<PAGE>
Page 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 22, 1999
BIOMAGNETIC TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA
(State or other jurisdiction of incorporation)
1-10285 95-2647755
(Commission File Number) (IRS Employer Identification No.)
9727 Pacific Heights Boulevard, San Diego, CA 92121-3719
(Address of principal executive offices) (Zip Code)
(858) 453-6300
(Registrant's telephone number, including area code)
<PAGE>
Page 2
This Current Report on Form 8-K/A amends the Current Report on Form 8-K filed
with the SEC on or about January 6, 2000.
ITEM 2. ACQUISITION OF BUSINESS
a) On December 22, 1999, Biomagnetic Technologies, Inc. ("BTi", "the
Company") acquired all of the issued and outstanding capital
stock ("Shares") of Neuromag Oy pursuant to the terms of a Share
Purchase Agreement by and between Marconi Medical Systems, Inc.
("Marconi") and BTi (the "Share Purchase Agreement"). Under the
terms of the Share Purchase Agreement, BTi paid a total of $10
million in cash to Marconi for the purchase of the Shares and
agreed to pay between a minimum of $2.5 million and a maximum of
$5 million in royalties to Marconi under a royalty agreement over
the next eight years, and additional consideration of up to
approximately $1.8 million dependent upon the occurrence of
certain future events.
The Company has obtained a loan from AIG Private Bank Ltd.
totaling $11 million that is secured by Shares of Neuromag Oy and
is guaranteed by an entity unaffiliated with the Company. The
loan matures June 30, 2000. Martin Egli, a board member of BTi,
also serves on the Board of Directors of AIG Private Bank Ltd. As
a part of its ongoing financing strategies, the Company intends
to raise additional capital for the purposes of repaying the loan
or restructuring the payment terms and maturity of the loan
facility and to continue to fund operations. There can be no
assurance that the Company will be able to raise such capital on
terms acceptable to the Company, if at all.
b) Similar to BTi, Neuromag Oy, is engaged in research, development
and manufacturing of magnetic source imaging systems. Neuromag Oy
is located in Helsinki, Finland. For the near term, the Company
intends to operate BTi and Neuromag as separate entities as it
further investigates and, as appropriate, initiates actions to
integrate operations on a consolidated basis.
The acquisition will be treated by the Registrant as a purchase
for accounting purposes. The description of the transaction set
forth above is qualified in its entirety by reference to the
Share Purchase Agreement and the Press Release issued by BTi
dated December 23, 1999, copies of which were attached to the
Form 8-K filed with the SEC on January 6, 2000 as Exhibits 2.1
and 99.1, respectively. The description of the loan as described
above is qualified in its entirety by reference to the Loan
Agreement dated December 21, 1999 between the Company and AIG
Private Bank Ltd., a copy of which was attached to the Form 10-Q
filed with the SEC on February 14, 2000 as Exhibit 10.1.
ITEM 7. Financial Statements and Exhibits
a) Financial Statements of Neuromag Oy. The audited financial
statements for Neuromag Oy as of December 31, 1999 and 1998 are
filed as Exhibit 99.2 below and are incorporated herein by
reference.
b) Pro Forma Financial Information. Unaudited pro forma combined
statements of operations for Biomagnetic Technologies, Inc. and
Neuromag Oy for the year ended September 30, 1999 and for the three
month period ended December 31, 1999 are filed as Exhibit 99.3
below and are incorporated herein by reference.
<PAGE>
Page 3
c) Exhibits.
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
2.1 (1) Share Purchase Agreement dated as of December 21,
1999, by and between Marconi Medical Systems, Inc.
and Biomagnetic Technologies, Inc. Certain
schedules and/or exhibits referenced in the Share
Purchase Agreement have not been included because
they contain information which is not material to
an investment decision or which is otherwise
discussed in the agreement. A copy of any omitted
schedule and/or exhibit will be furnished
supplementally to the Securities and Exchange
Commission upon request. In addition, confidential
treatment has been requested for certain portions
of this exhibit.
23.1 Independent Public Accountants' consent,
SVH Pricewaterhouse Coopers Oy.
27.1 Financial Data Schedule - Neuromag Oy.
99.1 (1) Press Release dated December 23, 1999.
