<PAGE> 1
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
Amendment #1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 17, 1997
SIMIONE CENTRAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-22162 22-3209241
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
6600 POWERS FERRY ROAD 30339
ATLANTA, GEORGIA (zip code)
(Address of principal
executive offices)
(Registrant's telephone number, including area code) (770) 644-6500
N/A
(Former name, former address and former fiscal year, if changed since last
report)
===============================================================================
<PAGE> 2
This amendment to Simione Central Holdings, Inc. Form 8-K dated December 31,
1997 is being filed to provide the information required by Item 7, Financial
Statements and Pro Forma Financial Information, which pursuant to Item 7 (a) (4)
of Form 8-K permits the registrant to file the required financial statements of
the business acquired and pro forma financial information within 60 days of the
due date of the original Form 8-K.
<PAGE> 3
Item 2. Acquisition of Assets.
On December 17, 1997, pursuant to an Asset Purchase Agreement of the
same date (the "Agreement") by and among DHS Acquisition, L.L.C., ("DHS"), a
Georgia limited liability company and a wholly-owned subsidiary of Simione
Central Holdings, Inc. (the "Company"), the Company, Dezine Healthcare
Solutions, Inc., a South Carolina corporation ("Dezine"), and Companion
Technologies Corporation, a South Carolina corporation and the sole shareholder
of Dezine, DHS completed the purchase (the "Acquisition") of substantially all
of the assets of Dezine's home medical equipment ("HME") software and services
business. As consideration for the purchase of Dezine's assets, DHS (i)
delivered to Dezine by wire transfer cash of Nine Million Five Hundred Thousand
Dollars ($9,500,000.00), and (ii) assumed certain of Dezine's liabilities. The
Company determined the purchase price by reviewing Dezine's financial statements
including, without limitation, Dezine's balance sheet, historical and projected
income statements and historical and projected statements of cash flow. The
proceeds obtained from the Company's 1997 Public Offering consummated in June
1997 were utilized for the Acquisition. The Company intends to continue the
business of Dezine as it was conducted prior to the acquisition.
Item 7. Financial Statements and Pro Forma Financial Information.
(a) Financial Statements of Business Acquired.
(1) Audited Financial Information
(a) Dezine Healthcare Solutions, Inc. Balance Sheets as of
November 30, 1997 and December 31, 1996, and the Statements of
Operations, Changes in Stockholder's Equity, and Cash Flows
for the eleven months ended November 30, 1997 and the year
ended December 31, 1996, Notes to Financial Statements, and
Report of Independent Accountants.
(b) Pro Forma Financial Information.
(1) Simione Central Holdings, Inc. Pro Forma Condensed Combined
Balance Sheets (unaudited) as of September 30, 1997.
(2) Simione Central Holdings, Inc. Pro Forma Condensed Combined
Statements of Operations (unaudited) for the nine months ended
September 30, 1997.
(3) Simione Central Holdings, Inc. Pro Forma Condensed Combined
Statements of Operations (unaudited) for the year ended
December 31, 1996.
The pro forma condensed combined balance sheet (unaudited) as of September 30,
1997 gives effect to the acquisition of Dezine by the Company as if it had
occurred at that date. The pro forma condensed combined statements of operations
(unaudited) for the year ended December 31, 1996 and for the nine months ended
September 30, 1997 give effect to the acquisition of Dezine by the Company as if
the acquisition had occurred on January 1, 1996.
The pro forma information is based upon the historical financial information of
the companies. Management is in the process of evaluating the fair value of
Dezine's assets acquired and liabilities assumed. These pro forma statements may
not be indicative of the results that actually would have occurred if the
combination had occurred on the date indicated or which may be obtained in the
future.
The pro forma financial statements should be read in conjunction with the
financial statements and notes thereto of Simione Central Holdings, Inc. and
Dezine Healthcare Solutions, Inc.
<PAGE> 4
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.
SIMIONE CENTRAL HOLDINGS, INC.
