-----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, Bsy/P/+pcHwEVamVpyGllI/72DJSpVR8VONkjKcXZBa6mlQe6DHa/Ba7L6JqZeQM L84hoY2j7hhoAFSb/gKhGQ== 0000950116-96-001440.txt : 19961216 0000950116-96-001440.hdr.sgml : 19961216 ACCESSION NUMBER: 0000950116-96-001440 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961001 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961213 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMPLETE MANAGEMENT INC CENTRAL INDEX KEY: 0001002063 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT CONSULTING SERVICES [8742] IRS NUMBER: 113149119 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-14356 FILM NUMBER: 96680188 BUSINESS ADDRESS: STREET 1: 254 W 31ST ST CITY: NEW YORK STATE: NY ZIP: 10004 BUSINESS PHONE: 2128681188 MAIL ADDRESS: STREET 1: 254 WEST 31ST STREET CITY: NEW YORK STATE: NY ZIP: 10001-2813 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM 8-K/A 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 1, 1996 --------------- COMPLETE MANAGEMENT, INC. (Exact name of Registrant as specified in its charter) NEW YORK 0-27260 11-3149119 - ----------------------------- ------------------- --------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 254 West 31st Street, New York, New York 10001-2813 - -------------------------------------------------------------------------------- (Address of principal executive office) (Zip Code) (212) 868-1188 - -------------------------------------------------------------------------------- Registrant's telephone number, including area code: N/A - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. Financial Statements of Business Acquired: The financial statements of Advanced Alliance Management Corp. listed on page F-2 hereof. Pro Forma Financial Information: The unaudited pro forma combined financial statements of Complete Management, Inc. and its subsidiaries listed on page PFF-1 hereof. INDEX TO FINANCIAL STATEMENTS
Page -------- ADVANCED ALLIANCE MANAGEMENT CORP. Report of Independent Public Accountants ......................................................... F-2 Consolidated Balance Sheets as of December 31, 1994, 1995, and September 30, 1996 (Unaudited) .... F-3 Consolidated Statements of Income for the years ended December 31, 1994 and 1995 and for the nine month periods ended September 30, 1995 and 1996 (Unaudited) ................................... F-4 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1994 and 1995 and for the nine month period ended September 30, 1996 (Unaudited) ................................ F-5 Consolidated Statements of Cash Flows for the year ended December 31, 1994 and 1995 and the nine month periods ended September 30, 1995 and 1996 (Unaudited) ................................... F-6 Notes to Consolidated Financial Statements ....................................................... F-7 COMPLETE MANAGEMENT, INC. Explanatory note ................................................................................. PFF-1 Unaudited Pro Forma Combined Balance Sheet as at September 30, 1996 .............................. PFF-2 Unaudited Pro Forma Combined Statements of Income for the year ended December 31, 1995 and for the nine month period ended September 30, 1996 ..................................................... PFF-3
F-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of Advanced Alliance Management Corp.: We have audited the accompanying balance sheets of Advanced Alliance Management Corp. (a New York corporation) as of December 31, 1994 and 1995, and the related statements of income, stockholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We 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 Advanced Alliance Management Corp. as of December 31, 1994 and 1995, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP New York, New York October 18, 1996 F-2 ADVANCED ALLIANCE MANAGEMENT CORP. BALANCE SHEETS AS OF DECEMBER 31, 1994, 1995 AND SEPTEMBER 30, 1996 (UNAUDITED)
December 31, September 30, ------------------------- --------------- 1994 1995 1996 ---------- ----------- --------------- (Unaudited) Assets Current assets: Cash and Cash Equivalents (Note 2) ...................... $ -- $ 73,234 $ -- Accounts Receivable: Others ............................................. 161,402 220,356 843,486 Related Parties .................................... 109,071 189,444 442,467 Note Receivable from Stockholder (Note 7) ............... -- 30,500 7,625 Prepaid Expenses ........................................ 17,500 8,108 -- ---------- ----------- --------------- Total Current Assets .......................... 287,973 521,642 1,293,578 Note Receivable from Stockholder, less current portion .. -- 30,500 -- Property and Equipment (Note 3) ......................... 279,470 395,438 432,555 Less: Accumulated Depreciation .......................... (82,435) (157,619) (220,768) ---------- ----------- --------------- Property and Equipment, Net ................... 