Securities and Exchange Commission
June 1, 1998
Page 1
WRITER'S DIRECT DIAL: (612) 573-3665
E-MAIL: [email protected]
June 1, 1998
Securities and Exchange Commission
Re: Biosensor Corporation (the "Company") - Schedule 14A
Transmitted herewith pursuant to Regulation S-T you will find the
Company's Schedule 14A relating to its Special Shareholders' Meeting scheduled
to be held on June 22, 1998. The Company anticipates releasing definitive copies
of the proxy statement on or about June 12, 1998.
The proxy statement is being distributed and proxies will be solicited
in an effort to make certain changes to the Company's Articles and Bylaws that
will facilitate the Company's acquisition of Carolina Medical, Inc., a North
Carolina corporation ("CMI"), in a share exchange transaction. While the changes
proposed in the proxy statement are not conditions precedent to the acquisition
of CMI, CMI has requested that the Company propose such changes to its
shareholders. The shareholders will not be taking action with regard to the CMI
share exchange transaction. Nevertheless the Company has included significant
financial information regarding CMI and its subsidiaries: A) unaudited pro forma
financial statements showing operations of the Company, CMI, and its two
subsidiaries Braemer, Inc, and Advanced Medical, Inc. on a consolidated basis
for the fiscal year ended June 30, 1997 and the nine-month period ended March
31, 1998; B) the Company's audited financial statements for the fiscal years
ended May 31, 1996 and May 31, 1997, and unaudited interim financial statements;
C) Carolina Medical, Inc. audited financial statements for fiscal years ended
June 30, 1996 and June 30, 1997, and unaudited interim financial statements; and
D) Advanced Medical Products, Inc. audited financial statements for fiscal years
ended June 30, 1996 and June 30, 1997, and unaudited interim financial
statements. In accordance with the instructions to Item 13 of Schedule 14A,
certain financial information has been omitted
<PAGE>
Securities and Exchange Commission
June 1, 1998
Page 2
because it is not currently available and it is not material for the exercise of
prudent judgment in regard to the matters to be acted upon by the shareholders.
The information omitted is 2 years of audited and interim financial statements
of Braemer, Inc., a wholly owned subsidiary of CMI, and audited financial
statements of BIOTEL International, Inc., a holding company that was merged into
CMI in late 1997. BIOTEL never had independent operations, profits or losses.
Prior to its merger with CMI, BIOTEL owned 55% of the CMI.
The Company plans to file, as part of its 8-K, all required financial
information within 75 days of the completion of the CMI share exchange
transaction.
If you have any questions of concerns, please call me at your
convenience.
Very truly yours,
FURBER TIMMER ZAHN, PLLP
Kevin S. Spreng
<PAGE>
PRELIMINARY COPIES
June 1, 1998
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of Commission Only
(as permitted by Rule 14a-6(e) (2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or
Rule 14a-12
BIOSENSOR CORPORATION
---------------------------------------------
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
<PAGE>
PRELIMINARY COPIES
June 1, 1998
1) Amount Previously Paid:
2) Form, Schedule or Registration No.:
3) Filing Party:
4) Date Filed:
<PAGE>
PRELIMINARY COPIES
June 1, 1998
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 22, 1998
Notice is hereby given that a special meeting of shareholders of
Biosensor Corporation (the "Company") will be held on June 22, 1998 at 2:00
p.m., at the Company's principal offices located at 7001 East Fish Lake Road,
Maple Grove, MN 55331- 2833 for the following purposes:
1. To vote upon a proposal to amend the Company's Articles of
Incorporation to change the name of the Company to "BIOTEL
Inc.";
2. To vote upon a proposal to amend the Company's Articles of
Incorporation to effectuate a one-for-six reverse stock split
of all outstanding shares of common stock of the Company; and
3. To vote upon a proposal to amend the Company's Articles of
Incorporation to increase the number of shares common stock
and the number of shares of Preferred Stock the Company is
authorized to issue.
4. To vote upon a proposal to amend the Company's bylaws to
permit the Board of Directors to fill vacancies on the board
resulting from newly created directorships.
The Board of Directors has fixed the close of business on May 21, 1998 as the
record date for the determination of shareholders entitled to notice of and to
vote at the meeting.
By Order of the Board of Directors,
B. Steven Springrose
President
Maple Grove, Minnesota
June __, 1998
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND RETURN YOUR
PROXY ON THE ENCLOSED PROXY CARD WHETHER OR NOT YOU EXPECT TO ATTEND IN PERSON.
SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON
IF THEY DESIRE.
<PAGE>
TABLE OF CONTENTS
Page
Introduction...................................................................1
Background.....................................................................2
Proposals......................................................................3
Proposal No. 1 Regarding Name Change..................................3
Proposal No. 2 Regarding Reverse Stock Split..........................4
Proposal No. 3 Regarding Increase in Authorized Capital Stock.........8
Proposal No. 4 Regarding Amendment of Bylaws.........................10
Shareholder Proposals.........................................................11
Incorporation of Certain Documents by Reference...............................11
Other Matters.................................................................12
ANNEX
Annex I Unaudited Pro Forma Financial Information
Annex II Carolina Medical, Inc. Audited Financial Statements for Fiscal Years
Ended June 30, 1996 and June 30, 1997 and Unaudited Interim
Financial Statements
Annex III Articles I and Article III of the Company's Articles of
Incorporation showing Amendments pursuant to Proposals No. 1 and 3
Annex IV Section 3.06 of the Company's Bylaws showing Amendments pursuant to
Proposals No. 4
<PAGE>
BIOSENSOR CORPORATION
------------------------
PROXY STATEMENT FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 22, 1998
------------------------
INTRODUCTION
------------
This Proxy Statement is furnished to the shareholders of Biosensor
Corporation (the "Company") in connection with the solicitation of proxies by
the Board of Directors of the Company to be voted at a Special Meeting of
shareholders to be held on June 22, 1998, or any adjournment(s). The purpose of
the Special Meeting is to vote upon: I) the change of the Company's name to
BIOTEL, Inc.," II) a one for six reverse stock split of the Company's common
stock, III) increasing the authorized number of shares of common stock and
preferred stock and IV) amending the bylaws to permit the board to fill
vacancies resulting from the creation of new directorships. The Company's
principal offices are located at 7001 East Fish Lake Road, Maple Grove,
Minnesota, 55311. The mailing of this Proxy Statement to shareholders of the
Company commenced on or about June 12, 1998.
Any proxy may be revoked at any time before it is voted by written
notice, mailed or delivered to the President of the Company, or by revocation of
a written proxy by request in person at the Special Meeting; but if not so
revoked, the shares represented by such proxy will be voted according to your
directions. If your proxy card is signed and returned without specifying a vote
or an abstention on any proposal, it will be voted according to the
recommendation of the Board of Directors on each proposal.
Under Minnesota law, each item of business properly presented at a
meeting of shareholders generally must be approved by the affirmative vote of
the holders of a majority of the voting power of the shares present, in person
or by proxy, and entitled to vote on that item of business. However, if the
shares present and entitled to vote on that item of business would not
constitute a quorum for the transaction of business at the meeting, then the
item must be approved by a majority of the voting power of the minimum number of
shares that would constitute a quorum. A shareholder who submits votes by proxy
but does not direct the proxy to vote on a specific item of business is not
considered to be present and entitled to vote with respect to such item of
business. On the other hand, a shareholder who specifically abstains with
respect to an item of business but otherwise gives a proxy authority to vote on
a shareholder's behalf will be counted as being present and entitled to vote on
such item even though the proxy may not vote on such item on the shareholder's
behalf.
The total number of shares of stock outstanding and entitled to vote at
the Special Meeting as of May 21, 1998 consisted of 2,843,055 shares of $.05 par
value common stock. Each share of common stock is entitled to one vote and there
is no cumulative voting. Only shareholders of record at the close of business on
May 21, 1998 will be entitled to vote at the meeting. The presence, in person or
by proxy, of holders of 51% of
<PAGE>
the shares of common stock entitled to vote at the Special Meeting of
shareholders constitutes a quorum for the transaction of business. The proposals
set forth in this Proxy Statement will be adopted upon the affirmative vote of
the holders of a majority of the voting power of the shares entitled to vote
thereon present, in person or by proxy, at the Special Meeting, provided a
quarum is present.
BACKGROUND
On May 29, 1998 the Company entered into a Plan of Reorganization and
Agreement (the "Plan") with Carolina Medical Inc. ("CMI"). The Plan provides for
a stock-for-stock exchange in which the Company will, effective as of July 1,
1998, acquire all outstanding shares of CMI's capital stock in exchange for up
to 150,000 shares of the Company's Series A Preferred Stock. The Plan requires
the Company to submit to its shareholders proposals I) to change the Company's
name to BIOTEL, Inc., II) to effect a one-for-six reverse stock split (the
"Reverse Stock Split"), and III) to increase the authorized number of shares of
common stock to 10,000,000 and the authorized number of preferred stock to
2,000,000. These proposals are set forth below as Proposal No. 1, Proposal No.2
and Proposal No. 3 respectively (Proposals 1, 2 and 3 are referred to herein
collectively as the "Proposals").
On May 27, 1998 by written action the Board of Directors, pursuant to
the Minnesota Business Corporation Act, unanimously approved the Plan and the
creation of the Series A Preferred Stock to be issued pursuant to the Plan. The
board believes this action is in the best interest of the Company because it may
alleviate some of the financial difficulties the Company has experienced. The
Plan was approved by the shareholders of CMI on May 18, 1998. There were no
dissenting CMI shareholders.
