Exhibit 2.2
MDP CORPORATION
FINANCIAL STATEMENTS
AS OF AND FOR THE YEAR ENDED
DECEMBER 31, 2000
Independent Auditor's Report
To the Shareholder of MDP Corporation:
We have audited the accompanying balance sheet of MDP Corporation as of December
31, 2000 and the related statements of operations, stockholder's equity, 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.
Except as discussed in the following paragraph, we conducted our audit in
accordance with auditing standards generally accepted in the United States of
America. 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.
We did not observe the taking of the physical inventories of prepaid expenses at
December 31, 2000 (stated at $48,517) since those dates were prior to the time
we were initially engaged as auditors for the Company. We were unable to
satisfy ourselves about inventory quantities by means of other auditing
procedures.
In our opinion, except for the effects of such adjustments, if any, as might
have been determined necessary had we been able to observe the physical
inventories taken as of December 31, 2000, the financial statements referred to
above present fairly, in all material respects, the financial position of MDP
Corporation at December 31, 2000 and the results of its operations and its cash
flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.
Pate, Cerqueda, Morgan & Gault, LLP
June 26, 2001
Marietta, GA
MDP CORPORATION
BALANCE SHEET
DECEMBER 31, 2000
ASSETS
Current assets
Cash $ 146,293
Accounts receivable, net of $15,300 allowance 679,374
Inventories 53,505
Prepaid expenses 241,364
----------
Total current assets 1,120,536
Property and equipment, Net 281,545
Other assets
Deposits 5,750
Employee loan 17,000
----------
Total other assets 22,750
----------
TOTAL ASSETS $1,424,831
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LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Current portion of long term debt $ 23,387
Accounts payable 335,250
Employee withholdings 13,200
Accrued liabilities 61,917
Customer postage deposits 164,863
----------
Total current liabilities 598,617
Long term liabilities
Note payable 180,739
Installment note 45,888
----------
Total long term liabilities 226,627
----------
Total liabilities 825,244
Stockholder's equity
Common stock, $1 par value, 100,000 authorized shares,
1 share issued and outstanding 1
Additional paid in capital 819,199
Retained deficit (219,613)
----------
Total stockholder's equity 599,587
----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $1,424,831
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The accompanying notes are an integral part of the financial statements
MDP CORPORATION
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000
Revenue $6,407,395
Cost of sales 4,536,405
----------
Gross profit 1,870,990
Operating expenses 1,443,171
----------
Income from operations 427,819
Other expenses
Interest expense 23,984
Depreciation and amortization 94,243
----------
Total other expenses 118,227
----------
Net income $ 309,592
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The accompanying notes are an integral part of the financial statements
MDP CORPORATION
STOCKHOLDER'S EQUITY
YEAR ENDED DECEMBER 31, 2000
Common Stock
--------------------------
Number of Additional Accumulated
Shares Par Value paid-in capital Deficit Total
------ --------- --------------- ------- -----
Balances, January 1, 2000 1 $ 1 $ 819,199 $ (423,783) $ 395,417
Stockholder Distributions (105,422) (105,422)
Current Net Income 309,592 309,592
------- --------- --------------- ----------- -----------
Balances, December 31, 2000 1 $ 1 $ 819,199 $ (219,613) $ 599,587
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The accompanying notes are an integral part of the financial statements
MDP CORPORATION
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 309,592
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 94,243
Gain on sale of fixed assets (3,280)
Change in operating assets and liabilities:
Increase in accounts receivable (26,247)
Increase in inventory (13,505)
Increase in prepaid postage (230,935)
Decrease in other assets 29,836
Increase in accounts payable and accrued expenses 120,117
Increase in customer postage deposits 6,588
---------
Net cash provided by operating activities 286,409
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (80,488)
Proceeds from sale of equipment 6,000
---------
Net cash used by investing activities (74,488)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of notes payable (21,362)
Stockholder distributions (105,422)
---------
Net cash used by financing activities (126,784)
---------
Net increase in cash and cash equivalents 85,137
Cash and cash equivalents at beginning of year 61,156
---------
Cash and cash equivalents at end of year $ 146,293
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year:
Interest $ 12,143
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The accompanying notes are an integral part of the financial statements
MDP CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
1. NATURE OF OPERATIONS
MDP Corporation ("MDP" or "the Company") was incorporated in 1992 as a medical
claims and patient statement processor for medical professionals primarily in
the eastern and southeastern United States. MDP's services are provided from
its operating facility located in Atlanta, Georgia.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
- -------------------
Revenues from the processing of medical claims and patient statements are
recorded in the period the services are preformed.
Cost of Sales
- -------------
The cost of processing electronic claims and patient statements includes
postage, supplies, certain communication costs, and certain per unit maintenance
charges related to the production equipment used in the processing of patient
statements.
Cash Equivalents
- ----------------
MDP considers all highly liquid instruments with maturities of three months or
less to be cash equivalents.
Inventory
- ---------
Inventories consist principally of supplies to be used in the processing of
patient statements and are stated at the lower of cost or market (first-in,
first-out method).
