<PAGE> United States
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): May 13, 1997
--------------
EQUIMED, INC.
- -----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-27456 25-1668112
- --------------------------- ------------ -------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
2171 Sandy Drive
State College, Pennsylvania 16803
- ------------------------------------ -----------------------
(Address of principal executive (Zip Code)
offices)
(814) 238-0375
- -----------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- -----------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 5: OTHER EVENTS
On May 13, 1997 EquiMed, Inc. (the "Registrant") consummated
the acquisitions of a group of management services companies from
Douglas R. Colkitt, M.D., the Chairman and Chief Executive
Officer of the Registrant ("Colkitt"). In the transactions, the
Registrant acquired all of the capital stock of Russell Data
Services, Inc., a Nevada corporation; Billing Services, Inc., a
Delaware corporation; Trident International Accounting, Inc., a
Delaware corporation; and Tiger Communications International
Ltd., a Nevada corporation, as well as 80 percent of the issued
and outstanding stock of Nittany Decisions Services Private
Limited, an Indian company (the "Acquired Companies"). The
acquired stock represents all of the interests previously owned
by Colkitt with respect to the Acquired Companies. The
acquisitions were effective as of April 1, 1997.
The Acquired Companies provide outsourcing of accounting,
billing, data processing, collections and other administrative
services, including medical and legal transcription services to
companies in the healthcare and law related industries. The
assets of the Acquired Companies consist of data processing
equipment located in the United States and in Madras, India, as
well as linking satellite telecommunications equipment and
contracts.
The financial statements of Russell Data Services, Inc.
("Russell") and the pro forma financial information of all of
the Acquired Companies are being filed to comply with
Rules 3-05(b)(2)(ii) and 11 of Regulation S-X.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
(a) Financial Statements of business acquired:
(i) Financial Statements of Russell as of December 31,
1996 and March 31, 1997 (unaudited) together with
Manually Signed Report of Independent Public
Accountants dated July 15, 1997.
(b) Pro forma financial information:
(i) Unaudited Pro Forma Consolidated Balance Sheet as of
March 31, 1997 of the Registrant and the Acquired
Companies.
(ii) The Unaudited Pro Forma Condensed Consolidated
Statement of Operations for the year ended December
31, 1996 of the Registrant and the Acquired
Companies.
<PAGE> 3
(iii) Unaudited Pro Forma Condensed Consolidated Statement
of Operations for the three months ended March 31,
1997 of the Registrant and the Acquired Companies.
(c) Exhibits:
2.1 Stock Purchase Agreement dated as of April 1, 1997
by and among the Registrant, Russell and Colkitt*
23.1 Consent of Independent Public Accountants
- --------------------------
* Filed previously
<PAGE> 4
Report of Independent Auditors
To the Board of Directors and Stockholder
Russell Data Services, Inc.
We have audited the accompanying balance sheet of Russell Data Services, Inc.
as of December 31, 1996, and the related statements of operations, capital
deficiency and cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Russell Data Services, Inc. at
December 31, 1996 and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.
Atlanta, Georgia
July 15, 1997
/s/ Ernst & Young LLP
<PAGE> 5
Russell Data Services, Inc.
Balance Sheets
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
--------- ---------
(unaudited)
</CAPTION>
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 16,754 $ 16,829
Amounts due from affiliates 1,390,640 941,570
-------------- -------------
1,407,394 958,399
Furniture and equipment (net of accumulated
depreciation of $805 at December 31,1996 and
$1,204 at March 31, 1997) 7,145 6,747
------------- -------------
Total assets $ 1,414,539 $ 965,146
LIABILITIES AND CAPITAL DEFICIENCY
Current liabilities:
Accounts payable and accrued liabilities $ 89,296 $ 36,570
Amounts due to affiliates 503,851 2,007,683
Note payable to National Medical Financial
Services Corporation 3,344,174 2,344,174
------------- ------------
3,937,321 4,388,427
Capital deficiency:
Common stock, no par value, 2,500 shares
authorized and 100 shares issued and
outstanding 100 100
Retained deficit (2,522,882) (3,423,381)
------------- ------------
(2,522,782) (3,423,281)
------------- ------------
Total liabilities and capital deficiency $ 1,414,539 $ 965,146
</TABLE>
See accompanying notes.
