-----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, Fmsh/naT6GKtFLlDeBu75H2turbvZ8rp0K0yvR+pYljWuwsaXW9oeS39lJOIIGrM ct6AIhBXVCFQnuNw2VAHrA== 0000892712-98-000130.txt : 19981229 0000892712-98-000130.hdr.sgml : 19981229 ACCESSION NUMBER: 0000892712-98-000130 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981014 ITEM INFORMATION: FILED AS OF DATE: 19981228 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VENTANA MEDICAL SYSTEMS INC CENTRAL INDEX KEY: 0000893160 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 942976937 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-20931 FILM NUMBER: 98776481 BUSINESS ADDRESS: STREET 1: 3865 N BUSINESS CENTER DRIVE CITY: TUCSON STATE: AZ ZIP: 85705 BUSINESS PHONE: 5208872155 MAIL ADDRESS: STREET 1: 3865 N BUSINESS CENTER DR CITY: TUCSON STATE: AZ ZIP: 85705 8-K/A 1 AMENDMENT NO. 1 TO FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A Amendment No. 1 (Amending Items 7(a), 7(b) and 7(c)) CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): October 14, 1998 VENTANA MEDICAL SYSTEMS, INC. (Exact name of registrant as specified in its charter) Delaware 2-20931 94-2976937 (State or other (Commission (IRS Employer jurisdiction of File Number) Identification incorporation) No.) 3865 North Business Center Drive Tucson, Arizona 85705 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (520) 887-2155 This Amendment No. 1 to Form 8-K supplements the Form 8-K filed on October 28, 1998 by the Company. At the time of the filing of the Form 8-K, it was impracticable for the Company to provide the financial statements of the business acquired and the pro forma financial information required by Items 7(a) and 7(b). Item 7. Financial Statements and Exhibits (a) Audited Financial Statements as of April 30, 1998 and 1997 of Biotechnology Tools, Inc. Unaudited Interim Financial Statements as of and for the five months ended September 30, 1998 of Biotechnology Tools, Inc. (b) Pro forma Financial Information Included in this Report is the following pro forma financial information: 1. Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 1998. 2. Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 1997. 3. Unaudited Pro Forma Condensed Consolidated Statement of Operations for the nine months ended September 30, 1998. 4. Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements. (c) Exhibits 23.1 Consent of Kempisty and Company. Item 7(a) Board of Directors and Stockholders Biotechnology Tools, Inc. We have audited the accompanying balance sheets of Biotechnology Tools, Inc. (Formerly Research and Manufacturing Company Inc.) as of April 30, 1998 and 1997, and the related statements of operations, shareholders' equity and cash flows for each of the two years in the period ended April 30, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted the audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements 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 audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Biotechnology Tools, Inc. as of April 30, 1998 and 1997, and the results of its operations, shareholders' equity and cash flows for each of the two years in the period ended April 30, 1998 in conformity with generally accepted accounting principles. Kempisty & Company Certified Public Accountants PC New York, New York August 20, 1998 BIOTECHNOLOGY TOOLS, INC. (FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.) FINANCIAL STATEMENTS YEAR ENDED APRIL 30, 1996 CONTENTS Report of Independent Auditors 1 Financial Statements Balance Sheets 2 Statements of Operations 4 Statements of Stockholders' Equity 5 Statements of Cash Flows 6 Notes to Financial Statements 7-12 BIOTECHNOLOGY TOOLS, INC. (FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.) BALANCE SHEETS April 30, 1998 1997 ASSETS Current Assets Cash $ 1,782 $ 11,182 Accounts receivable (net of allowance for doubtful accounts of $55,000 in 1997 and 1998) 826,566 462,528 Due from factor (Note 3) 97,635 15,965 Inventories (Note 5) 1,374,519 1,607,399 Total Current Assets 2,300,502 2,097,074 Property, plant and equipment Furniture and fixtures 118,790 118,120 Machinery and equipment 348,640 343,640 467,430 461,760 Less accumulated depreciation and amortization (460,731) (449,099) 6,699 12,661 Inventories - noncurrent (Note 5) 144,286 168,733 Other Assets Deposits receivable 32,172 13,110 Employee advances 2,066 - Total Other Assets 34,238 13,110 TOTAL ASSETS $2,485,725 $2,291,578 See notes to financial statements BIOTECHNOLOGY TOOLS, INC. (FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.) BALANCE SHEETS April 30, 1998 1997 LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Bank overdraft $66,590 $ - Accounts payable 852,998 938,012 Accrued expenses 300,902 297,829 Debentures payable (Note 6) 63,705 229,705 Taxes payable 25,860 16,500 Deferred revenue 142,131 150,731 Due to affiliates 113,920 111,620 Due to officers (Note 4) 440,578 446,453 Advance from Sherwood Medical 355,580 355,580 Total Current Liabilities 2,362,264 2,546,430 Commitments (Note 9) Stockholders' Equity Common stock, $.001 par value, 20,000,000 shares authorized, 3,789,100 and 3,789,100 shares issued and outstanding (Note 9) 3,789 3,789 Subscriptions receivable (2,345) (2,345) Preferred stock $.01 par value, 1,000,000 shares authorized, no shares issued or outstanding - - Additional paid-in capital 1,020,699 1,020,699 Retained earnings (deficit) (898,682) (1,276,995) Total Stockholders' Equity 123,461 (254,852) TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $2,485,725 $2,291,578 See notes fo financial statements BIOTECHNOLOGY TOOLS, INC. (FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.) STATEMENTS OF OPERATIONS April 30, 1998 1997 Net sales $5,384,611 $4,909,478 Cost of goods sold 2,941,369 2,745,855 Gross margin 2,443,242 2,163,623 Operating expenses: Selling, general and administrative 1,990,115 3,151,176 Interest 98,700 208,847 Total operating expenses 2,088,815 3,360,023 Income (loss) from operations 354,427 (1,196,400) Other income (expense) - - Gain on sale of building - 628,559 Interest income 162 85 Gain on extinguishment of debt 10,724 425,804 Gain on sale of equipment 13,000 - Income (loss) before income taxes 378,313 (141,952) Income taxes (Note 8) - - Income (loss) from continuing operations 378,313 (141,952) Net income (loss) 378,313 (141,952) Net income (loss) per common share $ 0.10 $ (0.04) Average number of common shares 3,789,100 3,904,742 Dividends per common share $ - $ - See notes to financial statements. BIOTECHNOLOGY TOOLS, INC. (FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.) STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock Additional Retained ($.001) Par Value Paid-In Subscription Earnings Shares Amount Capital Receivable (Deficit) Total Balance April 30, 1996 4,101,762 $4,102 $1,099,492 $(2,500) $(1,213,994) $(112,900) Cancellation of stock issued for services (157,900) (158) (78,793) - 78,951 0 Cancellation of stock issued for subscription receivable (154,762) (155) - 155 - 0 Net loss - - - - (141,952) (141,952) Balance April 30, 1997 3,789,100 3,789 1,020,699 (2,345) (1,276,995) (254,852) Net income - - - - 378,313 378,313 Balance April 30, 1998 3,789,100 $3,789 $1,020,699 $(2,345) $(898,682) $123,461
See notes to financial statements. BIOTECHNOLOGY TOOLS, INC. (FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.) STATEMENTS OF CASH FLOWS April 30, 1998 1997 Cash Flows From Operating Activities: Net income (loss) $378,313 $(141,952) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 11,632 58,977 Gain on cancellation of debt (10,724) (425,804) Gain on sale of fixed assets - (628,558) Changes in operating assets and liabilities: Accounts receivable - trade (364,038) (81,729) Income tax receivable - 57,757 Due from factor (81,670) 151,041 Due from affiliates 2,300 130,242 Inventories 257,327 212,398 Other assets (21,128) 142,880 Accounts payable and accrued expenses (15,351) (890,534) Income taxes payable 9,360 16,500 Due to officers (5,875) 437,693 Other liabilities (8,600) (13,116) Cash provided by operating activities 151,546 (974,205) Cash Flow From Investing Activities: Sale of property, plant and equipment (5,670) 1,750,134 Cash used in investing activities (5,670) 1,750,134 Cash Flows From Financing Activities: Principal payment of long term debt (155,276) (810,361) Cash used in financing activities (155,276) (810,361) Net decrease in cash (9,400) (34,432) Cash, beginning of the year 11,182 45,614 Cash, end of the year $ 1,78 $ 11,182 Supplementary cash flow information: Taxes paid $ - $ - Interest paid $90,000 $ 82,000 See notes to financial statements. BIOTECHNOLOGY TOOLS, INC. (FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.) NOTES TO FINANCIAL STATEMENTS APRIL 30, 1998 1. - DESCRIPTION OF BUSINESS Biotechnology Tools, Inc. (BTI or the Company) a Delaware Corporation (formerly Research and Manufacturing Company, Inc.) manufactures and markets a wide range of microtome products, cryogenic hardware and peripheral equipment, primarily for research and educational insitutions in the United States, Europe and the Far East. 2. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Revenue Recognition Sales are recorded when goods are shipped and profit is recognized at that time. Revenue from service contracts is deferred and taken into income on a straight-line basis over the period of the contract. b. Inventories Inventories are stated at the lower of cost or market. Cost is computed on the first-in, first- out basis. A certain portion of the Company's inventories consists of parts maintained solely for the repair and/or replacement of finished products previously sold. However, management cannot predict the anticipated future demand or usage for such inventories. These parts are classified as inventory - noncurrent. c. Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the related assets as follows: Leasehold improvements life of lease Furniture and fixtures 7 years Machinery and equipment 5 years Expenditures for major renewals and betterments are capitalized while repairs and maintenance are expensed. d. Research and Development Costs For financial reporting purposes, all costs of research and development activities are expensed as incurred. BIOTECHNOLOGY TOOLS, INC. (FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.) NOTES TO FINANCIAL STATEMENTS APRIL 30, 1998 e. Income Taxes The Company accounts for income taxes using the liability method. Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws expected to be in effect when the differences are expected to reverse. Valuation allowances are established when necessary to reduce the carrying amount of deferred tax assets to their net realizable value. f. Use of Estimates The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses, during the reporting period. Actual results could differ from those estimates. g. Fair Value of Financial Instruments The Company's cash and accounts receivable represent financial instruments as defined by Statement of Financial Accounting Standards No. 107, Disclosures About Fair Value of Financial Instruments. The carrying value of these financial instruments is a reasonable approximation of fair value, due to their current maturities. h. Net Income (Loss) Per Share Net income (loss) per common share is based upon the weighted average number of common shares outstanding during the periods presented. 3. - RECEIVABLES The Company sells some of its commercial credit accounts to a factor. Under the agreement, the Company sells the receivables at a discount and when the receivable is paid the discount is rebated to the Company less a fee based upon the length of time the receivable is outstanding. At April 30, 1997, and April 30, 1998, the outstanding balance of commercial credit accounts sold to the factor was approximately $258,180 and $517,400 respectively. The Company has provided an allowance for doubtful accounts of $55,000 at April 30, 1997 and 1998, which is believed to adequately BIOTECHNOLOGY TOOLS, INC. (FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.) NOTES TO FINANCIAL STATEMENTS APRIL 30, 1998 4. - LIQUIDITY The Company's current liabilities exceed current assets at April 30, 1998 by $ 61,762. In addition, the Company is currently in default on its' debentures payable. However, current liabilities include $440,578 of deferred payroll due to officers with no definite payback period, but is classified as current for financial statement purposes. Although management believes that cash generated from operations should provide the necessary working capital to sustain the business in the short-term, there can be no assurance that the Company may not experience adverse market conditions or other unfavorable events. 5. - INVENTORIES Inventories consist of the following: April 30, 1998 1997 Raw materials and components $1,123,702 $1,243,974 Work in process 172,932 341,022 Finished goods 222,171 191,136 Total inventories 1,518,805 1,776,132 Less amount classified as noncurrent 144,286 168,733 Current portion $ 1,374,519 $ 1,607,399 Inventory of $144,286 and $168,733 at April 30, 1998 and 1997, respectively, shown on the balnace sheet as a noncurrent asset, represents that portion of the inventory that is not expected to be sold currently. BIOTECHNOLOGY TOOLS, INC. (FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.) NOTES TO FINANCIAL STATEMENTS APRIL 30, 1998 6. - DEBENTURES PAYABLE 1998 1997 Subordinated debentures, maturing on July 1, 1996, quarterly principal payments plus interest at 12%. This debt is in default as of October 26, 1994 and is classified as currently payable. $63,705 $63,705 7. - INCOME TAXES Income taxes included in the Statements of Operations consist principally of federal and state income taxes. The provisions for income taxes for the fiscal years ended April 30, 1998 and 1997 are as follows: 1998 1997 Current: Federal $ - $ - State - - Total $ 0 $ 0 The tax provision differs from the amounts computed using the statutory federal income tax rate as follows: 1998 1997 Provision (benefit) at statutory federal income tax rate 35.0% (35.0%) Provision (benefit) - state income tax 5.9 (5.9) Utilization of net operating loss carryforward (40.9) - Establishment of net operating loss carryforwards - 40.9 0 0 The significant components of net deferred tax assets and liabilities as of April 30, are as follows: 1998 1997 Accrued liabilities and other 168,000 160,000 Valuation allowance (168,000) (160,000) Total deferred tax asset 0 0 BIOTECHNOLOGY TOOLS, INC. (FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.) NOTES TO FINANCIAL STATEMENTS APRIL 30, 1998 8. - COMMITMENTS The Company has entered into a lease agreement for office space. The lease expires in December 1999. Additionally, the Company subleases shipping and warehouse space from an affiliate on a month to month basis. Rental expense under the operating lease and sublease for the fiscal year ended April 30, 1998 was $77,577. Remaining commitments under the lease mature as follows: Year ending April 30, Amount 1999 $ 78,107 2000 54,886 $ 132,993 9.- COMMON STOCK During 1997, the Company cancelled 157,900 shares of common stock previously issued to a consultant. The shares were cancelled for non-performance of the service contracted. Additionally, 154,762 shares of common stock subscribed to by a former officer were cancelled for not meeting the terms of the subscription agreement. 