SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
APRIL 15, 2000
----------------------------------
Date of Report (Date of earliest event reported)
MEDCOM USA, INCORPORATED
------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 0-25474 65-0287558
---------------------------- ---------------------- ----------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification Number)
18001 COWAN, SUITES C & D
IRVINE, CALIFORNIA 92614
------------------------- --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (949) 261-6665
Not Applicable
-------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
- 1 -
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
The following financial statements of the business acquired are filed
herewith, commencing on page F-1:
Financial Statements of DCB Actuaries and Consultants, s.r.o. as of
December 31, 1999 (audited) and March 31, 2000 (unaudited) and for the year
ended December 31, 1999 (audited) and for the three months ended March 31, 2000
and 1999 (unaudited), and for the nine months and year ended March 31, 2000 and
June 30, 1999 (unaudited), respectively.
Independent Auditors Report.
Balance Sheets as of December 31, 1999 (audited) and March 31, 2000
(unaudited).
Statements of Operations for the year ended December 31, 1999 (audited)
and for the three months ended March 31, 2000 and 1999 (unaudited).
Statements of Stockholders' Equity for the year ended December 31,1999
(audited) and for the three months ended March 31, 2000 and 1999
(unaudited).
Statements of Cash Flows for the year ended December 31, 1999 (audited)
and for the three months ended March 31, 2000 and 1999 (unaudited).
Notes to Financial Statements.
Statements of operations for the nine months ended March 31, 2000 and
year ended June 30, 1999 (unaudited).
(b) Pro Forma Financial Information.
Foreign currency translation:
Balance Sheet of DCB Actuaries and Consultants, s.r.o. as of March 31,
2000 (unaudited)
Statements of operations of DCB Actuaries and Consultants, s.r.o. for
the nine months ended March 31, 1999 (unaudited) and the year ended
June 30, 1999 (unaudited)
The following pro forma financial statements of the registrant are filed
herewith, commencing on page F-19:
Unaudited Pro Forma Combined Financial Statements Introduction.
- 2 -
<PAGE>
Unaudited Pro Forma Combined Balance Sheet as of March 31, 2000.
Unaudited Pro Forma Combined Statement of Operations for the nine
months ended March 31, 2000.
Unaudited Pro Forma Combined Statement of Operations for the year ended
June 30, 1999.
Notes to Unaudited Pro Forma Combined Financial Statements.
(c) Exhibits
2.1 Shareholder Agreement dated March 31, 2000 between Medcom USA, Inc. and
Vladimir Havlena (previously filed).
2.2 Shareholder Agreement dated March 31, 2000 between Medcom USA, Inc. and
Vladimir Kanovsky (previously filed).
2.3 Shareholder Agreement dated March 31, 2000 between Medcom USA, Inc. and
Petr Hamza (previously filed).
2.4 Shareholder Agreement dated March 31, 2000 between Medcom USA, Inc. and
Martin Chvatal (previously filed).
2.5 Shareholder Agreement dated March 31, 2000 between Medcom USA, Inc. and
Pavel Juranek (previously filed).
2.6 Shareholder Agreement dated March 31, 2000 between Medcom USA, Inc. and
Karel Barak (previously filed).
2.7 Supplement to Shareholder Agreement, dated April 13, 2000 between Medcom
USA, Inc. and Vladimir Kanovsky (previously filed).
2.8 Supplement to Shareholder Agreement dated April 13, 2000, between Medcom
USA, Inc. and Petr Hamza (previously filed).
2.9 Supplement to Shareholder Agreement, dated April 13, 2000, between Medcom
USA, Inc. and Martin Chvatal (previously filed).
2.10 Supplement to Shareholder Agreement, dated April 13, 2000, between Medcom
USA, Inc. and Pavel Juranek (previously filed).
2.11 Supplement to Shareholder Agreement, dated April 13, 2000, between Medcom
USA, Inc. and Karel Barak (previously filed).
- 3 -
<PAGE>
2.12 Shareholder Purchase Agreement dated as of April 15, 2000 by and among DCB
Actuaries and Consultants, SRO, David Robinson, Vladimir Havlena and
Medcom USA, Inc. (previously filed).
2.13 Technology Purchase Agreement, dated as of April 15, 2000 by and between
DSM, LLC and Medcom USA, Inc. (previously filed).
4.1.1 Certificate of Designations of the Powers, Preferences and Relative,
Participating, Optional and Other Special Rights of Preferred Stock and
Qualifications, Limitations and Restrictions thereof, relating to Series D
Cumulative Convertible Preferred Stock (previously filed).
- 4 -
<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.
MEDCOM USA, INC.