Dated: March 3, 1998
/s/ Lori Nadler Siegel
-------------------------------------
Lori Nadler Siegel
Chief Financial Officer
<PAGE> 5
DEZINE HEALTHCARE
SOLUTIONS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF COMPANION
TECHNOLOGIES CORPORATION)
FINANCIAL STATEMENTS
NOVEMBER 30, 1997
AND DECEMBER 31, 1996
<PAGE> 6
REPORT OF INDEPENDENT ACCOUNTANTS
February 27, 1998
To the Board of Directors and
Stockholder of Dezine Healthcare Solutions, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of changes in stockholder's equity and of cash flows present fairly,
in all material respects, the financial position of Dezine Healthcare Solutions,
Inc. (a wholly-owned subsidiary of Companion Technologies Corporation) at
November 30, 1997 and December 31,1996, and the results of its operations and
its cash flows for the eleven month period ended November 30, 1997 and year
ended December 31, 1996, in conformity with generally accepted accounting
principles. 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 of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
<PAGE> 7
DEZINE HEALTHCARE SOLUTIONS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF COMPANION TECHNOLOGIES CORPORATION)
BALANCE SHEETS
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NOVEMBER 30, DECEMBER 31,
1997 1996
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 5,853 $ 17,730
Accounts receivable (less allowance for doubtful accounts
of $224,715 and $90,270, respectively) 822,378 625,177
Installment receivables, net 110,705 261,723
Deferred tax asset 357,112 284,358
Inventory 113,922 277,006
Prepaids and other current assets 30,611 53,144
---------- ----------
Total current assets 1,440,581 1,519,138
Property and equipment, net 308,543 284,665
Installment receivables, net 18,708 95,955
Goodwill, at cost, less accumulated amortization of
$409,709 and $267,268, respectively 1,779,838 1,922,279
Capitalized software development, at cost 820,429 326,977
---------- ----------
Total assets $4,368,099 $4,149,014
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Related party payable $ 719,654 $ 999,437
Accounts payable 253,574 122,993
Unearned revenues 671,263 612,364
Accrued compensation 157,779 79,712
Other current liabilities 14,015 54,836
---------- ----------
Total current liabilities 1,816,285 1,869,342
Deferred tax liability 267,626 69,885
Commitments and contingencies -- --
Stockholder's equity:
Common stock, no par value, 1,000,000 shares authorized, -- --
3,700 shares issued and outstanding
Additional paid-in capital 1,701,414 1,701,414
Retained earnings 582,774 508,373
---------- ----------
Total stockholder's equity 2,284,188 2,209,787
---------- ----------
Total liabilities and stockholder's equity $4,368,099 $4,149,014
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 8
DEZINE HEALTHCARE SOLUTIONS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF COMPANION TECHNOLOGIES CORPORATION)
STATEMENTS OF OPERATIONS
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED YEAR ENDED
NOVEMBER 30, DECEMBER 31,
1997 1996
------------- -----------
<S> <C> <C>
Revenues:
Net sales $2,949,253 $4,184,199
Other service revenue 3,503,396 3,280,607
---------- ----------
6,452,649 7,464,806
Expenses:
Cost of sales 2,081,505 2,351,152
Sales and marketing 472,625 538,200
General and administrative 3,399,765 3,841,807
Depreciation and amortization 256,359 336,390
---------- ----------
Income from operations 242,395 397,257
Other income (expense)
Interest income 29,581 57,523
Interest expense (34,817) (106,269)
---------- ----------
Income before income taxes 237,159 348,511
Provision for income taxes 162,758 188,519
---------- ----------
Net income $ 74,401 $ 159,992
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 9
DEZINE HEALTHCARE SOLUTIONS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF COMPANION TECHNOLOGIES CORPORATION)
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON COMMON ADDITIONAL
STOCK STOCK PAID-IN RETAINED
(SHARES) (DOLLARS) CAPITAL EARNINGS TOTAL
------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 3,700 $ -- $1,701,414 $ 348,381 $2,049,795
Net income for the year ended
December 31, 1996 -- -- -- 159,992 159,992
------- --------- ---------- ---------- ----------
Balance, December 31, 1996 3,700 -- 1,701,414 508,373 2,209,787
Net income for the period ended
November 30, 1997 -- -- -- 74,401 74,401
------- --------- ---------- ---------- ----------
Balance, November 30, 1997 3,700 $ -- $1,701,414 $ 582,774 $2,284,188
======= ========= ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 10
DEZINE HEALTHCARE SOLUTIONS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF COMPANION TECHNOLOGIES CORPORATION)
STATEMENTS OF CASH FLOWS
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED YEAR ENDED
