UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
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 3, 2005
ALPHA INNOTECH CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 1-14257 58-1729436
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2401 MERCED STREET, SAN LEANDRO, CALIFORNIA 94577
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 483-9620
XTRANA, INC.
P.O. BOX 668, SEDALIA, COLORADO 80135
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (SEE General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the
Securities Act (17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b)
under the Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c))
under the Exchange Act (17 CFR 240.13e-4c))
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Information included in this Form 8-K may contain forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
This information may involve known and unknown risks, uncertainties and other
factors which may cause our actual results, performance or achievements to be
materially different from future results, performance or achievements expressed
or implied by any forward-looking statements. Forward-looking statements, which
involve assumptions and describe our future plans, strategies and expectations,
are generally identifiable by use of the words "may," "will," "should,"
"expect," "anticipate," "estimate," "believe," "intend" or "project" or the
negative of these words or other variations on these words or comparable
terminology. Forward-looking statements are based on assumptions that may be
incorrect, and there can be no assurance that any projections or other
expectations included in any forward-looking statements will come to pass. Our
actual results could differ materially from those expressed or implied by the
forward-looking statements as a result of various factors. Except as required by
applicable laws, we undertake no obligation to update publicly any
forward-looking statements for any reason, even if new information becomes
available or other events occur in the future.
SECTION 2 - FINANCIAL INFORMATION
ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
On December 14, 2004, Alpha Innotech Corp. (formerly Xtrana, Inc.) (the
"Registrant") entered into the previously disclosed Agreement and Plan of Merger
(as amended on each of April 6, 2005, July 6, 2005 and August 25, 2005, the
"Merger Agreement") with Alpha Innotech Corporation, a California corporation
("Alpha CA"), and AIC Merger Corporation, our wholly-owned subsidiary ("Merger
Sub"). The closing of the transactions contemplated under the Merger Agreement
occurred on October 3, 2005. At the closing, pursuant to the terms of the Merger
Agreement, Merger Sub was merged with and into Alpha CA, with Alpha CA
continuing after the merger as the surviving corporation and our wholly-owned
subsidiary (such transactions are referred to as the "Merger"). In exchange for
all the issued and outstanding equity securities of Alpha CA, we issued to the
former shareholders of Alpha CA an aggregate of 8,072,484 shares of our common
stock (taking into account the reverse stock split described below in this
report). As a result of the Merger, the former Alpha CA shareholders hold
approximately 83% of our issued and outstanding common stock and stockholders
who held our common stock immediately prior to the Merger hold approximately 17%
of our issued and outstanding common stock (excluding options and warrants).
Pursuant to the Merger Agreement, of the total Merger consideration,
500,000 shares of common stock have been deposited in escrow to satisfy Alpha
CA's potential indemnification obligations under the Merger. An additional
500,000 treasury shares of our common stock have been deposited in escrow to
satisfy our potential indemnification obligations under the Merger Agreement.
These shares will be released from escrow in the event that no indemnification
claims are brought by the respective parties on or prior to March 31, 2006.
Pursuant to the Merger Agreement, we assumed all outstanding Alpha CA
options and warrants on substantially identical terms, with proportionate
adjustments of the number of underlying shares and exercise price of the options
and warrants based on the applicable exchange ratio.
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There are no material relationships between us and Alpha CA, other than
in respect of the Merger Agreement and related documents. Merger Sub was a
wholly-owned subsidiary of Xtrana, Inc., formed solely for the purpose of
effecting the Merger.
Concurrently with the closing of the Merger, we changed our corporate
name from Xtrana, Inc. to Alpha Innotech Corp.
Immediately prior to the closing of the Merger, we effected a reverse
stock split pursuant to which each ten shares of our outstanding common stock
was exchanged for one new share of common stock, as described in further detail
below in this report.
A copy of the press release, issued on October 4, 2005, announcing the
closing of the Merger is filed with this report as Exhibit 99.1 and incorporated
hereby by reference. A copy of the Merger Agreement and the Amendments to the
Merger Agreement are filed with this report as Exhibits 2.1, 2.1.1, 2.1.2 and
2.1.3.
ALPHA CA BUSINESS AND FINANCIAL INFORMATION
INTRODUCTION-FORWARD LOOKING STATEMENTS
Except for statements of historical fact, the statements herein are
forward-looking and are subject to a number of risks and uncertainties that
could cause actual results to differ materially from the statements made. These
include, among others, uncertainty associated with progress in research and
development programs, timely development, launch and acceptance of new products,
establishment of new corporate alliances and other factors described below under
the headings "Market Opportunity", " Technology", "Products", "Customers" and
"Distribution". In addition, such risks and uncertainties also include the
matters discussed under Management's Discussion and Analysis of Financial
Condition and Results of Operations below.
OVERVIEW
Alpha CA develops, manufactures and markets digital imaging and
detection systems for the life science research and drug discovery markets.
Alpha CA's goal is to combine instruments, reagents and bioinformatics software
to offer integrated modular technology platforms for the electrophoresis,
functional genomics, proteomics and cell analysis markets. Alpha CA was
incorporated in California in 1992. Alpha CA maintains its corporate offices at
2401 Merced Street, San Leandro, California 94577 and its telephone number is
(510) 483-9620. Alpha CA's corporate web site is located at
www.alphainnotech.com.
MARKET OPPORTUNITY
Alpha CA believes that international trade in scientific instruments in
general, and the research and development budgets of customers in certain
pharmaceutical and biotechnology companies in particular, have risen since 2002
and will continue to rise this year. Alpha CA intends to capture a share of this
rise with its product mix comprising instruments, software and reagents for the
gel imaging, microarray, and array of arrays markets.
Alpha CA represents a small segment of a life science research tool
market. This market includes a wide range of technologies such as various types
of instruments, reagents, consumables and software. Given the complexities and
focus of these tools for specific applications, Alpha CA is not aware of any
objective and accurate third party reports on various
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life science market segments that can be used to determine Alpha CA's market
share in this market. While Alpha CA does not have an accurate third party
quantitative measure of market size for its specific products, Alpha CA
management estimates the target market for Alpha CA's products is approximately
$675 million with a projected growth rate of over 20% annually.
Alpha CA believes the human genome project, genome studies of other
organisms, and large scale gene expression studies have identified and will
continue to identify many target genes. Alpha CA believes there is and will be
an increasing need for efficient tools and methods to further study this
multitude of target genes. Many genomic and some proteomics studies are
currently conducted using the microarray (slide) format. Alpha CA believes
multiplexed arrays or "array of arrays" (microtitre well) format will
increasingly be adopted by the life science research and drug discovery markets
for proteomics and cell analysis studies. The Alpha CA NovaRay array reader was
developed for and useful in both microarray and array of arrays formats.
TECHNOLOGY
Alpha CA patent portfolio consists of three issued U.S. patents and
five U.S. patent applications relating to its proprietary NovaRay(R) and Gel
Imaging technology. These patents expire in 2018, 2022 and 2024. One of the five
applications has been allowed and the fourth patent will be granted upon payment
of the issue fee and application fee.
Under the terms of an agreement between Digital Optical Imaging
Corporation ("DigiOpt") and Alpha CA, Alpha CA received certain exclusive
license rights to make and sell products incorporating the inventions disclosed
in four of DigiOpt's United States patents. These patents describe the use of
micro-optical-electrical-mechanical components such as digital micro mirror
devices for controlling both excitation and emission light in ways that can
improve the performance of instruments like the NovaRay(R). The agreement
remains in effect until the last underlying patent or patent application has
expired or is abandoned. The latest to expire patent covered by this agreement
is scheduled to expire in 2021. Alpha CA committed to pay certain patent
prosecution fees and costs; to date these costs have been minimal. Alpha CA
committed to pay DigiOpt guaranteed minimum royalties of the aggregate of
$40,000 over the five-year period following the earlier of the first commercial
sale of a product incorporating the technology or August 2006. Alpha CA has not
made any royalty payments to date. DigiOpt may convert the exclusive license
rights to non-exclusive if Alpha CA does not make a first commercial sale by
August 2006, or terminate them outright if Alpha CA does not make a first
commercial sale by February 2007.
Alpha CA's proprietary instrument designs and software are also
protected under state and federal trade secret and copyright law.
PRODUCTS
Alpha CA sells instruments, software and consumables used in life
science research laboratories for the study of nucleic acids (DNA and RNA) and
proteins used to discover and develop new pharmaceuticals. Alpha CA's products
address two segments of the life science research market: Gel Documentation and
Microarray/Multiplexed Arrays.
GEL DOCUMENTATION. Alpha CA's digital imaging systems for Gel
Documentation are used to detect, archive, and analyze fluorescent,
chemiluminescent and visible signals from biological samples such as DNA,
proteins and bacterial colonies. For example, in a common laboratory procedure
called electrophoresis, DNA molecules being analyzed are loaded into one
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end of a "gel" and driven toward the other end by an electric charge. Molecules
of different lengths and electrical charges travel at different speeds through
the gel. After electrophoresis, comparing the location of an unknown DNA
molecule with the location of known standardized DNA samples such as
AlphaQuant(TM) molecular ladders will provide important information to the
researcher about the size of unknown sample DNA molecules. However, the DNA
samples are usually invisible to the naked eye. To determine their locations, a
chemical such as ethidium bromide is added. The ethidium bromide binds to double
stranded DNA and "fluoresces", that is, it absorbs light energy of one
wavelength ("excitation") and emits a different wavelength ("emission"). The
researcher may then place the sample gel into any of Alpha CA's gel imaging
instruments (the FluorChem(TM), AlphaImager(R), or AlphaDigiDoc(TM)) which
bathes the sample in excitation light energy (in this example, ultraviolet
radiation) and captures the emission light energy with a scientific grade CCD
camera. The researcher may then use the analysis features of AlphaEase(R)
software for image capture and analysis to determine the size of the unknown DNA
sample molecule. The researcher may also determine the quantity of the unknown
molecules with AlphaEase(TM) by comparing signal intensities of the unknown with
the standard.
