<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Date of Report (Date of earliest event reported):
March 20, 1996
CAPSTONE PHARMACY SERVICES, INC.
----------------------------------------------------------
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 0-20606 11-2310352
-------- ----------- ----------
(State or other (Commission File (Employer
jurisdiction of Number) Identification
incorporation) Number)
</TABLE>
2930 Washington Boulevard, Baltimore, Maryland 21230
----------------------------------------------------------
(Address of principal executive offices)
(410) 646-6987
----------------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
----------------------------------------------------------
(Former name or former address,
if changed since last report)
<PAGE> 2
ITEM 5. OTHER EVENTS.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
And Stockholders of Capstone
Pharmacy Services, Inc.:
We have audited the accompanying consolidated balance sheets of Capstone
Pharmacy Services, Inc. (a Delaware corporation and formerly Choice Drug
Systems, Inc.) and subsidiaries as of December 31, 1995 and February 28, 1995,
and the related consolidated statements of operations, changes in stockholders'
equity and cash flows for the ten months ended December 31, 1995, and the years
ended February 28, 1995 and 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Capstone Pharmacy Services,
Inc. and subsidiaries as of December 31, 1995 and February 28, 1995, and the
results of their operations and their cash flows for the ten months ended
December 31, 1995, and the years ended February 28, 1995 and 1994, in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Baltimore, Maryland
March 11, 1996
<PAGE> 3
CAPSTONE PHARMACY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31, 1995 and February 28, 1995
ASSETS
<TABLE>
<CAPTION>
December 31, February 28,
1995 1995
--------------- ----------------
(Note 1)
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 1) $ 2,763,416 $ 546,898
Accounts receivable, net of allowance for doubtful
accounts of $1,294,000 as of December 31, 1995
and $1,561,000 as of February 28, 1995 12,646,087 6,169,272
Inventories (Note 1) 5,023,008 3,888,163
Refundable income taxes (Note 8) 828,628 500,000
Prepaid expenses and other current assets 688,549 350,568
Net assets of discontinued operations (Note 7) - 302,820
--------------- ----------------
21,949,688 11,757,721
--------------- ----------------
Equipment and leasehold improvements, net
(Notes 1 and 3) 2,692,298 1,329,093
--------------- ----------------
Other assets:
Notes receivable, less current portion 77,289 94,435
Advances to affiliates (Note 15) 2,242,841 -
Security deposits and other assets 587,915 509,498
Goodwill, net of accumulated amortization of
$1,554,000 as of December 31, 1995 and
$1,117,000 as of February 28, 1995 (Notes 1 and 2) 14,580,564 5,521,512
--------------- ----------------
17,488,609 6,125,445
--------------- ----------------
Total assets $ 42,130,595 $ 19,212,259
=============== ================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE> 4
CAPSTONE PHARMACY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31, 1995 and February 28, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31, February 28,
1995 1995
------------ ------------
(Note 1)
<S> <C> <C>
Current liabilities:
Accounts payable $ 4,671,435 $ 2,664,143
Accrued expenses and other current liabilities 1,465,837 1,702,711
Current portion of long-term debt (Notes 4 and 9) 4,222,608 765,387
Current portion of non-compete agreements 200,000 -
Accrued restructuring charges (Note 6) 575,349 716,173
------------- -------------
11,135,229 5,848,414
------------- -------------
Deferred income taxes (Note 8) 542,787 -
Non-compete agreements, net of current portion 400,000 -
Long-term debt, net of current portion (Notes 4 and 9) 2,692,202 7,650,455
Long-term portion of accrued restructuring charges (Note 6) 520,640 935,860
------------- -------------
4,155,629 8,586,315
------------- -------------
Commitments and contingencies (Notes 9, 10 and 15)
Stockholders' equity (Note 11):
Common stock: $.01 par value; 30,000,000 shares
authorized at December 31, 1995 and 15,000,000
shares authorized at February 28, 1995; 13,610,810
shares issued and outstanding as of December 31, 1995
and 8,120,810 shares issued and outstanding as of
February 28, 1995 136,108 81,208
Capital in excess of par 38,985,006 17,200,050
Accumulated deficit (12,281,377) (12,503,728)
------------- -------------
26,839,737 4,777,530
------------- -------------
Total liabilities and stockholders' $ 42,130,595 $ 19,212,259
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 5
CAPSTONE PHARMACY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the ten months ended December 31, 1995 and
the years ended February 28, 1995 and 1994
<TABLE>
<CAPTION>
Ten Months
Ended Years Ended February 28,
December 31, ----------------------------
1995 1995 1994
------------- -------------- ------------
(Note 1)
<S> <C> <C> <C>
Net sales (Note 1) $ 48,841,443 $ 43,607,946 $ 51,253,713
Cost of sales (Note 12) 30,654,118 27,969,532 32,440,841
------------- -------------- ------------
Gross profit 18,187,325 15,638,414 18,812,872
------------- -------------- ------------
Operating expenses:
Selling, general and administrative expenses 17,468,930 18,637,213 17,240,810
Depreciation and amortization 1,145,669 988,974 1,037,425
Costs in connection with litigation (Notes 4 and 9) - 4,389,163 463,207
Restructuring charges (Note 6) 240,000 2,069,432 -
------------- -------------- ------------
Total operating expenses 18,854,599 26,084,782 18,741,442
------------- -------------- ------------
(Loss) income from operations (667,274) (10,446,368) 71,430
------------- -------------- ------------
Non-operating expense (income):
