of temporary differences
between the income tax and financial statement reporting bases of assets and
liabilities. Current deferred tax assets consist of the following:
January 31,
----------------------
1999 2000
-------- --------
Accrued compensation $ 37,174 $ 56,396
Valuation allowance -- (56,396)
-------- --------
$ 37,174 $ --
======== ========
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9
14
JCA TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 2000 IS UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 7 - INCOME TAXES (CONTINUED)
A reconciliation between the effective tax rate and the statutory tax
rates for the years ended January 31, 1999 and 2000 are as follows:
1999 2000
------------------------ ------------------------
Percent Percent
of pretax of pretax
Amount earnings Amount earnings
------- --------- ------ ---------
Federal tax $269,000 34.0 $398,000 34.0
State franchise tax,
net of federal benefit 45,000 5.8 68,000 5.8
Non-deductible employee
and officer benefits 760 -- 8,130 0.7
Change in valuation
allowance -- -- 56,396 4.8
-------- ----- -------- -----
Income tax provision $314,760 39.8 $530,526 45.3
======== ===== ======== =====
The income tax provision for the nine-month period ended September 30,
2000 is consist of the following:
Pre-Tax Income Tax Benefit
(Loss) (Provision)
-------------- -----------
Loss incurred as a C-Corporation for
the one-month ended January 31, 2000 $ (265,906) $ 82,720
Income earned as an S Corporation for
the eight-months ended September 30, 2000 3,935,293 (74,255)
----------- -----------
Total for the period $ 3,669,387 $ 8,465
=========== ===========
As a result of the Company electing to be treated as an "S" corporation
effective February 1, 2000, a valuation allowance of $56,396 has been
established against deferred tax assets as of January 31, 2000.
- --------------------------------------------------------------------------------
10
15
JCA TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO SEPTEMBER 30, 2000 IS UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 8 - PROFIT SHARING PLAN
The Company has a defined contribution profit sharing retirement plan as
provided under Section 401(K) of the Internal Revenue Code, covering
substantially all full-time employees. The plan provides for contributions as
determined by the Board of Directors, but not in excess of the amount permitted
as a deductible expense under the Internal Revenue Code. Contributions vest
ratably over 6 years. There were no contributions made by the Company for the
years ended January 31, 1999 and 2000, or for the nine months ended September
30, 2000.
NOTE 9 - RELATED PARTY COMMITMENTS
The Company leases vehicles under non-cancelable operating lease
agreements that expire on various dates through December 2001. The Company
leases it manufacturing facility and corporate office from a shareholder under a
non-cancelable operating lease expiring October 2013. The monthly base rent for
the manufacturing facility and corporate office is to be adjusted for changes in
the Consumer Price Index throughout the term of the lease. Rent expense for the
years ended January 31, 1999 and 2000 and for the nine months ended September
30, 2000 amounted to $176,811, $321,972 and $220,663, respectively. Future
minimum payments under the non-cancelable operating leases are:
Years ending January 31, Related Parties Other Total
- ------------------------ --------------- ---------- ----------
2001 $ 294,216 $ 17,806 $ 312,022
2002 294,216 10,020 304,236
2003 294,216 -- 294,216
2004 294,216 -- 294,216
2005 294,216 -- 294,216
Thereafter 2,574,390 -- 2,574,390
---------- ---------- ----------
$4,045,470 $ 27,826 $4,073,296
========== ========== ==========
NOTE 10 - SUBSEQUENT EVENTS
On January 16, 2001, the Company completed a merger with New Focus,
Inc., a publicly traded company. All of the outstanding stock of the Company was
exchanged for cash and stock of New Focus, Inc. In connection with the merger,
the Company entered into various employment agreements with key members of
management.
NOTE 11 - SEGMENT INFORMATION
The Company's operations comprise a single segment, as defined by
Statement of Financial Accounting Standard No. 131.
- --------------------------------------------------------------------------------
11
16
(b) PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma combined condensed financial statements
give effect to the acquisition by New Focus, Inc. of all outstanding shares of
JCA Technology, Inc. in a transaction to be accounted for as a purchase.
