<PAGE> 1
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 of 1934
Date of Report (Date of earliest event reported): August 22, 1995
COLLAGEN CORPORATION
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation)
0-10640 94-2300486
- --------------------------------------------------------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
2500 Faber Place, Palo Alto, California 94303
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 856-0200
----------------------------
N/A
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
The undersigned Registrant hereby amends the following item of its
Current Report on Form 8-K filed on September 6, 1995. The Registrant is
amending Item 7 to include certain required financial statements and pro forma
financial statements and an exhibit associated therewith.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Acquired Business.
The following pages 3 through 21 contain (i) Audited Financial
Statements of LipoMatrix, Incorporated ("LipoMatrix") for the
years ended December 31, 1994 and 1993 with the Report of
Independent Public Auditors thereon, and (ii) the balance sheet of
LipoMatrix as of June 30, 1995 (unaudited) and the unaudited
statements of operations and cash flows of LipoMatrix and
accompanying notes for the six months ended June 30, 1995 and
1994.
2
<PAGE> 3
(LOGO)
LIPOMATRIX, INCORPORATED
(a development stage enterprise)
CONSOLIDATED FINANCIAL STATEMENTS
PERIOD FROM INCEPTION (FEBRUARY 14, 1992)
THROUGH DECEMBER 31, 1994
<PAGE> 4
[LETTERHEAD]
Price Waterhouse LLP
REPORT OF INDEPENDENT ACCOUNTANTS
September 1, 1995
To the Board of Directors
and Stockholders of LipoMatrix, Incorporated
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of cash flows and of stockholders'
deficit present fairly, in all material respects, the financial position of
LipoMatrix, Incorporated (a development stage enterprise) and its subsidiary at
December 31, 1994 and 1993, and the results of their operations and their cash
flows for the years then ended, for the period from inception (February 14,
1992) through December 31, 1992, and for the period from inception (February
14, 1992) through December 31, 1994, in conformity with generally accepted
accounting principles. 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 of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
<PAGE> 5
LIPOMATRIX, INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
December 31,
--------------------
1994 1993
------ -------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 1,311 $ 339
Prepaid expenses and other current assets 18 50
------- -------
Total current assets 1,329 389
Property and equipment, net (Note 2) 813 800
------- -------
$ 2,142 $ 1,189
======= =======
LIABILITIES AND STOCKHOLDERS' DEFICIT
- -------------------------------------
Current liabilities:
Accounts payable $ 274 $ 267
Accrued expenses and other current
liabilities (Note 2) 765 242
Amounts due related party (Note 7) 66 114
------- -------
Total current liabilities 1,105 623
------- -------
Bank borrowings (Note 3) 1,191 604
------- -------
Commitments and contingencies (Notes 6 and 9)
Stockholders' deficit (Note 4):
Series B preferred stock, $0.01 par value;
8,000,000 shares authorized: 6,483,333 and
1,980,000 shares issued and outstanding 8,104 2,475
Series A preferred stock, $0.01 par value;
4,040,818 shares authorized, issued and outstanding 495 495
Common stock, $0.01 par value;
16,000,000 shares authorized; 849,066 and
800,801 shares issued and outstanding 30 24
Additional paid-in capital 6 --
Notes receivable for common stock (19) (19)
Cumulative translation adjustment 4 (4)
Deficit accumulated during development stage (8,774) (3,009)
------- -------
Total stockholders' deficit (154) (38)
------- -------
$ 2,142 $ 1.189
======= =======
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE> 6
LIPOMATRIX, INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Period from inception
(February 14, 1992) through
Year ended December 31, December 31,
----------------------- ---------------------------
1994 1993 1992 1994
------- ------- ----- -------
<S> <C> <C> <C> <C>
Operating expenses:
Research and development $ 3,660 $ 1,688 $ 307 $ 5,655
Selling, general and administrative 2,084 959 102 3,145
------- ------- ----- -------
Total operating expenses 5,744 2,647 409 8,800
Interest expense 67 10 -- 77
Interest income (46) (48) (9) (103)
------- ------- ----- -------
Net loss $(5,765) $(2,609) $(400) $(8,774)
======= ======= ===== =======
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE> 7
LIPOMATRIX, INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Period from inception
(February 14, 1992) through
Year ended December 31, December 31,
------------------------- ---------------------------
1994 1993 1992 1994
------- ------- ----- -------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $(5,765) $(2,609) $(400) $(8,774)
Adjustments to reconcile net loss to
cash flows used in operating activities:
Depreciation 578 121 3 702
Issuance of preferred stock in exchange
for consulting services 29 -- -- 29
Changes in assets and liabilities:
Prepaid expenses and other current assets 32 (43) (7) (18)
Accounts payable 7 264 3 274
Accrued expenses and other current
liabilities 523 233 9 765
Amounts due related party (48) 114 -- 66
------- ------- ----- -------
Net cash used in operating activities (4,644) (1,920) (392) (6,956)
------- ------- ----- -------
