-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F/kYb5Xm5m3CyqaYN8vWTOZf1/QMLzruSTkZEBkOvYXtu/AAzzpoJoqaOP/cR+Zv Xfpp+zIdOEi5iCJW75N20Q== 0000893220-99-000425.txt : 19990408 0000893220-99-000425.hdr.sgml : 19990408 ACCESSION NUMBER: 0000893220-99-000425 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990121 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990407 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ESCALON MEDICAL CORP CENTRAL INDEX KEY: 0000862668 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 330272839 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-20127 FILM NUMBER: 99588359 BUSINESS ADDRESS: STREET 1: 351 EAST CONESTOGA ROAD STREET 2: PLZ LEVEL CITY: WAYNE STATE: PA ZIP: 19087 BUSINESS PHONE: 6106886830 MAIL ADDRESS: STREET 1: 351 EAST CONESTOGA ROAD CITY: WAYNE STATE: PA ZIP: 19087 FORMER COMPANY: FORMER CONFORMED NAME: INTELLIGENT SURGICAL LASERS INC DATE OF NAME CHANGE: 19930328 8-K/A 1 AMENDED FORM 8-K FOR ESCALON 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 Date of Report (Date of earliest event reported): January 21, 1999 ESCALON MEDICAL CORP. --------------------- (Exact name of registrant as specified in its charter) California 0-20127 33-0272839 (State or other jurisdiction (Commission File Number) (I.R.S. Employer of incorporation) Identification No.) 351 East Conestoga Road Wayne, Pennsylvania 19087 (Address of principal executive offices) Registrant's telephone number, including area code: (610) 688-6830 N/A --------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) 2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On January 21, 1999, Escalon Medical Corp. (the "Registrant"), Escalon Vascular Access, Inc., a wholly owned subsidiary of the Registrant (the "Buyer"), and Radiance Medical Systems, Inc. (the "Seller") entered into an Assets Sale and Purchase Agreement (the "Asset Purchase Agreement"), pursuant to which the Buyer purchased all of the assets of the Seller's Vascular Access Business for an aggregate purchase price consisting of $2,104,442 in cash, the Buyer's assumption of certain liabilities of the Seller relating to the Vascular Access Business and an agreement to pay royalties based on the sale of products of the Vascular Access Business for a period of five years following the closing of the Asset Purchase Agreement. At closing, the Buyer made an initial payment of the aggregate purchase in an amount equal to $1,104,442 in cash, and the remaining $1,000,000 will be payable upon the completion of the transition referred to in the next paragraph. The purchased assets include inventory, equipment and other physical property used in the Seller's Vascular Access Business. Prior to the acquisition the purchased assets were used by the Seller in the manufacture and distribution of a vascular access system for arterial and venous localization and catheterization. The Buyer intends to continue such use of the purchased assets in its business. The Seller will continue to manufacture Vascular Business products during a transition period while the Buyer transfers the Vascular Access Business to its Milwaukee, Wisconsin facility. No material relationship exists between the Seller and (i) the Registrant or the Buyer, (ii) any director or officer of the Registrant or the Buyer, or (iii) any associate of any such directors or officers. The purchase price was determined by arms' length negotiations between the Registrant and the Buyer and the Seller and took into account the following principal factors regarding the Seller: (i) the assets and liabilities regarding the Seller's Vascular Access Business, (ii) sales of the Vascular Access Business over the past two years, and (iii) judgements regarding the future results of operations and values of the Seller's Vascular Access Business. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial Statements of Businesses Acquired. The audited financial statements of the business acquired include only the statement of assets acquired and statement of operating revenue and direct expenses since it is impractical and uninformative to prepare complete financial statements from a larger entity of which the acquired assets were a part of. The significant operating assets that comprised the Seller, will continue to be operated by the Seller Exhibit 23.1 - Statement of Assets Sold and Related Statement of Operating Revenue and Expenses of the Vascular Access Line of Business of Radiance Medical Systems, Inc. (b) Unaudited Pro Forma Financial Information. The following unaudited pro forma condensed consolidated financial information has been prepared to reflect the transaction under the Asset Purchase Agreement (the "Transaction") between Escalon Medical Corp., Escalon Vascular Access, Inc., a wholly owned subsidiary of the Registrant (the "Buyer"), and Radiance Medical Systems, Inc. The unaudited pro forma condensed consolidated financial information should be read in conjunction with the audited historical consolidated financial statements and related notes included in the Registrants Annual 3 Report on Form 10-K for the period ended June 30, 1998 and the condensed consolidated financial statements for the six months ended December 31, 1998 in the Registrant's Quarterly Report on Form 10-Q for period ended December 31, 1998, which reports are incorporated herein by reference. The unaudited pro forma condensed consolidated statement of operations gives effect to the Transaction as if it had occurred at the beginning of the period presented. The unaudited pro forma condensed consolidated financial information is presented for illustrative purposes only and does not purport to be indicative of the operating results or financial position that would have actually occurred if the Transaction had been in effect on the dates indicated, nor is it necessarily indicative of future operating results or financial position. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1998
PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA ----------- ----------- ----------- Sales revenues $ 5,942,004 $ 2,663,605(1) $ 8,605,609 Costs and expenses: Cost of goods sold 2,588,500 1,342,270(1) 3,930,770 Research and development 494,895 479,872(1) 974,767 Marketing, general and administrative 2,805,454 1,226,814(1) 4,032,268 ----------- ----------- ----------- Total costs and expenses 5,888,849 3,048,956 8,937,805 ----------- ----------- ----------- Income (loss) from operations 53,155 (385,351) (332,196) Other income, net 118,317 -- 118,317 ----------- ----------- ----------- Net income (loss) $ 171,472 $ (385,351) $ (213,879) =========== =========== =========== Basic and diluted net loss per share (a) $ (0.039) $ (0.184) =========== =========== Weighted average shares - basic and diluted 2,673,093 2,673,093 =========== ===========
(a) For earnings per share computations, net income was decreased by $276,750 for preferred stock dividends and accretion. (1) Revenue and expenses as shown on the Radiance Medical Systems, Inc. Audited Statement of Operating Revenue and Expenses of the Vascular Access Line of Business for the year ended December 31, 1998. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTH ENDED DECEMBER 31, 1998
REGISTRANT PRO FORMA ACTUAL ADJUSTMENTS PRO FORMA ----------- ----------- ----------- Sales revenues $ 3,460,097 $ 1,331,803(1) $ 4,791,900 Costs and expenses: Cost of goods sold 1,509,004 671,135(1) 2,180,139 Research and development 341,250 239,936(1) 581,186 Marketing, general and administrative 1,397,973 613,407(1) 2,011,380 ----------- ----------- ----------- Total costs and expenses 3,248,227 1,524,478 4,772,705 ----------- ----------- ----------- Income from operations 211,870 (192,675) 19,195 Other income, net 68,567 -- 68,567 ----------- ----------- ----------- Net income (a) $ 280,437 $ (192,675) $ 87,762 =========== =========== =========== Basic net income per share $ 0.084 $ 0.021 =========== =========== Diluted net income per share $ 0.068 $ 0.021 =========== =========== Weighted average shares - basic 3,028,668 3,028,668 Weighted average shares - diluted 4,103,394 4,103,394 =========== ===========
(a) Net income is reduced by $24,540, for dividends paid to preferred shareholder and not available for common shareholders' in earnings per share computation. (1) Six months (50%) of revenues and expenses as reported on the Radiance Medical Systems, Inc. Audited Statement of Operating Revenue and Expenses of the Vascular Access Line of Business for the year ended December 31, 1998. 4 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1998
PRO FORMA PRO HISTORICAL ADJUSTMENTS FORMA ---------- ----------- ----- ASSETS Current Assets: Cash and cash equivalents $ 2,406,665 $ (1,104,442)(1) $ 1,302,223 Accounts receivable, net 873,975 -- 873,975 Inventory, net 688,079 704,442(2) 1,392,521 Investments and other current assets 613,954 -- 613,954 ------------ ------------ ------------ Total current assets 4,582,673 (400,000) 4,182,673 Furniture and equipment, at cost, net 130,522 313,890(2) 444,412 License and distribution rights, net 809,657 -- 809,657 Goodwill, net 904,451 1,086,110(2) 1,990,561 Other assets 621,079 -- 621,079 ------------ ------------ ------------ Total assets $ 7,048,382 $ 1,000,000 $ 8,048,382 ============ ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: $ 861,941 $ 1,000,000 $ 1,861,941 Shareholders' Equity: Preferred stock 679,231 -- 679,231 Common stock 45,321,687 -- 45,253,597 Treasury stock (118,108) -- (118,108) Accumulated deficit (39,696,369) -- (39,696,369) ------------ ------------ ------------ Total shareholders' equity 6,186,441 -- 6,186,441 ------------ ------------ ------------ Total liabilities and shareholder's Equity $ 7,048,382 $ 1,000,000 $ 8,048,382 ============ ============ ============
(1) Total purchase price paid, $1,104,442 in cash and $1,000,000 accrued and payable when production transfer to Wisconsin is completed. (2) Assets acquired, inventory, $ 704,442; manufacturing equipment, $313,890; and goodwill allocated to the acquisition, $ 1,086,110. Equipment and goodwill will be expensed on a straight line basis over 10 years. 5 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 thereunto duly authorized. ESCALON MEDICAL CORP. (Registrant) DATE: April 6, 1999 By: /s/ Douglas R. McGonegal ---------------------------------------- Douglas R. McGonegal Vice President Finance and Chief Financial Officer (Principal Financial and Accounting Officer) and Secretary 6 EXHIBIT INDEX
Exhibit No. Description - ----------- ----------- 2.1 Asset Sale and Purchase Agreement dated January 21,1999 among Escalon Medical Corp., Escalon Vascular Access, Inc. and Radiance Medical Systems, Inc. (1) 23.1 Statement of Assets Sold and Related Statement of Operating Revenue and Expenses of the Vascular Access Line of Business of Radiance Medical Systems, Inc. *
