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): AUGUST 9, 1996
STAT HEALTHCARE, INC.
(Exact name of registrant as specified in charter)
DELAWARE 1-14386 76-0496236
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
12450 GREENSPOINT DRIVE, SUITE 1200, HOUSTON, TEXAS 77060
(Address of principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (713) 872-6900
(Former name or former address, if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS.
On June 24, 1996, pursuant to the closing of the transactions (the
"Exchange") contemplated by that certain Amended and Restated Agreement and Plan
of Reorganization, dated as of March 15, 1996 (the "Reorganization Agreement"),
by and among the registrant, Old STAT, Inc., a Delaware corporation named "STAT
Healthcare, Inc." prior to the Exchange ("Old STAT"), STAT Acquisition Corp., a
Delaware corporation wholly owned by the registrant ("STAT Acquisition"), and
the AmHealth Corporations and AmHealth Partnerships described below, (a)
AmHealth Corporation, AmHealth Enterprises of the Valley, Inc. and AmHealth
Ambulatory Services, Inc., each a Texas corporation (collectively, the "AmHealth
Corporations"), were merged with and into the registrant, with the registrant as
the surviving corporation, (b) all the general partners and limited partners
(excluding limited partners representing a 25% interest in Brownsville Kidney
Center, Ltd.) (the "AmHealth Partners") of AmHealth Kidney Centers of the
Valley, Ltd., Weslaco Kidney Center, Ltd., Starr Dialysis Center, Ltd., Mission
Kidney Center, Ltd., Brownsville Kidney Center, Ltd., AmHealth Medical
Management, Ltd., Brownsville Hyperbaric Healthcare, Ltd., Southwestern Infusion
Healthcare, Ltd. and AmHealth Ambulatory Healthcare, Ltd., each a Texas limited
partnership (collectively, the "AmHealth Partnerships"), received shares of
common stock of the registrant (the "New STAT Common Stock") in exchange for the
outstanding general and limited partner interests in the AmHealth Partnerships
held by such partners, and (c) Old STAT merged with STAT Acquisition, with Old
STAT as the surviving corporation. The shareholders of the AmHealth Corporations
(the "AmHealth Shareholders") and the AmHealth Partners collectively received a
total of 11,200,000 shares of New STAT Common Stock, each of the 3,702,472
shares of common stock of Old STAT (the "Old STAT Common Stock") issued and
outstanding immediately prior to the consummation of the Exchange was converted
into one share of New STAT Common Stock, and each option and warrant to purchase
shares of Old STAT Common Stock outstanding immediately prior to the
consummation of the Exchange was converted into an option or warrant,
respectively, to purchase shares of New STAT Common Stock on substantially the
same terms and conditions. Upon consummation of the Exchange, (i) the
participating AmHealth Shareholders and AmHealth Partners collectively received
approximately 75% of the New STAT Common Stock outstanding immediately after the
Exchange, (ii) the corporate name of the registrant was changed to "STAT
Healthcare, Inc.", and (iii) the corporate name of Old STAT was changed to "Old
STAT, Inc." Additional information regarding the consummation of the Exchange
and disclosure of certain historical and pro forma financial information is
presented or incorporated by reference in the registrant's Current Report on
Form 8-K dated June 24, 1996.
The Exchange was accounted for using the pooling of interests method. The
audited supplemental consolidated financial statements set forth below are being
filed to restate the registrant's consolidated financial statements as of and
for the years ended December 31, 1993, 1994, and 1995. The supplemental
consolidated financial statements will become the primary historical financial
statements of the registrant upon issuance of financial statements that include
the date of consummation.
2
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
27.1 Restated Financial Data Schedule.
99.1 The following supplemental consolidated financial statements of
the registrant, together with the independent auditors' reports, are filed as
Exhibit 99.1 hereto:
PAGE
(1) Independent Auditors' Report ....................................... F-1
(2) Independent Auditors' Report ....................................... F-2
(3) Independent Auditors' Report ....................................... F-3
(4) Supplemental Consolidated Balance Sheets
at December 31, 1993, 1994 and 1995 ............................ F-4
(5) Supplemental Consolidated Statements of Income
for the years ended December 31, 1993,
1994 and 1995 .................................................. F-5
(6) Supplemental Consolidated Statements of Changes
in Stockholders' Equity for the years ended
December 31, 1993, 1994 and 1995 ............................... F-6
(7) Supplemental Consolidated Statements of Cash
Flows for the years ended December 31, 1993,
1994 and 1995 .................................................. F-7
(8) Notes to Supplemental Consolidated Financial
Statements ..................................................... F-8
SIGNATURES
Pursuant to the requirements 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.
Dated: August 14, 1996 STAT HEALTHCARE, INC.
(formerly New STAT Healthcare, Inc.)
By: /S/ NED E. CHAPMAN
Ned E. Chapman
Chief Financial Officer
EXHIBIT 99.1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
STAT Healthcare, Inc.:
We have audited the accompanying supplemental consolidated balance sheets
of STAT Healthcare, Inc. and subsidiaries (the Company) as of December 31, 1995
and 1994, and the related supplemental consolidated statements of income,
changes in stockholders' equity, and cash flows for the years then ended. These
supplemental consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
supplemental consolidated financial statements based on our audits. We did not
audit the 1994 financial statements of AmHealth Corporation and its related
health care entities, a wholly-owned subsidiary following the merger discussed
below, which statements reflect total assets constituting 57% and total net
service revenues constituting 52% of the related consolidated totals in 1994.
Those statements were audited by other auditors whose report has been furnished
to us, and our opinion, insofar as it relates to the amounts included for
AmHealth Corporation and its related health care entities, is based solely on
the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors for 1994 provide a
reasonable basis for our opinion.
The supplemental consolidated financial statements give retroactive effect
to the merger of STAT Healthcare, Inc. and AmHealth Corporation and its related
health care entities on June 24, 1996, which has been accounted for as a pooling
of interests as described in Note 3 to the supplemental consolidated financial
statements. Generally accepted accounting principles proscribe giving effect to
a consummated business combination accounted for by the pooling-of-interests
method in financial statements that do not include the date of consummation.
These financial statements do not extend through the date of consummation.
