SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-#1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): June 5, 1997
MEDCROSS, INC.
(Exact name of registrant as specified in its charter)
Florida 0-17973 59-2291344
(State or other jurisdiction (Commission (IRS Identification
of incorporation) File Number) Number)
3227 Bennet Street North, St. Petersburg, FL 33713
(Address of principal executive offices)
Registrant's telephone number, including area code: (813) 521-1793
<PAGE> 1
Item 7. Financial Statements and Exhibits
(a); (b) Financial Statements; Pro Forma Financial Information
The financial statements of Mibridge, Inc. and the pro forma
financial information relating to the acquisition required to be
filed pursuant to this item, follow.
<PAGE> 2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Medcross, Inc.
(Registrant)
Dated: August 14, 1997 By: /s/ John W. Edwards
John W. Edwards, President
Chief Executive Officer
/s/ Karl S. Ryser, Jr.
Karl S. Ryser, Jr. Treasurer
and Chief Financial Officer
<PAGE> 3
Mibridge, Inc.
__________
Financial Statements as of December 31, 1996 and
March 31, 1997 (unaudited) and for the period
from inception (March 18, 1996) through
December 31, 1996 and the three months
ended March 31, 1997 (unaudited)
<PAGE> 4
Report of Independent Accountants
---------------------------------
To the Stockholder of
MiBridge, Inc.:
We have audited the balance sheet of Mibridge, Inc. as of December 31, 1996,
and the related statements of operations, changes in stockholder's equity and
cash flows for the period from the date of inception (March 18, 1996) to
December 31, 1996. 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 audit.
We conducted our audit 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 audit provides 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 Mibridge, Inc. as of December
31, 1996, and the results of its operations and its cash flows for the period
from the date of inception (March 18, 1996) to December 31, 1996 in conformity
with generally accepted accounting principles.
Coopers & Lybrand, LLP
Salt Lake City, Utah
August 6, 1997
<PAGE> 5
MIBRIDGE, INC.
BALANCE SHEETS
(unaudited)
March 31, December 31,
1997 1996
ASSETS ----------- ------------
Current assets:
Cash $114,219 $ 25,581
Accounts receivable 30,000
Costs in excess of billing and estimated
earnings on uncompleted contracts 293,000 248,500
Inventory 20,644
Prepaid expenses 94,520
Deferred income taxes 33,006 7,443
------- -------
Total current assets 440,225 426,688
------- -------
Furniture and equipment:
Equipment 58,752 54,119
Office furniture 4,015 3,026
Less accumulated depreciation (13,332) (8,411)
------- -------
Total furniture and equipment 49,435 48,734
------- -------
Capitalized software development costs, net 11,670 7,433
Intangible assets 6,750 6,750
Other assets 2,125 2,125
------- -------
Total assets $510,205 $491,730
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 2,499
Accrued liabilities $ 20,191 20,852
Accrued director's fee payable 49,000
Deferred revenue 25,000 5,000
Income taxes payable 156,056 133,628
------- -------
Total current liabilities 201,247 210,979
------- -------
Deferred income taxes 10,774 9,696
------- -------
Total liabilities 212,021 220,675
------- -------
Commitments and contingencies (Note 6)
Stockholder's equity:
Common stock, no par value, authorized 10,000,000
shares, issued and outstanding 6,000,000 shares 1,000 1,000
Additional paid-in-capital 325,000 300,000
Deferred compensation (242,362) (244,445)
Retained earnings 214,546 214,500
------- -------
Total stockholder's equity 298,184 271,055
------- -------
Total liabilities and stockholder's equity $510,205 $491,730
======= =======
The accompanying notes are an integral part of these financial statements
<PAGE> 6
MIBRIDGE, INC.
