1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 8-K/A
(AMENDMENT NO. 2)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 28, 2000
United Therapeutics Corporation
----------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 0-26301 52-1984749
--------- -------- ----------
(State or Other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification Number)
Incorporation)
1110 Spring Street
Silver Spring, MD 20910
-------------------------------------------------------- -------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(301) 608-9292
-----------------------------------
2
This Amendment to the Current Report on Form 8-K/A filed on February 1, 2001 is
being filed to include the financial information required by Item 7 of this Form
8-K relating to the acquisition by the Registrant of Medicomp, Inc. and
Telemedical Procedures, LLC
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
Page Number
-------------
(a) Financial Statements of Business Acquired.
Independent Auditors' Report 4
Medicomp, Inc. and Subsidiary Consolidated Balance Sheet as of 5
October 31, 2000
Medicomp, Inc. and Subsidiary Consolidated Statement of Income for the 7
Year Ended October 31, 2000
Medicomp, Inc. and Subsidiary Consolidated Statement of Accumulated
Deficit for the Year Ended October 31, 2000 8
Medicomp, Inc. and Subsidiary Consolidated Statement of Cash Flows for the
Year Ended October 31, 2000 9
Notes to the Financial Statements 10
(b) Unaudited Pro Forma Combined Financial Statements 22
Unaudited Pro Forma Combined Balance Sheet as of September 30, 2000 23
Unaudited Pro Forma Combined Statement of Operations for the Year Ended
December 31, 1999 24
Unaudited Pro Forma Combined Statement of Operations for the Nine Month
Period Ended September 30, 2000 25
1
3
Note to Unaudited Pro Forma Combined Financial Statements 26
(c) Exhibits
2.1 Asset Purchase Agreement dated as of December 28, 2000 among UTSC
Sub, the Company, Medicomp and Telemedical*
(previously filed)
2.2 Registration Rights Agreement dated as of December 28, 2000
between the Company and Medicomp (previously filed)
2.3 Escrow Agreement dated as of December 28, 2000 among the Company,
UTSC Sub, Medicomp, Mahon, Patusky, Rothblatt & Fisher, Chartered,
as escrow agent, and Chicago Title, as successor escrow agent
(previously filed)
23.1 Consent of Berman Hopkins Wright & LaHam, CPAs LLP
(filed herewith)
* The Registrant hereby undertakes to furnish supplementally a copy of any
omitted schedule to this Agreement to the Securities and Exchange Commission
upon request.
2
4
SIGNATURE
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.
United Therapeutics Corporation
(Registrant)
Date: March 13, 2001 By: /s/ Fred T. Hadeed
----------------------------------
Name: Fred T. Hadeed
Title: Chief Financial Officer
3
5
INDEPENDENT AUDITORS' REPORT
Board of Directors
Medicomp, Inc. and subsidiary
West Melbourne, Florida
We have audited the accompanying consolidated balance sheet of Medicomp, Inc.
and subsidiary as of October 31, 2000, and the related consolidated statements
of income, accumulated deficit, and cash flows for the year then ended. The
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Medicomp, Inc. and
subsidiary as of October 31, 2000, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
February 28, 2001 BERMAN HOPKINS
Merritt Island, Florida WRIGHT & LAHAM, CPAs, LLP
4
6
MEDICOMP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
OCTOBER 31, 2000
ASSETS
CURRENT ASSETS
Cash $ 71,993
Accounts receivable, net of allowance for doubtful accounts 334,501
of $183,244
Inventories 447,584
Prepaid expenses 32,335
Deferred income taxes 1,135,070
Total current assets 2,021,483
PROPERTY AND EQUIPMENT
Cardiac monitoring equipment 392,970
Computer equipment and software 78,498
Manufacturing and drafting equipment 472,474
Office furniture and equipment 121,180
Vehicles 69,916
Property held under capital leases 98,100
-----------
1,233,138
Less accumulated depreciation 778,030
-----------
455,108
OTHER ASSETS
Capitalized software costs 163,900
Deposits 24,221
-----------
188,121
-----------
$ 2,664,712
===========
(continued)
5
7
MEDICOMP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
OCTOBER 31, 2000
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Notes payable $ 302,765
Notes payable - related parties 1,169,863
Current portion of long-term debt 10,389
Current portion of obligations under capital leases 30,384
Accounts payable 431,798
Accounts payable - related parties 30,893
Accrued payroll and related liabilities 860,175
Accrued other expenses 31,339
Accrued interest 82,032
Accrued interest - related parties 131,582
Warranty reserve 20,000
Deferred revenue 30,000
------------
Total current liabilities 3,131,220
LONG-TERM LIABILITIES
Long-term debt 2,510
Obligations under capital leases 28,653
------------
31,163
COMMITMENTS AND CONTINGENCIES
-
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARY 372,393
STOCKHOLDERS' DEFICIT
Preferred stock, non-cumulative and non-voting, $500 par value, 680,000
1,500 shares authorized, 1,360 shares issued and outstanding
Common stock, $.01 par value, 2,000,000 shares authorized, 16,067
1,606,667 shares issued and outstanding
Additional paid-in capital 459,932
Accumulated deficit (2,026,063)
------------
(870,064)
$ 2,664,712
============
The accompanying notes are an integral part of these consolidated financial
statements.
