UNITED STATES
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 earliest event reported: December 1, 1995
------------------------------------------
UCI Medical Affiliates, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-13265 59-2225346
(State or other jurisdiction of incorporation) (Commission File Number) (IRS Employer Identification No.)
6168 St. Andrews Road, Columbia, South Carolina 29212
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (803) 772-8840
-----------------------
No Change
(Former name or former address, if changed since last report.)
1
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Pursuant to the terms of an Asset Purchase Agreement dated December 1, 1995 and
executed December 1, 1995 (the "Contract") by and between Robert G. Mann, M.D.
P.A., (the "Seller") and UCI Medical Affiliates of South Carolina, Inc., a South
Carolina corporation (the "Company") and the wholly-owned subsidiary of UCI
Medical Affiliates, Inc., a Delaware corporation ("UCI"), the Company has
acquired certain assets of (including patient list and goodwill) associated with
the medical practice owned and operated by the Seller in Greenville, South
Carolina for a purchase price of $300,000, consisting of a $30,000 Promissory
Note (the "Note") ; 60,000 shares of common stock of UCI and cash of $30,000.
The consideration paid by the Company in connection with this acquisition was
determined by arms-length negotiations between the Company and the Seller.
The practice operated by the Seller was one at which medical conditions not
involving an immediate threat to life were treated on an outpatient basis.
Currently, the Company expects to continue the operations of the practice in
substantially the same manner as they were conducted prior to the acquisition.
All descriptions of the Asset Purchase Agreement and the Note noted herein are
qualified in their entirety by reference to such documents as Exhibits to this
Current Report on Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
a) Financial Statements of Business Acquired
The financial statements for R.G. Mann, M.D., P.A., the business
acquired by the wholly-owned subsidiary of the Company, are
included in this report beginning on page number 3.
b) Pro Forma Financial Information
The pro forma financial information for R.G. Mann, M.D., P.A., the
business acquired by the wholly-owned subsidiary of the Company,
is included in this report following the financial information
included herein in response to Item 7(a) above.
c) Exhibits
Exhibit 2 - Asset Purchase Agreement dated and executed on
December 1, 1995 by and between Robert G. Mann, M.D., P.A., and
UCI Medical Affiliates of South Carolina, Inc.
Exhibit 10.1 - Promissory Note dated and executed on December 1,
1995 given by UCI Medical Affiliates of South Carolina,
Inc. to Robert G. Mann, M.D., P.A.
2
UCI Medical Affiliates, Inc.
CONTENTS
Page
R.G. Mann, M.D., P.A. Financial Statements as of November 30, 1995...................................4-12
UCI Medical Affiliates, Inc. Pro Forma Combining Financial Statements
Combining Balance Sheet at September 30, 1995................................................... 13
Notes to Combining Balance Sheet................................................................ 14
Combining Statement of Operations and Accumulated Deficit
for year ended September 30, 1995............................................................ 15
Notes to Combining Statement of Operations...................................................... 16
3
Report of Independent Accountants
Board of Directors
UCI Medical Affiliates, Inc.
We have audited the accompanying balance sheets of R.G. Mann, M.D., P.A. as of
November 30,1995 and December 31, 1994 and the related statements of operations,
stockholder's capital, and cash flows for the periods then ended. These
financial statements are the responsibility of management. Our responsibility is
to express an opinion on this financial statement 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 financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements 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 R.G. Mann, M.D., P.A. as of
November 30, 1995 and December 31, 1994 and the results of its operations and
its cash flows for the periods then ended in conformity with generally accepted
accounting principles.
The financial statements have been prepared solely from the accounts of R.G.
Mann, M.D., P.A. and do not include the personal accounts of the stockholder or
those of any other operations in which he may be engaged.
Columbia, South Carolina
December 20, 1995
The original signed opinion is on file with UCI Medical Affiliates, Inc.
4
R.G. Mann, M.D., P.A.
