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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 31, 1998
UNIHOLDING CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 0-09833 58-1443790
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(State or other jurisdiction (Commission (IRS
Employer of incorporation) File Number)
Identification No.)
96 Spring Street, New York, New York 10012
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 219-9496
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Item 5. Other Events
On or about March 31, 1998, UniHolding Corporation ("UniHolding") mailed to
its shareholders an Information Statement describing the previously announced
spin-off of Global Unilabs Clinical Trials Limited, a British Virgin Islands
corporation ("GUCT") which owns the clinical trials business theretofore owned
by UniHolding. The aforementioned Information Statement is attached as an
Exhibit to this Report and is incorporated herein by reference.
Item 7. Financial Statements and Exhibits
(c) Exhibits.
(20) Information Statement mailed by UniHolding Corporation on or about
March 31, 1998.
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.
UNIHOLDING CORPORATION
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(Registrant)
By: /s/BRUNO ADAM
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Bruno Adam, Chief Financial Officer
Date: March 31, 1998
EXHIBIT (20)
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INFORMATION STATEMENT
GLOBAL UNILABS CLINICAL TRIALS LIMITED
Common Stock
(par value $0.15)
This Information Statement is being furnished by UniHolding Corporation
("UniHolding") in connection with the distribution (the "Distribution") to
holders of record of UniHolding Capital Stock at the close of business on
February 9, 1998 of one share of common stock, par value $0.15 (the "Common
Stock"), of Global Unilabs Clinical Trials Limited ("GUCT" or the "Company"),
for each share of UniHolding Capital Stock held of record as of that date. See
"The Distribution - Manner of Effecting the Distribution".
The Company was, until the Distribution, a wholly-owned subsidiary of
UniHolding, through Unilabs Group Limited, a British Virgin Islands corporation
wholly-owned by UniHolding ("UGL"). As of the date hereof, GUCT owns all of the
businesses and assets of, and is responsible for all of the liabilities
associated with, the former UniHolding's clinical trials testing for the
pharmaceutical industry (the "Clinical Trials Division") business.
The Distribution was effective on the Distribution Date. No
consideration was to be paid by UniHolding's shareholders for shares of GUCT
Common Stock. There is no current public market for the GUCT Common Stock, and
it is currently not possible to predict whether or when such a market might
exist.
NO VOTE OF SHAREHOLDERS IS REQUIRED IN CONNECTION WITH THIS DISTRIBUTION. NO
PROXIES ARE BEING SOLICITED, AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS INFORMATION STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THIS INFORMATION STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES.
The date of this Information Statement is March 27, 1998.
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TABLE OF CONTENTS
Page
Summary...................................................................3
Introduction..............................................................6
Business of GUCT..........................................................7
General.................................................................7
Business and Present Structure..........................................8
Human Resources and Management..........................................9
Industry Overview......................................................10
Competitive Advantages.................................................11
Quality Assurance......................................................12
Growth Opportunities...................................................12
Properties.............................................................12
Competition............................................................13
Government Regulation..................................................13
Legal Proceedings......................................................14
Selected Unaudited Consolidated Financial Data...........................15
Financing................................................................16
Bank Credit Facilities.................................................16
Long-Term Debt.........................................................16
The Distribution.........................................................17
Reasons for the Distribution...........................................17
Manner of Effecting the Distribution...................................17
Results of the Distribution............................................17
Relationship between UniHolding and GUCT after the Distribution........18
Certain U.S. Federal Income Tax Consequences of the Distribution.......19
Management of GUCT.......................................................20
Directors..............................................................20
Executive Officers and Senior Operating Management.....................21
Employment Agreements..................................................22
Aggregate Compensation.................................................22
Pension Benefits.......................................................22
Stock Options..........................................................22
Stock Ownership of Certain Beneficial Owners,
Executive Officers and Directors....................................23
Description of GUCT Capital Stock........................................27
GUCT Common Stock......................................................27
GUCT Preferred Stock...................................................27
British Virgin Islands Laws and Regulations............................28
Dividends..............................................................28
Transfer Agent and Registrar...........................................28
Listing and Trading of GUCT Common Stock...............................28
Indemnification of Directors.............................................29
Available Information....................................................30
Management's Discussion and Analysis.....................................31
Index to Financial Statements...........................................F-1
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INFORMATION STATEMENT
This Information Statement is being furnished solely to provide information
to shareholders of UniHolding who receive shares of GUCT Common Stock in the
Distribution. It is not, and is not to be construed as, an inducement or
encouragement to buy or sell any securities of UniHolding or GUCT. The
information contained in this Information Statement is believed to be accurate
as of the date set forth on its cover. Changes may occur after that date, and
neither UniHolding nor GUCT will update the information except in the normal
course of their respective public disclosures.
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SUMMARY
This summary is qualified by the more detailed information set forth
elsewhere in this Information Statement, which should be read in its entirety.
Unless the context otherwise requires, (i) references in this Information
Statement to UniHolding shall include UniHolding's subsidiaries, (ii) references
to GUCT or the Company shall include GUCT's subsidiaries, and (iii) references
to GUCT or the Company prior to the Distribution Date shall refer to the
clinical trials testing business, as heretofore operated by UniHolding.
THE DISTRIBUTION
Distributing Company....................................UniHolding Corporation
Global Unilabs
Clinical Trials
Limited .... Global Unilabs Clinical Trials Limited, a British Virgin
Islands corporation ("GUCT"), is the 71% shareholder in
Unilabs Clinical Trials International, Inc., a Delaware
corporation ("UCTI"), which, through its principal operating
subsidiaries, Unilabs Clinical Trials Limited, a United
Kingdom corporation ("UCT"), and NDA Clinical Trials
Services, Inc., a Delaware corporation based in New York
("NDA"), presently generates over $12 million in annual
sales of testing services to the pharmaceutical industry in
connection with clinical trials of new drugs.
Distribution Ratio- One share of GUCT Common Stock for each share of UniHolding
Capital Stock. See "The Distribution - Manner of Effecting
the Distribution". No payment need be made by UniHolding
shareholders for the shares of GUCT Common Stock to be
received by them, nor will they be required to surrender or
exchange UniHolding Capital Stock in order to receive GUCT
Common Stock.
Shares to be Approximately 7.9 million shares of GUCT Common Stock, based
Distributed on the number of shares of UniHolding Capital Stock issued
as of February 9, 1998. UniHolding will retain no ownership
of Common Stock in GUCT.
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UniHolding will, through UGL, retain ownership of all of the
GUCT Preferred Stock.
Conditions to None.
the Distribution
Trading Market and- There is currently no public market for the GUCT Common
Restrictions Stock, and it is currently not possible to predict whether
such a market will ever exist. The Company has restricted
transfer of shares of GUCT Common Stock until such time as a
Registration Statement on Form 20-F is filed and declared
effective.
Record Date.........February 9, 1998.
Distribution Agent..American Securities Transfer, Inc.
Distribution Date February 27, 1998. UniHolding transfers shares of GUCT to
the Distribution Agent for the benefit of the record holders
of UniHolding Capital Stock as of Record Date, and shares of
GUCT Common Stock are distributed to UniHolding shareholders
in book-entry form. The Distribution Agent will mail account
statements reflecting ownership of shares of GUCT Common
Stock to such holders of record of UniHolding Capital Stock.
See "The Distribution- Manner of Effecting the
Distribution."
Tax Consequences UniHolding has concluded that the Distribution will be
taxable for U.S. Federal income tax purposes. However, it
has also concluded that the Distribution should in effect
generate no more than nominal tax liability for U.S. Federal
income tax purposes. See "The Distribution - Certain U.S.
Federal Income Tax Consequences of the Distribution" for a
more detailed description.
Reasons for UniHolding's management and Board of Directors have
the Distribution concluded that the Distribution is in the best interests of
UniHolding and its shareholders. They believe that the
Distribution will (i) allow UniHolding to focus its
attention on its Diagnostic Laboratory business, by creating
a separate company focused on clinical trials testing for
the pharmaceutical industry, and (ii) permit UniHolding and
GUCT to offer management incentives more directly tied to
the performance of their respective businesses. UniHolding
management also believes that a separate clinical trials
testing company with strategies, organizational goals and
employee incentives more narrowly focused will be best
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able to maximize its own financial performance.
Relationship be- After the Distribution, UniHolding will have no ownership
tween UniHolding interest in GUCT Common Stock, while UniHolding will retain
and GUCT after ownership of GUCT Preferred Stock. GUCT will be an
the Distribution independent company owned by the same shareholders as
UniHolding. While UniHolding and GUCT presently have, and
may continue to have, common directors, the companies will
be managed in an independent manner by independent officers.
UniHolding and GUCT have entered, and will enter, into
certain agreements governing their relationship subsequent
to the Distribution. The agreements provide for each party
to make certain services, records and personnel available to
the other. They also provide for allocation of assets,
liabilities and responsibilities between them with respect
to employee benefits and compensation and for allocation of
tax and certain other liabilities between them for periods
prior to and after the Distribution.
GUCT Dividend The payment and level of cash dividends by GUCT after the
Policy Distribution will be subject to the discretion of the GUCT
Board of Directors. Dividend decisions will be based on a
number of factors including GUCT's operating results and
financial requirements on a stand-alone basis as well as
credit agreements and legal restrictions relating thereto.
See "Description of GUCT Capital Stock - Dividends."
Principal Office 207-208 Neptune House, Marina Bay, Gibraltar
of GUCT
SHAREHOLDERS WITH QUESTIONS MAY CALL:
For questions relating to the Distribution and delivery of GUCT Common Stock
certificates, call Investors Relations, at:
+ 350 45 460
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NO PERSON IS AUTHORIZED BY UNIHOLDING OR GUCT TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS INFORMATION STATEMENT,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED.
INTRODUCTION
Global Unilabs Clinical Trials Limited, a British Virgin Islands
corporation originally organized in 1995, is currently a wholly-owned subsidiary
of Unilabs Group Limited which in turn is a wholly-owned subsidiary of
UniHolding Corporation. The management and Board of Directors of UniHolding,
after careful review and analysis, have concluded that the Distribution is in
the best interests of UniHolding and its shareholders. They believe that the
Distribution will (i) allow UniHolding to focus its attention on its Diagnostic
Laboratory business, by creating a separate company focused on clinical trials
testing for the pharmaceutical industry, and (ii) permit UniHolding and GUCT to
offer management incentives more directly tied to the performance of their
respective businesses. UniHolding management also believes that a separate
clinical trials testing company with strategies, organizational goals and
employee incentives more narrowly focused will be best able to maximize its own
financial performance. To effect the Distribution, UniHolding will distribute
all the outstanding Common Stock of GUCT to UniHolding shareholders.
Prior to the Distribution, GUCT's debt to UGL, approximating $11 million,
together with $9 million of the GUCT Common Stock, has been converted into 2
million shares of GUCT Preferred Stock, par value $10 each. The GUCT Preferred
Stock shall have essentially no voting rights and they shall not be convertible
into GUCT Common Stock. In addition, the GUCT Preferred Stock shall be
redeemable at GUCT's option at any time during the first five years at a
redemption price equal to its then face value.
Upon completion of the Distribution, GUCT will be an independent company
with approximately $12 million in annual sales and about 190 employees. In the
fiscal year ended May 31, 1997, GUCT's worldwide sales exceeded $ 7.0 million.
GUCT is expected to be the only company dedicated exclusively to clinical trials
with centralized clinical laboratories active on a global scale, with operations
in the United States, Europe and Asia. This is expected to be a distinctive
competitive advantage for the pharmaceutical firms which are seeking a single,
global focused solution to their clinical trials needs. In addition, in spite of
its relatively recent formation, the Company already has a track record of
operating innovation and substantial areas of growth potential.
