<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT
TO SECTION 13 OF 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
MARCH 15, 1999
Date of report
(Date of earliest event reported)
ZEVEX INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 33-19583 87-0462807
(State of Incorporation) (Commission (I.R.S.Employer
File Number) Identification No.)
4314 ZEVEX PARK LANE,
SALT LAKE CITY, UTAH 84123
(Address of Principal Executive Offices)
Issuer's Telephone Number, Including Area Code: (801) 264-1001
NONE
(Former Name of Former Address, if Changed Since Last Report)
<PAGE> 2
Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired JTech Medical Industries, Inc.
and Aborn Electronics, Inc.
(b) Pro Forma Condensed Combined Financial Statements
(c) Exhibits
<PAGE> 3
Report of Independent Auditors
The Shareholders
JTech Medical Industries, Inc.
We have audited the accompanying balance sheets of JTech Medical Industries,
Inc. as of December 31, 1997 and 1998, and the related statements of income and
retained earnings 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 JTech Medical Industries, Inc.
at December 31, 1997 and 1998, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
February 3, 1999
<PAGE> 4
JTech Medical Industries, Inc.
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1997 1998
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 64,490 $ 107,247
Accounts receivable, less allowance for doubtful
accounts of $25,000 and $75,000 in 1997 and
1998, respectively 245,887 255,679
Inventories 189,531 318,532
Deferred tax asset 21,000 38,000
Prepaid expenses 7,459 10,665
--------- ---------
Total current assets 528,367 730,123
Property and equipment:
Furniture, fixtures and equipment 163,945 205,086
Automobile 8,500 8,500
--------- ---------
172,445 213,586
Less accumulated depreciation (77,127) (128,021)
--------- ---------
95,318 85,565
Other -- 2,815
--------- ---------
$ 623,685 $ 818,503
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 114,798 $ 139,261
Accrued liabilities 119,514 122,674
Current portion of capital lease obligations 15,873 15,873
Bank line of credit -- 100,000
--------- ---------
Total current liabilities 250,185 377,808
Long-term portion of capital lease obligations 15,758 3,270
Deferred tax liabilities 8,000 7,000
Commitments
Shareholders' equity:
Common shares, no par: 1,000,000 shares authorized;
1,000 shares issued and outstanding 1,000 1,000
Retained earnings 348,742 429,425
--------- ---------
Total shareholder's equity 349,742 430,425
--------- ---------
$ 623,685 $ 818,503
========= =========
</TABLE>
See accompanying notes.
<PAGE> 5
JTech Medical Industries, Inc.
Statements of Income and Retained Earnings
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
1997 1998
----------- -----------
<S> <C> <C>
Net sales $ 2,918,468 $ 2,796,344
Costs and expenses:
Cost of sales 1,094,557 931,138
Research and development 395,696 215,204
General, selling and administrative 1,301,692 1,538,014
----------- -----------
2,791,945 2,684,356
----------- -----------
126,523 111,988
Other income and (expenses):
Interest expense (5,965) (6,737)
Gain on sale of assets 9,336 --
----------- -----------
129,894 105,251
Provision for income taxes 45,970 24,568
----------- -----------
Net income 83,924 80,683
Retained earnings at beginning of year 264,818 348,742
----------- -----------
Retained earnings at end of year $ 348,742 $ 429,425
=========== ===========
</TABLE>
See accompanying notes.
<PAGE> 6
JTech Medical Industries, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31
1997 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 83,924 $ 80,683
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 44,128 57,867
Addition to allowance for doubtful accounts 25,000 50,000
Deferred income taxes (13,000) (18,000)
Changes in assets and liabilities:
Accounts receivable (143,429) (59,792)
Inventories 24,375 (129,001)
Prepaid expenses and other assets (4,588) (6,021)
Accounts payable (1,168) 24,463
Accrued liabilities 543 3,160
--------- ---------
Net cash provided by operating activities 15,785 3,359
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchase of property and equipment (35,684) (41,141)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of bank line of credit -- 100,000
Payments of capital leases (6,973) (19,461)
Payments of notes payable (41,308) --
--------- ---------
Net cash provided by (used in) financing activities (48,281) 80,539
--------- ---------
Net (decrease) increase in cash (68,180) 42,757
Cash at beginning of year 132,670 64,490
--------- ---------
Cash at end of year $ 64,490 $ 107,247
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 5,965 $ 6,734
Income taxes 71,632 46,636
========= =========
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
Capital lease obligations incurred for acquisition of
property and equipment $ 38,604 $ --
========= =========
</TABLE>
See accompanying notes.
