<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 3, 1999
------------
HOLOGIC, INC.
- --------------------------------------------------------------------------------
(Exact Name Of Registrant As Specified In Its Charter)
DELAWARE
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
0-18281 04-2902449
- --------------------------------- ------------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
35 Crosby Drive, Bedford, MA 01730
- --------------------------------- ------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(781) 999-7300
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
N/A
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
The undersigned hereby amends its Current Report on Form 8-K filed on
June 18, 1998 as follows:
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Direct Radiography Corp.
AUDITED BALANCE SHEETS AS OF DECEMBER 31, 1997 AND 1998 AND UNAUDITED
BALANCE SHEET AS OF APRIL 2, 1999
AUDITED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS FOR THE PERIOD
FROM MARCH 29, 1996 TO DECEMBER 31, 1996 AND FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1998 AND UNAUDITED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS FOR THE QUARTERS ENDED APRIL 3, 1998 AND APRIL 2,
1999
AUDITED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE PERIOD FROM MARCH
29, 1996 TO DECEMBER 31, 1996 AND FOR THE YEARS ENDED DECEMBER 31, 1997
AND 1998 AND UNAUDITED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE
QUARTER ENDED APRIL 2, 1999
AUDITED STATEMENTS OF CASH FLOWS FOR THE PERIOD FROM MARCH 29, 1996 TO
DECEMBER 31, 1996 AND FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1998
AND UNAUDITED STATEMENTS OF CASH FLOWS FOR THE QUARTERS ENDED APRIL 3,
1998 AND APRIL 2, 1999
NOTES TO FINANCIAL STATEMENTS
(b) Pro Forma Financial Information
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE YEAR ENDED SEPTEMBER 26, 1998
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX
MONTHS ENDED MARCH 27, 1999
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH
27, 1999
(c) Exhibits.
1. Securities Purchase Agreement dated April 28, 1999, as amended on
June 3, 1999 by and between the Registrant, Sterling Diagnostic
Imaging, Inc. and SDI Investments, L.L.C.*
2. Contract of Sale dated April 28, 1999, as amended on June 3, 1999,
by and between Glasgow Land Company, L.L.C. and the Registrant.*
* Previously filed by Hologic in its Current Report on Form 8-K dated
June 18, 1999.
-2-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HOLOGIC, INC.
Date: August 6, 1999 By: /s/ Glenn P. Muir
--------------------------------------------
Glenn P. Muir, Chief Financial Officer
-3-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholders of
Direct Radiography Corp.:
We have audited the accompanying balance sheets of Direct Radiography Corp. (the
"Company", formerly a subsidiary of Sterling Diagnostic Imaging, Inc., the
"Parent") as of December 31, 1997 and 1998, and the related statements of
operations and comprehensive loss, stockholders' equity (deficiency), and cash
flows for the period from March 29, 1996 (date of acquisition) to December 31,
1996 and the years ended December 31, 1997 and 1998. 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, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1997 and 1998
and the results of its operations and its cash flows for the period from March
29, 1996 (date of acquisition) to December 31, 1996 and the years ended December
31, 1997 and 1998 in conformity with generally accepted accounting principles.
The accompanying financial statements for the year ended December 31, 1998 have
been prepared assuming that the Company will continue as a going concern. As
discussed in Note 1 to the financial statements, the Company has experienced
significant losses from operations, has a significant stockholders' capital
deficiency, and anticipates additional losses from operations in 1999. These
matters raise substantial doubt about its ability to continue as a going
concern. Management's plans concerning these matters are also described in Note
1. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
As discussed in Note 1 to the financial statements, the Company was acquired by
Hologic, Inc. on June 3, 1999.
DELOITTE & TOUCHE LLP
Greenville, South Carolina
August 2, 1999
-4-
<PAGE>
DIRECT RADIOGRAPHY CORP.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1998 AND APRIL 2, 1999
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1997 1998 1999
(Unaudited)
CURRENT ASSETS:
<S> <C> <C> <C>
Cash $ 63 $ 39 $ -
Inventories 285 2,747 3,013
Prepaid expenses and other current assets 110 335 827
-------- -------- --------
Total current assets 458 3,121 3,840
PROPERTY AND EQUIPMENT, NET 6,712 6,544 6,449
OTHER ASSETS - 1,503 1,483
-------- -------- --------
TOTAL ASSETS $ 7,170 $ 11,168 $ 11,772
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable $ 1,483 $ 874 $ 387
Due to Parent 4,182 24,245 28,360
Accrued expenses - 316 355
-------- -------- --------
Total current liabilities 5,665 25,435 29,102
-------- -------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY):
Series A preferred stock, aggregate liquidation value $25,000,000
par value $.01 - 1,500,000 shares authorized, 1,000,000
issued and outstanding 10 10 10
Common stock, par value $.01 - 2,000 shares authorized and
1,000 shares issued and outstanding - - -
Additional paid-in capital 24,991 24,991 24,991
Accumulated deficit (23,496) (39,268) (42,331)
-------- -------- --------
Total stockholders' equity (deficiency) 1,505 (14,267) (17,330)
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY) $ 7,170 $ 11,168 $ 11,772
======== ======== ========
</TABLE>
See notes to financial statements.