GUCT's business, its operations, management and its strategy is described
below, followed by a discussion of the industry and how GUCT fits into the
industry today, and then by a discussion of the competitive advantages available
to GUCT. See "Business of GUCT."
From time to time, in both written and oral statements, GUCT and UniHolding
may discuss expectations regarding GUCT's future performance. These
"forward-looking statements" are based on currently available competitive,
financial and economic data and GUCT's operating plans. They are also inherently
uncertain and investors must recognize that actual results could turn out to be
significantly different than what was expected. Among the many factors that can
cause actual results to differ are economic and political conditions in the
countries and territories where GUCT operates, the impact of such conditions on
consumer spending, pricing pressures resulting from competitive discounting, new
services and concept development by industry competitors, and fluctuations in
reagent and transportation prices.
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BUSINESS OF GUCT
General
GUCT became a UniHolding wholly-owned subsidiary in fiscal 1996, and, in
July 1996, acquired from UniHolding the UniHolding assets related to its
newly-created Clinical Trials Division. The formation of such assets can be
summarized as follows.
On March 1, 1995, UniHolding entered into a Cooperation Agreement, a
Licensing Agreement and a Marketing Agreement (together referred to as the "NDA
Agreements") with NDA Clinical Trials Services Inc., a Delaware corporation
based in New York ("NDA"). The NDA Agreements were intended to provide a global
product of laboratory testing services to the pharmaceutical industry in
clinical evaluations in the United States and Europe utilizing similar
procedures in testing and data management. UniHolding had established two new
European subsidiaries to undertake the laboratory testing for clinical
evaluations in Europe, Unilabs Clinical Trials Limited, a United Kingdom
subsidiary ("UCT"), and UCT Software SA ("UCTS", formerly Pharmasoft SA), a
Swiss subsidiary. Such service is provided using laboratory facilities in
London, United Kingdom, and in Farmingdale, New York. UCTS is a Swiss company
and currently is a wholly-owned subsidiary of UCTI established for the purpose
of maintaining and updating the software systems and support services necessary
for the clinical trials operations performed by UCT. On June 1, 1996, UCT
acquired the clinical trials business thus far performed by Unilabs Clinical
Pathology Limited, a United Kingdom corporation controlled by UniHolding
("UCP"), for a consideration comprising a note of $610,000 and the establishment
of a five-year agreement between UCT and UCP for the provision of testing and
administrative services by UCP and the renting of space in UCP's facilities. The
price for the subcontracting of testing was fixed such that UCP would earn a
profit over the period of the contract which, together with the $610,000 note,
equaled the fair value of the business as of June 1, 1996. On December 31, 1997,
such subcontracting agreement was terminated by mutual agreement between UCP and
UCT owing to the growing complexity of the laboratory accreditation and quality
control needs specific to UCT. Among the provisions for such termination, UCP
transferred part of its laboratory staff, equipment and space to UCT with the
result that such contract termination would be financially neutral for both UCT
and UCP. As of October 16, 1995, UniHolding entered into a Stock Purchase
Agreement and an Option Agreement with NDA. Under these Agreements, UniHolding
acquired 17% of NDA's capital through the purchase of newly-issued shares,
together with an option to increase its stake in NDA to 30% on or before May 31,
1998. The consideration for the acquisition of 17% was $1,188,000 paid in cash
at closing. Simultaneously, UCT granted to NDA and NDA's stockholders (excluding
UniHolding), an option to subscribe to new shares of UCT. This option was
contingent upon UniHolding exercising its option on 13% of NDA's equity. As of
July 23, 1996, the reciprocal options on 13% of NDA's equity and on new shares
of UCT were terminated by mutual consent, and UniHolding transferred the assets
of its Clinical Trials Division, consisting of 100% of the equity of UCT, 100%
of the equity of UCTS and 17% of the equity of NDA to its newly formed
wholly-owned subsidiary GUCT in exchange for 217,000 ordinary shares
representing all of the issued and outstanding shares of GUCT. The ownership of
the 217,000 shares of GUCT was then transferred to UGL.
Also on July 23, 1996, UniHolding, through GUCT, made a loan of $700,000 to
NDA. From August 1996 through January 1997, UniHolding made further loans to
NDA, totaling $1.2 million. GUCT entered into and closed a Master Combination
Agreement ("UCTI Agreement") dated as of January 31, 1997 with NDA and the
stockholders of NDA. Pursuant
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to the UCTI Agreement, GUCT and the NDA stockholders contributed their
respective holdings in NDA (aggregating 100%) and GUCT contributed its 100%
holdings in UCT and UCTS to a newly-formed Delaware corporation, UCTI. GUCT also
converted an aggregate of approximately $1.9 million of debt of NDA and
approximately UK pounds 0.3 million of debt of UCT into equity of NDA and UCT
respectively, which were then exchanged for stock of UCTI. Further, GUCT
contributed approximately $2.2 million in cash to UCTI, which, together with the
other contributions of stock, caused GUCT's ownership in UCTI to be
approximately 70% at January 31, 1997. In May 1997, UCTI offered $7.1 million of
convertible notes to all of its shareholders in proportion to their share of
UCTI's equity. GUCT subscribed a note of $5.0 million corresponding to its
approximate 70% ownership. Five other UCTI shareholders subscribed to a total of
$0.3 million, thus leaving an unsubscribed balance of $1.8 million. Such balance
was offered in a second round of subscriptions to those shareholders who had
subscribed to the first round. Accordingly, GUCT subscribed an additional $1.7
million, and one other shareholder subscribed to the balance of $0.1 million.
The notes bear interest at the rate of 12% per annum, payable annually, and the
principal is payable on May 16, 2000. Interest and principal may be repaid by
UCTI, at the election of holders of notes representing at least 66.7% of the
aggregate outstanding principal amount, either in cash or by the issuance of
shares of UCTI common stock. On November 24, 1997, GUCT advanced a further
amount of $0.2 million on similar terms. All the above loans and advances made
by GUCT have been financed by loans and advances made to GUCT by UGL, its direct
shareholder.
Business and Present Structure
The Company believes that its Clinical Trials business will be subject to
substantial development in the near future. The Company believes that there will
be intense competition in this industry area in Europe, but equally believes
that its new concept and the stronger structure resulting from the merger of its
operations with NDA will offer it a competitive advantage.
UCTI is dedicated exclusively to providing central laboratory testing and
project support services for clinical trials to pharmaceutical company sponsors,
clinical research organizations (CROs) and investigating clinicians on a
uniform, global basis. UCTI's services are provided in Europe through UCT's
laboratory facility in London and in the United States through NDA's laboratory.
Both laboratories are fully accredited and provide automated same-day
reports with reference ranges in accordance with customers' wishes. They operate
under common operational procedures and utilize similar or comparable technology
producing comparable laboratory data. This data is presented to sponsors through
the use of a common, specifically designed software program providing a protocol
management system.
The UCTI service for Europe also includes a regional network of Site
Service Agents (SSA) providing investigator support locally. UCTI currently
employs 9 such SSAs around Europe and the Far East.
Most modern prescription drugs are born in the research laboratories of
pharmaceutical manufacturers. But before they may be sold, they must undergo a
rigorous, step-by-step approval process overseen by government agencies such as
the U.S. Food and
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Drug Administration (FDA). In the U.S., for instance, the process begins only
after the new drug has been successfully tested on animals. Armed with the test
results, sponsors of the product submit an Investigational New Drug (IND)
application to the FDA. In the absence of any comment from the FDA, human
clinical trials may begin 30 days after the IND is filed.
The clinical trials process consists of three, and sometimes four, phases:
Phase I examines the drug's clinical pharmacology; its effects on the body,
preferred modes of administration and dosage ranges. These tests are usually
done on small numbers (20 to 80) of healthy volunteers.
Phase II tests the safety and efficacy of the drug at expected dosage
levels among a few patient volunteers who have the medical condition the drug is
designed to treat.
Phase III trials are broad studies involving hundreds or even thousands of
patients, where new drugs are compared with placebos and with existing similar
drugs. This is the busiest and most intensive part of a clinical research
program and is the pivotal study for approval where researchers are gathering
further information on a drug's benefits and risks.
Phase IV trials are normally post-marketing tests mandated either for some
exceptionally potent or complex drugs to gather additional data on their effects
in the general population, or marketing studies aimed at further comparing a
drug with its competitors or extending a drug's range of indications.
After Phase III trials, the manufacturer submits a New Drug Application. In
the United States, it is only when the FDA has approved this Application that
the drug may be sold to the public. The entire approval process from initial
submission of the IND to final approval of the New Drug Application takes an
average of five years.
The process is generally similar in Europe but must typically be repeated
for each individual country (and must sometimes be performed at a regional
level). New European regulations aimed at simplifying the process (by allowing
one single submission for the whole EEC to the European Medical Evaluation
Agency) have been proposed, and the EMEA is expected to be by 1999 the only
European licensing authority.
Because of the importance and complexity of clinical trials (a typical
submission to the FDA can run to thousands of pages), many manufacturers employ
outside specialists to perform the trials. Often, the manufacturer hires a
clinical research organization (CRO) to manage the trial. The CRO, in turn,
hires clinical laboratories which will perform the actual tests required by the
trial protocol. Clinical laboratory data typically represents between forty and
sixty percent of the total data submitted for a new drug application. The final
link is a network of investigators, usually physicians, who work directly with
patients, monitoring their medical status and gathering clinical samples for
testing. Data management capacity is thus an essential factor in the whole drug
approval process.
Human Resources and Management
As a pure holding company, GUCT has no personnel and relies entirely on the
management of its majority-owned subsidiary, UCTI. Led by Paul Hokfelt and David
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Deutsch, UCTI has a strong management team with a proven track record in the
industry of clinical trials for the pharmaceutical industry.
Mr. Hokfelt has been Chief Executive Officer of UCTI since August 1997. He
has also served as Chief Operating Officer of UniHolding where he played an
important role in the growth of the Diagnostic Laboratory Division. Paul Hokfelt
was appointed Executive Vice President and Chief Operating Officer of UniHolding
as of June 1, 1995. In connection with the Distribution, Mr. Hokfelt resigned
from these duties as of January 31, 1998. Mr. Hokfelt has been a Director of
GUCT from its inception in 1996 until December 31, 1997 and has been a Director
of UCTI since its inception in 1996. He was the General Manager of UniHolding's
Swiss operations from 1989 to 1994, where he was instrumental in growing the
business and improving profitability. From 1987 to 1989, Paul Hokfelt was a
self-employed consultant and the manager of a finance company acquired by Swiss
Holdings in 1988. From 1978 to 1987, he held various management positions with
various financial institutions, including the Finans Skandic and Barclays Bank
groups.
David Deutsch most recently served as President of NDA and was appointed
President of UCTI in January 1997 upon the merger of NDA into UCTI. Mr. Deutsch
has twenty years' experience in the clinical laboratory business, running his
own New York laboratory company from 1974 to 1990 when he sold it and started
NDA.
See "Management of GUCT - Executive Officers and Senior Operating
Management" for a description of the experience of other members of the GUCT
management team.
GUCT believes that high quality, customer-focused central laboratory
management is critical to its long-term success. It also believes that its
fast-expanding position, strong results-oriented and recognition culture, and
various incentive programs help attract and retain highly motivated individuals
who are committed to providing superior customer satisfaction and outstanding
business results.
At the beginning of February 1998, GUCT employed approximately 190 persons.