<PAGE> 6
Russell Data Services, Inc.
Statements of Operations
<TABLE>
<CAPTION>
Year ended Three months ended
December 31, March 31
1996 1996 1997
------------ ----------- ----------
(unaudited)
</CAPTION>
<S> <C> <C> <C>
Revenues $ 6,233,692 $ 1,379,950 $ 1,640,943
Contract services 3,684,036 815,965 1,006,660
----------- ----------- -----------
$ 2,549,656 $ 563,985 $ 634,283
Loss on advances and note receivable 4,624,758 47,218 249,133
Selling, general and administrative expense 172,607 43,652 16,258 -
Interest expense 84,070 - 52,060
----------- ----------- -----------
Net (loss) income $(2,331,779) $ 473,115 $ 316,832
=========== =========== ===========
</TABLE>
See accompanying notes.
<PAGE> 7
Russell Data Services, Inc.
Statement of Capital Deficiency
<TABLE>
<CAPTION>
Common Stock
-------------------- Retained
Shares Amount Deficit Total
---------- -------- ----------- -----------
</CAPTION>
<S> <C> <C> <C> <C>
Balance at December 31, 1995 100 $100 $ 1,806,263 $ 1,806,363
Net loss - - (2,331,779) (2,331,779)
Cash and deemed distributions
to Dr. Colkitt and affiliates - - (1,997,366) (1,997,366)
--- ---- ----------- -----------
Balance at December 31, 1996 100 $100 $(2,522,882) $(2,522,782)
Net income (unaudited) - - 316,832 316,832
Cash and deemed distributions
to Dr. Colkitt and affiliates
(unaudited) - - (1,217,331) (1,217,331)
--- ---- ----------- -----------
Balance at March 31, 1997
(unaudited) 100 $100 $(3,423,381) $(3,423,281)
=== ==== =========== ===========
</TABLE>
See accompanying notes.
<PAGE> 8
Russell Data Services, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended Three months ended
December 31, March 31
1996 1996 1997
--------- ------------ -------------
(unaudited)
</CAPTION>
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $ (2,331,779) $ 473,115 $ 316,832
Adjustments to reconcile net (loss)
income to cash provided by operating
activities:
Depreciation 805 - 398
Loss on note receivable 3,344,174 - -
Changes in operating assets and
liabilities:
Amounts due from affiliates 604,421 183,479 449,070
Accounts payable and accrued expenses 13,322 (65,850) (52,726)
Amounts due to affiliates 358,973 142,315 398,546
------------- ----------- ------------
Net cash provided by operating activities 1,989,916 733,059 1,112,120
INVESTING ACTIVITIES
Purchases of furniture and equipment (7,950) - -
------------- ----------- ------------
Net cash used in investing activities (7,950) - -
FINANCING ACTIVITIES
Borrowings from EquiMed, Inc. for repayment
of note payable - - 1,105,286
Repayment of note payable - - (1,000,000)
Distributions to owner (1,997,366) (756,616) (1,217,331)
-------------- ----------- ------------
Net cash used in financing activities (1,997,366) (756,616) (1,112,045)
------------- ----------- ------------
Net (decrease) increase in cash and
cash equivalents (15,400) (23,557) 75
Cash and cash equivalents, beginning
of period 32,154 32,154 16,754
------------- ----------- ------------
Cash and cash equivalents, end of period $ 16,754 $ 8,597 $ 16,829
</TABLE>
See accompanying notes.
<PAGE> 9
Russell Data Services, Inc.
Notes to Financial Statements
December 31, 1996 and
March 31, 1996 (unaudited) and 1997 (unaudited)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Russell Data Services, Inc. (the "Company") was incorporated in October 1994.
The Company markets billing, accounts receivable and collections services, as
well as certain accounting services.
The Company derives all of its revenue from National Medical Financial Services
Corporation ("NMFS"), a public company primarily owned and controlled by Dr.
Douglas Colkitt, the president and sole stockholder of the Company, which
subjects the Company's related party receivable and revenue to concentration of
credit risk. The Company generally does not require collateral against its
receivables.
The Company has excess current liabilities over current assets and a deficit in
capital as of December 31, 1996. Included in current liabilities is a
short-term note due to NMFS in the amount of $3,344,174 (see Note 3). On May
13, 1997, the Company was acquired by EquiMed, Inc. ("EquiMed") (see Note 4),
a public company primarily owned by Dr. Colkitt. Dr. Colkitt is the Chairman
of the Board of Directors, Chief Executive Officer, and President of Equimed.
