<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(AMENDMENT NO. 1)
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) June 30, 1999
NOVAMETRIX MEDICAL SYSTEMS INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 20-8969 06-0977422
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation or organization) Number) Identification No.)
</TABLE>
5 Technology Drive Wallingford, Connecticut 06492
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 265-7701
Not Applicable
(Former name or former address, if changed since last report)
<PAGE> 2
The undersigned registrant hereby amends Item 7, sections (a) and (b), of its
Current Report on Form 8-K reporting the acquisition of all of the capital stock
of Children's Medical Ventures, Inc. ("ChMV") on July 1, 1999, to include
financial statements and pro forma financial data information as set forth
herein.
ITEM 7 FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
The following financial statements of Children's Medical Ventures, Inc. are
filed with amendment to Novametrix Medical Systems Inc. (the "Company") Form 8-K
which was previously filed on July 15, 1999.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report 3
Balance Sheet - December 31, 1998 4
Statement of Income - Year Ended December 31, 1998 6
Statement of Stockholders' Equity - Year Ended December 31, 1998 7
Statement of Cash Flows - Year Ended December 31, 1998 8
Notes to Financial Statements - Year Ended December 31, 1998 10
Unaudited Condensed Balance Sheet - June 30, 1999 16
Unaudited Condensed Statements of Income - Six Months Ended June 30, 1999 and 1998 18
Unaudited Condensed Statements of Cash Flows - Six Months Ended June 30, 1999 and 1998 19
Notes to Unaudited Condensed Financial Statements - June 30, 1999 20
</TABLE>
2
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
Board of Directors
Children's Medical Ventures, Inc.
Weymouth, Massachusetts
We have audited the accompanying balance sheet of Children's Medical Ventures,
Inc. at December 31, 1998 and the related statements of income, stockholders'
equity and cash flows for the year then ended. 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 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 financial statements referred to in the first paragraph
present fairly, in all material respects, the financial position of Children's
Medical Ventures, Inc. as of December 31, 1998 and the results of its operations
and cash flows for the year then ended in conformity with generally accepted
accounting principles.
Clarke, Snow & Riley, LLP
February 19, 1999
3
<PAGE> 4
CHILDREN'S MEDICAL VENTURES, INC.
Balance Sheet
December 31, 1998
ASSETS
(Notes 3 and 5)
<TABLE>
<CAPTION>
1998
----
<S> <C>
CURRENT ASSETS:
Cash $ 63,157
Accounts receivable, net of allowance
for doubtful accounts of $18,000 (Notes 7 and 8) 1,016,514
Inventories (Note 2) 924,436
Prepaid expenses 78,320
Due from employees (Note 8) 11,056
Other current assets 5,540
----------
Total current assets 2,099,023
PROPERTY AND EQUIPMENT, AT COST
Manufacturing and tooling equipment 270,967
Furniture and fixtures 102,594
Office equipment 112,490
Sales equipment 55,327
Computer software 21,675
Leasehold improvements 27,180
----------
590,233
Less accumulated depreciation 339,008
----------
Property and equipment, net 251,225
OTHER ASSETS:
Deposits 47,531
Patent and license fees net of
accumulated amortization of $13,086 19,686
----------
Total other assets 67,217
$2,417,465
==========
</TABLE>
See Notes to Financial Statements.
4
<PAGE> 5
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1998
----
<S> <C>
CURRENT LIABILITIES:
Current portion of long-term debt (Note 5) $ 11,250
Accounts payable (Notes 7 and 8) 306,787
Accrued expenses 206,927
Deferred revenue 24,773
Due to parent 219,145
-----------
Total current liabilities 768,882
-----------
LONG-TERM DEBT,
NET OF CURRENT PORTION (Note 5) 25,313
COMMITMENTS AND CONTINGENCY (Notes 4, 10 and 11)
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value
Authorized 3,000,000 shares; issued
and outstanding 2,656,664 shares (Note 11) 26,566
Additional paid in capital (Note 11) 1,361,117
Retained earnings 329,029
-----------
1,716,712
Less: Stock subscription receivable (Note 11) (93,442)
-----------
Total stockholders' equity 1,623,270
-----------
$ 2,417,465
===========
</TABLE>
See Notes to Financial Statements.
