1
EXHIBIT 7(b)
REGISTRANT'S
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma financial statements give effect to the sale
by Registrant of the operating assets of the Rehab Companies for $5,500,000 in
cash. The unaudited pro forma balance sheet reflects the disposition of these
assets as of December 31, 1998. The unaudited pro forma statements of income
reflect the results of operations of Registrant after giving effect to the
operations which were generated by the assets sold for the six months ended
December 31, 1998 and the year ended June 30, 1998 as if the disposition had
occurred on July 1, 1998 and February 13, 1998, the date the Rehab Companies
were acquired by Registrant, respectively.
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CONTINUCARE CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
December 31, 1998
(A)
Rehab
Companies
Assets Sold/
Liabilities Pro Forma
Continucare Assumed Adjustments Pro Forma
---------- --------- --------------- ----------
Current assets
Cash and cash equivalents $ 3,867,146 $ $ 1,450,000 (B) 4 5,317,146
Accounts receivable, net 9,660,111 5,881,590 -- 3,778,521
Other receivables 1,037,921 40,544 -- 997,377
Prepaid expenses and other assets 429,914 113,945 -- 315,969
Income taxes receivable -- -- -- --
---------- ----------- ----------- ----------
Total current assets 14,995,092 6,036,079 1,450,000 10,409,013
Notes receivable, net 1,584,069 -- -- 1,584,069
Equipment, furniture and leasehold improvements, net 3,760,672 1,946,886 -- 1,813,786
Cost in excess of net tangible assets aquired, net 37,289,038 5,834,126 -- 31,454,912
Other intangible assets, net 9,983,190 -- -- 9,983,190
Deferred financing costs 3,087,656 -- -- 3,087,656
Other assets, net 96,827 -- -- 96,827
---------- ----------- ----------- ----------
Total assets $70,796,544 $13,817,091 $ 1,450,000 $58,429,453
========== =========== =========== ==========
Current liabilities
Accounts payable 1,530,406 249,483 100,000 (C) 1,380,923
Accrued expenses 6,986,034 1,239,559 -- 5,746,475
Medical claims payable 2,512,417 -- -- 2,512,417
Current portion of long term debt 6,996,170 -- (4,000,000)(B) 2,996,170
Accrued interest payable 634,077 -- -- 634,077
Current portion of capital lease obligations 49,676 27,771 -- 21,905
---------- ----------- ----------- ----------
Total current liabilities 18,708,780 1,516,813 (3,900,000) 13,291,967
Long term debt 3,639,917 -- -- 3,639,917
Convertible subordinated notes payable 45,000,000 -- -- 45,000,000
Deferred tax liability 954,894 -- -- 954,894
Obligations under capital lease 364,715 -- -- 364,715
---------- ----------- ----------- ----------
Total liabilities 68,668,306 1,516,813 (3,900,000) 63,251,493
---------- ----------- ----------- ----------
Commitments and contingencies
Shareholders' equity
Common stock; $0.0001 par value;
100,000,000 shares authorized,
16,661,283 shares issued and
13,731,283 shares outstanding 1,462 -- -- 1,462
Additional paid in capital 32,910,465 -- -- 32,910,465
Deficit (25,541,009) -- (6,950,278)(D) (32,491,287)
Treasury stock (2,930,000 shares) (5,242,680) -- -- (5,242,680)
---------- ----------- ----------- ----------
Total shareholders' equity/(deficit) 2,128,238 -- (6,950,278) (4,822,040)
---------- ----------- ----------- ----------
Total liabilities and shareholders' equity $70,796,544 $ 1,516,813 $(10,850,278) $58,429,453
========== =========== =========== ==========
3
CONTINUCARE CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998
Rehab Pro Forma
Continucare Companies Adjustments Pro Forma
------------- ------------- ------------ -------------
Operations continuing
Revenue
Medical services, net $ 99,236,792 $ 9,369,801 -- $ 89,866,991
Management fees 549,680 -- -- 549,680
------------- ------------- ------------ -------------
Subtotal 99,786,472 9,369,801 -- 90,416,671
Expenses
Medical services 86,639,284 5,660,408 -- 80,978,876
Payroll and employee benefits 7,249,389 1,631,137 -- 5,618,252
