SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 14, 2001
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IVAX DIAGNOSTICS, INC.
F/K/A B2BSTORES.COM INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
001-14798 113500746
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(Commission File No.) (IRS Employer Identification No.)
2140 North Miami Avenue, Miami, Florida 33127
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(Address of Principal Executive Offices) (Zip Code)
(305) 324-2300
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(Registrant's Telephone Number, Including Area Code)]
B2BSTORES.COM INC.
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(Former Name or Former Address, If Changed Since Last Report)
ITEM 1. CHANGE OF CONTROL
On March 14, 2001, b2bstores.com Inc. (the "Company"), a Delaware
corporation, IVAX Corporation ("IVAX"), a Florida corporation, and IVAX
Diagnostics, Inc. ("Diagnostics"), a Florida corporation, consummated the merger
(the "Merger") of Diagnostics with and into the Company pursuant to a Merger
Agreement dated as of November 21, 2000 (the "Merger Agreement"). The Merger was
approved by the stockholders of the Company on March 14, 2001, and, pursuant to
the terms of the Merger Agreement, all of the issued and outstanding shares of
the common stock of Diagnostics were automatically converted into an aggregate
of 20,000,000 shares (the "Shares") of the Company's common stock, par value
$.01 per share ("Common Stock"), and non-qualified options previously granted to
employees of Diagnostics were converted into non-qualified options to purchase
an aggregate of 1,108,795 shares of Common Stock. As part of the Merger, the
Company changed its name to "IVAX Diagnostics, Inc." As a result of its
acquisition of the Shares from the Company, IVAX owns approximately 70% of the
issued and outstanding Common Stock. Pursuant to the terms of the Merger
Agreement, IVAX designated five persons to serve, and who were elected, as
members of the Company's seven person board of directors. In addition, the
executive officers of Diagnostics immediately prior to the Merger were appointed
executive officers of the Company. The terms of the Merger Agreement were
established as a result of arm's length negotiations between IVAX and the
Company.
The Company is now headquartered in Miami, Florida and develops,
manufactures and markets diagnostic test kits, reagents and instruments for use
in hospitals and reference laboratories and doctors' offices.
Other than as set forth above, the Company is not aware of any
arrangements that may at a subsequent date result in a change of control of the
Company.
ITEM 2. ACQUISITION OF ASSETS
See Item 1 above.
The foregoing description of the Merger is qualified in its entirety by
the full text of the Merger Agreement, which is included as Exhibit 2.1 to the
Company's Form 8-K dated November 30, 2000 and by the description of the Merger
contained in the Proxy Statement of the Company dated January 30, 2001, each of
which has been filed with the Securities and Exchange Commission and each of
which is incorporated herein by reference.
2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
1. Report of Independent Certified Public Accountants.
2. Consolidated Balance Sheets of IVAX Diagnostics, Inc.
as of December 31, 2000 and 1999.
3. Consolidated Statements of Operations of IVAX
Diagnostics, Inc. for the years ended December 31,
2000, 1999 and 1998.
4. Consolidated Statements of Shareholder's Equity of
IVAX Diagnostics, Inc. for the years ended
December 31, 2000, 1999 and 1998.
5. Consolidated Statements of Cash Flows of IVAX
Diagnostics for the years ended December 31, 2000,
1999 and 1998.
6. Notes to Consolidated Financial Statements of
IVAX Diagnostics, Inc.
(B) PRO FORMA FINANCIAL INFORMATION
1. Introduction to Unaudited Pro Forma Combined
Condensed Balance Sheet.
2. Unaudited Pro Forma Combined Condensed Balance Sheet
as of December 31, 2000.
3. Notes to Unaudited Pro Forma Combined Condensed
Balance Sheet
(C) EXHIBITS
25.1 Consent of Arthur Andersen LLP.
99.1 Press Release of IVAX Diagnostics, Inc., relating to
the consummation of the Merger.
3
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.
IVAX DIAGNOSTICS, INC.
By: /S/ MARK DEUTSCH
---------------------------------------
MARK DEUTSCH
VICE PRESIDENT OF FINANCE AND
CHIEF FINANCIAL OFFICER
Date: March 29, 2001
4
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To The Board of Directors and
Shareholders of IVAX Diagnostics, Inc.:
We have audited the accompanying consolidated balance sheets of IVAX
Diagnostics, Inc., a Florida corporation and subsidiary of IVAX Corporation, and
subsidiaries as of December 31, 2000 and 1999, and the related consolidated
statements of operations, Shareholders' equity and cash flows for each of the
three years in the period ended December 31, 2000. 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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial 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.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of IVAX Diagnostics,
Inc. and subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2000 in conformity with accounting principles generally accepted in
the United States.
As explained in Note 2 to the financial statements, IVAX Diagnostics, Inc. has
given retroactive effect to the change in accounting for Emerging Issues Task
Force No. 00-10, "Accounting for Shipping and Handling Fees and Costs."
ARTHUR ANDERSEN LLP
Miami, Florida,
March 6, 2001 (except with respect to matters
discussed in the second paragraph of Note 1, and Note 11,
as to which the date is March 14, 2001).