<PAGE> 7
JTech Medical Industries, Inc.
Notes to Financial Statements
December 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
JTech Medical Industries, Inc., a Utah corporation, (the "Company") was
incorporated on February 17, 1995. The Company designs and manufactures advanced
medical devices for use in several medical specialties, including occupational
medicine, orthopedics, physical medicine and rehabilitation, chiropractic,
physical therapy, neurology, podiatry and athletic training. The Company also
provides educational products and services, such as in-office training,
seminars, and multimedia disks.
Effective December 31, 1998, the Company's shareholders agreed to sell all
common shares for a purchase price of up to $7,250,000. The purchase price is
comprised of cash of $3,100,000, and a convertible debenture of $3,000,000.
Included in the purchase price are earn-out provisions over the following two
years that provide additional consideration not to exceed cash of $575,00 and a
convertible debenture of $575,000 which bears interest at 8% per annum. The
convertible debentures are convertible into common stock at $11 per share
between December 31, 1999 and 2001.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CONCENTRATION OF CREDIT RISK
The Company's financial instruments that are exposed to concentration of credit
risk consist primarily of cash and trade accounts receivable. Cash is held in
federally insured financial institutions. The Company sells its products
primarily to, and has trade receivables with, medical practitioners,
chiropractors and medical equipment dealers in the United States and abroad. For
the year ended December 31, 1998, none of the Company's customers accounted for
more than 10% of net product sales; however for the year ended December 31,
1997, one of the Company's customers accounted for 13% of net product sales.
Less than 10% of product sales are to foreign customers.
<PAGE> 8
JTech Medical Industries, Inc.
Notes to Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
As a general policy, collateral is not required for accounts receivable;
however, the Company periodically monitors the need for an allowance for
doubtful accounts based upon expected collections of accounts receivable and
specific identification of uncollectible accounts. Additionally, customers'
financial condition and credit worthiness are regularly evaluated. Historical
losses have not been material.
INVENTORIES
Inventories are stated at the lower of cost or market; cost is determined using
the average cost method. Inventories consist primarily of component parts for
final assembly of finished goods.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided over expected useful lives of three to five years using
the straight-line method. Leasehold improvements are amortized on a
straight-line basis over the lesser of the remaining lease term or their
estimated useful lives.
Major replacements, which extend the useful lives of equipment, are capitalized
and depreciated over the remaining useful life. Normal maintenance and repair
items are charged to costs and expenses as incurred.
Management of the Company assesses the recoverability of property and equipment
when certain events are known to management that may affect the carrying value
of such assets in relation to fair value. Management assesses fair value by
determining whether the carrying value of such assets over their remaining
useful lives can be recovered through projected undiscounted cash flows. To
date, management has not identified any impairment of property and equipment.
INCOME TAXES
The Company accounts for income taxes using the asset and liability method,
which requires recognition of deferred tax assets and liabilities based on
differences between financial reporting and tax bases of assets and liabilities
measured using enacted tax rates and laws that are expected to be in effect when
the differences are expected to reverse. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
<PAGE> 9
JTech Medical Industries, Inc.
Notes to Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
The Company records revenue from the sale of manufactured products upon
shipment. Revenue from technical support contracts is recognized ratably over
the contracted service period.
RESEARCH AND DEVELOPMENT
The Company expenses the cost of research and development, principally comprised
of payroll and related costs.
ADVERTISING COSTS
Advertising costs are expensed during the year in which they are incurred.
Advertising expenses were $108,329, and $144,242, respectively for the years
ended December 31, 1997 and 1998.
2. ACCRUED LIABILITIES
Accrued liabilities consist of the following at December 31, 1997 and 1998
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Accrued payroll and related liabilities $ 92,514 $ 83,755
Accrued vacation 12,000 18,919
Warranty reserve 15,000 20,000
-------- --------
$119,514 $122,674
======== ========
</TABLE>
3. LINE OF CREDIT
The Company maintains a short term $150,000 line-of-credit with a bank. Total
borrowings outstanding at December 31, 1997 and 1998 were $100,000 under this
line of credit agreement. The line matures on March 15, 1999. The line of credit
is collateralized by all of the Company's assets and bears interest at the prime
rate plus 1% (8.75%) at December 31, 1998. Due to the short-term nature of this
debt the carrying value approximates fair value.
