<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 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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.
-------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 36-4054899
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
900 N. Franklin St., Suite 401, Chicago, IL 60610
---------------------------------------------------
(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 November 10, 1997:
22,683,023 Transitional Small Business Disclosure Format (check one):
Yes [X] No [ ]
<PAGE> 2
ACCUMED INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I. Financial Information
1. Consolidated Financial Statements
Consolidated Balance Sheets -
September 30, 1997 and December 31, 1996...................... 1
Consolidated Statements of Operations -
Nine Months Ended September 30, 1997 and 1996 and
Three Months Ended September 30, 1997 and 1996................ 2
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1997 and 1996................. 3
Notes to Consolidated Financial Statements........................ 4
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 7
PART II. Other Information
6. Exhibits and Reports on Form 8-K.................................. 11
SIGNATURES.......................................................................... 12
</TABLE>
<PAGE> 3
ACCUMED INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
------------------
<TABLE>
<CAPTION>
(Unaudited) (Audited)
September 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 1,549,914 $ 2,801,359
Restricted cash - 100,000
Accounts receivable 5,033,413 2,143,596
Prepaid expenses and deposits 653,693 217,198
Production inventory 3,240,081 1,772,127
------------ ------------
Total current assets 10,477,101 7,034,280
------------ ------------
Fixed assets, net 5,901,605 1,696,071
------------ ------------
Notes receivable 225,700 214,273
Deferred financing costs 704,225 -
Intangible assets 5,122,400 5,340,411
Other assets 600,761 194,507
------------ ------------
$ 23,031,792 $ 14,479,542
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 4,700,210 $ 2,340,769
Other current liabilities 1,388,590 879,808
Deferred revenue 139,305 146,968
Notes payable 1,119,100 198,555
Capital lease obligation due within one year 67,122 89,810
------------ ------------
Total current liabilities 7,414,327 3,655,910
------------ ------------
Warranty reserves 814,092 -
Long term debt 11,190,595 230,795
Minority interest 152,408 456,841
------------ ------------
12,157,095 687,636
------------ ------------
Stockholders' equity
Common stock, $0.01 par value, 50,000,000 shares
authorized, 22,658,324 shares issued and outstanding
at September 30, 1997, 20,854,157 at December 31, 1996 226,583 208,542
Additional paid-in capital 51,838,319 44,424,646
Cumulative translation adjustment 32,586 32,586
Accumulated deficit (48,420,381) (34,335,313)
Less treasury stock, 37,956 shares at Sept. 30, 1997,
and 31,812 shares at December 31, 1996, respectively (216,737) (194,465)
------------ ------------
Total stockholders' equity 3,460,370 10,135,996
------------ ------------
$ 23,031,792 $ 14,479,542
============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
1
<PAGE> 4
ACCUMED INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
------------------
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
----------------------------- -----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales $ 14,157,306 $ 3,668,150 $ 4,914,004 $ 1,356,056
Less cost of sales (8,905,595) (2,054,122) (3,331,740) (588,665)
------------ ------------ ------------ ------------
Gross profit (loss) 5,251,711 1,614,028 1,582,264 767,391
------------ ------------ ------------ ------------
Operating expenses:
General and administrative 6,280,715 2,874,079 1,833,732 1,082,545
Research and development 3,639,509 1,798,289 1,340,234 508,604
Acquired research and development - 3,499,727 - -
Goodwill writeoff 3,582,068 - - -
Sales and marketing 3,215,636 1,465,047 1,125,213 623,481
------------ ------------ ------------ ------------
Total operating expenses 16,717,928 9,637,142 4,299,179 2,214,630
------------ ------------ ------------ ------------
Operating income (loss) (11,466,217) (8,023,114) (2,716,915) (1,447,239)
------------ ------------ ------------ ------------
Other income (expense):
Interest income 19,808 15,796 7,841 4,336
Interest expense (2,960,893) (450,628) (472,851) (12,643)
Other income (expense), net 18,449 3,588,623 (22,320) 58,818
Minority interest 303,785 (1,004,082) 116,569 (18,790)
------------ ------------ ------------ ------------
Total other income (expense) (2,618,851) 2,149,709 (370,761) 31,721
------------ ------------ ------------ ------------
Loss before income taxes (14,085,068) (5,873,405) (3,087,676) (1,415,518)
