FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 30, 1996
EDITEK, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-11394 95-3863205
(Commission File Number) (IRS Employer Identification No.)
1238 Anthony Road
Burlington, North Carolina 27215
(Address of principal executive offices) (Zip Code)
(910) 226-6311
(Registrant's telephone number, including area code)
Item 2. Acquisition or Disposition of Assets.
The Registrant entered into an agreement (the "Asset Purchase
Agreement") dated as of July 1, 1995, as amended by Amendment Agreements dated
as of January 2, 1996 and January 30, 1996 (the "Amendment Agreements")
(collectively, the "Purchase Agreement") with MedTox Laboratories, Inc.
("MedTox"), a Minnesota corporation involved in the performance of toxicological
testing services, including forensic, medical, biological and pharmacological
toxicology, to acquire substantially all of the assets of MedTox. By agreement
dated as of January 10, 1996, the Registrant assigned its rights to purchase the
assets to Psychiatric Diagnostic Laboratories of America, Inc. ("Psychiatric"),
a Delaware corporation and a wholly-owned subsidiary of Princeton Diagnostic
Laboratories of America, Inc., a Delaware corporation and a wholly-owned
subsidiary of the Registrant. On January 30, 1996 (the "Closing Date") the
Registrant closed the MedTox acquisition.
The Registrant intends to use the assets acquired from MedTox to
continue the toxicological testing business formerly conducted by MedTox. The
Registrant believes that the acquisition of the MedTox assets will enable the
Registrant to expand substantially its toxicological testing presence in the
United States and Canada and to obtain cost savings from the Registrant's
current laboratory operations. The Registrant has hired 247 former employees
of MedTox, which brings to 362 the number of employees of the Registrant.
The terms of the MedTox Transaction and the related Preferred Stock
financing were negotiated at arms' length, and no material relationship exists
between MedTox and the Registrant or between MedTox and Psychiatric.
Set forth below is a summary of some of the material terms of the
Purchase Agreement and other transactions related thereto (collectively, the
"MedTox Transaction"), which summary should be read in conjunction with the full
terms of the Purchase Agreement and other related agreements, copies of which
are included as exhibits hereto and are incorporated herein in their entirety.
Upon closing, the Registrant's assignee, Psychiatric, acquired
substantially all of the assets of MedTox, including all the tangible and
intangible assets (other than cash in bank accounts) owned by MedTox as of the
closing, including, without limitation, all accounts receivable, all inventory,
equipment, contracts, leases, subleases, licenses, customer and supplier lists,
certain business records, trade secrets, tradenames and marks and other
intellectual property. Certain of the liabilities of MedTox were also assumed by
the Registrant and Psychiatric in connection with the acquisition, as more fully
described in the Agreement.
The Purchase Agreement provides for a purchase price for the MedTox
assets of $24,000,000, of which (i) $19,000,000 was paid in cash and (ii)
$5,000,000 was paid in the form of 2,517,306 shares ("MedTox Shares") of the
Common Stock of the Registrant, par value $.15 per share (the "Common Stock"),
which number of shares is subject to upward adjustment as described below in
"Additional Shares For MedTox Shareholders." The cash portion of the purchase
price was financed by the Registrant through sale of 380 shares of Series A
Convertible
Preferred Stock ("Series A Preferred Stock") and debt financing
from Heller Financial, Inc. ("Heller") (the "Debt Financing.") In
addition, the Registrant sold an additional 235,295 shares of common
stock to Dr. Harry McCoy, a Medtox shareholder, (the "McCoy Shares"), and
27 shares of Series A Convertible Preferred Stock for working capital
purposes bringing the total number of Series A Preferred Shares sold to
407. The material terms of the Series A Preferred Stock and the Debt
Financing are described below.
