<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) OCTOBER 23, 1998
----------------
INFOCURE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHAPTER)
DELAWARE 001-12799 58-2271614
(COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
(STATE OR OTHER IDENTIFICATION NO.)
JURISDICTION OF
INCORPORATION)
1765 THE EXCHANGE, SUITE 450 ATLANTA, 30339
GA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 770-221-9990
NOT APPLICABLE
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Item 2: Acquisition or Disposition of Assets............................. 3
Item 7: Financial Statements, Pro Forma Financial Information and Exhib-
its..................................................................... 3
Signatures............................................................... 4
</TABLE>
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On October 23, 1998, InfoCure Corporation ("InfoCure" or the "Company")
acquired substantially all of the assets, subject to the assumption of
approximately $4.6 million of liabilities, of the Healthcare Systems Division
("HSD") of The Reynolds and Reynolds Company. HSD is currently headquartered in
Dayton, Ohio, and provides healthcare practice management systems principally
to the radiology, anesthesiology and enterprise-wide medical practice and MSO
markets. The aggregate consideration consisted of $36.5 million in cash, a
$10.0 million subordinated, convertible note payable to the seller over five
years and $2.0 million subordinated promissory note payable to the seller
within 120 days of closing, for a total purchase price of approximately $48.5
million. In addition to the purchase price, expenses of $1.4 million related to
the purchase and liabilities of $4.3 million were paid by InfoCure at closing.
The convertible note is convertible at InfoCure's option at any time through
September 30, 1999, into shares of InfoCure common stock. The conversion price
is based on the market price of the common stock at the time of conversion. The
cash portion of the purchase price was funded by a term loan from InfoCure's
senior lender. The Company expects to record a one-time pretax charge of
approximately $9.0 million in the quarter ended December 1998 representing the
acquisition of in-process research and development of software.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
Audited Financial Statements of the Healthcare Systems Division of
The Reynolds and Reynolds Company as of June 30, 1998 and the nine
months then ended and as of September 30, 1997 and the years ended
September 30, 1997 and 1996 are attached hereto.
(b) Pro Forma Financial Information
InfoCure Corporation Pro Forma Combined 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: December 21, 1998 by: /s/ Frederick L. Fine
-----------------------------------
Frederick L. Fine
President and Chief Executive
Officer
<PAGE>
INDEX TO FINANCIAL STATEMENTS
INFOCURE CORPORATION
FORM 8-K/A
Audited Financial Statements of the Healthcare Systems Division of The Reynolds
and Reynolds Company
- --------------------------------------------------------------------------------
Independent Auditors' Report.................................................F-2
Balance Sheets ..............................................................F-3
Statements of Operations and Deficit in Divisional Net Assets ...............F-4
Statements of Cash Flows ....................................................F-5
Notes to Financial Statements ..........................................F-6 - 10
InfoCure Corporation Pro Forma Combined Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
Basis of Presentation.......................................................F-11
Pro Forma Combined Balance Sheet............................................F-12
Pro Forma Combined Statements of Operations
For the year ended December 31, 1997 ................................F-13 - 14
For the six months ended June 30, 1998 ...................................F-15
Notes to Pro Forma Combined Financial Statements ...........................F-16
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
The Reynolds and Reynolds Company:
We have audited the accompanying balance sheets of the Healthcare Systems
Division of The Reynolds and Reynolds Company ("HSD") as of June 30, 1998 and
September 30, 1997, and the related statements of operations and deficit in
divisional net assets, and cash flows for the nine months ended June 30, 1998
and the years ended September 30, 1997 and 1996. These financial statements
are the responsibility of The Reynolds and Reynolds Company and HSD'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, such financial statements present fairly, in all material
respects, the financial position of HSD at June 30, 1998 and September 30,
1997, and the results of its operations and its cash flows for the nine months
ended June 30, 1998 and the years ended September 30, 1997 and 1996 in
conformity with generally accepted accounting principles.
Deloitte & Touche llp
Dayton, Ohio
September 28, 1998
F-2
<PAGE>
THE HEALTHCARE SYSTEMS DIVISION OF THE REYNOLDS AND REYNOLDS COMPANY
BALANCE SHEETS
JUNE 30, 1998 AND SEPTEMBER 30, 1997 (IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1998 1997
-------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............................. $ 2 $ 74
Accounts receivable (less allowance for doubtful
accounts: 1998--$1,033 and 1997--$974)............... 11,385 11,423
Inventories--finished goods........................... 2,333 1,836
Prepaid expenses and other assets..................... 538 649
------- --------
Total current assets................................ 14,258 13,982
------- --------
PROPERTY, PLANT AND EQUIPMENT:
Buildings and leasehold improvements.................. 675 572
Computer and other equipment.......................... 5,426 4,871
Furniture and other................................... 1,879 1,645
Construction in progress.............................. 73 90
------- --------
Total property, plant and equipment................. 8,053 7,178
Less accumulated depreciation......................... 4,654 3,671
------- --------
Net property, plant and equipment................... 3,399 3,507
------- --------
INTANGIBLE ASSETS:
Goodwill, net......................................... 9,562 9,986
Software licensed to customers, net................... 5,007 5,997
Other, net............................................ 1,609 3,240
------- --------
Total intangible assets............................. 16,178 19,223
------- --------
OTHER ASSETS............................................ 931 2,133
------- --------
TOTAL ASSETS............................................ $34,766 $ 38,845
======= ========
CURRENT LIABILITIES:
Accounts payable:
Trade................................................ $ 2,706 $ 2,340
Other................................................ 952 1,727
Accrued liabilities:
Compensation and related items....................... 2,795 3,033
