<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 20, 1996
Meridian Medical Technologies, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-5958 52-0898764
---------------------------- ----------- -------------------
(State or other jurisdiction (Commission (I.R.S. employer
of incorporation) file number) identification no.)
10240 Old Columbia Road, Columbia, MD 21046
---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (410) 309-6830
--------------
Survival Technology, Inc.
2275 Research Boulevard
Rockville, MD 20850
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
------------------------------------
On November 20, 1996, Brunswick Biomedical Corporation ("Brunswick"),
the holder of approximately 61.1% of the outstanding shares of the
Registrant's common stock, merged with and into Survival Technology, Inc.
("STI" or the "Registrant") pursuant to an Agreement and Plan of Merger dated
as of September 11, 1996 ("Agreement"). In the merger, each of Brunswick's
66,780 outstanding shares of common stock was converted into 2.1 shares of
STI's common stock and cash in lieu of fractional shares. Each of
Brunswick's 746,995 outstanding shares of preferred stock was converted into
2.1 shares of STI's common stock and cash in lieu of fractional shares as
well as a warrant to purchase 0.4 of a share of STI's common stock at an
exercise price of $11.00 per share exercisable for a period of five years
following the merger. In addition, STI assumed Brunswick's obligations
under outstanding options and warrants. These provisions of the Agreement
resulted in approximately 1.7 million shares of STI common stock being issued
in exchange for the Brunswick stock upon the consummation of the merger and may
result in additional issuances of approximately 1.05 million shares of STI
common stock if all options and warrants are exercised and the required
consideration is paid. Each of the 1,888,126 shares of STI common stock
formerly owned by Brunswick was retired in the merger.
Stockholders of the Registrant and Brunswick approved the Agreement at
the meetings held on November 20, 1996 and November 19, 1996, respectively.
Following the effective time of the merger, STI also changed its name to
Meridian Medical Technologies, Inc. On December 1, 1996, the Registrant
relocated its executive offices to 10240 Old Columbia Road, Columbia, MD
21046, and changed its phone number to (410) 309-6830.
Additional information regarding the background of the merger, the
negotiations of the exchange ratio, and the relationships of certain officers
and directors of the Registrant with Brunswick, as well as information
regarding the business and assets of Brunswick is set forth in the
Registrant's definitive proxy statement dated as of October 30, 1996.
Although the Registrant is the surviving corporation in the merger as a
legal matter, the merger is treated as a purchase of the Registrant for
financial accounting purposes. As a result, the Registrant's assets and
liabilities have been revalued to their respective fair values, and
Brunswick's historical financial statements will reflect the combined
- 2 -
<PAGE>
operations of the Registrant and Brunswick after November 20, 1996.
The Registrant will retain July 31st as its fiscal year end. This will
result in the separate reporting by Brunswick of unaudited interim financial
statements for the months ended July 31, 1996 and 1995 to transition
Brunswick's historical financial statements from a June 30th fiscal year end
to a July 31st fiscal year end.
The Agreement was previously filed as Exhibit 6(a) to Amendment No. 1 to
Brunswick's Schedule 13D relating to its holdings of STI common stock and
incorporated by reference as Exhibit 2 to the Registrant's Current Report on
Form 8-K dated September 16, 1996. For information regarding certain of the
terms of the merger, reference is made to the press release of the Registrant
dated November 20, 1996 attached hereto as Exhibit 99.2.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
-----------------------------------------
(a) FINANCIAL STATEMENTS.
(1) Audited consolidated financial statements of
Brunswick as of June 30, 1996 and for the year
then ended, together with the report of the
independent accountants thereon, were
previously included on pages F-1 through F-28
of the Registrant's definitive proxy statement
dated October 30, 1996.
(2) Audited consolidated financial statements of
Brunswick as of June 30, 1995 and 1994 and for
the two years ended June 30, 1995 and 1994,
together with the report of the independent
public accountants thereon, are filed herewith.
(3) Unaudited Interim Financial Statements of
Brunswick for the months ended July 31, 1996
and 1995 and as of October 31, 1996 and 1995
and for the quarters then ended are not yet
available and will be filed as an amendment to
this Form 8-K as soon as practicable, but not
later than 60 days after the date hereof.
- 3 -
<PAGE>
(b) PRO FORMA FINANCIAL INFORMATION.
(1) Unaudited pro forma combined financial
information as of July 31, 1996, giving effect
to the merger, were previously included on
pages 50-55 of the Registrant's Definitive
Proxy Statement dated October 30, 1996.
(c) EXHIBITS.
2.1 Agreement and Plan of Merger dated September 11,
1996 (incorporated by reference herein from
Exhibit 6(a) to Amendment No. 1 to Schedule 13D
filed by Brunswick Biomedical Corporation dated
September 13, 1996).
4.1 Form of Warrant to be issued by the Registrant to
holders of Brunswick preferred stock.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Arthur Andersen LLP.
99.1 Audited consolidated financial statements of
Brunswick as of June 30, 1995 and 1994 and for the
two years ended June 30, 1995 and 1994, together
with the report of the independent public
accountants thereon.
99.2 Press Release dated November 20, 1996.
- 4 -
<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, thereunto duly authorized
MERIDIAN MEDICAL TECHNOLOGIES, INC.
Date: December 5, 1996 By: /s/Jeffrey W. Church
-------------------------------
Jeffrey W. Church
Sr. Vice President-Finance
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
- 5 -
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
LOCATION IN
SEQUENTIALLY
NUMBERED COPY
-------------
<S> <C> <C>
2.1 Agreement and Plan of Merger
dated September 11, 1996
(incorporated by reference herein
from Exhibit 6(a) to Amendment No. 1
to Schedule 13D filed by Brunswick
Biomedical Corporation dated
September 13, 1996)......................
4.1 Form of Warrant to be issued by the
Registrant to holders of Brunswick
preferred stock.......................... 7
23.1 Consent of Price Waterhouse LLP.......... 15
23.2 Consent of Arthur Andersen LLP........... 16
99.1 Audited consolidated financial
statements of Brunswick as of
June 30, 1995 and 1994 and for the
two years ended June 30, 1995 and
1994, together with the report of
the independent public accountants
thereon.................................. 17
99.2 Press Release dated November 20, 1996.... 33
</TABLE>
- 6 -
<PAGE>
Exhibit 4.1
THE WARRANTS REPRESENTED HEREBY HAVE BEEN ACQUIRED BY THE
HOLDER NAMED HEREON FOR HIS OWN ACCOUNT FOR INVESTMENT WITH NO
INTENTION OF MAKING OR CAUSING TO BE MADE ANY PUBLIC DISTRIBUTION
OF ALL OR ANY PORTION THEREOF; THIS SECURITY HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THE ACT
AND SUCH LAWS OR (1) REGISTRATION UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED AND (2) AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY IS FURNISHED
TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE ACT
AND THE APPLICABLE STATE LAWS IS NOT REQUIRED
WARRANT TO PURCHASE COMMON STOCK OF
MERIDIAN MEDICAL TECHNOLOGIES, INC.