10. - RELATED PARTY TRANSACTIONS In 1998 the Company paid Biomatics, owned by its President David E. Simpson, approximately $47,700 for services provided to the Company by Biomatics in a prior year. The Company currently rents shipping and warehouse space from Denvu LLC, a company owned by it's Chairman and President on a month to month basis. The rent expense paid and accrued to Denvu during 1998 amounted to $9,200. The Company bills Denvu for use of its office supplies, shipping services, equipment and certain employees' time plus administrative overhead for measured services performed for Denvu. These charges amounted to approximately $82,000 for 1998 . Additionally, Denvu reimbursed the Company approximately $85,000 for payroll services performed by the Company. The above charges and reimbursement were recorded as an offset to the various expenses on the Company's books and have no effect on reported revenues and expenses or result in any income or loss. The Company purchases equipment and services related to its cryogenic product line from a company owned by the son of its Chairman. These purchases in 1998 and 1997 amounted to approximately $90,000 and $62,000 respectively. BIOTECHNOLOGY TOOLS, INC. (FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.) NOTES TO FINANCIAL STATEMENTS APRIL 30, 1998 11. - CONCENTRATION OF CREDIT RISK Trade receivables potentially subject the Company to credit risk. The Company extends credit to its customers based upon an evaluation of the customer's financial condition and credit history and generally does not require collateral. The Company has historically incurred minimal credit losses The Company's broad range of customers include two of which account for a significant percentage of sales volume, as follows: 1998 1997 Fisher Scientific 25 19 Nippon Automatic Control 6 11 12. - SUBSEQUENT EVENTS Deferred Savings Plan Under section 401(k) of the Internal Revenue Code of 1986, the Board of Directors adopted, effective May 1, 1998, a tax-qualified deferred compensation plan for employees of the Company. Participants may make contributions which defer up to 20% of their total salary, up to a maximum for fiscal 1999 of $10,000. The Company may, at its sole discretion, make cash contributions each plan year in amounts which match up to 100% of the salary deferred by the participants. BIOTECHNOLOGY TOOLS, INC. (FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.) FINANCIAL STATEMENTS FIVE MONTHS ENDED SEPTEMBER 30, 1998 Accountants' Review Report Board of Directors and Stockholders Biotechnology Tools, Inc. We have reviewed the accompanying balance sheet of Biotechnology Tools, Inc. (Formerly Research and Manufacturing Company Inc.) as of September 30, 1998, and the related statements of operations, shareholders' equity and cash flows for the five months then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. All information included in these financial statements is the representation of the management of Biotechnology Tools, Inc. A review consists principally of inquiries of Company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with generally accepted accounting principles. Kempisty & Company Certified Public Accountants PC New York, New York December 10, 1998 BIOTECHNOLOGY TOOLS, INC. (FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.) BALANCE SHEET SEPTEMBER 30, 1998 ASSETS Current Assets Cash $ 2,700 Accounts receivable (net of allowance for doubtful accounts of $141,160) 431,762 Due from factor (Note 3) 110,517 Interest receivable from officers 281,814 Inventories (Note 5) 1,521,354 Prepaid expenses 11,878 Total Current Assets 2,360,025 Property, plant and equipment Furniture and fixtures 118,790 Machinery and equipment 422,037 540,827 Less accumulated depreciation and amortization (469,244) 71,583 Inventories - noncurrent (Note 5) 169,039 Other Assets Deferred taxes 525,000 Deposits receivable 23,278 Total Other Assets 548,278 TOTAL ASSETS $ 3,148,925 See notes to financial statements. BIOTECHNOLOGY TOOLS, INC. (FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.) BALANCE SHEET SEPTEMBER 30, 1998 LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Bank overdraft $ 49,146 Accounts payable 835,590 Accrued expenses 306,926 Payroll taxes payable 34,692 Customer prepayments 42,525 Debentures payable 63,705 Taxes payable 25,860 Deferred revenue 135,858 Due to affiliates 73,013 Due to officers 440,578 Advance from Sherwood Medical 200,000 Note payable Ventana Medical 200,000 Other 13,383 Capital lease obligations-current portion 10,797 Total Current Liabilities 2,432,073 Capital lease obligations (non-current) 53,649 Commitments (Note 8) Stockholders' Equity Common stock, $.001 par value, 20,000,000 shares authorized, 3,789,100 shares issued and outstanding 3,789 Subscriptions receivable (1,172,619) Preferred stock $.01 par value, 1,000,000 shares authorized, no shares issued or outstanding - Additional paid-in capital 2,190,973 Retained earnings (deficit) (358,940) Total Stockholders' Equity 663,203 TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 3,148,925 See notes to financial statements. BIOTECHNOLOGY TOOLS, INC. (FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.) STATEMENT OF OPERATIONS FOR THE FIVE MONTHS ENDED SEPTEMBER 30, 1998 Net sales $ 2,129,106 Cost of goods sold 1,278,443 Gross margin 850,663 Operating expenses: Selling, general and administrative 1,290,936 Interest 30,408 Total operating expenses 1,321,344 Income (loss) from operations (470,681) Other income (expense): Interest income 281,910 Gain on extinguishment of debt 196,013 Gain on sale of equipment 7,500 Income (loss) before income taxes 14,742 Income tax benefit 525,000 Net income (loss) $ 539,742 Net income (loss) per common share $ 0.14 Average number of common shares 3,789,100 Dividends per common share $ - See notes to financial statements.