Other Alpha CA products in the Gel Documentation group include software
for analysis of "2-D" protein gels (Alpha GelFox(TM) software for 2D gel
analysis), reagents for use in chemiluminescent applications (ChemiGlow(TM)
chemiluminescent substrate), and software packages for electronic document
security (Alpha PART 11 Ease(TM) software for 21 C.F.R. Part 11 compliance).
MICROARRAY/MULTIPLEXED ARRAYS. Alpha CA's other major product group is
for the Microarray/Multiplexed Arrays market, in which researchers analyze
slides or multi-well microplates "printed" with genomic or proteomic
information, and in some cases, live cell cultures. The NovaRay(R) includes a
patented combination of a broad source lamp with multiple filter sets to provide
researchers maximum flexibility in their choice of fluorescent labels when
analyzing biochips such as microarrays. The NovaRay(R) reader provides
additional flexibility to the researcher by accommodating both the microplate
and the slide formats. The researcher can then analyze the emissions from the
samples using ArrayEase(R) analysis software. The NovaRay(R) has been placed
with select early-access customers. The NovaRay(R) is scheduled for broader
market launch in the fourth quarter of 2005.
PRODUCTS UNDER DEVELOPMENT. Alpha CA intends to introduce in the fourth
quarter of 2005, a laser-based microarray reader targeted at customers who use
the single slide format. Alpha CA intends also to offer as early as the fourth
quarter of 2005 other array analysis software.
CUSTOMERS
Alpha CA's customers include pharmaceutical and biotechnology
companies, universities, medical centers, government research institutes and
agencies worldwide.
DISTRIBUTION
In the United States Alpha CA's products are sold through a network of
direct sales representative and independent manufactures representatives.
Internationally, Alpha CA's products are sold through a network of 41
independent distributors in 43 countries worldwide. No distributor accounts for
more than 6.5% of Alpha CA's revenues. Alpha CA's independent distributors
generally have exclusive distribution rights for their respective territories
and perform sales, marketing and technical support functions for their local
customers.
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EMPLOYEES
As of September 30, 2005, Alpha CA had 49 full-time employees. Alpha CA
considers its relations with employees to be satisfactory. None of Alpha CA
employees is covered by a collective bargaining agreement.
FACILITIES
Headquarters, manufacturing, and research and development are housed in
35,000 feet of leased space in San Leandro, California. This lease expires in
December 2011.
LEGAL PROCEEDINGS
Alpha CA is not involved in any legal proceedings that would have a
material adverse impact on our business, financial condition or results of
operations.
RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this report. An investment in Alpha CA involves a high
degree of risk. If any of the following events or outcomes actually occurs, our
business, operating results, and financial condition would likely suffer.
ALPHA CA HAS A HISTORY OF OPERATING LOSSES AND MAY INCUR FUTURE LOSSES.
Alpha CA has not been profitable since 1999. Alpha CA's losses were
$3.3 million, $2.0 million and $2.6 million for fiscal years 2004, 2003 and
2002, respectively and Alpha CA had an accumulated deficit of $14.2 million as
of December 31, 2004 and $16.5 million as of June 30, 2005. Alpha CA's losses
have resulted principally from costs incurred in research and development,
manufacturing and from selling, general and administrative costs associated with
its operations.
Alpha CA's ability to generate significant revenues and maintain
profitability is dependent in large part on its ability to expand its customer
base, increase sales of its current products to existing customers, manage its
expense growth, and enter into additional supply, license and collaborative
arrangements as well as on its ability to successfully manufacture and
commercialize products incorporating its technologies in new applications and in
new markets.
ADDITIONAL FINANCING WILL BE REQUIRED FOR ALPHA CA'S FUTURE BUSINESS AND
OPERATIONS.
Alpha CA will require additional capital resources in order to conduct
its operations and develop its products. While Alpha CA estimates that upon
completion of the Merger, its capital resources will be sufficient to fund its
current level of operations over the near term, it cannot guarantee that this
will be the case. Additional funds will be required to implement Alpha CA's
business plan over the longer term. Alpha CA may not be successful in raising
such additional capital on favorable terms or at all.
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ALPHA CA'S BUSINESS DEPENDS ON RESEARCH AND DEVELOPMENT SPENDING LEVELS FOR
PHARMACEUTICAL AND BIOTECHNOLOGY COMPANIES AND ACADEMIC AND GOVERNMENTAL
RESEARCH INSTITUTIONS.
Alpha CA expects that its revenues in the foreseeable future will be
derived primarily from products and services provided to pharmaceutical and
biotechnology companies and academic, governmental and other research
institutions. Alpha CA's success will depend upon their demand for and use of
its products and services. Alpha CA's operating results may fluctuate
substantially due to reductions and delays in research and development
expenditures by these customers. For example, reductions in capital expenditures
by these customers may result in lower than expected instrumentation sales.
These reductions and delays may result from factors that are not within Alpha
CA's control, such as:
o changes in economic conditions;
o changes in government programs that provide funding to
companies and research institutions;
o changes in the regulatory environment affecting life sciences
companies and life sciences research;
o market-driven pressures on companies to consolidate and reduce
costs; and
o other factors affecting research and development spending.
ALPHA CA MUST SPEND A SIGNIFICANT AMOUNT OF TIME AND RESOURCES TO DEVELOP
PRODUCTS, AND IF THESE PRODUCTS DO NOT ACHIEVE COMMERCIAL ACCEPTANCE, ITS
OPERATING RESULTS MAY SUFFER.
Alpha CA expects to spend a significant amount of time and resources to
develop new products and refine existing products. In light of the long product
development cycles inherent in its industry, these expenditures will be made
well in advance of the prospect of deriving revenues from the sale of new
products. Alpha CA's ability to commercially introduce and successfully market
new products is subject to a wide variety of challenges during this development
cycle that could delay introduction of these products. If it does not achieve
market acceptance of new products, its operating results will suffer.
ALPHA CA DEPENDS ON A LIMITED NUMBER OF SUPPLIERS AND IT WILL FACE DELAYS IN
MANUFACTURING OF ITS PRODUCTS IF SHIPMENTS FROM THESE SUPPLIERS ARE DELAYED OR
INTERRUPTED.
Alpha CA depends on its vendors to provide components of its products
in required volumes, at appropriate quality and reliability levels, and in
compliance with regulatory requirements. If supplies from these vendors were
delayed or interrupted for any reason, Alpha CA would not be able to produce or
sell products in a timely fashion or in sufficient quantities or under
acceptable terms.
ALPHA CA'S DEPENDENCE ON CONTRACT MANUFACTURING AND OUTSOURCING OTHER PORTIONS
OF ITS SUPPLY CHAIN MAY ADVERSELY AFFECT ITS ABILITY TO BRING PRODUCTS TO
MARKET.
As part of Alpha CA's efforts to streamline operations and to cut
costs, it has been outsourcing and will continue to evaluate additional
outsourcing of certain operations. If Alpha CA's contract manufacturers or other
outsourcers fail to perform their obligations in a timely
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manner or at satisfactory quality levels, Alpha CA's ability to timely bring
products to market could suffer.
IF ALPHA CA IS UNABLE TO MAINTAIN ITS RELATIONSHIPS WITH COLLABORATIVE PARTNERS,
IT MAY HAVE DIFFICULTY DEVELOPING AND SELLING ITS PRODUCTS AND SERVICES.
Alpha CA believes that its success in penetrating its target markets
depends in part on its ability to develop and maintain collaborative
relationships with key companies as well as with key academic researchers. Alpha
CA considers DigiOpt to be one such key collaborative relationship. Relying on
these or other collaborative relationships is risky to its future success
because:
o its partners may develop technologies or components
competitive with its products;
o some of its agreements may terminate prematurely due to
disagreements between it and its partners;
o its partners may not devote sufficient resources to the
development and sale of its products;
o its partners may be unable to provide the resources required
for it to progress in the collaboration on a timely basis;
o its collaborations may be unsuccessful; or
o it may not be able to negotiate future collaborative
arrangements on acceptable terms.
IF ALPHA CA IS UNABLE TO MAINTAIN ITS RELATIONSHIPS WITH, AND FULFILL ITS
CONTRACTUAL OBLIGATIONS TO, ITS SELLING AND DISTRIBUTION PARTNERS, ITS GROWTH
AND FINANCIAL RESULTS MAY BE ADVERSELY AFFECTED.
As a small company, Alpha CA must continue to nurture current and future
distribution partners in order to continue to grow. Any issue that materially
affects its ability to deliver and support products with any of its current or
future distribution partners could significantly impact financial results.
ALPHA CA'S CURRENT SALES, MARKETING AND TECHNICAL SUPPORT ORGANIZATION MAY LIMIT
ITS ABILITY TO SELL ITS NEWER PRODUCTS.
Alpha CA believes that the market for microplate format arrays and
their readers is still evolving, and that initial sales for these readers will
require significant support from its in-house applications scientists. Alpha CA
may not have sufficient in-house resources to support worldwide sales of these
products.
ALPHA CA FACES INTENSE COMPETITION FROM OTHER COMPANIES.
Alpha CA's products face competition from other companies, including
Bio Rad, Kodak, Fuji, UVP, Perkin Elmer, Molecular Devices and Tecan, that have
more financial resources, technical staff and manufacturing and marketing
capabilities than it does. It may be difficult for Alpha CA to compete with
larger companies investing greater resources in development, marketing and
distribution of their products.
