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) September 1, 1998
---------------------
HEMAGEN DIAGNOSTICS, INC.
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(Exact name of Registrant as Specified in Charter)
Delaware 1-11700 04-2869857
- -------- ------- ----------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
34-40 Bear Hill Road, Waltham, MA 02451
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (781) 890-3766
-------------------------
FORM 8-K/A
November 11, 1998
Item Page
- ---- ----
Item 7. Financial Statements and Exhibits 1
Signature 2
Exhibit None
Item 7. Financial Statements and Exhibits
a. Financial Statements. Audited Financial Statements of the
Analyst business for the year ended December 31, 1997, for the
period May 7, 1996 to December 31, 1996 and for the three month
period ended March 31, 1998
b. Pro Forma Financial Information for the Registrant and the
Analyst business
Condensed Combined Pro Forma Financial Statements
(Unaudited) F1
Pro Forma Condensed Combined Balance Sheet, as of June 30,
1998 (Unaudited).. F3
Pro Forma Condensed Combined Statement of Operations,
Fiscal Year Ended September 30, 1997 (Unaudited) F4
Pro Forma Condensed Combined Statement of Operations, Nine
Months ended June 30, 1998 (Unaudited) F5
Notes to the Pro Forma Condensed Combined Financial
Statements (Unaudited) F6
c. Exhibits (previously filed with the Commission).
Exhibit
No. Title
------- -----
2.1 Asset Purchase Agreement, dated as of August 14, 1998,
between Dade Behring Inc. and Hemagen Diagnostics, Inc.
2.2 Amendment to Asset Purchase Agreement dated as of August
31, 1998, between Dade Behring Inc. and Hemagen
Diagnostics, Inc.
20.1 Press Release of Hemagen Diagnostics, Inc., dated
September 2, 1998
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.
Hemagen Diagnostics, Inc.
Dated November 11, 1998 By: /s/ Carl Franzblau, Ph.D.
-------------------------
Carl Franzblau, Ph.D.
President and Chairman of
the Board of Directors
Analyst(R) Business
(a business line of
Dade Behring, Inc.)
------------------------------------
Financial Statements
Three months ended March 31, 1998
Year ended December 31, 1997
Period May 7, 1996 to December 31, 1996
Analyst(R) Business
(a business line of Dade Behring, Inc.)
Contents
- -----------------------------------------------------------------
Report of Independent Certified Public Accountants 3
Financial Statements:
Statements of net assets to be purchased 4
Statements of operations 5
Notes to financial statements 6-13
Independent Auditors' Report
To the Board of Directors and Stockholders of
Hemagen Diagnostics, Inc.
We have audited the accompanying statements of net assets to be purchased of
the Analyst( business (the "Business"), a business line of Dade Behring,
Inc. (the "Company") as of March 31, 1998 and December 31, 1997 and 1996,
and the related statements of operations of the Business for the three
months ended March 31, 1998, the year ended December 31, 1997 and the period
May 7, 1996 through December 31, 1996. 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 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.
The accompanying statements of net assets to be purchased and operations of
the Business were prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission and are not intended
to be a complete presentation of the Business' financial position or results
of operations as of or for the periods noted.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the net assets to be purchased of the Business at
March 31, 1998 and December 31, 1997 and 1996 and the results of operations
of the Business for the respective periods ended March 31, 1998 and December
31, 1997 and 1996 in conformity with generally accepted accounting
principles.
/s/ BDO Seidman, LLP
Boston, Massachusetts
October 2, 1998
Analyst(R) Business
(a business line of Dade Behring, Inc.)