197,035 237,819 211,787 Management Agreement .................................... -- -- 2,025,254 Other Assets ............................................ 9,972 9,972 11,972 ---------- ----------- --------------- TOTAL ASSETS .................................. $494,980 $ 799,933 $3,542,591 ========== =========== =============== Liabilities and stockholders' equity Current liabilities: Accounts Payable: Others ............................................. $ 37,537 $ 127,470 $ 957,267 Related Parties .................................... 37,689 14,489 -- Accrued Expenses ........................................ 93,702 43,875 593,751 Due to Related Parties .................................. -- -- 443,809 Note Payable to Stockholder (Note 6) .................... -- 40,664 -- Current Portion of Capital Lease Obligations (Note 4) ... 43,578 48,905 35,390 ---------- ----------- --------------- Total Current Liabilities ..................... 212,506 275,403 2,030,217 Capital Lease Obligations, less current portion (Note 4) 129,766 80,861 63,481 ---------- ----------- --------------- TOTAL LIABILITIES ............................. 342,272 356,264 2,093,698 Common Stock, no par value, 200 shares authorized, 40 shares issued and outstanding as of December 31, 1994; and 45 shares issued and outstanding as of December 31, 1995; and 59 shares issued and outstanding as of September 30, 1996 (Unaudited) ........................ 78,000 139,000 2,164,254 Retained Earnings (Deficit) ............................. 74,708 365,669 (715,361) ---------- ----------- --------------- 152,708 504,669 1,448,893 Less: Treasury Stock, at cost, 0 shares as of December 31, 1994; and 5 shares as of December 31, 1995; and 0 shares as of September 30, 1996 (Unaudited) (Note 6) .. -- (61,000) -- ---------- ----------- --------------- 152,708 443,669 1,448,893 ---------- ----------- --------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........................ $494,980 $ 799,933 $3,542,591 ========= =========== ===============
The accompanying notes are an integral part of the financial statements. F-3 ADVANCED ALLIANCE MANAGEMENT CORP. STATEMENTS OF INCOME FOR THE YEARS DECEMBER 31, 1994, 1995 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 (UNAUDITED)
December 31, Nine Months Ended September 30, ---------------------------- ------------------------------ 1994 1995 1995 1996 ------------ ------------ ------------ -------------- (Unaudited) Revenue Others ................................. $1,869,759 $2,645,692 $2,213,812 $ 2,468,953 Related parties ........................ 3,434,798 3,884,525 2,900,407 3,112,034 ------------ ------------ ------------ -------------- 5,304,557 6,530,217 5,114,219 5,580,987 ------------ ------------ ------------ -------------- Cost of Revenue ............................. 3,442,932 3,905,168 2,919,932 4,712,530 General and Administrative expenses ......... 1,632,777 2,128,860 1,843,117 1,722,071 Expenses paid to related parties ............ 174,356 193,880 64,604 116,798 ------------ ------------ ------------ -------------- 5,250,065 6,227,908 4,827,653 6,551,399 ------------ ------------ ------------ -------------- Operating income (loss) ..................... 54,492 302,309 286,566 (970,412) Other expense ............................... 15,368 -- -- 63,770 Interest expense ............................ 14,009 10,803 7,309 6,848 ------------ ------------ ------------ -------------- Income (loss) before provision of income tax 25,115 291,506 279,257 (1,041,030) Provision of income tax ..................... 492 545 -- -- ------------ ------------ ------------ -------------- Net income (loss) ........................... $ 24,623 $ 290,961 $ 279,257 $(1,041,030) ============ ============ ============ ============== Net income (loss) per share ................. $ 456 $ 5,595 $ 5,476 $ (17,949) Weighted Average number of shares outstanding ............................... 54 52 51 58 Pro forma information (unaudited): Net income (loss) (historical) ......... $ 24,623 $ 290,961 $ 279,257 $(1,041,030) Pro forma adjustments -- income taxes .. 41,000 120,000 115,172 -- ------------ ------------ ------------ -------------- Pro forma net (loss) income ............ $ (16,377) $ 170,961 $ 164,085 $(1,041,030) ============ ============ ============ ============== Pro forma (loss) earnings per share .... $ (303) $ 3,287 $ 3,217 $ (17,949) Pro forma weighted average number of shares outstanding ................... 54 52 51 58 ============ ============ ============ ==============
The accompanying notes are an integral part of the financial statements. F-4 ADVANCED ALLIANCE MANAGEMENT CORP. STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED)