However, they will become the historical consolidated financial statements of
STAT Healthcare, Inc. and subsidiaries after financial statements covering the
date of consummation of the business combination are issued.
In our opinion, based on our audits and the report of other auditors for
1994, the supplemental consolidated financial statements referred to above
present fairly, in all material respects, the financial position of STAT
Healthcare, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles applicable after
financial statements are issued for a period which includes the date of
consummation of the business combination.
KPMG PEAT MARWICK LLP
Houston, Texas
August 9, 1996
F-1
INDEPENDENT AUDITORS' REPORT
The Boards of Directors/Partners
AmHealth Corporation and its
Related Health Care Entities:
We have audited the combined balance sheets of AmHealth Corporation and its
related health care entities (collectively referred to as the Company) as of
December 31, 1994, and the related combined statements of income, changes in
shareholders' equity and partners' capital, and cash flows for the year then
ended. These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
combined 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of AmHealth Corporation
and its related health care entities as of December 31, 1994, and the results of
their operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
LONG, CHILTON, PAYTE & HARDIN, LLP
McAllen, Texas
February 22, 1995
F-2
INDEPENDENT AUDITORS' REPORT
The Board of Directors
STAT Healthcare, Inc.:
We have audited the accompanying supplemental consolidated balance sheet of
STAT Healthcare, Inc. and subsidiaries (the Company) as of December 31, 1993,
and the related supplemental consolidated statements of income, changes in
stockholders' equity, and cash flows for the year then ended. These supplemental
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these supplemental
consolidated 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.
The supplemental consolidated financial statements give retroactive effect
to the merger of STAT Healthcare, Inc. and AmHealth Corporation and its related
health care entities on June 24, 1996, which has been accounted for as a pooling
of interests as described in Note 3 to the supplemental consolidated financial
statements. Generally accepted accounting principles proscribe giving effect to
a consummated business combination accounted for by the pooling-of-interests
method in financial statements that do not include the date of consummation.
These financial statements do not extend through the date of consummation.
However, they will become the historical consolidated financial statements of
STAT Healthcare, Inc. and subsidiaries after financial statements covering the
date of consummation of the business combination are issued.
In our opinion, the supplemental consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
STAT Healthcare, Inc. and subsidiaries as of December 31, 1993, and the results
of their operations and their cash flows for the year then ended, in conformity
with generally accepted accounting principles applicable after financial
statements are issued for a period which includes the date of consummation of
the business combination.
LONG, CHILTON, PAYTE & HARDIN, LLP
McAllen, Texas
August 9, 1996
F-3
<PAGE>
STAT HEALTHCARE, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents ................................................. $ 114,000 $ 470,000 $ 2,538,000
Accounts receivable, net (notes 5 and 8) .................................. 339,000 2,382,000 4,565,000
Notes receivable (note 6) ................................................. 8,000 8,000 266,000
Inventories (note 8) ...................................................... 32,000 63,000 103,000
Prepaid and other current assets .......................................... 71,000 143,000 709,000
----------- ----------- -----------
Total current assets ........................................... 564,000 3,066,000 8,181,000
Property and equipment, net (notes 7 and 8) ............................... 526,000 1,446,000 2,261,000
Other non-current assets .................................................. 53,000 312,000 133,000
----------- ----------- -----------
Total assets ................................................... $ 1,143,000 $ 4,824,000 $10,575,000
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt (note 8) ................................ $ 122,000 $ 470,000 $ 88,000
Current portion of capital lease obligations (note 9) ..................... 80,000 37,000 48,000
Accrued physicians' fees .................................................. -- 724,000 706,000
Accounts payable .......................................................... 116,000 352,000 925,000
Accrued liabilities ....................................................... 49,000 268,000 513,000
Distributions payable ..................................................... -- -- 283,000
----------- ----------- -----------
Total current liabilities ...................................... 367,000 1,851,000 2,563,000
Long-term debt (note 8) ................................................... 87,000 95,000 156,000
Long-term capital lease obligations (note 9) .............................. 243,000 1,099,000 1,484,000
----------- ----------- -----------
Total liabilities .............................................. 697,000 3,045,000 4,203,000
----------- ----------- -----------
Stockholders' equity (notes 8, 11 and 12):
Preferred stock, $.01 par value. Authorized 5,000,000
shares; Series A convertible, issued and outstanding
74,000 shares at December 31, 1994 ................................ -- 370,000 --
Common stock, $.01 par value. Authorized 40,000,000
shares; issued and outstanding 4,165,166,
6,183,52 and 14,823,332, respectively .......................... 42,000 62,000 148,000
Capital in excess of par value ....................................... 269,000 589,000 4,204,000
Retained earnings .................................................... 135,000 758,000 2,020,000
----------- ----------- -----------
Total stockholders' equity ..................................... 446,000 1,779,000 6,372,000
----------- ----------- -----------
Commitments and contingencies (notes 9, 13 and 15)
Total liabilities and stockholders' equity ..................... $ 1,143,000 $ 4,824,000 $10,575,000
=========== =========== ===========
</TABLE>
See accompanying notes to supplemental consolidated financial statements.
F-4
<PAGE>
STAT HEALTHCARE, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net service revenues (note 4) ....................................... $ 1,170,000 $ 7,645,000 $ 23,141,000
------------ ------------ ------------
Operating expenses:
Professional medical fees ...................................... -- 2,601,000 9,241,000
Human resources ................................................ 394,000 1,424,000 4,640,000
Supplies ....................................................... 336,000 1,127,000 1,818,000
Billing and collection costs ................................... -- 322,000 1,461,000
Outside services and other ..................................... 226,000 624,000 970,000
Liability insurance ............................................ -- 167,000 706,000
Furniture and equipment ........................................ 59,000 204,000 400,000
Occupancy ...................................................... -- 17,000 139,000
------------ ------------ ------------
Total operating expenses ................................. 1,015,000 6,486,000 19,375,000
------------ ------------ ------------
Operating income ......................................... 155,000 1,159,000 3,766,000
Interest income ..................................................... -- -- 75,000
Interest expense .................................................... (21,000) (143,000) (225,000)
Other income ........................................................ 1,000 153,000 29,000
------------ ------------ ------------
Income before income taxes ............................... 135,000 1,169,000 3,645,000
Income taxes (note 10) .............................................. -- 65,000 347,000
------------ ------------ ------------
Net income ............................................... 135,000 1,104,000 3,298,000
Proforma income taxes (note 2) ...................................... 46,000 332,000 892,000
------------ ------------ ------------
Proforma net income ...................................... $ 89,000 $ 772,000 $ 2,406,000
============ ============ ============
Proforma net income per common share (note 2) ............ $ 0.02 $ 0.11 $ 0.20
============ ============ ============
Number of shares used in computing
proforma net income per common share ........................... 5,257,954 7,079,131 11,897,371
============ ============ ============
</TABLE>
See accompanying notes to supplemental consolidated financial statements.
