<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934
For the quarterly period ended September 30, 1999.
OR
___ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____ to _____.
Commission file number: 0-20652
ACCUMED INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-4054899
---------------------------- -------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
920 N. Franklin St., Suite 402, Chicago, IL 60610
-------------------------------------------------
(Address of principal executive offices)
(312) 642-9200
--------------
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 registrant had 5,491,901 shares of common stock outstanding as of
October 28, 1999.
<PAGE> 2
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
Page
Number
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 1999 and December 31, 1998............................... 1
Condensed Consolidated Statements of Operations -
Nine Months and Three Months Ended September 30, 1999 and 1998......... 2
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1999 and 1998.......................... 3
Notes to Condensed Consolidated Financial Statements........................ 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................... 6
PART II. OTHER INFORMATION
Item 5 Proposed merger with Microsulis Corporation................................. 11
Item 6. Exhibits and Reports on Form 8-K............................................ 12
SIGNATURE................................................................................... 13
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
UNAUDITED
----------------- -----------------
ASSETS September 30,1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,849,251 $ 213,386
Accounts receivable, net 15,154 33,348
Prepaid expenses 90,162 64,048
Inventory 1,901,509 1,738,611
------------ ------------
TOTAL CURRENT ASSETS 3,856,076 2,049,393
------------ ------------
FIXED ASSETS, NET 886,618 1,488,809
------------ ------------
Deferred financing costs - 177,625
Purchased technology 4,351,368 5,085,018
Patents and other, net 918,552 884,564
Net assets of discontinued operations - 3,762,397
------------ ------------
$ 10,012,614 $ 13,447,806
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 659,043 $ 1,808,249
Accrued interest - 189,069
Income taxes - current 70,000 -
Other current liabilities 688,955 290,292
Long term debt, current portion 342,550 1,155,400
------------ ------------
TOTAL CURRENT LIABILITIES 1,760,548 3,443,010
------------ ------------
Long term debt 173,712 5,781,850
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock, series A convertible 4,249,735 4,329,466
Common stock, $0.01 par value 54,919 54,801
Additional paid-in capital 59,619,262 59,539,649
Other comprehensive income (120,787) (53,995)
Accumulated deficit (55,508,038) (59,430,238)
Treasury stock (216,737) (216,737)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 8,078,354 4,222,946
------------ ------------
$ 10,012,614 $ 13,447,806
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 4
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, THREE MONTHS ENDED SEPTEMBER 30,
------------------------------- --------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
SALES $ 11,435 $ 71,310 $ - $ 14,681
COST OF SALES (3,413) (472,168) - (279,843)
----------- ----------- ----------- -----------
Gross profit (loss) 8,022 (400,858) - (265,162)
----------- ----------- ----------- -----------
OPERATING EXPENSES:
General and administrative 2,307,707 4,013,936 692,123 2,610,542
Research and development 1,438,865 2,054,399 469,721 1,264,714
Sales and marketing 199,380 1,085,962 54,232 688,168
----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES 3,945,952 7,154,297 1,216,076 4,563,424
----------- ----------- ----------- -----------
OPERATING LOSS (3,937,930) (7,555,155) (1,216,076) (4,828,586)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (485,867) (1,114,591) (8,172) (616,443)
Other income (expense) 146,798 783,326 144,131 695,846
----------- ----------- ----------- -----------
TOTAL OTHER EXPENSE (339,069) (331,265) 135,959 79,403
----------- ----------- ----------- -----------
LOSS BEFORE INCOME TAXES FROM
CONTINUING OPERATIONS (4,276,999) (7,886,420) (1,080,117) (4,749,183)
INCOME TAX EXPENSE - - - -
----------- ----------- ----------- -----------
LOSS FROM CONTINUING OPERATIONS (4,276,999) (7,886,420) (1,080,117) (4,749,183)
DISCONTINUED OPERATIONS:
Income (loss) from operations (158,250) 3,930,367 -
