SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported) April 1, 1998
DENTAL CARE ALLIANCE, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE
----------------------------------------------
(State or other jurisdiction of incorporation)
0-23219 65-0555-126
------------------------ ---------------------------------
(Commission File Number) (IRS Employer Identification No.)
1343 MAIN STREET, 7TH FLOOR
SARASOTA, FLORIDA 34236
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (941) 955-3150
(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On April 1, 1998, Dental Care Alliance, Inc. a Delaware corporation
(the "Registrant"), acquired all the outstanding capital stock of Dental One
Associates, Inc., a Georgia corporation ("Dental One") pursuant to a Stock
Purchase Agreement effective March 20, 1998. A copy of the Stock Purchase
Agreement is being filed as Exhibit 2.1 hereto.
Pursuant to the Stock Purchase Agreement, the Company acquired all of
the assets of Dental One. Such assets consisted primarily of non-dental assets
(including dental equipment) and management agreements. The Registrant intends
to continue use of the equipment purchased in the same manner such equipment was
used by Dental One prior to the acquisition. Pursuant to the Stock Purchase
Agreements, Five Hundred Thousand shares (500,000) of the common stock of Dental
One, representing one hundred percent (100%) of the issued and outstanding
shares, were sold in consideration of (a) Two Million Four Hundred Thousand and
00/100 Dollars ($2,400,000.00) in cash; (b) a promissory note in the amount of
One Million Forty Seven Thousand Five Hundred Ten and 00/100 Dollars
($1,047,510.00), bearing an annual interest rate equal to eight and one-half
percent (8.5%), payable in equal quarterly installments of principal and
interest amortized over a period of five (5) years with a balloon payment for
the remaining principal balance and accrued interest on the third (3rd)
anniversary; and (c) a promissory note of One Million Two Hundred Thousand and
00/100 Dollars ($1,200,000.00), payable in equal monthly installments over a
period of 120 days.
The cash portion of the purchase price was paid with a portion of the
proceeds of the Registrant's initial public offering. The consideration paid by
the Registrant to the Dental One shareholders was determined by negotiation
among the Registrant. Dental One and the Dental One Shareholders.
ITEM 7 FINANCIAL STATEMENTS, PRO FORMA INFORMATION AND EXHIBITS
(a) Financial statements
The following financial statements of Paul Yurfest, D.D.S., P.A. and
Dental One Buyers Group, Inc. (collectively "Combined Practices") are filed
with amendment to Dental Care Alliance, Inc.'s (the "Company") Form 8-K
which was previously filed on April 16, 1998:
Page
Report of Independent Certified Public Accountants 3
Combined Balance Sheet - December 31, 1997 4
Combined Statement of Operations and Retained Earnings 5
Combined Statement of Cash Flows-Year Ended December 31, 1997 6
Notes to Combined Financial Statements 7
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(b) Pro Forma Financial Information
The following unaudited Pro Forma financial information required pursuant to
Article S-X are filed with this amendment to the Company's Form 8-K which was
previously filed on April 1,
PAGE
----
Basis of Presentation.............................................. 12
Unaudited Pro Forma Combined Balance sheet - December 31, 1997..... 13
Unaudited Pro Forma Combined Statement of Operations - Year Ended..
December 31, 1997.................................................. 14
Notes to Unaudited Pro Forma Combined Financial Information........ 15
(c) Exhibits
2.1 Stock Purchases Agreement, dated March 20, 1998 by and between Dental
Care Alliance, Inc. and Dental One Associates, Inc. shareholders
*Previously filed as an identically numbered exhibit to the Registrant's
Current Report on Form 8-K dated April 1, 1998 as filed with the Commission
on April 16, 1998.
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Dental Care Alliance, Inc.
In our opinion, the accompanying combined balance sheet and the related combined
statements of operations and retained earnings and of cash flows present fairly,
in all respects, the financial position of Paul Yurfest, D.D.S., P.A. d/b/a
Dental One P.A. and Dental One Buyer's Group Inc. d/b/a/ Dental One Associates
(collectively the "Combined Practices" or the "Company") at December 31, 1997
and the results of their operations and their cash flows for the year in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the management of the Combined Practices;
our responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Tampa, FL
June 10, 1998
1
<PAGE>
PAUL YURFEST, D.D.S., P.A
AND DENTAL ONE BUYERS GROUP, INC.
