SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) MARCH 26, 1997
COMPSCRIPT, INC.
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(Exact name of registrant as specified in its charter)
FLORIDA 0-20594 65-0506539
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(State or other jurisdiction (Commission File (IRS Employer
or incorporation) Number) Identification No.)
1225 BROKEN SOUND PARKWAY N.W., SUITE A, BOCA RATON, FLORIDA 33487
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(Address of principal executive
offices, including zip code)
Registrant's telephone number, including area code (561) 994-8585
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(Former name or former address, if changed since last report)
<PAGE>
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Audited Financial Statements of Hytree Pharmacy, Inc.for
the year ended March 31, 1996 and for the period from April 1,
1996 to December 31, 1996.
(b) CompScript, Inc. and Subsidiaries Pro Forma Consolidated
Condensed Statement of Operations Year Ended December 31, 1996
(Unaudited). Pro Forma Consolidated Condensed Balance Sheet
and Pro Forma Consolidated Condensed Interim Statement of
Operations filing requirements are included in the Company's
previously filed Form 10-QSB for the period ended March 31,
1997.
<PAGE>
Report of Independent Auditors
Shareholders of Hytree Pharmacy, Inc.
We have audited the accompanying balance sheets of Hytree Pharmacy, Inc. (the
Company) as of March 31 and December 31, 1996, and the related statements of
income and retained earnings, and cash flows for the year ended March 31, 1996
and for the period from April 1, 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 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 Hytree Pharmacy, Inc. at March
31, 1996 and December 31, 1996, and the results of its operations and its cash
flows for the year ended March 31, 1996 and for the period from April 1, 1996 to
December 31, 1996, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
March 14, 1997
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<TABLE>
<CAPTION>
Hytree Pharmacy, Inc.
Balance Sheets
MARCH 31, DECEMBER 31,
1996 1996
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<S> <C> <C>
ASSETS
Current assets:
Cash $ 300 $ 4,341
Accounts receivable, less allowance for doubtful accounts
of $30,000 1,713,841 2,185,941
Inventories 715,476 952,455
Income tax receivable 11,500
Prepaid expenses 10,800 10,050
Deferred taxes 52,100 49,300
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2,504,017 3,202,087
Property and equipment, at cost:
Furniture and fixtures 195,172 198,484
Medical equipment 124,420 137,109
Rental equipment 499,151 627,560
Office equipment 204,053 222,756
Leasehold improvements 7,020 10,665
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1,029,816 1,196,574
Less: Accumulated depreciation and amortization 603,687 704,860
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426,129 491,714
Other assets:
Deposits 2,590 2,590
Cash surrender value of officer's life insurance 16,280
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18,870 2,590
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TOTAL ASSETS $ 2,949,016 $ 3,696,391
===========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 663,311 $ 577,394
Income tax payable 214,000
Accrued payroll and related expenses 208,726 372,638
Notes payable--shareholders 467,724 215,723
Current portion of long-term debt 60,386 67,668
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1,400,147 1,447,423
Long-term debt 574,728 997,279
Deferred taxes 29,900 35,100
Shareholders' equity:
Common stock, no par value, 250 shares authorized;
150 shares issued and outstanding 263,860 263,860
Nonvoting common stock, no par value, 50 shares authorized;
.75 shares issued and outstanding 90,000 90,000
Retained earnings 590,381 862,729
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944,241 1,216,589
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,949,016 $ 3,696,391
===========================
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
<TABLE>
<CAPTION>
Hytree Pharmacy, Inc.
Statements of Income and Retained Earnings
APRIL 1, 1996
YEAR ENDED TO
MARCH 31, DECEMBER 31,
1996 1996
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<S> <C> <C>
Net revenues $ 10,004,455 $ 8,305,142
Cost of revenues 5,482,335 4,368,982
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Gross profit 4,522,120 3,936,160
Selling, general and administrative expenses 4,218,470 3,368,034
Interest expense 90,210 94,285
Other expense (income) 16,731 (10,507)
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Income before income taxes 196,709 484,348
Provision for income taxes 86,000 212,000
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Net income 110,709 272,348
Retained earnings--beginning of period 479,672 590,381
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Retained earnings--end of period $ 590,381 $ 862,729
==================================
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
<TABLE>
<CAPTION>
Hytree Pharmacy, Inc.
