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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 ON
FORM 8-K/A TO
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
December 21, 1999
Date of report (date of earliest event reported)
ANGEION CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota |
0-17019 |
41-1579150 |
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(State of Incorporation) | (Commission file number) | (I.R.S. Employer Identification No.) |
350 Oak Grove Parkway, Saint Paul, Minnesota |
55127 |
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(Address of principal executive offices) | (Zip Code) |
(651) 484-4874
(Registrant's telephone number, including area code)
Item 2. Acquisition or Disposition of Assets
On December 21, 1999, Angeion Corporation ("Angeion"), completed its acquisition of Medical Graphics Corporation ("Medical Graphics") and Medical Graphics became a wholly-owned subsidiary of Angeion. Angeion filed a Form 8-K on January 5, 2000 to announce the closing of the acquisition. Angeion Corporation is filing this Amendment No. 1 to include the financial statements and pro forma financial information required by Item 7 of Form 8-K.
On March 6, 2000, Angeion announced preliminary unaudited revenues for its recently acquired Medical Graphics subsidiary of approximately $6.0 million and $22.2 million for the three months and twelve months ended December 31, 1999. This compares to revenues of $5.8 million and $20.4 million for the three months and twelve months ended December 31, 1998, respectively. Operating income before interest and taxes for the Medical Graphics subsidiary is expected to be more than $450,000 and $1.3 million for the fourth quarter and year ended December 31, 1999, respectively. Angeion acquired Medical Graphics on December 21, 1999, and these preliminary results reflect Medical Graphics' operations for the entire fourth quarter and year.
Angeion had no operating revenue for the fourth quarter from its Implantable Cardioverter Defibrillator (ICD) business and expects to report total revenues of $5.2 million from the ICD business for the year ended December 31, 1999. Angeion expects both the fourth quarter and year to show continued operating losses for this business. Angeion expects that there will be additional adjustments in the fourth quarter as a result of its consolidation of the Medical Graphics business, but has not yet determined the effect of these adjustments on its net results or financial position.
Angeion has largely completed its assimilation of the Medical Graphics business and intends to focus its future efforts primarily on the markets served by and business operations of Medical Graphics and the acquisition and development of future businesses that contribute to shareholder value. Medical Graphics now comprises a majority of the total assets of Angeion and generates a majority of the revenues of Angeion. As a result, Angeion has decided to pursue the license or transfer of its ICD technology and intends to discontinue the ICD product line. Angeion expects the last sales of ICD products to occur during the first half of 2000.
In 1999, Angeion agreed to grant a non-exclusive license for its ICD technology to Medtronic, Inc., and agreed to grant a non-exclusive license for its ICD technology and to transfer some of its ICD assets to ELA Medical, Inc. Because these transactions were entered into prior to the Medical Graphics acquisition, by their terms they required shareholder approval and consent of the holders of Angeion's 71/2% Senior Convertible Notes due 2003.
The shareholders of Angeion approved these transactions at the 1999 Annual Meeting of Shareholders, which was originally held on December 31, 1999 and adjourned on several occasions. The shareholders approved the transactions on February 4, 2000. The transactions did not receive note holder consent and were not consummated. Due to the Medical Graphics acquisition, however, Angeion has concluded it does not now need shareholder or note holder consent for any future license or transfer of ICD technology
Angeion has entered into discussions with Medtronic and with ELA Medical to determine if it can structure new transactions that are in the best interests of Angeion and its shareholders. There can be no assurance that Angeion will successfully conclude transactions that are similar to those previously negotiated with either of these entities or enter into transactions with any other third parties to license or transfer the ICD technology.
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Angeion believes that any additional funds it may receive from the license or transfer of its non-Medical Graphics assets will strengthen Angeion's financial position and its ability to manufacture and sell medical device products.
In a related matter, on February 22, 1999, Angeion announced that on February 17, 2000, the Honorable Marilyn Brown Rosenbaum, Judge of Hennepin Country District Court in Minneapolis issued an Order granting Angeion's motion for Summary Judgment in connection with a lawsuit brought by U.S. Bank National Association on behalf of holders of Angeion's 71/2% Senior Convertible Notes due 2003. The Court dismissed all claims of the plaintiff, U.S. Bank, with prejudice, ruling that certain transactions by Angeion in 1999 did not constitute a sale of all or substantially all of the assets under the Indenture covering the notes, and that, therefore, note holders were not entitled to prepayment of their notes.
Item 7. Financial Statements and Exhibits
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Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned duly authorized.
Date: March 6, 2000
ANGEION CORPORATION
(Registrant)
By
/s/ Richard E. Jahnke
Richard E. Jahnke
President and Chief Executive Officer
(principal executive officer)
4
INDEPENDENT AUDITORS' REPORT
Shareholders and Board of Directors
Medical Graphics Corporation
We have audited the accompanying consolidated balance sheets of Medical Graphics Corporation and Subsidiary (the Company) as of December 31, 1998 and 1997 and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1998. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements present fairly, in all material respects, the financial position of Medical Graphics Corporation and Subsidiary at December 31, 1998 and 1997 and the results of their operations and cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
April 14, 1999
Minneapolis, Minnesota
5
MEDICAL GRAPHICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
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December 31 |
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September 30, 1999 |
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1998 |
1997 |
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(unaudited) |
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ASSETS | ||||||||||
Current Assets: |
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Cash | $ | 117 | $ | 387 | ||||||
Accounts receivable, less allowance for doubtful accounts of $136, $118, and $164, respectively | 4,569 | $ | 5,263 | 3,890 | ||||||
Inventories (Notes 1 and 2) | 5,549 | 4,917 | 4,800 | |||||||
Prepaid expenses and other current assets | 120 | 155 | 272 | |||||||
Total current assets | 10,355 | 10,335 | 9,349 | |||||||
Equipment and Fixtures (Notes 1 and 3) | 4,111 | 4,092 | 4,072 | |||||||
Less accumulated depreciation | 3,844 | 3,574 | 3,110 | |||||||
Equipment and fixtures, net | 267 | 518 | 962 | |||||||
Software Production Costs, less accumulated amortization of $1,473, $1,212, and $855, respectively (Note 1) | 586 | 566 | 602 | |||||||
Other Assets | 1 | 7 | 13 | |||||||
$ | 11,209 | $ | 11,426 | $ | 10,926 | |||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
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Current Liabilities: |
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Accounts payable | $ | 2,058 | $ | 2,975 | $ | 2,261 | ||||
Accounts payable financed with vendorscurrent (Note 1) | 408 | 769 | 1,145 | |||||||
Note payable (Note 8) | 3,595 | 3,291 | 2,254 | |||||||
Employee compensation | 739 | 517 | 786 | |||||||
Deferred service contract revenue | 900 | 870 | 896 | |||||||
Warranty reserve | 339 | 374 | 414 | |||||||
Other liabilities and accrued expenses | 407 | 327 | 675 | |||||||
Total current liabilities | 8,446 | 9,123 | 8,431 | |||||||
Long-Term Accounts Payable Financed with Vendors (Note 1) | 48 | 807 | ||||||||
Commitments and Contingencies (Notes 7 and 12) | ||||||||||
Shareholders' Equity (Notes 1, 9, and 10): | ||||||||||
Class A convertible common stock, par value $.05 per share; 500,000 shares authorized, liquidation preference of $3.38 per share, 444,000 issued and outstanding, convertible into 1,500,000 shares of common stock | 22 | 22 | 22 | |||||||
Common stock, par value $.05 per share; authorized 24,500,000 shares; issued and outstanding 5,651,000, 5,608,000, and 4,453,000, respectively | 283 | 280 | 223 | |||||||
Additional paid-in capital | 15,775 | 15,738 | 13,652 | |||||||
Retained deficit | (13,317 | ) | (13,785 | ) | (12,209 | ) | ||||
Total shareholders' equity | 2,763 | 2,255 | 1,688 | |||||||
$ | 11,209 | $ | 11,426 | $ | 10,926 | |||||
See notes to consolidated financial statements.