-5-
<PAGE>
DIRECT RADIOGRAPHY CORP.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
PERIOD FROM MARCH 29, 1996 (DATE OF ACQUISITION) TO DECEMBER 31, 1996
AND YEARS ENDED DECEMBER 31, 1997 AND 1998 AND QUARTERS ENDED
APRIL 3, 1998 AND APRIL 2, 1999
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, April 3, April 2,
-------------------------------------
1996 1997 1998 1998 1999
(Unaudited)
<S> <C> <C> <C> <C> <C>
NET SALES $ - $ - $ 1,001 $ - $ 764
COST OF GOODS SOLD - - 5,747 1,696 1,792
------- -------- -------- ------- -------
GROSS LOSS - - (4,746) (1,696) (1,028)
------- -------- -------- ------- -------
OPERATING EXPENSES -
Selling and marketing - - 641 - 383
General and administrative - - 844 259 236
Research and development 7,044 17,574 9,046 2,233 1,319
------- -------- -------- ------- -------
7,044 17,574 10,531 2,492 1,938
------- -------- -------- ------- -------
OTHER (INCOME) EXPENSE:
Interest income (565) (557) - (5) -
Other expense - - 495 - 97
------- -------- -------- ------- -------
(565) (557) 495 (5) 97
------- -------- -------- ------- -------
NET LOSS AND
COMPREHENSIVE LOSS $(6,479) $(17,017) $(15,772) $(4,183) $(3,063)
======= ======== ======== ======= =======
</TABLE>
-6-
<PAGE>
DIRECT RADIOGRAPHY CORP.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
PERIOD FROM MARCH 29, 1996 (DATE OF ACQUISITION) TO DECEMBER 31, 1996
AND YEARS ENDED DECEMBER 31, 1997 AND 1998 AND QUARTER ENDED
APRIL 2, 1999 (UNADITED)
(IN THOUSANDS)
_______________________________________________________________________________
<TABLE>
<CAPTION>
Total
Number of Number of Series A Additional Stockholders'
Common Preferred Preferred Paid-in Accumulated Equity
Shares Shares Stock Capital Deficit (Deficiency)
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock 1 - $ - $ 1 $ - $ 1
Issuance of preferred stock - 1,000 10 24,990 - 25,000
Net loss - - - - (6,479) (6,479)
------ ----- --------- ---------- ----------- ------------
BALANCE, DECEMBER 31, 1996 1 1,000 10 24,991 (6,479) 18,522
Net loss - - - - (17,017) (17,017)
------ ----- --------- ---------- ----------- ------------
BALANCE, DECEMBER 31, 1997 1 1,000 10 24,991 (23,496) 1,505
Net loss - - - - (15,772) (15,772)
------ ----- --------- ---------- ----------- -------------
BALANCE, DECEMBER 31, 1998 1 1,000 10 24,991 (39,268) (14,267)
Net loss - - - - (3,063) (3,063)
------ ----- --------- ---------- ----------- -------------
BALANCE, APRIL 2, 1999 1 1,000 $ 10 $ 24,991 $ (42,331) $ (17,330)
------ ===== ========= ========== =========== =============
</TABLE>
See notes to financial statements.
-7-
<PAGE>
DIRECT RADIOGRAPHY CORP.
