<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) January 6, 1998
---------------
NATIONAL MEDICAL FINANCIAL SERVICES CORPORATION
-----------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 0-25344 25-1741216
------ ------- ----------
(State or other juris- (Commission file (I.R.S. Employer
diction of organization) number) Identification No.)
1315 Greg Street, Suite 103, Sparks, Nevada 89431
- ------------------------------------------- ------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (702) 356-2315
--------------
Not Applicable
--------------
(Former name or former address, if changed since last report)
<PAGE>
Amendment No. 1
National Medical Financial Services Corporation (the "Company") hereby
amends the following items, financial statements, exhibits or other portions of
its Current Report on Form 8-K dated January 6, 1998 as follows:
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
Attached as Exhibit 7(a) are the Shoreline Medical Billing Systems,
Inc. and Maybruch & Co. ("Shoreline Medical Business Systems") audited
combined balance sheets as of December 31, 1997 and 1996, and related
combined statement of income and retained earnings and of cash flows
for each of the two years for the periods ended December 31, 1997 and
1996 and related notes to the financial statements and independent
auditors' report.
(b) Unaudited Proforma Financial Information.
Attached as Exhibit 7(b) are the unaudited proforma balance sheet as
of December 31, 1997 and unaudited proforma statement of income for
the year ended December 31, 1997.
(c) Exhibits
7(a) Shoreline Medical Billing Systems, Inc. and Maybruch & Co.
("Shoreline Medical Billing Systems") audited combined balance
sheets as of December 31, 1997 and 1996, and related combined
statement of income and retained earnings and of cash flows for
each of the two years for the periods ended December 31, 1997 and
1996 and related notes to the financial statements and
independent auditors' report.
7(b) Attached as Exhibit 7(b) are the unaudited proforma balance sheet
as of December 31, 1997 and unaudited proforma statement of
income for the year ended December 31, 1997.
2
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
NATIONAL MEDICAL FINANCIAL SERVICES CORPORATION
-----------------------------------------------
(Registrant)
Date: October 30, 1998 By: /s/ Robert W. Horner, Jr.
---------------------------------------
Robert W. Horner, Jr., Vice President,
Chief Financial Officer, Secretary
and Treasurer
3
<PAGE>
Exhibit 7(a): Financial statements of business acquired
Shoreline Medical Billing Systems, Inc. and Maybruch & Co. ("Shoreline
Medical Billing Systems") audited combined balance sheets as of December 31,
1997 and 1996, and related combined statement of income and retained earnings
and of cash flows for each of the two years for the periods ended December 31,
1997 and 1996 and related notes to the financial statements and independent
auditors' report.
4
<PAGE>
SHORELINE MEDICAL BILLING SYSTEMS
FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996
5
<PAGE>
June 3, 1998
To the Board of Directors of
Shoreline Medical Billing Systems:
We have audited the accompanying balance sheet of Shoreline Medical Billing
Systems (See Note 1) as of December 31, 1997 and 1996 and the related statements
of income and retained earnings and 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 statement is 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 Shoreline Medical Billing
Systems as of December 31, 1997 and 1996 and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
MEDWIG LABRIOLA & CO.