STATMENTS OF OPERATIONS
For the period from inception (March 18, 1996) to December 31, 1996 and
for the three-months ended March 31, 1997 (unaudited)
(unaudited)
March 31, December 31,
1997 1996
----------- ------------
Revenues:
Software sales and consulting $ 52,400 $290,700
Software development 144,500 528,500
------- -------
Total revenues 196,900 819,200
------- -------
Cost of sales:
Software sales and consulting 63,605 148,812
Software development 61,373 102,042
------- -------
Cost of sales 124,978 250,854
------- -------
Gross Margin 71,922 568,346
Operating expenses:
Selling, general and administrative 64,878 200,726
Depreciation and amortization 6,821 10,039
------- -------
Total operating expenses 71,699 210,765
------- -------
Net income before income taxes 223 357,581
Income tax provision 177 143,081
------- -------
Net income $ 46 $214,500
======= =======
The accompanying notes are an integral part of these financial statements
<PAGE> 7
<TABLE>
<CAPTION>
MIBRIDGE, INC.
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
For the period from inception (March 18, 1996) to December 31, 1996 and
for the three-months ended March 31, 1997 (unaudited)
Common Stock Additional Total
-------------------- Paid-in Deferred Retained Stockholder's
Shares Amount Capital Compensation Earnings Equity
--------- --------- ---------- ------------ --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at March 18, 1996
(inception)
Original shares issued 6,000,000 $1,000 $ 1,000
Stock options granted
on issued shares $300,000 $(300,000)
Amortization of deferred
compensation 55,555 55,555
Net income $214,500 214,500
--------- ------ -------- --------- -------- --------
Balance at December 31, 1996 6,000,000 1,000 300,000 (244,445) 214,500 271,055
Stock options granted
on issued shares 25,000 ( 25,000)
Amortization of deferred
compensation 27,083 27,083
Net income 46 46
--------- ------ -------- --------- -------- --------
Balance at March 31, 1997
(unaudited) 6,000,000 $1,000 $325,000 $(242,362) $214,546 $298,184
========= ====== ======== ========= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE> 8
MIBRIDGE, INC.
STATEMENTS OF CASH FLOWS
For the period from inception (March 18, 1996) to December 31, 1996 and
for the three-months ended March 31, 1997 (unaudited)
(unaudited)
March 31, December 31,
1997 1996
----------- ------------
Cash flows from operating activities:
Net income $ 46 $214,500
Adjustments to reconcile net income to net cash
Provided in operating activities:
Depreciation and amortization 6,821 10,039
Amortization of deferred compensation 27,083 55,555
Deferred taxes (24,485) 2,253
Increase (decrease) from changes in:
Accounts receivable 30,000 (30,000)
Costs in excess of billings and estimated
earnings on uncompleted contracts (44,500) (248,500)
Inventory 20,644 (20,644)
Prepaid expenses 94,520 (94,520)
Other assets (2,125)
Accounts payable (2,499) 2,499
Accrued liabilities and other payables (7,233) 208,480
------- -------
Net cash provided by operating activities 100,397 97,537
------- -------
Cash flows from investing activities:
Additions to furniture and equipment (5,622) (57,145)
Capitalized software development costs (6,137) (9,061)
Additions to intangible assets (6,750)
------- -------
Net cash used in investing activities (11,759) (72,956)
------- -------
Cash flows from financing activities:
Proceeds from shareholder advance 62,000
Repayment of shareholder advance (62,000)
Common stock issued 1,000
------- -------
Net cash provided by financing activities 1,000
------- -------
Increase in cash 88,638 25,581
Cash at beginning of period 25,581
------- -------
Cash at end of period $114,219 $ 25,581
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes $ 0 $ 7,200
======= =======
The accompanying notes are an integral part of these financial statements
<PAGE> 9
MIBRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Business Information
MiBridge, Inc. (the Company), a New Jersey corporation, began operations
on March 18, 1996. The Company develops communications software that
supports multimedia communications (voice, fax and audio) over the public
switched telephone network (PSTN), local area networks (LANs) and the
Internet. The Company creates speech encoding and compression algorithms
designed to produce superior audio quality and lower delay over low-
bandwidth networks.
The interim financial data as of March 31, 1997 and for the three-month
period then ended are unaudited; however, in the opinion of management of
the Company, the interim data includes all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the
results of operations, financial position and cash flows of the Company.
Inventories
Inventory consists of computer boards held for resale and is valued at the
lower of actual cost or market. Cost is determined by specific
identification of each unit.
