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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): September 18, 2000
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Commission File No. 1-10677
INTEGRATED ORTHOPAEDICS, INC.
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(Exact Name of Registrant as Specified in its Charter)
TEXAS 76-0203483
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1800 West Loop South, Suite 1030, Houston, Texas 77027
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(Address of Principal Executive Offices)
(713) 225-5464
(Registrant's Telephone Number, Including Area Code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Effective August 31, 2000 Integrated Orthopaedics, Inc., ("IOI" or the
"Company") and IOI Management Services of Louisiana ("IOI of
Louisiana"), a wholly-owned subsidiary of IOI, entered into an
agreement to terminate the Management Services Agreement between IOI of
Louisiana and Westside Orthopedic Clinic, P.C. ("WOC"). In conjunction
with the transaction, IOI of Louisiana sold its fixed assets and
accounts receivable to Doctors Katz and DiGrado, Inc. ("the
Purchaser"). The Purchaser is owned by the partner physicians of WOC.
The transaction was completed on September 18, 2000. The transaction
value of $1,266,000 is comprised of cash, the forgiveness of debt and
the assumption by the Purchaser of certain liabilities and was
determined in an arms-length negotiation.
ITEM 7. PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(b) Unaudited Pro Forma Financial Information (attached following the
signature page):
Unaudited Pro Forma Condensed Combining Statement of Operations
For the Six Months Ended June 30, 2000
Unaudited Pro Forma Condensed Combining Statement of Operations
For the Year Ended December 31, 1999
Unaudited Pro Forma Condensed Combining Balance Sheet - June 30, 2000
Notes to the Unaudited Pro Forma Condensed Combining Financial
Statements
(c) Exhibits
2.1 Asset Purchase Agreement dated September 18, 2000, by and
between IOI Management Services of Louisiana, Inc. and Doctors
Katz and DiGrado, Inc.
2.2 Agreement to Terminate the Management Agreement dated
September 18, 2000 by and between IOI Management Services of
Louisiana, Inc. and Westside Orthopedic Clinic, PC.
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SIGNATURE
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.
By: /s/ Laurie Hill Gutierrez
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LAURIE HILL GUTIERREZ
Chief Financial Officer
Senior Vice President
Dated: October 3, 2000
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INTEGRATED ORTHOPAEDICS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS
The following unaudited pro forma condensed financial statements have been
prepared based on historical financial statements of the Company after giving
effect to the transaction and the adjustments outlined in the accompanying
notes. The Unaudited Pro Forma Condensed Combining Balance Sheet as of June 30,
2000 gives effect to the transactions as if they had occurred on June 30, 2000.
The Unaudited Pro Forma Condensed Combining Statement of Operations for the six
months ended June 30, 2000 and the year ended December 31, 1999 gives effect to
the transactions as if they had occurred on January 1, 2000 and 1999,
respectively.
Effective August 31, 2000 Integrated Orthopaedics, Inc., ("IOI" or the
"Company") and IOI Management Services of Louisiana ("IOI of Louisiana"), a
wholly-owned subsidiary of IOI, entered into an agreement to terminate the
Management Services Agreement between IOI of Louisiana and Westside Orthopedic
Clinic, P.C. ("WOC"). In conjunction with the transaction, IOI of Louisiana sold
its fixed assets and accounts receivable to Doctors Katz and DiGrado, Inc. The
transaction was completed on September 18, 2000. The transaction value of
$1,266,000 is comprised of cash, the forgiveness of debt and the assumption by
Doctors Katz and DiGrado, Inc. of certain liabilities.
In addition, effective August 31, 2000 IOI and IOI Management Services of
Houston, Inc., a wholly owned subsidiary of IOI entered into an agreement to
sell its fixed assets to Work Well Performance Center, L.L.P and Momentum
Rehabilitation, L.L.C. The transaction was completed on August 31, 2000. The
combined transaction value of $120,413 is comprised of cash and notes
receivable.
As previously reported, the Company and IOI Management Services of Pennsylvania
("IOI of Pennsylvania") a wholly owned subsidiary of IOI, entered into an
agreement effective March 31, 2000 to terminate the Management Services
Agreement between IOI of Pennsylvania and Lancaster Orthopedic Group, P.C.
("LOG"). In conjunction with the transaction, IOI of Pennsylvania sold all of
its assets to LOG. The transaction was completed on April 12, 2000. The
transaction value of $4,210,000 is comprised of cash and the assumption by LOG
of certain liabilities.
On January 27, 2000, the Company and IOI Management Services of Colorado ("IOI
of Colorado"), a wholly owned subsidiary of IOI, entered into an agreement
effective December 31, 1999 to terminate the Management Services Agreement
between IOI of Colorado and Front Range Orthopedic Center, P.C. ("FROC"). In
conjunction with the transaction, IOI of Colorado sold all of its assets to FROC
and FROC, P.C. At December 31, 1999 the related net assets are reflected as
assets to be disposed of on the consolidated balance sheets included in the
Company's Annual Report on Form 10-KSB. The transaction value of $2,087,000 is
comprised of cash, secured promissory notes and the assumption by FROC, P.C. of
certain liabilities.