STATEMENTS OF CASH FLOWS
PERIOD FROM MARCH 29, 1996 (DATE OF ACQUISITION) TO DECEMBER 31, 1996
AND YEARS ENDED DECEMBER 31, 1997 AND 1998 AND QUARTERS ENDED
APRIL 3, 1999 AND APRIL 2, 1998
(IN THOUSANDS)
______________________________________________________________________________
<TABLE>
<CAPTION>
December 31,
-------------------------------- April 3, April 2,
1996 1997 1998 1998 1999
(Unaudited)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (6,479) $(17,017) $(15,772) $(4,183) $(3,063)
Adjustments to reconcile net loss to
cash flows from operating activities:
Loss on sale of property and equipment - - - - 97
Depreciation and amortization 158 886 1,311 336 349
Changes in assets and liabilities, net
of effects of acquisition:
Increase in inventories - (285) (2,462) (611) (266)
(Increase) decrease in prepaid expenses
and other assets (115) 5 (1,728) (220) (472)
Increase (decrease) in accounts
payable and accrued expenses 4,227 (2,744) (293) 408 (448)
-------- -------- -------- ------- -------
Net cash used in operating
activities (2,209) (19,155) (18,944) (4,270) (3,803)
-------- -------- -------- ------- -------
INVESTING ACTIVITIES:
Capital expenditures (2,408) (5,348) (1,143) (515) (381)
Proceeds from sale of property and equipment 30
(Increase) decrease in restricted cash (16,157) 16,157 - - -
-------- -------- -------- ------- -------
Net cash (used in) provided by
investing activities (18,565) 10,809 (1,143) (515) (351)
-------- -------- -------- ------- -------
FINANCING ACTIVITIES:
Issuance of preferred stock 25,000 - - - -
Issuance of common stock 1 - - - -
Increase in amounts due to Parent - 4,182 20,063 4,722 4,115
-------- -------- -------- ------- -------
Net cash provided by financing
activities 25,001 4,182 20,063 4,722 4,115
-------- -------- -------- ------- -------
INCREASE (DECREASE) IN CASH 4,227 (4,164) (24) (63) (39)
CASH:
Beginning of period - 4,227 63 63 39
-------- -------- -------- ------- -------
End of period $ 4,227 $ 63 $ 39 $ - $ -
======== ======== ======== ======= =======
</TABLE>
-8-
<PAGE>
DIRECT RADIOGRAPHY CORP.
NOTES TO FINANCIAL STATEMENTS
PERIOD FROM MARCH 29, 1996 (DATE OF ACQUISITION) TO DECEMBER 31, 1996
AND YEARS ENDED DECEMBER 31, 1997 AND 1998 AND QUARTERS ENDED
APRIL 2, 1998 AND 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND BASIS OF PRESENTATION
Direct Radiography Corp. (the "Company" or "DRC") was incorporated on
December 20, 1995. DRC became a wholly owned subsidiary of Sterling
Diagnostic Imaging, Inc. ("SDI" or "Parent"), which is a wholly owned
subsidiary of SDI Holding Corp. ("Holdings") on March 29, 1996 through the
issuance of 1,000 shares of DRC common stock. On that same date, DuPont
purchased 1,000,000 shares of DRC Series A preferred stock for $25 million in
cash and was issued warrants to purchase 334 shares, or 25%, of DRC common
stock for $.01 per share. On April 25, 1997, SDI settled certain claims
against DuPont related to their acquisition of the medical diagnostic imaging
business. In consideration for SDI releasing these claims, DuPont surrendered
ownership of all warrants to purchase DRC common stock.
DRC was formed with the purpose of developing and commercializing DirectRay
technology, which captures x-ray images directly in digital format. In 1998,
DRC emerged from the development stage and began commercial sales of its
product.
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements, since its inception the Company has incurred net losses of $39.3
million, and as of December 31, 1998 the Company had a net stockholders'
deficiency of $14.3 million and its current liabilities exceeded its current
assets by $22.3 million.
The Company's continuation as a going concern and its ultimate attainment of
successful operations are dependent upon SDI funding its operations either
through capital contributions or intercompany loans (see Note 7), or
obtaining additional financing or refinancing as may be required. There are
no assurances DRC can obtain such financing.
The factors described above may indicate that the Company will be unable to
continue as a going concern for a reasonable period of time. These financial
statements do not include any adjustments that may result from the Merger
(defined below), the sale of the Company or the Company's inability to obtain
future financing if it were unable to continue as a going concern.
On January 10, 1999, Agfa-Gevaert N.V. ("Agfa") and Holdings signed a
definitive merger agreement (the "Merger") for a subsidiary of Agfa to
purchase all of Holdings' capital stock, excluding DRC and certain other
assets. On May 14, 1999 the Merger was consummated as Agfa acquired all of
the outstanding capital stock of Holdings. Concurrent with this transaction
the following occurred: (1) ownership of the Company was transferred to SDI
Investments, LLC ("SDI Investments"), a newly formed holding company owned by
the shareholders of Holdings; (2) the intercompany promissory note with SDI
(see Note 7) was forgiven by SDI resulting in a credit to additional paid in
capital by the
-9-
<PAGE>
Company; and (3) legal title of approximately $800,000 (primarily accounts
receivable and inventory) in net assets was transferred from SDI and its
subsidiaries to the Company.
