SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K/A
________________________________
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
July 17, 1996
________________________________
INTERNATIONAL NURSING SERVICES, INC.
(Exact name of registrant as specified in its charter)
Colorado 0-24768 84-1123311
(State of Incorporation)(Commission File No.) (I.R.S. Employer
Identification No.)
360 S. Garfield St., Suite 400
Denver, Colorado 80209
(Address of principal executive offices)
(303) 393-1515
(Registrant's telephone number, including area code)
Item 7. Financial Statements and Exhibits
(a) In accordance with Item 7(a)(1) and the 7(b)(1), the Registrant is filing
the required financial statements of the Subisidary and the related pro
forma financial statements as an amendment to the Form 8-K.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
AND
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
The following unaudited pro forma combined statements of operations
for the year ended December 31, 1995 and six months ended June 30,
1996 and the unaudited pro forma combined balance sheet as of June
30, 1996 give effect to the business combination of International
Nursing Services, Inc. and Stat Health Care Services, Inc. effective
July 17, 1996, including the related pro forma adjustments described
in the notes thereto. The transaction between International Nursing
Services, Inc. and Stat Health Care Services, Inc. has been accounted
for as a combination of companies under the purchase method. The
unaudited pro forma combined statements of operations have been
prepared as if the proposed transaction occurred on January 1, 1995
and January 1, 1996, respectively. The unaudited pro forma balance
sheet has been prepared as if the proposed transaction occurred June
30, 1996. These pro forma financial statements are not necessarily
indicative of the results of operations or the financial positions as
they may be in the future or as they might have been had the
transaction become effective on the above mentioned date.
The pro forma combined statements of operations for the year ended
December 31, 1995 and the six months ended June 30, 1996 include the
results of operations of International Nursing Services, Inc. and
Stat Health Care Services, Inc.
The unaudited pro forma combined statements of operations and the
unaudited pro forma combined balance sheet should be read in
conjunction with the separate historical financial statements and
notes thereto of International Nursing Services, Inc. and Stat Health
Care Services, Inc.
Unaudited Pro Forma Combined Statements of Operations
Year Ended December 31, 1995
<TABLE>
<CAPTION>
International Stat Health
Nursing Care
Services, Services
Inc. Inc. Total
<S> <C> <C> <C>
Net revenues $12,978,000 $ 5,625,000 $18,603,000
Direct cost of services 10,278,000 4,096,000 14,374,000
Gross margin 2,700,000 1,529,000 4,229,000
Operating expenses 5,296,000 968,000 6,264,000
Impairment of goodwill 1,300,000 - 1,300,000
Income (loss) from operations (3,896,000) 561,000 (3,335,000)
Interest expense 715,000 47,000 762,000
Net income (loss) (4,611,000) 514,000 (4,097,000)
Preferred stock dividends 876,000 - 876,000
Net (loss) income applicable to
common stockholders $(5,487,000) 514,000 (4,973,000)
Pro forma (loss) per common
share $ (5.05)
Pro forma weighted average of
common shares outstanding 1,086,147
Continued on next page.
