SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT TO APPLICATION OR REPORT
FILED PURSUANT TO SECTION 12, 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
NOVATEK INTERNATIONAL, INC.
----------------------------
(Exact name of registrant as specified in charter)
AMENDMENT NO. I
The registrant hereby amends its response to Item No. 2 of
Form 8-K filed on March 19, 1996 to include the financial statements
of Medical Products, Inc. and the related pro forma financial
information as required by Item No. 7 of Form 8-K as set forth in the
pages attached.
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this amendment to be signed on
its behalf by the undersigned, hereunto duly authorized.
Date: April 2, 1996 Novatek International, Inc.
(Registrant)
By/s/ Frank J. Cooney
-------------------
Frank J. Cooney, President
Principal Executive Officer
<PAGE>
MEDICAL PRODUCTS, INC.
(A development stage company)
FINANCIAL STATEMENTS
FOR THE PERIOD FROM NOVEMBER 3, 1995 (DATE OF INCORPORATION)
THROUGH DECEMBER 31, 1995
AND
INDEPENDENT AUDITORS' REPORT
<PAGE>
MEDICAL PRODUCTS, INC.
(A development stage company)
TABLE OF CONTENTS
Page
----
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Balance Sheet 2
Statement of Operations and Deficit 3
Statement of Stockholders' Deficit 4
Statement of Cash Flows 5
NOTES TO FINANCIAL STATEMENTS 6-8
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Medical Products, Inc.
We have audited the accompanying balance sheet of Medical Products, Inc. (the
"Company"), a development stage enterprise, as of December 31, 1995, and the
related statements of operations and deficit, stockholders' deficit, and cash
flows for the period from November 3, 1995 (date of incorporation) through
December 31, 1995. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Medical Products, Inc. as of
December 31, 1995, and the results of its operations and its cash flows for
the period from November 3, 1995 (date of incorporation) through December 31,
1995 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared following generally
accepted accounting principles for a development stage enterprise. As
described in Note 1 to the financial statements, the Company has not yet begun
its planned principal operations.
AHEARN, JASCO + COMPANY, P.A.
Certified Public Accountants
Pompano Beach, Florida
February 13, 1996
1
<PAGE>
MEDICAL PRODUCTS, INC.
(A Development Stage Company)
BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS:
Cash $ 4,584
Refundable deposit 100,000
-----------
TOTAL CURRENT ASSETS 104,584
-----------
DISTRIBUTION LICENSES 30,000,000
OTHER ASSETS:
Deposit and prepaid rent 3,000
Organization costs, net of amortization of $31 900
-----------
TOTAL OTHER ASSETS 3,900
-----------
$30,108,484
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $11,537
Accrued interest payable 4,123
Current portion of distribution licenses debt 6,000,000
Notes payable 250,000
Loan payable, stockholder 97,760
-----------
TOTAL CURRENT LIABILITIES 6,363,420
-----------
DISTRIBUTION LICENSES DEBT, less current portion 23,750,000
-----------
STOCKHOLDERS' DEFICIT:
Common stock, $1 par value; 7,500 shares
authorized, 7,500 shares issued and outstanding 7,500
Deficit accumulated during the development stage (12,436)
-----------
STOCKHOLDERS' DEFICIT, net (4,936)
-----------
$30,108,484
===========
The accompanying notes should be read with these financial statements.
2
</TABLE>
<PAGE>
MEDICAL PRODUCTS, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS AND DEFICIT
FOR THE PERIOD FROM NOVEMBER 3, 1995 (DATE OF INCORPORATION)
THROUGH DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
EXPENSES:
Amortization $ 31
Bank charges 417
Interest 4,382
Legal and accounting fees 6,106
Rent and other office expenses 1,500
-----------
TOTAL EXPENSES, NET LOSS, AND DEFICIT
ACCUMULATED DURING THE DEVELOPMENT STAGE $ 12,436
===========
The accompanying notes should be read with these financial statements.