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DUE TO THE INTERNATIONAL NATURE OF ALPHA CA'S BUSINESS, POLITICAL OR ECONOMIC
CHANGES OR OTHER FACTORS COULD HARM ITS BUSINESS.
38% of Alpha CA's revenue is currently generated from sales outside the
United States. Though such transactions are denominated in U.S. dollars, Alpha
CA's future revenue, gross margin, expenses and financial condition are still
affected by such factors as changes in foreign currency exchange rates,
unexpected changes in, or impositions of, legislative or regulatory
requirements, including export and trade barriers and taxes; longer payment
cycles and greater difficulty in accounts receivable collection. Alpha CA is
also subject to general geopolitical risks in connection with international
operations, such as political, social and economic instability, potential
hostilities and changes in diplomatic and trade relationships. Alpha CA cannot
assure investors that one or more of the foregoing factors will not have a
material adverse effect on its business, financial condition and operating
results or require it to modify its current business practices.
THIRD PARTIES MAY CLAIM THAT ALPHA CA IS INFRINGING THEIR INTELLECTUAL PROPERTY,
AND IT COULD SUFFER SIGNIFICANT LITIGATION OR LICENSING EXPENSES OR BE PREVENTED
FROM SELLING PRODUCTS.
While Alpha CA does not believe that any of its products infringe the
valid intellectual property rights of third parties, it may be unaware of
intellectual property rights of others that may cover some of its technology,
products or services. Any litigation regarding patents or other intellectual
property could be costly and time-consuming and could divert its management and
key personnel from its business operations. The complexity of the technology
involved and the uncertainty of intellectual property litigation increase these
risks. Claims of intellectual property infringement might also require it to
enter into costly license agreements. However, it may not be able to obtain
license agreements on terms acceptable to it, or at all. Alpha CA also may be
subject to significant damages or injunctions against development and sale of
certain of its products.
THIRD PARTIES MAY INFRINGE ALPHA CA'S INTELLECTUAL PROPERTY, AND IT MAY EXPEND
SIGNIFICANT RESOURCES ENFORCING ITS RIGHTS OR SUFFER COMPETITIVE INJURY.
Alpha CA's success depends in large part on its proprietary technology.
Alpha CA relies on a combination of patents, copyrights, trademarks, trade
secrets, confidentiality provisions and licensing arrangements to establish and
protect its proprietary rights. If it fails to successfully enforce its
intellectual property rights, its competitive position could suffer, which could
harm its operating results.
Alpha CA's pending patent and trademark registration applications may
not be allowed, or competitors may challenge the validity or scope of its
patents, copyrights or trademarks. In addition, its patents may not provide us a
significant competitive advantage.
Alpha CA may be required to spend significant resources to monitor and
police its intellectual property rights. It may not be able to detect
infringement and its competitive position may be harmed before it does so. In
addition, competitors may design around its technology or develop competing
technologies. Intellectual property rights and Alpha CA's ability to enforce
them may also be unavailable or limited in some foreign countries, which could
make it easier for competitors to capture market share and result in lost
revenues.
IF ALPHA CA LOSES ITS KEY PERSONNEL OR IS UNABLE TO ATTRACT AND RETAIN
ADDITIONAL SKILLED PERSONNEL, ITS BUSINESS MAY SUFFER.
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Alpha CA depends substantially on the principal members of its
management, including Haseeb Chaudhry, Chief Executive Officer and Darryl Ray,
Chief Operating Officer and President. Any officer or employee can terminate his
or her relationship with Alpha CA at any time and work for one of our
competitors. Alpha CA's ability to operate successfully and manage its potential
future growth depends significantly upon retaining key research, technical,
sales, marketing, managerial and financial personnel, and attracting and
retaining additional highly qualified personnel in these areas. Alpha CA faces
intense competition for such personnel from numerous companies in the highly
competitive northern California business area. The inability to attract and
retain these personnel could result in delays in the research, development and
commercialization of its potential products.
TO ATTRACT AND RETAIN QUALIFIED PERSONNEL, ALPHA CA MAY NEED TO GRANT LARGE
STOCK-BASED INCENTIVES THAT COULD BE DILUTIVE TO ITS SHAREHOLDERS AND IT MAY BE
REQUIRED TO OFFER HIGHLY COMPETITIVE SALARIES WHICH WOULD INCREASE FUTURE
OPERATING COSTS.
To attract and retain skilled personnel, Alpha CA may be required to
issue large stock option grants or other equity incentives which may be
significantly dilutive to existing shareholders. Due to application of SFAS
123(R), such equity incentives would require the Company to record compensation
expenses that would adversely impact earnings. If Alpha CA is required to pay
highly competitive base salaries and cash bonuses to attract and retain skilled
personnel, its operating results would also suffer.
INTEGRATING ACQUIRED TECHNOLOGIES MAY BE COSTLY AND MAY NOT RESULT IN
TECHNOLOGICAL ADVANCES.
Alpha CA has licensed in certain technologies and is working with
collaborators to integrate those technologies into future products. However,
market advances resulting from the integration of technologies may not be
achieved as successfully or rapidly as anticipated, if at all.
IF ALPHA CA LOSES SOME OR ALL RIGHTS TO THE DIGITAL OPTICAL IMAGING PATENTS, ITS
BUSINESS MAY SUFFER.
Under the terms of an agreement between Digital Optical Imaging
Corporation ("DigiOpt") and Alpha CA, Alpha CA received certain exclusive rights
to make and sell products incorporating the inventions disclosed in four United
States patents. Alpha CA is working with strategic partners to incorporate these
technologies into future products. Under the terms of the agreement, Alpha CA is
obligated to pay certain patent prosecution costs and maintenance fees. Failure
to pay these costs and fees as they arise may lead to abandonment of the rights.
Furthermore, under the terms of the agreement, DigiOpt may convert the exclusive
license to non-exclusive if Alpha CA does not make its first commercial sale of
a product incorporating the licensed technology by August 4, 2006, and may
terminate the license if Alpha CA does not make its first commercial sale of a
product incorporating the licensed technology by February 4, 2007. Loss of these
exclusive rights by abandonment, conversion, or termination would impair Alpha
CA's ability to develop and market new products.
IF ALPHA CA SUFFERS LOSS TO ITS FACTORIES, FACILITIES OR DISTRIBUTION SYSTEM DUE
TO CATASTROPHE, ITS OPERATIONS COULD BE SERIOUSLY HARMED.
Alpha CA's factories, facilities and distribution system are subject to
catastrophic loss due to fire, flood, terrorism or other natural or man-made
disasters. In particular, its production facilities and headquarters in
California could be subject to a catastrophic loss caused by earthquake. If
these facilities were to experience a catastrophic loss, it could disrupt Alpha
CA's
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operations, delay production, shipments and revenue and result in large expenses
to repair or replace the facility. Although Alpha CA carries insurance for
property damage and business interruption, we do not carry insurance or
financial reserves for interruptions or potential losses arising from
earthquakes.
CHANGES IN ACCOUNTING AND FINANCIAL REPORTING RULES AND REGULATIONS, INCLUDING
COMPLIANCE WITH THE SARBANES-OXLEY ACT OF 2002, COULD MATERIALLY AFFECT ALPHA
CA'S FINANCIAL RESULTS.
The generally accepted accounting principles (GAAP) with which Alpha
CA's financial statements comply are subject to interpretation by the Securities
and Exchange Commission and various other regulatory and advisory bodies. A
change in the interpretation or application of these principles could
significantly affect Alpha CA's financial results and may even retroactively
affect previously reported financial statements.
The Sarbanes-Oxley Act of 2002 requires changes in Alpha CA's corporate
governance and compliance practices. In particular, compliance with Section 404
of the Sarbanes-Oxley Act will increase financial and legal costs by an as yet
undetermined amount and therefore the impact on future financial results cannot
be quantified. The increased liability exposure stipulated by the Sarbanes-Oxley
Act may also make it difficult to attract and retain qualified members of Alpha
CA's board of directors and executive officers.
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ALPHA CA FINANCIAL INFORMATION
The Audited Consolidated Financial Statements of Alpha CA as of and for
the years ended December 31, 2004 and 2003 and related Management's Discussion
and Analysis of financial Condition for the Years 2003 and 2004, are
incorporated herein by reference to Appendix C of the Xtrana, Inc. Definitive
Proxy Statement on Schedule 14A as filed with Securities and Exchange Commission
on August 12, 2005. Certain unaudited financial information for the six months
ended June 30, 2005 and 2004, is attached to this Form 8-K as EXHIBIT 99.2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION FOR SIX MONTHS ENDED
JUNE 30, 2005
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations contains forward-looking statements that
involve risks and uncertainties, such as statements of our plans, objectives,
expectations and intentions. Any statements that are not statements of
historical fact are forward-looking statements. When used, the words
"anticipate," "believe," "estimate," "expect," "intend," "plan," and similar
expressions identify certain of these forward-looking statements. These
forward-looking statements are subject to risks and uncertainties that could
cause actual results or events to differ materially from those expressed or
implied by the forward-looking statements in this Form 8-K. Alpha Innotech does
not undertake any obligation to update forward-looking statements to reflect
events or circumstances occurring after the date of this filing.
CRITICAL ACCOUNTING POLICIES
Alpha CA's financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires it to make estimates and
judgments that affect the reported amounts of its assets, liabilities, revenue
and expenses. Alpha CA bases its estimates on historical experience and on
various other assumptions that it believes to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. Alpha CA's critical accounting policies are set forth
below.
