-----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, OA+9iMqkZeQu72++XcQvp89KrQTZE+YSibCflANbgThfKbd5h2UIsCB/L7duazos xRyb/SiC0+NleczlnNMvpw== 0000950130-96-001684.txt : 19960515 0000950130-96-001684.hdr.sgml : 19960515 ACCESSION NUMBER: 0000950130-96-001684 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: IMPATH INC CENTRAL INDEX KEY: 0001003114 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEDICAL LABORATORIES [8071] IRS NUMBER: 133459685 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-27750 FILM NUMBER: 96562735 BUSINESS ADDRESS: STREET 1: 1010 THIRD AVE STREET 2: STE 303 CITY: NEW YORK STATE: NY ZIP: 10021 BUSINESS PHONE: 2127028321 MAIL ADDRESS: STREET 2: 1010 THIRD AVENUE STE 303 CITY: NEW YORK STATE: NY ZIP: 10021 10-K405 1 FORM 10K 405 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] NOTE: The registrant's Registration Statement on Form S-1 (Registration No. 33- 98916) became effective February 15, 1996 and did not contain certified financial statements for the fiscal year of the registrant ended December 31, 1995, the registrant's last full fiscal year. This report is filed pursuant to Rule 15d-2 and contains only financial statements for the fiscal year ended December 31, 1995. OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from _____ to _____ Commission file number 0-27750 ------- IMPATH INC. ---------------------- (Exact name of registrant as specified in its charter) Delaware 13-3459685 - ---------------------------- --------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1010 Third Avenue, Suite 302 New York, New York 10021 - ------------------------------- ------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 702-8300 -------------- Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered - --------------------- ----------------------- None None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.005 par value ------------------ Title of class Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period as the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ___ No X --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] State the aggregate market value of the voting stock held by non- affiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within 60 days prior to the date of filing. Aggregate market value as of May 6, 1996 ...........$54,689,176 ------ ---------- Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Common Stock, $.005 par value, as of May 6, 1996....5,247,389 ------ --------- DOCUMENTS INCORPORATED BY REFERENCE List hereunder the documents, all or portions of which are incorporated by reference herein, and the Part of the Form 10-K into which the document is incorporated: None. IMPATH INC. FINANCIAL STATEMENTS DECEMBER 31, 1994 AND 1995 (WITH INDEPENDENT AUDITORS' REPORT THEREON) INDEPENDENT AUDITORS' REPORT The Board of Directors Impath Inc.: We have audited the accompanying balance sheets of Impath Inc. as of December 31, 1994 and 1995, and the related statements of operations, stockholders' equity (deficiency) and cash flows for each of the years in the three-year period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted 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 provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Impath Inc. as of December 31, 1994 and 1995, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1995 in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP March 4, 1996 New York, New York IMPATH INC. BALANCE SHEETS DECEMBER 31, 1994 AND 1995
1995 PRO FORMA ASSETS 1994 1995 (NOTE 14) ---- ---- ---------- UNAUDITED Current assets: Cash and cash equivalents $ 615,317 1,512,695 1,512,695 Accounts receivable, net of allowance for doubtful accounts of $810,218 in 1994 and $1,485,375 in 1995 2,555,870 3,807,376 3,807,376 Prepaid expenses 58,769 214,245 214,245 Deferred tax assets, net -- 505,000 505,000 Other current assets 32,410 59,116 59,116 ----------- --------- --------- Total current assets 3,262,366 6,098,432 6,098,432 Fixed assets, less accumulated depreciation and amortization 832,028 2,305,739 2,305,739 Deposits and other assets 49,128 79,961 79,961 Deferred registration costs -- 746,462 746,462 Goodwill, net of accumulated amortization of $1,246 in 1995 -- 30,727 30,727 ----------- --------- --------- $ 4,143,522 9,261,321 9,261,321 =========== ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) Current liabilities: Current portion of loan payable-bank $ 100,000 100,000 100,000 Current portion of capital lease obligations 64,878 321,125 321,125 Accounts payable 235,449 1,013,537 1,013,537 Income taxes payable 15,014 78,415 78,415 Accrued expenses 346,649 485,195 485,195 Accrued dividends payable -- 478,000 478,000 ----------- --------- --------- Total