EquiMed has agreed to provide funds as necessary to the Company to pay the note
due to NMFS as payments of principal and interest are required during 1997.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results inevitably will differ from those estimates and such differences
may be material to the financial statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheets for cash, amounts due from
affiliates, accounts payable and accrued liabilities, and amounts due to
affiliates approximate their fair values. The fair value of the Company's note
payable approximates the reported amount in the balance sheet as its interest
rate approximates the market rate for similar debt instruments.
<PAGE> 10
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
Cash equivalents include investments in highly liquid instruments with a
maturity of three months or less at the date of purchase.
FURNITURE AND EQUIPMENT
Furniture and equipment is stated at cost. Depreciation is computed using the
straight-line method over estimated useful lives of five to seven years.
INCOME TAXES
The Company has elected an S-corporation status for federal and state income tax
reporting purposes. There are no material differences between financial and
income tax reporting which would give rise to deferred income taxes at December
31, 1996.
REVENUE RECOGNITION
Fees for the Company's services are based primarily on a percentage of net
billings of patient accounts, and revenue is recognized as such billings are
performed.
CASH MANAGEMENT
As part of the owner's cash management strategy, available cash generated by
the Company is generally transferred from the Company to other affiliates of Dr.
Colkitt. Such transfers have been treated as deemed distributions. In
addition, when the Company requires cash for operations, cash is generally
transferred from other affiliates of Dr. Colkitt. These cash transfers are
recorded on the Company's books as amounts due to or from affiliates. No
interest income or expense is applied to these receivables and payables. The
Company has been a net provider of cash to other affiliates of Dr. Colkitt. As
it is not the owner's intention to repay or request repayment of certain of
these amounts, such amounts have been reflected as deemed distributions and are,
therefore, not included in the accompanying balance sheet.
<PAGE> 11
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
UNAUDITED INTERIM FINANCIAL STATEMENTS
The unaudited interim financial statements as of March 31, 1997 and for the
three months ended March 31, 1996 and 1997 have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments, considered necessary for a fair presentation have been
included. Operating results for the three month periods ended March 31, 1996
and 1997 are not necessarily indicative of the results that may be expected for
the years ending December 31, 1996 and 1997.
3. RELATED PARTY TRANSACTIONS
Since October 1, 1994, the Company has contracted with NMFS (the "NMFS
Contract") to provide billing, accounts receivable, and collection services for
the clients of NMFS which are typically medical providers. The NMFS Contract
provides for NMFS to pay the Company 70% of all revenues collected by NMFS for
the performance of such services.
The NMFS Contract is scheduled to expire September 30, 2004. Under terms of the
NMFS Contract, NMFS is permitted to contract with providers of services to
companies other than the Company and the Company is permitted to provide its
service to companies other than NMFS, provided that the Company is obligated to
service for NMFS all client contracts which are priced not less than 80% of the
industry standard for similar contracts. The NMFS Contract contains an
arbitration procedure to be followed in the event that any dispute arises
between the parties under the contract. For the year ended December 31, 1996
and the three month periods ended March 31, 1996 and 1997, all of the Company's
revenue was from services provided to NMFS.
The Company, in connection with its contract with NMFS, derived approximately
25%, 30% and 23% of its revenues from EquiMed for the year ended December 31,
1996 and for the three month periods ended March 31, 1996 and 1997,
respectively. EquiMed has contracted with NMFS to provide billing and
accounting services for EquiMed's oncology division.