5
<PAGE> 6
CHILDREN'S MEDICAL VENTURES, INC.
Statement of Income
Year Ended December 31, 1998
<TABLE>
<CAPTION>
1998
----
<S> <C>
NET REVENUES (Notes 7 and 8) $ 6,297,229
COST OF SALES (Notes 7, 8 and 10) 3,060,897
-----------
GROSS PROFIT 3,236,332
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES (Notes 4, 6 and 11) 2,834,329
-----------
OPERATING INCOME 402,003
OTHER INCOME (EXPENSE)
Royalty Income 15,508
Interest Income 4,789
Interest Expense (3,821)
-----------
Total Other Income (Expense) 16,476
INCOME BEFORE PROVISION FOR INCOME TAXES 418,479
PROVISION FOR INCOME TAXES (Note 9) 175,190
-----------
NET INCOME $ 243,289
===========
</TABLE>
See Notes to Financial Statements.
6
<PAGE> 7
CHILDREN'S MEDICAL VENTURES, INC.
Statement of Stockholders' Equity
Year Ended December 31, 1998
<TABLE>
<CAPTION>
Common Retained
Stock Additional Earnings Stock
No. of ($.01 Par Paid In (Accumulated Subscription
Shares Value) Capital Deficit) Receivable Total
------ ------ ------- -------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 2,351,030 $ 23,510 1,251,089 $ 85,740 --- $ 1,360,339
Issuance of Stock 305,634 3,056 110,028 --- --- 113,084
Stock subscription receivable --- --- --- --- (93,442) (93,442)
Net income --- --- --- 243,289 --- 243,289
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1998 2,656,664 $ 26,566 $ 1,361,117 $ 329,029 $ (93,442) $ 1,623,270
=========== =========== =========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
7
<PAGE> 8
CHILDREN'S MEDICAL VENTURES, INC.
Statement of Cash Flows
Year Ended December 31, 1998
<TABLE>
<CAPTION>
1998
----
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 243,289
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 92,775
Salary expense related to exercised options 19,642
Net change in certain current assets
and certain current liabilities (301,134)
---------
Net cash provided by operating activities 54,572
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (120,038)
Deposits (44,248)
Loans receivable 5,907
---------
Net cash used by investing activities (158,379)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 45,000
Payments on long-term debt (8,437)
---------
Net cash provided by financing activities 36,563
---------
NET DECREASE IN CASH (67,244)
CASH, BEGINNING OF YEAR 130,401
---------
CASH, END OF YEAR $ 63,157
=========
</TABLE>
See Notes to Financial Statements.
8
<PAGE> 9
<TABLE>
<CAPTION>
1998
----
<S> <C>
Details of net change in certain current
assets and certain current liabilities:
Accounts receivable $(198,341)
Inventories (435,429)
Prepaid expenses 35,181
Other current assets 32,901
Accounts payable 82,561
Accrued expenses 90,668
Deferred revenue (35,945)
Income taxes payable 131,830
Other current liabilities (4,560)
----------
Net change in certain current assets and
certain current liabilities $(301,134)
=========
Additional disclosures of cash flow information:
Cash paid during the year for:
Interest $ 3,821
Income taxes 43,360
</TABLE>
See Notes to Financial Statements.
9
<PAGE> 10
CHILDREN'S MEDICAL VENTURES, INC.
Notes to Financial Statements
Year Ended December 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - The Company was organized under the laws of Delaware on September
19, 1989. Its principal business activities are the development and marketing to
hospitals of products designed to improve the health and well being of premature
infants and children. The Company also provides programs and consulting services
relating to infant development to hospitals and parents throughout the United
States.
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 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.
INVENTORY - Inventory is stated at the lower of cost or market as determined on
the first-in, first-out method.
REVENUE RECOGNITION - Total revenue consists of product sales and program and
consulting income. Product sales are recognized when goods are shipped. Program
and consulting income is recognized when services have been performed. Deferred
revenue represents amounts received from customers on program contracts in
advance of service performed.