Gain on disposal (net of income taxes of $140,000) 8,357,449 - 1,230,581
EXTRAORDINARY ITEM - DEBT EXTINGUISHMENT LOSS - (1,168,080) - -
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 3,922,200 $(5,124,133) $(1,080,117) $(3,518,602)
=========== =========== =========== ===========
BASIC LOSS PER SHARE FROM CONTINUING OPERATIONS $ (0.78) $ (1.59) $ (0.20) $ (0.87)
INCOME PER SHARE FROM DISCONTINUED OPERATIONS 1.50 0.79 - 0.22
LOSS PER SHARE FROM EXTRAORDINARY ITEM - (0.24) - -
----------- ----------- ----------- -----------
BASIC NET INCOME (LOSS) PER SHARE $ 0.72 $ (1.04) $ (0.20) $ (0.65)
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 5,471,784 4,950,396 5,491,901 5,416,970
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 5
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
UNAUDITED
---------------------------------
1999 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 3,922,200 $ (5,124,133)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
(Income) from discontinued operations (8,199,199) (3,930,367)
Non-cash expenses of asset disposal 492,500 -
Depreciation and amortization 694,176 934,000
Debt extinguishment loss - 1,168,080
Minority interest - (191,560)
Changes in assets and liabilities:
Decrease (Increase) in accounts receivable 18,194 (58,611)
Decrease (Increase) in prepaid expenses (26,114) (73,476)
Decrease (Increase) in inventory (162,898) (822,640)
Decrease (Increase) in other assets 61,575 (7,770)
Increase (Decrease) in accounts payable (1,149,206) (327,692)
Increase (Decrease) in other current liabilities 279,594 340,844
Increase (Decrease) in warranty reserves - 100,000
------------ ------------
CASH USED IN OPERATING ACTIVITIES FROM CONTINUING OPERATIONS (4,069,178) (7,993,325)
------------ ------------
INVESTING ACTIVITIES:
Purchase of fixed assets - (164,580)
Purchase of Oncometrics stock - (528,000)
Proceeds from sale of microbiology division 9,127,449 -
------------ ------------
CASH PROVIDED (USED) IN INVESTMENT ACTIVITIES 9,127,449 (692,580)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from issuances of common stock, net - 4,852,394
Payment of notes payable (3,225,000) (1,188,316)
Proceeds from issuance of notes payable - 1,362,500
------------ ------------
CASH (USED) PROVIDED BY FINANCING ACTIVITIES (3,225,000) 5,026,578
------------ ------------
CASH TRANSFER (TO) FROM DISCONTINUED OPERATIONS (197,406) 3,442,783
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,635,865 (216,544)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 213,386 331,983
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,849,251 $ 115,439
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE> 6
ACCUMED INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Preparation of Interim Financial Statements
In the opinion of the management of AccuMed International, Inc. and
Subsidiary, the accompanying unaudited condensed consolidated financial
statements include all normal adjustments considered necessary to present fairly
the financial position as of September 30, 1999, and the results of operations
for the three months and nine months ended September 30, 1999 and 1998 and cash
flows for the nine months ended September 30, 1999 and 1998. Interim results are
not necessarily indicative of results for a full year.
The condensed consolidated financial statements and notes are presented as
permitted by Form 10-Q, and do not contain certain information included in the
company's audited consolidated financial statements and notes for the fiscal
year ended December 31, 1998.
2. Basis of Presentation
The condensed consolidated financial statements include the accounts of the
company and its wholly owned subsidiary. All significant inter-company balances,
transactions and stockholdings have been eliminated.
On December 22, 1998, (the measurement date), the company received
shareholder approval to sell its microbiology division under a sales agreement
negotiated by management under the approval of the board of directors. On
January 29, 1999, AccuMed closed the sale of the microbiology division for an
initial sales price of $15,150,000, subject to final adjustment of working
capital items as defined in the sales agreement. Accordingly, the microbiology
division is accounted for as a discontinued operation in the accompanying
condensed consolidated balance sheets, statements of operations and statements
of cash flows.
Certain amounts in the 1998 financial statements have been reclassified to
conform to the 1999 presentation.