Although the Proposals are required by the Plan, the Plan is not
conditioned upon shareholder approval of the Proposals. The Company and CMI are
both obligated, subject to certain conditions in the Plan, to effect the
stock-for-stock exchange on July 1, 1998 regardless of whether the Company
receives shareholder approval for some, all, or any of the Proposals.
Each share of Series A Preferred Stock is convertible into 96 shares of
common stock before the Reverse Stock Split and 16 shares of common stock after
the Reverse Stock Split. Each share of Series A Preferred Stock has full voting
rights, and participates in dividends and liquidations on an as-if-converted
basis. After the completion of the stock-for-stock exchange with CMI, the
current CMI shareholders will effectively own up to approximately 83% of the
Company's issued and outstanding common stock. In addition, the Series A
Preferred Stock will automatically convert into common stock as of the end of
business on the first day following the date that I) there are shares of Series
A Preferred Stock issued and outstanding, and II) the Company's Articles of
Incorporation authorize sufficient common stock to accommodate conversion of all
issued and outstanding shares of Series A Preferred Stock.
CMI is a privately held North Carolina corporation that develops,
manufactures, markets and services digital ultrasound imagers, electronic
instruments for detecting circulatory system disorders and measuring the flow
and pressure of blood, and cardiac
<PAGE>
monitoring systems. CMI will merge into CMI of Minnesota, Inc., a Minnesota
corporation, prior to the effective day of the stock-for stock exchange with
Biosensor. CMI has two subsidiaries: Braemar, Inc., and Advance Medical
Products, Inc. Braemar, Inc., a North Carolina corporation, is a wholly owned
subsidiary of Carolina Medical that develops, manufactures and markets tape
recording devices for ambulatory ECG monitoring devices. CMI purchased the
assets of Braemar effective on or about October 1, 1997. CMI owns approximately
55% of the issued and outstanding common stock of Advanced Medical Product,
Inc., a publicly held Delaware corporation, that develops, manufactures, and
markets ambulatory ECG and blood pressure monitors.
The unaudited pro forma financial information attached as Annex I shows
operations of the Company, Carolina Medical, Braemar, Inc, and Advanced Medical
Products, Inc, on a consolidated basis for the fiscal year ended June 30, 1997
and the nine-month period ended March 31, 1998. Attached as Annex II are the
audited financial statements of Carolina Medical, Inc. for the fiscal years
ended June 30, 1996 and June 30, 1997. The Company's audited financial
statements for fiscal years ended May 30, 1997 and May 30, 1996 and unaudited
interim financial statements are incorporated herein by reference. See
"Incorporation of Certain Documents by Reference." Advanced Medical Product,
Inc.'s audited financial statements for the fiscal years ended June 30, 1996 and
June 30, 1997 and unaudited interim financial statements are incorporated herein
by reference. See "Incorporation of Certain Documents by Reference." Financial
information regarding Braemar, Inc. is included only to the extent that it is
reflected in the unaudited pro forma financial information.
PROPOSALS
PROPOSAL NO. 1
- --------------
CHANGING OF CORPORATE NAME
The Board of Directors has unanimously approved, for submission to the
shareholders, a resolution regarding amending Article I of the Company's
Articles of Incorporation to change the name of the Company to "BIOTEL, Inc."
(the "Name Change Amendment"). Article I of the Company's Articles of
Incorporation, as amended by the Name Change Amendment, is attached in Annex II.
The change of the corporate name will not in any way affect the
validity or transferability of stock certificates currently outstanding, the
capital structure of the Company, the rights or obligations of the Company with
respect to its existing contractual obligations, nor will it impact third
parties' obligations with respect to the Company. Similarly, it will not impact
the Company's ability to use its current tradename and trademarks.
Upon adoption of this proposal, the Board of Directors will authorize
the officers of the Company to file such amendment with the Minnesota Secretary
of State. In addition, notification of the name change will be filed with the
Securities and Exchange Commission.
<PAGE>
The Board of Directors believes that it is in the best interests of the
Company and its shareholders to amend the Company's Articles of Incorporation to
change the Company's name to "BIOTEL Inc." to reflect the broadening nature of
the Company's business.
THE BOARD OF DIRECTORS RECOMMENDS THAT
YOU VOTE "FOR" THE FOREGOING PROPOSAL NO. 1.
PROPOSAL NO. 2
- --------------
PROPOSAL TO EFFECT A
ONE-FOR-SIX REVERSE STOCK SPLIT
The Board of Directors has unanimously approved, for submission to the
shareholders, a resolution regarding a one-for-six reverse stock split (the
"Reverse Stock Split"). The intent of the Reverse Stock Split is to: I) reduce
the number of shares of common stock outstanding, II) reduce the number of
shares of common stock issuable upon conversion of the shares of Series A
Preferred Stock that the Company is obligated to issue on July 1, 1998 pursuant
to the Plan, and III) to increase the marketability and liquidity of the common
stock.
The Minnesota Business Corporation Act does not require the Reverse
Stock Split be submitted to a shareholder vote. The Company is doing so pursuant
to the terms of the Plan. The shareholders' vote on this Proposal No. 2 is not
binding on the Board of Directors. If the shareholders do not approve the
Reverse Stock Split, the Board of Directors may, in any event, exercise its
rights under the Minnesota Business Corporation Act and effect the Reverse Stock
Split.
If this Proposal No. 2 is approved, the Reverse Stock Split will become
effective as of 5:00 p.m. on the date it is approved (the "Reverse Split Date").
On the Reverse Split Date and without any further action by Company or
its shareholders, the following will occur: I) the shares of common stock held
by shareholders of record as of the Reverse Split Date will be converted into
the right to receive an amount of shares of common stock equal to the number of
their shares divided by six, II) the number of shares of common stock issuable
by the Company upon conversion of the authorized Series A Preferred Stock will
be reduced from 96 to 16 shares of common stock for each share of Series A
Preferred Stock, III) the number of authorized shares of common stock will be
reduced from 4,850,000 to 808,333.333 (prior to the increase in authorized
number of shares of common stock as set forth in Proposal No. 3 below), IV) the
outstanding shares of common stock will be reduced from 2,843,055 to 473,842,
and V) the aggregate number of shares of common stock issuable upon conversion
of the Series A Preferred Stock will be reduced from 14,400,000 to 2,400,000
(the number of authorized shares of Series A Preferred Stock will remain
150,000).
<PAGE>
TABLE SHOWING EFFECT OF REVERSE STOCK SPLIT
<TABLE>
<CAPTION>
- --------------------------- ------------------------------------- ------------------------------------------
Before Split After Split
- --------------------------- ------------------------------------- ------------------------------------------
Class of Stock Authorized Issued Authorized Issued
- --------------------------- --------------- --------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Common Stock 4,850,000 2,843,055 808,333.333 473,842(4)
- --------------------------- --------------- --------------------- --------------------- --------------------
Series A Preferred 150,000(1) none(2) 150,000(3) none(2)
- --------------------------- --------------- --------------------- --------------------- --------------------
</TABLE>
Footnotes
(1) Before the Reverse Stock Split each share of Series A Preferred Stock
is convertible into 96 shares of common stock, or an aggregate of
14,400,000 shares of common stock.
(2) As of the date of this Proxy Statement there are no shares of Series A
Preferred Stock issued and outstanding, but the Company is obligated to
issue up to 150,000 shares of Series A Preferred Stock on July 1, 1998
pursuant the Plan between the Company and CMI. See discussion in
"Background," above.
(3) After the Reverse Stock Split each share of Series A Preferred Stock
will be convertible into 16 shares of common stock, or an aggregate of
2,400,000 shares of common stock.
(4) After the Reverse Stock Split (but before the increase in capital stock
proposed in Proposal No. 3) 334,490 shares of common stock will be
authorized and unissued, assuming that no additional shares of common
stock are issued by the Company after the Reverse Stock Date.
Approval of the Reverse Stock Split would not affect any continuing
shareholder's percentage ownership interest in the Company or proportional
voting power, except for minor differences resulting from the issuance of scrip
for fractional shares. The shares of common stock which would be issued upon
approval of the Reverse Stock Split would be fully paid and non-assessable. The
voting rights and other privileges of the continuing holders of common stock
would not be affected substantially by adoption of the Reverse Stock Split or
subsequent implementation thereof. Consummation of the Reverse Stock Split will
have no material federal tax consequences to shareholders.
The common stock trades on the local over-the-counter market and on the
Record Date, May 21, 1998, the reported closing price of the common stock was
$.28 per share. The number of record holders of the common stock on the Record
Date was approximately 435. The Company does not anticipate that the Reverse
Stock Split would result in a significant reduction in the number of such
holders, and does not currently intend to effect the Reverse Stock Split if it
would result in a reduction in the number of holders large enough to jeopardize
the Company's status as a "public" company
On the Reverse Split Date, each share of the common stock issued and
outstanding immediately prior thereto (the "Old Common Stock") will be
reclassified as and changed into the appropriate fraction of a share of the
Company's common stock (the "New Common Stock"), subject to the treatment of
fractional share interests described below. Shortly after the Reverse Split
Date, the Company will send transmittal forms to
<PAGE>
the holders of the Old Common Stock for use in transmitting certificates
representing shares of Old Common Stock ("Old Certificates") to the Company's
transfer agent (the "Exchange Agent"). The letter of transmittal will contain
instructions for the surrender of Old Certificates to the Exchange Agent in
exchange for certificates representing the appropriate number of whole shares of
New Common Stock and scrip in lieu of any fraction of a share of New Common
Stock to which such holders would otherwise be entitled. No new certificates
will be issued to a shareholder until such shareholder has surrendered all Old
Certificates, together with a properly completed and executed letter of
transmittal, to the Exchange Agent.
