<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-19600
CORE, INC.
(Exact Name of Registrant as Specified in Charter)
AMENDMENT NO. 1
The undersigned Registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8-K (date
of earliest event reported: June 25, 1997) as set forth in the pages attached
hereto:
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned, hereto duly authorized.
CORE, INC.
Date: September 2, 1997 By: /s/ William E. Nixon
-------------------------------
William E. Nixon
Chief Financial Officer, Treasurer
and Executive Vice President (Duly
authorized officer)
<PAGE>
CORE, INC.
Item 7 of the Current Report on Form 8-K (date of earliest event reported:
June 25, 1997) of CORE, INC., a Massachusetts corporation, is hereby amended to
read in its entirety as follows:
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Businesses Acquired.
Pages F-1 through F-18 contain the audited combined balance sheets of Social
Security Disability Consultants Limited Partnership, Disability Services, Inc.,
DSI-Medicare Consultants Inc., and Diamond Entertainment, Inc. as of December
31, 1996, 1995 and 1994 and the related combined statements of operations,
retained earnings, partners' capital and cash flows for the years then ended and
the compiled combined balance sheets of Social Security Disability Consultants
Limited Partnership, Disability Services, Inc., DSI-Medicare Consultants, Inc.,
and Diamond Entertainment, Inc. as of June 24, 1997 and June 30, 1996 and the
related combined statements of operations, retained earnings, partners' capital
and cash flows for the six month periods then ended.
(b) Pro Forma Financial Information.
Pages F-19 through F-21 contain the unaudited pro forma combined condensed
statements of operations for the twelve months ended December 31, 1996 and the
six months ended June 30, 1997.
(c) Exhibits.
Exhibit
Number Description
- ------ -----------
2.1 Asset Purchase Agreement dated June 14, 1997, by and among CORE, INC.,
SSDC Corp., Social Security Disability Consultants Limited Partnership,
Disability Services, Inc., DSI Medicare Consultants, Inc., R. Gary
Dolenga and Phylis M. Dolenga, including Amendment No. 1 to Asset
Purchase Agreement, dated June 25, 1997, and Exhibit A - Performance
Criteria (excluding other Exhibits and Schedules). Filed as exhibit 2.1
to Registrant's Current Report on Form 8-K, filed July 15, 1997, and
incorporated herein by reference.
23.1* Consent of Correll Porvin Associates, PC
99.1 Option Agrement, dated June 14, 1997, by and between CORE, INC. and
R. Gary Dolenga. Filed as exhibit 99.1 to Registrant's Current Report on
Form 8-K, filed July 15, 1997, and incorporated herein by reference.
99.2 Employment Agreement, dated June 25, 1997, by and between SSDC Corp.
and R. Gary Dolenga. Filed as exhibit 99.2 to Registrant's Current Report
on Form 8-K, filed July 15, 1997, and incorporated herein by reference.
- --------------------------------------------------------------------------------
* filed herewith
<PAGE>
SOCIAL SECURITY DISABILITY CONSULTANTS, LIMITED PARTNERSHIP
DISABILITY SERVICES, INC.
DSI - MEDICARE CONSULTANTS, INC.
DIAMOND ENTERTAINMENT, INC.
Combined Financial Statements
December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE NO.
--------
<S> <C>
FINANCIAL STATEMENTS
Independent Auditors' Report....................... F-2
Combined Balance Sheet............................. F-3
Combined Statements of Operations, Retained
Earnings and Partners' Capital.................... F-5
Combined Statements of Cash Flows.................. F-6
Notes to Financial Statements...................... F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Partners and Boards of Directors
SOCIAL SECURITY DISABILITY CONSULTANTS, LIMITED PARTNERSHIP
DISABILITY SERVICES, INC.
DSI - MEDICARE CONSULTANTS, INC.
DIAMOND ENTERTAINMENT, INC.
Novi, Michigan
We have audited the accompanying combined balance sheets of SOCIAL SECURITY
DISABILITY CONSULTANTS, LIMITED PARTNERSHIP, DISABILITY SERVICES, INC., DSI -
MEDICARE CONSULTANTS, INC. and DIAMOND ENTERTAINMENT, INC. as of December 31,
1996, 1995 and 1994, and the related combined statements of operations, retained
earnings and partners' capital and cash flows for the years then ended. These
financial statements are the responsibility of the Companies' 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 audits 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 SOCIAL SECURITY DISABILITY
CONSULTANTS, LIMITED PARTNERSHIP, DISABILITY SERVICES, INC., DSI - MEDICARE
CONSULTANTS, INC. and DIAMOND ENTERTAINMENT, INC. as of December 31, 1996, 1995
and 1994, and the results of their operations and their cash flows for the years
then ended, in conformity with generally accepted accounting principles.
