SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): June 1, 1995
CNS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 0-16612 41-1580270
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
1250 Park Road
Chanhassen, MN 55317
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 474-7600
Item 2. Acquisition or Disposition of Assets.
On June 1, 1995, CNS, Inc. ("CNS") completed the sale of its sleep
disorders diagnostic products business to Aequitron Medical, Inc. ("Aequitron")
for a sales price of approximately $5.0 million in cash and a $600,000 note from
Aequitron to CNS. This line of business had revenues of approximately $7.1
million in 1994. CNS will record a gain of approximately $1.9 million on the
sale in the quarter ending June 30, 1995. Most of CNS' employees who had been
involved in the diagnostic business have joined Aequitron.
Aequitron designs, manufactures and markets electronic respiratory
products for home health care and hospital use, and wheel chair lifts and
automobile hand controls for people who face mobility challenges. CNS has
appointed Aequitron as a non-exclusive distributor for its Breathe Right7 nasal
strip in U.S. professional health care markets, including hospitals, sleep labs,
physician groups and homecare providers.
Item 7. Financial Statements.
(a) Financial Statements.
None
(b) Pro Forma Financial Information.
Unaudited Pro Forma Financial Statements ........ F-1
Unaudited Pro Forma Balance Sheet as of
March 31, 1995 ......................... F-2
Unaudited Pro Forma Statement of Operations for
the Three Months Ended March 31, 1995 .. F-3
Unaudited Pro Forma Statement of Operations for
the Year Ended December 31, 1994 ....... F-4
Notes to Unaudited Pro Forma Financial Statements F-5
(c) Exhibits.
10.1 Asset Purchase Agreement dated as of May 8, 1995 by
and between CNS and Aequitron (incorporated by
reference to Exhibit 10.4 to CNS' Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995 (the
"Form 10-Q")).
10.2 Non-Exclusive Distributorship Agreement dated as of
May 8, 1995 by and between CNS and Aequitron Medical,
Inc. (incorporated by reference to Exhibit 10.5 to
the Form 10-Q).
SIGNATURE
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, thereunto duly authorized.
CNS, INC.
By /s/ Richard E. Jahnke
Richard E. Jahnke, President
Dated: August 14, 1995
CNS, INC.
Unaudited Pro Forma Financial Statements
Basis of Presentation
The unaudited pro forma statements of operations for the year ended December 31,
1994 and for the three months ended March 31, 1995, present the operating
results of CNS, Inc. (the "Company"), excluding the operations of its Sleep
Disorder Diagnostic Products Division (the "Division"), as if the Division had
been disposed of at the beginning of the respective periods. The pro forma
balance sheet has been prepared assuming the disposition of the division took
place as of March 31, 1995.
The unaudited pro forma statements of operations, the balance sheet, and the
notes thereto should be read in conjunction with the Company's audited financial
statements and notes thereto, incorporated by reference from the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and the
unaudited financial statements and notes thereto incorporated by reference from
the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1995.
The unaudited pro forma information is not necessarily indicative of the results
of operations or financial position that would have resulted had the disposition
occurred as described above, nor is it necessarily indicative of the results of
operations or future periods or future financial position.
<TABLE>
<CAPTION>
CNS, INC.
Unaudited Pro Forma Balance Sheet
March 31, 1995
CNS Net assets CNS
ASSETS: historical sold (A) Adjustments pro forma
Current assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents......................... $ 7,645,629 $ 0 $ 4,743,000(B) $ 12,388,629
Accounts receivable, net of allowance for
doubtful accounts of $218,000................. 5,245,190 762,041 0 4,483,149
Notes receivable.................................. 0 0 595,611(B) 595,611
Inventories....................................... 2,738,379 2,195,013 0 543,366
Prepaid expenses and other current assets......... 147,810 0 0 147,810
Total current assets.......................... 15,777,008 2,957,054 5,338,611 18,158,565
Property and equipment, net........................ 560,745 239,332 0 321,413
Patents and trademarks, net........................ 135,568 13,728 0 121,840
$ 16,473,321 $ 3,210,114 $ 5,338,611 $ 18,601,818
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable.................................. 2,108,036 0 0 2,108,036
Accrued expenses.................................. 1,024,662 60,000 562,109(B) 1,526,771
Deferred maintenance revenues..................... 289,502 289,502 0 0
Total current liabilities......................... 3,422,200 349,502 562,109 3,634,807
Shareholders' equity:
Common stock - $.01 par value:
Authorized 50,000,000 shares; issued
and outstanding 17,065,856 shares (E)......... 85,329 0 0 85,329
Additional paid-in capital........................ 24,356,494 0 0 24,356,494
Accumulated deficit............................... (11,390,702) 0 1,915,890(B) (9,474,812)
Total shareholders' equity............... 13,051,121 0 1,915,890 14,967,011
Commitments and contingency
$ 16,473,321 $ 349,502 $ 2,477,999 $ 18,601,818
</TABLE>
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
CNS, INC.
