-----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, SF1k171zSgjBXhBm0z1upcAhrVW6Fqmu1rA/UZGVrqG3unJ0A49KNS0U/duvSk8l EMoUK0FVJsMCqMpqoP+Slw== 0001047469-99-000438.txt : 19990108 0001047469-99-000438.hdr.sgml : 19990108 ACCESSION NUMBER: 0001047469-99-000438 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981223 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990107 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 SEC ACT: SEC FILE NUMBER: 000-19600 FILM NUMBER: 99502364 BUSINESS ADDRESS: STREET 1: 18881 VON KARMAN AVE STREET 2: STE 1750 CITY: IRVINE STATE: CA ZIP: 92612 BUSINESS PHONE: 6173226400 MAIL ADDRESS: STREET 1: 18881 VON KARMAN AVE STREET 2: SUITE 1750 CITY: IRVINE STATE: CA ZIP: 92612 FORMER COMPANY: FORMER CONFORMED NAME: PEER REVIEW ANALYSIS INC DATE OF NAME CHANGE: 19930328 8-K 1 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): DECEMBER 23, 1998 ------------------ CORE, INC. ---------- (Exact name of registrant as specified in its charter) Commission file number 0-19600 -------- MASSACHUSETTS 04-2828817 ---------------------------- -------------------------------- (State or other jurisdiction (IRS employer identification no.) of incorporation) 18881 Von Karman Avenue, Suite 1750, Irvine, California 92612 ------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (949) 442-2100 --------------- CORE, INC. ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On March 17, 1998, TCM Services, Inc. ("TCM"), a wholly-owned subsidiary of CORE, INC., a Massachusetts corporation ("CORE"), acquired the assets of Transcend Case Management, Inc., a Georgia corporation specializing in the business of managing workers compensation cases ("Transcend"), pursuant to an Asset Purchase Agreement dated March 17, 1998 (the "Purchase Agreement"). Pursuant to the Purchase Agreement, the purchase price for such assets was to be a number of shares of common stock of CORE, based upon revenue performance of TCM in 1999 or 2000. The Purchase Agreement also provided that in the event TCM incurred losses, as defined in the Purchase Agreement, in excess of $60,000 in any three month period, TCM could elect to terminate the operation, subject to Transcend's option to reacquire the assets of TCM with a minimum net book value (the "Option to Reacquire the Assets"). In October 1998, TCM notified Transcend in writing that TCM lost more than $60,000 in several three month periods and that due to such losses TCM was planning to close their operation subject to Transcend's Option to Reacquire the Assets. In December 1998, Transcend exercised its Option to Reacquire the Assets. On December 23, 1998, TCM transferred substantially all its assets to Transcend. Notwithstanding the exercise of the Option to Reacquire the Assets, Transcend has initiated arbitration concerning TCM's operation of the business prior to Transcend's reacquisition of assets. Management of CORE, INC. believes that there are meritorious defenses to the claims made by Transcend, intends to vigorously defend against such claims and intends to assert counterclaims against Transcend in the arbitration. Prior to the consummation of these transactions there was no material relationship between Transcend Case Management, Inc. or its owner, Transcend Services, Inc., and CORE or any of CORE's affiliates, directors or officers, or any associate of any such director or officer. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. Not applicable. (b) PRO FORMA FINANCIAL INFORMATION. No pro forma financial information has been provided for the year ended December 31, 1997 because the acquisition and disposition of the assets of TCM each occurred within the current calendar year (1998) for which CORE has not yet filed an annual report. Pages F-1 through F-4 contain an unaudited pro forma combined condensed balance sheet as of September 30, 1998 and an unaudited pro forma combined condensed statement of operations for the nine months ended September 30, 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. 