NOVEMBER 30, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 74,401 $ 159,992
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization expense 256,359 336,390
Deferred income taxes 124,987 13,730
Decrease in accounts receivable and installment receivables 31,064 197,234
Decrease (increase) in inventory 163,084 (76,115)
Decrease in prepaids and other current assets 22,533 86,062
Decrease in related party payable (279,783) (4,778,220)
Increase in accounts payable 130,581 102,343
Increase in unearned revenues 58,899 40,203
Increase in accrued compensation and other current liabilities 37,246 74,945
--------- -----------
Net cash provided by (used in) operating activities 619,371 (3,843,436)
--------- -----------
Cash flows from investing activities:
Purchase of fixed assets (137,796) (241,746)
Increase in capitalized software (493,452) (220,691)
--------- -----------
Net cash used in investing activities (631,248) (462,437)
--------- -----------
Net decrease in cash (11,877) (4,305,873)
Cash at beginning of year 17,730 4,323,603
--------- -----------
Cash at end of year $ 5,853 $ 17,730
========= -----------
Supplemental disclosure of cash paid to Parent during the year for:
Interest $ 34,817 $ 106,269
========= ===========
Income taxes $ 37,771 $ 174,789
========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 11
DEZINE HEALTHCARE SOLUTIONS, INC
(A WHOLLY-OWNED SUBSIDIARY OF COMPANION TECHNOLOGIES CORPORATION)
NOTES TO FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Dezine Healthcare Solutions, Inc. (the "Company") incorporated in August,
1995, is a wholly-owned subsidiary of Companion Technologies Corporation
("Companion" or "Parent"), and is headquartered in Columbia, South
Carolina. Companion acquired the stock of Dezine Associates ("DA") in July
1993 in a purchase business combination. DA merged with Medical Solutions,
Inc. ("MSI"), a wholly-owned subsidiary of Companion, in December 1994. In
August 1995, the resulting company was merged into Dezine Healthcare
Solutions, Inc.
The Company develops and markets a suite of proprietary software products,
provides customer support and consulting services, and sells computer
hardware to healthcare providers specializing in the home healthcare
market.
BASIS OF FINANCIAL STATEMENT PRESENTATION
The financial statements have been prepared in conformity with generally
accepted accounting principles. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the balance sheet dates, and
reported revenues and expenses for the periods presented. Actual results
could differ from those estimates.
REVENUE RECOGNITION
The Company recognizes revenue on product sales at the time of shipment and
service revenue when the service is rendered or ratably over the service
period. Management establishes an allowance for doubtful accounts for
estimated uncollectible receivables.
INSTALLMENT RECEIVABLES
The Company provides to its customers various financing alternatives,
including sales type financing leases. The terms are generally three to
five years. Interest rates on gross installment receivables outstanding of
$136,370 and $376,305 at November 30, 1997 and December 31, 1996,
respectively, range from 11% to 17%. The allowance for uncollectible
installment receivables is approximately $7,000 and $19,000 at November 30,
1997 and December 31, 1996, respectively.
INVENTORY
Inventory consists of computer parts and equipment and is accounted for at
the lower of cost or market. Cost is determined using specific
identification. Management has established a reserve for obsolescence to
reduce the carrying value of inventory to its net realizable value. The
reserve for obsolescence is approximately $21,000 and $34,000 at November
30, 1997 and December 31, 1996, respectively.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost, less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful lives of the respective assets, generally 3 years for computer
equipment and software, 4 years for vehicles and 4 to 8 years for
furniture, fixtures and equipment.
6
<PAGE> 12
DEZINE HEALTHCARE SOLUTIONS, INC
(A WHOLLY-OWNED SUBSIDIARY OF COMPANION TECHNOLOGIES CORPORATION)
NOTES TO FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
GOODWILL AND OTHER INTANGIBLES
The Company's acquisitions are accounted for using the purchase method of
accounting. The excess of the purchase price over the fair value of the net
assets acquired (goodwill) is amortized over 15 years. Amortization expense
related to goodwill totaled $142,441 and $166,405 for the eleven months
ended November 30, 1997 and for the year ended December 31, 1996,
respectively. In addition, during 1996 the Company recognized amortization
expense of $66,183 related to other intangibles arising from acquisitions
in prior years.
