SEC Info℠  
    Home      Search      My Interests      Help      Sign In      Please Sign In

Conmed Healthcare Management, Inc. – ‘8-K’ for 1/26/07 – EX-99.3

On:  Thursday, 2/1/07, at 5:04pm ET   ·   For:  1/26/07   ·   Accession #:  1144204-7-4789   ·   File #:  0-27554

Previous ‘8-K’:  ‘8-K’ on 1/17/07 for 1/12/07   ·   Next:  ‘8-K’ on / for 3/19/07   ·   Latest:  ‘8-K’ on 8/29/12 for 8/27/12

Find Words in Filings emoji
 		  in    Show  and   ↓Hints

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 2/01/07  Conmed Healthcare Mgmt, Inc.      8-K:2,3,5,8 1/26/07   15:10M                                    Vintage/FA

Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Current Report                                      HTML    420K 
 2: EX-3.1      Articles of Incorporation/Organization or By-Laws   HTML      9K 
 3: EX-4.1      Instrument Defining the Rights of Security Holders  HTML     10K 
 4: EX-4.2      Instrument Defining the Rights of Security Holders  HTML      7K 
 5: EX-4.3      Instrument Defining the Rights of Security Holders  HTML     93K 
 6: EX-4.4      Instrument Defining the Rights of Security Holders  HTML     93K 
 7: EX-10.3     Material Contract                                   HTML    260K 
 8: EX-10.4     Material Contract                                   HTML    113K 
 9: EX-10.5     Material Contract                                   HTML    248K 
10: EX-10.6     Material Contract                                   HTML    134K 
11: EX-23.1     Consent of Experts or Counsel                       HTML      9K 
12: EX-23.2     Consent of Experts or Counsel                       HTML      9K 
13: EX-99.1     Miscellaneous Exhibit                               HTML    122K 
14: EX-99.2     Miscellaneous Exhibit                               HTML     93K 
15: EX-99.3     Miscellaneous Exhibit                               HTML    216K

EX-99.3   —   Miscellaneous Exhibit

This exhibit is an HTML Document rendered as filed.  [ Alternative Formats ]


Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Set forth below are the following unaudited pro forma financial statements:
 
 
•
the unaudited pro forma condensed combined balance sheet as of September 30, 2006 assuming the merger between Pace and CONMED occurred as of the balance sheet date presented;
 
 
•
the unaudited pro forma condensed combined statement of operations for the nine months ended September 30. 2006, assuming the merger between Pace and CONMED occurred as of January 1, 2006; and
 
 
•
the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2005, assuming the merger between PATY and CCS Consolidated occurred as of January 1, 2005.
 
The unaudited pro forma condensed combined financial statements give effect to the transaction between Pace and CONMED. The purchase price has been allocated among the fair values of the assets and liabilities of CONMED, while the historical results of Pace are reflected in the results of the combined company. The transaction has been accounted for under the purchase method of accounting in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations.” Under the purchase method of accounting, the total estimated purchase price, calculated as described in Notes to these unaudited pro forma condensed combined financial statements, is allocated to the net tangible and intangible assets acquired and liabilities assumed in connection with the transaction, based on their estimated fair values as of the completion of the transaction. Management has made a preliminary allocation of the estimated purchase price to the tangible and intangible assets acquired and liabilities assumed based on various preliminary estimates. A final determination of these estimated fair values will be based on the actual net tangible and intangible assets of CONMED that exist as of the date of completion of the transaction.
 
The unaudited pro forma condensed combined financial statements are presented for informational purposes only, are based on certain assumptions that Pace and CONMED believe to be reasonable, and do not purport to represent the companies’ combined financial condition nor results of operations had the merger occurred on or as of the dates noted above or to project results for any future date or period. In the opinion of management, all adjustments have been made that are needed to present fairly the unaudited pro forma condensed combined financial information. The information is subject to a number of uncertainties, relating to the merger and related matters, including among other things, estimates, assumptions and uncertainties regarding the amount of accruals for direct acquisition costs and the amount of expenses and other costs relating to the merger and the actual amount of identified intangible assets and goodwill that will result from the merger. Accordingly, the unaudited pro forma condensed combined financial information does not purport to be indicative of the actual results of operations or financial condition that would have been achieved had the merger in fact occurred on the dates indicated, nor does it purport to be indicative of the results of operations or financial condition that may be achieved in the future.
 
