<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------------
FORM 8-K/A NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
------------------------------------------
DATE OF REPORT: SEPTEMBER 20, 1996
------------------------------------------
DANNINGER MEDICAL TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
-------------------------------------------
Delaware 000-16893 31-0992628
- ---------------- -------------------- ----------------------
(STATE OR OTHER (COMMISSION FILE NO.) (IRS EMPLOYER
JURISDICTION OF IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
------------------------------------------
5160-B Blazer Memorial Parkway
Dublin, Ohio 43017-1339
(614) 718-0500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER
INCLUDING AREA CODE OF REGISTRANT'S
PRINCIPAL EXECUTIVE OFFICES)
------------------------------------------
Not Applicable
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
------------------------------------------
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On September 6, 1996, Danninger Medical Technology, Inc., a Delaware
corporation ("Danninger"), Stephen R. Draper of Port Huron, Michigan ("Draper"),
and Surgical and Orthopedic Specialties, Ltd., a Michigan corporation
("Surgical"), entered into a Stock Purchase Agreement, dated as of September 6,
1996, whereby Danninger purchased from Draper 100% of the stock of Surgical.
Under the terms of the Stock Purchase Agreement, Danninger agreed to acquire the
stock of Surgical in exchange for the aggregate purchase price of $2,900,000,
payable as follows: $1,000,000 in cash, a stock certificate registered in the
name of Draper for 83,334 shares of Danninger common stock, and Danninger's
promissory note in the principal amount of $1,400,000. The transaction was
accomplished through arms-length negotiations between Danninger's management and
Draper. There was no material relationship between Draper and Danninger or any
of Danninger's affiliates, any of Danninger's directors or officers, or any
associate of any such Danninger director or officer, prior to this transaction.
The funding of the cash amount was a loan made in the ordinary course of
business by Bank One, N.A.
Surgical is engaged in the rental and sale of orthopedic equipment,
primarily to medical businesses.
The Stock Purchase Agreement and Danninger's press release issued September
9, 1996 regarding the consummation of the Stock Purchase Agreement are attached
as exhibits to this report and are incorporated herein by reference. The
foregoing summary of the Stock Purchase Agreement does not purport to be
complete and is qualified in its entirety by reference to such exhibit.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
<PAGE>
October 30, 1996
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Surgical & Orthopedic Specialties, Ltd.
3050 Commerce Drive
Fort Gratiot, MI 48059
We have audited the balance sheets of Surgical & Orthopedic Specialties,
Ltd. as of December 31, 1995 and 1994, and the related statements of income and
expenses and cash flows for the years 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 audit.
We conducted our audits in accordance with generally accepted auditing
standards. These 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 refered to in the first paragraph
present fairly, in all material respects, the financial position of Surgical &
Orthopedic Specialties, Ltd. as of December 31, 1995 and 1994, and the
statements of income and expenses and cash flows referred to in the first
paragraph present fairly, in all material respects, the results of operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
FOLLMER, RUDZEWICZ & CO., P.C.
Sterling Heights, Michigan
<PAGE>
SURGICAL & ORTHOPEDIC SPECIALTIES, LTD.