The Company evaluates goodwill annually for impairment. Goodwill is written
off to the extent that the unamortized balance exceeds estimated future
cash flows for the acquired companies. During the eleven months ended
November 30, 1997 and the year ended December 31, 1996, no goodwill write
off was necessary as a result of the annual impairment evaluation.
CAPITALIZED SOFTWARE COSTS
The Company capitalizes costs related to the development of certain
software products. In accordance with Statement of Financial Accounting
Standards (SFAS) No. 86, "Accounting for the Costs of Computer Software to
be Sold, Leased, or Otherwise Marketed", capitalization of costs begins
when the technological feasibility has been established and ends when the
product is available for general release. Capitalized software costs are
amortized on a straight-line basis over the estimated economic life of the
product. Software costs of $493,542 and $220,691 incurred during the eleven
months ended November 30, 1997 and the year ended December 31, 1996,
respectively for the DME 7.0 and GEN 2000 projects have been capitalized
and will be amortized over the estimated economic life of the product
beginning at the date of product release.
The Company performs an annual impairment evaluation of its capitalized
software costs, and a loss is recognized when the carrying costs exceed net
realizable value. During the eleven months ended November 30, 1997 and the
year ended December 31, 1996, no loss was recorded as a result of the
annual impairment evaluation.
EARNED AND UNEARNED RENTAL AND MAINTENANCE REVENUE
Revenue under rental and maintenance agreements is deferred and recognized
ratably over the term of the agreements on a straight-line basis.
INCOME TAXES
The Company's operations are included in the consolidated tax return of
Companion's parent, Blue Cross Blue Shield of South Carolina ("BCBSSC").
BCBSSC's policy is to allocate the consolidated federal income tax
provision to each company within the consolidated group based upon its
federal income tax liability calculated in substantially the same manner as
if each company filed a separate tax return.
Deferred tax assets and liabilities are based on the temporary differences
between the financial statement carrying amounts and the tax bases of
assets and liabilities using the enacted tax rates in effect in years in
which the differences are expected to reverse. Valuation allowances are
established when necessary to reduce deferred tax assets to the
7
<PAGE> 13
DEZINE HEALTHCARE SOLUTIONS, INC
(A WHOLLY-OWNED SUBSIDIARY OF COMPANION TECHNOLOGIES CORPORATION)
NOTES TO FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
amount expected to be realized. Income tax expense is comprised of the
current income taxes on the period's earnings, as allocated by BCBSSC, and
the change during the period in deferred tax assets and liabilities.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, receivables, other current assets, accounts
payable and accrued liabilities, meeting the definition of a financial
instrument approximate fair value.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of accounts receivable and
installment receivables. Receivables are not collateralized and are
receivable primarily from providers of health care services. Management
believes credit risk associated with receivables is mitigated due to the
Company's large customer base.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at November 30, 1997 and
December 31, 1996:
<TABLE>
<CAPTION>
November 30, December 31,
1997 1996
----------- ------------
<S> <C> <C>
Furniture, fixtures and equipment $ 289,096 $ 173,071
Computer equipment and software 438,871 417,167
Vehicles 12,517 12,517
--------- ---------
740,484 602,755
Less accumulated depreciation (431,941) (318,090)
--------- ---------
$ 308,543 $ 284,665
========= =========
</TABLE>
Depreciation expense of $113,918 and $103,802 was charged to operations
during the eleven months ended November 30, 1997 and the year ended
December 31, 1996, respectively.