Statements of Operations
- -----------------------------------------------------------------
Three Months
Ended Year Ended May 7, 1996 -
March 31, December 31, December 31,
1998 1997 1996
- -------------------------------------------------------------------------------------------------
(Dollars in Thousands)
Net sales $1,777 $ 9,240 $ 6,914
Operating costs and expenses:
Cost of goods sold 868 8,588 6,160
Marketing and administrative expenses 506 3,006 1,740
- -------------------------------------------------------------------------------------------------
Income (loss) from operations 403 (2,354) (986)
Interest expense 97 422 316
- -------------------------------------------------------------------------------------------------
Excess (deficiency) of net sales over certain
costs and expenses before taxes on income 306 (2,776) (1,302)
Taxes on income 3 - -
- -------------------------------------------------------------------------------------------------
Excess (deficiency) of net sales over certain
costs and expenses $ 303 $(2,776) $(1,302)
=================================================================================================
See accompanying notes to financial statements.
Analyst(R) Business
(a business line of
Dade Behring, Inc.)
Notes to Financial Statements
------------------------------------
1. Basis of Presentation
On August 14, 1998, Dade Behring, Inc., ("Dade") entered into an Asset
Purchase Agreement (the "Agreement") with Hemagen Diagnostics, Inc.
("Hemagen") for the sale of Dade's Analyst(R) Business (the "Business").
The Business includes the development, manufacture and sale of the
Analyst(R) instrument together with the rotors and reagents for use in in-
vitro diagnostics. Revenues of the Business are principally derived from
the sale of reagents to physicians, veterinarians and small clinics in the
United States.
On August 31, 1998 (the "Closing Date"), Dade sold to Hemagen essentially
all of the assets currently comprising Dade's operation of the Business.
These assets consist of accounts receivable, inventories (including
materials, work-in process and finished products), machinery and production
equipment and equipment placed with customers.
Throughout the periods covered by these financial statements, the Business'
operations were conducted and accounted for as a business line of Dade's
Chemistry Business Unit. Historically, financial statements were not
prepared for the Business. The financial statements presented herein have
been derived from Dade's historical accounting records and are presented as
if the operations of the Business had been conducted exclusively within a
wholly-owned subsidiary of Dade.
Under Dade's centralized cash management system, cash requirements of the
Business were generally provided directly to the Business by Dade, and cash
generated by the Business was generally remitted directly to Dade.
Transaction systems (e.g. payroll and accounts payable) used to record and
account for cash disbursements were provided by centralized Dade functions.
Most of these corporate systems are not designed to track liabilities and
payments on a business-specific basis. Accordingly, it is not practical to
determine liabilities associated with the Business for the above items;
therefore, such liabilities cannot be included in the Statements of Net
Assets to be Sold. Given these constraints, a statement of cash flows is
not presented; thus, only certain supplemental cash flow information is
available as presented in Note 6.
The statements of operations include all revenues and costs, in conformity
with generally accepted accounting principles, attributable to the Business,
including: 1) costs for facilities, functions and services used by the
Business at sites shared with other Dade operations, 2) costs for certain
functions and services performed by centralized Dade organizations directly
charged to the Business and, 3) allocations of interest expense.
In anticipation of the sale of the Analyst Business, management allocated
less resources to the Business in the three month period ended March 31,
1998 which resulted in a higher gross margin in this period as a result of
the reduced costs as compared to previous periods presented.
All of the allocations and estimates in these financial statements are based
on assumptions that Dade management believes are reasonable under the
circumstances. However, these allocations and estimates are not necessarily
indicative of the costs that would have resulted if the Business had been
operated as a separate entity since allocations for shared services are
inherently made based upon appropriate relative measures.
Transactions between the Business and other Dade operations have been
identified in the financial statements as transactions between related
parties to the extent practicable (See Note 5).
2. Summary of Significant Accounting Policies
This summary of significant accounting policies is presented to assist the
reader in understanding and evaluating the accompanying financial
statements. These policies are in conformity with generally accepted
accounting principles and have been applied consistently unless otherwise
noted.
Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities,
revenues, expenses, and related disclosures. Actual results could differ
from those estimates.