99.2 Neuromag Oy audited financial statements:
(i) Report of Independent Public Accountants
(ii) Balance Sheets as of December 31, 1999 and 1998;
(iii) Statements of Operations for the years ended
December 31, 1999 and 1998;
(iv) Statements of Shareholders' Equity for the
years ended December 31, 1999 and 1998;
(v) Statements of Cash Flows for the years ended
December 31, 1999 and 1998; and
(vi) related Notes to Financial Statements.
99.3 (2) Biomagnetic Technologies, Inc. and Neuromag Oy
Unaudited Pro Forma:
(i) Combined Statements of Operations for the year
ended September 30, 1999 and for the three months ended
December 31, 1999; and
(ii) related Notes to Combined Statements of Operations.
(1) This exhibit was previously filed as part of, and is hereby incorporated
by reference to, the same numbered exhibit to the Company's Current Report
on Form 8-K filed with the SEC on January 6, 2000.
(2) Unaudited pro forma Combined Balance Sheets for the year ended
September 30, 1999 and for the three months ended December 31, 1999
are not included in this Current Report because the Company previously
reported a Consolidated Condensed Balance Sheet in Item 1, Part I of
the Company's Quarterly Report on Form 10-Q filed with the SEC on or about
February 14, 2000, and is hereby incorporated by reference.
</TABLE>
<PAGE>
Page 4
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.
BIOMAGNETIC TECHNOLOGIES, INC.
Date: March 6, 2000 /s/ D. Scott Buchanan
------------- -------------------------------------
D. Scott Buchanan, President and
Chief Executive Officer
<PAGE>
EXHIBIT 23.1
INDEPENDENT PUBLIC ACCOUNTANTS' CONSENT
As independent public accountants, we hereby consent to the incorporation by
reference of our report included in this Form 8-K/A as part of Exhibit 99.2,
into Biomagnetic Technologies, Inc.'s previously filed Form S-8 No. 33-60743,
No. 33-61057, No. 33-32260, No. 33-33179 and No. 33-68136.
/s/SVH Pricewaterhouse Coopers Oy
Authorized Public Accountants
Helsinki, Finland
March 3, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NEUROMAG
OY'S FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999 AND 1998 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 491 294
<SECURITIES> 51 59
<RECEIVABLES> 954 1,206
<ALLOWANCES> 0 0
<INVENTORY> 1,061 982
<CURRENT-ASSETS> 2,569 2,548
<PP&E> 362 352
<DEPRECIATION> 219 192
<TOTAL-ASSETS> 3,560 3,722
<CURRENT-LIABILITIES> 1,743 1,863
<BONDS> 558 628
0 0
0 0
<COMMON> 3,893 3,893
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 3,560 3,722
<SALES> 5,143 4,218
<TOTAL-REVENUES> 5,258 4,352
<CGS> 3,327 2,621
<TOTAL-COSTS> 3,408 2,738
<OTHER-EXPENSES> 1,564 1,883
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 23 12
<INCOME-PRETAX> 380 (260)
<INCOME-TAX> 181 (332)
<INCOME-CONTINUING> 200 72
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 200 72
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<PAGE>
EXHIBIT 99.2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Neuromag Oy:
We have audited the accompanying balance sheets of Neuromag Oy as of December
31, 1999 and 1998, and the related statements of operations, changes in
shareholders' equity, and cash flows for the years then ended in Finnish
Markka. These financial statements are the responsibility of Neuromag Oy's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in Finland, which are substantially the same as those generally accepted in the
United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by the 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 Neuromag Oy as of December 31,
1999 and 1998, and the results of the Company's operations and cash flows for
the years then ended, in conformity with generally accepted accounting
principles in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 10 to the
financial statements, on December 22, 1999, Biomagnetic Technologies, Inc.
acquired all of the issued and outstanding capital stock of Neuromag Oy.