These unaudited pro forma condensed combined financial statements have been prepared based on preliminary estimates of fair values. Amounts preliminarily allocated to intangible assets with definite lives may change, which could result in a material change in amortization of intangible assets. Therefore, the actual amounts recorded as of the completion of the transaction may differ materially from the information presented in these unaudited pro forma condensed combined financial statements.
 
The unaudited pro forma condensed combined financial information should be read in conjunction with CONMED’s audited financial statements and unaudited condensed financial statements and related attached notes included in this Form 8-K and Pace’s audited financial statements and unaudited condensed financial statements and related attached notes included in Pace’s Form 10-KSB for the year ended December 31, 2005 and its Form 10-QSB for the quarter ended September 30, 2006.

1
PACE Health Management Systems, Inc. and CONMED, Inc.
Pro Forma Condensed Combined Balance Sheet
As of September 30, 2006

The unaudited pro forma balance sheet and pro forma operating statements have been prepared assuming the Acquisition of CONMED and the Pipe Financing had been completed on September 30, 2006 but do not reflect the Plan of Recapitalization. The pro forma financial data is presented for illustrative purposes only and is not necessarily indicative of any future results of opera-tions or the results that might have occurred if the Acquisition and Pipe Financing had actually occurred on September 30, 2006.

   
CONMED as Reported 9/30/06
  
PACE as Reported 9/30/06
  
Private Placement Accounting Entries
      
Acquisition Accounting Entries
      
Pro forma 9/30/06 after Closing
      
ASSETS
                                                  
                                                   
CURRENT ASSETS
                                                  
Cash
  
$
564,032
  
$
1,090,641
  
$
13,105,000
    
a)
 
$
(8,053,000
)
  
c)
 
$
6,706,673
        
Accounts receivable
    
1,092,885
   
566
   
-
         
-
         
1,093,451
       
Prepaid expenses
    
151,137
   
23,252
   
-
         
-
         
174,389
       
Cash held in escrow
    
-
   
250,000
   
-
         
(250,000
)
        
-
       
Total current assets
    
1,808,054
   
1,364,459
   
13,105,000
         
(8,303,000
)
        
7,974,513
       
                                                   
PROPERTY AND EQUIPMENT, net
    
46,601
   
-
   
-
         
-
         
46,601
       
                                                   
OTHER ASSETS
                                                  
Deferred tax asset
    
-
   
-
   
-
         
297,000
   
d)
 
  
297,000
       
Service contracts acquired
    
-
   
-
   
-
         
4,500,000
   
e)
 
  
4,500,000
       
Non-compete agreements
    
-
   
-
   
-
         
1,000,000
   
f)
 
  
1,000,000
       
Goodwill
    
-
   
-
   
-
         
6,071,700
   
h)
 
  
6,071,700
       
Other
    
-
   
277,975
   
-
         
(213,000
)
  
c)
 
  
64,975
       
Deposit
    
140,166
   
-
   
(125,000
)
  
a)
 
  
-
         
15,166
       
Total other assets
    
140,166
   
277,975
   
(125,000
)
        