Cash flows used in investing activities for the
purchase of property and equipment (591) (884) (40) (1,515)
------- ------- ----- -------
Cash flows from financing activities:
Proceeds from bank borrowings 587 604 -- 1,191
Proceeds from issuance of preferred stock 5,600 2,475 495 8,570
Proceeds from Collagen loan 100 -- -- 100
Payment of Collagen loan (100) -- -- (100)
Proceeds from issuance of common stock 6 -- 5 11
Proceeds from sale of common stock warrants 6 -- -- 6
------- ------- ----- -------
Net cash provided by financing activities 6,199 3,079 500 9,778
------- ------- ----- -------
Effect of exchange rate changes on cash and
cash equivalents 8 (4) -- 4
------- ------- ----- -------
Net change in cash and cash equivalents 972 271 68 1,311
Cash and cash equivalents at beginning of period 339 68 -- --
------- ------- ----- -------
Cash and cash equivalents at end of period $ 1,311 $ 339 $ 68 $ 1,311
======= ======= ===== =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 67 $ 10 $ -- $ 77
NONCASH FINANCING ACTIVITIES:
Issuance of common stock for note
receivable $ -- $ 15 $ 4 $ 19
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE> 8
LIPOMATRIX, INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
PERIOD FROM INCEPTION (FEBRUARY 14, 1992) THROUGH DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Preferred Stock Common Stock
---------------------- -------------------
Shares Amount Shares Amount
---------- ------- -------- ------
<S> <C> <C> <C> <C>
Issuance of common stock -- $ -- 700,000 $ 9
Issuance of Series A preferred stock 4,040,818 495 -- --
Net loss -- -- -- --
---------- ------ ------- ---
Balance at December 31, 1992 4,040,818 495 700,000 9
Issuance of common stock -- -- 100,801 15
Issuance of Series B preferred stock 1,980,000 2,475 -- --
Cumulative translation adjustment -- -- -- --
Net loss -- -- -- --
---------- ------ ------- ---
Balance at December 31, 1993 6,020,818 2,970 800,801 24
Issuance of common stock -- -- 48,265 6
Issuance of Series B preferred stock 4,503,333 5,629 -- --
Sale of common stock warrants -- -- -- --
Cumulative translation adjustment -- -- -- --
Net loss -- -- -- --
---------- ------ ------- ---
Balance at December 31, 1994 10,524,151 $8,599 849,066 $30
========== ====== ======= ===
</TABLE>
<TABLE>
<CAPTION>
Notes Deficit
Receivable Accumulated
Additional for Cumulative During
Paid-in Common Translation Development
Capital Stock Adjustment Stage Total
-------- ---------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C>
Issuance of common stock $-- $ (4) $ -- $ -- $ 5
Issuance of Series A preferred stock -- -- -- -- 495
Net loss -- -- -- (400) (400)
--- ---- --- ------- -------
Balance at December 31, 1992 -- (4) -- (400) 100
Issuance of common stock -- (15) -- -- --
Issuance of Series B preferred stock -- -- -- -- 2,475
Cumulative translation adjustment -- -- (4) -- (4)
Net loss -- -- -- (2,609) (2,609)
--- ---- --- ------- -------
Balance at December 31, 1993 -- (19) (4) (3,009) (38)
Issuance of common stock -- -- -- -- 6
Issuance of Series B preferred stock -- -- -- -- 5,629
Sale of common stock warrants 6 -- -- -- 6
Cumulative translation adjustment -- -- 8 -- 8
Net loss -- -- -- (5,765) (5,765)
--- ---- --- ------- -------
Balance at December 31, 1994 $ 6 $(19) $ 4 $(8,774) $ (154)
=== ==== === ======= =======
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
<PAGE> 9
LIPOMATRIX, INCORPORATED
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY AND A SUMMARY OF ITS SIGNIFICANT ACCOUNTING POLICIES:
THE COMPANY
LipoMatrix, Incorporated (formerly LipoMatrix, Inc. and herein referred to as
the "Company") was originally incorporated in February 1992 in Delaware and was
reincorporated during 1993 in the British Virgin Islands ("BVI"). The
Company's primary facilities are in Neuchatel, Switzerland, and it maintains an
office in Palo Alto, California. The Company is a development stage enterprise
that intends to develop, manufacture and market innovative, implantable devices
that (i) augment, replace, reconstruct or protect human tissues, and (ii)
facilitate the acquisition of medical data pertinent to the performance of
medical devices.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiary after elimination of all significant intercompany accounts and
transactions.
CASH EQUIVALENTS
Cash equivalents consist of money market investments purchased with an original
maturity of three months or less.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of cash and cash equivalents.
The Company limits the amount of credit exposure to any one financial
institution.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization are
provided using the straight-line method over the estimated useful lives of the
assets, generally two to three years.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred.
INCOME TAXES
Current income tax expense or benefit represents the amount of income taxes
expected to be payable or refundable for the current year. A deferred income
tax liability or asset, net of valuation allowance, is established for the
expected future consequences resulting from the differences between financial
reporting and income tax bases of assets and liabilities and from net operating
<PAGE> 10
Page 2
loss and tax credit carryforwards. Deferred income tax expense or benefit
represents the net change during the period in the deferred income tax
liabilities or assets.