/s/Correll Porvin Associates, P.C.
Southfield, Michigan
June 19, 1997
except for Note F,
as to which the date is
June 25, 1997
F-2
<PAGE>
SOCIAL SECURITY DISABILITY CONSULTANTS, LIMITED PARTNERSHIP
DISABILITY SERVICES, INC.
DSI - MEDICARE CONSULTANTS, INC.
DIAMOND ENTERTAINMENT, INC.
COMBINED BALANCE SHEETS
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
ASSETS 1996 1995 1994
---------- ---------- ---------
<S> <C> <C> <C>
CURRENT ASSETS
Cash (restricted 1996 - $75,621,
1995 - $88,958, 1994 - $74,346)...... $ 783,441 $ 146,357 $195,333
Accounts receivable
(net of allowance of 1996 - $55,000,
1995 - $42,000, 1994 - $22,000)....... 2,237,852 1,179,414 455,829
Loan Receivable - Others............... 18,420 23,635 10,843
Federal income taxes refundable........ 1,483
Prepaid expenses....................... 31,143 22,016 13,785
---------- ---------- --------
Total current assets 3,070,856 1,371,422 677,273
PROPERTY AND EQUIPMENT
Furniture and equipment................ 321,720 423,108 327,913
Vehicles............................... 76,213 100,129 100,129
---------- ---------- --------
397,933 523,237 428,042
Less accumulated depreciation.......... 255,299 333,261 279,963
---------- ---------- --------
Net property and equipment.......... 142,634 189,976 148,079
OTHER ASSETS
Deposits.............................. 20,000 20,000 31,319
---------- ---------- --------
TOTAL OTHER ASSETS................. 20,000 20,000 31,319
---------- ---------- --------
TOTAL ASSETS....................... $3,233,490 $1,581,398 $856,671
========== ========== ========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
SOCIAL SECURITY DISABILITY CONSULTANTS, LIMITED PARTNERSHIP
DISABILITY SERVICES, INC.
DSI - MEDICARE CONSULTANTS, INC.
DIAMOND ENTERTAINMENT, INC.
COMBINED BALANCE SHEETS - CONTINUED
YEARS ENDED DECEMBER 31,
LIABILITIES AND EQUITY
<TABLE>
<CAPTION>
CURRENT LIABILITIES 1996 1995 1994
---------- ---------- --------
<S> <C> <C> <C>
Accounts payable....................... $ 37,884 $ 40,532 $ 25,210
Client deposits........................ 72,666 85,810 71,216
Accrued expenses....................... 176,492 91,849 129,566
Deferred Federal Income tax............ 2,832 544 544
---------- ---------- --------
Total current liabilities........... 289,874 218,735 226,536
EQUITY
Common stock:
$1 par value
Authorized shares 3,000
Issued and outstanding shares 3,000... 3,000 3,000 3,000
Retained earnings and partners'
capital............................... 2,940,616 1,359,663 627,135
---------- ---------- --------
Total equity........................ 2,943,616 1,362,663 630,135
---------- ---------- --------
TOTAL LIABILITIES AND EQUITY........ $3,233,490 $1,581,398 $856,671
========== ========== ========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
SOCIAL SECURITY DISABILITY CONSULTANTS, LIMITED PARTNERSHIP
DISABILITY SERVICES, INC.
DSI - MEDICARE CONSULTANTS, INC.
DIAMOND ENTERTAINMENT, INC.