Additional Shares For MedTox Shareholders
The Purchase Agreement provides that, if after the Closing Date the
market value of the Common Stock of the Registrant declines below $1.986 per
share, the Registrant will issue additional shares of Common Stock ("Additional
Shares") to shareholders of MedTox who retain their shares of Common Stock
through four specified dates (the "Repricing Dates") to compensate the MedTox
shareholders for decreases after the closing of the MedTox Transaction in the
market price of the Common Stock of the Registrant below $1.986 per share. The
Repricing Dates are the fifth trading day following the date the Registrant
issues press releases announcing its financial performance for the fiscal
quarters ending on March 31, 1996, September 30, 1996 and September 30, 1997 and
the fiscal year ending on December 31, 1996. Because the number of Additional
Shares that may become issuable is tied to decreases in the market price of the
Common Stock, the number of Additional Shares issuable in the future in
connection with the MedTox Transaction cannot be determined at this time and
will depend upon changes in the market price of the Common Stock, as well as the
extent to which MedTox shareholders retain the MedTox shares on each of the
Repricing Dates. Substantial sales of shares of Common Stock by the MedTox
shareholders or purchasers of Series A Preferred Stock may have a material
adverse effect on the market price of the Common Stock of the Registrant, which
would increase the number of Additional Shares issuable to MedTox shareholders
on the Repricing Dates.
Debt Financing
To obtain funds necessary to complete the MedTox Transaction and to
provide for the Registrant's working capital needs, the Registrant and its
affiliated entities, Psychiatric and diAGnostix, Inc., a Delaware corporation
and a wholly-owned subsidiary of the Registrant, entered into a credit facility
consisting of two term loans in the amount of $2,000,000 each, one with an
eighteen-month term and the other with a three-year term, and a revolving line
of credit of up to $7,000,000 (the "Credit Facility") with the amount available
under the Credit Facility dependent upon the amount of assets available to
secure borrowings under the Credit Facility. As of January 30, 1996
approximately $2,900,000 million was available under the Credit Facility, of
which approximately $1,000,000 has been drawn down by the Registrant. The
closing for the term loans and the Credit Facility occurred on January 30, 1996.
In connection with the Debt Financing, the Registrant and its
subsidiaries have granted Heller a security interest in substantially all their
assets and have agreed to comply with many financial and other covenants which
restrict operations of the Registrant and its subsidiaries, including the
ability to pay dividends. These security interests and covenants are contained
in agreements attached as exhibits hereto.
Series A Preferred Stock
The 407 shares of Series A Preferred Stock were sold for $50,000 per
share with the initial sales occurring on January 30, 1996 (the "Initial
Issuance Date"). Each share of Series A Preferred Stock is convertible into
shares of Common Stock, at any time on or after March 30, 1996 (60 days after
the Initial Issuance Date). On the second anniversary of the Initial Issuance
Date conversion rights terminate and any remaining shares of Series A Preferred
Stock will be automatically converted, unless the holder provides the Registrant
with prior written notice that conversion is not desired.
The number of shares of Common Stock issuable upon conversion of a
share of Series A Preferred Stock will equal the number derived by dividing (i)
the purchase price of the Series A Preferred Stock ($50,000 per share) by (ii)
the lower of (x) $2.775 or (y) 75% of the Market Price of the Common Stock on
the day the shares of Preferred Stock are converted into Common Stock. "Market
Price" is defined for this purpose as the daily average of the closing bid
prices quoted on the American Stock Exchange or other exchange on which the
Common Stock is traded for the five trading days immediately preceding the date
the shares are converted. Accordingly, a minimum of 7,333,333 shares of Common
Stock are issuable upon conversion of the 407 outstanding shares of Series A
Preferred Stock. However, the actual number of shares of Common Stock issuable
upon conversion of the Series A Preferred Stock will not be known until the
time of issuance of such Common Stock. Substantial sales of Common Stock
by the MedTox shareholders and purchasers of Series A Preferred Stock may
have a material adverse effect on the market price of the Registrant's Common
Stock, which would increase the number of shares of Common Stock issuable upon
conversion of the Series A Preferred Stock.
The Series A Preferred Stock has a liquidation preference and a 9%
annual dividend (cumulative until December 31, 1997) and very limited voting
rights, as described in the Amended Certificate of Designations of Preferred
Stock, a copy of which is attached as an Exhibit hereto.
Resales of Securities
The Registrant has issued the 2,517,306 MedTox Shares, 235,295 McCoy
Shares and 104 shares of Series A Preferred Stock pursuant to an exemption
from the registration requirements of the Securities Act of 1933, as amended
(the 1933 Act"), afforded by Regulation D of the Securities and Exchange
Commission (the "Commission").