Income tax expense - 850 - -
------------ ------------ ------------ ------------
Net loss $(14,085,068) $ (5,874,255) $ (3,087,676) $ (1,415,518)
============ ============ ============ ============
Net loss per share $ (0.65) $ (0.36) $ (0.14) $ (0.08)
============ ============ ============ ============
Weighted average common shares outstanding 21,574,098 16,502,973 22,482,305 17,722,514
============ ============ ============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
2
<PAGE> 5
ACCUMED INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
------------------
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(14,085,068) $ (5,874,255)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 2,161,617 866,733
Write-off of debt discount 1,966,340 -
Write-off of in-process research and development - 3,499,727
Write-off of impaired goodwill 3,582,068 -
Minority interest (303,785) -
Expenses paid with issuance of stock and warrants - 1,441,484
Non-cash gain on settlement (22,272) (159,957)
Loss on disposal of assets - 74,706
Changes in assets and liabilities:
Decrease in restricted cash 100,000 63,000
(Increase) in accounts receivable (679,152) (553,069)
(Increase) in prepaid expenses and deposits (436,495) (113,545)
(Increase) in production inventory (457,178) (423,419)
Decrease (Increase) in other and intangible assets (571,147) (736,422)
Increase in accounts payable 2,387,921 888,343
(Increase) in deferred financing costs (821,884) -
Increase (Decrease) in other current liabilities (54,181) 26,056
(Decrease) in warranty reserves (435,908) -
(Decrease) in deferred revenue (7,663) (1,408,806)
------------ ------------
Net cash used in operating activities (7,676,787) (2,409,424)
------------ ------------
Cash used in investing activities:
Purchase of fixed assets (898,372) (938,123)
Acquisition of business, net (6,000,000) -
------------ ------------
Net cash used in investment activities (6,898,372) (938,123)
------------ ------------
Cash flows from financing activities:
Proceeds from issuances of common stock, net 556,466 2,841,885
Notes receivable (issued) collected (11,427) -
Payment of capital lease obligation (32,870) (63,527)
Proceeds from issuance of notes payable and warrants 14,750,000 1,500,000
Proceeds from bridge loan 6,000,000 -
Payment of notes payable and bridge loan (7,938,455) (964,017)
------------ ------------
Net cash provided by financing activities 13,323,714 3,314,341
------------ ------------
Effect of exchange rates on cash - (1,491)
------------ ------------
Net increase (decrease) in cash and cash equivalents (1,251,445) (34,697)
Cash and cash equivalents at beginning of period 2,801,359 180,508
------------ ------------
Cash and cash equivalents at end of period $ 1,549,914 $ 145,811
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<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 September 30, 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.
4. Notes Payable: The Company received $4,500,000 in loan proceeds on
September 30, 1997. The loan bears interest at 14.5% and is secured by all
assets of the Company except for certain royalties and certain stock in the
Company's foreign subsidiaries. Terms of the loan call for 48 monthly
payments of $113,300 and a balloon payment of $696,700 in October
4
<PAGE> 7
2001. The Company also issued 245,783 warrants to purchase Common Stock of
the Company to the lender at an exercise price of $2.60. The warrants were
valued at $201,500, and were recorded as deferred financing costs in the
third quarter. This amount will be written off over four years, the term of
the loan. The Company used an aggregate of $1,250,000 of such loan proceeds
to repay interim financing received in the third quarter under two
installment loan agreements.
The Company utilized the Black-Scholes pricing model to determine the fair
value of the warrants issued. The following assumptions were incorporated
into the model: 245,783 warrants - risk free rate 6%, expected life 5
years, expected volatility 20%, and expected dividend zero.
This debt was recorded on the issue date in the consolidated balance sheet
as follows:
Face amount of loan $4,500,000
Less value of warrants issued (201,500)
----------
Loan recorded on balance sheet $4,298,500
Less current portion 658,000
----------
Long-term debt $3,640,500
==========
5. Private Placement. On March 14, 1997, the Company consummated a private
placement (the "Private Placement") of 85 Units each consisting of $100,000
in principal amount of 12% Convertible Promissory Notes (the "Notes") and
Warrants (the "Warrants") to purchase 10,000 shares of the Company's Common
Stock. The Company received net proceeds of approximately $7.8 million from
the Private Placement after deducting commissions and related expenses.
