<PAGE> 1
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) APRIL 24, 1997
QUADRAMED CORPORATION
---------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
DELAWARE 0-21031 52-1992861
- ------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
80 E. SIR FRANCIS DRAKE BLVD., SUITE 2A, LARKSPUR, CA 94939
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 461-7725
NONE
---------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE> 2
FORM 8-K/A
--------------------
AMENDMENT NO. 1
The undersigned Registrant hereby:
1. amends Item 2 of its Current Report on Form 8-K dated May 9, 1997
(the "Form 8-K") and files such amended Item 2 herewith; and
2. amends Item 7 of the Form 8-K and files such amended Item 7
herewith.
<PAGE> 3
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On April 24, 1997, QuadraMed Corporation, a Delaware
corporation (the "Company"), through its wholly owned subsidiary Healthcare
Recovery Acquisition Corporation, a Delaware corporation ("Acquisition
Corporation"), completed the acquisition and merger of Healthcare Recovery,
Incorporated, a New Jersey corporation and successor in interest to the Synergy
Companies doing business as "Synergy HMC" ("Healthcare Recovery"). The
acquisition and merger were completed by means of an Acquisition Agreement and
Plan of Merger, dated as of March 1, 1997, as amended by the First Amendment to
Acquisition Agreement and Plan of Merger, dated as of April 22, 1997, and the
Second Amendment to Acquisition Agreement and Plan of Merger, dated as of
April 24, 1997 (collectively, the "Acquisition Agreement"). The transaction
was accounted for as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986 for tax reporting purposes. The transaction
was accounted for as a purchase for financial reporting purposes.
Pursuant to the Acquisition Agreement, the Company paid an
aggregate amount of $3,415,523 (the "Consideration"), consisting of $1,415,118
in cash and 181,885 shares of its Common Stock, the aggregate fair market value
of which was $2,000,405. In exchange for the Consideration, the Company
received all of the outstanding capital stock of Healthcare Recovery. In
addition to the Consideration, the Company repaid certain indebtedness of
Healthcare Recovery in the aggregate amount of $1,706,306. The Company has also
agreed to issue additional shares of its Common Stock to the former shareholders
of Healthcare Recovery as contingent consideration, during the next two years,
if the audited gross revenues of Acquisition Corporation exceed certain
financial thresholds. The amount of consideration paid by the Company, and the
formula for determining the contingent consideration to be paid by the Company,
was determined by arms length negotiations between the parties. The Company
used a portion of its working capital for the payment of the Consideration and
the repayment of certain indebtedness of Healthcare Recovery.
The Company has entered into a Joint Marketing and Services
Agreement, dated November 1, 1995, with Kaden Arnone, Inc. Eugene M. Arnone,
the principal shareholder of Healthcare Recovery, was also a shareholder of
Kaden Arnone, Inc. As of April 24, 1997, Mr. Arnone became an Executive Vice
President of the Company and the Company's President, Business Office
Outsourcing Services Division.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired
1. Consolidated Balance Sheet as of December 31, 1996,
and the related Statements of Operations, and
accumulated Deficit and Cash Flows for the year ended
December 31,1996.
<PAGE> 4
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Medical Claims Processing, Inc.; Healthcare Recovery
Incorporated; And Claims Management Services (a Division of
Kaden Arnone, Inc.)
We have audited the accompanying combined balance sheet of The Synergy Companies
(see Note 1) as of December 31, 1996 and the related combined statements of
operations and accumulated deficit and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of The Synergy
Companies as of December 31, 1996 and the results of their operations and their
cash flows for the year then ended in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Roseland, New Jersey
June 9, 1997
<PAGE> 5
THE SYNERGY COMPANIES
COMBINED BALANCE SHEET -- DECEMBER 31, 1996
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash $ 496,882
Accounts receivable, net of allowance for doubtful accounts of $30,150 883,815
Due from Kaden Arnone, Inc. 24,342
Prepaid expenses 25,878
-----------
Total current assets 1,430,917
PROPERTY AND EQUIPMENT, net (Notes 1, 2, 4 and 5) 370,300
OTHER ASSETS (Note 3) 148,355
-----------
Total assets $ 1,949,572
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Short-term borrowings (Note 4) $ 1,212,698
Current portion of long-term debt (Note 5) 39,090
Due to stockholder (Note 6) 379,397
Accounts payable 1,115,401
Accrued expenses 445,574
Deferred revenue 50,600
-----------
Total current liabilities 3,242,760
-----------
LONG-TERM DEBT (Note 5) 74,824
-----------
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' DEFICIT:
Capital stock (Note 8)-
HRI common, no par, 2,500 shares authorized, 1,115 shares issued and outstanding 251
MCP common, no par, 1,000 shares authorized, 500 shares issued and outstanding 1,000
MCP treasury stock, 250 shares, at cost (28,000)
Additional paid-in capital 33,125
Accumulated deficit (1,374,388)
-----------
Total stockholders' deficit (1,368,012)
-----------
Total liabilities and stockholders' deficit $ 1,949,572
===========
</TABLE>
The accompanying notes to financial statements
are an integral part of this balance sheet.
