<PAGE>
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) December 30, 1999
HEALTHSTAR CORP.
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(Exact name of registrant as specified in its charter)
Delaware 0-19499 91-1934592
- ---------------------------- --------------- -----------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
15720 North Greenway Hayden Loop, Suite 1,
Scottsdale, Arizona 85260
------------------------------------- -------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (480) 451-8575
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(Former name or former address, if changed since last report.)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA INFORMATION AND EXHIBITS
(b) Pro Forma Financial Information (unaudited)
(i) Pro Forma Condensed Consolidated Balance Sheet (December 31,
1999);
(ii) Pro Forma Condensed Consolidated Statement of Operations
(Year ended March 31, 1999);
(iii) Pro Forma Condensed Consolidated Statement of Operations
(For Nine Months ended December 31, 1999); and
(iv) Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements.
(c) Exhibits
99.1 Pro Forma Financial Information Identified on Item 7(b).
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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.
HEALTHSTAR CORP.,
a Delaware corporation
/s/ STEVEN A. MARCUS
------------------------------------
Steven A. Marcus
Vice President and Chief Financial
Officer
Date: March 31, 2000
3
<PAGE>
HEALTHSTAR CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
The Unaudited Pro Forma Condensed Financial Statements are intended to
show the financial condition and the operating results of the remaining entity
assuming that the sales of HealthStar Corp.'s two subsidiaries occurred as of
the dates indicated. The Unaudited Pro Forma Condensed Consolidated Statements
of Operations set forth herein present the results of operations of HealthStar
Corp., assuming that the sale of HealthStar, Inc. occurred on April 1, 1998, for
the operating statements for the year ended March 31, 1999 and the nine months
ended December 31, 1999. The December 31, 1999 Unaudited Pro Forma Condensed
Consolidated Balance Sheet set forth herein presents the financial position of
the company assuming the sale of HealthStar Inc. occurred on December 31, 1999.
Adjustments necessary to reflect these assumptions and to restate the historical
consolidated balance sheet and results of operations are presented in the Pro
Forma Adjustments columns, which are further described in the Notes to Unaudited
Pro Forma Condensed Consolidated Financial Statements.
On December 30, 1999, the Company sold all of the assets of its
wholly owned subsidiary National Health Benefits & Casualty Corp. ("NHBC") to
Carlmont Capital Group, Inc., a California based company. The Company
received $1,500,000 in cash at closing and an earnout agreement that may
provide up to an additional $300,000 in cash, based on the actual cash flows
of NHBC over the next 18 months. The Company recorded a gain on the
disposition of assets of $1,145,746. The Unaudited Pro Forma Condensed
Consolidated Statements of Operations assume that the sale of NHBC occurred
on April 1, 1998 and therefore, the operating results of NHBC from that date
through December 30, 1999 (the date upon which the sale was consummated) have
been excluded. The sale of NHBC has been effected in the balance sheet at
December 31, 1999.
The historical financial information for HealthStar Corp. is derived
from the consolidated financial statements of HealthStar Corp. as of and for the
year ended March 31, 1999, and the unaudited consolidated financial statements
of HealthStar Corp. as of and for the nine months ended December 31, 1999.
The Unaudited Pro Forma Condensed Consolidated Financial Statements are
based on certain assumptions and adjustments described in the related Notes to
Unaudited Pro Forma Condensed Consolidated Financial Statements and should be
read in conjunction with the Stock Purchase Agreement and the HealthStar Corp.
audited and unaudited historical financial statements and notes thereto.
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HEALTHSTAR CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<CAPTION>
HEALTHSTAR
INC.
PRO FORMA TOTAL
ASSETS ACTUAL ADJUSTMENTS PRO FORMA
------------- ------------- ---------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 299,783 $ 8,880,000 (1a)
(196,730) (1b,3a)
(300,000) (1c)
(1,325,000) (1d) 7,358,053
Trade accounts receivable, net 1,537,176 (1,437,176) (3b) 100,000
Other current assets 372,906 (186,518) (3c) 186,388
------------- ------------- ---------------
Total current assets 2,209,865 5,434,576 7,644,441
Property and equipment, net 1,893,835 (1,863,575) (3d) 30,260
Goodwill, net 7,674,809 (7,674,809) (3e) -
Other assets, at cost 166,179 (32,823) (3f) 133,356
------------- ------------- ---------------
Total assets $11,944,688 $(4,136,631) $ 7,808,057
============= ============= ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 509,064 $ (420,444) (3g) $ 88,620
Accrued expenses 1,203,783 (779,861) (3h) 423,922
Current portion of long-term debt 1,525,000 (1,325,000) (1d) 200,000
------------- ------------- ---------------
Total current liabilities 3,237,847 (2,525,305) 712,542
Shareholders' equity:
Common stock, $.001 par value, 15,000,000
shares authorized,
4,145,872 shares issued and outstanding 4,146 4,146
Additional paid-in capital 8,727,428 8,727,428
Accumulated deficit (24,733) 8,880,000 (2a)
(300,000) (2b)
(10,191,326) (2c) (1,636,059)
------------- ------------- ---------------
Total shareholders'
equity 8,706,841 (1,611,326) 7,095,515
------------- ------------- ---------------
Total liabilities and
shareholders' equity $11,944,688 $(4,136,631) $ 7,808,057
============= ============= ===============
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements
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<PAGE>
HEALTHSTAR CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
NHBC HEALTHSTAR INC.
