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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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 3, 1997
ACCUMED INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-20652 36-4054899
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
900 N. FRANKLIN STREET, SUITE 401, CHICAGO, ILLINOIS 60610
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 642-9200
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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 3, 1997, AccuMed International, Inc., a Delaware corporation
(the "Company"), acquired (the "Acquisition") from Difco Microbiology Systems,
Inc., a Michigan corporation ("Difco"), certain assets (the "Purchased Assets")
and liabilities related to the ESP Culture System II product line (the "ESP
Product Line") including certain agreements with customers, purchase orders,
and patents, trademarks, trade secrets and other intellectual property relating
to the ESP Product Line (together with the ESP Product Line, the "ESP
Business") for an aggregate purchase price of $6.0 million in cash pursuant to
the terms of the Asset Purchase Agreement dated as of March 3, 1997 (the "Asset
Purchase Agreement"). The Company incurred approximately $138,000 in
acquisition-related fees and expenses. The terms of the transaction are more
fully described in the Asset Purchase Agreement filed as Exhibit 2.1 to this
report.
The ESP Product Line consists of disposables, software and instruments
for the growth and detection of microorganisms in blood cultures, sterile body
fluids and mycobacteria samples.
Of the purchase price, $5.6 million in cash was paid to Difco at the
closing and $400,000 was deposited into escrow (the "Escrow Funds"). If no
claim is filed by the Company against Difco seeking indemnification for losses
arising out of breaches of representations, warranties or covenants of Difco
contained in the Asset Purchase Agreement on or prior to March 3, 1998, the
Escrow Funds will be released to Difco on such date. If the Company files one
or more such claim on or prior to March 3, 1998, (i) an amount equal to the
aggregate losses claimed by the Company will be retained in escrow pending
resolution of such claim(s), and (ii) upon resolution thereof, such funds will
be released to either Difco or the Company, depending upon the resolution of
such claim(s).
The purchase price of the Acquisition was funded from the proceeds of
a loan (the "Bridge Loan") in the principal amount of $6.0 million made
pursuant to a Loan Agreement dated as of February 19, 1997 among the Company
and Robert L. Priddy and Edmund H. Shea, Jr. (each of Messrs. Priddy and Shea
are security holders of the Company and, collectively, are referred to as the
"Lender"), evidenced by a Convertible Promissory Note dated as of February 19,
1997 made by the Company in favor of the Lender. Interest on the indebtedness
under the Bridge Loan accrued at a rate of 12% per annum payable at maturity.
All amounts owed to the Lender by the Company pursuant to the Bridge Loan,
including an aggregate of $130,000 representing the loan origination fee,
interest and the prepayment premium were paid in full as of March 14, 1997
with a portion of the proceeds of the private placement of the Company's
securities descried in the following paragraph.
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On March 14, 1997, the Company consummated a private placement (the
"Private Placement") of 85 Units each consisting of $100,000 in principal
amount of 12% Convertible Promissory Notes (the "Notes") and Warrants (the
"Warrants") to purchase 10,000 shares of the Company's common stock, par value
$0.01 per share (the "Common Stock"). The Company received net proceeds of
approximately $7.8 million from the Private Placement after deducting
commissions and related expenses. Commonwealth Associates, Inc. acted as
placement agent in the Private Placement for which it received from the Company
(i) cash commissions equal to 7% of the gross proceeds, (ii) five-year warrants
to purchase 200,000 shares of Common Stock at an exercise price of $3.125 per
share, and (iii) an accountable expense reimbursement of $56,500 in cash.
The Notes bear interest at the rate of 12% per annum, payable
semi-annually in arrears on August 15 and February 15 of each year during the
term of the Notes. Principal under the Notes is due March 14, 2000.
Commencing three months following the date of issuance, and subject to
shareholder approval of an amendment to the Certificate of Incorporation (the
"Charter Amendment") to increase the authorized shares of Common Stock by an
amount sufficient to permit the Company to reserve for issuance a sufficient
number of shares to allow for the conversion of the Notes, the Notes will
become convertible at the option of the holder into shares of Common Stock at a
conversion price equal to $3.125 (the "Conversion Price"). If the Company does
not have sufficient authorized shares to accommodate conversion of the Notes by
May 31, 1997, (i) the Notes will become due and payable 30 days thereafter at
an amount equal to 150% of the outstanding principal amount, and (ii) the
Conversion Price will be reduced by 20%. If the Company defaults on its
obligations to pay interest or principal under the Notes, (i) the interest rate
thereunder will increase to 16% per annum during the continuance of such
default, (ii) the Conversion Price will be reduced by 20%, and (iii) the
holders will have the right to accelerate the Notes. During the three months
beginning March 14, 1997, the Company may redeem the Notes at an amount equal
to 110% of the outstanding principal amount; if the Company so redeems the
Notes, the term of the Warrants will be extended from six months to five years
following March 14, 1997. Thereafter, the Company may redeem the Notes at the
amount of outstanding principal if the Common Stock has traded for a minimum of
20 consecutive days trading days at a minimum price of 175% of the Conversion
Price, if the Notes are then convertible.
