HEALTHTRONICS INC /GA
8-K, 2000-05-15
ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS
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<PAGE>   1

                                  UNITED STATES
                       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):
                                January 25, 2000


                               HealthTronics, Inc.
           (Exact name of the Registrant as specified in its charter)


           Georgia                      001-14921                58-2210668
(State or other jurisdiction of  (Commission File Number)    (I.R.S. Employer
incorporation and organization)                             identification No.)

- --------------------------------------------------------------------------------

                         1841 West Oak Parkway, Suite A
                             Marietta, Georgia 30062
               (Address of Principal Executive Offices) (Zip Code)

               Registrant's telephone number, including area code:
                                  770-419-0691

<PAGE>   2

Item 2.  Acquisition or Disposition of Assets.

         On January 24, 2000, HealthTronics, Inc. (the "Company"), pursuant to
an Asset Purchase Agreement dated December 10, 1999, completed the acquisition
of the assets of Health Horizons (E.S.W.L.) L.P. for $850,000 in cash and the
assumption of certain liabilities, including a lease, trade and accounts payable
and obligations under regulatory permits. The assets purchased included a
lithotripter and related medical equipment, other furniture, equipment, patient
records and other related assets used in New Jersey Kidney Stone Treatment
Center. The purchase price was determined and negotiated by the parties based on
the expected annual cash flow to be generated by the assets purchased. The
Company has pre-negotiated (subject to negotiation of final agreement terms) to
sell the assets purchased to a partnership which will be managed by the Company
and of which the Company will own less than 20%. The remaining partners will be
independent of the Company. The Company financed the acquisition with working
capital generated by its business. Although financial information is included in
this report on a pro forma basis as though the entity purchased had been owned
by the Company for the year ended December 31, 1999 and for the three months
ended March 31, 2000 and 1999 this information is not indicative of financial
results that should be expected in the future. The Company never intended to
retain these assets.


Item 7.  Financial Statements, Pro Forma Financial Information and Exhibits.

         a.       Financial Statements of Business Acquired

         The following audited financial statements of Health Horizons
         (E.S.W.L.) L.P. as of and for the years ended December 31, 1999
         and 1998 are provided herein:

                  (1)      Independent Auditor's Report dated February 14, 2000

                  (2)      Balance sheets as of December 31, 1999 and 1998

                  (3)      Statements of Income for the years ended December 31,
                           1999 and 1998

                  (4)      Statements of Changes in Partners' Capital for the
                           years ended December 31, 1999 and 1998

                  (5)      Statements of Cash Flows for the years ended December
                           31, 1999 and 1998

                  (6)      Notes to Financial Statements for the years ended
                           December 31, 1999 and 1998

                  (7)      Schedules of Cost of Revenues for the years ended
                           December 31, 1999 and 1998

                  (8)      Schedules of General and Administrative Expenses for
                           the years ended December 31, 1999 and 1998

<PAGE>   3

         b.       Pro Forma Financial Information

         The following unaudited combined pro forma financial statements
         relative to the acquisition is provided herein as follows:

                  (1)      Pro Forma Combined Condensed Balance Sheet as of
                           December 31, 1999

                  (2)      Pro Forma Combined Condensed Statements of Income
                           for the year ended December 31, 1999

                  (3)      Pro Forma Combined Condensed Statements of Income
                           for the three months ended March 31, 2000

                  (4)      Pro Forma Combined Condensed Statements of Income
                           for the three months ended March 31, 1999

         The unaudited combined pro forma Statements of income give effect to
         the acquisition by the Company of certain assets of Health Horizons
         (E.S.W.L.) L.P., as if the acquisition had occurred on January 1 of the
         periods presented. The unaudited proforma balance sheet give effect to
         the acquisition by the Company of certain assets of Health Horizons
         (E.S.W.L.) L.P., as if the acquisition had occurred on December 31,
         1999. The pro forma adjustments are based upon estimates, currently
         available information and certain assumptions management deems
         appropriate. The unaudited combined pro forma financial data presented
         herein are not necessarily indicative of the results that the Company
         would have obtained had such events occurred at the beginning of the
         periods, as assumed, or of the future results of the Company.
         Furthermore the Company never intended to retain these assets for an
         extended period of time. The Company had pre-negotiated (subject to
         negotiation of final agreement terms) the sale of the assets at the
         time they were purchased.


<PAGE>   4

         c.       Exhibits

                  2.1      Asset Purchase Agreement dated December 10, 1999

                  23.1     Consent of Withum, Smith & Brown

<PAGE>   5

INDEPENDENT AUDITORS' REPORT


To the Board of Directors,
Health Horizons (E.S.W.L.) L.P.:

We have audited the accompanying balance sheets of Health Horizons (E.S.W.L.)
L.P., as of December 31, 1999 and 1998, and the related statements of income,
changes in partners' capital and cash flows for the years then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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 provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Health Horizons (E.S.W.L.) L.P.
as of December 31, 1999 and 1998, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules of cost of revenues and
general and administrative expenses are presented for purposes of additional
analysis and are not a required part of the basic financial statements. Such
information has been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.


WithumSmith+Brown
New Brunswick, New Jersey


February 14, 2000

<PAGE>   6
                         HEALTH HORIZONS (E.S.W.L.) L.P.
                                 BALANCE SHEETS
                           DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                    1999            1998
                                                                 ----------      ----------
<S>                                                              <C>             <C>

       ASSETS

Current Assets:
   Cash and cash equivalents                                     $  937,081      $  499,656
   Patient accounts receivable, less allowance for doubtful
     accounts of $134,429 in 1999 and $150,828 in 1998              634,749         596,348
   Interest receivable                                                4,361           2,502
   Prepaid expenses                                                  15,846          24,298
   Inventory                                                         10,632          14,436
   Advances to affiliate - CJHCC                                     51,849          60,940
                                                                 ----------      ----------
       Total Current Assets                                       1,654,518       1,198,180

Property and Equipment - Net                                        391,298         475,823
                                                                 ----------      ----------

       TOTAL ASSETS                                              $2,045,816      $1,674,003
                                                                 ==========      ==========


       LIABILITIES AND PARTNERS' CAPITAL

Current Liabilities:
   Accounts payable                                              $  406,771      $  212,566
   Accrued liabilities                                               80,377          11,401
   Advances from affiliate - CJHCC                                  137,917          73,780
   Advances from RWJUH                                               30,772          30,483
                                                                 ----------      ----------
       Total Current Liabilities                                    655,837         328,230


Partners' Capital                                                 1,389,979       1,345,773
                                                                 ----------      ----------

       TOTAL LIABILITIES AND PARTNERS' CAPITAL                   $2,045,816      $1,674,003
                                                                 ==========      ==========
</TABLE>

The Notes to Financial Statements are an integral part of these statements.


                                       2
<PAGE>   7

                         HEALTH HORIZONS (E.S.W.L.) L.P.
                              STATEMENTS OF INCOME
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                      1999              1998
                                                   -----------       -----------
<S>                                                <C>               <C>

Revenues:
   Net patient service revenue                     $ 3,491,061       $ 3,365,340
   Other revenue                                           311             1,714
                                                   -----------       -----------
       Total Revenues                                3,491,372         3,367,054

Cost of Revenues                                       433,825           442,621
                                                   -----------       -----------

Gross Profit                                         3,057,547         2,924,433

General and Administrative Expenses                  1,596,698         1,464,520
                                                   -----------       -----------

Income From Operations                               1,460,849         1,459,913

Other (Income) Expense:
   Interest income                                     (34,822)          (31,958)
   Loss on disposal of property and equipment           54,965                --
                                                   -----------       -----------
       Total Other (Income) Expense - Net               20,143           (31,958)
                                                   -----------       -----------

Net Income                                         $ 1,440,706       $ 1,491,871
                                                   ===========       ===========
</TABLE>

The Notes to Financial Statements are an integral part of these statements.