FOREIGN CURRENCY TRANSLATION
Asset and certain liability accounts of the Company's Swiss branch are
translated into U.S. dollars at the exchange rate prevailing at the balance
sheet date. The Swiss branch's equity and intercompany liability accounts are
translated into U.S. dollars at historical exchange rates as it is not planned
or anticipated in the foreseeable future that the Swiss branch will pay
dividends or settle its intercompany liability. Costs and expenses are
translated into U.S. dollars at average rates for the period. Net gains and
losses resulting from foreign currency translation are reported as a separate
component of stockholders' deficit.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1993 consolidated financial
statements to conform to the 1994 presentation.
NOTE 2 - BALANCE SHEET COMPONENTS:
Property and equipment comprise:
<TABLE>
<CAPTION>
December 31,
-------------------------
1994 1993
------ ----
(in thousands)
<S> <C> <C>
Leasehold improvements $ 806 $ 640
Machinery and equipment 494 163
Computer equipment 135 69
Furniture and fixtures 80 52
------ -----
1,515 924
Less: accumulated depreciation and amortization (702) (124)
------ -----
$ 813 $ 800
====== =====
</TABLE>
Accrued expenses and other current liabilities comprise:
<TABLE>
<CAPTION>
December 31,
---------------------
1994 1993
---- ----
(in thousands)
<S> <C> <C>
Compensation and benefits $378 $ 88
Consulting 71 80
Other 316 74
---- ----
$765 $242
==== ====
</TABLE>
<PAGE> 11
Page 3
NOTE 3 - BANK BORROWINGS:
In November 1993, the Company obtained a line of credit from a Swiss bank for
borrowings up to SF 800,000 ($610,000 and $540,000 at December 31, 1994 and
1993, respectively). The line of credit is denominated in Swiss Francs, bears
interest at 6.25% and is secured by certain assets of the Company. Interest is
payable every six months and, beginning June 30, 1996 and continuing through
December 31, 2003, principal is payable every six months in equal installments.
As of December 31, 1994 and 1993, this line of credit was fully utilized.
In December 1993, the Company obtained additional financing from the same Swiss
bank in the form of a government guaranteed line of credit for SF 800,000.
This line of credit is denominated in Swiss Francs, bears interest at 7% before
subsidies and is secured by certain assets of the Company as well as by a
guarantee from the Swiss federal government. The annual interest on this line
of credit is 22.5% subsidized by the Swiss federal government for the first
three years and 25% subsidized for the next three years, 25% subsidized by the
Neuchatel cantonal government for six years and 25% subsidized by the Swiss
bank for ten years. The terms of this line of credit prohibit dividend
payments from the Swiss branch to the BVI parent company during the entire
period of the interest subsidies. Interest is payable every six months and,
beginning June 30, 1996 and continuing through December 31, 2003, principal is
payable every six months in equal installments. As of December 31, 1994 and
1993, $581,000 and $64,000, respectively, had been drawn down on this line of
credit.
Aggregate scheduled maturities on these lines of credit are as follows:
<TABLE>
<CAPTION>
Year ending December 31, Amount
----------------------- ------
(in thousands)
<S> <C>
1995 $ --
1996 149
1997 149
1998 149
1999 149
Thereafter 595
------
$1,191
======
</TABLE>
NOTE 4 - STOCKHOLDERS' DEFICIT:
SERIES A AND B PREFERRED STOCK
In February 1992, the Company authorized the issuance of 4,040,818 shares of
its Series A preferred stock. All 4,040,818 shares were issued, along with
250,000 shares of common stock, in exchange for $495,000 in cash and a license
for proprietary technology. In February 1993, the Company authorized the
issuance of 2,000,000 shares of Series B preferred stock, of which 1,980,000
shares were issued at $1.25 per share. During 1994, the Company authorized the
sale and issuance of up to 6,000,000 additional shares of its Series B
preferred stock at $1.25 per share, of which 4,480,000 shares were issued at
$1.25 per share. In conjunction with this sale, these
<PAGE> 12
Page 4
Series B preferred stockholders also bought warrants to purchase 559,989 shares
of the Company's common stock at a purchase price equivalent to $0.01 per share
subject to the warrant. The warrants have an exercise price of $0.15 per share
and expire on the earlier of five years from the date of issuance or the
closing of a public offering of the Company's common stock.
The Series A and B preferred stock are herein referred to as "preferred stock."
DIVIDENDS
The holders of outstanding preferred stock are entitled to receive, when and if
declared by the Board of Directors, noncumulative dividends at the annual rate
of $0.012 per share for Series A preferred stock and $0.125 per share for
Series B preferred stock before any cash dividend is paid on common stock. In
the event the Company declares a dividend payable in securities or other
assets, the holders of the preferred stock shall be entitled to a proportionate
share of any such distribution.