3
</TABLE>
<PAGE>
MEDICAL PRODUCTS, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM NOVEMBER 3, 1995 (DATE OF INCORPORATION)
THROUGH DECEMBER 31, 1995
<TABLE>
<CAPTION>
Deficit Accumulated
Common During the
Stock Development Stage Total
------- ------------------- --------
<S> <C> <C> <C>
Sale of common stock at par
value on November 3, 1995 $ 7,500 - $ 7,500
Net loss for the period ended
December 31, 1995 - (12,436) (12,436)
------- ---------- ---------
Stockholders' deficit, end of period $ 7,500 $ (12,436) $ (4,936)
======= ========== =========
The accompanying notes should be read with these financial statements.
</TABLE>
4
<PAGE>
MEDICAL PRODUCTS, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM NOVEMBER 3, 1995 (DATE OF INCORPORATION)
THROUGH DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Deficit accumulated during the development stage $(12,436)
Adjustments to reconcile deficit accumulated during the
development stage to net cash provided by operating activities:
Amortization 31
Increase in accounts payable and accrued liabilities 15,660
--------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,255
--------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposit and prepaid rent incurred (3,000)
Refundable deposit incurred (100,000)
Organization costs paid (931)
--------
NET CASH USED IN INVESTING ACTIVITIES (103,931)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of stock 7,500
Issuance of notes payable 250,000
Payment on distribution license debt (250,000)
Loan from stockholder 97,760
--------
NET CASH PROVIDED BY FINANCING ACTIVITIES 105,260
--------
NET INCREASE IN CASH AND BALANCE AT
DECEMBER 31, 1995 $ 4,584
========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid in cash during the period $ -0-
========
Income taxes paid in cash during the period $ -0-
========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
The Company acquired distribution licenses by issuing notes payable
of $30,000,000.
The accompanying notes should be read with these financial statements.
</TABLE>
5
<PAGE>
MEDICAL PRODUCTS, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM NOVEMBER 3, 1995 (DATE OF INCORPORATION)
THROUGH DECEMBER 31, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Nature of Business and Basis of Presentation
- --------------------------------------------
Medical Products, Inc. (the "Company") was formed to obtain a license
to distribute certain medical diagnostic devices throughout South America
and the Bahamas. The Company meets the criteria under generally accepted
accounting principles of a development stage enterprise as its planned
principal operations have not yet commenced. During 1995, the Company's
development stage activities included obtaining financing, negotiating
agreements, and obtaining the license.
If the Company is unable to successfully generate revenues from its
planned principal operations and/or complete the merger described in Note
9, the Company may be unable to realize its assets and pay its incurred
obligations. No estimate can be made of a range of amounts of loss that
are reasonably possible should the completion of the development stage not
be successful.
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.
Income Taxes
- ------------
The Company accounts for income taxes in accordance with the
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," which requires the recognition of deferred tax liabilities and
assets at currently enacted tax rates for the expected future tax
consequences of events that have been included in the financial statements
or tax returns. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount that is more likely than not to be
realized.
Fair Value of Financial Instruments
- -----------------------------------
Cash, refundable deposit, accounts payable, and accrued liabilities
are reflected in the financial statements at cost, which approximates fair
value because of the short-term maturity of those instruments. The fair
values of the Company's debt obligations are also at approximate fair
value.
Cash Equivalents
- ----------------
For purposes of the statement of cash flows, cash equivalents, if
any, include highly liquid investments with an original maturity of three
months or less.
NOTE 2 - LOAN PAYABLE, STOCKHOLDER
- ----------------------------------
The loan from a stockholder is due on demand 90 days after the date
of the note (December 5, 1995) and bears interest at 12%. Interest is
payable beginning April 1, 1996.
6
<PAGE>
MEDICAL PRODUCTS, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM NOVEMBER 3, 1995 (DATE OF INCORPORATION)
THROUGH DECEMBER 31, 1995
NOTE 3 - DISTRIBUTION LICENSE
- -----------------------------
On November 30, 1995, the Company and New England Diagnostics, Inc.
("NED") entered into an agreement granting the Company the exclusive
license to market, sell, and distribute certain medical diagnostic devices
in South America and the Bahamas. Other provisions include a term of ten
years and annual minimum order requirements. The Company's consideration
for the agreement was to execute a $30,000,000 note to NED, secured by the
South American license and all of the equity interest in the Company. The
Company will amortize the license agreements over the remaining term
starting with the initial generation of revenue.
