UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 12, 1997
METROPOLITAN HEALTH NETWORKS, INC.
(Exact name of registrant as specified in its charter)
Florida 333-5884-A 65-0635748
(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation or organization) Number) Identification No.)
5100 Town Center Circle, Boca Raton, Florida 33486
(Address of principal executive office) (Zip Code)
(561) 416-9484
(Registrant's telephone number, including area code)
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2
METROPOLITAN HEALTH NETWORKS, INC.
INDEX
Item 7. Financial Statements and Exhibits
The following financial statements are incorporated herein as
part of this report.
Page No.
--------
(a)Financial Statements of Business Acquired
Condensed Balance Sheet- December 31, 1996
and March 12, 1997 3
Condensed Statements of Operations for the
Year ended December 31, 1996
and the Period Ended March 12, 1997 4
Condensed Statement of Cash Flows for the
Year ended December 31, 1996
and the Period Ended March 12, 1997 5
Notes to Condensed Financial Statements 6 - 10
(b) Exhibit
10.11 Merger Agreement, dated October 24, 1996, by
and amoung Metropolitan Health Networks, Inc., Metcare II,
Inc. ( a wholly owned subsidiary of Metropolitan Health
Networks, Inc.), Paul Wand, M.D., P.A., and Paul Wand
(incorporated by reference to Exhibit 10.11 to the
Registrant's Form SB-2, filed with the Commission on October
29, 1996).
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3
<TABLE>
<CAPTION>
PAUL WAND, M.D., P.A.
CONDENSED BALANCE SHEETS
(Unaudited)
<S> <C> <C>
December 31, March 12,
1996 1997
--------- ---------
ASSETS
CURRENT ASSETS:
Cash ......................................................... $ 70,963 5,536
Accounts receivable, net ..................................... 716,407 734,125
Other current assets ......................................... 1,028 1,028
--------- ---------
Total current assets ......................................... 788,398 740,690
PROPERTY AND EQUIPMENT, net .................................. 9,991 9,493
OTHER ASSETS ................................................. 9,122 9,122
--------- ---------
TOTAL ........................................................ $ 807,511 $ 759,305
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses ........................ $ 9,208 29,970
Deferred income taxes ........................................ 237,000 203,915
Current maturities of long-term debt ......................... 83,298 113,503
--------- ---------
Total current liabilities .................................... 329,506 347,388
LONG TERM DEBT ............................................... 34,638 32,774
--------- ---------
Total liabilities ............................................ 364,144 380,162
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock, par value $1.00 per share:
500 shares authorized,
issued and outstanding ..................................... 500 500
Additional paid-in capital ................................... 19,797 19,797
Retained earnings (deficit) .................................. 491,908 427,684
Due from stockholder ......................................... (68,838) (68,838)
--------- ---------
Total stockholders' equity ................................... 443,367 379,143
--------- ---------
TOTAL ........................................................ $ 807,511 $ 759,305
========= =========
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements
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4
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<CAPTION>
PAUL WAND, M.D., P.A.
CONDENSED STATEMENTS OF INCOME AND
RETAINED EARNINGS
(Unaudited)
<S> <C> <C>
Year Ended Period Ended
December 31, March 12,
1996 1997
----------- -----------
REVENUES:
Net patient revenues .................................................................. $ 1,128,684 $ 152,389
EXPENSES:
Salaries and benefits ................................................................. 555,984 148,57
Depreciation and amortization ......................................................... 2,052 498
General and administrative ............................................................ 566,383 69,753
----------- -----------
Total ................................................................................. 1,124,419 218,827
----------- -----------
INCOME (LOSS) FROM OPERATIONS: ........................................................ 4,265 (66,437)
OTHER INCOME (EXPENSE): ............................................................... 3,876 (30,872)
INCOME BEFORE INCOME TAXES: ........................................................... 8,141 (97,309)
INCOME TAXES: ......................................................................... (2,000) 33,085
----------- -----------
NET INCOME (LOSS) ..................................................................... $ 6,141 (64,224)
RETAINED EARNINGS, BEGINNING .......................................................... 485,767 491,908
----------- -----------
RETAINED EARNINGS, ENDING ............................................................. $ 491,908 $ 427,684
=========== ===========
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements
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5
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<CAPTION>
PAUL WAND, M.D., P.A.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<S> <C> <C>
For the Year For the Period
Ended Ended
December 31, March 12,
1996 1997
---------- -----------
Increase (Decrease) in Cash and equivalents from:
OPERATING ACTIVITIES:
Net Income (Loss) $ 6,141 (64,224)
Adjustments to reconcile net cash provided by operating activities:
Depreciation and amortization 2,052 498
Provision for bad debts 297,505 11,812
Changes in assets and liabilities:
Accounts receivable, net (233,193) (29,532)
Other current assets (1,028)
Other assets 0 0
Accounts payable and accrued expenses (6,744) 20,762
Deferred income tax 2,000 (33,085)
Loss from lawsuit settlement 0 30,000
------------ ------------
Net cash used in operating activities 66,733 455
------------ ------------
INVESTING ACTIVITIES:
Capital expenditures (5,718) 0
------------ ------------
Net cash used in investing activities (5,718) 0
----------- -------------
FINANCING ACTIVITIES:
Repayments of long term debt 9,307) (1,658)
Advances to Shareholders (9,657) 0
----------- -------------
Net cash provided by financing activities (18,964) (1,658)
----------- -------------
NET DECREASE IN CASH 42,051 (65,427)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 28,912 70,963
------------ ------------
CASH AND EQUIVALENTS AT END OF PERIOD $ 70,963 $ 5,536
============ ============
Supplemental Disclosures:
Interest paid $ 5,881 $ 872
============ ============
Income taxes paid $ 2,000 $ 0_
============ ============
</TABLE>
See notes to condensed consolidated financial statements--unaudited.