Revenue Recognition
Revenues for products sold consist principally of reagent sales to customers
possessing Dade's Analyst(R) instruments. These revenues are recognized
upon shipments of product and on the basis of contract sale prices.
Deferred Service Revenue
Analyst customers may elect to purchase extended service contracts on Dade's
Analyst(R) instruments. Revenues under product service contracts are
recognized ratably over the term of the contract.
Royalties
The Business entered into two royalty agreements with regard to the
technology for the manufacture of rotors. The royalties are based upon
sales and are payable quarterly and semi-annually, respectively. These
agreements expire in March 2000 and May 2005.
Warranties
The Business warrants the sale of its new Analyst(R) instruments for a
period of one year. The warranty provision is immaterial at each period-
end, as most of the Business' instrument sales are of refurbished
instruments, which are not warranted. Accordingly, no warranty provisions
are included in the accompanying statements of net assets to be purchased.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market. Cost includes materials, labor and manufacturing overhead costs.
Market for materials is based on replacement costs and, for other inventory
classifications, on net realizable value. Appropriate consideration is
given to deterioration, obsolescence and other factors in evaluating net
realizable value.
Machinery and Production Equipment
Machinery and production equipment are stated at cost and are depreciated
using the straight-line method. Depreciation is provided for over useful
lives ranging from 5 to 15 years.
Other Equipment
Other equipment includes Analyst(R) instruments provided to customers,
principally in the United States, at no charge in exchange for contractual
commitments for ongoing reagent revenues. Management believes the carrying
value of this equipment is recoverable from the revenues anticipated from
future sales of reagents. Other equipment is depreciated over 5 years.
Interest Expense
Interest expense was not historically allocated by Dade to its business
units. Interest expense has been allocated to the Business based on the
average net assets outstanding and the weighted average cost of borrowing
for each period presented. Dade management believes this allocation is
reasonable, but is not necessarily indicative of the interest cost that
would have been incurred if Analyst had been operated as a separate entity.
Income Taxes
For all periods presented, the taxable income (loss) of the Business was
included in the consolidated tax returns of Dade. Accordingly, separate
income tax returns were not prepared or filed for the Business. The income
tax expense (benefit) for the Business' earnings or losses has been
separately determined by applying the asset and liability approach as if the
Business were a separate taxpaying entity.
Loss Per Share
For all periods presented, the Business was operated as a business line and,
accordingly, disclosure of loss per share is not required.
3. Inventories
Inventories consist of the following:
March 31, December 31, December 31,
1998 1997 1996
- -------------------------------------------------------------------------
(Dollars in Thousands)
Raw materials $ 189 $ 203 $ 282
Work-in-process 269 262 552
Finished goods 1,040 1,311 1,657
- ----------------------------------------------------------------------
Total inventories at cost 1,498 1,776 2,491
Less valuation allowance (42) (42) (61)
- ----------------------------------------------------------------------
$1,456 $1,734 $2,430
======================================================================
4. Taxes on Income
The Business is not party to a formal tax sharing agreement with the
Company. Based upon the Business' history of operating losses, a valuation
allowance has been recognized for the deferred tax asset resulting primarily
from net operating losses on the basis that it is more likely than not that
these assets would not be realized by the Business as a separate taxpaying
entity. No Federal taxes have been provided due to the availability of net
operating loss carryforwards. Taxes in the 1998 period are comprised of
state taxes.
