-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Enu95B0ChQqSjjYK2Etp6wxOAFCswUXQY4MztNGEZvkjUG9q2phNOz5Tz7H5VrKP d0Pd2QFTIYSgSDufFL8STw== 0001044808-99-000004.txt : 19990212 0001044808-99-000004.hdr.sgml : 19990212 ACCESSION NUMBER: 0001044808-99-000004 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981029 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990211 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DERMA SCIENCES INC CENTRAL INDEX KEY: 0000892160 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 232328753 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-13070 FILM NUMBER: 99530195 BUSINESS ADDRESS: STREET 1: 214 CARNEGIE CENTER, SUITE 100 CITY: PRINCETON STATE: NJ ZIP: 08540 BUSINESS PHONE: 6095144744 MAIL ADDRESS: STREET 1: 214 CARNEGIE CENTER, SUITE 100 CITY: PRINCETON STATE: NJ ZIP: 08540 8-K/A 1 AMENDMENT NO. 2 TO REPORT ON FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------- FORM 8-K/A-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): October 29, 1998 DERMA SCIENCES, INC. (Exact name of registrant as specified in its charter) Pennsylvania 1-31070 23-2328753 (State or other jurisdiction (Commission (IRS employer of incorporation) File Number) identification number) 214 Carnegie Center, Suite 100 Princeton, NJ 08540 (609) 514-4744 (Address including zip code and telephone number, of principal executive offices) ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS This Current Report amends the Company's Current Report on Form 8-K filed November 13, 1998 and amended January 12, 1999, concerning the acquisition by the Company of Sunshine Products, Inc. ("Sunshine"). The purpose of the current amendment is the addition of note 1 to the Pro Forma Combined Condensed Balance Sheet required by Form 8-K Item 7(b). ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements of Businesses Acquired. The audited financial statements of Sunshine for the Twelve Months Ended June 30, 1998 are filed herewith as Exhibit 99.1. (b) Pro Forma Financial Information The Unaudited Pro Forma Combined Condensed Balance Sheets at September 30, 1998 and the Unaudited Pro Forma Combined Condensed Statements of Operations for the Nine Months ended September 30, 1998 and the year ended December 31, 1997 are filed herewith as Exhibit 99.2. (c) Exhibits: 99.1 Financial Statements of Sunshine Products, Inc. for the Twelve Months Ended June 30, 1998. 99.2 Pro Forma Financial Information. Unaudited Pro Forma Combined Condensed Balance Sheets at September 30, 1998 and Unaudited Pro Forma Combined Condensed Statements of Operations for the Nine Months ended September 30, 1998 and the years Ended December 31, 1997. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DERMA SCIENCES, INC. Date: February 11, 1999 By: /s/ Stephen T. Wills -------------------------- Stephen T. Wills, CPA, MST Vice President and Chief Financial Officer EX-99.1 2 FINANCIAL STATEMENTS OF SUNSHINE PRODUCTS, INC. Financial Statements Sunshine Products, Inc. Twelve months ended June 30, 1998 with Report of Independent Auditors Sunshine Products, Inc. Financial Statements Twelve months ended June 30, 1998 CONTENTS Report of Independent Auditors ........................... 1 Financial Statements Balance Sheet ............................................ 2 Statement of Income ...................................... 3 Statement of Stockholders' Equity ........................ 4 Statement of Cash Flows .................................. 5 Notes to Financial Statements ............................ 6 Report of Independent Auditors Board of Directors Sunshine Products, Inc. We have audited the accompanying balance sheet of Sunshine Products, Inc. as of June 30, 1998 and the related statements of income, stockholders' equity, and cash flows for the twelve months ended June 30, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our 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 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Sunshine Products, Inc. at June 30, 1998 and the results of its operations and its cash flows for the twelve months ended June 30, 1998 in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP St. Louis, Missouri October 9, 1998 1 Sunshine Products, Inc. Balance Sheet June 30, 1998 ASSETS Current assets: Cash and cash equivalents $ 18 Accounts receivable, less allowance of $15,359 240,624 Inventories 199,508 Deferred income taxes 13,600 Prepaid expenses and other current assets 6,248 ---------- Total current assets 459,998 Property and equipment, net 142,903 ---------- Total assets $ 602,901 ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank overdraft $ 26,789 Line of credit 52,803 Accounts payable 170,346 Accrued expenses 116,902 Income taxes payable 37,374 Notes payable 36,100 Notes payable - officers 24,060 ---------- Total current liabilities 464,374 Deferred income taxes 26,800 Stockholders' equity: Preferred stock, $1 par value; 30,000 shares authorized; 5,678 shares issued 5,678 Common stock, $1 par value; 9,000 shares authorized; 6,200 shares issued 6,200 Additional paid-in capital 22,657 Retained earnings 117,143 ---------- 151,678 Less treasury stock at cost: Common stock - 2,300 shares (10,735) Preferred stock - 5,573 shares (29,216) ---------- (39,951) ---------- Total stockholders' equity 111,727 ---------- Total liabilities and stockholders' equity $ 602,901 ========== See accompanying notes. 