In January 1999, the Company and IOI Management Services of Connecticut ("IOI of
Connecticut"), a wholly owned subsidiary of IOI, filed a lawsuit against its
Connecticut practice, Merritt Orthopaedics Associates, P.C. ("Merritt"). The
lawsuit sought to enforce certain repurchase obligations under the related
Management Services Agreement as a result of Merritt failing to satisfy certain
of its obligations thereunder. In March 2000, a settlement was reached between
the
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Company and Merritt whereby Merritt purchased all of the assets of IOI of
Connecticut for $750,000 in cash and promissory notes. At December 31, 1999 the
related net assets are reflected as assets to be disposed of on the consolidated
balance sheets included in the Company's Annual Report on Form 10-KSB.
These Unaudited Pro Forma Condensed Combining Financial Statements do not
purport to present the financial position or results of operations of the
Company had the above transactions occurred on the dates specified, nor are they
necessarily indicative of results of operations that may be expected in the
future. The Unaudited Pro Forma Condensed Combining Financial Statements are
qualified in their entirety by reference to, and should be read in conjunction
with, the Company's audited consolidated financial statements for the year ended
December 31, 1999, included in the Company's Annual Report on Form 10-KSB.
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INTEGRATED ORTHOPAEDICS, INC. UNAUDITED PRO FORMA
CONDENSED COMBINING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(In thousands)
<TABLE>
<CAPTION>
PRO FORMA
INTEGRATED INTEGRATED
ORTHOPAEDICS, PRO FORMA ORTHOPAEDICS,
INC. (1) ADJUSTMENTS REF. # INC.
------------------- ----------------- --------- --------------------
<S> <C> <C> <C> <C>
Revenues $ $ $
Costs and Expenses:
General and administrative 1,520 1,520
Special charges 884 884
Depreciation and amortization 98 98
------------------- ----------------- --------------------
2,502 2,502
------------------- ----------------- --------------------
Loss From Operations (2,502) (2,502)
Interest Income 69 50 5 119
Interest Expense (22) (22)
------------------- ----------------- --------------------
Loss from Continuing Operations Before
Provision for Income Taxes (2,455) 50 (2,405)
Income Tax Provision (33) (33)
------------------- ----------------- --------------------
Loss from Continuing Operations (2,488) 50 (2,438)
Discontinued Operations:
Income ( Loss) from operations, net of taxes (7,836) 7,430 2 (406)
Loss from disposal of operations, net of taxes (3,248) 2,879 3 (369)
------------------- ----------------- --------------------
Income (Loss) from Discontinued Operations (11,084) 10,309 (775)
Net Loss $ (13,572) $ 10,359 $ (3,213)
=================== ================= ====================
Loss from Continuing Operations Applicable to
Common Shares $ (3,961) $ 50 $ (3,911)
=================== ================= ====================
Loss from Continuing Operations Per Common
Share: Basic and Diluted $ (0.63) $ 0.01 $ (0.62)
=================== ================= ====================
Weighted Average Common Shares Outstanding 6,296 6,296 6,296
=================== ================= ====================
</TABLE>
See notes to Unaudited Pro Forma Condensed Combining Financial Statements.
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INTEGRATED ORTHOPAEDICS, INC. UNAUDITED PRO FORMA
CONDENSED COMBINING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(In thousands)
<TABLE>
<CAPTION>
PRO FORMA
INTEGRATED INTEGRATED
ORTHOPAEDICS, PRO FORMA ORTHOPAEDICS,
INC. (1) ADJUSTMENTS REF. # INC.
------------------- ----------------- --------- --------------------
<S> <C> <C> <C> <C>
Revenues $ $ $
Costs and Expenses:
General and administrative 3,658 3,658
Special charges 768 768
Depreciation and amortization 238 238
------------------- ----------------- --------------------
4,664 4,664
------------------- ----------------- --------------------
Loss From Operations (4,664) (4,664)
Interest Income 202 57 5 259
Interest Expense (284) (284)
------------------- ----------------- --------------------
Loss from Continuing Operations Before
Provision for Income Taxes (4,746) 57 (4,689)
Income Tax Provision (133) (133)
------------------- ----------------- --------------------
Loss from Continuing Operations (4,879) 57 (4,822)
Discontinued Operations:
Income ( Loss) from operations, net of taxes (5,016) 3,171 4 (1,845)
Loss from disposal of operations, net of taxes
------------------- ----------------- --------------------
Income (Loss) from Discontinued Operations (5,016) 3,171 (1,845)
Net Loss Before Extraordinary Items (9,895) 3,228 (6,667)
Extraordinary Loss related to retirement of
NationsBank debt, net (152) (152)
------------------- ----------------- --------------------
Net Loss $ (10,047) $ 3,228 $ (6,819)
=================== ================= ====================
Loss from Continuing Operations Applicable to
Common Shares $ (7,653) $ 57 $ (7,596)
=================== ================= ====================
Loss from Continuing Operations Per Common
Share: Basic and Diluted $ (1.18) $ 0.01 $ (1.17)
=================== ================= ====================
Weighted Average Common Shares Outstanding 6,496 6,496 6,496
=================== ================= ====================
</TABLE>
See notes to Unaudited Pro Forma Condensed Combining Financial Statements.