Balance Sheets
November 30, 1995 and December 31, 1994
1995 1994
-------- --------
ASSETS
Current assets:
Cash and cash equivalents $ -- $ 1,945
Accounts receivable, net of allowance for doubtful accounts of
$36,403 in 1995 and $25,922 in 1994 21,182 15,219
-------- --------
Total current assets 21,182 17,164
Cash surrender value of life insurance policy -- 51,119
Office and equipment, net 20,353 28,062
Other assets -- 2,345
-------- --------
20,353 81,526
-------- --------
Total assets $ 41,535 $ 98,690
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities:
Accounts payable, and accrued expenses $ 20,552 $ 12,132
Current portion of long-term payables 624 6,347
-------- --------
Total current liabilities 21,176 18,479
Loan payable to stockholder 8,503 --
Loans collateralized by life insurance policy -- 44,861
Long-term payables -- 17,235
-------- --------
Total liabilities 29,679 80,575
-------- --------
Stockholder's equity
Capital stock, 100,000 shares authorized; 1,000 1,000 1,000
shares issued and outstanding
Retained earnings 10,856 17,115
-------- --------
Stockholder's equity 11,856 18,115
-------- --------
Total liabilities and stockholder's equity $ 41,535 $ 98,690
======== ========
The accompanying notes are an integral part of the financial statements.
5
R.G. Mann, M.D., P.A.
Statements of Operations and Changes in Stockholder's Equity
For the eleven months ended November 30, 1995 and the year ended
December 31, 1994
1995 1994
------------------ ------------------
Net medical revenue $ 288,753 $ 294,632
Operating costs 122,007 131,743
------------------ ------------------
Operating margin 166,746 162,889
General and administrative expenses 167,007 155,639
Depreciation and amortization 5,777 8,262
------------------ ------------------
Loss from operations (6,038) (1,012)
Interest expense, net (221) (7,481)
------------------ ------------------
Net loss (6,259) (8,493)
Retained earning, beginning of year 17,115 25,608
------------------ ------------------
Retained earning, end of year $ 10,856 $ 17,115
================== ==================
The accompanying notes are an integral part of the financial statements.
6
R.G. Mann, M.D., P.A.
Statements of Cash Flows
For the eleven months ended November 30, 1995 and the year ended
December 31, 1994
1995 1994
------------------ ------------------
OPERATING ACTIVITIES:
Net loss $ (6,259) $ (8,493)
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization 5,777 8,262
Provision for bad debts 10,481 1,091
Changes in operating assets and liabilities:
Accounts receivable (16,444) (1,508)
Other assets -- (130)
Accounts payable and accrued expenses 8,420 807
------------------ ------------------
Cash provided by operating activities 1,975 29
INVESTING ACTIVITIES:
Increase in cash surrender value of life insurance -- (4,085)
Purchases of property and equipment, net -- (1,948)
------------------ ------------------
Cash used by investing activities -- (6,033)
FINANCING ACTIVITIES:
Proceeds from loans collateralized by life insurance policy
-- 12,550
Payments on long-term payables (3,920) (4,601)
------------------ ------------------
Cash used in financing activities (3,920) 7,949
Net increase (decrease) in cash and cash equivalents (1,945) 1,945
Cash and cash equivalents, beginning of year (1,945) --
================== ==================
Cash and cash equivalents, end of year $ -- $ 1,945
================== ==================
Supplemental cash flow information:
Cash paid for interest $ 784 $ 6,722
================== ==================
The accompanying notes are an integral part of the financial statements.
7
R.G. Mann, M.D., P.A.
Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
R.G. Mann, MD is the sole stockholder of R.G. Mann, M.D., P.A. (the "P.A.")
located in Greenville, South Carolina. The P.A. operates a family practice
medical office that provides treatments on an outpatient basis for medical
conditions not involving an immediate threat to life.
The financial statements have been prepared solely from the accounts of the P.A.
and do not include the personal accounts of R.G. Mann, MD or those of any other
activities in which he may be engaged. Management makes estimates that are a
necessary part of the preparation of financial statements. These estimates
include the useful lives of equipment, some of which is subject to technological
obsolescence, and the net realizable value of patient accounts receivable. At
November 30, 1995, management is not aware of any conditions that could
significantly affect the estimates employed in the preparation of the financial
statements.
ACCOUNTS RECEIVABLE
Accounts receivable represent amounts due from patients, employers and various
third-party payors. Provisions for uncollectable amounts are made based on
management's estimates of future collectibility and historical payment
percentages.
