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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report ( date of earliest event reported) July 22, 1996
I-FLOW CORPORATION
(Exact name of registrant as specified in charter)
California 0-18338 33-0121984
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Id. No.)
2532 White Road, Irvine, California 92614
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (714) 553-0888
- --------------------------------------------------------------------------------
(Former name / former address, if changed since last report)
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Item 7. Financial Statements and Exhibits.
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report dated July 22, 1996
on Form 8-K as set forth in the pages attached hereto.
(b) Pro forma financial information.
On July 3, 1996, I-Flow Corporation, a California corporation (the
"Company") entered into an Agreement for Purchase and Sale of Assets (the
"Agreement") by and among the Company, Block Medical, Inc., a Delaware
corporation ("Block"), and Hillenbrand Industries, Inc., an Indiana corporation
and the parent of Block ("Hillenbrand"), which contemplated the purchase by the
Company or its wholly-owned subsidiary of substantially all of the assets of
Block from Block and Hillenbrand. The transactions contemplated by the Agreement
were consummated on July 22, 1996. Concurrently therewith, the Company assigned
all of its rights and obligations under the Agreement to its wholly-owned
subsidiary, Block Medical, Inc., a California corporation (formerly known as
I-Flow Acquisition Subsidiary, a California corporation). Substantially all of
the assets of Block were acquired pursuant to the terms of the Agreement,
including without limitation the following general classes of assets.
(1) The name "Block Medical" and derivations thereof.
(2) All intellectual property rights associated with the business and
properties of Block, including, without limitation, the Voice-Link
patented technology and related know-how.
(3) All inventories of finished and unfinished goods and all accounts
receivable.
(4) All plant, property and manufacturing, assembly, testing, office and
other equipment used in the business.
(5) All of the goodwill of Block.
(6) All customer lists, books and other records of or relating to the
business of Block.
(7) All of the issued and outstanding capital stock of Block Medical de
Mexico, S.A. de C.V., Block's subsidiary located in Mexico.
The assets were acquired for an aggregate purchase price of
approximately $17 million (subject to certain possible post-closing
adjustments). A non-cash, non-recurring write-off of approximately $5 million
for in-process research and development was taken on July 22, 1996.
Consideration for the purchase consisted of: cash of $15,000,000; 433,018 shares
of I-Flow Corporation Common Stock with a value, as defined, of $2,000,000 as of
the date of closing; and a warrant to purchase 250,000 shares of I-Flow
Corporation Common Stock at a per share exercise price of $4.62, expiring July
22, 2001.
Funds of $11,000,000 used in the acquisition came from the Company's
existing cash on hand, and the remaining funds of $4,000,000 used in the
acquisition were obtained via a term loan made in the ordinary course of
business by Silicon Valley Bank of Santa Rosa, California.
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The accompanying unaudited pro forma combined financial statements give
effect to the purchase. The acquisition has been accounted for using the
purchase method of accounting. Under this method of accounting the assets and
liabilities of the acquired business are combined with those of the Company as
of the effective date of the acquisition, the carrying values of acquired assets
are adjusted to reflect the portion of the total purchase consideration
allocable to each asset, generally on the basis of the estimated fair market
values of the assets. The difference between the total consideration and the
aggregate carrying value of the acquired assets as so adjusted is recorded as
goodwill. The liabilities of the acquired business are recorded at their fair
value as of the effective date of the acquisition.
The Pro Forma Combined Balance Sheet presents the combined financial
position of the Company and Block as if the acquisition had occurred on June 30,
1996. The Pro Forma Combined Statements of Operations for the Twelve-Month
Period Ended December 31, 1995 and the Six-Month Period Ended June 30, 1996
present the combined results of the Company and Block as if the acquisition of
Block had occurred on January 1, 1995. Block's previous fiscal year and
six-month interim period ended December 2, 1995 and June 1, 1996, respectively.
As Block's reporting periods ended within 90 days of the Company's reporting
periods, there were no related adjustments to the pro forma combined financial
statements.
The pro forma financial statements are provided for comparative
purposes and have been prepared based upon the financial statements of the
Company and Block. The pro forma statements do not purport to be indicative of
the results which would actually have been obtained if the acquisitions had been
effected on the date or dates indicated nor are they necessarily indicative of
the results of operations that may be achieved in the future. The pro forma
financial statements should be read in conjunction with the historical financial
statements of the Company and Block incorporated herein by reference.
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I-FLOW CORPORATION
PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 1996
UNAUDITED
(All amounts in thousands)
<TABLE>
<CAPTION>
I-FLOW BLOCK
CORPORATION MEDICAL
JUNE 30, JUNE 1, PRO FORMA PRO FORMA
1996 1996 ADJUSTMENT COMBINED
---- ---- ---------- --------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 10,443 $ 410 $(10,853) 1(a) $ -
Accounts receivable, net 1,109 2,357 3,466
Inventories 1,517 2,001 3,518
Prepaids and other 129 112 241
-------- -------- -------- -------
Total current assets 13,198 4,880 (10,853) 7,225
-------- -------- -------- -------
PROPERTY:
Total property 1,898 3,504 (2,443) 1(b) 2,959
Less accumulated depreciation (1,275) (2,443) 2,443 1(b) (1,275)
-------- -------- -------- -------
Property, net 623 1,061 0 1,684
-------- -------- -------- -------
GOODWILL 6,405 (1,976) 1(c) 4,429
DEVELOPED TECHNOLOGY AND
OTHER INTANGIBLES 3,020 1(c) 0
OTHER ASSETS 432 476 908
-------- -------- -------- -------
TOTAL $ 14,253 $ 12,822 $ (9,809) $ 14,246
======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Bank overdraft $ 985 1(a) $ 985
Accounts payable $ 477 $ 313 790
Accrued payroll and related expenses 438 960 (960) 1(b) 438
Deferred revenue 430 430
Current portion of long-term debt 1,000 1(d) 1,000
Other liabilities 38 9,227 (9,227) 1(b) 38
-------- -------- -------- -------
Total current liabilities 1,383 10,500 (8,202) 3,681
-------- -------- -------- -------
LONG TERM DEBT 10,475 (7,475) 1(b), 3,000
1(d)
SHAREHOLDERS' EQUITY (DEFICIT):
Preferred stock 1,494 1,494
Common stock 28,326 53,899 (51,284) 1(e) 30,941
Accumulated deficit (16,950) (62,052) 57,152 1(e) (21,850)
-------- -------- -------- -------
Net shareholders' equity (deficit) 12,870 (8,153) 5,868 10,585
-------- -------- -------- -------
TOTAL $ 14,253 $ 12,822 $ (9,809) $ 17,266
======== ======== ======== ========
</TABLE>
See accompanying explanatory notes to pro forma financial statements.
