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):
MARCH 14, 1997
--------------
PROXYMED, INC.
--------------
(Exact name of registrant as specified in its charter)
FLORIDA 0-22052 65-0202059
------- ------- ----------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2501 DAVIE ROAD, SUITE 230, FT. LAUDERDALE, FLORIDA 33317-7424
- --------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (954) 473-1001
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) The audited financial statements required by Item 7(a) of Clinical
MicroSystems, Inc. as of and for the years ended December 31, 1996 and 1995 are
included as exhibits to this Form 8-K/A.
(b) The pro forma financial information required by Item 7(b) are
included as exhibits to this Form 8-K/A. Such pro forma financial information
has been derived from the audited financial statements of ProxyMed, Inc. and
Clinical MicroSystems, Inc. as of December 31, 1996 and for the year then ended.
(c) The following exhibits are included herein:
Exhibit 1 - Audited Financial Statements for Clinical
MicroSystems, Inc. as of and for the years ended December 31, 1996 and 1995.
Exhibit 2 - Pro Forma Combined Balance Sheets of ProxyMed, Inc.
and Clinical MicroSystems, Inc. as of December 31, 1996.
Exhibit 3 - Pro Forma Combined Statements of Operations of
ProxyMed, Inc. and Clinical MicroSystems, Inc. for the year ended December 31,
1996.
Exhibit 4 - Pro Forma Adjusting Entries at December 31, 1996.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PROXYMED, INC.
Date APRIL 21, 1997 /S/ BENNETT MARKS
-------------- -----------------
Bennett Marks, Executive Vice
President - Finance and Chief
Financial Officer
3
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
1 Audited Financial Statements for Clinical MicroSystems, Inc. as of and
for the years ended December 31, 1996 and 1995.
2 Pro Forma Combined Balance Sheets of ProxyMed, Inc. and Clinical
MicroSystems, Inc. as of December 31, 1996.
3 Pro Forma Combined Statements of Operations of ProxyMed, Inc. and
Clinical MicroSystems, Inc. for the year ended December 31, 1996.
4 Pro Forma Adjusting Entries at December 31, 1996.
EXHIBIT 1
CLINICAL MICROSYSTEMS, INC. (AN S CORPORATION)
-----------------------------------------------
FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1996 AND 1995 AND
INDEPENDENT AUDITORS' REPORT
<PAGE>
EICHEN & DIMEGLIO, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
1 Dupont Street
Plainview, New York 11803
Tel. (516) 576-3333
Fax. (516) 576-3342
INDEPENDENT AUDITORS' REPORT
To the stockholder of
Clinical MicroSystems, Inc.:
We have audited the accompanying balance sheets of Clinical MicroSystems, Inc.
(the "Company"), an S Corporation, as of December 31, 1996 and 1995 and the
related statements of income and retained earnings and of cash flows for the
years 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 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 the Company at December 31,
1996 and 1995, and the results of its operations and its cash flows for the
years then ended, in conformity with generally accepted accounting principles.
/s/ EICHEN & DIMEGLIO, P.C.
