Prospectus filed:
freeedgar.com
Common stock offered by the selling
stockholders............................. 10,800,000, of which 8,800,000 are
issuable upon exercise of
outstanding warrants and conversion
of outstanding convertible notes.
Our future will depend on our ability to develop, manufacture and commercialize products based upon our licensed proprietary technologies. Our first product, the DWDM optical chip, has only recently entered production in limited quantities and we expect to make only limited shipments of prototype chips in 2000. Even if our products appear promising when introduced, potential customers may not accept them, they may be difficult to produce in large volumes at an acceptable cost, fail to perform as expected, cost too much or be barred from production by the proprietary rights of others.
We expect to spend considerable sums to develop and market our new products. We expect our operating expenses to increase as we develop our technology and products, increase our sales and marketing activities and expand our assembly operations. We will not have revenues from product sales before 2001. The amount that we will lose and when, if ever, we will have profits is highly uncertain. If we become profitable, we do not know how much we will earn and our profits may vary significantly from quarter to quarter. . . .
Under the agreements with Molex, Molex will acquire the non-exclusive right to manufacture and sell certain jointly developed optical chip products in the event we have a change in control. Molex also has rights of first refusal
with respect to any sale of stock by certain of our stockholders. Such rights of Molex may have the effect of delaying or preventing a change in control that may
be favorable to stockholders other than Molex. . . .
As of August 31, 2000, we had outstanding options to purchase a total of 3,312,650 shares of common stock at a weighted average exercise price of US$14.73 per share and outstanding warrants to purchase an aggregate of 933,211 shares of our common stock at a weighted average exercise price of US$4.68 per share. We also have outstanding warrants to purchase an aggregate of 5,000,800
shares of common stock, subject to certain anti-dilution provisions, at a price to be determined in the future. The $35,000,000 five-year convertible notes issued in July 2000 are also convertible into a maximum of 5,000,000 shares of common stock. The exercise of outstanding options and warrants and the conversion of outstanding notes will dilute the then current stockholders' ownership of common stock. Sales in the public market of common stock acquired upon such exercise of options and warrants and conversion of notes could depress the price of our common stock. The holders of options, warrants and convertible notes can be expected to exercise or convert them at a time when we would be
able to sell common stock on terms more favorable than those provided by such options, warrants and convertible notes. This may adversely affect our ability to sell common stock. . . .
our overall loss for the year ended June 30, 2000 amounted to US$151,198,510 (CDN$223,562,114) or US$5.95 (CDN$8.80) per share, compared to US$704,524 (CDN$1,037,060) for the period from inception to June 30, 1999. . . .
We have commenced the manufacture of our prototype devices in our custom-designed pilot microfabrication facility located at Dorval, Quebec. The
capacity of this facility is 20 DWDM chips per day. As of August 2000, we have not sold a finished product in the open market. The current generation of chips is being used for development and test phases. This includes the development of solutions for pigtailing optical fiber to the DWDM chips, and for hermetic, semi-hermetic and non-hermetic packaging. . . .
Molex Agreement:
Under the teaming agreement, as amended, we agreed with Molex to jointly develop 8, 16 and 32-channel DWDM products for use in the DWDM market and other photonics markets. Subject to our testing and proving our technology
and our ability to manufacture and deliver certain devices, Molex is committed to purchase our entire DWDM production for the first 12 months of production, up
to 400 units per month. Molex also has the option to buy 50% of our remaining chip production. After the first 12-month period, Molex will have the option to purchase 50% of our DWDM production for the succeeding three-year period. Any product sold by us to Molex will be priced at our gross cost. In addition, Molex will pay to us 30% of the profits obtained on final products built from the chips supplied, 50% of the profits from sales of functionally unmodified packaged products and 30% of the profits from sales of other final products. We are free
to package and sell any remaining products, with all profits going to us. However, we cannot sell unpackaged chips for telecommunication applications, except for special order or exploratory purposes, without written agreement from Molex. In the event we are unable to supply Molex on a timely basis with a commercially reasonable quantity of the devices (which may trigger termination of the teaming agreement) or in the event we have a change of control, Molex has the non-exclusive right to manufacture all components of the devices in return
for a royalty equal to 50% of the profits from sales of functionally unmodified packaged products and 30% of the profits from sales of other final products.
Under the stock purchase agreement, Molex agreed to purchase 3,000,000 shares of our common stock at a price of US$0.50 per share in two stages. The first closing was held on June 21, 1999 for 1,500,000 shares of common stock and the second closing was held in March 2000 for an additional 1,500,000 shares of common stock. We also issued to Molex a warrant to purchase 1,666,667 additional shares of common stock at a price of US$0.90 per share, which was exercised on November 15, 1999.
In addition, we issued Molex a services common stock purchase warrant (the services warrant) to receive 5,800,000 additional shares of common stock in exchange for certain services to be rendered by Molex to us under the teaming agreement as part of the development of our technology. These shares were issued in 2000 as Molex performed services.
Under the stock restriction agreement, certain stockholders have agreed not to sell their respective shares of our common stock to a competitor of Molex
without Molex's prior consent. This agreement includes a right of first refusal and certain preemptive rights in favor of Molex, except that we can, without Molex's consent, issue up to 6,000,000 units (comprising one share of common stock and a warrant for the purchase of one share of common stock at a price of not less than US$0.90 per share) at a price not less than US$0.50 per unit to raise capital within the 24-month period ending in June 2001. The stock restriction agreement also requires the consent of Molex for certain
extraordinary actions relating to our governance and our operations. Certain rights or restrictions contained in the stock restriction agreement terminate upon completion of a public sale or a public offering, as described in the agreement. The stock restriction agreement will also terminate if the teaming agreement is terminated.
The net proceeds of the issuances of stock to Molex were added to our working capital and are being used in part to accelerate the commercialization of our DWDM products.
. . .
We entered into an agreement dated July 21, 2000 with Polaroid Corporation for the irrevocable non-exclusive license of certain patents held by Polaroid in connection with AWG. We agreed to pay to Polaroid an initial licensing fee of US $395,000 (CDN$584,047). In addition, we will pay royalties on the net selling price of our products, at an annual rate of 5% for aggregate net selling prices of US$5 million, 3.5% for aggregate net selling prices over five and up to US$40 million, and 1.75% for aggregate net selling prices over US$40 million, for each year of the agreement. . . . |