<PAGE> 10
JTech Medical Industries, Inc.
Notes to Financial Statements (continued)
4. CAPITAL LEASES
The Company has a capital lease obligation related to certain furniture and
fixtures with a recorded cost of $38,604 and accumulated amortization of
$19,461. The remaining minimum lease payments at December 31, 1998 total
$19,143, of which $15,873 is due in 1999 and $3,270 is due in 2000. Total
interest included in the future minimum payments is $1,740.
5. RELATED PARTY TRANSACTIONS
The Company leases office and manufacturing facilities under an operating lease
that expires June 1, 1999. Future minimum rental commitments for the remainder
of the lease are $50,268. The lessor is owned by two of the Company's
shareholders. Rent expense under this lease was $89,522 and $103,757 for the
years ended December 31, 1997 and 1998, respectively.
6. INCOME TAXES
As of December 31, 1997 and 1998, the Company had deferred tax assets of
approximately $21,000 and $38,000, respectively, and deferred tax liabilities of
$8,000 and $7,000, respectively. The current provision for 1998 of $24,568
consists of income tax expense from operations of $55,464 and a deferred benefit
of $30,896. The 1997 provision consists of $58,970 of income tax expense from
operations and a deferred benefit of $13,000. Deferred tax assets relate
primarily to certain accrued expenses and reserves that are currently not
deductible for income tax purposes. Deferred tax liabilities relate primarily to
the use of accelerated depreciation for tax purposes.
7. EMPLOYEE RETIREMENT PLANS
401(k) PROFIT SHARING PLAN
During 1996, the Company established a qualified 401(k) profit sharing plan
covering substantially all employees. Eligible employees may defer a portion of
their salary. At the discretion of the Company, the Company may make a
contribution of an additional 25% of the employee's deferral. Employees are
fully vested after six years. Contributions to the plan for the year ended
December 31 1997 and 1998 were $47,000 and $52,000, respectively. The Company
has recorded payables to the plan of $49,000 and $45,000 at December 31, 1997
and 1998, respectively, which are included in accrued liabilities.
<PAGE> 11
JTech Medical Industries, Inc.
Notes to Financial Statements (continued)
8. YEAR 2000 - UNAUDITED
The Company has performed an assessment of its computer systems currently in use
and initiated discussions with its software vendors to ensure that those parties
have appropriate plans to remediate Year 2000 issues where their software
packages impact the Company's operations. Based on its internal assessment and
on information from its software vendors, the Company currently expects the Year
2000 project to be substantially complete by early 1999. The Company's project
does not include the development of a contingency plan and no timetable for such
a plan has been established. The Company does not expect the Year 2000 project
to have a significant effect on operations and does not expect future additional
costs to exceed $3,000. As of December 31, 1998, approximately $12,000 has been
incurred, in this regard.
<PAGE> 12
Report of Independent Auditors
To the Shareholder
Aborn Electronics, Inc.
We have audited the accompanying balance sheets of Aborn Electronics, Inc. as of
June 30, 1998 and 1997, and the related statements of income and retained
earnings 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 Aborn Electronics, Inc. at June
30, 1998 and 1997, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
February 19, 1999
<PAGE> 13
Aborn Electronics, Inc.
