UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
April 18, 2000
----------------
Date of Report
(Date of Earliest Event Reported)
COMPUTERIZED THERMAL IMAGING, INC.
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(Exact name of registrant as specified in its charter)
Nevada 000-23955 87-0458721
------------------------ ----------------------- ------------------------
(State or Other (Commission File Number) (I.R.S. Employer
Jurisdiction of Identification Number)
Incorporation or
Organization)
476 HERITAGE PARK BOULEVARD, SUITE 210
LAYTON, UTAH 84041
--------------------------------------------------
(Address of principal executive offices)
(801) 776-4700
------------------------
(Registrant's telephone number)
Not Applicable
------------------------
(Former Name and Address of Principal Executive Offices)
Item 7. Financial Statements
(a) Financial statements of business acquired.
On April 27, 2000 we filed a Form 8-K dated April 18, 2000 reporting
our acquisition of 100 percent of the outstanding common stock of Bales
Scientific, Inc. for a total purchase price of $11.1 million. This amended
8-K is filed to provide the required audited financial statements and proforma
disclosures in connection with that filing.
<PAGE>
FINANCIAL STATEMENTS
The following comprise the audited financial statements of Bales
Scientific, Inc.
C O N T E N T S
-----------------
Independent Auditors' Report 3
Balance Sheet as of January 31, 2000 4
Statements of Operations for the years ended
January 31, 2000 and 1999 5
Statements of Stockholders' Equity (Deficit) for
the years ended January 31, 2000 and 1999 6
Statements of Cash Flows for the years ended
January 31, 2000 and 1999 7
Notes to the Financial Statements 8
2
<PAGE>
HJ & ASSOCIATES, LLC
Certified Public Accountants & Consultants
INDEPENDENT AUDITORS' REPORT
-----------------------------
To the Board of Directors and Stockholders
Bales Scientific, Inc.
Walnut Creek, California
We have audited the accompanying balance sheet of Bales Scientific, Inc. as of
January 31, 2000 and the related statements of operations, stockholders'
equity (deficit) and cash flows for the years ended January 31, 2000 and 1999.
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 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 consolidated
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Bales Scientific, Inc. as of
January 31, 2000 and the results of its operations and its cash flows for the
years ended January 31, 2000 and 1999 in conformity with generally accepted
accounting principles.
/s/ HJ & Associates, LLC
------------------------
HJ & Associates, LLC
Salt Lake City, Utah
June 14, 2000
3
<PAGE>
BALES SCIENTIFIC, INC.
Balance Sheets
ASSETS
------
January 31,
2000
------------
CURRENT ASSETS
Cash and cash equivalents $ 3,149
Accounts receivable, net (Note 2) 60,268
Inventory (Note 3) 133,948
------------
Total Current Assets 197,365
------------
EQUIPMENT, NET (NOTE 4) 3,835
------------
TOTAL ASSETS $ 201,200
============
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
--------------------------------------------
CURRENT LIABILITIES
Accounts payable $ 19,673
Accrued expenses 65,254
Accrued expenses, related parties (Note 10) 521,282
Notes payable, related (Note 5) 276,100
Line of credit payable (Note 6) 115,000
------------
Total Current Liabilities 997,309
------------
Total Liabilities 997,309
------------
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, no par value, 10,000 shares authorized;
200 shares issued and outstanding 260,000
Accumulated deficit (1,056,109)
------------
Total Stockholders' Equity (Deficit) (796,109)
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 201,200
============
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
BALES SCIENTIFIC, INC.
Statements of Operations
For the Years Ended
January 31,
---------------------------
2000 1999
------------- -------------
SALES, NET $ 893,247 $ 687,772
COST OF GOODS SOLD 204,884 143,145
------------- -------------
Gross Margin 688,363 544,627
------------- -------------
OPERATING EXPENSES
Depreciation 1,562 1,395
Bad debt expense 675 2,400
General and administrative expenses 320,830 337,951
Research and development 329,248 362,109
------------- -------------
Total Operating Expenses 652,315 703,855
------------- -------------
Income (Loss) from Operations 36,048 (159,228)
OTHER INCOME (EXPENSE)
Interest expense (43,723) (32,871)
------------- -------------
Total Other Income (Expense) (43,723) (32,871)
------------- -------------
NET (LOSS) $ (7,675) $ (192,099)
============= =============
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
BALES SCIENTIFIC, INC.