REVENUE RECOGNITION
Alpha CA's revenue is derived from the sale of digital imaging systems,
net of returns and allowances and is recognized when a contract is executed, all
delivery obligations have been met, the fee is fixed and determinable, and
collectibility is probable. All products are sold with a 1-year standard
warranty agreement and Alpha CA records an associated reserve for estimated
warranty costs.
For products sold where software is deemed to be more than incidental,
Alpha CA follows Statement of Position ("SOP") 97-2, "Software Revenue
Recognition," as amended. Revenue earned on software arrangements involving
multiple elements is allocated to each element based on vendor-specific
objective evidence, which is based on the price charged when the same element is
sold separately. When a digital imaging system is sold, the multiple elements
are software and maintenance and support. Revenue allocated to software is
recognized when a
12
contract is executed, all delivery obligations have been met, the fee is fixed
and determinable, and collection is probable. Revenue allocated to maintenance
and support is recorded as deferred revenue when a contract is executed, all
delivery obligations have been met, the fee is fixed and determinable, and
collection is probable. Deferred revenue for maintenance and support is
recognized ratably over the maintenance term (typically for a period of one
year, beginning when a digital imaging system is considered sold or an extended
maintenance and support contract is signed).
Revenue is recorded net of estimated returns. Alpha CA's management
makes estimates of potential future product returns related to current period
revenue. Alpha CA analyzes historical returns, current economic trends and
changes in its customer demand and acceptance of its product when evaluating the
adequacy of its allowance for sales returns and other allowances, such as
allowance for bad debts, in any accounting period. As of June 30, 2005 and
December 31, 2004, Alpha CA's allowance for sales returns was $75,000 and
$35,000, respectively, and its allowance for doubtful accounts was $17,000 and
$47,000, respectively.
INVENTORY
Alpha CA records inventories at the lower of cost or market value, with
cost generally determined on a first-in, first-out basis. Alpha CA performs
periodic valuation assessments based on projected sales forecasts and analyzing
upcoming changes in future configurations of its products and record inventory
write-downs for excess and obsolete inventory. Although Alpha CA strives to
ensure the accuracy of its forecasts, it periodically is faced with
uncertainties. As of June 30, 2005 and December 31, 2004, Alpha CA's allowance
for excess and obsolete inventory was $114,000 and $81,000, respectively.
DEFERRED TAXES VALUATION ALLOWANCE
Alpha CA believes that significant uncertainties exist regarding the
future realization of deferred tax assets, and, accordingly a full valuation
allowance is required which amounted to $4,533,000 at December 31, 2004. In
subsequent periods when Alpha CA generates pre-tax income, a tax expense will
not be recorded to the extent that the remaining valuation allowance can be used
to offset that expense. Once a consistent pattern of pre-tax income is
established or other events occur that indicate that the deferred tax assets
will be realized, additional portions or all of the remaining valuation
allowance will be reversed back to income. Should Alpha CA generate pre-tax
losses in subsequent periods, a tax benefit will not be recorded and the
valuation allowance will be increased. Despite the valuation allowance, Alpha CA
retains the ability to utilize the benefits of net operating loss carryforwards
and research and development credits.
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations should be read in conjunction with Alpha
CA's financial statements and the related notes thereto. This discussion
contains forward-looking statements based upon current expectations that involve
risks and uncertainties, such as Alpha CA's plans, objectives, expectations and
intentions. Alpha CA's actual results and the timing of events could differ
materially from those anticipated in these forward-looking statements as a
result of several factors.
13
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004
REVENUES
Alpha CA's revenues are primarily derived from sale of instruments,
software, consumables, and service contracts. Revenues for the six months ended
June 30, 2005 increased $208,000 or 4.3%, to $5,018,000, from $4,810,000 for the
six months ended June 30, 2004. There was not any material growth in the mix of
revenue between software, consumables, or service contracts, in the number of
units sold, or sales prices. However, the number of units sold for instrument
sales increased, with no material change in price, due to improvements in the
gel imaging product line.
Revenues outside of the United States represented 38% of Alpha CA's
total revenues for the six months ended June 30, 2005 and 32% of Alpha CA's
total revenues for the six months ended June 30, 2004. The increase in
international revenues is due primarily to increasing sales to emerging markets,
particularly Asia. Alpha CA anticipates its international revenue to account for
an increasing percentage of the total revenue in the immediate future.
COST OF GOODS SOLD
Cost of goods sold includes direct material, labor and manufacturing
overhead. Cost of goods sold for the six months ended June 30, 2005 increased
$247,000 or 9.8%, to $2,773,000, from $2,526,000 for the six months ended June
30, 2004 due primarily to increased material costs from product upgrades.
GROSS PROFIT
Gross profit for the six months ended June 30, 2005 decreased $39,000
or 1.7%, to $2,245,000, from $2,284,000 for six months ended June 30, 2004. The
gross profit as a percent of revenues declined from 47.5% for the six months
ended June 30, 2004 to 44.7% for the six months ended June 30, 2005. There were
no significant changes in labor or overhead rates, but material costs did
increase due to the upgrading of some products.
SALES AND MARKETING EXPENSES
Sales and marketing expenses for the six months ended June 30, 2005
increased $489,000 or 25.2%, to $2,428,000, from $1,939,000 for the six months
ended June 30, 2004. The sales and marketing expenses as a percentage of
revenues increased from 40.3% for the six months ended June 30, 2004 to 48.4%
for the six months ended June 30, 2005. The increase in sales and marketing
expenses was primarily due to expenses associated with increasing international
revenues, investments in business development, and higher sales and marketing
personnel expenses.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses for the six months ended June 30,
2005 decreased $231,000 or 22.3%, to $807,000 from $1,038,000 for the six months
ended June 30, 2004. The research and development expenses as a percentage of
revenues decreased from 21.6% for the six months ended June 30, 2004 to 16.1%
for the six months ended June 30, 2005. The decrease is a result of significant
investment in the development of the gel imaging product line in 2004 as the
product was introduced in the second half of 2004.
14
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for six months ended June 30, 2005
decreased $19,000 or 2.9%, to $643,000 from $662,000 for the six months ended
June 30, 2004 due to reduction in management personnel cost and decrease in bad
debt reserve, which was offset by increase in the merger costs. The general and
administrative expenses as a percentage of revenues decreased from 13.8% for the
six months ended June 30, 2004 to 12.8% for the six months ended June 30, 2005.
LIQUIDITY AND CAPITAL RESOURCES
To date, Alpha CA has funded its operations primarily through private
sales of equity securities and borrowings. As of June 30, 2005, Alpha CA had
raised a total of $1,978,000 in convertibles notes that were converted into
redeemable convertible preferred stock in 2004, a total of $7,743,000, net of
offering costs, from the issuance of redeemable convertible preferred stock, and
a total of $122,000, net of offering costs, from the issuance of common stock.
As of June 30, 2005, Alpha CA's had $566,000 in cash and a working capital
deficit of $ 2,662,000.
At June 30, 2005, Alpha CA had the following available to it:
BFI Business Finance Line of Credit - In connection with funding of
operations and development of new products on March 9, 2004, Alpha CA
established a line of credit with BFI Business Finance ("BFI"), in which BFI
uses Alpha CA's accounts receivable as collateral to obtain advances from BFI up
to 80% of Alpha CA's accounts receivable balance at the time of the borrowing,
but with principal advances not to exceed $1,000,000. The interest rate of the
line of credit is variable, and bears interest at a rate of 3% over prime. The
interest rate as of June 30, 2005 was 9% plus a 0.50% per month administrative
fee based on the average daily outstanding balance.
Xtrana Term Loan Agreement - On December 14, 2004, Alpha CA and Xtrana
entered into a merger agreement, pursuant to which a wholly-owned subsidiary of
Xtrana will be merged with and into Alpha CA, with Alpha CA continuing after the
merger as the surviving corporation and a wholly-own subsidiary of Xtrana.
Pursuant to the terms of the merger agreement, Xtrana made a loan to Alpha CA in
the amount of $500,000 on December 16, 2004. The obligations under the loan are
secured by a second priority lien and security interest in substantially all
assets of Alpha CA. The loan bears interest at the rate of 6% per annum. This
loan and the security interest terminated upon closing of the Merger.
Loan From Alexandria - On April 8, 2005, Alpha CA secured a loan in the
amount of $1,500,000. The loan bears interest at the rate of 12.5% per annum and
the outstanding principal amount of the loan is due and payable in 30 equal
monthly installments beginning on November 1, 2005. The obligations under the
loan are secured by a second priority lien and security interest in
substantially all assets of Alpha CA.
Cash used in operating activities was $460,000 and $210,000 for the six
months ended June 30, 2005 and 2004, respectively. For the six months ended June
30, 2005 Alpha CA was able to offset cash used to fund its operating losses by
aggressively reducing accounts receivable despite a 4.3% increase in revenues
and by deferring cash payments to its vendors. For the six
15
months ended June 30, 2005 cash flows from gross margin were inadequate to cover
expenditures for sales and marketing, research and development, and general and
administrative expenses.
Cash provided by financing activities was $1,126,000 and $395,000 for
the six months ended June 30, 2005 and 2004, respectively, with borrowing
partially offset by repayments. In the six months ended June 30, 2005,
$1,500,000 million was provided from issuance of debt obligations and offset by
$375,000 of repayments of debt obligation. In the six months ended June 30,
2004, $800,000 was provided from issuance of debt obligations and $337,000 from
issuance of convertible notes, offset by $742,000 of repayments of debt
obligation.
Cash used in investing activities was $140,000 and $149,000 for the six
months ended June 30, 2005 and 2004, respectively, to purchase property and
equipment needed to support our operations.