2 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. CORE, INC. Date: January 6, 1999 By: /s/ William E. Nixon ---------------------------------- William E. Nixon Chief Financial Officer, Executive Vice President and Treasurer 3 CORE, INC. PRO FORMA COMBINED CONDENSED FINANCIAL DATA (UNAUDITED) On March 17, 1998, TCM Services, Inc. ("TCM"), a wholly-owned subsidiary of CORE, INC., a Massachusetts corporation ("CORE"), acquired the assets of Transcend Case Management, Inc., a Georgia corporation specializing in the business of managing workers compensation cases ("Transcend"), pursuant to an Asset Purchase Agreement dated March 17, 1998 (the "Purchase Agreement") in a transaction accounted for as a purchase business combination. Pursuant to the Purchase Agreement, the purchase price for such assets was to be a number of shares of common stock of CORE, based upon revenue performance of TCM in 1999 or 2000. The Purchase Agreement also provided that in the event TCM incurred losses, as defined in the Purchase Agreement, in excess of $60,000 in any three month period, TCM could elect to terminate the operation, subject to Transcend's option to reacquire the assets of TCM with a minimum net book value (the "Option to Reacquire the Assets"). In October 1998, TCM notified Transcend in writing that TCM lost more than $60,000 in several three months periods and that due to such losses TCM was planning to close their operation subject to Transcend's Option to Reacquire the Assets. In December 1998, Transcend exercised its Option to Reacquire the Assets. On December 23, 1998, TCM transferred substantially all its assets to Transcend. On September 1, 1998, CORE acquired all shares of stock of Disability Reinsurance Management Services, Inc. ("DRMS"), a Delaware corporation, pursuant to a Capital Stock Purchase Agreement dated as of August 31, 1998 (the "Stock Purchase Agreement") in a transaction accounted for as a purchase business combination. Pursuant to the Stock Purchase Agreement, all of the shares of stock of DRMS were acquired in exchange for the cash payment of $20 million, the issuance of 480,000 shares of CORE common stock and the future issuance of up to an additional $7 million of CORE common stock after September 30, 2001, based on the future performance of DRMS. The purchase price is subject to certain adjustments as set forth in the Stock Purchase Agreement. DRMS is a full service reinsurance intermediary manager providing marketing, underwriting advice, claims, actuarial and compliance services to its insurance company clients and risk management expertise for reinsurers in a reinsurance facility. The unaudited pro forma combined condensed balance sheet and statement of operations and accompanying notes should be read in conjunction with the consolidated financial statements of CORE contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1997 and in the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1998. In addition, reference should be made to the Current Reports regarding the acquisitions of TCM and DRMS filed by the Company during 1998 on Form 8-K and each subsequently amended on Form 8-K/A. The unaudited pro forma combined condensed balance sheet as of September 30, 1998 and the statement of operations for the nine months ended September 30, 1998 gives effect to the disposition of TCM and acquisition of DRMS as if these transactions had occurred on January 1, 1998. The unaudited pro forma combined condensed financial data set forth below are provided for comparative purposes only and 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-1 CORE, INC. PRO FORMA COMBINED CONDENSED BALANCE SHEET (UNAUDITED) AS OF SEPTEMBER 30, 1998
CORE ADJUSTMENTS PRO FORMA ---- ----------- --------- Cash and cash equivalents $ 1,992,497 $ 1,992,497 Accounts receivable 10,792,884 $ (426,066) (1a) 10,366,818 Other assets 1,289,214 (6,890) (1a) 1,282,324 ------------- ----------- ------------- Total current assets 14,074,595 (432,956) 13,641,639 Property and equipment, net 7,503,572 (48,786) (1a) 7,454,786 Deposits and other assets 840,860 - 840,860 Goodwill, net 26,784,862 126,453 (1b) 26,911,315 Intangibles, net 80,478 - 80,478 ------------- ----------- ------------- Total assets $ 49,284,367 $ (355,289) $ 48,929,078 ------------- ----------- ------------- ------------- ----------- ------------- Accounts payable $ 1,993,138 $ (388,934) (1a) $ 1,604,204 Accrued expenses 3,129,271 (88,578) (1a) 3,040,693 Advances under revolving line of credit 2,500,000 - 2,500,000 Accrued payroll 366,312 (9,790) (1a) 356,522 Deferred income taxes 68,316 - 68,316 Notes payable 207,400 - 207,400 Capital lease obligations 12,354 - 12,354 ------------- ----------- ------------- Total current liabilities 8,276,791 (487,302) 7,789,489 Notes payable, net of current portion 189,638 - 189,638 Advances under revolving line of credit, net of current portion 14,500,000 - 14,500,000 Other long-term liabilities 254,520 - 254,520 Common stock 781,614 - 781,614 Additional paid-in capital 37,761,173 - 37,761,173 Deferred compensation (13,392) - (13,392) Accumulated deficit (12,465,977) 132,013 (1a) (12,333,964) ------------- ----------- ------------- Total stockholder's equity 26,063,418 132,013 26,195,431 ------------- ----------- ------------- Total liabilities and stockholders' equity $ 49,284,367 $ (355,289) $ 48,929,078 ------------- ----------- ------------- ------------- ----------- -------------