6
MEDICAL GRAPHICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
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Nine Months Ended September 30, |
Years Ended December 31, |
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1999 |
1998 |
1998 |
1997 |
1996 |
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(unaudited) |
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Revenues (Note 4): | ||||||||||||||||
Equipment and supplies sales | $ | 14,684 | $ | 13,257 | $ | 18,503 | $ | 17,485 | $ | 18,278 | ||||||
Service revenue | 1,444 | 1,423 | 1,946 | 1,688 | 2,011 | |||||||||||
Total revenues | 16,128 | 14,680 | 20,449 | 19,173 | 20,289 | |||||||||||
Cost of Goods Sold | 8,674 | 9,015 | 12,441 | 11,969 | 14,330 | |||||||||||
Gross Margin | 7,454 | 5,665 | 8,008 | 7,204 | 5,959 | |||||||||||
Operating Expenses: | ||||||||||||||||
Selling and marketing | 3,761 | 4,275 | 5,653 | 6,282 | 8,186 | |||||||||||
General and administrative | 1,670 | 1,470 | 1,927 | 2,228 | 4,469 | |||||||||||
Research and development | 1,136 | 1,207 | 1,550 | 1,867 | 2,762 | |||||||||||
Infrequent charges (Note 5) | | | | 1,738 | 200 | |||||||||||
Total operating expenses | 6,567 | 6,952 | 9,130 | 12,115 | 15,617 | |||||||||||
Income (Loss) From Operations | 887 | (1,287 | ) | (1,122 | ) | (4,911 | ) | (9,658 | ) | |||||||
Other (Expense) Income: | ||||||||||||||||
Interest expense | (419 | ) | (312 | ) | (454 | ) | (329 | ) | (189 | ) | ||||||
SensorMedics settlement, net of settlement costs (Note 1) | 1,438 | |||||||||||||||
Gain on sale of assets (Note 1) | 128 | |||||||||||||||
Income (Loss) Before Income Taxes | 468 | (1,599 | ) | (1,576 | ) | (5,112 | ) | (8,409 | ) | |||||||
Income Tax Benefit (Note 6) | 48 | |||||||||||||||
Net Income (Loss) | $ | 468 | $ | (1,599 | ) | $ | (1,576 | ) | $ | (5,112 | ) | $ | (8,361 | ) | ||
Net Income (Loss) per Share of Common Stock (Note 1): | ||||||||||||||||
Basic | $ | .07 | $ | (.28 | ) | $ | (0.26 | ) | $ | (1.15 | ) | $ | (2.19 | ) | ||
Diluted | $ | .06 | $ | (.28 | ) | $ | (0.26 | ) | $ | (1.15 | ) | $ | (2.19 | ) | ||
Weighted Average Common Shares Outstanding: | ||||||||||||||||
Basic | 7,128 | 5,646 | 6,015 | 4,449 | 3,818 | |||||||||||
Diluted | 7,246 | 5,646 | 6,015 | 4,449 | 3,818 | |||||||||||
See notes to consolidated financial statements.
7
MEDICAL GRAPHICS CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in thousands)
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Class A Common Stock |
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Common Stock |
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Additional Paid-in Capital |
Retained Deficit |
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Shares |
Amount |
Total |
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Balance at December 31, 1995 | 3,745 | $ | 188 | $ | 9,858 | $ | 1,264 | $ | 11,310 | |||||||||||
Net loss | (8,361 | ) | (8,361 | ) | ||||||||||||||||
Common stock issued upon exercise of stock options | 67 | 3 | 228 | 231 | ||||||||||||||||
Common stock issued under Employee Stock Purchase Plan | 27 | 1 | 74 | 75 | ||||||||||||||||
Balance at December 31, 1996 | 3,839 | 192 | 10,160 | (7,097 | ) | 3,255 | ||||||||||||||
Net loss | (5,112 | ) | (5,112 | ) | ||||||||||||||||
Class A stock issued in a private sale, net of issuance costs | 444 | $ | 22 | 1,434 | 1,456 | |||||||||||||||
Common stock issued to Chairman of Board of Directors | 45 | 2 | 100 | 102 | ||||||||||||||||
Common stock issued in a private sale, net of issuance costs | 545 | 28 | 1,384 | 1,412 | ||||||||||||||||
Common stock issued under Employee Stock Purchase Plan | 24 | 1 | 66 | 67 | ||||||||||||||||
Warrants issued in conjunction with development and implementation of cost reduction plan (Note 5) | 508 | 508 | ||||||||||||||||||
Balance at December 31, 1997 | 444 | 22 | 4,453 | 223 | 13,652 | (12,209 | ) | 1,688 | ||||||||||||
Net loss | (1,576 | ) | (1,576 | ) | ||||||||||||||||
Common stock issued under Employee Stock Purchase Plan | 20 | 1 | 44 | 45 | ||||||||||||||||
Common stock issued in private sales, net of issuance costs (Note 9) | 1,096 | 54 | 1,916 | 1,970 | ||||||||||||||||
Common stock issued to a former employee | 15 | 1 | 44 | 45 | ||||||||||||||||
Common stock issued upon exercise of stock options | 3 | 8 | 8 | |||||||||||||||||
Common stock issued to directors | 21 | 1 | 74 | 75 | ||||||||||||||||
Balance at December 31, 1998 | 444 | 22 | 5,608 | 280 | 15,738 | (13,785 | ) | 2,255 | ||||||||||||
Net income (unaudited) | 468 | 468 | ||||||||||||||||||
Common stock issued under Employee Stock Purchase Plan (unaudited) | 24 | 2 | 17 | 19 | ||||||||||||||||
Common stock issued to directors (unaudited) | 19 | 1 | 20 | 21 | ||||||||||||||||
Balance at September 30, 1999 (unaudited) | 444 | $ | 22 | 5,651 | $ | 283 | $ | 15,775 | $ | (13,317 | ) | $ | 2,763 | |||||||
See notes to consolidated financial statements.
