-----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, SVVjW4E+jfHsz5Y7VHkRHeRkl4ER9tuVGhmxe5k0heVRjiKcGCFgiNCvAmc2o1WL VXLDqBaigr9LXDvz088XzA== 0000849145-97-000015.txt : 19970912 0000849145-97-000015.hdr.sgml : 19970912 ACCESSION NUMBER: 0000849145-97-000015 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970605 ITEM INFORMATION: FILED AS OF DATE: 19970904 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDCROSS INC CENTRAL INDEX KEY: 0000849145 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEDICAL LABORATORIES [8071] IRS NUMBER: 592291344 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-17973 FILM NUMBER: 97675555 BUSINESS ADDRESS: STREET 1: 13751 S WADSWORTH PK DR STREET 2: STE 200 CITY: DRAPER STATE: UT ZIP: 84020 BUSINESS PHONE: 8015765000 MAIL ADDRESS: STREET 1: 3227 BENNET STREET NORTH CITY: ST PETERSBURG STATE: FL ZIP: 33713 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A-#2 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (date of earliest event reported): June 5, 1997 MEDCROSS, INC. (Exact name of registrant as specified in its charter) Florida 0-17973 59-2291344 (State or other jurisdiction (Commission File (I.R.S. Identification No.) of incorporation) Number) 3227 Bennet Street North, St. Petersburg, FL 33713 (Address of principal executive offices) Registrant's telephone number, including area code: (813) 521-1793 Item 7. Financial Statements and Exhibits (a); (b) Financial Statements; Pro Forma Financial Information The financial statements of MiBridge, Inc. and the pro forma financial information relating to the acquisition required to be filed pursuant to this item, follow. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Medcross, Inc. (Registrant) Dated: September 4, 1997 By: /s/ John W. Edwards John W. Edwards, President Chief Executive Officer /s/ Karl S. Ryser, Jr. Karl S. Ryser, Jr. Treasurer and Chief Financial Officer MiBridge, Inc. __________ Financial Statements as of December 31, 1996 and June 30, 1997 (unaudited) and for the period from inception (March 18, 1996) through December 31, 1996 and the six months ended June 30, 1997 (unaudited) Report of Independent Accountants To the Stockholder of MiBridge, Inc.: We have audited the balance sheet of Mibridge, Inc. as of December 31, 1996, and the related statements of operations, changes in stockholder's equity and cash flows for the period from the date of inception (March 18, 1996) to December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of MiBridge, Inc. as of December 31, 1996, and the results of its operations and its cash flows for the period from the date of inception (March 18, 1996) to December 31, 1996 in conformity with generally accepted accounting principles. Coopers & Lybrand L.L.P. Salt Lake City, Utah August 6, 1997
MIBRIDGE, INC. BALANCE SHEETS (unaudited) June 30, December 31, 1997 1996 ------------- ------------- ASSETS Current assets: Cash $ 165,005 $ 25,581 Accounts receivable 15,000 30,000 Costs and estimated earnings in excess of billing on uncompleted contracts 340,000 248,500 Inventory - 20,644 Prepaid expenses - 94,520 Deferred income taxes - 7,443 ---------- ---------- Total current assets 520,005 426,688 ---------- ---------- Furniture and equipment: Equipment 64,811 54,119 Office furniture 4,115 3,026 Less accumulated depreciation ( 18,751) ( 8,411) ---------- ---------- Total furniture and equipment 50,175 48,734 ---------- ---------- Capitalized software development costs, net 17,693 7,433 Intangible assets 6,750 6,750 Other assets 3,100 2,125 ---------- ---------- Total assets $ 597,723 $ 491,730 ========== ========== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Accounts payable $ - $ 2,499 Accrued liabilities 39,883 20,852 Accrued director's fee payable - 49,000 Deferred revenue 27,500 5,000 Income taxes payable 64,168 133,628 ---------- ---------- Total current liabilities 131,551 210,979 Deferred income taxes 11,952 9,696 ---------- ---------- Total liabilities 143,503 220,675 ---------- ---------- Commitments and contingencies (Note 6) Stockholder's equity: Common stock, no par value, authorized 10,000,000 shares, issued and outstanding 6,000,000 shares 1,000 1,000 Additional paid-in-capital 325,000 300,000 Deferred compensation - ( 244,445) Retained earnings 128,220 214,500 ---------- ---------- Total stockholder's equity 454,220 271,055 ---------- ---------- Total liabilities and stockholder's equity $ 597,723 $ 491,730 ========== ==========
The accompanying notes are an integral part of these financial statements 2
