SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 2
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
September 15, 1995
Date of Report (date of earliest event reported)
MEDNET, MPC CORPORATION
(Exact name of Registrant as specified in its charter)
Nevada 0-17120 88-0215949
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State or other (Commission File Number) (IRS Employer
jurisdiction of Identification Number)
Incorporation)
871-C Grier Drive
Las Vegas, Nevada 89119
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(Address of principal executive offices)
702-361-3119
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(Registrant's telephone number, including area code)
<PAGE>
Item 2. Acquisition or Disposition of Assets
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On September 15, 1995, Mednet, MPC Corporation (the "Company") completed the
acquisition of the assets (excluding cash and like assets) of Home Pharmacy, a
division of ArcVentures, Inc. ("Arc") pursuant to an Asset Purchase Agreement
dated July 29, 1995. Arc was not affiliated with the Company.
Home Pharmacy is a mail service pharmacy and prescription benefits management
company based in Chicago, Illinois. The mail service business acquired from Home
Pharmacy, together with regional mail service fulfillment for the Company's
Medi-Mail business, will be operated from a new 14,000 square foot facility
leased by the Company in Chicago. The Company intends to fully integrate the
acquired mail service business with its existing Medi-Mail business. The Home
Pharmacy prescription benefits management business will be integrated with the
Company's MediClaim subsidiary headquartered in LeMoyne, Pennsylvania.
The Company will file, in the time period required by applicable regulations,
pro forma financial information regarding the Company and the acquired business
and historical financial information for the acquired business. Such pro forma
information will not reflect any potential operational and purchasing
efficiencies resulting form the larger scale of the combined businesses.
The assets acquired included customer contracts, computers and other equipment,
the right to the name "Home Pharmacy" and certain other intellectual property.
The Company acquired up to $1,000,000 of Home Pharmacy's inventory, but did not
acquire the balance of Home's inventory or its cash or like assets.
The purchase price for the assets other than the inventory was $15,150,000,
consisting of $8,000,000 paid at closing, $2,500,000 represented by a short term
note and $4,650,000 represented by a hold-back note. The amount of the hold-back
note is due thirteen months from the closing unless accelerated on default. The
hold-back note was modified subsequent to the initial closing to remove
contingencies based on future performance of the acquired business. The short
term note and the hold back note are secured by shares of the Company's common
stock. The value of the acquired inventory will be paid in two installments due
30 days and six months from closing.
In determining the amount of consideration to be paid for the Home Pharmacy
assets, the Company considered the historical level of operations of Home
Pharmacy, the potential efficiencies of scale and marketing benefits which might
be obtained by combining the two businesses, the price the Company had paid for
similar acquisitions in the past, the value of Home Pharmacy's customer base and
similar factors. The acquisition of Home Pharmacy will be accounted for as a
purchase.
The foregoing is qualified in its entirety by reference to the Asset Purchase
Agreement, which is filed as an exhibit.
The Company obtained the funds to purchase the assets and additional working
capital from the issuance of common stock, warrants to purchase common stock and
10% Series A Convertible Exchangeable Preferred Stock equivalent to a total of
4,701,616 shares of common stock1/. The preferred stock is entitled to a
dividend of 10% of the face amount, which may be paid in common stock for the
first twelve quarterly dividend payments. Each share of preferred stock is
entitled to a liquidation preference of $20.00 per share and is convertible,
under certain circumstances into 6 2/3 shares of common stock. The preferred
stock generally votes as a class with the common stock, but is entitled to vote
as a separate class on certain significant corporate events and other matters
affecting the preferred stock directly. If a default in the payment of the
preferred stock dividend occurs, the holders of the preferred stock are given
the right to elect two directors until the default has been cured. The preferred
stock must be redeemed by the Company for its full face amount, plus accrued but
unpaid dividends, in September, 2005. The preferred stock is protected from
dilution in certain circumstances. The foregoing is qualified in its entirety by
reference to the Certificate of Designation of the preferred stock. Certain
affiliates of the Company purchased preferred or common stock on the same terms
as third parties.
<PAGE>
Item 7. Financial Statements and Exhibits.
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(a) The following financial statements of Home Pharmacy (a division of
ArcVentures, Inc.) were filed with Amendment No. 1 to this Form 8-K:
(1) Unaudited Statements of Assets and Liabilities at September 15,
1995 and December 31, 1994
(2) Unaudited Statements of Revenue and Expenses (excluding income
taxes) for the periods ended September 15, 1995, June 30, 1995, March 31,
1995, December 31, 1994 and September 30, 1994.