The unaudited pro forma combined condensed balance sheet as of October 1, 2000
gives effect to this acquisition as if it had occurred on October 1, 2000. The
unaudited pro forma combined condensed statements of operations for the year
ended December 31, 1999 and for the nine months ended October 1, 2000 give
effect to the acquisition as if it had occurred on January 1, 1999.
The unaudited pro forma combined condensed financial information is presented
for illustrative purposes only and is not necessarily indicative of the
operating results or financial position that would have actually occurred if the
acquisition had been consummated as of the dates indicated, nor is it
necessarily indicative of future operating results or financial position. The
unaudited pro forma combined condensed financial information, including the
notes thereto, is qualified in its entirety by reference to, and should be read
in conjunction with, the historical financial statements of New Focus included
in its Form S-1 and Form 10-Q filed August 10, 2000 and November 7, 2000,
respectively, with the Securities and Exchange Commission and the historical
financial statements of JCA Technology included in this Form 8-K/A.
17
NEW FOCUS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF OCTOBER 1, 2000
(In thousands)
Pro Forma Pro Forma
New Focus JCA Adjustments Combined
---------- ------- ----------- ---------
ASSETS
Current Assets
Cash and cash equivalents $ 504,453 $ 1,942 $ (75,000) (A) $ 431,395
Accounts receivable, net 11,082 2,906 -- 13,988
Inventories 20,928 1,523 -- 22,451
Other current assets 5,383 105 -- 5,488
--------- ------- --------- ---------
Total current assets 541,846 6,476 (75,000) 473,322
Property and equipment, net 30,858 1,532 -- 32,390
Goodwill and other intangibles 625 -- 291,717 (A) 324,881
32,539 (F)
Other assets, net 9,710 4 -- 9,714
--------- ------- --------- ---------
Total assets $ 583,039 $ 8,012 $ 249,256 $ 840,307
========= ======= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,654 $ 647 $ -- $ 11,301
Accrued expenses 6,501 585 8,500 (A) 15,586
Deferred research and development funding 343 -- -- 343
Current portion of long-term debt 269 -- -- 269
--------- ------- --------- ---------
Total current liabilities 17,767 1,232 8,500 27,499
Long-term debt, less current portion 172 -- -- 172
Deferred rent 1,064 -- -- 1,064
Deferred tax liability -- -- 32,539 (F) 32,539
Stockholders' equity:
Common stock 64 5 (5) (B) 74
8 (A)
2 (C)
Additional paid-in-capital 651,747 -- 228,389 (A) 936,165
56,029 (C)
Notes receivable from stockholders (7,281) -- -- (7,281)
Deferred compensation (31,265) -- (56,031) (C) (87,296)
Retained earnings (accumulated deficit) (49,229) 6,775 (6,775) (B) (62,629)
(13,400) (G)
--------- ------- --------- ---------
Total stockholders' equity 564,036 6,780 208,217 779,033
--------- ------- --------- ---------
Total liabilities and stockholders' equity $ 583,039 $ 8,012 $ 249,256 $ 840,307
========= ======= ========= =========
18
NEW FOCUS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED OCTOBER 1, 2000
(In thousands, except per share amounts)
Pro Forma Pro Forma
New Focus JCA Adjustments Combined
--------- -------- ----------- ---------
Net revenues $ 46,483 $ 13,295 $ -- $ 59,778
Cost of net revenues(1) 41,090 4,161 -- 45,251
-------- -------- --------- --------
Gross profit 5,393 9,134 -- 14,527
Operating Expenses:
Research and development, net(2) 15,771 864 -- 16,635
Selling, general and administrative(3) 10,421 4,639 -- 15,060
Deferred compensation 18,935 -- 8,567 (C) 27,502
Amortization of goodwill and other intangibles -- -- 55,364 (D) 55,364
-------- -------- --------- --------
Total operating expenses 45,127 5,503 63,931 114,561
-------- -------- --------- --------
Operating income (loss) (39,734) 3,631 (63,931) (100,034)
Interest and other income (expense), net 6,017 38 -- 6,055
-------- -------- --------- --------
Income (loss) before provision for income taxes (33,717) 3,669 (63,931) (93,979)
Provision (benefit) for income taxes 2 (9) 9 (E) 2
-------- -------- --------- --------
Net income (loss) $(33,719) $ 3,678 $ (63,940) $ (93,981)
======== ======== ========= =========
Basic and diluted net income (loss) per share $ (1.06) $ 0.91 $ (2.31)
======== ======== =========
Shares used to compute basic and diluted
net income (loss) per share 31,783 4,060 40,759
======== ======== =========
(1) Excludes $4,319 in amortization of deferred stock compensation for the pro
forma combined period.
