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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K/A
CURRENT REPORT
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PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) December 15, 1997
(September 30, 1997)
HENLEY HEALTHCARE, INC.
(Exact name of registrant as specified in its charter)
Commission File Number 0-28566
TEXAS 76-0335587
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
120 Industrial Boulevard, Sugar Land, Texas 77478
(Address of principal executive offices)
281-276-7000
(Registrant's telephone number, including area code)
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HENLEY HEALTHCARE, INC.
FORM 8-K/A
CURRENT REPORT
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 30, 1997 Henley Healthcare, Inc., a Texas corporation (the
"Company"), entered into an agreement with Cybex International, Inc., a New York
corporation ("Cybex"), whereby the Company purchased certain assets of (and
assumed certain liabilities associated with) the isokinetic rehabilitation
product line (the "Product Line") of Cybex for an estimated purchase price of
approximately $4.1 million including acquisition costs of approximately
$300,000. The assets acquired consist of tangible personal property including
machinery, equipment, furniture and fixtures; contracts; operating rights to use
intellectual property and trade names; business licenses; inventory; and prepaid
expenses. The initial purchase price has been allocated to the assets acquired
and liabilities assumed based upon estimated fair values at the date of
acquisition as follows:
ASSETS ACQUIRED:
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Inventory $3,173,000
Machinery and Equipment 727,000
Other assets 200,000
LIABILITY ASSUMED:
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Warranty Reserve 670,000
The purchase price was paid in cash which the Company obtained pursuant to
an amendment to its Amended and Restated Loan Agreement (the "Amended Loan
Agreement") entered into with Comerica Bank - Texas, a Texas banking corporation
("Comerica"). The Amended Loan Agreement with Comerica provides for a revolving
loan which permits borrowings up to $8,000,000 pursuant to a borrowing base
calculation derived from the Company's accounts receivable and inventory. In
connection with the Amended Loan Agreement, the Company paid off its Term Note A
with Comerica in the amount of $893,000 and issued a substitute Term Note A in
the amount of $1,430,000. The revolving loan's maturity date is February 1,
1999, while the maturity date of the $1,430,000 Term Note A is September 30,
2002. All of the borrowings from Comerica are secured by substantially all of
the assets of the Company including the assets acquired from Cybex. The Amended
Loan Agreement also contains a number of affirmative covenants, negative
covenants and financial covenants with which the Company must comply including a
minimum tangible net worth, leverage ratio, working capital ratio, fixed charge
ratio and interest coverage ratio.
In connection with the Amended Loan Agreement with Comerica relating to
the acquisition of the Product Line from Cybex, the Company entered into an
amendment to the Subordination Agreement (the "Subordination Amendment") by and
among Maxxim Medical,
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Inc. ("Maxxim"), Comerica and the Company. Pursuant to the Subordination
Amendment, the maximum amount of the Company's debt with Comerica that can be
issued senior to Maxxim's Convertible Subordinated Promissory Note from the
Company (the "Maxxim Note") was increased from $10,000,000 to $12,000,000. In
exchange for Maxxim's execution of the Subordination Amendment, the Company
entered into a note modification agreement with Maxxim in which the Conversion
Price (as defined in the Maxxim Note) was reduced from $3.00 to $2.00. The
modification of the Maxxim Note increases the number of shares of the Company's
common stock, par value $.01 per share ("Common Stock") beneficially owned by
Maxxim from 2,333,333 to 3,500,000 which upon conversion would represent
approximately 53% (compared to approximately 43% prior to the adjustment of the
conversion price) of the currently issued and outstanding Common Stock. The
Maxxim Note is convertible into Common Stock at any time at Maxxim's option.
The Company intends to continue the manufacturing and marketing of the
Product Line and has moved the manufacturing activity from the Cybex facilities
in Ronkonkoma, New York to the Company's manufacturing plants in Sugar Land and
Belton, Texas.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, AND EXHIBITS
(a) and (b) Financial Statements of Business Acquired and Pro Forma Financial
Information.
Upon further analysis of the facts and circumstances involved with the
transaction, the Company has concluded that the acquisition of the Product Line
from Cybex does not qualify as an acquisition of a business. Accordingly,
financial statements and pro forma financial information otherwise required, are
not presented.
The Product Line which comprised a small portion (about 10%) of Cybex's
gross revenues and represented an element of Cybex's Ronkonkoma, New York,
operation was not segregated or operated as a separate business unit, but was
manufactured and distributed by Cybex at one of its facilities (Ronkonkoma, New
York) where some other of its products were manufactured and distributed.
For the twelve months ended December 31, 1996 and the nine months ended
September 30, 1997, net revenues generated by the Product Line were
approximately $14.8 million and $8.4 million, respectively. Although the
customer class will remain generally the same as before the transaction, the
Company will seek and establish its own customer base, particularly since the
primary products acquired are high-dollar items that last over 10 years. The
Company will manufacture the Product Line using its existing employees in its
own facilities. To this end, the Company has moved and split the manufacturing
activity from the Cybex location in New York to the Company's two separate
manufacturing facilities in Belton and Sugar Land, Texas. Additionally, the
Company intends to sell the Product Line through its own established network of
independent dealers and sales representatives encompassing both national and
international markets.
Although the Company anticipates that the revenue stream generated by the
Product Line will remain generally the same as before the transaction, the cost
structure and activities
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required to generate that revenue stream will not be the same. The Company
intends to more actively support the Product Line to attempt to generate more
revenues at greatly reduced costs. Cybex's labor costs in Ronkonkoma, New York,
relating to the Product Line were about four times the Company's labor cost in
Belton and Sugar Land, Texas, where the Product Line will now be manufactured.
(c) Exhibits
The following exhibits, from which schedules and attachments have been
omitted and will be furnished to the Commission upon its request, are filed with
this report on Form 8-K. Exhibits incorporated by reference to a prior filing
(of Form 8-K) are designated by an asterisk(*); all other exhibits not so
designated are documents required to be filed as exhibits to this Form 8-K/A:
EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
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2.1* Asset Purchase Agreement by and between the Company and Cybex dated
September 30, 1997.
4.1* Amended and Restated Loan Agreement between Comerica and the Company
dated June 30, 1997 (the "Amended Loan Agreement")
4.2* First Amendment to the Amended Loan Agreement between Comerica and
the Company dated September 30, 1997.
4.3* Term Note A in the principal amount of $1,430,000 issued by the
Company to Comerica dated September 30, 1997.
4.4* Revolving Note in the principal amount of $8,000,000 issued by the
Company to Comerica dated September 30, 1997.
4.5* First Modification to the Convertible Subordinated Promissory Note
between the Company and Maxxim dated September 30, 1997.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED HEREUNTO DULY AUTHORIZED.
HENLEY HEALTHCARE, INC.
By: /s/ Dan D. Sudduth
Date: December 15, 1997 Dan D. Sudduth
Executive Vice President &
Chief Financial Officer
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