(A MICHIGAN CORPORATION)
COMPARATIVE BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
-----------
1995 1994
RESTATED RESTATED
-------- --------
CURRENT ASSETS:
<S> <C> <C>
Cash on hand and in banks $ --- $ 1,188
Marketable securities - Note B 31,522 20,131
Note receivable - officer, 7%, secured by personal
residence, due on demand 57,044 43,456
Accounts receivable:
Trade, net of allowance for doubtful accounts of
$79,100 and $50,000 in 1995 and 1994,
respectively 706,935 434,390
Related entity - Note C 4,603 6,099
Employee advances 50 13,943
Prepaid expenses:
Insurance 15,505 12,197
Rent 8,838 ---
Michigan Single Business Tax 100 ---
----------- -----------
Total current assets $824,597 $531,404
----------- -----------
PROPERTY AND EQUIPMENT, at cost:
Rental equipment $1,237,249 $1,151,940
Transportation equipment 138,976 118,269
Furniture and fixtures 175,777 185,117
----------- -----------
$1,552,002 $1,455,326
Less: Accumulated depreciation 1,149,077 1,048,777
----------- -----------
$ 402,925 $ 406,549
----------- -----------
OTHER ASSETS:
Deposits $ 3,538 $ 5,910
Cash surrender value of life insurance 20,815 16,023
----------- -----------
$ 24,353 $ 21,933
----------- -----------
$1,251,875 $ 959,886
----------- -----------
----------- -----------
</TABLE>
<PAGE>
LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1995 1994
RESTATED RESTATED
-------- --------
CURRENT LIABILITIES:
<S> <C> <C>
Notes payable:
Bank - Note D $ 115,000 $ 195,000
Related entity - Note C 85,000 60,000
Accounts payable:
Trade 246,301 107,228
401(k) withheld ---- 9,200
Accrued expenses:
Payroll 43,800 37,574
Commissions 12,200 19,586
Interest 1,756 1,635
Michigan Single Business Tax ---- 1,940
Contractual obligations, portion due within one
year 159,167 107,325
---------- --------
Total current liabilities $ 663,224 $ 539,488
---------- --------
CONTRACTUAL OBLIGATIONS:
Equipment contracts payable - Note E $ 226,667 $ 107,325
Less: Portion due within one year, classified as a
current liability above 159,167 107,325
---------- --------
$ 67,500 $ ----
---------- --------
STOCKHOLDER'S EQUITY
CAPITAL STOCK - Common, par value $1 per share:
authorized 2,000 shares, issued and outstanding
1,310 shares $ 1,310 $ 1,310
PAID IN CAPITAL IN EXCESS OF PAR VALUE 133,755 133,755
---------- --------
$135,065 $135,065
---------- --------
RETAINED EARNINGS - Note F:
Balance, January 1 $286,544 $190,610
Add: Net income for the year ended December 31 -
statement attached 96,072 95,934
---------- --------
Balance, December 31 $382,616 $286,544
---------- --------
UNREALIZED GAIN (LOSS) ON SECURITIES:
Balance, January 1 $ (1,211) $ ----
Add: Change in unrealized gain on securities 4,681 (1,211)
---------- --------
Balance, December 31 $ 3,470 $ (1,211)
---------- --------
$521,151 $420,398
---------- --------
$1,251,875 $959,886
---------- --------
---------- --------
</TABLE>
The attached NOTES TO FINANCIAL STATEMENTS form an integral part
of these statements.
<PAGE>
SURGICAL & ORTHOPEDIC SPECIALTIES, LTD.
COMPARATIVE STATEMENT OF INCOME AND EXPENSES
<TABLE>
<CAPTION>
For the years ended December 31,
1995 - Restated 1994 - Restated
---------------------------- -------------------------
Percent Percent
Amount of Income Amount of Income
------ --------- ------ ---------
<S> <C> <C> <C> <C>
INCOME:
Rental $2,021,366 80.2% $1,663,806 79.9%
Sales, net of allowance 499,520 19.8 416,490 20.0
Other ---- --- 2,177 .1
------------ ---------- ----------- -----
Total income $2,520,886 100.0% $2,082,473 100.0%
COST OF SALES:
Rental expense $ 466,985 18.5% $ 430,071 20.7%
Sales expense 54,248 2.2 31,981 1.5
------------ ---------- ----------- -----
Total cost of sales $ 521,233 20.7% $ 462,052 22.2%
------------ ---------- ----------- -----
Gross profit $1,999,653 79.3% $1,620,421 77.8%
------------ ---------- ----------- -----
OPERATING EXPENSES - schedule
attached $1,123,878 44.6% $ 919,902 44.2%
GENERAL AND ADMINISTRATIVE
EXPENSES - schedule attached 766,573 30.4 616,719 29.6
------------ ---------- ----------- -----
Total expenses $1,890,451 75.0% $1,536,621 73.8%
------------ ---------- ----------- -----
Operating income $ 109,202 4.3% $ 83,800 4.0%
------------ ---------- ----------- -----
OTHER INCOME (EXPENSE):
Interest and dividend income $ 5,399 .2% $ 3,881 .2%
Administrative income 30,000 1.2 30,000 1.5
Interest expense (41,567) (1.6) (22,500) (1.1)
Gain (loss) on sale of asset (6,962) (.3) 753 ---
------------ ---------- ----------- -----
Total other income (expense) $ (13,130) (.5%) $ 12,134 .6%
------------ ---------- ----------- -----
Net income $ 96,072 3.8% $ 95,934 4.6%
------------ ---------- ----------- -----
------------ ---------- ----------- -----
</TABLE>
The attached NOTES TO THE FINANCIAL STATEMENTS
form an integral part of these statements
<PAGE>
SURGICAL & ORTHOPEDIC SPECIALTIES, LTD.