Dated: June 28, 2000 By: /s/ Mark Bennett
----------------
Mark Bennett, President
and Chief Executive
Officer
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<PAGE>
(a) DCB ACTUARIES AND CONSULTANTS, s.r.o.
INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditors' Report F-2
Financial Statements:
Balance Sheet F-3
Statements of Operations F-4
Statements of Stockholders' Deficit F-5
Statements of Cash Flows F-6
Notes to the Financial Statements F-7
F - 1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Shareholders
DCB Actuaries and Consultants s.r.o.
Brno
We have audited the accompanying balance sheet of DCB Actuaries and Consultants
s.r.o. as of December 31, 1999 and the related statements of operations,
stockholders' equity, and cash flows for the year ended December 31, 1999. 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. 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 DCB Actuaries and Consultants
s.r.o. as of December 31, 1999 and the results of their operations and cash
flows for the year ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche
Prague, Czech Republic
June 21, 2000
F - 2
<PAGE>
DCB Actuaries and Consultants s.r.o.
BALANCE SHEET
(in thousands of Czech crowns)
<TABLE>
<CAPTION>
December 31, March 31,
1999 2000
------- -------
(unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ................................. 2,718 4,656
Accounts receivables, less allowance ...................... 8,755 7,817
Inventories ............................................... 2,422 2,468
Prepaid expenses .......................................... 616 1,984
------- -------
Total current assets ...................................... 14,511 16,925
------- -------
PROPERTY, PLANT AND EQUIPMENT, NET .......................... 13,544 10,690
------- -------
OTHER ASSETS
Licensing rights, net ..................................... 29,180 27,319
Other ..................................................... 50 50
------- -------
Total other assets ........................................ 29,230 27,369
------- -------
TOTAL ASSETS ................................................ 57,285 54,984
======= =======
LIABILITIES AND STOCKHOLDER'S DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued liabilities .................. 5,568 5,849
Dividends payable ......................................... 897 0
Loans ..................................................... 0 2,328
------- -------
Total Current Liabilities ................................. 6,465 8,177
DEFERRED REVENUE ............................................ 63,763 62,341
------- -------
TOTAL LIABILITIES ........................................... 70,228 70,518
------- -------
STOCKHOLDERS' DEFICIT
Registered Capital ........................................ 1,000 1,000
Accumulated deficit ....................................... (13,943) (16,534)
------- -------
Total stockholders' deficit ............................... (12,943) (15,534)
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT.................. 57,285 54,984
======= =======
</TABLE>
See notes to the financial statements.
F - 3
<PAGE>
DCB Actuaries and Consultants s.r.o.
STATEMENTS OF OPERATIONS
(in thousands of Czech crowns)
Three Months Ended
Year Ended -------------------
December 31, March 31, March 31,
1999 2000 2000
------- ------ ------
(unaudited) (unaudited)
REVENUE ......................... 43,962 11,719 13,190
COST OF SERVICES ................ 19,478 3,952 6,562
------- ------ ------
GROSS PROFIT .................... 24,484 7,767 6,628
OPERATING EXPENSES
General and administrative .. 20,598 4,160 4,790
Depreciation and amortization 17,233 4,905 3,862
Research and development .... 3,471 1,253 0
------- ------ ------
Total expenses .............. 41,302 10,318 8,652
------- ------ ------
OPERATING LOSS .............. (16,818) (2,551) (2,024)
OTHER INCOME (EXPENSE)
Interest expense ............ 0 0 0
Interest income ............. 381 9 146
Other income (expenses) ..... 1,635 (49) 671
------- ------ ------
Total other income (expense) 2,016 (40) 817
------- ------ ------
NET LOSS .................... (14,802) (2,591) (1,207)
======= ====== ======
See notes to the financial statements.
F - 4
<PAGE>
DCB Actuaries and Consultants s.r.o.
STATEMENTS OF STOCKHOLDERS' DEFICIT
(in thousands of Czech crowns)
Retained
Registered Earnings
Capital (Deficit) Total
------ ------- -------
BALANCE AT JANUARY 1, 1999 ..... 1,000 2,234 3,234
Net loss ................... 0 (14,802) (14,802)
Dividends .................. 0 (1,375) (1,375)
------ ------- -------
BALANCE AT DECEMBER 31, 1999 ... 1,000 (13,943) (12,943)
====== ======= =======
Net loss (unaudited) ....... 0 (2,591) (2,591)
BALANCE AT MARCH 31, 2000
(UNAUDITED) ................... 1,000 (16,534) (15,534)
====== ======= =======
BALANCE AT JANUARY 1, 1999
(UNAUDITED) ................... 1,000 2,234 3,234
Net loss (unaudited) ....... 0 (1,207) (1,027)
------ ------- -------
BALANCE AT MARCH 31, 1999
(UNAUDITED) ................... 1,000 1,027 2,027
====== ======= =======
See notes to the financial statements.