The Registrant has agreed to use its best efforts to register for
resale with the Commission the Common Stock issuable upon conversion of such
shares of Series A Preferred Stock (the "Conversion Shares"), the MedTox
Shares, the Additional Shares (as defined above), the McCoy Shares and 586,667
shares of Common Stock issuable pursuant to warrants issued as compensation to
Shoreline Pacific for investment banking services in connection with sales of
Series A Preferred Stock.
In addition, 303 shares of Series A Preferred Stock were sold by the
Registrant pursuant to Regulation S of the Commission (the "Offshore Offering").
The Registrant does not expect to file a registration statement with respect to
these shares of Series A Preferred Stock.
Regulation S generally provides that offers or sales that occur outside
the United States and in compliance with the requirements thereof are not
subject to the registration requirements of the Act. Subject to certain
restrictions and conditions set forth therein, Regulation S is available for
offers and sales to investors that are not in the U.S. Such offshore investors
who purchase the shares of Series A Preferred Stock in the Offshore Offering
pursuant to Regulation S are not permitted to transfer such shares or Conversion
Shares to a U.S. Person (defined generally as a resident of the U.S. or an
entity organized under the laws of the U.S.) for a period of at least 40 days
after February 2, 1996, the closing of the Offshore Offering (the "Restricted
Period"). Resales to buyers who are not U.S Persons are permitted at any time.
After the expiration of the Restricted Period, investors who purchased
shares of Series A Preferred Stock in the Offshore Offering may sell such shares
or Conversion Shares in the U.S., but only if such shares are registered or an
exemption from registration is available. Accordingly, beginning on March 30,
1996 (the first day any investor will be able to convert shares of Series A
Preferred Stock into shares of Common Stock), to the extent that any offshore
investors have converted their shares of Series A Preferred Stock into Common
Stock, such offshore investors will also be able to sell such Common Stock in
the U.S. if the shares are registered or an exemption is available.
The investors participating in the Offshore Offering who can resell in
accordance with Regulation S do not have registration rights to require the
Registrant to register for resale the Conversion Shares issuable upon conversion
of shares of Series A Preferred Stock. Therefore, sales of Conversion Shares for
such offshore investors must be made in compliance with an exemption from
registration. The stock certificates for the Conversion Shares will not contain
restrictive securities legends. Consequently, the Registrant will not be able to
prevent resales of Series A Preferred Stock or Conversion Shares by offshore
investors and each offshore investor will make its own determination whether
such sales qualify for exemptions from registration.
If substantial sales of the Registrant's Common Stock occur, whether by
the investors in the Offshore Offering or by U.S. investors pursuant to the
registration statement or otherwise, such sales could have a material adverse
affect on the market price of the Registrant's Common Stock.
Item 5. Other Events.
Effective January 31, 1996, the Board of Directors of the Registrant
elected two additional members to the Board of Directors of the Registrant,
bringing the total number of Directors to six. Dr. Harry McCoy was the President
and Co-Founder of MedTox. Dr. McCoy received his Bachelors Degree in Biology
from the University of California, San Diego and a Doctorate in Pharmacy from
the University of California, San Francisco. He conducted his clinical
internship at the Stanford Medical Center, University of California and
pursued his Post-Doctoral Fellowship in Pharmacokinetics with the
University of Minnesota where he held joint faculty appointments at the
University of Minnesota College of Pharmacy and the Section of Clinical
Pharmacology at the St. Paul-Ramsey Medical Center.
Mr. George Masters is Vice Chairman, President and Chief Executive
Officer of Seragen, Inc. Mr. Masters has spent his entire business career in the
healthcare industry, including 20 years with Warner-Lambert. He left
Warner-Lambert in 1983 as a Group President, and for the past 12 years has held
senior management positions with a number of biotechnology companies. Mr.
Masters has been a board member of approximately fifteen medically oriented
companies and currently serves as a member of the Board of Directors of: CME
Telemetrix, Hemosol, Inc., ImmuCell Corporation, Intelligent Medical Imaging,
and Seragen. Mr. Masters is on the Board of Directors of the Biotechnology
Industry Organization in Washington, DC and serves on its Executive Committee.
