SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K/A-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):
August 15, 1996
________________________________
THE COMPANY DOCTOR
(Exact name of registrant as specified in its charter)
Delaware 1-14150 72-1234136
(State of Incorporation)(Commission File No.) (I.R.S. Employer
Identification No.)
Suite 1800
5215 North O'Connor
Irving, Texas 75039
(Address of principal executive offices)
(214) 401-8300
(Registrant's telephone number, including area code)
ITEM 7. Financial Statements and Exhibits
(a) In accordance with Item 7(a)(1), the Registrant is filing the
required financial statements of the Practice as an amendment to
the Form 8-K.
(b) It was impracticable to provide the pro forma financial
information relative to the Subsidiary at the time of filing the
Form 8-K. In accordance with Item 7(b)(2), the Registrant
hereby files the required financial statements as an amendment
to the Form 8-K.
(c) The following exhibits are furnished herewith in accordance with
the provisions of Item 601 of Regulation S-K:
Reg. S-K
Exhibit No. Description Item No.
*2.5 Stock Purchase Agreement by and
among Doctors' Inn, Incorporated,
Henry H. Calderoni, M.D., Francisco
J. Guerra, M.D. and the Company 2
*2.6 Stock Purchase Agreement by and
among Francisco J. Guerra, M.D.,
P.A., Francisco J. Guerra, M.D. and
the Physician Group 2
*2.7 Stock Purchase Agreement by and
among Henry H. Calderoni, M.D.,
P.A., Henry H. Calderoni, M.D. and
the Physician Group 2
o99.3 Financial Statements of Doctor's
Inn, Incorporated 99
o99.4 Pro Forma Financial Statements
99
* Previously filed.
o Filed herewith
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.
THE COMPANY DOCTOR
Date: October 9, 1996 By: /s/ Fred G. Parrish
Fred G. Parrish, Chief
Operating Officer
EXHIBIT INDEX
Exhibit No. Description Page
*2.5 Stock Purchase Agreement by and
among Doctors' Inn, Incorporated,
Henry H. Calderoni, M.D., Francisco
J. Guerra, M.D. and the Company N/A
*2.6 Stock Purchase Agreement by and
among Francisco J. Guerra, M.D.,
P.A., Francisco J. Guerra, M.D. and
the Physician Group
N/A
*2.7 Stock Purchase Agreement by and
among Henry H. Calderoni, M.D.,
P.A., Henry H. Calderoni, M.D. and
the Physician Group
o99.3 Financial Statements of Doctor's
Inn, Incorporated F-7
o99.4 Pro Forma Financial Statements
F-1
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
AND
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
Attached are the historical audited financial statements of Doctors'
Inn, Incorporated for the acquisition of Doctors' Inn, Incorporated
by The Company Doctor. The following unaudited pro forma combined
financial statements reflects the acquisition by The Company Doctor
in its current reporting period. The unaudited pro forma combined
financial statements should be read in conjunction with the attached
historical financial statements of Doctors' Inn, Incorporated.
The following unaudited pro forma combined statement of operations
for the year ended June 30, 1996 and the unaudited pro forma combined
balance sheet as of June 30, 1996 give effect to the business
combination of The Company Doctor and Subsidiaries and The Doctor's
Inn, Incorporated (effective July 1, 1996) (the "Acquired Company"),
including the related pro forma adjustments described in the notes
thereto. The transaction between The Company Doctor and Subsidiaries
and the Acquired Company has been accounted for as a combination of
companies under the purchase method. The unaudited pro forma
statement of operations include the business combination of The
Company Doctor and Subsidiaries and the Acquired Company and have
been prepared as if the transaction occurred on July 1, 1995. The
unaudited pro forma balance sheet has been prepared as if the
transaction occurred June 30, 1996. These pro forma statements are
not necessarily indicative of the results of operations or the
financial positions as they may be in the future or as they might
have been had the transaction become effective on the above mentioned
date.
The pro forma combined statement of operations for the year ended
June 30, 1996 includes the results of operations of The Company
Doctor and Subsidiaries for the year ended June 30, 1996 and The
Doctor's Inn, Incorporated for the year ended December 31, 1995.