<PAGE> 6
THE SYNERGY COMPANIES
COMBINED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
REVENUE (Note 1):
Services $ 7,893,341
OPERATING EXPENSES:
Cost of services 6,317,468
General and administrative 1,910,569
Sales and marketing 607,927
Impairment loss (Note 2) 103,083
-----------
Total operating expenses 8,939,047
-----------
Loss from operations (1,045,706)
INTEREST EXPENSE 136,672
-----------
Net loss (1,182,378)
ACCUMULATED DEFICIT - JANUARY 1, 1996 (192,010)
-----------
ACCUMULATED DEFICIT - DECEMBER 31, 1996 ($1,374,388)
===========
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
<PAGE> 7
THE SYNERGY COMPANIES
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,182,378)
Adjustments to reconcile net loss to net cash used in operating activities-
Depreciation and amortization, including impairment loss 216,207
Changes in operating assets and liabilities-
Accounts receivable, net 542,473
Prepaid expenses 3,041
Other assets (57,731)
Accounts payable 411,771
Accrued expenses (82,262)
Deferred revenue 11,305
-----------
Net cash used in operating activities (137,574)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES -- Purchases of property
and equipment (297,271)
-----------
Net cash used in investing activities (297,271)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from short-term borrowings 361,728
Net proceeds from shareholder loan 379,397
Net proceeds from long-term debt 67,401
Repayments under capital leases (8,820)
Repayments to and advances to Kaden Arnone, Inc. (481,093)
-----------
Net cash provided by financing activities 318,613
-----------
Net decrease in cash (116,232)
CASH, beginning of period 613,114
-----------
CASH, end of period $ 496,882
===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for-
Interest $ 124,775
Taxes 24,199
===========
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
<PAGE> 8
THE SYNERGY COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(1) SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
Basis of Presentation-
The combined financial statements include The Synergy Companies,
composed of, Medical Claims Processing, Inc. (MCP); Healthcare Recovery
Incorporated (HRI); and Claims Management Services (a division of Kaden
Arnone, Inc.) (CMS). All significant intercompany accounts and
transactions have been eliminated.
The individual ownership of The Synergy Companies at December 31, 1996
is as follows-
<TABLE>
<CAPTION>
CMS HRI MCP
----- ----- -----
<S> <C> <C> <C>
Eugene Arnone (a) 26.29% 92.21% 100.0%
Frederick Stodolak (a) 15.89 -- --
David Rikkola (a) 17.18 -- --
Joanne Vaul (a) 12.97 -- --
Marc Stahl (a) 12.97 -- --
Gregory Adams (a) 7.40 -- --
Samuel Donio (a) 7.30 -- --
Charles Hehn -- 6.23 --
Deborah Marsh -- 1.56 --
</TABLE>
(a) Kaden Arnone, Inc. Stockholders
On January 30, 1997 CMS was split off from Kaden Arnone, Inc. and
incorporated as CMS Receivables Management, Inc. (CMS, Inc.).
On January 30, 1997 CMS, Inc. and MCP were merged with and into HRI.
Since all of the entities were deemed to be under common control the
merger was accounted for in a manner similar to a pooling of interests.
Each share of common stock of the surviving corporation (HRI, doing
business as Synergy HMC) remained issued and outstanding following the
merger. Each share of the MCP stock and the CMS, Inc. stock was
converted into .808 and .0867 shares of the surviving corporation
stock, respectively following the merger.
Effective April 24, 1997, all of the common stock and net assets of The
Synergy Companies were acquired by QuadraMed Corporation ("QuadraMed"),
a Delaware company. Pursuant to the acquisition agreement, QuadraMed
paid an aggregate amount of approximately $3,416,000 consisting of
$1,416,000 in cash and 181,885 shares of common stock, the aggregate
fair value of which was $2,000,000. In addition, QuadraMed repaid
certain indebtedness of The Synergy Companies of approximately
$1,706,000 (see Notes 4, 5 and 6).