5. Related Party Transactions
These financial statements include transactions with other Dade entities
involving functions and services (such as cash management, tax
administration, legal and data processing) that were provided to the
Business. The costs of these functions and services have been directly
charged and/or allocated to the Business using methods that Dade management
believes are reasonable. Such charges and allocations are not necessarily
indicative of the costs that would have been incurred if the Business had
been operated as a separate entity. It is not feasible to segregate all of
these charges from costs incurred directly by the Business. Charges and
allocations of these corporate expenses to the Business are as follows:
Three Months
Ended Year Ended May 7, 1996 -
March 31, December 31, December 31,
1998 1997 1996
- -----------------------------------------------------------------------------
(Dollars in Thousands)
Cost of good sold:
Glasgow employee
benefit expenses $ 19 $ 109 $ 79
=============================================================================
Marketing and
administrative
expenses:
Glasgow division
overhead $413 $2,300 $1,447
Dade corporate overhead 93 706 293
- -----------------------------------------------------------------------------
$506 $3,006 $1,740
=============================================================================
6. Supplemental Cash Flow Information
As described in Note 1, Dade's management system is not designed to trace
centralized cash and related financing transactions to the specific cash
requirements of the Business. In addition, Dade's corporate transaction
systems are not designed to track liabilities and payments on a business
specific basis. Given these constraints, the following data is presented to
facilitate analysis of key components of cash flows activity:
Three Months
Ended Year Ended May 7, 1996 -
March 31, December 31, December 31,
1998 1997 1996
- ------------------------------------------------------------------------------
(Dollars in Thousands)
Excess (deficiency) of
net sales over certain
costs and expenses $ 303 $(2,776) $(1,302)
Deferred tax
expense (benefit) (100) 1,291 551
Depreciation 88 388 313
Net loss on disposal of
equipment placed with
customers 25 97 53
Change in accounts
receivable 214 66 199
Change in inventory 278 696 (180)
Change in accounts
payable (234) 188 59
Change in royalty accrual (38) (90) 123
Change in deferred service
revenue 7 (67) (19)
- --------------------------------------------------------------------------
Cash flow from operating
activities, provided to
(from) Dade* $ 543 $ (207) $ (203)
==========================================================================
<F*> Cash flow from operating activities, as presented above, does not
necessarily represent the cash flows of the Business, or the timing of
such cash flows, had it operated as a separate entity.
7. Commitments and Contingencies
The Business has various purchase commitments for materials and supplies
incidental to the ordinary conduct of business. In the aggregate, such
commitments are not at prices in excess of current market.
The Business does not have any material lease commitments.
The Business is subject to various lawsuits and claims with respect to such
matters as product liabilities, governmental regulations and other actions
arising out of the normal course of business. While the effect on future
financial results is not subject to reasonable estimation because
considerable uncertainty exists, in the opinion of Dade's management and
legal counsel, there are currently no known lawsuits or claims which would
materially affect the financial position of the Business.
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
INTRODUCTION
On August 14, 1998, Hemagen Diagnostics, Inc. (the "Company") entered
into an Asset Purchase Agreement (the "Agreement") with Dade Behring
Inc. ("Dade"), for the purchase of certain assets related to a product
line sold under the tradename Analyst(R). The transaction closed on
September 1, 1998. The Analyst(R) product line consists primarily of
the Analyst bench top clinical chemistry system and the related
consumables which are used for both human and veterinary medical
diagnostic testing. The assets included accounts receivable,
inventory, equipment, and certain intellectual property. The Company
agreed to assume certain of Dade's liabilities including accounts
payable, service contracts and warranty obligations. Pursuant to the
Agreement and the related documents executed by the parties, Dade will
continue to manufacture the products under a separate manufacturing
agreement for a period of up to thirty-six months while the Company
transitions the manufacturing operations to its facility located in
Columbia, Maryland. The Company intends to have the instruments
manufactured by Dade or some other suitable third party for the
foreseeable future.
Under the Agreement, at the closing of the transaction, the Company
paid $3,500,000 in cash and issued a non-interest bearing promissory
note to Dade (the "Note") in the amount of $1,250,000. Under the
terms of the Note, the Company agrees to pay Dade in full on or before
September 1, 2000. The Note is subject to adjustment due to changes
in the net current asset values of the transferred assets. The
Company has also agreed to pay Dade a royalty on the sale of certain
consumables for use with the Analyst Instrument.
