---------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 31, 2002
MIM Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-28740 05-0489664
- ------------------------ ------------------------ -------------
(State of incorporation) (Commission File Number) (IRS Employer
Identification No.)
100 Clearbrook Road, Elmsford, NY 10523
--------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914) 460-1600
------------------------------------------------------------------------
(Former name or former address, if changed since last report)
Item 2. Acquisitions or Disposition of Assets.
This Form 8-K/A is being filed to amend the Form 8-K filed on February 5,
2002 by MIM Corporation (the "Company") to include the financial statements and
pro forma financial information referred to in Item 7 below relating to the
acquisition by the Company of all of the issued and outstanding common stock of
Vitality Home Infusion Services, Inc., a New York corporation ("Vitality"),
pursuant to a Stock Purchase Agreement dated as of January 9, 2002 (the
"Purchase Agreement"). At the time of the filing of the Form 8-K, it was
impractical for the Company to provide financial information for Vitality or pro
forma financial information of the Company relative to its acquisition of
Vitality. Pursuant to the instructions to Item 7 of Form 8-K, the Company hereby
amends Item 7 to the Form 8-K to include the previously omitted information.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired. The financial statements of
Vitality are attached hereto as Exhibit 99.2.
(b) Pro Forma Financial Information. The pro-forma consolidated financial
statements of the Company are attached hereto as Exhibit 99.3.
(c) Exhibits.
2.1* Purchase Agreement, dated as of January 9, 2002, among Vitality, Marc
Wiener, Barbara Kammerer and the Company.
99.1* Press Release, dated January 31, 2002, issued by the Company
99.2 Audited Financial Statements of Vitality as of December 31, 2001 and
2000 and for the years ended December 31, 2001, 2000 and 1999.
99.3 Pro-Forma Financial Statements of the Company as of and for the year
ended December 31, 2001.
99.4 Letter to SEC pursuant to Temporary Note 3T
* Incorporated by reference to the Company's Current Report on Form 8-K filed
with the Commission on February 5, 2002
2
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.
Date: April 16, 2002 MIM Corporation
By: /s/ Barry A. Posner
--------------------------------
Barry A. Posner,
Executive Vice President
EXHIBIT INDEX
99.2 Audited Financial Statements of Vitality as of December 31, 2001 and 2000
and for the years ended December 31, 2001, 2000 and 1999.
99.3 Pro-Forma Financial Statements of the Company as of and for the twelve
months ended December 31, 2001.
99.4 Letter to SEC pursuant to Temporary Note 3T
Exhibit 99.2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Vitality Home Infusion Services, Inc.:
We have audited the accompanying balance sheets of Vitality Home Infusion
Services, Inc. (a New York corporation) as of December 31, 2001 and 2000, and
the related statements of income, changes in stockholders' equity and cash flows
for each of the three years in the period ended December 31, 2001. 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 Vitality Home Infusion
Services, Inc. as of December 31, 2001 and 2000, and the results of its
operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
March 28, 2002
VITALITY HOME INFUSION SERVICES, INC.
BALANCE SHEETS AS OF
DECEMBER 31, 2001 AND 2000
ASSETS 2001 2000
------ ---- ----
CURRENT ASSETS:
Cash and cash equivalents $ 4,080,650 $ 2,355,415
Marketable securities 107,199 1,784,288
Accounts receivable, less allowance for doubtful accounts of $2,628,021 and
$2,261,990 in 2001 and 2000, respectively 5,204,879 7,313,693
Inventory 4,533,888 3,226,135
Prepaid expenses and other current assets 97,597 108,942
---------- ----------
Total current assets 14,024,213 14,788,473
PROPERTY AND EQUIPMENT, net 79,843 55,683
OTHER ASSETS 3,424 2,672
---------- ----------
Total assets $ 14,107,480 $ 14,846,828
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 5,323,307 $ 3,268,461
Accrued expenses 1,267,664 1,033,950
Capital lease obligations 6,924 -
---------- ----------
Total current liabilities 6,597,895 4,302,411
CAPITAL LEASE OBLIGATIONS, net of current portion 10,592 -
---------- ----------
Total liabilities 6,608,487 4,302,411
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par value, 200 shares authorized, 100 shares issued and
outstanding 2,000 2,000
Retained earnings 7,486,205 11,152,598
Accumulated other comprehensive income (loss) 10,788 (610,181)
Total stockholders' equity 7,498,993 10,544,417
---------- ----------
Total liabilities and stockholders' equity $ 14,107,480 $ 14,846,828
========== ==========
The accompanying notes to financial statements are an integral part of these balance sheets.
