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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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): May 11, 1998
DERMA SCIENCES, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 1-31070 23-2328753
(State or other jurisdiction (Commission (IRS employer
of incorporation) File Number) identification number)
214 Carnegie Center, Suite 100
Princeton, NJ 08540
(609) 514-4744
(Address including zip code and telephone
number, of principal executive offices)
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<PAGE>
ITEM 5. OTHER EVENTS
On May 12, 1998, the Registrant announced the execution of a nonbinding
letter of intent to acquire Genetic Laboratories Wound Care, Inc. ("GLWC"). The
acquisition would be accomplished by the merger of GLWC into a newly formed,
wholly owned subsidiary of the Registrant. GLWC shareholders would receive 0.7
shares of the Registrant's common stock for each share GLWC common stock owned.
The acquisition is conditioned upon: (1) execution of a definitive agreement and
plan of merger, (2) successful completion of due diligence examinations, (3)
approval of the acquisition by the boards of directors of the Registrant and
GLWC, and (4) approval of the acquisition by majority vote of the shareholders
of the Registrant and GLWC. The letter of intent, attached hereto as Exhibit 10,
and Registrant's press release relative to the contemplated acquisition,
attached hereto as Exhibit 99, are incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Not applicable
(b) Not applicable
(c) Exhibits:
10 - Letter of Intent dated May 12, 1998, between the Registrant
and Genetic Laboratories Wound Care, Inc.
99 - Press release issued May 12, 1998.
2
<PAGE>
Pursuant to 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.
DERMA SCIENCES, INC.
Date: May 13, 1998 By:/s/ Edward J. Quilty
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Edward J. Quilty
Chairman
3
[DERMA SCIENCES, INC. LETTERHEAD]
May 11, 1998
Mr. Arthur A. Beisang
Chief Executive Officer
Genetic Laboratories Wound Care, Inc.
2726 Patton Road
Saint Paul, MN 55113
Re: Derma Sciences, Inc. - Genetic Laboratories Wound Care, Inc.;
Merger Letter of Intent
Dear Art:
This letter sets forth the intent of Derma Sciences, Inc., a Pennsylvania
corporation ("Derma Sciences") and Genetic Laboratories Wound Care, Inc., a
Minnesota corporation ("Genetic Labs (MN)") to merge in accordance with the
terms described hereinbelow (the "Merger Transaction").
This is a non-binding letter of intent save for the obligations of
confidentiality and public disclosure described on pages 2-3 and page 4 hereof,
respectively. With the exception of the foregoing, this letter of intent imposes
no contractual or other legal obligations on either party hereto and does not
constitute an offer which may be accepted by execution hereof. A binding
contract will be created only upon the execution of an agreement and plan of
merger together with such other formal documents as may be necessary to carry
such merger into effect.
We contemplate the principal terms of the Merger Transaction to be as follows:
Structure
- ---------
Genetic Labs (MN) will merge with and into a 100% subsidiary of Derma Sciences
to be named Genetic Laboratories, Inc. ("Genetic Labs (PA)"). The surviving
corporation in the Merger Transaction shall be Genetic Labs (PA). The Merger
Transaction is intended to qualify as:
(a) a statutory merger under Subchapter C, Section 1921 et seq., of the
Pennsylvania Business Corporation Law of 1988 and
<PAGE>
Mr. Arthur A. Beisang
May 11, 1998
Page 2
(b) Section 302A.601 et seq. of the Minnesota Business Corporation Act,
and
(c) a reorganization under Section 368(a)(1)(A) of the Internal Revenue
Code.
Exchange Ratio - Adjustment
- ---------------------------
Derma Sciences will issue to the shareholders of Genetics Labs (MN), from its
authorized and unissued shares, a total of 1,706,990 shares of its $0.01 par
value common stock at the rate of 0.7 shares of Derma Sciences common stock for
each share of Genetic Labs (MN) common stock owned and tendered.
Transactions Outside the Ordinary Course of Business
- ----------------------------------------------------
Pending consummation of the Merger Transaction, Genetic Labs (MN) shall not
issue additional shares of its securities (other than pursuant to the exercise
of currently outstanding stock options), declare stock or cash dividends
relative to its common stock, pay bonuses or extraordinary compensation,
purchase or sell assets or incur indebtedness other than in the ordinary course
of its business.
Genetic Laboratories, Inc. (PA) - Officers and Directors
- --------------------------------------------------------
The board of directors of Genetic Labs (PA) shall initially consist of Edward J.