CONVERSION
Each share of preferred stock is convertible, at the option of the holder, into
common stock at the initial conversion rate of one share of common stock for
each share of preferred stock, subject to antidilution adjustments. Each share
of preferred stock shall be automatically converted into shares of common stock
upon the closing of a public offering of common stock for which the aggregate
proceeds are at least $7,500,000 and the offering price is not less than $5.00
per share. The Company has reserved a sufficient number of common shares for
any such conversion.
VOTING RIGHTS
Each holder of preferred stock is entitled to the number of votes equal to the
number of shares of common stock into which such shares of preferred stock
could be converted on the date of record.
LIQUIDATION
In the event of any liquidation of the Company, the holders of the Series B
preferred stock are entitled to receive the amount of $1.25 per share plus an
amount equal to all declared and unpaid dividends on the Series B preferred
stock. After payments have been made to the holders of Series B preferred
stock for the full amounts to which they shall be entitled, the Series A
preferred stockholders are entitled to receive the amount of $0.245 per share
for each share of Series A preferred stock.
COMMON STOCK
Subject to the rights of the preferred stockholders, the common stockholders
are entitled to receive dividends when and as declared by the Board of
Directors. The holders of each share of common stock have the right to one
vote. During 1994, the Company authorized the sale and issuance of up to
6,000,000 additional shares of its common stock.
<PAGE> 13
Page 5
STOCK OPTION plan
In February 1994, the Company adopted the LipoMatrix, Incorporated 1994 Stock
Option Plan with substantially the same terms as the predecessor corporation's
1992 stock option plan. These two plans are herein referred to as the "Option
Plan". Options granted under the Option Plan may be either incentive stock
options, within the meaning of Section 422 of the U.S. Internal Revenue Code,
or nonqualified stock options. The exercise price of incentive options must be
at least equal to the estimated fair value of the stock at the time of grant as
determined by the Board of Directors. Options granted under the Option Plan
generally vest over four years.
The following summarizes the activity under the Option Plan:
<TABLE>
<CAPTION>
Available
for Options Exercise
Grant Outstanding Price
--------- ----------- -----------
<S> <C> <C> <C>
Shares reserved 550,000 -- --
Granted (144,000) 144,000 $0.02
--------- ---------
Balance at December 31, 1992 406,000 144,000 $0.02
Additional shares reserved 700,000 -- --
Granted (423,000) 423,000 $0.15
Exercised -- (801) $0.15
Canceled 2,199 (2,199) $0.15
--------- ---------
Balance at December 31, 1993 685,199 564,000 $0.02-$0.15
Granted (637,000) 637,000 $0.15
Exercised -- (17,072) $0.02-$0.15
Canceled 126,761 (126,761) $0.15
--------- ---------
Balance at December 31, 1994 174,960 1,057,167 $0.02-$0.15
========= =========
Exercisable at December 31, 1994 -- 302,941 $0.02-$0.15
</TABLE>
NOTE 5 - INCOME TAXES:
The Company is not subject to BVI income taxes. The Company's Neuchatel branch
has an exemption from Swiss income taxes through 2003.
The Company's Palo Alto branch has approximately $700,000 of net operating loss
carryforwards as of December 31, 1994 that expire in 2009 and may be utilized
only to offset any future U.S. federal tax liability generated by the branch.
Due to the Company's historical operating losses, the related deferred tax
asset of approximately $280,000 has been offset by a full valuation allowance.
The amount of income tax benefit that would result from applying the U.S.
federal statutory rate to the Company's pre-tax income is not meaningful for
the factors described in the preceding paragraphs.
<PAGE> 14
Page 6
NOTE 6 - COMMITMENTS:
The Company leases its facility in Switzerland under a noncancelable lease
agreement which expired in March 1995. The lease has a provision which allows
the Company to renew the lease for annual periods ending March 31 for an
undefined period of time. The Company has renewed the lease through March
1996.
The rent expense on the facility was subsidized by the Neuchatel cantonal
government, which committed to assume 50% of the rent paid, excluding
incremental costs, for a one year period. The total amount committed to be
reimbursed by the Neuchatel cantonal government was approximately $96,000,
substantially all of which has been received by the Company as of December 31,
1994. The total anticipated net lease commitment is being charged to expense
on a straight-line basis over the anticipated lease term.
Future minimum lease payments are as follows:
<TABLE>
<CAPTION>
Year ending December 31 Amount
----------------------- ------
(in thousands)
<S> <C>
1995 $196
1996 49
----
245
Less: anticipated reimbursement (12)
----
$233
====
</TABLE>
NOTE 7 - RELATED PARTY TRANSACTIONS:
The Company rents its Palo Alto office on a month-to-month basis from Collagen
Corporation ("Collagen") which is a major stockholder. Rent expense on the
office, and other support costs (primarily employee benefits) charged by
Collagen amounted to $155,000 and $175,000 for 1994 and 1993, respectively.
The amounts related to these services which were accrued but unpaid were
$66,000 and $114,000 at December 31, 1994 and 1993, respectively.
In February 1994, the Company received and repaid a short-term loan of
$100,000 from Collagen.