COMPARATIVE STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
YEARS ENDED DECEMBER 31,
------------------------
1995 1994
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Cash received from customers $2,234,629 $1,968,557
Expenditures to suppliers and employees (2,103,120) (1,766,414)
Other operating cash receipts 30,000 30,000
Interest received 5,399 3,881
Interest paid (41,446) (22,045)
---------- ---------
Net cash provided by operating activities $ 125,462 $ 213,979
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property and equipment $(168,652) $(120,333)
Proceeds from sale of assets 2,750 2,422
Net activity under officer note receivable (13,588) (9,656)
Expenditures for cash surrender value of life insurance (4,792) (4,157)
Expenditures for marketable securities (6,710) (5,932)
---------- ---------
Net cash used in investing activities $(190,992) $(137,656)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net activity under short-term financing from bank
overdraft $ ---- $ (71,615)
Net activity under line-of-credit (80,000) 75,000
Proceeds from related entity note payable 25,000 60,000
Proceeds from issuance of contractual obligations 330,000 50,000
Payments of contractual obligations (210,658) (188,520)
---------- ---------
Net cash provided by (used in) financing
activities $ 64,342 $ (75,135)
---------- ---------
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS $ (1,188) $ 1,188
CASH AND CASH EQUIVALENTS, at beginning of year 1,188 -----
---------- ---------
CASH AND CASH EQUIVALENTS, at end of year $ ---- $ 1,188
---------- ---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1995 1994
RESTATED RESTATED
-------- --------
RECONCILIATION OF NET INCOME TO NET CASH FLOWS FROM
OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 96,072 $ 95,934
Adjustments to reconcile net income to net cash flows from
operating activities:
Depreciation 162,564 178,448
(Gain) loss on sale of assets 6,962 (753)
Allowance of doubtful accounts 29,100 15,000
Changes in:
Accounts receivable (286,257) (128,916)
Prepaid expenses (12,246) (152)
Deposits 2,372 (2,610)
Accounts payable and accrued expenses 126,895 57,028
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 125,462 $ 213,979
--------- ---------
--------- ---------
</TABLE>
The attached NOTES TO THE FINANCIAL STATEMENTS
form an integral part of these statements
<PAGE>
SURGICAL & ORTHOPEDIC SPECIALTIES, LTD.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
NOTE A SUMMARY OF ACCOUNTING POLICIES
The following is a summary of certain accounting policies followed in
the preparation of these financial statements. The policies conform
to generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
COMPANY OPERATIONS
The company is engaged in the rental and sale of orthopedic equipment,
primarily to medical businesses.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect 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 this reporting period. Actual results could
differ from those estimates.
CASH EQUIVALENTS
For purposes of the statement of cash flows, the company considers all
highly liquid debt instruments with a maturity of three months or less
to be cash equivalents.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The allowance for doubtful accounts is based upon a percentage
determined on the company's prior experience of collections.
PROPERTY AND EQUIPMENT
Management capitalizes expenditures for property and equipment.
Expenditures for maintenance and repairs are charged to operating
expenses. Property and equipment is carried at cost. Adjustments of
the assets and the related accumulated depreciation accounts are made
for property and equipment retirements and disposals, with the
resulting gain or loss included in the statement of income and
expenses.
<PAGE>
DEPRECIATION
Depreciation of property and equipment is computed using the
straight-line and accelerated methods over the estimated useful life
of the assets at acquisition.
INCOME TAXES
The company has elected to be treated as a Subchapter S corporation
under the Internal Revenue Code. Under these provisions, the company
generally does not pay Federal corporate income taxes on its taxable
income. Instead, the stockholders are liable for individual Federal
income taxes on their respective shares of the company's taxable
income. Accordingly, no provision for Federal corporate income taxes
has been reflected in the financial statements.