Balance Sheets
<TABLE>
<CAPTION>
June 30 December 31
1997 1998 1998
--------- --------- ---------
Assets (Unaudited)
<S> <C> <C> <C>
Current assets:
Cash $ 229,224 $ 216,489 $ 375,060
Accounts receivable, less allowance for
doubtful accounts of none in 1997,
$30,000 in 1998, and $30,000 at
December 31, 1998, respectively 51,717 121,159 95,001
Inventories 13,000 14,500 15,000
Deferred tax asset 4,000 28,000 28,000
--------- --------- ---------
Total current assets 297,941 380,148 513,061
Property and equipment:
Furniture, fixtures and equipment 39,888 39,888 39,888
Less accumulated depreciation (39,888) (39,888) (39,888)
--------- --------- ---------
Other 2,450 2,450 2,450
--------- --------- ---------
$ 300,391 $ 382,598 $ 515,511
========= ========= =========
Liabilities and shareholder's equity Current liabilities:
Accounts payable $ 35,586 $ 38,472 $ 36,035
Accrued liabilities 47,700 71,734 80,552
--------- --------- ---------
Total current liabilities 83,286 110,206 116,587
Commitments
Shareholder's equity:
Common shares, no par: 6,400,000 shares
authorized; 285,000 shares issued 2,850 2,850 2,850
Retained earnings 214,255 269,542 396,074
--------- --------- ---------
Total shareholder's equity 217,105 272,392 398,924
--------- --------- ---------
$ 300,391 $ 382,598 $ 515,511
========= ========= =========
</TABLE>
See accompanying notes.
<PAGE> 14
Aborn Electronics, Inc.
Statements of Income and Retained Earnings
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED ENDED
JUNE 30 DECEMBER 31
1997 1998 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Revenues $ 1,115,960 $ 1,218,164 $ 659,219
Costs and expenses:
Cost of sales 513,341 559,159 246,261
Research and development 167,394 186,430 76,956
Selling, general and administrative 401,169 440,929 153,225
----------- ----------- -----------
1,081,904 1,186,518 476,442
----------- ----------- -----------
Operating income 34,056 31,646 182,777
Other income and (expenses):
Interest income and other 17,029 16,945 4,181
Interest expense (1,350) (201) (605)
----------- ----------- -----------
Income before income taxes 49,735 48,390 186,353
(Benefit) provision for income taxes 12,320 (6,897) 59,821
----------- ----------- -----------
Net income 37,415 55,287 126,532
Retained earnings at beginning of period 176,840 176,840 214,255 269,542
----------- ----------- -----------
Retained earnings at end of period $ 214,255 $ 269,542 $ 396,074
=========== =========== ===========
</TABLE>
See accompanying notes.
<PAGE> 15
Aborn Electronics, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED ENDED
JUNE 30 DECEMBER 31
1997 1998 1998
--------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 37,415 $ 55,287 $ 126,532
Adjustments to reconcile net income to net
cash (used in) provided by operating
activities:
Allowance for doubtful accounts -- 30,000 --
Deferred income taxes (4,000) (24,000) --
Changes in assets and liabilities:
Accounts receivable (17,027) (99,442) 26,158
Inventories (1,500) (1,500) (500)
Accounts payable 7,962 2,886 (2,437)
Accrued payroll and related
liabilities 47,700 24,034 8,818
--------- --------- ---------
Net cash provided by (used in) operating
activities 70,550 (12,735) 158,571
FINANCING ACTIVITIES:
Distribution to Stockholder (52,000) -- --
--------- --------- ---------
Net increase (decrease) in cash 18,550 (12,735) 158,571
Cash at beginning of year 210,674 229,224 216,489
--------- --------- ---------
Cash at end of period $ 229,224 $ 216,489 $ 375,060
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 1,350 $ 201 $ 605
Income taxes 16,645 16,778 2,962
========= ========= =========
</TABLE>
See accompanying notes.
<PAGE> 16
Aborn Electronics, Inc.
Notes to Financial Statements
June 30, 1997 and June 30, 1998 and December 31, 1998 (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Aborn Electronics, Inc., a California corporation, (the "Company") was
incorporated on July 26, 1984. The Company designs and manufactures optical
sensor components for both medical and industrial applications. The Company's
design and manufacturing service customers are medical products and electronic
products companies who incorporate the Company's components into their end
products.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CONCENTRATION OF CREDIT RISK
The Company's financial instruments that are exposed to concentration of credit
risk consist primarily of cash and trade accounts receivable. Cash is held in
federally insured financial institutions. The Company sells its products
primarily to, and has trade receivables with, durable medical products
manufacturers and dealers in the United States and abroad. Two of the Company's
customers accounted for 52% and 17% of net product sales for the year ended June
30, 1998 and 43% and 26% of net product sales for the year ended June 30, 1997,
respectively. Two of the Company's customers accounted for 43% and 11% of net
product sales for the Unaudited six month period ended December 31, 1998. Less
than 10% of net product sales are to foreign customers.
