-----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, Un0N/YuJBwlsWlbOacUkn8VMa47re4vfhQr1UDA6KSp+EUXEBKG7YwWVR/XqwAne 15vAcqmVb3teK4sH0sChPg== /in/edgar/work/20000622/0000893220-00-000781/0000893220-00-000781.txt : 20000920 0000893220-00-000781.hdr.sgml : 20000920 ACCESSION NUMBER: 0000893220-00-000781 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000114 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000622 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ESCALON MEDICAL CORP CENTRAL INDEX KEY: 0000862668 STANDARD INDUSTRIAL CLASSIFICATION: [3845 ] IRS NUMBER: 330272839 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-20127 FILM NUMBER: 659104 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 0001.txt FORM 8-K/A 01/14/2000 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 14, 2000 ---------------- Escalon Medical Corp. ----------------------------------------- (Exact name of registrant as specified in its charter) Delaware 0-20127 33-0272839 - ---------------------------- ------------------------ ------------------- (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification No.) 351 East Conestoga Road, Wayne, Pennsylvania 19087 - -------------------------------------------- -------- (Address of principal executive offices) (Zip Code) 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. As reported in its Form 8-K Current Report, as filed with the Securities and Exchange Commission on January 19, 2000, Escalon Medical Corp. (the "Registrant") purchased all of the outstanding capital stock of Sonomed, Inc. ("Sonomed"), a privately held manufacturer and marketer of ophthalmic ultrasound diagnostics devices, pursuant to a Stock Purchase Agreement (the "Stock Purchase Agreement") dated as of January 14, 2000, among the Registrant, Sonomed and the stockholders of Sonomed. As a result of the transaction, Sonomed became a wholly owned subsidiary of the Registrant. The previously reported aggregate purchase price was $12,550,000, of which $12,050,000 was paid in cash and $500,000 was represented by a promissory note. The purchase price was subject to certain adjustments and the final purchase price is $12,325,125. On March 31, 2000, the Registrant filed an amendment to the Form 8-K Current Report on Form 8-K/A (the "Prior Amendment") for the purpose of presenting the preliminary pro forma balance sheet of the Registrant as of December 31, 1999. The Prior Amendment stated that the allocations set forth in the preliminary pro forma balance sheet were estimates that were subject to adjustment within 120 days after the filing of the Prior Amendment. This Amendment to the Form 8-K Current Report sets forth the final unaudited pro forma condensed consolidated balance sheet, to reflect the adjustments to the purchase price paid by the Registrant and the final allocations of the adjusted purchase price. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial Statements of Businesses Acquired. The audited financial statements of the business acquired, consisting of the balance sheets of Sonomed as of December 31, 1999 and 1998, and the related statements of income, shareholders' equity and cash flows for the three years in the period ended December 31, 1999, were reported in the Prior Amendment as Exhibit 99.1 - Financial Statements of Sonomed, Inc. and are incorporated herein by reference. (b) Unaudited Pro Forma Financial Information. The following unaudited pro forma condensed consolidated financial information has been prepared to reflect the acquisition by the Registrant of all of Sonomed's outstanding capital stock under the Stock Purchase Agreement (the "Acquisition"). 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 Registrant's Annual Report on Form 10-K for the period ended June 30, 1999 and the condensed consolidated financial statements for the six months ended December 31, 1999 in the Registrant's Quarterly Report on Form 10-Q for the period ended December 31, 1999, which reports are incorporated herein by reference. -2- 3 The unaudited pro forma condensed consolidated statement of operations reflects the Acquisition as if it had occurred at the beginning of the period presented. The Prior Amendment reported an aggregate purchase price of $12,550,000. Based on final adjustments, the aggregate purchase price has decreased to $12,325,125. Also, the preliminary pro forma balance sheet that was contained in the Prior Amendment reflected an estimated allocation of $11,050,000 of the purchase price to goodwill, which was subject to adjustment within 120 days after the date of filing of the Prior Amendment. The final pro forma balance sheet set forth in this Amendment reflects a reallocation of the $11,050,000 as follows: $7,700,000 to customer lists, $2,300,000 to trademarks and trade names and $1,050,000 to goodwill. Also, the tangible assets have been reduced by $224,875 to $1,275,125 to reflect the value of net assets acquired. 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 Acquisition had been in effect on the dates indicated, nor is it necessarily indicative of future operating results or financial position. -3- 4 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1999
PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA ---------- ----------- --------- Sales revenues $ 7,559,011 $ 7,169,357 (1) $ 14,728,368 Costs and expenses: Cost of goods sold 3,282,177 1,989,436 (1) 5,271,613 Research and development 738,124 211,837 (1) 949,961 Marketing, general and administrative 3,331,562 2,216,015 (1)(2) 5,547,577 ------------ ------------ ------------ Total costs and expenses 7,351,863 4,417,288 11,769,151 ------------ ------------ ------------ Income from operations 207,148 2,752,069 2,959,217 Other income, net 986,639 (966,098) (1)(3) 20,541 ------------ ------------ ------------ Income before income taxes 1,193,787 1,785,971 2,979,758 Income taxes -- 22,925 (1)(4) 22,925 ------------ ------------ ------------ Net income $ 1,193,787 $ 1,763,046 $ 2,956,833 ============ ============ ============ Basic net income per share (A) $ 0.10 $ 0.67 ============ ============ Diluted net income per share $ 0.10 $ 0.66 ============ ============ (1) Weighted average shares-basic 3,114,823 3,114,823 ============ ============ Weighted average shares-diluted 3,150,721 3,150,721 ============ ============
(A) Historical and pro forma net income available to common shareholders at June 30, 1999 was decreased by $870,523, for preferred stock dividends and accretion. (1) Net sales and expenses as per the Sonomed audited Statement of Income for the year ended December 31, 1999 (Exhibit 99.1). (2) Sonomed historical selling and administrative expenses of $515,499 and $748,769, respectively, additional compensation (bonus plan reflected in Item 2 of Form 8-K) of $215,080 and amortization of intangible assets (customer lists, trademarks and trade names and goodwill) arising from the Acquisition of $736,667. (3) Sonomed historical interest and other income of $145,478, gain on sale of investments, $12,080, less interest expense associated with the Acquisition (adjustable rate loans with interest rate cap) reported at the cap limit for presentation purposes, $1,123,656. The annual effect of a 1/8% rate reduction would be $14,344. (4) Sonomed was a Subchapter S corporation. The income tax provision reflects only New York State and other local taxes. There is no provision for federal income tax for either the Registrant or Sonomed due to utilization of net operating loss carryforwards. -4- 5 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999
PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA ---------- ----------- --------- Sales revenues $ 2,310,212 $ 3,584,679 (1) $ 5,894,891 Costs and expenses: Cost of goods sold 1,154,198 994,718 (1) 2,148,916 Research and development 467,383 105,919 (1) 573,302 Marketing, general and Administrative 1,978,070 1,108,008 (1)(2) 3,086,078 ----------- ----------- ----------- Total costs and expenses 3,599,651 2,208,645 5,808,296 ----------- ----------- ----------- Income (loss) from operations (1,289,439) 1,376,034 86,595 Gain on sale of Silicone Oil product line 1,848,215 -- 1,848,215 Write-off of Ocufit (455,112) -- (455,112) Other income, net 64,015 (492,013) (1)(3) (427,998) ----------- ----------- ----------- Income (loss) before income taxes 167,679 884,021 1,051,700 Income taxes -- 11,463 (1)(4) 11,463 =========== =========== =========== Net income (loss) $ 167,679 $ 872,558 $ 1,040,237 =========== =========== =========== Basic net loss per share $ 0.05 $ 0.32 =========== =========== Diluted net loss per share $ 0.05 $ 0.32 =========== =========== Weighted average shares-basic 3,242,184 3,242,184 =========== =========== Weighted average shares-diluted 3,254,250 3,254,250 =========== ===========
(1) Net sales and expenses as per Sonomed audited Statement of Income for the year ended December 31, 1999, reduced by 50%. (2) Sonomed historical selling and administrative expenses of $257,750 and $374,384, respectively, additional compensation (bonus plan reflected in Item 2 of Form 8-K) of $107,540 and amortization of intangible assets (customer lists, trademarks and trade names and goodwill) arising from the Acquisition of $368,334. (3) Sonomed historical interest and other income of $72,739, gain on sale of investments, $6,040, less interest expense associated with the Acquisition (adjustable rate loans with interest rate cap) reported at the cap limit for presentation purposes, $570,792. The annual effect of a 1/8% rate reduction would be $7,391. (4) Sonomed was a Subchapter S corporation. The income tax provision reflects only New York State and other local taxes. There is no provision for federal income tax for either the Registrant or Sonomed due to utilization of net operating loss carryforwards. -5- 6 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1999
