8-K 1 cte8kcdtsale.htm 080402_CTE_FORM 8K_CDT SALE cte8kcdtsale.htm





UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 




 
FORM 8-K
 




 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
Date of report (Date of earliest event reported): April 3, 2008 (March 28, 2008)
 
 




 
CardioTech International, Inc.
(Exact Name of Registrant as Specified in Charter)


Massachusetts
  
000-28034
  
04-3186647
(State or Other Jurisdiction
of Incorporation)
  
(Commission File Number)
  
(IRS Employer
Identification No.)

229 Andover Street, Wilmington, Massachusetts,        01887
      (Address of Principal Executive Offices)               (Zip Code)
 
(978) 657-0075
(Registrant’s telephone number, including area code)
 






 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 
 

Item 1.01
Entry Into A Material Definitive Agreement.

CardioTech International, Inc. (the “Company”) entered into a Stock Purchase Agreement (the “Purchase Agreement”) with TACPRO, Inc. (“TACPRO”), a California corporation, on March 28, 2008 (the “Closing Date”).  The Purchase Agreement provides for the sale to TACPRO of the Company’s wholly-owned subsidiary, Catheter and Disposables Technology, Inc. (“CDT”), an original equipment manufacturer and supplier of private-label advanced disposable medical devices from concept to finished packaged and sterilized products, for a purchase price of approximately $1,200,000 in cash (the “Purchase Price”).  Approximately $240,000 of the Purchase Price will remain in escrow until the first anniversary of the Closing Date as a reserve for the Company’s indemnification obligations to TACPRO, if any.  The Purchase Agreement also contains representations, warranties and indemnities that are customary in a transaction involving the sale of all or substantially all of a company or its assets.

Simultaneous with the execution of the Purchase Agreement, the Company completed the sale of CDT to TACPRO on the Closing Date.  After the escrow funding and cash transaction expenses of approximately $226,000, the Company will realize approximately $734,000 in proceeds from the sale of CDT.  The Company will also incur an additional non-cash expense of approximately $76,000 related to warrants issued to the investment bank that advised the Company on the sale of CDT.

A copy of the Purchase Agreement will be filed as an exhibit to our Annual Report on Form 10K for the fiscal year ending March 31, 2008.  A copy of the Company’s press release announcing its entry into the Purchase Agreement and completion of the sale is filed herewith as Exhibit 99.1.

Item 2.01                      Completion of Acquisition or Disposition of Assets.

See Item 1.01 of this Form 8-K which is incorporated herein by reference.


 
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Item 9.01                      Financial Statements and Exhibits.

(b)  
Pro forma financial information.

The unaudited pro forma condensed consolidated financial information should be read in conjunction with the historical financial statements and related notes of the Company.  The unaudited pro forma condensed consolidated financial information is provided for informational purposes only and is not necessarily indicative of the results that would have occurred if the sale of CDT had occurred on the date indicated or the expected financial position or results of operations in the future.  The information includes pro forma adjustments which reflect the disposition of CDT.

The unaudited pro forma condensed consolidated balance sheet was prepared assuming the sale of CDT occurred as of December 31, 2007.

The unaudited pro forma condensed consolidated statement of operations for the nine month period ended December 31, 2007 has been presented assuming the sale of CDT occurred as of April 1, 2007.

The unaudited pro forma condensed consolidated statement of operations for the fiscal year ended March 31, 2007 has been presented assuming the sale of CDT occurred as of April 1, 2006.

(c)  
Exhibits.

Exhibit No.                                Description


 
99.1
Press release of CardioTech International, Inc. dated March 31, 2008.


 
_________




 
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CardioTech International, Inc.
  
ProForma Condensed Consolidated Statement of Operations
  
(Unaudited - in thousands, except per share amounts)
  
                   
   
Nine Months Ended December 31, 2007
  
   
As Reported
    
Adjustments (1)
    
ProForma
  
Revenues:
                  
Product sales
   $ 3,325     $ (2,538 )   $ 787  
Royalties and development fees
     1,405       -       1,405  
      4,730       (2,538 )     2,192  
Cost of sales
     3,804       (2,962 )     842  
Gross margin
     926       424       1,350  
Operating expenses:
                        
Research, development and regulatory
     777       -       777  
Selling, general and administrative
     3,244       (881 )     2,363  
      4,021       (881 )     3,140  
Loss from operations
     (3,095 )     1,305       (1,790 )
Interest and other income and expense:
                        
Interest expense
     (1 )     1       -  
Interest income
     175       -       175  
Other income, net
     18       (18 )     -  
Interest and other income, net
     192       (17 )     175  
Net loss from continuing operations
     (2,903 )     1,288       (1,615 )
Loss from discontinued operations
     (319 )     -       (319 )
Loss on sale of Gish Biomedical, Inc.
     (1,173 )     -       (1,173 )
Net loss from discontinued operations
     (1,492 )     -       (1,492 )
Net loss
   $ (4,395 )   $ 1,288     $ (3,107 )
Net loss per common share, basic and diluted:
                        
Net loss per common share, continuing operations
   $ (0.14 )           $ (0.07 )
Net loss per common share, discontinued operations
     (0.08 )             (0.08 )
Net loss per common share, basic and diluted
   $ (0.22 )           $ (0.15 )
Shares used in computing net loss per common share, basic and diluted
     20,257               20,257  
                         

Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
 
(1)  
To eliminate revenues and expenses of CDT for the nine months ended December 31, 2007.
 


