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
June 6, 1996
Date of Report
(Date of earliest event reported)
OCCUPATIONAL HEALTH + REHABILITATION INC
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
02-21428 13-3464527
(Commission File Number) (IRS Employer Identification No.)
175 Derby Street, Suite 36
Hingham, Massachusetts 02043-5048
(Address of principal executive offices) (Zip Code)
(617) 741-5175
(Registrant's telephone number, including area code)
Telor Ophthalmic Pharmaceuticals, Inc.
790 Turnpike Street, Suite 202
North Andover, Massachusetts 01845
(Former name or former address, if changed since last report)
<PAGE>
Item 2 - Acquisition or Disposition of Assets
On June 6, 1996, Telor Ophthalmic Pharmaceuticals, Inc. ("Telor") merged
(the "Merger") with Occupational Health + Rehabilitation Inc ("OH+R"), with
Telor being the surviving company (the "Company"). In connection with the
Merger, the Company changed its name to Occupational Health + Rehabilitation
Inc. Prior to the Merger, Telor had no operating business. OH+R is an early
stage company that develops, owns and operates multi- disciplinary, out patient
healthcare centers for the prevention, treatment and management of work-related
injuries and illnesses. As a result of the Merger, the Company's primary
business is the business of OH+R. The Merger is being accounted for as a
"reverse acquisition" whereby OH+R will be deemed to have acquired Telor for
financial reporting purposes.
In conjunction with the Merger, the Company issued to the former
stockholders of OH+R 681,415 shares of its common stock in exchange for all
outstanding shares of OH+R capital stock. In addition, outstanding options held
by employees, directors and consultants of OH+R to purchase 832,000 shares of
OH+R common stock now entitle the holders to purchase approximately 117,807
shares of Company common stock. Warrants to purchase 148,150 shares of OH+R
common stock now entitle the holders to acquire approximately 20,977 shares of
Company common stock.
The number of shares of Company common stock that each holder of the OH+R
capital stock received in the Merger was determined by multiplying the number of
shares of OH+R capital stock held by each holder by a fraction, the numerator of
which was equal to the total number of issued and outstanding shares of capital
stock of Telor (assuming the exercise of all Telor options), and the denominator
of which was equal to the total number of issued and outstanding shares of
capital stock of OH+R (assuming the exercise of all OH+R options and warrants).
Since the transaction was structured as a merger, the Company did not need
or obtain funds from third parties in order to consummate the Merger. Prior to
the Merger, Prince Venture Partners, III L.P. ("Prince III") was a stockholder
of Telor and OH+R, and one general partner of Prince III served on Telor's board
of directors and another general partner of Prince III served on OH+R's board of
directors. There was no other material relationship between the former
stockholders of OH+R and Telor or any of Telor's affiliates, officers or
directors (or any associates thereof).
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
Audited financial statements of OH+R, and the notes thereto, required by
this Item were included in the definitive Proxy Statement of Telor dated May 15,
1996 (the "Proxy Statement"), and are incorporated herein by reference. Such
financial statements are attached hereto as Exhibit 20.1.
Also filed as part of Exhibit 20.1 is a manually signed report of Ernst &
Young LLP, independent public accountants of OH+R, with respect to the audited
financial statements filed with this Current Report.
On the date of filing of this Current Report, it is impracticable for the
Company to file the unaudited interim financial statements of OH+R at and as of
March 31, 1996. The Company will file these financial statements as soon as is
practicable, but not later than sixty days from the date of the filing of this
Current Report.
(b) Pro forma financial information.
The pro forma financial information required by this Item was included on
pages 65-69 of the Proxy Statement and is incorporated herein by reference. Such
information is filed as Exhibit 20.2 hereto.
On the date of filing of this Current Report, it is impracticable for the
Company to file the unaudited pro forma financial statements of OH+R at and as
of March 31, 1996. The Company will file these financial statements as soon as
is practicable, but not later than sixty days from the date of the filing of
this Current Report.
(c) Exhibits.
The following exhibits are filed as part of this Current Report pursuant to
Item 601 of Regulation S-K:
Exhibit 2.1 - Agreement and Plan of Merger between Telor and OH+R was filed
as Exhibit 10.50 to the Registrant's Form 10- K for the fiscal year ended
December 31, 1995, as amended, File No. 01-21428 and is incorporated herein
by reference.
Exhibit 4.1 - Restated Certificate of Incorporation of the Registrant was
filed as Exhibit 3 to the Registrant's Form 8-A\A, Amendment No. 1 and is
incorporated herein by reference.
- 2 -
<PAGE>
Exhibit 4.2 - Certificate of Amendment to the Restated Certificate of
Incorporation of Telor Ophthalmic Pharmaceuticals, Inc.
Exhibit 4.3 - Certificate of Merger of OH+R with and into Telor
Exhibit 20.1 - Audited Financial Statements of OH+R from the Proxy
Statement filed pursuant to Item 7(a) of this Current Report, and a
manually signed report of Ernst & Young LLP.
Exhibit 20.2 - Pages 65-69 of the Proxy Statement which include the pro
forma financial information filed pursuant to Item 7(b) of this Current
Report.
- 3 -
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: June 20, 1996 OCCUPATIONAL HEALTH +
REHABILITATION INC
/s/ John C. Garbarino
---------------------
John C. Garbarino
President and Chief Executive
Officer
- 4 -
Exhibit 4.2
CERTIFICATE OF AMENDMENT TO THE RESTATED CERTIFICATE OF
INCORPORATION OF TELOR OPHTHALMIC PHARMACEUTICALS, INC.
Telor Ophthalmic Pharmaceuticals, Inc., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "Company"), does hereby certify:
First: That the Restated Certificate of Incorporation of the Company as
filed with the Secretary of State of the State of Delaware on May 18, 1993 is
hereby amended as follows:
Article FOURTH of the Restated Certificate of Incorporation of the Company
shall be amended by deleting Paragraph A thereof and replacing it with a new
Paragraph A, as follows:
FOURTH: A. Designation and Number of Shares.
The total number of shares of stock which the Corporation is authorized to
issue is Thirty Million (30,000,000) shares, consisting of:
25,000,000 shares of Common Stock, par value of one tenth of one cent
($.001) per share (the "Common Stock"); and
5,000,000 shares of Preferred Stock, par value of one tenth of one cent
($.001) per share (the "Preferred Stock").