The Company financed the acquisition using $3,500,000 in proceeds from
a $5,000,000 revolving credit line from Bank Boston, N.A., which is
secured by all the assets of the Company and its subsidiaries.
The unaudited pro forma condensed combined balance sheet of Hemagen
Diagnostics, Inc. ("Hemagen") as of June 30, 1998 assumes the acquisition of
the Analyst business ("Analyst") occurred on that date.
The unaudited pro forma condensed combined statements of operations for the
year ended September 30, 1997 and the nine months ended June 30, 1998
present the results as if the Analyst acquisition had been consummated as of
October 1, 1996. The operating results for the Analyst's business for the
year ended December 31, 1997 were used to prepare the unaudited pro forma
condensed combined statement of operations for Hemagen's fiscal year ended
September 30, 1997. Accordingly, the unaudited operating results for the
Analyst business for the three months ended December 31, 1997, which
included revenue of $2,310,000 and a net loss of $694,000, have been
included in both periods presented.
The unaudited pro forma condensed combined financial statements have been
prepared by Hemagen and all calculations have been made based upon
assumptions deemed appropriate. The unaudited pro forma condensed combined
financial statements were prepared utilizing the accounting policies of
Hemagen. The pro forma adjustments reflect the acquisition being recorded
as a purchase and the preliminary allocation of the purchase price and
accordingly may be subject to certain significant adjustments as the Company
finalizes the allocation of the purchase price in accordance with generally
accepted accounting principles. The purchase price has been allocated based
upon the estimated fair value of the assets and liabilities acquired.
The unaudited pro forma financial information does not purport to be
indicative of the results of operations or the financial position which
would have actually been obtained if the acquisition had been consummated on
the dates indicated. In addition, the unaudited pro forma financial
information does not purport to be indicative of results of operations or
financial position which may be achieved in the future.
The unaudited pro forma financial information should be read in conjunction
with Hemagen's historical consolidated financial statements and notes
thereto contained in the 1997 Annual Report on Form 10-KSB and the Quarterly
Report on Form 10-QSB for the quarter ended June 30, 1998, and the financial
statements of the Analyst business presented herein.
Hemagen Diagnostics, Inc. and Subsidiary
Pro Forma Condensed Combined Balance Sheet
As of June 30, 1998
(Unaudited)
Historical
---------------------------- Pro forma
Analyst Pro forma Combined
Hemagen Business Line Adjustments As Adjusted
Assets
Current Assets:
Cash and cash equivalents $ 920,639 $ - $(3,750,000)(1) $ 1,044,157
3,500,000 (2)
373,518 (3)
Restricted cash 96,050 - 96,050
Accounts and other receivable 1,931,676 855,451 2,787,127
Inventories 4,750,994 1,812,834 94,000 (1) 6,657,828
Other current assets 242,379 - 242,379
--------------------------------------------------------------
Total current assets 7,941,738 2,668,285 217,518 10,827,541
Property and equipment (net) 2,259,334 1,449,967 537,033 (1) 4,246,334
Other Assets 1,478,283 - 1,478,283
--------------------------------------------------------------
Total Assets $11,679,355 $4,118,252 $ 754,551 $16,552,158
==============================================================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expense $ 772,549 $ 126,326 $ - $ 898,875
Deferred service revenue - 166,477 166,477
Customer deposits 109,410 - 109,410
Note payable - 3,500,000 (2) 3,500,000
Current portion of long-term debt 282,680 - 282,680
--------------------------------------------------------------
Total current liabilities 1,164,639 292,803 3,500,000 4,957,442
Long-term debt, less current portion - - 1,080,000 (1) 1,080,000
--------------------------------------------------------------
Total Liabilities 1,164,639 292,803 4,580,000 6,037,442
--------------------------------------------------------------
Stockholders equity:
Preferred Stock - - -
Common Stock 78,519 - 78,519
Additional paid-in capital 13,434,946 - 13,434,946
Retained earnings/deficit (2,998,749) (2,998,749)
--------------------------------------------------------------
Total stockholder's equity 10,514,716 3,825,449 (3,825,449)(1) 10,514,716
--------------------------------------------------------------
Total liabilities and stockholder's equity $11,679,355 $4,118,252 $ 754,551 $16,552,158
==============================================================
See Notes to Pro Forma Condensed Combined Financial Statements.
