<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
Commission file number 0-19600
CORE, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2828817
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
18881 Von Karman Avenue, Suite 1750, Irvine, California 92612
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (714) 442-2100
Indicate by check "X" whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
On May 8, 1998 there were 7,323,181 shares of the Registrant's Common Stock
outstanding.
<PAGE>
CORE, INC.
FORM 10-Q
for the quarter ended March 31, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION Page
----
<S> <C>
Item 1. Financial Statements
Consolidated Condensed Balance Sheets 3
Consolidated Condensed Statements of Income 5
Consolidated Condensed Statements of Cash Flows 6
Notes to Consolidated Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk N/A
PART II OTHER INFORMATION
Item 1. Legal Proceedings N/A
Item 2. Change in Securities and Use of Proceeds 12
Item 3. Defaults Upon Senior Securities N/A
Item 4. Submission of Matters to a Vote of Security Holders N/A
Item 5. Other Information N/A
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
2
<PAGE>
CORE, INC.
Consolidated Condensed Balance Sheets
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
(Note 1) (Unaudited)
--------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 7,944,595 $ 6,494,029
Investments available-for-sale 1,188,037 1,198,829
Accounts receivable, net of allowance for
doubtful accounts of $151,633 in 1997 and
$166,633 at March 31,1998 6,473,037 7,353,446
Notes receivable from officers 106,388 100,177
Prepaid expenses and other current assets 815,100 800,710
--------------------------
Total current assets 16,527,157 15,947,191
Property and equipment, net 6,444,803 6,761,603
Deposits and other assets 494,208 900,208
Goodwill, net of accumulated amortization of
$340,705 in 1997 and $451,697 at
March 31, 1998 8,818,159 8,511,444
Intangibles, net 530,705 150,705
--------------------------
Total assets $32,815,032 $32,271,151
-------------------------
-------------------------
</TABLE>
See accompanying notes.
3
<PAGE>
CORE, INC.
Consolidated Condensed Balance Sheets - Continued
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
(Note 1) (Unaudited)
-----------------------------
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 833,898 $ 1,092,260
Accrued expenses 1,846,545 1,978,065
Accrued payroll 650,230 178,790
Deferred income taxes 74,816 68,316
Note payable 64,900 64,900
Obligation from acquisition 1,125,000 375,000
Current portion of obligations
to former shareholders 50,000 50,000
Current portion of capital lease
obligations 31,651 23,254
--------------------------
Total current liabilities 4,677,040 3,830,585
Note payable 185,049 174,551
Capital lease obligations, net of current
portion 4,695 2,988
Deferred rent, net of current portion 146,592 167,018
Deferred income taxes 143,000 149,500
Stockholders' equity
Preferred stock, no par value, authorized
500,000 shares; no shares outstanding
Common stock, $0.10 par value per share;
authorized 30,000,000 shares; issued and
outstanding 7,303,079 at December 31, 1997
and 7,319,740 at March 31, 1998 730,308 731,974
Additional paid-in capital 34,909,579 34,986,078
Deferred compensation (13,392) (13,392)
Accumulated deficit (7,967,839) (7,758,151)
--------------------------
Total stockholders' equity 27,658,656 27,946,509
-------------------------
-------------------------
Total liabilities and stockholders' equity $32,815,032 $32,271,151
-------------------------
-------------------------
</TABLE>
See accompanying notes.
4
<PAGE>
CORE, INC.
