<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 24, 1998
-----------------
INFOCURE CORPORATION
--------------------
(exact name of registrant as specified in chapter)
Delaware 001-12799 58-2271614
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
1765 The Exchange, Suite 450, Atlanta, GA 30339
- --------------------------------------------------------------------------------
(Address of principal executive office) (zip code)
Registrant's telephone number, including area code: 770-221-9990
------------
Not Applicable
--------------
(Former name or former address, if changed since last report)
<PAGE>
Contents
- --------------------------------------------------------------------------------
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
December 31, 1997 and 1996 Audited Financial Statements of Micro-
Software Designs, Inc. are attached hereto.
December 31, 1997 and 1996 Audited Financial Statements of Medical
Software Integrators, Inc. are attached hereto.
(b) Pro Forma Financial Information.
InfoCure Corporation Pro Forma Condensed Consolidated Financial
Statements (Unaudited) are attached hereto.
<PAGE>
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.
INFOCURE CORPORATION
(Registrant)
Date: May 11, 1998 by: /s/ Frederick L. Fine
----------------------------------
Frederick L. Fine
President; Chief Executive Officer
<PAGE>
INDEX TO FINANCIAL STATEMENTS
InfoCure Corporation
Form 8-K/A
December 31, 1997 and 1996 Audited Financial Statements of Micro-Software
Designs, Inc.
- -------------------------------------------------------------------------
Report of Independent Certified Public Accountants................... F-2
Balance Sheets....................................................... F-3
Statements of Income and Retained Earnings........................... F-4
Statements of Cash Flows............................................. F-5
Notes to Financial Statements...................................... F-6 - 9
December 31, 1997 and 1996 Audited Financial Statements of Medical Software
Integrators, Inc.
- ---------------------------------------------------------------------------
Report of Independent Certified Public Accountants................... F-10
Balance Sheets....................................................... F-11
Statements of Income and Retained Earnings........................... F-12
Statements of Cash Flows............................................. F-13
Notes to Financial Statements..................................... F-14 - 19
InfoCure Corporation Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
- --------------------------------------------------------------------------
Pro Forma Condensed Consolidated Balance Sheet....................... F-20
Pro Forma Condensed Consolidated Statements of Operations
For the eleven months ended December 31, 1997..................... F-21
Notes to Pro Forma Condensed Consolidated Financial Statements.... F-22 - 24
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Micro-Software Designs, Inc.
Ridgefield, Connecticut
We have audited the accompanying balance sheets of Micro-Software Designs, Inc.
as of December 31, 1997 and 1996, and the related statements of operations and
retained earnings, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our 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 Micro-Software Designs, Inc. at
December 31, 1997 and 1996, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
BDO SEIDMAN, LLP
Atlanta, Georgia
January 15, 1998
F-2
<PAGE>
Micro-Software Designs, Inc.
Balance Sheets
<TABLE>
<CAPTION>
December 31,
----------------------------------
1997 1996
---------- ----------
<S> <C> <C>
Assets
Current
Cash......................................................... $ 269,153 $ 293,249
Accounts receivable net of allowance of $37,000 in 1997
and $27,000 in 1996......................................... 117,431 88,316
Prepaid assets............................................... 152,451 9,925
Other receivables............................................ 16,557 -
---------- ----------
Total current assets.......................................... 555,592 391,490
Property and equipment at cost, net of accumulated
depreciation................................................. 158,650 159,496
Software development costs, net of accumulated
amortization of $390,032 and $205,667........................ 420,082 352,084
Deposits...................................................... 72,330 -
---------- ----------
Total assets.................................................. $1,206,654 $ 903,070
========== ==========
Liabilities and Stockholder's Equity
Current liabilities
Accounts payable and accrued expenses........................ $ 8,712 $ 55,929
Deferred revenue............................................. 714,714 391,096
Current portion of long-term debt............................ - 5,546
Note payable to shareholder.................................. - 152,435
---------- ----------
Total current liabilities..................................... 723,426 605,006
---------- ----------
Stockholder's equity
Common stock, no par or stated value, 200
shares authorized issued and outstanding.................... - -
Retained earnings............................................ 483,228 298,064
---------- ----------
Total stockholder's equity.................................... 483,228 298,064
---------- ----------
Total liabilities and stockholder's equity $1,206,654 $ 903,070
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
Micro-Software Designs, Inc.
