<PAGE> 1
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: DECEMBER 24, 1997
COMMISSION FILE NUMBER: 01-9723
PHARMACEUTICAL MARKETING SERVICES INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 51-0335521
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
SUITE 912, 45 ROCKEFELLER PLAZA, NEW YORK 10111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 841 0610
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Pharmaceutical Marketing Services Inc. ("PMSI" or the "Company") announced on
August 20, 1997 that it had signed definitive agreements to acquire Source
Informatics European Holdings L.L.C. ("Source Europe"), a development stage
business, from Source Informatics Inc. ("Source") and to sell its minority
interest in the venture with Source in the United States ("Source US"), together
with its OTC Physician Survey business ("OTC"), to National Data Corporation
(NYSE:NDC). On December 15, 1997 the Company announced that, following the
approval of its shareholders, this transaction had been consummated.
Under the terms of the three-way transaction, the Company received (i) the
entire Source Europe business; (ii) 918,254 PMSI common shares held by Source,
which PMSI now holds as treasury stock; (iii) $15.5 million in cash; and (iv)
1,084,950 NDC shares with a market value on December 15, 1997 of $35.3 million.
The total cash consideration paid by the Company to acquire the Source Europe
business was $6.4 million, representing forgiveness of loans under a line of
credit extended by PMSI to Source Europe during the period since September 30,
1997.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Information
1. Unaudited Pro Forma Condensed Consolidated Balance Sheet at
September 30, 1997.
2. Unaudited Pro Forma Condensed Consolidated Statement of Operations
for the Three Months ended September 30, 1997.
3. Unaudited Pro Forma Condensed Consolidated Statement of Operations
for the Fiscal Year ended June 30, 1997.
4. Notes to the Pro Forma Condensed Consolidated Financial Statements.
5. Consolidated Financial Statements of Source Informatics European
Holdings L.L.C. for the years ended June 30, 1995, 1996 and 1997.
6. Unaudited Financial Statements of Source Informatics European
Holdings L.L.C. for the three months ended September 30, 1996 and
1997 and for the period from inception (January 1, 1994) through
June 30, 1997.
(c) Exhibits
2. Stock Purchase Agreement, dated as of August 20, 1997, by and among
National Data Corporation, PMSI Database Holdings Inc. and
Pharmaceutical Marketing Services Inc., the sole stockholder of PMSI
Database Holdings Inc. ("The Stock Purchase Agreement").
Securities Transfer Agreement, dated August 20, 1997, as amended, by
and among Pharmaceutical Marketing Services Inc. and Source
Informatics Inc. ("The Securities Transfer Agreement").
99.1 Press Release dated December 15, 1997.
1
<PAGE> 3
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 thereunto duly authorized.
PHARMACEUTICAL MARKETING SERVICES INC.
Date: December 24, 1997 By: Raymund M. Davies
Treasurer and Chief
Financial Officer
2
<PAGE> 4
PRO FORMA FINANCIAL INFORMATION
The following unaudited proforma condensed consolidated financial statements
give effect to the sale of the OTC business and PMSI's minority interest in
Source US, pursuant to the Stock Purchase Agreement, and the acquisition of
Source Europe pursuant to the Securities Transfer Agreement. The unaudited
proforma condensed consolidated balance sheet reflects these transactions as if
they had occurred on September 30, 1997. The unaudited proforma condensed
consolidated statements of operations combine the historical results of
operations of PMSI and Source Europe, after giving effect to the sale of the OTC
business and Source US, for the quarter ended September 30, 1997 and for the
year ended June 30, 1997, as if these transactions had occurred on July 1, 1996.
The unaudited proforma condensed consolidated financial statements do not
reflect cost savings, synergies and tax planning opportunities which may be
achieved from the acquisition of Source Europe, nor do they purport to be
indicative of the operating results or financial position that would have been
achieved had the transactions referred to above been affected for the periods
indicated or the results or financial position which may be obtained in the
future.
The unaudited condensed consolidated financial statements are based on and
should be read in conjunction with the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1997 and its Quarterly Report on Form 10-Q for
the fiscal quarter ended September 30, 1997 previously filed with the Securities
and Exchange Commission ("the PMSI Reports") and the consolidated financial
statements of Source Europe included in this Report.
The following pro forma financial information is provided:
1. Unaudited Pro Forma Condensed Consolidated Balance Sheet at
September 30, 1997.
2. Unaudited Pro Forma Condensed Consolidated Statement of Operations
for the Three Months ended September 30, 1997.
3. Unaudited Pro Forma Condensed Consolidated Statement of Operations
for the Fiscal Year ended June 30, 1997.