PRO FORMA PRO FORMA TOTAL
ACTUAL ADJUSTMENTS TOTAL ADJUSTMENTS PRO FORMA
------------- -------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Revenues:
Capitated fees $ 9,481,392 $ (152,372) (1) $ 9,329,020 $ (9,329,020) (4) $ -
Repricing fees 6,893,519 (2,480,084) (1) 4,413,435 (4,413,435) (4) -
Other income 540,381 (21,414) (1) 518,967 (518,967) (4) -
------------- -------------- --------------- --------------- ---------------
16,915,292 (2,653,870) 14,261,422 (14,261,422) -
------------- -------------- --------------- --------------- ---------------
Operating expenses:
Cost of services 2,434,238 (804,593) (1) 1,629,645 (1,629,645) (4)
Salaries and wages 8,202,561 (782,762) (1) 7,419,799 (7,057,803) (4) 361,996
General and administrative 4,877,761 (346,936) (1) 4,530,825 (3,998,246) (4) 532,579
Depreciation and amortization 1,214,204 (51,353) (1) 1,162,851 (1,149,617) (4) 13,234
------------- -------------- --------------- --------------- ---------------
16,728,764 (1,985,644) 14,743,120 (13,835,311) 907,809
------------- -------------- --------------- --------------- ---------------
Income (loss) from operations 186,528 (668,226) (481,698) (426,111) (907,809)
Non-operating income (expense
Interest expense (397,165) (228) (1) (397,393) 394,832 (4) (2,561)
Loss on sale of investment (59,626) (59,626) (59,626)
------------- -------------- --------------- --------------- ---------------
Income (loss) before income taxes (270,263) (668,454) (938,717) (31,279) (969,996)
Income tax expense (benefit) (94,593) (233,959) (1) (328,552) (10,948) (4) (339,499)
------------- -------------- --------------- --------------- ---------------
Net earnings (loss) $ (175,670) $ (434,495) $ (610,165) $ (20,331) $ (630,497)
============= ============== =============== =============== ===============
Earnings (loss) per share - basic and dilute $ (0.05) $ (0.19) $ (0.20)
============= =============== ===============
Weighted average shares outstanding - basic and
diluted 3,216,676 3,216,676 3,216,676
============= =============== ===============
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements
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HEALTHSTAR CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
NHBC HEALTHSTAR INC.
PRO FORMA PRO FORMA TOTAL
ACTUAL ADJUSTMENTS TOTAL ADJUSTMENTS PRO FORMA
------------- -------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Revenues:
Capitated fees $ 6,201,906 $ (12,849) (1) $ 6,189,057 (6,189,057) (4) -
Repricing fees 4,294,089 (1,825,285) (1) 2,468 (2,468,804) (4) -
Other income 222,138 (963) (1) 221,175 (221,175) (4) -
------------- -------------- --------------- --------------- ---------------
10,718,133 (1,839,097) 8,879,036 (8,879,036) -
------------- -------------- --------------- --------------- ---------------
Operating expenses:
Cost of services 1,401,696 (541,869) (1) 859,827 (859,827) (4)
Salaries and wages 5,570,288 (469,801) (1) 5,100,487 (4,832,060) (4) 268,427
General and administrative 3,091,327 (243,859) (1) 2,847,468 (2,620,719) (4) 226,749
Depreciation and amortization 937,513 (34,669) (1) 902,844 (898,965) (4) 3,879
------------- -------------- --------------- --------------- ---------------
11,000,824 (1,290,198) 9,710,626 (9,211,571) 499,055
------------- -------------- --------------- --------------- ---------------
Income (loss) from operations (282,691) (548,899) (831,590) 332,535 (499,055)
Non-operating income (expense)
Interest expense (230,600) (1,203) (1) (231,803) 231,803 (4) -
Gain on disposition of assets 1,145,748 (1,145,748) (1) - -
Asset impairment charge (650,000) (650,000) 650,000 (4) -
------------- -------------- --------------- --------------- ---------------
Income (loss) before income taxes (17,543) (1,695,850) (1,713,393) 1,214,338 (499,055)
Income tax expense (benefit) 223,893 (593,548) (1) (369,655) 425,018 (4) 55,363
------------- -------------- --------------- --------------- ---------------
Net earnings (loss) $ (241,436) $(1,102,302) $ (1,343,738) $ 789,320 $ (554,418)
============= ============== =============== =============== ===============
Earnings (loss) per share - basic and diluted $ (0.06) $ (0.35) $ 0.14
============= =============== ===============
Weighted average shares outstanding - basic and
diluted 3,879,378 3,879,378 3,879,378
============= =============== ===============
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements
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<PAGE>
HEALTHSTAR CORP.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
HealthStar Corp. has entered into an agreement with Beyond Benefits,
Inc. to sell all of the stock of HealthStar Inc. to Beyond Benefits, Inc. for
$8,880,000 in cash. The agreement is subject to the approval of the shareholders
of HealthStar Corp.