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I-FLOW CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE TWELVE-MONTH PERIOD ENDED
DECEMBER 31, 1995
UNAUDITED
(All amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
I-FLOW BLOCK
CORPORATION MEDICAL
DECEMBER 31, DECEMBER 2, PRO FORMA PRO FORMA
1995 1995 ADJUSTMENT COMBINED
---- ---- ---------- --------
<S> <C> <C> <C> <C>
NET REVENUES $10,143 $ 13,518 $ (90) 2(a) $23,571
------- -------- -------- -------
COSTS AND EXPENSES
Cost of sales 4,422 7,286 11,708
Selling and marketing 1,483 4,128 5,611
General and administrative 2,329 4,691 1,198 2(b) 8,218
Product development 840 793 1,633
Interest expense 913 (589) 2(a) 324
Goodwill write-down 20,000 (20,000)
In-process research and development 4,900 2(c) 4,900
------- -------- -------- -------
Total costs and expenses 9,074 37,811 (14,491) 32,394
------- -------- -------- -------
INCOME TAX BENEFIT 1,187 (1,187) 2(d)
------- -------- -------- -------
NET INCOME (LOSS) $ 1,069 $(23,106) $ 13,214 $(8,823)
======= ======== ======== =======
WEIGHTED AVERAGE COMMON SHARES
AND COMMON EQUIVALENTS 9,247 433 2(e) 9,680
======= ======== =======
NET INCOME (LOSS)
PER SHARE $ 0.12 $ (0.91)
======= =======
</TABLE>
See accompanying explanatory notes to pro forma financial statements.
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I-FLOW CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1996
UNAUDITED
(All amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
I-FLOW BLOCK
CORPORATION MEDICAL
JUNE 30, JUNE 1, PRO FORMA PRO FORMA
1996 1996 ADJUSTMENT COMBINED
---- ---- ---------- --------
<S> <C> <C> <C> <C>
NET REVENUES $ 4,513 $6,970 $(114) 2(a) $11,369
------- ------ ----- -------
COSTS AND EXPENSES:
Cost of sales 906 3,431 4,337
Selling and marketing 732 1,583 2,315
General and administrative 1,311 1,344 599 2(b) 3,254
Product development 470 558 1,028
Interest expense 374 (221) 2(a) 153
------- ------ ----- -------
Total costs and expenses 3,419 7,290 378 11,087
------- ------ ----- -------
------- ------ ----- -------
NET INCOME (LOSS) $ 1,094 $ (320) $(492) $ 282
======= ====== ===== =======
WEIGHTED AVERAGE COMMON SHARES
AND COMMON EQUIVALENTS 12,519 433 2(e) 12,952
======= ===== =======
NET INCOME (LOSS)
PER SHARE $ 0.10 $ 0.02
======= =======
</TABLE>
See accompanying explanatory notes to pro forma financial statements.
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NOTES TO PRO FORMA FINANCIAL STATEMENTS
1. Combined Balance Sheet Adjustments as of June 30, 1996.
The pro forma balance sheet adjustments relate to:
(a) reduction of cash for the amount required for the consummation of the
acquisition and for other costs associated with the acquisition;
(b) revaluation of certain assets and elimination of certain assets and
liabilities not acquired or assumed in the transaction;
(c) net adjustment to goodwill and other intangibles to equal the difference
between the aggregate consideration paid in the acquisition and the
aggregate carrying value of the assets and liabilities acquired;
(d) net adjustment to record bank borrowings for a portion of the cash
required upon the consummation of the acquisition; and
(e) issuance of Common Stock and warrants required for the consummation of
the acquisition and the elimination of Block equity accounts upon
consolidation.
2. Pro Forma Adjustments to the Pro Forma Combined Statements of Operations for
the Twelve-Month Period Ended December 31, 1995 and the Six-Month Period
Ended June 30, 1996.
These pro forma adjustments represent the combined adjustments arising from
the acquisition as if such acquisition had occurred at the beginning of
1995. The adjustments relate to:
(a) recording of interest expense on bank borrowings used in the
acquisition, elimination of interest expense on debt of Block not
assumed and foregone interest income associated with cash payments
required to consummate the acquisition;
(b) recording of the amortization of goodwill and other intangibles;
(c) recording of the allocation of a portion of the purchase price to
in-process research and development;
(d) elimination of the tax benefit provided to the selling corporation from
the operating results of Block; and
(e) issuance of additional shares of Common Stock required for the
consummation of the acquisition.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
I-FLOW CORPORATION
Date: October 2, 1996 By: /s/Donald M. Earhart
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Donald M. Earhart
President and Chief Executive Officer