Provision for bad debt 1,730,592 632,112 -- 1,098,480
Professional fees 658,645 59,117 -- 599,528
General and administrative 5,454,699 1,818,101 -- 3,636,598
Depreciation and amortization 2,899,307 560,267 -- 2,339,040
------------- ------------- ------------ -------------
104,631,916 10,361,142 -- 94,270,774
Operations disposed of
Revenues 1,924,092 -- -- 1,924,092
Expenses 3,641,081 -- -- 3,641,081
------------- ------------- ------------ -------------
Subtotal (1,716,989) -- -- (1,716,989)
------------- ------------- ------------ -------------
Loss from operations (6,562,433) (991,341) -- (5,571,092)
Other income/(expenses)
Interest income 71,555 3,092 -- 68,463
Interest expense (2,397,207) (2,837) -- (2,394,370)
Loss on sale of subsidiary (4,152,250) -- -- (4,152,250)
------------- ------------- ------------ -------------
Loss before income taxes (13,040,335) (991,086) -- (12,049,249)
Provision/benefit for income taxes -- -- -- --
------------- ------------- ------------ -------------
Net loss before
extraordinary items $ (13,040,335) $ (991,086) $ -- $ (12,049,249)
============= ============= ============ =============
Net loss before extraordinary items
Basic $ (0.91) $ (0.84)
Diluted $ (0.91) $ (0.84)
Shares used in earnings per share
calculations
Basic 14,340,311 14,340,311
Diluted 14,340,311 14,340,311
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CONTINUCARE CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED JUNE 30, 1998
Rehab Pro Forma
Continucare Companies Adjustments Pro Forma
------------ ------------ ----------- ------------
Operations continuing
Revenue
Medical services, net $ 63,088,911 $ 9,569,943 $ 53,518,968
Management fees 1,233,284 296,523 936,761
------------ ------------ ----------- ------------
Subtotal 64,322,195 9,866,466 -- 54,455,729
Expenses
Medical services 44,380,226 5,487,178 38,893,048
Payroll and employee benefits 13,681,854 2,132,307 11,549,547
Provision for bad debt 1,953,013 144,645 1,808,368
Professional fees 1,637,957 -- 1,637,957
General and administrative 8,435,001 1,546,940 6,888,061
Depreciation and amortization 3,247,717 380,154 2,867,563
------------ ------------ ----------- ------------
73,335,768 9,691,224 -- 63,644,544
Operations disposed of
Revenues 1,262,098 1,262,098
Expenses 2,348,019 2,348,019
------------ ------------ ----------- ------------
Subtotal (1,085,921) -- -- (1,085,921)
Provision for notes receivable 3,825,203 3,825,203
------------ ------------ ----------- ------------
Subtotal (4,911,124) -- -- (4,911,124)
------------ ------------ ----------- ------------
(Loss) / income from operations (13,924,697) 175,242 -- (14,099,939)
Other income / (expenses)
Interest income 932,397 12,705 919,692
Interest expense (3,007,331) (6,292) (3,001,039)
Other 107,696 107,696
------------ ------------ ----------- ------------
(Loss) / income before income taxes (15,891,935) 181,655 -- (16,073,590)
Benefit for income taxes (909,000) (909,000)
------------ ------------ ----------- ------------
Net (loss) / income $(14,982,935) $ 181,655 $ -- $(15,164,590)
============ ============ =========== ============
Net loss per share
Basic $ (1.20) $ (1.21)
Diluted $ (1.20) $ (1.21)
Shares used in earnings per share
calculations
Basic 12,517,503 12,517,503
Diluted 12,517,503 12,517,503
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CONTINUCARE CORPORATION
FOOTNOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
(A) Represents the assets sold or liabilities assumed by Kessler, excludes
aproximately $1.4 million of liabilities not assumed by Kessler
(B) Represents the net cash proceeds from the disposition.
(C) Estimated cost related to the disposition.
(D) The loss on the disposition of the Rehab Companies which results
from the excess of the net book value of the assets sold and the
liabilities assumed over the sales price, plus any associated costs of
the transaction.