5
IVAX DIAGNOSTICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
2000 1999
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,262,888 $ 4,217,956
Accounts receivable, net of allowance for doubtful accounts
of $2,202,135 and $2,361,532, respectively 4,576,916 4,231,682
Inventories 2,693,887 2,427,576
Deferred income taxes 602,279 666,990
Other current assets 41,171 104,773
------------ ------------
Total current assets 9,177,141 11,648,977
------------ ------------
PROPERTY, PLANT AND EQUIPMENT:
Land 352,957 352,957
Buildings and improvements 2,257,882 2,185,850
Machinery and equipment 1,486,882 1,546,985
Furniture and fixtures 1,269,508 1,195,267
------------ ------------
5,367,229 5,281,059
Less - Accumulated depreciation (3,828,822) (3,541,379)
------------ ------------
1,538,407 1,739,680
------------ ------------
OTHER ASSETS:
Goodwill, net 7,106,135 7,330,307
Equipment on lease, net 614,666 670,411
Deferred income taxes 59,511 67,425
Other 164,224 204,958
------------ ------------
7,944,536 8,273,101
------------ ------------
Total assets $ 18,660,084 $ 21,661,758
============ ============
(Continued)
6
IVAX DIAGNOSTICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
(Continued)
2000 1999
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 769,192 $ 720,100
Accrued expenses 2,341,970 2,234,599
Income taxes payable 37,030 94,078
------------ ------------
Total current liabilities 3,148,192 3,048,777
DUE TO PARENT 7,961,669 8,664,725
OTHER LONG-TERM LIABILITIES 331,633 286,066
------------ ------------
Total liabilities 11,441,494 11,999,568
------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes 3 and 9)
SHAREHOLDERS' EQUITY:
Common stock, par value $0.01 per share,
authorized 50,000,000 shares, issued and
outstanding 20,000,000 shares 200,000 200,000
Additional paid-in capital 11,258,251 11,258,251
Accumulated deficit (2,087,637) (232,325)
Accumulated other comprehensive loss (2,152,024) (1,563,736)
------------ ------------
Total shareholders' equity 7,218,590 9,662,190
------------ ------------
Total liabilities and shareholders' equity $ 18,660,084 $ 21,661,758
============ ============
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
7
IVAX DIAGNOSTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998
------------ ------------ ------------
NET REVENUE $ 11,793,010 $ 11,236,779 $ 9,718,949
COST OF SALES 5,379,668 5,324,356 4,826,159
------------ ------------ ------------
Gross profit 6,413,342 5,912,423 4,892,790
------------ ------------ ------------
OPERATING EXPENSES:
Selling 2,623,738 2,941,791 2,650,947
General and administrative (Note 9) 2,081,602 2,938,217 3,831,551
Research and development 1,291,042 1,216,040 1,653,752
Goodwill amortization 255,375 257,770 258,603
------------ ------------ ------------
Total operating expenses 6,251,757 7,353,818 8,394,853
------------ ------------ ------------
Income (loss) from operations 161,585 (1,441,395) (3,502,063)
------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest income 157,584 320,210 267,195
Interest expense - Parent (525,794) (506,741) (429,658)
Other income (expense), net (117,407) 22,938 (99,490)
------------ ------------ ------------
Total other expense (485,617) (163,593) (261,953)
------------ ------------ ------------
Loss before provision (benefit)
for income taxes (324,032) (1,604,988) (3,764,016)
PROVISION (BENEFIT) FOR INCOME TAXES 1,531,280 861,216 (181,834)
------------ ------------ ------------
Net loss $ (1,855,312) $ (2,466,204) $ (3,582,182)
============ ============ ============
Basic and diluted net loss per share $ (.09) $ (.12) $ (.18)
============ ============ ============
Weighted average shares outstanding 20,000,000 20,000,000 20,000,000
============ ============ ============
The accompanying notes to consolidated financial statements
are an integral part of these statements.
8
IVAX DIAGNOSTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
Accumulated
Retained Other
Common Stock Additional Earnings Comprehensive Total
------------------------- Paid-in (Accumulated Income Shareholders'
Shares Amount Capital Deficit) (Loss) Equity
---------- ---------- ------------- ------------- ------------ -------------
BALANCE, December 31, 1997 20,000,000 $ 200,000 $ 10,758,251 $ 5,816,061 $ (784,753) $ 15,989,559
Comprehensive income:
Net loss - - - (3,582,182) - (3,582,182)
Translation adjustment - - - - 544,526 544,526
-------------
Comprehensive income - - - - - (3,037,656)
Capital contribution from Parent - - 500,000 - - 500,000
---------- ---------- ------------- ------------- ------------ -------------
BALANCE, December 31, 1998 20,000,000 200,000 11,258,251 2,233,879 (240,227) 13,451,903
Comprehensive income:
Net loss - - - (2,466,204) - (2,466,204)
Translation adjustment - - - - (1,323,509) (1,323,509)
-------------
Comprehensive income (3,789,713)
---------- ---------- ------------- ------------- ------------ -------------
BALANCE, December 31, 1999 20,000,000 200,000 11,258,251 (232,325) (1,563,736) 9,662,190
Comprehensive income:
Net loss - - - (1,855,312) - (1,855,312)
Translation adjustment - - - - (588,288) (588,288)
-------------
Comprehensive income (2,443,600)
---------- ---------- ------------- ------------- ------------ -------------
BALANCE, December 31, 2000 20,000,000 $ 200,000 $ 11,258,251 $ (2,087,637) $ (2,152,024) $ 7,218,590
========== ========== ============= ============= ============ =============
The accompanying notes to consolidated financial statements
are an integral part of these statements.