Other................................................ 1,222 1,543
Deferred revenues..................................... 250 867
------- --------
Total current liabilities........................... 7,925 9,510
------- --------
OTHER LIABILITIES:
Postretirement medical................................ 397 222
Pensions.............................................. 1,628 1,143
Other................................................. 53 797
------- --------
Total other liabilities............................. 2,078 2,162
------- --------
ADVANCES FROM PARENT, NET............................... 32,269 47,907
------- --------
DEFICIT IN DIVISIONAL NET ASSETS........................ (7,506) (20,734)
------- --------
TOTAL LIABILITIES AND DEFICIT IN DIVISIONAL NET ASSETS.. $34,766 $ 38,845
======= ========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
THE HEALTHCARE SYSTEMS DIVISION OF THE REYNOLDS AND REYNOLDS COMPANY
STATEMENTS OF OPERATIONS AND DEFICIT IN DIVISIONAL NET ASSETS
NINE MONTHS ENDED JUNE 30, 1998 AND YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS YEARS ENDED
ENDED SEPTEMBER 30,
JUNE 30, -----------------
1998 1997 1996
----------- -------- -------
<S> <C> <C> <C>
NET SALES AND REVENUES:
Products....................................... $ 18,875 $ 22,651 $24,259
Services....................................... 18,570 17,796 16,412
-------- -------- -------
Total net sales and revenues............... 37,445 40,447 40,671
-------- -------- -------
COSTS AND EXPENSES
Cost of sales:
Products..................................... 14,731 18,935 16,701
Services..................................... 10,048 8,917 7,986
-------- -------- -------
Total cost of sales........................ 24,779 27,852 24,687
-------- -------- -------
Selling, general and administrative expenses... 24,649 42,815 24,339
Restructuring charge........................... 1,427
-------- -------- -------
Total costs and expenses................... 49,428 72,094 49,026
-------- -------- -------
OPERATING LOSS................................... (11,983) (31,647) (8,355)
-------- -------- -------
OTHER CHARGES (INCOME):
Interest expense............................... 3 1
Interest income................................ (46) (49) (16)
Other.......................................... (1) (20) 7
-------- -------- -------
Total other income......................... (47) (66) (8)
-------- -------- -------
LOSS BEFORE INCOME TAX BENEFIT................... (11,936) (31,581) (8,347)
INCOME TAX BENEFIT............................... (4,430) (10,847) (2,900)
-------- -------- -------
NET LOSS......................................... (7,506) (20,734) (5,447)
DEFICIT IN DIVISIONAL NET ASSETS:
Beginning of period............................ (20,734) (5,447) (2,458)
Advance from parent............................ 20,734 5,447 2,458
-------- -------- -------
End of period.................................. $ (7,506) $(20,734) $(5,447)
======== ======== =======
</TABLE>
See notes to financial statements.
F-4
<PAGE>
THE HEALTHCARE SYSTEMS DIVISION OF THE REYNOLDS AND REYNOLDS COMPANY
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1998 AND YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS YEARS ENDED
ENDED SEPTEMBER 30,
JUNE 30, -----------------
1998 1997 1996
----------- -------- -------
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING
ACTIVITIES:
Net loss...................................... $(7,506) $(20,734) $(5,447)
Adjustments to reconcile net loss to net cash
used in operating activities:
Purchased in-process research and
development costs.......................... 11,000
Depreciation and amortization............... 5,667 5,587 3,387
Loss on sales of assets..................... 138 4
Changes in operating assets and liabilities,
net of assets acquired:
Accounts receivable......................... 38 686 (2,998)
Inventories................................. (497) (526) 247
Prepaid expenses, intangible and other
assets..................................... 1,326 379 (258)
Accounts payable............................ (409) 194 1,485
Accrued and other liabilities............... (1,710) (1,083) 675
------- -------- -------
Net cash used in operating activities..... (3,091) (4,359) (2,905)
------- -------- -------
CASH FLOWS PROVIDED BY (USED IN) INVESTING
ACTIVITIES:
Business combinations, net of cash acquired... (494) (17,524)
Capital expenditures.......................... (893) (1,244) (2,478)
Net proceeds from sales of assets............. 10 19 622
Capitalization of software licensed to
customers.................................... (700) (1,065) (888)
------- -------- -------
Net cash used in investing activities..... (2,077) (19,814) (2,744)
------- -------- -------
CASH FLOWS PROVIDED BY (USED IN) FINANCING
ACTIVITIES:
Advances from parent, net..................... 5,096 26,015 5,349
Principal payment on debt..................... (1,769) (10)
------- -------- -------
Net cash provided by financing
activities............................... 5,096 24,246 5,339
------- -------- -------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS..... (72) 73 (310)
CASH AND EQUIVALENTS--Beginning of year......... 74 1 311
------- -------- -------
CASH AND EQUIVALENTS--End of year............... $ 2 $ 74 $ 1
======= ======== =======
SUPPLEMENTAL DISCLOSURE OF NON-CASH
TRANSACTION--
Advance from parent........................... $20,734 $ 5,447 $ 2,458
======= ======== =======
</TABLE>
See notes to financial statements.
F-5
<PAGE>
THE HEALTHCARE SYSTEMS DIVISION OF THE REYNOLDS AND REYNOLDS COMPANY
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1998 AND YEARS ENDED SEPTEMBER 30, 1997 AND 1996
(IN THOUSANDS)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business--The financial statements include the accounts of
the Healthcare Systems Division of The Reynolds and Reynolds Company ("HSD" or
the "Division"). HSD sells computer systems including both hardware and
software to a wide range of entities that operate in the healthcare industry.
HSD also receives service revenue from hardware and software maintenance as
well as training and installation.
Because HSD is operated as a division of The Reynolds and Reynolds Company
("R&R"), these financial statements may not necessarily be representative of
results that would have been attained if HSD had operated as a separate
entity.
Use of Estimates--The financial statements are prepared in conformity with
generally accepted accounting principles and include amounts based on
management's best estimates and judgments. The use of estimates and judgments
may affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the period. Actual
results could differ from those estimates.
Cash and Cash Equivalents--For purposes of reporting cash flows, cash and
cash equivalents includes cash on hand, cash deposits and investments with
maturities of three months or less at the time of purchase. The carrying
amount of these short-term investments approximates fair value.
