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| HYTM > SEC Filings for HYTM > Form 8-K on 26-Jan-2009 | All Recent SEC Filings |
26-Jan-2009
Entry into a Material Definitive Agreement, Completion of Acquisition or Disposition
Pursuant to a Stock Purchase Agreement between our wholly-owned subsidiary WoodCliff Healthcare Investment Partners, LLC (WoodCliff) and Core Corporate Consulting Group, Inc. (Core), dated January 14, 2009, and effective as of January 20, 2009, we have disposed of our entire interest in our majority-owned, controlled subsidiary Comprehensive Care Corporation (CompCare), consisting of 14,400 shares of Class A Series Preferred Stock, and 1,739,130 shares of common stock of CompCare held by Woodcliff, for aggregate gross proceeds of $1,500,000.
On January 20, 2009, we disposed of CompCare, in accordance with the agreement described in Item 1.01 above.
We expect to recognize a gain of approximately $10.5 million from the sale of our CompCare interest, to be recognized in our first quarter 2009 earnings and included in our results from operations for the 3 months ending March 31, 2009.
In accordance with Financial Accounting Standards Board Statement of Financial Accounting Standards 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," CompCare's results from operations will be included in Income from Discontinued Operations, and its assets and liabilities will be separately classified as relating to discontinued operations beginning in the Quarterly Report on Form 10-Q for the three months ending March 31, 2009.
The goodwill from our original purchase of our interest in CompCare in January, 2007 was assigned to our healthcare services reporting unit as part of the purchase accounting for the transaction. On January 21, 2009 Hythiam concluded that this goodwill had been impaired as part of our quarterly impairment testing and evaluation, mainly resulting from the decline in the value of the reporting unit that arose from the downward re-pricing of risk that occurred broadly in the equity markets and affected the reporting unit in the fourth quarter. The amount of the resulting non-cash impairment charge is estimated at $9.8 million, representing the full carrying value of such goodwill, and will be recognized and included in our results of operations for the three months and fiscal year ended December 31, 2008.
We made the decision to sell our interest in CompCare in order to preserve capital rather than investing the significant additional funds we believe would be required to adequately capitalize CompCare and to maintain its operations. We also expect to achieve cost reductions and administrative efficiencies as a result of the sale.
Although agreements for the substance dependence offering that were expected to close in late 2008 have been delayed, we anticipate they are moving toward closing and expect finalization soon. We are also looking forward to closing agreements for autism and ADHD in 2009.
The specialty behavioral health products and programs fit within our strategy of offering integrated behavioral and medical solutions to address high cost areas for health plans. These new products are expected to be relevant because 34 states currently have some level of mandated autism coverage with additional states adding coverage soon, and because of the recently passed Wellstone and Domenici Mental Health Parity and Addiction Equity Act. Specific programs aimed at addressing high-cost conditions by improving patient care and reducing overall medical
costs can benefit health plans that do not have or do not wish to dedicate the capacity or focus to develop programs internally.
(b) Pro forma financial information
The unaudited pro forma consolidated financial statements in the tables below have been prepared by applying pro forma adjustments to the consolidated financial statements included in Hythiam, Inc.'s Annual Report on form 10-K for the year ended December 31, 2007 and Quarterly Report on Form 10-Q for the nine month period ended September 30, 2008. The unaudited pro forma consolidated statements of operations reflect the transaction described in Items 1.01 and 2.01 above, assuming the transaction had been consummated as of the beginning of the fiscal period presented. The unaudited pro form consolidated balance sheet reflects such transactions, assuming they had been consummated as of September 30, 2008.
The pro forma adjustments, as described in the notes to the unaudited pro forma consolidated financial statements, are based upon available information and certain assumptions that we believe are reasonable. The allocations are preliminary in nature and subject to change following the transaction based on refinements as actual data becomes available. The unaudited pro forma consolidated financial statements should be read in conjunction with the historical financial statements and the related management's discussion and analysis of financial condition and results of operations, which are contained in the Quarterly Report on Form 10-Q for the three month period ended September 30, 2008 and the 2007 Annual Report on Form 10-K.