No certificates or cash representing fractional share interests in the
New Common Stock will be issued, and no such fractional share interest will
entitle the holder thereof to vote, or to any rights of a shareholder of the
Company. In lieu of any such fractional share interest, each holder of Old
Common Stock who would otherwise be entitled to receive a fractional share of
New Common Stock will be issued scrip upon surrender of certificates formerly
representing Old Common Stock held by such holder which scrip shall equal a
credit toward an additional share of the Company's New Common Stock, in an
amount equal to the product of such fraction multiplied by the closing price of
the Old Common Stock on the local over-the-counter market as of the Reverse
Split Date (or in the event that the common stock is not so traded at such time,
such closing price on the next preceding day on which such stock was traded on
the such market). The Company will issue a certificate for a full share of
common stock upon surrender of scrips aggregating a full share. The scrip shall
be freely transferable.
Upon proper completion and execution of the letter of transmittal and
return thereof, along with all Old Certificates, to the Exchange Agent,
shareholders will receive a new certificate or certificates representing the
number of whole shares of New Common Stock into which their shares of common
stock represented by the Old Certificates have been converted as a result of the
Reverse Stock Split, and scrip in lieu of any fraction of a share of New Common
Stock to which such holders would otherwise be entitled. Until surrendered,
outstanding Old Certificates held by shareholders will be deemed for all
purposes to represent the number of whole shares of New Common Stock to which
such shareholders are entitled as a result of the Reverse Stock Split.
Shareholders should not send their Old Certificates to the Exchange Agent until
they have received the letter of transmittal. Old Certificates not presented for
surrender as soon as practicable after the letter of transmittal is sent shall
be exchanged at the first time they are presented for transfer. Shareholders
whose shares are held of record by their brokerage firm or other nominees need
not take any action to exchange such shares. The brokerage firm or other
nominee, as the record holder of such shares, will receive the letter of
transmittal and will be required to surrender the Old Certificates representing
such shares, together with the completed and executed letter of transmittal, in
order to receive new certificates. No service charges will be payable by holders
of shares of common stock in connection with the exchange of certificates, all
expenses of which will be borne by the Company.
The principal purpose of the Reverse Stock Split is to reduce the
number of shares of common stock outstanding. The Board of Directors believes
that the total number of shares currently outstanding is disproportionately
large relative to the Company's present
<PAGE>
market capitalization. The Board of Directors believes that a decrease in the
number of outstanding shares of common stock, without any material alteration of
the proportionate economic interest in the Company held by individual
shareholders, may increase the trading price of the outstanding shares to a
price roughly proportional to the Reverse Stock Split, although no assurance can
be given that the market price of the common stock will rise in proportion to
the reduction in the number of outstanding shares resulting from the Reverse
Stock Split.
The shares of common stock of the Company outstanding have not traded
on any exchange since it was de-listed by NASDAQ in 1987. During the last twelve
months, the Company's common stock has been trade in the local over-the-counter
market listed at prices ranging from $.0625 bid to $.45 asked. There have been
no active market makers and trading volume has been extremely light.
The Board of Directors believes it would be highly advantageous to the
Company's shareholders to obtain NASDAQ SmallCap listing for the common stock.
One requirement for listing involves a $4.00 per share minimum price. While the
Reverse Stock Split will not result in a per share price equal to or in excess
of $4.00 per share or in the Company satisfying other NASDAQ SmallCap listing
criteria, the Board of Directors believes the Reverse Stock Split is a
preliminary step necessary to be in a position at some time to attempt to list
the common stock on the NASDAQ SmallCap market.
Additionally, the Board of Directors believes that the current per
share price of the common stock may limit the effective marketability of the
common stock because of the reluctance of many brokerage firms and institutional
investors to recommend lower-priced stocks to their clients or to hold them in
their own portfolios. Certain policies and practices of the securities industry
may tend to discourage individual brokers within those firms from dealing in
lower-priced stocks. Some of those policies and practices involve time-consuming
procedures that make the handling of lower-priced stocks economically
unattractive. The brokerage commission on a sale of a lower-priced stock may
represent a higher percentage of the sale price than the brokerage commission on
a higher-priced issue. Any reduction in brokerage commissions resulting from the
Reverse Stock Split may be offset, however, in whole or in part, by increased
brokerage commissions required to be paid by shareholders selling "odd lots"
created by the Reverse Stock Split.
The Board of Directors believes that the decrease in the number of
shares of common stock outstanding as a consequence of the proposed Reverse
Stock Split and the resulting anticipated increased price level will encourage
greater interest in the common stock by the financial community and the
investment public and possibly promote greater liquidity for the holders of the
common stock. It is possible, however, that liquidity could be affected
adversely by the reduced number of shares outstanding after the Reverse Stock
Split. Although any increase in the market price of the common stock resulting
from the Reverse Stock Split may be proportionately less than the decrease in
the number of shares outstanding, the proposed Reverse Stock Split could result
in a market price for the shares that would be high enough to overcome the
reluctance, policies and practices of brokerage houses and investors referred to
above and to diminish the adverse impact of correspondingly high trading
commissions on the market for the shares.
<PAGE>
There can be no assurances, however, that the foregoing effects will
occur or that the market price of the common stock immediately after
implementation of the proposed Reverse Stock Split will be maintained for any
period of time, or that such market price will approximate six times the market
price before the proposed Reverse Stock Split.
The following description of federal income tax consequences is based
on the Internal Revenue Code of 1986, as amended (the "Code"), the applicable
Treasury Regulations promulgated thereunder, judicial authority and current
administrative rulings and practices as in effect on the date of this Proxy
Statement. The discussion is for general information only and does not discuss
consequences which may apply to special classes of taxpayers (e.g., non-resident
aliens, broker-dealers or insurance companies). This summary does not discuss
any consequence of the Reverse Stock Split under any state, local or foreign tax
laws. Shareholders are urged to consult their own tax advisors to determine the
particular consequences to them.
Neither the exchange of shares of Old Common Stock for shares of New
Common Stock nor the issuance of scrip will result in recognition of gain or
loss. Gain or loss will result upon the sale or other disposition of scrip
(except if such scrip is exchanged with the Company in return for the issuance
of additional shares of common stock). In such event a shareholder would
recognize gain or loss, as the case may be, measured by the difference between
the amount of cash or other property received and the basis of his or her Old
Common Stock allocable to the fractional share represented by the scrip. Such
gain or loss will be capital gain or loss if such shareholder's Old Common Stock
was held as a capital asset, and any such capital gain or loss will generally be
long-term capital gain or loss to the extent such shareholder's holding period
for his or her Old Common Stock exceeds twelve (12) months.
The holding period of the shares of New Common Stock will include the
shareholder's holding period for the shares of Old Common Stock exchanged
therefor, provided that the shares of Old Common Stock were held as a capital
asset. The total basis of the shares of New Common Stock will be the same as the
total basis of the shares of Old Common Stock exchanged therefor, reduced by the
basis allocable to the receipt of scrip in lieu of fractional shares described
above.
THE BOARD OF DIRECTORS RECOMMENDS THAT
YOU VOTE "FOR" THE FOREGOING PROPOSAL NO. 2.
PROPOSAL NO. 3
- --------------
PROPOSAL TO AMEND
ARTICLES OF INCORPORATION TO
INCREASE AUTHORIZED NUMBER OF SHARES
OF COMMON STOCK AND PREFERRED STOCK
The Board of Directors has unanimously approved, for submission to the
shareholders, a resolution regarding amending Article III of the Company's
Articles of
<PAGE>
Incorporation to increase the authorized number of shares of common stock of the
Company from 808,333.333, following the Reverse Stock Split, to 10,000,000
shares, and to increase the authorized number of shares of Preferred Stock of
the Company from 150,000, following the Reverse Stock Split, to 2,000,000
shares. Article III of the Company's Articles of Incorporation, as amended by
this proposal, is attached in Annex III.
The Company's Articles of Incorporation currently provide that the
Company is authorized to issue up to 5,000,000 shares of capital stock, of which
4,850,000 has been designated Class A common stock and 150,000 of which has been
designated as Series A Preferred Stock. If the Reverse Stock Split is approved,
there will be 808,333.333 shares of common stock authorized of which 473,842
will be issued and outstanding. The authorized number of Series A Preferred
Stock will be unaffected by the Reverse Stock Split. The number of shares of
common stock issuable upon conversion of the Series A Preferred Stock will,
however, be reduced from 14,400,000 to 2,400,000. In addition, if the Reverse
Stock Split is approved, the Company will have 334,490 whole shares of common
stock that are authorized but unissued, of which 13,750 will be reserved for
issuance upon exercise of outstanding options and warrants. In order to fulfill
its obligations under the outstanding options and warrants, and to convert the
Series A Preferred Stock, which the Board of Directors believes is in the best
interest of the Company, the Company needs at least 2,413,750 shares of
authorized but unissued common stock.