Each share of Common Stock of the Company of the par value of one-tenth of
one cent ($.001) issued and outstanding or held in the treasury of the Company
is hereby reclassified and changed into one-tenth of a fully paid and
nonassessable share of Common Stock of the Company of the par value of one-tenth
of one cent ($.001) each, and each stock certificate for one or more shares of
Common Stock of the Company as of the close of business on the date this
amendment becomes effective (the "Effective Date") shall represent the whole
number of shares of Common Stock obtained by multiplying by .10 the number of
shares of Common Stock represented by such certificate immediately prior to the
Effective Date and a right to receive cash for the fractional shares of Common
Stock, if any, which such stockholder would otherwise be entitled to receive in
an amount equal to the fractional share which such stockholder would otherwise
be entitled to receive multiplied by the average of the high and low sales
prices of the Common Stock on the Effective Date as reported on the Nasdaq/NMS
or, if no sales of the Company's Common Stock occur on the Effective Date as
reported on the Nasdaq/NMS, the first day immediately preceding the Effective
Date on which a sale of the Company's Common Stock occurs as
<PAGE>
reported on the Nasdaq/NMS, appropriately adjusted for the Reverse Stock Split.
The relative powers, designations, preferences, special rights,
restrictions and other matters relating to such Common Stock and Preferred Stock
are as set forth below in this Article FOURTH.
Second: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Section 242 of the General Corporation Law of the
State of Delaware.
Third: That this Certificate of Amendment shall become effective at 8:30
a.m. on November 15, 1995.
IN WITNESS WHEREOF, Telor Ophthalmic Pharmaceuticals, Inc. has caused this
Certificate of Amendment to be signed by its duly authorized Chief Executive
Officer and President this 14th day of November, 1995.
TELOR OPHTHALMIC PHARMACEUTICALS, INC.
By: /s/ John K. Herdklotz, Ph.D.
-----------------------------------
John K. Herdklotz, Ph.D.
Chief Executive Officer and
President
- 2 -
Exhibit 4.3
CERTIFICATE OF MERGER OF OCCUPATIONAL HEALTH + REHABILITATION
INC. WITH AND INTO TELOR OPHTHALMIC PHARMACEUTICALS, INC.
(UNDER SECTION 251 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE)
The undersigned corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware does hereby certify:
FIRST: That the names and states of incorporation of each of the
constituent corporations of the merger are as follows:
Name State of Incorporation
---- ----------------------
Occupational Health + Rehabilitation Inc. Delaware
Telor Ophthalmic Pharmaceuticals, Inc. Delaware
SECOND: That an Agreement and Plan of Merger ("Agreement") among the
parties to the merger has been approved, adopted, certified, executed and
acknowledged by Occupational Health + Rehabilitation Inc. and by Telor
Ophthalmic Pharmaceuticals, Inc. in accordance with the requirements of Section
251 of the General Corporation Law of the State of Delaware.
THIRD: That the surviving corporation of the merger is Telor Ophthalmic
Pharmaceuticals, Inc., a corporation organized under the laws of the Delaware.
FOURTH: That the Certificate of Incorporation of Telor Ophthalmic
Pharmaceuticals, Inc., as amended hereby, shall be the Certificate of
Incorporation of the surviving corporation.
FIFTH: That the executed Agreement is on file at the principal place of
business of Telor Ophthalmic Pharmaceuticals, Inc., at 796 Turnpike Street,
North Andover, MA 01845 and at the principal place of business of Occupational
Health + Rehabilitation Inc. at 175 Derby Street, Suite 36, Hingham, MA 02043.
SIXTH: That a copy of the Agreement will be furnished by Telor Ophthalmic
Pharmaceuticals, Inc. on request and without cost, to any stockholder of Telor
Ophthalmic Pharmaceuticals, Inc. or Occupational Health + Rehabilitation Inc.
SEVENTH: That the Certificate of Incorporation of Telor Ophthalmic
Pharmaceuticals, Inc. be amended such that Occupational Health + Rehabilitation
Inc is the name of the surviving corporation.
<PAGE>
EIGHTH: That Article Fourth, Section A of the Certificate of Incorporation
of the surviving corporation be deleted in its
entirety and replaced with the following:
FOURTH: A. Designation and Number of Shares.
The total number of shares of stock which the Corporation is authorized to
issue is Fifteen Million (15,000,000) shares, consisting of:
10,000,000 shares of Common Stock, par value of one-tenth of
one cent ($.001) per share (the "Common Stock"); and
5,000,000 shares of Preferred Stock, par value of one-tenth of one cent
($.001) per share (the "Preferred Stock").
The relative powers, designations, preferences, special rights,
restrictions and other matters relating to such Common Stock and Preferred Stock
are as set forth below in this Article FOURTH.
IN WITNESS WHEREOF, Telor Ophthalmic Pharmaceuticals, Inc. has caused this
Certificate to be signed by John K. Herdklotz, Ph.D., its Acting President and
Chief Executive Officer on the 6th day of June, 1996.
TELOR OPHTHALMIC PHARMACEUTICALS, INC.
