SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1
(Amending Items 7(a), 7(b) and 7(c))
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 14, 1998
VENTANA MEDICAL SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 2-20931 94-2976937
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) No.)
3865 North Business Center Drive
Tucson, Arizona 85705
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (520) 887-2155
<PAGE>
This Amendment No. 1 to Form 8-K supplements the
Form 8-K filed on October 28, 1998 by the Company. At
the time of the filing of the Form 8-K, it was
impracticable for the Company to provide the financial
statements of the business acquired and the pro forma
financial information required by Items 7(a) and 7(b).
Item 7. Financial Statements and Exhibits
(a) Audited Financial Statements as of April
30, 1998 and 1997 of Biotechnology Tools,
Inc.
Unaudited Interim Financial Statements
as of and for the five months ended September
30, 1998 of Biotechnology Tools, Inc.
(b) Pro forma Financial Information
Included in this Report is the following
pro forma financial information:
1. Unaudited Pro Forma Condensed
Consolidated Balance Sheet as of
September 30, 1998.
2. Unaudited Pro Forma Condensed
Consolidated Statement of Operations for
the year ended December 31, 1997.
3. Unaudited Pro Forma Condensed
Consolidated Statement of Operations for
the nine months ended September 30,
1998.
4. Notes to Unaudited Pro Forma
Condensed Consolidated Financial
Statements.
(c) Exhibits
23.1 Consent of Kempisty and
Company.
<PAGE>
Item 7(a)
Board of Directors and Stockholders
Biotechnology Tools, Inc.
We have audited the accompanying balance sheets of
Biotechnology Tools, Inc. (Formerly Research and
Manufacturing Company Inc.) as of April 30, 1998 and
1997, and the related statements of operations,
shareholders' equity and cash flows for each of the two
years in the period ended April 30, 1998. These
financial statements are the responsibility of the
Company's management. Our responsibility is to express
an opinion on these financial statements based on our
audits. We conducted the audits in accordance with
generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain
reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the
accounting principles used and significant estimates
made by management, as well as evaluating the overall
financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion. In
our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Biotechnology Tools, Inc. as of April 30,
1998 and 1997, and the results of its operations,
shareholders' equity and cash flows for each of the two
years in the period ended April 30, 1998 in conformity
with generally accepted accounting principles.
Kempisty & Company
Certified Public Accountants PC
New York, New York
August 20, 1998
<PAGE>
BIOTECHNOLOGY TOOLS, INC.
(FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.)
FINANCIAL STATEMENTS
YEAR ENDED APRIL 30, 1996
CONTENTS
Report of Independent Auditors 1
Financial Statements
Balance Sheets 2
Statements of Operations 4
Statements of Stockholders' Equity 5
Statements of Cash Flows 6
Notes to Financial Statements 7-12
<PAGE>
BIOTECHNOLOGY TOOLS, INC.
(FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.)
BALANCE SHEETS
April 30,
1998 1997
ASSETS
Current Assets
Cash $ 1,782 $ 11,182
Accounts receivable (net of
allowance for doubtful accounts
of $55,000 in 1997 and 1998) 826,566 462,528
Due from factor (Note 3) 97,635 15,965
Inventories (Note 5) 1,374,519 1,607,399
Total Current Assets 2,300,502 2,097,074
Property, plant and equipment
Furniture and fixtures 118,790 118,120
Machinery and equipment 348,640 343,640
467,430 461,760
Less accumulated depreciation
and amortization (460,731) (449,099)
6,699 12,661
Inventories - noncurrent (Note 5) 144,286 168,733
Other Assets
Deposits receivable 32,172 13,110
Employee advances 2,066 -
Total Other Assets 34,238 13,110
TOTAL ASSETS $2,485,725 $2,291,578
See notes to financial statements
<PAGE>
BIOTECHNOLOGY TOOLS, INC.
(FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.)
BALANCE SHEETS
April 30,
1998 1997
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft $66,590 $ -
Accounts payable 852,998 938,012
Accrued expenses 300,902 297,829
Debentures payable (Note 6) 63,705 229,705
Taxes payable 25,860 16,500
Deferred revenue 142,131 150,731
Due to affiliates 113,920 111,620
Due to officers (Note 4) 440,578 446,453
Advance from Sherwood Medical 355,580 355,580
Total Current Liabilities 2,362,264 2,546,430
Commitments (Note 9)
Stockholders' Equity
Common stock, $.001 par value,
20,000,000 shares authorized,
3,789,100 and 3,789,100 shares
issued and outstanding (Note 9) 3,789 3,789
Subscriptions receivable (2,345) (2,345)
Preferred stock $.01 par value,
1,000,000 shares authorized,
no shares issued or outstanding - -
Additional paid-in capital 1,020,699 1,020,699
Retained earnings (deficit) (898,682) (1,276,995)
Total Stockholders' Equity 123,461 (254,852)
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $2,485,725 $2,291,578
See notes fo financial statements
<PAGE>
BIOTECHNOLOGY TOOLS, INC.
(FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.)