COMBINED STATEMENTS OF OPERATIONS, RETAINED EARNINGS
AND PARTNERS' CAPITAL
YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Sales (net of client costs of 1996 - $540,749,
1995 - $412,857, 1994 - $317,937)................... $8,184,840 $4,683,453 $3,264,591
Operating expenses.................................... 5,802,811 3,978,324 3,275,739
---------- ---------- ----------
Income (loss) from operations........................ 2,382,029 705,129 (11,148)
Other income (expense):
Interest income...................................... 48,439 16,481 10,327
Suite rental income.................................. 5,504 15,077
Loss on disposal of assets........................... (13,063)
Miscellaneous income................................. 1,457 3,715 7,015
---------- ---------- ----------
42,337 35,273 17,342
---------- ---------- ----------
Income (loss) before income taxes.................... 2,424,366 740,402 6,194
Income taxes (refundable)............................. 2,288 (1,514)
---------- ---------- ----------
NET INCOME........................................... 2,422,078 740,402 7,708
Retained earnings and
Partners' Capital - Beginning of the year............ 1,359,663 627,135 687,696
Less: Withdrawals..................................... (841,125) (7,874) (68,269)
---------- ---------- ----------
Retained earnings and
Partners' Capital - End of the year.................. $2,940,616 $1,359,663 $ 627,135
========== ========== ==========
See accompanying notes to financial statements.
</TABLE>
F-5
<PAGE>
SOCIAL SECURITY DISABILITY CONSULTANTS, LIMITED PARTNERSHIP
DISABILITY SERVICES, INC.
DSI - MEDICARE CONSULTANTS, INC.
DIAMOND ENTERTAINMENT, INC.
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from clients............... $ 7,100,258 $ 3,974,462 $ 3,243,587
Cash paid to suppliers and employees..... (5,665,327) (3,955,638) (3,178,466)
Interest income received................. 48,439 16,481 10,327
Income taxes paid........................ (1,601)
Income taxes received.................... 1,483
Suite rental income...................... 5,504 15,077
Miscellaneous............................ 1,457 3,701 7,015
----------- ----------- -----------
Net cash provided by operating
activities............................ 1,490,331 55,566 80,862
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property and equipment.. (17,337) (95,195) (37,133)
Repayments of loans receivable........... 5,215
Deposits returned (made)................. 11,319 (4,450)
Loans made............................... (12,792) (3,636)
----------- ----------- -----------
Net cash used in investing activities... (12,122) (96,668) (45,219)
CASH FLOWS FROM FINANCING ACTIVITIES
Partners' withdrawals.................... (841,125) (7,874) (68,269)
Issuance of stock........................ 1,000
----------- ----------- -----------
NET CASH USED IN FINANCING ACTIVITIES.. (841,125) (7,874) (67,269)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH......... 637,084 (48,976) (31,626)
Cash - Beginning of the period............. 146,357 195,333 226,959
----------- ----------- -----------
Cash - End of the period................... $ 783,441 $ 146,357 $ 195,333
=========== =========== ===========
See accompanying notes to financial statements.
</TABLE>
F-6
<PAGE>
DISABILITY SERVICES, INC.
DSI - MEDICARE CONSULTANTS, INC.
DIAMOND ENTERTAINMENT, INC.
COMBINED STATEMENTS OF CASH FLOWS - CONTINUED
YEARS ENDED DECEMBER 31,
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OR USED IN OPERATING ACTIVITIES
<TABLE>
<CAPTION>
1996 1995 1994
---------- --------- --------
<S> <C> <C> <C>
Net income................................... $2,422,078 $ 740,402 $ 7,708
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation.............................. 51,616 53,313 44,307
Deferred income taxes..................... 2,288 (31)
Loss on disposal of assets................ 13,063
Other..................................... (14) (282)
Changes in:
Accounts receivable...................... (1,058,438) (723,585) (24,667)
Accounts payable......................... (2,648) 15,322 3,512
Accrued expenses......................... 84,643 (37,718) 51,191
Prepaid expenses......................... (9,127) (8,231) (6,455)
Prepaid income taxes..................... 1,483 (1,483)
Client deposits.......................... (13,144) 14,594 8,663
Income tax payable....................... (1,601)
----------- --------- --------
Total adjustments....................... (931,747) (684,836) 73,154
----------- --------- --------
NET CASH PROVIDED BY
OPERATING ACTIVITIES.................. $ 1,490,331 $ 55,566 $ 80,862
=========== ========= ========
See accompanying notes to financial statements.
</TABLE>
F-7
<PAGE>
SOCIAL SECURITY DISABILITY CONSULTANTS, LIMITED PARTNERSHIP
DISABILITY SERVICES, INC.
DSI - MEDICARE CONSULTANTS, INC.