The Board of Directors believes conversion of the Series A Preferred
Stock into common stock is in the best interests of the Company and its
shareholders because it will simplify the capitalization of the Company, which
is often more attractive to both the public and private equity markets.
The Board of Directors recommends the increase in authorized number of
shares of common stock and Preferred Stock to enable the Company to convert the
Series A Preferred Stock and to have additional shares available for issuance in
connection with future acquisitions, public or private offerings, conversions of
convertible securities (including the conversion of the Series A Preferred
Stock), employee benefit plans, stock splits effected in the form of stock
dividends, and other general corporate purposes. Increasing the authorized
number of shares of common stock and Preferred Stock will give the Company
greater flexibility and will allow the Company to issue additional capital stock
for the purposes described above.
Other than in connection with: i) the Plan and ii) the possible merger
of Advance Medical Products, Inc. (see "Background" and "Incorporation of
Certain Documents by Reference" for information regarding Advanced Medical
Products, Inc.) into the Company, the Company has no current plans, agreements
or arrangements for the issuance of additional shares of common stock or
Preferred Stock, other than the issuance of shares pursuant to its stock option
and other employee benefit plans. The Company is at all times investigating
additional sources of financing and future acquisitions which the Board of
Directors believes will be in the best interests of the Company and its
shareholders. In addition, the Company is currently seeking and plans to
continue to seek additional financing, which could involve the issuance of
either or both debt or equity of the Company.
<PAGE>
The additional authorized shares of common stock and Preferred Stock
would also be available for issuance (subject to shareholder approval if
required by law) at such times, on such terms and for such proper corporate
purposes as the Board of Directors may approve, including possible future
financing and acquisition transactions. Depending upon the nature and terms
thereof, such transactions could enable the Board of Directors to render more
difficult an attempt by a third party to obtain control of the Company. For
example, the issuance of shares of common stock or Preferred Stock in a public
or private sale, merger or similar transaction would increase the number of the
Company's outstanding shares, thereby diluting the interest of a party seeking
to acquire control of the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT
YOU VOTE "FOR" THE FOREGOING PROPOSAL NO. 3.
PROPOSAL NO. 4
- --------------
PROPOSAL TO AMEND BYLAWS
TO PERMIT THE BOARD TO
FILL CERTAIN VACANCIES
The Board plans to amended Section 3.02 of the Bylaws to increase the
size of the Company's Board of Directors from the number of directors last
elected by the shareholders (presently 2) to between 2 and 10. When this
amendment is effected the board will be able to create new directorships. The
Company's bylaws (the "Bylaws") are silent on whether the board may fill
vacancies resulting from the creation of new directorships. The board believes
it would be in the best interest of the Company to have a clear mechanism for
filling such directorships until the next annual shareholder meeting or special
shareholder meeting called for the purpose of electing directors and suggests
that the Bylaws be amended to provide such a mechanism. Section 3.06 of the
Bylaws, as amended by this proposal, is attached in Annex IV.
The Board of Directors believes that allowing the board to fill
vacancies resulting from the creation of new directorships is in the best
interests of the Company because it will facilitate the appointment or new
directors representing the interest of new shareholders and the appointment
outside directors, both of which are contemplated in connection with the Plan.
<PAGE>
THE BOARD OF DIRECTORS RECOMMEND THAT YOU VOTE
"FOR" THE FOREGOING PROPOSAL NO. 4
SHAREHOLDER PROPOSALS FOR THE
1998 ANNUAL MEETING
The proxy rules of the Securities and Exchange Commission permit
shareholders, after timely notice to issuers, to present proposals for
shareholder action in issuer proxy statements where such proposals are
consistent with applicable law, pertain to matters appropriate for shareholder
action and are not properly omitted by issuer action in accordance with the
proxy rules. The Company's annual meeting for the fiscal year ended May 31,
1998, is expected to be held on or about October 8, 1998, and all proxy
materials in connection with that meeting are expected to be mailed on or about
September 15, 1998. Shareholder proposals prepared in accordance with the proxy
rules must be received by the Company at the registrant's principal executive
offices a reasonable period of time in advance of the date of the Company plans
to release to shareholders in connection with its annual meeting of
shareholders.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the
Securities and Exchange Commission (the "Commission") pursuant to the Securities
Exchange Act of 1934, as amended, (the "Exchange Act") are incorporated into
this Proxy Statement:
a) The Company's annual report on Form 10-KSB for the fiscal year ended
May 31, 1997.
b) The Company's quarterly report on Form 10-QSB for the quarter ended
February 28, 1998.
The following documents previously filed by the Advanced Medical
Products, Inc. ("AMPI") with the Commission Exchange Act are incorporated into
this Proxy Statement:
a) AMPI's annual report on Form 10-KSB for the fiscal year ended June
30, 1997.
b) AMPI's quarterly report on Form 10-QSB for the quarter ended March
31, 1998.
Shareholders may receive without charge a copy of any one or more of
the documents incorporated herein by reference by calling the Company at
420-2600 or writing 7001 East Fish Lake Road, Maple Grove, MN 55331-2833
<PAGE>
OTHER MATTERS
All proxies properly executed will be voted in the manner directed by
shareholders. If no direction is made, proxies will be voted "FOR" proposals 1,
2, 3, and 4.
All expenses in connection with solicitation of proxies will be borne
by the Company. The Company will pay brokers, fiduciaries, or other custodians
their reasonable expenses for sending proxy material to, and obtaining
instructions from, persons for whom they hold stock of the Company. The Company
expects to solicit proxies by mail, but directors, officers, and other employees
of the Company may also solicit in person, by telephone, by facsimile or by
mail.
By Order of the Board of Directors,
B. Steven Springrose
PRESIDENT
<PAGE>
ANNEX I
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following pro forma consolidated financial statements (the "Pro Forma
Financial Statements") are based on the financial statements of Carolina
Medical, Inc., ("CMI"), Braemar, Inc., ("BMI"), Advanced Medical Products, Inc.,
(AMPI"), and Biosensor Corporation, ("BSC") adjusted to give pro forma affects
to the acquisition and merger transactions described below.
CMI acquired the operating assets and liabilities of BMI on October 1, 1997, and
also acquired over 50% of the outstanding common stock of AMPI during 1997. BSC
will aquire the outstanding common stock of CMI on July 1, 1998 in a
stock-for-stock exchange. However, because after the exchange CMI shareholders
will own approximately 82% of BSC, the exchange will be accounted for as
reverse acquisition transaction in which CMI will be the accounting acquiror.
BSC will be the legal surviving company and will be renamed BIOTEL, Inc. These
events are collectively referred to herein as the Transactions.
The unaudited Pro Forma Consolidated Statement of Operations for the year ended
June 30, 1997, are derived from the audited statements of operations of CMI and
AMPI for the year then ended, the audited statement of operations for BSC for
the year ended May 31, 1997, and the unaudited statement of operations for BMI
for the year ended June 30, 1997 and assume the Transactions were consummated on
July 1, 1996. The unauditied Pro Forma Statements of Consolidated Operations for
the nine months ended March 31, 1998, are derived from the unaudited statements
of operations of CMI, BMI, and AMPI for the nine months ended March 31, 1998,
and the unaudited statement of operations of BSC for the nine months ended
February 28, 1998, and assume the Transactions were consummated on July 1, 1997.
The unaudited Pro Forma Consolidated Balance Sheet as of March 31, 1998, is
derived from the unaudited balance sheets of CMI, BMI, and AMPI as of March 31,
1998, and the February 28, 1998 balance sheet of BSC, and assume the
Transactions were consummated on that date, except that the acquisition of the
assets of BMI are assumed to occur on October 1, 1997, the actual acquisition
date.
The unaudited Pro Forma Financial Statements do not purport to represent what
the companies' results of operations or financial condition would actually have
been if the Transactions had occurred on the dates indicated or to project the
companies' results or financial conditions for or at any future period or date.
The unaudited Pro Forma Financial Statements are presented for comparative
purposes only. The pro forma adjustments, as described in the accompany data,
are based on available information and certain assumptions that management
believes are reasonable.
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(A) The adjustment reflects the additional amortization expense of goodwill
resulting from the allocation of the purchase price of BMI and BSC.
(B) The adjustment reflects additional interest expense on the indebtedness
incurred on the acquisition of BMI assuming the debt was created at the
beginning of the period and no principal reductions occurred during the
period.
(C) These adjustments reflect the elimination of historical equity
accounts, investment and operating accounts in order to consolidate the
companies.
(D) The adjustments are to eliminate amounts owed to and from CMI, BMI, and
AMPI.
(E) The adjustment reflects the acquisition of BSC, which will be accounted
for as a purchase and is assumed to occur on March 31, 1998. The
purchase price of BSC is assumed to be approximately $430,364, based on
$.15 per share. The equity of BSC at March 31, 1998 is assumed to be
$305,364, and the difference of $125,000 is allocated to goodwill. No
value is assigned to goodwill resulting from the AMPI acquisition.
(F) The preferred stock of AMPI is assumed to have no value as of March 31,
1998.
<PAGE>
PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PROFORMA
CAROLINA ADVANCED MED. BIOSENSOR PROFORMA CONSOLIDATED
MEDICAL, INC. BRAEMAR, INC. PRODUCTS, INC. CORPORATION ADJUSTMENTS BIOTEL, INC.