Approximately 50% of GUCT's employees are employed in the United States, and the
rest in Europe, primarily the United Kingdom. The Company believes that it
provides working conditions and compensation that compare favorably with those
of its principal competitors. None of GUCT's U.S. employees are covered by
collective bargaining agreements. GUCT's non-U.S. employees are primarily
subject to United Kingdom labor laws. The Company has never experienced any work
stoppages, slow-downs, or other material labor problems and believes its
relations with its employees are satisfactory.
Industry Overview
The U.S. market for Phases II and III clinical trial laboratory testing is
estimated to be approximately $660 million. The market for laboratory testing
and data management services is expected to grow at the same pace as the
underlying U.S. market for pharmaceutical research and development expenditures;
whereas the centralized laboratory testing segment is expected to grow more
rapidly due to the continuing centralization trend.
The European and Asian markets for Phases II and III clinical trial
laboratory testing are estimated to be approximately $1.4 billion. The European
and Asian markets for laboratory testing and data management services are
expected to continue growing more
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rapidly than in the U.S. based on growth in
the underlying market for pharmaceutical research and development expenditures,
whereas the centralized laboratory testing segment is expected to grow even more
rapidly due to the continuing centralization trend.
The expected European growth is explained by a shift from U.S. to
European-based clinical trials as a result of the approval of European Good
Clinical Practices (GCPs) in 1991 and the introduction by a growing number of
countries of Good Laboratory Practices (GLPs). These programs, which make it
possible for pharmaceutical companies to obtain FDA drug approval in the U.S.
with European clinical trials data, is expected to cause some of the European-
based pharmaceutical companies to shift the geographical focus of their clinical
trial activity towards Europe because of the logistical benefits and cost
savings. This shift is also expected to enable a reduction in the global number
of patients submitted for testing of a new drug, thus reducing costs.
Competitive Advantages
Focused Concept : UCTI is expected to be the only company
dedicated exclusively to centralized clinical laboratory testing for the
pharmaceutical industry on a global basis. Other competitors (see below
"Competition") either lack the global presence or are part of larger CRO
or clinical laboratory groups and may lack the focus which UCTI's single
dedication provides.
Worldwide Capabilities : UCTI has global delivery capability
through its own operations in the U.S. and Europe and its partnership with
Melbourne Pathology in Australia and is thus able to provide unique,
customized solutions for transcontinental clinical trials. To reinforce
this global presence through ensuring the control of multi-national
studies, UCTI has pioneered the concept of Site Service Agents in Europe
and Asia to support local investigating physicians.
Management Information Systems : UCTI has developed its advanced
proprietary Protocol Administration Computer System (PACS), a highly
flexible system which allows delivery of fully combinable data and
multi-lingual, customized reports to investigating physicians or
pharmaceutical sponsors, as well as its advanced proprietary Remote data
Access System (REMACS), a graphics oriented Internet-based program which
allows pharmaceutical sponsors to have instant access to summary protocol,
patient enrollment and testing information.
Proven Operating Record : whilst GUCT has experienced, and will
continue to incur, substantial start-up losses as it establishes its
global capabilities, it has demonstrated its operating record in serving
demanding pharmaceutical clinical trials in America, Europe and Asia for
some of the world's leading pharmaceutical companies and has already
reached preferred provider status with a number of those.
Marketing Competence : UCTI markets a common service in America
and Europe through a highly experienced sales and marketing staff which
has been able to capitalize on the company's focused yet flexible clinical
trials approach to achieve a significant track record.
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Quality Assurance.
UCTI has devised a system to ensure that its two laboratories operate
as one, including the use of instruments and reagents from the same
manufacturer. Identical operating and validation procedures have been
instituted. Further, quality control data is transmitted electronically between
sites on a daily basis to assure each site of the other's performance.
External quality control data from the College of American Pathologists
(CAP) is used to monitor bias. The London laboratory has British CPA and GLP
accreditation, as well as CAP accreditation. The U.S. laboratory is also
accredited by CAP. A laboratory services coordinator ensures close adherence to
all these criteria. All the procedures guarantee the high quality of all results
and allow them to be combined into a trial database as if they had been
generated from one laboratory.
Growth Opportunities
Backlog
Certain of UCTI's contracts are performed over an extended period of time
which may be one to three years. With respect to such studies or projects, UCTI
maintains an order backlog to track anticipated net revenues for such work that
has yet to be earned. Backlog is principally calculated with respect to work to
be performed pursuant to letters of intent and contracts. Once work under a
letter of intent or contract commences, net revenue is recognized over the life
of the contract as the actual work is performed.
Backlog is a meaningful tool for management as it provides both an
excellent indicator of the growth trend and, owing to the trials' average
duration, helps management in planning expansion. However, no assurance can be
given that the Company will be able to realize all or any net revenue included
in backlog. Further, the Company believes that its aggregate backlog as of any
date is not necessarily a meaningful indicator of future results. Subject to the
above discussion, the Company's aggregate backlog was approximately $29 million
as of February 20, 1998.
International Growth Opportunities
UCTI aims at further expanding its global coverage through the
establishment of a laboratory presence in South Africa and India, either
directly or through a joint venture with a strong local partner. It will also
complete the installation of its PACS system in Australia to allow full
integration of the local laboratory data for global submission. Finally, UCTI
will expand its network of Site Service Agents as and when required.
Properties
All of the laboratory facilities have been improved and adapted for the
sole purpose of providing clinical testing services. Accordingly, the facilities
are suitable and adequate and utilized solely for such services. Following are
the descriptions of each regional facility.
UCT is located in London, UK, where it subleases approximately 20,000
sq.ft. of laboratory and office space from a UniHolding subsidiary at market
rates. UCT believes that such facilities are fully suitable and adequate for its
business. Upon expiration of any
12
<PAGE>
lease, the Company could find alternative space at competitive market rates and
relocate its operations.
NDA is located in Farmingdale, New York where it leases approximately
25,000 sq.ft. of laboratory and office space under a long-term lease at market
rates. Management of NDA believes that such laboratory space and office space
are fully suitable and adequate for its business.
UCTS is domiciled in Neuchatel, Switzerland. UCTS believes that, when there
is a need for office space in the future, it can find facilities suitable and
adequate for its business at competitive market rates.
Competition
Most of the laboratory testing for European clinical trials is currently
performed by local hospitals and is initiated by and through each sponsor's
national subsidiary offices. Approximately 70% of all trials conducted in Europe
are multi-country suggesting that the concept of a global service/single
sourcing would be attractive to industry participants. It is estimated that
between 10 to 20 European companies offer some form of centralized clinical
testing facilities. In the U.S., which pioneered the concept of centralized
clinical testing, it is estimated that between 10 to 20 companies offer some
form of centralized clinical testing facilities. In all, it is estimated that
only five to ten companies offer some form of centralized clinical testing
services in both Europe and the U.S. The largest such companies, which belong to
much larger groups than the Company, are (1) a division of Covance, Inc., (2) a
subsidiary of SmithKline Beecham PLC, and (3) a division of Quintiles
Transnational Corp.
UCTI has recently concluded a strategic alliance with Melbourne
Pathology, an Australian laboratory group, which will give UCTI extensive
support in the servicing of Australian investigational sites. Future
developments are always being contemplated and UCTI expects to see further
laboratory alliances around the world, advanced sample storage and tracking
systems, greater interaction with investigators and the continuing process of
the introduction of new laboratory techniques to meet customer demands.
Government Regulation
The services performed by the Company are subject to various regulatory
requirements designed to ensure the quality and integrity of the testing
processes. In the United States, for example, the industry standards for
conducting preclinical laboratory testing are embodied in the GLP regulations
and for central laboratory operations in Clinical Laboratory Improvement
Amendments of 1988 ("CLIA"). GLP have been adopted by the FDA, by the Department
of Health in the United Kingdom and by similar regulatory authorities in other
parts of the world. GLP stipulate requirements for facilities, equipment and
professional staff. The regulations require standardized procedures for studies,
for recording and reporting data and for retaining appropriate records. The
Company's central laboratories follow GLP and CLIA. To help ensure compliance,
the Company has established quality assurance controls at its laboratory
facilities which monitor ongoing compliance with GLP and CLIA regulations, as
applicable, by auditing test data and conducting regular inspections of testing
procedures.
13
<PAGE>
The Company's standard operating procedures are written in accordance with
regulations and guidelines appropriate to the region and the nation where they
will be used. Within Europe, all work is carried out in accordance with the
European Community Note for Guidance "Good Clinical Practice for Trials on
Medicinal Products in the European Community" and the requirements of the
applicable country. In addition, FDA regulations and guidelines serve as a basis
for the Company's North American and Asian/Pacific standard operating
procedures. From an international perspective, when applicable, the Company has
implemented common standard operating procedures across regions to assure
consistency whenever it is feasible and appropriate to do so.
The Company's U.S. laboratory is subject to licensing and regulation under
federal, state and local laws relating to hazard communication and employee
right-to-know regulations, the handling and disposal of medical specimens and
hazardous waste and radioactive materials, as well as to the safety and health
of laboratory employees. All Company's laboratories are operated in material
compliance with applicable federal and state laws and regulations relating to
the storage and disposal of all laboratory specimens including the regulations
of the U.S. Environmental Protection Agency, the Nuclear Regulatory Commission,
the Department of Transportation, the National Fire Protection Agency and the
Resource Conservation and Recovery Act, or their UK equivalents. Although the
Company believes that it is currently in compliance in all material respects
with such federal, state and local laws, failure to comply could subject the
Company to denial of the right to conduct business, fines, criminal penalties
and other enforcement actions.
In addition to its comprehensive regulation of safety in the workplace, the
Occupational Safety and Health Administration has established extensive
requirements relating to workplace safety for health care employers, whose
workers may be exposed to blood-borne pathogens such as HIV and the hepatitis B
virus. These regulations, among other things, require work practice controls,
protective clothing and equipment, training, medical follow-up, vaccinations and
other measures designed to minimize exposure to chemicals, and transmission of
blood-borne and airborne pathogens. Furthermore, relevant Company employees
receive initial and periodic training to ensure compliance with applicable
hazardous materials regulations and health and safety guidelines.
The regulations of the U.S. Department of Transportation, the Public Heath
Service and the Postal Service or their equivalents in other countries apply to
the surface and air transportation of laboratory specimens. The Company's
laboratories also comply with the International Air Transport Association
regulations, which govern international shipments of laboratory specimens.
Furthermore, when the materials are sent to a foreign country, the
transportation of such materials becomes subject to the laws, rules and
regulations of such foreign country.
Legal Proceedings
In the normal conduct of its business, the Company may be a party to
certain litigation. As of the date hereof, the Company is not a party to any
litigation.