Terms of the $30,000,000 note are as follows: no interest for six
months, thereafter at 12%; $6,000,000 is due on demand by NED; NED may
require principal payments of up to $3,000,000 per year payable on the
first day of each year starting January 1, 1997; the maturity date for
unpaid principal and interest is November 30, 2002. During the period
ended December 31, 1995, the Company has paid NED $250,000 of principal
under the note. Subsequent to December 31, 1995, the Company has paid an
additional $400,000 of principal to NED under the note.
On December 1, 1995, the Company entered into a license agreement
with Novatek International, Inc. ("Novatek") under which Novatek will hold
the above described distribution rights for the Bahamas. Consideration
given to the Company by Novatek was an exclusive license to manufacture,
market, and distribute the Novatek patented building system in Brazil and
for Novatek to pay a royalty of 10% of the wholesale price of medical
devices delivered under the terms of the license. Additional
responsibilities include Novatek's obligation to develop a market in the
Bahamas, and the Company's obligation to provide the medical devices
ordered by Novatek. Because of the reciprocal nature of this transaction,
the exchange of licenses is accounted for as a nonmonetary exchange with
the estimated value of the licenses being set at the standard published
terms for Novatek's licenses. Therefore, the value assigned by the Company
for the licenses exchanged is $20,000.
NOTE 4 - NOTES PAYABLE
- ----------------------
Notes payable consist of the following at December 31, 1995:
Due February 19, 1996 with interest at 12%; to be secured by
certain securities placed in escrow; personally guaranteed by
a shareholder of the Company; convertible into certain
securities at the option of the holder. $ 200,000
Due February 19, 1996 with interest at 12%; to be secured by
certain securities placed in escrow; personally guaranteed by
a shareholder of the Company; convertible into certain
securities at the option of the holder. 50,000
---------
Total $ 250,000
=========
7
<PAGE>
MEDICAL PRODUCTS, INC.
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM NOVEMBER 3, 1995 (DATE OF INCORPORATION)
THROUGH DECEMBER 31, 1995
NOTE 5 - INCOME TAXES
- ---------------------
Net deferred tax assets are as follows:
Arising from the loss $ 1,900
. Valuation allowance (1,900)
---------
Net deferred tax assets $ -0-
The Company's benefit for income taxes is less than the expected
amount because of the valuation allowance. A tax net operating loss of
about $12,400 is available to offset future taxable income.
NOTE 6 - COMMITMENTS
- --------------------
The Company leases office space and obtains certain office support
services for $1,500 per month under a one-year agreement dated November 13,
1995. The landlord is holding security and rent deposits totaling $3,000.
NOTE 7 - RELATED PARTY TRANSACTIONS
- -----------------------------------
The $100,000 refundable deposit is held by Universal Health Watch,
Inc., a related entity through common ownership. The President of the
Company currently serves without compensation.
NOTE 8 - PLAN OF MERGER
- -----------------------
Effective December 29, 1995, Novatek entered into an agreement and
plan of merger with the Company and its stockholders pursuant to which the
Company, through a wholly-owned subsidiary of Novatek, will be acquired by
Novatek for a total consideration of $72,000,000, subject to adjustment,
consisting of $3,000,000 cash; 6,000,000 shares of Novatek's common stock,
valued at $30,000,000; a $3,000,000 short-term convertible note, executed
on January 3, 1996, and convertible into an additional 1,200,000 shares of
Novatek's common stock; and a $36,000,000 debenture due January 1, 2001.
The closing of this transaction is scheduled for no later than February 29,
1996.
