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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): February 28, 1997
CONSOLIDATED HEALTH CARE ASSOCIATES, INC.
(Exact name of registrant as specified in its charter)
Nevada 0-15893 91-1256470
(State or Other Jurisdiction of Commission File No. (I.R.S. Employer
Incorporation or Organization) Identification No.)
38 Pond Street, Suite 305
Franklin, Massachusetts 02038
(Address of principal executive offices) (Zip Code)
(508) 520-2422
Registrant's telephone number including
area code
Not Applicable
Former name, former address and former fiscal
year, if changed since last report
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Item 2. Acquisition or Disposition of Assets
(a) The disposition
(I) On February 28, 1997 pursuant to an Asset Purchase Agreement,
Consolidated Health Care Associates, Inc. consummated the sale of
three of its four Pennsylvania clinics to Richard and Vicky
Tribbitt. The clinics included those located in Millersburg, PA,
Mechanicsburg, PA, and Shermans Dale, PA. The Company had
purchased these clinics from the Buyer in 1993.
(II) The Asset Purchase Agreement also provided for the assignment of
trade receivables, assignments of leases, collection agreements,
security agreements, a service agreement, the assignment of trade
payables, rights to the use of names similar to "CPRS" and
"RSCP", and certain fixed assets used in the business of the
clinics involved.
The consideration for the sale of the clinics and related assets
was $900,000 in cash and a $150,000 five year note receivable at
9%. The Buyer also assumed $230,000 of associated liabilities.
In January 1997, prior to entering into the Asset Purchase
Agreement, the Company agreed to satisfy a note of the Company
held by the Buyer issued in connection with the 1993 business
acquisition in the amount of $413,259 by assignment to the Buyer
of $484,000 in face amount of receivables, but only to the extent
of collections in the amount due under the note.
Pursuant to the Asset Purchase Agreement, the Buyer agreed to
advance certain operating expenses of the clinics proposed to be
sold, which advances would be deducted from the cash portion of
the purchase price. The Buyer advanced $100,000 which amount was
deducted from the $900,000 cash portion of the sale
consideration.
2
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
Pro Forma Financial Data
The following Unaudited Pro Forma Consolidated Balance Sheet and Unaudited
Pro Forma Consolidated Statements of Operations give effect to the sale of three
of the Company's Pennsylvania clinics pursuant to the terms of an Asset Purchase
Agreement between the Company and the prospective purchaser (the "Disposition").
These Unaudited Pro Forma Consolidated Financial Statements have been derived
from the statements of operations of the Company for the fiscal year ended
December 31, 1995 and the nine months ended September 30, 1996. The Unaudited
Pro Forma Consolidated Balance Sheet gives effect to the Disposition as if it
had occurred on September 30, 1996. The Unaudited Pro Forma Consolidated
Statements of Operations give effect to the Disposition as if it had occurred at
the beginning of each of the periods presented.
The Unaudited Pro Forma Consolidated Financial Statements should be read in
conjunction with the notes thereto and the Company's consolidated financial
statements and related notes. The Unaudited Pro Forma Consolidated Financial
Statements are presented for informational purposes only and do not purport to
be indicative of the results of operations that actually would have resulted if
the Disposition had been consummated previously nor which may result from future
operations.
Unaudited Pro Forma Consolidated Balance Sheet
SEPTEMBER 30, 1996
------------------
ASSETS ACTUAL ADJUSTMENTS PRO FORMA
Current Assets:
Cash and cash equivalents $90,782 $ 900,000 (1) $990,782
Accounts receivable, net 2,076,023 (805,168) (2) 1,270,855
Prepaid expenses and other current assets 268,099 (21,500) (3) 246,599
Notes receivable - current portion 0 30,000 (1) 30,000
------------ ------------ ----------
Total current assets 2,434,904 103,332 2,538,236
Property, plant and equipment, net 501,008 (34,763) (4) 466,245
Goodwill, net 2,447,213 0 2,447,213
Note receivable - long term portion 0 120,000 (1) 120,000
Deferred charges and other assets, net 235,445 0 235,445
------------ ------------ ----------
5,618,570 188,569 5,807,139
============ ============ ==========
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Accounts payable and notes payable 714,990 (136,299) (2) 578,691
Current portion long-term debt 371,454 0 371,454
Accrued expenses 782,864 (89,701) (2) 693,163
------------ ------------ ----------
Total current liabilities 1,869,308 (226,000) 1,643,308
Long-term debt 1,672,151 (413,259) (2) 1,258,892
Other accrued debt 0 0 0
Stockholders' equity (deficiency):
Common Stock, $0.012 par value,
50,000,000 shares authorized; Issued
16,273,500 195,282 0 195,282
Preferred stock, 10,000,000 shares
authorized; Issued: 1,727,305 1,727,305 0 1,727,305
Accumulated deficit (7,957,366) 827,828 (5) (7,129,538)
Additional paid-in Capital 8,199,390 0 8,199,390
Less - treasury stock, 700,000 shares
at cost (87,500) 0 (87,500)
------------ ------------ ----------
Total stockholders' equity (deficiency) 2,077,111 827,828 2,904,939
------------ ------------ ----------
5,618,570 188,569 5,807,139
============ ============ ==========
See Notes to Unaudited Pro Forma Consolidated Balance Sheet
3
Notes To Unaudited Pro Forma Consolidated Condensed Balance Sheet
(1) Adjustments to reflect proceeds received by the Company from the
Disposition. The adjustments reflects proceeds of $900,000 in cash and a
$150,000 five year note.
