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 (date of earliest event reported): August 31, 1997
MEADOWBROOK REHABILITATION GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-19726 94-3022377
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification Number)
incorporation)
2200 Powell Street, Suite 800, Emeryville, CA 94608 (Address of
principal executive offices) (zip code)
Registrant's telephone number, including area code:
(510) 420-0900
Item 2. Acquisition or Disposition of Assets
On August 31, 1997, a subsidiary of Meadowbrook Rehabilitation Group, Inc.,
a Delaware corporation (the "Company"), sold five outpatient rehabilitation
clinics and certain other assets located in Florida and Georgia. The outpatient
rehabilitation clinics were located in St. Augustine, Palatka, Palm Coast, and
Ormond Beach, Florida and in Moultrie, Georgia. The Company sold the clinics in
two separate transactions. The purchaser of the St. Augustine and Palatka
outpatient rehabilitation clinics and certain other assets, was Remlap Services,
Inc., and the purchaser of the Ormond Beach, Palm Coast, and Moultrie outpatient
rehabilitation clinics was Titan Healthcare, Inc. The aggregate sale price for
the outpatient rehabilitation clinics and other assets was $550,000. The Company
received promissory notes from the purchasers for the aggregate purchase price
($215,000 from Remlap Services, Inc. and $335,000 from Titan Healthcare, Inc.).
The promissory notes are secured by the acquired assets and the Company also
received personal guarantees from the shareholders of Remlap Services, Inc. and
Titan Healthcare, Inc. The purchasers acquired all assets including accounts
receivable and are responsible for all accounts payable and certain payroll
liabilities. As part of the transaction, the Company retained all liabilities
for amounts due to the former owners of the clinics. At closing, this amount was
$197,000.
This transaction resulted in a loss of $2,046,000, primarily as a result of
the write-off of goodwill associated with the Company's acquisition of certain
of the clinics in 1994. The loss will be recorded as other operating expense in
the Company's financial statements for the twelve months ended June 30, 1997.
The selling price for the clinics and other assets sold was determined based on
arms-length negotiations between the parties. Kim Palmer, the Company's former
Vice President of outpatient operations, is a shareholder in both Remlap
Services, Inc. and Titan Healthcare, Inc. Otherwise, there was no material
relationship between either of the purchasers and the Company or any of its
affiliates, any director or officer of the Company or any associate of any such
director or officer.
Item 7. Financial Statements and Exhibits.
(b) Pro Forma financial information required pursuant to Article 11 of
Regulation S-X.
The following Pro Forma financial statements are included
following the signature page to this Form 8-K:
Introduction to the Pro Forma Condensed Consolidated financial
information.
Pro Forma Condensed Consolidated Balance Sheet as of March 31,
1997 (unaudited).
Pro Forma Condensed Consolidated Statements of Income for the
twelve months ended June 30, 1996 and for the nine months ended
March 31, 1997 (unaudited).
Notes to Pro Forma Condensed Consolidated financial information
(unaudited).
(c) Exhibits:
Exhibit 2.1 Agreement of Purchase and Sale, dated August 31, 1997, between
Remlap Services, Inc., and Medbrook Corp. and the Agreement of Purchase and
Sale, dated August 31, 1997, between Titan Healthcare, Inc., and Medbrook Corp.
The Registrant agrees to furnish to the Commission supplementally a copy of the
omitted schedules.
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.
Dated: September 12, 1997.
MEADOWBROOK REHABILITATION
GROUP, INC.
By:/s/Harvey Wm. Glasser, M.D.
Harvey Wm. Glasser, M.D.
President and Chief Executive Officer
Item 7(b) Meadowbrook Rehabilitation Group, Inc. reflecting the sale of
five outpatient rehabilitation clinics and certain other assets
located in Florida and Georgia. Introduction to unaudited Pro Forma
Condensed Consolidated Financial information.
The following tables set forth the unaudited Pro Forma Condensed
Consolidated Balance Sheet of the Company as of March 31, 1997, and the
unaudited Pro Forma Condensed Consolidated Statements of Income of the Company
for the twelve months ended June 30, 1996 and the nine months ended March 31,
1997. The Pro Forma Condensed Consolidated Statements of Income include
adjustments related to the sale of the five outpatient rehabilitation clinics
and certain other assets in Florida and Georgia (the "Assets"), the sale of
Meadowbrook Rehabilitation Group of Georgia, Inc. and the sale of the assets of
Meadowbrook Neurocare-Kansas City, Inc. The closing date for the sale of
Meadowbrook Rehabilitation Group of Georgia, Inc. was March 31, 1997 and
therefore the Condensed Consolidated Balance Sheet as of March 31, 1997 reflects
the disposition. The Pro Forma Condensed Consolidated Balance Sheet was prepared
assuming that the Company's disposition of the Assets and the sale of the assets
of Meadowbrook Neurocare-Kansas City, Inc. took place on March 31, 1997. The Pro
Forma Condensed Consolidated Statements of Income were prepared assuming that
the disposition of the Assets, the sale of the assets of Meadowbrook
Neurocare-Kansas City, Inc. and the disposition of Meadowbrook Rehabilitation
Group of Georgia, Inc. took place as of the beginning of the twelve months ended
June 30, 1996 and at the beginning of the nine months ended March 31, 1997,
respectively.
