REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To American Disease Management Associates L.L.C.:
We have audited the accompanying balance sheets of American Disease Management
Associates L.L.C. (the "Company") as of December 31, 1999 and 1998 and the
related statements of income, members' equity and cash flows for each of the
three years in the period ended December 31, 1999. 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 audits provide 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 American Disease Management
Associates L.L.C. as of December 31, 1999 and 1998, and the results of their
operations and their cash flows each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
Arthur Andersen LLP
Roseland, New Jersey
October 11, 2000
EXHIBIT 99.1
AMERICAN DISEASE MANAGEMENT ASSOCIATES L.L.C.
BALANCE SHEETS
(in thousands)
As of December 31, As of June 30, 2000
------------------ -------------------
1998 1999 (unaudited)
---- ---- -----------
ASSETS
Current assets
Cash and cash equivalents $ 6 $ 934 $ 918
Accounts receivable, less allowance for
doubtful accounts of $231, $645 and $645, respectively 1,841 2,605 2,761
Inventory 203 1,053 923
Prepaid expenses and other current assets 11 20 11
------ ------ ------
Total current assets 2,061 4,612 4,613
Property and equipment, net 105 105 137
Other assets 18 18 21
------ ------ ------
Total assets $2,184 $4,735 $4,771
====== ====== ======
LIABILITIES AND MEMBERS' EQUITY
Current liabilities
Current portion of capital lease obligations $ 24 $ 13 $ --
Notes payable 275 160 100
Accounts payable 114 185 690
Member distributions payable 151 136 --
Accrued expenses 74 14 112
------ ------ ------
Total current liabilities 638 508 902
Capital lease obligations 13 -- --
Commitments and Continegencies
Members' equity
Members' capital 9 9 9
Retained earnings 1,524 4,218 3,860
------ ------ ------
Total members' equity 1,533 4,227 3,869
------ ------ ------
Total liabilities and members' equity $2,184 $4,735 $4,771
====== ====== ======
The accompanying notes are an integral part of these financial statements.
EXHIBIT 99.1
AMERICAN DISEASE MANAGEMENT L.L.C.
STATEMENTS OF INCOME
(in thousands)
For the Years Ended December 31, For the Periods Ended June 30,
-------------------------------- ------------------------------
1997 1998 1999 1999 2000
---- ---- ---- ---- ----
(unaudited) (unaudited)
Revenue $ 2,215 $ 5,107 $11,605 $ 4,285 $ 8,560
Cost of revenue 1,191 2,372 5,811 2,253 4,899
------- ------- ------- ------- -------
Gross profit 1,024 2,735 5,794 2,032 3,661
General and administrative expenses 526 1,335 2,290 953 1,306
------- ------- ------- ------- -------
Income from operations 498 1,400 3,504 1,079 2,355
Interest (expense) income , net (25) (24) 16 (4) 37
------- ------- ------- ------- -------
Net income $ 473 $ 1,376 $ 3,520 $ 1,075 $ 2,392
======= ======= ======= ======= =======
The accompanying notes are an integral part of these financial statements.
EXHIBIT 99.1
AMERICAN DISEASE MANAGEMENT ASSOCIATES L.L.C.
STATEMENTS OF CASH FLOWS
(in thousands)
For the Years Ended December 31, For the Periods Ended June 30,
-------------------------------- ------------------------------
1997 1998 1999 1999 2000
---- ---- ---- ---- ----
(unaudited) (unaudited)
Cash flows from operating activities:
Net income $ 473 $ 1,376 $ 3,520 $ 1,075 $ 2,392
Adjustments to reconcile net
income to net cash (used in)
provided by operating activities:
Depreciation and amortization 8 16 25 10 12
Provision for losses on receivables -- 231 414 207 --
Changes in assets and liabilities
Receivables (634) (1,248) (1,178) (545) (156)
Inventory -- (203) (850) (132) 130
Prepaid expenses and other current assets -- (11) (9) (4) 9
Other assets (2) 2 -- -- (3)
Accounts payable 101 (60) 71 68 505
Accrued expenses 25 28 (60) 10 98
Member distributions payable -- 151 (15) (41) (136)
Net cash (used in) provided
by operating activities (29) 282 1,918 648 2,851
------- ------- ------- ------- -------
Cash flows from investing activities:
Purchases of property and equipment (16) (87) (25) (16) (44)
------- ------- ------- ------- -------
Net cash used in investing activities (16) (87) (25) (16) (44)
------- ------- ------- ------- -------
Cash flows from financing activities:
Borrowings from capital lease obligations -- 37 -- -- --
Payments on capital lease obligations -- -- (24) (11) (13)
Borrowings (repayments) of notes payable 55 -- (115) (45) (60)
Distributions to members -- (250) (826) -- (2,750)
------- ------- ------- -------
Net cash provided by (used in)
financing activities 55 (213) (965) (56) (2,823)
------- ------- ------- ------- -------
Net decrease (increase) in cash and cash equivalents 10 (18) 928 576 (16)
Cash and cash equivalents -- beginning of period 14 24 6 6 934
------- ------- ------- ------- -------
Cash and cash equivalents -- end of period $ 24 $ 6 $ 934 $ 582 $ 918
======= ======= ======= ======= =======
The accompanying notes are an integral part of these financial statements.