Concentrations of Credit Risk--The Company is a leading provider of
information management systems to entities in the healthcare industry. A
significant portion of accounts receivable are due from such entities.
Inventories--Inventories, which consist primarily of computer equipment, are
stated at the lower of cost or market. Cost is determined by specific
identification. Market is based on net realizable value.
Property, Plant and Equipment--Property, plant and equipment are stated at
cost. Depreciation and amortization are provided over the estimated useful
service lives of the assets or asset groups, principally on the straight-line
method for financial reporting purposes. Estimated asset lives are:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and leasehold improvements................................... 3-33
Computer and other equipment........................................... 3-5
Furniture and other.................................................... 3-15
</TABLE>
Intangible Assets--The excess of cost over the fair value of net assets of
companies acquired is recorded as goodwill and is amortized on a straight-line
basis over primarily seven years. Amortization expense was $1,718 for the nine
months ended June 30, 1998 and $1,878 and $1,803 for the years ended September
30, 1997 and 1996, respectively. At June 30, 1998 and September 30, 1997,
accumulated amortization was $6,785 and $5,067, respectively.
The Company capitalizes certain costs of developing its software products.
Upon completion of a software product, amortization is determined based on the
larger of the amounts computed using (a) the ratio that current gross revenues
for each product bears to the total of current and anticipated future gross
revenues for that product or (b) the straight-line method over the remaining
estimated economic life of the product, ranging from five to seven years.
Amortization expense for software licensed to customers was $1,690 for the
nine months ended June 30, 1998 and $1,103 and $116 for the years ended
September 30, 1997 and 1996, respectively. Amortization expense, which is
included in cost of goods sold, for the nine months ended June 30, 1998
includes a $750 write-
F-6
<PAGE>
THE HEALTHCARE SYSTEMS DIVISION OF THE REYNOLDS AND REYNOLDS COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
off of capitalized software, which was determined to be impaired based on
management's analysis of undiscounted future cash flows. In addition,
amortization expense for the year ended September 30, 1997 included $648 from
special charges (see Note B). At June 30, 1998 and September 30, 1997
accumulated amortization was $13,489 and $11,799, respectively.
Other intangible assets are amortized over periods ranging from two to
fifteen years. Amortization expense was $1,268 for the nine months ended June
30, 1998 and $1,473 and $534 for the years ended September 30, 1997 and 1996,
respectively. At June 30, 1998 and September 30, 1997 accumulated amortization
was $6,550 and $5,282, respectively.
The carrying values of goodwill and other intangible assets are reviewed if
the facts and circumstances indicate potential impairment of their carrying
value. Any impairment in the carrying value of such intangibles is recorded
when identified.
Revenue Recognition--Revenues consist of both sales and service revenues.
Products sales, including computer hardware and software licenses, are
recorded upon shipment to customers. Service revenues, which include computer
hardware maintenance, software support and training are recorded ratably over
the contract period or as services are performed.
Lease Obligations--The Division along with other divisions at R&R leases
premises and equipment under various capital and operating lease agreements.
However, the Division has not entered into significant leasing arrangements
separate from other R&R divisions; therefore, future minimum rental
commitments are not significant. Rental expenses allocated to the Division
were $1,780 for the nine months ended June 30, 1998 and $2,001 and $1,397 for
the years ended September 30, 1997 and 1996, respectively.
Research and Development Costs--The Company expenses research and
development costs as incurred. These costs were $2,981 for the nine months
ended June 30, 1998 and $14,676 and $3,240 for the years ended September 30,
1997 and 1996, respectively. These costs are included in selling, general and
administrative expenses in the accompanying statements of operations. Included
in the year ended September 30, 1997 are $11,000 of purchased in-process
research and development costs. In-process research and development acquired
in business combinations represented software development costs for which
technological feasibility was not established and for which there was no
alternative future use.
Income Taxes--The results of operations of HSD are included in a
consolidated federal income tax return with R&R. Federal income tax benefits
allocable to the operations of HSD are calculated as if it had filed separate
income tax returns, state income taxes are allocated based on R&R's overall
effective state tax rate. Income tax benefits are charged against advances
from parent, net. No deferred tax assets or liabilities are allocated by R&R
to the Division.
B. RESTRUCTURING AND SPECIAL CHARGES
During the year ended September 30, 1997, the Division recorded a pretax
charge of $13,075 consisting of a $1,427 restructuring charge and $11,648 of
other special charges. After income tax benefit, the charge increased net loss
by $9,530. The income tax rate on the combined charges represented a 27.1%
effective tax rate because not all of the charges were tax deductible. Major
components of the charge are listed on the following table:
<TABLE>
<CAPTION>
RESTRUCTURING SPECIAL TOTAL
CHARGE CHARGES CHARGES
------------- ------- -------
<S> <C> <C> <C>
Employee termination benefits................. $1,427 $ $ 1,427
In-process research and development........... 11,000 11,000
Discontinued products......................... 648 648
------ ------- -------
Totals........................................ $1,427 $11,648 $13,075
====== ======= =======
</TABLE>
F-7
<PAGE>
THE HEALTHCARE SYSTEMS DIVISION OF THE REYNOLDS AND REYNOLDS COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Restructuring Charge--Employee termination benefits consisted of involuntary
severance benefits and voluntary retirement benefits for 23 employees. Through
June 30, 1998, all involuntary termination benefits had been paid. See Note E
to the financial statements for a discussion of voluntary retirement benefits.
Special Charges--In-process research and development expenses resulted from
two recent computer services business combinations and represented software
development costs for which technological feasibility was not established and
for which there were no alternative future use. The balance of special charges
represented primarily the write-off of discontinued software licensed to
customers. Special charges increased cost of sales $648 and selling, general
and administrative expenses $11,000.