Prepaid Postage
- ---------------
MDP typically utilizes bulk rate and first-class pre-sorted postage rates in
customer mailings. From time-to-time, the company may make advance payments to
the post office for this postage.
Customer Postage Deposits
- -------------------------
The company occasionally requires a postage deposit for those customers who
contract for patient statement processing services. Upon contract termination,
these deposits are used to offset any unpaid amounts due to MDP.
Advertising
- -----------
Advertising costs are expensed during the year in which they are incurred.
Advertising expense for the year ended December 31, 2000 amounted to $42,248.
7
MDP CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
Income Taxes
- ------------
The Company with the consent of its sole stockholder has elected to be taxed as
an S corporation under the Internal Revenue Code. Instead of paying corporate
income taxes, the stockholder is taxed individually on their share of the
taxable income. No provision for Federal income taxes has been included in these
combined financial statements.
Fair Value of Financial Instruments
- -----------------------------------
The company evaluates the fair value of its financial instruments based on the
current interest rate environment and current pricing of debt instruments with
comparable terms. The carrying of debt and other financial instruments are
considered to approximate fair value.
Estimates
- ---------
The preparation of financial statements in conformity with generally accepted
accounting principles in the United States 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.
3. SUBSEQUENT EVENT
On May 1, 2001, substantially all of the Company's assets were sold to ProxyMed,
Inc., a publicly traded healthcare transaction processing service company, for
$10 million. The purchase price consisted of $3 million cash paid to MDP at
closing and a $7 million promissory note receivable on May 1, 2002. The note
bears simple interest at 7% and is due monthly. In accordance with the sale, MDP
paid ProxyMed approximately $130,000 in June 2001 to satisfy a working capital
shortfall based on the amount of accounts receivable, accounts payable, and
accrued expenses at the closing date.
4. CONCENTRATION OF CREDIT RISK
The company maintains cash balances at a financial institution. At December 31,
2000, the Company's uninsured cash balance (in excess of the federal Deposit
Insurance Corporation insured limit of $100,000) totaled $149,664.
MDP CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
5. PROPERTY AND EQUIPMENT
All property and equipment are recorded at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets. Leasehold
improvements are amortized on a straight-line basis over the lesser of the
related lease or the estimated useful life of the asset.
Repairs and maintenance charges, which do not increase the useful lives of the
assets, are charged to operations as incurred while renewals and betterments are
capitalized and depreciated. Upon sale or retirement, the cost and related
accumulated depreciation are eliminated from the respective accounts, and the
resulting gain or loss included in the results of operations. Examination for
obsolete, damaged and impaired fixed assets is periodically reviewed by
management.
All property and equipment are recorded at cost and are depreciated using the
straight line method.
At December 31, 2000 property and equipment consisted of the following:
Estimated
useful lives
------------
Leasehold Improvements $ 46,849 7
Computer Software 40,256 3
Operations Equipment 137,099 7
Furniture & Equipment 115,037 5-7
Computer Equipment 162,580 3
Vehicles 90,120 5
---------
591,941
Less accumulated depreciation 310,396
---------
$ 281,545
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6. RETIREMENT PLAN
During 2000, the Company established a 401(k) profit sharing plan to cover all
full time employees who met certain minimum lengths of employment and minimum
age requirements. Employees could voluntarily participate at the beginning of
the quarter after their hire date and contribute a maximum of 20% of their
annual compensation. For the year ended December 31, 2000, matching
contributions of 1% of annual compensation for participating employees totaling
$6,780 were made by MDP. Matching contributions vest at 20% per year after the
first full plan year of participation.
MDP CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
7. LONG TERM DEBT
As of December 31, 2001, long-term-debt consists of the following:
NationsBank, due in monthly installments of $963,
including interest at an interest rate of 8.75% per annum,
collateralized by a vehicle. $ 16,098
NationsBank due in monthly installments of $1,439,
including interest at an interest rate of 9.38% per annum,
collateralized by office equipment. 53,177
Unsecured note to an individual due January 2002
at an interest rate 6% per annum. 180,739
---------
250,014
Less current portion of long-term debt 23,387
---------
$ 226,627
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The aggregate maturities of the notes payable during the next five years are as
follows:
2001 $ 23,387
2002 200,358
2003 15,461
2004 10,808
---------
$ 250,014
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8. LEASE COMMITMENTS
The Company leases its office space under an operating lease agreement with an
unrelated party, which expires in 2003. The base rent is $10,720 per month and
requires MDP to pay such costs as property taxes, maintenance and insurance.
Additionally, the company leases production and office equipment under operating
leases which expire on various date through 2005.
MDP CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
8. LEASE COMMITMENTS (Continued)
At December 31, 2000, the future minimum lease payments under non-cancelable
operating leases with initial or remaining lease terms in excess of one year are
as follows:
2001 $217,521
2002 211,581
2003 90,287
2004 45,962
2005 19,151
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Total minimum lease payments $584,502
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