Additionally, the following agreements were entered into: (1) transitional
service agreements between SDI Investments and Holdings for Holdings to
provide certain research and development, general and administrative and
operational services to the Company; (2) a sales and services agreement
between the Company and SDI outlining the terms and conditions of sales of
direct radiography product from the Company to SDI or any of its designated
subsidiaries; (3) a royalty-free license agreement between the Company and
SDI allowing the Company to use DirectRay Operator's Console software owned
by SDI on existing or enhanced DirectRay Technology (as defined).
On June 3, 1999, all of the stock of the Company was sold to Hologic, Inc for
approximately $12 million of which approximately $3 million was paid in cash
and of which approximately $9 million was paid by delivery of 1,285,714
shares of Hologic's common stock. Of the total consideration, 437,571 shares
of Hologic's common stock and approximately $1.8 million in cash was
transferred to the preferred stock holder to repurchase the outstanding
preferred stock. The carryforward amount of the net operating losses
disclosed in Note 4 may be materially reduced as a result of this
transaction.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition - Revenue on sales of digital radiographic systems is
recognized when the systems are shipped and title transfers to the customer.
Inventories - The Company values inventories at the lower of cost or market.
Cost is determined principally on the first-in, first-out basis cost method.
Property and Equipment - Property and equipment is stated at cost and is
depreciated on a straight-line basis over the following estimated useful
lives:
Machinery and equipment 3 to 8 years
Computer hardware and software 5 years
Furniture, fixtures and improvements 5 years
Long-lived Assets - The Company analyzes the carrying value of long-lived
assets for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. No impairment
charges were recorded in the accompanying financial statements.
Warranties - The Company's products are generally warranted for one year.
Estimated costs related to warranty claims are accrued at the time the
related sale is recorded.
Research and Development - Research and development costs are charged to
expense when incurred.
Reclassifications - Certain amounts in the accompanying 1997 consolidated
financial statements have been reclassified to conform to the 1998
presentation. Such reclassification had no effect on net loss or
stockholders' equity (deficiency).
Financial Statement 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
-10-
<PAGE>
the financial statements and the revenues and expenses during the period
reported. Actual results could differ from those estimates.
Interim Financial Information - The interim financial information presented
has been prepared in accordance with generally accepted accounting principles
for interim financial information. The information does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. However, in the opinion of the
Company's management, the interim data includes all adjustments, consisting
of only normal recurring adjustments, necessary for a fair statement of the
results for the interim periods presented. The operating results for the
quarter ended April 2, 1999 are not necessarily indicative of the results
that might be expected for the year ending December 31, 1999.
Segments - The Company operates in only one industry segment: manufacture and
sale of medical imaging equipment.
Recently Issued Pronouncements - Accounting for Derivative Instruments and
Hedging Activities - The Financial Accounting Standards Board ("FASB") issued
Statement No. 133, Accounting For Derivative Instruments and Hedging
Activities in June 1998 and it is effective for the Company beginning in
fiscal year 2001 (as amended by Statement No. 137). The Statement establishes
accounting and reporting standards for derivative instruments and for hedging
activities. It requires that derivatives be recognized in the balance sheet
at fair value and specifies the accounting for changes in fair value. The
Company is in the process of assessing the impact of this pronouncement on
its financial statements.
-11-
<PAGE>
3. BALANCE SHEET INFORMATION
The major components of certain balance sheet accounts at December 31, 1997
and 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
Inventories:
Raw materials $ 285 $ 1,001
Work in process - 482
Finished products - 1,264
------- -------
Total $ 285 $ 2,747
======= =======
Prepaid expenses and other current assets:
Prepaid royalty $ - $ 250
Vendor advances 110 85
------- -------
Total $ 110 $ 335
======= =======
Property and equipment:
Machinery and equipment $ 6,059 $ 7,067
Furniture and fixtures 382 439
Computer hardware and software 1,315 1,393
------- -------
7,756 8,899
Accumulated depreciation (1,044) (2,355)
------- -------
Total $ 6,712 $ 6,544
======= =======
Other assets:
Prepaid royalty $ - $ 1,173
Vendor advances - 330
------- -------
Total $ - $ 1,503
======= =======
Accrued expenses:
Product warranties $ - $ 65
Engineering fees - 105
Deposits - 146
------- -------
Total $ - $ 316
======= =======
</TABLE>
-12-
<PAGE>
4. INCOME TAXES
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes.