F-5
<PAGE>
STAT HEALTHCARE, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
Preferred stock Common stock Capital in Total
-------------------------- ------------------------- excess of Retained stockholders'
Shares Amount Shares Amount par value earnings equity
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at January 1, 1993 .... -- $ -- 339,604 $ 4,000 $ 18,000 $ -- $ 22,000
Capital contributions .......... -- -- 3,825,562 38,000 251,000 -- 289,000
Net income ..................... -- -- -- -- -- 135,000 135,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balances at December 31, 1993 .. -- -- 4,165,166 42,000 269,000 135,000 446,000
Sale of common stock at par .... -- -- 450,000 5,000 -- -- 5,000
Sale of Series A, Convertible
Preferred stock ........... 74,000 370,000 -- -- -- -- 370,000
Sale of common stock at
$.10 per share ............ -- -- 100,000 1,000 9,000 -- 10,000
Sale of common stock at
$1.00 per share, net of
issuance cost ............. -- -- 250,000 2,000 233,000 -- 235,000
Capital contributions .......... -- -- 1,218,386 12,000 78,000 -- 90,000
Distributions to shareholders .. -- -- -- -- -- (481,000) (481,000)
Net income ..................... -- -- -- -- -- 1,104,000 1,104,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balances at December 31, 1994 .. 74,000 370,000 6,183,552 62,000 589,000 758,000 1,779,000
Initial public offering of
common stock, net of
issuance cost ............. -- -- 1,250,000 12,000 3,243,000 -- 3,255,000
Conversion of 10% secured
notes to common stock ..... -- -- 93,332 1,000 17,000 -- 18,000
Conversion of Series A,
Convertible Preferred stock
to common stock ........... (74,000) (370,000) 1,480,000 15,000 355,000 -- --
Capital contributions .......... -- -- 5,816,448 58,000 -- (31,000) 27,000
Distributions to shareholders .. -- -- -- -- -- (2,005,000) (2,005,000)
Net income ..................... -- -- -- -- -- 3,298,000 3,298,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balances at December 31, 1995 .. -- $ -- 14,823,332 $ 148,000 $ 4,204,000 $ 2,020,000 $ 6,372,000
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to supplemental consolidated financial statements.
F-6
<PAGE>
STAT HEALTHCARE, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ................................................................. $ 135,000 $ 1,104,000 $ 3,298,000
----------- ----------- -----------
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization ........................................ 59,000 196,000 360,000
Changes in assets and liabilities:
(Increase) in net accounts receivable ............................ (337,000) (2,043,000) (2,183,000)
(Increase) in inventories ........................................ (32,000) (31,000) (40,000)
(Increase) in prepaid and other current assets ................... (71,000) (72,000) (566,000)
(Increase) in organization and start-up costs .................... (59,000) (43,000) (68,000)
(Increase) in other non-current assets ........................... -- -- (9,000)
Increase (decrease) in accrued physicians' fees .................. -- 724,000 (18,000)
Increase in accounts payable ..................................... 116,000 236,000 573,000
Increase in accrued liabilities .................................. 49,000 219,000 245,000
Increase in distributions payable ................................ -- -- 283,000
----------- ----------- -----------
Total adjustments ................................................ (275,000) (814,000) (1,423,000)
----------- ----------- -----------
Net cash provided by (used in)
operating activities ...................................... (140,000) 290,000 1,875,000
----------- ----------- -----------
Cash flows from investing activities:
Increase in notes receivable ............................................. (8,000) -- (258,000)
Purchase of property and equipment ....................................... (219,000) (186,000) (548,000)
----------- ----------- -----------
Net cash used in investing activities ........................ (227,000) (186,000) (806,000)
----------- ----------- -----------
Cash flows from financing activities:
Sale of common stock and capital contributions ........................... 289,000 90,000 27,000
Proceeds from sale of common stock ....................................... -- 250,000 3,255,000
Proceeds from sale of preferred stock .................................... -- 370,000 --
Proceeds from issuance of convertible
secured notes ........................................................ -- 350,000 --
Distributions to shareholders ............................................ -- (481,000) (2,005,000)
Issuance of long-term debt ............................................... 220,000 360,000 278,000
Repayment of long-term debt .............................................. (11,000) (354,000) (249,000)
Repayment of convertible secured notes ................................... -- -- (332,000)
Repayments of capital lease obligations .................................. (34,000) (99,000) (209,000)
Decrease (increase) in deferred offering costs ........................... -- (234,000) 234,000
----------- ----------- -----------
Net cash provided by
financing activities ...................................... 464,000 252,000 999,000
----------- ----------- -----------
Net increase in cash and cash equivalents ....................................... 97,000 356,000 2,068,000
Cash and cash equivalents at beginning of year .................................. 17,000 114,000 470,000
----------- ----------- -----------
Cash and cash equivalents at end of year ........................................ $ 114,000 $ 470,000 $ 2,538,000
=========== =========== ===========
</TABLE>
See accompanying notes to supplemental consolidated financial statements.
F-7
<PAGE>
STAT HEALTHCARE, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1993, 1994 and 1995
(1) BUSINESS OF THE COMPANY AND ORGANIZATION
BUSINESS OF THE COMPANY
STAT Healthcare, Inc. (STAT) was incorporated in the state of Delaware
on July 29, 1994. STAT provides emergency medical management services. On June
24, 1996, STAT, through a successor entity formed for the purpose of effecting a
business combination, acquired all the common stock and partnership interests of
AmHealth Corporation and its related health care entities (AmHealth) (see note
3). AmHealth provides disease management services focused primarily on ailments
associated with diabetes. STAT and AmHealth merged into the successor entity
which became the parent and registrant and which then changed its name to STAT
Healthcare, Inc.