Statement of Cash Flows
APRIL 1, 1996
YEAR ENDED TO
MARCH 31, DECEMBER 31,
1996 1996
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<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 110,709 $ 272,348
Noncash items included in income:
Depreciation and amortization 130,644 101,517
Loss on abandoned leasehold improvements 37,506
Stock compensation expense 90,000
Deferred taxes 79,800 8,000
Provision for bad debts 82,470 61,840
Increase (decrease) in cash caused by changes in current items:
Accounts receivable (595,035) (533,940)
Inventories (159,593) (236,979)
Prepaid expenses 7,046 750
Accounts payable 171,294 (85,917)
Other current liabilities (22,211) 389,412
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Net cash used in operating activities (67,370) (22,969)
INVESTING ACTIVITIES
Change in other assets (6,065) 16,280
Acquisition of property and equipment (93,017) (167,102)
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Net cash used in investing activities (99,082) (150,822)
FINANCING ACTIVITIES
Borrowings on long-term debt 3,718,896 2,647,113
Increase in notes payable to shareholders 446,441
Notes payable to shareholders (292,842) (252,001)
Repayment of long-term debt (3,791,021) (2,217,280)
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Net cash provided by financing activities 81,474 177,832
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Net (decrease) increase in cash (84,978) 4,041
Cash--beginning of year 85,278 300
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CASH--END OF YEAR $ 300 $ 4,341
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NONCASH INVESTING AND FINANCING ACTIVITY
Acquisition of property and equipment under capital lease $ 43,711 $ -0-
==============================
SUPPLEMENTAL INFORMATION
Interest paid $ 90,210 $ 94,285
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Income taxes paid $ 78,506 $ -0-
==============================
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
Hytree Pharmacy, Inc.
Notes to the Financial Statements
For the Year Ended March 31, 1996 and for the
Period from April 1, 1996 to December 31, 1996
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The Company provides pharmacy services for nursing homes and homebound patients,
sells and rents medical equipment and supplies, and operates retail pharmacies,
all in Northeast Ohio.
In March of 1997 CompScript announced its intent to exchange CompScript common
stock for all of the outstanding stock of Hytree Pharmacy, Inc. The business
combination will be accounted for as a pooling of interests.
REVENUE RECOGNITION
Revenue is recognized when products or services are provided to the customer. A
significant portion of the Company's revenues from sales of pharmaceutical and
medical products are reimbursable from third-party payors (principally Medicaid
and Medicare). The Company monitors its receivables from these reimbursement
sources under policies established by management and reports such revenues at
the net realizable amount expected to be received.
ACCOUNTS RECEIVABLE
On average, approximately 52% of accounts receivable are due from third party
payors, 37% are due from nursing homes, and the remaining 11% are due from
guarantors and others. An allowance for doubtful accounts is provided for the
estimated losses that will be incurred in the collection of outstanding accounts
receivable balances. Estimated losses are based on a review of the current
status of outstanding accounts receivable balances and historical collection
experiences.
INVENTORIES
Inventories, consisting of pharmaceuticals, medical equipment and supplies, are
stated at the lower of cost (first in, first out method) or market.
<PAGE>
Hytree Pharmacy, Inc.
Notes to Financial Statements - Continued
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
PROPERTY AND EQUIPMENT
Property and equipment is depreciated or amortized using the straight-line and
declining balance methods over the estimated useful lives of the assets as
follows:
Furniture and fixtures 5-7 years
Medical and rental equipment 7 years
Office equipment 5-7 years
Leasehold improvements 10 years
At December 31, 1996, property and equipment included assets held under capital
leases at an aggregate cost of $169,248, with related accumulated amortization
of $57,381. Amortization of equipment under capital leases is included in
depreciation expense.
INCOME TAXES
The Company follows Statement of Financial Accounting Standards No. 109,
ACCOUNTING FOR INCOME TAXES. This accounting standard requires that the
liability method be used in accounting for income taxes. Under this accounting
method, deferred tax assets and liabilities are determined based on the
differences between the financial reporting basis and the tax basis of assets
and liabilities and are measured using the enacted tax rates and laws that apply
in the periods in which the deferred tax asset or liability is expected to be
realized or settled.