3. Other Comprehensive Income
<TABLE>
<CAPTION>
9 Months Ended September 30 3 Months ended September 30
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income (loss) $3,922,200 $(5,124,133) $(1,080,117) $(3,518,602)
Other comprehensive
Income(loss).(Foreign
Currency translation) (66,792) (7,803) 7,956 (5,991)
---------- ----------- ----------- -----------
Comprehensive Income
(loss) $3,855,408 $(5,131,936) $(1,072,161) $(3,524,593)
========== =========== =========== ===========
</TABLE>
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<PAGE> 7
4. Inventories
<TABLE>
<CAPTION>
Inventories are summarized as follows: September 30, December 31,
1999 1998
---- ----
<S> <C> <C>
Raw material and packaging $ 681,220 $ 907,038
Finished goods and work in process 1,220,289 831,573
----------- -----------
Total inventories $ 1,901,509 $ 1,738,611
=========== ===========
</TABLE>
5. Debt Retirement
On February 2, 1999, the company repaid in full its 12% unsecured
convertible notes payable for $3,225,000 plus accrued interest.
6. Supplemental Disclosures of Cash Flow Information
<TABLE>
<CAPTION>
9 Months ended September 30,
1999 1998
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Interest paid $ 485,867 $ 1,114,591
NON-CASH INVESTING AND FINANCING ACTIVITIES
Deposit reclassified to fixed assets $ --- $ 125,000
</TABLE>
In connection with the sale of the microbiology division on January 29,
1999, the company repaid in full a note payable under its revolving credit
agreement for $1,250,000 and its 14.5% secured note payable for $3,900,000,
including prepayment penalties.
The company paid expenses connected with the sale of the microbiology
business of $700,000 from the gross proceeds of the sale of the microbiology
business in January 1999.
The company extinguished debt with a carrying value of $4,818,800 through
the issuance of preferred stock and warrants with a fair value of $5,986,880
including transaction fees, resulting in an extraordinary loss of $1,168,000 in
February 1998.
The company satisfied its obligation under a $1,000,000 note payable
through the issuance of 222,222 shares of common stock in March 1998.
7. Subsequent Event.
In connection with an agreement to merge with Microsulis Corporation, as more
fully discussed in Part II of this report, the company loaned Microsulis
Corporation on October 18, 1999 $310,000 for general corporate purposes and
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<PAGE> 8
to expedite the commencement of clinical trials once an Investigational
Device Exemption (IDE) has been received from the U.S. Food and Drug
Administration.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
During 1998, AccuMed received shareholder approval to sell its microbiology
business. Accordingly, the results of the microbiology business are reported as
a discontinued operation in the accompanying financial statements. On January
29, 1999, the company closed the sale of the microbiology business for an
initial sales price of $15,150,000, subject to final adjustment of working
capital items as defined in the sales agreement.
The following management discussion and analysis of financial condition and
results of operations relate only to the cytopathology business, AccuMed's only
business line. Also, the company is committed to a substantial research and
development program. Accordingly, AccuMed expects to incur additional operating
losses over at least the next 12 months due to continued spending for product
development, prototype construction and testing and regulatory activities.
OVERVIEW
AccuMed is engaged in the marketing and development of cost effective
screening instruments and systems for clinical diagnostic laboratories,
hospitals and others. The company's integrated systems use reliable, accurate
and innovative products and methods to provide laboratories with comprehensive
solutions that are intended to improve efficiency and reduce costs while
achieving significant improvements in disease detection.
The company is developing cytology computer-aided image cytometry instruments
and systems that support early detection and diagnosis programs for screening
high-risk individuals for cellular diseases, such as lung cancer.
On August 11, 1999, the company announced that the letter of intent with
Ampersand Medical Corporation (formerly Bell National Corporation) to license
the AcCell product line, including patents, engineering study results, and
proprietary information was mutually terminated. The non-refundable, good faith
deposit of $100,000 provided to the company by Ampersand was recognized in the
third quarter as Other Income.
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<PAGE> 9
RESULT OF OPERATIONS
The company currently markets its AcCell(TM) cytopathology products
directly to collect, analyze and document performance data of the products in
several primary clinical cytology laboratory market segments. The
AcCell/Savant(TM) DNA image cytometer, the company's next generation product, is
currently in development and prototyping. Marketing efforts for the
AcCell-Savant/research systems began, as anticipated, in the second half of
1999.
