Current Report on Form 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 6, 1998
INAMED CORPORATION
------------------
(Exact name of registrant as specified in its charter)
FLORIDA 1-9741 59-0920629
- ---------------------------- ------------- -----------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3800 Howard Hughes Parkway, Suite 900
Las Vegas, Nevada 89109
--------------------------------------
Address of principal executive offices
Registrant's telephone number, including area code: 702/791-3388
N/A
-------------------------------------------------------------
(Former name or former address, if changed since last report.)
INAMED Corporation (the "Company" or "INAMED") is filing
this report on Form 8-K in connection with the resignation of
Coopers & Lybrand L.L.P. as the Company's independent accountant.
The issues of concern expressed by the former independent
accountant, as noted below in Item 4, relate to matters arising
prior to major changes in senior management which began in
December 1997. The new senior management, the audit committee
and the board of directors hereby express their commitment to
ensuring that these types of issues do not arise again.
Item 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
(i) As of March 6, 1998 Coopers & Lybrand L.L.P., the
Company's independent accountant, has resigned.
(ii) The prior reports of the former independent accountant
contained explanatory language discussing the Company's
ability to continue as a going concern and the
uncertainty related to the outcome of the breast
implant class action litigation. In addition, the
Company is currently subject to a default judgment of
$10 million in 1995 (arising from a case in Missouri in
which its products were not used), which the Company is
challenging, for which no conclusion has been reached
as to the appropriate accounting; accordingly, once
proper accounting treatment is resolved, it may affect
prior accounting periods and previously issued
financial statements.
(iii)Neither the Company's board of directors nor its
audit committee had recommended the decision by the
former independent accountant to resign.
(iv) The former independent accountant advised the Company
that there had been a disagreement, which was
satisfactorily resolved, as to the method for
determining the Company's reserves for product returns
and the adequacy of such reserves. The Company had
reduced its reserves for returns in the third quarter
of 1996 by approximately $1.9 million; as a result of
the resolution of this issue, the Company plans to
file an amended Form 10-Q to increase such reserves.
(v) I. The former independent accountant advised the
Company that the quality and oversight of the Company's
systems of internal controls and management controls
were not being properly administered, resulting in
matters such as the following:
. In early and mid-1997, the Company filed registration
statements on Forms S-1 and S-3 containing historical
financial statements for 1995 and 1996 without the prior
knowledge or consent of the former independent accountant.
. The former independent accountant has been informed that the
1996 and 1997 financial statements will have large fourth quarter
adjustments. No conclusion has been reached as to the
appropriate quarter(s) in which such adjustments should be
recorded; however, the Company believes it will be necessary to
restate and refile its Form 10-Qs for 1996 and 1997.
. There have been numerous related party transactions which
were not supported by adequate documentation or independent
approval and authorization, such as:
(i) Use of chartered airplane;
(ii) Wire transfers in 1997 totaling
approximately $240,000 to a corporate
officer/director;
(iii)Advance payments in 1996 totaling
approximately $330,000 to a management
company owned by a corporate
officer/director; and
(iv) The Company's personnel and other
resources had been used to assist in the
development of a business opportunity
related to ultrasonic liposuction for
the benefit of a company controlled by
INAMED's former chairman and CEO.
With respect to item (ii) above, $180,000 of those
monies were properly payable to that person
pursuant to a pre-existing consulting agreement.
When the difference of $60,000 was brought to the
attention of senior management, that person
promptly repaid those funds (plus interest) to the
Company.
With respect to item (iii) above, in 1997 the
Company received invoices to support part of that
payment and the balance was repaid to the Company
(plus interest).
With respect to item (iv) above, to date the
Company has not been reimbursed for the use of its
personnel and resources, although it believes that
the amounts in question aggregate approximately
$150,000.
The Company plans to take adequate reserves for
these transactions and to seek appropriate
documentation and support. The new senior
management has instituted new policies and
procedures to appropriately deal with all related
party transactions and to ensure that any payments
to related parties do not impede the Company's
other obligations (such as remittance of payroll
taxes when due).