COMBINED BALANCE SHEET
- --------------------------------------------------------------------------------
DECEMBER 31,
1997
ASSETS
Cash and cash equivalents $ 107,407
Accounts receivable, less provision for contractual
allowances and allowance for doubtful accounts of $449,961 824,674
Deferred tax assets 298,600
Prepaid expenses and other current assets 67,073
-----------
Total current assets 1,297,754
Property, plant and equipment, net 887,534
Deferred tax assets 90,633
Other assets 25,560
-----------
$ 2,301,481
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 380,176
Accrued owners' compensation 281,652
Accrued expenses and other 944,754
Deferred tax liabilities 27,451
Line of credit 30,000
Current maturities of long-term debt and
capital lease obligations 188,950
-----------
Total current liabilities 1,852,983
Long-term debt and capital lease obligations, less
current portion 521,086
-----------
Total liabilities 2,374,069
-----------
Commitments and contingencies (Note 9) --
Stockholders' equity
Common stock (Note 7) 41,000
Accumulated deficit (113,588)
-----------
Total stockholders' equity (72,588)
-----------
$ 2,301,481
===========
The accompanying notes are an integral part of these combined
financial statements.
2
<PAGE>
PAUL YURFEST, D.D.S., P.A
AND DENTAL ONE BUYERS GROUP, INC.
COMBINED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
- --------------------------------------------------------------------------------
FOR THE YEAR
ENDED
DECEMBER 31,
1997
Revenues
Net patient revenues $ 7,180,480
Other operating income 53,139
-----------
Total revenues 7,233,619
-----------
Operating expenses
Staff salaries and benefits 4,304,569
General and administrative 635,569
Occupancy 571,100
Dental supplies 574,997
Laboratory fees 299,687
Provision for bad debts 234,067
Depreciation and amortization 168,762
Marketing 158,507
Other 235,087
-----------
Total operating expenses 7,182,345
-----------
Operating income 51,274
Other expenses
Interest expense 126,852
Other expense 153,151
-----------
280,003
-----------
Loss before income taxes (228,729)
Income tax benefit 57,782
-----------
Net loss (170,947)
Beginning retained earnings 57,359
-----------
Ending accumulated deficit $ (113,588)
===========
The accompanying notes are an integral part of these combined
financial statements.
3
<PAGE>
PAUL YURFEST, D.D.S., P.A
AND DENTAL ONE BUYERS GROUP, INC.
COMBINED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
FOR THE YEAR
ENDED
DECEMBER 31,
1997
Cash flows from operating activities
Net loss $(170,947)
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation and amortization 168,762
Deferred tax provision (87,263)
Changes in assets and liabilities
Accounts receivable (103,412)
Prepaid expenses and other assets (13,535)
Deferred tax assets (17,024)
Accounts payable and accrued expenses 440,172
---------
Net cash provided by operating activities 216,753
---------
Cash flows from investing activities
Purchases of property, plant and equipment (55,836)
---------
Net cash used by investing activities (55,836)
---------
Cash flows from financing activities
Principle payments on debt and capital leases (158,801)
---------
Net cash used in financing activities (158,801)
---------
Net increase in cash equivalents 2,116
Cash and cash equivalents, beginning of period 105,291
---------
Cash and cash equivalents, end of period $ 107,407
=========
Supplemental disclosures of cash flow information
Property and equipment purchased with capital leases in
1997 $ 32,716
=========
Cash paid for interest $ 126,852
=========
Cash paid for income taxes $ 5,932
=========
The accompanying notes are an integral part of these combined
financial statements.
4
<PAGE>
PAUL YURFEST, D.D.S., P.A
AND DENTAL ONE BUYERS GROUP, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Paul Yurfest, D.D.S., P.A., d/b/a Dental One P.A., (the "Operating
Company") is engaged in the practice of general and specialized dentistry.
Dental One Buyers Group, Inc. d/b/a Dental One Associates (the "Management
Company") manages the practice. The Operating Company and the Management
Company (collectively the "Combined Practices" or the "Company") are
under common ownership, and operate under an agreement which calls for all
net income of the Operating Company to be recognized by the Management
Company in the form of a management fee. The Company's business and its
patients are concentrated in the Atlanta, Georgia area. Three of the
Company's offices (College Park, Tucker, and Windy Hill) have been open in
excess of ten years. The Midtown office was opened in June 1994.
