<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K A1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report June 30, 1995
(Date of earliest event reported) (April 19, 1995)
TRANSCEND SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-18217 33-0378756
(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation or organization) Number) Identification No.)
3353 PEACHTREE ROAD, SUITE 1000
ATLANTA, GA 30326
(404) 364-4600
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
DAVID W. MURPHY
CHIEF FINANCIAL OFFICER
3353 PEACHTREE ROAD, SUITE 1000
ATLANTA, GA 30326
(404) 364-4600
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
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<PAGE> 2
Item 7 of the Registrant's Form 8-K dated May 2, 1995, is hereby amended in its
entirety as follows:
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired: The following financial
statements for Medical Transcription of Atlanta, Inc. for the
years ended December 31, 1993 and 1994 are attached hereto as
Exhibit 99(a):
- Independent Auditor's Report
- Balance Sheets as of December 31, 1993 and 1994
- Statements of Income and Retained Earnings for the years
ended December 31, 1993 and 1994
- Statements of Cash Flows for the years ended December 31,
1993 and 1994
(b) Proforma Financial Information: Attached hereto as Exhibit 99(b)
are the unaudited ProForma Combined Condensed Statement of
Operations for the year ended December 31, 1994 and the quarter
ended March 31, 1995 and the unaudited ProForma Combined Condensed
Balance Sheet as of March 31, 1995.
(c) Exhibits:
2(a) Asset Purchase Agreement dated April 19, 1995 (previously
filed).
99(a) Audited Financial Statements of Medical Transcription of
Atlanta, Inc. for the years ended December 31, 1993 and
1994.
99(b) Unaudited ProForma Combined Condensed Statements of
Operations for the year ended December 31, 1994 and the
quarter ended March 31, 1995 and Unaudited ProForma
Combined Condensed Balance Sheet as of March 31, 1995.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
TRANSCEND SERVICES, INC.
Date: June 30, 1995 By: David W. Murphy
-----------------------
David W. Murphy
Chief Financial Officer
<PAGE> 4
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ----------- ------------
<S> <C>
2(a) Asset Purchase Agreement dated April 19, 1995 (previously filed).
99(a) Audited Financial Statements of Medical Transcription of Atlanta, Inc.
for the years ended December 31, 1993 and 1994.
99(b) Unaudited ProForma Combined Condensed Statements of Operations for the
year ended December 31, 1994 and the quarter ended March 31, 1995 and
Unaudited ProForma Combined Condensed Balance Sheet as of
March 31, 1995.
</TABLE>
<PAGE> 1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
Medical Transcription of Atlanta, Inc. and
to the Board of Directors of
Transcend Services, Inc.:
We have audited the accompanying balance sheets of MEDICAL TRANSCRIPTION OF
ATLANTA, INC. (a Georgia corporation) as of December 31, 1994 and 1993 and the
related statements of income and retained earnings and cash flows for the years
then ended. 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 Medical Transcription of
Atlanta, Inc. as of December 31, 1994 and 1993 and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.As discussed in Note 4, substantially
all of the Company's net assets were sold subsequent to year-end.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
June 23, 1995
<PAGE> 2
MEDICAL TRANSCRIPTION OF ATLANTA, INC.
BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
ASSETS
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 40,894 $ 9,622
Accounts receivable (Note 1) 299,574 155,181
-------- --------
Total current assets 340,468 164,803
PROPERTY AND EQUIPMENT, AT COST, LESS ACCUMULATED
DEPRECIATION OF $181,429 AND $126,279 IN 1994 AND 1993,
RESPECTIVELY 97,411 113,409
-------- --------
Total assets $437,879 $278,212
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued liabilities $ 16,982 $ 4,637
Demand note (Note 2) 0 16,575
Current portion of long-term debt (Note 3) 9,743 28,547
-------- --------
Total current liabilities 26,725 49,759
LONG-TERM DEBT, LESS CURRENT PORTION ABOVE (NOTE 3) 7,413 17,156
-------- --------
Total liabilities 34,138 66,915
-------- --------
SHAREHOLDERS' EQUITY:
Common stock, $10 par value; 5,000 shares issued
and outstanding 500 500
Retained earnings 403,241 210,797
-------- --------
Total shareholders' equity 403,741 211,297
-------- --------
Total liabilities and shareholders' equity $437,879 $278,212
======== ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE> 3
MEDICAL TRANSCRIPTION OF ATLANTA, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
REVENUES $ 1,992,726 $ 1,222,547
COST OF SERVICES (1,258,186) (764,144)
----------- -----------
Gross profit 734,540 458,403
GENERAL AND ADMINISTRATIVE EXPENSE (403,138) (263,379)
----------- -----------
Operating income 331,402 195,024
----------- -----------
OTHER INCOME (EXPENSE):
Net interest (expense) income 208 (7,844)
Other income 2,334 9,425
----------- -----------
Total other income (expense) 2,542 1,581
----------- -----------
NET INCOME 333,944 196,605
RETAINED EARNINGS, BEGINNING OF YEAR 210,797 91,592
SHAREHOLDERS' DISTRIBUTIONS (141,500) (77,400)
----------- -----------
RETAINED EARNINGS, END OF YEAR $ 403,241 $ 210,797
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 4
MEDICAL TRANSCRIPTION OF ATLANTA, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 333,944 $ 196,605
--------- ---------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation expense 55,150 53,486
Changes in assets and liabilities:
Accounts receivable (144,393) (72,755)
Accrued liabilities 12,345 2,327
--------- ---------
Total adjustments (76,898) (16,942)
--------- ---------
Net cash provided by operating activities 257,046 179,663
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (39,152) (72,864)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line-of-credit agreement (16,575) 2,675
Borrowings from long-term debt (9,743) 17,156
Payments on short-term debt (18,804) (44,751)
Distribution to shareholders (141,500) (77,400)
--------- ---------
Net cash used in financing activities (186,622) (102,320)
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 31,272 4,479
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 9,622 5,143
--------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 40,894 $ 9,622
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 5
MEDICAL TRANSCRIPTION OF ATLANTA, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies of Medical Transcription of
Atlanta, Inc. (the "Company") is presented below. The Company provides
medical transcription services. The Company has offices in Atlanta,
Georgia.
BASIS OF ACCOUNTING
The Company's financial statements are presented on the accrual basis of
accounting, and consequently, revenues are recognized and recorded when
they are earned and expenses are recognized and recorded when they are
incurred.
CASH AND CASH EQUIVALENTS
Highly liquid investments purchased with an original maturity of three
months or less are considered to be cash equivalents.
ACCOUNTS RECEIVABLE
Accounts receivable are substantially collectible in full. An allowance
for bad debts has been established; however, the allowance, based on
historical collections, has been determined to be zero.
PROPERTY AND EQUIPMENT
At December 31, 1994 and 1993, property and equipment consisted of the
following amounts:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Furniture and equipment $230,540 $191,760
Vehicles 39,590 39,590
Leasehold improvements 8,710 8,338
-------- --------
$278,840 $239,688
======== ========
</TABLE>
Accumulated depreciation at December 31, 1994 and 1993 is $181,429
and $126,279, respectively. Property and equipment are shown at cost
and are being depreciated over their useful lives using the
straight-line method.
<PAGE> 6
-2-
INCOME TAXES
The Company, with the consent of its shareholders, has elected to be
an S corporation under the Internal Revenue Code and similar state
law. Instead of paying corporate income taxes, the shareholders are
taxed individually on the Company's taxable income. Therefore, no
provision or liability for federal or state income taxes has been
made in the accompanying financial statements.
COST OF SERVICES AND ADMINISTRATIVE EXPENSES
Cost of services includes transcription subcontract costs and
equipment rental costs. Administrative expenses comprise expenses
that are not directly related to the transcription revenue earnings
process.
