SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: August 7, 1995
GOLDEN PHARMACEUTICALS, INC.
(Exact Name of Registrant as Specified in Charter)
Colorado
(State of
Incorporation)
0-9065
(Commission
File Number)
84-0645174
(IRS Employer
Identification Number)
1313 Washington Avenue, Golden, Colorado 80401
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (303) 279-9375
Not Applicable
(Former Name or Former Address, if Change Since Last Report)
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
Please see Exhibit A attached hereto.
(b) Pro Forma Financial Information.
Please see Exhibit B attached hereto.
(c) Exhibits.
None.
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
GOLDEN PHARMACEUTICALS, INC.
Date: October 20, 1995 By:
Glen H. Weaver, Vice President
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by
the undersigned thereunto duly authorized
GOLDEN PHARMACEUTICALS, INC.
Date: October 20, 1995 By: /s/ Glen H. Weaver
Glen H. Weaver, Vice President
EXHIBIT A
FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
QUALITY CARE PHARMACEUTICALS, INC.
December 31, 1994
1660 Lincoln Street
Denver, CO 80264-2601
303 861-5555
FAX 303 831-4646
Grant Thornton
GRANT THORNTON LLP Accountants and
Management Consultants
The U.S. Member Firm of
Grant Thornton
International
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Quality Care Pharmaceuticals, Inc.
We have audited the accompanying balance sheets
of Quality Care Pharmaceuticals, Inc. as of
December 31, 1994 and 1993 and the related
statements of operations, changes in
stockholders' equity and cash flows for the
years ended December 31, 1994, 1993 and 1992.
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 our 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
Quality Care Pharmaceuticals, Inc. as of
December 31, 1994 and 1993 and the results of
its operations and cash flows for the years
ended December 31, 1994, 1993 and 1992, in
conformity with generally accepted accounting
principles.
Grant Thornton LLP
Denver, Colorado
June 2, 1995
FINANCIAL STATEMENTS
Quality Care Pharmaceuticals, Inc.
BALANCE SHEETS
December 31,
1994 1993
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 11,707 $ 20,543
Accounts receivable - trade
less allowance for doubtful
accounts of $962 and $2,046
for 1994 and 1993,
respectively 728,513 811,801
Inventories (note A2) 367,530 275,390
Prepaid expenses 34,592 41,915
Total current assets 1,142,342 1,149,649
PROPERTY AND EQUIPMENT - AT COST (note A3)
Furniture and fixtures 135,822 120,012
Warehouse and prod equipment 94,348 45,068
Leasehold improvements 77,380 61,632
307,550 226,712
Less accumulated depreciation
and amortization 92,266 58,501
215,284 168,211
OTHER ASSETS
Plant licensing - net of
accumulated amortization 63,340 67,346
$ 1,420,966 $ 1,385,206
The accompanying notes are an integral part of this
statement.
1994 1993
LIABILITIES
CURRENT LIABILITIES
Notes payable (note B) $ 649,121 $ 499,121
Current maturities of
long-term debt (note C) - 2,125
Accounts payable - trade 479,224 749,693
Accrued liabilities
Wages 32,140 26,163
Commissions 42,751 30,029
Regulatory fines - 46,258
Total cur. liabilities 1,203,236 1,353,389
COMMITMENTS AND CONT. (note D) - -
STOCKHOLDERS' EQUITY (note A1)
Common stock - authorized,
1,250,000 shares of no
par value; issued and
outstanding, 1,037,252
and 852,502 shares at
December 31, 1994 and 1993,
respectively 449,938 172,812
Accumulated deficit (232,208) (140,995)
217,730 31,817
$ 1,420,966 $1,385,206
Quality Care Pharmaceuticals, Inc.
STATEMENTS OF OPERATIONS
Year ended December 31,
1994 1993 1992
Net sales $ 4,930,542$ 4,179,728 $ 2,956,617
Cost of goods sold 3,451,602 3,005,852 2,217,014
Gross profit 1,478,940 1,173,876 739,603
Operating expenses
Sales and marketing 560,188 378,693 232,518
General and administrative 796,431 851,647 452,529
Relocation expense - 37,542 -
Compensation to organizers 138,409 15,060 -
Abandonment of computer
software/equipment - 136,054 -
1,495,028 1,418,996 685,047
Operating income (loss) (16,088) (245,120) 54,556
Other income (expense)
Interest expense (61,228) (29,179) (6,448)
Other (13,897) (3,036) 22,169
(75,125) (32,215) 15,721
NET INCOME (LOSS) $(91,213) $ (277,335) $70,277
The accompanying notes are an integral part of these
statements.