8
MEDICAL GRAPHICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
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Nine Months Ended September 30, |
Years Ended December 31, |
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1999 |
1998 |
1998 |
1997 |
1996 |
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(unaudited) |
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Cash Flows from Operating Activities: | ||||||||||||||||
Net income (loss) | $ | 468 | $ | (1,599 | ) | $ | (1,576 | ) | $ | (5,112 | ) | $ | (8,361 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||||||
Depreciation | 270 | 450 | 511 | 579 | 765 | |||||||||||
Amortization | 261 | 264 | 357 | 287 | 276 | |||||||||||
Common stock issued to directors and former officers in lieu of compensation | 120 | |||||||||||||||
Common stock and warrants issued in conjunction with the development and implementation of a cost reduction plan (Note 5) | 610 | |||||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable | 694 | (267 | ) | (1,373 | ) | 924 | 4,368 | |||||||||
Inventory | (632 | ) | (463 | ) | (117 | ) | 2,393 | (1,033 | ) | |||||||
Prepaid expenses and other assets | 41 | 83 | 123 | (72 | ) | 431 | ||||||||||
Accounts payable and accrued expenses | (1,024 | ) | (956 | ) | (788 | ) | (683 | ) | 3,111 | |||||||
Warranty reserve | (35 | ) | (40 | ) | (40 | ) | (149 | ) | 323 | |||||||
Deferred service contract revenue | 30 | (8 | ) | (26 | ) | (92 | ) | (168 | ) | |||||||
Net cash provided by (used in) operating activities | 73 | (2,536 | ) | (2,809 | ) | (1,315 | ) | (288 | ) | |||||||
Cash Flows from Investing Activities: | ||||||||||||||||
Capital expenditures | (19 | ) | (23 | ) | (67 | ) | (215 | ) | (884 | ) | ||||||
Software production costs | (281 | ) | (256 | ) | (321 | ) | (417 | ) | (345 | ) | ||||||
Net cash used in investing activities | (300 | ) | (279 | ) | (388 | ) | (632 | ) | (1,229 | ) | ||||||
Cash Flows from Financing Activities: | ||||||||||||||||
Borrowings under line of credit agreement | 17,343 | 17,303 | 22,483 | 18,682 | 1,725 | |||||||||||
Repayments under line of credit agreement | (17,039 | ) | (17,044 | ) | (21,446 | ) | (19,828 | ) | ||||||||
Net proceeds from issuance of common stock | 40 | 2,169 | 1,773 | 2,935 | 306 | |||||||||||
Net cash provided by financing activities | 344 | 2,428 | 2,810 | 1,789 | 2,031 | |||||||||||
Increase (Decrease) in Cash | 117 | (387 | ) | (387 | ) | (158 | ) | 514 | ||||||||
Cash at Beginning of Year | 387 | 387 | 545 | 31 | ||||||||||||
Cash at End of Year | $ | 117 | $ | | $ | | $ | 387 | $ | 545 | ||||||
See notes to consolidated financial statements.
9
MEDICAL GRAPHICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997 AND THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998 (unaudited)
1. DESCRIPTION OF BUSINESS, LIQUIDITY, AND SIGNIFICANT ACCOUNTING POLICIES
BusinessMedical Graphics designs and produces innovative noninvasive diagnostic systems for the prevention, early detection, and cost-effective treatment of heart and lung disease. In addition, Medical Graphics purchases noninvasive sleep diagnostic systems from a third party.
LiquidityMedical Graphics' working capital requirements for 1998 were met principally through amounts borrowed on Medical Graphics' line of credit (see Note 8), the issuance of common stock under private sales to investors (see Note 9), and credit arrangements made with Medical Graphics' vendors during the first quarter 1997. This vendor credit consisted of Medical Graphics entering into financing arrangements with certain vendors that provided for payment of outstanding balances in equal monthly installments for up to 36 months. The remaining amounts due under these vendor agreements are payable in the amount of $769,000 and $48,000 in 1999 and 2000, respectively. The balances outstanding at December 31, 1998 that will be paid after December 31, 1999 have been classified as long-term accounts payable financed with vendors.
In addition, Medical Graphics incurred net losses of $1,576,000, $5,112,000, and $8,361,000 for the years ended December 31, 1998, 1997, and 1996, respectively. Management plans to generate profitable operations by increasing revenues, improving gross margins, and controlling expenses. There can be no assurance Medical Graphics will be able to generate profitable operations in the future.
ConsolidationThe financial statements include the accounts of Medical Graphics and its wholly owned subsidiary, Medical Graphics Corporation, GmbH (MGCG). All intercompany transactions have been eliminated. The operations of MGCG were terminated early in 1997 in accordance with an exit plan adopted in the fourth quarter of 1996 (see Note 5).
Unaudited Consolidated Financial StatementsThe consolidated financial statements as of September 30, 1999 and for the nine months ended September 30, 1999 and 1998 are unaudited. In the opinion of management, such unaudited consolidated financial statements include all adjustments, consisting of only normal, recurring accruals, necessary for a fair presentation thereof. The results of operations for any interim period are not necessarily indicative of the results of operations for the year.
InventoriesInventories are valued at the lower of cost or market determined by the first-in, first-out method.
Equipment and FixturesEquipment and fixtures are stated at cost. Medical Graphics provides for depreciation using straight-line and accelerated methods at rates designed to amortize the cost of equipment and fixtures over their estimated useful lives.