Quilty, Arthur A. Beisang and Robert A. Ersek, M.D. each of whom shall be
elected to serve a one year term or until his successor is elected and
qualifies. The officers of Genetic Labs (PA) shall initially consist of Edward
J. Quilty, Chairman of the Board of Directors, Arthur A. Beisang, Chief
Executive Officer, H. James Thompson, President and Chief Operating Officer, and
Robert A. Ersek, M.D., Medical Director, each of whom shall be elected to serve
a one year term or until his successor is elected and qualifies.
Genetic Laboratories, Inc. (MN) - Executive Contracts
- -----------------------------------------------------
Prior to consummation of the Merger Transaction, Derma Sciences shall accept
assignment from Genetic Labs (MN) of the rights and responsibilities of Genetic
Labs (MN) under those certain executive agreements dated May 1, 1998 with Arthur
A. Beisang, Robert A. Ersek, M.D. and H. James Thompson.
<PAGE>
Mr. Arthur A. Beisang
May 11, 1998
Page 3
Transfer and Conversion of Options
- ----------------------------------
The agreement of merger governing the Merger Transaction shall provide that
options to purchase shares of the common stock of Genetic Labs (MN) outstanding
as of the merger effective date shall be transferred and converted into options
to purchase shares of common stock of Derma Sciences ("Derma Sciences Options")
in the ratio of 0.7 Derma Sciences Options to one Genetic Labs (MN) Option.
Transaction Expenses
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Prior to the consummation of the agreement and plan of merger contemplated
hereby, each party shall be responsible for its own expenses, of whatsoever
nature, relative to the Merger Transaction and the negotiation and examination
thereof.
Conditions
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Consummation of the Merger Transaction shall be subject to the following
conditions, together with such other terms and conditions as are necessarily
incident thereto: (1) execution of an agreement and plan of merger governing the
Merger Transaction; (2) successful completion of due diligence by Derma Sciences
and Genetic Labs (MN); (3) approval of the agreement and plan of merger by the
boards of directors of Derma Sciences and Genetic Labs (MN); (4) approval of the
agreement and plan of merger by majority vote of the holders of the common stock
of Genetic Labs (MN); and (5) the occurrence of no material adverse change in
the business operations or financial condition of Derma Sciences or Genetic Labs
(MN).
Due Diligence
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Immediately following the execution hereof, Derma Sciences and Genetic Labs (MN)
will allow each other, and their respective accountants, attorneys and other
authorized representatives, to review each other's books, records, financial
statements, tax returns, inventory, tangible and intangible assets, material
contracts, evidence of liabilities and any and all other material necessary in
order for each of Derma Sciences and Genetic Labs (MN) to satisfy themselves as
to each other's financial condition and business operations.
Milestones
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The parties contemplate that the agreement and plan of merger governing the
Merger Transaction will the executed not later than May 31, 1998 and that the
<PAGE>
Mr. Arthur A. Beisang
May 11, 1998
Page 4
merger proxy/registration statement on Form S-4 will be filed with the
Securities and Exchange Commission not later than June 30, 1998.
Confidentiality
- ---------------
The parties agree to keep confidential all information regarding the Merger
Transaction, and any information obtained in the process of due diligence
relative thereto, except to the extent otherwise permitted hereby or required by
securities laws or other laws or regulations, and except to the extent otherwise
required by legal process or in response to inquiries by governmental officials
or agencies. Provided, however, the parties may share such information with
financial and legal advisers, accountants, consultants, agents and employees.
Public Announcement - Securities Filings
- ----------------------------------------
Immediately upon execution hereof, Derma Sciences and Genetic Labs (MN) shall:
(a) prepare and issue press releases announcing the Merger Transaction, and (b)
prepare and file with the Securities and Exchange Commission current reports on
Form 8-K disclosing the contemplated Merger Transaction and the principal terms
thereof.
Very truly yours,
DERMA SCIENCES, INC.
By:/s/ Edward J. Quilty
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Edward J. Quilty
Chairman of the Board
Accepted in accordance with the terms hereof.
GENETIC LABORATORIES WOUND CARE, INC.
By:/s/ Arthur Z. Beisang
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Arthur A. Beisang
Chairman of the Board
RCH:JMH
D E R M A S C I E N C E S
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NEWS RELEASE
FOR RELEASE MAY 12, 1998 AT 7:30 AM EDT
Contact: Mark Alvino (investors)
(212) 698-1360
or
Rene Caron or Kent Broussard (investors)
Owen Daley (media)
Allen & Caron Inc
(949) 252-8440
DERMA SCIENCES TO ACQUIRE GENETIC LABORATORIES WOUND CARE
PRINCETON, NJ (MAY 12 1998) . . . . Derma Sciences, Inc., (Nasdaq:DSCI) and St.