Statements of Operations and Retained Earnings
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
Revenue
Software sales................................................. $3,326,317 $2,670,987
Support and consulting revenue................................. 1,564,098 1,267,206
---------- ----------
Total revenue................................................... 4,890,415 3,938,193
---------- ----------
Operating costs and expenses
Salaries, wages and benefits................................... 1,402,644 1,115,505
Officers' compensation......................................... 1,780,304 1,104,100
Cost of revenue - training, travel and installation............ 377,805 432,308
Commissions and consulting..................................... 64,734 169,525
Depreciation and amortization.................................. 257,783 156,551
Rent and utilities............................................. 182,749 167,720
Meals and travel............................................... 3,416 3,515
Telephone and office........................................... 293,223 236,259
Other.......................................................... 64,898 127,243
Advertising and promotion...................................... 51,467 64,813
Professional fees.............................................. 217,091 59,477
---------- ----------
Total costs and operating expenses.............................. 4,696,114 3,637,016
---------- ----------
Income from operations.......................................... 194,301 301,177
---------- ----------
Other income and (expense)
Interest income................................................ 12,763 4,442
Interest expense............................................... - (2,496)
---------- ----------
Total other income (expenses)................................... 12,763 1,946
---------- ----------
Income before taxes............................................. 207,064 303,123
Income taxes.................................................... 21,900 4,299
---------- ----------
Net income...................................................... 185,164 298,824
Retained earnings, beginning.................................... 298,064 (760)
---------- ----------
Retained earnings, ending....................................... $ 483,228 $ 298,064
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
Micro-Software Designs, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1997 1996
-------- --------
<S> <C> <C>
Operating activities
Net income..................................................... $185,164 $298,824
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization................................ 257,783 156,551
Provision for uncollectible accounts......................... 10,000 -
(Increase) decrease in:
Accounts receivable........................................ (39,115) (2,901)
Other current assets....................................... (159,083) 24,875
Deposits................................................... (72,330) -
Increase (decrease) in:
Accounts payable and accrued expenses...................... (47,217) (10,200)
Deferred revenue........................................... 323,618 72,968
-------- --------
Cash provided by operating activities........................... 458,820 540,117
-------- --------
Investing activities
Purchase of property and equipment............................. (72,572) (83,486)
Software development costs..................................... (252,363) (284,459)
-------- --------
Cash used in investing activities............................... (324,935) (367,945)
-------- --------
Financing activities
Increase (decrease) in loans from shareholder.................. (152,435) 35,022
Repayment of long-term debt.................................... (5,546) (33,338)
-------- --------
Cash provided by (used in) financing activities................. (157,981) 1,684
-------- --------
Net increase (decrease) in cash................................. (24,096) 173,856
Cash, beginning................................................. 293,249 119,393
-------- --------
Cash, ending.................................................... $269,153 $293,249
======== ========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
Micro-Software Designs, Inc.
Notes to Financial Statements
<TABLE>
<S> <C>
1. Summary of Significant Description of Business
Accounting Policies
The Company develops, sells, installs and services computer software for
the medical industry. Costs of sales are included in other costs and
expenses.
Revenue Recognition
In October 1997, the AICPA issued Statement of Position ("SOP") 97-2
"Software Revenue Recognition" which requires software revenue to be
recognized when all elements essential to the functionality of the
software have been delivered. The Company's policies are consistent with
the provisions of SOP 97-2. Revenue from maintenance and support service
contracts is recognized over the contact period.
Software Development Costs
Certain costs incurred in the internal development of computer software
which is to be licensed, sold, or otherwise marketed, are capitalized and
amortized on a straight-line basis over the expected useful life of the
individual software products (generally four years). Development costs
include detailed design, prototyping, coding, testing, documentation,
production and quality assurance. Such costs are capitalized once the
product's technological feasibility is established and are expensed after
the product is available for general release. During the years ended
December 31, 1997 and 1996, the Company capitalized $252,363 and
$284,459, respectively, of software development costs. Amortization of
capitalized software development costs for the years ended December 31,
1997 and 1996, was $184,365 and $92,028, respectively.
The Company's operational policy for the assessment and measurement of
the continuing value of capitalized software is to evaluate the
recoverability of the remaining life of its capitalized software and
determine whether the software should be completely or partially written
off or the amortization period accelerated. The Company will recognize
an impairment if undiscounted estimated future cash flows of the
capitalized software is determined to be less than the carrying amount of
capitalized software.
</TABLE>
F-6
<PAGE>
Micro-Software Designs, Inc.
Notes to Financial Statements
Property and Equipment
Property and equipment are stated at cost. Depreciation
is computed over the estimated useful life of the
assets using straight-line methods.
Use of Estimates in Preparing Financial Statements
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that
affect the reported amounts of assets and liabilities
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.
Concentration of Credit Risk
The Company markets its products and services primarily
to healthcare providers. As a result, the Company may
be exposed to credit risk resulting from factors
impacting that industry. The Company markets its
products in diverse geographic areas. This diversity
reduces the concentration of credit risk which may
arise from the resultant accounts receivable.