Interest expense, net (Note 4) 634,232 905,404 670,425
Other income, net (Note 13) (431,900) (104,076) (26,366)
------------- -------------- ------------
Total non-operating expense, net 202,332 801,328 644,059
------------- -------------- ------------
Loss before income taxes, discontinued
operations and extraordinary item (869,606) (11,247,696) (572,629)
Benefit for income taxes (Note 8) (225,082) (466,214) (51,495)
------------- -------------- ------------
Loss from continuing operations (644,524) (10,781,482) (521,134)
Discontinued Operations (Note 7):
Gain (loss) from operations of discontinued business
segments, net of tax benefits of $ - 0 - , $ - 0 - and
$ 175,000 for the ten months ended December 31, 1995
and the years ended February 28, 1995 and 1994,
respectively 18,667 (135,430) (340,416)
Gain (loss) on disposal of business segments, net 564,844 (503,067) -
------------- -------------- ------------
Loss before extraordinary item (61,013) (11,419,979) (861,550)
Extraordinary item (Note 5):
Discount on repayment of vendor debt 283,364 - -
------------- -------------- ------------
Net Income (loss) $ 222,351 $ (11,419,979) $ (861,550)
============= ============== ============
Earnings per share data:
Primary
Continuing operations $ (0.06)$ (1.67) $ (0.08)
Discontinued operations 0.05 (0.10) (0.06)
Extraordinary item 0.03 - -
------------- -------------- ------------
Net income (loss) $ 0.02 $ (1.77) $ (0.14)
============= ============== ============
Fully Diluted
Continuing operations $ (0.05)$ (1.67) $ (0.08)
Discontinued operations 0.05 (0.10) (0.06)
Extraordinary item 0.02 - -
------------- -------------- ------------
Net income (loss) $ 0.02 $ (1.77) $ (0.14)
============= ============== ============
Weighted average number of common
shares outstanding:
Primary 11,337,997 6,458,891 6,071,687
============= ============== ============
Fully Diluted 12,398,401 6,458,891 6,071,687
============= ============== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 6
CAPSTONE PHARMACY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the ten months ended December 31, 1995 and
the years ended February 28, 1995 and 1994
<TABLE>
<CAPTION>
Common stock Capital
------------------------- in excess Accumulated
Shares Amount of par deficit
---------- ------------- ------------ ---------------
<S> <C> <C> <C> <C>
Balance, February 28, 1993 6,026,810 $ 60,268 $ 9,238,690 $ (222,199)
Issuance of common stock in
connection with exercise of
stock warrants 60,000 600 100,650 -
Net loss for the year ended February 28, 1994 - - - (861,550)
---------- ------------- ------------ ---------------
Balance, February 28, 1994 6,086,810 60,868 9,339,340 (1,083,749)
Issuance of common stock:
Stock issued to Counsel Corporation
in connection with stock purchase
agreement, net of related issuance
costs (Note 5) 2,000,000 20,000 7,171,300 -
Stock issued in connection with
exercise of stock options (Note 11) 34,000 340 89,410 -
Stock to be issued in settlement
of litigation (Note 9) - - 600,000 -
Net loss for the year ended February 28, 1995 - - - (11,419,979)
---------- ------------- ------------ ---------------
Balance, February 28, 1995 8,120,810 81,208 17,200,050 (12,503,728)
Issuance of common stock:
Stock issued in connection with
private placements, net of related
issuance costs (Note 5) 5,100,000 51,000 20,769,231 -
Stock issued in connection with the
acquisition of PremierPharmacy, Inc.
(Note 2) 35,000 350 157,150 -
Stock issued in connection with
exercise of stock options (Note 11) 355,000 3,550 858,575 -
Net income for the ten months ended
December 31, 1995 - - - 222,351
---------- ------------- ------------ ---------------
Balance, December 31, 1995 (Note 1) 13,610,810 $ 136,108 $ 38,985,006 $ (12,281,377)
========== ============= ============ ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 7
CAPSTONE PHARMACY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the ten months ended December 31, 1995 and
the years ended February 28, 1995 and 1994
<TABLE>
<CAPTION>
Ten Months
Ended Years Ended February 28,
December 31, ---------------------------
1995 1995 1994
-------------- ------------- ------------
(Note 1)
<S> <C> <C> <C>
Cash flows from (to) operating activities:
Net income (loss) $ 222,351 $ (11,419,979) $ (861,550)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization 1,145,669 988,974 1,037,425
(Gain) loss on disposal of business segments (564,844) 503,067 -
Settlement of litigation - 3,500,000 -
Change in assets and liabilities, net of effects from
acquisition/disposal of businesses:
(Increase) decrease in accounts receivable (2,644,719) 2,161,906 184,737
Decrease in inventories 357,029 1,297,829 754,674
(Increase) decrease in refundable income taxes (238,168) (108,699) 482,969
(Increase) decrease in prepaid expenses and
other current assets (51,870) 779,825 (31,159)
(Increase) decrease in other assets (133,629) (333,011) 17,135
Increase (decrease) in accounts payable 821,665 (282,502) (1,023,784)
(Decrease) increase in accrued expenses and
other current liabilities (1,810,162) 137,441 1,259,862
(Decrease) increase in accrued restructuring charges (691,200) 1,652,033 -
------------- ------------- ------------
Net cash (used in) provided by operating activities (3,587,878) (1,123,116) 1,820,309
------------- ------------- ------------
Cash flows from (to) investing activities:
Purchase of equipment and leasehold improvements (1,076,976) (252,943) (316,737)
Acquisition of PremierPharmacy, Inc. net of cash acquired (4,168,872) - -
Proceeds from sale of business segment 700,000 - -
Advances to affiliates (2,242,841) - -
Repayments of notes receivable 229,571 261,555 372,088
------------- ------------- ------------
Net cash (used in) provided by investing activities (6,559,118) 8,612 55,351