PREPAID EXPENSES - Prepaid expenses include costs associated with programs which
will be presented in 1999.
PATENTS AND LICENSES - The costs associated with patents and licenses are
amortized on a straight line basis over ten to fifteen years.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost. Maintenance,
routine repairs and minor replacements are charged against current operations as
incurred, while those items which materially improve or extend the lives of
existing assets are capitalized. Depreciation and amortization have been
computed utilizing accelerated and straight-line methods calculated to amortize
the cost of the assets over their estimated useful lives.
<TABLE>
<CAPTION>
ASSETS YEARS
<S> <C>
Manufacturing and tooling equipment 5
Furniture and fixtures 7 - 15
Office equipment 5 - 7
Sales equipment 7
Computer software 3
Leasehold improvements 39
</TABLE>
10
<PAGE> 11
CHILDREN'S MEDICAL VENTURES, INC.
Notes to Financial Statements
Year Ended December 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING - The Company follows the policy of charging the costs of
advertising to expense as incurred. Advertising expense was $55,287 for December
31, 1998.
INCOME TAXES - The Company files consolidated income tax returns with its
parent. The income taxes for these financial statements are computed using the
separate entity method. Accordingly, income tax obligations arising from taxable
profit of the Company are accrued and presented as due to parent.
CONCENTRATION OF CREDIT RISK - The Company maintains cash balances with one
bank. Demand deposits are only insured in full up to $100,000 through the
Federal Deposit Insurance Corporation. Cash concentrations at one financial
institution in excess of the insured amount expose the Company to a potential
loss.
.
NOTE 2 - INVENTORIES
Inventories at December 31, 1998 consist of the following:
<TABLE>
<CAPTION>
1998
----
<S> <C>
Raw materials $ 289,340
Work in process 40,902
Finished goods 594,194
-----------
$ 924,436
===========
</TABLE>
NOTE 3 - NOTE PAYABLE, BANK
The Company has a $100,000 line of credit with a bank for equipment purchases
and leasehold improvements at an interest rate of 1.25% over the bank's prime
rate. At the end of the drawing period amounts are converted to long-term debt.
The amount available to be drawn on the line of credit is reduced by the
outstanding long-term debt. As of December 31, 1998, $63,437 was available (Note
5).
The Company has a line of credit with a bank which permits the Company to borrow
up to $250,000 at an interest rate of 1% over the bank's prime rate. There were
no amounts outstanding at December 31, 1998.
11
<PAGE> 12
CHILDREN'S MEDICAL VENTURES, INC.
Notes to Financial Statements
Year Ended December 31, 1998
NOTE 3 - NOTE PAYABLE, BANK (CONTINUED)
Substantially all assets of the Company secure the lines of credit. These lines
of credit agreements are subject to annual renewal and expire April 30, 2000.
NOTE 4 - LEASE COMMITMENTS
The Company leases office facilities from a nonrelated entity under an operating
lease agreement expiring on August 31, 2000. The Company amended this lease
during 1997 to include additional space. The annual base rent for leased
facilities at year end is $64,183. The lease includes normal real estate tax
escalation clauses and requires payments of the lessee's share of real estate
taxes and other operating expenses. Rent expense was $76,435 in 1998.
The Company leases office equipment under operating leases which expire through
December 2001. Equipment lease expense was $25,517 in 1998.
The following is a schedule of future minimum lease commitments for all leases
at December 31, 1998.
<TABLE>
<CAPTION>
YEAR AMOUNT
<S> <C>
1999 $ 79,247
2000 52,770
2001 926
--------
$132,943
========
</TABLE>
NOTE 5 - LONG-TERM DEBT
<TABLE>
<CAPTION>
1998
----
<S> <C>
Note payable through March 31, 2002 payable
in monthly principal installments of
$938 plus interest at prime plus 1.25%.
This note payable is secured by
substantially all Company assets.
$36,563
Less current portion 11,250
-------
$25,313
=======
</TABLE>
12
<PAGE> 13
CHILDREN'S MEDICAL VENTURES, INC.