In September 1994, the Company entered into an agreement with Collagen for a
$2,000,000 line of credit. The agreement stated that borrowings under the line
of credit were not permitted prior to February 1995. Borrowings will bear
interest at the U.S. prime rate with principal and interest payable on the
earlier of September 2004, the Company's initial public offering or certain
transactions involving a change of ownership of the Company. As of December
31, 1994 there were no borrowings under this line of credit agreement.
In September 1994, the Company entered into an agreement with Alafi Capital
("Alafi"), which is a major stockholder, whereby an employee of Alafi, who is
also a director of the Company, would provide certain consulting services to
the Company over the period September 1994 to August
<PAGE> 15
Page 7
1995. In exchange for these services, the Company agreed to issue 70,000
shares of the Company's Series B preferred stock to Alafi on a pro rata basis
over the period in which the services are provided. As of December 31, 1994,
23,333 shares had been issued pursuant to the agreement which were valued at
$1.25 per share.
In 1993, the Company purchased $30,000 of furniture and equipment from an
executive of the Company who is also a stockholder.
NOTE 8 - SEGMENT AND GEOGRAPHIC REPORTING:
The Company operates in one industry segment which includes developing and
marketing implantable devices. Information about the Company's operations in
different geographic locations for the years ended December 31, 1994 and 1993
and the period from inception (February 14, 1992) through December 31, 1992 is
shown below. The Company's operations outside of the United States and the BVI
are in Switzerland. Operating loss represents operating costs and expenses
pertaining to specific geographic areas. Identifiable assets are those assets
used in the geographic areas and are reflected after elimination of
intercompany balances.
<TABLE>
<CAPTION>
Period from inception
Year ended December 31, (February 14, 1992)
-------------------------- through December 31,
1994 1993 1992
------ ------ ---------------------
(in thousands)
<S> <C> <C> <C>
Operating loss:
United States and BVI $2,088 $ 802 $409
Switzerland 3,656 1,845 --
------ ------ ----
$5,744 $2,647 $409
====== ====== ====
</TABLE>
<TABLE>
<CAPTION>
December 31,
--------------------------
1994 1993
------ ----
(in thousands)
<S> <C> <C>
Identifiable assets:
United States and BVI $ 631 $ 422
Switzerland 1,511 767
------ ------
$2,142 $1,189
====== ======
</TABLE>
NOTE 9 - CONTINGENCIES:
The Company is involved in various legal matters in the ordinary course of
business. Management believes that such matters will be resolved with no
significant adverse impact on the Company's financial position, results of
operations or cash flows.
<PAGE> 16
Page 8
NOTE 10 - SUBSEQUENT EVENTS:
1994 STOCK OPTION PLAN
In March 1995, the Company's Board of Directors reserved an additional 400,000
common shares for issuance under the Option Plan.
COLLAGEN LINE OF CREDIT AND CONVERTIBLE DEBT FINANCING
In June 1995, the Company completed a convertible debt financing in the amount
of $4,600,000. Collagen contributed $4,000,000 of this financing and
simultaneously, the previous $2,000,000 line of credit agreement with Collagen
was canceled. Of the $4,600,000, $2,400,000 was received either in cash or by
conversion of the borrowings under the previous Collagen line of credit, and
the remaining $2,200,000 was received in the form of a promissory note from
Collagen, payable by September 1995. Borrowings, including interest which
accrues at 7%, are convertible into a new series of preferred stock at $1.50
per share on the earlier of the Company's next round of equity financing, the
Company's initial public offering or June 30, 2000.
COLLAGEN PURCHASE
On August 22, 1995, Collagen agreed to purchase approximately 50% of the
Company's outstanding equity securities on a fully diluted basis for
approximately $18,000,000. After this purchase, Collagen will own
approximately 90% of the Company's outstanding equity securities on a fully
diluted basis, with the Company's management owning most of the remainder. The
purchase is scheduled to close on January 3, 1996.
<PAGE> 17
LIPOMATRIX, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1995
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 414
Accounts receivable, net 79
Inventories 351
Other current assets 106
--------
Total current assets 950
Property and equipment, net 727
--------
$ 1,677
========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities $ 1,108
Bank borrowings 1,384
Convertible debt 2,418
Stockholders' deficit:
Preferred & common stock 8,661
Accumulated deficit (11,768)
Cumulative translation adjustment (126)
--------
Total stockholders' deficit (3,233)
--------
$ 1,677
========
</TABLE>
See accompanying notes.
17
<PAGE> 18
LIPOMATRIX, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1995 1994
------- -------
<S> <C> <C>
Revenues $ 89 $ --
Operating expenses:
Research and development 2,000 1,272
Selling, general and administrative 1,026 945
------- -------
3,026 2,217
------- -------
Loss from operations (2,937) (2,217)
Other income (expense):
Interest income 3 16
Interest expense (60) (20)
------- -------
Net loss $(2,994) $(2,221)
======= =======
</TABLE>
See accompanying notes.