BIOTECHNOLOGY TOOLS, INC. (FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.) STATEMENT OF STOCKHOLDERS' EQUITY FOR THE FIVE MONTHS ENDED SEPTEMBER 30, 1998 Common Stock Additional Retained ($.001) Par Value Paid-In Subscription Earnings Shares Amount Capital Receivable (Deficit) Total Balance April 30, 1998 3,789,100 $ 3,789 $ 1,020,699 $ (2,345) $ (898,682) $ 123,461 Increase in stock subscription - - 1,170,274 (1,170,274) - 0 Net income - - - - 539,742 539,742 Balance September 30, 1998 3,789,100 $ 3,789 $2,190,973 $(1,172,619) $(358,940) $ 663,203
See notes to financial statements. BIOTECHNOLOGY TOOLS, INC. (FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.) STATEMENT OF CASH FLOWS FOR THE FIVE MONTHS ENDED SEPTEMBER 30, 1998 Cash Flows From Operating Activities: Net income $539,742 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 8,513 Increase in allowance for doubtful accounts 86,160 Increase in reserve for obsolete inventory 41,480 Gain from debt extinguishment (196,013) Income tax benefit (525,000) Changes in operating assets and liabilities: Decrease in accounts receivable - trade 349,077 (Increase) in due from factor (12,882) (Increase) in interest receivable from officers (281,814) (Increase) in inventories (213,068) (Increase) in prepaid expenses (11,878) Decrease in other assets 10,960 (Decrease) in bank overdraft (17,444) (Decrease) in accounts payable and accrued expenses (11,384) Increase in payroll taxes payable 34,692 Increase in customer prepayments 42,525 (Decrease) in deferred revenue (6,273) (Decrease) in due to affiliates (40,907) Increase in other liabilities 13,383 Cash used in operating activities (190,131) Cash Flows Used in Investing Activities: Equipment purchase (73,397) Cash used in investing activities (73,397) Cash Flows From Financing Activities: Loan from Ventana Medical 200,000 Capital lease financing 65,300 Principal payment on capital lease (854) Cash provided by financing activities 264,446 Net decrease in cash 918 Cash, beginning of the year 1,782 Cash, end of the year $2,700 Supplementary cash flow information: Taxes paid $ - Interest paid $30,408 See notes to financial statements. BIOTECHNOLOGY TOOLS, INC. (FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1998 1. DESCRIPTION OF BUSINESS Biotechnology Tools, Inc. (BTI or the Company) a Delaware Corporation (formerly Research and Manufacturing Company, Inc.) manufactures and markets a wide range of microtorne products, cryogenic hardware and peripheral equipment, primarily for research and educational institutions in the United States, Europe and the Far East. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Revenue Recognition Sales are recorded when goods are shipped and profit is recognized at that time. Revenue from service contracts is deferred and taken into income on a straight-line basis over the period of the contract. b. Inventories Inventories are stated at the lower of cost or market. Cost is computed on the first-in, first-out basis. A certain protion of the Company's inventories consists of parts maintained solely for the repair and/or replacement of finished products previously sold. However, management cannot predict the anticipated future demand or usage for such inventories. these parts are classified as inventory - noncurrent. c. Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the related assets as follows: Leasehold improvements life of lease Furniture and fixtures 7 years Machinery and equipment 5 years Expenditures for major renewals and betterments are capitalized while repairs and maintenance are expensed. d. Research and Development Costs For financial reporting purposes, all costs of research and development activities are expensed as incurred. For the five months ended September 30, 1998 the Company expensed approximately $69,000 for research and development. e. Income Taxes The Company accounts for income taxes using the liability method. Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws ezpected to be in effect when the differences are expected to reverse. Valuation allowances are established when necessary to reduce the carrying amount of deferred tax assets to their net realizable value. f. Use of Estimates The preparation of financial statements in accordance with generally accepted accounting principles requires managmeent to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses, during the reporting period. Actual results could differ from those estimates. g. Fair Value of Financial Instruments The Company's cash and accoutns receivable represent financial insturments as defined by Statement of Fiancial Accounting Standards No. 107, Disclosures About Fair Value of Fiancial Instruments. The carrying value of these financial instruments is a reasonable approximation of fair value, due to their current maturities. h. Net Income (Loss) Per Share Net income (loss) per common share is based upon the weighted average number of common shares outstanding during the periods presented. 