/s/SVH Pricewaterhouse Coopers Oy
Authorized Public Accountants
Esko Saarinen
Authorized Public Accountant
<PAGE>
NEUROMAG OY
BALANCE SHEETS
(all amounts in U.S. dollars)
<TABLE>
<CAPTION>
December 31,
1999 1998
----------------- ----------------
<S> <C> <C>
ASSETS
Cash $ 491,420 $ 293,958
Short-term investments 50,688 58,870
Accounts receivable 954,244 1,205,977
Inventories 1,061,286 982,040
Prepaid expenses and other 11,684 7,376
----------------- ----------------
Total current assets 2,569,322 2,548,221
----------------- ---------------
Net machinery and equipment 142,928 159,947
Intangibles, net 62,620 88,041
Deferred income taxes 616,280 925,425
Other assets 168,962 -
----------------- ---------------
TOTAL ASSETS $ 3,560,112 $ 3,721,634
================= ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 452,614 $ 472,297
Accrued expenses 758,556 370,436
Customer deposits 531,849 824,089
Bank loan - 196,230
----------------- ---------------
Total current liabilities 1,743,019 1,863,052
----------------- ---------------
Subordinated loan 530,539 616,170
Accrued interest on subordinated loan 27,134 11,799
----------------- ---------------
Total liabilities 2,300,692 2,491,021
----------------- ---------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Share capital - $25 par value;
1,832 shares issued and outstanding 46,431 46,431
Additional paid-in capital 3,846,751 3,846,751
Accumulated deficit (2,633,762) (2,833,590)
Cumulative translation adjustment - 171,021
---------------- ----------------
Total shareholders' equity 1,259,420 1,230,613
---------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,560,112 $ 3,721,634
================ ================
</TABLE>
See Notes to Financial Statements
<PAGE>
NEUROMAG OY
STATEMENTS OF OPERATIONS
(all amounts in U.S. dollars)
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
------------------- -----------------
<S> <C> <C>
REVENUES
Product $ 5,143,113 $ 4,218,033
Product services 114,515 133,699
------------------ -----------------
5,257,628 4,351,732
------------------ -----------------
COST OF REVENUES
Product 3,326,669 2,621,111
Product services 81,436 116,563
------------------ -----------------
3,408,105 2,737,674
------------------ -----------------
GROSS MARGIN 1,849,523 1,614,058
------------------ -----------------
OPERATING EXPENSES
Research and development 605,264 1,160,581
Marketing, general and administrative 958,695 722,694
------------------ -----------------
1,563,959 1,883,275
------------------ -----------------
OPERATING INCOME (LOSS) 285,564 (269,217)
Interest expense (23,244) (11,728)
Interest income 7,538 13,633
Other income, net 1,991 7,693
Gain on sale of investment in other
company 108,515 -
------------------ -----------------
INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR 380,364 (259,619)
INCOME TAXES
Provision (benefit) for income taxes 180,536 (331,963)
------------------ -----------------
NET INCOME $ 199,828 $ 72,344
================== =================
</TABLE>
See Notes to Financial Statements
<PAGE>
NEUROMAG OY
STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999 AND 1998
(all amounts in U.S. dollars)
<TABLE>
<CAPTION>
Additional Cumulative
Share Capital Paid-in Translation Accumulated
Shares Amount Capital Adjustment Deficit Total
-------------- -------------- -------------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997 1,832 $ 46,431 $ 3,846,751 $ - $(2,905,934) $ 987,248
Change in cumulative
translation adjustment - - - 171,021 - 171,021
Net income - - - - 72,344 72,344
------------
Comprehensive income 243,365
-------------- -------------- -------------- -------------- ----------- ------------
BALANCE, DECEMBER 31, 1998 1,832 46,431 3,846,751 171,021 (2,833,590) 1,230,613
Change in cumulative
translation adjustment - - - (171,021) - (171,021)
Net income - - - - 199,828 199,828
------------
Comprehensive income 28,807
-------------- -------------- -------------- -------------- ----------- ------------
BALANCE, DECEMBER 31, 1999 1,832 $ 46,431 $ 3,846,751 $ - $(2,633,762) $ 1,259,420
============== ============== ============== ============== =========== ============
</TABLE>
See Notes to Financial Statements
<PAGE>
NEUROMAG OY
STATEMENTS OF CASH FLOWS
(all amounts in U.S. dollars)
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
------------------ -----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 199,828 $ 72,344
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 76,956 85,512
Gain on sale of investment in other company (108,515) -