                                       3
<PAGE>   8

                         HEALTH HORIZONS (E.S.W.L.) L.P.
                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                            General          Limited
                                            Partner          Partners            Total
                                           ---------       -----------       -----------
<S>                                        <C>             <C>               <C>

Partners' Capital - January 1, 1998        $ 186,996       $ 1,183,106       $ 1,370,102

Net Income - 1998                            372,968         1,118,903         1,491,871

Distribution to Partners - 1998             (379,050)       (1,137,150)       (1,516,200)
                                           ---------       -----------       -----------

Partners' Capital - December 31, 1998        180,914         1,164,859         1,345,773

Net Income - 1999                            360,177         1,080,529         1,440,706

Distribution to Partners - 1999             (349,125)       (1,047,375)       (1,396,500)
                                           ---------       -----------       -----------

Partners' Capital - December 31, 1999      $ 191,966       $ 1,198,013       $ 1,389,979
                                           =========       ===========       ===========
</TABLE>

The Notes to Financial Statements are an integral part of these statements.


                                       4
<PAGE>   9

                         HEALTH HORIZONS (E.S.W.L.) L.P.
                            STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                           1999               1998
                                                        -----------       -----------
<S>                                                     <C>               <C>

Cash Flows From Operating Activities:
Net income                                              $ 1,440,706       $ 1,491,871
   Adjustments to reconcile net income to
     net cash provided by operating activities:
     Loss on disposal of property and equipment              54,965                --
     Depreciation and amortization                           73,985           101,641
     Change in:
       Patient accounts receivable                          (38,401)           96,704
       Interest receivable                                   (1,859)              195
       Prepaid expenses                                       8,452            (5,459)
       Inventory                                              3,804            (7,729)
       Advances to affiliate - CJHCC                          9,091            19,090
       Accounts payable                                     194,205            98,965
       Accrued liabilities                                   68,976            (8,821)
       Advances from affiliate - CJHCC                       64,137           (80,012)
       Advances from RWJUH                                      289             2,759
                                                        -----------       -----------
         Net Cash Provided By Operating Activities        1,878,350         1,709,204

Cash Flows From Investing Activities:
   Purchases of property and equipment                      (44,425)           (6,975)

Cash Flows From Financing Activities:
   Distributions to partners                             (1,396,500)       (1,516,200)
                                                        -----------       -----------

Net Increase In Cash and Cash Equivalents                   437,425           186,029

Cash and Cash Equivalents at Beginning of Year              499,656           313,627
                                                        -----------       -----------

Cash and Cash Equivalents at End of Year                $   937,081       $   499,656
                                                        ===========       ===========
</TABLE>

The Notes to Financial Statements are an integral part of these statements.


                                       5
<PAGE>   10
                         HEALTH HORIZONS (E.S.W.L.) L.P.
                          NOTES TO FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

         Significant accounting policies followed by the Partnership in the
         preparation of the accompanying financial statements are summarized
         below:

         NATURE OF BUSINESS OPERATIONS

         Health Horizons (E.S.W.L.) L.P. is organized under the Uniformed
         Limited Partnership Act of the State of New Jersey. It was formed on or
         about July 23, 1986. The Partnership was formed to provide a regional
         health care facility for kidney stone treatment using Extracorporeal
         Shock Wave Lithotripsey, (E.S.W.L.). The Partnership is located in New
         Brunswick, New Jersey.

         CASH AND CASH EQUIVALENTS

         Cash and cash equivalents include cash on hand and in the bank, as well
         as all short-term securities held for the primary purpose of general
         liquidity. Such securities normally mature within three months from the
         date of acquisition.

         INVENTORY

         Inventory consists of electrodes and medical supplies and is carried at
         the lower of cost or market, with cost being determined on the
         first-in, first-out basis.

         PROPERTY AND EQUIPMENT

         Property and equipment is recorded at cost. Depreciation and
         amortization is provided on the straight-line method over the estimated
         useful lives of the respective assets, generally thirty-one and a half
         years for leasehold improvements and seven years for equipment.

         Maintenance and repairs are charged to expense as incurred; major
         renewals and betterments are capitalized. When items of property or
         equipment are sold or retired, the related cost and accumulated
         depreciation are removed from the accounts and the resulting gain or
         loss is included in income.

         INCOME TAXES

         The income of the Partnership is included in the current taxable income
         of the partners. Consequently, Partnership net income is presented
         without a provision for income taxes.

         NET PATIENT SERVICE REVENUE

         The partnership has agreements with third-party payors that provide for
         payments to the Organization at amounts different from its established
         rates. Payment arrangements include prospectively determined rates per
         discharge, reimbursed costs, discounted charges, and per diem payments.
         Net patient service revenue is reported at the estimated net realizable
         amounts from patients, third-party payors, and others for services
         rendered, including estimated retroactive adjustments under
         reimbursement agreements with third-party payors. Retroactive
         adjustments are accrued on an estimated basis in the period the related
         services are rendered and adjusted in future periods as final
         settlements are determined.


                                       6
<PAGE>   11

                         HEALTH HORIZONS (E.S.W.L.) L.P.
                          NOTES TO FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

         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.

         RECLASSIFICATIONS

         Certain amounts reported in the 1998 financial statements have been
         reclassified to conform to the 1999 presentations.

NOTE 2 - PARTNERSHIP AGREEMENT:

         From the inception of the Partnership, any income or loss generated was
         to be allocated 95 percent to the limited partners and 5 percent to the
         general partner until the limited partners' accumulated distributions
         were equal to their capital contributions. Thereafter, any income or
         loss generated will be allocated 75 percent to the limited partners and
         25 percent to the general partner. As of 1990, the limited partners'
         cumulative distributions were in excess of their capital contributions.
         Therefore, income generated in 1999 and 1998 was allocated 25% to the
         general partner and 75% to the limited partners.

NOTE 3 - INVENTORY:

         At December 31, inventory consisted of the following:

<TABLE>
<CAPTION>
                                  1999         1998
                                 -------      -------

           <S>                   <C>          <C>
           Electrodes            $   116      $ 5,365
           Medical supplies       10,516        9,071
                                 -------      -------
              Total              $10,632      $14,436
                                 =======      =======
</TABLE>

NOTE 4 - PROPERTY AND EQUIPMENT:

         The major classifications of property and equipment are summarized as
         follows at December 31:

<TABLE>
<CAPTION>
                                                 1999            1998
                                              ----------      ----------
           <S>                                <C>             <C>
           Property and Equipment:
                  Equipment                   $  606,745      $  562,321
                  Leasehold improvements         481,792         560,422
                                              ----------      ----------
                                               1,088,537       1,122,743
           Less Accumulated Depreciation
                  and Amortization               697,239         646,920
                                              ----------      ----------

           Property and Equipment - Net       $  391,298      $  475,823
                                              ==========      ==========
</TABLE>

         Depreciation and amortization expense charged to operations amounted to
         $73,985 in 1999 and $101,641 in 1998.


                                       7
<PAGE>   12

                         HEALTH HORIZONS (E.S.W.L.) L.P.
                          NOTES TO FINANCIAL STATEMENTS


NOTE 5 - COMMITMENTS:

         The principal types of property leased by the Partnership are office
         and operating space. The most significant obligations under this lease
         are insurance, utilities, repairs and maintenance. The lease expired in
         December of 1999, and will be paid on a month to month basis.

         Total rent expense for the Partnership was $107,105 in 1999 and $92,328
         in 1998.

NOTE 6 - RELATED PARTY TRANSACTIONS:

         The Partnership has entered into a management agreement with its
         general partner, Central Jersey Health Care Corporation (CJHCC). The
         general partner has agreed to provide an established level of staffing,
         certain designated medical equipment and certain office furnishings.
         The compensation relating to this agreement amounted to $862,353 and
         $863,566 for 1999 and 1998, respectively.

         At December 31, 1999 and 1998, the Partnership had net advances due to
         the general partner (CJHCC) in the amount of $86,068 and $12,840,
         respectively. The net advances are unsecured and non-interest bearing.

         At December 31, 1999 and 1998, the Partnership is liable to Robert Wood
         Johnson University Hospital (RWJUH), a member of the general partner,
         which is a non-profit organization and whose parent company is a
         limited partner, in the amount of $30,772 and $30,483, respectively,
         for purchase of supplies and services. The total amount of purchases
         and services included as a charge to operations amounted to
         approximately $330,000 and $347,000 for the years ended December 31,
         1999 and 1998, respectively.

NOTE 7 - CONCENTRATION OF CREDIT RISK:

         The Kidney Stone Treatment center is located in New Brunswick, New
         Jersey. The Center grants credit in the form of accounts receivable to
         users of its center without collateral, most of whom are local
         residents and are insured under third party payor agreements.