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
SALES $ 1,886,047 $ 5,730,464 $ 2,976,847 $ 2,504,907 $ 13,098,265
COST OF SALES AND SERVICES 950,274 3,758,855 1,642,960 1,235,205 7,587,294
------------ ------------ ------------ ------------ ------------
GROSS PROFIT 935,773 1,971,609 1,333,887 1,269,702 5,510,971
------------ ------------ ------------ ------------ ------------
OPERATING EXPENSES 784,378 1,573,892 1,987,565 1,415,886 $75,000 (A) 5,836,721
------------ ------------ ------------ ------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS 151,396 397,717 (653,678) (146,184) (75,000) (325,750)
------------ ------------ ------------ ------------ ------------ ------------
OTHER INCOME AND (EXPENSE):
INTEREST INCOME 19,806 2,593 22,399
INTEREST EXPENSE (32,848) (52,991) (65,168) (2,587) (230,000)(B) (383,594)
EQUITY-SUBSIDIARY OPERATIONS-AMP (426,009) 426,009 (C)
OTHER (369) 37,934 (353,761) (316,196)
------------ ------------ ------------ ------------ ------------ ------------
NET OTHER INCOME (EXPENSE) (439,420) (52,991) (27,234) (353,755) 196,009 (677,391)
------------ ------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS) BEFORE TAXES (288,025) 344,726 (680,912) (499,939) 121,009 (1,003,141)
PROVISION FOR INCOME TAXES (32,528) (136,164) (168,692)
------------ ------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (320,553) $ 208,562 $ (680,912) $ (499,939) $ 121,009 $ (1,171,833)
=========================== ============ ============ ============ ============
BASIC AND DILUTED LOSS PER SHARE $ (0.41)
============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 2,823,060
============
</TABLE>
SEE NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
PROFORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
PROFORMA
CAROLINA ADVANCED MED. BIOSENSOR PROFORMA CONSOLIDATED
MEDICAL, INC. BRAEMAR, INC. PRODUCTS, INC. CORPORATION ADJUSTMENTS BIOTEL, INC.
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
CASH $ 137,269 $ 192,448 $ 49,186 $ 37,219 $ 416,122
ACCOUNTS RECEIVABLE, TRADE 200,203 877,023 579,968 266,507 ($ 122,726)(D) 1,800,975
NOTE RECEIVABLE - ADVANCED MEDICAL 150,000 (150,000)(D)
ACCOUNTS RECEIVABLE, OTHER 14,856 80,000 (94,482)(D) 374
INVENTORY 703,281 726,222 540,818 246,153 2,216,474
PREPAIDS 11,933 63,191 48,007 28,312 151,443
----------- ----------- ----------- ----------- ----------- -----------
TOTAL CURRENT ASSETS 1,217,542 1,858,884 1,297,979 578,191 (367,208) 4,585,388
----------- ----------- ----------- ----------- ----------- -----------
PROPERTY & EQUIPMENT,NET 170,672 402,863 204,245 44,131 821,911
----------- ----------- ----------- ----------- -----------
OTHER ASSETS:
DEFERRED CHARGES (NET) 67,500 67,500
CASH VALUE OF LIFE INSURANCE-NET 23,547 23,547
INVESTMENT IN AMP 63,908 (63,908)(C)
INVESTMENT IN BRAEMAR 156,375 (156,375)(C)
NOTE RECEIVABLE-BRAEMAR 1,600,000 (1,600,000)(D)
GOODWILL 966,667 125,000 (E) 1,091,667
OTHER 88,292 205,072 67,232 18,000 (197,240)(D) 181,356
----------- ----------- ----------- ----------- ----------- -----------
TOTAL OTHER ASSETS 1,932,122 1,239,239 67,232 18,000 (1,892,523) 1,364,070
----------- ----------- ----------- ----------- ----------- -----------
TOTAL ASSETS $ 3,320,336 $ 3,500,986 $ 1,569,456 $ 640,322 ($2,259,731) $ 6,771,369
=========== =========== =========== =========== =========== ===========
</TABLE>
SEE NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
PROFORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
PROFORMA
CAROLINA ADVANCED MED. BIOSENSOR PROFORMA CONSOLIDATED
MEDICAL, INC. BRAEMAR, INC. PRODUCTS, INC. CORPORATION ADJUSTMENTS BIOTEL, INC.
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CURRENT LIABILITIES:
NOTES PAYABLE $ 402,615 $ 402,615
CURRENT MATURITIES OF LONG-TERM DEBT $ 151,893 $ 100,000 24,000 275,893
NOTE PAYABLE-KLAWANS 150,000 150,000
NOTE PAYABLE-AMP 80,000 (80,000)(D)
TRADE ACCOUNTS PAYABLE 73,955 561,826 543,049 $ 85,369 (122,726)(D) 1,141,473
ACCRUED EXPENSES 158,515 179,014 97,912 90,917 (14,482)(D) 511,876
DEFERRED SERVICE CONTRACTS 142,699 163,628 306,327
WARRANTY RESERVE 30,548 0 31,672 62,220
OTHER PAYABLES 14,458 42,600 69,544 126,602
----------- ----------- ----------- ----------- ----------- -----------
TOTAL CURRENT LIABILITIES 802,068 883,440 1,300,748 207,958 (217,208) 2,977,006
----------- ----------- ----------- ----------- ----------- -----------
LONG-TERM LIABILITIES:
LONG-TERM DEBT, LESS CURRENT MATURITIES 257,636 860,171 75,576 1,193,383
NOTE PAYABLE-BRAEMAR 196,240 (196,240)(D)
NOTE PAYABLE-ORDWAY 1,600,000 1,600,000
NOTE PAYABLE-BIOTEL/CMI 1,600,000 150,000 (1,750,000)(D)
OTHER LONG-TERM LIABILITIES 148,015 127,000 275,015
----------- ----------- ----------- ----------- ----------- -----------
TOTAL LONG-TERM LIABILITIES 2,053,876 2,460,171 373,591 127,000 (1,946,240) 3,068,398
----------- ----------- ----------- ----------- ----------- -----------
TOTAL LIABILITIES 2,855,944 3,343,611 1,674,339 334,958 (2,163,448) 6,045,404
----------- ----------- ----------- ----------- ----------- -----------
STOCKHOLDERS' EQUITY:
COMMON STOCK 314,922 1,000 59,625 141,153 (375,547)(C) 141,153
PREFERRED STOCK 2,289,410 (2,289,410)(F)
ADDITIONAL PAID-IN CAPITAL 312,859 2,501,175 2,940,447 (5,006,280)(C) 748,201
RETAINED EARNINGS (DEFICIT) (163,388) 156,375 (4,955,093) (2,776,236) 7,574,954 (C) (163,388)
----------- ----------- ----------- ----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY 464,392 157,375 (104,883) 305,364 (96,283) 725,965
----------- ----------- ----------- ----------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 3,320,336 $ 3,500,986 $ 1,569,456 $ 640,322 ($2,259,731) $ 6,771,369
=========== =========== =========== =========== =========== ===========
</TABLE>
SEE NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
PROFORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PROFORMA
CAROLINA ADVANCED MED. BIOSENSOR PROFORMA CONSOLIDATED
MEDICAL, INC. BRAEMAR, INC. PRODUCTS,INC. CORPORATION ADJUSTMENTS BIOTEL, INC.
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
SALES $ 1,385,464 $ 4,507,844 $ 1,645,896 $ 1,547,901 $ 9,087,105
COST OF SALES AND SERVICES 798,113 2,851,725 817,789 782,856 5,250,483
----------- ----------- ----------- ----------- -----------
GROSS PROFIT 587,351 1,656,119 828,107 765,045 3,836,622
----------- ----------- ----------- ----------- -----------
OPERATING EXPENSES 565,078 1,216,191 929,610 958,320 $22,250 (A) 3,691,449
----------- ----------- ----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS 22,273 439,928 (101,503) (193,275) 145,173
----------- ----------- ----------- ----------- -----------
OTHER INCOME AND (EXPENSE):
INTEREST INCOME 8,661 8,661
INTEREST EXPENSE (44,227) (91,392) (81,901) (57,500)(B) (275,020)
EQUITY-SUBSIDIARY OPERATIONS-BRM 55,147 (55,147)(C)
EQUITY-SUBSIDIARY OPERATIONS-AMP (199,592) (199,592)(C)
OTHER (55) (12,469) 152,950 140,426
----------- ----------- ----------- ----------- -----------
NET OTHER INCOME (EXPENSE) (180,066) (103,861) (81,901) 152,950 (125,933)
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS) BEFORE TAXES (157,793) 336,067 (183,404) (40,325) 19,240
PROVISION FOR INCOME TAXES 269 (132,747) (407) (132,885)
----------- ----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (157,524) $ 203,320 $ (183,404) $ (40,732) ($ 289,989) $ (113,645)
=========== =========== =========== =========== =========== ===========
BASIC AND DILUTED LOSS PER SHARE ($ 0.04)
===========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 2,823,060
===========
</TABLE>
SEE NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
ANNEX II
CAROLINA MEDICAL, INC.
King, North Carolina
AUDITED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
AND FOR THE YEAR AND
THE NINE MONTHS THEN ENDED
<PAGE>
Audited Financial Statements
CAROLINA MEDICAL, INC.
