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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File No.: __________
NEW DIMENSIONS IN MEDICINE, INC. LIQUIDATING TRUST
(Exact name of registrant as specified in its charter)
DELAWARE 41-6410139
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
45 SOUTH SEVENTH STREET
SUITE 3400 55402
MINNEAPOLIS, MINNESOTA (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number, including area code: (612) 344-9300
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
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TO: The Beneficiaries of the NDM Liquidating Trust
FROM: James A. Potter
Liquidating Trustee of the NDM Liquidating Trust
DATE: March 26, 1997
SUBJECT: Report to Beneficiaries of the NDM Liquidating Trust as
of December 31, 1996
- - - --------------------------------------------------------------------------
I. INTRODUCTION
On November 14, 1995, the Board of Directors ("Board") of New Dimensions
In Medicine, Inc. ("NDM") approved the Plan of Complete Liquidation
and Dissolution of NDM ("Plan of Liquidation"). The Board appointed
James A. Potter to serve as Liquidating Trustee of the liquidating trust
to be formed under the Plan of Liquidation. On February 22, 1996,
the Board approved the execution of the New Dimensions In Medicine, Inc.
Liquidating Trust Agreement ("Trust Agreement"). Terms not otherwise
defined herein shall have the meaning ascribed in the Trust Agreement.
Pursuant to the terms of the Trust Agreement, the Liquidating Trustee is
to deliver semi-annual reports to beneficiaries of the NDM Liquidating
Trust. This is the second such semi-annual report. The Trust Agreement
requires that the year-end report include an audited financial statement,
which is attached.
THIS REPORT HAS NOT BEEN REVIEWED BY ANY GOVERNMENTAL AGENCY TO DETERMINE
THE ADEQUACY OR ACCURACY OF INFORMATION CONTAINED HEREIN. HOWEVER, EVERY
EFFORT HAS BEEN MADE TO ENSURE ACCURACY.
II. BACKGROUND
On October 18, 1995, the Board approved the sale of most of NDM's assets to
CONMED Corporation ("CONMED"). NDM also entered into an agreement to sell
its international wound care business to Paul Hartmann AG ("Hartmann").
NDM's shareholders approved the Plan of Liquidation and the sale of assets
to CONMED at a special meeting of shareholders held on February 23,
1996. After consummating the sales to CONMED and Hartmann on February
23, 1996, NDM ceased doing business.
On February 17, 1996, the Board approved an Initial Liquidation
Distribution to shareholders of record as of February 23, 1996. The
aggregate distribution totaled $19,119,087.52 or $4.3189 per share. On
March 8, 1996, NDM executed the Trust Agreement and created the NDM
Liquidating Trust. The purpose of the NDM Liquidating Trust is to
liquidate the remaining assets of NDM, pay all fixed and known
liabilities of NDM, and distribute any remaining assets to the holders of
the NDM Common Stock of record as of March 12, 1996. On March 7, 1996, the
Board approved a second liquidation distribution ("Second
Liquidation Distribution") of $.1201 per share for an aggregate distribution
of $530,768.00.
III. SURRENDER AND CANCELLATION OF NDM COMMON STOCK
As a condition to receiving the Second Liquidation Distribution or any
other distribution from the NDM Liquidating Trust, each holder of the
common stock of NDM ("NDM Common Stock") must surrender the certificates
representing such stock. A letter of transmittal has been previously
circulated for that purpose. The Liquidating Trustee shall maintain a
record of each holder's beneficial interest in the NDM Liquidating Trust.
Each holder's beneficial interest in the NDM Liquidating Trust shall
be maintained in
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book entry form only. No beneficial interest will be certificated.
BENEFICIAL INTERESTS IN THE NDM LIQUIDATING TRUST ARE NON-TRANSFERABLE,
EXCEPT IN ACCORDANCE WITH THE LAWS OF DESCENT AND DISTRIBUTION. Any
distribution from the NDM Liquidating Trust shall be paid only to the
holder(s) designated on the letter of transmittal.
IV. SIGNIFICANT EVENTS
A. Novamedix Litigation
As indicated in the Proxy Statement dated February 2, 1996,
Novamedix Limited ("Novamedix") commenced an action against NDM on
June 10, 1994, alleging infringement on several of Novamedix's
patents. A detailed description of the Novamedix litigation is
included in the Proxy Statement under the heading "Legal
Proceedings," p. 61.
