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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 13, 1999
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
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.
Effective August 13, 1999, Escalon Medical Corp. (the "Registrant")
entered into a Termination Agreement (the "Termination Agreement") between the
Registrant and Bausch & Lomb Surgical, Inc. ("BLS") and a Supply Agreement (the
"Supply Agreement") between the Registrant and BLS.
Pursuant to the Termination Agreement, the Distribution and Development
Agreement dated January 1, 1990, as amended, between the Registrant and Adatomed
GmbH, a wholly owned subsidiary of BLS, was terminated, and the Registrant
transferred its license and distribution rights for Adatosil(R)5000 Silicone Oil
("Silicone Oil"), as well as related inventory, back to BLS. In consideration of
the transfer, BLS agreed to pay to the Registrant cash in the amount of
$2,117,180, payable in quarterly installments, with the initial installment paid
on August 14, 1999, and additional cash consideration based on future sales of
Adatosil(R)5000 Silicone Oil over the next six years. Adatosil(R)5000 Silicone
Oil represented approximately 56% of the Registrant's sales in the fiscal year
ended June 30, 1999. For additional information, see the Registrant's news
release dated August 13, 1999 attached to this Form 8-K Report as Exhibit 2.3.
Pursuant to the Supply Agreement, BLS agreed to purchase from the
Registrant, and the Registrant agreed to manufacture and sell to BLS, certain
viscous fluid systems for a period of six years.
No material relationship exists between (i) the Registrant and BLS,
(ii) any director or officer of the Registrant and any director or officer of
BLS or (iii) any associate of any director or officer of the Registrant and any
associate of any director or officer of BLS. The consideration under the
Termination Agreement was determined by arms' length negotiations between the
Registrant and BLS.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(b) Unaudited Pro Forma Financial Information
The following unaudited pro forma condensed consolidated financial
information has been prepared to reflect the transaction under the Termination
Agreement between the Registrant and BLS (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 periods ended
June 30, 1997, 1998 and 1999, 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 June 30, 1999.
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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, 1999
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
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Sales revenues $ 7,559,011 $(4,299,603) (1) $ 3,259,408
Costs and expenses:
Cost of goods sold 3,282,177 (1,788,490) (2) 1,493,687
Research and development 738,124 -- 738,124
Marketing, general and
administrative 3,331,562 (246,085) (3) 3,085,477
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Total costs and expenses 7,351,863 (2,034,575) 5,317,288
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Income (loss) from operations 207,148 (2,265,028) (2,057,880)
Other income, net 986,639 -- 986,639
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Net income (loss) $ 1,193,787 $(2,265,028) $(1,071,241)
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Basic net income (loss) per share(a) $ 0.10 $ (0.62)
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Diluted net income (loss) per share $ 0.10 $ (0.62)
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Weighted average shares-basic 3,114,823 3,114,823
=========== ===========
Weighted average shares-diluted 3,150,721 3,114,823
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(a) Historical and pro forma net income was decreased by $870,523, for
preferred dividends and accretion.
(1) Net Silicone Oil sales and billed freight for the fiscal year ended
June 30, 1999 of $4,243,061 and $56,542, respectively.
(2) Direct expenses related to Silicone Oil sales: cost of goods sold,
$1,735,177, and freight costs, $53,313.
(3) Other expenses related to the Silicone Oil product line: commissions,
$192,913; foreign currency gain, $(7,157); and license and distribution
rights amortization, $60,329.
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
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Sales revenues $ 5,942,004 $(3,499,601) (1) $ 2,442,403
Costs and expenses:
Cost of goods sold 2,588,500 (1,431,393) (2) 1,157,107
Research and development 494,895 -- 494,895
Marketing, general and
administrative 2,805,454 (240,372) (3) 2,565,082
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Total costs and expenses 5,888,849 (1,671,765) 4,217,084
----------- ----------- -----------
Income (loss) from operations 53,155 (1,827,836) (1,774,681)
Other income, net 118,317 -- 118,317
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Net income (loss) $ 171,472 $(1,827,836) $(1,656,364)
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Basic net loss per share(a) $ (0.04) $ (0.72)
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Diluted net loss per share $ (0.04) $ (0.72)
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Weighted average shares-basic 2,673,093 2,673,093
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Weighted average shares-diluted 2,673,093 2,673,093
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(a) Historical and pro forma net income was decreased by $276,750 for
preferred dividends and accretion.
(1) Net Silicone Oil sales and billed freight for the fiscal year ended
June 30, 1998 of $3,440,664 and $58,937, respectively.
(2) Direct expenses related to Silicone Oil sales: cost of goods sold,
$1,372,298 and freight costs, $59,095.