CONSOLIDATED FINANCIAL STATEMENTS
The merger of STAT and AmHealth has been accounted for as a pooling of
interests. Accordingly, the consolidated financial statements of STAT
Healthcare, Inc. and subsidiaries (the Company) have been restated to include
the accounts and results of operations of both STAT and AmHealth for all periods
presented.
The supplemental consolidated financial statements will become the
primary historical financial statements of the Company upon issuance of
financial statements that include the date of consummation.
Following the merger, the Company is an integrated disease management
and medical services company which owns, operates and manages specialty medical
facilities which provide a continuum of care focused on the needs of diabetics
and other patients requiring specialty care. In addition, the Company focuses on
the needs of its hospital clientele providing a range of services including
management of emergency departments and other hospital based services relating
to its disease management capabilities.
OPERATIONS AND ORGANIZATION OF STAT
Upon incorporation in July 1994, STAT negotiated a Management Agreement
with South Texas Acute Trauma Physicians, P.A. (STAT Physicians). The Management
Agreement became effective September 1, 1994 and is perpetual. The Management
Agreement has no termination or cancellation provisions. In addition, the
Company has the ability to control the designation of physician owner(s) of STAT
Physicians. Prior to the merger with AmHealth, the Company's income was derived
exclusively from revenues associated with the Management Agreement, less direct
expenses paid by the Company on behalf of Physicians, as provided in the
Management Agreement and less the operating expenses of the Company.
Additionally, on September 1, 1994,
F-8
the Company assumed the employment of all personnel previously employed at STAT
Physicians and the operating costs associated therewith from that date forward.
Prior to the merger with AmHealth, the Company operated in a single
business segment, emergency medical management services. The Company's principal
business related to management and administrative services provided to those
engaged in physician staffing of hospital emergency departments. At December 31,
1994 and 1995, the Company managed contracts for physician services with 12 and
11 hospitals, respectively, located in South Texas. Under these contracts,
24-hour physician coverage of the emergency departments is provided.
Physicians providing services are independent contractors to STAT
Physicians and are paid monthly on a basis of fixed hourly rates. As independent
contractors, these physicians are responsible for their own income and Social
Security taxes as well as workers compensation insurance.
The contracts between STAT Physicians and hospitals are generally
written for an initial term of two years and automatically renew for extended
periods after the initial term. STAT Physicians' contractual arrangements with
hospitals are principally fee-for-service contracts under which the Company
bills and collects the professional component of medical services on behalf of
STAT Physicians. At December 31, 1994, 9 of 12 contracts were fee-for-service
contracts, while at December 31, 1995, all contracts were fee-for-service
contracts. Services performed under contracts not subject to fee-for-service
arrangements at December 31, 1994 were compensated by the hospitals on a fixed
fee basis.
OPERATIONS AND ORGANIZATION OF AMHEALTH
AmHealth operates in two business segments, kidney dialysis services
and healthcare management services. It owns and operates outpatient kidney
dialysis centers, provides management services for outpatient hyperbaric
medicine units and provides management and personnel services to outpatient home
health providers in the Rio Grande Valley of Southern Texas.
F-9
The AmHealth entities, their pre-merger structure and their dates of
inception are as follows:
ENTITY STRUCTURE DATE OF INCEPTION
Management operations:
AmHealth Corporation S Corporation Oct 1992
Kidney dialysis center operations:
AmHealth Enterprises of the Valley, Inc. S Corporation Oct 1992
AmHealth Kidney Center of the Valley, Ltd. Partnership Apr 1993
Starr Dialysis Center, Ltd. Partnership Nov 1993
Weslaco Kidney Center, Ltd. Partnership Jun 1994
Mission Kidney Center, Ltd. Partnership Aug 1995
Brownsville Kidney Center, Ltd. Partnership Apr 1996
Healthcare management operations:
Southwestern Infusion Healthcare, Ltd. Partnership Jun 1994
AmHealth Ambulatory Services, Inc. C Corporation Apr 1995
AmHealth Ambulatory Healthcare, Ltd. Partnership Apr 1995
Brownsville Hyperbaric Healthcare, Ltd. Partnership May 1995
AmHealth Medical Management, Ltd. Partnership Jun 1995
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of STAT
Healthcare, Inc., AmHealth Corporation and its related health care entities (all
wholly-owned), and the results of operations of STAT Physicians since September
1, 1994, the effective date of the Company's management agreement with STAT
Physicians.
Because of the existence of a parent-subsidiary relationship by means
other than record ownership of STAT Physicians' voting stock and because of the
unilateral control, notwithstanding the lack of technical majority ownership,
which the Company has over the assets and operation of STAT Physicians,
consolidation of its results of operations is necessary to present fairly the
results of operations of the Company.
All significant intercompany balances and transactions have been
eliminated in consolidation.
F-10
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 amounts reported in the financial statements and
accompanying notes. Management believes that the estimates utilized in preparing
its consolidated financial statements are reasonable and prudent. Actual results
could differ from these estimates.
CASH EQUIVALENTS
Investments in highly liquid, short-term instruments purchased with
original maturities of three months or less are deemed to be cash equivalents.
SERVICE REVENUES AND ACCOUNTS RECEIVABLE
Patient service revenues are recorded at established billing rates, net
of an allowance for contractual adjustments and a provision for uncollectible
accounts. Management services revenue for hospital and home health agency
accounts are recorded net of an allowance for doubtful accounts.
Patient accounts receivable are reduced to an estimated realizable
value taking into consideration contractual adjustments mandated by payors
(Medicare, Medicaid and private insurers) and expected write-offs of
uncollectible accounts. These estimates are based upon management judgements and
historical experience.
INVENTORIES
Inventories, consisting primarily of dialysis and pharmacy supplies,
are stated at the lower of cost or market. Cost is determined using the
first-in, first-out method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated using the
straight-line depreciation method over the estimated useful lives of the assets
by class: minor equipment, 3 years; major equipment, 5 years; improvements, 5
years.
Equipment under capital lease is stated at the lesser of the present
value of the minimum lease payments or the fair value of the leased property at
the inception of the lease. Equipment under capital lease is amortized using the
straight-line method over the term of the leases which is 4 to 7 years.
