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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A-1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) - June 1, 1995
AEQUITRON MEDICAL, INC.
(Exact name of small business issuer as specified in its charter)
Commission file number 0-11571
MINNESOTA 41-1359703
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14800 28th Avenue North
Plymouth, Minnesota 55447
(Address of principal executive offices)
(Zip Code)
612/557-9200
(Registrant's telephone number, including area code)
AEQUITRON MEDICAL, INC.
(Former name or former address, if changed since last report)
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The undersigned registrant hereby amends Item 7 of its Current Report on Form
8-K dated June 1, 1995 as set forth below:
ITEM 7. FINANCIAL STATEMENTS; PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of business acquired.
Independent Auditors' Report dated July 17, 1995.
Audited Statements of Assets, Liabilities and Equity
for the years ended December 31, 1993 and 1994, and unaudited
for the period ended March 31, 1995.
Audited Statements of Operations for the years ended
December 31, 1993 and 1994, and unaudited for the period
ended March 31, 1995.
Audited Statements of Cash Flows for the years ended
December 31, 1993 and 1994 and unaudited for the period ended
March 31, 1995.
Notes to above Financial Statements.
(b) Pro Forma Financial Information.
Unaudited Pro Forma Financial Statements of the Company
as of April 30, 1995.
Unaudited Pro Forma Consolidated Balance Sheets as of April
30, 1995.
Unaudited Pro Forma Consolidated Statement of
Operations for the year ended April 30, 1995.
Notes to Unaudited Pro Forma Financial Statements.
(c) Exhibits.
The following Exhibits are included in this report:
See "Exhibit Index to Form 8-K" immediately following the
signature page of this report.
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INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
CNS, Inc.:
We have audited the accompanying statements of assets, liabilities, and equity
of Sleep Disorder Diagnostic Products Division (a division of CNS, Inc.) as of
December 31, 1993 and 1994 and the related statements of operations 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 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 Sleep Disorder Diagnostic
Products Division as of December 31, 1993 and 1994 and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
Minneapolis, Minnesota
July 17, 1995
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SLEEP DISORDER DIAGNOSTIC PRODUCTS DIVISION
(a division of CNS, Inc.)
Statements of Assets, Liabilities, and Equity
<TABLE>
<CAPTION>
December 31
------------------------ March 31,
Assets 1993 1994 1995
--------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
Current assets:
Accounts receivable, net of allowance for
doubtful accounts of $113,632, $78,400,
and $97,000, respectively $ 1,513,848 1,454,372 1,280,341
Inventories 2,063,880 2,056,947 2,028,456
Prepaid expenses and other current assets 35,563 17,245 25,084
--------------------------------------------------------------------------------------------------------------
Total current assets 3,613,291 3,528,564 3,333,881
Property and equipment, net 311,514 364,802 373,078
Patents and trademarks, net 28,597 18,504 16,251
--------------------------------------------------------------------------------------------------------------
$ 3,953,402 3,911,870 3,723,210
--------------------------------------------------------------------------------------------------------------
Liabilities and Equity
Current liabilities:
Accounts payable 404,497 390,495 276,362
Accrued expenses 232,952 248,783 208,755
Deferred maintenance revenues 245,000 281,602 289,502
--------------------------------------------------------------------------------------------------------------
Total current liabilities 882,449 920,880 774,619
--------------------------------------------------------------------------------------------------------------
Equity:
Advances from CNS 3,070,953 2,990,990 2,948,591
--------------------------------------------------------------------------------------------------------------
Total equity 3,070,953 2,990,990 2,948,591
--------------------------------------------------------------------------------------------------------------
$ 3,953,402 3,911,870 3,723,210
--------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
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SLEEP DISORDER DIAGNOSTIC PRODUCTS DIVISION
(a division of CNS, Inc.)