The significant accounting policies are presented below:
PRINCIPLES OF COMBINATION
The accompanying financial statements have been prepared on the accrual
basis of accounting and include only those operations which are under the
financial control of the Combined Practices.
The combined financial statements include the accounts and operations of
the Operating Company and the Management Company. All material intercompany
accounts and transactions have been eliminated.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, the Company considers demand deposits
and highly liquid investments with an original maturity of three months or
less, which can be readily converted to cash on demand, without penalty, to
be cash equivalents.
REVENUES AND ACCOUNTS RECEIVABLE
Accounts receivable and revenues are recorded net of contractual
adjustments and are recognized as the services are performed. Contractual
adjustments represent the difference between the Company's established
rates for services and the amounts allowed for such services by dental care
programs and others.
The provisions for bad debts relating to patient revenues is charged to
expenses based upon an evaluation of potential uncollectible accounts. The
provision considered necessary for such bad debts is based on an analysis
of current and past due accounts, collection experience in relation to
amounts billed and other relevant information. The allowance for doubtful
accounts represents the estimate of the uncollectible portion of accounts
receivable.
5
<PAGE>
PAUL YURFEST, D.D.S., P.A
AND DENTAL ONE BUYERS GROUP, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
PROPERTY, PLANT AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method balance over the expected remaining useful lives
of the property and equipment, primarily five to seven years. Leasehold
improvements are amortized over the shorter of the terms of the leases or
the estimated useful lives of the assets. Amortization of property under
capital leases is computed using similar methods.
INCOME TAXES
The Company utilizes the asset and liability method of accounting for
income taxes. Accordingly, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statements carrying values of existing assets and
liabilities and their respective tax bases and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates,
including estimates relating to assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of financial statements and the reported amounts of
revenues and expenses during the reporting period. Estimates are used in
the determination of the allowance for doubtful accounts, depreciation and
amortization, income taxes and the recording of contingent liabilities.
Actual results could differ from these estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of amounts reported in the financial statements
have been determined using available market information and appropriate
valuation methodologies. The carrying value of all current assets and
current liabilities approximates fair value because of their short-term
maturity. The carrying value of all non-current financial instruments are
considered to approximate fair value based upon interest rates available to
the Companies on instruments with similar maturities.
6
<PAGE>
PAUL YURFEST, D.D.S., P.A
AND DENTAL ONE BUYERS GROUP, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. PROPERTY PLANT & EQUIPMENT
Property, plant and equipment consist of the following:
Computer equipment $ 282,921
Dental equipment 1,148,092
Furniture and fixtures 112,869
Leasehold improvements 660,177
-----------
2,204,059
Less accumulated depreciation (1,316,525)
-----------
Net property, plant and equipment $ 887,534
===========
3. ACCRUED EXPENSES AND OTHER
Accrued expenses and other consist of the following:
Accrued salaries and wages $ 436,112
Litigation accruals (See Note 9) 179,951
Customer credit balances 178,344
Vacation accrual 79,000
Other accruals 45,247
Income taxes payable 26,100
-----------
$ 944,754
===========
4. LINE OF CREDIT
At December 31, 1997, the Operating Company had a $50,000 bank line of
credit bearing interest at the prime rate at December 31, 1997 which
matures June 1, 1998. The line of credit is collateralized by the Operating
Company's accounts receivable. At December 31, 1997, $30,000 was
outstanding under this agreement.
