<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): March 5, 1999
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Escalon Medical Corp.
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(Exact name of registrant as specified in its charter)
California 0-20127 33-0272839
- ---------------------------- ------------------------ -------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
351 East Conestoga Road, Wayne, Pennsylvania 19087
- -------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 688-6830
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N/A
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(Former name or former address, if changed since last report.)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On March 5, 1999, Escalon Medical Corp. (the "Registrant") consummated
transactions under a Bill of Sale and Acceptance Agreement between the
Registrant and Alcon Laboratories, Inc. ("Alcon Laboratories") and a Bill of
Sale and Acceptance Agreement between the Registrant and Alcon Universal, Ltd.
("Alcon Universal" and collectively with Alcon Laboratories, the "Buyers"),
pursuant to which:
(i) for a cash purchase price of $959,835, Alcon Laboratories purchased
all of the Registrant's inventory of 5% Betadine Sterile Ophthalmic Solution
("5% Betadine Solution"); and
(ii) for an aggregate purchase price of $1,100,000, the Registrant: (A)
transferred to Alcon Universal the Registrant's customer list for 5% Betadine
Solution; (B) terminated the Distribution and License Agreement dated August 31,
1995 between the Registrant, as assignee of EOI Corp. (formerly Escalon
Ophthalmics, Inc.), and The Purdue Frederick Company ("Purdue Frederick"),
pursuant to which the Registrant had the exclusive right to distribute 5%
Betadine Solution, in order to permit Purdue Frederick to enter into an
exclusive distribution agreement for 5% Betadine Solution with Alcon Universal;
and (C) agreed with Alcon Universal that the Registrant will not distribute or
sell 5% Betadine Solution in the United States for a period of five years after
the date of the Agreement.
No material relationship exists between (i) the Registrant and either
of the Buyers, (ii) any director or officer of the Registrant and any director
or officer of either of the Buyers or (iii) any associate of any director or
officer of the Registrant and any associate of any director or officer of either
of the Buyers. The purchase prices under the Agreements were determined by arms'
length negotiations between the Registrant and the Buyers.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
Not applicable.
(b) Unaudited Pro Forma Financial Information.
The following unaudited pro forma condensed consolidated financial
information has been prepared to reflect the transaction under a Bill of Sale
and Acceptance Agreement between the Registrant and Alcon Laboratories, Inc.
and a Bill of Sale and Acceptance Agreement between the Registrant and Alcon
Universal, Ltd. (the "Transaction"). The unaudited pro forma condensed
consolidated financial information should be read in conjunction with the
audited historical consolidated financial statements and related notes included
in the Registrant's Annual Report on Form 10-K for the period ended June 30,
1998 and the condensed consolidated financial statements for the six months
ended December 31, 1998 in the Registrant's Quarterly Report on Form 10-Q for
period ended December 31, 1998, which reports are incorporated herein by
reference.
The unaudited pro forma condensed consolidated statement of
operations gives effect to the Transaction as if it had occurred at the
beginning of the periods presented.
The unaudited pro forma condensed consolidated balance sheet gives
effect to the Transaction as if it had occurred on December 31, 1998.
The unaudited pro forma condensed consolidated financial information
is presented for illustrative purposes only and does not purport to be
indicative of the operating results or financial position that would have
actually occurred if the Transaction had been in effect on the dates indicated,
nor is it necessarily indicative of future operating results or financial
position.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
REGISTRANT PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
------ ----------- ---------
<S> <C> <C> <C> <C>
Sales revenues $ 5,942,004 $ (976,447) (1) $ 4,965,557
Costs and expenses:
Cost of goods sold 2,588,500 (416,980) (2) 2,171,520
Research and development 494,895 - 494,895
Marketing, general and administrative 2,805,454 (335,081) (3) 2,470,373
----------------- --------------------- --------------------
Total costs and expenses 5,888,849 (752,061) 5,136,788
----------------- --------------------- --------------------
Income (loss) from operations 53,155 (224,386) (171,231)
Other income, net 118,317 - 118,317
----------------- --------------------- --------------------
Net income (loss) $ 171,472 $ (224,386) $ (52,914)
================= ===================== ====================
</TABLE>
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<TABLE>
<CAPTION>
REGISTRANT PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
------ ----------- ---------
<S> <C> <C> <C> <C>
Basic and diluted net loss per share (a) $ (0.039) $ (0.123)
================= ====================
Weighted average shares -
basic and diluted 2,673,093 2,673,093
================= ====================
</TABLE>
(a) For earnings per share computations, net income was decreased by $ 276,750
for preferred stock dividends and accretion.