Common Stock Treasury Stock Number Number Retained of Shares Amount of Shares Amount Earnings/Deficit Total ----------- ------------ ----------- ----------- ---------------- ------------- Balance at December 31, 1993 ..... 40 $ 78,000 $ $ 50,085 $ 128,085 Net income for the year ended December 31, 1994 ............... -- -- -- -- 24,623 24,623 ----------- ------------ ----------- ----------- ---------------- ------------- Balance at December 31, 1994 ..... 40 $ 78,000 -- -- 74,708 152,708 Purchase of Treasury Stock ....... -- (5) (61,000) -- (61,000) Issuance of Common Stock ......... 5 61,000 -- -- -- 61,000 Net Income for the year ended December 31, 1995 ............... -- -- -- -- 290,961 290,961 ----------- ------------ ----------- ----------- ---------------- ------------- Balance at December 31, 1995 ..... 45 $ 139,000 (5) $(61,000) $ 365,669 $ 443,669 Issuance of Common Stock (Unaudited) ..................... 5 61,000 -- -- -- 61,000 Retirement of Treasury Stock (Unaudited) ..................... (5) (61,000) 5 61,000 -- -- Issuance of Common Stock in exchange for management agreement (unaudited) ..................... 14 2,025,254 -- -- -- 2,025,254 Dividends (unaudited) ............ -- -- -- -- (40,000) (40,000) Net loss for the nine months ended September 30, 1996 (unaudited) .. -- -- -- -- (1,041,030) (1,041,030) ----------- ------------ ----------- ----------- ---------------- ------------- Balance at September 30, 1996 (unaudited) ..................... 59 $2,164,254 -- $ -- $ (715,361) $ 1,448,893 =========== ============ =========== =========== ================ =============
The accompanying notes are an integral part of the financial statements. F-5 ADVANCED ALLIANCE MANAGEMENT CORP. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 (UNAUDITED)
Year Ended December 31, Nine Months Ended September 30, ------------------------- ------------------------------ 1994 1995 1995 1996 ---------- ----------- ----------- --------------- (Unaudited) Operating Activities Net Income ............................. $ 24,623 $ 290,961 $ 279,257 $ (1,041,030) Adjustments to reconcile net income to net cash provided operating activities: Depreciation ...................... 34,063 75,184 52,500 63,149 Loss on sale of property .......... 15,368 -- -- -- Changes in operating assets and liabilities: Accounts receivable ............. (16,473) (139,327) (262,982) (876,153) Prepaid expenses ................ (17,500) 9,392 (10,974) 8,108 Other Assets .................... (6,648) -- 9,972 (2,000) Accounts payable ................ (11,446) 66,733 50,974 815,308 Accrued expenses ................ (666) (49,827) 4,099 549,876 Due to related parties .......... -- -- -- 443,809 ---------- ----------- ----------- --------------- Net cash provided by (used in) operating activities ........................... 21,321 253,116 122,846 (38,933) Investing activities Purchases of property and equipment .... -- (115,968) (44,818) (37,117) Proceeds from note receivable .......... -- -- -- 73,711 ---------- ----------- ----------- --------------- Net cash provided by (used in) investing activities ........................... -- (115,968) (44,818) 36,594 ---------- ----------- ----------- --------------- Financing activities Payment of note payable to a stockholder -- (20,336) (7,626) -- Dividends Paid ......................... -- -- -- (40,000) Principal payment under capital lease obligations .......................... (22,792) (43,578) (24,638) (30,895) ---------- ----------- ----------- --------------- Net cash used in financing activities .. (22,792) (63,914) (32,264) (70,895) ---------- ----------- ----------- --------------- Net (decrease) increase in cash ........ (1,471) 73,234 45,764 (73,234) Cash and cash equivalents at the beginning of the period .............. 1,471 -- -- 73,234 ---------- ----------- ----------- --------------- Cash and cash equivalents at the end of the period ........................... $ 0 $ 73,234 $ 45,764 $ 0 ========== =========== =========== =============== Supplemental disclosures of cash flow information Cash paid during the period for: Interest .......................... $ 14,654 $ 13,868 $ 7,309 $ 6,848 Taxes ............................. 475 492 492 498 Noncash activities: Investment in Capital Lease ....... $ 68,500 $ -- $ -- $ -- Note payable to stockholder ....... -- 61,000 61,000 -- Note receivable from stockholder .. -- 61,000 61,000 20,336 Issuance of stock in exchange for management agreement ............ -- -- -- 2,025,254