6
<PAGE>
SHORELINE MEDICAL BILLING SYSTEMS
BALANCE SHEET
DECEMBER 31
ASSETS
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents ................ $ 8,340 $ 44,091
Accounts receivable ...................... 175,340 221,785
Notes receivable - Related
party (Note 4) .................... 116,050 112,000
Prepaid expenses ......................... 18,023
-------- --------
Total current assets ..................... 317,753 377,876
-------- --------
Property and equipment - net (Note 5) ...... 76,057 65,377
-------- --------
Total assets ...................... $393,810 $443,253
-------- --------
-------- --------
LIABILITIES
Current Liabilities:
Accounts payable.......................... $ 50,563 $ 46,036
Bank loans payable (Note 6) .............. 25,144 95,000
-------- --------
Total current liabilities ................ 75,707 141,036
-------- --------
Long-term debt (Note 6) ................. 124,856 129,027
-------- --------
Total liabilities ................. 200,563 270,063
-------- --------
EQUITY
Common stock (Note 1) ...................... 1,000 1,000
Retained earnings .......................... 192,247 172,190
-------- --------
Total equity ...................... 193,247 173,190
-------- --------
Total liabilities and equity ............... $393,810 $443,253
-------- --------
-------- --------
</TABLE>
7
<PAGE>
SHORELINE MEDICAL BILLING SYSTEMS
INCOME STATEMENTS AND STATEMENT OF
CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1997 1996
--------- ---------
REVENUE
<S> <C> <C>
Billing to clients ................... $ 1,749,534 $ 1,484,757
Interest income ...................... 12,731
--------- ---------
Total revenue ...................... 1,762,265 1,485,757
--------- ---------
EXPENSE
Payroll costs & related benefits ..... 1,066,581 902,325
Supplies & operating costs ........... 467,795 370,007
Depreciation ......................... 19,349 11,366
Selling & administration ............. 107,234 86,401
Interest ............................. 19,181 17,893
--------- ---------
Total expenses ..................... 1,680,140 1,387,992
--------- ---------
Net income ........................... 82,125 97,765
Equity - beginning of period ......... 172,190 147,651
Distributions ........................ (62,068) (73,226)
--------- ---------
Equity - end of year ................. $ 192,247 $ 172,190
--------- ---------
--------- ---------
</TABLE>
8
<PAGE>
SHORELINE MEDICAL BILLING SYSTEMS
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1997 1996
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income ....................................... $ 82,125 $ 97,765
Adjustments to reconcile net income
to net cash provided by (used by)
operating activities:
Depreciation .............................. 19,349 11,366
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 46,445 (80,134)
(Increase) in notes receivable ............ (4,050) (81,355)
(Increase) in prepaid expenses ............ (18,024) 36,765
Increase in accounts payable .............. 7,616
-------- ---------
Net cash provided by operating activities ........ 133,461 (15,593)
-------- ---------
Cash flows from investing activities:
Additions to fixed assets ........................ (30,029) (48,415)
Distributions to shareholders .................... (62,068) (73,226)
-------- ---------
Net cash used in investing activities ............ (92,097) (121,641)
-------- ---------
Cash flows from financing activities:
Bank loans obtained .............................. 150,000 225,000
Payments on bank loans ........................... (227,115) (34,135)
-------- ---------
Net cash provided by financing activities ........ (77,115) 190,865
-------- ---------
Net (decrease) increase in cash (35,751) 53,631
Cash balance - beginning of year ................... 44,091 (9,540)
-------- ---------
Cash balance - end of year ......................... $ 8,340 $ 44,091
-------- ---------
-------- ---------
</TABLE>
9
<PAGE>
SHORELINE MEDICAL BILLING SYSTEMS
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 1 - ACCOUNTING POLICIES
Shoreline Medical Billing Systems (Shoreline) was incorporated in 1994 and
all stock is owned by Morris Maybruch. Mr. Maybruch has a 75% ownership interest
as a partner in the firm of Maybruch & Cygielman (M&C) Both of these entities
markets its services to medical providers offering billing, accounts receivable,
collection and business consulting services. Effective January 1, 1998, Mr.
Maybruch's interest in both entities was purchased by National Medical Financial
Services Corporation (NMFS) (see Note 2).
For the purpose of these financial statements the combined financial
statements are presented to include Shoreline and Mr. Maybruch's 75% partnership
interest in M&C with guaranteed payments made to the departing partner reflected
as payroll costs & related benefits.
The combined financial statements will be referred to as "Shoreline Medical
Billing Systems". Effective January 1, 1998, M&C partnership was dissolved. Mr.
Maybruch consulting activities subsequent to December 31, 1997 will be conducted
through NMFS.
NOTE 2 - SALE OF ASSETS TO NMFS
Effective January 1, 1998, NMFS purchased certain assets of Shoreline and
Mr. Maybruch's 75% interest in M&C for total consideration of $1,313,702. Cash
consideration amounted to $913,702 with stock consideration of an additional
$400,000. As of January 1, 1998, 163,405 shares of NMFS stock was issued to Mr.