18
<PAGE> 19
LIPOMATRIX, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1995 1994
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(2,994) $(2,221)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 301 348
Changes in assets and liabilities:
Accounts receivable (79) --
Inventories (351) --
Prepaid expenses and other current assets (88) (35)
Accounts payable, accrued expenses and
other current liabilities 3 (308)
------- -------
Total adjustments (214) 5
------- -------
Net cash used in operating activities (3,208) (2,216)
------- -------
Cash flows used in investing activities for the purchase of
property and equipment (215) (289)
------- -------
Cash flows from financing activities:
Proceeds from line of credit 1,818 --
Proceeds from convertible debt 600 --
Proceeds from bank borrowings 193 391
Proceeds from issuance of preferred stock 45 3,542
------- -------
Net cash provided by financing activities 2,656 3,933
------- -------
Effect of exchange rate changes on cash and cash equivalents (130) 50
------- -------
Net increase (decrease) in cash and cash equivalents (897) 1,478
Cash and cash equivalents at beginning of period 1,311 339
------- -------
Cash and cash equivalents at end of period $ 414 $ 1,817
======= =======
Supplemental disclosure of non-cash financing activities:
Conversion of line of credit to convertible debt $ 1,818 $ --
======= =======
</TABLE>
See accompanying notes.
19
<PAGE> 20
LIPOMATRIX, INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
(UNAUDITED)
1. Accounting Policies
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
In the opinion of management, the financial statements contain all
adjustments necessary to present fairly the financial position of
LipoMatrix, Incorporated ("LipoMatrix") at June 30, 1995, and the
results of its operations and cash flows for the six months ended June
30, 1995 and 1994. Interim results for the six month periods are not
necessarily indicative of operating results to be expected for the full
year. These financial statements should be read in conjunction with
the audited financial statements and the notes thereto filed herein as
part of this Form 8-K/A.
The accounting policies of LipoMatrix are as set forth in Note 1 to
LipoMatrix's audited financial statements for the year ended December
31, 1994 filed herein as part of this Form 8-K/A.
2. Line of Credit and Convertible Debt Financing
In June 1995, LipoMatrix completed a convertible debt financing in the
amount of $4,600,000. Collagen Corporation ("Collagen") contributed
$4,000,000 of this financing and simultaneously, the previous
$2,000,000 line of credit agreement with Collagen was canceled. Of the
$4,600,000, $2,400,000 was received either in cash or by conversion of
the borrowings under the previous Collagen line of credit, and the
remaining $2,200,000 was scheduled to be received from Collagen by
September 30, 1995. Borrowings, including interest which accrues at 7%,
are convertible into a new series of preferred stock at $1.50 per share
on the earlier of the Company's next round of equity financing, the
Company's initial public offering or June 30, 2000.
20
<PAGE> 21
3. Sale of LipoMatrix
On August 22, 1995, certain of the stockholders of LipoMatrix entered
into a stock purchase agreement ("Agreement") with Collagen, pursuant
to which the stockholders agreed to sell to Collagen, subject to
certain terms and conditions, approximately 50% of the outstanding
securities of LipoMatrix on a fully diluted basis. At this time,
Collagen has also entered into discussions with certain of
LipoMatrix's management and employees to purchase the remaining 10% of
the outstanding securities of LipoMatrix on a fully diluted basis. The
total sales proceeds would approximate $21 million, $18 million of
which is payable in January 1996, with the remaining $3 million
expected to be paid by July 1, 1997. In connection with the
Agreement, certain LipoMatrix stockholders granted to Collagen an
irrevocable proxy covering the voting rights of approximately 50% of
the outstanding securities.
21
<PAGE> 22
ITEM 7. Continued
(b) Pro Forma Financial Statements.
The following pages 23 through 27 contain the unaudited pro
forma condensed combined balance sheet of the Registrant and
LipoMatrix as of June 30, 1995, the unaudited pro forma
condensed combined statement of operations of the Registrant
and LipoMatrix for the year ended June 30, 1995 and the notes
thereto.
The unaudited pro forma condensed combined balance sheet and
the unaudited pro forma combined statement of operations of
the Registrant and LipoMatrix (collectively, the Pro Forma
Statements) were prepared to give effect to the acquisition by
the Registrant of all the outstanding common shares of
LipoMatrix. The pro forma condensed combined balance sheet as
of June 30, 1995 assumes that the acquisition occurred on June
30, 1995. The pro forma condensed combined statement of
operations for the year ended June 30, 1995 assumes that the
acquisition occurred on July 1, 1994. The pro forma condensed
combined statement of operations reflects the combined
revenues and expenses of the Registrant and LipoMatrix. The
Pro Forma Statements do not purport to represent what the
companies' financial position or results of operations would
have been if the acquisition in fact had occurred on the
date or at the beginning of the period indicated or to
project the companies' financial position or results of
operations for any future date or period.
The pro forma adjustments are based upon available information and
upon certain assumptions as described in note 1 to the Pro Forma
Statements that the Registrant believes are reasonable in the
circumstances. The purchase price has been allocated to the acquired
assets and liabilities based on a preliminary determination from an
independent appraisal of their respective fair values. The Pro Forma
Statements and accompanying notes should be read in conjunction with
the respective historical financial statements of the Registrant and
LipoMatrix, including the notes thereto. The historical financial
statements of LipoMatrix are included elsewhere in this Form 8-K/A.