Statements of Operations
<TABLE>
<CAPTION>
Three months
Years ended December 31 ended
------------------------- March 31,
1993 1994 1995
--------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
Sales $ 7,158,076 7,057,876 1,552,337
Cost of goods sold 4,025,421 3,731,283 1,098,205
--------------------------------------------------------------------------------------------
Gross profit 3,132,655 3,326,593 454,132
--------------------------------------------------------------------------------------------
Marketing and selling 2,360,875 2,469,572 507,181
General and administrative 1,051,037 527,071 214,261
Research and development 852,762 639,263 183,094
--------------------------------------------------------------------------------------------
Total operating expenses 4,264,674 3,635,906 904,536
--------------------------------------------------------------------------------------------
Net loss $(1,132,019) (309,313) (450,404)
============================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
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SLEEP DISORDER DIAGNOSTIC PRODUCTS DIVISION
(a division of CNS, Inc.)
Statements of Cash Flows
<TABLE>
<CAPTION>
Three months
Years ended December 31 ended
---------------------------- March 31,
1993 1994 1995
------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
Operating activities:
Net loss $(1,132,019) (309,313) (450,404)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 121,254 140,629 37,496
Changes in operating assets and liabilities:
Accounts receivable 1,083,293 59,476 174,031
Inventories (67,032) 6,933 28,491
Prepaid expenses and other current
assets 85,541 18,318 (7,839)
Accounts payable (107,923) (14,002) (114,133)
Accrued expenses (145,079) 15,831 (40,028)
Deferred maintenance revenues 0 36,602 7,900
------------------------------------------------------------------------------------------------------------------
Net cash used in operating
activities (161,965) (45,526) (364,486)
------------------------------------------------------------------------------------------------------------------
Investing activities:
Payments for purchases of property and
equipment (49,031) (183,824) (43,519)
Payments for patents and trademarks (30,278) 0 0
------------------------------------------------------------------------------------------------------------------
Net cash used in investing
activities (79,309) (183,824) (43,519)
------------------------------------------------------------------------------------------------------------------
Financing activities:
Proceeds from advances from CNS 241,274 229,350 408,005
------------------------------------------------------------------------------------------------------------------
Net cash provided by
financing activities 241,274 229,350 408,005
------------------------------------------------------------------------------------------------------------------
Net change in cash and
cash equivalents 0 0 0
Cash and cash equivalents:
Beginning of period 0 0 0
------------------------------------------------------------------------------------------------------------------
End of period $ 0 0 0
------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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SLEEP DISORDER DIAGNOSTIC PRODUCTS DIVISION
(a division of CNS, Inc.)
Notes to Financial Statements
December 31, 1993 and 1994 and March 31, 1995 (unaudited)
(1) Summary of Significant Accounting Policies
Business
The Sleep Disorder Diagnostic Products Division (the Division) of CNS,
Inc. (CNS) designs, manufactures and markets computer-based diagnostic
medical devices that record and analyze patient data for hospital-
based sleep laboratories, physicians, and home health care providers.
Revenue Recognition
Revenue from sales is recognized when earned, generally at the time
products are shipped.
Inventories
Inventories are valued at the lower of cost (determined on a first-in,
first-out basis) or market.
Property and Equipment
Property and equipment are stated at cost. Equipment is depreciated
using the straight-line method over five years.
Research and Development Costs
Expenditures for research and development activities are charged to
operations as incurred.
Patents and Trademarks
Patents and trademarks are stated at cost and are amortized over three
years using the straight-line method.
Foreign Sales
Foreign sales are made in U.S. dollars only. There are no currency
conversions.
(Continued)
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2
SLEEP DISORDER DIAGNOSTIC PRODUCTS DIVISION
(a division of CNS, Inc.)