By:/s/ John K Herdklotz
-----------------------
John K Herdklotz
Acting President and Chief
Executive Officer
- 2 -
Exhibit 20.1
OCCUPATIONAL HEALTH + REHABILITATION INC
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
Consolidated Financial
Statements
Occupational Health +
Rehabilitation Inc
Years ended December 31, 1995 and 1994
- i -
<PAGE>
Occupational Health + Rehabilitation Inc
Consolidated Financial Statements
Years ended December 31, 1995 and 1994
Contents
Report of Independent Auditors......................................... 1
Consolidated Financial Statements
Consolidated Balance Sheets............................................ 2
Consolidated Statements of Operations.................................. 3
Consolidated Statements of Stockholders' Equity (Deficit)
and Redeemable Stock................................................. 4
Consolidated Statements of Cash Flows.................................. 5
Notes to Consolidated Financial Statements............................. 7
- ii -
<PAGE>
[LOGO] ERNST & YOUNG LLP o 200 Clarendon Street o Phone: 617 266 2000
Boston Fax: 617 266 5843
Massachusetts 02116-5072
Report of Independent Auditors
Board of Directors
Occupational Health + Rehabilitation Inc
We have audited the accompanying consolidated balance sheets of Occupational
Health + Rehabilitation Inc and subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of operations, stockholders' equity
(deficit), and cash flows for each of the three years in the period ended
December 31, 1995. 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 opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Occupational Health + Rehabilitation Inc and subsidiaries at December 31, 1995
and 1994, and the consolidated results of its operations and its cash flows for
each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
January 23, 1996, except for Note 13, as to
which the date is March 4, 1996
1
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
<PAGE>
Occupational Health + Rehabilitation Inc
Consolidated Balance Sheets
December 31
1995 1994
-----------------------
Assets
Current assets:
Cash and cash equivalents $ 368,959 $1,211,285
Accounts receivable, less allowance for doubtful
accounts of $75,155 and $72,766 in 1995 and
1994, respectively 236,875 533,949
Prepaid expenses 103,406 76,081
Other accounts receivable 62,625
Due from related party 680,445
Other assets 166,056
-----------------------
Total current assets 1,555,741 1,883,940
Property and equipment, net 1,058,311 559,911
Intangible assets, net 1,565,179 899,611
Deposits 40,864 36,495
Other assets 29,167 125,000
-----------------------
Total assets $4,249,262 $3,504,957
=======================
<TABLE>
<CAPTION>
December 31
1995 1994
--------------------------
<S> <C> <C>
Liabilities, redeemable stock and stockholders' equity
(deficit)
Current liabilities:
Accounts payable and accrued expenses $ 1,001,768 $ 353,788
Current portion of obligations under capital leases 99,490 72,627
Current maturities of long-term debt 91,667 240,673
Current portion of obligations under noncompetition
agreements 325,000
Due to related party 377,862
--------------------------
Total current liabilities 1,895,787 667,088
Long-term debt, less current maturities 744,779
Obligations under capital leases 122,621 82,827
Obligations under noncompetition agreements 293,153 587,486
--------------------------
Total liabilities 3,056,340 1,337,401
Minority interest 201,106
Redeemable stock:
Redeemable convertible preferred stock,
Series 1, $.01 par value--1,600,000 shares
authorized, issued and outstanding 2,700,000 2,500,000
Redeemable convertible preferred stock, Series 2, $.01
par value--3,000,000 shares authorized, 2,537,843
shares issued and outstanding 4,479,221 3,518,545
--------------------------
Total redeemable stock 7,179,221 6,018,545
Stockholders' equity (deficit):
Common stock, $.01 par value--8,000,000
shares authorized, issued and outstanding
671,855 shares in 1995 and 651,855 in
1994 6,719 6,519
Additional paid-in capital 11,022 6,222
Accumulated deficit (6,205,146) (3,863,730)
--------------------------
Total stockholders' equity (deficit) (6,187,405) (3,850,989)
--------------------------
Total liabilities, redeemable stock and stockholders'
equity (deficit) $ 4,249,262 $ 3,504,957
==========================
</TABLE>
See accompanying notes.
2
<PAGE>
Occupational Health + Rehabilitation Inc
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year ended December 31
1995 1994 1993
-----------------------------------------
<S> <C> <C> <C>
Net patient service revenue $ 5,798,037 $ 2,570,636 $ 1,618,242
Management fee income 189,323 108,580 88,655
Other income 36,587 13,146 30,942
-----------------------------------------
Total revenue 6,023,947 2,692,362 1,737,839
Operating and administrative expenses (7,697,903) (3,865,263) (3,043,429)
Depreciation and amortization (365,486) (222,274) (219,616)
Interest expense (96,746) (53,408) (55,822)
Interest income 37,566 38,154 43,109
Minority interest in net loss of subsidiary 322,211
-----------------------------------------
Loss before income taxes (1,776,411) (1,410,429) (1,537,919)
Deferred income tax benefit 32,860
-----------------------------------------
Net loss $(1,776,411) $(1,410,429) $(1,505,059)
=========================================
Net loss available to common stock $(2,337,087) $(1,830,542) $(1,796,726)
=========================================
Net loss per share $ (3.53) $ (2.81) $ (2.76)
=========================================
Weighted-average common shares and
common share equivalents outstanding 661,855 651,855 651,855
=========================================
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
<CAPTION>
Occupational Health + Rehabilitation Inc
Consolidated Statements of Common Stockholders' Equity (Deficit) and Redeemable Stock
Redeemable Redeemable
Total Convertible Convertible
Additional Stockholders' Preferred Preferred
Common Stock Paid-in Accumulated Equity Stock Stock
Shares Amount Capital Deficit (Deficit) Series 1 Series 2
----------------------------------------------------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 651,855 $6,519 $ 6,222 $ (193,985) $ (181,244) $2,100,000 $ 0
Issuance of redeemable preferred stock
(42,477) (42,477) 2,000,001
Dividends on redeemable preferred stock
(291,667) (291,667) 200,000 91,667
Net loss (1,505,059) (1,505,059)
----------------------------------------------------------- ----------- --------------
Balance at December 31, 1993 651,855 6,519 6,222 (2,033,188) (2,020,447) 2,300,000 2,091,668
Issuance of redeemable
preferred stock 1,206,764
Dividends on redeemable preferred stock
(420,113) (420,113) 200,000 220,113
Net loss (1,410,429) (1,410,429)
----------------------------------------------------------- ----------- --------------
Balance at December 31, 1994 651,855 6,519 6,222 (3,863,730) (3,850,989) 2,500,000 3,518,545
Issuance of common stock 20,000 200 4,800 5,000
Issuance of redeemable preferred stock
(4,329) (4,329) 600,000
Dividends on redeemable preferred stock
(560,676) (560,676) 200,000 360,676
Net loss (1,776,411) (1,776,411)
----------------------------------------------------------- ----------- --------------
Balance at December 31, 1995 671,855 $6,719 $11,022 $(6,205,146) $(6,187,405) $2,700,000 $4,479,221
=========================================================== =========== ==============
</TABLE>
See accompanying notes.
4
<PAGE>
Occupational Health + Rehabilitation Inc
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31
1995 1994 1993
----------------------------------------------
<S> <C> <C> <C>
Operating activities
Net loss $(1,776,411) $(1,410,429) $(1,505,059)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 365,486 222,274 219,616
Amortization of discount 30,667 29,145 26,414
Minority interest in loss of subsidiary (322,211)
Loss on sale of equipment 1,800
Deferred income tax benefit (32,860)
Changes in operating assets and
liabilities:
Accounts receivable 297,074 (145,251) 19,578
Prepaid expenses and other
current assets (130,756) (7,688) (111,034)
Due from related party, net 105,556
Deposits and other noncurrent assets 91,464 (10,749) (113,913)
Accounts payable and accrued
expenses 543,072 90,659 94,713
----------------------------------------------
Net cash used in operating activities (794,259) (1,232,039) (1,402,545)
Investing activities
Property and equipment additions (161,570) (73,266) (233,589)
Cash paid for acquisitions (336,278) (41,174)
----------------------------------------------
Net cash used in investing activities (497,848) (114,440) (233,589)
Financing activities
Proceeds from sale of preferred stock, net 595,671 1,000,000 1,957,524
Proceeds from line of credit 75,000 262,591
Payments of long-term debt (240,693) (115,959) (164,430)
Payments of capital lease obligations (101,197) (48,409) (49,447)
Cash received by partnership 196,000
----------------------------------------------
Net cash provided by financing activities 449,781 910,632 2,006,238
----------------------------------------------
Net increase (decrease) in cash and cash
equivalents (842,326) (435,847) 370,104
Cash and cash equivalents at beginning of year 1,211,285 1,647,132 1,277,028
----------------------------------------------
Cash and cash equivalents at end of year $ 368,959 $ 1,211,285 $ 1,647,132
==============================================
</TABLE>
5
<PAGE>
Occupational Health + Rehabilitation Inc
Consolidated Statements of Cash Flows (continued)
Supplemental Disclosure of Noncash Items:
- -- The Company entered into capital lease obligations during 1995, 1994 and
1993 totaling $167,854, $87,872 and $165,438, respectively.