Buildings and land under capital lease are stated at the fair value of the
properties and are amortized using the straight-line method over the term of the
leases which is 10 years.
F-11
ORGANIZATION AND START-UP COSTS
Organization and start-up costs have been capitalized and are being
amortized using the straight-line method over five years.
DEFERRED OFFERING COSTS
Deferred offering costs totaling $234,000 at December 31, 1994 were
included in other non-current assets. Such assets were combined with additional
offering costs incurred during 1995 and were recorded as a reduction of the
proceeds from the initial public offering of common stock during 1995.
DEFERRED ACQUISITION COSTS
Costs incurred to effect an expected pooling of interests business
combination are deferred and charged to expense in the period that the business
combination is consummated. If a plan of combination is abandoned, costs that
have been deferred are expensed. At December 31, 1995, deferred acquisition
costs of $134,000 were included in prepaid and other current assets. These costs
were combined with additional acquisition costs incurred in 1996 and were
expensed in the second quarter of 1996 when the AmHealth merger was consummated.
INCOME TAXES
The Company utilizes the asset and liability method of accounting for
income taxes. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
Prior to consummation of the merger, each of the AmHealth entities
(except AmHealth Ambulatory Services, Inc.) was a partnership or had elected to
be treated as an S Corporation. Accordingly, each entity's income or loss was
allocated to that entity's shareholders or partners for inclusion in their
personal federal income tax returns. No federal income taxes were assessed to
any of the entities (except AmHealth Ambulatory Services, Inc.), and
accordingly, no provision for federal income taxes for these entities has been
reflected in the accompanying consolidated statements of income prior to
consummation of the merger. AmHealth Ambulatory Services, Inc. began operations
in April 1995. Taxable income of this corporation from its date of inception
through December 31, 1995 was not material.
F-12
NET INCOME PER COMMON SHARE
Net income per common share is computed based on the sum of STAT and
AmHealth common and common equivalent shares calculated as follows:
- STAT. From inception through the date of STAT's initial public
offering, the number of common and common equivalent shares is
computed as if all shares were outstanding for the entire period,
less the number of treasury shares assumed to have been purchased
(at the initial offering price of STAT's common stock) from the
proceeds of actual sales of stock. Following the initial public
offering, the number of common and common equivalent shares is
computed based on the weighted average number of common shares
outstanding adjusted for the incremental shares attributed to
outstanding options and warrants to purchase common stock.
- AmHealth. The number of common and common equivalent shares is
computed based on the number of shares of the Company's common
stock issued to the shareholders or partners of each AmHealth
entity upon consummation of the merger, as if such shares were
outstanding since the date of inception for each entity.
PRO FORMA NET INCOME AND PRO FORMA NET INCOME PER SHARE
Pro forma income taxes are calculated to reflect the effect of income
taxes not otherwise payable by the AmHealth entities which were partnerships or
S Corporations prior to consummation of the merger. The pro forma income taxes
are based on an effective rate of 34%. Pro forma net income per share is
computed based on the pro forma net income amount.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Methods and assumptions used to estimate the fair value of each class
of financial instruments are as follows:
- Cash equivalents, trade accounts receivable, notes receivable
and payables -- The carrying amounts approximate fair value
because of the short maturity of these instruments.
- Long-term debt -- The carrying amount approximates fair value
because the notes generally have an adjustable interest rate
which is updated based on the prime rate.
F-13
(3) MERGER
On June 24, 1996, the Company acquired all the common stock and partnership
interests of AmHealth Corporation and its related health care entities
(AmHealth) for 11,200,000 shares of the Company's common stock. AmHealth
operates outpatient kidney dialysis centers, provides management services for
outpatient hyperbaric medicine units, and provides management and personnel
services to outpatient home health providers in the Rio Grande Valley of
Southern Texas. The transaction has been accounted for as a pooling of interests
and, accordingly, the consolidated financial statements for all periods
presented have been restated to include the accounts of AmHealth.
Separate and combined results of STAT and AmHealth during the years ended
December 31, 1993, 1994 and 1995 (periods preceding the merger) were as follows:
1993 1994 1995
------------ ------------ ------------
Net service revenues:
STAT ....................... $ -- $ 3,672,000 $ 14,124,000
AmHealth ................... 1,170,000 3,973,000 9,017,000
------------ ------------ ------------
Combined .................. $ 1,170,000 $ 7,645,000 $ 23,141,000
============ ============ ============
Net income:
STAT ....................... $ -- $ 128,000 $ 674,000
AmHealth ................... 135,000 976,000 2,624,000
------------ ------------ ------------
Combined .................. 135,000 1,104,000 3,298,000
Proforma income taxes ....... (46,000) (332,000) (892,000)
------------ ------------ ------------
Proforma net income ....... $ 89,000 $ 772,000 $ 2,406,000
============ ============ ============
(4) NET SERVICES REVENUES
Under the contracts between STAT Physicians and the hospitals and under
its management agreement with STAT Physicians, the Company has the ability,
subject to hospital concurrence, to establish the rates to be billed to patients
for services provided. Gross service revenues represent the billed value of
physician services provided at hospital locations, and patient service and
management services revenue recorded at established billing rates. Billings
discounts represent the difference between gross service revenues and the amount
which is ultimately expected to be received. These discounts relate principally
to contractual adjustments mandated by payors such as Medicare and Medicaid and
also to contracted arrangements with private insurers. Discounts also include
provisions for indigent patients without the means of paying for services
provided.
F-14
Gross service revenues and billings discounts for the years ended December
31, 1993, 1994 and 1995 are as follows:
1993 1994 1995
------------ ------------ ------------
Gross service revenues ........ $ 1,418,000 $ 12,180,000 $ 40,143,000
Billings discounts ............ (248,000) (4,535,000) (17,002,000)
Net service revenues .......... $ 1,170,000 $ 7,645,000 $ 23,141,000
Service revenues have been primarily generated in Southern Texas.
Although subject to individual contracts, net service revenues derived from
hospitals which, at December 31, 1995, were owned by Columbia/HCA Healthcare
Corporation accounted for 31% and 41% of 1994 and 1995 net service revenues,
respectively.