4. Notes to the Pro Forma Condensed Consolidated Financial Statements.
3
<PAGE> 5
PHARMACEUTICAL MARKETING SERVICES INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
SALE OF ACQUISITION
PMSI AS SOURCE US OF SOURCE CONSOLIDATED
REPORTED AND OTC EUROPE ADJUSTMENTS PROFORMA
-------- --------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 28,910 $ (219) $ 1,648 $13,852 $ 44,191
Marketable securities 33,146 -- -- -- 33,146
Accounts receivable 19,577 (7,622) 802 -- 12,757
Work in process 1,619 (242) -- -- 1,377
Prepaid expenses and other
current assets 7,999 -- 204 (1,898) 6,305
Net current assets held for sale 989 -- -- -- 989
-------- -------- -------- ------- --------
Total current assets 92,240 (8,083) 2,654 11,954 98,765
Marketable securities 9,493 -- -- 35,328 44,821
Property and equipment, net 12,116 (4,378) 545 -- 8,283
Goodwill, net 22,931 -- -- -- 22,931
Other assets, net 6,222 (4) 1,036 -- 7,254
Net assets held for sale 18,721 -- -- -- 18,721
-------- -------- -------- ------- --------
Total assets $161,723 $(12,465) $ 4,235 $47,282 $200,775
======== ======== ======== ======= ========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities
Current maturities of long-term debt $ 633 $ (553) -- -- $ 80
Accounts payable 3,156 (353) $ 1,706 -- 4,509
Accrued liabilities 8,053 (861) 4,485 $11,375 23,052
Accrued income taxes on sale of
Source US and OTC -- -- -- 13,379 13,379
Unearned income 14,150 (4,920) 11,479 -- 20,709
-------- -------- -------- ------- --------
Total current liabilities 25,992 (6,687) 17,670 24,754 61,729
Long-term debt 70,081 (1,046) 35 -- 69,070
Other liabilities 497 -- -- -- 497
Amounts due to Source -- -- 9,149 (9,149) --
Amounts due to PMSI -- -- 1,898 (1,898) --
-------- -------- -------- ------- --------
Total liabilities 96,570 (7,733) 28,752 13,707 131,296
Total stockholders' equity (deficit) 65,153 (4,732) (24,517) 33,575 69,479
-------- -------- -------- ------- --------
Total liabilities and stockholders'
equity (deficit) $161,723 $(12,465) $ 4,235 $47,282 $200,775
======== ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these proforma condensed
consolidated financial statements
4
<PAGE> 6
PHARMACEUTICAL MARKETING SERVICES INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
SALE OF ACQUISITION
PMSI AS SOURCE US OF SOURCE CONSOLIDATED
REPORTED AND OTC EUROPE ADJUSTMENTS PROFORMA
-------- ------- ------ ----------- --------
<S> <C> <C> <C> <C> <C>
Revenue $ 20,093 $(6,235) $ 778 $ (37) $ 14,599
Operating expenses (20,061) 5,509 (5,432) 37 (19,947)
-------- ------- ------- ----- --------
Operating income (loss) 32 (726) (4,654) -- (5,348)
Gain on sale of operations 2,631 -- -- -- 2,631
Interest and other income 871 (12) 9 -- 888
Interest expense (1,166) 45 (1) -- (1,122)
-------- ------- ------- ----- --------
Income (loss) from continuing operations
before income taxes 2,368 (693) (4,646) -- (2,971)
Income tax provision 105 277 -- -- 382
-------- ------- ------- ----- --------
Net income (loss) from continuing operations $ 2,473 $ (416) $(4,646) $ -- $ (2,589)
======== ======= ======= ===== ========
Net income (loss) per share:
Continuing operations $ 0.18 $ (0.21)
======== ========
Common stock and common stock
equivalents 13,498 (918) 12,580
======== ===== ========
</TABLE>
The accompanying notes are an integral part of these proforma condensed
consolidated financial statements
5
<PAGE> 7
PHARMACEUTICAL MARKETING SERVICES INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
SALE OF ACQUISITION
PMSI AS SOURCE US OF SOURCE CONSOLIDATED
REPORTED AND OTC EUROPE ADJUSTMENTS PRO FORMA
-------- --------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Revenue $ 98,485 $(25,009) $ 407 $(125) $ 73,758
Operating expenses (90,961) 19,091 (20,985) 125 (92,730)
-------- -------- -------- ----- --------
Operating income (loss) 7,524 (5,918) (20,578) -- (18,972)
Interest and other income 3,299 (91) 59 -- 3,267
Interest expense (3,490) 147 (477) 477 (3,343)
-------- -------- -------- ----- --------
Income from continuing operations
before income taxes 7,333 (5,862) (20,996) 477 (19,048)
Income tax provision (2,655) 2,333 -- -- (322)
Minority interest (17) -- -- -- (17)
-------- -------- -------- ----- --------
Net income (loss) from continuing operations $ 4,661 $ (3,529) $(20,996) $ 477 $(19,387)
======== ======== ======== ===== ========
Net income (loss) per share:
Continuing operations $ 0.35 $ (1.57)
======== ========
Common stock and common stock
equivalents 13,297 (918) 12,379
======== ===== ========
</TABLE>
The accompanying notes are an integral part of these pro forma condensed
consolidated financial statements
6
<PAGE> 8
PHARMACEUTICAL MARKETING SERVICES INC.
NOTES TO PROFORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
(Unaudited)
1. PROFORMA BASIS OF PRESENTATION AND ADJUSTMENTS
The unaudited proforma condensed consolidated financial statements present
the Company's sale to NDC of (i) the OTC Business and (ii) the Company's
interest in Source US, for aggregate proceeds of $6,500 in cash and 1,084,950
registered shares of NDC Common Stock. In addition, the unaudited proforma
condensed consolidated financial statements present the acquisition of Source
Europe, where, in return for assuming the net liabilities of Source Europe and
canceling certain loans under a line of credit made by PMSI in favor of Source,
the Company received $9,000 of cash and an aggregate of 918,254 shares of
Company Common Stock previously owned by Source.
The unaudited proforma condensed consolidated balance sheet at September
30,1997 reflects (i) the divestiture of the OTC Business and the Company's
interest in Source US and (ii) the acquisition of Source Europe, as if these
transactions had occurred on September 30, 1997.
The unaudited proforma condensed consolidated statements of operations for
the quarter ended September 30, 1997 and for the year ended June 30, 1997
reflect (i) the divestiture of the OTC Business and the Company's interest in
Source US and (ii) the acquisition of Source Europe, as if these transactions
had occurred on July 1, 1996.
The unaudited proforma condensed consolidated financial statements are
intended for information purposes and are not necessarily indicative of the
future consolidated financial position or future results of operations, nor do
they purport to be indicative of the operating results or financial position
that would have been achieved had the transactions referred to above been
effective from the periods indicated. These proforma condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto of Source Informatics European Holdings
L.L.C. included elsewhere in this Report, and the PMSI Reports.