F - 5
<PAGE>
DCB Actuaries and Consultants s.r.o.
STATEMENTS OF CASH FLOWS
(in thousands of Czech crowns)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
December 31, --------------------
1999 2000 1999
------- ------- --------
(unaudited) (unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .......................................... (14,802) (2,591) (1,207)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization ..................... 17,233 4,905 3,862
Changes in assets and liabilities
Accounts and other receivables .................. (300) 938 4,590
Inventories ..................................... 1,803 (46) 182
Prepaid expenses ................................ (553) (1,368) (1,090)
Accounts payable ................................ (10,758) 281 (10,254)
Deferred revenue ................................ (7,231) (1,422) (2,033)
------- ------- --------
Net cash (used in) provided by operating
activities ....................................... (14,608) 697 (5,950)
------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ........................... (1,301) (190) (174)
------- ------- --------
Net cash (used in) investing activities .......... (1,301) (190) (174)
------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans ............................ 0 2,328 0
Payments of dividends .......................... (316) (897) 0
------- ------- --------
Net cash (used in) provided by financing
activities ....................................... (316) 1,431 0
------- ------- --------
NET (DECREASE) INCREASE IN CASH ... (16,225) 1,938 (6,124)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .. 18,943 2,718 18,944
------- ------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ........ 2,718 4,656 12,820
======= ======= ========
</TABLE>
See notes to consolidated financial statements
F - 6
<PAGE>
DCB Actuaries and Consultants s.r.o.
NOTES TO FINANCIAL STATEMENTS
(amounts in thousands of Czech crowns except share and percent data)
1 ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
DCB Actuaries and Consultants s.r.o. (the "Company") was formed in 1991 under
the name Democentrum Brno as a Czech entity. The Company is located in Brno,
Czech Republic.
DCB focuses on development and implementation of specialised transactional
information systems, workflow and document management systems and high-end
decision support systems with data warehousing especially in the insurance and
health insurance sectors.
The Company is a member of an international network of actuarial consulting
firms Woodrow Milliman.
The ownership structure as at 31 December 1999 is described in the
following table:
<TABLE>
<CAPTION>
Name Title Shares %
---------------- -------------------- ---------- ---------
<S> <C> <C> <C>
J. D. Robinson President 330 33
V. Havlena Managing director 150 15
P. Ham_a Technical director 130 13
V. Kaoovsky Finance manager 120 12
K. Barak Manager of HW group 90 9
M. Chvatal Software team manager 90 9
P. Juranek Senior insurance mathematician 90 9
------ ----
Total 1,000 100
====== ====
</TABLE>
On April 15, 2000 MEDCOM USA, Incorporated acquired all outstanding shares of
the Company.
Basis of preparation
The financial statements were prepared in accordance with generally accepted
accounting principles of the United States of America.
F - 7
<PAGE>
Unaudited interim balances
The unaudited financial statements included herein have been prepared by the
Company in accordance with the rules and regulations of the Securities and
Exchange Commission and consequently do not include all of the disclosures
normally required by generally accepted accounting principles. These unaudited
financial statements should be read in conjunction with the audited financial
statements and related notes thereto included herein. The unaudited financial
information contained herein reflects all adjustments (consisting of only normal
recurring accruals) which, in the opinion of management, are necessary for a
fair presentation of the results of operations for the three months period ended
March 31, 1999 and March 31, 2000.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Management believes that such estimates
have been based on reasonable assumptions and that such estimates are adequate,
however, actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with an original
maturity of three months or less to be cash equivalents.
Inventories
Inventories consist primarily of office material, software and computer spare
parts to sell, CD ROM and magnetic cassette software records and are recorded at
the lower of cost or market determined by the weighted average.
Property and Equipment
Property and equipment is stated at cost. Depreciation is provided utilizing the
straight-line method over the estimated useful lives of the related assets as
follows:
Class Life in years
----- -------------
Vehicles 5
Furniture, fixtures and other 7
Machinery and equipment 3
Software 3
Expenditures for maintenance and repairs are charged to expense as incurred.
Licensing Rights
Licensing rights are amortized over an expected useful life of 5 years.
F - 8
<PAGE>
Revenue Recognition
Revenues from contracts for delivery of complex information systems are
accounted for under the percentage of completion method. Under this method,
revenue is recognized as work progresses in the proportion that costs incurred
bear to estimated total costs. Revenue recognized is shown as Accounts
receivable. Expected losses on contracts in progress are charged to operations
currently.
Revenues from providing technical support and maintenance services are
recognized upon delivery of the service or over the contract period.
