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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
AMENDMENT NO. 1
AMENDMENT TO APPLICATION OR REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 1, 1997
INTEGRATED ORTHOPAEDICS, INC.
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(Exact name of registrant as specified in its charter)
TEXAS
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(State or other jurisdiction of incorporation)
1-10677 76-0203483
(Commission File Number) (I.R.S. Employer
Identification No.)
5858 Westheimer, Suite 500
Houston, Texas 77057
(Address of principal executive office,
including zip code)
Registrant's telephone number, including area code: (713) 225-5464
5858 Westheimer, Suite 500, Houston, Texas 77057
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(former name or former address, if changed since last report)
This document consists of 7 pages.
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The undersigned registrant hereby amends the following items, financial
statements, exhibits or other provisions of its Current Report on Form 8-K (the
"K") dated October 15, 1997, (Commission File Number 1-10677), as set forth
below:
Item 7 Financial Statements and Exhibits
- ------ ---------------------------------
Pro Forma financial information
Introduction Page 2
Unaudited Pro Forma Balance Sheet as of
September 30, 1997 Page 3
Unaudited Pro Forma Statement of
Income for the Nine Months Ended
September 30, 1997 Page 4
Unaudited Pro Forma Statement of
Income for the Year Ended December 31, 1997 Page 5
Notes to Unaudited Pro Forma Financial Statements Page 6
Item 7(b) Unaudited Pro Forma Financial Information
- --------- -----------------------------------------
Effective October 1, 1997, Integrated Orthopaedics, Inc., through a wholly-
owned subsidiary (together, the "Company"), acquired the accounts receivable,
acquired the right to manage the non-medical operations, and entered into a long
term management agreement with the medical practice conducted by Merritt
Orthopaedic Associates, P.C. ("MOA"), a five physician orthopaedic medicine
practice located in Bridgeport, Connecticut. In exchange, the Company delivered
aggregate consideration, of approximately $4,110,000, including (i) cash and
estimated transaction costs of approximately $962,000, (ii) an agreement to
deliver cash of $1,505,000 on January 5, 1998, and (iii) an agreement to deliver
423,917 shares of the Company's common stock on January 5, 1998. The purchase
price was determined after arms-length negotiations between the Company and MOA.
The cash portion of the transaction was funded from the Company's existing cash
reserves. In connection with the MOA transaction, the Company also undertook a
five-year operating lease covering the facility from which MOA has historically
rendered its medical services. The use of this facility will be provided to MOA
pursuant to the Company's obligations under the management agreement.
The following Unaudited Pro Forma Consolidated Balance Sheet as of
September 30, 1997 and the Unaudited Pro Forma Consolidated Statement of
Operations for the nine months ended September 30, 1997 and for the year ended
December 31, 1996 have been prepared to reflect adjustments to the Company's
historical financial position and results of operations to give effect to the
Merritt Orthopaedic Associates, P.C. management services agreement transaction
(the "Merritt Transaction").
The Unaudited Pro Forma consolidated Balance Sheet has been prepared as if
the Merritt Transaction occurred on September 30, 1997.
The Unaudited Pro Forma Consolidated Statement of Operations for the nine
months ended September 30, 1997 and the year ended December 31, 1996 have been
prepared as if the Merritt Transaction occurred on January 1, 1997 and 1996,
respectively.
The pro forma financial statements have been prepared by the Company based
on the Company's and Merritt's unaudited financial statements as of and for the
nine months ended September 30, 1997 and the audited financial statements for
the year ended December 31, 1996. For purposes of preparing the pro forma
financial statements, the Company has estimated revenues for the periods prior
to the Company's affiliation with Merritt by applying the management fee formula
contained in the management services agreement with Merritt to the historical
medical practice revenue. These pro forma financial statements are presented
for illustrative purposes only and are not necessarily indicative of the results
that would have been obtained had the Merritt Transaction been completed at the
time above. This information should be read in conjunction with the Company's
and Merritt's historical financial statements.
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INTEGRATED ORTHOPAEDICS, INC.
