Insurance Management Solutions (INMG) 8-K Acquisition or disposition of assets

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report:	December 28, 2001
	(Date of earliest event reported)

Insurance Management Solutions Group, Inc.

(Exact name of Registrant as specified in its charter)

Florida	000-25273	59-3422536
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification Number)

360 Central Avenue St. Petersburg, Florida	33701
(Address of principal executive offices)	(Zip Code)

(727) 803-2040

(Registrant’s telephone number, including area code)

TABLE OF CONTENTS

	Item 2. Acquisition or Disposition of Assets.
	Item 7. Financial Statements and Exhibits.
PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
SIGNATURE
EXHIBIT INDEX
Stock Purchase Agreement
Amendment to Stock Purchase Agreement

Item 2. Acquisition or Disposition of Assets.

Insurance Management Solutions Group, Inc. (the “Company”) is filing this Current Report on Form 8-K to report that on December 28, 2001 the Company consummated the transactions contemplated by a stock purchase agreement (as amended, the “Stock Purchase Agreement”), dated as of September 20, 2001, by and among the Company, Geotrac of America, Inc., Geotrac Holdings, Inc., Daniel J. White, the Daniel J. White Trust, the Sandra A. White Trust, and, solely for purposes of a non-competition covenant, Bankers Insurance Group, Inc. (“BIG”). BIG (including its direct and indirect subsidiaries) is the Company’s majority shareholder and principal customer. The shareholders of the Company approved the Stock Purchase Agreement and the transactions contemplated thereby in accordance with Florida law at a Special Meeting of Shareholders held on December 26, 2001.

Pursuant to the Stock Purchase Agreement, Geotrac Holdings, Inc., a Delaware corporation formed by Daniel J. White and his spouse, Sandra A. White, purchased all the issued and outstanding capital stock (the “Shares”) of Geotrac of America, Inc., a wholly-owned subsidiary of the Company (“Geotrac”). Prior to the consummation of the transactions contemplated by the Stock Purchase Agreement, Mr. White served as a director of the Company and President, Chief Executive Officer and a director of Geotrac. Mr. White resigned as a director of the Company effective as of the consummation of the sale of the Shares.

The purchase price paid for the Shares was $19,000,000 in cash, plus 524,198 shares of Common Stock, $.01 par value, of the Company beneficially owned by Daniel J. White and Sandra A. White. Pursuant to the Stock Purchase Agreement, certain of the parties also entered into additional agreements as of the closing of such sale, including a Flood Zone Determination Service Agreement pursuant to which Geotrac will provide the Company with flood zone determination services for up to ten years at pricing management of the Company currently considers to be favorable.

The Company intends to consider various alternatives for the use of the estimated $18.2 million in net cash proceeds received from the sale of the Shares. Among those alternatives are a one-time shareholder dividend, a stock repurchase program, retention for working capital and other general corporate purposes, and funding operational growth opportunities.

The Stock Purchase Agreement (including the Exhibits thereto) is attached to this Current Report on Form 8-K as Exhibits 2.1 and 2.2 and is incorporated herein by reference.

1

Item 7. Financial Statements and Exhibits.

(a)	Financial statements of business acquired.
	Not applicable.
(b)	Pro forma financial information.
	The accompany unaudited pro forma condensed consolidated balance sheet as of September 30, 2001, reflects the December 28, 2001 disposition of the net assets of Geotrac of America, Inc. as if the transaction had occurred September 30, 2001.
	The accompanying unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2000 and for the nine months ended September 30, 2001 reflect (i) the disposition of the net assets of Geotrac of America, Inc. as if the transaction had occurred December 31, 1999, (ii) the Flood Zone Determination Services Agreement as though the terms of the agreement were in effect since January 1, 2000.
	The unaudited pro forma condensed consolidated statements of operations and balance sheet are based on currently available information and do not purport to represent what the Company’s results of operations would have been if the events referred to occurred on the above dates, or to project the Company’s results of operations for any future periods.
	The pro forma condensed consolidated financial statements should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2000 and Quarterly Report on Form 10-Q for the nine months ended September 30, 2001, incorporated by reference herein.
	Index	Page No.
	Pro forma Condensed Consolidated Balance Sheet as of September 30, 2001	3
	Pro forma Condensed Consolidated Statement of Operations for the year ended December 31, 2000	4
	Pro forma Condensed Consolidated Statement of Operations for the nine months ended September 30, 2001	5
	Notes to Pro forma Condensed Consolidated Financial Information	6-7