STATEMENTS OF OPERATIONS
April 30,
1998 1997
Net sales $5,384,611 $4,909,478
Cost of goods sold 2,941,369 2,745,855
Gross margin 2,443,242 2,163,623
Operating expenses:
Selling, general and administrative 1,990,115 3,151,176
Interest 98,700 208,847
Total operating expenses 2,088,815 3,360,023
Income (loss) from operations 354,427 (1,196,400)
Other income (expense) - -
Gain on sale of building - 628,559
Interest income 162 85
Gain on extinguishment of debt 10,724 425,804
Gain on sale of equipment 13,000 -
Income (loss) before income taxes 378,313 (141,952)
Income taxes (Note 8) - -
Income (loss) from continuing
operations 378,313 (141,952)
Net income (loss) 378,313 (141,952)
Net income (loss) per common share $ 0.10 $ (0.04)
Average number of common shares 3,789,100 3,904,742
Dividends per common share $ - $ -
See notes to financial statements.
<PAGE>
BIOTECHNOLOGY TOOLS, INC.
(FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.)
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional Retained
($.001) Par Value Paid-In Subscription Earnings
Shares Amount Capital Receivable (Deficit) Total
<S> <C> <C> <C> <C> <C>
Balance April 30, 1996 4,101,762 $4,102 $1,099,492 $(2,500) $(1,213,994) $(112,900)
Cancellation of stock
issued for services (157,900) (158) (78,793) - 78,951 0
Cancellation of stock
issued for subscription
receivable (154,762) (155) - 155 - 0
Net loss - - - - (141,952) (141,952)
Balance April 30, 1997 3,789,100 3,789 1,020,699 (2,345) (1,276,995) (254,852)
Net income - - - - 378,313 378,313
Balance April 30, 1998 3,789,100 $3,789 $1,020,699 $(2,345) $(898,682) $123,461
</TABLE>
See notes to financial statements.
<PAGE>
BIOTECHNOLOGY TOOLS, INC.
(FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.)
STATEMENTS OF CASH FLOWS
April 30,
1998 1997
Cash Flows From Operating Activities:
Net income (loss) $378,313 $(141,952)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 11,632 58,977
Gain on cancellation of debt (10,724) (425,804)
Gain on sale of fixed assets - (628,558)
Changes in operating assets and liabilities:
Accounts receivable - trade (364,038) (81,729)
Income tax receivable - 57,757
Due from factor (81,670) 151,041
Due from affiliates 2,300 130,242
Inventories 257,327 212,398
Other assets (21,128) 142,880
Accounts payable and accrued expenses (15,351) (890,534)
Income taxes payable 9,360 16,500
Due to officers (5,875) 437,693
Other liabilities (8,600) (13,116)
Cash provided by operating activities 151,546 (974,205)
Cash Flow From Investing Activities:
Sale of property, plant and equipment (5,670) 1,750,134
Cash used in investing activities (5,670) 1,750,134
Cash Flows From Financing Activities:
Principal payment of long term debt (155,276) (810,361)
Cash used in financing activities (155,276) (810,361)
Net decrease in cash (9,400) (34,432)
Cash, beginning of the year 11,182 45,614
Cash, end of the year $ 1,78 $ 11,182
Supplementary cash flow information:
Taxes paid $ - $ -
Interest paid $90,000 $ 82,000
See notes to financial statements.
<PAGE>
BIOTECHNOLOGY TOOLS, INC.
(FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998
1. - DESCRIPTION OF BUSINESS
Biotechnology Tools, Inc. (BTI or the Company) a
Delaware Corporation (formerly Research and
Manufacturing Company, Inc.) manufactures and
markets a wide range of microtome products,
cryogenic hardware and peripheral equipment,
primarily for research and educational insitutions
in the United States, Europe and the Far East.
2. - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Revenue Recognition
Sales are recorded when goods are shipped and
profit is recognized at that time. Revenue from
service contracts is deferred and taken into
income on a straight-line basis over the period of
the contract.
b. Inventories
Inventories are stated at the lower of cost or
market. Cost is computed on the first-in, first-
out basis. A certain portion of the Company's
inventories consists of parts maintained solely
for the repair and/or replacement of finished
products previously sold. However, management
cannot predict the anticipated future demand or
usage for such inventories. These parts are
classified as inventory - noncurrent.
c. Property, Plant and Equipment
Property, plant and equipment are stated at cost.
Depreciation is provided using the straight-line
method over the estimated useful lives of the
related assets as follows:
Leasehold improvements life of lease
Furniture and fixtures 7 years
Machinery and equipment 5 years
Expenditures for major renewals and betterments
are capitalized while repairs and maintenance are
expensed.
d. Research and Development Costs
For financial reporting purposes, all costs of
research and development activities are expensed
as incurred.
<PAGE>
BIOTECHNOLOGY TOOLS, INC.
(FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998
e. Income Taxes
The Company accounts for income taxes using the
liability method. Deferred tax assets and
liabilities are determined based on differences
between financial reporting and tax bases of
assets and liabilities and are measured using
enacted tax rates and laws expected to be in
effect when the differences are expected to
reverse. Valuation allowances are established
when necessary to reduce the carrying amount of
deferred tax assets to their net realizable
value.
f. Use of Estimates
The preparation of financial statements in
accordance with generally accepted accounting
principles requires management to make estimates
and assumptions that affect the reported amounts
of assets and liabilities and disclosure of
contingent assets and liabilities at the date of
the financial statements and the reported
amounts of revenues and expenses, during the
reporting period. Actual results could differ
from those estimates.
g. Fair Value of Financial Instruments
The Company's cash and accounts receivable
represent financial instruments as defined by
Statement of Financial Accounting Standards No.
107, Disclosures About Fair Value of Financial
Instruments. The carrying value of these
financial instruments is a reasonable
approximation of fair value, due to their
current maturities.
h. Net Income (Loss) Per Share
Net income (loss) per common share is based upon
the weighted average number of common shares
outstanding during the periods presented.
3. - RECEIVABLES
The Company sells some of its commercial credit
accounts to a factor. Under the agreement, the
Company sells the receivables at a discount and
when the receivable is paid the discount is rebated
to the Company less a fee based upon the length of
time the receivable is outstanding. At April 30,
1997, and April 30, 1998, the outstanding balance
of commercial credit accounts sold to the factor
was approximately $258,180 and $517,400
respectively. The Company has provided an
allowance for doubtful accounts of $55,000 at April
30, 1997 and 1998, which is believed to adequately
<PAGE>
BIOTECHNOLOGY TOOLS, INC.
(FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998
4. - LIQUIDITY
The Company's current liabilities exceed current assets
at April 30, 1998 by $ 61,762. In addition, the
Company is currently in default on its' debentures
payable. However, current liabilities include $440,578
of deferred payroll due to officers with no definite
payback period, but is classified as current for
financial statement purposes. Although management
believes that cash generated from operations should
provide the necessary working capital to sustain the
business in the short-term, there can be no assurance
that the Company may not experience adverse market
conditions or other unfavorable events.
5. - INVENTORIES
Inventories consist of the following:
April 30,
1998 1997
Raw materials and components $1,123,702 $1,243,974
Work in process 172,932 341,022
Finished goods 222,171 191,136
Total inventories 1,518,805 1,776,132
Less amount classified as
noncurrent 144,286 168,733
Current portion $ 1,374,519 $ 1,607,399
Inventory of $144,286 and $168,733 at April 30, 1998
and 1997, respectively, shown on the balnace sheet as a
noncurrent asset, represents that portion of the
inventory that is not expected to be sold currently.
<PAGE>
BIOTECHNOLOGY TOOLS, INC.
(FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998
6. - DEBENTURES PAYABLE
1998 1997
Subordinated debentures, maturing
on July 1, 1996, quarterly principal
payments plus interest at 12%. This
debt is in default as of October 26,
1994 and is classified as currently
payable. $63,705 $63,705
7. - INCOME TAXES
Income taxes included in the Statements of
Operations consist principally of federal and state
income taxes. The provisions for income taxes for the
fiscal years ended April 30, 1998 and 1997 are as
follows:
1998 1997
Current:
Federal $ - $ -
State - -
Total $ 0 $ 0
The tax provision differs from the amounts
computed using the statutory federal income tax rate as
follows:
1998 1997
Provision (benefit) at
statutory federal income
tax rate 35.0% (35.0%)
Provision (benefit) -
state income tax 5.9 (5.9)
Utilization of net operating
loss carryforward (40.9) -
Establishment of net
operating loss carryforwards - 40.9
0 0
The significant components of net deferred tax
assets and liabilities as of April 30, are as follows:
1998 1997
Accrued liabilities and other 168,000 160,000
Valuation allowance (168,000) (160,000)
Total deferred tax asset 0 0
<PAGE>
BIOTECHNOLOGY TOOLS, INC.
(FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998
8. - COMMITMENTS
The Company has entered into a lease agreement for
office space. The lease expires in December 1999.
Additionally, the Company subleases shipping and
warehouse space from an affiliate on a month to month
basis. Rental expense under the operating lease and
sublease for the fiscal year ended April 30, 1998 was
$77,577. Remaining commitments under the lease mature
as follows:
Year ending
April 30, Amount
1999 $ 78,107
2000 54,886
$ 132,993
9.- COMMON STOCK
During 1997, the Company cancelled 157,900 shares
of common stock previously issued to a consultant. The
shares were cancelled for non-performance of the
service contracted. Additionally, 154,762 shares of
common stock subscribed to by a former officer were
cancelled for not meeting the terms of the subscription
agreement.
10. - RELATED PARTY TRANSACTIONS
In 1998 the Company paid Biomatics, owned by its
President David E. Simpson, approximately $47,700 for
services provided to the Company by Biomatics in a
prior year.
The Company currently rents shipping and warehouse
space from Denvu LLC, a company owned by it's Chairman
and President on a month to month basis. The rent
expense paid and accrued to Denvu during 1998 amounted
to $9,200.
The Company bills Denvu for use of its office
supplies, shipping services, equipment and certain
employees' time plus administrative overhead for
measured services performed for Denvu. These charges
amounted to approximately $82,000 for 1998 .