Hemagen Diagnostics, Inc. and Subsidiary
Pro Forma Condensed Combined Statement of Operations
Fiscal Year Ended September 30, 1997
(Unaudited)
Historical
-----------------------------
Analyst
Hemagen Business Line Pro forma
Year Ended Year Ended Pro forma Combined
9/30/97 12/31/97 Adjustments As Adjusted
Net sales $12,991,102 $ 9,240,000 $ - $22,231,102
Costs and expenses:
Cost of sales 7,603,909 8,588,000 107,000 (4) 16,298,909
Research and development 1,072,188 1,072,188
Selling, general and administrative 3,808,000 3,006,000 6,814,000
--------------------------------------------------------------
12,484,097 11,594,000 107,000 24,185,097
--------------------------------------------------------------
Operating income (loss) 507,005 (2,354,000) (107,000) (1,953,995)
Other income (expenses), net (101,876) (422,000) (297,000)(4) (483,876)
(85,000)(4)
422,000 (4)
--------------------------------------------------------------
Income (loss) before income taxes 405,129 (2,776,000) (67,000) (2,437,871)
Provision for income taxes - - - -
--------------------------------------------------------------
Net Income (loss) $ 405,129 $(2,776,000) $ (67,000) $(2,437,871)
==============================================================
Net income (loss) per share $ 0.05 $ (0.32)
==============================================================
Weighted average shares outstanding 7,676,561 7,676,561
==============================================================
See Notes to Pro Forma Condensed Combined Financial Statements.
Hemagen Diagnostics, Inc. and Subsidiary
Pro Forma Condensed Combined Statement of Operations
Nine Months Ended June 30, 1998
(Unaudited)
Historical
-----------------------------
Analyst
Hemagen Business Line
Nine Months Nine Months Pro forma
Ended Ended Pro forma Combined
6/30/98 6/30/98 Adjustments As Adjusted
Net sales $ 9,037,276 $ 5,695,400 $ - $14,732,676
Costs and expenses:
Cost of sales 5,111,675 3,693,600 81,000(4) 8,886,275
Research and development 802,891 802,891
Selling, general and administrative 2,726,387 1,630,700 4,357,087
--------------------------------------------------------------
8,640,953 5,324,300 81,000 14,046,253
Operating income 396,323 371,100 (81,000) 686,423
Other income (expenses), net (19,969) (299,500) (223,000)(4) (306,719)
(63,750)(4)
299,500 (4)
--------------------------------------------------------------
Income before income taxes 376,354 71,600 (68,250) 379,704
Provision for income taxes - 6,000 (6,000)(4) -
--------------------------------------------------------------
Net Income $ 376,354 $ 65,600 $ (62,250) $ 379,704
==============================================================
Net income per share $ 0.05 $ 0.05
==============================================================
Weighted average shares outstanding 7,853,390 7,853,390
==============================================================
See Notes to Pro Forma Condensed Combined Financial Statements.
Hemagen Diagnostics, Inc. and Subsidiary
Notes to Pro Forma Condensed Combined Financial Statements
(Unaudited)
The pro forma adjustments to the condensed consolidated balance sheet are as
follows:
(1) To reflect the acquisition of the Analyst business, a product
line of Dade Behring Inc. and the allocation of the purchase price on the
basis of estimated fair values of the assets acquired and liabilities
assumed. The components of the purchase price and its allocation to the
assets and liabilities of the Analyst business are approximately as follows:
Components of purchase price:
Cash paid at closing $3,500,000
Estimated direct expenses of the acquisition 250,000
Present value of note payable to seller
(Face value $1,250,000) 1,080,000
Adjustment of purchase price (see note 3) (374,000)
----------
Total purchase price $4,456,000
Allocation of purchase price:
Accounts receivable (net) $ 855,000
Inventories 1,907,000
Property and equipment 1,987,000
Accounts payable and accrued
expenses (127,000)
Deferred service revenue (166,000)
----------
Total allocation $4,456,000
(2) To reflect receipt of $3,500,000 from a revolving credit line
from BankBoston, N.A. to finance the Analyst acquisition.
