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EX-99.3
Pro Forma Combined Balance Sheet & Statement of Operations
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NU-TECH BIO-MED, INC.
PRO FORMA COMBINED BALANCE SHEET AND STATEMENT OF OPERATIONS
(UNAUDITED)
BACKGROUND INFORMATION
Acquisition of Physicians Clinical Laboratory, Inc.
On November 8, 1996, (the "Petition Date"), Physicians Clinical
Laboratory, Inc., a Delaware corporation ("PCL"), and its subsidiaries, Quantum
Clinical Laboratories, Inc., Regional Reference Laboratory Governing
Corporation, Diagnostic Laboratories, Inc., and California Regional Reference
Laboratory (collectively with PCL, the "Debtors") commenced their respective
reorganization cases by filing voluntary petitions for relief under Chapter 11
of the Bankruptcy Code, 11 U.S.C. Sections 101-1330 (the "Bankruptcy Code").
The Debtors provide clinical laboratory testing services in the State of
California. Clinical testing focuses on testing bodily fluids for the diagnosis
and treatment of illnesses. The Debtors provide these services in a high-quality
and cost-efficient manner to a diversified group of customers and payor sources,
including office-based physicians, managed health care associations and
acute-care hospitals.
On December 12, 1996, the Debtors, Registrant and the Debtors' senior
lenders (collectively, the "Proponents") filed a joint plan of reorganization
which embodied the terms of the Prepetition Termsheet agreed to among the
Proponents. On January 17, 1997, the Proponents filed a modified joint plan of
reorganization, which contained certain amendments to the joint plan of
reorganization filed on December 2, 1996. On February 11, 1997, the Proponents
filed the Second Amended Plan of Reorganization of Physicians Clinical
Laboratories, Inc., and Its Affiliated Debtors (the "Plan") with the United
States Bankruptcy Court for the Central District of California (the "Court"),
which contained certain amendments to the plan of reorganization filed on
January 17, 1997.
On February 26, 1997, the Registrant completed the sale of its ownership
interest in another clinical laboratory company, Medical Science Institute, Inc.
("MSI") to PCL. The Registrant sold its interest in MSI to PCL for approximately
$7.6 million. The Registrant received approximately $2.6 million in cash and a
secured promissory note of PCL in the principal amount of $5,000,000 that was
secured by all the assets of PCL, but was subordinate to certain other claims
and other administrative expenses (the "MSI Acquisition Note"). In the event the
Plan was consummated and the Plan provided that the Registrant was to become the
owner of 52.6% of the outstanding capital stock of PCL, the MSI Acquisition Note
was to be forgiven.
By order dated April 23, 1997, (the "Confirmation Order'), the Court
confirmed the Plan pursuant to section 1129 of the Bankruptcy Code. By separate
order dated April 23, 1997, the Debtors' Chapter 11 estates were substantively
consolidated. Pursuant to the Plan, all conditions
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to the effective date of the plan (the "Effective Date") were to be satisfied or
waived on or before July 22, 1997, unless such date was extended by the Court.
In late May 1997, PCL became aware of a subpoena it had received in
April of 1997 to furnish certain documents to the United States Department of
Defense with respect to PCL's Civilian Health and Medical Program of Uniformed
Services ("CHAMPUS") billing practices. In late May 1997, PCL was also notified
that its Medicare and MediCal billing practices were undergoing review by the
Office of Inspector General of the United States Department of Health and Human
Services ("HHS/OIG"), and in early June of 1997, PCL received a subpoena to
furnish certain documents to HHS/OIG in connection with such review. Due to
PCL's cooperation and negotiations with these government agencies, on July 24,
1997, the Court, on stipulation of PCL, the Registrant, and the creditors of
PCL, extended the date that certain conditions be satisfied or waived pursuant
to the Plan for 60 days to September 19, 1997, and stated that the terms and
conditions of the Plan would continue in full force and effect.
Pursuant to the Plan, prior to the Effective Date, all of the Debtors
were merged with and into PCL. On October 3, 1997, all conditions to the
Effective Date that were set forth in the Plan were satisfied and the Effective
Date occurred.
BASIS OF ACCOMPANYING UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The Accompanying Unaudited Pro Forma Combined Financial Statements
presents the historical financial statements of Nu-Tech Bio-Med., Inc.
(Nu-Tech), the historical financial statements of PCL, the pro forma adjustments
relating to the PCL acquisition (inclusive of the adjustments to account for PCL
liabilities to be converted to equity or modified by the bankruptcy court in
accordance with the PCL Plan) and Pro Forma Combined (which includes Nu-Tech and
the acquisition of PCL taking into consideration pro forma adjustments).