EXHIBIT 99.1
AMERICAN DISEASE MANAGEMENT ASSOCIATES L.L.C.
STATEMENTS OF MEMBERS' EQUITY
(in thousands)
Members' Retained Total Members'
Capital Earnings Equity
------- -------- ------
Balance at December 31, 1996 $ 9 $ (75) $ (66)
---------------------------------------------
Net income -- 473 473
------- ------- -------
Balance at December 31, 1997 9 398 407
---------------------------------------------
Distributions -- (250) (250)
Net income -- 1,376 1,376
------- ------- -------
Balance at December 31, 1998 9 1,524 1,533
---------------------------------------------
Distributions -- (826) (826)
Net income -- 3,520 3,520
------- ------- -------
Balance at December 31, 1999 9 4,218 4,227
---------------------------------------------
Distributions -- (2,750) (2,750)
Net income -- 2,392 2,392
------- ------- -------
Balance at June 30, 2000 $ 9 $ 3,860 $ 3,869
---------------------------------------------
The accompanying notes are an integral part of these financial statements.
AMERICAN DISEASE MANAGEMENT ASSOCIATES, L.L.C
NOTES TO FINANCIAL STATEMENTS
Data with respect to the periods ended June 30, 1999 and 2000 is unaudited
(in thousands)
NOTE 1 -BUSINESS
American Disease Management Associates, L.L.C. ("ADIMA" or the
"Company") provides high-tech intravenous and injectible specialty
pharmaceutical products to chronically ill patients receiving healthcare
services from home by highly trained IV certified registered nurses, typically
after a hospital discharge. ADIMA has established itself among its managed care
client base as a high quality provider of specialy pharmaceutical infusion and
injectible products. ADIMA provides these products and services to managed care
organization's plan members principally residing in the New York and New Jersey
metropolitan areas.
ADIMA's customers are individual patients with various debilitating
illnesses. The Company provides services directly to individual clients and
bills the appropriate third party payor.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
certain estimates and assumptions. These estimates and assumptions affect the
reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from these estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and investments with original
maturities of three months or less.
Accounts Receivable
Accounts receivable includes amounts due from insurance companies
according to the contractual agreements. The allowance for doubtful accounts was
$231, $645, and $645 as of December 31, 1998, December 31, 1999, and June 30,
2000, respectively.
Inventory
Inventory is stated at the lower of cost or market. The cost of
inventory is determined using the first-in, first-out (FIFO) method.
Property and Equipment
Property and equipment are recorded at cost less accumulated
depreciation. Depreciation is provided on the straight-line method over the
estimated useful lives of the assets (three to seven years). Medical equipment
consists of components used during infusion therapy services. Leasehold
improvements are amortized using the straight-line basis over the related lease
term or estimated useful life of the assets, whichever is less.
Fair Value of Financial Instruments
The Company's financial instruments consist mainly of cash and cash
equivalents, accounts receivable, accounts payable, and notes payable. The
carrying amounts of these financial instruments approximate fair value due to
their short-term nature.
Revenue Recognition
Revenue is recognized at the time of service, at the amount to be
received from the insurance carriers according to contractual agreements.
Cost of Revenue
Cost of revenue includes drug costs, ancillary supply costs, nursing
costs, and bio-hazardous waste removal costs.
