<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________
Form 8-K
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 5, 1996.
--------------------
BIOSOURCE INTERNATIONAL, INC.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 000-21930 77-0340829
- ---------------------------- --------------- -------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
820 Flynn Road
Camarillo, California 93012
----------------------------------------------
(Address of principal executive offices)
(805) 987-0086
-----------------------------------
(Registrant's telephone number)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) On June 5, 1996, Registrant acquired certain assets and
selected liabilities of Medgenix Diagnostics, S.A. ("Medgenix"), located in
Fleurus, Belgium, related to its in vitro diagnostic business (the "Medgenix
Business"). Fleurus is located in the southern part of Belgium, in the Walloon
region, approximately 60 miles south of Brussels. There was no prior
relationship between Medgenix or any of its officers, directors or affiliates.
The Medgenix Assets consist of certain product lines which are similar to those
of the Company, customer accounts, laboratory and animal facilities, real
property leasehold interests and an existing employee base, all of which are
used in the Medgenix Business. The purchase price for the Medgenix Business was
$6.9 million, payable in cash. The Registrant funded the purchase price of the
Medgenix Business from a portion of the net proceeds of its secondary offering
of Common Stock which closed concurrently with the closing of the Medgenix
acquisition. In addition, the Registrant agreed to pay a royalty of three
percent (3%) for a period of five years on the net sales (as defined in the
agreement relating to such royalties) of certain products from the Medgenix
Business. The Registrant believes that the acquisition of the Medgenix Business
expands and broadens its product lines and provides a European manufacturing
capability, access to an additional animal facility and a direct sales force in
Europe. The Registrant also believes that the acquisition of the Medgenix
Business provides the Company with a number of strategic advantages that will
enhance its existing business. The acquisition was accomplished as a purchase of
assets (and assumption of certain liabilities) which were acquired by a
wholly-owned subsidiary of the Registrant, BioSource Europe, S.A., and was
accounted for as a purchase.
(b) The Registrant intends to continue to operate the Medgenix
Business as a wholly-owned subsidiary from its current location in Fleurus,
Belgium. All acquired assets, including plant and equipment, will remain intact
and continue to be utilized in essentially the same manner as such assets were
used by Medgenix.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
(a) Financial Statements of Medgenix Diagnostics, S.A.
Independent Auditors' Report . . . . . . . . . . . . . . . . . F-1
Consolidated Balance Sheet as of October 31, 1995 . . . . . . F-2
Consolidated Statements of Operations for the years
ended October 31, 1994 and 1995 . . . . . . . . . . . . . . F-3
Consolidated Statements of Changes in Net Assets for
the years ended October 31, 1994 and 1995 . . . . . . . . . F-4
Consolidated Statements of Cash Flows for the years
ended October 31, 1994 and 1995 . . . . . . . . . . . . . . F-5
Notes to Consolidated Financial Statements . . . . . . . . . . F-6
Unaudited Consolidated Balance Sheet as of
January 31, 1996 . . . . . . . . . . . . . . . . . . . . . . F-9
Unaudited Consolidated Statements of Operations for the
three months ended January 31, 1995 and 1996 . . . . . . . . F-10
Unaudited Consolidated Statements of Cash Flows for the
three months ended January 31, 1995 and 1996 . . . . . . . . F-11
Notes to Consolidated Financial Statements . . . . . . . . . . F-12
(b) Pro Forma Financial Information
Introduction to the Unaudited Pro Forma Condensed
Consolidated Financial Information . . . . . . . . . . . . . F-15
Unaudited Pro Forma Condensed Consolidated Balance
Sheet as of March 31, 1996 . . . . . . . . . . . . . . . . . F-16
Unaudited Pro Forma Condensed Consolidated Statement
of Operations for the year ended December 31, 1995 . . . . . F-17
Unaudited Pro Forma Condensed Consolidated Statement
of Operations for the three months ended March 31, 1996 . . F-18
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements . . . . . . . . . . . . . . . . . . . . F-19
(c) Exhibits
Exhibit No. Exhibit
----------- -------
2.1 Asset Purchase Agreement, dated
April 30, 1996, by and among
Registrant, Nordion International, Inc.
and Medgenix Diagnostics, S.A.*
23.1 Consent of KPMG Reviseurs d'Enterprises
-----------
* Incorporated by reference from the Company's Registration Statement
on Form SB-2 as filed with the Commission on April 10, 1996, as
amended.