         The Organization maintains cash balances at one financial institution
         in excess of amounts insured by the Federal Deposit Insurance
         Corporation. Management monitors the soundness of this institution and
         considers the Organization's risk negligible.

NOTE 8 - SUBSEQUENT EVENT (UNAUDITED):

         On January 24, 2000, the Partnership consummated an agreement to sell
         substantially all of the assets of the Partnership, excluding cash and
         receivables for $850,000 to Healthtronics, Inc. As of January 25, 2000,
         the Partnership no longer has any operations. The Partnership will
         terminate after all liabilities have been satisfied and the remaining
         assets are distributed.


                                       8
<PAGE>   13

                         HEALTH HORIZONS (E.S.W.L.) L.P.
                          SCHEDULES OF COST OF REVENUES
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                  1999          1998
                                                --------      --------
<S>                                             <C>           <C>

Inventory at Beginning of Year                  $ 14,436      $  6,706


Add:     Pharmacy                                 16,624        27,474

         Radiology                                19,668        18,924

         Anesthesia                               12,000        12,195

         Stents                                   28,502        27,992

         Electrodes                              121,232       120,447

         Other Medical Supplies                   30,474        28,565

         Operating Room Rental                    37,487        32,315

         Stone Analysis Expense                    1,178         7,580

         Industrial Account Expense                1,154         1,187

         Depreciation                             44,902        65,696

         Repairs and Maintenance Equipment       102,643        96,414

         Parking                                  14,157        11,562
                                                --------      --------
                                                 444,457       457,057

Less:    Inventory at End of Year                 10,632        14,436
                                                --------      --------

Total Cost of Revenues                          $433,825      $442,621
                                                ========      ========
</TABLE>

See Independent Auditors' Report.


                                       9
<PAGE>   14

                         HEALTH HORIZONS (E.S.W.L.) L.P.
                SCHEDULES OF GENERAL AND ADMINISTRATIVE EXPENSES
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                           1999            1998
                                                        ----------      ----------
<S>                                                     <C>             <C>

Management Fee                                          $  862,353      $  863,566

Marketing                                                   65,081         103,305

Professional Fees                                          185,895          12,934

Financial Service Charge                                    75,000          72,000

Accounting Fees                                              9,300           7,764

Bad Debts                                                  108,381          89,810

Collection and Application Fees                              6,473          12,775

Dues and Subscriptions                                         842             812

Meetings and Seminars                                        4,050           2,893

Educational Programs                                         2,575           1,000

Telephone                                                    7,966           7,671

Repairs and Maintenance                                        226             445

Office Supplies                                             34,294          37,668

Depreciation and Amortization                               29,083          35,945

Office Rental                                               69,618          60,013

Purchase Labor                                              32,625          44,768

Utilities                                                   15,016          20,556

Insurance                                                   46,635          49,574

Licenses                                                     3,625           2,684

Support Services                                            34,837          33,809

Miscellaneous                                                2,823           4,528
                                                        ----------      ----------

         Total General and Administrative Expenses      $1,596,698      $1,464,520
                                                        ==========      ==========
</TABLE>

See Independent Auditors' Report.


                                       10
<PAGE>   15

Item 7(b) - Pro Forma Financial Information

                      HealthTronics, Inc. and Subsidiaries
                  Pro Forma Combined Condensed Balance Sheets
                             AS OF DECEMBER 31, 1999
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                     HISTORICAL
                                                    -------------
                                                    HEALTHTRONICS,      HEALTH HORIZONS       PRO FORMA             PRO FORMA
                                                         INC.         (E.S.W.L.) L.P.(1)     ADJUSTMENTS            COMBINED
                                                    -------------     ------------------    --------------        ------------
<S>                                                 <C>               <C>                   <C>                   <C>
CURRENT ASSETS
Cash and cash equivalents                           $  5,024,890                            $  (850,000)(2)       $  4,174,890
Trade accounts receivable, net                         4,426,973                                                     4,426,973
Inventory                                              1,195,743             16,550                                  1,212,293
Due from affiliated partnerships                         162,523                                                       162,523
Vendor deposits                                          802,009                                                       802,009
Prepaid expenses                                          48,778              7,927                                     56,705
Deferred income taxes                                    375,751                                                       375,751
                                                    ------------           --------          ----------           ------------

  TOTAL CURRENT ASSETS                                12,036,667             24,477            (850,000)            11,211,144

Property and equipment, at cost:
  Medical devices placed in service                    9,085,000             51,490                                  9,136,490
  Office equipment, furniture and fixtures               129,942             20,766                                    150,708
  Vehicles and accessories                             1,340,420                                                     1,340,420
                                                    ------------           --------          ----------           ------------
                                                      10,555,362             72,256                                 10,627,618
  Less accumulated depreciation                       (2,376,510)                                                   (2,376,510)
                                                    ------------           --------          ----------           ------------
NET PROPERTY AND EQUIPMENT                             8,178,852             72,256                                  8,251,108

Partnership investments                                  318,150                                                       318,150
Goodwill, net                                          2,905,540                                753,207(2)           3,658,809
Patent license                                            55,007                                                        55,007
Other assets                                              40,465                                                        40,465
                                                    ------------           --------          ----------           ------------

TOTAL ASSETS                                        $ 23,534,681           $ 96,733          $  (96,733)          $ 23,534,681
                                                    ============           ========          ==========           ============
</TABLE>


<PAGE>   16

<TABLE>
<CAPTION>
                                                     HISTORICAL
                                                    -------------
                                                    HEALTHTRONICS,      HEALTH HORIZONS        PRO FORMA          PRO FORMA
                                                        INC.          (E.S.W.L.) L.P.(1)      ADJUSTMENTS         COMBINED
                                                    -------------     -------------------     -----------       -------------
<S>                                                 <C>               <C>                     <C>               <C>
CURRENT LIABILITIES
Trade accounts payable                                 $1,131,142                                                  $1,131,142
Customer deposits                                         903,352                                                     903,352
Income taxes payable                                      141,652                                                     748,272
Warranty accrual                                          513,305                                                     513,305
Other accrued expenses                                  1,099,751                                                   1,099,751
Deferred profit on service contracts                       90,155                                                      90,155
Current portion of long-term debt                       1,287,054                                                   1,287,054
                                                    -------------          ---------          ----------        -------------
TOTAL CURRENT LIABILITIES                               5,166,411                                                   5,773,031

Long-term debt, less current portion                    1,759,126                                                   1,759,126
Deferred income taxes                                      12,977                                                      12,977
Deferral of profit on medical device sales to
  related parties                                         244,194                                                     244,194
Minority interest                                       2,224,087                                                   2,224,087
                                                    -------------          ---------          ----------        -------------

TOTAL LIABILITIES                                       9,406,795                                                  10,013,415

Shareholders' equity:
  Common stock                                         12,309,181                                                  12,309,181
  Retained earnings                                     1,818,705             96,733             (96,733)(2)        1,161,865
                                                    -------------          ---------          ----------        -------------

TOTAL LIABILITIES & SHAREHOLDERS' EQUITY            $  23,534,681          $  96,733          $  (96,733)       $  23,534,681
                                                    =============          =========          ==========        =============
</TABLE>

1.       Represents the assets purchased and liabilities assumed of
         Health Horizons (E.S.W.L.) L.P. on January 25, 2000. There were no
         liabilities assumed as of the acquisition date as trade payables were
         paid off prior to the acquisition.

2.       Represents the adjustment required to record the purchase of the assets
         of Health Horizons (E.S.W.L.) L.P. on January 25, 2000.