No sales revenue was generated in the third quarter, 1999. Revenues in 1998
represent consumables and computer support equipment. Cost of sales for the
quarter ended September 30, 1998 also includes non-capitalizable costs
associated with upgrading products. The company suspended its manufacturing
operations in October 1998 to eliminate related indirect overhead costs and
anticipates future product sales will be made on a build-to-order or contract
manufacturing basis.
General and administrative expenses decreased 73.5 %, declining from
$2,611,000 in the third quarter of 1998 to $692,000 in the comparable 1999
quarter. This decrease reflects reduced corporate level activity, including
reductions in staff, due to the sale of the company's microbiology business and
less administrative costs due to the consolidation of cytopathology operations.
Research and development expenses decreased 62.9 % from $1,265,000 in the
third quarter of 1998 to $470,000 in the third quarter of 1999 due primarily to
reduced staffing levels. The current quarter expenses represent the ongoing
efforts to develop the Savant medical technologies next generation products. The
third 1998 quarter expenses represent costs associated with the AcCell(TM) 2000
and TracCell(TM) slide mapping system, which were completed in August 1998.
The decrease in sales and marketing expenses of 92.1 % from $688,000 in the
third quarter of 1998 to $54,000 in the third quarter of 1999 reflects the
reduction in marketing staff announced in October 1998. With increased financial
commitment to sales and marketing, the company believes that product sales would
benefit. The AcCell-Savant (research) is being directly marketed to research
facilities.
Interest expense of $616,000 in the third quarter of 1998 reflected amounts
accrued on the $4.5 million equipment loan and the 12% convertible notes issued
in March 1997. Interest expense for the third quarter 1999 was $8,000. The
interest expense for the nine months ended September 30, 1999 was $486,000 and
reflected one month of interest on the company's equipment loan and convertible
notes and $370,000 in non-cash write-off of deferred financing costs and related
debt discount. The non-cash write-offs were made because the company used a
portion of the cash proceeds from the sale of the microbiology division on
January 29, 1999 to retire all of this debt in the first quarter of 1999.
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<PAGE> 10
Discontinued operations in the third quarter of 1998 and nine months ended
September 30, 1998 reflects the operating results of the company's microbiology
division. For the nine months ended September 30, 1999, the gain on sale of this
division as of January 29, 1999 is based on the initial closing price of
$15,150,000. The initial closing price is subject to adjustment for working
capital items as called for in the sales agreement. The company retained about
$5,700,000 in cash after repayment of all related debt and expenses of the sale.
The company is using these funds for development of the AcCell/Savant(TM) DNA
image cytometer.
For the nine month period ended September 30, 1998, the company incurred a
$1,168,000 extraordinary loss related to the conversion of par value $5,275,000
of convertible notes and $329,030 in accrued interest thereon into 1,245,340
shares of series A convertible preferred stock. Of the total expense, $193,000
represented cash fees and expenses. As a result of this exchange of convertible
notes for convertible preferred stock, the company's net tangible assets
increased by about $4,700,000 and its interest expense was reduced by about
$633,000 through January 1999. At the conclusion of the sale of the microbiology
division in January 1999 the remaining notes were paid off using a portion of
the proceeds from that sale.
LIQUIDITY AND CAPITAL RESOURCES
The company's primary cash requirements are for research and development,
general corporate and marketing expenses, including salaries, material and
consulting support, to develop and market new cytopathology products. The
company anticipates its operations will continue to consume working capital for
the remainder of the year as the company continues its research and product
development efforts. The company believes that current cash balances and
internally generated funds will not be sufficient to finance the company's
projected operations through the next 12 months. An effort to raise additional
capital will be necessary, particularly assuming completion of the acquisition
of Microsulis Corporation.
The company had a cash balance of $1,849,000 at September 30, 1999 as
compared to $213,000 in cash at December 31, 1998. The September 30, 1999
balance represents the cash remaining from the sale of the company's
microbiology business, after the retirement of its 14.5% secured note payable,
the 12% unsecured convertible notes payable, and the revolving line of credit.