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS
MEDGENIX DIAGNOSTICS, S.A.
We have audited the accompanying consolidated balance sheet of the in vitro
business segment of Medgenix Diagnostics, S.A. and subsidiaries as of October
31, 1995, and the related consolidated statements of operations, changes in net
assets and cash flows for the years ended October 31, 1994 and 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the in vitro
business segment of Medgenix Diagnostics, S.A. and subsidiaries as of October
31, 1995 and the results of their operations and their cash flows for each of
the years ended October 31, 1994 and 1995 in conformity with generally accepted
accounting principles in the United States.
KPMG Reviseurs d'Entreprises
Brussels
May 23, 1996
F-1
<PAGE> 4
MEDGENIX DIAGNOSTICS, S.A.
(IN VITRO BUSINESS)
CONSOLIDATED BALANCE SHEET
OCTOBER 31, 1995
(IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................ $ 2,006
Accounts receivable, less allowance for doubtful accounts of $333................ 4,407
Inventories...................................................................... 3,115
Prepaid expenses and other current assets........................................ 1,050
-------
Total current assets..................................................... 10,578
Property and equipment, net........................................................ 1,196
Other assets....................................................................... 64
-------
$11,838
=======
LIABILITIES AND NET ASSETS
Current liabilities:
Notes payable to bank............................................................ $ 192
Accounts payable................................................................. 2,249
Accrued expenses................................................................. 1,923
Income taxes payable............................................................. 391
-------
Total current liabilities................................................ 4,755
Commitments and contingencies
Net Assets:
Financing in vitro business by Medgenix Diagnostics, S.A. ....................... 16,050
Consolidation difference......................................................... (3,525)
Loss brought forward since November 1, 1993...................................... (2,666)
Current year loss................................................................ (2,473)
Translation differences.......................................................... (303)
-------
Net Assets............................................................... 7,083
-------
$11,838
=======
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE> 5
MEDGENIX DIAGNOSTICS, S.A.
(IN VITRO BUSINESS)
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED OCTOBER 31, 1994 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Revenue.................................................................. $11,575 $11,313
Cost of goods sold....................................................... 4,710 4,405
------- -------
Gross profit........................................................... 6,865 6,908
Operating expenses:
Research and development............................................... 1,973 1,655
Selling and marketing.................................................. 4,104 3,532
General and administrative............................................. 3,353 4,045
------- -------
Total operating expenses............................................ 9,430 9,232
------- -------
Operating loss...................................................... (2,565) (2,324)
Other income (expense):
Interest expense....................................................... (163) (189)
Interest income........................................................ 142 140
------- -------
Total other expense................................................. (21) (49)
------- -------
Loss before income taxes................................................. (2,586) (2,373)
Provision for income taxes............................................. 80 100
------- -------
Net loss................................................................. $(2,666) $(2,473)
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 6
MEDGENIX DIAGNOSTICS, S.A.
(IN VITRO BUSINESS)
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED OCTOBER 31, 1995 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
FINANCING IN VITRO
BUSINESS BY
MEDGENIX ACCUMULATED CONSOLIDATION TRANSLATION
DIAGNOSTICS, S.A. DEFICIT DIFFERENCE DIFFERENCE
------------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Balance at November 1, 1993........... $ 9,672 $ -- $(3,525) $ (58)
Additional financing in vitro......... 3,166
Net loss.............................. (2,666)
Translation difference................ (212)
------- ------- ------- -----
Balance at October 31, 1994........... 12,838 (2,666) (3,525) (270)
Additional financing in vitro......... 3,212
Net loss.............................. (2,473)
Translation difference................ (33)
------- ------- ------- -----
Balance at October 31, 1995........... $16,050 $(5,139) $(3,525) $(303)
======= ======= ======= =====
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 7
MEDGENIX DIAGNOSTICS, S.A.