The accompanying notes are an integral part of the financial statements. F-6 ADVANCED ALLIANCE MANAGEMENT CORP. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) 1. DESCRIPTION OF BUSINESS Advanced Alliance Management Corp. ("AAMC" or the "Company") was incorporated on July 15, 1988 in the state of New York. The Company was formed for the purpose of offering practice management services to Northern Metropolitan Radiology Associates, P.C. ("NMRA"), an entity under common ownership, which provides expertise in various radiological subspecialties including, but not limited to: neuroradiology, mammography, and interventional, pediatric and nuclear radiology. Presently, the Company offers a variety of practice management and other services to its hospital and physician-group client base. These services include: billing and collection, transcription, provision of ultrasound, x-ray and nuclear medicine technicians, mobile x-ray services, non-medical personnel staffing, OSHA compliance and credentialling. 2. SIGNIFICANT ACCOUNTING POLICIES Revenue Recognition Revenues are recognized when services are rendered for all but billing and collection services. Revenue earned from billing and collection services rendered are recognized only upon the collection of the customers' accounts receivable balance by AAMC. Property and Equipment Medical equipment, office furniture and computer equipment are depreciated on the straight-line basis over the estimated useful lives of the assets (generally 5 years). Cash and Cash Equivalents The Company considers all highly liquid financial instruments with a maturity of three months or less, when purchased, to be cash equivalents. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Income Taxes Income taxes are determined under the liability method as required by Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). Under SFAS 109 deferred tax assets and liabilities are determined based upon differences between financial reporting and tax basis assets and liabilities. Recently Issued Accounting Standards During March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting for the Impairment of Long Lived Assets and for Long Lived Assets to Be Disposed Of." This statement establishes financial accounting and reporting standards for the impairment of long lived assets, certain identifiable intangibles, and goodwill related to those assets to be held and used, and for long lived assets and certain identifiable intangibles to be disposed of. SFAS 121 is effective for financial statements for fiscal years beginning after December 15, 1995, although earlier application is encouraged. The Company does not expect that the adoption of SFAS 121 will have a material effect on its financial statements. Earnings Per Share Earnings per share are computed using the weighted average number of common shares outstanding. F-7 ADVANCED ALLIANCE MANAGEMENT CORP. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) 3. PROPERTY AND EQUIPMENT Property and equipment consist of the following at December 31, 1994 and 1995:
1994 1995 ---------- ----------- Medical equipment ............. $270,898 $ 369,172 Office furniture .............. 1,506 15,375 Computer equipment ............ 7,066 10,891 ---------- ----------- 279,470 395,438 Less: accumulated depreciation (82,435) (157,619) ---------- ----------- Property and equipment, net ... $197,035 $ 237,819 ========== ===========
4. CAPITAL LEASE OBLIGATIONS The Company leases medical and other equipment under capital leases expiring through November 1998. At December 31, 1995, future minimum lease payments including interest at 11% to 12% annually, were as follows:
Year ended December 31, ---------------------- 1996 ............................. $ 61,248 1997 ............................. 61,248 1998 ............................. 26,288 ---------- 148,784 Less: Amount representing interest (19,018) ---------- $129,766
5. OPERATING LEASE OBLIGATIONS The Company leases medical and other equipment under operating leases on a month-to-month basis. Medical and other equipment rental amounted to approximately $161,943 and $78,338 for the years ended December 31, 1995 and 1994, respectively. 6. TREASURY STOCK/NOTE PAYABLE TO FORMER SHAREHOLDER In March 1995, the Company purchased five shares of its previously issued stock. The purchase price of $61,000, in the form of a note, is payable in 24 equal monthly installments commencing in April 1995. At December 31, 1995, the balance due to the former shareholder was approximately $41,000. The treasury shares were then retired by the Company. Subsequent to year end, the former shareholder purchased five new shares of the Company's previously unissued common stock. As consideration for these shares, the balance of the note payable due to the shareholder was forgiven and a note approximating $20,000 was provided to the Company. 7. NOTES RECEIVABLE FROM RELATED PARTY In July 1995, five shares of the Company's unissued common stock was sold to an unrelated party for $61,000. The consideration received for the shares was in the form of a note due in 24 equal monthly payments commencing in July 1995. Subsequent to December 31, 1995, the repayment terms of the note were modified to commence in January 1996. At December 31, 1995, the entire $61,000 face amount of the note was due. F-8 ADVANCED ALLIANCE MANAGEMENT CORP. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) 8. PROFIT-SHARING PLAN All eligible employees of the Company who meet certain requirements with respect to age and years of service are covered under the NMRA Profit-Sharing Plan and Trust. AAMC's contributions to the plan are determined annually by the Board of Directors. The Company made no contributions and $56,702 to the plan for the years ended December 31, 1995 and 1994, respectively. 9. RELATED PARTY TRANSACTIONS Sales to NMRA and its divisions and subsidiaries under common ownership totaled approximately $3,885,000 or 59% of total sales and approximately $3,435,000 or 63% of total sales for the years ended December 31, 1995 and 1994, respectively. The Company leases its office space, on a month-to-month basis, from Northern Metropolitan Service Corporation ("NMSC"), a related party. During the year ended December 31, 1994, the Company paid no rent expense to NMSC. Rent expense for the year ended December 31, 1995 was approximately $82,000. Certain operating expenses of the Company are paid to a related party. Such operating expenses amounted to $193,880 and $174,356 for the years ended December 31, 1995 and 1994, respectively. As described in Note 8, the employees of the Company are covered under the NMRA Profit Sharing Plan and Trust. 10. INCOME TAXES Commencing July 15, 1988, the Company elected to be treated as a Subchapter S Corporation and use the cash method of accounting under applicable sections of the Internal Revenue Code for federal income tax purposes. In addition, the Company elected to be treated for New York State and New Jersey State income tax purposes as a Subchapter S Corporation. As such, in lieu of corporate income taxes, the shareholders of the Company report their proportionate share of the Company's income or loss on their personal income tax returns. Consequently, no provision is made for federal income taxes and a statutory minimum provision is made for state income taxes. Immediately after the transfer of ownership discussed in Note 12, the Company will no longer be treated as a Subchapter S Corporation or be eligible to use the cash method of accounting. The accompanying consolidated financial statements reflect a provision for income taxes on a pro forma basis as if the Company was liable for federal, state and local income taxes as an accrual basis taxable corporate entity throughout the years presented. The proforma adjustments reflected in the income statement for the year ended December 31, 1994 includes a $30,000 income tax liability which would have resulted due to the change from the cash to the accrual method of accounting and from a nontaxable to taxable entity as of January 1, 1994. The pro forma income taxes represent the liability which would have occurred if the Company was a taxable entity from January 1, 1994. The following summarizes pro forma income taxes provision: Pro forma income tax adjustment:
For the year ended For the year ended ------------------ ------------------ 1994 1995 ------------------ ------------------ Current Federal .............. $30,000 $ 89,000 State ................ 11,000 31,000 ------------------ ------------------ Total income tax provision $41,000 $120,000
F-9 ADVANCED ALLIANCE MANAGEMENT CORP. NOTES TO FINANCIAL STATEMENTS - (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) 10. INCOME TAXES - (Continued) The pro forma provision for income taxes differs from the amounts computed by applying federal statutory rates due to the following:
For the year ended For the year ended ---------------------- ---------------------- 1994 1995 ----- ----- Pro forma provision computed at the federal statutory rate ................................ 34.0% 34.0% Pro forma state income taxes, net of federal tax benefit ....................................... 7.5% 7.5% ----- ----- Total .......................................... 41.5% 41.5%
11. GOVERNMENT REGULATION The healthcare industry is highly regulated. Requirements pertaining to the ownership, operation and acquisition of medical equipment and the provision of medical practice management services vary from state to state, including licensing regulations, third-party payor regulations, corporate practice of medicine, fee splitting, physician self-referral, anti-kickback laws and regulations in certain jurisdictions requiring certificates of need for certain types of "healthcare facilities" and "major medical equipment". 