C. BUSINESS COMBINATIONS
In fiscal year 1997, the Division purchased two healthcare computer services
businesses for $17,524, paid from R&R's available cash. One of the businesses,
acquired June 30, 1997, provided information systems to physician practices
with primary emphasis on practice management systems for hospital-based
physicians. The other business, acquired February 28, 1997, has capabilities
in electronic medical records and clinical management. These businesses had
annual sales of about $10,000. Based on management's analysis of cash flows
and an appraisal, $11,000 of the purchase price was allocated to in-process
research and development, representing software development costs for which
technological feasibility was not established and for which there was no
alternative future use. Through June 30, 1998, no amounts have been
capitalized for software development relating to these projects.
Recorded liabilities of acquired companies included the costs to exit
duplicate facilities. Key elements of the costs accrued for exiting duplicate
facilities were involuntary termination benefits of $398 and lease costs of
$219. Involuntary termination benefits represent severance payments and
outplacement services for 54 employees. Through June 30, 1998, all severance
benefits were paid and the Division bought out its remaining lease obligation.
Costs paid approximated those reserved.
All business combinations were accounted for as purchases and the accounts
of the acquired businesses were included in the Division's financial
statements since the dates of acquisition. In connection with the business
combinations, the Division recorded goodwill of $2,889 in 1997. This goodwill
is being amortized on a straight-line basis over seven years.
Pro Forma Information (Unaudited)--On a pro forma basis, assuming that the
1997 business combinations were made as of October 1, 1995, the revenues of
HSD would have increased by $9,700 and $13,500 for the years ended September
30, 1997 and 1996, respectively. Net loss would have decreased by $7,700 for
the year-ended September 30, 1997 and increased by $10,600 for the year-ended
September 30, 1996. These pro forma results of operations include pre-
acquisition results of the businesses acquired and may not be indicative of
the results of operations that actually would have been obtained if the
business combination had been in effect or that may be obtained in the future.
D. INCOME TAX BENEFIT
<TABLE>
<CAPTION>
SEPTEMBER 30,
JUNE 30, --------------
1998 1997 1996
-------- ------- ------
<S> <C> <C> <C>
Provision for Income Tax Benefit
Federal.............................................. $3,521 $ 8,618 $2,301
State and local...................................... 909 2,229 599
------ ------- ------
Income tax benefit..................................... $4,430 $10,847 $2,900
====== ======= ======
</TABLE>
F-8
<PAGE>
THE HEALTHCARE SYSTEMS DIVISION OF THE REYNOLDS AND REYNOLDS COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
JUNE 30, 1998 SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
--------------- --------------------- ---------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Reconciliation of Income
Tax Rates
Statutory federal
income taxes......... $4,178 35.0% $ 11,053 35.0% $ 2,921 35.0%
State and local taxes
less federal income
tax effect........... 590 4.9 1,449 4.6 390 4.7
Goodwill amortization
and write-off........ (284) (2.3) (323) (1.0) (313) (3.7)
In-process research
and development...... (1,401) (4.4)
Other................. (54) (0.5) 69 0.1 (98) (1.3)
------ ---- ---------- ------- ---------- --------
Income tax benefit...... $4,430 37.1% $ 10,847 34.3% $ 2,900 34.7%
====== ==== ========== ======= ========== ========
</TABLE>
E. POSTRETIREMENT BENEFITS
Pension benefits for the majority of the Division's employees are provided
through plans that are maintained by R&R. Pension benefits are based primarily
on years of service and compensation. R&R's funding policy is to make annual
contributions to the pension plan sufficient to meet or exceed the minimum
statutory requirements.
The Division also participates in the R&R sponsored defined benefit medical
plan for employees who retired before October 1, 1993. Future retirees may
purchase postretirement medical insurance from R&R. Discounts from the market
price of postretirement medical insurance will be provided to certain retirees
based on age and length of remaining service as of October 1, 1993. R&R also
sponsors a defined benefit life insurance plan in which substantially all of
the Division's employees participate. Medical and life insurance benefits are
funded on a pay as you go basis.
The Division was allocated $854, $1,691, and $656, respectively of pension
expense and $44, $171, and $25, respectively, of postretirement medical and
life insurance benefits expense for the nine months ended June 30, 1998 and
the years ended September 30, 1997 and 1996. During the year ended September
30, 1997, the Division expensed $769 of special termination benefits in
connection with a voluntary retirement program.
F. RELATED PARTY TRANSACTIONS
All of HSD's financing requirements are provided by R&R. These financial
statements do not include any long-term debt or interest expense because the
Division has not guaranteed the debt nor pledged any of its assets against the
debt. Such amounts are included in advances from parent, and will be increased
or decreased based on cash flows of the Division. R&R has allocated to the
Division costs related to employee benefits, data processing and other
corporate overhead of $1,931 for the nine months ended June 30, 1998 and
$1,475 and $1,115 for the years ended September 30, 1997 and 1996,
respectively, which are included in selling, general and administrative
expenses. Management believes that the amounts allocated are reasonable;
however, the amounts that would have been or will be incurred on a separate
company basis could differ from the estimated amounts due to economies of
scale realized by R&R and differences in management techniques and
organization.
G. ACCOUNTING STANDARDS
In October 1997, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 97-2, "Software Revenue Recognition," which
supersedes SOP 91-1, "Software Revenue Recognition." SOP 97-2 provides
guidance on applying generally accepted accounting principles in recognizing
revenue on software transactions. The new SOP will be effective for
transactions entered into in fiscal years beginning after December 15, 1997.
Management believes the adoption of this pronouncement will reduce revenues in
the period
F-9
<PAGE>
THE HEALTHCARE SYSTEMS DIVISION OF THE REYNOLDS AND REYNOLDS COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
of adoption. The effect on net sales and revenue has not yet been determined.
The adoption will not effect the Division's future cash flows.
H. SUBSEQUENT EVENT
On September 28, 1998, R&R agreed to sell substantially all the assets of the
Division, net of certain liabilities to be assumed, to InfoCure Corporation for
approximately $50.0 million.
