<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
FORM 8-K/A
AMENDMENT NO 1 TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
November 12, 1998
IMPATH INC.
-------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 0-27750 13-3459685
- -----------------------------------------------------------------------------
(State or other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
</TABLE>
521 West 57th Street, New York, New York 10019
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (ZIP CODE)
Registrant's Telephone Number, Including Area Code: (212) 698-0300
------------------
(Not applicable)
-------------------------------------------------------------
(Former Name or former Address, if Changed, Since Last Report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
- ---------------------------------------------
On August 31, 1998 the Registrant announced it had acquired Medical Registry
Services, Inc. ("MRS"), a leading developer and marketer of cancer registry
software products that are currently utilized in over 400 hospitals throughout
the United States. The products are used to collect and manage critical
diagnostic, treatment, follow-up and outcomes data on cancer patients. MRS
shareholders received 550,000 shares of the Registrant's common stock in
exchange for all of the outstanding shares of MRS. The acquisition was
originally accounted for as pooling-of-interests. On October 26, 1998 the
Registrant released its earnings for the third quarter ended September 30, 1998,
which included results of at least 30 days of combined operations of the
Registrant and MRS. On December 11, 1998, the Registrant announced it has
initiated a stock repurchase program pursuant to which its Board authorized the
repurchase of $25,000,000. In accordance with SEC Rules and Regulations,
specifically Staff Accounting Bulleting #96, such buyback required the
Registrant to account for the business combinations as a purchase, as opposed to
a pooling-of-interests. As such, the Company is restating its previously filed
Form 10-Q for the quarter ended September 30, 1998.
2
<PAGE>
Item 7. Financial Statements and Exhibits
- -----------------------------------------
The audited financial statements of MRS as of and for the year ended December
31, 1997, and the unaudited interim financial statements of MRS as of and for
the six month periods ended June 30, 1998 and 1997 required by this Item are
included herein on pages F-4 through F-11 of this Form 8-K. These audited
financial statements were not required under Rule 3-05 as it related to a
pooling-of-interest transaction but they are now required as the Registrant is
now utilizing purchase accounting.
The Unaudited Pro Forma Financial Information required by this Item is also
included on pages F-1 through F-3 of this Form 8-K. The Unaudited Pro Forma
Financial Information assumes that the acquisition of MRS occurred, with respect
to the June 30, 1998 balance sheet information, on June 30, 1998, and with
respect to the statement of operations information at the beginning of each
respective period.
The Unaudited Pro Forma Financial Information is not intended to be indicative
of the financial position or results of operations had the acquisitions actually
occurred on the dates indicated.
The Unaudited Pro Forma Balance Sheet reflects the allocation of the MRS
purchase price to the estimated fair value of the assets acquired and
liabilities assumed, including various intangible assets, with the residual
being allocated to goodwill.
The unaudited pro forma statements of operations reflect the effects of the
purchase allocation described above and the resultant amortization. It also
assumes the 550,000 shares were outstanding for the entire period.
3
<PAGE>
Impath
Consolidated Proforma Balance Sheet
6/30/98
<TABLE>
<CAPTION>
Adjustments Proforma
Assets Impath MRS Column (A) Combined
---------- ----------- ----------- ----------
Current Assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 61,952,571 $ 891,604 $ -- $ 62,844,175
Marketable securities, at market value 17,240,436 -- -- 17,240,436
Accounts receivable 15,830,324 48,911 -- 15,879,235
Prepaid expenses 674,271 -- -- 674,271
Prepaid taxes 950,506 -- -- 950,506
Deferred tax assets 53,427 -- -- 53,427
Other current assets 956,175 10,935 -- 967,110
------------ ------------ ------------ -----------
Total current assets 97,657,710 951,450 -- 98,609,160
Fixed assets, less accumulated depreciation & amortization 15,233,189 123,058 -- 15,356,247
Deposits and other assets 160,282 -- -- 160,282
Intangible assets, net of accumulated amortization 7,965,864 -- 16,685,000 24,650,864
