<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Filed Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 27, 1996
------------------
LIFEQUEST MEDICAL, INC.
-----------------------
(Exact name of registrant as specified in its charter)
Delaware 0-20532 74-2559866
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
9601 McAllister Freeway, Suite 1120, San Antonio, Texas 78216
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (210) 366-2100
-----------------------
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired.
VAL-U-MED, Inc.
Page
Number
------
1. Report of Independent Public Accountants 3
2. Balance Sheets as of December 31, 1996 and 1995 4
3. Statements of Operations for the Years Ended
December 31, 1996 and 1995 5
4. Statements of Stockholders' Equity for the Years Ended
December 31, 1996 and 1995 6
5. Statements of Cash Flows for the Years Ended
December 31, 1996 and 1995 7
6. Notes to Financial Statements 8
(b) Pro Forma Financial Information.
1. Pro Forma Condensed Financial Statements Introduction 12
2. Pro Forma Condensed Balance Sheet as of
September 30, 1996 13
3. Pro Forma Condensed Statements of Operations
for the Nine Months Ended September 30, 1996
and for the Year Ended December 31, 1995 14-15
4. Notes to Pro Forma Condensed Financial Statements 16
2
<PAGE> 3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
LifeQuest Medical, Inc.:
We have audited the accompanying balance sheets of VAL-U-MED, Inc. (a Georgia
corporation), as of December 31, 1996 and 1995, and the related statements of
operations, stockholders' equity 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 VAL-U-MED, Inc., as of
December 31, 1996 and 1995, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/S/ ARTHUR ANDERSEN LLP
San Antonio, Texas
January 31, 1997
3
<PAGE> 4
VAL-U-MED, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
-----------
1995 1996
---------- ----------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 27,708 $ -
Accounts receivable, net of allowance for doubtful accounts of $224,907
in 1996 and $63,083 in 1995 444,887 430,247
Inventory, net of obsolescence reserve of $20,000 in 1996 and $10,000
in 1995
295,561 444,742
Prepaid expenses - 8,348
---------- ----------
Total current assets 768,156 883,337
---------- ----------
PROPERTY AND EQUIPMENT:
Property and equipment 13,065 32,723
Less- Accumulated depreciation (1,194) (5,293)
---------- ----------
Total property and equipment 11,871 27,430
---------- ----------
Total assets $ 780,027 $ 910,767
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 282,759 $ 262,234
Accrued expenses 334,428 663,270
---------- ----------
Total current liabilities 617,187 925,504
---------- ----------
Total liabilities 617,187 925,504
---------- ----------
COMMITMENTS
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.01 par value; 1,000 shares authorized; 400 shares issued
and outstanding in 1996 and 388 shares issued and outstanding at
December 31, 1995 4 4
Additional paid-in capital 379,896 391,896
Accumulated deficit (217,060) (406,637)
---------- ----------
Total stockholders' equity (deficit) 162,840 (14,737)
---------- ----------
Total liabilities and stockholders' equity (deficit) $ 780,027 $ 910,767
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
VAL-U-MED, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
For the Years Ended
December 31
-----------
1995 1996
----------- -----------
<S> <C> <C>
REVENUE:
Net sales $ 2,699,117 $ 4,385,224
Investment income 1,048 3,101
----------- -----------
2,700,165 4,388,325
----------- -----------
COSTS AND EXPENSES:
Cost of sales 1,556,636 2,496,409
Selling, general and administrative 1,125,034 2,076,477
Depreciation 1,014 5,016
----------- -----------
2,682,684 4,577,902
----------- -----------
NET INCOME (LOSS) BEFORE INCOME TAXES 17,481 (189,577)
----------- -----------
INCOME TAXES 2,820 -
----------- -----------
NET INCOME (LOSS) $ 14,661 $ (189,577)
=========== ===========
NET INCOME (LOSS) PER SHARE OF COMMON STOCK $ 37.79 $ (483.61)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
VAL-U-MED, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Common Stock
------------------------ Total
Shares Additional Stockholders'
Issued and $.01 Par Paid-In Accumulated Equity
Outstanding Value Capital Deficit (Deficit)
----------- --------- ------------ ----------- ---------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994 388 $ 4 $ 379,896 $ (231,721) $ 148,179
Net income - - - 14,661 14,661
----- ------- ----------- ------------ ------------
BALANCE, December 31, 1995 388 4 379,896 (217,060) 162,840
Issuance of stock 12 - 12,000 - 12,000
Net loss - - - (189,577) (189,577)
----- ------- ----------- ------------ ------------
BALANCE, December 31, 1996 400 $ 4 $ 391,896 $ (406,637) $ (14,737)
===== ======= =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
VAL-U-MED, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
For the Years Ended
December 31
------------------------
1995 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 14,661 $ (189,577)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities-
Depreciation 1,014 5,016
Bad debt expense 44,309 161,824
(Increase) decrease in current assets-
Accounts receivable (197,495) (147,184)