current liabilities 761,990 2,476,272 2,476,272 ----------- ----------- --------- Capital lease obligations, net of current portion 240,902 946,723 946,723 Loan payable - bank, net of current portion -- 183,333 183,333 Redeemable preferred stock 6,406,507 -- -- Stockholders' equity (deficiency): Convertible preferred stock: Series D 8% Convertible Participating Preferred Stock, $.01 par value. Authorized, issued and outstanding 1,612,904 shares in 1995 (aggregate involuntary liquidation value $2,142,000) -- 1,911,879 -- Series C 8% Convertible Preferred Stock, $.01 par value. Authorized, issued and outstanding 3,035,320 shares in 1995 (aggregate involuntary liquidation value $2,925,000) -- 2,702,546 -- Series B 8% Convertible Preferred Stock, $.01 par value. Authorized, issued and outstanding 668,182 shares in 1995 (aggregate involuntary liquidation value $630,000) -- 562,952 -- Series A 8% Convertible Preferred Stock, $.01 par value. Authorized, issued and outstanding 1,876,318 shares in 1995 (aggregate involuntary liquidation value $1,527,000) -- 1,387,908 -- Common stock, $.005 par value. Authorized 20,000,000 shares; 439,113 shares issued in 1994 and 455,007 and 3,003,940 shares issued in 1995, respectively; 432,025 shares outstanding in 1994 and 447,919 and 2,996,852 shares outstanding in 1995, respectively 2,195 2,275 15,020 Additional paid-in capital (deficiency) (1,676,111) 11,447 6,563,987 Accumulated deficit (1,591,861) (548,672) (548,672) ----------- --------- --------- (3,265,777) 6,030,335 6,030,335 Less: Cost of 7,088 shares of common stock held in treasury (100) (100) (100) Notes receivable from stockholders -- (31,335) (31,335) Deferred compensation -- (343,907) (343,907) Commitments ------------ --------- --------- Total stockholders' equity (deficiency) (3,265,877) 5,654,993 5,654,993 ------------ --------- --------- $ 4,143,522 9,261,321 9,261,321 ============ ========= =========
See accompanying notes to financial statements. IMPATH INC. STATEMENTS OF OPERATIONS DATA YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
1993 1994 1995 ---- ---- ---- Revenues: Net diagnostic and prognostic services $ 6,659,313 9,888,084 14,578,326 Contract laboratory services 383,071 126,258 135,238 ---------- ---------- ---------- Total revenues 7,042,384 10,014,342 14,713,564 ---------- ---------- ========== Operating expenses: Salaries and related costs 4,161,689 4,681,992 6,830,210 Selling, general and administrative 3,805,430 4,351,038 6,862,503 ---------- ---------- ---------- Total operating expenses 7,967,119 9,033,030 13,692,713 ---------- ---------- ---------- Income (loss) from operations (924,735) 981,312 1,020,851 Interest income 14,553 16,466 102,711 Interest expense 13,296 31,427 80,373 ---------- ---------- ---------- Income (loss) before income tax expense (923,478) 966,351 1,043,189 Income tax expense 18,910 97,921 -- ---------- ---------- ========== Net income (loss) (942,388) 868,430 1,043,189 Accrued dividends on preferred stock (371,010) (427,121) (478,000) ---------- ---------- ---------- Net income (loss) available to common stockholders $ (1,313,398) 441,309 565,189 ========== ========== ========== Pro forma net income per share $ .31 ========== Pro forma weighted average common and common equivalent shares outstanding 3,371,400 ==========
See accompanying notes to financial statements. IMPATH INC. STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
NONREDEEMABLE CONVERTIBLE ADDITIONAL COMMON STOCK PREFERRED STOCK PAID-IN ------------------ ------------------ CAPITAL ACCUMULATED SHARES AMOUNT SHARES AMOUNT (DEFICIENCY) DEFICIT ------ ------ ------ ------ ---------- ----------- Balance at December 31, 1992 335,621 $ 1,678 -- $ -- (947,200) (1,517,903) Common shares issued upon exercise of stock options 86,231 431 -- -- 26,369 -- Common shares issued as compensation -- for services rendered 3,972 20 -- -- 9,168 -- Preferred stock issuance -- -- -- -- -- -- Accrual of preferred stock dividends on redeemable preferred stock -- -- -- -- (371,010) -- Net loss for the year ended December 31, 1993 -- -- -- -- -- (942,388) ------- ------- --------- --------- ------- -------- Balance at December 31, 1993 425,824 2,129 -- -- (1,282,673) (2,460,291) Common shares issued as compensation for services rendered 13,289 66 -- -- 33,683 -- Accrual of preferred stock dividends on redeemable preferred stock -- -- -- -- (427,121) -- Net income for the year ended December 31, 1994 -- -- -- -- -- 868,430 ------- ------- --------- --------- ------- -------- Balance at December 31, 1994 439,113 2,195 -- -- (1,676,111) (1,591,861) Common shares issued upon exercise of stock options 6,443 33 -- -- 6,122 -- Common shares issued as compensation for services rendered 9,451 47 -- -- 