Warrant No. _______ ____________ Shares
This certifies that, for value received, ___________________ (the
"Holder") is entitled to subscribe for and purchase up to ______ shares
(subject to adjustment from time to time pursuant to the provisions of
Section 5 hereof) of fully paid and nonassessable Common Stock of MERIDIAN
MEDICAL TECHNOLOGIES, INC., a Delaware corporation (the "Company"), at the
Warrant Price (as defined in Section 2 hereof), subject to the provisions and
upon the terms and conditions hereinafter set forth.
As used herein, the term "Common Stock" shall mean the Company's
authorized common stock, $.10 par value per share.
This Warrant is one of a series of substantially identical warrants (the
"Warrants") issued pursuant to that certain Agreement and Plan of Merger
between the Company and Brunswick Biomedical Corporation dated September 11,
1996 (the "Merger Agreement") as part of the Merger Consideration as defined
therein.
1. Term of Warrant. The purchase right represented by this Warrant is
exercisable, in whole or in part, at any time during the period beginning on
November 20, 1996 (the "Initial Exercise Date") and ending on November 19,
2001.
2. Warrant Price. The exercise price of this Warrant is $11.00 per
share, subject to adjustment from time to time pursuant to the provisions of
Section 5 hereof (the "Warrant Price").
7
<PAGE>
3. Method of Exercise; Payment; Issuance of New Warrant. Subject to
Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the Holder, in whole or in part, by the surrender of this Warrant
(with the notice of exercise form attached hereto as Exhibit 1 duly executed)
at the principal office of the Company and by the payment to the Company, by
check or wire transfer, of an amount equal to the Warrant Price per share
multiplied by the number of shares then being purchased. The Company agrees
that the shares so purchased shall be deemed to be issued to the Holder as the
record owner of such shares as of the close of business on the date on which
this Warrant shall have been surrendered and payment made for such shares as
aforesaid. In the event of any exercise of this Warrant, certificates for the
shares of stock so purchased shall be delivered to the Holder within 15 days
thereafter and, unless this Warrant has been fully exercised or expired, a new
Warrant representing the portion of the shares, if any, with respect to which
this Warrant shall not then have been exercised, shall also be issued to the
Holder within such 15 day period. The issuance of any shares or other
securities upon the exercise of this Warrant and the delivery of certificates
or other instruments representing such shares or other securities shall be
made without charge to the Holder for any tax or other charge (other than
payment of the Warrant Price) in respect of such issuance. The Company shall
not, however, be required to pay any tax that may be payable in respect of any
transfer involved in the issue and delivery of any certificate in a name other
than that of the Holder, and the Company shall not be required to issue or
deliver any such certificate unless and until the person or persons requesting
the issue thereof shall have paid to the Company the amount of such tax or
shall have established of the satisfaction of the Company that such tax has
been paid.
4. Stock Fully Paid; Reservation of Shares. All Common Stock which may
be issued upon the exercise or conversion of this Warrant will, upon issuance,
be fully paid and nonassessable, and free from all taxes, liens and charges
with respect to the issue thereof. During the period within which the rights
represented by this Warrant may be exercised, the Company will at all times
have authorized, and reserved for the purpose of the issuance upon exercise of
the purchase rights evidenced by this Warrant, a sufficient number of shares
of its Common Stock to provide for the exercise of the rights represented by
this Warrant.
5. Adjustments.
(a) Reclassification, Consolidation or Merger. In case of any
reorganization, reclassification or change of outstanding securities of the
class issuable upon exercise of this Warrant (other than a change in par
value, or from par value to no par value, or from no par value to par value,
or as a result of a subdivision or combination), or in case of any
consolidation or merger of the Company with or into another corporation, other
than a reorganization or merger with another corporation in which the Company
is a continuing corporation and which does not result in any reclassification
or change of outstanding securities issuable upon exercise of this Warrant, or
in case of any sale of all or substantially all of the assets of the Company,
there shall thereafter be deliverable upon exercise of this Warrant, in lieu
of each share of Common Stock theretofore issuable upon exercise of this
Warrant, the kind and amount of shares of stock, other securities, money and
property receivable upon such
8
<PAGE>
reorganization, reclassification, change, consolidation, merger or sale by a
holder of one share of Common Stock. The Company shall not effect any such
reorganization, reclassification, change, consolidation, merger or sale
unless upon or before the consummation thereof the successor corporation (or
if the Company shall be the surviving corporation in any such reorganization
or merger and is not the issuer of the shares of stock or other securities or
property to be delivered to holders of shares of the Common Stock outstanding
at the effective time thereof, then such issuer) shall assume by written
instrument the obligation to deliver to the Holder such shares of stock,
securities, cash or other property as the Holder shall be entitled to
purchase in accordance with the foregoing provisions. The provisions of this
subsection (a) shall similarly apply to successive reclassification, changes,
consolidations, mergers and transfers.
(b) Subdivision or Combination of Shares. If the Company at any
time while this Warrant remains outstanding and unexpired shall subdivide or
combine its Common Stock, the Warrant Price shall be proportionately decreased
in the case of a subdivision or increased in the case of a combination.
(c) Dividends in Cash or Property. If the Company shall distribute
to all holders of Common Stock (including any such distribution made to the
shareholders of the Company in connection with a consolidation or merger in
which the Company is the continuing corporation) (i) evidences of its
indebtedness, cash or assets (other than ordinary cash dividends paid out of
the net profits of the Company for its most recent fiscal year), (ii) rights,
options or warrants to subscribe for or purchase Common Stock, or (iii) any
equity securities of the Company (other than Common Stock), including any
securities convertible into or exchangeable for shares of Common Stock, then,
in each case, the Warrant Price shall be adjusted by multiplying the Warrant
Price in effect immediately before the record date for the determination of
shareholders entitled to receive such distribution by a fraction, the
numerator of which shall be the Current Market Price (as determined below) per
share of Common Stock on such record date, less the fair market value (as
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error) of the portion of the
evidences of indebtedness or assets so to be distributed, or of such
securities, rights, options, or warrants, or the amount of such cash,
applicable to one share, and the denominator of which shall be such Current
Market Price per share of Common Stock. Such adjustment shall become
effective at the close of business on such record date. The Current Market
Price per share of Common Stock as of any date shall be the average of the
daily closing prices for the 20 consecutive trading days immediately preceding
the date in question. The closing price for each day shall be the last
reported sales price regular way or, in case no such reported sale takes place
on such date, the closing bid price regular way, in either case on the
principal national securities exchange (including, for purposes hereof, the
Nasdaq National Market) on which the Common Stock is listed or admitted to
trading or, if the Common Stock is not listed or admitted to trading on any
national securities exchange, the highest reported bid price of the Common
Stock as furnished by the National Association of Securities Dealers, Inc.
through Nasdaq, or a similar organization if Nasdaq is no longer reporting
such information. If on any such date the Common Stock is not listed or
admitted to trading on any national securities exchange and
9
<PAGE>
is not quoted by Nasdaq or any similar organization, the fair value of a
share of Common Stock on such date, as determined in good faith by the board
of directors of the Company, whose determination shall be conclusive absent
manifest error, shall be used.