<PAGE> 9
Business-
The Synergy Companies, located in Howell, New Jersey provide accounts
receivable management services as well as hospital and physician
billing services and collection services.
Income Taxes-
HRI and MCP and their stockholders elected to be taxed as an S
Corporations under the provisions of the Internal Revenue Code. As
such, the taxable income of the Companies is included in the individual
tax returns of the stockholders for Federal income tax purposes. HRI
has also elected to be treated as an S Corporation for state tax
purposes. Accordingly, HRI provides for the applicable state income
taxes at the S Corporation rate. MCP provides for state income taxes at
C Corporation rate. CMS is a division of an S Corporation for both
Federal and state purposes.
Deferred state tax assets and liabilities for HRI and MCP are
determined based on the temporary differences between the financial
accounting and tax bases of assets and liabilities. Deferred tax assets
or liabilities at the end of each period are determined using the
currently enacted tax rates expected to apply to taxable income in the
periods in which the deferred tax asset or liability is expected to be
settled or realized. As of December 31, 1996, there were no significant
temporary differences requiring deferred tax provisions or credits.
Revenue Recognition-
The Synergy Companies generate revenue from professional services
rendered. Revenue is recognized as earned under the contingency
contract, as defined within the contract, with the corresponding cost
of providing those services reflected as a cost of service.
Substantially all customers are billed on a contingency basis. Billings
to customers for out-of-pocket expenses are recorded as a reduction of
expenses incurred.
Property and Equipment-
Property and equipment is stated at cost, less accumulated
depreciation. Depreciation is provided using the straight-line method
over the estimated useful lives of the assets (five to twenty years).
Costs of maintenance and repairs are charged to expenses as incurred.
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 reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
<PAGE> 10
(2) PROPERTY AND EQUIPMENT:
Property and equipment consist of the following as of December 31, 1996-
<TABLE>
<S> <C>
Equipment $ 1,233,610
Furniture and fixtures 120,446
Leasehold improvements 34,251
Automobiles 24,032
Computer software 22,641
-----------
1,434,980
Less - Accumulated depreciation (1,064,680)
-----------
$ 370,300
===========
</TABLE>
Effective January 1, 1996 The Synergy Companies have adopted the
provisions of Statement of Financial Accounting Standard No. 121,
"Accounting for the Impairment of Long-Lived Assets" ("SFAS 121"). SFAS
121 requires, among other things, that an entity review its long-lived
assets and certain related intangibles for impairment whenever changes
in circumstances indicate that the carrying amount of an asset may not
be fully recoverable. As a result of The Synergy Companies review of
their long-lived assets, approximately $103,000 was charged to
operations in 1996. This amount represents the amount by which the
carrying value of the assets exceeded the fair value of the assets
which was determined by a professional appraisal using both the cost
and market approach.
(3) OTHER ASSETS:
Other assets consists principally of deposits on leased property.
(4) SHORT-TERM BORROWINGS:
The Synergy Companies are co-borrowers with Kaden Arnone, Inc. Together
the companies maintain a revolving line of credit which provides for
borrowings up to $1,500,000. The portion of the outstanding borrowings
attributable to The Synergy Companies and Kaden Arnone, Inc. totaled
$1,212,698 and $283,451 at December 31, 1996, respectively. The balance
is due on demand. Interest is payable monthly at the Bank's prime rate
plus .75% (9.0% at December 31, 1996). The line is secured by
substantially all of the assets of HRI, MCP and Kaden Arnone, Inc.
As a result of the acquisition of Synergy HMC by QuadraMed Corporation on
April 24, 1997 (see Note 1), all of the outstanding debt at December 31,
1996 has been subsequently repaid.
(5) LONG-TERM DEBT:
Long-term debt consists of the following-
<TABLE>
<CAPTION>
Total Current Long-Term
-------- -------- ---------
<S> <C> <C> <C>
CoreStates - Equipment Loan (A) $ 24,978 $ 10,240 $ 14,738
CoreStates - Equipment Loan (B) 52,041 15,380 36,661
Covenant - Equipment Loan (C) 16,743 4,930 11,813
Covenant - Equipment Loan (D) 20,152 8,540 11,612
-------- -------- --------
$113,914 $ 39,090 $ 74,824
======== ======== ========
</TABLE>
<PAGE> 11
(A) Term loan payable in monthly principal payments of $853 through
July 1999 plus interest at the Bank's prime rate plus 1% (9.25% at
December, 31, 1996). Secured by substantially all of the assets of
HRI.