(2) Details of Selected Balance Sheet Accounts
<TABLE>
<CAPTION>
December 31,
----------------------- March 31,
1993 1994 1995
--------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
Inventories:
Component parts and subassemblies $1,458,948 1,528,033 1,566,667
Work in process 219,990 55,915 163,802
Finished goods 384,942 472,999 297,987
-------------------------------------------------------------------------------------------------------------
Total inventories $2,063,880 2,056,947 2,028,456
-------------------------------------------------------------------------------------------------------------
Property and equipment:
Lab and test equipment 962,241 1,069,101 1,112,622
Less accumulated depreciation
and amortization 650,727 704,299 739,544
-------------------------------------------------------------------------------------------------------------
Property and equipment, net $ 311,514 364,802 373,078
-------------------------------------------------------------------------------------------------------------
Patents and trademarks:
Patents and trademarks 30,278 30,278 30,278
Less accumulated amortization 1,681 11,774 14,027
-------------------------------------------------------------------------------------------------------------
Patents and trademarks, net $ 28,597 18,504 16,251
-------------------------------------------------------------------------------------------------------------
Accrued expenses:
Vacations 52,068 61,692 55,553
Accrued rent expense 59,887 45,221 41,554
Commissions, royalty, and bonus 47,584 62,615 15,393
Accrued warranty, installation, and repair 60,000 60,000 60,000
Other 13,413 19,255 36,255
-------------------------------------------------------------------------------------------------------------
Accrued expenses $ 232,952 248,783 208,755
-------------------------------------------------------------------------------------------------------------
(Continued)
</TABLE>
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3
SLEEP DISORDER DIAGNOSTIC PRODUCTS DIVISION
(a division of CNS, Inc.)
(3) INCOME TAXES
CNS incurred a net loss for the years ended December 31, 1993 and 1994,
and has a net operating loss carryforward for financial statement and
income tax purposes. Accordingly, CNS recognized no income tax
expense or benefit and no income tax allocations were made to the
Division.
(4) LEASE EXPENSE
The Division has been allocated lease expense based on their portion of
CNS's leases. Total rental expense for operating leases for the
Division was $175,830, $175,430 and $45,054 for the years ended
December 31, 1993 and 1994 and the three months ended March 31, 1995
(unaudited), respectively.
(5) SALES
The Division had a foreign customer, a distributor of its products,
which accounted for approximately 21%, 21%, and 23% of sales for the
years ended December 31, 1993, and 1994 and the three months ended
March 31, 1995 (unaudited), respectively. Accounts receivable from
this customer as of December 31, 1993 and 1994 and March 31, 1995
(unaudited) were $148,651, $209,781, and $284,145, respectively.
The Division's foreign sales were $2,080,847, $1,887,215, and $375,810
for the years ended December 31, 1993 and 1994 and the three months
ended March 31, 1995 (unaudited), respectively.
(6) SUBSEQUENT EVENT
On June 1, 1995, CNS completed the sale of substantially all of the
assets of the Division to a third party for $5 million plus a note
totaling $595,611. Certain liabilities aggregating approximately
$112,000 (unaudited) were not assumed by the buyer.
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PRO FORMA FINANCIAL INFORMATION
(UNAUDITED)
The following unaudited pro forma financial information presents the
estimated effects of the Purchase of the CNS, Inc. Sleep Disorder Diagnostic
Products Division (the "Division") as a purchase for accounting purposes. The
pro forma information in the Pro Forma Statement of Operations assume that the
Purchase had occured on May 1, 1994. In the case of the April 30, 1995 Pro
Forma Balance Sheet, the Purchase is reflected on a pro forma basis as if it
occurred on April 30, 1995. The information presented in the following pro
forma financial statements reflects the financial statements of Aequitron
Medical, Inc. and the Division as and for the years ended April 30, 1995 and
March 31, 1995, respectively.
The following pro forma financial data is not necessarily indicative
of the results of the future operations of the combined entity or the actual
results that would have been achieved had the Purchase been consummated on the
dates indicated.
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Aequitron Medical, Inc.