Revenues from sales of goods are recognized upon delivery.
Fair Value of Financial Instruments
The carrying amounts of financial instruments including cash and cash
equivalents, receivables, accounts payable, and accrued expenses approximates
fair value at December 31, 1999 because of the relatively short maturity of
these instruments.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes.
Under the asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax basis. Deferred tax assets and liabilities are measured
using enacted tax rates expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
Research and Development
Research and development costs consist primarily of costs related to the
conceptual formation, design, tooling and development of prototypes and are
expensed as incurred.
Concentration of Credit Risks
Financial instruments that potentially subject the Company to concentration of
credit risk consist primarily of temporary cash investments and receivables. The
Company places its cash investments with high credit quality financial
institutions and, by policy limits the amount of credit exposure to any one
institution. The Company periodically performs credit analysis and monitors the
financial condition of its clients in order to minimize credit risk.
Segment disclosure
The company operates within one segment.
F - 9
<PAGE>
2 CONTINUED OPERATIONS
The accompanying financial statements have been prepared on a going concern
basis which contemplates the realization of assets and liquidation of
liabilities in the ordinary course of business. During the year ended December
31, 1999, the Company suffered loss from operations in excess of 15,000
resulting in an accumulated deficit of approximately 12,900. The loss was caused
partially by increased depreciation expense related to purchase of licensing
rights (Note 7) and software (Note 6). The purchase related to the contract
described in Note 10.
Medcom Incorporated, the new shareholder of the Company (Note 1), provided the
Company with financial support in the form of short-term loans totaling to
6,984 through June 21, 2000, (2,328 as of March 31, 2000, unaudited). As stated
in the acquisition contract, it is the new owner's intent to provide funding to
the Company for further development of its activities and ensure that the
Company will be able to meet its obligations in normal course.
In cooperation with the new shareholder the Company's management plans to expand
its activities in the health care sector especially abroad (USA, UK) and
believes that these activities will significantly improve the Company's future
financial performance.
3 CASH AND CASH EQUIVALENTS
December 31, March 31,
1999 2000
------- ------
(unaudited)
Cash in hand ........ 56 85
Current bank accounts 763 2,135
Term deposits ....... 1,899 2,436
------- ------
Total ............... 2,718 4,656
======= ======
Included in the above cash amounts, the equivalent of 1,840 crowns are
maintained in US dollar bank account as of December 31, 1999 (2,377 at March 31,
2000, unaudited).
4 ACCOUNTS RECEIVABLES
December 31, March 31,
1999 2000
------ ------
(unaudited)
Trade receivables ................................ 4,721 2,850
Costs and estimated earnings in excess of billings
on uncompleted contracts ........................ 3,007 3,948
Receivables from employees ....................... 309 300
Refundable income tax ............................ 722 723
Allowance for doubtful accounts .................. (4) (4)
------ ------
Total ............................................ 8,755 7,817
====== ======
F - 10
<PAGE>
5 INVENTORIES
Inventories consist mainly of merchandise.
6 PROPERTY, PLANT AND EQUIPMENT
Property and equipment consist of the following:
December 31, March 31,
1999 2000
-------- -------
(unaudited)
Property and equipment
Vehicles 3,047 3,047
Furniture, fixtures and other 281 83
Machinery and equipment 7,902 7,567
Software 22,585 22,585
Accumulated depreciation and amortization (20,271) (22,592)
-------- -------
Net 13,544 10,690
======== =======
In 1998, the Company developed in-house and capitalized the cost of data
warehouse software totaling 20,000, which is used in conjunction with the
licensed proprietary methodology described in Note 7.
7 LICENSING RIGHTS
December 31, March 31,
1999 2000
------- ------
(unaudited)
Gross ............................ 37,225 37,225
Accumulated Amortization ......... (8,045) (9,906)
------- ------
Net 29,180 27,319
======= ======
In 1998, the company purchased license rights to a proprietary data warehouse
methodology. The licensed methodology, combined with the data warehousing
software described in Note 6, enable the Company to secure contracts to provide
services such as those described in Note 10.
8 INCOME TAXES
Deferred tax liabilities and assets are determined based on the difference
between the financial statement and tax basis of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse. The measurement of deferred tax assets is reduced, if necessary, by
the amount of any tax benefits that, based on available evidence, are not
expected to be realized.
F - 11
<PAGE>
The principal temporary differences that will result in deferred tax assets and
liabilities are depreciation for financial reporting purposes in excess of
depreciation for tax purposes and revenues recognized under the percentage of
completion method for financial reporting purposes and at invoiced for tax
purposes. The effect of the differences outlined above and the benefit of the
Company's net operating loss carryforward generated a long-term deferred tax
asset that totals approximately 5 700 and has been reduced 100% by a valuation
allowance because of a lack of profitable operating history. Accordingly, there
is no net deferred tax asset reflected in the accompanying financial statements.