11,655,700
         
11,948,841
       
   
$
1,994,821
  
$
1,642,434
  
$
12,980,000
        
$
3,352,700
        
$
19,696,955
        
LIABILITIES AND STOCKHOLDERS' EQUITY
                                                  
CURRENT LIABILITIES
                                                  
Accounts payable
  
$
1,001,773
  
$
57,916
  
$
-
        
$
-
        
$
1,059,689
        
Accrued expenses
    
739,940
   
-
   
-
         
-
         
739,940
       
Deferred revenue
    
91,381
   
-
   
-
         
-
         
91,381
       
Notes payable, current portion
    
7,220
   
-
   
-
         
-
         
7,220
       
                                                   
Total current liabilities
    
1,840,314
   
57,916
   
-
         
-
         
1,898,230
       
                                                   
NOTES PAYABLE, LONG-TERM
    
15,108
   
-
   
-
         
-
         
15,108
       
                                                   
DEFERRED TAXES
    
-
   
-
   
-
         
2,145,000
   
h)
 
  
2,145,000
       
                                                   
REDEEMABLE WARRANTS
    
-
   
-
   
2,918,011
   
a)
 
              
2,918,011
   
j)
 
                                                   
SERIES B REDEEMABLE CONVERTIBLE PARTICIPATING PREFERRED STOCK
    
-
   
-
   
9,907,049
   
a)
 
              
9,907,049
   
j)
 
                                                   
STOCKHOLDERS' EQUITY
                                                  
Series A convertible participating preferred stock
    
-
   
2,875,000
   
(2,875,000
)
  
b)
 
  
-
         
-
       
Series C convertible preferred stock
    
-
   
-
   
-
         
1,347,099
   
c)
 
  
1,347,099
   
j)
 
Common stock
    
300
   
17,065,136
   
2,875,000
   
b)
 
  
(300
)
  
i)
 
  
19,940,136
       
Additional pain-in capital
    
-
   
683,486
   
154,940
   
a)
 
  
-
         
838,426
       
Retained earnings (deficit)
    
139,099
   
(19,039,104
)
  
-
         
(139,399
)
  
i)
 
  
(19,039,104
)
      
Total stockholders' equity
    
139,399
   
1,584,518
   
154,940
         
1,207,700
         
3,086,557
       
   
$
1,994,821
  
$
1,642,434
  
$
12,980,000
        
$
3,352,700
        
$
19,969,955
        
Key Data Elements
                                                  
Cash
    
564,032
   
1,090,641
                           
6,706,673
       
Working capital
    
(32,260
)
  
1,306,543
                           
6,076,283
       
Net tangible assets
    
139,399
   
1,584,518
                           
(6,637,143
)
      
Debt
    
15,108
   
-
                           
9,922,157
       
 
2
Footnotes to the Pro forma Condensed Combined Balance Sheet on the previous page

Entries related to the Financing

 
a)
To give effect to the issuance of $15,000,000 Series B, Redeemable Preferred Stock with warrants less deal expenses of $2,174,940.
 
b)
The conversion of Series A preferred stock into common stock

Entries related to the Acquisition of CONMED
 
c)
Purchase price of $8,000,000 cash plus 8,000 shares of Series C Preferred Stock convertible into 800,000 shares of common stock, less deal expenses of $266,000, including $213,000 paid prior to September 30, 2006, and an adjustment in the minimum equity requirement of CONMED estimated at the time of closing to be $260,901. The value of the shares issued is estimated as follows:
 
800,000 shares at $2.01 per share
  
$
1,068,000
  
Less: equity adjustment (129,901 shares)
    
260,901
  
Total equity issued
  
$
1,347,099
  

 
d)
Reflects adjustments of deferred tax assets. As of December 31, 2005, PACE had recorded deferred tax assets for net operating loss carryforwards, R&D credit carryforwards and warrants totaling $6,957,000, which were offset by a valuation allowance of $6,957,000. The Company believes that 382 Change of Control Limitations will apply to this transaction and the deferred tax asset will be reduced to an amount equal to approximately $297,000. 
 
e)
Records the value of service contracts acquired based on the estimated operating profit for the remaining life of existing contracts plus option renewal periods
 
f)
Records the value of non-compete agreements and employment agreements for the principal shareholders of CONMED as part of the Acquisition.
 
g)
Deferred tax liability related to the projected amortization of the service contracts and non-compete/employment agreements acquired
 
h)
Reflects the value of goodwill acquired based the following purchase price allocation.