Changes in operating assets and liabilities:
Accounts receivable 251,733 (606,240)
Inventories (85,810) (129,793)
Prepaid expenses and other (4,665) (3,537)
Deferred income taxes 180,536 (331,963)
Accounts payable (21,313) 32,562
Accrued expenses 403,455 (261,732)
Customer deposits (316,458) (615,982)
---------------- -----------------
Net cash provided by (used in) operating activities 575,747 (1,758,829)
---------------- -----------------
INVESTING ACTIVITIES
Purchases of machinery and equipment (64,118) (61,781)
Payments for intangibles (4,183) (11,774)
Net change in short-term investments 8,860 1,177,380
---------------- -----------------
Net cash (used in) provided by investing activities (59,441) 1,103,825
--------------- -----------------
FINANCING ACTIVITIES
Net (payments) borrowings on bank loan (212,488) 627,544
--------------- ----------------
Net cash (used in) provided by financing activities (212,488) 627,544
--------------- ----------------
NET INCREASE (DECREASE) IN CASH 303,818 (27,460)
EXCHANGE RATE EFFECTS (106,356) (2,949)
CASH, BEGINNING OF YEAR 293,958 324,367
--------------- ----------------
CASH, END OF YEAR $ 491,420 $ 293,958
=============== ================
</TABLE>
See Notes to Financial Statements
<PAGE>
NEUROMAG OY
Notes to Financial Statements
December 31, 1999 and 1998
1. BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS ACTIVITY
Neuromag Oy ("Neuromag") was incorporated in Helsinki, Finland on June 6,
1989. Neuromag operates in one business segment, developing, manufacturing
and selling products designed to measure magnetic fields generated by the
human body. Neuromag sells its products primarily to researchers at
universities, corporations, and research institutions throughout the Pacific
Rim, Europe and North America.
SHORT-TERM INVESTMENTS
Neuromag has classified its short-term investments as "available for sale" at
December 31, 1999 and 1998 and are stated at fair market value which
approximates cost. For the years ended December 31, 1999 and 1998, realized
gains and losses on short-term investments were not material.
FAIR VALUE OF FINANCIAL INSTRUMENTS
It is Neuromag's belief that the carrying amounts shown for the Company's
financial instruments are reasonable estimates of their related fair values.
INVENTORIES
Inventories are carried at the lower of cost or market. Cost is determined on
the first-in, first-out basis.
MACHINERY AND EQUIPMENT
Machinery and equipment are stated at cost less accumulated depreciation.
Depreciation is generally computed using the straight-line method over estimated
useful lives of four to ten years. Maintenance and repairs are charged to
expense as incurred and the costs of additions and betterments that increase the
useful lives of related assets are capitalized.
INTANGIBLES
Intangibles consist of patents and other acquired assets. Intangibles and
patents are amortized over five to ten years.
INVESTMENTS IN OTHER COMPANIES
Neuromag accounts for its minority equity holdings (less than or equal to 20
percent investment) in other companies under the cost method.
LONG-LIVED ASSETS
Neuromag assesses potential impairments to its long-lived assets on an
exception basis when there is evidence that events or changes in
circumstances have made recovery of the asset's carrying value unlikely. An
impairment loss would be recognized when the sum of the expected future net
cash flows is less than the carrying amount of the asset.
INCOME TAXES
Deferred income tax assets or liabilities are recognized based on the temporary
differences between financial statement and income tax bases of assets and
liabilities using enacted tax rates in effect for the years in which the
differences are expected to reverse. Deferred income tax expenses or credits are
based on the changes in the deferred income tax assets or liabilities from
period to period.
<PAGE>
REVENUE RECOGNITION
Revenue from product sales is recognized upon shipment. Standard terms of
sale also include a one year service period following the sale. Neuromag
defers and recognizes service revenues over the related service period.
Product service revenues are recognized as services are performed.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
SOFTWARE DEVELOPMENT COSTS
Costs relating to the development of software after technological feasibility
is established are required to be capitalized. Neuromag has expensed all
software development costs as incurred as technological feasibility is not
reached until product testing is complete, which generally coincides with
product release.