Quality Care Pharmaceuticals, Inc.
STATEMENTS OF STOCKHOLDERS' EQUITY
Year ended December 31, 1994, 1993 and 1992
Retained
earnings
Common stock
(accumulated Shares Amount
deficit) Total
Balance at January 1, 1992 $637,500 $5,000 $15,981 $20,981
Net income for the year - - 70,277 70,277
Dividends - - (18,162) (18,162)
Balance at December 31, 1992 637,500 5,000 68,096 73,096
Common stock issued
(note A1) 215,002 322,503 - 322,503
Offering costs - (86,447) - (86,447)
Net income (loss) for
the year - - (277,335) (277,335)
Transfer S corporation
accumulated deficit
to common stock upon
termination of S
corporation election - (68,244) 68,244 -
Balance at December 31, 1993 852,502 172,812 (140,995) 31,817
Issuance of common stock 184,750 277,126 - 277,126
Net income (loss) for
the year - - (91,213) (91,213)
Balance at
December 31, 1994$ 1,037,252 $449,938 $(232,208) $217,730
The accompanying notes are an integral part of these statements.
Quality Care Pharmaceuticals, Inc.
STATEMENTS OF CASH FLOWS
Year ended December 31,
1994 1993 1992
Cash flows from operating activities
Net income (loss) $ (91,213) $(277,335) $70,277
Adjustment to reconcile net income
(loss) to net cash provided by
operating activities
Depreciation and amortization 42,302 28,277 7,286
Writedown of computer equipment - 136,054 -
Common stock issued for
services and fees 138,409 6,653 -
Changes in assets and liabilities
Decrease (increase) in accounts
receivable 83,288 (172,456) (531,049)
(Increase) in inventories (92,140) (76,109) (167,982)
Decrease (increase) in prepaid
expenses 7,324 (26,048) 25
(Decrease) increase in accounts
payable (270,469) 170,789 460,201
(Decrease) increase in accrued
liabilities (27,559) 68,008 30,230
Total adjustments (118,845) 135,168 (201,289)
Net cash used in operating
activities (210,058) (142,167) (131,012)
Cash flows from investing activities
Purchase of fixed assets (85,369) (335,083) (88,261)
Proceeds from sale of fixed assets - 6,565 897
Net cash used in investing
activities (85,369) (328,518) (87,364)
The accompanying notes are an integral part of these statements.
Quality Care Pharmaceuticals, Inc.
STATEMENTS OF CASH FLOWS (CONTINUED)
Year ended December 31,
1994 1993 1992
Cash flows from financing activities
Payments on note payable $(651,246) $(306,479) $(75,291)
Borrowings on note payable 799,120 608,764 250,849
Proceeds from private placement
offering, net of issuance costs 138,717 236,056 -
Dividends paid - (18,162) -
Net change in bank overdraft - (28,951) 28,951
Net cash provided by
financing activities 286,591 491,228 204,509
NET (DECREASE) IN CASH AND
CASH EQUIVALENTS (8,836) 20,543 (13,867)
Cash and cash equivalents at
beginning of year 20,543 - 13,867
Cash and cash equivalents at
end of year $ 11,707 $ 20,543 $ -
Supplemental disclosures of cash
flow information
Cash paid during the year for
Interest $ 61,228 $ 29,179 $ 6,448
The accompanying notes are an integral part of these statements.
Quality Care Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1994 and 1993
NOTE A - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
A summary of the Company's significant accounting
policies consistently applied in the preparation of the
accompanying financial statements follows:
1. History and Business Activity
The Company purchases pharmaceutical drugs from
manufacturers and repackages them for sale into
single-user prescription size packages. The Company's
clients consist of private physicians, hospitals, group
practices, managed care programs, pharmacies and other
legally constituted medical facilities throughout the United
States.
On April 27, 1993 the Company filed a restated certificate
of incorporation effectively changing the name of the Company
to Quality Care Pharmaceuticals, Inc. and authorizing the
issuance of 1,250,000 shares of common stock.
