<PAGE>
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): June 12, 1995
INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
Delaware 0-9767 94-2579751
(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
9162 Eton Avenue, Chatsworth, California 91311
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (818) 709-1244
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 12, 1995, the Registrant ("IRIS") completed the acquisition of LDA
Systems, Inc. ("LDA") for approximately 495,000 shares of IRIS Common Stock.
IRIS acquired LDA pursuant to the exercise of its option under the LDA Restated
Certificate of Incorporation to purchase all of the outstanding shares of LDA
Common Stock. On April 13, 1995, IRIS gave written notice to the LDA
stockholders of its intent to exercise the option. The option exercise price
was $20 per share of LDA Common Stock, and IRIS elected to pay the exercise
price with IRIS Common Stock. For this purpose, the IRIS Common Stock was
valued at $7.7625 per share -- the average closing price of a share of IRIS
Common Stock on the American Stock Exchange for the 20 trading days preceding
the date of the notice. Accordingly, IRIS tendered 2.5765 shares of IRIS Common
Stock for each share of LDA Common Stock. As a result of the acquisition, IRIS
expects to incur a one-time, noncash charge of $3.7 million against earnings
in the second quarter for the acquisition of in-process research and
development (i.e. work-in-process not yet cleared by the Food and Drug
Administration ("FDA")) and the recognition of deferred warrant costs.
LDA was formed in 1992 to enter into a joint development program with IRIS to
complete commercial development of The White IRIS (TM) leukocyte differential
analyzer -- an instrument being developed from technology originally pioneered
by IRIS. Under the program, IRIS and LDA jointly funded $2.8 million of
research, development, clinical evaluation and pre-market testing for The White
IRIS (TM). The first phase of trials yielded the data necessary to submit an
application for FDA clearance to market The White IRIS (TM). IRIS expects to
submit an application to the FDA during the third quarter of 1995. The joint
development program generated six U.S. patents and a number of additional
pending patent applications. To date, IRIS has produced six prototype
instruments which successfully incorporate most of the technology considered
essential for the commercial market.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
See Exhibit 28.1
(b) PRO FORMA FINANCIAL INFORMATION.
See Exhibit 28.2
(c) EXHIBITS.
2.1 Restated Certificate of Incorporation of LDA
Systems, Inc. (The terms of the option are contained in
Article FOUR).
23.1 Consent of Coopers & Lybrand L.L.P.
28.1 LDA Financial Statements
-2-
<PAGE>
28.2 PRO FORMA Combined Financial Statements
-3-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTERNATIONAL REMOTE IMAGING
SYSTEMS, INC.
Date: June 26, 1995 By:/s/ E. Eduardo Benmaor
--------------------------------
E. Eduardo Benmaor
Controller, Principal Accounting
Officer and Secretary
-4-
<PAGE>
EXHIBIT INDEX
2.1 Restated Certificate of Incorporation of LDA Systems,
Inc. (The terms of the option are contained in Article
FOUR).
23.1 Consent of Coopers & Lybrand L.L.P.
28.1 LDA Financial Statements
28.2 PRO FORMA Combined Financial Statements
-5-
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION OF
LDA SYSTEMS, INC.
LDA Systems, Inc., a corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), hereby certifies as follows that:
1. The Corporation was incorporated under the name LDA Systems, Inc. and
the original Certificate of Incorporation of the Corporation was filed with the
Delaware Secretary of State on April 22, 1992.
2. This Restated Certificate of Incorporation restates and integrates and
further amends the Certificate of Incorporation of the Corporation and has been
duly adopted in accordance with Sections 242 and 245 of the Delaware General
Corporation Law, by approval of the Board of Directors of the Corporation and by
the affirmative vote of at least a majority of the outstanding stock entitled to
vote.
3. The Certificate of Incorporation is hereby amended and restated to
read in its entirety as follows:
"ONE: The name of this corporation is:
LDA Systems, Inc.
TWO: The address of its registered office in the State of Delaware is
15 East North Street, Dover, Delaware 19903. The name of its registered agent
at such address is Incorporating Services, Ltd.
THREE: The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the Delaware General Corporation Law ("DGCL").
FOUR: The corporation is authorized to issue one class of stock which
will be designated Common Stock; the total number of shares which the
corporation shall have authority to issue is Two Hundred Thousand Six Hundred
(200,600), and the par value of each of such shares is one cent ($.01).
The Common Stock shall be subject to the following purchase option:
A. OPTION. International Remote Imaging Systems, Inc., a
Delaware corporation ("IRIS"), holds an exclusive, irrevocable option (the
"Option") to purchase all (but not less than all) of the outstanding Common
Stock of this corporation upon the terms and conditions set forth in
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this Restated Certificate of Incorporation. The Option will be exercisable at
any time prior to 5:00 p.m., Los Angeles time, on the one hundred twenty first
(121st) day (the "Expiration Date") following termination of the Research and
Development Agreement by and between this corporation and IRIS to be entered
into at the closing of the public offering by this corporation described in that
certain Registration Statement on Form S-1/S-2 filed with the Securities and
Exchange Commission on May 5, 1992. If the Expiration Date is not otherwise a
business day, then the Expiration Date shall be 5:00 p.m., Los Angeles time, on
the next succeeding business day.
B. EXERCISE PRICE. Upon exercise of the Option, IRIS shall
make payment for each share of Common Stock (the "Exercise Price") as follows:
<TABLE>
<CAPTION>
EXERCISE DATE EXERCISE PRICE
------------- --------------
<S> <C>
On or before July 31, 1993 $ 14.00
From August 1, 1993 through
July 31, 1994 17.00
From after August 1, 1994
through the Expiration Date 20.00
</TABLE>
C. FORM OF PAYMENT. Except as provided in Paragraph F and the
last sentence of this Paragraph, the Exercise Price may be paid in cash or IRIS
Common Stock (but not a combination thereof) at the sole discretion of IRIS.
For purposes of determining the number of shares of IRIS Common Stock to be
delivered in payment of all or a portion of the Exercise Price, shares of IRIS
Common Stock will be valued according to the average of the mean of the closing
bid and asked prices quoted in the NASDAQ over-the-counter market (or, if then
quoted on the NASDAQ National Market System, the average closing prices thereon,
or if then traded on a national securities exchange, the average of the closing
prices on the principal national securities exchange on which listed) on each of
the 20 trading days immediately preceding the date the Option is exercised. If
the IRIS Common Stock is not so quoted or traded during such 20-day period, the
Exercise Price will be paid entirely in cash.