MIBRIDGE, INC. STATEMENTS OF OPERATIONS For the period from inception (March 18, 1996) to December 31, 1996 and for the six months ended June 30, 1997 (unaudited) (unaudited) June 30, December 31, 1997 1996 ------------- ------------- Revenues: Software sales and consulting $ 255,799 $ 290,700 Software development 241,500 528,500 ---------- ---------- Total revenues 497,299 819,200 ---------- ---------- Cost of sales: Software sales and consulting 189,020 148,812 Software development 184,987 102,042 ---------- ---------- Cost of sales 374,007 250,854 ---------- ---------- Gross Margin 123,292 568,346 ---------- ---------- Operating expenses: Selling, general and administrative 252,027 200,726 Depreciation and amortization 15,072 10,039 ---------- ---------- Total operating expenses 267,099 210,765 ---------- ---------- Net income (loss) before income taxes ( 143,807) 357,581 Income tax (provision) benefit 57,527 ( 143,081) ---------- ---------- Net income (loss) $( 86,280) $ 214,500 ========== ==========
The accompanying notes are an integral part of these financial statements 3
MIBRIDGE, INC. STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY For the period from inception (March 18, 1996) to December 31, 1996 and for the six months ended June 30, 1997 (unaudited) Additional Total Common Stock Paid-in Deferred Retained Stockholder's Shares Amount Capital Compensation Earnings Equity ----------- ----------- ----------- ------------ ----------- ----------- Balance at March 18, 1996 (inception) Original shares issued 6,000,000 $ 1,000 $ - $ - $ - $ 1,000 Stock options granted on issued shares - - 300,000 ( 300,000) - - Amortization of deferred compensation - - - 55,555 - 55,555 Net income - - - - 214,500 214,500 --------- ------- ------- -------- ------- ------- Balance at December 31, 1996 6,000,000 1,000 300,000 ( 244,445) 214,500 271,055 Stock options granted on issued shares - - 25,000 ( 25,000) - - Amortization of deferred compensation - - - 269,445 - 269,445 Net loss ( 86,280) ( 86,280) --------- ------- ------- -------- ------- ------- Balance at June 30, 1997 (unaudited) 6,000,000 $ 1,000 $ 325,000 $ - $ 128,220 $ 454,220 ========= ======= ======= ======== =======
The accompanying notes are an integral part of these financial statements 4
MIBRIDGE, INC. STATEMENTS OF CASH FLOWS For the period from March 18, 1996 (inception) to December 31, 1996 and for the six month period ending June 30, 1997 (unaudited) (unaudited) June 30, December 31, 1997 1996 ------------- ------------- Cash flows from operating activities: Net income (loss) $( 86,280) $ 214,500 Adjustments to reconcile net income to net cash Provided in operating activities: Depreciation and amortization 15,072 10,039 Amortization of deferred compensation 269,445 55,555 Deferred taxes 9,699 2,253 Increase (decrease) from changes in: Accounts receivable 15,000 ( 30,000) Costs and estimated earnings in exces of billings on uncompleted contracts ( 91,500) (248,500) Inventory 20,644 ( 20,644) Prepaid expenses 94,520 ( 94,520) Other assets ( 975) ( 2,125) Accounts payable ( 2,499) 2,499 Accrued liabilities and other payables ( 76,929) 208,480 ------- ------- Net cash provided by operating activities 166,197 97,537 ------- ------- Cash flows from investing activities: Additions to furniture and equipment ( 11,781) ( 57,145) Capitalized software development costs ( 14,992) ( 9,061) Additions to intangible assets - ( 6,750) ------- ------- Net cash used in investing activities ( 26,773) ( 72,956) ------- ------- Cash flows from financing activities: Proceeds from shareholder advance - 62,000 Repayment of shareholder advance - ( 62,000) Common stock issued - 1,000 ------- ------- Net cash provided by financing activities - 1,000 ------- ------- Increase in cash 139,424 25,581 Cash at beginning of period 25,581 - ------- ------- Cash at end of period $ 165,005 $ 25,581 ======= ======= Supplemental disclosure of cash flow information: Cash paid during the period for income taxes $ - $ 7,200 ======= =======