<PAGE>   17

                      HealthTronics, Inc. and Subsidiaries
                Pro Forma Combined Condensed Statements of Income
                      FOR THE YEAR ENDED DECEMBER 31, 1999
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                          HISTORICAL
                                            --------------------------------------
                                            HEALTHTRONICS,       HEALTH HORIZONS        PRO FORMA            PRO FORMA
                                                 INC.           (E.S.W.L.) L.P.(1)     ADJUSTMENTS           COMBINED
                                            --------------      ------------------     -----------         ------------
<S>                                         <C>                 <C>                    <C>                 <C>
Net Revenue                                  $ 24,414,179           $3,491,372                             $ 27,905,551
Cost of goods sold, rentals
  and services provided                        10,213,821              433,825                               10,647,646
                                             ------------           ----------          ---------          ------------
                                               14,200,358            3,057,547                               17,257,905

General and administrative expenses             6,492,909            1,596,698             50,218 (2)         8,139,825
                                             ------------           ----------          ---------          ------------
                                                7,707,449            1,460,849            (50,218)            9,118,080

Equity in earnings of
  unconsolidated partnerships                     117,711                                                       117,711
Partnership distributions
  from cost based investments                     147,252                                                       147,252
Gain on sale of partnership
  investment interest                             151,637                                                       151,637
Loss on disposal of property
  and equipment                                                        (54,965)                                 (54,965)
Interest expense                                 (315,694)                                                     (315,694)
Interest income                                    54,546               34,822                                   89,368
                                             ------------           ----------          ---------          ------------
Income before minority
  interest and income taxes                     7,862,901            1,440,706            (50,218)            9,253,389

Minority interest                              (5,076,045)                                                   (5,076,045)
                                             ------------           ----------          ---------          ------------
Income before income taxes                      2,786,856            1,440,706            (50,218)            4,177,344

Provision for income taxes                     (1,189,638)                               (606,620)(3)        (1,796,258)
                                             ------------           ----------          ---------          ------------
Net income                                   $  1,597,218           $1,440,706          $(656,838)         $  2,381,086
                                             ============           ==========          =========          ============

Basic and diluted income
  per common share:
Basic                                        $       0.16                                                  $       0.24
                                             ============                                                  ============
Diluted                                      $       0.16                                                  $       0.23
                                             ============                                                  ============

Weighted average common
  shares outstanding:
Basic                                          10,036,851                                                    10,036,851
                                             ============                                                  ============
Diluted                                        10,238,379                                                    10,238,379
                                             ============                                                  ============
</TABLE>

1.       The historical amounts represent the results of Health Horizons
         (E.S.W.L.) L.P. for the year ended December 31, 1999 adjusted to
         conform with HealthTronics' presentation of revenue and expenses.

2.       Adjustment represents additional amortization resulting from goodwill
         reported as a part of the purchase of Health Horizons (E.S.W.L.) L.P.
         on January 25, 2000 as if the acquisition had occurred on January 1,
         2000.

3.       Adjustment represents additional income tax expense as a result of the
         addition of Health Horizons (E.S.W.L.) L.P. on January 25, 2000
         reported as if the acquisition had occurred on January 1, 2000.

<PAGE>   18
                      HealthTronics, Inc. and Subsidiaries
                Pro Forma Combined Condensed Statements of Income
                    FOR THE THREE MONTHS ENDED MARCH 31, 2000
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                       HISTORICAL
                                        --------------------------------------------

                                        HEALTHTRONICS,             HEALTH HORIZONS             PRO FORMA               PRO FORMA
                                            INC.                 (E.S.W.L.) L.P. (1)         ADJUSTMENTS                COMBINED
                                        ------------             -------------------         ------------             ------------
<S>                                     <C>                      <C>                         <C>                      <C>
Net Revenue                             $  7,623,520             $    235,272                                         $  7,858,792
Cost of goods sold, rentals
  and services provided                    3,411,119                   30,132                                            3,441,251
                                        ------------             ------------                ------------             ------------
                                           4,212,401                  205,140                                            4,417,541

General and administrative
  expenses                                 2,134,258                  132,554                       4,185 (2)            2,270,997
                                        ------------             ------------                ------------             ------------
                                           2,078,143                   72,586                      (4,185)               2,146,544

Equity in earnings of
  unconsolidated partnership                  40,508                                                                        40,508

Partnership distributions
  from cost based investments                 37,592                                                                        37,592
Interest expense                             (81,905)                                                                      (81,905)
Interest income                               58,274                    5,732                                               64,006
                                        ------------             ------------                ------------             ------------
Income before minority
  interest and income taxes                2,132,612                   78,318                      (4,185)               2,206,745

Minority interest                         (1,227,074)                                                                   (1,227,074)
                                        ------------             ------------                ------------             ------------
Income before income taxes                   905,538                   78,318                      (4,185)                 979,671

Provision for income taxes                  (398,804)                                             (32,251)(3)             (431,055)
                                        ------------             ------------                ------------             ------------
Net income                              $    506,734             $     78,318                $    (36,436)            $    548,616
                                        ============             ============                ============             ============

Basic and diluted income
  per common share:
Basic                                   $       0.05                                                                  $       0.05
                                        ============                                                                  ============
Diluted                                 $       0.05                                                                  $       0.05
                                        ============                                                                  ============

Weighted average common
  shares outstanding:
Basic                                     10,719,822                                                                    10,719,822
                                        ============                                                                  ============
Diluted                                   11,163,469                                                                    11,163,469
                                        ============                                                                  ============

</TABLE>

1.       The historical amounts represent the results of Health Horizons
         (E.S.W.L.) L.P. for the three months ended March 31, 2000 adjusted to
         conform with HealthTronics' presentation of revenue and expenses.

2.       Adjustment represents additional amortization resulting from goodwill
         reported as a part of the purchase of Health Horizons (E.S.W.L.) L.P.
         on January 25, 2000, as if the acquisition had occurred on January 1,
         1999.

3.       Adjustment represents income tax expense reported as a result of the
         addition of Health Horizons (E.S.W.L.) L.P. net income before income
         taxes on January 25, 2000, as if the acquisition had occurred on
         January 1, 1999.

<PAGE>   19

                      HealthTronics, Inc. and Subsidiaries
                Pro Forma Combined Condensed Statements of Income
                    FOR THE THREE MONTHS ENDED MARCH 31, 1999
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                       HISTORICAL
                                        --------------------------------------------

                                        HEALTHTRONICS,             HEALTH HORIZONS       PRO FORMA                PRO FORMA
                                            INC.                 (E.S.W.L.) L.P. (1)    ADJUSTMENTS               COMBINED
                                        --------------           -------------------    -----------              -----------
<S>                                     <C>                     <C>                   <C>                        <C>
Net Revenue                             $ 4,646,327             $   796,029                                      $ 5,442,356
Cost of goods sold, rentals
 and services provided                    1,858,045                 103,098                                        1,961,143
                                        -----------             -----------           -----------                -----------
                                          2,788,282                 692,931                                        3,481,213

General and administrative
 expenses                                 1,343,134                 343,178                12,555 (2)              1,698,867
                                        -----------             -----------           -----------                -----------
                                          1,445,148                 349,753               (12,555)                 1,782,346

Equity in earnings of
 unconsolidated partnerships                 20,787                                                                   20,787

Partnership distributions
 from cost based investments                 19,241                                                                   19,241
Interest expense                           (105,104)                                                                (105,104)
Interest income                               8,434                   9,645                                           18,079
                                        -----------             -----------           -----------                -----------
Income before minority
 interest and income taxes                1,388,506                 359,398               (12,555)                 1,735,349

Minority interest                          (895,326)                                                                (895,326)
                                        -----------             -----------           -----------                -----------
Income before income taxes                  493,180                 359,398               (12,555)                   840,023

Provision for income taxes                 (177,141)                                     (124,579)(3)               (301,720)
                                        -----------             -----------           -----------                -----------
Net income                              $   316,039             $   359,398           $  (137,134)               $   538,303
                                        ===========             ===========           ===========                ===========

Basic and diluted income
 per common share:
Basic                                   $      0.03                                                              $      0.05
                                        ===========                                                              ===========
Diluted                                 $      0.03                                                              $      0.05
                                        ===========                                                              ===========

Weighted average common
 shares outstanding:
Basic                                     9,665,342                                                                9,665,342
                                        ===========                                                              ===========
Diluted                                   9,979,175                                                                9,979,175
                                        ===========                                                              ===========
</TABLE>


1.       The historical amounts represent the results of Health Horizons
         (E.S.W.L.) L.P. for the three months ended March 31, 1999 adjusted to
         conform with HealthTronics' presentation of revenue and expenses.

2.       Adjustment represents additional amortization resulting from goodwill
         reported as a part of the purchase of Health Horizons (E.S.W.L.) L.P.
         on January 25, 2000, as if the acquisition had occurred on January 1,
         1999.

