<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1 on
FORM 10-QSB/A
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 0R 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997.
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
- --- For the transition period from to .
----- -----
Commission file number 0-20652
ACCUMED INTERNATIONAL, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 36-4054899
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
900 N. Franklin St., Suite 401, Chicago, IL 60610
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(Address of principal executive offices)
(312) 642-9200
--------------
(Issuer's telephone number including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes X No
--- ---
The number of shares of Common Stock outstanding as of May 6, 1997:
22,147,232
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
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ACCUMED INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
Page
Number
<S> <C>
PART I Financial Information
1. Consolidated Financial Statements
Consolidated Balance Sheets -
March 31, 1997 and December 31, 1996 . . . . . . . . . . . . 1
Consolidated Statements of Operations-
Three Months Ended March 31, 1997 and 1996 . . . . . . . . 2
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1997 and 1996 . . . . . . . . 3
Notes to Consolidated Financial Statements. . . . . . . . . . . 4
PART II. Other Information
6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 6
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
<PAGE> 3
ACCUMED INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1997 1996
---------- ----------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 1,626,887 $ 2,801,359
Restricted cash 100,000 100,000
Accounts receivable 4,522,224 2,143,596
Prepaid expenses and deposits 327,369 217,198
Production inventory 3,229,249 1,772,127
----------- -----------
Total current assets 9,805,729 7,034,280
----------- -----------
Fixed assets, net 6,437,781 1,696,071
----------- -----------
Notes receivable 208,273 214,273
Deferred financing costs 1,310,540 -
Goodwill and intangible assets 5,160,036 5,340,411
Other assets 207,176 194,507
----------- -----------
$23,129,535 $14,479,542
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 2,864,851 $ 2,340,769
Other current liabilities 1,232,316 879,808
Deferred revenue 44,303 146,968
Notes payable 25,100 198,555
Capital lease obligation due within one year 75,435 89,810
----------- -----------
Total current liabilities 4,242,005 3,655,910
----------- -----------
Warranty reserves 1,500,000 -
Long term debt 8,715,793 230,795
Minority interest 419,118 456,841
----------- -----------
10,634,911 687,636
----------- -----------
Stockholders' equity
Common stock, $0.01 par value, 30,000,000 shares
authorized, 21,888,631 shares issued and outstanding
at March 31, 1997, 20,854,157 at December 31, 1996 218,886 208,542
Additional paid-in capital 48,736,351 44,424,646
Cumulative translation adjustment 13,436 32,586
Accumulated deficit (40,499,317) (34,335,313)
Less treasury stock, 37,956 shares at March 31, 1997,
and 31,812 shares at December 31, 1996, respectively (216,737) (194,465)
----------- -----------
Total stockholders' equity 8,252,619 10,135,996
----------- -----------
$23,129,535 $14,479,542
=========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
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ACCUMED INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1997 1996
----------- ----------
<S> <C> <C>
Sales $3,049,414 $1,187,701
Less cost of sales (1,491,600) (595,210)
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Gross profit (loss) 1,557,814 592,491
---------- ----------
Operating expenses:
General and administrative 1,859,995 914,057
Acquired Research and development - 3,499,727
Research and development 1,153,784 575,059
Goodwill writeoff 3,582,068 -
Sales and marketing 975,217 393,177
---------- ----------
Total operating expenses 7,571,064 5,382,020
---------- ----------
Operating loss (6,013,250) (4,789,529)
---------- ----------
Other income (expense):
Interest income 11,598 5,837
Interest expense (199,898) (326,831)
Other income (expense) 430 2,462,252
Minority interest 37,723 -
---------- ----------
Total other income (expense) (150,147) 2,141,258
---------- ----------
Loss before income taxes (6,163,397) (2,648,271)
Income tax expense - 850
---------- ----------
Net loss ($6,163,397) ($2,649,121)
========== ==========
Net loss per share ($0.29) ($0.17)
========== ==========
Weighted average common shares outstanding 20,999,058 15,793,157
========== ==========
</TABLE>
See accompanying notes to the consolidated financial statements.