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Adjustments Pro Forma
Total Debit Credit Combined
<S> <C> <C> <C> <C>
Net revenues $18,603,000 $18,603,000
Direct cost of
services 14,374,000 14,374,000
Gross margin 4,229,000 4,229,000
Operating expenses 6,264,000 128,000(3) 6,399,000
7,000(9)
Impairment of
goodwill 1,300,000 1,300,000
Income (loss) from
operations (3,335,000) 135,000 (3,470,000)
Interest expense 762,000 47,000(6) 715,000
Net income (loss) (4,097,000) 135,000 47,000 (4,185,000)
Preferred stock
dividends 876,000 190,000(8) 1,066,000
Net (loss) income
applicable to common
stockholders $(4,973,000) 325,000 47,000 (5,251,000)
Pro forma (loss) per
common share $(1.88)
Pro forma weighted
average of common
shares outstanding 2,798,147
</TABLE>
Unaudited Pro Forma Combined Statements of Operations
Six Months Ended June 30, 1996
<TABLE>
<CAPTION> International
Nursing Stat Health
Services Care Services
Inc. Inc. Total
<S> <C> <C> <C>
Net revenues $ 6,580,000 $ 2,658,000 $ 9,238,000
Direct cost of services 4,845,000 1,920,000 6,765,000
Gross margin 1,735,000 738,000 2,473,000
Operating expenses 1,473,000 480,000 1,953,000
Income from operations 262,000 258,000 520,000
Interest expense 257,000 31,000 288,000
Interest income 5,000 227,000 232,000
Preferred stock dividends (441,000) - (441,000)
Net income applicable to common
stockholders $ 446,000 $ 227,000 $ 673,000
Pro forma income per common
share $ .09
Pro forma weighted average of
common shares outstanding 4,770,755
</TABLE>
Continued on next page.
<TABLE>
<CAPTION>
Pro Forma Adjustments Pro Forma
Total Debit Credit Combined
<S> <C> <C> <C> <C>
Net revenues $ 9,238,000 $ 9,238,000
Direct cost of
services 6,765,000 6,765,000
Gross margin 2,473,000 2,473,000
Operating expenses 1,953,000 64,000(3) 2,020,000
3,000(9)
67,000
Income from
operations 520,000 453,000
Interest expense 288,000 31,000(6) 257,000
Net income 232,000 67,000 31,000 196,000
Preferred stock
dividends (441,000) 95,000(8) (346,000)
Net income
applicable to common
stockholders $ 673,000 162,000 31,000 542,000
Pro forma income per
common share $ .08
Pro forma weighted
average of common
shares outstanding 6,482,755
</TABLE>
Unaudited Pro Forma Combined Balance Sheet
June 30, 1996
<TABLE>
<CAPTION>
International
Nursing Stat Health
Services, Care Services
Inc. Inc. Total
<S> <C> <C> <C>
Assets
Current assets
Cash $ - $ - $ -
Accounts receivable, net 2,490,000 1,891,000 4,381,000
Prepaid expenses and other 22,000 34,000 56,000
Total current assets 2,512,000 1,925,000 4,437,000
Property and equipment, net 359,000 12,000 371,000
Other assets
Deposits - 10,000 10,000
Intangible assets, net 2,143,000 - 2,143,000
Total assets $5,014,000 $1,947,000 $6,961,000
Liabilities and Stockholders' Equity
Current liabilities
Checks written in excess of
bank balance $ 37,000 $ 173,000 $ 210,000
Notes payable, including
current portion of long-term
debt 178,000 775,000 953,000
Advances under financing
agreement 1,687,000 - 1,687,000
Accounts payable 723,000 10,000 733,000
Accrued expenses 491,000 156,000 647,000
Deferred income tax - 211,000 211,000
Total current liabilities 3,116,000 1,325,000 4,441,000
Long-term debt 73,000 - 73,000
Stockholders' equity
Preferred stock - - -
Common stock 4,000 - 4,000
Dividends payable - - -
APIC 7,392,000 5,000 7,397,000
Treasury stock - (400,000) (400,000)
Retained earnings
(accumulated deficit) (5,571,000) 1,017,000 (4,554,000)
Total equity 1,825,000 622,000 2,447,000
Total liabilities and
stockholders' equity $ 5,014,000 1,947,000 6,961,000
</TABLE>
Continued on next page.