The unaudited pro forma financial information is for informational purposes only and does not purport to present what our results would actually have been had these transactions actually occurred on the dates presented or to project our results of operations or financial position for any future period.
Forward-Looking Statements
Except for statements of historical fact, the matters discussed in this report are forward looking and made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect numerous assumptions and involve a variety of risks and uncertainties, many of which are beyond the company's control that may cause actual results to differ materially from stated expectations. These risk factors include, among others, limited operating history and lack of statistically significant formal research studies, the risk that treatment protocols might not be effective, difficulty in developing, exploiting and protecting proprietary technologies, intense competition and substantial regulation in the healthcare industry; and additional risks factors as discussed in the reports filed by the company with the Securities and Exchange Commission, which are available on its website at http://www.sec.gov.
Except as required by law, we disclaim any obligation to release publicly any updates or any changes in its expectations or any change in events, conditions, or circumstances on which any forward-looking statements are based.
HYTHIAM, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008
(In thousands, except per share amounts)
(unaudited)
Hythiam, Inc. Hythiam, Inc.
Consolidated CompCare Pro Forma
as reported Operations (a) Consolidated
Revenues:
Behavioral health managed care services $ 27,315 $ (27,315 ) $ -
Healthcare services 5,295 - 5,295
Total revenues 32,610 (27,315 ) 5,295
Operating expenses:
Behavioral health managed care services 28,912 (28,912 ) -
Cost of healthcare services 1,335 - 1,335
General administrative expenses 32,449 (2,983 ) 29,466
Research and development 2,986 - 2,986
Depreciation & amortization 2,104 (685 ) 1,419
Total operating expenses 67,786 (32,580 ) 35,206
Loss from operations (35,176 ) 5,265 (29,911 )
Interest income 761 (23 ) 738
Interest expense (1,354 ) 205 (1,149 )
Change in fair value of warrant liabilities 4,713 - 4,713
Loss before provision for income taxes from
continuing operations (31,056 ) 5,447 (25,609 )
Provision for income taxes 25 (2 ) 23
Loss from continuing operations (31,081 ) 5,449 (25,632 )
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Loss from continuing operations per common share (Basic and diluted):
Loss from continuing operations $ (0.57 ) $ 0.10 $ (0.47 )
Weighted average shares outstanding:
Basic and diluted 54,479 54,479
HYTHIAM, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007
(In thousands, except per share amounts)
(unaudited)
Hythiam, Inc. Hythiam, Inc.
Consolidated CompCare Pro Forma
as reported Operations (a) Consolidated
Revenues:
Behavioral health managed care services $ 26,525 $ (26,525 ) $ -
Healthcare services 5,692 - 5,692
Total revenues 32,217 (26,525 ) 5,692
Operating expenses:
Behavioral health managed care services 25,874 (25,874 ) -
Cost of healthcare services 1,370 - 1,370
General administrative expenses 34,592 (2,902 ) 31,690
Impairment loss 2,387 - 2,387
Research and development 2,429 - 2,429
Depreciation & amortization 1,830 (682 ) 1,148
Total operating expenses 68,482 (29,458 ) 39,024
Loss from operations (36,265 ) 2,933 (33,332 )
Other non-operating income, net 32 (32 ) -
Interest income 1,179 (112 ) 1,067
Interest expense (1,736 ) 194 (1,542 )
Loss before provision for income taxes from
continuing operations (36,790 ) 2,983 (33,807 )
Provision for income taxes 48 (39 ) 9
Loss from continuing operations (36,838 ) 3,022 (33,816 )
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Loss from continuing operations per common share (Basic and diluted):
Loss from continuing operations $ (0.83 ) $ 0.06 $ (0.77 )
Weighted average shares outstanding:
Basic and diluted 44,131 44,131
HYTHIAM, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2007
(In thousands, except per share amounts)
(unaudited)
Hythiam, Inc. Hythiam, Inc.