Alpha CA rents its office facilities under an operating lease, which
expires on December 2011. The following presents our prospective future lease
payments under this agreement:
Year ending December 31:
2005 $ 441,000
2006 450,000
2007 459,000
2008 468,000
2009 478,000
Thereafter 945,000
-----------
Total minimum lease obligation $ 3,241,000
===========
Alpha CA believes that subsequent to the reverse merger it will have
sufficient cash and available borrowings to meet its operating and capital
requirements for the near term. Long-term, Alpha CA will require additional
funds to support our working capital requirements or for other purposes and may
seek to raise additional funds through public or private equity or debt
financing or from other sources. Alpha CA cannot be assured that such additional
financing will be available on acceptable terms, or at all.
If adequate funds are not available to satisfy either short- or
long-term capital requirements, Alpha CA might be required to limit its
operations significantly and its business might fail.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Alpha CA does not use derivative financial instruments in its
investment portfolio and has no foreign exchange contracts. Its financial
instruments consist of cash and cash equivalents, trade accounts receivable,
accounts payable and long-term obligations. Alpha CA considers investments in
highly liquid instruments purchased with a remaining maturity of 90 days or less
at the date of purchase to be cash equivalents. Alpha CA's exposure to market
risk for changes in interest rates relates primarily to its short-term
investments and short-term obligations; thus, fluctuations in interest rates
would not have a material impact on the fair value of these securities.
16
At June 30, 2005, Alpha CA had $566,000 in cash and cash equivalents. A
hypothetical 10% increase or decrease in interest rates would not have a
material impact on its earnings or loss, or the fair market value or cash flow
of these instruments.
EFFECTS OF RECENT ACCOUNT PRONOUNCEMENTS
In December 2004, the FASB issued SFAS No. 123 (revised 2004),
Share-based Payment ("SFAS 123(R)"). This is a revision of SFAS No. 123,
Accounting for Stock-based Compensation, and supercedes APB No. 25, Accounting
for Stock Issued to Employees ("APB 25"). As noted in Alpha CA's stock based
compensation accounting policy described above, Alpha CA generally does not
record compensation expense for employee stock options. Under SFAS 123(R), Alpha
CA will be required to measure the cost of employee services received in
exchange for stock compensation, based on the grant date fair value (with
limited exceptions). That cost will be recognized over the period during which
an employee is required to provide service in exchange for the award (usually
the vesting period). The fair value for stock options will be estimated using an
option-pricing model. Excess tax benefits, as defined in SFAS 123(R), will be
recognized as an addition to paid-in capital. Under SFAS 123(R), measurement and
recognition of compensation expense related to Alpha CA's restricted stock will
be the same as APB 25. On April 14, 2005, the Securities and Exchange Commission
("SEC") announced the adoption of a rule that defers the required effective date
of SFAS 123(R). The SEC rule provides that SFAS 123(R) is now effective for
registrants as of the beginning of the first fiscal year beginning after June
15, 2005, instead of at the beginning of the first quarter after June 15, 2005.
Therefore, the required effective date of SFAS 123(R) for calendar year-end
public companies is January 1, 2006. Alpha CA is currently evaluating the impact
of this statement on its consolidated financial statements.
In November 2004, FASB issued SFAS 151, Inventory Cost. This statement
amends Accounting Research Bulletin No. 43, Chapter 4, Inventory Pricing, to
clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs and wasted material (spoilage). The provision of the statement is
effective for inventory costs incurred during fiscal years beginning after June
15, 2005. Alpha CA is currently evaluating the impact of this statement on its
consolidated financial statements.
In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.
FIN 46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46 is
effective immediately for all new variable interest entities created or acquired
after January 31, 2003. For variable interest entities created or acquired prior
to February 1, 2003, the provisions of FIN 46 must be applied for the first
interim or annual period beginning after June 15, 2003. Alpha CA does not have
any ownership in any variable interest entities as of December 31, 2003. Alpha
CA will apply the consolidation requirement of FIN 46 in future periods if it
should own any interest in a variable interest entity.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity. SFAS
No. 150 establishes standards for how an issuer classifies and measures
financial instruments with characteristics of both debt and equity and requires
an issuer to classify the following instruments as liabilities in its balance
sheet: (1) a financial instrument issued in the form of shares that is
mandatorily redeemable and embodies an unconditional obligation that requires
the issuer to redeem it by transferring its assets at a specific or determined
date or upon an event that is certain to occur; (2)
17
a financial instrument, other than an outstanding share, that embodies an
obligation to replace the issuer's equity shares, or is indexed to such
obligation, and requires the issuer to settle the obligation by transferring
assets; and (3) a financial instrument that embodies an unconditional obligation
that the issuer must settle by issuing a variable number of equity shares if the
monetary value of the obligation is based solely or predominantly on (a) a fixed
monetary amount, (b) variations in something other than fair value of the
issuer's equity shares, or (c) variations inversely related to changes in the
fair value of the issuer's equity shares.
In November 2003, the FASB issued FASB Staff Position No. 150-3, which
deferred the effective dates of applying certain provisions of SFAS No. 150
related to mandatorily redeemable financial instruments of certain nonpublic
entities and certain mandatorily redeemable noncontrolling interests for public
and nonpublic entities.
For public entities, SFAS No. 150 is effective for mandatorily
redeemable financial instruments entered into or modified after May 31, 2003 and
is effective for all other financial instruments as of the first interim period
beginning after June 15, 2003.
For mandatorily redeemable noncontrolling interests that would not have
to be classified as liabilities by a subsidiary under the exception in paragraph
9 of SFAS No. 150, but would be classified as liabilities by the parent, the
classification and measurement provisions of SFAS No. 150 are deferred
indefinitely. For other mandatorily redeemable noncontrolling interests that
were issued before November 5, 2003, the measurement provisions of SFAS No. 150
are deferred indefinitely. For those instruments, the measurement guidance for
redeemable shares and noncontrolling interests in other literature shall apply
during the deferral period.
The adoption of SFAS No. 150 did not have any impact on Alpha CA's
consolidated financial statements.
18
MANAGEMENT OF ALPHA INNOTECH CORP.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information, as of June 30, 2005,
regarding those individuals who will serve as directors and executive officers
of the surviving corporation after the Merger.
NAME AGE POSITION
---- --- --------
Michael D. Bick, Ph.D. 60 Director
James H. Chamberlain 57 Director
Nagesh Mhatre, Ph.D. 72 Director
Haseeb Chaudhry 39 Chief Executive Officer and Director
Darryl Ray, Ph.D. 53 President, acting Chief Financial Officer,
Chief Operating Officer and Director
William Snider 35 Director
MICHAEL D. BICK, PH.D., previously has served as Chairman of Board of
Xtrana from July 1993 until the closing of the Merger. Dr. Bick also served as
Chief Executive Officer from August 1991 until August 2000 and President from
January 1996 until August 2000. In 1988, Dr. Bick founded Xtrana's former
subsidiary, MeDiTech, and was President and Chief Executive Officer thereof
until it was acquired by Biopool in January 1992. Prior to that date, he was
co-founder and president of a privately held medical device firm for ten years.
Dr. Bick received a Ph.D. in molecular biology from the University of Southern
California in 1971 and was affiliated with the Harvard Medical School and
Children's Hospital Medical Center in Boston carrying out research in human
genetics from 1971 to 1974. Dr. Bick was a staff member of the Roche Institute
of Molecular Biology from 1974 to 1978. Dr. Bick has served on the Board of
Counselors of the School of Pharmacy, University of Southern California, is a
Charter Member of the Keiretsu Forum of Southern California and a Director of
VCBio.
JAMES H. CHAMBERLAIN was appointed as the interim Chief Executive
Officer and Chief Financial Officer of Xtrana in March 2004 and served in that
position until the closing of the Merger. Since November 2000, Mr. Chamberlain
has served as a director of the West Virginia University Foundation. Mr.
Chamberlain founded BioSource International, Inc., a Nasdaq National Market
System company dedicated to the research, development, manufacturing, and
marketing of biomedical products to the diagnostic and research markets, in
1989. Mr. Chamberlain retired as a director of BioSource and as its Chairman,
President, and Chief Executive Officer in 2000. Prior to BioSource, Mr.
Chamberlain was the Manager of Business Development for Amgen, Inc. Mr.
Chamberlain also serves on the Boards of Directors of Marligen and Cerionx, both
private companies in the biotechnology industry. Mr. Chamberlain received a B.S.
degree in biology and chemistry from West Virginia University in 1969 and
completed an M.B.A. Executive Program at Pepperdine University in 1981.
HASEEB CHAUDHRY, co-founded Alpha CA and became its director and Chief
Executive Officer in 1992. Mr. Chaudhry has over 14 years of experience in
strategic planning, business development, sales and marketing and managing
technology and application development. Prior to founding Alpha CA, Mr. Chaudhry
was involved with a start-up biotech company, American
19
Synthesis, where he sold and marketed customized oligonucleotides, reagents,
chemicals and scientific instruments. Mr. Chaudhry has participated in various
start-up ventures in retail, industrial services and international training. He
holds a B.A. degree in Genetics from the University of California, Berkeley.
DARRYL RAY, PH.D., co-founded Alpha CA and became its director,
President and Chief Operations Officer in 1992 and Acting Chief Accounting
Officer in 2005. Prior to founding Alpha CA, Dr. Ray was Director of Technical
Affairs at American Synthesis, overseeing Quality Assurance of the
oligonucleotides manufacturing facility and actively leading the development of
a variety of new instruments for Life Science research. Prior to American
Synthesis, Dr. Ray was involved in the development of diagnostic, R&D, and
research instruments at American Bionetics (ABN) and Hoefer Scientific
Instruments (now Harvard Bioscience). Dr. Ray received his B. S. degree in
biology from California State Polytechnic University, Pomona and his Ph.D.
degree in Cell Biology from the University of California, Santa Barbara.