Historically, the Company was included in the consolidated Federal income tax
return of Holdings and filed its own state income tax returns. A tax sharing
agreement with Holdings provides for the federal income tax return to be
filed on a consolidated basis and that the consolidated tax liability be
allocated among the members based on the relative level of income of each
member. Income taxes have been computed as if the Company had filed its tax
returns as a separate company.
Presented below are the elements which comprise deferred income tax assets
and liabilities at December 31, 1997 and 1998 (in thousands):
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
Gross deferred income tax assets:
Net operating loss carryforwards $ 6,546 $ 13,612
Other accruals and reserves - 97
Less: Valuation allowance (6,081) (12,759)
------- --------
Deferred income tax assets, net of valuation allowance 465 950
Gross deferred tax liabilities: depreciation (465) (950)
------- --------
Net deferred income tax asset (liability) $ - $ -
======= ========
</TABLE>
The Company has provided a valuation allowance for the portion of the
deferred income tax asset for which it is more likely than not, based on
current available evidence, that a tax benefit will not be realized. No
deferred income tax assets or liabilities have been presented in the
accompanying balance sheets as the elements of deferred income tax assets and
liabilities are all noncurrent assets and liabilities.
-13-
<PAGE>
A reconciliation of the income tax provision (benefit) at the Federal
statutory rate to the total income tax provision (benefit) is as follows (in
thousands):
<TABLE>
<CAPTION>
Period From
March 29, 1996
to December 31, Years Ended December 31,
------------------------
1996 1997 1998
<S> <C> <C> <C>
Federal income tax benefit at the statutory rate $(2,267) $(5,956) $(6,320)
State income tax, net of federal tax benefit (295) (774) (822)
Portion of losses not benefited 2,562 6,619 7,084
Other - 111 58
------- ------- -------
Provision (benefit) for income taxes $ - $ - $ -
======= ======= =======
</TABLE>
At December 31, 1998, the Company had available through its tax sharing
agreement with Holdings, net operating loss carryforwards of approximately
$33 million which expire beginning in 2012.
5. PREFERRED STOCK
At the time DRC achieves $25 million in cumulative retained earnings, the
Series A preferred stock would begin to accrue dividends at an annual rate of
10%, subject to certain limitations. Preferred stockholders have no voting
rights, except as provided by law. The preferred stock is redeemable by DRC,
at its sole option, in whole or in part, at any time. Upon redemption or
liquidation, preferred stockholders receive $25 per share (the "Liquidation
Value") plus all accumulated and unpaid dividends, if any. The holder can
require redemption of the DRC preferred stock upon occurrence of a change of
control (as defined) (see Note 1). In both cases, the Redemption Value is
equal to 100% of the Liquidation Value ($25 per share, or an aggregate of $25
million) plus accumulated unpaid dividends, if any. Any and all dividends or
redemptions are contingent upon there being legally available funds under
Delaware corporate law. As of December 31, 1997 and 1998, no dividends had
been accrued on the preferred stock and funds were not legally available for
any redemptions or dividends.
6. COMMITMENTS AND CONTINGENCIES
From time to time, the Company is party to various legal proceedings and
administrative actions, all of which are of an ordinary or routine nature
incidental to the operations of the Company.
In November 1997, a lawsuit was filed against the Company alleging that the
Company's manufacture of its DirectRay radiation detector infringed patents
held by the plaintiff. DRC filed a countersuit against the plaintiff. On June
30, 1998, the parties agreed to the dismissal of the lawsuits and entered
into a licensing agreement pursuant to which DRC agreed to pay royalty fees
on future sales of its radiation detectors not to exceed $6.5 million. The
first $1.7 million was paid
-14-
<PAGE>
as a nonrefundable advance, and is to be offset against the first $1.7
million of royalties otherwise earned.
Supplier Relationships - The Company's products are produced from several key
components which the Company believes are critical to the development and
production of its proprietary technology. Material supplier relationships are
described below:
Fischer Imaging Corporation ("Fischer"), a leading x-ray equipment designer
and manufacturer, supplies the x-ray equipment and systems for the
Company's integrated systems, the iiRAD(TM) DR1000C and DR1000. The Company
has funded 50% of Fischer's nonrecurring development expenses associated
with production of the iiRAD(TM) DR1000C and DR1000.