(IN VITRO BUSINESS)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1994 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................................... $(2,666) $(2,473)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization....................................... 485 509
Changes in translation differences and consolidation differences.... (383) 9
Changes in assets and liabilities:
Accounts receivable................................................. 1,279 (505)
Inventories......................................................... 613 236
Prepaid expenses and other assets................................... 409 (134)
Accounts payable.................................................... (2,188) (164)
Accrued expenses.................................................... 436 (884)
Income taxes payable................................................ (13) 164
------- -------
Net cash used in operating activities.................................. (2,028) (3,242)
------- -------
Cash flows from investing activities -- purchase of property and
equipment.............................................................. 26 (317)
------- -------
Cash flows from financing activities:
Repayments to banks.................................................... (1,070) (115)
Financing in vitro..................................................... 3,166 3,212
------- -------
Net cash provided by financing activities.............................. 2,096 3,097
------- -------
Net increase (decrease) in cash and cash equivalents..................... 94 (462)
------- -------
Cash and cash equivalents at beginning of year........................... 2,374 2,468
------- -------
Cash and cash equivalents at end of year................................. $ 2,468 $ 2,006
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 8
MEDGENIX DIAGNOSTICS, S.A.
(IN VITRO BUSINESS)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1995
(1) DESCRIPTION OF BUSINESS
Medgenix Diagnostics, S.A. is a company incorporated under Belgian law with
subsidiaries in the United Kingdom, France, Italy, Spain, Switzerland and The
Netherlands. Medgenix Diagnostics, S.A. is a wholly owned subsidiary of Nordion
Europe, S.A. Its principal activities comprise two business segments: the in
vivo and in vitro products.
The financial statements reflect only the in vitro business segment. This
segment is involved in the development, manufacture, marketing and distribution
of immunological reagents and test kits used in biomedical research.
(2) BASIS OF PRESENTATION
The financial statements have been prepared in accordance with generally
accepted accounting principles in the United States.
The financial statements have been prepared in the context of the
acquisition by BioSource International, Inc. of the in vitro business of
Medgenix Diagnostics, S.A.
The consolidated financial statements include all significant components of
the in vitro business. They have been prepared as if the in vitro business had
operated as a separate entity during all periods presented.
The financing of the in vitro segment is presented under the heading
"Financing in vitro". No interest charge on this account has been recorded.
The consolidated financial statements do not include the assets of the in
vivo business and of Nordion Europe S.A. However, an allocation of the cost of
shared facilities as well as allocated expenses relating to corporate
accounting, financial, administrative, marketing and selling services provided
by Medgenix Diagnostics, S.A. and Nordion Europe, S.A. to the in vitro business
are included in the consolidated statements of operations. Expenses are
allocated on the basis of actual usage or using other allocation methods which
approximate actual usage. Management believes that the allocation methods are
reasonable.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include all the operations and
accounts of the in vitro business of Medgenix Diagnostics, S.A. All significant
intercompany accounts and transactions have been eliminated.
The difference between the acquisition cost of the investment in the
subsidiary and the net equity as at the date of first consolidation is shown
under the heading "Consolidation Differences".
Foreign Currency Translation
In consolidating the operations, currency effects are recorded and included
in the consolidated financial statements under the heading "Translation
Difference".
The translation difference results from the translation into United States
currency of all balance sheet assets and liabilities at the year end rate and
the statement of operations at an average rate for the year.
Cash and Cash Equivalents
Cash and cash equivalents include all cash balances and highly liquid
investments in debt instruments with an original maturity of three months or
less.
F-6
<PAGE> 9
MEDGENIX DIAGNOSTICS, S.A.
(IN VITRO BUSINESS)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
(net realizable value) for raw materials and work in process, and at
average-cost for finished goods.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets which
range from three to ten years. Leasehold improvements are amortized using the
straight-line method over their estimated useful lives or the lease term,
whichever is shorter.
Revenue Recognition
Revenue and related cost of goods sold are recognized upon shipment of
products.
Research and Development Costs
Research and development costs and any related subsidies obtained are
charged or credited to the Statement of Operations as incurred.
Income Taxes
The in vitro business operations are included in the respective local tax
returns of Medgenix Diagnostics, S.A. and each of its subsidiaries. The
consolidated financial statements include the provision for income taxes for the
operating entities that have a net taxable income.
The Company uses the asset and liability method for accounting for income
taxes. Under the asset and liability method, deferred income taxes are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
The primary temporary difference which would give rise to a deferred tax
asset is net operating losses available for offset against future taxable
income. As the management of the Company is of the opinion that it is not in a
position to confirm that it is more likely than not that the Company will be
able to realize the future tax benefit resulting from these losses, a valuation
allowance has been recorded for the amount of the related deferred tax asset.
Temporary differences which give rise to deferred tax liabilities are
immaterial.