9
IVAX DIAGNOSTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,855,312) $(2,466,204) $(3,582,182)
Adjustments to reconcile net loss to net cash
used in operating activities-
Depreciation and amortization 998,399 1,079,038 1,098,359
Provision for losses on accounts receivable 43,715 68,385 64,520
Loss on asset sale -- -- 33,660
Deferred income tax provision 136,298 134,997 33,192
Changes in operating assets and liabilities:
Accounts receivable (601,140) 783,920 (267,158)
Inventories (325,663) (557,040) 263,802
Income taxes receivable -- 611,647 (640,083)
Other current assets 57,312 10,381 (2,128)
Other assets 36,628 9,728 9,424
Accounts payable and accrued expenses 216,606 76,493 456,759
Other long-term liabilities 64,683 (181,913) 65,456
----------- ----------- -----------
Net cash used in operating activities (1,228,474) (430,568) (2,466,379)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (149,137) (118,539) (217,988)
Cash proceeds from sale of property, plant and equipment -- -- 8,044
Acquisition of equipment on lease (367,530) (445,181) (458,354)
----------- ----------- -----------
Net cash used in investing activities (516,667) (563,720) (668,298)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contribution from Parent -- -- 500,000
Change in due to Parent (703,056) 4,596,714 2,637,147
----------- ----------- -----------
Net cash provided by (used in) financing activities (703,056) 4,596,714 3,137,147
----------- ----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (506,871) (1,538,412) 597,468
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (2,955,068) 2,064,014 599,938
CASH AND CASH EQUIVALENTS, beginning of year 4,217,956 2,153,942 1,554,004
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of year $ 1,262,888 $ 4,217,956 $ 2,153,942
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES:
Interest paid $ -- $ -- $ 6,243
=========== =========== ===========
Income taxes paid $ 696,200 $ 204,430 $ 59,746
=========== =========== ===========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
10
IVAX DIAGNOSTICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
1. ORGANIZATION AND OPERATIONS
IVAX Diagnostics, Inc. ("Diagnostics" or the "Company") is a Florida corporation
and a subsidiary of IVAX Corporation ("IVAX" or the "Parent"). The Company is
engaged in developing, manufacturing and marketing diagnostic test kits,
reagents and instruments for use in hospital and reference laboratories and
doctors' offices. For the years ended December 31, 2000, 1999 and 1998 the
Company generated net losses and required net cash advances from IVAX to fund
its operations.
On November 21, 2000, Diagnostics and b2bstores.com Inc., a Delaware corporation
("B2B"), entered into a merger agreement, pursuant to which B2B agreed to issue
20,000,000 shares of its common stock to IVAX in exchange for all of
Diagnostics' common stock. On March 14, 2001, Diagnostics completed its merger
with B2B, resulting in IVAX owning approximately 70% of B2B, which immediately
changed its name to "IVAX Diagnostics, Inc." and began trading under the symbol
"IVD" on the American Stock Exchange.
As of December 31, 2000, the principal asset of B2B is $24.6 million in cash and
marketable securities. The merger is considered a reverse merger for accounting
purposes and as a result:
o The accompanying consolidated financial statements have been
retroactively restated, as if a stock split occurred, to reflect
the 20,000,000 shares of B2B common stock that IVAX received in
the merger as outstanding for all periods presented. Other than
for the stock split, the accompanying consolidated financial
statements do not reflect any other adjustments that may result
from the merger.
o The first quarter of 2001 consolidated financial statements of
Diagnostics will further reflect the closing of the merger on
March 14, 2001 as a capital transaction equivalent to the issuance
of common stock by Diagnostics for B2B's net monetary assets.
Pursuant to the terms of the Company's 1999 Plan (Note 7), the difference
between the $.73 exercise price and the fair value of the 1,108,795 options
outstanding will be recorded in the first quarter of 2001 as compensation
expense by Diagnostics.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
On September 28, 1998, IVAX, the then owner of 100% of the common stock of
Immunovision, Inc. and Diamedix Corporation contributed its ownership of these
companies to the Company. As the transfer was between companies under common
control, it has been accounted for at historical cost in a manner similar to a
pooling of interests. Accordingly, the 1998 financial statements of the Company
have been retroactively restated to include the results of Immunovision, Inc.
and Diamedix Corporation for all periods presented.
11
Use of Estimates
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. The Company's actual results in subsequent
periods may differ from the estimates and assumptions used in the preparation of
the accompanying consolidated financial statements. Significant estimates
include the allowance for doubtful accounts, inventory reserves, litigation
accruals, customer returns, discounts and allowances, warranty accruals and
deferred tax asset valuation allowances.
Recently Issued Accounting Standards
In December 1999, Securities and Exchange Commission Staff Accounting Bulletin
("SAB") No. 101 regarding revenue recognition was issued. SAB No. 101 clarifies
issues relating to revenue recognition in financial statements including income
statement presentation and disclosure. SAB No. 101 is effective for the Company
for the fourth fiscal quarter of all years beginning after December 15, 1999. As
such, the Company adopted SAB No. 101 on October 1, 2000. The adoption did not
have a material effect on the Company's financial position or results of
operations.
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging Activities," as amended
by SFAS Nos. 137 and 138, in the first quarter of 2001. SFAS No. 133, as
amended, establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value. The adoption of SFAS No. 133, as amended, did
not have a material impact on the Company's consolidated financial statements as
the Company had no derivative financial instruments at December 31, 2000.
EITF Issue No. 00-10, "Accounting for Shipping and Handling Fees and Costs,"
requires that amounts billed to a customer related to shipping and handling be
classified as revenue, and allows companies to adopt a policy of including
shipping and handling costs in cost of sales or another income statement line
item. Diagnostics adopted EITF Issue No. 00-10 in the fourth quarter of 2000 and
elected to report the costs of shipping and handling in cost of sales. Prior
quarter and annual amounts have been reclassified to conform to the current
classification resulting in an approximately 1% decrease in gross profit margins
from those previously reported.
EITF Issue No. 00-14, "Accounting for Certain Sales Incentives," addresses the
recognition, measurement and income statement classification for sales
incentives offered voluntarily by a vendor, without charge to the customer, in a
single exchange transaction at the point of sale. In addition to providing
guidance or when to recognize and how to measure the cost of sales incentives,
it requires that incentives in the form of a reduction in or refund of the
selling price of a product or service be classified as a reduction of revenue
and incentives in the form of free products or services delivered at the time of
sale should be classified as an expense. The amended effective date of adoption
is the later of fiscal quarters beginning after March 15, 2001 or fiscal years
beginning after December 15, 1999. Diagnostics elected to adopt EITF Issue No.
00-14 in the fourth quarter of 2000. The adoption of EITF Issue No. 00-14 did
not have a material impact on the Company's consolidated financial statements.