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INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES
PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
September 30, 2001

					Insurance
					Management		ProForma Adjustments(1)(2)							��
					Solutions
					Group, Inc.		Geotrac of								ProForma
					and Subsidiaries		America, Inc.		Other			Subtotal			Adjustments(1)(3)			ProForma
				ASSETS
Current assets:
	Cash and cash equivalents				$	8,419,601	$	3,628,723				$	4,790,878		$	19,000,000	(f.3)	$	24,692,741
																901,863	(e)
	Accounts receivable					4,082,479		2,381,392					1,701,087						1,701,087
	Due from affiliates					9,907,036		1,709,969	$	1,709,969	(a)		9,907,036						9,907,036
	Due from Geotrac					—		—		1,079,353	(b)		1,079,353			(1,079,353	)(e)		—
	Income taxes receivable from Geotrac					—		—		1,668,070	(d)		1,668,070			(1,668,070	)(e)		—
	Prepaid expenses and other assets					1,301,796		315,393					986,403						986,403
		Total current assets				23,710,912		8,035,477					20,132,827						37,287,267
Property and equipment						10,373,045		6,006,646					4,366,399						4,366,399
Other assets:
	Supply contract					—		—					—			2,189,090	(f.3)		2,189,090
	Investment in subsidiary					—		—		22,097,996	(c)		22,097,996			(22,097,996	)(f.1)		—
	Goodwill					14,672,754		12,389,251					2,283,503						2,283,503
	Customer contracts					766,667		766,667					—						—
	Deferred tax assets					629,617		135,591		135,591	(d)		629,617			(440,000	)(g)		189,617
	Capitalized software					700,715		—					700,715						700,715
	Other					129,448		103,848					25,600						25,600
		Total assets			$	50,983,158	$	27,437,480				$	50,236,657					$	47,042,191
			LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
	Current portion of long- term debt				$	79,562	$	79,562				$	—					$	—
	Accounts payable					1,864,617		598,478					1,266,139						1,266,139
	Due to affiliates					306,602		1,079,353	$	1,079,353	(b)		306,602						306,602
	Due to Geotrac					—		—		1,709,969	(a)		1,709,969		$	(1,709,969	)(e)		—
	Employee related accrued expenses					2,374,307		913,886					1,460,421						1,460,421
	Other accrued expenses					3,125,520		155,918					2,969,602			370,000	(f.2)		3,339,602
	Income taxes payable					3,518,852		1,668,070		1,668,070	(d)		3,518,852			745,000	(g)		4,263,852
	Income taxes payable to Geotrac					—		—		135,591	(d)		135,591			(135,591	)(e)		—
		Total current liabilities				11,269,460		4,495,267					11,367,176						10,636,616
Long-term debt						161,584		161,584					—						—
Deferred revenue						883,541		682,633					200,908						200,908
Deferred tax liabilities																920,000	(g)		920,000
Shareholders’ equity:
	Common stock					128,002		500		500			128,002						128,002
	Additional paid-in capital					27,680,901		12,536,180		12,536,180			27,680,901						27,680,901
	Retained earnings					10,859,670		9,561,316		9,561,316			10,859,670			(2,047,201	)(h)		8,812,469
	Treasury stock					—		—					—			(1,336,705	)(f.3)		(1,336,705	)
		Total shareholders’ equity				38,668,573		22,097,996		22,097,996	(c)		38,668,573						35,284,667
		Total liabilities and equity			$	50,983,158	$	27,437,480				$	50,236,657					$	47,042,191

3

INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
For the year ended December 31, 2000

