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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended September 30, 1996 Commission File Number 0-26538
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HEALTHCARE ACQUISITION CORP.
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(Exact Name of registrant as specified in its charter)
Delaware 65-0572565
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(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) Number)
200 East Broward Boulevard, P.O. Box 1900, Fort Lauderdale, Florida 33301
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (954) 761-2908
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Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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The number of shares of Common Stock outstanding as of November 11,
1996 was 2,100,000.
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HEALTHCARE ACQUISITION CORP.
QUARTERLY REPORT FORM 10-Q
INDEX
PAGE
PART I ----
Item 1 - Financial statements: 3
Balance Sheets 3
Statements of Operations 4
Statement of Cash Flows 5
Notes to Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
PART II
Item 6 - Exhibits and Reports on Form 8-K 9
Signatures 10
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HEALTHCARE ACQUISITION CORP.
(A CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEETS
September December 31,
A S S E T S 30, 1996 1995
------------- --------------
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 383,820 $ 31,562
U.S. Treasury Bills and Cash held in Trust Fund . . . . . . . . . . . . . . . 8,617,000
Prepaid Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,807
Deferred registration costs . . . . . . . . . . . . . . . . . . . . . . . . . 184,056
Deferred financing costs net of amortization . . . . . . . . . . . . . . . . . 12,543
Organization costs net of amortization. . . . . . . . . . . . . . . . . . . . 4,675 5,195
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T O T A L . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,047,302 $233,356
=========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bridge notes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $190,726
Reimbursable expenses due to stockholder . . . . . . . . . . . . . . . . . . . 3,489
Accrued interest on notes payable. . . . . . . . . . . . . . . . . . . . . . . 12,722
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,559 20,340
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Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . 17,559 227,277
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Common stock, subject to possible conversion,
344,999 shares at conversion value. 1,676,695
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Stockholders' equity:
Preferred stock, $.001 par value - shares
authorized 1,000,000; none issued
Common stock, $.001 par value - shares
authorized 20,000,000; issued and
outstanding 2,100,000 shares at September
30, 1996 (including 344,999 shares subject to
possible conversion) and 375,000 shares
at December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,755 375
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . 7,309,767 44,625
Retained earnings (deficit accumulated during the
development stage) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,526 (38,921)
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Total stockholders' equity. . . . . . . . . . . . . . . . . . . . . . . 7,353,048 6,079
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T O T A L . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,047,302 $233,356
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The accompanying notes
are an integral part of the financial statements.
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HEALTHCARE ACQUISITION CORP.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS OF OPERATIONS
Nine Months March 21, 1995 Three Months Three Months March 21, 1995
Ended (Inception) to Ended Ended (Inception) to
September 30, 1996 September 30, 1995 September 30, 1996 September 30, 1995 September 30, 1996
------------------ ------------------ ------------------ ------------------ ------------------
Interest Income $243,157 $111,453 $243,157
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Expenses:
General and administra- 137,069 $961 45,292 $409 138,035
tive expenses
Amortization of 21,817 15,206 10,137 47,050
financing costs
on notes payable
Interest 3,824 7,667 5,111 16,546
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Total Expenses 162,710 23,834 45,292 15,657 201,631
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Net Income (Loss) for the $80,447 ($23,834) $66,161 ($15,657) $41,526
period ======= ======== ======= ======== =======
Net Income (Loss) per $0.05 ($0.06) $0.03 ($ 0.04)
share ===== ======= ===== =======
Weighted average common
shares outstanding 1,633,065 375,000 2,100,000 375,000
========= ======= ========= =======
The accompanying notes are an integral part of the financial statements
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HEALTHCARE ACQUISITION CORP.