2. UNAUDITED PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET
The adjustments reflect the proceeds and estimated transaction costs of the
divestiture of the OTC Business and the Company's interest in Source US, as well
as the estimated liabilities assumed, cash received and transaction costs
incurred related to the acquisition of Source Europe as at September 30, 1997.
a) DIVESTITURE OF THE OTC BUSINESS AND THE COMPANY'S INTEREST IN SOURCE US
The adjustments related to the divestiture of the OTC Business and the
Company's interest in Source US include:
(i) $6,500 cash proceeds from NDC,
(ii) 1,084,950 shares of NDC Common Stock with a total value of $35,328
based on a December 15, 1997 market value of $32.562 per share, and
(iii) $4,464 related to estimated transaction costs, including
investment banking fees, legal fees, accountants' fees, bonuses and
related out-of-pocket expenses.
7
<PAGE> 9
PHARMACEUTICAL MARKETING SERVICES INC.
NOTES TO PROFORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except per share data)
(Unaudited)
2. UNAUDITED PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
The proforma condensed consolidated balance sheet includes a non-recurring
after-tax gain of $19,253 on the divestiture, reflecting an effective tax rate
of 41%. The estimated after-tax gain has been intentionally omitted from the
proforma condensed consolidated statements of operations and is subject to
finalization.
b) ACQUISITION OF SOURCE EUROPE
The proforma condensed consolidated balance sheet reflects the acquisition
of Source Europe using the purchase method of accounting. The excess of $6,433
of the purchase consideration over the fair value of the net assets is presented
as an in-process research and development write down. The ultimate allocation of
the purchase price to net assets acquired, in-process research and development,
other intangible assets and goodwill is subject to final determination of their
respective fair values.
The adjustments related to the acquisition of Source Europe reflect (i)
$9,000 of cash contributed by Source to Source Europe, (ii) 918,254 shares of
Company Common Stock, held by Source, contributed to Source Europe, (iii) the
cancellation of certain loans under a line of credit made by PMSI to Source,
totalling $6,433, of which $1,500 had been advanced to Source at September 30,
1997, which formed the purchase consideration on closure of the deal, (iv) the
cancellation of loans totalling $9,149 from Source to Source Europe net of an
adjustment of $1,648 to reflect cash and cash equivalents on hand and (v) $1,978
related to estimated transaction costs, including legal fees, accountants' fees
and related expenses.
The Company Common Stock to be contributed by Source to Source Europe has
been valued in the adjustments at $8,494 based on the December 15, 1997 closing
price of $9.25. A further adjustment has been recorded to reclassify the fair
value of the Company Common Stock from marketable securities to treasury stock
in the proforma condensed consolidated balance sheet.
The adjustments also reflect the elimination of a net receivable due to PMSI
from Source Europe totalling $1,898, including $1,500 advanced to Source under a
line of credit during the quarter ended September 30, 1997.
8
<PAGE> 10
PHARMACEUTICAL MARKETING SERVICES INC.
NOTES TO PROFORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except per share data)
(Unaudited)
2. UNAUDITED PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
The following table presents the adjustments described in Note 2 to the proforma
condensed consolidated balance sheet by respective balance sheet accounts:
<TABLE>
<CAPTION>
Adjustment
Adjustments Adjustments per Proforma
Sale of Acquisition Condensed
Source US of Source Consolidated
and OTC Europe Balance
Note Note 2a Note 2b Sheet
------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Cash and cash equivalents 2a(i) $ 6,500 $ 6,500
2b(i) -- $ 9,000 9,000
2b(iv) -- (1,648) (1,648)
--------- --------- ---------
$ 6,500 $ 7,352 $ 13,852
========= ========= =========
Prepaid expenses and other
current assets 2b -- $ (1,898) $ (1,898)
========= ========= =========
Marketable securities 2a(ii) $ 35,328 $ 35,328
2b -- 8,494 8,494
2b -- (8,494) (8,494)
--------- --------- ---------
$ 35,328 $ -- $ 35,328
========= ========= =========
Accrued liabilities 2a(iii) $ 4,464 $ 4,464
2b(iii) -- $ 4,933 4,933
2b(v) -- 1,978 1,978
--------- --------- ---------
$ 4,464 $ 6,911 $ 11,375
========= ========= =========
Accrued income taxes on sale of
Source US and OTC 2a $ 13,379 -- $ 13,379
========= ========= =========
Amounts due to Source Informatics 2b(iv) -- $ (9,149) $ (9,149)
========= ========= =========
Amounts advanced under line of
credit 2b -- $ (1,500) $ (1,500)
Amounts due to PMSI companies 2b -- (398) (398)
--------- --------- ---------
-- $ (1,898) $ (1,898)
========= ========= =========
Stockholders' equity 2a $ 19,253 $ 19,253
2b -- $ (8,494) (8,494)
Stockholders' equity:
In-process research and
development 2b -- (6,433) (6,433)
Source Europe -- 24,517 24,517
Source US and OTC 4,732 -- 4,732
--------- --------- ---------
$ 23,985 $ 9,590 $ 33,575
========= ========= =========
</TABLE>
9
<PAGE> 11
PHARMACEUTICAL MARKETING SERVICES INC.
NOTES TO PROFORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except per share data)
(Unaudited)
3. UNAUDITED PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 1997
The adjustment eliminates data purchases made by Source Europe from PMSI
during the three months ended September 30, 1997, totalling $37.
The reduction of 918,254 shares of Company Common Stock and common stock
equivalents reflects the reclassification to treasury stock of the shares of
Company Common Stock received in the acquisition of Source Europe.
The anticipated post-tax gain on the sale of the Company's interest in
Source US and the OTC Business of $19,253 is not reflected in the proforma
condensed consolidated statement of operations. Similarly, anticipated income
relating to the investment of the sale proceeds is excluded.