. During 1996 and early 1997, the Company repurchased an
aggregate of approximately $56,000 of outstanding common stock
from former employees and others, which appears to be a
violation of certain debt covenants. These transactions were
rescinded in 1998 once they were brought to the attention of
senior management; no conclusion has been reached as to whether
these actions may give rise to the need for waivers of covenants
in the Company's indenture for its senior debt.
. The Company has not responded in writing to a comment letter
from the Securities and Exchange Commission ("S.E.C.") dated
February 14, 1997. However, the Company has held verbal
discussions with the S.E.C. and has reflected many of the
comments in subsequent filings. In connection with the filing of
its 1997 Form 10-K, the Company plans to respond in writing to
the S.E.C. comment letter.
II. The former independent accountant has advised the
Company that there were illegal acts in 1996 and 1997,
which were appropriately corrected by the Company once
they were brought to the attention of the audit
committee. See item (a) below. In addition, there are
currently a number of other matters which the former
independent accountant has advised the Company may
constitute illegal acts. See item (b) below.
(a) During 1997, the former independent accountant
advised the Company that it was an illegal act for
the Company to not promptly pay an aggregate of
approximately $4.6 million of payroll taxes when
due in late 1996 and early 1997 to state and
federal tax agencies. This issue was
appropriately corrected by the Company once it was
brought to the attention of the audit committee
and the board of directors.
(b) After the changes in senior management began in
December 1997, other potential violations of law
arising earlier in the year were identified by the
former independent accountant; these issues were
promptly addressed once they were brought to the
attention of new senior management. These include
the failure to garnish approximately $4,000 of a
former corporate officer's salary, and the
question of whether the Company's Brazilian
subsidiary (which accounts for less than 1% of the
Company's sales) had properly paid certain taxes,
had proper authority to conduct its business, and
whether it was maintaining proper books of
account. These matters are being reviewed by
legal counsel. No conclusion has been reached as
to whether any of these activities might give rise
to the need for waivers of covenants in the
Company's indenture for its senior debt.
Item 5. OTHER EVENTS.
On March 11, 1998, the Company issued a news release
disclosing that Coopers & Lybrand L.L.P. had resigned as the
Company's independent accountant and that Thomas R. Pilholski is
no longer an employee of the Company. The full text of that
announcement is attached as an exhibit.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS
(c) EXHIBITS
16 Letters from Coopers & Lybrand L.L.P. [to be filed
by amendment]
99.1 News Release dated March 11, 1998
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
INAMED CORPORATION
Dated: March 13, 1998 By: /s/ Richard G. Babbitt
Name: Richard G. Babbitt
Title: Chairman and Chief
Executive Officer
EXHIBIT INDEX
16 Letters from Coopers & Lybrand [to be filed by amendment]
99.1 News Release March 11, 1998
Exhibit 99.1
INAMED "Innovation and Medicine" INAMED CORPORATION
3800 Howard Hughes Parkway
Suite 900
Las Vegas, NV 89109
(702) 791-3388
Fax: (702) 791-1922
NEWS RELEASE
FOR IMMEDIATE RELEASE
Company Contact: Richard G. Babbitt
(702) 791-3388
INAMED CORPORATION ANNOUNCES
RESIGNATION OF COOPERS & LYBRAND
LAS VEGAS, NEVADA - March 11, 1998 - INAMED Corporation (OTC
Bulletin Board: IMDC), a global surgical and medical device
company, announced today that Coopers & Lybrand has resigned as
the Company's outside auditor. The reasons for the resignation
will be set forth in a Form 8-K, to be filed shortly. The
Company also announced that Thomas R. Pilholski, who had been
hired as Chief Financial Officer in December 1997, is no longer
an employee. The Company expects to hire a new Chief Financial
Officer and retain a new outside auditor in the near future.
INAMED Corporation has 26 operating subsidiaries in the United
States, Europe, Mexico, Latin America and Asia. The subsidiaries
are engaged in the development, manufacturing and marketing of
medical devices for the plastic and reconstructive, bariatric and
general surgery markets. INAMED is headquartered in Las Vegas,
Nevada.