3.       Adjustment represents income tax expense reported as a result of the
         addition of Health Horizons (E.S.W.L.) L.P. net income before income
         taxes on January 25, 2000, as if the acquisition had occurred on
         January 1, 1999.
<PAGE>   20

                                   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.

                                        HealthTronics, Inc.

Dated:
May 15, 2000                            By:  /s/ Victoria W. Beck
                                            ------------------------------------
                                            Victoria W. Beck
                                            Chief Financial Officer

<PAGE>   21


                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT  DESCRIPTION
- -------  -----------
<S>      <C>
2.1      Asset Purchase Agreement dated December 10, 1999

23.1     Consent of Withum, Smith & Brown
</TABLE>


<PAGE>   1
                            ASSET PURCHASE AGREEMENT


       THIS AGREEMENT (the "Agreement") is made as of December 10, 1999, between
HEALTH HORIZONS "ESWL", L.P., a New Jersey limited partnership having an
address at 100 Albany St., Kilmer Square, Second Floor, New Brunswick, NJ 08901
("Seller"), and HEALTHTRONICS, INC, a Georgia corporation having an address at
425 Franklin Road, Marietta, GA 30067 ("Purchaser").


                                    RECITALS
                                    --------

       A. Seller is a New Jersey limited partnership organized for the provision
of lithotripsy health care services.

       B. Seller has, directly or through its affiliates, leased approximately
3,000 square feet of existing space in the Robert Wood Johnson University
Hospital, One Robert Wood Johnson Place, New Brunswick, New Jersey (the
"Premises") where it is operating a Lithotripsy service known as the New Jersey
Kidney Stone Treatment Center (the "Center"). All furniture, fixtures,
equipment, rights, assets and interests comprising a portion thereof or related
thereto are sometimes referred to collectively hereinafter as the "Center". The
development, ownership and operation of the Center is referred to hereinafter as
the "Business".

       C. Seller desires to sell to Purchaser substantially all of Seller's
assets and rights comprising the Center or otherwise forming a part of or used
in the operation of the Business, other than the Excluded Assets, as herein
defined (the "Purchased Assets"), and Purchaser

<PAGE>   2
desires to purchase the Purchased Assets, and all on the terms and subject to
the conditions contained in this Agreement.


                                   AGREEMENTS

       Therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:


                                   ARTICLE I

                          Purchase and Sale of Assets

       1.1      Agreement to Purchase and Sell.  On the terms and subject to the
conditions contained in this Agreement, Purchaser agrees to purchase from
Seller, and Seller agrees to sell to Purchaser, all of the Purchased Assets.

       1.2      Enumeration of Purchased Assets. The Purchased Assets shall
include the following assets owned by Seller, but only to the extent the same
comprise a portion of the Center or otherwise relate exclusively to the
Business:

                  (a) all licenses, permits, registrations and governmental or
regulatory approvals applied for or issued to Seller with respect to the Center
or the Business, and any rights thereto or interests therein, including without
limitation: (i) the license for the Center issued to Seller by the New Jersey
Department of Health and Senior Services ("NJDOH") to the extent legally
transferable by Seller;

                  (b) all inventory and supplies;


                                      -2-


<PAGE>   3
       (c) all furniture, fixtures, equipment (including, Dornier HM4
Lithotripter without limitation, medical, scientific and office equipment),
machinery, parts, computer hardware, and all other tangible personal property
(other than the Inventory) (collectively, the "Equipment");

       (d) all leasehold interests in personal property leased to Seller (the
"Leased Personalty");

       (e) Seller's entire leasehold interest under that certain lease for the
Premises between Seller and Robert Wood Johnson University Hospital (the
"Hospital"), subject to the written consent to the assignment by the Hospital,
as the same may be modified, supplemented, or replaced, the "Lease").

       (f) all contracts, license agreements, distribution agreements, service
agreements including the Management Subcontract between Seller and Robert Wood
Johnson University Hospital, supply agreements, purchase orders, contracts or
bids, franchise agreements, computer software agreements and technical service
agreements to the extent they are legally transferable by Seller including,
without limitation all third party payor contracts relating to the Business;

       (g) all patient lists, patient records and information to the extent they
are legally transferable by Seller,

       (h) all books and records with respect to the Center and/or the operation
of the Business;


                                      -3-
<PAGE>   4
       (i) all rights in connection with deposits and prepaid expenses with
respect to the assets being sold hereunder;

       (j) all computer software, including all documentation and source codes
with respect to such software and licenses and leases of software to the extent
they are legally transferable by Seller;

       (k) the right to use the name "New Jersey Kidney Stone Treatment Center",
and any corresponding marks or designs, but only in connection with the
operation of the Center, and excluding any variations or derivations thereof or
any use thereof in connection with other properties or businesses, and excluding
any other trademarks, trade names, marks or designs of Seller (together with
associated goodwill) or its Affiliates, as hereafter provided;

       (l) all promotional materials and advertising literature for the
Business, in any medium whatsoever;

       (m) all telephone numbers of the Business; and

       1.3.   Excluded Assets.  The Excluded Assets shall consist of the
following items:

              (a) Seller's bank accounts, cash on hand, checkbooks and canceled
checks;

              (b) all accounts receivable, negotiable notes and negotiable
instruments (collectively the "Accounts Receivable");


                                      -4-
<PAGE>   5
       (c)  claims (and benefits to the extent they arise therefrom) that
relate to liabilities other than the Assumed Liabilities (as herein defined)
and assets other than the Purchased Assets;

       (d)  rights arising from prepaid expenses, if any, with respect to
assets not being sold hereunder;

       (e)  rights arising from any refunds due with respect to insurance
premium payments and tax refunds due from federal, state and local taxing
authorities;

       (f)  all rights of indemnification and claims which relate to the
conduct of the Business prior to the Closing Date;

       (g)  Seller's rights under this Agreement;

       (h)  Seller's minute and record books, and tax returns;

       (i)  the agreements, if any, set forth on Schedule 1.3(j); and

       (j)  any and all assets, properties or rights not comprising a portion
of the Center or otherwise used exclusively in the operation of the Business,
including without limitation, those assets described on Schedule 1.3(k).


                                      -5-
<PAGE>   6

                                   ARTICLE II

                           ASSUMPTION OF LIABILITIES

       2.1.   Agreement to Assume.  At the Closing (as herein defined),
Purchaser shall assume and agree to discharge and perform when due, all
liabilities and obligations of Seller relating to the development, ownership
and operation of the Center or the conduct of the Business, of every kind and
description, other than the Excluded Liabilities, as herein defined (the
"Assumed Liabilities"). Assumed Liabilities shall include, but not be limited
to:

              (a) Seller's obligations under the lease for the Premises;

              (b) trade and other accounts payable as of the Closing Date (as
herein defined);

              (c) Seller's obligations or liabilities under any of the Permits
which are assigned or transferred to Purchaser pursuant to the provisions
hereof, and

       2.2.   Excluded Liabilities.  The following (and only the following)
liabilities and obligations of Seller shall constitute the "Excluded
Liabilities":

              (a) any liabilities of Seller for income taxes; and

              (b) any liabilities of Seller under those leases, contracts,
insurance policies, commitments, sales orders, purchase orders, Permits which
are not assigned to Purchaser pursuant to this Agreement.


                                      -6-
<PAGE>   7
       2.3. No Expansion of Third Party Rights.  The assumption by Purchaser of
the Assumed Liabilities shall not expand the rights or remedies of any third
party against the Purchaser or the Seller as compared to the rights and remedies
which such third party would have had against the Seller had the Purchaser not
assumed the Assumed Liabilities.


                                  ARTICLE III

                 Purchase Price, Manner of Payment and Closing

       3.1. Purchase Price.  The purchase price for the Purchased Assets
("Purchase Price") shall be $850,000.00.

       3.2. Time and Place of Closing.  The transaction contemplated by this
Agreement shall be consummated (the "Closing") at 10:00 a.m. at the offices of
Dechert Price & Rhoads Princeton Pike Corporate Center, 997 Lenox Drive,
Building 3, Suite 210, Lawrenceville, NJ 08648 within ten (10) business days
after satisfaction of all conditions to Closing under Article VI hereof. The
date on which the Closing occurs as provided above is referred to in this
Agreement as the "Closing Date". The Closing shall be deemed to be effective as
of 12:01 a.m. on the Closing Date.