There has been no apportionment of corporate overhead to the results of
PMSI's interest in Source US and the OTC Business. Such an allocation would have
reduced the reported operating profit of the businesses to be disposed.
4. UNAUDITED PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE
YEAR ENDED JUNE 30, 1997
The adjustments comprise the elimination of data purchases made by Source
Europe from PMSI during the twelve months ended June 30, 1997, totalling $125,
and interest expense of $477 arising on loans from Source to Source Europe,
canceled on closing.
The reduction of 918,254 shares of Company Common Stock and common stock
equivalents reflects the reclassification to treasury stock of the shares of
Company Common Stock received in the acquisition of Source Europe.
The anticipated post-tax gain on the sale of the Company's interest in
Source US and the OTC Business of $19,253 is not reflected in the proforma
condensed consolidated statement of operations. Similarly, anticipated income
relating to the investment of the sale proceeds is excluded.
There has been no apportionment of corporate overhead to the results of
PMSI's interest in Source US and the OTC Business. Such an allocation would have
reduced the reported operating profit of the businesses to be disposed.
10
<PAGE> 12
SOURCE INFORMATICS EUROPEAN HOLDINGS L.L.C. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Accountants F-2
Consolidated Balance Sheets as of June 30, 1996 and 1997 F-3
Consolidated Statements of Operations for the years ended June 30, 1995,
1996 and 1997 F-4
Consolidated Statements of Stockholder Deficit for the years ended June 30,
1995,1996 and 1997 F-5
Consolidated Statements of Cash Flows for the years ended June 30, 1995,
1996 and 1997 F-6
Notes to the Consolidated Financial Statements F-7
</TABLE>
F-1
<PAGE> 13
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of Source Informatics European
Holdings L.L.C.
We have audited the accompanying consolidated balance sheets of Source
Informatics European Holdings L.L.C. and Subsidiaries (a development stage
enterprise) as of June 30, 1996 and 1997, and the related consolidated
statements of operations, stockholder deficit and cash flows for each of the
three years in the period ended June 30, 1997. 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 report dated September 15, 1997 we included an explanatory paragraph
which discussed the factors that raised substantial doubt about the Company's
ability to continue as a going concern. As described in the third paragraph of
Note 1, the Company, on December 15, 1997, was acquired by Pharmaceutical
Marketing Services Inc. who has agreed to provide adequate financing, thereby
mitigating the factors that raised the substantial doubt about the Company's
ability to continue as a going concern. Accordingly, our report on the
consolidated financial statements for 1997, as presented herein, excludes this
explanatory paragraph.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Source Informatics European Holdings L.L.C. and Subsidiaries as of June 30, 1996
and 1997, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended June 30, 1997 in conformity with
generally accepted accounting principles.
December 16, 1997 COOPERS & LYBRAND L.L.P.
Stamford, Connecticut
F-2
<PAGE> 14
SOURCE INFORMATICS EUROPEAN HOLDINGS L.L.C. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30,
--------------------------
1996 1997
----------- ---------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 1,194 $ 2,222
Accounts receivable -- 234
Other receivables 91 538
Prepaid expenses 40 176
-------- --------
Total current assets 1,325 3,170
Property and equipment, net 180 546
Other assets, net 31 463
Net amount due from Source Informatics Inc.
and subsidiaries 1,271 --
-------- --------
Total assets $ 2,807 $ 4,179
======== ========
LIABILITIES AND STOCKHOLDER DEFICIT
Current liabilities
Current portion of capital lease
obligations $ 38
Accounts payable $ 3,209 2,700
Accrued liabilities 469 2,277
Unearned income 5,250 11,319
-------- --------
Total current liabilities 8,928 16,334
Capital lease obligations -- 43
Net amount due to Source Informatics Inc.
and subsidiaries -- 6,334
-------- --------
Total liabilities 8,928 22,711
-------- --------
Stockholder deficit:
Source Informatics equity investment and
accumulated deficit during the development
stage (6,121) --
Common Stock - $0.01 par value, 100 shares
authorized; 100 shares
issued and outstanding -- --
Paid-in capital -- 22,465
Deficit accumulated during the development
stage -- (42,002)
Cumulative translation adjustment -- 1,005
-------- --------
Total stockholder deficit (6,121) (18,532)
-------- --------
Total liabilities and
stockholder deficit $ 2,807 $ 4,179
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 15
SOURCE INFORMATICS EUROPEAN HOLDINGS L.L.C. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Years Ended June 30,
-----------------------------------
1995 1996 1997
-------- --------- ---------
<S> <C> <C> <C>
Revenue $ 407
Costs and expenses:
Production costs $(2,010) $ (5,060) (7,456)
Selling, general and administrative expenses (2,903) (7,245) (10,148)
Research and development costs (412) (2,110) (3,347)
Amortization of intangible assets -- (7) (34)
------- -------- --------
Operating loss (5,325) (14,422) (20,578)
Interest:
Interest income -- 2 59
Interest expense -- -- (477)
------- -------- --------
Net loss $(5,325) $(14,420) $(20,996)
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 16
SOURCE INFORMATICS EUROPEAN HOLDINGS L.L.C. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDER DEFICIT
(DOLLARS IN THOUSANDS)
YEARS ENDED JUNE 30, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
Common Walsh/Source
Stock Equity
Par Deficit accumulated Cumulative Investment and
Share Paid-in during the Translation Accumulated
Shares Value Capital Development Stage Adjustment Deficit
-------- -------- --------- --------------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1994 -- -- -- -- -- --
Net loss 1995 -- -- -- -- -- $ (5,325)
Contribution from Walsh -- -- -- -- -- 5,325
-------- -------- --------- --------------------- ------------- ---------------
Balance June 30, 1995 -- -- -- -- -- --
Net loss 1996 -- -- -- -- -- (14,420)
Contribution from Walsh -- -- -- -- -- 8,299
-------- -------- --------- --------------------- ------------- ---------------
Balance June 30, 1996 -- -- -- -- -- (6,121)
Net loss 1997 -- -- -- -- -- (20,996)
Contribution from Source -- -- -- -- -- 7,580
Elimination of Source Equity
Investment and issuance of
Common Stock 100 -- $22,465 $ (42,002) -- 19,537