Maybruch. Additional shares of NMFS stock may be issued in the future if the
market price of the NMFS shares is not sufficient to yield $400,000 and
Shoreline operating results achieve levels specified in the purchase agreements.
A summary of the net assets sold to NMFS is presented below:
Accounts receivable $175,340
Fixed assets and software 76,057
---------
$251,397
---------
---------
10
<PAGE>
SHORELINE MEDICAL BILLING SYSTEMS
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 3 - ACCOUNTING POLICIES
Revenue Recognition
Fees for the Company's services are primarily based on a percentage of net
collections on patient accounts, and revenue is recognized as such services are
performed.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments with an
initial maturity of note more than three months.
Property and Equipment
Property and equipment is stated at cost. Depreciation is computed using
the straight line method over the estimated useful lives of the assets,
generally seven years for furniture and fixtures and five years for data
processing equipment.
Income Taxes
Shoreline is an "S" Corporation and M&C is a partnership. No income tax
provision is necessary in these financial statements, since the tax effect of
its income is the responsibility of the shareholder/partner.
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 amount 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.
NOTE 4 - NOTES RECEIVABLE - RELATED PARTY
Notes receivable related party are advances made to the shareholder. No
interest has been paid or accrued. The note is payable on demand.
11
<PAGE>
SHORELINE MEDICAL BILLING SYSTEMS
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
NOTE 5 - PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Computer Equipment & fixtures $117,110 $ 87,575
Less: Accumulated Depreciation (41,053) (22,198)
-------- --------
$ 76,057 $ 65,377
-------- --------
-------- --------
</TABLE>
NOTE 6 - BANK LOANS PAYABLE
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
8% loan from bank payable
through 2002 $150,000
9% loan from bank payable
through 1999 $ 149,027
Variable rate loan from bank
payable through 1999 75,000
--------- ---------
150,000 224,027
Less: Current portion (25,144) (95,000)
--------- ---------
$ 124,856 $ 129,027
--------- ---------
--------- ---------
</TABLE>
The loans are personally guaranteed by the shareholder. Principal
repayments during the succeeding five years are: $25,144 in 1998; $27,367 in
1999; $29,786 in 2000; $32,419 in 2001 and $35,284 in 2002.
NOTE 7 - LEASES
Minimum lease payments for the succeeding five years are:
<TABLE>
<CAPTION>
<S> <C>
1998 $63,936
1999 $69,264
2000 $71,928
2001 $77,256
2002 $82,584
</TABLE>
12
<PAGE>
Exhibit 7(b): Unaudited Proforma Financial Information
The accompanying unaudited proforma combined balance sheet as of December
31, 1997 and unaudited proforma combined statements of income for the year ended
December 31, 1997 are presented to reflect the acquisition of assets and
business operations of Shoreline Medical Billing Systems, Inc. and Maybruch &
Co. ("Shoreline Medical Billing Systems") for a purchase price of $913,702 in
cash and 1,634,043 shares of the Company's common stock valued at $0.24 per
share. The acquisitions were effected pursuant to the terms of the Medical
Billing Business Asset Purchase Agreement and Accounting Business Asset Purchase
Agreement, dated January 1, 1998 ("Asset Purchase Agreements"). The acquisitions
were accounted for under the purchase method of accounting. The accompanying
unaudited proforma combined financial statements reflects the effects of a
preliminary allocation of the purchase price.
The accompanying unaudited proforma combined financial statements should be
read in conjunction with the respective companies' historical financial
statements and notes thereto. The unaudited proforma combined financial
statements are presented for informational purposes only and are not necessarily
indicative of actual results had the foregoing transaction occurred as described
in the following paragraph, nor do they purport to represent results of future
operations of the combined companies.