At September 30, 1999, the company's non-current assets included purchased
technology, with a book value of $ 4,351,000, which was being amortized over a
period of ten years. This was originally recorded in connection with the merger
of AccuMed Inc. in 1995 and purchase of Oncometrics Imaging Corp. in 1996 and
1998. The value of this asset is expected to be realized through its application
in the company's AcCell/Savant Research Systems, which are now being sold, and
in the AcCell/Savant DNA Image Cytometer, which is expected to be completed and
available to the market in the year 2000.
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<PAGE> 11
The company's equity at September 30, 1999 was $8,078,000, of which
$8,200,000 was recorded in the first quarter through the gain on the sale of the
company's microbiology business. The company's equity at December 31, 1998 was
$4,223,000.
Operating Activities
Cash used in operating activities reflects the company's ongoing efforts to
develop its next generation product, which the company believes will have
applications for early lung cancer testing. The company expects a prototype of
this product to be completed in the first quarter of 2000. In addition, over
$1,000,000 of cash was used in the first nine months of 1999 to reduce vendor
financing carried over from the third and fourth quarter of 1998. The company
has accrued for the cost of unneeded office space, net of sublease rental
income. The company is actively marketing its excess office space. If the excess
remaining space were subleased, the rental savings to the company would
approximate $160,000 annually.
Investing Activities
The cash received from the sale of the microbiology business is being used
to develop the company's next generation cytopathology products as well as for
general and corporate expenses. The cash received of $9,100,000 is after
immediate payment of expenses associated with the sale and retirement of the
company's equipment loan and revolving line of credit.
The company has no material commitments for property or equipment
investments at this time.
Financing Activities
The company paid off its $3,225,000 in 12% convertible notes on February 2,
1999 to reduce its future interest expense by $420,000 through March 2000.
The company's remaining debt consists principally of a floating rate
convertible note due December 29, 1999 in the amount of $500,000 Canadian
dollars. The note bears interest at a rate of 2% over the Canadian prime rate
(8.25 % at September 30, 1999)(or a default rate of prime + 6%), payable
quarterly in arrears. It is convertible, in whole or in part into common stock
at a price of $1.43 per share
The company currently has no commitments with respect to sources of
additional financing. The failure of the company to obtain adequate additional
financing may require the company to delay, curtail or scale back some or all of
its studies and regulatory activities and, potentially, to cease its operations.
Any additional equity financing may involve substantial dilution to the
company's then-existing stockholders.
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<PAGE> 12
The company's future liquidity and capital requirements will depend upon
numerous factors, including the costs and timing 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. Because the
company no longer has cash resources available to sustain 12 months of
operations, it anticipates that additional financing will be necessary, through
public or private financings, from collaborative relationships or other
arrangements.
YEAR 2000 COMPLIANCE
The Year 2000 (Y2K) issue is the result of computer programs being written
using two digits rather than four to define the applicable year. This could
result in a system failure or miscalculations causing disruptions of operations,
including, but not limited to, a temporary inability to process transactions,
including invoices or other similar normal business activities.
State of Readiness
The company's Year 2000 compliance plan provided for the conversion of
non-compliant information technology systems in the third quarter of 1999. The
conversion project involved three phases: selection and installation of hardware
and software, loading the financial database into the new system, and testing.
This conversion to a Year 2000 compliant technology system was completed in the
third quarter, 1999.
The company has reviewed its non-information technology systems and has
determined that any required repair or replacement of imbedded technology should
not have a significant impact on the company's operations. The company has
received representation form its vendors of non-financial network servers and
software that these products are Y2K compliant. All of the company's products,
including software sold in products to customers, have been developed with
consideration for the millenium change, and have undergone specific year 2000
date testing to verify and validate compliance.
The company has made inquiry of its bank and has received representation
that the devices and software used by this party is Y2K compliant.
Costs to Address the Company's Year 2000 Issues
The company has used internal personnel versed in the Y2K issue to evaluate
its remediation cost. The cost of evaluation and remediation of the company's
non-compliant systems, related to financial hardware and software, are believed
to be immaterial.
