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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): December 31, 1997
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ESCALON MEDICAL CORP.
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(Exact Name of Registrant Specified in Charter)
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<S> <C> <C>
California 0-20127 33-0272839
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(State or Other (Commission File (I.R.S. Employer
Jurisdiction of Number) Identification No.)
Incorporation)
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<S> <C>
351 East Conestoga Road
Wayne, PA 19087
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(Address of Principal Executive Offices) (Zip Code)
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Registrant's telephone number, including area code: (610)688-6830
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
On December 31, 1997, the Company issued $1,350,000 of Series
A 6% Convertible Preferred Stock in a private placement. The net proceeds will
be used by the Company for working capital purposes. After March 1, 1998, the
Preferred Stock may be converted at the option of the holder into shares of the
Company's Common Stock at a rate determined by dividing the liquidation value
of the Preferred Stock being converted by the conversion price then in effect.
The conversion price will be the lesser of (i) the five-day average closing bid
price prior to December 31, 1997, or (ii) up to 82% of the five-day average
closing bid price prior to the conversion date. Any Preferred Stock that is
outstanding on December 31, 1999, will be automatically converted into Common
Stock. The Preferred Stock pays cumulative dividends of 6% per annum payable
quarterly in cash or Common Stock, at the Company's option. The Preferred
Stock may be redeemed, at the option of the Company. The Preferred Stock was
accompanied by a five-year Warrant to purchase 40,000 shares Common Stock at
exercise prices ranging from the closing bid price as of December 31, 1997 to
135% of that closing bid price. The Company also issued to the private
placement agent a similar Warrant to purchase 50,000 shares of Common Stock.
The Company has agreed to register the Common Stock underlying the Preferred
Stock and the Warrants.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(b) Pro Forma Financial Information
The following unaudited pro forma balance sheet as of November
30, 1997 gives effect to the transaction noted in Item 5 above. The pro forma
balance sheet was prepared by the management of the Company based upon the
historical financial statements of the Company. The pro forma adjustments are
based on the terms of the financing along with managment's estimate of related
offering costs. The pro forma balance sheet should be read in conjunction with
the Company's annual report on Form 10-K and its quarterly report on Form 10-Q
filed with the Securities and Exchange Commission in October and November 1997,
respectively.
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ESCALON MEDICAL CORP.
PRO FORMA BALANCE SHEET
(UNAUDITED)
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NOVEMBER 30, PRO FORMA PRO FORMA
1997 ADJUSTMENTS BALANCE
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ASSETS
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Current Assets:
Cash and cash equivalents $ 1,552,464 $ 1,158,000 $ 2,710,464
Investments 95,000 95,000
Accounts receivable, net 717,675 717,675
Inventories, net 713,739 713,739
Other current assets 44,195 44,195
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Total current assets 3,123,073 1,158,000 4,281,073
Furniture and equipment, at cost, net 83,066 83,066
Long-term receivables 150,000 150,000
License and distribution rights, net 933,072 933,072
Patents, net 486,299 486,299
Goodwill, net 1,042,779 1,042,779
Other assets 12,342 12,342
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$ 5,830,631 $ 1,158,000 $ 6,988,631
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current Liabilities:
Current portion of capital lease obligations $ 1,220 $ $ 1,220
Accounts payable 709,780 709,780
Accrued and other liabilities 138,675 138,675
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Total current liabilities 849,675 849,675
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Commitments
Shareholders' Equity:
Preferred stock, no par value; 2,000,000 shares
authorized; 1,350 shares issued and outstanding -- 1,158,000 1,158,000
Common stock, no par value; 35,000,000 shares
authorized; 2,629,379 shares issued and outstanding
at November 30, 1997 44,645,440 44,645,440
Accumulated deficit (39,664,484) (39,664,484)
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Total shareholders' equity 4,980,956 1,158,000 6,138,956
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$ 5,830,631 $ 1,158,000 $ 6,988,631
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See notes to pro forma balance sheet
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ESCALON MEDICAL CORP.
NOTES TO PRO FORMA BALANCE SHEET
The November 30, 1997 unaudited pro forma balance sheet reflects the
impact on the Company's capital structure for the issuance of 1,350 shares of
nonvoting Series A 6% Convertible Preferred Stock ("Preferred Stock") on
December 31, 1997 from which the Company received funds totaling approximately
$1,158,000, net of estimated offering costs of $192,000. After March 1, 1998,
the Preferred Stock may be converted into shares of the Company's Common Stock
at a rate determined by dividing the liquidation value of the Preferred Shares
being converted by the stated conversion price which is the lessor of (i) the
five-day average closing bid price prior to the December 31, 1997 funding date,
or, (ii) up to 82% of the five-day average closing bid price prior to a
conversation date. The maximum number of shares of Common Stock that may be
issued upon conversion of the Preferred Stock is 19.9% of the issued and
outstanding shares of Common Stock as of December 31, 1997. The Preferred
Stock must be converted into shares of Common Stock by December 31, 1999.
The Preferred Stock pays cumulative dividends of 6% per annum payable
quarterly in cash or by issuing shares of the Company's Common Stock. The
Preferred Stock may be redeemed, at the option of the Company, at any time
prior to conversion in cash at the redemption price.
In connection with the issuance of the Preferred Stock, the Company
issued warrants to purchase 90,000 shares of the Company's Common Stock to the
buyer and underwriter. These warrants have any exercise price ranging from the
closing bid price as of December 31, 1997, the funding date, and 135% of the
closing bid price as of the funding date and expire on December 31, 2002.
While the Company has not yet assigned a value to the warrants, the net impact
on the pro forma adjustments is $0.
(c) Exhibits
Exhibit Number Description
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
ESCALON MEDICAL CORP.
(Registrant)
By /s/ John T. Rich
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John T. Rich
Vice President, Finance and
Administration, Secretary
Dated: January 2, 1998