The unaudited proforma combined balance sheet assumes the acquisitions
occurred on December 31, 1997. The unaudited proforma combined statements of
income present the historical statements of income for the year ended December
31, 1997 adjusted to give effect to the acquisitions as if the acquisitions had
occurred on January 1, 1997. Unaudited proforma combined financial information
presented herein reflects adjustments for (i) the estimated allocation of
purchase price to the fair value of the assets acquired, (ii) the effect of
recurring charges related to the acquisition, primarily the amortization of
goodwill, and (iii) the recording of shares of common stock issued for the
acquisition. The unaudited combined financial information does not reflect any
adjustments for the potential issuance of additional shares of the Company's
common stock which may be issued under the terms of the Asset Purchase
Agreements.
13
<PAGE>
NATIONAL MEDICAL FINANCIAL SERVICES CORPORATION
PROFORMA COMBINED BALANCE SHEET
DECEMBER 31, 1997
(In thousands)
ASSETS
<TABLE>
<CAPTION>
Proforma
NMFS Shoreline Adjustments Total
----------- ---------- ----------- -----------
(Note B)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents ........... $ 317.5 $ 317.5
Accounts receivable ................. 3,009.2 $ 175.0 3,184.2
Notes and interest receivable
- related party ................... 2,848.0 2,848.0
Refundable income taxes ............. 1,756.6 (Note D) $ (4.0) 1,752.6
Other assets ........................ 309.0 309.0
----------- ---------- ----------- -----------
Total current assets ..... 8,240.3 175.0 (4.0) 8,411.3
----------- ---------- ----------- -----------
Property and equipment, net ......... 19.8 76.0 95.8
Intangible assets, net .............. 624.2 1,063.0 (Note C) (71.0) 1,616.2
Other assets ........................ 185.3 185.3
----------- ---------- ----------- -----------
Total assets ............. $ 9,069.6 $ 1,314.0 $(75.0) $10,308.6
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
LIABILITIES
Current liabilities:
Accrued subcontract fees ............ $ 2,165.1 2,165.1
Accounts payable and accrued
expenses .......................... 46.9 $ 914.0 (Note B) $(82.0) 878.9
Accrued terminations costs .......... 305.7 305.7
Short term debt ..................... 97.7 97.7
----------- ---------- ----------- -----------
Total current liabilities 2,615.4 914.0 (82.0) 3,447.4
----------- ---------- ----------- -----------
Long-term debt ...................... 171.8 171.8
----------- ---------- ----------- -----------
Total liabilities ........ 2,787.2 914.0 (82.0) 3,619.2
----------- ---------- ----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock
Common stock, $.01 par value,
40,000,000 shares authorized ...... 15.4 1.6 17.0
Paid-in capital ....................... 12,511.3 398.4 12,909.7
Retained earnings (deficit) ........... (5,244.3) 7.0 (5,237.3)
Common stock in escrow to be
returned .......................... (1,000.0) (1,000.0)
----------- ---------- ----------- -----------
Total stockholders' equity 6,282.4 400.0 7.0 6,689.4
----------- ---------- ----------- -----------
Total liabilities and
stockholder's equity ... $ 9,069.6 $ 1,314.0 $(75.0) $ 10,308.6
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
</TABLE>
14
<PAGE>
NATIONAL MEDICAL FINANCIAL SERVICES CORPORATION
PROFORMA COMBINED INCOME STATEMENT
DECEMBER 31, 1997
(In thousands)
<TABLE>
<CAPTION>
Proforma Proforma
NMFS Shoreline Adjustments Combined
--------------- --------------- ----------- ------------
(Note B)
<S> <C> <C> <C>
Revenues .................... $ 8,257.5 $ 1,749.0 $ 10,006.5
Direct cost of billings and
subcontract expense ....... 5,619.0 1,534.0 7,153.0
--------------- --------------- ---------- ------------
Operating income 2,638.5 215.0 2,853.5
Selling, general and
administrative expense .... 617.8 107.0 724.8
Depreciation and amortization
expense ................... 507.2 19.0 (Note C) 71.0 597.2
Interest (income) net (315.0) 7.0 (308.0)
Write-offs of expense client
contracts ................. 11,029.1 11,029.1
--------------- --------------- ---------- ------------
Income (loss) before
