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): February 5, 2002
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I-TRAX, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-30275 23-3057155
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(State or other jurisdiction of (Commission (IRS Employer
incorporation) File Number) Identification No.)
One Logan Square
130 N. 18th St., Suite 2615
Philadelphia, PA 19103
----------------------------------------- ------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 557-7488
N/A
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(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets.
On February 20, 2002, I-trax, Inc. filed a Current Report on Form 8-K
reporting the closing on February 5 and 6, 2002 of a two-step reorganization
transaction in which I-trax acquired WellComm Group, Inc., an Illinois
corporation. I-trax is filing this Amendment to the Current Report to disclose
(1) the financial statements of WellComm required under Item 7(a) of Form 8-K
and (2) pro forma financial information required under Item 7(b) of Form 8-K,
including the unaudited pro forma balance sheet of I-trax as of December 31,
2001 as if the acquisition of WellComm had occurred on January 1, 2001 and the
unaudited pro forma results of operations of I-trax giving effect to the
acquisition of WellComm as though the transaction had occurred on January 1,
2000.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial statements of business acquired.
WellComm Group, Inc. Financial Statements as of December 31, 2001 and
for the Years Ended December 31, 2001 and 2000.
(b) Pro Forma financial information.
Unaudited Pro Forma Balance Sheet and Statement of Operations of
I-trax, Inc. and its Subsidiaries and WellComm Group, Inc. as of December 31,
2001 and for the Years Ended December 31, 2001 and 2000.
(c) Exhibits.
Exhibit 23. Consent of Independent Certified Public Accountants.
SIGNATURE
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.
I-TRAX, INC.
Date: April 22, 2002 By: /s/ Anthony Tomaro
----------------------------------
Name: Anthony Tomaro
Title: Chief Financial Officer
WELLCOMM GROUP, INC.
FINANCIAL STATEMENT AND
INDEPENDENT ACCOUNTANTS' AUDIT REPORT
DECEMBER 31, 2001 AND 2000
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WELLCOMM GROUP, INC.
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INDEX
Page
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Independent Accountants' Audit Report 1
Balance Sheets 2
Statements of Operations 3
Statements of Stockholders' Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6-10
[Lutz & Company Letterhead]
INDEPENDENT ACCOUNTANTS' AUDIT REPORT
Board of Directors and Stockholders
WellComm Group, Inc.
Omaha, Nebraska
We have audited the accompanying balance sheets of WellComm Group, Inc., an
Illinois corporation, as of December 31, 2001 and 2000, and the related
statements of operations, stockholders' equity and cash flows for the years 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 audits.
We conducted our audits 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 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 WellComm Group, Inc. as of
December 31, 2001 and 2000, and the results of its operations and its cash flows
for the years ended in conformity with accounting principles generally accepted
in the United States of America.
/s/ Lutz & Company, P.C.
January 23, 2002
Omaha, Nebraska
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BALANCE SHEETS
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WELLCOMM GROUP, INC.
BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
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ASSETS (Note 2)
2001 2000
---- ----
CURRENT ASSETS
Cash and Cash Equivalents $ 491,576 $ 16,719
Trade Accounts Receivable (Note 6) 439,698 192,827
Prepaid Expenses 13,828 17,749
Deferred Income Taxes (Note 8) 117,700 248,300
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Total Current Assets 1,062,802 475,595
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PROPERTY AND EQUIPMENT
Furniture and Fixtures 40,346 37,235
Computer Software 76,680 46,680
Equipment 192,571 136,438
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Equipment under Capital Lease (Note 4) 157,380 198,345
Total Cost 466,977 418,698
Less Accumulated Depreciation 187,279 113,388
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Net Book Value 279,698 305,310
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OTHER ASSETS
Deposits 3,507 3,507
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TOTAL ASSETS $1,346,007 $784,412
====================================================================================================================================
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See Notes to Financial Statements.
