-----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, MUWMbOrDNTto9Nks98AtbpXCMrXvtbr7WGtYOZBBTGXl+fOTVLS7srtBHnA7MKVL U8YmI3v9ldG7YTK7dWEVNA== 0000950148-97-003016.txt : 19971210 0000950148-97-003016.hdr.sgml : 19971210 ACCESSION NUMBER: 0000950148-97-003016 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971209 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACCUMED INTERNATIONAL INC CENTRAL INDEX KEY: 0000888335 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 364054899 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: SEC FILE NUMBER: 000-20652 FILM NUMBER: 97734737 BUSINESS ADDRESS: STREET 1: 920 N FRANKLIN ST STREET 2: STE 402 CITY: CHICAGO STATE: IL ZIP: 60610 BUSINESS PHONE: 3126429200 MAIL ADDRESS: STREET 1: 920 N FRANKLIN STREET STREET 2: SUITE 402 CITY: CHICAGO STATE: IL ZIP: 60610 FORMER COMPANY: FORMER CONFORMED NAME: ALAMAR BIOSCIENCES INC DATE OF NAME CHANGE: 19950504 10QSB/A 1 AMENDMENT NO. 1 TO 10QSB 1 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 AMENDMENT NO. 1 ON FORM 10-QSB/A (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997. [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from _____ to _____. Commission file number 0-20652 ACCUMED INTERNATIONAL, INC. ------------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Delaware 36-4054899 (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 900 N. Franklin St., Suite 401, Chicago, IL 60610 --------------------------------------------------- (Address of principal executive offices) (312) 642-9200 ------------------------------------------------- (Issuer's telephone number including area code) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of shares of Common Stock outstanding as of November 10, 1997: 22,683,023 Transitional Small Business Disclosure Format (check one): Yes [X] No [ ] 2 ACCUMED INTERNATIONAL, INC. INDEX
Page Number ------ PART I. Financial Information 1. Consolidated Financial Statements Consolidated Balance Sheets - September 30, 1997 and December 31, 1996...................... 1 Consolidated Statements of Operations - Nine Months Ended September 30, 1997 and 1996 and Three Months Ended September 30, 1997 and 1996................ 2 Consolidated Statements of Cash Flows - Nine Months Ended September 30, 1997 and 1996................. 3 Notes to Consolidated Financial Statements........................ 4 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................ 7 PART II. Other Information 6. Exhibits and Reports on Form 8-K.................................. 11 SIGNATURES.......................................................................... 12
3 ACCUMED INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS ------------------
(Unaudited) (Audited) September 30, December 31, 1997 1996 ------------ ------------ ASSETS Current Assets Cash and cash equivalents $ 1,549,914 $ 2,801,359 Restricted cash - 100,000 Accounts receivable 5,033,413 2,143,596 Prepaid expenses and deposits 653,693 217,198 Production inventory 3,240,081 1,772,127 ------------ ------------ Total current assets 10,477,101 7,034,280 ------------ ------------ Fixed assets, net 5,901,605 1,696,071 ------------ ------------ Notes receivable 225,700 214,273 Deferred financing costs 704,225 - Intangible assets 5,122,400 5,340,411 Other assets 600,761 194,507 ------------ ------------ $ 23,031,792 $ 14,479,542 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 4,700,210 $ 2,340,769 Other current liabilities 1,388,590 879,808 Deferred revenue 139,305 146,968 Notes payable 1,119,100 198,555 Capital lease obligation due within one year 67,122 89,810 ------------ ------------ Total current liabilities 7,414,327 3,655,910 ------------ ------------ Warranty reserves 814,092 - Long term debt 11,190,595 230,795 Minority interest 152,408 456,841 ------------ ------------ 12,157,095 687,636 ------------ ------------ Stockholders' equity Common stock, $0.01 par value, 50,000,000 shares authorized, 22,658,324 shares issued and outstanding at September 30, 1997, 20,854,157 at December 31, 1996 226,583 208,542 Additional paid-in capital 51,838,319 44,424,646 Cumulative translation adjustment 32,586 32,586 Accumulated deficit (48,420,381) (34,335,313) Less treasury stock, 37,956 shares at Sept. 30, 1997, and 31,812 shares at December 31, 1996, respectively (216,737) (194,465) ------------ ------------ Total stockholders' equity 3,460,370 10,135,996 ------------ ------------ $ 23,031,792 $ 14,479,542 ============ ============
See accompanying notes to the consolidated financial statements. 1 4 ACCUMED INTERNATIONAL, INC. CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) ------------------