(B) Term loan payable in monthly principal payments of $1,282 through
July 2000 plus interest at the Bank's prime rate plus 1% (9.25% at
December, 31, 1996). Secured by substantially all of the assets of
HRI.
(C) Term loan payable in monthly principal payments of $375 through
June 2000, plus interest at the Bank's prime rate plus 1% (9.25%
at December 31, 1996). Secured by substantially all of the assets
of HRI and guaranteed by certain stockholders of HRI.
(D) Term loan payable in monthly principal payments of $650 through
May 1999 plus interest at the Bank's prime rate plus 1% (9.25% at
December 31, 1996). Secured by substantially all of the assets of
HRI and guaranteed by certain stockholders of HRI.
As a result of the acquisition of Synergy HMC by QuadraMed Corporation on
April 24, 1997 (see Note 1), all of the outstanding debt at December 31,
1996 has been subsequently repaid.
(6) DUE TO STOCKHOLDERS:
The amounts due to stockholder are due on demand and bear interest at 6%
per year. As a result of the acquisition of The Synergy Companies by
QuadraMed Corporation on April 24, 1997 all amounts due to stockholders
have subsequently been repaid.
(7) RETIREMENT PLAN:
The Synergy Companies maintain a combined 401(K) and profit sharing plan.
The profit sharing plan is a discretionary defined contribution plan
which covers substantially all full-time employees. If a participant
elects to contribute to the 401(k) plan, 25% of the first 3% of the
contribution is matched by The Synergy Companies. Total expense related
to the plan was $25,352 for year ended December 31, 1996.
(8) STOCK REDEMPTION AGREEMENTS:
Transactions related to the common stock of The Synergy Companies are
subject to terms and conditions of stockholders' agreements. Stockholders
may sell or otherwise dispose of their stock only in accordance with this
agreement.
Included within the agreements are certain put and call options. A
stockholder has the right to sell (put option) all of his stock to the
individual Synergy Company (The Company) upon death, permanent
disability, or retirement. The price to be paid by The Company is
predominately based upon the value of The Company and the percentage of
ownership of the withdrawing stockholder.
The Company has the option to call all of the stock owned by any
stockholder upon certain terms and conditions. The price to be paid is
based upon the applicable value of The Company and other matters.
<PAGE> 12
All stockholder agreements were canceled upon the formation of Synergy
HMC (Note 1).
(9) COMMITMENTS AND CONTINGENCIES:
Commitments-
The Synergy Companies leases office facilities and office equipment
under various operating leases. The minimum annual lease payments for
future years are as follows-
<TABLE>
<S> <C>
1997 $578,000
1998 585,000
1999 607,000
2000 540,000
2001 12,000
</TABLE>
Lease expense was approximately $633,000 for the year ended December
31, 1996.
Contingencies-
The Synergy Companies are involved in a legal proceeding in which a
former employee has alleged improper termination under the New Jersey
Conscientious Employees' Protection Act. The Synergy Companies have
indicated that the plaintiff's employment was terminated for legitimate
and independent reasons and have filed a motion for summary judgment.
Another action has been brought by a former part-time employee of MCP,
alleging employment discrimination in violation of New Jersey's Law
Against Discrimination. The plaintiff, who is deaf, alleges that MCP
was obligated to provide an interpreter. The Synergy Companies position
is that there were independent and legitimate performance based reasons
for the plaintiff's termination and that, in any event, the imposition
of the requirement of an interpreter given the part-time status of
plaintiff, the nature of plaintiff's position, the size of MCP and its
financial circumstances at the time would constitute an undue burden.
The Synergy Companies from time to time are involved in various legal
proceedings incurred in the normal course of business. In the opinion
of management, if adversely decided, none of these proceedings would
have a material effect on The Synergy Companies combined financial
statements.
<PAGE> 13
(b) Pro Forma Financial Information
1. Consolidated Balance Sheet as of March 31, 1997, and
Statements of Operations for the three months ended
March 31, 1997 and the year ended December 31, 1996.