(2) Excludes $6,073 in amortization of deferred stock compensation for the pro
forma combined period.
(3) Excludes $17,110 in amortization of deferred stock compensation for the pro
forma combined period.
19
NEW FOCUS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(In thousands, except per share amounts)
Pro Forma Pro Forma
New Focus JCA Adjustments Combined
--------- ------- ----------- ---------
Net revenues $ 22,842 $ 9,666 $ -- $ 32,508
Cost of net revenues(1) 15,125 3,618 -- 18,743
-------- ------- --------- --------
Gross profit 7,717 6,048 -- 13,765
Operating Expenses:
Research and development, net(2) 9,481 805 -- 10,286
Selling, general and administrative(3) 7,196 4,113 -- 11,309
Deferred compensation 132 -- 46,863 (C) 46,995
Amortization of goodwill and other intangibles -- -- 73,819 (D) 73,819
-------- ------- --------- --------
Total operating expenses 16,809 4,918 120,682 142,409
-------- ------- --------- --------
Operating income (loss) (9,092) 1,130 (120,682) (128,644)
Interest and other income (expense), net (177) 39 -- (138)
-------- ------- --------- --------
Income (loss) before provision for income taxes (9,269) 1,169 (120,682) (128,782)
Provision for income taxes 4 530 (530) (E) 4
-------- ------- --------- --------
Net income (loss) $ (9,273) $ 639 $(120,152) $(128,786)
======== ======= ========= =========
Basic and diluted net income (loss) per share $ (3.78) $ 0.16 $ (12.22)
======== ======= =========
Shares used to compute basic and diluted
net income (loss) per share 2,455 4,060 10,541
======== ======= ========
(1) Excludes $ 4,983 in amortization of deferred stock compensation for the pro
forma combined period.
(2) Excludes $ 4,975 in amortization of deferred stock compensation for the pro
forma combined period.
(3) Excludes $37,037 in amortization of deferred stock compensation for the pro
forma combined period.
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NOTE 1 - BASIS OF PRESENTATION:
New Focus, Inc. ("the Company") acquired JCA Technology, Inc. ("JCA") on
January 16, 2001 for a total purchase price of approximately $311.9 million in a
transaction to be accounted for as a purchase. The Company paid $75.0 million in
cash and exchanged approximately 7,954,000 shares of New Focus common stock with
a fair value of approximately $303.4 million for all of the outstanding stock of
JCA. In addition, the Company issued or will issue approximately 2,079,000
shares of restricted stock subject to forfeiture. The common stock was valued
using the Company's average stock price for the seven-day period ending December
27, 2000. The average price was $28.71. Direct transaction costs related to the
merger are estimated to be approximately $8.5 million.
Of the 2,079,000 shares of restricted stock to be issued, the Company will
record approximately $56.0 million of unearned compensation related to
approximately 1,951,000 restricted shares. These shares are subject to
forfeiture, with such right expiring over a two-year vesting period. The related
unearned compensation will be amortized over the vesting period using the graded
method. The balance of approximately 128,000 shares of restricted stock will
vest contingent upon meeting certain fiscal 2001 operating objectives. The value
of these shares will be measured and recorded as compensation at the time the
contingency is satisfied.