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<PAGE> 5
ACCUMED INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (6,163,397) $ (2,649,121)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 181,724 133,344
Write-off of in-process research and development - 3,499,727
Write-off of impaired goodwill 3,582,068 -
Minority interest (7,839) -
Expenses paid with issuance of warrants - 1,350,390
Shares received for litigation settlement 22,272 -
Changes in assets and liabilities:
Decrease (Increase) in restricted cash - 53,000
Decrease (Increase) in accounts receivable 335,113 5,355
Decrease (Increase) in prepaid expenses and deposits (110,171) 11,383
Decrease (Increase) in production inventory (456,346) (205,558)
(Increase) in other assets and intangible assets 20,040 (6,508)
Increase in accounts payable 21,322 475,631
(Increase) in deferred financing costs and intangibl (650,920) -
Increase in other current liabilities and reserves 39,545 (115,595)
Increase in notes payable - 314,446
Increase (Decrease) in deferred revenue (102,665) (1,454,450)
------------ ------------
Net cash used in operating activities (3,211,255) 1,412,044
------------ ------------
Cash used in investing activities:
Purchase of fixed assets (275,153) (200,685)
Acquisition of business, net (6,000,000) -
------------ ------------
Net cash used in investment activities (6,275,153) (200,685)
------------ ------------
Cash flows from financing activities:
Proceeds from issuances of common stock net 38,097 16,924
Notes receivable (issued) collected (13,150) -
Payment of capital lease obligation (24,557) (26,663)
Proceeds from issuance of notes payable 8,500,000 -
Proceeds from bridge loan 6,000,000 -
Payment of notes payable and bridge loan (6,188,455) -
------------ ------------
Net cash provided by financing activities 8,311,935 (9,739)
------------ ------------
Net increase (decrease) in cash and cash equivalents (1,174,473) 1,201,620
Cash and cash equivalents at beginning of period 2,801,359 180,508
------------ ------------
Cash and cash equivalents at end of period $ 1,626,887 $ 1,382,128
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 6
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
ACCUMED INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Preparation of Interim Financial Statements: The accompanying consolidated
financial statements have been prepared in accordance with the instructions
to Form 10-QSB and, therefore, do not include all information and footnotes
necessary for a presentation of financial position, results of operations
and cash flows in conformity with generally accepted accounting principles.
In the opinion of management, such consolidated financial statements
reflect all normal and recurring adjustments necessary for a fair
presentation of the results of operations and financial position for the
interim periods presented. Operating results for the three month period
ended March 31, 1997 are not necessarily indicative of the results that may
be expected for the fiscal year ending December 31, 1997.
2. Basis of Presentation: The condensed consolidated financial statements
include the accounts of the Company and its wholly-owned and majority-owned
subsidiaries. All significant intercompany balances, transactions and
stockholdings have been eliminated.
3. Merger Transaction: On December 29, 1995, the Company acquired all of the
common stock of AccuMed, Inc. and its wholly-owned subsidiary. Pursuant to
the terms of the merger agreement, 1,881,910 shares of Common Stock and
126,945 warrants were issued to AccuMed, Inc. stockholders and
warrantholders, respectively, which were contingent and subject to
forfeiture if specified performance goals were not achieved by the merged
entity. The contingency associated with 940,955 shares of Common Stock and
63,473 warrants was resolved (performance goal achieved) in March 1996
resulting in contingent consideration of $5,430,326. Such amount has been
allocated to identifiable intangibles of acquired proprietary technology
($1,930,599) and in-process research and development ($3,499,727). The
acquired proprietary technology is being amortized over the expected period
to be benefited of ten years, with the in-process research and development
charged to operations during the three months ended March 31, 1996.