- -- During 1995, 1994 and 1993, the Company accrued dividends in kind to
preferred shareholders of $560,676, $420,113 and $291,667, respectively.
- -- In 1994, $206,764 of the acquisition of Link Performance and Recovery
Systems, Inc. was financed through the issuance of 137,842 shares of Series
2 Preferred Stock.
- -- In 1995, $5,000 of the acquisition of Family Health Care, P.A. was financed
through the issuance of 20,000 of Common Stock as part of a noncompetition
agreement.
See accompanying notes.
6
<PAGE>
Occupational Health + Rehabilitation Inc
Notes to Consolidated Financial Statements
December 31, 1995
1. Summary of Significant Accounting Policies
Business
Occupational Health + Rehabilitation Inc, formerly Occupational Health, Inc.
(the Company), a Delaware corporation, was incorporated on May 15, 1992 for
purposes of acquiring Occupational Orthopedic Center, Inc. (OOC) on July 1,
1992. The Company had no significant operations prior to that date.
The Company develops and operates outpatient medical centers specializing in the
prevention, treatment and management of work-related injuries and illnesses. The
Company operates the centers under long-term service agreements with physician
and physical therapy groups that practice exclusively through such centers.
Effective April 1, 1995, the Company entered into a partnership agreement with
NEB Enterprises, Inc., forming NEB Occupational Health (NEBOH), to provide
management and related services to the centers established by the partnership.
(see Note 2).
Basis of Presentation
The Company's consolidated financial statements have been presented on a going
concern basis which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company generated losses of
$1,776,411 during the year ended December 31, 1995 and cumulative net losses of
$4,691,899 during the three year period then ended. As an early stage company,
the Company has predictably generated losses as it has developed its network of
rehabilitation centers. The Company's cash flow needs have been met through the
infusion of capital from venture capital investors through the sale of preferred
stock. At December 31, 1995, management's plan for the 1996 year indicates that
another of infusion of capital will be necessary to meet both operational needs
and requirements for potential acquisitions. As more fully described in Note 14,
the Company has signed a letter of intent to merge into Telor Ophthalmic
Pharmaceuticals, Inc. (Telor). Telor has adequate cash resources to ensure that
the Company can continue as a going concern through December 31, 1996. Should
the merger with Telor not be consummated, management will seek funding through
the Company's venture capital investors or other financing sources.
Principles of Consolidation
The consolidated financial statements include the accounts of Occupational
Health + Rehabilitation Inc, its wholly-owned subsidiary and its majority-owned
partnership, NEBOH. All significant intercompany accounts and transactions have
been eliminated.
7
<PAGE>
Occupational Health + Rehabilitation Inc
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less at date of purchase to be cash equivalents.
Property and Equipment
Property and equipment is stated on the basis of cost. Depreciation of property
and equipment is calculated using the straight-line and declining-balance
methods over the estimated useful lives of the assets. Leasehold improvements
are amortized on a straight-line basis over the shorter of the lease term or the
estimated useful life of the asset. Amortization of assets under capital lease
is included with depreciation.
Intangible Assets
Excess Cost of Net Assets Acquired
The excess of cost over the fair value of the net assets of businesses acquired
(goodwill) is amortized using the straight-line method over periods of 20 to 40
years.
Noncompetition Agreements
Covenants not-to-compete are amortized over the term of the noncompetition
agreement, which is currently five years.
Organization Costs
Costs of organizing the Company are being amortized over a period of five years.
The carrying value of intangible assets will be reviewed if the facts and
circumstances suggest that it may be impaired. If this review indicates that an
intangible asset will not be recoverable, an impairment loss is recognized to
the extent the sum of the undiscounted expected future cash flows is less than
the carrying amount of the asset. Measurement of impairment should be based on
the fair value of the asset. No such impairment exists at December 31, 1995.
8
<PAGE>
Occupational Health + Rehabilitation Inc
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which
establishes criteria for the recognition and measurement of impairment loss
associated with long-lived assets. The Company will be required to adopt this
Standard in the first quarter of 1996. Based on the Company's initial
evaluation, adoption is not expected to have a material impact on the Company's
financial position or results of operations.
Net Patient Service Revenue
Net patient service revenue for all centers is recorded at established rates
reduced by allowances for doubtful accounts and contractual adjustments, which
amounted to $801,076, $321,168 and $321,896 for the years ended December 31,
1995, 1994 and 1993, respectively.
Professional Liability Coverage
The Company maintains professional liability insurance coverage on a claims-made
basis in Maine and Rhode Island, and on an occurrence basis in Massachusetts and
Vermont. Management is unaware of any claims that may result in a loss in excess
of amounts covered by its existing insurance.
Stock Option Accounting
The Company accounts for its stock compensation arrangements under the
provisions of APB 25, "Accounting for Stock Issued to Employees," and intends to
continue to do so.
Estimates and Assumptions
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, if any, 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.
9
<PAGE>
Occupational Health + Rehabilitation Inc
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Fair Value of Financial Instruments
The Company's financial instruments consist of cash and cash equivalents,
accounts receivable, accounts payable and accrued expenses, long-term debt and
obligations under noncompetition agreements. The Company believes that the
carrying value of its financial instruments approximates fair value. The Company
has made this determination for its fixed-rate long-term debt based upon
interest rates currently available to it to refinance such debt.
Net Loss Per Common Share
Net loss per share of common stock is computed by dividing net loss, adjusted
for preferred stock dividends, by the weighted-average number of shares of
common stock outstanding during each period presented. The effect of options and
warrants is not considered as it would be antidilutive.