income taxes .............. (9,200.6) 82.0 (71.0) (9,189.6)
Provision (benefit) for
income taxes .............. (1,355.9) (Note D) 4.0 (1,351.9)
--------------- --------------- ---------- ------------
Net income (loss) ........... (7,844.7) 82.0 (75.0) (7,837.7)
--------------- --------------- ---------- ------------
--------------- --------------- ---------- ------------
Weighted average number
of shares used in basic
calculations .............. 1,516,676 163,405 (Note E) 1,680,081
--------------- --------------- ---------- ------------
--------------- --------------- ---------- ------------
Basic net income (loss)
per share ................. ($ 5.17) ($ 4.67)
--------------- ------------
--------------- ------------
Weighted average number
of shares used in basic
calculations .............. 1,516,676 163,405 (Note E) ($ 4.67)
--------------- --------------- ---------- ------------
--------------- --------------- ---------- ------------
Diluted net income (loss)
per share ................. ($ 5.17) ($ 4.67)
--------------- ------------
--------------- ------------
</TABLE>
15
<PAGE>
NATIONAL MEDICAL FINANCIAL SERVICES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 1 - ACCOUNTING POLICIES
Shoreline Medical Billing Systems (Shoreline) was incorporated in 1994 and
all stock is owned by Morris Maybruch. Mr. Maybruch has a 75% ownership interest
as a partner in the firm of Maybruch & Cygielman (M&C). Both of these entities
markets its services to medical providers offering billing, accounts receivable,
collection and business consulting services. Effective January 1, 1998, Mr.
Maybruch's interest in both entities was purchased by National Medical Financial
Services Corporation (NMFS) (see Note 2).
For the purpose of these financial statements the combined financial
statements are presented to include Shoreline and Mr. Maybruch's 75% partnership
interest in M&C with guaranteed payments made to the departing partner reflected
as payroll costs & related benefits.
The combined financial statements will be referred to as "Shoreline Medical
Billing Systems". Effective January 1, 1998, M&C partnership was dissolved. Mr.
Maybruch consulting activities subsequent to December 31, 1997 will be conducted
through NMFS.
NOTE 2 - SALE OF ASSETS TO NMFS
Effective January 1, 1998, NMFS purchased certain assets of Shoreline and
Mr. Maybruch's 75 percent interest in M&C for total consideration of $1,313,702.
Cash consideration amounted to $913,702 with stock consideration of an
additional $400,000. As of January 1, 1998, 163,405 shares of NMFS stock was
issued to Mr. Maybruch. Additional shares of NMFS stock may be issued in the
future if the market price of the NMFS shares is not sufficient to yield
$400,000 and Shoreline operating results achieve levels specified in the
purchase agreements.
A summary of the net assets sold to NMFS is presented below:
<TABLE>
<CAPTION>
<S> <C>
Accounts receivable $175,340
Fixed assets and software 76,057
--------
$251,397
--------
--------
</TABLE>
16
<PAGE>
NATIONAL MEDICAL FINANCIAL SERVICES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997
The accompanying proforma financial statements as of December 31, 1997
gives effect to the acquisition of Shoreline as if the transaction occurred on
January 1, 1997.
Proforma Balance Sheet Adjustments
A. To record the acquisition of Shoreline, NMFS acquired certain assets for
total consideration of $1,313,702. Cash consideration amounted to $913,702
with stock consideration of and additional $400,000. Net assets acquired
were as follows:
<TABLE>
<CAPTION>
<S> <C>
Accounts receivable $175,340
Fixed assets and software 76,057
--------
$251,397
--------
--------
</TABLE>
Goodwill of $1,063,000 has been recognized to account for the excess
of purchase price over assets acquired.
Proforma Income Statement Adjustments
B. Shoreline income for the year ended December 31, 1997 has been
combined with NMFS.
C. Amortization of goodwill over 15 year life.
D. Provisions for income taxes at estimated income tax rate of 40%.
E. Weighted average shares increased by 163,405 shares as if these shares
were issued on January 1, 1997 and were outstanding for the entire
year.
17