------------- ------------- ------------
Cash flows from (to) financing activities:
Loan proceeds from Creditanstalt 11,600,000 - -
Loan repayments to Creditanstalt (9,650,000) - -
Proceeds from issuance of common stock, net 21,682,356 7,281,050 101,250
Loan proceeds from Counsel Corporation 1,268,250 - -
Loan repayments to Counsel Corporation (1,268,250) - -
Non-compete agreement payments (200,000) - -
Repayments of long-term debt, net (10,884,850) (5,902,723) (1,715,698)
Principal payments of capital lease obligations (183,992) (160,183) (140,379)
------------- ------------- ------------
Net cash provided by (used in) financing activities 12,363,514 1,218,144 (1,754,827)
------------- ------------- ------------
Net increase in cash and cash equivalents 2,216,518 103,640 120,833
Cash and cash equivalents, beginning of year 546,898 443,258 322,425
------------- ------------- ------------
Cash and cash equivalents, end of year $ 2,763,416 $ 546,898 $ 443,258
============= ============= ============
Supplemental Disclosure of Cash Flows Information
Cash paid for:
Interest $ 659,184 $ 887,691 $ 741,705
============= ============= ============
Taxes $ 144,149 $ 224,477 $ 24,349
============= ============= ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 8
CAPSTONE PHARMACY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
Capstone Pharmacy Services, Inc. (formerly known as Choice Drug
Systems, Inc.) together with its subsidiaries (the "Company"), a
Delaware corporation, is principally engaged in the business of
providing pharmaceuticals and related services to long-term care
facilities, correctional institutions, hospitals and health
maintenance organizations. The Company's long-term care and health
maintenance organization customers are primarily located in New York,
New Jersey, Maryland, Pennsylvania and Delaware, while the Company's
hospital and correctional facility customers are located throughout
the United States.
On August 28, 1995, the Company changed its state of incorporation
from New York to Delaware. Effective October 2, 1995, the Company
changed its name from Choice Drug Systems, Inc. to Capstone Pharmacy
Services, Inc. Additionally, effective December 31, 1995, the Company
changed its year-end from February 28 to December 31.
As of December 31, 1995, Counsel Corporation, an Ontario corporation
("Counsel"), owned approximately 3,908,000 shares of the Company's
common stock together with warrants to purchase approximately
2,337,000 additional shares. Counsel is a management and business
development company operating primarily in the United States health
care industry (See Note 5).
Principles of Consolidation
The consolidated financial statements include the accounts of Capstone
Pharmacy Services, Inc. and its wholly-owned subsidiaries. All
material intercompany accounts and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions. These estimates and assumptions affect the reported
amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues, expenses, gains and losses during the
reporting periods. Actual results could differ from these estimates.
F-7
<PAGE> 9
CAPSTONE PHARMACY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Reclassifications
Certain prior year amounts have been reclassified to conform to the
current period presentation.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents.
Inventories
Inventories are stated at the lower of cost (first-in, first-out
method) or market. Inventories consist principally of purchased
pharmaceuticals.
Equipment and Leasehold Improvements
Equipment and leasehold improvements are recorded at cost.
Depreciation and amortization are computed using the straight-line
method over the following estimated useful lives or with respect to
leasehold improvements, over the term of the lease if shorter.
<TABLE>
<S> <C> <C>
Furniture, fixtures and equipment . . . . . . . 3-10 years
Automobiles and trucks . . . . . . . . . . . . . 3-4 years
Leasehold improvements . . . . . . . . . . . . . 5-10 years
Equipment under capital leases . . . . . . . . . 3-5 years
</TABLE>
Equipment and leasehold improvements obtained in acquisitions of
subsidiaries are depreciated or amortized based on their remaining
useful lives at the acquisition date.
Goodwill
Costs in excess of fair values of businesses acquired are recorded as
goodwill and amortized using the straight-line method over periods of
twenty to forty years. Amortization of goodwill amounted to
approximately $460,000, $384,000 and $408,000 for the ten months ended
December 31, 1995 and the years ended February 28, 1995 and 1994,
respectively.
F-8
<PAGE> 10
CAPSTONE PHARMACY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
The Company monitors the individual financial performance of each of
the acquired businesses and continually evaluates the realizability of
goodwill and the potential for any impairment to its recoverability
based on the projected future net income of the respective acquired
businesses.
401(K) Benefit Plan
Effective May 22, 1995, employees of the Company may participate in a
supplemental retirement program established under Section 401(K) of
the Internal Revenue Code of 1986, as amended. Contributions by the
Company may be made to the plan subject to the discretion of the Board
of Directors. No Company contribution was made for the ten months
ended December 31, 1995.
Revenue Recognition
Revenues are recorded as products are shipped and services are
rendered. A portion of the Company's sales are covered by various
state and Federal reimbursement programs, which are subject to review
and/or audit. Reimbursement programs are also subject to change from
time to time.
Income Taxes
The Company files a consolidated Federal income tax return. Income
tax expense is based on reported earnings before income taxes.