Fair Value of Financial Instruments
The Company's financial instruments include
receivables, payable and accrued liabilities. Such
instruments are reported at values which the Company
believes are not materially different from their fair
values.
New Accounting Pronouncements
SFAS No. 130, "Reporting Comprehensive Income" is
effective for years beginning after December 15, 1997.
This statement establishes standards for reporting and
display of comprehensive income, its components and
accumulated balances. This pronouncement is not
expected to have a material impact on the Company's
financial statements when adopted.
SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" is effective for
years beginning after December 15, 1997. This statement
establishes standards for the way that public business
enterprises report information about operating segments
in annual financial statements. It also establishes
standards for related disclosures about products and
services, geographic areas, and major customers. This
F-7
<PAGE>
Micro-Software Designs, Inc.
Notes to Financial Statements
pronouncement is not expected to have a material
impact on the Company's financial statements when
adopted.
2. Property and Equipment Major classes of property and equipment at December
31, 1997 and 1996 consisted of the following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Computers................ $239,024 $172,229
Furniture and fixtures... 117,383 117,383
Telephone................ 30,597 24,819
-------- --------
Total cost............... 387,004 314,431
Less: accumulated
depreciation............ 228,354 154,936
-------- --------
$158,650 $159,495
======== ========
</TABLE>
3. Leases The Company is obligated under terms of operating
leases for its office facilities and certain
equipment.
Future annual minimum payments under these
operating leases are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1998..................... $202,800
1999..................... 213,200
2000..................... 223,600
2001..................... 234,000
2002..................... 244,400
Thereafter............... 520,000
</TABLE>
Rental expense was $165,725 and $148,880 for the
years ended December 31, 1997 and 1996,
respectively.
F-8
<PAGE>
Micro-Software Designs, Inc.
Notes to Financial Statements
4. Employee Benefit Plan The Company maintains a 401(k) plan for its
employees who have completed one year of
service and attained the age of 21. In addition
to the amount deferred by each employee, the
company may make a matching contribution to
each participant up to 10% of the participant's
annual compensation. Expense related to this
plan was approximately $13,600 and $26,000 for
the years ended December 31, 1997 and 1996,
respectively.
5. Income Taxes The Company has elected to be taxed as an "S"
Corporation under the provisions of Subchapter
S of the Internal Revenue Code. As such, the
profits of the Company are taxed on the
individual income tax returns of its
stockholder. Accordingly, no provision for
federal income taxes has been made in the
accompanying financial statements. Income tax
expense consists of income taxes payable to
state tax authorities.
6. Related Party A shareholder advanced the Company $152,435
Transactions during 1996 to help fund operations. Such
advances were repaid in 1997.
7. Subsequent Event In November 1997, the Company entered into
negotiations with InfoCure Corporation
("InfoCure"), whereby InfoCure would acquire
substantially all of the assets and assume all
of the liabilities of the Company in exchange
for up to $15,600,000 in cash and InfoCure
common stock and up to $4,400,000 in additional
consideration contingent upon achievement of
certain defined profit objectives over a two
year period following the closing. The
transaction is expected to close in the first
quarter of 1998.
F-9
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Medical Software Integrators, Inc.
Marietta, Georgia
We have audited the accompanying balance sheets of Medical Software Integrators,
Inc. as of December 31, 1997 and 1996, and the related statements of income and
retained earnings, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our 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 Medical Software Integrators,
Inc. at December 31, 1997 and 1996, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
BDO SEIDMAN, LLP
Atlanta, Georgia
January 16, 1998
F-10
<PAGE>
Medical Software Integrators, Inc.
Balance Sheets
<TABLE>
<CAPTION>
December 31,
----------------------------------
1997 1996
---------- ----------
<S> <C> <C>
Assets
Current
Cash.......................................................... $ 227,624 $ 3,465
Accounts receivable........................................... 1,081,313 701,567
Inventory..................................................... 206,074 69,198
Prepaid expenses.............................................. 13,171 7,428
Deferred tax asset............................................ 129,000 -
Other current assets.......................................... 29,778 -
---------- ----------
Total current assets........................................... 1,686,960 781,658
Property and equipment at cost, net of accumulated
depreciation.................................................. 760,601 527,990
Other assets................................................... 8,614 -
---------- ----------
$2,456,175 $1,309,648
========== ==========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable.............................................. $ 84,216 $ 239,051
Income taxes payable.......................................... 68,967 34,440
Deferred tax liability........................................ - 68,000
Unearned revenue.............................................. 1,272,742 492,495
Accrued expenses.............................................. 199,394 11,284
Current portion of notes payable.............................. - 8,406
---------- ----------
Total current liabilities...................................... 1,625,319 853,676
Notes payable, less current portion............................ - 38,626
---------- ----------
Total liabilities.............................................. 1,625,319 892,302
---------- ----------
Stockholders' equity
Common stock, $1 par, 500 shares authorized,
issued and outstanding....................................... 500 500
Additional paid-in capital.................................... 1,333 1,333
Retained earnings............................................. 829,023 415,513
---------- ----------
Total stockholders' equity..................................... 830,856 417,346
---------- ----------
$2,456,175 $1,309,648
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-11
<PAGE>
Medical Software Integrators, Inc.