He is on the Board of Visitors of Boston University School of Medicine and the
Board of Associates of the Whitehead Institute for Biomedical Research at MIT.
He also acts as an investment advisor to three venture capital funds.
Item 7. Financial Statements and Exhibits.
(a) Financial statements.
Audited Consolidated Balance Sheets, Statements of Operations
and Cash Flows for MedTox Laboratories, Inc. for fiscal years
ended December 31, 1993 and December 31, 1994. (Incorporated
by reference to the Registrant's Proxy Statement dated
September 25, 1995.)
Interim Consolidated Balance Sheets, Statements of Operations
and Cash Flows for MedTox Laboratories, Inc. for the nine
months ended September 30, 1995.
(b) Pro Forma Financial Information.
EDITEK, Inc. and MedTox Laboratories, Inc. Pro Forma Condensed
Balance Sheet as of September 30, 1995 and Statements of
operations for fiscal year ended December 31, 1994 and Nine
Months ended September 30, 1995.
(c) Exhibits.
3.1 Amended Certificate of Designations of Series A
Convertible Preferred Stock.
10.1 Asset Purchase Agreement dated as of July 1, 1995
between EDITEK, Inc. and MedTox Laboratories, Inc.
10.2 Amendment Agreement dated as of January 2, 1996
between EDITEK, Inc. and MedTox Laboratories, Inc.
10.3 Amendment Agreement dated as of January 30, 1996
among the Registrant, MedTox Laboratories, Inc. and
Psychiatric Diagnostic Laboratories of America, Inc.
10.4 Loan and Security Agreement (together with the
Exhibits and Schedules thereto) by and between the
Registrant, Psychiatric Diagnostic Laboratories of
America, Inc., diAGnostix, Inc. and Heller Financial,
Inc., dated January 30, 1996.
10.5 Term Note A executed by the Registrant, Psychiatric
Diagnostic Laboratories of America, Inc. and
diAGnostix in favor of Heller Financial, Inc., dated
January 30, 1996.
10.6 Term Note B executed by the Registrant, Psychiatric
Diagnostic Laboratories of America, Inc. and
diAGnostix in favor of Heller Financial, Inc., dated
January 30, 1996.
10.7 Assignment for Security (Patents) executed by the
Registrant in favor of Heller Financial, Inc., dated
January 30, 1996.
10.8 Assignment for Security - EDITEK (Trademarks)
executed by the Registrant in favor of Heller
Financial, Inc., dated January 30, 1996; and
10.9 Assignment for Security - Princeton (Trademarks)
executed by Princeton Diagnostic Laboratories of
America, Inc. in favor of Heller Financial, Inc.,
dated January 30, 1996.
10.10 Lease Agreement between MedTox Laboratories, Inc.
and Phoenix Home Life Mutual Insurance Company, dated
April 1, 1992, and amendments to such lease.
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.
EDITEK, INC.
Date: February 7, 1996 By: /s/ Peter J. Heath
Name: Peter J. Heath
Title: Vice President of Finance
and Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Description
(a) Interim Consolidated Balance Sheets, Statements of Operations and Cash Flows for MedTox
Laboratories, Inc. for the nine months ended September 30, 1995.
(b) EDITEK, Inc. and MedTox Laboratories, Inc. Pro Forma Condensed Balance Sheet as of
September 30, 1995 and Statements of Income for fiscal year ended December 31, 1994
and Nine Months ended September 30, 1995.
3.1 Amended Certificate of Designations of Series A Convertible Preferred Stock.
10.1 Asset Purchase Agreement dated as of July 1, 1995 between EDITEK, Inc. and MedTox
Laboratories, Inc.
10.2 Amendment Agreement dated as of January 2, 1996 between EDITEK, Inc. and MedTox
Laboratories, Inc.
10.3 Assignment Agreement dated as of January 10, 1996 among the Registrant, MedTox
Laboratories, Inc. and Psychiatric Diagnostic Laboratories of America, Inc.
10.4 Loan and Security Agreement (together with the Exhibits and Schedules thereto) by and
between the Registrant, Psychiatric Diagnostic Laboratories of America, Inc., diAGnostix,
Inc. and Heller Financial, Inc., dated January 30, 1996.