OFFICE AND EQUIPMENT
Office and equipment is reported at cost. Depreciation for financial reporting
purposes is computed principally by the straight-line method over the estimated
useful lives of the assets, ranging from five to seven years. Maintenance,
repairs and minor renewals are charged to expense. Major renewals or
betterments, which prolong the life of the assets, are capitalized. Upon
disposal of depreciable property, the asset accounts are reduced by the related
cost and accumulated depreciation. The resulting gains and losses are reflected
in the statements of operations.
8
R.G. Mann, M.D., P.A.
Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
As provided by the Internal Revenue Code, the P.A. has elected S Corporation
status. Under this election, net income from the Company is reported in the
stockholder's individual federal and state income tax returns along with the
stockholder's other items of income and expense for the period. The P.A. is not
a taxpaying entity for purposes of federal and state income taxation.
Accordingly, provisions for income taxes have not been recorded in the P.A.'s
financial statements.
CASH EQUIVALENTS
The P.A. considers all short-term debt investments with a maturity of three
months or less at the date of acquisition to be cash equivalents.
Supplemental disclosure of non-cash investing and financing activities:
In 1995, the P.A. transferred certain transportation equipment, prepaid assets
and the cash surrender value of a life insurance policy in consideration for his
assuming a loan collateralized by the cash value of the insurance policy and a
long term payable to a vendor. Additionally, in 1995, Dr. Mann assumed the
obligation to pay the remaining long - term liabilities of the P.A. in exchange
for a note payable to Dr. Mann. The aggregate amount of these two transfers were
$55,417 and $8,503, respectively. In 1994, the P.A. capitalized prepaid interest
of $501 on the loan collateralized by the cash value of the life insurance
policy.
FAIR VALUE OF FINANCIAL INVESTMENTS
The fair value of accounts receivable and accrued expenses payable are estimated
by management to approximate their respective carrying values.
9
R.G. Mann, M.D., P.A.
Notes to Financial Statements
2. OFFICE AND MEDICAL EQUIPMENT
Office and medical equipment consists of the following at November 30, 1995 and
December 31, 1994:
1995 1994
------------------- --------------------
Office and medical equipment $ 26,663 $ 26,663
Leasehold improvements 18,284 18,284
Transportation equipment -- 9,315
Furniture and fixtures 6,596 6,596
------------------- --------------------
51,543 60,858
Less, accumulated depreciation and amortization 31,190 32,796
------------------- --------------------
$ 20,353 $ 28,062
=================== ====================
At November 30, 1995 and December 31, 1994, the cost of equipment under capital
leases was $18,650 and accumulated amortization thereon was $9,631 and $7,188,
respectively. Amortization of assets under capital lease is reported in
depreciation and amortization.
3. DESCRIPTION OF LEASING ARRANGEMENTS
The P.A. leases certain medical equipment under capital leases expiring in
March, 1996. At the end of the lease terms, the P.A. is generally transferred
title to the leased equipment or, in some cases, the payment of a fee
representing residual value is required.
At November 30, 1995, the remaining lease payments and interest thereon total
$624.00.
The P.A. leases office space under an operating lease expiring on December 1,
1995. The P.A. believes the lease on the office spaces may be renewed under
substantially the same terms at that time. Total rental expense was $9,950 and
$10,300 for the eleven months ended December 1, 1995 and the year ended December
31, 1994, respectively.
10
R.G. Mann, M.D., P.A.
Notes to Financial Statements
4. RELATED PARTY TRANSACTIONS
R.G. Mann, MD, the sole stockholder, participates in the medical activities of
the P.A.. All payments for services and benefits to R.G. Mann, MD are recorded
as salaries and are included in cost of operations in the financial statements.
For the periods ended November 30, 1995 and December 31, 1994, amounts paid to
the stockholder were $91,000 and $75,000, respectively. At November 30, 1995,
the P.A. was indebted to the stockholder in the amount of $8,503. At and
December 31, 1994, the stockholder owed the P.A. $397.
On January 1, 1995, the P.A. transferred certain transportation equipment, a
life insurance policy, and certain other assets in exchange for certain current
and long-term liabilities the stockholder assumed. In November 1995, the P.A.
transferred to the stockholder the remaining long-term liabilities of the P.A.
in exchange for a note payable to the stockholder in the amount of $8,503.
5. CONCENTRATION OF CREDIT RISK
In the normal course of providing health care services, the Company extends
credit to patients in the Greenville, South Carolina area without requiring
collateral. Each individual's ability to pay balances due the Company is
assessed and reserves are established to provide for management's estimate of
uncollectable balances. Future revenues of the Company are largely dependent on
third-party payors and include Medicare and private insurance companies. The
amount of loss the Company would incur in the event of non-payment by the
counter party is the amount of the patient billing.