NOTE B MARKETABLE SECURITIES
Effective January 1, 1994, the company adopted Statement of Financial
Accounting Standards No. 115, "Accounting of Certain Investments in
Debt and Equity Securities". The company's investment securities are
classified as "available-for sale" and are recorded at current market
value. Accordingly, unrealized gains and losses are excluded from
earnings and reported in a separate component of stockholders' equity.
Realized gains and losses are computed based on specific
identification of the securities sold.
The market value presented of $31,522 is greater than the aggregate
cost at December 31, 1995. The increase the carrying amount of
marketable securities to market, a valuation allowance in the amount
of $3,470 has been included in stockholders' equity at December 31,
1995.
The market value presented of $20,131 is less than the aggregate cost
at December 31, 1994. To decrease the carrying amount of marketable
securities to market, a valuation allowance in the amount of $(1,211)
has been included in stockholders' equity at December 31, 1994.
NOTE C TRANSACTIONS WITH RELATED ENTITIES
The company engages in various transactions with a related entity.
ACCOUNTS RECEIVABLE
At December 31, 1995 and 1994, the company was owed $4,603 and $6,099,
respectively, from a related entity through common ownership.
NOTE PAYABLE
At December 31, 1995 and 1994, the company had a note payable to a
related entity through common ownership in the amount of $85,000 and
$60,000, respectively. The note is due on demand, unsecured, with
interest at prime plus .5% (prime was 8.5% at December 31, 1995).
LEASES
The company leases its Port Huron facility from a related entity
through common ownership under an operating lease expiring in
December, 2009, with rents provided for at $6,000 per month.
The company leases various other buildings from non-related parties
under operating leases expiring at various dates through 1998 at
$2,763 per month. Total rent expense for the years ended December 31,
1995 and 1994 was $101,343 and $76,722, respectively.
Minimum future rental payments under non-cancelable operating leases
having initial or remaining terms in excess of one year as of December
31, 1995 for each of the next five years and in the aggregate are:
For the years ending December 31 Amount
1996 $ 106,825
1997 92,613
1998 87,125
1999 72,000
2000 72,000
Subsequent to 2000 648,000
-----------
$ 1,078,563
<PAGE>
ADMINISTRATIVE SERVICE FEE INCOME
The company provides administrative services to Instramed, Inc., a
related entity through common ownership. Fees from these services
amounted to $30,000 for each of the years ended December 31, 1995 and
1994. The company also purchases disposable products from Instramed,
Inc.
NOTE D NOTE PAYABLE - BANK
At December 31, 1995 and 1994, the company had drawn $115,000 and
$195,000, respectively, under a revolving credit agreement with a
bank. The company may borrow up to $250,000 with interest at prime
plus .5% (prime was 8.5% at December 31, 1995). The note is secured
by the company's general assets.
<TABLE>
<CAPTION>
NOTE E CONTRACTUAL OBLIGATIONS
The company had the following contractual obligations as of December 31:
1995 1994
<S> <C> <C>
Equipment contracts payable to a bank, in
monthly installments of $5,208, plus interest at
prime plus .75% (prime was 8.5% at December 31,
1994). The notes were paid in full during the year
ended December 31, 1995. The general assets and
the personal guarantee of the shareholder and a
related entity were pledged as collateral................. $ $ 57,325
Note payable to a bank, in the amount of $50,000,
plus interest at prime plus .75% (prime was 8.5% at
December 31, 1994). The note was paid in full during
the year ended December 31, 1995. The general assets
of the company were pledged as collateral............... $ $ 50,000
Note payable to a bank, in monthly installments of $4,167,
plus interest at prime plus .75% (prime was 8.5% at
December 31, 1995), through February, 1997. The general
assets of the company have been pledged as collateral.... $ 54,167 $
Note payable to a bank, in monthly installments of $8,125,
plus interest at prime plus .75% (prime was 8.5% at
December 31, 1995), through June, 1997. The general
assets of the company have been pledged as collateral.... $146,250 $
Note payable to a bank, in monthly installments of $972,
plus interest at prime plus .75% (prime was 8.5% at
December 31, 1995), through March, 1998. The general
assets of the company have been pledged as collateral.... $ 26,250 $
------- -------
$226,667 $107,325
Less: Portion due within one year....................... 159,167 107,325
------- -------
$ 67,500 $ 00,000
------- -------
------- -------
</TABLE>
The following is a schedule of minimum long-term payments for each of
the next three years and in the aggregate:
For the years ending December 31 Amount
1996 $ 159,167
<PAGE>
1997 64,583
1998 2,917
----------
$ 226,667
----------
----------
NOTE F RETAINED EARNINGS
At December 31, 1995 and 1994, retained earnings consists of the
following:
1995 1994
---- ----
S-Corporation.......................... $300,549 $204,477
C-Corporation.......................... 82,067 82,067
------ ------
$382,616 $286,544
-------- --------
-------- --------
NOTE G RETIREMENT PLANS
The company has a 401(k) Retirement Plan covering substantially all
eligible employees. Participating employees may contribute a
percentage of their annual compensation, but not more than $9,240.