The results of the acquired operations will be included in the Company's
operating results as of the closing date of the acquisition. The Unaudited Pro
Forma Combined Balance Sheet assumes that the acquisitions occurred on September
30, 1997. The Unaudited Pro Forma Combined Statements of Operations combines the
historical results of operations of the acquired company for the year ended
December 31, 1996 and the nine months ended September 30, 1997 assuming the
acquisitions occurred on January 1, 1996 and January 1, 1997, respectively. The
unaudited pro forma combined statement of operations do not reflect cost savings
and synergies that might result from the acquisition. In addition, the unaudited
pro forma combined statement of operations do not consider non-recurring
charges, if any, that may result from the transaction and the proposed
integration of the acquired company into the Company.
The Unaudited Pro Forma Combined Balance Sheet includes direct
transaction costs associated with the acquisition. The Company has not completed
its evaluation of the carrying value of fixed assets or debt assumed nor has the
Company completed its evaluation of the intangible asset acquired giving
consideration to impairment factors. The actual allocation of the final purchase
price may be different from that reflected in the pro forma financial combined
financial statements. Such
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evaluation is expected to be completed prior to the filing of the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1997.
Management believes that the assumptions used in preparing these
Unaudited Pro Forma Combined Financial Statements provide a reasonable basis for
presenting all of the significant effects of the acquisition. These Unaudited
Pro Forma Combined Financial Statements do not purport to be indicative of the
results that actually would have been obtained had the acquisitions been
effected on the date indicated or of those results that may be achieved in the
future. The Pro Forma Combined Financial Statements should be read in
conjunction with the consolidated financial statements included in the Nu-Tech's
and PCL's Annual Reports on Form 10-KSB for the year ended December 31, 1996,
and February 28, 1997, respectively, and on Form 10-QSB for the nine month
period ended September 30, 1997 and August 31, 1997, respectively.
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Footnotes
(1) Nu-Tech's historical statement of operations data includes the
nine-month period ending September 30, 1997 and the year ended December
31, 1996, respectively, and September 30, 1997 for the balance sheet
data.
(2) PCL's historical statement of operations data includes the nine-month
period ending August 31, 1997 and the year ended February 28, 1997,
respectively, and August 31, 1997 for the balance sheet data.
(3) Includes adjustments to recognize an entire nine month period to reflect
the acquisition of MSI for the nine month period ended September 30,
1997; includes adjustments to recognize an entire year to reflect the
acquisition of MSI and Prompt Medical for the year ended December 31,
1996.
(4) A summary of the pro forma adjustments is set forth as follows:
(a) To eliminate amortization of historical goodwill of PCL.
(b) To record amortization of newly created goodwill as a result of
Nu-tech's acquisition of PCL.
(c) To eliminate interest expense incurred by PCL and MSI on debt to
be forgiven.
(d) To record interest expense on the $55 million debt using a 12%
rate, payable in additional debt. Also includes accretion of
debt discount.
(e) To record the minority interest share of losses up to the extent
of the minority interest ($5.5 million suspended for the year
ended December 31, 1996; $2.3 million suspended for the nine
month period ended September 30, 1997).
(f) To eliminate write down of historical intangibles of PCL.
(g) To reflect the borrowing of the remainder of the $9.8 million
debtor-in-possession financing.
(h) To provide for additional charges to PCL operations associated
with valuation adjustments reflected in September 1997, as if
they had occurred in August 1997.
(i) To reclassify Nu-Tech's net investment in Senior Debt of PCL and
deferred acquisition costs as a 52.6% investment in PCL's equity
and to record minority interest (47.4%) in the net assets of PCL
at their fair value.
(j) To account for PCL liabilities to be converted to equity or
modified by the bankruptcy court in accordance with the PCL
Plan.
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Nu-Tech Bio-Med, Inc.