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LIABILITIES
2001 2000
---- ----
CURRENT LIABILITIES
Notes Payable, Related Parties (Note 3) $ $ 24,625
Current Portion of Long-Term Debt (Note 4) 51,596 72,915
Accounts Payable 76,959 13,641
Accrued Salaries and Wages 54,382 48,532
Payroll Taxes Accrued and Withheld 534,516 5,967
Customer Deposits 24,408 125,787
------------------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 741,861 291,467
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LONG-TERM LIABILITIES
Long-Term Debt, Less Current Portion (Note 4) 32,789 118,147
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Total Liabilities 774,650 409,614
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COMMITMENTS AND CONTINGENCIES (Notes 5 and 9)
STOCKHOLDERS' EQUITY (DEFICIT)
COMMON STOCK
$1 Par Value, Authorized, 1,000 Shares
Issued and Outstanding, 223 Shares 223 223
PAID IN CAPITAL 750,339 750,339
ACCUMULATED DEFICIT (179,205) (375,764)
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Total Stockholders' Equity 571,357 374,798
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,346,007 $ 784,412
====================================================================================================================================
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2
WELLCOMM GROUP, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
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2001 2000
---- ----
REVENUES (Note 6) $5,287,702 $ 979,142
COST OF REVENUES 2,510,279 529,509
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GROSS PROFIT 2,777,423 449,633
OPERATING EXPENSES 2,449,409 581,433
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Earnings (Loss) from Operations 328,014 (131,800)
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OTHER INCOME AND EXPENSE
Interest Income 9,896 802
Other Income 1,643 28,995
Interest Expense (12,394) (17,951)
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Total Other Income and Expense (855) 11,846
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Earnings (Loss) Before Provision for Income Taxes 327,159 (119,954)
PROVISION FOR INCOME TAXES (Note 8) 130,600 (38,400)
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NET EARNINGS (LOSS) $ 196,559 $ (81,554)
====================================================================================================================================
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See Notes to Financial Statements.
3
WELLCOMM GROUP, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
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Total
Common Paid In Accumulated Stockholders'
Stock Capital Deficit Equity
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BALANCES, December 31, 1999 $100 $ 252,456 $(294,210) $ (41,654)
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Purchase and Retirement of 24 Shares
of Common Stock (24) (101,976) (102,000)
Issuance of 147 Shares of Common Stock 147 599,859 600,006
Net Loss (81,554) (81,554)
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BALANCES, December 31, 2000 223 750,339 (375,764) 374,798
------------------------------------------------------------------------------------------------------------------------------------
Net Earnings 196,559 196,559
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BALANCES, December 31, 2001 $223 $ 750,339 $(179,205) $571,357
====================================================================================================================================
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See Notes to Financial Statements.
4
WELLCOMM GROUP, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
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2001 2000
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Earnings (Loss) $196,559 $ (81,554)
Adjustments to Reconcile Net Earnings (Loss) to
Net Cash Provided by (Used in) Operating Activities
Depreciation 73,891 72,292
Changes in Current Assets and Liabilities
Increase in Trade Accounts Receivable (246,871) (173,247)
Decrease (Increase) in Prepaid Expenses 3,921 (15,887)
Decrease (Increase) Deferred Income Taxes 130,600 (38,400)
Increase (Decrease) in Accounts Payable 63,318 (17,092)
Increase in Accrued Salaries and Wages 5,850 36,509
Increase in Payroll Taxes Accrued and Withheld 528,549 5,967
Increase (Decrease) in Customer Deposits (101,379) 125,787
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Net Cash Provided by (Used in) Operating Activities 654,438 (85,625)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment (48,279) (19,621)
Increase in Deposits (3,507)
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Net Cash Used in Investing Activities (48,279) (23,128)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Long-Term Debt 30,487
Repayments of Long-Term Debt (106,677) (419,024)
Advances on (Repayments of) Notes Payable, Related Parties (24,625) 15,000
Purchase and Retirement of Common Stock (102,000)
Proceeds from Issuance of Common Stock 600,006
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Net Cash Provided by (Used in) Financing Activities (131,302) 124,469
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Net Increase in Cash and Cash Equivalents 474,857 15,716
Cash and Cash Equivalents, Beginning of Year 16,719 1,003
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Cash and Cash Equivalents, End of Year $491,576 $ 16,719
====================================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest Paid $ 12,394 $ 17,951
NONCASH INVESTING AND FINANCING ACTIVITY
Long-Term Debt Incurred to Purchase Equipment under Capital Lease 206,921
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5
WELLCOMM GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
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1. Summary of Significant Accounting Policies
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A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements is set forth
below.
Organization and
Nature of Business WellComm Group, Inc. (the "Company") was incorporated
in January of 1997. The Company is a national health
management organization committed to improving
performance, quality and access to care and wellness
through its "Telehealth" service program, which
provides patients covered by health insurance
policies, 24-hour access to professional, telephonic
health advice and wellness information and support.
The Company is located in Omaha, Nebraska.