<PAGE> 12
3. RELATED PARTY TRANSACTIONS (CONTINUED)
On May 1, 1996, NMFS entered into a transaction with First United Equities
Corporation ("First United"), a broker-dealer registered with the Securities
and Exchange Commission. First United is the principal market maker in NFMS's
Common Stock. Pursuant to the transaction, NMFS loaned $5,200,000 through a
series of advances evidenced by a promissory note bearing interest at 10% to
First United. Such note was due and payable on demand with seven days
notice. The note was collateralized by the guarantees of the principals of
First United. On May 29, 1996, First United repaid $2,000,000 to NMFS. On
October 1, 1996, the Company assumed the remaining balance of the note and
accrued interest of approximately $3,344,000 due from First United in
exchange for an unsecured note due to NMFS. The note due to NMFS also bears
interest at 10% and establishes a payment schedule of $1,000,000 each at
January 15, April 15 and July 15, 1997 plus interest thereon with the
remaining balance and interest thereon due on September 15, 1997. Accrued
interest on the note due NMFS approximated $84,070 and $31,470 as of December
31, 1996 and March 31, 1997, respectively and is included in accounts payable
and accrued liabilities on the accompanying balance sheets. As of July 15,
1997, the Company has not made the payments which were due to NMFS on April
15, 1997 and July 15, 1997. NMFS has not demanded payment. EquiMed has
agreed to provide funds as necessary to the Company to pay the note due to
NMFS as payments of principal and interest are required (see Note 1). The
Company has reflected a loss of approximately $3,844,000 for the year ended
December 31, 1996 relating to note receivable of approximately $3,344,000 and
other cash advances of approximately $500,000 due from First United.
Effective October 1, 1994, the Company has contracted with Billing Services,
Inc. ("BSI"), an entity owned and controlled by Dr. Colkitt. Pursuant to the
contract with BSI (the "BSI Contract"), BSI is to provide to the Company, on a
non-exclusive basis, certain specified billing and collection services for a
fee equal to BSI's operating costs plus two and one-half percent (2-1/2%).
The BSI Contract is for a term of ten years. Under the terms of the BSI
Contract, the Company is permitted to contract with providers of service
other than BSI and BSI is permitted to provide its services to companies other
than the Company. BSI has contracted with Nittany Decisions Private Limited, a
company located in Madras, India which is 80% owned by Dr. Colkitt, to perform
the billing services relating to the BSI Contract. For the year ended December
31, 1996 and the three month periods ended March 31, 1996 and 1997 the Company
incurred $1,245,500, $312,000 and $330,000, respectively for services provided
by BSI.
<PAGE> 13
3. RELATED PARTY TRANSACTIONS (CONTINUED)
Effective January 1, 1996, the Company has contracted with Trident
International Accounting, Inc. ("Trident"), an entity owned and controlled by
Dr. Colkitt. Pursuant to the contract with Trident (the "Trident Contract"),
Trident is to provide to the Company, on a non-exclusive basis, certain
specified accounting services for a fee of 17-1/2% of net revenues to be
received by the Company for services billed to Trident. These services were
performed by BSI prior to January 1, 1996. The Trident Contract is for a term
of ten years. Under the terms of the Trident Contract, the Company is
permitted to contract with providers of service other than Trident and
Trident is permitted to provide its services to companies other than the
Company. Trident has contracted with Nittany Decisions Private Limited, a
company located in Madras, India which is 80% owned by Dr. Colkitt, to
perform the accounting services relating to the Trident Contract. For the
year ended December 31, 1996 and the three month periods ended March 31,
1996 and 1997 the Company incurred $273,600, $67,600 and $68,000,
respectively, for services provided by Trident.
Effective July 1, 1995 the Company has contracted with Asterino & Associates,
Inc. ("Asterino"), an entity owned and controlled by Dr. Colkitt. Pursuant
to the contract with Asterino (the "Asterino Contract"), Asterino is to
provide to the Company, on a non-exclusive basis, certain specified
accounting services for a fee of 70% of net revenues to be received by the
Company for services billed to Asterino. The Asterino Contract is for a
term of ten years. Under the terms of the Asterino Contract, the Company is
permitted to contract with providers of service other than Asterino
and Asterino is permitted to provide its services to companies other than
the Company. For the year ended December 31, 1996 and the three month
period ended March 31, 1996 and 1997 the Company incurred $874,000,
$212,000, and $213,000, respectively, for services provided by Asterino.
<PAGE> 14
3. RELATED PARTY TRANSACTIONS (CONTINUED)
The Company maintains contracts with Medical Business Services of Nevada, Inc.