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS OF CASH FLOWS
March 21, 1995 March 21, 1995
Nine Months (Inception) (Inception)
Ended to to
September 30, September 30, September 30,
1996 1995 1996
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Cash flows from operating activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . $ 80,447 $ (23,834) $ 41,526
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Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Amortization of organization costs . . . . . . . . . . 520 520
Amortization of deferred financing costs . . . . . . . . 21,817 15,206 47,050
Increase (decrease) in cash from changes in:
Interest receivable and interest on trust fund (233,500) (233,500)
investments
Prepaid expenses . . . . . . . . . . . . . . . . . . (41,807) (41,807)
Accrued interest on notes payable. . . . . . . . . . (12,722) 7,667
Accrued expenses . . . . . . . . . . . . . . . . . . 7,219 7,219
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Total adjustments . . . . . . . . . . . . . . . . (258,473) 22,873 (220,518)
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Net cash (used in) operating
activities. . . . . . . . . . . . . . . . . . . (178,026) (961) (178,992)
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Cash flows from investing activities:
Cash in trust fund. . . . . . . . . . . . . . . . . . . . . . (8,383,500) (8,383,500)
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Cash flows from financing activities:
Proceeds from public offering,
net of underwriting discount and
offering expenses . . . . . . . . . . . . . . . . . . . . . 9,113,784 8,953,557
Registration costs. . . . . . . . . . . . . . . . . . . . . . (149,729)
Proceeds from bridge notes payable. . . . . . . . . . . . . . 200,000 200,000
Advances from stockholders. . . . . . . . . . . . . . . . . . 8,000 8,000
Repayment of bridge notes payable . . . . . . . . . . . . . . (200,000) (200,000)
Repayments to stockholders. . . . . . . . . . . . . . . . . . (8,000) (8,000)
Proceeds from sale of common stock to
founding stockholders . . . . . . . . . . . . . . . . . . . 25,000 25,000
Financing costs . . . . . . . . . . . . . . . . . . . . . . . (27,050) (27,050)
Organization costs. . . . . . . . . . . . . . . . . . . . . . (5,171) (5,195)
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Net cash provided by financing activities. . . . . . . 8,913,784 43,050 8,946,312
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NET INCREASE IN CASH . . . . . . . . . . . . . . . . . . . . . . 352,258 42,089 383,820
Cash at beginning of period. . . . . . . . . . . . . . . . . . . 31,562
--------- --------- -----------
CASH AT END OF PERIOD. . . . . . . . . . . . . . . . . . . . . . $ 383,820 $ 42,089 $ 383,820
========== ====== ===========
Supplemental disclosures of noncash
transactions:
Registration costs included in accrued expenses and amounts
due to shareholder. . . . . . . . . . . . . . . . . . . $ - 0 - 34,062 $ 3,809
The accompanying notes
are an integral part of the financial statements.
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HEALTHCARE ACQUISITION CORP.
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
The financial information herein is unaudited. However, in the opinion
of management, such information reflects all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation of the results of
operations for the periods being reported. Additionally, it should be noted
that the accompanying financial statements do not purport to contain complete
disclosures in conformity with generally accepted accounting principles.
The results of operations for the nine months ended September 30, 1996
are not necessarily indicative of the results of operations for the full fiscal
year ending December 31, 1996. The balance sheet as of December 31, 1995 was
extracted from the audited balance sheet appearing in the Company's Form 10-K
for the year ended December 31, 1995.
These statements should be read in conjunction with the Company's
financial statements for the period March 21, 1995 (inception) to December 31,
1995 appearing in the Company's Form 10-K for the year ended December 31, 1995.
(NOTE 1) - Organization and Business Operations:
Healthcare Acquisition Corp. (the "Company") was incorporated in
Delaware on March 21, 1995 with the objective of acquiring or merging with an
operating business in the healthcare industry. The Company's founding
directors and advisors purchased 425,000 common shares, $.001 par value, in
April 1995. In January 1996, the stockholders contributed 100,000 shares back
to the Company. In addition, in March 1996, the Company effected a 1 2/13 for
1 stock split. The contribution and stock split have been reflected
retroactively in the accompanying financial statements. The Company has
selected December 31 as its fiscal year-end.
The Company consummated an initial public offering of its common stock
on March 13, 1996 (the "Offering") and raised net proceeds of approximately
$7,826,000. On March 25, 1996 and April 10, 1996, the underwriters of the
Offering exercised their over-allotment option and the Company received net
proceeds of approximately $864,000 and $351,000, respectively. The Company's
management has broad discretion with respect to the specific application of the
net proceeds of the Offering, although substantially all of the net proceeds of
the Offering are intended to be generally applied toward consummating a
business combination with an operating business engaged in the healthcare
industry (the "Business Combination"). Furthermore, there is no assurance that
the Company will be able to successfully effect a Business Combination. As of
September 30, 1996, $8,617,000 or $5.00 per share held by the Public
Stockholders (as defined below) is being held in a trust account (the "Trust
Fund"), and has been invested in government securities until the earlier of (i)
the consummation of a Business Combination or (ii) the liquidation of the
Company. The remaining proceeds may be used to pay for business, legal and
accounting due diligence on prospective acquisitions, and continuing general
and administrative expenses in addition to other expenses.