February 28, 1997
<PAGE>
<TABLE>
<CAPTION>
CLINICAL MICROSYSTEMS, INC. (An S Corporation)
- -------------------------------------------------------------------------------
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
- -------------------------------------------------------------------------------
A S S E T S NOTES 1996 1995
- ----------- ------- -------------- --------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash $ 35,921 $ 8,737
Accounts receivable, net of allowance for
doubtful accounts of $24,650 and $7,123:
Billed 368,145 236,771
Unbilled 84,945 126,101
Prepaid expenses 3,682 569
-------------- --------------
Total current assets 492,693 372,178
LONG-TERM ACCOUNT RECEIVABLE 2 300,000 0
FIXED ASSETS - NET 2,3 24,099 4,548
COMPUTER SOFTWARE COSTS - NET 2,4 103,828 85,679
-------------- --------------
TOTAL ASSETS 5 $ 920,620 $ 462,405
============== ==============
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 118,321 $ 110,135
Current portion of deferred revenue 2 112,519 46,766
Current portion of long-term debt 5 19,265 42,500
-------------- --------------
Total current liabilities 250,105 199,401
-------------- --------------
DEFERRED REVENUE 2 300,000 0
-------------- --------------
LONG-TERM DEBT 5 13,225 17,500
-------------- --------------
COMMITMENTS 6
STOCKHOLDER'S EQUITY:
Common stock, no par value, 200 shares
authorized, issued and outstanding 15,000 15,000
Retained earnings 342,290 230,504
-------------- --------------
Total stockholder's equity 357,290 245,504
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 920,620 $ 462,405
============== ==============
</TABLE>
- -------------------------------------------------------------------------------
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
CLINICAL MICROSYSTEMS, INC. (An S Corporation)
- -----------------------------------------------------------------------------
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
- -----------------------------------------------------------------------------
NOTES 1996 1995
------- -------------- ---------------
<S> <C> <C> <C>
NET SALES 2 $ 1,758,645 $ 1,131,470
COST OF SALES 4 432,858 332,324
-------------- ---------------
GROSS PROFIT 1,325,787 799,146
OPERATING EXPENSES 1,031,460 729,956
-------------- ---------------
INCOME FROM OPERATIONS 294,327 69,190
INTEREST EXPENSE 5 5,240 7,666
-------------- ---------------
INCOME BEFORE PROVISION FOR
STATE INCOME TAXES 289,087 61,524
PROVISION FOR STATE INCOME TAXES 2 325 325
-------------- ---------------
NET INCOME 288,762 61,199
RETAINED EARNINGS, beginning of year 230,504 182,848
DISTRIBUTIONS TO STOCKHOLDER (176,976) (13,543)
-------------- ---------------
RETAINED EARNINGS, end of year $ 342,290 $ 230,504
============== ===============
</TABLE>
- -------------------------------------------------------------------------------
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
CLINICAL MICROSYSTEMS, INC. (An S Corporation)
- --------------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
- --------------------------------------------------------------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 288,762 $ 61,199
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 92,053 75,548
Changes in operating assets and liabilities:
Accounts receivable - net (90,218) (45,093)
Prepaid expenses and other current assets (3,113) 10,947
Accounts payable and accrued expenses 8,186 (5,474)
Deferred revenue 65,753 18,916
-------------- --------------
Net cash provided by operating activities 361,423 116,043
-------------- --------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of property and equipment (27,520) (2,405)
Capitalized computer software costs (102,233) (107,017)
-------------- --------------
Net cash used in investing activities (129,753) (109,422)
-------------- --------------
CASH FLOWS (USED IN) FROM FINANCING ACTIVITIES:
Long-term debt:
Proceeds 16,320 20,000
Reduction (43,830) 0
Reduction of capital lease obligation 0 (4,341)
Distributions to stockholder (176,976) (13,543)
-------------- --------------
Net cash (used in) from financing activities (204,486) 2,116
-------------- --------------
NET INCREASE IN CASH 27,184 8,737
CASH, beginning of year 8,737 0
-------------- --------------
CASH, end of year $ 35,921 $ 8,737
============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 5,414 $ 7,667
============== ==============
Cash paid during the year for income taxes $ 325 $ 325
============== ==============
Recording of long-term account receivable and deferred $ 300,000
revenue
===============
</TABLE>
- -------------------------------------------------------------------------------
See notes to financial statements.
<PAGE>
CLINICAL MICROSYSTEMS, INC. (An S Corporation)
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. ORGANIZATION AND BUSINESS DESCRIPTION
Clinical MicroSystems, Inc. (the "Company") was incorporated during April 1992
as a subchapter S corporation. The Company is engaged in the design, development
and marketing of communications and information management software products for
the medical industry.
During February 1997, the Company entered into a definitive agreement providing
for the sale of substantially all of its assets and business (see Note 7).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Revenue from the sale of software licenses, in which no or insignificant vendor
obligations exist and collectibility is probable, is recognized upon shipment to
the customer. There is no right of return for software licenses.
Post contract customer support ("PCS"), which includes telephone support and
product enhancements, is sold separately from software licenses. Revenue from
PCS is recognized ratably over the period of the agreement (typically 1 year) as
the services are provided.
Revenue from the sale of peripheral hardware is recognized upon the shipment to
the customer. There is no right of return for hardware sales.
DEFERRED REVENUE
The current portion of deferred revenue represents advance billings to customers
for PCS for periods subsequent to the respective year end. The long-term
deferred revenue at December 31, 1996 consists of $300,000 due from a customer
for which collectibility is uncertain. Pursuant to the terms of an agreement
with such customer, the Company has extended payment until January 1998 and
accordingly, has recorded a long-term account receivable in the 1996 balance
sheet. Upon receipt of the amount due from this customer, the Company will
record the related revenue.