The contingency associated with the remaining 940,955 shares of Common
Stock and 63,472 warrants was resolved (performance goal achieved) in March
1997 resulting in contingent consideration of $3,582,068. Such amount has
been recorded as goodwill associated with the merger and charged off in its
entirety to operations during the three months ended March 31, 1997 as an
impaired asset as such amount cannot be reasonably recovered against future
operating results of the Company.
4. Notes Payable: On March 14, 1997, the Company received $8,500,000 in
cash in exchange for convertible notes bearing interest at 12% due in March
2000. Investors also received 850,000 warrants to purchase shares of the
Company's Common Stock with an expiration period dependent on conversion of
the notes. The total proceeds received of $8,500,000 were allocated to the
notes payable and warrants based on the estimated fair value of $8,222,500
and $277,500, respectively. The original issue discount of $277,500
relating to the notes payable has been recorded in Deferred Finance Costs
on the March 31, 1997 Balance Sheet, and will be amortized over the term of
the notes. The placement agent, a shareholder of the
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<PAGE> 7
Company, received fees estimated at $961,500 representing out of pocket
expenses of $56,500, a placement fee equal to $595,000 or 7% of the
proceeds of the offering and five year warrants to purchase 200,000 shares
of the Company's Common Stock with a fair value of $310,000. The Company
utilized the Black-Scholes pricing model to determine the fair value of the
warrants granted. The following assumptions were incorporated into the
model: risk free rate 7%, expected life five years, expected volatility .2,
and expected dividend zero. Of the loan proceeds, $6,130,000 (including
$130,000 of interest) was used to repay a $6,000,000 bridge loan used for
the ESP Culture System II product line acquisition on March 3, 1997 (see
note 5), $651,500 was used for issuance costs, and the remaining $1,718,500
was retained to cover transition costs of the acquired business. The
costs associated with the issuance of these notes of $1,321,000 will be
amortized over the three year term of the notes.
5. Acquisitions: On March 3, 1997, the Company acquired certain assets and
liabilities of Difco Microbiology Systems, Inc ("Difco") for a total
purchase price of $6,000,000 in cash. The acquisition was accounted for
using the purchase method of accounting with the purchase price allocated to
the net assets acquired based on their estimated fair values. This
treatment resulted in no excess purchase price over fair value of tangible
assets acquired. The operations of Difco have been included in the
consolidated statement of operations since the date of acquisition.
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<PAGE> 8
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. The following exhibits are filed herewith:
27.1 Financial Data Schedule
(b) Reports on Form 8-K. The following Current Report on Form 8-K was
filed by the Company with the Securities and Exchange Commission during the
quarter ended March 31, 1997 1. On March 18, 1997, a Current Report on Form
8-K dated March 3, 1997: Item 2 - Acquisition or Disposal of Assets -
reporting the acquisition of the ESP Culture System II product line, and Item 7
- - Financial Statements and Exhibits.
- 6 -
<PAGE> 9
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of
1934, the Registrant has caused this Amendment No. 1 to the Report to be
signed on its behalf by the undersigned thereunto duly authorized.
ACCUMED INTERNATIONAL, INC.
/s/ Leonard R. Prange
----------------------------
Leonard R. Prange
Chief Financial Officer and
Chief Operating Officer
Date: July 17, 1997
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,627
<SECURITIES> 0
<RECEIVABLES> 4,522
<ALLOWANCES> 0
<INVENTORY> 3,229
<CURRENT-ASSETS> 9,806
<PP&E> 6,438
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,130
<CURRENT-LIABILITIES> 4,242
<BONDS> 8,716
0
0
<COMMON> 219
<OTHER-SE> 8,034
<TOTAL-LIABILITY-AND-EQUITY> 23,130
<SALES> 3,049
<TOTAL-REVENUES> 3,049
<CGS> 1,492
<TOTAL-COSTS> 1,492
<OTHER-EXPENSES> 7,571
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 200
<INCOME-PRETAX> (6,163)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,163)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,163)
<EPS-PRIMARY> (0.29)
<EPS-DILUTED> (0.29)
</TABLE>