In September, 1993, the existing shareholders of Physicians Remedy,
Inc. (PRI) contributed all issued and outstanding shares of common
stock in exchange for 637,500 shares of Quality Care Pharmaceuticals,
Inc. common stock. PRI common stock and Treasury stock were
canceled. This reorganization has been given retroactive treatment
in the financial statements.
During 1993 and 1994, 399,752 shares of common stock were
issued pursuant to a private placement. Of these shares, 300,000 were
issued for cash at $1.50 per share. The remaining 99,752 shares were
issued for cash of $.15 share and services of $1.35 per share. The shares
were actually issued in May, 1994, but have been considered to have been
issued as the consideration for the shares received.
Quality Care Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994 and 1993
NOTE A - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
2. Inventories
Inventories are stated at the lower of cost or market. Cost is determined
principally by the first-in, first-out method as follows:
1994 1993
Raw materials $ 307,320 $ 176,200
Finished goods 60,210 99,190
$ 367,530 $ 275,390
3. Depreciation and Amortization
Depreciation and amortization are provided for in amounts sufficient to
relate the cost of depreciable assets to operations over their estimated
useful lives. Leasehold improvements are amortized over the lives of the
respective leases or the service lives of the improvements, whichever is
shorter. The straight-line method of depreciation is followed for
substantially all assets for financial reporting purposes as follows:
Estimated
life
Furniture and fixtures 5 - 7
years
Warehouse and production equipment 7 years
4. Income Taxes
Income taxes are recorded using the liability method. Deferred income
taxes are provided for items which are reported for tax purposes in
different periods than in the financial statements.
Prior to the Company's reorganization, the Company was an S Corporation
for tax purposes. Income taxes on taxable earnings were payable personally
by the stockholders through the date of the reorganization.
Quality Care Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994 and 1993
NOTE A - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
5. Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid cash investments with an original maturity of three months or
less to be cash equivalents.
NOTE B - NOTES PAYABLE
The Company maintains a $650,000 bank line of credit. The credit line
is collateralized by inventories and trade accounts receivable. Borrowings
under the line of credit which bear interest at the prime rate plus 2.5% and
3% were $649,121 and $499,121 at December 31, 1994 and 1993,
respectively. The prime rate of interest was 8.5% at December 31, 1994.
The line-of-credit was originally due May 8, 1995. The Company
obtained an extension through July 16, 1995.
The bank note agreement has covenants requiring the Company to meet
certain financial ratios. As of December 31, 1994 and 1993, the
Company was not in compliance with certain covenants relating to the line
of-credit.
NOTE C - LONG-TERM DEBT
Long-term debt at December 31, 1993 consisted of:
Note payable to bank $2,125
Less current maturities 2,125
$ -
The note payable was due in monthly installments of $312.
Quality Care Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994 and 1993
NOTE D - COMMITMENTS AND CONTINGENCIES
The Company leases office and facility space, and equipment under
operating lease arrangements. Total lease payments were $76,675,
$63,602 and $42,060 for the years ended December 31, 1994, 1993 and
1992, respectively.
The minimum rental commitments under the noncancelable lease are as
follows:
Year ending December 31,
1995 $ 65,174
1996 62,115
1997 27,193
Total minimum payment
required $ 154,482
The Company operates and is licensed by the Federal Food and Drug
Administration (FDA), the State of California and the Drug Enforcement
Agency (DEA). The Company must comply with regulatory requirements
Should it violate such requirements, its ability to operate could be
suspended or terminated. Management believes it has the control system
and policies in place so that it will fully comply with regulatory requirements.
NOTE E - INCOME TAXES
The provision for income taxes differs from the amount determined by
applying the statutory rate to net income before taxes, due to the following
reasons:
1994 1993
Income tax expense (benefit) at
statutory rate $(35,000) $(106,000)
Tax effect of S corporation loss - 52,000
Compensation to organizers 52,500 -
Other - 30,500
17,500 (75,500)
Change in valuation allowance (17,500) 75,500
Income tax expense $ - $ -
Quality Care Pharmaceuticals, Inc.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1994 and 1993
NOTE E - INCOME TAXES (CONTINUED)
Net deferred taxes are comprised of the following:
1994 1993
Assets
Commissions accrued $ 10,000 $ 11,500
Salaries accrual 12,000 10,000
Net operating loss carryforward 36,000 54,000
58,000 75,500
Valuation allowance (58,000) (75,500)
$ - $ -
The Company has a net operating loss carryforward of approximately
$100,000 at December 31, 1994.