Nine Months Ended Three Months Ended September 30, September 30, ----------------------------- ----------------------------- 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Sales $ 14,157,306 $ 3,668,150 $ 4,914,004 $ 1,356,056 Less cost of sales (8,905,595) (2,054,122) (3,331,740) (588,665) ------------ ------------ ------------ ------------ Gross profit (loss) 5,251,711 1,614,028 1,582,264 767,391 ------------ ------------ ------------ ------------ Operating expenses: General and administrative 6,280,715 2,874,079 1,833,732 1,082,545 Research and development 3,639,509 1,798,289 1,340,234 508,604 Acquired research and development - 3,499,727 - - Goodwill writeoff 3,582,068 - - - Sales and marketing 3,215,636 1,465,047 1,125,213 623,481 ------------ ------------ ------------ ------------ Total operating expenses 16,717,928 9,637,142 4,299,179 2,214,630 ------------ ------------ ------------ ------------ Operating income (loss) (11,466,217) (8,023,114) (2,716,915) (1,447,239) ------------ ------------ ------------ ------------ Other income (expense): Interest income 19,808 15,796 7,841 4,336 Interest expense (2,960,893) (450,628) (472,851) (12,643) Other income (expense), net 18,449 3,588,623 (22,320) 58,818 Minority interest 303,785 (1,004,082) 116,569 (18,790) ------------ ------------ ------------ ------------ Total other income (expense) (2,618,851) 2,149,709 (370,761) 31,721 ------------ ------------ ------------ ------------ Loss before income taxes (14,085,068) (5,873,405) (3,087,676) (1,415,518) Income tax expense - 850 - - ------------ ------------ ------------ ------------ Net loss $(14,085,068) $ (5,874,255) $ (3,087,676) $ (1,415,518) ============ ============ ============ ============ Net loss per share $ (0.65) $ (0.36) $ (0.14) $ (0.08) ============ ============ ============ ============ Weighted average common shares outstanding 21,574,098 16,502,973 22,482,305 17,722,514 ============ ============ ============ ============
See accompanying notes to the consolidated financial statements. 2 5 ACCUMED INTERNATIONAL, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) ------------------
Nine Months Ended September 30, ------------------------------- 1997 1996 ------------ ------------ Cash flows from operating activities: Net income (loss) $(14,085,068) $ (5,874,255) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 2,161,617 866,733 Write-off of debt discount 1,966,340 - Write-off of in-process research and development - 3,499,727 Write-off of impaired goodwill 3,582,068 - Minority interest (303,785) - Expenses paid with issuance of stock and warrants - 1,441,484 Non-cash gain on settlement (22,272) (159,957) Loss on disposal of assets - 74,706 Changes in assets and liabilities: Decrease in restricted cash 100,000 63,000 (Increase) in accounts receivable (679,152) (553,069) (Increase) in prepaid expenses and deposits (436,495) (113,545) (Increase) in production inventory (457,178) (423,419) Decrease (Increase) in other and intangible assets (571,147) (736,422) Increase in accounts payable 2,387,921 888,343 (Increase) in deferred financing costs (821,884) - Increase (Decrease) in other current liabilities (54,181) 26,056 (Decrease) in warranty reserves (435,908) - (Decrease) in deferred revenue (7,663) (1,408,806) ------------ ------------ Net cash used in operating activities (7,676,787) (2,409,424) ------------ ------------ Cash used in investing activities: Purchase of fixed assets (898,372) (938,123) Acquisition of business, net (6,000,000) - ------------ ------------ Net cash used in investment activities (6,898,372) (938,123) ------------ ------------ Cash flows from financing activities: Proceeds from issuances of common stock, net 556,466 2,841,885 Notes receivable (issued) collected (11,427) - Payment of capital lease obligation (32,870) (63,527) Proceeds from issuance of notes payable and warrants 14,750,000 1,500,000 Proceeds from bridge loan 6,000,000 - Payment of notes payable and bridge loan (7,938,455) (964,017) ------------ ------------ Net cash provided by financing activities 13,323,714 3,314,341 ------------ ------------ Effect of exchange rates on cash - (1,491) ------------ ------------ Net increase (decrease) in cash and cash equivalents (1,251,445) (34,697) Cash and cash equivalents at beginning of period 2,801,359 180,508 ------------ ------------ Cash and cash equivalents at end of period $ 1,549,914 $ 145,811 ============ ============