Cash at closing $ 900,000
Note receivable-current portion 30,000
Note receivable-long term portion 120,000
----------
Total purchase price $1,050,000
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(2) Adjustment to reflect the exchange of certain accounts pursuant to the
Disposition and related transactions. The buyer will receive $805,168 of
net accounts receivable related to the assets to be disposed of and will
assume $226,000 of accounts payable. In January 1997, the Company agreed to
satisfy a note of the Company held by the buyer in the amount of $413,259,
out of the proceeds of $484,000 in face amount of the aforesaid
receivables. Accordingly, the pro forma adjustments also reflect
elimination of the liability under the note.
(3) Adjustment to reflect deferred financing expense that will be expensed on
the completion of the Disposition. In April of 1996, the Company
renegotiated a promissory note in the principal amount of $413,259, which
note was issued to the buyer in connection with the acquisition by the
Company of certain assets included in the Disposition. In consideration of
the renegotiation of the note, the Company issued to the noteholder 120,000
shares of Common Stock deemed valued at $.25 per share, or $30,000 in the
aggregate. This amount was being amortized as a deferred financing cost.
The remaining unamortized portion of this deferred financing cost in the
amount of $21,500 will be expensed upon the completion of the Disposition.
(4) Adjustment to eliminate the net value of the assets included in the
Disposition, as follows:
Fixed asset acquisition cost $89,030
Accumulated depreciation 54,287
------
Net fixed assets 34,743
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(5) Adjustment to reflect the gain realized upon the Disposition.
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Unaudited Pro Forma Consolidated Statements Of Operations
Fiscal Year Ended Nine Months Ended
December 31, 1995 September 30, 1996
----------------------------------------- --------------------------------------------
Pro Forma Pro Forma
Actual adjustments Pro Forma Actual adjustments Pro Forma
------ ----------- --------- ------ ----------- ---------
Revenue, net $ 8,617,798 $ 1,916,763(1) $ 6,701,035 $ 6,901,137 $ 1,614,032(1) $ 5,287,105
Costs and expenses:
Operating costs 7,244,196 1,707,506(2) 5,536,690 5,258,134 1,450,203(2) 3,807,931
Administrative and
selling 1,641,099 0(3) 1,641,099 1,662,655 0(3) 1,662,655
Depreciation and
amortization 230,115 9,600(4) 220,515 175,486 7,600(4) 167,886
--------- --------- --------- --------- --------- ---------
Total operating costs 9,115,410 1,717,106 7,398,304 7,096,275 1,457,803 5,638,472
--------- --------- --------- --------- --------- ---------
Operating loss (497,612) 199,657 (697,269) (195,138) 156,229 (351,367)
Interest expense, net 183,023 31,854(5) 151,169 207,356 28,568(5) 178,788
Other expense (income) (81,780) 0 (81,780) 0 0 0
--------- --------- --------- --------- --------- ---------
Income (loss) before
taxes and extraordinary
income (charge) (598,855) 167,803 (766,658) (402,494) 127,661 (530,155)
Provision for taxes 10,000 0(6) 10,000 55,788 0(6) 55,788
--------- --------- --------- --------- --------- ---------
Income (loss) before
extraordinary income
(charge) (608,855) 167,803 (776,658) (458,282) 127,661 (585,943)
========= ========= ========= ========= ========= =========
Income (loss) before
extraordinary income
(charge) per share of
common stock (0.06) (0.04)
=========== ============
Average number of 13,267,333 14,787,803
common shares =========== ===========
outstanding
See Notes to Unaudited Pro Forma Consolidated Statements of Operations
5
Notes to Unaudited Pro Forma Consolidated Statements of Operations
(1) Adjustment to eliminate actual net revenues for the periods presented
attributable to the assets to be disposed of.
(2) Adjustment to eliminate direct actual and accrued expenses relating to the
assets to be disposed of, which consist principally of salaries, wages,
fringe benefits and other clinical costs.
(3) Assumes no reduction in the Company's administrative and selling expenses
resulting from the Disposition.
(4) Adjustment to eliminate actual depreciation expense for the periods
presented attributable to the assets to be disposed of.
(5) In January 1997, the Company agreed to satisfy a note of the Company held
by the buyer in the amount of $413,259, out of the proceeds of $484,000 in
face amount of receivables attributable to the assets to be disposed of.
The pro forma adjustment eliminates actual and accrued interest expense
attributable to this note. Lower interest expense resulting from the use of
proceeds of the Disposition to reduce the Company's outstanding debt is not
reflected in the pro forma adjustments.
(6) Excludes extraordinary income resulting from the gain on the sale of the
Disposition. Accordingly, the pro forma adjustments do not assume any
change in Federal and state income tax.
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized:
Date: March 14, 1997 By: __________________________
Robert M. Whitty, President
Date: March 14, 1997 By: __________________________
Raymond L. LeBlanc, Chief Financial Officer
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Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized:
Date: March 14, 1997 By: /s/ Robert M. Whitty
-------------------------
Robert M. Whitty, President
Date: March 14, 1997 By: /s/ Raymond L. LeBlanc
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Raymond L. LeBlanc, Chief Financial Officer
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Exhibit Index
2.1 Asset Purchase Agreement between the Company and Richard and Vicky
Tribbitt, dated February 28, 1997.
2.2 Assumption Agreement & Release between the Company and Richard and Vicky
Tribbitt, dated February 28, 1997.
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