Inventory, net (104,772) (149,181)
Prepaid expenses - (8,348)
Increase (decrease) in current liabilities-
Accounts payable 38,238 (20,525)
Accrued expenses 206,767 328,842
---------- ----------
Net cash provided by (used in) operating activities 2,722 (19,133)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (7,794) (20,575)
---------- ----------
Net cash used in investing activities (7,794) (20,575)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock - 12,000
---------- ----------
Net cash provided by financing activities - 12,000
---------- ----------
NET DECREASE IN CASH (5,072) (27,708)
CASH AND CASH EQUIVALENTS, beginning of year 32,780 27,708
---------- ----------
CASH AND CASH EQUIVALENTS, end of year $ 27,708 $ -
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for income taxes $ - $ 2,820
========== ==========
Cash paid during the year for interest $ - $ -
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 8
VAL-U-MED, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
1. BUSINESS:
VAL-U-MED, Inc. (the Company), was incorporated September 1, 1993, under the
laws of the State of Georgia. The Company distributes and markets instruments
used in minimally invasive surgical procedures. The Company primarily
distributes these products in the southeastern region of the U.S.
In December 1996, the Company was merged with and into VAL-U-MED Acquisition
Co., a subsidiary of LifeQuest Medical, Inc. The surviving corporation to this
merger took the name of VAL-U-MED, Inc. (VAL-U-MED). See Note 7.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition
Operating revenues are recognized upon the shipment of products to the
customer.
Inventory
Inventory consists of finished goods which are stated at the lower of cost
(determined on a first-in, first-out basis) or market.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided utilizing
the straight-line method over the estimated useful lives of the respective
assets; primarily over five years.
Additions and improvements that extend the useful life of the asset are
capitalized. Repairs and maintenance expenditures are charged to expense as
incurred. Upon sales or retirement of property and equipment, the related cost
and accumulated depreciation are eliminated from the accounts and the resulting
gain or loss is recorded.
Provision for Income Taxes
Deferred income taxes are provided when certain revenues and expenses are
reported in different periods for financial reporting purposes than for income
tax reporting purposes.
Deferred tax liabilities and assets are recorded based on the enacted income
tax rates which are expected to be in effect in the periods in which the
deferred tax liability or asset is expected to be settled or realized. A change
in the tax laws or rates results in adjustments to the deferred tax liabilities
and assets. The effect of such adjustments shall be included in income in the
period in which the tax laws or rates are changed.
Earnings (Loss) Per Share
There are no common stock equivalents outstanding and the weighted average
number of common shares used in computing net income (loss) per share is 392
shares in 1996 and 388 shares in 1995.
8
<PAGE> 9
Impact of Recently Issued Accounting Standards
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 (SFAS No. 121), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. SFAS No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company adopted SFAS No. 121
in 1996. The adoption of SFAS No. 121 did not have a material effect on the
Company's financial position or results of operations.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management of the Company 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 may differ from those estimates.
3. CONCENTRATION OF RISK:
Credit Risk
The Company's accounts receivable are from various hospitals, clinics and
practicing surgeons. Based on the Company's evaluation of the collectibility
of these accounts receivable, $161,824 and $44,309 in bad debt expense was
recognized in 1996 and 1995, respectively. The Company's management believes
that the remainder of the receivables outstanding are collectible and, thus,
believes the Company's exposure to credit risk related to the remaining
accounts receivable is minimized. The Company's accounts receivable are
generally not collateralized.
Customer
The Company did not have any customer which accounted for more than 10 percent
of total sales during 1995 or 1996.
Supplier
One supplier accounted for 62 percent and 48 percent of purchases for the years
ended December 31, 1996 and 1995, respectively. In addition, during 1996, the
Company had one other supplier which accounted for 10 percent of total
purchases.
4. OPERATING LEASES:
Future minimum lease payments under noncancelable operating leases subsequent
to December 31, 1996, are:
<TABLE>
<CAPTION>
Year ending December 31-
<S> <C>
1997 $ 69,000
1998 64,500
1999 75,800
2000 79,800
2001 82,000
Thereafter 13,300
--------
Total future minimum lease payments $384,400
========
</TABLE>
9
<PAGE> 10
The Company has operating lease agreements for its facility and office
equipment. Rent expense totaled approximately $16,000 and $12,000 for the
years ended December 31, 1996 and 1995, respectively.