("MBS") and Rapier Investments, Ltd.("Rapier"), companies owned by a
shareholder and former chief executive officer of NMFS. Pursuant to these
contracts with MBS and Rapier (the "MBS and Rapier Contracts"), MBS and Rapier
are to provide to the Company, on a non-exclusive basis, certain specified
accounting services for a fee of 70% of net revenues to be received by the
Company for services billed to MBS and Rapier. The MBS and Rapier Contracts
are for a term of ten years. Under the terms of the MBS and Rapier Contracts,
the Company is permitted to contract with providers of service other than MBS
and Rapier and MBS and Rapier are permitted to provide their services to
companies other than the Company. For the year ended December 31, 1996 and
the three month periods ended March 31, 1996 and 1997, the Company incurred
$783,300, $137,400, and $222,000, respectively, for services provided by MBS.
In addition, for the year ended December 31, 1996 and the three month periods
ended March 31, 1996 and 1997, the Company incurred $507,600, $87,000, and
$174,000, respectively, for services provided by Rapier. The Company had
advanced to MBS and Rapier approximately $781,000 and $249,000 as of December
31, 1996 and March 31, 1997 in excess of amounts due based on the MBS and
Rapier Contracts. The Company has reflected a loss of approximately $781,000,
$47,000 and $249,000 during the year ended December 31, 1996 and the three-
month periods ended March 31, 1996 and 1997, respectively, relating to these
advances as they have been deemed to be uncollectible. The Company is
currently reviewing its contractual relationships with MBS and Rapier.
Amounts due from affiliates consists of the following as of December 31, 1996
and March 31, 1997:
<TABLE>
<CAPTION>
December 31, 1996 March 31, 1997
----------------- --------------
(unaudited)
</CAPTION>
<S> <C> <C>
National Medical Financial
Services Corporation $ 1,057,181 $ 522,889
Asterino & Associates, Inc. 333,459 418,681
------------- -------------
$ 1,390,640 $ 941,570
============= =============
</TABLE>
<PAGE> 15
3. RELATED PARTY TRANSACTIONS (CONTINUED)
Amounts due to affiliates consists of the following as of December 31, 1996 and
March 31, 1997:
<TABLE>
<CAPTION>
December 31, 1996 March 31, 1997
------------------ --------------
(unaudited)
</CAPTION>
<S> <C> <C>
Billing Services, Inc. $ 422,205 $ 752,671
Trident International
Accounting, Inc. 81,646 149,726
EquiMed, Inc. - 1,105,286
------------ ------------
$ 503,851 $ 2,007,683
</TABLE>
4. SUBSEQUENT EVENTS
In February 1997, EquiMed advanced approximately $1,105,000 to the Company to
enable the Company to pay the scheduled payment of principal and interest on
the Company's note payable to NMFS (see Note 3).
On May 13, 1997, EquiMed acquired the Company in a series of related
transactions with Nittany Decisions Services Private Limited, Trident
International Accounting, Inc., Billing Services, Inc., and Tiger
Communications International Ltd. for approximately $6,000,000 in cash and a
potential earnout up to $9,300,000 payable in EquiMed's common stock. Tiger
Communications International Ltd. is wholly owned by Dr. Colkitt and
provides communication services to BSI and Trident.
<PAGE> 16
EQUIMED, INC.
AND
RUSSELL DATA SERVICES, INC.
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information includes the unaudited
pro forma balance sheet as of March 31, 1997 as if the acquisition of Russell
Data Services, Inc. ("Russell"), Trident International Accounting, Inc.
("Trident"), Billing Services, Inc. ("BSI"), Tiger Communications
International, Ltd. ("Tiger"), and Nittany Decisions Services Private
Limited ("Nittany") (collectively, the "Acquired Companies") had occurred on
that date, and includes the unaudited pro forma statement of operations for
the year ended December 31, 1996 and for the three months ended March 31,
1997 as if the acquisition of the Acquired Companies had occurred as of
January 1, 1996. These pro forma statements do not necessarily reflect
the results of operations as they would have been if the Company had
completed the acquisition on the dates indicated above. This unaudited pro
forma information should be read in conjunction with the separate financial
statements and notes of EquiMed and Russell.
The unaudited pro forma statement of operations for the year ended December 31,
1996 also has been adjusted to remove the operations related to EquiMed's
ophthalmology division due to EquiMed's sale of this division during 1996.
<PAGE> 17
EQUIMED, INC.
AND
RUSSELL DATA SERVICES, INC.
PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1997
(000'S)
<TABLE>
<CAPTION>
Pro Other Pro
Forma As Acquired Forma Pro
EquiMed Russell Adjustments Adjusted Companies Adjustments Forma
---------- -------- ---------- --------- --------- --------- ---------
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash & cash
equivalents $ 12,841 $ 16 $ (3,490)(A) $ 9,367 $ 350 $ (2,510) (B) $ 7,207
Accounts receivable,
net 7,830 - - 7,830 3 - 7,833
Receivables from
affiliates 16,586 942 (1,105) (C) 16,423 975 (1,340) (D) 16,058
Deferred income
taxes 3,529 - - 3,529 - - 3,529
Prepaid expenses and
other current assets 2,345 - - 2,345 1,047 - 3,392
-------- -------- -------- --------- --------- --------- ---------
Total current assets 43,131 958 (4,595) 39,494 2,375 (3,850) 38,019
Property and
equipment, net 23,361 7 - 23,368 560 - 23,928
Advances to
principal
stockholder 2,286 - - 2,286 - - 2,286
Management
agreements, net of
accumulated
amortization 14,480 - - 14,480 - - 14,480
Other assets, net 930 - - 930 - - 930
-------- --------- -------- --------- --------- --------- ---------
Total assets $ 84,188 $ 965 $ (4,595) $ 80,558 $ 2,935 $ (3,850) $ 79,643
======== ========= ======== ========= ========= ========= =========
LIABILITIES AND CAPITAL
DEFICIENCY
Current liabilities:
Accounts payable 2,334 36 - 2,370 400 - 2,770
Accrued salaries and
contractual fees 3,407 - - 3,407 79 - 3,486
Other accrued
expenses 6,295 - - 6,295 8 - 6,303
Income taxes payable 9,273 - - 9,273 - - 9,273
Payable to affiliates 6,933 2,008 (1,105) (C) 7,836 1,416 (1,340) (D) 7,912
Current portion of
long-term debt 2,342 2,344 - 4,686 - - 4,686
Current portion of
obligations under
capital leases:
Related parties 317 - - 317 - - 317
Other 2,680 - - 2,680 - - 2,680
-------- --------- -------- --------- --------- --------- ---------
Total current liabilities 33,581 4,388 (1,105) 36,864 1,903 (1,340) 37,427
Long-term debt 7,609 - - 7,609 - - 7,609
Obligations under
capital leases:
Related parties 1,397 - - 1,397 - - 1,397
Other 5,484 - - 5,484 - - 5,484
Deferred income taxes 771 - - 771 - - 771
Minority interest 1,765 - - 1,765 - - 1,765
Stockholder's equity:
Common stock 3 - - 3 88 - 91
Less: treasury stock (3,611) - - (3,611) - - (3,611)
Additional paid in
capital 81,600 - - 81,600 - - 81,600
Partner's capital 657 - - 657 2,455 - 3,112
Retained deficit (45,068) (3,423) (3,490) (A) (51,981) (1,511) (2,510) (B) (56,002)
-------- --------- -------- --------- --------- --------- ---------
Total stockholders'
equity 33,581 (3,423) (3,490) 26,668 1,032 (2,510) 25,190
-------- --------- -------- --------- --------- --------- ---------
Total liabilities and
stockholders' equity $ 84,188 $ 965 $ (4,595) $ 80,558 $ 2,935 $ (3,850) $ 79,643
======== ========= ======== ========= ========= ========= =========
</TABLE>
See accompanying notes to unaudited pro forma balance sheet.
<PAGE> 18
EQUIMED, INC.
