-----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, G6CfjYzjSY/LjvIo9ty6ymRxT8IxYOM1vZcTuiqwuedYDbIxStnKUQI9aPIMOASz 3VvSmRMteses7wlQjoYQSQ== 0001047469-98-022209.txt : 19980601 0001047469-98-022209.hdr.sgml : 19980601 ACCESSION NUMBER: 0001047469-98-022209 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971231 ITEM INFORMATION: FILED AS OF DATE: 19980529 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CORE INC CENTRAL INDEX KEY: 0000880238 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 042828817 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-19600 FILM NUMBER: 98633830 BUSINESS ADDRESS: STREET 1: 18881 VON KARMAN AVE STREET 2: STE 1750 CITY: IRVINE STATE: CA ZIP: 92715 BUSINESS PHONE: 6173226400 MAIL ADDRESS: STREET 1: 18881 VON KARMAN AVE STREET 2: SUITE 1750 CITY: IRVINE STATE: CA ZIP: 92715 FORMER COMPANY: FORMER CONFORMED NAME: PEER REVIEW ANALYSIS INC DATE OF NAME CHANGE: 19930328 8-K/A 1 FORM 8-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A AMENDMENT TO CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-19600 CORE, INC. (Exact Name of Registrant as Specified in Charter) AMENDMENT NO. 1 The undersigned Registrant hereby amends the following items, financial statements, exhibits or other portions of its Current Report on Form 8-K (date of earliest event reported: March 17, 1998) as set forth in the pages attached hereto: Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this amendment to be signed on its behalf by the undersigned, hereto duly authorized. CORE, INC. Date: May 27, 1998 By: /s/ William E. Nixon ---------------------------------- William E. Nixon Chief Financial Officer, Treasurer and Executive Vice President (Duly authorized officer) 1 CORE, INC. Item 7 of the Current Report on Form 8-K (date of earliest event reported: March 17, 1998) of CORE, INC., a Massachusetts corporation, is hereby amended to read in its entirety as follows: Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (a) Financial Statements of Business Acquired. Pages F-1 through F-6 contain the audited balance sheet of Transcend Case Management, Inc. as of December 31, 1997 and the related statements of operations, accumulated deficit and cash flows for the year then ended. Pages F-7 through F-8 contain the unaudited interim statements of operations, accumulated deficit and cash flows for the period from January 1, 1998 through March 16, 1998. (b) Pro Forma Financial Information. Pages F-9 through F-12 contain the unaudited pro forma combined condensed statements of operations for the twelve months ended December 31, 1997 and the three months ended March 31, 1998. (c) Exhibits.
Exhibit Number Description - ------- ----------- 10.1 Asset Purchase Agreement, dated March 17, 1998, by and among CORE, INC., TCM Services, Inc., Transcend Case Management, Inc. and Transcend Services, Inc. (excluding exhibits and schedules). Filed as exhibit 2.4 to Registrant's Annual Report on Form 10-K, filed April 1, 1998, and incorporated herein by reference. 10.2 Registration Rights Agreement, dated March 17, 1998, between CORE, INC. and Transcend Services, Inc. Filed as exhibit 10.22 to Registrant's Annual Report on Form 10-K, filed April 1, 1998, and incorporated herein by reference. 10.3 Asset Purchase Agreement dated June 14, 1997, by and among CORE, INC., SSDC Corp., Social Security Disability Consultants Limited Partnership, Disability Services, Inc., DSI Medicare Consultants, Inc., R. Gary Dolenga and Phylis M. Dolenga, including Amendment No. 1 to Asset Purchase Agreement, dated June 25, 1997, and Exhibit A - Performance Criteria (excluding other Exhibits and Schedules). Filed as exhibit 2.1 to Registrant's Current Report on Form 8-K, filed July 15, 1997, and incorporated herein by reference.