5. INCOME TAXES:
As of December 31, 1996, the Company had net operating loss (NOL) carryforwards
of approximately $86,000 for federal income tax purposes which are available to
reduce future taxable income and will expire in 2011 if not utilized.
The principal components of deferred taxes at December 31, 1996 and 1995, are
as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Accrual to cash adjustments $ 19,600 $ 88,100
Book reserves not deductible for tax 94,400 27,000
Depreciation (2,000) -
Federal tax losses not currently utilizable 32,000 -
---------- ---------
Net deferred tax assets 144,000 115,100
Deferred tax valuation reserve (144,000) (115,100)
---------- ----------
Deferred tax assets, net of valuation analysis $ - $ -
========== =========
</TABLE>
As the Company has had net operating losses or insignificant levels of
operating income since inception, a 100 percent valuation reserve has been
established.
The Company's ability to use its NOL carryforwards to offset future taxable
income is subject to restrictions enacted in the U.S. Internal Revenue Code of
1986 as amended (the Code). These restrictions provide for limitations on the
Company's utilization of its NOL carryforwards following certain ownership
changes described in the Code.
6. CONTINGENCY REGARDING SALES TAX:
The Company has accrued $574,000 and $311,000 as of December 31, 1996 and 1995,
respectively, related to sales tax payable. The Company is currently in
process of obtaining the necessary documentation to achieve exemption from
sales tax related to sales made to certain of its customers. However, as there
can be no assurance that management of the Company will ultimately be
successful in obtaining such documentation, management has established accruals
for the potential sales tax liability.
7. ACQUISITION OF THE COMPANY:
In December 1996, the Company was merged with and into VAL-U-MED Acquisition
Co., a subsidiary of LifeQuest Medical, Inc. (LifeQuest). The surviving
corporation to this merger took the name of VAL-U-MED, Inc. (VAL-U-MED). The
merger was accomplished through exchanging all of the outstanding stock of the
Company for 1,200,000 shares of LifeQuest common stock and $400,000. In
addition, LifeQuest gave 57,000 shares of LifeQuest stock to a third party for
a finder's fee associated with the transaction. The transaction was recorded
using the purchase method of accounting effective December 27, 1996. The
December 31, 1996, financial statements are the historical financial statements
of the Company and do not include any purchase adjustments.
10
<PAGE> 11
The merger agreement also provides for an employment agreement with the
president of the Company to act as chief operating officer of the surviving
corporation, VAL-U-MED, and as a vice president of LifeQuest through December
31, 1999. In addition, the existing vice president of sales of the Company
will continue in this capacity with VAL-U-MED. The agreement provides for base
compensation of approximately $100,000 per year each to these individuals,
additional performance based compensation and participation in all employee
benefits provided by LifeQuest. In addition, LifeQuest and the president and
vice president of sales have entered into nonqualified stock option agreements
pursuant to which LifeQuest has granted to the president and vice president of
sales nonqualified stock options to receive up to 60,000 shares each of common
stock of LifeQuest as specified in the agreement.
8. SUBSEQUENT EVENT:
In January 1997, VAL-U-MED entered into a lease agreement for new office space.
The lease term is from March 1997 through February 2002. The payments under
this operating lease have been included in the future minimum lease payments in
Note 4.
11
<PAGE> 12
LIFEQUEST MEDICAL, INC., AND SUBSIDIARIES
PRO FORMA CONDENSED FINANCIAL STATEMENTS
(Unaudited)
INTRODUCTION
The following unaudited pro forma condensed financial statements include the
accounts of LifeQuest Medical, Inc., and subsidiaries, a Delaware corporation
(LifeQuest) and VAL-U-MED, Inc. All significant intercompany accounts and
transactions have been eliminated in consolidation. The condensed financial
statements of the Company have been adjusted to reflect the effects of the
Company's acquisition of VAL-U-MED, Inc. (a Georgia corporation), with and into
VAL-U-MED Acquisition Co. (a Nevada corporation), a wholly owned subsidiary of
LifeQuest. The surviving corporation to this merger took the name of
VAL-U-MED, Inc. (VAL-U-MED). VAL-U-MED was acquired through the issuance of
1,200,000 shares of LifeQuest restricted common stock and $400,000. In
addition, LifeQuest gave 57,000 shares of LifeQuest stock to a third party for
a finder's fee associated with the transaction. The transaction was recorded
using the purchase method of accounting and was effective December 27, 1996.