F-10
<PAGE>
INFOCURE CORPORATION
PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
The unaudited pro forma combined financial statements present the balance
sheet and income statement data from the consolidated financial statements of
InfoCure Corporation ("InfoCure" or the "Company") including the Founding
Companies (acquired by the Company concurrent with its initial public
offering) and the Subsequent Acquisitions (completed from October 1997 through
January 1998) (collectively, the "Historical Acquisitions") and give effect to
the acquisition by InfoCure (entered into in September 1998) of substantially
all the net assets of The Healthcare Systems Division ("HSD") of The Reynolds
and Reynolds Company (the "HSD Acquisition") and other related transactions.
The unaudited pro forma combined statements of operations have been prepared
for the year ended December 31, 1997 and the six months ended June 30, 1998.
These statements give effect to the HSD Acquisition and InfoCure's Historical
Acquisitions as if such transactions had occurred at the beginning of the
earliest period presented. The unaudited pro forma combined balance sheet
gives effect to the HSD Acquisition, and certain other related transactions as
if such events had occurred on June 30, 1998.
The unaudited pro forma combined financial statements are based on the
historical financial statements of the Company, its Historical Acquisitions,
and HSD and the estimates and assumptions set forth below and in the notes to
the unaudited pro forma combined financial statements.
The Company had previously reported on a fiscal year ending January 31,
while HSD's operations were reported on the September 30 fiscal year of its
parent. Effective February 1, 1997, the Company changed its year-end to
December 31; therefore, the Company's historical financial statements for 1997
contain its statement of operations for the eleven-month period February 1 to
December 31 including results of operations of the Historical Acquisitions
completed in 1997 effective from their respective acquisition dates. The
unaudited pro forma combined statements of operations for the year ended
December 31, 1997 presented herein include the Company's statement of
operations for this eleven-month period with appropriate adjustments to
reflect (i) the 1997 and 1998 Historical Acquisitions as if these acquisitions
had occurred at the beginning of the period presented, and (ii) an estimated
one-month period of operations for the Company and the Historical
Acquisitions.
The pro forma combined statements of operations for the year ended December
31, 1997 also include HSD's historical results of operations for the year
ended September 30, 1997 which, for pro forma purposes, are considered
comparable to the results of a calendar twelve-month period. Additionally,
HSD's historical operating results include the operating results of two small
businesses acquired in 1997 ("HSD's Historical Acquisitions") from their
respective acquisition dates. The pro forma combined statements of operations
for the year ended December 31, 1997 reflect adjustments of these immaterial
acquisitions as if they had occurred at the beginning of the period.
The unaudited pro forma combined statements of operations for the six months
ended June 30, 1998 include the Company's results of operations for the six
months ended June 30, 1998 (which include the results of operations of the
Historical Acquisitions) with appropriate adjustments to reflect the HSD
Acquisition for the six months ended June 30, 1998.
The pro forma adjustments are based on preliminary estimates, available
information and certain assumptions that management deems appropriate. The
unaudited pro forma combined financial data presented herein do not purport to
represent the results that the Company would have obtained had the
transactions which are the subject of pro forma adjustments occurred at the
beginning of the applicable periods presented, as assumed, or to project the
future results of the Company.
F-11
<PAGE>
INFOCURE CORPORATION
PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 1998
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO
CONSOLIDATED HSD SUBTOTAL ADJUSTMENTS REF FORMA
------------ ------- -------- ----------- --- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Current:
Cash and cash $ 4,105 $ 2 $ 4,107 $ (2,202) (A) $ 4,214
equivalents...........
2,309 (C)
Accounts receivable,
net .................. 6,669 11,385 18,054 -- 18,054
Inventory.............. 490 2,333 2,823 -- 2,823
Deferred tax asset..... 675 -- 675 -- 675
Prepaid expenses and
other ................ 904 538 1,442 -- 1,442
-------- ------- -------- -------- --------
Total current
assets.............. 12,843 14,258 27,101 107 27,208
Property and equipment,
net of depreciation.... 3,455 3,399 6,854 501 (A) 7,355
Goodwill, net of
accumulated
amortization........... 38,627 9,562 48,189 21,802 (A) 69,991
Other intangibles, net
of accumulated
amortization........... 1,725 6,616 8,341 (6,616) (A) 5,625
3,900 (B)
Deferred tax asset...... 2,060 -- 2,060 -- 2,060
Other assets............ 353 931 1,284 (931) (A) 353
-------- ------- -------- -------- --------
Total assets......... $ 59,063 $34,766 $ 93,829 $ 18,763 $112,592
======== ======= ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable....... $ 1,099 $ 3,658 $ 4,757 $ (3,658) (A) $ 3,599
2,500 (B)
Accrued restructuring
costs................. 2,137 -- 2,137 -- 2,137
Accrued expenses....... 2,159 4,017 6,176 -- 6,176
Deferred revenue....... 4,437 250 4,687 -- 4,687
Current portion of
long-term debt........ 2,587 -- 2,587 4,000 (B) 6,587
-------- ------- -------- -------- --------
Total current
liabilities......... 12,419 7,925 20,344 2,842 23,186
Long-term debt, less
current portion........ 27,664 -- 27,664 48,000 (B) 75,664
Common stock issuable
for earnout
commitments............ 1,575 -- 1,575 -- 1,575
Other liabilities....... -- 2,078 2,078 (2,025) (A) 53
-------- ------- -------- -------- --------
Total liabilities.... 41,658 10,003 51,661 48,817 100,478
-------- ------- -------- -------- --------
Convertible, redeemable
preferred stock........ 8,500 -- 8,500 -- 8,500
-------- ------- -------- -------- --------
Stockholders' equity:
Common stock, $.001
par................... 6 -- 6 -- 6
Additional paid-in
capital............... 20,822 -- 20,822 1,400 (B) 24,531
2,309 (C)
Accumulated deficit.... (11,701) -- (11,701) (9,000) (A) (20,701)
Treasury stock, at
cost.................. (222) -- (222) -- (222)
Net assets of
purchased companies... -- 24,763 24,763 (24,763) (A) --
-------- ------- -------- -------- --------
Total stockholders'
equity.............. 8,905 24,763 33,668 (30,054) 3,614
-------- ------- -------- -------- --------
Total liabilities and
stockholders'
equity.............. $ 59,063 $34,766 $ 93,829 $ 18,763 $112,592
======== ======= ======== ======== ========
</TABLE>
See notes to pro forma combined financial statements.