Furniture and Equipment
Furniture and equipment are stated at cost. Depreciation is provided for
financial reporting purposes using the straight-line method over the
following estimated useful lives:
Office equipment 3 years
Furniture 5 years
Maintenance and repairs, which are not considered betterments and do not
extend the useful life of assets, are charged to expense as incurred. The
cost and related accumulated depreciation of assets sold or retired are
removed from the accounts, and any resulting gain or loss is reflected in
results of operations.
Intangible Assets
Intangible assets include certain legal expenditures for patent filing fees
relating to proprietary techniques developed by the Company. The patents
are pending; therefore, no amortization of patent filing fees is reflected
in the financial statements.
Continued
<PAGE> 10
MIBRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued:
Revenue Recognition
Revenues are generally recognized as products are shipped or services are
performed. Initial software royalties are recognized upon delivery of the
master copy, as the Company is not required to provide any additional
services. As minimum software usage levels are exceeded by the customer,
the Company will receive additional royalties based on a per port usage.
Most software is sold with maintenance contracts that cover periods from
one to twelve months. Revenue related to these contracts is deferred and
recognized on a straight-line basis over the term of the maintenance
agreement.
Certain development projects are jointly funded by a customer. Revenues on
these long-term funded development contracts are recognized under the
percentage of completion method of accounting and are measured based upon
the level of effort expended on the project, compared to total billings
allowed by the contract. Estimated contract earnings are reviewed and
revised periodically as the work progresses. Estimated losses are charged
against earnings in the period in which such losses are identified. In
exchange for its participation in funding the project, the customer will
receive joint marketing rights and a portion of future revenues from the
sale of the developed technology based on a revenue sharing agreement. The
amount of future revenues to be received by the customer party ranges
between 20 and 55 percent and depends upon who markets the product and the
terms of the specific contract. As of December 31, 1996, there were no
sales of jointly developed products.
Software Development Costs
The Company capitalizes software development costs when the project reaches
technological feasibility. Research and development costs related to
software development that has not reached technological feasibility are
expensed as incurred. Capitalized software development costs are amortized
at the greater of the straight-line method over the expected life of the
product or the ratio of current revenues for a product to the total of
current and anticipated future revenues. Capitalized software development
costs were $7,433 at December 31, 1996, net of accumulated amortization of
$1,628.
Continued
<PAGE> 11
MIBRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued:
Income Taxes
The Company records deferred taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes". The Statement requires recognition of deferred tax assets
and liabilities for the temporary differences between the tax bases of
assets and liabilities and the amounts at which they are carried in the
financial statements based upon the enacted tax rates in effect for the
year in which the differences are expected to reverse. Valuation
allowances are established when necessary to reduce deferred tax assets to
amounts expected to be realized.
Concentration of Credit Risk
All of the Company's cash is held by one financial institution in New
Jersey. The Company has approximately $54,000 that exceeds the FDIC
insurance limits at December 31, 1996.
During the period from inception to December 31, 1996 approximately 86%
of the Company's revenues were related to one customer. Unbilled
receivables from this customer represented approximately 51% of total
assets as of December 31, 1996.
Estimates
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Continued
<PAGE> 12
MIBRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
2. LONG-TERM CONTRACT ACCOUNTING
Costs in excess of billings and estimated earnings on uncompleted contracts
consist of amounts of revenue recognized on contracts for which billings
have not been recorded. Billings in excess of costs and estimated earnings
on uncompleted contracts consist of amounts of billings recognized on
contracts in excess of costs.
Contract revenues and costs related to uncompleted contracts are included
in the accompanying balance sheet as of December 31, 1996 under the
following captions:
Costs in excess of billings and estimated
earnings on uncompleted contracts $ 248,500
Billings in excess of costs and estimated
earnings on uncompleted contracts 0
-------
$ 248,500
=======
Costs incurred on long-term contracts $ 104,000
Estimated earnings 424,500
Billings to date (280,000)
-------
$ 248,500
=======
3. INCOME TAXES
The income tax provision for the period since inception to December 31,
1996 consists of the following:
Current federal income tax provision $ 109,094
Current state income tax provision 31,734
Deferred tax provision 2,253
-------
Income tax provision $ 143,081
=======
Continued
<PAGE> 13
MIBRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
3. INCOME TAXES, continued
The reported provision for income taxes varies from the amount that would
be provided by applying the statutory U.S. Federal income tax rate to
income before taxes primarily because of state taxes and certain non-
deductible meals and entertainment.