(1) Net Betadine sales for fiscal year ended June 30, 1998, $ 976,447.
(2) Direct expenses related to Betadine sales; cost of goods sold, $ 364,758;
freight, $ 21,199; and warehousing expense, $ 31,023.
(3) Other direct expenses related to the Betadine product line; license and
distribution rights amortization, $ 52,722;.goodwill amortization, $
66,752; royalties to Purdue Frederick, $95,923; and sales commissions,
$119,684.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
REGISTRANT PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
------------------------------------------------- ---------
<S> <C> <C> <C>
Sales revenues $ 3,460,097 $ (574,365) (1) $ 2,885,732
Costs and expenses:
Cost of goods sold 1,509,004 (248,025) (2) 1,260,979
Research and development 341,250 - 341,250
Marketing, general and administrative 1,397,973 (182,309) (3) 1,215,664
---------------- ----------------- ----------------
Total costs and expenses 3,248,227 (430,334) 2,817,893
---------------- ----------------- ----------------
Income from operations 211,870 (144,031) 67,839
Other income, net 68,567 - 68,567
---------------- ----------------- ----------------
Net income $ 280,437 $ (144,031) $ 136,406
================ ================= ================
Basic net income per share (a) $ 0.084 $ 0.037
================ =================
Diluted net income per share $ 0.068 $ 0.033
================ =================
Weighted average shares - basic 3,028,668 3,028,668
================ =================
Weighted average shares - diluted 4,103,394 4,103,394
================ =================
</TABLE>
(a) Net income is reduced by $ 24,540,for dividends paid to preferred
shareholder and not available for common shareholders' in earnings per
share computation.
(1) Net Betadine sales for six months ended December 31, 1998, $ 574,365
(2) Direct expenses related to Betadine sales; cost of goods sold, $ 214,005;
freight, $ 14,323; and warehousing expense, $ 19,697.
(3) Other direct expenses related to the Betadine product line; license and
distribution rights amortization,$ 26,361; goodwill amortization, $ 33,376;
royalties to Purdue Frederick, $ 56,851; and sales commissions,$ 65,721.
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(4) The sale of the Betadine product line will result in a non-recurring gain of
approximately $854,000, net of sale expenses of approximately $25,000.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
REGISTRANT PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
--------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 2,406,665 $ 2,059,835 (1) $ 4,466,500
Accounts receivable, net 873,975 - 873,975
Inventory, net 688,079 (274,760) (2) 413,319
Investments and other current assets 613,954 - 613,954
--------------------- --------------------- ---------------------
Total current assets 4,582,673 1,785,075 6,367,748
License and distribution rights, net 809,657 (268,007) (3) 541,650
Goodwill, net 904,451 (472,829) (4) 431,622
Other assets 751,601 - 751,601
--------------------- --------------------- ---------------------
Total assets $ 7,048,382 $ 1,044,239 $ 8,092,621
===================== ===================== =====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities $ 861,941 $ - $ 861,941
Shareholders' Equity:
Preferred stock 679,231 - 679,231
Common stock 45,321,687 - 45,321,687
Treasury stock (118,108) - (118,108)
Accumulated deficit (39,696,369) 1,044,239 (1)(2) (38,652,130)
--------------------- --------------------- (3)(4) ---------------------
Total shareholders' equity 6,186,441 1,044,239 7,230,680
--------------------- --------------------- ---------------------
Total liabilities and shareholders'
equity $ 7,048,382 $ 1,044,239 $ 8,092,621
===================== ===================== =====================
</TABLE>
(1) Proceeds from sale of Betadine product line, $ 2,059,835.
(2) To reflect the sale of Betadine inventory valued at $274,760.
(3) To reflect the retirement of $ 268,007 in unamortized license and
distribution rights, allocated at acquisition, to the Betadine product
line.