Statements of Stockholders' Equity (Deficit)
Common Stock
----------------------------- Accumulated
Shares Amount Deficit
-------------- -------------- ------------
Balance, January 31, 1998 200 $ 260,000 $ (856,335)
Net loss for the year ended
January 31, 1999 - - (192,099)
-------------- -------------- ------------
Balance, January 31, 1999 200 260,000 (1,048,434)
Net loss for the year ended
January 31, 2000 - - (7,675)
-------------- -------------- ------------
Balance, January 31, 2000 200 $ 260,000 $(1,056,109)
============== ============== ============
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
BALES SCIENTIFIC, INC.
Statements of Cash Flows
For the Years Ended
January 31,
---------------------------
2000 1999
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (7,675) $ (192,099)
Adjustments to reconcile net (loss) to net cash
used in operating activities:
Depreciation and amortization 1,562 1,395
Bad debt expense 675 2,400
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (48,022) 24,993
(Increase) decrease in inventory (49,667) 18,972
Increase (decrease) in accounts payable (32,534) 36,282
Increase (decrease) in accrued expenses 101,121 74,471
------------- -------------
Net Cash Provided (Used) in
Operating Activities (34,540) (33,586)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (3,362) (650)
------------- -------------
Net Cash Used in Investing Activities (3,362) (650)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from line of credit 35,702 30,641
------------- -------------
Net Cash Provided by Financing Activities 35,702 30,641
------------- -------------
NET INCREASE (DECREASE) IN CASH (2,200) (3,595)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 5,349 8,944
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 3,149 $ 5,349
============= =============
CASH PAID FOR:
Interest $ 16,113 $ 6,620
Income taxes $ - $ -
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
BALES SCIENTIFIC, INC.
Notes to the Financial Statements
January 31, 2000 and 1999
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
The financial statements presented are those of Bales Scientific, Inc. (the
"Company"). The Company was incorporated in the State of California on
February 20, 1979 to carry on any lawful activity under the laws of
California. The Company is engaged in the business of designing and producing
medical and other specialized imaging products.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's financial statements are prepared using the accrual method of
accounting. The Company has elected a January 31 year end.
b. Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less to be cash equivalents.
c. Inventory
Inventories of raw materials, finished goods and work-in-process are stated at
the lower of cost or market. The cost of the inventory includes the purchase
price and direct costs such as freight-in.
d. Revenue Recognition
The Company's revenue is derived primarily from the sale of medical thermal
imaging equipment. The revenue is recognized upon completion and shipment to
the customer. The cost of work-in-process and finished goods includes all
direct materials, labor and those indirect costs related to the equipment.
Selling, general and administrative costs are expensed as incurred.
e. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and 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.
Actual results could differ from those estimates.
f. Allowance for Doubtful Accounts
The Company's accounts receivable are shown net of an allowance for doubtful
accounts of $4,375 at January 31, 2000.
8
<PAGE>
BALES SCIENTIFIC, INC.
Notes to the Financial Statements
January 31, 2000 and 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
g. Reclassification
Certain January 31, 1999 balances have been reclassified to conform with the
January 31, 2000 financial statement presentation.
h. Advertising
The Company expenses advertising costs as incurred.
NOTE 3 - INVENTORY
Inventories for January 31, 2000 consisted of the following:
January 31,
2000
-------------
Finished goods $ 62,200
Work-in-process, raw materials and supplies 71,748
-------------
Total $ 133,948
=============
The inventory is valued at lower of cost or market and is valued on a
first-in, first-out basis.
NOTE 4 - EQUIPMENT
All equipment is accounted for at cost. Equipment is depreciated over its
estimated useful lives of 5 years. For the years ended January 31, 2000 and
1999, the Company expensed $1,562 and $1,395 in depreciation, respectively.
NOTE 5 - NOTE PAYABLE - RELATED PARTY
The Company has received advances from its president which bear interest at
10.25% and are due on demand. The balance due at January 31, 2000 was
$276,100. The note was paid prior to the sale of the Company to Computerized
Thermal Imaging, Inc. (NOTE 11).
NOTE 6 - LINE OF CREDIT PAYABLE
The line of credit payable at January 13, 2000 consisted of the following:
Line of credit payable to Wells Fargo Bank; secured by
accounts receivable, inventory and fixed assets, bearing
interest at 9% and due August 10, 2003. $ 115,000
=========
The line of credit was paid off subsequent to year end in conjunction with the
sale of the Company to Computerized Thermal Imaging. Inc. Accordingly, the
payable is recorded as a current liability.