(5) ACCOUNTS RECEIVABLE
Accounts receivable at December 31, 1993, 1994 and 1995 are as follows:
1993 1994 1995
----------- ----------- -----------
Gross patient accounts receivable ... $ 436,000 $ 4,617,000 $ 8,892,000
Allowance for contractual adjustments (81,000) (1,943,000) (2,938,000)
----------- ----------- -----------
Estimated accounts receivable .. 355,000 2,674,000 5,954,000
Allowance for doubtful accounts ..... (17,000) (539,000 (1,882,000)
----------- ----------- -----------
Net patient accounts receivable 338,000 2,135,000 4,072,000
Other accounts receivable ........... 1,000 188,000 371,000
Due from STAT Physicians ............ -- 59,000 122,000
Accounts receivable, net ....... $ 339,000 $ 2,382,000 $ 4,565,000
=========== =========== ===========
F-16
(6) NOTES RECEIVABLE
Notes receivable at December 1993, 1994 and 1995 are as follows:
1993 1994 1995
-------- -------- --------
Non interest-bearing note receivable from
Mission Medical Properties ................. $ -- $ -- $ 50,000
Note receivable from officer/shareholders,
interest at 6%, due October 31, 1996 ....... -- -- 200,000
Other ......................................... 8,000 8,000 16,000
-------- -------- --------
Notes receivable ......................... $ 8,000 $ 8,000 $266,000
======== ======== ========
Mission Medical Properties leases buildings and land under capital
leases to the Company and is owned by certain stockholders of the Company.
(7) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1993, 1994 and 1995 are
as follows:
1993 1994 1995
----------- ----------- -----------
Land and buildings ................ $ -- $ 619,000 $ 969,000
Equipment and furnishings ......... 515,000 915,000 1,705,000
Improvements ...................... 63,000 142,000 155,000
----------- ----------- -----------
578,000 1,676,000 2,829,000
Less accumulated depreciation
and amortization ......... (52,000) (230,000) (568,000)
----------- ----------- -----------
Property and equipment, net ....... $ 526,000 $ 1,446,000 $ 2,261,000
=========== =========== ===========
Depreciation and amortization of property and equipment charged to
operations was $52,000, $178,000 and $338,000 during the years ended December
31, 1993, 1994 and 1995, respectively.
F-16
(8) LONG-TERM DEBT
Long-term debt at December 31, 1993, 1994 and 1995 is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Convertible secured notes; interest at 10% ............................. $ -- $ 350,000 $ --
Revolving credit payable to bank, due in quarterly
installments of $9,375 plus interest through March
1999; interest at prime plus .5% ..................................... -- -- 122,000
Revolving credit payable to bank; interest at prime
plus 1% .............................................................. 79,000 75,000 --
Note payable to TransAmerican Insurance Finance,
due January 1, 1996; interest at 11.64% .............................. -- -- 4,000
Note payable to bank, due April 2, 1996; interest at
prime plus 1% ........................................................ 54,000 27,000 10,000
Noninterest-bearing note payable to Palmco, Inc., for
construction allowance on leased building, due
April 1, 1996 ........................................................ 26,000 15,000 4,000
Note payable to bank, due October 30, 1997; interest
at prime plus 1% ..................................................... 50,000 38,000 6,000
Note payable to bank, due June 15, 1998; interest at
prime plus 1% ........................................................ -- 60,000 48,000
Note payable to bank, due November 6, 1999; interest
at prime plus 1% ..................................................... -- -- 50,000
--------- --------- ---------
Total debt ........................................................ 209,000 565,000 244,000
Less current portion .............................................. (122,000) (470,000) (88,000)
--------- --------- ---------
Long-term debt .................................................... $ 87,000 $ 95,000 $ 156,000
========= ========= =========
</TABLE>
The convertible secured notes were issued in October and November 1994
in connection with a bridge financing. A total of $332,000 was repaid and the
balance of $18,000 was converted to common stock in connection with STAT's
initial public offering during 1995. The conversion of convertible secured notes
to common stock is a non cash investing and financing transaction and is
excluded from the 1995 consolidated statement of cash flows.
The revolving credit payables to bank and notes payable to bank are
secured by the Company's accounts receivable, inventories and equipment.
Long-term debt totaling $240,000 at December 31, 1995 was guaranteed by a
stockholder of the Company.
F-17
Future payments of long-term debt at December 31, 1995 are as follows:
1996 . . . . . . . . . . $ 88,000
1997 . . . . . . . . . . 66,000
1998 . . . . . . . . . . 68,000
1999 . . . . . . . . . . 22,000
----------
$244,000
Cash paid for interest was $21,000, $126,000 and $214,000 during the years
ended December 31, 1993, 1994 and 1995, respectively.
(9) LEASE OBLIGATIONS
Future minimum lease payments under capital leases, together with the
present value of the net minimum lease payments, at December 31, 1995 are as
follows:
1996 . . . . . . . . . . . . . . . . . . . $ 476,000
1997 . . . . . . . . . . . . . . . . . . 426,000
1998 . . . . . . . . . . . . . . . . . . 341,000
1999 . . . . . . . . . . . . . . . . . . 261,000
2000 . . . . . . . . . . . . . . . . . . 203,000
Later years . . . . . . . . . . . . . . . 781,000
----------
Total minimum lease payments . . . . . . . . . . 2,488,000
Less amount representing interest . . . . (956,000)
----------
Present value of net minimum lease payments . . 1,532,000
Less current portion . . . . . . . . . (48,000)
----------
Long-term capital lease obligations . . $1,484,000
==========
At December 31, 1995, the Company's capital lease obligations include
amounts payable to entities owned or controlled by stockholders of the Company.
Total payments to these entities under the capital leases were $87,000 and
$147,000 for the years ended December 31, 1994 and 1995, respectively.
On September 10, 1995, the Company entered into an agreement to lease a
facility located in Brownsville, Texas, to be constructed and owned by an entity
owned by stockholders of the Company. Lease payments begin 45 days after
completion and are $7,600 per month for a term of 120 months. Based on an
estimated fair market value of $490,000 and the terms of the lease, the lease
will be a capital lease.