Unaudited Pro Forma Combined Balance Sheet
June 30, 1996
<TABLE>
<CAPTION>
The
Company Doctors Pro Forma Pro Forma
Doctor and Inn Combined Adjustments Combined
Subsidiaries Incorporated Total Debit Credit Total
<S> <C> <C> <C> <C> <C> <C>
Current assets
Cash and cash $ 5,636,433 $ 211,734 $ 5,848,167 $700,000(C) $5,148,167
equivalents
Restricted cash 500,000 - 500,000 500,000
Short-term 1,250,357 - 1,250,357 1,250,357
investments
Accounts
receivable
Trade, less
allowance for
doubtful accounts
of $170,000 1,097,308 372,056 1,469,364 1,469,364
Related parties 113,117 - 113,117 113,117
Other 85,348 - 85,348 85,348
Prepaid expenses 97,767 6,612 104,379 104,379
Total current8,780,330 590,402 9,370,732 8,670,732
assets
Property and 1,536,898 523,187 2,060,085 2,060,085
equipment
Less accumulated
depreciation and (659,394) (474,181) (1,133,575) (1,133,575)
amortization
877,504 49,006 926,510 926,510
Other assets 563,406 - 563,406 563,406
Intangibles, net 1,688,314 - 1,688,314 4,323,290(C) 6,011,604
Investments 1,630,453 - 1,630,453 1,630,453
Total other 3,882,173 - 3,882,173 8,205,463
assets
Total assets $13,540,007 $639,408 $14,179,415 $17,802,705
Liabilities and
Stockholders'
Equity
Current
liabilities
Notes payable $ 1,271,357 $ - $ 1,271,357 $1,900,000(C) $3,171,357
Current maturities
of capital lease 52,501 - 52,501 52,501
obligations
Accounts payable
and accrued 338,077 203,945 542,022 91,247(B) 450,775
expenses
Due to seller 987,010 - 987,010 987,010
Total current 2,648,945 203,945 2,852,890 4,661,643
liabilities
Claims payable 1,743,107 - 1,743,107 1,743,107
Long-term capital 79,644 - 79,644 79,644
lease obligations
Total 4,471,696 203,945 4,675,641 6,484,394
liabilities
Stockholders'
equity
Preferred stock - - - -
Common stock 46,765 2,000 48,765 2,000(A) 2,268(C) 49,033
Additional paid-10,255,346 18,000 10,273,346 18,000(A)2,247,732(C)12,503,078
in capital
(Accumulated
deficit)
retained (1,233,800) 415,463 (818,337) 415,463(A) (1,233,800)
earnings
Total 9,068,311 435,463 9,503,774 11,318,311
stockholders'
equity
Total liabilities
and stockholders'
equity $13,540,007 639,408 14,179,415 17,802,705
Unaudited Pro Forma Combined Statement of Operations
June 30, 1996
</TABLE>
<TABLE>
<CAPTION>
The Doctors'
Company Doctors'
Doctor Inn,
and Incorporated Pro Forma
Subsidiaries December 31, Combined Pro Forma Combined
June 30, 1996 1995 Total Adjustments Total
<S> <C> <C> <C> <C> <C>
Revenues $ 4,193,906 $ 3,072,612 $ 7,266,518 $ 7,266,518
Cost of services 1,433,170 1,711,762 3,144,932 (683,006)(D) 2,461,926
provided
General and 2,536,751 1,051,786 3,588,537 216,165(E) 3,708,188
administrative
expenses
(89,214)(F)
(7,300)(G)
Marketing expenses 94,964 9,768 104,732 104,732
Development and 202,468 - 202,468 202,468
acquisition costs
4,267,353 2,773,316 7,040,669 6,477,314
(Loss) income from (73,447) 299,296 225,849 789,204
operations
Other income
(expense)
Interest income 139,082 - 139,082 (42,000)(H) 97,082
Interest expense (82,665) (1,436) (84,101) (15,040)(J) (99,141)
56,417 (1,436) 54,981 (2,059)
Net (loss) income (17,030) 297,860 280,830 787,145
before income taxes
Income taxes 100,000 - 100,000 (367,000)(J) (267,000)
Net income $ 82,970 $ 297,860 $ 380,830 $ 520,145
Net income per share $ .12
Weighted average 4,375,722
shares outstanding
Notes to Unaudited Pro Forma Combined Financial Statements
In August 1996, the Company acquired Doctor's Inn Incorporated (Dr.