Reclassifications
Certain reclassifications of 1994 amounts have been made to permit comparison.
2. Acquisitions and Joint Ventures
During 1994, the Company purchased substantially all the net assets of Link
Performance and Recovery Systems, Inc., an outpatient medical center located in
Maine. The purchase price was $247,938 which was paid in cash and 137,842 shares
of Series 2 preferred stock. The transaction was accounted for as a purchase.
Effective April 1995, the Company entered into a partnership, NEBOH, with NEB
Enterprises, Inc. (NEBE), a wholly-owned subsidiary of New England Baptist
Hospital, to provide management and related services to the centers established
by the partnership. The Company made a capital contribution to NEBOH of $204,000
in cash and has a partnership interest equal to 51%. In addition, OH+R has
control of the business and affairs of the partnership through its majority
control of the Management Committee. The Management Committee consists of two
persons designated by NEBE (the minority shareholder) and three persons
designated by OH+R. Therefore, OH+R has majority voting control of the
partnership and consolidates the partnership in its financial statements. Under
the terms of a related agreement, the Company issued a promissory note payable
to NEBE in the amount of $536,446 and incurred a short-term obligation of
$104,908 to NEBE for the purchase of 51% of the assets, properties and rights,
both tangible and intangible, in the Waltham center owned by NEBE and operated
by the Company. NEBE acquired from the Company a 49% interest in certain of the
Company's
10
<PAGE>
Occupational Health + Rehabilitation Inc
Notes to Consolidated Financial Statements (continued)
2. Acquisitions and Joint Ventures (continued)
Boston center assets. These exchanges of assets of the Waltham center and Boston
center were consummated at the fair value of the tangible and intangible net
assets of the centers. Goodwill of $337,464 was recorded by OH+R in connection
with these transactions. Both the Company and NEBE contributed their respective
interests in the Waltham and Boston centers to the partnership. The promissory
note, at the option of the holder, may be converted into shares of common stock
of the Company. As a result of the Company's interest to merge with Telor (see
Note 14), the seller has agreed to waive the right to convert the note into
shares of common stock of the Company.
In May 1995, the Company purchased substantially all of the assets (excluding
accounts receivable) of Family Health Care, P.A., a physician practice located
in Bangor, Maine. The purchase price was $105,000, consisting of 20,000 common
stock shares of the Company and a promissory note. At the option of the holder,
principal payments may be made in shares of common stock of the Company. As a
result of the Company's intent to merge with Telor (see Note 14), the seller has
agreed to waive the right to receive such shares under the promissory note. The
note is secured by certain assets of the Company. This transaction was accounted
for as a purchase.
In June 1995, the Company purchased substantially all of the assets (excluding
accounts receivable) of Green Mountain Sports Physical Therapy, an outpatient
therapy center located in Vermont. The purchase price was $400,000, consisting
of cash and a promissory note. At the option of the holder, principal payments
may be made in shares of common stock of the Company. As a result of the
Company's intent to merge with Telor (see Note 14), the seller has agreed to
waive the right to receive shares under the promissory note. The note is secured
by certain assets of the Company. This transaction was accounted for as a
purchase.
Certain purchase agreements require additional payments if specific financial
targets are met. In 1995, no additional payments were made.
3. Management Agreements
New England Baptist Hospital
On April 1, 1993, the Company entered into a management agreement with New
England Baptist Hospital in Boston, Massachusetts. Under the agreement, the
Company operated an outpatient medical center in Waltham, Massachusetts in
return for management fees. The management agreement terminated when the Company
entered into a partnership agreement with NEBE (see Note 2). Management fees of
$21,555, $108,580 and $88,655 were earned in 1995, 1994 and 1993, respectively,
under this agreement.
11
<PAGE>
Occupational Health + Rehabilitation Inc
Notes to Consolidated Financial Statements (continued)
3. Management Agreements (continued)
NEB Occupational Health
Effective April 1995, NEBOH entered into a management agreement with New England
Baptist Hospital. Under the terms of the agreement, NEBOH operates an outpatient
medical center in Waltham, Massachusetts in return for a fee equal to the net
revenue (as defined) of the center, less certain primary expenses. Fees earned
during 1995 were $589,363, comprised of $705,411 of net revenue, less primary
expenses of $116,048. Such revenue and expenses are included in net patient
service revenue, and cost of services and administrative expenses, respectively,
in the consolidated statement of operations.
Effective April 1995, the Company entered into a submanagement agreement with
NEBOH. Under the terms of the agreement, the Company operates outpatient medical
centers in Waltham and Boston, Massachusetts in return for management fees.
Management fees of $167,768 were earned in 1995 under this agreement.
4. Sale of Accounts Receivable
In June 1995, the Company entered into an agreement with NPF-WL, Inc.
(Purchaser) and National Premier Financial Services, Inc. (Servicer) of Dublin,
Ohio for the sale of receivables from certain Company centers. Under the terms
of this agreement, certain eligible medical receivables are sold to the
Purchaser on a weekly basis. Up to $1,200,000, ongoing, is available to the
Company. Total proceeds during 1995 were $1,857,978 under this agreement. The
Company is required to maintain credit reserves with the Purchaser equal to 17%
of the total outstanding purchase and to pay interest equal to 1.17% per month
on the outstanding purchase balance. The Company paid $72,134 in interest during
1995. At December 31, 1995, the outstanding purchase was $626,897 and was
appropriately recorded as a deduction of accounts receivable. The Company
maintained credit reserves of $116,056 at December 31, 1995 in other current
assets.
12
<PAGE>
Occupational Health + Rehabilitation Inc
Notes to Consolidated Financial Statements (continued)
5. Property and Equipment
Property and equipment consist of the following:
December 31
1995 1994
--------------------------
Vehicles $ 13,000
Medical equipment 911,058 $489,857
Furniture and office equipment 451,631 313,943
Leasehold improvements 220,504 122,244
--------------------------
1,596,193 926,044
Less accumulated depreciation 537,882 366,133
--------------------------
$1,058,311 $559,911
==========================
The cost of certain equipment leased under capital lease agreements was $420,727
and $252,873 at December 31, 1995 and 1994, respectively. Accumulated
depreciation on these capitalized lease assets was $81,813 and $37,233 at
December 31, 1995 and 1994, respectively.