Statements of Income and Retained Earnings
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------
1997 1996
---------- ----------
<S> <C> <C>
Revenue
Hardware and software sales.................................... $1,386,123 $1,631,631
Equipment rental income........................................ 1,909,956 517,915
Training and installation...................................... 252,825 176,215
Support and consulting......................................... 169,265 75,185
Forms and supplies............................................. 58,552 70,895
Other.......................................................... 194,076 106,634
---------- ----------
Total revenue................................................... 3,970,797 2,578,475
---------- ----------
Operating costs and expenses
Salaries, wages and benefits................................... 2,142,174 1,355,058
Hardware purchases for resale.................................. 317,203 261,671
Software purchases for resale.................................. 95,504 58,368
Depreciation................................................... 284,600 179,340
Meals and travel............................................... 80,624 98,234
Telephone...................................................... 42,170 34,762
Rent........................................................... 87,016 81,030
Other.......................................................... 288,672 187,849
---------- ----------
Total operating costs and expenses.............................. 3,337,963 2,256,312
---------- ----------
Income from operations.......................................... 632,834 322,163
---------- ----------
Other (income) expense
Interest income................................................ (6,268) (3,614)
Interest expense............................................... 3,592 1,537
Loss on disposal............................................... - 10,908
---------- ----------
Total other (income) expense.................................... (2,676) 8,831
---------- ----------
Income before taxes............................................. 635,510 313,332
Income taxes.................................................... 222,000 129,000
---------- ----------
Net income...................................................... 413,510 184,332
Retained earnings, beginning.................................... 415,513 231,181
---------- ----------
Retained earnings, ending....................................... $ 829,023 $ 415,513
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-12
<PAGE>
Medical Software Integrators, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------
1997 1996
--------- ---------
<S> <C> <C>
Operating activities
Net income..................................................... $ 413,510 $ 184,332
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation................................................. 284,600 179,340
Loss on disposal of property, plant and equipment............ - 10,908
Deferred tax expense (benefit)............................... (197,000) 77,000
(Increase) decrease in:
Accounts receivable........................................ (379,746) (595,686)
Inventory.................................................. (136,876) (69,198)
Prepaid expenses........................................... (5,743) (7,428)
Other current assets....................................... (29,778) -
Other assets............................................... (8,614) -
Increase (decrease) in:
Accounts payable........................................... (154,835) 238,669
Income taxes payable....................................... 34,527 -
Unearned revenue........................................... 780,247 381,356
Accrued expenses........................................... 188,110 21,665
--------- ---------
Cash provided by operating activities........................... 788,402 420,958
--------- ---------
Investing activity
Purchase of property and equipment............................. (517,211) (418,546)
--------- ---------
Financing activity
Payments on notes payable...................................... (47,032) (6,502)
--------- ---------
Net increase (decrease) in cash................................. 224,159 (4,090)
Cash, beginning................................................. 3,465 7,555
--------- ---------
Cash, ending.................................................... $ 227,624 $ 3,465
========= =========
Supplemental Cash Flow Information
Property acquired with loan proceeds........................... $ - $ 53,534
========= =========
Cash paid for interest......................................... $ 3,592 $ 1,537
========= =========
Cash paid for income taxes..................................... $ 384,473 $ 20,000
========= =========
</TABLE>
See accompanying notes to financial statements.
F-13
<PAGE>
Medical Software Integrators, Inc.
Notes to Financial Statements
1. Summary of Description of Business
Significant
Accounting The Company develops, markets, installs and
Policies services computer software for the medical
industry. The Company also markets computer hardware
and supplies. Costs of sales are included in other
costs and expenses.
Revenue Recognition
Revenue from sales of hardware and software is
recognized when products are delivered. Revenue from
maintenance and support service contracts is
recognized ratably over the contract period. Rental
income is recognized ratably, over the life of the
related agreement. Revenue from other services is
recognized when the service is performed. Unearned
revenue represents customer deposits and other
amounts billed in advance.