Tax Status
The members of the Company are taxed on their share of the Company's
taxable income. Therefore, no provision for Federal or state income taxes has
been included in the financial statements for the Company.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
As of December 31, As of June 30,
--------------------------------------------------------------
(unaudited)
1998 1999 2000
----------------------------------------------------------------------------------------------------
Furniture and fixtures $10 $13 $22
Computer and office equipment 40 60 90
Leasehold improvements 14 14 26
Medical equipment 67 69 62
----------------------------------------------------------------------------------------------------
131 156 200
Less: Accumulated depreciation (26) (51) (63)
----------------------------------------------------------------------------------------------------
Property and equipment, net $105 $105 $137
==============================================================
NOTE 4 - NOTES PAYABLE
In August 1996, the Company entered into a $220 note payable agreement,
due on demand, with a third party. The note bears interest at 10% per annum on
the unpaid principal balance. Additionally, in March 1997, the Company entered
into a $55 note payable agreement, due on demand, with the same third
party and the same terms. As of December 31, 1998, December 31, 1999, and June
30, 2000, $275, $160, and $100, respectively, were outstanding.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Leases
In July 1996, the Company signed a three-year lease agreement for
office space. In February 2000, the Company extended the lease agreement through
February 2003. Rent expense for the years ended December 31, 1997, 1998, and
1999 and for the periods ended June 30, 1999 and 2000, was $58, $58, $59, $29,
and $48, respectively.
The future minimum lease obligations under the agreement as of June 30,
2000, for the applicable calendar year are as follows:
2000 $48
2001 96
2002 96
2003 16
Litigation
The Company is not currently involved in any litigation.
NOTE 6 - SUBSEQUENT EVENT
On August 4, 2000, the Company was acquired by MIM Corporation for
approximately $24,035 in cash and MIM Corporation common stock.
EXHIBIT 99.1
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
(amounts are in thousands of dollars)
On August 4, 2000, MIM Corporation and subsidiaries ("MIM") completed
its acquisition of American Disease Management Associates, L.L.C. ("ADIMA"). The
acquisition was treated as a purchase for financial reporting purposes. The
aggregate purchase price approximated $24,035, and included $19,000 in cash and
2,697,947 shares of MIM common stock valued at $5,035. The excess of the
purchase price over the fair value of net assets acquired will be amortized over
the estimated useful life of 20 years.
The following unaudited pro forma combined condensed financial
statements are based on the respective historical consolidated financial
statements and the notes thereto of MIM and ADIMA. The unaudited pro forma
combined condensed balance sheet assumes that the acquisition took place on June
30, 2000. The unaudited pro forma combined condensed statements of operations
assumes that the acquisition took place on January 1, 1999.
The unaudited pro forma combined condensed financial statements are
based on the estimates and assumptions set forth in the notes to such
statements. The pro forma adjustments made in connection with the development of
the pro forma information are preliminary and have been made solely for purposes
of developing such pro forma information for illustrative purposes. The amount
of the purchase price in excess of ADIMA's net assets acquired has been
allocated to goodwill based on management estimates and the allocation will be
finalized based on an appraisal. Although MIM does not expect that the final
allocation will be materially different from these estimates, there can be no
assurances that such differences, if any will not be material. The unaudited pro
forma combined condensed financial statements do not purport to be indicative of
the results of operations for future periods or the combined financial position
or the results that actually would have resulted had the entity been a single
entity during these periods.