2 Sunshine Products, Inc. Statement of Income Twelve months ended June 30, 1998 Net sales $ 2,854,053 Cost of sales 1,478,855 ------------ Gross profit 1,375,198 Operating expenses: Selling and marketing 768,014 General and administrative 486,705 ------------ Total operating expenses 1,254,719 ------------ Operating income 120,479 Other income (expense): Investment income 8,274 Gain on sale of securities 11,717 Interest expense (11,105) Other (1,278) ------------ Income before income taxes 128,087 Provision for income taxes 45,000 ------------ Net income $ 83,087 ============ See accompanying notes. 3 Sunshine Products, Inc. Statement of Stockholders' Equity
TREASURY STOCK ADDITIONAL UNREALIZED ---------------------- PREFERRED COMMON PAID-IN RETAINED GAIN ON PREFERRED COMMON STOCKHOLDERS' STOCK STOCK CAPITAL EARNINGS SECURITIES STOCK STOCK EQUITY ---------------------------------------------------------------------------------------- Balance at June 30, 1997 $5,678 $6,200 $22,657 $34,056 $ 12,322 $ (9,048) $(10,735) $ 61,130 Change in unrealized gain on securities available for sale -- -- -- -- (12,322) -- -- (12,322) Redemption of 3,667 shares of preferred stock -- -- -- -- -- (20,168) -- (20,168) Net income -- -- -- 83,087 -- -- -- 83,087 ----------------------------------------------------------------------------------------- Balance at June 30, 1998 $5,678 $6,200 $22,657 $117,143 $ -- $(29,216) $(10,735) $111,727 =========================================================================================
See accompanying notes. 4 Sunshine Products, Inc. Statement of Cash Flows Twelve months ended June 30, 1998 OPERATING ACTIVITIES Net income $ 83,087 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 28,714 Deferred income taxes 2,300 Gain on sale of securities (11,717) Changes in operating assets and liabilities: Accounts receivable (29,241) Inventories (44,192) Prepaid expenses and other current assets 9,676 Accounts payable (37,703) Accrued expenses (7,395) Income taxes payable 37,374 --------- Net cash provided by operating activities 30,903 INVESTING ACTIVITIES Purchases of property and equipment (2,413) Proceeds from sale of available-for-sale securities 41,060 --------- Net cash provided by investing activities 38,647 FINANCING ACTIVITIES Bank overdraft (7,200) Net repayments on line of credit (9,332) Principal payments of notes payable (14,559) Principal payments of notes payable - officers (18,273) Redemption of preferred stock (20,168) --------- Net cash used in financing activities (69,532) --------- Net increase in cash and cash equivalents 18 Cash and cash equivalents, beginning of period -- --------- Cash and cash equivalents, end of period $ 18 ========= See accompanying notes. 5 Sunshine Products, Inc. Notes to Financial Statements June 30, 1998 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS Sunshine Products, Inc. (the Company) is engaged in the development, marketing, and sale of general purpose and specialized skin care products. The Company markets its products principally through independent distributors, mainly to health care agencies throughout the United States. BASIS OF PRESENTATION The Company has a December 31 fiscal year-end. In connection with the sale of the Company as discussed in Note 11, the Company has prepared the accompanying financial statements as of and for the twelve months ended June 30, 1998. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. CASH EQUIVALENTS The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The carrying value of these investments approximates fair value. BANK OVERDRAFT The bank overdraft in the accompanying balance sheet consists of issued and outstanding checks that have not cleared the bank and are in excess of the related bank account balance as of the balance sheet date. INVENTORIES Inventories are stated at the lower of cost (using the first-in, first-out method) or market. 