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INTEGRATED ORTHOPAEDICS, INC. UNAUDITED PRO FORMA
CONDENSED COMBINING BALANCE SHEET
JUNE 30, 2000 (In thousands)
<TABLE>
<CAPTION>
INTEGRATED PRO FORMA PRO FORMA
ORTHOPAEDICS, ADJUSTMENTS REF. INTEGRATED
INC. (1) INCREASE/ # ORTHOPAEDICS,
(DECREASE) INC.
-------------- ----------- ---- -------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 3,471 $ 171 6 $ 3,642
Note receivable 760 55 6 815
Other current assets 115 115
Net assets of discontinued operations - Work Hardening Services 16 (109) 7 (93)
Net assets of discontinued operations - Ambulatory Surgery
Center 2,522 (100) 7 2,422
--------------- -------------- --------------
Total Current Assets 6,884 17 6,901
Property and Equipment (including capital leases) 1,185 1,185
Less: Accumulated Depreciation and Amortization (1,131) (1,131)
--------------- -------------- --------------
Net Property and Equipment 54 54
Other Assets 184 184
--------------- -------------- --------------
TOTAL ASSETS $ 7,122 $ 17 $ 7,139
=============== ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 85 $ $ 85
Accrued liabilities 885 885
Net liabilities of discontinued operations - Practice Management
Services 13 (4) 7 9
Current maturities of notes payable and capital lease
obligations 77 77
--------------- -------------- --------------
Total Current Liabilities 1,060 (4) 1,056
Obligations Under Capital Leases 146 146
Dividends Payable 836 836
--------------- -------------- --------------
Total Liabilities 2,042 (4) 2,038
--------------- -------------- --------------
Commitments and contingencies
Stockholders' Equity:
Preferred stock 3 3
Common stock 7 7
Additional paid-in capital 51,156 51,156
Accumulated deficit (45,365) 21 8 (45,344)
Treasury shares (721) (721)
--------------- -------------- --------------
Total Stockholders' Equity 5,080 21 5,101
--------------- -------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,122 $ 17 $ 7,139
=============== ============== ==============
</TABLE>
See notes to Unaudited Pro Forma Condensed Combining Financial Statements.
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INTEGRATED ORTHOPAEDICS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS
Reference
Number Description
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1. The statements of operations and balance sheet for Integrated
Orthopaedics, Inc. as of and for the six months ended June 30,
2000, summarized from its June 30, 2000 Quarterly Report on
Form 10-QSB. The results of operations for the year ended
December 31, 1999, summarized from its December 31, 1999
Annual Report on Form 10-KSB.
2. To remove Lancaster Orthopedic, P.C.'s ("LOG"), Westside
Orthopedic Clinic, P.C.'s ("WOC"), and IOI Management Services
of Houston Inc.'s ("IOI Houston") historical results of
operations for the period of January 1, 2000 through May 31,
2000.
3. To remove LOG's, WOC's, and IOI Houston's historical results
of operations for the month of June 2000.
4. To remove LOG's, WOC's, Front Range Orthopedic Center, P.C.'s
("FROC"), Merritt Orthopaedics Associates, P.C.'s ("Merritt")
and IOI Houston's historical results of operations.
5. To record pro forma interest income on the FROC, FROC, P.C.,
Merritt, Work Well Performance Center, L.L.P and Momentum
Rehabilitation, LLC notes.
6. To record the consideration received from Doctors Katz and
DiGrado, Inc., for the sale of IOI of Louisiana's accounts
receivable, furniture, fixtures and equipment and the
termination of the Management Services Agreement and to record
the consideration received from Momentum Rehabilitation,
L.L.C. and Work Well Performance Center, L.L.P from the sale
of IOI Houston's fixed assets.
7. To remove WOC's and IOI of Houston's net assets and net
liabilities.
8. To adjust the loss on impairment on the disposal of WOC and
IOI Houston that was recorded at June 30, 2000 based on the
final terms of the transactions.
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INDEX TO EXHIBITS
Exhibit
Number Description
------- -----------
2.1 Asset Purchase Agreement dated September 18, 2000, by and
between IOI Management Services of Louisiana, Inc. and Doctors
Katz and DiGrado, Inc.
2.2 Agreement to Terminate the Management Agreement dated
September 18, 2000 by and between IOI Management Services of
Louisiana, Inc. and Westside Orthopedic Clinic, PC.
