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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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): April 28, 1999
INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 1-11181 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
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Item 5. Other Events.
In September 1995, the Company and Poly U/A Systems Inc., a
Company-sponsored research and development entity ("Poly UA"), entered into a
joint development project for the development of several new products to enhance
automated urinalysis using the Company's technology. Poly UA funded most of the
cost of the project with the net proceeds from a 1995 private placement of
units, each unit consisting of shares of Poly UA common stock and warrants to
purchase common stock of the Company. The project ultimately yielded, among
other things, certain new technology for improving automated analysis of various
compositions in urine. Under the terms of the project, the Company has the right
without further payment to use this technology for enhancing The Yellow IRIS
family of urinalysis workstations, but the Company has to acquire Poly UA to use
the new technology in stand-alone devices. IRIS expects to begin incorporating
some of this new technology into its workstations before the end of this year.
The Company had an option until November 29, 1998 to acquire all of the
common stock of Poly UA for an aggregate price of $5.1 million, payable in cash
or shares of the Company's common stock. The Company ultimately decided not to
exercise its option and instead entered into discussions to acquire Poly UA at a
price below the option price. Subsequently, certain shareholders of Poly UA
threatened in writing to file a lawsuit if the Company failed to purchase Poly
UA for an amount substantially equal to the $5.1 million option price. Primarily
to avoid litigation which, regardless of its merits, could adversely affect the
Company's ability to negotiate strategic transactions, the Company entered into
a letter of intent on April 28, 1999 with Poly UA to settle the matter for a
package of Company securities with an estimated value of up to $1.5 million. The
Company plans to record this amount as litigation settlement expense in the
first quarter of 1999.
Under the terms of the proposed settlement, the Company will make a
tender offer for all of the outstanding stock of Poly UA which consists of
256,000 shares of common stock. The Company will offer to pay for each share of
Poly UA common stock (and a signed release of claims from the tendering
stockholder) a package of the Company's securities consisting of the following:
(a) 3 shares of the Company's common stock, (b) 1 share of a new series of
callable preferred stock with a liquidation preference of $3 per share and no
coupon, and (c) a three-year warrant to purchase 3 shares of common stock, 1.5
shares at $1.00 per share and 1.5 shares at $2.00 per share. The "callable"
feature of the preferred stock will entitle the Company to convert the preferred
stock at any time into a number shares of common stock equal to the liquidation
value divided by the market price of the common stock at the time of conversion
(subject to a minimum value of $2.00 per share of common stock). The preferred
stock will automatically be converted under the same formula at the end of three
years if not converted sooner by the Company. The Company will also have the
right to redeem any unexercised warrants for a nominal amount of cash any time
after the 30-day average closing price of the common stock exceeds 200% of the
warrant exercise price.
If all of the Poly common stock is tendered and accepted, the Company
would issue an aggregate of (i) 768,000 shares of common stock, (ii) 256,000
shares of callable preferred stock (with an aggregate liquidation preference of
$768,000), and (iii) warrants to purchase 768,000
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shares of common stock (half at $1.00 per share and half at $2.00 per share).
The tender offer will be subject to customary conditions, as well as the tender
of shares constituting at least 90% of the outstanding stock of Poly and signed
releases of all claims from each tendering stockholder. Based on its
understanding that all of the Poly UA stockholders are "accredited investors,"
the Company plans to conduct the tender offer as a private placement exempt from
the registration requirements of the Securities Act of 1933 based on Regulation
D. However, the Company plans to grant the tendering stockholders the right to
demand one registration for public resales of the shares of common stock issued
in the tender offer as well as any shares of common stock subsequently issued
upon conversion of the preferred stock or exercise of the warrants.
This Form 8-K contains forward-looking statements made in reliance upon
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Forward-looking statements are inherently subject to uncertainties and
other factors which could cause actual results to differ materially from the
forward-looking statement. For example, the settlement with Poly UA is subject
to the completion of mutually acceptable documentation and final approvals by
the Boards of both companies; the tender offer may not be accepted by the
necessary number of Poly U/A stockholders to meet the 90% condition;
dissatisfied Poly U/A stockholders could still file a lawsuit which could
adversely affect IRIS; and the first contemplated enhancements may not be
incorporated into The Yellow IRIS workstations as quickly as expected, or even
at all, if their implementation proves difficult. The settlement could also be
affected by material changes in the Company's stock price, results of operations
or financial condition. The Company refers interested persons to its most recent
Annual Report on Form 10-K and its other SEC filings for a description of
certain additional uncertainties and factors which may affect forward-looking
statements.
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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.
Dated: May 7, 1999 By: /s/ MARTIN S. MCDERMUT
______________________________
Martin S. McDermut
Vice President - Finance and
Administration, Chief Financial
Officer and Secretary
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