LifeQuest recorded the assets and liabilities of VAL-U-MED at fair value as of
the purchase date. LifeQuest utilized a 40 percent discount on its stock price
at the transaction date due to the inherent risks associated with the
restricted nature of the stock. The excess of the purchase price over net
assets acquired of $2,677,337 was recorded as goodwill and will be amortized
over 10 years.
The LifeQuest and VAL-U-MED, Inc., columns in the following condensed financial
statements reflect the preacquisition financial statements.
The pro forma condensed balance sheet assumes the merger described above
occurred as of September 30, 1996.
The pro forma condensed statements of operations assume the merger described
above occurred as of January 1, 1995. The pro forma adjustments relate to the
amortization of the goodwill associated with the purchase transaction and the
elimination of income taxes due to utilization of LifeQuest's net operating
loss carryforwards.
In the opinion of management, all adjustments necessary to present fairly the
pro forma condensed financial statements have been made.
These pro forma condensed financial statements should be read in conjunction
with LifeQuest's historical financial statements and notes thereto for the year
ended December 31, 1995, included in the Company's Form 10-K, the September 30,
1996, Form 10-Q, and subsequently issued Form 8-K/A dated November 27, 1996,
regarding the pooling of Klein Medical, Inc. The pro forma condensed
statements of operations are not necessarily indicative of what actual results
of operations would have been had the transactions occurred at the beginning of
the respective years nor do they purport to indicate the results of future
operations of the Company.
12
<PAGE> 13
LIFEQUEST MEDICAL, INC., AND SUBSIDIARIES
PRO FORMA CONDENSED BALANCE SHEET
SEPTEMBER 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
LifeQuest Balance
Medical, Sheet,
Inc., and Pro Forma September 30,
Subsidiaries VAL-U-MED Adjustments 1996
------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 240,733 $ 191,832 $ (400,000)(a) $ 32,565
Short-term investments 3,406,733 - 3,406,733
Interest receivable 125,318 - 125,318
Accounts receivable, net 488,087 403,391 891,478
Inventory, net 484,097 206,073 690,170
Other current assets 19,660 39,312 58,972
------------- ------------ ----------- ------------
Total current assets 4,764,628 840,608 (400,000) 5,205,236
------------- ------------ ----------- ------------
PROPERTY AND EQUIPMENT, net 402,680 24,162 426,842
------------- ------------ ------------
INTANGIBLE ASSETS 427,273 - 2,677,337 (a) 3,104,610
------------- ------------ ----------- ------------
Total assets $ 5,594,581 $ 864,770 $ 2,277,337 $ 8,736,688
============= ============ =========== ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
CURRENT LIABILITIES:
Current portion of long-term obligations $ 713,926 $ - $ 713,926
Accounts payable 503,552 199,509 703,061
Accrued expenses 44,696 518,852 563,548
Due to stockholder 16,433 - 16,433
------------- ------------ ------------
Total current liabilities 1,278,607 718,361 1,996,968
------------- ------------ ------------
LONG-TERM DEBT, less current portion 10,603 - 10,603
------------- ------------ ------------
MINORITY INTEREST 125,447 - 125,447
------------- ------------ ------------
STOCKHOLDERS' EQUITY:
Common stock 4,393 4 1,253 (a) 5,650
Additional paid-in capital 17,671,759 391,896 1,869,447 (a) 19,933,102
(Accumulated deficit) (13,496,228) (245,491) 406,637 (b) (13,335,082)
------------- ------------ ----------- ------------
Total stockholders' equity 4,179,924 146,409 2,277,337 6,603,670
------------- ------------ ----------- ------------
Total liabilities and stockholders' equity $ 5,594,581 $ 864,770 $ 2,277,337 $ 8,736,688
============= ============ =========== ============
</TABLE>
13
<PAGE> 14
LIFEQUEST MEDICAL, INC., AND SUBSIDIARIES
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
Condensed
LifeQuest Statement of
Medical, Operations,
Inc., and Pro Forma September 30,
Subsidiaries VAL-U-MED Adjustments 1996
-------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
REVENUES:
Net sales $ 2,891,470 $ 3,274,967 $ - $ 6,166,437
Investment income - 698 - 698
------------ ----------- ------------ -------------
Total revenues 2,891,470 3,275,665 - 6,167,135