6 Sunshine Products, Inc. Notes to Financial Statements (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) PROPERTY AND EQUIPMENT Property and equipment are recorded at cost. Depreciation is recorded using the straight-line method over the estimated useful lives ranging from three to ten years. REVENUE RECOGNITION The Company's products are primarily sold to independent distributors. Sales are recorded when products are shipped. ADVERTISING COSTS Advertising costs are expensed as incurred. Advertising expense for the twelve months ended June 30, 1998 totaled $18,663. INCOME TAXES The Company accounts for income taxes under the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. INVESTMENTS The Company accounts for its short-term investments in accordance with Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Management determines the appropriate classification of its investments in debt and equity securities at the time of purchase and reevaluates such determination at each balance sheet date. Costs of investments are determined on a first-in, first-out method. FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable. The cash is held by a high credit quality financial institution. The Company sells almost all of its products to medical supply companies and health care providers. Accordingly, primarily all of the Company's accounts receivable are from companies in the health care industry. For accounts 7 Sunshine Products, Inc. Notes to Financial Statements (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK (CONTINUED) receivable, the Company performs ongoing credit evaluations of its customers' financial condition and generally does not require collateral. Other financial instruments consist of accounts payable and notes payable. The carrying values of such amounts reported at the balance sheet date approximate their fair values. For the twelve months ended June 30, 1998, one customer, a distributor, accounted for 24 percent of net sales, and the same customer accounted for 14 percent of accounts receivable as of June 30, 1998. 2. INVESTMENTS At July 1, 1997, the Company held available-for-sale equity securities with a cost of $29,343 and an unrealized gain of $12,322. During the twelve months ended June 30, 1998, the Company sold these securities, which resulted in proceeds of $41,060 and a realized gain of $11,717. At June 30, 1998, the Company had no investments in debt or equity securities. 3. INVENTORIES At June 30, 1998, inventories consisted of the following: Raw materials $ 35,421 Packaging materials 95,706 Finished goods 68,381 ======== $199,508 ======== 4. PROPERTY AND EQUIPMENT At June 30, 1998, property and equipment consisted of the following: Machinery and equipment $304,479 Furniture and fixtures 9,966 -------- 314,445 Less accumulated depreciation 171,542 ======== $142,903 ======== 8 Sunshine Products, Inc. Notes to Financial Statements (continued) 5. DEBT LINE OF CREDIT The Company maintains a $100,000 revolving line of credit with a bank which expires on April 1, 1999. The line of credit is secured by accounts receivable, inventories, the Company's United States patents and trademarks, and the personal guarantees of certain stockholders of the Company. Borrowings on the line of credit are due on demand and bear interest, which is payable monthly, at the bank's base rate plus 1 percent (9.5 percent at June 30, 1998). At June 30, 1998, borrowings under this line of credit were $52,803, and available borrowings were $47,197. NOTES PAYABLE At June 30, 1998, notes payable consisted of the following: Demand note payable to bank, monthly installments of $794 (including interest at 8.25%) through maturity in February 1999 $ 6,138 Demand note payable to bank, monthly installments of $786 (including interest at 8.75%) with a final payment of $17,125 at maturity in February 2000 29,962 ----------- $36,100 =========== The notes payable are secured by substantially all of the Company's assets and personal guarantees of certain common stockholders. In addition, because the above notes are due on demand, such notes have been classified as current liabilities. NOTES PAYABLE - OFFICERS The officers of the Company have made various loans to the Company. All loans and subsequent repayments have been made equally by the three officers. The notes bear interest at various rates ranging from 7 percent to 8 percent. At June 30, 1998, notes payable outstanding to these officers totaled $24,060. For the twelve months ended June 30, 1998, interest expense totaled $3,445. At June 30, 1998, accrued interest of $5,208 on these notes payable to officers has been included in accrued expenses in the accompanying balance sheet. 9 Sunshine Products, Inc. Notes to Financial Statements (continued) 5. DEBT (CONTINUED) Interest paid on debt for the twelve months ended June 30, 1998 was $14,115. 