(3) Unaudited Statement of Equity for the eight and one half months
ended September 15, 1995.
(4) Unaudited Statements of Cash Flows for the periods ended September
15, 1995, June 30, 1995 and March 31, 1995.
(5) Statements of Assets and Liabilities at June 30, 1995 and 1994
(6) Statements of Revenues and Expenses (excluding income taxes) for
the years ended June 30, 1995, 1994 and 1993.
(7) Statements of Equity for the years ended June 30, 1995, 1994 and
1993.
(8) Statements of Cash Flows for the years ended June 30, 1995, 1994
and 1993.
The following is being filed with this Amendment:
(9) Report of Independent Public Accountants
(b) The Company's Form 10-Q for the quarter ended September 30, 1995
contains a balance sheet at September 30, 1995 which includes the acquired
business. Pro forma balance sheets are therefore not required to be filed as
part of this Form 8-K. The following revised pro forma financial information
regarding the acquired business is filed with this Amendment No. 2:
(1) Pro forma Income Statement for the twelve months ended December
31, 1994.
(2) Pro forma Income Statement for the nine months ended September 30,
1995
(c) The following exhibits were filed with the original of this report:
(1) Asset Purchase Agreement, as amended.
(2) Certificate of Designations of 10% Series A Convertible
Exchangeable Preferred stock
The following exhibit is filed herewith:
3. Consent of Arthur Andersen, LLP
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1/ Assumes conversion of all preferred stock and exercise of all warrants.
<PAGE>
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.
MEDNET, MPC CORPORATION
Dated: January 17, 1996 By /s/ M.B. Merryman
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M.B. Merryman, President
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
ArcVentures, Inc.:
We have audited the accompanying statements of assets and liabilities of HOME
PHARMACY (a division of ArcVentures, Inc., an Illinois corporation) as of June
30, 1995 and 1994, and the related statements of revenues and expenses
(excluding income taxes), equity and cash flows for each of the three years in
the period ended June 30, 1995. These financial statements are the
responsibility of Home Pharmacy'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.
The statements of assets and liabilities, revenues and expenses (excluding
income taxes), equity and cash flows were prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission (for
filings pursuant to the Securities Act of 1933 and the Securities Exchange Act
of 1934) as described in Note 1 and are not intended to be a complete
presentation of Home Pharmacy's results of operations.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets and liabilities of Home Pharmacy as of June
30, 1995 and 1994, and its revenues and expenses (excluding income taxes) and
its cash flows for each of the three years in the period ended June 30, 1995, in
conformity with generally accepted accounting principles.
/s/ARTHUR ANDERSEN LLP
Chicago, Illinois,
October 6, 1995
<PAGE>
MEDNET, MPC CORPORATION
UNAUDITED PRO FORMA INCOME STATEMENTS
These pro forma financial statements reflect the September 15, 1995 acquisition
of Home Pharmacy. The pro forma income statment is presented as if the
transaction occurred at the beginning of the nine months ended September 30,
1995 and the year ended December 31, 1994. A pro forma balance sheet is not
presented because the balance sheet as reported in the Company's Form 10-Q for
the quarter ended September 30, 1995 included the acquisition.
The pro forma adjustments are based upon available information and certain
assumptions that management believes are reasonable. The pro forma operations
and financial information do not purport to represent what the Company's
financial position or results of operations would actually have been had the
transactions in fact occurred on such date or to project the Company's financial
position or results of operations for any future date or period.
A further description of the purchase business combination, nature and pro forma
adjustments follow the pro forma financial statements.