DIAMOND ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SOCIAL SECURITY DISABILITY CONSULTANTS, LIMITED PARTNERSHIP, DISABILITY
SERVICES, INC., DSI - MEDICARE CONSULTANTS, INC. provide loss control
services to employers, insurers and administrators for disability claims
together with government entitlement advocacy throughout the United
States. DIAMOND ENTERTAINMENT, INC. holds a license to rent a luxury suite
at an entertainment and sports arena.
The following summary of significant accounting policies is presented to
assist in understanding the financial statements.
1. PRINCIPLES OF COMBINATION
The accompanying combined financial statements include the accounts of
SOCIAL SECURITY DISABILITY CONSULTANTS, LIMITED PARTNERSHIP,
DISABILITY SERVICES, INC., DSI - MEDICARE CONSULTANTS, INC. and
DIAMOND ENTERTAINMENT, INC. All significant intercompany balances and
transactions have been eliminated in combining.
2. REVENUE RECOGNITION
The Companies recognize revenue on contracts as services are
performed, which is generally when they are billed.
3. DEPRECIATION
Property and equipment are stated at cost and are being depreciated
using the straight-line method applied over the estimated useful lives
of the respective assets.
4. CASH EQUIVALENTS
For purposes of the statement of cash flows, the Companies consider
all highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
F-8
<PAGE>
SOCIAL SECURITY DISABILITY CONSULTANTS, LIMITED PARTNERSHIP
DISABILITY SERVICES, INC.
DSI - MEDICARE CONSULTANTS, INC.
DIAMOND ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
5. INCOME TAXES
SOCIAL SECURITY DISABILITY CONSULTANTS, LIMITED PARTNERSHIP'S earnings
and losses are included in the tax returns of its partners. DISABILITY
SERVICES, INC. and DSI - MEDICARE CONSULTANTS, INC. have elected S
Corporation status with earnings and losses included in the personal
income tax returns of the shareholder and taxed depending on his
personal tax strategies.
6. ESTIMATES
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 and 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.
NOTE B - FINANCIAL INSTRUMENTS
The Companies' cash, accounts receivable, and accounts payable are
financial instruments.
Cash held for investment at December 31, 1996, 1995, and 1994 of $812,055,
$135,265, and $254, 213 is not guaranteed by Federal deposit insurance.
Other bank balances did not exceed the $100,000 Federal deposit guarantee.
NOTE C - INCOME TAXES
DIAMOND ENTERTAINMENT, INC. files a Federal income tax return which
results in the following components of deferred and current income tax:
Provision for income taxes:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Current $ $ ($1,483)
Deferred 2,258 (31)
------ ----- -------
Total $2,258 $ ($1,514)
====== ===== =======
</TABLE>
F-9
<PAGE>
SOCIAL SECURITY DISABILITY CONSULTANTS, LIMITED PARTNERSHIP
DISABILITY SERVICES, INC.
DSI - MEDICARE CONSULTANTS, INC.
DIAMOND ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE C- INCOME TAXES (CONTINUED)
The deferred tax liabilities for each year results from the use of
accelerated methods of depreciation and use of the cash basis method of
reporting for tax purposes.
NOTE D - OPERATING LEASES AND OTHER COMMITMENTS
The Companies leases its office facility under an operating lease which
expires August 31, 1998. The agreement requires monthly payments of $11,530
through August 31, 1997, increasing to $12,221 for the final 12 months,
plus an annual cost escalation adjustment for insurance, taxes and other
costs.
The Companies also lease equipment under an operating lease at $147 per
month through November, 1999.
One of the Company's is a licensee of a luxury suite at an entertainment
and sports arena. The license requires quarterly payments of $15,000,
increasing to $15,625 through July 31, 1998.
Future minimum rentals under these agreements are as follows:
1997 $204,130
1998 130,779
1999 1,612
--------
Total minimum rentals $336,521
========
Total rent and licensing expense amounted to $193,957, $183,795, and
$175,940 for 1996, 1995, and 1994, respectively.
NOTE E - RETIREMENT PLAN
The Companies maintain a deferred compensation saving plan under Section
401 (k) of the Internal Revenue Code. Employees covered by the plan are
permitted to save for retirement a portion of their gross compensation
without such amounts being subject to Federal or State income tax
withholding. It is the Companies' policy to contribute 2.5% of the
employee's contribution. The Companies' contribution to the plan amounted
to $3,181, $2,610, and $2,293 for 1996, 1995 and 1994, respectively.