FIXED ASSETS
Fixed assets are stated at cost. Depreciation of fixed assets is provided on a
straight-line basis over estimated useful lives of three years.
<PAGE>
COMPUTER SOFTWARE COSTS
The Company capitalizes computer software development costs upon the
establishment of the technological feasibility of a product to the extent that
such costs are expected to be recovered through future sales of the products.
These costs are amortized on the straight-line method over an estimated useful
life of three years.
RESEARCH AND DEVELOPMENT COSTS
The Company charges all costs incurred to establish the technological
feasibility of a product or enhancement to research and development expense.
INCOME TAXES
The Company has elected to be treated as a subchapter S corporation for federal
and state tax purposes and, accordingly, the taxable income of the Company is
included in the gross income of its stockholder and no income tax is imposed on
the Company . The provision for state income taxes consists of minimum taxes.
CONCENTRATIONS
The Company's sales consist principally of several software products and
peripheral hardware to medical laboratories located throughout the United
States. During the year ended December 31, 1996 sales to two customers
aggregated approximately 34 percent of net sales.
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 amounts reported in the financial statements. Significant estimates
included in the accompanying financial statements are costs capitalized as
computer software for product development and the related amortization period of
three years (see Note 4). Actual amounts could differ from those estimates.
3. FIXED ASSETS - NET
Fixed assets at December 31, 1996 and 1995 consist of the following:
1996 1995
------- -------
Computer equipment $15,889 $15,889
Equipment held under capital leases 7,987 7,987
Vehicles 27,520 0
------- -------
Total 51,396 23,876
Less accumulated depreciation and amortization (27,297) (19,328)
------- -------
Fixed assets - net $24,099 $ 4,548
======= =======
The equipment held under capital leases was fully amortized during 1995.
<PAGE>
4. COMPUTER SOFTWARE COSTS
The Company capitalized $102,233 and $107,017 of costs incurred during 1996 and
1995, respectively, principally to develop product enhancements. Related
amortization expense in 1996 and 1995 aggregated $84,084 and $70,696,
respectively, and is included in cost of sales in the accompanying statement of
income and retained earnings.
5. LONG-TERM DEBT
Long-term debt at December 31, 1996 and 1995 consists of the following:
<TABLE>
1996 1995
-------- -------
<S> <C> <C>
/bullet/ Note payable to bank with interest at 2 percent
above the bank's prime rate per annum (8.5 percent
and 8.25 percent at December 31, 1996 and 1995),
due in equal monthly principal installments of $2,500
plus interest through February 1997. $ 5,000 $35,000
/bullet/ Note payable to bank with interest at 2 percent
above the bank's prime rate per annum, due in
equal monthly principal installments of $1,042
plus interest through December 1997. 12,500 25,000
/bullet/ Note payable to bank with interest at 9.95 percent
per annum, due in monthly installments of $278
(including interest) through March 1999 and a
final balloon payment of $10,634. 14,990 0
-------- -------
Total 32,490 60,000
Less current portion (19,265) (42,500)
-------- -------
Long-term debt $13,225 $17,500
======== =======
</TABLE>
Long-term debt matures in aggregate principal amounts of $19,265, $2,117 and
$11,108 during the years ending December 31, 1997, 1998 and 1999, respectively.
Substantially all of the Company's assets are pledged as collateral to the notes
payable to bank.
<PAGE>
6. COMMITMENTS
LEASES
The Company is obligated under noncancelable operating leases for the rental of
its office space and computer equipment. The lease for office space contains
customary escalation clauses and expires in June 1997.
Future minimum lease payments for years subsequent to December 31, 1996 under
such operating leases are as follows:
Year ending December 31,
1997 $18,868
1998 7,591
1999 3,675
-------
Total $30,134
=======
Rent expense for the years ended December 31, 1996 and 1995 aggregated
approximately $26,902 and $38,533, respectively.
7. SUBSEQUENT EVENT
During February 1997, the Company entered into a definitive agreement with
ProxyMed, Inc. ("ProxyMed") providing for the acquisition of substantially all
of the assets and assumption of liabilities of the Company. Under the terms of
such agreement, the Company would receive an aggregate of $6 million in cash and
restricted common stock of ProxyMed over a two year period commencing from the
closing date. Consummation of the transaction is subject to certain customary
conditions.