Consolidated Condensed Statements of Income (Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1997 1998
----------------------------
<S> <C> <C>
Revenues $8,127,048 $10,170,490
Cost of services 5,243,622 6,620,032
----------------------------
Gross profit 2,883,426 3,550,458
Operating expenses:
General and administrative 1,882,162 2,232,315
Sales and marketing 595,728 817,747
Depreciation and amortization 437,398 515,845
----------------------------
Total operating expenses 2,915,288 3,565,907
----------------------------
Loss from operations (31,862) (15,449)
Other income (expense):
Interest income 177,439 153,015
Interest expense (5,508) (2,878)
----------------------------
171,931 150,137
----------------------------
Income before income taxes 140,069 134,688
Income tax benefit 75,000
----------------------------
Net income 140,069 209,688
============================
Net income per common share:
Basic $0.02 $0.03
============================
Diluted $0.02 $0.03
============================
Weighted average number of common
shares and equivalents
outstanding:
Basic 7,197,000 7,310,000
============================
Diluted 7,813,000 8,359,000
============================
</TABLE>
See accompanying notes.
5
<PAGE>
CORE, INC.
Consolidated Condensed Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1997 1998
----------------------------
<S> <C> <C>
Operating activities:
Net income $ 140,069 $ 209,688
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation 404,737 424,853
Amortization 156,111 302,585
Changes in operating assets and liabilities:
Increase in accounts receivable (1,395,573) (529,209)
Increase in prepaid expenses and
other current assets (88,940) (86,655)
Decrease in accounts payable and
accrued expenses (250,054) (129,889)
----------------------------
Net cash provided by (used in) operating
activities (1,033,650) 191,373
Investing activities:
Additions to property and equipment (614,129) (793,711)
Additions to goodwill and intangibles, net (145,210)
Decrease in notes receivable from officers 2,761 6,211
(Increase) decrease in deposits and other
assets 3,954 (6,000)
Payments on non-compete obligations to
former shareholders (50,000)
Purchases of investments available-for-sale (4,835,649) (9,456,705)
Sales of investments available-for-sale 6,693,994 9,445,913
----------------------------
Net cash provided by (used in) investing
activities 1,200,931 (949,502)
Financing activities:
Payments on notes payable (14,638) (10,498)
Payments on capital lease obligations (10,049) (10,104)
Payments on obligation from acquisition (750,000)
Issuance of common stock upon exercise of
stock options and warrants 199,725 78,165
----------------------------
Net cash provided by (used in) financing
activities 175,038 (692,437)
----------------------------
Net increase (decrease) in cash and cash
equivalents 342,319 (1,450,566)
Cash and cash equivalents at beginning of
period 4,281,994 7,944,595
----------------------------
Cash and cash equivalents at end of period $4,624,313 $6,494,029
----------------------------
----------------------------
Supplemental disclosure of cash flow
information:
Interest paid $ 8,000 $ 3,750
----------------------------
----------------------------
Income taxes paid $ 49,500
----------------------------
----------------------------
</TABLE>
See accompanying notes.
6
<PAGE>
CORE, INC.
Notes to Consolidated Condensed Financial Statements (Unaudited)
March 31, 1998
Note 1 - Basis of Presentation
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission, but do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. The balance sheet at December 31, 1997 has been derived
from the audited financial statements of CORE, INC. (the "Company") at that
date.
In the opinion of management, all adjustments (consisting of only normal
recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the three-month period ended March 31, 1998 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1998. For further information, refer to the consolidated
financial statements for the year ended December 31, 1997 contained in the
Company's annual report filed on Form 10-K filed on April 1, 1998, as amended by
the Company's 10-K/A filed with the Securities and Exchange Commission on
April 10, 1998.
Note 2 - Business Acquisitions
On March 17, 1998, a wholly-owned subsidiary of 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. Additional payments
of $375,000 and performance based payments of up to $781,000 are payable through
June 1999. 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 pro forma unaudited results of operations for the three months ended March
31, 1997 and 1998, assuming consummation of the TCM and SSDC acquisitions as of
January 1, 1997, are as follows:
<TABLE>
<CAPTION>
Three months ended March 31,
1997 1998
-------------------------------
<S> <C> <C>
Revenues $11,091,000 $10,578,000
Income before extraordinary
item 1,074,000 247,000
Net income 2,178,000 247,000
Earnings per common share:
Net income before extraordinary item:
Basic $0.14 $0.03
Diluted $0.13 $0.03
Net income:
Basic $0.29 $0.03
Diluted $0.27 $0.03
</TABLE>
The pro forma financial information is presented for informational purposes only
and is not necessarily indicative of what the actual consolidated results of
operations might have been had the transactions occurred on the date indicated.