------------ ------------ ------------ -----------
Total assets $121,017,045 $1,074,508 $ 16,685,000 $138,776,553
============= ============ ============ ============
Liabilities & Stockholder's Equity
Current Liabilities:
Current portion of capital lease obligations $ 1,506,178 $ -- $ -- $ 1,506,178
Current portion of note payable 506,085 -- -- 506,085
Accounts payable 1,978,443 291,380 775,000 3,044,823
Construction payments payable -- -- -- --
Deferred Revenues -- 1,667,387 -- 1,667,387
Income taxes payable -- -- -- --
Accrued expenses 611,896 -- -- 611,896
------------ ------------ ------------ -----------
Total current liabilities 4,602,602 1,958,767 775,000 7,336,369
------------ ------------ ------------ ------------
Capital lease obligations, net of current portion 2,818,997 -- -- 2,818,997
Note payable, net of current portion 61,872 -- -- 61,872
Deferred tax liability -- -- 1,210,000 1,210,000
Stockholders' equity:
Common stock: 39,658 10,000 (7,250) 42,408
Additional paid-in capital 106,041,039 -- 13,812,991 119,854,030
Retained earnings 8,014,935 (466,555) 466,555 8,014,935
Unrealized net depreciation of marketable securities (67,392) -- -- (67,392)
------------ ------------ ------------ -----------
114,028,240 (456,555) 14,272,296 127,843,981
Less:
Cost of shares of common stock held in treasury (100) (427,704) 427,704 (100)
Deferred compensation (494,566) -- -- (494,566)
------------ ------------ ------------ -----------
Commitments and Contingencies -- -- -- --
Total stockholders' equity 113,533,574 (884,259) 14,700,000 127,349,315
------------ ------------ ------------ -----------
Total liabilities and stockholders' equity $121,017,045 $1,074,508 $ 16,685,000 $138,776,553
============ ============ ============ ===========
</TABLE>
F-1
<PAGE>
Impath
Consolidated Proforma Statement of Operations
For The Year Ended December 31, 1997
<TABLE>
<CAPTION>
Adjustments Proforma
Impath MRS Column Combined
---------------- ------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Revenues:
Net diagnostic and prognostic services $ 36,821,738 $ 3,449,795 $ - $ 40,271,533
Contract laboratory services 241,743 - - 241,743
---------------- ------------- ----------------- ----------------
Total Revenues 37,063,481 3,449,795 - 40,513,276
--------------- -------------- ---------------- ----------------
Operating expenses:
Salaries and related costs 15,056,221 2,285,703 (300,000) C 17,041,924
Selling, general, and administrative 16,222,332 1,152,047 1,009,000 B 18,383,379
--------------- -------------- ---------------- ----------------
Total operating expenses 31,278,553 3,437,750 709,000 35,425,303
--------------- -------------- ---------------- ----------------
Income from operations 5,784,928 12,045 (709,000) 5,087,973
Interest income 677,109 20,582 - 697,691
Interest expense (339,903) - - (339,903)
Gains on marketable securities, net 379,001 - - 379,001
--------------- -------------- ---------------- ----------------
Income before tax expense 6,501,135 32,627 (709,000) 5,824,762
Income tax expense (2,851,936) (10,456) 28,000 D (2,834,392)
--------------- -------------- ---------------- ----------------
Net income $ 3,649,199 $ 22,171 $ (681,000) $ 2,990,370
=============== ============== ================ ================
Per common and common equivalent share:
Basic
Net income per common share $ 0.68 N/A N/A $ 0.50
=============== ============== ================ ================
Weighted average common and common equivalent
shares outstanding 5,398,000 N/A 550,000 E 5,948,000
=============== ============== ================ ================
Diluted:
Net income per common share - assuming dilution $ 0.63 N/A N/A $ 0.47
=============== ============== ================ ================
Weighted average common and common equivalent
shares outstanding - assuming dilution 5,809,000 N/A 550,000 E 6,359,000
=============== ============== ================ ================
</TABLE>
F-2
<PAGE>
Impath
Consolidated Proforma Statement of Operations
For The Six Months Ended June 30, 1998
<TABLE>
<CAPTION>
6 mo.end 6 mo.end 6 mo.end
Impath MRS Adjustments Proforma
6/30/98 6/30/98 Column Combined
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Revenues:
Net diagnostic and prognostic services $ 24,897,988 $ 1,811,380 $ -- $ 26,709,368
Contract laboratory services 249,429 -- -- 249,429
----------- ----------- ---------- -----------
Total Revenues 25,147,417 1,811,380 -- 26,958,797
----------- ----------- ---------- -----------
Operating expenses:
Salaries and related costs 10,125,666 1,033,406 (150,000)C 11,009,072