<PAGE> 14
QUADRAMED CORPORATION AND THE SYNERGY COMPANIES
PRO FORMA
CONDENSED COMBINED BALANCE SHEETS
(IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31, 1997
---------------------------
HISTORICAL HISTORICAL
QUADRAMED THE SYNERGY PRO FORMA PRO FORMA
CORPORATION COMPANIES(a) ADJUSTMENTS COMBINED
----------- ------------ ----------- ---------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .............................. $ 16,009 $ 351 $(3,121)(b) $ 13,239
Restricted cash ........................................ 31 - 31
Accounts receivable, net ............................... 5,515 799 (10)(c) 6,304
Prepaid expenses and other ............................. 497 62 559
-------- ------- --------
Total current assets ............................... 22,052 1,212 20,133
-------- ------- --------
EQUIPMENT
Equipment .............................................. 3,960 1,677 5,637
Accumulated depreciation ............................... (1,765) (995) (2,760)
-------- ------- --------
Equipment, net ..................................... 2,195 682 2,877
-------- ------- --------
Capitalized software development costs, net ............ 1,007 - 1,007
Acquired software, net ................................. 1,535 - 1,535
Goodwill, net .......................................... 1,918 - 4,925 (d) 6,843
Other .................................................. 85 125 210
-------- ------- --------
$ 28,792 $ 2,019 $ 32,605
======== ======= ========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings ................................. $ - $ 1,283 $(1,283)(b) $ -
Current portion of long-term debt ..................... - 13 (13)(b) -
Current maturities of capital lease obligations ....... 80 56 136
Due to stockholder .................................... - 385 (385)(b) -
Accounts payable ...................................... 619 741 (10)(c) 1,350
Accrued liabilities ................................... 1,176 772 1,948
Deferred revenue ...................................... 1,369 48 1,417
-------- ------- --------
Total current liabilities ......................... 3,244 3,298 4,851
-------- ------- --------
Capital lease obligations, less current portion ....... 127 195 (11)(b) 311
--------
Long-term debt ........................................ - 14 (14)(b) -
-------- ------- --------
Total liabilities ....................................... 3,371 3,507 5,162
-------- ------- --------
STOCKHOLDERS' EQUITY
Common stock .......................................... 58 1 1 (b) 60
Deferred compensation ................................. (314) - - (314)
Treasury stock ........................................ - (28) 28 (e) -
Additional paid-in capital ............................ 40,304 22 1,998 (b) 42,324
Accumulated deficit ................................... (14,627) (1,483) 1,483 (e) (14,627)
-------- ------- --------
Total stockholders' equity ........................ 25,421 (1,488) 27,443
-------- ------- --------
$ 28,792 $ 2,019 $ 32,605
======== ======= ========
</TABLE>
<PAGE> 15
QUADRAMED CORPORATION AND THE SYNERGY COMPANIES
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997
-----------------------------------------------------------
HISTORICAL(a)
HISTORICAL THE SYNERGY PRO FORMA PRO FORMA
QUADRAMED COMPANIES ADJUSTMENTS COMBINED
---------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Licenses............................................ $4,163 $ -- $ (4)(f) $4,159
Services............................................ 971 1,722 -- 2,693
------ ------ ---- ------
Total......................................... 5,134 1,722 (4) 6,852
------ ------ ---- ------
OPERATING EXPENSES:
Cost of licenses.................................... 1,601 -- 1,601
Cost of services.................................... 573 1,398 1,971
General and administration.......................... 832 385 1,217
Sales and marketing................................. 765 -- 765
Research and development............................ 647 -- 647
Amortization of goodwill............................ 120 -- 123 (g) 243
Non-recurring start-up charges...................... 334 -- 334
------ ------ ---- ------
Total operating expenses...................... 4,872 1,783 123 6,778
------ ------ ---- ------
INCOME (LOSS) FROM OPERATIONS......................... 262 (61) 74
OTHER INCOME (EXPENSE):
Interest income..................................... 226 -- 226
Interest expense.................................... -- (48) (48)
Other income (expense), net......................... (5) -- (5)
------ ------ ------
Total other income (expense).................. 221 (48) 173
------ ------ ------
Income (loss) before provision for income taxes....... 483 (109) 247
Provision for income taxes.......................... 38 38
------ ------ ------
NET INCOME (LOSS)..................................... $ 445 $ (109) $ 209
====== ====== ======
NET INCOME (LOSS) PER SHARE........................... $ 0.03
======
PRO FORMA WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES................................... $7,586
======
</TABLE>
<PAGE> 16
QUADRAMED CORPORATION
AND THE SYNERGY COMPANIES
NOTES TO PRO FORMA CONDENSED COMBINED
BALANCE SHEET AND STATEMENT OF OPERATIONS
(UNAUDITED)
NOTE 1. PRO FORMA ADJUSTMENTS
Certain pro forma adjustments have been made to the accompanying pro
forma condensed combined balance sheet and statement of operations as
described below:
(a) Includes the Synergy Companies historical condensed
combined balance sheet as of March 31, 1997, and results of operations for the
three months ended March 31, 1997.