12. SUBSEQUENT EVENTS On October 2, 1996, the Company was acquired by Complete Management, Inc. ("CMI") for approximately $8.5 million of consideration (the "Acquisition"). CMI, a New York corporation, provides comprehensive management services primarily to high volume medical practices in New York State. These services include development, administration and leasing of medical offices and equipment, staffing and supervision of non-medical personnel, accounting, billing and collection, and development and implementation of practice growth and marketing strategies. Directly prior to the Acquisition, in September 1996, the Company issued 3.5 shares to each of four shareholders of NMRA for a nominal amount, and, entered into a formal 30 year management agreement with NMRA. As a result of these series of transactions, approximately $2.0 million has been assigned to the management agreement and will be amortized over a period not to exceed 20 years. The value assigned to the management agreement is based upon the fair value per share of the Company's outstanding common stock based upon the Acquisition price. 13. UNAUDITED INTERIM PERIODS PRESENTED The interim consolidated financial statements for the nine months periods ended September 30, 1995 and 1996 are unaudited. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for the fair presentation have been included. Operating results for the nine months period ended September 30, 1996 are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. 14. SIGNIFICANT EVENTS (UNAUDITED) During September 1996, the Company paid substantially all of its employees (approximately 183 persons) a bonus aggregating approximately $473,646 for past services. Such amount has been charged to operations. F-10 UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION EXPLANATORY NOTE The Unaudited Pro Forma Combined Balance Sheet of CMI at September 30, 1996 and the Unaudited Pro Forma Combined Statements of Income of CMI for the year ended December 31, 1995 and the nine months ended September 30, 1996 which are set forth below, give effect to all of the acquisitions consummated through November 15, 1996, consisting of the MMI Merger, the AAMC Merger and the Other Acquisitions, based upon the assumptions set forth below, and in the notes to such statements. These acquisitions have each been accounted for as a "purchase." However, because CMI and MMI have a common control group, that portion of the assets of MMI attributable to such control group, approximately 39.0% of total assets, was acquired at a carryover historical basis. The excess of purchase price over the value of the remaining net assets acquired as if these acquisitions occurred on December 31, 1995, is estimated at approximately $21,843,000, and will be amortized over various periods based upon appraisals and valuations by qualified independent parties. A period of 20 years has been assumed for the amortization, for the purpose of the pro forma financial statements. The unaudited pro forma financial statements reflect amortization expense of such excess in the amount of $1,092,000 for the year ended December 31, 1995. The unaudited pro forma combined financial information assumes that (i) the AAMC Merger and the Other Post 9/30/96 Acquisition were completed at September 30, 1996 for the Unaudited Pro Forma Combined Balance Sheet as of September 30, 1996, (ii) the MMI Merger, the AAMC Merger and Other Acquisitions were completed at January 1, 1995 for the Unaudited Pro Forma Combined Statement of Income for the year ended December 31, 1995, and (iii) the AAMC Merger and Other Acquisitions were completed at January 1, 1996 for the Unaudited Pro Forma Combined Statement of Income for the nine month period ended September 30, 1996. The unaudited pro forma financial information has been included pursuant to the requirements set forth in applicable rules of the SEC and is provided for comparative purposes only. The unaudited pro forma financial information presented is based upon the respective historical consolidated financial statements of CMI and the acquired companies and should be read in conjunction with such financial statements and related notes thereto to the extent included in this document. The Company believes that the accompanying unaudited pro forma combined financial information contains all the material adjustments necessary to fairly present the financial position of CMI as of December 31, 1995. The unaudited pro forma financial information presented does not purport to be indicative of the financial position or operating results which would have been achieved had the acquisitions taken place at the dates indicated and should not be construed as representative of the Company's financial position or results of operations for any future date or period. The unaudited pro forma adjustments are based on available information and upon certain assumptions that the Company believes are reasonable under the circumstances; however, the actual recording of the acquisitions will be based on ultimate appraisals, evaluations and estimates of fair values. If these appraisals and evaluations identify assets with lives shorter than 20 years, such assets will be amortized over their expected useful lives. Periodically, but no less than quarterly, the Company will evaluate the relative fair market value of the intangible assets identified (including goodwill, if any) in its acquisitions by estimating the future earning streams of the related business lines and comparing the present value of the result of that estimation to the stated value of the related assets. Impairments, if any, will be charged to operations when identified. PFF-1 UNAUDITED PRO FORMA COMBINED BALANCE SHEET AS AT SEPTEMBER 30, 1996 (IN THOUSANDS)