Novamedix and NDM entered into a settlement agreement on or about
March 7, 1996. As a part of the settlement agreement, NDM agreed to the
entry of a consent judgment against it, it shipped its footpump and
consumable inventory to Novamedix in Texas, and it paid Novamedix
$47,500.00.
Several days after the parties signed the settlement papers, and before
the inventory was shipped, an NDM employee informed Novamedix that tests
on the footpump slippers indicated that they did not conform to the
specifications filed with the Federal Drug Administration ("FDA").
Novamedix sought and received NDM's internal memoranda on the topic
generated in early 1996.
Subsequently, Novamedix moved the federal court in Ohio for an
order styled as "enforcing the settlement agreement" by requiring NDM
to pay Novamedix $744,300.00, the alleged value of the slippers
had they complied with the FDA specifications. Novamedix has
based its claim on the Uniform Commercial Code's ("UCC") implied
warranties of fitness and merchantability on the sales of goods.
Mr. Potter, on behalf of NDM, has denied that the slippers
constituted value given for the settlement or that the UCC applies to
the transfer of inventory pursuant to the settlement of a patent
infringement lawsuit. He also has argued that the slippers are
not valueless, and that Novamedix has no right to sell the slippers
in any event absent obtaining its own authority from the FDA at
which time the differing specifications would be disclosed and
most likely approved.
The court heard telephonic oral arguments in August. On March
20, 1997, the court denied Novamedix's motion. Novamedix has 30
days in which to appeal the decision.
B. Hartmann Escrow
In connection with the sale of assets to Hartmann, NDM
deposited $600,000.00 into an escrow account ("Hartmann Escrow")
to ensure payment of NDM's obligation to indemnify Hartmann against
certain threatened litigation. The Liquidating Trustee has the
authority to direct investment of the funds in the Hartmann Escrow,
and all income on such funds are payable to the Trust Agreement.
Funds in the Escrow Account will be released when a settlement
agreement is reached or April 22, 1998, whichever is earlier. The
current balance of the Hartmann Escrow is approximately $625,000.
2
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V. SUMMARY OF RECEIPTS AND DISBURSEMENTS
A copy of the trust's audited financial statement is attached.
VI. QUESTIONS REGARDING THE SURRENDER OF THE NDM COMMON STOCK AND
COMMUNICATIONS WITH THE LIQUIDATING TRUSTEE
If you should have questions regarding the surrender of the NDM Common
Stock, please contact Norwest Stock Transfer at (612) 450-2448 or
(800) 380-1372. Questions for the Liquidating Trustee should be directed
to: Oppenheimer Wolff & Donnelly, 3400 Plaza VII, 45 South Seventh
Street, Minneapolis, Minnesota 55402, Attention: Mark G. Rabogliatti, Esq.
Please note that neither the Liquidating Trustee nor its counsel can
give tax advice.
3
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NEW DIMENSIONS IN MEDICINE, INC. LIQUIDATING TRUST
STATEMENT OF NET ASSETS IN LIQUIDATION
DECEMBER 31,1996
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TABLE OF CONTENTS
PAGE
Report of Larson, Allen, Weishair & Co., LLP, Independent Auditors 1
Statement of Net Assets in Liquidation
December 31, 1996 2
Statement of Cash Receipts and Disbursements
From Inception Date of March 8, 1996 through December 31, 1996 3
Statement of Changes in Net Assets in Liquidation
From Inception Date of March 8, 1996 through December 31, 1996 4
Statement of Cash Flows
From Inception Date of March 8, 1996 through December 31, 1996 5
Notes to Financial Statements 6-9
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REPORT OF LARSON, ALLEN, WEISHAIR & CO., LLP
INDEPENDENT AUDITORS
Trustee
New Dimensions in Medicine, Inc. Liquidating Trust
Minneapolis, Minnesota
We have audited the accompanying statement of net assets in
liquidation of New Dimensions in Medicine, Inc. Liquidating Trust (the
"Liquidating Trust") as of December 31, 1996, and the related
statements of cash receipts and disbursements, changes in net assets in
liquidation, and cash flows from inception date of March 8, 1996
through the period ended December 31, 1996. These financial
statements are the responsibility of the Liquidating Trust's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
As described in Note 2 to the financial statements, the Liquidating Trust's
policy is to prepare its financial statements on the basis of cash receipts
and disbursements, which is a comprehensive basis of accounting other than
generally accepted accounting principles.
