SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
(AN AMENDMENT TO FORM 8-K FILED ON JANUARY 13, 1998)
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported) MARCH 16, 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 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial statements
The following financial statements of Children's Dental Arcade, Inc. and
Wellington Marketplace Dental Group, P.A. (collectively "Combined
Practices") are filed with amendment to Dental Care Alliance, Inc.'s (the
"Company") Form 8-K which was previously filed on January 13, 1998:
Page
Report of Independent Certified Public Accounts............................ 3
Combined Balance Sheets - December 31, 1996 and September 30, 1997 ........ 4
Combined Statements of Operations - Year ended December 31, 1996 and Nine
Months Ended September 30, 1997 ........................................... 5
Combined Statements of Shareholders' Equity - December 31, 1996 and
September 30, 1997 ........................................................ 6
Combined Statements of Cash Flows - Year ended December 31, 1996 and Nine
Months Ended September 30, 1997 ........................................... 7
2
<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 sheets and the related
combined statements of operations, of stockholders' equity and cash flows
present fairly, in all material respects, the financial position of Children's
Dental Arcade, Inc. and Wellington Marketplace Dental Group, P.A. (collectively
"Combined Practices") as of September 30, 1997 and December 31, 1996, and the
results of their operations and their cash flows for each of the periods then
ended, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of management; our responsibility is
to express an opinion on these financial statements based on our audits. We
conducted our audits 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
audits provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Tampa, Florida
March 16, 1998
3
<PAGE>
<TABLE>
<CAPTION>
CHILDREN'S DENTAL ARCADE, INC. AND WELLINGTON MARKETPLACE DENTAL GROUP, P.A.
COMBINED BALANCE SHEETS
DECEMBER 31, SEPTEMBER 30,
ASSETS 1996 1997
------------ -------------
<S> <C> <C>
Current assets:
Cash $ 45,153 $ 63,296
Accounts receivable, less allowance for uncollectible
accounts of $11,062 and 18,159, respectively 74,787 85,366
Inventory 56,505 56,505
Other current assets 15,801 --
--------- ---------
TOTAL CURRENT ASSETS 192,246 205,167
Property and equipment, net 635,164 597,062
Intangible assets, net -- 70,000
Other assets 30,892 38,058
--------- ---------
TOTAL ASSETS $ 858,302 $ 910,287
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 59,256 $ 56,668
Other accrued liabilities 80,588 89,192
Current portion of long-term debt 147,915 225,762
--------- ---------
TOTAL CURRENT LIABILITIES 287,759 371,622
Long-term debt, less current portion 502,395 491,773
--------- ---------
Total liabilities 790,154 863,395
Commitments and contingencies (Note 8) -- --
Stockholders' equity:
Common stock, $.001 par value, 5,000,000 shares authorized,
4,525,000 and 5,000,000 issued and outstanding as of
December 31, 1996 and September 30, 1997, respectively 4,525 5,000
Common stock, $1.00 par value, 1,000 shares authorized,
issued and outstanding 1,000 1,000
Additional paid-in capital 95,475 142,250
Accumulated deficit (32,852) (101,358)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 68,148 46,892
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 858,302 $ 910,287
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
CHILDREN'S DENTAL ARCADE, INC. AND WELLINGTON MARKETPLACE DENTAL GROUP, P.A.
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED FOR THE NINE MONTHS
DECEMBER 31, ENDED SEPTEMBER 30,
1996 1997
------------------ -------------------
Patient Revenue $ 1,674,329 $ 1,290,695
Rental Income 144,000 108,000
----------- -----------
TOTAL REVENUES 1,818,329 1,398,695
Professional salaries and benefits 391,031 334,170
Staff salaries and benefits 465,631 446,791
Dental supplies 90,532 85,219
Laboratory fees 58,001 43,232
Marketing 17,232 5,138
Occupancy 214,618 177,556
Other 202,949 141,854
Depreciation and amortization 107,375 96,760
----------- -----------
Operating income 270,960 67,975
Interest expense, net (93,576) (69,979)
----------- -----------
Net income (loss) $ 177,384 $ (2,004)
=========== ===========
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
CHILDREN'S DENTAL ARCADE, INC. AND WELLINGTON MARKETPLACE DENTAL GROUP, P.A.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
WELLINGTON MARKETPLACE
CHILDREN'S DENTAL ARCADE, INC. DENTAL GROUP, P.A.