D. MANNER OF EXERCISE. The Option shall be exercised on or
before the Expiration Date by written notice from IRIS to each holder of record
of the Common Stock at the address last indicated on the records of this
corporation (i) fixing a record date no earlier than ten (10) days after, and no
later than twenty (20) days after, the date of such notice (and in no event
shall such record date be later than the Expiration Date) (the "Record Date"),
(ii) stating that the Option is being exercised and (iii) setting forth (a) the
Exercise Price, (b) the date on which IRIS will purchase all
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of the Common Stock (such date to be not less than twenty (20) nor more than
forty (40) days after the Record Date) (the "Closing Date"), and
(c) instructions for securing payment of the Exercise Price.
E. PAYMENT AGENT. Subject to the provisions of Paragraph F
below, on or before the Closing Date, IRIS shall deposit the full amount of the
Exercise Price for all of the Common Stock with a bank, transfer agent or
similar entity (the "Payment Agent") which shall have been designated by IRIS to
pay, on its behalf, the Exercise Price. The cash or IRIS Common Stock deposited
with the Payment Agent shall be delivered in trust for the benefit of the
holders of record of the Common Stock on the Record Date, and IRIS shall provide
the Payment Agent with irrevocable instructions to pay, on or after the Closing
Date, the Exercise Price for the Common Stock to such record holders upon
surrender of their certificates representing shares of the Common Stock.
Payment for shares of the Common Stock shall be mailed to each such record
holder at the address set forth in this corporation's records or at the address
provided by each such record holder or, if no address is set forth in the
corporation's records for any such record holder or provided by any such record
holder, to such record holder at the address of the corporation, but only upon
receipt from each such record holder of certificates evidencing shares of the
Common Stock. Any cash or IRIS Common Stock deposited with the Payment Agent
pursuant to this Paragraph E that remains unclaimed for one (1) year following
the Closing Date, and all interest earned thereon, shall be automatically
returned to IRIS.
F. REGISTRATION OR LISTING. If IRIS fails by the Closing Date
to have (a) any required registration statement declared effective under the
Securities Act of 1933, as amended, with respect to the shares of IRIS Common
Stock, if any, to be delivered as payment pursuant to the exercise of the Option
or (b) the shares of IRIS Common Stock to be issued in connection therewith (i)
listed on the principal national securities exchange on which IRIS Common Stock
is then listed or (ii), if IRIS Common Stock is not then listed on a national
securities exchange, listed on either the NASDAQ National Market System or the
over-the-counter system, then in either of such cases IRIS shall be obligated to
make such payment all in cash on the Closing Date.
G. TRANSFER OF TITLE. Transfer of title to IRIS of all of the
Common Stock shall be deemed to occur automatically on the Closing Date, and
thereafter the corporation shall treat IRIS as the sole holder of all the Common
Stock, notwithstanding the failure of any holder of record of shares of Common
Stock to tender certificates representing such shares to the Payment Agent for
payment therefor in accordance with Paragraph E hereof. After the Closing Date,
the record holders of the Common Stock as
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determined in accordance with Paragraph D hereof shall have no rights in
connection with such Common Stock other than the right to receive the Exercise
Price.
H. ANTIDILUTION. Pursuant to Article FOUR of this Certificate
of Incorporation, this corporation is prohibited from, among other things,
issuing any shares of its capital stock, paying any dividends, merging or
consolidating with any corporation, reacquiring any shares of its capital stock,
dissolving or liquidating. In the event that this corporation violates any of
such restrictions, the Option shall include, at no additional cost to IRIS, the
right to receive all securities or other property distributed with respect to
shares of Common Stock in violation of such restrictions, and payment by the
Paying Agent may, at the option of IRIS, be conditioned on receipt of any such
securities or other property along with the certificates representing the
relevant shares of Common Stock.
I. ASSIGNMENT BY HOLDERS OF COMMON STOCK. Shares of Common
Stock shall automatically continue to be subject to the Option and the other
terms and conditions related thereto contained in this Certificate of
Incorporation, without regard to any assignment, sale or other transfer of the
Common Stock.
J. LEGEND. Until the expiration or exercise of the Option, any
certificates evidencing shares of the Common Stock shall bear a legend in
substantially the following form:
The shares of LDA Systems, Inc. evidenced hereby are subject
to an option granting International Remote Imaging Systems,
Inc. the right to purchase such shares at a purchase price and
during a period set forth in the Restated Certificate of
Incorporation of LDA Systems, Inc. Copies of the Restated
Certificate of Incorporation of LDA Systems, Inc. are
available at its principal place of business, 9162 Eton
Avenue, Chatsworth, California 91311, and will be furnished
without cost to any stockholder upon written request.
K. AMENDMENT. Paragraphs A through L of this Article FOUR may
be amended only by the approval of IRIS and the holders of record of two-thirds
(2/3) of the then outstanding shares of Common Stock.
L. PRESERVATION OF RIGHTS OF IRIS. This corporation shall not
take, or permit any other person or entity within its control to take, any
action inconsistent
4
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with the rights of IRIS under this Article FOUR. In addition, this corporation
shall not enter into any arrangement, agreement or understanding, either oral or
written, that is inconsistent with the rights of IRIS and the obligations of
this corporation under this Article FOUR.
FIVE: This corporation shall not, without the written consent of
IRIS and the holder of this corporation's Class A Note, dated as of June 11,
1992, in the principal amount of $100.00 (the "Class A Note"), while the Class A
Note is outstanding, (i) issue (by sale or otherwise) any shares of its capital
stock, (ii) merge, consolidate or reorganize with or into any other corporation
or other entity, (iii) sell, lease, transfer or otherwise dispose of all or
substantially all of its assets, (iv) declare or pay dividends, (v) redeem,
retire, repurchase or otherwise reacquire any shares of its capital stock,
(vi) borrow any funds in the aggregate in excess of twenty-five thousand dollars
($25,000), (vii) grant any options, warrants or other rights with respect to its
capital stock, (viii) undertake any voluntary dissolution or liquidation,
(ix) amend this Certificate of Incorporation or (x) commit to take any of the
foregoing actions.