The Company will continue to assess the valuation allowance and to the extent it
is determined that it is more likely than not that the tax benefits will be
realized, the tax benefit of the remaining net deferred assets will be
recognized at that time.
The differences between the income tax rate per Czech tax law and the effective
income tax rate as reflected in the accompanying statements of operations are:
Year Ended
December 31,
1999
------
Statutory income tax rate (benefit) 31%
Valuation allowance for net operating loss 31%
Effective tax rate (benefit) --%
9 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
December 31, March 31,
1999 2000
------- -------
(unaudited)
Trade payables ..................... 2,727 3,735
Accrued payroll .................... 1,450 1,155
Social and health insurance payables 936 687
Withholding tax payable ............ 334 199
VAT and other taxes payable ........ 121 73
------ ------
Total .............................. 5,568 5,849
====== ======
F - 12
<PAGE>
10 DEFERRED REVENUE
In 1998 the Company entered into 10 year contract with an insurance company.
Under the contract the Company is responsible for building, maintaining and
updating a specialized data warehouse in the health care insurance sector of the
Czech Republic and providing the insurance company with access to the data
warehouse. The insurance company paid 78,000 in cash for services to be provided
by the Company over the 10 year period beginning in the year 1998. Despite the
fact that the project was stopped in 1999, the contract is still valid and the
Company has fulfilled all conditions defined by the contract. The project may be
re-launched any time during the 10 year period. The Company recorded the cash
payment received as deferred revenue, and is amortizing it to revenue over 10
years on a straight line basis. Except for ongoing maintenance of the system the
Company does not expect to incur significant additional costs related to the
contract.
Deferred revenue related to the above described contract:
December 31, March 31,
1999 2000
-------- -------
(unaudited)
Opening balance ... 70,615 62,769
Charged to revenues 7,846 1,962
-------- -------
Closing balance ... 62,769 60,807
======== =======
11 REVENUES
<TABLE>
<CAPTION>
Three Months Ended
March 31,
December 31, --------------------
1999 2000 1999
--------- ------- -------
(unaudited) (unaudited)
<S> <C> <C> <C>
Revenues under the contract described in 10 7,846 1,962 1,962
Revenues from services and products ....... 29,530 9,377 6,267
Revenues from sales of goods .............. 6,586 380 4,961
--------- ------- -------
Total ..................................... 43,962 11,719 13,190
========= ======= =======
Sales of goods:
Revenues from sales of goods .............. 6,586 380 4,961
Costs of goods sold (part of the Costs
of services) ............................. (4,569) (295) (2,413)
--------- ------- -------
Gross margin .............................. 2,017 85 2,548
========= ======= =======
All the revenue in the year ended December 31, 1999 except 5,093 (5,060 in the
three months ended March 31, 2000, unaudited) was generated in the Czech
Republic.
</TABLE>
F - 13
<PAGE>
12 COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases administrative offices under operating lease in Brno. Current
contract is signed for indefinite period of time with three months notice for
cancellation. Rent expense totaled 2,974 in 1999.
Litigation
The Company contracted to develop an information system for a customer. The
system was delivered and is in use by the customer. However, the customer paid
only 2,787 of total contract price of 5,150 (excluding VAT, contracted by two
contracts - 250 for the project and 4,900 for the information system). The
Company canceled the contract for the information system because the customer
refused to accept and pay for the system even though the system was physically
installed and delivered to the customer. The customer filed a legal claim in the
amount of 2,787 for refund of its payments made under the contracts, which claim
has been appealed by the Company. Legal proceedings will be instituted in
this matter but have not as yet begun. The court issued on January 24, 2000 a
payment order that the Company should pay the amount back. The Company has
appealed against the payment order, which cancels the payment order and the
court has to institute legal proceedings. As of the date of the financial
statements, the legal proceedings were not instituted yet. Management believes
that the final resolution of this matter will not result in a materially adverse
impact on the Company's financial position and results of operations, and
accordingly, no adjustment has been recorded related to this issue.
13 SUBSEQUENT EVENT
On April 15, 2000 Medcom USA, Incorporated ("Medcom") acquired all outstanding
shares of the Company. Through June 21, 2000, Medcom has provided the Company
with financial support in the form of short-term loans totaling to 6,984,
(2,328 as of March 31, 2000, unaudited).
F - 14
<PAGE>
DCB ACTUARIES AND CONSULTANTS, s.r.o.