Cash and Cash Equivalents
The Company considers all investments with a maturity of three months or less as
of the date of purchase to be cash equivalents.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market.
Components of inventory cost include materials, labor and manufacturing
overhead. In evaluating whether inventory is stated at the lower of cost or
market, management considers such factors as the amount of inventory on hand,
estimated time required to sell such inventory, remaining shelf life and current
market conditions. Reserves are provided as appropriate to reduce excess or
obsolete inventories to the lower of cost or market. Inventories consist of the
following:
12
December 31,
---------------------------------
2000 1999
------------ ------------
Raw materials $ 1,228,781 $ 1,028,508
Work-in-process 309,216 418,758
Finished goods 1,155,890 980,310
------------ ------------
Total $ 2,693,887 $ 2,427,576
============ ============
Property, Plant and Equipment
Property, plant and equipment are carried at cost, less accumulated
depreciation. Depreciation is computed on the straight-line basis over the
estimated useful lives of the assets as follows:
Years
---------
Buildings and improvements 5-20
Machinery and equipment 3-10
Furniture and fixtures 3-10
Costs of major additions and improvements are capitalized and expenditures for
maintenance and repairs which do not extend the life of the assets are expensed.
Upon sale or disposition of property, plant and equipment, the cost and related
accumulated depreciation is eliminated from the accounts and any resulting gain
or loss is credited or charged to operations.
Depreciation expense related to property, plant and equipment was $346,839,
$393,800 and $402,253 for the years ended December 31, 2000, 1999 and 1998,
respectively.
Goodwill
Cost in excess of net assets of acquired companies (goodwill) is amortized using
the straight-line method over 40 years. Goodwill is reported net of accumulated
amortization and consists of the following:
December 31,
---------------------------------
2000 1999
------------ ------------
Goodwill $ 9,219,591 $ 9,083,157
Less - Accumulated amortization (2,113,456) (1,752,850)
------------ ------------
$ 7,106,135 $ 7,330,307
============ ============
Amortization expense related to goodwill was $255,375, $257,770 and $258,603 for
the years ended December 31, 2000, 1999 and 1998, respectively.
Equipment on Lease, net
The cost of the Company's owned instruments, which are placed under reagent
rental programs at customer facilities for testing and usage of the Company's
products (see Note 2 - Revenue Recognition), less accumulated amortization
consists of the following:
December 31,
----------------------------------
2000 1999
------------ ------------
Equipment on lease at cost $ 2,227,122 $ 1,970,734
Less - Accumulated amortization (1,612,456) (1,300,323)
------------ ------------
$ 614,666 $ 670,411
============ ============
13
Equipment on lease is amortized over three years. Amortization expense related
to equipment on lease was $396,185, $427,468 and $437,503 for the years ended
December 31, 2000, 1999 and 1998, respectively.
Review for Impairment
The Company continually evaluates whether events and circumstances have occurred
that indicate that the remaining balance of long-lived assets including
goodwill, may not be recoverable. When factors indicate that long-lived assets,
including goodwill, may be impaired, the Company uses various methods to
estimate the asset's future cash flows expected to result from the use of the
asset and its eventual disposition. If the sum of the expected future
undiscounted cash flows is less than the carrying amount of the asset, an
impairment loss is recognized based on the excess of the carrying amount over
the estimated fair value of the asset. Any impairment amount is charged to
operations.
Foreign Currencies
The Company's operations include operations that are located in Italy. Assets
and liabilities as stated in the local reporting and functional currency are
translated at the rate of exchange prevailing at the balance sheet date. The
gains or losses that result from this process are shown in the accumulated other
comprehensive income (loss) caption in the Shareholder's equity section of the
accompanying consolidated balance sheets. Amounts in the consolidated statements
of operations are translated at the average rates for the period.
The Company is exposed to the risk of currency fluctuation, as a significant
portion of its operations occur in Italy. The Company does not use financial
derivatives to hedge either exchange rates or interest rate fluctuations.
Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable, and
accounts payable approximate fair value due to the short-term maturity of the
instruments and reserves for potential losses, as applicable. The Company does
not speculate in the foreign exchange market.
Revenue Recognition
Revenue and the related cost of sales on sales of test kits and instruments are
recognized at the time of shipment. Net revenue is comprised of gross revenue
less provisions for expected customer returns, allowances and discounts. These
provisions and discounts totaled $14,978, $34,968 and $7,611 for the years ended
December 31, 2000, 1999 and 1998, respectively.
The Company also owns instruments, which it places under reagent rental programs
common to the industry for periods of time at customer facilities for testing
and usage of the Company's products ("equipment on lease"). The instrument
system, utilized by customers to expedite the performance of certain tests, are
paid for over an agreed upon contract period by the purchase of test kits.
Revenue is recognized ratably over the rental period.
Provision for estimated warranty claims are established by the Company
concurrently with the recognition of revenue. Provisions are established in
accordance with generally accepted accounting principles based upon
consideration of a variety of factors, including actual experience for products
during the past several years by product type, the market for the product,
estimated customer inventory levels by product and projected economic
conditions. Actual customer returns, allowances and discounts and warranty
claims incurred are, however, dependent upon future events. The Company
continually monitors the factors that influence customer returns, allowances and
discounts and warranty claims and makes adjustments to these provisions when
management believes that actual amounts may differ from established reserves.
Research and Development Costs
Company sponsored research and development costs related to future products are
expensed currently.
14
Stock-Based Compensation Plans
The employees of the Company are eligible to participate in the stock option
plans of IVAX. As permissible under SFAS No. 123, "Accounting for Stock-based
Compensation," the Company accounts for all stock-based compensation
arrangements using the intrinsic value method prescribed by Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees", and discloses pro forma net earnings and earnings per share amounts
as if the fair value method had been adopted.
Comprehensive Loss
Comprehensive loss, consisting of the sum of net loss and translation
adjustment, was $2,443,600, 3,789,713 and $3,037,656 for the years ended
December 31, 2000, 1999 and 1998, respectively.