F-12
<PAGE>
INFOCURE CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA EFFECTS OF SUBTOTAL
HISTORICAL ACQUISITIONS INFOCURE INFOCURE
----------------------------------------------- HISTORICAL AND ADJUSTMENT YEAR ENDED
INFOCURE FOUNDING 1997 1998 HISTORICAL FOR ONE MONTH DECEMBER 31,
HISTORICAL COMPANIES (1) ACQUISITIONS (2) ACQUISITIONS (3) ACQUISITIONS OF OPERATIONS (4) 1997
---------- ------------- ---------------- ---------------- -------------- ----------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Systems and
software......... $ 8,540 $2,406 $ 6,995 $4,729 $22,670 $2,061 $24,731
Maintenance,
support and
services......... 7,215 2,784 4,503 3,394 17,896 1,627 19,523
------- ------ ------- ------ ------- ------ -------
15,755 5,190 11,498 8,123 40,566 3,688 44,254
Operating expenses:
Hardware and
other items
purchased for
resale........... 4,075 1,568 2,598 638 8,879 807 9,686
Selling, general
and
administrative... 9,198 2,328 6,425 4,373 22,324 2,029 24,353
Depreciation and
amortization..... 946 474 720 1,547 3,687 335 4,022
Asset impairment,
restructuring
and special
charges.......... 11,136 -- -- -- 11,136 -- 11,136
------- ------ ------- ------ ------- ------ -------
Operating income
(loss)............ (9,600) 820 1,755 1,565 (5,460) 517 (4,943)
Other expense
(income):
Interest, net..... 276 (80) 481 1,499 2,176 198 2,374
Other, net........ (69) (6) (64) (17) (156) (14) (170)
------- ------ ------- ------ ------- ------ -------
Income (loss)
before taxes...... (9,807) 906 1,338 83 (7,480) 333 (7,147)
Provision (benefit)
for income taxes.. (1,237) 428 597 65 (147) 127 (20)
------- ------ ------- ------ ------- ------ -------
Net income
(loss)......... $(8,570) $ 478 $ 741 $ 18 $(7,333) $ 206 $(7,127)
======= ====== ======= ====== ======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA SUBTOTAL HSD
EFFECTS OF HSD'S AND HSD'S
HSD HISTORICAL HISTORICAL INFOCURE AND PRO FORMA PRO
HISTORICAL (5) ACQUISITIONS (6) ACQUISITIONS HSD COMBINED ADJUSTMENTS REF FORMA
-------------- ---------------- ------------ ------------ ----------- --- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Systems and software... $ 22,651 $5,531 $ 28,182 $ 52,913 $ -- $ 52,913
Maintenance, support
and services.......... 17,796 4,172 21,968 41,491 -- 41,491
-------- ------ -------- -------- -------- --------
40,447 9,703 50,150 94,404 -- 94,404
Operating expenses:
Hardware and other
items purchased for
resale................ 8,853 1,748 10,601 20,287 -- 20,287
Selling, general and
administrative........ 45,227 6,558 51,785 76,138 (18,311) (D) 57,827
Depreciation and
amortization.......... 4,939 1,500 6,439 10,461 (3,734) (E) 6,727
Purchased research and
development........... 11,000 -- 11,000 11,000 9,000 (F) 20,000
Asset impairment,
restructuring and
special charges....... 2,075 -- 2,075 13,211 -- 13,211
-------- ------ -------- -------- -------- --------
Operating income
(loss)................. (31,647) (103) (31,750) (36,693) 13,045 (23,648)
Other expense (income):
Interest, net.......... (46) 848 802 3,176 4,727 (G) 7,903
Other, net............. (20) -- (20) (190) -- (190)
-------- ------ -------- -------- -------- --------
Income (loss) before
taxes.................. (31,581) (951) (32,532) (39,679) 8,318 (31,361)
Provision (benefit) for
income taxes........... (10,847) (401) (11,248) (11,268) 3,161 (H) (8,107)
-------- ------ -------- -------- -------- --------
Net income (loss)....... $(20,734) $ (550) $(21,284) $(28,411) $ 5,157 $(23,254)
======== ====== ======== ======== ======== ========
Net loss per share:
Basic.................. $ (3.82)
========
Diluted................ $ (3.82)
========
Shares used in computing
net loss per share (I)
Basic.................. 6,094
========
Diluted................ 6,094
========
</TABLE>
See notes to pro forma combined financial statements.
F-13
<PAGE>
- --------
(1) Includes pro forma effect of acquisitions from February 1 to July 10, 1997
of DR Software, KComp, Millard-Wayne and Rovak. The audited historical
financial statements were included in the Company's Form SB-2 on file with
the Commission.
(2) Includes pro forma effect of acquisitions during 1997 from February 1 to
the effective date of acquisition, which was September 30, 1997 for
SoftEasy, CCI and POLCI, October 31, 1997 for PACE and November 30, 1997
for OPMS. The audited historical financial statements of POLCI and
Software Manufacturing Group, the predecessor to OPMS, were included in
previously filed Forms 8-K. SoftEasy, CCI and PACE were not deemed
significant at their date of acquisition and therefore inclusion of
audited financial statements is unnecessary.
(3) Includes pro forma effect of acquisitions during 1997 from February 1 to
December 31 for MDI and MSI, which were acquired effective January 1,
1998. The audited historical financial statements were included in a
previously filed Form 8-K.
(4) Represents annualization of the eleven month operating data.
(5) Represents the fiscal year ended September 30, 1997.