22
<PAGE> 23
COLLAGEN CORPORATION
PRO FORMA CONDENSED
COMBINED BALANCE SHEET
(UNAUDITED)
JUNE 30, 1995
<TABLE>
<CAPTION>
COLLAGEN LIPOMATRIX PRO FORMA PRO FORMA
CORPORATION INCORPORATED ADJUSTMENTS COMBINED
- -------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except share and per share amounts)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash, cash equivalents and short-term investments $ 9,384 $ 414 $ -- $ 9,798
Accounts receivable, net 13,402 79 -- 13,481
Inventories 5,056 351 -- 5,407
Other current assets 5,568 106 -- 5,674
----------- ------------ ----------- ---------
Total current assets 33,410 950 -- 34,360
Property and equipment, net 16,506 727 -- 17,233
Intangible assets and goodwill 2,727 -- 8,855 (b) 11,582
Investment in Target Therapeutics, Inc. 17,570 -- -- 17,570
Investment in LipoMatrix, Incorporated 411 -- (411) (a) --
498 (a)
(498) (a)
23,655 (a)
(23,655) (b)
Other investments and assets 6,282 -- -- 6,282
----------- ------------ ----------- ---------
$ 76,906 $ 1,677 $ 8,444 $ 87,027
=========== ============ =========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,250 $ -- $ -- $ 2,250
Accrued compensation 2,908 -- -- 2,908
Accrued liabilities 7,954 1,108 -- 9,062
LipoMatrix purchase liabilities -- -- 498 (a) 22,429
20,990 (a)
830 (a)
111 (a)
Income taxes payable 5,902 -- -- 5,902
----------- ------------ ----------- ---------
Total current liabilities 19,014 1,108 22,429 42,551
Deferred income taxes 8,478 -- -- 8,478
Convertible debt -- 2,418 (2,418) (a) --
Other long-term liabilities 1,494 1,384 -- 2,878
Commitments and contingencies
Stockholders' equity:
Common stock - Collagen 106 -- -- 106
Additional paid-in capital - Collagen 63,855 -- -- 63,855
Retained earnings - Collagen 17,273 -- (14,800) (b) 2,473
Preferred & common stock - LipoMatrix -- 8,661 (8,661) (a) --
Accumulated deficit - LipoMatrix -- (11,768) 11,768 (a) --
Cumulative translation adjustment (604) (126) 126 (a) (604)
Treasury stock, at cost (32,710) -- -- (32,710)
----------- ------------ ----------- ---------
Total stockholders' equity 47,920 (3,233) (11,567) 33,120
----------- ------------ ----------- ---------
$ 76,906 $ 1,677 $ 8,444 $ 87,027
=========== ============ =========== =========
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
23
<PAGE> 24
COLLAGEN CORPORATION
PRO FORMA CONDENSED
COMBINED STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
COLLAGEN LIPOMATRIX PRO FORMA PRO FORMA
CORPORATION INCORPORATED ADJUSTMENTS COMBINED
- -------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
REVENUES:
Product sales $ 71,560 $ -- $ -- $ 71,560
Other 1,000 89 -- 1,089
----------- ------------ ----------- ---------
72,560 89 -- 72,649
COST AND EXPENSES:
Cost of sales 18,584 -- -- 18,584
Research and development 9,943 4,388 -- 14,331
Selling, general and administrative 32,179 2,165 1,515 (c) 35,859
----------- ------------ ----------- ---------
60,706 6,553 1,515 68,774
----------- ------------ ----------- ---------
Income (loss) from operations 11,854 (6,464) (1,515) 3,875
Other income (expense):
Net gain from investments,
principally Target Therapeutics, Inc. 5,110 -- -- 5,110
Equity in earnings of Target Therapeutics, Inc. 2,417 -- -- 2,417
Equity in losses of other affiliates (3,577) -- 2,437 (d) (1,140)
Interest income 487 33 -- 520
Interest expense (91) (107) -- (198)
----------- ------------ ----------- ---------
Income (loss) before income taxes 16,200 (6,538) 922 10,584
Provision for income taxes 7,440 -- -- (e) 7,440
----------- ------------ ----------- ---------
Net income (loss) $ 8,760 $ (6,538) $ 922 $ 3,144
=========== ============ =========== =========
Net income per share $ .93 $ .33
=========== =========
Shares used in calculating per share information 9,460 9,460
=========== =========
</TABLE>
See notes to unaudited Pro Forma condensed combined financial statements.