F-18
Future minimum rental payments required under operating leases that
have initial or remaining noncancelable lease terms in excess of one year at
December 31, 1995 are as follows:
1996............................................. $265,000
1997............................................. 268,000
1998............................................. 121,000
1999............................................. 16,000
--------
Total minimum lease payments..................... $670,000
========
Rental expense under operating leases was $16,000, $31,000 and $60,000 for
the years ended December 31, 1993, 1994 and 1995, respectively.
Obligations under capital lease incurred for property and equipment were
$358,000, $912,000 and $605,000 during the years ended December 31, 1993, 1994
and 1995, respectively. These non cash investing and financing transactions have
been excluded from the consolidated statements of cash flows.
F-19
(10) INCOME TAXES
Income taxes for the years ended December 31, 1993, 1994 and 1995 are
as follows:
1993 1994 1995
--------- -------- --------
Federal .................... $ -- $ 58,000 $330,000
State ...................... -- 7,000 17,000
--------- -------- --------
Total ...................... $ -- $ 65,000 $347,000
========= ======== ========
The actual income tax expense for the years ended December 31, 1993,
1994 and 1995 differs from the expected federal income tax computed by applying
the U.S. corporate rate of 34% to income before income taxes as follows:
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Computed "expected" tax expense ........... $ 46,000 $ 398,000 $ 1,239,000
Taxes on income earned and reported by
shareholders of S corporations and
partners of partnerships .............. (46,000) (332,000) (892,000)
Increase in tax resulting from
nondeductible expenses ................ -- 1,000 2,000
State tax provision, net of federal benefit -- 4,000 11,000
Other ..................................... -- (6,000) (13,000)
----------- ----------- -----------
Actual income tax expense ........ $ -- $ 65,000 $ 347,000
=========== =========== ===========
</TABLE>
For the years ended December 31, 1993, 1994 and 1995 there were no
significant temporary differences which created deferred tax assets or
liabilities. Income taxes payable of $65,000 are included in accrued liabilities
at December 31, 1994. Refundable income taxes of $31,000 are included in other
current assets at December 31, 1995. No income taxes were paid during the years
ended December 31, 1993 and 1994. Income taxes of $440,000 were paid during the
year ended December 31, 1995.
(11) CAPITAL STOCK
Authorized capital stock of the Company consists of 5,000,000 shares of
$.01 par value preferred stock and 40,000,000 shares of $.01 par value common
stock. In September 1994, the Company sold 74,000 shares of Series A convertible
preferred stock (Preferred Stock) to STAT Physicians for $370,000. The Preferred
Stock was converted into common stock at a rate of 20 shares of common stock for
each share of Preferred Stock (1,480,000 common shares) upon the completion of
STAT's initial public offering of common stock in 1995. The conversion of
Preferred Stock into common stock is a non cash investing and financing
transaction and is excluded from the 1995 consolidated statement of cash flows.
F-20
At December 31, 1995, shares of common stock are reserved for issuance
in connection with the future exercise of Class A warrants to purchase common
stock at the price of $4.50 per share (734,166 shares) and underwriter warrants
for 125,000 shares of common stock at $5.44 per share. These warrants were
issued in connection with STAT's initial public offering of common stock and the
related conversion of 10% convertible secured notes. Additionally, at December
31, 1995, 300,000 shares of common stock are reserved for issuance in connection
with the Company's stock option plan.
(12) STOCK OPTION PLAN
The Company has a stock option plan, providing for the granting of
incentive stock options or nonqualified stock options, for the benefit of its
employees and directors. Under this plan, options may be granted to purchase an
aggregate of 300,000 shares of common stock at no less than 100% (90% in the
event of a nonqualified stock option) of the fair market value of the common
stock at the time of the grant. At December 31, 1995, 10,000 unoptioned shares
were available for granting. All options which have been granted expire five
years from the date of grant. Information relating to stock options is as
follows:
<TABLE>
<CAPTION>
NUMBER OF OPTIONS OPTION PRICE PER SHARE
<S> <C> <C>
Outstanding at December 31, 1994 ......................... -- --
Granted .................................................. 290,000 $ 2.88 - 3.17
------- ----------------
Outstanding at December 31, 1995 ......................... 290,000 $ 2.88 - 3.17
======= ================
Shares exercisable at December 31, 1995 .................. 2,500 $ 3.00
======= ================
</TABLE>
(13) COMMITMENTS AND CONTINGENT LIABILITIES
The Company has certain pending and threatened litigation and claims
incurred in the ordinary course of business; however, management believes that
the probable resolution of such contingencies will not materially affect the
liquidity, the financial position, or the results of the Company's operations.
The Company procures professional liability insurance on behalf of STAT
Physicians which provides coverage on a claims-made basis during the policy
period. The coverage is purchased on a "slot" basis and extends to the Company,
to STAT Physicians and to contract physicians who perform services. Individual
policies are not provided to physicians; however, they must be prequalified for
coverage as a routine credentialing process. If a claims-made policy is not
renewed or replaced by a new policy which provides coverage retroactively, it
becomes necessary to purchase an extended reporting period endorsement.
Management intends to renew the existing claims-made policy and in the past has
either renewed or successfully purchased retroactive coverage.
F-21
Although the Company does not directly contract with hospitals or
physicians for the provision or procurement of medical services, its contractual
relationship with STAT Physicians exposes it to potential claims from litigants.
Accordingly, the Company is named as an additional insured under the
professional liability coverage of STAT Physicians.
Effective October 1, 1995, the Company established a 401(k) plan (the Plan)
for its employees. The Plan allows participants with at least one year of prior
service to make elective deferrals of up to 15% of their compensation. The Plan
also allows discretionary matching employer contributions as well as additional
discretionary contributions which shall be allocated to each eligible employee
in proportion to his or her compensation as a percentage of the compensation of
all eligible employees. Employer contributions vest at the rate of 20% per year
of service. No discretionary contributions were made to the Plan by the Company
during the year ended December 31, 1995.