------------------------------ -----------------------
COMMON COMMON ADDITIONAL
COMMON STOCK COMMON STOCK PAID-IN ACCUMULATED
STOCK ($.001 PAR) STOCK ($1.00 PAR) CAPITAL DEFICIT TOTAL
--------- ----------- --------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 4,525,000 $ 4,525 1,000 $ 1,000 $ 95,475 $ (84,076) $ 16,924
Net Income -- -- -- -- -- 177,384 177,384
Distributions -- -- -- -- -- (126,162) (126,162)
--------- --------- --------- --------- --------- --------- ---------
Balance, December 31, 1996 4,525,000 4,525 1,000 1,000 95,475 (32,854) 68,146
Issuance of Common Stock 475,000 475 -- -- 46,775 -- 47,250
Net Loss -- -- -- -- -- (2,004) (2,004)
Distributions -- -- -- -- -- (66,500) (66,500)
--------- --------- --------- --------- --------- --------- ---------
Balance, September 30, 1997 5,000,000 $ 5,000 1,000 $ 1,000 $ 142,250 $(101,358) $ 46,892
========= ========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
CHILDREN'S DENTAL ARCADE, INC. AND WELLINGTON MARKETPLACE DENTAL GROUP, P.A.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED FOR THE NINE MONTHS
DECEMBER 31, ENDED SEPTEMBER 30,
1996 1997
------------------- -------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 177,384 $ (2,004)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 107,375 96,760
Issuance of common stock -- 47,250
(Increase) decrease in:
Accounts receivable 13,942 (10,579)
Inventory (7,612) --
Other current assets (14,322) 15,799
Increase (decrease) in:
Accounts payable 24,080 (2,588)
Other accrued liabilities (13,430) 8,604
--------- ---------
Net cash provided by operating activities 287,417 153,242
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (23,043) (23,150)
Decrease (increase) other assets 5,570 (7,674)
--------- ---------
Net cash used in investing activities (17,473) (30,824)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (133,467) (102,708)
Proceeds from issuance of long-term debt -- 64,933
Distributions (126,162) (66,500)
--------- ---------
Net cash (used in) provided by financing activities (259,629) (104,275)
--------- ---------
Net increase in cash and cash equivalents 10,315 (104,275)
Cash and cash equivalents at beginning of period $ 34,838 $ 45,153
Cash and cash equivalents at end of period $ 45,153 $ 63,296
Cash paid during the year for interest $96,276 $61,785
Supplemental disclosures of cash flow information:
Supplemental disclosures of non-cash activities:
The Company issued shares of common stock for no
consideration in exchange for services rendered with
a fair value of $47,250.
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
CHILDREN'S DENTAL ARCADE, INC. AND WELLINGTON MARKETPLACE DENTAL GROUP, P.A.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. OPERATIONS AND ORGANIZATION
Children's Dental Arcade, Inc. ("CDA"), was incorporated on January 26,
1994 and operates dental practices in Palm Beach County, Florida. The
dental practices are owned by Wellington Marketplace Dental Group, P.A.
("Wellington"), a professional association, which was formed on October 18,
1990. Wellington is owned 100% by a shareholder who also owns 95% of CDA.
The dental practices operated by and the opening dates of the Combined
Practices are as follows:
Wellington A-5 January, 1994 Wellington A-2 September, 1994
Mangonia Park May, 1994 Delray Beach September, 1995
Belle Glade June, 1994 Okeechobee Blvd September, 1997
Lake Worth August, 1994
2. SIGNIFICANT ACCOUNTING POLICIES
INCOME TAXES. The Company, with the consent of its stockholder, has
elected under the Internal Revenue Code to be an S Corporation. In lieu of
corporate income taxes, the stockholders of an S Corporation are taxed on
their proportionate share of the Company's taxable income. Therefore, no
provision or liability for income taxes has been included in these financial
statements.
INVENTORY. Inventory consists primarily of dental supplies and small
tools and are stated at cost using the first-in first-out method.