- ----------------------- * Filed herewith (1) Filed as an exhibit to the Company's Form 8-K dated January 21, 1999. EX-23.1 2 CONSENT OF ERNST AND YOUNG 1 Exhibit 23.1 Statement of Assets Sold and Related Statement of Operating Revenue and Expenses of the Vascular Access Line of Business of Radiance Medical Systems, Inc. As of January 21, 1999 and for the year ended December 31, 1998 with Report of Independent Auditors 2 Report of Independent Auditors Board of Directors and Shareholders Radiance Medical System, Inc. We have audited the accompanying statement of assets sold as of January 21, 1999 and the statement of operating revenues and expenses of the vascular access line of business of Radiance Medical System, Inc. for the year ended December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of assets sold and statement of operating revenues and expenses of the vascular access line of business 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above presents fairly, in all material respects, the statement of assets sold as of January 21, 1999 and the statement of operating revenues and expenses of the vascular access line of business of Radiance Medical Systems, Inc. for the year ended December 31, 1998, in conformity with generally accepted accounting principles. The accompanying statement of assets sold and statement of operating revenues and expenses of the vascular access line of business of Radiance Medical Systems, Inc. has been prepared in order to comply with a requirement to include audited financial statements in Escalon Medical Corporation's Form 8-K to be filed with the Securities and Exchange Commission. /s/Ernst & Young LLP Orange County, California April 2, 1999 1 3 Vascular Access Line of Business of Radiance Medical Systems, Inc. Statement of Assets Sold January 21, 1999 Inventory $704,442 Equipment, net of accumulated depreciation of $35,058 146,025 -------- Total assets $850,467 ========
See accompanying notes. 2 4 Vascular Access Line of Business of Radiance Medical Systems, Inc. Statement of Operating Revenue and Expenses For the year ended December 31, 1998 Revenue $ 2,663,605 Costs of goods sold 1,342,270 ----------- Gross margin 1,321,335 Operating Expenses: Research and development 479,872 Sales and marketing 556,372 Allocation of corporate expenses 670,442 ----------- Total operating expenses 1,706,686 ----------- Net loss $ (385,331) ===========
See accompanying notes. 3 5 Vascular Access Line of Business of Radiance Medical Systems, Inc. Notes to the Statement of Assets Sold and the Statement of Operating Revenues and Expenses of the Vascular Access Line of Business December 31, 1998 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PURPOSE OF FINANCIAL STATEMENTS Effective January 21, 1999, Radiance Medical System, Inc. (the Company) sold its vascular access line of business to Escalon Medical Corporation (Escalon). These financial statements have been prepared in order for Escalon to comply with a Securities an Exchange Commission requirement to file audited financial statements with its Form 8-K related to the purchase of the vascular access line of business from the Company. BASIS OF PRESENTATION The accompanying the statement of assets sold and the statement of operating revenues and expenses of the vascular access line of business of the Company has been prepared based on amounts included in the Company's books and records. All other financial statements required by generally accepted accounting principles have been excluded by management. USE OF ESTIMATES The preparation of financial statements in conformity with generally accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. REVENUE RECOGNITION Sales and related cost of sales are recognized on the date of shipment, or if required, upon acceptance by the customer. INVENTORY Inventory is comprised of raw materials, work-in-process and finished goods and is stated at the lower of cost, determined on an average cost basis, or market value. 4 6 Vascular Access Line of Business of Radiance Medical Systems, Inc. Notes to the Statement of Assets Sold and the Statement of Operating Revenues and Expenses of the Vascular Access Line of Business (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INVENTORY (CONTINUED) Inventories consist of the following at January 21, 1999: Raw materials $357,988 Work-in-process 92,743 Finished goods 253,711 -------- $704,442 ========
EQUIPMENT Equipment is stated at cost and is depreciated on a straight line basis over five years. Equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets expected to be disposed of are stated at the estimated fair value less the costs to sell. ADVERTISING EXPENSE The Company expenses advertising costs as incurred. No advertising was incurred for the vascular access line of business during 1998. CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT CUSTOMERS The Company sells its products primarily to medical institutions and distributors worldwide. The Company performs on going credit evaluations of its customers' financial condition and generally does not require collateral from customers. 5 7 Vascular Access Line of Business of Radiance Medical Systems, Inc. Notes to the Statement of Assets Sold and the Statement of Operating Revenues and Expenses of the Vascular Access Line of Business (continued) 2. ALLOCATION OF CORPORATE EXPENSES The accompanying statement of operating revenue and expenses includes an allocation of corporate general and administrative expenses to the vascular access line of business. This allocation is intended to recognize the costs of corporate services provided to the vascular access business including: accounting, auditing, payroll and treasury functions; administration of employee incentive programs; marketing support; facilities management; legal services; and other support services. The allocation is based on sales of the vascular access line of business as a percentage of total Company sales applied to the total general and administrative expenses incurred by the Company. Management believes that the allocation is reasonable. 6 -----END PRIVACY-ENHANCED MESSAGE-----