2. DEMAND NOTE
In 1993, the Company entered into a revolving credit agreement with
a local bank whereby the Company could borrow up to a maximum of
$20,000. The Company pays 7.5% interest on the principal balance
outstanding, which is payable on demand. As of December 31, 1994 and
1993, the Company has borrowed $0 and $16,575, respectively, on this
line of credit. The line of credit expired on April 15, 1995.
3. DEBT
Debt at December 31, 1994 and 1993 consisted of the following
amounts:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Note payable to bank at 7.65% interest, due August 1, 1997;
collateralized by a vehicle $ 11,513 $ 15,395
Term note payable to bank at 7.5% interest, due December 20,
1995; collateralized by receivables 5,643 9,250
Term note payable to bank at 7.5% interest, due August 15,
1995; collateralized by inventory and receivables; paid off
in 1994 0 14,114
Note payable to an outside vendor at 5% interest, paid off
April 1994; collateralized by fixed assets 0 6,944
-------- --------
Total debt 17,156 45,703
Less current portion of long-term debt (9,743) (28,547)
-------- --------
Long-term debt $ 7,413 $ 17,156
======== ========
</TABLE>
<PAGE> 7
-3-
4. SUBSEQUENT EVENTS
On April 19, 1995, the Company completed the sale of its net assets to
Transcend Services, Inc. for $1,200,000 in cash and notes and $172,500 of
Transcend Services, Inc. stock.
<PAGE> 1
TRANSCEND SERVICES, INC.
PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA COMBINED
TRANSCEND MTA ADJUSTMENTS PRO FORMA
--------- ------ ----------- ---------
<S> <C> <C> <C> <C>
Net revenues $12,393 $1,993 $14,386
Direct Costs 10,787 1,258 12,045
------- ------ --- -------
Gross Profit 1,606 735 0 2,341
Marketing and sales expense 929 - 929
General and administrative 1,673 403 (87)(3) 1,989
Amortization expense of intangibles 357 - 126 (1) 483
------- ------ --- -------
Operating income (loss) (1,353) 332 (39) (1,060)
Other income (expense) (40) 2 (46)(4) (84)
------- ------ --- -------
Pre-tax income (loss) (1,393) 334 (85) (1,144)
Benefit (provision) for income taxes (13) - - (13)
------- ------ --- -------
Income (loss) from continuing operations (1,406) 334 (85) (1,157)
======= ====== === =======
Net income (loss) per common share
and common share equivalent from
continuing operations ($0.34) ($0.28)
======= =======
Weighted average common
shares outstanding 4,096 4,122 (5)
======= =======
</TABLE>
The accompanying notes are an integral part of this pro forma financial
statement.
<PAGE> 2
TRANSCEND SERVICES, INC.
PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
FOR THE QUARTER ENDED MARCH 31, 1995
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA COMBINED
TRANSCEND MTA ADJUSTMENTS PRO FORMA
--------- --- ----------- ---------
ASSETS
<S> <C> <C> <C> <C>
Current Assets:
Cash $ 2,329 $ 79 ($550)(1) 1,858
Accounts receivable, net 1,597 207 1,804
Other receivables 0 0 0
Prepaid expenses 252 - 252
------- ---- ------ -------
Total current assets 4,178 286 (550) 3,914
Net assets related to discontinued
operations 3,617 - - 3,617
Securities from sale of Occucare 2,050 - - 2,050
Equipment, net 1,291 96 (9)(2) 1,378
Deposits and other assets 14 - 14
Intangible assets 4,868 0 1,003 (1) 5,871
------- ---- ------ -------
Total assets $16,018 $382 $ 444 $16,844
======= ==== ====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilites:
Current portion of long term debt 4 - 94 (1) 98
Accounts payable 376 2 - 378
Accrued liabilities 2,225 - - 2,225
Accrued liabilities related to sale of Occucare 464 - - 464
Note payable - - 100 (1) 100
------- ---- ------ -------
Total current liabilities 3,069 2 194 3,265
------- ---- ------ -------
Long term debt - - 456 (1) 456
Deferred income taxes related to discontinued
operations 679 - - 679
Common stock 175 1 1 (1) 177
Additional paid in capital 16,209 - 172 (1) 16,381
Retained earnings (deficit) (4,114) 379 -379 (1) (4,114)
------- ---- ------ -------
Total stockholders' equity 12,270 380 (206) 12,444
------- ---- ------ -------
Total liabilities and stockholders' Equity $16,018 $382 $ 444 $16,844
======= ==== ====== =======
</TABLE>
The accompanying notes are an integral part of this pro forma consolidating
balance sheet.