Earnings per Share
Loss per share is computed by dividing net loss by the weighted average number
of common and common equivalent shares outstanding during the period. All
outstanding stock options are considered common stock equivalents. The dilutive
effect, if any, of those options is calculated using the treasury stock method.
Basic and diluted net loss per share are the same for all periods presented. The
number of stock options outstanding not included in the calculation of earnings
per share because their impact is antidilutive was 1,108,795, 1,108,795, and 0
for the years ended December 31, 2000, 1999 and 1998, respectively.
3. CONCENTRATION OF CREDIT RISK
The Company performs periodic credit evaluations of its customers' financial
condition and provides allowances for doubtful accounts as required. One
customer accounted for 40.8% and 9.8% of the Company's net accounts receivable
as of December 31, 2000 and 1999, respectively. The same customer accounted for
40.1%, 27.8% and 14.0% of the Company's net revenues for the years ended
December 31, 2000, 1999 and 1998, respectively. The customer and the Company
entered into a contract in April 1999, pursuant to which the customer agreed to
purchase minimum levels of the Company's products during the three-year period
beginning May 1, 1999.
Twice during 2000, the Company's largest customer suspended its purchases of the
Company's products for several months while representatives of the Company and
the customer resolved certain product issues. On January 10, 2001, shipments to
the Company's largest customer resumed. There can be no assurance that the
customer will make additional purchases at the anticipated levels or within the
anticipated time frame. The failure of the customer to do so would have a
material adverse effect on the Company's business, prospects, operating results
and financial condition.
4. INCOME TAXES
The Company reports its income taxes as part of a consolidated group with the
Parent. For financial statement purposes, the Company accounts for income taxes
on a stand-alone basis as though the Company had filed its own income tax
returns.
The Company accounts for income taxes in accordance with SFAS No. 109
"Accounting for Income Taxes". Under SFAS No. 109, deferred tax assets or
liabilities are computed based upon the difference between the financial
statement and income tax basis of assets and liabilities using the enacted
marginal tax rate applicable when the related asset or liability is expected to
be realized or settled. Deferred income tax expenses or benefits are based on
the changes in the asset or liability from period to period. If available
evidence suggest that it is more likely than not that some portion or all of the
deferred tax assets will not be realized, a valuation allowance is required to
reduce the deferred tax assets to the amount that is more likely than not to be
realized. Future changes in such valuation allowance would be included in the
provision for deferred income taxes in the period of change. At December 31,
2000 and 1999, the Company has provided full valuation reserves against its net
domestic deferred tax assets because the Company does not believe that it is
more likely than not that some portion or all of the deferred tax assets will
not be realized.
15
The provision (benefit) for income taxes consists of the following:
December 31,
-----------------------------------------------------
2000 1999 1998
------------ ----------- -----------
Current:
Foreign $ 1,394,982 $ 726,219 $ (215,026)
Deferred:
Foreign 136,298 134,997 33,192
------------ ----------- -----------
Total $ 1,531,280 $ 861,216 $ (181,834)
============ =========== ===========
A detail of the significant components of the net foreign deferred income tax
asset (liability) balances follows:
December 31,
----------------------------
2000 1999
----------- -----------
Accounts receivable allowances $ 631,692 $ 626,265
Reserves and accruals (29,413) 40,725
Book/tax depreciation differences on
property, plant and equipment 59,506 65,791
Other 5 1,634
----------- -----------
$ 661,790 $ 734,415
=========== ===========
As discussed above, the Company has established a full valuation allowance on
its net domestic deferred tax assets, which are primarily comprised of net
operating loss carryforwards of approximately $4.7 million and $2.6 million at
December 31, 2000 and 1999, respectively. These domestic net operating loss
carryforwards are available for use by the Parent. On a separate return basis,
no recognition of that utilization is reflected in the accompanying consolidated
financial statements. These domestic net operating loss carryforwards begin to
expire in 2012.
The Company's income tax provisions for the years ended December 31, 2000, 1999
and 1998 were different from the amount computed on the loss before provision
for income taxes at the statutory rate of 35% primarily due to the
nonrecognition of the benefits of domestic losses of $3,148,332, $1,406,765 and
$2,794,739, respectively.
United States income taxes have not been provided on undistributed earnings of
foreign subsidiaries, as such earnings are being retained indefinitely by such
subsidiaries for reinvestment. The distribution of these earnings would first
reduce the domestic valuation allowance before resulting in additional United
States income taxes.
5. EMPLOYEE BENEFIT PLAN
The Company's employees within the United States are eligible to participate in
IVAX' 401(k) retirement plan, which permits pre-tax employee payroll
contributions (subject to certain limitations) and discretionary employer
matching contributions. Total matching contributions for the years ended
December 31, 2000, 1999 and 1998 were $62,990, $59,569 and $45,520,
respectively.
16
6. ACCRUED EXPENSES
Accrued expenses consist of the following:
December 31,
---------------------------------
2000 1999
------------ ------------
Accrued payroll costs $ 405,080 $ 344,453
Other accrued taxes 1,120,350 1,508,940
Professional fees 454,656 112,227
Other 361,884 268,979
------------ ------------
$ 2,341,970 $ 2,234,599
============ ============
7. SHAREHOLDERS' EQUITY
Employee Stock Purchase Program
On June 17, 1999, IVAX' 1999 Employee Stock Purchase Plan ("ESPP") was approved
at the Annual Meeting of IVAX' shareholders. IVAX' Board of Directors also
approved the purchase of common stock in the open market, as needed, for the
ESPP. The ESPP became effective January 1, 2000 for employees of the Company
based in the United States and Puerto Rico and allows them to purchase IVAX
common stock at 85% of the fair market value on the enrollment date or exercise
date, whichever is lower. The maximum amount of stock an employee may purchase
in a year is $25,000 and subsequent resale is restricted as stated in the ESPP.