These unaudited pro forma combined condensed financial statements
should be read in conjunction with the historical financial statements and the
related notes thereto of MIM and ADIMA.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(in thousands)
As of June 30, 2000
-------------------
MIM ADIMA Pro Forma MIM
--- ----- --------- ---
(Historical) (Historical) Adjustments Pro Forma
ASSETS
Cash & cash equivalents $ 20,586 $ 918 $ (19,000) (4) $ 2,504
Investment securities 5,000 -- -- 5,000
Recievables, less allowance
for doubtful accounts 55,289 2,761 -- 58,050
Inventory 1,357 923 -- 2,280
Prepaid expenses and other current assets 1,430 11 -- 1,441
----- ----- ------ -----
Total current assets 83,662 4,613 (19,000) 69,275
Other investments 2,347 -- -- 2,347
Property, plant and equipment, net 8,792 137 -- 8,929
Due from affiliates 1,909 -- -- 1,909
Other assets, net 1,006 21 -- 1,027
Intangible assets, net 19,447 -- 20,165 (4,5) 39,612
------ ------- ------ ------
TOTAL ASSETS $ 117,163 $ 4,771 $ 1,165 $ 123,099
========= ======= ======= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of capital lease obligations $ 507 $ -- $ -- $ 507
Current portion of long term debt 279 100 -- 379
Accounts payable 6,384 690 -- 7,074
Claims payable 35,273 -- -- 35,273
Payable to plan sponsors and others 26,894 -- -- 26,894
Accrued expenses 4,374 112 -- 4,486
----- --- ------ -----
Total current liabilities 73,711 902 -- 74,613
Capital lease, net of current portion 437 -- -- 437
Long term debt, net of current portion 2,833 -- -- 2,833
Other non current liabilities 985 -- -- 985
Minority Interest 1,112 -- -- 1,112
Stockholders Equity
Preferred stock -- -- -- --
Common stock 2 -- -- 2
Treasury stock, at cost (338) -- -- (338)
Additional paid in capital 91,948 9 5,025 (3,5) 96,982
Accumulated deficit (52,768) 3,860 (3,860)(5) (52,768)
Stockholder notes receivable (759) -- -- (759)
---- ----- ----- ----
Total stockholders' equity 38,085 3,869 1,165 43,119
-------- ----- ----- ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $117,163 $ 4,771 $ 1,165 $ 123,099
======== ======= ======= =========
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Period ended June 30, 2000
--------------------------
MIM ADIMA Pro Forma MIM
(Historical) (Historical) Adjustments Pro Forma
------------ ------------ ----------- ---------
Revenues $ 184,795 $ 8,560 $ -- $ 193,355
Cost of revenues 169,659 4,899 -- 174,558
------- ----- -------
Gross profit 15,136 3,661 18,797
General & administrative expenses 14,043 1,306 492 (1) 15,841
------ ----- ------ ------
Income (loss) from operations 1,093 2,355 (492) 2,956
Interest income (expense) 714 37 (360)(2) 391
--- ------- ------ ---
Net income (loss) $ 1,807 $ 2,392 $ (852) $ 3,347
======= ======= ====== =======
Basic income per share $ 0.10 $ -- -- $ 0.16
Diluted income per share $ 0.09 $ -- -- $ 0.15
Weighted average common
shares used in computing
basic income per share 18,821 2,698 (3) 21,519
Weighted average common
shares used in computing
diluted income per share 19,218 2,698 (3) 21,916
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Year ended December 31, 1999
----------------------------
MIM ADIMA Pro Forma MIM
(Historical) (Historical) Adjustments Pro Forma
------------ ------------ ----------- ---------
Revenues $ 377,420 $ 11,605 -- $ 389,025
Cost of revenues 347,115 5,811 -- 352,926
------- ----- -------
Gross profit 30,305 5,794 36,099
General & administrative expenses 35,102 2,290 984 (1) 38,376
------ ----- -------- ------
Income (loss) from operations (4,797) 3,504 (984) (2,277)
Interest income (expense) 1,012 16 (720) (2) 308
----- ------- -------- ---
Net income (loss) $ (3,785) $ 3,520 $ (1,704) $ (1,969)
======== ======= ======== ========
Basic loss per share $ (0.20) $ -- -- $ (0.09)
Diluted loss per share $ (0.20) $ -- -- $ (0.09)
Weighted average common
shares used in computing
basic loss per share 18,660 2,698 (3) 21,358
Weighted average common
shares used in computing
diluted loss per share 18,660 2,698 (3) 21,358
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
(1) Represents the amortization of goodwill over twenty years.
(2) Represents the reduction of interest income for cash paid in connection
with the ADIMA acquisition.
(3) Represents the issuance of 2,697,947 shares of MIM common stock in
connection with the acquisition. The MIM common stock has been valued at
$1.87 per share (average price per share of MIM common stock several days
before and after the date of the agreement).
(4) Represents the cash paid in connection with the ADIMA acquisition.
(5) The amount of the purchase price in excess of ADIMA's net assets acquired
which has been allocated to goodwill based on management estimates and the
allocation will be finalized based on an appraisal.