Effective March 1, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes".
Under this Statement, deferred taxes on income are provided for those
items for which the reporting period and methods used for income tax
purposes differ from those used for financial statement purposes,
using the asset and liability method. Deferred income taxes are
recognized for the tax consequences of "temporary differences" by
applying enacted statutory rates applicable to future years to
differences between the financial statement carrying amounts and the
tax bases of existing assets and liabilities. The impact of initially
adopting SFAS No. 109 for the year ended February 28, 1994 was $0.
Earnings Per Share
Net loss per common share for the years ended February 28, 1995 and
1994, was computed by dividing the net loss by the weighted average
number of common shares outstanding. For the ten months ended
December 31, 1995, primary and
F-9
<PAGE> 11
CAPSTONE PHARMACY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
fully diluted earnings per common share were computed by dividing net
income by the weighted average number of shares of common stock and
common stock equivalents outstanding. The amount of common stock
equivalents outstanding was computed using the treasury stock method.
2. ACQUISITIONS
In May 1995, the Company acquired PremierPharmacy, Inc. ("Premier"),
an institutional pharmacy, for a purchase price of $4,250,000 in cash.
Premier's operations generate annualized revenues of approximately
$24,000,000, primarily from pharmacy services provided to long-term
care facilities located in the New York metropolitan area and
hospitals located in the southeastern United States.
The Premier acquisition has been accounted for under the purchase
method of accounting with the assets and liabilities of Premier
recorded at their estimated fair market values at the date of
acquisition. The operations of Premier, since the acquisition, are
included in the accompanying consolidated statement of operations for
the ten months ended December 31, 1995. Goodwill of approximately
$9,350,000, representing the excess of acquisition costs over the
fair market value of acquired net assets, is being amortized over
forty years.
The following proforma information reflects the combined results of
operations of the Company as if the acquisition of Premier was
consummated on March 1, 1994:
<TABLE>
<CAPTION>
Ten Months Ended Year Ended
December 31, February 28,
(In thousands, except for per share amounts) 1995 1995
---------------- ---------------
<S> <C> <C> <C> <C>
Net sales $ 54,834 $ 68,503
Cost of sales 34,531 42,704
-------------- ---------------
Gross profit 20,303 25,799
Operating expenses including
interest and taxes 22,330 37,493
-------------- ---------------
Loss from continuing operations (2,027) (11,694)
Discontinued operations 584 (638)
Extraordinary items 283 -
-------------- ---------------
Net loss $ (1,160) $ (12,332)
============== ===============
Net loss per share $ (.10) $ (1.53)
============== ===============
</TABLE>
These proforma operating results reflect certain adjustments,
including amortization of goodwill acquired and related income tax
effects. The proforma results are not necessarily indicative of the
operating results that would have occurred had the Premier acquisition
been consummated on March 1, 1994, nor are they necessarily indicative
of future results.
F-10
<PAGE> 12
CAPSTONE PHARMACY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
The Company is obligated to pay the former stockholders of certain
subsidiaries acquired by Premier $200,000 per year for the next three
years under non-compete agreements.
3. Equipment and leasehold improvements
Equipment and leasehold improvements are comprised of the following:
<TABLE>
<CAPTION>
December 31, February 28,
1995 1995
------------ ------------
<S> <C> <C>
Leasehold improvements $ 544,272 $ 749,468
Furniture, fixtures and equipment 3,945,149 3,181,738
Data processing equipment 1,512,500 910,377
Automobiles and trucks 258,379 161,454
----------- ------------
6,260,300 5,003,037
Accumulated depreciation and
amortization (3,568,002) (3,673,944)
----------- -----------
$ 2,692,298 $ 1,329,093
=========== ===========
</TABLE>
Depreciation and amortization of equipment and leasehold improvements
amounted to approximately $686,000, $605,000 and $629,000 for the ten
months ended December 31, 1995 and the years ended February 28, 1995
and 1994, respectively.
F-11
<PAGE> 13
CAPSTONE PHARMACY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
4. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt at December 31, 1995 and February 28, 1995, consisted
of the following:
<TABLE>
<CAPTION>
December 31, February 28,
1995 1995
------------------ ------------------
<S> <C> <C>
Loan payable to United Jersey Bank, interest at
prime plus 1.5%, repaid on May 22, 1995 $ - $ 2,983,303
Borrowings under a $10,000,000 revolving loan
with Creditanstalt, interest at prime plus 0.5%,
secured by substantially all assets of the
Company, due on demand 1,950,000 -
Unsecured note payable to relative of former
stockholder, payable in quarterly installments
with interest at 9% through January 2000 297,938 355,372
Subordinated promissory note payable to major
supplier, payable in equal monthly
installments, interest at prime plus 3%,
repaid on May 22, 1995 - 1,533,333
Promissory note payable to major supplier,
payable monthly with interest at prime
plus 3%, repaid on May 22, 1995 - 242,730
Amounts due under a Medicare settlement
with the United States Government,
payable in quarterly installments with
interest at 7.75% through 2001 2,537,500 2,900,000
Unsecured notes payable to former stock-
holders of a Premier subsidiary, interest
at 6%, currently payable 1,000,000 -
Unsecured notes payable to former stock-
holders of a Premier subsidiary, due in
monthly installments of $14,898, including
interest at 6% through October 31, 1998 464,752 -
Unsecured note payable to former stockholder
of a Premier subsidiary, interest at 7%,
due August 11, 1996 153,334 -
Unsecured notes payable to former stockholders
of a Premier subsidiary, interest at 7%, due
in annual installments of $30,000 through
June 30, 1999 120,000 -
</TABLE>
F-12
<PAGE> 14
CAPSTONE PHARMACY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
December 31, February 28,
1995 1995
---------- -----------
<S> <C> <C>
Capital lease obligations (Note 9) 364,844 401,104
Other 26,442 -
---------- -----------
6,914,810 8,415,842
Less: Current portion (4,222,608) (765,387)
---------- -----------
Long-term portion $ 2,692,202 $ 7,650,455
========== ===========
</TABLE>
Future maturities of long-term debt, exclusive of capital lease
obligations, at December 31, 1995, follow:
<TABLE>
<S> <C>
1996 $ 4,001,674
1997 768,391
1998 757,091
1999 539,481
2000 483,329
---------
$ 6,549,966
=========
</TABLE>
The Company's agreement with Creditanstalt requires that the Company
provide certain information and maintain certain financial ratios and
minimum net worth and earnings levels. The average interest rate on
amounts outstanding under this agreement was 8.75%. A letter of
credit fee of 1.25% is paid on a monthly basis. Amounts available to
be borrowed under this agreement are based upon levels of accounts
receivable and inventories. The Company had unused credit available
under this agreement as of December 31, 1995 of $7,450,000.