2 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Transcend Services, Inc.: We have audited the accompanying balance sheet of TRANSCEND CASE MANAGEMENT, INC. (a Georgia corporation and a wholly owned subsidiary of Transcend Services, Inc.) as of December 31, 1997 and the related statements of operations and accumulated deficit and cash flows for the year 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 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 Transcend Case Management, Inc. as of December 31, 1997 and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP Atlanta, Georgia February 16, 1998 F-1 TRANSCEND CASE MANAGEMENT, INC. (A Wholly Owned Subsidiary of Transcend Services, Inc.) BALANCE SHEET DECEMBER 31, 1997
ASSETS CURRENT ASSETS: Cash $ 25,044 Accounts receivable, net of allowance for doubtful accounts of approximately $24,000 252,590 Prepaid expenses 17,564 ------------ Total current assets 295,198 ------------ EQUIPMENT: Office furniture and equipment 678,659 Less accumulated depreciation (619,160) ------------ Equipment, net 59,499 ------------ DEPOSITS 1,385 ------------ Total assets $ 356,082 ------------ ------------ LIABILITIES AND SHAREHOLDER'S EQUITY CURRENT LIABILITIES: Accounts payable $ 65,160 Accrued compensation and employee benefits 44,389 Other accrued liabilities 164,723 Due to Parent (Note 2) 2,465,138 ------------ Total current liabilities 2,739,410 ------------ COMMITMENTS AND CONTINGENCIES (Note 4) SHAREHOLDER'S DEFICIT: Common stock, $1 par value, 100 shares authorized, issued, and outstanding as of December 31, 1997 100 Accumulated deficit (2,383,428) ------------ Total shareholder's deficit (2,383,328) ------------ Total liabilities and shareholder's deficit $ 356,082 ------------ ------------
The accompanying notes are an integral part of this balance sheet. F-2 TRANSCEND CASE MANAGEMENT, INC. (A Wholly Owned Subsidiary of Transcend Services, Inc.) STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT FOR THE YEAR ENDED DECEMBER 31, 1997
REVENUES $ 1,860,571 DIRECT COSTS 1,661,951 -------------- Gross profit 198,620 -------------- EXPENSES: Selling and marketing 527,877 General and administration 675,640 -------------- 1,203,517 -------------- NET LOSS (1,004,897) ACCUMULATED DEFICIT AT DECEMBER 31, 1996 (1,378,531) -------------- ACCUMULATED DEFICIT AT DECEMBER 31, 1997 $(2,383,428) -------------- --------------
The accompanying notes are an integral part of this statement. F-3 TRANSCEND CASE MANAGEMENT, INC. (A Wholly Owned Subsidiary of Transcend Services, Inc.) STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1997
CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(1,004,897) ----------- Adjustments to reconcile net loss to net cash used in operating activities: Depreciation expense 102,000 Changes in assets and liabilities: Accounts receivable, net 222,942 Prepaid expenses 30,412 Accounts payable and accrued liabilities 31,423 Due to Parent 599,103 ----------- Total adjustments 985,880 ----------- Net cash used in operating activities (19,017) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (6,066) ----------- NET DECREASE IN CASH (25,083) CASH AT BEGINNING OF YEAR 50,127 ----------- CASH AT END OF YEAR $ 25,044 ----------- -----------
The accompanying notes are an integral part of this statement. F-4 TRANSCEND CASE MANAGEMENT, INC. (A Wholly Owned Subsidiary of Transcend Services, Inc.) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business Transcend Case Management, Inc. (the "Company"), formerly Sullivan Health Management Services, Inc. is a Georgia corporation and a wholly owned subsidiary of Transcend Services, Inc. (the "Parent"). The Company is engaged in the business of managing workers' compensation cases. 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 accompanying financial statements and disclosures. Actual results could differ from these estimates. Accounts Receivable An allowance for doubtful accounts has been established to provide for losses on uncollectible accounts based on management's estimates and historical collection experience. Bad debt expense was $6,300 for the year ended December 31, 1997. Revenue Recognition Revenue is recognized monthly as the work is performed based on a fixed fee per hour related to consultant's work on an individual case basis. Depreciation Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets, which range from three to seven years. Income Taxes The Company is consolidated with its Parent for tax purposes. The Company's results of operations are included in the consolidated federal income tax return of the Parent. F-5 Deferred tax assets are settled with the Parent on a current basis. Therefore, no deferred tax assets or liabilities are recorded on the Company's balance sheet at December 31, 1997. 2. TRANSACTIONS WITH THE PARENT The Company utilizes certain Parent services, including, but not limited to, computer systems, accounting, payroll and related benefits, and disbursements and treasury. The amount shown as "Due to Parent" includes corporate allocations of overhead (based on revenues), certain other expenses, and cash funding of continuing operations. 3. BENEFIT PLANS The Parent sponsors a cash accumulation plan (the "401(k) Plan"). Employee participants can elect to voluntarily contribute amounts to the 401(k) Plan subject to certain minimum and maximum limitations. The Parent matches employee contributions on a discretionary basis as determined by the Parent's board of directors. Expenses related to the 401(k) Plan are recorded on the Parent's books. 4. COMMITMENTS AND CONTINGENCIES Lease Commitments The Company leases certain office facilities under noncancelable operating leases. Future minimum annual rental obligations under noncancelable leases as of December 31, 1997 are as follows:
1998 $38,019 1999 15,841 2000 and thereafter 0 ------- $53,860 ------- -------
Rent expense was $94,240 for the year ended December 31, 1997. 5. SUBSEQUENT EVENTS On January 21, 1998, the Parent signed a letter of intent to sell the net assets of the Company to CORE, INC., a publicly traded national provider of managed disability and health care benefits management services. Under the terms of the agreement, the Parent will receive CORE stock with the value based on the future annual revenues from CORE's operation of the Company as of a date, the "Determination Date", to be determined at the Parent's discretion between April 1, 1999 and February 28, 2001. F-6 TRANSCEND CASE MANAGEMENT, INC. (A Wholly Owned Subsidiary of Transcend Services, Inc.) UNAUDITED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT FOR THE PERIOD FROM JANUARY 1, 1998 THROUGH MARCH 16, 1998
REVENUES $ 432,563 DIRECT COSTS 221,646 -------------- Gross profit 210,917 -------------- EXPENSES: Selling and marketing 73,776 General and administration 101,556 -------------- 175,332 -------------- NET INCOME 35,585 ACCUMULATED DEFICIT AT DECEMBER 31, 1997 (2,383,428) -------------- ACCUMULATED DEFICIT AT MARCH 16, 1998 $ (2,347,843) -------------- --------------
F-7 TRANSCEND CASE MANAGEMENT, INC. (A Wholly Owned Subsidiary of Transcend Services, Inc.) UNAUDITED STATEMENT OF CASH FLOWS FOR THE PERIOD FROM JANUARY 1, 1998 THROUGH MARCH 16, 1998
CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 35,585 ---------- Adjustments to reconcile net income to net cash used in operating activities: Depreciation expense 6,250 Changes in assets and liabilities: Accounts receivable, net (98,610) Prepaid expenses (1,264) Accounts payable and accrued liabilities (40,792) Due to Parent 96,918 ---------- Total adjustments (37,498) ---------- Net cash used in operating activities (1,913) ---------- NET DECREASE IN CASH (1,913) CASH AT BEGINNING OF PERIOD 25,044 ---------- CASH AT END OF PERIOD $ 23,131 ---------- ----------
F-8 PRO FORMA COMBINED CONDENSED FINANCIAL DATA (UNAUDITED) On March 17, 1998, a wholly owned subsidiary of CORE, INC. (the "Company") acquired the assets of Transcend Case Management, Inc., a Georgia corporation ("TCM"), pursuant to an Asset Purchase Agreement (the "Purchase Agreement"). Pursuant to the Purchase Agreement, all of the assets of TCM were acquired in exchange for the assumption of certain liabilities and the issuance of shares of common stock of CORE, the number of which shall be equal to a valuation based upon future revenue performance of TCM. The purchase price is subject to certain adjustments as set forth in the Purchase Agreement. TCM is a provider of workers' compensation case management services. The acquisition has been accounted for as a purchase. On June 25, 1997, a wholly-owned subsidiary of the Company purchased certain assets and liabilities of Social Security Disability Consultants and Disability Services, Inc. (collectively, "SSDC") for an initial purchase price of $6,500,000 and additional performance related cash payments of up to $920,000. SSDC provides disability management services with two key areas of business: social security disability benefits advocacy and Medicare coordination of benefits. The acquisition has been accounted for as a purchase. The unaudited pro forma combined condensed financial data set forth below are based on the consolidated results of operations of the Company and SSDC as filed with the Securities and Exchange Commission and the results of operations of TCM included elsewhere herein. The unaudited pro forma combined condensed statements of operations for the year ended December 31, 1997 and the three months ended March 31, 1998 gives effect to the acquisitions of SSDC and TCM as if the transactions had occurred on January 1, 1997. The unaudited pro forma combined condensed financial data set forth below do not purport to represent what the Company's results of operations would have been had the transactions described above occurred on the date indicated, or to project the Company's results of operations for any future period or date, nor does it give effect to any matters other than those described in the notes thereto. F-9 Pro Forma Combined Condensed Statement of Operations (Unaudited) For the year ended December 31, 1997