USE OF ACCOUNTING ESTIMATES
Management uses estimates and assumptions in preparing financial statements in
accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported revenues and
expenses. Actual results could differ from the estimates that were used.
ADVERTISING COSTS
The Company expenses advertising costs as incurred. Advertising costs for the
year ended March 31, 1996 and for the period from April 1, 1996 to December 31,
1996 amounted to $13,386 and $12,905, respectively.
<PAGE>
Hytree Pharmacy, Inc.
Notes to Financial Statements - Continued
B. NOTES PAYABLE--SHAREHOLDERS
Notes payable--shareholders consist of unsecured demand borrowings bearing
interest at 12% and payable to shareholders of the Company. These notes are
subordinate to the line of credit borrowings (see Note C). Interest paid to the
shareholders for the year ended March 31, 1996 and for the period from April 1,
1996 to December 31, 1996 was $18,162 and $30,676, respectively.
In addition, accrued payroll and related expenses includes $6,000 and $349,276
at March 31, 1996 and December 31, 1996, respectively, owed to shareholders of
the Company.
C. DEBT
At December 31, 1996, long-term debt consisted of the following:
Various capital lease agreements due in monthly
installments through October, 1999 at interest rates
ranging from 9.25% to 19.3% $ 100,633
Note payable to a related individual in monthly
installments of $1,000 through May 1997 4,515
Note payable under a $1,000,000 line of credit arrangement,
including interest at (OMEGA)% above the bank's prime rate
(prime--8.25% at December 31, 1996), collateralized by
substantially all assets of the Company and guaranteed
by the shareholders of the Company 959,799
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1,064,947
Less: Current portion 67,668
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Long-term portion $ 997,279
==============
Future maturities of long-term debt are as follows: 1997--$67,668;
1998--$984,510 and 1999--$12,769.
<PAGE>
Hytree Pharmacy, Inc.
Notes to Financial Statements - Continued
D. INCOME TAX EXPENSE
Income tax expense (benefit) for the year ended March 31, 1996 and for the
period from April 1, 1996 to December 31, 1996 consists of:
<TABLE>
<CAPTION>
APRIL 1, 1996 TO
YEAR ENDED MARCH 31, 1996 DECEMBER 31, 1996
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CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL
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<S> <C> <C> <C> <C> <C> <C>
Federal $ 5,200 $ 67,800 $ 73,000 $ 173,400 $ 6,800 $ 180,200
State 1,000 12,000 13,000 30,600 1,200 31,800
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$ 6,200 $ 79,800 $ 86,000 $ 204,000 $ 8,000 $ 212,000
==================================================================================
</TABLE>
The Company's deferred income tax asset is due primarily to the temporary
effects of accrued compensation, allowance for doubtful accounts and inventory
obsolescence reserve offset by accelerated tax depreciation.
The difference between the statutory federal income tax rate of 34% and the
effective income tax rate is due to state income taxes, net of federal benefit.
E. OPERATING LEASES
Minimum annual rentals under non-cancelable lease obligations, including amounts
due to a related party, are as follows:
1997 $ 157,920
1998 157,920
1999 157,920
2000 99,120
2001 14,160
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$ 587,040
============
<PAGE>
Hytree Pharmacy, Inc.
Notes to Financial Statements - Continued
E. OPERATING LEASES--CONTINUED
The Company also leases medical equipment, automobiles and delivery equipment
under month-to-month cancellable agreements from BDB Leasing. Monthly lease
payments approximate $22,400.
F. COMMITMENTS AND RELATED PARTY TRANSACTIONS
Total rent and lease expense for the year ended March 31, 1996 was $511,000, of
which $358,677 was incurred to related parties. Total rent and lease expense for
the period from April 1, 1996 to December 31, 1996 was $396,492, of which
$312,065 was incurred to related parties.
G. STOCK BONUS AGREEMENT
Effective February 1, 1996, the Company entered into a stock bonus agreement
(Agreement) with an employee granting the employee up to a two percent
non-voting interest in the Company. Compensation expense of $90,000 was recorded
in the year ended March 31, 1996 in connection with the Agreement.