14
<PAGE>
SELECTED UNAUDITED CONSOLIDATED FINANCIAL DATA
The following selected unaudited consolidated financial data of GUCT should
be read in conjunction with, and is qualified in its entirety by reference to,
the Unaudited Consolidated Financial Statements and the related notes thereto
included on pages F-2 and following, and should also be read in conjunction with
"Management's Discussion and Analysis". GUCT commenced operating under its
present form in July 1996. Accordingly, the following table presents selected
historical consolidated financial data of GUCT for the year and six months in
the period ended November 30, 1997, and selected historical consolidated
financial data of UniHolding's Clinical Trials Division for each of the two
years in the period ended May 31, 1996, which have been derived from unaudited
financial statements appearing elsewhere herein (in thousands, except per share
data, unaudited):
<TABLE>
<CAPTION>
Six months ended Years Ended May 31
November 30 ------------------------------
1997 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue ......................................... $ 5,652 $ 7,009 $ 4,427 $ 3,540
Earnings (loss) before Interest, Taxes,
Depreciation and Amortization
(4,315) (5,641) (1,694) 497
Operating Income (loss) ......................... (4,919) (6,823) (1,832) 486
Income (loss) before Taxes and Minority
Interests ....................................... (5,093) (7,261) (2,138) 486
Tax Provision (benefit) ......................... (1,579) (4,402) (624) 143
Minority Interests .............................. 1,015 (174) (41) (44)
Net Income (loss) ............................... (2,499) (3,033) (1,555) 300
Net Income (loss) per common share of
UniHolding ...................................... ($ 0.32) ($ 0.43) ($ 0.26) $ 0.05
Weighted Average Number of UniHolding
Common Shares Outstanding
7,755 7,016 6,006 5,783
Total Assets .................................... 16,948 17,763 2,200 NA
Long-Term debt, net of current portion
-0- -0- NA NA
Stockholders' Equity ............................ 3,001 5,471 NA NA
</TABLE>
15
<PAGE>
FINANCING
UniHolding's general practice has been to incur debt at the parent company
level rather than the subsidiary level, even when the funds obtained from such
borrowings have been used in the businesses of its subsidiaries, except in the
case of capital leases, assumed debt of acquired businesses and certain
international third party debt which generally have been incurred at the
subsidiary level. Accordingly, the financing requirements of the clinical trials
businesses generally have been largely funded through intercompany accounts with
UniHolding.
Prior to the Distribution, GUCT has agreed with UGL that substantially all
of GUCT's debt to UGL, approximating $11 million, together with $9 million of
the GUCT Common Stock, were converted into 2 million of newly-created shares of
GUCT Preferred Stock, par value $10 each. Such GUCT Preferred Stock entitles UGL
to receive an annual dividend in the form of additional Preferred Stock
calculated to correspond to the following percentages of the principal amount of
Preferred Stock: 5% in the first and second year, 10% in the third and fourth
year, and 15% in the fifth year. Thereafter, any dividend shall be paid in cash
at the rate of 15%. The GUCT Preferred Stock shall have essentially no voting
right. The GUCT Preferred Stock in whole or in part shall be redeemable at
GUCT's option at any time during the first five years, at a redemption price
equal to the then face value. There shall be no conversion into GUCT Common
Stock.
The remainder of the investment in GUCT by UGL has been distributed by UGL
to UniHolding and then by UniHolding to its shareholders in the form of GUCT
Common Stock. UniHolding will therefore retain no interest in GUCT Common Stock,
while it will retain all of the then outstanding GUCT Preferred Stock.
GUCT has no assurance that, as an independent company, it will be able to
obtain financing upon terms as favorable as those historically experienced by
UniHolding.
Bank Credit Facilities
GUCT has no material bank credit facilities.
Long-Term Debt
GUCT and UCTI may refinance a portion of their borrowings, including the
GUCT Preferred Stock, with long-term financing when market conditions are deemed
appropriate following the Distribution. Interest rates would be expected to be
based on market conditions at the time of the refinancings.
16
<PAGE>
THE DISTRIBUTION
Reasons for the Distribution
UniHolding's management has proposed the Distribution to achieve two
specific business objectives: (i) to allow UniHolding to focus its attention on
its core diagnostic laboratories, and (ii) to permit UniHolding and GUCT to
offer management incentives more directly tied to the performance of their
respective businesses. UniHolding is distributing the shares of GUCT to its
shareholders based on its belief that the Clinical Trials business, on the one
hand, and UniHolding's Diagnostic Laboratory business, on the other hand,
represent different business propositions. They involve fundamentally different
growth opportunities, financial returns, investment requirements, operating
systems and people dynamics. UniHolding also believes that corporations perform
optimally when business strategy, organization and employee incentives are more
narrowly focused.
Accordingly, UniHolding has concluded that the long-term interests of both
businesses are best served through the creation of two separate,
independently-managed and focused corporations, GUCT focused on Clinical Trials
and a "new UniHolding" focused on Diagnostic Laboratory.
Manner of Effecting the Distribution
On the Distribution Date, UniHolding has transferred approximately 7.9
million shares of GUCT Common Stock to American Securities Transfer, Inc., as
Distribution agent (the "Distribution Agent"), for the benefit of holders of
record of UniHolding Capital Stock at the close of business on February 9, 1998
(the "Record Date"), representing all shares of GUCT Common Stock then owned by
UniHolding.
The Distribution is made to holders of record of UniHolding Capital Stock
at the close of business on the Record Date, without any consideration being
paid by such holders, on the basis of one share of GUCT Common Stock for each
share of UniHolding Capital Stock held on the Record Date. As soon as
practicable after the Distribution Date, the Distribution Agent will mail
account statements reflecting ownership of shares of GUCT Common Stock to such
holders of record of UniHolding Capital Stock. Any GUCT shareholders that would
like to receive a certificate representing their shares may contact the
Distribution Agent. The shares of GUCT Common Stock will be fully paid and
nonassessable and the holders thereof will not be entitled to preemptive rights.
See "Description of GUCT Capital Stock - GUCT Common Stock."
The Company has restricted the transfer of shares of GUCT Common Stock
until such time as a Registration Statement on Form 20-F is filed and declared
effective. GUCT intends to file such Registration Statement with the Securities
and Exchange Commission as soon as practicable after the end of its fiscal year
on May 31, 1998.
Results of the Distribution
Subsequent to the Distribution, which is effective at 11:59:59 p.m. E.D.T.
on the Distribution Date, GUCT operates as an independent clinical trials
company, and UniHolding will continue to conduct its Diagnostic Laboratory
operations.
17
<PAGE>
Relationship between UniHolding and GUCT after the Distribution
After the Distribution, UniHolding will have no Common Stock ownership
interest in GUCT, and GUCT will be an independently-managed, publicly-owned
company. UniHolding, through UGL, will however continue to own GUCT Preferred
Stock. GUCT and UniHolding have entered, and will enter, into certain
agreements, described below, governing their relationship subsequent to the
Distribution and providing for the allocation of tax and certain other
liabilities and obligations arising from periods prior to and after the
Distribution. Copies of the forms of such agreements will be filed as exhibits
to the Company's Registration Statement on Form 20-F. The following summarizes
the material terms of such agreements, but is qualified by reference to the text
of such agreements.
Separation Agreement
UniHolding and GUCT will enter into a Separation Agreement
(the "Separation Agreement"), which will provide for, among other things,
certain services, records and personnel which UniHolding and GUCT will make
available to each other after the Distribution Date. To facilitate an orderly
transition, UniHolding may continue to provide, for up to 12 months, certain
services to GUCT, with the related costs and expenses being paid by GUCT. GUCT
will nonetheless have to utilize additional personnel to perform certain
services previously provided by UniHolding. The Separation Agreement also will
provide for the assumption by GUCT of liabilities relating to UniHolding's
clinical trials businesses and the indemnification of UniHolding with respect to
such liabilities. At November 30, 1997, there were approximately $12.4 million
of liabilities reflected on GUCT's balance sheet.
Tax Separation Agreement
UniHolding and GUCT will enter into a Tax Separation Agreement
(the "Tax Separation Agreement"), on behalf of themselves and their respective
consolidated groups, that reflects each party's rights and obligations with
respect to payments and refunds of taxes that are attributable to periods
beginning prior to and including the Distribution Date and taxes resulting from
transactions effected in connection with the Distribution. The Tax Separation
Agreement also expresses each party's intention with respect to certain tax
attributes of GUCT after the Distribution. The Tax Separation Agreement will
provide for payments between the two companies for certain tax adjustments made
after the Distribution that cover pre-Distribution tax liabilities. Other
provisions cover the handling of audits, settlements, stock options, elections,
accounting methods and return filing in cases where both companies have an
interest in the results of these activities.
Other Services Agreement
UniHolding and GUCT will also enter into an Other Services
Agreement (the "Other Services Agreement") setting forth the arrangements
between the parties with respect to property rental and certain administrative
services. Such Other Services Agreement will cover the London premises occupied
by UCT and owned by a subsidiary of UniHolding, which will be rented to UCT at
market rates with a minimum lease term of two years, and the provision of
certain administrative and financial services to GUCT with respect to regulatory
and administrative filings and other matters until such time as GUCT assumes
such functions itself.
18
<PAGE>
Certain U.S. Federal Income Tax Consequences of the Distribution
UniHolding has reviewed in detail the possible U.S. tax consequences of
the Distribution. It has concluded that the Distribution may not qualify as a
tax-free Distribution under Section 355 of the Internal Revenue Code of 1986, as
amended (the "Code"). Nevertheless, UniHolding has concluded that the
Distribution should, in effect, generate no tax liability to UniHolding for U.S.
Federal income tax purposes for the reasons mentioned below.
While UGL and GUCT are British Virgin Islands corporations, they both
are "controlled foreign corporations" for U.S. tax purposes, and the
distribution of GUCT Common Stock to UniHolding by UGL therefore has U.S. tax
consequences. Under Sections 301 and 316 of the Code, distributions of property
to shareholders are treated as a dividend to the extent of the lesser of (a)
current or accumulated earnings and profits of the distributing corporation or
(b) the fair market value of the property distributed, then as a reduction of
the tax basis that the distributee has in the distributing corporation, and then
as a capital gain. No gain or loss is recognized by the distributing corporation
upon the distribution of property to a shareholder (except when fair market
value of the property exceeds its basis in the hands of the distributing
corporation, which UniHolding has concluded is not the case here). Such dividend
and/or capital gain, in the case of a controlled foreign corporation, may be
treated as "Subpart F income", and currently includible in UniHolding's income.
In the present circumstances, in view of the current financial situation of GUCT
and its subsidiaries, and in view of UniHolding's evaluation of UGL's possible
current and accumulated earnings and profits, UniHolding has concluded that the
Distribution should not be considered as a dividend distribution, but as a
return of capital which in all likelihood does not exceed its basis in the GUCT
Common Stock, and therefore should not generate any Subpart F or dividend income
to UniHolding.
Further, UniHolding believes that the distribution of GUCT Common Stock
to the UniHolding stockholders may not qualify as a Section 355 tax-free
distribution for U.S. federal income tax purposes. A holder of UniHolding common
stock who receives shares of the GUCT Common Stock pursuant to the Distribution
would therefore be treated under the Code as receiving a distribution equal to
the fair market value of the GUCT Common Stock received on the Distribution
Date, which, based upon UniHolding's own evaluation, should be nominal. Such a
distribution would be treated as a dividend to the extent of UniHolding's
current or accumulated earnings and profits. In computing such earnings and
profits, the accumulated deficit in earnings and profits will not be available
to offset any current earnings and profits for the year of the distribution. Any
excess portion of the distribution first will be treated as a reduction in the
basis of the UniHolding common stock held by such stockholder, and, thereafter,
as gain from the sale or exchange of such holder's UniHolding common stock. The
determination of a corporation's earnings and profits entails complex factual
and legal analysis, and the current earnings and profits cannot be determined
until the close of such taxable year. UniHolding does not believe that the
Distribution itself will create earnings and profits.
A shareholder's basis in the GUCT Common Stock will be equal to the
fair market value of such stock on the distribution date and the holding period
for such stock will be deemed to commence as of the distribution date. A
UniHolding Stockholder's holding period for UniHolding common stock will be
unaffected by the distribution.