<PAGE>
Mednet, MPC Corporation
Unaudited Pro Forma Income Statement
Year Ended December 31, 1994
<TABLE>
Pro Forma
Mednet Home Pharmacy Adjustments Pro Forma
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<S> <C> <C> <C> <C>
Net Sales ......................................................... 67,863,000 51,281,000 119,144,000
Cost of Sales ..................................................... 58,793,000 43,787,000 102,580,000
Gross Profit ...................................................... 9,070,000 7,494,000 16,564,000
Selling, general and administrative expenses ...................... 14,794,000 6,188,000 451,000 21,433,000
Note 2
Related-party expense allocations ................................. 620,000 (620,000) 0
Note 2
Operating (loss) .................................................. (5,724,000) 686,000 169,000 (4,869,000)
Other income (expenses):
Debt conversion cost .............................................. (203,000) (203,000)
Interest expense .................................................. (310,000) (175,000) (397,000) (882,000)
Interest income ................................................... 49,000 Note 2 49,000
Rental income ..................................................... 4,000 4,000
Other, net ........................................................ 168,000 168,000
Total Other Income (Loss) ......................................... (292,000) (175,000) (397,000) (864,000)
Net Income (Loss) ................................................. (6,016,000) 511,000 (228,000) (5,733,000)
Net (Loss) Per Common Share ...................................... (0.24)
Weighted Average Shares .......................................... 24,265,185
</TABLE>
<PAGE>
Mednet, MPC Corporation
Unaudited Pro Forma Income Statement
Nine Months Ended September 30, 1995
<TABLE>
Pro Forma
Mednet Adjustments Pro Forma
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<S> <C> <C> <C>
Net Sales ................................................. 83,693,000 83,693,000
Cost of Sales ............................................. 71,262,000 71,262,000
Gross Profit .............................................. 12,431,000 12,431,000
Selling, general and administrative expenses .............. 12,991,000 338,000 13,329,000
Note 2
Operating (loss) .......................................... (560,000) (338,000) (898,000)
Other income (expenses):
Subsidiary operations for period not owned ................ (982,000) 982,000 0
Interest expense .......................................... (627,000) (338,000) (965,000)
Interest income ........................................... 31,000 Note 2 31,000
Other, net ................................................ (134,000) (134,000)
Total Other Income (Loss) ................................. (1,712,000) 644,000 (1,068,000)
Net Income (Loss) ......................................... (2,272,000) 306,000 (1,966,000)
Net (Loss) Per Common Share ............................... (0.07)
Weighted Average Shares ................................... 26,827,221
</TABLE>
<PAGE>
Mednet, MPC Corporation
Notes to Pro Forma Income Statements
Note 1. Acquisition of Home Pharmacy
On September 15, 1995, Mednet, MPC Corporation (the "Company") completed the
acquisition of the assets (excluding cash and like assets) of Home Pharmacy, a
division of ArcVentures, Inc. pursuant to an Asset Purchase Agreement dated July
29, 1995.
Home Pharmacy is a mail service pharmacy and prescription benefits management
company based in Chicago, Illinois. The Company intends to fully integrate the
acquired mail service business with its existing Medi-Mail business. The Home
Pharmacy prescription benefits management business will be integrated with the
Company's Medi-Claim subsidiary headquartered in LeMoyne, Pennsylvania.
The assets acquired included customer contracts, computers and other equipment,
the right to the name "Home Pharmacy" and certain other intellectual property.
The Company acquired up to $1,000,000 of Home Pharmacy's inventory, but did not
acquire the balance of Home's inventory or its cash or like assets.
The Company has elected to consolidate the operations of Home Pharmacy
retroactively to January 1, 1995 in accordance with ARB 51. Accordingly, the
pre-acquisition income of Home Pharmacy of $982,000 has been deducted in the
consolidated operations for the period ended September 30, 1995.
Note 2. Pro Forma Adjustments The following is a description and summary of the
pro forma adjustments related to the accompanying balance sheets.
Nine months Twelve months
ended ended
Sept. 30, 1995 Dec. 31, 1994
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(1) Amortization of acquisition goodwill 338,000 451,000
To record estimated amotization of acquisition
goodwill
(2) Interest expense 338,000 397,000
To record interest expense associated with
financing the acquisition of Home Pharmacy
(3) Subsidiary operations for period 982,000 --
not owned
To record pre-acquisition income of Home Pharmacy
(4) Related-party expense allocations -- 620,000
To record elimination of original parent company
overhead expenses
Note 3. Net Income Per Share Information
The Pro Forma net loss per share and number of common shares outstanding have
been calculated using the weighted average number of shares assumed to be
outstanding as if the acquisition of Home Pharmacy had occurred on January 1,
1994 with respect to the year ended December 31, 1994 and on January 1, 1995
with respect to the nine months ended September 30, 1995.
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Mednet, MPC Corporation
Las Vegas, Nevada
As independent public accountants, we hereby consent to the use of our report
dated October 6, 1995 (and to all references to our Firm) included in or made a
part of this (the attached)Form 8-K/A.
/s/ ARTHUR ANDERSEN LLP
Chicago, Illinois
January 17, 1996