9
<PAGE>
BALES SCIENTIFIC, INC.
Notes to the Financial Statements
January 31, 2000 and 1999
NOTE 7 - COMMITMENTS AND CONTINGENCIES
a. Office Lease
The Company leases its office and warehouse space on a month-to-month basis
from a related party. Rent expense for the years ended January 31, 2000 and
1999 was $62,000 and $61,700, respectively.
NOTE 8 - CONCENTRATIONS OF RISK
a. Cash
The Company maintains a cash account at a financial institution located in
Walnut Creek, California. The account is insured by the Federal Deposit
Insurance Corporation up to $100,000. The Company's balances occasionally
exceed that amount.
b. Accounts Receivable
The Company provides for accounts receivable as part of operations.
Management does not believe that the Company is subject to credit risks
outside the normal course of business.
NOTE 9 - CUSTOMERS AND EXPORT SALES
During 2000 and 1999, the Company operated one industry segment which includes
the development, manufacturing and marketing of thermal imaging medical
equipment.
The Company's financial instruments subject to credit risk are primarily trade
accounts receivable from its customers.
For the Years Ended
January 31,
----------------------------
2000 1999
------------- -------------
Foreign Sales $ - $ -
Domestic Sales 893,247 687,772
------------- -------------
$ 893,247 $ 687,772
============= =============
10
<PAGE>
BALES SCIENTIFIC, INC.
Notes to the Financial Statements
January 31, 2000 and 1999
NOTE 10 - ACCRUED EXPENSES - RELATED PARTIES
Accrued expenses-related parties was comprised of the following at January 31,
2000
January 31,
2000
-------------
Accrued interest payable $ 282,760
Accrued rent payable 238,522
-------------
Total $ 521,282
=============
On April 18, 2000, these amounts were forgiven as part of the sale of the
Company to Computerized Thermal Imaging, Inc. (NOTE 11)
NOTE 11 - MERGER WITH COMPUTERIZED THERMAL IMAGING, INC.
On April 18, 2000, Computerized Thermal Imaging, Inc. (CTI) purchased 100% of
the common stock of the Company.
11
<PAGE>
(b) Proforma financial information.
The following is an unaudited proforma consolidated balance sheet and income
statement assuming the issuance of 709,677 shares of common stock valued at
$5,500,000 by CTI to acquire 100% of the outstanding shares of common stock of
the Company. The acquisition of the Company by CTI will be accounted for as a
purchase of the Company pursuant to APB No. 18. The accounts of CTI are as of
June 30, 1999, its last audited balance sheet and income statement. The
accounts of the Company are as of January 31, 2000.
BALES SCIENTIFIC, INC.
Consolidated Proforma Balance Sheet
January 31, 2000
(Unaudited)
ASSETS
------
Computerized Proforma
Thermal Bales Adjustments
Imaging Scientific Increase Proforma
Inc. Inc. (Decrease) Consolidated
----------- ------------- ------------- -------------
CURRENT ASSETS
Cash $ 137,162 $ 3,149 $ 38,943,103 $ 39,083,414
Accounts receivable, net - 60,268 - 60,268
Inventory - 133,948 - 133,948
----------- ------------- ------------- -------------
Total Current Assets 137,162 197,365 38,943,103 39,277,630
----------- ------------- ------------- -------------
EQUIPMENT, NET 238,643 3,835 - 242,478
----------- ------------- ------------- -------------
OTHER ASSETS
Goodwill, net - - 10,706,498 10,706,498
----------- ------------- ------------- -------------
Total Other Assets - - 10,706,498 10,706,498
----------- ------------- ------------- -------------
TOTAL ASSETS $ 375,805 $ 201,200 $ 49,649,601 $ 50,226,606
=========== ============= ============= =============
12
<PAGE>
BALES SCIENTIFIC, INC.