June 30, 1997 and 1996
and For The Year and The Nine Months Then Ended
AUDITED FINANCIAL STATEMENTS
Independent Auditors' Report..................................................1
Balance Sheets................................................................2
Statements of Income and Retained Earnings (Accumulated Deficits).............4
Statements of Cash Flows......................................................5
Notes to Financial Statements.................................................7
<PAGE>
The Board of Directors
CAROLINA MEDICAL, INC.
King, North Carolina
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheets of CAROLINA MEDICAL, INC. as of
June 30, 1997 and 1996, and the related statements of income and retained
earnings (accumulated deficits) and cash flows for the year and the nine months
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CAROLINA MEDICAL, INC. as of
June 30, 1997 and 1996, and the results of its operations and its cash flows for
the year and the nine months then ended in conformity with generally accepted
accounting principles.
August 21, 1997, except for Note N,
as to which the date is December 5, 1997
Royster Smith Shelton & Co.
<PAGE>
BALANCE SHEETS
CAROLINA MEDICAL, INC.
June 30,
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 138,667 $ 276,210
Accounts receivable 286,812 301,107
Refundable income taxes 8,580 28,000
Inventories--Note C 805,760 556,136
Prepaid expenses 32,279 29,086
Deferred income taxes--Note I 56,152 49,955
---------- ----------
Total Current Assets 1,328,250 1,240,494
---------- ----------
PROPERTY AND EQUIPMENT--Note D 151,845 165,129
---------- ----------
DEFERRED TAXES-Noncurrent--Note I 32,141 42,245
---------- ----------
OTHER ASSETS
Equity investment--Note M 15,842
Cash value of life insurance,
net of policy loans--Note E 23,547 25,772
Other 40,899 44,130
---------- ----------
64,446 85,744
---------- ----------
$1,576,682 $1,533,612
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt--Note G $ 209,171 $ 140,540
Note payable--Note F 18,333 18,316
Trade accounts payable 117,777 139,513
Accrued salaries and other expenses 76,501 86,615
Accrued expenses - affiliates 7,622
Accrued vacation 34,104 34,849
Accrued royalties 32,225 8,913
Warranty reserve 49,924 42,763
Accrued commissions 11,503 7,354
Deferred service contract revenue 154,763 166,110
Advances from customers 16,143 20,373
Income taxes payable--Note I 9,200
----------- -----------
Total Current Liabilities 729,644 672,968
----------- -----------
LONG-TERM DEBT, less current maturities--Note G 321,715 413,720
----------- -----------
DEFERRED CONTRACT REVENUE 1,631 2,639
----------- -----------
COMMITMENTS AND CONTINGENCIES--Note H
STOCKHOLDERS' EQUITY
Common stock, $.20 par value; 4,000,000 shares
authorized; 1,147,968 issued and outstanding 229,594 229,594
Additional paid-in capital 259,309 259,309
Retained earnings (accumulated deficit) 34,789 (44,618)
----------- -----------
523,692 444,285
----------- -----------
$ 1,576,682 $ 1,533,612
=========== ===========
</TABLE>
See notes to financial statements
<PAGE>
STATEMENTS OF INCOME AND RETAINED EARNINGS (ACCUMULATED DEFICIT)
CAROLINA MEDICAL, INC.
For The Year Ended June 30, 1997
and The Nine Months Ended June 30, 1996
<TABLE>
<CAPTION>
1997 1996
(ONE YEAR) (Nine Months)
----------- -----------
<S> <C> <C>
GROSS SALES:
Product sales $ 913,479 $ 942,355
Service contracts and other 972,568 884,931
----------- -----------
1,886,047 1,827,286
COST OF SALES AND SERVICES 950,274 997,938
----------- -----------
GROSS PROFIT 935,773 829,348
----------- -----------
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES:
Research and development 169,361 144,518
Marketing and sales 242,926 180,189
General and administrative 359,836 334,139
----------- -----------
772,123 658,846
----------- -----------
OPERATING INCOME 163,650 170,502
LOSS FROM EQUITY INVESTMENT (15,842) (134,158)
OTHER EXPENSES, net--Note K (35,873) (23,496)
----------- -----------
NET INCOME BEFORE INCOME TAX BENEFIT 111,935 12,848
INCOME TAX BENEFIT (PROVISION)--Note I (32,528) 53,183
----------- -----------
NET INCOME 79,407 66,031
ACCUMULATED DEFICITS AT
BEGINNING OF YEAR (44,618) (110,649)
----------- -----------
RETAINED EARNINGS (ACCUMULATED DEFICIT) AT
END OF YEAR $ 34,789 $ (44,618)
=========== ===========
</TABLE>
See notes to financial statements
<PAGE>
STATEMENTS OF CASH FLOWS
CAROLINA MEDICAL, INC.
For The Year Ended June 30, 1997
and The Nine Months Ended June 30, 1996
<TABLE>
<CAPTION>
1997 1996
(ONE YEAR) (Nine Months)
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 79,407 $ 66,031
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization 43,425 80,671
Gain on disposal of fixed assets (2,085)
(Decrease) increase in deferred tax assets 3,907 (55,183)
Loss from operations of equity investment 15,842 134,158
Decrease (increase) in refundable income taxes 19,420 (28,000)
Decrease in accounts receivable 14,295 136,355
Increase in inventories (66,506) (4,204)
Increase in other prepaids (3,193) (5,895)
Decrease in accounts payable
and accrued expenses (39,275) (101,258)
Decrease in deferred service
contract revenue (12,355) (70,045)
----------- -----------
CASH PROVIDED BY OPERATING ACTIVITIES 54,967 150,545
----------- -----------
INVESTING ACTIVITIES
Decrease in cash value of life insurance 2,225 1,267
Purchase of property and equipment (19,157) (61,176)
Purchase of software (7,753) (13,978)
Proceeds from sale of fixed assets 2,485
Purchase of equity investment (150,000)
Purchase of license agreement (10,000)
----------- -----------
CASH USED BY INVESTING ACTIVITIES (24,685) (231,402)
----------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1997 1996
(ONE YEAR) (Nine Months)
--------- ----------
<S> <C> <C>
FINANCING ACTIVITIES
Proceeds from issuance of debt 20,530 55,527
Repayments of debt (188,355) (220,414)
--------- ---------
CASH USED BY FINANCING ACTIVITIES (167,825) (164,887)
--------- ---------
NET DECREASE IN CASH
AND CASH EQUIVALENTS (137,543) (245,744)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 276,210 521,954
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 138,667 $ 276,210
========= =========
SUPPLEMENTAL DISCLOSURE:
Cash paid for interest $ 39,916 $ 31,020
========= =========
Cash paid for income taxes $ 30,000
=========
SCHEDULE OF NON-CASH OPERATING
AND FINANCING TRANSACTIONS
Acquisition of inventory in exchange for a note payable $ 183,118
=========
Issuance of note payable in exchange for inventory $ 144,468
=========
Exchange of fixed asset for inventory $ 11,000
=========
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
CAROLINA MEDICAL, INC.
NOTE A--NATURE OF BUSINESS
CAROLINA MEDICAL, INC. (the "Company") was incorporated in July 1959, and is
established in manufacturing and the servicing of ultrasound imaging and
electronic diagnostic instruments for detecting circulatory disorders and
measuring blood flow and blood pressure parameters. The Company's sales are
principally to customers in the United States with some international sales.
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR CHANGE: The Company changed its annual accounting reporting period
from September 30 to June 30 in 1996. The current period financial statements
are presented as of and for the year ended June 30, 1997. Comparative balances
are reported as of and for the nine months ended June 30, 1996.
CASH AND CASH EQUIVALENTS: The Company considers all highly liquid short-term
investments purchased with an original maturity of three months or less to be
equivalent to cash. During fiscal years 1997 and 1996, the Company had bank
deposits in excess of the amounts insured by the Federal Deposit Insurance
Corporation.
INVENTORIES: Inventories are valued at the lower of cost or market using the
standard cost method.
PROPERTY AND EQUIPMENT: Property and equipment are recorded at cost.
Depreciation is calculated by the straight-line or declining-balance method over
estimated useful lives of three to ten years for equipment and three to five
years for automobiles for financial reporting purposes, and accelerated methods
for income tax purposes.
REVENUE RECOGNITION: Revenues from product sales are recognized at date of
shipment. Service contract revenues are recognized during the term of the
service contract which, in most cases, ranges from one to three years.
WARRANTY RESERVE: The Company warrants its products against defects in material
and workmanship for ninety days for electromagnetic and ultrasound probes and
one year for electronic and ultrasound equipment. A reserve is provided for
estimated warranty cost.
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
RESEARCH AND DEVELOPMENT: Research and development costs are charged to
operations as incurred. These costs are for proprietary research and development
activities that are expected to contribute to the future profitability of the
Company.
SOFTWARE DEVELOPMENT COSTS: The costs incurred by the Company to develop
computer software for sale with products are expensed as research and
development costs until technological feasibility is established. Costs incurred
after the attainment of technological feasibility are capitalized until the
software is ready for sale. Thereafter, capitalized software costs are amortized
over their estimated useful lives.
MANAGEMENT ESTIMATES: Management uses estimates and assumptions in preparing
financial statements. Those estimates and assumptions may affect the reported
amounts of assets and liabilities, the disclosures of contingent assets and
liabilities, and reported revenues and expenses. Significant estimates used in
preparing these financial statements include those assumed in computing the
inventory valuation allowance and warranty reserve. Actual results could differ
from those estimates.