3. - RECEIVABLES The Company sells some of its commercial credit accounts to a factor. Under the agreement, the Company sells the receivables at a discount and when the receivable is paid the discount is rebated to the Company less a fee based upon the length of time the receivable is outstanding. At September 30, 1998, the outstanding balance of commercial credit accounts sold to the factor was approximately $577,000. The Company has provided an allowance for doubtful accounts of $141,160 at September 30, 1998, which is believed to adequately cover its credit risk related to its accounts receivable. BIOTECHNOLOGY TOOLS, INC. (FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.) NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1998 4. - LIQUIDITY The Company's current liabilities exceed current assets at September 30, 1998 by $72,048. In addition, the Company is currently in default on its' debentures payable. However, current liabilities include approximately $425,000 of deferred payroll due to officers with no definite payback period, but is classified as current for financial statement purposes. Although management believes that cash generated from operations should provide the necessary working capital to sustain the business in the short-term, there can be no assurance that the Company may not experience adverse market conditions or other unfavorable events. During August 1998 the Company and Ventana Acquisitions Corporation ("VAC") signed a definitive agreement of merger to be effective October 15, 1998. At the same time the parent of VAC lent the Company $200,000. 5. - INVENTORIES Inventories at September 30, 1998 consist of the following: Raw materials and components $1,362,595 Work in process 396,558 Finished goods 194,891 Reserve for obsolete inventory (263,651) Total inventories 1,690,393 Less amount classified as noncurrent 169,039 Current portion $1,521,354 Inventory of $169,039 at September 30, 1998, shown on the balance sheet as a noncurrent asset, represents that portion of the inventory that is not expected to be sold currently. BIOTECHNOLOGY TOOLS, INC. (FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.) NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1998 6. - DEBENTURES PAYABLE 1998 Subordinated debentures, maturing on July 1, 1996, quarterly principal payments plus interest at 12%. This debt is in default as of October 26, 1994 and is classified as currently payable. $63,705 7. - INCOME TAXES The provision (benefit) for income taxes consisted of the following (in thousands): Five months ended September 30, 1998 Current: Federal $125 State 18 Deferred: Federal (585) State (83) $(525) The reconciliation of reported income tax expense to the amount of income tax expense that would result from applying domestic federal statutory tax rates to pretax income is as follows (in thousands): Five month ended September 30, 1998 Statutory federal income tax $5 State income tax-net of federal benefit 1 Valuation allowance change (531) $(525) BIOTECHNOLOGY TOOLS, INC. (FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.) NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1998 7. - INCOME TAXES (continued) The components of deferred tax assets and liabilities were as follows (in thousands): September 30, 1998 Deferred tax assets: Net operating loss carryforward $ 273 Officers deferred compensation 170 Inventory reserves 105 Accounts receivable reserve 56 Other liabilities and reserves 48 Total deferred assets $ 652 Deferred tax liabilities: Disqualification of disc $ 127 Net deferred tax assets $ 525 SFAS No. 109 requires a valuation allowance to be recorded when it is more likely than not that some or all of the deferred tax assets will not be realized. At April 30, 1998, a valuation allowance for the full amount of the net deferred tax asset was recorded because of pre-1998 losses and uncertainties as to the amount of taxable income that would be generated in future years. Due in large part to cost reductions, the Company's taxable income has increased substantially. In the current period, management determined that it was more likely than not that future taxable income would be sufficient to enable the Company to realize all of its deferred tax assets. Accordingly, no valuation allowance has been recorded at September 30, 1998. 8. - COMMITMENTS The Company has entered into a lease agreement for office space. The lease expires in December 1999. Additionally, the Company subleases shipping and warehouse space from an affiliate on a month to month basis. Rental expense under the operating lease and sublease for the five months ended September 30, 1998 was $39,415. Remaining commitments under the lease mature as follows: Twelve months ending September 30, Amount 1999 $ 80,746 2000 20,582 $ 101,328 BIOTECHNOLOGY TOOLS, INC. (FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.) NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1998 9. - RELATED PARTY TRANSACTIONS The Company currently rents shipping and warehouse space on a month to month basis from Denvu LLC, a company owned by it's Chairman and President. The rent expense paid and accrued to Denvu during the period amounted to $7,500. The Company bills Denvu for use of its office supplies, shipping services, equipment and certain employees' time plus administrative overhead for measured services performed for Denvu. These charges amounted to approximately $21,000 for the five months ended September 30, 1998. Additionally, Denvu reimbursed the Company approximately $109,000 for payroll services performed by the Company. The above charges and reimbursements were recorded as an offset to the various expenses on the Company's books, which neither effects reported revenues and expenses nor results in any income or loss. The Company purchases equipment and services related to its cryogenic product line from a company owned by the son of its Chairman. These purchases for the five months ended September 30, 1998 amounted to approximately $158,000. 