(d) Stock Dividends. If the Company at any time while this Warrant
is outstanding and unexpired shall pay a dividend with respect to Common Stock
payable in, or make any other distribution with respect to, Common Stock
(except any distribution specifically provided for in the foregoing
subparagraphs (a) or (b) then the Warrant Price shall be adjusted, from and
after the record date of determination of shareholders entitled to receive
such dividend or distribution, to that price determined by multiplying the
Warrant Price in effect immediately prior to such date of determination by a
fraction (a) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution
and (b) the denominator of which shall be the total number of shares of Common
Stock outstanding immediately after such dividend or distribution.
(e) No Adjustment. No adjustment in the Warrant Price pursuant to
Section 5(a), (b), (c) or (d) shall be required unless such adjustment would
require an increase of a decrease of at least $0.01 per share of Common Stock;
provided, however, that any adjustments that by reason of this Section 5(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment.
(f) Adjustment of Number of Shares. Upon each adjustment in the
Warrant Price pursuant to Section 5(a), (b), (c) or (d), the number of shares
of Common Stock purchasable hereunder shall be adjusted, to the nearest whole
share, to the product obtained by multiplying the number of shares purchasable
immediately prior to such adjustment in the Warrant Price by a fraction, the
numerator of which shall be the Warrant Price immediately prior to such
adjustment and the denominator of which shall be the Warrant Price immediately
thereafter.
6. Notice of Adjustments. Whenever any Warrant Price shall be adjusted
pursuant to Section 5 hereof, the Company shall prepare a certificate signed
by its chief financial officer setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which
such adjustment was calculated, the Warrant Price after giving effect to such
adjustment and the number of shares then purchasable upon exercise of this
Warrant, and shall cause copies of such certificate to be mailed (by first
class mail, postage prepaid) to the holder of this Warrant at the address
specified in Section 10(d) hereof, or at such other address as may be provided
to the Company in writing by the holder of this Warrant.
7. Fractional Shares. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor upon the
basis of the Warrant Price then in effect.
8. Compliance with the Act. The holder of this Warrant, by acceptance
hereof, agrees that this Warrant and the shares of Common Stock to be issued
upon exercise hereof are
10
<PAGE>
being acquired for such holder's own account for investment with no intention
of making or causing to be made any public distribution of all or any portion
thereof; and such securities may not be pledged, sold or in any other way
transferred in the absence of an effective registration statement for such
securities under the Act and registration of such securities under applicable
state securities laws or (i) registration under applicable state securities
laws is not required and (ii) an opinion of counsel satisfactory to the
Company is furnished to the Company to the effect that registration under the
Act is not required.
9. Transfer and Exchange of Warrant.
(a) Transfer. This Warrant may be transferred or succeeded to by
any person; provided, however, that the Company is given written notice by the
transferee at the time of such transfer stating the name and address of the
transferee and identifying the securities with respect to which such rights
are being assigned.
(b) Exchange. Subject to compliance with the terms hereof, this
Warrant and all rights hereunder are transferable, in whole or in part, at the
office of the Company by the Holder in person or by duly authorized attorney,
upon surrender of this Warrant properly endorsed. Each taker and holder of
this Warrant, by taking or holding the same, consents and agrees that this
Warrant, when endorsed in blank, shall be deemed negotiable; provided, that
the last holder of this Warrant as registered on the books of the Company may
be treated by the Company and all persons dealing with this Warrant as the
absolute owner hereof for any purposes and as the person entitled to exercise
the rights represented by this Warrant or to transfer hereof on the books of
the Company, any notice to the contrary notwithstanding, unless and until such
holder seeks to transfer registered ownership of this Warrant on the books of
the Company and such transfer is effected.
10. Miscellaneous.
(a) No Rights as Shareholder. No holder of the Warrant or Warrants
shall be entitled to vote or receive dividends or be deemed the holder of
Common Stock or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon the holder of this Warrant, as such, any of
the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action
(whether upon any recapitalization, issuance of stock, reclassification of
stock, change of par value or change of stock to no par value, consolidation,
merger, conveyance or otherwise) or to receive notice of meetings, or to
receive dividends or subscription rights or otherwise until the Warrant or
Warrants shall have been exercised and the shares purchasable upon the
exercise hereof shall have become deliverable, as provided herein.
(b) Replacement. On receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant and,
in the case of loss,
11
<PAGE>
theft, or destruction, on delivery of an indemnity agreement, or bond
reasonably satisfactory in form and amount to the Company or, in the case of
mutilation, on surrender and cancellation of this Warrant, the Company, at
its expense, will execute and deliver, in lieu of this Warrant, a new Warrant
of like tenor.
(c) Notice of Capital Changes. In case:
(i) the Company shall declare any dividend or distribution
payable to the holders of its Common Stock;
(ii) there shall be any capital reorganization,
reclassification or change of outstanding securities of the class issuable
upon exercise of this Warrant (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of a
subdivision or combination) of the Company, or consolidation or merger of the
Company with, or sale of all or substantially all of its assets to, another
corporation or business organization; or
(iii) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give the holder of
this Warrant written notice, in the manner set forth in subparagraph (d)
below, of the date on which a record shall be taken for such dividend, or
distribution or for determining shareholders entitled to vote upon such
reorganization, reclassification, change, consolidation, merger, sale,
dissolution, liquidation or winding up and of the date when any such
transaction shall take place, as the case may be. Such written notice shall
be given at least 30 days prior to the transaction in question and not less
than 20 days prior to the record date in respect thereof.
(d) Notice. Any notice given to either party under this Warrant
shall be in writing, and any notice hereunder shall be deemed to have been
given upon the earlier of delivery thereof by hand delivery, by courier, or by
standard form of telecommunication or three (3) business days after the
mailing thereof if sent registered mail with postage prepaid, addressed to the
Company at its principal executive offices and to the holder at its address
set forth in the Company's books and records or at such other address as the
holder may have provided to the Company in writing.
(e) No Impairment. The Company will not, by amendment of its
Restated Certificate of Incorporation or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions in the Warrant.
12
<PAGE>
(f) Registration Rights. The Common Stock issued upon exercise of
this Warrant shall be entitled to registration under the Act as set forth in
the Questionnaire and Registration Rights Agreement.