6. Intangible Assets
Intangible assets consist of the following:
December 31
1995 1994
--------------------------
Excess cost of net assets acquired $1,299,067 $ 540,614
Noncompetition agreements 632,144 617,144
Organization costs 208,420 121,929
--------------------------
2,139,631 1,279,687
Less accumulated amortization 574,452 380,076
--------------------------
$1,565,179 $ 899,611
==========================
13
<PAGE>
Occupational Health + Rehabilitation Inc
Notes to Consolidated Financial Statements (continued)
7. Long-Term Debt and Noncompetition Agreements
Long-term debt consists of the following:
December 31
1995 1994
------------------------
Note payable to NEBE $536,446
Promissory note, bearing interest at 9% due in
three annual installments through June 1998 200,000
Promissory note, bearing interest at 8.5% due
in four annual installments through June
1999 100,000
Line of credit with bank, bearing interest at the
bank's prime rate plus 1% $150,000
Term loan payable to bank, bearing interest at
the bank's prime rate plus 1%, due June
1996 67,340
Note payable to bank, bearing interest at the
bank's prime rate plus 1%, due February
1996 23,333
------------------------
836,446 240,673
Less current portion 91,667 240,673
------------------------
$744,779 $ 0
========================
In June 1995, the Company repaid certain amounts outstanding under its debt
agreements with the proceeds of an accounts receivable factoring agreement (see
Note 4).
In connection with its investment in NEBOH, on April 1, 1995, the Company
entered into a convertible subordinated note agreement with NEBE in the amount
of $536,446. The note carries interest at 9.75% and requires payment of interest
only, in arrears, on April 1, 1996, 1997 and 1998. Beginning October 1, 1999,
the Company is required to make semi-annual payments of interest, in arrears, on
each October 1st and April 1st. Beginning April 1, 1999, the Company is required
to make five equal installments of principal of $107,293 on each April 1 until
final maturity on April 1, 2003. Payments of principal may be deferred at the
option of the payee. At the option of NEBE the note may be converted into shares
of the Company's common stock at a price of $1.50 per share, subject to
adjustment in certain circumstances. The note will automatically convert in the
event of an initial public offering, merger or sale of the Company, subject to
certain conditions. The note is secured by a special distribution of certain
assets of NEBOH.
14
<PAGE>
Occupational Health + Rehabilitation Inc
Notes to Consolidated Financial Statements (continued)
7. Long-Term Debt and Noncompetition Agreements (continued)
Obligations under noncompetition agreements of $618,153 are net of unamortized
discount of $31,847 at December 31, 1995 (effective interest rate 5.22%). These
obligations consist of amounts due to five individuals in connection with the
acquisition of OOC and are payable in equal installments of $325,000 during 1996
and 1997.
Maturities of obligations under noncompetition agreements are as follows:
1996--$325,000 and 1997--$293,153.
Aggregate maturities of obligations under long-term debt agreements are as
follows:
1996 $ 91,667
1997 91,667
1998 91,666
1999 132,293
2000 107,293
Thereafter 321,860
--------
$836,446
========
Interest paid in 1995, 1994 and 1993 amounted to $113,903, $50,676 and
$29,408, respectively.
8. Leases
The Company maintains operating leases for commercial property and office
equipment. The commercial leases contain renewal options and require the Company
to pay certain utilities and taxes over established base amounts. Operating
lease expense amounted to $717,804, $392,862 and $295,733 for 1995, 1994 and
1993, respectively.
In 1995, 1994 and 1993, the Company entered into various capital lease
agreements for the purchase and installation of certain therapy equipment,
office equipment, computer equipment and software (see Note 5).
15
<PAGE>
Occupational Health + Rehabilitation Inc
Notes to Consolidated Financial Statements (continued)
8. Leases (continued)
Future minimum lease payments under capital leases and noncancelable operating
leases are as follows:
Operating
Capital Leases Leases
---------------------------
1996 $123,067 $ 673,082
1997 99,131 509,381
1998 32,729 245,928
1999 3,665 248,839
2000 79,344
---------------------------
Total minimum lease payments 258,592 $1,756,574
==========
Amounts representing interest 36,481
----------
Present value of net minimum lease payments $222,111
==========
9. Income Taxes
The Company provides for income taxes under the liability method. Deferred
income taxes arise principally from temporary differences related to accrued
bonuses, net operating losses, bad debt reserves and use of accelerated
depreciation for tax return purposes. The components of the Company's deferred
income taxes at December 31, 1995 and 1994 are as follows:
December 31
1995 1994
-------------------------
Deferred tax assets $ 1,906,225 $ 1,199,241
Less valuation allowance (1,852,874) (1,144,967)
-------------------------
Deferred tax asset after valuation allowance $ 53,351 $ 54,274
=========================
Deferred tax liability $ (53,351) $ (54,274)
=========================
At December 31, 1995, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $4,624,878 which begin to expire in
2008. For financial reporting purposes, a valuation allowance of $1,862,901 has
been recognized to offset deferred tax assets related to this carryforward since
uncertainty exists with respect to future realization of such carryforwards.
16
<PAGE>
Occupational Health + Rehabilitation Inc
Notes to Consolidated Financial Statements (continued)
10. Stockholders' Equity and Redeemable Preferred Stock
In April 1995, the Company adopted a Certificate of Amendment of their
Certificate of Incorporation which increased the authorized number of shares of
Common Stock of the Company from 6,000,000 to 8,000,000 shares and Series 2
Preferred Stock from 2,500,000 to 3,000,000 shares. The Company has reserved
5,514,575 shares of Common Stock for future issuance under the terms of the
Preferred Stock, Warrant, Stock Option and NEBE Note Agreements.
Preferred Stock
Each share of Series 1 and Series 2 Preferred Stock (Preferred Stock) is
convertible into one share of common stock, subject to certain anti-dilution
requirements, and will automatically convert immediately prior to the closing of
an initial public offering at a price of at least $4.50 per share. Each share of
Preferred Stock is entitled to one vote. Dividends are payable when and if
declared by the Board of Directors and accrue at an annual cumulative rate of
$.125 and $.150 per share on the Preferred Stock, respectively. Dividends
accrued on the Series 1 Preferred Stock totaled $200,000 in each of 1995, 1994
and 1993. Dividends accrued on the Series 2 Preferred Stock totaled $360,676,
$220,113 and $91,667 for 1995, 1994 and 1993, respectively.
In the event of voluntary or involuntary liquidation, distribution of assets,
dissolution or winding up of the Company, and after payment in full of all debts
and other obligations of the Company, the holders of the Preferred Stock are
entitled to receive an amount equal to $1.25 and $1.50, respectively, per share
plus all accrued but unpaid dividends, whether or not declared.