Software Production CostsSoftware production costs are capitalized once technological feasibility has been established and all research and development activities for other components of the product are completed. Capitalized software production costs are amortized over three years using the straight-line method.
Revenue RecognitionSales are recorded by Medical Graphics when products are shipped or services are provided to the customer. An accrual is recorded for estimated warranty costs.
Deferred Service ContractsAmounts billed to customers under service contracts are deferred and recognized as income over the term of the agreement, and costs are recognized as incurred.
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Income TaxesIncome taxes are recorded under the liability method. Deferred income taxes are recorded to reflect the tax consequences in future years of differences between the basis of assets and liabilities for income tax and for financial reporting purposes using enacted tax rates in effect during the year in which the differences are expected to reverse. Deferred tax asset valuation allowances are recorded to reduce deferred tax assets to the amount expected to be realized.
Other Income (Expense)In 1997, Medical Graphics sold certain assets of its asthma line of business for approximately $144,000, which resulted in a gain of $128,000.
During 1995, Medical Graphics was awarded a judgment of $4.35 million, related to a patent infringement suit against a competitor. The judgment was to be paid over an eight-year period. Medical Graphics received $975,000 after related legal costs during 1995. Medical Graphics recorded the gain as cash was received due to uncertainty regarding the ultimate collectibility of the judgment. During 1996, the competitor was acquired by a third party and pursuant to the terms of the settlement agreement, Medical Graphics received the net present value of the remaining payments, $1,438,000 after paying related legal costs.
Fair Value of Financial InstrumentsCash, accounts receivables, accounts payable, note payable, and accrued expenses are carried at amounts which reasonably approximate their fair value due to the short-term nature of these amounts or due to variable rates of interest which are consistent with current market rates.
Basic and Diluted Net Loss Per ShareIn 1997, Medical Graphics adopted Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share. Basic net loss per share of common stock is computed by dividing net loss by the weighted average number of common shares outstanding during each year. For purposes of this calculation, the convertible Class A common shares are assumed to have been converted. Common equivalent shares from stock options and warrants to purchase 1,697,000, 1,342,000, and 915,000 shares of common stock at a range of $1.00 to $8.67, $1.92 to $10.00, and $3.00 to $10.00 were outstanding during 1998, 1997, and 1996, respectively, but are excluded from the computation of dilutive net loss per share as their effect is antidilutive. Therefore, basic and dilutive net loss per share amounts are equal for each of the periods presented.
Sales and Segment InformationMedical Graphics manufactures and sells its products to customers in the medical field and operates in only one business segment. Medical Graphics grants its customers credit in connection with sales of its products. It performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. Medical Graphics requires irrevocable letters of credit on sales to certain foreign customers. Receivables generally are due within 30 days for domestic customers. Credit losses relating to customers have consistently been within management's expectations. Export sales to foreign countries, primarily in Europe and the Pacific Rim, accounted for 13%, 18%, and 27% of total sales in 1998, 1997, and 1996, respectively.
Use of EstimatesThe preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that
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affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from the estimates.
Impairment of Long-Lived AssetsMedical Graphics records losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount. To the extent long-lived assets are considered impaired, such assets are adjusted to their estimated fair values with fair value determined by the present value of discounted future cash flows or, to the extent such long-lived assets are held for sale, the estimated sales proceeds less costs of disposal.
Accounting PronouncementIn June 1997, the Financial Accounting Standards Board issued SFAS No. 131, Disclosure about Segments of an Enterprise and Related Information, which changes the way public companies report information about operating segments. SFAS No. 131, which is based on the management approach to segment reporting, establishes requirements to report selected segment information and to report entitywide disclosures about products and services, major customers, and material countries in which the entity holds assets and reports revenue. Medical Graphics adopted SFAS No. 131 in 1998. Medical Graphics operates within a single operating segment.
Comprehensive Earnings (Loss)Comprehensive earnings (loss) is a measure of all nonowner changes in shareholders' equity and includes such items as net earnings, certain foreign currency translation items, minimum pension liability adjustments, and changes in the value of available-for-sale securities. In 1998, 1997, and 1996, comprehensive earnings (loss) for Medical Graphics was the same as net earnings (loss) as reported.
ReclassificationsCertain reclassifications have been made to the 1997 financial statements to conform to the classifications used in 1998. These reclassifications had no effect on previously reported net loss or shareholders' equity.
2. INVENTORIES
Medical Graphics inventories consisted of the following components (in thousands):
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December 31 |
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September 30, 1999 |
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1998 |
1997 |
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Purchased components and work-in-process | $ | 3,303 | $ | 2,941 | $ | 3,164 | |||
Finished goods | 2,246 | 1,976 | 1,636 | ||||||
$ | 5,549 | $ | 4,917 | $ | 4,800 | ||||
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3. EQUIPMENT AND FIXTURES
At December 31, Medical Graphics' equipment and fixtures consisted of the following (in thousands):
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1998 |
1997 |
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Building improvements | $ | 742 | $ | 733 | ||
Computer equipment | 1,548 | 1,491 | ||||
Manufacturing equipment | 933 | 933 | ||||
Furniture and fixtures | 869 | 915 | ||||
Total equipment and fixtures, at cost | 4,092 | 4,072 | ||||
Less accumulated depreciation | 3,574 | 3,110 | ||||
$ | 518 | $ | 962 | |||
4. GEOGRAPHIC INFORMATION
Medical Graphics manages its business on the basis of one reportable segment. See Note 1 for a brief description of Medical Graphics' business. As of December 31, 1998, Medical Graphics had operations established in various countries throughout the world. Medical Graphics is exposed to the risk of changes in social, political, and economic conditions inherent in foreign operations, and Medical Graphics' results of operations are affected by fluctuations in foreign currency exchange rates. In no single country outside the United States did operations account for more than 10% of Medical Graphics' net sales for 1998, 1997, and 1996. Net sales by geographic area are presented by attributing revenues from external customers on the basis of where the products are sold. Medical Graphics does not maintain significant assets in foreign countries.