The plan provides for contributions in such amounts as the Board of
Directors may determine annually. There were no corporate
contributions for the years ended December 31, 1995 and 1994.
NOTE H RESTATEMENT
The accompanying financial statements for the year ended December 31,
1995 and 1994 have been restated to properly reflect marketable
securities.
<PAGE>
October 30, 1996
INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTARY INFORMATION
Board of Directors
Surgical & Orthopedic Specialties, Ltd.
3050 Commerce Drive
Fort Gratiot, Michigan 48059
Our report on our audits of the basic financial statements of Surgical &
Orthopedic Specialties, Ltd. for the years ended December 31, 1995 and 1994
appears on page one. The audit was made for the purpose of forming an opinion
of the basic financial statements taken as a whole. The supplementary
information included on page eleven is presented for purposes of additional
analysis and is not a required part of the procedures applied in the audit of
the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
FOLLMER, RUDZEQICZ & CO., F.C.
Sterling Heights, Michigan
<PAGE>
SURGICAL & ORTHOPEDIC SPECIALTIES, LTD.
COMPARATIVE SCHEDULE OF OPERATING EXPENSES
For the years ended December 31
1995 1994
Percent Percent
Amount of Income Amount of Income
------ --------- ------ ---------
Commissions $ 236,877 9.4% $ 310,058 14.9%
Salaries and wages 266,503 10.6% 94,967 4.6%
Payroll Taxes 39,792 1.6% 25,021 1.2%
Travel and entertainment 27,801 1.1% 26,743 1.3%
Repairs and maintenance 57,662 2.3% 56,430 2.7%
Disposables 214,912 8.5% 153,525 7.4%
Postage and freight 49,435 2.0% 26,507 1.3%
Automotive 52,528 2.1% 30,855 1.5%
Advertising 12,785 .5% 14,903 .7%
Insurance 3,019 .1% 2,445 .1%
Depreciation 162,564 6.4% 178,448 8.5%
-------- ----- -------- -----
$1,123,878 44.56% $ 919,902 44.2%
-------- ----- -------- -----
-------- ----- -------- -----
COMPARATIVE SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES
Salaries and wages:
Officer $ 176,500 7.0% $ 161,500 7.8%
Office 245,242 9.7% 187,637 9.0%
Taxes:
Michigan Single Business 13,518 .5% 9,647 .5%
Payroll 33,338 1.3% 20,876 1.0%
Other 8,551 .4%
Insurance:
General 27,172 1.1% 22,001 1.1%
Health 1,692 .1% 1,861 .1%
Employee Life 208 843
Professional Fees 54,334 2.2% 39,878 1.9%
Rent 101,343 4.0% 76,722 3.7%
Equipment rental 2,950 .1%
Office supplies and expense 28,416 1.1% 24,346 1.2%
Telephone 59,110 2.3% 41,800 2.0%
Consulting fees 10,639 .4% 1,771 .1%
Dues and subscriptions 1,509 .1% 8,887 .1%
Utilities 8,709 .3% 6,560 .3%
Miscellaneous 1,618 .2% 3,269 .1%
Donations 275 570
-------- ----- -------- -----
$766,573 30.4% $616.719 29.6%
-------- ----- -------- -----
-------- ----- -------- -----
<PAGE>
(b) PRO FORMA FINANCIAL INFORMATION.