FOREIGN CURRENCY TRANSLATION
The functional currency of Neuromag is the Finnish Markka. In the
accompanying financial statements, monetary assets and liabilities of
Neuromag have been translated into U.S. dollars at the exchange rate in
effect at the balance sheet dates. Revenues and expenses have been translated
at average exchange rates for the period. The effects of such foreign
currency translation have been recorded as a component of shareholders'
equity.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
effect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
<PAGE>
2. FINANCIAL STATEMENT INFORMATION
For the years ended December 31, 1999 and 1998, the following were
approximate cash payments for:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Interest $ 7,000 $ 1,000
Income taxes $ - $ -
Inventories consist of the following at December 31, 1999 and 1998:
1999 1998
----------- -----------
Raw materials and components $ 234,563 $ 225,233
Work in process 826,723 756,807
----------- -----------
$1,061,286 $ 982,040
=========== ===========
Machinery and equipment consists of the following at December 31, 1999
and 1998:
1999 1998
----------- -----------
Machinery and equipment, at cost $ 361,945 $ 351,591
Accumulated depreciation and amortization (219,017) (191,644)
----------- -----------
$ 142,928 $ 159,947
=========== ===========
Accrued expenses consist of the following:
1999 1998
----------- -----------
Warranty costs $ 81,102 $ 82,418
Uninvoiced material receipts 428,915 -
Payroll and related 150,275 165,584
Facility lease loss 38,301 81,796
Other 59,963 40,638
----------- -----------
$ 758,556 $ 370,436
=========== ===========
</TABLE>
3. RETIREMENT BENEFITS
In accordance with Finnish law, Neuromag is required to make annual
contributions to a pension fund for the benefit of its employees. Pension
contributions are based on a fixed percentage of employees' salaries.
Provided that Neuromag makes such required contributions, it has no further
obligations related to such future employee pension benefits. For the years
ended December 31, 1999 and 1998, Neuromag made pension contributions
totaling approximately $130,000 and $115,000, respectively.
4. SUBORDINATED LOAN
Neuromag borrowed a total of FIM 3,140,000 ($530,539 at December 31, 1999)
from TEKES at the Finnish state base interest rate minus 1% (1.75% at
December 31, 1999), subject to a minimum rate of 3%. Repayment of this loan
and related accrued interest can occur only after Neuromag has generated
sufficient distributable equity based upon the statutory final accounts
prepared according to Finnish GAAP. Distributable equity as of December 31,
1999 in accordance with Finnish GAAP was a deficit of FIM 10,227,322
($1,728,023 at December 31, 1999). Therefore, the future repayment date for
principal and related accrued interest outstanding is dependent upon Neuromag
generating sufficient distributable equity in the future.
<PAGE>
5. SEGMENT AND GEOGRAPHIC INFORMATION
The following data represents information about operations of Neuromag in
different geographic regions:
<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
REVENUES
Finland $ 245,856 $ 25,870
Germany 16,359 25,755
Japan 4,986,592 4,053,131
USA 8,821 246,976
------------ -----------
$ 5,257,628 $ 4,351,732
============ ===========
</TABLE>
Net income and substantially all identifiable assets pertain to Neuromag's
operating facility in Finland.
6. INCOME TAXES
Components of Neuromag's net deferred tax assets are as follows at
December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 174,017 $ 229,477
Depreciation 120,534 134,971
Research and development credits 465,959 719,674
Accrued expenses 23,525 66,954
Other 6,262 3,826
---------- ----------
Total deferred tax assets 790,297 1,154,902
Valuation allowance (174,017) (229,477)
---------- ----------
Net deferred assets $ 616,280 $ 925,425
========== ==========
</TABLE>
A valuation allowance has been provided for the value of Neuromag's net
operating loss carryforwards due to changes in control of Neuromag (see Note
10). The amount of net deferred tax assets considered realizable is subject
to change in the near term based on future operating results of Neuromag.
For the years ended December 31, 1999 and 1998, the provision (benefit) for
income taxes consists of deferred Finnish taxes.
7. COMMITMENTS AND CONTINGENCIES
LEGAL MATTERS
Neuromag is at times subject to pending and threatened legal matters that
arise out of the normal course of business. There are no pending or
threatened legal actions that Neuromag is aware of that the ultimate
disposition of these matters will have a material adverse effect on the
financial position or results of operations of Neuromag.
<PAGE>
LEASE COMMITMENTS
Neuromag leases certain facilities under a non-cancelable operating lease
with a shareholder. After December 31, 2000, Neuromag has the option to
cancel such lease upon six months written notice. Approximate future
non-cancelable minimum lease payments at December 31, 1999 consist of the
following:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
-----------------------
<S> <C>
2000 $ 134,000
2001 67,000
----------
TOTAL $ 201,000
==========
</TABLE>
Total rent expense for the years ending December 31, 1999 and 1998 was
approximately $95,000 and $70,000, respectively.