Pro Forma Balance Sheet
April 30, 1995
<TABLE>
<CAPTION>
AMI CNS Pro Forma
Historical Historical Adjustments Pro Forma
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents 4,986,800 - (2,308,000) 1 2,678,800
Accounts receivable, net 4,311,200 1,280,300 (579,600) 2 5,011,900
Inventories 3,071,100 2,028,500 (728,500) 3 4,371,100
Deferred income tax 606,100 - 606,100
Prepaid expenses and other 336,100 25,100 60,000 4 421,200
---------- ---------- ---------- ----------
Total Current Assets 13,311,300 3,333,900 (3,556,100) 13,089,100
Property and equipment:
Buildings 652,600 - 652,600
Equipment 3,930,900 1,112,600 (68,500) 5 4,975,000
Leasehold improvements 26,800 - 26,800
---------- ---------- ---------- ----------
4,610,300 1,112,600 (68,500) 5,654,400
Less allowances for depreciation (2,901,400) (739,500) 0 (3,640,900)
---------- ---------- ---------- ----------
1,708,900 373,100 (68,500) 2,013,500
Other assets
Goodwill, net 1,789,500 - 1,936,700 7 3,726,200
Demonstration, evaluation and
rental equipment 1,133,600 - 300,000 3 1,433,600
Other assets 0 16,300 1,000,000 6 1,016,300
---------- ---------- ---------- ----------
2,923,100 16,300 3,236,700 6,176,100
---------- ---------- ---------- ----------
Total Assets 17,943,300 3,723,300 (387,900) 21,278,700
========== ========== ========== ==========
Liabilities and shareholders' equity
Current Liabilities:
Note payable 0 - 595,600 1 595,600
Accounts Payable 1,161,100 276,400 (276,300) 1 1,161,200
Employee Compensation 1,104,900 208,800 (208,800) 1 1,104,900
Commissions Payable 543,200 - 543,200
Deferred maintenance revenues 0 289,500 (49,800) 1 239,700
Other liabilities and accrued expenses 1,075,000 - 1,075,000
Current maturities of long-term debt 38,300 - 38,300
---------- ---------- ---------- ----------
Total Current Liabilities 3,922,500 774,700 60,700 4,757,900
Long-term Debt 64,000 - 2,500,000 1 2,564,000
Shareholders' equity:
Advances from CNS 2,948,600 (2,948,600) 1 0
Preferred stock 0 - 0
Common stock 48,500 - 48,500
Additional paid-in capital 5,933,700 - 5,933,700
Retained Earnings 7,974,600 - 7,974,600
---------- ---------- ---------- ----------
Total shareholders' equity 13,956,800 2,948,600 (2,948,600) 13,956,800
---------- ---------- ---------- ----------
Total liabilities and shareholders' equity 17,943,300 3,723,300 (387,900) 21,278,700
========== ========== ========== ==========
</TABLE>
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Aequitron Medical, Inc.
Pro Forma Statement of Operations
Year Ended April 30, 1995
<TABLE>
<CAPTION>
AMI CNS Pro Forma
Historical Historical Adjustments Pro Forma
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues:
Sales 28,385,100 6,852,400 35,237,500
Service 2,417,200 - 2,417,200
---------- ---------- -------- ----------
Total revenues 30,802,300 6,852,400 37,654,700
Cost of sales
Product 13,061,600 3,897,700 16,959,300
Service 821,400 - 821,400
---------- ---------- -------- ----------
Total cost of sales 13,883,000 3,897,700 17,780,700
---------- ---------- -------- ----------
Gross profit 16,919,300 2,954,700 19,874,000
Operating expenses:
Sales and marketing 6,258,500 2,418,800 8,677,300
General and administrative 5,021,600 621,700 336,500 6,7 5,979,800
Research and development 2,953,700 639,800 3,593,500
---------- ---------- -------- ----------
14,233,800 3,680,300 336,500 18,250,600
Operating income(loss) 2,685,500 (725,600) (336,500) 1,623,400
Other income(expense)
Interest income 302,000 - 302,000
Interest expense (24,800) - (24,800)
Other - Net 82,500 - 82,500
---------- ---------- -------- ----------
359,700 - 359,700
Income(loss) before income taxes 3,045,200 (725,600) (336,500) 1,983,100
Income taxes 1,187,600 - (414,600) 8 773,400
Net income(loss) 1,857,600 (725,600) 78,100 1,209,700
========== ========== ======== ==========
Earnings per common Share: $0.36 $0.24
========== ==========
Weighted average number of common
and common equivalent shares 5,125,200 5,125,200
========== ==========
</TABLE>
Note: Historical amounts for the CNS, Inc. Sleep Disorder Diagnostic
Products Division were determined by adding amounts from the
three months ended March 31, 1995, Statement of Operations to
the amounts from the twelve months ended December 31, 1994,
Statement of Operations and subtracted amounts from the three
months ended March 31, 1994, Statement of Operations.