During 1998, the Company purchased all of its thin film transistor (TFT)
panels, a major component of the DR1000C and the DR1000, from a supplier
that ceased operations in October 1998. The Company currently believes that
it has sufficient TFT panels to meet production needs through the second
quarter of 1999. The Company completed qualifying a replacement supplier
and is expecting the first shipment of TFT panels in the third quarter of
1999.
Liebel-Flarsheim ("Liebel") supplies the Bucky assembly which contains the
DirectRay(R) detector for use in the iiRAD(TM) DR1000C and DR1000 Digital
Radiographic Systems. The Company funds 50% of Liebel's nonrecurring
development expenses.
Noranda Advanced Materials supplies the selenium coating for the Company's
TFT panels under a minimum annual purchase commitment.
The Company has also contracted with certain suppliers for the specialized
silicon chips used in the production of the Company's DirectRay(R)
technology. These contracts include minimum annual purchase commitments.
7. RELATED PARTY TRANSACTIONS
The Company has intercompany arrangements with SDI for certain services and
administrative functions. Significant intercompany arrangements and
transactions are described below.
Distributor Sales - The Company used SDI as a distributor of its products.
All of the Company's sales are made to SDI at the same prices that are
charged to the specific third party customers.
Manufacturing and Operating Expenses- SDI provides all employees to the
Company and charges the Company for actual payroll costs and an allocation of
all related benefits. The direct manufacturing and operating expenses are
borne directly by the Company. Indirect manufacturing and operating expenses
are allocated to the Company by SDI using proportional cost allocation
methods (e.g., square footage of facility utilized, headcount and employee
compensation). SDI's and the Company's management believe that all
significant indirect costs have been allocated on methods which they believe
are reasonable.
Financing - On August 25, 1997 (and as amended January 1, 1998), the Company
entered into a credit agreement with SDI in the form of an inter-company
promissory note (the "Note") whereby the Company is entitled to advances not
to exceed $25 million. Amounts available at December 31,
-15-
<PAGE>
1998 were approximately $790,000. The Note matures on March 31, 2001, is
payable on demand and is noninterest bearing. As of December 31, 1997 and
1998, the Company had amounts payable to SDI totaling $4.2 million and $24.2
million, respectively, under this agreement. On March 18, 1999 the Company
entered into a new credit agreement with SDI which replaced the Note and
increased entitled advances to $42 million subject to the limitations under
SDI's bank agreement. As described in Note 1, the Note was forgiven and
terminated in conjunction with the transfer of the Company's stock to SDI
Investments.
SDI funded all of the Company's direct and indirect expenditures after the
Company exhausted its available internal cash in 1997. There were no
payments by the Company to SDI; only the intercompany sales were offset
against the amounts due to SDI.
The accompanying financial statements have been prepared from the separate
records maintained by the Company and may not necessarily be indicative of
the conditions that would have existed or the results of operations if the
Company had operated as an unaffiliated company.
********
-16-
<PAGE>
HOLOGIC, INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
On June 3, 1999, pursuant to a securities purchase agreement dated
April 28, 1999, as amended, between Hologic, Inc. (Hologic), Sterling Diagnostic
Imaging, Inc., a Delaware corporation ("SDI") and SDI Investments, LLC, a
Delaware limited liability company ("SDI Investments") (the "Securities Purchase
Agreement"), Hologic purchased 100% of the issued and outstanding shares of
capital stock of Direct Radiography Corporation Holding Corp., the parent
company of Direct Radiography Corp. (DRC), a manufacturer of digital X-ray
systems for medical imaging and non-destructive testing applications. On June
3, 1999, pursuant to a Contract of Sale between Glasgow Land Company ("Contract
of Sale"), Hologic also purchased from Glasgow Land Company, LLC, a Delaware
limited liability company and a wholly-owned subsidiary of SDI Investments, the
land and buildings in Glasgow, Delaware at which DRC conducts its business.
Hologic intends to continue to conduct the business operations of DRC as
conducted prior to the acquisition. The aggregate purchase price for the stock
of DRC Holding and for the real estate and buildings was approximately
$20,000,000, of which approximately $7,000,000 was paid in cash and of which
approximately $13,000,000 was paid by delivery of 1,857,142 shares of Hologic's
Common Stock, par value $.01 per share (the "Purchase Price"). In connection
with the acquisition, Hologic incurred $1,002,000 of acquisition costs.