VITALITY HOME INFUSION SERVICES, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
2001 2000 1999
---- ---- ----
REVENUE $ 74,770,575 $ 64,295,242 $ 54,329,896
COST OF REVENUE 63,396,319 46,814,594 43,411,372
---------- ---------- ----------
Gross profit 11,374,256 17,480,648 10,918,524
OPERATING EXPENSES 7,078,584 7,115,082 3,722,201
---------- ---------- ----------
Income from operations 4,295,672 10,365,566 7,196,323
OTHER (EXPENSE) INCOME (1,561,760) 3,858 161,749
---------- ---------- ----------
Income before provision for income taxes 2,733,912 10,369,424 7,358,072
PROVISION FOR INCOME TAXES 56,516 92,328 82,651
---------- ---------- ----------
Net income $ 2,677,396 $ 10,277,096 $ 7,275,421
========== ========== ==========
The accompanying notes to financial statements are an integral part of these statements.
VITALITY HOME INFUSION SERVICES, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
Accumulated
Other Total
Common Stock Retained Comprehensive Stockholders' Comprehensive
Shares Amounts Earnings Equity Equity Income (Loss)
------ ------- -------- ------ ------ ------------
BALANCE, December 31, 1998 100 $ 2,000 $ 4,333,694 $ - $ 4,335,694
Distributions paid to stockholders - - (3,913,170) - (3,913,170) $ -
Unrealized gain on marketable securities - - - 68,755 68,755 68,755
Net income - - 7,275,421 - 7,275,421 7,275,421
----- --------- ----------- ----------- ------------ ---------------
Comprehensive income $ 7,344,176
===============
BALANCE, December 31, 1999 100 2,000 7,695,945 68,755 7,766,700
Distributions paid to stockholders - - (6,820,443) - (6,820,443) $ -
Unrealized loss on marketable securities - - - (678,936) (678,936) (678,936)
Net income - - 10,277,096 - 10,277,096 10,277,096
----- --------- ----------- ----------- ------------ ---------------
Comprehensive income $ 9,598,160
===============
BALANCE, December 31, 2000 100 2,000 11,152,598 (610,181) 10,544,417
Distributions paid to stockholders - - (6,343,789) - (6,343,789) $ -
Realized loss and unrecognized gain
on sale of marketable securities - - - 620,969 620,969 620,969
Net income - - 2,677,396 - 2,677,396 2,677,396
----- --------- ----------- ----------- ------------ ---------------
Comprehensive income $ 3,298,365
===============
BALANCE, December 31, 2001 100 $ 2,000 $ 7,486,205 $ 10,788 $ 7,498,993
===== ========= =========== =========== ============
The accompanying notes to financial statements are an integral part of these statements.