(4) To reflect the retirement of $ 472,829 in unamortized goodwill
allocated, at acquisition, to the Betadine product line.
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(c) Exhibits.
Exhibit No. Document
----------- --------
2.1 Bill of Sale and Acceptance Agreement dated March 5,
1999 between Escalon Medical Corp. and Alcon
Laboratories, Inc.
2.2 Bill of Sale and Acceptance Agreement dated March 5,
1999 between Escalon Medical Corp. and Alcon
Universal, Ltd.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
ESCALON MEDICAL CORP.
Date: March 19, 1999 By:/s/ Douglas R. McGonegal
--------------------------------------
Douglas R. McGonegal,
Vice President--Finance
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EXHIBIT INDEX
Exhibit No. Document
----------- --------
2.1 Bill of Sale and Acceptance Agreement dated March 5,
1999 between Escalon Medical Corp. and Alcon
Laboratories, Inc.
2.2 Bill of Sale and Acceptance Agreement dated March 5,
1999 between Escalon Medical Corp. and Alcon
Universal, Ltd.
-8-
<PAGE> 1
EXHIBIT 2.1
BILL OF SALE AND ACCEPTANCE AGREEMENT
This Bill of Sale and Acceptance Agreement ("Bill of Sale") is dated the 5th day
of March, 1999.
PARTIES
The parties to this Bill of Sale are Escalon Medical Corp., Inc. ("Seller"), a
corporation organized and existing under the laws of the State of California,
and Alcon Laboratories, Inc. ("Buyer"), a corporation organized and existing
under the laws of the State of Delaware. Seller does hereby bargain, sell,
grant, convey, transfer and assign unto Buyer all of Seller's right, title and
interest in and to the assets as described herein.
RECITALS
WHEREAS, pursuant to a Distribution and License Agreement, dated 8/31/1995,
("License Agreement") between Escalon Ophthalmics, Inc., Seller's predecessor,
and The Purdue Frederick Company ("Purdue Frederick"), Seller has the exclusive
right to distribution of 5% Betadine Sterile Ophthalmic Solution ("5%
Betadine"); and
WHEREAS, Seller has agreed to transfer and convey to Buyer all of Seller's
Inventory of 5% Betadine as identified on Schedule A for a purchase price equal
to Nine Hundred Fifty-Nine Thousand Eight Hundred Thirty-Five and 00/100 Dollars
($959,835.00); and
WHEREAS, Seller is executing and delivering this Bill of Sale to Buyer for the
purpose of assigning, transferring, selling, conveying, and vesting in Buyer,
all of Seller's right, title, and interest in the Inventory and in order that
Buyer shall be in possession of an instrument evidencing Seller's transfer of
the Inventory; and
WHEREAS, Buyer is executing and delivering this Bill of Sale to Seller for the
purpose of assuming all of Seller's right, title and interest in the Inventory
in order that Seller is in possession of an instrument evidencing Buyer's
acceptance of the Inventory;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
promises and covenants herein, and intending to be legally bound, the parties do
hereby agree as follows:
1
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AGREEMENT
1. Sale. Seller, by these presents and upon the terms and conditions set forth
herein, hereby sells, grants conveys, assigns, transfers, and sets over to and
vest in Buyer, its successors and assigns, all of Seller's right, title and
interest legal and equitable, in and to all of the Inventory. Seller further
agrees to transfer to Buyer all open and future purchase orders Seller has or
will have with third party purchasers of the Inventory.
2. Purchase Price. The purchase price for the Inventory shall be Nine Hundred
Fifty-Nine Thousand Eight Hundred Thirty-Five and 00/100 Dollars ($959,835.00).
3. Acceptance. Buyer hereby accepts Seller's transfer of, as well as all of
Seller's right, title and interest in the Inventory. Seller authorizes Buyer to
use the current NDC (No. 00340410-20) for all Inventory purchased pursuant to
this Agreement.