EQUIPMENT AND LEASEHOLD IMPROVEMENTS. Equipment and leasehold
improvements are stated at cost less accumulated depreciation. Depreciation
is computed using the straight line method over estimated useful lives
ranging from 5 to 10 years.
USE OF ESTIMATES. The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the period. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS. The estimated fair value of
amounts reported in the financial statements have been determined by using
available fair market information and appropriate valuation methodologies.
The carrying value of all current assets and current liabilities approximates
fair value because of their short-term nature. The carrying value of all
non-current financial instruments are considered to approximate fair value
based on current market rates and instruments with similar risks and
maturities.
8
<PAGE>
<TABLE>
<CAPTION>
CHILDREN'S DENTAL ARCADE, INC. AND WELLINGTON MARKETPLACE DENTAL GROUP, P.A.
NOTES TO COMBINED FINANCIAL STATEMENTS
3. DEBT
Long Term Debt consists of the following:
DECEMBER 31, SEPTEMBER 30,
1996 1997
----------- ------------
<S> <C> <C>
Capital lease obligations, secured by majority of equipment and leasehold
improvements and guaranteed by principal shareholder of Combined Practices.
Various terms ranging from five to six years with imputed interest rates
of 13.6% - 17.2% $379,300 $321,000
Note payable to financial institutions, guaranteed by Small Business
Administration and guaranteed by principal shareholder of Combined Practices,
secured by third mortgage on personal residence, assignment of notes and
mortgages and life insurance policy on shareholder. Interest rate at 2.75% over
lender's prime (11.75% at September 30, 1997), maturing in the year 2001. 183,860 165,735
Note payable equipment finance company, secured by equipment at
dental practice, interest at 10%, maturing in 2002 -- 123,465
Note payable shareholder is unsecured, bears interest at 10% per annum
and is due on demand. 87,150 57,335
Note payable to seller, secured by equipment and leasehold improvements
and dental practice, interest at 10% maturing in 2000. -- 20,000
Line of credit with financial institution, unsecured, due in 1997 with interest
of 2% over prime. -- 10,000
-------- --------
650,310 697,535
Less current portion 147,915 205,762
-------- --------
$502,395 $491,773
======== ========
</TABLE>
Future debt principal payments as of September 30, 1997 are:
YEAR
-----
1998 $119,010
1999 78,016
2000 65,136
2001 73,129
2002 41,244
--------
$376,535
========
Future payments on capital lease obligations as of September 30, 1997 are:
YEAR
----
1998 $ 86,752
1999 100,216
2000 133,730
2001 302
--------
$321,000
========
CHILDREN'S DENTAL ARCADE, INC. AND WELLINGTON MARKETPLACE DENTAL GROUP, P.A.
9
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS
4. OPERATING LEASES
The Company leases its administrative offices, all of its dental offices and
two automobiles under operating leases. All of the dental offices are for
initial terms of five years and provide for one or two renewal terms of
similar periods. The lease covering the administrative office is for a term
of three years. All of the real estate leases also provide for increasing
rent payments over the lease terms or for increases in rent based upon
changes in the consumer price index. The two automobile leases are for three
year terms and provide for fixed price purchase options at the expiration of
the lease terms.
Future minimum rental commitments on operating leases as of September 30,
1997 are as follows:
1998 $128,011
1999 116,781
2000 59,101
========
$303,893
========
5. COMMITMENTS AND CONTINGENCIES
During 1996, a sample of the dental practices' claims to the Medicaid program
were audited. The preliminary results, as asserted by the auditor, is that
the Company will be required to pay back to the program approximately
$128,000. The Company is in progress of vigorously refuting this assessment
and has filed an appeal. Management believes that it will be successful in
its appeal, however, acknowledges that a settlement in the range of $13,000
to $39,000 will be required to resolve this matter. As a result, the Company
has accrued $39,000, which is the amount management estimates it will be
required to pay.
6. SUBSEQUENT EVENT
On September 30, 1997, Children's Dental Arcade, Inc. became known as
Marketplace Dental, Inc. ("MDI"). Concurrent with this change, Wellington
retained all of the dental assets of the Combined Practices and MDI became
the management company responsible for the non-dental aspects of operations.