SIX: The following provisions are inserted for the
management of the business and the conduct of the affairs of the corporation,
and for further definition, limitation and regulation of the powers of the
corporation and of its directors and stockholders:
A. The business and affairs of the corporation shall be
managed by or under the direction of the Board of Directors. In addition to the
powers and authority expressly conferred upon them by the DGCL or by this
Certificate of Incorporation or the Bylaws of the corporation, the directors are
hereby empowered to exercise all such powers and do all such acts and things as
may be exercised or done by the corporation.
B. The Board of Directors may adopt, amend or repeal the
Bylaws of the corporation.
C. Election of directors need not be by written ballot.
SEVEN: The officers of the corporation shall be chosen in such a
manner, shall hold their offices for such terms and shall carry out such duties
as are determined solely by the Board of Directors, subject to the right of the
Board of Directors to remove any officer or officers at any time with or without
cause.
EIGHT: No director of the corporation shall be personally liable to
the corporation or its stockholders for monetary damages for any breach of
fiduciary duty by such a
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director as a director. Notwithstanding the foregoing sentence, a director
shall be liable to the extent provided by applicable law (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the DGCL or (iv) for
any transaction from which such director derived an improper personal benefit.
No amendment to or repeal of this Article SEVEN shall apply to or have any
effect on the liability or alleged liability of any director of the corporation
for or with respect to any acts or omissions of such director occurring prior to
such amendment or repeal. If the DGCL is amended hereafter to further eliminate
or limit the personal liability of directors, the liability of a director of the
corporation shall be limited or eliminated to the fullest extent permitted by
the DGCL, as amended.
NINE: A. RIGHT TO INDEMNIFICATION. Each person who was or is
made a party to or is threatened to be made a party to or is involuntarily
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "Proceeding"), by reason of the fact that he
or she is or was a director or officer of the corporation, or is or was serving
(during his or her tenure as director and/or officer) at the request of the
corporation as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, whether the basis of
such Proceeding is an alleged action or inaction in an official capacity as a
director or officer or in any other capacity while serving as a director or
officer, shall be indemnified and held harmless by the corporation to the
fullest extent authorized by the DGCL (or other applicable law), as the same
exists or may hereafter be amended, against all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) reasonably incurred or suffered by
such person in connection with such Proceeding. Such director or officer shall
have the right to be paid by the corporation for expenses incurred in defending
any such Proceeding in advance of its final disposition; provided, however,
that, if the DGCL (or other applicable law) requires, the payment of such
expenses in advance of the final disposition of any such Proceeding shall be
made only upon receipt by the corporation of an undertaking by or on behalf of
such director or officer to repay all amounts so advanced if it should be
determined ultimately that he or she is not entitled to be indemnified under
this Article EIGHT or otherwise.
B. RIGHT OF CLAIMANT TO BRING SUIT. If a claim under this
Article NINE is not paid in full by the corporation within ninety (90) days
after a written claim has been received by the corporation, the claimant may at
any time
6
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thereafter bring suit against the corporation to recover the unpaid amount of
the claim, together with interest thereon, and, if successful in whole or in
part, the claimant shall also be entitled to be paid the expense of prosecuting
such claim, including reasonable attorneys' fees incurred in connection
therewith. It shall be a defense to any such action (other than action brought
to enforce a claim for expenses incurred in defending any Proceeding in advance
of its final disposition where the required undertaking, if any is required, has
been tendered to the corporation) that the claimant has not met the standards of
conduct which make it permissible under the DGCL (or other applicable law) for
the corporation to indemnify the claimant for the amount claimed. Neither the
failure of the corporation (or of its full Board of Directors, its directors who
are not parties to the Proceeding with respect to which indemnification is
claimed, its stockholders, or independent legal counsel) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the DGCL (or other applicable law),
nor an actual determination by any such person or persons that such claimant has
not met such applicable standard of conduct, shall be a defense to such action
or create the presumption that the claimant has not met the applicable standard
of conduct.
C. NON-EXCLUSIVITY OF RIGHTS. The rights conferred by
this Article NINE shall not be exclusive of any other right which any director,
officer, representative, employee or other agent may have or hereafter acquire
under the DGCL or any other statute, or any provision contained in the
corporation's Certificate of Incorporation or Bylaws, or any agreement, or
pursuant to a vote of stockholders or disinterested directors, or otherwise.
D. INSURANCE AND TRUST FUND. In furtherance and not in
limitation of the powers conferred by statute:
(1) the corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against him
or her and incurred by him or her in any such capacity, or arising out of his or
her status as such, whether or not the corporation would have the power to
indemnify him or her against such liability under the provisions of law; and
(2) the corporation may create a trust fund, grant a
security interest and/or use other means (including, without limitation, letters
of credit, surety bonds and/or other similar arrangements), as well as enter
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into contracts providing indemnification to the fullest extent permitted by law
and including as part thereof provisions with respect to any or all of the
foregoing, to ensure the payment of such amount as may become necessary to
effect indemnification as provided therein, or elsewhere.
E. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE
CORPORATION. The corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification, including the right to
be paid by the corporation the expenses incurred in defending any Proceeding in
advance of its final disposition, to any employee or agent of the corporation to
the fullest extent of the provisions of this Section or otherwise with respect
to the indemnification and advancement of expenses of directors and officers of
the corporation.
F. EFFECT OF REPEAL OR MODIFICATION. Articles EIGHT and
NINE herein are also contained in Article VIII, Sections 1 through 6, of the
corporation's Bylaws. Any repeal or modification of this Article NINE shall not
change the rights of any officer or director to indemnification with respect to
any action or omission occurring prior to such repeal or modification.
TEN: The corporation reserves the right to repeal, alter, amend,
or rescind any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred on
stockholders herein are granted subject to this reservation."
IN WITNESS WHEREOF, LDA Systems, Inc. has caused this Restated
Certificate of Incorporation to be signed by its President and attested by its
Secretary this 26th day of June, 1992.
LDA Systems, Inc.
By: /s/ Fred H. Deindoerfer
------------------------
Fred H. Deindoerfer
President
ATTEST:
/s/ E. Eduardo Benmaor
- --------------------------
E. Eduardo Benmaor
Secretary
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CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
International Remote Imaging Systems, Inc. on Forms S-8 (File Nos. 2-77496 and
33-10631) of our report dated August 23, 1994, on our audit of the financial
statements of LDA Systems, Inc. as of June 30, 1994 and 1993 and for the years
ended June 30, 1994 and 1993 and for the cumulative period from April 24, 1992
(date of inception) through June 30, 1994, which report is included in this
Report on Form 8-K.