4. Benefit. Nothing in this instrument, expressed or implied, is intended or
shall be construed to confer upon or give to any person, corporation, or entity,
other than Seller and Buyer and its respective successors and assigns, any
remedy or claim under or by reason of this instrument or any term, covenant, or
condition hereof, and all of the terms, covenants, conditions, promises and
agreements contained in this Bill of Sale shall be for the sole and exclusive
benefit of Seller and Buyer and their respective successors and assigns.
5. Inventory. Inventory shall consist of 50 ml Betadine 5% Sterile Ophthalmic
Prep Solution in finished goods form. Buyer shall purchase all Seller's
Inventory wherever located, but including the public warehouse facility
Livingston Heathcare Services, Inc., at 220 Lake Drive, Newark, DE 19702. The
purchase price for the Inventory shall be Nine Hundred Fifty-Nine Thousand Eight
Hundred Thirty-Five and 00/100 Dollars ($959,835.00) and shall be paid upon
confirmation of Inventory quantities by Buyer and from the report of Livingston
Heathcare Services, Inc. as of the closing of the transaction contemplated by
this Bill of Sale.
6. Warranties and Representations. Seller hereby warrants and represents to
Buyer that the Inventory is (i) delivered free and clear from any security
interest or other liens, encumbrances, equities or claims, (ii) good and salable
with at least 24 months dating, and (iii) free from defects. Seller further
warrants and represents that it has operated in the normal course of business
over the preceding six (6) months, and that all returns, credits, allowances,
rebates, discounts, charge backs, or any other credits due a customer of Seller
relating to a sale of product prior to the date hereof will be Seller's
obligation.
2
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7. Indemnification. Seller will indemnify and hold Buyer harmless from and
against any and all liability, damage, loss, cost, or expense, including
attorney's fees and expenses, resulting from any third party claims made or
suits brought against Buyer which arise from the products sold to Buyer pursuant
to this Bill of Sale or Seller's breach of any warranty set forth herein.
8. Insurance. Seller shall maintain at its expense product liability insurance
with limits of liability of $1 million per occurrence for a period of four years
from the date of this Bill of Sale. The certificate should name Buyer as an
additional insured and Seller agrees to furnish Buyer certificates of insurance
showing compliance with the foregoing requirements.
9. Termination of License Agreement. This Bill of Sale is subject to and
contingent upon the termination of Seller's License Agreement with Purdue
Frederick; Seller agrees to provide Buyer with documentation evidencing the
termination of the License Agreement on or before this Bill of Sale is executed
by Buyer.
10. Closing. Closing of the transaction contemplated by this Bill of Sale shall
be March 4, 1999.
IN WITNESS WHEREOF, the parties duly execute this Bill of Sale on the date first
herein above written.
Attested: ESCALON MEDICAL CORP., INC.
/s/ Richard J. DePiano, Jr. By: /s/ Richard J. DePiano
Assistant Secretary -------------------------
Richard J. DePiano
CEO & Chairman
Attested: ALCON LABORATORIES, INC.
By:
-------------------------
Name:
Title:
3
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SCHEDULE A
INVENTORY
168,216 BOTTLES @ $5.705967
4
<PAGE> 1
EXHIBIT 2.2
BILL OF SALE AND ACCEPTANCE AGREEMENT
This Bill of Sale and Acceptance Agreement ("Bill of Sale") is dated the 5th day
of March, 1999.
PARTIES
The parties to this Bill of Sale are Escalon Medical Corp., Inc. ("Seller"), a
corporation organized and existing under the laws of the State of California,
and Alcon Universal, Ltd. ("Buyer"), a joint stock corporation organized and
existing under the laws of Switzerland. Seller does hereby bargain, sell, grant,
convey, transfer and assign unto Buyer all of Seller's right, title and interest
in and to those certain assets as described herein.