NAGESH S. MHATRE, PH.D. has been a director of Alpha CA and the
Executive Chairman since 2001. Dr. Mhatre is currently an executive chairman of
BioImagene. Dr. Mhatre has over 40 years of senior management experience in
international medical technology companies, including Miles Laboratories (Bayer,
AG.) and Becton Dickinson & Company. While at Becton Dickinson, he served for 13
years as corporate vice president and president of its Immunocytometry Systems
Division. Prior to this, he was for three years President of Becton Dickinson
Laboratory Products, Europe, in Grenoble, France. At Miles Laboratories, he
served for four years as managing director, Miles-Yeda, in Rehovot, Israel, a
joint venture with the Weizmann Institute of Science. Dr. Mhatre has been a
member of the Boards of Governors of Silicon Valley Capital Club, Heidelberg
International Club, San Francisco, CA. and Friends of Weizmann Institute of
Science. He serves as a Trustee on the Board of World Affairs Council, San
Francisco. Dr. Mhatre is a charter member and membership chair (1998-9) of The
Indus Entrepreneur-TiE Silicon Valley. Dr. Mhatre received his B.S. degree from
Bombay University, India, an M.S. degree from Oregon State University and a
Ph.D. degree in biochemistry/microbiology from Rutgers University.
WILLIAM SNIDER, CFA has been a member of Alpha CA's board of directors
since 2002. Mr. Snider is a general partner and co-founder of Emerging
Technology Partners, LLC. Prior to ETP he was a mutual fund portfolio manager at
T. Rowe Price. Mr. Snider joined T. Rowe Price in 1991 after attending the
Wharton School. Shortly thereafter he became the youngest vice president and
portfolio manager in the firm's 60+ year history. His responsibilities included
managing $2 billion of mutual fund and institutional client portfolios.
BOARD OF DIRECTORS AND COMMITTEES
The board of directors will consist of six members immediately
following the consummation of the Merger. The board of directors has an audit
committee, consisting of Michael Bick and William Snider. The audit committee
will oversee the work of the surviving corporation's auditors with respect to
financial and accounting matters.
20
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding ownership of the
Common Stock as of October 4, 2005 by (a) each person known to Alpha CA to own
more than 5% of the outstanding shares of the Common Stock based on the
9,725,811 shares outstanding on October 4, 2005, (b) each continuing director of
Alpha CA, (c) Alpha CA's Chief Executive Officer and each other executive
officer named in the compensation tables appearing later in this document and
(d) all directors and executive officers as a group. The information in this
table is based solely on statements in filings with the Securities and Exchange
Commission (the "SEC") or other reliable information.
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP(2) OF CLASS
-------------------------------------- ----------------------- --------
5% SHAREHOLDERS
Biotechnology Development Fund II 1,839,717 18.92%
c/o BioAsia Management Investment
575 High Street, Suite 201
Palo Alto, CA 94301
ETP/FBR Venture Capital, LLC 1,379,788 14.19%
1901 Research Blvd., Suite 350
Rockville, MD 20850
E-Health Holdings Limited 976,380 9.18%
15/F, Suite 1502, Chinachem Golden
Plaza, 77 Mody Rd., Tsimshatsui East
Kowloon, Hong Kong
OFFICERS AND DIRECTORS
Haseeb Chaudhry(3) 1,338,115 13.49%
Darryl Ray 1,338,115 13.49%
Nagesh S. Mhatre 164,650 1.67%
Michael D. Bick 109,295 1.11%
James H. Chamberlain 17,400 *
William Snider 5,715 *
Lewis Chapman 4,286 *
All Directors and Executive Officers
as a group (5 people) 2,977,575 28.75%
*Less than 1%.
(1) Unless otherwise indicated, the address of each of the named
individuals is c/o Alpha Innotech Corp., 2401 Merced Street, San
Leandro, California 94577.
(2) Beneficial ownership of shares is determined in accordance with the
rules of the SEC and generally includes any shares over which a person
exercises sole or shared voting or investment power, or of which a
person has the right to acquire ownership within 60 days after October
4, 2005. Except as otherwise noted, each person or entity has sole
voting and investment power with respect to the shares shown.
(3) Held by Haseeb and Chloe Chaudhry Family Revocable Trust.
21
EXECUTIVE COMPENSATION
The following tables and descriptive materials set forth information
concerning compensation earned for services rendered to Alpha CA by the Chief
Executive Officer (the "CEO") and Alpha CA's next two most highly compensated
executive officers for fiscal year 2004 whose salary and bonus for the fiscal
year 2004 exceeded $100,000. Collectively, together with the CEO, these are the
"Named Executive Officers".
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION SECURITIES
---------------------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER OPTIONS
---------------------------- ---- ----------- ------- ---------- -------
Haseeb Chaudhry, Chief
Executive Officer 2004 $100,000.08 535,473(2)
2003 $101,282.20 $175.00
2002 $138,461.70
Darryl Ray, President
2004 $100,000.08 535,473(2)
2003 $101,282.20 $175.00
2002 $138,461.70
Lewis Chapman,VP - Sales and
Marketing (1) 2004 $114,333.20 $22,036.90
(1) Includes $22,036.90 in commissions. Mr. Chapman joined Alpha CA on
April 15, 2004.
(2) Each Mr. Ray and Mr. Chaudhry received a warrant to purchase 535,473
(or 61,120 post-merger) shares of common stock with a purchase price of
$0.01 (or $0.087 post-merger) per share.
OPTIONS/EXECUTIVE OFFICERS
No stock options were granted to the Named Executive Officers during
fiscal year 2004.
AGGREGATED OPTION EXERCISES AND OPTION VALUES TABLE
The following table shows information concerning the exercise of stock
options by each of the Named Executive Officers during fiscal 2004, and the
value of all remaining exercisable and unexercisable options at December 31,
2004, on a pre-tax basis.
22
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE 12/31/04 AT 12/31/04 (1)
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------------- ----------- -------- ----------- ------------- ----------- -------------
Haseeb Chaudhry, Chief
Executive Officer 0 0 42,005 18,001 0 0
----------- -------- ----------- ------------- ----------- -------------
Darryl Ray, President 0 0 42,005 18,001 0 0
----------- -------- ----------- ------------- ----------- -------------
Lewis Chapman,VP - Sales
and Marketing 0 0 0 0 0 0
----------
(1) Based on the closing price of the common stock as reported on the OTC
Bulletin Board at October 4, 2005, less the exercise price, multiplied
by the number of shares underlying the option (the number of shares
reflect the 10 to 1 stock split and the merger exchange conversion
ratio of 0.1142909).
EMPLOYMENT AGREEMENTS
An Employment Agreement was executed between Alpha CA and Haseeb
Chaudhry dated May 11, 2001 and amended March 28, 2005 which provides for an
annual base salary of $100,000, participation in the management bonus plan based
on the company's achievement of certain revenue milestones for each of the
fiscal years 2005, 2006 and 2007. In the event of termination without cause,
death, disability or voluntary resignation within six months of a significant
reduction in the level of duties, responsibilities or job description, the
company is required to pay Mr. Chaudhry a severance payment equal to his annual
base salary.
An Employment Agreement was executed between the Alpha CA and Darryl
Ray dated May 11, 2001 and amended March 28, 2005 which provides for an annual
base salary of $100,000, participation in the management bonus plan based on the
company's achievement of certain revenue milestones for each of the fiscal years
2005, 2006 and 2007. In the event of termination without cause, death,
disability or voluntary resignation within six months of a significant reduction
in the level of duties, responsibilities or job description, the company is
required to pay Mr. Ray a severance payment equal to his annual base salary.
SECTION 3 - SECURITIES AND TRADING MARKETS
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES.
Reference is made to the disclosure set forth under Item 2.01 of this
Current Report on Form 8-K, which disclosure is incorporated herein by
reference.
The issuance of our securities to the former securityholders of Alpha
CA in the Merger was exempt from registration under the Securities Act pursuant
to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. We
made this determination based on the representations of the Alpha CA
shareholders which included, in pertinent part, that such shareholders were
acquiring the securities for investment purposes for their own respective
accounts and not as nominees or agents, and not with a view to the resale or
distribution thereof, and that each member understood that the securities may
not be sold or otherwise disposed of without registration under the Securities
Act or an applicable exemption therefrom. There were a total of 32 shareholders
of Alpha CA that received shares of our common stock in the Merger. In
23
addition, 15 of such shareholders represented to us that they were "accredited
investors" within the meaning of Rule 501 of Regulation D promulgated under the
Securities Act. We provided all such shareholders, including those shareholders
who may not qualify as accredited investors, the information required to be
furnished under Rule 502(b) of the Securities Act and received confirmation from
such shareholders that they had received and been given an opportunity to review
such information.
ITEM 3.03 MATERIAL MODIFICATION TO RIGHTS OF SECURITY HOLDERS.
Reference is made to the disclosure set forth under Items 2.10 and 5.03
of this Current Report on Form 8-K, which disclosure is incorporated herein by
reference.
As a result of the closing of the Merger, the former shareholders of
Alpha CA own 83% of the total outstanding shares of our capital stock and 83%
total voting power of all our outstanding voting securities.