VITALITY HOME INFUSION SERVICES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
2001 2000 1999
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,677,396 $ 10,277,096 $ 7,275,421
Adjustments to reconcile net income to net cash provided by
operating activities-
Depreciation and amortization 17,692 14,112 16,271
Realized loss (gain) on sale of marketable securities 1,526,467 (128,757) (37,324)
Provision for bad debts 3,970,989 4,665,923 1,960,291
Changes in assets and liabilities-
Increase in accounts receivable (1,862,175) (5,914,312) (5,394,315)
Increase in inventory (1,307,753) (909,445) (734,651)
(Increase) decrease in prepaid expenses 11,345 (62,339) 30,565
(Increase) decrease in other assets (752) 4,816 (7,488)
Increase (decrease) in accounts payable 2,054,846 (1,517,554) 2,149,863
Increase in accrued expenses 233,714 922,864 18,151
----------- ----------- -------------
Net cash provided by operating activities 7,321,769 7,352,404 5,276,784
----------- ----------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (20,873) (34,011) (33,975)
Marketable securities 771,591 (1,419,171) (418,329)
----------- ----------- -------------
Net cash provided by (used in) financing activities 750,718 (1,453,182) (452,304)
----------- ----------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of capital lease obligations (3,463) - -
Distributions paid to stockholders (6,343,789) (6,820,443) (3,913,170)
----------- ----------- -------------
Net cash used in financing activities (6,347,252) (6,820,443) (3,913,170)
----------- ----------- -------------
Net increase (decrease) in cash 1,725,235 (921,221) 911,310
CASH AND CASH EQUIVALENTS, beginning of year 2,355,415 3,276,636 2,365,326
----------- ----------- -------------
CASH AND CASH EQUIVALENTS, end of year $ 4,080,650 $ 2,355,415 $ 3,276,636
=========== =========== =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for-
Income taxes $ 118,800 $ 82,400 $ 33,100
=========== =========== =============
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:
Fixed assets acquired under capital leases $ 20,979 $ - $ -
=========== =========== =============
The accompanying notes to financial statements are an integral part of these statements.
1. THE COMPANY AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
The Company
Vitality Home Infusion Services, Inc. ("Vitality") is a New York based provider
of specialty pharmaceutical services. Vitality distributes specialty
pharmaceutical services, on a national basis, to chronically ill and genetically
impaired patients, particularly focusing on oncology, infectious disease,
immunology and rheumatory disease.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted 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.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and investments purchased with
original maturities of three months or less. Cash equivalents are carried at
cost, and consist principally of commercial paper.
Marketable Securities
In accordance with Financial Accounting Standards Board Statement No. 115,
Vitality determines the classification of securities as held-to-maturity or
available-for-sale at the time of purchase, and reevaluates such designation at
each balance sheet date. Securities are classified as held-to-maturity when
Vitality has the positive intent and ability to hold the securities to maturity.
Held-to-maturity securities are stated at cost, adjusted for amortization of
premiums and discounts to maturity. Marketable securities not classified as
held-to-maturity are classified as available-for-sale. Available-for-sale
securities are carried at fair value, with unrealized gains and losses reported
as a separate component of stockholders' equity. The cost of securities sold is
based on the specific identification method.
Allowance for Doubtful Accounts
Vitality provides an allowance for doubtful accounts, which is based upon a
review of outstanding receivables as well as historical collection information.
In determining the amount of the allowance, management is required to make
certain estimates and assumptions regarding the timing and amount of collection.
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 stated at cost and are depreciated using the
straight-line method over the estimated useful lives of the respective assets,
which range from 5 to 7 years. Leasehold improvements are amortized using the
straight-line method over the related lease term or the estimated useful life of
the assets, whichever is less.
Long-Lived Assets
Vitality reviews the recoverability of its long-lived assets when events or
changes in circumstances arise in order to identify business conditions which
may indicate a possible impairment. Vitality believes that there have been no
such events or changes in circumstances.
Revenue Recognition
Revenue is recognized upon the shipment of products or provision of services
when persuasive evidence of an arrangement exists according to contractual
agreements, delivery has occurred or services have been rendered, the price is
fixed or determinable and collectibility is reasonably assured.
Fair Value of Financial Instruments
Vitality's financial instruments consist mainly of cash and cash equivalents,
marketable securities, accounts receivable and accounts payable. The carrying
amounts of these financial instruments approximate fair value due to their
short-term nature.