Use of Estimates The preparation of financial statements in conformity
with accounting principles generally accepted in the
United States of America 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 For purposes of the Statement of Cash Flows, the
Company considers all investments with maturities of
three months or less to be cash and cash equivalents.
Trade Accounts
Receivable The Company considers trade accounts receivable to be
fully collectible; accordingly, no allowance for
doubtful accounts is required. If amounts become
uncollectible, they will be charged to operations
when that determination is made.
Concentration of
Credit Risk The Company has two financial instruments that
potentially subject the Company to credit risk. The
Company maintains bank accounts in which the balances
sometimes exceed federally insured limits. The
Company's trade accounts receivable also subject the
Company to credit risk.
Property and
Equipment Property and equipment are recorded at cost.
Expenditures for additions and betterments are
capitalized; expenditures for maintenance and repairs
are charged to expense as incurred. The costs of
assets disposed and the related accumulated
depreciation are eliminated from the accounts in the
year of disposal. Gains or losses from property
disposals are recognized in the year of disposal.
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6
WELLCOMM GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
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1. Summary of Significant Accounting Policies - Continued
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Property and
Equipment - Cont. Depreciation is computed using the straight-line
method over the following estimated useful lives:
Years
Furniture and Fixtures 7
Computer Software 3
Equipment 5-7
Equipment under Capital Lease 7
Revenue Recognition Revenue is recognized as services are
rendered. The Company contracts with its customers to
provide services based on an established monthly fee,
a per-call charge or a combination of both. The
Company invoices its customers in arrears of
rendering these services.
Income Taxes Deferred income tax assets and liabilities are
computed annually for differences between the
financial statement and tax bases of assets and
liabilities that will result in taxable or deductible
amounts in the future based on enacted tax laws and
rates applicable to the periods in which the
differences are expected to affect taxable income.
Valuation allowances are established when necessary
to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable
or refundable for the period plus or minus the change
during the period in deferred tax assets and
liabilities.
2. Financing Arrangements
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The Company has a $308,108 revolving bank line of credit, with interest at
.5% over the national prime rate as published by the Wall Street Journal
(4.75% at December 31, 2001) and payable monthly. This line of credit is
collateralized by all assets of the Company. There were no amounts
outstanding against this line of credit at December 31, 2001 and 2000.
3. Notes Payable, Related Parties
--------------------------------------------------------------------------------
Notes payable, related parties consisted of two unsecured notes to the
Company's vice president of operations, also a stockholder, and her sister.
Both notes were non-interest bearing and paid in full during the year ended
December 31, 2001.
4. Long-Term Debt
--------------------------------------------------------------------------------
Long-term debt at December 31, consists of the following:
2001 2000
---- ----
Capitalized equipment lease payable to a corporation, payable in monthly
installments of $4,856, including imputed interest at 10.91%, through July
2003, collateralized by the equipment being leased. $84,385 $131,059
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7
WELLCOMM GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
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4. Long-Term Debt - Continued
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2001 2000
---- ----
Capitalized equipment lease payable to a corporation, payable in monthly
installments of $1,372, including imputed interest at 13.4%, collateralized
by the equipment being leased. This lease was paid in full during the year
ended December 31, 2001. $ $ 31,833
Installment note payable to a bank on behalf of the Company's president and
stockholder, payable in monthly installments of $1,400, including interest
at 9.5%. This note was paid in full during the year ended December 31,
2001. 28,170
------- --------
Total Long-Term Debt 84,385 191,062
Less Current Portion 51,596 72,915
------- --------
Long-Term Debt, Less Current Portion $32,789 $118,147
======= ========
5. Commitments and Contingencies
--------------------------------------------------------------------------------
Lease Obligations
The Company has entered into various operating leases for office space and
certain equipment used by the Company. The future minimum lease payments
under these noncancelable operating leases as of December 31, 2001 are as
follows:
Year Ending December 31,
2002 $42,057
2003 28,923
2004 1,420
---------
$72,400
=========
Lease expense under these operating leases was approximately $43,000 and
$28,000 for the years ended December 31, 2001 and 2000, respectively.
Employment Agreements
The Company entered into two employment agreements with its president and
vice president of operations, both stockholders of the Company, in April
2000 that provides for a minimum annual salary. Subsequent to December 31,
2001, these agreements were terminated and new agreements were signed as a
result of the Company being acquired (See Note 9).