The following unaudited Pro Forma Consolidated Statements of Income give
effect to the acquisition of Surgical as if the transaction, which occurred on
September 6, 1996, had taken place on January 1, 1995. The following unaudited
Pro Forma Consolidated Balance Sheet gives effect to the acquisition as if the
transaction had occurred on January 1, 1995.
The unaudited pro forma consolidated financial statements should be read in
conjunction with the accompanying historical financial statements located in
Item 7(a)above. These statements do not purport to be indicative of the results
of operations which actually would have occurred had the acquisition taken place
on December 31, 1995 nor do they purport to indicate the results of future
operations of Danninger.
DANNINGER MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
(IN THOUSANDS)
DANNINGER SURGICAL AND
MEDICAL ORTHOPEDIC
TECHNOLOGY SPECIALTIES
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
12/31/95 12/31/95(a) ADJUSTMENTS(a) 12/31/95
Net Revenue 12,584 2,520 15,104
Costs & Expenses
Costs of goods 6,360 521 6,881
Selling, General & Admin. 5,215 1,890 126 (1) 7,231
Research & Development 1,147 ----- 1,147
Operating Income (Loss) (138) 109 (126) (155)
Interest Expense 293 41 190 (2) 524
Other Expense (Income) (29) (29)
Income (Loss) Before Taxes (431) 97 (316) (650)
Income Taxes (72) (55)(3) (127)
Net Income (Loss) (359) 97 (261) (523)
Net Income (Loss) Per Share (0.08) (0.11)
Weighted Average of Common 4,661,332 83,334 (4) 4,744,666
<PAGE>
DANNINGER MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO THE PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
(IN THOUSANDS)
(a) Certain reclassifications have been made to Surgical's historical statement
of income to conform to Danninger's classification.
(1) To amortize non-compete agreement ($20) and goodwill ($106).
(2) To reflect interest on acquisition indebtedness.
(3) To reflect domestic income taxes not previously recorded by Surgical due to
its incorporation as a Subchapter S corporation, as well as, income
taxes resulting from changes in pro forma interest expense and
amortization of non-compete agreements and goodwill at estimated federal
and state income tax rates.
(4) To reflect shares granted as part of the purchase price.
<PAGE>
DANNINGER MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1995
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
DANNINGER SURGICAL AND
MEDICAL ORTHOPEDIC
TECHNOLOGY SPECIALTIES
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
12/31/95 12/31/95(a) ADJUSTMENTS(a) 12/31/95
<S> <C> <C> <C> <C>
Cash Equivalents 31 31
Accounts & Notes Receivable 3,497 769 4,266
Inventory 4,227 ---- 4,227
Prepaid and Other Assets 583 25 608
Total Current Assets 8,307 825 9,132
Property & Equipment 2,206 1,552 3,758
Less Accumulated Depreciation (1,482) (1,149) (2,631)
Net Property & Equip. 724 403 1,127
Other Assets
Goodwill 2,646 (3) 2,646
Intangibles 304 100 (2) 404
Other 182 24 206
Total Other Assets 486 24 2,746 3,256
Total Assets 9,517 1,252 2,746 13,515
Current Liabilities
Revolving Line of Credit 3,000 115 3,115
Current Portion of Long Term Debt 406 244 700 (1) 1,350
Accounts Payable 1,146 246 1,392
Accrued Exp & Other Liabilities 569 58 267 (4) 894
Total Current Liabilities 5,121 663 967 6,751
Term Debt (net of current maturities) 874 67 1,800 (1) 2,741
Shareholders' Equity
Common Stock 47 1 82 (5) 130
Additional Paid-in-Capital 3,367 135 283 (5) 3,785
Retained Earnings 108 386 (386)(5) 108
Total Shareholders' Equity 3,522 522 (18) 4,023
Total Liabilities and
Shareholders' Equity 9,517 1,252 2,746 13,515
</TABLE>
<PAGE>
DANNINGER MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1995
(UNAUDITED)
(IN THOUSANDS)
(1) To reflect additional borrowings to finance part of the purchase price
($1,000), and to reflect part of purchase price financed by the seller
($1,500).