<TABLE>
<CAPTION>
Pro Forma Adjustments Pro Forma
Assets Total Debit Credit Combined
<S> <C> <C> <C> <C>
Current assets
Cash $ - 1,800,000(7) 1,550,000(1) $ 150,000
100,000(9)
Accounts
receivable, net 4,381,000 1,891,000(2) 2,490,000
Prepaid expenses
and other 56,000 34,000(2) 22,000
Total current
assets 4,437,000 1,800,000 3,575,000 2,662,000
Property and
equipment, net 371,000 10,000(1) 12,000(2) 369,000
Other assets
Deposits 10,000 10,000(2) -
Intangible assets,
net 2,143,000 1,916,000(1) 4,159,000
100,000(9)
Total assets $6,961,000 $3,826,000 $3,597,000 $7,190,000
Liabilities and
Stockholders' Equity
Current liabilities
Checks written in
excess of bank
balance $ 210,000 173,000(2) $ 37,000
Notes payable,
including current
portion of long-term
debt 953,000 775,000(2) 178,000
Advances under
financing
agreement 1,687,000 1,687,000
Accounts payable 733,000 10,000(2) 723,000
Accrued expenses 647,000 156,000(2) 491,000
Deferred income tax 211,000 211,000(2) -
Total current
liabilities 4,441,000 1,325,000 3,116,000
Long-term debt 73,000 73,000
Stockholders' equity
Preferred stock - 1,800,000(7) 1,800,000
Common stock 4,000 4,000
Dividends payable - -
APIC 7,397,000 5,000(2) 376,000(1) 7,768,000
Treasury stock (400,000) 400,000(2) -
Retained earnings
(accumulated
deficit) (4,554,000) 1,017,000(2) (5,571,000)
Total equity 2,447,000 1,022,000 2,576,000 4,001,000
Total liabilities
and stockholders'
equity $ 6,961,000 $ 2,347,000 $ 2,576,000 $ 7,190,000
</TABLE>
Notes to Unaudited Pro Forma Combined Financial Statements
The following adjustments are related to the business combination
between International Nursing Services, Inc. (INS) and Stat Health
Care Services, Inc. (STAT).
1. To record the acquisition of Stat Health Care Services, Inc. fixed
assets and goodwill for $1,926,000. INS paid $1,550,000 cash, issued
200,000 shares of INS common stock valued at $1.88 and warrants to
purchase 125,000 shares of INS common stock at $1.88 per share.
<TABLE>
<CAPTION>
<S> <C>
Asset Category Valuation
Fixed assets $ 10,000
Goodwill 1,916,000
Total purchase
price $1,926,000
</TABLE>
2. To eliminate assets, liabilities and equity not being assumed by INS.
3. To reflect amortization of the $1,916,000 of goodwill over 15 years.
4. To eliminate interest expense associated with long term debt not
assumed by INS in the purchase.
5. To record the proceeds received to consummate the purchase which
consisted of a private placement of 189 units at $10,000 per unit of
a new class of convertible preferred stock. The new class of
convertible preferred stock carries a 10% dividend payable quarterly.
Net proceeds from the private placement were approximately
$1,800,000.
6. To record the quarterly 10% dividend on the convertible preferred
stock of which the proceeds were used for the STAT acquisition.
7. Record acquisition costs of $100,000 and amortization over 15 years.
8. No pro forma income tax effect is recognized as INS has approximately
$5,500,000 of net operating loss carryforwards, the benefit of which
has been fully allowed for.
Table of Contents
Independent Auditors' Report F-1
Financial Statements
Balance Sheets F-2
Statements of Operations F-3
Statement of Changes in Stockholders' Equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Stat Health Care Services, Inc.
Bronx, New York
We have audited the balance sheet of Stat Health Care Service, Inc.
as of December 31, 1995 and the related statements of operations,
stockholders' equity, and cash flows for the years ended December 31,
1995 and 1994. 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 financial statements referred to above present
fairly, in all material respects, the financial position of Stat
Health Care Services, Inc. as of December 31, 1995, and the results
of its operations and its cash flows for the years ended December 31,
1995 and 1994 in conformity with generally accepted accounting
principles.