10. - STOCK SUBSCRIPTION RECEIVABLE On September 29, 1994 certain officers of the Company agreed to purchase stock in the Company at $.50 per common share payable in five years at 6% interest per annum. Due to a decline in the value of the Company shortly thereafter, the Company changed the share purchase price to $.001 per share. As a result of the merger agreement the officers agreed to retroactively reinstate their original purchase price of $.50 per common share plus the 6% interest on the unpaid balance to October 14, 1998. The prior year financial statements have not been restated to reflect this change because notes payable plus accrued interest would have been fully reserved. The accrued interest receivable as of September 30, 1998 was $281,814 and the note receivable for the stock subscription was $1,172,619. 11. - CONCENTRATION OF CREDIT RISK Trade receivables potentially subject the Company to credit risk. The Company extends credit to its customers based upon an evaluation of the customer's financial condition and credit history and generally does not require collateral. The Company has historically incurred minimal credit losses. 12. - DEFERRED SAVINGS PLAN Under section 401(k) of the Internal Revenue Code of 1986, the Board of Directors adopted, effective May 1, 1998, a tax-qualified deferred compensation plan for employees of the Company. Participants may make contributions which defer up to 20% of their total salary, up to a maximum for fiscal 1999 of $10,000. The Company may, at its sole discretion, make cash contributions each plan year in amounts which match up to 100% of the salary deferred by the participants. Item 7(b) VENTANA MEDICAL SYSTEMS, INC. INTRODUCTION TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Ventana Medical Systems, Inc. ("Ventana") acquired Biotechnology Tools, Inc. ("Biotechnology") on October 14, 1998. The accompanying unaudited pro forma condensed consolidated balance sheet as of September 30, 1998 has been prepared as if the acquisition of Biotechnology had been consummated as of that date. The accompanying unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 1997 and for the nine months ended September 30, 1998 have been prepared as if the acquisition of Biotechnology had been consummated as of January 1, 1997. The pro forma information is based on the historical financial statements of Ventana and Biotechnology, giving effect to the transaction under the purchase method of accounting and the assumptions and adjustments described in the accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements. The pro forma information is not indicative of actual results that would have been achieved had the acquisition actually been completed as of the dates indicated, nor is it indicative of the future operating results or financial position of Ventana. The pro forma adjustments are based upon information and assumptions available at the time of filing this Form 8-K/A. The pro forma condensed consolidated financial statements should be read in conjunction with the historical financial statements of Ventana and the related notes thereto previously filed with the Securities and Exchange Commission and the historical financial statements of Biotechnology and the related notes thereto include elsewhere in this Form 8-K/A. VENTANA MEDICAL SYSTEMS, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET As of September 30, 1998 (in thousands) ASSETS
Ventana Biotechnology Pro Forma Pro Forma Historical Historical Adjustments As Adjusted Current assets: Cash and cash equivalents $17,275 $ 3 $(3,800)(1)(2) $13,478 Accounts receivable 11,581 542 - 12,123 Inventories 8,157 1,521 - 9,678 Other 3,073 294 (284)(2) 3,083 Total current assets 40,086 2,360 (4,084) 38,362 Property, plant and equipment, net 6,901 72 - 6,973 Intangibles, net 7,637 - 5,146(3) 12,783 Other assets - 717 (525)(4) 192 Total assets $54,624 $3,149 $ 537 $58,310 LIABILITIES, AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $2,374 $ 836 $ - $ 3,210 Other current liabilities 3,224 1,597 1,200(5) 6,021 Total current liabilities 5,598 2,433 1,200 9,231 Long term debt 1,826 53 - 1,879 Stockholders' equity (deficit) Common stock 13 4 (4)(6) 13 Additional paid in capital 78,148 2,191 (2,191)(6) 78,148 Subscriptions receivable - (1,173) 1,173(2) - Accumulated deficit (30,532) (359) 359(6) (30,532) Accumulated other comprehensive losses (429) - - (429) Total stockholders' equity (deficit) 47,200 663 (663) 47,200 Total liabilities and stockholders' equity $54,624 $3,149 $ 537 $ 58,310