The accompanying notes are an integral part of these financial statements 5 MIBRIDGE, INC. NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Business Information MiBridge, Inc. (the Company), a New Jersey corporation, began operations on March 18, 1996. The Company develops communications software that supports multimedia communications (voice, fax and audio) over the public switched telephone network (PSTN), local area networks (LANs) and the Internet. The Company creates speech encoding and compression algorithms designed to produce superior audio quality and lower delay over low-bandwidth networks. The interim financial data as of June 30, 1997 and for the six-month period then ended are unaudited; however, in the opinion of management of the Company, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of operations, financial position and cash flows of the Company. Inventories Inventory consists of computer boards held for resale and is valued at the lower of actual cost or market. Cost is determined by specific identification of each unit. Furniture and Equipment Furniture and equipment are stated at cost. Depreciation is provided for financial reporting purposes using the straight-line method over the following estimated useful lives: Office equipment 3 years Furniture 5 years Maintenance and repairs, which are not considered betterments and do not extend the useful life of assets, are charged to expense as incurred. The cost and related accumulated depreciation of assets sold or retired are removed from the accounts, and any resulting gain or loss is reflected in results of operations. Intangible Assets Intangible assets include certain legal expenditures for patent filing fees relating to proprietary techniques developed by the Company. The patents are pending; therefore, no amortization of patent filing fees is reflected in the financial statements. Continued 6 MIBRIDGE, INC. NOTES TO FINANCIAL STATEMENTS, Continued 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued: Revenue Recognition Revenues are generally recognized as products are shipped or services are performed. Initial software royalties are recognized upon delivery of the master copy, as the Company is not required to provide any additional services. As minimum software usage levels are exceeded by the customer, the Company will receive additional royalties based on a per port usage. Most software is sold with maintenance contracts that cover periods from one to twelve months. Revenue related to these contracts is deferred and recognized on a straight-line basis over the term of the maintenance agreement. Certain development projects are jointly funded by a customer. Revenues on these long-term funded development contracts are recognized under the percentage of completion method of accounting and are measured based upon the level of effort expended on the project, compared to total billings allowed by the contract. Estimated contract earnings are reviewed and revised periodically as the work progresses. Estimated losses are charged against earnings in the period in which such losses are identified. In exchange for its participation in funding the project, the customer will receive joint marketing rights and a portion of future revenues from the sale of the developed technology based on a revenue sharing agreement. The amount of future revenues to be received by the customer party ranges between 20 and 55 percent and depends upon who markets the product and the terms of the specific contract. As of December 31, 1996, there were no sales of jointly developed products. Software Development Costs The Company capitalizes software development costs when the project reaches technological feasibility. Research and development costs related to software development that has not reached technological feasibility are expensed as incurred. Capitalized software development costs are amortized at the greater of the straight-line method over the expected life of the product (maximum three year period) or the ratio of current revenues for a product to the total of current and anticipated future revenues. Capitalized software development costs were $7,433 at December 31, 1996, net of accumulated amortization of $1,628. Continued 7 MIBRIDGE, INC. NOTES TO FINANCIAL STATEMENTS, Continued 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued: Income Taxes The Company records deferred taxes in accordance with the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". The Statement requires recognition of deferred tax assets and liabilities for the temporary differences between the tax bases of assets and liabilities and the amounts at which they are carried in the financial statements based upon the enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to amounts expected to be realized. Concentration of Credit Risk All of the Company's cash is held by one financial institution in New Jersey. The Company has approximately $54,000 that exceeds the FDIC insurance limits at December 31, 1996. During the period from inception to December 31, 1996 approximately 86% of the Company's revenues were related