NOTE F - RELATED PARTY TRANSACTIONS
A shareholder of the Company controls a corporation which performs the
marketing and sales of the Company's products. Commissions paid for
services rendered were $286,319 and $239,637 in 1994 and 1993,
respectively. At December 31, 1994 and 1993, the Company owed this
corporation $26,231 and $30,029, respectively.
NOTE G - MAJOR CUSTOMERS
The Company had sales of approximately 13% of total sales to one
customer in 1994. No sales to one customer exceeded 10% in 1993 and
1992.
EXHIBIT B
PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS OF
GOLDEN PHARMACEUTICALS, INC. AND QUALITY
CARE PHARMACEUTICALS, INC.
The following pro forma consolidated financial statements of Golden
Pharmaceuticals, Inc. (Golden) and Quality Care Pharmaceuticals, Inc.
(Quality Care) for the year ended August 31, 1994 and for the nine-months
ended May 31, 1995 are presented as if the merger had occurred on
September 1, 1993. The pro forma consolidated balance sheet assumes the
merger occurred as of May 31, 1995. The merger is to be treated as a
purchase transaction.
The pro forma consolidated financial statements are derived from the
respective historical financial statements of Golden and Quality Care. The
pro forma balance sheet combines Golden's May 31, 1995 consolidated
balance sheet with Quality Care's May 31, 1995 balance sheet. The pro
forma consolidated statements of income combine Quality Care's historical
statement of earnings for the year ended December 31, 1994 and the nine-
month period ended May 31, 1995 with Golden's historical consolidated
statement of income for the year ended August 31, 1994 and the nine-month
period ended May 31, 1995. Accordingly sales and net income of Quality
Care for the period September 1, 1994 through December 31, 1994 of
$1,865,877 and $70,708 respectively have been included both as part of
the year and subsequent interim period.
The pro forma data is presented for informational purposes only and may
not be indicative of the future results of operations and financial position of
the Company or what the results of operations and financial position of the
Company would have been had the merger occurred immediately prior to
the periods indicated.
Assumptions underlying the pro forma adjustments are described in the
accompanying notes which should be read in conjunction with the
statements. These statements should also be read in conjunction with the
attached financial statements of Quality Care and notes thereto.
Golden Pharmaceuticals, Inc. And Subsidiary
Pro Forma Consolidated Balance Sheet
As of May 31, 1995
Historical
Golden Quality Care
Pharm.,Inc. Pharm., Inc. Debit Credit ProForma
Assets
Current Assets:
Cash $ 115,773 $ 84,491 $ 200,264
Accounts Rec. 292,832 920,347 60,000 1) 1,153,179
Inventories 66,573 478,128 544,701
Prepaid exp. 204,459 61,408 275,000 1) 428,511 1) 112,356
Deferred tax 434,243 0 434,243
Interco Rec. 11,000 0 11,000 3) 0
Note Rec. 165,000 0 165,000
Total Current Assets 1,289,880 1,544,374 275,000 499,511 2,609,704
Property, Plant & Equipment:
Land 148,000 0 148,000
Building and improv. 822,224 146,842 77,380 1) 891,686
Prod. machinery 416,654 262,033 678,687
Office furn. & fix 739,789 232,864 972,653
Vehicles 19,017 0 19,017
2,145,684 641,739 0 77,380 2,710,043
Less accumulated
depreciation (1,620,121) (121,389) 18,872 1) (1,722,635)
Total P,P&E 525,563 520,353 18,872 77,380 987,408
Goodwill 0 0 3,642,954 1) 3,642,954
Investment in Sub. 0 0
Deferred taxes-LT 65,757 65,757
Total Assets $ 1,881,200 $ 2,064,727 $ 3,936,826 $ 576,891 $ 7,305,862
Golden Pharmaceuticals, Inc. And Subsidiary
Pro Forma Consolidated Balance Sheet
As of May 31, 1995
Historical
Golden Quality Care
Pharm.,Inc. Pharm., Inc. Debit Credit ProForma
Liabilities and Stockholders' Equity