At any time after July 1998, any holder of Preferred Stock shall have the right,
at such holder's option, to require the Company to redeem all or part of the
Preferred Stock at a redemption value of $1.25 plus all unpaid dividends for the
Series 1 Preferred Stock and $1.50 plus all unpaid dividends for the Series 2
Preferred Stock.
At any time after July 1999, the Company may redeem all, but not less than all,
of the Preferred Stock at the same redemption values noted in the previous
paragraph.
In April 1995, the Company issued 400,000 shares of Series 2 Preferred Stock and
received proceeds of $600,000.
Common Stock
On July 1, 1992, the Company sold 651,855 shares of $.01 par value common stock
to its founders for $6,519. These shares are subject to certain vesting and
repurchase agreements.
17
<PAGE>
Occupational Health + Rehabilitation Inc
Notes to Consolidated Financial Statements (continued)
10. Stockholders' Equity and Redeemable Preferred Stock (continued)
During 1995, the Company issued 20,000 of its common stock at $.25 per share as
part of a noncompetition agreement.
Warrants
In conjunction with the acquisition of OOC and the sale of Series 1 Preferred
Stock (see Note 1 and Preferred Stock section above), the Company issued stock
purchase warrants. The warrants provide the holders the right to purchase an
aggregate of 148,150 shares of common stock at $1.25 per share. The warrants are
exercisable in part or whole from July 1, 1997 until August 31, 1997.
Stock Plan
The Company's Stock Plan provides the opportunity for employees, related
corporations, directors and consultants to be granted options to purchase,
receive awards or make direct purchases of up to 870,951 shares of the Company's
common stock. Options granted under the Plan may be "incentive stock options" or
"nonqualified options" under the applicable provisions of the Internal Revenue
Code. The exercise price of "incentive stock options" granted under the plan may
not be less than the fair market value of the Company's common stock at the date
of grant. "Nonqualified options" may not be granted at less than 50% of fair
market value.
Option activity under the plan was as follows:
Number of Option Price
Shares Per Share
-----------------------------
Outstanding at December 31, 1992 0
Granted 560,065 $.25
Canceled (123,050) .25
-----------------------------
Outstanding at December 31, 1993 437,015 .25
Granted 180,260 .25
Canceled (77,400) .25
-----------------------------
Outstanding at December 31, 1994 539,875 .25
Granted 71,850 .25-.50
Canceled (55,700) .25
-----------------------------
Outstanding at December 31, 1995 556,025 $.25-.50
=============================
18
<PAGE>
Occupational Health + Rehabilitation Inc
Notes to Consolidated Financial Statements (continued)
10. Stockholders' Equity and Redeemable Preferred Stock (continued)
No options were exercised in 1995, 1994 or 1993. At December 31, 1995, options
covering 210,070 shares were exercisable. All options granted vest over a
four-year period.
In January 1996, options covering an additional 317,100 shares were granted at
$.50 per share. All options granted vest over a two to four-year period, except
for 200,000 options which vest upon the occurrence of certain events.
11. Employee Benefit Plan
The Company has a qualified 401(k) plan (the Plan) for all employees meeting
certain eligibility requirements. The Company contributes a stipulated
percentage based on employee contributions. Company contributions to the Plan
were $38,118, $26,269 and $15,799 during 1995, 1994 and 1993, respectively.
12. Transactions with Related Parties
Amounts due to NEBOH from New England Baptist Hospital consist of cash collected
from certain accounts related to a management agreement and from certain
accounts contributed to NEBOH under a partnership agreement effective April 1,
1995. Amounts owed to NEBOH at December 31, 1995 were $680,445.
Amounts payable to New England Baptist Hospital from NEBOH consist of certain
operating expenses paid by New England Baptist Hospital during the year. Amounts
owed to New England Baptist Hospital at December 31, 1995 were $377,862.
The Company rents certain fixed assets to NEBOH. Equipment rent expense for 1995
was $14,569.
13. Subsequent Events
In January 1996, NEBOH obtained a line of credit with a bank which provided for
borrowings of up to $300,000. The line of credit is secured by certain accounts
receivable of the partnership. The proceeds of the line are to be used for
general operating expenses. The line bears interest at prime plus 3/4%.
On March 4, 1996, the Company signed a promissory note with one of its investors
to provide for borrowings of up to $350,000. The proceeds of the note are to be
used for the payment of certain outstanding debt. The note is due and payable on
the earlier of the closing of the merger (see Note 14) or January 15, 1997 and
bears interest at 9%. The note is unsecured.
19
<PAGE>
14. Merger
On December 6, 1995, the Company signed a letter of intent to merge into Telor.
Under the terms of the merger, all of the outstanding shares of common stock and
convertible preferred stock of the Company at the effective date of the merger
will be converted into shares of Telor common stock, $.001 par value. All of the
outstanding warrants and options to purchase shares of Company common stock will
upon the merger become warrants and options to purchase shares of Telor common
stock.
Immediately after the consummation of the merger, the Company stockholders will
hold or have the right to receive upon exercise of options or warrants fifty
percent (50%) of the outstanding shares of Telor stock on a fully diluted basis.
The name of the surviving corporation will be Occupational Health +
Rehabilitation Inc. It is expected that the merger will be accounted for as a
reverse purchase and is intended to quality as a tax-free reorganization.
20
Exhibit 20.2
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Telor Ophthalmic Pharmaceuticals, Inc. and
Occupational Health + Rehabilitation Inc
The following Unaudited Pro Forma Combined Balance Sheet as of December 31,
1995 and the Unaudited Pro Forma Combined Statement of Operations for the year
ended December 31, 1995 give effect to the Merger accounted for under the
reverse acquisition purchase method of accounting. The financial information for
the year ended December 31, 1995 for Telor has been obtained from the financial
statements of Telor which have been audited by Arthur Andersen LLP. The
consolidated financial information for the year ended December 31, 1995 for OH+R
has been obtained from the consolidated financial statements of OH+R which have
been audited by Ernst & Young LLP.
The Unaudited Pro Forma Combined Financial Information is based on the
historical financial statements of Telor and OH+R under the assumptions and
adjustments set forth in the accompanying Notes to the Unaudited Pro Forma
Combined Financial Information. The Unaudited Pro Forma Combined Balance Sheet
assumes that the Merger was consummated on December 31, 1995, and the Unaudited
Pro Forma Combined Statement of Operations assumes that the Merger was
consummated on January 1, 1995.
The Pro Forma adjustments are based on the reverse acquisition method of
accounting, which provides that the net assets of the acquired company (Telor)
be recorded at their historical cost, which approximates fair value.