See accompanying notes to consolidated financial statements. 3 6 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. ACCUMED INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Preparation of Interim Financial Statements: The accompanying consolidated financial statements have been prepared in accordance with the instructions to Form 10-QSB and, therefore, do not include all information and footnotes necessary for a presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. In the opinion of management, such consolidated financial statements reflect all normal and recurring adjustments necessary for a fair presentation of the results of operations and financial position for the interim periods presented. Operating results for the three month period ended September 30, 1997 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1997. 2. Basis of Presentation: The condensed consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All significant intercompany balances, transactions and stockholdings have been eliminated. 3. Merger Transaction: On December 29, 1995, the Company acquired all of the common stock of AccuMed, Inc. and its wholly owned subsidiary. Pursuant to the terms of the merger agreement, 1,881,910 shares of Common Stock and 126,945 warrants were issued to AccuMed, Inc. stockholders and warrantholders, respectively, which were contingent and subject to forfeiture if specified performance goals were not achieved by the merged entity. The contingency associated with 940,955 shares of Common Stock and 63,473 warrants was resolved (performance goal achieved) in March 1996 resulting in contingent consideration of $5,430,326. Such amount has been allocated to identifiable intangibles of acquired proprietary technology ($1,930,599) and in-process research and development ($3,499,727). The acquired proprietary technology is being amortized over the expected period to be benefited of ten years, with the in-process research and development charged to operations during the three months ended March 31, 1996. The contingency associated with the remaining 940,955 shares of Common Stock and 63,472 warrants was resolved (performance goal achieved) in March 1997 resulting in contingent consideration of $3,582,068. Such amount has been recorded as goodwill associated with the merger and charged off in its entirety to operations during the three months ended March 31, 1997 as an impaired asset. 4. Notes Payable: The Company received $4,500,000 in loan proceeds on September 30, 1997. The loan bears interest at 14.5% and is secured by all assets of the Company except for certain royalties and certain stock in the Company's foreign subsidiaries. Terms of the loan call for 48 monthly payments of $113,300 and a balloon payment of $696,700 in October 4 7 2001. The Company also issued 245,783 warrants to purchase Common Stock of the Company to the lender at an exercise price of $2.60. The warrants were valued at $201,500, and were recorded as deferred financing costs in the third quarter. This amount will be written off over four years, the term of the loan. The Company used an aggregate of $1,250,000 of such loan proceeds to repay interim financing received in the third quarter under two installment loan agreements. The Company utilized the Black-Scholes pricing model to determine the fair value of the warrants issued. The following assumptions were incorporated into the model: 245,783 warrants - risk free rate 6%, expected life 5 years, expected volatility 20%, and expected dividend zero. This debt was recorded on the issue date in the consolidated balance sheet as follows: Face amount of loan $4,500,000 Less value of warrants issued (201,500) ---------- Loan recorded on balance sheet $4,298,500 Less current portion 658,000 ---------- Long-term debt $3,640,500 ========== 5. Private Placement. On March 14, 1997, the Company consummated a private placement (the "Private Placement") of 85 Units each consisting of $100,000 in principal amount of 12% Convertible Promissory Notes (the "Notes") and Warrants (the "Warrants") to purchase 10,000 shares of the Company's Common Stock. The Company received net proceeds of approximately $7.8 million from the Private Placement after deducting commissions and related expenses. The Notes bear interest at the rate of 12% per annum, payable semi-annually in arrears on August 15 and February 15 of each year during the term of the Notes. Principal under the Notes is due March 14, 2000. The Notes are convertible at the option of the holder into shares of Common Stock at a conversion price equal to $3.125 (the "Conversion Price"). At the date of issuance the conversion feature of the Notes was "in the money", with the intrinsic value of such feature calculated as approximately $1,900,000. Such amount has been reflected as additional paid-in capital, and was written off as deferred financing costs in the second quarter, the period in which the notes became convertible. The Warrants are exercisable to purchase Common Stock at an exercise price of $3.125 per share. Of the 10,000 Warrants included in each Unit, 8,823 became exercisable for a period six months following March 14, 1997, and 1,177 Warrants became exercisable upon issuance for a six-month period beginning May 23, 1997. Pursuant to registration rights granted to the Warrant holders, on May 30, 1997 the Company filed with the