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<PAGE> 13
Risks of the Company's Year 2000 Issues
The company believes that it has become Y2K compliant in the third quarter
of 1999. The most reasonably likely worst case scenario due to the failure to be
Y2K compliant would be the company's inability to process financial
transactions, including invoices or other normal business dealings. The company
cannot quantify how significant the potential effect on liquidity or financial
condition could be.
Surveys to ascertain the Y2K readiness of suppliers or customers have
not been done. A reasonable description of the most reasonably likely worst case
Y2K scenario due to the failure of customers or suppliers to be Y2K compliant
would be a disruption in the production and shipment of products, resulting in a
decrease in sales and operating cash flow. The company cannot quantify how
significant the potential sales or operating cash flow decrease could be.
The Company's Contingency Plans
With the disposal of the microbiology business and the nature of the
company's continuing research and development operations, the company does not
have significant interdependence on computer systems with third party customers
or suppliers. Management has elected to develop contingency plans on an ad hoc
basis as the need for such plans arise.
PART II.
OTHER INFORMATION
ITEM 5. SUBSEQUENT EVENT
The company and Microsulis Corporation, a Florida corporation (Microsulis), have
entered into a Letter of Intent (LOI) dated October 6, 1999, as amended,
pursuant to which Microsulis would be merged with and into the Company or a
wholly-owned subsidiary of the company, and the company would continue as the
surviving corporate entity. The LOI provides that the company's current
stockholders would retain an aggregate of approximately 37.5% of the outstanding
Common Stock and Microsulis stockholders would receive an aggregate of
approximately 62.5% of the Common Stock in the company.
Consumation of the Microsulis merger is subject to the following conditions,
among others, (i) satisfactory completion of due diligence investigations, (ii)
negotiation, board approval, and execution and delivery of a definitive merger
agreement containing representations, warranties, covenants and conditions
customary in such transactions, (iii) effectiveness of a registration statement
registering the company's proxy materials for use in connection with a special
meeting of stockholders, and (iv) approval of the Microsulis Merger by the
stockholders of the company and Microsulis.
Pursuant to a license agreement with Microsulis PLC of the United Kingdom
(Microsulis PLC), Microsulis Corporation has the sole marketing, distribution,
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and the potential of manufacturing rights for the Western Hemisphere for
Microwave Endometrial Ablation systems (MEA System) and related applicators
developed and manufactured by Microsulis PLC. The first product, MEA System, is
an alternative to hysterectomy for women suffering from excessive menstrual
bleeding. The product, presently, is being sold in the U.K., in Europe, in Asia,
and, most recently, in Canada. If the merger is consummated the company will
conduct clinical trials after the Food and Drug Administration approves an
Investigational Device Exemption (IDE) for the MEA System. Clinical trials are
anticipated to commence with the objective of obtaining authorization to market
the product in the United States. On October 18, 1999, to hasten these clinical
trials and for general corporate use, the company made a secured loan of
$310,000 to Microsulis Corporation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. The following exhibits are filed herewith:
---------
27.1 Financial Data Schedule
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<PAGE> 15
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/ Paul F. Lavallee
---------------------
Paul F. Lavallee
Chairman and Chief Executive Officer
(Principal Accounting Officer)
Date: November 13, 1999
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<PAGE> 16
Index to Exhibits
-----------------
Exhibit No. Description of Exhibit
----------- ----------------------
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,849
<SECURITIES> 0
<RECEIVABLES> 15
<ALLOWANCES> 0
<INVENTORY> 1,902
<CURRENT-ASSETS> 3,856
<PP&E> 887
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,013
<CURRENT-LIABILITIES> 1,760
<BONDS> 174
0
4,250
<COMMON> 55
<OTHER-SE> 3,774
<TOTAL-LIABILITY-AND-EQUITY> 10,013
<SALES> 11
<TOTAL-REVENUES> 11
<CGS> 3
<TOTAL-COSTS> 3,946
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 486
<INCOME-PRETAX> 4,277
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,277
<DISCONTINUED> 8,199
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,922
<EPS-BASIC> 0.72
<EPS-DILUTED> 0
</TABLE>