to one customer. Unbilled receivables from this customer represented approximately 51% of total assets as of December 31, 1996. Estimates 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. Continued 8 MIBRIDGE, INC. NOTES TO FINANCIAL STATEMENTS, Continued 2. LONG-TERM CONTRACT ACCOUNTING Costs and estimated earnings in excess of billings on uncompleted contracts consist of amounts of revenue recognized on contracts for which billings have not been recorded. Billings in excess of costs and estimated earnings on uncompleted contracts consist of amounts of billings recognized on contracts in excess of costs. Contract revenues and costs related to uncompleted contracts are included in the accompanying balance sheet as of December 31, 1996 under the following captions: Costs and estimated earnings in excess of billings on uncompleted contracts $ 248,500 Billings in excess of costs and estimated earnings on uncompleted contracts - ------- $ 248,500 ======= Costs incurred on long-term contracts $ 104,000 Estimated earnings 424,500 Billings to date (280,000) ------- $ 248,500 ======= 3. INCOME TAXES The income tax provision for the period since inception to December 31, 1996 consists of the following: Current federal income tax provision $ 109,094 Current state income tax provision 31,734 Deferred tax provision 2,253 ------- Income tax provision $ 143,081 ======= Continued 9 MIBRIDGE, INC. NOTES TO FINANCIAL STATEMENTS, Continued 3. INCOME TAXES, continued The reported provision for income taxes varies from the amount that would be provided by applying the statutory U.S. Federal income tax rate to income before taxes primarily because of state taxes and certain non-deductible meals and entertainment. The components of the net deferred tax asset and liability as of December 31, 1996 are as follows: Deferred tax assets: Stock award compensation expense $ 22,189 Accrued director's fees 19,970 ------- Total deferred tax asset 42,159 ======= Deferred tax liability: Excess tax depreciation ( 6,727) Capitalized software development costs ( 2,969) Prepaid salaries ( 34,716) ------- Total deferred tax liability ( 44,412) ------- Net deferred tax liability $( 2,253) ======= The net deferred tax liability as of December 31, 1996 is reflected in the balance sheet as follows: Current deferred tax asset $ 7,443 Long-term deferred tax liability ( 9,696) ------- $( 2,253) ======= 4. RELATED PARTY TRANSACTIONS During 1996, the owner of the Company advanced a total of $62,000 to the Company to fund operations. These advances were repaid during the period. During the period ended December 31, 1996, the Company had sales of $25,000 with Medcross, Inc. (see note 7). Continued 10 MIBRIDGE, INC. NOTES TO FINANCIAL STATEMENTS, Continued 5. STOCKHOLDER'S EQUITY Common Stock At the inception of the Company, the owner contributed $1,000 in exchange for 6,000,000 shares of the Company's common stock. Additional Paid in Capital - Stock Awards During the year, the sole shareholder of the Company granted certain employees options to buy shares of stock owned by the shareholder. The awards were granted to attract and retain qualified employees for the Company, and accordingly, the Company has accounted for these awards as if they had been made directly by the Company. The Company applies APB Opinion No. 25 and related interpretations in accounting for stock compensation awards. Had compensation cost for the Company's stock-based awards been determined based on fair-value at the grant date consistent with the minimum value method outlined by Statement of Financial Accounting Standard No. 123, the difference would have been insignificant. The number of options outstanding and the weighted average exercise price per option are as follows: Weighted Average Exercise Options Price ---------- ---------- Outstanding at beginning of year Granted 900,000 $0.00 ------- ------- Outstanding at end of year 900,000 $0.00 ======= ======= Options exercisable at year end - $0.00 ======= ======= The awards were granted in equal amounts in May, June and August of 1996 and vest annually over a three year period (weighted average remaining life of 2.4 years). Additional paid-in capital and deferred compensation recorded during the year represent the difference between the exercise price of the options and the value of the stock, which is based on management's best estimate of the fair value of the Company at the stock option grant date. Compensation expense is recognized on a straight-line basis over the vesting period of the options. Vesting of the awards would be accelerated should the Company be purchased. Continued 11 MIBRIDGE, INC. NOTES TO FINANCIAL STATEMENTS, Continued 6. EMPLOYMENT AGREEMENTS The Company has employment agreements with seven employees of the Company providing for a salary continuation (usually three years) in the event of termination for reasons other than cause. As of December 31, 1996, if all of the employees under contract at that date were to be terminated by the Company without cause, the Company's total future payments to these employees would be approximately $600,000. 