7
<PAGE>
PAUL YURFEST, D.D.S., P.A
AND DENTAL ONE BUYERS GROUP, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. LONG-TERM DEBT AND CAPITAL LEASES OBLIGATIONS
Long Term debt and captial lease obligations consist of the following at
December 31, 1997:
8.72% note payable with monthly payments of $3,868,
including interest, and secured by equipment and
accounts receivable $ 169,641
8.50% note payable with monthly payments of $1,255,
including interest, and secured by equipment 49,997
8.90% note payable with monthly payments of $10,356,
including interest, and secured by equipment and
accounts receivable 383,634
7.62% note payable with monthly payments of $2,877,
including interest, and secured by equipment 66,625
Capital leases, various 40,139
---------
710,036
LESS: current maturities (188,950)
---------
$ 521,086
=========
The aggregate maturities required on long-term debt at December 31, 1997
are as follows:
1998 $ 188,950
1999 188,824
2000 173,019
2001 137,391
2002 and thereafter 21,852
---------
$ 710,036
=========
8
<PAGE>
PAUL YURFEST, D.D.S., P.A
AND DENTAL ONE BUYERS GROUP, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. INCOME TAXES
The components of the benefit from income taxes for the year ended
December 31, 1997 are as follows:
Current tax expense $ 29,481
Deferred tax benefit (87,263)
---------
Benefit from income taxes $ (57,782)
=========
An analysis of the differences between the statutory federal income tax
rates and the effective tax rate for the year ended December 31, 1997 is as
follows:
Expected tax benefit $ (77,768)
Valuation reserve on net operating loss 18,580
Penalties 3,839
Other (2,433)
---------
$ (57,782)
=========
The components of deferred tax assets and liabilities as of December 31,
1997 are as follows:
Deferred tax assets:
Allowances for accounts receivable $ 157,486
Cash Basis Items:
Accrual to cash adjustment 141,114
Non-deductible accruals 90,633
Net operating losses 19,126
Valuation allowance (19,126)
---------
389,233
Deferred tax liabilities:
Property, plant and equipment (27,451)
---------
Deferred tax assets and liabilities, net $ 361,782
=========
At December 31, 1997, the Management Company had net operating loss carry
forwards of $54,646 to reduce future income tax expenses which is fully
offset by a vaulation allowance. These carryforwards expire in 2013.
9
<PAGE>
PAUL YURFEST, D.D.S., P.A
AND DENTAL ONE BUYERS GROUP, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. COMMON STOCK
Common stock consisted of the following at December 31, 1997:
Dental One Associates:
Class A, no par value, 255,000 shares
authorized, issued and outstanding $ 500
Class B, no par value, 245,000 shares
authorized, issued and outstanding 40,000
-------
40,500
-------
Dental One P.C.:
no par value, 100 shares authorized,
100 shares issued and outstanding 500
-------
$41,000
=======
Class A stockholders are entitled to vote for two directors of the
Management Company and may own 51% of the Management Company, while Class B
stockholders are entitled to vote for one director and may own 49% of the
Management Company. There are no other preferences between the two classes
of stock. Under an agreement between the Management Company and the
stockholders, the Management Company has the right of first refusal to
repurchase any shares offered for sale by any stockholder.
During 1997, a Class B stockholder purchased an additional 84,138 shares of
Class B stock from two existing owners. This stockholder now owns 29.08% of
the Management Company.
8. RELATED PARTY TRANSACTIONS
Physician stockholder compensation for the year ended December 31, 1997
totaled $612,971. During 1997, the Operating Company paid $27,412 in
interest to stockholders related to accrued compensation. Physician
compensation is based on the number of days worked and on a percentage of
cash collections, ranging from 25% to 33% depending on the type of
professional practice.
The Company has a related party receivable of $20,140 at December 31, 1997
to a stockholder.
The Company has related party notes payable to a trust held for a
stockholder's son and to a trust held for a stockholder's daughter. At
December 31, 1997, the aggregate outstanding balance was $12,655.
10
<PAGE>
PAUL YURFEST, D.D.S., P.A
AND DENTAL ONE BUYERS GROUP, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. COMMITMENTS AND CONTINGENCIES
LEGAL MATTERS
The Company is a defendant in two lawsuits. Regarding the first matter, a
summary judgment has been rendered against the Company. The Company has
accrued the judgment amount plus related interest. The Company has appealed
the decision. The second matter concerns a dispute with an employee.
Subsequent to December 31, 1997, the Company reached an agreement to settle
the case and has accrued such amount in the accompanying financial
statements.
In the normal course of business, the Company is a defendant in various
matters involving disputes and/or litigation. It is not possible to
determine the ultimate outcome of these matters, but based on the facts now
available, it is management's opinion that no provision for loss
contingency is required and any potential liability would not materially
affect the Company's financial position or results of operations.
LEASE COMMITMENTS
The Management Company leases five office locations under operating leases
which expire on various dates between March 1999 and December 2005. All of
the leases provide for escalating payments over the lease terms. The leases
contain no significant restrictions. Future minimum rental payments under
operating leases that have initial or remaining noncancelable lease terms
in excess of one year as of December 31, 1997, are as follows:
1998 $455,005
1999 463,738
2000 321,459
2001 266,853
2002 280,161
Thereafter 544,380
----------
$2,331,596
==========
Lease expense for the year ended December 31, 1997 totalled $457,544.