19
<PAGE>
The foregoing is a summary of the material U.S. Federal income tax
consequences of the Distribution under the law in effect as of the date of this
Information Statement. IT DOES NOT PURPORT TO COVER ALL INCOME TAX CONSEQUENCES
AND MAY NOT APPLY TO SHAREHOLDERS WHO ARE NOT CITIZENS OR RESIDENTS OF THE
UNITED STATES, OR WHO ARE OTHERWISE SUBJECT TO SPECIAL TREATMENT UNDER THE CODE.
All UniHolding shareholders should consult their own tax advisors regarding the
appropriate income tax treatment of their receipt of GUCT Common Stock,
including the application of Federal, state, local and foreign tax laws, and the
effect of possible changes in tax law that may affect the tax consequences
described above.
MANAGEMENT OF GUCT
Directors
GUCT's Amended Articles of Association provide that the number of Directors
may be altered from time to time, by resolution adopted by the Company's Board
of Directors. However, the number of Directors may not be less than one nor more
than six. Further, the Directors are elected by the other Directors, for a term
of five years with thereafter the possibility for renewal for same period and so
on at every maturity date.
The following individuals have agreed to serve as Directors of GUCT
following the Distribution:
Edgard Zwirn
Edgard Zwirn has been Chairman and a member of UniHolding's board of
directors since April 28, 1994. Edgard Zwirn was appointed as Chief Executive
Officer of UniHolding on April 26, 1994. Edgard Zwirn has been the Chairman of
the board of directors of Unilabs Holdings SA (a Panama corporation, "Holdings",
which is UniHolding's largest shareholder) since 1993, ULSA since 1989, UCP
since 1993, UGL since inception in October 1993, UGUK since inception in
December 1993, UIL, GUCT and UCTI since their respective inception in 1996, and
UCLE since its inception in December 1991. He has been Chairman of the board,
President and Chief Executive Officer of Unilabs Holdings SA (a Swiss
corporation which is the parent company of Holdings, "Swiss Holdings") since
1987. He has been President of UGL since October of 1993. Edgard Zwirn has been
a member of Unilab Corporation's board of directors since November 1993 after
having served as a member of the board of directors of the predecessor of Unilab
Corporation from its formation in November 1988 until November 1993. Mr. Zwirn
resigned from the Unilab Corporation board as of June 30, 1995. He has held
various senior management positions with companies in Belgium principally in the
areas of computer software for medical applications and technical equipment
leasing. Previously, he had been a director of IESA Investissements SA from
April 1987 to February 1992.
Alessandra van Gemerden
Alessandra van Gemerden has been a member of UniHolding's board of
directors since July 1996. She holds degrees in Management and Psychology and
has had prior experience in public relations and management of investment
portfolios. Alessandra van Gemerden has been a Director of UGUK since April 30,
1996, and a Director of UIL, GUCT and UCTI since their respective inception in
1996. Ms. van Gemerden holds directorships in various non-U.S. corporations
involved in the asset management business.
20
<PAGE>
Tobias Fenster
Tobias Fenster has been a member of UniHolding's board of directors since
July 1996. He holds degrees in Industrial Engineering and Business
Administration from Stanford University. His previous work experience includes
consulting services with Booz Allen & Hamilton and management of closely-held
enterprises in the wood industry and in the computer distribution industry.
Tobias Fenster currently is General Manager of United Laboratories Espana S.A.,
a subsidiary of UniHolding ("ULSP"). Mr. Fenster has been a Director of UGUK
since April 30, 1996, and a Director of UIL, GUCT and UCTI since their
respective inception in 1996. Mr. Fenster is Mr. Zwirn's brother-in-law.
In addition, Lancaster Enterprises Limited, a British Virgin Islands
corporation which may be deemed to be affiliated with Ms. van Gemerden and Mr.
Enrico Gherardi (a Director of UniHolding), and which is also a Director of UGL,
will serve as a Director of GUCT.
Executive Officers and Senior Operating Management
The following individuals have been nominated to serve as Executive
Officers of GUCT following the Distribution:
Paul Hokfelt, UCTI Chief Executive Officer
For a biography of Mr. Hokfelt, please refer to "Human Resources and
Management".
David Deutsch, UCTI President
For a biography of Mr. Deutsch, please refer to "Human Resources and
Management".
Sally Osmond, UCTI Chief Operating Officer
Ms. Osmond has 25 years of experience in the clinical laboratory business.
She was appointed Chief Operating Officer of UCTI in February 1998. Prior to
that, she was Clinical Trials Manager of UniHolding's then Clinical Trials
Division since June 1994 where she was initially responsible for all aspects of
service support and sales. She then also became responsible for all aspects of
business development including the setting up of a sales and marketing
department. Ms. Osmond holds an HND in clinical chemistry and is a member of the
United Kingdom Institute of Biomedical Scientists. She also holds a fellowship
in immunology.
Ron Gambardella, Senior Vice President-U.S. Operations,
Head of Group Project Management
Dr. Gambardella is the head of UCTI's U.S. operations, and is responsible
for worldwide project management of UCTI. He also serves as Medical Laboratory
Director of UCTI's U.S. facility. Prior to January 1997, he was President of
NDA. Dr. Gambardella has 18 years of experience in the clinical laboratory
business as an owner and manager of several clinical laboratories. Dr.
Gambardella holds a Ph.D. in clinical pathology from Ohio State University,
having also earned an M.S. in clinical chemistry and B.S. in medical technology.
In addition, the following individual will be part of the Senior
Operating Management following the Distribution:
21
<PAGE>
Peter George, MSc., Vice President-UK Operations,
Head of Group Laboratory Management
Mr. George has had 18 years of experience in clinical pathology in the UK
National Health Service, prior to joining UCTI in September 1997.
Employment Agreements
Paul Hokfelt
The Company has entered into an employment agreement with Mr. Hokfelt under
which he will serve as Chief Executive Officer of UCTI. As of February 1, 1998,
the agreement provides for an annual salary of $265,000, annual incentive
compensation awards to be determined by the UCTI Board of Directors, and options
to purchase shares of UCTI Common Stock. The agreement provides for a notice
period of 12 months for both parties.
David Deutsch
The Company has entered into an employment agreement with Mr. Deutsch under
which he will serve as President of UCTI until January 31, 2000. As of January
1, 1998, the agreement provides for an annual salary of $150,000, annual
incentive compensation awards to be determined by the UCTI Board of Directors,
and options to purchase shares of UCTI Common Stock. In addition, Mr. Deutsch
holds a put option on the shares of UCTI he owns pursuant to which, in the event
of termination of his employment contract other than for cause before UCTI has
effected an initial public offering of its shares, Mr. Deutsch has the right to
sell his UCTI shares to UCTI at a price based on a formula of 8 times the net
after tax consolidated earnings of UCTI for its latest fiscal year, with certain
minimums.
Mr. Ron Gambardella is also party to an employment agreement substantially
the same as that of Mr. Deutsch with respect to termination and put options.
Aggregate Compensation
The aggregate amount of compensation paid by GUCT and its subsidiaries
during the last fiscal year to all directors and officers as a group was
approximately $1.3 million .
Pension Benefits
Other than Mr. Edgard Zwirn, who is compensated through a management
contract, all of the named executive officers have retirement benefits pursuant
to mandatory provisions of U.S. and UK law.
In August 1997, NDA established a 401 (k) plan for its employees pursuant
to which no contribution to the plan is to be made by GUCT or any of its
subsidiaries other than the payment of the annual administration fees.
Stock Options
In connection with the Distribution, UniHolding and GUCT will not
convert any of the existing options on UniHolding Common Stock, either all or in
part, into options on GUCT Common Stock.
22
<PAGE>
During fiscal 1997, GUCT agreed to give the following options to three of
GUCT's then directors and officers, Edgard Zwirn, Giorgio Gherardi (a brother of
Mr. Enrico Gherardi and Ms. Van Gemerden's father) and Paul Hokfelt, who may
each purchase from GUCT 3,331 UCTI shares, corresponding for each individual to
2% of the issued and outstanding UCTI capital at the time of the grant (166,559
shares). The exercise price of the option equals the per share cost paid by
GUCT, plus interest at a rate which will fluctuate each year in accordance with
market, and has been set at 10% per annum until June 1, 1998. Such options are
exercisable any time over a period of 5 years commencing on June 1, 1997.
In addition, UCTI has issued to three former NDA shareholders a total of
1,155 warrants to purchase UCTI newly-issued shares of common stock at a price
of $122 to $133 per share. Further UCTI has granted to certain of its employees
options to acquire a total of 16,452 newly-issued shares of common stock at the
price of $150 per share, out of which 4,055 vested. The number of shares of
common stock of UCTI currently outstanding is 166,559, out of which GUCT owns
118,822.
Stock Ownership of Certain Beneficial Owners, Executive Officers and Directors
As of February 9, 1998, there were issued 7,627,736 shares of Voting Common
Stock, the only class of voting securities of UniHolding. Each share of Voting
Common Stock entitles its holder to one vote, with the exception of 731,098
shares of Voting Common Stock held in treasury by UniHolding. There are
accordingly 6,896,638 shares of Voting Common Stock presently with voting
rights.
The following table sets forth, as of February 9, 1998, the name and
address of each person known to UniHolding to be the beneficial owner of more
than 5% of the Voting Common Stock, the total number of shares of Voting Common
Stock owned by each such person and the percentage of the class owned by each
such person. Except as otherwise noted, each such person has full voting and
investment power with respect to the shares so owned.
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address of Beneficial Percent of Class
Title of Class Beneficial Owner Ownership (1)
-------------- ---------------- --------- ---
<S> <C> <C> <C>
Voting Common Stock Unilabs Holdings SA 2,173,731 31.52%
53rd Street Urbanizacion
Obarrio Torre Swiss Bank
Sixteenth Floor, Panama
" Edgard Zwirn (2) 2,890,018 41.90%
207-208 Neptune House Marina
Bay
Gibraltar
" Franklin Mutual 702,481 10.19%
Advisers, Inc.
51 John F. Kennedy Parkway
Short Hills, NJ 07078 (3)
23
<PAGE>
" Mutual European Fund 576,585 8.36%
51 John F. Kennedy Parkway
Short Hills, NJ 07078 (4)
" Grace Brothers, Ltd. 464,987 6.74%
1560 Sherman Avenue, Suite
900
Evanston, IL 60201
(5)
" Alessandra 490,125 7.11%
van Gemerden
c/o Unilabs S.A.
12 place de Cornavin
CH 1211 Geneva,
Switzerland (6)
" Morgan Stanley & Co. 457,027 6.63%
Incorporated 1585 Broadway
New York, NY 10036 (7)
" SBC Equity Partners 298,384 4.33%
1, Europastrasse,
8152 Opfikon, Switzerland
" All Directors and Executive 3,647,701 52.89%
Officers as a group (8)
Non-Voting Common SBC Equity Partners 298,384 100.00%
Stock, par value 1, Europastrasse,
$0.01 per share 8152 Opfikon, Switzerland
<FN>
(1) Percent of Class is calculated by dividing the number of currently issued
and outstanding shares held by such beneficial owner by the total number of
currently issued and outstanding shares of UniHolding.
(2) Edgard Zwirn may be deemed to be the beneficial owner of 2,433,579 shares by
virtue of his position as Chairman of the Board of Unilabs Holdings SA, a
Switzerland corporation ("Swiss Holdings") which is the parent of Unilabs
Holdings SA (Panama). However, Mr. Zwirn disclaims beneficial ownership of such
shares except for 22.3% thereof, his proportionate ownership of Swiss Holdings
or 542,688 shares. Further, he is deemed to beneficially own 580,000 shares by
virtue of his position of director in companies which own such shares; Mr. Zwirn
disclaims beneficial ownership of all such shares. He directly owns 136,287
shares of the Common Stock of UniHolding. Mr. Zwirn has the right to acquire an
additional 50,000 shares of Common Stock pursuant to an option granted by
UniHolding on August 17, 1995 and exercisable since February 1997, 112,821
shares of Common Stock pursuant to an option granted by UniHolding on July 9,
1996 and exercisable since January
24
<PAGE>
1998, and 112,821 shares of Common Stock pursuant to an option granted by
UniHolding on August 22, 1997 and exercisable starting February 1999. Further,
Mr. Zwirn has the right to acquire from GUCT 3,370 UCTI shares, such option
being exercisable over a period of 5 years commencing on June 1, 1997.