Property and Equipment
Property and equipment are stated at cost.
Depreciation is computed over the estimated useful
life of the assets using accelerated methods.
Income Taxes
The Company uses the liability method to account for
income taxes. Under this approach, deferred income
taxes are provided for the temporary differences
between the book and tax bases of assets and
liabilities using currently enacted tax rates.
Changes in tax laws or rates are recognized in the
deferred tax balances when enacted.
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 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.
Concentrations of Credit Risk
The Company markets its products and services
primarily to healthcare providers. As a result, the
Company may be exposed to credit risk resulting from
factors impacting that industry. The company markets
its products throughout the United States. This
geographic diversity reduces the concentration of
credit risk
F-14
<PAGE>
Medical Software Integrators, Inc.
Notes to Financial Statements
which may arise from the resultant receivables.
Fair Value of Financial Instruments
The Company's financial instruments include
receivables, payables and accrued liabilities. Such
instruments are reported at values which the Company
believes are not materially different from their fair
values.
New Accounting Pronouncements
Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of "
was adopted in 1996.
This statement required that long-lived assets,
including certain intangibles, held and used by the
Company be reviewed for potential impairment. This new
pronouncement did not have a material effect on the
Company's financial statements when adopted.
SFAS No. 130, "Reporting Comprehensive Income" is
effective for years beginning after December 15, 1997.
This statement establishes standards for reporting and
display of comprehensive income, its components and
accumulated balances. This pronouncement is not
expected to have a material impact on the Company's
financial statements when adopted.
SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" is effective for
years beginning after December 15, 1997. This
statement establishes standards for the way that
public business enterprises report information about
operating segments in annual financial statements. It
also establishes standards for related disclosures
about products and services, geographic areas, and
major customers. This pronouncement is not expected
to have a material impact on the Company's financial
statements when adopted.
Statement of Position 97-2 "Software Revenue
Recognition" is effective for years beginning after
December 15, 1997. This statement of position provides
guidance for when revenue should be recognized and in
what amounts for licensing, selling, leasing, or
otherwise marketing computer software. This statement
of position is not expected to have a material impact
on the Company's financial statements when applied.
F-15
<PAGE>
Medical Software Integrators, Inc.
Notes to Financial Statements
2. Property and Property and equipment consists of the following:
Equipment
<TABLE>
<CAPTION>
Estimated
Useful
December 31, Life 1997 1996
------------- --------- -------- ------
<S> <C> <C> <C>
Furniture
and fixtures........ 5 $ 73,792 $ 25,629
Leased systems........ 5 1,041,147 655,364
Automobiles........... 3 - 53,534
Computer equipment.... 5 330,797 204,534
Leasehold improve-
ments............... 3,238 -
--------- --------
1,448,974 939,061
Less accumulated
depreciation........ 688,373 411,071
--------- --------
$ 760,601 $527,990
========== ========
</TABLE>
Depreciation expense was $284,600 and $179,340 for
the years ended December 31, 1997 and 1996,
respectively.
3. Leasing As Lessor
Activity
The Company is the lessor of equipment under
operating leases for periods up to five years.
Customers routinely extend the lease terms in
connection with a system upgrade. The cost of
leased systems is generally depreciated over five
years to a zero value on an accelerated basis.
Accumulated depreciation on leased systems was
$494,624 and $286,928 at December 31, 1997 and
1996, respectively.
Minimum rentals receivable under existing operating
leases as of December 31, 1997 were as follows:
<TABLE>
<CAPTION>
Year Amount
---- -------
<S> <C>
1998............................................ $ 1,688,502
1999............................................ 1,113,972
2000............................................ 543,873
2001............................................ 244,045
2002............................................ 33,370
Thereafter...................................... 24,950
</TABLE>
F-16
<PAGE>
Medical Software Integrators, Inc.
Notes to Financial Statements
As Lessee
The Company is obligated under terms of operating
leases for its office facilities and certain
equipment.
Future annual minimum payments under these
operating leases are as follows:
<TABLE>
<CAPTION>
Year Amount
---- -------
<S> <C>
1998................. $ 86,652
1999................. 51,320
</TABLE>
Rental expense was approximately $87,000 and $81,000
for the years ended December 31, 1997 and 1996,
respectively.
4. Notes Payable At December 31, 1996, the Company was obligated
under terms of two notes payable for vehicles. In
December 1997, the Company paid all amounts,
including accrued interest thereon, due under the
notes.
5. Employee Benefit Plan The Company maintains a 401(k) profit sharing plan
for its employees who have completed one year of
service and attained the age of 21. In addition to
the amount deferred by each employee, the company
may make a discretionary contribution to each
participant according to a formula based upon the
participant's annual compensation and age. As of
January 16, 1998, the Company has not declared a
contribution for the year ended December 31, 1997.