The components of the net deferred tax asset and liability as of December
31, 1996 are as follows:
Deferred tax assets:
Stock award compensation expense $ 22,189
Accrued director's fees 19,970
-------
Total deferred tax asset 42,159
-------
Deferred tax liability:
Excess tax depreciation ( 6,727)
Capitalized software development costs ( 2,969)
Prepaid salaries ( 34,716)
-------
Total deferred tax liability ( 44,412)
-------
Net deferred tax liability $( 2,253)
=======
The net deferred tax liability as of December 31, 1996 is reflected in
the balance sheet as follows:
Current deferred tax asset $ 7,443
Long-term deferred tax liability ( 9,696)
-------
$( 2,253)
=======
4. RELATED PARTY TRANSACTIONS
During 1996, the owner of the Company advanced a total of $62,000 to the
Company to fund operations. These advances were repaid during the period.
During the period ended December 31, 1996, the Company had sales of $25,000
with Medcross, Inc. (see note 8).
Continued
<PAGE> 14
MIBRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
5. STOCKHOLDER'S EQUITY
Common Stock
At the inception of the Company, the owner contributed $1,000 in exchange
for 6,000,000 shares of the Company's common stock.
Additional Paid in Capital - Stock Awards
During the year, the sole shareholder of the Company granted certain
employees options to buy shares of stock owned by the shareholder. The
awards were granted to attract and retain qualified employees for the
Company, and accordingly, the Company has accounted for these awards as if
they had been made directly by the Company. The Company applies APB
Opinion No. 25 and related interpretations in accounting for stock
compensation awards. Had compensation cost for the Company's stock-based
awards been determined based on fair-value at the grant date consistent
with the minimum value method outlined by Statement of Financial Accounting
Standard No. 123, the difference would have been insignificant.
The number of options outstanding and the weighted average exercise price
per option are as follows:
Weighted
Average
Options Exercise Price
--------- --------------
Outstanding at beginning of year
Granted 900,000 $0.00
------- ----
Outstanding at end of year 900,000 $0.00
======= ====
Options exercisable at year end 0 $0.00
======= ====
The awards were granted in equal amounts in May, June and August of 1996
and vest annually over a three year period (weighted average remaining
life of 2.4 years). Additional paid-in capital and deferred compensation
recorded during the year represent the difference between the exercise
price of the options and the value of the stock, which is based on
management's best estimate of the fair value of the Company at the stock
option grant date. Compensation expense is recognized on a straight-line
basis over the vesting period of the options. Vesting of the awards would
be accelerated should the Company be purchased.
Continued
<PAGE> 15
MIBRIDGE, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
6. EMPLOYMENT AGREEMENTS
The Company has employment agreements with seven employees of the Company
providing for a salary continuation (usually three years) in the event of
termination for reasons other than cause. As of December 31, 1996, if all
of the employees under contract at that date were to be terminated by the
Company without cause, the Company's total future payments to these
employees would be approximately $600,000.
7. ACQUISITION OF THE COMPANY BY MEDCROSS, INC.
Subsequent to year-end and effective June 5, 1997, the Company entered into
a purchase agreement (the "agreement") with Medcross, Inc. (Medcross).
Under the finalized agreement, Medcross will acquire 100% of the Company's
outstanding shares of common stock in exchange for 1,000 shares of Medcross
Series D Preferred stock and a promissory note of $2,000,000, payable with
interest in quarterly installments over the two years. The preferred
shares are convertible at the option of the prior MiBridge shareholders
into Medcross common stock shares equal in number to $6,250,000 divided by
the lower of $9.25 or the average closing bid price of Medcross common
stock for the five consecutive trading days immediately preceding the
conversion date.