10. SUBSEQUENT EVENTS
During the first quarter of 1998, the Management Company changed its name
to Dental One Associates, Inc. ("Dental One").
On April 1, 1998 Dental Care Alliance, Inc. ("DCA") acquired all of the
outstanding capital stock of Dental One pursuant to a Stock Purchase
Agreement (the "Agreement") effective March 20, 1998. Pursuant to the
Agreement, DCA acquired all of the assets of Dental One. Pursuant to the
Agreement, 500,000 shares of the common stock of Dental One, representing
one hundred percent of the issued and outstanding shares,
11
<PAGE>
PAUL YURFEST, D.D.S., P.A
AND DENTAL ONE BUYERS GROUP, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
were sold in consideration of: (a) $2,400,000 cash; (b) a promissory note
in the amount of $1,047,510 payable over three years; and (c) $1,200,000
payable over three months representing the liquidation of accounts
receivable. Such amount will be adjusted, as necessary, to equal the net
amount collected on accounts receivable transferred to DCA.
On April 1, 1998, SOCO LLC by Morris Socoloff, D.D.S. (SOCO) acquired all
of the outstanding capital stock of the Operating Company pursuant to a
Stock Purchase Agreement (the "SOCO Agreement"). Pursuant to the SOCO
Agreement, SOCO acquired all of the assets of the Operating Company.
Pursuant to the SOCO Agreement, 100 shares of the common stock of the
Operating Company, representing one hundred percent of the issued and
outstanding shares, were sold in consideration of (a) $600,000 cash and (b)
a promissory note in the amount of $952,490 payable over three years.
12
<PAGE>
DENTAL CARE ALLIANCE, INC.
BASIS OF PRESENTATION
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The unaudited pro forma combined statement of operations for the year ended
December 31, 1997 gives effect to the acquisition of Dental One Associates, Inc.
("Dental One"), as if it had occurred at the beginning of the period. The
unaudited pro forma combined balance sheet as of December 31, 1997 gives effect
to the acquisition of Dental One on March 20, 1998, as if it had occurred on
December 31, 1997. The Dental One acquisition has been accounted for using the
purchase method of accounting.
The unaudited pro forma combined financial information has been prepared by the
Company based on the Company's audited statement of operations and balance sheet
as of and for the year ended December 31, 1997, and the audited financial
statements of the Combined Practices as of and for the year ended December 31,
1997. The audited historical financial statements of the Combined Practices, are
included elsewhere in this Form 8-K/A. The unaudited pro forma combined
financial information should be read in conjunction with the complete historical
financial statements of Dental Care Alliance, Inc. and the notes thereto as
filed by the Company in its Form 10-K, and the historical financial statements
of the Combined Practices included as a part of this Form 8-K/A. The pro forma
combined financial information does not purport to be indicative of the combined
results of operations that actually would have occurred if the transactions
described above had been effected at the dates indicated or to project future
results of operations for any period.
<PAGE>
DENTAL CARE ALLIANCE, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<CAPTION>
Dental One Pro Forma Pro Forma Historical Acquisition Pro Forma
ASSETS Combined Adjustments Dental One Company Adjustments Company
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 107,407 $ $ 107,407 $20,367,722 $ (2,400,000)(1) $ 18,075,129
Accounts receivable 824,674 (824,674)(A) -- -- 1,200,000 (6) 1,200,000
Consulting and license fees receivable -- -- 64,116 64,116
Management fee receivable from PAs -- 552,532 (A) 552,532 914,026 (552,532)(3) 914,026
Advances to PAs -- -- 483,421 483,421
Other current assets 365,673 365,673 254,412 620,085
Current portion of long-term notes
receivable from PAs -- -- 83,522 83,522
----------- ---------- ---------- ----------- ------------ ------------
Total current assets 1,297,754 (272,142) 1,025,612 22,167,219 (1,752,532) 21,440,299
Property and equipment, net 887,534 887,534 1,113,050 2,000,584