The Notes bear interest at the rate of 12% per annum, payable semi-annually
in arrears on August 15 and February 15 of each year during the term of the
Notes. Principal under the Notes is due March 14, 2000. The Notes are
convertible at the option of the holder into shares of Common Stock at a
conversion price equal to $3.125 (the "Conversion Price").
At the date of issuance the conversion feature of the Notes was "in the
money", with the intrinsic value of such feature calculated as
approximately $1,900,000. Such amount has been reflected as additional
paid-in capital, and was written off as deferred financing costs in the
second quarter, the period in which the notes became convertible.
The Warrants are exercisable to purchase Common Stock at an exercise price
of $3.125 per share. Of the 10,000 Warrants included in each Unit, 8,823
became exercisable for a period six months following March 14, 1997, and
1,177 Warrants became exercisable upon issuance for a six-month period
beginning May 23, 1997. Pursuant to registration rights granted to the
Warrant holders, on May 30, 1997 the Company filed with the Commission
a registration statement covering the resale of the shares underlying
the warrants. Management and the Warrant holders had anticipated that
such registration statement would become effective prior to expiration
of the warrants and remain effective for a sufficient period of time
prior to such expiration to allow exercise of the warrants and resale
of the underlying shares in an orderly fashion. As the expiration dates
approached and the registration statement was not yet effective, the
Board of Directors determined to extend the expiration dates until
December 31, 1997 to allow time to complete the registration process.
The total proceeds received of $8,500,000 were allocated to the Notes and
Warrants based on the estimated fair value of $7,934,500 and $565,500,
respectively. The original issue discount of $565,500 relating to the Notes
has been recorded in Deferred Financing Costs on the balance sheet, and
will be amortized over the term of the Notes. The placement agent, a
shareholder of the 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 Private Placement and five year
warrants to purchase 200,000 shares of the Company's Common Stock with a
fair value of $310,000. Of the Private Placement 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 (the "ESP Product Line")
acquisition on March 3, 1997 (see
5
<PAGE> 8
Note 6), $651,500 was used for issuance costs, and the remaining $1,718,500
was retained to cover transition costs of the acquired business. Of the
total of $3,517,000 of costs associated with the issuance of the Notes,
$1,617,000 will be amortized over the three year term of the Notes and
$1,900,000 related to the "in the money" conversion feature was written off
in the second quarter.
The Company utilized the Black-Scholes pricing model to determine the fair
value of the Warrants issued. The following assumptions were incorporated
into the model: 850,000 warrants - risk free rate 7%, expected life six
months, expected volatility 20%, and expected dividend zero; 200,000
warrants - risk free rate 7%, expected life 5 years, expected volatility
20%, and expected dividend zero.
This debt was recorded on the issue date in the consolidated balance
sheet as follows:
Face amount of loan $8,500,000
Less value of warrants issued (875,500)
----------
Loan recorded on balance sheet $7,624,500
Less current portion -0-
----------
Long-term debt $7,624,500
==========
6. Acquisition: On March 3, 1997, the Company acquired the ESP Product Line
from 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 the fair value of tangible assets acquired.
The operations associated with this acquisition have been included in the
consolidated statement of operations since the date of acquisition.
The pro-forma consolidated results of operations giving effect to the
acquisition of the ESP Product Line as if it had occurred as of January 1,
1996 follows:
<TABLE>
<CAPTION>
For the Nine Months Ended
Sept. 30, 1997 Sept. 30, 1996
-------------- --------------
<S> <C> <C>
Sales $ 16,796,428 $ 16,542,887
Net Loss $(14,702,621) $(13,821,847)
Net Loss per Share $(0.68) $(0.82)
</TABLE>
7. Warranty reserve: A portion of the warranty reserve has been classified as
a non-current liability based on management's estimate of claims to be paid
in the next 12 months. Warranty reserves have been recorded to reflect
future costs to be borne by the Company to repair and replace equipment
under lease to customers, acquired as part of the ESP product line (see
Note 6).
8. Related Party Loan: During the third quarter, the Company received a
$500,000 bridge loan from a director and shareholder of the Company. The
loan was repaid in full from the loan proceeds received on September 30,
1997 (see Note 4), together with interest and prepayment premium of an
aggregate of $10,000. In addition, the Company issued 50,000 warrants to
purchase Common Stock of the Company at an exercise price of $2.50. The
warrants were valued at $39,500 and recorded as interest expense in the
third quarter.