- -------------------------------------------------------------------------------
EXHIBIT 2
<TABLE>
<CAPTION>
PROXYMED, INC.
PRO FORMA COMBINED BALANCE SHEETS
DECEMBER 31, 1996
CLINICAL MICRO-
PROXYMED, INC. SYSTEMS, INC. TOTAL
-------------------- -------------------- --------------------
ASSETS
--------------------------------------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $6,020,358 35,921 6,056,279
Investment in U.S. Treasury Notes 6,008,698 0 6,008,698
Accounts receivable 815,945 453,090 1,269,035
Inventory 195,964 0 195,964
Other current assets 164,963 3,682 168,645
-------------------- -------------------- --------------------
Total current assets 13,205,928 492,693 13,698,621
Long-term accounts receivable 0 300,000 300,000
Property and equipment, net 1,069,662 24,099 1,093,761
Capitalized software costs, net 795,479 103,828 899,307
Goodwill, net 597,637 0 597,637
Other assets 26,349 0 26,349
-------------------- -------------------- --------------------
Total assets $15,695,055 920,620 16,615,675
==================== ==================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY:
--------------------------------------------
Current liabilities:
Current portion of long-term debt $0 19,265 19,265
Accounts payable and accrued expenses 664,750 118,321 783,071
Current portion of acquisition price payable 0 0 0
Deferred revenue, current portion 115,000 112,519 227,519
-------------------- -------------------- --------------------
Total current liabilities 779,750 250,105 1,029,855
Deferred revenue, less current portion 0 300,000 300,000
Acquisition price payable, less current portion 0 0 0
Long-term debt, less current portion 0 13,225 13,225
-------------------- -------------------- --------------------
Total liabilities 779,750 563,330 1,343,080
-------------------- -------------------- --------------------
Equity:
Common stock 9,542 15,000 24,542
Additional paid-in capital 25,944,057 0 25,944,057
Retained earnings (accumulated deficit) (11,038,294) 342,290 (10,696,004)
-------------------- -------------------- --------------------
Total equity 14,915,305 357,290 15,272,595
-------------------- -------------------- --------------------
Total liabilities and stockholders' equity $15,695,055 $920,620 16,615,675
==================== ==================== ====================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROXYMED, INC.
PRO FORMA COMBINED BALANCE SHEETS
DECEMBER 31, 1996
PRO FORMA ADJUSTMENTS
---------------------------- PRO FORMA
# DR. (CR.) COMBINED
---------------------------- --------------------
ASSETS
--------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents (1) (3,000,000) 3,023,789
(2) (32,490)
Investment in U.S. Treasury Notes 6,008,698
Accounts receivable 1,269,035
Inventory 195,964
Other current assets 168,645
--------------------
Total current assets 10,666,131
Long-term accounts receivable 300,000
Property and equipment, net 1,093,761
Capitalized software costs, net 899,307
Goodwill, net (1) 952,717 1,550,354
Other assets 26,349
--------------------
Total assets 14,535,902
====================
LIABILITIES AND STOCKHOLDERS' EQUITY:
--------------------------------------------
Current liabilities:
Current portion of long-term debt (2) 19,265 0
Accounts payable and accrued expenses (1) (200,000) 983,071
Current portion of acquisition price payable (1) (679,902) 679,902
Deferred revenue, current portion 227,519
--------------------
Total current liabilities 1,890,492
Deferred revenue, less current portion 300,000
Acquisition price payable, less current portion (1) (969,653) 969,653
Long-term debt, less current portion (2) 13,225 0
--------------------
Total liabilities 3,160,145
--------------------
Equity:
Common stock (1) 15,000 9,668
(1) (126)
Additional paid-in capital (1) (760,326) 26,704,383
Retained earnings (accumulated deficit) (1) 342,290 (15,338,294)
(1) 4,300,000
--------------------
Total equity 11,375,757
--------------------
Total liabilities and stockholders' equity 14,535,902
====================
</TABLE>
EXHIBIT 3
<TABLE>
<CAPTION>
PROXYMED, INC.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
CLINICAL MICRO
PROXYMED, INC. SYSTEMS, INC. TOTAL
---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Net sales $3,054,151 1,758,645 4,812,796
---------------------- ---------------------- ----------------------
Costs and expenses:
Cost of sales 1,327,423 433,183 1,760,606
Selling, general and admin-
istrative expenses 6,032,021 1,031,460 7,063,481
---------------------- ---------------------- ----------------------
7,359,444 1,464,643 8,824,087
---------------------- ---------------------- ----------------------
Operating income (loss) (4,305,293) 294,002 (4,011,291)
Other income (expense):
Gain on sale of assets 1,014,989 0 1,014,989
Interest, net 436,569 (5,240) 431,329
---------------------- ---------------------- ----------------------
Net income (loss) (2,853,735) 288,762 (2,564,973)
Dividends on cumulative
preferred stock 95,803 0 95,803
---------------------- ---------------------- ----------------------
Net income (loss) applicable
to common shareholders ($2,949,538) 288,762 (2,660,776)
====================== ====================== ======================
Weighted average common
shares outstanding 7,660,383
======================
Net income (loss) per share
of common stock ($0.39)
======================
Note - Pursuant to Rule 11-02(b)(5), the pro forma income statement presented above excludes the non-recurring effect
of the write-off of purchased in-process research and development costs which are directly attributable to the
acquisition of Clinical MicroSystems, Inc. Such write-off, in the amount of $4,300,000, will be charged to the
operations of ProxyMed, Inc. in the first quarter ended March 31, 1997. The income tax benefit resulting from
this write-off is estimated to be approximately $1,612,000. Based on the weight of available evidence, a
valuation allowance in the amount of $1,612,000 will be recorded concurrently.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROXYMED, INC.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
PRO FORMA ADJUSTMENTS
------------------------------- PRO FORMA
# DR. (CR.) COMBINED
------------------------------- ----------------------
<S> <C> <C>
Net sales 4,812,796
----------------------
Costs and expenses:
Cost of sales 1,760,606
Selling, general and admin-
istrative expenses (3) 47,636 7,111,117
----------------------
8,871,723
----------------------
Operating income (loss) (4,058,927)
Other income (expense):
Gain on sale of assets 1,014,989
Interest, net (4) 170,069 261,260
----------------------
Net income (loss) (2,782,678)
Dividends on cumulative
preferred stock 95,803
----------------------
Net income (loss) applicable
to common shareholders ($2,878,481)
======================
Weighted average common
shares outstanding 125,786 7,786,169
======================
Net income (loss) per share
of common stock (0.37)
======================
Note - Pursuant to Rule 11-02(b)(5), the pro forma income statement presented above excludes the non-recurring effect
of the write-off of purchased in-process research and development costs which are directly attributable to the
acquisition of Clinical MicroSystems, Inc. Such write-off, in the amount of $4,300,000, will be charged to the
operations of ProxyMed, Inc. in the first quarter ended March 31, 1997. The income tax benefit resulting from
this write-off is estimated to be approximately $1,612,000. Based on the weight of available evidence, a
valuation allowance in the amount of $1,612,000 will be recorded concurrently.
</TABLE>
EXHIBIT 4
<TABLE>
<CAPTION>
PROXYMED, INC.
PRO FORMA ADJUSTING ENTRIES
DECEMBER 31, 1996
# Dr. Cr.
- ------- ----------------- -----------------
<S> <C> <C>
(1) Common stock $15,000
Retained earnings 342,290
Purchased in-process research and
development costs 4,300,000
Goodwill 952,717
Cash $3,000,000
Acquisition price payable, current 679,902
portion
Acquisition price payable, less current 969,653
portion
Accrued expenses 200,000
Common stock 126
Additional paid-in capital 760,326
To reflect the acquisition of Clinical MicroSystems, Inc. on a
pro forma basis as of December 31, 1996. The
allocation of the purchase price was based upon independent
appraisals of the assets acquired, the liabilities assumed and
the consideration paid as of the date of the acquisition.
(2) Long-term debt 13,225
Current portion of long-term debt 19,265
Cash 32,490
To reflect the payoff of acquiree's
long-term debt.
(3) Amortization expense 47,636
To record the amortization of goodwill for 1996 over its
expected useful life of 20 years.
(4) Interest expense 170,069
To record interest for 1996 on the acquisition price
payable in the first year.
</TABLE>