On October 3, 2005, we amended our certificate of incorporation to
effect a reverse stock split pursuant to which each ten outstanding shares of
our common stock was exchanged for one new share our common stock. We also
changed our corporate name from Xtrana, Inc. to Alpha Innotech Corp. The reverse
stock split and name change were effective on the OTC Bulletin Board as of
October 6, 2005, and our common stock is now quoted on the OTC Bulletin Board
under the symbol "APNO." Our Certificate of Incorporation, as amended, is filed
with this report as Exhibits 3.1 and 3.1.1.
SECTION 5 - CORPORATE GOVERNANCE AND MANAGEMENT
ITEM 5.01 CHANGES IN CONTROL OF REGISTRANT.
Reference is made to the disclosure set forth under Item 2.01 of this
Current Report on Form 8-K, which disclosure is incorporated herein by
reference.
As a result of the closing of the Merger, the former shareholders of
Alpha CA own 83% of the total outstanding shares of our capital stock and 83%
total voting power of all our outstanding voting securities.
ITEM 5.02 DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF
DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS.
In connection with the closing of the Merger (as described in Item 2.01
of this Current Report on Form 8-K), as of October 3, 2005, James H. Chamberlain
resigned as our Chief Executive Officer and Chief Financial Officer and Douglas
L. Ayer, John C. Gerdes, James B. Mahony and N. Price Paschall resigned as
members of our Board of Directors.
On October 3, 2005, in connection with the closing of the Merger,
Haseeb Chaudhry was appointed as our Chief Executive Officer, Darryl Ray, Ph.D.,
was appointed as our President, Chief Operating Officer and Acting Chief
Financial Officer.
On October 3, 2005, in connection with the closing of the Merger, the
following persons were appointed as members of our Board of Directors: Haseeb
Chaudhry, Darryl Ray, Ph.D., Nagesh Mahtre, PhD, and William Snider.
24
For certain biographical and other information regarding the newly
appointed officers and directors, see the disclosure under Item 2.01 of this
Current Report on 8-K, which disclosure is incorporated herein by reference.
ITEM 5.03 AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN
FISCAL YEAR.
On October 3, 2005, we amended our certificate of incorporation to:
o change our corporate name from Xtrana, Inc. to Alpha Innotech
Corp.; and
o effect a reverse stock split pursuant to which each ten
outstanding shares of our common stock was exchanged for one
new share our common stock.
The corporate name change and reverse stock split were effective on the
OTC Bulletin Board as of October 6, 2005, and our common stock is now quoted on
the OTC Bulletin Board under the symbol "APNO."
Our Certificate of Incorporation, as amended, is filed with this report
as Exhibits 3.1 and 3.1.1.
SECTION 9 - FINANCIAL STATEMENTS AND EXHIBITS
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
The Audited Consolidated Financial Statements of Alpha CA as of and for
the years ended December 31, 2004 and 2003, are incorporated herein by
reference to Appendix C of the Xtrana, Inc. Definitive Proxy Statement
on Schedule 14A as filed with Securities and Exchange Commission on
August 12, 2005.
The unaudited consolidated interim financial statements of Alpha CA as
of and for the six months ended June 30, 2005 are attached to this
report as Exhibit 99.2 and incorporated herein by reference.
(b) PRO FORMA FINANCIAL INFORMATION.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial statements
give effect to the reverse acquisition of Alpha CA by Xtrana and are based on
the estimates and assumptions set forth herein and in the notes to such
statements.
On December 14, 2004, Xtrana and Alpha CA entered into the Merger
Agreement. The closing of the transactions contemplated under the Merger
Agreement occurred on October 3, 2005. The following has occurred:
o Immediately prior to the completion of the proposed reverse
acquisition, Xtrana effected a reverse stock split pursuant to
which ten shares of Xtrana's outstanding common stock were
exchanged for one new share of common stock resulting in
approximately 1,653,000 shares being outstanding.
25
o Each share of Alpha CA common and preferred stock issued and
outstanding at the closing of the merger was converted into
shares of the newly issued Xtrana common stock (approximately
8,073,000 shares).
o Xtrana's wholly-owned subsidiary AIC Merger Corporation merged
with and into Alpha CA.
o Alpha CA is the surviving corporation.
o The separate existence of Xtrana and AIC Merger Corporation
ended.
o Xtrana changed its name to Alpha Innotech Corp.
The transaction has been accounted for as a reverse acquisition and a
recapitalization. Alpha CA is the acquirer for accounting purposes.
The following unaudited pro forma consolidated financial information
gives effect to the above. The unaudited pro forma financial information was
prepared from (1) Xtrana's audited historical financial statements included in
Xtrana's Form 10-KSB for the year ended December 31, 2004, (2) Xtrana's
unaudited historical financial statement included in Xtrana's 10-QSB for the
period ended June 30, 2005, (3) Alpha CA's audited historical financial
statements for the year ended December 31, 2004 included in Appendix C of
Xtrana's Definitive Proxy Statement on Schedule 14A, and (4) Alpha CA's
unaudited historical financial statements as of and for the period ended June
30, 2005.
The unaudited pro forma consolidated balance sheet at June 30, 2005
assumes the effects of the above took place as of June 30, 2005.
The unaudited pro forma consolidated statement of operations combines
the historical statement of operations of Xtrana and Alpha CA for the twelve
months ended December 31, 2004. The unaudited pro forma consolidated statement
of operations combines the historical statement of operations of Xtrana and
Alpha CA for the period ended June 30, 2005. The unaudited pro forma
consolidated statements of operations assume that the effects of the above took
place as of January 1, 2004.
The unaudited pro forma consolidated financial information is presented
for illustrative purposes only and is not necessarily indicative of the
operating results or financial position that would have occurred if the
transaction had been consummated at the dates indicated, nor is it necessarily
indicative of the future operating results of financial position of the
consolidated companies.
26
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of June 30, 2005 (in thousands)
Historical Pro Forma
-------------------- --------------------------------------------------
Alpha Conversion
Innotech Xtrana Of Restate
Corporation Inc. Preferred Merger Capital Consolidated
-------- -------- -------- -------- -------- --------
ASSETS
Current assets:
Cash and cash equivalents .......... $ 566 $ 2,124 $ -- $ -- $ -- $ 2,690
Accounts receivable, net ........... 1,261 -- -- -- -- 1,261
Inventory, net ..................... 799 -- -- -- -- 799
Prepaid expenses and other
current assets .................. 110 39 -- -- -- 149
-------- -------- -------- -------- -------- --------
Total current assets ........... 2,736 2,163 -- -- -- 4,899
Property and equipment, net ............. 1,243 -- -- -- -- 1,243
Other assets ............................ 75 -- -- -- -- 75
-------- -------- -------- -------- -------- --------
Total assets ....................... $ 4,054 $ 2,163 $ -- $ -- $ -- $ 6,217
======== ======== ======== ======== ======== ========
LIABILTIIES, REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND SHAREHOLDERS'
EQUITY
Current liabilities:
Accounts payable ................... $ 1,918 $ 14 $ -- $ -- $ -- $ 1,932
Accrued liabilities ................ 1,092 98 -- -- -- 1,190
Debt ............................... 1,635 -- -- (2) (500) -- 1,135
Deferred revenue ................... 586 -- -- -- -- 586
Other liabilities .................. 167 -- -- -- -- 167
-------- -------- -------- -------- -------- --------
Total current liabilities ...... 5,398 112 -- (500) -- 5,010
-------- -------- -------- -------- -------- --------
Debt, less current portion .............. 1,100 -- -- -- -- 1,100
Commitments and contingencies ........... -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Redeemable convertible preferred stock:
Series A preferred stock ........... 10,610 -- (1) (10,610) -- -- --
Series A-1 preferred stock ......... 2,272 -- (1) (2,272) -- -- --
-------- -------- -------- -------- -------- --------
Total redeemable convertible
preferred stock ............. 12,882 -- (12,882) -- -- --
-------- -------- -------- -------- -------- --------
Shareholders' equity:
Common stock ....................... 1,148 165 (1) 12,882 (2) (165)(3) (13,933) 97
Additional paid-in capital ......... -- 19,446 -- (2) (16,895)(3) 13,933 16,484
Accumulated deficit ................ (16,474) (18,574) -- (2) 18,574 -- (16,474)
Retained earnings during development
stage ........................... -- 1,014 -- (2) (1,014) -- --
-------- -------- -------- -------- -------- --------
Total shareholders' equity ..... (15,326) 2,051 12,882 500 -- 107
-------- -------- -------- -------- -------- --------
Total liabilities, redeemable
convertible preferred stock
and shareholders' equity .. $ 4,054 $ 2,163 $ -- $ -- $ -- $ 6,217
======== ======== ======== ======== ======== ========
27
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2005
(in thousands)
Historical Pro Forma
-------------------- --------------------------------------------------
Alpha Conversion
Innotech Xtrana Of Restate
Corporation Inc. Preferred Merger Capital Consolidated
-------- -------- -------- -------- -------- --------
Revenue:
Products ........................... $ 5,018 $ -- $ -- $ -- $ -- $ 5,018
-------- -------- -------- -------- -------- --------
Total revenues ................. 5,018 -- -- -- -- 5,018
Cost of sales:
Products ........................... 2,773 -- -- -- -- 2,773
-------- -------- -------- -------- -------- --------