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: 50,000
6
<PAGE> 9
warrants - risk free rate 6%, expected life five years, expected volatility
20%, and expected dividend zero.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The Company is engaged in the development and manufacturing of cost
effective screening instruments and systems for clinical diagnostic
laboratories. The Company markets products in two laboratory market segments: 1)
Microbiology - proprietary disposable products and automated instruments used to
identify infectious organisms and determine susceptibility to antimicrobial
agents, and 2) Cytopathology - systems made up of multiple instruments networked
via proprietary software that support the review and analysis of Pap smears.
Effective March 3, 1997, the Company acquired certain assets and
liabilities of Difco Microbiology Systems, Inc. relating to the ESP Culture
System II product line (the "ESP Product Line"). The results of operations
reflected in the Company's consolidated statement of operations for the quarter
and nine months ended September 30, 1997 include the results of operations of
the ESP Product Line from the date of the acquisition, whereas results of
operations from prior periods reflect the operations of the Company's
microbiology and cytopathology product lines only.
Sales revenues for the quarter ended September 30, 1997 increased to
$4,914,000 compared to $1,356,000 for the quarter ended September 30, 1996, due
primarily to the increase in sales in the microbiology product line and the
addition of the ESP product line.
Cost of sales increased from $589,000 in the third quarter of 1996 to
$3,332,000 in the third quarter of 1997, reflecting the increased sales volume
in the microbiology product line and the addition of the ESP product line.
Gross margins decreased from 56.6% in the third quarter of 1996 to
32.2% in the third quarter of 1997, reflecting unabsorbed volume variances
of the cytopathology product line. The unabsorbed costs relate mainly to
indirect and overhead costs associated with expanding manufacturing capacity
of that product line.
General and administrative expenses increased from $1,083,000 in the
third quarter of 1996 to $1,834,000 in the comparable 1997 quarter primarily due
to increases in staffing, office, professional fees, and investor relations
efforts.
Interest expense of $473,000 in the third quarter of 1997 reflected
amounts accrued on the three year notes issued in March of 1997 and installment
and bridge financing received in the third quarter. The interest expense for the
third quarter of 1996 of $13,000 reflected non-cash interest incurred for
issuance of warrants connected with notes payable repaid in 1996.
Research and development expenses increased from $509,000 in the third
quarter of 1996 to $1,340,000 in the third quarter of 1997 due primarily to
increased spending in the cytopathology area.
Sales and marketing expenses increased from $623,000 in the third
quarter of 1996 to $1,125,000 in the third quarter of 1997 due to increased
marketing efforts for the cytopathology product line.
7
<PAGE> 10
Net loss increased from $1,416,000 for the third quarter of 1996 to
$3,088,000 for the third quarter of 1997 due to increased sales volume and
related gross margins offset by increases in all operating expense categories.
Net loss per share for the quarter ended September 30, 1997 was $0.14 compared
to $0.08 for the quarter ending September 30, 1996. Weighted average shares
outstanding for the periods 1997 and 1996 were 22,482,000 and 17,723,000,
respectively.
Sales revenues for the nine months ended September 30, 1997 increased
to $14,157,000 compared to $3,668,000 for the nine months ended September 30,
1996, due primarily to the increased sales in the microbiology product line and
the addition of the ESP product line.
Cost of sales increased from $2,054,000 for the nine months ended
September 30, 1996 to $8,906,000 for the comparable 1997 period, reflecting
the increased sales volume in the microbiology product line and the addition
of the ESP product line.
Gross margins decreased from 44.0% for the nine month period ended
September 30, 1996 to 37.1% for the nine months ended September 30, 1997,
reflecting unabsorbed volume variances of the cytopathology product line.
The unabsorbed costs relate mainly to indirect and overhead costs associated
with expanding manufacturing capacity of that product line.
For the nine month period ended September 30, 1997, net loss was
$14,085,000 and $5,874,000 for the comparable 1996 period. The increase in the
loss for 1997 as compared to 1996 was primarily attributed to higher spending in
the administrative area and increased sales and marketing efforts. Also, the
Company received no other income from licensing agreements in 1997, while
$3,500,000 of such other income was received in 1996. The "in the money"
write-off of $1.9 million in the second quarter of 1997, related to the
conversion feature of notes issued in March 1997, also contributed to the
increased loss as compared to the first nine months of 1996. The net loss per
share for the first nine months of 1997 was $0.65 compared to $0.36 for the 1996
period. The loss per share for the 1997 nine-month period was about $0.20 per
share less due to the increase in the weighted average shares outstanding for
1997.