Selling, general, and administrative 11,296,138 626,469 504,000 B 12,426,607
----------- ----------- ---------- -----------
Total operating expenses 21,421,804 1,659,875 354,000 23,435,679
----------- ----------- ---------- -----------
Income from operations 3,725,613 151,505 (354,000) 3,523,118
Interest income 1,384,152 8,290 -- 1,392,442
Interest expense (250,684) -- -- (250,684)
----------- ----------- ---------- -----------
Income before tax expense 4,859,081 159,795 (354,000) 4,664,876
Income tax expense (1,992,223) (3,829) 74,000 D (1,922,052)
----------- ----------- ---------- -----------
Net income $ 2,866,858 $ 155,966 $ (280,000) $ 2,742,824
=========== =========== ========== ===========
Per common and common equivalent share:
Basic
Net income per common share $ 0.41 N/A N/A $ 0.36
=========== =========== ========== ===========
Weighted average common and common equivalent
shares outstanding 6,968,000 N/A 550,000 E 7,518,000
=========== =========== ========== ===========
Diluted:
Net income per common share - assuming dilution $ 0.39 N/A N/A $ 0.35
=========== =========== ========== ===========
Weighted average common and common equivalent
shares outstanding - assuming dilution 7,380,000 N/A 550,000 E 7,930,000
=========== =========== ========== ===========
</TABLE>
F-3
<PAGE>
IMPATH INC.
NOTES TO UNAUDITED CONDENSED
COMBINED FINANCIAL STATEMENTS
The pro forma financial information is based on the purchase method of
accounting. Under Accounting Principles Board Opinion No. 16, "Business
Combinations," the acquiring corporation records as its cost the fair market
value of the acquired assets less liabilities assumed. A difference between the
sum of the fair values of all tangible and identifiable intangible assets
acquired, less liabilities assumed, is recorded as goodwill. The reported
income of an acquiring corporation includes the operations of the acquired
company after the effective date of the acquisition.
The acquisition of MRS was consummated on August 31, 1998. The consideration
and the allocation of the purchase price are summarized below (based upon June
30, 1998 MRS balance sheet):
<TABLE>
<CAPTION>
Purchase Price:
<S> <C>
Issuance of 550,000 shares of IMPATH Inc. common stock
(approximately $25 per share) $13,750,000
Non-compete payment (due 2/99) 200,000
Acquisition costs 475,000
-----------
Net current assets and liabilities $14,425,000
===========
Allocation of Purchase Price:
Furniture and fixtures $ 123,000
Net current assets and liabilities (1,007,000)
Net deferred tax liability (1,210,000)
Intangible assets: Workforce 330,000
Tradename 145,000
Software 500,000
Customer list 2,657,000
Non-compete 200,000
Goodwill 12,687,000
-----------
$14,425,000
===========
</TABLE>
The intangibles will be amortized over the following estimated useful lives:
Workforce 7 years
Tradename 20 years
Software 5 years
Customer list 20 years
Non-compete 5 years
Goodwill 20 years
F-4
<PAGE>
The following is a description of the pro forma adjustments:
A) To record the issuance of IMPATH Inc. common shares and the fair values
ascribed to the assets acquired and liabilities assumed; to eliminate the
equity of MRS and to accrue certain estimated payments related to the merger.
B) To record the amortization of the acquired intangibles.
C) To reduce compensation expense related to the two former principal owners of
MRS to amounts per their employment agreements with IMPATH (MRS formerly a
subchapter S Corp.).
D) To reflect a pro forma tax provision related to the net income of MRS. No tax
benefit reflected regarding the amortization of goodwill as the transaction
was a tax-free merger.
E) To adjust earnings per share calculation to reflect the 550,000 shares
issued as consideration as outstanding for the entire period.
F-5
<PAGE>
MEDICAL REGISTRY SERVICES, INC.
AND AFFILIATED COMPANY
Combined Financial Statements
(With Independent Auditors' Report Thereon)
F-6
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
Medical Registry Services, Inc.:
We have audited the accompanying combined balance sheet of Medical Registry
Services, Inc. and affiliated company as of December 31, 1997, and the related
combined statements of operations and accumulated deficit, and cash flows for
the year then ended. These combined financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
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 audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Medical Registry
Services, Inc. and affiliated company as of December 31, 1997, and the results
of their operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles.
