1
Exhibit 99.1
FINANCIAL STATEMENTS
DECEMBER 31, 1994
PROMPT MEDICAL BILLING, INC.
MIAMI, FLORIDA
2
INDEPENDENT AUDITORS' REPORT
The Stockholders
Prompt Medical Billing, Inc.
Miami, Florida
We have audited the accompanying balance sheet of Prompt Medical Billing, Inc.
as of December 31, 1994, and the related statements of income and retained
earnings, and cash flows for the period from March 1, 1994 (date of inception)
to December 31, 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 audit.
We conducted our audit 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 audit provides 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 Prompt Medical Billing, Inc. as
of December 31, 1994, and the results of its operations and its cash flows for
the period from March 1, 1994 (date of inception) to December 31, 1994 in
conformity with generally accepted accounting principles.
October 30, 1996
Page 1 OF 6
3
BALANCE SHEET
DECEMBER 31, 1994
PROMPT MEDICAL BILLING, INC.
ASSETS
CURRENT ASSETS
Cash $64,165
Accounts receivable 30,418
-------
Total current assets $94,583
=======
SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY
Common stock, $1 par value, 1,000 shares
authorized, issued and outstanding $ 1,000
Paid in capital 8,006
Retained earnings 85,577
-------
Total shareholders' equity $94,583
=======
The accompanying notes to financial statements are an integral part of this
financial statement.
Page 2 OF 6
4
STATEMENT OF INCOME AND RETAINED EARNINGS
PERIOD FROM MARCH 1, 1994 (DATE OF INCEPTION)
TO DECEMBER 31, 1994
PROMPT MEDICAL BILLING, INC.
REVENUES
Fees $ 215,247
Interest income 374
---------
Total revenues $ 215,621
EXPENSES
Officers' compensation $ 12,000
Pension 3,000
Printing 2,111
Telephone and utilities 5,291
Repairs and maintenance 7,337
Payroll taxes 926
Other taxes and licenses 200
Postage and shipping 502
Supplies 4,377
---------
Total expenses 35,744
---------
Net income 179,877
RETAINED EARNINGS, March 1, 1994 --
Distributions (94,300)
---------
RETAINED EARNINGS, December 31, 1994 $ 85,577
=========
The accompanying notes to financial statements are an integral part of this
financial statement.
Page 3 OF 6
5
STATEMENT OF CASH FLOWS
PERIOD FROM MARCH 1, 1994 (DATE OF INCEPTION)
TO DECEMBER 31, 1994
PROMPT MEDICAL BILLING, INC.
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 179,877
Adjustments to reconcile net income to cash
provided by operations:
Expenses paid by related party 8,006
Increase in accounts receivable (30,418)
---------
Net cash provided by operating activities $ 157,465
CASH FLOWS FROM FINANCING ACTIVITIES:
Shareholder distributions (94,300)
Proceeds from issuance of capital stock 1,000
---------
Net cash used in financing activities (93,300)
---------
Net increase in cash 64,165
CASH, March 1, 1994 --
---------
CASH, December 31, 1994 $ 64,165
=========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
$8,006 of expenses were paid by a related party and recorded as additional
paid in capital.
The accompanying notes to financial statements are an integral part of this
financial statement.
Page 4 OF 6
6
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
PROMPT MEDICAL BILLING, INC.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Prompt Medical Billing, Inc. (the Company) was incorporated in
the State of Florida on December 13, 1993 and commenced business
operations on March 1, 1994. The Company's principal operations
consist of providing billing and collection services to doctors.
For 1994, 75% of the Company's revenues and 90% of the Company's
accounts receivable were derived from one unrelated party
located in Miami, Florida.
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.
INCOME TAXES
The Company, with the consent of its shareholders, has elected
to be treated as an S Corporation for income tax purposes. As a
result, the shareholders report their share of the corporate
taxable income on their individual income tax returns for each
year the election is in effect. Accordingly, no provision for
income taxes is included in the accompanying financial
statements for the Company.
NOTE 2 - ACCOUNTS RECEIVABLE
Accounts receivable consist of open trade accounts with
unrelated parties. Management considers all of the accounts
receivable to be fully collectible; therefore, there is no
provision for uncollectible accounts as of December 31, 1994.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company reimburses a related party for expenses paid on its
behalf. The expenses include payroll, payroll taxes and pension
contributions. These expenses totalled $15,926 in 1994.
Additionally, $8,006 of unreimbursed expenses were paid and
contributed to capital by a related party.
NOTE 4 - RETIREMENT PLAN
The Company sponsors a money purchase pension plan for qualified
employees. The minimum mandatory contributions are determined on
an annual basis by the Company and are limited to the lesser of
25% of compensation and S corporation earnings or $30,000 per
eligible employee. The Company's contribution expense amounted
to $3,000 for the year ended December 31, 1994.
Page 5 OF 6
7
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
PROMPT MEDICAL BILLING, INC.
NOTE 5 - COMMON CONTROL
The Company's shareholders also control other companies whose
operations are similar to or vertically integrated with those of
the Company. The Company reimburses a related party for payroll,
payroll taxes and pension contributions which are allocated to
the Company by that related party. Transactions between these
companies are more fully disclosed in Note 3. The shareholders,
however, are in a position to, and in the future may, influence
the revenues or expenses of the Company for the benefit of other
companies in the same line of business that are under their
control.
NOTE 6 - SUBSEQUENT EVENTS
Pursuant to the respective audited December 31, 1995 and
compiled June 30, 1996 financial statements, the Company made a
profit of $61,148 and $78,166 for the year ended December 31,
1995 and six months ended June 30, 1996, respectively.
On October 21, 1996, the Company sold corporate intangible
assets which include goodwill, the name "Prompt Medical Billing,
Inc." and customer agreements for $675,000. The payment terms
include shares of stock of the purchasing company with an
aggregate value of $500,000 and the balance of the purchase
price in cash. This consideration is to be held in escrow until
the earlier of two years from the closing date of October 21,
1996 or the date on which all cash and shares of stock of the
purchasing company are released from escrow ("Escrow Period").
The cash portion of the purchase price shall be paid to Prompt
Medical Billing, Inc. or its shareholders in eight equal
quarterly installments commencing ninety days from the closing
date and the shares of stock of the purchasing company shall be
released from escrow upon the termination of the escrow period.
The sales agreement also includes a two-year covenant not to
compete, employment contract for the majority shareholder and a
consulting agreement with a related party.
On September 9, 1996, the Company paid a management fee of
$25,000 to a related party for consulting services rendered
regarding the sale.
On September 13, 1996, the Company adopted a plan of Complete
Liquidation and Dissolution of Prompt Medical Billing, Inc. in
accordance with Section 331, 453(h) and 453B(h) of the Internal
Revenue Code. There is a twelve-month liquidation period from
the adoption date to finalize business, liquidate and distribute
any and all of its assets to the shareholders.
Page 6 OF 6