COOPERS & LYBRAND L.L.P.
/s/ Coopers & Lybrand L.L.P.
Los Angeles, California
June 26, 1995
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of LDA Systems, Inc.:
We have audited the balance sheets of LDA Systems, Inc. (a development
stage enterprise) as of June 30, 1994 and 1993 and the related statements of
operations, changes in shareholders' equity and cash flows for the years ended
June 30, 1994 and 1993 and for the cumulative period from April 24, 1992 (date
of inception) through June 30, 1994. 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 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 LDA Systems, Inc. (a
development stage enterprise) at June 30, 1994 and 1993, and the results of its
operations and its cash flows for the years ended June 30, 1994 and 1993 and for
the cumulative period from April 24, 1992 (date of inception) through June 30,
1994 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 2, the Company
anticipates that it will exhaust its cash reserves by March 1995, which raises
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to this matter are also discussed in Note 2. The
financial statements do not include any adjustments that might result from this
uncertainty.
COOPERS & LYBRAND L.L.P.
/s/ Coopers & Lybrand L.L.P.
Los Angeles, California
August 23, 1994
F-1
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LDA SYSTEMS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
<TABLE>
<CAPTION>
BALANCE SHEETS
ASSETS
June 30, 1993 June 30, 1994
------------- -------------
<S> <C> <C>
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . $ 462,690 $ 990,128
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,000 10,000
---------- ----------
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . 484,690 1,000,128
Property and equipment, net. . . . . . . . . . . . . . . . . . . . . . -- 723
---------- ----------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 484,690 $1,000,851
---------- ----------
---------- ----------
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities:
Payable to IRIS. . . . . . . . . . . . . . . . . . . . . . . $ 59,739 $ 150,772
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . 9,767 26,978
---------- ----------
Total Current Liabilities. . . . . . . . . . . . . . . . . . . . . . . 69,506 177,750
Long Term Liabilities:
Class A Note . . . . . . . . . . . . . . . . . . . . . . . . 100 100
---------- ----------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 69,606 177,850
---------- ----------
Commitments (note 4)
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, 200,600 shares authorized,
107,750 (1993) and 193,464 (1994)
shares issued and outstanding. . . . . . . . . . . . . . . . 1,078 1,935
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . 768,588 1,967,731
Deficit accumulated during the development stage . . . . . . . . . . . (354,582) (1,146,665)
---------- ----------
Total Shareholders' Equity . . . . . . . . . . . . . . . . . . . . . . 415,084 823,001
---------- ----------
Total Liabilities and Shareholders' Equity . . . . . . . . . . . . . . $ 484,690 $1,000,851
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are in integral part of these financial statements.
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
Cumulative
For the For the From April 24, 1992
Year Ended Year Ended (Date of Inception)
June 30, 1993 June 30, 1994 through June 30, 1994
------------- ------------- ---------------------
<S> <C> <C> <C>
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,457 $ 10,861 $ 24,318
-------- -------- ----------
Operating Expenses:
General & administrative . . . . . . . . . . . . . . . . . . 49,352 105,204 154,556
Research & development . . . . . . . . . . . . . . . . . . . 308,687 677,740 986,427
License fee. . . . . . . . . . . . . . . . . . . . . . . . . 10,000 20,000 30,000
-------- -------- ----------
Total operating expenses . . . . . . . . . . . . . . . . . . 368,039 802,944 1,170,983
-------- -------- ----------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $354,582 $792,083 $1,146,665
-------- -------- ----------
-------- -------- ----------
Net loss per common share. . . . . . . . . . . . . . . . . . . . . . . $3.29 $6.13 $9.75
-------- -------- ----------
-------- -------- ----------
Weighted average common shares outstanding . . . . . . . . . . . . . . 107,750 129,179 117,640
-------- -------- ----------
-------- -------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
LDA SYSTEMS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the years ended June 30, 1994 and 1993 and
for the period April 24, 1992 (date of inception) through June 30, 1994
Additional Total
Common Paid-in Accumulated Shareholders'
Stock Capital Deficit Equity
------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Balance at April 24, 1992. . . . . . . . . . . . . . . . . . . . $ 1 $ 99 $ -- $ 100
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- -- --
------- ----------- ----------- ----------
Balance at June 30, 1992 1 99 0 100
Contribution to Additional Paid-in-Capital . . . . . . . . . . . 4,900 4,900
Issuance of 107,750 shares of common stock at
$10 per share, net of issuance costs of $307,834. . . . . . 1,078 768,588 -- 769,666
Repurchase of shares issued upon incorporation . . . . . . . . . (1) (4,999) -- (5,000)
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- (354,582) (354,582)
------- ----------- ----------- ----------
Balance at June 30, 1993 1,078 768,588 (354,582) 415,084
Issuance of 85,714 shares of common stock at $14 per share . . . 857 1,199,143 -- 1,200,000
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- (792,083) (792,083)
------- ----------- ----------- ----------
Balance at June 30, 1994 $ 1,935 $ 1,967,731 ($1,146,665) $ 823,001
------- ----------- ----------- ----------
------- ----------- ----------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
LDA SYSTEMS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
Cumulative
For the For the From April 24, 1992
Year Ended Year Ended (Date of Inception)
June 30, 1993 June 30, 1994 through June 30, 1994
------------- ------------- ---------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . $(354,582) $(792,083) $(1,146,665)
Adjustment to reconcile net loss to
cash used by operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . -- 855 855
Changes in assets and liabilities:
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . (22,000) 12,000 (10,000)
Payable to IRIS . . . . . . . . . . . . . . . . . . . . . . . . 59,739 91,033 150,772
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . 9,767 17,211 26,978
--------- ---------- -----------
Net cash flows used by operating activities . . . . . . . . . . (307,076) ( 670,984) ( 978,060)
--------- ---------- -----------
Cash flows from investing activities:
Acquisition of property and equipment. . . . . . . . . . . . . -- (1,578) (1,578)
--------- ---------- -----------
Cash flows used by investing activities . . . . . . . . . . . . -- (1,578) (1,578)
--------- ---------- -----------
Cash flows from financing activities:
Issuance of common stock for cash,
net of $307,864 in issuance costs (1993). . . . . . . . . . . . 769,666 1,200,000 1,969,666
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- 100
--------- ---------- -----------
Cash flows provided by financing activities . . . . . . . . . . 769,666 1,200,000 1,969,766
--------- ---------- -----------
Net increase in cash and cash equivalents. . . . . . . . . . . . . . . 462,590 527,438 990,128
Cash and cash equivalents at beginning of the period . . . . . . . . . 100 462,690 --
--------- ---------- -----------
Cash and cash equivalents at end of the period . . . . . . . . . . . . $ 462,690 $ 990,128 $ 990,128
--------- ---------- -----------
--------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
LDA SYSTEMS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS OPERATIONS.