As a general policy, collateral is not required for accounts receivable;
however, the Company periodically monitors the need for an allowance for
doubtful accounts based upon expected collections of accounts receivable and
specific identification of uncollectible accounts. Additionally, customers'
financial condition and credit worthiness are regularly evaluated. Historical
losses have not been material.
INVENTORIES
Inventories are stated at the lower of cost or market; cost is determined using
the first-in, first-out method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided over expected useful lives using the straight-line
method. Leasehold improvements are amortized on a straight-line basis over the
lesser of the remaining lease term or their estimated useful lives.
<PAGE> 17
Aborn Electronics, Inc.
Notes to Financial Statements (continued)
June 30, 1997 and June 30, 1998 and December 31, 1998 (Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Major replacements, which extend the useful lives of equipment, are capitalized
and depreciated over the remaining useful life. Normal maintenance and repair
are charged to costs and expenses as incurred.
Management of the Company assesses the recoverability of property and equipment
when certain events are known to management that may affect the carrying value
of such assets in relation to fair value. Management assesses fair value by
determining whether the carrying value of such assets over their remaining
useful lives can be recovered through projected undiscounted cash flows. To
date, management has not identified any impairment of property and equipment.
INCOME TAXES
The Company accounts for income taxes using the asset and liability method,
which requires recognition of deferred tax assets and liabilities based on
differences between financial reporting and tax bases of assets and liabilities
measured using enacted tax rates and laws that are expected to be in effect when
the differences are expected to reverse. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
REVENUE RECOGNITION
The Company records revenue from the sale of manufactured products upon
shipment. Revenue from contracts to perform engineering design and product
development services are generally recognized as milestones are achieved and
costs are expensed as incurred.
RESEARCH AND DEVELOPMENT
The Company expenses the cost of research and development, principally comprised
of payroll and related costs.
2. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1997 1998 1998
------- ------- -------
(UNAUDITED)
<S> <C> <C> <C>
Pension plan payable $37,700 $51,734 $ 9,661
Income taxes payable -- -- 50,891
Warranty reserve 10,000 20,000 20,000
------- ------- -------
$47,700 $71,734 $80,552
======= ======= =======
</TABLE>
<PAGE> 18
Aborn Electronics, Inc.
Notes to Financial Statements (continued)
June 30, 1997 and June 30, 1998 and December 31, 1998 (Unaudited)
3. INCOME TAXES
As of June 30, 1997 and 1998, the Company had deferred tax assets of
approximately $4,000 and $28,000. The current benefit for 1998 consists of
income tax expense from operations of $17,103 and a deferred benefit of $24,000.
The 1997 provision consists of $16,320 of income tax expense from operations and
a deferred benefit of $4,000. The provision for the Unaudited six months ended
December 31, 1998 relates entirely to income from operations. Deferred tax
assets relate primarily to certain accrued expenses and reserves that are
currently not deductible for income tax purposes.
4. EMPLOYEE BENEFIT PLAN
The Company has a defined contribution pension plan covering substantially all
employees. Eligible employees may defer a portion of their salary. Contributions
to the plan for the years ended June 30, 1997 and 1998 were $35,700 and $49,103,
respectively. No contributions were made during the Unaudited six month period
ended December 31, 1998.
5. RELATED PARTY
The Company leases office and manufacturing facilities under a month-to-month
operating lease. The lessor is 50% owned by the Company's sole shareholder. Rent
expense under this lease was $24,363 and $26,191 for the year ended June 30,
1997 and 1998, respectively. Rent expense for the Unaudited six month period
ended December 31, 1998 was $13,955.
6. SUBSEQUENT EVENT
Effective December 31, 1998, the Company's sole shareholder agreed to sell all
common shares for a purchase price of up to $5,100,000. The purchase price is
comprised of cash of $1,350,000, adjustable by $500,000, and a convertible
debenture of $1,350,000. Included in the purchase price is an earn-out provision
that provides additional consideration not to exceed cash of $950,000 and a
convertible debentures of $950,000. The convertible debentures are convertible
into common stock at $11 per share between one to three years from the issuance
dates.