INCOME TAXES: Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due plus
deferred taxes. Deferred taxes relate to differences between financial and
income tax reporting for the basis of inventory, property and equipment, equity
investments, and accrued compensation. The deferred tax accounts represent the
future tax return consequences of those differences, which will either be
deductible or taxable when the assets and liabilities are recovered or settled
(Note I).
EQUITY INVESTMENTS: An investment in a corporation over which the Company can
exert significant influence is accounted for under the equity method of
accounting, whereby the investment is recorded at cost and adjusted for the
Company's proportionate share of its undistributed earnings or losses (Note M).
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE C--INVENTORIES
JUNE 30, June 30
1997 1996
-------- --------
Raw materials and supplies $414,941 $242,889
Work in process 227,907 189,381
Finished goods at plant 140,768 99,222
Finished goods on short-term loan,
held for sale and demonstration 72,144 64,644
Inventory reserve (50,000) (40,000)
-------- --------
$805,760 $556,136
======== ========
The inventory reserve has been established for estimated inventory losses due to
obsolescence and waste.
NOTE D--PROPERTY AND EQUIPMENT
JUNE 30, June 30
1997 1996
-------- --------
Machinery and equipment $927,801 $908,644
Vehicles 23,330 23,330
Leasehold improvements 9,127 9,127
-------- --------
960,258 941,101
Less accumulated depreciation (808,413) (775,972)
-------- --------
$151,845 $165,129
======== ========
Depreciation expense recorded for the year ended June 30, 1997 and the nine
months ended June 30, 1996 was $32,491 and $72,933, respectively.
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE E--CASH VALUE OF LIFE INSURANCE
JUNE 30, June 30
1997 1996
-------- --------
Cash surrender value $ 44,628 $ 45,318
Policy loans (21,081) (19,546)
-------- --------
Net cash value of life insurance $ 23,547 $ 25,772
======== ========
NOTE F--NOTE PAYABLE
The Company owed $18,333 and $18,316 as of June 30, 1997 and 1996, respectively,
under separate note agreements for product liability insurance coverage. The
current note is due in nine monthly installments, including interest at 9 1/2%
per annum.
NOTE G--LONG-TERM DEBT
JUNE 30, June 30
1997 1996
-------- --------
Term loan with bank, payable in monthly installments
of $3,600, including interest at 8% per annum through
June 1, 2001; guaranteed by certain officers of the
Company and collateralized by substantially all of
the Company's assets $146,412 $176,591
Term loan with bank, payable in monthly installments
of $1,500 including interest at the bank's prime rate
plus 2% per annum, due on April 1, 1999, secured by
equipment 71,218 81,301
Note due to stockholder, annual interest of 9%,
due September 30, 1997, unsecured 25,800 25,800
Note due to affiliated partnership, annual interest of
5 1/4%, due July 21, 1999, unsecured--Note L 32,081 42,110
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE G--LONG-TERM DEBT - CONTINUED
JUNE 30, June 30
1997 1996
-------- --------
Term loan with bank, payable in monthly
installments of $2,042, including interest at
10% per annum through October 10, 2000,
collateralized by substantially all of the
Company's assets 115,647 127,928
Non-interest bearing notes to a company for
purchase of equipment, due December 31, 1997,
secured by equipment 31,746 100,530
Non-interest bearing note to a company for
purchase of inventory, due February 1999,
payable in monthly installments of $6,020,
interest imputed at 8% per annum; (net of
unamortized discount of $7,408) 107,982
-------- --------
530,886 554,260
Less current maturities 209,171 140,540
-------- --------
$321,715 $413,720
======== ========
Maturities of long-term debt are as follows:
1998 $209,171
1999 111,801
2000 81,048
2001 74,533
2002 25,504
Thereafter 28,829
--------
$530,886
========
The bank loan agreements contain requirements to provide certain financial
information to the bank on a quarterly basis. These agreements require the book
values of the assets securing the obligations to be at least 1.5 times the
outstanding loan balances.
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE H--COMMITMENTS AND CONTINGENCIES
In January 1993, certain intellectual property was acquired through a
non-exclusive licensing agreement with Indiana Business Modernization and
Technology Corporation ("BMT"). In accordance with this agreement, the Company
paid an initial $10,000 fee and is required to pay a royalty equal to one
percent of net sales incorporating the intellectual property, until total
payments equal $300,000. Thereafter, the Company is required to pay one-half
percent of net sales, until total payments equal $603,450. In no event shall the
royalty payments be less than $25,000 per year for the first five years of the
agreement. The agreement also stipulates that BMT shall not grant any
non-exclusive license of the intellectual property to any other party for
eighteen months after the date of the agreement. The Company's royalty fees for
the year ended June 30, 1997 and for the nine months ended June 30, 1996 were
$25,000 and $18,225, respectively.
In fiscal year 1997, it was discovered that the land adjacent to the building
occupied by the Company is contaminated by toxic chemicals. This land is owned
by an affiliated partnership which also owns the land and building occupied by
the Company (Note L). The initial cleanup cost of approximately $10,000 was paid
by the partnership in 1997. The cost of the property cleanup is not expected to
exceed $75,000. While the Company may be contingently liable for these
remediation cost, it is possible that the property owner or its insurance
company will be ultimately liable for these costs.
NOTE I--INCOME TAXES
The Company accounts for its income taxes under Statement of Financial
Accounting Standard No. 109, ACCOUNTING FOR INCOME TAXES, which requires an
asset and liability approach to financial accounting and reporting for income
taxes. The Company's income tax year end is September 30, even though its
financial reporting year end is June 30. The Company intends to change its
income tax year end to June 30 when Internal Revenue Service rules allow such a
change.
The income tax (expense) benefit consists of the following:
1997 1996
-------- --------
(ONE YEAR) (Nine Months)
Taxes currently payable $(28,621) $ (2,000)
Deferred tax benefit (provision) (3,907) 55,183
-------- --------
$(32,528) $ 53,183
======== ========
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE I--INCOME TAXES - CONTINUED
The net deferred tax assets in the accompanying balance sheets include the
following components:
JUNE 30, June 30
1997 1996
--------- --------
Deferred tax assets $ 108,572 $104,568
Deferred tax liabilities (20,279) (12,368)
Valuation allowance 0 0
--------- --------
Net deferred tax assets 88,293 92,200
Less current portion 56,152 49,955
--------- --------
Long-term portion $ 32,141 $ 42,245
========= ========
The Company has net operating loss carryovers totaling approximately $21,700 for
state tax purposes that may be offset against future taxable income.
Additionally, the Company has research and development tax credits of
approximately $40,000 which are available to reduce income taxes payable in
future periods.
The loss and credit carryovers expire as follows:
Research and
Development
Year Ending State Loss Tax Credit
September 30 Carryovers Carryovers
------------ ---------- ------------
1998 $21,700
2002 $ 40,000
------- ---------
$21,700 $ 40,000
======= =========
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE J--EMPLOYEE BENEFIT PLANS
PROFIT-SHARING PLAN - The Company has a profit-sharing plan covering its
eligible employees, which includes essentially all employees. This plan is to be
funded as accrued and is non-contributory by the participants. There were no
contributions made by the Company to this plan for the year and the nine months
ended June 30, 1997 and 1996, respectively.
EMPLOYEE 401(k) PLAN - The Company has an employee 401(k) plan which is
contributory by the participants. The Company, at its option, may contribute to
the plan on a matching basis. There were no contributions by the Company for the
year ended June 30, 1997. The Company contributed $5,000 to this plan for the
nine months ended June 30, 1996.
EMPLOYEE FLEXIBLE BENEFITS PLAN - The Company has an employee flexible benefits
plan, or salary reduction plan, which provides for pre-tax payment by employees
of employer-sponsored employee medical insurance premiums and part of their
unreimbursed medical and dependent care expenses.
NOTE K--OTHER INCOME AND EXPENSES
Other income and (expenses) consist of:
1997 1996
--------- ---------
(ONE YEAR) (Nine Months)
Interest income $ 7,865 $ 7,883
Interest expense (43,369) (33,637)
Gain on sale of equipment 2,085
Miscellaneous income (expense) (369) 173
--------- ---------
$ (35,873) $ (23,496)
========= =========
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE L--TRANSACTIONS WITH RELATED PARTIES
In April 1987, the Company sold its land and building located in King, North
Carolina to King Investment Partners ("KIP"), a partnership composed principally
of the Company's controlling stockholders and their spouses. The Company entered
into an agreement to lease the land and building from KIP for a three-year
period. Under this agreement, KIP has the option of increasing the lease amount
at the end of each year. The lease imposes certain subleasing restrictions on
the Company, as well as minimum insurance requirements. In 1993, the Company
renewed the lease for an additional three-year term with minimum annual lease
payments of $96,600. In July 1994, the Company and KIP amended the lease
agreement for the remainder of the term to reduce the lease payments to $72,000
annually. Effective May 1, 1996, the lease term was amended by the Company and
KIP to allow for a 10% increase in rental payments. During July 1994, the
Company issued an unsecured note payable to KIP for unpaid rent payable due over
five years at an interest rate of 5 1/4 percent per annum (Note G). The current
three-year lease expires on May 1, 1999.
Total rent expense to KIP was $79,200 for the year ended June 30, 1997 and
$52,200 for the nine months ended June 30, 1996.
