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Previous: FIDELITY ABERDEEN STREET TRUST, NSAR-B, 1998-05-29 |
Next: LATIN AMERICAN CASINOS INC, DEF 14A, 1998-05-29 |
<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: March 17, 1998) 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: May 27, 1998 By: /s/ William E. Nixon
----------------------------------
William E. Nixon
Chief Financial Officer, Treasurer
and Executive Vice President (Duly
authorized officer)
1
<PAGE>
CORE, INC.
Item 7 of the Current Report on Form 8-K (date of earliest event reported: March
17, 1998) 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 Business Acquired.
Pages F-1 through F-6 contain the audited balance sheet of
Transcend Case Management, Inc. as of December 31, 1997 and the related
statements of operations, accumulated deficit and cash flows for the year then
ended. Pages F-7 through F-8 contain the unaudited interim statements of
operations, accumulated deficit and cash flows for the period from January 1,
1998 through March 16, 1998.
(b) Pro Forma Financial Information.
Pages F-9 through F-12 contain the unaudited pro forma
combined condensed statements of operations for the twelve months ended December
31, 1997 and the three months ended March 31, 1998.
(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
10.1 Asset Purchase Agreement, dated March 17, 1998, by and among CORE,
INC., TCM Services, Inc., Transcend Case Management, Inc. and Transcend
Services, Inc. (excluding exhibits and schedules). Filed as exhibit 2.4
to Registrant's Annual Report on Form 10-K, filed April 1, 1998, and
incorporated herein by reference.
10.2 Registration Rights Agreement, dated March 17, 1998, between CORE, INC.
and Transcend Services, Inc. Filed as exhibit 10.22 to Registrant's
Annual Report on Form 10-K, filed April 1, 1998, and incorporated
herein by reference.
10.3 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.
</TABLE>
2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Transcend Services, Inc.:
We have audited the accompanying balance sheet of TRANSCEND CASE MANAGEMENT,
INC. (a Georgia corporation and a wholly owned subsidiary of Transcend Services,
Inc.) as of December 31, 1997 and the related statements of operations and
accumulated deficit and cash flows for the year then ended. 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 audit.
We conducted our audit 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 audit provides 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 Transcend Case Management, Inc.
as of December 31, 1997 and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 16, 1998
F-1
<PAGE>
TRANSCEND CASE MANAGEMENT, INC.
(A Wholly Owned Subsidiary of Transcend Services, Inc.)
BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash $ 25,044
Accounts receivable, net of allowance for doubtful accounts of approximately $24,000 252,590
Prepaid expenses 17,564
------------
Total current assets 295,198
------------
EQUIPMENT:
Office furniture and equipment 678,659
Less accumulated depreciation (619,160)
------------
Equipment, net 59,499
------------
DEPOSITS 1,385
------------
Total assets $ 356,082
------------
------------
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 65,160
Accrued compensation and employee benefits 44,389
Other accrued liabilities 164,723
Due to Parent (Note 2) 2,465,138
------------
Total current liabilities 2,739,410
------------
COMMITMENTS AND CONTINGENCIES (Note 4)
SHAREHOLDER'S DEFICIT:
Common stock, $1 par value, 100 shares authorized, issued, and outstanding as of
December 31, 1997 100
Accumulated deficit (2,383,428)
------------
Total shareholder's deficit (2,383,328)
------------
Total liabilities and shareholder's deficit $ 356,082
------------
------------
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-2
<PAGE>
TRANSCEND CASE MANAGEMENT, INC.
(A Wholly Owned Subsidiary of Transcend Services, Inc.)
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
<S> <C>
REVENUES $ 1,860,571
DIRECT COSTS 1,661,951
--------------
Gross profit 198,620
--------------
EXPENSES:
Selling and marketing 527,877
General and administration 675,640
--------------
1,203,517
--------------
NET LOSS (1,004,897)
ACCUMULATED DEFICIT AT DECEMBER 31, 1996 (1,378,531)
--------------
ACCUMULATED DEFICIT AT DECEMBER 31, 1997 $(2,383,428)
--------------
--------------
</TABLE>
The accompanying notes are an integral part of this statement.