7
<PAGE>
CORE, INC.
Notes to Consolidated Condensed Financial Statements (Unaudited) - Continued
Note 3 - Earnings per Common Share
The following table sets forth the computation of basic and diluted earnings per
share for the three months ended March 31, 1997 and 1998:
<TABLE>
<CAPTION>
1997 1998
-----------------------
<S> <C> <C>
Numerator:
Net income $ 140,000 $ 210,000
-----------------------
-----------------------
Denominator:
Denominator for basic
earnings per share:
weighted-average shares 7,197,000 7,310,000
Effect of dilutive stock
options and warrants 616,000 1,049,000
-----------------------
Denominator for diluted
earnings per share:
adjusted
weighted-average shares
and assumed conversions 7,813,000 8,359,000
-----------------------
-----------------------
Basic earnings per share $0.02 $.0.03
-----------------------
-----------------------
Diluted earnings per share $0.02 $.0.03
-----------------------
-----------------------
</TABLE>
Note 4 - Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 (SFAS 130) "Reporting Comprehensive
Income" As of January 1, 1998, the Company adopted SFAS 130. SFAS 130
establishes new rules for the reporting and display of comprehensive income and
its components; however, the adoption of this statement had no impact on the
Company's net income or stockholders' equity. SFAS 130 requires unrealized gains
or losses on the Company's available-for-sale securities, which prior to
adoption were reported separately in stockholders' equity to be included in
other comprehensive income.
During the first quarter of 1997, other comprehensive income was not
significant. There was no other comprehensive income during the three-month
period ended March 31, 1998.
Note 5 - Effect of Recently Issued Accounting Pronouncements
Disclosures about Segments of an Enterprise and Related Information. In June
1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 131 (SFAS No. 131), "Disclosures about Segments of an
Enterprise and Related Information" which is effective for fiscal years
beginning after December 15, 1997. The Statement changes the way public
companies report information about segments of their business in their annual
financial statements and requires them to report selected segment information in
their quarterly reports on a comparative basis beginning with the Company's
quarter ending March 31, 1999. Adoption of SFAS No. 131 is not expected to have
a material effect on the Company's financial statements.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Overview
The Company provides managed disability services (which consist of the
Company's WorkAbility(R) program, analytic consulting services, social security
disability benefits advocacy, Medicare coordination of benefits, bill audit
services and job analysis and loss prevention services), specialty physician and
behavioral health review services and health care benefits utilization review
and case management services. These services are provided principally to
self-insured employers, third-party administrators and insurance carriers. The
Company is typically compensated for these services either on a per review
(i.e., per case), hourly, per enrollee or percentage of cost recovery (for
social security advocacy and Medicare benefits services) basis. The managed
disability service line also includes a limited amount of revenue (1% for the
quarter ended March 31, 1998) from licensing fees attributable to license grants
by the Company of the medical protocol portion of the WorkAbility software
program.
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 and
the Company's actual results could differ materially from those contemplated by
such statements. Such statements reflect management's current views, are based
on many assumptions and are subject to risks and uncertainties. Some important
factors the Company believes could cause such results to differ include the
Company's reliance on its WorkAbility program, the Company's dependence on key
clients, risks associated with the Company's growth strategy, increases or
changes in government regulation and competition. The foregoing list of factors
is not intended to represent a complete list of the general or specific risks
that may affect the Company. It should be recognized that other risks might be
significant, presently or in the future.
Current Developments
On March 17, 1998, the Company purchased the operating assets and certain
liabilities of Transcend Case Management, Inc. ("TCM".) TCM, based in Orlando,
Florida, is a provider of workers' compensation case management services.