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8
WELLCOMM GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
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5. Commitments and Contingencies - Continued
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Stockholder Agreements
The Company and its stockholders have entered into an agreement, which
restricts the stockholders from selling their shares to any entity other
than the Company or remaining stockholders unless approved by the Company
and its stockholders. The Company and remaining stockholders have the first
option to purchase the shares, except in the case of death, whereby the
Company and remaining stockholders are required to purchase the shares, at
purchase price as defined in the agreement.
--------------------------------------------------------------------------------
6. Economic Dependency - Major Customers
--------------------------------------------------------------------------------
Major customers whose revenue exceeded 10% of the total revenues were as
follows:
2001 2000
---- ----
Number of Major Customers 1 2
Percentage of Revenues 82% 92%
Percentage of Trade Accounts
Receivable at December 31 74% 59%
These revenues consist of several contracts with each customer that have
specific terms. Additionally, these contracts have a termination clause
without cause of 30 days.
7. 401(k) Plan
--------------------------------------------------------------------------------
The Company implemented a 401(k) plan in December 2001, which covers
substantially all employees upon the completion of three months of service
and attainment of 21 years of age. Matching contributions to the plan are
at the Company's discretion. The plan goes into affect beginning January
2002.
8. Income Taxes
--------------------------------------------------------------------------------
Components of the provision for income tax expense (benefit) are as
follows:
Federal State Total
2001
Current $ $ $
Deferred 108,300 22,300 130,600
-------- ------- --------
$108,300 $22,300 $130,600
======== ======= ========
2000
Current $ $ $
Deferred (31,800) (6,600) (38,400)
-------- ------- --------
$(31,800) $(6,600) $(38,400)
======== ======= ========
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9
WELLCOMM GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
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8. Income Taxes - Continued
--------------------------------------------------------------------------------
As of December 31, net deferred income taxes include the following
components:
2001 2000
---- ----
Deferred Tax Assets
Net Operating Loss Carryforward $ 92,000 $228,300
Temporary Differences
Accrued Vacation 19,600
Depreciation and Amortization 6,100 20,000
-------- --------
$117,700 $248,300
======== ========
The Company has available at December 31, 2001, unused operating loss
carryforwards of approximately $224,000, which may be applied against
future taxable income expiring in December 2019 and 2020.
9. Subsequent Event
--------------------------------------------------------------------------------
On February 6, 2002, the existing stockholders of the Company sold 100% of
their shares to I-trax, Inc. for a combination of cash and stock. As a
result of this transaction the Company was merged into a subsidiary of
I-trax. As of February 6, 2002, the Company no longer exists as a legal
entity.
10
PRO FORMA FINANCIAL INFORMATION
The first table below sets forth the unaudited pro forma balance sheet
of I-trax as of December 31, 2001 reflecting the acquisition of WellComm Group,
Inc., which had occurred on February 6, 2002, as if it had occurred on January
1, 2001.
The second table below sets forth the unaudited pro forma results of
operations of I-trax giving effect to the acquisition of WellComm as though the
transaction had occurred on January 1, 2000.
I-trax, Inc.
Pro Forma Balance Sheet
December 31, 2001
Assets
Pro Forma Pro Forma
WellComm Adj. Adjustments Balances
I-trax, Inc. Group, Inc. Subtotal Ref. (Unaudited) (Unaudited)
---------------- ---------------- ----------------------------------------- ----------------
Current assets
Cash $ 1,029,208 $ 491,576 $1,520,784 A $2,000,000 $1,330,784
B (2,190,000)
Accounts receivable - 439,698 439,698 439,698
Prepaid expenses 99,245 13,828 113,073 113,073
Deferred income taxes - 117,700 117,700 117,700
Other current assets 1,915 - 1,915 1,915
Note receivable 72,437 - 72,437 72,437
---------------- ---------------- ---------------- ----------------- ----------------
Total current assets 1,202,805 1,062,802 2,265,607 (190,000) 2,075,607
---------------- ---------------- ---------------- ----------------- ----------------
Property and equipment, net 279,635 279,698 559,333 559,333
---------------- ---------------- ---------------- ----------------- ----------------
Other Assets
Security deposits 66,896 3,507 70,403 70,403
Intangible assets - MyFamilyMD, net 2,224,726 - 2,224,726 2,224,726
Intangible assets - WellComm - - B 12,190,000
C (571,357) $ 11,618,643
---------------- ---------------- ---------------- ----------------- ----------------
Total other assets 2,291,622 3,507 2,295,129 11,618,643 13,913,772
---------------- ---------------- ---------------- ----------------- ----------------
Total assets $ 3,774,062 $ 1,346,007 $5,120,069 $11,428,643 $ 16,548,712
================ ================ ================ ================= ================
(Continued)
I-trax, Inc.