Additionally, Denvu reimbursed the Company
approximately $85,000 for payroll services performed by
the Company. The above charges and reimbursement were
recorded as an offset to the various expenses on the
Company's books and have no effect on reported revenues
and expenses or result in any income or loss.
The Company purchases equipment and services
related to its cryogenic product line from a company
owned by the son of its Chairman. These purchases in
1998 and 1997 amounted to approximately $90,000 and
$62,000 respectively.
<PAGE>
BIOTECHNOLOGY TOOLS, INC.
(FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998
11. - CONCENTRATION OF CREDIT RISK
Trade receivables potentially subject the Company
to credit risk. The Company extends credit to its
customers based upon an evaluation of the customer's
financial condition and credit history and generally
does not require collateral. The Company has
historically incurred minimal credit losses
The Company's broad range of customers include two
of which account for a significant percentage of sales
volume, as follows:
1998 1997
Fisher Scientific 25 19
Nippon Automatic Control 6 11
12. - SUBSEQUENT EVENTS
Deferred Savings Plan
Under section 401(k) of the Internal Revenue Code
of 1986, the Board of Directors adopted, effective May
1, 1998, a tax-qualified deferred compensation plan for
employees of the Company. Participants may make
contributions which defer up to 20% of their total
salary, up to a maximum for fiscal 1999 of $10,000.
The Company may, at its sole discretion, make cash
contributions each plan year in amounts which match up
to 100% of the salary deferred by the participants.
<PAGE>
BIOTECHNOLOGY TOOLS, INC.
(FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.)
FINANCIAL STATEMENTS
FIVE MONTHS ENDED SEPTEMBER 30, 1998
Accountants' Review Report
Board of Directors and Stockholders
Biotechnology Tools, Inc.
We have reviewed the accompanying balance sheet of
Biotechnology Tools, Inc. (Formerly Research and
Manufacturing Company Inc.) as of September 30, 1998,
and the related statements of operations, shareholders'
equity and cash flows for the five months then ended,
in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of
Certified Public Accountants. All information included in
these financial statements is the representation of the
management of Biotechnology Tools, Inc.
A review consists principally of inquiries of Company
personnel and analytical procedures applied to financial
data. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying financial
statements in order for them to be in conformity with generally
accepted accounting principles.
Kempisty & Company
Certified Public Accountants PC
New York, New York
December 10, 1998
<PAGE>
BIOTECHNOLOGY TOOLS, INC.
(FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.)
BALANCE SHEET
SEPTEMBER 30, 1998
ASSETS
Current Assets
Cash $ 2,700
Accounts receivable (net of allowance for
doubtful accounts of $141,160) 431,762
Due from factor (Note 3) 110,517
Interest receivable from officers 281,814
Inventories (Note 5) 1,521,354
Prepaid expenses 11,878
Total Current Assets 2,360,025
Property, plant and equipment
Furniture and fixtures 118,790
Machinery and equipment 422,037
540,827
Less accumulated depreciation and amortization (469,244)
71,583
Inventories - noncurrent (Note 5) 169,039
Other Assets
Deferred taxes 525,000
Deposits receivable 23,278
Total Other Assets 548,278
TOTAL ASSETS $ 3,148,925
See notes to financial statements.
<PAGE>
BIOTECHNOLOGY TOOLS, INC.
(FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.)
BALANCE SHEET
SEPTEMBER 30, 1998
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft $ 49,146
Accounts payable 835,590
Accrued expenses 306,926
Payroll taxes payable 34,692
Customer prepayments 42,525
Debentures payable 63,705
Taxes payable 25,860
Deferred revenue 135,858
Due to affiliates 73,013
Due to officers 440,578
Advance from Sherwood Medical 200,000
Note payable Ventana Medical 200,000
Other 13,383
Capital lease obligations-current portion 10,797
Total Current Liabilities 2,432,073
Capital lease obligations (non-current) 53,649
Commitments (Note 8)
Stockholders' Equity
Common stock, $.001 par value, 20,000,000
shares authorized, 3,789,100 shares issued
and outstanding 3,789
Subscriptions receivable (1,172,619)
Preferred stock $.01 par value, 1,000,000
shares authorized, no shares issued or
outstanding -
Additional paid-in capital 2,190,973
Retained earnings (deficit) (358,940)
Total Stockholders' Equity 663,203
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 3,148,925
See notes to financial statements.
<PAGE>
BIOTECHNOLOGY TOOLS, INC.
(FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.)
STATEMENT OF OPERATIONS
FOR THE FIVE MONTHS ENDED SEPTEMBER 30, 1998
Net sales $ 2,129,106
Cost of goods sold 1,278,443
Gross margin 850,663
Operating expenses:
Selling, general and administrative 1,290,936
Interest 30,408
Total operating expenses 1,321,344
Income (loss) from operations (470,681)
Other income (expense):
Interest income 281,910
Gain on extinguishment of debt 196,013
Gain on sale of equipment 7,500
Income (loss) before income taxes 14,742
Income tax benefit 525,000
Net income (loss) $ 539,742
Net income (loss) per common share $ 0.14
Average number of common shares 3,789,100
Dividends per common share $ -
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
BIOTECHNOLOGY TOOLS, INC.
(FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE FIVE MONTHS ENDED SEPTEMBER 30, 1998
Common Stock Additional Retained
($.001) Par Value Paid-In Subscription Earnings
Shares Amount Capital Receivable (Deficit) Total
<S> <C> <C> <C> <C> <C> <C>
Balance April 30, 1998 3,789,100 $ 3,789 $ 1,020,699 $ (2,345) $ (898,682) $ 123,461
Increase in stock
subscription - - 1,170,274 (1,170,274) - 0
Net income - - - - 539,742 539,742
Balance September 30,
1998 3,789,100 $ 3,789 $2,190,973 $(1,172,619) $(358,940) $ 663,203
</TABLE>
See notes to financial statements.
<PAGE>
BIOTECHNOLOGY TOOLS, INC.
(FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.)
STATEMENT OF CASH FLOWS
FOR THE FIVE MONTHS ENDED SEPTEMBER 30, 1998
Cash Flows From Operating Activities:
Net income $539,742
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 8,513
Increase in allowance for doubtful accounts 86,160
Increase in reserve for obsolete inventory 41,480
Gain from debt extinguishment (196,013)
Income tax benefit (525,000)
Changes in operating assets and liabilities:
Decrease in accounts receivable - trade 349,077
(Increase) in due from factor (12,882)
(Increase) in interest receivable from officers (281,814)
(Increase) in inventories (213,068)
(Increase) in prepaid expenses (11,878)
Decrease in other assets 10,960
(Decrease) in bank overdraft (17,444)
(Decrease) in accounts payable and accrued
expenses (11,384)
Increase in payroll taxes payable 34,692
Increase in customer prepayments 42,525
(Decrease) in deferred revenue (6,273)
(Decrease) in due to affiliates (40,907)
Increase in other liabilities 13,383
Cash used in operating activities (190,131)
Cash Flows Used in Investing Activities:
Equipment purchase (73,397)
Cash used in investing activities (73,397)
Cash Flows From Financing Activities:
Loan from Ventana Medical 200,000
Capital lease financing 65,300
Principal payment on capital lease (854)
Cash provided by financing activities 264,446
Net decrease in cash 918
Cash, beginning of the year 1,782
Cash, end of the year $2,700
Supplementary cash flow information:
Taxes paid $ -
Interest paid $30,408
See notes to financial statements.
<PAGE>
BIOTECHNOLOGY TOOLS, INC.
(FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
1. DESCRIPTION OF BUSINESS
Biotechnology Tools, Inc. (BTI or the Company) a
Delaware Corporation (formerly Research and
Manufacturing Company, Inc.) manufactures and markets a
wide range of microtorne products, cryogenic hardware
and peripheral equipment, primarily for research and
educational institutions in the United States, Europe
and the Far East.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Revenue Recognition
Sales are recorded when goods are shipped and
profit is recognized at that time. Revenue from
service contracts is deferred and taken into income on
a straight-line basis over the period of the contract.
b. Inventories
Inventories are stated at the lower of cost or
market. Cost is computed on the first-in, first-out
basis. A certain protion of the Company's inventories
consists of parts maintained solely for the repair
and/or replacement of finished products previously
sold. However, management cannot predict the
anticipated future demand or usage for such
inventories. these parts are classified as inventory -
noncurrent.
c. Property, Plant and Equipment
Property, plant and equipment are stated at
cost. Depreciation is provided using the straight-line
method over the estimated useful lives of the related
assets as follows:
Leasehold improvements life of lease
Furniture and fixtures 7 years
Machinery and equipment 5 years
Expenditures for major renewals and betterments
are capitalized while repairs and maintenance are expensed.
d. Research and Development Costs
For financial reporting purposes, all costs of
research and development activities are expensed as incurred.
For the five months ended September 30, 1998 the
<PAGE>
Company expensed approximately $69,000 for research and development.
e. Income Taxes
The Company accounts for income taxes using the
liability method. Deferred tax assets and liabilities
are determined based on differences between financial
reporting and tax bases of assets and liabilities and
are measured using enacted tax rates and laws ezpected
to be in effect when the differences are expected to
reverse. Valuation allowances are established when
necessary to reduce the carrying amount of deferred tax
assets to their net realizable value.
f. Use of Estimates
The preparation of financial statements in accordance
with generally accepted accounting principles requires
managmeent to make estimates and assumptions that
affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported
amounts of revenues and expenses, during the reporting
period. Actual results could differ from those
estimates.
g. Fair Value of Financial Instruments
The Company's cash and accoutns receivable represent
financial insturments as defined by Statement of
Fiancial Accounting Standards No. 107, Disclosures
About Fair Value of Fiancial Instruments. The
carrying value of these financial instruments is a
reasonable approximation of fair value, due to their
current maturities.
h. Net Income (Loss) Per Share
Net income (loss) per common share is based upon
the weighted average number of common shares outstanding
during the periods presented.