Statements of Operations for the Nine Months Ended March 31, 2000 and year Ended
June 30, 1999 (unaudited)
(In Thousands of Czech Crowns)
Nine Months Year
Ended Ended
March 31, June
2000 1999
------- -------
(unaudited) (unaudited)
REVENUE ....................... 28,109 43,962
COST OF SERVICES .............. 12,965 19,478
------- -------
GROSS PROFIT .................. 15,144 24,484
------- -------
OPERATING EXPENSES
General and administrative .. 13,809 20,598
Depreciation and amortization 13,517 17,233
Selling and marketing ....... 4,724 3,471
------- -------
Total expenses ........... 32,050 41,302
------- -------
OPERATING RESULT .............. (16,906) (16,818)
======= =======
OTHER INCOME (EXPENSE)
Interest income ............. 108 381
Other income (expense) ...... 880 1,635
------- -------
Other income (expense total) 988 2,016
------- -------
NET RESULT .................... (15,918) (14,802)
======= =======
F - 15
<PAGE>
(b) UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS OF
INTRODUCTION
The following the unaudited pro forma combined balance sheet as of March 31,
2000 and the unaudited pro forma combined statements of operations for the nine
month period ended March 31, 2000 and for the year ended June 30, 1999 give
effect to the business combination of MedCom USA, Incorporated and DCB Actuaries
and Consultants, s.r.o.. The transaction between MedCom USA, Incorporated and
DCB Actuaries and Consultants, s.r.o. has been accounted for as a combination of
companies under the purchase method of accounting. The unaudited pro forma
balance sheet has been prepared as if the proposed transaction occurred on March
31, 2000. The unaudited pro forma statements of operations have been prepared as
if the proposed transaction occurred on July 1, 1999. These pro forma statements
are not necessarily indicative of the results of operations or the financial
position as they may be in the future or as they might have been had the
transactions become effective on the above-mentioned dates.
The unaudited pro forma combined financial statements do not include the
acquisition of certain technology by MedCom USA from DSM, LLC.
The unaudited pro forma combined balance sheet and statements of operations
should be read in conjunction with the separate historical financial statements
and notes thereto of MedCom USA, Incorporated and DCB Actuaries and Consultants,
s.r.o.
F - 16
<PAGE>
FOREIGN CURRENTY TRANSLATION
Unaudited Balance Sheet of DCB Actuaries and Consultants, s.r.o.
As of March 31, 2000
In Czech in U.S.
Crowns Dollars**
----------- -----------
(in 000's)
(unaudited) (unaudited)
Assets
Current assets
Cash ........................ $ 4,656 $ 123,633
Accounts receivable ......... 7,817 207,568
Inventories ................. 2,468 65,534
Other current assets ........ 1,984 52,681
----------- -----------
Total current assets ..... 16,925 449,416
Property, plant and equipment . 10,690 283,856
Other assets
Licensing rights ............ 27,319 725,412
Other ....................... 50 1,327
----------- -----------
Total other assets ....... 27,369 726,739
----------- -----------
Total assets .................. $ 54,984 $ 1,460,011
=========== ===========
Liabilities and Equity
Current liabilities
Accounts payable ............ $ 5,849 $ 155,311
Loans ....................... 2,328 61,816
----------- -----------
Total current liabilities 8,177 217,127
Non current liabilities ....... 62,341 1,655,364
----------- -----------
Total liabilities ........ 70,518 1,872,491
----------- -----------
Stockholders' equity
Registered capital .......... 1,000 26,553
Accumulated deficit ......... (16,534) (439,033)
----------- -----------
Total stockholders' equity (15,534) (412,480)
----------- -----------
Total liabilities and equity .. $ 54,984 $ 1,460,011
=========== ===========
** Converted to U.S. Dollars based on the March 31, 2000 conversion rate of
37.66 Czech crowns per U.S. dollar.
F - 17
<PAGE>
FOREIGN CURRENTY TRANSLATION
Unaudited Statements of Operations of DCB Actuaries and Consultants, s.r.o.
<TABLE>
<CAPTION>
For the Nine Months Ended For the Year Ended
March 31, 2000 June 30, 1999
---------------------------- ----------------------------
In Czech in U.S. In Czech In U.S.