The decrease in net current assets of $97,000 as of September 30, 1997
as compared to December 31, 1996 is due primarily to a decrease in net current
assets of the cytopathology product line, partially offset by an increase in net
current assets relating to the Company's acquisition at March 3, 1997 of the ESP
Product Line.
The warranty reserve liability recorded as a result of the acquisition
of the ESP product line represents estimated future costs to be borne by the
Company to repair and replace equipment currently leased to customers.
Management estimates the timing and amount of the payments for such repairs will
occur principally over the final years of the equipment leases, which are
scheduled to expire in the years 1998 through 2001.
LIQUIDITY AND CAPITAL RESOURCES
The Company has been substantially dependent on the private placements
of its debt and equity securities and the proceeds of its public offerings of
securities to fund its cash requirements. From the initial public offering in
October 1992 through September 30, 1997, the Company has raised approximately
$43,000,000 in aggregate net proceeds from public offerings and private
placements of securities.
The Company's most recent private placement was closed in March 1997,
resulting in the issuance of $8,500,000 of three year convertible notes bearing
interest at a rate of 12% per annum. Investors also received 850,000 warrants to
purchase shares of the Company's Common Stock at a price of $3.125 per share.
Approximately 750,000 of such Warrants would have expired on October 14, 1997
and the balance would have expired on November 23, 1997. However, the Company
extended the expiration date of all 850,000 Warrants to December 31, 1997. Of
such Warrants, 25,000 have been exercised; if the balance of the Warrants are
exercised, of which there can be no assurance, the Company would receive
approximately $2,581,000 in gross proceeds.
In September 1997, the Company incurred indebtedness of $4,500,000
secured by a lien against virtually all of the Company's assets, repayable in 48
monthly installments of $113,300 starting November 1997. A balloon payment for
the balance of $696,700 is due October 2001. The loan bears interest at a rate
of 14.5% per annum. The lender also received 245,783 warrants
-8-
<PAGE> 11
to purchase shares of the Company's Common Stock at an exercise price of $2.60
per share. The warrants expire September 30, 2002. If all of these warrants are
exercised, of which there can be no assurance, the Company would receive
approximately $639,000 in gross proceeds. In October 1997, the Company entered
into a one-year revolving credit facility with the same lender. Pursuant to such
facility, the Company may borrow up to $4,000,000 from time to time based on the
amount of eligible accounts receivable. Indebtedness under such revolving
facility is secured by a lien on virtually all the Company's assets and bears
interest at an annual rate of prime plus 3%. On October 28, 1997, the Company
received $1,500,000 under such revolving facility.
During the third quarter of 1997, the Company received an aggregate of
$207,000 upon the exercise of certain stock options and warrants and a $100,000
abatement of investment banking fees. In addition, the Company received and
repaid $1,750,000 in loans. One of the lenders received warrants to purchase
50,000 shares of the Company's Common Stock at an exercise price of $2.50 per
share, expiring in August 2002. If all of these warrants are exercised, of which
there can be no assurance, the Company would receive approximately $125,000 in
gross proceeds.
During the nine months ended September 30, 1997, the Company has
expended substantial funds for research and product development, scale-up of
manufacturing capacity, sales and marketing efforts and other general corporate
purposes. Management believes that existing cash balances and internally
generated funds will be sufficient to finance the Company's projected operations
through at least the next 12 months. The Company's future liquidity and capital
requirements will depend upon numerous factors, including the costs and timing
of expansion of manufacturing capacity, the costs, timing and success of the
Company's product development efforts, the costs and timing of acceptance of the
Company's products, competing technological and market developments, the
progress of commercialization efforts of the Company and its distributors, the
costs involved in preparing, filing, prosecuting, maintaining, enforcing and
defending patent claims and other intellectual property rights, developments
related to regulatory and third-party reimbursement matters, and other factors.
The Company currently has no commitments with respect to sources of
additional financing, and there can be no assurance that any such financing
sources will be available to the Company or that adequate funds for the
Company's operations, whether from the Company's revenues, financial markets,
collaborative or other arrangements with corporate partners or from other
sources, will be available when needed or on terms satisfactory to management.
