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 31, 1997
MEDICORE, INC.
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(Exact name of registrant as specified in its charter)
Florida 0-9606 59-0941551
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2337 West 76th Street, Hialeah, Florida 33016
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (305) 558-4000
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Item 2. Acquisition or Disposition of Assets
On October 31, 1997, Dialysis Corporation of America ("DCA"), a 69%
owned subsidiary of Medicore, Inc. (the "Company") concluded a sale of
substantially all of the assets of two of its subsidiaries, Dialysis
Services of Florida, Inc.- Fort Walton Beach ("DSF") (dialysis opera-
tions), and Dialysis Medical, Inc. ("DMI") (Florida Method 2 home patient
operations) and an in-patient hospital services agreement of its 100%
owned subsidiary, DCA Medical Services, Inc. ("DCAMS") (collectively the
assets sold will be referred to as the "Disposed of Assets" and collective-
ly DSF, DMI and DCAMS will be referred to as the "Subsidiaries"). DCA sold
the Disposed of Assets to Renal Care Group of the Southeast, Inc.
("RCGSE"), pursuant to an Asset Purchase Agreement ("Agreement") by and
among DCA, the Subsidiaries, Henry M. Haire, M.D. ("Dr. Haire"), who owns
a 20% interest in DSF and DMI, and Renal Care Group, Inc. ("RCG"), the
parent of RCGSE. The Company was not a party to the Agreement.
The Disposed of Assets were exclusive of cash, prepaid expenses, claims
for medicare reimbursement, intercompany indebtedness, tax refunds, if any,
and vendor volume discounts of DCA and its Subsidiaries. Much of the lia-
bilities, except for obligations and liabilities arising from and after
the closing of the Agreement under leases, contracts, commitments and
agreements included in the Disposed of Assets, remained with the Subsidi-
aries. DCA and its Subsidiaries made various representations and war-
ranties as to themselves and the operations of the Subsidiaries and
indemnified RCGSE and RCG for any material breaches of such warranties
and representations.
The consideration for the sale of the Disposed of Assets aggregated
$5,065,000, consisting of $480,000 worth of RCG common stock (the "RCG
Shares") amounting to 13,873 RCG Shares subject to adjustment in valua-
tion when registered and sold, and the balance of $4,585,000 was cash. The
consideration for the transaction was determined by negotiations between
and among the parties to the Agreement based primarily on the patient base
and the going rate per patient.
DCA plans to use the revenues of the asset sale to establish additional
dialysis centers and acute management services, initially in New Jersey
and Pennsylvania, and in other areas of the country.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired
Not Applicable
(b) Pro forma financial information
The following unaudited pro forma condensed consolidated financial
statements are filed with this report:
Pro Forma Condensed Consolidated Balance
Sheet as of June 30, 1997 . . . . . . . . . . . . F-1
Pro Forma Condensed Consolidated Statements
of Income:
Year ended December 31, 1996 . . . . . . . . . F-2
Six Months Ended June 30, 1997 . . . . . . . . F-3
Notes to Pro Forma Consolidated Condensed
Financial Statements at June 30, 1997 and
for the six months ended June 30, 1997 and
the year ended December 31, 1996. . . . . . . . . F-4
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(c) Exhibits
2.1 - Asset Purchase Agreement by and among Dialysis Corporation
of America, Dialysis Services of Florida, Inc. - Fort Walton
Beach, DCA Medical Services, Inc., Dialysis Medical, Inc., Renal
Care Group, Inc., Renal Care Group of the Southeast, Inc. and
Henry M. Haire, M.D. (incorporated by reference to Dialysis
Corporation of America's Current Report on Form 8-K dated
November 12, 1997 ("DCA Form 8-K"), Item 7(c)(2.1)).
2.2 - Assignment and Assumption of Lease and Release by and among
Dialysis Services of Florida, Inc. - Fort Walton Beach, Renal
Care Group of the Southeast, Inc., Renal Care Group, Inc. and
JACO, L.C. dated October 31, 1997 (incorporated by reference to
the DCA Form 8-K, Item 7(c)(2.2)).
2.3 - Assignment and Assumption of In-Patient Hospital Agreement
between DCA Medical Services, Inc., Columbia Fort Walton Beach
Medical Center and Renal Care Group of the Southeast, Inc. dated
October 31, 1997 (incorporated by reference to the DCA Form 8-K,
Item 7(c)(2.3)).