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6
PAUL WAND, M.D., P.A.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activity
Paul Wand, M.D., P.A. ( the "Association"), a professional association,
was incorporated on December 2, 1982, in the State of Florida. The Association
provides neurological medical services to individual patients, principally at
its office located in Hollywood, Florida.
Property and Equipment
Property and equipment is recorded is recorded at cost. Expenditures for major
betterments and additions are charged to the asset account while replacements,
maintenance and repairs, which do not improve or extend the lives of the
respective assets, are charged to expense currently.
Depreciation and Amortization
Depreciation of property and equipment is determined using straight-line
and accelerated methods, at various rates based generally on the estimated
useful lives of the assets.
The estimated useful lives are as follows:
Medical and office equipment 5-7 years
Furniture and fixtures 5-7 years
Income Taxes
The association is a personal service C Corporation which utilizes the
cash method for its basis of accounting for income tax purposes.
Deferred income taxes are provided for the estimated tax effect of
temporary differences between financial and taxable income. The deferred income
tax liability results primarily from utilization of the cash method of
accounting for income tax purposes and generally accepted accounting principles
for financial reporting purposes.
Revenue Recognition
The Association recognizes revenue net of contractual allowances as
medical services are provided to patients. These revenues are typically billed
directly to patients, Medicare, Medicaid, health maintenance organizations and
insurance companies. Although revenues are recorded net of contractual
allowances, expected collections differ from billed charges; accordingly , an
allowance for doubtful accounts has been provided.
Use of Estimates in the Preparation of Financial Statements
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 revenue and expenses during the reporting
period. Actual results could differ from those estimates.
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7
PAUL WAND, M.D., P.A.
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(Continued)
The allowance for doubtful accounts is an estimate which is establishes
through charges to earnings for estimated uncollectable amounts. Management's
judgment in determining the adequacy of the allowance is based upon several
factors which include, but are not limited to, agreements with third-party
payors, the nature and volume of the receivable portfolio, review of problem or
non-performing receivables and management's judgment with respect to current
economic conditions and their impact on the existing receivable portfolio. Given
the nature of the medical services industry, it is reasonably possible the
Association's estimate of the allowance could change in the future.
Fair Value of Financial Instruments
Generally accepted accounting principles require disclosure of the fair
value of certain financial instruments. Cash, due from stockholder, other
assets, accounts payable and accrued expenses are reflected in the accompanying
financial statements at cost, which approximates fair value.
NOTE 2. PROPERTY AND EQUIPMENT
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Property and equipment consisted of the following:
<S> <C> <C>
December 31, March 12,
1996 1997
(Unaudited) (Unaudited)
Medical and office equipment ............................................... 259,633 259,633
Furniture and fixtures ..................................................... 29,169 29,169
-------- --------
288,802 288,802
Less accumulated depreciation .......................................... (278,811) (279,309)
-------- --------
9,991 9,493
======== ========
</TABLE>
Depreciation expense was $ 2,052 and $ 498 for the year ended December
31, 1996 and the period ended March 12, 1997, respectively.
NOTE 3. DUE FROM STOCKHOLDER
From time to time, the Association advances money to the stockholder;
this balance is non-interest bearing and is due on demand.
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8
PAUL WAND, M.D., P.A.