Net sales by geographic area (in thousands):
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1998 |
1997 |
1996 |
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United States | $ | 17,770 | $ | 15,637 | $ | 14,863 | |||
International | 2,679 | 3,536 | 5,426 | ||||||
$ | 20,449 | $ | 19,173 | $ | 20,289 | ||||
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MEDICAL GRAPHICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997 AND THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998 (unaudited)
5. INFREQUENT CHARGES
Germany:
During December 1996, the Board of Directors approved closing Medical Graphics' sales and marketing subsidiary in Germany and authorized implementation of a restructuring plan. Medical Graphics recorded a $550,000 charge to operations in the fourth quarter of 1996 related to expected exit costs of the German office. Of this total, $250,000 was recorded as cost of goods sold, $100,000 was recorded in general and administrative expenses, and the remainder as an infrequent charge, primarily related to future lease payments. During 1997, Medical Graphics recorded an additional $150,000 infrequent charge for severance to seven employees in its subsidiary in Germany. The change in estimated liabilities in 1998 was due to several employees leaving earlier than anticipated and a revision in the expected ultimate lease payments.
The following table shows the activity related to severance and exit costs of the German office (in thousands):
BalanceJanuary 1, 1996 | $ | | ||
Provision | 150 | |||
BalanceDecember 31, 1996 | 150 | |||
Provision | 150 | |||
Payments | (200 | ) | ||
BalanceDecember 31, 1997 | 100 | |||
Provision | | |||
Payments | (40 | ) | ||
Change in estimate | (60 | ) | ||
BalanceDecember 31, 1998 | $ | | ||
Domestic:
During 1997, Medical Graphics implemented certain domestic cost-cutting strategies that resulted in $1,588,000 of infrequent charges, substantially all of which were paid in 1997. Approximately $1,012,000 of these charges were for professional services incurred in connection with the development and implementation of the cost-cutting strategies. Included in these costs was approximately $530,000 relating to the issuance of the stock and warrants. Medical Graphics granted the former chairperson of Medical Graphics a warrant to purchase 195,000 shares of common stock at a price of $2.67 per share in exchange for certain consulting services to the Company. The warrant expires on March 31, 2000. Medical Graphics also issued 45,000 shares of common stock and granted a warrant to purchase 225,000 shares of common stock at a price of $2.25 per share to an individual for services provided in connection with the development and implementation of the cost reduction plan. This warrant expires on March 31, 2002. In addition, Medical Graphics paid approximately $243,000 to the company where this individual is president in connection with certain investment banking and consulting services. This individual also was elected the chairman of the Board of Directors. The value for the warrants was estimated using the Black-Scholes option-pricing model, and the value for the common stock was calculated using the closing price of the stock on the day it was granted.
14
The remaining $575,000 was severance costs related to the termination of various employees. The following table shows the activity related to the domestic severance charges (in thousands):
BalanceJanuary 1, 1997 | $ | | ||
Provision | 576 | |||
Payments | (511 | ) | ||
BalanceDecember 31, 1997 | 65 | |||
Payments | (65 | ) | ||
BalanceDecember 31, 1998 | $ | | ||
These costs included payments of cash and stock to 26 employees and cash and warrants paid to the former president and chairperson of the Board of Directors.
6. INCOME TAXES
Significant components of the income tax benefit are as follows:
|
1998 |
1997 |
1996 |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Current: | ||||||||||
Federal | $ | | $ | | $ | (28 | ) | |||
State | | | (20 | ) | ||||||
Deferred | | | | |||||||
Income tax benefit | $ | | $ | | $ | (48 | ) | |||
15
Significant components of Medical Graphics' deferred tax assets and liabilities at December 31 are as follows (in thousands):
|
1998 |
1997 |
|||||
---|---|---|---|---|---|---|---|
Allowance for bad debts | $ | 42 | $ | 58 | |||
Inventory reserve | 69 | 69 | |||||
Warranty reserve | 133 | 147 | |||||
Other reserve | 63 | ||||||
Vacation accrual | 36 | 48 | |||||
Deferred service contract revenue | 58 | 60 | |||||
Valuation allowance | (338 | ) | (445 | ) | |||
Total current | | | |||||
Inventory capitalization | 15 | 3 | |||||
Capitalized software and patents | (201 | ) | (214 | ) | |||
Net operating loss and tax credit carryforwards | 4,635 | 3,806 | |||||
Valuation allowance | (4,449 | ) | (3,595 | ) | |||
Total noncurrent | | | |||||
Net deferred tax assets | $ | | $ | | |||
Reconciliations of Medical Graphics' expected income tax benefits computed at the U.S. federal statutory tax rate to the income tax benefits recorded are as follows (in thousands):
|
1998 |
1997 |
1996 |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Income tax benefit at statutory rate | $ | (552 | ) | $ | (1,789 | ) | $ | (2,926 | ) | |
Increase in deferred tax asset valuation allowance | 747 | 1,139 | 2,615 | |||||||
Utilization of net operating loss carryforward related to IRS audit adjustments for 1994 and 1993 | 613 | |||||||||
Foreign tax loss | 172 | |||||||||
Other | (195 | ) | 37 | 91 | ||||||
$ | | $ | | $ | (48 | ) | ||||
As of December 31, 1998, Medical Graphics had federal net operating loss carryforwards of $12,290,000 that expire from 2002 through 2012. The Internal Revenue Service has examined Medical Graphics' income tax returns through December 31, 1995. Total income taxes paid were $6,000, $24,000, and $26,000 in 1998, 1997, and 1996, respectively.
7. LEASES
Medical Graphics leases office and manufacturing facilities, automobiles, and various office accessories. The building lease expires in 2002, at which time Medical Graphics has an option to renew the lease for an additional four years. Medical Graphics has the option to purchase the building at the end of each lease expiration period at the building's fair market value.
16
Future minimum lease payments under noncancelable operating leases with remaining terms of one year or more consisted of the following at December 31, 1998 (in thousands):
Year ending December 31: | |||
1999 | $ | 397 | |
2000 | 367 | ||
2001 | 357 | ||
2002 | 172 | ||
$ | 1,293 | ||
Rent expense for the years ended December 31, 1998, 1997, and 1996 was $420,000, $490,000, and $494,000, respectively.
8. NOTE PAYABLE TO BANK
In March 1997, Medical Graphics obtained a new credit agreement with Norwest Business Credit, Inc. (Norwest) that provides for total borrowings, based on available collateral as defined, of up to $4,100,000, at the discretion of Norwest, and expires March 31, 2000. The credit line allows Medical Graphics to borrow up to 80% of eligible domestic accounts receivable, 40% of eligible domestic inventory (not to exceed $1,500,000), and 90% of eligible foreign accounts receivable. Medical Graphics' accounts receivable and inventories secure total borrowings outstanding under the credit agreement. The credit agreement contains certain restrictive covenants, including maintenance of minimum net worth (as defined), earnings requirements, and debt service requirements as well as limitations on capital expenditures and payment of dividends.