2.4 - Assignment and Assumption of Lease and Release by and among
Dialysis Corporation of America, Renal Care Group of the South-
east, Inc., Renal Care Group, Inc. and B. Braun Medical, Inc.
dated October 31, 1997 (incorporated by reference to the DCA
Form 8-K, Item 7(c)(2.4)).
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.
MEDICORE, INC.
By: /s/ Daniel R. Ouzts
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DANIEL R. OUZTS, Vice President,
Treasurer, Principal Financial
Officer and Controller
Dated: November 12, 1997
<PAGE>
MEDICORE, INC.
PRO FORMA FINANCIAL INFORMATION
(Unaudited)
On October 31, 1997, the Company's 69% owned subsidiary, Dialysis Cor-
poration of America ("DCA"), sold (the "Sale") substantially all of the
assets of Dialysis Services of Florida, Inc. - Fort Walton Beach and
related operations to Renal Care Group of the Southeast, Inc. ("RCGSE")
for a price of $5,065,000, including $4,585,000 in cash and 13,873 shares
of the common stock of Renal Care Group ("RCG") of which RCGSE is a wholly-
owned subsidiary.
The following pro forma unaudited consolidated condensed financial
statements for the Company present the pro forma financial position at
June 30, 1997 and the pro forma results of operations for the six months
then ended, along with the pro forma results of operations for the year
ended December 31, 1996.
These pro forma unaudited consolidated condensed financial statements
give effect to the Sale as if it had occurred at the beginning of each
period for purposes of the condensed consolidated statements of income
and as if it had occurred at the end of the period for purposes of the
condensed consolidated balance sheet.
The pro forma unaudited consolidated condensed financial statements
do not purport to represent what the Company's actual results of opera-
tions would have been had the Sale occurred at the beginning of the
periods and may not be indicative of the Company's financial position
or operating results for any future periods.
No assumption has been included in the pro forma unaudited consoli-
dated condensed financial statements as to investment income to be
realized from investment of the proceeds of the sale or other use of
the proceeds. See Notes to Pro Forma Consolidated Condensed Financial
Statements.
The pro forma adjustments are based on currently available informa-
tion. The assumptions underlying the calculation of the pro forma
adjustments are considered appropriate under the circumstances. The
pro forma unaudited consolidated condensed financial statements should
be read in conjunction with the Company's Consolidated Financial
Statements and the Notes thereto for the year ended December 31, 1996,
along with Management's Discussion and Analysis of Financial Condition
and Results of Operations, which are included in the Company's Annual
Report on Form 10-K covering such year, and the Company's Condensed
Consolidated Financial Statements and the Notes thereto for the six
months ended June 30, 1997, along with Management's Discussion and
Analysis of Financial Condition and Results of Operations, which are
included in the Company's Quarterly Report on Form 10-Q covering such
period.
On July 31, 1997, Techdyne, Inc. ("Techdyne"), a subsidiary of the
Company, completed the acquisition of Lytton Incorporated ("Lytton")
pursuant to a Stock Purchase Agreement for $2,500,000 cash, financed
by Techdyne's refinanced bank line of credit, and 300,000 shares of
Techdyne Common Stock which had a fair market value of approximately
$1,031,000 based on the closing price of the common stock on the date
of acquisition, which shares are held by the former sole shareholder
of Lytton, Patricia Crossley ("Selling Shareholder"). The acquisition was
accounted for under the purchase method. Techdyne was 63% owned by the
Company prior to the acquisition and 59% owned by the
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MEDICORE, INC.
PRO FORMA FINANCIAL INFORMATION
(Unaudited)
Company subsequent to the acquisition. Techdyne has guaranteed that the
Selling Shareholder will realize a minimum of $2,000,000 from the sale of
the Techdyne Common Stock within twelve months from the closing of the
acquisition with the guaranteed sales proceeds amounting to $2,400,000
if certain earnings objectives are met by Lytton in a specified one year
period. The Stock Purchase Agreement also provides for incentive con-
sideration based on specific sales levels of Lytton for each of three
years as specified in the Agreement with any such consideration payable
in cash.
The pro forma unaudited consolidated condensed financial statements
do not reflect the Lytton acquisition. As indicated in the Company's
Current Report on Form 8-K/A#1 dated October 15, 1997, the Lytton acqui-
sition as it relates to the Company was not a significant transaction,
and therefore no financial statements of Lytton or pro forma information
of the Company were required to be filed by the Company. The Company
originally reported the Lytton acquisition in its Current Report on
Form 8-K dated August 14, 1997. Information regarding the Lytton
acquisition was filed in Techdyne's Current Report on Form 8-K dated
August 12, 1997 ("Techdyne Form 8-K") and the amendment thereto filed
on Form 8-K/A#1 dated October 3, 1997 ("Techdyne Form 8-K/A#1") containing
Lytton's financial statements and pro forma financial information of
Techdyne combined with Lytton which can be referred to in conjunction
with the pro forma adjustments from the DCA Sale of assets.