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NOTES TO PRO FORMA FINANCIAL STATEMENTS
1. To reflect the purchase consideration of $5,693,100 consisting of
$2,308,000 cash, $2,500,000 long-term debt, $595,600 note payable and
the assumption of deferred maintenance costs of $239,700.
2. To reflect the accounts receivable acquired at the date of purchase.
3. To reflect the writedown to fair value and reclassification of certain
amounts of the Division's inventories.
4. To reflect the preliminary estimate of acquired prepaid expenses.
5. To reflect the writedown to estimated fair value of equipment
acquired.
6. To reflect fair value of acquired patents and covenant not to compete
and the related amortization over an eleven and seven year period,
respectively, on a straight-line basis.
7. To reflect the preliminary estimate of goodwill and the related
amortization over a ten year period on a straight-line basis.
8. To reflect Aequitron Medical, Inc. effective tax rate.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
DATED: August 14, 1995 AEQUITRON MEDICAL, INC.
By:/s/ James B. Hickey, Jr.
------------------------
James B. Hickey, Jr.
President and Chief
Executive Officer
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBIT INDEX TO FORM 8-K
Date of Report: Commission File No.:
June 1, 1995 0-11571
AEQUITRON MEDICAL, INC.
Exhibit
2.1 Asset Purchase Agreement dated May 8, 1995 by and among Aequitron Medical,
Inc. and CNS, Inc. Upon the request of the Commission, the Company agrees
to furnish a copy of the exhibits and schedules to the Asset Purchase
Agreement.(1)
2.2 Non-Competition Agreement dated May 8, 1995 by and between Dan Cohen and
Aequitron Medical, Inc.(1)
2.3 Term Loan and Credit Agreement dated June 1, 1995 by and between Norwest
Bank Minnesota, N.A. and Aequitron Medical, Inc.(1)
2.4 Term Note from Aequitron Medical, Inc. to Norwest Bank Minnesota, N.A.
dated June 1, 1995 in the amount of $2,500,000.(1)
2.5 Security Agreement dated June 1, 1995 for Norwest Bank Minnesota, N.A. by
Aequitron Medical, Inc.(1)
23 Consent of Peat Marwick
(1) Previously filed.
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EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the (i) Registration Statement Number 33-13783 on Form S-8
dated April 24, 1987, (ii) Registration Statement Number 33-21862 on Form S-8
dated March 4, 1988, (iii) Registration Statement Number 33-25981 on Form S-8
dated December 7, 1988 and (iv) Registration Statement number 33-89950 on Form
S-8 dated March 3, 1995 of our report dated June 14, 1995, relating to the
financial statements of the sleep diagnostics business of CNS, Inc., which
appears in the Report of Form 8-K/A-1 of Aequitron Medical, Inc. dated August
11, 1995 filed with the Securities and Exchange Commission.
KPMG Peat Marwick
Minneapolis, Minnesota
August 11, 1995
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