The difference between the expected tax benefit and the tax expense
recorded in 1994 and 1995 relates primarily to the provision for income taxes
for the operating entities that have a net taxable income which cannot be
compensated by the tax losses of the other entities.
In addition, as the tax losses can only be used by Medgenix Diagnostics,
S.A., no allocation between in vivo and in vitro has been made.
F-7
<PAGE> 10
MEDGENIX DIAGNOSTICS, S.A.
(IN VITRO BUSINESS)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) INVENTORIES
Inventories at October 31, 1995 are summarized as follows (in thousands):
<TABLE>
<S> <C>
Raw materials....................................................... $ 771
Work in process..................................................... 782
Finished goods...................................................... 1,562
------
$3,115
======
</TABLE>
(5) PROPERTY AND EQUIPMENT
Property and equipment at October 31, 1995 are summarized as follows (in
thousands):
<TABLE>
<S> <C>
Buildings........................................................... $ 26
Leasehold improvements.............................................. 498
Machinery and equipment............................................. 2,978
Furniture and equipment............................................. 405
Corporate equipment................................................. 1,253
------
5,160
Less accumulated depreciation....................................... 3,964
------
$1,196
======
</TABLE>
(6) COMMITMENTS AND CONTINGENCIES
Since 1987, Medgenix Diagnostics, S.A. has received subsidies from the
Region Wallone to finance certain of its R&D activities. If a R&D project
culminates in a commercial product, the Company will have to reimburse the
subsidies received by way of royalties on the related sales. These royalties are
recorded and charged to the income statement during the year in which they
occur.
The revenues and costs incurred are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Revenues...................................................... $357 $ 43
Costs......................................................... 307 258
</TABLE>
The cumulative subsidies received to date but not yet reimbursed at October
31, 1995 is summarized as follows (in thousands):
<TABLE>
<S> <C>
Subsidies:
Received....................................................... $8,511
Included in accounts receivable................................ 444
------
8,955
Royalties:
Paid........................................................... (973)
Accrued........................................................ (82)
------
Subsidies received but not yet reimbursed........................... $7,900
======
</TABLE>
At October 31, 1995, the Company had not recorded a liability for these
subsidies as it has the option of submitting all related R&D data to Region
Wallone in exchange for the subsidies received.
F-8
<PAGE> 11
MEDGENIX DIAGNOSTICS, S.A.
(IN VITRO BUSINESS)
CONSOLIDATED BALANCE SHEET
JANUARY 31, 1996
(IN THOUSANDS)
(UNAUDITED)
ASSETS
<TABLE>
<S> <C>
Current Assets:
Cash and cash equivalents...................................................... $ 2,181
Accounts receivable, less allowance for doubtful accounts of $324.............. 4,194
Inventories.................................................................... 2,958
Prepaid expenses and other current assets...................................... 1,424
-------
Total current assets................................................... 10,757
Property and equipment, net...................................................... 1,120
Other assets..................................................................... 60
-------
$11,937
=======
</TABLE>
LIABILITIES AND NET ASSETS
<TABLE>
<S> <C>
Current liabilities:
Note payable to bank........................................................... $ 184
Accounts payable............................................................... 2,386
Accrued expenses............................................................... 1,754
-------
Total current liabilities.............................................. 4,324
Commitments and contingencies:
Net Assets:
Financing in vitro business by Medgenix Diagnostics, S.A....................... 16,426
Accumulated deficit............................................................ (5,290)
Consolidation difference....................................................... (3,405)
Translation differences........................................................ (118)
-------
Net Assets............................................................. 7,613
-------
$11,937
=======
</TABLE>
See accompanying notes to consolidated financial statements.
F-9
<PAGE> 12
MEDGENIX DIAGNOSTICS, S.A.
(IN VITRO BUSINESS)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JANUARY 31
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Revenue............................................................ $2,708 $2,926
Cost of sales...................................................... 1,013 1,160
------ ------
Gross Profit..................................................... 1,695 1,766
------ ------
Operating expenses:
Research and development......................................... 364 388
Selling and marketing............................................ 852 775
General and administrative....................................... 936 783
------ ------
Total operating expenses................................. 2,152 1,946
------ ------
Operating loss........................................... (457) (180)
Other income (expense):
Interest expense................................................. (39) (14)
Interest income.................................................. 14 50
------ ------
Loss before income taxes........................................... (482) (144)
Provision for income taxes......................................... (1) (7)
------ ------
Net loss................................................. $ (483) $ (151)
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
F-10
<PAGE> 13
MEDGENIX DIAGNOSTICS, S.A.