(g) Governing Law. This Warrant shall be governed by and construed
under the laws of the State of Delaware.
IN WITNESS WHEREOF, this Warrant is executed as of this 20th day of
November, 1996.
MERIDIAN MEDICAL TECHNOLOGIES, INC.
By: ______________________________________
Title:
13
<PAGE>
EXHIBIT 1
NOTICE OF EXERCISE
TO: MERIDIAN MEDICAL TECHNOLOGIES, INC.
1. The undersigned hereby elects to purchase ___ shares of Common Stock of
MERIDIAN MEDICAL TECHNOLOGIES, INC. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.
2. Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
____________________________________
(Name)
____________________________________
____________________________________
(Address)
3. THE UNDERSIGNED REPRESENTS THAT THE AFORESAID SHARES OF COMMON STOCK
ARE BEING ACQUIRED FOR THE ACCOUNT OF THE UNDERSIGNED FOR INVESTMENT AND NOT
WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, THE DISTRIBUTION THEREOF AND
THAT THE UNDERSIGNED HAS NO PRESENT INTENTION OF DISTRIBUTING OR RESELLING
SUCH SHARES EXCEPT AS PERMITTED BY THE TERMS OF SUCH WARRANT.
________________________
Signature
14
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference herein of our report
dated October 25, 1996 appearing on page F-2 of the Registant's definitive
proxy statement dated October 30, 1996 in this Form 8-K of Meridian Medical
Techonologies, Inc.
PRICE WATERHOUSE LLP
Washington, DC
December 4, 1996
15
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion in
this Form 8-K of our report on Brunswick Biomedical Corporation dated August
24, 1995. It should be noted that we have not audited any financial
statements of the Company subsequent to June 30, 1995 or performed any audit
procedures subsequent to the date of our report.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
December 4, 1996
16
<PAGE>
Exhibit 99.1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Brunswick Biomedical Corporation:
We have audited the accompanying consolidated balance sheets of Brunswick
Biomedical Corporation (a Massachusetts corporation) and subsidiaries as of
June 30, 1995 and 1994, and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for the years then
ended. 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 did not audit the financial statements of
Brunswick Biomedical Limited, a subsidiary, which reflect total assets and
total revenues of 11% and 3% in 1995 and 8% and 38% in 1994, respectively, of
the consolidated totals. Those statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates
to the amounts included for Brunswick Biomedical Limited, is based solely on
the report of the other auditors.
We conducted our 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 and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Brunswick Biomedical Corporation and subsidiaries as
of June 30, 1995 and 1994, and the results of their operations and their cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
Boston, Massachusetts
August 24, 1995
17
<PAGE>
BRUNSWICK BIOMEDICAL CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets--June 30, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents......................................... $ 51,714 $ 3,288,165
Accounts receivable, net of allowance for doubtful accounts of
approximately $66,000 in 1995 and $17,000 in 1994............... 579,274 310,361
Inventories....................................................... 305,502 265,182
Prepaid expenses.................................................. 44,099 65,910
------------ ------------
Total current assets...................................... 980,589 3,929,618
------------ ------------
Property and Equipment, net:
Equipment and vehicles under capital leases....................... 202,785 168,143
Manufacturing equipment........................................... 168,206 98,685
Office equipment.................................................. 53,234 17,597
------------ ------------
424,225 284,425
Less--Accumulated depreciation.................................... 224,175 189,114
------------ ------------
200,050 95,311
------------ ------------
Other Assets:
Deposits and other assets......................................... 368,342 258,920
Goodwill, net..................................................... 1,639,195 --
------------ ------------
2,007,537 258,920
------------ ------------
$ 3,188,176 $ 4,283,849
------------ ------------
------------ ------------
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities:
Line of credit (Note 4(b))........................................ $ 225,950 $ 211,075
Demand notes payable to shareholder (Note 4(a))................... 200,000 --
Accounts payable.................................................. 557,308 245,070
Current maturities of capital lease obligations................... 15,312 30,990
Current maturities under noncompete obligations................... 56,342 165,278
Accrued expenses.................................................. 606,381 558,246
------------ ------------
Total current liabilities...................................... 1,661,293 1,210,659
------------ ------------
Capital Lease Obligations, net of current maturities................ 55,381 --
------------ ------------
Commitments (Notes 5 and 7)
Stockholders' Equity:
Preferred stock, $.01 par value--
Authorized--1,400,000 shares
Issued and outstanding, as follows--
Series A, 8% convertible redeemable preferred stock--
64,665 shares (liquidation preference of $500,000).......... 647 647
Series B, 8% convertible redeemable preferred stock--
29,144 shares (liquidation preference of $510,000).......... 291 291
Series C, 10% convertible redeemable preferred stock--
374,462 shares (liquidation preference of $7,645,324)....... 3,744 3,744
Common stock, $.01 par value--
Authorized--1,075,000 shares
Issued--68,417 shares in 1995 and 1994.......................... 684 684
Additional paid-in capital........................................ 8,311,396 8,098,167
Accumulated deficit............................................... (6,598,341) (4,998,274)
Cumulative translation adjustment................................. 19,671 29,443
Deferred compensation............................................. (255,137) (104,854)
------------ ------------
1,482,955 3,029,848
Treasury stock, at cost, 1,636 and 1,857 shares at
December 31, 1995 and 1994..................................... (11,453) (13,000)
------------ ------------
Total stockholders' equity........................... 1,471,502 3,016,848
------------ ------------
$ 3,188,176 $ 4,283,849
------------ ------------
------------ ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
18
<PAGE>
BRUNSWICK BIOMEDICAL CORPORATION
AND SUBSIDIARY
Consolidated Statements of Operations
for the Years Ended June 30, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Net Sales....................................................... $ 2,903,532 $ 2,426,984
Cost of Goods Sold.............................................. 1,698,374 1,641,581
------------- -------------
Gross profit................................................ 1,205,158 785,403
------------- -------------
Operating Expenses:
Engineering, research and development......................... 698,034 616,834
Selling, general and administrative........................... 2,088,614 1,795,917
------------- -------------
2,786,648 2,412,751
------------- -------------
Loss from operations........................................ (1,581,490) (1,627,348)
Interest Expense, net........................................... (18,577) (97,496)
------------- -------------
Net loss.................................................... $ (1,600,067) $ (1,724,844)