Borrowings under the line of credit bear interest at the Norwest "base" rate plus 4.0% (11.75% at December 31, 1998). The "base" rate is equal to the interest rate publicly announced by Norwest Bank Minnesota, National Association from time to time as its "base" rate. The line of credit contains a minimum monthly interest charge of $15,000. In addition, Medical Graphics granted to Norwest a three-year warrant to purchase 93,750 shares of the Company's common stock at an exercise price of $2.25 per share. The value of this warrant ($73,000) is being amortized to interest expense over the term of the line of credit. The warrant contained antidilution provisions and, as a result of Medical Graphics' September 1998 issuance of common stock, the warrant exercise price decreased to $1.00 per share and the shares issuable under the warrant increased to 210,937 shares.
Medical Graphics had outstanding borrowings of $3,291,000 and $2,254,000 at December 31, 1998 and 1997, respectively, and at December 31, 1998 had additional borrowing availability of $744,000. Total cash paid for interest was $454,000, $329,000, and $167,000 for the years ended December 31, 1998, 1997, and 1996, respectively. Medical Graphics amended its line of credit agreement in June and November 1997 as well as March, August, and September 1998. As of December 31, 1998, Medical Graphics was in technical default of its minimum net income and minimum debt service coverage ratio covenants. These technical defaults were waived through an amendment to the line of credit agreement on March 29, 1999.
17
9. CAPITAL STOCK
In June 1998, Medical Graphics distributed a three-for-two stock split effected in the form of a stock dividend. All share and per share data have been adjusted to reflect this stock split.
In March 1997, Medical Graphics' Board of Directors authorized 500,000 shares of a new class of convertible stock (Class A stock). The Class A stock has voting rights. Each share was originally convertible into 1.5 shares of common stock. Medical Graphics issued 444,000 shares of the new class of stock receiving net proceeds of $1,456,000. These shares have a liquidation preference of $3.38 per share, aggregating $1,500,000 at December 31, 1998.
In October 1997, Medical Graphics' Board of Directors authorized the issuance of additional common stock in a private sale to investors. On November 10, 1997 Medical Graphics agreed to sell up to 1,096,000 shares of Medical Graphics' common stock at a price of $2.75 per share. The investors purchased 545,000 shares for $1,500,000 (less costs of issuance of $88,000) on November 10, 1997 and 545,000 shares for $1,500,000 (less costs of issuance of $31,000) in January and February of 1998.
In September 1998, Medical Graphics' Board of Directors authorized the issuance of additional common stock in a private sale to investors. On September 30, 1998 the investors purchased 550,000 shares for $550,000 (less costs of issuance of $49,000).
Medical Graphics' Class A stock contained antidilution provisions. As a result of the September 1998 offering, 444,000 shares of class A stock are now convertible into 1,500,000 shares of common stock.
10. STOCK OPTION PLANS, EMPLOYEE STOCK PURCHASE PLAN, AND 401(k) PLAN
Medical Graphics has an Employee Incentive Stock Option Plan under which a total of 1,350,000 shares have been reserved for issuance, with 276,000 shares remaining reserved and unissued at December 31, 1998. Options are generally issued at prices not less than the fair market value at the date of grant and become exercisable over a one- to five-year period. Also, under the option plan, nonqualified options have been issued to an officer and certain nonemployees. These options become exercisable over a one- to ten-year period following the date of grant.
Medical Graphics also has a Nonemployee Director Compensation Plan, which provides for the granting of nonqualified options for up to 675,000 shares of common stock to nonemployee members of the Board of Directors as well as the Chairman of the Board. Under the plan, an option to purchase 15,000 shares of common stock will be granted automatically when an eligible director is first elected to the Board of Directors of Medical Graphics. An option to purchase 2,250 shares (4,500 shares for the Chairman of the Board) will be granted automatically following each board meeting personally attended by each director, not to exceed 13,500 shares (27,000 shares for the Chairman of the Board) per director annually. An option to purchase 750 shares will be granted automatically following each board committee meeting personally attended by each director, not to exceed 2,250 shares per director annually. The option exercise price per share will not be less than the fair market value of the common stock on the date of grant. All options granted under the plan become exercisable one year after the date of grant.
18
A summary of option activity is as follows (in thousands except per share amounts):
|
Employee Incentive Stock Options Outstanding |
Weighted Average Exercise Price |
Nonqualified Stock Options Outstanding |
Weighted Average Exercise Price |
||||||
---|---|---|---|---|---|---|---|---|---|---|
Balance at December 31, 1995 | 332 | $ | 4.41 | 347 | $ | 5.03 | ||||
Granted | 143 | 3.91 | 247 | 3.68 | ||||||
Exercised | (67 | ) | 3.00 | |||||||
Canceled or expired | (84 | ) | 5.67 | (3 | ) | 2.00 | ||||
Balance at December 31, 1996 | 324 | 4.09 | 591 | 4.48 | ||||||
Granted | 400 | 2.46 | 312 | 2.43 | ||||||
Canceled or expired | (246 | ) | 4.19 | (554 | ) | 4.45 | ||||
Balance at December 31, 1997 | 478 | 2.68 | 349 | 2.69 | ||||||
Granted | 263 | 1.20 | 294 | 2.34 | ||||||
Exercised | (3 | ) | 2.87 | |||||||
Canceled or expired | (238 | ) | 2.38 | (14 | ) | 4.84 | ||||
Balance at December 31, 1998 | 500 | $ | 1.96 | 629 | $ | 2.43 | ||||
Exercisable at December 31, 1997 | 124 | $ | 3.17 | 214 | $ | 2.71 | ||||
Exercisable at December 31, 1998 | 200 | $ | 2.53 | 333 | $ | 2.51 | ||||
Medical Graphics' Employee Stock Purchase Plan (the ESP Plan), a qualified plan pursuant to Internal Revenue Code Section 423, became effective in May 1993. The ESP Plan gives eligible employees an opportunity to purchase Medical Graphics' common stock, through payroll deductions not exceeding 15% of eligible compensation, at a per share price of 85% of the lesser of the fair value on the first day or the last day of each six-month purchase period. The six-month purchase periods begin on July 1 and January 1 of each year. Participating employees may purchase a maximum of 5,000 shares during each purchase period and no more than $25,000 of fair value of stock in each calendar year. A total of 300,000 shares has been authorized for issuance under the ESP Plan. Shares issued under the ESP Plan in 1998, 1997, and 1996 were 20,000, 24,000, and 27,000 shares, respectively. The ESP Plan will terminate on January 1, 2003, unless extended by the Board of Directors.