8
<PAGE>
PRO FORMA FINANCIAL INFORMATION
NOVATEK INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
----------------------------
Historical MPI (a) Other Pro Forma
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 58,234 $ 4,584 $ 229,000 (e) $ 291,818
Contract receivables, net 164,705 - - 164,705
Costs in excess of billings
on uncompleted contracts 285,103 - - 285,103
Inventories 119,115 - - 119,115
Other current assets 200,430 100,000 - 300,430
------------- ------------- ------------- -------------
Total current assets 827,587 104,584 229,000 1,161,171
Property and equipment, net 1,055,920 - - 1,055,920
Distribution licenses - 30,000,000 25,018,875 (b) 55,018,875
Other assets 291,780 3,900 - 295,680
------------- ------------- ------------- -------------
$ 2,175,287 $ 30,108,484 $ 25,247,875 $ 57,531,646
============= ============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable and other current
liabilities $ 164,627 $ 15,660 $ 40,358 (c) 220,645
Billings and estimated losses in
excess of costs on uncompleted
contracts 78,742 - - 78,742
Current maturities of long-term debt 7,472 6,250,000 (6,000,000)(d) 257,472
Loan payable, stockholder - 97,760 - 97,760
------------- ------------- ------------- -------------
Total current liabilities 250,841 6,363,420 (5,959,642) 654,619
------------- ------------- ------------- -------------
Long-term debt, less current maturities 322,777 - - 322,777
------------- ------------- ------------- -------------
Distribution licenses debt, less current
portion - 23,750,000 (23,750,000)(d) -
------------- ------------- ------------- -------------
Convertible notes payable - - 2,354,000 (e) 2,354,000
------------- ------------- ------------- -------------
Convertible debenture payable - - 36,000,000 (f) 36,000,000
------------- ------------- ------------- -------------
Sales contracts to be acquired - - (36,000,000)(f) (36,000,000)
------------- ------------- ------------- -------------
Shareholders' Equity (Deficit)
Preferred stock 1,887,000 - - 1,887,000
Common stock 6,228,185 7,500 52,643,875 (g) 58,879,560
Additional paid-in capital 1,076 - - 1,076
Accumulated (deficit) (6,514,592) (12,436) (40,358)(c) (6,567,386)
------------- ------------- ------------- -------------
1,601,669 (4,936) 52,603,517 54,200,250
------------- ------------- ------------- -------------
$ 2,175,287 $ 30,108,484 $ 25,247,875 $ 57,531,646
============= ============= ============= =============
(a) To reflect the acquisition of the assets and liabilities included in the balance sheet of Medical Products, Inc.
("MPI")as of December 31, 1995.
(b) To allocate purchase price to assets acquired.
(c) To reflect accrued interest expense on the outstanding convertible notes payable.
(d) To reflect cash paid and the Company's issuance of 3,453,125 shares of its common stock to NED in payment in full
of the balance due to NED of a promissory note in the original face amount of $30,000,000 owing from MPI to NED
(e) To reflect the Company's, after giving effect to the merger, issuance of convertible notes payaable which are
convertible into the Company's common stock at $2.50 per share.
(f) To reflect the Company's issuance of a $36,000,000 face amount, 9% convertible debenture convertible into
7,200,000 shares of the Company's common stock to New England Diagnostics ("NED") as consideration for NED
acquiring for the Company certain sales contracts for products for which MPI holds a license to distribute. This
debenture has been placed in escrow pending the performance by NED of its obligation to acquire these certain
sales contracts. Interest on debenture begins at the time the related sales contracts are delivered.
(g) To reflect the Company's issuance of common stock.
</TABLE>
<PAGE>
PRO FORMA FINANCIAL INFORMATION
NOVATEK INTERNATIONAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
----------------------------
Historical MPI (a) Other Pro Forma
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Contract revenues earned $ 2,509,323 $ - $ - $ 2,509,323
Contracts costs 3,038,911 - - 3,038,911
-------------- ------------- ------------- -------------
Gross (loss) (529,588) - - (529,588)
Operating expenses 1,096,201 8,054 - 1,104,255
-------------- ------------- ------------- -------------
Operating loss (1,625,789) (8,054) - (1,633,843)
-------------- ------------- ------------- -------------
Other income (expense) 119,280 - - 119,280
Interest expense (156,681) (4,382) (40,358)(b) (201,421)
-------------- ------------- ------------- -------------
(37,401) (4,382) (40,358) (82,141)
Net (loss) $ (1,663,190) $ (12,436) $ (40,358) $ (1,715,984)
============== ============= ============= =============
(Loss) per common share $ (0.65) $ (0.44)
============== =============
Weighted common shares outstanding 2,558,257 3,902,332
============== =============
(a) To reflect the loss of MPI for the period from November 3, 1995 (Date of Incorporation) through
December 31, 1995.
(b) To reflect interest expense on the outstanding convertible notes payable.
</TABLE>