Crowns Dollars** Crowns Dollars**
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues .................... $ 28,109 $ 795,687 $ 43,962 $ 1,354,858
Cost of sales ............... 12,965 367,003 19,478 600,289
----------- ----------- ----------- -----------
Gross profit ........... 15,144 428,684 24,484 754,569
General and administrative .. 13,809 390,894 20,598 634,807
Depreciation ................ 13,517 382,629 17,233 531,101
Research and development .... 4,724 133,723 3,471 106,972
----------- ----------- ----------- -----------
Total expenses ......... 32,050 907,246 41,302 1,272,880
----------- ----------- ----------- -----------
Operating loss .............. (16,906) (478,562) (16,818) (518,311)
Other income (expense) ...... 988 27,968 2,016 62,130
----------- ----------- ----------- -----------
Loss before income taxes .... (15,918) (450,594) (14,802) (456,181)
Income taxes ................ -- -- -- --
----------- ----------- ----------- -----------
Net loss .................... (15,918) (450,594) (14,802) (456,181)
Preferred stock dividend .... -- -- -- --
----------- ----------- ----------- -----------
Net loss applicable to common $ (15,918) $ (450,594) $ (14,802) $ (456,181)
=========== =========== =========== ===========
</TABLE>
** Converted using the weighted average exchange rate for the nine months ended
March 31, 2000 and the twelve months ended June 30, 1999 of 35.33 and 32.45
Czech crowns per U.S. dollar, respectively.
F - 18
<PAGE>
Unaudited Pro Forma Combined Balance Sheet
As of March 31, 2000
(In US Dollars)
<TABLE>
<CAPTION>
Assets
Pro Forma Adjustments
-------------------------
MedCom(1) DCB(3) Total Debit Credit Combined
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Current assets ......................... $ 5,885,839 $ 449,416 $ 6,335,255 $ -- $ 1,604,611 5, 6 $ 4,730,644
Property and equipment, net ............ 1,951,051 283,856 2,234,907 -- -- 2,234,907
Other assets ........................... 3,231,329 726,739 3,958,068 2,498,128 -- 5 6,456,196
----------- ----------- ----------- ----------- ----------- -----------
Total assets ........................... $11,068,219 $ 1,460,011 $12,528,230 $ 2,498,128 $ 1,604,611 $13,421,747
=========== =========== =========== =========== =========== ===========
Liabilities and Shareholders' equity
Total current liabilities .............. $ 818,916 $ 217,127 $ 1,036,043 $ 65,000 $ -- 6 $ 971,043
Non current liabilities ................ 816,024 1,655,364 2,471,388 -- -- 2,471,388
----------- ----------- ----------- ----------- ----------- -----------
Total liabilities ...................... 1,634,940 1,872,491 3,507,431 65,000 -- 3,442,431
----------- ----------- ----------- ----------- ----------- -----------
Shareholders' equity (deficit) ......... 9,433,279 (412,480) 9,020,799 -- 958,517 5 9,979,316
----------- ----------- ----------- ----------- ----------- -----------
Total liabilities and equity ........... $11,068,219 $ 1,460,011 $12,528,230 $ 65,000 $ 958,517 $13,421,747
=========== =========== =========== =========== =========== ===========
</TABLE>
F - 19
<PAGE>
Unaudited Pro Forma Combined Statement of Operations
For the Nine Months Ended March 31, 2000
(In US Dollars)
<TABLE>
<CAPTION>
Pro Forma Adjustments
---------------------------
MedCom(1) DCB (4) Total Debit Credit Combined
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues ............................. $ 2,384,364 $ 795,687 $ 3,180,051 $ -- $ -- $ 3,180,051
Cost of revenues ..................... 962,980 367,003 1,329,983 -- -- 1,329,983
----------- ----------- ----------- ----------- ----------- -----------
Gross profit (loss) ............... 1,421,384 428,684 1,850,068 -- -- 1,850,068
----------- ----------- ----------- ----------- ----------- -----------
Operating expenses
General and admin ................. 5,404,922 390,894 5,795,816 -- -- 5,795,816
Deprecation and amortization ...... 1,009,158 382,629 1,391,787 187,360 7 1,579,147
Research & development ............ -- 133,723 133,723 -- -- 133,723
Selling and marketing ............. 534,428 -- 534,428 -- -- 534,428
----------- ----------- ----------- ----------- ----------- ----------
Total operating expenses ........ 6,948,508 907,246 7,855,754 187,360 -- 8,043,114
----------- ----------- ----------- ----------- ----------- ----------
Income (loss) from operations ........ (5,527,124) (478,562) (6,005,686) (187,360) -- (6,193,046)
----------- ----------- ----------- ----------- ----------- ----------
Other income (expense) ............... (6,275) 27,968 21,693 -- -- 21,693
Income (loss) before taxes ........... (5,533,399) (450,594) (5,983,993) (187,360) -- (6,171,353)
Income tax expense (benefit) ......... 13,334 -- 13,334 -- -- 13,334
----------- ----------- ----------- ----------- ----------- ----------
Net income (loss) .................... (5,546,733) (450,594) (5,997,327) (187,360) -- (6,184,687)