(3) Franklin Mutual Advisers, Inc. ("FMAI") is an investment adviser registered
under the Investment Advisers Act of 1940. Two of FMAI's advisory clients (the
"Advisory Clients"), one of which is Mutual European Fund, the beneficial owner
of 576,585 shares of UniHolding common Stock (see 4), are the beneficial owners,
in the aggregate, of 702,481 shares of UniHolding Common Stock. Pursuant to
investment advisory agreements with the Advisory Clients, FMAI has sole
investment discretion and voting authority with respect to the UniHolding Common
Stock beneficially owned by the Advisory Clients. On behalf of the Advisory
Clients, FMAI purchased from Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ") a subparticipation interest in a 100% participation interest in the
Unilab Note purchased by DLJ from Unilab Corporation (the "FMAI Subparticipation
Interest"). The Unilab Note converted as of January 1, 1997 into 1,394,963
shares of UniHolding Common Stock. The Advisory Clients obtained beneficial
ownership of 697,482 shares of UniHolding Common Stock by means of the FMAI
Subparticipation Interest. FMAI is a wholly owned subsidiary of Franklin
Resources, Inc. ("FRI"), a diversified financial services organization. Charles
B. Johnson and Rupert H. Johnson, Jr. (the "Principal Shareholders") each own in
excess of 10% of the outstanding common stock of FRI and are the principal
shareholders of FRI. FMAI, FRI and the Principal Shareholders may be deemed to
be, for purposes of Rule 13d-3 under the Securities Exchange Act of 1934, the
beneficial owners of the UniHolding Common Stock owned by the Advisory Clients.
FMAI, FRI and the Principal Shareholders have no interest in dividends or
proceeds from the sale of UniHolding Common Stock and disclaim beneficial
ownership of all UniHolding Common Stock owned by the Advisory Clients.
(4) Mutual European Fund is one of five portfolios comprising Franklin Mutual
Series Fund Inc., an open-end management investment company registered under the
Investment Company Act of 1940. Pursuant to an investment advisory agreement
with FMAI, FMAI has sole investment discretion and voting authority with respect
to the shares of UniHolding Common Stock owned by Mutual European Fund. Mutual
European Fund obtained beneficial ownership of 576,585 shares of UniHolding
Common Stock by means of the FMAI Subparticipation Interest.
(5) Grace Brothers, Ltd. ("Grace Brothers") purchased from DLJ a
subparticipation interest in a 100% participation interest in the Unilab Note
purchased by DLJ from Unilab Corporation (the "Grace Brothers Subparticipation
Interest"). The Unilab Note converted as of January 1, 1997 into 1,394,963
shares of UniHolding Common Stock. Grace Brothers obtained beneficial ownership
of 464,987 shares of UniHolding Common Stock by means of the Grace Brothers
Subparticipation Interest.
(6) Alessandra van Gemerden, a Director, is deemed to beneficially own 490,125
shares of UniHolding's Common Stock; however, Ms. Van Gemerden disclaims
beneficial ownership of such shares except for 90,125 thereof.
(7) Morgan Stanley holds 408,988 shares that were acquired pursuant to the
Morgan Stanley Agreement, including 75,655 that were acquired pursuant to
antidilution rights related to the conversion of the Unilab Note. In addition,
as of February 9, 1998, to the best of UniHolding's
25
<PAGE>
knowledge, Morgan Stanley held as market maker 48,039 shares of UniHolding
Common Stock.
(8) Of the officers and directors as a group, Edgard Zwirn may be deemed to
beneficially own 3,149,866 shares of UniHolding's Common Stock. Enrico Gherardi,
a Director, is deemed to beneficially own 249,875 shares of UniHolding's Common
Stock. Mr. Enrico Gherardi has the right to acquire 50,000 shares of common
stock of UniHolding pursuant to an option granted by UniHolding on August 17,
1995 and exercisable in February 1997, 112,821 shares of common stock pursuant
to an option granted by UniHolding on July 9, 1996 and exercisable in January
1998, and 112,821 shares of common stock pursuant to an option granted by
UniHolding on August 22, 1997 and exercisable in February 1999. On August 17,
1995, UniHolding granted options to its other executive officers totaling 27,500
shares of common stock of UniHolding exercisable in February of 1997. On July 9,
1996, UniHolding granted options to its other executive officers totaling 70,000
shares of common stock of UniHolding exercisable in January of 1998. On August
22, 1997, UniHolding granted options to its other executive officers totaling
70,000 shares of common stock of UniHolding exercisable in February of 1999.
Alessandra van Gemerden, a Director, is deemed to beneficially own 490,125
shares of UniHolding's Common Stock; however, Ms. van Gemerden disclaims
beneficial ownership of such shares except for 90,125 thereof.
</FN>
</TABLE>
Three Swiss pension funds, Retraites Populaires, Caisse de Pensions de
l'Etat de Vaud and Caisse Intercommunale de Pensions, acquired 579,038 shares,
or approximately then 9.97% of UniHolding's common stock in 1994. However, no
one fund owns over 5% individually and each pension fund maintains its own
voting power and control.
Pursuant to the terms of a Stock Purchase Agreement, dated June 30, 1995,
by and between Unilab, UniHolding and UGL, UniHolding acquired 40% of the common
stock of UGL in exchange for the Unilab Note in the principal amount of
$15,000,000 and certain other consideration. The principal amount of the Unilab
Note was due as of June 30, 1996. Pursuant to the terms of the Unilab Note, the
Unilab Note was converted as of January 1, 1997 into 1,394,963 shares of
UniHolding Common Stock.
The following table sets forth information concerning the GUCT Common Stock
that is expected to be beneficially owned by each of GUCT's proposed directors,
by each of the named executive officers of GUCT and by all directors and
executive officers as a group. The projections are based upon the number of
shares of UniHolding Capital Stock held by the individuals and the group at
February 9, 1998.
<TABLE>
<CAPTION>
Beneficial Owner of Shares Projected Number Percent of Class (1)
-------------------------- ---------------- --------------------
<S> <C> <C>
Edgard Zwirn (2) 2,890,018 41.90%
Alessandra van Gemerden (2) 490,125 7.11%
Tobias Fenster -0- -0-
Paul Hokfelt 17,671 0.26%
David Deutsch -0- -0-
Ron Gambardella -0- -0-
Sally Osmond -0- -0-
All Directors and Executive Officers as a group (2) 3,647,701 52.89%
26
<PAGE>
<FN>
(1) Percent of Class is calculated by dividing the number of currently issued
and outstanding shares held by such beneficial owner by the total number of
currently issued and outstanding shares of UniHolding.
(2) See additional explanations and disclaimers above.
</FN>
</TABLE>
DESCRIPTION OF GUCT CAPITAL STOCK
Under GUCT's Amended Articles of Association (the "GUCT Articles"), GUCT's
authorized Capital Stock consists of 23,000,000 shares, of which 20,000,000
shall be Common Stock, par value $0.15 each, and 3,000,000 shall be preferred
stock ("Preferred Stock"), par value $10.00 each. Based on approximately 7.9
million shares of UniHolding Capital Stock issued as of February 9, 1998, and a
distribution ratio of one share of GUCT Common Stock for each share of
UniHolding Capital Stock, it is expected that approximately 7.9 million shares
of GUCT Common Stock will be distributed to holders of UniHolding Capital Stock.
No Preferred Stock will be distributed to UniHolding shareholders in connection
with the Distribution.
GUCT Common Stock
The holders of GUCT Common Stock will be entitled to one vote for each
share on all matters voted on by shareholders. Except as provided with respect
to any series of Preferred Stock authorized by GUCT's Board of Directors, the
exclusive voting power with respect to all matters to be voted on by
shareholders shall be vested in the holders of Common Stock. The GUCT Articles
do not provide for any voting by shareholders in the election of directors. The
holders of GUCT Common Stock will be entitled to such dividends as may be
declared from time to time by the GUCT Board from funds available therefor, and
upon liquidation will be entitled to receive, pro rata, all the net assets of
GUCT available for distribution to such holders. All of the shares of GUCT
Common Stock distributed by UniHolding will be fully paid and nonassessable. The
holders of GUCT Common Stock will have no preemptive right to subscribe for or
purchase any securities of any kind or class of GUCT.
GUCT Preferred Stock
Under the GUCT Articles, the Company's Board of Directors is empowered,
subject to limitations prescribed by British Virgin Islands law, to amend the
GUCT Articles to authorize the issuance of Preferred Stock. The Preferred Stock
may be divided into two or more series, with such preferences, limitations and
relative rights as the Board may determine.
Prior to the Distribution, GUCT's debt to UGL, approximating $11 million,
together with $9 million of the GUCT Common Stock, has been converted into 2
million shares of GUCT Preferred Stock, par value $10 each. The GUCT Preferred
Stock shall have essentially no voting rights and they shall not be convertible
into GUCT Common Stock. In addition, the GUCT Preferred Stock shall be
redeemable at GUCT's option at any time during the first five years at a
redemption price equal to its then face value.
27
<PAGE>
British Virgin Islands Laws and Regulations
There are no governmental laws, decrees or regulations in the British
Virgin Islands relating to restrictions on the import/export of capital
affecting the remittance of interest, dividends or other payments to
non-residential holders of the Company's shares. Any such remittances to
non-residential holders are not subject to any withholding tax.
Further, there are no limitations under the laws of the British Virgin
Islands or in the charter or any other constituent documents of the Company on
the right of foreigners to hold and/or vote the shares of the Company.
There currently is no tax treaty between the British Virgin Islands and the
United States.
Dividends
The payment and level of cash dividends, if any, declared by GUCT after the
Distribution will be subject to the discretion of the GUCT Board. Dividend
decisions will be based on a number of factors, including GUCT's operating
results and financial requirements on a stand-alone basis as well as credit
agreements and legal restrictions relating thereto.
In accordance with the GUCT Articles, and resolutions passed by the
Directors, holders of Preferred Stock are entitled to non-cumulative dividends
in the form of additional Preferred Stock for a period of five years, and to
cash dividends thereafter.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the GUCT Common Stock will be American
Securities Transfer, Inc.
Listing and Trading of GUCT Common Stock
Prior to the date hereof, there has not been any established trading market
for GUCT Common Stock. It is currently not possible to predict whether such a
market will ever exist.
After the Distribution, the transfer of shares of GUCT Common Stock will be
restricted by the Company until such time as a Registration Statement on Form
20-F is filed and declared effective, and such shares will be subject to any
other transfer restrictions that may apply.
28
<PAGE>
INDEMNIFICATION OF DIRECTORS
A provision of the GUCT Articles (the "Provision") provides that to the
full extent from time to time permitted by law, no Director shall be personally
liable in any action for monetary damages for breach of any duty as a Director,
whether such action is brought by or in the right of the Company or otherwise.
Neither the amendment nor repeal of the Provision, nor adoption of any provision
of the GUCT Articles which is inconsistent with the Provision, shall eliminate
or reduce the protection afforded by the Provision with respect to any matter
which occurred, or any cause of action, suit or claim which, but for the
Provision would have accrued or arisen, prior to such amendment, repeal or
adoption.