(IN VITRO BUSINESS)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JANUARY 31
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net loss................................................................. $ (483) $ (151)
Adjustments to reconcile net loss to net cash used in operating
activities...........................................................
Depreciation and amortization......................................... 113 166
Changes in translation differences & consolidation differences........ 75 --
Changes in assets and liabilities
Accounts receivable................................................... 467 63
Inventories........................................................... 168 51
Prepaid expenses and other assets..................................... (124) (410)
Accounts payable...................................................... 213 213
Accrued expenses...................................................... (773) (103)
Income taxes payable.................................................. (210) (378)
------ ------
Net cash used in operating activities................................. (554) (549)
Cash flows from investing activities -- purchase of property and
equipment................................................................ (18) (128)
Cash flows from financing activities:
Repayments to bank....................................................... (63) (1)
Financing in-vitro....................................................... 342 921
------ ------
Net cash provided by financing activities........................ 279 920
------ ------
Net increase (decrease) in cash and cash equivalents............. (293) 243
Cash and cash equivalents at beginning of period........................... 2,283 1,938
------ ------
Cash and cash equivalents at end of period................................. $1,990 $2,181
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
F-11
<PAGE> 14
MEDGENIX DIAGNOSTICS, S.A.
(IN VITRO BUSINESS)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The unaudited financial statements as of January 31, 1996 and for the three
month periods ended January 31, 1995 and 1996 included herein have been prepared
by the in vitro business. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. However, the in vitro
business believes that the disclosures are adequate to prevent the information
presented from being misleading. These financial statements should be read in
conjunction with the financial statements and the notes thereto included in the
in vitro business' annual report for the year ended October 31, 1995.
The information provided in this report reflects all adjustments that are,
in the opinion of management, necessary to present fairly the results of
operations for these periods. The results of these periods are not necessarily
indicative of the results to be expected for the full year.
(1) DESCRIPTION OF BUSINESS
Medgenix Diagnostics, S.A. is a company incorporated under Belgian law with
subsidiaries in the United Kingdom, France, Italy, Spain, Switzerland and The
Netherlands. Medgenix Diagnostics, S.A. is a wholly owned subsidiary of Nordion
Europe, S.A. Its principle activities comprise two business segments: the in
vivo and in vitro products.
The financial statements reflect only the in vitro business segment. This
segment is involved in the development, manufacture, marketing and distribution
of immunological reagents and test kits used in biomedical research.
(2) BASIS OF PRESENTATION
The financial statements have been prepared in accordance with generally
accepted accounting principles in the United States.
The financial statements have been prepared in the context of the
acquisition by BioSource International, Inc. of the in vitro business of
Medgenix Diagnostics, S.A.
The consolidated financial statements include all significant components of
the in vitro business. They have been prepared as if the in vitro business
operated as a separate entity during all periods presented.
The financing of the in vitro segment is presented under the heading
"Financing in vitro." No interest charge on this account has been recorded.
The consolidated financial statements do not include the assets of the in
vivo business and of Nordion Europe, S.A. However, an allocation of the cost of
shared facilities as well as allocated expenses relating to corporate
accounting, financial, administrative, marketing and selling services provided
by Medgenix Diagnostics, S.A. and Nordion Europe, S.A. to the in vitro business
are included in the consolidated statements of operations. Expenses are
allocated on the basis of actual usage or using other allocation methods which
approximate actual usage. Management believes that the allocation methods are
reasonable.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include all the operations and
accounts of the in vitro business of Medgenix Diagnostics, S.A. All significant
intercompany accounts and transactions have been eliminated.
The difference between the acquisition cost of the investment in the
subsidiary and the net equity as at the date of first consolidation is shown
under the heading "Consolidation Differences."
F-12
<PAGE> 15
MEDGENIX DIAGNOSTICS, S.A.
(IN VITRO BUSINESS)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Foreign Currency Translation
In consolidating the operations, currency effects are recorded and included
in the consolidated financial statements under the heading "Translation
Difference."
The translation difference results from the translation into United States
currency of all balance sheet assets and liabilities at the year end rate and
the statement of operations at an average rate for the year.