6. CONTINGENCIES
At November 30, 1995, management and its legal counsel are not aware of any
pending or threatened litigation, or unasserted claims against the P.A. that
could result in losses, if any, that would be material to the financial
statements.
11
R.G. Mann, M.D., P.A.
Notes to Financial Statements
7. SUBSEQUENT EVENT
On December 1, 1995, UCI Medical Affiliates of South Carolina, Inc. ("UCI")
acquired certain office and medical equipment and substantially all the
Company's tangible personal property (including patient lists and goodwill) for
$300,000 consisting of $240,000 in restricted common stock of UCI and cash of
$60,000.
As a condition of the above transaction, R.G. Mann, MD entered into a 3 year
employment agreement with UCI.
12
UCI MEDICAL AFFILIATES, INC.
PRO FORMA COMBINING BALANCE SHEET
SEPTEMBER 30, 1995
(UNAUDITED)
The following pro forma combining balance sheet is based on the individual
balance sheets of UCI Medical Affiliates, Inc. as of September 30, 1995 per the
Company's Annual Report and R.G. Mann, M.D.,P.A. as of November 30, 1995
appearing in item 7a of this filing. The information has been prepared to
reflect the acquisition by UCI Medical Affiliates, Inc. of R.G. Mann, M.D.,P.A
after giving effect to the pro forma adjustments described in Note 1. This
statement should be read in conjunction with each entity's financial statements
and footnotes.
UCI Medical
Affiliates,
Inc. R.G. Mann, Pro Forma Pro Forma
M.D., P.A. Adjustments Combined
-------------- ----------------- --------------- ---------------
ASSETS
Cash and cash equivalents $ 76,513 $ -- $ (76,513) $ --
Accounts receivable - net 2,343,325 21,182 -- 2,364,507
Medical supplies inventory 265,068 -- -- 265,068
Deferred taxes 491,543 -- -- 491,543
Prepaids and other assets 282,060 -- -- 282,060
Goodwill 3,578,371 -- 241,816 (c) 3,820,187
Property, plant and
equipment, net 2,795,384 20,353 -- 2,815,737
Deferred taxes 120,639 -- -- 120,639
Other assets 262,768 -- -- 262,768
============== ================= =============== ===============
Total assets $ 10,215,671 $ 41,535 $ 165,303 $ 10,422,509
============== ================= =============== ===============
LIABILITIES
Current portion - long-term
debt $ 1,244,603 $ -- $ -- $ 1,244,603
Current portion - capital
lease -- 624 -- 624
Accounts payable 1,652,792 20,552 (20,552) (b) 1,686,279
Accrued payroll 498,791 -- 33,487 (a) 532,278
Other accrued liabilities 445,362 60,000 (d) 505,362
Long-term debt, net of
current 3,121,098 -- -- 3,121,098
Loans payable to stockholder
-- 8,503 (8,503) (b) --
(1,000) (e)
Common stock 175,408 1,000 600 (f) 176,008
Paid-in capital 9,694,256 -- 239,400 (f) 9,933,656
Accumulated earnings (10,856) (e)
(deficit) (6,616,639) 10,856 (127,273) (g) (6,743,912)
============== ================= =============== ===============
Total liabilities
and capital $ 10,215,671 $ 41,535 $ 165,303 $ 10,422,509
============== ================= =============== ===============
13
UCI MEDICAL AFFILIATES, INC.
NOTES TO PRO FORMA COMBINING BALANCE SHEET
SEPTEMBER 30, 1995
(UNAUDITED)
1. The pro forma combining balance sheet has been prepared to reflect the
acquisition of R.G. Mann, M.D.,P.A by UCI Medical Affiliates, Inc. for an
aggregate price of $300,624. The purchase occurred on December 1,1995. The
combining balance sheet reflects the year ended September 30, 1995. Pro forma
adjustments are made to reflect:
(a.) A net increase as a result of the following:
$ (110,000) increase in physician salaries
===================
$ (110,000)
===================
Assumed paid in cash ($76,513) and accrued as payroll liability
($33,487).
(b.) Accrued expenses of ($20,552) and loan payable to shareholder ($8,503) were
not acquired.