Results of Operations
The following table sets forth certain statement of operations data for
the periods indicated expressed as a percentage of revenues:
<TABLE>
<CAPTION>
Three months
ended
March 31,
-----------------
1997 1998
-----------------
<S> <C> <C>
Revenue 100.0% 100.0%
Cost of services 64.5 65.1
Gross profit 35.5 34.9
General and administrative
expense 23.2 21.9
Sales and marketing expense 7.3 8.0
</TABLE>
9
<PAGE>
The following table sets forth the contribution to total revenues of each
of the Company's principal service lines for the periods indicated:
<TABLE>
<CAPTION>
Three months ended March 31,
---------------------------------
1997 1998
---------------------------------
Amount Percent Amount Percent
---------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Managed disability
services $3,965 49% $6,112 60%
Specialty physician and
behavioral health
review 2,455 30 2,482 24
Utilization review and
case management 1,707 21 1,576 16
-------------------------------
-------------------------------
$8,127 100% $10,170 100%
-------------------------------
-------------------------------
</TABLE>
Managed disability services include: CORE's WorkAbility services, analytic
consulting, social security disability benefits advocacy, Medicare coordination
of benefits, bill audit services, job analysis/ loss prevention services, long
term disability case management and license fees.
Three Months Ended March 31, 1998 and 1997
Revenues increased by $2,043,000 (25%) from $8,127,000 for the first
quarter of 1997 to $10,170,000 for the first quarter of 1998 due primarily to
growth in managed disability services. Growth in managed disability services for
the quarter ended March 31, 1998 was lead by increased revenues from WorkAbility
services during the first quarter of 1998, as compared to the first quarter of
1997, despite the loss of clients under the CIGNA distribution agreement.
Increased WorkAbility revenues were derived from several new clients brought on
during 1997 and the first quarter of 1998, including Motorola Inc., Apple
Computer and Fleet Financial Group. Managed disability services revenues also
grew through the additioni of services such as social security benefit advocacy,
Medicare coordination of benefits, and job analysis/loss prevention as a result
of acquisitions completed during June and July 1997. Revenues from specialty
physician review services remained relatively constant for the quarter ended
1998, as compared to the quarter ended 1997. Revenues from utilization review
and case management services declined 8% for the quarter ended 1998 as compared
to the quarter ended 1997 due to a decline in enrollment in our clients'
indemnity plan based group health business. The Company expects utilization
review and case management revenues to continue to decline in future periods as
compared to prior year levels.
The Company's top five clients represented 46% of revenues for the first
quarter of 1998 as compared to 45% for the first quarter of 1997. Bell Atlantic
accounted for approximately 23% of revenues for the first quarter of 1998 and
25% of revenues for the first quarter of 1997. No other single client
represented more than 10% of total revenues for the first quarter of 1998 or
1997.
Cost of services for the Company include direct expenses associated with
the delivery of its review and managed care services, including salaries for
professional, clerical and license support staff, the cost of physician reviewer
consultants and telephone expense. Cost of services increased $1,376,000 (26%)
from $5,244,000 for the first quarter of 1997 to $6,620,000 for the first
quarter of 1998. The increase is primarily the result of additional payroll
costs associated with business acquisitions completed in June and July of 1997
and increased staffing levels required to service new and growing WorkAbility
clients. Additionally, increased amortization expense has been recorded as
software enhancements to the Company's operating systems are placed into
service.
CORE's gross profit performance for the first quarter of 1998 remained
relatively constant at approximately 35% as compared to the first quarter of
1997. Gross profit performance for each of the Company's principal service lines
for the quarters ended March 31, 1998 and 1997, respectively are: 38% and 36%
for managed disability services, 34% and 38% for specialty physician and
behavioral health review services and 26% and 31% for utilization review and
case management services. During the first quarter of 1998, gross profit
performance was adversely impacted, under managed disability services and
specialty physician review, as a result of adding expenses in advance of
expected program revenues with a number of new and expanding clients.