Future minimum lease payments under the lease with KIP as of June 30, 1997 are
as follows:
1998 $ 79,200
1999 66,000
---------
$ 145,200
=========
The Company has agreed to pay an annual bonus of not less than $35,000 to an
officer of the Company. The bonus is to be paid for a period of three years
beginning October 1, 1993, contingent upon the continued employment of the
officer. The bonus was paid in full during fiscal 1997.
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE M--EQUITY INVESTMENT
Effective in January 1996, the Company acquired approximately 22% of the common
stock of Advanced Medical Products, Inc. ("Advanced Medical"). Advanced Medical,
which is a publicly-held company, issued additional common stock during March
1996, thereby diluting the Company's ownership interest to 15.5%. This
investment is accounted for under the equity method since the Company exercises
significant influence over the operating policies of this investee.
Financial information of Advanced Medical as of and for the year ended June 30,
1997 was not available at the time that these financial statements were issued.
Advanced Medical's assets, liabilities, and results of operations for 1996 were
as follows.
1996
-----------
Total Assets $ 1,853,947
===========
Total Liabilities $ 1,411,369
===========
Net Loss $(1,201,141)
===========
NOTE N--SUBSEQUENT EVENTS
Effective on October 22, 1997, a wholly-owned subsidiary of BioTel
International, Inc. (BioTel), a Delaware corporation and stockholder of the
Company, acquired certain assets and assumed certain liabilities of Braemar,
Inc. of Burnsville, Minnesota. Braemar manufactures non-invasive medical
recording and monitoring equipment. In addition to the liabilities assumed, this
acquisition was financed by a note payable to the seller for $1,000,000 and a
loan from a stockholder of BioTel of $1,600,000, of which $1,403,760 was paid to
the seller. During November 1997, the subsidiary advanced the remaining $196,240
to BioTel, which paid $183,500, along with a note for $80,000, to Advanced
Medical in exchange for 850,000 additional shares of Advanced Medical common
stock.
On September 15, 1997, the board of directors of the Company approved a plan of
merger of BioTel with the Company, whereby the surviving entity will be Carolina
Medical, Inc. This merger is expected to become effective by December 31, 1997.
<PAGE>
CAROLINA MEDICAL, INC.
FOR THE NINE MONTHS ENDING 3/31/98
ASSETS
<TABLE>
<CAPTION>
NINE MONTHS
03/31/98
------------
<S> <C>
CURRENT ASSETS:
CASH $137,269
ACCOUNTS RECEIVABLE, TRADE 200,203
NOTE RECEIVABLE - ADVANCED MEDICAL 150,000
ACCOUNTS RECEIVABLE, OTHER 14,856
INVENTORY 703,281
PREPAIDS 11,933
------------
TOTAL CURRENT ASSETS 1,217,542
------------
PROPERTY & EQUIPMENT
PROPERTY & EQUIPMENT 1,012,165
LESS DEPRECIATION & AMORTIZATION (841,493)
------------
NET PROPERTY, PLANT AND EQUIPMENT 170,672
------------
OTHER ASSETS:
CAPITALIZED COSTS-ASSET ACQUISITION
DEFERRED CHARGES (NET)
CASH VALUE OF LIFE INSURANCE-NET 23,547
INVESTMENT IN AMP 382,587
INVESTMENT IN BRAEMAR 156,375
NOTE RECEIVABLE-BRAEMAR 1,600,000
OTHER 88,292
------------
TOTAL OTHER ASSETS 2,250,801
------------
TOTAL ASSETS $3,639,015
============
</TABLE>
*UNAUDITED STATEMENTS
<PAGE>
CAROLINA MEDICAL, INC.
FOR THE NINE MONTHS ENDING 3/31/98
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NINE MONTHS
03/31/98
------------
<S> <C>
CURRENT LIABILITIES:
NOTES PAYABLE
CURRENT MATURITIES OF LONG-TERM DEBT 151,893
NOTE PAYABLE-KLAWANS 150,000
NOTE PAYABLE-AMP 80,000
TRADE ACCOUNTS PAYABLE 73,955
ACCRUED EXPENSES 158,515
DEFERRED SERVICE CONTRACTS 142,699
WARRANTY RESERVE 30,548
OTHER PAYABLES 14,458
------------
TOTAL CURRENT LIABILITIES 802,068
------------
LONG-TERM LIABILITIES:
LONG-TERM DEBT, LESS CURRENT MATURITIES 257,636
NOTE PAYABLE-BRAEMAR 196,240
NOTE PAYABLE-ORDWAY 1,600,000
NOTE PAYABLE-BIOTEL/CMI
OTHER LONG-TERM LIABILITIES 0
------------
TOTAL LONG-TERM LIABILITIES 2,053,876
------------
TOTAL LIABILITIES 2,855,944
------------
STOCKHOLDERS' EQUITY:
COMMON STOCK 314,922
PREFERRED STOCK
ADDITIONAL PAID-IN CAPITAL 438,059
RETAINED EARNINGS (DEFICIT) 30,091
------------
TOTAL STOCKHOLDERS' EQUITY 783,071
------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $3,639,015
============
</TABLE>
*UNAUDITED STATEMENTS
<PAGE>
CAROLINA MEDICAL, INC.
INCOME AND RETAINED EARNINGS
FOR THE NINE MONTHS ENDING 3/31/98
<TABLE>
<CAPTION>
NINE MONTHS
03/31/98
------------
<S> <C>
SALES 1,385,464
COST OF SALES AND SERVICES 798,113
------------
GROSS PROFIT 587,351
------------
OPERATING EXPENSES:
TOTAL OPERATING EXPENSES 565,078
------------
INCOME FROM OPERATIONS 22,273
------------
FINANCIAL INCOME AND (EXPENSE):
INTEREST INCOME 8,661
INTEREST EXPENSE (44,227)
EQUITY-SUBSIDIARY OPERATIONS-BRM 55,147
EQUITY-SUBSIDIARY OPERATIONS-AMP (46,767)
OTHER (55)
------------
NET FINANCIAL INCOME (EXPENSE) (27,241)
------------
NET INCOME (LOSS) BEFORE TAXES (4,968)
PROVISION FOR INCOME TAXES:
FEDERAL AND STATE 269
------------
NET INCOME (LOSS) $ (4,699)
============
</TABLE>
*UNAUDITED STATEMENTS
<PAGE>
ANNEX III - ARTICLES I AND III OF THE COMPANY'S ARTICLES OF INCORPORATION AS
PROPOSED TO BE AMENDED PURSUANT TO PROPOSALS 1 AND 3
ARTICLE I
The name of this corporation is BIOTEL, Inc.
ARTICLE III
The number of shares of common stock which this corporation shall have
the authority to issue is Ten Million (10,000,000) shares with a stated par
value of five cents ($.05) per share. The number of shares of preferred stock
which this corporation shall have the authority to issue is Two Million
(2,000,000) shares with a stated par value of ($.01) per share. The Board of
Directors may, from time to time, establish by resolution different classes or
series of shares and may fix the rights and preferences of said shares in any
class or series. The Board of Directors shall have the authority to issue shares
of a class or series to holders of shares of another class or series to
effectuate share dividends, splits, or conversion or its outstanding shares.
<PAGE>
ANNEX IV - SECTION 3.06 OF THE COMPANY'S BYLAWS AS PROPOSED TO BE AMENDED BY
PROPOSAL NO. 4
Section 3.06. Vacancies. Vacancies on the board resulting from death,
resignation, removal or the creation of new directorships may be filled by the
affirmative vote of a majority of the remaining directors, even though less than
a quorum. Each director elected under this Section to fill a vacancy holds
office until a qualified successor is elected by the shareholders at the next
regular of special shareholders meeting.
<PAGE>
May __, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE SPECIAL
MEETING OF SHAREHOLDERS TO BE HELD JUNE 22, 1998
The undersigned hereby appoints B. Steven Springrose or Kevin Spreng or
either one of them, as proxies, with full power of substitution to vote all the
shares of common stock which the undersigned would be entitled to vote if
personally present at the Special Meeting of shareholders of Biosensor
Corporation, to be held June 22, 1998, at 2:00 p.m. a.m. at the Company's
principal offices located at 7001 East Fish Lake Road, Maple Grove, MN
55331-2833, or at any adjournments thereof, hereby revoking all former proxies.
(1) PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION TO CHANGE THE
NAME OF THE COMPANY TO "BIOTEL, INC."
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(2) PROPOSAL TO EFFECTUATE A ONE-FOR-SIX REVERSE STOCK SPLIT OF ALL
OUTSTANDING SHARES OF COMMON STOCK AND PREFERRED STOCK OF THE COMPANY.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION TO INCREASE
THE AMOUNT OF AUTHORIZED COMMON STOCK AND PREFERRED STOCK.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) PROPOSAL TO AMEND THE COMPANY'S BYLAWS TO PERMIT THE BOARD TO FILL
VACANCIES RESULTING FROM THE CREATION OF NEW DIRECTORSHIPS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3, AND 4
IF THERE IS NO SPECIFICATION.
Dated _________________________, 1998
_____________________________________
<PAGE>
Signature of shareholder
_____________________________________
Signature of Joint shareholder
(if held jointly)
PLEASE DATE AND SIGN exactly as your name(s) appear below indicating, where
proper, official position or representative capacity in which you are signing.
When signing as executor, administrator, trustee or guardian, give full title as
such; when shares have been issued in names or two or more persons, all should
sign.