F-10
<PAGE>
SOCIAL SECURITY DISABILITY CONSULTANTS, LIMITED PARTNERSHIP
DISABILITY SERVICES, INC.
DSI - MEDICARE CONSULTANTS, INC.
DIAMOND ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE F - SUBSEQUENT EVENT
Subsequent to December 31, 1996, the Companies entered into negotiations to
sell its business to a publicly-held corporation. These negotiations have
ultimately resulted in an understanding of agreement where the Companies
would sell selected assets including property and equipment and goodwill
for $6,500,000. The sales price would be payable with $5,000,000 at closing
and the balance due of $1,500,000 payable quarterly during the first year
and an additional $920,000 payable quarterly based on performance during
the first two years . The sale was completed on June 25, 1997.
F-11
<PAGE>
SOCIAL SECURITY DISABILITY CONSULTANTS, LIMITED PARTNERSHIP
DISABILITY SERVICES, INC.
DSI - MEDICARE CONSULTANTS, INC.
DIAMOND ENTERTAINMENT, INC.
Combined Financial Statements
June 24, 1997 and June 30, 1996
TABLE OF CONTENTS PAGE NO.
--------
FINANCIAL STATEMENTS
Accountants' Compilation Report.................. F-13
Combined Balance Sheets.......................... F-14
Combined Statements of Operations, Retained
Earnings and Partners' Capital.................. F-16
Combined Statements of Cash Flows................ F-17
F-12
<PAGE>
ACCOUNTANTS COMPILATION REPORT
To the Partners and Boards of Directors
SOCIAL SECURITY DISABILITY CONSULTANTS, Limited Partnership
DISABILITY SERVICES, INC.
DSI - MEDICARE CONSULTANTS, INC.
DIAMOND ENTERTAINMENT, INC.
Novi, Michigan
We have compiled the accompanying combined balance sheets of SOCIAL SECURITY
DISABILITY CONSULTANTS, Limited Partnership, DISABILITY SERVICES, INC., DSI -
MEDICARE CONSULTANTS, INC., and DIAMOND ENTERTAINMENT, INC. as of June 24, 1997
and June 30, 1996, and the related combined statements of operations and
retained earnings, partners' capital and cash flows for the period January 1
through June 24, 1997 and the six months ended June 30, 1996, in accordance with
Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants.
A compilation is limited to presenting, in the form of financial statements,
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
Management has elected to omit substantially all of the disclosures required by
generally accepted accounting principles. If the omitted disclosures were
included in the financial statements, they might influence the user's
conclusions about the Company's financial position, results of operations and
cash flows. Accordingly, these financial statements are not designed for those
who are not informed about such matters.
/s/Correll Porvin Associates, P.C.
Southfield, Michigan
August 5, 1997
F-13
<PAGE>
SOCIAL SECURITY DISABILITY CONSULTANTS, LIMITED PARTNERSHIP
DISABILITY SERVICES, INC.
DSI - MEDICARE CONSULTANTS, INC.
DIAMOND ENTERTAINMENT, INC.
COMBINED BALANCE SHEETS - UNAUDITED
JUNE 24, 1997 AND JUNE 30, 1996
ASSETS
<TABLE>
<CAPTION>
CURRENT ASSETS JUNE 24, JUNE 30,
1997 1996
-------- --------
<S> <C> <C>
Cash (restricted: 1997 - $43,017;
1996 - $64,048)................................ $2,670,428 1,527,053
Accounts receivable
(net of allowance of: 1997 - $40,000;
1996 - $39,000)................................ 1,539,677 1,251,212
Loan receivable - Other......................... 19,859 20,733
Prepaid expenses................................ 25,731 16,723
---------- ----------
Total current assets.......................... 4,255,695 2,815,721
PROPERTY AND EQUIPMENT
Furniture and equipment......................... 328,822 314,996
Vehicles........................................ 76,213 76,213
---------- ----------
405,035 391,209
Less accumulated depreciation................... 277,882 228,752
---------- ----------
Net property and equipment.................... 127,153 162,457
OTHER ASSETS
Deposits....................................... 20,000 20,000
---------- ----------
TOTAL OTHER ASSETS.......................... 20,000 20,000
---------- ----------
TOTAL ASSETS................................ $4,402,848 $2,998,178
========== ==========
</TABLE>
See accountants' compilation report.