Lytton had total assets of approximately $7,073,000 as of March 31,
1997 with sales of $16,730,000 and net income of $621,000 for its fiscal
year then ended as reflected in its audited financial statements, and had
total assets of $6,865,000 as of June 30, 1997 with sales of $9,211,000
and net income of $427,000 as reflected in the pro forma information
included on the Techdyne Form 8-K/A#1.
<PAGE>
MEDICORE, INC.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
June 30, 1997
(Unaudited)
Pro Forma Adjusted
As Reported Adjustments Pro Forma
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Assets
Current Assets:
Cash and cash equivalents $8,775,063 $4,585,000 (A) $13,360,063
Marketable securities 655,948 655,948
Short-term investments 131,802 131,802
Accounts receivable 4,524,939 (328,000)(B) 4,196,939
Inventories, less
allowance for
obsolescence 4,160,429 (60,000)(B) 4,100,429
Prepaid expenses and
other current assets 684,446 684,446
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Total current assets 18,932,627 4,197,000 23,129,627
Property and Equipment:
Land and improvements 1,018,455 1,018,455
Building and building
improvements 3,111,712 3,111,712
Equipment and furniture 6,689,115 (508,000)(B) 6,181,115
Leasehold improvements 636,604 (134,000)(B) 502,604
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11,455,886 (642,000) 10,813,886
Less accumulated
depreciation and
amortization 5,044,697 (275,000)(B) 4,769,697
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6,411,189 (367,000) 6,044,189
Deferred expenses and
other assets 278,758 480,000 (A) 736,758
(22,000)(B)
Costs in excess of net
tangible assets acquired,
net 679,415 679,415
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$26,301,989 $4,288,000 $30,589,989
=========== ========== ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $2,787,201 $2,787,201
Accrued expenses and
other current
liabilities 1,483,665 50,000 (C) 1,533,665
Current portion of
long-term debt 666,093 (24,000)(B) 642,093
Income taxes payable 272,470 1,700,000 (D) 1,972,470
Deferred income taxes 249,260 249,260
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Total current liabilities 5,458,689 1,726,000 7,184,689
Long-term debt 1,762,464 (96,000)(B) 1,666,464
Deferred income taxes 2,188,757 2,188,757
Minority interest in
subsidiaries 3,982,502 1,199,000 (E) 5,181,502
Commitments and contingencies
Stockholders' Equity:
Common stock 54,569 54,569
Capital in excess of
par value 11,465,099 (42,000)(E) 11,423,099
Retained earnings 991,599 1,501,000 (F) 2,492,599
Foreign currency
translation adjustment (8,378) (8,378)
Unrealized gain on
marketable securities
for sale 406,688 406,688
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Total Stockholders' Equity 12,909,577 1,459,000 14,368,577
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$26,301,989 $4,288,000 $30,589,989
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MEDICORE, INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME
Six Months Ended June 30, 1997
(Unaudited)
Pro Forma Adjusted
As Reported Adjustments Pro Forma
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REVENUES
Sales $15,844,626 $ (992,189) $14,852,437
Gain on subsidiary
securities offering and
warrants exercise 89,898 89,898
Realized gain on sale of
marketable securities 49,493 49,493
Other income 290,742 (2,463) 288,279
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16,274,759 (994,652) 15,280,107
COST AND EXPENSES
Cost of goods sold 12,702,846 (610,201) 12,092,645
Selling, general and
administrative expenses 2,878,297 (180,680) 2,697,617
Interest expense 110,226 (6,741) 103,485
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15,691,369 (797,622) 14,893,747
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 583,390 (197,030) 386,360
Income tax benefit (39,867) (14,000) (53,867)
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INCOME BEFORE MINORITY
INTEREST 623,257 (183,030) 440,227
Minority interest in
earnings of consolidated
subsidiaries 241,204 (59,058) 182,146
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NET INCOME $ 382,053 $ (123,972) $ 258,081
=========== =========== ===========
Net income per share $.06 $.04
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Average common and dilutive
shares outstanding 5,890,978 5,890,978
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See notes to pro forma consolidated condensed financial statements.