6. COMMITMENTS AND CONTINGENCIES LEASES The Company leases its office and manufacturing facility and automobiles under noncancelable operating lease agreements that expire at various dates through June 2000. Rent expense for the twelve months ended June 30, 1998 was $122,241. Future minimum lease payments under noncancelable operating leases as of June 30, 1998 are $135,739 and $34,893 for the twelve months ended June 30, 1999 and 2000, respectively. CONTINGENCIES Various claims or notices have been or may be asserted against the Company in the ordinary course of business pertaining to state and local tax issues. In the opinion of management, after consultation with legal counsel, resolution of these matters will not have a material effect on the accompanying financial statements. 7. INCOME TAXES The components of the provision for income taxes for the twelve months ended June 30, 1998 are as follows: Current: Federal $36,300 State 6,400 --------- 42,700 Deferred: Federal 2,000 State 300 --------- 2,300 ========= $45,000 ========= 10 Sunshine Products, Inc. Notes to Financial Statements (continued) 7. INCOME TAXES (CONTINUED) A reconciliation of the difference between the federal statutory tax rate and effective tax rate as a percentage of net income for the twelve months ended June 30, 1998 is as follows: U.S. federal statutory tax rate 30.0% State income taxes, net of federal tax benefit 3.7 Other, net 1.4 ========== 35.1% ========== The tax effect of temporary differences that give rise to the deferred tax assets and liabilities is as follows: Deferred tax assets: Accrued vacation pay $ 4,300 Allowances for discounts 5,200 Allowance for obsolete inventory 4,100 --------- 13,600 Deferred tax liabilities: Depreciation expense 26,800 --------- Net deferred tax liabilities $13,200 ========= 8. EMPLOYEE BENEFIT PLAN The Company sponsors a Savings Incentive Match Plan for Employees of Small Employers. The Company matches eligible employees' contributions up to a maximum of 3 percent of the employees' compensation for the calendar year. During the twelve months ended June 30, 1998, the Company's matching contribution totaled $15,173. 9. PREFERRED STOCK The Company's preferred stock, which is nonvoting, ranks senior to the common stock with respect to payment of dividends and distribution of assets upon liquidation. In the event of liquidation, as defined, the holders of the preferred stock are entitled to up to five times of the amount available for distribution to the common stockholders plus any unpaid dividends. Although dividends on preferred stock are noncumulative, if the Company declares or pays dividends on its common stock, the holders of preferred stock 11 Sunshine Products, Inc. Notes to Financial Statements (continued) 9. PREFERRED STOCK (CONTINUED) are entitled to receive a dividend twice such amount. The Company may, with the approval of the Board of Directors, redeem the preferred stock at any time at a price equal to the original sales price plus 10 percent of the original sales price and any unpaid dividends. 10. YEAR 2000 (UNAUDITED) Based on the Company's assessment, it determined that it will not be required to modify or replace significant portions of its software so that its computer systems will function properly with respect to dates in the year 2000 and thereafter. The Company presently believes the year 2000 issue will not pose significant operational problems for its computer systems or other computer-based equipment. 11. EVENT (UNAUDITED) SUBSEQUENT TO THE DATE OF THE INDEPENDENT AUDITORS' REPORT On October 29, 1998, the Company and its stockholders entered into a definitive agreement with Derma Sciences, Inc. which, among other things, resulted in the sale of all issued and outstanding stock of the Company for $1.5 million in cash. 12 EX-99.2 3 FINANCIAL STATEMENTS OF SUNSHINE PRODUCTS, INC. DERMA SCIENCES, INC. UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET September 30, 1998
ASSETS Sunshine Pro Forma Consolidated Derma Sciences Products Adjustments Pro Forma _______________________________________________________________ CURRENT ASSETS Cash and cash equivalents 5,465,839 23 -1,500,000 3,965,862 Accounts receivable, net 952,094 254,933 0 1,207,027 Inventory 1,528,595 151,506 0 1,680,101 Prepaid expenses and other current assets 337,131 19,848 -13,600 343,379 __________ ________ __________ _________ Total Current Assets 8,283,659 426,310 -1,513,600 7,196,369 PROPERTY AND EQUIPMENT, NET 236,996 147,622 200,000 584,618 GOODWILL 0 0 1,114,404 1,114,404 OTHER ASSETS NET: 377,853 0 0 377,853 __________ ________ __________ _________ Total Assets 8,898,508 573,932 -199,196 9,273,244 ========== ======== ========== ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Bank