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Exhibit 99.2
FINANCIAL STATEMENTS
(RESTATED)
DECEMBER 31, 1995
PROMPT MEDICAL BILLING, INC.
MIAMI, FLORIDA
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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, 1995, and the related statements of income and retained
earnings, and cash flows for the year 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 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
material respects, the financial position of Prompt Medical Billing, Inc. as of
December 31, 1995, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
As discussed in Note 9 to the financial statements, certain 1995 and 1994
unrecorded expenses were paid and contributed to capital by a related party.
Accordingly, the financial statements have been restated to reflect this
contribution.
September 20, 1996, except for Notes 8 and 9,
as to which the date is October 30, 1996
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BALANCE SHEET
DECEMBER 31, 1995
PROMPT MEDICAL BILLING, INC.
(restated)
ASSETS
CURRENT ASSETS
Cash $ 244
Accounts receivable 46,606
Due from shareholders 25,257
-------
Total current assets $72,107
=======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $13,809
Accrued pension contribution 24,500
-------
Total current liabilities 38,309
SHAREHOLDERS' EQUITY
Common stock, $1 par value, 1,000 shares
authorized, issued and outstanding 1,000
Paid in capital 17,916
Retained earnings 14,882
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Total shareholders' equity 33,798
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Total liabilities and shareholders'
equity $72,107
=======
See independent auditors' report and the accompanying notes to financial
statements, which are an integral part of this financial statement.
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STATEMENT OF INCOME AND RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1995
PROMPT MEDICAL BILLING, INC.
(restated)
REVENUES
Fees $ 202,185
Interest income 600
---------
Total revenues $ 202,785
EXPENSES
Officers' compensation 61,600
Pension 39,900
Printing 6,862
Telephone and utilities 6,625
Repairs and maintenance 15,451
Payroll taxes 4,664
Other taxes and licenses 200
Postage and shipping 3,401
Supplies 2,439
Professional fees 495
---------
Total expenses 141,637
---------
Net income 61,148
RETAINED EARNINGS, beginning of year 85,577
Distributions (131,843)
---------
RETAINED EARNINGS, end of year $ 14,882
=========
See independent auditors' report and the accompanying notes to financial
statements, which are an integral part of this financial statement.
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STATEMENT OF CASH FLOWS YEAR
ENDED DECEMBER 31, 1995 PROMPT
MEDICAL BILLING, INC.
(restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 61,148
Adjustments to reconcile net income to cash
provided by operations:
Expenses paid by a related party 9,910
Increase in accounts receivable (16,188)
Increase in accounts payable and accrued
pension contribution 38,309
---------
Net cash provided by operating activities 93,179
CASH FLOWS FROM INVESTING ACTIVITIES:
Advances to shareholders (25,257)
CASH FLOWS FROM FINANCING ACTIVITIES:
Shareholder distributions (131,843)
---------
Net decrease in cash (63,921)
CASH, beginning of year 64,165
---------
CASH, end of year $ 244
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SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
$9,910 of expenses were paid by a related party and recorded as additional
paid in capital.
See independent auditors' report and the accompanying notes to financial
statements, which are an integral part of this financial statement.
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NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
PROMPT MEDICAL BILLING, INC.
(restated)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Prompt Medical Billing, Inc.'s (the Company) principal
operations consist of providing billing and collection services
to doctors. For 1995, 74% of the Company's revenues and 95% of
the Company's accounts receivable were derived from two
unrelated parties 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.
FAIR VALUES OF FINANCIAL INSTRUMENTS
During 1995, the Company adopted Financial Accounting Standards
Board Statement No. 107, "Disclosures about Fair Value of
Financial Instruments" (FAS 107). This statement requires the
Company to disclose the fair value of financial instruments for
which it is practicable to estimate that value. FAS 107 also
requires the entity to disclose the method(s) and significant
assumptions used to estimate the fair value of financial
instruments.
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it
is practicable to estimate that value:
Cash
The fair value of cash is its carrying value.
Due from Shareholders
The fair value of the amount due from the shareholders
approximates its carrying value.
See independent auditors' report.
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NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
PROMPT MEDICAL BILLING, INC.
(restated)
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, 1995.
NOTE 3 - DUE FROM SHAREHOLDERS
Noninterest bearing, due on demand.
NOTE 4 - ACCOUNTS PAYABLE
Accounts payable consist of amounts due to an affiliate for
reimbursement of operating expenses as described in Note 5.
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company reimburses a related party for expenses paid on its
behalf. The expenses include payroll, payroll taxes, pension
contributions and overhead expenses. These expenses totalled
$119,973 in 1995. At December 31, 1995, the total amount of
accounts payable and accrued pension contribution represents
amounts due to this related party. Additionally, $9,910 of
unreimbursed expenses were paid and contributed to capital by a
related party during 1995.
NOTE 6 - 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 $39,900 for the year ended December 31, 1995.
NOTE 7 - 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, pension contributions and overhead expenses which
are allocated to the Company by that related party. Transactions
between these companies are more fully disclosed in Note 4. 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 8 - SUBSEQUENT EVENTS
Pursuant to the compiled June 30, 1996 financial statement, the
Company made a profit of $78,166 for the six months ended June
30, 1996.
See independent auditors' report.
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NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
PROMPT MEDICAL BILLING, INC.
(restated)
NOTE 8 - SUBSEQUENT EVENTS (CONTINUED)
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.
NOTE 9 - SUBSEQUENT DISCOVERY OF FACTS
Subsequent to the issuance of the Company's financial
statements, management became aware that certain unrecorded
expenses paid by a related party were not recorded as paid in
capital in 1995 and 1994. Recording these expenses increased
paid in capital by $17,916 and decreased net income and retained
earnings by $9,910 and $17,916, respectively.
See independent auditors' report.
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