6
8
MEDICOMP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED OCTOBER 31, 2000
REVENUES $ 2,194,194
COST OF REVENUES 972,937
------------
1,221,257
OPERATING EXPENSES
Selling 888,404
General and administrative 1,228,807
Interest 45,274
Interest - related parties 109,440
------------
2,271,925
RESEARCH AND DEVELOPMENT COSTS 550,810
------------
Loss from operations (1,601,478)
MINORITY INTERESTS IN LOSS OF 554,265
CONSOLIDATED SUBSIDIARY
------------
Loss before income taxes (1,047,213)
INCOME TAX BENEFIT 1,135,070
------------
Net income $ 87,857
============
WEIGHTED NUMBER OF COMMON SHARES 1,606,667
OUTSTANDING
============
EARNINGS PER COMMON SHARE $ 0.05
============
The accompanying notes are an integral part of these consolidated financial
statements.
7
9
MEDICOMP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF ACCUMULATED DEFICIT
YEAR ENDED OCTOBER 31, 2000
DEFICIT AT BEGINNING OF YEAR $ (2,113,920)
Net income 87,857
------------
DEFICIT AT END OF YEAR $ (2,026,063)
============
The accompanying notes are an integral part of these consolidated financial
statements.
8
10
MEDICOMP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED OCTOBER 31, 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 87,857
Adjustments to reconcile net income to
net cash used in operating activities
Depreciation and amortization 132,506
Increase in allowance for doubtful accounts 88,166
Decrease in deferred income taxes valuation allowance (1,470,257)
Minority interests in loss of consolidated subsidiary (554,265)
(Increase) decrease in assets:
Accounts receivable (72,860)
Inventories (299,312)
Prepaid expenses (31,523)
Deferred income taxes 335,187
Increase (decrease) in liabilities:
Accounts payable 222,732
Accrued payroll and related liabilities 750,739
Accrued other expenses (55,335)
Accrued interest 57,680
Deferred revenue (10,000)
Net cash used in operating activities (818,685)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (8,788)
---------
Net cash used in investing activities (8,788)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt (35,250)
Proceeds from issuance of notes payable - related parties 225,000
Contributed capital from minority interest 500,000
---------
Net cash provided by financing activities 689,750
Net decrease in cash (137,723)
Cash at beginning of year 209,716
---------
Cash at end of year $ 71,993
=========
CASH PAID FOR INTEREST $ 69,098
=========
CASH PAID FOR INCOME TAXES $ -
=========
The accompanying notes are an integral part of these consolidated financial
statements.
9
11
MEDICOMP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Consolidation policy
The accompanying consolidated financial statements include the accounts
of Medicomp, Inc. and its majority-owned subsidiary Telemedical
Procedures, LLC (collectively the "Company"). Intercompany transactions
and balances have been eliminated in consolidation.
2. Nature of business
The Company is headquartered in West Melbourne, Florida, and is
primarily in the business of developing and manufacturing diagnostic
electrocardiographic equipment and providing transtelephonic cardiac
monitoring services. The Company markets worldwide, primarily to its
customer base of major hospitals, clinics and physicians' offices.
3. Use of estimates
The process of preparing financial statements in conformity with
generally accepted accounting principles requires the use of estimates
and assumptions regarding certain types of assets, liabilities,
revenues, and expenses. Such estimates primarily relate to unsettled
transactions and events as of the date of the financial statements.
Accordingly, upon settlement, actual results may differ from estimated
amounts.
4. Fair value of financial instruments
Financial Accounting Standards Board Statement No. 107 ("FAS 107"),
"Disclosures about Fair Value of Financial Instruments," requires
disclosure of fair value information about financial instruments. Fair
value estimates discussed herein are based upon certain market
assumptions and pertinent information available to management as of
October 31, 2000.
The respective carrying value of certain on-balance-sheet financial
instruments approximates their fair values. These financial instruments
include cash, accounts receivable, prepaid expenses, accounts payable
and accrued liabilities. Fair values were assumed to approximate
carrying values for these financial instruments since they are
short-term in nature and their carrying amounts approximate fair value
or they are receivable or payable on demand. The fair values of the
Company's notes payable, capital leases, and long-term debt are
estimated based upon the quoted market prices for the same or similar
issues or on the current rates offered for instruments for the same
remaining maturities. The carrying value of the Company's notes payable,
capital leases, and long-term debt approximates their fair market value.
10
12
MEDICOMP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
5. Inventories
Inventories are stated at the lower of cost, determined by the
weighted-average method, or market.
6. Property and equipment
Property and equipment is recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the related assets.
For the year ended October 31, 2000, depreciation charged to current
operations totaled approximately $100,000. Depreciation expense of
approximately $90,000 and $10,000 has been charged to cost of revenues and
general and administrative expenses, respectively.