10.5 Term Note A executed by the Registrant, Psychiatric Diagnostic Laboratories of America,
Inc. and diAGnostix in favor of Heller Financial, Inc., dated January 30, 1996.
10.6 Term Note B executed by the Registrant, Psychiatric Diagnostic Laboratories of America,
Inc. and diAGnostix in favor of Heller Financial, Inc., dated January 30, 1996.
10.7 Assignment for Security (Patents) executed by the Registrant in favor of
Heller Financial, Inc., dated January 30, 1996.
10.8 Assignment for Security - EDITEK (Trademarks) executed by the Registrant in favor of
Heller Financial, Inc., dated January 30, 1996.
10.9 Assignment for Security - Princeton (Trademarks) executed by Princeton Diagnostic
Laboratories of America, Inc. in favor of Heller Financial, Inc., dated January 30, 1996.
10.10 Lease Agreement between MedTox Laboratories, Inc. and Phoenix Home Life Mutual Insurance
Company, dated April 1, 1992, and amendments to such lease.
Exhibit (a)
MEDTOX LABORATORIES, INC.
AND SUBSIDIARY
Consolidated Balance Sheet
9/30/95 12/31/94
--------------------------------
(unaudited)
Current assets:
Cash and cash equivalents $ 2,034,921 $ 526,512
Accounts receivable, less allowance for
doubtful accounts 3,438,523 2,966,466
Laboratory supplies 310,395 413,301
Prepaid expenses and other current assets 179,386 107,622
--------------------------------
Total current assets 5,963,225 4,013,901
Property and equipment:
Laboratory equipment 4,736,097 4,108,629
Office furniture and fixtures 372,764 370,685
Leasehold improvements 543,277 426,017
Transportation equipment 315,819 304,891
--------------------------------
Total property and equipment 5,967,957 5,210,222
Less accumulated depreciation (4,169,368) (3,700,312)
--------------------------------
Net property and equipment 1,798,589 1,509,910
Other assets, net of related amortization:
Software 66,505 84,242
Goodwill 5,331 9,022
Deposits and other 18,629 19,596
--------------------------------
Total other assets 90,465 112,860
--------------------------------
Total assets $ 7,852,279 $ 5,636,671
================================
Current Liabilities
Accounts payable $ 639,451 $ 98,218
Accrued salary and wages 287,724 335,120
Accrued expenses 1,114,215 761,700
Restructuring accrual, current portion 258,070 258,070
Current portion of long-term debt 501,710 437,755
--------------------------------
Total current liabilities 2,801,170 1,890,863
Restructuring accrual, long-term portion 514,173 659,795
Long-term debt (net of current portion) 591,525 518,563
Minority interest in subsidiary
210 210
--------------------------------
Total liabilities 3,907,078 3,069,431
Stockholder's equity:
Common stock, $1 par value per share, 50,000 shares
authorized; 29,658 issued and outstanding 29,658 29,658
Additional paid-in capital 600,033 600,032
Retained earnings 3,315,510 1,937,550
--------------------------------
Total stockholders' equity 3,945,201 2,567,240
Total liabilities and stockholders' equity $ 7,852,279 $ 5,636,671
================================
MEDTOX LABORATORIES, INC.
AND SUBSIDIARY
Unaudited Consolidated Statement of Operations
Nine Months Nine Months
Ended Ended
9/30/95 9/30/94
---------------------------------
Revenues $17,019,777 $16,575,770
Pass through costs (1,669,418) (1,664,776)
---------------------------------
Net revenues 15,350,359 14,910,994
Cost of revenues:
Supplies 3,013,015 3,233,910
Direct labor 2,652,051 2,201,928
Laboratory overhead 1,259,848
-
---------------------------------
Total cost of sales 6,924,914 5,435,838
Gross profit 8,425,445 9,475,156
Operating expenses:
Distribution expenses 1,839,941 -
Sales and marketing expenses 707,987 638,483
Client support expenses 1,413,822 2,557,649
MIS expenses 144,980 103,800
General and administrative expenses 1,616,389 3,709,373
---------------------------------
Total operating costs 5,723,119 7,009,305
Other income (expense)
Other Income 1,112 4,000
Interest expense (139,156) (109,410)
---------------------------------
Total other income (expense) (138,044) (105,410)
---------------------------------
Net income $ 2,564,282 $ 2,360,441
=================================
Pro forma income data:
Net income as reported $ 2,564,282 $ 1,613,686
Pro forma adjustment to record
provision for income taxes 971,863 611,587
---------------------------------
Pro forma net income $ 1,592,419 $ 1,002,099
=================================
Pro forma net income per share $ 53.71 $ 33.95
=================================
MEDTOX LABORATORIES, INC.