(2) To reflect the fair value of non-compete agreement.
(3) To reflect the excess of purchase price over the underlying value of net
assets acquired (goodwill).
(4) To reflect accrued cost of completing acquisition ($75) and to reflect
deferred taxes relating to differences between expected financial
statements and tax basis of acquired assets ($192).
(5) To reflect part of purchase price financed with Danninger Common Stock
($500) offset by the elimination of Surgical's equity ($522).
<PAGE>
DANNINGER MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
DANNINGER SURGICAL AND
MEDICAL ORTHOPEDIC
TECHNOLOGY SPECIALTIES
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
06/30/96 06/30/96(a) ADJUSTMENTS(a) 06/30/96
<S> <C> <C> <C> <C>
Net Revenue 7,830 1,123 8,953
Costs and Expenses
Cost of goods 3,578 197 3,775
Selling, General & Admin. 3,204 960 63 (1) 4,227
Research & Development 456 ---- 456
Operating Income (Loss) 592 (34) (63) 495
Interest Expense 217 21 95 (2) 333
Other Expense (Income) -- ----
Income (Loss) Before Taxes 375 (55) (158) 162
Income Taxes 92 (53)(3) 39
Net Income (Loss) 283 (55) (105) 123
Net Income (Loss) Per Share 0.06 0.02
Weighted Average of Common
Shares Outstanding 4,981,136 83,334 (4) 5,064,469
</TABLE>
<PAGE>
DANNINGER MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO THE PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
(IN THOUSANDS)
(a) Certain reclassifications have been made to Surgical's historical statement
of income to conform to Danninger's classification.
(1) To amortize non-compete agreement ($10) and goodwill ($53).
(2) To reflect interest on acquisition indebtedness.
(3) To reflect domestic income taxes not previously recorded by Surgical due to
its incorporation as a Subchapter S corporation, as well as, income
taxes resulting from changes in pro forma interest expense and
amortization of non-compete agreements and goodwill at estimated federal
and state income tax rates.
(4) To reflect shares granted as part of the purchase price.
<PAGE>
(c) EXHIBITS.
EXHIBIT NO. DESCRIPTION
2 Stock Purchase Agreement, dated as of September 6, 1996, among
Danninger Medical Technology, Inc., Stephen R. Draper, and
Surgical and Orthopedic Specialties, Ltd.
20 Press release of Danninger Medical Technology, Inc. issued
September 9, 1996, regarding the Stock Purchase Agreement.
23 Consent of Follmer, Rudzewicz & Co., P.C.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DANNINGER MEDICAL
TECHNOLOGY, INC.
Date: November 22, 1996 By: /s/ Paul A. Miller
-------------------------------------
Paul A. Miller, Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
<S> <C> <C>
2 Stock Purchase Agreement, dated as of September 6, 1996,
among Danninger Medical Technology, Inc., Stephen
R. Draper, and Surgical and Orthopedic Specialties, Ltd.
(Reference is made to Exhibit 2 to the Current Report on
Form 8-K filed with the Securities and Exchange Commission
on September 20, 1996, and incorporated herein by
reference.)
20 Press release of Danninger Medical Technology,
Inc. issued September 9, 1996, regarding the Stock
Purchase Agreement. (Reference is made to Exhibit
20 to the Current Report on Form 8-K filed with
the Securities and Exchange Commission on
September 20, 1996, and incorporated herein by
reference.)
23 Consent of Follmer, Rudzewicz & Co., P.C.
</TABLE>
<PAGE>
FOLLMER,
RUDZEWICZ & CO., P.C.
CERTIFIED PUBLIC ACCOUNTANTS
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Danninger Medical Technology, Inc., on Form S-8 (file numbers 33-26211,
33-39336, 33-61995 and 33-91610) of our report dated October 30, 1996, on our
audits of the financial statements of Surgical & Orthopedic Specialties, Ltd. as
of December 31, 1995 and 1994, which report is included in this Form 8-K.
/s/ Follmer, Rudzewicz & Co., P.C.
FOLLMER, RUDZEWICZ & CO., P.C.
Sterling Heights, Michigan
11-21-96
- -------------
Date