3. - RECEIVABLES
The Company sells some of its commercial credit
accounts to a factor. Under the agreement, the Company
sells the receivables at a discount and when the receivable
is paid the discount is rebated to the Company less a fee based
upon the length of time the receivable is outstanding. At
September 30, 1998, the outstanding balance of commercial credit
accounts sold to the factor was approximately $577,000. The Company
has provided an allowance for doubtful accounts of $141,160 at
September 30, 1998, which is believed to adequately cover its credit
risk related to its accounts receivable.
<PAGE>
BIOTECHNOLOGY TOOLS, INC.
(FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
4. - LIQUIDITY
The Company's current liabilities exceed current
assets at September 30, 1998 by $72,048. In addition,
the Company is currently in default on its' debentures payable.
However, current liabilities include approximately $425,000 of
deferred payroll due to officers with no definite payback period,
but is classified as current for financial statement purposes.
Although management believes that cash generated
from operations should provide the necessary working capital
to sustain the business in the short-term, there can be no
assurance that the Company may not experience adverse market
conditions or other unfavorable events.
During August 1998 the Company and Ventana Acquisitions
Corporation ("VAC") signed a definitive agreement of merger to
be effective October 15, 1998. At the same time the parent of
VAC lent the Company $200,000.
5. - INVENTORIES
Inventories at September 30, 1998 consist of the
following:
Raw materials and components $1,362,595
Work in process 396,558
Finished goods 194,891
Reserve for obsolete inventory (263,651)
Total inventories 1,690,393
Less amount classified as noncurrent 169,039
Current portion $1,521,354
Inventory of $169,039 at September 30, 1998, shown on the
balance sheet as a noncurrent asset, represents that portion of
the inventory that is not expected to be sold currently.
<PAGE>
BIOTECHNOLOGY TOOLS, INC.
(FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
6. - DEBENTURES PAYABLE
1998
Subordinated debentures, maturing on July 1, 1996,
quarterly principal payments plus interest at 12%.
This debt is in default as of October 26, 1994 and
is classified as currently payable. $63,705
7. - INCOME TAXES
The provision (benefit) for income taxes
consisted of the following (in thousands):
Five months
ended
September 30,
1998
Current:
Federal $125
State 18
Deferred:
Federal (585)
State (83)
$(525)
The reconciliation of reported income tax expense
to the amount of income tax expense that would result from
applying domestic federal statutory tax rates to pretax income
is as follows (in thousands):
Five month
ended
September 30,
1998
Statutory federal income tax $5
State income tax-net of federal benefit 1
Valuation allowance change (531)
$(525)
<PAGE>
BIOTECHNOLOGY TOOLS, INC.
(FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
7. - INCOME TAXES (continued)
The components of deferred tax assets and
liabilities were as follows (in thousands):
September 30,
1998
Deferred tax assets:
Net operating loss carryforward $ 273
Officers deferred compensation 170
Inventory reserves 105
Accounts receivable reserve 56
Other liabilities and reserves 48
Total deferred assets $ 652
Deferred tax liabilities:
Disqualification of disc $ 127
Net deferred tax assets $ 525
SFAS No. 109 requires a valuation allowance to be
recorded when it is more likely than not that some or all
of the deferred tax assets will not be realized. At April
30, 1998, a valuation allowance for the full amount of the
net deferred tax asset was recorded because of pre-1998
losses and uncertainties as to the amount of taxable income
that would be generated in future years. Due in large part
to cost reductions, the Company's taxable income has increased
substantially. In the current period, management determined that
it was more likely than not that future taxable income would be
sufficient to enable the Company to realize all of its deferred tax
assets. Accordingly, no valuation allowance has been recorded at
September 30, 1998.
8. - COMMITMENTS
The Company has entered into a lease agreement for office
space. The lease expires in December 1999. Additionally, the
Company subleases shipping and warehouse space from an affiliate
on a month to month basis. Rental expense under the operating
lease and sublease for the five months ended September 30, 1998
was $39,415. Remaining commitments under the lease mature as
follows:
Twelve months ending
September 30, Amount
1999 $ 80,746
2000 20,582
$ 101,328
<PAGE>
BIOTECHNOLOGY TOOLS, INC.
(FORMERLY RESEARCH AND MANUFACTURING COMPANY, INC.)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
9. - RELATED PARTY TRANSACTIONS
The Company currently rents shipping and warehouse space
on a month to month basis from Denvu LLC, a company owned by it's
Chairman and President. The rent expense paid and accrued to Denvu
during the period amounted to $7,500.
The Company bills Denvu for use of its office supplies, shipping
services, equipment and certain employees' time plus administrative
overhead for measured services performed for Denvu. These charges
amounted to approximately $21,000 for the five months ended September
30, 1998. Additionally, Denvu reimbursed the Company approximately
$109,000 for payroll services performed by the Company. The above
charges and reimbursements were recorded as an offset to the various
expenses on the Company's books, which neither effects reported
revenues and expenses nor results in any income or loss.
The Company purchases equipment and services related to its
cryogenic product line from a company owned by the son of its Chairman.