MDI and Wellington entered into a Management Agreement whereby MDI will
receive a fee equal to 70% of net patient revenue and assume liability for
payment of all expenses of Wellington, with the exception of (1) salary and
benefits to employ the dentists, hygienists and contracted specialists; (2)
debt and asset carrying costs on the acquisition of practices; and (3) any
other direct costs to the P.A. not covered under the Management Agreement.
On December 29, 1997, MDI was acquired by Dental Care Alliance, Inc. ("DCA").
10
<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 11 of Regulation S-X are filed with this amendment
to the Company's Form 8-K which was previously filed on January 13,
1998.
PAGE
----
Basis of Presentation .................................................... 15
Pro Forma Condensed Balance Sheet - December 31, 1996 ......................16
Pro Forma Condensed Balance Sheet - September 30, 1997 ..................16
Pro Forma Condensed Statement of Income - Year Ended December 31, 1996......17
Pro Forma Condensed Statement of Income - Nine months Ended
September 30, 1997........................................................ 18
Notes to Pro Forma Combined Financial Information...........................19
11
<PAGE>
DENTAL CARE ALLIANCE, INC.
BASIS OF PRESENTATION
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The unaudited Pro Forma Combined Statements of Income for the year ended
December 31, 1996 and the nine months ended September 30, 1997 gives effect to
the acquisition of Marketplace Dental, Inc. ("MDI"), as if it had occurred on
January 1, 1996. The unaudited Pro Forma Combined Balance Sheets as of December
31, 1996 and September 30, 1997 gives effect to the acquisition of MDI on
December 29, 1997 as if it occurred at January 1, 1996. The MDI acquisition has
been accounted for using the purchase method of accounting, so that the
Company's historical statement of operations data include results of operations
of the acquired company from the effective date of the acquisition.
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, 1996, the unaudited Statement of
Operations and Balance Sheet as of and for the nine months ended September 30,
1997, and the audited financial statements of the Combined Practices for the
year ended December 31, 1996 and for the nine months ended September 30, 1997.
The Audited Historical Financial Statements of the Combined Practices, are
included elsewhere in this Form 8-K/A. The 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 prospectus, 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.
12
<PAGE>
<TABLE>
<CAPTION>
DENTAL CARE ALLIANCE
PRO FORMA CONDENSED BALANCE SHEET
FOR THE YEAR ENDED DECEMBER 31, 1996
COMBINED PRO FORMA PRO FORMA HISTORICAL ACQUISITION
ASSETS PRACTICES ADJUSTMENTS MDI COMPANY ADJUSTMENTS
----------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 45,153 $ (1,800) b $ 43,353 $ 1,283,268 $ (500,001) 1
Accounts receivable 74,787 (22,877) b -- --
(51,910) a
Consulting and license fees receivable -- -- 59,000
Management fee receivable from P.A.s -- (59,358) a (59,358) 397,441
Advances to P.A.s -- -- 16,454
Other current assets 72,306 (12,014) 60,292 27,644
Current portion of long-term notes
receivable from -P.A.s -- -- 68,460
----------- ----------- ----------- ----------- -----------
Total current assets 192,246 (147,959) 44,287 1,822,258 (500,000)
Property and equipment, net 635,164 (87,640) b 547,524 40,230 (42,181) 1
(72,192) 2
Intangible assets, net -- -- 803,753 1,159,768 1
(46,391) 2
Long-term notes receivable from P.A.s,
less current portion -- -- 129,935
Consulting and licensing fees receivable,