General and administrative expenses include the cost of executive,
administrative and information services personnel, rent and other overhead
items. General and administrative expenses increased $350,000 (19%) from
$1,882,000
10
<PAGE>
for the first quarter of 1997 to $2,232,000 for the first quarter of 1998.
Higher costs in payroll, rent and other general and administrative expenses
relate primarily to the Company's acquisitions of SSDC and Protocol Work Systems
in June and July 1997. The Company has also incurred additional costs associated
with the maintenance of its computer network hardware and software as capacity
has been expanded to accommodate growth. General and administrative
expenses, as a percentage of revenues, decreased from 23% for the first quarter
of 1997 to 22% for the first quarter of 1998. This improvement is generally due
to greater economies of scale related to higher revenues.
Sales and marketing expenses include, but are not limited to, salaries for
sales and account management personnel and travel expenses. Sales and marketing
expenses also include costs designed to increase revenues, such as participation
in and attendance at industry trade shows and conferences. Sales and marketing
expenses increased $222,000 (37%) from $596,000 for the first quarter of 1997 to
$818,000 for the first quarter of 1998. The increase is primarily due to
increased staffing to support the sales and product development departments as
well as additional travel costs and costs for participation in tradeshows.
During 1997, the Company expanded its sales organization, organized its sales
force into five geographical regions and began its plan to prospect all Fortune
500 companies. Additionally, a sales tracking system was implemented in 1997 to
streamline prospective sales activities, centrally manage the Company's sales
activities and assist in identifying cross-selling opportunities of the
Company's products and services to take advantage of the 1997 acquisitions of
SSDC and Protocol Work Systems and the recent acquisition of TCM. The Company
expects to invest an increased amount of resources in sales and marketing in
future periods.
Depreciation and amortization expenses increased $79,000 (18%) from
$437,000 for the first quarter of 1997 to $516,000 for the first quarter of
1998. The increase is largely attributable to increased amortization expense on
the goodwill acquired in the purchases of SSDC and Protocol Work Systems.
Other income consists primarily of interest income, which represents
amounts earned by the Company's investments as reduced by interest expense.
Other income decreased $22,000 (13%) from $172,000 for the first quarter of 1997
to $150,000 for the first quarter of 1998. The decrease is due to a decrease in
funds available for investment.
Financial Condition, Liquidity and Capital Resources
For the three months ended March 31, 1998, the Company's cash and cash
equivalents decreased by $1,451,000. For this period, operating activities
provided $191,000 due primarily to net income of $210,000 and depreciation and
amortization of $727,000, as offset by a net increase in accounts receivable of
$529,000 (resulting from the increase in revenues). The Company's investing
activities used $950,000 of cash due primarily to the purchases of property and
equipment (including software development) of $794,000. The Company's financing
activities used $692,000 for this period due primarily to payments made on
obligations for acquisitions.
The Company leases its facilities and certain office equipment. Lease
commitments, which relate substantially to space rental, for the years ended
December 31, 1998 and December 31, 1999 are approximately $1.3 million and $1.5
million, respectively. All obligations held by the Company under lease
commitments expire on various dates through April 2002 and total $4.5 million as
of March 31, 1998.
The Company has net operating loss carryforwards for income tax purposes
of approximately $5 million as of March 31, 1998, which can be used to reduce
future obligations for federal and state income taxes. The amount of net
operating loss carryforwards that can be utilized in any future year are limited
due to "equity structure shifts" in 1995 involving "5% shareholders" (as these
terms are defined in Section 382 of the Internal Revenue Code), which resulted
in a more than 50 percentage point change in ownership. The utilization of these
net operating loss carryforwards may be subject to further limitation provided
by the Internal Revenue Code of 1986 and similar state provisions.
The Company plans to finance its operations and working capital
requirements with the proceeds of the August 1996 offering, earnings from
operations, investments on hand and other sources of available funds. The
Company presently believes that these resources will be sufficient to meet its
liquidity and funding requirements through at least the year 1999.