Commission a registration statement covering the resale of the shares underlying the warrants. Management and the Warrant holders had anticipated that such registration statement would become effective prior to expiration of the warrants and remain effective for a sufficient period of time prior to such expiration to allow exercise of the warrants and resale of the underlying shares in an orderly fashion. As the expiration dates approached and the registration statement was not yet effective, the Board of Directors determined to extend the expiration dates until December 31, 1997 to allow time to complete the registration process. The total proceeds received of $8,500,000 were allocated to the Notes and Warrants based on the estimated fair value of $7,934,500 and $565,500, respectively. The original issue discount of $565,500 relating to the Notes has been recorded in Deferred Financing Costs on the balance sheet, and will be amortized over the term of the Notes. The placement agent, a shareholder of the Company, received fees estimated at $961,500, representing out of pocket expenses of $56,500, a placement fee equal to $595,000, or 7% of the proceeds of the Private Placement and five year warrants to purchase 200,000 shares of the Company's Common Stock with a fair value of $310,000. Of the Private Placement proceeds, $6,130,000 (including $130,000 of interest) was used to repay a $6,000,000 bridge loan used for the ESP Culture System II product line (the "ESP Product Line") acquisition on March 3, 1997 (see 5 8 Note 6), $651,500 was used for issuance costs, and the remaining $1,718,500 was retained to cover transition costs of the acquired business. Of the total of $3,517,000 of costs associated with the issuance of the Notes, $1,617,000 will be amortized over the three year term of the Notes and $1,900,000 related to the "in the money" conversion feature was written off in the second quarter. The Company utilized the Black-Scholes pricing model to determine the fair value of the Warrants issued. The following assumptions were incorporated into the model: 850,000 warrants - risk free rate 7%, expected life six months, expected volatility 20%, and expected dividend zero; 200,000 warrants - risk free rate 7%, expected life 5 years, expected volatility 20%, and expected dividend zero. This debt was recorded on the issue date in the consolidated balance sheet as follows: Face amount of loan $8,500,000 Less value of warrants issued (875,500) ---------- Loan recorded on balance sheet $7,624,500 Less current portion -0- ---------- Long-term debt $7,624,500 ========== 6. Acquisition: On March 3, 1997, the Company acquired the ESP Product Line from Difco Microbiology Systems, Inc. ("Difco") for a total purchase price of $6,000,000 in cash. The acquisition was accounted for using the purchase method of accounting with the purchase price allocated to the net assets acquired based on their estimated fair values. This treatment resulted in no excess purchase price over the fair value of tangible assets acquired. The operations associated with this acquisition have been included in the consolidated statement of operations since the date of acquisition. The pro-forma consolidated results of operations giving effect to the acquisition of the ESP Product Line as if it had occurred as of January 1, 1996 follows:
For the Nine Months Ended Sept. 30, 1997 Sept. 30, 1996 -------------- -------------- Sales $ 16,796,428 $ 16,542,887 Net Loss $(14,702,621) $(13,821,847) Net Loss per Share $(0.68) $(0.82)
7. Warranty reserve: A portion of the warranty reserve has been classified as a non-current liability based on management's estimate of claims to be paid in the next 12 months. Warranty reserves have been recorded to reflect future costs to be borne by the Company to repair and replace equipment under lease to customers, acquired as part of the ESP product line (see Note 6). 8. Related Party Loan: During the third quarter, the Company received a $500,000 bridge loan from a director and shareholder of the Company. The loan was repaid in full from the loan proceeds received on September 30, 1997 (see Note 4), together with interest and prepayment premium of an aggregate of $10,000. In addition, the Company issued 50,000 warrants to purchase Common Stock of the Company at an exercise price of $2.50. The warrants were valued at $39,500 and recorded as interest expense in the third quarter. The Company utilized the Black-Scholes pricing model to determine the fair value of the warrants granted. The following assumptions were incorporated into the model: 50,000 6 9 warrants - risk free rate 6%, expected life five years, expected volatility 20%, and expected dividend zero. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The Company is engaged in the development and manufacturing of cost effective screening instruments and systems for clinical diagnostic laboratories. The Company markets products in two laboratory market segments: 1) Microbiology - proprietary disposable products and automated instruments used to identify infectious organisms and determine susceptibility to antimicrobial agents, and 2) Cytopathology - systems made up of multiple instruments networked via proprietary software that support the review and analysis of Pap smears. Effective March 3, 1997, the Company acquired certain assets and liabilities of Difco Microbiology Systems, Inc. relating to the ESP Culture System II product line (the "ESP Product Line"). The results of operations reflected in the Company's consolidated statement of operations for the quarter and nine months ended September 30, 1997 include the results of operations of the ESP Product Line from the date of the acquisition, whereas results of operations from prior periods reflect the operations of the Company's microbiology and cytopathology product lines only. Sales revenues for the quarter ended September 30, 1997 increased to $4,914,000 compared to $1,356,000 for the quarter ended September 30, 1996, due primarily to the increase in sales in the microbiology product line and the addition of the ESP product line. Cost of sales increased from $589,000 in the third quarter of 1996 to $3,332,000 in the third quarter of 1997, reflecting the increased sales volume in the microbiology product line and the addition of the ESP product line. Gross margins decreased from 56.6% in the third quarter of 1996 to 32.2% in the third quarter of 1997, reflecting unabsorbed volume variances of the cytopathology product line. The unabsorbed costs relate mainly to indirect and overhead costs associated with expanding manufacturing capacity of that product line. General and administrative expenses increased from $1,083,000 in the third quarter of 1996 to $1,834,000 in the comparable 1997 quarter primarily due to increases in staffing, office, professional fees, and investor relations efforts. Interest expense of $473,000 in the third quarter of 1997 reflected amounts accrued on the three year notes issued in March of 1997 and installment and bridge financing received in the third quarter. The interest expense for the third quarter of 1996 of $13,000 reflected non-cash interest incurred for issuance of warrants connected with notes payable repaid in 1996. Research and development expenses increased from $509,000 in the third quarter of 1996 to $1,340,000 in the third quarter of 1997 due primarily to increased spending in the cytopathology area. Sales and marketing expenses increased from $623,000 in the third quarter of 1996 to $1,125,000 in the third quarter of 1997 due to increased marketing efforts for the cytopathology product line. 7 10 Net loss increased from $1,416,000 for the third quarter of 1996 to $3,088,000 for the third quarter of 1997 due to increased sales volume and related gross margins offset by increases in all operating expense categories. Net loss per share for the quarter ended September 30, 1997 was $0.14 compared to $0.08 for the quarter ending September 30, 1996. Weighted average shares outstanding for the periods 1997 and 1996 were 22,482,000 and 17,723,000, respectively. Sales revenues for the nine months ended September 30, 1997 increased to $14,157,000 compared to $3,668,000 for the nine months ended September 30, 1996, due primarily to the increased sales in the microbiology product line and the addition of the ESP product line. Cost of sales increased from $2,054,000 for the nine months ended September 30, 1996 to $8,906,000 for the comparable 1997 period, reflecting the increased sales volume in the microbiology product line and the addition of the ESP product line. Gross margins decreased from 44.0% for the nine month period ended September 30, 1996 to 37.1% for the nine months ended September 30, 1997, reflecting unabsorbed volume variances of the cytopathology product line. The unabsorbed costs relate mainly to indirect and overhead costs associated with expanding manufacturing capacity of that product line. For the nine month period ended September 30, 1997, net loss was $14,085,000 and $5,874,000 for the comparable 1996 period. The increase in the loss for 1997 as compared to 1996 was primarily attributed to higher spending in the administrative area and increased sales and marketing efforts. Also, the Company received no other income from licensing agreements in 1997, while $3,500,000 of such other income was received in 1996. The "in the money" write-off of $1.9 million in the second quarter of 1997, related to the conversion feature of notes issued in March 1997, also contributed to the increased loss as compared to the first nine months of 1996. The net loss per share for the