The failure to obtain adequate additional financing may require management to
delay, curtail or scale back some or all of its studies and regulatory
activities and, potentially, to cease all operations. Any additional equity
financing may involve substantial dilution to the Company's then-existing
stockholders.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
Management expects that the Company's operating results will fluctuate
significantly from quarter to quarter and will depend on various factors, many
of which are outside of
-9-
<PAGE> 12
management's control. These factors include the success of the marketing efforts
for the Company's products, obtaining necessary regulatory clearances or
approvals for the Company's products, the timing and level of expenditures
associated with expansion of sales and marketing activities and overall
operations, the Company's ability to cost effectively expand manufacturing
capacity and maintain consistently acceptable yields, the timing of
establishment of strategic distribution arrangements and the success of the
activities conducted under such changes in government regulation and other
factors, the timing of significant orders from and shipments to customers, and
general economic conditions. These or other factors could have a material
adverse effect on the Company's business, financial condition and results of
operations.
-10-
<PAGE> 13
PART II.
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. The following exhibits are filed herewith:
10.1 Equipment Loan and Security Agreement dated as of
September 23, 1997 between Registrant and Transamerica
Business Credit Corporation. (previously filed with the
Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1997)
10.2 Promissory Note No. 1 dated as of September 30, 1997 by
the Registrant in favor of Transamerica Business Credit
Corporation in the original principal amount of
$1,500,000. (previously filed with the Quarterly Report
on Form 10-QSB for the quarter ended September 30, 1997)
10.3 Promissory Note No. 2 dated as of September 30, 1997 by
the Registrant in favor of Transamerica Business Credit
Corporation in the original principal amount of
$1,500,000. (previously filed with the Quarterly Report
on Form 10-QSB for the quarter ended September 30, 1997)
10.4 Promissory Note No. 3 dated as of September 30, 1997 by
the Registrant in favor of Transamerica Business Credit
Corporation in the original principal amount of
$1,500,000. (previously filed with the Quarterly Report
on Form 10-QSB for the quarter ended September 30, 1997)
27.1 Financial Data Schedule
-11-
<PAGE> 14
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this 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: December 9, 1997
-12-
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ------------ ----------------------
<S> <C>
10.1 Equipment Loan and Security Agreement dated as of September
23, 1997 between Registrant and Transamerica Business Credit
Corporation. (previously filed with the Quarterly Report on
Form 10-QSB for the quarter ended September 30, 1997)
10.2 Promissory Note No. 1 dated as of September 30, 1997 by the
Registrant in favor of Transamerica Business Credit
Corporation in the original principal amount of $1,500,000.
(previously filed with the Quarterly Report on Form 10-QSB
for the quarter ended September 30, 1997)
10.3 Promissory Note No. 2 dated as of September 30, 1997 by the
Registrant in favor of Transamerica Business Credit
Corporation in the original principal amount of $1,500,000.
(previously filed with the Quarterly Report on Form 10-QSB
for the quarter ended September 30, 1997)
10.4 Promissory Note No. 3 dated as of September 30, 1997 by the
Registrant in favor of Transamerica Business Credit
Corporation in the original principal amount of $1,500,000.
(previously filed with the Quarterly Report on Form 10-QSB
for the quarter ended September 30, 1997)
27.1 Financial Data Schedule
</TABLE>
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,550
<SECURITIES> 0
<RECEIVABLES> 5,033
<ALLOWANCES> 0
<INVENTORY> 3,240
<CURRENT-ASSETS> 10,477
<PP&E> 5,902
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,032
<CURRENT-LIABILITIES> 7,164
<BONDS> 11,191
0
0
<COMMON> 227
<OTHER-SE> 3,233
<TOTAL-LIABILITY-AND-EQUITY> 23,032
<SALES> 14,157
<TOTAL-REVENUES> 14,157
<CGS> 8,906
<TOTAL-COSTS> 8,906
<OTHER-EXPENSES> 16,718
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,961
<INCOME-PRETAX> (14,085)
<INCOME-TAX> 0
<INCOME-CONTINUING> (14,085)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,085)
<EPS-PRIMARY> (0.65)
<EPS-DILUTED> (0.65)
</TABLE>