NOTES TO FINANACIAL STATEMENTS--(Continued)
NOTE 4. LONG-TERM DEBT
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<S> <C> <C>
Long-term debt consisted of the following:
December 31, March 12,
1996 1997
Note payable--bank--bearing interest at bank's prime rate plus 3%; monthly
payments of $1,265 including interest; matures September 25, 2000,
collateralized by medical office equipment, personally
guaranteed by the stockholder ..................................................... 45,093 43,434
Loan payable-former employee ........................................................... 72,844 72,844
Liability due from Lawsuit ............................................................. 0 30,000
-------- --------
117,937 146,278
Less: current maturities ........................................................... 83,299 113,504
-------- --------
$ 34,638 $ 32,774
======== ========
</TABLE>
Aggregate maturities of long-term debt for the years subsequent to
December 31, 1996, are as follows:
1997 $ 83,299
1998 11,747
1999 13,198
2000 9,693
Loan payable-former employee consists of remaining principal and interest
due to a former employee under an oral agreement, wherein $75,000 was loaned to
the association in 1993. Terms of this agreement require monthly payments of
$1,450, including principal and interest at 6%. At March 12, 1997 the
Association was not in compliance with these terms; accordingly, the full amount
is reflected as currently due.
Interest expense on all indebtedness amounted to $8,185 for the year
ended December 31, 1996 and $1,167 for the period ended March 12, 1997.
The carrying value of the note payable-bank approximates the fair value
as the interest rate is adjusted as market conditions change. The short term
nature of the loan, the carrying value of the loan payable-former employee
approximates the fair value.
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9
PAUL WAND, M.D., P.A.
NOTES TO FINANACIAL STATEMENTS--(Continued)
NOTE 5. COMMITMENT AND CONTINGENCIES
Physician Agreements
In June 1994, Paul Wand, M.D., (stockholder) entered into a Health
Maintenance Organization (HMO) Specialist Physician Agreement and Preferred
Provider Organization (PPO) Physician Agreement with Principal Health Care of
Florida, Inc., whereby stockholder agrees to provide medical services to
patients that are members of each plan. The HMO agreement provides compensation
of covered services rendered to members of the plan on a fee for service basis,
subject to Medicare fee maximum rates or customary charge, whichever is lower.
Under the HMO Agreement, the stockholder agrees not to bill members for amounts
in excess of deductibles and/or co-payments provided for in the Member's Group
Membership Agreement.
Under the PPO Agreement, the Association charges member fees in
accordance with a pre-established fee schedule, bills the insurance company
directly and bills members only for applicable co-payments, coinsurance,
deductibles and services not covered under the plan.
The HMO and PPO Agreements are renewed automatically each calendar year
for one year periods and may be assignable with consent of the other party.
Either party may cancel the agreements without cause upon 90 days written
notice. Lease Commitment In September, 1991, the Association entered into a five
year and two month lease, beginning December 1991, for its medical office
facility located in Hollywood, Florida. The obligation of the lease is
personally guaranteed by the stockholder. This lease has been renewed for
another five year term ending January 31, 2002.
The future minimum commitment on the lease is as follows:
1997 $ 67,955
1998 71,692
1999 75,994
2000 80,554
2001 85,387
2002 7,149
Rent expense amounted to $ 69,430 in 1996 and $ 8,863 through March 12,
1997.
Contingencies
The Association is a defendant in a lawsuit claiming approximately
$75,000, relating to the termination of the former employee discussed in Note 4.
The Asssociation has entered into a tentative agreement with the former employee
whereby the lawsuit will be dismissed without any further obligation of the
Association.
In early 1997, the Association settled a lawsuit which arose from an
alleged breach of an independent contractor agreement for the amount of $30,000.
The Association paid $10,000 as the first payment and will pay $4,000 per month
for five months starting April 1, 1997.
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PAUL WAND, M.D., P.A.
NOTES TO FINANCIAL STATEMENTS---(CONTINUED)
NOTE 6. INCOME TAXES
The components of the provision for income taxes is as follows:
Years Ended For Period Ended
December 31, March 12,
1996 1997
------- ------
(Unaudited) (Unaudited)
Deferred taxes 2,000 (33,085)
The difference between the income taxes and the amount computed by
applying the federal statutory income tax rate of 34% to income before income
taxes is as follows:
Years Ended Period Ended
December 31, March 12,
1996 1997
(Unaudited)
Tax provision at U.S. statutory rates 2,768 (33,085)
State income taxes 0 0
Other. (768) 0
----------- -----------
Income taxes $ 2,000 $(33,085)
=========== ===========
NOTE 7. SUBSEQUENT EVENTS
Under a merger agreement dated October 24, 1996, Metropolitan Health
Networks, Inc. has acquired 100% of the Association from the stockholder.
This transaction was completed March 12, 1997.