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
INTRODUCTION TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
On March 26, 1997, CompScript, Inc. ("CompScript" or the "Company") consummated
a Stock Purchase Agreement with the shareholders of Hytree Pharmacy, Inc.
("Hytree"). Under the Stock Purchase Agreement, CompScript acquired all the
issued and outstanding shares of Hytree in exchange for 850,000 shares of
CompScript's Common Stock.
The following pro forma condensed consolidated financial information consists of
an unaudited Pro Forma Condensed Consolidated Statement of Operations for the
year ended December 31, 1996 (the "Pro Forma Statement"). The Pro Forma
Statement for the year ended December 31, 1996 gives effect to the acquisition
of Hytree as if the transaction had occurred on January 1, 1996. The pro forma
adjustments to, or reflected in" the Pro Forma Statement are based on the
historical results of the acquired business giving effect to the transaction
based on the pooling method of accounting used to record the acquisition and the
assumptions and adjustments described in the accompanying notes to the Pro Forma
Statement. The pro forma adjustments are based upon currently available
information and upon certain assumptions that management of the Company believes
are reasonable under the circumstances. The Pro Forma Statement does not purport
to be indicative of what the Company's results of operations would actually have
been if the aforementioned transaction in fact had occurred at the beginning of
the period indicated, or to project the results of operations at any future date
or for any future period.
A separate Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1997
or Statement of Operations for the three month period ended March 31, 1997 has
not been included, as such representation of the Company's financial position
and results of operations have been included in the Company's previously filed
Form 10-QSB for the three month period ended March 31, 1997.
<PAGE>
<TABLE>
<CAPTION>
CompScript Inc. and Subsidiaries
Pro Forma Condensed Consolidated Statement of Operations (Unaudited)
Year Ended December 31, 1996
(A)
Restated Hytree Pro Forma
CompScript, Inc. Pharmacy, Inc. Adjustments Pro Forma
---------------- -------------- ----------- ---------
<S> <C> <C> <C> <C>
Sales $31,808,585 $10,907,771 $ $42,716,356
-
Cost of sales 19,856,573 5,799,963 - 25,656,536
----------- ---------- ---------- -----------
Gross profit 11,952,012 5,107,808 - 17,059,820
Selling, general and administrative
expenses 11,694,235 4,259,679 - 15,953,914
Provision for doubtful accounts 836,141 95,800 - 931,941
Merger related costs 934,223 - 355,000(B) 1,289,223
----------- ---------- ---------- -----------
Operating (loss) income (1,512,587) 752,329 (355,000) (1,115,258)
Other
Interest and other income 47,824 10,507 - 58,331
Interest expense (244,499) (114,799) - (359,298)
----------- ---------- ---------- -----------
Income (loss) before income tax expense
(benefit) (1,709,262) 648,037 (355,000) (1,416,225)
Income tax expense (benefit) (289,769) 285,136 - (4,633)
----------- ---------- ---------- -----------
Net income (loss) $(1,419,493) $362,901 $(355,000) $(1,411,592)
=========== ========== ========== ===========
Net loss per share $ (0.12) $ (0.11)
=========== ===========
Weighted average common shares and
common stock equivalents outstanding 11,616,648 12,466,648
=========== ===========
</TABLE>
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIATED
FINANCIAL STATEMENTS
(UNAUDITED)
(A) The accompanying Condensed Consolidated Statement of Operations for the
year ended December 31, 1996 has been derived from the audited statement
of operations. Such statement of operations was restated to reflect the
January 10, 1997 and February 28, 1997 acquisitions of Medical Services
Consortium, Inc. and Campo's Medical Pharmacy, Inc. which were accounted
for as pooling of interests.
(B) To properly reflect the effect of acquisition costs associated with the
acquisition of Hytree as if the transaction took place on January 1,
1996. No tax benefit has been computed as such costs are not deductible
for Federal or State income tax purposes.
<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.
COMPSCRIPT, INC.
By: /S/ BRIAN A. KAHAN
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Brian A. Kahan
Chief Executive Officer
DATED: June 9, 1997