------------- -------------
------------- -------------
Net Loss Per Share.............................................. $ (23.39) $ (24.69)
------------- -------------
------------- -------------
Weighted Average Common Shares Outstanding (Note 2(i)).......... 68,417 69,870
------------- -------------
------------- -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
19
<PAGE>
BRUNSWICK BIOMEDICAL CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
CONVERTIBLE REDEEMABLE
COMMON STOCK
PREFERRED STOCK COMMON STOCK
------------------------ ------------------------ ADDITIONAL CUMULATIVE
NUMBER $.01 NUMBER $.01 PAR PAID-IN ACCUMULATED TRANSLATION
OF SHARES PAR VALUE OF SHARES VALUE CAPITAL DEFICIT ADJUSTMENT
----------- ----------- ----------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1993 93,809 $ 938 71,447 $ 714 $1,486,682 $(3,273,430) $ 46,218
Issuance of Series C preferred stock
in retirement of notes payable 95,279 953 -- -- 1,666,488 -- --
Sale of Series C preferred stock,
net of issuance costs of $41,634 279,183 2,791 -- -- 4,841,278 -- --
Issuance of nonqualified stock options -- -- -- -- 125,824 -- --
Amortization of deferred compensation -- -- -- -- -- -- --
Purchase of treasury stock -- -- -- -- -- -- --
Retirement of treasury stock -- -- (3,030) (30) (22,105) -- --
Cumulative translation adjustment -- -- -- -- -- -- (16,775)
Net loss -- -- -- -- -- (1,724,844) --
----------- ---------- ----------- ----- ---------- ------------ -----------
Balance, June 30, 1994 468,271 4,682 68,417 684 8,098,167 (4,998,274) 29,443
Issuance of nonqualified stock options -- -- -- -- 209,700 -- --
Amortization of deferred compensation -- -- -- -- -- -- --
Issuance of treasury stock for payment
of services -- -- -- -- 3,529 -- --
Cumulative translation adjustment -- -- -- -- -- -- (9,772)
Net loss -- -- -- -- -- (1,600,067) --
----------- ---------- ----------- ----- --------- ------------ -----------
Balance, June 30, 1995 468,271 $ 4,682 68,417 $ 684 $8,311,396 $(6,598,341) $ 19,671
----------- ---------- ----------- ----- ---------- ------------ -----------
----------- ---------- ----------- ----- ---------- ------------ -----------
<CAPTION>
TREASURY STOCK
---------------------- STOCKHOLDERS'
NUMBER DEFERRED EQUITY
OF SHARES COST COMPENSATION (DEFICIT)
----------- --------- ------------- ------------
<S> <C> <C> <C> <C>
Balance, June 30, 1993 -- $ -- $ -- $(1,738,878)
Issuance of Series C preferred stock in
retirement of notes payable -- -- -- 1,667,441
Sale of Series C preferred stock, net of
issuance costs of $41,634 -- -- -- 4,844,069
Issuance of nonqualified stock options -- -- (125,824) --
Amortization of deferred compensation -- -- 20,970 20,970
Purchase of treasury stock 4,887 (35,135) -- (35,135)
Retirement of treasury stock (3,030) 22,135 -- --
Cumulative translation adjustment -- -- -- (16,775)
Net loss -- -- -- (1,724,844)
----------- --------- ------------- ------------
Balance, June 30, 1994 1,857 (13,000) (104,854) 3,016,848
Issuance of nonqualified stock options -- -- (209,700) --
Amortization of deferred compensation -- -- 59,417 59,417
Issuance of treasury stock for payment
of services (221) 1,547 -- 5,076
Cumulative translation adjustment -- -- -- (9,772)
Net loss -- -- -- (1,600,067)
----------- --------- ------------- ------------
Balance, June 30, 1995 1,636 $ (11,453) $(255,137) $1,471,502
----------- --------- ------------- ------------
----------- --------- ------------- ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
20
<PAGE>
BRUNSWICK BIOMEDICAL CORPORATION
AND SUBSIDIARY
Consolidated Statements of Cash Flows
for the Years Ended June 30, 1995 and 1994
<TABLE>
<CAPTION> 1995 1994
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss...................................................... $ (1,600,067) $ (1,724,844)
Adjustments to reconcile net loss to net cash used in operating
activities--
Issuance of treasury stock for payment of services........... 5,076 --
Interest payable converted to preferred stock................ -- 60,700
Depreciation and amortization................................ 244,219 211,301
Amortization of deferred compensation........................ 59,417 20,970
Amortization of noncompete discount.......................... 14,722 36,999
Changes in assets and liabilities--
Accounts receivable.......................................... (264,150) (40,080)
Inventories.................................................. 150,272 5,695
Prepaid expenses............................................. 22,871 (25,457)
Accounts payable............................................. 303,931 (266,906)
Accrued expenses............................................. 46,854 203,109
------------ ------------
Net cash used in operating activities...................... (1,016,855) (1,518,513)
------------ ------------
Cash Flows from Investing Activities:
Increases in other assets...................................... (109,422) (249,968)
Purchase of Telemedicine Division.............................. (2,062,993) --
Purchases of property and equipment............................ (34,798) (41,781)
------------- -------------
Net cash used in investing activities...................... (2,207,213) (291,749)
------------- -------------
Cash Flows from Financing Activities:
Purchase of treasury stock..................................... -- (22,135)
Proceeds from demand notes payable, net........................ 200,000 --
Payments under capital lease obligations....................... (35,859) (23,415)
Payments under noncompete agreements........................... (180,000) (258,905)
Net proceeds from the sale of preferred stock.................. -- 4,844,068
Net (repayments) borrowings of line of credit.................. 7,901 (2,732)
Decrease in deferred financing costs........................... -- 53,444
------------- -------------
Net cash provided by (used in) financing activities......... (7,958) 4,590,325
------------- -------------
Net Effect of Currency Fluctuations on Cash Flows................ (4,425) (9,267)
------------- -------------
Net Increase (Decrease) in Cash.................................. (3,236,451) 2,770,796
Cash, beginning of year......................................... 3,288,165 517,369
------------- -------------
Cash, end of year............................................... $ 51,714 $ 3,288,165
------------- -------------
------------- -------------
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest........................................ $ 45,107 $ 29,063
------------- -------------
------------- -------------
Supplemental Schedule of Noncash Investing and Financing
Activities:
Conversion of notes payable to preferred stock................ $ -- 1,579,970
Retirement of treasury stock.................................. -- 22,135
Increase in deferred compensation in the issuance of
nonqualified stock options................................... 209,700 125,824
Assets acquired under capital lease........................... 79,980 --
Collection of accounts receivable by tendering of common
stock........................................................ -- 13,000
Conversion of interest payable to preferred stock............. -- 87,472
------------- -------------
$ 289,680 $ 1,828,401
------------- -------------
------------- -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
21
<PAGE>
BRUNSWICK BIOMEDICAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) OPERATIONS
Brunswick Biomedical Corporation (the Company) is engaged in the
development, manufacture and sale of emergency life saving and
less/noninvasive arrhythmia management devices.