Total cost of sales ............ 2,773 -- -- -- -- 2,773
-------- -------- -------- -------- -------- --------
Gross profit .............. 2,245 -- -- -- -- 2,245
-------- -------- -------- -------- -------- --------
Operating expenses:
Sales and marketing ................ 2,428 -- -- -- -- 2,428
Research and development ........... 807 -- -- -- -- 807
General and administrative ......... 643 264 -- (2) (264) -- 643
-------- -------- -------- -------- -------- --------
Total operating expenses ....... 3,878 264 -- (264) -- 3,878
-------- -------- -------- -------- -------- --------
Loss from operations ...... (1,633) (264) -- 264 -- (1,633)
Other income (expense):
Interest expense ................... (159) -- -- -- -- (159)
Other income (expense), net ........ (5) 22 -- (2) (22) -- (5)
-------- -------- -------- -------- -------- --------
Total other income (expense) ... (164) 22 -- (22) -- (164)
-------- -------- -------- -------- -------- --------
Net Loss .................. (1,797) (242) -- 242 -- (1,797)
Accretions on preferred stock ........... (428) -- (1) 428 -- -- --
-------- -------- -------- -------- -------- --------
Net loss applicable to common
stockholders .................... $ (2,225) $ (242) $ 428 $ 242 $ -- $ (1,797)
======== ======== ======== ======== ======== ========
Basic and diluted net loss per share .... $ (0.28) $ (0.15) -- -- -- $ (0.18)
======== ======== ======== ======== ======== ========
Number of shares used in computing
basic and diluted net loss per share . 8,073 1,653 -- -- -- 9,726
======== ======== ======== ======== ======== ========
28
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year ended December 31, 2004
(in thousands)
Historical Pro Forma
-------------------- --------------------------------------------------
Alpha Conversion
Innotech Xtrana Of Restate
Corporation Inc. Preferred Merger Capital Consolidated
-------- -------- -------- -------- -------- --------
Revenue:
Products ............................ $ 10,511 $ -- $ -- $ -- $ -- $ 10,511
Grants .............................. -- 102 -- (2) (102) -- --
-------- -------- -------- -------- -------- --------
Total revenues .................. 10,511 102 -- (102) -- 10,511
Cost of sales:
Products ............................ 5,378 -- -- -- -- 5,378
Grants .............................. -- 79 -- (2) (79) -- --
-------- -------- -------- -------- -------- --------
Total cost of sales ............. 5,378 79 -- (79) -- 5,378
-------- -------- -------- -------- -------- --------
Gross profit ............... 5,133 23 -- (23) -- 5,133
-------- -------- -------- -------- -------- --------
Operating expenses:
Sales and marketing ................. 3,925 -- -- -- -- 3,925
Research and development ............ 1,963 99 -- (2) (99) -- 1,963
General and administrative .......... 1,968 1,492 -- (2) (1,492) -- 1,968
-------- -------- -------- -------- -------- --------
Total operating expenses ........ 7,856 1,591 -- (1,591) -- 7,856
-------- -------- -------- -------- -------- --------
Loss from operations ....... (2,723) (1,568) -- 1,568 -- (2,723)
Other income (expense):
Interest expense .................... (574) -- -- -- -- (574)
Other income (expense), net ......... (1) 16 -- (2) (16) -- (1)
Reserve for loss on note receivable . -- (500) -- (2) 500 -- --
Gain on sale of intellectual property -- 3,310 -- (2) (3,310) -- --
-------- -------- -------- -------- -------- --------
Total other income (expense) .... (575) 2,826 -- (2,826) -- (575)
-------- -------- -------- -------- -------- --------
Net Loss ................... (3,298) 1,258 -- (1,258) -- (3,298)
Accretions on preferred stock ............ (704) -- (1) 704 -- -- --
-------- -------- -------- -------- -------- --------
Net loss applicable to common
stockholders ..................... $ (4,002) $ 1,258 $ 704 $ (1,258) $ -- $ (3,298)
======== ======== ======== ======== ======== ========
Basic and diluted net loss per share ..... $ (0.50) $ (0.76) -- -- -- $ (0.34)
======== ======== ======== ======== ======== ========
Number of shares used in computing basic
and diluted net loss per share ........ 8,072 1,653 -- -- -- 9,725
======== ======== ======== ======== ======== ========
29
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
1. Accounting treatment applied as a result of the merger
The transaction is being accounted for as a reverse acquisition and
recapitalization. Alpha CA is the acquirer for accounting purposes. Xtrana is
the issuer. The historical financial statements for the periods prior to the
acquisition become those of the acquirer. In a recapitalization, historical
stockholders' equity of the acquirer prior to the merger is retroactively
restated for the equivalent number of shares received in the merger after giving
effect to any difference in par value of the issuer's and acquirer's stock with
an offset to additional paid-in capital. Accumulated deficit of the acquirer is
carried forward after the acquisition. Operations prior to the merger are those
of the accounting acquirer. Earnings per share for the periods prior to the
merger are restated to reflect the equivalent number of shares outstanding.
2. Shares issued and outstanding prior to the merger, as of June 30, 2005,
were as follows:
Xtrana:
Common Stock 16,533,269
Alpha CA:
Series A Redeemable Convertible Preferred Stock 10,533,334
Series A-1 Redeemable Convertible Preferred Stock 7,343,418
Common Stock 23,180,587
3. The following is a reconciliation of the shares used in calculating the
per share information as of June 30, 2005:
Type Original Number
Of Shares Conversion Of
Entity Stock Outstanding Factor Shares
--------------- ---------- ----------- ---------- -----------
Xtrana Common 16,533,269 .10 1,653,327
-----------
Alpha CA Series A 10,533,334 .3033634 3,195,428
Alpha CA Series A-1 7,343,418 .3033634 2,227,724
Alpha CA Common 23,180,587 .1142909 2,649,330
-----------
Alpha CA 8,072,482
-----------
Total 9,725,809
===========
30
4. The following is a reconciliation of the shares used in calculating the
per share information as of December 31, 2004:
Type Original Number
Of Shares Conversion Of
Entity Stock Outstanding Factor Shares
--------------- ----------- ----------- ---------- ------------
Xtrana Common 16,533,269 .10 1,653,327
-----------
Alpha CA Series A 10,533,334 .3033634 3,195,428
Alpha CA Series A-1 7,343,418 .3033634 2,227,724
Alpha CA Common 23,177,526 .1142909 2,648,980
-----------
Alpha CA 8,072,132
-----------
Total 9,725,459
===========
5. Adjustments to the unaudited pro forma consolidated balance sheet
The adjustments to the unaudited pro forma consolidated balance sheet
as of June 30, 2005 have been calculated as if the reverse acquisition
occurred on that date and are as follows:
(1) To reflect the conversion of Alpha CA's preferred stock into
Xtrana's common stock.
(2) To reflect the conversion of Alpha CA's common stock into
Xtrana's common stock, the elimination of intercompany
transactions, and the reverse acquisition.
(3) To reflect the revised amounts for common stock and additional
paid-in capital subsequent to the reverse acquisition.
6. Adjustments to the unaudited pro forma consolidated statement of
operations
The adjustments to the unaudited pro forma consolidated statements of
operations for the periods ended December 31, 2004 and June 30, 2005
have been calculated as if the merger occurred as of January 1, 2004
and are as follows:
(1) To eliminate accretion on preferred stock.
(2) To eliminate the operations of Xtrana, which will not be
supported after the reverse acquisition.
(c) EXHIBITS.
See the Exhibit Index following the signature page of this Current
Report on Form 8-K for a list of the exhibits filed herewith.
31
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.
XTRANA, INC.
Date: October 7, 2005 By: /S/ HASEEB CHAUDHRY
---------------------------------
Haseeb Chaudhry
Chief Executive Officer
32
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------------------------
2.1 Agreement and Plan of Merger dated as of December 14, 2004, by and
among Xtrana, Inc., AIC Merger Corp. and Alpha Innotech
Corporation. (Incorporated by reference to the Registrant's
Current Report Form 8-K filed on December 17, 2004)
2.1.1 Amendment No. 1 to Agreement and Plan of Merger dated as of
December 14, 2004, by and among Xtrana, Inc., AIC Merger Corp. and
Alpha Innotech Corporation. (Incorporated by reference to the
Registrant's Current Report Form 8-K filed on April 12, 2005)
2.1.2 Amendment No. 2 to Agreement and Plan of Merger dated as of
December 14, 2004, by and among Xtrana, Inc., AIC Merger Corp. and
Alpha Innotech Corporation. (Incorporated by reference to the
Registrant's Current Report Form 8-K filed on July 11, 2005)
2.1.3 Amendment No. 3 to Agreement and Plan of Merger dated as of
December 14, 2004, by and among Xtrana, Inc., AIC Merger Corp. and
Alpha Innotech Corporation. (Incorporated by reference to the
Registrant's Current Report Form 8-K filed on August 26, 2005)
3.1 Certificate of Incorporation
3.1.1 Certificate of Amendment to Certificate of Incorporation
10.1* Alpha Innotech Corporation 1999 Stock Option Plan
10.2* Alpha Innotech Corporation 2001 Management Incentive Plan
10.3* Employment Agreement between Alpha Innotech Corporation and Mr.
Chaudhry dated as of May 11, 2001.
10.4* Amendment to Employment Agreement between Alpha Innotech
Corporation and Mr. Chaudhry dated as of April 6, 2005.
10.5* Employment Agreement between Alpha Innotech Corporation and Mr.
Ray dated as of May 11, 2001.
10.6* Amendment to Employment Agreement between Alpha Innotech
Corporation and Mr. Ray dated as of April 6, 2005
10.7 Secured Promissory Note issued to Alexandria Finance, LLC dated
April 8, 2005
10.8 Loan and Security Agreement with BFI Business Finance dated March
9, 2004
21.1 Subsidiaries.
99.1 Press Release dated October 4, 2005 announcing closing of the
Merger.
99.2 Unaudited consolidated interim financial statements of Alpha
Innotech Corporation as of and for the three and six months ended
June 30, 2005.
*Management contract.
33