       3.3. Manner of Payment of the Purchase Price.  At the Closing, Purchaser
shall assume in writing the Assumed Liabilities and pay the Purchase Price in
cash to Seller by wire transfer to such account as Seller shall designate by
written notice delivered to Purchaser on or prior to the Closing Date.


                                      -7-
<PAGE>   8
       3.4     Closing Deliveries.  At the Closing, the parties shall execute
and deliver such bills of sale, assignments, documents of title, assumption
agreements, closing certificates, searches, title insurance policies and other
documents as are reasonably required in order to effectuate the consummation of
the transaction contemplated hereby. All documents to be delivered by a party
shall be in form and substance reasonably satisfactory to the other party.

       3.5.    Allocation of Purchase Price.  The Purchase Price shall be
allocated among the Purchased Assets in the manner required by Section 1060 of
the Internal Revenue Code of 1986, as amended (the "Code") and in accordance
with the respective amounts specified in the Purchase Price Computation
submitted by Seller, which shall be conclusive and binding upon the parties for
all purposes hereunder. The Purchaser and the Seller shall each report the
federal, state, and local income and other tax consequences of the transactions
called for in this Agreement in a manner consistent with the foregoing
allocation of the Purchase Price, including but not limited to the preparation
and filing of Form 8594 under Section 1060 of the Code. Such allocations shall
be followed in all tax returns of the Purchaser and the Seller for the taxable
year that includes the Closing Date, and neither Purchaser nor Seller will take
any position inconsistent with the allocations unless otherwise required by
applicable law.

       3.6.    Possession.  Seller shall deliver to Purchaser, at Closing,
possession of the Center, of any of the tangible Purchased Assets capable of
being so delivered, and originals or copies of any documents in Seller's
possession representing intangible Purchase Assets, if applicable.


                                      -8-
<PAGE>   9
                                   ARTICLE IV

                         Representations and Warranties


       4.1    Purchaser's Representations and Warranties.  Purchaser represents
and warrants to Seller that:

              (a) Purchaser is a corporation duly organized, existing and in
good standing, under the laws of the State of Georgia.

              (b) Purchaser has full power and authority to enter into and
perform (i) this Agreement and (ii) all documents and instruments to be
executed by Purchaser pursuant to this Agreement (collectively, "Purchaser's
Ancillary Documents"). This Agreement has been, and Purchaser's Ancillary
Documents will be, duly executed and delivered by and on behalf of Purchaser.

              (c) No consent, authorization, order or approval of, or filing or
registration with, any governmental authority or other person is required for
the execution and delivery by Purchaser of this Agreement and Purchaser's
Ancillary Agreements, and the consummation by Purchaser of the transaction
contemplated by this Agreement and Purchaser's Ancillary Documents except for
approvals of the transfer to Purchaser of the licenses and permits.

              (d) Neither the execution and delivery of this Agreement and
Purchaser's Ancillary Documents by Purchaser, nor the consummation by Purchaser
of the transaction contemplated hereby, will conflict with or result in a breach
of any of the terms, conditions or provisions of Purchaser's Certificate of
Incorporation or Bylaws, or of any statute or


                                      -9-

<PAGE>   10
administrative regulation, or of any order, writ, injunction, judgment or decree
of any court or governmental authority or of any arbitration award.

              (e) Purchaser is not a party to any unexpired, undischarged or
unsatisfied written or oral contract, agreement, indenture, mortgage, debenture,
note or other instrument under the terms of which performance by Purchaser
according to the terms of which performance by Purchaser according to the terms
of this Agreement will be a default, or whereby timely performance by Purchaser
according to the terms of this Agreement may be prohibited, prevented or
delayed.

              (f) Neither Purchaser, nor any of its Affiliates has dealt with
any person or entity who is or may be entitled to a broker's commission,
finder's fee, investment banker's fee or similar payment for arranging the
transaction contemplated hereby or introducing the parties to each other. As
used herein, an "Affiliate" means (i) any person or entity directly or
indirectly controlling, controlled by, or under common control with another
person or entity, (ii) any person or entity owning or controlling 10% or more
of the outstanding voting securities of another person or entity, (iii) any
officer, director, partner or employee of any person or entity, and (iv) any
company for which a person, classified as an Affiliate by virtue of (i), (ii),
or (iii) supra, acts as an officer, director, partner or employee.

              (g) Purchaser is familiar with the Purchased Assets, including the
licenses and permits, and shall acquire the same subject to all conditions and
restrictions set forth therein, and all obligations and liabilities of Seller
thereunder or in connection therewith, except for those specified herein as
Excluded Liabilities


                                      -10-

<PAGE>   11

       4.2.   Seller's Representations and Warranties.  Seller represents and
warrants to Purchaser that, except as set forth in the schedule delivered by
Seller to Purchaser concurrently herewith and identified as the "Disclosure
Schedule":

              (a) Seller is a limited partnership duly organized, existing and
in good standing, under the laws of the State of New Jersey. Seller has all
necessary power and authority to conduct the Business as the Business is now
being conducted.

              (b) Seller has full power and authority to enter into and perform
(i) this Agreement and (ii) all documents and instruments to be executed by
Seller pursuant to this Agreement (collectively, "Seller's Ancillary
Documents"). This Agreement will be, and Seller's Ancillary Documents will be,
duly executed and delivered by duly authorized officers of Seller.

              (c) No consent, authorization, order or approval of, or filing or
registration with, any governmental authority or other person is required for
the execution and delivery of this Agreement and Seller's Ancillary Documents
and the consummation by Seller of the transaction contemplated by this
Agreement and Seller's Ancillary Documents except for: (i) approvals of the
transfer to Purchaser of the licenses and permits and third party payor
contracts for the Business as permitted, or issuance thereof directly to
Purchaser; and (ii) any other Consents required to carry out the transactions
contemplated hereby or described herein.

              (d) Neither the execution and delivery of this Agreement and
Seller's Ancillary Documents by Seller, nor the consummation by Seller of the
transaction contemplated hereby, will conflict with or result in a breach of
any of the terms, conditions or provisions of


                                      -11-
<PAGE>   12
Seller's Partnership Agreement, or of any statute or administrative regulation,
or of any order, writ, injunction, judgment or decree of any court or any
governmental authority or of any arbitration award.

       (e) Seller has good and marketable title to, and the power to sell, the
Purchased Assets, free and clear of any liens, claims, encumbrances and
security interests, except for the following liens: (i) statutory liens for
taxes not yet due; (ii) liens of landlords, carriers, warehousemen, mechanics
and materialmen for sums not yet due; (iv) liens incurred or deposits made in
connection with workers' compensation, unemployment insurance and the like or
to secure other performance and obligations; and (v) minor irregularities of
title which do not in the aggregate materially detract from the value or use of
the Purchased Assets. Seller makes no representation or warranty as to title to
the Premises.

       (f) No default by Seller has occurred under any material contracts,
leases or agreements to which Seller is a party and which relate to the Center
or the conduct of the Business; and, to Seller's knowledge, no default by the
other contracting parties has occurred thereunder, which default would have a
Material Adverse Effect. For the purposes of this Agreement, "Material Adverse
Effect" means a material adverse effect on the assets, liabilities, financial
condition or results of operations of the Business, taken as a whole.

       (g) Seller is not a party to, or bound by, any unexpired, undischarged
or unsatisfied written contract, agreement, indenture, mortgage, debenture,
note or other instrument under the terms of which performance by Seller
according to the terms of this Agreement will be a default or an event of
acceleration, which default or acceleration would have a Material


                                      -12-

<PAGE>   13
Adverse Effect, or whereby timely performance by Seller according to the terms
of this Agreement may be prohibited, prevented or delayed.

              (h) Except as set forth in the Disclosure Schedule, Seller
possesses or has applied for all permits and approvals which are required in
order for the Seller to conduct the Business as contemplated hereunder, where
the failure to possess or obtain such Permits would have a Material Adverse
Effect.

              (i) There is no litigation or proceeding, at law or in equity,
and there are no proceedings or governmental investigations before any
commission or other administrative authority, pending, or, to Seller's
knowledge, overtly threatened, against Seller or its Affiliates, relating to he
Center or the Business, which if decided adversely to Seller would prohibit,
prevent or delay Seller's performance hereunder.