Expense related to this plan was $51,151 for the
year ended December 31, 1996.
6. Related Party The Company provides all accounting services to
Transactions Doctors Billing Office, Inc. (DBO), an affiliate of
the Company. The Company is not compensated for
providing these services but it is reimbursed all
expenses paid on behalf of DBO. The Company also
reimburses DBO for all collections received on
behalf of DBO. Unreimbursed expenses paid on behalf
of DBO were approximately $29,800 and $0 as of
December 31, 1997 and 1996, respectively and are
included in other current assets in the accompanying
balance sheets.
F-17
<PAGE>
Medical Software Integrators, Inc.
Notes to Financial Statements
In addition, the Company also rents certain
equipment and sells supplies to DBO. The amount of
sales resulting from these transactions were
approximately $44,000 and $30,000 in 1997 and 1996,
respectively.
7. Income Taxes The components of income tax expense (benefit) are
as follows:
<TABLE>
<CAPTION>
1997 1996
---------- --------
<S> <C> <C>
Current
Federal......................... $ 353,000 $ 42,000
State........................... 66,000 10,000
---------- --------
Total current..................... 419,000 52,000
Deferred
Federal......................... (166,000) 64,000
State........................... (31,000) 13,000
---------- ---------
Total deferred.................... (197,000) 77,000
---------- ---------
Total income taxes................ $ 222,000 $129,000
========== ========
</TABLE>
Deferred income taxes relate to temporary
differences between financial and income tax
reporting and relate primarily to the Company
reporting on a cash basis for income tax purposes.
Deferred tax assets (liabilities) are comprised of
the following:
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
Current:
Deferred income tax assets
(liabilities)
Accrual to cash
differences..................... $ 129,000 $(68,000)
========== ========
</TABLE>
F-18
<PAGE>
Medical Software Integrators, Inc.
Notes to Financial Statements
Income taxes differed from amounts computed by
applying the U.S. Federal income tax statutory rate
to pretax income as a result of the following:
<TABLE>
<CAPTION>
1997 1996
---------- --------
<S> <C> <C>
Expected tax expense................... $ 216,000 $ 107,000
Increase in income
taxes resulting from:
State income taxes................. 38,000 19,000
Other, net......................... (32,000) 3,000
---------- --------
Net income taxes....................... $ 222,000 $ 129,000
========== ==========
</TABLE>
8. Subsequent Event In November 1997, the Company entered into
negotiations with InfoCure Corporation ("InfoCure"),
whereby InfoCure would acquire all of the common
stock of the Company in exchange for an estimated
$5,760,000 cash and approximately $1,440,000 worth
of shares of InfoCure common stock. An additional
$2,200,000 worth of shares would be contingently
issuable in 1998 and 1999 upon achievement of
certain revenue and/or profit objectives in those
years. The sale is expected to occur in the first
quarter of 1998.
F-19
<PAGE>
INFOCURE CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
PRO FORMA
INFOCURE MSD MSI ADJUSTMENTS COMBINED
------------- ------------- ------------ ---------------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash $ 1,406 $ 269 $ 228 $ - $ 1,903
Accounts and notes receivable net of
allowances 5,169 134 1,081 - 6,384
Inventory 437 - 206 - 643
Deferred tax asset 556 - 129 - 685
Prepaid expenses and other current assets 511 152 43 - 706
---------------------------------------------------------------------------
Total current assets 8,079 555 1,687 - 10,321
Property and equipment, net of depreciation 1,328 159 761 - 2,248
Goodwill, net of amortization 17,014 - - 21,357 [A] 38,371
Capitalized software, net of amortization 1,027 420 - - 1,447
Deferred tax asset 1,906 - - - 1,906
Other assets 197 73 8 - 278
---------------------------------------------------------------------------
TOTAL ASSETS $ 29,551 $1,207 $2,456 $ 21,357 $ 54,571
===========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,694 $ 9 $ 84 $ - $ 1,787
Accrued restructuring costs 3,172 - - - 3,172
Accrued expenses 1,084 - 268 - 1,352
Deferred revenue 3,389 714 1,273 - 5,376
Current portion of long-term debt 2,001 - - - 2,001
---------------------------------------------------------------------------
Total current liabilities 11,340 723 1,625 - 13,688
Long-term debt, less current portion 6,960 - - - 6,960
Other liabilities 6,519 - - 18,532 [B] 25,051
---------------------------------------------------------------------------
Total liabilities 24,819 723 1,625 18,532 45,699
---------------------------------------------------------------------------
Stockholders' equity
Common stock, $.001 par value -
authorized
15,000,000 shares; 5,736,937 outstanding 6 - - - 6
Additional paid-in capital 16,662 - - 4,140 [B] 20,802
Accumulated deficit (11,820) - - - (11,820)
Treasury stock and accrued stock
repurchase, at cost (116) - - - (116)
Net Assets of Purchased Companies - 484 831 (1,315) [A] -
---------------------------------------------------------------------------
Total stockholders' equity 4,732 484 831 2,825 8,872
---------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 29,551 $1,207 $2,456 $ 21,357 $ 54,571
===========================================================================
</TABLE>
See notes to pro forma condensed consolidated financial statements.