These purchases for the five months ended September 30, 1998 amounted to
approximately $158,000.
10. - STOCK SUBSCRIPTION RECEIVABLE
On September 29, 1994 certain officers of the Company agreed to
purchase stock in the Company at $.50 per common share payable in
five years at 6% interest per annum. Due to a decline in the value
of the Company shortly thereafter, the Company changed the share
purchase price to $.001 per share. As a result of the merger agreement
the officers agreed to retroactively reinstate their original
purchase price of $.50 per common share plus the 6% interest on the
unpaid balance to October 14, 1998. The prior year financial
statements have not been restated to reflect this change because notes
payable plus accrued interest would have been fully reserved. The
accrued interest receivable as of September 30, 1998 was $281,814 and
the note receivable for the stock subscription was $1,172,619.
11. - CONCENTRATION OF CREDIT RISK
Trade receivables potentially subject the Company to credit risk.
The Company extends credit to its customers based upon an evaluation
of the customer's financial condition and credit history and generally
does not require collateral. The Company has historically incurred
minimal credit losses.
12. - DEFERRED SAVINGS PLAN
Under section 401(k) of the Internal Revenue Code of 1986, the
Board of Directors adopted, effective May 1, 1998, a tax-qualified
deferred compensation plan for employees of the Company. Participants
may make contributions which defer up to 20% of their total salary, up
to a maximum for fiscal 1999 of $10,000. The Company may, at its
sole discretion, make cash contributions each plan year in amounts which
match up to 100% of the salary deferred by the participants.
<PAGE>
Item 7(b)
VENTANA MEDICAL SYSTEMS, INC.
INTRODUCTION TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
Ventana Medical Systems, Inc. ("Ventana") acquired
Biotechnology Tools, Inc. ("Biotechnology") on October
14, 1998. The accompanying unaudited pro forma
condensed consolidated balance sheet as of September
30, 1998 has been prepared as if the acquisition of
Biotechnology had been consummated as of that date. The
accompanying unaudited pro forma condensed consolidated
statements of operations for the year ended December
31, 1997 and for the nine months ended September 30,
1998 have been prepared as if the acquisition of
Biotechnology had been consummated as of January 1,
1997.
The pro forma information is based on the historical
financial statements of Ventana and Biotechnology,
giving effect to the transaction under the purchase
method of accounting and the assumptions and
adjustments described in the accompanying Notes to
Unaudited Pro Forma Condensed Consolidated Financial
Statements.
The pro forma information is not indicative of
actual results that would have been achieved had the
acquisition actually been completed as of the dates
indicated, nor is it indicative of the future operating
results or financial position of Ventana. The pro forma
adjustments are based upon information and assumptions
available at the time of filing this Form 8-K/A. The
pro forma condensed consolidated financial statements
should be read in conjunction with the historical
financial statements of Ventana and the related notes
thereto previously filed with the Securities and
Exchange Commission and the historical financial
statements of Biotechnology and the related notes
thereto include elsewhere in this Form 8-K/A.
<PAGE>
VENTANA MEDICAL SYSTEMS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE
SHEET
As of September 30, 1998
(in thousands)
ASSETS
<TABLE>
<CAPTION>
Ventana Biotechnology Pro Forma Pro Forma
Historical Historical Adjustments As Adjusted
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $17,275 $ 3 $(3,800)(1)(2) $13,478
Accounts receivable 11,581 542 - 12,123
Inventories 8,157 1,521 - 9,678
Other 3,073 294 (284)(2) 3,083
Total current assets 40,086 2,360 (4,084) 38,362
Property, plant and
equipment, net 6,901 72 - 6,973
Intangibles, net 7,637 - 5,146(3) 12,783
Other assets - 717 (525)(4) 192
Total assets $54,624 $3,149 $ 537 $58,310
LIABILITIES, AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,374 $ 836 $ - $ 3,210
Other current liabilities 3,224 1,597 1,200(5) 6,021
Total current liabilities 5,598 2,433 1,200 9,231
Long term debt 1,826 53 - 1,879
Stockholders' equity (deficit)
Common stock 13 4 (4)(6) 13
Additional paid in capital 78,148 2,191 (2,191)(6) 78,148
Subscriptions receivable - (1,173) 1,173(2) -
Accumulated deficit (30,532) (359) 359(6) (30,532)
Accumulated other
comprehensive losses (429) - - (429)
Total stockholders'
equity (deficit) 47,200 663 (663) 47,200
Total liabilities and
stockholders' equity $54,624 $3,149 $ 537 $ 58,310
</TABLE>
See accompanying notes.
<PAGE>
VENTANA MEDICAL SYSTEMS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS
For the Year Ended December 31, 1997
(in thousands, except per share data)
Ventana Biotechnology Pro Forma Pro Forma As
Historical Historical(1) Adjustments Adjusted
Net sales $32,153 $5,226 $ - $37,379
Cost of goods sold 11,138 2,876 - 14,014
Gross profit 21,015 2,350 23,365
Operating expenses:
Research and development 3,050 192 - 3,050
Selling, general and
administrative 16,953 2,185 - 19,330
Nonrecurring expenses 1,656 - - 1,656
Amortization of
intangibles 509 - 343(6) 852
Loss from operations (1,153) (27) (343) (1,523)
Interest (expense)
income 781 (136) (190)(2) 455
Other income - 645 (645)(3) -
Net (loss) income $ (372) $ 482 $(1,178) $ (1,068)
Net loss per share
basic and diluted $ (.03) $ (.08)
Weighted average shares
outstanding 12,778 12,778
See accompanying notes.