23,959 -- Preferred stock issuance -- -- 1,612,904 1,911,879 -- -- Accrual of preferred stock dividends on redeemable preferred stock -- -- -- -- (46,808) -- Restructuring of redeemable preferred stock in conjunction with Series D preferred stock issuance -- -- 5,579,820 4,653,406 1,799,909 -- Accrual of preferred stock dividends -- -- -- -- (478,000) -- Compensation associated with issuance of options -- -- -- -- 382,376 -- Amortization of deferred compensation -- -- -- -- -- -- Repayments of loans to stockholders -- -- -- -- -- -- Net income for the year ended December 31, 1995 -- -- -- -- -- 1,043,189 ------- ------- --------- --------- ------- -------- Balance at December 31, 1995 455,007 $ 2,275 7,192,724 $6,565,285 11,447 (548,672) ======= ======= ========= ========= ======= ========
NOTES RECEIVABLE DEFERRED TREASURY FROM COMPEN- STOCK STOCKHOLDERS SATION TOTAL ------- ------------ -------- ------ Balance at December 31, 1992 (100) - - (2,463,525) Common shares issued upon exercise of stock options - - - 26,800 Common shares issued as compensation for services rendered - - - 9,188 Preferred stock issuance - - - - Accrual of preferred stock dividends on redeemable preferred stock - - - (371,010) Net loss for the year ended December 31, 1993 - - - (942,388) ------- ------------ -------- --------- Balance at December 31, 1993 (100) - - (3,740,935) Common shares issued as compensation for services rendered - - - 33,749 Accrual of preferred stock dividends on redeemable preferred stock - - - (427,121) Net income for the year ended December 31, 1994 - - - 868,430 ------- ------------ -------- --------- Balance at December 31, 1994 (100) - - (3,265,877) Common shares issued upon exercise - - - 6,155 of stock options Common shares issued as compensation for services rendered - - - 24,006 Preferred stock issuance - (33,085) - 1,878,794 Accrual of preferred stock dividends on redeemable preferred stock - - - (46,808) Restructuring of redeemable preferred stock in conjunction with Series D preferred stock issuance - - - 6,453,315 Accrual of preferred stock dividends - - - (478,000) Compensation associated with issuance of options - - (382,376) - Amortization of deferred compensation - - 38,469 38,469 Repayments of loans to stockholders - 1,750 - 1,750 Net income for the year ended December 31, 1995 - - - 1,043,189 ------- ------------ -------- --------- Balance at December 31, 1995 (100) (31,335) (343,907) 5,654,993 ======== ============ ======== =========
See accompanying notes to financial statements. 4 IMPATH INC. STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
1993 1994 1995 ---- ---- ---- Cash flows from operating activities: Net income (loss) $ (942,388) 868,430 1,043,189 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 104,857 154,992 395,901 Provision for uncollectible accounts receivable 480,241 797,126 1,580,733 Amortization of deferred compensation -- -- 38,469 Changes in assets and liabilities (net of the effects of the acquisition of OncoCare in 1995): Increase in accounts receivable (1,043,626) (1,688,692) (2,812,333) Increase in prepaid expenses (5,759) (5,995) (123,548) Increase in deferred tax asset -- -- (505,000) Decrease (increase) in other current assets 22,089 8,754 (26,706) Decrease (increase) in deposits and other assets (8,640) 9,276 (30,833) Increase in accounts payable 239,148 -- 753,088 Increase (decrease) in income taxes payable (23,189) -- 63,401 Increase (decrease) in accrued expenses 223,189 (175,270) 138,546 Decrease in other noncurrent liabilities (1,905) -- -- ---------- ---------- --------- Total adjustments (13,595) (899,809) (528,282) ----------- ---------- ---------- Net cash provided by (used in) operating activities (955,983) (31,379) 514,907 ----------- ---------- ---------- Cash flow from investing activities: Acquisition of OncoCare, net of cash acquired -- -- (19,955) Redemption of short-term investments, net 507,672 -- -- Capital expenditures (118,521) (217,028) (737,239) ----------- ---------- ---------- Net cash provided by (used in) investing activities 389,151 (217,028) (757,194) ---------- ---------- --------- Cash flows from financing activities: Issuance of common stock 37,988 33,749 30,161 Issuance of preferred stock 1,256,789 -- 1,911,879 Proceeds from bank loan -- 100,000 300,000 Repayments of bank loan -- -- (164,667) Payments of capital lease obligations -- (40,992) (159,911) Issuance of loans to stockholders -- -- (33,085) Repayments of loans to stockholders -- -- 1,750 Deferred registration costs -- -- (746,462) ---------- ---------- --------- Net cash provided by financing activities 1,294,777 92,757 1,139,665 ----------- ---------- ---------- Net increase (decrease) in cash and cash equivalents 727,945 (155,650) 897,378 