Inn) in El Paso, Texas. The acquisition will be accounted for under
the purchase method of accounting applying the provisions of
Accounting Principles Board Opinion No. 16 ("APB 16"). Pursuant to
the requirements of APB 16, the aggregate purchase price, based on
fair values, will be allocated to the tangible and intangible assets
and liabilities assumed based on their estimated fair value at the
date of the consummation of the acquisition. The estimated aggregate
purchase price to be allocated to the assets acquired and liabilities
assumed on the acquisition is as follows:
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Cash paid for assets acquired and liabilities assumed $ 700,000
Notes payable issued 1,900,000
Common stock 2,250,000
Total $ 4,850,000
</TABLE>
The allocation of the purchase price for purposes of the pro forma
financial information has been estimated as follows:
<TABLE>
<CAPTION>
<S> <C>
Current assets $ 590,000
Property and equipment 49,000
Liabilities assumed (113,000)
Total $ 526,000
</TABLE>
The preliminary excess purchase price over net assets acquired of
$4,324,000 has been allocated to goodwill.
(A) To eliminate the equity of the acquired company.
(B) To eliminate the accrued pension costs not assumed by TCD.
(C) To record (i) the issuance of 226,752 shares of common stock
(ii), the cash purchase price of $700,000, (iii) the notes
payable issued totaling $1,900,000 and (iv) the excess of
purchase price over net assets.
(D) To adjust for excess compensation paid to the doctors throughout
the year.
(E) To record amortization of the excess purchase price of
$4,324,000 over the estimated useful life of twenty years.
Notes to Unaudited Pro Forma Combined Financial Statements
(F) To eliminate excess rent paid by the predecessor Company's.
(G) To eliminate current year pension expense.
(H) To eliminate interest income at approximately 6% on cash paid
per the terms of the acquisition.
(I) To record interest expense on the notes payable issued in
conjunction with the acquisitions.
(J) To record income taxes at 34% of pro forma net income.
DOCTOR'S INN, INCORPORATED
F-6
Table of Contents
Independent Auditors' Report F-7
Financial Statements
Balance Sheets F-8
Statements of Income F-9
Statement of Stockholders' Equity F-10
Statements of Cash Flows F-11
Notes to Financial Statements F-12
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Doctor's Inn, Incorporated
El Paso, Texas
We have audited the balance sheet of Doctor's Inn, Incorporated as of
December 31, 1995 and the related statements of income, stockholder's
equity, and cash flows for the years ended December 31, 1995 and
1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Doctor's
Inn, Incorporated as of December 31, 1995, and the results of its
operations and its cash flows for the years ended December 31, 1995
and 1994 in conformity with generally accepted accounting principles.
/s/ Ehrhardt Keefe Steiner & Hottman PC
Ehrhardt Keefe Steiner & Hottman PC
August 9, 1996
Denver, Colorado
Balance Sheets
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
(Unaudited)
Assets
<S> <C> <C>
Current assets
Cash $ 2,940 $ 211,734
Accounts receivable, less allowance for
doubtful accounts of $65,000 376,963 372,056
Other current assets 4,674 6,612
Total current assets 384,577 590,402
Property and equipment (Note 2) 516,991 523,187
Less accumulated depreciation and (463,173) (474,181)
amortization
53,818 49,006
Total assets $ 438,395 $ 639,408
Liabilities and Stockholder's Equity
Current liabilities
Checks written in excess of bank $ 29,667 $ -
balance
Accounts payable - trade 39,975 38,701
Accrued expenses (Note 3) 175,556 165,244
Total current liabilities 245,198 203,945
Commitments and contingencies (Note 3)
Stockholder's equity
Common stock; $1.00 par value; 500,000
shares authorized; 2,000 shares issued 2,000 2,000
and outstanding
Additional paid-in capital 18,000 18,000
Retained earnings 173,197 415,463
Total stockholder's equity 193,197 435,463
Total liabilities and stockholders' $ 438,395 $ 639,408
equity
Statements of Income
</TABLE>
<TABLE>
<CAPTION>
For the Years Ended For the Six Months Ended
December 31, June 31, 30,
1994 1995 1995 1996
(Unaudited)
<S> <C> <C> <C> <C>
Revenues $ 2,503,291 $ 3,072,612 $ 1,421,342 $ 1,626,822
Cost of services
provided 1,051,408 1,711,762 637,175 776,352
General and
administrative expenses 1,213,922 1,051,786 451,129 559,336
Marketing expenses 15,365 9,768 5,691 9,912
2,280,695 2,773,316 1,093,995 1,345,600
Income from operations 222,596 299,296 327,347 281,222