In our opinion, the statements referred to above present fairly, in all
material respects, the net assets in liquidation of the Liquidating Trust at
December 31, 1996, and its cash receipts and disbursements and changes in net
assets in liquidation and its cash flows from the inception date through the
period ended December 31, 1996, on the basis of accounting described in
Note 2.
LARSON, ALLEN, WEISHAIR & CO., LLP
Minneapolis, Minnesota
March 22, 1997
(1)
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NEW DIMENSIONS IN MEDICINE, INC. LIQUIDATING TRUST
STATEMENT OF NET ASSETS IN LIQUIDATION
DECEMBER 31, 1996
Cash $ 555,763
Cash-Restricted 744,300
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Net Assets $ 1,300,063
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SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
(2)
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NEW DIMENSIONS IN MEDICINE, INC. LIQUIDATING TRUST
STATEMENT OF CASH RECEIPTS AND DISBURSEMENTS
FROM INCEPTION DATE OF MARCH 8, 1996 THROUGH DECEMBER 31, 1996
CASH RECEIPTS
Interest $ 55,024
Other 34,146
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Total Cash Receipts $ 89,170
CASH DISBURSEMENTS
General and Administrative Disbursements 269,582
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CASH DISBURSEMENTS IN EXCESS OF
CASH RECEIPTS ALLOCABLE TO BENEFICIARIES $ (180,412)
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SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
(3)
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NEW DIMENSIONS IN MEDICINE, INC. LIQUIDATING TRUST
STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
FROM INCEPTION DATE OF MARCH 8, 1996 THROUGH DECEMBER 31, 1996
Net Assets at Inception, March 8, 1996 (Per Unit: 1996, $.4543) $ 2,011,243
Cash Disbursements in Excess of Cash Receipts Allocable to
Beneficiaries (Per Unit: 1996, $.0407) (180,412)
Liquidating Distribution (Per Unit: 1996, $.1201) (530,768)
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NET ASSETS AT END OF YEAR (Per Unit: 1996, $.2937) $ 1,300,063
------------
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There were 4,426,842 units of beneficial interest outstanding at the
beginning and end of the year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
(4)
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NEW DIMENSIONS IN MEDICINE, INC. LIQUIDATING TRUST
STATEMENT OF CASH FLOWS
FROM INCEPTION DATE OF MARCH 8, 1996 THROUGH DECEMBER 31, 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Cash Disbursements in Excess of Cash Receipts
Allocable to Beneficiaries $ (180,412)
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CASH FLOWS FROM FINANCING ACTIVITIES
Initial Funding of Trust $ 2,011,243
Liquidating Distributions Paid (530,768)
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Net Cash Provided by Financing Activities $ 1,480,475
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NET INCREASE IN CASH AND CASH EQUIVALENTS $ 1,300,063
Cash and Cash Equivalents - Beginning of Period --
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CASH AND CASH EQUIVALENTS - END OF PERIOD $ 1,300,063
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SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
(5)
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NEW DIMENSIONS IN MEDICINE, INC. LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS
FROM INCEPTION DATE OF MARCH 8, 1996 THROUGH DECEMBER 31, 1996
NOTE 1 ORGANIZATION AND BACKGROUND
On November 14, 1995, the Board of Directors (Board) of New
Dimensions In Medicine, Inc. (NDM) approved the Plan of Complete
Liquidation and Dissolution of NDM (Plan of Liquidation).
On March 8, 1996, NDM executed the Trust Agreement and created
NDM Liquidating Trust. The purpose of the NDM Liquidating Trust is to
liquidate the remaining assets of NDM, pay all fixed and known
liabilities of NDM, and distribute any remaining assets to the holders
of the NDM Common Stock of record as of March 12, 1996. On February
17, 1996, the Board approved an Initial Liquidation Distribution to
shareholders of record as of February 23 1996. The aggregate
distribution totaled $19,119,088 or $4.3189 per share. On March 7,
1996, the Board approved a second liquidation distribution of $.1201
per unit for an aggregate distribution of $530,768.