first nine months of 1997 was $0.65 compared to $0.36 for the 1996 period. The loss per share for the 1997 nine-month period was about $0.20 per share less due to the increase in the weighted average shares outstanding for 1997. The decrease in net current assets of $97,000 as of September 30, 1997 as compared to December 31, 1996 is due primarily to a decrease in net current assets of the cytopathology product line, partially offset by an increase in net current assets relating to the Company's acquisition at March 3, 1997 of the ESP Product Line. The warranty reserve liability recorded as a result of the acquisition of the ESP product line represents estimated future costs to be borne by the Company to repair and replace equipment currently leased to customers. Management estimates the timing and amount of the payments for such repairs will occur principally over the final years of the equipment leases, which are scheduled to expire in the years 1998 through 2001. LIQUIDITY AND CAPITAL RESOURCES The Company has been substantially dependent on the private placements of its debt and equity securities and the proceeds of its public offerings of securities to fund its cash requirements. From the initial public offering in October 1992 through September 30, 1997, the Company has raised approximately $43,000,000 in aggregate net proceeds from public offerings and private placements of securities. The Company's most recent private placement was closed in March 1997, resulting in the issuance of $8,500,000 of three year convertible notes bearing interest at a rate of 12% per annum. Investors also received 850,000 warrants to purchase shares of the Company's Common Stock at a price of $3.125 per share. Approximately 750,000 of such Warrants would have expired on October 14, 1997 and the balance would have expired on November 23, 1997. However, the Company extended the expiration date of all 850,000 Warrants to December 31, 1997. Of such Warrants, 25,000 have been exercised; if the balance of the Warrants are exercised, of which there can be no assurance, the Company would receive approximately $2,581,000 in gross proceeds. In September 1997, the Company incurred indebtedness of $4,500,000 secured by a lien against virtually all of the Company's assets, repayable in 48 monthly installments of $113,300 starting November 1997. A balloon payment for the balance of $696,700 is due October 2001. The loan bears interest at a rate of 14.5% per annum. The lender also received 245,783 warrants -8- 11 to purchase shares of the Company's Common Stock at an exercise price of $2.60 per share. The warrants expire September 30, 2002. If all of these warrants are exercised, of which there can be no assurance, the Company would receive approximately $639,000 in gross proceeds. In October 1997, the Company entered into a one-year revolving credit facility with the same lender. Pursuant to such facility, the Company may borrow up to $4,000,000 from time to time based on the amount of eligible accounts receivable. Indebtedness under such revolving facility is secured by a lien on virtually all the Company's assets and bears interest at an annual rate of prime plus 3%. On October 28, 1997, the Company received $1,500,000 under such revolving facility. During the third quarter of 1997, the Company received an aggregate of $207,000 upon the exercise of certain stock options and warrants and a $100,000 abatement of investment banking fees. In addition, the Company received and repaid $1,750,000 in loans. One of the lenders received warrants to purchase 50,000 shares of the Company's Common Stock at an exercise price of $2.50 per share, expiring in August 2002. If all of these warrants are exercised, of which there can be no assurance, the Company would receive approximately $125,000 in gross proceeds. During the nine months ended September 30, 1997, the Company has expended substantial funds for research and product development, scale-up of manufacturing capacity, sales and marketing efforts and other general corporate purposes. Management believes that existing cash balances and internally generated funds will be sufficient to finance the Company's projected operations through at least the next 12 months. The Company's future liquidity and capital requirements will depend upon numerous factors, including the costs and timing of expansion of manufacturing capacity, the costs, timing and success of the Company's product development efforts, the costs and timing of acceptance of the Company's products, competing technological and market developments, the progress of commercialization efforts of the Company and its distributors, the costs involved in preparing, filing, prosecuting, maintaining, enforcing and defending patent claims and other intellectual property rights, developments related to