KPMG LLP
Short Hills, New Jersey
July 1, 1998
F-7
<PAGE>
MEDICAL REGISTRY SERVICES, INC.
AND AFFILIATED COMPANY
Combined Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
Assets 1998 1997
--------------- ----------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 891,604 $ 261,772
Accounts receivable 48,911 187,732
----------- -----------
Total current assets 940,515 449,504
Furniture and fixtures, net of accumulated amortization
of $402,557 and $378,186, respectively 123,058 147,429
Other assets 10,935 11,155
----------- -----------
Total assets $ 1,074,508 $ 608,088
=========== ===========
Liabilities and Stockholders' Deficit
Liabilities:
Accounts payable $ 217,180 $ 285,097
Accrued pension expense 74,200 70,492
Deferred revenues 1,667,387 1,247,724
----------- -----------
Total liabilities 1,958,767 1,603,313
----------- -----------
Stockholders' deficit:
Common stock, no par value. Authorized, issued and
outstanding 1,000 shares 10,000 10,000
Accumulated deficit (466,555) (577,521)
Treasury stock, at cost (427,704) (427,704)
----------- -----------
Total stockholders' deficit (884,259) (995,225)
----------- -----------
Total liabilities and stockholders' deficit $ 1,074,508 $ 608,088
=========== ===========
</TABLE>
See accompanying notes to combined financial statements.
F-8
<PAGE>
MEDICAL REGISTRY SERVICES, INC.
AND AFFILIATED COMPANY
Combined Statements of Operations and Accumulated Deficit
<TABLE>
<CAPTION>
Six-month
Period ended June 30 Year ended
------------------------------------ December 31,
1998 1997 1997
---------------- ---------------- ----------------
(Unaudited)
<S> <C> <C> <C>
Revenues:
License fees and rental income $ 1,811,390 $ 1,726,221 $ 3,449,795
Interest and dividend income 8,290 8,633 20,582
----------- ----------- -----------
Total revenues 1,819,680 1,734,854 3,470,377
----------- ----------- -----------
Expenses:
Salaries and related costs 1,033,406 1,024,115 2,285,703
Selling, general and administrative expense 626,479 631,981 1,152,047
----------- ----------- -----------
Total expenses 1,659,885 1,656,096 3,437,750
----------- ----------- -----------
Net income before state
income taxes 159,795 78,758 32,627
State income taxes (3,829) (4,095) (10,456)
----------- ----------- -----------
Net income 155,966 74,663 22,171
Accumulated deficit at beginning of period (577,521) (439,692) (439,692)
Distributions (45,000) (127,000) (160,000)
----------- ----------- -----------
Accumulated deficit at end of period $ (466,555) $ (492,029) $ (577,521)
=========== =========== ===========
</TABLE>
See accompanying notes to combined financial statements.
F-9
<PAGE>
MEDICAL REGISTRY SERVICES, INC.
AND AFFILIATED COMPANY
Combined Statements of Cash Flows
<TABLE>
<CAPTION>
Six-month
Period ended June 30
--------------------------------- Year ended
1998 1997 December 31, 1997
--------------- -------------- -----------------
(Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 155,966 $ 74,663 $ 22,171
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 24,371 19,221 37,948
Changes in assets and liabilities:
(Increase) decrease in accounts
receivables 138,821 78,403 (56,324)
(Increase) decrease in other assets 220 -- (1,720)
Increase (decrease) in accounts payable (67,917) 136,621 75,269
Increase (decrease) in accrued pension
expense 3,708 (6,726) 4,216
Increase in deferred revenue 419,663 364,945 121,968
--------- --------- ---------
Net cash provided by operating
activities 674,832 667,127 203,528
Cash flows from financing activities - distributions (45,000) (127,000) (160,000)
--------- --------- ---------
Net increase in cash 629,832 540,127 43,528
Cash at beginning of period 261,772 218,244 218,244
--------- --------- ---------
Cash at end of period $ 891,604 $ 758,371 $ 261,772
========= ========= =========
Supplementary disclosure - taxes paid $ 10,456 $ 4,210 $ 8,206
========= ========= =========
</TABLE>
See accompanying notes to combined financial statements.