Unaudited Pro Forma Combined Balance Sheet
September 30, 1997
Nu-Tech PCL Pro Forma Pro Forma
Historical (1) Historical (2) Adjustments (4) Combined
-------------- -------------- --------------- --------
ASSETS
Current Assets:
Cash and cash equivalents $ 346,923 $ 769,076 $ 1,056,817 G $ 2,172,816
Accounts receivable, net 88,044 11,755,327 (2,876,000) H 8,967,371
Notes receivable -- current 198,649 359,400 (350,000) H 208,049
Inventory 11,985 1,689,805 -- 1,701,790
Prepaid expenses 38,449 829,513 (90,000) H 777,962
------------- ------------- ------------- -------------
Total current assets 684,050 15,403,121 (2,259,183) 13,827,988
Investment in senior debt of PCL 13,287,164 -- (13,287,164) I --
Note receivable 100,000 -- -- 100,000
Equipment and leasehold improvements, net 316,898 9,243,660 (6,434,631) H 3,125,927
Deferred acquisition costs 1,085,477 -- (1,085,477) I --
Goodwill, net 683,222 -- 64,015,157 I 64,698,379
Other assets 18,206 672,947 -- 691,153
------------- ------------- ------------- -------------
Total Assets $ 16,175,017 $ 25,319,728 $ 40,948,702 $ 82,443,447
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 533,556 $ 2,456,124 $ 1,200,000 J $ 4,189,680
Accrued expenses 201,066 18,379,580 (14,391,630) J 4,189,016
Notes payable to Nu-Tech -- 5,000,000 (5,000,000) J --
Notes payable (DIP) -- 8,243,183 (8,243,183) J --
Other current liabilities 55,571 -- -- 55,571
Current portion of long term debt 146,302 270,025 -- 416,327
Current portion of capitalized lease
obligations 17,719 -- 129,975 J 147,694
------------- ------------- ------------- -------------
Total current liabilities 954,214 34,348,912 (26,304,838) 8,998,288
Long term debt - Oaktree -- -- 39,087,000 J 39,087,000
Due Medicare Settlement -- -- 1,800,000 H 1,800,000
Due IRS -- -- 496,314 H 496,314
Credit agreement -- -- 2,860,000 J 2,860,000
Debt 18,149 464,042 -- 482,191
Capitalized lease obligations 3,237 -- -- 3,237
Liabilities subject to compromise -- 167,454,300 (167,454,300) J --
------------- ------------- ------------- -------------
Total liabilities 975,600 202,267,254 (149,515,824) 53,727,030
Minority interest -- -- 13,517,000 I 13,517,000
Stockholders' equity:
Preferred stock 68 -- -- 68
Common stock 105,387 60,713 (60,713) I,J 105,387
Capital in excess of par 39,211,823 15,570,802 (15,570,802) I,J 39,211,823
Deferred consulting expense (55,005) -- -- (55,005)
Retained Earnings (Accumulated Deficit) (24,062,856) (192,579,041) 192,579,041 I,J (24,062,856)
------------- ------------- ------------- -------------
Total stockholders' equity 15,199,417 (176,947,526) 176,947,526 15,199,417
Total Liabilities and Stockholders' Equity $ 16,175,017 $ 25,319,728 $ 40,948,702 $ 82,443,447
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Nu-Tech Bio-Med, Inc.
Unaudited Pro Forma Combined Statement of Operations
Year Ended December 31, 1996
Adjustments to
include
Nu-Tech PCL Other Pro Forma
Historical (1) Historical (2) Acquired Companies (3) Adjustments (4)
-------------- -------------- --------------------------------------
Revenues:
Assay sales, net $ 115,397 $ - $ - $ -
Laboratory revenues, net 836,143 62,830,847 11,941,084 -
Medical billing services revenues 113,932 - 193,801 -
--------- ------------ ----------- -----------
Total revenues 1,065,472 62,830,847 12,134,885 -
Laboratory costs 1,188,564 43,131,052 9,606,831 -
Medical billing services costs 89,314 - 68,126 -
--------- ------------ ----------- -----------
Total cost of revenues 1,277,878 43,131,052 9,674,957 -
Gross profit (deficiency) (212,406) 19,699,795 2,459,928 -
Expenses:
Selling, general and administrative 3,689,588 24,880,448 3,837,764 -
Provision for doubtful accounts - 8,843,252 519,363 -
Research and development expenses 90,903 - - -
Public relations expenses 1,882,000 - - -
Depreciation, amortization and - - - -
write-down of intangibles - 9,670,097 314,356 1,731,419 A,B
--------- ------------ ----------- -----------
Total expenses 5,662,491 43,393,797 4,671,483 1,731,419
Operating income (loss) $ (5,874,897) $ (23,694,002) $ (2,211,555) $ (1,731,419)
Other income (expense):
Share of loss attributable to minority
interest - - - 13,517,000 E
Investment and interest income 161,871 21,855 (69) -
Finance expense (1,422,500) - - -
Write-off of goodwill and patents (372,864) (59,400,000) - 59,400,000 F
Reoganization charges - (1,558,820) - -
Deferred acquisition assets charged off (218,914) - - -
Interest expense (60,351) (15,838,895) (426,902) 8,015,797 C,D
Nonoperating income (expense), net - (1,708,848) (164,631) -
--------- ------------ ----------- -----------
Total other income (expense) (1,912,758) (78,484,708) (591,602) 80,932,797