The unaudited pro forma financial information furnished herein reflects all
adjustments for the twelve months ended June 30, 1996 and the nine months ended
March 31, 1997, respectively, consisting only of normal recurring adjustments
which, in the opinion of management, are necessary to fairly state the Company's
financial position and the results of its operations for the periods presented.
The unaudited pro forma financial information does not purport to present
the consolidated financial position and consolidated results of operations of
the Company had the Company's disposition of the Assets, the disposition of
Meadowbrook Neurocare-Kansas City, Inc. and the disposition of Meadowbrook
Rehabilitation Group of Georgia, Inc. actually occurred on the dates indicated;
nor does it purport to be indicative of results that will be attained in the
future.
The pro forma financial information should be read in conjunction with the
Company's historical Consolidated Financial Statements and Notes thereto
contained in the Company's From 10-K for the fiscal year ended June 30, 1996,
the Company's Form 8-K dated March 31, 1997, and the Company's Form 8-K dated
July 31, 1997.
PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET
As of March 31, 1997
----------------------------------------------------------------------------------------
Kansas Pro Forma Florida Pro Forma
Adjustments Adjustments
-------------------------------------------------------------
Actual Debit Credit Ref Debit Credit Ref Pro Forma
------------------------------------------------------------------------------------------
CURRENT ASSETS
Cash and cash equivalents $3,639,993 $1,500,000 (B) $5,139,993
Net patient accounts receivable 5,122,109 $361,695 (A) 4,760,414
Due from intermediaries 9,630 $40,369 (A) 49,999
Prepaid expenses and other assets 1,198,336 $2,410 (B) 550,000 361,862 (A) 1,384,064
-----------
-----------
Total current assets 9,970,068 11,334,470
----------- -----------
PROPERTY AND EQUIPMENT, (net) 1,188,669 208,148 (B) 263,104 (A) 717,417
GOODWILL AND INTANGIBLE
ASSETS 1,820,472 1,468,673 (A) 351,799
----------- -----------
TOTAL ASSETS $12,979,209 $12,403,686
=========== ===========
CURRENT LIABILITIES $3,550,872 146,000 (B) 181,227 (A) $3,878,099
LONG-TERM LIABILITIES 380,956 380,956
----------- -----------
Total Liabilities 3,931,828 4,259,055
----------- -----------
MINORITY INTEREST -- --
STOCKHOLDERS' EQUITY
Common stock 19,302 19,302
Paid-in capital 17,908,122 17,908,122
Retained deficit (8,880,043) 1,143,442 (B) 2,046,192 (A) (9,782,793)
----------- -----------
Total stockholders' equity 9,047,381 8,144,631
----------- ---------- ---------- ---------- ---------- -----------
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY $12,979,209 $1,500,000 $1,500,000 $2,636,561 $2,636,561 $12,403,686
=========== ========== ========== ========= ========== ===========
<FN>
Footnotes on page 9.