PRO FORMA BALANCE SHEET (UNAUDITED)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Historical (1) Pro Forma
------------------------------- -------------------------------
Integrated Transaction As
Orthopaedics, Inc. Merritt Adjustments Adjusted
------------------ ------- ----------- --------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash & Equivalents $ 5,588,181 $ 115,302 $ (980,243) (2) $ 4,723,240
Accounts Receivable, net 2,782,925 516,000 0 3,298,925
Income Taxes Receivable 810,311 0 0 810,311
Notes Receivable, net 183,950 0 0 183,950
Other Current Assets 254,263 2,093 (2,093) (3) 254,263
----------- --------- ---------- --- -----------
Total Current Assets 9,619,630 633,395 (982,336) 9,270,689
Property and Equipment
Equipment 3,460,892 175,333 (175,333) (3) 3,460,892
Leasehold Improvements 259,368 2,622 (2,622) (3) 259,368
Furniture & Fixtures 385,838 0 0 385,838
----------- --------- ---------- -----------
4,106,098 177,955 (177,955) 4,106,098
Less : Accumulated Depreciation 3,108,342 147,417 147,417 (3) 3,108,342
----------- --------- ---------- --- -----------
997,756 30,538 (30,538) 997,756
Other Assets 324,934 0 0 324,934
Management Services Agreement (MSA) 0 0 3,594,230 (4) 3,594,230
Less : Accumulated Amortization 0 0 0 0
----------- --------- ---------- -----------
Net MSA 0 0 3,594,230 3,594,230
----------- --------- ---------- -----------
Total Assets $10,942,320 $ 663,933 $2,581,356 $14,187,609
=========== ========= ========== ===========
Current Liabilities
Accounts Payable 1,031,472 9,743 (9,743) 1,031,472
Accrued Expenses 1,646,089 0 97,059 (5) 1,743,148
Income Taxes Payable 208,168 33,527 (33,527) (3) 208,168
Current Obligations Under Capital Lease 14,379 0 0 14,379
Current Portion of Notes Payable 103,470 0 0 103,470
----------- --------- ---------- -----------
Total Current 3,003,578 43,270 53,789 3,100,637
Note Payable 577,832 0 1,505,000 (6) 2,082,832
Obligations Under Capital Lease 172,303 0 0 172,303
Deferred Income Taxes 160,174 191,766 (191,766) (3) 160,174
----------- --------- ---------- -----------
Total Liabilities 3,913,887 235,036 1,367,023 5,515,946
----------- --------- ---------- -----------
Stockholders Equity
Common Stock 5,314 1,200 (776) (7)(8) 5,738
Preferred Stock 252 0 0 252
Additional paid in capital 4,886,712 0 1,642,806 (8) 6,529,518
Retained Earnings 2,136,169 427,697 (427,697) (7) 2,136,169
Treasury Stock (14) 0 0 (14)
----------- --------- ---------- -----------
Total Stockholder's Equity 7,028,433 428,897 1,214,333 8,671,663
----------- --------- ---------- -----------
Total Liabilities & Stockholders Equity $10,942,320 $ 663,933 $2,581,356 $14,187,609
=========== ========= ========== ===========
</TABLE>
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INTEGRATED ORTHOPAEDICS, INC.
PRO FORMA STATEMENT OF INCOME (UNAUDITED)
FOR NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Unaudited Historical Pro Forma
-------------------------------------------- ----------------------------------
Integrated
Orthopaedics, New Transaction As
Inc. Merritt Combined Adjustments Adjusted
- --------------------------------------- ------------ ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 5,934,687 $2,029,645 $ 7,964,332 ($881,353) (9) $ 7,082,979
----------- ---------- ----------- ----------- --- -----------
Cost & Expenses:
Compensation costs and medical services 3,088,825 1,474,575 4,563,400 (1,180,125) (10) 3,383,275
Other direct costs 910,231 66,761 976,992 0 976,992
General and administrative 3,023,862 436,763 3,460,625 (27,405) (11) 3,443,220
Depreciation and amortization 176,182 10,086 186,268 57,306 (12) 243,574
Provision for doubtful accounts 820,878 0 820,878 0 820,878
Gain from restructuring (627,996) 0 (627,996) 0 (627,996)
----------- ---------- ----------- ----------- -----------
Income From Operations (1,457,295) 41,460 (1,415,835) 268,871 (1,146,964)
Interest Expense 56,975 0 56,975 78,796 (13) 135,771
Interest Income 267,470 0 267,470 0 267,470
----------- ---------- ----------- ----------- -----------
Earnings (Loss) Before Income Taxes (1,246,800) 41,460 (1,205,340) 190,075 (1,015,265)
Income Tax Benefit/(Provision) 473,784 (19,350) 454,434 (72,228) (14) 382,206
----------- ---------- ----------- ----------- -----------
Net Income/(Loss) $ (773,016) $ 22,110 $ (750,906) $ 117,847 $ (633,059)
=========== ========== =========== =========== ===========
</TABLE>
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INTEGRATED ORTHOPAEDICS, INC.