Income Taxes
Vitality has elected to be treated as an "S" corporation for Federal income tax
purposes. As an "S" corporation the stockholders of Vitality are liable for
Federal income taxes on Vitality's taxable income, as it passes through to the
stockholders' individual income tax returns. Therefore, no provision for Federal
income taxes has been included in these financial statements. During 2001, 2000
and 1999, Vitality has provided for state income taxes at statutory rates.
Deferred state income taxes for differences in timing in reporting income for
financial statement and tax purposes are not significant. Vitality's "S"
corporation status terminated on February 1, 2002.
Subsequent to December 31, 2001, Vitality distributed $2,057,955 to its former
stockholders.
Recent Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," and
No. 142, "Goodwill and Other Intangible Assets," which establishes accounting
and reporting standards governing business combinations, goodwill and intangible
assets. SFAS No. 141 requires all business combinations initiated after June 30,
2001, to be accounted for using the purchase method. SFAS No. 142 states that
goodwill is no longer subject to amortization over its estimated useful life.
Rather, goodwill will be subject to at least an annual assessment for impairment
by applying a fair-value based test. Under the new rules, an acquired intangible
asset should be separately recognized and amortized over its useful life (unless
an indefinite life) if the benefit of the intangible asset is obtained through
contractual or other legal rights, or if the intangible asset can be sold,
transferred, licensed, rented or exchanged regardless of the acquirer's intent
to do so. Vitality adopted these standards on January 1, 2002. Vitality does not
expect that the adoption of these standards will have any effect on Vitality's
results of operations, financial position or cash flows.
In August 2001, the Financial Accounting Standards Board issued SFAS No. 143,
"Accounting for Asset Retirement Obligations". SFAS No. 143 addresses financial
accounting and reporting obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. SFAS No. 143 is
effective for fiscal years beginning after June 14, 2002. Vitality does not
expect that the adoption of SFAS No. 143, which will be effective for Vitality
as of January 1, 2003, will have any effect on Vitality's results of operations,
financial position or cash flows.
In August 2001, the Financial Accounting Standards Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets", which is
effective for fiscal years beginning after December 15, 2001, and addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets. This statement supersedes SFAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and the
accounting and reporting provisions of Accounting Principles Board Opinion No.
30, "Reporting the Results of Operations - Reporting the Effects of Disposal of
a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions," for the disposal of a segment of a business. Vitality
plans to adopt the standard during 2002, and does not expect that the adoption
of SFAS No. 144 will have any effect on its results of operations, financial
position or cash flows.
Concentrations
During the years ended December 31, 2001 and 2000, revenue from members of one
insurance carrier represented 9.6% and 47.5% of total revenue, respectively.
Accounts receivable from these members as of December 31, 2001 and 2000, was
$617,156 and $4,135,929, respectively.
During the year ended December 31, 2001, revenue from one distributor
represented 29% of total revenue. Accounts receivable from this customer as of
December 31, 2001 was $24,416. Generally, reserves derived from distributors
provide a lower profit margin to Vitality than revenues derived from members of
insurance carriers.
2. MARKETABLE SECURITIES
The cost and estimated fair value of the marketable securities are as follows:
Gross
Unrealized
Cost Gain (Loss) Fair Value
---- ----------- ----------
Available-for-sale equity securities as of:
December 31, 2000 $ 2,394,469 $ (610,181) $ 1,784,288
=============== ============== ==============
December 31, 2001 $ 96,311 $ 10,788 $ 107,199
=============== ============== ==============
During the years ended December 31, 2001, 2000 and 1999, net realized gains
(losses) on marketable securities were ($1,526,467), $128,757 and $37,324,
respectively, and is included in other income (expense) in the statements of
income.
3. PROPERTIES AND EQUIPMENT
As of December 31, 2001 and 2000, property and equipment consisted of the
following:
2001 2000
---- ----
Furniture and fixtures $ 16,128 $ 16,128
Computers and equipment 88,757 67,884
Vehicles 55,626 34,647
Leasehold improvements 14,148 14,148
-------- --------
174,659 132,807
Less- Accumulated depreciation 94,816 77,124
-------- --------
$ 79,843 $ 55,683
======== ========
4. RELATED PARTY TRANSACTIONS
Vitality leases office space from an entity owned by the former stockholders of
Vitality. Vitality was not required to pay rent related to this space during
2001, 2000 and 1999. Vitality pays all real estate taxes, repairs, maintenance
and other expenses related to the building. During the years ended December 31,
2001, 2000 and 1999, these expenses totaled $93,305, $78,480 and $108,630,
respectively.