F-14
<PAGE>
SOCIAL SECURITY DISABILITY CONSULTANTS, LIMITED PARTNERSHIP
DISABILITY SERVICES, INC.
DSI - MEDICARE CONSULTANTS, INC.
DIAMOND ENTERTAINMENT, INC.
LIABILITIES AND EQUITY
<TABLE>
<CAPTION>
CURRENT LIABILITIES JUNE 24, JUNE 30,
1997 1996
-------- --------
<S> <C> <C>
Accounts payable............................. $ 95,692 60,372
Accrued expenses............................. 234,343 188,242
Deferred Federal income tax.................. 2,832 544
Client deposits.............................. 41,756 62,525
---------- ----------
Total current liabilities................... 374,623 311,683
Common stock:
$1 par value
Authorized shares 3,000
Issued and outstanding shares 3,000....... 3,000 3,000
Retained earnings and partners' capital..... 4,025,225 2,683,495
---------- ----------
Total equity............................. 4,028,225 2,686,495
---------- ----------
TOTAL LIABILITIES AND EQUITY............. $4,402,848 $2,998,178
========== ==========
</TABLE>
See accountants' compilation report.
F-15
<PAGE>
SOCIAL SECURITY DISABILITY CONSULTANTS, LIMITED PARTNERSHIP
DISABILITY SERVICES, INC.
DSI - MEDICARE CONSULTANTS, INC.
DIAMOND ENTERTAINMENT, INC.
COMBINED STATEMENTS OF OPERATIONS, RETAINED EARNINGS
AND PARTNERS' CAPITAL - UNAUDITED
<TABLE>
<CAPTION>
For the period For the six
January 1 through months ended
June 24, 1997 June 30,1996
----------------- ------------
<S> <C> <C>
Sales............................................ 3,392,938 $4,074,269
Operating expenses............................... 1,972,584 2,754,965
---------- -----------
Income from operations.......................... 1,420,354 1,319,304
Other income:
Loss on disposal of assets...................... (11,878)
Interest income................................. 69,712 14,777
Suite rental income............................. 877
Miscellaneous income............................ 743 752
---------- -----------
70,455 4,528
---------- -----------
Income before income taxes and
extraordinary item............................. 1,490,809 1,323,832
Income taxes.....................................
---------- -----------
Income before extraordinary item................ 1,490,809 1,323,832
EXTRAORDINARY ITEM - Settlement income
on contract with customer (no applicable
income taxes)................................... 1,348,650
---------- -----------
NET INCOME....................................... 2,839,459 1,323,832
RETAINED EARNINGS AND PARTNERS' CAPITAL -
Beginning of the year.......................... 2,940,616 1,359,663
Less: Withdrawals................................ (1,754,850)
---------- -----------
RETAINED EARNINGS AND PARTNERS' CAPITAL -
End of the period.............................. $4,025,225 $ 2,683,495
========== ===========
See accountants' compilation report.
</TABLE>
F-16
<PAGE>
SOCIAL SECURITY DISABILITY CONSULTANTS, LIMITED PARTNERSHIP
DISABILITY SERVICES, INC.
DSI - MEDICARE CONSULTANTS, INC.
DIAMOND ENTERTAINMENT, INC.
COMBINED STATEMENTS OF CASH FLOWS - UNAUDITED
CASH FLOWS FROM OPERATING ACTIVITIES
<TABLE>
<CAPTION>
For the period For the six
January 1 through months ended
June 24, 1997 June 30,1996
----------------- ------------
<S> <C> <C>
Cash received from customers................ 5,408,853 $ 3,979,186
Cash paid to suppliers and employees........ (1,827,718) (2,608,486)
Interest income received.................... 69,712 14,777
Suite rental income......................... 877
Miscellaneous............................... 743 752
----------- -----------
Net cash provided by operating activities 3,651,590 1,387,106
CASH FLOWS FROM INVESTING ACTIVITIES
Repayment of loans receivable (loans made).. (1,439) 2,902
Expenditures for property and equipment..... (8,314) (9,312)
----------- -----------
Net cash used in investing activities...... (9,753) (6,410)
CASH FLOWS FROM FINANCING ACTIVITIES
Partners' withdrawal........................ (1,754,850)
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES...... (1,754,850)
----------- -----------
NET INCREASE IN CASH....................... 1,886,987 1,380,696
Cash - Beginning of the period................ 783,441 146,357
----------- -----------
Cash - End of the period...................... $ 2,670,428 $ 1,527,053
=========== ===========
See accountants' compilation report.