				Insurance
				Management			ProForma Adjustments(1)(2)
				Solutions
				Group, Inc.			Geotrac of									ProForma
				and Subsidiaries			America, Inc.			Other			Subtotal			Adjustments(1)(3)			ProForma
REVENUES:
	Outsourcing services			$	45,917,152			—		$	938,002	(a)	$	46,855,154					$	46,855,154
	Flood zone determination services				17,066,945		$	17,066,945						—						—
			Total revenues		62,984,097			17,066,945			938,002			46,855,154						46,855,154
EXPENSES
	Cost of outsourcing services				36,766,042			—			929,002	(a)		37,695,044		$	(660,409	)(c)		37,034,635
	Cost of flood zone determination services				7,664,052			7,673,052			9,000	(a)		—						—
	Selling, general and administrative				11,205,336			3,766,623						7,438,713						7,438,713
	Management services from Parent				1,885,022			24,263						1,860,759						1,860,759
	Depreciation and amortization				5,342,099			2,317,526						3,024,573			660,409	(d)		3,684,982
			Total expenses		62,862,551			13,781,464			938,002			50,019,089			—			50,019,089
Operating income (loss)					121,546			3,285,481						(3,163,935	)					(3,163,935	)
Interest income					288,715			244,630			262,822	(b)		306,907						306,907
Interest expense					(70,244	)		(272,164	)		(262,822	)(b)		(60,902	)					(60,902	)
Income (loss) before taxes					340,017			3,257,947						(2,917,930	)					(2,917,930	)
Provision (benefit) for income taxes					849,383			1,580,371						(730,988	)					(730,938	)
Net income (loss)				$	(509,366	)	$	1,677,576		$	—		$	(2,186,942	)				$	(2,186,942	)
Net income (loss) per common share:
		Basic and diluted		$	(.04	)													$	(.18	)
Weighted average common shares outstanding:
		Basic and diluted			12,793,953															12,269,755

4

INSURANCE MANAGEMENT SOLUTIONS GROUP, INC. AND SUBSIDIARIES
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
For the nine months ended September 30, 2001

				Insurance
				Management			ProForma Adjustments(1)(2)
				Solutions
				Group, Inc.			Geotrac of									ProForma
				and Subsidiaries			America, Inc.			Other			Subtotal			Adjustments(1)(3)			ProForma
REVENUES:
	Outsourcing services			$	45,655,162			—		$	892,806	(a)	$	46,547,968					$	46,547,968
	Flood zone determination services			$	15,647,236		$	15,647,236						—						—
			Total revenues		61,302,398			15,647,236			892,806			46,547,968						46,547,968
EXPENSES
	Cost of outsourcing services				31,273,839			—			892,806	(a)		32,166,645		$	(646,769	)(c)		31,519,876
	Cost of flood zone determination services				7,167,451			7,167,451						—						—
	Selling, general and administrative				8,808,175			3,510,722						5,297,453						5,297,453
	Management services from Parent				1,187,506			44,522						1,142,984						1,142,984
	Depreciation and amortization				4,026,733			1,768,238						2,258,495			646,769	(d)		2,905,264
			Total expenses		52,463,704			12,490,933			892,806			40,865,577			—			40,865,577
Operating income					8,838,694			3,156,303						5,682,391						5,682,391
Interest income					250,492			72,380			3,942	(b)		182,054						182,054
Interest expense					(13,599	)		(11,805	)		(3,942	)(b)		(5,736	)					(5,736	)
Equity in earnings of Sub					(54,388	)		(54,388	)					—						—
Income before taxes					9,021,199			3,162,490						5,858,709						5,858,709
Provision (benefit) for income taxes					3,600,214			1,623,032						1,977,182						1,977,182
Net income				$	5,420,985		$	1,539,458		$	—		$	3,881,527					$	3,881,527
Net income per common share:
		Basic and diluted		$	.42														$	.32
Weighted average common shares outstanding:
		Basic and diluted			12,800,261															12,276,063

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NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

BALANCE SHEET – September 30, 2001

(1)	See the introduction to the Pro Forma Condensed Consolidated Financial Information
(2)	The Geotrac of America, Inc. (Geotrac) column amounts represent its separate historical balance sheet at September 30, 2001. The “Other” column represents the reversal of the intercompany elimination entries (a), (b), (c) and (d) related to Geotrac made by the Company to derive its consolidated balance sheet (the first column in the presentation). Such reversals, for pro forma reporting purposes only, result in reflecting Geotrac on an unconsolidated basis in the column labeled “Subtotal” to more easily show the disposition (see 3 below).
(3)	Pro forma adjustments: (e) reflects the cash settlement of intercompany accounts. In the pro forma information previously released before the final close of this transaction it was assumed that the intercompany amounts, to the extent that they did not offset, would be forgiven by both parties. However, in closing the transaction the parties completed an estimated cash settlement immediately prior to the December 28, 2001 disposition whereby the intercompany amounts including those related to income taxes were satisfied;(f.1) reflect the disposition (elimination) of Geotrac net assets; (f.2) reflects the recording of transaction costs not already recorded in the September 30, 2001 financial statements (the Company elected to expense and not capitalize transaction costs such as legal, accounting and investment banking fees as they were incurred. Prior to September 30, 2001 approximately $434,000 of these costs had been incurred, and paid and/or accrued at September 30, 2001. An additional amount of $370,000 is estimated to have been incurred after September 30, 2001, for a total of approximately $804,000 in transaction costs related to the disposition); (f.3) reflects the consideration received totaling approximately $22,537,000 comprised of $19,000,000 in cash, 524,198 shares of the Company’s common stock valued at $2.55 a share (fair market quote at September 30, 2001) or approximately $1,337,000, and a favorable long-term supply contract with Geotrac valued at approximately $2,200,000 by management of the Company and supported by an independent third party investment banking firm’s valuation; (g) reflects the current and deferred income taxes on the transaction. The transaction for financial statement purposes results in a pre-tax loss of approximately $375,000. Because of the existence of non-deductible goodwill of approximately $5,400,000, the total income tax expense for financial statement purposes is approximately $2,105,000, using a statutory federal and state rate of approximately 42%; (h) reflects the after tax loss of approximately $2,047,000 for financial statement purposes, exclusive of the effect of the transaction costs of $434,000 (pre-tax) already expensed in the historical financial statements at September 30, 2001.