The useful lives of property and equipment for purposes of computing
depreciation are:
----------------------------------------------------------------
Cardiac monitoring equipment 5 years
----------------------------------------------------------------
Computer equipment and software 3-5 years
----------------------------------------------------------------
Manufacturing and drafting equipment 7 years
----------------------------------------------------------------
Office furniture and equipment 7 years
----------------------------------------------------------------
Vehicles 5 years
----------------------------------------------------------------
----------------------------------------------------------------
7. Capitalized software costs
The Company has capitalized software costs incurred after feasibility of
the software of a specific product was established. The costs are being
amortized over the product's estimated useful life from the date the
product was available to be sold. Amortization is being charged at a
rate of $100 per unit sold. For the year ended October 31, 2000,
amortization of capitalized software costs was $34,500, all of which is
included in cost of revenues on the accompanying consolidated statement
of income.
8. Warranty reserve
The Company warranties certain products, primarily for a one year
period. The accompanying consolidated financial statements include a
reserve of $20,000 for estimated warranty claims. The reserve is
estimated based on the Company's experience with the annual volume of
actual claims.
The Company expensed approximately $30,000 during the year ended
October 31, 2000 for warranty service.
11
13
MEDICOMP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
9. Revenue recognition
The Company recognizes revenue when products are shipped or services are
completed. All product and service sales are invoiced and collected in
U.S. dollars.
10.Income taxes
The Company and its subsidiary file separate tax returns. The subsidiary
is treated as a partnership for federal tax purposes and does not incur
income taxes. Instead, its losses are included in the personal returns
of the members and taxed depending on their personal tax situations. Per
the subsidiary's operating agreement, all of the subsidiary's losses
through October 31, 2000 have been allocated to the minority members. As
such, the results of the subsidiary's operations do not affect the
Company's income tax accounts.
Income tax benefit considers federal and state taxes currently payable
and deferred taxes arising from temporary differences between income for
financial reporting and income tax purposes. These differences result
principally from the allowance for doubtful accounts, certain
liabilities that have been accrued but are not currently deductible, and
operating loss carryforwards.
11.Non-cash investing and financing activities
In addition to the information disclosed in the consolidated statement
of cash flows, the Company acquired $38,100 in manufacturing and
drafting equipment by entering into a capital lease agreement.
Additionally, the Company transferred inventory with a carrying value of
$229,976 to cardiac monitoring equipment.
12.Concentration of cash deposits
The Company maintains cash deposits at two banks in Florida. Deposits at
each bank are insured by the Federal Deposit Insurance Corporation up to
$100,000. As of October 31, 2000, there were no uninsured portions at
the banks.
12
14
MEDICOMP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
NOTE B - INVENTORIES
Inventories consist of the following:
----------------------------------------------------------------
Raw materials $ 256,331
----------------------------------------------------------------
Work-in-process 151,432
----------------------------------------------------------------
Finished goods 39,821
----------------------------------------------------------------
$ 447,584
----------------------------------------------------------------
==========
----------------------------------------------------------------
NOTE C - CAPITAL LEASES AND SALE-LEASEBACK TRANSACTIONS
The Company is a lessee of manufacturing equipment under a capital lease
expiring in fiscal year 2005.
Additionally, during October 1998 the company entered into a
sale-leaseback arrangement. Under the arrangement, the Company sold
cardiac monitoring equipment and leased it back, through three separate
leases, for a period of three years. The leasebacks have been accounted
for as capital leases. The revenue of $50,000 realized on the sales
portion of this transaction was deferred and is being recognized in
proportion to the depreciation being taken on the leased assets. As of
October 31, 2000, the deferred revenue balance is $30,000. For the year
ended October 31, 2000, revenue totaling $10,000 was recognized.
The assets and liabilities under capital leases are recorded at the
lower of the present value of the minimum lease payments or the fair
value of the assets. The assets are depreciated over their estimated
productive lives. Depreciation of the assets under capital leases,
totaling $14,268, is included in depreciation expense for the year ended
October 31, 2000.