Income (loss) before extraordinary items $ (7,787,655) $ (102,178,710) $ (2,803,157) $ 79,201,378
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Net income (loss) per common share $ (5.66) $ (52.10) $ (1.43) $ 40.39
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Weighted average common shares outstanding 1,961,078 1,961,078 1,961,078 1,961,078
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Pro Forma
Combined
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Revenues:
Assay sales, net $ 115,397
Laboratory revenues, net 75,608,074
Medical billing services revenues 307,733
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Total revenues 76,031,204
Laboratory costs 53,926,447
Medical billing services costs 157,440
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Total cost of revenues 54,083,887
Gross profit (deficiency) 21,947,317
Expenses:
Selling, general and administrative 32,407,800
Provision for doubtful accounts 9,362,615
Research and development expenses 90,903
Public relations expenses 1,882,000
Depreciation, amortization and -
write-down of intangibles 11,715,872
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Total expenses 55,459,190
Operating income (loss) $ (33,511,873)
Other income (expense):
Share of loss attributable to minority
interest 13,517,000
Investment and interest income 183,657
Finance expense (1,422,500)
Write-off of goodwill and patents (372,864)
Reoganization charges (1,558,820)
Deferred acquisition assets charged off (218,914)
Interest expense (8,310,351)
Nonoperating income (expense), net (1,873,479)
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Total other income (expense) (56,271)
Income (loss) before extraordinary items $ (33,568,144)
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Net income (loss) per common share $ (18.81)
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Weighted average common shares outstanding 1,961,078
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Nu-Tech Bio-Med, Inc.
Unaudited Pro Forma Combined Statement of Operations
Nine Month Period Ended September 30, 1997
Adjustments to
include
Nu-Tech PCL Other Pro Forma Pro Forma
Historical (1) Historical (2) Acquired Companies (3) Adjustments (4) Combined
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Revenues:
Assay sales, net $ 70,109 $ - $ - $ - $ 70,109
Laboratory revenues, net 1,798,361 47,635,331 1,257,995 - 50,691,687
Contract revenue 5,540 - - - 5,540
Medical billing services revenues 392,666 - - - 392,666
------------ ------------ -------- ----------- -------------
Total revenues 2,266,676 47,635,331 1,257,995 - 51,160,002
Cost of Revenues:
Laboratory costs 1,500,914 33,665,400 941,293 - 36,107,607
Medical billing services costs 366,768 - - - 366,768
------------ ------------ -------- ----------- -------------
Total cost of revenues 1,867,682 33,665,400 941,293 - 36,474,375
Gross Profit 398,994 13,969,931 316,702 - 14,685,627
Expenses:
Selling, general and administrative 2,238,267 17,530,596 (34,633) 3,226,000 H 22,960,230
Provision for doubtful accounts - 7,620,907 154,622 - 7,775,529
Research and development expenses 48,940 - - - 48,940
Public relations expenses - - - - -
- - - - -
Depreciation, amortization and - - - - -
write-down of intangibles - 4,863,466 119,534 1,107,671 A,B 6,090,671
------------ ------------ -------- ----------- -------------
Total expenses 2,287,207 30,014,969 239,523 4,333,671 36,875,370
Operating income (loss) $ (1,888,213) $ (16,045,038) $ 77,179 $ (4,333,671) $ (22,189,743)
Other income (expense):
Share of loss attributable to
minority interest - - - 13,517,000 E 13,517,000
Investment and interest income 25,317 11,855 (3,263) - 33,909
Medicare and Medicaid settlement - - - (2,100,000) H (2,100,000)
Write-off of goodwill and patents - (59,400,000) - 59,400,000 F -
Reorganization expense - (3,100,625) - (1,285,000) H (4,385,625)
Deferred acquisition assets
charged off - - - - -
Interest expense (535,783) (13,575,982) (27,789) 7,416,271 C,D (6,723,283)
Nonoperating income (expense),
net - (44,848) (4,322) - (49,170)
------------ ------------ -------- ----------- -------------
Total other income (expense) (510,466) (76,109,600) (35,374) 76,948,271 292,831
Income (loss) before extraordinary
items $ (2,398,679) $ (92,154,638) $ 41,805 $ 72,614,600 $ (21,896,912)
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Net income (loss) per common share $ (0.47) $ (17.98) $ 0.01 $ 14.17 $ (4.59)
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Weighted average common shares
outstanding 5,126,074 5,126,074 5,126,074 5,126,074 5,126,074
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