Notes to Financial Statements
Year Ended December 31, 1998
NOTE 5 - LONG-TERM DEBT (CONTINUED)
At December 31, 1998, long-term debt matures as follows:
<TABLE>
<CAPTION>
YEARS AMOUNT
<S> <C>
1999 $ 11,250
2000 11,250
2001 11,250
2002 2,813
-------------
$ 36,563
=============
</TABLE>
NOTE 6 - 401(k) PLAN
The Company established a 401(k) plan for all employees who are 18 years of age
and older and have been employed by the Company for at least three months.
Employees may contribute a portion of their salaries to the plan and the Company
currently matches 50% of the first 4% of the employee's salary deferral. The
Company contributed $14,000 as a matching contribution to this plan during 1998.
NOTE 7 - TRANSACTIONS WITH SIGNIFICANT CUSTOMERS AND VENDORS
During 1998, the Company had sales of $1,003,613 to a single customer. At
December 31, 1998, accounts receivable from this customer was $248,583.
During 1998, the Company purchased approximately 36% of its inventory from two
vendors. At December 31, 1998, the total amount due to these vendors included in
accounts payable was $63,586.
NOTE 8 - RELATED PARTY TRANSACTIONS
Child Health Investment Corporation (the majority owner) is owned by a group of
thirty-seven children's hospitals. The Company's sales to these hospitals
totaled approximately $857,341 in 1998. At December 31, 1998, there was
approximately $115,154 of accounts receivable due from these related parties.
13
<PAGE> 14
CHILDREN'S MEDICAL VENTURES, INC.
Notes to Financial Statements
Year Ended December 31, 1998
NOTE 8 - RELATED PARTY TRANSACTIONS (CONTINUED)
The Company has a royalty agreement with one of the related hospitals. The
agreement states that the Company will pay 6% of net sales of a certain product
to the hospital on a quarterly basis. Total royalty expense to this hospital was
$45,095 for the year ended December 31, 1998. At December 31, 1998, fourth
quarter royalties of $13,488 were included in accounts payable.
At December 31, 1998, amounts due from employees are $11,056. Interest is
calculated at various rates from 5.58% to 8.5%. The balance is anticipated to be
collected within the next operating cycle, and therefore has been classified as
a current asset on the accompanying balance sheet.
NOTE 9 - INCOME TAXES .
The components of income tax expense related to continuing operations are as
follows:
<TABLE>
<CAPTION>
1998
----
<S> <C>
Current
Federal $129,720
State 45,470
--------
$175,190
========
</TABLE>
NOTE 10 - ROYALTIES
The Company pays royalties associated with the sale of certain items. Royalties
of 2% to 10% of net sales of certain products are required to be paid quarterly.
Royalties for 1998 sales were approximately $41,450, excluding related party
amounts.
NOTE 11 - EMPLOYEE STOCK OPTION PLAN
The Company has a stock option plan which provides for the granting of options
to officers and key employees of the Company. The option price, number of
shares, grant dates and vesting schedules are determined at the discretion of
the Company's board of directors. There is no expiration date for the options
which were granted.
14
<PAGE> 15
CHILDREN'S MEDICAL VENTURES, INC.
Notes to Financial Statements
Year Ended December 31, 1998
NOTE 11 - EMPLOYEE STOCK OPTION PLAN (CONTINUED)
The Company has elected to account for the stock option plan under Accounting
Principles Board Opinion No. 25, "Accounting for Stock issued to Employees", and
related interpretations. For the year ended December 31, 1998, compensation
expense was recorded in the amount of $19,642 for the non-qualified stock
options of the plan that were exercised.
A summary of option transactions during the year ended December 31, 1998 is
shown below:
<TABLE>
<CAPTION>
WEIGHTED/
NUMBER AVERAGE
OF SHARES EXERCISE PRICE
<S> <C> <C>
Outstanding January 1, 1998 305,634 $ 0.31
------- --------
Exercised 305,634 0.31
Canceled -- --
------- --------
Outstanding December 31, 1998 -- --
======= ========
Exercisable, December 31, 1998 -- $ --
======= ========
Available for issuance,
December 31, 1998 47,021
=======
</TABLE>
NOTE 12 - SUBSEQUENT EVENTS
Subsequent to year end, the Parent Company has received a non-binding offer to
purchase 100% of Children's Medical Ventures, Inc. by outside parties. The
purchase has not been consummated as of February 19, 1999.