The following is a summary of property held under capital leases:
----------------------------------------------------------------
Cardiac monitoring equipment $ 60,000
----------------------------------------------------------------
Manufacturing and drafting equipment 38,100
----------------------------------------------------------------
98,100
----------------------------------------------------------------
Less accumulated depreciation 26,268
----------------------------------------------------------------
$ 71,832
============
----------------------------------------------------------------
13
15
MEDICOMP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
NOTE D - NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt consists of the following:
------------------------------------------------------------------------------
Prime plus 1.0% (10.5% at October 31, 2000) note to
a bank, due in February 2001, interest payable
monthly and principal payable at maturity,
collateralized by substantially all of the Company's
assets, guaranteed by majority stockholder $ 190,594
------------------------------------------------------------------------------
------------------------------------------------------------------------------
7.5% note to bank, due in February 2002,
equal monthly installments of $846, including
principal and interest, collateralized by a vehicle 12,899
------------------------------------------------------------------------------
------------------------------------------------------------------------------
8.0% notes payable to individuals, principal
and accrued interest due January 2001, uncollateralized 18,825
------------------------------------------------------------------------------
------------------------------------------------------------------------------
9.0% notes payable to majority stockholder, principal
and accrued interest due the earlier of November
2001, or upon demand subsequent to the sale of
part or all of the company, uncollateralized 536,976
------------------------------------------------------------------------------
------------------------------------------------------------------------------
8.0% note payable to corporation, interest payable
monthly and principal due the earlier of February
2004 or within 30 days after the sale of a 5% or
greater equity interest of Medicomp, Inc. or its
subsidiary, uncollateralized 62,000
------------------------------------------------------------------------------
------------------------------------------------------------------------------
9.0% notes payable to a minority stockholder,
principal and accrued interest due December
2000, uncollateralized 29,516
------------------------------------------------------------------------------
------------------------------------------------------------------------------
8.25% note payable to a corporation, interest
payable monthly and principal due February 2001,
collateralized by building lease 31,346
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
14
16
MEDICOMP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
NOTE D - NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)
---------------------------------------------------------------------------------
15.0% notes payable to a corporation, interest payable
monthly and principal due the earlier of December
2001 or the receipt of $2 million, or greater, equity
investment into Medicomp, Inc., collateralized by
substantially all of the Company's assets 368,371
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
8.0% note payable to minority member, principal and
accrued interest due December 2000,
uncollateralized 10,000
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
12.0% notes payable to minority members, principal
and accrued interest due November 2000,
uncollateralized 80,000
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
12.0% note payable to a corporation, principal and
accrued interest due December 2000,
uncollateralized 40,000
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
12.0% note payable to minority member, principal and
accrued interest due on demand, uncollateralized 40,000
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
12.0% note payable to majority stockholder, principal
and accrued interest due on demand,
uncollateralized 40,000
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
8.5% note payable to majority stockholder, principal
and accrued interest due on November 2000,
uncollateralized 25,000
---------------------------------------------------------------------------------
1,485,527
---------------------------------------------------------------------------------
Less current notes payable 302,765
---------------------------------------------------------------------------------
Less current notes payable - related parties 1,169,863
---------------------------------------------------------------------------------
Less current portion of long-term debt 10,389
---------------------------------------------------------------------------------
$ 2,510
==============
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
The $2,510 of long-term debt will be due during fiscal year ending 2002.
15
17
MEDICOMP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
NOTE E - OBLIGATIONS UNDER CAPITAL LEASES
Minimum future lease payments under capital leases as of October 31, 2000
for each of the next five fiscal years are as follows:
---------------------------------------------------------------
2001 $ 37,413
---------------------------------------------------------------
2002 10,056
---------------------------------------------------------------
2003 10,056
---------------------------------------------------------------
2004 10,056
---------------------------------------------------------------
2005 5,028
---------------------------------------------------------------
Total minimum lease payments 72,609
---------------------------------------------------------------
Less amount representing interest 13,572
---------------------------------------------------------------
Present value of minimum lease payments 59,037
---------------------------------------------------------------
Less current portion of obligations under
capital leases 30,384
---------------------------------------------------------------
Long-term obligations under capital leases $ 28,653
---------------------------------------------------============
---------------------------------------------------------------
Interest rates on capital leases vary from 12% to 26% and are imputed
based on the lower of the Company's incremental borrowing rate at the
inception of each lease or the lessor's implicit rate of return.
NOTE F - PROFIT SHARING PLAN
The Company sponsors a defined contribution 401(k) profit sharing plan.
Company contributions to the plan charged to operations during the year
ended October 31, 2000 totaled approximately $11,000.
NOTE G - INCOME TAXES
A reconciliation of income tax at the statutory rate to the Company's
effective rate is as follows:
16
18
---------------------------------------------------------------
Computed at the expected statutory rate 34%
---------------------------------------------------------------
State income tax - net of federal tax benefit 3%
---------------------------------------------------------------
Minority interests in loss of consolidated
subsidiary 20%
---------------------------------------------------------------
Change in valuation allowance 53%
---------------------------------------------------------------
Other -2%
---------------------------------------------------------------
Effective income tax rate 108%
---------------------------------------------------============
---------------------------------------------------------------
17
19
MEDICOMP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
NOTE G - INCOME TAXES (CONTINUED)
The following table presents the components of the income tax expense
(benefit) by jurisdiction:
-----------------------------------------------------------------
Current $ -
-----------------------------------------------------------------
Deferred
-----------------------------------------------------------------
Federal 302,872
-----------------------------------------------------------------
State 32,315
-----------------------------------------------------------------
Net current and deferred income tax expense 335,187
-----------------------------------------------------------------
Decrease in valuation allowance (1,470,257)
-----------------------------------------------------------------
Income tax benefit $ (1,135,070)
-------------------------------------------------================
-----------------------------------------------------------------
The Company has available net operating loss carryforwards and
alternative minimum tax credits totaling approximately $2,100,000 and
$1,808 respectively. The carryforwards and credits may be applied
against future taxable income. The net operating loss carryforwards
expire at various dates through 2013.