Cash purchase price
  
$
8,000,000
  
Escrow deposit forfeited
    
250,000
  
Deal expenses
    
266,000
  
Stock issued
    
1,347,099
  
Total purchase price
    
9,863,099
  
         
Historical net book value
    
139,399
  
Change in valuation allowance
    
297,000
  
Identified intangibles
    
5,500,000
  
Deferred taxes on intangibles
    
(2,145,000
)
Fair value of net identified assets acquired
    
3,791,399
  
Goodwill
  
$
6,071,700
  

i) Eliminate the equity of CONMED

Entries related to the Plan of Recapitalization
 
j)
All of the Series A, B and C preferred shares automatically convert into common shares following the Plan of Recapitalization.

3
PACE Health Management Systems, Inc. and CONMED, Inc.
Pro forma Statement of Operations
For the Nine Months Ended September 30, 2006

The following pro forma Condensed Combined Statement of Operations is prepared to reflect financial results as if the agreement occurred prior to the beginning of the financial period being presented and after giving effect to the Acquisition and Private Placement but before giving effect to the Plan of Recapitalization. The pro forma financial data is presented for illustrative purposes only and is not necessarily indicative of any future results of operations or the results that might have occurred if the Acquisition and Private Placement had actually occurred before January 1, 2006.

   
PACE as Reported 9/30/06
  
CONMED as Reported 9/30/06
  
Entries Related to the Acquisition
      
Pro forma 9/30/06
      
Revenue
  
$
-
  
$
11,117,051
  
$
-
        
$
11,117,051
        
                                       
OPERATING EXPENSES:
                                      
Salaries and employee benefits
    
-
   
6,421,376
   
-
         
6,421,376
       
Lab fees and medical supplies
    
-
   
3,140,173
   
-
         
3,140,173
       
Other operating expenses
    
225,312
   
1,198,318
   
-
         
1,423,630
       
Amortization of service contracts
   
-
   
-
   
1,492,000
   
a)
 
  
1,492,000
   
 
 
Amortization of employment contracts
    
-
   
-
   
201,000
   
b)
 
  
201,000
   
 
 
Total operating expenses
    
225,312
   
10,759,867
   
1,693,000
         
12,678,179
       
                                       
Operating income (loss)
    
(225,312
)
  
357,184
   
(1,693,000
)
        
(1,561,128
)
      
                                       
Interest (income) /expense
    
(55,752
)
  
6,722
   
-
         
(49,030
)
      
                                       
Income (loss) before income taxes
    
(169,560
)
  
350,462
   
(1,693,000
)
        
(1,512,098
)
      
                                       
Provision for income taxes (benefits)
    
-
   
-
   
(590,000
)
  
c)
 
  
(590,000
)
  
 
 
                                       
Net income (loss)
    
(169,560
)
  
350,462
   
(1,103,000
)
        
(922,098
)
      
                                       
Preferred dividends in arrears
    
215,625
   
-
   
-
         
215,625
       
                                       
Net loss attributable to common shareholders
  
$
(385,185
)
$
350,462
  
$
(1,103,000
)
      
$
(1,137,723
)
      
                                       
LOSS PER COMMON SHARE
                                      
Basic and diluted
  
$
(0.07
)
                  
$
(0.14
)
      
                                       
WEIGHTED AVERAGE SHARES OUTSTANDING
                                      
Basic and diluted
    
5,716,074
                     
8,316,074
   
 
 

a)
Amortization of the capitalized value of acquired service contracts for the first nine months from the date of acquisition based on the life of individual contracts.
b)
Amortization of the capitalized value of acquired employment and non-compete agreements for the first nine months from the date of acquisition.
c)
Based an on estimated federal and state effective tax rate of 39% of pro forma loss.
d)
Options, warrants, and convertible preferred stock were excluded from the computation of diluted loss per share because the effect of their inclusion would be antidilutive. Weighted shares include the conversion of 50% of the accrued dividends related to the Series A Convertible Preferred Stock, which occurred in connection with the Private Placement.