/s/ Ehrhardt Keefe Steiner & Hottman PC
Ehrhardt Keefe Steiner & Hottman PC
August 7, 1996
Denver, Colorado
Balance Sheets
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
(Unaudited)
<S> <C> <C>
Assets
Current assets
Accounts receivable, net of allowance of
$52,000 (1995) and $92,000 (1996) (Note
3) $ 1,845,116 $ 1,890,752
Prepaid expenses 24,847 34,224
Total current assets 1,869,963 1,924,976
Furniture and equipment, net of
accumulated depreciation of $10,519
(1995) and $12,301 (1996) Note 3) 13,353 11,570
Other assets
Deposits 9,985 9,985
Total assets $ 1,893,301 $ 1,946,531
Liabilities and Stockholders' Equity
Current liabilities
Bank overdraft $ 89,129 $ 173,305
Notes payable - officer (Note 3) - 200,000
Note payable - bank (Note 3) 500,000 575,000
Accounts payable 10,000 9,924
Accrued expenses 153,013 155,685
Deferred income taxes (Note 6) 205,000 211,000
Total current liabilities 957,142 1,324,914
Commitments (Note 4)
Stockholders' equity
Common stock, $.10 par value, 200,000
shares authorized, 2,000 issued and
outstanding 200 200
Additional paid-in capital 4,800 4,800
Retained earnings 931,159 1,016,617
936,159 1,021,617
Less treasury stock, 500 shares at cost - (400,000)
936,159 621,617
Total liabilities and stockholders'
equity $ 1,893,301 $ 1,946,531
Statements of Operations
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended For the Six Months Ended
December 31, June 31,
1994 1995 1995 1996
(Unaudited)
<S> <C> <C> <C> <C>
Net revenues $ 5,434,769 $ 5,624,959 $2,688,104 $ 2,657,979
Direct patient care 3,766,994 4,096,493 1,981,559 1,920,352
Gross margin 1,667,775 1,528,466 706,545 737,627
General and administrative
expense 908,835 968,119 426,183 480,115
Income from operations 758,940 560,347 280,362 257,512
Interest expense 61,193 46,768 22,576 30,674
Net income before provision
for income taxes 697,747 513,579 257,786 226,838
Income taxes (Note 6) 68,560 70,394 13,416 25,380
Net income before pro forma
adjustment 629,187 443,185 244,370 201,458
Pro forma adjustment -
provision for income taxes 213,923 150,683 83,086 68,496
Pro forma net income $ 415,264 $ 292,502 $ 161,284 $ 132,962
</TABLE>
Statement of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock Additional
Number of Paid-in Treasury Retained
Shares Amount Capital Stock Earnings Total
<S> <C> <C> <C> <C> <C> <C>
Balance,
December 31,
1993 2,000 $200 $4,800 $ - $ 382,326 $ 387,326
Distributions
to stock-
holders - - - - (164,731) (164,731)
Net income - - - - 629,187 629,187
Balance,
December 31,
1994 2,000 200 4,800 - 846,782 851,782
Distributions
to stock-
holders - - - - (358,808) (358,808)
Net income - - - - 443,185 443,185
Balance,
December 31,
1995 2,000 200 4,800 - 931,159 936,159
Purchase of
treasury stock
(unaudited)
(Note 9) - - - (400,000) - (400,000)
Distributions
to stock-
holders
(unaudited) - - - - (116,000) (116,000)
Net income
(unaudited) - - - - 201,458 201,458
Balance,
June 30, 1996
(unaudited) 2,000 200 4,800 (400,000) 1,016,617 621,617
Statements of Cash Flows
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended For the Six Months Ended
December 31, June 30,
1994 1995 1995 1996
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating
activities
Net income $ 629,187 $ 443,185 $ 244,370 $ 201,458
Adjustments to reconcile
net loss to net cash used
in operating activities
Deferred income taxes 17,000 21,000 (24,000) 6,000
Depreciation and
amortization 2,481 3,079 1,239 1,783
Change in operating assets
and liabilities
Accounts receivable (54,724) (141,507) 138,376 (45,636)
Prepaid expenses and
other - (24,847) (8,338) (9,377)
Accounts payable and
accrued expenses (85,036) (10,302) 63,595 2,596
(120,279) (152,577) 170,872 (44,634)
Net cash provided
by operating
activities 508,908 290,608 415,242 156,824
Cash flows from investing
activities
Purchase of property and
equipment - (3,540) - -
Net cash used in
investing
activities - (3,540) - -
Cash flows from financing
activities
Bank overdrafts (94,177) 71,740 (17,389) 84,176
Proceeds from issuance of
note payable -officer - - - 200,000
Net change in note payable -