Other expenses
Interest expense, net 3,128 1,436 479 -
Net income before pro
forma adjustment 219,468 297,860 326,868 281,222
Pro forma adjustment -
provision for income
taxes 74,619 101,272 111,135 95,615
Pro forma net income $ 144,849 $ 196,588 $ 215,733 $ 185,607
Pro forma net income per
common share $ 72.43 $ 98.29 $ 107.87 $ 92.81
Weighted average common
shares outstanding 2,000 2,000 2,000 2,000
Statement of Stockholders' Equity
</TABLE>
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid-In Retained Stockholders'
Shares Amount Capital Earnings Equity
<S> <C> <C> <C> <C> <C>
Balance, December 2,000 $ 2,000 $18,000 $173,199 $193,199
31, 1993
Shareholder - - - (321,818) (321,818)
distributions
Net income - - - 219,468 219,468
Balance, December 2,000 2,000 18,000 70,849 90,849
31, 1994
Shareholder - - - (195,512) (195,512)
distributions
Net income - - - 297,860 297,860
Balance, December 2,000 2,000 18,000 173,197 193,197
31, 1995
Shareholder - - - (38,956) (38,956)
distributions
Net income - - - 281,222 281,222
(unaudited)
Balance, June 30,
1996 (unaudited) 2,000 $2,000 $18,000 $415,463 $435,463
Statements of Cash Flows
</TABLE>
<TABLE>
<CAPTION>
For the Years Ended For the Six Months Ended
December 31, June 30,
1994 1995 1995 1996
(Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating
activities
Net income $219,468 $297,860 $326,868 $281,222
Adjustments to reconcile
net income to net cash
provided by operating
activities -
Depreciation and 29,527 18,470 9,235 11,008
amortization
Change in assets and
liabilities -
Accounts receivable 61,340 (174,963) (67,597) 4,907
Prepaid expenses 8,608 - (2,885) (1,938)
Checks written in
excess of bank balance - 29,667 - (29,667)
Accounts payable 6,711 11,968 (3,310) (1,274)
Accrued expenses 12,469 (780) 37,054 (10,312)
118,655 (115,638) (27,503) (27,276)
Net cash provided by
operating activities 338,123 182,222 299,365 253,946
Cash flows from investing
activities
Purchases of property and (17,262) - - (6,196)
equipment
Proceeds from sale of - 14,202 - -
equipment
Net cash (used in)
provided by investing (17,262) 14,202 - (6,196)
activities
Cash flows from financing
activities
Distributions to (321,818) (195,512) (175,652) (38,956)
shareholders
Net cash used in
financing activities (321,818) (195,512) (175,652) (38,956)
Cash (decrease) increase (957) 912 123,713 208,794
Cash - beginning of year 2,985 2,028 2,028 2,940
Cash - end of year $ 2,028 $ 2,940 $125,741 $211,734
Supplemental disclosure of cash flow information
Cash paid during the period for interest was $3,128, $1,436,
$479, and $0 for December 31, 1994 and 1995, and the six months
ended June 30, 1995 and 1996, respectively.
Note 1 - Summary of Significant Accounting Policies
Nature of Business and Organization
Doctors' Inn, Incorporated (the Company) provides
industrial/occupational medical and related services to employees and
prospective employees of subscribing businesses and various other
medical services to individuals in the El Paso, Texas area.
Interim Financial Statements (Unaudited)
In the opinion of the Doctor's Inn, Incorporated, the accompanying
unaudited financial statements contain all adjustments (consisting of
only normal recurring accruals) necessary to present fairly the
financial position of the Company at June 30, 1996 and the results of
its operations and changes in cash flows for the six months ended
June 30, 1995 and 1994. The results of operations for the six months
ended June 30, 1996 and 1995 are not necessarily indicative of the
results to be expected for a full year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Cash
The Company maintains cash in depository accounts which, at times,
may exceed FDIC insurance limits.
Accounts Receivable
In the normal course of business, the Company extends unsecured
credit to virtually all of its customers related to providing
industrial/occupational medical and related services. All customers
are located in close proximity to the Company's office which is
located in the El Paso, Texas.
Because of the credit risk involved, management has provided an
allowance for doubtful accounts which reflects its opinion of amounts
which will eventually become uncollectible. In the event of complete
non-performance by the Company's customers, the maximum exposure to
the Company is the outstanding accounts receivable balance at the
date of non-performance.
Revenue Recognition
Revenue is recognized when services are rendered at the net
realizable amounts expected to be received from payors, patients and
others.