F-22
(14) BUSINESS SEGMENTS
The Company operates in three business segments; emergency services,
kidney dialysis services and health care management services. Information by
business segment as of and for the years ended December 31, 1993, 1994 and 1995
is as follows:
<TABLE>
<CAPTION>
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net service revenues:
Emergency services ...................................... $ -- $ 3,672,000 $ 14,124,000
Kidney dialysis ......................................... 1,170,000 3,766,000 6,262,000
Healthcare management ................................... -- 207,000 2,755,000
------------ ------------ ------------
Total ................................................... $ 1,170,000 $ 7,645,000 $ 23,141,000
============ ============ ============
Operating income:
Emergency services ...................................... $ -- $ 202,000 $ 977,000
Kidney dialysis ......................................... 210,000 998,000 1,715,000
Healthcare management ................................... -- 123,000 1,120,000
General corporate ....................................... (55,000) (164,000) (46,000)
------------ ------------ ------------
Total ................................................... $ 155,000 $ 1,159,000 $ 3,766,000
============ ============ ============
Identifiable assets:
Emergency services ...................................... $ -- $ 2,094,000 $ 5,860,000
Kidney dialysis ......................................... 1,117,000 2,557,000 3,642,000
Healthcare management ................................... -- 103,000 970,000
General corporate ....................................... 26,000 70,000 103,000
------------ ------------ ------------
Total ................................................... $ 1,143,000 $ 4,824,000 $ 10,575,000
============ ============ ============
Depreciation and amortization:
Emergency services ...................................... $ -- $ -- $ 16,000
Kidney dialysis ......................................... 57,000 192,000 301,000
Healthcare management ................................... -- 2,000 40,000
General corporate ....................................... 2,000 2,000 3,000
------------ ------------ ------------
Total ................................................... $ 59,000 $ 196,000 $ 360,000
============ ============ ============
Capital expenditures:
Emergency services ...................................... $ -- $ -- $ 112,000
Kidney dialysis ......................................... 572,000 1,094,000 742,000
Healthcare management ................................... -- 4,000 282,000
General corporate ....................................... 5,000 -- 17,000
------------ ------------ ------------
Total ................................................... $ 577,000 $ 1,098,000 $ 1,153,000
============ ============ ============
</TABLE>
F-23
(15) SUBSEQUENT EVENTS
In January 1996 the Company reached an agreement with the Greater
Houston Division of Columbia/HCA Healthcare Corporation (Columbia) to provide
emergency medicine services to all but one of Columbia's emergency departments
in the Greater Houston Division. This agreement will result in the addition of
nine hospitals to the Company's service base between February 1 and July 1, 1996
resulting in a total of 18 hospitals served (16 of which are owned by Columbia).
The contract for services relating to this agreement was finalized in April
1996. The Houston Division hospitals (15) are covered by this contract which has
an initial term of two years and which renews automatically. This contract will
account for a significant portion of the Company's net service revenues and
operating expenses.
On January 31, 1996, and in conjunction with the Columbia agreement
noted above, the Company acquired the rights to a one hospital contract for the
provision of emergency department medical services. Consideration paid for the
contract and certain non-competition covenants consisted of $960,000 in cash and
52,174 shares of the Company's common stock. Up to an additional $100,000 may be
paid in each of the three twelve-month periods following the acquisition of the
contract based on profits realized at that hospital.
On February 1, 1996, the Company acquired intangible assets of Amedica,
Ltd. (Amedica) in a transaction that will be accounted for by the purchase
method of accounting. Amedica provides healthcare services relating to the
management of independent physician associations. Consideration paid consisted
of $200,000 in cash and 15,730 shares of the Company's common stock.
Unaudited financial information of Amedica as of December 31, 1995 and
for the year then ended is as follows:
Balance sheet information:
Current assets.................... $128,000
Total assets...................... 135,000
Current liabilities............... 25,000
Total liabilities................. 150,000
Partners' capital ................. (15,000)
=======
Operations information:
Revenue........................... $439,000
Expenses 518,000
Net loss ......................... (79,000)
=======
F-24
Unaudited proforma results of operations for the year ended December
31, 1995, giving effect to the Amedica acquisition as though it had occurred on
January 1, 1995, are as follows:
Net service revenues . . . . . . . . . . . . . . . $23,580,000
Net income . . . . . . . . . . . . . . . . . . . . . 3,222,000
===========
Net income per common share . . . . . . . . $ 0.20
===========
STAT was advised in May 1996 that the common stock (67,904 shares, with
an ascribed value of $310,000) issued in connection with the acquisitions
described in this note, may have been issued in violation of Section 5 of the
Securities Act. Such a violation would entitle the recipients to recission
rights. In July 1996, the Company offered the right of recission, which right
included the payment of the ascribed value plus accrued interest from the
acquisition dates, to the recipients. The recipients declined such offer and
asserted their right to exchange their STAT common stock for common stock of the
Company pursuant to the merger and exchange agreement between STAT and AmHealth.
Accordingly, the $310,000 will be reported as permanent equity.
In June 1996, stockholders of STAT and stockholders and partners of
AmHealth approved the New STAT Healthcare, Inc. 1996 Stock Incentive Plan under
which 1,500,000 shares of common stock of the Company became reserved for future
issuance to officers, employees, consultants and non-employee directors of the
Company. The 290,000 options outstanding at December 31, 1995, and (see note 12)
are considered to be options outstanding under this 1996 plan.
On July 22, 1996, the Company signed a commitment letter for a
$6,500,000 bank credit facility comprised of a $3,000,000 revolving line of
credit and a $3,500,000 three year, non-revolving line of credit. The formal
agreement is expected to be finalized during August 1996 and pursuant to the
commitment agreement will provide for interest at prime. Borrowings under the
lines will be collateralized by security interests in the Company's accounts
receivable and in capital assets.
F-25
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,538,000
<SECURITIES> 709,000
<RECEIVABLES> 4,831,000
<ALLOWANCES> 0
<INVENTORY> 103,000
<CURRENT-ASSETS> 8,181,000
<PP&E> 2,394,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,575,000
<CURRENT-LIABILITIES> 2,563,000
<BONDS> 1,640,000
0
0
<COMMON> 148,000
<OTHER-SE> 6,224,000
<TOTAL-LIABILITY-AND-EQUITY> 10,575,000
<SALES> 23,141,000
<TOTAL-REVENUES> 23,141,000
<CGS> 0
<TOTAL-COSTS> 19,271,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 225,000
<INCOME-PRETAX> 3,645,000
<INCOME-TAX> 1,239,000
<INCOME-CONTINUING> 2,406,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,406,000
<EPS-PRIMARY> 0.2
<EPS-DILUTED> 0.2
</TABLE>