F-10
<PAGE>
MEDICAL REGISTRY SERVICES, INC.
AND AFFILIATED COMPANY
Notes to Combined Financial Statements
(1) Organization and Business Activities
Medical Registry Services, Inc. was incorporated in 1979 and currently
markets cancer registry software utilized in hospitals throughout the United
States. The financial statements of RW Associates have been combined with
those of Medical Registry Services, Inc. (the Company) because of common
ownership. The operations of RW Associates are limited.
(2) Summary of Significant Accounting Policies
Interim Financial Statements
The interim combined financial statements as of June 30, 1998 and for the
six-months periods ended June 30, 1998 and 1997 are unaudited, and certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted. In the opinion of management, all adjustments,
consisting only of normal recurring adjustments necessary to fairly present
the financial position, results of operations and cash flows with respect to
the interim financial statements, have been included. The results of
operations for the interim periods are not necessarily indicative of the
results for the entire fiscal year.
Furniture and Fixtures
Furniture and fixtures are stated at cost, less accumulated depreciation and
amortization. Depreciation is computed on the straight-line method over the
estimated useful lives of the assets, which range from three to seven years.
The Company reviews its fixed assets for impairment when events or changes
in business conditions indicate that their full carrying value may not be
recovered. Assets are considered to be impaired and written down to fair
value if expected associated cash flows are less than the carrying amount.
Fair value is generally the present value of the expected associated cash
flows.
Research and Development
Research and product development costs are expensed as incurred.
Accounting for Income Taxes
The Company has elected S Corporation status as defined by the Internal
Revenue Code and state tax statutes, whereby the Company is not subject to
taxation for federal purposes. Under S Corporation status, the stockholders
report their share of the Company's taxable earnings or losses in their
personal tax returns. State taxes are provided for at the company level.
F-11
<PAGE>
MEDICAL REGISTRY SERVICES, INC.
AND AFFILIATED COMPANY
Notes to Combined Financial Statements
Revenue Recognition
Revenue from the license of software is deferred and recognized on a
straight-line basis over the term of the agreement. All license agreements
have support and maintenance obligations by the Company.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing
parties. The carrying amount of the Company's financial instruments included
in the accompanying combined balance sheet approximates estimated fair value
due to their short-term nature.
(3) Commitments
The Company maintains various operating leases, primarily for office space.
As of December 31, 1997, future minimum lease payments under noncancellable
leases are as follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $ 71,645
1999 67,445
2000 26,087
2001 901
--------
$ 166,078
=========
</TABLE>
Rent expense for the year ended December 31, 1997 totaled approximately
$74,000.
F-12
<PAGE>
MEDICAL REGISTRY SERVICES, INC.
AND AFFILIATED COMPANY
Notes to Combined Financial Statements
(4) Employee Benefits
Effective January 1, 1991, the Company adopted the Medical Registry
Services Inc. Profit Sharing Plan (the Profit Sharing Plan) benefiting
certain employees. Employees who are over the age of 21 and have completed
one year of service are eligible for participation. The contribution to the
Profit Sharing Plan is an amount determined by the Company each year.
Employees are 100% vested in employer contributions over a six-year period.
Effective March 2, 1991 and amended and restated July 1, 1997, the Company
adopted the Medical Registry Services Inc. 401(k) Plan (the Plan)
benefiting certain employees. All employees who are over the age of 21 are
eligible for immediate voluntary participation in the Plan. Employees may
contribute 1% to 15% of their total salaries on a before tax basis. There
is no matching contribution from the Company, however, the Company may
decide to make an additional contribution to the Plan at their discretion.
Plan participants become 100% vested in their contributions after five
years of service. The Company contributed a total of $123,359 related to
these plan's for the year ended December 31, 1997.
(5) Related Party
The Company paid approximately $41,000 in consulting fees to a company
owned by the wife of one of the principals of the Company in 1997.
(6) Subsequent Event (Unaudited)
On August 31, 1998, the Company was acquired by IMPATH Inc. for 550,000
shares of IMPATH's common stock.
F-13
<PAGE>
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.
IMPATH INC.
Date: March 24, 1999 By /s/ John P. Gandolfo
--------------------
Name: John P. Gandolfo
Title: Executive Vice President,
Chief Operating Officer and
Chief Financial Officer
4