Note 1 - Summary of Significant Accounting Policies (continued)
Fair Value of Financial Instruments
The carrying amounts of financial instruments including cash,
receivables, accounts payable and accrued expenses approximated fair
value as of December 31, 1995 and June 30, 1996, because of the
relatively short maturity of these instruments.
Property and Equipment Property and Equipment
Property and equipment are stated at cost. Depreciation is computed
on the straight-line method over the estimated useful lives of the
assets which is five to seven years.
Net Income Per Common Share
Net income per common share has been computed based on the weighted
average number of common shares outstanding during each year.
Income Taxes
The Company currently operates as an S corporation. As such, no
provision for income taxes for the Company has been provided in the
accompanying financial statements as any income or loss is included
on the income tax returns of the shareholders. The pro forma tax
provision and net income, assuming a 34% tax rate, discloses the tax
expense incurred had the Company been a C-Corporation subject to
Federal income taxes.
Note 2 - Property and Equipment
Property and equipment consist of the following:
</TABLE>
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
(Unaudited)
<S> <C> <C>
Medical equipment $ 419,844 $ 425,201
Furniture, fixtures, and equipment 58,184 59,023
Leasehold improvements 38,963 38,963
516,991 523,187
Less accumulated depreciation and (463,173) (474,181)
amortization
$ 53,818 $ 49,006
</TABLE>
Note 3 - Pension Plan
The Company has a defined benefit pension plan covering substantially
all full-time employees with more than one year of service per year.
Participants vest 100% after six years of service or upon reaching
normal retirement age, death or disability. The following table sets
forth the accrued pension expense reflected in the December 31, 1995
financial statements based on the last actuarial valuation at
December 31, 1995:
Actuarial present value of benefit obligations
<TABLE>
<CAPTION>
<S> <C>
Accumulated benefit obligation
Vested benefit obligation $ 199,599
Non-vested liability 5,937
$ 205,536
Projected benefit obligation $ 261,759
Plan assets at fair value 197,467
Projected benefit obligation in
excess of plan assets at
December 31, 1995 64,292
Unrecognized net transition loss 19,802
Unrecognized net gain 7,153
Accrued pension expense $ 91,247
</TABLE>
Net pension cost for the year ended December 31, 1995 includes the
following:
<TABLE>
<CAPTION>
<S> <C>
Service cost $ 88,870
Interest cost 12,086
Return on assets 16,037
Net amortization and deferrals 6,328
$ 123,321
</TABLE>
Note 3 - Pension Plan (continued)
Assumptions used in determining pension information as of December
31, 1995 were:
<TABLE>
<CAPTION>
<S> <C>
Discount rate 7.5%
Rate of increase in compensation 2.5%
levels
Expected long-term rate of return on 7.5%
assets
Note 4 - Sale of Assets - Subsequent Event
In August 1996, the Company's stockholders sold all of their common
stock of the Company in exchange for 226,752 shares of common stock
of The Company Doctor (TCD), two promissory notes for a total of
$1,900,000 with interest at 9.5%, due April 15, 1997 and $700,000
cash.
In conjunction with the acquisition, TCD entered into a lease
agreement with the sellers of the Company to lease the clinic
building for ten years at approximately $50,000 per year.
Note 5 - Related Party Lease
Prior to the sale of the Company, the Company leased its facility
from its stockholders. Rent expense for the years ended December 31,
1995 and 1994 and the six months ended June 30, 1996 and 1995
(unaudited) was approximately $139,000, $131,000, $72,000, and
$87,000, respectively.
September 10, 1996
Dr. Henry Calderoni
Dr. F.J. Guerra
Doctors' Inn, Incorporated
1865 Lee Travino Blvd.
El Paso, Texas 79936
Dear Gentlemen:
Enclosed please find a tentative draft copy of the financial
statements for Doctors' Inn, Incorporated as well as the management
representation letter. We are required to issue the financial
statements with the SEC by Thursday, September 12th and would
appreciate having your comments by 3:00 p.m. MST on Wednesday,
September 11th. In addition, please type the representation letter
on Company letterhead, sign and fax to our office tomorrow with the
original to follow by mail.
Thank you in advance for your prompt attention to this matter.
Sincerely,
J. Lee Ehrhardt, CPA
Ehrhardt Keefe Steiner & Hottman PC
EKS&H/acb
Enclosures
</TABLE>