7. YEAR 2000 - UNAUDITED
The Company has performed an assessment of its information technology and
manufacturing systems currently in use and initiated discussions with its
hardware and software vendors to ensure that those parties have appropriate
plans to remediate Year 2000 issues where their software packages impact the
Company's operations. Based on its internal assessment and on information from
its vendors, the Company currently expects the Year 2000 project to be
substantially complete by early 1999. The Company does not expect this project
to have a significant effect on operations and does not expect costs to exceed
that of the usual hardware and software upgrades. The Company's project does not
include the development of a contingency plan and no timetable for such a plan
has been established. As of December 31, 1998, no costs have been incurred in
this regard.
<PAGE> 19
Item 7. Financial Statements and Exhibits.
(b) Pro forma financial information.
ZEVEX INTERNATIONAL, INC.
PROFORMA CONDENSED COMBINED FINANCIAL STATEMENTS INTRODUCTION
The following Unaudited pro forma condensed combined financial statements have
been prepared from the historical consolidated financial statements of ZEVEX
International, Inc. (the "Company"). The JTech Medical Industries, Inc and Aborn
Electronics, Inc. columns in the following Unaudited pro forma condensed
combined financial statements reflect the historical financial statements of
JTech Medical Industries, Inc. ("JTech") and Aborn Electronics, Inc. ("Aborn")
restated to be consistent with the reporting periods of the Company.
The Unaudited pro forma condensed combined financial statements have been
adjusted to reflect the acquisitions of JTech and Aborn under the terms
described in Item 2 of Form 8-K dated December 31, 1998, previously filed by the
Company and incorporated herein by reference.
The Unaudited pro forma condensed combined financial statements assume that the
acquisitions of JTech and Aborn occurred as of January 1, 1998 for the Unaudited
pro forma condensed combined statements of operations and as of December 31,
1998 for the Unaudited pro forma condensed combined balance sheet.
The Unaudited pro forma condensed combined financial statements should be read
in conjunction with the Company's historical consolidated financial statements
and related notes to such statements in the December 31, 1998 Annual Report on
Form 10-K to be filed by the Company; and the acquisitions of JTech and Aborn
historical financial statements and notes thereto included herein. The Unaudited
pro forma condensed combined financial statements are not necessarily indicative
of the financial position or results of operations had the acquisitions occurred
on the indicated dates nor do they purport to indicate the results of future
operations of the Company.
The pro forma financial information has been prepared by the Company and all
calculations have been made based upon assumptions deemed appropriate by the
Company. In the opinion of management, all adjustments necessary to present
fairly the Unaudited pro forma condensed combined financial statements have been
made.
The adjustments being made to the following balance sheet and statement of
operations are summarized as follows:
a) An adjustment was made to the balance sheet to reflect the revaluing of
fixed assets and the capitalization of goodwill related to the
acquisitions. The transactions are being accounted for using the Purchase
method of accounting.
b) Adjustments were made to reduce expense in both cost of sales and selling,
general and administrative expenses, including substantial decreases in
salaries of prior owners of both companies to conform to the salary
structure of the Company, rent and operating expenses that will be reduced
because of business consolidation and one time expenses incurred by both
companies during the acquisitions.
c) An adjustment was made to increase expenses related to amortization of
goodwill and interest to be paid on the convertible debt used in the
transactions.