The Company's primary computer application platforms were originally
designed to process and store dates in a four-character year format. The Company
believes this substantially reduces the magnitude of the effort required to
address the Year 2000 issue. Management believes CORE's major systems are
effectively Year 2000 compliant and will require minor modifications. The
Company has completed an assessment of internal applications and licensed
operating systems, software tools and utilities. Additionally, the Company has
evaluated third party data feeds, primarily to/from client's
11
<PAGE>
information systems and will have to modify or replace portions of its software
so that its computer systems will function properly with respect to dates in the
Year 2000 and thereafter.
The Company estimates that the Year 2000 project will be completed no
later than December 31, 1998, which is prior to any anticipated impact on its
operating systems. The Company believes that with modifications to existing
software and conversions to new software, the Year 2000 Issue will not pose
significant operational problems for its computer systems. The Company has
initiated formal communications with all of its significant suppliers and large
customers to determine the extent to which the Company's interface systems are
vulnerable to those third parties' failure to remediate their own Year 2000
Issues. There is no guarantee that the systems of other companies on which the
Company's systems rely will be timely converted and would not have an adverse
effect on the Company's systems.
The costs of the Year 2000 project and the date on which the Company
believes it will complete the Year 2000 modifications are based on management's
best estimates, which were derived utilizing numerous assumptions of future
events, including the continued availability of certain resources and other
factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes, and similar
uncertainties.
PART II
Item 2. Changes in Securities and Use of Proceeds
In the quarter ended March 31, 1998, the Company sold the following shares of
Common Stock which were not registered under Securities Act at the time of
issuance. All such shares were sold to present and former employees or
consultants upon the exercise of stock options.
<TABLE>
<CAPTION>
Purchase Price
Date Security Purchaser Number of Shares per Share
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1/8/98 Common Stock P. Polivka 42 $6.25
1/16/98 Common Stock K. Stock 70 $6.25
2/17/98 Common Stock J. Wilson 66 $6.25
3/10/98 Common Stock V. Ford 333 $6.25
3/10/98 Common Stock L. Lundell 600 $8.75
</TABLE>
These shares of Common Stock were not registered under the Securities Act at the
time of sale and issuance, in reliance upon the exception contained in Section
4(2) of the Securities Act for transactions by an issuer not involving any
public offering.
12
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. The following exhibits are included:
<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.
27* Financial Data Schedule.
</TABLE>
- ------------------------------------
* Filed herewith
(b) Reports on Form 8-K.
--------------------
The Company filed a report on Form 8-K dated March 17, 1998 concerning the
acquisition of the operating assets and certain liabilities of Transcend Case
Management ("TCM"). Pursuant to the Purchase Agreement, the operating 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.
13
<PAGE>
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.
CORE, INC.
Dated: May 15, 1998 By: /s/ William E. Nixon
--------------------
William E. Nixon
Chief Financial Officer, Executive
Vice President and Treasurer
(Duly authorized officer and Principal
Financial Officer)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 6,494,029
<SECURITIES> 1,198,829
<RECEIVABLES> 7,520,079
<ALLOWANCES> (166,633)
<INVENTORY> 0
<CURRENT-ASSETS> 15,947,191
<PP&E> 14,249,142
<DEPRECIATION> (7,487,539)
<TOTAL-ASSETS> 32,271,151
<CURRENT-LIABILITIES> 3,830,585
<BONDS> 0
0
0
<COMMON> 731,974
<OTHER-SE> 27,214,535
<TOTAL-LIABILITY-AND-EQUITY> 27,946,509
<SALES> 0
<TOTAL-REVENUES> 10,170,490
<CGS> 0
<TOTAL-COSTS> (6,620,032)
<OTHER-EXPENSES> (3,580,907)
<LOSS-PROVISION> (15,000)
<INTEREST-EXPENSE> (2,878)
<INCOME-PRETAX> 134,688
<INCOME-TAX> 75,000
<INCOME-CONTINUING> 209,688
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 209,688
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