Pro forma Combined Actual ------------------------------- ---------------------- CMI, AAMC & Other Post 9/30/96 CMI AAMC Adjustments Acquisition ---------- -------- ------------- -------------- (1) Cash and cash equivalents .................. $ 11,792 $ -- $(5,290)(2) $ 6,502 Marketable securities ...................... 25,177 -- 25,177 Notes receivable from related party -- current ................................... 1,953 8 1,961 Accounts receivable -- current, net ........ 16,436 1,286 17,722 Other current assets ....................... 1,998 -- 1,998 ---------- -------- ------------- -------------- Total current assets ..................... 57,356 1,294 (5,290) 53,360 Notes receivable from related party -- non-current .............................. 67 -- 67 Accounts receivable -- non-current, net .... 23,172 -- 23,172 Marketable securities held to maturity -- non-current .............................. 674 -- 674 Property and equipment, net ................ 6,544 212 6,756 Purchase price in excess of net assets acquired ................................. 12,068 -- 9,444(3) 21,512 Deferred & debt issuance costs ............. 4,692 2,025 6,717 Other long-term assets ..................... 635 12 647 ---------- -------- ------------- -------------- Total assets .......................... $105,208 $3,543 $ 4,154 $112,905 ========== ======== ============= ============== Notes payable .............................. $ -- $ -- $ -- $ -- Accounts payable and accrued expenses ...... 1,845 1,551 3,396 Income taxes payable ....................... 2,354 -- 2,354 Due to clients, related parties ............ -- 444 444 Deferred income taxes -- current ........... 5,103 -- 5,103 Current portion of long-term debt .......... 317 -- 317 Current portion of obligations under capital leases ................................... 522 35 557 ---------- -------- ------------- -------------- Total current liabilities ............. 10,141 2,030 -- 12,171 Deferred income taxes -- non-current ....... 5,165 -- 5,165 Long-term debt, less current portion ....... 398 -- 398 Obligations under capital leases ........... 1,567 64 1,631 Convertible subordinated debt .............. 45,250 -- 45,250 Minority interest .......................... -- -- -- Common stock ............................... 8 2,164 (2,164)(4) 8 Paid-in capital ............................ 31,687 -- 5,603 (5) 37,290 Retained earnings .......................... 10,992 (715) 715 (4) 10,992 ---------- -------- ------------- -------------- Total shareholders' equity ............... 42,687 1,449 4,154 48,290 ---------- -------- ------------- -------------- Total liabilities and shareholders' equity . $105,208 $3,543 $ 4,154 $112,905 ========== ======== ============= ============== Working Capital ............................ $ 47,215 $ (736) $ 41,189 ========== ======== ==============
- ------ (1) Reflects the AAMC Merger in which the Company paid $4,034,000 and 286,000 Common Shares with a market value of $4,501,000. Such acquisition has been accounted for as a purchase. (2) Reflects the cash portion of the consideration paid in the AAMC Merger and the Other Post 9/30/96 Acquisition. (3) Reflects the effect of the AAMC Merger and the Other Post 9/30/96 Acquisition, which acquisitions were made after September 30, 1996. The aggregate purchase price of the AAMC Merger and the Other Post 9/30/96 Acquisition was $15,699,000, which was in excess of the aggregate net assets acquired in the amount of $13,168,000. The excess purchase price is assumed to have a life of 20 years. (4) Reflects the elimination of the shareholder's equity from the AAMC Merger and the Other Post 9/30/96 Acquisition. (5) Reflects the adjustments to increase paid-in capital arising from the issuance of Common Shares in connection with the AAMC Merger and the Other Post 9/30/96 Acquisition. PFF-2 UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA)