The Company, after signing a definitive agreement for the acquisition
of a target business, will submit such transaction for stockholder approval.
All of the Company's stockholders immediately prior to the Offering, including
all of the officers, directors and the advisors of the Company (the "Initial
Stockholders"), have agreed to vote the shares of common stock owned by
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them as of the effective date of the Offering in accordance with the vote of
the majority in interest of all other stockholders of the Company (the "Public
Stockholders") with respect to any Business Combination. After consummation of
the Company's first Business Combination, this voting safeguard will no longer
be applicable.
With respect to the first Business Combination which is approved and
consummated, any Public Stockholder who votes against the Business Combination
may demand that the Company convert his shares into cash. The per share
conversion price will equal the amount in the Trust Fund as of the record date
of determination of stockholders entitled to vote on the Business Combination
divided by the number of shares held by Public Stockholders. The Company will
not consummate a Business Combination if 20% or more in interest of the Public
Stockholders exercise their conversion rights. Accordingly, Public
Stockholders holding approximately 19.99% of the aggregate number of shares
owned by all Public Stockholders may have their shares converted to cash in the
event of a Business Combination. Such Public Stockholders are entitled to
receive their per share interest in the Trust Fund, computed without regard to
shares held by Initial Stockholders.
The Company's Certificate of Incorporation provides for mandatory
liquidation of the Company, without stockholder approval, in the event that the
Company does not consummate a Business Combination within 18 months from the
date of the consummation of the Offering, or 24 months from the consummation of
the Offering if certain extension criteria have been satisfied. In the event
of liquidation, it is likely that the per share value of the residual assets
remaining available for distribution (including Trust Fund assets) will be less
than the initial public offering price per share in the Offering.
(NOTE 2) - Net loss per share:
Net loss per common share is computed on the basis of the weighted
average number of common shares outstanding during the period. Warrants to
purchase shares of common stock are anti-dilutive and are excluded from the
calculation.
(NOTE 3) - Merger Agreement:
On November 12, 1996, the Company, Healthcare Acquisition, Inc., a
newly formed wholly-owned subsidiary of the Company ("Acquisition"), and Encore
Orthopedics, Inc. ("Encore") entered into an Agreement and Plan of Merger
("Merger Agreement") pursuant to which Acquisition will merge with and into
Encore, with Encore being the surviving corporation and becoming a wholly-owned
subsidiary of the Company. The consummation of the transactions contemplated
by the Merger Agreement are subject, among other conditions, to the prior
approval of the stockholders of the Company and Encore.
The Company will file a Report on Form 8-K with the Securities and
Exchange Commission as soon as practicable which will summarize the basic terms
and conditions of the Merger Agreement and include the Merger Agreement as an
Exhibit.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
Healthcare Acquisition Corp. (the "Company") is a newly organized
"Special Purpose Acquisition Company," the objective of which is to acquire or
merge with an operating business in the Healthcare Industry (a "Business
Combination"). The Company was incorporated on March 21, 1995. The Initial
Stockholders (as hereinafter defined) paid an aggregate of $25,000 for a total
of 375,000 shares of Common Stock and have agreed to contribute an additional
$25,000 to the Company if it liquidates prior to the consummation of a Business
Combination.
In May 1995, the Company consummated a "Bridge Financing" in order to
pay certain organizational expenses, the costs of such Bridge Financing and
certain costs of the Company's initial public offering of its securities (the
"IPO"). Six Bridge Investors loaned an aggregate of $200,000 to the Company
and were issued promissory notes ("Bridge Notes") in that amount, bearing
interest at the rate of 10% per annum and 400,000 warrants to purchase shares
of Common Stock ("Bridge Warrants"). The Bridge Notes were paid in full with a
portion of the proceeds from the IPO which was consummated on March 13, 1996.