15
<PAGE> 16
Unaudited financial statements for the interim periods ended June 30, 1999, and
June 30, 1998 where applicable:
CHILDREN'S MEDICAL VENTURES, INC.
Unaudited Condensed Balance Sheet
<TABLE>
<CAPTION>
JUNE 30, 1999
-------------
<S> <C>
CURRENT ASSETS:
Cash $ 36,139
Accounts receivable, net of allowance
for doubtful accounts of $50,000 1,059,982
Inventories 1,181,352
Prepaid expenses 76,408
Other current assets 15,043
---------
2,368,924
PROPERTY AND EQUIPMENT, less 188,540
accumulated depreciation of $338,241
at June 30, 1999
LICENSES, AND PATENTS, less 18,422
accumulated amortization of $14,350
at June 30, 1999
----------
$2,575,886
==========
</TABLE>
See notes to unaudited financial statements.
16
<PAGE> 17
CHILDREN'S MEDICAL VENTURES, INC.
Unaudited Condensed Balance Sheet
<TABLE>
<CAPTION>
JUNE 30, 1999
-------------
<S> <C>
CURRENT LIABILITIES
Accounts payable $ 416,295
Accrued expenses 540,381
-----------
956,676
STOCKHOLDERS' EQUITY
Common Stock, $0.01 par value 26,567
Authorized 3,000,000 shares; issued and
outstanding 2,656,664
Additional paid-in capital 1,361,117
Retained earnings 324,968
-----------
1,712,652
Less: Stock subscription receivable (93,442)
-----------
1,619,210
-----------
$ 2,575,886
===========
</TABLE>
See notes to unaudited financial statements.
17
<PAGE> 18
CHILDREN'S MEDICAL VENTURES, INC.
Unaudited Condensed Statements of Income
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1998
------------- -------------
<S> <C> <C>
Net Sales $ 3,724,679 $ 2,943,624
Cost of Sales 1,890,734 1,472,437
----------- -----------
Gross Profit 1,833,945 1,471,187
Selling, General And Administrative Expenses 1,799,450 1,359,151
Interest Expense 1,623 1,766
Other (Income) Expense (3,978) (8,528)
----------- -----------
INCOME BEFORE PROVISION FOR
INCOME TAXES 36,850 118,798
Provision for Income Taxes 15,825 49,895
----------- -----------
NET INCOME $ 21,025 $ 68,903
=========== ===========
</TABLE>
See notes to unaudited financial statements.
18
<PAGE> 19
CHILDREN'S MEDICAL VENTURES, INC.
Unaudited Condensed Statements of Cash Flow
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING 23,063 132,480
ACTIVITIES
INVESTING ACTIVITIES
Purchases of equipment (13,518) (58,911)
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (13,518) (58,911)
FINANCING ACTIVITIES
Proceeds from notes payable 45,000
Principal payments on borrowings (36,563) (2,812)
--------- ---------
NET CASH (USED) PROVIDED BY
FINANCING ACTIVITIES (36,563) 42,188
--------- ---------
(DECREASE) INCREASE IN CASH (27,018) 115,757
Cash at beginning of period 63,157 130,401
--------- ---------
Cash at end of period $ 36,139 $ 246,158
========= =========
</TABLE>
See notes to unaudited financial statements.
19
<PAGE> 20
CHILDREN'S MEDICAL VENTURES, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1999
NOTE 1 - BASIS OF PRESENTATION: The accompanying unaudited financial statements
of Children's Medical Ventures, Inc. for the six months ended June 30, 1999 and
1998 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 information. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the six months ended
June 30, 1999 are not necessarily indicative of the results that may be expected
for the full year ended December 31, 1999. It is recommended that the unaudited
interim financial statements be read in conjunction with the audited financial
statements and notes thereto for the year ended December 31, 1998.