8
<PAGE> 14
DEZINE HEALTHCARE SOLUTIONS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF COMPANION TECHNOLOGIES CORPORATION)
NOTES TO FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
3. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED YEAR ENDED
NOVEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Current:
Federal $ 6,684 $ 143,853
State 31,087 30,936
---------- ----------
37,771 174,789
---------- ----------
Deferred:
Federal 102,865 11,300
State 22,122 2,430
---------- ----------
124,987 13,730
---------- ----------
$ 162,758 $ 188,519
========== ==========
</TABLE>
Deferred tax assets (liabilities) are comprised of the following:
<TABLE>
<CAPTION>
NOVEMBER 30, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Deferred revenue $ 265,485 $ 242,190
Capitalized software (324,480) (129,319)
Depreciation 21,735 21,262
Amortization 35,119 38,172
Allowance for doubtful accounts 91,627 42,168
---------- ----------
$ 89,486 $ 214,473
========== ==========
</TABLE>
A reconciliation between the provision for income taxes and the amount
computed by applying the U.S. federal statutory rate is as follows:
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED YEAR ENDED
NOVEMBER 30, DECEMBER 31,
1997 1996
-------------- ------------
<S> <C> <C>
Tax provision computed at U.S. Federal statutory rate of 35% $ 83,005 $ 121,979
State taxes on income, net of U.S. Federal income tax 10,791 15,857
Goodwill 60,329 65,813
Nondeductible expenses 10,770 6,352
Tax effect from filing a consolidated return (2,137) (21,482)
----------- ---------
Provision for income taxes $ 162,758 $ 188,519
=========== =========
</TABLE>
9
<PAGE> 15
DEZINE HEALTHCARE SOLUTIONS, INC
(A WHOLLY-OWNED SUBSIDIARY OF COMPANION TECHNOLOGIES CORPORATION)
NOTES TO FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
4. RELATED PARTY TRANSACTIONS
Related party payable represents amounts payable to Companion and bears
interest at Companion's borrowing rate from BCBSSC, approximately 4.8% and
8.3% during the eleven months ended November 30, 1997 and the year ended
December 31, 1996, respectively. The balance consists of allocations made
to the Company to fund operations, net of repayments.
A portion of the Company's corporate offices, other facilities and
management services are provided by Companion or Companion's parent,
BCBSSC. BCBSSC also provides all personnel services to the Company.
Reimbursement to Companion and BCBSSC for these costs is based on
allocations representing estimates of actual costs incurred. Such
allocations are not necessarily indicative of the costs that would have
been incurred if the Company had been a separate entity. Expenses allocated
to the Company are comprised of the following:
<TABLE>
<CAPTION>
ELEVEN MONTHS
ENDED YEAR ENDED
NOVEMBER 30, DECEMBER 31,
1997 1996
-------------- ------------
<S> <C> <C>
Management fee $ 55,000 $ 152,454
Accounting allocation 110,000 142,100
Interest expense incurred on related 34,817 80,513
party payable -------- ---------
$199,817 $ 375,067
======== =========
</TABLE>
5. COMMITMENTS
The Company has commitments under long-term operating leases, principally
for building space. Lease terms generally cover periods from three to five
years. As of November 30, 1997, the future minimum lease payments for
noncancelable operating lease obligations, which extend beyond one year,
are as follows:
<TABLE>
<CAPTION>
AMOUNT
---------
<S> <C>
Month ending December 31, 1997 $ 19,486
Fiscal year 1998 234,900
Fiscal year 1999 239,169
Fiscal year 2000 181,773
---------
$ 675,328
=========
</TABLE>
Rent expense charged to operations was $229,719 and $235,344 during the
eleven months ended November 30, 1997 and the year ended December 31, 1996,
respectively.
10
<PAGE> 16
DEZINE HEALTHCARE SOLUTIONS, INC
(A WHOLLY-OWNED SUBSIDIARY OF COMPANION TECHNOLOGIES CORPORATION)
NOTES TO FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
6. CONTINGENT LIABILITIES
In the ordinary course of business, there are various legal proceedings
pending against the Company. Management believes the aggregate liabilities,
if any, arising from legal actions would not have a material adverse effect
on the financial position of the Company.
7. SUBSEQUENT EVENT
On December 17, 1997, the Company entered into an Asset Purchase Agreement
with Simione Central Holdings, Inc. whereby certain of the Company's assets
were acquired and certain liabilities were assumed, effective December 1,
1997.