On November 1, 1995, the Company elected not to make a scheduled
installment payment on a note payable to former stockholders of a
Premier subsidiary in the aggregate principal amount of $1,000,000,
due to a dispute with these former stockholders. This amount is
recorded as current portion of long-term debt in the accompanying
consolidated balance sheet as of December 31, 1995.
On October 31, 1994, the Company entered into an agreement with the
United States Government settling an investigation conducted by the
U.S. Attorney for the Eastern District of Pennsylvania into claims for
reimbursement made by certain of the Company's subsidiaries to the
Medicare Program. The subject of the investigation was the Company's
claims documentation and Medicare reimbursement practices for December
1993 and prior. Under the terms of the settlement, without admitting
any liability, the Company has agreed to repay, as a return of revenue
previously received, over a six-year period, $3,400,000 to settle the
Government's claims. Initially, $100,000 was paid upon the execution
of the agreement and $400,000 was paid on December 31, 1994.
Thereafter, $2,900,000
F-13
<PAGE> 15
CAPSTONE PHARMACY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
plus interest at an annual rate of 7.75% is payable in quarterly
installments over a six-year period ending January 1, 2001. The full
amount of the settlement, including related legal fees, is included in
costs in connection with litigation in the accompanying consolidated
statement of operations for the year ended February 28, 1995.
Based on the borrowing rates currently available to the Company, the
fair value of long-term debt, exclusive of capital lease obligations,
as of December 31, 1995, is approximately $5,942,000.
5. PRIVATE PLACEMENTS
On December 16, 1994, the Company entered into a Stock Purchase
Agreement with Counsel. Pursuant to the Stock Purchase Agreement,
Counsel acquired 2,000,000 shares of the Company's common stock for
net proceeds of approximately $7,191,000. Counsel was also granted
two three-year warrants, the first of which grants Counsel the right
to purchase up to 1,000,000 shares of the Company's common stock at
the exercise price of $4.50 per share, and the second of which grants
Counsel the right to acquire up to 800,000 shares of the Company's
common stock at the exercise price of $5.50 per share.
On May 22, 1995, the Company completed a private placement of
1,600,000 units (the "Units"). Each Unit consisted of one share of
common stock, a three-year warrant to acquire 0.5 shares of common
stock at the exercise price of $4.50 per share, and a three-year
warrant to acquire 0.4 shares of common stock at the exercise price of
$5.50 per share. The offering of Units raised proceeds of
approximately $5,759,000, net of related costs, at a price of $3.65
per Unit. The proceeds of the private placement were used to fund the
acquisition of Premier and to retire the debt to a major vendor in the
amount of approximately $1,776,000, resulting in a gain on the
discount of debt of approximately $283,000. The gain on the discount
of debt is reflected in the accompanying consolidated statement of
operations for the ten months ended December 31, 1995 as an
extraordinary item.
On August 29, 1995, the Company completed a second private placement
of its common stock. This offering consisted of 3,500,000 shares at a
price of $4.38 per share. The net proceeds of this private placement
were approximately $15,061,000, net of related costs including
placement commissions. There were no warrants issued in connection
with this second private placement. The proceeds of this private
placement were used to retire outstanding debt of $9,650,000 due to
Creditanstalt and for general working capital purposes.
F-14
<PAGE> 16
CAPSTONE PHARMACY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
The Company has granted certain registration rights with respect to
the common stock issued under these private placements and the common
stock underlying the related warrants.
6. RESTRUCTURING CHARGES
In February 1995, the Company adopted a formal plan of restructuring
in order to realign and consolidate businesses, concentrate resources,
and better position itself to achieve its strategic growth objectives.
This plan included the termination of the medical/surgical supply
operations and the closing of the Company's Missouri location on June
30, 1995. The Company recorded restructuring charges of $2,069,432
for the year ended February 28, 1995, which includes the write-down of
accounts receivable, inventories, and fixed assets to net realizable
value and the accrual for the termination of leases, employee
severance costs, and the estimated administrative costs of terminating
operations. Also included in the restructuring costs are amounts due
to former executives of the Company under consulting agreements which
expire in May 1997 and other long-term contractual obligations related
to the restructured business.