Cumulative translation adjustment -- -- -- -- $ 1,005 --
-------- -------- --------- --------------------- ------------- ---------------
Balance June 30, 1997 100 -- $22,465 $ (42,002) $ 1,005 --
======== ======== ========= ===================== ============= ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 17
SOURCE INFORMATICS EUROPEAN HOLDINGS L.L.C. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Years Ended June 30,
--------------------------------------
1995 1996 1997
---------- --------- ----------
<S> <C> <C> <C>
Cashflows from operating activities:
Net loss $ (5,325) $ (14,420) $ (20,996)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization -- 62 175
Change in assets and liabilities:
Increase in accounts receivable -- -- (246)
Increase in prepaid expenses and other assets -- (162) (972)
Increase in accounts payable and accrued
liabilities -- 3,678 1,580
Increase in unearned income -- 5,250 6,095
---------- --------- ----------
Net cash used in operating activities (5,325) (5,592) (14,364)
---------- --------- ----------
Cashflows used in investing activities:
Capital expenditures -- (235) (610)
---------- --------- ----------
Net cash used in investing activities -- (235) (610)
---------- --------- ----------
Cash provided by (used in) financing activities:
Cash contribution from Walsh 5,325 8,072 --
Capital contribution by Source -- -- 7,580
Increase (decrease) in inter-company
indebtedness -- (1,271) 7,968
Capital lease payments -- -- (31)
---------- --------- ----------
Net cash provided by financing activities 5,325 6,801 15,517
---------- --------- ----------
Effect of exchange rate movements -- 220 485
---------- --------- ----------
Net increase in cash and cash equivalents -- 1,194 1,028
Cash and cash equivalents at beginning of year -- -- 1,194
---------- --------- ----------
Cash and cash equivalents at end of year $ -- $ 1,194 $ 2,222
========== ========= ==========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ -- $ -- $ 2
========== ========= ==========
Supplemental disclosures of non-cash investing
and financing activities:
Assets acquired under capital leases $ -- $ -- $ 110
========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 18
SOURCE INFORMATICS EUROPEAN HOLDINGS L.L.C. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
FORMATION OF THE COMPANY
On April 16, 1996, Walsh International Inc. ("Walsh") formed Source
Informatics Inc. ("Source"), a Delaware corporation, as the holding company for
the entities engaged in developing, maintaining, delivering and analyzing
prescription and product shipment databases to the pharmaceutical and healthcare
industries (the "Source Business"). Effective that same date, Walsh transferred
all of the assets and liabilities of the Source Business together with cash,
marketable securities, convertible preferred stock obligations and other
corporate assets into Source. In conjunction with the transfer of such assets
and liabilities, all of the issued and outstanding capital stock of Source was
spun-off to the then current stockholders of Walsh (the "Spin-Off").
On November 18, 1997, Source formed Source Informatics European Holdings
L.L.C. ("Source Europe" or the "Company"), a Delaware corporation, to act as a
holding company for the entities engaged in the Source Business in Europe
subsequent to a definitive agreement to sell the Source Business in Europe to
Pharmaceutical Marketing Services Inc. ("PMSI"). All assets and liabilities of
the entities engaged in the Source Business in Europe were transferred to Source
Europe. Source Europe remained a wholly-owned subsidiary of Source Informatics
Inc.
On December 15, 1997 PMSI acquired the Source Business in Europe. The
business was acquired for cash consideration of $6,433,000, which represented
the cancellation of loans by PMSI to Source Europe under a line of credit
provided for by the Securities Transfer Agreement. On consummation of the
transaction, Source forgave loans to Source Europe totalling $8,408,099 and PMSI
received $9,000,000 in cash plus 918,254 PMSI common shares held by Source. PMSI
will account for the acquisition of Source Europe in accordance with the
purchase method. Under this method, the purchase price will be allocated to the
fair values of the respective assets and liabilities acquired, including
in-process research and development, with any excess being allocated to
goodwill. PMSI has agreed to provide adequate financing to allow the Company to
fund operations through January 31, 1999.
THE BUSINESS
Since January 1, 1994, Source Europe has been a development stage enterprise
as defined by Statement of Financial Accounting Standards No. 7, building
databases of prescriptions dispensed in the UK, Germany, France, Italy and
Belgium and developing the software technology to support, provide access to,
and generate information from such databases. Source Europe sells such
information to pharmaceutical companies in each of the markets in which it
operates to enable such companies to measure, analyze and improve salesforce and
product performance at a detailed geographical level, namely small groups of
prescribing physicians or at the individual physician level.
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements present the accounts of Source
Europe's operations as though they were combined from the commencement of their
operations using their historical accounting basis. All inter-company balances
and transactions within Source Europe have been eliminated. The financial
statements also include the allocation from Walsh and Source of direct and
indirect costs attributable to Source Europe. The method by which such amounts
are allocated are deemed reasonable by management and are described in the
accompanying notes.
F-7
<PAGE> 19
SOURCE INFORMATICS EUROPEAN HOLDINGS L.L.C. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FINANCIAL CONDITION OF SOURCE EUROPE
The Company's financial statements for the year ended June 30, 1997 have
been prepared on a going concern basis which contemplates the realization of
assets and settlement of liabilities and commitments in the normal course of
business. The Company incurred a net loss of $20,996,000 for the year ended June
30, 1997, and as at June 30, 1997 had a deficit accumulated during the
development stage of $42,002,000. The Company expects to incur substantial
expenditures to complete the development of the Source databases and services in
Europe. There is no assurance that the Company will achieve profitable
operations and the Company is dependent on continued financial support from
PMSI.