Pro Forma Acquisition After CORE SSDC TCM Adjustments Acquisitions ---- ---- --- ----------- ------------ Revenues $38,506,563 $3,392,938 $1,860,571 $(108,409) (1a) $43,651,663 Cost of services 23,330,004 1,661,951 1,420,370 (1b) 26,303,916 (108,409) (1a) ------------ ---------- ---------- ----------- Gross profit 15,176,559 3,392,938 198,620 17,347,747 Operating expenses: Operating expenses 1,972,584 (1,972,584) (1b) General and administrative 7,940,005 675,640 (102,000) (1a) 8,950,808 437,163 (1b) Sales and marketing 2,482,561 527,877 86,847 (1b) 3,097,285 Depreciation and amortization 1,954,810 102,000 (1a) 2,235,105 23,795 (1b) 162,500 (1c) (8,000) (1d) ------------ ---------- ---------- ----------- Total operating expense 12,377,376 1,972,584 1,203,517 14,283,198 ------------ ---------- ---------- ----------- Income (loss) from operations 2,799,183 1,420,354 (1,004,897) 3,064,549 Other income (expense): Interest and other income 589,853 70,455 (150,000) (1e) 510,309 Interest and other expense (27,315) (4,410) (1b) (31,725) ------------ ---------- ---------- ----------- 562,538 70,455 478,584 ------------ ---------- ---------- ----------- Income (loss) before income taxes and extraordinary item 3,361,721 1,490,809 (1,004,897) 3,543,133 Provision for income taxes (610,000) (216,000) (1f) (643,000) 183,000 (1g) ------------ ---------- ---------- ----------- Income (loss) before extraordinary item 2,751,721 1,490,809 (1,004,897) 2,900,133 Extraordinary item 1,348,650 (245,000) (1f) 1,103,650 ------------ ---------- ---------- ----------- Net income (loss) $2,751,721 $2,839,459 $(1,004,897) $4,003,783 ------------ ---------- ---------- ----------- ------------ ---------- ---------- ----------- Earnings per common share: Income before extraordinary item: Basic $0.38 $0.40 ---------------- ----------- ---------------- ----------- Diluted $0.35 $0.37 ---------------- ----------- ---------------- ----------- Net income: Basic $0.38 $0.55 ---------------- ----------- ---------------- ----------- Diluted $0.35 $0.51 ---------------- ----------- ---------------- ----------- Weighted average common shares and equivalents: Basic 7,246,000 7,246,000 ---------------- ----------- ---------------- ----------- Diluted 7,934,000 7,934,000 ---------------- ----------- ---------------- -----------
F-10 Pro Forma Combined Condensed Statement of Operations (Unaudited) For the three months ended March 31, 1998
Pro Forma TCM After Acquisition TCM CORE TCM Adjustments Acquisition ---- --- ----------- ------------ Revenues $10,170,490 $432,563 $(25,474) (1a) $10,577,579 Cost of services 6,620,032 221,646 (25,474) (1a) 6,816,204 ------------ ---------- ----------- Gross profit 3,550,458 210,917 3,761,375 Operating expenses: General and administrative 2,231,087 101,556 (6,250) (1a) 2,326,393 Sales and marketing 817,747 73,776 891,523 Depreciation and amortization 515,845 6,250 (1a) 522,095 ------------ ---------- ----------- Total operating expense 3,564,679 175,332 3,740,011 ------------ ---------- ----------- Income (loss) from operations (14,221) 35,585 21,364 Other income (expense): Interest and otherincome 150,137 150,137 ------------ ---------- ----------- 150,137 150,137 ------------ ---------- ----------- Income before income taxes 135,916 35,585 171,501 Benefit for income taxes 75,000 75,000 ------------ ---------- ----------- Net income $210,916 $35,585 $246,501 ------------ ---------- ----------- ------------ ---------- ----------- Net income: Basic $0.03 $0.03 --------------- -------------- --------------- -------------- Diluted $0.03 $0.03 --------------- -------------- --------------- -------------- Weighted average common shares and equivalents: Basic 7,310,000 7,310,000 --------------- -------------- --------------- -------------- Diluted 8,359,000 8,359,000 --------------- -------------- --------------- --------------
F-11 Notes to Pro Forma Combined Condensed Statements of Operations (Unaudited) (1.) The acquisition adjustments consist of the following and represent: (a.) The reclassifications of certain of TCM's expenses to be consistent with CORE's classifications. The reclassifications have no impact on income from operations. Expenses reclassified include depreciation expenses (included in TCM's general & administrative expenses) and billable travel costs (included in TCM's costs of services versus netted against revenues as with CORE's classifications). (b.) The reclassifications of certain of SSDC's expenses to be consistent with CORE's classifications. The reclassifications have no impact on income from operations. Expenses reclassified include salaries and benefits, equipment and facilities rent and result in the reclassification of SSDC's operating expenses to cost of services, general and administrative expenses, sales and marketing expenses, depreciation and amortization expenses and interest expenses. (c.) The pro forma amortization expense of goodwill purchased from SSDC, valued at $6,500,000, and amortized on a straight-line basis over 20 years. (d.) The decrease in depreciation for SSDC assets not acquired in the purchase. (e.) The reduction of investment income resulting from the use of short-term investments to finance the initial purchase price paid for the purchase of SSDC. (f.) The increase in income tax provision as a result of the income recognized by SSDC for the six month period ended June 24, 1997. The pro forma provision for income taxes has been computed assuming the Company's pro forma results of operations had been included in a consolidated federal income tax return. (g.) The decrease in income tax provision as a result of the loss recognized by TCM for the year ended December 31, 1997. The pro forma provision for income taxes has been computed assuming the Company's pro forma results of operations had been included in a consolidated federal income tax return. F-12 -----END PRIVACY-ENHANCED MESSAGE-----