Since inception, the Company has incurred cumulative net losses of
approximately $6,598,000 in an industry characterized by intense competition
from a number of larger, more established companies with significantly
greater financial resources. The Company is subject to risks common among
companies in similar stages of development, including the ability to achieve
profitable operations, to successfully market its products and to obtain
additional financing. The Company's principal investor is a venture capital
firm that has indicated that it will continue to support and fund the
Company's operations as necessary.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements reflect the
application of certain accounting policies described below and elsewhere in
these notes to consolidated financial statements. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures 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.
(a) BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts
of the Company and its majority-owned subsidiaries; Brunswick Biomedical
Technologies, Inc. (BBT), a Massachusetts corporation; Brunswick Biomedical
Limited (BBL) (formerly NIRAD Limited), a Northern Ireland corporation; and
Brunswick Biomedical Investment Corporation (BBI), a Massachusetts
corporation. All significant intercompany accounts and transactions have been
eliminated in consolidation.
(b) CASH AND CASH EQUIVALENTS
In accordance with Statement of Financial Accounting Standards (SFAS) No.
115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, the
Company considers all highly liquid investments purchased with a remaining
maturity of three months or less to be cash equivalents. At June 30, 1994,
the Company had $2,633,992 invested in a commercial paper instrument that
matured on July 6, 1994. There were no such investments at June 30, 1995.
22
<PAGE>
(c) FOREIGN CURRENCY
In accordance with SFAS No. 52, FOREIGN CURRENCY TRANSLATION, BBL's
assets and liabilities are translated at the exchange rate in effect at the
balance sheet date. Revenue and expense accounts are translated using a
weighted average of exchange rates in effect during the year. Cumulative
translation gains and losses are shown in the accompanying consolidated
balance sheets as a separate component of stockholders' equity. There were no
material foreign currency transaction gains or losses during fiscal 1995 and
1994.
(d) INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out) or
market and consist of the following at June 30, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Raw materials......................................... $ 208,556 $ 225,286
Work-in-process....................................... 36,020 29,506
Finished goods........................................ 60,926 10,390
---------- ---------
$ 305,502 $ 265,182
---------- ---------
---------- ---------
</TABLE>
Work-in-process and finished goods inventories include materials, labor
and manufacturing overhead.
(e) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated using the
straight-line method by charges to operations in amounts estimated to
allocate the cost of the assets over estimated useful lives of three to five
years.
(f) REVENUE RECOGNITION
Revenue from product sales is recognized at the time of shipment.
23
<PAGE>
(g) CONCENTRATION OF CREDIT RISK
SFAS No. 105, DISCLOSURE OF INFORMATION ABOUT FINANCIAL INSTRUMENTS WITH
OFF-BALANCE-SHEET RISK AND FINANCIAL INSTRUMENTS WITH CONCENTRATIONS OF
CREDIT RISK, requires disclosures of any significant off-balance sheet and
credit risk concentrations. The Company has no significant off-balance-sheet
concentration of credit risk such as foreign exchange contracts, option
contracts or other foreign hedging arrangements. The Company's accounts
receivable credit risk is not concentrated within any geographic area and no
customer represented a significant credit risk to the Company.
(h) FINANCIAL INSTRUMENTS
The estimated fair value of the Company's financial instruments, which
include cash and cash equivalents, accounts receivable, line of credit,
demand note payable to shareholder and capital lease obligations,
approximates their carrying value.
(i) NET LOSS DATA AND EARNINGS PER SHARE
Net loss per share is computed by dividing net loss by the number of
shares of common stock outstanding during the period. Preferred stock and
common stock equivalents have not been considered in the calculation of net
loss per share, as their effect would be antidilutive. Fully diluted net loss
per share has not been separately presented, as the amounts are not
materially different from primary pro forma net loss per share.
(j) POSTRETIREMENT BENEFITS
The Company has not obligations for postretirement benefits under SFAS
No. 106, EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN
PENSIONS, or postemployment benefits under SFAS No. 112, EMPLOYERS'
ACCOUNTING FOR POSTEMPLOYMENT BENEFITS, as it does not currently offer such
benefits.
(K) RECENTLY ISSUED ACCOUNTING STANDARD
Effective July 1, 1995, the Company adopted SFAS No. 121, ACCOUNTING FOR
THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED
OF. SFAS No. 121 requires the Company to continually evaluate whether events
and circumstances have occurred that indicate that the estimated remaining
useful life of long-lived assets and such intangibles as goodwill may warrant
revision or that the carrying value of these assets may be impaired. To
compute whether
24
<PAGE>
assets have been impaired, the estimated gross cash flows for the estimated
remaining useful life of the asset are compared to the carrying value. To the
extent that the gross cash flows are less than the carrying value, the assets
are written down to the estimated fair value of the asset. The adoption of this
standard did not have a material effect on the Company's financial position of
results of operations.
(3) ACQUISITIONS
In October 1991, the Company entered into an agreement to purchase up to
100% of the outstanding stock of BBL, the principal location of which is Antrim,
Northern Ireland. The purchase, completed in December 1993, involved the
issuance of 36,113 shares of the Company's common stock. The acquisition has
been accounted for as a purchase. The value of shares and cash issued exceeded
the fair value of BBL's net assets by $878,319. The excess was expensed as
research and development in fiscal 1993 and 1992.
On July 31, 1994, the Company acquired substantially all of the assets of
the Telemedicine Division of Survival Technology, Inc. (Telemedicine Division),
a business engaged in developing, manufacturing and selling electronic
heart-monitoring medical devices and services and breathing-monitoring devices
and services. As consideration, the Company paid $2,026,580 in cash and the
transaction was accounted for as a purchase. In addition, the Company must pay
future royalties of up to $1,000,000 based on product sales over five years.
During fiscal 1995 and 1994, royalty expense of approximately $119,000 and $0,
respectively, was charged to operations. The aggregate purchase price of
$2,062,993 (which included $36,413 of direct acquisition costs) was allocated
based on the fair value of the tangible and intangible assets acquired as
follows:
Equipment $ 71,795
Inventory 186,580
Goodwill and intangible assets 1,804,618
----------
$2,062,993
----------
----------
The goodwill and intangible assets are amortized on a straight-line basis
over 10 years.
25
<PAGE>
(4) DEBT
(a) DEMAND NOTES PAYABLE TO SHAREHOLDERS
In 1995, the Company issued a $200,000 demand note payable to a
shareholder. The note bears interest at the rate of 11%.
(b) LINE OF CREDIT
BBL had borrowings of $225,950 and $211,075 outstanding at June 30, 1995
and 1994, respectively, under a foreign bank line that carries a borrowing
limitation of L145,000 ($231,000 at June 30, 1995). Borrowings under the line
of credit are due on demand and bear interest at the bank's published rate
(6.75% at June 30, 1995) plus 2%. The line expires on December 18, 1996 and
is secured by an irrevocable letter of credit.
The Company, as collateral for the line of credit on BBL's behalf,
pledged $250,000, which is held in an interest-bearing account by a bank.