<PAGE>
VENTANA MEDICAL SYSTEMS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS
For the Nine Months Ended September 30, 1998
(in thousands, except per share data)
Ventana Biotechnology Pro Forma Pro Forma As
Historical Historical(1) Adjustments Adjusted
Net sales $33,045 $3,924 $ - $36,969
Cost of goods sold 10,233 2,259 - 12,492
Gross profit 22,812 1,665 - 24,477
Operating expenses:
Research and development 4,026 133 - 4,159
Selling, general and
administrative 16,220 1,822 - 18,042
Amortization of
intangibles 382 - 257(6) 639
Income (loss) from
operations 2,184 (290) (257) 1,637
Interest (expense)
income 1,066 219 (425)(4)(2) 860
Other income - 736 (736)(5) -
Net income (loss) $ 3,250 $ 665 $(1,418) $ 2,497
Net income per share:
Basic $ .24 $ .19
Diluted $ .22 $ .17
Weighted average
shares outstanding:
Basic 13,301 13,301
Diluted 14,691 14,691
See accompanying notes.
<PAGE>
VENTANA MEDICAL SYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
The Company acquired Biotechnology for $6,457 on
October 14, 1998. The pro forma condensed consolidated
balance sheet reflects the Company's financial position
as if it had acquired Biotechnology on September 30,
1998. The pro forma results of operations reflect the
Company's operations as if it had acquired
Biotechnology on January 1, 1997. The acquisition has
been accounted for as a purchase. The composition of
the consideration paid for Biotechnology and the
allocation of the purchase price is presented below:
The purchase price for Biotechnology consisted of:
Cash consideration $3,800
Offset for amounts due from management shareholders 1,457
Escrow for contingencies 1,200
Total purchase price $6,457
The purchase price was allocated as follows:
Tangible net assets $1,311
Goodwill and other intangibles 5,146
$6,457
The purchase price allocation shown above is
preliminary and subject to change.
Intangible assets consist primarily of goodwill,
which is amortized over the estimated useful life of 15
years.
Balance Sheet Adjustments
(1) Reflects the payment by Ventana of $5,257 of
cash consideration to Biotechnology shareholders.
(2) Reflects the receipt of $1,457 in cash from
Biotechnology shareholders for stock subscription
and related accrued interest income receivables.
(3) Reflects the goodwill resulting from the
purchase of Biotechnology, amortizable over 15
years. The amount allocated to goodwill is
preliminary and subject to change.
(4) Reflects the establishment of a valuation
allowance for Biotechnology's deferred tax assets.
(5) Reflects the contingent consideration payable
to Biotechnology's shareholders in connection with
the purchase by Ventana.
(6) Reflects the elimination of Biotechnology's
equity accounts as of the balance sheet date, after
giving effect to the transactions noted in (2) and
(4) above.
Statement of Operations Adjustments
(1) Biotechnology's historical fiscal year ends on
April 30. Biotechnology's historical results of
operations have been adjusted to a calendar year
basis to conform with the reporting period of
Ventana.
(2) To record the forgone interest income from the
net cash used to purchase Biotechnology ($190 in
1997, $143 for nine months ended September 30,
1998).
(3) Biotechnology's historical results included a
gain on the sale of a building. As such non-
recurring gain is not indicative of the operations
of the combined entity, it has been deducted in
computing pro-forma income.
<PAGE>
(4) Biotechnology's historical results included
interest income recognized on stock subscriptions
receivable from certain officers. Such income is
not indicative of the operations of the combined
entity and has therefore been deducted in computing
pro-forma income.
(5) Biotechnology's historical results included
gains on extinguishment of debt and the sale of
equipment ($211) and the recognition of deferred tax
assets ($525). Such other income is not indicative
of the operations of the combined entity and has
therefore been deducted in computing pro-forma
income.
(6) To record the amortization of goodwill (15 year
life) established in connection with the
Biotechnology purchase.
<PAGE>
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.
Dated: December 28, 1998 VENTANA MEDICAL SYSTEMS, INC.
By: /s/ Pierre Sice
---------------------------------------
Pierre Sice
Vice President, Chief Financial Officer,
Treasurer and Secretary
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference of our report on the financial statements
of Biotechnology Tools, Inc., dated August 20, 1998 included in this
Amendment No. 1 to Form 8-K, and in Form S-8 (No. 333-16707) pertaining
to the 1996 Stock Option Plan, 1996 Director Option Plan, 1988 Stock
Option Plan and 1996 Employee Stock Purchase Plan of Ventana Medical
Systems, Inc.
/s/ Kempisty & Company
Kempisty & Company
New York, New York
December 28, 1998