Pro Forma Balance Sheet
December 31, 2001
(Continued)
Liabilities And Stockholders' Equity
I-trax, Inc. WellComm Adj. Pro Forma Pro Forma
Adjustments Balances
Group, Inc. Subtotal Ref. (Unaudited) (Unaudited)
---------------- ---------------- ----------------------------------------- ----------------
Current liabilities
Accounts payable $ 619,612 $ 76,959 $ 696,571 $ 696,571
Accrued expenses 276,750 588,898 865,648 865,648
Deferred revenue 148,830 24,408 173,238 173,238
Capital lease payable 42,878 51,596 94,474 94,474
Due to related parties 739,598 -- 739,598 739,598
---------------- ---------------- ---------------- ----------------
Total current liabilities 1,827,668 741,861 2,569,529 2,569,529
Long term debt 55,901 32,789 88,690 A $ 2,000,000 2,088,690
Promissory notes, net of discount 312,327 -- 312,327 312,327
---------------- ---------------- ---------------- ----------------- ----------------
Total liabilities 2,195,896 774,650 2,970,546 2,000,000 4,970,546
---------------- ---------------- ---------------- ----------------- ----------------
Common stock - 100,000,000 shares
authorized, 34,939,464 actual issued
and outstanding, 42,939,464 issued
and outstanding on a pro forma basis 34,939 223 35,162 B 8,000 42,939
C (223)
Additional paid-in capital 22,964,778 750,339 23,715,117 B 9,992,000 32,956,778
C (750,339)
Accumulated deficit (21,421,551) (179,205) (21,600,756) B 179,205 (21,421,551)
---------------- ---------------- ---------------- ----------------- ----------------
Total stockholders' equity 1,578,166 571,357 2,149,523 9,428,643 11,578,166
---------------- ---------------- ---------------- ----------------- ----------------
Total liabilities and stockholders'
equity $ 3,774,062 $1,346,007 $5,120,069 $11,428,643 $16,548,712
================ ================ ================ ================= ================
I-trax, Inc.
Pro Forma Statement of Operations
For the Years Ended December 31, 2001 and 2000
Year ended Year ended
December 31, December 31,
2001 2000
------------------ -------------------
Sales $ 5,900,772 $ 1,239,787
Expenses 20,063,645 7,736,825
Net loss (14,162,873) (6,497,038)
Earnings per share
Basic and Diluted $ (.54) $ (.25)
Weighted average shares outstanding
Basic and Diluted 34,457,013 26,037,879
Footnotes to Pro Forma Balance Sheet and Statement of Operations
Adj. A I-trax, Inc. prior to acquiring WellComm Group, Inc. sold a 6%
convertible senior debenture in the aggregate principal amount of
$2,000,000 to Palladin Opportunity Fund LLC pursuant to a Purchase
Agreement dated February 4, 2002. The outstanding principal and any
capitalized interest under this debenture are payable in full on or
before February 3, 2004. Further, outstanding principal and any
capitalized interest may be converted at any time at the election of
Palladin into I-trax common stock at an initial conversion price of
$1.00 per share.
Adj. B Pursuant to a Merger Agreement, on February 6, 2002, I-trax completed
the acquisition of WellComm by issuing 7,440,000 hares of I-trax common
stock and granting 560,000 options with a nominal exercise price.
Therefore, the total stock consideration issued by I-trax to acquire
WellComm was 8,000,000 shares of I-trax common stock. For purposes of
these pro forma statements, I-trax had assigned a per share price of
$1.25 for each share of I-trax Common Stock issued in the acquisition,
or $10,000,000 in the aggregate. I-trax also paid $2,190,000 in cash.
And therefore the aggregate acquisition value is $12,190,000. WellComm
is a healthcare service company that offers a broad array of expertise
including a nurse contact center specializing in disease management,
triage, health information survey, and research services for the
healthcare industry. The acquisition will be accounted for as a
purchase. As such, the purchase price will be allocated to the
estimated fair values of the assets acquired and liabilities assumed.
I-trax is in the process of obtaining third-party valuations of certain
intangible assets.
Adj. C To eliminate the stockholder's equity of WellComm upon consolidation.