</TABLE>
F-17
<PAGE>
SOCIAL SECURITY DISABILITY CONSULTANTS, LIMITED PARTNERSHIP
DISABILITY SERVICES, INC.
DSI - MEDICARE CONSULTANTS, INC.
DIAMOND ENTERTAINMENT, INC.
COMBINED STATEMENTS OF CASH FLOWS - CONTINUED
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OR USED IN OPERATING ACTIVITIES
<TABLE>
<CAPTION>
For the period For the six
January 1 through months ended
June 24, 1997 June 30,1996
----------------- ------------
<S> <C> <C>
Net income................................................... 2,839,459 $1,323,832
Adjustments to reconcile net income to net cash provided by
or used in operating activities:
Depreciation.............................................. 23,795 24,953
Loss on disposal of assets................................ 11,878
Changes in:
Accounts receivable...................................... 698,175 (71,798)
Accounts payable......................................... 57,808 19,840
Accrued expenses......................................... 57,851 96,393
Prepaid expenses......................................... 5,412 5,293
Client deposits.......................................... (30,910) (23,285)
---------- ----------
Total adjustments....................................... 812,131 63,274
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES............... $3,651,590 $1,387,106
========== ==========
See accountants' compilation report.
</TABLE>
F-18
<PAGE>
PRO FORMA COMBINED CONDENSED FINANCIAL DATA (UNAUDITED)
On June 25, 1997, CORE, INC. ("CORE" or the "Company") completed the
acquisition of Social Security Disability Consultants Limited Partnership and
Disability Services, Inc. (collectively referred to as "SSDC"), a Michigan based
company which specializes in social security disability advocacy and Medicare
coordination of benefits services. The Company acquired certain assets of SSDC
for approximately $6,500,000 in cash, additional performance related payments of
up to $920,000 and 300,000 stock options. The Company has accounted for this
acquisition as a purchase.
The unaudited pro forma combined condensed financial data set forth
below are based on the consolidated results of operations of the Company as
filed with the Securities and Exchange Commission and the results of operations
of SSDC included elsewhere herein. The unaudited pro forma combined condensed
statements of operations for the year ended December 31, 1996 and the six months
ended June 30, 1997 gives effect to the acquisition of SSDC as if the
transaction had occurred on January 1, 1996. The unaudited pro forma combined
condensed financial data set forth below do not purport to represent what the
Company's results of operations would have been had the transactions described
above occurred on the date indicated, or to project the Company's results of
operations for any future period or date, nor does it give effect to any matters
other than those described in the notes thereto.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRO FORMA
SSDC AFTER
ACQUISITION SSDC
CORE SSDC ADJUSTMENTS ACQUISITION
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues $28,805,590 $8,184,840 $36,990,430
Cost of services 17,740,901 2,713,289 (1a) 20,454,190
------------------------ -----------
Gross profit 11,064,689 8,184,840 16,536,240
Operating expenses:
Operating expenses 5,802,811 (5,802,811) (1a)
General and administrative 1,744,386 2,943,738 (la) 2,489,674
(2,198,450) (1b)
Sales and marketing 6,284,651 91,880 (1a) 6,376,531
Non-recurring write-off of 1,919,871 1,919,871
AmHealth acquisition
Depreciation and amortization 1,338,122 51,616 (1a) 1,690,843
325,000 (1c)
(23,895) (1d)
------------------------ -----------
Total operating expense 11,287,030 5,802,811 12,476,919
------------------------ -----------
Income (loss) from operations (222,341) 2,382,029 4,059,321
Other income (expense):
Interest and other income 401,878 55,400 (125,000) (1e) 332,278
Interest and other expense (35,512) (13,063) (277,000) (1f) (325,575)
------------------------ -----------
366,366 42,337 6,703
------------------------ -----------
Income before income taxes 144,025 2,424,366 4,066,024
Provision for income taxes 2,288 (1a) 442,288
440,000 (1g)
------------------------ -----------
Net income $ 144,025 $2,424,366 $ 3,623,736
======================== ===========
----------- -----------
Net income per common share $0.02 $0.55
=========== ===========
Weighted average common
shares and equivalents 6,274,000 300,000 (2) 6,574,000
=========== ===========
</TABLE>