 
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CardioTech International, Inc.
  
Pro Forma Condensed Consolidated Statement of Operations
  
(Unaudited - in thousands, except per share amounts)
  
                         
   
Year Ended March 31, 2007
        
   
As Reported
    
Adjustments
    
ProForma
  
           
(1)
      
(2)
        
Revenues:
                            
Product sales
   $ 19,593     $ (15,210 )   $ (3,665 )   $ 718  
Royalties and development fees
     1,558       -       -       1,558  
      21,151       (15,210 )     (3,665 )     2,276  
Cost of sales
     15,977       (11,331 )     (4,016 )     630  
Gross margin
     5,174       (3,879 )     351       1,646  
Operating expenses:
                                
Research and development, regulatory and engineering
     1,547       (778 )     -       769  
Selling, general and administrative
     6,664       (2,937 )     (1,225 )     2,502  
Non-cash compensation
     48       -       -       48  
      8,259       (3,715 )     (1,225 )     3,319  
Loss from operations
     (3,085 )     (164 )     1,576       (1,673 )
Interest and other income and expense:
                                
Interest expense
     (2 )     1       -       (1 )
Interest income
     136       (65 )     (1 )     70  
Other income, net
     268       -       (249 )     19  
Other income, net
     402       (64 )     (250 )     88  
Equity in net loss of CorNova, Inc.
     (279 )     -       -       (279 )
Net loss
   $ (2,962 )   $ (228 )   $ 1,326     $ (1,864 )
Net loss per common share, basic and diluted
   $ (0.15 )                   $ (0.09 )
Shares used in computing net loss per common share, basic and diluted
     19,859                       19,859  
                                 

Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
 
(1)  
To eliminate revenues and expenses of Gish Biomedical, Inc. (“Gish”) for the fiscal year ended March 31, 2007. Gish was a former subsidiary of the Company which was sold on July 6, 2007.
 
(2)  
To eliminate revenues and expenses of CDT for the fiscal year ended March 31, 2007.
 


 
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CardioTech International, Inc.
  
Pro Forma Condensed Consolidated Balance Sheet
  
(Unaudited - in thousands)
  
                 
   
As of December 31, 2007
        
   
As Reported
  
Adjustments (1)
    
ProForma
  
                 
ASSETS
                
Current assets:
                
Cash and cash equivalents
   $ 6,652   $ 960  
(2)
 $ 7,612  
Accounts receivable-trade, net
     646     (388 )     258  
Accounts receivable-other
     449     -       449  
Inventories
     784     (627 )     157  
Prepaid expenses and other current assets
     183     (16 )     167  
Total current assets
     8,714     (71 )     8,643  
Property, plant and equipment, net
     3,905     (609 )     3,296  
Goodwill
     487     -       487  
Other assets
     76             76  
Total assets
   $ 13,182   $ (680 )   $ 12,502  
                       
LIABILITIES AND STOCKHOLDERS' EQUITY
                      
Current liabilities:
                      
Accounts payable
   $ 340   $ (147 )   $ 193  
Accrued expenses
     555     187  
(3)(4)
   742  
Deferred revenue
     351     (88 )     263  
Current liabilities of discontinued operations
     149     -       149  
Total current liabilities
     1,395     (48 )     1,347  
                       
Stockholders' equity:
                      
Preferred stock
     -     -       -  
Common stock
     21     -       21  
Additional paid-in capital
     38,462     -       38,462  
Accumulated deficit
     (26,696 )   (632 )
(5)
   (27,328 )
Total stockholders' equity
     11,787     (632 )     11,155  
Total liabilities and stockholders' equity
   $ 13,182   $ (680 )   $ 12,502  
                       

Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
 
(1)  
To eliminate assets, liabilities and stockholders’ equity of CDT as of December 31, 2007.
 
(2)  
To record cash consideration received in connection with the sale of CDT subsequent to December 31, 2007 in the approximate amount of $1,200,000, less $240,000 which will be held in a one-year cash escrow to fund CardioTech’s post-closing indemnification obligations to TACPRO.
 
(3)  
Elimination of CDT accrued expenses of $185,000.
 
(4)  
Accrual of estimated transaction costs of $302,000 in connection with the sale of CDT, and $70,000 for fees paid to a CDT employee in connection with the transaction.
 
(5)  
Record loss on sale of CDT.
 




 
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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.

 
CARDIOTECH INTERNATIONAL, INC.
 


Dated:  April 3, 2008                                                                By:           /s/ Michael F. Adams____________________
     Michael F. Adams
     CEO and President

 





 
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EXHIBIT INDEX
 

Exhibit No.                                Description


 
99.1
Press release of CardioTech International, Inc. dated March 31, 2008.
 
_________