See accompanying notes. VENTANA MEDICAL SYSTEMS, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS For the Year Ended December 31, 1997 (in thousands, except per share data) Ventana Biotechnology Pro Forma Pro Forma As Historical Historical(1) Adjustments Adjusted Net sales $32,153 $5,226 $ - $37,379 Cost of goods sold 11,138 2,876 - 14,014 Gross profit 21,015 2,350 23,365 Operating expenses: Research and development 3,050 192 - 3,050 Selling, general and administrative 16,953 2,185 - 19,330 Nonrecurring expenses 1,656 - - 1,656 Amortization of intangibles 509 - 343(6) 852 Loss from operations (1,153) (27) (343) (1,523) Interest (expense) income 781 (136) (190)(2) 455 Other income - 645 (645)(3) - Net (loss) income $ (372) $ 482 $(1,178) $ (1,068) Net loss per share basic and diluted $ (.03) $ (.08) Weighted average shares outstanding 12,778 12,778 See accompanying notes. VENTANA MEDICAL SYSTEMS, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS For the Nine Months Ended September 30, 1998 (in thousands, except per share data) Ventana Biotechnology Pro Forma Pro Forma As Historical Historical(1) Adjustments Adjusted Net sales $33,045 $3,924 $ - $36,969 Cost of goods sold 10,233 2,259 - 12,492 Gross profit 22,812 1,665 - 24,477 Operating expenses: Research and development 4,026 133 - 4,159 Selling, general and administrative 16,220 1,822 - 18,042 Amortization of intangibles 382 - 257(6) 639 Income (loss) from operations 2,184 (290) (257) 1,637 Interest (expense) income 1,066 219 (425)(4)(2) 860 Other income - 736 (736)(5) - Net income (loss) $ 3,250 $ 665 $(1,418) $ 2,497 Net income per share: Basic $ .24 $ .19 Diluted $ .22 $ .17 Weighted average shares outstanding: Basic 13,301 13,301 Diluted 14,691 14,691 See accompanying notes. VENTANA MEDICAL SYSTEMS, INC. NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share data) The Company acquired Biotechnology for $6,457 on October 14, 1998. The pro forma condensed consolidated balance sheet reflects the Company's financial position as if it had acquired Biotechnology on September 30, 1998. The pro forma results of operations reflect the Company's operations as if it had acquired Biotechnology on January 1, 1997. The acquisition has been accounted for as a purchase. The composition of the consideration paid for Biotechnology and the allocation of the purchase price is presented below: The purchase price for Biotechnology consisted of: Cash consideration $3,800 Offset for amounts due from management shareholders 1,457 Escrow for contingencies 1,200 Total purchase price $6,457 The purchase price was allocated as follows: Tangible net assets $1,311 Goodwill and other intangibles 5,146 $6,457 The purchase price allocation shown above is preliminary and subject to change. Intangible assets consist primarily of goodwill, which is amortized over the estimated useful life of 15 years. Balance Sheet Adjustments (1) Reflects the payment by Ventana of $5,257 of cash consideration to Biotechnology shareholders. (2) Reflects the receipt of $1,457 in cash from Biotechnology shareholders for stock subscription and related accrued interest income receivables. (3) Reflects the goodwill resulting from the purchase of Biotechnology, amortizable over 15 years. The amount allocated to goodwill is preliminary and subject to change. (4) Reflects the establishment of a valuation allowance for Biotechnology's deferred tax assets. (5) Reflects the contingent consideration payable to Biotechnology's shareholders in connection with the purchase by Ventana. (6) Reflects the elimination of Biotechnology's equity accounts as of the balance sheet date, after giving effect to the transactions noted in (2) and (4) above. Statement of Operations Adjustments (1) Biotechnology's historical fiscal year ends on April 30. Biotechnology's historical results of operations have been adjusted to a calendar year basis to conform with the reporting period of Ventana. (2) To record the forgone interest income from the net cash used to purchase Biotechnology ($190 in 1997, $143 for nine months ended September 30, 1998). (3) Biotechnology's historical results included a gain on the sale of a building. As such non- recurring gain is not indicative of the operations of the combined entity, it has been deducted in computing pro-forma income. (4) Biotechnology's historical results included interest income recognized on stock subscriptions receivable from certain officers. Such income is not indicative of the operations of the combined entity and has therefore been deducted in computing pro-forma income. (5) Biotechnology's historical results included gains on extinguishment of debt and the sale of equipment ($211) and the recognition of deferred tax assets ($525). Such other income is not indicative of the operations of the combined entity and has therefore been deducted in computing pro-forma income. (6) To record the amortization of goodwill (15 year life) established in connection with the Biotechnology purchase. 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. Dated: December 28, 1998 VENTANA MEDICAL SYSTEMS, INC. By: /s/ Pierre Sice --------------------------------------- Pierre Sice Vice President, Chief Financial Officer, Treasurer and Secretary EX-23.1 2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our report on the financial statements of Biotechnology Tools, Inc., dated August 20, 1998 included in this Amendment No. 1 to Form 8-K, and in Form S-8 (No. 333-16707) pertaining to the 1996 Stock Option Plan, 1996 Director Option Plan, 1988 Stock Option Plan and 1996 Employee Stock Purchase Plan of Ventana Medical Systems, Inc. /s/ Kempisty & Company Kempisty & Company New York, New York December 28, 1998 -----END PRIVACY-ENHANCED MESSAGE-----