DATABASES
All costs associated with the development, maintenance and updating of
databases are expensed as incurred.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. All maintenance and repairs are
expensed as incurred. Depreciation is provided using the straight-line method.
Furniture, office equipment and computer equipment are depreciated over five
years and automobiles over four years. Leasehold improvements are amortized over
the estimated lives of the assets or the lease terms (maximum of 10 years),
whichever are shorter. Buildings are depreciated over their estimated useful
lives of 50 years.
On disposal, costs and accumulated depreciation are removed from the
accounts and gains (losses) are recognized in the statement of operations.
REVENUE RECOGNITION
Revenue is recognized on the delivery of a product or as the service is
rendered. Prebillings for products that have not yet been delivered or for
services not yet rendered are classified as unearned income until the earnings
process is complete.
Unearned income is also comprised of cash received in the form of
contributions from clients (a) for the purpose of funding the development of a
proprietary database to service the European markets and (b) to provide these
clients with future discounts on products generated from the database. Through
June 30, 1997, none of the contributions, which aggregated $11.3 million on that
date, have been recognized as revenue. These contributions will be recognized as
revenue to match future sales of products generated from the database.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash balances and trade
receivables. The Company invests its excess cash with major banks. The Company's
customer base principally comprises companies within the pharmaceutical industry
and the Company does not require collateral from its customers.
F-8
<PAGE> 20
SOURCE INFORMATICS EUROPEAN HOLDINGS L.L.C. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY
The balance sheet and results of operations of the Company's foreign
subsidiaries that operate outside the United States, are measured using local
currency as the functional currency.
Assets and liabilities have been translated into United States dollars at
the rates of exchange at the balance sheet date. Translation gains and losses
arising from the use of differing exchange rates from year to year are included
in the cumulative translation adjustment on the balance sheet. Revenues and
expenses are translated into United States dollars at the average rate during
the period.
Transaction gains and losses are recognized in the statement of operations
as incurred. For the years presented, these amounts were not material.
INCOME TAXES
Deferred income taxes are recorded to reflect the tax consequences on future
years of differences between the tax basis of assets and liabilities and
financial reporting amounts at each year-end.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with maturity dates of
three months or less from the date of acquisition by the Company to be cash
equivalents.
USE OF ESTIMATES IN THE PREPARATION OF THE FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. TRANSACTIONS WITH WALSH AND SOURCE INFORMATICS INC.
PHARBASE LICENSE
In April 1996 Walsh granted to Source Europe a non-exclusive license to its
Pharbase medical professional databases in certain European countries. The
Company is allowed to use the Pharbase databases only for internal purposes and
in connection with the development, delivery and marketing of its
prescriber-linked prescription databases. The initial term of the license runs
for ten years and the license is renewable for two additional terms. Source
Europe has agreed to provide Walsh with all updated information which it
receives with regard to medical professionals, their specialties, affiliations
and locations generated as a result of the use of Pharbase by Source Europe. The
Company has agreed to pay $1.00 per prescriber in the database universe in the
first year of prescription data collection in a particular market. In
consideration of the Company's obligation to provide updated information to
Walsh, such fee will be reduced to $0.75 in the second year, $0.50 in the third
year and $0.25 per prescriber thereafter. In addition, Source Europe had agreed
to pay Walsh 75% of the list price of the Pharbase service for each Source
Europe client to which it delivers prescriber-level data and which does not have
a current Pharbase license.
F-9
<PAGE> 21
SOURCE INFORMATICS EUROPEAN HOLDINGS L.L.C. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. TRANSACTIONS WITH WALSH AND SOURCE INFORMATICS INC. (CONTINUED)
SERVICE AGREEMENTS
Source Europe is supplied by Source and, prior to the Spin-Off was supplied
by Walsh, with administrative support, including general management, financial,
legal, tax, audit, personnel and employee benefits. The Company has also been
provided by Source's US operation with software and database development
services specifically for the European market. Accruals for the services and
benefits have been measured and recorded based on usage or other methods that
management believes to be reasonable. Such allocations were as follows for
fiscal years ended June 30, 1995, 1996 and 1997, respectively: administrative
support services, $1,623,000, $2,295,000 and $1,741,000; and software and
database services, $412,000, $2,110,000 and $3,347,000. The cumulative costs
since inception (January 1, 1994) amount to $5,659,000 (unaudited) for
administrative support services and $5,947,000 for software and database
services.
3. PROPERTY AND EQUIPMENT
Property and equipment at June 30, 1996 and 1997 consisted of the following
(in thousands):
<TABLE>
<CAPTION>
June 30,
---------------------
1996 1997
--------- ---------
<S> <C> <C>
Property $ 33 $ 48
Furniture and office equipment 58 164
Computer equipment 144 505
Automobiles -- --
--------- ---------
235 717
Less: accumulated depreciation and amortization (55) (171)
--------- ---------
180 546
========= =========
</TABLE>
Depreciation and amortization charged to operations amounted to $0, $55,000
and $116,000 for the years ended June 30, 1995, 1996 and 1997, respectively.
Cumulative depreciation and amortization since inception (January 1, 1994)
amounts to $171,000 (unaudited).
F-10
<PAGE> 22
SOURCE INFORMATICS EUROPEAN HOLDINGS L.L.C. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. OTHER ASSETS
Other assets at June 30, 1996 and 1997 consisted of the following (in
thousands):
<TABLE>
<CAPTION>
June 30,
--------------------
1996 1997
------ -------
<S> <C> <C>
Purchased software $ 10 $ 167
Less: accumulated depreciation (7) (41)
------ ------
3 126
Sales tax recoverable - 274
Deposits 28 63
------ ------
$ 31 $ 463
====== ======
</TABLE>
Amortization charged to operations amounted to $0, $7,000 and $34,000 for the
years ended June 30, 1995, 1996, and 1997, respectively. Cumulative amortization
since inception (January 1, 1994) amounts to $41,000 (unaudited).