Cash and cash equivalents at beginning of year 43,022 770,967 615,317 ---------- ---------- --------- Cash and cash equivalents at end of year $ 770,967 615,317 1,512,695 ========== ========== ========= Supplemental disclosures of cash flow information: Cash paid during the period for income taxes $ 35,144 44,989 441,599 ========== ========== ========= Cash paid during the period for interest $ 13,296 31,427 80,373 ========== ========== ========= Fixed assets acquired pursuant to capital leases $ 141,000 206,000 1,121,979 ========== ========== ========= Accrual of dividends on preferred stock $ 371,010 427,121 524,808 ========== ========== ========= Forgiveness of dividends on preferred stock $ -- -- 1,799,909 ========== ========== =========
See accompanying notes to financial statements. IMPATH INC. NOTES TO FINANCIAL STATEMENTS December 31, 1993, 1994 and 1995 (1) ORGANIZATION Impath Inc. (the "Company") was incorporated on March 1, 1988 under the laws of the State of Delaware. The Company was organized for the purpose of establishing a specialized facility dedicated to the use of the most sophisticated technologies to provide diagnostic and prognostic information to physicians specializing in cancer. The Company conducts these analyses by utilizing immunohistochemistry, flow and image cytometry and molecular pathology technologies. The Company's revenues are derived through: . diagnostic and prognostic analytical services to hospitals, medical centers, clinical laboratories and physicians; and . monoclonal antibody and molecular probe characterization services to biotechnology companies and other researchers. The Company submits its invoices for diagnostic and prognostic analytical services to its clients, primary and secondary insurers, or individual patients. The Company does not require collateral from its clients as security for payment of its invoices. (2) SIGNIFICANT ACCOUNTING POLICIES (a) Cash Equivalents Cash equivalents of $477,360 at December 31,1994 consist of money market funds in the amount of $427,360 and certificates of deposit in the amount of $50,000. Cash equivalents of $1,494,976 at December 31, 1995 consist of US treasury bills in the amount of $1,481,935, and money market funds in the amount of $13,041. For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. (b) Fixed Assets Leasehold improvements and furniture, fixtures, laboratory equipment and personal computers are stated at cost. Depreciation of furniture, fixtures, laboratory equipment and personal computers is provided over their estimated useful lives (which range from three to seven years) using the straight-line method, and leasehold improvements are being amortized over the shorter of the related lease term or the lives of the improvements using the straight-line method. Software development costs represent external costs capitalized for software developed to meet the specific needs of the Company. These costs are being amortized over a three-year period using the straight-line method. (c) Revenue Recognition Revenues are recognized on an accrual basis as earned at such time as the Company has completed performance of its diagnostic or prognostic services. (d) Goodwill Goodwill is being amortized over a 15-year period using the straight-line method. IMPATH INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (e) Deferred Registration Costs Deferred registration costs represent costs incurred through December 31, 1995, in connection with the Company's initial public offering (see note 13). (f) Income Taxes Income taxes are provided pursuant to the asset and liability method as described in Statement of Financial Accounting Standards ("SFAS") No.109 ("SFAS 109"). SFAS 109 requires that the Company recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under SFAS No.109, deferred tax assets and liabilities are determined on the basis of the difference between the tax basis of assets and liabilities and their respective financial reporting amounts ("temporary differences") at enacted tax rates in effect for the years in which the differences are expected to reverse. (g) Amendment to Certificate of Incorporation On October 31, 1995, the Company filed an amendment to its Certificate of Incorporation that provided for a 1-for-2.8218735 reverse stock split of outstanding common stock. All common stock share and per share amounts (including preferred stock conversion rates) in the accompanying financial statements have been retroactively adjusted for the reverse stock split. (h) Pro Forma Net Income Per Share Pro forma net income per share is based on the weighted average number of shares of common stock outstanding after giving effect to the conversion (calculated using the as-converted method) of