In 1996, Medical Graphics adopted SFAS No. 123, Accounting for Stock-Based Compensation. The Company has elected to continue following the accounting guidance of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, for measurement and recognition of stock-based transactions with employees. No compensation cost has been recognized for options issued under the stock option plans, because the exercise price of all options granted was at least equal to the fair value of the common stock on the date of the grant. Had compensation costs for the stock options issued to certain directors and employees and common stock issued under the ESP Plan been determined at the grant date, based on the fair value provisions of SFAS No. 123, Medical Graphics' 1998, 1997, and 1996 pro forma net loss would have been ($2,058,000), ($5,535,000), and ($8,593,000),
19
respectively, and basic and dilutive net loss per share would have been ($.34), ($1.24), and ($2.25), respectively.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: dividend yield of 0%; a risk-free interest rate of 4.7%, 6.5%, and 6.1% in 1998, 1997, and 1996, respectively; an expected life of 5, 7, and 10 years in 1998, 1997, and 1996, respectively; and expected volatility of 47%, 54%, and 44% in 1998, 1997, and 1996, respectively. The weighted average fair value of options issued in 1998, 1997, and 1996 was $0.80, $1.66, and $2.21, respectively.
Substantially all employees of Medical Graphics may participate in a defined contribution plan established under the provisions of Section 401(k) of the Internal Revenue Code. The plan generally provides for a contribution by the employee of up to 15% of their gross earnings with a 25% matching contribution by the Company on the first 6% of gross earnings. Medical Graphics did not contribute to the plan in 1998 and expensed contributions to the plan of approximately $12,000 and $62,000 in 1997 and 1996, respectively.
11. RELATED-PARTY TRANSACTIONS
A former officer and director of Medical Graphics is the president of ErgometRx Corporation. ErgometRx Corporation possesses certain proprietary information and prototype hardware relating to an exercise bike used for stress testing and physical exercise. The Company has obtained an exclusive license to manufacture and sell products utilizing this proprietary information in certain markets under a five-year royalty agreement. Under this agreement, Medical Graphics paid no royalties for 1998 or 1997, and $40,000 in 1996.
An officer/Chairperson of the Board of Directors of Medical Graphics who resigned in March 1997 is also the president of e-med.OnCall, Inc. During 1996, the Chairperson began a transition from Medical Graphics to e-med.OnCall, Inc. As part of this transition, Medical Graphics transferred equipment with a net book value of approximately $75,000 to a new office for the Chairperson and paid certain administrative expenses in the amount of approximately $60,000 with respect to that office. This office also serves as the office for e-med.OnCall, Inc. All such amounts were recorded as administrative expense during 1996.
The current Chairman of the Board of Directors is the president of Manchester. As part of the cost reduction plan in 1997, the Board of Directors engaged Manchester to provide investment banking and management consulting services to Medical Graphics. Fees aggregating $120,000 and $265,000 for 1998 and 1997, respectively, were paid to Manchester for those services. In addition, Medical Graphics was paid $10,000 for administrative services that were provided to Manchester.
12. LITIGATION
Medical Graphics is a defendant in various claims and litigation which are incidental to its business. Management is of the opinion that certain of these matters are covered by insurance and that ultimate settlement of these matters will not have a material impact on its consolidated financial statements.
20
Unaudited Pro Forma Combined Financial Statements
The following unaudited pro forma combined financial statements give effect to the merger with Medical Graphics as of September 30, 1999 and for the nine months and year ended September 30, 1999 and December 31, 1998, respectively. The unaudited pro forma financial statements have been prepared on the basis of assumptions described in the notes thereto. The unaudited pro forma financial information is presented for informational purposes only and does not purport to represent what the financial position or results of operations for the Company would actually have been had the transactions occurred on the dates specified or to project the financial position or results of operations for the Company at any future date or for any future periods. The unaudited pro forma financial statements should be read in conjunction with the respective financial statements of the Company and the related notes thereto.
21
Pro Forma Combined Balance Sheet
September 30, 1999
(in thousands)
|
|
|
Pro forma |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Actual Angeion |
Actual Medical Graphics |
|||||||||||
|
adjustments |
combined |
|||||||||||
Assets | |||||||||||||
Current assets: | |||||||||||||
Cash | $ | 27,072 | $ | 117 | $ | (16,600 | )(1) | $ | 10,589 | ||||
Accounts receivable, net | 666 | 4,569 | 5,235 | ||||||||||
Inventories | 226 | 5,549 | 5,775 | ||||||||||
Prepaid expenses and other current assets | 1,225 | 120 | 1,345 | ||||||||||
Total current assets | 29,189 | 10,355 | (16,600 | ) | 22,944 | ||||||||
Property and equipment, net |
|
|
1,885 |
|
|
267 |
|
|
|
|
|
2,152 |
|
Goodwill | 2,000 | (1) | 2,000 | ||||||||||
Purchased technology | 11,837 | (1) | 11,837 | ||||||||||
Investment in joint venture, net | 1,527 | 1,527 | |||||||||||