The deferred tax asset is comprised of the following at October 31, 2000:
---------------------------------------------------------------
Net operating loss and alternative minimum
tax credit carryforwards $ 789,508
---------------------------------------------------------------
Related party expenses accrued but
not paid 289,477
---------------------------------------------------------------
Reserves and allowances 28,223
---------------------------------------------------------------
Employee benefit obligations 16,573
---------------------------------------------------------------
Other 11,289
---------------------------------------------------------------
$ 1,135,070
--------------------------------------------------=============
---------------------------------------------------------------
Due to the sale of the Company's assets (as further discussed in Note
K-3), the Company's taxable income is expected to increase substantially
in the year ended October 31, 2001. As such, management has determined
that it is more likely than not that future taxable income will be
sufficient to enable the Company to realize all of its deferred tax
asset. As such, no valuation allowance has been recorded as of October
31, 2000.
18
20
MEDICOMP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
NOTE H - RELATED PARTY TRANSACTIONS
Periodically, the Company has acquired working capital through proceeds
from issuance of notes payable to related parties. The related parties
include the majority and minority stockholders, the Chief Executive
Officer for the year ended October 31, 2000, as well as minority members
of the subsidiary. At October 31, 2000, related party notes payable
totaled $1,169,863 and are reflected in the current liabilities on the
accompanying consolidated balance sheet. Additionally, at October 31,
2000, interest payable to the related parties totaling $131,582 and
$30,893 is included in accrued interest - related parties and accounts
payable, respectively.
The Company incurred approximately $109,000 of interest expense to the
related parties during the year ended October 31, 2000.
NOTE I - OPERATING LEASES
The Company rents its facility, including plant and office space, under
a noncancelable operating lease, which expired in November 2000. Rent
expense under the facility's operating lease totaled $101,712 for the
year ended October 31, 2000. Subsequent to October 31, 2000, the Company
renewed the lease for an additional three-year term through November
2003. Monthly rent under the new lease is $8,426. The schedule below
includes minimum lease payments required under the renewed lease.
Additionally, the Company leases a vehicle under a noncancelable lease
through November 2001. Rent expense under the vehicle lease totaled
$9,336 for the year ended October 31, 2000.
The following is a schedule of future minimum lease payments under the
noncancelable leases for each of the next four fiscal years ending in:
Facility Vehicle Total
-----------------------------------------------------------------------
2001 $ 101,162 $ 9,336 $ 110,498
-----------------------------------------------------------------------
2002 101,112 778 101,890
-----------------------------------------------------------------------
2003 101,112 - 101,112
-----------------------------------------------------------------------
2004 8,426 - 8,426
-----------------------------------------------------------------------
$ 311,812 $ 10,114 $ 321,926
------------------------------=========================================
-----------------------------------------------------------------------
19
21
MEDICOMP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
NOTE J - CONTINGENCIES
1. Litigation
Subsequent to the year ended October 31, 2000, the Company has filed
suit against its former Chief Executive Officer for alleged
self-dealings and breach of fiduciary duties. The former Chief Executive
Officer responded by filing a counterclaim against the Company and other
related parties. The multi-count counterclaim seeks damages in excess of
$20 million together with a request for receivership and judicial
dissolution of the Company. Additionally, the counter-claim seeks to
impose constructive trust upon 12% of all proceeds from the sale of the
assets of the Company (as discussed in Note K-3). Outside counsel for
the Company has advised management that at this stage of the proceedings
an opinion as to the ultimate outcome of the Company's claim, nor the
counter-claim filed against the Company, cannot be offered. The Company
intends to resolutely pursue its claim and vigorously contest the claims
against it. As the outcome of this matter is uncertain, and not
estimable, no accrual is reflected in these consolidated financial
statements.
In addition to the above matter and in the normal course of conducting
its business, the Company is periodically involved in litigation
matters. However, management does not believe that any of these matters
will have a material adverse effect on the Company's financial position
or results of operations.
2. Subsidiary's income
Pursuant to the subsidiary's operating agreement, all losses of the
subsidiary have been allocated to the minority members. Under the same
agreement, the Company will not be allocated any of the subsidiary's
future net income until certain conditions are met. Pursuant to the
operating agreement, future net income must first be allocated to each
minority member in an amount equal to the net losses that have been
allocated to them for all prior years. In addition, future net income
must be allocated to the minority members based on a 15% cumulative
annual return on their initial investment. The subsidiary's operating
agreement has similar restrictions on the distribution of available
cash.
20
22
MEDICOMP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
NOTE K - SUBSEQUENT EVENT
1. Related party notes
During December 2000, the Company obtained an additional $65,000 in
working capital through the issuance of notes payable to related
parties.
2. Issuance of common stock
During December 2000, the Company amended its articles of incorporation
to increase the authorized number of common stock shares to 2,500,000
shares. Concurrently, as a bonus to key management, the Company issued
635,000 shares of common stock. Had this transaction occurred on
November 1, 1999, earnings per common share would have been $.04 for the
year ending October 31, 2000.
3. Sale of the Company's assets
During December 2000, the Company entered into an agreement to sell all
of its assets to UTSC Sub Acquisition, Inc. a subsidiary of United
Therapeutics Corporation (collectively "UTC") for approximately $19.8
million. As consideration for the assets, UTC paid $8 million in cash
and issued 257,142 shares of United Therapeutics Corporation's common
stock. Medicomp may receive additional shares from UTC on the third
anniversary of the closing if the average closing price of the Company's
common stock over the 30 calendar days prior to the anniversary is less
than $70.00 per share, in order that the value of all shares issued to
Medicomp equal the value of the shares issued to Medicomp at the closing
at $70.00 per share (subject to a maximum of 600,000 additional shares).