5. EMPLOYEE BENEFIT PLAN
Vitality provides for a qualified profit-sharing plan to all eligible employees.
During 2001, 2000 and 1999, Vitality charged $154,365, $109,907 and $72,874,
respectively, to operations for profit sharing expenses. Vitality elected to
terminate the profit-sharing plan as of January 31, 2002.
6. COMMITMENTS AND CONTINGENCIES
On November 2, 2000, a customer requested a refund amounting to approximately
$700,000 for claims processed from February 2, 2000 through July 18, 2000
relating to overpayments for claim quantities in excess of contractual terms.
The customer contends that it should not have been billed for the excess claim
quantities.
The outcome of this matter is uncertain and cannot be predicted at this time. In
2000 Vitality provided a reserve for the full refund requested by this customer
as a reduction of revenue. As of December 31, 2001 and 2000, the entire
liability is outstanding and accrued in the financial statements.
Various lawsuits and other claims may occur in the normal course of business.
Management is not aware of any additional pending lawsuits or other claims and
is of the opinion that such lawsuits and claims, if any, will not have a
material effect on the accompanying financial statements.
7. SUBSEQUENT EVENT
On January 9, 2002, the stockholders of Vitality executed an agreement to sell
all of the common stock of Vitality to MIM Corporation. The agreement provides
for consideration of $45,000,000, of which $35,000,000 was paid in cash and
$10,000,000 of MIM Corporation common stock. The acquisition was consummated on
January 31, 2002.
Exhibit 99.3
MIM CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
On January 31, 2002, MIM Corporation (the "Company") acquired from Marc Wiener
and Barbara Kammerer all of the issued and outstanding common stock of Vitality
Home Infusion Services, Inc., a New York corporation ("Vitality"), pursuant to a
Stock Purchase Agreement dated as of January 9, 2002 (the "Purchase Agreement")
among Vitality, Marc Wiener, Barbara Kammerer and the Company. Vitality, located
in Roslyn Heights, New York, distributes specialty pharmaceutical services, on a
national basis, to chronically ill and genetically impaired patients,
particularly focusing on oncology, infectious disease, immunology and rheumatory
disease.
The aggregate purchase price for Vitality was $45,000,000, consisting of
$35,000,000 in cash and the balance in Company common stock, a portion of which
is being held in escrow to secure potential indemnification claims for breaches
of Vitality and/or the individual seller's representations and warranties and
covenants under the Purchase Agreement. The cash portion of the purchase price
was funded through borrowings under the Company's existing $45,000,000 revolving
credit facility. The transaction was accounted for as a purchase.
The following unaudited pro forma combined condensed financial statements are
based on the respective historical consolidated financial statements of the
Company and Vitality. The unaudited pro forma combined condensed balance sheet
assumes the acquisition was completed on December 31, 2001. The unaudited pro
forma combined condensed statement of income assumes the acquisition was
completed on January 1, 2001.
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 purchase price of the
acquisition was allocated to the net assets acquired based on management's
estimates of their fair values at the date of acquisition. Although the Company
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 the Company and Vitality.