LDA Systems, Inc. ("LDA"), a development stage enterprise, was incorporated
in April 1992 in Delaware to engage in the research, development and clinical
testing of a white blood cell differential analyzer ("The White IRIS-TM-).
LDA does not anticipate the receipt of any significant revenues unless and
until The White IRIS-TM- is successfully commercialized. International Remote
Imaging Systems, Inc. ("IRIS") has completed development of a prototype
commercial instrument which successfully incorporates most of the technology
considered essential for the commercial market. However, significant additional
work must be completed before the White IRIS-TM- will be ready for the
commercial market, and that work could prove unsuccessful.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Basis of Presentation:
LDA's cash requirements for the foreseeable future will consist primarily
of its financial obligations under the Development Agreement, expenses
associated with preparing an FDA application and its operating expenses. Total
research and development expenditures for The White IRIS-TM- are currently
averaging $73,000 per month. Pursuant to the terms of the Development
Agreement, LDA and IRIS are funding approximately $58,000 and $15,000,
respectively, of this amount per month. LDA anticipates that it will have
sufficient funds to complete commercial development of The White IRIS-TM-,
however, at its current level of operations, LDA anticipates that it will
exhaust its cash reserves by March 1995.
LDA also believes that IRIS has sufficient cash on hand plus short term
investments to fund LDA's operations at their current level for at least the
next year. But its present funding commitment under the Development Agreement
is limited to approximately $15,000 per month until December 1994 and $5,000 for
January 1995. Although IRIS may elect to provide additional funding beyond this
level, it is not obligated to do so.
There can be no assurance that LDA will have the funds necessary to cover
operating costs through its next fiscal year, which raises substantial doubt
about its ability to continue as a going concern. The financial statements do
not include any adjustments that might result from this uncertainty.
Cash and Cash Equivalents:
Cash and cash equivalents comprise money market and checking accounts. LDA
places its cash and cash equivalents with high credit quality institutions and
at times these deposits may be in excess of the federally insured limit.
Net Loss Per Common Share:
Net loss per common share is computed based on the weighted average number
of common shares outstanding during the period. LDA has paid no dividends on
its common stock to date.
Income Taxes:
LDA adopted the provisions of Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes," effective July 1, 1993. The adoption of
this statement did not have an affect on LDA's financial position or results of
operations.
F-5
<PAGE>
3. INITIAL AND SECONDARY PUBLIC OFFERINGS.
In July 1992, LDA commenced an offering of up to 200,000 units at $10.00
per unit. Each unit consisted of one share of callable LDA common stock and ten
IRIS warrants, each IRIS warrant entitling the holder to purchase one share of
common stock of IRIS at $.75 per share. LDA successfully closed the offering in
October 1992 after having received subscriptions for 107,750 units. After
reimbursing IRIS for the costs of the offering, the net proceeds to LDA amounted
to approximately $769,000. On July 12, 1993, the IRIS warrants were
automatically adjusted to reflect the 1 for 5 reverse stock split of the IRIS
common stock. As a result, each five IRIS warrants now entitles the holder to
purchase one share of IRIS common stock for $3.75.
In April 1994, LDA completed the sale of 85,714 shares of its common stock
and warrants to purchase 248,571 shares of IRIS common stock at an Exercise
Price of $3.75 per share, to CORANGE INTERNATIONAL LIMITED. As part of the
investment agreement, Corange has the option to participate with IRIS and LDA in
the joint development, manufacturing and marketing of a hematology workstation.
Also, Corange has appointed two additional members to the LDA Board of
Directors.
Pursuant to LDA's Certificate of Incorporation, IRIS holds an exclusive
option to purchase all of the outstanding shares of LDA common stock at an
exercise price of $20 per share. The option expires 121 days after termination
of the Development Agreement (described below), which terminates not later than
July 31, 1995.
4. AGREEMENTS WITH IRIS.
As a result of the success of the Offering, LDA and IRIS entered into the
following agreements in October 1992: (i) a Technology License Agreement
("Technology License Agreement"), (ii) a Research and Development Agreement
("Development Agreement") and (iii) an Administration and Services Agreement
("Administration and Services Agreement"). Under the Technology License
Agreement, IRIS granted LDA an exclusive license to use the IRIS technology to
develop, manufacture and market The White IRIS-TM-, and LDA granted IRIS an
exclusive license to use all technology developed or acquired by LDA for all
purposes other than manufacturing or marketing The White IRIS-TM-. The license
granted to LDA will be subject to an existing license agreement between IRIS and
Cytocolor, Inc. requiring LDA to pay Cytocolor royalties of $1,000 each on the
sale of the first 1,000 units of The White IRIS-TM- plus 8% of the net selling
price of certain consumable products, subject to a minimum annual royalty of
$20,000 through 2013. LDA is currently paying the minimum annual royalty.
Under the Development Agreement, IRIS is continuing research, development,
clinical evaluation and pre-market testing of The White IRIS-TM-. IRIS is
funding over a three-year period $500,000 of the direct and indirect costs of
performing its duties under the Development Agreement, and LDA is reimbursing
IRIS for the additional direct and indirect costs of such work up to a maximum
aggregate amount equal to the net proceeds of its unit offerings less certain
expenses. Under the Administration and Services Agreement, IRIS is providing
certain services, including financial and administrative services, to LDA at
cost.
At June 30, 1994 and 1993, LDA had payables of $150,772 and $59,739,
respectively, to IRIS for costs incurred under the above agreements.
5. LONG TERM DEBT.
LDA has issued a Promissory Note in the principal amount of $100, without
interest, to IRIS. The note is due on the one hundred twenty first day
following termination of the Development Agreement and may not be prepaid.