All pro forma adjustments have been prepared assuming that the sale of
HealthStar Inc. occurred on April 1, 1998 for the statements of operations and
on December 31, 1999 for balance sheet purposes. The financial statements as of
and for the nine-month period ended December 31, 1999 reflect $650,000 of asset
impairment charges that were made prior to the finalization of the current sales
price. As a result of the most recent amendment to the Stock Purchase Agreement,
the sale of HSI is expected to create a loss on sale of approximately
$1,600,000. The Company expects to take this loss as an additional asset
impairment charge in the quarter ending March 31, 2000.
On December 30, 1999 the Company sold the assets of NHBC to Carlmont
Capital Group, Inc., a privately-held company that is not affiliated with the
Company, for $1,500,000 cash. The Company also received an earnout agreement
which may generate an additional $300,000 through June 29, 2001. Management
assigned no value to the earnout provision. The Company recorded a gain on
disposition of assets of $1,145,746. The Unaudited Pro Forma Condensed
Consolidated Statements of Operations have been prepared in a manner consistent
with the HealthStar, Inc. sale. The sale of NHBC has been effected in the
balance sheet at December 31, 1999.
The unaudited pro forma condensed consolidated financial statements
assume the following:
<TABLE>
<CAPTION>
HEALTHSTAR INC.
TRANSACTION DATE APRIL 1, 1998 DECEMBER 31,1999
------------- ----------------
<S> <C> <C>
Cash $ 8,880,000 $ 8,880,000
Transaction and related costs (300,000) (300,000)
Net assets of HealthStar, Inc. (11,501,481) (10,191,326)
------------ ------------
Loss on sale $ (2,921,481) $ (1,611,326)
============ ============
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
NHBC Adjustments:
(1) To record the effect of eliminating the results of NHBC, the
net effect of which is assumed to be tax effected at the
expected rate of 35%.
<S> <C>
HealthStar, Inc. Adjustments:
(1) To record cash received from sale and payment of debt:
(a) Cash received for sale of HealthStar Inc. $ 8,880,000
(b) Elimination of HealthStar Inc. cash at December 31, 1999 (196,730)
(c) Transaction and related costs (300,000)
(d) Payoff Harris Bank indebtedness (1,325,000)
-----------
$ 7,058,053
(2) To record the loss on sale (no tax benefit is expected to be
realized):
(a) Cash received from the sale of HealthStar Inc. $ 8,880,000
(b) Transaction and related costs (300,000)
(c) Net assets of HealthStar Inc. (10,191,326)
-------------
$ (1,611,326)
==============
(3) To record the disposition of the assets and liabilities of
HealthStar, Inc. The composition of the December 31, 1999 net
assets of HealthStar, Inc. is as follows:
(a) Cash $ 196,730
(b) Trade accounts receivable, net 1,437,176
(c) Other current assets 186,518
(d) Property and equipment, net 1,863,575
(e) Goodwill, net 7,674,809
(f) Other assets 32,823
-------------
Total assets 11,391,631
(g) Accounts payable (420,444)
(h) Accrued expenses (779,861)
Net assets $ 10,191,326
(4) To record the effect of eliminating the results of HealthStar
Inc., the net effect of which is assumed to be tax effected at
the expected rate of 35%.
</TABLE>
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<PAGE>
Comparative Per Share Data
(Unaudited)
The following table reflects the historical net income (loss) per share
from the continuing operations after giving effect to the sale of the NHBC
assets and the planned sale of HealthStar, Inc. The information presented in
this table should be read in conjunction with the pro forma financial data
appearing elsewhere herein and the Company's consolidated financial statements
included in the Company's annual report on Form 10-KSB for the year ended
March 31, 1999.
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
MARCH 31, 1999 DECEMBER 31, 1999
-------------- -----------------
<S> <C> <C>
Net income (loss) per share $(0.05) $(0.06)
Pro Forma income (loss) per share (0.20) (0.14)
Historical book value per share 0.25
Pro Forma book value per share 1.71
</TABLE>
Book value per share is computed at December 31, 1999 by measuring
tangible book value (historical shareholders' equity of $8,706,841 less goodwill
of $7,674,809 divided by 4,145,872 shares outstanding; and pro forma
shareholders' equity of $7,095,515 less goodwill of $0 divided by 4,145,872
shares outstanding).
10