F-2 CORE, INC. PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
CORE DRMS ADJUSTMENTS PRO FORMA ---- ---- ----------- --------- Revenues $32,373,654 $3,823,530 $(939,022) (2a) $35,258,162 Cost of services 20,440,617 - (737,329) (2a) 20,659,171 955,883 (2b) ------------------------------------------------ ------------ Gross profit 11,933,037 3,823,530 (1,157,576) 14,598,991 Operating expenses: Operating expense 2,148,828 (2,148,828) (2b) - General and administrative 6,934,536 - (105,285) (2a) 7,383,922 554,671 (2b) Sales and marketing 2,648,847 - (217,172) (2a) 2,737,557 305,882 (2b) Non-recurring charges 5,579,586 - - 5,579,586 Depreciation and amortization 1,624,043 - (11,249) (2a) 2,470,186 107,392 (2b) 750,000 (2c) ------------------------------------------------ ------------ Total operating expense 16,787,012 2,148,828 (764,589) 18,171,251 ------------------------------------------------ ------------ Income (loss) from continuing operations (4,853,975) 1,674,702 (392,987) (3,572,260) Other income (expense): Interest and other income 297,695 104,353 (120,000) (2d) 282,048 Interest and other expense (136,858) (123,399) (1,076,667) (2e) (1,336,924) Nonrecurring charges directly attributable to the transaction - - (225,000) (2f) (225,000) ------------------------------------------------ ------------ 160,837 (19,046) (1,421,667) (1,279,876) ------------------------------------------------ ------------ Income (loss) before income taxes (4,693,138) 1,655,656 (1,814,654) (4,852,136) Benefit for income taxes 195,000 - - 195,000 ------------------------------------------------ ------------ Net income (loss) $(4,498,138) $1,655,656 $(1,814,654) $(4,657,136) ------------------------------------------------ ------------ ------------------------------------------------ ------------ Earnings (loss) per common share: Net income (loss): Basic $(0.61) $(0.60) ------------ ------------- ------------ ------------- Diluted $(0.61) $(0.60) ------------ ------------- ------------ ------------- Weighted average common shares and equivalents: Basic 7,377,000 426,667 (2g) 7,803,667 ------------ --------- ------------- ------------ --------- ------------- Diluted 7,377,000 426,667 (2g) 7,803,667 ------------ --------- ------------- ------------ --------- -------------
F-3 CORE, INC. NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL DATA (UNAUDITED) (1) The adjustments included on the Pro Forma Combined Condensed Balance Sheet (Unaudited) consist of the following and represent: (a) Elimination of TCM balances included in CORE's consolidated balances as of September 30, 1998. (b) Elimination of negative goodwill related to the acquisition of TCM. (2) The adjustments included on the Pro Forma Combined Condensed Statement of Operations (Unaudited) consist of the following and represent: (a) Elimination of TCM operating results included in CORE's consolidated operating results for the nine months ended September 30, 1998. (b) Certain of DRMS' expenses have been reclassified to be consistent with CORE's classifications. The reclassifications have no impact on income from operations. Expenses reclassified include salaries and benefits, travel and rent and result in the reclassification of DRMS' operating expenses to cost of services, general and administrative expenses, sales and marketing expenses and depreciation and amortization expenses. (c) Pro forma amortization expense of goodwill purchased from DRMS, valued at $22,000,000, and amortized on a straight-line basis over 20 years. (d) Reduction of investment income resulting from the use of short-term investments to finance $3,000,000 of the cash purchase price paid for the acquisition of DRMS. (e) Increase in interest expense resulting from interest charges incurred (at 9.50%) on the funds borrowed to finance $17,000,000 of the cash purchase price paid for the acquisition of DRMS. (f) Reclassification of expenses incurred by DRMS that are directly related to the transaction, including mostly legal and financial adviser fees incurred through September 30, 1998. (g) Weighted average issuance of 480,000 shares of CORE common stock to the former shareholder of DRMS upon the acquisition of DRMS. F-4 -----END PRIVACY-ENHANCED MESSAGE-----