(6) Includes pro forma effect of HSD's acquisitions from October 1, 1996 to
the effective date of the respective acquisitions of two small businesses
acquired during the year ended September 30, 1997. These acquisitions were
not deemed significant at their date of acquisition and therefore
inclusion of audited financial statements is unnecessary.
See accompanying notes to pro forma combined financial statements.
F-14
<PAGE>
INFOCURE CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
INFOCURE
HISTORICAL HSD INFOCURE AND PRO FORMA
CONSOLIDATED HISTORICAL HSD COMBINED ADJUSTMENTS REF PRO FORMA
------------ ---------- ------------ ----------- --- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Systems and software... $12,448 $12,583 $25,031 $ -- $25,031
Maintenance, support
and services.......... 10,359 12,380 22,739 -- 22,739
------- ------- ------- ------- -------
22,807 24,963 47,770 -- 47,770
Operating expenses:
Hardware and other
items purchased for
resale................ 4,924 6,520 11,444 -- 11,444
Selling, general and
administrative........ 12,889 22,186 35,075 (9,496) (D) 25,579
Depreciation and
amortization.......... 1,771 3,278 5,049 (1,926) (E) 3,123
Restructuring and
special charges....... 1,874 750 2,624 -- 2,624
------- ------- ------- ------- -------
Operating income
(loss)................. 1,349 (7,771) (6,422) 11,422 5,000
Other expense (income):
Interest, net.......... 994 (31) 963 2,788 (G) 3,751
Other, net............. (10) (1) (11) -- (11)
------- ------- ------- ------- -------
Income (loss) before
taxes.................. 365 (7,739) (7,374) 8,634 1,260
Provision (benefit) for
income taxes........... 246 (2,953) (2,707) 3,281 (H) 574
------- ------- ------- ------- -------
Net income (loss)....... $ 119 $(4,786) $(4,667) $ 5,353 $ 686
======= ======= ======= ======= =======
Net loss per share:
Basic.................. $ 0.11
=======
Diluted................ $ 0.08
=======
Shares used in
computing net loss per
share (I)
Basic.................. 6,094
=======
Diluted................ 8,615
=======
</TABLE>
F-15
<PAGE>
INFOCURE CORPORATION
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
InfoCure Corporation ("InfoCure" and, together with its subsidiaries, the
"Company") was founded in 1996 to become a leading national provider of
practice management software and services to targeted healthcare specialty
practices. On July 10, 1997, InfoCure completed the initial public offering
("IPO") of its common stock (the "Common Stock") and simultaneously acquired,
in separate transactions, six businesses (collectively the "Founding
Companies"). Contemporaneously with the acquisition of the Founding Companies
and the IPO, InfoCure merged with American Medcare Corporation ("AMC"). AMC is
considered the predecessor to InfoCure and the accounting acquirer of the
Founding Companies. Subsequent to the IPO and through June 30, 1998, the
Company acquired seven practice management companies, all of which were
accounted for as purchases. In September 1998, the Company entered into an
agreement to acquire substantially all of the net assets of the Healthcare
Systems Division ("HSD") of The Reynolds and Reynolds Company (the "HSD
Acquisition") in a transaction to be accounted for as a purchase.
2. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS
(A) Records the acquisition of the net assets and payment of certain
liabilities of HSD for $48.5 million and $4.3 million, respectively. In
addition to the purchase price, the Company assumed liabilities of
approximately $4.3 million and incurred transaction costs estimated at $1.4
million. In connection therewith, the Company paid cash of approximately $2.2
million, issued subordinated notes payable to the seller for $10.0 million and
$2.0 million and obtained an additional advance of $40.0 million on its
acquisition line of credit with FINOVA Capital (the "Line of Credit"). This
acquisition was accounted for as a purchase with the $54.2 million total
consideration allocated to the assets acquired as follows:
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
----------- --------------
(IN THOUSANDS)
<S> <C>
Accounts receivable........................................ $11,385
Inventory.................................................. 2,333
Prepaid expenses........................................... 538
Property and equipment..................................... 3,900
Accrued expenses........................................... (4,017)
Deferred revenue........................................... (250)
Other liabilities.......................................... (53)
-------
Net assets............................................... 13,836
Purchased research and development......................... 9,000
Goodwill................................................... 31,364
-------
Total consideration...................................... $54,200
=======
</TABLE>
The foregoing allocations are based on estimated fair values and are subject
to adjustment. Fair values were determined based on preliminary findings of an
independent appraisal of the purchase transaction.
In connection with the HSD Acquisition, the Company did not acquire or
assume the following assets and liabilities:
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
----------- --------------
(IN THOUSANDS)
<S> <C>
Cash and cash
equivalents.............. $ 2
Other intangible assets,
net of accumulated
amortization............. 6,616
Other assets.............. 931
Accounts payable.......... (3,658)
Other liabilities......... (2,025)
------
Net assets.............. $1,866
======
</TABLE>
F-16
<PAGE>
INFOCURE CORPORATION
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(B) Records proceeds of the $40.0 million addition to the Company's Line of
Credit and the $10.0 million and $2.0 million notes payable to the seller in
connection with the HSD Acquisition. In connection with the Line of Credit
increase, the Company will be obligated to pay $2.5 million in loan fees and
similar costs and issue detachable warrants to FINOVA which grant FINOVA the
right to acquire 225,000 shares of Common Stock at $16 per share. The loan
fees, costs and the $1.4 million estimated value of the warrants will be
amortized over the remaining term of the Line of Credit.
The $10.0 million note payable to the seller is a five-year, convertible
promissory note which bears interest per annum at rates commencing at eight
percent and increasing each year to a maximum of 14%. The note is convertible
into Common Stock at the Company's option during the first year of the term at
a price based on the market value of the Common Stock at the conversion date.
The $2.0 million note payable to the seller bears interest at 12% and is due
within 120 days of closing.
(C) Records the net proceeds from the September 1998 sale of 203,338 shares
of Common Stock in a private placement to an institutional investor.