noncurrent -- -- 251,925
Other assets 30,892 (2,195) b 28,697 74,838
----------- ----------- ----------- ----------- -----------
Total assets $ 858,302 $ (237,794) $ 620,508 $ 3,122,939 $ 499,004
=========== =========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 59,256 $ (8,393) b $ 50,863 $ 491,509 $ --
Accrued payroll and payroll related costs -- -- 124,236
Other accrued liabilities 80,588 (2,351) b 78,237 67,008
Bank credit facility -- -- --
Current portion of long-term debt 147,915 147,915 173,652
----------- ----------- ----------- ----------- -----------
Total current liabilities 287,759 (10,744) 277,015 856,405
Long-term debt, less current portion 502,395 (40,756) b 461,639 40,350 (182,413) 1
----------- ----------- ----------- ----------- -----------
Total liabilities 790,154 (51,500) 738,654 896,755 (182,413)
Commitments and contingencies
Mandatorily redeemable preferred stock,
$.01 par value, 15,000 shares authorized,
issued and outstanding -- 1,402,562
Put rights associated with common stock -- 191,237 -
----------- ----------- ----------- ----------- -----------
-- 1,593,799
----------- ----------- ----------- ----------- -----------
Stockholders' equity:
Common stock, $.01 par value, 50,000,000
shares authorized, 3,995,460 issued and
outstanding 39,955 800 1
Common stock, $.001 par value, 5,000,000
shares authorized, 4,525,000 issued and
outstanding 4,525 4,525
Common stock, $1.00 par value, 1,000 shares
authorized, issued and outstanding 1,000 (1,000) b --
Additional paid-in capital, net of $272,768
Stock Subscription receivable 95,475 95,475 554,696 799,200 1
Retained earnings (32,852) (111,268) a (218,146) 37,734 (118,583) 2
(74,026) b
----------- ----------- ----------- ----------- -----------
Total stockholders' equity 68,148 (186,294) (118,146) 632,385 681,417
----------- ----------- ----------- ----------- -----------
</TABLE>
PRO FORMA
COMPANY
-----------
ASSETS
Current assets:
Cash and cash equivalents $ 796,612
Accounts receivable, less allowance for
Consulting and license fees receivable 59,000
Management fee receivable from P.A.s 338,083
Advances to P.A.s 16,454
Other current assets 87,936
Current portion of long-term notes
receivable from -P.A.s 68,460
-----------
Total current assets 1,366,545
Property and equipment, net 473,381
Intangible assets, net 1,917,130
Long-term notes receivable from P.A.s,
less current portion 129,935
Consulting and licensing fees receivable,
noncurrent 251,925
Other assets 103,535
-----------
Total assets $ 4,242,451
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 542,372
Accrued payroll and payroll related costs 124,236
Other accrued liabilities 145,245
Bank credit facility --
Current portion of long-term debt 321,567
-----------
Total current liabilities 1,133,420
Long-term debt, less current portion 319,576
-----------
Total liabilities 1,452,996
Commitments and contingencies
Mandatorily redeemable preferred stock,
$.01 par value, 15,000 shares authorized,
issued and outstanding 1,402,562
Put rights associated with common stock 191,237
-----------
1,593,799
-----------
Stockholders' equity:
Common stock, $.01 par value, 50,000,000
shares authorized, 3,995,460 issued and
outstanding 40,755
Common stock, $.001 par value, 5,000,000
shares authorized, 4,525,000 issued and
outstanding 4,525
Common stock, $1.00 par value, 1,000 shares
authorized, issued and outstanding --
Additional paid-in capital, net of $272,768 loan
receivable 1,449,371
Retained earnings (298,995)
-----------
Total stockholders' equity 1,195,656
-----------
4,242,451
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
DENTAL CARE ALLIANCE, INC.