* * *
11
<PAGE> 17
SIMIONE CENTRAL HOLDINGS, INC
PRO FORMA CONDENSED COMBINED BALANCE SHEETS
SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Simione Central Dezine Healthcare Pro Forma Pro Forma
Holdings, Inc. Solutions, Inc. Adjustments Combined
------------- ----------------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 19,530,966 $ 8,470 $ (9,532,063) (1) $ 10,007,373
Accounts receivable, net 8,820,990 1,097,838 -- 9,918,828
Prepaid expenses and other current assets 716,579 241,032 -- 957,611
------------ ---------- ------------ ------------
Total current assets 29,068,535 1,347,340 (9,532,063) 20,883,812
Purchased software, furniture and equipment, net 1,923,833 306,261 --
Intangible assets, net 5,192,490 1,807,572 (1,807,572) (2) 2,230,094
1,322,991 (1) 6,515,481
Other assets 198,295 606,906 (606,906) (2) 198,295
------------ ---------- ------------ ------------
Total assets $ 36,383,153 $4,068,079 $(10,623,550) $ 29,827,682
============ ========== ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Lines of credit $ 1,013,321 $ -- $ -- $ 1,013,321
Accounts payable 1,643,833 141,027 199,938 (1) 1,984,798
Accrued compensation expense 1,028,920 -- -- 1,028,920
Accrued liabilities 2,787,419 763,565 (747,210) (2) 3,103,774
300,000 (1)
Customer deposits 2,019,033 -- -- 2,019,033
Unearned revenues 984,722 914,156 -- 1,898,878
Current portion of capital lease obligations 303,311 -- -- 303,311
------------ ---------- ------------ ------------
Total current liabilities 9,780,559 1,818,748 (247,272) 11,352,035
Capital lease obligations, less current portion 291,485 -- -- 291,485
Commitments and contingencies
Shareholders' equity:
Preferred stock -- -- -- --
Common stock 8,501 1,500 (1,500) (2) 8,501
Additional paid-in capital 41,483,552 1,699,914 (1,699,914) (2) 41,483,552
Retained earnings (deficit) (15,180,944) 547,917 (547,917) (2) (23,307,891)
(8,126,947) (1)
------------ ---------- ------------ ------------
Total shareholders' equity 26,311,109 2,249,331 (10,376,278) 18,184,162
------------ ---------- ------------ ------------
Total liabilities and shareholders' equity $ 36,383,153 $4,068,079 $(10,623,550) $ 29,827,682
============ ========== ============ ============
</TABLE>
See accompanying note to pro forma condensed combined financial statements
(unaudited).
<PAGE> 18
SIMIONE CENTRAL HOLDINGS, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Simione Central Dezine Healthcare Pro Forma Pro Forma
Holdings, Inc. Solutions, Inc. Adjustments Combined
--------------- ----------------- ----------- ----------
<S> <C> <C> <C> <C>
Net revenues:
Shared resource solution $ 7,959,809 $ -- $ -- $ 7,959,809
In-house solution 11,669,443 5,293,550 -- 16,962,993
Agency support and consulting services 15,147,462 -- -- 15,147,462
------------ ----------- --------- ------------
Total net revenues 34,776,714 5,293,550 -- 40,070,264
Costs and expenses:
Cost of revenues 16,131,302 1,693,936 -- 17,825,238
Selling, general and administrative 9,783,031 3,100,311 -- 12,883,342
Research and development 5,172,905 -- -- 5,172,905
Amortization and depreciation 1,238,644 211,312 157,815 (3) 1,607,771
------------ ----------- --------- ------------
Total costs and expenses 32,325,882 5,005,559 157,815 37,489,256
------------ ----------- --------- ------------
Income from operations 2,450,832 287,991 (157,815) 2,581,008
Other income (expense):
Interest expense (185,702) (29,315) -- (215,017)
Interest and other income 246,230 26,536 -- 272,766
------------ ----------- --------- ------------
Income before income taxes 2,511,360 285,212 (157,815) 2,638,757
Provision for income taxes -- 34,272 (34,272)(4) --
------------ ----------- --------- ------------
Net income $ 2,511,360 $ 250,940 $(123,543) $ 2,638,757
============ =========== ========= ============
Net income per share $ 0.33 $ 0.35
============ ============
Weighted average common and
common equivalent shares 7,624,199 7,624,199
============ ============
</TABLE>
See accompanying note to pro forma condensed combined financial statements
(unaudited).