Unaudited Pro Forma Statement of Operations
Three Months Ended March 31, 1995
Divested
CNS unit's CNS
historical operations(C) Adjustments pro forma
<S> <C> <C> <C> <C>
Sales ........................ $ 9,011,575 $ 1,552,337 $ 0 $ 7,459,238
Cost of goods sold ........... 3,948,490 1,098,205 0 2,850,285
Gross profit ............. 5,063,085 454,132 0 4,608,953
Operating expenses:
Marketing and selling ....... 2,646,540 507,181 0 2,139,359
General and administrative .. 514,600 214,261 0 300,339
Research and development .... 183,358 183,094 0 264
Total operating expenses 3,344,498 904,536 0 2,439,962
Operating income (loss) . 1,718,587 (450,404) 0 2,168,991
Interest income .............. 84,175 0 57,312(D) 141,487
Net income (loss) ....... $ 1,802,762 $ (450,404) $ 57,312 $ 2,310,478
Net income (loss) per common
and common equivalent share $ 0.10 $ (0.03) $ 0.00 $ 0.13
Weighted average number of
common shares (E) .......... 18,173,576 18,173,576 18,173,576 18,173,576
</TABLE>
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
CNS, INC.
Unaudited Pro Forma Statement of Operations
Year Ended December 31, 1994
Divested
CNS unit's CNS
historical operations(C) Adjustments pro forma
<S> <C> <C> <C> <C>
Sales ....................... $ 9,856,048 $ 7,057,876 $ 0 $ 2,798,172
Cost of goods sold .......... 5,520,828 3,731,283 0 1,789,545
Gross profit ........... 4,335,220 3,326,593 0 1,008,627
Operating expenses:
Marketing and selling ...... 5,569,379 2,469,572 0 3,099,807
General and administrative . 1,046,913 527,071 0 519,842
Research and development ... 785,878 639,263 0 146,615
Total operating expenses 7,402,170 3,635,906 0 3,766,264
Operating income (loss) (3,066,950) (309,313) 0 (2,757,637)
Interest income ............. 207,480 0 232,848(D) 440,328
Interest expense ............ (7,945) 0 0 (7,945)
Net income (loss) ...... $ (2,867,415) $ (309,313) $ 232,848 $ (2,325,254)
Net income (loss) per common
and common equivalent share $ (0.18) $ (0.02) $ 0.01 $ (0.15)
Weighted average number of
common shares (E) ......... 15,754,586 15,754,586 15,754,586 15,754,586
</TABLE>
The accompanying notes are an integral part of the financial statements.
CNS, INC.
Notes to Unaudited Pro Forma Financial Statements
NOTE A
The "net assets sold" amounts reflect the elimination of assets sold to and
liabilities assumed by the buyer pursuant to the "Asset Purchase Agreement."
NOTE B
Effective June 1, 1995, the Company completed the sale of its Sleep Disorder
Diagnostic Products Division (the "Division"). The Company received $5.0 million
in cash proceeds and a note receivable of $595,611, resulting in a gain on sale
of $1,915,890.
The pro forma adjustment to cash reflects the assumption that a portion of the
proceeds would have been used to pay expenses incurred in connection with the
sale of the Division.
The pro forma adjustment to accrued expenses reflects additional expenses the
Company incurred as a result of the sale including severance, commissions,
travel, warranty and training.
The pro forma adjustment to retained earnings reflects the gain on the sale.
NOTE C
The "divested unit's operations" reflects the elimination of net sales and
expenses of the Division which was divested.
NOTE D
Increase in interest income reflects the assumed investment of the cash
proceeds, net of accrued expenses at an interest rate of 5% and the interest
accrual on the note receivable at an interest rate of 4%.
NOTE E
Effective June 1, 1995, the Company declared a two-for-one stock split. All
share and per share amounts in the accompanying financial statements have been
retroactively adjusted to reflect the stock split.