Intangible assets, net -- -- 4,747,303 3,447,510 (1) 8,198,413
(266,919)(2)
(1,683,621)(3)
552,532 (3)
1,401,608 (7)
Long-term notes receivable from PAs, less
current portion -- -- 313,940 313,940
Consulting and licensing fees receivable,
concurrent -- -- -- --
Other assets 116,193 116,193 212,975 329,168
----------- ---------- ---------- ----------- ------------ ------------
Total assets $ 2,301,481 $ (272,142) $2,029,339 $28,554,487 1,698,578 $ 32,282,404
=========== ========== ========== =========== ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 380,176 $ $ 380,176 $ 638,030 $ (380,176)(3) $ 638,030
Accrued payroll and payroll related costs 281,652 (281,652)(B) -- 64,933 64,933
Other accrued liabilities 944,754 (329,997)(B) 614,757 412,952 (535,958)(3) 491,751
Due to Seller -- -- 920,000 1,200,000 (6) 2,120,000
Income taxes payable 27,451 27,451 179,367 (27,451)(3) 179,367
Bank credit facility 30,000 30,000 -- (30,000)(3) --
Current portion of long-term debt 188,950 188,950 195,193 (188,950)(3) 195,193
----------- ---------- ---------- ----------- ------------ ------------
Total current liabilities 1,852,983 (611,649) 1,241,334 2,410,475 37,465 3,689,274
Deferred income taxes -- -- 773,269 1,401,608 (7) 2,174,877
Long-term debt less current portion 521,086 521,086 816,918 1,047,510 (1) 1,864,428
(521,086)(3)
----------- ---------- ---------- ----------- ------------ ------------
Total liabilities 2,374,069 (611,649) 1,762,420 4,000,662 1,965,497 7,728,579
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value,
50,000,000 shares authorized,
3,995,460 issued and outstanding 69,777 69,777
Common stock, Class A, no par value,
255,000 shares authorized, issued
and outstanding 500 500 -- (500)(2) --
Common stock, Class B, no par value,
245,000 shares authorized, issued
and outstanding 40,000 40,000 -- (40,000)(2) --
Common stock, Dental One, PC, no par
value, 500 shares authorized,
issued and outstanding 500 500 -- (500)(2) --
Additional paid-in capital, net of $272,768
stock subscription -- -- 24,126,009 24,126,009
Retained earnings (113,588) (272,142)(A) 225,919 358,039 (225,919)(2) 358,039
281,652 (B)
329,997 (B)
-------- ---------- ---------- ----------- ------------- -----------
Total stockholders' equity (72,588) 339,507 266,919 24,553,825 (266,919) 24,553,825
-------- ---------- ---------- ----------- ------------- -----------
Total liabilities and stockholders'
equity 2,301,481 (272,142) 2,029,339 28,554,487 1,698,578 32,282,404
========= ========== ========== =========== ============= ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DENTAL CARE ALLIANCE, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
Dental One Pro Forma Pro Forma Historical Acquisition Pro Forma
Combined Adjustments Dental One Company Adjustments Company
<S> <C> <C> <C> <C> <C> <C>
Patient Revenue $ 7,180,480 $(7,180,480)(A) $ -- $ $ -- $ --
Management fees -- 4,654,097 (A) 4,654,097 7,588,193 12,242,290
Consulting and licensing fees -- -- 290,885 290,885
Other operating income 53,139 53,139 -- 53,139
----------- ----------- ---------- ----------- ------------- -----------
TOTAL REVENUES 7,233,619 (2,526,383) 4,707,236 7,879,078 12,586,314
Managed dental center expenses:
Professional salaries and benefits 2,619,963 (2,619,963)(B) -- -- --
Staff salaries and benefits 1,684,606 1,684,606 2,021,497 3,706,103
Dental supplies 574,997 574,997 650,444 1,225,441
Laboratory fees 299,687 299,687 971,024 1,270,711
Provision for bad debts 234,067 (234,067)(A) -- -- --
Marketing 158,507 158,507 414,519 573,026
Occupancy 571,100 571,100 998,141 1,569,241
Other 235,087 235,087 851,631 1,086,718
----------- ----------- ---------- ----------- ------------- -----------
TOTAL MANAGED DENTAL CENTER EXPENSES 6,378,014 (2,854,030) 3,523,984 5,907,256 9,431,240
----------- ----------- ---------- ----------- ------------- -----------
855,605 327,647 1,183,252 1,971,822 3,155,074
Salaries and benefits -- -- 786,795 786,795
General and administrative 635,569 635,569 600,657 1,236,226
Depreciation and amortization 168,762 168,762 163,681 138,044 (4) 470,487
----------- ----------- ---------- ----------- ------------- -----------
OPERATING INCOME (LOSS) 51,274 327,647 378,921 420,689 (138,044) 661,566