AND SUBSIDIARY
Unaudited Consolidated Statement of Cash Flows
Nine Months Nine Months
Ended Ended
9/30/95 9/30/94
-----------------------------------
Reconciliation of net income to net cash provided by operating activities:
Net income $ 2,564,282 $ 2,360,441
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 536,659 468,000
(Gain) loss on sale of assets (1,112) (4,000)
Changes in operating assets and liabilities:
Accounts receivable (472,057) (311,655)
Laboratory supplies 102,906 167,056
Prepaid and other current assets (71,764) 168,965
Accounts payable 517,707 (848,245)
Accrued expenses, salaries and wages 183,020 558,706
-----------------------------------
Net cash provided by operating activities $ 3,359,641 $ 2,559,268
Cash flows from investing activities:
Purchases of property and equipment $ (670,928) $ (462,248)
Purchases of intangible assets and software (132,982) (33,335)
Proceeds from sale of equipment 1,112 4,000
Decrease in deposits and other assets 967 19,157
-----------------------------------
Net cash used in investing activities $ (801,831) $ (472,426)
Cash flows from financing activities:
Proceeds from long-term debt $ 478,000 $ 124,619
Net decrease in line of credit - (500,000)
Payments on long-term debt (341,083) (724,890)
Proceeds from the issuance of common stock - 31,200
Distributions to stockholders (1,186,318) -
-----------------------------------
Net cash used in financing activities $ (1,049,401) $ (1,069,071)
Net increase in cash and cash equivalents $ 1,508,409 $ 1,017,771
Cash and cash equivalents, beginning of year $ 526,512 $ 27,977
-----------------------------------
Cash and cash equivalents, end of year $ 2,034,921 $ 1,045,748
===================================
EXHIBIT (b)
The following unaudited pro forma consolidated balance sheet as of September 30,
1995, and the unaudited pro forma consolidated statements of operations for the
nine months ended September 30, 1995 and the year ended December 31, 1994, give
effect to the acquisition of MEDTOX by EDITEK using the purchase method. The
unaudited pro forma consolidated financial information is based on the
historical financial information of EDITEK and MEDTOX as of September 30, 1995
and the pro forma adjustments described in the notes thereto. There are no pro
forma adjustments to other amounts reflected in the historical financial
statements of MEDTOX as management believes that the historical costs assigned
to MEDTOX assets and liabilities approximate fair value.
Information was prepared as if the acquisition was effected as of
September 30, 1995 in the case of the unaudited pro forma consolidated balance
sheet; as of January 1, 1994 in the case of the September 30, 1995 and December
31, 1994 unaudited pro forma statements of operations. The unaudited pro forma
financial statements may not be indicative of the results that actually would
have occurred if the acquisition had been in effect on the dates indicated or
which may be obtained in the future. The unaudited pro forma financial
information should be read in conjunction with the financial statements and
other financial data of EDITEK and MEDTOX.