AND
RUSSELL DATA SERVICES, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(000'S, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Historical Pro Other Pro
EquiMed, Pro Forma As Forma As Acquired Forma Pro
Inc. Ophthalmology Adjusted Russell Adjustments Adjusted Companies Adjustments Forma
---------- ----------- -------- -------- ----------- --------- -------- ----------- ----------
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues $ 99,115 $ (42,250) (E) $ 56,865 $ 6,234 $ - $ 63,099 $ 2,731 $ (1,519) (G) $ 64,311
Costs and expenses:
Professional expenses 26,479 (12,217) (E) 14,262 3,684 - 17,946 2,367 (1,519) (F) 18,794
Center operating
expenses 42,422 (23,787) (E) 18,635 - - 18,635 1,298 - 19,933
General and
administrative 8,755 (1,783) (E) 6,972 173 - 7,145 1,493 - 8,638
Depreciation and
amortization 6,040 (3,224) (E) 2,816 - - 2,816 42 - 2,858
Interest expense:
Related parties 643 - 643 - - 643 - - 643
Other 1,905 (1,279) (E) 626 84 - 710 - - 710
Loss on sale of
receivables 640 - 640 - - 640 - - 640
Other income, net (723) 29 (E) (694) - - (694) 13 - (681)
Loss on sale of
division 31,112 (31,112) (E) - - - - - - -
Loss on advances and
note receivable - - - 4,625 - 4,625 - - 4,625
--------- --------- -------- -------- ------- --------- --------- -------- ----------
Total costs and
expenses $ 117,273 $ (73,373) (E) $ 43,900 $ 8,566 $ - $ 52,466 5,213 (1,519) 56,160
--------- --------- -------- -------- ------- --------- --------- -------- ----------
Income (loss)
before minority
interest and
income taxes (18,158) 31,123 (E) 12,965 (2,332) - 10,633 (2,482) - 8,151
Minority interest 1,171 - 1,171 - - 1,171 - - 1,171
--------- --------- -------- -------- ------- --------- --------- -------- ----------
Income (loss)
before income
taxes (19,329) 31,123 (E) 11,794 (2,332) - 9,462 (2,482) - 6,980
Provision (benefit)
for income taxes 11,890 (5,456) (E) 6,434 - (932) (H) 5,502 - (894) (I) 4,608
--------- --------- -------- -------- ------- --------- --------- -------- ----------
Net income (loss) $ (31,219) $ 36,579 (E) $ 5,360 $ (2,332) $ 932 $ 3,960 $ (2,482) $ 894 $ 2,372
========= ========= ======== ======== ======= ========= ========= ======== ==========
Income (loss)
per share (1.13) .09
========= ==========
Weighted average
shares outstanding 27,577 27,577
========= ==========
</TABLE>
See accompanying notes to unaudited pro forma statement of operations
<PAGE> 19
EQUIMED, INC.
AND
RUSSELL DATA SERVICES, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(000'S, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Historical Pro Other Pro
EquiMed, Forma As Acquired Forma Pro
Inc. Russell Adjustments Adjusted Companies Adjustments Forma
------------ ---------- ----------- ----------- ---------- ------------- ----------
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues $ 17,707 $ 1,641 $ - $ 19,348 $ 832 $ (398) (G) $ 19,782
Costs and expenses:
Professional expenses 3,621 1,007 - 4,628 774 (398) (F) 5,004
Central operating
expenses 6,274 - - 6,274 763 - 7,037
General and
administrative 1,632 16 - 1,648 - - 1,648
Depreciation and
amortization 1,122 - - 1,122 17 - 1,139
Interest:
Related parties 161 - - 161 - - 161
Other 412 52 - 464 - - 464
Loss on sale of
receivables 127 - - 127 - - 127
Other income, net (89) - - (89) - - (89)
Loss on advances
and note receivable - 249 - 249 - - 249
----------- ---------- ---------- ---------- --------- --------- ----------
Total costs and
expenses $ 13,260 $ 1,324 $ - $ 14,584 $ 1,554 $ (398) $ 15,740
----------- ---------- ---------- ---------- --------- --------- ----------
Income (loss) before
minority interest
and income taxes 4,447 317 - 4,764 (722) - 4,042
Minority interest 292 - - 292 - - 292
----------- ---------- ---------- ---------- --------- --------- ----------
Income (loss) before
income taxes 4,155 317 - 4,472 (722) - 3,750
Provision (benefit)
for income taxes 1,352 - 127 (H) 1,479 - (280) (I) 1,199
----------- ---------- ---------- ---------- --------- --------- ----------
Net income (loss) $ 2,803 $ 317 $ (127) $ 2,993 $ (722) $ 280 $ 2,551
=========== ========== ========== ========== ========= ========= ==========
Loss per share .10 .09
=========== ==========
Weighted average
shares outstanding 28,035 28,035
=========== ==========
</TABLE>
See accompanying notes to unaudited pro forma statement of operations.
<PAGE> 20
EQUIMED, INC.
AND
RUSSELL DATA SERVICES, INC.