the convertible preferred stock that converted (see note 9) upon the completion of the Company's initial public offering. Common equivalent shares from stock options and warrants are included in the computation using the treasury stock method to the extent that their effect is dilutive. All stock options and warrants issued within a one year period prior to the initial filing of the registration statement (see notes 9(a), 9(b) and 13) relating to the initial public offering have been treated as outstanding for all reported periods. (i) Use of Estimates Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. (3) FAIR VALUE OF FINANCIAL INSTRUMENTS SFAS No.107, "Disclosure about Fair Value of Financial Instruments," defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value because of the short maturity of those instruments. 7 IMPATH INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) The fair value of the loan payable approximates the carrying value as its stated interest rate is consistent with rates currently available to the Company for similar debt instruments of comparable maturities. (4) BUSINESS AND CREDIT CONCENTRATIONS At December 31, 1995, approximately 50% of the Company's clients are located in the Metropolitan New York area and in California. Accounts receivable from clients as a percentage of total net receivables at December 31, 1994 and 1995 are as follows: 1994 1995 ---- ---- Medicare 13% 15% Commercial insurance 35 33 Hospitals, clinics and other institutions 38 37 Patients 14 15 --- --- 100% 100% === === (5) FIXED ASSETS At December 31, 1994 and 1995, fixed assets consisted of the following: 1994 1995 ---- ---- Personal computers $ 56,340 283,096 Software development costs 181,119 629,361 Furniture, fixtures and laboratory equipment 758,527 1,442,646 Leasehold improvements 247,250 757,560 --------- --------- 1,243,236 3,112,663 ---------- --------- Less accumulated depreciation and amortization 411,208 806,924 --------- --------- 832,028 2,305,739 ========= ========= Included in the above at December 31, 1995 are gross assets under capital leases of approximately $1,505,000 and the related accumulated amortization at such date was approximately $390,000. (6) ACQUISITION In May 1995, the Company acquired the assets and assumed certain liabilities of OncoCare, a serum analysis facility located in California, for a total purchase price of $20,000 plus assumed liabilities of $73,000. The acquisition was accounted for as a purchase and resulted in goodwill of $31,973. The results of operations of OncoCare are included in the accompanying financial statements from the date of acquisition. 8 IMPATH INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (7) ACCRUED EXPENSES Accrued expenses are comprised of the following as of December 31, 1994 and 1995: 1994 1995 ---- ---- Deferred registration costs $ -- 236,373 Salaries and related costs 175,114 129,409 Other accrued expenses 171,535 119,413 ------- ------- $ 346,649 485,195 ======= ======= (8) INDEBTEDNESS During January 1994, the Company entered into a revolving term loan agreement ("Agreement") in the amount of $100,000 with a commercial bank. Borrowings under the Agreement were secured by the Company's accounts receivable. Borrowings bore interest at the bank's prime rate plus 1%. The outstanding indebtedness under the loan at December 31, 1994 was $100,000. In March 1995, this amount was repaid out of the proceeds of the Company's 8% Series D Convertible Participating Preferred Stock offering (see note 9(a)). The Agreement was terminated in March 1995. The Company entered into a new line of credit with Chemical Bank in the aggregate amount of $1,000,000, which expires on June 30, 1996. Borrowings under the line are secured by and limited to 60% of eligible accounts receivable and must be reduced to zero for at least 30 consecutive days during the term of the line. Borrowings bear interest at 0.5% over the bank's prime rate. As of December 31, 1995, there were no amounts outstanding under this line of credit. On September 21, 1995, the Company entered into a $300,000 term loan with a commercial bank. Borrowings are secured by the Company's accounts receivable and a promissory note that requires repayment over 36 months using an effective rate of interest equal to the bank's prime rate (8.5% at December 31, 1995) plus 1.0%. The outstanding indebtedness under the loan at December 31, 1995 was $283,333. Amounts are payable as follows for the years ended December 31, 1996 - - $100,000, 1997 - $100,000; 1998 - $83,333. (9) STOCKHOLDERS' EQUITY (DEFICIENCY) (a) Preferred Stock Redeemable preferred stock consists of the following at December 31, 1994: Series C 9% Convertible Preferred Stock, $.01 par value. Authorized, issued and outstanding 3,035,320 shares $ 3,380,908 Series B 9% Convertible Preferred Stock, $.01 par value Authorized, issued and outstanding 668,182 shares 814,631 Series A 9% Convertible Preferred Stock, $.01 par value Authorized, issued and outstanding 1,876,318 shares.. 