The 257,142 shares of United Therapeutics' common stock are valued at
the fair value of the 257,142 shares of stock issued using an average
NASDAQ closing price of $13.84 which totaled approximately $3.6 million.
The value of the potential additional 600,000 shares that may be issued
were valued at approximately $8.3 million (equivalent to the average
NASDAQ closing price of $13.84 multiplied by 600,000 shares).
Additionally, the Company agreed to pay bonuses ranging from 6.0% to
7.0% of net sales to continuing employees.
4. Company name change
During January 2001, the Company amended its articles of incorporation
to change its name to Guardian Ventures Company.
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23
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The unaudited pro forma combined balance sheet gives effect to the
acquisition of Medicomp, Inc. and Subsidiary (Medicomp), completed by
United Therapeutics Corporation on December 29, 2000, as if it had
occurred on September 30, 2000.
The unaudited pro forma combined statement of operations for the year
ended December 31, 1999 gives effect to the acquisition of Medicomp as if
it had occurred on January 1, 1999. The unaudited pro forma combined
statement of operations for the nine months ended September 30, 2000 gives
effect to the acquisition of Medicomp as if it had occurred on January 1,
2000.
The unaudited pro forma combined balance sheet and statements of
operations are based on available information and on certain assumptions
and adjustments described in the accompanying notes which United
Therapeutics believes are reasonable. The unaudited pro forma combined
statements of operations are provided for informational purposes only and
do not purport to present the results of operations of United Therapeutics
had the transaction assumed therein occurred on or as of the date
indicated, nor is it necessarily indicative of the results of operations
which may be achieved in the future. The unaudited pro forma combined
balance sheet, statements of operations and related notes should be read
in conjunction with the consolidated financial statements of United
Therapeutics and notes thereto included in its Annual Report on Form 10-K
for the fiscal year ended December 31, 1999 and the financial statements
of Medicomp and notes thereto included in this Current Report on Form 8-K.
On December 28, 2000, United Therapeutics closed on the acquisition of
Cooke Pharma, Inc. and filed a Current Report on Form 8-K/A with the
required pro forma information on March 6, 2001. The accompanying pro
forma information related to the acquisition of Medicomp does not include
the impact of the Cooke Pharma, Inc. acquisition.
22
24
UNITED THERAPEUTICS CORPORATION
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2000
HISTORICAL
UNITED
THERAPEUTICS HISTORICAL PRO FORMA PRO FORMA
CORPORATION MEDICOMP, INC. ADJUSTMENTS COMBINED
------------ -------------- ----------- ----------
Assets (a) (b) (c)
------
Current assets:
Cash and cash equivalents $ 224,287,827 $ 71,993 $ (8,000,000) (c) $ 216,359,820
Investments 14,256,455 - - 14,256,455
Accounts receivable, net 581,969 334,501 - 916,470
Inventories 1,207,272 447,584 - 1,654,856
Prepaid expense 46,996 32,335 - 79,331
Other current assets 454,859 - - 454,859
Deferred income taxes - 1,135,070 (1,135,070) (d) -
------------- ----------- ------------ ---------------
Total current assets 240,835,378 2,021,483 (9,135,070) 233,721,791
============= =========== ============ ===============
Property, plant and equipment,
net 3,918,618 455,108 1,121,550 (e) 5,495,276
Certificate of deposit 563,253 - - 563,253
Goodwill and other intangible
assets, net 2,094,339 - 7,585,326 (f) 9,679,665
Investment in affiliate 4,782,635 - - 4,782,635
Other 247,022 188,121 - 435,143
------------- ----------- ------------ ---------------
Total assets $ 252,441,245 $ 2,664,712 $ (428,194) $ 254,677,763
============= =========== ============ ===============
Liabilities and Stockholders'
------------------------------
Equity
-------
Current liabilities:
Accounts payable $ 3,328,785 $ 462,691 $ (329,018) (g) $ 3,462,458
Accrued expenses 4,533,305 264,953 (264,953) (g) 4,533,305
Accrued payroll and related - 860,175 (860,175) (g) -
Current portion of notes and
leases payable 29,247 1,513,401 (1,513,401) (g) 29,247
Deferred revenue - 30,000 (30,000) (g) -
------------- ----------- ------------ -------------
Total current liabilities 7,891,337 3,131,220 (2,997,547) 8,025,010
Notes and leases payable,
excluding current portion 1,762,778 31,163 (31,163) (g) 1,762,778
Other liabilities 13,823 - - 13,823
------------- ----------- ------------ -------------
Total liabilities 9,667,938 3,162,383 (3,028,710) 9,801,611
Minority interest in
consolidated subsidiary - 372,393 (372,393) (h) -
Stockholders' equity:
Preferred stock - 680,000 (680,000) (i) -
Common stock 201,846 16,067 (13,496) (i) 204,417
Additional paid-in capital 335,580,796 459,932 11,400,342 (i) 347,441,070
Accumulated deficit (93,009,335) (2,026,063) (7,733,937) (j) (102,769,335)
------------- ----------- ------------ -------------
Total stockholders' equity 242,773,307 (870,064) 2,972,909 244,876,152
------------- ----------- ------------ -------------
Total liabilities and
stockholders' equity $ 252,441,245 $ 2,664,712 $ (428,194) $ 254,677,763
============= =========== ============ =============
See note to unaudited pro forma combined financial statements.