The following unaudited pro forma combined condensed financial
statements set forth the combined financial position and the combined results of
operations of Hologic and DRC. The acquisition was accounted for as a purchase
and assumes the acquisition occurred on March 27, 1999, for the pro forma
balance sheet and as of September 29, 1997, for the pro forma statements of
operations.
The unaudited pro forma information combines the (1) historical
balance sheets of Hologic as of March 27, 1999 and the historical balance sheet
of DRC as of April 2, 1999 (2) the historical statement of operations of Hologic
for the year ended September 26, 1998 and the historical statement of operations
of DRC for the year ended December 31, 1998 and (3) the historical statement of
operations of Hologic for the six months ended March 27, 1999 and the historical
statement of operations of DRC for the six months ended April 2, 1999.
The Pro Forma Condensed Consolidated Statements of Operations are not
necessarily indicative of the actual results that would have been achieved had
the acquisition occurred at the beginning of the respective periods, nor do they
purport to indicate the results of future operations of the Company. The
accompanying Pro Forma Condensed Consolidated Financial Statements should be
read in conjunction with the Company's historical financial statements and
related notes thereto appearing elsewhere or incorporated by reference in this
Form 8-K.
-17-
<PAGE>
HOLOGIC, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 26, 1998
(unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Historical (1)
-------------
Pro Forma Pro Forma
Hologic DRC Adjustments Combined
-------- ----- ------------ ---------
<S> <C> <C> <C> <C>
Revenues:
Product Sales.................... $111,498 $ 1,001 $ - $ 112,499
Other Revenue.................... 4,066 - - 4,066
-------- -------- ------------ ---------
115,564 1,001 - 116,565
Costs and Expenses:
Cost of product sales............ 55,891 5,747 (299) (2) 61,339
Research and development......... 9,778 9,046 (182) (2) 18,642
Selling and marketing............ 28,589 641 (37) (2) 29,193
General and administrative....... 10,452 844 (16) (2) 11,280
-------- -------- ------------ ---------
104,710 16,278 (534) 120,454
Income (loss) from operations...... 10,854 (15,277) 534 (3,889)
Rental income, net................. - - 545 (3) 535
Other income (expense)............. 5,334 (495) (890) (4) 3,949
-------- -------- ------------ ---------
Income (loss) before provision
for income taxes................. 16,188 (15,772) 179 595
Provision for income taxes......... 5,800 - (5,587) (5) 213
-------- -------- ------------ ---------
Net income (loss).................. $ 10,388 $(15,772) $ 5,766 $ 382
======== ======== ============ =========
Net income per share
Basic $ 0.78 $ 0.03
Diluted $ 0.75 $ 0.02
Weighted average shares
outstanding
Basic 13,259 1,857 (6) 15,116
Diluted 13,766 1,857 (6) 15,623
</TABLE>
-18-
<PAGE>
Pro forma Adjustments
- ---------------------
(1) The historical results of operations of Hologic and DRC are for the years
ended September 26, 1998 and December 31, 1998, respectively.
(2) Reflects the reduction of rent expense of $672, net of additional
depreciation expense of $138 as a result of the building purchased in the
acquisition.
(3) Gives effect to rental income from an existing tenant of $672, net of
depreciation expense of $138 from the building acquired in connection with
the acquisition.
(4) Gives effect to a reduction in interest income as a result of utilizing
cash for the acquisition.
(5) Gives effect to an adjustment in the tax provision as a result of the
combination and pro forma adjustments.
(6) Gives effect to the additional shares issued as part of the purchase price.