3. UNAUDITED PRO FORMA STATEMENT OF OPERATIONS ADJUSTMENTS
(D) Records pro forma adjustments to compensation and certain other
operating expenses pursuant to applicable provisions of the HSD acquisition
agreement. In accordance with specific terms of the agreement, certain
operating units and certain specifically identified personnel and costs
related thereto which were not part of the acquisition have been eliminated.
These adjustments are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED
DESCRIPTION OF ADJUSTMENT 1997 JUNE 30, 1998
------------------------- ------------ -------------
<S> <C> <C>
Reduction in compensation and related expenses..... $ 3,062 $ 1,684
Net reductions in costs and expenses of operating
activities/centers not acquired................... 1,836 435
Elimination of HSD's corporate services overhead
and related allocations not acquired.............. 15,533 8,543
Increase in the Company's overhead expenses to
integrate the HSD acquisition..................... (2,120) (1,166)
------- -------
$18,311 $ 9,496
======= =======
</TABLE>
The pro forma adjustment to compensation and related expenses is derived
from position reductions at the four HSD operating centers. These reductions,
which are specifically provided for in the acquisition and related agreements,
aggregate 55 positions or approximately 20% of the total headcount prior to
the acquisition. The position eliminations are duplicative in nature and
attributable to administrative activities and redundancies in sales, support
and research and development.
F-17
<PAGE>
INFOCURE CORPORATION
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The pro forma adjustment to eliminate net results of operating
activities/centers not acquired is based on the exclusion, pursuant to
specific terms of the acquisition agreement, of HSD's clinical product
development center and its forms management operation. These activities
generated minimal contribution, are not important to integration of the other
operating centers and do not fit within the Company's overall strategy.
The elimination of the corporate services overhead and related allocations
reflects the rational adjustment to eliminate excessive infrastructure costs.
The expenditure of approximately $15.0 million in overhead for an enterprise
with revenues of approximately $50.0 million clearly indicates that HSD's
parent had made a significant investment in infrastructure intended to support
a significantly larger organization. In management's opinion, pro forma
adjustments for the elimination of the corporate services overhead is
appropriate inasmuch as this department and its activities are redundant and
are not being assumed as specifically provided for in the acquisition and
related agreements.
It is management's opinion that the reductions will not materially adversely
affect the Company's ability to continue service levels, sales efforts and
other functions required to maintain sales levels comparable with those
historically achieved and, assuming no unforeseen change in economic or other
factors, that these levels could be maintained through the period required to
achieve integration of the HSD Acquisition. Further, as indicted in the table
summarizing pro forma adjustments, management has provided for an addition to
the Company's overhead, including increases in appropriate corporate support
and administrative personnel to facilitate integration of the HSD Acquisition.
Assuming constant sales levels, management believes that no additional
change in personnel is required or anticipated. Any increase in personnel
requirements would be related to increased activity from growth or the
introduction of new products and services. The specifically negotiated
reductions in the workforce give recognition to the economies of scale and
synergies to be attained as a result of integration of the HSD Acquisition.
(E) Records adjustment to depreciation and amortization expense as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
INCREASE (DECREASE) DUE TO: DECEMBER 31, 1997 JUNE 30, 1998
--------------------------- ----------------- ----------------
<S> <C> <C>
Amortization of new basis in goodwill over
life of 15 years on a straight-line
basis..................................... $(1,323) $ (118)
Eliminate amortization for other
intangibles not acquired.................. (1,928) (1,472)
Adjustment to depreciation and amortization
for increase in basis and application of
uniform lives of three to seven years..... (483) (336)
------- -------
$(3,734) $(1,926)
======= =======
</TABLE>
The new basis in goodwill reflects adjustment to previous carrying value of
intangibles of HSD to estimated values reflected in the independent appraisal.
The 15-year estimated useful life of goodwill is consistent with the Company's
established policy and, with respect to the HSD Acquisition, is supported by
the findings in the appraisal.
(F) Records pro forma adjustment to recognize as an expense the estimated
fair value of in-process research and development costs purchased in the HSD
Acquisition. Such costs relate to expenditures for development of new
products, which have not yet reached technological feasibility, and for
modifications to extend the useful life of existing products. Estimated fair
value is based on the findings of an independent appraisal.
(G) Records adjustment of interest expense related to debt incurred to
effect the purchase of the HSD Acquisition.
(H) Adjusts the provision for income taxes based on other pro forma
adjustments.
F-18
<PAGE>
INFOCURE CORPORATION
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
4. PRO FORMA EARNINGS PER SHARE
(I) The weighted average number of shares used to calculate earnings per
share (EPS) for pro forma purposes included the following:
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30,
1997 1998
------------- ----------
<S> <C> <C>
ESTIMATED SHARES OUTSTANDING--PRO FORMA
Shares issued in conjunction with the Company's
IPO................................................ 1,400,000 1,400,000
Shares issued to acquire the Founding Companies..... 3,895,887 3,895,887
Shares issued in connection with Historical
Acquisitions....................................... 450,295 450,295
Shares issued in payment of debt and other
obligations, net................................... 236,273 236,273
Shares issued in connection with exercise of
warrants........................................... 111,296 111,296
--------- ----------
Estimated shares outstanding pro forma--basic....... 6,093,751 6,093,751
Shares assumed issued to convert 850,060 shares of
preferred stock.................................... 1,000,070
Shares issuable or assumed issued in satisfaction of
earnout commitments................................ 413,507
Shares assumed issued upon exercise of options and
warrants........................................... 2,296,444
Shares assumed to be repurchased from proceeds from
shares assumed issued from exercise of options..... (1,188,569)
--------- ----------
Estimated shares outstanding pro forma--diluted..... 6,093,751 8,615,203
========= ==========
</TABLE>
The impact of the assumed exercise of the Company's stock options and
warrants would be antidilutive for the twelve months ended December 31, 1997
and have not been presented.
F-19