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25
UNITED THERAPEUTICS CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
HISTORICAL
UNITED
THERAPEUTICS HISTORICAL PRO FORMA PRO FORMA
CORPORATION MEDICOMP, INC. ADJUSTMENTS COMBINED
------------- -------------- ------------ -------------
Revenues: (k) (l)
Sales $ 225,245 $ 1,421,637 $ - $ 1,646,882
Grant revenue 211,250 - - 211,250
------------- ----------- ------------- ---------------
Total revenues 436,495 1,421,637 - 1,858,132
------------- ----------- ------------- ---------------
Operating expenses:
Research and
development 30,715,255 383,619 484,586 (m) 31,583,460
Sales and marketing - 328,743 101,253 (m) 429,996
General and
administrative 4,977,983 963,678 509,307 (m) 6,450,968
Cost of sales 164,147 524,352 - 688,499
------------- ----------- ------------- ---------------
Total operating
expenses 35,857,385 2,200,392 1,095,146 39,152,923
------------- ----------- ------------- ---------------
Loss from operations (35,420,890) (778,755) (1,095,146) (37,294,791)
Other income (expense):
Interest income 1,925,326 - - 1,925,326
Interest expense (57,744) - - (57,744)
Other - net 50,064 - - 50,064
------------- ----------- ------------- ---------------
Total other income 1,917,646 - - 1,917,646
------------- ----------- ------------- ---------------
Loss before minority
interest in consolidated
subsidiary, discontinued
operations, and
extraordinary item (33,503,244) (778,755) (1,095,146) (35,377,145)
Minority interest in
consolidated subsidiary - 73,342 (73,342) (n) -
------------- ----------- ------------- ---------------
Loss before discontinued
operations and
extraordinary item (33,503,244) (705,413) (1,168,488) (35,377,145)
Loss from discontinued
Operations - (206,605) - (206,605)
------------- ----------- ------------- ---------------
Loss before
extraordinary item (33,503,244) (912,018) (1,168,488) (35,583,750)
Extraordinary item -
gain on extinguishment
of debt - 237,696 (237,696) (o) -
------------- ----------- ------------- ---------------
Loss before income tax (33,503,244) (674,322) (1,406,184) (35,583,750)
Income tax (3,454) - - (3,454)
------------- ----------- ------------- ---------------
Net loss $(33,506,698) $(674,322) $(1,406,184) $(35,587,204)
============ ========= =========== ==============
Net loss per common
share - basic and
diluted (p) $ (2.51) $ (2.61)
============= ==============
Weighted average number
of common shares
outstanding - basic and
diluted (p) 13,374,294 257,142 13,631,436
========== ======= ============
See note to unaudited pro forma combined financial statements.
24
26
UNITED THERAPEUTICS CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2000
HISTORICAL
UNITED
THERAPEUTICS HISTORICAL PRO FORMA PRO FORMA
CORPORATION MEDICOMP,INC. ADJUSTMENTS COMBINED
----------- ------------- ----------- -----------
(q) (r)
Revenues:
Sales $ 1,109,591 $ 1,763,942 $ - $ 2,873,533
Grant revenue 150,000 - - 150,000
----------- ----------- ----------- ----------
Total revenues 1,259,591 1,763,942 - 3,023,533
----------- ----------- ----------- ----------
Operating expenses:
Research and
development 42,848,352 465,694 382,068 (s) 43,696,114
Sales and marketing - 682,560 94,568 (s) 777,128
General and
administrative 7,924,105 1,216,297 419,236 (s) 9,559,638
Cost of sales 918,417 890,944 - 1,809,361
----------- ----------- ----------- ----------
Total operating
expenses 51,690,874 3,255,495 895,872 55,842,241
----------- ----------- ----------- ----------
Loss from operations (50,431,283) (1,491,553) (895,872) (52,818,708)
Other income (expense):
Interest income 6,709,370 - - 6,709,370
Interest expense (90,201) - - (90,201)
Other - net 76,178 - - 76,178
----------- ----------- ----------- ----------
Total other income 6,695,347 - - 6,695,347
----------- ----------- ----------- ----------
Net loss before
minority
Interest and
income tax
benefit (43,735,936) (1,491,553) (895,872) (46,123,361)
Minority interests
in loss of
consolidated
subsidiary - 474,775 (474,775) (t) -
----------- ----------- ----------- ----------
Net loss before
income tax
benefit (43,735,936) (1,016,778) (1,370,647) (46,123,361)
Income tax benefit - 851,303 (851,303) (u)
----------- ----------- ----------- ----------
Net loss $(43,735,936) $ (165,475) $(2,221,950) $ (46,123,361)
=========== =========== =========== ==========
Net loss per common
share-basic and
diluted (p) $ (2.32) $ (2.41)
============ =============
`
common shares
outstanding -
basic and diluted (p) 18,871,366 257,142 19,128,508
=========== =========== ==========
See note to unaudited pro forma combined financial statements.