Paul-based Genetic Laboratories Wound Care, Inc., (EBB:GELW) jointly announced
today that they have signed a letter of intent whereby Genetic Laboratories
would be acquired by a wholly owned subsidiary of Derma Sciences. Genetic
Laboratories shareholders would receive 0.7 shares of Derma Sciences Common
Stock in exchange for each share of Genetic Laboratories Common Stock owned.
Closing of the acquisition is subject to execution of a definitive
merger agreement, completion of due diligence, approvals of the Boards of
Directors and shareholders of both companies and certain other conditions. The
companies expect to sign a definitive agreement by the end of May, 1998 and to
complete the transaction by September, 1998.
Derma Sciences Chairman Edward J. Quilty commented, "Our acquisition of
Genetic Laboratories is in line with our previously announced goal of
implementing strategic acquisitions and thereby broadening our product lines and
increasing our revenue streams. Genetic Laboratories' extensive line of wound
closure strips and specialty catheter fasteners, together with its recently
introduced wound irrigation system, represent important synergistic additions to
our expanding line of wound care products. We believe that Genetic Laboratories'
well developed access to hospitals and alternate care facilities and Derma
Sciences' strong presence in the extended care and home healthcare markets will
create a powerful combination.
Quilty further commented, "Genetic Laboratories has a history of
consistent revenue growth and profitability. Its revenues and profits for the
nine-month period ended February 28, 1998 were $2.3 million and $78,253
(unaudited), respectively. Based on these results, Genetic Laboratories appears
to be on track to achieve its May 31, 1998 fiscal year goal of $3.0 million in
sales. We expect this acquisition to have an immediate and positive impact on
Derma Sciences' revenues, net income and earnings per share."
MORE-MORE-MORE
<PAGE>
DERMA SCIENCES TO ACQUIRE GENETIC LABORATORIES WOUND CARE
Page 2-2-2
Arthur A. Beisang, Chairman and Chief Executive Officer of Genetics
Laboratories, added, "We are excited at the prospect of combining the wound care
products and the marketing and sales capabilities of our organizations. Derma
Sciences and Genetic Laboratories have complementary strengths whose potential
will be greatly enhanced by our joining forces."
Upon completion of the transaction, Arthur Beisang will become a member
of Derma Sciences' Board of Directors and H. James Thompson, currently President
and Chief Operating Officer of Genetic Laboratories, will become President and
Chief Operating Officer of the newly formed subsidiary of Derma Sciences to be
named Genetics Laboratories, Inc. Genetic Laboratories will continue to be
headquartered in St. Paul.
Genetic Laboratories Wound Care, Inc., is engaged in the development,
manufacture, marketing and sale of wound closure products, specialty fasteners
used to secure catheters and tubes and a recently introduced wound irrigation
system. For more information about Genetic Laboratories Wound Care, Inc., visit
its home page on the Internet at http://www.geneticlabs.com
Derma Sciences, Inc. is engaged in the development, marketing and sales
of topical nutrient-based wound care products using its proprietary zinc
formulations for the management of certain chronic, non-healing skin ulcerations
such as pressure and venous ulcers, surgical incisions and burns. For more
information about Derma Sciences, Inc., visit its home page on the Internet at
http://www.dermasciences.com
Statements contained in this release that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the generality of the foregoing, words such as "may," "will," "expect,"
"believe," "anticipate," "intend," "could," "would," "estimate" or "continue"
are intended to identify forward-looking statements. Readers are cautioned that
certain important factors may affect the timing of signing a definitive
agreement or the completion of the merger and could cause such timing or
completion to differ materially from any forward-looking statements which may be
made in this release or which are otherwise made by or on behalf of Derma
Sciences, Inc., and/or Genetic Laboratories Wound Care, Inc. Factors which may
affect the timing of signing a definitive agreement or completion of the merger
include, but are not limited to, the success or failure of negotiations, Board
or shareholder approvals and trade, legal, social and economic risks. Additional
factors that could cause or contribute to differences between the timing of
signing a definitive agreement or completion of the merger and forward-looking
statements include, but are not limited to, those discussed in the filings with
the Securities and Exchange Commission of Derma Sciences, Inc. and/or Genetic
Laboratories Wound Care, Inc.
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