Other assets | 1,658 | 587 | 2,245 | ||||||||||
$ | 34,259 | $ | 11,209 | $ | (2,763 | ) | $ | 42,705 | |||||
Liabilities and Shareholders' Equity (Deficit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: | |||||||||||||
Accounts payable | $ | 301 | $ | 2,466 | $ | 2,767 | |||||||
Line of credit | 0 | 3,595 | 3,595 | ||||||||||
Other accrued expenses | 1,407 | 2,385 | 3,792 | ||||||||||
Total current liabilities | 1,708 | 8,446 | 0 | 10,154 | |||||||||
Long-term debt |
|
|
20,198 |
|
|
|
|
|
|
|
|
20,198 |
|
Shareholders' equity (deficit): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $.01 par value. Authorized 7,500,000 shares; issued and outstanding 4,009,109 shares at September 30, 1999 | 40 | 305 | (305 | )(1) | 40 | ||||||||
Additional paid-in capital | 128,679 | 15,775 | (15,775 | )(1) | 128,679 | ||||||||
Cumulative translation adjustment | (8 | ) | (8 | ) | |||||||||
Accumulated deficit | (116,358 | ) | (13,317 | ) | 13,317 | (1) | (116,358 | ) | |||||
Total shareholders' equity (deficit) |
|
|
12,353 |
|
|
2,763 |
|
|
(2,763 |
) |
|
12,353 |
|
$ | 34,259 | $ | 11,209 | $ | (2,763 | ) | $ | 42,705 | |||||
22
Pro Forma Combined Statements of Operations
Nine Months Ended September 30, 1999
(in thousands except per share amounts)
|
|
Pro forma |
|
|
|
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
|
Pro forma |
||||||||||||||||
|
Actual Angeion |
ICD business |
after discontinuance |
Actual Medical Graphics |
|||||||||||||||
|
adjustments |
combined |
|||||||||||||||||
Net sales | $ | 5,175 | $ | (5,175 | )(1) | $ | | $ | 16,128 | $ | 16,128 | ||||||||
Cost of goods sold | 10,988 | (10,988 | )(1) | 0 | 8,674 | 8,674 | |||||||||||||
Gross margin | (5,813 | ) | 5,813 | 0 | 7,454 | 0 | 7,454 | ||||||||||||
Operating Expenses: | |||||||||||||||||||
Selling, general and administrative | 4,235 | (3,785 | )(1) | 450 | 5,431 | 963 | (2) | 6,844 | |||||||||||
Research and development | 6,372 | (6,372 | )(1) | 0 | 1,136 | 1,136 | |||||||||||||
Restructuring | 4,504 | (4,504 | )(1) | 0 | 0 | ||||||||||||||
15,111 | (14,661 | ) | 450 | 6,567 | 963 | 7,980 | |||||||||||||
Operating income (loss) | (20,924 | ) | 20,474 | (450 | ) | 887 | (963 | ) | (526 | ) | |||||||||
Other income (expense): | |||||||||||||||||||
Equity in net loss of joint venture | (1,695 | ) | 1,695 | (1) | 0 | 0 | 0 | ||||||||||||
Other income | 30,570 | 30,570 | 0 | 30,570 | |||||||||||||||
Interest, net | (1,082 | ) | (1,082 | ) | (419 | ) | (1,501 | ) | |||||||||||
27,793 | 1,695 | 29,488 | (419 | ) | 0 | 29,069 | |||||||||||||
Income before taxes | 6,869 | 22,169 | 29,038 | 468 | (963 | ) | 28,543 | ||||||||||||
Provision for taxes | 171 | 171 | 171 | ||||||||||||||||
Net income from continuing operations | 6,698 | 22,169 | 28,867 | 468 | (963 | ) | 28,372 | ||||||||||||
Loss from discontinued operations | (22,169 | ) | (22,169 | ) | (22,169 | ) | |||||||||||||
Net income | $ | 6,698 | $ | | $ | 6,698 | $ | 468 | $ | (963 | ) | $ | 6,203 | ||||||
Net income (loss) per common sharebasic: | |||||||||||||||||||
Continuing operations | $ | 1.68 | $ | 7.23 | $ | 7.11 | |||||||||||||
Discontinued operations | | (5.55 | ) | (5.55 | ) | ||||||||||||||
Net income | 1.68 | 1.68 | 1.55 | ||||||||||||||||
Net income (loss) per common sharediluted: | |||||||||||||||||||
Continuing operations | 1.25 | 4.81 | 4.74 | ||||||||||||||||
Discontinued operations | | (3.56 | ) | (3.56 | ) | ||||||||||||||
Net income | 1.25 | 1.25 | 1.17 | ||||||||||||||||
Weighted average common shares outstanding | |||||||||||||||||||
Basic | 3,992,324 | 3,992,324 | 3,992,324 | ||||||||||||||||
Diluted | 6,225,106 | 6,225,106 | 6,225,106 | ||||||||||||||||
Pro forma footnotes:
23
Pro Forma Combined Statements of Operations
Year Ended December 31, 1998
(in thousands except per share amounts)
|
|
Pro forma |
|
|
|
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
|
Pro forma |
||||||||||||||||
|
Actual Angeion |
ICD business |
after discontinuance |
Actual Medical Graphics |
|||||||||||||||
|
adjustments |
combined |
|||||||||||||||||
Net sales | $ | 4,567 | $ | (4,567 | )(1) | $ | | $ | 20,449 | $ | 20,449 | ||||||||
Cost of goods sold | 12,394 | (12,394 | )(1) | 0 | 12,441 | 12,441 | |||||||||||||
Gross margin | (7,827 | ) | 7,827 | 0 | 8,008 | 0 | 8,008 | ||||||||||||
Operating Expenses: | |||||||||||||||||||
Selling, general and administrative | 7,186 | (6,586 | )(1) | 600 | 7,580 | 1,284 | (2) | 9,464 | |||||||||||
Research and development | 21,637 | (21,637 | )(1) | 0 | 1,550 | 1,550 | |||||||||||||
28,823 | (28,223 | ) | 600 | 9,130 | 1,284 | 11,014 | |||||||||||||
Operating loss | (36,650 | ) | 36,050 | (600 | ) | (1,122 | ) | (1,284 | ) | (3,006 | ) | ||||||||
Other income (expense): | |||||||||||||||||||
Equity in net loss of joint venture | (2,779 | ) | 2,779 | (1) | 0 | 0 | |||||||||||||
Other income | 2,050 | 2,050 | 2,050 | ||||||||||||||||
Interest, net | (1,459 | ) | (1,459 | ) | (454 | ) | (1,913 | ) | |||||||||||
(2,188 | ) | 2,779 | 591 | (454 | ) | 0 | 137 | ||||||||||||
Net loss from continuing operations | (38,838 | ) | 38,829 | (9 | ) | (1,576 | ) | (1,284 | ) | (2,869 | ) | ||||||||
Loss from discontinued operations | 0 | (38,829 | )(1) | (38,829 | ) | (38,829 | ) | ||||||||||||
Net loss | $ | (38,838 | ) | $ | | $ | (38,838 | ) | $ | (1,576 | ) | $ | (1,284 | ) | $ | (41,698 | ) | ||
Net loss per common share: | |||||||||||||||||||
Continuing operations | $ | (11.23 | ) | $ | (0.01 | ) | $ | (0.83 | ) | ||||||||||
Discontinued operations | | (11.22 | ) | (11.22 | ) | ||||||||||||||
Net loss | (11.23 | ) | (11.23 | ) | (12.05 | ) | |||||||||||||
Weighted average common shares outstanding | 3,459,507 | 3,459,507 | 3,459,507 | ||||||||||||||||
Pro forma footnotes:
24
|