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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 5, 1999
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Escalon Medical Corp.
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(Exact name of registrant as specified in its charter)
California 0-20127 33-0272839
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
351 East Conestoga Road, Wayne, Pennsylvania 19087
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 688-6830
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N/A
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(Former name or former address, if changed since last report.)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On March 5, 1999, Escalon Medical Corp. (the "Registrant") consummated
transactions under a Bill of Sale and Acceptance Agreement between the
Registrant and Alcon Laboratories, Inc. ("Alcon Laboratories") and a Bill of
Sale and Acceptance Agreement between the Registrant and Alcon Universal, Ltd.
("Alcon Universal" and collectively with Alcon Laboratories, the "Buyers"),
pursuant to which:
(i) for a cash purchase price of $959,835, Alcon Laboratories purchased
all of the Registrant's inventory of 5% Betadine Sterile Ophthalmic Solution
("5% Betadine Solution"); and
(ii) for an aggregate purchase price of $1,100,000, the Registrant: (A)
transferred to Alcon Universal the Registrant's customer list for 5% Betadine
Solution; (B) terminated the Distribution and License Agreement dated August 31,
1995 between the Registrant, as assignee of EOI Corp. (formerly Escalon
Ophthalmics, Inc.), and The Purdue Frederick Company ("Purdue Frederick"),
pursuant to which the Registrant had the exclusive right to distribute 5%
Betadine Solution, in order to permit Purdue Frederick to enter into an
exclusive distribution agreement for 5% Betadine Solution with Alcon Universal;
and (C) agreed with Alcon Universal that the Registrant will not distribute or
sell 5% Betadine Solution in the United States for a period of five years after
the date of the Agreement.
No material relationship exists between (i) the Registrant and either
of the Buyers, (ii) any director or officer of the Registrant and any director
or officer of either of the Buyers or (iii) any associate of any director or
officer of the Registrant and any associate of any director or officer of either
of the Buyers. The purchase prices under the Agreements were determined by arms'
length negotiations between the Registrant and the Buyers.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
Not applicable.
(b) Unaudited Pro Forma Financial Information.
The following unaudited pro forma condensed consolidated financial
information has been prepared to reflect the transaction under a Bill of Sale
and Acceptance Agreement between the Registrant and Alcon Laboratories, Inc.
and a Bill of Sale and Acceptance Agreement between the Registrant and Alcon
Universal, Ltd. (the "Transaction"). The unaudited pro forma condensed
consolidated financial information should be read in conjunction with the
audited historical consolidated financial statements and related notes included
in the Registrant's Annual Report on Form 10-K for the period ended June 30,
1998 and the condensed consolidated financial statements for the six months
ended December 31, 1998 in the Registrant's Quarterly Report on Form 10-Q for
period ended December 31, 1998, which reports are incorporated herein by
reference.
The unaudited pro forma condensed consolidated statement of
operations gives effect to the Transaction as if it had occurred at the
beginning of the periods presented.
The unaudited pro forma condensed consolidated balance sheet gives
effect to the Transaction as if it had occurred on December 31, 1998.
The unaudited pro forma condensed consolidated financial information
is presented for illustrative purposes only and does not purport to be
indicative of the operating results or financial position that would have
actually occurred if the Transaction had been in effect on the dates indicated,
nor is it necessarily indicative of future operating results or financial
position.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
REGISTRANT PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
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Sales revenues $ 5,942,004 $ (976,447) (1) $ 4,965,557
Costs and expenses:
Cost of goods sold 2,588,500 (416,980) (2) 2,171,520
Research and development 494,895 - 494,895
Marketing, general and administrative 2,805,454 (335,081) (3) 2,470,373
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Total costs and expenses 5,888,849 (752,061) 5,136,788
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Income (loss) from operations 53,155 (224,386) (171,231)
Other income, net 118,317 - 118,317
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Net income (loss) $ 171,472 $ (224,386) $ (52,914)
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REGISTRANT PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
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Basic and diluted net loss per share (a) $ (0.039) $ (0.123)
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Weighted average shares -
basic and diluted 2,673,093 2,673,093
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(a) For earnings per share computations, net income was decreased by $ 276,750
for preferred stock dividends and accretion.
(1) Net Betadine sales for fiscal year ended June 30, 1998, $ 976,447.