Cash and Cash Equivalents
Cash and cash equivalents include all cash balances and highly liquid
investments in debt instruments with an original maturity of three months or
less.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
(net realizable value) for raw materials and work in process, and at
average-cost for finished goods.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets which
range from three to ten years. Leasehold improvements are amortized using the
straight-line method over the estimated useful lives or the lease term,
whichever is shorter.
Revenue Recognition
Revenue and related cost of goods sold are recognized upon shipment of
products.
Research and Development Costs
Research and development costs and any related subsidies obtained are
charged or credited to the Statement of Operations as incurred.
Income Taxes
The in vitro business operations are included in the respective local tax
returns of Medgenix Diagnostics, S.A. and each of its subsidiaries. The
consolidated financial statements include the provision for income taxes for the
operating entities that have a net taxable income.
The Company uses the asset and liability method for accounting for income
taxes. Under the asset and liability method, deferred income taxes are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
The primary temporary difference which would give rise to a deferred tax
asset is net operating losses available for offset against future taxable
income. As the management of the Company is of the opinion that it is not in a
position to confirm that it is more likely than not that the Company will be
able to realize the future tax benefit resulting from these losses, a valuation
allowance has been recorded for the amount of the related deferred tax asset.
Temporary differences which give rise to deferred tax liabilities are
immaterial.
F-13
<PAGE> 16
MEDGENIX DIAGNOSTICS, S.A.
(IN VITRO BUSINESS)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The difference between the expected tax benefit and the tax benefit
recorded for the three month periods ended January 31, 1995 and 1996 relates
primarily to the provision for income taxes for the operating entities that have
a net taxable income which cannot be compensated by the tax losses of the other
entities.
In addition, as the tax losses can only be used by Medgenix Diagnostics,
S.A. no allocation between in vivo and in vitro has been made.
F-14
<PAGE> 17
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARY
INTRODUCTION TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
The following Unaudited Pro Forma Condensed Consolidated Financial
Statements give effect to the following transactions as if they had occurred as
of March 31, 1996 for purposes of the pro forma condensed consolidated balance
sheet data and as of the beginning of the period for purposes of the pro forma
condensed consolidated statements of operations: (1) the acquisition of certain
assets and assumption of certain liabilities of Medgenix Diagnostics, S.A.
(Medgenix) which relate to the in vitro business of Medgenix in exchange for
cash of $6,868,000 and (2) the issuance of 2,393,000 shares of the Company's
Common Stock through a secondary offering at an initial public offering price of
$9.25 per share (including the sale of 31,000 shares of Common Stock to be
issued by the Company upon exercise of warrants by two of the Selling
Stockholders for which the Company will receive net proceeds of $59,750). The
principal use of proceeds from this offering is to fund the Medgenix in-vitro
business acquisition. Both of these transactions are expected to be consummated
in June 1996.
The Unaudited Pro Forma Condensed Consolidated Financial Statements do not
purport to present the financial position or results of operations of BioSource
had the transactions assumed therein occurred on the dates specified, nor are
they necessarily indicative of the results of operations that may be achieved in
the future.
The following Unaudited Pro Forma Condensed Consolidated Financial
Statements for the year ended December 31, 1995 and for the three months ended
March 31, 1996 do not reflect certain cost savings that management believes may
be realized as a result of the acquisition. These savings are expected to be
realized primarily through the elimination of duplicative corporate overhead
expenses, reduced work force and sales and marketing expenses. No assurances can
be made as to the amount of cost savings, if any, that actually will be
realized.
The Unaudited Pro Forma Condensed Consolidated Financial Statements are
based on certain assumptions and adjustments described in the Notes to Unaudited
Pro Forma Condensed Consolidated Financial Statements included herein and should
be read in conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations and the Consolidated Financial Statements of
the Company and the related Notes thereto and the Combined Financial Statements
of Medgenix and the related Notes thereto included herein.
BioSource reports its financial information on the basis of a December 31
fiscal year. Medgenix reports its financial information on the basis of an
October 31 fiscal year.