2,210,968 --------- Total redeemable preferred stock $ 6,406,507 ========= 9 IMPATH INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) -------------------------------------------- Effective February 10, 1995, the Company sold 1,612,904 shares of its 8% Series D Convertible Participating Preferred Stock and warrants to purchase 42,529 shares of its common stock at $3.50 per share for an aggregate sales price of $2,000,000 (before issuance costs). The warrants are exercisable for a period of six years. No value was ascribed to these warrants for financial reporting as the Company believes such amount would not be material to the accompanying financial statements. The warrants are considered to be outstanding for all periods presented for the purpose of the calculation of pro forma net income per share. The holders of this preferred stock may convert their shares into shares of common stock, subject to certain adjustments. Concurrent with the issuance of the 8% Series D Convertible Participating Preferred Stock and common stock warrants, the terms of the outstanding Series A, B and C Redeemable Preferred Stock were revised, resulting in the elimination of all previously existing redemption rights, elimination of all previously accrued dividends in the amount of $1,799,909 and a change in the future dividend rate from 9% to 8%, which would be payable when declared by the Board of Directors or, whether or not so declared, in the event of a liquidation or deemed liquidation, and participation in liquidation on a pro-rata basis to common and preferred stockholders on an as-converted basis. The holders of the Series D preferred stock are entitled to preference in liquidation amounts. The available assets would be distributed pro rata to common and preferred stockholders on an as- converted basis. In June 1988 and March 1990, the Company sold 1,776,318 and 100,000 shares, respectively, of its Series A 9% Convertible Preferred Stock (subsequently amended to 8%) with a par value of $.01 per share for $1,350,000 (before issuance costs) and $76,000, respectively. The holders of this preferred stock may convert their shares into shares of common stock at any time. Each of these preferred shares is convertible into .3543745 shares of common stock. The conversion ratio is subject to adjustment upon the occurrence of certain capital transactions as defined. The agreements under which these shares were sold contain anti-dilutive provisions and preemptive rights with respect to new stock issuances. The holders of the Series A 8% Convertible Preferred Stock are entitled to receive a cumulative dividend at the annual rate of 8%, commencing February 10, 1995, when and as declared by the Board of Directors, or whether or not so declared, in the event of a liquidation or deemed liquidation. Further, these preferred stockholders shall participate in any dividends declared on the common stock and shall be entitled to voting rights, on an as-converted basis. The liquidation value of each of these preferred shares is $.76 per share, plus accrued dividends commencing February 10, 1995. In March 1990, the Company issued 668,182 shares of its Series B 9% Convertible Preferred Stock (subsequently amended to 8%; terms are substantially identical to those of the Series A 8% Convertible Preferred Stock) for an aggregate consideration of $587,998 (before issuance costs). The holders of the Series B 8% Convertible Preferred Stock are entitled to preference in liquidation over holders of the Series A 8% Convertible Preferred Stock. The liquidation value of each of these preferred shares is $.88 per share, plus accrued dividends commencing February 10, 1995. In March 1991, the Company issued 1,638,887 shares of its Series C 9% Convertible Preferred Stock (subsequently amended to 8%; terms are substantially identical to those of the Series A 8% Convertible Preferred Stock) for an aggregate consideration of $1,475,000 (before issuance costs). In June and July 1993, the Company issued 1,396,433 additional shares of its Series C 9% Convertible Preferred Stock (subsequently amended to 8%) for an aggregate consideration of $1,256,789. The holders of the Series C 8% Convertible Preferred Stock are entitled to preference in liquidation over holders of the Series A 8% Convertible Preferred Stock and the Series B 8% Convertible Preferred Stock. The liquidation value of each of these preferred shares is $.90 per share, plus accrued dividends commencing February 10, 1995. 