During the ten months ended December 31, 1995, the Company recorded,
as a change in estimate, an additional $100,000 write-down of accounts
receivable for the medical/surgical supply operations.
The net sales and (loss) income from continuing operations of the
medical/surgical supply operations and the Missouri location, follow:
<TABLE>
<CAPTION>
Years Ended February 28,
Ten Months Ended ----------------------------------------
December 31, 1995 1995 1994
----------------- --------- ---------
<S> <C> <C> <C>
Net sales $ 854,018 $ 3,983,533 $ 5,466,810
======== ========= =========
(Loss) income from
continuing operations $ (157,218) $ (2,406,438) $ 9,569
======== ========= =========
</TABLE>
In December 1995, the Company adopted a formal plan of restructuring
in order to consolidate certain of its satellite locations. The
Company recorded restructuring costs of $140,000 for the ten months
ended December 31, 1995, which includes the write-down of fixed assets
to net realizable value and the accrual for employee severance costs
and the termination of leases.
F-15
<PAGE> 17
CAPSTONE PHARMACY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
7. DISCONTINUED OPERATIONS
In February 1995, in connection with adoption of its formal
restructuring plan, the Company decided to discontinue the operations
of its mail order and computerized health care software businesses.
The mail order business was closed effective August 1, 1995 and the
assets of the computerized health care software business were sold to
an unrelated party on June 30, 1995 for $700,000, which resulted in a
gain in the amount of $564,844, net of related income taxes of
$38,000.
The net gains or losses of these operations for the ten months ended
December 31, 1995 and the year ended February 28, 1995 and 1994 are
included in the consolidated statements of operations under gain
(loss) from operations of discontinued business segments. The loss on
disposal of $503,067 reflected on the consolidated statement of
operations for the year ended February 28, 1995, includes the
write-down of the assets of the mail order and computer software
businesses to estimated net realizable value and the estimated costs
of disposing of these operations, including a pro-rata share of the
Company's expense for office space in Baltimore.
The Company had net sales from discontinued operations of
approximately $909,000, $2,731,000 and $3,123,000 for the ten months
ended December 31, 1995 and the years ended February 28, 1995 and
1994, respectively.
Net assets of discontinued operations have been included in the
accompanying consolidated balance sheet as of February 28, 1995, and
consist of the following:
<TABLE>
<CAPTION>
Mail Order Software
Business Business Total
-------- -------- -----
<S> <C> <C> <C>
Accounts receivable $ 170,848 $ 227,158 $ 398,006
Fixed assets 2,856 22,539 25,395
Current liabilities (19,246) (101,335) (120,581)
------- -------- ---------
Net $ 154,458 $ 148,362 $ 302,820
======= ======== =========
</TABLE>
F-16
<PAGE> 18
CAPSTONE PHARMACY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
8. INCOME TAXES
The benefit for income taxes consisted of the following:
<TABLE>
<CAPTION>
Ten Months
Ended Years Ended February 28,
December 31, -------------------------------
(In thousands) 1995 1995 1994
-------------- ------- -------
<S> <C> <C> <C>
Federal:
Current $ (219) $ (466) $ (102)
Deferred (46) - -
------- ------- ------
(265) (466) (102)
State and local 40 - 51
------- ------- ------
Total $ (225) $ (466) $ (51)
======= ======= ======
</TABLE>
For the ten months ended December 31, 1995, the Federal benefit for
income taxes is primarily due to the carryback of a prior year taxable
loss to prior periods and represents a change in estimate of the
amount refundable upon final preparation of the return.
The actual income tax benefit for the ten months ended December 31,
1995 and for the fiscal years ended February 28, 1995 and 1994 is
different from the amounts computed by applying the statutory Federal
income tax rates to losses from continuing operations before income
taxes. The reconciliation of these differences, follow:
<TABLE>
<CAPTION>
Ten Months
Ended Years Ended February 28,
December 31, ----------------------------------
(In Thousands) 1995 1995 1994
------------ --------- -------
<S> <C> <C> <C>
Tax benefit at statutory rate $ (296) $ (3,824) $ (194)
Additional refunds received (219) - -
Increase resulting from:
State income taxes, net of
federal income tax effect 26 - 33
Current loss not available
for carryback 172 3,206 -
Tax effect of permanent
differences 68 152 123
Other items, net 24 - (13)
------ --------- --------
Benefit for income taxes $ (225) $ (466) $ (51)
====== ========= ========
</TABLE>
F-17
<PAGE> 19
CAPSTONE PHARMACY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
At December 31, 1995, the Company had a net operating loss
carryforward of approximately $10,506,000 for Federal income tax
purposes, expiring in increments through 2011. The utilization of
approximately $2,903,000 of such losses is restricted to offset only
future taxable income generated by Choice Maryland and Premier.
The tax effect of cumulative temporary differences at December 31,
1995 and February 28, 1995, follow:
<TABLE>
<CAPTION>
December 31, February 28,
(In Thousands) 1995 1995
----------- -----------
<S> <C> <C>
Current Deferred Tax Assets:
Tax carryforwards $ 4,172 $ 1,868
Accounts receivable allowances 413 625
Accrued litigation costs 1,255 1,400
Accrued restructuring charges 536 828
Accrued liabilities 280 420
Other 254 144
----------- -----------
6,910 5,285
Less: Valuation allowance (6,910) (5,285)
----------- -----------
Net deferred tax asset $ - $ -
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
December 31, February 28,
(In Thousands) 1995 1995
-------------- -----------
<S> <C> <C>
Puerto Rico withholding tax $ 425 $ -
Depreciation and other 118 -
------------ -----------
Net deferred tax liability $ 543 $ -
============ ===========
</TABLE>
F-18
<PAGE> 20
CAPSTONE PHARMACY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
9. COMMITMENTS
Leases
The Company leases office and warehouse space, automobiles and
equipment. Rental expense under these leases aggregated approximately
$781,000, $719,000, and $1,120,000 for the ten months ended December
31, 1995 and the years ended February 28, 1995 and 1994, respectively.