(b) Reflects the purchase price which was paid with cash and
the issuance of common stock and the repayment of indebtedness of the Synergy
Companies for $1,706,000.
(c) Reflects the elimination of intercompany receivables and
payables between QuadraMed and the Synergy Companies.
(d) Reflects the recording of goodwill acquired from the
acquisition of the Synergy Companies.
(e) Reflects the elimination of the Synergy Companies
stockholders' equity.
(f) Reflects the elimination of revenues from licensing
transactions between QuadraMed and the Synergy Companies during the three
months ended March 31, 1997.
(g) Reflects the amortization of goodwill acquired of
$4,925,000 which will be amortized on a straight line basis over its estimated
life of ten years.
<PAGE> 17
QUADRAMED CORPORATION AND THE SYNERGY COMPANIES
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
---------------------------------------------------------
HISTORICAL(a)
HISTORICAL THE SYNERGY PRO FORMA PRO FORMA
QUADRAMED COMPANIES ADJUSTMENTS COMBINED
---------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Licenses ................................ $16,223 $ -- $(16)(b) $16,207
Services ................................ 2,865 7,893 10,758
------- ------- -------
Total ............................... 19,088 7,893 26,965
------- ------- -------
OPERATING EXPENSES:
Cost of licenses ........................ 7,294 -- 7,294
Cost of services ........................ 2,683 6,317 9,000
General and administration .............. 3,221 1,911 5,132
Sales and marketing ..................... 2,434 608 3,042
Research and development ................ 2,499 -- 2,499
Amortization of goodwill ................ 460 -- 493(c) 953
Impairment Loss ......................... -- 103 103
------- ------- -------
Total operating expenses ............ 18,591 8,939 28,023
------- ------- -------
INCOME (LOSS) FROM OPERATIONS ............. 497 (1,046) (1,058)
OTHER INCOME (EXPENSES):
Interest income ......................... 214 -- 214
Interest expense ........................ (543) (137) (680)
Other income (expense), net ............. (15) -- (15)
------- ------- -------
Total other income (expense) ........ (344) (137) (481)
------- ------- -------
NET INCOME (LOSS) ......................... $ 153 $(1,183) $(1,539)
======= ======= =======
NET INCOME (LOSS) PER SHARE ............... $ (0.29)
PRO FORMA WEIGHTED AVERAGE COMMON =======
AND COMMON EQUIVALENT SHARES ............ 5,271
=======
</TABLE>
<PAGE> 18
QUADRAMED CORPORATION
AND THE SYNERGY COMPANIES
NOTES TO PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
(Unaudited)
NOTE 1. PRO FORMA ADJUSTMENTS
Certain pro forma adjustments have been made to the accompanying pro
forma condensed combined statements of operations as described below:
(a) Includes the Synergy Companies historical results of
operations for the year ended December 31, 1996.
(b) Reflects the elimination of revenues from licensing
transactions between QuadraMed and the Synergy Companies during 1996.
(c) Reflects the amortization of goodwill acquired of $4,925,000
which will be amortized on a straight line basis over its estimated life
of ten years.
F-28
<PAGE> 19
(c) Exhibits
*2.5 Acquisition Agreement and Plan of Merger, dated as of
March 1, 1997, by and among QuadraMed Corporation,
Healthcare Recovery Acquisition Corporation,
Healthcare Recovery, Incorporated and its
Shareholders (the "Acquisition Agreement and Plan of
Merger").
*2.6 First Amendment to Acquisition Agreement and Plan of
Merger, dated as of April 22, 1997.
*2.7 Second Amendment to Acquisition Agreement and Plan of
Merger, dated as of April 24, 1997.
*10.37 Letter dated April 22, 1997, from QuadraMed
Corporation to Eugene M. Arnone, regarding terms of
employment.
*10.38 Non-Competition and Non-Circumvention Agreement,
dated March 1, 1997, by and among QuadraMed
Corporation, Healthcare Recovery Acquisition
Corporation and Eugene M. Arnone.
* Previously filed.
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 hereunto duly authorized.
Dated: July 8, 1997 By: /s/ JAMES D. DURHAM
----------------------------
Name: James D. Durham
Title: Chairman of the Board,
President & Chief
Executive Officer