While the GUCT Articles provide Directors with protection from awards for
monetary damages for breaches of their duty of care, they do not eliminate such
duty. Accordingly, the GUCT Articles will have no effect on the availability of
equitable remedies such as an injunction or recission based on a Director's
breach of his or her duty of care.
The GUCT Articles provide that the Company shall, to the fullest extent
from time to time permitted by law, indemnify its Directors and officers against
all liabilities and expenses in any suit or proceeding, whether civil, criminal,
administrative or investigative, and whether or not brought by or on behalf of
the Company, including all appeals therefrom, arising out of their status as
such or their activities in any of the foregoing capacities, unless the
activities of the person to be indemnified were at the time taken known or
believed by him to be clearly in conflict with the best interests of the
Company. The Company shall likewise and to the same extent indemnify any person
who, at the request of the Company, is or was serving as a Director, officer,
partner, trustee, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise, or as a trustee or
administrator under any employee benefit plan. The right to be indemnified shall
include, without limitation, the right of a Director or officer to be paid
expenses in advance of the final disposition of any proceeding upon receipt of
an undertaking to repay such amount unless it shall ultimately be determined
that he or she is entitled to be indemnified. A person entitled to
indemnification shall also be paid reasonable costs, expenses and attorneys'
fees (including expenses) in connection with the enforcement of rights to the
indemnification granted. The foregoing rights of indemnification shall not be
exclusive of any other rights to which those seeking indemnification may be
entitled and shall not be limited by the provisions of the British Virgin
Islands law or any successor statute. The Board of Directors may take such
action as it deems necessary or desirable to carry out the foregoing
indemnification provisions, including adopting procedures for determining and
enforcing the rights guaranteed thereby, and the Board of Directors is expressly
empowered to adopt, approve and amend from time to time such Bylaws, resolutions
or contracts implementing such provisions or such further indemnification
arrangement as may be permitted by law. Neither the amendment or repeal of the
foregoing indemnification provisions, nor the adoption of any provision of the
GUCT Articles inconsistent with the foregoing indemnification provisions, shall
eliminate or reduce any rights to indemnification afforded by the foregoing
indemnification provisions to any person with respect to their status or any
activities in their official capacities prior to such amendment, repeal or
adoption.
29
<PAGE>
AVAILABLE INFORMATION
GUCT intends to file a Registration Statement on Form 20-F as soon as
practicable after audited financial statements of GUCT as of May 31, 1998, are
available. When the Form 20-F is filed and becomes effective, GUCT will be
subject to the reporting requirements of the Securities Exchange Act of 1934, as
amended, and, in accordance therewith, will file reports and other information
with the Securities and Exchange Commission (the "Commission"). Copies of the
Form 20-F, including the exhibits thereto, and the reports and other information
filed by GUCT with the Commission can then be inspected and copied at the public
reference facilities of the Commission, 450 Fifth Street N.W., Room 1024,
Washington D.C. 20549 and at the Commission's Regional Offices: 7 World Trade
Center, 13th floor, New York, NY 10048; 500 West Madison Street, Suite 1400,
Chicago, IL 60661; and 5757 Wilshire Boulevard, Suite 500 East, Lost Angeles, CA
90036. Copies of such material can be obtained at prescribed rates from the
Public Reference Section of the Commission, 450 Fifth Street N.W, Room 1024,
Washington D.C. 20549. Copies may also be obtained from the Commission's Web
Site (http://www.sec.gov). HOWEVER, NO SUCH INFORMATION WILL BE AVAILABLE UNTIL
THE REGISTRATION STATEMENT ON FORM 20-F IS FILED AND BECOMES EFFECTIVE.
30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following Management's Discussion and Analysis should be read in
conjunction with the Unaudited Consolidated Financial Statements on pages F-2
and following and the Cautionary Statements outlined below. The Unaudited
Consolidated Financial Statements included herein may not necessarily be
indicative of the results of operations, financial position and cash flows of
GUCT in the future or had it operated as a separate, independent company during
the periods presented. The Unaudited Consolidated Financial Statements included
herein do not reflect any changes that may occur in the financing and operations
of GUCT as a result of the Distribution.
<TABLE>
<CAPTION>
Twelve months ended May 31, 1997 compared with the twelve months ended May 31, 1996
Year ended Year ended
May 31, 1997 May 31, 1996
------------ ------------
<S> <C> <C>
REVENUE .................................................... $ 7,009 $ 4,427
Operating expenses:
Salaries and related charges ............................ 3,804 1,413
Supplies ................................................ 475 157
Other operating expenses ................................ 8,371 4,551
Depreciation and amortization of tangible assets ........ 1,161
Amortization of intangible assets ....................... 70 77
----------- -----------
OPERATING LOSS ............................................. (6,823) (1,832)
Interest, net .............................................. (118) (49)
Other, net ................................................. (320) (257)
----------- -----------
Loss before taxes and minority interests ................... (2,138)
Tax benefit ................................................ 4,402 624
----------- -----------
Loss before minority interests ............................. (2,859) (1,514)
Minority interests in loss ................................. (174) (41)
----------- -----------
NET LOSS ................................................... ($ 3,033) ($ 1,555)
=========== ===========
Weighted average common shares outstanding ................. 7,015,943 6,005,643
Loss per share of common stock ............................. ($ 0.43) ($ 0.26)
</TABLE>
UniHolding's Clinical Trials Division increased its revenues to $7.0
million (a 58% increase) due to the development of a new client base.
The variance in operating results of UniHolding's Clinical Trials Division
(an operating loss of $6.8 million as compared to $1.8 million) reflects fixed
expenses which are not matched with income to be recorded in the future from a
backlog of contracts, due to lead-time of up to six months from the signing of a
contract to the actual start of a study.
Provision for income taxes for the year ended May 31, 1997, is a tax
benefit of $4.4 million attributable to losses of UniHolding's Clinical Trials
Division which gave rise to a tax benefit, which management believes it is more
likely than not that the Company will recover through future income of such
Division in view of the already existing backlog of contracts.
Minority interests in losses attributable to minority shareholders
increased by $0.1 million as compared to the prior year, resulting from the
increase in losses of UniHolding's Clinical Trials Division attributable to
minority shareholders.
31
<PAGE>
Six month period ended November 30, 1997 compared with the six month period
ended November 30, 1996
<TABLE>
<CAPTION>
Six months ended Six months ended
November 30, 1997 November 30, 1996
----------------- -----------------
<S> <C> <C>
REVENUE .................................................... $ 5,652 $ 2,819
Operating expenses:
Salaries and related charges ............................ 4,307 1,412
Supplies ................................................ 545 104
Other operating expenses ................................ 5,115 3,287
Depreciation and amortization of tangible assets ........ 243 78
Amortization of intangible assets ....................... 361 23
----------- -----------
OPERATING LOSS ............................................. (4,919) (2,085)
Interest, net .............................................. (182) (71)
Other, net ................................................. 8 (75)
----------- -----------
Loss before taxes and minority interests ................... (5,093) (2,231)
Tax benefit ................................................ 1,579 639
----------- -----------
Loss before minority interests ............................. (3,514) (1,592)
Minority interests in loss ................................. 1,015 0
----------- -----------
NET LOSS ................................................... ($ 2,499) ($ 1,592)
=========== ===========
Weighted average common shares outstanding ................. 7,754,936 6,358,963
Loss per share of common stock ............................. ($ 0.32) ($ 0.25)
</TABLE>
Revenues of $5.7 million for the six months ended November 30, 1997,
representing an increase of $2.9 million from the comparable prior year period,
were recorded by UniHolding's Clinical Trials Division due to the development of
a new client base and to the January 1997 reorganization of UCTI whereby NDA
became fully consolidated within this division, which was not the case in the
comparable prior year period.
The variance in operating results of UniHolding's Clinical Trials Division
(an operating loss of $4.9 million for the six months ended November 30, 1997 as
compared to a loss of $2.1 million in the comparable prior year period) reflects
the January 1997 reorganization of UCTI whereby NDA became fully consolidated
within the Division, and fixed expenses not matched with income to be recorded
in the future from a backlog of contracts, due to lead-time of up to six months
from the signing of a contract to the actual start of a study.
UniHolding's Clinical Trials Division recorded a tax benefit of $1.6
million in the six months ended November 30, 1997, which management believes it
is more likely than not it will be recovered through future income of such
Division in view of the already existing backlog of contracts.
UniHolding's Clinical Trials Division also recorded a $1.0 million credit
to minority interests during the six months ended November 30, 1997, due to
period losses of the division attributable to minority shareholders. Such amount
compares to nil in the comparable prior year period due to the January 1997
reorganization of UCTI.
Liquidity and Capital Resources
Net cash used by operating activities for the six months ended November 30,
1997, amounted to $4.3 million, primarily due to period losses and working
capital needs.
32
<PAGE>
Net cash provided by financing activities for the six months ended November
30, 1997, was $2.2 million, due to loans and advances received from the
Company's parent.
Net cash used in investing activities for the six months ended November 30,
1997, was $0.7 million.
GUCT and its subdidiaries presently do not have any bank credit facilities.
The Company believes that the existing cash balances and the cash from
operating activities within the next few months will most likely not be
sufficient to meet the Company's capital requirements for the foreseeable future
including anticipated operating expenses. It is accordingly currently reviewing
a number of alternatives, including a further capital injection from its
shareholders.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
The preceding "Business Description" and Management's Discussion and
Analysis contains various "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, which represent the Company's
expectations or beliefs concerning the Company's operations, economic
performance and financial condition, including, in particular, forward-looking
statements regarding the Company's expectation of future performance following
implementation of its new business strategy. Such statements are subject to
various risks and uncertainties. These "forward-looking statements" are based on
currently available competitive, financial and economic data and GUCT's
operating plans. They are also inherently uncertain and investors must recognize
that events could turn out to be significantly different than what was expected.
GUCT has never operated as a totally separate, totally independent entity and as
a result, future performance will be impacted significantly by actions of its
management team and the implementation of its strategic objectives. Accordingly,
the Company hereby identifies the following important factors that could cause
the Company's actual financial results to differ materially from those
projected, forecast, estimated, or budgeted by the Company in such
forward-looking statements.
(a) Heightened competition, including the intensification of price competition.
(b) Impact of changes in tests and client mix.
(c) Adverse actions by governmental or other third-party payors, including
potential pressure on prices for new drugs developed by the Company's clients.
(d) Failure to obtain new customers, retain existing customers or reduction in
tests ordered.
(e) Adverse results in significant litigation matters, if any.
(f) Denial of certification or licensure of any of the Company's laboratories by
governmental agencies.
(g) Adverse publicity and news coverage about the Company or the clinical trials
industry.
33
<PAGE>
(h) Inability to carry out marketing and sales plans.
(i) Inability to successfully integrate operations of or fully realize costs
savings expected from the consolidation of certain operations and the
elimination of duplicative expenses or risk that declining revenues or increases
in other expenses will offset such savings.
(j) Ability of the Company to attract and retain experienced and qualified
personnel.
(k) Changes in interest rates causing an increase in the Company's effective
borrowing rate, and changes in exchange rates causing variances in consolidated
income and expenses reported in dollars.
(l) The effect of the Company's effort to improve account profitability by
selectively repricing or discontinuing business which perform below Company
expectations.
Other Information
The Company operates in Europe principally in pounds sterling. For
reporting purposes the financial statements are translated in accordance with
U.S. generally accepted accounting principles which require, generally, that
assets, liabilities and equity are translated at the exchange rates in effect at
the balance sheet date and revenues and expenses at the weighted average rates
during each year. Accordingly assets, liabilities and shareholders' equity will
be affected by changes in such exchange rates.