F-15
<PAGE> 18
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------ PRO FORMA
BIOSOURCE MEDGENIX PRO FORMA CONSOLIDATED
MARCH 31, 1996 JANUARY 31, 1996 ADJUSTMENTS MARCH 31, 1996
--------------- ---------------- ----------- --------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents..... $ 1,301,488 $ 2,181,000 $19,478,855(a) $ 13,912,343
(6,868,000)(b)
(2,181,000)(c)
Accounts receivable, less
allowance for doubtful
accounts................... 1,464,221 4,194,000 (2,324,000)(d) 3,334,221
Inventories................... 3,384,222 2,958,000 6,342,222
Prepaid expenses and other
current assets............. 373,993 1,424,000 (197,000)(e) 1,600,993
Deferred income taxes......... 91,000 -- 91,000
----------- ----------- ----------- -----------
Total current
assets.............. 6,614,924 10,757,000 7,908,855 25,280,779
Unallocated excess net book
value over purchase price..... -- -- 1,436,000(f)
197,000(e) 1,633,000
Property and equipment.......... 2,439,013 1,120,000 3,559,013
Other assets.................... 366,455 60,000 426,455
----------- ----------- ----------- -----------
$ 9,420,392 $ 11,937,000 $ 9,541,855 $ 30,899,247
=========== =========== =========== ===========
Current liabilities:
Current maturities of notes
payable.................... $ 665,489 $ 184,000 $ 849,489
Accounts payable.............. 831,545 2,386,000 (1,271,000)(d) 1,946,545
Accrued expenses.............. 190,304 1,754,000 (1,053,000)(d) 891,304
Income taxes payable.......... 237,369 -- 237,369
----------- ----------- ----------- -----------
Total current
liabilities......... 1,924,707 4,324,000 (2,324,000) 3,924,707
Notes payable, less current
maturities.................... 785,289 -- 785,289
Deferred income taxes........... 65,000 -- 65,000
Commitments and contingencies:
Stockholders' equity:
Preferred stock............... -- -- --
Common stock.................. 5,863 -- 2,393(a) 8,256
Additional paid-in capital.... 9,566,806 -- 19,476,462(a) 29,043,268
Financing in vitro business by
Medgenix Diagnostics,
S.A. ...................... -- 16,426,000 --
Consolidation difference...... -- (3,405,000) --
(2,181,000)(c)
(3,972,000)(f)
(6,868,000)(b)
Accumulated deficit........... (2,927,273) (5,290,000) 5,290,000(f) (2,927,273)
Translation difference........ -- (118,000) 118,000(f) --
----------- ----------- ----------- -----------
Net stockholders'
equity.............. 6,645,396 7,613,000 11,865,855 26,124,251
----------- ----------- ----------- -----------
$ 9,420,392 $ 11,937,000 $ 9,541,855 $ 30,899,247
=========== =========== =========== ===========
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
F-16
<PAGE> 19
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------
BIOSOURCE MEDGENIX PRO FORMA
----------------- ---------------- -----------------
YEAR ENDED YEAR ENDED PRO FORMA YEAR ENDED
DECEMBER 31, 1995 OCTOBER 31, 1995 ADJUSTMENTS DECEMBER 31, 1995
----------------- ---------------- ------------ -----------------
<S> <C> <C> <C> <C>
Revenue.............................. $ 8,608,447 $ 11,313,000 $19,921,447
Cost of goods sold................... 2,996,103 4,405,000 7,401,103
---------- ----------- -----------
Gross profit............... 5,612,344 6,908,000 12,520,344
---------- ----------- -----------
Operating expenses:
Research and development........... 1,073,733 1,655,000 2,728,733
Sales and marketing................ 1,289,939 3,532,000 4,821,939
General and administrative......... 1,633,649 4,045,000 109,000(g) 5,787,649
---------- ----------- ------- -----------
Total operating expenses... 3,997,321 9,232,000 109,000 13,338,321
---------- ----------- ------- -----------
Operating income (loss).... 1,615,023 (2,324,000) (109,000) (817,977)
Other expenses, net.................. (3,644) (49,000) (52,644)
---------- ----------- ------- -----------
Income (loss) before income
taxes.................... 1,611,379 (2,373,000) (109,000) (870,621)
Provision for income taxes........... 451,000 100,000 551,000
---------- ----------- ------- -----------
Net income (loss).......... $ 1,160,379 $ (2,473,000) (109,000) $(1,421,621)
========== =========== ======= ===========
Income (loss) per share:
Net income (loss) per
share.................... $ 0.20 $ (0.17)
========== ===========
Weighted average number of common
shares outstanding................. 5,945,900 8,338,900
========== ===========
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
F-17
<PAGE> 20
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------
BIOSOURCE MEDGENIX PRO FORMA
-------------- ---------------- --------------
THREE MONTHS THREE MONTHS THREE MONTHS
ENDED ENDED PRO FORMA ENDED
MARCH 31, 1996 JANUARY 31, 1996 ADJUSTMENTS MARCH 31, 1996