5. ACCRUED LIABILITIES
Accrued liabilities at June 30, 1996 and 1997 consisted of the following (in
thousands):
<TABLE>
<CAPTION>
June 30,
-------------------
1996 1997
------- -------
<S> <C> <C>
Employee compensation and benefits $ 201 $ 1,026
Data purchase - 778
Other liabilities 268 473
------- -------
$ 469 $ 2,277
======= =======
</TABLE>
6. INCOME TAX
Deferred tax assets at June 30, 1996 and 1997 comprise the following (in
thousands):
<TABLE>
<CAPTION>
June 30,
-------------------
1996 1997
------- -------
<S> <C> <C>
Deferred tax assets
Loss carry forward $ 1,746 $ 8,215
------- -------
Gross deferred tax assets 1,746 8,215
Valuation allowance (1,746) (8,215)
------- -------
Deferred taxes, net $ - $ -
======= =======
</TABLE>
F-11
<PAGE> 23
SOURCE INFORMATICS EUROPEAN HOLDINGS L.L.C. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAX (CONTINUED)
As at June 30, 1997, there were available for foreign income tax purposes
operating loss carryforwards of approximately $24,163,000 which may provide
future tax benefits totalling $8,215,000 expiring as follows: 2001: $271,000,
2002: $1,027,000 and thereafter $6,917,000.
7. EMPLOYEE BENEFIT PLANS
Subsidiaries of the Company in the United Kingdom and Belgium have pension
or profit sharing plans covering substantially all their employees.
In the United Kingdom a money purchase plan is operated with the employer
contributing an average of approximately 5% of salaries.
In Belgium a defined contribution pension plan is operated with the employer
contributing an average of approximately 5% of salaries.
The total costs associated with these plans were as follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30,
--------------------
1996 1997
-------- --------
<S> <C> <C>
Belgium $17 $23
United Kingdom 46 73
--- ---
$63 $96
=== ===
</TABLE>
8. LEASING ARRANGEMENTS AND OTHER COMMITMENTS
Various subsidiaries of the Company lease certain property and equipment.
Obligations under long-term and non-cancellable lease agreements expiring at
various dates have the following aggregate approximate annual minimum rentals
(in thousands):
<TABLE>
<CAPTION>
CAPITAL LEASES OPERATING LEASES
-------------- ----------------
<S> <C> <C>
To June 30, 1998 $ 43 $ 529
To June 30, 1999 42 422
To June 30, 2000 15 220
To June 30, 2001 -- 88
To June 30, 2002 -- 60
After June 30, 2002 -- 5
---- ------
Total minimum lease payments 100 $1,324
======
Less amount representing interest 19
----
Present value of minimum lease
payments 81
Less current portion 38
----
$ 43
====
</TABLE>
F-12
<PAGE> 24
SOURCE INFORMATICS EUROPEAN HOLDINGS L.L.C. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. LEASING ARRANGEMENTS AND OTHER COMMITMENTS (CONTINUED)
Operating lease rentals for the years ended June 30, 1995, 1996 and 1997
were $0, $0 and $453,000, respectively. Cumulative operating lease rentals since
inception (January 1, 1994) amount to $453,000 (unaudited).
Included in property and equipment at June 30, 1996 and 1997 are assets
subject to capitalized leases with a cost of $0 and $113,000, respectively, and
accumulated amortization of $0 and $31,000 for the years ended June 30, 1996 and
June 30, 1997, respectively.
F-13
<PAGE> 25
SOURCE INFORMATICS EUROPEAN HOLDINGS L.L.C. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Consolidated Balance Sheet (unaudited) as of September 30, 1997 F-15
Consolidated Statements of Operations (unaudited) for the Three Months Ended
September 30, 1996 and 1997 and for the period from inception
(January 1, 1994) through September 30, 1997 (unaudited) F-16
Consolidated Statements of Cash Flows (unaudited) for the Three Months
Ended September 30, 1996 and 1997 and for the period from inception
(January 1, 1994) through September 30, 1997 (unaudited) F-17
Notes to Consolidated Financial Statements F-18
</TABLE>
F-14
<PAGE> 26
SOURCE INFORMATICS EUROPEAN HOLDINGS L.L.C. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
-------------
<S> <C>
ASSETS
Current assets
Cash and cash equivalents $ 1,648
Accounts receivable 802
Prepaid expenses and other current assets 204
--------
Total current assets 2,654
Property and equipment, net 545
Other assets, net 1,036
--------
Total assets $ 4,235
========
LIABILITIES AND STOCKHOLDER DEFICIT
Current liabilities
Accounts payable 1,706
Accrued liabilities 4,485
Unearned income 11,479
--------
Total current liabilities 17,670
--------
Capital lease obligations 35
Amounts due to Source 9,149
Amounts due to PMSI 1,898
--------
Total liabilities 28,752
Total stockholder deficit (24,517)
--------
Total liabilities and stockholder deficit $ 4,235
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-15
<PAGE> 27
SOURCE INFORMATICS EUROPEAN HOLDINGS L.L.C. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
PERIOD OF INCEPTION
JANUARY 1, 1994
THREE MONTHS ENDED THROUGH
SEPTEMBER 30, SEPTEMBER 30, 1997
1996 1997 (UNAUDITED)
------- ------- ------------------
<S> <C> <C> <C>
Revenue -- $ 778 $ 1,185
Production costs $(1,712) (2,972) (17,985)
Selling, general and administrative expenses (2,189) (2,203) (23,195)
Research and development costs (543) (243) (6,190)
Amortization of intangible assets (1) (14) (55)
------- ------- --------
Operating loss (4,445) (4,654) (46,240)
Interest income -- 9 70
Interest expense (68) (1) (478)
------- ------- --------
Net loss $(4,513) $(4,646) $(46,648)
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-16
<PAGE> 28
SOURCE INFORMATICS EUROPEAN HOLDINGS L.L.C. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
Period of
Inception
January 1, 1994
Three Months Ended through
September 30, September 30, 1997