F-19
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
PRO FORMA
SSDC AFTER
ACQUISITION SSDC
CORE SSDC ADJUSTMENTS ACQUISITION
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues $17,098,622 $3,392,938 $20,491,560
Cost of services 10,690,909 $ 1,420,370 (1a) 12,111,279
------------------------ -----------
Gross profit 6,407,713 3,392,938 8,380,281
Operating expenses:
Operating expenses 1,972,584 (1,972,584) (1a)
General and administrative 3,865,554 437,163 (1a) 4,302,717
Sales and marketing 1,127,281 86,847 (1a) 1,214,128
Depreciation and amortization 890,372 23,795 (1a) 1,068,667
162,500 (1c)
(8,000) (1d)
------------------------ -----------
Total operating expense 5,883,207 1,972,584 6,585,512
------------------------ -----------
Income (loss) from operations 524,506 1,420,354 1,794,769
Other income (expense):
Interest and other income 342,018 69,712 (150,000) (1e) 261,730
Suite rental income 743 743
Interest and other expense (12,123) (4,408) (1a) (16,531)
------------------------ -----------
329,895 70,455 245,942
------------------------ -----------
Income (loss) before income
taxes and extraordinary item 854,401 1,490,809 2,040,711
Income taxes 31,000 193,000 (1g) 224,000
------------------------ -----------
Income before extraordinary item 823,401 1,490,809 1,816,711
Extraordinary item - Settlement
income on contract with customer 1,348,650 (147,000) (1g) 1,201,650
------------------------ -----------
Net income (loss) $ 823,401 $2,839,459 $ 3,018,361
======================== ===========
Earnings per common share: -----------
Income before extraordinary item $0.11 $0.22
=========== ===========
Net income $0.11 $0.37
=========== ===========
Weighted average common shares
and common share equivalents 7,797,000 300,000 (2) 8,097,000
=========== ===========
</TABLE>
F-20
<PAGE>
NOTES TO PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(1.) The SSDC acquisition adjustments consist of the following and represent:
(a.) The reclassifications of certain of SSDC's expenses to be consistent
with CORE's classifications. The reclassifications have no impact on
income from operations. Expenses reclassified include salaries and
benefits, equipment and facilities rent and result in the
reclassification of SSDC's operation expenses to cost of services,
general and administrative expenses, sales and marketing,
depreciation and amortization expense and income tax expenses.
(b.) The decrease in general and administrative expenses resulting from a
contractual reduction in officer's salary for SSDC under the
assumption that the former owner of SSDC became an employee of CORE
at the beginning of 1996.
(c.) The pro forma amortization expense of goodwill, valued at $6,500,000,
which is being amortized on a straight-line basis over 20 years.
(d.) The decrease in depreciation for SSDC assets not acquired in the
purchase.
(e.) The reduction of investment income resulting from the use of short-
term investments to reflect the paydown of the proforma adjustment to
the companies line of credit to fund the purchase of SSDC.
(f.) The increase in interest expense resulting from the usage of CORE's
line of credit to fund the purchase of SSDC.
(g.) The increase in income tax provision as a result of the income
recognized by SSDC. The pro forma provision for income taxes has been
computed assuming the Company's pro forma results of operations had
been included in a consolidated federal income tax return.
(2.) Weighted average common equivalent shares as if options issued in
connection with the purchase were issued at the beginning of 1996.
F-21
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANT
We consent to the incorporation by reference in this Form 8-K, Current Report
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934, of CORE,
INC. of our report dated June 19, 1997 except for Note F, as to which the date
is June 25, 1997, on our audits of the combined financial statements of Social
Security Disability Consultants, Limited Partnership, Disability Services, Inc.,
DSI-Medicare Consultants, Inc. and Diamond Entertainment, Inc. as of December
31, 1996, 1995 and 1994, and for the years then ended, and on our compilation
report dated August 5, 1997 on the combined financial statements as of June 24,
1997 and June 30, 1996 and for the period January 1, 1997 through June 24, 1997
and the six months ended June 30, 1996, which reports are included in this Form
8-K.
/s/ Correll Porvin Associates, P.C.
Southfield, Michigan
August 29, 1997