NOTE 2 - SUBSEQUENT EVENT: The Company was acquired by Novametrix Medical
Systems Inc. on July 1, 1999.
20
<PAGE> 21
b) Pro Forma Condensed Consolidated Financial Information
The following unaudited pro forma financial information required pursuant to
Article 11 of Regulation S-X is filed with this amendment to the Company's Form
8-K which was previously filed on July 15, 1999.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Basis of Presentation 21
Unaudited Pro Forma Condensed Consolidated Balance Sheets - May 2, 1999 22
Unaudited Pro Forma Condensed Consolidated Statements of Income -
Year Ended May 2, 1999 24
Notes to Unaudited Pro Forma Condensed Consolidated Financial Information -
May 2, 1999 25
</TABLE>
Basis of Presentation
The following unaudited pro forma condensed consolidated financial information
of the Company gives effect to (i) the acquisition of all of the capital stock
of Children's Medical Ventures, Inc. ("ChMV") for $8,700,000 in cash and a
five-year warrant to purchase 25,000 shares of the Company's Common Stock which
occurred on July 1, 1999 (the "Acquisition") and (ii) the related financing, as
if such transactions had occurred on May 4, 1998 for the fiscal year ended May
2, 1999.
The unaudited pro forma condensed consolidated financial information set forth
below reflects pro forma adjustments that are based upon available information
and certain assumptions that the Company believes are reasonable. The unaudited
pro forma condensed consolidated financial information does not purport to
represent the Company's results of operations or financial position that would
have resulted had the transactions to which pro forma effect is given been
consummated as of the dates or for the periods indicated. The Acquisition has
been accounted for using the purchase method of accounting. The total purchase
price of ChMV was allocated to the tangible and intangible assets acquired and
liabilities assumed based upon their respective fair values. The excess of the
purchase price over the fair value of its net assets was recorded as goodwill.
The unaudited pro forma condensed consolidated financial information and
accompanying notes should be read in conjunction with the historical
consolidated financial statements of the Company as filed with the Securities
and Exchange Commission and the financial statements and notes of ChMV contained
herein.
21
<PAGE> 22
NOVAMETRIX MEDICAL SYSTEMS INC.
UNAUDITED PRO FORM CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MAY 2, 1999
($000's)
The following unaudited pro forma condensed consolidated balance sheet has
been prepared as if the Acquisition had occurred on May 4, 1998. This balance
sheet combines the consolidated balance sheet of the Company as of May 2, 1999
giving effect to the adjustments for the Acquisition and related financing.
<TABLE>
<CAPTION>
Novametrix ChMV Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------- ---------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 269 $ 44 $ 436(a) $ 749
Accounts receivable, net of allowance
for doubtful accounts 11,613 1,083 12,696
Current portion of notes receivable 380 380
Inventories 9,352 1,150 10,502
Prepaid expenses and other current assets 916 121 (13)(b) 1,024
Deferred income taxes, net 1,769 1,769
-------- -------- -------- --------
Total current assets 24,299 2,398 423 27,120
Notes receivable, less current portion 1,501 1,501
Equipment, less accumulated depreciation 3,682 234 (64)(c) 3,852
License, technology, patent and other costs 4,545 19 45(d) 4,609
Goodwill 7,648(e) 7,648
Deferred income taxes, net 1,949 1,949
-------- -------- -------- --------
$ 35,976 $ 2,651 $ 8,052 $ 46,679
======== ======== ======== ========
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
22
<PAGE> 23
NOVAMETRIX MEDICAL SYSTEMS INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MAY 2, 1999
($000's)
(CONTINUED)
<TABLE>
<CAPTION>
Novametrix ChMV Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------- ---------- ----------- --------
<S> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of debt and
capital lease obligation $ 3,837 $ 33 $ 1,920(f) $ 5,790
Accounts payable 2,385 313 2,698