PRO FORMA CONDENSED BALANCE SHEET
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
COMBINED PRO FORMA PRO FORMA HISTORICAL ACQUISITION PRO FORMA
ASSETS PRACTICES ADJUSTMENTS MDI COMPANY ADJUSTMENTS COMPANY
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 63,296 $ (27,629)d $ 35,667 $ 442,747 $ (500,000)3 $ (21,586)
Accounts receivable, less allowance
for uncollectible accounts of $18,159 85,366 (14,872)d -- -- --
(70,494)c
Consulting and license fees receivable -- -- 70,917 70,917
Management fee receivable from P.A.s -- 23,358 c 23,358 653,177 676,535
Advances to P.A.s -- -- 817,554 817,554
Other current assets 56,505 (9,655)d 46,850 131,662 178,512
Current portion of long-term
notes receivable from P.A.s -- -- 72,533 72,533
--------- --------- --------- ----------- ----------- -----------
Total current assets 205,167 (99,292) 105,875 2,188,590 (500,000) 1,794,465
Property and equipment, net 597,062 (69,909)d 527,153 559,104 (42,181)3 917,740
(72,192)4
(54,144)5
Intangible assets, net -- -- 1,682,420 1,159,768 3 2,761,004
(46,391)4
(34,793)5
Long-term notes receivable from P.A.s,
less current portion -- -- 146,304 146,304
Other assets 108,058 (74,914)d 33,144 204,264 237,408
--------- --------- --------- ----------- ----------- -----------
Total assets $ 910,287 $(244,115) $ 666,172 $ 4,780,682 $ 410,067 $ 5,856,921
========= ========= ========= =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 56,668 $ (4,359)d $ 52,309 $ 640,651 $ 692,960
Accrued payroll and payroll related costs -- -- 328,504 328,504
Other accrued liabilities 89,192 (10,381)d 78,811 327,585 406,396
Bank credit facility -- -- 212,687 212,687
Current portion of long-term debt 225,762 225,762 208,281 434,043
--------- --------- --------- ----------- ----------- -----------
Total current liabilities 371,622 (14,740) 356,882 1,717,708 -- 2,074,590
Long-term debt, less current portion 491,773 (50,756)d 441,017 681,511 (182,413)4 940,115
--------- --------- --------- ----------- ----------- -----------
Total liabilities 863,395 (65,496) 797,899 2,399,219 (182,413) 3,014,705
Commitments and contingencies
Mandatorily redeemable preferred stock,
$.01 par value, 15,000 shares
authorized, issued and outstanding -- 1,503,062 1,503,062
Put rights associated with common stock -- 191,237 191,237
--------- --------- --------- ----------- ----------- -----------
-- 1,694,299 -- 1,694,299
--------- --------- --------- ----------- ----------- -----------
Stockholders' equity:
Common stock, $.01 par value, 50,000,000
shares authorized, 3,995,460 issued
and outstanding 42,433 800 1 43,233
Common stock, $.001 par value, 5,000,000
shares authorized, issued and outstanding 5,000 5,000 5,000
Common stock, $1.00 par value, 1,000
shares authorized, issued and outstanding 1,000 (1,000)d --
Additional paid-in capital, net of $272,768
loan receivable 142,250 142,250 572,238 799,200 1 1,513,688
Retained earnings (101,358) (47,136)c (278,977) 72,493 (118,583)4 (414,004)
-- (130,483)d (88,937)
--------- --------- --------- ----------- ----------- -----------
Total stockholders' equity 46,892 (178,619) (131,727) 687,164 592,480 1,147,917
--------- --------- --------- ----------- ----------- -----------
Total liabilities and stockholders'
equity $ 910,287 $(244,115) $ 666,172 $ 4,780,682 $ 410,067 $ 5,856,921
========= ========= ========= =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
DENTAL CARE ALLIANCE, INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMBINED PRO FORMA PRO FORMA HISTORICAL ACQUISITION PRO FORMA
PRACTICES ADJUSTMENTS MDI COMPANY ADJUSTMENTS COMPANY
<S> <C> <C> <C> <C> <C> <C>
Patient Revenue $ 1,674,329 $(1,674,329)a $ -- $ -- $ -- $ --
Rental Income 144,000 144,000 144,000
Management fees -- 1,172,030 a 1,172,030 1,289,828 2,461,858
Consulting and licensing fees -- 347,600 347,600
----------- ----------- ----------- ----------- ----------- -----------
Total revenues 1,818,329 (502,299) 1,316,030 1,637,428 -- 2,953,458
Managed dental center expenses:
Professional salaries and benefits 391,031 (391,031)a -- -- --
Staff salaries and benefits 465,631 465,631 223,657 689,288
Dental supplies 90,532 90,532 79,448 169,980
Laboratory fees 58,001 58,001 98,222 156,223
Marketing 17,232 17,232 38,128 55,360
Occupancy 214,618 214,618 106,501 321,119
Other 202,949 202,949 57,182 260,131