4
PACE Health Management Systems, Inc. and CONMED, Inc.
Pro forma Statement of Operations
For the Years Ended December 31, 2005

The following pro forma Condensed Combined Statement of Operations is prepared to reflect financial results as if the agreement occurred prior to the beginning of the financial period being presented and after giving effect to the Acquisition and Private Placement but before giving effect to the Plan of Recapitalization. The pro forma financial data is presented for illustrative purposes only and is not necessarily indicative of any future results of operations or the results that might have occurred if the Acquisition and Private Placement had actually occurred on January 1, 2005.

   
PACE as Reported 12/31/05
  
CONMED as Reported 12/31/05
  
Adjustments
      
Pro forma 12/31/05
      
Revenue
  
$
-
  
$
11,669,322
  
$
-
        
$
11,669,322
        
                                       
OPERATING EXPENSES:
                                      
Salaries and employee benefits
    
-
   
6,991,780
   
-
         
6,991,780
       
Lab fees and medical supplies
    
-
   
2,989,838
   
-
         
2,989,838
       
Other operating expenses
    
119,394
   
1,101,599
   
-
         
1,220,993
       
Amortization of service contracts
   
-
   
-
   
1,909,000
   
a)
 
  
1,909,000
   
 
 
Amortization of employment contracts
    
-
   
-
   
269,000
   
b)
 
  
269,000
   
 
 
Total operating expenses
    
119,394
   
11,083,217
   
2,178,000
         
13,380,611
       
                                       
Operating income (loss)
    
(119,394
)
  
586,105
   
(2,178,000
)
        
(1,711,289
)
      
                                       
Interest (income) /expense
    
(47,963
)
  
4,433
   
-
         
(43,530
)
      
                                       
Income (loss) before income taxes
    
(71,431
)
  
581,672
   
(2,178,000
)
        
(1,667,759
)
      
                                       
Provision for income taxes (benefits)
    
-
   
-
   
(650,000
)
  
c)
 
  
(650,000
)
  
 
 
                                       
Net income (loss)
    
(71,431
)
  
581,672
   
(1,528,000
)
        
(1,017,759
)
      
                                       
Preferred dividends in arrears
    
287,500
   
-
   
-
         
287,500
       
                                       
Net loss attributable to common shareholders
  
$
(358,931
)
$
581,672
  
$
(1,528,000
)
      
$
(1,305,259
)
      
                                       
LOSS PER COMMON SHARE
                                      
Basic and diluted
  
$
(0.06
)
                  
$
(0.16
)
      
                                       
WEIGHTED AVERAGE SHARES OUTSTANDING
                                      
Basic and diluted
    
5,716,074
                     
8,316,074
   
 
 

a)
Amortization of the capitalized value of acquired service contracts for the first nine months from the date of acquisition based on the life of individual contracts.
b)
Amortization of the capitalized value of acquired employment and non-compete agreements for the first nine months from the date of acquisition.
c)
Based an on estimated federal and state effective tax rate of 39% of pro forma net loss.
d)
Options, warrants, and convertible preferred stock were excluded from the computation of diluted loss per share because the effect of their inclusion would be antidilutive. Weighted shares include the conversion of 50% of the accrued dividends related to the Series A Convertible Preferred Stock, which occurred in connection with the Private Placement.

5

Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘8-K’ Filing    Date    Other Filings
Filed on:2/1/07
For Period End:1/26/073,  4
9/30/0610QSB
1/1/06
12/31/0510KSB
1/1/05
 List all Filings 
↑Top
Filing Submission 0001144204-07-004789   –   Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)
Copyright © 2024 Fran Finnegan & Company LLC – All Rights Reserved.
About — Privacy — Redactions — Help — Wed., Apr. 24, 6:14:58.1pm ET