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27
UNITED THERAPEUTICS CORPORATION
NOTE TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Note 1 - Pro Forma Adjustments for Acquisition of Medicomp, Inc.
a. Balance sheet of United Therapeutics Corporation as of
September 30, 2000.
b. Balance sheet of Medicomp, Inc. and Subsidiary (Medicomp) as of
October 31, 2000. The fiscal year end of Medicomp is October 31,
which is less than 93 days from September 30. There were no
significant transactions in the intervening 30 days.
c. Represents adjustments for the Medicomp acquisition based on a
purchase price of approximately $19.8 million through the issuance
of 257,142 shares of United Therapeutics' common stock and payment
of $8.0 million in cash. Medicomp may receive additional shares
from United Therapeutics on the third anniversary of the closing if
the average closing price of United Therapeutics' common stock over
the 30 calendar days prior to the anniversary is less than $70.00
per share, in order that the value of all shares issued to Medicomp
equals the value of the shares issued to Medicomp at the closing at
$70.00 per share (subject to a maximum of 600,000 additional
shares). The 257,142 shares of United Therapeutics' common stock
were valued at the fair value of the 257,142 shares of stock issued
using an average NASDAQ closing price of $13.84 which totaled
approximately $3.6 million. The value of the potential additional
600,000 shares that may be issued were valued at approximately $8.3
million (equivalent to the average NASDAQ closing price of $13.84
multiplied by 600,000 shares). Additionally, United Therapeutics
agreed to pay bonuses ranging from 6.0% to 7.0% of net sales to
continuing employees.
d. Represents the elimination of the Medicomp deferred income tax
asset not acquired.
e. Represents the adjustment to Medicomp's property, plant and
equipment to reflect the estimated fair value of these assets
acquired.
f. Represents the amount of purchase price allocated to the Medicomp
assembled workforce, core technology and goodwill. These
intangibles totaled approximately $7.6 million and will be
amortized in a straight line manner over terms of three to twenty
years.
g. Represents the estimated direct legal and other costs related to
the Medicomp acquisition. Also, represents the elimination of all
Medicomp liabilities as they were not assumed.
h. Represents the elimination of the minority interest in Medicomp
held by a minority investor.
i. Represents the elimination of Medicomp's stockholder equity
accounts, and the issuance of 257,142 shares of United
Therapeutics' common stock valued as described above in note 1(c).
j. Represents the charge for acquired in-process research &
development of $9.8 million and the elimination of Medicomp's
accumulated deficit. This charge is nonrecurring and therefore not
included in the pro forma statements of operations.
k. Statement of operations for United Therapeutics for the year ended
December 31, 1999.
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28
l. Statement of operations for Medicomp for the year ended October 31,
1999. The fiscal year end of Medicomp is October 31, which is less
than 93 days from United Therapeutics' year end. There were no
significant transactions in the intervening 60 days.
m. Represents amortization expense totaling approximately $853,000
related to the intangibles acquired in the Medicomp acquisition and
approximately $242,000 related to additional employee bonuses.
n. Represents the elimination of the loss that is attributable to the
minority interest in a consolidated subsidiary.
o. Represents the elimination of an extraordinary gain resulting from
the extinguishment of debt.
p. For the pro forma combined net loss per share (basic and diluted)
and the weighted average share outstanding calculation, 257,142
shares of United Therapeutics common stock have been included as if
the acquisition occurred on January 1, 1999 and January 1, 2000 for
the pro forma unaudited financial statements for the year ended
December 31, 1999 and for the nine months ended September 30, 2000,
respectively.
q. Statement of operations for United Therapeutics for the nine months
ended September 30, 2000.
r. Statement of operations for Medicomp for the nine months ended
October 31, 2000. Medicomp's fiscal year end is October 31, which
is less than 93 days from September 30. Operations from November 1,
1999 through January 31, 2000 have not been included in the pro
forma statements of operations.
s. Represents amortization expense totaling approximately $640,000
related to the intangibles acquired in the Medicomp acquisition and
approximately $256,000 related to additional employee bonuses.
t. Represents the elimination of the loss that is attributable to the
minority interest in a consolidated subsidiary.
u. Represents the elimination of the Medicomp income tax benefit
relating to deferred tax assets not acquired.
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29
UNITED THERAPEUTICS CORPORATION
EXHIBIT INDEX
Exhibit No. Description
------------ --------------
2.1 Asset Purchase Agreement dated as of December 28, 2000 among UTSC Sub,
the Company, Medicomp and Telemedical (previously filed)
2.2 Registration Rights Agreement dated as of December 28, 2000 between
the Company and Medicomp (previously filed)
2.3 Escrow Agreement dated as of December 28, 2000 among the Company,
UTSC Sub, Medicomp, Mahon, Patusky, Rothblatt & Fisher,
Chartered, as escrow agent, and Chicago Title, as successor
escrow agent (previously filed)
23.1 Consent of Berman Hopkins Wright & LaHam, CPAs LLP
28