------------ ----------- ------------ -------------
COSTS AND EXPENSES:
Cost of sales 2,170,024 1,879,330 - 4,049,354
Research and development 278,752 - - 278,752
Selling, general and administrative 1,505,146 1,417,942 - 2,923,088
Interest 42,068 - - 42,068
Depreciation and amortization 99,929 3,762 200,801 (c) 304,492
------------ ----------- ------------ -------------
Total costs and expenses 4,095,919 3,301,034 200,801 7,597,754
------------ ----------- ------------ -------------
NET INCOME (LOSS) BEFORE OTHER INCOME
(EXPENSE) AND INCOME TAXES (1,204,449) (25,369) (200,801) (1,430,619)
OTHER INCOME 169,808 - - 169,808
MERGER AND ACQUISITION COSTS (115,375) - - (115,375)
MINORITY INTEREST IN NET LOSS OF
CONSOLIDATED SUBSIDIARY 15,916 - - 15,916
------------ ----------- ------------ -------------
NET LOSS BEFORE INCOME TAXES AND
NONRECURRING CHARGES (1,134,100) (25,369) (200,801) (1,360,270)
INCOME TAXES - - - -
------------ ----------- ------------ -------------
NET LOSS FROM CONTINUING
OPERATIONS AND BEFORE
NONRECURRING CHARGES $ (1,134,100) $ (25,369) $ (200,801) $ (1,360,270)
============ =========== =========== =============
NET LOSS PER SHARE BEFORE
NONRECURRING CHARGES $ (0.26) $ (.24)
============ =============
WEIGHTED AVERAGE SHARES
OUTSTANDING 4,386,140 5,643,140
============ =============
</TABLE>
14
<PAGE> 15
LIFEQUEST MEDICAL, INC., AND SUBSIDIARIES
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
Condensed
LifeQuest Statement of
Medical, Operations,
Inc., and Pro Forma December 31,
Subsidiaries VAL-U-MED Adjustments 1995
-------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
REVENUES:
Net sales $ 3,686,178 $2,699,117 $ - $ 6,385,295
Investment income 347,143 1,048 - 348,191
----------- ---------- --------- -----------
Total revenues 4,033,321 2,700,165 - 6,733,486
----------- ---------- --------- -----------
COST AND EXPENSES:
Cost of sales 2,926,480 1,556,636 - 4,483,116
Research and development 729,000 - - 729,000
Selling, general and administrative 2,606,569 1,125,034 - 3,731,603
Interest 50,029 - - 50,029
Depreciation and amortization 161,463 1,014 267,734(c) 430,211
----------- ---------- --------- -----------
Total costs and expenses 6,473,541 2,682,684 267,734 9,423,959
----------- ---------- --------- -----------
NET INCOME (LOSS) BEFORE OTHER
INCOME (EXPENSE) AND INCOME
TAXES (2,440,220) 17,481 (267,734) (2,690,473)
MINORITY INTEREST IN NET LOSS OF
CONSOLIDATED SUBSIDIARY 138,751 - - 138,751
----------- ---------- --------- -----------
NET INCOME (LOSS) BEFORE INCOME
TAXES AND NONRECURRING (2,301,469) 17,481 (267,734) (2,551,722)
CHARGES
INCOME TAXES 800 2,820 (2,820)(d) 800
----------- ---------- --------- -----------
NET INCOME (LOSS) FROM
CONTINUING OPERATIONS AND
BEFORE NONRECURRING CHARGES $(2,302,269) $ 14,661 $(264,914) $(2,552,522)
=========== =========== ========= ===========
NET LOSS PER SHARE BEFORE
NONRECURRING CHARGES $(0.53) $ (0.45)
=========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING 4,354,835 5,611,835
=========== ===========
</TABLE>
15
<PAGE> 16
LIFEQUEST MEDICAL, INC., AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(Unaudited)
PRO FORMA CONDENSED BALANCE SHEET
ADJUSTMENTS:
- ---------------------------------
(a) This adjustment reflects the acquisition of VAL-U-MED for cash and stock,
the recording of the goodwill of $2,677,337 and the combining of the
separate entities' common stock and paid-in capital accounts.
(b) This adjustment reflects the elimination of the accumulated deficit as of
September 30, 1996 and the net loss for the period from October 1, 1996
through the date of the acquisition.
PRO FORMA CONDENSED STATEMENTS OF
OPERATIONS ADJUSTMENTS:
- ---------------------------------
(c) This adjustment reflects the amortization of the goodwill of $2,677,337
recorded in the purchase transaction. The goodwill is being amortized on a
straight-line basis over 10 years.
(d) This adjustment reflects the elimination of income tax expense due to the
utilization of LifeQuest's net operating loss carryforwards.
16
<PAGE> 17
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
LIFEQUEST MEDICAL, INC.
By/s/ Randall K. Boatright
------------------------------------------
Randall K. Boatright
Vice President and Chief Financial Officer
(Principal Accounting Officer)
DATE: March 10, 1997
17