-------------------- ------------------
1996 1997 (unaudited)
------- ------- ------------------
<S> <C> <C> <C>
Net cash used in operating activities .................... $(3,817) $(3,844) $(30,386)
------- ------- --------
Cashflows used in investing activities:
Capital expenditures ................................... (114) (7) (852)
------- ------- --------
Net cash used in investing activities .................... (114) (7) (852)
Cash provided by (used in) financing activities:
Increase in inter-company indebtedness ................. 4,129 2,613 31,548
Loan from PMSI ......................................... -- 1,500 1,500
Capital lease payments ................................. -- (10) (41)
------- ------- --------
Net cash provided by financing activities ................ 4,129 4,103 33,007
Effect of exchange rate movements ........................ (343) (826) (121)
------- ------- --------
Net (decrease) increase in cash and cash equivalents ..... (145) (574) 1,648
Cash and cash equivalents at beginning of period ......... 1,194 2,222 --
------- ------- --------
Cash and cash equivalents at end of period ............... $1,049 $1,648 $1,648
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-17
<PAGE> 29
SOURCE INFORMATICS EUROPEAN HOLDINGS L.L.C. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. INTERIM UNAUDITED FINANCIAL INFORMATION
The accompanying statements of operations for the three months ended
September 30, 1996 and 1997, the statements of cash flows for the three months
ended September 30, 1996 and 1997, the balance sheet as of September 30, 1997
and the related information of Source Informatics European Holdings L.L.C.
("Source Europe") included in these notes to the financial statements are
unaudited. In the opinion of management, the interim financial information
reflects all adjustments (consisting only of items of a normal recurring nature)
necessary for the fair presentation of the financial position, results of
operations and cash flows for the periods presented. The results of operations
for the three months ended September 30, 1997 are not necessarily indicative of
the results to be expected for the entire fiscal year.
These interim financial statements should be read in conjunction with the
audited consolidated financial statements and related notes thereto included
elsewhere in this Report.
2. INCOME TAXES
As of September 30, 1997, Source Europe had approximately $28.8 million of
foreign net operating loss carry-forwards. These carry-forwards will increase
until Source Europe becomes profitable.
3. LINE OF CREDIT
In the three months ended September 30, 1997, $1.5 million was advanced to
Source Europe under a line of credit from PMSI. Outstanding amounts under the
line of credit accrued interest at the rate of prime plus 2%. The line of credit
was collateralized by the pledge of approximately 17% of the outstanding shares
of Common Stock of Source's US operating subsidiary and an aggregate 435,000 of
the shares of PMSI Common Stock owned by Source.
F-18
<PAGE> 1
EXHIBIT 99.1
PMSI COMPLETES ACQUISITION OF SOURCE EUROPE AND DIVESTMENT OF
MINORITY HOLDING IN US SOURCE VENTURE
NEW YORK, NY, DECEMBER 15, 1997 - PHARMACEUTICAL MARKETING SERVICES INC. (PMSI)
(NASDAQ: PMRX), a leading provider of information services to the pharmaceutical
and healthcare industries, today announced that, having received stockholder
approval at the special meeting held in New York today, it had completed the
acquisition of Source Europe from Source Informatics Inc. (Source) and the
divestment to National Data Corporation (NDC) (NYSE: NDC) of its minority
interest in the Source Informatics venture in the United States, together with
its OTC Physician Survey Business.
The Company confirmed that in a three-way transaction with Source and NDC, in
exchange for its minority operating interest in the Source venture and the OTC
business in the United States, PMSI received (i) the Source Europe business,
(ii) 918,254 PMSI common shares held by Source, (iii) $15.5 million in cash, and
(iv) 1,084,950 registered NDC shares. As was provided for in the agreement
between NDC and PMSI, since the average closing price of NDC stock for a 10 day
period preceding closing was below the $37.25 minimum value of the "collar", NDC
opted to increase the number of shares received by PMSI by 25,121 shares.
PMSI PROVIDES A RANGE OF INFORMATION SERVICES TO PHARMACEUTICAL AND HEALTHCARE
COMPANIES IN THE UNITED STATES, EUROPE AND JAPAN, TO ENABLE THEM TO OPTIMIZE
THEIR SALES AND MARKETING PERFORMANCE. MOST OF THE COMPANY'S INFORMATION
SERVICES ARE GENERATED FROM PMSI'S PROPRIETARY DATABASES WHICH CONTAIN UNIQUE
PRESCRIPTION, MANAGED CARE, HEALTHCARE MARKET AND MEDICAL PRESCRIBER DATA.
CONTACT: JEREMY WALSH KATERINA CHARALAMBOUS
PMSI THE ANNE MCBRIDE COMPANY
TEL: (44) 181-943-5355 TEL: (1) 212-983-1702
(THIS NEWS RELEASE CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THOSE STATEMENTS INCLUDE STATEMENTS
REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE COMPANY AND ITS
MANAGEMENT. PROSPECTIVE INVESTORS ARE CAUTIONED THAT ANY SUCH FORWARD LOOKING
STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE A NUMBER OF
RISKS AND UNCERTAINTIES INCLUDING, BUT NOT LIMITED TO, THE RISKS DETAILED IN THE
COMPANY'S SECURITIES AND EXCHANGE COMMISSION FILINGS, AND THE FACT THAT ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD LOOKING
STATEMENTS. THE COMPANY ASSUMES NO OBLIGATION TO UPDATE THE INFORMATION
CONTAINED IN THIS NEWS RELEASE, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE
EVENTS OR OTHERWISE.)