<PAGE> 3
TRANSCEND SERVICES, INC.
PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 1995
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA COMBINED
TRANSCEND MTA ADJUSTMENTS PRO FORMA
--------- --- ----------- ---------
<S> <C> <C> <C> <C>
Net revenues $ 4,897 $506 - $ 5,403
Direct Costs 4346 333 - 4,679
------- ---- ---- -------
Gross Profit 551 173 0 724
Marketing and sales expense 437 - 437
General and administrative 1113 103 (15)(3) 1,201
Amortization expense of intangibles 145 - 33 (1) 178
------- ---- ---- -------
Operating income (loss) (1,144) 70 (18) (1,092)
Other income (expense) 36 2 (10)(4) 28
------- ---- ---- -------
Pre-tax income (loss) (1,108) 72 (28) (1,064)
Benefit (provision) for income taxes - - - -
------- ---- ---- -------
Income (loss) from continuing operations ($1,108) $ 72 ($28) ($1,064)
======= ==== ==== =======
Net income (loss) per common share
and common share equivalent from
continuing operations ($0.06) ($0.06)
======= =======
Weighted average common
shares outstanding 17,533 17,593 (6)
======= =======
</TABLE>
The accompanying notes are an integral part of this pro forma financial
statement.
<PAGE> 4
TRANSCEND SERVICES, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1994 AND THE
QUARTER ENDED MARCH 31, 1995
On April 26, 1995, Transcend completed the acquisition of Medical
Transcription of Atlanta, Inc. ("MTA") for $1,372,000, consisting of $550,000
paid in cash at closing, promissory notes of $100,000 and $550,000, and 60,000
shares of Transcend common stock valued at $172,000 at the time of the
acquisition.
The unaudited Pro Forma Combined Condensed Financial Statements give effect to
the acquisition of MTA as of April 10, 1995. The historical statements of MTA
have been adjusted to reflect the statements of operations for the twelve
months ended December 31, 1994 and March 31, 1995 and balance sheet as of March
31, 1995. The Pro Forma Combined Condensed Statement of Operations is not
necessarily indicative of future operating results or financial position.
(1) Reflects the purchase by Transcend of MTA for a purchase price of
$1,372,000 consisting of $550,000 in cash, promissory notes of $100,000
and $550,000, and 60,000 shares of Transcend stock which will result in
goodwill of $690,000 and other intangible assets of $375,000.
Transcend's policy will be to amortize goodwill over a twenty year
period and other intangibles over a three and seven year period
resulting in annual amortization expense of $126,000.
(2) Reflects adjustment of net equipment related to MTA based on the
elimination of leasehold improvements.
(3) Reflects adjustment of general and administrative costs related to MTA
based on the elimination of owners' expense.
(4) Reflects adjustment of interest expense related to Transcend based on
the interest incurred on the promissory notes of $100,000 and $550,000.
(5) Pro Forma Weighted Average Shares Outstanding have been calculated as
follows (000's):
Transcend shares outstanding at December 31, 1994 4,096
(represents shares outstanding prior to merger with
Tricare, Inc. on January 10, 1995)
Transcend shares issued for the purchase of MTA
(share calculation is based on a conversion
factor of 2.34 to 1)
of Transcend) 26
-----
4,122
=====
(6) Pro Forma Weighted Average Shares Outstanding have been calculated as
follows (000's):
Transcend shares outstanding at March 31, 1995 17,533
Transcend shares issued for the purchase of MTA 60
------
17,593
======