7. ACQUISITION OF THE COMPANY BY MEDCROSS, INC. On June 5, 1997, the Company entered into a letter of intent with Medcross, Inc. (Medcross) pursuant to which the Company entered into negotiations to sell 100% of the Company's outstanding stock. A final agreement was signed on August 12, 1997, with closing anticipated in the third quarter of 1997. Under the finalized agreement, Medcross will acquire 100% of the Company's outstanding shares of common stock in exchange for 1,000 shares of Medcross Series D Preferred stock and a promissory note of $2,000,000, payable with interest in quarterly installments over the two years. The preferred shares are convertible at the option of the prior MiBridge shareholders into Medcross common stock shares equal in number to $6,250,000 divided by the lower of $9.25 or the average closing bid price of Medcross common stock for the five consecutive trading days immediately preceding the conversion date. Continued 12 MEDCROSS, INC., FAMILY TELECOMMUNICATIONS INCORPORATED AND MIBRIDGE, INC. ___________ Pro Forma Combined Financial Statements (unaudited)
MEDCROSS, INC., FAMILY TELECOMMUNICATIONS INCORPORATED (FTI) AND MIBRIDGE, INC. PRO FORMA COMBINED BALANCE SHEET as of June 30, 1997 (unaudited) Pro Forma Medcross FTI MiBridge Adjustment Pro Forma ------------- ------------- ------------- ------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 992,267 $ 184,119 $ 15,000 $ - $ 1,191,386 Accounts receivable less allowance for doubtful accounts of $1,069,389 2,417,210 2,114,740 435,000 ( 596,000) A 4,370,950 Inventory less allowance of $260,033 763,263 - - - 763,263 Certificate of deposit - restricted 198,640 - - - 198,640 Other current assets 191,461 7,613 3,000 - 202,074 ---------- ---------- ---------- ---------- ---------- Total current assets 4,562,841 2,306,472 453,000 ( 596,000) 6,726,313 ---------- ---------- ---------- ---------- ---------- Property and equipment: Property and equipment 6,090,101 1,270,857 75,000 ( 19,000) F 7,416,958 Less accumulated depreciation ( 3,046,395) ( 151,605) ( 19,000) 19,000 F ( 3,198,000) ---------- ---------- ---------- ---------- ---------- Net property and equipment 3,043,706 1,119,252 56,000 - 4,218,958 ---------- ---------- ---------- ---------- ---------- Other assets: Intangible assets, net 9,319,136 2,281,278 7,000 3,648,000 C/F 15,255,414 Certificate of deposit - restricted 1,742,711 - - - 1,742,711 Investment in FTI 2,414,583 - - ( 2,414,583) D - Other assets 83,837 40,228 21,000 - 145,065 ---------- ---------- ---------- ---------- ---------- Total other assets 13,560,267 2,321,506 28,000 1,233,417 17,143,190 ---------- ---------- ---------- ---------- ---------- Total assets $ 21,166,814 $ 5,747,230 $ 537,000 $ 637,417 $ 28,088,461 ========== ========== ========== ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 4,256,609 $ 3,501,925 $ 175,000 $( 596,000) A $ 7,337,534 Notes payable 1,045,000 - - - 1,045,000 Current portion of long-term debt 43,554 408,429 - 1,000,000 C 1,451,983 Obligations under capital lease 187,047 - - - 187,047 ---------- ---------- ---------- ---------- ---------- Total current liabilities 5,532,210 3,910,354 175,000 404,000 10,021,564 ---------- ---------- ---------- ---------- ---------- Long-term debt ( 1,592,080) 2,202,194 - 1,000,000 C 1,610,114 Obligations under capital lease 147,274 - - - 147,274 Deferred taxes - - 12,000 ( 12,000) H - Minority interest in consolidated subsidiary 299,198 - - - 299,198 ---------- ---------- ---------- ---------- ---------- Total liabilities 4,386,602 6,112,548 187,000 1,392,000 12,078,150 ---------- ---------- ---------- ---------- ---------- Commitments and contingencies Stockholders' equity: Preferred stock 2,475,000 - - 10,000 C 2,485,000 Common stock 74,393 - 1,000 ( 1,000) E 74,393 Common stock to be issued 11,289,583 - - - 11,289,583 Additional paid in capital 40,236,521 2,414,583 325,000 3,500,417 C/D/E 46,476,521 Deferred compensation ( 4,200,000) - - - ( 4,200,000) Accumulated deficit (33,095,285) ( 2,779,901) 24,000 ( 4,264,000) C/E (40,115,186) ---------- ---------- ---------- ---------- ---------- Total stockholders' equity 16,780,212 ( 365,318) 350,000 ( 754,583) 16,010,311 ---------- ---------- ---------- ---------- ---------- Total liabilities and stockholders' equity $ 21,166,814 $ 5,747,230 $ 537,000 $ 637,417 $ 28,088,461 ========== ========== ========== ========== ==========