<PAGE> 16
MEDCROSS, INC., FAMILY TELECOMMUNICATIONS
INCORPORATED AND MIBRIDGE, INC.
___________
Pro Forma Combined Financial Statements
(unaudited)
<PAGE> 17
<TABLE>
<CAPTION>
MEDCROSS, INC., FAMILY TELECOMMUNICATIONS
INCORPORATED (FTI) AND MIBRIDGE, INC.
PRO FORMA COMBINED BALANCE SHEET
as of December 31, 1996 (unaudited)
Pro Forma
Medcross FTI MiBridge Adjustment Pro Forma
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,500,227 $ 435,312 $ 25,581 $ 4,961,120
Accounts receivable less allowance for
Doubtful accounts of $1,433,806 780,907 1,283,700 278,500 $( 120,000) A 2,223,107
Inventory less allowance of $260,033 557,036 20,644 577,680
Certificate of deposit - restricted 208,500 208,500
Prepaid expenses 47,472 94,520 141,992
Deferred taxes 7,443 7,443
Other current assets 11,411 20,696 32,107
---------- --------- ------- --------- ----------
Total current assets 6,105,553 1,739,708 426,688 ( 120,000) 8,151,949
---------- --------- ------- --------- ----------
Property and equipment:
Office furniture, equipment and
Leasehold improvements 388,191 218,558 57,145 ( 8,411) D 655,483
Network services furniture
and equipment 2,110,996 1,004,121 ( 84,725) D 3,030,392
Medical equipment and vehicles 2,975,701 2,975,701
Less accumulated depreciation ( 2,618,252) ( 150,261) ( 8,411) 158,672 D ( 2,618,252)
---------- --------- ------- --------- ----------
Net property and equipment 2,856,636 1,072,418 48,734 65,536 4,043,324
---------- --------- ------- --------- ----------
Other assets:
Intangible assets, net 486,028 6,750 6,608,140 B 7,100,918
Certificate of deposit - restricted 1,761,312 1,761,312
Other assets 224,301 28,491 9,558 262,350
---------- --------- ------- --------- ----------
Total other assets 2,471,641 28,491 16,308 6,608,140 9,124,580
---------- --------- ------- --------- ----------
Total assets $ 11,433,830 $2,840,617 $ 491,730 $ 6,553,676 $ 21,319,853
========== ========= ======= ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 2,379,451 $ 926,357 $ 210,979 $( 120,000) A $ 3,396,787
Accrued litigation settlement 821,000 821,000
Notes payable 1,095,000 124,000 500,000 B 1,719,000
Current portion of long-term debt 43,554 280,000 323,554
Obligations under capital lease 187,047 187,047
---------- --------- ------- --------- ----------
Total current liabilities 4,526,052 1,330,357 210,979 380,000 6,447,388
---------- --------- ------- --------- ----------
Long-term debt 44,128 1,711,216 1,500,000 B 3,255,344
Capital lease obligation 236,705 236,705
Deferred taxes 9,696 9,696
Minority interest in consolidated subsidiary 328,328 328,328
---------- --------- ------- --------- ----------
Total liabilities 5,135,213 3,041,573 220,675 1,880,000 10,277,461
---------- --------- ------- --------- ----------
Commitments and contingencies
Stockholders' equity:
Preferred stock 2,475,000 10,000 B 2,485,000
Common stock 74,253 4 1,000 1,796 B/C 77,053
Additional paid in capital 30,874,910 1,036,915 300,000 7,314,868 B/C 39,526,693
Deferred compensation (244,445) 244,445 C
Accumulated deficit (27,125,546) (1,237,875) 214,500 (2,897,433) B/C (31,046,354)
---------- --------- ------- --------- ----------
Total stockholders' equity 6,298,617 ( 200,956) 271,055 4,673,676 11,042,392
---------- --------- ------- --------- ----------
Total liabilities and stockholders equity $ 11,433,830 $ 2,840,617 $ 491,730 $ 6,553,676 $ 21,319,853
========== ========= ======= ========= ==========
</TABLE>
See notes to unaudited pro forma combined financial statements
<PAGE> 18
<TABLE>
<CAPTIONS>
MEDCROSS, INC., FAMILY TELECOMMUNICATIONS
INCORPORATED (FTI) AND MIBRIDGE, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