----------- ----------- ----------- ----------- ----------- -----------
Total managed dental center
expenses 1,439,994 (391,031) 1,048,963 603,138 -- 1,652,101
----------- ----------- ----------- ----------- ----------- -----------
378,335 (111,268) 267,067 1,034,290 -- 1,301,357
Salaries and benefits -- -- 521,683 521,683
General and administrative -- -- 260,558 260,558
Depreciation and amortization 107,375 107,375 27,654 118,583 2 253,612
----------- ----------- ----------- ----------- ----------- -----------
Operating income (loss) 270,960 (111,268) 159,692 224,395 (118,583) 265,504
Interest income (expense), net (93,576) (93,576) 20,781 (72,795)
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes and
minority interest 177,384 (111,268) 66,116 245,176 (118,583) 192,709
Provision for income taxes 35,500 35,500
Minority interest 7,674 7,674
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) 177,384 (111,268) 66,116 202,002 (118,583) 149,535
Adjustment to redemption value of
common and preferred securities (191,237) (191,237)
Cumulative preferred stock dividend (6,485) (6,485)
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) applicable to common
shares $ 177,384 $ (111,268) $ 66,116 $ 4,280 $ (118,583) $ (48,187)
=========== =========== =========== =========== =========== ===========
Net income (loss) per common share:
Basic $ -- $ --
Diluted $ -- $ --
Weighted average common shares outstanding:
Basic 3,829,029 3,909,029
Diluted 3,873,747 3,953,747
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
DENTAL CARE ALLIANCE, INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMBINED PRO FORMA PRO FORMA HISTORICAL ACQUISITION PRO FORMA
PRACTICES ADJUSTMENTS MDI COMPANY ADJUSTMENTS COMPANY
<S> <C> <C> <C> <C> <C> <C>
Patient Revenue $ 1,290,695 $(1,290,695)c $ $ $ -- $ --
Rental Income 108,000 108,000 108,000
Management fees -- 903,487 c 903,487 4,692,756 5,596,243
Consulting and licensing fees -- -- 216,284 216,284
----------- ----------- ----------- ----------- ----------- -----------
Total revenues 1,398,695 (387,208) 1,011,487 4,909,040 -- 5,920,527
Managed dental center expenses:
Professional salaries and benefits 334,170 (340,072)c (5,902) -- (5,902)
Staff salaries and benefits 446,791 446,791 1,294,446 1,741,237
Dental supplies 85,219 85,219 391,315 476,534
Laboratory fees 43,232 43,232 627,610 670,842
Marketing 5,138 5,138 263,031 268,169
Occupancy 177,556 177,556 614,980 792,536
Other 141,854 141,854 585,621 727,475
----------- ----------- ----------- ----------- ----------- -----------
Total managed dental center
expenses 1,233,960 (340,072) 893,888 3,777,003 -- 4,670,891
----------- ----------- ----------- ----------- ----------- -----------
164,735 (47,136) 117,599 1,132,037 -- 1,249,636
Salaries and benefits -- -- 557,528 557,528
General and administrative -- -- 313,054 313,054
Depreciation and amortization 96,760 96,760 87,062 88,937 5 272,759
----------- ----------- ----------- ----------- ----------- -----------
Operating income (loss) 67,975 (47,136) 20,839 174,393 (88,937) 106,295
Interest income (expense), net (69,979) (69,979) 45,809 (24,170)
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes and
minority interest (2,004) (47,136) (49,140) 220,202 (88,937) 82,125
Provision for income taxes 84,943 84,943
Minority interest -- --
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) (2,004) (47,136) (49,140) 135,259 (88,937) (2,818)
Adjustment to redemption value of
common and preferred securities (10,500) (10,500)
Cumulative preferred stock dividend (90,000) (90,000)
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) applicable to common
share $ (2,004) $ (47,136) $ (49,140) $ 34,759 $ (88,937) $ (103,318)
=========== =========== =========== =========== =========== ===========
Net income (loss) per common share:
Basic $ 0.01 $ --
Diluted $ 0.01 $ --
Weighted average common shares outstanding:
Basic 4,169,197 4,249,197
Diluted 4,256,675 4,826,099
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION
The accompanying pro forma combined financial information presents the pro forma
financial position of Dental Care Alliance, Inc. as of December 31, 1996 and
September 30, 1997 and the pro forma results of its operations for the year
ended December 31, 1996 and the nine months ended September 30, 1997.