PRO-FORMA STATEMENTS OF INCOME (UNADUITED)
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Historical Pro Forma
-------------------------------------------- ----------------------------------
Integrated
Orthopaedics, New Transaction As
Inc. Merritt Combined Adjustments Adjusted
- --------------------------------------- ------------ ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $14,313,154 $2,411,977 $16,725,131 ($1,040,074) (9) $15,685,057
----------- ---------- ----------- ----------- -----------
Cost & Expenses:
Compensation costs and medical services 7,471,423 1,647,079 9,118,502 (1,261,144) (10) 7,857,358
Other direct costs 3,807,499 75,296 3,882,795 0 3,882,795
General and administrative 2,612,645 518,324 3,130,969 (53,398) (11) 3,077,571
Depreciation and amortization 790,523 12,265 802,788 77,591 (12) 880,379
Provision for doubtful accounts 1,417,485 0 1,417,485 0 1,417,485
Gain from restructuring (3,167,701) 0 (3,167,701) 0 (3,167,701)
----------- ---------- ----------- ----------- -----------
Income From Operations 1,381,280 159,013 1,540,293 196,877 1,737,170
Interest Expense 170,577 0 170,577 105,350 (13) 275,927
Interest Income 0 0 0 0 0
----------- ---------- ----------- ----------- -----------
Earnings (Loss) Before Taxes 1,210,703 159,013 1,369,716 91,527 1,461,243
Income Taxes 423,591 61,986 485,577 32,023 (14) 517,600
----------- ---------- ----------- ----------- -----------
Net Income $ 787,112 $ 97,027 $ 884,139 $ 59,504 $ 943,643
=========== ========== =========== =========== ===========
</TABLE>
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INTEGRATED ORTHOPAEDICS, INC.
Notes to Unaudited Pro Forma financial Statements
(1) The columns include unaudited September 30, 1997 and audited December 31,
1996 historical financial information of Integrated Orthopaedics, Inc.
("IOI") and Merritt Orthopaedic Associates, P.C. ("Merritt").
(2) Adjustment to reflect payment of cash consideration of $746,000,
transaction costs of $118,941 and $115,302 of cash retained by the Merritt
physicians.
(3) Adjustment to eliminate assets not acquired and liabilities not assumed in
the Merritt transaction.
(4) Adjustment to reflect the cost of the Merritt management services
agreement, estimated for purposes of the pro forma balance sheet as
$3,594,230. The Company does not expect this estimate to change materially
when the Company completes its valuations of acquired assets and assumed
liabilities.
(5) Adjustment to reflect $97,059 of accrued transaction costs.
(6) Adjustment to reflect $1,505,000 payable to Merritt affiliated physicians
due January 5, 1998.
(7) Adjustment to eliminate the historical ownership interest of Merritt.
(8) Adjustment to reflect the commitment to issue 423,917 shares of Common
Stock at specified future dates for no additional consideration to Merritt
affiliated physicians.
(9) Adjustment to eliminate medical practice revenues of Merritt which would
not constitute revenue to the Company pursuant to the management services
agreements.
(10) Adjustment to eliminate Merritt physician compensation that would not
constitute expense to the Company pursuant to the management services
agreement.
(11) Adjustment to eliminate medical practice expenses of Merritt which would
not constitute expenses to the Company pursuant to the management services
agreement.
(12) Adjustment to reflect additional amortization attributable to the newly
obtained management service agreements with Merritt over their contractual
term of 40 years, and depreciation on Merritt's fixed assets not assumed
in the transaction.
(13) Adjustment to reflect the impact of interest expense implied on the
$1,505,000 payable to Merritt affiliated physicians at 7% interest.
(14) Adjustment to reflect the tax (provision)/benefit of transaction
adjustments.
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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, hereunto duly authorized.
INTEGRATED ORTHOPAEDICS, INC.
(Registrant)
Date: December 15, 1997 By /s/ RONALD E. PIERCE
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Ronald E. Pierce
President
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