This amount is included as restricted cash in deposits and other assets in
the accompanying consolidated balance sheets at June 30, 1995 and 1994.
(c) CAPITAL LEASE OBLIGATIONS
The Company leases certain equipment and motor vehicles under agreements
accounted for as capital leases.
The future minimum lease payments under these leases are as follows:
1996 $ 22,844
1997 22,847
1998 40,214
--------
85,905
Less--Amount representing
interest 15,212
---------
Present value of minimum
lease payments 70,693
Less--Current maturities 15,312
---------
$ 55,381
---------
---------
26
<PAGE>
(5) NONCOMPETE OBLIGATIONS
The Company previously entered into separate noncompete agreements with
two of the minority stockholders of BBT. These noncompete agreements
prohibited these individuals from competing with the Company through June 30,
1994. During 1994, the Company extended the repayment term of one of the
noncompete agreements beyond its original June 1994 maturity. As of June 30,
1995, the discounted present value of the remaining noncompete payments was
$56,342, which matures in October 1995. The value of the noncompete agreement
was amortized over the initial 48-month period.
(6) INCOME TAXES
The Company provides for federal and state income taxes in accordance
with SFAS No. 109, ACCOUNTING FOR INCOME TAXES. Under the liability method
specified by SFAS No. 109, a deferred tax asset or liability is determined
based on the difference between the financial statement and tax bases of
assets and liabilities, as measured by the enacted tax rates assumed to be in
effect when these differences reverse. As of June 30, 1995 and 1994, the
Company had net operating loss carryforwards, credit carryforwards and other
temporary differences that could result in a potential tax benefit. The net
operating loss carryforwards of approximately $3,894,000 and $3,249,000 at
June 30, 1995 and 1994, respectively, expire through 2010 and are subject to
review and possible adjustment by the Internal Revenue Service. In addition,
the occurrence of certain events, including significant changes in ownership
interests, may limit the amount of the net operating loss carryforwards
available to be used in any given year.
The components of the Company's income tax accounts and the approximate
amount of each at June 30, 1995 and 1994 are as follows:
1995 1994
------------ ------------
Net operating loss
carryforwards $ 1,558,000 $ 1,299,000
Credit carryforwards 25,000 --
Temporary differences 378,000 195,000
------------ ------------
1,961,000 1,494,000
Valuation allowance (1,961,000) (1,494,000)
------------ ------------
$ -- $ --
------------ ------------
------------ ------------
A valuation allowance has been provided, as it is uncertain if the Company
will realize the benefit of the deferred tax asset.
27
<PAGE>
(7) COMMITMENTS
The Company conducts its domestic manufacturing in facilities owned by
the minority stockholders of BBT. The Company entered into an agreement with
the minority stockholders to extend the lease through June 30, 1996. The
aggregate minimum lease payments were $80,000 in year one and $55,000 in year
two. The Company has been leasing on a tenant-at-will basis since June 30,
1996, at a rate of $4,783 per month. Rent expense of approximately $80,000
and $125,000 was charged to BBT operations during fiscal 1995 and 1994,
respectively.
(8) STOCKHOLDERS' EQUITY
(a) COMMON STOCK
In conjunction with raising working capital during the year ended June
30, 1994, the Company increased the number of shares of its authorized common
stock from 500,000 to 1,075,000. The Company has reserved 477,911 shares of
common stock for the conversion of the preferred stock and the issuance upon
exercise of stock options and common stock warrants.
(b) COMMON STOCK WARRANTS
During 1993, in connection with the issuance of certain notes payable,
the Company issued warrants to purchase 5,999 shares of common stock. These
warrants vested at a rate of 20% per month beginning on July 22, 1993 until
the Company met certain milestones. In November 1993, the milestones were
achieved, and 3,600 of the 5,999 warrants vested. The remaining 2,399
warrants were canceled. In addition, the Company issued 4,000 warrants to two
stockholders of the Company in March 1994. These warrants are exercisable
through April 22, 2000 at a per share price of $17.50, adjustable for certain
dilutive events, as defined.
During 1993 and 1992, in connection with the issuance of certain notes
payable, the Company issued warrants to purchase 656 shares and 984 shares,
respectively, of common stock. These warrants were exercisable through August
10, 1995 at a per share price of $30.50, adjustable for certain dilutive
events, as defined. During 1992, the Company also issued warrants to purchase
400 shares of common stock, at a per share price of $17.50, to a financial
institution as additional consideration for borrowings received by the
Company.
(c) STOCK OPTION PLAN
In November 1993, the Company adopted the 1993 Stock Option Plan (the
Plan). Pursuant to the Plan, the Company may grant to any employee, director
or consultant of the Company, stock options to purchase up to 155,493 shares
of common stock. As of June 30, 1995, 137,220 options were outstanding and
18,273 options were available for issuance under the Plan.
28
<PAGE>
(d) CONVERTIBLE REDEEMABLE PREFERRED STOCK
The Company has authorized 500,000 shares of preferred stock, par value
of $.01 per share, of which 65,000 shares have been designated Series A
preferred stock, 30,000 shares have been designated series B preferred stock,
380,000 shares have been designated Series C preferred stock and 25,000
shares have not been designated.
In November 1993, the Company issued 279,183 and 95,279 shares of Series
C preferred stock in exchange for cash and the conversion of certain notes
payable, respectively.
The rights, privileges and preferences of the preferred stock are listed
below.
CONVERSION
The preferred stock is convertible into common stock at the rate of one
share of common stock for each share of preferred stock, adjusted for certain
dilutive events. Conversion is at the option of the preferred stockholders
but becomes automatic upon the closing of an initial public offering at a per
share price of at least $52.50 for Series A, B and C, $82.65 for Series F and
resulting in aggregate proceeds to the Company of at least $10,000,000.
REDEMPTION
Outstanding shares of Series A and B preferred stock may be redeemed over
a five-year period upon a two-thirds vote of the stockholders, beginning no
earlier than January 1, 1999, in the amount of $7.73 and $17.50 per share,
respectively, plus any declared but unpaid dividends. Shares of Series C
preferred stock may be redeemed over a three-year period upon a two-thirds
vote of the stockholders, beginning no earlier than January 1, 1999, in the
amount of $17.50 per share plus any declared but unpaid dividends. Preferred
stockholders of each class may postpone or waive redemption by a two-thirds
vote.
DIVIDENDS
The holders of the Series A and B preferred stock shall be entitled to
receive, when and as declared by the Board of Directors, dividends out of
funds legally available.
The holders of the Series C preferred stock shall be entitled to receive,
when and as declared by the Board of Directors, out of funds legally
available, cumulative cash dividends equal to $1.75 per share.
29
<PAGE>
The dividends shall be payable only in the event of (i) a liquidation,
dissolution or winding up of the Company, (ii) a consolidation or merger of
the Company or a sale of all or substantially all of the assets of the
Company or (iii) a redemption of the preferred stock.