See notes to unaudited pro forma combined financial statements 14
MEDCROSS, INC., FAMILY TELECOMMUNICATIONS INCORPORATED (FTI) AND MIBRIDGE, INC. PRO FORMA STATEMENT OF OPERATIONS for the six-month period ended June 30, 1997 (unaudited) Pro Forma Medcross FTI MiBridge Adjustment Pro Forma ------------- ------------- ------------- ------------- ------------- Revenues: Telecommunications service revenue $ - $ 4,414,825 $ - $ - $ 4,414,825 Health care service revenue 1,179,555 - - - 1,179,555 Marketing service revenue 720,490 - - - 720,490 Software sales and development - - 497,299 - 497,299 ---------- ---------- ---------- ---------- ---------- Net operating revenue 1,900,045 4,414,825 497,299 - 6,812,169 ---------- ---------- ---------- ---------- ---------- Operating costs and expenses: Telecommunications network expense 1,496,349 5,569,441 - - 7,065,790 Marketing services costs 640,739 - - - 640,739 Selling, general and administrative 3,713,197 1,312,837 630,239 - 5,656,273 Provision for doubtful accounts 158,498 345,000 - - 503,498 Depreciation and amortization 684,333 335,605 10,340 502,167 G 1,532,445 Provision for asset valuation 213,944 - - - 213,944 Research and development 269,334 76,000 - - 345,334 ---------- ---------- ---------- ---------- ---------- Total operating costs and expenses 7,176,394 7,638,883 640,579 502,167 15,958,023 ---------- ---------- ---------- ---------- ---------- Operating loss ( 5,276,349) ( 3,224,058) ( 143,280) ( 502,167) ( 9,145,854) Other income (expense): Interest expense ( 405,001) ( 15,474) - - ( 420,475) Interest and other income 141,046 1,068 - - 142,114 ---------- ---------- ---------- ---------- ---------- Total other income (expense) ( 263,955) ( 14,406) - - ( 278,361) ---------- ---------- ---------- ---------- ---------- Loss before minority interest in loss of consolidated subsidiaries ( 5,540,304) ( 3,238,464) ( 143,280) ( 502,167) ( 9,424,215) Minority interest in income of consolidated subsidiaries 29,128 - - - 29,128 ---------- ---------- ---------- ---------- ---------- Net loss before income taxes ( 5,511,176) ( 3,238,464) ( 143,280) ( 502,167) ( 9,395,087) Income tax benefit - - 57,000 ( 57,000) H - ---------- ---------- ---------- ---------- ---------- Net loss $( 5,511,176) $( 3,238,464) $( 86,280) $( 559,167) $( 9,395,087) ========== ========== ========== ========== ========== Net loss per common share after preferred dividends $( 0.57) $( 0.91) ========== ==========
See notes to unaudited pro forma combined financial statements 15
MEDCROSS, INC., FAMILY TELECOMMUNICATIONS INCORPORATED (FTI) AND MIBRIDGE, INC. PRO FORMA STATEMENT OF OPERATIONS for the year ended December 31, 1997 (unaudited) Pro Forma Medcross FTI MiBridge Adjustment Pro Forma ------------- ------------- ------------- ------------- ------------- Revenues: Health care service revenue, net $ 2,212,544 $ - $ - $ - $ 2,212,544 Network service revenue 170,532 - - - 170,532 Long distance service revenue - 3,880,457 - ( 5,026) B 3,875,431 Software sales and development - - 819,200 ( 25,000) B 794,200 ---------- ---------- ---------- ---------- ---------- Net operating revenue 2,383,076 3,880,457 819,200 ( 30,026) 7,052,707 ---------- ---------- ---------- ---------- ---------- Operating costs and expenses: Telecommunications network expense 1,120,779 3,301,890 - - 4,422,669 Costs of sales - software - - 250,854 - 250,854 Selling, general and administrative 4,977,763 1,352,732 200,726 ( 5,026) B 6,526,195 Provision for doubtful accounts 197,565 784,537 - - 982,102 Depreciation and amortization 1,094,004 150,261 10,039 959,183 G 2,213,487 Provision for asset valuation 260,033 - - - 260,033 Research and development 347,504 79,609 - ( 25,000) B 402,113 Acquired in-process research and development expenses 14,577,942 - - - 14,577,942 ---------- ---------- ---------- ---------- ---------- Total operating costs and expenses 22,575,590 5,669,029 461,619 929,157 29,635,395 ---------- ---------- ---------- ---------- ---------- Operating (loss) income (20,192,514) ( 1,788,572) 357,581 ( 959,183) (22,582,688) ---------- ---------- ---------- ---------- ---------- Other income (expense): Sales of equipment - 585,541 - ( 585,541) B - Interest expense ( 2,191,629) ( 7,524) - - ( 2,199,153) Interest income 147,322 2,109 - - 149,431 Equity in income (loss) of unconsolidated subsidiaries ( 3,211) - - - ( 3,211) Litigation settlement expense ( 821,000) - - - ( 821,000) Other ( 8,108) ( 29,429) - - ( 37,537) ---------- ---------- ---------- ---------- ---------- Total other income (expense) ( 2,876,626) 550,697 - ( 585,541) ( 2,911,470) ---------- ---------- ---------- ---------- ---------- (Loss) income before minority interest in loss of consolidated subsidiaries (23,069,140) ( 1,237,875) 357,581 ( 1,544,724) (25,494,158) Minority interest in income of consolidated subsidiaries 4,900 - - - 4,900 ---------- ---------- ---------- ---------- ---------- Net (loss) income before income taxes (23,064,240) ( 1,237,875) 357,581 ( 1,544,724) (25,489,258) Provision for income taxes - - ( 143,081) 143,081 H - ---------- ---------- ---------- ---------- ---------- Net (loss) income $(23,064,240) $( 1,237,875) $ 214,500 $( 1,401,643) $(25,489,258) ========== ========== ========== ========== ========== Net loss per common share after preferred dividends $( 6.53) $( 6.59) ========== ==========
See notes to unaudited pro forma combined financial statements 16 MEDCROSS, INC., FAMILY TELECOMMUNICATIONS INCORPORATED (FTI) AND MIBRIDGE, INC. NOTES TO THE PRO FORMA COMBINED FINANCIAL STATEMENTS (unaudited) 1. BASIS OF PRESENTATION: The unaudited pro forma combined balance sheet as of June 30, 1997 and the unaudited pro forma combined statements of operations for the six-month period ended June 30, 1997 and the year ended December 31, 1996 give effect to the acquisitions of 100% of the outstanding common stock of Family Telecommunications Incorporated (FTI) and MiBridge, Inc. (MiBridge) by Medcross, Inc. (the "Company") as if the acquisitions, accounted for under the purchase method of accounting, had occurred on the balance sheet date with respect to the balance sheet and on March 20, 1996 (date of inception of FTI) and March 18, 1996 (date of inception of MiBridge) with respect to the statements of operations. FTI was acquired by the Company effective January 1, 1997. The acquisition of MiBridge is expected to close in the third quarter of 1997. The pro forma financial statements have been prepared based upon the financial statements of the Company, MiBridge and FTI as of and for the six-month period ended June 30, 1997 and for the year ended December 31, 1996. These pro forma financial statements may not be indicative of the results that actually would have occurred if the combinations had been in effect on the dates indicated or which may be obtained in the future. The pro forma adjustments are based upon certain estimates that may change as additional information becomes available. The pro forma financial statements should be read in conjunction with the audited financial statements for the Company, MiBridge and FTI. 2. PRO FORMA ADJUSTMENTS: The pro forma adjustments reflected in the pro forma financial statements are summarized in items A to H below: A. Pro forma adjustment to eliminate $596,000 in intercompany accounts receivable and notes payable of the Company and FTI, respectively. B. Pro forma adjustment to remove the following intercompany transactions: (1) intercompany sales (between FTI and the Company) of long-distance service ($5,026), (2) intercompany sales (between MiBridge and the Company) of software ($25,000) and (3) profit on intercompany sale (between the Company and FTI) of equipment resulting in a gain to FTI of ($585,541). 17 MEDCROSS, INC., FAMILY TELECOMMUNICATIONS INCORPORATED (FTI) AND MIBRIDGE, INC. NOTES TO THE PRO FORMA COMBINED FINANCIAL STATEMENTS (unaudited) 2. PRO FORMA ADJUSTMENTS, continued: C. Pro forma adjustment reflecting the purchase by the Company of all of the outstanding common stock of MiBridge in return for issuance of 1,000 shares of Class D preferred stock of the Company and a note payable of $2,000,000: The purchase price allocations of FTI and MiBridge (estimate) are as follows:
FTI MiBridge Combined ------------ ------------ ------------ Note payable $ - $ 2,000,000 $ 2,000,000 Common stock (400,000 shares issued at $0.07 par value with a market value of $6.03 per share) 2,800 - 2,800 Preferred stock (1,000 shares issued at $10.00 par value with a total market value of $6,250,000) - 10,000 10,000 Additional paid in capital 2,411,783 6,240,000 8,651,783 ---------- ---------- ---------- Purchase price 2,414,583 8,250,000 10,664,583 ---------- ---------- ---------- Net liabilities assumed (assets acquired) 135,420 ( 355,000) ( 219,580) ---------- ---------- ---------- Excess (allocated to intangible assets, acquired in-process research and development and goodwill) $ 2,550,003 $ 7,895,000 $ 10,445,003 ========== ========== ==========