</FN>
PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
Year Ended June 30, 1996
----------------------------------------------------------------------------------------------
Georgia and Kansas Florida Pro Forma
Pro Forma Adjustments Adjustments
-----------------------------------------------------------
Actual Debit Credit Ref Debit Credit Ref Pro Forma
-------------------------------------------------------------------------------------------
OPERATING REVENUES:
Net patient revenues $23,622,560 $12,399,325 $184,000 (F,G) $2,253,763 (C) $9,153,472
----------- -----------
Net operating revenues 23,622,560 9,153,472
----------- -----------
OPERATING EXPENSES:
Salaries and employee 15,189,173 7,591,751 (D,F) $1,274,039 (C,D) 6,323,383
benefits
Other operating expenses 9,108,509 4,103,036 (D,F) 1,083,718 (C,D) 3,921,755
----------- -----------
Total operating expenses 24,297,682 10,245,138
----------- -----------
Loss from operations (675,122) (1,091,666)
----------- -----------
OTHER (INCOME) EXPENSE:
Gain on sale of assets -- --
Interest income (113,834) 140,000 (E) 55,000 (E) (308,834)
----------- -----------
Net other income (113,834) (308,834)
----------- -----------
Loss before income taxes (561,288) (782,832)
INCOME TAX PROVISION
(BENEFIT) -- --
----------- -----------
NET LOSS BEFORE
MINORITY INTEREST (561,288) (782,832)
----------- -----------
MINORITY INTEREST 29,016 29,016 (C) --
----------- ----------- ----------- ---------- ---------- -----------
NET LOSS ($590,304) $12,399,325 $12,018,787 $2,253,763 $2,441,662 ($782,832)
=========== =========== =========== ========== ========== ===========
NET LOSS PER SHARE
(primary and fully diluted) ($0.31) ($0.41)
=========== ===========
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING
1,930,349 1,930,349
=========== ===========
<FN>
Footnotes on page 9.
</FN>
PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
Nine Months Ended March 31, 1997
-------------------------------------------------------------------------------------------
Georgia and Kansas Florida Pro Forma
Pro Forma Adjustments Adjustments
---------------------------------------------------------------
Actual Debit Credit Ref Debit Credit Ref Pro Forma
-----------------------------------------------------------------------------------------
OPERATING REVENUES:
Net patient revenues $17,013,035 $8,594,961 $138,000 (F,G) $1,244,531 (C) $7,311,543
------------ ----------
Net operating revenues 17,013,035 7,311,543
------------ ----------
OPERATING EXPENSES:
Salaries and employee benefits 11,926,130 5,924,265 (D,F) $1,088,875 (C,D) 4,912,990
Other operating expenses 6,668,417 2,869,724 (D,F) 761,999 (C,D) 3,036,694
------------ ----------
Total operating expenses 18,594,547 7,949,684
------------ ----------
Loss from operations (1,581,512) (638,141)
------------ ----------
OTHER (INCOME) EXPENSE:
Gain on sale of assets (530,942) (530,942)
Interest income (38,184) 105,000 (E) 41,250 (E) (184,434)
------------ ----------
Net other income (569,126) (715,376)
------------ ----------
Loss before income taxes (1,012,386) 77,235
----------
INCOME TAX PROVISION
(BENEFIT) -- --
------------ ----------
NET LOSS BEFORE MINORITY
INTEREST (1,012,386) 77,235
------------ ----------
MINORITY INTEREST 26,660 26,660 (C) --
------------ ---------- ---------- ---------- ---------- ----------
NET LOSS ($1,039,046) $8,594,961 $9,036,989 $1,244,531 $1,918,784 $77,235
============ ========== ========== ========== ========== ==========
NET LOSS PER SHARE
(primary and fully diluted) ($0.54) $0.04
============ ==========
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING
1,930,244 1,930,244
============ ==========
Meadowbrook Rehabilitation Group, Inc.
Reflecting the Sale of Five Outpatient Rehabilitation Clinics
and Certain Other Assets in Florida
Notes to Pro Forma Condensed Consolidated Financial Information
1. The amounts reflected in these notes are based on estimates
which are subject to change. The following pro forma
adjustments were made to the March 31, 1997 Condensed
Consolidated Balance Sheet to reflect the sale of five
outpatient rehabilitation clinics and certain other assets in
Florida. The Company received promissory notes from the
purchasers for the aggregate purchase price of $550,000.
(A) To record the sale of five outpatient rehabilitation clinics
and certain other assets in Florida and Georgia and the
assumption of certain liabilities by the purchasers.
(B) To record the sale of certain assets of Meadowbrook
Neurocare-Kansas City, Inc. and the assumption of certain
liabilities by the purchaser.
2. The following pro forma adjustments were made to the Condensed
Consolidated Statements of Income for the twelve months ended
June 30, 1996 and the nine months ended March 31, 1997.
(C) Elimination of all operating revenue and expenses for the five
outpatient rehabilitation clinics in Florida and Georgia.
(D) Estimated reduction of corporate office salaries and wages
and operating expenses.
(E) Estimated increase in Meadowbrook Rehabilitation Group, Inc.'s
interest income due to payments on promissory notes received
in connection with the sale of five outpatient clinics and
certain other assets in Florida and Georgia.
(F) Elimination of all operating revenue and expenses for
Meadowbrook Neurocare- Kansas City, Inc. and Meadowbrook
Rehabilitation Group of Georgia, Inc.
(G) Estimated increase in revenue due to increased Medicare
reimbursement based on higher overall Medicare utilization.