regulatory and third-party reimbursement matters, and other factors. The Company currently has no commitments with respect to sources of additional financing, and there can be no assurance that any such financing sources will be available to the Company or that adequate funds for the Company's operations, whether from the Company's revenues, financial markets, collaborative or other arrangements with corporate partners or from other sources, will be available when needed or on terms satisfactory to management. The failure to obtain adequate additional financing may require management to delay, curtail or scale back some or all of its studies and regulatory activities and, potentially, to cease all operations. Any additional equity financing may involve substantial dilution to the Company's then-existing stockholders. CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS Management expects that the Company's operating results will fluctuate significantly from quarter to quarter and will depend on various factors, many of which are outside of -9- 12 management's control. These factors include the success of the marketing efforts for the Company's products, obtaining necessary regulatory clearances or approvals for the Company's products, the timing and level of expenditures associated with expansion of sales and marketing activities and overall operations, the Company's ability to cost effectively expand manufacturing capacity and maintain consistently acceptable yields, the timing of establishment of strategic distribution arrangements and the success of the activities conducted under such changes in government regulation and other factors, the timing of significant orders from and shipments to customers, and general economic conditions. These or other factors could have a material adverse effect on the Company's business, financial condition and results of operations. -10- 13 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. The following exhibits are filed herewith: 10.1 Equipment Loan and Security Agreement dated as of September 23, 1997 between Registrant and Transamerica Business Credit Corporation. (previously filed with the Quarterly Report on Form 10-QSB for the quarter ended September 30, 1997) 10.2 Promissory Note No. 1 dated as of September 30, 1997 by the Registrant in favor of Transamerica Business Credit Corporation in the original principal amount of $1,500,000. (previously filed with the Quarterly Report on Form 10-QSB for the quarter ended September 30, 1997) 10.3 Promissory Note No. 2 dated as of September 30, 1997 by the Registrant in favor of Transamerica Business Credit Corporation in the original principal amount of $1,500,000. (previously filed with the Quarterly Report on Form 10-QSB for the quarter ended September 30, 1997) 10.4 Promissory Note No. 3 dated as of September 30, 1997 by the Registrant in favor of Transamerica Business Credit Corporation in the original principal amount of $1,500,000. (previously filed with the Quarterly Report on Form 10-QSB for the quarter ended September 30, 1997) 27.1 Financial Data Schedule -11- 14 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. ACCUMED INTERNATIONAL, INC. /s/ LEONARD R. PRANGE ----------------------------------------- Leonard R. Prange Chief Financial Officer and Chief Operating Officer Date: December 9, 1997 -12- 15 INDEX TO EXHIBITS
Exhibit No. Description of Exhibit - ------------ ---------------------- 10.1 Equipment Loan and Security Agreement dated as of September 23, 1997 between Registrant and Transamerica Business Credit Corporation. (previously filed with the Quarterly Report on Form 10-QSB for the quarter ended September 30, 1997) 10.2 Promissory Note No. 1 dated as of September 30, 1997 by the Registrant in favor of Transamerica Business Credit Corporation in the original principal amount of $1,500,000. (previously filed with the Quarterly Report on Form 10-QSB for the quarter ended September 30, 1997) 10.3 Promissory Note No. 2 dated as of September 30, 1997 by the Registrant in favor of Transamerica Business Credit Corporation in the original principal amount of $1,500,000. (previously filed with the Quarterly Report on Form 10-QSB for the quarter ended September 30, 1997) 10.4 Promissory Note No. 3 dated as of September 30, 1997 by the Registrant in favor of Transamerica Business Credit Corporation in the original principal amount of $1,500,000. (previously filed with the Quarterly Report on Form 10-QSB for the quarter ended September 30, 1997) 27.1 Financial Data Schedule
-13- EX-27.1 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 1,550 0 5,033 0 3,240 10,477 5,902 0 23,032 7,164 11,191 0 0 227 3,233 23,032 14,157 14,157 8,906 8,906 16,718 0 2,961 (14,085) 0 (14,085) 0 0 0 (14,085) (0.65) (0.65)
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