bank (250,000) - (150,000) 75,000
Purchase of treasury stock - - - (400,000)
Distributions paid (164,731) (358,808) (247,387) (116,000)
Net cash used in
financing
activities (508,908) (287,068) (414,776) (156,824)
Net increase in cash - - 466 -
Cash, beginning of period - - - -
Cash, end of period $ - $ - $ 466 $ -
Supplemental disclosure of cash flow information:
Cash paid during the period for interest was $61,060 and $50,102
for the years ended December 31, 1994 and 1995, respectively and
$22,609 and $25,174 for the six months ended June 30, 1995 and
1996, respectively.
Cash paid during the period for income taxes was $46,560 and
$53,179 for the years ended December 31, 1994 and 1995,
respectively and $37,416 and $23,903 for the six months ended
June 30, 1995 and 1996, respectively.
Note 1 - Unaudited Interim Information
The balance sheet as of June 30, 1996 and the statements of
operations for the six month periods ended June 30, 1995 and 1996
were prepared from the Company's books and records without audit.
However, in the opinion of management, such information includes all
adjustments (consisting only of normal accruals), which are
necessary to properly reflect the financial position of the Company
as of June 30, 1996 and the results of operations for the six months
ended June 30, 1995 and 1996. The results of operations for the
interim periods presented are not necessarily indicative of the
results to be expected for a full year.
Note 2 - Organization and Significant Accounting Policies
Organization
Stat Health Care Services, Inc. (the "Company") provides home health
aides to nursing homes, other long-term health-care facilities,
hospitals, and private residences.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of accounts
receivable. The Company grants credit to health-care facilities
primarily in New York State. The Company periodically performs
credit analysis and monitors the financial condition of its clients
in order to minimize credit risk.
Revenue Recognition
Revenue is recognized when services are rendered at the net
realizable amounts expected to be received from payors, patients and
others. Management believes there are no material claims,
retroactive adjustments, or disputes with any third party payors.
Income Taxes
The Company has elected to be taxed under the provisions of
Subchapter S of the Internal Revenue Code for federal income taxes.
Under these provisions, the Company is not subject to federal income
taxes as a separate entity. Federal income tax is required to be
included in the tax returns of the stockholders. The pro forma tax
provision and net income, assuming a 34% tax rate, discloses the tax
expense incurred had the Company been a C Corporation subject to
federal income taxes.
Note 2 - Organization and Significant Accounting Policies (continued)
Income Taxes (continued)
The state and local jurisdictions, in which the Company has its
operations, vary in their treatment of Subchapter S status for city
and state income taxes. Therefore, for city and state taxes, the
Company files its income tax returns using the cash basis of
accounting. As such, the Company recognizes deferred tax liabilities
and assets based on the differences between the tax basis of assets
and liabilities and their reported amounts in the financial
statements, which will result in taxable or deductible amounts in
future years.
Property and Equipment
Property and equipment are stated at cost. Depreciation is
calculated using the straight-line method over the estimated useful
lives of the related assets which is seven years.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Accounting Standards
In March 1995, the Financial Accounting Standards Board issued
Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," which requires
impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. Statement 121 also addresses
the accounting for long-lived assets that are expected to be disposed
of. The Company adopted Statement 121 in 1996 the adoption of which
had no effect on the Company's financial statements.