IVAX believes ESPP qualifies as a noncompensatory plan under guidelines of APB
No. 25, and as such no compensation is recorded by IVAX or the Company.
Common Stock
Concurrent with the approval of the merger discussed in Note 1, the
aforementioned merger date, the Company amended its articles of incorporation to
increase the number of shares of authorized common stock from 25 million to 50
million.
In June of 1998, IVAX made a $500,000 capital contribution to the Company.
Stock Option Plan
Employees of the Company are eligible to participate in the IVAX 1997 Employee
Stock Option Plan, as amended (the "1997 Plan"), which permits the issuance of
options to employees and consultants to purchase shares of IVAX common stock.
The 1997 Plan provides that the exercise price of the issued options shall be no
less than the fair market value of the common stock on the date of grant and
that the option terms shall not exceed ten years.
17
The following summarizes outstanding stock options under the 1997 Plan for
employees of the Company:
Number of Weighted Average
Shares Exercise Price
---------- ----------------
Outstanding at January 1, 1998 372,858 $ 13.48
Granted 249,270 5.55
Terminated (365,109) 13.47
Outstanding at December 31, 1998 257,019 6.53
Terminated (6,649) 15.35
Exercised (40,702) 5.55
----------
Outstanding at December 31, 1999 209,668 6.44
Granted 30,000 18.29
Exercised (116,211) 5.60
----------
Outstanding at December 31, 2000 123,457 9.82
========== =======
Options exercisable at December 31, 2000 93,457 $ 10.93
========== =======
The Company's pro forma net loss and pro forma weighted average fair value of
options granted, with related assumptions, assuming the Company had adopted the
fair value method of accounting for all stock-based compensation arrangements
consistent with the provisions of SFAS No. 123, using the Black-Scholes option
pricing model, are indicated below for the years ended December 31, 2000, 1999
and 1998.
2000 1999 1998
----------- ----------- -----------
Net loss as reported $(1,855,312) $(2,466,204) $(3,582,182)
Pro forma net loss (1,896,120) (2,520,449) (3,626,549)
Pro forma basic and diluted
earnings per share (.09) (.13) (.18)
Pro forma weighted average fair
value of options granted 10.39 -- 1.53
Expected life (years) 5.4 4.1 4.6
Risk-free interest rate 5.44%-6.63% 4.57%-6.08% 4.37%-5.65%
Expected volatility 25% 27% 27%
Dividend yield 0% 0% 0%
Effective June 29, 1999, the Board of Directors of the Company approved the
Company's 1999 Stock Option Plan (the "1999 Plan"). The 1999 Plan permits the
issuance of options to employees, non-employee directors and consultants of the
Company to purchase up to 2,000,000 shares of the 50,000,000 authorized shares
of the Company. In June and August of 1999 (as determined below), non-qualified
options of 1,144,795 shares of common stock were granted with an exercise price
of $.73 per share, a vesting schedule of 50% at the end of year 2 and 25% at the
end of years 3 and 4 and expiration dates ranging from June to August of 2006.
To date no options have been exercised and 36,000 options have been terminated.
18
Under the 1999 Plan, prior to the consummation of an initial public offering
("IPO"), fair value shall be determined based on the book value per share of the
Company and its subsidiaries as reflected on the most recently prepared
financial statements of the Company, assuming that all options outstanding under
the 1999 Plan have been exercised (whether or not such options are exercisable
at the time the determination of value is made). Any capital contribution made
by the Parent will be excluded from the book value calculation.
Upon completion of an IPO, fair value shall be determined by reference to
available market quotations. The options are not exercisable until the date on
which an IPO is consummated. If, prior to the consummation of an initial public
offering, there shall be consummated (a) any consolidation or merger of the
Company in which the Company is not the surviving corporation (other than a
merger of the Company in which the holders of the Company's outstanding voting
securities immediately prior to the merger have the same proportionate ownership
of the surviving corporation immediately after the merger and other than a
merger or consolidation which itself would result in an initial public
offering), or (b) any sale, lease, exchange or other transfer of all, or
substantially all, of the assets of the Company to an entity which is not a
wholly-owned subsidiary of the Company (each of the foregoing a "Corporate
Transaction"), then the vesting and exercisability of each option outstanding
under the 1999 Plan will be automatically accelerated so that each such option
will, immediately prior to the specified effective date of such Corporate
Transaction, become fully exercisable with respect to the total number of shares
subject to such option and may be exercised for all or any portion of such
shares. Upon the consummation of such Corporate Transaction, all outstanding
options under the 1999 Plan will, to the extent not previously exercised,
terminate and cease to be outstanding.
If, following the Company's consummation of an IPO the shareholders of the
Company approve any Corporate Transaction then, to the extent such options are
not either assumed by the successor corporation or parent thereof or replaced
with a comparable option to purchase shares of the capital stock of the
successor corporation or parent thereof, the vesting and exercisability of each
option outstanding under the 1999 Plan will be automatically accelerated so that
each such option will, immediately prior to the specified effective date of such
Corporate Transaction, become fully exercisable with respect to the total number
of shares subject to such option and may be exercised for all or any portion of
such shares. Upon the consummation of such Corporate Transaction, all
outstanding options under the 1999 Plan will, to the extent not previously
exercised, assumed by the successor corporation or its parent or replaced with a
comparable option to purchase shares of the capital stock of the successor
corporation or parent thereof, terminate and cease to be outstanding.
If the Company has not consummated an IPO on or before the fourth anniversary of
the date on which the 1999 Plan is adopted by the Board of Directors (i.e., June
29, 2003) then at any time after the fourth anniversary, the employee may elect
to return any of such employee's vested options to the Company in exchange for a
cash payment from the Company equal to the excess of the share value as of the
date such employee exercises such right over the per share exercise price of
such option (multiplied by the number of share options to be exercised).