<PAGE> 20
ZEVEX INTERNATIONAL, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Pro forma
JTech Adjustments
ZEVEX Medical Aborn &
International Industries, Electronics, Combined Elimination Pro forma
Inc. Inc. Inc. Total Entries Combined
------------ ------------ ------------ ------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash $ 225,255 $ 107,247 $ 375,060 $ 707,562 $ 707,562
Accounts Receivable 3,084,501 255,679 95,001 3,435,181 3,435,181
Inventory 5,153,229 318,532 15,000 5,486,761 5,486,761
Other Current Assets 238,146 48,665 28,000 314,811 314,811
Other Investments 9,033,030 9,033,030 9,033,030
------------ ------------ ------------ ------------ ------------ ------------
Total Current Assets 17,734,161 730,123 513,061 18,977,345 18,977,345
Property & Equipment,
Net 5,282,579 85,565 5,368,144 137,500 5,505,644
Intangibles, Net 587,260 587,260 8,565,397 9,152,657
Other Assets 264,359 2,815 2,450 269,624 (231,246) 38,378
------------ ------------ ------------ ------------ ------------ ------------
Total Assets $ 23,868,359 $ 818,503 $ 515,511 $ 25,202,373 $ 8,471,651 $ 33,674,024
============ ============ ============ ============ ============ ============
Liabilities &
Shareholders' Equity
Current Liabilities
Accounts Payable $ 900,814 $ 139,261 $ 36,035 $ 1,076,110 $ 1,076,110
Accrued Liabilities 747,988 122,674 80,552 951,214 951,214
Other Current
Liabilities 541,993 115,873 657,866 4,950,000 5,607,866
------------ ------------ ------------ ------------ ------------ ------------
Total Current
Liabilities 2,190,795 377,808 116,587 2,685,190 7,635,190
Convertible Debt 4,350,000 4,350,000
Industrial Development
Bond 1,800,000 1,800,000 1,800,000
Other Long-term Debt 90,228 10,270 100,498 100,498
Common Stock 3,419 1,000 2,850 7,269 (3,850) 3,419
Additional Paid in
Capital 17,381,793 17,381,793 17,381,793
Treasury Stock (50,790) (50,790) (50,790)
Retained Earnings 2,452,914 429,425 396,074 3,278,413 (824,499) 2,453,914
------------ ------------ ------------ ------------ ------------ ------------
Total Liabilities &
Shareholders' Equity $ 23,868,359 $ 818,503 $ 515,511 $ 25,202,373 $ 8,471,651 $ 33,674,024
============ ============ ============ ============ ============ ============
</TABLE>
<PAGE> 21
ZEVEX INTERNATIONAL, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
ZEVEX JTech
International, Medical Aborn
Inc. Industries, Electronics, Combined Pro forma Pro forma
(Unaudited) Inc. Inc. Total Adjustments Combined
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 11,084,413 $ 2,796,344 $ 1,250,488 $ 15,131,245 -- $ 15,131,245
Costs and Expenses
Cost of Sales 6,934,076 931,138 603,584 8,468,798 (305,308) 8,163,490
Research & Development 290,669 215,204 151,430 657,303 -- 657,303
Selling, General and
Administrative 3,879,408 1,538,014 535,624 5,953,046 (781,515) 5,171,531
------------ ------------ ------------ ------------ ------------ ------------
11,104,153 2,684,356 1,290,638 15,079,147 (1,086,823) 13,992,324
------------ ------------ ------------ ------------ ------------ ------------
Operating Income (Loss) (19,740) 111,988 (40,150) 52,098 1,086,823 1,138,921
Other Income and
(Expenses) 498,665 (6,737) (18,441) 473,487 -- 473,487
Interest Expense (91,196) -- -- (91,196) (324,000) (415,196)
Goodwill Amortization -- -- -- -- (527,000) (527,000)
------------ ------------ ------------ ------------ ------------ ------------
Income (Loss) Before
Taxes 387,729 105,251 (58,591) 402,789 235,823 670,212
Provision(Benefit) for
Taxes 25,536 24,568 (23,436) 26,668 182,108 208,776
------------ ------------ ------------ ------------ ------------ ------------
Net Income (Loss) $ 362,193 $ 80,683 $ (35,155) $ 376,121 $ 53,715 $ 461,436
============ ============ ============ ============ ============ ============
Earnings Per Share
Basic $ .10 $ .13
============ ============ ============ ============ ============ ============
Fully Diluted $ .10 $ .13
============ ============ ============ ============ ============ ============
</TABLE>
<PAGE> 22
INDEX TO EXHIBITS
NUMBER EXHIBITS FILED WITH THIS REPORT
None
<TABLE>
<CAPTION>
PREVIOUSLY FILED EXHIBITS WITH THE PRIOR FORM 8-K FILED
NUMBER JANUARY 14, 1999
- - ------ ----------------
<S> <C>
10.1 Stock Purchase Agreement - JTech Medical Industries, Inc.,
dated December 31, 1998, with certain material exhibits.
10.2 Stock Purchase Agreement - Aborn Electronics, Inc., dated
December 31, 1998, with certain material exhibits.
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the Undersigned, thereunto duly authorized.
ZEVEX International, Inc.
Dated: March 15, 1999 By /s/ Dean G. Constantine
--------------------------------------
Dean G. Constantine, President
Principal Executive Officer