The acquisition was accounted for under the purchase method of accounting in
accordance with APB Opinion No. 16. Under the purchase method of accounting, the
purchase price is allocated to the assets acquired and liabilities assumed based
on their estimated fair value. The pro forma financial information has been
prepared on the basis of assumptions described in the following notes and
includes assumptions relating to the allocation of the consideration paid for
the assets and liabilities of JCA based on preliminary estimates of their fair
values from an independent appraisal. The actual allocation of such
consideration may differ from that reflected in the pro forma financial
statements after valuations have been completed. New Focus does not expect that
the final allocation of the purchase price will differ materially from the
preliminary allocation.
The unaudited pro forma combined condensed balance sheet as of October 1,
2000 gives effect to the acquisition as if it had occurred on October 1, 2000.
The unaudited pro forma combined condensed statements of operations for the year
ended December 31, 1999 and for the nine months ended October 1, 2000 give
effect to the acquisition as if it had occurred on January 1, 1999. The pro
forma statement of operations for the year ended December 31, 1999 combines the
Company's results of operations for the fiscal year ended December 31, 1999 with
JCA's results of operations for its fiscal year ended January 31, 2000. The pro
forma statement of operations for the nine months ended October 1, 2000 combines
the Company's results of operations for the nine months ended October 1, 2000
with JCA's results of operations for the nine months ended September 30, 2000.
The unaudited pro forma combined condensed financial information is
presented for illustrative purposes only and is not necessarily indicative of
the operating results or financial position that would have actually occurred if
the acquisition had been consummated as of the dates indicated, nor is it
necessarily indicative of future operating results or financial position.
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NOTE 2 - PURCHASE PRICE ALLOCATION:
The Company's allocation of the aggregate purchase price is based on
management's preliminary analysis and estimates of the fair values of the
tangible assets, intangible assets and in-process research and development,
which has not reached technological feasibility and therefore has no alternative
future use. The book values of tangible assets and liabilities acquired are
assumed to approximate fair values. The acquired workforce will be amortized
over an estimated useful life of two years, and the current technology, customer
base and goodwill will be amortized over an estimated useful life of four years.
In-process research and development will be charged to the statement of
operations in the period the acquisition is consummated. The allocation is
summarized below (in thousands):
Net assets acquired $ 6,780
Current technology 31,300
In-process research and development 13,400
Acquired workforce and customer base 7,560
Goodwill 285,396
---------
Subtotal 344,436
Deferred tax liability (32,539)
---------
Total $ 311,897
=========
NOTE 3 - UNAUDITED PRO FORMA COMBINED NET LOSS PER SHARE:
Net loss per share and shares used in computing the net loss per share are
based upon the Company's historical weighted average common shares outstanding
together with the shares issued in the transaction as if such shares were issued
January 1, 1999. Common stock issuable upon the exercise of stock options,
warrants and unvested restricted stock has been excluded, as the effect would be
anti-dilutive for all periods presented.
NOTE 4 - PURCHASE ADJUSTMENTS:
The following adjustments were applied to the combined financial statements:
(A) To reflect the issuance of cash and shares in the acquisition and to
record estimated transaction costs and other assets and liabilities at
their fair values.
(B) To reflect the elimination of the stockholders' equity accounts of JCA.
(C) To record stock compensation associated with shares issued subject to
forfeiture. Unearned compensation is amortized using the graded method
over the vesting period of 2 years, which results in the amortization
of approximately 84% in the first year.
(D) To record amortization of goodwill and other intangibles. Goodwill and
other intangibles are amortized on a straight-line basis over two to
four years.
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(E) To reflect the elimination of JCA's provision (benefit) for income
taxes.
(F) To reflect the deferred tax liability related to other identifiable
intangible assets acquired and deferred stock compensation associated
with shares issued.
(G) The Company will record an immediate write-off of in-process research
and development at the consummation of the acquisition. The unaudited
pro forma combined condensed statements of operations do not include
the charge for in-process research and development of approximately
$13.4 million since it is considered a non-recurring charge. The amount
will be expensed in the quarter ended April 1, 2001.
- -
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SIGNATURES
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 hereunto duly authorized.
NEW FOCUS, INC.
Dated: March 16, 2001
By: /s/ William L. Potts, Jr.
-------------------------
William L. Potts, Jr.
Chief Financial Officer