For the year ended December 31, 2000, no compensation expense had been recorded
related to the Company's 1999 Plan because there has not been an increase in the
book value per share above the $.73 exercise price.
8. SEGMENT INFORMATION
Diagnostics' management reviews financial information, allocates resources and
manages its business by geographic region. The Domestic region contains
Diagnostics' subsidiaries in the United States. The Italian region contains
subsidiaries located in Italy. The information provided is based on internal
reports and was developed and utilized by management for the sole purpose of
tracking trends and changes in the results of the regions. The information,
including the allocations of expense and overhead, were calculated based on a
management approach and may not reflect the actual economic costs, contributions
or results of operations of the regions as stand alone businesses. If a
different basis of presentation or allocation were utilized, the relative
contributions of the regions might differ but the relative trends would, in
management's view, likely not be materially impacted. The table below sets forth
net revenue, income from operations and assets by region.
19
Domestic Italian Eliminations Total
-------------- -------------- ------------- -------------
December 31, 2000:
External net sales $ 4,144,986 $ 7,648,024 $ -- $ 11,793,010
Intercompany sales 573,377 400,524 (973,901) --
-------------- -------------- ------------- -------------
Net revenue $ 4,718,363 $ 8,048,548 $ (973,901) $ 11,793,010
============== ============== ============= =============
Income (loss) from operations $ (2,354,438) $ 2,491,529 $ 24,494 $ 161,585
============== ============== ============= =============
Assets $ 4,377,560 $ 14,314,351 $ (31,827) $ 18,660,084
============== ============== ============= =============
December 31, 1999:
External net sales $ 3,950,767 $ 7,286,012 $ -- $ 11,236,779
Intercompany sales 630,968 429,899 (1,060,867) --
-------------- -------------- ------------- -------------
Net revenue $ 4,581,735 $ 7,715,911 $ (1,060,867) $ 11,236,779
============== ============== ============= =============
Income (loss) from operations $ (3,193,725) $ 1,807,734 $ (55,404) $ (1,441,395)
============== ============== ============= =============
Assets $ 4,205,192 $ 17,534,366 $ (77,800) $ 21,661,758
============== ============== ============= =============
December 31, 1998:
External net sales $ 4,005,129 $ 5,713,820 $ -- $ 9,718,949
Intercompany sales 446,958 134,479 (581,437) --
-------------- -------------- ------------- -------------
Net revenue $ 4,452,087 $ 5,848,299 $ (581,437) $ 9,718,949
============== ============== ============= =============
Income (loss) from operations $ (3,504,772) $ (8,761) $ 11,470 $ (3,502,063)
============== ============== ============= =============
Assets $ 4,310,890 $ 17,831,730 $ (22,396) $ 22,120,224
============== ============== ============= =============
9. COMMITMENTS AND CONTIGENCIES
Leases
The Company leases office, plant and warehouse facilities under noncancellable
operating leases. Rent expense for the years ended December 31, 2000, 1999 and
1998 totaled $189,395, $202,459 and $201,111, respectively. The future minimum
lease payments under noncancellable capital leases and their related assets
recorded at December 31, 1999 and 1998 were not material. The future minimum
lease payments under noncancellable operating leases with initial or remaining
terms of one year or more at December 31, 2000, were as follows:
Operating
Leases
-----------
2001 $ 241,537
2002 223,037
2003 181,922
-----------
Total minimum lease payments $ 646,566
===========
Litigation, Claims and Assessments
In August of 1996, a company filed a declatory judgment action seeking to
invalidate certain patents licensed from the Company. A settlement was reached
in favor of the Company in 2000 for $500,000. This amount was received and
recorded by the Company in 2000 as a reduction of general and administrative
expenses.
20
The Company is involved in various other legal claims, regulatory matters,
trademark matters and other notices and demand proceedings arising in the
ordinary course of business. While it is not feasible to predict or determine
the outcome of these proceedings, in the opinion of management, based on a
review with legal counsel, any losses resulting from such legal proceedings will
not have a material adverse impact on the financial position, results of
operations or cash flows of the Company.
On March 2, 2001, B2B received notice that a Shareholder of B2B filed a lawsuit
against B2B and two of its directors. The lawsuit alleges that B2B violated
certain aspects of Section 14(a) of the Securities Exchange Act of 1934, as
amended, and that certain directors breached their fiduciary duties in
connection with the Merger. The suit seeks the court's determination of
declaratory relief as to whether (i) the proxy statement materials sent to
shareholders shall be considered null, void and unenforceable, (ii) the Merger,
if accomplished based on the use of the proxy materials, should be set aside,
and (iii) the termination fee of $1.0 million, as defined in the Merger
Agreement, shall be found void. The directors and officers of B2B deny the
allegations and intend to vigorously defend such claims, but the ultimate
outcome of any such legal proceeding cannot be determined.
10. RELATED-PARTY TRANSACTIONS
Included in the accompanying consolidated balance sheets as due to Parent are
amounts due to IVAX as follows:
December 31,
-------------------------------
2000 1999
------------ ------------
Advances from IVAX, unsecured
and interest bearing $ 4,144,812 $ 6,424,812
Advances from IVAX, unsecured
and noninterest bearing 3,816,857 2,239,913
------------ ------------
$ 7,961,669 $ 8,664,725
============ ============
IVAX charges interest, which is included in the accompanying statement of
operations, on the interest bearing advances at prime plus 1%, which ranged from
8.75% to 9.5% from 1998 to 2000.
At December 31, 1999, accounts receivable in the amount of $660,324,
respectively were sold at book value to an affiliate of the Company and were
repurchased for the same price on January 1, 2000.
IVAX administrates and funds health care claims on behalf of the Company and
charges the Company a fee reflective at the cost of service. Additionally, IVAX
provides certain legal, treasury, tax, insurance, payroll and human resource
service to the Company for which no fee is charged to the Company.