<PAGE> 19
SIMIONE CENTRAL HOLDINGS, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Simione Central Dezine Healthcare Pro Forma Pro Forma
Holdings, Inc. Solutions, Inc. Adjustments Combined
--------------- ----------------- ----------- ------------
<S> <C> <C> <C> <C>
Net revenues:
Shared resource solution $ 12,890,608 $ -- $ -- $ 12,890,608
In-house solution 2,417,280 7,464,806 -- 9,882,086
Agency support and consulting services 10,686,735 -- -- 10,686,735
------------ ----------- --------- ------------
Total net revenues 25,994,641 7,464,806 -- 33,459,447
Costs and expenses:
Cost of revenues 14,698,177 2,351,152 -- 17,049,329
Selling, general and administrative 7,037,446 4,380,007 -- 11,417,453
Research and development 5,676,898 -- -- 5,676,898
Amortization and depreciation 784,502 336,390 210,420(3) 1,331,312
Purchased in-process research and development 12,573,931 -- -- 12,573,931
Severance and other restructuring charges 1,214,669 -- -- 1,214,669
------------ ----------- --------- ------------
Total costs and expenses 41,985,623 7,067,549 210,420 49,263,592
Income (loss) from operations (15,990,982) 397,257 (210,420) (15,804,145)
Other income (expense):
Interest expense (114,817) (106,269) -- (221,086)
Interest and other income 206,902 57,523 -- 264,425
------------ ----------- --------- ------------
Income (loss) before income taxes (15,898,897) 348,511 (210,420) (15,760,806)
Provision for income taxes -- 188,519 (188,519)(4) --
------------ ----------- --------- ------------
Net income (loss) $(15,898,897) $ 159,992 $ (21,901) $(15,760,806)
============ =========== ========= ============
Net income (loss) per share $ (1.85) $ (1.84)
============ ============
Weighted average common and
common equivalent shares 4,287,956 4,287,956
============ ============
</TABLE>
See accompanying note to pro forma condensed combined financial statements
(unaudited).
<PAGE> 20
SIMIONE CENTRAL HOLDINGS, INC.
NOTE TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying pro forma condensed combined financial statements (unaudited)
as of September 30, 1997 and for the nine months ended September 30, 1997 and
the year ended December 31, 1996 give effect to the acquisition of Dezine
Healthcare Solutions, Inc. (Dezine) by Simione Central Holdings, Inc. (Simione)
as if the acquisition had occurred September 30, 1997 for balance sheet purposes
and January 1, 1996 for the statements of operations purposes.
The pro forma information is based on the unaudited consolidated financial
statements of Simione as of and for the nine months ended September 30, 1997 and
the audited consolidated financial statements of Simione as of and for the year
ended December 31, 1996. In addition, certain pro forma information was obtained
from Dezine's audited financial statements as of and for the year ended December
31, 1996, and from the unaudited financial statements as of and for the nine
months ended September 30, 1997.
These pro forma condensed combined financial statements have been prepared by
management and may not be indicative of the results of operations or the
financial position that actually would have occurred if the combination had been
in effect on the dates indicated or which may be obtained in the future.
These pro forma financial statements should be read in conjunction with the
unaudited financial statements and related notes of Simione Central Holdings,
Inc. as of and for the nine months ended September 30, 1997 and the audited
financial statements and related notes of Dezine included herein.
(1) To reflect the acquisition of Dezine by Simione. The acquired intangibles
were estimated as follows:
<TABLE>
<S> <C>
Purchase price $9,532,063
Estimated acquisition costs 199,938
----------
9,732,001
Less: Net assets acquired 282,063
Purchased in process R&D immediately expensed
in the period of acquisition 8,126,947
----------
Acquired intangibles $1,322,991
==========
</TABLE>
Purchased in process R&D of $8,126,947 is not reflected in the Pro Forma
Condensed Combined Statements of Operations for the nine months ended September
30, 1997 and the year ended December 31, 1996; however, it is reflected in the
Pro Forma Condensed Combined Balance Sheets as of September 30, 1997.
(2) To eliminate the assets not acquired, liabilities not assumed, common stock
and accumulated earnings of Dezine as of September 30, 1997.
(3) To amortize the acquired intangibles of $1,322,991 resulting from the
acquisition of Dezine over the weighted average estimated useful life of 7
years.
(4) To eliminate the income tax related items due to the existence of Simione's
NOL carryforwards.