F-20
<PAGE>
INFOCURE CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
FOUNDING
BUSINESSES
AND OTHER PRO FORMA
INFOCURE ACQUISITIONS ADJUSTMENTS [1] SUBTOTAL
------------------ ------------------ -------------------- --------------
<S> <C> <C> <C> <C>
Revenues $15,755 $16,687 $ - $32,442
Cost of revenues 4,075 4,166 - 8,241
--------------------------------------------------------------------------------------
Gross profit 11,680 12,521 - 24,201
Operating expenses 10,143 11,531 (1,583) 20,091
Restructuring costs 11,136 - - 11,136
--------------------------------------------------------------------------------------
Operating income (9,599) 990 1,583 (7,026)
Other expense (income) 207 168 161 536
--------------------------------------------------------------------------------------
Income before taxes (9,806) 822 1,422 (7,562)
Taxes (benefit) (1,237) 345 680 (212)
--------------------------------------------------------------------------------------
NET INCOME $(8,569) $ 477 $ 742 $(7,350)
======================================================================================
ACQUISITION OF ACQUISITION PRO FORMA
MICRO DESIGNS OF MSI ADJUSTMENTS TOTAL
------------------ ------------------ -------------------- --------------
<S> <C> <C> <C> <C>
Revenues $ 4,890 $ 3,971 $ - $41,303
Cost of revenues 378 317 - 8,936
--------------------------------------------------------------------------------------
Gross profit 4,512 3,654 - 32,367
Operating expenses 4,318 3,021 (880) [C] 26,550
Restructuring costs - - - 11,136
--------------------------------------------------------------------------------------
Operating income 194 633 880 (5,319)
Other expense (income) (13) (2) 1,631 [D] 2,152
--------------------------------------------------------------------------------------
Income before taxes 207 635 (751) (7,471)
Taxes (benefit) 22 222 (172) [E] (140)
--------------------------------------------------------------------------------------
NET INCOME $ 185 $ 413 $ (579) $(7,331)
======================================================================================
Pro forma income per share $ (1.20)
==============
Shares used in computing pro forma income per share 6,132
==============
See notes to pro forma condensed consolidated financial statements.
</TABLE>
F-21
<PAGE>
INFOCURE CORPORATION
NOTES TO CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - BASIS OF PRESENTATION
InfoCure Corporation ("InfoCure" and together with InfoCure subsidiaries the
"Company") was formed in November 1996 to acquire certain healthcare practice
management companies in order to offer a comprehensive array of healthcare
practice management systems. On July 10, 1997, contemporaneous with the closing
of the Company's initial public offering, the Company completed the acquisition
of (i) American MedCare Corporation ("AMC")(the "Predecessor Company")(the
parent of International Computer Solutions, Health Care Division and Millard-
Wayne, Inc.); (ii) DR Software, Inc.; (iii) KComp Management Systems, Inc.; and
(iv) Rovak, Inc. AMC acquired Health Care Division effective December 3, 1996
and Millard-Wayne, Inc. effective July 10, 1997. The foregoing acquired
companies (except for AMC as the Predecessor Company) are referred to in the
condensed consolidated pro forma financial statements as the "Founding
Businesses".
The accompanying unaudited condensed consolidated pro forma financial statements
are presented to illustrate the effect on the Company's historical results of
operations of (i) the acquisition of the Founding Businesses as discussed above;
(ii) the acquisition, effective as of October 1, 1997, of the assets, subject to
the assumption of certain liabilities, of Professional On-Line Computers, Inc.
(POLCI"); (iii) the acquisitions, effective as of October 1, 1997, of the
capital stock of SoftEasy, Inc. ("SoftEasy") and certain health care assets,
subject to the assumption of certain health care liabilities, of Commercial
Computers, Inc. ("CCI"); (iv) the acquisition, effective November 1, 1997, of
the stock of Pace Financial Corporation ("PACE"); (v) and the acquisition,
effective December 1, 1997, of the assets of Orthodontic Practice Management
System ("OPMS"), formerly a division of HALIS, Inc. (POLCI, SoftEasy, CCI, PACE
and OPMS are collectively referred to as the "Other Acquisitions").