11. SUBSEQUENT EVENTS (Unaudited)
On November 21, 2000, B2B, IVAX, and Diagnostics entered into a definitive
merger agreement, according to which Diagnostics would be merged with and into
B2B (the "Merger"). On March 14, 2001, the shareholders of B2B approved the
Merger and it became effective. B2B is the surviving corporation in the Merger.
As a result, B2B automatically acquired all of Diagnostics' assets and assumed
all of Diagnostics' liabilities and obligations. B2B has changed its name from
b2bstores.com Inc. to IVAX Diagnostics, Inc. and its trading symbol from BTBC on
NASDAQ Exchange to IVD on the American Stock Exchange. As consideration for the
Merger, B2B issued to IVAX 20 million shares of B2B common stock. At the time of
closing of the Merger, B2B met or exceeded all minimum cash and equity standards
established by the Merger Agreement. B2B incurred approximately $2,700,000 of
charges and expenses, related to the Merger including investment banking
expenses, finders' fees, professional fees and other related charges including
severance payments of approximately $561,000 to certain of its officers. Of
these expenses, approximately $600,000 was incurred in fiscal 2000, $500,000
during fiscal 2001 and, upon consummation of the Merger, an additional
$1,600,000. A lawsuit was filed by a shareholder of B2B to cease and/or reverse
the finalization of the Merger. In the event this shareholder is successful in
its attempt to void this agreement, B2B could be subject to a $1 million
termination fee. Additional costs relating to the outcome of certain litigation
brought by a shareholder (see Note 9) may be incurred as a result of the Merger.
21
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
The following unaudited pro forma combined condensed balance sheet as of
December 31, 2000 gives effect to the merger of the Company and B2B. The
unaudited pro forma combined condensed balance sheet is based on the estimates
and assumptions in the notes to such statements. This information should be read
in conjunction with the historical financial statements and notes thereto, which
are included elsewhere in this Form 8-K.
The merger has been accounted for as a capital transaction equivalent to the
issuance of stock by the Company for B2B's net monetary assets, accompanied
by a recapitalization of the Company.
The pro forma adjustments are described in the accompanying notes to unaudited
pro forma combined condensed balance sheet. The unaudited pro forma combined
condensed balance sheet assumes the Merger had occurred as of December 31, 2000.
No proforma statement of operations has been presented since B2B's Internet
business operations have terminated and will be reflected as discontinued
operations in B2B's future financial statements.
22
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 2000
(In thousands)
IVAX Pro Forma
ASSETS Diagnostic B2B Adjustments Combined
------ ---------- ---------- ----------- ----------
CURRENT ASSETS:
Cash and cash equivalents $ 1,263 $ 18,944 $ (2,700)(a) $ 17,507
Marketable securities - 5,625 - 5,625
Accounts receivable, net 4,577 - - 4,577
Inventories 2,694 - - 2,694
Deferred income taxes 602 - - 602
Other current assets 41 39 (39)(b) 41
-------- ---------- ---------- ----------
Total current assets 9,177 24,608 (2,739) 31,046
-------- ---------- ---------- ----------
PROPERTY, PLANT AND EQUIPMENT 1,538 - - 1,538
-------- ---------- ---------- ----------
OTHER ASSETS:
Goodwill, net 7,106 - - 7,106
Equipment on lease, net 615 - - 615
Deferred income taxes 60 - - 60
Other 164 - - 164
-------- ---------- ---------- ----------
7,945 - - 7,945
-------- ---------- ---------- ----------
Total assets $ 18,660 $ 24,608 $ (2,739) $ 40,529
======== ========== ========== ==========
LIABILITIES AND
STOCKHOLDER'S EQUITY
--------------------
CURRENT LIABILITIES:
Accounts payable and accrued expense $ 3,111 $ 90 $ (90)(b) $ 3,111
Income taxes payable 37 - - 37
Net liabilities of discontinued operations - 93 51(b) 144
-------- ---------- ---------- ----------
Total current liabilities 3,148 183 (39) 3,292
DUE TO PARENT 7,962 - (7,962)(c) -
OTHER LONG-TERM LIABILITIES 331 - - 331
-------- ---------- ---------- ----------
Total liabilities 11,441 183 (8,001) 3,623
-------- ---------- ---------- ----------
STOCKHOLDER'S EQUITY:
Preferred stock - - - -
Common stock 200 86 - 286
Additional paid-in capital 11,258 35,903 - 47,161
7,962 (c)
(11,564)(d)
Accumulated deficit (2,088) (11,564) (2,700)(a) (8,390)
11,564 (d)
Accumulated other comprehensive loss (2,151) - - (2,151)
-------- ---------- ---------- ----------
Total stockholder's equity 7,219 24,425 5,262 36,906
-------- ---------- ---------- ----------
Total liabilities and
stockholder's equity $ 18,660 $ 24,608 $ (2,739) $ 40,529
======== ========== ========== ==========
The accompanying notes to unaudited pro forma combined condensed
financial statements are an integral part of this balance sheet.
23
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL INFORMATION
Note 1: The pro forma combined condensed financial information for the
periods presented does not reflect the difference between the fair
value of B2B's common stock and the $.73 exercise price of outstanding
options to acquire 1,108,795 shares of B2B's common stock pursuant to
the stock option plan of the Company that B2B will assume as part of
the merger and which are exercisable. The difference between the fair
value of B2B's common stock and the $.73 exercise price for each such
option will be recorded as an expense based upon the fair value on that
date.
Note 2: The pro forma adjustments were made:
(a) To record the estimated cost of the Merger.
(b) To reflect the operations of B2B as discontinued.
(c) To reflect the contribution to capital of amounts due to
affiliates of the Company which will not be repaid.
(d) To eliminate B2B's historical accumulated deficit.
24
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
23.1 Consent of Arthur Andersen LLP.
99.1 Press Release of IVAX Diagnostics, Inc., relating to the
consummation of the Merger.