NOTES TO
PRO FORMA FINANCIAL STATEMENTS
(000'S, EXCEPT SHARE AMOUNTS)
PRO FORMA BALANCE SHEET ADJUSTMENTS
The accompanying pro forma balance sheet as of March 31, 1997 gives effect to
the acquisition of the Acquired Companies as if such transaction or event had
occurred on March 31, 1997. Due to the common control of EquiMed and the
Acquired Companies, the excess of purchase price over historical cost of the
assets and liabilities has been reflected as a dividend.
(A) To record the acquisition of Russell. Pursuant to this acquisition,
EquiMed acquired certain assets and assumed certain liabilities in
exchange for $3,490,000 in cash and a potential earn out of up to
$9,300,000 payable in EquiMed Common Stock. The cash payment was
funded through available cash. The historical cost of assets and
liabilities of Russell acquired as of April 1, 1997 are as follows:
<TABLE>
<CAPTION>
Net assets acquired Dollars (000's)
------------------- ---------------
</CAPTION>
<S> <C>
Cash $ 16
Amounts due from affiliates 942
Furniture and equipment, net 7
Accounts payable and accrued
liabilities (36)
Amounts due to affiliates (2,008)
Note payable to affiliate (2,344)
---------
(3,423)
Dividend 6,913
---------
Consideration paid in cash $ 3,490
=========
</TABLE>
(B) To record the acquisition of Trident, BSI, Tiger and Nittany
(collectively the "Other Acquired Companies"). Pursuant to these
acquisitions, EquiMed acquired certain assets and assumed certain
liabilities in exchange for $2,510,000 in cash. The cash payment
was funded through available cash. The historical cost of assets and
liabilities of the Other Acquired Companies acquired as of April 1,
1997 are as follows:
<PAGE> 21
<TABLE>
<CAPTION>
Net assets acquired Dollars (000's):
------------------- ----------------
</CAPTION>
<S> <C>
Cash $ 350
Accounts receivable 3
Amounts due from affiliates 975
Prepaids and other current assets 1,047
Furniture and equipment, net 560
Accounts payable and accrued liabilities (487)
Amounts due to affiliates (1,416)
----------
1,032
Dividend 1,478
----------
Consideration paid in cash $ 2,510
==========
</TABLE>
(C) To remove amounts due to and amounts due from EquiMed and Russell.
(D) To remove amounts due to and due from affiliates between EquiMed, Russell,
BSI, Trident, Nittany, and Tiger.
<PAGE> 22
Pro Forma Statement of Operations Adjustments
The accompanying pro forma statements of operations for the year ended December
31, 1996 and for the three months ended March 31, 1997 assume that as of
January 1, 1996, EquiMed had completed the sale of the Ophthalmology
Division and the acquisition of the Acquired Companies.
(E) To remove the operations of Ophthalmology Division sold effective October
31, 1996 and included in the operations of EquiMed.
(F) To eliminate contract services expense recorded by Russell related to
contractual services performed by entities included in Other Acquired
Companies.
(G) To eliminate revenue recorded by entities included in Other Acquired
Companies related to contracts with Russell.
(H) To adjust for the change in Russell's income tax status from an S
Corporation to filing as part of a consolidated C Corporation.
(I) To adjust for the change in the Other Acquired Companies' income tax
status from S Corporations to filing as part of a consolidated C
Corporation.
<PAGE> 23
EXHIBIT INDEX
23.1 Consent of Independent Public Accountants
<PAGE> 24
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement on
Form S-8 (No. 333-01112) pertaining to the EquiVision, Inc. Stock Option Plan
and all non-qualified stock options and in the Registration Statements and in
the related prospectuses of EquiMed, Inc. (successor to EquiVision, Inc.) on
Form S-3 (No. 333-01096 and No. 333-12595) and on Form S-4 (No. 333-12773) of
our report dated July 15, 1997 related to the financial statements of Russell
Data Services, Inc. included in this Current Report on Form 8-K/A filed with
the Securities and Exchange Commission.
ERNST & YOUNG LLP
Atlanta, Georgia
July 28, 1997
<PAGE> 25
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.
EQUIMED, INC.
----------------------------------------
(Registrant)
July 28, 1997
/s/ Daniel L. Beckett
-----------------------------------------
Daniel L. Beckett
Chief Financial Officer