EDITEK AND MEDTOX
UNAUDITED CONSOLIDATED BALANCE SHEETS
September 30, 1995
(In Thousands except per share amounts)
Historical Proforma
------------------------------- ------------------------------------
EDITEK MEDTOX Adjustments Consolidated
------------- -------------- ---------------- -----------------
ASSETS:
Cash and Cash Equivalents $ 416 $ 2,035 $ 934 (a) $ 3,385
Accounts Receivable, net 1,308 3,439 - 4,747
Inventory and Supplies 868 310 - 1,178
Other Current Assets 741 179 (500)(a) 420
------------------------------- ---------------- -----------------
Total Current Assets 3,333 5,963 434 9,730
Property and Equipment 7,512 5,968 - 13,480
Accumulated Depreciation (6,704) (4,169) - (10,873)
------------------------------- ---------------- -----------------
Property & Equipment, net 808 1,799 - 2,607
Other Assets - 85 - 85
Goodwill, net 3,241 5 22,202 (c) 25,448
------------------------------- ---------------- -----------------
Total Non-Current Assets 4,049 1,889 22,202 28,140
------------------------------- ---------------- -----------------
Total Assets $ 7,382 $ 7,852 $ 22,636 $ 37,870
============= ============== ================ =================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Revolving line of credit $ - $ - $ 990 (a) $ 990
Accounts Payable 1,139 639 - 1,778
Accrued Expenses 333 1,402 112 (h) 1,847
Current Maturities of Long Term Debt 82 502 831 (b) 1,415
Restructuring Accrual, Current Portion - 258 - 258
Other Current Liabilities 13 - - 13
------------- -------------- ---------------- -----------------
Total Current Liabilities 1,567 2,801 1,933 6,301
Long Term Debt Obligations - 592 2,075 (b) 2,667
Restructuring Accrual, Long Term Portion - 514 - 514
-
Other Long Term Liabilities - - - -
------------- -------------- ---------------- -----------------
Total Liabilities 1,567 3,907 4,008 9,482
Common Stock 1,532 30 348 (e) 1,910
Addt. Paid-in Capital 33,631 600 2,595 (e) 36,826
Preferred Stock - - 19,000 (e) 19,000
Retained Earnings (Deficit) (29,172) 3,315 (3,315) (e) (29,172)
------------- -------------- ---------------- -----------------
5,991 3,945 18,628 28,564
Less: Treasury Stock and Other Contra Equity (176) - - (176)
------------- -------------- ---------------- -----------------
Total Stockholders' Equity 5,815 3,945 18,628 28,388
------------- -------------- ---------------- -----------------
Total Liabilities and Shareholders' Equity $ 7,382 $ 7,852 $ 22,636 $ 37,870
============= ============== ================ =================
See notes to unaudited pro forma consolidated financial statements
EDITEK AND MEDTOX
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended September 30, 1995
(In Thousands except per share amounts)
Historical Proforma
--------------------------------- ----------------------------------------
EDITEK MEDTOX Adjustments Consolidated
--------------------------------- ----------------- ------------------
Revenues $ 5,663 $ 15,351 $ - 21,014
Cost of sales 4,800 6,925 1,985 (g) 13,710
--------------------------------- ----------------- ------------------
Gross margin 863 8,426 (1,985) 7,304
Operating expenses
Research and development 669 - - 669
Selling, general and administrative 2,852 5,723 (1,985) (g) 6,590
Amortization 111 - 833 (d) 944
--------------------------------- ----------------- ------------------
Total operating expenses (1,152)
3,632 5,723 8,203
Income (loss) before interest
and other income (2,769) 2,703 (833) (899)
Other income - 1 - 1
Interest expense (21) (139) (206) (b) (366)
--------------------------------- ----------------- ------------------
Net income (loss) (2,790) 2,565 (1,039) (1,264)
Preferred stock dividend - - 1,283 (f) 1,283
--------------------------------- ----------------- ------------------
Net income (loss) applicable to common
shareholders $ (2,790) $ 2,565 $ (2,321) $ (2,546)
================================= ================= ==================
Income (Loss) per common share $ (0.28) $ 86.51 $ (0.20)
================================= ==================
Weighted average number of common
shares outstanding 9,915,427 29,650 12,432,733
================================= ==================
See notes to unaudited pro forma consolidated financial statements
EDITEK AND MEDTOX
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31, 1994
(In Thousands except per share amounts)
Historical Proforma
---------------------------- ---------------------------------------
EDITEK MEDTOX Adjustments Consolidated