While the note is outstanding, LDA may not take certain actions without the
consent of IRIS, including, among other things, issuing additional capital
stock, merging with another corporation, paying dividends, amending its
Certificate of Incorporation or borrowing more than $25,000 in the aggregate.
6. INCOME TAXES.
Net operating loss carryforwards for federal income tax purposes are
approximately $342,000, and begin expiring in 2008.
F-6
<PAGE>
The components of temporary differences which give rise to LDA's net
deferred taxes of June 30, 1994 and July 1, 1993 are as follows:
<TABLE>
<CAPTION>
June 30, July 1,
1994 1993
--------- ---------
<S> <C> <C>
Deferred start up costs . . . . . . . . $ 62,000 $ 82,000
Capitalized research and
development costs . . . . . . . . . 763,000 262,000
Net operating loss carryforward . . . . . 123,000 3,000
Valuation allowance . . . . . . . . . . . (948,000) (347,000)
--------- ---------
Net deferred tax asset . . . . . . . . . $ 0 $ 0
--------- ---------
--------- ---------
</TABLE>
F-7
<PAGE>
LDA Systems, Inc.
(a development stage enterprise)
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1994 March 31, 1995
------------- --------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 990,128 $ 620,047
Prepaid expenses 10,000 15,000
------------ ------------
Total current assets 1,000,128 635,047
Property, plant & equipment 723 327
------------ ------------
Total Assets $ 1,000,851 $ 635,374
------------ ------------
------------ ------------
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities:
Payable to IRIS $ 150,772 $ 762,834
Accrued expenses 26,978 2,945
------------ ------------
Total current liabilities 177,750 765,779
Long Term Liabilities:
Class A Note 100 100
------------ ------------
Total Liabilities 177,850 765,879
SHAREHOLDERS' EQUITY (DEFICIT)
Common Stock, $.01 par value, 200,600 shares
authorized, 193,464 shares issued and outstanding 1,935 1,935
Additional paid-in capital 1,967,731 1,967,731
Deficit accumulated in the development stage (1,146,665) (2,100,171)
------------ ------------
Total shareholders' equity (deficit) 823,001 (130,505)
------------ ------------
Total Liabilities and Shareholders' Equity $ 1,000,851 $ 635,374
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
LDA Systems, Inc.
(a development stage enterprise)
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the
For the Three Months Ended
Three Months Ended March 31, 1995
March 31, 1994 (As Restated)
------------------ ------------------
<S> <C> <C>
Interest income $ 4,532 $ 4,882
Operating Expenses
General & Administrative 67,655 27,205
Research & Development 445,167 166,731
License Fee 16,500 5,000
---------- ----------
Total Operating Expenses 529,322 198,936
---------- ----------
Net loss $ (524,790) $ (194,054)
---------- ----------
---------- ----------
Net loss per common share $(4.87) $(1.00)
---------- ----------
---------- ----------
Weighted average common shares outstanding 107,750 193,464
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
LDA Systems, Inc.
(a development stage enterprise)
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Cumulative from
For the For the April 24, 1992 (Date of
Nine Months Ended Nine Months Ended Inception) through
March 31, 1994 March 31, 1995 March 31, 1995
----------------- ----------------- -----------------------
<S> <C> <C> <C>
Interest income $ 4,532 $ 16,653 $ 40,971
Operating Expenses
General & Administrative 67,655 70,622 225,178
Research & Development 445,167 884,537 1,870,964
License Fee 16,500 15,000 45,000
---------- ---------- ------------
Total Operating Expenses 529,322 970,159 2,141,142
---------- ---------- ------------
Net loss $ (524,790) $ (953,506) $ (2,100,171)
---------- ---------- ------------
---------- ---------- ------------
Net loss per common share $(4.87) $(4.93) $(15.47)
------ ------ -------
------ ------ -------
Weighted average common shares outstanding 107,750 193,464 135.787
------- ------ ------
------- ------ ------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
LDA Systems, Inc.
(a development stage enterprise)
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Cumulative from
For the For the April 24, 1992 (Date of
Nine Months Ended Nine Months Ended Inception) through
March 31, 1994 March 31, 1995 March 31, 1994
----------------- ----------------- -----------------------
<S> <C> <C> <C>
Cash flows from operations:
Net loss $ (524,790) $ (953,506) $ (2,100,171)
Adjustment to reconcile net loss to cash used
by operating activities:
Depreciation and amortization 329 396 1,251
Changes in assets and liabilities:
Prepaid expenses 16,500 (5,000) (15,000)
Accrued expenses (9,767) (24,033) 2,945
Payable to IRIS 146,104 612,062 762,834
---------- ---------- ------------
Net cash flows used in operations (371,624) (370,081) (1,348,141)
---------- ---------- ------------
Cash flows from investing activities:
Acquisition of equipment (1,578) -- (1,578)
---------- ---------- ------------
Cash flow used by investing activities: (1,578) -- ( 1,578)
---------- ---------- ------------
Cash flows from financing activities
Issuance of common stock for cash, net of
$308,000 in issuance costs -- -- 1,969,666
Note payable -- -- 100
---------- ---------- ------------
Cash flows from financing activities -- -- 1,969,766
---------- ---------- ------------
Net (decrease) increase in cash and cash
equivalents (373,202) (370,081) 620,047
Cash and cash equivalents at beginning of
period 462,690 990,128 --
---------- ---------- ------------
Cash and cash equivalents at end of period $ 89,488 $ 620,047 $ 620,047
---------- ---------- ------------
---------- ---------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS OPERATIONS.
LDA Systems, Inc. (LDA), a development stage enterprise, was incorporated
in April 1992 in Delaware to engage in the research, development and clinical
testing of a white blood cell differential analyzer called "The White IRIS-TM-."
LDA does not anticipate the receipt of any significant revenues unless and
until The White IRIS is successfully commercialized. International Remote
Imaging Systems, Inc. (IRIS) has manufactured six prototype commercial
instruments which successfully incorporate most of the technology considered
essential for the commercial market. Of these, the three most recent
instruments were manufactured in compliance with FDA standards for "good
manufacturing practices". LDA believes it has completed collection of the data
necessary to submit an application for FDA clearance to market The White IRIS-
TM- and expects an application will be submitted during the second calendar
quarter of 1995. Assuming such approval is granted, IRIS and LDA expect to have
completed commercial development of The White IRIS-TM- by that time. However,
there can be no assurance that that the project will have produced a
commercially feasible or successful product.