Accrued expenses 2,844 606 100(g) 3,550
-------- -------- -------- --------
Total current liabilities 9,066 952 2,020 12,038
Long-term debt and capital lease obligation,
less current portion 2,254 7,680 (f) 9,934
Shareholders' equity:
Common Stock, $.01 par value 92 27 (27)(h) 92
Additional paid-in capital 34,966 1,361 (1,310)(h) 35,017
Retained earnings (3,260) 404 (404)(h) (3,260)
Stock subscription receivable (93) 93 (b) --
Treasury Stock (7,142) (7,142)
-------- -------- -------- --------
24,656 1,699 (1,648) 24,707
-------- -------- -------- --------
$ 35,976 $ 2,651 $ 8,052 $ 46,679
======== ======== ======== ========
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
23
<PAGE> 24
NOVAMETRIX MEDICAL SYSTEMS INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED MAY 2, 1999
($000's)
<TABLE>
<CAPTION>
Novametrix ChMV Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------- ---------- ----------- --------
<S> <C> <C> <C> <C>
REVENUES
Sales $ 32,865 $ 6,815 $ 39,680
Interest 113 113
---------- ---------- ----------
32,978 6,815 39,793
COSTS AND EXPENSES
Cost of products sold 13,569 3,225 16,794
Research and product development 3,958 3,958
Selling, general and administrative 12,321 3,102 15,423
Interest 212 (11) 648(i) 849
Goodwill amortization 306(j) 306
Other expense, net 48 1 14(k) 63
---------- ---------- --------- ----------
30,108 6,317 968 37,393
INCOME BEFORE INCOME TAXES 2,870 498 (968) 2,400
Income tax provision 803 209 (244)(l) 768
---------- ---------- --------- ----------
NET INCOME $ 2,067 $ 289 $ (724) $ 1,632
========== ========== ========= ==========
Earnings per common share:
Basic $ .25 $ .20
Diluted $ .24 $ .19
Weighted average common shares
Basic 8,299,707 8,299,707
Diluted 8,596,162 8,596,162
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
24
<PAGE> 25
NOVAMETRIX MEDICAL SYSTEMS INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MAY 2, 1999
($000's)
(a) Represents net cash from various purchase related transactions as follows:
<TABLE>
<S> <C>
Cash received from notes payable $ 9,600
Proceeds from repayment of loans
to management 106
Less: cash portion of amount paid to sellers (8,700)
purchase transaction costs (570)
-------
$ 436
=======
</TABLE>
(b) To record the repayment of certain loans to management.
(c) To write-down computer equipment and certain leasehold improvements to fair
value.
(d) To record loan financing costs.
(e) To record excess of purchase price paid over the book value of the net
assets acquired.
<TABLE>
<S> <C>
Purchase price paid
Cash $ 8,700
Warrant (25,000 shares of the Company's
Common Stock at fair value using the
Black-Scholes pricing model) 51
-------
8,751
Transaction costs 525
Book value of net assets acquired 1,699
Adjustments of book value of certain
assets to estimated fair value:
Equipment (64)
Accrued expenses (100)
Proceeds from stock subscription
receivable 93
-------
Adjusted net assets acquired 1,628
-------
Excess of purchase price paid over net
assets acquired $ 7,648
=======
</TABLE>
25
<PAGE> 26
NOVAMETRIX MEDICAL SYSTEMS INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
MAY 2, 1999
($000's)
(Continued)
(f) To record notes payable of $9,600, the current portion of which is $1,920.
(g) To record various acquisition related liabilities including severance
provisions and lease close out costs.
(h) To eliminate the historical shareholders' equity of ChMV less partial offset
of $51 related to issuance of warrant.
(i) To record additional interest expense pertaining to the financing of the
acquisition.
(j) To record amortization of goodwill over 25 years.
(k) To record amortization of loan financing costs over 5 years.
(l) To recognize reduction of income taxes associated with the adjustments
above and adjust the combined provision for income taxes to the Company's
estimated effective tax rate.
26
<PAGE> 27
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.
NOVAMETRIX MEDICAL SYSTEMS INC.
-------------------------------
(Registrant)
Date: September 13, 1999 By: /s/ William J. Lacourciere
---------------------------------------
William J. Lacourciere
Chairman of the Board, President and
Chief Executive Officer
27