PRO FORMA ASSETS HISTORICAL ADJUSTMENTS PRO FORMA ------ ---------- ----------- --------- Current assets: $ (12,158,714) (a) Cash and cash equivalents $ 3,039,913 12,400,000 (b) $ 2,447,869 (833,330) (c) Cash and cash equivalents - restricted 1,000,000 (1,000,000) (c) -- Accounts receivable, net 1,479,590 838,676 (a) 2,318,266 Inventory, net 1,017,481 620,332 (a) 1,637,813 Other current assets 195,143 18,645 (a) 213,788 ------------ ------------ ------------ TOTAL CURRENT ASSETS 6,732,127 (114,391) 6,617,736 Long-term receivables 150,000 -- 150,000 License and distribution rights, net 251,585 -- 251,585 Customer lists -- 7,700,000 (a) 7,700,000 Trademarks and trade names -- 2,300,000 (a) 2,300,000 Goodwill, net 1,187,385 1,050,000 (a) 2,237,385 29,324 (a) 808,840 30,130 (a) 968,294 Other assets 100,000 (b) ------------ ------------ ------------ TOTAL ASSETS $ 9,129,937 $ 11,095,063 $ 20,225,000 ============ ============= ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: $ 5,000,000 (b) Line of credit $ 1,000,000 (1,000,000) (c) $5,000,000 1,050,000 (b) Current portion of long-term debt 200,000 (200,000) (c) 1,050,000 Note payable -- 500,000 (b) 500,000 Accounts payable and accrued expenses 851,227 428,393 (a) 1,279,620 ------------ ------------ ------------ TOTAL CURRENT LIABILITIES 2,051,227 5,778,393 7,829,620 5,950,000 (b) Long-term debt 633,330 (633,330) (c) 5,950,000 ------------ ------------ ------------ TOTAL LIABILITIES 2,684,557 11,095,063 13,779,620 SHAREHOLDERS' EQUITY: Common stock 46,024,811 -- 46,024,811 Accumulated deficit (39,579,431) -- (39,579,431) ------------ ------------ ------------ TOTAL SHAREHOLDERS' EQUITY 6,445,380 -- 6,445,380 ------------ ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 9,129,937 $ 11,095,063 $ 20,225,000 ============ ============= ============
-6- 7 (a) Sonomed was acquired January 14, 2000 in a business combination accounted for as a purchase. The total cost of the acquisition was $12,325,125, which exceeded the fair value of the net assets acquired by $11,050,000. The excess will be amortized on the straight-line method over 15 years. The purchase price was allocated as follows: Cash $ 166,411 Receivables 838,676 Inventories 620,332 Other current assets 18,645 Property and equipment 29,324 Other assets 30,130 Customer lists 7,700,000 Trademarks and trade names 2,300,000 Goodwill 1,050,000 Accounts payable and accrued expenses (428,393) ------------ Total cost of acquisition $ 12,325,125 (b) The acquisition was financed through a five-year line of credit of $5,000,000, a five-year term loan of $7,000,000 and a $500,000 note payable to the Sonomed shareholders. This note was adjusted as part of the final purchase price adjustment and is paid in full. The interest rate on the line of credit is based on prime plus 0.75% and the term loan is based on prime plus 1.0%. Floating interest rate protection is in place to cover the $7,000,000 term loan through January 2003 and $3,000,000 of the line of credit through January 2002. The maximum interest rate that may be charged on the term loan for calendar year 2000 is 10% and 9.75% on the protected portion of the line of credit The Registrant paid $100,000 in finance fees that are recorded in other assets. These fees will be amortized over the term of the loans using the effective interest method (c) In connection with the financing this acquisition, the Registrant repaid all of its existing debt utilizing cash on hand and the restricted certificate of deposit that secured a portion of that debt. -7- 8 (c) Exhibits. Exhibit No. Document ----------- -------- 2.1 Stock Purchase Agreement dated as of January 14, 2000 among Escalon Medical Corp., Sonomed, Inc. and the Stockholders of Sonomed, Inc. (1) 2.2 Note dated January 14, 2000 in the principal amount of $500,000 from the Registrant to Louis Katz. (1) 2.3 Employment Agreement dated as of January 14, 2000 between Sonomed, Inc. and Louis Katz. (1) 2.4 Bonus Plan for Management Employees of Sonomed, Inc. (1) 2.5 Escalon Medical Corp. Equity Incentive Plan for Employees of Sonomed, Inc. (1) 2.6 News Release of the Registrant dated January 18, 2000. (1) 99.1 Financial Statements of Sonomed, Inc. for the years ended December 31, 1999, 1998 and 1997 with Report of Independent Auditors. (2) - ---------- (1) Filed as an exhibit to the Company's Form 8-K, dated January 19, 2000. (2) Filed as an exhibit to the Company's Form 8-K/A, dated March 31, 2000. -8- 9 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized. ESCALON MEDICAL CORP. Date: June 20, 2000 By: /s/ Douglas R. McGonegal ------------------------- Douglas R. McGonegal, Vice President - Finance Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----