-19-
<PAGE>
HOLOGIC, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 27, 1999
(unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Historical (1)
--------------
Pro Forma Pro Forma
Hologic DRC Adjustments Combined
------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Product Sales................. $42,711 $ 1,765 - $ 44,476
Other Revenue................. 1,285 - 1,285
------- -------- ----------- ---------
43,996 1,765 - 45,761
Costs and Expenses:
Cost of product sales......... 24,324 3,490 (150) (2) 27,664
Research and development...... 5,101 2,707 (91) (2) 7,717
Selling and marketing......... 9,970 642 (19) (2) 10,593
General and administrative.... 5,047 469 (8) (2) 5,508
------- -------- ----------- ---------
44,442 7,308 (267) 51,483
Income (loss) from
Operations.................... (446) (5,543) 267 (5,722)
Rental income, net.............. - - 267 (3) 267
Other income (expense).......... 1,915 (97) (279) (4) 1,539
------- -------- ----------- ---------
Income (loss) before
provision for income taxes.... 1,469 (5,640) 255 (3,916)
Provision for income taxes...... 520 - (520) (5) -
------- -------- ----------- ---------
Net income (loss)............... $ 949 $ (5,640) $ 775 $ (3,916)
======= ======== =========== =========
Net income (loss) per share
Basic $ 0.07 - - $ (0.26)
Diluted $ 0.07 - - $ (0.26)
Weighted average shares
outstanding
Basic 13,353 - 1,857 (6) 15,210
Diluted 13,628 - 1,857 (6) 15,210
</TABLE>
-20-
<PAGE>
Pro forma Adjustments
- ---------------------
(1) The historical results of operations of Hologic and DRC are for the six
months ended March 27, 1999 and April 2, 1999, respectively. The DRC
results of operations for the three months ended December 31, 1998 are also
included in the pro forma combined condensed statement of operations for
the year ended September 26, 1998. Revenues of $1,001 and net loss of
$2,518 are included in both periods.
(2) Reflects the reduction of rent expense of $336 net of additional
depreciation expense of $69 as a result of the building purchased in the
acquisition.
(3) Gives effect to rental income from an existing tenant of $336, net of
depreciation expense of $69 from the building acquired in connection with
the acquisition.
(4) Gives effect to a reduction in interest income as a result of utilizing
cash for the acquisition.
(5) Gives effect to an adjustment in the tax provision as a result of the
combination and pro forma adjustments.
(6) Gives effect to the additional shares issued as part of the purchase price.
-21-
<PAGE>
HOLOGIC, INC.
-------------
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of March 27, 1999
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Historical (1)
--------------
Pro Pro
Forma Forma
Hologic DRC Adjustments Combined
-------------- ------------- ----------------- -------------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 36,582 $ - $ (7,216) (3) $ 29,366
Short-term investments 28,271 - - 28,271
Accounts receivable, net 31,703 31,703
Inventories 19,089 3,013 - 22,102
Prepaid expenses and other current
assets 6,287 827 - 7,114
-------------- ------------- ----------------- ------------------
Total current assets 121,932 3,840 (7,216) 118,556
Property and equipment, net 33,059 6,449 12,500 (3) 52,008
Other assets, net 14,819 1,483 (1,483) (3) 14,819
-------------- ------------- ----------------- -------------------
$169,810 $ 11,772 $ 3,801 $185,383
============== ============= ================= ===================
LIABILITIES AND
STOCKHOLDERS' EQUITY(DEFICIT)
CURRENT LIABILITIES:
Line of credit $ 1,523 $ - $ - $ 1,523
Accounts payable 6,342 28,747 (28,747) (2) 6,342
Accrued expenses 10,602 355 1,002 (3) 11,959
Deferred revenue 10,199 - - 10,199
-------------- ------------- ----------------- ------------------
Total current liabilities 28,666 29,102 (27,745) 30,023
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock 134 10 1,847 (3) 1,991
Preferred Stock - 24,991 (24,991) (2) -
Capital in excess of par value 95,452 - 12,359 (3) 107,811
Retained earnings(deficit) 47,136 (42,331) 42,331 (2) 47,136
Cumulative translation adjustment (1,114) - - (1,114)
Treasury stock (464) - - (464)
----------------------------------------------------------------------------------
Total stockholders' equity 141,144 (17,330) 31,546 155,360
----------------------------------------------------------------------------------
$169,810 $ 11,772 $ 3,801 $185,383
==================================================================================
</TABLE>
-22-
<PAGE>
Pro forma Adjustments
- ---------------------
(1) The historical balance sheet amounts of Hologic, Inc. and DRC are as of
March 27, 1999 and April 2, 1999, respectively.
(2) Gives effect to the elimination of intercompany transactions among DRC
controlled group and elimination of DRC's equity as a result of the
acquisition.
(3) Gives effect to the acquisition and the allocation of purchase price.
-23-
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
1. Securities Purchase Agreement dated April 28, 1999, as amended on
June 3, 1999 by and between the Registrant, Sterling Diagnostic
Imaging, Inc. and SDI Investments, L.L.C.*
2. Contract of Sale dated April 28, 1999, as amended on June 3, 1999,
by and between Glasgow Land Company, L.L.C. and the Registrant.*
____________
* Previously filed by Hologic, Inc. in its Current Report on Form 8-K dated
June 18, 1999.
-24-