8. SHAREHOLDER PURCHASE OPTION AGREEMENT
Pursuant to a shareholder agreement between Neuromag and Marconi Medical
Systems, Inc., a shareholder of Neuromag, Marconi has a call option to
purchase all of the outstanding shares of Neuromag for cash and royalties on
future revenues. Marconi exercised this option in conjunction with the
ultimate sale of the Company's outstanding share capital to Biomagnetic
Technologies, Inc. (see Note 10)
9. CONCENTRATIONS OF RISK
During the years ended December 31, 1999 and 1998, the Company obtained
substantially all of its SQUID components for its products from one vendor. The
Company believes that it could obtain such components from other vendors on
comparable terms, but a change in vendors could have a material adverse impact
on the Company's financial position and results of operations.
During the years ended December 31, 1999 and 1998, the Company sold
substantially all of its products through two distributors that in turn sell the
products to end-users. Termination of such distributor relationships could have
a material adverse impact on the Company's financial position and results of
operations.
Marconi Medical Systems, Inc. has been the exclusive U.S. distributor for
Neuromag Oy since January 1996. During the years ended December 31, 1999 and
1998, sales to Marconi totaled approximately $24,000 and $1,590,000,
respectively. At December 31, 1999 and 1998, approximately $173,000 and
$210,000, respectively, was due from Marconi and included in accounts
receivable.
10. ACQUISITION OF NEUROMAG OY SHARE CAPITAL BY BIOMAGNETIC
TECHNOLOGIES, INC.
On December 22, 1999, Biomagnetic Technologies, Inc., acquired all of the
issued and outstanding capital stock ("Shares") of Neuromag Oy pursuant to
the terms of a Share Purchase Agreement, by and between Marconi Medical
Systems, Inc. ("Marconi") and BTi (the "Share Purchase Agreement"). Similar
to Neuromag Oy, BTi is engaged in the research, development and manufacturing
of MSI systems. BTi is located in San Diego, California. Under the terms of
the Share Purchase Agreement, BTi paid a total of $10 million in cash to
Marconi for the purchase of the Shares and agreed to pay between a minimum of
$2.5 million and a maximum of $5 million in royalties to Marconi under an
ancillary royalty agreement over 8 years, and additional consideration of up
to approximately $1.8 million dependent upon the occurrence of certain future
events.
<PAGE>
EXHIBIT 99.3
BIOMAGNETIC TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined statements of operations for the year
ended September 30, 1999 and the three months ended December 31, 1999,
illustrate the effect of the merger as if it had occurred on October 1, 1998.
There were material differences between the accounting policies of Biomagnetic
Technologies, Inc. and Neuromag Oy (after converting Neuromag Oy financial
statements from Finnish to U.S. GAAP) and, therefore, no conforming of
accounting policy adjustments have been made to the pro forma financial
statements. The unaudited pro forma combined statement of operations for the
year ended September 30, 1999 includes the results of operations of Biomagnetic
Technologies, Inc. for the year ended September 30, 1999 and the results of
operations of Neuromag Oy for the year ended December 31, 1999.
The unaudited proforma combined statement of operations for the three months
ended December 31, 1999 includes the results of operations of Biomagnetic
Technologies, Inc. and Neuromag Oy for the same period.
The unaudited pro forma combined financial statements are presented for
comparative purposes only and are not necessarily indicative of the combined
results of operations of future periods or the results that actually would have
been realized had Biomagnetic Technologies, Inc. and Neuromag Oy been a single
entity during the periods presented.
The unaudited pro forma combined financial statements have been derived from the
respective historical audited and unaudited consolidated financial statements of
Biomagnetic Technologies, Inc. and Neuromag Oy and should be read in conjunction
with such financial statements and the notes thereto that are incorporated
herein by reference.