(3) The Asset Purchase Agreement dated August 14, 1998 calls for an
adjustment of the purchase price if working capital is below $2,611,550 at
the time of the acquisition. The actual working capital as of June 30, 1998
was $2,375,482, therefore, if the acquisition had closed on this date there
would have been an adjustment of the purchase price of $373,518.
(4) To reflect the adjustments to the pro forma condensed combined
statements of income as follows:
Year Ended Nine Months Ended
December 31, 1997 June 30, 1998
----------------- -----------------
Increase in interest expense-
bank debt used to finance acquisition $(297,000) $(223,000)
Amortization of discount of note
payable to seller (85,000) (63,750)
Increase in depreciation expense
as a result of purchase accounting
step-up in basis. (107,000) (81,000)
Decrease in tax provision allocated
by Dade 6,000
Decrease in interest expense-
allocated by Dade 422,000 299,500
-------------------------------
Total pro forma adjustment to income $ (67,000) $ (62,250)
===============================
The pro forma adjustments reflect the acquisition being recorded as a
purchase and the preliminary allocation of the purchase price. The purchase
will be allocated to the assets and liabilities based on their estimated
fair value and accordingly may be subject to certain significant adjustments
as the Company finalizes the allocation of the purchase price in accordance
with generally accepted accounting principles. The Company will review,
with the assistance of independent outside auditors, the fair value of the
assets and liabilities acquired and accordingly, certain amounts recorded
herein, including the possible recognition of goodwill, will be adjusted to
reflect to those values.
Analyst Business
Unaudited Quarterly Financial Information
The accompanying unaudited condensed financial statements of the
Analyst business have been prepared in accordance with generally accepted
accounting principles for interim financial information and Item 310 (G) of
Regulation SB-2. Accordingly, they do no include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. For further information, refer to the
audited Statements of net assets to be purchased and operations and
footnotes thereto of the Analyst business included with this report.
Analyst Business
(a business line of Dade Behring Inc.)
Statement of Net Assets to be Purchased
As of June 30, 1998
(Unaudited)
Assets
Accounts receivable
Gross $1,069,000
Less allowance for doubtful accounts (214,000)
Inventories
Cost 1,865,000
Less valuation allowance (52,000)
Machinery and production equipment 1,763,000
Less accumulated depreciation (497,000)
Other equipment 377,000
Less accumulated depreciation (193,000)
----------
Total assets $4,118,000
==========
Liabilities
- -----------
Accounts payable $ 68,000
Deferred service revenue 166,000
Royalty obligation 59,000
----------
Total liabilites 293,000
----------
Net assets $3,825,000
==========
Analyst Business
(a business line of Dade Behring Inc.)
Statements of Operations
(Unaudited)
Six Months Ended
June 30,
--------------------------
1998 1997
--------------------------
Net sales $3,385,400 $ 4,484,000
Operating costs and expenses
Cost of goods sold 1,546,600 4,167,597
Marketing and administrative expenses 879,200 1,503,000
--------------------------
Income (loss) from operations 959,600 (1,186,597)
Interest expense (194,000) (211,000)
--------------------------
Excess (deficiency) of net sales over certain costs
and expenses before taxes on income 765,600 (1,397,597)
Taxes on income 6,000
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Excess (defiency) of net sales over certain costs
and expenses $ 759,600 $(1,397,597)
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