RECITALS
WHEREAS, pursuant to a Distribution and License Agreement, dated 8/31/1995,
("License Agreement") between Escalon Ophthalmics, Inc., Seller's predecessor,
and The Purdue Frederick Company ("Purdue Frederick"), Seller has the exclusive
right to distribution of 5% Betadine Sterile Ophthalmic Solution ("5%
Betadine"); and
WHEREAS, Seller has agreed to transfer and convey to Buyer certain assets that
are listed on Schedule A attached hereto ("Acquired Assets"); and
WHEREAS, in order to induce Seller to terminate its Licensing Agreement with
Purdue Frederick, Buyer shall buy the Acquired Assets for a Purchase Price of
One Million One Hundred Thousand Dollars ($1,100,000.00); and
WHEREAS, Seller is terminating its exclusive distribution rights with Purdue
Frederick in order for Purdue Frederick to enter into an agreement with Buyer
for the exclusive global distribution of 5% Betadine; and
WHEREAS, Seller is executing and delivering this Bill of Sale to Buyer for the
purpose of assigning, transferring, selling, conveying, and vesting in Buyer,
all of Seller's right, title, and interest in the Acquired Assets and in order
that Buyer shall be in possession of an instrument evidencing Seller's transfer
of the Acquired Assets; and
WHEREAS, Buyer is executing and delivering this Bill of Sale to Seller for the
purpose of assuming all of Seller's right, title and interest in the Acquired
Assets in order that Seller is in possession of an instrument evidencing Buyer's
acceptance of the Acquired Assets;
1
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NOW, THEREFORE, in consideration of the foregoing premises and the mutual
promises and covenants herein, and intending to be legally bound, the parties do
hereby agree as follows:
AGREEMENT
1. Sale. Seller, by these presents and upon the terms and conditions set forth
herein, hereby sells, grants, conveys, assigns, transfers, and sets over to and
vests in Buyer, its successors and assigns, all of Seller's right, title and
interest, legal and equitable, in and to all of the Acquired Assets.
2. Purchase Price. The purchase price for the Acquired Assets shall be One
Million One Hundred Thousand Dollars ($1,100,000.00).
3. Acceptance. Buyer hereby accepts Seller's transfer of, as well as all of
Seller's right, title and interest in the Acquired Assets.
4. Benefit. Nothing in this instrument, expressed or implied, is intended or
shall be construed to confer upon or give to any person, corporation, or entity,
other than Seller and Buyer and its respective successors and assigns, any
remedy or claim under or by reason of this instrument or any term, covenant, or
condition hereof, and all of the terms, covenants, conditions, promises and
agreements contained in this Bill of Sale shall be for the sole and exclusive
benefit of Seller and Buyer and their respective successors and assigns.
5. Warranties and Representations. Seller warrants and represents that it has
operated in the normal course of business over the preceding six (6) months, and
that all returns, credits, allowances, rebates, discounts, charge backs, or any
other credits due a customer of Seller relating to a sale of product prior to
the date hereof will be Seller's obligation.
6. Indemnification. Seller will indemnify and hold Buyer harmless from and
against any and all liability, damage, loss, cost, or expense, including
attorney's fees and expenses, resulting from any third party claims made or
suits brought against Buyer which arise from the products sold to Buyer pursuant
to this Bill of Sale or Seller's breach of any warranty set forth herein.
7. Insurance. Seller shall maintain at its expense product liability insurance
with limits of liability of $1 million per occurrence for a period of four years
from the date of this Bill of Sale. The certificate should name Buyer as an
additional insured and Seller agrees to furnish Buyer certificates of insurance
showing compliance with the foregoing requirements.
8. Termination of License Agreement. This Bill of Sale is subject to and
contingent upon the termination of Seller's License Agreement with Purdue
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Frederick; Seller agrees to provide Buyer with documentation evidencing the
termination of the License Agreement on or before this Bill of Sale is executed
by Buyer. Further, Seller agrees that it will not distribute or sell 5% Betadine
in the United States for a period of five years from the date of this Bill of
Sale.
9. Closing. Closing of the transaction contemplated by this Bill of Sale shall
be March 4, 1999.
IN WITNESS WHEREOF, the parties duly execute this Bill of Sale on the date first
herein above written.
Attested: ESCALON MEDICAL CORP., INC.
By: /s/ Richard J. DePiano
----------------------
Richard J. DePiano
CEO & Chairman
Attested:
ALCON UNIVERSAL, LTD.
By: s/s Guido Koller
-------------------
Name: Guido Koller
Title:
3
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SCHEDULE A
ACQUIRED ASSETS
1. Customer List for 5% Betadine.
2. Seller's termination of its Licensing Agreement with Purdue Frederick.
4