IRIS has an option to purchase for cash or shares of IRIS common stock all
of the outstanding shares of Callable LDA common stock at an exercise price of
$20 per share. The option expires 121 days after termination of the research
and development agreement, which concludes no later than July 31, 1995.
On April 13, 1995, IRIS elected to exercise its option to acquire all of
the outstanding LDA common stock for approximately $3.9 million. IRIS has
elected to pay the purchase price with IRIS Common Stock and will issue an
aggregate of approximately 495,000 shares in the transaction. The closing date
will be June 12, 1995 at which time IRIS will tender 2.5765 shares of IRIS
Common Stock for each share of LDA common stock plus cash in lieu of any
fractional shares based on a $7.7625 price per share of IRIS Common Stock.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Basis of Presentation:
In the opinion of LDA, the accompanying financial statements contain all
normal recurring adjustments necessary to present fairly the financial position
of LDA as of March 31, 1995 and the result of its operations for the three and
nine months then ended. These financial statements should be read in
conjunction with LDA's audited financial statements and related notes for the
year ended June 30, 1994.
LDA's plan of operation through the closing of June 12 will consist
primarily of preparing the FDA application.
Total research and development expenditures for The White IRIS have been
averaging approximately $98,000
6
<PAGE>
per month. In accordance with the Development Agreement, LDA and IRIS were
funding approximately $83,000 and $15,000, respectively, of this amount.
LDA's cash requirements for the foreseeable future will consist primarily
of its financial obligations under the Development Agreement.
Cash and Cash Equivalents:
Cash and cash equivalents comprise money market and checking accounts. LDA
places its cash and cash equivalents with high credit quality institutions and
at times these deposits may be in excess of the federally insured limit.
Net Loss Per Common Share:
Net loss per common share is computed based on the weighted average number
of common shares outstanding during the period. LDA has paid no dividends on
its common stock to date.
Income Taxes:
LDA adopted the provisions of Statement of Financial Accounting Standards
no. 109 "Accounting for Income Taxes", effective July 1, 1993. The adoption of
this statement had no effect on LDA's financial position or results of
operations.
Restatement:
LDA has restated its previously issued statements of operations for the
quarters ended March 31, 1995 and December 31, 1994 to reflect an adjustment for
the recognition of research and development costs incurred under its development
agreement with IRIS. This adjustment related to the timing of the expense
recognized under the agreement and increased the previously reported net loss
for the quarter ended December 31, 1994 by $335,612 ($1.74 per share) and
reduced the net loss previously reported for the quarter ended March 31, 1995 by
$335,612 ($1.74 per share). This adjustment had no effect on the net loss
previously reported for the nine months ended March 31, 1995.
7
<PAGE>
PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements give effect
to the acquisition of LDA Systems, Inc. ("LDA") by International Remote Imaging
Systems, Inc. ("IRIS") under the purchase method of accounting at the date and
for the periods shown. Substantially all of the purchase price for the
acquisition of LDA by IRIS, including amounts for liabilities of LDA to be
assumed by IRIS will be allocated to in-process research and development. Under
the purchase method of accounting, the purchased research and development (as
finally determined) will be written off as of the purchase date. IRIS presently
expects to record this nonrecurring charge in the quarter ending June 30, 1995.
The pro forma combined balance sheet assumes the acquisition occurred on
March 31, 1995 (the date of the balance sheet). The pro forma combined
statements of operations assume the acquisition took place January 1, 1994 (the
first day of the first period shown). The one time write-off of in-process
research and development described above is excluded from the pro forma
statements of operations as it represents a nonrecurring item. The unaudited
pro forma combined financial statements may not be indicative of the results
that actually would have occurred if the acquisition had been consummated on the
dates indicated or which may be obtained in the future.
The unaudited pro forma combined financial statements should be read in
conjunction with the related historical financial statements, and related notes
thereto, of IRIS and the related historical financial statements, and related
notes thereto, of LDA included elsewhere herein.
<PAGE>
INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
AND LDA SYSTEMS, INC.
PRO FORMA COMBINED BALANCE SHEET - UNAUDITED
MARCH 31, 1995
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
Assets IRIS LDA Adjustments Combined
---- --- ----------- --------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $1,235,400 $620,047 $1,855,447
Short-term investments 2,685,933 2,685,933
Accounts receivable - trade 2,096,313 2,096,313
Accounts receivable - LDA 762,834 ($762,834) (3) 0
Inventories 1,789,597 1,789,597
Prepaid expenses and other 241,078 15,000 (100) (3) 255,978
----------- -------- ----------- -----------
Total current assets 8,811,155 635,047 (762,934) 8,683,268
Property and equipment 533,620 327 533,947
Software development costs 37,466 37,466
Long-term investments 1,200,000 1,200,000
Other assets 1,880,326 (488,949) (4) 1,391,377
In-process research and development 3,255,505 (1) 0
(3,255,505) (2)
----------- -------- ----------- -----------
Total assets $12,462,567 $635,374 ($1,251,883) $11,846,058
----------- -------- ----------- -----------
----------- -------- ----------- -----------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $466,990 $466,990
Accounts payable - IRIS $762,834 ($762,834) (3) 0
Accrued expenses 615,348 2,945 25,000 (1) 643,293
Deferred income - service contracts 751,271 751,271
----------- -------- ----------- -----------
Total current liabilities 1,833,609 765,779 (737,834) 1,861,554
Class A Note 100 (100) (3) 0
Deferred income - service contracts 219,847 219,847
----------- -------- ----------- -----------
Total liabilities 2,053,456 765,879 (737,934) 2,081,401
----------- -------- ----------- -----------
Shareholders' equity:
Common stock ; shares outstanding
Historical; IRIS; 5,041,780
Historical; LDA; 193,464
Pro forma combined; 5,536,780 50,418 1,935 (1,935) (1) 55,368
4,950 (1)
Additional paid in capital 27,007,581 1,967,731 (1,967,731) (1) 30,102,631
3,095,050 (1)
Treasury stock (453,386) (453,386)
Unearned compensation (81,428) (81,428)
Accumulated deficit (16,114,074) (2,100,171) 2,100,171 (1) (19,858,528)
(3,255,505) (2)
(488,949) (4)