(3) Other expenses related to the Silicone Oil product line: commissions,
$195,996; foreign currency gain, $(15,953); and license and
distribution rights amortization, $60,329.
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
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Sales revenues $ 5,431,282 $ (3,114,406) (1) $ 2,316,876
Costs and expenses:
Cost of goods sold 2,650,360 (1,418,735) (2) 1,231,625
Research and development 1,570,674 -- 1,570,674
Marketing, general and
administrative 3,715,727 (275,053) (3) 3,440,674
Write down of goodwill and
license and distribution 3,318,888 (1,708,395) (4) 1,610,493
rights ------------ ------------ ------------
Total costs and expenses 11,255,649 (3,402,183) 7,853,466
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Loss from operations (5,824,367) (287,777) (5,536,590)
Other income, net 139,397 -- 139,397
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Net loss $ (5,684,970) $ (287,777) $ (5,397,193)
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Basic net loss per share $ (2.16) $ (2.05)
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Diluted net loss per share $ (2.16) $ (2.05)
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Weighted average shares- 2,629,624 2,629,624
basic ============ ============
Weighted average shares- 2,629,624 2,629,624
diluted ============ ============
(1) Net Silicone Oil sales and billed freight for the fiscal year ended
June 30, 1997 of $3,069,025 and $45,381, respectively.
(2) Direct expenses related to Silicone Oil sales: cost of goods sold,
$1,366,603 and freight costs, $52,132.
(3) Other expenses related to the Silicone Oil product line: commissions,
$246,434; foreign currency gain, $(31,710); and license and
distribution rights amortization, $60,329.
(4) Eliminate Silicone Oil portion of intangible write down: goodwill
amortization, $1,311,228; and license and distribution rights
amortization, $397,167.
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1999
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
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ASSETS
Current Assets:
Cash and cash equivalents $ 3,854,240 $ 688,852 (1)(2) $ 4,543,092
Cash and cash equivalents -
restricted 1,000,000 -- 1,000,000
Accounts receivable, net 1,063,829 -- 1,063,829
Inventory, net 1,117,208 (159,557) (2) 957,651
Note receivable and other 157,235 1,058,590 (1) 1,215,825
current assets ------------ ------------ ------------
TOTAL CURRENT ASSETS 7,192,512 1,587,885 8,780,397
Long-term receivables 150,000 529,295 (1) 679,295
License and distribution
rights, net 537,138 (276,506) (3) 260,632
Goodwill, net 1,510,207 -- 1,510,207
Other assets 1,012,916 -- 1,012,916
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TOTAL ASSETS $ 10,402,773 $ 1,840,674 $ 12,243,447
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LIABILITIES AND SHAREHOLDERS'
EQUITY
Current Liabilities:
Line of credit $ 1,000,000 $ -- $ 1,000,000
Current portion of
long-term debt,
accounts payable and
accrued payroll 1,005,307 -- 1,005,307
Other accrued expenses 1,386,433 -- 1,386,433
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TOTAL CURRENT LIABILITIES 3,391,740 -- 3,391,740
Long-term debt 733,332 -- 733,332
SHAREHOLDERS' EQUITY:
Common stock 46,024,811 -- 46,024,811
Treasury stock (118,108) -- (118,108)
Accumulated deficit (39,629,002) 1,840,674 (37,788,328)
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TOTAL SHAREHOLDERS' EQUITY 6,277,701 1,840,674 (1)(3) 8,118,375
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TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 10,402,773 $ 1,840,674 $ 12,243,447
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(1) Record sale of Silicone Oil product line $2,117,180: cash proceeds,
$529,295; remaining three quarterly installments receivable:
$1,058,590, current and $529,295, long-term (due August 2000).
(2) Record sale of Silicone Oil inventory valued at $159,557.
(3) Eliminate unamortized license and distribution rights allocated to
Silicone Oil product line, $276,506.
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(c) Exhibits.
Exhibit No. Document
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2.1 Termination Agreement effective as of August
13, 1999 between Escalon Medical Corp. and
Bausch & Lomb Surgical, Inc., included with
Form 8-K as filed on August 27, 1999 and
incorporated herein by reference.
2.2 Supply Agreement effective as of August 13,
1999 between Escalon Medical Corp. and
Bausch & Lomb Surgical, Inc., included with
Form 8-K as filed on August 27, 1999 and
incorporated herein by reference.
2.3 News Release of the Registrant dated August
13, 1999, included with Form 8-K as filed on
August 27, 1999 and incorporated herein by
reference.
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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: October 18, 1999 By: /s/ Douglas R. McGonegal
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Douglas R. McGonegal,
Vice President - Finance
Chief Financial Officer