Consolidated CompCare Pro Forma
as reported Operations (a) Consolidated
Revenues:
Behavioral health managed care services $ 36,306 $ (36,306 ) $ -
Healthcare services 7,695 - 7,695
Total revenues 44,001 (36,306 ) 7,695
Operating expenses:
Behavioral health managed care services 35,679 (35,679 ) -
Cost of healthcare services 2,052 - 2,052
General administrative expenses 45,554 (3,721 ) 41,833
Impairment loss 2,387 - 2,387
Research and development 3,358 - 3,358
Depreciation & amortization 2,502 (923 ) 1,579
Total operating expenses 91,532 (40,323 ) 51,209
Loss from operations (47,531 ) 4,017 (43,514 )
Interest income 1,584 (143 ) 1,441
Interest expense (2,190 ) 263 (1,927 )
Loss on extinguishment of debt (741 ) - (741 )
Change in fair value of warrant liabilities 3,471 - 3,471
Other non-operating income, net 32 (32 ) -
Loss before provision for income taxes from
continuing operations (45,375 ) 4,105 (41,270 )
Provision for income taxes 87 (72 ) 15
Loss from continuing operations (45,462 ) 4,177 (41,285 )
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Loss from continuing operations per common share (basic and diluted):
Loss from continuing operations $ (0.99 ) $ 0.09 $ (0.90 )
Weighted average shares outstanding:
Basic and diluted 45,695 45,695
HYTHIAM, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2008
(In thousands)
(unaudited)
Hythiam, Inc. Pro Forma,
as reported Compcare (b) as adjusted
Assets:
Cash and cash equivalents $ 13,724 $ 373 $ 14,097
Marketable securities, at fair value 1,767 - 1,767
Restricted cash 53 (1 ) 52
Receivables, net 2,661 (1,845 ) 816
Notes receivable 24 (24 ) -
Prepaids and other current assets 1,397 (408 ) 989
Total Current Assets 19,626 (1,905 ) 17,721
Marketable securities, at fair value 10,408 - 10,408
Property and equipment, net 3,259 (275 ) 2,984
Goodwill 10,291 (493 ) 9,798
Intellectual property & other intangible assets 4,242 (795 ) 3,447
Deposits and other assets 599 (273 ) 326
Total Assets $ 48,425 $ (3,741 ) $ 44,684
Liabilities and Stockholders' Equity:
Accounts payable $ 4,998 (450 ) 4,548
Accrued compensation and benefits 1,649 (279 ) 1,370
Accrued liabilities 2,347 (1,479 ) 868
Accrued claims payable 6,371 (6,371 ) -
Short term debt 9,081 - 9,081
Income taxes payable 15 (15 ) -
Total Current Liabilities 24,461 (8,594 ) 15,867
Long-term debt 2,320 (2,320 ) -
Accrued reinsurance claims payable 2,526 (2,526 ) -
Warrant liabilities 1,187 - 1,187
Capital lease obligations 183 (78 ) 105
Deferred rent and other long-term liabilities 194 - 194
Total Liabilities 30,871 (13,518 ) 17,353
Stockholders' Equity:
Preferred stock - - -
Common stock 5 - 5
Additional paid-in capital 172,925 - 172,925
Accumulated other comprehensive loss (1,092 ) - (1,092 )
Accumulated deficit (154,284 ) 9,777 (144,507 )
Total stockholders' equity (deficit) 17,554 9,777 27,331
Total Liabilities and Stockholders' Equity $ 48,425 $ (3,741 ) $ 44,684
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(a) Reflects the elimination of results for CompCare's operations, which were reported in our behavioral health managed care reporting segment.
(b) Reflects the elimination of assets and liabilities of CompCare, including the resulting gain on the sale, assuming the sale had been consummated on September 30, 2008:
Net Proceeds from the sale of CompCare $ 1,500
Net liabilities of CompCare operations 8,277
Gain on sale $ 9,777
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The pro forma consolidated statements of operations have not been adjusted to give effect to the gain on sale of CompCare.
(d) Exhibits.
No. Description
10.1 Stock Purchase Agreement
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