The Company's operating results will continue to be affected by the volume,
mix and timing of test orders received during a period and by conditions in the
industry (including pricing regulations) and in the economies in which the
Company operates, such as recessionary periods, political instability, and
fluctuations in interest or currency exchange rates.
The Company may experience both increases and decreases in its volume of
testing due to the specific characteristics of contracts with its customers.
This may lead to quarterly information which may not be indicative of the trend
of the Company's business.
Inflation was not a material factor in either revenue or operating expenses
during the years presented, and is not expected to be in the current year.
34
<PAGE>
<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
Page
<S> <C>
Unaudited Consolidated Financial Statements
Unaudited Consolidated Balance Sheets - November 30, 1997 and May 31, 1997............... F-2
Unaudited Consolidated Statements of Operations - Six and Twelve Months ended
November 30, 1997, and May 31, 1997.................................................. F-4
Unaudited Consolidated Statements of Changes in Stockholders' Equity - Year ended
May 31, 1997......................................................................... F-5
Unaudited Consolidated Statements of Cash Flows - Six and Twelve Months
ended November 30, 1997, and May 31, 1997............................................ F-6
Notes to Unaudited Consolidated Financial Statements..................................... F-7
</TABLE>
All other financial statements and schedules have been omitted since the
required information is not present or not present in amounts sufficient to
require submission of the financial statement or schedule, or because the
information required is included in the above listed financial statements or the
notes thereto.
F-1
<PAGE>
GLOBAL UNILABS CLINICAL TRIALS LIMITED AND SUBSIDIARIES
<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS November 30, May 31,
1997 1997
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $501 $3,276
Accounts receivable, net of allowance for doubtful accounts 2,588 2,347
Inventories 270 220
Prepaid expenses 22 235
Other current assets 204 17
----------- -----------
Total current assets 3,585 6,095
----------- -----------
NON-CURRENT ASSETS:
Deferred tax assets 6,804 5,199
Intangible assets, net 4,526 4,700
Property, plant and equipment, net 2,033 1,659
Other assets, net - 110
----------- -----------
Total non-current assets 13,363 11,668
----------- -----------
$16,948 $17,763
======= =======
</TABLE>
See notes to financial statements
F-2
<PAGE>
GLOBAL UNILABS CLINICAL TRIALS LIMITED AND SUBSIDIARIES
<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
Pro Forma
LIABILITIES AND STOCKHOLDERS' EQUITY November 30, November 30, Mays31,
1997 1997 1997
(see Note 7)
----------- ------------ ----------
<S> <C> <C> <C>
CURRENT LIABILITIES:
Lease payable $80 $80 $298
Payable to related parties 9,039 1,186 6,732
Trade payables 2,707 2,707 2,213
Accrued liabilities 512 512 473
----------- ----------- -----------
Total current liabilities 12,338 4,485 9,716
----------- ----------- -----------
NON-CURRENT LIABILITIES:
Lease payable 66 66 -
----------- ----------- -----------
Total non-current liabilities 66 66 -
----------- ----------- -----------
Total liabilities 12,404 4,551 9,716
----------- ----------- -----------
MINORITY INTERESTS 1,543 1,543 2,576
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $1.00 par value as of May 31 and November 30,
1997, $0.15 par value as of December 1, 1997; authorized
20,000,000 shares; 10,000,000 shares issued and outstanding
as of May 31 and November 30, 1997 10,000 1,000 10,000
Preferred stock, $10.00 par value; authorized, issued and
outstanding -0- shares as of May 31 and November 30, 1997;
authorized 3,000,000 as of December 1, 1997 -- 16,853 --
Cumulative translation adjustment
(1) (1) (30)
Accumulated deficit (6,998) (6,998) (4,499)
----------- ----------- -----------
Total stockholders' equity 3,001 10,854 5,471
----------- ----------- -----------
$16,948 $16,948 $17,763
======= ======= =======
</TABLE>
See notes to financial statements
F-3
<PAGE>
GLOBAL UNILABS CLINICAL TRIALS LIMITED AND SUBSIDIARIES
<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
Six Months ended Year ended
November 30, 1997 May 31, 1997
----------------- ------------
<S> <C> <C>
REVENUE $5,652 $7,009
Operating expenses:
Salaries and related charges 4,307 3,804
Supplies 545 475
Other operating expenses 5,115 8,371
Depreciation and amortization of tangible assets 243 1,112
Amortization of intangible assets 361 70
----------- -----------
OPERATING LOSS (4,919) (6,823)
Interest, net (182) (118)
Equity in loss of affiliates - (253)
Other, net 8 (67)
----------- -----------
Loss before taxes and minority interests (5,093) (7,261)
Tax benefit 1,579 4,402
----------- -----------
Loss before minority interests (3,514) (2,859)
Minority interests in loss 1,015 (174)
----------- -----------
NET LOSS ($2,499) ($3,033)
======= =======
Weighted average UniHolding common shares outstanding 7,754,936 6,358,963
Loss per share of UniHolding common stock ($0.32) ($0.48)
</TABLE>
See notes to financial statements
F-4
<PAGE>
GLOBAL UNILABS CLINICAL TRIALS LIMITED AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
Voting Non-Voting Cumulative Total
Common Stock Preferred Stock Translation Accumulated Stockholders'
Shares Amount Shares Amount Adjustment Deficit Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, May 31, 1996 217,000 $217 - - - ($2,429) ($2,212)
Issuance of common stock through
loan conversion 9,783,000 9,783 9,783
Net loss (2,070) (2,070)
Cumulative translation adjustment (30) (30)
---------- ------- ------- ------ -------- --------- --------
Balances, May 31, 1997 10,000,000 $10,000 - - ($30) ($4,499) $5,471
========== ====== ======= ====== ======== ========= ========
</TABLE>
See notes to financial statements
F-5
<PAGE>
GLOBAL UNILABS CLINICAL TRIALS LIMITED AND SUBSIDIARIES
<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Six Months ended Year ended
November 30, 1997 May 31, 1997
----------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($2,499) ($3,033)
Adjustments to reconcile net income to net cash
provided by operations:
Equity in loss of affiliates - 253
Minority interests in income (1,015) 174
Deferred taxes (1,579) (4,406)
Depreciation and amortization of tangible assets 243 1,112
Amortization of intangible assets 361 70
Other non-cash income (expenses) 357 903
Net changes in assets and liabilities,
net of acquisitions and disposals:
Accounts receivable (215) (1,681)
Inventories (48) (72)
Prepaid expenses 153 (63)
Other current assets 377 (15)
Trade payables (217) 954
Accrued liabilities (190) 10
----------- -----------
Net cash used in operating activities (4,272) (5,794)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loans and advances from affiliates 2,215 10,206
Repayment of lease debt - (121)
----------- -----------
Net cash provided by financing activities 2,215 10,085
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for purchases of property and equipment (142) (835)
Payment for purchase of intangible assets (576) (234)
----------- -----------
Net cash used in investing activities (718) (1,069)
----------- -----------
Effect of exchange rate changes on cash
Net increase (decrease) in cash and cash equivalents (2,775) 3,222
Cash and cash equivalents, beginning of period 3,276 54
----------- -----------
Cash and cash equivalents, end of period $501 $3,276
======= =======
</TABLE>
See notes to financial statements
F-6
<PAGE>
GLOBAL UNILABS CLINICAL TRIALS LIMITED AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Monetary amounts in thousands, except per share data)
1. Basis of Presentation
The consolidated financial statements include the accounts of Global
Unilabs Clinical Trials Limited and its majority-owned subsidiaries (the
"Company"). All significant intercompany accounts and transactions have been
eliminated. As discussed in Note 7, the Company was until February 9, 1998, an
indirect wholly-owned subsidiary of UniHolding Corporation, a Delaware
corporation ("UniHolding").
2. Management Opinion
In the opinion of management, the accompanying unaudited interim financial
statements reflect all adjustments which are necessary to present fairly the
financial position, results of operations and cash flows for the interim periods
reported. All such adjustments made were of a normal recurring nature.
The results of operations and financial position for interim periods are
not necessarily indicative of those to be expected for a full year, due, in
part, to the seasonal fluctuations which are normal for the Company's business.
The accompanying interim financial statements and related notes should be
read in conjunction with the consolidated financial statements of UniHolding
Corporation and Subsidiaries and related notes as contained in the UniHolding
Annual Report on Form 10-K for the year ended May 31, 1997.
3. Net Income (Loss) Per Share
Net income (loss) per share is computed by dividing net income or net loss
by the weighted average number of voting and non-voting common shares
outstanding.
4. Supplemental Disclosure of Cash Flow Information
Six months ended
November 30
1997
Cash paid during the period for
Interest nil
Income taxes nil
5. Capital Stock
As of November 30, 1997, the Company's authorized capital stock consisted
of 20,000,000 shares of $1.00 par value each, out of which 10,000,000 were
issued and outstanding. As of December 1, 1997, the Company's Memorandum of
Association was amended in such a way as to provide for an authorized capital of
$33,000,000 divided into 20,000,000 shares of common stock of $0.15 par value
each and 3,000,000 shares of preferred stock of $10.00 par value each.
F-7
<PAGE>
Common Stock
The holders of the Company's Common Stock are entitled to one vote for each
share on all matters voted on by shareholders. Except as provided with respect
to any series of Preferred Stock authorized by the Company's Board of Directors,
the exclusive voting power with respect to all matters to be voted on by
shareholders shall be vested in the holders of Common Stock. The Company's
Articles do not provide for any voting by shareholders in the election of
directors. The holders of the Company's Common Stock will be entitled to such
dividends as may be declared from time to time by the Company's Board from funds
available therefor, and upon liquidation will be entitled to receive, pro rata,
all the net assets of the Company available for distribution to such holders.
The holders of the Company's Common Stock will have no preemptive right to
subscribe for or purchase any securities of any kind or class of the Company.
Preferred Stock
Under the Company's Articles of Association, the Company's Board of
Directors is empowered, subject to limitations prescribed by British Virgin
Islands law, to amend the Company's Articles to authorize the issuance of
Preferred Stock. The Preferred Stock may be divided into two or more series,
with such preferences, limitations and relative rights as the Board may
determine.
As of February 1, 1998, the Company's debt to its then direct shareholder,
Unilabs Group Limited, approximating $11 million, together with $9 million of
the Company's Common Stock, has been converted into 2 million shares of the
Company's Preferred Stock, par value $10 each. The Company's Preferred Stock
shall have essentially no voting rights and they shall not be convertible into
the Company's Common Stock. In addition, the Company's Preferred Stock shall be
redeemable at the Company's option at any time during the first five years at a
redemption price equal to its then face value.
6. Segment Information
The Company has one business segment, the clinical trials testing business
7. Subsequent Events
On January 15, 1998, UniHolding announced its decision to spin off its
clinical trials division to UniHolding's shareholders. The transaction was in
the form of a distribution by UniHolding to its shareholders of all the common
stock of Global Unilabs Clinical Trials Limited, a British Virgin Islands
corporation . UniHolding will retain approximately $20 million of non-voting
preferred stock in the Company. One share of common stock of the Company was
distributed to the shareholders of UniHolding, without any consideration, for
each share of common stock of UniHolding held on February 9, 1998, the record
date. The distribution date was February 27, 1998. The Company will restrict the
transfer of shares of the Company's common stock until a Registration Statement
under the Securities Exchange Act of 1934 has been filed and declared effective.
F-8