For the Nine Months Ending September 30, 1996 ------------------------------------------------------------------------------- CMI AAMC Other Acquisitions Adjustments Pro forma --------- ---------- ------------------ ------------- ---------------- (7) (6) (1) Revenue ................................. $20,030 $ 5,581 $1,787 $ -- $27,398 Interest discount (2) ................... (1,748) -- -- (1,748) --------- ---------- ------------------ ------------- ---------------- Net revenue ............................. 18,282 5,581 1,787 -- 25,650 Cost of revenue ......................... 6,598 4,721 1,526 12,845 General and administrative expenses ..... 4,869 1,830 308 494(4) 7,501 --------- ---------- ------------------ ------------- ---------------- Operating income ........................ 6,815 (970) (47) (494) 5,304 Interest discount included in income (3) 1,855 -- -- 1,855 Other income/(expense) .................. (1,142) (71) (10) (1,223) --------- ---------- ------------------ ------------- ---------------- Income before provision for income taxes 7,528 (1,041) (57) (494) 5,936 Provision for taxes ..................... 3,613 -- 1 (517)(5) 3,097 --------- ---------- ------------------ ------------- ---------------- Net income .............................. $ 3,915 $(1,041) $ (58) $ 23 $ 2,839 ========= ========== ================== ============= ================ Primary net income per share ............ $ 0.50 $ 0.35 ========= ================ Fully diluted net income per share ...... $ 0.42 $ 0.30 ========= ================ Weighted average number of shares outstanding ............................ 7,840 8,198 ========= ================ Pro forma income taxes (5) .............. 340 340 ------------------ ---------------- Pro forma net income .................... $ (398) $ 2,499 ================== ================
For the Year Ended December 31, 1995 ---------------------------------------------------------------------------------------- CMI MMI AAMC Other Acquisitions Adjustments Pro forma --------- -------- -------- ------------------ ------------- --------------- (6) (1) Revenue ..................... $12,294 $7,287 $6,530 $3,224 $ -- $29,335 Interest discount (2) ....... (2,017) (702) -- -- (2,719) --------- -------- -------- ------------------ ------------- --------------- Net revenue ................. 10,277 6,585 6,530 3,224 -- 26,616 Cost of revenue ............. 2,771 2,792 3,905 2,160 11,628 General and administrative expenses ................... 2,974 2,382 2,323 851 1,092(4) 9,622 --------- -------- -------- ------------------ ------------- --------------- Operating income ............ 4,532 1,411 302 213 (1,092) 5,366 Interest discount included in income (3) ................. 1,585 651 -- -- 2,236 Other income/(expense) ...... (29) (170) (11) (3) (213) --------- -------- -------- ------------------ ------------- --------------- Income before provision for income taxes ............... 6,088 1,892 291 210 (1,092) 7,389 Provision for taxes ......... 2,861 889 -- 1 234(5) 3,985 --------- -------- -------- ------------------ ------------- --------------- Net income .................. $ 3,227 $1,003 $ 291 $ 209 $(1,326) $ 3,404 ========= ======== ======== ================== ============= =============== Primary net income per share $ 1.08 $ 0.33 $ 0.43 ========= ======== =============== Fully diluted net income per share ...................... $ -- $ 0.29 $ -- ========= ======== =============== Weighted average number of shares outstanding ......... 2,981 3,035 7,964 ========= ======== =============== Pro forma income taxes (5) .. 131 305 436 -------- ------------------ --------------- Pro forma net income (loss) . $ 160 $ (96) $ 2,968 ======== ================== ===============
- ------ (1) Reflects the AAMC Merger and the Other Acquisitions as if they had occurred at the beginning of each year and includes the MMI Merger at January 1, 1995. (2) Represents an interest discount taken to reflect the presumed collection of revenues over a period in excess of one year. See "Notes to Consolidated Financial Statements of CMI." (3) Represents interest income included in income as a result of the amortization over three and two year periods of the interest discount on revenues for CMI and MMI, respectively. See "Notes to Consolidated Financial Statements of CMI and MMI." PFF-3 (4) Reflects the amortization of purchase price in excess of net assets acquired recorded at approximately $21,843,000 in 1995 assuming a useful life of 20 years. In 1996, MMI is consolidated with CMI. (5) Pro forma net income reflects a provision for income taxes since certain acquisitions had been S Corporations before being acquired by CMI. Such provision assumes an effective tax rate of 47%. (6) The adjustments are based on available information and certain assumptions that the Company believes are reasonable under the circumstances; however, the actual recording of the MMI Merger, AAMC Merger and the Other Acquisitions (which recording management does not expect to vary materially) will be based on independent appraisals, evaluations and estimates of fair values. (7) Included in general and administrative expenses are bonuses aggregating approximately $474,000 paid to substantially all AAMC employees for past services. PFF-4 -----END PRIVACY-ENHANCED MESSAGE-----