<PAGE>
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): October 13, 2000
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TRANSCEND SERVICES, INC.
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(Exact name of registrant
as specified in its charter)
Delaware 0-18217 33-0378756
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
945 East Paces Ferry Rd, Suite 1475, Atlanta, Georgia 30326
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (404)364-8000
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3353 Peachtree Rd, Suite 1000, Atlanta, Georgia, 30326
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(Former name or former address, if changed since last report.)
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Item 2. Acquisition or Disposition of Assets.
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Effective October 13, 2000, Transcend Services, Inc. ("Transcend")
completed the sale of its Co-Sourcing and CodeRemote businesses (the
"Businesses") to Provider HealthNet Services, Inc. ("PHNS"), a Delaware
corporation, pursuant to an Asset Purchase Agreement (the "Agreement") with
PHNS. The Co-Sourcing business is a business process service that provides
on-site management of paper-based and electronic records for hospitals and
healthcare systems. The CodeRemote business helps healthcare providers improve
their coding turnaround and accuracy for hospital billing and reimbursement
services. Transcend received approximately $4.7 million in cash with the
potential to receive additional consideration of up to $4.3 million, payable
over the next five years, bringing the total purchase price to approximately $9
million. The amount of future consideration to be received by Transcend will be
based on Transcend receiving fixed percentages of net revenues received by PHNS
from (i) the CodeRemote business over a base revenue level of $1,000,000 per
year, (ii) the renewal of existing contracts sold pursuant to the Agreement, and
(iii) new services offered to existing customers of the Businesses. The purchase
price was structured in such a way as to encourage future collaboration between
PHNS and Transcend in joint selling of their services. Transcend will use the
cash proceeds from the sale to retire debt and fund its future growth in the
transcription business. The purchase price was determined through arms-length
negotiations between Transcend and PHNS.
Item 7. Financial Statements and Exhibits.
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(b) Pro Forma Financial Information
Introduction
The following unaudited pro forma condensed consolidated financial
statements gives effect to the disposition of substantially all of the
assets of the Co-Sourcing and CodeRemote businesses of Transcend
Services, Inc. to Provider HealthNet Services, Inc. The unaudited Pro
Forma Condensed Consolidated Balance Sheet gives effect to the above
transaction as of June 30, 2000 and the unaudited Pro Forma Condensed
Consolidated Statements of Operations for the year ended December 31,
1999 and six months ended June 30, 2000 give effect to the above
transaction as if it had occurred on January 1, 1999.
Effective October 13, 2000, Transcend Services, Inc. ("Transcend")
completed the sale of its Co-Sourcing and CodeRemote businesses (the
"Businesses") to Provider HealthNet Services, Inc. ("PHNS"), a
Delaware corporation, pursuant to an Asset Purchase Agreement (the
"Agreement") with PHNS. The Co-Sourcing business is a business process
service that provides on-site management of paper-based and electronic
records for hospitals and healthcare systems. The CodeRemote business
helps healthcare providers improve their coding turnaround and
accuracy for hospital billing and reimbursement services. Transcend
received approximately $4.7 million in cash with the potential to
receive additional consideration of up to $4.3 million, payable over
the next five years, bringing the total purchase price to
approximately $9 million. The amount of future consideration to be
received by Transcend will be based on Transcend receiving fixed
percentages of net revenues received by PHNS from (i) the CodeRemote
business over a base revenue level of $1,000,000 per year, (ii) the
renewal of existing contracts sold pursuant to the Agreement, and
(iii) new services offered to existing customers of the Businesses.
The purchase price was structured in such a way as to encourage future
collaboration between PHNS and Transcend in joint selling of their
services. Transcend will use the cash proceeds from the sale to retire
debt and fund its future ventures in the transcription business. The
purchase price was determined through arms-length negotiations between
Transcend and PHNS.
The unaudited pro forma condensed consolidated financial statements
should be read in conjunction with the historical consolidated
financial statements of Transcend, including the related notes
thereto. The Pro Forma Condensed Consolidated Statements of Operation
data is not necessarily indicative of Transcend's future operating
results that would have occurred or will occur upon consummation of
the transcation described above.
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Transcend Services, Inc.
Consolidated Condensed Balance Sheet
June 30, 2000
(unaudited)
Amounts In Thousands
<TABLE>
<CAPTION>
Historical
As Reported Adjustments Pro Forma
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Assets
<S> <C> <C> <C>
Cash $ 162 $ 4,700 (2)
(3,000) (3) $ 1,862
Other Current Assets 6,513 (333) (1) 6,180
Property and Equipment, net 3,555 (1,571) (1) 1,984
Other Assets 431 431
Intangible Assets, net 556 556
Net Assets Related to - -
Discontinued Operations 1,295 1,295
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$ 12,512 $ (204) $ 12,308
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Liabilities and Stockholder's Equity
Current Liabilities $ 3,494 $ (474) (1) $ 3,020
Current Debt 4,500 (3,000) (3) 1,500
Other Long Term Liabilities - - -
Deferred Income Taxes - - -
Equity 4,518 3,270 7,788
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$ 12,512 $ (204) $ 12,308
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(1) Assets and liabilities of Co-Sourcing and CodeRemote businesses sold to
PHNS.