<PAGE>
BIOMAGNETIC TECHNOLOGIES, INC. AND NEUROMAG OY
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(all amounts in U.S. dollars)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
BTi NEUROMAG OY ADJUSTMENTS COMBINED
--------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUES $ 3,254 $ 5,258 $ - $ 8,512
COST OF REVENUES 3,224 3,408 313 (A) 6,945
--------- ---------- ----------- ---------
Gross margin 30 1,850 (313) 1,567
OPERATING EXPENSES
Research and development 3,729 605 - 4,334
Marketing, general and administrative 3,833 959 1,124 (B) 5,916
--------- ---------- ---------- ---------
Total operating expenses 7,562 1,564 1,124 10,250
--------- ---------- ---------- ---------
OPERATING (LOSS) INCOME (7,532) 286 (1,437) (8,683)
--------- --------- ---------- ---------
INTEREST AND OTHER INCOME (EXPENSE), NET 69 (14) (950) (C) (895)
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES (7,463) 272 (2,387) (9,578)
PROVISION FOR INCOME TAXES 1 181 (181) (D) 1
--------- ---------- ---------- ---------
Net (Loss) Income $ (7,464) $ 91 $ (2,206) $ (9,579)
--------- ---------- ---------- ---------
--------- ---------- ---------- ---------
NET LOSS PER SHARE:
Basic and diluted $ (.09) $ (.11)
========== =========
WEIGHTED AVERAGE SHARES USED IN NET LOSS PER SHARE
CALCULATION:
Basic and diluted 83,367 83,367
========== =========
</TABLE>
(A) To record royalty expense based on minimum guaranteed royalty
commitment related to acquisition for $2,500 over eight years.
(B) To record goodwill amortization based on acquisition goodwill
of $11,124 over ten years.
(C) To record interest expense based on $10,000 of loan proceeds used
for acquisition of Neuromag shares.
(D) To remove Neuromag Oy's tax provision based on combined net loss
position.
See Notes to Unaudited Pro Forma Combined Statements of Operations.
<PAGE>
BIOMAGNETIC TECHNOLOGIES, INC. AND NEUROMAG OY
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(all amounts in U.S. dollars)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
BTi NEUROMAG OY ADJUSTMENTS COMBINED
--------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUES $ 278 $ 2,025 $ - $ 2,303
COST OF REVENUES 448 1,158 78 (A) 1,684
--------- ---------- ---------- ---------
Gross margin (170) 867 (78) 619
OPERATING EXPENSES
Research and development 545 133 - 678
Marketing, general and administrative 1,073 206 281 (B) 1,560
--------- ---------- ---------- ---------
Total operating expenses 1,618 339 281 (B) 2,238
--------- ---------- ---------- ---------
(Loss) income from operations (1,788) 528 (359) (1,619)
--------- ---------- ---------- ---------
INTEREST AND OTHER INCOME (EXPENSE), NET 67 29 (238) (C) (142)
--------- ---------- --------- ---------
INCOME BEFORE (BENEFIT) PROVISION FOR INCOME TAXES (1,721) 557 (597) (1,761)
PROVISION (BENEFIT) FOR INCOME TAXES - 91 (91) (D) -
--------- ---------- --------- ---------
Net (loss) income $ (1,721) $ 466 $ (506) $ (1,761)
--------- ---------- --------- ---------
--------- ---------- --------- ---------
NET LOSS PER SHARE:
Basic and diluted $ (.02) $ (.02)
========= =========
WEIGHTED AVERAGE SHARES USED IN NET LOSS PER SHARE
CALCULATION:
Basic and diluted 83,367 83,367
========= =========
</TABLE>
(A) To record royalty expense based on minimum guaranteed royalty commitment
related to acquisition for $2,500 over eight years.
(B) To record goodwill amortization based on acquisition goodwill of
$11,124 over ten years.
(C) To record interest expense based on $10,000 of loan proceeds used for
acquisition of Neuromag shares.
(D) To remove Neuromag Oy's tax provision based on combined net loss position.
See Notes to Unaudited Pro Forma Combined Statements of Operations.
<PAGE>
BIOMAGNETIC TECHNOLOGIES, INC. AND NEUROMAG OY
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
1. BASIS OF PRESENTATION
The unaudited pro forma combined statements of operations for the year ended
September 30, 1999 combine the historical statements of operations for
Biomagnetic Technologies, Inc. for the year ended September 30, 1999 with the
historical statements of operations of Neuromag Oy for the year ended December
31, 1999. For the three months ended December 31, 1999, the unaudited pro forma
combined statements of operations combine the historical statements of
operations for each company for the three months ended December 31, 1999. All
unaudited pro forma combined statements of operations assume consummation of the
merger as if it had occurred on October 1, 1998.
2. INTERCOMPANY TRANSACTIONS
Biomagnetic Technologies, Inc. and Neuromag Oy had no intercompany transactions.
3. ACQUISITION COSTS
The unaudited pro forma combined statements of operations exclude expenses
related to the acquisition as they are nonrecurring in nature.