-------------- ---------------- ------------ --------------
<S> <C> <C> <C> <C>
Revenue.................................. $2,518,557 $2,926,000 $5,444,557
Cost of goods sold....................... 849,031 1,160,000 2,009,031
---------- ---------- ----------
Gross profit................... 1,669,526 1,766,000 3,435,526
---------- ---------- ----------
Operating expenses:
Research and development............... 244,019 388,000 632,019
Sales and marketing.................... 323,442 775,000 1,098,442
General and administrative............. 373,540 783,000 27,000(g) 1,183,540
---------- ---------- -------- ----------
Total operating expenses....... 941,001 1,946,000 27,000 2,914,001
---------- ---------- -------- ----------
Operating income (loss)........ 728,525 (180,000) (27,000) 521,525
Other income, net........................ 61,416 36,000 97,416
---------- ---------- -------- ----------
Income (loss) before income
taxes........................ 789,941 (144,000) (27,000) 618,941
Provision for income taxes............... 270,193 7,000 277,193
---------- ---------- -------- ----------
Net income (loss).............. $ 519,748 $ (151,000) $(27,000) $ 341,748
========== ========== ======== ==========
Income per share:
Net income per share........... $ 0.09 $ 0.04
========== ==========
Weighted average number of common shares
outstanding............................ 5,957,285 8,350,285
========== ==========
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
F-18
<PAGE> 21
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
The Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the year ended December 31, 1995 and for the three months ended March 31, 1996
do not give effect to certain cost savings that may be realized as a result of
the acquisition. The anticipated savings are based on estimates and assumptions
that are inherently uncertain; though considered reasonable by the Company, they
are subject to significant business, economic and competitive uncertainties and
contingencies, all of which are difficult to predict and many of which are
beyond the control of management. There can be no assurances that such savings,
if any, will be achieved.
The adjustments to arrive at the Unaudited Pro Forma Condensed Consolidated
Financial Statements are as follows:
(a) To record the estimated net proceeds received from issuance of
2,393,000 shares of BioSource common stock at an initial public
offering price of $9.25 per share (including the sale of 31,000 shares
of Common Stock to be issued by the Company upon exercise of warrants
by two of the Selling Stockholders for which the Company will receive
net proceeds of $59,750) less estimated offering costs.
(b) To record the estimated cash used to purchase the in vitro business of
Medgenix Diagnostics, S.A.
(c) To record the adjustment for Medgenix cash not acquired by BioSource.
(d) To record the adjustment for Medgenix receivables not acquired and
liabilities not assumed.
(e) To record the adjustment to reflect the Nordion warrant with a fair
value of $197,000 as a component of the purchase price. If the
acquisition is not completed, the fair value of the warrant will be
charged to operations.
(f) To record the adjustment to eliminate net stockholders' equity of
Medgenix.
(g) To record the amortization expense related to the unallocated excess
net book value over purchase price assuming a useful life of 15 years.
The final purchase price allocation has not been completed and
accordingly, no portion of the purchase price has been allocated to any
potential identifiable intangible assets. If any portion of the
purchase price is ultimately allocated to specific intangible assets,
including but not limited to non-compete covenants, it is likely that
such related amortization would be recognized over a shorter period
than the 15 year life assigned to the unallocated purchase price for
purposes of these pro forma financial statements.
F-19
<PAGE> 22
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 hereunto duly authorized.
July 17, 1996 BIOSOURCE INTERNATIONAL, INC.
By: /s/ JAMES H. CHAMBERLAIN
----------------------------------
James H. Chamberlain
President and
Chief Executive Officer
<PAGE> 1
EXHIBIT 23.1
The Board of Directors
Medgenix Diagnostics, S.A.:
We consent to the use of our report dated May 23, 1996 included
herein relating to the consolidated balance sheet of the in vitro business
segment of Medgenix Diagnostics, S.A. and subsidiaries as of October 31, 1995,
and the related consolidated statements of operations, changes in net assets
and cash flows for the years ended October 31, 1994 and 1995.
KPMG Reviseurs d'Entreprises
Brussels
July 22, 1996