(2) Direct expenses related to Betadine sales; cost of goods sold, $ 364,758;
freight, $ 21,199; and warehousing expense, $ 31,023.
(3) Other direct expenses related to the Betadine product line; license and
distribution rights amortization, $ 52,722;.goodwill amortization, $
66,752; royalties to Purdue Frederick, $95,923; and sales commissions,
$119,684.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998
REGISTRANT PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
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Sales revenues $ 3,460,097 $ (574,365) (1) $ 2,885,732
Costs and expenses:
Cost of goods sold 1,509,004 (248,025) (2) 1,260,979
Research and development 341,250 - 341,250
Marketing, general and administrative 1,397,973 (182,309) (3) 1,215,664
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Total costs and expenses 3,248,227 (430,334) 2,817,893
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Income from operations 211,870 (144,031) 67,839
Other income, net 68,567 - 68,567
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Net income $ 280,437 $ (144,031) $ 136,406
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Basic net income per share (a) $ 0.084 $ 0.037
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Diluted net income per share $ 0.068 $ 0.033
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Weighted average shares - basic 3,028,668 3,028,668
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Weighted average shares - diluted 4,103,394 4,103,394
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(a) Net income is reduced by $ 24,540,for dividends paid to preferred
shareholder and not available for common shareholders' in earnings per
share computation.
(1) Net Betadine sales for six months ended December 31, 1998, $ 574,365
(2) Direct expenses related to Betadine sales; cost of goods sold, $ 214,005;
freight, $ 14,323; and warehousing expense, $ 19,697.
(3) Other direct expenses related to the Betadine product line; license and
distribution rights amortization,$ 26,361; goodwill amortization, $ 33,376;
royalties to Purdue Frederick, $ 56,851; and sales commissions,$ 65,721.
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(4) The sale of the Betadine product line will result in a non-recurring gain of
approximately $854,000, net of sale expenses of approximately $25,000.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998
REGISTRANT PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
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ASSETS
Current Assets:
Cash and cash equivalents $ 2,406,665 $ 2,059,835 (1) $ 4,466,500
Accounts receivable, net 873,975 - 873,975
Inventory, net 688,079 (274,760) (2) 413,319
Investments and other current assets 613,954 - 613,954
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Total current assets 4,582,673 1,785,075 6,367,748
License and distribution rights, net 809,657 (268,007) (3) 541,650
Goodwill, net 904,451 (472,829) (4) 431,622
Other assets 751,601 - 751,601
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Total assets $ 7,048,382 $ 1,044,239 $ 8,092,621
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities $ 861,941 $ - $ 861,941
Shareholders' Equity:
Preferred stock 679,231 - 679,231
Common stock 45,321,687 - 45,321,687
Treasury stock (118,108) - (118,108)
Accumulated deficit (39,696,369) 1,044,239 (1)(2) (38,652,130)
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Total shareholders' equity 6,186,441 1,044,239 7,230,680
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Total liabilities and shareholders'
equity $ 7,048,382 $ 1,044,239 $ 8,092,621
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(1) Proceeds from sale of Betadine product line, $ 2,059,835.
(2) To reflect the sale of Betadine inventory valued at $274,760.
(3) To reflect the retirement of $ 268,007 in unamortized license and
distribution rights, allocated at acquisition, to the Betadine product
line.
(4) To reflect the retirement of $ 472,829 in unamortized goodwill
allocated, at acquisition, to the Betadine product line.
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(c) Exhibits.
Exhibit No. Document
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2.1 Bill of Sale and Acceptance Agreement dated March 5,
1999 between Escalon Medical Corp. and Alcon
Laboratories, Inc.
2.2 Bill of Sale and Acceptance Agreement dated March 5,
1999 between Escalon Medical Corp. and Alcon
Universal, Ltd.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
ESCALON MEDICAL CORP.
Date: March 19, 1999 By:/s/ Douglas R. McGonegal
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Douglas R. McGonegal,
Vice President--Finance
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EXHIBIT INDEX
Exhibit No. Document
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2.1 Bill of Sale and Acceptance Agreement dated March 5,
1999 between Escalon Medical Corp. and Alcon
Laboratories, Inc.
2.2 Bill of Sale and Acceptance Agreement dated March 5,
1999 between Escalon Medical Corp. and Alcon
Universal, Ltd.
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