The Bridge Warrants are identical to the Warrants issued by the Company in the
IPO except that they are not redeemable by the Company until 90 days after
consummation of a Business Combination and the Bridge Investors have agreed not
to transfer the Bridge Warrants until after the consummation of a Business
Combination and not to exercise them until 90 days after such consummation.
The resale of the Bridge Warrants and the issuance of the underlying Common
Stock ("Bridge Warrant Shares") were registered under the Registration
Statement filed with respect to the IPO.
On March 13, 1996, the Company consummated the IPO and the Company
received net proceeds of approximately $7,609,000, after the Company repaid the
Bridge Notes, including the interest thereon, and the payment of offering
expenses. $7,290,000 of such proceeds were placed in a "Trust Fund" and
invested in United States Government Securities. The Company's management has
broad discretion with respect to the specific application of the net proceeds
of the IPO, although substantially all of the net proceeds will be used toward
consummating a Business Combination with an operating business in the
Healthcare Industry. There is no assurance that the Company will be able to
successfully effect a Business Combination. The amounts in the Trust Fund will
not be released until the earlier of the consummation of a Business Combination
or the liquidation of the Company. The remaining net proceeds will be used to
pay for business, legal and accounting due diligence on prospective Target
Businesses, and to pay for the general and administrative expenses of the
Company, including legal and accounting fees and expenses in connection with
the Company's reporting obligations to the Securities and Exchange Commission.
On March 25, 1996, the underwriters of the IPO exercised a portion of
their over-allotment option pursuant to the IPO and the Company received net
proceeds of approximately $864,000. From these proceeds, approximately
$777,600 has been placed in the Trust Fund and invested in government
securities.
On April 10, 1996, the underwriters of the IPO exercised the remaining
portion of their over-allotment option and the Company received additional net
proceeds of approximately $351,000. From these proceeds, approximately
$315,900 has been placed in the Trust Fund and invested in government
securities.
In the event that the Company does not consummate a Business
Combination by September 13, 1997 (March 13, 1998 if certain extension criteria
are met), the Company will dissolve and will distribute to all the stockholders
other than the Initial Stockholders ("Public Stockholders") in
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proportion to their respective equity interests in the Company, an aggregate
sum equal to the amount in the Trust Fund, inclusive of any interest thereon,
plus any remaining net assets of the Company. All of the Company's
stockholders immediately prior to the IPO ("Initial Stockholders") have waived
their respective rights to participate in any liquidation distribution with
respect to the shares of Common Stock owned by them immediately prior to the
IPO. A Public Stockholder is also entitled to receive funds from the Trust
Fund in the event that such stockholder seeks redemption of his shares in
connection with a Business Combination which the stockholder votes against and
which is actually consummated by the Company.
Prior to the consummation of a Business Combination, substantially all
of the Company's working capital will be used to identify, evaluate and select
a suitable Target Business and, thereafter, to structure and negotiate a
Business Combination with such Target Business. Such working capital needs are
expected to be satisfied from the net proceeds of the IPO not deposited in the
Trust Fund.
On November 12, 1996, the Company, Healthcare Acquisition, Inc., a
newly formed wholly-owned subsidiary of the Company ("Acquisition"), and Encore
Orthopedics, Inc. ("Encore") entered into an Agreement and Plan of Merger
("Merger Agreement") pursuant to which Acquisition will merge with and into
Encore, with Encore being the surviving corporation and becoming a wholly-owned
subsidiary of the Company. The consummation of the transactions contemplated
by the Merger Agreement are subject, among other conditions, to the prior
approval of the stockholders of the Company and Encore.
The Company will file a Report on Form 8-K with the Securities and
Exchange Commission as soon as practicable which will summarize the basic terms
and conditions of the Merger Agreement and include the Merger Agreement as an
Exhibit.
Item 6. EXHIBITS
(a) Exhibits
Exhibit 27.1 - Financial Data Schedule(for SEC use only).
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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 duly authorized.
Date: November 7, 1996 HEALTHCARE ACQUISITION CORP.
(Registrant)
By: /s/ John H. Abeles
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John H. Abeles
President and Treasurer:
(Principal Financial Officer)
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