Current Liabilities:
Current maturities
long term debt $170,724 0 170,724 1) 80,000 1) $80,000
Credit line 0 649,121 649,121 1) 343,454 1) 343,454
Accounts payable 157,754 803,828 961,582
Lease payable 0 206,489 206,489
Interco payable 0 11,000 11,000 3) 0
Accrued exp. 52,582 114,504 16,5211) 150,565
Total Current
Liabilities 381,060 1,784,942 847,366 423,454 1,742,090
Long term debt 256,368 0 256,368 4,320,000 1) 4,320,000
Stockholders' Equity
Common stock 21,288,851 449,938 449,938 3) 21,288,851
Preferred stock 292,558 0 292,558
Dividends on PS 411,214 0 411,214
Accum deficit (20,748,851) (170,153) 170,153 3) (20,748,851)
Total Stockholder's
Equity 1,243,772 279,785 449,938 170,153 1,243,772
Total Liabilities
and Stockholders'
Equity $ 1,881,200 $ 2,064,727 $ 1,553,672 $ 4,913,607 $ 7,305,862
Golden Pharmaceuticals, Inc. And Subsidiary
Pro Forma Consolidated Statement of Income
For Nine Months Ended May 31, 1995
Historical
Golden Quality Care
Pharm.,Inc. Pharm., Inc. Debit Credit ProForma
Net Sales $ 2,721,860 $ 4,567,641 $7,289,201
Cost of Sales 1,246,520 3,242,385 4,488,905
Gross Margin 1,475,340 1,324,956 2,800,296
Selling, G&A 853,265 1,050,357 154,271 2) 2,057,893
Operating Income 622,075 274,599 154,271 0 742,403
Other Income/(expense)
Interest expense (41,642) (56,116) 408,223 2) 97,758 2) (408,223)
Other income 8,949 (1,648) 7,301
Total Other
Income/(Expense) (32,693) (57,764) 408,223 97,758 (400,922)
Income Before Income
Taxes and Extraordinary
Items 589,382 216,835 562,494 97,758 341,481
Income Tax
(Benefit)/Expense 7,006 0 0 0 7,006
Income Before
Extraordinary Items 582,376 216,835 562,494 97,758 334,475
Extraordinary Items
Settlement of trade a/p 99,677 99,677
Net Income $ 682,053 $ 216,835 $ 562,494 $ 97,758 $ 434,152
Pro Forma earnings per share $ *
Weighted average number of shares outstanding 107,382,020
* - less than $.01 per share
Golden Pharmaceuticals, Inc. And Subsidiary
Pro Forma Consolidated Statement of Income
For Year Ended August 31, 1994
Historical
Golden Quality Care
Pharm., Inc. Pharm., Inc.
FYE 8/31/94 FYE 8/31/94 Debit Credit ProForma
Net Sales $ 3,451,020 $ 4,930,542 $8,381,562
Cost of Sales 1,584,864 3,451,602 5,036,466
Gross Margin 1,866,15 1,478,940 3,345,096
Selling, G&A 1,037,502 1,495,028 182,148 2) 2,057,893
Operating Income 828,654 (16,088) 182,148 0 630,418
Other Income/(expense)
Interest expense (83,949) (61,228) 543,097 2) 145,177 2) (543,097)
Other income 7,847 (13,897) (6,050)
Total Other
Income/(Expense) (76,102) (75,125) 543,097 145,177 (549,1472)
Income Before Income
Taxes and Extraordinary
Items 752,552 (91,213) 725,245 145,177 81,271
Income Tax
(Benefit)/Expense (500,000) 0 0 0 (500,000)
Income Before
Extraordinary Items 1,252,552 (91,213) 725,245 145,177 581,271
Extraordinary Items
Settlement of trade a/p 76,560 76,560
Net Income $ 1,329,112 $ (91,213) $ 725,245 $ 145,177 $ 657,831
Pro Forma earnings per share $ *
Weighted average number of shares outstanding 76,754,249
* - less than $.01 per share
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS
Pro forma adjustments consist of the following:
1) Allocation of purchase price adjusting assets and recognizing
intangibles and revised debt structure.
2) Interest expense related revised debt structure and amortization of
goodwill on the straight line method over twenty years.
3) Elimination of Intercompany Accounts.
October 20, 1995
Securities and Exchange Commission
Filing Desk
450 Fifth Street, N.W.
Washington, D.C. 20549
Re:Golden Pharmaceuticals, Inc.
Ladies and Gentlemen:
Transmitted herewith for filing please find Golden Pharmaceuticals,
Inc.'s Amended Current Report on Form 8-K/A-1 dated August 7,
1995.
Should you have any comments, please do not hesitate to call the
undersigned at (303) 297-2400.
Sincerely,
Deborah A. Hogan