Preferred stock dividend ............. (56,424) -- (56,424) (85,500) 8 (141,924)
----------- ----------- ----------- ----------- ----------- ----------
Net loss applicable to common
stockholders ........................ $(5,603,157) $ (450,594) (6,053,751) $ (272,860) $ -- $(6,326,611)
=========== =========== =========== =========== =========== ==========
Basic and diluted earnings per share . $ (0.25) $ (0.28)
=========== ===========
Weighted average pro forma shares
outstanding - basic and diluted ..... 22,342,194 22,342,194
=========== ===========
</TABLE>
F - 20
<PAGE>
Unaudited Pro Forma Combined Statement of Operations
For the Year Ended June 30, 1999
(In US Dollars)
<TABLE>
<CAPTION>
Pro Forma Adjustments
--------------------------
MedCom(2) DCB(4) Total Debit Credit Combined
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues ............................. $ 2,240,876 $ 1,354,858 $ 3,595,734 $ -- $ -- $ 3,595,734
Cost of revenues ..................... 697,481 600,289 1,297,770 -- -- 1,297,770
----------- ----------- ----------- ----------- ----------- -----------
Gross profit (loss) ............... 1,543,395 754,569 2,297,964 -- -- 2,297,964
----------- ----------- ----------- ----------- ----------- -----------
Operating expenses
General and admin ................. 6,101,305 634,807 6,736,112 -- -- 6,736,112
Depreciation and amortization ..... 1,057,908 531,101 1,589,009 249,813 -- 7 1,838,822
Research & development ............ -- 106,972 106,972 -- -- 106,972
Selling and marketing ............. 1,164,761 -- 1,164,761 -- -- 1,164,761
----------- ----------- ----------- ----------- ----------- -----------
Total operating expenses ........ 8,323,974 1,272,880 9,596,854 249,813 -- 9,846,667
----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from operations ........ (6,780,579) (518,311) (7,298,890) (249,813) -- (7,548,703)
----------- ----------- ----------- ----------- ----------- -----------
Other income (expense) ............... (308,381) 62,130 (246,251) -- -- (246,251)
Income (loss) before taxes ........... (7,088,960) (456,181) (7,545,141) (249,813) -- (7,794,954)
Income tax expense (benefit) ......... -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) .................... (7,088,960) (456,181) (7,545,141) (249,813) -- (7,794,954)
Preferred stock dividend ............. (58,025) -- (58,025) (114,000) -- 8 (172,025)
----------- ----------- ----------- ----------- ----------- -----------
Net loss applicable to common
shareholders ................... $(7,146,985) $ (456,181) $(7,603,166) $ (363,813) $ -- $(7,966,979)
=========== =========== =========== =========== =========== ===========
Basic and diluted earnings per share . $ (0.67) $ (0.75)
=========== ===========
Weighted average pro forma shares
outstanding - basic and diluted ..... 10,602,609 10,602,609
=========== ===========
</TABLE>
F - 21
<PAGE>
Notes to Unaudited Pro Forma Combined Financial Statements
The following notes and adjustments are related to the business combination
between of MedCom USA, Inc. (MedCom) and DCB Actuaries and Consultants, s.r.o.
(DCB).
1. Reflects the March 31, 2000 unaudited balance sheet and statement of
operations for the nine months ended March 31, 2000 of MedCom as filed in a
Quarterly Report on Form 10-QSB on May 15, 2000.
2. Reflects the June 30, 1999 audited balance sheet and statement of operations
for the year ended June 30, 1999 of MedCom as filed in an Annual Report on
Form 10-KSB/A on April 21, 2000
3. Reflects the March 31, 2000 unaudited balance sheet for DCB Actuaries and
Consultants s.r.o. included in this Form 8K as converted to US dollars.
4. Reflects the unaudited income statements for DCB Actuaries and Consultants
s.r.o. for the nine months ended March 31, 2000 and the year ended June 30,
1999 included in this Form 8K as converted to US dollars.
5. Records the acquisition of DCB for $2,085,648, including estimated
acquisition costs totaling approximately $188,000. The acquisition costs
include the issuance of 12,881 shares of MedCom's common stock and $34,692 of
cash to the individual that served as the broker on the transaction. To
finance the acquisition, MedCom issued 494 shares of its series D preferred
stock, valued at $494,000, and the balance was paid for with cash.
The purchase price was comprised of the following:
Purchase price - preferred stock ......... $ 494,000
Purchase price - cash .................... 1,403,848
Direct costs of acquisition - cash ....... 135,763
Direct costs of acquisition - common stock 52,037
Excess of liabilities over assets of DCB . 412,480
----------
Total acquisition value ................ $2,498,128
==========
6. To eliminate a short-term loan made by MedCom to DCB.
7. To record amortization of intangible assets acquired over ten years.
8. To record accrued dividends on the series D preferred stock.
F - 22