              (j) To the best of Seller's knowledge, neither the Center nor the
Business is in violation of, or delinquent in respect of, any decree, order or
arbitration award or law, statute, or regulation of or agreement with, or
permit from, any Federal, state or local governmental authority (or to which
the Center, the Business or the Premises are subject), including, without
limitation, laws, statutes and regulations relating to equal employment
opportunities, fair employment practices, unfair labor practices, terms of
employment, occupational health and safety, wages and hours and discrimination,
which violation or delinquency would have a Material Adverse Effect.


                                      -13-
<PAGE>   14


       (k) The Premises are leased to Seller pursuant to the Lease, a copy of
which is attached to the Disclosure Schedule. Seller is not in default under any
material term of the Lease or of any other agreement relating to the Premises
nor, to Seller's knowledge, is any other party thereto in material default
thereunder.

       (l) Neither Seller, nor any of tis Affiliates, has dealt with any person
or entity who is or may be entitled to a broker's commission, finder's fee,
investment banker's fee or similar payment from Purchaser for arranging the
transaction contemplated hereby or introducing the parties to each other.

       4.3.   Limitations on Warranties.  Seller makes no express or implied
warranty of any kind whatsoever, including, without limitation, any
representation as to physical condition or value of any of the Purchased Assets
or the future profitability or future earnings performance of the Business.
ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE
ARE EXPRESSLY EXCLUDED, THE BENEFITS(S) THEREOF BEING HEREBY WAIVED BY
PURCHASER.

       4.4.   Definition of Knowledge. For purposes of this Agreement, a
representation and warranty made to the best of a party's "knowledge" (or any
variation of the foregoing) shall refer only to the conscious awareness of any
officer or management-level employee of such party, having supervisory or
administrative responsibility in respect of the fact(s) or circumstance(s)
described therein.

                                     -14-
<PAGE>   15

                                   ARTICLE V

                          Conduct Prior to the Closing

       5.1.   General.  Between the date hereof and the Closing Date:

              (a) Seller shall give to Purchaser's manager, officers,
employees, attorneys, consultants, accountants and lenders reasonable access
during normal business hours to all of the properties, books, contracts,
documents, records and personnel of Seller and shall furnish to Purchaser such
information as Purchaser may at any time and from time to time reasonably
request.

              (b) Seller shall use reasonable efforts and make every good faith
attempt (and Purchaser shall cooperate with Seller) to obtain such consents as
are necessary for the assignment to Purchaser of, the assumption of Seller's
obligations under, and the release of Seller under, the contracts, leases,
insurance policies, agreements, purchase orders, sales orders or other
instruments (including, without limitation, the Lease), and permits comprising
Purchased Assets or Assumed Liabilities hereunder, all as may be necessary to
carry out the transactions contemplated hereby (the "Consents").

              (c) Seller shall carry on the Business in a manner consistent
with past practices and shall use its reasonable efforts and make every good
faith attempt to establish and preserve its business and the goodwill of its
patients, suppliers and others having business relations with Seller, including
keeping available the services of its present employees, representatives and
agent.


                                      -15-
<PAGE>   16
       (d) No party shall intentionally perform any act which, if performed, or
omit to perform any act which, if omitted to be performed, would prevent or
excuse the performance of this Agreement by any party hereto or which would
result in any representation or warranty herein contained of said party being
untrue in any material respect as if originally made on and as of the Closing
Date.


                                   ARTICLE VI

                             Conditions to Closing

       6.1.    Conditions to Seller's Obligations.  The obligation of Seller to
consummate the transaction contemplated hereby is subject to the fulfillment of
all of the following conditions on or prior to the Closing Date, upon the
non-fulfillment of any of which this Agreement may, at Seller's option, be
terminated pursuant to and with the effect set forth in Article XI:

               (a) Consent of the limited partners of Seller to proceed with
the transaction.

               (b) Consent of the Board of Directors of the corporate general
partner of the Limited Partnership.

               (c) Each and every representation and warranty made by Purchaser
shall have been true and correct in all material respects when made and shall
be true and correct in all material respects as if originally made on and as of
the Closing Date.

               (d) All obligations of Purchaser to be performed hereunder
through, and including the Closing Date (including, without limitation, all
obligations which Purchaser would


                                      -16-
<PAGE>   17
be required to perform at the Closing if the transaction contemplated hereby was
consummated) shall have been performed.

                  (e) No suit or proceeding shall have been commenced by any
governmental authority on any grounds to restrain, enjoin or hinder the
consummation of the transaction contemplated hereby.

       6.2      Conditions to Purchaser's Obligations.  The obligation of
Purchaser to consummate the transaction contemplated hereby is subject to the
fulfillment of all of the following conditions on or prior to the Closing Date,
upon the non-fulfillment of any of which this Agreement may, at Purchaser's
option, be terminated pursuant to and with the effect set forth in Article XI:

                  (a) Each and every representation and warranty made by Seller
shall have been true and correct in all material respects when made and shall be
true and correct in all material respects as if originally made on and as of the
Closing Date.

                  (b) No suit or proceeding shall have been commenced by any
governmental authority on any grounds to restrain, enjoin or hinder the
consummation of the transaction contemplated hereby.

                  (c) New Jersey Department of Health and Senior Services shall
have approved in writing Purchaser as license-holder for the Center.


                                      -17-
<PAGE>   18
                                  ARTICLE VII

                            Post-Closing Agreements

       7.1.    Post-Closing Agreements.  From and after the Closing, the parties
shall have the respective rights and obligations which are set forth in the
remainder of this Article VII.

       7.2.    Payments of Accounts Receivable.  In the event Purchaser shall
receive any instrument of payment of any of the Accounts Receivable, Purchaser
shall forthwith deliver it to Seller, endorsed where necessary, without
recourse, in favor of Seller.

       7.3.    Non-Assignment.  Notwithstanding any provision to the contrary
contained herein, Seller shall not be obligated to assign to Purchaser any
contract, payor contract or agreement, purchase order, sales order, lease or
other instrument which provides that it may not be assigned without the consent
of the other party thereto and for which such consent is not obtained, but in
any such event, Seller shall cooperate with Purchaser in any reasonable
arrangement designed to provide the benefits thereof to Purchaser.

       7.4.    Further Assurances.  The parties shall execute such further
documents, and perform such further acts, as may be necessary to transfer and
convey the Purchased Assets to Purchaser, on the terms herein contained, and to
otherwise comply with the terms of this Agreement and consummate the transaction
contemplated hereby.


                                     - 18 -

<PAGE>   19
                                  ARTICLE VIII

                                Indemnification

       8.1.   Indemnification by Seller.  Seller covenants and shall indemnify
Purchaser and hold it harmless against and with respect to any and all damage,
loss, liability, deficiency, cost and expense (including, without limitation,
reasonable attorney fees) (referred to herein as a "Loss") resulting from (i)
any misrepresentation, breach of warranty, or failure to fulfill any agreement
or covenant on the part of Seller under this Agreement; (ii) any taxes,
interest, penalties and additions to tax that are required to be paid to the
United States Government or any state or local taxing authority resulting from
the operation of the Center for any period ending on or before the Closing Date;
(iii) any claim relating to operation of the Center arising from events or
transactions occurring prior to the Closing; (iv) any claim relating to Seller's
involvement with any employee pension benefit plan or employee welfare benefit
plan, as those terms are defined in ERISA, or any other similar plan, agreement
or arrangement designed to provide retirement, medical or supplemental benefits
for an employee or group of employees; and (v) any and all actions, suits,
proceedings, demands, assessments, judgments, cost and legal and other expenses
incident to any of the foregoing.

              If any claim or demand for which Seller will be liable to
Purchaser pursuant to this Paragraph 9.1 is asserted against or sought to be
collected from Purchaser by a third party, Purchaser will give written notice
thereof to Seller, and Seller shall have the option to defend Purchaser against
such claim or demand by counsel satisfactory to Purchaser; provided, however,
that Seller shall not, in defense of any such claim, except with the prior
written consent of


                                     - 19 -

<PAGE>   20
Purchaser, consent to the entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff in question to Purchaser and its affiliates a release of
any liabilities in respect of such claims, or that does not result only in the
payment of money damages by Seller.