F-3
<PAGE>
TRANSCEND CASE MANAGEMENT, INC.
(A Wholly Owned Subsidiary of Transcend Services, Inc.)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,004,897)
-----------
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense 102,000
Changes in assets and liabilities:
Accounts receivable, net 222,942
Prepaid expenses 30,412
Accounts payable and accrued liabilities 31,423
Due to Parent 599,103
-----------
Total adjustments 985,880
-----------
Net cash used in operating activities (19,017)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (6,066)
-----------
NET DECREASE IN CASH (25,083)
CASH AT BEGINNING OF YEAR 50,127
-----------
CASH AT END OF YEAR $ 25,044
-----------
-----------
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
TRANSCEND CASE MANAGEMENT, INC.
(A Wholly Owned Subsidiary of Transcend Services, Inc.)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Transcend Case Management, Inc. (the "Company"), formerly Sullivan Health
Management Services, Inc. is a Georgia corporation and a wholly owned
subsidiary of Transcend Services, Inc. (the "Parent"). The Company
is engaged in the business of managing workers' compensation cases.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the accompanying financial statements and
disclosures. Actual results could differ from these estimates.
Accounts Receivable
An allowance for doubtful accounts has been established to provide for
losses on uncollectible accounts based on management's estimates and
historical collection experience. Bad debt expense was $6,300 for the year
ended December 31, 1997.
Revenue Recognition
Revenue is recognized monthly as the work is performed based on a fixed
fee per hour related to consultant's work on an individual case basis.
Depreciation
Depreciation is computed using the straight-line method over the estimated
useful lives of the respective assets, which range from three to seven
years.
Income Taxes
The Company is consolidated with its Parent for tax purposes. The
Company's results of operations are included in the consolidated federal
income tax return of the Parent.
F-5
<PAGE>
Deferred tax assets are settled with the Parent on a current basis.
Therefore, no deferred tax assets or liabilities are recorded
on the Company's balance sheet at December 31, 1997.
2. TRANSACTIONS WITH THE PARENT
The Company utilizes certain Parent services, including, but not limited
to, computer systems, accounting, payroll and related benefits, and
disbursements and treasury.
The amount shown as "Due to Parent" includes corporate allocations of
overhead (based on revenues), certain other expenses, and cash funding of
continuing operations.
3. BENEFIT PLANS
The Parent sponsors a cash accumulation plan (the "401(k) Plan"). Employee
participants can elect to voluntarily contribute amounts to the 401(k)
Plan subject to certain minimum and maximum limitations. The Parent
matches employee contributions on a discretionary basis as determined by
the Parent's board of directors. Expenses related to the 401(k) Plan are
recorded on the Parent's books.
4. COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases certain office facilities under noncancelable operating
leases. Future minimum annual rental obligations under noncancelable
leases as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $38,019
1999 15,841
2000 and thereafter 0
-------
$53,860
-------
-------
</TABLE>
Rent expense was $94,240 for the year ended December 31, 1997.
5. SUBSEQUENT EVENTS
On January 21, 1998, the Parent signed a letter of intent to sell the net
assets of the Company to CORE, INC., a publicly traded national provider
of managed disability and health care benefits management services. Under
the terms of the agreement, the Parent will receive CORE stock with the
value based on the future annual revenues from CORE's operation of the
Company as of a date, the "Determination Date", to be determined at the
Parent's discretion between April 1, 1999 and February 28, 2001.
F-6
<PAGE>
TRANSCEND CASE MANAGEMENT, INC.
(A Wholly Owned Subsidiary of Transcend Services, Inc.)
UNAUDITED STATEMENT OF OPERATIONS
AND ACCUMULATED DEFICIT
FOR THE PERIOD FROM JANUARY 1, 1998 THROUGH MARCH 16, 1998
<TABLE>
<CAPTION>
<S> <C>
REVENUES $ 432,563
DIRECT COSTS 221,646
--------------
Gross profit 210,917
--------------
EXPENSES:
Selling and marketing 73,776
General and administration 101,556
--------------
175,332
--------------
NET INCOME 35,585
ACCUMULATED DEFICIT AT DECEMBER 31, 1997 (2,383,428)
--------------
ACCUMULATED DEFICIT AT MARCH 16, 1998 $ (2,347,843)
--------------
--------------
</TABLE>
F-7
<PAGE>
TRANSCEND CASE MANAGEMENT, INC.