(c.) Excess of acquisition cost over the values of net assets acquired
(goodwill) less one year's amortization. ($259,089 goodwill less $17,273
amortization)
(d.) Accrual of $60,000 for cash to be paid in two parts, one at closing and the
other on April 1, 1996.
(e.) Changes in the P.A.'s equity as a result of adjustments on pro forma
statement of operations.
(f.) Issuance of restricted common shares valued at $240,000 at estimated per
share value of $4.00.
(g.) Effects of pro forma adjustments on statement of operations.
14
UCI MEDICAL AFFILIATES, INC.
PRO FORMA STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE YEAR ENDED SEPTEMBER 30, 1995
(UNAUDITED)
The following pro forma combining statement is based on the individual
statements of operations and accumulated deficit of UCI Medical Affiliates, Inc.
as of September 30, 1995 per the Company's Annual Report and R.G. Mann, M.D.,
P.A., as of November 30, 1995 appearing in item 7a of this filing. The
information has been prepared to reflect the acquisition by UCI Medical
Affiliates, Inc. of R.G. Mann, M.D., P.A., after giving effect to the pro forma
adjustments described in Note 1. This statement should be read in conjunction
with each entity's financial statements and footnotes.
UCI Medical
Affiliates,
Inc. R.G. Mann, Pro Forma Pro Forma
M.D., P.A., Adjustments Combined
-------------- ----------------- --------------- ---------------
Revenue $ 17,987,147 $ 288,753 $ -- $ 18,275,900
Operating costs 18,180,080 122,007 110,000 (a) 18,412,087
-------------- ----------------- --------------- ---------------
Operating margin (192,933) 166,746 (110,000) (136,187)
General and administrative
expenses 87,616 167,007 -- 254,623
Depreciation and
amortization 579,224 5,777 17,273 (b) 602,274
-------------- ----------------- --------------- ---------------
Loss from operations (859,773) (6,038) (127,273) (993,084)
Interest expense, net 505,459 221 -- 505,680
Gain on equipment 5,493 -- -- 5,493
-------------- ----------------- --------------- ---------------
Loss before income tax (1,359,739) (6,259) (127,273) (1,493,271)
Benefit for income taxes -- -- -- --
-------------- ----------------- --------------- ---------------
Net loss (1,359,739) (6,259) (127,273) (1,493,271
Accumulated deficit -
beginning of year (5,256,896) 17,115 -- (5,239,781)
-------------- ----------------- --------------- ---------------
Accumulated deficit - end
of year $ (6,616,639) $ 10,856 $ (127,273) $ (6,733,056)
============== ================= =============== ===============
Earnings per common and common equivalent share:
Net income $ (.43) (c) $ (.47)
============== ================= =============== ===============
Weighted average shares of
common stock outstanding
3,136,544 (c) 3,196,544
============== ================= =============== ===============
15
UCI MEDICAL AFFILIATES, INC.
NOTE TO PRO FORMA COMBINING STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE YEAR ENDED SEPTEMBER 30, 1995
(UNAUDITED)
1. The above statement gives effect to the following pro forma adjustments
necessary to reflect the acquisition outlined in Note 1 to the pro forma balance
sheet:
(a) Additional physician salary based on employment contract between R.G. Mann,
M.D. and UCI Medical Affiliates, Inc.
(b) Addition for amortization of goodwill on a straight line basis over 15
years.
(c) Not applicable, R.G. Mann M.D., P.A. was not required to, and did not,
compute earnings per share.
16
SIGNATURES
Pursuant to the requirements of The Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
UCI Medical Affiliates, Inc.
(Registrant)
/s/ M.F. McFarland, III, M.D. /s/ Jerry F. Wells, Jr.
President, Chief Executive Officer and Chief Financial Officer
Chairman of the Board
Date: January 31, 1996
17
UCI MEDICAL AFFILIATES, INC.
EXHIBIT INDEX
TO
FORM 8-K
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
2 Asset Purchase Agreement dated and executed December 1, 19
1995 by and between Robert G. Mann, M.D., P.A. and
UCI Medical Affiliates of South Carolina, Inc.
10.1 Promissory Note dated and executed December 1, 1995 47
given by UCI Medical Affiliates of South Carolina, Inc.
to Robert G. Mann, M.D., P.A.
18