for the year ended December 31, 1996 (unaudited)
Pro Forma
Medcross FTI MiBridge Adjustment Pro Forma
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Health care service revenues, net $ 2,212,544 $ 2,212,544
Network service revenue 170,532 170,532
Long distance service revenue $ 3,880,457 $( 5,026) A 3,875,431
Software service revenue $ 819,200 ( 25,000) 794,200
---------- --------- ------- --------- ----------
Net operating revenue 2,383,076 3,880,457 819,200 ( 30,026) 7,052,707
---------- --------- ------- --------- ----------
Operating costs and expenses:
Line costs 2,841,860 2,841,860
Commissions 460,030 460,030
Salaries and benefits 1,825,138 854,609 ( 5,026) A 2,674,721
Selling, general and administrative 2,863,963 498,123 200,726 3,562,812
Communications network expenses 1,120,779 1,120,779
Costs of sales - software 250,854 250,854
Depreciation and amortization 1,094,004 150,261 10,039 839,235 E 2,093,539
Provision for inventory valuation 260,033 260,033
Repairs and maintenance 288,662 288,662
Provision for doubtful accounts 197,565 784,537 982,102
Research and development 347,504 79,609 ( 25,000) A 402,113
Acquired in-process research
and development expenses 14,577,942 3,920,808 E 18,498,750
---------- --------- ------- --------- ----------
Total operating costs and expenses 22,575,590 5,669,029 461,619 4,730,017 33,436,255
---------- --------- ------- --------- ----------
Operating (loss) income (20,192,514) (1,788,572) 357,581 (4,760,043) (26,383,548)
---------- --------- ------- --------- ----------
Other income (expense):
Sales of equipment 585,541 ( 585,541) A
Interest expense ( 2,191,629) ( 7,524) ( 2,199,153)
Interest income 147,322 2,109 149,431
Equity in income (loss) of
Unconsolidated subsidiaries ( 3,211) ( 3,211)
Litigation settlement expense ( 821,000) ( 821,000)
Other ( 8,108) ( 29,429) ( 37,537)
---------- --------- ------- --------- ----------
Total other income (expense) ( 2,876,626) 550,697 ( 585,541) ( 2,911,470)
---------- --------- ------- --------- ----------
(Loss) income before minority interest in
loss of consolidated subsidiaries (23,069,140) (1,237,875) 357,581 (5,345,584) (29,295,018)
Minority interest in income of
consolidated subsidiaries 4,900 4,900
---------- --------- ------- --------- ----------
Net (loss) income before income taxes (23,064,240) (1,237,875) 357,581 (5,345,584) (29,290,118)
---------- --------- ------- --------- ----------
Provision for income taxes (143,081) 143,081
---------- --------- ------- --------- ----------
Net (loss) income $(23,064,240) $(1,237,875) $ 214,500 $(5,202,503) $(29,290,118)
========== ========= ======= ========= ==========
Net loss per common share after
Preferred dividends $(6.53) $(7.13)
==== ====
See notes to unaudited pro forma combined financial statements
<PAGE> 19
MEDCROSS, INC., FAMILY TELECOMMUNICATIONS
INCORPORATED (FTI) AND MIBRIDGE, INC.
NOTES TO THE PRO FORMA COMBINED STATEMENT OF OPERATIONS
(unaudited)
1. BASIS OF PRESENTATION
The unaudited pro forma combined balance sheet as of December 31, 1996 and
the unaudited pro forma combined statement of operations for the year ended
December 31, 1996 give effect to the acquisitions of 100% of the
outstanding common stock of Family Telecommunications Incorporated
(FTI) and MiBridge, Inc. (MiBridge) by Medcross, Inc. (the "Company") as
if the acquisitions, accounted for under the purchase method of accounting,
had occurred on the balance sheet date with respect to the balance sheet
and on March 20, 1996 (date of inception of FTI) and March 18, 1996 (date
of inception of MiBridge) with respect to the statement of operations.