In October 1995, the FASB issued Statement No. 123, "Accounting for
Stock-Based Compensation" ("FAS 123"). FAS 123 establishes financial
accounting and reporting standards for stock-based employee
compensation plans. FAS 123 is effective for transactions entered
into in fiscal years beginning after December 15, 1995. The Company
currently accounts for stock-based compensation awards under the
provisions of Accounting Principles Board Opinion No. 25, as
permitted by FAS 123, and intends to continue to do so.
Note 3 - Notes Payable
Notes payable consist of the following:
</TABLE>
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
(Unaudited)
<S> <C> <C>
Note payable to a bank, interest at 1
1/2% over the prime rate (the prime rate
at December 31, 1995 and June 30, 1996
was 8.50% and 8.25%, respectively), due
in full on June 19, 1996. The note is
collateralized by a first lien on the
Company's accounts receivable and fixed
assets. $ 500,000 $575,000
Demand note payable to a stockholder of
the Company, interest at 1 1/2% over the
prime rate. The note is unsecured. $ - $200,000
</TABLE>
Note 4 - Commitments
Operating Leases
The Company leases office facilities under non-cancelable operating
leases. Rent expense for the years ended December 31, 1994 and 1995
was approximately $43,000 and $42,000, respectively, and for the six
months ended June 30, 1995 and 1996 was approximately $14,000 and
$18,000, respectively. The current lease expires in October 1996;
therefore, future minimum lease payments for 1996 are approximately
$27,000. The Company is anticipating renewing the agreement.
Note 5 - Related Party Transactions
Also in 1993, the Company loaned funds to House to House, Inc., which
was owned by the stockholders of the Company. The loan was for start-
up and operating costs of House to House, Inc. Due to poor financial
results, the stockholders of House to House, Inc. decided to
discontinue its operations in 1994. As a result, House to House
defaulted on the loan and the balance of the loan was written off.
The Company reflected bad debt expense of $21,000 and $46,323 in 1993
and 1994, respectively, relating to the note receivable.
Note 6 - Income Taxes
The components of the provision for state and city income taxes are
as follows:
<TABLE>
<CAPTION>
For the Year Ended For the Six Months Ended
December 31, June 30,
1994 1995 1995 1996
(Unaudited)
<S> <C> <C> <C> <C>
Current tax provision
City $ 44,860 $ 42,994 $ 32,516 $ 16,880
State 6,700 6,400 4,900 2,500
51,560 49,394 37,416 19,380
Deferred tax provision
(benefit)
City 15,000 18,000 (21,000) 5,000
State 2,000 3,000 (3,000) 1,000
17,000 21,000 (24,000) 6,000
$ 68,560 $ 70,394 $ 13,416 $ 25,380
</TABLE>
The current deferred tax liability in the accompanying balance sheets
of $205,000 and $211,000 at December 31, 1995 and June 30, 1996,
respectively, consists primarily of differences between accrual basis
financial reporting amounts and cash basis method accounting for
income taxes.
Note 7 - Sale of Assets - Subsequent Event
In July 1996, the Company sold certain assets of the Company to
International Nursing Services, Inc. (INS) in exchange for 200,000
shares of common stock of INS, $1,550,000 cash and warrants to
purchase 125,000 common shares of INS.
Note 8 - Disclosure About Fair Value of Financial Instruments
At December 31, 1995 and June 30, 1996, the fair values of the
accounts receivable and notes payable approximated carrying values
because of the short-term nature of these instruments.
Note 9 - Treasury Stock
During the period ended June 30, 1996, the Company purchased 500
shares of stock from a stockholder for $400,000 in cash of which
$200,000 was funded by the majority stockholder through a note
payable of $200,000 (Note 3).