On December 29, 1997 (effective as of December 1, 1997), the Company acquired
the assets of Marketplace Dental, Inc. ("MDI"). The accompanying pro forma
combined balance sheets included the acquired assets, assumed liabilities and
effects of financing the MDI acquisition as if the acquisition had taken place
on January 1, 1996. The accompanying pro forma combined statements of income
reflect the pro forma results of operations of the Company, as adjusted, as if
MDI had been acquired on January 1, 1996.
PRO FORMA COMBINED BALANCE SHEET
The pro forma adjustments reflected in the pro forma combined balance sheet are
as follows:
(a)To reflect as of and for the year ended December 31, 1996 the elimination
of historical net patient revenue, patient receivables and dental
professional costs and establish management fee revenue and receivable.
(b)To eliminate as of and for year ended December 31, 1996 the assets and
liabilities of Wellington from those of the Combined Practices.
(c)To reflect as of and for the nine months ended September 30, 1997 the
elimination of historical net patient revenue, patient receivables and
dental professional costs and establish management fee revenue and
receivable.
(d)To eliminate as of and for the nine months ended September 30, 1997 the
assets and liabilities of Wellington from those of the Combined Practices.
The acquisition adjustments reflected in the pro forma combined balance sheet
are as follows:
(1) Reflects the acquisition of MDI as of December 31, 1996 for a total cost
of $1,300,000. The acquisition cost consisted of cash of $500,000 to be
paid by the Registrant and $800,000 in common stock of the Registrant
representing 80,000 common shares valued at the fair market value at
December 29, 1997 of $10/share. The Registrant allocated the purchase
price as follows: $1,159,768 to management services agreement, $505,343 to
property and equipment and $365,111 in assumed liabilities.
(2) To reflect depreciation and amortization for the year ended December 31,
1996.
17
<PAGE>
(3) To reflect accumulated depreciation and accumulated amortization as of
January 1, 1997.
(4) To reflect depreciation and amortization for nine months ended September
30, 1997.
PRO FORMA COMBINED STATEMENTS OF INCOME
The pro forma adjustments reflected in the pro forma combined statements of
income are as follows:
(a) To reflect as of and for the year ended December 31, 1996 the elimination
of historical net patient revenue, patient receivables and dental
professional costs and establish management fee revenue and receivable.
(b) To eliminate as of and for year ended December 31, 1996 the assets and
liabilities of Wellington from those of the Combined Practices.
(c) To reflect as of and for the nine months ended September 30, 1997 the
elimination of historical net patient revenue, patient receivables and
dental professional costs and establish management fee revenue and
receivable.
(d) To eliminate as of and for the nine months ended September 30, 1997 the
assets and liabilities of Wellington from those of the Combined Practices.
The acquisition adjustments reflected in the pro forma combined balance sheet
are as follows:
(1) Reflects the acquisition of MDI as of December 31, 1996 for a total cost
of $1,300,000. The acquisition cost consisted of cash of $500,000 to be
paid by the Registrant and $800,000 in common stock of the Registrant
representing 80,000 common shares valued at the fair market value at
December 29, 1997 of $10/share. The Registrant allocated the purchase
price as follows: $1,159,768 to management services agreement, $505,343 to
property and equipment and $365,111 in assumed liabilities.
(2) To reflect depreciation and amortization for the year ended December 31,
1996.
(3) To reflect accumulated depreciation and accumulated amortization as of
January 1, 1997.
(4) To reflect depreciation and amortization for nine months ended September
30, 1997.
18
<PAGE>
Exhibits:
2.1 Agreement and Plan of Merger, dated December 29, 1997, buy and among
the Registrant, Marketplace, DCA Florida and the "Marketplace"
Shareholders (filed previously as Exhibit 2.1 to the Company's Form
8-K dated January 13, 1998).
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.
DENTAL CARE ALLIANCE, INC.
Dated: March 16, 1998 By: /s/ STEVEN R. MATZKIN
----------------------
Steven R. Matzkin, Chairman of the
Board of Directors, Chief Executive
Officer and President
19