On February 24, 1998, InfoCure acquired the assets, subject to certain
liabilities, of Micro-Software Designs, Inc. ("MSD"),a New York corporation,
pursuant to an asset purchase agreement effective January 1, 1998. MSD is
headquartered in Ridgefield, Connecticut and provides computerized office
information systems for oral and maxillofacial surgeons. The aggregate
consideration consisted of $12.5 million in cash, 270,000 shares of common stock
with a fair value of $2.7 million based on market prices at the date of the
acquisition and the assumption of $723,000 in liabilities. Additional cash
consideration of up to $4.4 million is contingently payable based on the
attainment of certain income targets during the 24-month period beginning
January 1, 1998.
On March 2, 1998, InfoCure closed the transaction to acquire all of the
outstanding equity securities of Medical Software Integrators, Inc. ("MSI"), a
Georgia corporation, pursuant to a stock purchase agreement effective January 1,
1998. MSI is headquartered in
F-22
<PAGE>
INFOCURE CORPORATION
NOTES TO CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(unaudited)
Marietta, Georgia and provides practice management systems and decision support
tools to anesthesiologists. The aggregate consideration consisted of $5.8
million in cash and 101,767 shares of common stock with a fair value of $1.4
million based on market prices at the date of the acquisition. Additional
consideration of up to $2.2 million is contingently payable based on the
attainment of certain income targets during the 24-month period beginning
January 1, 1998. This additional contingent consideration is payable in shares
of the Company's common stock.
The unaudited condensed consolidated pro forma statements of operations have
been prepared as if all the foregoing acquisitions had been consummated as of
February 1, 1997, the beginning of the eleven month period presented. This
eleven month transition period results from the Company's change in fiscal from
January 31 to December 31 which was made effective February 1, 1997.
The pro forma statement of operations for the eleven months ended December 31,
1997 combines the Company's statement of operations for that period with (i) the
respective statements of operations for each of the Founding Businesses for the
approximate five and one-half month period from February 1, 1997; plus the
period from July 10, 1997 (date of acquisition to December 31, 1997 (except for
Health Care Division whose results of operations are included for the eleven
months ended December 31, 1997); (ii) the respective statements of operations
for the Other Acquisitions for the period most closely approximating the eleven
months ended December 31, 1997; (iii) the statement of operations for MSD
for the approximate eleven-month period ended December 31, 1997; and (iv) the
statement of operations for MSI for the approximate eleven-month December 31,
1997.
The unaudited condensed consolidated pro forma balance sheet has been prepared
as if the acquisition of MSD and MSI had been consummated as of February 1,
1997. The acquisitions of the Founding Businesses and the Other Acquisitions
had previously been consummated as described in documents on file with the
Commission.
The pro forma adjustments described in Note 2 below are based on preliminary
estimates, available information and certain assumptions that management deems
appropriate. The unaudited pro forma condensed consolidated data presented
herein do not purport to represent what the Company's results of operations
would actually have been had such events occurred at the beginning of the
periods presented, as assumed, or to project the Company's results of operations
for any future period or the future results of the Company.
F-23
<PAGE>
NOTE 2 - PRO FORMA ADJUSTMENTS
The pro forma adjustments to the condensed consolidated statements of operations
are as follows:
<TABLE>
<S> <C>
[1] The pro forma adjustments with respect to the Founding
Businesses are described in the Company's registration
statement on Form SB-2 on file with the Commission. The pro
forma adjustments with respect to the Other Acquisitions are
described in the Company's Forms 8-K, as amended, also on
file with the Commission.
[A] To record acquisition of certain assets subject to certain
liabilities and the allocation of the companies' purchase
price on the basis of the estimated fair values of the assets
acquired and the liabilities assumed.
Management continues to study the allocation of purchase
prices; upon completion of such study, the allocation may
change.
[B] To reflect stock issued and the liability for the cash portion
of the purchase price. Amount was subsequently funded under the
Company's acquisition line of credit and proceeds from a
private placement of convertible preferred stock.
[C] To adjust costs and expenses to reflect the termination of
certain personnel and the changes in the salaries of other
personnel specifically provided for in the acquisition and
related agreements. To adjust depreciation and amortization to
reflect the adjusted bases of assets. Goodwill resulting from
the acquisition will be amortized over a 15 year period.
[D] To adjust interest expense to reflect the increase in debt in
connection with the acquisition.
[E] To adjust income tax expense
</TABLE>
F-24