The NDM Liquidating Trust shall terminate on the earliest of the
following dates: (a) the date that all assets in such NDM Liquidating
Trust have been liquidated and the proceeds distributed to the
Beneficiaries as provided in the Plan of Liquidation and in the Trust
Agreement, (b) the date on which a court of competent jurisdiction
enters a Final Order authorizing the termination of such NDM
Liquidating Trust, or (c) three years after the Transfer Date.
Notwithstanding the foregoing, in the event the Trustee shall have
been unable, after reasonable efforts, to liquidate or otherwise
dispose of the assets of the NDM Liquidating Trust within the initial
three-year term of the Trust Agreement, then the Trustee shall have
the right to extend the term of the NDM Liquidating Trust for
successive one-year renewal terms until the assets of the NDM
Liquidating Trust have been sold or otherwise disposed of in
fulfillment of the purpose of the NDM Liquidating Trust. The term of
the NDM Liquidating Trust shall in no event exceed fifteen years after
the date that the Trust Agreement is executed.
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements were prepared on the basis of cash receipts and
disbursements. Under this method, cash receipts and related assets were
recognized when received, rather than when earned, and cash disbursements
were recognized when paid, rather than when the obligation was incurred.
CASH EQUIVALENTS
Cash equivalents consist of cash invested in a mutual fund
consisting of short-term U.S. Government obligations.
(6)
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NEW DIMENSIONS IN MEDICINE, INC. LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS
FROM INCEPTION DATE OF MARCH 8, 1996 THROUGH DECEMBER 31, 1996
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
For federal income tax purposes, the transfer of assets and liabilities to
the Liquidating Trust and distribution to the shareholders of Units of
Beneficial Interest in the Liquidating Trust were treated as a distribution
of assets and liabilities by the Company to its shareholders and a
contribution by the shareholders of such net assets to the Liquidating Trust
in return for Units of Beneficial Interest. The Liquidating Trust is treated
as a grantor trust and not as a corporation. Accordingly, any receipts or
disbursements of the Liquidating Trust is not taxable to the Liquidating
Trust, but was taxable to the Unit holders as if the Unit holders had
themselves realized the receipts or disbursements from their undivided
interests in the assets of the Liquidating Trust.
NOTE 3 CONTINGENT LIABILITIES - RESERVE FUND
Under Delaware law, NDM was required, in connection with its
dissolution, to pay or provide for payment of all known, fixed and
contingent liabilities. Within the liquidation period, NDM set aside
a cash Reserve Fund for payment of all known or ascertainable
liabilities of the Company, including amounts estimated to be
necessary for the payment of estimated expenses, taxes and contingent
liabilities.
If any portion of the Reserve Fund appears to be in excess of
remaining liabilities, distributions to stockholders and/or interest
holders correspondingly would be increased. Nevertheless, in the
event that the amounts set aside in the Reserve Fund prove to be
inadequate to pay NDM's liabilities, pursuant to Section 282 of the
Delaware General Common Law, the stockholders of NDM may be held
personally liable for the payment of any claim against NDM, but such
personal liability by statute cannot exceed the lesser of the
stockholder's pro rata share of the claim or the amount distributed to
such stockholder pursuant to the Plan of Liquidation. In addition, in
the event a court determines that NDM failed to pay or to make
adequate provision for its liabilities prior to a liquidation
distribution, a creditor of NDM could obtain an injunction delaying or
diminishing the anticipated liquidation to the stockholders pursuant
to the Plan of Liquidation.
NOVAMEDIX LITIGATION
Novamedix Limited (Novamedix) commenced an action against NDM on
June 10, 1994, alleging infringement on several of Novamedix's
patents.
Novamedix and NDM entered into a settlement agreement on or about
March 7, 1996. As a part of the settlement agreement, NDM agreed to
the entry of a consent judgment against the company and shipped its
footpump and consumable inventory to Novamedix in Texas and paid
Novamedix $47,500.
(7)
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NEW DIMENSIONS IN MEDICINE, INC. LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS
FROM INCEPTION DATE OF MARCH 8, 1996 THROUGH DECEMBER 31, 1996
NOTE 3 CONTINGENT LIABILITIES - RESERVE FUND (CONTINUED)
NOVAMEDIX LITIGATION (CONTINUED)
Several days after the parties signed the settlement papers, and before the
inventory was shipped, an NDM employee informed Novamedix that tests on the
footpump slippers indicated that they did not conform to the
specifications filed with the Federal Drug Administration (FDA).