LIQUIDATION PREFERENCE
The holders of the preferred stock have preference in the event of a
liquidation, sale or dissolution of the Company to liquidation proceeds equal
to the amount paid for such shares plus any declared but unpaid dividends.
Series C preferred stock has preference in liquidation over Series A and B
preferred stock.
RIGHT OF FIRST REFUSAL
The preferred stockholders, subject to the rights of certain common
stockholders, have the right of first refusal to purchase a PRO RATA portion
of any new securities, as defined, equal to their proportion of capital stock
owned at the time of issuance of the new securities.
VOTING RIGHTS
The preferred stockholders are entitled to vote on all matters with the
common stockholders as if they were one class of stock. The preferred
stockholders are entitled to the number of votes equal to the number of
shares of common stock into which each share of the preferred stock is then
convertible.
(9) DEPOSITS AND OTHER ASSETS
Deposits and other assets consist of the following:
JUNE 30,
1995 1994
Restricted cash $ 250,000 $ 255,593
Deposits 118,342 3,327
---------- ----------
$ 368,342 $ 258,920
---------- ----------
---------- ----------
30
<PAGE>
(10) ACCRUED EXPENSES
Accrued expenses consist of the following:
JUNE 30,
1995 1994
Payroll and related $ 105,423 $ 90,626
Professional fees 72,301 87,301
--------- --------
Other 428,657 380,319
--------- --------
$ 606,381 $558,246
--------- --------
--------- --------
(11) FINANCIAL INFORMATION BY GEOGRAPHIC AREA
Domestic and export sales as a percentage of total revenues are as
follows:
YEAR ENDED
JUNE 30,
1995 1994
--------- ---------
United States 96.6% 62.2%
Europe 3.4 37.8
--------- ---------
100.0% 100.0%
--------- ---------
--------- ---------
Revenues, income (loss) from operations and identifiable assets for the
Company's United States and European operations are as follows.
UNITED STATES EUROPE ELIMINATIONS CONSOLIDATED
Year Ended June 30, 1995--
Revenues $ 2,804,726 $ 820,803 $ (721,997) $ 2,903,532
----------- --------- ------------ -------------
----------- --------- ------------ -------------
Income (loss) from
operations $(1,181,538) $(459,843) $ 59,891 $(1,581,490)
----------- --------- ------------ -------------
----------- --------- ------------ -------------
Identifiable assets $ 5,650,751 $ 352,523 $(2,815,098) $ 3,188,176
----------- --------- ------------ -------------
----------- --------- ------------ -------------
31
<PAGE>
UNITED STATES EUROPE ELIMINATIONS CONSOLIDATED
Year Ended June 30, 1994--
Revenues $ 1,510,248 $ 916,736 $ -- $ 2,426,984
------------ --------- ------------ -------------
------------ --------- ------------ -------------
Loss from operations $(1,292,548) $(242,727) $ (92,073) $(1,627,348)
------------ --------- ------------ -------------
------------ --------- ------------ -------------
Identifiable assets $ 8,880,765 $ 370,593 $(4,967,509) $ 4,283,849
------------ --------- ------------ -------------
------------ --------- ------------ -------------
(12) VALUATION AND QUALIFYING ACCOUNTS
The following tables set forth activity in the Company's accounts
receivable reserve account:
BEGINNING COST AND END OF
OF YEAR EXPENSE DEDUCTIONS YEAR
For the Year Ended
June 30, 1994 $ 17,000 $ -- $ -- $ 17,000
----------- --------- ------- --------
----------- --------- ------- --------
For the Year Ended
June 30, 1995 $ 17,000 $ 49,000 $ -- $ 66,000
----------- --------- ------- --------
----------- --------- ------- --------
(13) SUBSEQUENT EVENTS
On August 24, 1995, the Company issued 36,620 shares of Series D
convertible preferred stock at a per share price of $27.55 and received net
cash proceeds of $650,000 after the conversion of $359,000 in notes payable
and accrued interest.
32
<PAGE>
Exhibit 99.2
STI/BBC Merger Creates New Medical Device
Company `Meridian Medical Technologies'
ROCKVILLE, Md., Nov. 21 /PR Newswire/ -- Survival Technology, Inc. (STI)
(Nasdaq: STIQ) and Brunswick Biomedical Corporation (BBC) today announced
they completed their previously announced merger to form Meridian Medical
Technologies, Inc. The company's new Nasdaq ticker symbol is MTEC effective
November 22, 1996 (Nasdaq: MTEC).
"The mission of Meridian Medical Technologies is to be a global leader in
early intervention home healthcare and emergency medical technologies," said
James H. Miller, chairman, president and CEO. "The Meridian name reflects
our commitment to reaching new heights in these key growth segments of the
medical device industry."
He noted that the combining of resources creates new opportunities for
growth in both drug delivery systems and cardiopulmonary products and
services, STI is the world leader in auto-injector drug delivery technology
for pharmaceuticals, biotechnology products and the military. Brunswick
develops, manufactures and markets emergency-care products and medical
devices for the non-invasive monitoring, diagnosis and care of cardiac
patients.
"We are optimistic about the exciting prospects for growth, synergy and
new technological advances in the years ahead," Mr. Miller said. During
fiscal 1996 ended July 31, 1996, STIQ sales increased 23 percent over the
previous year to $31.4 million, while earnings increased 177 percent to $1.3
million ($.41 per share).
Meridian Medical Technologies' facilities will include the former STI
manufacturing complex in St. Louis, offices in Rockville and international
operations based in England as well as the former Brunswick facilities in
Wareham, Mass. and Northern Ireland.
Pursuant to the definitive agreement, each of Brunswick's outstanding
shares of common stock was converted into 2.1 shares of the company's common
stock. Each of Brunswick's outstanding shares of preferred stock was
converted into 2.1 shares of the company's common stock and a warrant to
purchase 0.4 of a share of the company's common stock at an exercise price of
$11.00 per share, exercisable for a period of five years following the merger.
33
<PAGE>
In addition, the company assumed Brunswick's obligations under
outstanding options and warrants. These provisions of the agreement resulted
in approximately 1.7 million shares of the company's common stock being
issued in exchange for the Brunswick stock upon the consummation of the
merger and could result in the issuance of an additional 1.05 million shares
of the company's common stock if all options and warrants are exercised and
the required consideration paid. Each of the 1,888,126 shares of the
company's common stock formerly owned by Brunswick was retired in the merger.
The transaction is being accounted for by the purchase method of accounting.
SOURCE Survival Technology, Inc.
-0- 11/21/96
/CONTACT: James H. Miller, Chairman, President and
CEO or Jeffrey W. Church, Sr. Vice President, Finance and
CFO, 800-638-8093, both of Survival Technology/
34