Rental income -- -- --
Other income (expense), net (153,151) (153,151) (153,151)
Interest income (expense), net (126,852) (126,852) 263,568 (288,038)(5) (151,322)
----------- ----------- ---------- ----------- ------------- -----------
Income (loss) before income taxes and
minority interest (228,729) 327,647 98,918 684,257 (426,082) 357,093
(Benefit) provision for income taxes (57,782) 82,771 (C) 24,989 263,952 (164,361)(7) 124,580
----------- ----------- ---------- ----------- ------------- -----------
Net income (loss) (170,947) 244,876 73,929 420,305 (261,721) 232,513
Adjustment to redemption value of common
and preferred securities (10,500) (10,500)
Cumulative preferred stock dividend (100,000) (100,000)
----------- ----------- ---------- ----------- ------------- -----------
Net income (loss) applicable to common shares $ (170,947) $ 244,876 $ 73,929 $ 309,805 $ (261,721) $ 122,013
=========== =========== ========== =========== ============= ===========
Net income per common share:
Basic $ 0.07 $ 0.03
Diluted $ 0.07 $ 0.03
Weighted average common shares outstanding:
Basic 4,610,331 4,610,331
Diluted 4,697,809 4,697,809
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION
The accompanying unaudited pro forma combined financial information presents the
pro forma financial position of Dental Care Alliance, Inc. (the "Company") as of
and for the year ended December 31, 1997.
On April 1, 1998, the Company acquired all the outstanding capital stock of
Dental One Associates, Inc. ("Dental One"). The accompanying unaudited pro forma
combined balance sheet includes the acquired assets, assumed liabilities and
effects of financing the acquisition as if the acquisition had taken place on
December 31, 1997. The accompanying unaudited pro forma combined statement of
income reflects the pro forma results of operations of the Company as if Dental
One had been acquired on January 1, 1997.
The pro forma adjustments reflected in the pro forma combined balance sheet and
combined statement of operations are as follows:
(A) To reflect the elimination of historical net patient revenue,
patient receivables and dental professional costs and establish
management fee revenue and receivable.
(B) To remove payroll costs associated with professional staff.
(C) To reflect the tax effect of the pro forma adjustments.
The acquisition adjustments reflected in the pro forma combined balance sheet
and statement of operations are as follows:
(1) Reflects the acquisition of Dental One for a total cost of
approximately $3.45 million. The acquisition cost consisted of
cash of $2.4 million and $1.05 million in notes payable to be paid
by the Registrant.
(2) Reflects the adjustment to eliminate the equity of Dental One.
(3) Reflects the adjustment to eliminate the assets and liabilities
retained by seller.
(4) Reflects the expense associated with amortization of the
intangible asset recorded in conjunction with the acquisition.
(5) Reflects the expense associated with the carrying cost of the
amount due to seller.
(6) Reflects the adjustment to establish the debt due seller related
to accounts receivable to be collected for seller.
(7) Reflects the tax effect of the acquisition adjustments.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
DENTAL CARE ALLIANCE, INC.
Dated: June 15, 1998 By: /s/ STEVEN R. MATZKIN
-----------------------
Steven R. Matzkin, Chairman of
the Board of Directors, Chief
Executive Officer and President
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1997
<CASH> 18,075,129
<SECURITIES> 0
<RECEIVABLES> 3,111,524
<ALLOWANCES> (449,961)
<INVENTORY> 0
<CURRENT-ASSETS> 21,440,299
<PP&E> 2,109,713
<DEPRECIATION> (109,129)
<TOTAL-ASSETS> 32,282,404
<CURRENT-LIABILITIES> 3,689,274
<BONDS> 0
0
0
<COMMON> 69,777
<OTHER-SE> 24,126,009
<TOTAL-LIABILITY-AND-EQUITY> 33,282,404
<SALES> 12,586,314
<TOTAL-REVENUES> 12,586,314
<CGS> 9,431,240
<TOTAL-COSTS> 2,493,508
<OTHER-EXPENSES> 153,151
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 151,322
<INCOME-PRETAX> 357,093
<INCOME-TAX> 124,580
<INCOME-CONTINUING> 232,513
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 232,513
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>