<PAGE>
MEDICORE, INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME
Year Ended December 31, 1996
(Unaudited)
Pro Forma Adjusted
As Reported Adjustments Pro Forma
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REVENUES
Sales $29,680,520 $(2,007,563) $27,672,957
Gain on securities
offering of subsidiaries 1,521,127 1,521,127
Realized gain on sale
of marketable securities 2,583,500 2,583,500
Other income 934,259 (27,168) 907,091
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34,719,406 (2,034,731) 32,684,675
COST AND EXPENSES
Cost of goods sold 24,247,403 (1,195,820) 23,051,583
Selling, general and
administrative expense 6,211,485 (451,468) 5,760,017
Interest expense 217,615 (1,096) 216,519
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30,676,503 (1,648,384) 29,028,119
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INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 4,042,903 (386,347) 3,656,556
Income tax provision 1,350,746 1,350,746
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INCOME BEFORE MINORITY
INTEREST 2,692,157 (386,347) 2,305,810
Minority interest in income
of consolidated subsidiaries 274,888 (86,221) 188,667
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NET INCOME $ 2,417,269 $ (300,126) $ 2,117,143
=========== =========== ===========
Earnings per share:
Primary $.40 $.35
==== ====
Fully diluted $.39 $.34
==== ====
Average common and dilutive
shares outstanding:
Primary 6,031,004 6,031,004
========= =========
Fully diluted 6,139,303 6,139,303
========= =========
See notes to pro forma consolidated condensed financial statements.
<PAGE>
MEDICORE, INC.
NOTES TO PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
The pro forma unaudited consolidated condensed financial statements
of income reflect the pro forma results of operations of the Company as
though the Sale had occurred at the beginning of each period presented
and reflects the removal of results of operations related to the business
operations sold. For purposes of the pro forma statements of operations,
no assumption has been made that expenses have been eliminated which were
included in corporate expense allocations by DCA and the Company to the
business operations sold and which were included in the actual results of
operations of these businesses. Such expenses which amounted to approxi-
mately $70,000 for the six months ended June 30, 1997 and $253,000 for
the year ended December 31, 1996 have accordingly not been removed by
the pro forma adjustments eliminating the results of operations of the
businesses sold.
The pro forma consolidated condensed balance sheet reflects the pro
forma financial position of the Company at June 30, 1997 as if the Sale
occurred on June 30, 1997 and includes adjustments for the following items:
(A) Proceeds of the Sale.
(B) Elimination of assets sold and related liabilities assumed and
intangibles related to the operations sold.
(C) Accrual of estimated costs of the transaction.
(D) Estimated income tax liability resulting from the Sale.
(E) Total effect on minority interest consisting of DCA minority interest
in the transaction of $671,000 based on net effect on DCA retained
earnings of $2,172,000 and minority interest of the subsidiaries
whose assets were sold of $528,000.
(F) Net effect of estimated after tax gain of approximately $2,700,000
based on pre-tax gain of approximately $4,400,000, related estimated
income taxes of approximately $1,700,000, minority interest of the
subsidiaries whose assets were sold in the net after tax gain of
approximately $528,000, and DCA minority interest of approximately
$671,000 in the net effect of $2,172,000 of these transactions on
DCA retained earnings.
The actual gain to be recorded as of October 31, 1997 may differ from
the estimated gain reflected in the June 30, 1997 pro forma consolidated
condensed balance sheet.
No assumption has been included in the pro forma unaudited consolida-
ted condensed financial statements as to investment income to be realized
from investment of the proceeds of the Sale or other use of the proceeds.
If the estimated after tax proceeds of $2,885,000, based on $4,585,000
cash proceeds at closing and estimated income taxes of $1,700,000, were
assumed to have been invested in short-term Treasury bills at the current
estimated yield of 5.15% for the entire periods presented pending decision
as to other investment of the funds, estimated interest income of $74,000
for the six months ended June 30, 1997, and $148,000 for the year ended
December 31, 1996, would have been earned and pro forma results of
<PAGE>
operations would have been as follows, assuming no income tax applicable
to the periods presented since DCA would have been in a loss position:
Other income $ 362,279 $ 1,055,091
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Total revenues $15,354,107 $32,832,675
=========== ===========
Income before minority
interest $ 514,227 $ 2,453,810
=========== ===========
Net income $ 299,148 $ 2,199,277
=========== ===========
Net income per share $.05 $.36
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