The Unaudited Pro Forma Combined Financial Statements may not be indicative
of the results that actually would have occurred if the Merger had been in
effect on the dates indicated or which may be obtained in the future. The
Unaudited Pro Forma Combined Financial Statements should be read in conjunction
with the historical financial statements and accompanying notes of Telor and
OH+R.
<PAGE>
TELOR OPHTHALMIC PHARMACEUTICALS, INC.
AND
OCCUPATIONAL HEALTH + REHABILITATION INC
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
December 31, 1995
(In thousands)
<TABLE>
<CAPTION>
Pro Forma
OH+R Telor Adjustments Pro Forma
---- ----- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................. $ 369 $ 3,305 $ 3,674
Short-term investments .................................... 1,987 1,987
Accounts receivable, net .................................. 237 63 300
Other current assets ...................................... 950 149 1,099
-------- -------- -------- --------
Total current assets ........................................ 1,556 5,504 0 7,060
Property and equipment, net ................................. 1,058 23 1,081
Intangible assets, net ...................................... 1,565 1,565
Other assets ................................................ 70 360 430
-------- -------- -------- --------
Total assets ................................................ $ 4,249 $ 5,887 $ 0 $ 10,136
======== ======== ======== ========
LIABILITIES, REDEEMABLE STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses ..................... $ 1,002 $ 745 $ $ 1,747
Current portion of obligations under capital
leases .................................................. 99 43 142
Current maturities of long-term debt ...................... 91 -- 91
Current portion of obligations under
noncompetition agreements ............................... 325 -- 325
Due to related party ...................................... 378 -- 378
-------- -------- -------- --------
Total current liabilities ................................... 1,895 788 0 2,683
Long-term debt, less current maturities ..................... 745 -- 745
Obligations under capital leases ............................ 123 513 636
Obligations under noncompetition agreements ................. 293 -- 293
-------- -------- -------- --------
3,056 1,301 4,357
Minority interest ........................................... 201 -- 0 201
Redeemable stock ............................................ 7,179 -- (7,179)(B) 0
Stockholders' equity (deficit):
Common stock .............................................. 7 1 (7)(B) 1
Additional paid-in capital ................................ 11 35,652 (25,253)(B) 10,410
Accumulated deficit ....................................... (6,205) (31,067) 32,439(B) (4,833)
-------- -------- -------- --------
Total stockholders' equity (deficit) ........................ (6,187) 4,586 7,179 5,578
-------- -------- -------- --------
Total liabilities, redeemable stock and
stockholders' equity (deficit) ............................ $ 4,249 $ 5,887 $ 0 $ 10,136
======== ======== ======== ========
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Financial Information.
- 2 -
<PAGE>
TELOR OPHTHALMIC PHARMACEUTICALS, INC.
AND
OCCUPATIONAL HEALTH + REHABILITATION INC
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the year ended December 31, 1995
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Pro Forma
OH+R Telor Adjustments Pro Forma
---- ----- ----------- ---------
<S> <C> <C> <C> <C>
Total revenue ............................................ $ 6,024 $ $ $ 6,024
Operating and administrative expenses .................... (7,698) (7,718)(A) (15,416)
Depreciation and amortization ............................ (365) (220) (585)
Interest expense ......................................... (97) -- (97)
Interest income .......................................... 38 383 421
Minority interest in net loss of subsidiary .............. 322 -- 322
-------- -------- -------- --------
Net loss ................................................. $ (1,776) $ (7,555) $ 0 $ (9,331)
======== ======== ======== ========
Net loss available to common stock ....................... $ (2,337)
Net loss per share ....................................... $ (3.53) $ (9.67) $ (6.48)
======== ======== ========
Weighted average common shares and common
share equivalents outstanding .......................... 662 781 (3)(C) 1,440
======== ======== ======== ========
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Financial Information.
- 3 -
<PAGE>
TELOR OPHTHALMIC PHARMACEUTICALS, INC.
AND
OCCUPATIONAL HEALTH + REHABILITATION INC
NOTES TO UNAUDITED PRO FORMA COMBINED
FINANCIAL INFORMATION
A. Basis of Presentation
The Unaudited Pro Forma Combined Balance Sheet assumes that the Merger was
consummated on December 31, 1995, and the Unaudited Pro Forma Combined Statement
of Operations assumes that the Merger was consummated on January 1, 1995. The
Merger has been accounted for in the accompanying Unaudited Pro Forma Combined
Financial Information under the reverse acquisition purchase method of
accounting.
B. Balance Sheet Adjustments
The adjustments to redeemable stock and stockholders' equity (deficit)
comprise the following (in thousands, except share and per share data):
o Redeemable Stock:
Waiver of accrued preferred stock dividends
on OH+R Preferred Stock.......................................... $(1,372)
Conversion of 1,600,000 shares of OH+R Series 1 Preferred Stock.... (2,000)
Conversion of 2,537,843 shares of OH+R Series 2 Preferred Stock.... (3,807)
--------
$(7,179)
========
o Common Stock:
Reversal of OH+R par value ($.01) of 671,855 shares................ $ (8)
Recording of Telor par value ($.001) of newly issued shares........ 1
--------
$ (7)
========
o Additional paid-in capital:
Conversion of OH+R preferred shares to common $ 5,806
Elimination of Telor accumulated deficit (31,067)
Reversal of OH+R additional paid-in capital on common shares 8
--------
$(25,253)
========
o Accumulated deficit:
Waiver of accrued preferred stock dividends
on OH+R Preferred Stock.......................................... $ 1,372
Elimination of Telor accumulated deficit........................... 31,067
--------
$ 32,439
========
- 4 -
<PAGE>
C. Adjustments to Statement of Operations
The adjustment to weighted average common shares and common share
equivalents outstanding for purposes of computing pro forma net loss per share
reflects the conversion of shares of OH+R Common Stock and OH+R Preferred Stock
into Telor Stock at a conversion ratio of 0.1413123.
D. Non-Recurring Adjustment Attributable to the Merger
Upon the consummation of the Merger, a new measurement date will be
established for the former OH+R options. In accordance with EITF 90-9, an
analysis will be performed to determine whether a charge to compensation expense
and credit to paid-in capital will be required based upon the market value of
the Telor Stock immediately after the Merger. An estimate of such compensation
expense cannot be determined at this time. Once determined, such charge will be
recorded in the quarter that the Merger closes to the extent that the options
are vested. Compensation expense related to options which are unvested will be
amortized over the remaining vesting period.
- 5 -