       8.2    Indemnification by Purchaser.  After Closing, Purchaser covenants
and shall indemnify Seller and hold it harmless against and with respect to any
and all Losses resulting from (i) any misrepresentation, breach of warranty, or
failure to fulfill any agreement or covenant on the part of Purchaser under
this Agreement; (ii) any claim relating to any liability of Seller or the
Center that are expressly assumed by the Purchaser pursuant to the terms of this
Agreement; (iii) any claim relating to the operation of the Center arising from
events or transactions occurring after the Closing; and (v) any and all
actions, suits, proceedings, demands, assessments, judgments, costs and legal
and other expenses incident to any of the foregoing.

              If any claim or demand for which Purchaser will be liable to
Seller pursuant to this Paragraph 9.2 is asserted against or sought to be
collected from Seller by a third party, Seller will give written notice thereof
to Purchaser, and Purchaser shall have the option to defend Seller against such
claim or demand by counsel satisfactory to Seller, provided, however, that
Purchaser shall not, in defense of any such claim, except with the prior
written consent of Seller, consent to the entry of any judgment or enter into
any settlement that does not include as an unconditional term thereof the
giving by the claimant or plaintiff in question to Seller and its affiliates a
release of any liabilities in respect of such claims, or that does not result
only in the payment of money damages by Purchaser.

                                      -20-
<PAGE>   21
                                   ARTICLE IX

                        Effect of Termination/Proceeding

       9.1.   Right to Terminate.  This Agreement and the transaction
contemplated hereby may be terminated at any time prior to the Closing by
prompt notice given in accordance with Section 10.3:

              (a) by the mutual written consent of Purchaser and Seller.

       9.2.   Remedies.  In the event of a breach of this Agreement, the
non-breaching party shall not be limited to the remedy of termination of this
Agreement, but shall be entitled to pursue a claim against the defaulting party.


                                   ARTICLE X

                                 Miscellaneous

       10.1.  Sales and Transfer Taxes.  Purchaser shall pay all sales, use,
transfer and conveyance taxes, if any, arising in connection with the sale and
transfer of the Purchased Assets to Purchaser pursuant to this Agreement.

       10.2.  Publicity.  Except as otherwise required by law, press releases
concerning this transaction shall be made only with the prior agreement of both
Seller and Purchaser.

       10.3.  Notices.  All notices required or permitted to be given hereunder
shall be in writing and may be delivered by hand, by facsimile, by nationally
recognized private courier, or


                                      -21-
<PAGE>   22
by United States mail. Notices delivered by mail shall be deemed given three
(3) business days after being deposited in the United States mail, postage,
prepaid, registered or certified mail. Notices delivered by hand by facsimile,
or by nationally recognized private carrier shall be deemed given on the first
business day following receipt, provided, however, that a notice delivered by
facsimile shall only be effective if such notice is also delivered by hand, or
deposited in the United States mail, postage prepaid, registered or certified
mail, on or before two (2) business days after its delivery by facsimile. All
notices shall be addressed as follows:

       If to Seller

       Addressed to:

       Central Jersey Health Care Corporation

       One Robert Wood Johnson Place

       New Brunswick, NJ 08901

       Attention: Lawrence Garinello

       Telecopier: 732/937-8941

       with copy to:

       Susan M. Hendrickson, Esq.

       Dechert Price & Rhoads

       P.O. Box 5218

       Princeton, NJ 08543-5218


                                      -22-

<PAGE>   23
       If to Purchaser

       Addressed to:

       Healthtronics, Inc.

       425 Franklin Road

       Marietta, GA 30067

       Attention:

       Telecopier:

and/or to such other respective addresses and/or addressees as may be
designated by notice given in accordance with the provisions of this Section
11.3.

       10.4.   Expenses.  Each party hereto shall bear all fees and expenses
incurred by such party in connection with, relating to or arising out of the
execution, delivery and performance of this Agreement and the consummation of
the transaction contemplated hereby, including, without limitation, attorneys',
accountants' and other professional fees and expenses.

       10.5.   Entire Agreement.  This Agreement and the instruments to be
delivered by the parties pursuant hereto constitute the entire agreement
between the parties. Each exhibit and the Disclosure Schedule shall be
considered incorporated into this Agreement. Any matter which is disclosed in
any portion of the Disclosure Schedule is deemed to have been disclosed for the
purposes of all relevant provisions of this Agreement. The inclusion of any
item in the Disclosure Schedule is not evidence of the materiality of such item
for the purposes of this Agreement and Seller's Ancillary Documents. The
parties make no representations or warranties


                                      -23-
<PAGE>   24
to each other, except as contained in this Agreement. Purchaser acknowledges
that it has conducted an independent investigation of the financial condition,
assets, liabilities, properties and operations of the Business in making its
determination as to the propriety of the transaction contemplated by this
Agreement, and in entering into this Agreement has relied solely on the results
of said investigation, and on the representations and warranties of Seller
expressly contained in this Agreement.

         10.6.    Non-Waiver.  The failure in any one or more instances of a
party to insist upon performance of any of the terms, covenants or conditions of
this Agreement, to exercise any right or privilege in this Agreement conferred,
or the waiver by said party of any breach of any of the terms, covenants or
conditions of this Agreement, shall not be construed as a subsequent waiver of
any such terms, covenants, conditions, rights or privileges, but the same shall
continue and remain in full force and effect as if no such forbearance or waiver
had occurred. No waiver shall be effective unless it is in writing and signed by
an authorized representative of the waiving party.

         10.7.    Applicable Law.  This Agreement shall be governed and
controlled as to validity, enforcement, interpretation, construction, effect and
in all other respects by the internal laws of the State of New Jersey applicable
to contracts made in that State.

         10.8.    Binding Effect, Benefit.  This Agreement shall inure to the
benefit of and be binding upon the parties hereto, and their successors and
permitted assigns. Nothing in this Agreement, express or implied, is intended
to confer on any person other than the parties hereto, and their respective
successors and permitted assigns any rights, remedies, obligations or


                                      -24-


<PAGE>   25
liabilities under or by reason of this Agreement, including, without
limitation, third party beneficiary rights.

       10.9.   Assignability.  This Agreement shall not be assignable by either
party without the prior written consent of the other party.

       10.10.  Amendments.  This Agreement shall not be modified or amended
except pursuant to an instrument in writing executed and delivered on behalf of
each of the parties hereto.

       10.11.  Heading.  The headings contained in this Agreement are for
convenience of reference only and shall not affect the meaning or
interpretation of this Agreement.


                                      -25-
<PAGE>   26

              IN WITNESS WHEREOF, the parties have executed this Agreement on
the date first above written.


                                          SELLER:


                                          HEALTH HORIZONS


                                          a New Jersey Limited Partnership

                                          By: /s/ LAWRENCE GARINELLO
                                              ---------------------------------

                                          Name:  LAWRENCE GARINELLO

                                          Title: Vice President


                                          PURCHASER:


                                          HEALTHTRONICS, INC.


                                          a Georgia corporation

                                          By: /s/ ROY S. BROWN
                                              ---------------------------------

                                          Name:  ROY S. BROWN

                                          Title: President


                                      -26-
<PAGE>   27
                                SCHEDULE 1.3(i)

                          Excluded Assets: Agreements


                                SCHEDULE 1.3(k)

              Excluded Assets: Assets, Properties Or Rights Not Comprising A
Portion Of The Center Or Otherwise Used Exclusively In The Operation Of The
Business.


                                      -27-
<PAGE>   28
                              DISCLOSURE SCHEDULE


                      Permits Not Obtained or Applied For
                      -----------------------------------



                                     [None]




                              Copies of the Lease
                              -------------------


                                   [Attached]


                                     - 28 -


<PAGE>   1
                                                                    EXHIBIT 23.1



                        CONSENT OF INDEPENDENT AUDITORS



We consent to the incorporation by reference of our report dated February 14,
2000, with respect to the financial statements of Health Horizons (E.S.W.L.)
L.P. as of December 31, 1999 and 1998, and for each of the years then ended,
incorporated by reference in Registration Statement No. 333-31820 on Form S-8,
of HealthTronics, Inc.



/s/Withum Smith + Brown
New Brunswick, New Jersey
May 15, 2000



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