MIM Corporation
Unaudited Pro Forma Combined Condensed Balance Sheet
(In Thousands)
As of December 31, 2001
-----------------------------------------------------------
MIM Vitality Pro Forma MIM
(Historical) (Historical) Adjustments Pro Forma
---------------- ---------- ---------- ------------
ASSETS
Cash and cash equivalents $ 12,487 $ 4,080 $ - $ 16,567
Marketable securities - 107 - 107
Accounts receivable, net of allowance for doubtful accounts 70,089 5,205 - 75,294
Inventory 3,726 4,534 - 8,260
Prepaid expenses and other current assets 1,439 98 - 1,537
---------------- ---------- ---------- ------------
Total current assets 87,741 14,024 - 101,765
Property, plant and equipment, net 9,287 80 - 9,367
Due from officer 2,132 - - 2,132
Other assets 1,650 3 - 1,653
Intangible assets, net 39,009 - 38,828 (1) 77,837
---------------- ---------- ---------- ------------
TOTAL ASSETS $ 139,819 $ 14,107 $ 38,828 $ 192,754
================ ========== ========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of capital lease obligations $ 594 $ 7 $ - $ 601
Line of credit - - 35,000 (1) 35,000
Accounts payable 4,468 5,323 - 9,791
Claims payable 46,564 - - 46,564
Payables to plan sponsors 21,063 - - 21,063
Accrued expenses and other current liabilities 5,745 1,267 961 (1) 7,973
---------------- ---------- ---------- ------------
Total current liabilities 78,434 6,597 35,961 120,992
Capital lease obligations, net of current portion 1,031 11 - 1,042
Other non-current liabilities 58 - - 58
---------------- ---------- ---------- ------------
Total liabilities 79,523 6,608 35,961 122,092
Stockholders' Equity:
Preferred stock - - -
Common stock 2 2 (2)(1) 2
Additional paid-in capital 105,424 - 10,000 (1) 115,779
355 (1)
(Accumulated deficit)/Retained earnings (42,196) 7,486 (7,486)(1) (42,196)
Treasury stock (2,934) - - (2,934)
Accumulated other comprehensive income - 11 - 11
---------------- ---------- ---------- ------------
Total stockholders' equity 60,296 7,499 2,867 70,662
---------------- ---------- ---------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 139,819 $ 14,107 $ 38,828 $ 192,754
================ ========== ========== ============
MIM Corporation
Unaudited Pro Forma Combined Condensed Statement of Income
(In Thousands, Except Per Share Amounts)
Year ended December 31, 2001
-----------------------------------------------------------------
MIM Vitality Pro Forma MIM
(Historical) (Historical) Adjustments Pro Forma
------------ ----------- ---------- ------------
Revenue $ 456,646 $ 74,770 $ - $ 531,416
Cost of revenue 403,243 63,396 - 466,639
------------ ----------- ---------- ------------
Gross profit 53,403 11,374 - 64,777
General and administrative expenses 38,489 7,078 126 (5) 45,693
Amortization of goodwill and other intangibles 2,200 - (2,065) (2) 928
793 (3)
Special credits (2,476) - - (2,476)
------------ ----------- ---------- ------------
Income from operations 15,190 4,296 1,146 20,632
Other expense, net (56) (1,562) (1,488) (4) (3,106)
------------ ----------- ---------- ------------
Income (loss) before provision for income taxes 15,134 2,734 (342) 17,526
Provision for income taxes 932 57 90 (6) 1,079
------------ ----------- ---------- ------------
Net income $ 14,202 $ 2,677 $ (432) $ 16,447
============ =========== ========== ============
Basic income per common share $ 0.67 $ 0.75
============ ============
Diluted income per common share $ 0.64 $ 0.72
============ ============
Weighted average common shares used in
computing basic income per share 21,273 592 (1) 21,865
============ ========== ============
Weighted average common shares used in
computing diluted income per share 22,289 592 (1) 22,881
============ ========== ============
MIM Corporation
Notes to Unaudited Pro Forma Combined Condensed
Financial Information (In Thousands)
The unaudited pro forma combined condensed statement of income has been prepared
to reflect the acquisition of Vitality as if the acquisition occurred on January
1, 2001, utilizing the purchase method of accounting. The unaudited pro forma
combined condensed balance sheet was prepared to reflect the acquisition as of
December 31, 2001, utilizing the purchase method of accounting.