FTI and MiBridge were acquired by the Company effective January 1, 1997
and June 5, 1997, respectively.
The pro forma financial statements have been prepared based upon the
financial statements of the Company, MiBridge and FTI as of and for the
year ended December 31, 1996. These pro forma financial statements may
not be indicative of the results that actually would have occurred if the
combination had been in effect on the dates indicated or which may be
obtained in the future. The pro forma adjustments are based upon certain
estimates that may change as additional information becomes available.
The pro forma financial statements should be read in conjunction with the
audited financial statements for the Company, MiBridge and FTI.
2. PRO FORMA ADJUSTMENTS:
The pro forma adjustments reflected in the pro forma financial statements
are summarized in items A to E below:
A. Removal of the following intercompany transactions occurring during
1996: (1) intercompany accounts receivable and payables ($120,000),
(2) intercompany sales of long distance service ($5,026) and software
($25,000) and (3) profit on intercompany sale of equipment resulting in
gain to FTI ($585,541).
Continued
<PAGE> 20
MEDCROSS, INC., FAMILY TELECOMMUNICATIONS
INCORPORATED (FTI) AND MIBRIDGE, INC.
NOTES TO THE PRO FORMA COMBINED STATEMENT OF OPERATIONS
B. Pro forma adjustment reflecting the purchase of all of the outstanding
common stock of FTI by the Company in return for the issuance of
400,000 shares of common stock of the Company to the stockholders
of FTI and the purchase of all of the outstanding common stock of
MiBridge in return for issuance of 1,000 shares of Class D preferred
stock of the Company and a note payable of $2,000,000:
</TABLE>
<TABLE>
<CAPTIONS>
FTI MiBridge Combined
------------ ------------ ------------
<S> <C> <C> <C>
Note payable $ 2,000,000 $ 2,000,000
Common stock (400,000 shares
Issued at $0.07 par value with a
Market value of $6.03 per share) $ 2,800 2,800
Preferred stock (1,000 shares issued
at $10.00 par value with a total
market value of $6,250,000) 10,000 10,000
Additional paid in capital 2,411,783 6,240,000 8,651,783
--------- --------- ----------
Purchase price 2,414,583 8,250,000 10,664,583
Net liabilities assumed
(assets acquired) 135,420 ( 271,055) ( 135,635)
--------- --------- ----------
Excess (allocated to intangible
assets, acquired in-process
research and development
and goodwill) $ 2,550,003 $ 7,978,945 $ 10,528,948
========= ========= ==========
</TABLE>
<PAGE> 21
MEDCROSS, INC., FAMILY TELECOMMUNICATIONS
INCORPORATED (FTI) AND MIBRIDGE, INC.
NOTES TO THE PRO FORMA COMBINED STATEMENT OF OPERATIONS
(unaudited)
Allocation of the excess purchase price for FTI to intangible assets is as
follows: goodwill ($1,490,003), customer list ($520,000), and carrier
identification code and tariff registration status ($540,000). Allocation
of the excess purchase price for MiBridge is as follows: goodwill
($2,225,137), workforce in place ($702,000), completed technology
($1,131,000) and in-process research and development ($3,920,808). Goodwill
and carrier identification code and tariff registration status are amortized
over 10 years. All other intangible assets are amortized over three years.
Acquired in-process research and development is expensed at the acquisition
date. The allocation of excess purchase price to these intangible assets is
subject to final revisions which may be material and if material then the
amounts allocated to the intangible assets, specifically goodwill, may be
revised.
C. Pro forma adjustments to remove FTI and MiBridge stockholder's equity
accounts as of December 31, 1996 as part of the purchase price
allocation process.
D. Pro forma adjustments to reflect the effect of the purchase price
allocation adjustments to property and equipment.
E. Pro forma adjustments to record amortization of intangible assets
(see item B above) and adjustment to depreciation of property and
equipment due to change in value as a result of purchase price
allocations (see item D above).
F. Pro forma adjustment to reflect the impact of filing a consolidated
income tax return. The consolidated group would have been able to
offset all taxable income against current losses.
<PAGE> 22