Subsequently Novamedix moved the federal court in Ohio for an order enforcing
the settlement agreement by requiring NDM to pay Novamedix $744,300, the
alleged value of the slippers had they complied with the FDA specifications.
Novamedix has based its claim on the Uniform Commercial Code's (UCC) implied
warranties of fitness and merchantability on the sales of goods.
The Trustee, on behalf of NDM, has denied that the slippers
constituted value given for the settlement or that the UCC applies
to the transfer of inventory pursuant to the settlement of a patent
infringement lawsuit. The Trustee also has argued that the slippers
have value, and that Novamedix has no right to sell the slippers in
any event absent obtaining its own authority from the FDA at which
time the differing specifications would be disclosed and most likely
approved.
The court heard telephonic oral arguments in August of 1996. At December 31,
1996, the Trustee had agreed not to make distributions out of the trust which
would reduce the balance below $744,300. Consequently, this amount is shown
on the balance sheet as restricted cash. On March 20, 1997, the court denied
Novamedix's motion. Novamedix has 30 days in which to appeal the decision.
TAXES
The Trust may be liable for income taxes which could arise if the
utilization of NDM's net operating loss carryforwards are disallowed
to offset the gains realized by NDM upon the sale of NDM's assets.
The NDM Board of Directors have estimated that this liability could
range from $-0- to $1,000,000.
NOTE 4 HARTMANN ESCROW
In connection with the sale of assets of NDM's International Wound Care
Business, NDM deposited $600,000 into an escrow account (Hartmann Escrow) to
ensure payment of NDM's obligation to indemnify the buyer (Hartmann) against
certain threatened litigation. The Trustee has the authority to direct
investment of the funds in the Hartmann Escrow, and all income on such funds
is payable to the Trust. Funds in the Escrow Account will be released when a
settlement agreement is reached or April 22, 1998, whichever is earlier. The
current balance of the Hartmann Escrow is approximately $625,000.
(8)
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NEW DIMENSIONS IN MEDICINE, INC. LIQUIDATING TRUST
NOTES TO FINANCIAL STATEMENTS
FROM INCEPTION DATE OF MARCH 8, 1996 THROUGH DECEMBER 31, 1996
NOTE 5 LIQUIDATING DISTRIBUTION
As a condition to receiving any distributions under the
Liquidating Trust Agreement, shareholders of NDM surrendered the
instruments representing their NDM common stock to the Trustee. No
distributions subsequent to February 23, 1996 have been or will be
made to any shareholder who has not surrendered their NDM common
stock.
Any future distributions, including the Second Liquidation
Distribution, allocable to a shareholder who has not surrendered or is
not deemed to have surrendered their NDM common stock is placed in a
segregated account for the benefit of such shareholder. If the holder
does not surrender its NDM common stock within 180 days of the date on
which the notice of Final Distribution is mailed, all distributions
allocable to such shareholder shall be transferred to and deposited
with the state official authorized by the laws of the State of
Delaware to receive the proceeds of such distribution. Such transfer
shall comply in all respects with the laws of the State of Delaware.
The proceeds of such distribution shall thereafter be held solely for
the benefit of and for the ultimate distribution to such shareholder
as the sole equitable owner thereof and shall escheat to the State of
Delaware or be treated as abandoned property in accordance with the
laws of the State of Delaware. In no event shall the proceeds of any
such distribution revert to or become the property of the NDM Trust
Estate. At December 31, 1996, 20,652 shares of NDM common stock had
not been surrendered to the Trustee.
Distribution
Record Date Payment Date Per Unit Amount
- - - ------------- ------------ ------------ ------------
Initial Distribution Prior to Formation of Trust:
February 23, 1996 February 23, 1996 4.3189 $ 19,119,088
------------
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Liquidating Distributions were Paid as Follows:
March 7, 1996 April 16, 1996 .1201 $ 530,768
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NOTE 6 PATENTS
The Liquidating Trust has right to various patents which were
obtained by NDM. The value, if any, of such patents has not been
determined and no value has been included as a Trust Asset.
(9)
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 31, 1997 NDM LIQUIDATING TRUST
By /s/ James A. Potter
------------------------
James A. Potter
TRUSTEE