Future minimum lease payments, follow:
<TABLE>
<CAPTION>
Year Ending Capital Operating
December 31, Leases Leases
------------ -------- ---------
<S> <C> <C>
1996 $ 249,404 $ 1,051,641
1997 90,587 932,029
1998 42,644 695,988
1999 30,241 533,824
2000 - 401,423
Thereafter - 600,677
--------- ----------
Total minimum lease payments 412,876 $ 4,215,582
=========
Less: Amounts representing
interest (48,032)
---------
Present value of net minimum
lease payments 364,844
Less: Current portion (220,934)
---------
Long-term portion $ 143,910
==========
</TABLE>
Other
In connection with the settlement of a class action law suit filed in
June 1993, the parties have agreed to accept in full settlement
$600,000 in common stock to be issued by the Company and $650,000 in
cash, which was previously paid by the Company's directors and
officers liability insurance carrier. The common stock is issuable
upon final approval of an escrow agreement and the number of shares to
be issued will be based upon a specified formula, which will result in
the issuance of approximately 98,500 common shares. The Company's
portion of the proposed settlement ($600,000), is included in costs in
connection with litigation in the accompanying consolidated statement
of operations, for the year ended February 28, 1995.
F-19
<PAGE> 21
CAPSTONE PHARMACY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
10. CONTINGENCIES
The Company is subject to various claims and litigation in the
ordinary course of its business. In the opinion of management and
outside counsel, settlement of these claims and litigation will not
have a material adverse effect on the financial position or future
operating results of the Company.
11. STOCKHOLDERS' EQUITY
Common Stock Authorized
On August 28, 1995, the Company's stockholders approved an increase in
the authorized common stock of the Company from 15,000,000 shares to
30,000,000 shares.
Stock Option Plans
The Company has eight stock option plans and an employee stock
purchase plan covering up to 2,655,000 shares of the Company's common
stock, pursuant to which officers, directors and employees of the
Company are eligible to receive either incentive or non-qualified
options. Stock options generally expire five or ten years from the
date of grant. The exercise price of an incentive stock option is
equal to the fair market value of the Company's common shares on the
date such option was granted. The exercise price of non-qualified
stock options may be less than the fair market value on the date of
grant.
F-20
<PAGE> 22
CAPSTONE PHARMACY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
A summary of option transactions during the ten months ended December 31,
1995 and the years ended February 28, 1995 and 1994, follow:
<TABLE>
<CAPTION>
Number of Shares
---------------------------------------------------
Ten Months Ended Years Ended February 28,
-----------------------
December 31, 1995 1995 1994
----------------- ---- ----
<S> <C> <C> <C>
Shares under option at
beginning of period 994,500 818,500 832,000
Granted ($2.86-$7.50) 949,500 564,000 51,500
Cancelled ($2.87-$6.00) (125,000) (354,000) (65,000)
Exercised ($1.88-$4.50) (355,000) (34,000) -
---------- ------- -------
Options outstanding at end
of period ($2.85-$7.50) 1,464,000 994,500 818,500
========== ======= =======
Shares available for future grant 693,750 568,250 778,250
========== ======= =======
Options exercisable at end
of period 1,289,000 994,500 818,500
========== ======= =======
</TABLE>
Warrants
In August 1995, the Company's Board of Directors extended the expiration
date of certain outstanding redeemable warrants issued as part of the
Company's initial public offering (the "IPO Warrants") to March 31, 1996.
Subsequent to year-end, the expiration date of the IPO Warrants was
extended further to June 30, 1996. The exercise price of the 650,000 IPO
Warrants is $6.00 per share. The expiration date of the 650,000 Class B
Warrants (which are exercisable at $10.00 per share) to be issued upon
exercise of the IPO Warrants was also extended subsequent to year-end to
June 30, 1997. The other terms of the IPO Warrants remain the same.
In connection with the private placements discussed in Note 5, the Company
issued warrants to purchase 3,240,000 shares of stock at prices ranging
from $4.50 to $5.50 per share. These warrants expire through May 1998.
Total warrants for 3,990,000 shares were outstanding at December 31, 1995,
including the IPO Warrants, warrants issued in connection with private
placements and 100,000 warrants issued in connection with prior
acquisitions, at exercise prices ranging from $4.50 to $6.00 per share. No
warrants were exercised during the year.
F-21
<PAGE> 23
CAPSTONE PHARMACY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. MAJOR VENDOR
The Company utilizes a primary supplier arrangement for its purchases
of pharmaceuticals. In light of the financial and operating
significance of purchases, the Company routinely monitors the
performance of its primary supplier and negotiates settlements and
future service levels based thereon. Anticipated settlement amounts
are recorded based upon management's estimates. The Company changed
its primary supplier in December 1995. Purchases of inventory under
the primary supplier relationships during the ten months ended
December 31, 1995 and the years ended February 28, 1995 and 1994, were
approximately 87%, 55% and 57%, respectively, of the Company's total
inventory purchases.