(A Wholly Owned Subsidiary of Transcend Services, Inc.)
UNAUDITED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 1998 THROUGH MARCH 16, 1998
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 35,585
----------
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation expense 6,250
Changes in assets and liabilities:
Accounts receivable, net (98,610)
Prepaid expenses (1,264)
Accounts payable and accrued liabilities (40,792)
Due to Parent 96,918
----------
Total adjustments (37,498)
----------
Net cash used in operating activities (1,913)
----------
NET DECREASE IN CASH (1,913)
CASH AT BEGINNING OF PERIOD 25,044
----------
CASH AT END OF PERIOD $ 23,131
----------
----------
</TABLE>
F-8
<PAGE>
PRO FORMA COMBINED CONDENSED FINANCIAL DATA (UNAUDITED)
On March 17, 1998, a wholly owned subsidiary of CORE, INC. (the
"Company") acquired the assets of Transcend Case Management, Inc., a Georgia
corporation ("TCM"), pursuant to an Asset Purchase Agreement (the "Purchase
Agreement"). Pursuant to the Purchase Agreement, all of the assets of TCM
were acquired in exchange for the assumption of certain liabilities and the
issuance of shares of common stock of CORE, the number of which shall be
equal to a valuation based upon future revenue performance of TCM. The
purchase price is subject to certain adjustments as set forth in the Purchase
Agreement. TCM is a provider of workers' compensation case management
services. The acquisition has been accounted for as a purchase.
On June 25, 1997, a wholly-owned subsidiary of the Company purchased
certain assets and liabilities of Social Security Disability Consultants and
Disability Services, Inc. (collectively, "SSDC") for an initial purchase
price of $6,500,000 and additional performance related cash payments of up to
$920,000. SSDC provides disability management services with two key areas of
business: social security disability benefits advocacy and Medicare
coordination of benefits. The acquisition has been accounted for 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 and
SSDC as filed with the Securities and Exchange Commission and the results of
operations of TCM included elsewhere herein. The unaudited pro forma
combined condensed statements of operations for the year ended December 31,
1997 and the three months ended March 31, 1998 gives effect to the
acquisitions of SSDC and TCM as if the transactions had occurred on January
1, 1997. 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.
F-9
<PAGE>
Pro Forma Combined Condensed Statement of Operations (Unaudited)
For the year ended December 31, 1997
<TABLE>
<CAPTION>
Pro Forma
Acquisition After
CORE SSDC TCM Adjustments Acquisitions
---- ---- --- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues $38,506,563 $3,392,938 $1,860,571 $(108,409) (1a) $43,651,663
Cost of services 23,330,004 1,661,951 1,420,370 (1b) 26,303,916
(108,409) (1a)
------------ ---------- ---------- -----------
Gross profit 15,176,559 3,392,938 198,620 17,347,747
Operating expenses:
Operating expenses 1,972,584 (1,972,584) (1b)
General and administrative 7,940,005 675,640 (102,000) (1a) 8,950,808
437,163 (1b)
Sales and marketing 2,482,561 527,877 86,847 (1b) 3,097,285
Depreciation and amortization 1,954,810 102,000 (1a) 2,235,105
23,795 (1b)
162,500 (1c)
(8,000) (1d)
------------ ---------- ---------- -----------
Total operating expense 12,377,376 1,972,584 1,203,517 14,283,198
------------ ---------- ---------- -----------
Income (loss) from operations 2,799,183 1,420,354 (1,004,897) 3,064,549
Other income (expense):
Interest and other income 589,853 70,455 (150,000) (1e) 510,309
Interest and other expense (27,315) (4,410) (1b) (31,725)
------------ ---------- ---------- -----------
562,538 70,455 478,584
------------ ---------- ---------- -----------
Income (loss) before income taxes
and extraordinary item 3,361,721 1,490,809 (1,004,897) 3,543,133
Provision for income taxes (610,000) (216,000) (1f) (643,000)
183,000 (1g)
------------ ---------- ---------- -----------