---------------------------- ---------------- -----------------
Revenues $ 6,593 $ 19,651 $ 37 (g) $ 26,281
Cost of sales 6,044 8,714 2,635 (g) 17,393
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Gross margin 549 10,937 (2,598) 8,888
Operating expenses
Research and development 729 - - 729
Selling, general and administrative 3,194 7,576 (2,617) (g) 8,153
Amortization 147 - 1,110 (d) 1,257
Restructuring costs - 568 - 568
---------------------------- ---------------- -----------------
Total operating expenses 4,070 8,144 (1,507) 10,707
Income (loss) before interest
and other income (3,521) 2,793 (1,091) (1,819)
Other income - 19 (19) (g) -
Interest income(expense) (25) (218) (368) (a) (611)
---------------------------- ---------------- -----------------
Net income (loss) (3,546) 2,594 (1,478) (2,430)
Preferred stock dividend - - 1,710 (f) 1,710
---------------------------- ---------------- -----------------
Net income (loss) applicable to common
shareholders $ (3,546) $ 2,594 $ (3,188) $ (4,140)
============================ ================ =================
Income (Loss) per common share $ (0.49) $ 87.87 $ (0.43)
============================ =================
Weighted average number of common
shares outstanding 7,204,244 29,520 9,595,685
============================ =================
See notes to unaudited pro forma consolidated financial statements
EDITEK AND MEDTOX
NOTES TO UNAUDITED
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
a) EDITEK was able to close the $24 million acquisition of MEDTOX by raising
$19 million from the issuance of 380 shares of Preferred Stock, borrowing
approximately $5 million in the form of two term loans and a revolving line
of credit and issuing $5 million of Common Stock of the Company to the
shareholders of MEDTOX in the form of 2,517,306 shares of Common Stock. The
Company did not acquire the cash on hand at MEDTOX at September 30, 1995
and was required to pay off the existing loans of MEDTOX and approximately
$1.2 million in financing costs.
Cash and Cash Equivalents
(dollar amounts in thousands)
Proceeds from issuance of
Series A Preferred Stock $19,000
Proceeds from debt:
Term Loans 4,000
Credit Facility 990
Compensation to Investment
Bankers ( 1,262)
Compensation for Placement
of Debt ( 165)
Payment of MedTox Notes:
Current Portion ( 502)
Long Term Portion ( 592)
Payment to MedTox
Shareholders (18,500)
MedTox distribution of cash
on hand at Medtox ( 2,035)
--------------
$ 934
Reduction of $500 in other Current Assets represents deposit previously
paid to Medtox.
(b) Pro Forma adjustment to long term debt accounts are summarized as follows:
Current Long Term
Portion Portion
Elimination of Medtox's
long term debt $ (502) $ (592)
Issuance of term loans 1,333 2,667
-----------------------
$ 831 $ 2,075
The interest rates on the loans are as follows:
Term Loan A 2.0% above Prime Rate
Term Loan B 2.5% above Prime Rate
Credit Facility 1.5% above Prime Rate
c) Goodwill representing the excess of the purchase price of $24 million over
the fair value of the identifiable net assets of MedTox has been reflected
and is comprised of the following:
(dollar amounts in thousands)
Purchase price ............................................ $ 24,000
Costs related to acquisition .............................. 400
Net assets acquired @ 9/30/95 ............................. (2,198)
--------
$ 22,202
The allocation of the total amount of excess purchase price over the fair
value of the assets is a preliminary allocation absent an appraisal of
certain intangible assets.
d) Amortization is based on an effective date of the acquisition of MEDTOX of
January 1, 1994 amortized over a twenty year period.
e) Pro Forma adjustment to stockholder's equity accounts are summarized as
follows:
(dollar amounts in thousands)
Additional
Common Preferred Paid In Retained
Stock Stock Capital Earnings
Elimination of MEDTOX'S equity accounts $ (30) $ - $ (600) $ (3,315)
Issuance of Preferred Stock - 19,000 (1,427) -
Issuance of Common Stock 378 - 4,622 -
----------- --------- ---------------- ----------
$ 348 $ 19,000 $ 2,595 $ ( 3,315)
f) Dividend of 9% declared for $19 million of Preferred Stock issued and
outstanding.
g) Adjustments to reclassify certain expenses of MEDTOX, including
distribution expenses to conform with the historical presentation of the
financial statements of EDITEK. These reclassifications have no impact on
the operating income of MEDTOX.
h) Adjustment to reflect Acquisition costs are expected to approximate
$400,000.