13. OTHER INCOME
The components of other income, follow:
<TABLE>
<CAPTION> Years Ended February 28,
Ten Months Ended -------------------------------
December 31, 1995 1995 1994
----------------- ---- ----
<S> <C> <C> <C>
(Gain) loss on sale of assets $ (289,865) $ (5,222) $ 3,860
Contract delivery fees (60,655) (50,666) -
Other, net (81,380) (48,188) (30,226)
---------- -------- -------
$ (431,900) $ (104,076) $ (26,366)
========== ======== =======
</TABLE>
14. NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets To Be Disposed Of". This Statement requires that
long-lived assets and certain intangibles be reviewed for impairment
under certain circumstances, and that an impairment loss be recorded
if the sum of expected future cash flows is less than the carrying
amount of the assets. The amount of any impairment loss is based on
the fair market value of the assets. The Statement also requires that
long-lived assets and intangibles to be disposed of be recorded at
the lower of cost or fair value, less costs to sell. The Company will
be required to adopt this standard for the year ending December 31,
1996.
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123 "Accounting for Stock-Based Compensation". This Statement
encourages
F-22
<PAGE> 24
CAPSTONE PHARMACY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
companies to record compensation costs for stock options granted to
employees on the date of grant based on the fair value of these
options. Alternatively, it allows companies to continue to measure
compensation based on the difference between the option exercise price
and the fair market value of the stock on the date of grant.
Companies electing to continue with this method must provide proforma
disclosures of net income and earnings per share as if the fair value
based method of accounting was used. The Company will be required to
adopt this standard for the year ending December 31, 1996.
The impact, if any, that the adoption of these standards will have on
the Company's financial statements is not presently determinable.
15. SUBSEQUENT EVENTS
During January 1996, Creditanstalt agreed to amend the existing line
of credit to provide for an increase in borrowings available under the
line of credit to $15,000,000 and to add a term loan facility in the
amount of $10,000,000. Availability under the line of credit and the
term loan will be increased to $21,000,000 and $14,000,000,
respectively, in the event the Company raises at least $7,500,000 of
additional common equity. Borrowings under the amended line of credit
and term loan are secured by substantially all of the assets of the
Company, bear interest at rates of either prime plus .25% or LIBOR
plus 1.25% and are subject to other restrictions and loan covenants,
all as defined by the underlying agreements.
On January 3, 1996, the Company entered into an Agreement and Plan of
Merger with Geri-Care Systems, Inc. and Scripts & Things, Inc.
(Geri-Care), by which the Company acquired the operations of
Geri-Care. The purchase price was approximately $6,400,000, payable
$1,350,000 in cash and promissory notes, and the remainder in common
stock of the Company. The agreement also includes an additional
contingent incentive payment of $1,500,000 as compensation for certain
new business to be generated through 1998 by the selling shareholders
of Geri-Care. The Company has made advances to Geri-Care under the
terms of the Agreement of approximately $2,243,000.
Geri-Care is a privately held provider of pharmacy services to nursing
homes in the New York metropolitan area and generates annualized
revenues of approximately $7,000,000.
F-23
<PAGE> 25
CAPSTONE PHARMACY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
On February 29, 1996, the Company entered into an Asset Purchase
Agreement with IMD Corporation (IMD) by which the Company acquired the
operations of IMD. The purchase price was approximately $15,500,000
in cash.
IMD is a privately held institutional pharmacy business in the State
of Illinois and has annualized revenues of approximately $18,000,000.
The Company has paid fees totalling $570,000 to a company affiliated
with a member of the Board of Directors for certain services rendered
in connection with the Geri-Care and IMD acquisitions.
The Company is currently contemplating a private placement of up to
approximately 3,000,000 shares of common stock. If completed, the
private placement is expected to generate net proceeds of up to
approximately $24,000,000.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits. The exhibit filed as a part of this report is listed in
the Exhibit Index immediately following the signature page.
F-24
<PAGE> 26
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.
CAPSTONE PHARMACY SERVICES, INC.
By: /s/ Donald W. Hughes
---------------------------
Vice-President and
Chief Financial Officer
Date: March 20, 1996
<PAGE> 27
Exhibit Index
-------------
Exhibit No.
-----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE AUDITED FINANCIAL
STATEMENTS OF CAPSTONE PHARMACY SERVICES, INC. FORM 8-K FOR THE TEN MONTHS
ENDED DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> MAR-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<CASH> 2,063
<SECURITIES> 0
<RECEIVABLES> 13,940
<ALLOWANCES> 1,294
<INVENTORY> 5,023
<CURRENT-ASSETS> 21,950
<PP&E> 6,260
<DEPRECIATION> 3,568
<TOTAL-ASSETS> 42,131
<CURRENT-LIABILITIES> 11,135
<BONDS> 4,156
0
0
<COMMON> 39,121
<OTHER-SE> (12,281)
<TOTAL-LIABILITY-AND-EQUITY> 42,131
<SALES> 48,841
<TOTAL-REVENUES> 0
<CGS> 30,654
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 17,854
<LOSS-PROVISION> 569
<INTEREST-EXPENSE> 634
<INCOME-PRETAX> (870)
<INCOME-TAX> (225)
<INCOME-CONTINUING> (645)
<DISCONTINUED> 584
<EXTRAORDINARY> 283
<CHANGES> 0
<NET-INCOME> 222
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