----------- -------- ----------- -----------
Total shareholders' equity 10,409,111 (130,505) (513,949) 9,764,657
----------- -------- ----------- -----------
Total liabilities and
shareholders' equity $12,462,567 $635,374 ($1,251,883) $11,846,058
----------- -------- ----------- -----------
----------- -------- ----------- -----------
</TABLE>
See accompanying notes
<PAGE>
INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
AND LDA SYSTEMS, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS - UNAUDITED
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
IRIS LDA (5) Adjustments Combined
---- ------- ----------- --------
<S> <C> <C> <C> <C>
Sales of workstations and related supplies $7,430,489 $7,430,489
Service contracts 2,153,076 2,153,076
Research and development revenues 1,078,378 ($1,069,770) (3) 8,608
----------- ----------- ----------- -----------
Net revenues 10,661,943 (1,069,770) 9,592,173
----------- ----------- ----------- -----------
Cost of goods from workstations and supplies 2,922,084 2,922,084
Cost of goods from service contracts 1,752,031 1,752,031
Cost of research and development revenues 1,258,405 (1,249,770) (7) 8,635
----------- ----------- ----------- -----------
Cost of goods sold 5,932,520 (1,249,770) 4,682,750
----------- ----------- ----------- -----------
Gross margin 4,729,423 180,000 4,909,423
Marketing and selling expenses 1,736,713 1,736,713
General and administrative expenses 1,392,785 $125,652 (43,964) (4) 1,474,473
Research and development expenses 321,391 1,084,151 (1,069,770) (3) 1,585,542
1,249,770 (7)
----------- ----------- ----------- -----------
Operating income 1,278,534 (1,209,803) 43,964 112,695
Interest income 162,112 18,720 180,832
Other income (expense) 111,240 (19,000) 92,240
----------- ----------- ----------- -----------
Income before income taxes 1,551,886 (1,210,083) 43,964 385,767
Income taxes 79,000 (25,000) (6) 54,000
----------- ----------- ----------- -----------
Net income (loss) $1,472,886 ($1,210,083) $68,964 $331,767
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net income (loss) per share $0.28 ($8.19) $0.06
----------- ----------- -----------
----------- ----------- -----------
Weighted average shares and common
equivalent shares outstanding 5,323,108 147,790 5,818,108
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying notes
<PAGE>
INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
AND LDA SYSTEMS, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS - UNAUDITED
FOR THE THREE MONTHS ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
Assets IRIS LDA (5) Adjustments Combined
---- ------- ----------- --------
<S> <C> <C> <C> <C>
Sales of workstations and related supplies $1,889,816 $1,889,816
Service contracts 567,425 567,425
Research and development revenues 274,360 ($120,067) (3) 154,293
----------- ----------- ----------- -----------
Net revenues 2,731,601 (120,067) 2,611,534
----------- ----------- ----------- -----------
Cost of goods from workstations and supplies 774,875 774,875
Cost of goods from service contracts 417,692 417,692
Cost of research and development revenues 319,360 (165,067) (7) 154,293
----------- ----------- ----------- -----------
Cost of goods sold 1,511,927 (165,067) 1,346,860
----------- ----------- ----------- -----------
Gross margin 1,219,674 45,000 1,264,674
Marketing and selling expenses 568,347 568,347
General and administrative expenses 338,732 $27,205 (14,196) (4) 351,741
Research and development expenses 101,178 166,731 (120,067) (3) 312,909
165,067 (7)
----------- ----------- ----------- -----------
Operating income 211,417 (193,936) 14,196 31,677
Interest income 82,048 4,882 86,930
Other income (expense) 31,510 (5,000) 26,510
----------- ----------- ----------- -----------
Income before income taxes 324,975 (194,054) 14,196 145,117
Income taxes 15,000 15,000
----------- ----------- ----------- -----------
Net income (loss) $309,975 ($194,054) $14,196 $130,117
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net income (loss) per share $0.06 ($1.00) $0.02
----------- ----------- -----------
----------- ----------- -----------
Weighted average shares and common
equivalent shares outstanding 5,570,691 193,464 6,065,691
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying notes
<PAGE>
INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
AND LDA SYSTEMS, INC., COMBINED
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
The aggregate purchase price (consisting of the fair value of IRIS shares
issued, transaction expenses and liabilities assumed by IRIS) will be allocated
to assets acquired based on their estimated fair values at the date the
acquisition is consummated. For purposes of the pro forma balance sheet, the
value of IRIS common stock assumed to be issued is based on a per share price of
$6.25. The estimated aggregate amount to be allocated to the assets acquired
consists of:
IRIS common stock issued to LDA stockholders $3,100,000
Estimated costs and expenses 25,000
Liabilities assumed, excluding intercompany balances ($762,934) 2,945
-----
Total $3,127,945
----------
----------
The actual allocation will be based on the estimated fair value of LDA's
tangible and intangible assets at the date of purchase. For purposes of the pro
forma balance sheet, the preliminary allocation has been estimated as follows:
Assets presently recorded by LDA $635,374
Elimination of intercompany balances (762,934)
In-process research and development 3,255,505
----------
Total $3,127,945
----------
----------
Pro Forma Adjustments:
(1) Issuance of IRIS common stock to LDA stockholders, assumption of LDA
liabilities and allocation of purchase price to the tangible and intangible
assets acquired, as described above.
(2) Write-off of acquired in-process research and development at the
acquisition date. This adjustment is excluded from the pro forma
statements of operations as it is a nonrecurring item.
(3) Elimination of intercompany items.
(4) Write-off of deferred warrant costs, and elimination of related
amortization, in connection with warrants issued in conjunction with the
LDA unit offering. The write-off of deferred warrant costs is excluded
from the pro forma statements of operations as it is a nonrecurring item.
(5) For purposes of the pro forma combined statements of operations, in order
to conform LDA's historical statements of operations to IRIS's fiscal year,
LDA's historical financial statements have been recast from a June 30
fiscal year end to a calendar year end, by adding the net loss of $759,452
for the six months ended December 31, 1994 and subtracting the net loss of
<PAGE>
$341,452 for the six months ended December 31, 1993 from the loss incurred
for the fiscal year ended June 30, 1994.
(6) Adjustment to the provision for income taxes to reflect the tax benefit of
LDA's loss.
(7) To reclass research and development costs incurred by IRIS under the
development agreement with LDA to research and development expense.