line of credit 689,000 46,298 0 735,298 Accounts payable 1,374,208 144,710 0 1,518,918 Accrued expenses and other current liabilities 1,042,244 210,528 -26,800 1,225,972 __________ ________ __________ _________ Total Current Liabilities 3,105,452 401,536 -26,800 3,480,188 __________ ________ __________ _________ SHAREHOLDERS' EQUITY Common stock, $.01 par value, authorized 15,000,000 shares, issued and outstanding 6,261,247 shares 62,612 6,200 -6,200 62,612 Convertible preferred stock, $.01 par value, authorized 5,083,333 shares, issued and outstanding 5,070,833 50,708 5,678 -5,678 50,708 Treasury stock - common 0 -10,735 10,735 Treasury stock - preferred 0 -29,216 29,216 Additional paid-in capital 10,741,436 22,657 -22,657 10,741,436 Accumulated earnings , (deficit) -5,061,700 177,812 -177,812 -5,061,700 __________ ________ __________ _________ Total Shareholders' Equity 5,793,056 172,396 -172,396 5,793,056 __________ ________ __________ _________ Total Liabilities and Shareholders' Equity 8,898,508 573,932 -199,196 9,273,244 ========== ======== ========== =========
DERMA SCIENCES, INC. UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1998
Derma Pro Forma Consolidated Sciences Sunshine Adjustments Pro Forma ____________________________________________________ NET SALES $6,512,346 $2,254,459 - $8,766,805 COST OF SALES 1,450,844 1,172,319 - 2,623,163 __________ __________ ___________ __________ GROSS PROFIT 5,061,502 1,082,140 - 6,143,642 OPERATING EXPENSES 5,084,130 1,003,234 - 6,087,364 __________ __________ ___________ __________ LOSS FROM OPERATIONS (22,628) 78,906 - 56,278 OTHER INCOME (EXPENSE) Interest income/(expense), net 55,363 (9,281) - 46,082 Merger Costs (198,024) 0 - (198,024) Restructuring Costs (550,000) 0 - (550,000) Litigation settlement (819,353) 0 - (819,353) __________ __________ ___________ __________ Total Other Income (Expense) (1,512,014) (9,281) - (1,521,295) __________ __________ ___________ __________ LOSS BEFORE INCOME TAXES (1,534,642) 69,625 - (1,465,017) Income taxes 0 0 - 0 __________ __________ ___________ __________ NET LOSS ($1,534,642) $ 69,625 - ($1,465,017) ============ ========== =========== ============ NET LOSS PER COMMON SHARE BASIC AND DILUTED ($0.25) $17.85 - ($0.23) ============ ========== =========== ============ WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 6,253,181 3,900 - 6,253,181 ============ ========== =========== ============
DERMA SCIENCES, INC. UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1997
Derma Sunshine Pro Forma Consolidated Sciences Products Adjustments Pro Forma __________ __________ ___________ ____________ NET SALES $6,601,524 $2,839,811 - $9,441,335 COST OF SALES $1,884,192 1,465,342 - 3,349,534 __________ __________ ___________ ____________ GROSS PROFIT $4,717,332 1,374,469 - $6,091,801 OPERATING EXPENSES $7,069,314 1,272,235 - 8,341,549 _____________ __________ ___________ ____________ LOSS FROM OPERATIONS ($ 2,351,982) 102,234 - (2,249,748) OTHER INCOME (EXPENSE) Interest income/(expense), net $93,329 (7,224) - $86,105 Merger Costs $0 0 - $0 Restructuring Costs $0 0 - $0 Litigation settlement $0 0 - $0 _____________ __________ ___________ ____________ Total Other Income (Expense) $93,329 (7,224) - 86,105 _____________ __________ ___________ ____________ LOSS BEFORE INCOME TAXES ($ 2,258,653) 95,010 - ($ 2,163,643) Income taxes $0 0 - $0 _____________ __________ ___________ ____________ NET LOSS ($ 2,258,653) $ 95,010 - ($2,163,643) ============= ========== =========== ============ NET LOSS PER COMMON SHARE BASIC AND DILUTED ($0.34) $24.36 - ($0.33) ============= ========== =========== ============ WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 6,553,315 3,900 - 6,557,215 ============= ========== =========== ============
Derma Sciences, Inc. Note To Unaudited Pro Forma Consolidated Condensed Balance Sheet September 30, 1998 1. PRELIMINARY ALLOCATION OF PURCHASE PRICE. On October 31, 1998, all of the outstanding stock of Sunshine Products, Inc. ("Sunshine Products") was acquired by Derma Sciences, Inc. for total consideration paid by Derma Sciences, Inc. of $1.5 million. The acquisition has been accounted for under the purchase method. Pursuant to the terms of the purchase agreement, certain property, equipment, intangible assets, other assets and working capital were acquired and certain liabilities were assumed for consideration of approximately $1.5 million in cash. The preliminary allocation of the purchase price is as follows: Property and equipment $ 347,622 Current assets acquired 412,710 Excess cost over fair market value of net assets acquired 1,114,404 Other liabilities (374,736) ------------ $1,500,000 ============ -----END PRIVACY-ENHANCED MESSAGE-----