Income (loss) before extraordinary
item 2,751,721 1,490,809 (1,004,897) 2,900,133
Extraordinary item 1,348,650 (245,000) (1f) 1,103,650
------------ ---------- ---------- -----------
Net income (loss) $2,751,721 $2,839,459 $(1,004,897) $4,003,783
------------ ---------- ---------- -----------
------------ ---------- ---------- -----------
Earnings per common share:
Income before extraordinary item:
Basic $0.38 $0.40
---------------- -----------
---------------- -----------
Diluted $0.35 $0.37
---------------- -----------
---------------- -----------
Net income:
Basic $0.38 $0.55
---------------- -----------
---------------- -----------
Diluted $0.35 $0.51
---------------- -----------
---------------- -----------
Weighted average common
shares and equivalents:
Basic 7,246,000 7,246,000
---------------- -----------
---------------- -----------
Diluted 7,934,000 7,934,000
---------------- -----------
---------------- -----------
</TABLE>
F-10
<PAGE>
Pro Forma Combined Condensed Statement of Operations (Unaudited)
For the three months ended March 31, 1998
<TABLE>
<CAPTION>
Pro Forma
TCM After
Acquisition TCM
CORE TCM Adjustments Acquisition
---- --- ----------- ------------
<S> <C> <C> <C> <C>
Revenues $10,170,490 $432,563 $(25,474) (1a) $10,577,579
Cost of services 6,620,032 221,646 (25,474) (1a) 6,816,204
------------ ---------- -----------
Gross profit 3,550,458 210,917 3,761,375
Operating expenses:
General and administrative 2,231,087 101,556 (6,250) (1a) 2,326,393
Sales and marketing 817,747 73,776 891,523
Depreciation and amortization 515,845 6,250 (1a) 522,095
------------ ---------- -----------
Total operating expense 3,564,679 175,332 3,740,011
------------ ---------- -----------
Income (loss) from operations (14,221) 35,585 21,364
Other income (expense):
Interest and otherincome 150,137 150,137
------------ ---------- -----------
150,137 150,137
------------ ---------- -----------
Income before income taxes 135,916 35,585 171,501
Benefit for income taxes 75,000 75,000
------------ ---------- -----------
Net income $210,916 $35,585 $246,501
------------ ---------- -----------
------------ ---------- -----------
Net income:
Basic $0.03 $0.03
--------------- --------------
--------------- --------------
Diluted $0.03 $0.03
--------------- --------------
--------------- --------------
Weighted average common shares and
equivalents:
Basic 7,310,000 7,310,000
--------------- --------------
--------------- --------------
Diluted 8,359,000 8,359,000
--------------- --------------
--------------- --------------
</TABLE>
F-11
<PAGE>
Notes to Pro Forma Combined Condensed Statements of Operations (Unaudited)
(1.) The acquisition adjustments consist of the following and represent:
(a.) The reclassifications of certain of TCM's expenses to be
consistent with CORE's classifications. The reclassifications
have no impact on income from operations. Expenses reclassified
include depreciation expenses (included in TCM's general &
administrative expenses) and billable travel costs (included in
TCM's costs of services versus netted against revenues as with
CORE's classifications).
(b.) 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 operating expenses to
cost of services, general and administrative expenses, sales and
marketing expenses, depreciation and amortization expenses and
interest expenses.
(c.) The pro forma amortization expense of goodwill purchased from
SSDC, valued at $6,500,000, and 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 finance the initial purchase price paid
for the purchase of SSDC.
(f.) The increase in income tax provision as a result of the income
recognized by SSDC for the six month period ended June 24, 1997.
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.
(g.) The decrease in income tax provision as a result of the loss
recognized by TCM for the year ended December 31, 1997. 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.
F-12
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