STATEMENT OF OPERATIONS – year ended December 31, 2000

(1)	See the introduction to the Pro Forma Condensed Consolidated Financial Information.
(2)	The Geotrac of America, Inc. column amounts represent its separate historical statement of operations for the year ended December 31, 2000. The “Other” column represents the entries, (a) and (b), made by the Company to derive its consolidated statement of operations (the first column in the presentation).
(3)	Pro forma adjustment (c) reflects the more favorable pricing terms for flood zone determinations performed by Geotrac for the Company’s customers under the new service agreement. Pro forma adjustment (d) reflects the amortization of the asset supply contract (the service agreement) totaling $2,189,090 recorded as a component of consideration received when Geotrac was sold. The asset is to be amortized over the 10-year contract period using a method that approximates the projected annual requirements of flood zone determinations. Amortization is greater in earlier periods, as it is anticipated that the differential between the contract’s pricing and market quotes from other vendors will decrease during the contract’s term.

6

STATEMENT OF OPERATIONS – nine months ended September 30, 2001

(1)	See the introduction to the Pro Forma Condensed Consolidated Financial Information.
(2)	The Geotrac of America, Inc. column amounts represent its separate historical statement of operations for the nine months ended September 30, 2001. The “Other” column represents the entries, (a) and (b), made by the Company to derive its consolidated statement of operations (the first column in the presentation).
(3)	Pro forma adjustment (c) reflects the more favorable pricing terms for flood zone determinations performed by Geotrac for the Company’s customers under the new service agreement. Pro forma adjustment (d) reflects the amortization of the asset supply contract (the service agreement) totaling $2,189,090 recorded as a component of consideration received when Geotrac was sold. The asset is to be amortized over the 10-year contract period using a method that approximates the projected annual requirements of flood zone determinations. Amortization is greater in earlier periods, as it is anticipated that the differential between the contract’s pricing and market quotes from other vendors will decrease during the contract’s term and the time value of money.

7

	(c)        Exhibits.
2.1	Stock Purchase Agreement, dated as of September 20, 2001 (the “Stock Purchase Agreement”), by and among Insurance Management Solutions Group, Inc., Geotrac of America, Inc., Geotrac Holdings, Inc., Daniel J. White, the Daniel J. White Trust, the Sandra A. White Trust and, solely for purposes of Section 7.2, Bankers Insurance Group, Inc. (including the Exhibits thereto).*
2.2	Amendment to the Stock Purchase Agreement, dated December 28, 2001.

* The Disclosure Schedules to the Stock Purchase Agreement have been purposely omitted. Copies thereof will be furnished supplementally to the Securities and Exchange Commission upon request.

8

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	INSURANCE MANAGEMENT SOLUTIONS GROUP, INC.
	By: /s/ David M. Howard
	David M. Howard President and Chief Executive Officer
Date: January 14, 2002

9

EXHIBIT INDEX

Exhibit No.	Description
2.1	Stock Purchase Agreement, dated as of September 20, 2001 (the “Stock Purchase Agreement”), by and among Insurance Management Solutions Group, Inc., Geotrac of America, Inc., Geotrac Holdings, Inc., Daniel J. White, the Daniel J. White Trust, the Sandra A. White Trust and, solely for purposes of Section 7.2, Bankers Insurance Group, Inc. (including the Exhibits thereto)
2.2	Amendment to the Stock Purchase Agreement, dated December 28, 2001.

E-1