Allocation of the excess purchase price for MiBridge is anticipated to be approximately as follows: goodwill ($1,605,000), workforce in place ($600,000), completed technology ($1,450,000) and in-process research and development ($4,240,000). Goodwill is amortized over 5 years. All other intangible assets are amortized over three years. Acquired in-process research and development will be expensed at the acquisition date (expected to be in the third quarter of 1997), but is not included in the pro forma statements of operations as it represents a non-recurring charge. The allocation of excess purchase price to these intangible assets and in-process research and development is subject to final revisions which, if material, the amounts allocated to the intangible assets, specifically goodwill, may be revised. 18 MEDCROSS, INC., FAMILY TELECOMMUNICATIONS INCORPORATED (FTI) AND MIBRIDGE, INC. NOTES TO THE PRO FORMA COMBINED FINANCIAL STATEMENTS (unaudited) 2. PRO FORMA ADJUSTMENTS, continued: Allocation of excess purchase price for FTI to intangible assets is as follows: goodwill ($1,490,003), customer list ($520,000), and carrier identification code and tariff registration status ($540,000). Goodwill and carrier identification code and tariff registration status are being amortized over 10 years. The customer list is being amortized over three years. These intangible assets and related amortization are reflected in the FTI column (as of and for the six-month period ended June 30, 1997) as the acquisition was effective January 1, 1997. Accordingly, pro forma adjustments relative to the acquisition of FTI are required only for the combined statement of operations for the year ended December 31, 1996. D. The historical balance sheet of FTI as presented includes the transactions recorded at the acquisition date to give effect to the purchase price allocation. The related investment in FTI ($2,414,583) by the Company is being carried on the Company's books as "Investment in FTI" and on FTI's books as additional paid-in capital. This pro forma adjustment is provided to eliminate these intercompany accounts. E. Pro forma adjustments to remove MiBridge estimated stockholder's equity accounts as of the acquisition date as part of the purchase price allocation process. F. Pro forma adjustments to reflect the estimated effect of the purchase price allocation adjustments to property and equipment of MiBridge. G. Pro forma adjustments to record estimated amortization of intangible assets (see item C above) of MiBridge and FTI. No pro forma adjustment is required for the amortization of intangible assets of FTI for the six-month period ended June 30, 1997 as these amounts are already included in the historical amounts presented in the FTI column. H. Pro forma adjustment to reflect the impact of filing a consolidated income tax return and to eliminate the deferred tax liabilities of MiBridge as a result of the purchase price allocation. 19 MEDCROSS, INC., FAMILY TELECOMMUNICATIONS INCORPORATED (FTI) AND MIBRIDGE, INC. NOTES TO THE PRO FORMA COMBINED FINANCIAL STATEMENTS (unaudited) 3. NET LOSS PER COMMON SHARE AFTER PREFERRED DIVIDENDS: The pro forma net loss per common share for the six-month period ended June 30, 1997 is computed based on the weighted average number of common and common equivalent shares outstanding during the period (10,617,597) and assumes that the 400,000 shares to be issued in connection with the FTI acquisition were outstanding for the entire period. The pro forma net loss per common share for the year-ended December 31, 1996 is computed based on the weighted average number of common and common equivalent shares outstanding during the year (6,780,352) and assumes that the 400,000 shares to be issued in connection with the FTI acquisition were outstanding from March 20, 1996 (date of inception of FTI). Options, warrants and convertible preferred stock (as in the case of the MiBridge acquisition) are excluded from the calculation as their effect would be anti-dilutive. The net loss per common share after preferred dividends includes $577,923 and $21,223,629 of cumulative preferred stock dividends not paid for the six-month period ended June 30, 1997 and the year ended December 31, 1996, respectively. -----END PRIVACY-ENHANCED MESSAGE-----