(2) Cash paid by PHNS for the net assets; contingent consideration of $4.3
million will only be recorded when contingency has been met and cash received.
(3) Convertible debt and line of credit paid off by cash received.
</TABLE>
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Transcend Services, Inc.
Consolidated Condensed Statements of Operations
Six Months Ended June 30, 2000
(unaudited)
Amounts In Thousands
<TABLE>
<CAPTION>
Historical
As Reported Adjustments (1) Pro Forma
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<S> <C> <C> <C>
Net Revenues $ 14,952 $ (7,462) $ 7,490
Direct Costs 12,638 (6,372) 6,266
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Gross Profit 2,314 (1,090)(2) 1,224
Marketing and Sales Expenses 185 (65) 120
General and Administrative Expenses 1,636 (586) 1,050
Research and Development Expenses 170 - 170
Amortization Expenses 30 - 30
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Income (loss) from Operations 293 (439) (146)
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Interest Expense, net (251) 209 (42)
Income (loss) Before Tax from Continuing Operations 42 (230) (188)
Income Taxes - - -
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Income (loss) from Continuing Operations $ 42 $ (230) $ (188)
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(1) Revenues and expenses of Co-Sourcing and CodeRemote businesses removed due
to sale of PHNS
(2) Co-sourcing included a onetime sale of equipment which provided a one time
gross profit of $131 thousand.
</TABLE>
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Transcend Services, Inc.
Consolidated Condensed Statements of Operations
Year Ended December 31, 1999
(unaudited)
Amounts In Thousands
<TABLE>
<CAPTION>
Historical
As Reported Adjustments (1) Pro Forma
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<S> <C> <C> <C>
Net Revenues $ 47,281 $ (24,086) $ 23,195
Direct Costs 45,305 (22,430) 22,875
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Gross Profit 1,976 (1,656) 320
Marketing and Sales Expenses 1,448 (1,208) 240
General and Administrative Expenses 6,448 (4,348) 2,100
Research and Development Expenses 1,282 - 1,282
Amortization Expenses 173 - 173
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Income (loss) from Operations (7,375) (3,900) (8,607)
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Other Income (expense):
Interest Expense, net (855) 771 (84)
Gain on Sale of Assets 5,774 - 5,774
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4,919 - 5,690
Income (loss) Before Tax from Continuing Operations (2,456) (4,671) (2,215)
Income Taxes - - -
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Income (loss) from Continuing Operations $ (2,456) $ 4,671 $ 2,215
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(1) Revenues and expenses of Co-Sourcing and CodeRemote businesses removed due
to sale of PHNS
</TABLE>
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(c) Exhibits:
2.7 - Asset Purchase Agreement, dated as of October 13, 2000, by and
among Transcend Services, Inc. and Provider HealthNet
Services, Inc.*
99.1 - Press Release of Transcend, dated October 13, 2000.
* Certain exhibits and disclosure schedules related to the Asset Purchase
Agreement are omitted from this filing. Transcend Services, Inc. agrees to
supplementally furnish to the Commission upon request a copy of any omitted
exhibit or schedule. The omitted exhibits relate to the following sections of
the Asset Purchase Agreement: Exhibit 2.a - Base Purchase Price; Exhibit
2.b.ii -New Services to Existing Customers; Exhibit 2.b.iii - Form of Finder's
Fee Agreement; Exhibit 2.b.v - Form of Escrow Agreement; Exhibit 5.b.i - Form of
Bill of Sale; Exhibit 5.b.iii - Form of Assignment and Assumption Agreement;
Exhibit 5.b.iv - Form of Services Agreement; Exhibit 5.b.v - Form of Management
Agreement; Exhibit 5.b.ix- Form of License Agreement; Exhibit 8.e.ii - Dispute
Resolution Procedures.
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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.
TRANSCEND SERVICES, INC.
By: /s/ Larry G. Gerdes
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Name: Larry G. Gerdes
Title: President, Chief Executive Officer and
Chief Financial Officer
Dated: October 30, 2000
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EXHIBIT INDEX
Exhibit
Number Exhibit Name
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2.7 Asset Purchase Agreement, dated as of October 13, 2000, by and
among Transcend Services, Inc. and Provider HealthNet Services,
Inc. *
99.1 Press Release of Transcend, dated October 16, 2000.
* Certain exhibits and disclosure schedules related to the Asset Purchase
Agreement are omitted from this filing. Transcend Services, Inc. agrees to
supplementally furnish to the Commission upon request a copy of any omitted
exhibit or schedule. The omitted exhibits relate to the following sections of
the Asset Purchase Agreement: Exhibit 2.a - Base Purchase Price; Exhibit
2.b.ii -New Services to Existing Customers; Exhibit 2.b.iii - Form of Finder's
Fee Agreement; Exhibit 2.b.v - Form of Escrow Agreement; Exhibit 5.b.i - Form of
Bill of Sale; Exhibit 5.b.iii - Form of Assignment and Assumption Agreement;
Exhibit 5.b.iv - Form of Services Agreement; Exhibit 5.b.v - Form of Management
Agreement; Exhibit 5.b.ix- Form of License Agreement; Exhibit 8.e.ii - Dispute
Resolution Procedures.