Consolidated Proforma Balance Sheet (Continued)
January 31, 2000
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
Computerized Proforma
Thermal Bales Adjustments
Imaging Scientific Increase Proforma
Inc. Inc. (Decrease) Consolidated
----------- ------------- ------------- -------------
CURRENT LIABILITIES
Accounts payable $ 470,870 $ 19,673 $ 41,970 $ 532,513
Accrued expenses 64,644 65,254 - 129,898
Accrued expenses,
related parties - 521,282 (521,282) -
Notes payable - related - 276,100 - 276,100
Line of credit payable - 115,000 - 115,000
----------- ------------- ------------- -------------
Total Current
Liabilities 535,514 997,309 (479,312) 1,053,511
----------- ------------- ------------- -------------
Total Liabilities 535,514 997,309 (479,312) 1,053,511
----------- ------------- ------------- -------------
COMMITMENTS AND
CONTINGENCIES
STOCKHOLDERS'
EQUITY (DEFICIT)
Common stock, $0.001 par
value, 100,000,000
shares authorized;
74,644,197 shares
issued and
outstanding 62,276 260,000 (247,631) 74,645
Additional paid-
in capital 25,486,825 - 49,320,435 74,807,260
Accumulated deficit (25,708,810) (1,056,109) 1,056,109 (25,708,810)
----------- ------------- ------------- -------------
Total
Stockholders'
Equity (Deficit) (159,709) (796,109) 50,128,913 49,173,095
----------- ------------- ------------- -------------
TOTAL LIABILITIES
AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 375,805 $ 201,200 $ 49,649,601 $ 50,226,606
=========== ============= ============= =============
13
<PAGE>
BALES SCIENTIFIC, INC.
Consolidated Proforma Statement of Operations
January 31, 2000
(Unaudited)
Computerized Proforma
Thermal Bales Adjustments
Imaging Scientific Increase Proforma
Inc. Inc. (Decrease) Consolidated
----------- ------------- ------------- -------------
SALES, NET $ - $ 893,247 $ - $ 893,247
COST OF GOODS SOLD - 204,884 - 204,884
----------- ------------- ------------- -------------
Gross Margin - 688,363 - 688,363
----------- ------------- ------------- -------------
OPERATING EXPENSES
Depreciation and
amortization - 1,562 1,189,611 1,191,173
Bad debt expense - 675 - 675
General and admini-
strative expenses 2,626,562 320,830 - 2,947,392
Research and
development costs 1,837,182 329,248 - 2,166,430
----------- ------------- ------------- -------------
Total Operating
Expenses 4,463,744 652,315 1,189,611 6,305,670
----------- ------------- ------------- -------------
Income (Loss)
from Operations (4,463,744) 36,048 (1,189,611) (5,617,307)
----------- ------------- ------------- -------------
OTHER INCOME (EXPENSE)
Interest income 6,124 - - 6,124
Interest expense (568,221) (43,723) - (611,944)
----------- ------------- ------------- -------------
Total Other
Income (Expense) (562,097) (43,723) - (605,820)
----------- ------------- ------------- -------------
NET (LOSS) $(5,025,841) $ (7,675) $ (1,189,611) $ (6,223,127)
=========== ============= ============= =============
14
<PAGE>
BALES SCIENTIFIC, INC.
Summary of Proforma Adjustments
January 31, 2000
(Unaudited)
Proforma Adjustments
--------------------
1) Goodwill (CTI) $ 11,896,109
Common stock (Bales) 260,000
Retained Earnings (Bales) (1,056,109)
Common stock (CTI) (710)
Additional paid-in-capital (CTI) (5,499,290)
Cash (CTI) (5,600,000)
----------------
-
================
To record purchase of the Company through the issuance of 709,677 shares of
CTI common stock valued at $7.75 per share and $5.6 million cash.
2) Amortization expense $ 1,189,611
Accumulated amortization - goodwill (1,189,611)
----------------
-
================
To amortize 1 year of goodwill based on a 10-year life.
3) Cash (CTI) $ 44,543,103
Common stock (CTI) (11,659)
Additional paid-in capital (CTI) (44,531,444)
----------------
-
================
To record issuance of 11,658,970 shares of common stock and warrants for cash
to fund the purchase of the Company.
4) General and administrative (CTI) $ 41,970
Accounts payable (CTI) (41,970)
----------------
-
================
To record legal fees associated with the purchase.
5) Accrued expenses-related (Bales) $ 521,282
Additional paid-in capital (CTI) (521,282)
----------------
-
================
To record contribution of capital by shareholder.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
COMPUTERIZED THERMAL IMAGING, INC.
Date: 6/16/2000 By: /s/ Kevin L. Packard
------------------- -----------------------------
Kevin L. Packard
Chief Financial Officer