The Warrants are exercisable to purchase Common Stock at an exercise
price of $3.125 per share. Of the 10,000 Warrants included in each Unit, 8,823
are immediately exercisable for a period of six months following March 14,
1997, and 1,177 Warrants will become immediately exercisable upon effectiveness
of the Charter Amendment and will remain exercisable for six months
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thereafter. If the Notes are redeemed by the Company within three months
following March 14, 1997, the term of the Warrants will be reset to March 14,
2002.
The Company has agreed to register the resale of the Common Stock
underlying the Notes and the Warrants under the Securities Act of 1933, as
amended. If the Company fails to file with the Securities and Exchange
Commission a registration statement covering such underlying Common Stock on or
prior to May 31, 1997, (i) the interest rate on the Notes will increase to 16%
per annum until such registration statement is filed, and (ii) the Conversion
Price will be reduced by 20%.
Among the Purchased Assets are certain pieces of manufacturing
equipment which had been used by affiliates of Difco to manufacture the
disposable bottles which comprise part of the ESP Product Line. The Company
intends to continue to use such equipment to manufacture, directly or through a
third-party manufacturer, such disposable bottles. (Concurrent with entering
into the Asset Purchase Agreement, the Company entered into a Manufacturing
Agreement with affiliates of Difco pursuant to which such affiliates will
manufacture such disposable bottles, using such equipment, for the Company for
a period of two years.) Other of the Purchased Assets include molds, robotics
and conveyor equipment used to manufacture a component for the instruments
which comprise part of the ESP Product Line. Such assets are located at the
facilities of a third party manufacturer. The Company intends that such assets
will continued to be used to manufacture such component, either directly by the
Company or through a third party.
The amount of consideration paid in the Acquisition was determined by
the Board of Directors with reference to the value of the ongoing ESP Business
and the Purchased Assets, net of assumed liabilities. The net assets acquired
primarily consist of instruments, production machinery and equipment, accounts
receivable, inventories, patents, trademarks, trade secrets, know-how and other
intellectual property. The Board of Directors also considered the rights and
obligations of the Company under certain ancillary agreements entered into with
Difco and/or its affiliates simultaneous to consummation of the Acquisition.
The foregoing discussion of the information and factors considered and
given weight by the Company's Board of Directors in determining the amount of
consideration is not intended to be exhaustive. In view of the variety of
factors considered in connection with its evaluation of the Acquisition, the
Board of Directors did not find it practicable to and did not quantify or
otherwise assign relative weights to the specific factors considered in
reaching its determination.
The purchase price of $6.0 million was paid in cash. Using
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the purchase method of accounting, the purchase price will be allocated based
on the fair value of the assets acquired and liabilities assumed.
Prior to entering into the Asset Purchase Agreement and the ancillary
agreements, there were no material relationships between the Company and its
officers or directors or associates of any such officer or director, on the one
hand, and Difco or any of its respective officers or directors or associates of
any such officer or director, on the other hand, except that from November 1994
until early 1996, the Company and Difco's parent corporation were adverse
parties in patent infringement litigation which was settled in early 1996.
Item 7. Financial Statements and Exhibits
(a) Financial Information of Business Acquired:
It would be impracticable for the Company to file herewith the
financial statements of the ESP Business required to be filed pursuant to this
Item. The financial statements listed below will be filed by amendment to this
Current Report on Form 8-K as soon as they are available, but in no event later
than May 17, 1997 (60 days after the date on which this Current Report on Form
8-K is required to be filed).
ESP Business Audited Financial Statements for the years ended
December 31, 1995 and 1996.
(b) Pro Forma Financial Information:
It would be impracticable for the Company to file herewith the pro
forma financial information required to be filed pursuant to this Item. Such
pro forma financial information will be filed by amendment to this Current
Report on Form 8-K as soon as it is available, but in no event later than May
17, 1997 (60 days after the date on which this Current Report on Form 8-K is
required to be filed).
AccuMed International, Inc. Pro Forma Financial Statements as
of December 31, 1996 and for the year ended December 31, 1996.
(c) Exhibits:
2.1 Asset Purchase Agreement between the Registrant and Difco Microbiology
Systems, Inc., dated as of March 3, 1997.
23.1 Consent of Perrin Fordree & Company, P.C. (to be filed by amendment).
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SIGNATURE
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.
Dated: March 18, 1997
ACCUMED INTERNATIONAL, INC.
By: /s/ LEONARD R. PRANGE
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Leonard R. Prange
Chief Financial Officer
and Corporate Vice President
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EXHIBIT INDEX
NO. EXHIBIT
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2.1 Asset Purchase Agreement between the Registrant and Difco Microbiology Systems, Inc.,
dated as of March 3, 1997.
23.1 Consent of Perrin Fordree & Company, P.C. (to be filed by amendment).
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