10 IMPATH INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Upon the consummation of the Company's initial public offering on February 20, 1996 (see notes 13 and 14), all preferred shares were converted into 2,548,933 shares of common stock. In October of 1995, the Financial Accounting Standards Board issued SFAS No.123, "Accounting for Stock-Based Compensation," which must be adopted by the Company in 1996. The Company has elected not to implement the fair value based accounting method for employee stock options, but has elected to disclose, commencing in 1996, the pro forma net income and earnings per share as if such method had been used to account for stock-based compensation cost as described in the Statement. (b) Stock Option Plan In February 1989, the Company adopted (and subsequently amended) a Stock Option Plan, which provides for granting to certain key employees of the Company, directors and consultants, options to purchase up to 884,688 shares of common stock. Options granted are exercisable over a period not to exceed ten years. At December 31, 1995, options to purchase approximately 533,357 shares of common stock at exercise prices ranging from $.28 to $8.00 per share were outstanding, 271,885 of which were exercisable. In August of 1995, four directors were granted options to purchase a total of 42,528 shares at an exercise price of $3.50 per share under the Company's Stock Option Plan, which vest ratably over 36 months. Management of the Company estimated the fair market value of the underlying common stock to be approximately $8.00 per share and, accordingly, recorded deferred compensation of $191,000, which amount will be amortized ratably over the vesting period. In October of 1995, three additional directors were granted options to purchase a total of 31,896 shares at an exercise price of $3.50 per share, which vest ratably over 36 months. Management of the Company estimated fair market value of the underlying common stock to be approximately $9.50 per share and, accordingly, recorded deferred compensation of $191,000, which amount will be amortized ratably over the vesting period. All such options issued to directors (and other options issued subsequent to November 1, 1994) are considered to be outstanding for all periods presented for purposes of the calculation of pro forma net income per share. The following is a summary of option activity during the years ended December 31, 1993, 1994 and 1995: Shares Price under options range ($) -------------- ---------- Options outstanding at December 31, 1992 306,993 .28-2.54 Granted 84,089 2.54 Exercised (86,231) .28-2.54 Canceled (43,647) 2.54 ------- Options outstanding at December 31, 1993.. 261,204 .28-2.54 Granted 204,297 2.54-3.50 Canceled (35,615) 2.54 ------- Options outstanding at December 31, 1994.. 429,886 .28-3.50 Granted 126,692 3.50-8.00 Exercised (6,444) .56-3.50 Canceled (16,777) .56-3.50 ------- Options outstanding at December 31, 1995.. 533,357 .28-8.00 ======= 11 IMPATH INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (10) 401(K) RETIREMENT SAVINGS PLAN Effective June 1, 1995, the Company adopted the Impath Inc. 401(k) Retirement Savings Plan (the "Plan") benefiting certain employees. Employees who are over the age of 21 and have completed six months of service are eligible for voluntary participation in the Plan. Employees may contribute 1% to 20% of their total salaries on a before tax basis, and the Company will match up to 25% of the first 4% of employee contributions. Plan participants who were employees as of June 1, 1995 are 100% vested in all contributions. Any employees hired subsequent to June 1, 1995 are 100% vested in their own contributions and will vested in employer contributions over a three-year period. Employer contributions for the year ended December 31, 1995 were $22,129. (11) INCOME TAXES The components of the provision for income taxes for 1993, 1994 and 1995 are as follows: 1993 1994 1995 Current: Federal $ -- 336,000 463,000 State and local 18,910 337,921 321,000 Benefit of operating loss -- (576,000) (279,000) carryforwards -------- -------- --------- 18,910 97,921 505,000 -------- -------- -------- Deferred: Federal -- -- (298,000) State and local -- -- (207,000) -------- -------- -------- -- -- (505,000) -------- -------- -------- $ 18,910 97,921 -- ======== ======== ======== Net deferred tax assets at December 31, 1994 and 1995 are as follows: 1994 1995 Net operating loss carryforwards $ 279,000 -- Allowance for doubtful accounts 365,000 667,000 All other (30,000) (77,000) -------- -------- 614,000 590,000 Less: Valuation allowance (614,000) (85,000) -------- -------- Deferred tax assets, net $ -- 505,000 ========= ======== 12 IMPATH INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) The Company has reduced its valuation allowance against net deferred tax assets in 1995 to increase the carrying value of such assets to the extent of taxes that it expects to pay on estimated current year taxable earnings through December 31, 1995. As a result, management of the Company believes that it is more likely than not that future tax benefits will be realized as a result of the reversal of its temporary differences. A reconciliation of the Federal statutory income tax rate to the effective tax rate for the years ended December 31, 1993, 1994 and 1995 follows: 1993 1994 1995 ------- ------ ------ Federal statutory income tax rate (34.0%) 34.0% 34.0% State and local taxes, net of Federal income tax benefit (1.4) 23.1 20.3 Change in valuation allowance 37.5 (48.7) (50.7) Other -- 1.7 (3.6) ----- ----- ----- 2.1% 10.1% 0.0% ===== ===== ===== (12) LEASES The Company utilizes laboratory and office facilities and leases equipment pursuant to the terms of operating and capital leases, which expire in 1996 through 2001 (certain leases expiring in 1999 are cancelable at the Company's option in 1996). The present value of future minimum lease payments (including those cancelable at the Company's option in 1996 and subject to increases in the Consumer Price Index and real estate taxes) for the operating and capital leases are as follows: Operating Capital Year ending December 31 leases leases - ----------------------- --------- ------- 1996 $ 665,483 469,206 1997 629,989 487,407 1998 593,791 450,166 1999 467,828 172,450 2000 266,754 -- Thereafter 3,116 -- - -------------- -------- ---------- $ 2,626,961 1,579,229 ========== Less amount representing interest (311,381) --------- Present value of minimum lease payments 1,267,848 Less current portion 321,125 --------- $ 946,723 ======== For the years 1993, 1994 and 1995, rent expense totaled $250,955, $316,498 and $328,580, respectively. 13 IMPATH INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (13) INITIAL PUBLIC OFFERING On October 13, 1995, the Board of Directors authorized the Company to file a registration statement with the Securities and Exchange Commission to register shares of its common stock in connection with an initial public offering. Such offering was consummated on February 26, 1996, for a total of 2,242,500 common shares at an offering price of $13 per share. The net proceeds to the Company amounted to approximately $26,062,000. (14) PRO FORMA CAPITALIZATION (UNAUDITED) The pro forma presentation of the balance sheet gives effect to the conversion of Series A, Series B, Series C and Series D preferred stock into an aggregate of 2,548,933 common shares, which conversion occurred on February 26, 1996 at a rate of one share of common for each 2.8218735 shares of preferred, as if it had occurred on December 31, 1995. Such presentation excludes the receipt of the net proceeds and the issuance of common stock in conjunction with the Company's initial public offering. 14 POWER OF ATTORNEY The Registrant and each person whose signature appears below hereby appoint Anu D. Saad, Ph.D. and John P. Gandolfo as attorneys-in-fact with full power of substitution, severally, to execute in the name and on behalf of the Registrant and each such person, individually and in each capacity stated below, one or more amendments to this Annual Report on Form 10-K, which amendments may make such changes in this Report as the attorney-in-fact acting in the premises deems appropriate and to file any such amendment to this Report with the Securities and Exchange Commission. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. Dated: May 6, 1996 -- IMPATH INC. By /s/Anu D. Saad ------------------- Anu D. Saad, Ph.D President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Dated: May 6, 1996 By /s/John L. Cassis -- --------------------- John L. Cassis Chairman of the Board and Director Dated: May 6, 1996 By /s/Anu D.Saad ---------------------------------- Anu D. Saad, Ph.D President, Chief Executive Officer and Director Dated: May 6, 1996 By /s/Richard Kessler ---------------------------------- Richard Kessler Director Dated: May 6, 1996 By /s/Richard J.Cote ---------------------------------- Richard J. Cote Director Dated: May __,1996 By ---------------------------------- Joseph A. Mollica Director Dated: May ___,1996 By ---------------------------------- Marcy H. Shockey Director Dated: May ___, 1996 By ---------------------------------- David B. Snow, Jr. Director Dated: May 6, 1996 By /s/John P.Gandolfo ---------------------------------- John P. Gandolfo Executive Vice President, Chief Financial Officer, Secretary, Treasurer and Principal Accounting Officer -----END PRIVACY-ENHANCED MESSAGE-----