24
<PAGE> 25
COLLAGEN CORPORATION
Notes to Pro Forma Condensed
Combined Financial Statements
June 30, 1995
(unaudited)
1. Basis of Presentation
On August 22, 1995, the Registrant entered into a stock purchase agreement
with certain of the stockholders of LipoMatrix, Incorporated
("LipoMatrix"), pursuant to which the Registrant will acquire from such
shareholders, subject to certain terms and conditions, approximately 50% of
the outstanding securities of LipoMatrix on a fully diluted basis. At this
time, the Registrant has also entered into discussions with certain
of LipoMatrix's management and employees to purchase the remaining 10% of
the outstanding securities of LipoMatrix on a fully diluted basis. This
purchase will increase the Registrant's ownership in LipoMatrix from
approximately 40% to approximately 100% of the outstanding securities on
a fully diluted basis. A cash payment of approximately $18 million is due
from the Registrant to the selling LipoMatrix stockholders in January
1996. Further cash payments of approximately $3 million are expected to
be paid by July 1, 1997.
The acquisition of LipoMatrix, which was accounted for as a purchase, has
been recorded based upon available information and upon certain assumptions
that the Registrant believes are reasonable in the circumstances. The
purchase price has been allocated to the acquired assets and liabilities
based on an independent appraisal of their respective fair values, subject
to final adjustments, which the Registrant believes will not be
significant. The aggregate purchase price was approximately $23.7 million,
of which $14.8 million was allocated to in-process research and
development, $3.8 million to intangible assets and $5.1 million to
goodwill. The Registrant also assumed $926,000 of LipoMatrix's liabilities
in excess of its identifiable assets. The amount allocated to in-process
research and development that does not have alternative future uses was
recognized as a one-time charge to earnings in the Registrant's statement
of operations for the three months ended September 30, 1995.
25
<PAGE> 26
2. Pro Forma Adjustments (in thousands)
(a) The aggregate purchase price of the LipoMatrix acquisition, including
direct acquisition costs, of $23,655 was determined as follows:
<TABLE>
<S> <C>
Payable to LipoMatrix's shareholders $20,990
Assumption of LipoMatrix's liabilities in excess
of LipoMatrix's assets
- as of June 30, 1995 815
- accrued for the period from June 30
to August 22, 1995 111
Balance of the Registrant's investment in
LipoMatrix prior to date of acquisition
- paid prior to June 30, 1995 411
- paid in the period from June 30
to August 22, 1995 498
Direct acquisition costs - paid after date of acquisition 830
-------
$23,655
=======
</TABLE>
(b) Of the aggregate purchase price of $23,655, $14,800 was allocated to
in-process research and development, $3,745 to intangible assets and
$5,110 to goodwill based on the fair market values of assets acquired
and liabilities assumed.
The acquired in-process research and development, deemed not to have
alternative future uses, was recognized as a one-time charge. This
charge is reflected in the pro forma condensed combined balance
sheet, but is not reflected in the pro forma condensed combined
statement of operations included herein since it is a non-recurring
charge directly attributable to the transaction. Such amount was
reflected as an expense in the Company's statement of operations for
the three months ended September 30, 1995, prepared on the historical
cost basis.
26
<PAGE> 27
(c) Amortization expense of the aforementioned intangible assets and
goodwill for the year ended June 30, 1995, based on estimated useful
lives, are as follows:
<TABLE>
<CAPTION>
Period of Annual
Amount Amortization Amortization
------ ------------ ------------
<S> <C> <C> <C>
Intangible assets
Assembled workforce $ 700 2 years $ 350
Developed technology 3,045 7 years 435
------ ------
$3,745 $ 785
------ ------
Goodwill $5,110 7 years $ 730
------ ------
$8,855 $1,515
====== ======
</TABLE>
(d) Equity in losses of LipoMatrix recorded by the Registrant in the year
ended June 30, 1995. There was no tax effect related to the reversal
of these equity losses.
(e) No pro forma tax effect has been reflected for the $1,515 of non-
deductible amortization expense of purchased intangible assets and
goodwill. Further, no pro forma tax effect has been reflected for
operating losses incurred by LipoMatrix for which no benefit is
realizable.
27
<PAGE> 28
ITEM 7. Continued
(c) Exhibits
2.1* Stock Purchase Agreement dated August 22, 1995 between
the Registrant and certain stockholders of LipoMatrix.
24.1 Consent of Price Waterhouse L.L.P.
* Previously filed.
28
<PAGE> 29
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 thereunto duly authorized.
COLLAGEN CORPORATION
(Registrant)
Date: November 6, 1995 /s/David Foster
---------------- -----------------------
David Foster
Vice President and
Chief Financial Officer
(Principal Financial
and Accounting Officer)
29
<PAGE> 30
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibits
- --------
<S> <C>
24.1 Consent of Price Waterhouse L.L.P.
</TABLE>
30
<PAGE> 1
EXHIBIT 24.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 2-93777, No. 33-21252, No. 33-39684, No. 33-73674,
and No. 33-80038) of Collagen Corporation of our report dated September 1, 1995
relating to the consolidated financial statements of LipoMatrix, Incorporated,
which appears in the Current Report on Form 8-K/A (Amendment No. 1) of Collagen
Corporation dated November 6, 1995.
/s/PRICE WATERHOUSE LLP
San Jose, California
November 3, 1995
31