The following is a summary of the adjustments reflected in the unaudited pro
forma combined condensed balance sheet and income statement:
(1) Represents the elimination of Vitality's historical equity and the
preliminary estimates of the excess of the purchase price over the fair value of
the net tangible assets acquired:
Purchase price:
Funded from the Company's line of credit $35,000
Common stock value 10,000
Transaction costs 1,316
-----
Total purchase price 46,316
Less - Net tangible assets as of December 31, 2001 7,488
-----
Excess of purchase price over net tangible assets acquired $38,828
=======
Preliminary allocation of excess purchase price and
amortizable life:
Customer relationships (20 years) $11,000
Trademarks (Indefinite) 4,700
Non-compete agreements (3 years) 730
Goodwill 22,398
------
$38,828
=======
The total estimated purchase price of the acquisition has been allocated on a
preliminary basis to assets and liabilities based on management's best estimates
of fair value. These allocations are subject to change pending a final appraisal
of the total purchase price and the fair value of the assets acquired and
liabilities assumed.
On January 31, 2002, the Company acquired from Marc Wiener and Barbara Kammerer
all of the issued and outstanding common stock of Vitality, pursuant to a Stock
Purchase Agreement dated as of January 9, 2002 (the "Purchase Agreement") among
Vitality, Marc Wiener, Barbara Kammerer and the Company. Vitality, located in
Roslyn Heights, New York, distributes specialty pharmaceutical products, on a
national basis, to the chronically ill and genetically impaired, particularly
focusing on oncology, infections disease, immunology and rheumatory disease.
The aggregate purchase price for Vitality was $45,000 consisting of $35,000 in
cash and the balance in the Company's common stock, a portion of which is being
held in escrow to secure potential indemnification claims for breaches of
Vitality and/or the individual seller's representations and warranties and
covenants under the Purchase Agreement. The cash portion of the purchase price
was funded through borrowings under the Company's existing $45,000 revolving
credit facility.
Included in the purchase price is an accrual for transaction costs for certain
merger legal, accounting and other miscellaneous expenses associated with the
acquisition totaling approximately $1,316. Included in this amount is
approximately $355 common stock provided for these services.
(2) Represents the reversal of amortization of goodwill incurred in 2001.
On January 1, 2002, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible
Assets," and is no longer amortizing goodwill and intangible assets
with indefinite lives.
(3) Represents amortization expense related to intangible assets, with
definite lives, based on preliminary estimates of the allocation of the
purchase price.
(4) Represents interest expense on amounts to fund the acquisition under
the Company's line of credit. The interest expense was calculated using
the Company's borrowing rate (4.25% on December 31, 2001).
(5) Represents rent expense for use of the facility owned by the former
stockholders of Vitality.
(6) Represents the state income tax effect of the pro forma adjustments
related to the acquisition. There was available Federal net operating
loss carryforwards to offset Federal taxable income.
Exhibit 99.4
MIM Corporation
100 Clearbrook Road
Elmsford, NY 10523
(914) 460-1600
April 16, 2002
Securities and Exchange Commission
450 Fifth Street, N. W.
Washington, D.C. 20549-0408
Ladies and Gentlemen:
This letter is written pursuant to Temporary Note 3T to Article 3 of Regulation
S-X.
MIM Corporation has received a representation letter from Arthur Andersen LLP
("Andersen") stating that the audit of the balance sheets of Vitality Home
Infusion Services, Inc. as of December 31, 2001 and 2000, and the related
statements of income, changes in stockholders' equity and cash flows for each of
the three years in the period ended December 31, 2001, was subject to Andersen's
quality control system for the U.S. accounting and auditing practice to provide
reasonable assurance that the engagement was conducted in compliance with
professional standards, that there was appropriate continuity of Andersen
personnel working on the audit, availability of national office consultation,
and availability of personnel at foreign affiliates of Andersen to conduct the
relevant portions of the audit.
Very truly yours,
MIM Corporation
By: /s/ Barry A. Posner
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Barry A. Posner
Executive Vice President & General Counsel